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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, 1999
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.)
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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. [ ]
The aggregate market value of Gillette Common Stock held by non-affiliates
as of February 29, 2000 was approximately $32,315,000,000.*
The number of shares of Gillette Common Stock outstanding as of February
29, 2000 was 1,054,679,181.
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 1999 Annual Report to Stockholders
(the "1999 Annual Report")............................... Parts I and II
2. The Gillette Company 2000 Proxy Statement (The "2000
Proxy Statement")......................................... Part III
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* This amount does not include the value of 140,312 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, a Delaware corporation incorporated in 1917, was
founded in 1901 by King C. Gillette, the inventor of the safety razor. Gillette
manufactures and sells a wide variety of consumer products throughout the world.
Gillette's primary businesses are:
- Grooming, which includes male and female wet and dry shaving franchises
and related toiletries.
- Portable Power, including alkaline and specialty batteries.
- Oral Care, including toothbrushes and power-assisted plaque removers.
Gillette also manufactures and sells stationery products and small
household appliances. Gillette has manufacturing operations at 54 facilities in
20 countries and distributes products in over 200 countries and territories.
Grooming
Gillette is the global leader in the Blade and Razor segment of its
business. Its shaving systems include the Mach3(R), SensorExcel(R), Sensor(R),
and Trac II(R) brands, as well as disposable razors brands such as Custom
Plus(R) and Good News(R). The Company is also the world leader in the women's
wet shaving market. Gillette's female shaving systems include Gillette for Women
SensorExcel(R) and Sensor for Women(R) brands. In the second half of 2000,
Gillette expects to unveil a new female shaving system that incorporates
features of the Mach3 brand with features custom-designed for women.
The Company sells electric shavers and electric hair epilators as part of
its Braun Products segment. These products include the world's number one foil
electric shaver for men and electric hair epilator for women. The Toiletries
segment includes deodorants, antiperspirants, shave preparations, and
after-shave products sold under the Gillette(R) Series, Right Guard(R), Soft &
Dri(R), Satin Care(R) and Dry Idea(R) brands.
Portable Power
In the Duracell Products segment, the Company is the global leader in
alkaline batteries, including premium-performing Duracell Ultra(R) batteries, as
well as Duracell(R) batteries, the best-selling brand of alkaline batteries in
the world.
Oral Care
The Company holds the global leadership positions in manual and
power-assisted plaque removal with its Oral-B(R) toothbrushes and Braun(R)
Oral-B plaque removers. The Company also manufactures and sells other oral care
products under the Oral-B brand as part of the Oral-B Products segment of its
business.
Other Products
The Company is a top seller of writing instruments and correction products.
The products in the Stationery Products segment consist of four major brands,
Paper Mate(R), Parker(R), Waterman(R), and Liquid Paper(R). The Company also
produces small household appliances through its Braun Products segment. The
Company is reviewing the strategic alternatives for these businesses. The
Company has reached an agreement to sell its White Rain(R) line of toiletry
products to a third party.
Organizational Changes
During 1999, the Company implemented the reorganization announced in the
fall of 1998, which created both business management and commercial operations
functions. Within commercial operations, which are organized geographically, the
Company established a single commercial unit in each market, responsible for
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selling and trade marketing. In January 2000, the Company further streamlined
its organization by consolidating business management into a single, focused
unit responsible for global strategic marketing, product development,
manufacturing and distribution.
INDUSTRY SEGMENTS
"Operating Segments and Related Information," containing information on net
sales, profit from operations, identifiable assets, capital expenditures and
depreciation for each of the last three years, appears in the Company's 1999
Annual Report at page 33 and is incorporated herein by reference.
DISTRIBUTION
In major geographic markets, Gillette products are sold directly to
retailers and to wholesalers for resale through retail stores. Braun personal
diagnostic appliances and Oral-B products are also sold directly to dental
professionals for distribution to patients. In small geographic 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, Stationery products, Duracell, Braun, and Oral-B businesses. No
patent or license held by the Company is material to the Company's total
business. Gillette has licensed many of its blade and razor patents to other
manufacturers. In all of these categories, Gillette competitors also have
significant patent positions. The patents and licenses held by the Company are
of varying remaining durations.
TRADEMARKS
In general, the Company's principal trademarks have been registered in the
United States and throughout the world where the Company's products are sold.
Gillette products are marketed outside the United States under various
trademarks, many of which are the same as those used in the United States. The
trademark "Gillette" is of principal importance to the Company. In addition, a
number of other trademarks owned by the 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
All of the Company's markets are highly competitive. Many of the Company's
competitors are larger and have greater resources than the Company. Grooming
products are 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 in blades and razors
include Warner-Lambert Company, with its Schick product line and, in North
America and Europe, its Wilkinson Sword product line, 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. Toiletries 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. Portable power products compete on the basis of product performance,
innovation, price and in marketing, advertising and promotion. Competition in
oral care products is focused on product performance, price and professional
endorsement. Competition in writing instruments 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 small household appliance products is based primarily on product
performance, innovation and price, with numerous competitors.
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EMPLOYEES
At year-end, Gillette employed approximately 39,800 persons, nearly
three-quarters of them outside the United States.
RESEARCH AND DEVELOPMENT
In 1999, research and development expenditures were $223 million, compared
with $209 million in 1998 and $212 million in 1997.
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
Net sales and long-lived assets by geographic area for each of the last
three years appear in the 1999 Annual Report at page 34 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 Center, Boston, Massachusetts,
where it holds a long-term lease. The following table sets forth the Company's
principal plants:
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BUSINESS SEGMENT LOCATION OWNED/LEASED
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Blades & Razors Boston, MA (US) Owned
Isleworth, UK Owned
Berlin, Germany Owned
Shanghai, China* Leased
Naucalli, Mexico* Owned
Manaus, Brazil* Owned
Toiletries 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
Multi-segment packaging Hemel Hempstead, Leased
operations UK Pkg. Ctr
Devens, MA, US Pkg. Ctr Leased
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The above facilities are in good repair, meet the Company's needs adequately 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, advertising, 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 16,
2000 is set out below.
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NAME AND CURRENT POSITION FIVE-YEAR BUSINESS HISTORY AGE
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Michael C. Hawley Chairman of the Board and Chief Executive Officer since 62
Chairman of the Board and Chief April 1999; President and Chief Operating Officer, April
Executive Officer 1995 - April 1999; Executive Vice President,
International Group, December 1993 - March 1995
Edward F. DeGraan Executive Vice President, Global Business Management 56
Executive Vice President since January 2000; Executive Vice President, Global
Business Management, Gillette Grooming Products and
Duracell, January 1999 - January 2000; Executive Vice
President, Duracell North Atlantic Group, January 1997 -
December 1998; Senior Vice President, Manufacturing and
Technical Operations, Gillette North Atlantic Group, May
1991 - December 1996
Robert G. King Executive Vice President, Commercial Operations, Western 54
Executive Vice President Hemisphere, since January 1999; Executive Vice
President, Gillette North Atlantic Group, February 1997
-December 1998; Executive Vice President, International
Group, April 1995 - January 1997; Group Vice President -
Latin America, March 1991 - March 1995
Archibald Livis Executive Vice President, Chairman's Office, since 61
Executive Vice President January 2000; Executive Vice President, Global Business
Management, Diversified Group, January 1999 - January
2000; Executive Vice President, Diversified Group, May
1998 - December 1998; Chairman, Braun Board of
Management, October 1993 - April 1998
Jorgen Wedel Executive Vice President, Commercial Operations, Eastern 50
Executive Vice President Hemisphere, since January 1999; Executive Vice
President, International Group since February 1997 -
December 1998; President, Oral-B Laboratories, Inc.,
November 1993 - January 1997
Charles W. Cramb Senior Vice President, Finance and Chief Financial 52
Senior Vice President and Officer since December 1999; Senior Vice President,
Chief Financial Officer Finance, Chief Financial Officer and Principal
Accounting Officer, July 1997 - December 1999; Vice
President and Controller, July 1995 - June 1997; Vice
President, Finance, Planning and Administration,
Diversified Group, October 1992 - June 1995
Robert E. DiCenso Senior Vice President, Personnel and Administration, 58
Senior Vice President since July 1994; Vice President, Investor Relations,
January 1993 - June 1994
Richard K. Willard Senior Vice President, Legal, since November 1999; 51
Senior Vice President Partner, Steptoe & Johnson LLP, 1988 - October 1999
Mark N. Edoff Principal Accounting Officer, since December 1999; 40
Principal Accounting Officer Partner, KPMG LLP, July 1997 - November 1999; Senior
Manager, KPMG LLP, 1991-June 1997
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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 1999 Annual Report on the inside back cover under the
caption, "Common Stock," and at page 34 under the caption, "Quarterly Financial
Information," and is incorporated by reference. As of February 29, 2000, the
record date for the 2000 Annual Meeting, there were 57,340 Gillette stockholders
of record.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears in the 1999 Annual Report at
page 35 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 1999 Annual Report at
pages 13 through 17 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 within the meaning
of the Federal securities laws. These statements may be identified by such
forward-looking words as "expect," "look," "believe," "anticipate," "may,"
"will" and variations of these words or other forward-looking terminology.
Forward-looking statements made by the Company are not guarantees of future
performance. Actual results may differ materially from those in the
forward-looking statements as the result of risks and uncertainties including
those listed below. The Company assumes no obligation to update any
forward-looking information:
- 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;
- a substantial portion 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;
- the ability of the Company to successfully reduce trade inventories to
levels consistent with the changing needs of the more concentrated retail
trade;
- 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.
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- the effects of rapid technological change on product development,
differentiation, acceptance and costs including technological advances of
competitors;
- the effects of patents including possible new patents granted to
competitors or challenges to Company patents and expiration of patents,
which affect competition and product acceptance.
ITEM 7A. DISCLOSURES CONCERNING MARKET RISK SENSITIVE INSTRUMENTS
The information required by this item appears in the 1999 Annual Report at
page 16 under the caption, "Market Risk," and is incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements and Supplementary Data for The Gillette
Company and Subsidiary Companies appear in the 1999 Annual Report at the pages
indicated below and are incorporated by reference.
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(1) Independent Auditors' Report................................ Page 18
(2) Consolidated Statement of Income for the Years Ended
December 31, 1999, 1998 and 1997............................ Page 19
(3) Consolidated Balance Sheet at December 31, 1999 and 1998.... Page 20
(4) Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997............................ Page 21
(5) Consolidated Statement of Stockholders' Equity for the
periods ended December 31, 1999, 1998 and 1997.............. Page 22
(6) Notes to Consolidated Financial Statements.................. Pages 23
through 34
(7) Computation of per share earnings........................... Pages 19, 23,
24, 34 and 35
(8) Quarterly Financial Information............................. Page 34
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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 2000 Proxy Statement at pages 2 through 4 and at pages 7
and 8, under the caption "Company Transactions with Directors and Officers," and
at page 18 under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance," 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 5.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in the 2000 Proxy Statement
at pages 8 through 17 under the captions "Compensation of Non-Employee
Directors", "Personnel Committee Report on Executive Compensation", "Gillette
Comparative Five-Year Investment Performance", and "Executive Compensation" and
is incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item concerning the security ownership of
certain beneficial owners and management appears in the 2000 Proxy Statement at
pages 6 and 7 under the caption "Stock Ownership of Five Percent Beneficial
Owners and Management" and is incorporated by reference.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears in the 2000 Proxy Statement
at pages 7 and 8 under the caption "Company Transactions with Directors and
Officers" 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 1999 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 18
(2) Consolidated Statement of Income for the Years Ended
December 31, 1999, 1998 and 1997............................ Page 19
(3) Consolidated Balance Sheet at December 31, 1999 and 1998.... Page 20
(4) Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997............................ Page 21
(5) Consolidated Statement of Stockholders' Equity for the
periods ended December 31, 1999, 1998 and 1997.............. Page 22
(6) Notes to Consolidated Financial Statements.................. Pages 23
through 34
(7) Computation of per share earnings........................... Pages 19, 23,
24, 34 and 35
</TABLE>
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.
EXHIBITS
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3(a) Composite Certificate of Incorporation of The Gillette
Company, as amended, filed as Exhibit 3(i) to The Gillette
Company Quarterly Report on Form 10-Q for the period ended
March 31, 1998, Commission File No. 1-922, incorporated by
reference herein.
(b) The Bylaws of The Gillette Company, as amended March 16,
2000 filed herewith.
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. 1-911, 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.
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<TABLE>
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(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. 1-911, 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. 1-922, 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,
1998, 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.
The Company has issued non-registered debt instruments
copies of which will be furnished to the Commission upon
request.
10 Material Contracts
*(a) The Gillette Company 1971 Stock Option Plan, as amended,
filed herewith.
*(b) The Gillette Company Stock Equivalent Unit Plan, as amended,
filed herewith.
*(c) The Gillette Company Incentive Bonus Plan, as amended, filed
herewith.
*(d) The Gillette Company Executive Life Insurance Program, filed
as Exhibit 10(d) to The Gillette Company Annual Report on
Form 10-K for the year ended December 31, 1997, incorporated
by reference herein.
(e) Directors and Officers and Company Liability Policy and
Fiduciary Liability Insurance policy, filed herewith.
*(f) Description of Conversion of Outside Directors' Vested
Pension Benefit into Deferred Stock Units, as amended, filed
herewith.
*(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) Employment Agreement, dated December 16, 1999, between The
Gillette Company and Michael C. Hawley, filed herewith.
*(i) Employment Agreement, dated December 16, 1999, between The
Gillette Company and Edward F. DeGraan, filed herewith.
*(j) Employment Agreement, dated December 16, 1999, between The
Gillette Company and Robert G. King, filed herewith.
*(k) Employment Agreement, dated December 16, 1999, between The
Gillette Company and Archibald Livis, filed herewith.
*(l) Employment Agreement, dated December 16, 1999, between The
Gillette Company and Jorgen Wedel, filed herewith.
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<TABLE>
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*(m) Employment Agreement, dated December 16, 1999, between The
Gillette Company and Charles W. Cramb, filed herewith.
*(n) Employment Agreement, dated December 16, 1999, between The
Gillette Company and Robert E. DiCenso, filed herewith.
*(o) Employment Agreement, dated December 16, 1999, between The
Gillette Company and Richard K. Willard, filed herewith.
*(p) The Gillette Company Change of Control Severance Program for
Key Executives, filed herewith.
*(q) Letter Agreement Re: Estate Preservation Plan II dated May
27, 1999, between The Gillette Company and Alfred M. Zeien,
filed herewith.
(r) 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.
*(s) 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.
*(t) 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.
*(u) The Gillette Company Estate Preservation Plan, filed as
Exhibit 10(1) to The Gillette Company Annual Report on Form
10-K for the year ended December 31, 1997, incorporated by
reference herein.
*(v) The Gillette Company Supplemental Retirement Plan, as
amended, filed herewith.
*(w) The Gillette Company Supplemental Savings Plan, as amended,
filed herewith.
(x) 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.
(y) $2,335,000,000 364-Day Credit Agreement dated as of December
20, 1996, and amended and restated as of October 20, 1997,
October 19, 1998, October 18, 1999, and supplemental as of
March 24, 2000 among The Gillette Company, Morgan Guaranty
Trust Company of New York, as agent and a syndicate of
domestic and foreign banks, filed herewith.
(z) 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 1999, 1998 and 1997, filed
herewith.
13 Portions of the 1999 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).
11
<PAGE> 13
B. REPORTS ON FORM 8-K
A report on Form 8-K was filed on November 8, 1999, which announced the
Company's third-quarter results, an expansion of the stock repurchase program
and a program to reduce trade inventories.
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.
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.
12
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
of THE GILLETTE COMPANY:
Under date of February 11, 2000, we reported on the consolidated balance
sheet of The Gillette Company and subsidiary companies as of December 31, 1999
and 1998, 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, 1999, as contained in the 1999 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 1999. 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 LLP
Boston, Massachusetts
February 11, 2000
13
<PAGE> 15
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(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>
1999
- -----
Reserves deducted from assets:
Receivables....................... $79 $50 -- $55 $74
=== === === === ===
1998
- -----
Reserves deducted from assets:
Receivables....................... $74 $43 -- $38 $79
=== === === === ===
1997
- -----
Reserves deducted from assets:
Receivables....................... $81 $42 -- $49 $74
=== === === === ===
</TABLE>
14
<PAGE> 16
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 and Chief
Financial Officer
Date: March 30, 2000
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>
* MICHAEL C. HAWLEY Chairman of the Board March 30, 2000
- ----------------------------------------------------- of Directors, Chief Executive Officer
Michael C. Hawley and Director
* CHARLES W. CRAMB Senior Vice President March 30, 2000
- ----------------------------------------------------- and Chief Financial Officer
Charles W. Cramb
* MARK N. EDOFF Principal Accounting Officer March 30, 2000
- -----------------------------------------------------
Mark N. Edoff
* WARREN E. BUFFETT Director March 30, 2000
- -----------------------------------------------------
Warren E. Buffett
* WILBUR H. GANTZ Director March 30, 2000
- -----------------------------------------------------
Wilbur H. Gantz
* MICHAEL B. GIFFORD Director March 30, 2000
- -----------------------------------------------------
Michael B. Gifford
* CAROL R. GOLDBERG Director March 30, 2000
- -----------------------------------------------------
Carol R. Goldberg
* DENNIS F. HIGHTOWER Director March 30, 2000
- -----------------------------------------------------
Dennis F. Hightower
* HERBERT H. JACOBI Director March 30, 2000
- -----------------------------------------------------
Herbert H. Jacobi
* HENRY R. KRAVIS Director March 30, 2000
- -----------------------------------------------------
Henry R. Kravis
* JORGE PAULO LEMANN Director March 30, 2000
- -----------------------------------------------------
Jorge Paulo Lemann
* RICHARD R. PIVIROTTO Director March 30, 2000
- -----------------------------------------------------
Richard R. Pivirotto
* ALEXANDER B. TROWBRIDGE Director March 30, 2000
- -----------------------------------------------------
Alexander B. Trowbridge
* MARJORIE M. YANG Director March 30, 2000
- -----------------------------------------------------
Marjorie M. Yang
* ALFRED M. ZEIEN Director March 30, 2000
- -----------------------------------------------------
Alfred M. Zeien
*By CHARLES W. CRAMB
---------------------------------------------------
Charles W. Cramb
as Attorney-In-Fact
</TABLE>
15
<PAGE> 1
Exhibit 3(b)
BYLAWS
OF
THE GILLETTE COMPANY
AS AMENDED ON MARCH 16, 2000
(NOTICE PROVISIONS IN ARTICLES II AND V EFFECTIVE APRIL 20, 2000)
ARTICLE I
CERTIFICATE OF INCORPORATION - OFFICES
The name and the nature of the business or purposes of the corporation and
the location of its registered office shall be as set forth in its certificate
of incorporation. The corporation may also have offices in such other places as
the board of directors may from time to time determine or the business of the
corporation may require. These bylaws shall be subject to all requirements and
provisions of law applicable to the corporation and to all requirements and
provisions of the certificate of incorporation. In these bylaws, references to
the certificate of incorporation mean the provisions of the certificate of
incorporation (as that term is defined in the General Corporation Law of the
State of Delaware) of the corporation as from time to time in effect, and
reference to these bylaws or to any requirement or provisions of law means these
bylaws or such requirement or provision of law as from time to time in effect.
1
<PAGE> 2
ARTICLE II
ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and a
time designated by the board of directors. At the meeting, directors shall be
elected and any other business properly brought before the meeting pursuant to
these bylaws may be transacted. The annual meeting may be held at any place
within or without the State of Delaware designated by the board of directors.
Purposes for which the annual meeting is to be held additional to those
prescribed by law, the certificate of incorporation and these bylaws may be
specified by resolution of the board of directors or by a writing filed with the
secretary signed by the chief executive officer or by a majority of the
directors.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the board
of directors, (b) properly brought before the meeting by or at the direction of
a majority of the total number of directors which the corporation would have if
there were no vacancies, or (c) otherwise properly requested to be brought
before the meeting by a stockholder of record of the corporation who was a
stockholder of record at the time of the giving of the notice provided for in
this Article II, who is entitled to vote at the meeting and who has complied
with the notice procedures of this Article II.
In addition to any other applicable requirements, for business to be
properly requested to be brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing in proper form to
the secretary of the corporation, such business must be a proper matter for
stockholder action under the Delaware General Corporation Law and, if the
stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, solicits or participates in the
2
<PAGE> 3
solicitation of proxies in support of such proposal, the stockholder must have
timely indicated its, or such beneficial owner's, intention to do so as provided
below. To be timely, a stockholder's notice must be delivered to or mailed
(including electronic mail) and received at the principal executive offices of
the corporation not more than 120 days nor less than 90 days prior to the
anniversary date of the prior year's annual meeting of the stockholders;
provided, however, that in the event that annual meeting is called for a date
that is not within 30 days before or after such anniversary date, notice by the
stockholder to be timely must be delivered to or mailed (including electronic
mail) and received at the principal executive offices of the corporation not
later than the close of business on the tenth day following the day on which
notice of the date of the annual meeting was mailed or public announcement of
the date of the annual meeting was made, whichever first occurs. In no event
shall the public announcement of an adjournment or postponement of a meeting of
stockholders commence a new time period (or extend any time period) for the
giving of a stockholder's notice as described above.
To be in proper form, a stockholder's notice to the secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting (including the text of any resolutions proposed for consideration and in
the event that such business includes a proposal to amend the bylaws of the
corporation, the language of the proposed amendment), (b) the name and address,
as they appear on the corporation's books, of the stockholder proposing such
business and of the beneficial owner, if any, on whose behalf such proposal is
being made, (c) the class and number of shares of the corporation which are
owned beneficially and of record by the stockholder and the beneficial owner,
(d) any material interest of the stockholder or beneficial owner in such
business, (e) any other information that is required to be provided by the
stockholder or beneficial owner pursuant to Section 14 of the Securities
Exchange Act of 1934, (the "Securities Exchange Act") and the rules and
regulations promulgated thereunder, in such stockholder's or beneficial owner's
capacity as a proponent of the shareholder proposal, and (f) whether either such
stockholder or
3
<PAGE> 4
beneficial owner, alone or as part of a group, intends to deliver a proxy
statement and/or form of proxy or to otherwise solicit or participate in the
solicitation of proxies in favor of such proposal. Notwithstanding anything in
these bylaws to the contrary, no business shall be conducted at an annual
meeting except business brought before the annual meeting in accordance with the
procedures set forth in this Article II; provided, however, that once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Article II shall be deemed to preclude discussion by
any stockholder of such business.
The chairman of an annual meeting shall, if he determines that business was
not properly brought before the annual meeting in accordance with the foregoing
procedures, declare to the meeting that the business was not properly brought
before the meeting in accordance with the provisions of this Article II
(including whether the stockholder or beneficial owner, if any, on whose behalf
the proposal is made solicits (or is part of a group which solicits), or fails
to so solicit, as the case may be, proxies in support of such stockholder's
proposal in compliance with such stockholder's notice as required by this
Article), and if he should so determine, he shall so declare to the meeting any
such business not properly brought before the meeting shall not be transacted,
and such business shall be disregarded.
Notwithstanding the foregoing provisions of this Article II, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act and the rules and regulations thereunder with respect to matters set forth
in this Article II. Nothing in this Article II shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the corporation's
proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act.
For purposes of this Article II, the date of public announcement of a
meeting or of an adjournment or postponement of a meeting shall include, but not
be limited to, the date on which disclosure of the date of the meeting,
adjournment or postponement is released to
4
<PAGE> 5
a national news service, or in a document publicly filed by the corporation with
the Securities and Exchange Commission pursuant to Sections 13, 14 and 15(d) (or
the rules and regulations thereunder) of the Securities Exchange Act.
ARTICLE III
SPECIAL MEETINGS OF STOCKHOLDERS
Special meetings of the stockholders may be held either within or without
the State of Delaware, at such time and place and for such purposes as shall be
specified in a call for such meeting made by resolution of the board of
directors or by a writing filed with the secretary signed by the chief executive
officer or by a majority of the directors, but, unless otherwise required by
law, such special meetings may not be called by any other person or persons.
Only such business shall be considered at a special meeting of stockholders as
shall have been stated in the notice for such meeting. To the extent such
business includes the election of directors, nominations of persons for election
to the board of directors may be made at a special meeting of stockholders only
by or at the direction of the board of directors or a committee appointed by the
board of directors or by a stockholder of record of the corporation who was a
stockholder of record at the time of the giving of the notice provided for in
Article V entitled to vote at the special meeting and who complies with the
notice and other procedures and requirements set forth in Article V.
ARTICLE IV
NOTICE OF STOCKHOLDERS' MEETINGS
Except where some other notice is required by law or by the certificate of
incorporation, a written or printed notice of each meeting of stockholders,
stating the place, day and hour thereof and the purposes for which the meeting
is called, shall be given by or under the direction of the secretary, not less
than ten nor more than sixty days before the
5
<PAGE> 6
date fixed for such meeting, to each stockholder entitled to vote at such
meeting and to each stockholder who, by law or the certificate of incorporation
or these bylaws, is entitled to notice thereof by leaving such notice with the
stockholder or at such stockholder's residence or usual place of business or by
depositing such notice in the United States mail, postage prepaid, addressed to
such stockholder at the address carried on the books of the corporation. In case
of the death, absence, incapacity or refusal of the secretary, such notice may
be given by a person designated either by the secretary or by the person or
persons calling the meeting or by the board of directors. Every stockholder
shall for all purposes be deemed to have received notice of a meeting, or any
adjourned session thereof, in due season if such stockholder shall be present or
represented by proxy at such meeting or adjourned session or shall in writing
waive such notice before or after the meeting or adjourned session. Neither the
business to be transacted at, nor the purpose of, any meeting of the
stockholders or any adjourned session need be specified in any written waiver of
notice. If a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place are announced at the
meeting at which the adjournment is taken, except that if the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at said adjourned meeting and to
each stockholder who, by law or the certificate of incorporation or these
bylaws, is entitled to notice thereof, in the same manner as would the original
notice of any meeting be given.
ARTICLE V
NOMINATION OF DIRECTOR CANDIDATES
Only persons who are nominated in accordance with the procedures set forth in
this Article V shall be eligible for election as directors. Subject to the
rights of holders of any class or series of preferred stock of the corporation
to nominate and elect a specified number of directors as provided in the
Certificate of Incorporation, nominations for the election of
6
<PAGE> 7
directors may be made by the board of directors or a committee appointed by the
board of directors or by any stockholder of record of the corporation who was a
stockholder of record at the time of the giving of notice provided for in this
Article V, entitled to vote in the election of directors generally and who has
complied with the notice provisions of this Article V. In addition to any other
applicable requirements for a stockholder to nominate one or more persons for
election as director(s) at a meeting, such stockholder shall have given written
notice of such stockholder's intent to make such nomination or nominations in
proper written form to the secretary of the corporation. To be timely, a
stockholder's notice to the secretary must be delivered to or mailed (including
electronic mail) and received at the primary executive office of the corporation
(a) in the case of an annual meeting, not less than 90 days nor more than 120
days prior to the anniversary date of the prior year's annual meeting; provided,
however, that in the event that the annual meeting is called for a date that is
within 30 days before or after such anniversary date, notice by the stockholder
in order to be timely must be delivered and so received not later than the close
of business on the tenth day following the day on which notice of the date of
the annual meeting was mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs; and (b) in the case of a
special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the tenth day following the day on which
notice of the date of the special meeting was mailed or public disclosure of the
date of the special meeting was made, whichever first occurs.
In no event shall the public announcement of an adjournment or postponement
of a meeting of stockholders commence a new time period (or extend any time
period) for the giving of a stockholder's notice as described above. To be in
proper form, each such notice shall set forth: (a) the name and address, as they
appear on the corporation's books, of the stockholder who intends to make the
nomination and of the beneficial owner, if any, on whose behalf such nomination
is being made and of the person or persons to be nominated, (b) a representation
that the stockholder is a holder of record of stock of the corporation entitled
to vote for the election of directors on the date of such notice and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the
7
<PAGE> 8
notice, (c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) and between the beneficial owner and such nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder, (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement pursuant to Section 14 of the
Securities Exchange Act and the rules and regulations promulgated thereunder,
had the nominee been nominated, or intended to be nominated by the board of
directors, (e) the consent of each nominee to serve as a director of the
corporation if so elected; (f) the class and number of shares of the corporation
which are owned beneficially and of record by the stockholder who intends to
make the nomination and by the beneficial owner on whose behalf such nomination
is intended to be made, (g) whether either such stockholder or beneficial owner,
alone or as part of a group, intends to deliver a proxy statement and/or form of
proxy or to otherwise solicit or participate in the solicitation of proxies in
favor of such nomination, and (h) a certification that each nominee meets the
qualifications prescribed in these bylaws. At the request of the board of
directors, any person nominated by the board of directors for election as a
director shall furnish to the secretary of the corporation that information
required to be set forth in a stockholder's notice of nomination pertaining to a
nominee.
The chairman of the meeting shall, if he determines that the nomination of
any person was not made in compliance with the foregoing procedures (including
whether the stockholder or beneficial owner, if any, on whose behalf the
nomination is made solicits (or is part of a group which solicits), or fails to
so solicit, as the case may be, proxies in support of such stockholder's
nomination in compliance with such stockholder's notice as required by this
Article), declare to the meeting that such nomination was defective and such
nomination shall be disregarded; provided, however, that nothing in this Article
V shall be deemed to limit any voting rights upon the occurrence of dividend
arrearages provided to holders of Preferred Stock pursuant to the Preferred
Stock Designation for any series of Preferred Stock.
8
<PAGE> 9
For purposes of this Article V, the date of public announcement of a
meeting or of an adjournment or postponement or a meeting shall include, but not
be limited to, the date on which disclosure of the date of the meeting,
adjournment or postponement is released to a national news service, or in a
document publicly filed by the corporation with the Securities and Exchange
Commission pursuant to Sections 13, 14 and 15(d) (or the rules and regulations
thereunder) of the Securities Exchange Act.
ARTICLE VI
QUORUM OF STOCKHOLDERS; ADJOURNMENTS; POSTPONEMENTS AND CANCELLATIONS
Quorum. Except where a larger quorum is required by law, the certificate of
incorporation or these bylaws, at each meeting of stockholders the presence in
person or by proxy of the holders of a majority in voting power of the
outstanding shares of stock entitled to vote at the meeting shall be necessary
and sufficient to constitute a quorum. When a quorum is present at any meeting,
a plurality of the votes properly cast for election of directors shall so elect,
and a majority of the votes properly cast upon any question other than an
election of directors shall decide such question, except that where a larger
vote is required by an express provision of law, the certificate of
incorporation or these bylaws, such express provision shall govern.
At the adjourned meeting at which a quorum is present, the stockholders may
transact any business, which might have been transacted at the original meeting.
Once a share is represented for any purpose at a meeting, it shall be present
for quorum purposes for the remainder of the meeting and for any adjournment of
that meeting unless a new record date is or must be set for the adjourned
meeting. Shares of its own stock belonging to the corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held, directly or indirectly, by the
corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided,
9
<PAGE> 10
however, that the foregoing shall not limit the right of any corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
If a quorum is initially present, the stockholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Adjournments. Any stockholders' meeting, annual or special, whether or not
a quorum is present, may be adjourned solely by the chair of the meeting, from
time to time to reconvene at the same or some other time, date and place. The
stockholders present at a meeting shall not have the authority to adjourn the
meeting. At any adjourned meeting the corporation may transact only such
business which might have been transacted at the original meeting.
Postponement and Cancellation of Stockholder Meeting. Any previously
scheduled annual or special meeting of stockholders may be postponed, and any
previously scheduled annual or special meeting of stockholders called by the
board of directors may be canceled, by resolution of the board of directors upon
public notice given prior to the time previously scheduled for such meeting of
stockholders.
ARTICLE VII
PROXIES AND VOTING
Except as otherwise provided in the certificate of incorporation, and
subject to the provisions of Article XII of these bylaws, each stockholder of
record shall at every meeting of the stockholders be entitled to one vote for
each share of the capital stock held by such stockholder. Stockholders entitled
to vote at a meeting of stockholders or to express consent or dissent to
corporate action in writing may authorize another person or persons to act for
them by written proxy, which may be in the form of a telegram, cablegram, or
other
10
<PAGE> 11
means of electronic submission, signed by the stockholder or the stockholder's
authorized officer, director, employee or agent and filed with the secretary of
the corporation, but no proxy shall be voted or acted upon after three years
from its date, unless said proxy provides for a longer period. A proxy shall be
deemed signed if the stockholder's name is placed on the proxy (whether by
manual signature, typewriting, telegraphic transmission or other reasonable
means) by the stockholder or the stockholder's authorized officer, director,
employee or agent. The delivery of a proxy on behalf of a stockholder consistent
with telephonic or electronically transmitted instructions obtained pursuant to
procedures of the corporation reasonably designed to verify that such
instructions have been authorized by such stockholder shall constitute the
delivery of a validly signed proxy by or on behalf of the stockholder. Persons
holding stock in a fiduciary capacity shall be entitled to vote the shares so
held, and persons whose stock is pledged shall be entitled to vote, unless in
the transfer by the pledgors on the books of the corporation they shall have
expressly empowered the pledgees to vote thereon, in which case only the
pledgees, or their proxies, may represent said stock and vote thereon.
Revocability of Proxies. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and, if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A proxy may be
made irrevocable regardless of whether the interest with which it is coupled is
an interest in the stock itself or an interest in the corporation generally. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or by delivering a proxy in accordance with applicable law bearing a later
date to the secretary of the corporation.
Death, Incapacity, etc. of a Stockholder. In case of the death, bankruptcy,
minority or mental incapacity of any stockholder the person entitled to transfer
such stockholder's shares shall be entitled to vote in respect of such shares,
and if there shall be more than one such person, the right to vote shall be the
same as if the shares stood of record in the names of two or more persons, as
provided by applicable law. A vote given in accordance with a
11
<PAGE> 12
proxy shall be valid notwithstanding the previous death of the stockholder or
revocation of the proxy unless information in writing of the death or revocation
shall have been previously received by the secretary of the corporation.
List of Stockholders. The secretary shall prepare and make, at least ten
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at said meeting, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. The stock ledger shall be the only evidence as to who are
stockholders entitled to examine the stock ledger or such list, or to vote in
person or by proxy at such meeting, or, subject to the provisions of Article
XXVIII of these bylaws, to inspect the accounts or books of the corporation.
Inspectors. In advance of or at any meeting of the stockholders, the board
of directors or the chairman of the meeting may, and shall if required by
applicable law, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment thereof and make a written
report thereof. Unless otherwise required by law, inspectors may be officers,
employees or agents of the corporation. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of his or her ability. The inspectors, if any, shall determine the
number of shares of stock outstanding and the voting power of each, the shares
of stock represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all stockholders. Upon request of the person presiding at the meeting, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them.
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Conduct of Meetings. Meetings of stockholders shall be presided over by the
Chairman of the Board or by another chair designated by the board of directors.
The board of directors of the corporation may adopt by resolution such rules and
regulations for the conduct of the meeting of stockholders as it shall deem
appropriate. Except to the extent inconsistent with such rules and regulations
as adopted by the board of directors, the chairman of any meeting of
stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the board of directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (a) the establishment of an agenda or order of business for the
meeting, (b) rules and procedures for maintaining order at the meeting and the
safety of those present, (c) limitations on attendance at or participation in
the meeting to stockholders of record of the corporation, their duly authorized
and constituted proxies or such other persons as the chairman of the meeting
shall determine, (d) restrictions on entry to the meeting after the time fixed
for the commencement thereof, and (e) limitations on the time allotted to
questions or comments by participants. The date and time of the opening and
closing of the polls for each matter upon which the stockholder will vote at a
meeting shall be determined by the chair of the meeting and announced at the
meeting. Unless and to the extent determined by the board of directors or the
chairman of the meeting, meetings of stockholders shall not be required to be
held in accordance with the rules of parliamentary procedure.
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ARTICLE VIII
ACTION BY WRITTEN CONSENT
Any action required by the General Corporation Law of the State of Delaware
to be taken at any annual or special meeting of the stockholders of the
corporation, or any action which may be taken at any annual or special meeting
of such stockholders in accordance with these bylaws and the certificate of
incorporation, as amended, of the corporation, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder
who signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of the date of
the earliest dated consent delivered to the corporation in the manner required
by this Article VIII, written consents signed by a sufficient number of holders
to take action are delivered to the corporation by delivery to its registered
office in the State of Delaware or its primary executive offices. Delivery made
to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholder who have not consented in writing and who, if the
action had been at a meeting, would have been entitled to notice of the meeting
if the record date for such meeting had been the date
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that written consents signed by a sufficient number of holders to take the
action were delivered to the corporation as provided in this Article VIII.
Upon receipt by the corporation in accordance with this Article VIII of
written consents which purport to be signed by holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take the action set forth in such written consents at a meeting at
which all shares entitled to vote thereon were present and voted, the
corporation shall cause such written consents to be reviewed (with all
reasonable speed) by duly qualified and objective inspectors to be appointed by
the board of directors of the corporation. Such review shall be made to
determine the sufficiency of such written consents, including, without
limitation, the compliance of such written consents with these bylaws and the
General Corporation Law of the State of Delaware. If, upon completion of such
review, the inspectors determine that such written consents are sufficient to
take the action or actions set forth therein without a meeting, that fact shall
be forthwith be certified on the records of the corporation kept for the purpose
of recording the proceedings of meetings of the stockholders, and the consent
shall be filed in such records, at which time such action or actions shall
thereupon be immediately effective. No action by written consent without a
meeting shall be effective until such date as the inspectors certify to the
corporation that the consents delivered to the corporation in accordance with
this Article VIII represent at least the minimum number of votes that would be
necessary to take the action. In the event that the number of consents is
determined by the inspectors to be inadequate and thereafter, but within the
period provided by this Article VIII, additional consents are delivered to the
corporation in accordance with this Article VIII, the corporation shall cause
such additional consents to be reviewed by the inspectors on the same basis as
though such additional consents had been delivered and reviewed with the written
consents which were previously reviewed. If, upon completion of such additional
review, the inspectors determine that such written consents are sufficient to
take the action or actions set forth therein without a meeting, such action or
actions shall thereupon be immediately effective.
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In conducting any review required by this Article VIII, the secretary of
the corporation or the inspectors (as the case may be) may, at the expense of
the corporation, retain special legal counsel and any other necessary or
appropriate professional advisors, and such other personnel as they may deem
necessary or appropriate to assist them, and shall be fully protected in relying
in good faith upon the opinion of such counsel or advisors.
Nothing contained in the Article VIII shall in any way be construed to
suggest or imply that the board of directors or any stockholder shall not be
entitled to contest the validity of any consent or revocation thereof, whether
before or after such certification by inspectors, or to take any other action
(including, without limitation, the commencement, prosecution, or defense of any
litigation with respect thereto, and the seeking of injunctive relief in such
litigation).
ARTICLE IX
STOCK CERTIFICATES
Every holder of stock in the corporation shall be entitled to have a
certificate or certificates certifying the number and class and series
designation, if any, of the shares such stockholder owns in the corporation
signed by, or in the name of the corporation by, the chairman of the board of
directors, a vice chairman of the board of directors, a president or a vice
president and the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the corporation. Any of or all the signatures on the
certificate may be facsimile signatures. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if such person were such officer, transfer agent, or registrar at
the date of issue. In case any certificate shall be alleged to be lost or
destroyed or mutilated, a new certificate may be issued in place thereof upon
reasonable evidence of
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the loss or destruction or mutilation and upon such indemnity, including receipt
of a bond by the corporation sufficient to indemnify the corporation against any
claim on account thereof, as the board of directors may require. Certificates of
stock shall be in such form as shall in conformity with law be prescribed from
time to time by the board of directors.
ARTICLE X
TRANSFERS OF STOCK
Subject to the restrictions, if any, imposed by the certificate of
incorporation or stated or noted on the stock certificate, title to a
certificate of stock and to the shares represented thereby shall be transferred
only by delivery of the certificate properly endorsed, or by delivery of the
certificate accompanied by a written assignment of the same, or a written power
of attorney to sell, assign, or transfer the same or the shares represented
thereby, properly executed; but, except as may be otherwise required by law or
by Article XII of these bylaws, the person registered on the stock ledger of the
corporation as the owner of shares shall have the exclusive right to receive
dividends thereon and to vote thereon as such owner, shall be held liable for
such calls and assessments, if any, as may lawfully be made thereon, and may in
all respects be treated by the corporation and its transfer agents and
registrars, if any, as the exclusive owner thereof. The corporation shall not be
bound to take notice of or recognize any trust, charge or equity affecting any
of the shares of the capital stock or recognize any person as having any
interest therein except the person or persons whose name or names appear on the
corporation's stock ledger as the legal owner or owners thereof. It shall be the
duty of the stockholders to notify the corporation of their post office
addresses.
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ARTICLE XI
ACQUISITIONS OF STOCK
(a) The corporation shall not acquire any of its voting equity securities,
as defined below, at a price above the average market price, as defined below,
of such securities from any person who is the beneficial owner, as defined
below, of more than three percent of the corporation's voting equity securities
and has been such for less than two years, unless such acquisition is pursuant
to the same offer and terms as made to all holders of securities of such class
and to all holders of any other class from or into which such securities may be
converted.
(b) This provision shall not apply to any acquisition that has been
approved by a vote of a majority of the shares entitled to vote, excluding those
owned by any such beneficial owner any of whose shares are proposed to be
acquired pursuant to that vote.
(c) This provision shall not restrict the corporation from: (1)
reacquiring shares in the open market in transactions in which all stockholders
have an equal chance to sell their shares, and in number of shares that do not
exceed in any one day the daily average trading volume for the preceding three
months; (2) offering to acquire at market price all shares, but not less than
all shares, of any stockholder owning less than 100 shares of common stock; or
(3) reacquiring shares pursuant to the terms of a stock option plan that has
been approved by a vote of a majority of the common shares.
(d) A person will be deemed to be the beneficial owner of any voting
equity security of which that person would be deemed the beneficial owner
pursuant to Rule 13d-3 under the Securities Exchange Act (or any successor rule
or regulation).
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(e) Average market price means the weighted average of sale prices for
shares of the subject class of the corporation's voting equity securities
determined by (1) multiplying the closing sale prices of shares of the subject
class of the corporation's voting stock as reported on the Composite Tape for
New York Stock Exchange-listed stocks for each of the ten full trading sessions
immediately preceding the earlier of the first public announcement of, or the
signing of a definitive agreement for, a purchase of the corporation's voting
equity securities by the number of shares of such voting equity securities
traded during each respective trading session, (2) adding the products of these
multiplications, and (3) dividing the sum by the total number of shares of the
corporation's voting equity securities traded during that period.
(f) Voting equity securities of the corporation means equity securities
issued from time to time by the corporation which by their terms are entitled to
be voted generally in the election of the directors or similar officials of the
corporation.
ARTICLE XII
RECORD DATE
(a) Meetings of Stockholders. In order that the corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, except stockholder action by written consent
as provided for below, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, and shall not be more than
sixty nor less than ten days (or such longer period as may be required by law)
before the date of such meeting, nor more than sixty days prior to any other
action, except stockholder action by written consent, and in such case such
stockholders and only such stockholders as shall be
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stockholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting, or to receive payment of such dividend, or other
distribution or allotment of rights, or to exercise such rights, or for the
purpose of such other lawful action, as the case may be, notwithstanding any
transfer of any stock on the stock ledger of the corporation after such record
date fixed as aforesaid.
If no record date is fixed as provided in the preceding paragraph, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is held
and the record date for determining stockholders for any other purpose, except
stockholder action by written consent, shall be at the close of business on the
day on which the board of directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
(b) Action by Written Consent. (1) The record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting shall be as fixed by the board of directors or as otherwise
established under this Article XII. Any person seeking to have the stockholders
authorize or take corporate action by written consent without a meeting shall,
by written notice addressed to the secretary and delivered to the corporation
and signed by a stockholder of record, request that a record date be fixed for
such purpose. The written notice shall contain at a minimum the information set
forth in paragraph (2) below. The board of directors shall have ten (10) days
following the date of receipt of the notice to determine the validity of the
request. Following the determination of the validity of the request, and
(subject to paragraph (2) below) no later than ten (10) days after the date on
which such request is received by the corporation, the board of directors may
fix a record date for such purpose, which shall be no more than ten (10) days
after the date upon which the resolution fixing the record date is adopted by
the
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board of directors and shall not precede the date such resolution is adopted. If
the board of directors fails within ten (10) days after the date the corporation
receives such notice to fix a record date for such purpose, the record date
shall be the day on which the first written consent is delivered to the
corporation in the manner described in Article VIII unless prior action by the
board of directors is required under the General Corporation Law of Delaware, in
which event the record date shall be at the close of business on the day on
which the board of directors adopts the resolution taking such prior action.
(2) Any stockholder's notice required by this section (b) shall describe
each action that the stockholder proposes to take by written consent. For each
such proposal, the notice shall set forth (i) the text of the proposal
(including the text of any resolutions to be adopted by written consent and the
language of any proposed amendment to the bylaws of the corporation), (ii) the
reasons for soliciting consents for the proposal, (iii) any material interest in
the proposal held by the stockholder and the beneficial owner, if any, on whose
behalf the action is to be taken, and (iv) any other information relating to the
stockholder, the beneficial owner, or the proposal that would be required to be
disclosed in filings in connection with the solicitation of proxies or consents
pursuant to Section 14 of the Securities Exchange Act and the rules and
regulations promulgated thereunder. To the extent the proposed action by written
consent involves the election of directors, the notice shall set forth as to
each person whom the stockholder proposes to elect as a director the same
information that would be required to be set forth in a stockholder's notice of
nomination pursuant to Article V. In addition to the foregoing, a stockholder's
notice shall set forth as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the notice is given (i) the name and
address of such stockholder as they appear on the corporation's books, and the
name and address of such beneficial owner, (ii) the class and number of shares
of the corporation which are owned beneficially and of record by the stockholder
and the beneficial owner, (iii) a description of all arrangements or
understandings between the stockholder and any other person or persons relating
to the proposed action by written consent, (iv) a representation whether the
stockholder or the beneficial owner, if any, intends or is part of a group which
intends to deliver a proxy
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statement and/or consent solicitation statement to stockholders either to
solicit consents or to solicit proxies to execute consents, or otherwise solicit
proxies or consents from stockholders in support of the action to be taken by
written consent, and (v) any other information relating to the stockholder and
beneficial owner that would be required to be disclosed in filings required to
be made in connection with solicitation of proxies or consents relating to the
proposed action by consent pursuant to Section 14 of the Securities Exchange Act
and the rules and regulations promulgated thereunder. During the ten (10) day
period following the date of the receipt of the notice required under this
section (b), the corporation may require the stockholder of record and/or
beneficial owner requesting a record date for proposed stockholder action by
written consent to furnish such other information as it may reasonably require
to determine the validity of the request for a record date.
ARTICLE XIII
THE BOARD OF DIRECTORS
Qualifications. Directors need not be stockholders. No director shall be
elected or reelected who shall have attained the age of seventy prior to or on
the date of such election or reelection. No director who shall have been an
officer or employee of the corporation, other than a chief executive officer or
chief operating officer, shall be elected or reelected if he or she shall have
attained the age of sixty-five or if his or her employment with the corporation
shall have terminated prior to or on the date of such election or reelection.
Number; Election. The board of directors shall consist of not less than
seven nor more than fifteen directors, the exact number of directors to be
determined from time to time by resolution adopted by affirmative vote of a
majority of the entire board of directors. The directors shall be divided into
three classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
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directors constituting the entire board of directors. At each annual meeting of
stockholders, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which that
director's term expires and until that director's successor shall be elected and
qualified, subject, however, to prior death, resignation, retirement,
disqualification or removal.
The board of directors shall elect a chairman of the board of directors and
may from time to time elect or appoint one or more vice chairmen of the board of
directors. The chairman of the board of directors and each vice chairman shall
each be a member of the board of directors. The chairman of the board of
directors and each vice chairman shall hold such position until such person's
successor shall be elected or appointed and qualified, subject, however, to
prior death, resignation, retirement, disqualification or removal.
Vacancies. If the office of any director becomes vacant at any time by
reason of death, resignation, retirement, disqualification, removal from office
or otherwise, or if any new directorship is created by any increase in the
authorized number of directors, a majority of the directors then in office,
although less than a quorum, or the sole remaining director, may choose a
successor or fill the newly created directorship, and the director so chosen
shall hold office, subject to the provisions of these bylaws, until the
expiration of the term of the class to which he or she has been assigned or
until a successor shall be duly elected and qualified. Notwithstanding the
foregoing, whenever the holder of any one or more classes or series of Preferred
Stock issued by the corporation shall have the right, voting separately by class
or series, to elect directors at an annual or special meeting of
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stockholders, the election, term of office, voting powers and other attributes
of such directorships shall be governed by the resolutions of the board of
directors or the provisions of the certificate of incorporation creating that
class or series, and such directors so elected shall not be divided into classes
pursuant to this Article unless expressly provided by such resolutions or such
provisions of the certificate of incorporation. The continuing directors may act
notwithstanding any vacancy in the board and all acts done by the board of
directors or by any director shall be valid notwithstanding any defects in the
election or qualification of any such director.
Resignations. Any director may resign by giving written notice to the
chairman of the board of directors, the chief executive officer or the
secretary. Such resignation shall take effect at the time stated therein, or if
no time be so stated then upon its delivery, and without in either case the
necessity of its being accepted unless the resignation shall so state. When one
or more directors shall resign from the board, effective at a future date, a
majority of the directors then in office shall have power to fill such vacancy
or vacancies, the vote or action by writing thereon to take effect when such
resignation or resignations shall become effective.
Removal. Notwithstanding any other provisions of these bylaws (and
notwithstanding the fact that some lesser percentage may be specified by law),
any director or the entire board of directors of the corporation may be removed
at any time, but only for cause, by the holders of a majority of the shares then
entitled to vote at an election of directors. Notwithstanding the foregoing, and
except as otherwise required by law, whenever the holders of any one or more
series of Preferred Stock shall have the right, voting separately as a class, to
elect one or more directors of the corporation, the provisions of this paragraph
shall not apply with respect to the director or directors elected by such
holders of Preferred Stock.
No director resigning, and (except where a right to receive compensation
shall be expressly provided in a duly authorized written agreement) no director
removed, shall have
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any right to any compensation as such director for any period following
resignation or removal, or any right to damages on account of such removal,
whether such compensation is to be by the month or by the year or otherwise.
ARTICLE XIV
POWERS OF THE BOARD OF DIRECTORS
The business and affairs of the corporation shall be managed by or under
the direction of the board of directors, except as may otherwise be provided by
law, by the certificate of incorporation or by these bylaws.
ARTICLE XV
MEETINGS OF THE BOARD OF DIRECTORS
The board of directors may hold meetings and have one or more offices and
keep the books of the corporation within or without the State of Delaware in
such place or places as may from time to time be determined by a majority of the
entire board of directors. Regular meetings of the board of directors may be
held without call or notice at such places within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the board
of directors may be held without call or formal notice immediately after and at
the same place as the annual meeting of the stockholders, or any special meeting
of the stockholders at which a board of directors is elected.
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Special meetings of the board of directors may be held at any place either
within or without the State of Delaware at any time when called by a majority of
the board of directors, the chairman of the board of directors, the president,
treasurer or secretary, reasonable notice of the time and place thereof being
given to each director. A waiver of such notice in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent to such notice. Notice of a meeting need not
be given to any director who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to such director. In any case
it shall be deemed sufficient notice to the directors to send notice in writing
(which may include electronic facsimile), at least twenty-four hours before the
meeting, to them at their usual or last known business or residence addresses.
With respect to any meeting of the board of directors other than a regularly
scheduled meeting, reasonable efforts shall be made also to give notice by
telephone at least twenty-four hours before the meeting and, upon request of any
director, reasonable efforts shall be made to enable such director to
participate in the meeting by telephone. Neither notice of meeting nor waiver of
notice need specify the purposes of a meeting.
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place. No notice of any adjourned
meeting of the board of directors shall be required.
Except as may be otherwise provided by law, the certificate of
incorporation or these bylaws, when a quorum is present at any meeting the vote
of a majority of the directors present shall be the act of the board of
directors.
Members of the board of directors, or any committee designated by the board
of directors, may participate in a meeting of the board or such committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other or by any
other means permitted by law. Such participation shall constitute presence in
person at such meeting.
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Interested Directors and Officers. No contract or transaction between the
corporation and one or more of its directors or officers, or between the
corporation and any other corporation, partnership, association, or other
organization in which one or more of the corporation's directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the board or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if (1) the material facts as to the director's
relationship or interest and as to the contract or transaction are disclosed or
are known to the board of directors or the committee, and the board or committee
in good faith authorizes the contract or transaction by the affirmative vote of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum, (2) the material facts as to the director's
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders,
or (3) the contract or transaction is fair as to the corporation as of the time
it is authorized, approved or ratified, by the board of directors, a committee
thereof, or the stockholders. Interested directors may be counted in determining
the presence of a quorum at a meeting of the board of directors or of a
committee, which authorizes the contract or transaction.
ARTICLE XVI
QUORUM OF THE BOARD OF DIRECTORS
Except as otherwise required by law, the certificate of incorporation or
these bylaws, a majority of the entire board of directors shall constitute a
quorum for the transaction of all business.
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ARTICLE XVII
COMMITTEES OF THE BOARD OF DIRECTORS
There shall be four standing committees of the board of directors,
identified as the executive committee, the audit committee, the finance
committee, and the personnel committee. In addition, the board of directors may,
pursuant to the procedures hereinafter outlined in this Article XVII, from time
to time create such additional committees as it may deem necessary or
appropriate. All committees shall have only such powers and duties as are
hereinafter described and as may specifically from time to time be voted by
resolution of a majority of the board of directors.
The board of directors may, by resolution adopted by a majority of the
board of directors, (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of two or
more of the directors; (b) designate one or more directors as alternate members
of any such committee who may replace any absent or disqualified member at any
meeting of the committee; and (c) determine the extent to which each such
committee shall have and may exercise the powers of the board of directors in
the management of the business and affairs of the corporation, including the
power to authorize the seal of the corporation to be affixed to all papers which
may require it; excepting, however, such powers which by law, the certificate of
incorporation or these bylaws they are prohibited from so delegating. In the
absence or disqualification of any member of such committee and his alternate,
if any, the member or members thereof present at any meeting and not
disqualified from voting, whether or not constituting a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member. Except as the
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board of directors may otherwise determine, any committee may make rules for the
conduct of its business, but unless otherwise provided by the board or such
rules, its business shall be conducted as nearly as may be in the same manner as
is provided by these bylaws for the conduct of business by the board of
directors.
Vacancies on the committees of the board of directors may be filled by the
board of directors by resolution adopted by a majority of the board at any
meeting of the board.
ARTICLE XVIII
THE EXECUTIVE COMMITTEE
The executive committee shall consist of such members of the board of
directors as the board shall from time to time determine, and shall include ex
officio the chief executive officer of the corporation. No elective member of
the executive committee shall be an employee of the corporation, with the
exception of the chairman of the committee, who may be an employee of the
corporation. In no event shall a majority of the members of the executive
committee be employees of the corporation. The members and the chairman of the
executive committee shall be elected annually by resolution passed by a majority
of the board of directors at its first meeting following the annual meeting of
stockholders or at any other time. The members shall hold office until the first
meeting of the board of directors following the next annual meeting of the
stockholders and until their successors are respectively elected and qualified
or until their earlier resignation, removal or death.
The executive committee, in all cases in which specific directions to the
contrary shall not have been given by the board of directors, shall have and may
exercise, during the intervals between the meetings of the board of directors,
all the powers and authority of the board of directors in the management of the
business and affairs of the corporation in such manner as the executive
committee may deem in the best interests of the corporation, except that the
executive committee shall not have the power or authority to (i) approve or
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adopt or recommend to the stockholders any action or matter that requires the
approval of the stockholders or (ii) adopt, amend or repeal any bylaw of the
corporation.
The executive committee shall also recommend to the board of directors:
nominees for election or reelection as directors; the composition,
responsibilities, organization and procedures of the board of directors and its
committees; the nature and scope of the Corporation's business and its plans for
future growth; and, plans for the succession to the office of chief executive
officer of the corporation.
Meetings of the executive committee shall be held at such times as may be
requested by the chief executive officer or by the chairman of the executive
committee, but normally no fewer than four times each calendar year. At least
once each calendar year, at a time designated by the chief executive officer,
the executive committee shall conduct an overall review of the major matters
within the scope of its responsibilities. Reasonable notice of all meetings
shall be given by the secretary. A majority shall constitute a quorum of the
executive committee. A majority of the committee in attendance shall decide any
question brought before any meeting of the committee.
ARTICLE XIX
THE AUDIT COMMITTEE
The audit committee shall consist of at least three members of the board of
directors as the board shall from time to time determine, no one of whom shall
be an employee of the corporation. The members and the chairman of the audit
committee shall be elected annually by resolution passed by a majority of the
board of directors at its first meeting following the annual meeting of
stockholders or at any other time. The members shall hold office until the first
meeting of the board of directors following the next annual meeting of the
stockholders and until their successors are respectively elected and qualified
or until their earlier resignation, removal or death.
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The audit committee shall review with the corporation's independent auditor
the results of its examination of the financial operations of the corporation
and shall make recommendations to the board of directors with respect thereto.
It shall also review annually the corporation's internal audit function. The
audit committee and the board of directors shall have the sole authority to
appoint or remove the independent auditor.
The chief executive officer and the chief financial officer, although not
members of the audit committee, shall receive notice of and shall customarily
attend all meetings of the committee, except that the committee may at its
discretion elect to meet in executive session without the presence of the chief
executive officer or chief financial officer and shall so meet at least once
each calendar year with the corporation's independent auditors to review their
report on the operation of the business.
Meetings of the audit committee shall be held at such times as may be
requested by the chief executive officer or the chairman of the committee, but
normally no fewer than three times each calendar year. Reasonable notice of all
meetings shall be given by the secretary. A majority shall constitute a quorum
of the audit committee. A majority of the committee in attendance shall decide
any question brought before any meeting of the committee.
ARTICLE XX
THE FINANCE COMMITTEE
The finance committee shall consist of such members of the board of
directors as the board shall from time to time determine, no one of whom shall
be an employee of the corporation. The members and the chairman of the finance
committee shall be elected annually by resolution passed by a majority of the
board of directors at its first meeting following the annual meeting of
stockholders or at any other time. The members shall hold
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office until the first meeting of the board of directors following the next
annual meeting of the stockholders and until their successors are respectively
elected and qualified or until their earlier resignation, removal or death.
The finance committee shall be available to review and make recommendations
to the board of directors with respect to financial policies of the corporation,
including (i) the corporation's financial condition and its requirements for
funds, (ii) the timing and the types of financing to be undertaken, (iii) cash
flow, borrowing and dividend policy and criteria for assessing such programs,
and (iv) financial terms of proposed acquisitions and sales or other disposition
of divisions or subsidiaries of the corporation.
The chief executive officer and chief financial officer, although not
members of the finance committee, shall receive notice of and shall customarily
attend all meetings of the committee, except that the committee may at its
discretion elect to meet in executive session without the presence of the chief
executive officer or chief financial officer.
Meetings of the finance committee shall be held at such times as may be
requested by the chief executive officer or the chairman of the committee, but
normally no fewer than three times each calendar year. Reasonable notice of all
meetings shall be given by the secretary. A majority shall constitute a quorum
of the finance committee. A majority of the committee in attendance shall decide
any question brought before any meeting of the committee.
ARTICLE XXI
THE PERSONNEL COMMITTEE
The personnel committee shall consist of such members of the board of
directors as the board shall from time to time determine, no one of whom shall
be an employee of the corporation. The members and the chairman of the personnel
committee shall be elected
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annually by resolution passed by a majority of the board of directors at its
first meeting following the annual meeting of stockholders or at any other time.
The members shall hold office until the first meeting of the board of directors
following the next annual meeting of the stockholders and until their successors
are respectively elected and qualified or until their earlier resignation,
removal or death.
The personnel committee shall: be designated as the committee of the board
of directors authorized to administer the corporation's stock purchase, stock
option and stock equivalent unit plans and other executive incentive plans, with
authority to grant or to approve or disapprove participation by specific
employees in those plans as required by the terms of those plans; review and
make recommendations to the management and/or the board of directors on the
personnel policies of the corporation, particularly as related to fringe
benefits; review and make recommendations to the board of directors on the
compensation of all officers of the corporation and such other executives and
employees as the personnel committee shall determine; and shall, upon request of
the chief executive officer, the chief operating officer or the chief personnel
officer of the corporation, review and make recommendations on stock option
plans, stock purchase plans and employees' savings and bonus plans, pension and
retirement plans, and any other plans, systems and practices of the corporation
relating directly or indirectly to compensation, which are in effect or are
proposed to be adopted with respect to any of the employees of the corporation
or its subsidiaries.
The chief executive officer and the chief personnel officer, although not
members of the personnel committee, shall receive notice of and shall
customarily attend all meetings of the committee, except that the committee may
at its discretion elect to meet in executive session without the presence of the
chief executive officer or chief personnel officer.
Meetings of the personnel committee shall be held at such times as may be
requested by the chief executive officer or the chairman of the committee.
Reasonable
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notice of all meetings shall be given by the secretary of the corporation. Two
members shall constitute a quorum of the personnel committee. A majority of the
committee in attendance shall decide any question brought before any meeting of
the committee.
ARTICLE XXII
DELEGATION OF POWERS
In addition to the provisions of Article XVII of these bylaws, and to the
extent permitted by applicable law, the board of directors may from time to time
delegate any of its powers to officers, attorneys or agents of the corporation
subject to such regulations as may be imposed by the board.
ARTICLE XXIII
ACTION WITHOUT A MEETING
Any action required or permitted to be taken at any meeting of the board of
directors or of any committee thereof may be taken without a meeting, if consent
thereto in writing is given by all members of the board or of such committee, as
the case may be, and the writing or writings constituting such consent are filed
with the minutes of the proceedings of the board or such committee. Such written
consent shall be treated for all purposes as the act of the board of directors
or of such committee, as the case may be.
ARTICLE XXIV
STATEMENT OF ASSETS AND LIABILITIES
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At the annual meetings and at any other time when required by the
stockholders, the board of directors shall present a statement of the assets and
liabilities of the corporation and of the condition of the corporation's
affairs.
ARTICLE XXV
OFFICERS
The board of directors shall elect a chief executive officer of the
corporation and, in its discretion, a president and one or more vice presidents.
The board of directors or the chief executive officer may from time to time
elect or appoint such other officers and agents with such powers and duties as
they or the chief executive officer may designate. Officers shall be elected or
appointed, and any designations to the titles of such officers shall be fixed
annually by the board of directors at its first meeting following the annual
meeting of stockholders or at any other time. The chief executive officer of the
corporation shall be a member of the board of directors and shall serve as its
chairman, unless the board of directors elects another member as its chairman.
Any two or more offices may be held by the same person. The officers shall hold
office until the first meeting of the board of directors following the next
annual meeting of the stockholders and until their successors are respectively
elected or appointed and qualified, unless a shorter period shall have been
specified by the terms of their election or appointment, or until their earlier
resignation, retirement, removal or death. Subject to law and to the provisions
of these bylaws, each officer shall have such duties and powers as are
prescribed by law or these bylaws and as are commonly incident to the office and
such additional duties and powers as the board of directors or the chief
executive officer may from time to time designate.
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ARTICLE XXVI
RESIGNATIONS AND REMOVALS OF OFFICERS
Any officer may resign by giving written notice to the board of directors,
the chief executive officer or the secretary. Such resignation shall take effect
at the time stated therein, or if no time be so stated then upon its delivery,
and without in either case the necessity of its being accepted unless the
resignation shall so state.
The board of directors may by a majority vote of its entire number remove
from office any officer of the corporation, either with or without cause. The
board of directors may at any time terminate or modify the authority of any
agent. The chief executive officer may remove with or without cause any officer
or agent appointed by the chief executive officer.
No officer resigning, and (except where a right to receive compensation
shall be expressly provided in a duly authorized written agreement) no officer
removed, shall have any right to any compensation as such officer for any period
following resignation or removal, or any right to damages on account of such
removal, whether such compensation be by the month or by the year or otherwise.
ARTICLE XXVII
VACANCIES
Any vacancy occurring in any office may be filled by the directors at any
meeting of the board of directors or, if the office is not the chief executive
officer, president or a vice president, by the chief executive officer, and the
officers so chosen shall hold office for the
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unexpired term in respect of which the vacancy occurred and until their
successors shall be duly elected or appointed and qualified unless sooner
displaced.
ARTICLE XXVIII
INSPECTION OF ACCOUNTS AND BOOKS
No account or book of the corporation shall be open to the inspection of
any stockholder (except as provided by the laws of Delaware) unless such
inspection in any case shall have been authorized by a resolution of a majority
of the entire board of directors who shall be the sole judges as to whether any
such inspection shall be allowed, and the stockholders' rights in this respect
are and shall be restricted and limited accordingly.
ARTICLE XXIX
INDEMNIFICATION
(a) The corporation shall indemnify and hold harmless, to the maximum
extent permitted from time to time under the law of the state of Delaware, and
upon request advance expenses to, any person who is or was a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, proceeding or claim, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was or has agreed to
be a director, officer or employee of the corporation or while a director,
officer or employee is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, against expenses (including attorney's fees
and expenses), judgments, fines, penalties and amounts paid in settlement
incurred (and not otherwise recovered) in connection with the investigation,
preparation to defend or defense of such action, suit, proceeding or claim. The
foregoing shall not require the corporation to indemnify and/or hold harmless or
advance expenses to
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any person in connection with any action, suit, proceeding, claim or
counterclaim initiated by or on behalf of such person. Such indemnification
shall not be exclusive of other indemnification rights arising under contract,
agreement, vote of directors or stockholders or otherwise and shall inure to the
benefit of the heirs and legal representatives of such person. Any person
seeking indemnification under this Article XXIX shall be deemed to have met the
standard of conduct required for such indemnification unless the contrary shall
be established. Any repeal or modification of the foregoing provisions of this
Article XXIX shall not adversely affect any right or protection of a director,
officer or employee of the corporation with respect to any acts or omissions of
such director, officer or employee occurring prior to such repeal or
modification.
(b) To the extent that a director, officer or employee of the corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraph (a) or in defense of any claim, issue or
matter therein, such person shall be indemnified and/or held harmless against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
(c) Any indemnification under paragraph (a) (unless ordered by a court)
shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer or employee is
proper in the circumstances because such person has met the applicable standard
of conduct set forth in paragraph (a). Such determination shall be made (1) by
the board of directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(d) Expenses incurred in connection with a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon the request of and receipt of an
undertaking by or on behalf of the director, officer or employee to repay such
amount if it shall ultimately be
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determined that such person is not entitled to be indemnified by the corporation
as authorized in this Article XXIX.
Notwithstanding the foregoing, unless otherwise determined pursuant to this
Article XXIX, no advance shall be made by the corporation to a director, officer
or employee of the corporation (except by reason of the fact that such officer
is or was a director of the corporation in which event this paragraph shall not
apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (2) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrates
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interest of the
corporation.
(e) The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer or employee of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such person and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify such person
against such liability under the provisions of this Article XXIX or otherwise.
(f) For the purposes of this Article XXIX, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or
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beneficiaries; and a person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
XXIX.
(g) The indemnification and advancement of expenses provided by or granted
pursuant to, this Article XXIX shall continue as to a person who has ceased to
be a director, officer or employee and shall inure to the benefit of the heirs,
executors and administrators of such a person. Each person who is or becomes a
director, officer or employee as aforesaid shall be deemed to have served or to
have continued to serve in such capacity in reliance upon the indemnity and
advancement of expenses herein provided for in this Article XXIX.
ARTICLE XXX
SEAL
The common seal of the corporation shall be circular in form with the name
of the corporation around the periphery and the words and figures "Incorporated
1917 Delaware" within.
ARTICLE XXXI
EXECUTION OF PAPERS
Except as the board of directors may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, agreements, debentures, bonds, notes, checks, drafts and
other obligations made, accepted or endorsed by the corporation shall be signed
in the name and on behalf of the corporation by the chairman of the board of
directors or by any vice chairman of the board of directors,
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president or vice president, or by the treasurer or any assistant treasurer or
secretary or any assistant secretary, and the signature of any such officer may
be facsimile and in case any such officer who shall have signed, or whose
facsimile signature shall have been used on any debenture, note or other
document shall cease to be such officer of the corporation, whether because of
death, resignation, or otherwise, before such debenture, note or other document
shall have been delivered by the corporation, such debenture, note or other
document may nevertheless be adopted by the corporation and be issued and
delivered as though the person who signed such debenture, note or other document
or whose facsimile signature shall have been used thereon had not ceased to be
such officer and the delivery of any such debenture, note or other document
shall be deemed the adoption thereof by the corporation.
ARTICLE XXXII
AMENDMENTS
Except as otherwise provided in the certificate of incorporation, the
foregoing bylaws may be altered or amended by the stockholders or by a majority
of the entire board of directors at any regular meeting or at any special
meeting duly called for that purpose.
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Exhibit 10(a)
THE GILLETTE COMPANY
1971 STOCK OPTION PLAN, AS AMENDED
1. PURPOSE. The purpose of the 1971 Stock Option Plan (hereinafter
referred to as the "Plan") is to provide a special incentive to selected key
salaried employees of The Gillette Company (hereinafter referred to as the
"Company") and of its subsidiaries and to the non-employee members of the Board
of Directors of the Company to promote the Company's business. The Plan is
designed to accomplish this purpose by offering such employees and non-employee
directors a favorable opportunity to purchase shares of the common stock of the
Company so that they will share in the success of the Company's business. For
purposes of the Plan a subsidiary is 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. ADMINISTRATION. 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 key salaried employees of the Company and its
subsidiaries shall be granted options; (b) to determine whether the options
granted to any employees shall be incentive stock options within the meaning of
the Internal Revenue Code or non-qualified stock options or both; provided,
however, that with respect to options granted after December 31, 1986, in no
event shall the fair market value of the stock (determined at the time of grant
of the options) subject to incentive stock options within the meaning of the
Internal Revenue Code which first became exercisable by any employee in any
calendar year exceed $100,000 (and, to the extent such fair market value exceeds
$100,000, the later granted options shall be treated as non-qualified stock
options); (c) to determine the time or times when options shall be granted to
employees and the number of shares of common stock to be subject to each such
option provided, however, subject to adjustment as provided in Section 9 of the
Plan, in no event shall any employee be granted options covering more than
800,000 shares of common stock in any calendar year; (d) with respect to options
granted to employees, to determine the option price of the shares subject to
each option and the method of payment of such price; (e) with respect to options
granted to employees, to determine the time or times when each option becomes
exercisable and the duration of the exercise period; (f) to prescribe the form
or forms of the instruments evidencing any options granted under the Plan and of
any other instruments required under the Plan and to change such forms from time
to time; (g) to make all determinations as to the terms of any sales of common
stock of the Company to employees under Section 8; (h) to adopt, amend and
rescind rules and regulations for the administration of the Plan and the options
and for its own acts and proceedings; and (i) 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. PARTICIPANTS. The participants in the Plan shall be such key salaried
employees of the Company or of any of its subsidiaries, whether or not also
officers or directors, as may be selected from time to time by the Committee in
its discretion, subject to the provisions of Section 8. In addition, each
non-employee director shall be a participant in the Plan. In any grant of
options after the initial grant, or
<PAGE> 2
any sale made under Section 8 after the initial sale, employees who were
previously granted options or sold shares under the Plan may be included or
excluded.
4. LIMITATIONS. No option shall be granted under the Plan and no sale
shall be made under Section 8 after April 18, 2002, but options theretofore
granted may extend beyond that date. Subject to adjustment as provided in
Section 9 of the Plan, the number of shares of common stock of the Company,
which may be delivered under the Plan, shall not exceed 158,800,000 in the
aggregate. To the extent that any option granted under the Plan shall expire or
terminate unexercised or for any reason become unexercisable as to any shares
subject thereto, such shares shall thereafter be available for further grants
under the Plan, within the limit specified above.
5. STOCK TO BE DELIVERED. Stock to be delivered under the Plan may
constitute an original issue of authorized stock or may consist of previously
issued stock acquired by the Company, as shall be determined by the Board of
Directors. The Board of Directors and the proper officers of the Company shall
take any appropriate action required for such delivery.
6. TERMS AND CONDITIONS OF OPTIONS GRANTED TO EMPLOYEES. All options
granted to either non-employee directors or employees shall be subject to
Section 6 Paragraph (c) Subparagraphs (4) and (5). All options granted to
employees under the Plan shall be subject to all the following additional terms
and conditions (except as provided in Sections 7 and 8 below) and to such other
terms and conditions as the Committee shall determine to be appropriate to
accomplish the purposes of the Plan:
(a) OPTION PRICE. The option price under each option shall be
determined by the Committee and shall be not less than l00 percent of
the fair market value per share at the time the option is granted. If
the Committee so directs, an option may provide that if an employee
Participant who was an employee participant at the time of the grant
of the option and who is not an officer or director of the Company at
the time of any exercise of the option, he shall not be required to
make payment in cash or equivalent at that time for the shares
acquired on such exercise, but may at his election pay the purchase
price for such shares by making a payment in cash or equivalent of not
less than five percent of such price and entering into an agreement,
in a form prescribed by the Committee, providing for payment of the
balance of such price, with interest at a specified rate, but not less
than four percent, over a period not to exceed five years and
containing such other provisions as the Committee in its discretion
determines. In addition, if the Committee so directs, an option may
provide for a guarantee by the Company of repayment of amounts
borrowed by the Participant in order to exercise the option, provided
he is not an officer or director of the Company at the time of such
borrowing, or may provide that the Company may make a loan, guarantee,
or otherwise provide assistance as the Committee deems appropriate to
enable the Participant to exercise the option, provided that no such
loan, guarantee, or other assistance shall be made without approval of
the Board of Directors as required by law.
(b) PERIOD OF OPTIONS. The period of an option shall not exceed
ten years from the date of grant.
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<PAGE> 3
(c) EXERCISE OF OPTION.
(1) Each option held by a participant other than a
non-employee director should be made exercisable at such time or
times, whether or not in installments, as the Committee shall
prescribe at the time the option is granted. In the case of an
option held by a participant other than a non-employee director
which is not immediately exercisable in full, the Committee may
at any time accelerate the time at which all or any part of the
option may be exercised.
(2) Options intended to be incentive stock options, as
defined in the Internal Revenue Code, shall contain and be
subject to such provisions relating to the exercise and other
matters as are required of incentive stock options under the
applicable provisions of the Internal Revenue Code and Treasury
Regulations, as from time to time in effect, and the Secretary of
the Committee shall inform optionees of such provisions.
(3) Each incentive stock option within the meaning of the
Internal Revenue Code granted on or before December 31, 1986
shall contain and be subject to the following provision:
This option shall not be exercisable while there is
outstanding (within the meaning of Section 422A(c)(7) of the
Internal Revenue Code of l954, as amended) any incentive
stock option (as that term is defined in said Code) which
was granted to the Participant before the granting of this
option to purchase stock in his employer corporation
(whether The Gillette Company or a parent or subsidiary
corporation thereof), or in a corporation which at the time
of the granting of this option is a parent or subsidiary
corporation of the employer corporation, or in a predecessor
corporation of any such corporation.
Each incentive stock option within the meaning of the
Internal Revenue Code granted after December 31, 1986 shall not
be subject to the above provision.
(4) Payment for Delivery of Shares. Upon exercise of any
option, payment in full in the form of cash or a certified bank,
or cashier's check or, with the approval of the Secretary of the
Committee, in whole or part Common Stock of the Company at fair
market value, which for this purpose shall be the closing price
on the business day preceding the date of exercise, shall be made
at the time of such exercise for all shares then being purchased
thereunder, except in the case of an exercise to which the
provisions of the second sentence of subsection (a) above are
applicable.
The purchase price payable by any person, other than a
non-employee director, who is not a citizen or resident of the
United States of America and who is an employee of a foreign
subsidiary at the time payment is due shall, if the Committee so
directs, be paid to such subsidiary in the currency of the
country in which such subsidiary is located, computed at such
exchange rate as the Committee may direct. The amount of each
such payment may, in the discretion of the Committee, be
accounted for on the books of such
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subsidiary as a contribution to its capital by the Company. The
Company shall not be obligated to deliver any shares unless and
until, in the opinion of the Company's counsel, all applicable
federal and state laws and regulations have been complied with,
nor, in the event the outstanding common stock is at the time
listed upon any stock exchange, unless and until the shares to be
delivered have been listed or authorized to be added to the list
upon official notice of issuance upon such exchange, nor unless
or until all other legal matters in connection with the issuance
and delivery of shares have been approved by the Company's
counsel. Without limiting the generality of the foregoing, the
Company may require from the Participant such investment
representation or such agreement, if any, as counsel for the
Company may consider necessary in order to comply with the
Securities Act of 1933 and may require that the Participant agree
that any sale of the shares will be made only on the New York
Stock Exchange or in such other manner as is permitted by the
Committee and that he will notify the Company when he makes any
disposition of the shares whether by sale, gift, or otherwise.
The Company shall use its best efforts to effect any such
compliance and listing, and the Participant shall take any action
reasonably requested by the Company in such connection. A
Participant shall have the rights of a shareholder only as to
shares actually acquired by him under the Plan.
(5) Notwithstanding any other provision of this Plan, if
within one year of a Change in Control, as hereinafter defined,
the employment of an employee Participant is terminated for any
reason other than willful misconduct or the service as a director
of a non-employee director is terminated, all his outstanding
options which are not yet exercisable shall become immediately
exercisable and all the rights and benefits relating to such
options including, but not limited to, periods during which such
options may be exercised shall become fixed and not subject to
change or revocation by the Company; provided, that in the case
of any incentive stock option (the "second option") which is not
exercisable by reason of a previously granted incentive stock
option which is still "outstanding" within the meaning of section
422A(c)(7) of the Internal Revenue Code (as in effect before the
amendments made by the Tax Reform Act of 1986), the second option
shall not be exercisable until the earlier outstanding option is
exercised in full or expires by reason of the lapse of time. For
purposes of the foregoing, a Change in Control shall mean the
happening of any of the following events:
(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 of the Company;
(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
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<PAGE> 5
(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.
(d) NONTRANSFERABILITY OF OPTIONS. No option may be transferred
by the Participant otherwise than by will or by the laws of descent
and distribution, and during the Participant's lifetime the option may
be exercised only by him.
(e) NONTRANSFERABILITY OF SHARES. If the Committee so
determines, an option granted to an employee may provide that, without
prior consent of the Committee, shares acquired by exercise of the
option shall not be transferred, sold, pledged or otherwise disposed
of within a period not to exceed one year from the date the shares are
transferred to the Participant upon his exercise of the option or
prior to the satisfaction of all indebtedness with respect thereto, if
later.
(f) TERMINATION OF EMPLOYMENT. If the employment of an employee
Participant terminates for any reason other than his death, he may,
unless discharged for cause which in the opinion of the Committee
casts such discredit on him as to justify termination of his option,
thereafter exercise his option as provided below:
(i) If such termination of employment is voluntary on the
part of the employee Participant, he may exercise his option only
within 30 days after the date of termination of his employment
(unless a longer period not in excess of three months is allowed
by the Committee).
(ii) If such termination of employment is involuntary on the
part of the employee Participant, he may exercise his option only
within three months after the date of termination of his
employment.
(iii) If such termination of employment is on account of the
employee Participant's total and permanent disability, he may
exercise his option only within one year after the date of
termination of his employment.
(iv) Notwithstanding the above, if an employee Participant
(a) upon termination of the employment with the Company begins
receiving early or normal retirement benefits under The Gillette
Company Retirement Plan, (b) upon termination of employment with
a subsidiary begins receiving retirement benefits under a
retirement plan maintained by or to which the subsidiary
contributes, or (c) leaves the employment of a subsidiary which
does not maintain or contribute to a retirement plan for the
benefit of the Participant at a time when the Participant would
have been eligible to begin receiving early or normal retirement
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<PAGE> 6
benefits under The Gillette Company Retirement Plan had the
individual been a participant of that Plan, he may exercise (I)
any option granted prior to January 1, 1994, other than an option
designated as an incentive stock option hereunder, within a
period not to exceed two years after his retirement date, (II)
any option granted after December 31, 1993 and prior to April
17,1997, other than an option designated an incentive stock
option hereunder, within a period not to exceed three years after
his retirement date, (III) any option granted prior to April 17,
1997 and designated an incentive stock option hereunder within a
period not to exceed three months after his retirement date, and
(IV) any option granted after April 16, 1997 within a period not
to exceed five years after his retirement date, provided that
such option shall cease to qualify as an incentive stock option
under the Internal Revenue Code if not exercised within three
months after his retirement date.
The Committee may, in its sole discretion, terminate any such
option at or any time after the date when that option otherwise would
have terminated as a result of the termination of the Participant's
employment, if it deems such action to be in the best interests of the
Company. In no event, however, may any Participant exercise any option
(i) which was not exercisable on the date he ceased to be an employee,
except in the case of options granted at least one year prior to a
Participant's cessation of employment on account of retirement or
total and permanent disability, or (ii) after the expiration of the
option period. For the purposes of this Paragraph (f), a Participant's
employment shall not be considered terminated in the case of a sick
leave or other bona fide leave of absence approved by the Company or a
subsidiary in conformance with the applicable provisions of the
Internal Revenue Code or Treasury Regulations, or in the case of a
transfer to the employment of a subsidiary or to the employment of the
Company.
(g) DEATH. If a Participant dies while holding an option which
had been granted at least one year prior to the date of death, then at
any time or times within one year after his death (or with respect to
employee Participants such further period as the Committee may allow)
such option may be exercised, as to all or any of the shares covered
by such option, by his executor or administrator of the person or
persons to whom the option is transferred by will or the applicable
laws of descent and distribution, and except as so exercised the
option shall expire after the expiration of such period. In no event,
however, may any option be exercised after the expiration of the
option period.
7. REPLACEMENT OPTIONS. The Company may grant options under the Plan on
terms differing from those provided for in Section 6 where such options are
granted in substitution for options held by employees of other corporations who
concurrently become employees of the Company or a subsidiary as the result of a
merger or consolidation of the employing corporation with the Company or
subsidiary, or the acquisition by the Company or a subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
options be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.
Notwithstanding anything contained in this Plan, the Committee shall have
authority, with respect to any options granted or to be granted to employees or
outstanding installment Purchase Agreements of participants other than
non-employee directors under this Plan, to extend the time for payment of any
and all installments, to modify the amount of any installment, to amend
outstanding
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<PAGE> 7
option certificates to provide for installment payments or to take any other
action which it may, in its discretion, deem necessary, provided that: (1)
interest on the unpaid balance under any outstanding Purchase Agreement at the
rate of at least four percent (4%) per annum shall continue to be due and
payable quarterly during the period of any deferral of payment; (2) all such
installment Purchase Agreements and unexercised options, shall at all times be
in accordance with the applicable provisions of Regulation G of the Board of
Governors of the Federal Reserve System, as from time to time amended, and with
all other applicable legal requirements; (3) no such action by the Committee
shall jeopardize the status of stock options as incentive stock options under
the Internal Revenue Code.
8. FOREIGN EMPLOYEES. The Company may grant options under the Plan on
terms differing from those provided for in Section 6 where such options are
granted to employee Participants who are not citizens or residents of the United
States of America if the Committee determines that such different terms are
appropriate in view of the circumstances of such Participants, provided,
however, that such options shall not be inconsistent with the provisions of
Section 6(a) or Section 6(b).
In addition, if the Committee determines that options are inappropriate for
any key salaried employees who are not citizens or residents of the United
States of America, whether because of the tax laws of the foreign countries in
which such employees are residents or for other reasons, the Board of Directors
may authorize special arrangements for the sale of shares of common stock of the
Company to such employees, whether by the Company, or a subsidiary, or other
person. Such arrangements may, if approved by the Board of Directors, include
the establishment of a trust by the foreign subsidiary, which is the employer of
the key salaried employees, designated by such subsidiary, to whom the shares
are to be sold. Such arrangements shall provide for a purchase price of not less
than the fair market value of the stock at the date of sale and a maximum annual
grant per participant of options to purchase 800,000 shares of common stock and
may provide that the purchase price be paid over a period of not more than ten
years, with or without interest, and that such employees have the right, with or
without payment of a specified premium, to require the seller of the shares to
repurchase such shares at the same price, subject to specified conditions. Such
arrangements may also include provisions deemed appropriate as to acceleration
or prepayment of the balance of the purchase price, restrictions on the transfer
of the shares by the employee, representations or agreements by the employee
about his investment purposes and other miscellaneous matters.
9. CHANGES IN STOCK. In the event of a stock dividend, split-up or
combinations of shares, recapitalization or merger 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 subject to the Plan and to
options then outstanding or to be granted thereunder, the maximum number of
shares or securities which may be issued or sold under the Plan, the maximum
annual grant for each participant, the automatic annual grant for each
non-employee director, the option price 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 which
results in the acquisition of substantially all the Company's outstanding stock
by a single person or entity or by a group of persons and/or entities acting in
concert, or in the event of complete liquidation of the Company, all outstanding
options shall thereupon terminate, provided that (i) at least twenty days prior
to the effective date of any such consolidation or merger, the Board of
Directors shall with respect to employee participants either (a)
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<PAGE> 8
make all outstanding options immediately exercisable, or (b) arrange to have the
surviving corporation grant replacement options to the employee Participants and
(ii) in the case of option grants to non-employee directors, all outstanding
options not otherwise exercisable shall become exercisable on the twentieth day
prior to the effective date of the merger.
10. EMPLOYMENT RIGHTS. The adoption of the Plan does not confer upon any
employee of the Company or a subsidiary any right to continued employment with
the Company or a subsidiary, as the case may be, nor does it interfere in any
way with the right of the Company or a subsidiary to terminate the employment of
any of its employees at any time.
11. THE COMMITTEE MAY AT ANY TIME DISCONTINUE GRANTING OPTIONS UNDER THE
PLAN. 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 or times
amend the Plan or amend any outstanding option or options or arrangements
established under Section 8 for the purpose of satisfying the requirements of
any changes in applicable laws or regulations or for any other purpose which may
at the time be permitted by law, provided that (except to the extent required or
permitted under Section 9 and, with respect to clauses (b) and (f) below, except
to the extent required or permitted under Section 7) no such amendment shall,
without the approval of the stockholders of the Company, (a) increase the
maximum number of shares available under the Plan or the maximum annual grant
per participant other than as permitted under Section 9, (b) reduce the minimum
option price of options thereafter to be granted below the price provided for in
Section 6(a), except that the Plan may be amended to provide that the minimum
option price of non-qualified stock options thereafter to be granted to
employees may be not less than 95% of the fair market value at the date of grant
if the Board determines that such amendment is necessary for tax reasons to
carry out the objectives of the Plan, (c) reduce the price at which shares of
common stock of the Company may be sold under Section 8 below the price provided
for in Section 8, (d) reduce the option price of outstanding options, (e) extend
the time within which options may be granted, (f) extend the period of an
outstanding option beyond ten years from the date of grant, (g) amend the
provisions of Section 12 with respect to the terms and conditions of options to
non-employee directors and further provided no such amendment shall adversely
affect the rights of any Participant (without his consent) under any option
theretofore granted or other contractual arrangements theretofore entered into
or after a Change in Control deprive any Participant of any right or benefit
which became operative in the event of a Change in Control. Notwithstanding the
above, in no event may the provisions of Section 12 be amended more than once
every six months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act, or the rules thereunder.
12. TERMS AND CONDITIONS OF OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS.
Effective at the close of business on the second business day after the 1992
Annual Meeting of Shareholders of the Company and on the second business day
after each Annual Meeting thereafter, each non-employee director shall be
automatically granted a non-incentive stock option to purchase 4,000 shares of
the common stock of the Company upon the following terms and conditions:
(a) OPTION PRICE. The option price under each option shall be the
fair market value on the date of grant, which for this purpose is defined
as the average between the high and the low price of the common stock on
the NYSE Composite Transaction listing.
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<PAGE> 9
(b) OPTION PERIOD. The period of an option shall be ten years from
the date of grant.
(c) OPTION EXERCISE. Each option shall become exercisable on the
earlier of the first Annual Meeting following the date of grant or the
first anniversary of the date of grant except as otherwise provided under
Section 6 Paragraph c Subparagraph 5 of this Plan. Any option, otherwise
exercisable, may be exercised during the period a non-employee director
remains a member of the Board of Directors and for a period of three months
following the date a non-employee director ceases to be a director except
in the case where the non-employee director is or will be eligible to
receive benefits under the Company's Retirement Plan for Directors when
membership on the Board of Directors ends and where the non-employee
director continues to be so eligible as of the date of exercise, that
non-employee director's options shall be exercisable for a period of two
years with respect to options granted before 1994 and three years for
options granted after 1993 from the date membership on the Board of
Directors ceases.
If a non-employee director dies at the time when the non-employee
director is entitled to exercise an option, then at any time or times
within one year after that non-employee director's death that non-employee
director's option may be exercised in accordance with the provisions of
Section 6 Paragraph (g) of the Plan. In no event shall any option be
exercised after the expiration of the option period.
(d) PAYMENT FOR DELIVERY OF SHARES. Payment for the shares shall be
made in accordance with the provisions of Section 6 Paragraph c
Subparagraph 4 of this Plan.
(e) NONTRANSFERABILITY OF OPTIONS. No option may be transferred by a
non-employee director otherwise than by will or by the laws of descent and
distribution, and during the non-employee director's lifetime the option
may be exercised only by the non-employee director.
March 18, 1999
9
<PAGE> 1
Exhibit 10(b)
THE GILLETTE COMPANY
STOCK EQUIVALENT UNIT PLAN
(AS AMENDED THROUGH DECEMBER 1999)
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.
2. 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 l5 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).
<PAGE> 2
2.9 Plan - The Stock Equivalent Unit Plan set forth herein, as from time to time
amended.
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 l5 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 l5 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
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<PAGE> 3
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 maturity date.
2.15 Change of Control - The occurrence of any of the following events:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A)
the then-outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however,
that, for purposes of this Section, the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
Affiliated Company or (iv) any acquisition by any corporation pursuant to a
transaction that complies with clauses (A), (B) and (C) of Subsection (c) below;
(b) Individuals who, as of December 16, 1999, constitute the Board of Directors
(the "Board") of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board;
(c) Consummation of a reorganization, merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through
3
<PAGE> 4
one or more subsidiaries) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities, as the case
may be, (B) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then-outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then-outstanding voting
securities of such corporation, except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement or of the action of the Board providing for such Business
Combination; or
(d) Approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
2.16 Change of Control Severance Program - With respect to any participant, the
Company's Change of Control Severance Program for Key Executives, Change of
Control Severance Program for Exempt Employees or Change of Control Severance
Program for Non-Exempt Employees under which such participant is eligible to
participate in the event of a Change of Control, or the individual Employment
Agreement between the participant and the Company the severance provisions of
which become operative in the event of a Change of Control.
3. ADMINISTRATION.
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.
4. PARTICIPATION.
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<PAGE> 5
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.
5. 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 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
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<PAGE> 6
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.
6. 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 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, if a
participant retires prior to his normal retirement date but after the occurrence
of a
6
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Change of Control, 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.
6.2.3.1 In the event of a Change of 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 upon the
participant's termination of employment within two years of the Change of
Control under circumstances entitling the participant to separation benefits
under the Change of Control Severance Program (or, in the case of a participant
whose designated home country is other than the United States, under
circumstances that would have entitled the participant to separation benefits
under the Change of Control Severance Program if such participant's designated
home country was the United States). The aggregate amount of such awards shall
be payable in accordance with the participant's payment election made in
accordance with Section 6.3, unless prior to the Change of Control the
participant had provided in such election for its revocation in the event of a
Change of Control in which event payment of such awards shall be made as soon as
practicable following the Change of 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, the Realignment
Plan and Parker Integration Plan approved by the Board of Directors at its
meeting held on January 7, 1994 or the Realignment Program approved by the Board
of Directors at its meeting held on September 28, 1998, 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, the Reorganization Plan
approved by the Board of Directors of the Company at its meeting on December 14,
1989 or the Reorganization and Realignment Program approved by the Board of
Directors at its meeting held on September 28, 1998, 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
7
<PAGE> 8
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.
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 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, and in the absence of an affirmative deferral election shall be
deemed to have elected payment in accordance with the
8
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preceding clause (a). When making such deferral election, the participant may
provide for the revocation of all such deferral elections in the event of a
Change of Control and for the payment by the Company of all such deferred
amounts as soon as practicable following the Change of Control.
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.
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.
7. 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 nor 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 a Change of
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 in accordance with Subparagraph 6.2.3.1.
7.2 The Board of Directors of the Company may terminate the Plan at any time
except that after a Change of 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 in accordance with
Subparagraph 6.2.3.1.
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 the
happening of any event in connection with or in anticipation of a Change of
Control that actually occurs, deprive a participant of a benefit or right which
becomes operative upon a Change of Control.
9
<PAGE> 10
8. 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 right 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 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.
DECEMBER 1999
10
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Exhibit 10(c)
THE GILLETTE COMPANY
INCENTIVE BONUS PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000)
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 employees for outstanding performance in the accomplishment of
assigned goals under the Company's Management by Objectives Program through
annual awards of cash bonuses.
2. DEFINITIONS.
BASE BONUS - The portion of an Eligible Employee's Bonus Award which
becomes payable automatically upon the Company's achievement of the Growth Goals
at the threshold level for an Incentive Year.
BASE SALARY - The Participant'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 pursuant to Section 5.
BONUS POOL - An amount earned in any Incentive Year as determined pursuant
to Section 5, from which Bonus Awards may be paid.
CHAIRMAN - The Chairman of the Board of Directors of the Company.
CHANGE OF CONTROL - The occurrence of any of the following events:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section, the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with clauses (A), (B)
and (C) of subsection (c) below;
(b) Individuals who, as of December 16, 1999, constitute the Board of
Directors (the "Board") of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
<PAGE> 2
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shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board;
(c) Consummation of a reorganization, merger, consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement or of the action of the Board
providing for such Business Combination; or
(d) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
CHANGE OF CONTROL SEVERANCE PROGRAM - With respect to any Participant, the
Company's Change of Control Severance Program for Key Executives, Change of
Control Severance Program for Exempt Employees or Change of Control Severance
Program for Non-Exempt Employees under which such Participant is eligible to
participate in the event of a Change of Control, or the individual Employment
Agreement between the Participant and the Company the severance provisions of
which become operative in the event of a Change of Control.
COMMITTEE - The Personnel Committee established by the Board of Directors
of the Company.
COMPANY - The Gillette Company, a Delaware corporation.
<PAGE> 3
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ELIGIBLE GRADE LEVEL - For each Incentive Year, the position or personal
grade level(s) for the Company's key management employees whom the Committee
determines 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 (a) 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, (b) has been employed by the Company or a
subsidiary for the entire Incentive Year and in an Eligible Grade Level at the
end of such Incentive Year, (c) has been assigned goals under the Company's
Management by Objectives Program to be accomplished during the Incentive Year
and has received a performance rating of "Effective" or higher on his or her
Management Reporting Form for the Incentive Year, (d) is an active employee on
the date of the granting of Bonus Awards (or is a former employee whose
employment terminated (i) on account of death, retirement or disability, or (ii)
under circumstances entitling the person to severance benefits under the
applicable Change of Control Severance Program), and (e) has not engaged in any
conduct that the Committee determines to be against the best interests of the
Company.
GROWTH GOALS - Growth Goals for each Incentive Year shall mean the specific
percentage of increase in Profit from Operations, Sales Growth and Return on
Assets, as determined by the Committee for that Incentive Year, which if
achieved would result in the awarding of a Bonus Pool under Section 5.
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.
MAXIMUM BONUS - The maximum amount of Bonus Award that may be paid to any
Participant for an Incentive Year.
MAXIMUM BONUS POOL - The amount of the Bonus Pool which would be earned
assuming the Growth Goals for the applicable Incentive Year are achieved at the
maximum level established by the Committee.
PARTICIPANT - Each Eligible Employee for an Incentive Year and each other
employee (including a former employee whose employment terminated during the
Incentive Year on account of death, retirement or disability) whom the Committee
has determined, in its sole and exclusive discretion, should receive a Bonus
Award for the Incentive Year in accordance with Section 5(c) or 6.
PLAN - The Incentive Bonus Plan as set forth herein, as from time to time
amended.
PRESIDENT - The President of the Company.
<PAGE> 4
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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 adjustments, 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.
RETIREMENT - The termination of a Participant's employment with the Company
and its Subsidiaries if (a) upon such termination the Participant begins
receiving early or normal retirement benefits under The Gillette Company
Retirement Plan, (b) upon such termination of employment with a Subsidiary
begins receiving retirement benefits under a retirement plan maintained by or to
which the Subsidiary contributes, or (c) the Participant leaves the employment
of a Subsidiary that does not maintain or contribute to a retirement plan for
the benefit of the Participant at a time when the Participant would have been
eligible to begin receiving early or normal retirement benefits under The
Gillette Company Retirement Plan had the individual been a participant of that
plan.
RETURN ON ASSETS - The Company's earnings for an Incentive Year, expressed
as a percentage of the Company's average assets for the Incentive Year, in each
case after adjustments determined by the Committee to be necessary or
appropriate to insure comparability of this Growth Goal from year to year for
the purposes of the Plan.
SAVINGS PLAN EQUIVALENCY - An amount computed by multiplying one half of
the employee's rate of matched savings under The Gillette Company Employees'
Savings Plan, or one half of the employee's rate of savings under The Gillette
Company Ltd/Ltee Retirement Income Savings Plan, as applicable, as of the
January l immediately preceding the date of a Bonus Award, by the amount of that
award which is deferred under Section 7(b) of this Plan.
SUBSIDIARY - Any corporation (a) 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, (b) over which the Company has effective
operating control, or (c) in which the Company has a material interest as
determined by the Committee.
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.
TARGET BONUS - The targeted amount of Bonus Award established for each
Eligible Employee, expressed as a percentage of the Eligible Employee's Base
Salary corresponding to the Eligible Employee's position or personal grade level
at the end of the applicable Incentive Year, assuming the Growth Goals for such
Incentive Year are achieved at the 100% level established by the Committee.
TARGET BONUS POOL - The amount of the Bonus Pool which would be earned
assuming the Growth Goals for the applicable Incentive Year are achieved at the
100% level established by the Committee.
<PAGE> 5
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3. DESIGNATION OF PARTICIPANTS. For each Incentive Year, the Committee
shall designate the Eligible Grade Level for determining the Eligible Employees
and shall approve such other persons who are recommended for participation by
the Chairman and the President. Designation of a person as an Eligible Employee
or a Participant for any Incentive Year shall not bind the Committee to
designate the person in any other Incentive Year.
4. ESTABLISHMENT OF GROWTH GOALS AND BONUS POOL RANGE. For each Incentive
Year, the Committee shall establish in writing (a) the Growth Goals for such
Incentive Year at threshold, target and maximum levels, and by means of one or
more formulae the corresponding amount of the Bonus Pool which may be earned at
each level of achievement of such Growth Goals, (b) the Target Bonus percentage
for each Eligible Grade Level (or group of Eligible Grade levels), and (c) the
portion of the Target Bonus constituting the Base Bonus. The Committee in its
discretion also may establish for an Incentive Year quantitative and/or
qualitative factors for its use in allocating an earned or contingency reserve
Bonus Pool (or portion thereof) among the Company's business units.
5. DETERMINATION OF BONUS POOL AND AWARDS. (a) As soon as practicable
after the end of each Incentive Year, the Committee shall determine whether the
Growth Goals for the Incentive Year were achieved and, if so, at what level of
achievement under the formulae established for such Incentive Year.
(b) If the Committee determines that Growth Goals for an Incentive Year
have been achieved at the threshold level or better, then a Bonus Pool shall be
earned for that Incentive Year and Eligible Employees shall be entitled to
receive Bonus Awards in amounts equal to their respective Base Bonuses. The
Committee in its discretion may authorize the payment of additional Bonus Awards
for the Incentive Year, up to an aggregate Bonus Pool amount corresponding to
the level of achievement of the Growth Goals (and in no event in an amount
exceeding the Maximum Bonus Pool) for such Incentive Year. The additional Bonus
Awards shall be allocated on an aggregate basis among the Company's business
units as determined by the Committee.
(c) The Chairman and the President shall allocate the additional Bonus
Awards among the Participants, except for themselves, provided that in no event
shall any individual Participant receive a total Bonus Award in excess of his or
her Maximum Bonus. Additional Bonus 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.
6. CONTINGENCY RESERVE; CARRY-FORWARD. For any Incentive Year, the
Committee may, within its sole discretion, establish a contingency reserve, in
an amount that shall not exceed thirty-five percent (35%) of the Target 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, the Committee may, within its sole discretion, elect to carry
forward up to fifteen percent (15%) of the Bonus Pool earned in any Incentive
Year to any one or more of
<PAGE> 6
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the next following three Incentive 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.
Bonus Awards authorized to be made from a contingency reserve, or from a
carried forward amount, shall be allocated among the Participants in accordance
with Section 5(b) and (c) above.
7. VESTING AND PAYMENT OF AWARDS; DEFERRAL ELECTION. (a) Bonus Awards
shall be immediately and fully vested upon the Committee's authorization of the
Bonus Pool for the applicable Incentive Year. In general, Bonus Awards shall be
paid to Participants within a reasonable time after the Committee's
authorization of such awards.
(b) The Committee in its sole and exclusive discretion may allow
Participants at certain grade levels and/or located in certain countries the
opportunity to defer payment of all or a portion of any Bonus Award earned for
any Incentive Year to March 1 of any future year or to Retirement.
Notwithstanding any prior voluntary deferral election hereunder, all amounts so
deferred shall be paid within a reasonable time after the Participant's
termination of employment with the Company and its Subsidiaries for any reason
other than Retirement. A Participant whose employment ceases on account of
Retirement may, prior to termination of employment, elect to defer payment of
any Bonus Awards beyond Retirement in accordance with rules prescribed by the
Committee and, if no such election is made, such amounts shall be paid within a
reasonable time after the date of termination of employment.
Notwithstanding the provisions of this subsection, the opportunity to defer
payment beyond termination of employment 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
prescribed by the Committee.
(c) Amounts deferred under subsection (a) or (b) 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.
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 Participant's account on at least an annual basis. Upon
payment to a Participant of an amount deferred under subsection (a) or (b)
above, the related Savings Plan Equivalency and amounts equivalent to interest
credited thereon also will be paid. In the event that the Savings Plan
Equivalency no longer exists by virtue of termination of The Gillette Company
Employees' Savings Plan and/or its Fixed Income Fund, the amounts in each
Participant'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.
<PAGE> 7
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(d) If a Participant dies or becomes totally and permanently disabled
while an employee of the Company or a Subsidiary, all deferred Bonus Awards and
the related Savings Plan Equivalencies and amounts equivalent to interest
accrued thereon shall be paid to the Participant or, in the case of death, to
the executor or administrator of the Participant's estate or as otherwise
provided by law.
(e) All payments made under this Plan shall be subject to any required
withholdings.
(f) Prior to the occurrence of a Change of Control, in accordance with
rules prescribed by the Committee, Participants making deferral elections
pursuant to subsection (a) or (b) above may provide for the revocation of all
such deferral elections in the event of a Change of Control and for the payment
by the Company of all such deferred amounts (plus the related Savings Plan
Equivalencies and amounts equivalent to interest accrued thereon) as soon as
practicable following the Change of Control.
(g) In the event of a Change of Control, Bonus Awards deferred in
accordance with subsection (a) or (b) above, plus the related Savings Plan
Equivalencies and amounts equivalent to interest accrued thereon, shall continue
to be payable to each Participant in accordance with his or her deferral
elections unless the Participant has provided in the most recent such election
for their revocation in accordance with subsection (f) above.
(h) Bonus Awards shall be payable solely from the general assets of the
Company and its Subsidiaries. No Participant shall have any right to, or
interest in, any specific assets of the Company or any Subsidiary in respect of
current or deferred Bonus Awards. The foregoing shall not preclude the Company
from establishing one or more funds from which payments under the Plan shall be
made, including but not limited to circumstances under which payments are to be
made following a Change of Control.
8. 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 rights of any Participant under any Bonus
Award previously granted. Further, once an Incentive Year has commenced, neither
the Board of Directors nor the Personnel Committee of the Board of Directors
shall have the discretion (a) not to make Bonus Awards if a Bonus Pool is earned
for that Incentive Year or (b) after a contingency reserve has been established
in any Incentive Year not to make Bonus Awards from such contingency reserve.
9. NO ASSIGNMENT. Bonus Awards authorized under this Plan shall be paid
only to Participants (or, in the event of a Participant's death, to the person
identified in Section 7(d) above). No Bonus Award, nor any part thereof, and no
right or claim to any of the moneys 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 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
<PAGE> 8
-8-
adjudged incompetent, the Committee may direct that any amounts payable be paid
to the Participant's guardian or legal representative.
10. EMPLOYMENT AND PLAN RIGHTS. The Plan shall not be deemed to give any
Eligible Employee or Participant the right 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 right to any Bonus Award until such
award is authorized in accordance with Section 5 or 6.
11. ADMINISTRATION AND AUTHORITY. The Plan shall be administered by the
Committee except as otherwise provided herein. The Committee shall have the
exclusive authority, consistent with the Plan, to (a) determine adjustments to
Profit from Operations, Net Sales and Return on Assets as provided in Section 2
of the Plan, (b) designate the Eligible Grade Levels, Eligible Employees and
Participants in the Plan for each Incentive Year, (c) determine the Growth Goals
necessary to earn a Bonus Pool for each Incentive Year, (d) establish Target
Bonus percentages for Eligible Employees for each Incentive Year, (e) establish
a contingency reserve and authorize payments of Bonus Awards from the reserve,
and/or provide for a carry-forward of a portion of an earned Bonus Pool and
authorize payments of Bonus Awards from the carry forward, (f) review and
approve Bonus Awards made to officers of the Company and other senior management
employees whose compensation is regularly reviewed by it, (g) adopt, amend and
rescind rules and regulations for the administration of the Plan and for its own
acts and proceedings, and (h) 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 clause (g)
above.
The Chairman and the President, except with respect to themselves, shall
have authority, consistent with the Plan, (a) to recommend to the Committee the
persons other than Eligible Employees for designation as Participants for each
Incentive Year, (b) to recommend to the Committee the amount of additional Bonus
Awards to be made to Participants identified in clause (f) of the preceding
paragraph, (c) to determine the amount of additional Bonus Awards to
Participants other than those identified in clause (f) of the preceding
paragraph, and (d) to evaluate the performance or review evaluations of the
performance of employees in the accomplishment of assigned objectives as
reported on their Management Reporting Forms. The Chairman and the President may
delegate any or all administrative responsibilities delegated to them by the
Committee.
All decisions, determinations and interpretations of the Committee, the
Chairman and the President, or their delegates with respect to the exercise of
their respective responsibilities, shall be binding on all parties concerned.
12. INDIVIDUAL ACCOUNTS. The Committee shall maintain a separate account
under the Plan for each Participant. Each account shall show the amounts awarded
and, if applicable, amounts deferred, Savings Plan Equivalencies and amounts
equivalent to interest credited thereon.
<PAGE> 9
-9-
13. BONUS AWARDS IN THE EVENT OF CHANGE OF CONTROL. Notwithstanding any
other provision of this Plan to the contrary, in the event of a Change of
Control, a Bonus Award for the Incentive Year in which the Change of Control
occurs shall be paid to each employee in an Eligible Grade Level at the time of
the Change of Control, whether or not the employee remains employed by the
Company or a Subsidiary at the end of the Incentive Year (other than any such
employees whose termination of employment is by the Company for cause, within
the meaning of the applicable Change of Control Severance Program). The amount
of Bonus Award payable to each such employee shall be no less than the product
of (a) the highest bonus percentage, measured as a percentage of Base Salary,
awarded the employee for any of the three full Incentive Years preceding the
Incentive Year in which the Change of Control occurs (or, if greater and if
applicable, the "target bonus percentage" set forth below), and (b) the
employee's actual salary earned for the Incentive Year in which the Change of
Control occurs.
For the purposes of this Section 13, the term `"target bonus percentage"
shall mean, with respect to each of the following groups of bonus-eligible
employees:
Employees Covered By r Under Target Bonus Percentage
---------------------------- -----------------------
Individual Employment Agreements
Chief Executive Officer 100%
Other Executives with Agreements 65%
Change of Control Severance Program
for Key Executives 35%
14. APPLICABILITY OF PLAN DOCUMENT. The Plan as amended and restated
hereinabove shall be applicable for Incentive Years beginning on and after
January 1, 2000.
March 16, 2000
<PAGE> 1
Exhibit 10(e)
DECLARATIONS
DIRECTORS, OFFICERS AND COMPANY
LIABILITY POLICY
THIS IS A CLAIMS MADE AND REPORTED POLICY. SUBJECT TO ITS TERMS, THIS POLICY
APPLIES ONLY TO ANY CLAIM FIRST MADE DURING THE POLICY PERIOD PROVIDED SUCH
CLAIM IS REPORTED TO UNDERWRITERS AS SOON AS PRACTICABLE BUT IN NO EVENT LATER
THAN 90 DAYS AFTER THE END OF THE POLICY PERIOD. AMOUNTS INCURRED AS COSTS,
CHARGES AND EXPENSES SHALL REDUCE AND MAY EXHAUST THE LIMIT OF LIABILITY AND ARE
SUBJECT TO THE RETENTIONS. THIS POLICY DOES NOT PROVIDE FOR ANY DUTY BY
UNDERWRITERS TO DEFEND ANY OF THE ASSUREDS.
These Declarations along with the Policy with endorsements shall constitute the
contract between the ASSUREDS and Underwriters.
Policy No: 509/QB343098
ITEM A. PARENT COMPANY: The Gillette Company
PRINCIPAL ADDRESS: The Prudential Center
Boston, Ma 02199
STATE OF INCORPORATION: Delaware
ITEM B. POLICY PERIOD:
FROM: June 1, 1998
TO: June 1, 2001
Both days 12:01 a.m. Standard Local Time at the Principal
Address stated in Item A.
ITEM C. LIMIT OF LIABILITY
SIGNING SCHEDULE A
US $15,000,000 in the aggregate for the POLICY PERIOD.
SIGNING SCHEDULE B
US $5,000,000 in the aggregate for the POLICY PERIOD.
Excess of:
US $15,000,000 in the aggregate for the POLICY PERIOD.
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<PAGE> 2
ITEM D. RETENTIONS:
$USDNIL each of the DIRECTORS AND OFFICERS each CLAIM but in
no event exceeding
$USDNIL in the aggregate each CLAIM all DIRECTORS AND
OFFICERS under Insuring Clause I.A.
USD $1,000,000 each CLAIM under Insuring Clause I.B.
USD $1,000,000 each CLAIM under Insuring Clause I.C.
ITEM E. INSURED PERCENTAGE:
100% of LOSS in excess of retention under Insuring Clause I.A.
100% of LOSS in excess of retention under Insuring Clause I.B.
100% of LOSS in excess of retention under Insuring Clause I.C.
ITEM F. PREMIUM:
US $800,318 being:
US $640,255.00 in respect of Signing Schedule A, and
US $160,063.00 in respect of Signing Schedule B.
ITEM G. 1. Premium for OPTIONAL EXTENSION PERIOD: 22.5 % of the total
premium as provided
in Clause VIII.
2. Length of OPTIONAL EXTENSION PERIOD: 365 Days.
ITEM H. NOTIFICATION PURSUANT TO CLAUSES VI. AND XII. SHALL BE GIVEN
TO:
Hanson & Peters,
Attention: Keith A. Hanson,
311 South Wacker Drive,
Chicago, Illinois 60606.
2
<PAGE> 3
ITEM I. OUTSIDE ENTITIES:
Massachusetts Mutual Life Insurance Company
Polaroid
Repligen Corporation
Bank of Boston
First National Bank of Boston
Raytheon
Texaco, Inc.
John Hancock Mutual Insurance Company
ITEM J. SERVICE OF PROCESS IN ANY SUIT SHALL BE MADE UPON:
Mendes & Mount
750 Seventh Avenue
New York,
New York 10019-6829,
USA
DATED IN LONDON: 29th September, 1999
3
<PAGE> 4
DIRECTORS, OFFICERS AND COMPANY
LIABILITY POLICY
In consideration of the payment of the premium, and subject to all of the
provisions of this Policy, Underwriters and the ASSUREDS agree as follows.
I. INSURING CLAUSES
A. Underwriters shall pay on behalf of the DIRECTORS AND OFFICERS LOSS
resulting from any CLAIM first made against the DIRECTORS AND OFFICERS
during the POLICY PERIOD for an INDIVIDUAL ACT.
B. Underwriters shall pay on behalf of the COMPANY LOSS which the COMPANY
is required or permitted to pay as indemnification to any of the
DIRECTORS AND OFFICERS resulting from any CLAIM first made against the
DIRECTORS AND OFFICERS during the POLICY PERIOD for an INDIVIDUAL ACT.
C. Underwriters shall pay on behalf of the COMPANY LOSS resulting from
any Claim first made against the COMPANY during the POLICY PERIOD for
a CORPORATE ACT.
II. DEFINITIONS
The following terms whenever used in this Policy in boldface type shall have the
meanings indicated.
A. "ASSUREDS" means the COMPANY and the DIRECTORS AND OFFICERS.
B. "CLAIM" means:
1. any written demand for damages or other relief against any of the
ASSUREDS; or
2. any civil, criminal, administrative or regulatory proceeding
initiated against any of the ASSUREDS, including:
(a) any appeal therefrom;
(b) any proceeding before the Equal Employment Opportunity
Commission or any similar federal, state or local
governmental body with jurisdiction over any EMPLOYMENT
PRACTICE VIOLATION; or
(c) any formal investigatory proceeding before the Securities
and Exchange Commission or any similar federal, state or
local governmental body with jurisdiction over any
SECURITIES LAW VIOLATION.
D. "COMPANY" means:
1. the PARENT COMPANY
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<PAGE> 5
2. any SUBSIDIARY, including any entities which are consolidated for
accounting purposes:
3. any unincorporated division, and
4. The Gillette Charitable Foundation
E. "CORPORATE ACT" means any actual or alleged act, error, omission,
misstatement, misleading statement, neglect or breach of duty by the
COMPANY involving a SECURITIES LAW VIOLATION.
F. "CORPORATE TAKE-OVER" means:
1. the acquisition by any person or entity of more than 50% of the
outstanding securities of the PARENT COMPANY representing the
present right to vote for the election of directors; or
2. the merger of the PARENT COMPANY into another entity such that
the PARENT COMPANY is not the surviving entity.
G. "COSTS, CHARGES AND EXPENSES" means reasonable legal fees and expenses
incurred by the ASSUREDS in defense of any CLAIM and cost of
attachment or similar bonds, but shall not include:
1. salaries, wages, overhead or benefit expenses associated with
directors, officers or employees of the COMPANY; or
2. any amounts incurred in defence of any CLAIM for which any other
insurer has a duty to defend and is so defending.
H. "DIRECTORS AND OFFICERS" means all persons who were, now are, or shall
be:
1. a) directors or officers of the COMPANY
b) general managers, area general managers and group general
managers of the Company and the Director of Investor
Relations.
c) all persons outside the United States while serving with any
titles, roles, positions, and/or capacities comparable to
the United States positions as identified in H.1.a) and b),
including their estates, heirs, legal representatives or
assigns in the event of their death, incapacity or
bankruptcy or their equivalent in countries where not so
titled.
d) with respect to outside directorship coverage only, a
director, officer, trustee, governor or executive officer of
any not-for-profit organization where such officers of the
PARENT COMPANY serve with such not-for-profit organization
with the knowledge and consent of the Board of Directors.
2. the lawful spouse of any of the persons set forth in H.1 a), b),
and c) the above provisions of this definition, but only to the
extent the spouse is a party to any CLAIM solely in the capacity
as spouse of any such persons and only for the purposes of any
CLAIM seeking damages recoverable from marital community
property, property jointly held by any such person and the
spouse, or property transferred from any such person to the
spouse, including their estates, heirs, legal representatives or
assigns in the
5
<PAGE> 6
event of their death, incapacity or bankruptcy;
3. to the extent any Claim is for an EMPLOYMENT PRACTICE VIOLATION or a
SECURITIES LAW VIOLATION, all persons who were, now are, or shall be
employees of the COMPANY;
4. With regard to Gillette Foundation only, trustees or committee members
thereof;
5. Employees of the Company, including their estates, heirs, legal
representatives or assigns in the event of their death or incapacity
or bankruptcy. However, coverage for employees who are not DIRECTORS
AND OFFICERS as identified in H.1.(a),(b) and (c) shall only apply
when an employee is named as a co-defendant with a DIRECTOR OR OFFICER
of the company as identified in H.1.(a),(b) and (c) above;
6. a Duracell High Power, Inc. representative on the Management Committee
of 3CAlliance, but only as set forth in endorsement #1 of the policy;
7. duly elected directors or duly appointed officers of Duracell
International, Inc. and its Subsidiaries and all persons holding any
officer position created by the charter or bylaws of Duracell
International Inc. and its subsidiaries, or any equivalent executive
positions of Duracell International Inc. and its subsidiaries, but
only as set forth in endorsement #1.
I. "EMPLOYMENT PRACTICE VIOLATION" means any actual or alleged:
1. wrongful dismissal, discharge or termination of employment whether
actual or constructive;
2. employment related misrepresentations;
3. violation of any federal, state or local law concerning employment or
discrimination in employment, including the Americans with
Disabilities Act of 1992, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act of 1967, Title VII of the Civil
Rights law of 1964 (as amended), the Pregnancy Discrimination Act of
1978, the Civil Rights Act of 1866, the Family and Medical Leave Act
of 1993, the Older Workers Benefit Protection Act of 1990, the Fifth
and Fourteenth Amendments of the United States Constitution, or any
rule or regulation promulgated thereunder;
4. sexual or other harassment in the workplace;
5. wrongful deprivation of career opportunity, employment or promotion;
6. wrongful discipline or evaluation; or
7. failure to adopt adequate employment or workplace policies and
procedures.
J. "INDIVIDUAL ACT" means
1. any actual or alleged act, error, omission, misstatement, misleading
statement, neglect or
6
<PAGE> 7
breach of duty by any of the DIRECTORS AND OFFICERS, while acting in
their capacity as a DIRECTOR OR OFFICER as defined herein
2. any matter asserted against the DIRECTORS AND OFFICERS by reason of
his or her status as a director or officer of the COMPANY
K. "INTERRELATED WRONGFUL ACTS" means WRONGFUL ACTS which have as a common
nexus any fact, circumstance, situation, event, transaction or series of
facts, circumstances, situations, events or transactions.
L. "LOSS" means damages, judgements, settlements and COSTS, CHARGES AND
EXPENSES incurred by any of the ASSUREDS, but shall not include:
1. punitive or exemplary damages, except where the applicable law in that
jurisdiction allows coverage for punitive or exemplary damages;
2. that portion of any multiplied damages award which exceeds the amount
multiplied;
3. taxes, criminal or civil fines or penalties imposed by law;
4. matters deemed uninsurable under the law pursuant to which this Policy
shall be construed; or
5. any wages, salary or benefits owed pursuant to the terms of any
employment contract, however this exception shall not apply to any
wages, salary or benefits, other than back pay, with regard to LOSS
arising out of CLAIMS alleging EMPLOYMENT PRACTICES VIOLATION.
With respect to coverage for punitive or exemplary damages, where the
Assureds are able to demonstrate in good faith that punitive or exemplary
damages are insurable under any applicable law, Underwriters shall not
challenge that interpretation of insurability.
M. "OPTIONAL EXTENSION PERIOD" means the period described in Clause
VIII.A.
N. "PARENT COMPANY" means the entity named in Item A. of the
Declarations.
O. "POLICY PERIOD" means the period from the effective date and hour of
this Policy to the Policy expiration date and hour as set forth in
Item B. of the Declarations, or its earlier cancellation date and
hour, if any, or the end of the OPTIONAL EXTENSION PERIOD, if
purchased.
P. "SECURITIES LAW VIOLATION" means (1) any violation of the Securities
Act of 1933, the Securities Act of 34, rules or regulations of the
Securities Exchange Commission under either or both Acts, similar laws
or regulations of any state, or any common law or country relating to
any transaction arising out of, involving, or relating to the purchase
or sale of, offer to purchase or sell, or transfer or conversion of
any securities, whether on the open market, through a public or
private offering, or through merger or (2) any Claim brought directly,
derivatively or otherwise by one or more security holders or
beneficial owners of the securities of the COMPANY who are not also
DIRECTORS OR OFFICERS, but only if the CLAIM is brought solely with
respect to the security holder or beneficial holders interest in such
7
<PAGE> 8
securities of the company.
Q. "SUBSIDIARY" means any corporate entity while more than 50% of the
outstanding securities representing the present right to vote for the
election of such entity's directors are owned by the Parent COMPANY
directly or indirectly, or any entity which is consolidated for PARENT
COMPANY accounting purposes, if such entity:
1. was so owned prior to the inception date of this Policy and was
insured under a policy of which this Policy is a renewal;
2. was so owned on the inception date of this Policy;
3. becomes so owned after the inception date of this Policy provided
the assets of the entity do not exceed 25% of the consolidated
assets of the COMPANY as set forth in the Company's most recent
audited financial statement; or
4. becomes so owned after the inception date of this Policy provided
that if the assets of the entity exceed 25% of the consolidated
assets of the COMPANY as set forth in the Company's most recent
audited financial statement, the provisions of Clause VII.B. must
be fulfilled.
R. "WRONGFUL ACT" means any CORPORATE ACT or INDIVIDUAL ACT.
S. "NO LIABILITY" means with respect to any CLAIMS for SECURITIES LAW
VIOLATION
1. a final judgement of no liability obtained prior to trial in
favour of all the ASSUREDS who are the subject of such CLAIM, by
reason of a motion to dismiss or a motion for summary judgement,
after the exhaustion of all appeals, or
2. a final judgement of no liability obtained after trial, in favour
of all the ASSUREDS who are the subject of such CLAIM, after
exhaustion of all appeals.
In no event shall the term NO LIABILITY apply to claims for SECURITIES
LAW VIOLATION for which a settlement has occurred.
T. COMMON LAW COUNTRY means any country in which governing principles of
law are derived from judicial decisions as opposed to the enactment of
legislatures, as in the Anglo-Saxon tradition. Such countries include,
but are not limited to, the United States of America, Canada,
Australia, New Zealand, the United Kingdom, the Republic of Ireland,
and any state, territory, possession or political subdivision.
U. SUPERVISORY BOARD means a group of natural persons elected by
shareholders or employees of a COMPANY pursuant to the Articles of
Incorporation of such organization, to control and supervise the
management of the MANAGEMENT BOARD.
V. MANAGEMENT BOARD means one or a group of natural persons appointed by
the SUPERVISORY
8
<PAGE> 9
BOARD of a COMPANY, pursuant to the articles of incorporation of such
organization, to control and supervise the management of such
organization.
III. EXCLUSIONS
Underwriters shall not be liable to make any payment in connection with any
CLAIM:
A. for actual or alleged sickness, disease, death, false arrest, false
imprisonment, damage to or destruction of tangible property (including
loss of use thereof) or, except to the extent the CLAIM is for an
EMPLOYMENT PRACTICE VIOLATION, for bodily injury, assault, battery,
invasion of privacy, mental anguish, emotional distress, libel,
slander or defamation;
B. based upon, arising out of, directly or indirectly resulting from or
in consequence of, or in any way involving:
1. any WRONGFUL ACT or any fact, circumstance or situation which has
been the subject of any notice given prior to the POLICY PERIOD
under any Directors and Officers Liability Policy, or
2. any other WRONGFUL ACT whenever occurring, which, together with a
WRONGFUL ACT which has been the subject of such notice, would
constitute INTERRELATED WRONGFUL ACTS;
C. to the extent it is insured under any other existing valid Directors
and Officers Liability Policy or Wrongful Employment Practices
Liability Policy or equivalent, whether such other Directors and
Officers Liability, or Wrongful Employment Practices Liability or
equivalent insurance is stated to be primary, contributory, excess,
contingent or otherwise, and regardless of whether or not any Loss in
connection with such CLAIM is collectible or recoverable under such
other policy; provided, however, this exclusion shall not apply to the
amount of LOSS which is in excess of the amount of any deductible and
the Limit of Liability of such other policy where such CLAIM is
otherwise covered by this Policy;
D. based upon, arising out of, directly or indirectly resulting from or
in consequence of, or in any way involving, actual or alleged seepage,
pollution or contamination of any kind; provided, however, this
exclusion shall not apply to the coverage afforded under Insuring
Clause I.A.;
E. for violation of the Employee Retirement Income Security Act of 1974
as amended (or any regulations promulgated thereunder) or similar
provisions of any federal, state or local law in connection with any
employment benefit or welfare plans subject to ERISA and sponsored by
the COMPANY;
F. by, on behalf of, or at the direction of the ASSUREDS, except and to
the extent such CLAIM:
1. is brought derivatively or directly by a security holder of the
COMPANY who, when such CLAIM is first made, is acting
independently of the PARENT COMPANY, its SUBSIDIARIES and the
DIRECTORS AND OFFICERS, (as defined in H 1.a.), b.), c.), 6 and 7
only);
2. is brought by any of the ASSUREDS in the form of a crossclaim,
third party claim or
9
<PAGE> 10
otherwise for contribution or indemnity which is part of and
results directly from a CLAIM not otherwise excluded by the terms
of this Policy;
3. is brought by any of the DIRECTORS AND OFFICERS for an EMPLOYMENT
PRACTICE VIOLATION;
4. is brought in a Country other than a COMMON LAW COUNTRY;
(a) on behalf of the COMPANY pursuant to approval by its owners
at its general meeting;
and
(b) against a DIRECTOR OR OFFICER in his or her capacity as a
member of the board of such COMPANY; or
5. is brought in a Country other than a COMMON LAW COUNTRY:
(a) on behalf of the COMPANY by a DIRECTOR OR OFFICER in his or
her capacity as a member of a SUPERVISORY BOARD of such
COMPANY; and
(b) against a DIRECTOR OR OFFICER in his or her capacity as a
member of the MANAGEMENT BOARD of a Company;
G. brought about or contributed to by any dishonest, fraudulent or
criminal act or omission or any personal profit or advantage gained by
any of the DIRECTORS AND OFFICERS to which they were not legally
entitled as established by judgement or other final adjudication
H. for the return by any of the DIRECTORS AND OFFICERS of any
remuneration paid to them without the previous approval of the
appropriate governing body of the COMPANY, which payment without such
previous approval shall be determined by a final adjudication in the
underlying action or in a separate action or proceeding to be in
violation of the law;
I. against any of the DIRECTORS AND OFFICERS of any SUBSIDIARY or against
any SUBSIDIARY based upon, arising out of, directly or indirectly
resulting from or in consequence of, or in any way involving:
1. any WRONGFUL ACT occurring prior to the date such entity became a
SUBSIDIARY or subsequent to the date such entity ceased to be a
SUBSIDIARY, or
2. any WRONGFUL ACT occurring while such entity was a SUBSIDIARY
which, together with a WRONGFUL ACT occurring prior to the date
such entity became a SUBSIDIARY, would constitute INTERRELATED
WRONGFUL ACTS;
provided however, that this Exclusion shall not apply to Parker
Pen Company;
J. based upon, arising out of, directly or indirectly, resulting from or
in consequence of, or in any way involving, any WRONGFUL ACT actually
or allegedly committed subsequent to a
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CORPORATE TAKE-OVER; or
K. based upon, arising out of, directly or indirectly resulting from or
in consequence of, or in any way involving, service as a director,
officer, trustee, employee, governor, executive director or in a
functionally equivalent position with any entity other than the
COMPANY; provided, however, this exclusion shall not apply to LOSS
resulting from any CLAIM to the extent that
1. coverage is provided by virtue of this policy to DIRECTORS AND
OFFICERS sitting on the Corporate Boards of the Entities
specified in Item I of the Declaration Page or as otherwise noted
in the II. Definitions H.1.d) and
2. such loss is excess of any indemnification actually made by any
outside entity or any of its insurers.
No WRONGFUL ACT shall be imputed to any other ASSUREDS for the
purpose of determining the applicability of any of the
Exclusions.
IV. LIMIT OF LIABILITY, RETENTIONS AND ORDER OF PAYMENTS
A. (1) Underwriters shall be liable to pay the percentage of LOSS set
forth in Item E. of the Declarations in excess of the amount of
the applicable Retention up to the Limit of Liability, it being
warranted that the remaining percentage of LOSS shall be
uninsured. The Retention applicable to Insuring Clause I.B. shall
apply to Loss payable under Insuring Clause I.A. if
indemnification by the COMPANY is required by law or is legally
permissible to the fullest extent permitted by law, regardless of
whether or not actual indemnification is made, unless the COMPANY
is unable to make such actual indemnification by reason of its
insolvency or bankruptcy.
(2) (a) If the ASSUREDS have given notice(s) to Underwriters of
CLAIMs or WRONGFUL ACTS in accordance with Clause VI.
NOTIFICATION A. or B. then the PARENT COMPANY shall have the
right to purchase, in consideration of an additional premium of
150% of the pro rata remaining premium subject to a minimum of
150% of the annualized premium for this Policy, a reinstatement
of the Limit of Liability of this Policy a single time. The
PARENT COMPANY can purchase the reinstated Limit of Liability at
any time provided it is before the end of the POLICY PERIOD. In
order to purchase the reinstated Limit of Liability, the PARENT
COMPANY must provide written notice by certified mail, return
receipt requested, indicating that it is the intent of the PARENT
COMPANY to Purchase the reinstated Limit of Liability. The
reinstated Limit of Liability shall be effective at 12:01 am
Standard Time at the Principal Address stated in Item A of the
Declaration following the date on which the PARENT COMPANY
dispatched such notice.
(b) Such reinstated Limit of Liability shall not apply to any
Loss resulting from:
(i) any CLAIM for which notice was provided to Underwriters
prior to the effective date of the reinstated Limit of
Liability or any CLAIM made on or subsequent to such
effective date based upon, arising out of, directly or
indirectly resulting from or in consequence of, or in any
way involving the same WRONGFUL ACT, which together with any
WRONGFUL ACT on which the prior CLAIM was based, would
constitute
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INTERRELATED WRONGFUL ACTS; or
(ii) any CLAIM based on, arising out of, directly or
indirectly resulting from or in consequence of, or in any
way involving any WRONGFUL ACT for which notice was given to
Underwriters in accordance with Clause VI.B. prior to the
effective date of the reinstated Limit of Liability.
The remaining original Limit of Liability, if any, shall be
applicable to any LOSS resulting from such CLAIMS.
(c)The reinstated Limit of Liability shall apply excess of the
original Limit of Liability of this Policy and all policies of
insurance providing excess coverage.
B. The amount shown in Item C. of the Declarations shall be the maximum
aggregate Limit of Liability of Underwriters under the Policy,
provided however, if a reinstatement of the Limit of Liability is
purchased, then the maximum aggregate Limit of Liability of
Underwriters under this policy, regardless of the number of CLAIMS,
shall be an amount twice that shown in Item C. of the Declarations.
Subject to Clause IV.A.2. the maximum aggregate Limit of Liability of
Underwriters in connection with any one CLAIM shall be the amount
shown in Item C. of the Declarations.
C. More than one CLAIM involving the same WRONGFUL ACT or INTERRELATED
WRONGFUL ACTS shall be deemed to constitute a single CLAIM and shall
be deemed to have been made at the earliest of the following times:
1. the time at which the earliest CLAIM involving the same WRONGFUL
ACT or INTERRELATED WRONGFUL ACTS is first made; or
2. the time at which the CLAIM involving the same WRONGFUL ACT or
INTERRELATED WRONGFUL ACTS shall be deemed to have been made
pursuant to Clause VI.B.
D. In the event more than one of the Insuring Clauses set forth in Clause
I. are applicable to a CLAIM, the Retentions set forth in Item D. of
the Declarations shall be applied separately to that part of the LOSS
resulting from such CLAIM covered by each Insuring Clause. The sum of
the Retentions so applied shall constitute the Retention applicable to
such CLAIM. The total Retention as finally determined shall in no
event exceed the largest of the Retentions applicable to the Insuring
Clauses that are applicable to such CLAIM.
E. Payments of LOSS by Underwriters shall reduce the Limit of Liability.
Underwriters shall pay LOSS in the order in which LOSS is incurred. If
LOSS payable under Insuring Clause I.A. and one or more of the other
insuring clauses is incurred contemporaneously, Underwriters first
shall pay LOSS payable under Insuring Clause I.A. The PARENT COMPANY
may elect through its chief executive officer to decline or defer
payment under Insuring Clause I.B. or Insuring Clause I.C.
Underwriters shall have no obligation to pay LOSS after exhaustion of
the Limit of Liability regardless of whether the PARENT COMPANY has
declined or deferred payment.
F. Underwriters shall pay COSTS, CHARGES AND EXPENSES no more than once
every ninety
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<PAGE> 13
days.
G. Notwithstanding the foregoing, solely with respect to SECURITIES LAW
VIOLATIONS Underwriters shall reimburse COSTS, CHARGES AND EXPENSES
paid by the Assureds with respect to each such claim in the event of:
(1) a determination of NO LIABILITY with respect to such CLAIM, or
(2) (a) dismissal of, or
(b) a stipulation to dismiss
the CLAIM without prejudice and without the payment of any
consideration by or on behalf of any of the ASSUREDS who are the
subject of such CLAIM.
provided, however, that in the case of (2) above, such reimbursement
shall occur 90 days after the date of dismissal or stipulation as long
as the CLAIM (and any other CLAIM involving the same WRONGFUL ACT or
INTERRELATED WRONGFUL ACTS) is not re-brought within that time, and
further subject to an undertaking by the COMPANY in a form acceptable
to Underwriters that such reimbursement shall be paid back by the
COMPANY to the Underwriter in the event the CLAIM (and any other CLAIM
involving the same WRONGFUL ACT or INTERRELATED WRONGFUL ACTS) is
brought after such 90 day period and before the expiration of the
statute of limitations of such CLAIM.
V. SETTLEMENTS AND DEFENSE
A. No settlement shall be made and no COSTS, CHARGES AND EXPENSES shall
be incurred without Underwriters' consent, such consent not to be
unreasonably withheld.
B. It shall be the duty of the ASSUREDS and not the duty of Underwriters
to defend CLAIMS.
VI. NOTIFICATION
A. The ASSUREDS shall, as a condition precedent to their rights to
payment under this Policy, give to Underwriters notice in writing of
any CLAIM as soon as practicable after the ASSURED'S Risk Manager
first becomes aware of any such CLAIM but in no event later than 90
days after the end of the POLICY PERIOD.
B. If during the Policy Period the ASSUREDS Risk Manager first becomes
aware of a specific WRONGFUL ACT, and if the Assureds during the
POLICY PERIOD give written notice to Underwriters as soon as
practicable of:
1. the specific WRONGFUL ACT;
2. the consequences which have resulted or may result therefrom; and
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<PAGE> 14
3. the circumstances by which the ASSUREDS first became aware
thereof,
then any CLAIM made subsequently arising out of such WRONGFUL ACT
shall be deemed for the purposes of this Policy to have been made at
the time such notice was first given.
C. Notice to Underwriters provided for in Clause VI. shall be given to
the firm shown under Item H. of the Declarations.
VII. GENERAL CONDITIONS
A. Warranty Clause
It is warranted that this policy shall be deemed to be a single unitary
contract and not a severable contract of insurance or a series of
individual contracts of insurance with each of the ASSUREDS.
B. Adjustment Clause
1. This Policy is issued and the premium computed on the basis of
the information submitted to Underwriters. In the event the
COMPANY acquires any other entity or acquires substantially all
of the assets of another entity, or merges with another entity
such that the COMPANY is the surviving entity, or creates or
acquires a SUBSIDIARY as defined in Clause II.Q.4. after the
inception of this Policy, coverage shall be afforded for a period
of 90 days for any LOSS in any way involving the assets acquired
or the assets, liabilities, directors, officers or employees of
the entity acquired or merged with, or such SUBSIDIARY. Coverage
beyond such 90-day period shall only be available if:
(a) written notice of such transaction or event is given to
Underwriters by the PARENT COMPANY;
(b) the PARENT COMPANY provides Underwriters with such
information in connection therewith as Underwriters may deem
necessary
(c) the ASSUREDS accept any special terms, conditions,
exclusions or additional premium charge as may be required
by Underwriters; and
(d) Underwriters, at their sole discretion, agree to provide
such coverage.
2. In the event any entity ceases to be a SUBSIDIARY as defined
herein after the inception date of this Policy or of any policy
issued by Underwriters of which this Policy is a renewal or
replacement, this Policy, subject to its terms, shall continue to
apply to:
(a) any of the DIRECTORS AND OFFICERS who were DIRECTORS AND
OFFICERS of such SUBSIDIARY in connection with any CLAIMS,
and
(b) such SUBSIDIARY in connection with CLAIMS for SECURITIES LAW
VIOLATION provided such CLAIMS are first made during the
POLICY PERIOD for WRONGFUL ACTs
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<PAGE> 15
committed or allegedly committed prior to the time such
entity ceased to be a SUBSIDIARY.
3. In the event of a CORPORATE TAKE-OVER after the inception date of
this Policy or of any policy issued by Underwriters of which this
Policy is a renewal or replacement, this Policy, subject to its
terms, shall continue to apply to the DIRECTORS AND OFFICERS and
to the COMPANY but only with respect to WRONGFUL ACTS committed
or allegedly committed prior to the CORPORATE TAKE-OVER.
C. Cancellation Clause
1. By acceptance of this Policy, the ASSUREDS hereby confer the
exclusive power and authority to cancel this Policy on their
behalf to the PARENT COMPANY. Such entity may cancel this Policy
by surrender thereof to Underwriters, or by mailing to
Underwriters written notice stating when thereafter such
cancellation shall be effective. The mailing of such notice shall
be sufficient notice and the effective date of cancellation
stated in the notice shall become the end of the POLICY PERIOD.
Delivery of such written notice shall be equivalent to mailing.
2. Underwriters may cancel this Policy only for non-payment of
premium by mailing to the PARENT COMPANY written notice stating
when, not less than 30 days thereafter, such cancellation shall
be effective. The mailing of such notice shall be sufficient
notice and the effective date of cancellation stated in the
notice shall become the end of the POLICY PERIOD. Delivery of
such written notice by Underwriters shall be equivalent to
mailing. If the foregoing notice period is in conflict with any
governing law or regulation, then such period shall be amended to
afford the minimum notice period permitted thereunder.
3. If this Policy is cancelled pursuant to 1. hereinabove,
Underwriters shall retain the customary short rate proportion of
the premium hereon, except it shall be pro-rated if the
cancellation is due to an insurance program restructuring by the
ASSURED provided Underwriters are given an opportunity to
participate on such program. If this Policy is cancelled pursuant
to 2. hereinabove, Underwriters shall retain the pro rata
proportion of the premium hereon. Payment or tender of any
unearned premium by Underwriters shall not be a condition
precedent to the effectiveness of cancellation.
D. Company Authorisation Clause
By acceptance of this Policy the ASSUREDS agree that the PARENT
COMPANY will act on their behalf with respect to the giving of all
notices to Underwriters, the receiving of notices from Underwriters,
the payment of the premium and the receipt of any return premium.
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<PAGE> 16
VIII. OPTIONAL EXTENSION PERIOD
A. If this policy is not renewed by the PARENT COMPANY or by the
Underwriters, then the PARENT COMPANY shall have the right, upon
payment of an additional premium calculated at that percentage shown
in Item G.1. of the Declarations of the total premium for this Policy,
to an extension of the coverage granted by this Policy with respect to
any CLAIM first made during the period of time set forth in Item G.2.
of the Declarations after the Policy expiration date, but only with
respect to any WRONGFUL ACT committed before such date.
B. As a condition precedent to the right to purchase the OPTIONAL
EXTENSION PERIOD, the total premium for this Policy must have been
paid. The right to purchase the OPTIONAL EXTENSION PERIOD shall
terminate unless written notice together with full payment of the
premium for the OPTIONAL EXTENSION Period is given to Underwriters
within 30 days after the Policy expiration date. If such notice and
premium payment is not so given to Underwriters, there shall be no
right to purchase the OPTIONAL EXTENSION PERIOD.
C. In the event of the purchase of the OPTIONAL EXTENSION PERIOD, the
entire premium therefore shall be deemed earned at its commencement.
D. In the event the OPTIONAL EXTENSION PERIOD is purchased, it shall
terminate forthwith on the effective date of any contract of insurance
or indemnity which replaces the coverage afforded by this Policy
through the OPTIONAL EXTENSION PERIOD either in whole or in part, and
in the event the OPTIONAL EXTENSION PERIOD is so terminated,
Underwriters shall refund pro rata any unearned premium for the
unexpired period of such extension.
E. The exercise of the OPTIONAL EXTENSION PERIOD shall not in any way
increase the Limit of Liability of Underwriters.
IX. ASSISTANCE, COOPERATION AND SUBROGATION
The ASSUREDS agree to provide Underwriters with such information,
assistance and co-operation as Underwriters or their counsel may reasonably
request, and they further agree that they shall not take any action which
in any way increases Underwriters' exposure under this Policy.
In the event of any payment under this Policy, Underwriters shall be
subrogated to the ASSUREDS' rights of recovery therefor against any person
or entity. The ASSUREDS shall execute all papers required and shall do
everything that may be necessary to secure and preserve such rights
including the execution of such documents as are necessary to enable
Underwriters effectively to bring suit in their name, and shall provide all
other assistance and co-operation which Underwriters may reasonably
require.
X. ASSIGNMENTS AND ACTION AGAINST UNDERWRITERS
No action shall lie against Underwriters unless, as a condition precedent
thereto, the ASSUREDS
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<PAGE> 17
shall have fully complied with all of the terms of this Policy, nor until
the amount of the ASSUREDS' obligation to pay shall have been fully and
finally determined either by judgement against them or by written agreement
between them, the claimant and Underwriters. Nothing contained herein shall
give any person or organisation any right to join Underwriters as a party
to any CLAIM against the ASSUREDS to determine their liability, nor shall
Underwriters be impleaded by the ASSUREDS or their legal representative in
any CLAIM. Assignment of interest under this Policy shall not bind
Underwriters unless their consent is endorsed hereon.
XI. ENTIRE AGREEMENT
By acceptance of this Policy, the ASSUREDS agree that this Policy embodies
all agreements existing between them and Underwriters or any of their
agents relating to this insurance. Notice to any agent or knowledge
possessed by any agent or other person acting on behalf of Underwriters
shall not effect a waiver or a change in any part of this Policy or estop
Underwriters from asserting any right under the terms of this Policy, nor
shall the terms be waived or changed except by written endorsement or rider
issued by Underwriters to form a part of this Policy.
XII. SERVICE OF SUIT
It is agreed that in the event of the failure of Underwriters to pay any
amount claimed to be due hereunder, Underwriters at the request of any
person or entity insured hereunder will submit to the jurisdiction of any
court of competent jurisdiction within the United States and will comply
with all requirements necessary to give such court jurisdiction. Nothing in
this Clause constitutes or should be understood to constitute a waiver of
Underwriters' rights to commence an action in any court of competent
jurisdiction in the United States, to remove an action to United States
District Court, or to seek a transfer of a case to another court as
permitted by the laws of the United States or of any state in the United
States. It is further agreed that service of process in such suit may be
made upon the firm shown under Item H. of the Declarations, and that in
such suit instituted against any one of the Underwriters upon this Policy,
Underwriters will abide by the final decision of such court or of any
appellate court in the event of an appeal.
The firm shown under Item H. of the Declarations is authorised and directed
to accept service of process on behalf of Underwriters in any such suit
and/or upon the request of any person or entity insured hereunder to give a
written undertaking to such person or entity that it will enter a general
appearance upon Underwriters' behalf in the event such a suit shall be
instituted.
Further, pursuant to the statute of any state, territory or district of the
United States which makes provision therefor, Underwriters hereon hereby
designate the Superintendent, Commissioner or Director of Insurance or
other officers specified for that purpose in the statute, or any of their
successors in office, as their true and lawful attorney, upon whom may be
served any lawful process in any action, suit or proceeding instituted by
or on behalf of any person or entity insured hereunder or any beneficiary
hereunder arising out of this Policy, and hereby designate the firm shown
under Item H. of the Declarations as the firm to whom the said officer is
authorised to mail such process or a true copy thereof.
17
<PAGE> 18
Endorsement #1
DURACELL ENDORSEMENT
Endorsement #A
It is understood and agreed that the term "COMPANY" is deemed to include
Duracell International, Inc. and its Subsidiaries, Duracell HighPower, Inc. and
3CAlliance L.P. but only with respect to CLAIMS for WRONGFUL ACTS occurring on
or subsequent to 31st December 1996.
18
<PAGE> 19
ENDORSEMENT #4
OUTSIDE BOARD ENDORSEMENT
It is understood and agreed that the term "DIRECTORS AND OFFICERS" is deemed to
cover the following individuals for their participation on the identified for
profit outside boards. The coverage for Mr. Zeien shall only apply with respect
to CLAIMS made arising out of WRONGFUL ACTS occurring on or before June 30th,
1999.
DIRECTOR AND OFFICER OUTSIDE BOARD
Mr. Alfred Zeien Massachusetts Mutual Life Insurance Company
Polaroid
Repligen Corporation
Bank of Boston
First National Bank of Boston
Raytheon
Michael C. Hawley Texaco, Inc.
John Hancock Mutual Insurance Company
19
<PAGE> 20
ENDORSEMENT #2
In consideration of the premium charged for the Policy, it is hereby understood
and agreed that:
1. Clause IV. LIMIT OF LIABILITY AND RETENTIONS is amended by the addition of
the following:
H. The maximum aggregate Limit of Liability under the Policy and policy
757/FD960228 and 757/FD960229 issued to The Gillette Company combined
shall be $20,000,000 excess the applicable retention as set forth
under Clause IV.I. for all LOSS resulting from:
1. all CLAIMS made against the DIRECTORS AND OFFICERS, and
2. all CLAIMS made against the DIRECTORS AND OFFICERS under policy
757/FD960228 and 757/FD960229 issued to The Gillette Company.
provided, however, that this maximum aggregate Limit of Liability
shall apply only when such CLAIMS are based upon, arise from, or
involve the same WRONGFUL ACT or INTERRELATED WRONGFUL ACTS.
Nothwithstanding the above, the Assureds shall have the right to
reinstate limits per Clause IV.B of this policy.
I. In the event of payment of LOSS for a CLAIM under both this Policy and
under policy 757/FD960228 and 757/FD960229 issued to The Gillette
Company as set forth in Clause IV. H. above, the applicable retentions
under each policy shall be applied separately to that part of the LOSS
resulting from such CLAIM covered by each policy, and the sum of the
retentions so applied shall constitute the Retention applicable to
such CLAIM, provided, however, the total Retention as finally
determined shall in no event exceed the greater of the two..
2. Clause IV. LIMIT OF LIABILITY AND RETENTIONS F. is deleted and the
following is substituted therefor:
F. Underwriters shall pay COSTS, CHARGES AND EXPENSES no more than once
every 90 days. COSTS, CHARGES AND EXPENSES shall be part of and not in
addition to the Limit of Liability as shown under Item C. of the
Declarations, or the maximum aggregate Limit of Liability under Clause
IV.H. and such COSTS, CHARGES AND EXPENSES shall reduce the Limit of
Liability as shown under Item C. of the Declarations and under Clause
IV.H.
3. Clause VIII. OPTIONAL EXTENSION PERIOD F. is amended by deleting the
period, substituting a comma therefor, and adding the following: and under
Clause IV. LIMIT OF LIABILITY AND RETENTIONS H. (This paragraph needs some
review since there is no VIII Optional Extension Period F in the basic
form.)
20
<PAGE> 21
Endorsement #3
In consideration of the premium charged for the Policy and subject to all the
terms, exclusions and conditions of the Policy, it is hereby understood and
agreed that the Policy is amended by the addition of the following:
Underwriters and the ASSUREDS agree that "Y2K Problems" as that term is defined
in this endorsement, will not be excluded from coverage under the Policy.
However any CLAIM involving "Y2K problems" shall be subject to all terms,
conditions, limitations and exclusions of this policy.
The term "Y2K Problems" shall refer to the following:
The failure of any computer software or hardware, computer system or network or
computer or computer chip to accurately read, process, accept, distinguish,
interpret, recognize, sort or store, or to perform mathematical calculations
involving:
any time or date on or after midnight on December 31, 1999, or
any time or date representing or referring to different centuries or more than
one century, or
any time or date data as its true time or calendar date, or
the millennium change is occurring when the year 1999 changes to the year 2000,
whether such failures or alleged failures occur before, during or after the year
2000.
This endorsement does not change or amend any coverage provided under this
Policy. All terms and conditions of the Policy remain unchanged.
21
<PAGE> 22
EXHIBIT 10-E
- --------------------------------------------------------------------------------
TRAVELERSPropertyCasualty Fiduciary Liability Plus+(TM) Policy
A member of citigroup [LOGO]
- --------------------------------------------------------------------------------
DECLARATIONS POLICY NO. 006 FF 103202106 BCM
- --------------------------------------------------------------------------------
[X] TRAVELERS CASUALTY AND SURETY COMPANY [ ] TRAVELERS CASUALTY AND SURETY
OF AMERICA COMPANY OF ILLINOIS
Hartford, Connecticut 06183-9062 Naperville, Illinois 60563-8458
[ ] TRAVELERS CASUALTY AND SURETY COMPANY
Hartford, Connecticut 06183-9062 (A Stock Insurance Company, herein
called the Company)
THIS IS A CLAIMS MADE POLICY. PLEASE READ THE POLICY CAREFULLY.
---------------------------------------------------------------
NOTE: THE LIMIT OF LIABILITY AVAILABLE TO PAY DAMAGES OR SETTLEMENTS MAY BE
REDUCED BY THE AMOUNTS INCURRED AS "DEFENSE EXPENSES", AND "DEFENSE EXPENSES"
MAY BE APPLIED AGAINST THE DEDUCTIBLE AMOUNT.
THIS POLICY REPLACES 006FF101047092BCM
- --------------------------------------------------------------------------------
ITEM 1. NAMED INSURED: THE GILLETTE COMPANY
ADDRESS: PRUDENTIAL TOWER BUILDING
BOSTON, MASSACHUSETTS 02199
- --------------------------------------------------------------------------------
ITEM 2. POLICY PERIOD: Inception Date: JULY 01,1999
Expiration Date: JULY 01, 2002
12:01 A.M. standard time both dates at the
address stated in Item 1.
- --------------------------------------------------------------------------------
Item 3. Annual Aggregate Limit of Liability: $20,000,000.00
- --------------------------------------------------------------------------------
Item 4. Deductible Amount: $100,000.00 (Each and every CLAIM)
-----------
- --------------------------------------------------------------------------------
Item 5. Premium for the POLICY PERIOD: $106,875.00
-----------
Current: $106,875.00 Each Anniversary:
-----------
- --------------------------------------------------------------------------------
Item 6. Extended Reporting Period: 12 months for 75% of the Premium for
the POLICY PERIOD
(If exercised, in accordance with Section XII. of this Policy.)
If the POLICY PERIOD is for a period of more than one year, the %
of the premium for the POLICY PERIOD shall be calculated from the
equivalent annual premium.
- --------------------------------------------------------------------------------
Item 7. This policy (FLP-1001) is subject to the terms of the following
endorsements attached hereto:
FLP-1010 09-98, FLP-1014 09-98, FLP-1015 09-98, FLP 1030 09-98,
FLP-1031 09-98, FLP 1008 (09-98), FLP-1012 (09-98), FLP-1016
(r6-98), NON-CANCELLABLE AGREEMENT, REINSTATEMENT OF LIMITS OF
LIABILITY
- --------------------------------------------------------------------------------
Item 8. Continuity Date: 07/01/1987
----------
(If no Continuity Date is entered above, the Continuity Date
shall be the Inception Date shown in Item 2.)
- --------------------------------------------------------------------------------
- ------------------------------ ---------------------------------
Countersigned by (if required) Authorized Company Representative
FLP-1000 (09-98)
<PAGE> 23
- --------------------------------------------------------------------------------
TRAVELERSPropertyCasualty Fiduciary Liability Plus+(SM) Policy
A member of citigroup
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
TRAVELERS CASUALTY AND SURETY COMPANY TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA TRAVELERS CASUALTY AND SURETY COMPANY
OF ILLINOIS
Hartford, Connecticut 06183-9062 Hartford, Connecticut 06183-9062 Naperville, Illinois 60563
</TABLE>
THIS IS A CLAIMS MADE POLICY. PLEASE READ THE POLICY CAREFULLY.
NOTE: THE LIMIT OF LIABILITY AVAILABLE TO PAY DAMAGES OR SETTLEMENTS MAY BE
REDUCED BY THE AMOUNTS INCURRED AS "DEFENSE EXPENSES", AND "DEFENSE EXPENSES"
MAY BE APPLIED AGAINST THE DEDUCTIBLE AMOUNT.
IN CONSIDERATION of the payment of the premium stated in the Declarations and
subject to all of the terms, conditions and limitations of this Policy, the
Company agrees as follows:
I. INSURING AGREEMENT.
The Company shall pay on BEHALF OF THE INSURED all DAMAGES on account of a CLAIM
first made during the POLICY PERIOD for an actual or alleged WRONGFUL ACT.
II. DEFENSE PROVISIONS; TERRITORY
A. If a CLAIM is brought in the United States, its territories or
possessions, or in Canada, the Company shall have the right and duty to defend
such CLAIM, and shall pay DEFENSE EXPENSES, even if the CLAIM is groundless,
false or fraudulent; DEFENSE EXPENSES with regard to such CLAIM shall be in
addition to, and not part of, the "Annual Aggregate Limit of Liability" set out
in the Declarations to the Policy.
B. If a formal civil adjudicative proceeding seeking DAMAGES is brought
anywhere in the world other than the United States, its territories or
possessions, or Canada, which asserts a CLAIM first made during the POLICY
PERIOD, it shall be the right and duty of the INSURED'S option, either reimburse
or advance DEFENSE EXPENSES which the INSURED pays or incurs with regard to such
proceeding, even if the CLAIM asserted therein is groundless, false or
fraudulent. DEFENSE EXPENSES with regard to such proceeding shall be part of,
and not in addition to, the "Annual Aggregate Limit of Liability" set out in the
Declarations to the Policy, and payment or reimbursement of such DEFENSE
EXPENSES shall reduce the amount of the "Annual Aggregate Limit of Liability"
available for payment or reimbursement of DEFENSE EXPENSES, judgements or
settlements.
III. DEFINITIONS
A. "ADMINISTRATION" means:
1. giving counsel to employees, participants, or beneficiaries with
respect to EMPLOYEE BENEFITS;
2. interpreting EMPLOYEE BENEFITS;
3. handling records in connection with EMPLOYEE BENEFITS; or
4. effecting enrollment, termination or cancellation of employees,
participants, or beneficiaries under an EMPLOYEE BENEFITS program.
B. "CLAIMS" means:
1. a written demand,
2. a civil proceeding commenced by service of a compliant or similar
pleading,
3. a criminal proceeding commenced by return of an indictment, or
4. a formal administrative or regulatory proceeding commenced by
filing a notice of charges, formal investigative order or similar document,
seeking DAMAGES or injunctive or other equitable relief from an INSURED
for an alleged WRONGFUL ACT.
All RELATED CLAIMS are a single CLAIM for purposes of this Policy, and all
RELATED CLAIMS shall be deemed to have been made at the time the first of such
RELATED CLAIMS was made.
C. "DAMAGES" means money, including prejudgement and postjudgement
interest, which an INSURED is legally obligated to pay as a result of a CLAIM;
provided, however that "DAMAGES" shall not include:
1. Fines; penalties, other than civil penalties under Sections 502(i)
and 502(l) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"); taxes; punitive or exemplary damages; matters deemed uninsurable
under applicable law;
2. Payment of medical, pension, severance or EMPLOYEE BENEFITS which
are or may become due, except to the extent that such sums are payable as a
personal obligation of a natural person who is an INSURED, because of such
INSURED'S WRONGFUL ACT; provided, however, that this exclusion shall not apply
to the Company's obligation to defend, or to pay, advance or reimburse DEFENSE
EXPENSES, regarding a CLAIM seeking such benefits.
D. "DEFENSE EXPENSES" means reasonable and necessary fees and expenses
incurred in the investigation, defense, settlement and appeal of a CLAIM,
including the premium for appeal bonds regarding such CLAIM; but DEFENSE
EXPENSES shall not include salaries, wages, benefits or overhead of, or paid to,
any INSURED or any employee of an INSURED.
E. "EMPLOYEE BENEFIT PLAN" means:
1. any WELFARE PLAN which was, is now, or becomes sponsored solely by
the NAMES INSURED or jointly by the NAMED INSURED and a labor organization
exclusively for the benefit of employees of the NAMED INSURED;
2. any PENSION PLAN or other plan identified in the endorsements to
this Policy;
3. any WELFARE PLAN or PENSION PLAN for which coverage is provided
pursuant to Section XI of this Policy.
F. "EMPLOYEE BENEFITS" means benefits provided through an EMPLOYEE BENEFIT
PLAN, and also includes benefits provided under Worker's Compensation Insurance,
Unemployment Insurance, Social Security and Disability Insurance, and the
Consolidated Omnibus Budget Reconciliation Act of 1985 and amendments thereto
("COBRA").
G. "INSURED" means:
1. the NAMED INSURED;
2. an EMPLOYEE BENEFIT PLAN;
FLP-1001 (09-98) Page 1 of 5
<PAGE> 24
3. any natural person who was, is or becomes:
(a) a trustee of an EMPLOYEE BENEFIT PLAN, while acting in
his or her capacity as a fiduciary,
(b) a director, officer or employee of the Named Insured,
or an EMPLOYEE BENEFIT PLAN, while acting in his or her
capacity as a fiduciary, or
(c) an heir, executor, administrator, assignee or other
legal representative of an INSURED, in the event of the
INSURED'S death, incapacity or bankruptcy; and the
lawful spouse, parent, child or sibling of a natural
person who is an INSURED.
H. "NAMED INSURED" means the entity named in Item 1 of the Declarations of
the Policy, and includes entities which the NAMED INSURED owns, has owned, or
during the POLICY PERIOD forms or acquires, but only for CLAIMS with regard to
WRONGFUL ACTS which occur wholly during the time that the NAMED INSURED owns
more than fifty percent (50%) of such entities.
I. "PENSION PLAN" means any plan so defined in Section 3(2) of ERISA, as
amended, or in any related or similar state, local or foreign law or regulation.
J. "POLICY PERIOD" means either the dates set forth in the Declarations to
the Policy, or the dates set forth in the most recent Renewal Certificate with
respect to the Policy, whichever period is later; in no event, however, shall
the POLICY PERIOD continue past the effective date of cancellation or
termination of the Policy.
K. "RELATED CLAIMS" means all CLAIMS based on, or directly or indirectly
arising or resulting from, or in any way involving, the same facts,
circumstances, situations, transactions, events or WRONGFUL ACTS; and all CLAIMS
based on a series of continuous or related facts, circumstances, situations,
transactions, events or WRONGFUL ACTS.
L. "WELFARE PLAN" means any plan so defined in Section 3(1) of ERISA, as
amended, or in any related or similar state, local or foreign law or regulation.
M. "WRONGFUL ACT" means a breach of fiduciary duty by the INSURED with
respect to an EMPLOYEE BENEFIT PLAN, including but no limited to:
1. breach of duties, obligations and responsibilities imposed by ERISA or
by COBRA, or by any related or similar state, local or foreign law or
regulation, in the discharge of the INSURED'S duties as respects an EMPLOYEE
BENEFIT PLAN;
2. any other matter claimed against an INSURED solely because of the
INSURED'S status as a fiduciary as respects an EMPLOYEE BENEFIT PLAN; and
3. negligent acts, errors or omissions of the INSURED in the
ADMINISTRATION of EMPLOYEE BENEFITS.
IV. EXCLUSIONS.
This insurance shall not apply to, and the Company shall have no duty to defend
or to pay, reimburse or advance DAMAGES or DEFENSE EXPENSES for, any CLAIM:
A. For or arising our of dishonest, fraudulent or criminal acts by the
INSURED; provided, however, that this exclusion shall not apply to such CLAIM,
or to the Company's obligation to defend or to pay, reimburse or advance DEFENSE
EXPENSES regarding such CLAIM, until a judgment or other final adjudication
adverse to the INSURED shall establish such acts.
B. For damage to, or destruction of, loss of, or loss of use of any tangible
property; or arising out of bodily injury, sickness, mental or emotional
distress, disease or death of any person.
C. For any obligation imposed by, or arising out of an INSURED'S failure to
comply with, any law concerning Workers' Compensation, Unemployment Insurance,
Social Security, Disability Insurance, or any related or similar law other than
COBRA.
D. For or arising out of or in consequence of the liability of others assumed
by an INSURED under any contract of agreement, whether oral or written, other
than an EMPLOYEE BENEFIT PLAN, except to the extent that the INSURED would have
been liable in the absence of such contract or agreement.
E. For or arising out of an INSURED'S having gained in fact any profit,
remuneration or advantage to which such INSURED was not legally entitled, or
for the return by the INSURED of any remuneration paid to or received by such
INSURED if payment or receipt of such remuneration was in violation of law.
F. For or arising out of the INSURED having willfully violated any judicial
or regulatory order or any law; provided, however, that this exclusion shall
not apply to such CLAIM, or to the Company's obligation to defend or to pay,
reimburse or advance DEFENSE EXPENSES regarding such CLAIM, until a judgment or
other adjudication adverse to the INSURED shall establish such willful
violation.
G. Based upon, alleging or arising out of any actual or alleged or
threatened discharge, release, seepage, escape or disposal of any hazardous or
toxic waste, emissions or substances, including but not limited to pollution or
contamination of any kind, and including but not limited to directions,
requests or orders that an INSURED report, test for, monitor, clean up, remove,
contain, treat, detoxify or neutralize any hazardous or toxic waste, emissions
or substances.
H. Based upon, alleging or arising out of discrimination, retaliation or
wrongful termination of any type or kind, other than CLAIMS asserted under
ERISA section 510.
I. Based upon, alleging or arising out of any pending or prior litigation as
of the inception of coverage under the Policy, or under the first Policy issued
to the NAMED INSURED by the Company provided that similar and uninterrupted
coverage has been in force with the Company since that time, or alleging or
derived from the same or substantially similar facts, circumstances or
situations underlying or alleged in such prior or pending litigation.
J. Based upon, alleging or arising out of any facts, circumstances,
situations, transactions or events as to which notice has been given to any
insurer under prior similar coverage.
V. SEVERABILITY OF EXCLUSIONS.
With respect to the Exclusions in Section IV of this Policy, no act or omission
of one INSURED shall be imputed to any other INSURED for the purpose of
determining the applicability of any exclusion, and the coverage otherwise
afforded under this Policy shall continue to apply to all INSUREDS who did not
commit, direct, approve or ratify such act or omission.
VI. DEDUCTIBLE.
The sum stated in the Declarations, "Deductible Amount," shall be deducted from
all amounts, including DEFENSE EXPENSES, paid by the Company for each CLAIM,
and the Company shall be liable only for sums in excess of such Deductible
Amount. The Company shall have no obligation to pay, advance or reimburse
DAMAGES or DEFENSE EXPENSES until the Deductible Amount has been paid by the
INSURED. The Company may elect to pay all or part of the Deductible Amount to
effect settlement of a CLAIM and, upon notice of the action taken by the
Company, the INSURED shall promptly reimburse the Company such part of the
Deductible Amount as has been paid by the Company; provided, however, that the
Deductible Amount shall not apply to an INSURED as defined in Section III(G)(3)
if indemnification by the NAMED INSURED is not permitted by law or if the NAMED
INSURED is unable to make such indemnification solely by reason of its
financial insolvency.
VII. LIMITS OF LIABILITY.
Regardless of the number of persons or entities bringing CLAIMS and regardless
of the number of persons or entities who are INSUREDS, the total limit of the
Company's liability because of all CLAIMS, including RELATED
FLP-1001 (09-98) Page 2 of 5
<PAGE> 25
CLAIMS, made during a single POLICY PERIOD, shall not exceed the amount shown
in the Declarations to the Policy as the "Annual Aggregate Limit of Liability,"
regardless of when payment is made and regardless of when an INSURED'S legal
obligation with regard thereto arises or is established. If the POLICY PERIOD
in the Declarations is more than one year, then the "Annual Aggregate Limit of
Liability" shall apply separately to each consecutive annual period.
In the event of a judgment in excess of the portion of the "Annual Aggregate
Limit of Liability" remaining after prior payments of judgments, settlements,
and DEFENSE EXPENSES payable under Section II.B., the Company's potential
liability with regard thereto shall not exceed the then remaining amount of the
"Annual Aggregate Limit of Liability." In no event shall the Company be
obligated to make payment with regard to any CLAIM or judgment, or to defend or
continue to defend, or to pay, reimburse or advance DEFENSE EXPENSES, after the
"Annual Aggregate Limit of Liability" has been exhausted by payment of
judgments, settlements, and DEFENSE EXPENSES payable under Section II.B..
VIII. CONSENT TO SETTLE.
The Company may, with the written consent of the INSURED, make such settlement
or compromise of any CLAIM as the Company deems expedient, and if the INSURED
shall refuse to consent to the settlement of any CLAIM as recommended by the
Company based upon a judgment or a bona fide offer of settlement, then the
INSURED thereafter shall negotiate or defend such CLAIM independently of the
Company and on the INSURED'S own behalf and solely at the expense of the
INSURED; in such event all DEFENSE EXPENSES and other costs and expenses
incurred or paid by the INSURED after the date the INSURED refused to consent
to settlement as recommended by the Company, shall be the sole responsibility of
the INSURED and shall not be recoverable under this Policy, and the INSURED
also shall be solely responsible for all DAMAGES in excess of the lower of the
amount for which settlement could have been made as recommended by the Company
or the remaining portion of the "Annual Aggregate Limit of Liability."
IX. CLAIMS MADE EXTENSION CLAUSE.
If, during the POLICY PERIOD, the INSURED shall first become aware of any
WRONGFUL ACT which may subsequently give rise to a CLAIM and shall, during such
POLICY PERIOD, give written notice thereof as set forth herein to the Company,
then any CLAIM which subsequently is made against the INSURED with regard to
such WRONGFUL ACT shall be deemed to have been first made during such POLICY
PERIOD. The written notice shall include the particulars of such WRONGFUL ACT,
including all facts constituting the alleged WRONGFUL ACT, the identity of each
person allegedly involved in or affected by the WRONGFUL ACT, and the date(s)
of the alleged events, all of which shall be provided as soon as practicable,
but in any event prior to the end of such POLICY PERIOD. Notice of any actual
CLAIM which is subsequently made with respect to such WRONGFUL ACT must be
given in accordance with Section XIII.A.
X. CANCELLATION.
This policy may be canceled by the NAMED INSURED named in Item 1 of the
Declarations at any time by written notice to the Company stating when
thereafter cancellation shall be effective. This Policy may be canceled by the
Company by mailing to the NAMED INSURED named in Item 1 of the Declarations, at
the address shown in Item 1 of the Declarations, written notice stating when,
not less than ten (10) days thereafter for nonpayment of premium or not less
than sixty (60) days thereafter for any other reason, cancellation shall be
effective. Mailing of such notice by the Company shall be sufficient proof of
such notice, and the Policy shall terminate at the date and hour specified
therein.
If this Policy is canceled by the NAMED INSURED, the Company shall retain the
customary short rate proportion of the premium hereon. If this Policy is
canceled by the Company, the Company shall retain the pro rata proportion of
the premium. Payment or tender of any unearned premium by the Company shall not
be a condition precedent to the effectiveness of cancellation but such payment
shall be made as soon as practicable.
A. FORMATION OR ACQUISITION OF PENSION PLAN.
If, during the POLICY PERIOD, the NAMED INSURED forms or acquires a
PENSION PLAN(S), other than an employee stock ownership plan, which is then
solely sponsored by the NAMED INSURED or jointly by the NAMED INSURED and a
labor organization exclusively for the benefit of the employees of the NAMED
INSURED, the Policy will provide coverage for such plan(s), subject to all
other terms and conditions of this Policy and only for so long as the Policy
remains in effect as to the NAMED INSURED, but only for CLAIMS with regard to
WRONGFUL ACTS which occur after the date of the formation or acquisition,
provided written notice of such formation or acquisition has been given to the
Company, and specific application has been submitted on the Company's form in
use at the time, together with such documentation and information as the
Company's underwriters may require, all within ninety (90) days after the
effective date of such formation or acquisition. The Policy shall not afford
any coverage with respect to such plan(s) following such 90-day period unless
the Company has agreed to provide such coverage, subject to any additional
terms and condition as the Company may require, and the NAMED INSURED has paid
the Company any additional premium as may be required by the Company.
The 90-day notice requirement shall not apply, however, if the total assets of
the formed or acquired plan(s), as of the effective date of such formation or
acquisition, do not exceed 10% of the total plan assets shown on the most
recent application submitted by the NAMED INSURED, or such formation or
acquisition occurs less than 90 days prior to the end of the POLICY PERIOD. In
either such event, the Policy will provide coverage, as described in the
preceding paragraph, for such plan(s), provided written notice of such
formation or acquisition is given to the Company prior to the end of such
POLICY PERIOD, or if such POLICY PERIOD in the Declarations is more than one
year, at the end of the annual period during which such formation or
acquisition became effective.
Notwithstanding the foregoing, no coverage shall be provided pursuant to this
Subsection XI.A. for any employee stock ownership plan or any natural person or
NAMED INSURED with respect thereto unless the Company, by specific written
endorsement hereto, agrees to provide such coverage. Any such coverage shall
be at the terms and conditions set forth in the endorsement and for such
additional premium as may be required by the Company.
B. MERGER OF PLANS.
If, during the POLICY PERIOD, a WELFARE PLAN or PENSION PLAN for which
coverage is provided under this Policy is merged with another WELFARE PLAN or
PENSION PLAN for which coverage is also provided under this Policy, the Policy
shall continue to provide coverage for both plans, subject to all other terms
and conditions of this Policy and only for so long as the Policy remains in
effect as to the NAMED INSURED.
If, during the POLICY PERIOD, a WELFARE PLAN or PENSION PLAN for which coverage
is provided under this Policy ("Covered Plan") is merged with another WELFARE
PLAN or PENSION PLAN for which coverage is not provided under this Policy
("Uncovered Plan"), the Policy shall continue to provide coverage for only the
Covered Plan, subject to all other terms and conditions of this Policy and only
for so long as the Policy remains in effect as to the NAMED INSURED, but only
for CLAIMS with regard to WRONGFUL ACTS which occurred prior to the date of
such merger.
C. SALE OR TERMINATION OF PLAN.
If, prior to or during the POLICY PERIOD, any WELFARE PLAN or PENSION PLAN
is sold or terminated, the Policy shall provide coverage for such plan, subject
to all other terms and conditions of this Policy and only for so long as the
Policy remains in effect as to the NAMED INSURED. The coverage provided pursuant
to this Subsection XI.C. shall apply only:
1. for CLAIMS with regard to WRONGFUL ACTS which occurred prior to the date
of such sale or termination.
2. while such plan was sponsored solely by the NAMED INSURED or jointly by
the NAMED INSURED and a labor organization exclusively for the benefit of
employees of the NAMED INSURED, and
3. if notice of such sale or termination is given to the Company prior to
the end of such POLICY PERIOD.
Page 3 of 5
<PAGE> 26
D. Change of Control of Named Insured.
-----------------------------------
If, during the POLICY PERIOD, more than fifty percent (50%) of the
ownership of the NAMED INSURED named in Item 1 of the Declarations is changed,
then this Policy shall continue to provide coverage, subject to all other terms
and conditions of this Policy, but only for CLAIMS with regard to WRONGFUL ACTS
which occurred prior to the effective date of such change of ownership. Such
coverage will terminate at the end of the POLICY PERIOD or, if the POLICY
PERIOD in the Declarations is more than one year, at the end of the annual
period during which the change of ownership became effective. If coverage is
terminated pursuant to this provision prior to end of the POLICY PERIOD, the
Company shall retain the pro rata proportion of the premium.
XII. EXTENDED REPORTING PERIOD.
Upon termination or cancellation of this Policy for any reason other than
non-payment of premium, the NAMED INSURED named in Item 1 of the Declarations
shall have the right, upon payment of the additional premium set forth in Item
6 of the Declarations, to the period of time set forth in Item 6 of the
Declarations following the effective date of termination or cancellation (the
"Extended Reporting Period") in which to give the Company written notice of
CLAIMS first made against persons or entities who at the effective date of
termination or cancellation are INSUREDS, but only for WRONGFUL ACTS occurring
wholly prior to the effective date of the termination or cancellation and which
otherwise would be covered by this Policy, subject to the following conditions:
A. The Extended Reporting Period shall not provide a new, additional or
renewed "Annual Aggregate Limit of Liability." The Company's total liability
for all CLAIMS made during the Extended Reporting Period shall be limited to
the remaining portion of the "Annual Aggregate Limit of Liability" set forth in
the Declarations as of the effective date of termination or cancellation;
B. Section IX of this Policy ("Claims Made Extension Clause") does not
apply and may not be invoked during the Extended Reporting Period;
C. The Extended Reporting Period shall terminate on the effective date of
any insurance purchased or obtained by the INSURED or its successors in
business, which replaces in whole or in part the insurance afforded by this
Policy. If such other policy provides no coverage for loss sustained prior to
its effective date, it shall not be deemed a replacement within the meaning of
this provision; and
D. The rights contained in this Section XII, shall terminate unless written
notice of such election, together with payment of the additional premium due,
is received by the Company within thirty (30) days of the effective date of the
termination or cancellation.
XIII. CONDITIONS.
A. INSURED'S DUTIES IN EVENT OF CLAIMS: It is a condition precedent to all
insurance afforded by this Policy that:
1. In the event of a CLAIM made against any INSURED, written notice
concerning all particulars of such CLAIM, including all facts constituting the
alleged WRONGFUL ACT, the identity of each person allegedly involved in or
affected by such WRONGFUL ACT, and the date(s) of the alleged events, shall be
provided to the Company as soon as practicable;
2. The INSURED as soon as practicable shall forward to the Company every
demand, notice, summons or legal process with respect to any CLAIM; and
3. The INSURED shall cooperate with the Company and, upon the Company's
request, assist in making settlements and in defense of CLAIMS and in enforcing
rights of contribution or indemnity against any person or entity which may be
liable to the INSURED because of an act or omission covered under this Policy,
shall attend hearings and trials and assist in securing and giving evidence and
obtaining the attendance of witnesses. The INSURED shall not voluntarily assume
or admit any liability nor, except at the INSURED'S own cost, voluntarily make
any payment, pay or incur any DEFENSE EXPENSES, assume any obligation or incur
any other expense, without the Company's prior written consent, such consent
not to be unreasonably withheld.
B. ACTION AGAINST THE COMPANY: No action shall lie against the Company
unless, as a condition precedent thereto, there shall have been full compliance
with all of the terms of this Policy, nor until the amount of the INSURED'S
obligation to pay shall have been finally determined either by judgment against
the INSURED after actual trial or by written agreement of the INSURED, the
claimant and the Company.
Any person or organization or legal representative thereof who has secured such
judgment or written agreement shall thereafter be entitled to recover under
this Policy, in a court of competent jurisdiction in the United States, its
territories or possessions, or Canada, to the extent of the insurance afforded
by this Policy. No person or organization shall have any right under this
Policy to join the Company as a party to any action against the INSURED to
determine the INSURED'S liability, nor shall the Company be impleaded by the
INSURED of said INSURED'S legal representative. Bankruptcy or insolvency of
the INSURED or of the INSURED'S estate shall not relieve the Company of any of
its obligations hereunder.
C. OTHER INSURANCE: This insurance shall apply only as excess insurance over,
and shall not contribute with, any other valid and collectible insurance
available to the INSURED, unless such other insurance is specifically in excess
of this Policy.
D. SUBROGATION: In the event of payment under this Policy the Company shall
be subrogated to all of the INSURED'S rights of recovery against any person or
organization to the extent of such payment and the INSURED shall execute and
deliver instruments and papers and do whatever else is necessary to secure
such rights. The INSURED shall do nothing after loss to prejudice such rights.
E. CHANGES: Notice to any agent or knowledge possessed by any agent or by any
other person shall not effect a waiver or a change in any part of the Policy,
or estop the Company from asserting any right under the terms of this Policy,
nor may the terms of this Policy be waived or changed, except by a written
endorsement issued by the Company to form a part of this Policy.
F. ASSIGNMENT: Assignment of interest under this Policy shall not bind the
Company until its consent is endorsed hereon; if, however, the INSURED becomes
incompetent or dies, such insurance as is afforded by this Policy shall apply
to the INSURED'S legal representative as an INSURED, but only while acting
within the scope of said INSURED'S duties as such.
G. VALUATION: All premiums, limits of liability, deductibles, DAMAGES,
DEFENSE EXPENSES, and other amounts under this Policy are expressed and payable
in the currency of the United States of America. If judgment is rendered,
settlement or invoice is denominated, or another element of DAMAGES or DEFENSE
EXPENSES is stated in a currency other than United States of America dollars,
payment under this Policy shall be made in United States dollars at the rate of
exchange published in the WALL STREET JOURNAL on the date the final judgment is
entered, the settlement agreement is executed, the invoice is dated, or the
other element of DAMAGES or DEFENSE EXPENSES is due, respectively.
H. CONTINUITY OF COVERAGE: This Policy applies only to CLAIMS first made
during the POLICY PERIOD provided the INSURED had no knowledge of or could not
have reasonably foreseen any circumstances which might result in a CLAIM as of
the Continuity Date set forth in Item 8 of the Declarations.
I. REPRESENTATIONS AND SEVERABILITY: By acceptances of this Policy, each
INSURED agrees that:
1. All statements in the Application for this Policy, and all statements
in any application for any policy or policies the issuance date of which is a
Continuity Date under this Policy, are said INSURED'S agreements and
representations;
2. All such applications, including any attachments thereto, are deemed to
be attached to, incorporated into, and form a part of, this Policy;
3. All such representations in all such applications are material to the
Company's acceptance of this risk;
FLP-1001 (09-98) Page 4 of 5
<PAGE> 27
4. This Policy is issued in reliance upon the truth of such
representations in all such applications; and
5. This Policy embodies all agreements existing between said INSURED
and the Company or any of its agents relating to this insurance.
No statement in the application, and no knowledge or information possessed by
any INSURED with regard to the subject matter of questions asked in the
application, shall be imputed to any other INSURED for the purpose of
determining the availability of coverage hereunder.
J. AUTHORIZATION: By acceptance of this Policy, the NAMED INSURED named
in Item 1 of the Declarations agrees to act on behalf of all INSUREDS with
respect to the payment of premiums, the receiving of any return premiums that
may become due under the Policy, and the receiving of notices of cancellation,
nonrenewal, or change of coverages and the INSUREDS each agree that they have,
individually and collectively, delegated such authority exclusively to the
NAMED INSURED named in Item 1 of the Declarations; provided, however, that
nothing herein shall relieve the INSUREDS, and each of them, from giving any
notice to the Company that is required under Section XIII A. of this Policy.
K. LIBERALIZATION CLAUSE: If during the period that insurance is in
force under this Policy, or within 45 days prior to the inception date thereof
the Company shall be required, by law or by insurance supervisory authorities
of the state in which the Policy was issued, to make any changes in the form of
this Policy, by which the insurance afforded by this Policy could be extended
or broadened without increased premium charge by endorsement or substitution of
form, then such extended or broadened insurance shall inure to the benefit of
the INSURED hereunder as though such endorsement or substitution of form had
been made.
L. RECOURSE: In the event that an INSURED breaches any fiduciary
obligation imposed by the Employee Retirement Income Security Act of 1974, as
amended from time to time, it is agreed that the Company has the right of
recourse against any such INSURED for any amount paid by the Company on account
of such a breach of fiduciary obligation, but the Company shall have no such
right of recourse if this policy has been purchased by an employer or by an
employee organization.
IN WITNESS WHEREOF, the Company has caused this Policy to be signed by its
authorized Company officers at Hartford, Connecticut, and signed on the
Declarations page by a duly authorized person on behalf of the Company.
/s/ Joseph P. Kiernan /s/ James M. MacMillan
Executive Vice President Corporate Secretary
<PAGE> 28
FIDUCIARY LIABILITY PLUS+(SM) POLICY POLICY NO: 06 FF 103202106 BCM
-------------------
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
CHANGE ANNUAL AGGREGATE LIMIT OF LIABILITY
TO AGGREGATE LIMIT OF LIABILITY ENDORSEMENT
It is agreed that:
1. Item 3 of the Declarations is amended as follows:
From: Annual Aggregate Limit of Liability $20,000,000
-----------
To: Aggregate Limit of Liability $20,000,000
-----------
2. Throughout this Policy the phrase "Annual Aggregate Limit of Liability" is
replaced with "Aggregate Limit of Liability".
3. The first paragraph of Section VII. LIMITS OF LIABILITY shall be deleted in
its entirety and replaced with the following:
Regardless of the number of persons or entities bringing CLAIMS and
regardless of the number of persons or entities who are INSUREDS, the total
limit of the Company's liability because of all CLAIMS, including RELATED
CLAIMS, made during a single POLICY PERIOD, shall not exceed the amount
shown in the Declarations to the Policy as the Aggregate Limit of Liability,
regardless of when payment is made and regardless of when an INSURED'S legal
obligation with regard thereto arises or is established.
4. Nothing contained herein shall vary, alter or extend the terms, conditions
and limitations of the policy except as stated above.
This endorsement is effective at the inception date stated in Item 2 of the
Declarations or effective at 12:01 A.M. on JULY 1, 1999, if indicated herein.
Complete the following only when this endorsement is not prepared with the
policy or is to be effective on a date other than the inception of the policy.
Accepted by:
----------------------------------
On behalf of the Named Insured
----------------------------------
Title
----------------------------------
Authorized Company Representative
<PAGE> 29
FIDUCIARY LIABILITY PLUS+(SM) POLICY POLICY NO: 06 FF 103202106 BCM
-------------------
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
IRS CLOSING AGREEMENT PROGRAM
Issued to: THE GILLETTE COMPANY
It is agreed that:
1. Notwithstanding the provisions of Section III. DEFINITIONS. subsection C.
"DAMAGES", DAMAGES shall include payments to the Internal Revenue Service or the
United States Department of the Treasury pursuant to the Closing Agreement
Program (where insurable by law) with respect to an EMPLOYEE BENEFIT PLAN.
2. The Company's total limit of liability for all such Closing Agreement Program
payments is limited to FIFTY THOUSAND AND 0/00 dollars ($50,000), regardless
of the number of plan years affected, or the number of plans affected by any or
all Closing Agreement Program payments.
3. DEFENSE EXPENSES with respect to CLAIMS seeking Closing Agreement Program
payments are part of, and not in addition to, the sublimit of liability stated
above. Such sublimit of liability shall be part of and not in addition to the
"Annual Aggregate Limit of Liability" stated in Item 3 of the Declarations.
4. Notwithstanding the above, there shall be no coverage under this policy for
any Closing Agreement Program payment made to satisfy or settle any
investigation or CLAIM of which any INSURED first received notice prior to the
effective date of this endorsement, or subsequent to the end of the POLICY
PERIOD or effective date of cancellation.
5. Nothing contained herein shall vary, alter or extend the terms, conditions
and limitations of the policy except as stated above.
This endorsement is effective at the inception date stated in Item 2 of the
Declarations or effective at 12:01 A.M. on JULY 01, 1999, if indicated herein.
Complete the following only when this endorsement is not prepared with the
policy or is to be effective on a date other than the inception of the policy.
Accepted by:
----------------------------------
On behalf of the Named Insured
----------------------------------
Title
----------------------------------
Authorized Company Representative
<PAGE> 30
FIDUCIARY LIABILITY PLUS+(SM) POLICY POLICY NO: 006 FF 103202106 BCM
--------------------
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
DEFENSE WITHIN THE AGGREGATE ENDORSEMENT
Issued to: THE GILLETTE COMPANY
It is agreed that:
1. Section II. DEFENSE PROVISIONS; TERRITORY subsection A. paragraph 1. is
deleted in its entirety and replaced by the following:
A. If a CLAIM is brought in the United States, its territories or
possessions, or in Canada, the Company shall have the right and duty to
defend such CLAIM, and shall pay DEFENSE EXPENSES, even if the CLAIM is
groundless, false or fraudulent; DEFENSE EXPENSES with regard to such CLAIM
shall be part of, and not in addition to, the "Annual Aggregate Limit of
Liability" set out in the Declarations to the Policy and payment of such
Defense Expenses shall reduce the amount of the "Annual Aggregate Limit of
Liability" available for payment of DEFENSE EXPENSES, judgments or
settlements.
2. Section VII. LIMITS OF LIABILITY is deleted in its entirety and replaced by
the following:
Regardless of the number of persons or entities bringing CLAIMS and
regardless of the number of persons or entities who are INSUREDS, the total
limit of the Company's liability because of all Claims, including RELATED
CLAIMS, made during a single POLICY PERIOD shall not exceed the amount shown
in the Declarations to the Policy as the "Annual Aggregate Limit of
Liability," regardless of when payment is made and regardless of when an
INSURED'S legal obligation with regard thereto arises or is established. If
the POLICY PERIOD in the Declarations is more than one year, then the
"Annual Aggregate Limit of Liability" shall apply separately to each
consecutive annual period. For purposes of this Section VII. only, the
Extended Reporting Period, if exercised, shall be part of and not in
addition to the immediately preceding POLICY PERIOD.
DEFENSE EXPENSES are part of and not in addition to the "Annual Aggregate
Limit of Liability" set out in the Declarations to the Policy. The "Annual
Aggregate Limit of Liability" shall be reduced by all DEFENSE EXPENSES paid,
advanced or reimbursed by the Company.
In the event of a judgment in excess of the portion of the "Annual Aggregate
Limit of Liability" remaining after prior payments of judgments, settlements
and DEFENSE EXPENSES, the Company's potential liability with regard thereto
shall not exceed the then remaining amount of the "Annual Aggregate Limit of
Liability." In no event shall the Company be obligated to make payment with
regard to any CLAIM or judgment, or to defend or continue to defend, or to
pay, reimburse or advance DEFENSE EXPENSES, after the "Annual Aggregate
Limit of Liability" has been exhausted by payment of judgments settlements
and DEFENSE EXPENSES.
3. Nothing contained herein shall vary, alter or extend the terms, conditions
and limitations of the policy except as stated above.
This endorsement is effective at the inception date stated in Item 2 of the
Declarations or effective at 12:01 A.M. on JULY 01, 1999, if indicated herein.
Complete the following only when this endorsement is not prepared with the
policy or is to be effective on a date other than the inception of the policy.
Accepted by:
----------------------------------
On behalf of the Named Insured
----------------------------------
Title
----------------------------------
Authorized Company Representative
<PAGE> 31
FIDUCIARY LIABILITY PLUS+(SM) POLICY POLICY NO: 06 FF 103202106 BCM
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
OMNIBUS PENSION PLAN COVERAGE
It is agreed that:
1. Section III. DEFINITIONS subsection E.(2) is deleted in its entirety and
replaced by the following:
Any PENSION PLAN(S), RABBI TRUST, OR SEP which was or at the inception date of
this policy is sponsored solely by the NAMED INSURED or jointly by the NAMED
INSURED and a labor organization exclusively for the benefit of employees of the
NAMED INSURED.
2. Nothing contained herein shall vary, alter or extend the terms, conditions
and limitations of the policy except as stated above.
This endorsement is effective at the inception date stated in Item 2 of the
Declarations or effective at 12:01 A.M. on _____________, if indicated herein.
Complete the following only when this endorsement is not prepared with the
policy or is to be effective on a date other than the inception of the policy.
Accepted by:
----------------------------------
On behalf of the Named Insured
----------------------------------
Title
----------------------------------
Authorized Company Representative
<PAGE> 32
FIDUCIARY LIABILITY PLUS+(SM) POLICY POLICY NO: 06 FF 103202106 BCM
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
CIVIL PENALTIES UNDER PENSIONS ACT 1995
It is agreed that:
1. Section III. DEFINITIONS (C) "DAMAGES" subsection (1) is deleted in its
entirety and replaced by the following:
(1) Fines; penalties, other than civil penalties under Sections 502(i) and
502(I) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or civil penalties imposed, pursuant to Pensions Act 1995, by the
Occupational Pensions Regulatory Authority in the United Kingdom or the
Pensions Ombudsman of the United Kingdom as the result of a finding of a
WRONGFUL ACT; taxes; punitives or exemplary damages; matters deemed
uninsurable under applicable law;
2. The funds or assets of the pension scheme shall not be used to fund, pay or
reimburse the premium for coverage provided hereunder.
3. Notwithstanding the above, there shall be no coverage under this policy for
any civil penalty imposed against an INSURED arising out of any investigation or
CLAIM of which any INSURED first received notice prior to the effective date of
this endorsement.
4. Nothing contained herein shall vary, alter or extend any of the terms,
conditions and limitations of the Policy except as stated above.
This endorsement is effective at the inception date stated in Item 2 of the
Declarations or effective at 12:01 A.M. on JANUARY 5, 1998, indicated herein.
Complete the following only when this endorsement is not prepared with the
policy or is to be effective on a date other than the inception of the policy.
Accepted by:
----------------------------------
On behalf of the Named Insured
----------------------------------
Title
----------------------------------
Authorized Company Representative
<PAGE> 33
[TravelersPropertyCasualty Logo] WALTER E. GROTE
Manager
Bond - Commercial Risk
300 Crown Colony Drive
Quincy, Ma 02169
(617) 984-1228
Fax (617) 479-9137
AGREEMENT
Travelers Casualty & Surety Company of America ("Travelers"), and its successor
in interest agrees to a thirty-six (36) month Fiduciary Liability Plus+
Policy, ("the Policy") with a $20,000,000 Aggregate Limit of Liability for a
premium of $106,875.00 prepaid to The Gillette Company effective 7/1/99 to
7/1/02, ("the Policy Period"). Travelers further agrees not to cancel the
policy at any time during the Policy Period unless there has been a material
change in the financial condition of The Gillette Company. Not withstanding
any provision to the contrary in the Policy, The Gillette Company, and its
successors in interest agrees not to cancel Policy No. 06 FF 103202106 BCM
at any time during the Policy Period unless there has been a material change
in the financial condition of Travelers.
The terms of this Agreement are confidential and therefore will not be disclosed
to any other parties by the Undersigned, their directors, officers or
employees, agents or insurance brokers.
The Gillette Company Travelers Casualty & Surety Company of America
By: By: /s/ Walter E. Grote
---------------------------- -------------------------
Dated: Date: 6/30/99
------------------------- -----------------------
<PAGE> 34
FIDUCIARY LIABILITY PLUS+(SM) POLICY POLICY NO: 006 FF 103202106 BCM
--------------------
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
DELETE EXCLUSION (I)
Issued to: THE GILLETTE COMPANY
It is agreed that:
1. Section IV. EXCLUSIONS. subsection I. is deleted in its entirety.
2. Nothing contained herein shall vary, alter or extend the terms, conditions
and limitations of the policy except as stated above.
This endorsement is effective at the inception date stated in Item 2 of the
Declarations or effective at 12:01 A.M. on JULY 01, 1999, if indicated herein.
Complete the following only when this endorsement is not prepared with the
policy or is to be effective on a date other than the inception of the policy.
Accepted by:
----------------------------------
On behalf of the Named Insured
----------------------------------
Title
----------------------------------
Authorized Company Representative
FLP-1015 (09-98)
<PAGE> 35
FIDUCIARY LIABILITY PLUS+(SM) POLICY POLICY NO: 06 FF 103202106 BCM
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
AMEND DEFINITION OF CLAIM
It is agreed that:
1. Section III. DEFINITIONS subsection B. "CLAIM", is amended by adding the
following:
5. Any fact finding investigation by the Department of Labor, the Pension
Benefit Guaranty Corporation or similar governmental agency which is located
outside of the United States.
2. Nothing contained herein shall vary, alter or extend the terms, conditions
and limitations of the policy except as stated above.
This endorsement is effective at the inception date stated in Item 2 of the
Declarations or effective at 12:01 A.M on _______________, if indicated herein.
Complete the following only when this endorsement is not prepared with the
policy or is to be effective on a date other than the inception of the policy.
Accepted by:
----------------------------------
On behalf of the Named Insured
----------------------------------
Title
----------------------------------
Authorized Company Representative
FLP-1012 (09-98)
<PAGE> 36
FIDUCIARY LIABILITY PLUS+(SM) POLICY POLICY NO: 06 FF 103202106 BCM
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
AMEND DEFINITION OF INSURED - INCLUDE MANAGED COMPANIES
LESS THAN 50% OWNED
It is agreed that:
1. Section III. DEFINITIONS subsection H. "NAMED INSURED" is deleted in its
entirety and replaced by the following:
H. "NAMED INSURED" means the entity named in Item 1 of the Declarations
of the Policy, and includes:
1. entities which said NAMED INSURED owns, has owned, or during the
POLICY PERIOD forms or acquires, but only for Claims with regard
to WRONGFUL ACTS which occur wholly during the time that said
NAMED INSURED owns more than fifty percent (50%) of such entities;
and
2. affiliated companies managed by said Named Insured, but only for
CLAIMS with regard to WRONGFUL ACTS which occur wholly during the
time that said NAMED INSURED manages such affiliated companies.
2. Nothing contained herein shall vary, alter or extend the terms, conditions
and limitations of the policy except as stated above.
This endorsement is effective at the inception date stated in Item 2 of the
Declarations or effective at 12:01 A.M. on ______________, if indicated herein.
Complete the following only when this endorsement is not prepared with the
policy or is to be effective on a date other than the inception of the policy.
Accepted by:
----------------------------------
On behalf of the Named Insured
----------------------------------
Title
----------------------------------
Authorized Company Representative
Managed Companies
FLP-1016 (r 6-99)
<PAGE> 37
FIDUCIARY LIABILITY PLUS+(SM) POLICY POLICY NO: 06 FF 103202106 BCM
REINSTATEMENT OF LIMITS OF LIABILITY
To be attached to and form a part of
Policy No.: 06 FF 103202106 BCM
Issued to: THE GILLETTE COMPANY
It is agreed that Section XIII. CONDITIONS is amended by adding the following:
M. REINSTATEMENT OF LIMIT OF LIABILITY OPTION.
The Insured shall have the right, on or after July 1, 2000, to purchase one, and
only one, reinstatement of the Limit of Liability set forth in Item 3 of the
Declarations of this Policy, pursuant to the following terms and conditions:
1. The reinstatement shall be effected by issuance of an excess policy
("Reinstatement Excess Policy") which shall follow the form of this Policy,
except as otherwise provided herein. The Reinstatement Excess Policy shall be
excess of this Policy and any other insurance written specifically as excess of
this Policy. The INSURED shall maintain such excess insurance in an aggregate
amount not less than $20,000,000, and such excess insurance shall be maintained
for as long as this reinstatement option is in force and exercisable. Before the
Company shall have any obligation to make any payment under the Reinstatement
Excess Policy, the full amount of such excess insurance must be completely
exhausted by actual payment of losses thereunder. In the event that such excess
insurance is not maintained or is not collectable for any reason, the
Reinstatement Excess Policy shall not drop down or replace such excess insurance
but rather shall provide the same coverage that would have been provided had
such excess insurance been maintained or collectable.
2. The additional premium for the reinstatement shall equal 200% of the
pro-rata amount of the Premium for the POLICY PERIOD set forth in Item 5 of the
Declarations based on the remaining term of the POLICY PERIOD set forth in Item
2 of the Declarations (beginning with the effective date of the reinstatement),
subject to a minimum premium of 100% of the Premium for the POLICY PERIOD set
forth in Item 5 of the Declarations. Such reinstatement premium shall be deemed
fully earned upon the effective date of reinstatement, and due within ten (10)
days of the effective date of reinstatement.
3. This right may only be exercised during the POLICY PERIOD set forth in
Item 2 of the Declarations and may only be exercised one time. Once this right
has been exercised and the Company has issued the Reinstatement Excess Policy in
accordance therewith, there shall be no right to purchase a further or
additional reinstatement of the Limit of Liability.
4. This right may only be exercised after the INSURED has given the
Company notice of a CLAIM in accordance with Section XIII.A. of this Policy.
5. This right may only be exercised by the INSURED providing written
notice to the Company of its election to exercise this right to purchase a
reinstatement, pursuant to the terms and conditions herein. Such notice shall be
given prior to and specify the effective date of reinstatement, and must be
delivered to the Company at the following address:
Travelers Casualty and Surety Company of America
<PAGE> 38
One Tower Square
Bond, 3PB
Hartford, CT 06183-9062
6. The POLICY PERIOD for the Reinstatement Excess Policy shall commence as
of the effective date stated in the notice of election to exercise this right
("the Inception Date"), and shall terminate on the same date that this Policy
terminates. The Reinstatement Excess Policy shall not provide coverage for any
Claim first made or deemed to have been made against any INSURED prior to the
Inception Date of the Reinstatement Excess Policy.
7. The limit of liability in the Reinstatement Excess Policy shall be
equal to the Limit of Liability set forth in Item 3 of the Declarations.
However, the Company's maximum aggregate limit of liability for any one CLAIM,
including RELATED CLAIMS, covered under both this Policy and the Reinstatement
Excess Policy (or if any CLAIM, including RELATED CLAIMS, would be so covered if
not for the exhaustion of the Limit of Liability of this Policy) shall be the
Limit of Liability set forth in Item 3 of the Declarations.
8. Notwithstanding anything herein to the contrary, the Reinstatement
Excess Policy shall not provide coverage for any CLAIM:
a. based upon, alleging, arising out of, or in any way relating to,
directly or indirectly, any fact, circumstance, situation, transaction, event or
WRONGFUL ACT underlying or alleged in any prior and/or pending demand or civil,
criminal, administrative or regulatory proceeding as of the Inception Date of
the Reinstatement Excess Policy; or
b. based upon, alleging, arising out of, or in any way relating to,
directly or indirectly, any fact, circumstance, situation, transaction, event or
WRONGFUL ACT which has been the subject of any notice given under this Policy or
under any other insurance policy prior to the Inception Date of the
Reinstatement Excess Policy.
9. Nothing contained herein shall vary, alter or extend the terms,
conditions and limitations of the policy except as stated above.
10. The Deductible Amount identified in Item 4. of the Policy Declarations
will increase to $1,000,000 on the date the Reinstatement of the Limits of
Liability option is exercised.
This endorsement forms a part of the policy to which it is attached, effective
on the inception of the policy unless otherwise stated herein.
----------------------------------------------------------------------------
Complete Only When This Endorsement Is Not Prepared With The Policy Or Is To Be
Effective On A Date Other Than The Inception Of The Policy.
Issued to (Designated Trust or Plan):
Effective date of this endorsement:
By:
----------------------------------------
(Authorized Representative)
Accepted by:
---------------------------
<PAGE> 1
EXHIBIT 10(f)
CONVERSION OF DIRECTORS' VESTED PENSION BENEFIT
INTO DEFERRED STOCK UNITS
(As Amended November 19, 1998)
* THE PRESENT VALUE OF VESTED PENSION BENEFIT AS OF 12/31/96 WILL BE
CALCULATED BY HEWITT ASSOCIATES BASED ON INFORMATION PROVIDED BY GILLETTE.
A STATEMENT THE PRESENT VALUE AND ASSUMPTIONS WILL BE PROVIDED TO EACH
DIRECTOR AT THE NOVEMBER 21, 1996, BOARD MEETING.
* THE NUMBER OF FULL AND PARTIAL DEFERRED STOCK UNITS (DSUs) SHALL BE
CALCULATED BY DIVIDING THE PRESENT VALUE OF THE VESTED PENSION BENEFIT BY
THE AVERAGE OF THE HIGH AND LOW STOCK PRICES AS REPORTED ON THE NEW YORK
STOCK EXCHANGE COMPOSITE INDEX FOR THE LAST TRADING DAY OF THE MONTHS OF
JULY THROUGH DECEMBER, 1996. THE NUMBER OF DSUs SHALL BE ROUNDED TO THE
NEAREST THOUSANDTH.
* FOR ACTIVE DIRECTORS, DEFERRED STOCK UNITS WILL ACCRUE ADDITIONAL DSUs FROM
DIVIDENDS.
* THE NUMBER OF ADDITIONAL DSUs FROM DIVIDENDS WILL BE CALCULATED EACH
QUARTER BY DIVIDING THE AMOUNT OF THE DIVIDEND (THE NUMBER OF DSUs CREDITED
TO THE DIRECTORS' ACCOUNTS ON THE DIVIDEND RECORD DATE MULTIPLIED BY THE
DIVIDEND RATE) BY THE FAIR MARKET VALUE (FMV) OF GILLETTE STOCK ON THE
DIVIDEND PAYMENT DATE. THE FMV SHALL BE CALCULATED BASED UPON THE AVERAGE
OF THE HIGH AND LOW PRICES FOR GILLETTE STOCK AS REPORTED ON THE NEW YORK
STOCK EXCHANGE COMPOSITE INDEX FOR THE DIVIDEND PAYMENT DATE.
<PAGE> 2
* WHEN A DIRECTOR RETIRES, THE DEFERRED STOCK UNIT ACCOUNT WILL BE CONVERTED
INTO A FIXED AMOUNT CALCULATED BY MULTIPLYING THE TOTAL NUMBER OF DSUs BY
THE FAIR MARKET VALUE OF GILLETTE STOCK BASED ON THE AVERAGE OF THE HIGH
AND LOW STOCK PRICES AS REPORTED ON THE NEW YORK STOCK EXCHANGE COMPOSITE
INDEX FOR THE 20 TRADING DAYS PRECEDING THE RETIREMENT DATE.
* FROM THE RETIREMENT DATE THROUGH THE DATE OF PAYOUT, THE CASH VALUE WILL
ACCRUE INTEREST AT AN INTEREST RATE EQUIVALENT TO THE AVERAGE YIELD ON
10-YEAR U.S. TREASURY BILLS ON THE FIRST TRADING DAY OF EACH CALENDAR YEAR.
THE RATE WILL BE ADJUSTED ANNUALLY.
* THIS CONVERSION WILL BE AUTOMATIC FOR ALL OUTSIDE DIRECTORS WHO HAVE NOT
ATTAINED AGE 65 AS OF THE DATE OF CONVERSION WHETHER OR NOT THEY ARE VESTED
UNDER THE CURRENT PLAN. THOSE DIRECTORS WHO ARE NOT YET VESTED WILL BECOME
FULLY VESTED AS OF DECEMBER 31, 1996.
* FOR THOSE DIRECTORS WHO HAVE ATTAINED AGE 65 AS OF THE CONVERSION DATE, A
ONE TIME ELECTION MAY BE MADE BY DECEMBER 15, 1996 TO CONVERT THE PRESENT
VALUE OF VESTED PENSION BENEFITS INTO DEFERRED STOCK UNITS (DSUs).
* IF A DIRECTOR DOES NOT CHOOSE TO CONVERT THE PRESENT VALUE OF THE VESTED
PENSION BENEFIT TO DEFERRED STOCK UNITS, THEN THE PENSION BENEFIT IS FROZEN
AS OF DECEMBER 31, 1996, AND WILL BE PAID OUT UNDER THE TERMS OF THE
CURRENT RETIREMENT PLAN FOR DIRECTORS. NO CREDIT FOR FUTURE SERVICE WILL BE
GIVEN AND THE ANNUAL PENSION
<PAGE> 3
BENEFIT PAYMENT WILL BE $28,000, REGARDLESS OF FUTURE INCREASES IN THE
AMOUNT OF THE BOARD RETAINER.
* DIRECTORS PARTICIPATING IN THIS PLAN MUST ELECT BY DECEMBER 15, 1996, HOW
THEY WISH TO RECEIVE PAYMENT OF THE CONVERTED AMOUNTS AFTER RETIREMENT OR
IN THE EVENT OF A CHANGE IN CONTROL. THE PAYMENTS MAY BE MADE IN UP TO 10
APPROXIMATELY EQUAL ANNUAL INSTALLMENTS WITH PAYMENTS BEGINNING WITHIN 30
DAYS FOLLOWING RETIREMENT.
* UPON THE DEATH OF A DIRECTOR, ANY UNPAID AMOUNTS WILL BE PAID IN A LUMP SUM
TO THE BENEFICIARY DESIGNATED BY THE DIRECTOR. IF THE DESIGNATED
BENEFICIARY DOES NOT SURVIVE THE DIRECTOR, OR THE IF THE DIRECTOR DOES NOT
DESIGNATE A BENEFICIARY, ANY REMAINING UNPAID AMOUNTS WILL BE PAID IN A
SINGLE LUMP SUM TO THE ESTATE OF THE DIRECTOR. A DIRECTOR MAY DESIGNATE OR
CHANGE A BENEFICIARY AT ANY TIME BY COMPLETING AND DELIVERING TO THE
COMPANY A BENEFICIARY DESIGNATION FORM.
* THIS ACCOUNT WILL BE SEPARATE FROM ANY OTHER DEFERRED STOCK UNIT ACCOUNT
WHICH THE DIRECTOR MAY HAVE. ANNUAL ACCOUNT STATEMENTS WILL BE PROVIDED TO
THE DIRECTORS.
* FOR THOSE RETIRED DIRECTORS CURRENTLY RECEIVING A RETIREMENT BENEFIT, THE
PROVISIONS OF THE RETIREMENT PLAN FOR DIRECTORS CONTINUE TO APPLY.
<PAGE> 1
Exhibit 10(h)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 16th day of December, 1999 (this
"Agreement"), by and between The Gillette Company, a Delaware corporation (the
"Company"), and Michael C. Hawley (the "Executive").
WHEREAS, the Company has determined that it is in its best interests
and that of its stockholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined herein). The Company believes it
is imperative to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or threatened
Change of Control and to encourage the Executive's full attention and dedication
to the current Company and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that are
competitive with those of other corporations. Therefore, in order to accomplish
these objectives, the Company has entered into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the
first date during the Change of Control Period (as defined herein) on which a
Change of Control occurs. Notwithstanding anything in this Agreement to the
contrary, if a Change of Control occurs and if the Executive's employment with
the Company is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (1) was at the request of a third party that has taken
steps reasonably calculated to effect a Change of Control or (2) otherwise arose
in connection with or anticipation of a Change of Control, then "Effective Date"
means the date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the
date hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.
(d) Change of Control" means:
<PAGE> 2
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section 1(d), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
l(d)(3)(A), l(d)(3)(B) and l(d)(3)(C).
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Consummation of a reorganization, merger, consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of
-2-
<PAGE> 3
the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "Recent Annual Bonus Percentage" means the highest actual annual
bonus percentage awarded to the Executive under the Company's annual incentive
plans, or any comparable bonus under any predecessor or successor plan, for the
last three full fiscal years prior to the Effective Date.
(f) "Highest Annual Bonus Percentage" means the higher of (i) the
Executive's Recent Annual Bonus Percentage and (ii) one-hundred percent (100%).
(g) "Highest Annual Bonus" means an amount equal to the product of
(i) the Executive's Annual Base Salary at the Date of Termination and (ii) the
Highest Annual Bonus Percentage.
(h) "Bonus Payment Amount" means the mount actually paid to the
Executive pursuant to Section 13 of the Company's Incentive Bonus Plan or any
comparable provision of any successor annual bonus plan.
Section 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
second anniversary of the Effective Date (the "Employment Period' ).
Section 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1)
During the Employment Period, (A) the Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 120-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the office or location where the
Executive was employed immediately preceding the Effective Date or at any other
location less than 35 miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational
-3-
<PAGE> 4
institutions and (C) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that, to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary (the "Annual Base Salary"), which
Annual Base Salary shall be paid at a monthly rate at least equal to 12 times
the highest monthly base salary paid or payable, including any base salary that
has been earned but deferred, to the Executive by the Company and the Affiliated
Companies in respect of the 12-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually, beginning no more than 12 months
after the last salary increase awarded to the Executive prior to the Effective
Date. Any increase in the Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. The Annual Base
Salary shall not be reduced after any such increase and the term "Annual Base
Salary" shall refer to the Annual Base Salary as so increased.
(2) ANNUAL BONUS. In addition to the Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash, determined as a percentage
of Annual Base Salary which shall not be less than the Recent Annual Bonus
Percentage. Each such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus.
(3) INCENTIVE SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies, and programs applicable generally to
other peer executives of the Company and the Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and the Affiliated Companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and the Affiliated Companies.
(4) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under the Company's
Executive Life Insurance Plan and Estate
-4-
<PAGE> 5
Preservation Plan, and any other welfare benefit plans, practices, policies and
programs provided by the Company and the Affiliated Companies (including,
without limitation, medical, prescription, dental, disability,
employee/spouse/dependent life insurance and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the
Company and the Affiliated Companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits that are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.
(5) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and
the Affiliated Companies.
(6) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, parking benefits and fitness center membership, in
accordance with the most favorable plans, practices, programs and policies of
the Company and the Affiliated Companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(7) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the Affiliated Companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(8) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated Companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.
(9) EFFECT OF TERMINATION. Notwithstanding anything in this Agreement
to the contrary, upon termination of employment for any reason, the Employment
Period shall
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cease and the Executive shall have no further right to any of the payments or
benefits described in Sections 2 and 3.
SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 1l(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. "Disability"
means the absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or any Affiliated
Company (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company that specifically identifies the manner in
which the Board or the Chief Executive Officer of the Company believes that
the Executive has not substantially performed the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.
For purposes of this Section 40(b), no act, or failure to act, on the part of
the Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board Or upon the instructions of the Chief Executive
Officer of the Company or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best interests of
the Company. The cessation of employment of the Executive shall not be deemed
to be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice is provided
to the Executive and the Executive is given an opportunity, together with
counsel for the Executive, to be heard before the Board),
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finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a), or any other action by the Company that
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company to comply with any of the provisions
of Section 3(b), other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(3) the Company's requiring the Executive to be based at any office
or location other than as provided in Section 3(a)(1)(B) or the Company's
requiring the Executive to travel on Company business to a substantially
greater extent than required immediately prior to the Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(5) any failure by the Company to comply with and satisfy Section
10(c).
For purposes of this Section 4(c), any good faith determination of
Good Reason made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the
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Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD
REASON: OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment
Period, the Company terminates the Executive's employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in cash
within 30 days after the Date of Termination, the aggregate of the
following mounts:
(A) the sum of (i) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (ii) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination and the denominator of which is 365,
reduced (but not below zero), if the Date of Termination occurs in the
same fiscal year as the Change of Control, by the Executive's Bonus
Payment Amount, (iii) if elected by the Executive, any compensation
previously deferred by the Executive under the Company's Supplemental
Savings Plan, Incentive Bonus Plan and/or Stock Equivalent Unit Plan
(together with any accrued interest or earnings thereon), and (iv) any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in subclauses (i), (ii), (iii) and
(iv), the "Accrued Obligations"); and
(B) the amount equal to the product of (i) three and (ii) the
sum of (x) the Executive's Annual Base Salary and (y) the Executive's
Highest Annual Bonus; and
(C) if elected by the Executive within 60 days following
execution of this Agreement and prior to the Effective Date, in lieu
of and substitution for the applicable portion of the Executive's
monthly benefit otherwise payable under the final paragraph of Article
IV, Section 1 or paragraph (a) of Article V, Section 3 of the
Company's Retirement Plan and the final paragraph of Section 3 of
Supplemental Retirement Plan (collectively, the "Retirement Plans"),
an
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amount equal to the excess of (i) the lump sum actuarial equivalent
(utilizing the interest rate and mortality table in effect for lump
sum distributions under the Retirement Plan immediately prior to the
Effective Date, and determined assuming benefit commencement as of the
Date of Termination) of the benefit under the Retirement Plans that
the Executive would receive if the Executive's employment continued
for three years after the Date of Termination, assuming for this
purpose that all accrued benefits are fully vested and assuming that
the Executive's compensation in each of the three years is the Annual
Base Salary and Highest Annual Bonus, over (ii) the lump sum actuarial
equivalent (determined in the same manner as in clause (i) above) of
the Executive's actual benefit (paid or payable), if any, under the
Retirement Plans as of the Date of Termination without regard to such
three years' compensation and service;
(2) for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue welfare benefits to
the Executive and/or the Executive's family at least equal to those that
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(4) if the Executive's
employment had not been terminated or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and the Affiliated Companies and their families,
provided, however, that, if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
the Executive's eligibility for retiree benefits pursuant to such welfare
plans, practices, programs and policies, the Executive shall be considered
to have remained employed until three years after the Date of Termination,
provided, however, that the Executive's commencement of such retiree
benefits shall not be any sooner than the Executive's earliest retirement
date under the Retirement Plans;
(3) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall
be selected by the Executive in the Executive's sole discretion; and
(4) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or that the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and the Affiliated Companies (such other amounts
and benefits, the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, the Company shall have no
further obligations to the Executive's legal representatives under this
Agreement, except for payment of the Accrued Obligations and the timely payment
or provision of the Other Benefits. The
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Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term "Other Benefits"
as utilized in this Section 5(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and the
Affiliated Companies to the estates and beneficiaries of peer executives of the
Company and the Affiliated Companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the Affiliated Companies and their beneficiaries.
(e) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, the Company shall
have no further obligations to the Executive under this Agreement, except for
payment of the Accrued Obligations and the timely payment or provision of the
Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at an y time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
is terminated for Cause during the Employment Period, the Company shall have no
further obligations to the Executive under this Agreement, except for payment to
the Executive of (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously deferred by the
Executive, and (3) the Other Benefits, in each case, to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, the Company shall have no
further obligations to the Executive under this Agreement, except for payment of
the Accrued Obligations and the timely payment or provision of the Other
Benefits. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or the Affiliated
Companies and for which the Executive may qualify, nor, subject to Section
1l(f), shall anything herein limit or otherwise affect such
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<PAGE> 11
rights as the Executive may have under any other contract or agreement with the
Company or the Affiliated Companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the Affiliated
Companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.
SECTION 7. FULL SETTLEMENT. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense, or other claim, right or action that the Company may have
against the Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and such amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses that the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus, in each case, interest on any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or the Affiliated Companies to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise but determined without regard to any additional payments
required under this Section 8) (the "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code, or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, collectively, the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (the
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other certified public accounting firm as may be designated by
the Executive (the "Accounting Firm") that shall
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provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments that will not have been made by the Company should have
been made (the "Underpayment"), consistent with the calculations required to be
made hereunder. In the event the Company exhausts its remedies pursuant to
Section 8(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the mount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that the Company desires to contest such claim, the
Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order effectively to
contest such claim, and
(4) permit the Company to participate in any proceedings relating to
such
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provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in
connection with such contest, and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that, if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which the Gross-Up
Payment would be payable hereunder, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive's employment by
the Company or the Affiliated Companies and which information, knowledge or data
shall not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
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termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
SECTION 10. SUCCESSORS. (a) This Agreement is personal to the
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
if to the Executive:
Mr. Michael C. Hawley
42 Chestnut Street
Boston, Massachusetts 02108
if to the Company:
The Gillette Company
Prudential Tower Building
Boston, Massachusetts 02199
Attention: General Counsel
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or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date: (i) this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof, and (ii) if the Executive receives severance
benefits under Section 5(a), the Executive shall not be entitled to receive
severance pay or benefits under any other plan, program, policy or arrangement
of the Company providing severance benefits.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from the Board, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
/s/ Michael C. Hawley
--------------------------------
Michael C. Hawley
THE GILLETTE COMPANY
By /s/ Robert E. DiCenso
------------------------------
Title: S.V.P. - Personnel &
Administration
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Exhibit 10(i)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 16th day of December, 1999 (this
"Agreement"), by and between The Gillette Company, a Delaware corporation (the
"Company"), and Edward F. DeGraan (the "Executive" ).
WHEREAS, the Company has determined that it is in its best interests
and that of its stockholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined herein). The Company believes it
is imperative to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or threatened
Change of Control and to encourage the Executive's full attention and
dedication to the current Company and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that are
competitive with those of other corporations. Therefore, in order to accomplish
these objectives, the Company has entered into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the
first date during the Change of Control Period (as defined herein) on which a
Change of Control occurs. Notwithstanding anything in this Agreement to the
contrary, if a Change of Control occurs and if the Executive's employment with
the Company is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (1) was at the request of a third party that has taken
steps reasonably calculated to effect a Change of Control or (2) otherwise arose
in connection with or anticipation of a Change of Control, then "Effective Date"
means the date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the
date hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.
(d) "Change of Control" means:
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(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities" );
provided, however, that, for purposes of this Section l(d), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
l(d)(3)(A), l(d)(3)(B) and l(d)(3)(C).
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Consummation of a reorganization, merger, consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of
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the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "Recent Annual Bonus Percentage" means the highest actual annual
bonus percentage awarded to the Executive under the Company's annual incentive
plans, or any comparable bonus under any predecessor or successor plan, for the
last three full fiscal years prior to the Effective Date.
(f) "Highest Annual Bonus Percentage" means the higher of (i) the
Executive's Recent Annual Bonus Percentage and (ii) sixty-five percent (65%).
(g) "Highest Annual Bonus" means an amount equal to the product of
(i) the Executive's Annual Base Salary at the Date of Termination and (ii) the
Highest Annual Bonus Percentage.
(h) "Bonus Payment Amount" means the amount actually paid to the
Executive pursuant to Section 13 of the Company's Incentive Bonus Plan or any
comparable provision of any successor annual bonus plan.
SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
second anniversary of the Effective Date (the "Employment Period' ).
SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1)
During the Employment Period, (A) the Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 120-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the office or location where the
Executive was employed immediately preceding the Effective Date or at any other
location less than 35 miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational
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institutions and (C) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that, to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary (the "Annual Base Salary"), which
Annual Base Salary shall be paid at a monthly rate at least equal to 12 times
the highest monthly base salary paid or payable, including any base salary that
has been earned but deferred, to the Executive by the Company and the Affiliated
Companies in respect of the 12-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually, beginning no more than 12 months
after the last salary increase awarded to the Executive prior to the Effective
Date. Any increase in the Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. The Annual Base
Salary shall not be reduced after any such increase and the term "Annual Base
Salary" shall refer to the Annual Base Salary as so increased.
(2) ANNUAL BONUS. In addition to the Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash, determined as a percentage
of Annual Base Salary which shall not be less than the Recent Annual Bonus
Percentage. Each such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus.
(3) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies, and programs applicable generally to
other peer executives of the Company and the Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and the Affiliated Companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and the Affiliated Companies.
(4) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under the Company's
Executive Life Insurance Plan and Estate
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Preservation Plan, and any other welfare benefit plans, practices, policies and
programs provided by the Company and the Affiliated Companies (including,
without limitation, medical, prescription, dental, disability,
employee/spouse/dependent life insurance and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the
Company and the Affiliated Companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits that are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.
(5) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and
the Affiliated Companies.
(6) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, parking benefits and fitness center membership, in
accordance with the most favorable plans, practices, programs and policies of
the Company and the Affiliated Companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(7) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the Affiliated Companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(8) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated Companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.
(9) EFFECT OF TERMINATION. Notwithstanding anything in this Agreement
to the contrary, upon termination of employment for any reason, the Employment
Period shall
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cease and the Executive shall have no further right to any of the payments or
benefits described in Sections 2 and 3.
SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 1l(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. "Disability"
means the absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or any Affiliated
Company (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company that specifically identifies the manner in
which the Board or the Chief Executive Officer of the Company believes that
the Executive has not substantially performed the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel for
the Executive, to be heard before the Board),
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finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a), or any other action by the Company that
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company to comply with any of the provisions
of Section 3(b), other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(3) the Company's requiring the Executive to be based at any office
or location other than as provided in Section 3(a)(1)(B) or the Company's
requiring the Executive to travel on Company business to a substantially
greater extent than required mediately prior to the Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(5) any failure by the Company to comply with and satisfy Section
10(c).
For purposes of this Section 4(c), any good faith determination of
Good Reason made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the
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<PAGE> 8
Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD
REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment
Period, the Company terminates the Executive's employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in cash
within 30 days after the Date of Termination, the aggregate of the
following amounts:
(A) the sum of (i) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (ii) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination and the denominator of which is 365,
reduced (but not below zero), if the Date of Termination occurs in the
same fiscal year as the Change of Control, by the Executive's Bonus
Payment Amount, (iii) if elected by the Executive, any compensation
previously deferred by the Executive under the Company's Supplemental
Savings Plan, Incentive Bonus Plan and/or Stock Equivalent Unit Plan
(together with any accrued interest or earnings thereon), and (iv) any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in subclauses (i), (ii), (iii) and
(iv), the "Accrued Obligations"); and
(B) the amount equal to the product of (i) three and (ii) the
sum of (x) the Executive's Annual Base Salary and (y) the Executive's
Highest Annual Bonus; and
(C) if elected by the Executive within 60 days following
execution of this Agreement and prior to the Effective Date, in lieu
of and substitution for the applicable portion of the Executive's
monthly benefit otherwise payable under the final paragraph of Article
IV, Section 1 or paragraph (a) of Article V, Section 3 of the
Company's Retirement Plan and the final paragraph of Section 3 of
Supplemental Retirement Plan (collectively, the "Retirement Plans"),
an
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amount equal to the excess of (i) the lump sum actuarial equivalent
(utilizing the interest rate and mortality table in effect for lump
sum distributions under the Retirement Plan immediately prior to the
Effective Date, and determined assuming benefit commencement as of the
Date of Termination) of the benefit under the Retirement Plans that
the Executive would receive if the Executive's employment continued
for three years after the Date of Termination, assuming for this
purpose that all accrued benefits are fully vested and assuming that
the Executive's compensation in each of the three years is the Annual
Base Salary and Highest Annual Bonus, over (ii) the lump sum actuarial
equivalent (determined in the same manner as in clause (i) above) of
the Executive's actual benefit (paid or payable), if any, under the
Retirement Plans as of the Date of Termination without regard to such
three years' compensation and service;
(2) for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue welfare benefits to
the Executive and/or the Executive's family at least equal to those that
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(4) if the Executive's
employment had not been terminated or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and the Affiliated Companies and their families,
provided, however, that, if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
the Executive's eligibility for retiree benefits pursuant to such welfare
plans, practices, programs and policies, the Executive shall be considered
to have remained employed until three years after the Date of Termination,
provided, however, that the Executive's commencement of such retiree
benefits shall not be any sooner than the Executive's earliest retirement
date under the Retirement Plans;
(3) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall
be selected by the Executive in the Executive's sole discretion; and
(4) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or that the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and the Affiliated Companies (such other amounts
and benefits, the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, the Company shall have no
further obligations to the Executive's legal representatives under this
Agreement, except for payment of the Accrued Obligations and the timely payment
or provision of the Other Benefits. The
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Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term "Other Benefits"
as utilized in this Section 5(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and the
Affiliated Companies to the estates and beneficiaries of peer executives of the
Company and the Affiliated Companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, the Company shall
have no further obligations to the Executive under this Agreement, except for
payment of the Accrued Obligations and the timely payment or provision of the
Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits' as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.
(d) CAUSE: OTHER THAN FOR GOOD REASON. If the Executive's employment
is terminated for Cause during the Employment Period, the Company shall have no
further obligations to the Executive under this Agreement, except for payment to
the Executive of (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously deferred by the
Executive, and (3) the Other Benefits, in each case, to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, the Company shall have no
further obligations to the Executive under this Agreement, except for payment of
the Accrued Obligations and the timely payment or provision of the Other
Benefits. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or the Affiliated
Companies and for which the Executive may qualify, nor, subject to Section
ll(f), shall anything herein limit or otherwise affect such
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rights as the Executive may have under any other contract or agreement with the
Company or the Affiliated Companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the Affiliated
Companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.
SECTION 7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such
amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses that the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus, in each case, interest on any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or the Affiliated Companies to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise but determined without regard to any additional payments
required under this Section 8) (the "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code, or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, collectively, the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (the
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other certified public accounting firm as may be designated by
the Executive (the "Accounting Firm") that shall
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<PAGE> 12
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments that will not have been made by the Company should have
been made (the "Underpayment"), consistent with the calculations required to be
made hereunder. In the event the Company exhausts its remedies pursuant to
Section 8(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that the Company desires to contest such claim, the
Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order effectively to
contest such claim, and
(4) permit the Company to participate in any proceedings relating to
such
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<PAGE> 13
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in
connection with such contest, and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that, if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which the Gross-Up
Payment would be payable hereunder, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive's employment by
the Company or the Affiliated Companies and which information, knowledge or data
shall not be or become public knowledge or data shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After
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<PAGE> 14
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
Section 10. SUCCESSORS. (a) This Agreement is personal to the
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
if to the Executive:
Mr. Edward F. DeGraan
11 Olmsted Road
Hingham, MA 02043
if to the Company:
The Gillette Company
Prudential Tower Building
Boston, Massachusetts 02199
Attention: General Counsel
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<PAGE> 15
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any .amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section l(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date: (i) this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof, and (ii) if the Executive receives severance
benefits under Section 5(a), the Executive shall not be entitled to receive
severance pay or benefits under any other plan, program, policy or arrangement
of the Company providing severance benefits.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from the Board, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
/s/ Edward F. DeGraan 1/28/00
-----------------------------------
Edward F. DeGraan
THE GILLETTE COMPANY
By /s/ Robert E. DiCenso
---------------------------------
Title: S.V.P. - Personnel &
Administration
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<PAGE> 1
Exhibit 10(j)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 16th day of December, 1999 (this
"Agreement"), by and between The Gillette Company, a Delaware corporation (the
"Company"), and Robert G. King (the "Executive").
WHEREAS, the Company has determined that it is in its best interests
and that of its stockholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined herein). The Company believes it
is imperative to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or threatened
Change of Control and to encourage the Executive's full attention and
dedication to the current Company and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that are
competitive with those of other corporations. Therefore, in order to accomplish
these objectives, the Company has entered into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the
first date during the Change of Control Period (as defined herein) on which a
Change of Control occurs. Notwithstanding anything in this Agreement to the
contrary, if a Change of Control occurs and if the Executive's employment with
the Company is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (1) was at the request of a third party that has taken
steps reasonably calculated to effect a Change of Control or (2) otherwise arose
in connection with or anticipation of a Change of Control, then "Effective Date"
means the date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the
date hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.
(d) "Change of Control" means:
<PAGE> 2
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section l(d), the. following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
l(d)(3)(A), l(d)(3)(B) and l(d)(3)(C).
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Consummation of a reorganization, merger, consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of
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<PAGE> 3
the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "Recent Annual Bonus Percentage" means the highest actual annual
bonus percentage awarded to the Executive under the Company's annual incentive
plans, or any comparable bonus under any predecessor or successor plan, for the
last three full fiscal years prior to the Effective Date.
(f) "Highest Annual Bonus Percentage" means the higher of (i) the
Executive's Recent Annual Bonus Percentage and (ii) sixty-five percent (65%).
(g) "Highest Annual Bonus" means an amount equal to the product of
(i) the Executive's Annual Base Salary at the Date of Termination and (ii) the
Highest Annual Bonus Percentage.
(h) "Bonus Payment Amount" means the amount actually paid to the
Executive pursuant to Section 13 of the Company's Incentive Bonus Plan or any
comparable provision of any successor annual bonus plan.
SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
second anniversary of the Effective Date (the "Employment Period").
SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1)
During the Employment Period, (A) the Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 120-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the office or location where the
Executive was employed immediately preceding the Effective Date or at any other
location less than 35 miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational
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<PAGE> 4
institutions and (C) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that, to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary (the "Annual Base Salary"), which
Annual Base Salary shall be paid at a monthly rate at least equal to 12 times
the highest monthly base salary paid or payable, including any base salary that
has been earned but deferred, to the Executive by the Company and the Affiliated
Companies in respect of the 12-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually, beginning no more than 12 months
after the last salary increase awarded to the Executive prior to the Effective
Date. Any increase in the Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. The Annual Base
Salary shall not be reduced after any such increase and the term "Annual Base
Salary" shall refer to the Annual Base Salary as so increased.
(2) ANNUAL BONUS. In addition to the Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash, determined as a percentage
of Annual Base Salary which shall not be less than the Recent Annual Bonus
Percentage. Each such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus.
(3) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies, and programs applicable generally to
other peer executives of the Company and the Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and the Affiliated Companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and the Affiliated Companies.
(4) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under the Company's
Executive Life Insurance Plan and Estate
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<PAGE> 5
Preservation Plan, and any other welfare benefit plans, practices, policies and
programs provided by the Company and the Affiliated Companies (including,
without limitation, medical, prescription, dental, disability,
employee/spouse/dependent life insurance and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the
Company and the Affiliated Companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits that are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.
(5) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and
the Affiliated Companies.
(6) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, parking benefits and fitness center membership, in
accordance with the most favorable plans, practices, programs and policies of
the Company and the Affiliated Companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(7) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the Affiliated Companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(8) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated Companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.
(9) EFFECT OF TERMINATION. Notwithstanding anything in this Agreement
to the contrary, upon termination of employment for any reason, the Employment
Period shall
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<PAGE> 6
cease and the Executive shall have no further right to any of the payments or
benefits described in Sections 2 and 3.
SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. "Disability"
means the absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or any Affiliated
Company (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company that specifically identifies the manner in
which the Board or the Chief Executive Officer of the Company believes that
the Executive has not substantially performed the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel for
the Executive, to be heard before the Board),
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<PAGE> 7
finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a), or any other action by the Company that
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company to comply with any of the provisions
of Section 3(b), other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(3) the Company's requiring the Executive to be based at any office
or location other than as provided in Section 3(a)(1)(B) or the Company's
requiring the Executive to travel on Company business to a substantially
greater extent than required immediately prior to the Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(5) any failure by the Company to comply with and satisfy Section
10(c).
For purposes of this Section 4(c), any good faith determination of
Good Reason made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the
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Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD
REASON: OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment
Period, the Company terminates the Executive's employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in cash
within 30 days after the Date of Termination, the aggregate of the
following amounts:
(A) the sum of (i) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (ii) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination and the denominator of which is 365,
reduced (but not below zero), if the Date of Termination occurs in the
same fiscal year as the Change of Control, by the Executive's Bonus
Payment Amount, (iii) if elected by the Executive, any compensation
previously deferred by the Executive under the Company's Supplemental
Savings Plan, Incentive Bonus Plan and/or Stock Equivalent Unit Plan
(together with any accrued interest or earnings thereon), and (iv) any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in subclauses (i), (ii), (iii) and
(iv), the "Accrued Obligations"); and
(B) the amount equal to the product of (i) three and (ii) the
sum of (x) the Executive's Annual Base Salary and (y) the Executive's
Highest Annual Bonus; and
(C) if elected by the Executive within 60 days following
execution of this Agreement and prior to the Effective Date, in lieu
of and substitution for the applicable portion of the Executive's
monthly benefit otherwise payable under the final paragraph of Article
IV, Section 1 or paragraph (a) of Article V, Section 3 of the
Company's Retirement Plan and the final paragraph of Section 3 of
Supplemental Retirement Plan (collectively, the "Retirement Plans"),
an
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<PAGE> 9
amount equal to the excess of (i) the lump sum actuarial equivalent
(utilizing the interest rate and mortality table in effect for lump
sum distributions under the Retirement Plan immediately prior to the
Effective Date, and determined assuming benefit commencement as of the
Date of Termination) of the benefit under the Retirement Plans that
the Executive would receive if the Executive's employment continued
for three years after the Date of Termination, assuming for this
purpose that all accrued benefits are fully vested and assuming that
the Executive's compensation in each of the three years is the Annual
Base Salary and Highest Annual Bonus, over (ii) the lump sum actuarial
equivalent (determined in the same manner as in clause (i) above) of
the Executive's actual benefit (paid or payable), if any, under the
Retirement Plans as of the Date of Termination without regard to such
three years' compensation and service;
(2) for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue welfare benefits to
the Executive and/or the Executive's family at least equal to those that
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(4) if the Executive's
employment had not been terminated or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and the Affiliated Companies and their families,
provided, however, that, if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
the Executive's eligibility for retiree benefits pursuant to such welfare
plans, practices, programs and policies, the Executive shall be considered
to have remained employed until three years after the Date of Termination,
provided, however, that the Executive's commencement of such retiree
benefits shall not be any sooner than the Executive's earliest retirement
date under the Retirement Plans;
(3) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall
be selected by the Executive in the. Executive's sole discretion; and
(4) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or that the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and the Affiliated Companies (such other amounts
and benefits, the "Other Benefits').
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, the Company shall have no
further obligations to the Executive's legal representatives under this
Agreement, except for payment of the Accrued Obligations and the timely payment
or provision of the Other Benefits. The
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<PAGE> 10
Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term "Other Benefits"
as utilized in this Section 5(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and the
Affiliated Companies to the estates and beneficiaries of peer executives of the
Company and the Affiliated Companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, the Company shall
have no further obligations to the Executive under this Agreement, except for
payment of the Accrued Obligations and the timely payment or provision of the
Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits' as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.
(d) CAUSE: OTHER THAN FOR GOOD REASON. If the Executive's employment
is terminated for Cause during the Employment Period, the Company shall have no
further obligations to the Executive under this Agreement, except for payment to
the Executive of (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously deferred by the
Executive, and (3) the Other Benefits, in each case, to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, the Company shall have no
further obligations to the Executive under this Agreement, except for payment of
the Accrued Obligations and the timely payment or provision of the Other
Benefits. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or the Affiliated
Companies and for which the Executive may qualify, nor, subject to Section
11(f), shall anything herein limit or otherwise affect such
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<PAGE> 11
rights as the Executive may have under any other contract or agreement with the
Company or the Affiliated Companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the Affiliated
Companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.
SECTION 7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such
amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses that the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus, in each case, interest on any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or the Affiliated Companies to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise but determined without regard to any additional payments
required under this Section 8) (the "Payment") would be subject to the excise
tax imposed by Section 4999 of the C ode, or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, collectively, the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (the
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other certified public accounting firm as may be designated by
the Executive (the "Accounting Firm") that shall
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<PAGE> 12
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments that will not have been made by the Company should have been
made (the "Underpayment"), consistent with the calculations required to be made
hereunder. In the event the Company exhausts its remedies pursuant to Section
8(c) and the Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Under payment shall be promptly paid by the Company to or
for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that the Company desires to contest such claim, the
Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order effectively to
contest such claim, and
(4) permit the Company to participate in any proceedings relating to
such claim;
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<PAGE> 13
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in
connection with such contest, and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that, if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which the Gross-Up
Payment would be payable hereunder, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive's employment by
the Company or the Affiliated Companies and which information, knowledge or data
shall not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
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<PAGE> 14
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any mounts
otherwise payable to the Executive under this Agreement.
SECTION 10. SUCCESSORS. (a) This Agreement is personal to the
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
if to the Executive:
Mr. Robert G. King
181 Atlantic Avenue
Cohasset, MA 02025
if to the Company:
The Gillette Company
Prudential Tower Building
Boston, Massachusetts 02199
Attention: General Counsel
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<PAGE> 15
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section l(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date: (i) this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof, and (ii) if the Executive receives severance
benefits under Section 5(a), the Executive shall not be entitled to receive
severance pay or benefits under any other plan, program, policy or arrangement
of the Company providing severance benefits.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from the Board, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
/s/ Robert G. King
---------------------------------
Robert G. King
THE GILLETTE COMPANY
By /s/ Robert E. DiCenso
-------------------------------
Title: S.V.P. - Personnel &
Administration
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<PAGE> 1
Exhibit 10(k)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 16~h day of December, 1999 (this
"Agreement"), by and between The Gillette Company, a Delaware corporation (the
"Company"), and Archibald Livis (the "Executive").
WHEREAS, the Company has determined that it is in its best interests
and that of its stockholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined herein). The Company believes it
is imperative to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or threatened
Change of Control and to encourage the Executive's full attention and dedication
to the current Company and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that are
competitive with those of other corporations. Therefore, in order to accomplish
these objectives, the Company has entered into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the
first date during the Change of Control Period (as defined herein) on which a
Change of Control occurs. Notwithstanding anything in this Agreement to the
contrary, if a Change of Control occurs and if the Executive's employment with
the Company is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (1) was at the request of a third party that has taken
steps reasonably calculated to effect a Change of Control or (2) otherwise arose
in connection with or anticipation of a Change of Control, then "Effective Date"
means the date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the
date hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.
(d) "Change of Control" means:
<PAGE> 2
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section l(d), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
l(d)(3)(A), l(d)(3)(B) and l(d)(3)(C).
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Consummation of a reorganization, merger, consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of
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<PAGE> 3
the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "Recent Annual Bonus Percentage" means the highest actual annual
bonus percentage awarded to the Executive under the Company's annual incentive
plans, or any comparable bonus under any predecessor or successor plan, for the
last three full fiscal years prior to the Effective Date.
(f) "Highest Annual Bonus Percentage" means the higher of (i) the
Executive's Recent Annual Bonus Percentage and (ii) sixty-five percent (65%).
(g) "Highest Annual Bonus" means an amount equal to the product of
(i) the Executive's Annual Base Salary at the Date of Termination and (ii) the
Highest Annual Bonus Percentage.
(h) "Bonus Payment Amount" means the amount actually paid to the
Executive pursuant to Section 13 of the Company's Incentive Bonus Plan or any
comparable provision of any successor annual bonus plan.
SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
second anniversary of the Effective Date (the "Employment Period' ).
SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1)
During the Employment Period, (A) the Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 120-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the office or location where the
Executive was employed immediately preceding the Effective Date or at any other
location less than 35 miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational
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<PAGE> 4
institutions and (C) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that, to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary (the "Annual Base Salary"), which
Annual Base Salary shall be paid at a monthly rate at least equal to 12 times
the highest monthly base salary paid or payable, including any base salary that
has been earned but deferred, to the Executive by the Company and the Affiliated
Companies in respect of the 12-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually, beginning no more than 12 months
after the last salary increase awarded to the Executive prior to the Effective
Date. Any increase in the Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. The Annual Base
Salary shall not be reduced after any such increase and the term "Annual Base
Salary" shall refer to the Annual Base Salary as so increased.
(2) ANNUAL BONUS. In addition to the Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash, determined as a
percentage of Annual Base Salary which shall not be less than the Recent Annual
Bonus Percentage. Each such Annual Bonus shall be paid no later than the end of
the third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus.
(3) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies, and programs applicable generally to
other peer executives of the Company and the Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and the Affiliated Companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and the Affiliated Companies.
(4) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under the Company's
Executive Life Insurance Plan and Estate
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Preservation Plan, and any other welfare benefit plans, practices, policies and
programs provided by the Company and the Affiliated Companies (including,
without limitation, medical, prescription, dental, disability,
employee/spouse/dependent life insurance and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the
Company and the Affiliated Companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits that are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.
(5) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and the
Affiliated Companies.
(6) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, parking benefits and fitness center membership, in
accordance with the most favorable plans, practices, programs and policies of
the Company and the Affiliated Companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(7) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the Affiliated Companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(8) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated Companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.
(9) EFFECT OF TERMINATION. Notwithstanding anything in this Agreement
to the contrary, upon termination of employment for any reason, the Employment
Period shall
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cease and the Executive shall have no further right to any of the payments or
benefits described in Sections 2 and 3.
SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. "Disability"
means the absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or any Affiliated
Company (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company that specifically identifies the manner in
which the Board or the Chief Executive Officer of the Company believes that
the Executive has not substantially performed the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel for
the Executive, to be heard before the Board),
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finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices~ titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a), or any other action by the Company that
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company to comply with any of the provisions
of Section 3(b), other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(3) the Company's requiring the Executive to be based at any office
or location other than as provided in Section 3(a)(1)(B) or the Company's
requiring the Executive to travel on Company business to a substantially
greater extent than required immediately prior to the Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(5) any failure by the Company to comply with and satisfy Section
10(c).
For purposes of this Section 4(c), any good faith determination of
Good Reason made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the
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<PAGE> 8
Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD
REASON: OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment
Period, the Company terminates the Executive's employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in cash
within 30 days after the Date of Termination, the aggregate of the
following amounts:
(A) the sum of (i) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (ii) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination and the denominator of which is 365,
reduced (but not below zero), if the Date of Termination occurs in the
same fiscal year as the Change of Control, by the Executive's Bonus
Payment Amount, (iii) if elected by the Executive, any compensation
previously deferred by the Executive under the Company's Supplemental
Savings Plan, Incentive Bonus Plan and/or Stock Equivalent Unit Plan
(together with any accrued interest or earnings thereon), and (iv) any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in subclauses (i), (ii), (iii) and
(iv), the "Accrued Obligations"); and
(B) the amount equal to the product of (i) three and (ii) the
sum of (x) the Executive's Annual Base Salary and (y) the Executive's
Highest Annual Bonus; and
(C) if elected by the Executive within 60 days following
execution of this Agreement and prior to the Effective Date, in lieu
of and substitution for the applicable portion of the Executive's
monthly benefit otherwise payable under the final paragraph of Article
IV, Section 1 or paragraph (a) of Article V, Section 3 of the
Company's Retirement Plan and the final paragraph of Section 3 of
Supplemental Retirement Plan (collectively, the "Retirement Plans"),
an
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amount equal to the excess of (i) the lump sum actuarial equivalent
(utilizing the interest rate and mortality table in effect for lump
sum distributions under the Retirement Plan immediately prior to the
Effective Date, and determined assuming benefit commencement as of the
Date of Termination) of the benefit under the Retirement Plans that
the Executive would receive if the Executive's employment continued
for three years after the Date of Termination, assuming for this
purpose that all accrued benefits are fully vested and assuming that
the Executive's compensation in each of the three years is the Annual
Base Salary and Highest Annual Bonus, over (ii) the lump sum actuarial
equivalent (determined in the same manner as in clause (i) above) of
the Executive's actual benefit (paid or payable), if any, under the
Retirement Plans as of the Date of Termination without regard to such
three years' compensation and service;
(2) for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue welfare benefits to
the Executive and/or the Executive's family at least equal to those that
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(4) if the Executive's
employment had not been terminated or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and the Affiliated Companies and their families,
provided, however, that, if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes o f determining
the Executive's eligibility for retiree benefits pursuant to such welfare
plans, practices, programs and policies, the Executive shall be considered
to have remained employed until three years after the Date of Termination,
provided, however, that the Executive's commencement of such retiree
benefits shall not be any sooner than the Executive's earliest retirement
date under the Retirement Plans;
(3) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall
be selected by the Executive in the Executive's sole discretion; and
(4) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or that the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and the Affiliated Companies (such other amounts
and benefits, the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, the Company shall have no
further obligations to the Executive's legal representatives under this
Agreement, except for payment of the Accrued Obligations and the timely payment
or provision of the Other Benefits. The
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<PAGE> 10
Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term "Other Benefits"
as utilized in this Section 5(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and the
Affiliated Companies to the estates and beneficiaries of peer executives of the
Company and the Affiliated Companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, the Company shall
have no further obligations to the Executive under this Agreement, except for
payment of the Accrued Obligations and the timely payment or provision of the
Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.
(d) CAUSE: OTHER THAN FOR GOOD REASON. If the Executive's employment
is terminated for Cause during the Employment Period, the Company shall have no
further obligations to the Executive under this Agreement, except for payment to
the Executive of (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously deferred by the
Executive, and (3) the Other Benefits, in each case, to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, the Company shall have no
further obligations to the Executive under this Agreement, except for payment of
the Accrued Obligations and the timely payment or provision of the Other
Benefits. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or the Affiliated
Companies and for which the Executive may qualify, nor, subject to Section
l1(f), shall anything herein limit or otherwise affect such
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rights as the Executive may have under any other contract or agreement with the
Company or the Affiliated Companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the Affiliated
Companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.
SECTION 7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such
amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses that the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of an y contest by the Executive about the amount of any
payment pursuant to this Agreement), plus, in each case, interest on any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or the Affiliated Companies to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise but determined without regard to any additional payments
required under this Section 8) (the "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code, or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, collectively, the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (the
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other certified public accounting firm as may be designated by
the Executive (the "Accounting Firm") that shall
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provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments that will not have been made by the Company should have
been made (the "Underpayment"), consistent with the calculations required to be
made hereunder. In the event the Company exhausts its remedies pursuant to
Section 8(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that the Company desires to contest such claim, the
Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order effectively to
contest such claim, and
(4) permit the Company to participate in any proceedings relating to
such claim;
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provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in connection
with such contest, and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that, if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which the Gross-Up
Payment would be payable hereunder, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive's employment by
the Company or the Affiliated Companies and which information, knowledge or data
shall not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
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termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
SECTION 10. SUCCESSORS. (a) This Agreement is personal to the
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
if to the Executive:
Mr. Archibald Livis
220 Boylston Street #1213
Boston, MA 02116
if to the Company:
The Gillette Company
Prudential Tower Building
Boston, Massachusetts 02199
Attention: General Counsel
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or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section l(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date: (i) this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof, and (ii) if the Executive receives severance
benefits under Section 5(a), the Executive shall not be entitled to receive
severance pay or benefits under any other plan, program, policy or arrangement
of the Company providing severance benefits.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from the Board, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
/s/ Archibald Livis
----------------------------------
Archibald Livis
THE GILLETTE COMPANY
By /s/ Robert E. DiCenso
--------------------------------
Title: S.V.P. - Personnel &
Administration
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Exhibit 10(l)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 16th day of December, 1999 (this
"Agreement"), by and between The Gillette Company, a Delaware corporation (the
"Company"), and Jorgen Wedel (the "Executive").
WHEREAS, the Company has determined that it is in its best interests
and that of its stockholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined herein). The Company believes it
is imperative to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or threatened
Change of Control and to encourage the Executive's full attention and
dedication to the current Company and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that are
competitive with those of other corporations. Therefore, in order to accomplish
these objectives, the Company has entered into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first
date during the Change of Control Period (as defined herein) on which a Change
of Control occurs. Notwithstanding anything in this Agreement to the contrary,
if a Change of Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control occurs, and if it
is reasonably demonstrated by the Executive that such termination of employment
(1) was at the request of a third party that has taken steps reasonably
calculated to effect a Change of Control or (2) otherwise arose in connection
with or anticipation of a Change of Control, then "Effective Date" means the
date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.
(d) "Change of Control" means:
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(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section 1(d), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C).
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Consummation of a reorganization, merger, consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trus) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of
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the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "Recent Annual Bonus Percentage" means the highest actual annual
bonus percentage awarded to the Executive under the Company's annual incentive
plans, or any comparable bonus under any predecessor or successor plan, for the
last three full fiscal years prior to the Effective Date.
(f) "Highest Annual Bonus Percentage" means the higher of (i) the
Executive's Recent Annual Bonus Percentage and (ii) sixty-five percent (65%).
(g) "Highest Annual Bonus" means an amount equal to the product of (i)
the Executive's Annual Base Salary at the Date of Termination and (ii) the
Highest Annual Bonus Percentage.
(h) "Bonus Payment Amount" means the amount actually paid to the
Executive pursuant to Section 13 of the Company's Incentive Bonus Plan or any
comparable provision of any successor annual bonus plan.
SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue
the Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company, subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the second
anniversary of the Effective Date (the "Employment Period").
SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During
the Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the office or location where the Executive was employed
immediately preceding the Effective Date or at any other location less than 35
miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational
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institutions and (C) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that, to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary (the "Annual Base Salary"), which
Annual Base Salary shall be paid at a monthly rate at least equal to 12 times
the highest monthly base salary paid or payable, including any base salary that
has been earned but deferred, to the Executive by the Company and the Affiliated
Companies in respect of the 12-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually, beginning no more than 12 months
after the last salary increase awarded to the Executive prior to the Effective
Date. Any increase in the Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. The Annual Base
Salary shall not be reduced after any such increase and the term "Annual Base
Salary" shall refer to the Annual Base Salary as so increased.
(2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash, determined as a percentage of Annual
Base Salary which shall not be less than the Recent Annual Bonus Percentage.
Each such Annual Bonus shall be paid no later than the end of the third month of
the fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(3) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies, and programs applicable generally to
other peer executives of the Company and the Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and the Affiliated Companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and the Affiliated Companies.
(4) WELFARE BENEFIT PLANS. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under the Company's Executive
Life Insurance Plan and Estate
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Preservation Plan, and any other welfare benefit plans, practices, policies and
programs provided by the Company and the Affiliated Companies (including,
without limitation, medical, prescription, dental, disability,
employee/spouse/dependent life insurance and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the
Company and the Affiliated Companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits that are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.
(5) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and
the Affiliated Companies.
(6) FRINGE BENEFITS. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, tax and financial
planning services, parking benefits and fitness center membership, in accordance
with the most favorable plans, practices, programs and policies of the Company
and the Affiliated Companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and the Affiliated Companies.
(7) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the Affiliated Companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(8) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated Companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.
(9) EFFECT OF TERMINATION. Notwithstanding anything in this Agreement
to the contrary, upon termination of employment for any reason, the Employment
Period shall
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cease and the Executive shall have no further right to any of the payments or
benefits described in Sections 2 and 3.
SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. "Disability"
means the absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment during
the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or any Affiliated
Company (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company that specifically identifies the manner in
which the Board or the Chief Executive Officer of the Company believes that
the Executive has not substantially performed the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel for
the Executive, to be heard before the Board),
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finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a), or any other action by the Company that
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company to comply with any of the provisions of
Section 3(b), other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and that is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(3) the Company's requiring the Executive to be based at any office or
location other than as provided in Section 3(a)(1)(B) or the Company's
requiring the Executive to travel on Company business to a substantially
greater extent than required immediately prior to the Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(5) any failure by the Company to comply with and satisfy Section
10(c).
For purposes of this Section 4(c), any good faith determination of
Good Reason made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the
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Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD
REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment
Period, the Company terminates the Executive's employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in cash
within 30 days after the Date of Termination, the aggregate of the
following mounts:
(A) the sum of (i) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (ii) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination and the denominator of which is 365,
reduced (but not below zero), if the Date of Termination occurs in the
same fiscal year as the Change of Control, by the Executive's Bonus
Payment Amount, (iii) if elected by the Executive, any compensation
previously deferred by the Executive under the Company's Supplemental
Savings Plan, Incentive Bonus Plan and/or Stock Equivalent Unit Plan
(together with any accrued interest or earnings thereon), and (iv) any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in subclauses (i), (ii), (iii) and
(iv), the "Accrued Obligations"); and
(B) the amount equal to the product of (i) three and (ii) the
sum of (x) the Executive's Annual Base Salary and (y) the Executive's
Highest Annual Bonus; and
(C) if elected by the Executive within 60 days following
execution of this Agreement and prior to the Effective Date, in lieu
of and substitution for the applicable portion of the Executive's
monthly benefit otherwise payable under the final paragraph of Article
IV, Section 1 or paragraph (a) of Article V, Section 3 of the
Company's Retirement Plan and the final paragraph of Section 3 of
Supplemental Retirement Plan (collectively, the "Retirement Plans"),
an
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amount equal to the excess of (i) the lump sum actuarial equivalent
(utilizing the interest rate and mortality table in effect for lump
sum distributions under the Retirement Plan immediately prior to the
Effective Date, and determined assuming benefit commencement as of the
Date of Termination) of the benefit under the Retirement Plans that
the Executive would receive if the Executive's employment continued
for three years after the Date of Termination, assuming for this
purpose that all accrued benefits are fully vested and assuming that
the Executive's compensation in each of the three years is the Annual
Base Salary and Highest Annual Bonus, over (ii) the lump sum actuarial
equivalent (determined in the same manner as in clause (i) above) of
the Executive's actual benefit (paid or payable), if any, under the
Retirement Plans as of the Date of Termination without regard to such
three years' compensation and service;
(2) for three years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue welfare benefits to
the Executive and/or the Executive's family at least equal to those that
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(4) if the Executive's
employment had not been terminated or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and the Affiliated Companies and their families,
provided, however, that, if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
the Executive's eligibility for retiree benefits pursuant to such welfare
plans, practices, programs and policies, the Executive shall be considered
to have remained employed until three years after the Date of Termination,
provided, however, that the Executive's commencement of such retiree
benefits shall not be any sooner than the Executive's earliest retirement
date under the Retirement Plans;
(3) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall
be selected by the Executive in the Executive's sole discretion; and
(4) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or that the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and the Affiliated Companies (such other amounts
and benefits, the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, the Company shall have no
further obligations to the Executive's legal representatives under this
Agreement, except for payment of the Accrued Obligations and the timely payment
or provision of the Other Benefits. The
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Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term "Other Benefits"
as utilized in this Section 5(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and the
Affiliated Companies to the estates and beneficiaries of peer executives of the
Company and the Affiliated Companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, the Company shall
have no further obligations to the Executive under this Agreement, except for
payment of the Accrued Obligations and the timely payment or provision of the
Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.
(d) CAUSE: OTHER THAN FOR GOOD REASON. If the Executive's employment
is terminated for Cause during the Employment Period, the Company shall have no
further obligations to the Executive under this Agreement, except for payment to
the Executive of (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously deferred by the
Executive, and (3) the Other Benefits, in each case, to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, the Company shall have no
further obligations to the Executive under this Agreement, except for payment of
the Accrued Obligations and the timely payment or provision of the Other
Benefits. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or the Affiliated Companies
and for which the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such
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rights as the Executive may have under any other contract or agreement with the
Company or the Affiliated Companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the Affiliated
Companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.
Section 7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such
amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent permitted
by law, all legal fees and expenses that the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus, in each case, interest on any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company or
the Affiliated Companies to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise but determined without regard to any additional payments required
under this Section 8) (the "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code, or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, collectively, the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (the "Gross-Up Payment") in
an amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other certified public accounting firm as may be designated by
the Executive (the "Accounting Firm") that shall
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provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments that will not have been made by the Company should have
been made (the "Underpayment"), consistent with the calculations required to be
made hereunder. In the event the Company exhausts its remedies pursuant to
Section 8(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that the Company desires to contest such claim, the
Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order effectively to
contest such claim, and
(4) permit the Company to participate in any proceedings relating to
such claim;
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<PAGE> 13
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in
connection with such contest, and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that, if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which the Gross-Up
Payment would be payable hereunder, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive's employment by
the Company or the Affiliated Companies and which information, knowledge or data
shall not be or become public knowledge (other than by acts of the Executive or
representatives of the Executive in violation of this Agreement). After
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termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any mounts
otherwise payable to the Executive under this Agreement.
SECTION 10. SUCCESSORS. (a) This Agreement is personal to the
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive:
Mr. Jorgen Wedel
29 Winsor Way
Weston, MA 02493
if to the Company:
The Gillette Company
Prudential Tower Building
Boston, Massachusetts 02199
Attention: General Counsel
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<PAGE> 15
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date: (i) this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof, and (ii) if the Executive receives severance
benefits under Section 5(a), the Executive shall not be entitled to receive
severance pay or benefits under any other plan, program, policy or arrangement
of the Company providing severance benefits.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from the Board, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
/s/ Jorgen Wedel 1/18/2000
--------------------------
Jorgen Wedel
THE GILLETTE COMPANY
By /s/ Robert E. DiCenso
------------------------
Title: S.V.P. - Personnel & Admin
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<PAGE> 1
Exhibit 10(m)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 16th day of December, 1999 (this
"Agreement"), by and betwecm The Gillette Company, a Delaware corporation (the
"Company"), and Charles W. Cramb, Jr. (the "Executive").
WHEREAS, the Company has determined that it is in its best interests
and that of its stockholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined herein). The Company believes it
is imperative to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or threatened
Change of Control and to encourage the Executive's full attention and dedication
to the current Company and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that are
competitive with those of other corporations. Therefore, in order to accomplish
these objectives, the Company has entered into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first
date during the Change of Control Period (as defined herein) on which a Change
of Control occurs. Notwithstanding anything in this Agreement to the contrary,
if a Change of Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control occurs, and if it
is reasonably demonstrated by the Executive that such termination of employment
(1) was at the request of a third party that has taken steps reasonably
calculated to effect a Change of Control or (2) otherwise arose in connection
with or anticipation of a Change of Control, then "Effective Date" means the
date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.
(d) "Change of Control" means:
<PAGE> 2
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section 1(d), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C).
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Consummation of a reorganization, merger, consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of
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the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "Recent Annual Bonus Percentage" means the highest actual annual
bonus percentage awarded to the Executive under the Company's annual incentive
plans, or any comparable bonus under any predecessor or successor plan, for the
last three full fiscal years prior to the Effective Date.
(f) "Highest Annual Bonus Percentage" means the higher of (i) the
Executive's Recent Annual Bonus Percentage and (ii) sixty-five percent (65%).
(g) "Highest Annual Bonus" means an amount equal to the product of (i)
the Executive's Annual Base Salary at the Date of Termination and (ii) the
Highest Annual Bonus Percentage.
(h) "Bonus Payment Amount" means the amount actually paid to the
Executive pursuant to Section 13 of the Company's Incentive Bonus Plan or any
comparable provision of any successor annual bonus plan.
SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue
the Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company, subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the second
anniversary of the Effective Date (the "Employment Period").
SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During
the Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the office or location where the Executive was employed
immediately preceding the Effective Date or at any other location less than 35
miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational
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institutions and (C) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that, to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION (1) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary (the "Annual Base Salary"), which
Annual Base Salary shall be paid at a monthly rate at least equal to 12 times
the highest monthly base salary paid or payable, including any base salary that
has been earned but deferred, to the Executive by the Company and the Affiliated
Companies in respect of the 12-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually, beginning no more than 12 months
after the last salary increase awarded to the Executive prior to the Effective
Date. Any increase in the Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. The Annual Base
Salary shall not be reduced after any such increase and the term "Annual Base
Salary" shall refer to the Annual Base Salary as so increased.
(2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus" ) in cash, determined as a percentage of Annual
Base Salary which shall not be less than the Recent Annual Bonus Percentage.
Each such Annual Bonus shall be paid no later than the end of the third month of
the fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(3) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies, and programs applicable generally to
other peer executives of the Company and the Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and the Affiliated Companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and the Affiliated Companies.
(4) WELFARE BENEFIT PLANS. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under the Company's Executive
Life Insurance Plan and Estate
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<PAGE> 5
Preservation Plan, and any other welfare benefit plans, practices, policies and
programs provided by the Company and the Affiliated Companies (including,
without limitation, medical, prescription, dental, disability,
employee/spouse/dependent life insurance and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the
Company and the Affiliated Companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits that are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.
(5) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and the
Affiliated Companies.
(6) FRINGE BENEFITS. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, tax and financial
planning services, parking benefits and fitness center membership, in accordance
with the most favorable plans, practices, programs and policies of the Company
and the Affiliated Companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and the Affiliated Companies.
(7) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the Affiliated Companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(8) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated Companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.
(9) EFFECT OF TERMINATION. Notwithstanding anything in this Agreement
to the contrary, upon termination of employment for any reason, the Employment
Period shall
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<PAGE> 6
cease and the Executive shall have no further right to any of the payments or
benefits described in Sections 2 and 3.
SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. "Disability"
means the absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment during
the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or any Affiliated
Company (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company that specifically identifies the manner in
which the Board or the Chief Executive Officer of the Company believes that
the Executive has not substantially performed the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel for
the Executive, to be heard before the Board),
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finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a), or any other action by the Company that
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company to comply with any of the provisions
of Section 3(b), other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(3) the Company's requiring the Executive to be based at any office
or location other than as provided in Section 3(a)(1)(B) or the Company's
requiring the Executive to travel on Company business to a substantially
greater extent than required immediately prior to the Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(5) any failure by the Company to comply with and satisfy Section
10(c).
For purposes of this Section 4(c), any good faith determination of
Good Reason made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11 (b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the
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Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD
REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment
Period, the Company terminates the Executive's employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in cash
within 30 days after the Date of Termination, the aggregate of the
following amounts:
(A) the sum of (i) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (ii) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination and the denominator of which is 365,
reduced (but not below zero), if the Date of Termination occurs in the
same fiscal year as the Change of Control, by the Executive's Bonus
Payment Amount, (iii) if elected by the Executive, any compensation
previously deferred by the Executive under the Company's Supplemental
Savings Plan, Incentive Bonus Plan and/or Stock Equivalent Unit Plan
(together with any accrued interest or earnings thereon), and (iv) any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in subclauses (i), (ii), (iii) and
(iv), the "Accrued Obligations"); and
(B) the amount equal to the product of (i) three and (ii) the
sum of (x) the Executive's Annual Base Salary and (y) the Executive's
Highest Annual Bonus; and
(C) if elected by the Executive within 60 days following
execution of this Agreement and prior to the Effective Date, in lieu
of and substitution for the applicable portion of the Executive's
monthly benefit otherwise payable under the final paragraph of Article
IV, Section 1 or paragraph (a) of Article V, Section 3 of the
Company's Retirement Plan and the final paragraph of Section 3 of
Supplemental Retirement Plan (collectively, the "Retirement Plans"),
an
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<PAGE> 9
amount equal to the excess of (i) the lump sum actuarial equivalent
(utilizing the interest rate and mortality table in effect for lump
sum distributions under the Retirement Plan immediately prior to the
Effective Date, and determined assuming benefit commencement as of the
Date of Termination) of the benefit under the Retirement Plans that
the Executive would receive if the Executive's employment continued
for three years after the Date of Termination, assuming for this
purpose that all accrued benefits are fully vested and assuming that
the Executive's compensation in each of the three years is the Annual
Base Salary and Highest Annual Bonus, over (ii) the lump sum actuarial
equivalent (determined in the same manner as in clause (i) above) of
the Executive's actual benefit (paid or payable), if any, under the
Retirement Plans as of the Date of Termination without regard to such
three years' compensation and service;
(2) for three years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue welfare benefits to the Executive
and/or the Executive's family at least equal to those that would have been
provided to them in accordance with the plans, programs, practices and policies
described in Section 3(b)(4) if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and the
Affiliated Companies and their families, provided, however, that, if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility. For
purposes of determining the Executive's eligibility for retiree benefits
pursuant to such welfare plans, practices, programs and policies, the Executive
shall be considered to have remained employed until three years after the Date
of Termination, provided, however, that the Executive's commencement of such
retiree benefits shall not be any sooner than the Executive's earliest
retirement date under the Retirement Plans;
(3) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive in the Executive's sole discretion; and
(4) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required to
be paid or provided or that the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the Company and the
Affiliated Companies (such other amounts and benefits, the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, the Company shall have no
further obligations to the Executive's legal representatives under this
Agreement, except for payment of the Accrued Obligations and the timely payment
or provision of the Other Benefits. The
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<PAGE> 10
Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term "Other Benefits"
as utilized in this Section 5(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and the
Affiliated Companies to the estates and beneficiaries of peer executives of the
Company and the Affiliated Companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, the Company shall
have no further obligations to the Executive under this Agreement, except for
payment of the Accrued Obligations and the timely payment or provision of the
Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
is terminated for Cause during the Employment Period, the Company shall have no
further obligations to the Executive under this Agreement, except for payment to
the Executive of (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously deferred by the
Executive, and (3) the Other Benefits, in each case, to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, the Company shall have no
further obligations to the Executive under this Agreement, except for payment of
the Accrued Obligations and the timely payment or provision of the Other
Benefits. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or the Affiliated Companies
and for which the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such
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<PAGE> 11
rights as the Executive may have under any other contract or agreement with the
Company or the Affiliated Companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the Affiliated
Companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.
SECTION 7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to
this Agreement), plus, in each case, interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company or
the Affiliated Companies to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise but determined without regard to any additional payments required
under this Section 8) (the "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code, or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, collectively, the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (the "Gross-Up Payment") in
an amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other certified public accounting firm as may be designated by
the Executive (the "Accounting Firm") that shall
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provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments that will not have been made by the Company should have been
made (the "Underpayment"), consistent with the calculations required to be made
hereunder. In the event the Company exhausts its remedies pursuant to Section
8(c) and the Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that the Company desires to contest such claim, the
Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) permit the Company to participate in any proceedings
relating to such claim;
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<PAGE> 13
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in
connection with such contest, and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that, if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which the Gross-Up
Payment would be payable hereunder, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive's employment by
the Company or the Affiliated Companies and which information, knowledge or data
shall not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
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termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
SECTION 10. SUCCESSORS. (a) This Agreement is personal to the
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive:
Mr. Charles W. Cramb, Jr.
65 COmmonwealth Avenue
Boston, MA 02116
if to the Company:
The Gillette Company
Prudential Tower Building
Boston, Massachusetts 02199
Attention: General Counsel
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<PAGE> 15
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date: (i) this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof, and (ii) if the Executive receives severance
benefits under Section 5(a), the Executive shall not be entitled to receive
severance pay or benefits under any other plan, program, policy or arrangement
of the Company providing severance benefits.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from the Board, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
/s/ Charles W. Cramb, Jr. Jan 5, 2000
------------------------------
Charles W. Cramb, Jr.
THE GILLETTE COMPANY
By /s/ Robert E. DiCenso
----------------------------
Title: S.V.P. - Personnel & Admin
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<PAGE> 1
Exhibit 10(n)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 16th day of December, 1999 (this
"Agreement"), by and between The Gillette Company, a Delaware corporation (the
"Company"), and Robert E. DiCenso (the "Executive").
WHEREAS, the Company has determined that it is in its best interests
and that of its stockholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined herein). The Company believes it
is imperative to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or threatened
Change of Control and to encourage the Executive's full attention and dedication
to the current Company and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that are
competitive with those of other corporations. Therefore, in order to accomplish
these objectives, the Company has entered into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first
date during the Change of Control Period (as defined herein) on which a Change
of Control occurs. Notwithstanding anything in this Agreement to the contrary,
if a Change of Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control occurs, and if it
is reasonably demonstrated by the Executive that such termination of employment
(1) was at the request of a third party that has taken steps reasonably
calculated to effect a Change of Control or (2) otherwise arose in connection
with or anticipation of a Change of Control, then "Effective Date" means the
date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.
(d) "Change of Control" means:
<PAGE> 2
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section 1(d), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C).
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Consummation of a reorganization, merger, consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of
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the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "Recent Annual Bonus Percentage" means the highest actual annual
bonus percentage awarded to the Executive under the Company's annual incentive
plans, or any comparable bonus under any predecessor or successor plan, for the
last three full fiscal years prior to the Effective Date.
(f) "Highest Annual Bonus Percentage" means the higher of (i) the
Executive's Recent Annual Bonus Percentage and (ii) sixty-five percent (65%).
(g) "Highest Annual Bonus" means an amount equal to the product of (i)
the Executive's Annual Base Salary at the Date of Termination and (ii) the
Highest Annual Bonus Percentage.
(h) "Bonus Payment Amount" means the amount actually paid to the
Executive pursuant to Section 13 of the Company's Incentive Bonus Plan or any
comparable provision of any successor annual bonus plan.
SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue
the Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company, subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the second
anniversary of the Effective Date (the "Employment Period").
SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During
the Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the office or location where the Executive was employed
immediately preceding the Effective Date or at any other location less than 35
miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or
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committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that, to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (1) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary (the "Annual Base Salary"), which
Annual Base Salary shall be paid at a monthly rate at least equal to 12 times
the highest monthly base salary paid or payable, including any base salary that
has been earned but deferred, to the Executive by the Company and the Affiliated
Companies in respect of the 12-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually, beginning no more than 12 months
after the last salary increase awarded to the Executive prior to the Effective
Date. Any increase in the Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. The Annual Base
Salary shall not be reduced after any such increase and the term "Annual Base
Salary" shall refer to the Annual Base Salary as so increased.
(2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash, determined as a percentage of Annual
Base Salary which shall not be less than the Recent Annual Bonus Percentage.
Each such Annual Bonus shall be paid no later than the end of the third month of
the fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(3) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies, and programs applicable generally to
other peer executives of the Company and the Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and the Affiliated Companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and the Affiliated Companies.
(4) WELFARE BENEFIT PLANS. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and
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shall receive all benefits under the Company's Executive Life Insurance Plan and
Estate Preservation Plan, and any other welfare benefit plans, practices,
policies and programs provided by the Company and the Affiliated Companies
(including, without limitation, medical, prescription, dental, disability,
employee/spouse/dependent life insurance and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the
Company and the Affiliated Companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits that are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.
(5) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and the
Affiliated Companies.
(6) FRINGE BENEFITS. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, tax and financial
planning services, parking benefits and fitness center membership, in accordance
with the most favorable plans, practices, programs and policies of the Company
and the Affiliated Companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and the Affiliated Companies.
(7) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the Affiliated Companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(8) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated Companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.
(9) EFFECT OF TERMINATION. Notwithstanding anything in this Agreement
to the contrary, upon termination of employment for any reason, the Employment
Period shall
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cease and the Executive shall have no further right to any of the payments or
benefits described in Sections 2 and 3.
SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. "Disability"
means the absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment during
the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or any
Affiliated Company (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand
for substantial performance is delivered to the Executive by the Board
or the Chief Executive Officer of the Company that specifically
identifies the manner in which the Board or the Chief Executive
Officer of the Company believes that the Executive has not
substantially performed the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct or
gross misconduct that is materially and demonstrably injurious to the
Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel for
the Executive, to be heard before the Board),
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finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a), or any other action
by the Company that results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
and that is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(2) any failure by the Company to comply with any of the
provisions of Section 3(b), other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and that is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(3) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 3(a)(1)(B) or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required mediately prior to the
Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(5) any failure by the Company to comply with and satisfy
Section 10(c).
For purposes of this Section 4(c), any good faith determination of
Good Reason made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the
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Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD
REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment
Period, the Company terminates the Executive's employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in
cash within 30 days after the Date of Termination, the aggregate of
the following amounts:
(A) the sum of (i) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (ii) the product of (x) the Highest Annual Bonus and (y) a
fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination and the
denominator of which is 365, reduced (but not below zero), if the
Date of Termination occurs in the same fiscal year as the Change
of Control, by the Executive's Bonus Payment Amount, (iii) if
elected by the Executive, any compensation previously deferred by
the Executive under the Company's Supplemental Savings Plan,
Incentive Bonus Plan and/or Stock Equivalent Unit Plan (together
with any accrued interest or earnings thereon), and (iv) any
accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in subclauses (i), (ii),
(iii) and (iv), the "Accrued Obligations"); and
(B) the amount equal to the product of (i) three and (ii)
the sum of (x) the Executive's Annual Base Salary and (y) the
Executive's Highest Annual Bonus; and
(C) if elected by the Executive within 60 days following
execution of this Agreement and prior to the Effective Date, in
lieu of and substitution for the applicable portion of the
Executive's monthly benefit otherwise payable under the final
paragraph of Article IV, Section 1 or paragraph (a) of Article V,
Section 3 of the Company's Retirement Plan and the final
paragraph of Section 3 of Supplemental Retirement Plan
(collectively, the "Retirement Plans"), an
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amount equal to the excess of (i) the lump sum actuarial
equivalent (utilizing the interest rate and mortality table in
effect for lump sum distributions under the Retirement Plan
immediately prior to the Effective Date, and determined assuming
benefit commencement as of the Date of Termination) of the
benefit under the Retirement Plans that the Executive would
receive if the Executive's employment continued for three years
after the Date of Termination, assuming for this purpose that all
accrued benefits are fully vested and assuming that the
Executive's compensation in each of the three years is the Annual
Base Salary and Highest Annual Bonus, over (ii) the lump sum
actuarial equivalent (determined in the same manner as in clause
(i) above) of the Executive's actual benefit (paid or payable),
if any, under the Retirement Plans as of the Date of Termination
without regard to such three years' compensation and service;
(2) for three years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue welfare benefits to the Executive
and/or the Executive's family at least equal to those that would have been
provided to them in accordance with the plans, programs, practices and policies
described in Section 3(b)(4) if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and the
Affiliated Companies and their families, provided, however, that, if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility. For
purposes of determining the Executive's eligibility for retiree benefits
pursuant to such welfare plans, practices, programs and policies, the Executive
shall be considered to have remained employed until three years after the Date
of Termination, provided, however, that the Executive's commencement of such
retiree benefits shall not be any sooner than the Executive's earliest
retirement date under the Retirement Plans;
(3) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive in the Executive's sole discretion; and
(4) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required to
be paid or provided or that the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the Company and the
Affiliated Companies (such other amounts and benefits, the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, the Company shall have no
further obligations to the Executive's legal representatives under this
Agreement, except for payment of the Accrued Obligations and the timely payment
or provision of the Other Benefits. The
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Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term "Other Benefits"
as utilized in this Section 5(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and the
Affiliated Companies to the estates and beneficiaries of peer executives of the
Company and the Affiliated Companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, the Company
shall have no further obligations to the Executive under this Agreement, except
for payment of the Accrued Obligations and the timely payment or provision of
the Other Benefits. The Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
is terminated for Cause during the Employment Period, the Company shall have no
further obligations to the Executive under this Agreement, except for payment to
the Executive of (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously deferred by the
Executive, and (3) the Other Benefits, in each case, to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, the Company shall have no
further obligations to the Executive under this Agreement, except for payment of
the Accrued Obligations and the timely payment or provision of the Other
Benefits. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or the Affiliated Companies
and for which the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such
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rights as the Executive may have under any other contract or agreement with the
Company or the Affiliated Companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the Affiliated
Companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.
SECTION 7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to
this Agreement), plus, in each case, interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company or
the Affiliated Companies to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise but determined without regard to any additional payments required
under this Section 8) (the "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code, or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, collectively, the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (the "Gross-Up Payment") in
an amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other certified public accounting firm as may be designated by
the Executive (the "Accounting Firm") that shall
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provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments that will not have been made by the Company should have
been made (the "Underpayment"), consistent with the calculations required to be
made hereunder. In the event the Company exhausts its remedies pursuant to
Section 8(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that the Company desires to contest such claim, the
Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order effectively to
contest such claim, and
(4) permit the Company to participate in any proceedings relating to
such claim;
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provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in
connection with such contest, and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that, if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which the Gross-Up
Payment would be payable hereunder, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive's employment by
the Company or the Affiliated Companies and which information, knowledge or data
shall not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
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termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
SECTION 10. SUCCESSORS. (a) This Agreement is personal to the
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive:
Mr. Robert E. DiCenso
P.O. Box 508
Cohasset, MA 02025
if to the Company:
The Gillette Company
Prudential Tower Building
Boston, Massachusetts 02199
Attention: General Counsel
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or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date: (i) this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof, and (ii) if the Executive receives severance
benefits under Section 5(a), the Executive shall not be entitled to receive
severance pay or benefits under any other plan, program, policy or arrangement
of the Company providing severance benefits.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from the Board, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
/s/ Robert E. DiCenso
-----------------------------
Robert E. DiCenso
THE GILLETTE COMPANY
By /s/ [signature illegible]
---------------------------
Title:
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<PAGE> 1
Exhibit 10(o)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 16th day of December, 1999 (this
"Agreement"), by and between The Gillette Company, a Delaware corporation (the
"Company"), and Richard K. Willard (the "Executive").
WHEREAS, the Company has determined that it is in its best interests
and that of its stockholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined herein). The Company believes it
is imperative to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or threatened
Change of Control and to encourage the Executive's full attention and dedication
to the current Company and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that are
competitive with those of other corporations. Therefore, in order to accomplish
these objectives, the Company has entered into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
SECTION 1. CERTAIN DEFINITIONS. (a) "Effective Date" means the first
date during the Change of Control Period (as defined herein) on which a Change
of Control occurs. Notwithstanding anything in this Agreement to the contrary,
if a Change of Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control occurs, and if it
is reasonably demonstrated by the Executive that such termination of employment
(1) was at the request of a third party that has taken steps reasonably
calculated to effect a Change of Control or (2) otherwise arose in connection
with or anticipation of a Change of Control, then "Effective Date" means the
date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
(c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.
(d) "Change of Control" means:
<PAGE> 2
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section 1(d), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C).
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Consummation of a reorganization, merger, consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that, as a result of
such transaction, owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of
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the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "Recent Annual Bonus Percentage" means the highest actual annual
bonus percentage awarded to the Executive under the Company's annual incentive
plans, or any comparable bonus under any predecessor or successor plan, for the
last three full fiscal years prior to the Effective Date.
(f) "Highest Annual Bonus Percentage" means the higher of (i) the
Executive's Recent Annual Bonus Percentage and (ii) sixty-five percent (65%).
(g) "Highest Annual Bonus" means an amount equal to the product of (i)
the Executive's Annual Base Salary at the Date of Termination and (ii) the
Highest Annual Bonus Percentage.
(h) "Bonus Payment Amount" means the amount actually paid to the
Executive pursuant to Section 13 of the Company's Incentive Bonus Plan or any
comparable provision of any successor annual bonus plan.
SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue
the Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company, subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the second
anniversary of the Effective Date (the "Employment Period").
SECTION 3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During
the Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the office or location where the Executive was employed
immediately preceding the Effective Date or at any other location less than 35
miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational
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<PAGE> 4
institutions and (C) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that, to the extent that any
such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION (1) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary (the "Annual Base Salary"), which
Annual Base Salary shall be paid at a monthly rate at least equal to 12 times
the highest monthly base salary paid or payable, including any base salary that
has been earned but deferred, to the Executive by the Company and the Affiliated
Companies in respect of the 12-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually, beginning no more than 12 months
after the last salary increase awarded to the Executive prior to the Effective
Date. Any increase in the Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. The Annual Base
Salary shall not be reduced after any such increase and the term "Annual Base
Salary" shall refer to the Annual Base Salary as so increased.
(2) ANNUAL BONUS. In addition to the Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash, determined as a percentage of Annual
Base Salary which shall not be less than the Recent Annual Bonus Percentage.
Each such Annual Bonus shall be paid no later than the end of the third month of
the fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(3) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies, and programs applicable generally to
other peer executives of the Company and the Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and the Affiliated Companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and the Affiliated Companies.
(4) WELFARE BENEFIT PLANS. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under the Company's Executive
Life Insurance Plan and Estate
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<PAGE> 5
Preservation Plan, and any other welfare benefit plans, practices, policies and
programs provided by the Company and the Affiliated Companies (including,
without limitation, medical, prescription, dental, disability,
employee/spouse/dependent life insurance and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the
Company and the Affiliated Companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits that are
less favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time during
the 120-day period mediately preceding the Effective Date or, if more favorable
to the Executive, those provided generally at any time after the Effective Date
to other peer executives of the Company and the Affiliated Companies.
(5) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and the
Affiliated Companies.
(6) FRINGE BENEFITS. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, tax and financial
planning services, parking benefits and fitness center membership, in accordance
with the most favorable plans, practices, programs and policies of the Company
and the Affiliated Companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and the Affiliated Companies.
(7) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the Affiliated Companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.
(8) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the Affiliated Companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.
(9) EFFECT OF TERMINATION. Notwithstanding anything in this Agreement
to the contrary, upon termination of employment for any reason, the Employment
Period shall
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<PAGE> 6
cease and the Executive shall have no further right to any of the payments or
benefits described in Sections 2 and 3.
SECTION 4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive's duties. "Disability"
means the absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness that is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment during
the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or any Affiliated
Company (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company that specifically identifies the manner in
which the Board or the Chief Executive Officer of the Company believes that
the Executive has not substantially performed the Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel for
the Executive, to be heard before the Board),
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finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a), or any other action by the Company that
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company to comply with any of the provisions
of Section 3(b), other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(3) the Company's requiring the Executive to be based at any office
or location other than as provided in Section 3(a)(1)(B) or the Company's
requiring the Executive to travel on Company business to a substantially
greater extent than required immediately prior to the Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(5) any failure by the Company to comply with and satisfy Section
10(c).
For purposes of this Section 4(c), any good faith determination of
Good Reason made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
"Notice of Termination" means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the
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<PAGE> 8
Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's respective rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, as the case may be, (2)
if the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD
REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment
Period, the Company terminates the Executive's employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in cash
within 30 days after the Date of Termination, the aggregate of the
following amounts:
(A) the sum of (i) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (ii) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination and the denominator of which is 365,
reduced (but not below zero), if the Date of Termination occurs in the
same fiscal year as the Change of Control, by the Executive's Bonus
Payment Amount, (iii) if elected by the Executive, any compensation
previously deferred by the Executive under the Company's Supplemental
Savings Plan, Incentive Bonus Plan and/or Stock Equivalent Unit Plan
(together with any accrued interest or earnings thereon), and (iv) any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in subclauses (i), (ii), (iii) and
(iv), the "Accrued Obligations"); and
(B) the amount equal to the product of (i) three and (ii) the
sum of (x) the Executive's Annual Base Salary and (y) the Executive's
Highest Annual Bonus; and
(C) if elected by the Executive within 60 days following
execution of this Agreement and prior to the Effective Date, in lieu
of and substitution for the applicable portion of the Executive's
monthly benefit otherwise payable under the final paragraph of Article
IV, Section 1 or paragraph (a) of Article V, Section 3 of the
Company's Retirement Plan and the final paragraph of Section 3 of
Supplemental Retirement Plan (collectively, the "Retirement Plans"),
an
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amount equal to the excess of (i) the lump sum actuarial equivalent (utilizing
the interest rate and mortality table in effect for lump sum distributions under
the Retirement Plan immediately prior to the Effective Date, and determined
assuming benefit commencement as of the Date of Termination) of the benefit
under the Retirement Plans that the Executive would receive if the Executive's
employment continued for three years after the Date of Termination, assuming for
this purpose that all accrued benefits are fully vested and assuming that the
Executive's compensation in each of the three years is the Annual Base Salary
and Highest Annual Bonus, over (ii) the lump sum actuarial equivalent
(determined in the same manner as in clause (i) above) of the Executive's actual
benefit (paid or payable), if any, under the Retirement Plans as of the Date of
Termination without regard to such three years' compensation and service;
(2) for three years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue welfare benefits to the Executive
and/or the Executive's family at least equal to those that would have been
provided to them in accordance with the plans, programs, practices and policies
described in Section 3(b)(4) if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and the
Affiliated Companies and their families, provided, however, that, if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility. For
purposes of determining the Executive's eligibility for retiree benefits
pursuant to such welfare plans, practices, programs and policies, the Executive
shall be considered to have remained employed until three years after the Date
of Termination, provided, however, that the Executive's commencement of such
retiree benefits shall not be any sooner than the Executive's earliest
retirement date under the Retirement Plans;
(3) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive in the Executive's sole discretion; and
(4) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required to
be paid or provided or that the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the Company and the
Affiliated Companies (such other amounts and benefits, the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, the Company shall have no
further obligations to the Executive's legal representatives under this
Agreement, except for payment of the Accrued Obligations and the timely payment
or provision of the Other Benefits. The
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Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term "Other Benefits"
as utilized in this Section 5(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and the
Affiliated Companies to the estates and beneficiaries of peer executives of the
Company and the Affiliated Companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, the Company shall
have no further obligations to the Executive under this Agreement, except for
payment of the Accrued Obligations and the timely payment or provision of the
Other Benefits. The Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term "Other Benefits" as utilized in this
Section 5(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
is terminated for Cause during the Employment Period, the Company shall have no
further obligations to the Executive under this Agreement, except for payment to
the Executive of (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously deferred by the
Executive, and (3) the Other Benefits, in each case, to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, the Company shall have no
further obligations to the Executive under this Agreement, except for payment of
the Accrued Obligations and the timely payment or provision of the Other
Benefits. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or the Affiliated Companies
and for which the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such
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<PAGE> 11
rights as the Executive may have under any other contract or agreement with the
Company or the Affiliated Companies. Amounts that are vested benefits or that
the Executive is otherwise entitled to receive under any plan, policy, practice
or program of or any contract or agreement with the Company or the Affiliated
Companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.
SECTION 7. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to
this Agreement), plus, in each case, interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company or
the Affiliated Companies to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise but determined without regard to any additional payments required
under this Section 8) (the "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code, or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, collectively, the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (the "Gross-Up Payment") in
an amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick or such other certified public accounting firm as may be designated by
the Executive (the "Accounting Firm") that shall
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provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments that will not have been made by the Company should have been
made (the "Underpayment"), consistent with the calculations required to be made
hereunder. In the event the Company exhausts its remedies pursuant to Section
8(c) and the Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that the Company desires to contest such claim, the
Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) permit the Company to participate in any proceedings
relating to such claim;
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<PAGE> 13
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in
connection with such contest, and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that, if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which the Gross-Up
Payment would be payable hereunder, and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive's employment by
the Company or the Affiliated Companies and which information, knowledge or data
shall not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
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<PAGE> 14
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of
this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
SECTION 10. SUCCESSORS. (a) This Agreement is personal to the
Executive, and, without the prior written consent of the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. "Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law or otherwise.
SECTION 11. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive:
Mr. Richard K. Willard
32 Garrison Street #50-504
Boston, MA 02116
if to the Company:
The Gillette Company
Prudential Tower Building
Boston, Massachusetts 02199
Attention: General Counsel
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<PAGE> 15
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date: (i) this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof, and (ii) if the Executive receives severance
benefits under Section 5(a), the Executive shall not be entitled to receive
severance pay or benefits under any other plan, program, policy or arrangement
of the Company providing severance benefits.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from the Board, the Company has caused
these presents to be executed in its name on its behalf, all as of the day and
year first above written.
/s/ Richard K. Willard
------------------------------
Richard K. Willard
THE GILLETTE COMPANY
By /s/ Robert E. DiCenso
----------------------------
Title: S.V.P. - Personnel & Admin
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<PAGE> 1
Exhibit 10(p)
THE GILLETTE COMPANY CHANGE OF CONTROL
SEVERANCE PROGRAM FOR KEY EXECUTIVES
INTRODUCTION
The Gillette Company (the "Company") believes that it is
consistent with the Company's long-standing employment practices and policies
and in the best interests of the Company and its shareholders to treat fairly
its employees whose employment terminates in connection with or following a
Change of Control.
Accordingly, the Company has determined that appropriate steps
should be taken to assure the Company of the continued employment and attention
and dedication to duty of certain of its key management employees and to seek to
ensure the availability of their continued service, notwithstanding the
possibility or occurrence of a Change of Control.
Therefore, in order to fulfill the above purposes, the
following Change of Control Severance Program for Key Executives has been
developed and is hereby adopted.
1.
ARTICLE I
ESTABLISHMENT OF PLAN
As of the Effective Date, the Company hereby establishes The
Gillette Company Change of Control Severance Program for Key Executives, as set
forth in this document.
2.
ARTICLE II
DEFINITIONS
As used herein the following words and phrases shall have the
following respective meanings (unless the context clearly indicates otherwise):
(a) AFFILIATE. Any entity controlled by, controlling or under common
control with the Company.
(b) ANNUAL BASE SALARY. Twelve times the higher of (i) the highest
monthly base salary paid or payable to the Participant by the Company and its
Affiliates in respect of the twelve-month period immediately preceding the month
in which the Change of Control occurs, and (ii) the highest monthly base salary
in effect at any time thereafter, in each case including any base salary that
has been earned and deferred.
(c) BOARD. The Board of Directors of The Gillette Company.
<PAGE> 2
(d) BONUS PAYMENT AMOUNT. The amount actually paid to a Participant
pursuant to Section 13 of the Company's Incentive Bonus Plan or any comparable
provision of any successor annual bonus plan.
(e) CAUSE. As defined in Section 4.2(b)(i).
(f) CHANGE OF CONTROL. The first to occur of the following events:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (a) the then
outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (b) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting
Securities"); PROVIDED, HOWEVER, that for purposes of this subsection
(i), the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition pursuant
to a transaction which complies with clauses (A), (B) and (C) of
subsection (iii) of this Section 2(e); or
(ii) Individuals who, as of the Effective Date, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; PROVIDED, HOWEVER, that any individual
becoming a director subsequent to the Effective Date whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company or the acquisition of assets of another
entity (a "Corporate Transaction"), in each case, unless, immediately
following such Corporate Transaction, (A) all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Corporate
Transaction beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either
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<PAGE> 3
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Corporate
Transaction of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (B) no Person (excluding
any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Corporate Transaction) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from
such Corporate Transaction or the combined voting power of the then
outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Corporate Transaction and (C)
at least a majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction were members of
the Incumbent Board at the time of the execution of the initial Plan,
or of the action of the Board, providing for such Corporate
Transaction; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(g) CODE. The Internal Revenue Code of 1986, as amended from time to
time.
(h) COMMITTEE. The Personnel Committee of the Board.
(i) COMPANY. The Gillette Company and any successor thereto.
(j) COVERAGE PERIOD. As defined in Section 3A.1.
(k) DATE OF TERMINATION. (i) If the Participant's employment is
terminated by the Company for Cause or by the Participant for Good Reason, the
date of receipt of the Notice of Termination (as described in Section 4.2(c)) or
any later date specified therein, as the case may be, (ii) if the Participant's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Participant of such termination and (iii) if the Participant's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Participant or the Disability Effective Date, as the
case may be.
(l) DISABILITY. As defined in Section 4.2(b)(ii).
(m) DISABILITY EFFECTIVE DATE. As defined in Section 4.2(b)(ii).
(n) EFFECTIVE DATE. December 16, 1999.
(o) EMPLOYER. The Company or any of its Affiliates.
(p) EXCISE TAX. The excise tax imposed by Section 4999 of the Code,
together with any interest or penalties imposed with respect to such excise tax.
(q) GOOD REASON. As defined in Section 4.2(a).
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(r) HIGHEST ANNUAL BONUS. An amount equal to the product of the
Participant's Annual Base Salary at the Date of Termination and the Highest
Annual Bonus Percentage.
(s) HIGHEST ANNUAL BONUS PERCENTAGE. The higher of the Participant's
Recent Annual Bonus Percentage and thirty-five percent (35%).
(t) KEY EXECUTIVE. An employee who is employed on a regular basis by an
Employer in a position having grade 25 or above (or having a personal grade of
25 or above) or in such other position designated by the Company's Senior Vice
President - Personnel and Administration as being eligible to participate in
this Plan, excluding any such employee who is a party to an employment agreement
with the Company which becomes effective in the event of a Change of Control.
(u) NON-US EXECUTIVE. A Key Executive whose designated home country,
for purposes of the Employer's personnel and benefits programs and policies, is
other than the United States.
(v) PARTICIPANT. A Key Executive who meets the eligibility requirements
of Section 3.1; provided, however, that any Non-US Executive who, under the laws
of his or her designated home country or the legally enforceable programs or
policies of the Employer in such designated home country, is entitled to
receive, in the event of termination of employment (whether or not by reason of
a Change of Control), separation benefits at least equal in aggregate amount to
the Separation Pay prescribed under Section 4.3(b), shall not be considered a
Participant for the purposes of this Plan.
(w) PAYMENT. Any payment or distribution in the nature of compensation
(within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of
the Participant, whether paid or payable pursuant to this Plan or otherwise.
(x) PLAN. The Gillette Company Change of Control Severance Program for
Key Executives, as set forth herein.
(y) PLAN ADMINISTRATOR. The third-party accounting, actuarial or
consulting firm retained by the Company prior to a Change of Control to
administer this Program following a Change of Control.
(z) RECENT ANNUAL BONUS PERCENTAGE. The highest actual annual bonus
percentage awarded to the Participant under the Company's annual incentive
plans, or any comparable bonus under any predecessor or successor plan, for the
last three full fiscal years prior to the Change of Control (and equal to 35% in
the event that the Participant was not employed by the Employer for one full
fiscal year prior to the Change of Control).
(aa) REQUIRED COMPENSATION. With respect to any Participant, the sum of
(i) the Participant's Annual Base Salary and (ii) an amount equal to the product
of (A) the Participant's Annual Base Salary and (B) the Recent Annual Bonus
Percentage.
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<PAGE> 5
(bb) SEPARATION BENEFITS. The amounts and benefits payable or required
to be provided in accordance with Section 4.3.
(cc) SEPARATION PAY. The amounts or amounts payable in accordance with
Section 4.3(b).
(dd) US PARTICIPANT. A Participant whose designated home country, for
purposes of the Employer's personnel and benefits programs and policies, is the
United States.
3.
ARTICLE III
ELIGIBILITY
3.1 PARTICIPATION. Except as set forth in paragraph (v) of Article II, each
employee who is a Key Executive on the Effective Date shall be a Participant in
the Plan effective as of the Effective Date and each other employee shall become
a Participant in the Plan effective as of the date of the employee's promotion
or hire as a Key Executive.
3.2 DURATION OF PARTICIPATION. A Participant shall cease to be a Participant in
the Plan if (i) he or she ceases to be employed by an Employer under
circumstances not entitling him or her to Separation Benefits or (ii) he or she
otherwise ceases to be a Key Executive, provided that no Key Executive may be so
removed from Plan participation in connection with or in anticipation of a
Change of Control that actually occurs. Notwithstanding the foregoing, a
Participant who is entitled, as a result of ceasing to be a Key Executive of an
Employer, to receive benefits under the Plan shall remain a Participant in the
Plan until the amounts and benefits payable under the Plan have been paid or
provided to the Participant in full.
ARTICLE III-A
BENEFITS FOLLOWING CHANGE OF CONTROL
3A.1 CONTINUATION OF BENEFIT PLAN PARTICIPATION. During the period commencing on
the date a Change of Control occurs and ending on the second anniversary of such
date ("Coverage Period"), each US Participant and/or the US Participant's
family, as the case may be, shall be eligible for participation in and shall
receive all benefits under the savings, retirement, welfare and fringe benefit
plans, practices, policies and programs provided by the Employer to the extent
applicable generally to other peer executives of the Employer, but in no event
shall such plans, practices, policies and programs provide the US Participant
with benefits of lesser value, in the aggregate, than the plans, practices,
policies and programs in which the US Participant participated immediately prior
to the Change of Control or, if more favorable to the US Participant, those
provided generally at any time after the Effective Date to other peer executives
of the Employer.
3A.2 ANNUAL BONUS. For each fiscal year of the Company ending during the
Coverage Period, each Participant shall be awarded an annual bonus in cash which
shall not be less than the product of (i) the Participant's Annual Base Salary
and (ii) the Participant's Recent Annual Bonus Percentage. If, prior to the end
of a fiscal year ending during the Coverage Period, a
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Participant's employment is terminated for Disability or as a result of the
Participant's death, or the Participant terminates his or her own employment
other than for Good Reason, the Participant shall be awarded a prorated annual
bonus (determined in accordance with the preceding sentence) for such fiscal
year. Each such annual bonus shall be paid to the Participant no later than the
end of the third month of the fiscal year next following the fiscal year for
which such annual bonus is awarded, unless the Participant elects to defer the
receipt of such annual bonus.
4.
ARTICLE IV
SEPARATION BENEFITS
4.1 RIGHT TO SEPARATION BENEFITS. A Participant shall be entitled to receive
from the Company the Separation Benefits as provided in Section 4.3, if a Change
of Control has occurred and the Participant's employment by an Employer is
terminated under circumstances specified in Section 4.2(a), whether the
termination is voluntary or involuntary, and if (i) such termination occurs
after such Change of Control and on or before the second anniversary thereof, or
(ii) such termination is reasonably demonstrated by the Participant to have been
initiated by a third party that has taken steps reasonably calculated to effect
a Change of Control or otherwise to have arisen in connection with or in
anticipation of such Change of Control.
4.2 TERMINATION OF EMPLOYMENT.
(a) TERMINATIONS WHICH GIVE RISE TO SEPARATION BENEFITS UNDER THIS
PLAN. The circumstances specified in this Section 4.2(a) are any termination of
employment with an Employer by action of the Company or any of its Affiliates or
by a Participant for Good Reason, other than as set forth in Section 4.2(b)
below. For purposes of this Plan, "Good Reason" shall mean:
(i) the assignment to the Participant of any duties
inconsistent in any respect with the Participant's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as in effect immediately prior to the Change of
Control, or any other action by the Company or the Employer that
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and that is remedied by
the Company and/or the Employer promptly after receipt of notice
thereof given by the Participant;
(ii) a decrease in the Participant's compensation below the
Required Compensation, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and that is remedied by
the Company and/or the Employer promptly after receipt of notice
thereof given by the Participant;
(iii) the Company's or the Affiliate's requiring the
Participant to be based at any office or location other than (A) the
office or where the Participant was based and performed services
immediately prior to the Change of Control or (B) any other location
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<PAGE> 7
less than 35 miles from such office, or the Company's or the
Affiliate's requiring the Participant to travel on business to a
substantially greater extent than required immediately prior to the
Change of Control;
(iv) any purported termination by the Company or the Affiliate
of the Participant's employment otherwise than as expressly permitted
by this Plan; or
(v) any failure by the Company to require any successor
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of
the Company to assume expressly and agree to perform this Plan in the
same manner and to the same extent that the Company would be required
to perform it if no such succession had taken place, as required by
Article V.
(b) TERMINATIONS WHICH DO NOT GIVE RISE TO SEPARATION BENEFITS UNDER
THIS PLAN. Notwithstanding Section 4.2(a), if a Participant's employment is
terminated for Cause or Disability (as those terms are defined below) or as a
result of the Participant's death, or the Participant terminates his or her own
employment other than for Good Reason, the Participant shall not be entitled to
Separation Benefits under the Plan, regardless of the occurrence of a Change of
Control.
(i) A termination for "Cause" shall have occurred where a
Participant is terminated because of:
(A) the willful and continued failure of the
Participant to perform substantially the Participant's duties
with the Company or any of the Affiliates (other than any such
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance
is delivered to the Participant by the Board or an elected
officer of the Company which specifically identifies the
manner in which the Board or the elected officer believes that
the Participant has not substantially performed the
Participant's duties; or
(B) the willful engaging by the Participant in
illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company or the Affiliate.
For purposes of this Section 4.2(b)(i), no act, or failure to act, on
the part of the Participant shall be considered "willful" unless it is
done, or omitted to be done, by the Participant in bad faith or without
reasonable belief that the Participant's action or omission was in the
best interests of the Company or the Affiliate. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted
by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice
of counsel for the Company or the Affiliate shall be conclusively
presumed to be done, or omitted to be done, by the Participant in good
faith and in the best interests of the Company or the Affiliate.
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<PAGE> 8
(ii) A termination for "Disability" shall have occurred where
a Participant is absent from the Participant's duties with the Employer
on a full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its
insurers and acceptable to the Participant or the Participant's legal
representative. In such event, the Participant's employment with the
Employer shall terminate effective on the 30th day after receipt of
such notice by the Participant (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Participant
shall not have returned to full-time performance of the Participant's
duties.
(c) NOTICE OF TERMINATION. Any termination by the Company for Cause, or
by the Participant for Good Reason, shall be communicated by a Notice of
Termination to the other party. For purposes of this Plan, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Plan relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Participant's employment under the provision so indicated and
(iii) if the Date of Termination is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than 30
days after the giving of such notice). The failure by the Participant or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Participant or the Company, respectively, hereunder or preclude the
Participant or the Company, respectively, from asserting such fact or
circumstance in enforcing the Participant's or the Company's rights hereunder.
4.3 SEPARATION BENEFITS. If a Participant's employment is terminated under the
circumstances set forth in Section 4.2(a) entitling him or her to Separation
Benefits, the Company shall pay or provide, as the case may be, to the
Participant the amounts and benefits set forth in items (a) through (e) below
(the "Separation Benefits"):
(a) The Company shall pay to the Participant, in a lump sum in cash
within 30 days after the Date of Termination, the sum of (A) the Participant's
Annual Base Salary through the Date of Termination to the extent not theretofore
paid, (B) the product of (x) the Participant's Highest Annual Bonus and (y) a
fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination and the denominator of which is 365,
reduced (but not below zero), if the Date of Termination occurs in the same
fiscal year as the Change of Control, by the Participant's Bonus Payment Amount,
(C) if elected by the Participant, any compensation previously deferred by the
Participant under the Company's Supplemental Savings Plan, Incentive Bonus Plan
and/or Stock Equivalent Unit Plan (together with any accrued interest or
earnings thereon), and (D) any accrued vacation pay, in each case to the extent
not theretofore paid (the sum of the amounts described in subclauses (A), (B),
(C) and (D), the "Accrued Obligations").
(b) The Company also shall pay to the Participant an amount
("Separation Pay") equal to the product of (A) two and (B) the sum of (x) the
Participant's Annual Base Salary and (y) the Participant's Highest Annual Bonus,
reduced (but not below zero) in the case of any Participant who is a Non-US
Executive by the US dollar equivalent (determined as of the
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<PAGE> 9
Participant's Date of Termination) of any payments made to the Participant under
the laws of his or her designated home country or any program or policy of the
Employer in such country on account of the Participant's termination of
employment. A Participant may elect to receive Separation Pay either ratably as
continuing salary payments over a period not to exceed two years following the
Participant's Date of Termination or as a single lump sum cash payment;
provided, however, that a Participant who, as of the Date of Termination, is
within five years of qualifying for early or normal retirement under a
tax-qualified retirement plan maintained by the Company or its Affiliates, may
extend the period for payment of the Separation Pay as continued salary payments
until the date of earliest eligibility for retirement. Separation Pay received
as a lump sum payment is not eligible for Savings Plan contribution, nor is such
payment considered pension-eligible compensation.
(c) Solely with respect to US Participants, for two years after the
Participant's Date of Termination, or such longer period as may be provided by
the terms of the appropriate plan, program, practice or policy, the Company
shall continue welfare benefits to the Participant and/or the Participant's
family at least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies (including, without
limitation, medical, prescription, dental, disability, employee/spouse/child
life insurance, executive life, estate preservation (second-to-die life
insurance) and travel accident insurance plans and programs), as if the
Participant's employment had not been terminated, or, if more favorable to the
Participant, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliates and their families; provided,
however, that if the Participant becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable period
of eligibility. For purposes of determining the Participant's eligibility for
retiree benefits pursuant to such welfare plans, practices, programs and
policies, the Participant shall be considered to have remained employed until
two years after the Date of Termination, provided, however, that the Executive's
commencement of such retiree benefits shall not be any sooner than the
Executive's earliest retirement date under the Company's tax-qualified
Retirement Plan.
(d) The Company shall, at its sole expense, provide the Participant
with outplacement services through the provider of the Company's choice, the
scope of which shall be chosen by the Participant in his or her sole discretion
within the terms and conditions of the Company's outplacement services policy as
in effect immediately prior to the Change of Control.
(e) To the extent not theretofore paid or provided, the Employer shall
timely pay or provide to the Participant any other amounts or benefits required
to be paid or provided or that the Participant is eligible to receive under any
plan, program, policy or practice or contract or agreement of the Company and
its Affiliates.
4.4 CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Plan to the
contrary notwithstanding, with respect to any Participant who is a citizen or
resident of the United States, in the event it shall be determined that any
Payment would be subject to the Excise Tax, then the Participant shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Participant of all taxes (including any interest
or penalties
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<PAGE> 10
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Participant retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 4.4(c), all determinations
required to be made under this Section 4.4, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
KPMG Peat Marwick LLP or such other nationally recognized certified public
accounting firm as may be designated by the Participant (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Participant within 15 business days of the receipt of notice from the
Participant that there has been a Payment, or such earlier time as is requested
by the Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Subject to Section 4.4(e) below, any Gross-Up Payment, as
determined pursuant to this Section 4.4, shall be paid by the Company to the
Participant within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Participant. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 4.4(c) and the
Participant thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Participant.
(c) The Participant shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Participant is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Participant shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Participant in writing prior to the
expiration of such period that it desires to contest such claim, the Participant
shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
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<PAGE> 11
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Participant harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 4.4(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Participant to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and the Participant agrees to prosecute
such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the Company
shall determine; PROVIDED, HOWEVER, that if the Company directs the Participant
to pay such claim and sue for a refund, the Company shall advance the amount of
such payment to the Participant, on an interest-free basis and shall indemnify
and hold the Participant harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Participant
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Participant shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Participant of an amount advanced by
the Company pursuant to Section 4.4(c), the Participant becomes entitled to
receive any refund with respect to such claim, the Participant shall (subject to
the Company's complying with the requirements of Section 4.4(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Participant of an amount advanced by the Company pursuant to Section 4.4(c), a
determination is made that the Participant shall not be entitled to any refund
with respect to such claim and the Company does not notify the Participant in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
(e) Notwithstanding any other provision of this Section 4.4, the
Company may withhold and pay over to the Internal Revenue Service for the
benefit of the Participant all or any portion of the Gross-Up Payment that it
determines in good faith that it is or may be in the future required to
withhold, and the Participant hereby consents to such withholding.
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<PAGE> 12
4.5 PAYMENT OBLIGATIONS ABSOLUTE. Upon a Change of Control, the obligations of
the Company and its Affiliates to pay or provide the Separation Benefits
described in Section 4.3 shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company or any of the
Affiliates may have against any Participant. In no event shall a Participant be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to a Participant under any of the provisions of this
Plan, nor shall the amount of any payment or value of any benefits hereunder be
reduced by any compensation or benefits earned by a Participant as a result of
employment by another employer, except as specifically provided under Section
4.3.
4.6 NON-EXCLUSIVITY OF RIGHTS. Nothing in this Plan shall prevent or limit the
Participant's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of the Affiliates and for which the
Participant may qualify, nor, subject to Section 7.2, shall anything herein
limit or otherwise affect such rights as the Participant may have under any
contract or agreement with the Company or any of the Affiliates. Amounts or
benefits which the Participant is otherwise entitled to receive under any plan,
policy, practice or program of or any contract or agreement with the Company or
any of the Affiliates shall be payable in accordance with such plan, policy,
practice or program or contract or agreement, except as explicitly modified by
this Plan.
5.
ARTICLE V
SUCCESSOR TO COMPANY
This Plan shall bind any successor of the Company, its assets
or its businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise), in the same manner and to the same extent that the
Company would be obligated under this Plan if no succession had taken place.
In the case of any transaction in which a successor would not
by the foregoing provision or by operation of law be bound by this Plan, the
Company shall require such successor expressly and unconditionally to assume and
agree to perform the Company's obligations under this Plan, in the same manner
and to the same extent that the Company would be required to perform if no such
succession had taken place. The term "Company," as used in this Plan, shall mean
the Company as hereinbefore defined and any successor or assignee to the
business or assets which by reason hereof becomes bound by this Plan.
6.
ARTICLE VI
DURATION, AMENDMENT AND TERMINATION
6.1 DURATION. This Plan shall remain in effect until terminated as provided in
Section 6.2. Notwithstanding the foregoing, if a Change of Control occurs, this
Plan shall continue in full
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<PAGE> 13
force and effect and shall not terminate or expire until after all Participants
who become entitled to any payments or benefits hereunder shall have received
such payments or benefits in full.
6.2 AMENDMENT AND TERMINATION. The Plan may be terminated or amended in any
respect by resolution adopted by a majority of the Board, unless a Change of
Control has previously occurred. However, after the Board has knowledge of a
possible transaction or event that if consummated would constitute a Change of
Control, this Plan may not be terminated or amended in any manner which would
adversely affect the rights or potential rights of Participants, unless and
until the Board has determined that all transactions or events that, if
consummated, would constitute a Change of Control have been abandoned and will
not be consummated, and, provided that, the Board does not have knowledge of
other transactions or events that, if consummated, would constitute a Change of
Control. If a Change of Control occurs, the Plan shall no longer be subject to
amendment, change, substitution, deletion, revocation or termination in any
respect that adversely affects the rights of Participants, and no Participant
shall be removed from Plan participation.
ARTICLE VII
MISCELLANEOUS
7.
7.1 LEGAL FEES. The Company agrees to pay, to the full extent permitted by law,
all legal fees and expenses which the Participant may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company or the
Affiliates, the Participant or others of the validity or enforceability of, or
liability under, any provision of this Plan or any guarantee of performance
thereof (including as a result of any contest by the Participant about the
amount of any payment pursuant to this Plan), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code.
7.2 EMPLOYMENT STATUS. This Plan does not constitute a contract of employment or
impose on the Participant, the Company or the Participant's Employer any
obligation to retain the Participant as an employee, to change the status of the
Participant's employment as an "at will" employee, or to change the Company's or
the Affiliates' policies regarding termination of employment.
7.3 TAX WITHHOLDING. The Company may withhold from any amounts payable under
this Plan such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
7.4 VALIDITY AND SEVERABILITY. The invalidity or unenforceability of any
provision of the Plan shall not affect the validity or enforceability of any
other provision of the Plan, which shall remain in full force and effect, and
any prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
7.5 GOVERNING LAW. The validity, interpretation, construction and performance of
the Plan shall in all respects be governed by the laws of Delaware, without
reference to principles of conflict of law.
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<PAGE> 14
7.6 CLAIM PROCEDURE. If a Participant makes a written request alleging a right
to receive Separation Benefits under the Plan or alleging a right to receive an
adjustment in benefits being paid under the Plan, the Company shall treat it as
a claim for benefits. All claims for Separation Benefits under the Plan shall be
sent to the General Counsel of the Company and must be received within 30 days
after the Date of Termination. If the Company determines that any individual who
has claimed a right to receive Separation Benefits under the Plan is not
entitled to receive all or a part of the benefits claimed, it will inform the
claimant in writing of its determination and the reasons therefor in terms
calculated to be understood by the claimant. The notice will be sent within 90
days of the written request, unless the Company determines additional time, not
exceeding 90 days, is needed. The notice shall make specific reference to the
pertinent Plan provisions on which the denial is based, and describe any
additional material or information that is necessary. Such notice shall, in
addition, inform the claimant what procedure the claimant should follow to take
advantage of the review procedures set forth below in the event the claimant
desires to contest the denial of the claim. The claimant may within 90 days
thereafter submit in writing to the Plan Administrator a notice that the
claimant contests the denial of his or her claim by the Company and desires a
further review. The Plan Administrator shall within 60 days thereafter review
the claim and authorize the claimant to appear personally and review the
pertinent documents and submit issues and comments relating to the claim to the
persons responsible for making the determination on behalf of the Plan
Administrator. The Plan Administrator will render its final decision with
specific reasons therefor in writing and will transmit it to the claimant within
60 days of the written request for review, unless the Plan Administrator
determines additional time, not exceeding 60 days, is needed, and so notifies
the Participant. If the Plan Administrator fails to respond to a claim filed in
accordance with the foregoing within 60 days or any such extended period, the
Plan Administrator shall be deemed to have denied the claim.
7.7 UNFUNDED PLAN STATUS. This Plan is intended to be an unfunded plan and to
qualify as a severance pay plan within the meaning of Labor Department
Regulations section 2510.3-2(b). All payments pursuant to the Plan shall be made
from the general funds of the Company and no special or separate fund shall be
established or other segregation of assets made to assure payment. No
Participant or other person shall have under any circumstances any interest in
any particular property or assets of the Company as a result of participating in
the Plan. Notwithstanding the foregoing, the Company may (but shall not be
obligated to) create one or more grantor trusts, the assets of which are subject
to the claims of the Company's creditors, to assist it in accumulating funds to
pay its obligations under the Plan.
7.8 RELIANCE ON ADOPTION OF PLAN. Each person who shall become a Key Executive
shall be deemed to have served and continue to serve in such capacity in
reliance upon the change of control provisions contained in this Plan.
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<PAGE> 15
7.9 PROGRAM SUPERSEDES PRIOR US ARRANGEMENTS. For the period of two years
following the occurrence of a Change of Control, the provisions of this Program
shall supersede, with respect to US Participants, any and all plans, programs,
policies and arrangements of the Company providing severance benefits.
IN WITNESS WHEREOF, The Gillette Company has caused this Plan to be executed by
its duly authorized officer effective as of the Effective Date set forth above.
THE GILLETTE COMPANY
By: /s/ Robert E. DiCenso
---------------------------------
Senior Vice President - Personnel
and Administration
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<PAGE> 1
Exhibit 10(q)
[The Gillette Company LOGO]
May 27, 1999
Mr. Alfred M. Zeien
4900 Prudential Tower Building
Boston, MA 02199
Re: ESTATE PRESERVATION PLAN II
---------------------------
Dear Al:
Pursuant to resolutions adopted by this Company's Board of Directors at its
April 15, 1999 meeting, I am please to extend this offer to you, under the terms
and conditions described below, to purchase a life insurance policy with a death
benefit payable following the deaths of both Joyce and you.
Under this arrangement, the Company will agree to make stated payments to an
insurance company over a five-year period in order to fund the annual premium
cost of the death benefit coverage under the policy. The Company's cumulative
payments will be returned to the Company, without interest, at the end of the
fifteenth (15th) policy year or, if sooner occurring, following the deaths of
Joyce and you. The trust designated as the owner of the policy will be
responsible for the annual cost of the life insurance protection as well as any
additional cost of the insurance coverage following the 15th policy year. As a
condition to the issuance of the policy, you and the policyowner will execute a
Split-Dollar Agreement and Collateral-Assignment (in the forms annexed hereto)
which documents shall establish the respective rights of the Company and the
policyowner with respect to the death benefit proceeds and cash value (including
investment direction, loans and withdrawals) under the policy. Other terms and
conditions of this life insurance arrangement are set forth on the Term Sheet
annexed hereto.
In consideration of the aforementioned life insurance arrangement, you agree to
forego and waive irrevocably your right to any benefits otherwise payable under
the Company's Supplemental Savings Plan. Your waiver of these benefits will
result in certain cash and financial cost savings to the Company, from which
savings the Company will obtain the funding for the purchase of the life
insurance policy. For the purposes of determining the amount of life insurance
coverage to be purchased, the value of your benefit under the Company's
Supplemental Savings Plan will been calculated as of the close of the business
day today and increased by the amount that otherwise would be credited to your
<PAGE> 2
-2-
Supplemental Savings Plan accounts (without earnings), at your current savings
contribution and salary rates, until your retirement date.
By signing where indicated below, you accept this offer and signify your
agreement to forego and waive irrevocably the Supplemental Savings Plan benefits
specified above, to have executed the Split-Dollar Agreement,
Collateral-Assignment and such other documents as may be necessary or desirable
to implement your coverage under the life insurance policy, and to do such
further actions (including a medical examination for underwriting purposes) as
may be necessary or desirable to effectuate the purposes of this arrangement.
Joyce also must sign below agreeing to the above-described actions related to
the purchase of the life insurance policy.
You are further acknowledging that there are certain tax considerations to be
evaluated in accepting this offer and that you have had the opportunity to
review these tax issues with your personal tax advisor before accepting this
offer. You agree to be fully responsible for the tax consequences of your
participation in this arrangement, and acknowledge that the Company reserves the
right to seek reimbursement from you if the Company is charged with the
obligation to pay any of your income or employment taxes in respect of this
arrangement.
This arrangement may be modified only by written agreement between you and an
authorized representative of the Company. This arrangement shall inure to the
benefit of, and shall be binding upon, you and your heirs, personal
representatives, successors and assignees, and upon the Company and its
officers, directors, employees, shareholders and their successors and assignees.
This arrangement shall be construed and enforced under the laws of the
Commonwealth of Massachusetts.
Please return one copy of this letter, signed where indicated below, to indicate
your agreement to the foregoing terms by the close of the business day on June
4, 1999.
Very truly yours,
/s/ Robert E. DiCenso
Robert E. DiCenso
Senior Vice President - Personnel and Administration
<PAGE> 3
-3-
ACCEPTANCE OF OFFER:
I hereby accept the Company's offer and agree to the terms and conditions of the
arrangement set forth above and contained in the documents annexed hereto.
/s/ Alfred M. Zeien
- -----------------------------
Alfred M. Zeien
/s/ Joyce Zeien
- -----------------------------
Joyce Zeien
<PAGE> 1
Exhibit 10(v)
THE GILLETTE COMPANY
SUPPLEMENTAL RETIREMENT PLAN
(AS AMENDED AND RESTATED EFFECTIVE JUNE 16, 1994)
(WITH AMENDMENTS ADOPTED THROUGH JANUARY 1, 2000)
1. PURPOSE. The Gillette Company Supplemental Retirement Plan (the "Plan") has
been adopted by The Gillette Company (the "Company") to provide additional
benefits to certain employees of the Company and its Participating
Subsidiaries whose benefits under The Gillette Company Retirement Plan (the
"Retirement Plan") have been limited by the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), in order to provide that the
total benefits payable under this Plan and the Retirement Plan shall be
approximately equal to the amount of benefits which would have accrued
under the Retirement Plan for such employees had such limitations imposed
by the Code not been in effect.
The Plan is intended to constitute an "excess benefit plan" within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and an unfunded plan of deferred compensation
described in Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and in
Sections 3121(v)(2) and 3306(r)(2) of the Code.
2. PARTICIPANTS. The Participants in this Plan shall be those employees of the
Company and Participating Subsidiaries who are participating in the
Retirement Plan and (i) whose pension benefits under the Retirement Plan
are limited by reason of Section 415 of the Code, or (ii) who are
determined by the Committee to be management or highly compensated
employees and whose pension benefits or Compensation taken into account
under the Retirement Plan are limited by reason of another provision of the
Code.
3. AMOUNT OF BENEFITS. The benefit accrued to each Participant in this Plan,
as determined at any time, shall be an amount equal to the difference
between the amount of monthly pension benefit payable to the Participant
under the Retirement Plan and the amount of monthly pension benefit which
would have been payable to the Participant under the Retirement Plan but
for the limitation on pension benefits and/or Compensation taken into
account under the Retirement Plan by reason of a provision of the Code. For
the purposes of this determination, the rules contained in the Retirement
Plan at the relevant time governing the accrual and vesting of pension
benefits and the timing and forms of payment of such benefits shall apply.
Notwithstanding any other provision of the Plan to the contrary, in the
event of a Change of Control:
(i) With respect to any Participant who receives separation benefits
following termination of employment pursuant to the terms of the
Participant's
<PAGE> 2
-2-
Employment Agreement with the Company, and who elects to receive
payment of the relevant portion of such separation benefits as
additional pension benefits under this Plan, (x) the Participant's
Average Annual Compensation shall be determined taking into account as
Compensation, for each year of the three-year period following the
Participant's termination date, the amounts of annual salary and
highest annual bonus calculated in accordance with such Employment
Agreement, (y) the Participant's Credited Service shall be determined
taking into account as regular scheduled hours the three-year period
following the termination date, and (z) if the Participant is within
five years of eligibility for early or normal retirement as of the
termination date, the Participant's Credited Service shall include
(without duplication for the service taken into account in the
preceding clause (y)) the period between the Participant's termination
date and date of earliest retirement eligibility;
(ii) With respect to any Participant who receives separation payments
following termination of employment pursuant to the Company's Change
of Control Severance Program for Key Executives, which payments are
received in the form of full salary continuation, (a) the
Participant's Average Annual Compensation shall be determined taking
into account as Compensation the amount (if any) of separation pay
received by the Participant as full salary continuation, (b) the
Participant's Credited Service shall be determined taking into account
the period (if any) over which separation pay is received as full
salary continuation, and (c) if the Participant is within five years
of eligibility for early or normal retirement as of the Participant's
termination date, the Participant's Credited Service shall include
(without duplication for the service taken into account in the
preceding clause (b)) the period between the Participant's termination
date and date of earliest retirement eligibility; and
(iii) Each person who is a Participant on the date of a Change of Control
shall have a fully vested and nonforfeitable interest in his entire
benefit then accrued under the Plan.
4. PAYMENT OF BENEFITS. The Company shall pay the benefit accrued to each
Participant in this Plan at the same time or times and in the same manner
as the Participant's pension benefit under the Retirement Plan is paid.
Such payment shall continue for the life of the Participant and, if a joint
annuity form of payment is elected by the Participant under the Retirement
Plan, the life of the designated joint annuitant, but in no event beyond
the time at which the pension benefit payable under the Retirement Plan is
no longer limited by reason of a provision of the Code.
In the event of the death of the Participant prior to commencement of
pension benefits under the Retirement Plan and this Plan, the Company shall
pay to the surviving spouse of the Participant, if any, a benefit for the
life of the surviving spouse equal to the difference between the amount of
monthly Pre-Retirement
<PAGE> 3
-3-
Survivor Benefit payable to the spouse under the Retirement Plan and the
amount of monthly Pre-Retirement Survivor Benefit which would have been
payable to the spouse under the Retirement Plan but for the limitation on
the Participant's pension benefits and/or Compensation taken into account
under the Retirement Plan by reason of a provision of the Code.
Anything contained in the foregoing to the contrary notwithstanding, in the
event that the Participant's pension benefit under the Retirement Plan
becomes subject to a "qualified domestic relations order" as defined in
Section 414(p) of the Code, the Committee shall have the sole and exclusive
discretionary power to determine the person or persons to whom, and the
amount and time or times at which, the Company shall pay benefits under
this Plan.
All payments under the Plan shall be subject to any required withholding of
Federal, state and local taxes.
5. SEPARATE ACCOUNTS. The Company shall maintain on its books separate
accounts for each Participant entitled to benefits under this Plan, to
which shall be credited annually such amounts as may be necessary or
desirable to provide the accrued benefits on an actuarial basis (utilizing
such assumptions and method as determined by the Committee), and which
shall be debited for the monthly benefit payments made under the Plan to or
on account of the Participant.
6. SOURCE OF PAYMENTS. All amounts payable under the Plan shall be paid by the
Company and Participating Subsidiaries from their general assets.
Notwithstanding the maintenance of separate accounts on its books as
described in Section 5 above, no Participant or any other person shall have
any right to or interest in any assets of the Company or any Participating
Subsidiary other than as an unsecured general creditor, and no separate
fund shall be established in which any Participant or other person has any
right or interest. The foregoing shall not prevent the Company or any
Subsidiary from establishing a fund from which to satisfy its payment
obligations under the Plan.
7. PLAN AMENDMENT AND TERMINATION. The Plan may be amended or terminated by
the Company at any time and in any manner prior to the happening of any
event in connection with or in anticipation of a Change of Control that
actually occurs, provided that no amendment or termination shall adversely
affect the rights and benefits of Participants with respect to compensation
deferred or benefits accrued pursuant to the Plan prior to such action.
After the happening of any event in connection with or in anticipation of a
Change of Control that actually occurs: (1) no amendment shall be made
which adversely affects the rights and benefits of Participants with
respect to compensation deferred or benefits accrued pursuant to the Plan
prior to such amendment; and (2) no amendment may be made with respect to
any provision of the Plan which becomes operative upon a Change of Control.
<PAGE> 4
-4-
8. NO RIGHT OF EMPLOYMENT. The adoption and operation of this Plan shall not
create in any Participant a right of continued employment with the Company
or any Subsidiary.
9. ADMINISTRATION. The Plan shall be administered by the Retirement Plan
Committee appointed by the Board of Directors of the Company (the
"Committee"), which shall have the discretionary power and authority to
construe and interpret the provisions of the Plan, to determine the
eligibility of employees to participate in the Plan and the amount and
timing of payment of any benefits due under the Plan, and to determine all
other matters in carrying out the intended purposes of the Plan. In
administering this Plan, including but not limited to considering appeals
from the denial of claims for benefits and issuing decisions thereon, rules
and procedures substantially similar to those set forth in the Retirement
Plan shall govern.
10. NO ASSIGNMENT OF INTEREST. The interest of any Participant under the Plan
may not be assigned, alienated, encumbered or otherwise transferred, and
shall not be subject to attachment, garnishment, execution or levy; and any
attempted assignment, alienation, encumbrance, transfer, attachment,
garnishment, execution or levy shall be void and of no force or effect.
11. CONSTRUCTION OF TERMS. Except as expressly provided in this Plan to the
contrary, capitalized terms referenced herein shall have the same meanings
as are applied to such terms in the Retirement Plan as in effect from time
to time.
THE GILLETTE COMPANY
Date: July 25, 1994 By: /s/ Robert E. Dicenso
--------------------- ------------------------------------
Title: Senior Vice President -
Personnel and Administration
[Reflects amendment executed
December 30, 1999]
<PAGE> 1
Exhibit 10(w)
THE GILLETTE COMPANY
SUPPLEMENTAL SAVINGS PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997)
(WITH AMENDMENTS ADOPTED THROUGH JANUARY 1, 2000)
1. PURPOSE. The Gillette Company Supplemental Savings Plan (the "Plan") has
been adopted by The Gillette Company (the "Company") to provide additional
benefits to certain employees of the Company and its Participating
Subsidiaries whose benefits under The Gillette Company Employees' Savings
Plan (the "Savings Plan") have been limited by the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), in order to provide
that the total benefits payable under this Plan and the Savings Plan shall
be approximately equal to the amount of benefits which would have accrued
under the Savings Plan for such employees had such limitations imposed by
the Code not been in effect.
The Plan document as amended and restated herein is a continuation of The
Gillette Company Supplemental Savings Plan for Contributions Prior to May
1, 1991 and The Gillette Company Supplemental Savings Plan for
Contributions After April 30, 1991.
The Plan is intended to constitute an "excess benefit plan" within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and an unfunded plan of deferred compensation
described in Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and in
Sections 3121(v)(2) and 3306(r)(2) of the Code.
2. ELIGIBLE EMPLOYEES. Employees eligible to participate in this Plan for any
calendar year shall be those employees of the Company and Participating
Subsidiaries who are eligible to participate in the Savings Plan and (i)
whose Annual Additions are limited for such year by reason of Section 415
of the Code, based on actual participation in the Savings Plan, or (ii) who
are determined by the Committee to be management or highly compensated
employees for such year and whose contributions or Compensation taken into
account under the Savings Plan are limited for such year by reason of
another provision of the Code, based on actual participation in the Savings
Plan.
3. PARTICIPANTS. Participants are eligible employees who elect to participate
in the Plan, at such time and in such manner prescribed by the Committee,
as of the next practicable payroll period by executing and delivering to
the Company a Participation and Salary Deferral Agreement, in a form
prescribed by the Committee. Participation in the Plan may be discontinued
by a Participant at any time, effective as of the next practicable payroll
period, by executing and delivering to the Company a revocation of such
Participation and Salary Deferral Agreement.
<PAGE> 2
-2-
Such revocation shall operate prospectively and shall have no effect on
prior deferrals under this Plan. An individual who has previously
participated in the Plan shall be considered a Participant for the purposes
of the Plan, other than Section (4)(a) and (b) below, until final
distribution is made of amounts credited to the individual's accounts under
the Plan. An eligible employee who was a participant in the Duracell Inc.
Supplemental Cash Balance Plan on December 31, 1998 and, pursuant to
section 9.2 of such plan, whose benefit under such plan was transferred to
this Plan, shall be a Participant as of January 1, 1999.
4. DEFERRALS; CREDITS TO ACCOUNTS.
(a) If any portion of Compensation from the Company which, but for the
limitations on contributions or Compensation contained in the
provisions of the Code set forth in Section 4(c) below, would be
contributed to the Savings Plan as Tax Deferred Savings and/or Taxed
Savings for a calendar year, a Participant may defer such Compensation
on a pre-tax basis until retirement or later elected date, termination
of employment or hardship. These deferred amounts (hereinafter
referred to as "Supplemental Savings") will be recorded in an account,
entitled the "Supplemental Savings Account," maintained for each
Participant on the books of the Company. A Participant shall always be
fully vested in amounts credited to the Supplemental Savings Account
maintained for such Participant.
(b) The Company Contribution that would have been made under the Savings
Plan in respect of each Participant's Compensation elected to be
contributed as Tax Deferred Savings and Taxed Savings for a calendar
year, which Compensation is instead deferred pursuant to Section 4(a)
above, shall not be made but an equal amount (hereinafter referred to
as "Supplemental Company Contributions") shall be recorded by the
Company in an account on its books, entitled the "Supplemental Company
Contribution Account," maintained for such Participant. Amounts
credited to a Participant's Supplemental Company Contribution Account
shall become vested at the same time the Participant becomes vested in
his Company Contributions under the Savings Plan.
(c) For the purposes of Section 4(a) above, the applicable provisions of
the Code are (i) the Section 415 limitations on Annual Additions, (ii)
the Section 402(g) limitation on Tax Deferred Savings, (iii) the
Section 401(a)(17) limitation on Compensation, and (iv) if and to the
extent determined by the Committee for a given year, the Section
401(k) and (m) limitations on contributions by and on behalf of Highly
Compensated Employees.
(d) As of January 1, 1999, there also shall be recorded in a Supplemental
Savings Account for each Participant who was a participant in the
Duracell Inc. Supplemental Cash Balance Plan on December 31, 1998 and,
pursuant to section 9.2 of such plan, whose benefit under such plan
was transferred to this
<PAGE> 3
-3-
Plan, an amount equal to the "Termination Value" of such Participant's
benefit under the Duracell Inc. Supplemental Cash Balance Plan. The
Participant shall always be fully vested in the amount credited to the
Supplemental Savings Account in accordance with this subsection.
(e) Notwithstanding any other provision of the Plan to the contrary, in
the event of a Change of Control, with respect to any Participant who
terminates employment within two years of the Change of Control under
circumstances entitling the Participant to separation benefits under
the Company's Change of Control Severance Program for Key Executives,
any of such separation benefits payable to the Participant as salary
continuation shall be treated as Compensation under this Plan (and not
the Savings Plan), and shall be subject to deferral as Supplemental
Savings and to Supplemental Company Contributions pursuant to this
Section 4.
5. ADDITIONAL CREDITS TO ACCOUNTS.
(a) Each Participant, upon electing to participate in the Plan, shall
designate the Investment Fund or Funds with respect to which such
Participant's Supplemental Savings shall be deemed invested, either on
a Participation and Salary Deferral Agreement or in such other manner
prescribed by the Committee for such purpose. The election shall
specify one or more of the Investment Funds available for investment
under the Savings Plan at such time, and shall be in whole percentage
increments of each such Investment Fund. A Participant's election
shall remain in effect with respect to all future Supplemental Savings
made on the Participant's behalf unless and until changed by the
Participant in accordance with Section 5(b) below.
If a Participant fails to make an election hereunder, all Supplemental
Savings made on behalf of the Participant shall be deemed invested in
the same Investment Fund or Funds in which the Participant's Tax
Deferred Savings are invested under the Savings Plan until the
Participant makes an election hereunder.
(b) A Participant may change the Investment Fund or Funds in which future
Supplemental Savings are deemed to be invested, at any time by
telephonic instruction to the Recordkeeper. Such change in election
shall be effective as of the close of the Business Day on which the
Recordkeeper receives such instruction or, if such instruction is
received after the close of a Business Day, as of the close of the
next following Business Day.
(c) Amounts recorded in the Supplemental Savings Account maintained for
each Participant shall be credited or debited with amounts equivalent
to gains or losses realized by the Investment Funds in which the
Participant elects to have his Supplemental Savings Account deemed
invested from time to time.
<PAGE> 4
-4-
Amounts recorded in the Supplemental Company Contribution Account
maintained for each Participant shall be credited or debited with
amounts equivalent to gains or losses realized by the Gillette Company
Stock Fund or, if applicable, the Investment Funds in which the
Participant elects to have his Supplemental Company Contribution
Account deemed invested from time to time.
(d) Subject to the limitations set forth in paragraphs (i) through (iv)
below, a Participant may elect at any time to have amounts credited to
his Accounts under the Plan deemed transferred from any Investment
Fund to any of the other Investment Funds, by designating the
percentage of the Accounts deemed invested in the transferring
Investment Fund to be transferred (in whole percentage increments) and
the percentage of such transferred amount to be deemed invested in the
receiving Investment Fund or Funds (in whole percentage increments). A
separate transfer election may be made with respect to each of the
Participant's Supplemental Savings Account and Supplemental Company
Contribution Account (if eligible pursuant to paragraph (iii) below).
The Participant shall make a transfer election by telephonic
instruction to the Recordkeeper. Such transfer election shall be
effective, and the applicable Investment Funds shall be valued for the
purpose of implementing such election, as of the close of the Business
Day on which the Recordkeeper receives such instruction or, if such
instruction is received after the close of a Business Day, as of the
close of the next following Business Day.
Elections by Participants under this Section 5(d) shall be limited in
the following respects:
(i) The minimum amount that may be deemed transferred from any
Investment Fund shall be $250 or, if less, the entire balance of
the Participant's Accounts deemed invested in such Investment
Fund.
(ii) Amounts deemed invested in a Stable Value Fund may not be
transferred directly to either a Money Market Fund or a Bond
Fund, but must first be transferred to either an Asset
Allocation Fund, Growth and Income Fund, Growth Fund,
International Fund or the Gillette Company Stock Fund and must
remain in such Investment Fund for a period of at least 90 days.
(iii) Elections to transfer amounts credited to Supplemental Company
Contribution Accounts from the Gillette Company Stock Fund may
be made only by Participants who have attained or will attain
age 50 in the year in which the election is made, Participants
who have become Totally and Permanently Disabled, and
Participants who have incurred a Termination of Employment on
account of Retirement.
<PAGE> 5
-5-
(iv) The Committee may in its discretion limit the number of transfers
which may be deemed made to or from any Investment Fund at any
time. The Committee also shall have the discretionary right to
suspend the availability of deemed transfers among any or all of
the Investment Funds at any time without prior notice to
Participants.
The provisions of this Section 5(d) also shall apply to former
employees for whom Accounts are maintained under the Plan on or after
January 1, 1997.
(e) Notwithstanding any other provision of the Plan to the contrary, in
the event of a Change of Control, the Trustee shall have the authority
to prescribe alternative investment media in which Participants'
accounts under this Plan shall be deemed invested; provided, however,
that (i) if Participants retain the right to designate the investment
media for deemed investment of their respective accounts, then the
investment media selected by the Trustee shall include at least an
Equity Index Fund and a Money Market Fund, and (ii) if Participants
are no longer entitled to designate the investment media for deemed
investment of their respective accounts, then all accounts under this
Plan shall automatically be deemed invested in the Money Market Fund
pending distribution in accordance with Section 6(d) below.
6. PAYMENTS FROM ACCOUNTS.
(a) Except as otherwise provided in this Section, no amounts shall be
payable under the Plan to any Participant while he is employed by the
Company or any Participating Subsidiary. While employed, a Participant
may request a payment of amounts credited to the Supplemental Savings
Account maintained for such Participant on the basis of an immediate
and heavy financial hardship for which no other resources are
available to the Participant and following the Participant's
withdrawal of all amounts then available for withdrawal from the
Savings Plan. Such request shall be subject to the approval of the
Committee or its delegate. Unless an election is made in accordance
with Section 6(b) or (c) below or unless Section 6(d) below applies,
all vested amounts credited to a Participant's accounts under the Plan
shall be paid in a single lump sum as soon as practicable following
the termination of the Participant's employment with the Company and
all Participating Subsidiaries, valued as of the close of such
termination date.
(b) A Participant may elect to defer payment of his accounts under the
Plan to any date subsequent to the date of the Participant's
termination of employment with the Company and all Participating
Subsidiaries, but not later than April 1 of the calendar year
following the calendar year in which the Participant attains age 70
1/2, provided (i) the Participant's termination of employment is on
account of retirement or total and permanent disability (such terms
having the same meanings as used under the Savings Plan), (ii) the
value of the Participant's
<PAGE> 6
-6-
vested account balance under the Plan as of the close of the date of
termination is at least $25,000, and (iii) the Participant's deferral
election is made at least twelve months prior to the date of such
termination. Such deferred payment shall be valued as of the close of
the elected payment date (or the next following business day), and
shall be made in a single lump sum as soon as practicable thereafter.
Pending final distribution, the Participant's accounts shall continue
to be credited or debited with amounts equivalent to gains and losses
realized by the Investment Funds in which the Participant's Accounts
are deemed invested from time to time.
(c) A Participant may elect to receive payment of his accounts under the
Plan in the form of annual installments of from two to ten years
commencing in the calendar year following the year of the
Participant's termination of employment with the Company and all
Participating Subsidiaries, provided (i) the Participant's termination
of employment is on account of retirement or total and permanent
disability (such terms having the same meanings as used under the
Savings Plan), (ii) the value of the Participant's vested account
balance under the Plan as of the close of the date of termination is
at least $25,000, and (iii) the Participant's installment payment
election is made at least twelve months prior to the date of such
termination. Each installment payment shall be valued as of the close
of the first business day in January of the year of commencement and
each year thereafter, and shall be paid as soon as practicable
thereafter. Pending final distribution, the remaining balance in the
Participant's accounts shall continue to be credited or debited with
amounts equivalent to gains and losses realized by the Investment
Funds in which the Participant's Accounts are deemed invested from
time to time.
(d) Prior to the occurrence of a Change of Control, in accordance with
rules prescribed by the Committee, a Participant making a deferral
election pursuant to Section 6(b) above or an installment election
pursuant to Section 6(c) above may provide for the revocation of such
deferral or installment election in the event of a Change of Control
and for the payment by the Company of the Participant's accounts under
the Plan as soon as practicable following the Change of Control.
In the event of a Change of Control, upon the termination of this Plan
or the Savings Plan or the amendment to this Plan or the Savings Plan
which amendment adversely affects the rights and benefits of
Participants, all unvested accounts under this Plan shall vest.
Notwithstanding anything contained in this Section 6 to the contrary,
in the event of a Change of Control, each Participant's vested
accounts shall be paid in accordance with his deferral or installment
payment election in force, or if no payment election has been made
prior to the Change of Control, as soon as practicable following the
Participant's termination of employment, unless the Participant has
provided in his payment election for its revocation upon a Change of
Control in which
<PAGE> 7
-7-
event payment of the Participant's vested accounts shall be paid as
soon as practicable following the Change of Control.
(e) In the event of the death of a Participant, whether or not then
employed by the Company or a Participating Subsidiary, all amounts
credited to the Participant's accounts under the Plan shall vest and
shall be paid to the Participant's estate in a single lump sum valued
as of the close of the date of death.
(f) All determinations of value of Participants' accounts under the Plan
shall be made in accordance with the relevant provisions of the
Savings Plan.
(g) All payments under the Plan shall be subject to any required
withholding of Federal, state and local taxes.
7. SOURCE OF PAYMENTS. All amounts payable under the Plan shall be paid by the
Company and Participating Subsidiaries from their general assets.
Notwithstanding the maintenance of records on its books as described in
Section 4 above, no Participant shall have any right to or interest in any
assets of the Company or any Participating Subsidiary other than as an
unsecured general creditor, and no separate fund shall be established in
which any Participant has any right or interest. The foregoing shall not
prevent the Company or any Subsidiary from establishing a fund from which
to satisfy its payment obligations under the Plan.
8. PLAN AMENDMENT AND TERMINATION. The Plan may be amended or terminated by
the Company at any time and in any manner prior to the happening of any
event in connection with or in anticipation of a Change of Control that
actually occurs, provided that no amendment or termination shall adversely
affect the rights and benefits of Participants with respect to Compensation
deferred or deducted pursuant to the Plan prior to such action. After the
happening of any event in connection with or in anticipation of a Change of
Control that actually occurs: (a) no amendment shall be made which
adversely affects the rights and benefits of Participants with respect to
Compensation deferred or deducted or benefits accrued pursuant to the Plan
prior to such amendment; (b) the Plan may not be terminated or amended in a
manner to provide less favorable prospective benefits unless all benefits
under this Plan which are unvested become immediately vested; and (c) no
amendment may be made with respect to any provision of the Plan which
becomes operative upon a Change of Control.
9. NO RIGHT OF EMPLOYMENT. The adoption and operation of this Plan shall not
create in any Participant a right of continued employment with the Company
or any Subsidiary.
10. ADMINISTRATION. The Plan shall be administered by the Savings Plan
Committee appointed by the Board of Directors of the Company (the
"Committee"), which shall
<PAGE> 8
-8-
have the discretionary power and authority to construe and interpret the
provisions of the Plan, to determine the eligibility of employees to
participate in the Plan and the amount and timing of payment of any
benefits due under the Plan, and to determine all other matters in carrying
out the intended purposes of the Plan. In administering this Plan,
including but not limited to considering appeals from the denial of claims
for benefits and issuing decisions thereon, rules and procedures
substantially similar to those set forth in the Savings Plan shall govern.
11. NO ASSIGNMENT OF INTEREST. The interest of any Participant under the Plan
may not be assigned, alienated, encumbered or otherwise transferred, and
shall not be subject to attachment, garnishment, execution or levy; and any
attempted assignment, alienation, encumbrance, transfer, attachment,
garnishment, execution or levy shall be void and of no force or effect.
12. CONSTRUCTION OF TERMS. Except as expressly provided in this Plan to the
contrary, capitalized terms referenced herein shall have the same meanings
as are applied to such terms in the Savings Plan as in effect from time to
time.
THE GILLETTE COMPANY
Date: October 28, 1996 By: /s/ Robert E. Dicenso
-------------------- --------------------------------------
Robert E. DiCenso
Senior Vice President - Personnel and
Administration
[Reflects amendments executed April 30,
1998, August 21, 1998 and December 30,
1999]
<PAGE> 1
Exhibit 10(y)
SUPPLEMENT TO CREDIT AGREEMENT
SUPPLEMENT TO CREDIT AGREEMENT dated as of March 24, 2000 among THE
GILLETTE COMPANY (the "Borrower"), the BANKS listed on the signature pages
hereof (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent
(the "Agent").
WITNESSETH:
WHEREAS, the parties hereto have heretofore entered into a 364-Day Credit
Agreement dated as of December 20, 1996 and amendments and restatements thereof
dated as of October 20, 1997, October 19, 1998 and October 18, 1999 (the
"Agreement");
WHEREAS, at the date hereof, there are no Loans outstanding under the
Agreement;
WHEREAS, pursuant to Section 2.19 of the Agreement Borrower has proposed to
increase the aggregate amount of the Commitments to $2,335,000,000 and the
parties hereto have agreed to such increase on the terms and conditions provided
herein; and
WHEREAS, the parties hereto desire to supplement the Agreement as set forth
herein to reflect the foregoing increase in Commitments;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
herein, each capitalized term used herein which is defined in the Agreement
shall have the meaning assigned to such term in the Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Agreement shall from and after the date hereof refer to the
Agreement as supplemented hereby. The term "Notes" defined in the Agreement
shall include from and after the date hereof the New Notes (as defined below).
SECTION 2. Increased Commitments. With effect from and including the date
this Supplement becomes effective in accordance with Section 8 hereof,
<PAGE> 2
the Commitment of each Bank shall be the amount set forth opposite the name of
such Bank on the attached Commitment Schedule, which shall replace the
existing Commitment Schedule.
SECTION 3. Representations and Warranties. The Borrower hereby represents
and warrants that as of the date hereof and after giving effect hereto:
(a) no Default has occurred and is continuing; and
(b) each representation and warranty of the Borrower set forth in the
Agreement after giving effect to this Supplement is true and correct as though
made on and as of such date.
SECTION 4. Governing Law. This Supplement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5. Counterparts; Effectiveness. This Supplement 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 Supplement shall become effective as of the date hereof when each of the
following conditions shall have been satisfied:
(i) receipt by the Administrative Agent of duly executed counterparts
hereof signed by the Borrower and by each Bank whose Commitment is
increased hereby (or, in the case of any party as to which an executed
counterpart shall not have been received, the Agent shall have received
telegraphic, telex or other written confirmation from such party of
execution of a counterpart hereof by such party);
(ii) receipt by the Administrative Agent of an opinion of such counsel
for the Borrower as may be acceptable to the Administrative Agent,
substantially to the effect of Exhibit E to the Agreement with reference to
this Supplement and the Agreement as supplemented hereby; and
(iii) receipt by the Administrative Agent of all documents it may
reasonably request relating to the existence of the Borrower, the corporate
authority for and the validity of the Agreement as supplemented hereby, and
any other matters relevant hereto, all in form and substance satisfactory
to the Administrative Agent;
provided that this Supplement shall not become effective or binding on any party
hereto unless all of the foregoing conditions are satisfied not later than the
date
2
<PAGE> 3
hereof. The Administrative Agent shall promptly notify the Borrower and the
Banks of the effectiveness of this Supplement, and such notice shall be
conclusive and binding on all parties hereto.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THE GILLETTE COMPANY
By /s/ Gian Camuzzi
----------------------------------
Name: GIAN CAMUZZI
Title: VICE PRESIDENT - TREASURER
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
----------------------------------
Name:
Title:
BANK ONE, NA (MAIN OFFICE
CHICAGO)
By
----------------------------------
Name:
Title:
ABN AMRO BANK N.V.
By
----------------------------------
Name:
Title:
<PAGE> 5
BANK OF AMERICA, N.A.
By
----------------------------------
Name:
Title:
CITIBANK, N.A.
By
----------------------------------
Name:
Title:
BANCA COMMERCIALE ITALIANA,
NEW YORK BRANCH
By
----------------------------------
Name:
Title:
DEUTSCHE BANK AG
NEW YORK BRANCH AND/OR
CAYMAN ISLANDS BRANCH
By
----------------------------------
Name:
Title:
By
----------------------------------
Name:
Title:
<PAGE> 6
MELLON BANK, N.A.
By
----------------------------------
Name:
Title:
WACHOVIA BANK N.A.
By
----------------------------------
Name:
Title:
FORTIS (USA) FINANCE L.L.C.
By
----------------------------------
Name:
Title:
By
----------------------------------
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent
By
----------------------------------
Name:
Title:
<PAGE> 7
COMMITMENT SCHEDULE
Bank Commitment
- --------------------------------------------------------------------------------
Morgan Guaranty Trust Company of New York $ 262,500,000
Bank One, NA (Main Office Chicago) $ 250,000,000
Bank of America, N.A. $ 200,000,000
Citibank, N.A. $ 200,000,00O
ABN AMRO Bank N.V. $ 200,000,000
Credit Suisse First Boston $ 200,000,000
BankBoston, N.A. $ 160,000,000
Banca Commerciale Italiana, $ 125,000,000
New York Branch
Deutsche Bank AG $ 125,000,000
New York Branch and/or
Cayman Islands Branch
Wachovia Bank, N.A. $ 125,000,000
Mellon Bank, N.A. $ 125,000,000
Royal Bank of Canada $ 100,000,000
Fortis (USA) Finance L.L.C. $ 62,500,000
Societe Generale $ 50,000,000
Banco Santander Central $ 50,000,000
Hispano, S.A.
State Street Bank and Trust Company $ 50,000,000
Paribas $ 50,0OO,000
--------------
Total $2,335,000,000
==============
<PAGE> 1
EXHIBIT 12
COMPUTATION OF THE RATIOS OF CURRENT ASSETS TO CURRENT
LIABILITIES FOR THE YEARS 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current Assets 5132 5440 4690
Current Liabilities 4180 3478 2641
---- ---- ----
1.23 1.56 1.78
</TABLE>
<PAGE> 1
EXHIBIT 13
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION
RESULTS OF OPERATIONS
NET SALES
================================================================================
Net sales in 1999 were $9.90 billion, 2% below those of 1998. Unfavorable
volume/mix of 1% reflected fourth-quarter trade destocking, primarily in the
blade and razor segment. Pricing contributed 3%, which was more than offset by
4% unfavorable exchange. Excluding the adverse effects of exchange and the 1998
divestiture of Jafra Cosmetics International, sales rose 3%. In 1998, sales
matched those of 1997. Volume/new products and prices contributed equally to a
3% sales increase, which was offset by unfavorable exchange rates. Excluding
unfavorable exchange and the divestiture of Jafra Cosmetics International, sales
growth was 5%.
Sales in North America grew 5% in 1999, due to successful new product
launches, including the Mach 3 shaving system, Duracell Ultra battery and Oral-B
CrossAction toothbrush. Sales in Latin America were 10% below those of 1998,
reflecting the negative effect of Brazil's recessionary environment on both
volume and exchange rates. Sales in Asia-Pacific were 13% above those of the
prior year, due to improved volume/mix in all business segments. Sales in
Western Europe declined 7% from the 1998 level. Sales in the AMEE region
(Africa, Middle East and Eastern Europe) were 2% below those of the prior year,
due to unfavorable exchange in certain markets and to the continuing weakness in
the Russian economy.
An analysis of sales by business segment follows.
% Increase/
(Millions of dollars) (Decrease)
---------------------------- -------------
1999 1998 1997 99/98 98/97
==============================================================================
Blades & Razors ............. $3,167 $ 3,028 $ 2,881 5 5
Toiletries .................. 1,062 1,214 1,410 (13) (14)
Duracell Products ........... 2,726 2,576 2,478 6 4
Oral-B Products ............. 616 642 624 (4) 3
Braun Products .............. 1,583 1,740 1,744 (9) --
Stationery Products ......... 743 856 924 (13) (7)
Other ....................... -- -- 1 -- --
---------------------------- ----------
$9,897 $10,056 $10,062 (2) --
============================ ==========
Blade and razor sales were 5% higher than those of the prior year, buoyed
by the Mach3 shaving system, which was launched in all major markets, except
Brazil, by year-end 1999. Sales in North America, reflecting the steady growth
of the Mach 3 system, were 14% above those of the year before. The Company's
trade inventory reduction initiative contributed to lower sales in Western
Europe and Latin America. Sales of blades and razors in 1998 were 5% above those
of a year earlier. This reflected gains in North America and rapid growth in
Western Europe, both driven by the launch of the Mach 3 shaving system. Results
for 1998 in other international markets were lower, due to broad-based negative
economic factors.
Toiletries sales were 13% below those of the prior year, due in part to the
divestiture of the Jafra business in April 1998. Excluding Jafra, toiletries
sales declined 7%, due to lower sales in Western Europe, Latin America and the
AMEE region. In 1998, toiletries sales fell 14%, due to the divestiture of
Jafra.
Sales of Duracell products increased 6% in 1999, reflecting 15% sales
growth in North America due to improved volume/mix, higher volume in the AMEE
region and better mix in the Asia-Pacific region. In 1998, sales of Duracell
products rose 4%, as the launch of Duracell Ultra batteries and price increases
contributed to higher sales in North America and Western Europe.
Sales of Oral-B products were 4% below those of a year earlier. Gains in
North America, driven by the success of the CrossAction toothbrush, were offset
by shortfalls in Latin America, due to the region's economic weakness. In 1998,
sales of Oral-B products were 3% higher than in 1997, as growth in North America
was partially offset by shortfalls in Asia-Pacific.
Braun sales were 9% below those of 1998, due to economic softness in
Western Europe and lower sales in North America. Sales in 1998 showed little
change from those of the year before, as gains in Western Europe and North
America countered shortfalls in Asia-Pacific.
Sales of stationery products decreased 13%, reflecting weakness in all
regions except Asia-Pacific. Sales in 1998 were 7% below those of 1997, due
primarily to the negative impact of the Asian financial crisis, while sales in
North America and Western Europe were virtually unchanged.
GROSS PROFIT
================================================================================
Gross profit was $6.19 billion in 1999, $6.20 billion in 1998 and $6.23 billion
in 1997. As a percent of sales, gross profit was 62.5% in 1999, compared with
61.7% in 1998 and 61.9% in 1997. Margin improvement in 1999 was due in part to
improved sales mix from increased sales of higher margin blade and razor
products, as well as to the introduction of higher margin Duracell and Oral-B
products. Additionally, margin improvements were realized in all segments, due
to the ongoing reorganization and realignment program, and in the blade and
razor and Duracell businesses, due to enhancements in manufacturing technology.
The slight decrease in 1998 was due to a less favorable product mix.
13
<PAGE> 2
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
================================================================================
Selling, general and administrative expenses amounted to 41.2% of sales,
compared with 38.6% and 38.8% in 1998 and 1997, respectively. In absolute terms,
these expenses increased 5% in 1999 and declined 1% in 1998.
In 1999, $606 million was spent on advertising, including sampling, and
$1,202 million on sales promotion, for a total of $1,808 million, an increase of
2% over the 1998 spending level. Spending in 1999 included the continued major
marketing effort behind the Mach3 shaving system and Duracell Ultra battery, as
well as increased support for other new products, such as the Oral-B CrossAction
toothbrush. This spending compares with 1998 amounts of $613 million, $1,165
million and $1,778 million, respectively. In 1997, these were $641 million,
$1,060 million and $1,701 million, respectively. The spending in 1999
represented 18.3% of sales, compared with 17.7% and 16.9% in 1998 and 1997,
respectively. Spending for research and development increased 6% in 1999,
compared with a decrease of 2% in 1998. Other marketing and administrative
expenses increased 8% in 1999 and declined 5% in 1998.
PROFIT FROM OPERATIONS
================================================================================
Profit from operations in 1999 was $2.11 billion, compared with $1.79 billion in
1998 and $2.32 billion in 1997. Profit from operations in 1998 was $2.32 billion
before a reorganization and realignment charge of $535 million. Profit from
operations in 1999 represented 21.3% of sales, compared with 23.1% in both 1998
and 1997, excluding the reorganization and realignment charge in 1998. The
decrease in operating profits in 1999 was due to higher marketing support of $30
million and an increased investment of $14 million in research and development
for new product programs. Further, the Company incurred $61 million of
incremental expenses related to the reorganization and realignment program,
primarily for equipment and employee relocation and employee training. These
expenses were not included as part of the original reserve, due to the
requirements of the accounting standard. In addition, a gain of $22 million on
the sale of land and a building was recognized in 1999.
In the following table, the reorganization and realignment charge is
included in Corporate/Other.
An analysis by business segment follows.
% Increase/
(Millions of dollars) (Decrease)
----------------------- ---------------
1999 1998 1997 99/98 98/97
================================================================================
Blades & Razors ......... $1,206 $1,153 $1,186 5 (3)
Toiletries .............. 85 54 124 57 (56)
Duracell Products ....... 606 597 526 2 13
Oral-B Products ......... 77 101 85 (24) 20
Braun Products .......... 154 291 304 (47) (4)
Stationery Products ..... 18 108 156 (83) (31)
---------------------------- --------------
2,146 2,304 2,381 (7) (3)
---------------------------- --------------
Corporate/Other ......... (41) (515) (57)
----------------------------
$2,105 $1,789 $2,324
============================
See Notes to Consolidated Financial Statements for segment and geographic area
data.
Blade and razor profits were 5% higher in 1999, due to the sales growth of
the Mach3 shaving system. Profits for the blade and razor segment were 3% lower
in 1998, due to start-up expenses for the Mach3 system.
Toiletries profits were 57% above those of the prior year, due to unmatched
new product launch expenses in 1998. In 1998, toiletries profits fell 56%,
reflecting the divestiture of Jafra, new product launch expenses and
significantly lower sales of White Rain hair care products.
The Duracell segment reported profits 2% above those of the previous year,
reflecting higher marketing expenses behind the geographic rollout of Duracell
Ultra batteries and higher promotional support in North America. Profits
advanced 13% in 1998, due to sales gains and the higher margin of Duracell Ultra
batteries in North America.
Oral-B profits declined 24%, due to marketing expenses supporting the
CrossAction toothbrush launch in North America and Europe. In 1998, profits grew
20%, due to improved product mix and cost containment.
Braun profits were $154 million in 1999, compared with $291 million in 1998,
primarily the result of lower revenue to cover fixed costs. In 1998, Braun
profits decreased 4%, due to lower sales of higher margin products and the Asian
financial crisis.
Profits for the stationery products segment were $18 million, compared with
$108 million in 1998. The decline was due to decreased sales, as well as to
unfavorable factory variances resulting from lower production levels. Profits in
1998 were 31% below those of the year before, due primarily to sales declines in
the Asia-Pacific region.
The Company is carefully reviewing those portions of the Braun and
stationery segments whose performance has lagged expectations. The Company will
look to prune, divest or discontinue any product category that doesn't clearly
demonstrate the potential for acceptable rates of growth.
14
<PAGE> 3
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION
NONOPERAT1NG CHARGES/INCOME
================================================================================
Net interest expense amounted to $129 million in 1999, $86 million in 1998 and
$69 million in 1997. Net interest expense rose in 1999, due to higher borrowings
to fund the Company's share repurchase program. The increase in 1998 was
attributable to greater borrowings to fund the Company's share repurchase
program, capital investments and its pension plans in Germany.
Net exchange losses of $35 million in 1999, which compared with 1998 and
1997 totals of $23 million and $18 million, respectively, were due primarily to
subsidiaries in highly inflationary countries. Translation adjustments resulting
from currency fluctuations of net foreign investments in non-highly inflationary
countries are accumulated in a separate section of stockholders' equity, as
noted on page 24. In 1999, the negative adjustment was $205 million, compared
with negative adjustments of $36 million in 1998 and $268 million in 1997,
reflecting significant exchange rate movements.
TAXES AND NET INCOME
================================================================================
The effective tax rate was 34.8% in 1999, compared with rates of 35.3% in 1998
and 35.8% in 1997.
Net income for 1999 was $1,260 million, compared with $1,081 million in 1998
and $1,427 million in 1997. Fully diluted net income per common share in 1999
was $1.14, compared with $.95 and $1.24 in 1998 and 1997, respectively.
Excluding the charge in 1998 for reorganization and realignment expenses, 1998
net income of $1,428 million matched that of 1997, and fully diluted net income
per common share of $1.25 rose 1% over the 1997 level.
FINANCIAL CONDITION
================================================================================
The Company's financial condition continued to be strong in 1999. Net debt
increased $1.35 billion during 1999, reflecting significant spending under the
Company's share repurchase and capital investment programs.
Net debt (total debt net of associated swaps, less cash and cash
equivalents) at December 31, 1999, amounted to $4.53 billion, compared with
$3.18 billion and $1.87 billion at December 31, 1998 and 1997, respectively.
The market value of Gillette equity was over $43 billion at the end of
1999, compared with $52 billion in 1998. The Company's book equity position
amounted to $3.06 billion at the end of 1999, compared with $4.54 billion at the
end of 1998 and $4.84 billion at the end of 1997. The decreases in book equity
in 1999 and 1998 were primarily due to the Gillette share repurchase program.
Net cash provided by operating activities in 1999 was $1.58 billion,
compared with $1.03 billion in 1998 and $1.27 billion in 1997. The current ratio
of the Company was 1.23 for 1999, compared with ratios of 1.56 for 1998 and 1.78
for 1997. The decrease in the 1999 current ratio was primarily attributable to
the Company's increased short-term debt.
Capital spending in 1999 amounted to $932 million, compared with $1.00
billion in 1998 and $973 million in 1997. Spending in all three years reflected
substantial investments in the blade and razor, Duracell and Braun product
segments.
In 1998, the Company made acquisitions in the Duracell segment for $100
million and sold the Jafra business for $200 million.
Share repurchase funding in 1999, net of proceeds received from the sale of
put options on Company stock, amounted to $1.95 billion, compared with $1.01
billion in 1998 and $26 million in 1997.
Maintaining its financial flexibility, the Company renewed its $2.0 billion
revolving credit facility, extending the expiration to October 2000. The Company
also has a $1.1 billion revolving credit agreement, which expires in December
2001. Both facilities are used by the Company to complement its commercial paper
program.
At year-end 1999, there was $2.41 billion outstanding under the Company's
commercial paper program, compared with $1.66 billion at the end of 1998 and
$780 million at the end of 1997.
During 1999, the Company issued Euro-denominated Notes for $343 million,
due February 2004, entered into a $325 million Euro-denominated debt obligation,
with redemption rights in March 2002, and entered into a $437 million
Euro-denominated debt obligation, with redemption rights in January 2003. During
1998, the Company issued Notes for $200 million, due August 2001, and for $300
million, due December 2006. The net proceeds were used to refinance existing
short-term debt associated with the Company's share repurchase program.
During 1999, both Standard & Poor's and Moody's maintained the Company's
current credit ratings. Standard & Poor's rates the Company's long-term debt at
AA, while Moody's rating is Aa3. The commercial paper rating is A1+ by Standard
& Poor's and P1 by Moody's.
Gillette will continue to have capital available for growth through both
internally generated funds and significant credit resources. The Company has
substantial unused lines of credit and access to worldwide financial market
sources for funds.
15
<PAGE> 4
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION
MARKET RISK
================================================================================
The Company is exposed to the impact of changes in interest rates and foreign
currency exchange rates. Gillette uses product sourcing and pricing as a natural
hedge to its foreign currency revenues and costs, thus limiting the Company's
profit exposure to foreign currency fluctuations. In addition, when considered
appropriate, the Company purchases foreign currency options to reduce the
exposure of the Company's earnings to currency fluctuations.
Gillette enters into currency and interest rate swaps, and currency
forwards, which effectively change the interest rate and currency of its
borrowings in order to optimize borrowing costs and reduce the Company's
exposure to currency fluctuations on its investments in foreign subsidiaries.
The swaps are entered into with contract amounts, interest rates and time
periods that match the underlying debt.
The Company uses swaps and options to hedge equity-linked compensation
liability exposures with terms that match the underlying exposures. The Company
sells equity put options to supplement open market purchases of its common
stock.
Gillette has established clear policies, procedures and internal accounting
and administrative controls governing the use of financial instruments to manage
its exposure to market risks. The Company does not purchase, sell or hold any
derivative financial instruments for trading, profit or speculative purposes.
Financial instrument positions are monitored using value-at-risk techniques.
Value at risk is estimated for each instrument based on historical volatility of
market rates and a 95% confidence level.
Based on the Company's overall evaluation of its market risk exposures from
all of its financial instruments at December 31, 1999 and 1998, a near-term
change in market rates would not materially affect the consolidated financial
position, results of operations or cash flows of the Company.
REORGANIZATION AND REALIGNMENT
================================================================================
On September 28, 1998, the Company announced a reorganization and realignment
program that resulted in a third-quarter charge to operations of $535 million
($347 million after taxes, or $.30 in net income per common share, fully
diluted).
The worldwide reorganization of operations will aid the Company in several
ways. The program was designed to strengthen the global business management
focus on core product categories, enhance the global focus on new product
development and manufacturing, achieve more effective leveraging of global
resources, respond to changing worldwide business conditions and improve the
Company's ability to rapidly expand product offerings to consumers through
worldwide trade channels.
This program budgeted for the closure of 14 factories, 12 warehouses and 30
office facilities, as well as for a reduction of approximately 4,700 employees
across all business segments, geographies and employee groups. Project activity
will be substantially complete at the end of the first quarter of 2000.
Details of the facility closures and employee reductions follow.
Plan Inception
through
Initial 1999 December 31,
Plan Activity 1999
================================================================================
Facility Closures
Factories ................. 14 9 11
Warehouses ................ 12 11 11
Office Facilities ......... 30 29 29
Employee Reductions ......... 4,700 2,830 3,450
At December 31, 1999, the carrying value of assets held for sale was $24
million.
Pretax cash outlays were $16 million in 1998 and $197 million in 1999 and
are estimated to be $139 million in 2000. Cash severance payments will extend
beyond the completion of program activities, due to the severance payment
deferral options available to terminated employees. In 1999, cash expenditures
for the program were greater than the cash benefits generated and were funded
from operations. In 1999, approximately 45% of the ongoing annual benefit
(estimated pretax rate of $200 million) was achieved.
The assets affected by this program include factories, warehouses and office
facilities, as well as manufacturing, distribution and office equipment.
Asset disposals began at the end of 1998 and will be substantially complete
at the end of the first quarter of 2000. Assets held for disposal, which could
be removed from use at any time, have been removed in stages to allow for an
orderly implementation of all actions.
Additional details are provided in the Notes to Consolidated Financial
Statements.
YEAR 2000
================================================================================
The Company's Year 2000 initiative was extremely successful. No interruptions to
Gillette business processes have occurred, and no material problem is expected.
Program spending was budgeted, expensed as incurred and not material.
16
<PAGE> 5
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION
EURO CONVERSION
================================================================================
A multi-functional Euro project team is responsible for ensuring the Company's
ability to operate effectively during the Euro transition phase and through
final Euro conversion. Total program costs are not expected to be material.
Among other factors, conversion to the Euro may affect competition between
markets, due to the existing pricing structure. The Company has developed
marketing and pricing strategies for implementation throughout the more open
European market. The Euro project team will further enhance these strategies as
part of the ongoing Euro initiative.
The Company is currently able to make and receive payments in Euros and will
convert financial and information technology systems to be able to use Euros as
its base currency in relevant markets prior to January 1, 2002.
Based on the analysis and actions taken to date, the Company does not expect
the Euro conversion to materially affect the consolidated financial position,
results of operations or cash flows of the Company.
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 the Company's 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 business in each of the Company's markets worldwide; competitive
product, advertising, promotional and pricing activity; dependence on the rate
of development and degree of acceptance of new product introductions in the
marketplace; the success of the Company's efforts to decrease the levels of
trade inventories and working capital and to address underperforming product
lines; and the difficulty of forecasting sales at certain times in certain
markets. Any such "forward-looking statements" also are 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, Cautionary Statement, in
the Company's most recent Quarterly Report on Form 10-Q.
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 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 on
page 18. 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, internal auditors and financial
officers of the Company, as it deems necessary, to review 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 policies relating to proper accounting and financial
reporting systems and the Company's relationship with the independent auditors.
In addition, the Committee is responsible for recommending the appointment of
the Company's independent auditors, subject to stockholder approval.
17
<PAGE> 6
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
INDEPENDENT AUDITORS' REPORT
[KPMG 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, 1999 and 1998, 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, 1999. 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, 1999 and 1998, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
Boston, Massachusetts
February 11, 2000
18
<PAGE> 7
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(Millions, except per share amounts)
Years Ended December 31, 1999, 1998 and 1997 1999 1998 1997
=========================================================================================================
<S> <C> <C> <C>
NET SALES .............................................. $9,897 $10,056 $10,062
Cost of Sales .......................................... 3,711 3,853 3,831
--------------------------------------------
GROSS PROFIT ........................................... 6,186 6,203 6,231
Selling, General and Administrative Expenses ........... 4,081 3,879 3,907
Reorganization and Realignment Expenses ................ -- 535 --
--------------------------------------------
PROFIT FROM OPERATIONS ................................. 2,105 1,789 2,324
Nonoperating Charges (Income)
Interest income ...................................... (7) (8) (9)
Interest expense ..................................... 136 94 78
Other charges - net .................................. 46 34 34
--------------------------------------------
175 120 103
--------------------------------------------
INCOME BEFORE INCOME TAXES ............................. 1,930 1,669 2,221
Income Taxes ........................................... 670 588 794
--------------------------------------------
Net Income ............................................. $1,260 $ 1,081 $ 1,427
============================================
NET INCOME PER COMMON SHARE, BASIC ..................... $ 1.15 $ .96 $ 1.27
NET INCOME PER COMMON SHARE, ASSUMING FULL DILUTION .... $ 1.14 $ .95 $ 1.24
Weighted average number of common shares outstanding
Basic ................................................ 1,089 1,117 1,118
Assuming full dilution ............................... 1,111 1,144 1,148
=========================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
19
<PAGE> 8
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Millions, except per share amount)
December 31, 1999 and 1998 1999 1998
=====================================================================================================
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ............................................... $ 80 $ 102
Trade receivables, less allowances: 1999 - $74; 1998 - $79 .............. 2,433 2,622
Other receivables ....................................................... 352 321
Inventories ............................................................. 1,621 1,595
Deferred income taxes ................................................... 317 517
Other current assets .................................................... 329 283
----------------------
TOTAL CURRENT ASSETS .................................................. 5,132 5,440
----------------------
PROPERTY, PLANT AND EQUIPMENT, at cost less accumulated depreciation ...... 3,667 3,472
INTANGIBLE ASSETS, less accumulated amortization .......................... 2,358 2,448
OTHER ASSETS .............................................................. 629 542
----------------------
$11,786 $11,902
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans payable ........................................................... $ 1,440 $ 981
Current portion of long-term debt ....................................... 358 9
Accounts payable and accrued liabilities ................................ 2,158 2,170
Income taxes ............................................................ 224 318
----------------------
TOTAL CURRENT LIABILITIES ............................................. 4,180 3,478
----------------------
LONG-TERM DEBT ............................................................ 2,931 2,256
DEFERRED INCOME TAXES ..................................................... 423 411
OTHER LONG-TERM LIABILITIES ............................................... 795 898
MINORITY INTEREST ......................................................... 38 39
CONTINGENT REDEMPTION VALUE OF COMMON STOCK PUT OPTIONS ................... 359 277
STOCKHOLDERS' EQUITY
8.0% Cumulative Series C ESOP Convertible Preferred, without par value,
Issued: 1999- .1 shares; 1998- .1 shares .............................. 85 9O
Unearned ESOP compensation .............................................. (4) (10)
Common stock, par value $1 per share
Authorized: 2,320 shares
Issued: 1999 - 1,364 shares; 1998 - 1,358 shares ...................... 1,364 1,358
Additional paid-in capital .............................................. 748 621
Earnings reinvested in the business ..................................... 6,147 5,529
Accumulated other comprehensive income
Foreign currency translation .......................................... (1,031) (826)
Pension adjustment .................................................... (30) (47)
Treasury stock, at cost:
1999 - 299 shares; 1998 - 253 shares .................................. (4,219) (2,172)
----------------------
3,060 4,543
----------------------
TOTAL STOCKHOLDERS' EQUITY ............................................ $11,786 $11,902
======================
=====================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
20
<PAGE> 9
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(Millions)
Years Ended December 31, 1999, 1998 and 1997 1999 1998 1997
========================================================================================================================
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ................................................................... $ 1,260 $ 1,081 $ 1,427
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for reorganization and realignment ................................ -- 535 --
Depreciation and amortization ............................................... 500 459 422
Other ....................................................................... (7) (46) (23)
Changes in assets and liabilities, excluding the effects of acquisitions
and divestitures:
Accounts receivable ....................................................... (5) (435) (340)
Inventories ............................................................... (91) (123) (157)
Accounts payable and accrued liabilities .................................. 65 72 29
Other working capital items ............................................... 108 (121) 80
Other noncurrent assets and liabilities ................................... (252) (142) (167)
Funding German pension plans .............................................. -- (252) --
-------------------------------------
Net cash provided by operating activities .............................. 1,578 1,028 1,271
-------------------------------------
INVESTING ACTIVITIES
Additions to property, plant and equipment ................................... (932) (1,000) (973)
Disposals of property, plant and equipment ................................... 127 88 59
Acquisition of businesses, less cash acquired ................................ -- (91) (3)
Sale of business ............................................................. -- 200 --
Other ........................................................................ 2 5 12
-------------------------------------
Net cash used in investing activities .................................. (803) (798) (905)
-------------------------------------
FINANCING ACTIVITIES
Purchase of treasury stock ................................................... (2,021) (1,066) (53)
Proceeds from sale of put options ............................................ 72 56 27
Proceeds from exercise of stock option and purchase plans .................... 149 126 210
Proceeds from long-term debt ................................................. 1,105 500 300
Decrease in long-term debt ................................................... -- (12) (6)
Increase (decrease) in loans payable ......................................... 484 708 (383)
Dividends paid ............................................................... (626) (552) (466)
Other ........................................................................ 42 9 9
-------------------------------------
Net cash used in financing activities .................................. (795) (231) (362)
-------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ........................................ (2) (2) (7)
NET CASH FROM HARMONIZATION PERIOD ............................................. -- -- 24
-------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............................... (22) (3) 21
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................................. 102 105 84
-------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ....................................... $ 80 $ 102 $ 105
=====================================
Supplemental disclosure of cash paid for:
Interest ................................................................... $ 126 $ 120 $ 101
Income taxes ............................................................... $ 463 $ 478 $ 451
Noncash investing and financing activities:
Acquisition of businesses
Fair value of assets acquired ............................................ $ -- $ 100 $ 3
Cash paid ................................................................ -- 91 3
-------------------------------------
Liabilities assumed .................................................... $ -- $ 9 $ --
=====================================
========================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
21
<PAGE> 10
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unearned Additional
Preferred ESOP Common Pain-in
(Millions, except per share amounts) Shares Compensation Stock Capital
=========================================================================================================================
<S> <C> <C> <C> <C>
Balance at December 31, 1996 ................................. $ 95 $(25) $1,343 $ 487
---------------------------------------------------------
Net income ................................................. -- -- -- --
Net results of year-end
harmonization ............................................. -- -- -- --
Foreign currency translation .............................. -- -- -- --
Other comprehensive income .............................. -- -- -- --
Comprehensive income ...................................
Dividends declared (per share $.43) ........................ -- -- -- --
Stock option and purchase plans
(9.7 shares) .............................................. -- -- 10 201
Conversion of Series C ESOP
preferred stock (.3 shares) ............................... (2) -- -- 1
Purchase of Gillette treasury stock
(1.2 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) 1,353 309
---------------------------------------------------------
Net income ................................................. -- -- -- --
Foreign currency translation .............................. -- -- -- --
Pension adjustment ........................................ -- -- -- --
Other comprehensive income .............................. -- -- -- --
Comprehensive income ...................................
Dividends declared (per share $.51) ........................ -- -- -- --
Stock option and purchase plans
(5.3 shares) .............................................. -- -- 5 125
Conversion of Series C ESOP
preferred stock (.4 shares) ............................... (3) -- -- 1
Purchase of Gillette treasury stock
(21.3 shares) ............................................. -- -- -- --
Proceeds from sale of put options .......................... -- -- -- 56
Contingent liability of put options ........................ -- -- -- 130
Earned ESOP compensation ................................... -- 7 -- --
---------------------------------------------------------
Balance at December 31, 1998 ................................. 90 (10) 1,358 621
---------------------------------------------------------
Net income ................................................. -- -- -- --
Foreign currency translation .............................. -- -- -- --
Pension adjustment ........................................ -- -- -- --
Other comprehensive income .............................. -- -- -- --
Comprehensive income
Dividends declared (per share $.59) ........................ -- -- -- --
Stock option and purchase plans
(5.7 shares) .............................................. -- -- 6 139
Conversion of Series C ESOP
preferred stock (.6 shares) ............................... (5) -- -- (2)
Purchase of Gillette treasury stock
(46.8 shares) ............................................. -- -- -- --
Proceeds from sale of put options .......................... -- -- -- 72
Contingent liability of put options ........................ -- -- -- (82)
Earned ESOP compensation ................................... -- 6 -- --
---------------------------------------------------------
Balance at December 31, 1999 ................................. $ 85 $ (4) $1,364 $ 748
=========================================================
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Other Total
Earnings Treasury Comprehensive Stockholders'
(Millions, except per share amounts) Reinvested Stock Income Equity
==============================================================================================================================
<S> <C> <C> <C> <C>
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)
Foreign currency translation ........................ -- -- (268) (268)
------- -------
Other comprehensive income ......................... -- -- (268) (268)
------- -------
Comprehensive income ............................. 1,070
-------
Dividends declared (per share $.43) .................. (486) -- -- (486)
Stock option and purchase plans
(9.7 shares) ........................................ -- -- -- 211
Conversion of Series C ESOP
preferred stock (.3 shares) ......................... -- 1 -- --
Purchase of Gillette treasury stock
(1.2 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
-------------------------------------------------------------------
Net income ........................................... 1,081 -- -- 1,081
Foreign currency translation ........................ -- -- (36) (36)
Pension adjustment .................................. -- -- (27) (27)
------- -------
Other comprehensive income ......................... -- -- (63) (63)
------- -------
Comprehensive income ............................. 1,018
-------
Dividends declared (per share $.51) .................. (573) -- -- (573)
Stock option and purchase plans
(5.3 shares) ........................................ -- -- -- 130
Conversion of Series C ESOP
preferred stock (.4 shares) ......................... -- 2 -- --
Purchase of Gillette treasury stock
(21.3 shares) ....................................... -- (1,066) -- (1,066)
Proceeds from sale of put options .................... -- -- -- 56
Contingent liability of put options .................. -- -- -- 130
Earned ESOP compensation ............................. -- -- -- 7
-------------------------------------------------------------------
Balance at December 31, 1998 ........................... 5,529 (2,172) (873) 4,543
-------------------------------------------------------------------
Net income ........................................... 1,260 -- -- 1,260
Foreign currency translation ........................ -- -- (205) (205)
Pension adjustment .................................. -- -- 17 17
------- -------
Other comprehensive income ......................... -- -- (188) (188)
------- -------
Comprehensive income ............................. 1,072
-------
Dividends declared (per share $.59) .................. (642) -- -- (642)
Stock option and purchase plans
(5.7 shares) ........................................ -- -- -- 145
Conversion of Series C ESOP
preferred stock (.6 shares) ......................... -- 7 -- --
Purchase of Gillette treasury stock
(46.8 shares) ....................................... -- (2,054) -- (2,054)
Proceeds from sale of put options .................... -- -- -- 72
Contingent liability of put options .................. -- -- -- (82)
Earned ESOP compensation ............................. -- -- -- 6
-------------------------------------------------------------------
Balance at December 31, 1999 ........................... $ 6,147 $(4,219) $(1,061) $ 3,060
===================================================================
==============================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
22
<PAGE> 11
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NATURE OF OPERATIONS
The Gillette Company is a global consumer products firm, with manufacturing
operations conducted at 54 facilities in 20 countries. Products are distributed
through wholesalers, retailers and agents in over 200 countries and territories.
Gillette is the world leader in male grooming, a category that includes blades,
razors and shaving preparations, and also in female grooming products, such as
wet shaving products and hair epilation devices. The Company is the world's top
seller of alkaline batteries, toothbrushes and oral care appliances, and
correction products.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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.
REVENUE RECOGNITION
================================================================================
Revenue from product sales is recognized when the goods are shipped and title
passes to the customer.
INVENTORIES
================================================================================
Inventories are stated at the lower of cost or market. Cost is determined on a
first-in, first-out (FIFO) basis.
INTANGIBLE ASSETS
================================================================================
Goodwill is amortized on the straight-line method, generally over a period of 40
years. The Company assesses the recoverability of goodwill by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. If the goodwill amortization cannot be fully recovered, the amount of
possible goodwill impairment is analyzed based on projected discounted future
operating cash flows or appraised values, depending on the nature of the asset.
Other Intangible Assets are amortized on the straight-line method over a period
of 10 to 40 years, predominantly 40 years.
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. Advertising spending was
$606 million in 1999, compared with $613 million in 1998 and $641 million in
1997. For interim reporting purposes, advertising expenses are charged to
operations as a percentage of sales, based on estimated sales and related
advertising expense for the full year.
RESEARCH AND DEVELOPMENT
================================================================================
Research and development costs, included in selling, general and administrative
expenses, amounted to $223 million in 1999, $209 million in 1998 and $212
million in 1997.
INCOME TAXES
================================================================================
The Company reinvests unremitted earnings of foreign operations and,
accordingly, does not provide for Federal income taxes that could result from
the remittance of such earnings. These unremitted earnings amounted to $2.8
billion and $3.7 billion at December 31, 1999 and 1998, respectively.
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.
23
<PAGE> 12
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The calculation of fully diluted net income per common share assumes conversion
of preferred stock and stock options into common stock, and also adjusts net
income for the effect of converting the preferred stock to common stock.
Net income and shares used to compute net income per share, basic and
assuming full dilution, are reconciled below.
(Millions) 1999 1998 1997
==============================================================================
Net income as reported............... $1,260 $1,081 $1,427
Less: Preferred stock dividends...... 4 4 4
-------------------------------------
Net income, basic.................... $1,256 $1,077 $1,423
Effect of dilutive securities:
Convertible preferred stock........ 5 5 4
-------------------------------------
Net income, assuming full dilution... $1,261 $1,082 $1,427
=====================================
Common shares, basic................. 1,089 1,117 1,118
Effect of dilutive securities:
Convertible preferred stock........ 12 12 12
Stock options...................... 10 15 18
-------------------------------------
Common shares, assuming full
dilution........................... 1,111 1,144 1,148
=====================================
RECLASSIFICATION OF PRIOR YEARS
================================================================================
Prior year financial statements have been reclassified to conform to the 1999
presentations.
EFFECT OF ACCOUNTING CHANGES
In 1998, the Financial Accounting Standards Board issued SFAS 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS 133 will be adopted on
January 1, 2001. Its impact on the consolidated financial statements is still
being evaluated, but is not expected to be material.
Also in 1998, the American Institute of Certified Public Accountants issued
SOP 98-5, "Reporting on the Costs of Start-Up Activities." The Company adopted
SOP 98-5 in 1999. It did not materially affect the consolidated financial
statements.
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.
(Millions) 1999 1998 1997
===============================================================================
Balance at beginning of year ............. $ (826) $(790) $(522)
Translation adjustments,
including the effect of hedging ........ (79) (86) (222)
Related income tax effect ................ (126) 50 (46)
-------------------------------
Balance at end of year ................... $(1,031) $(826) $(790)
===============================
Included in Other charges in the Consolidated Statement of Income are net
exchange losses of $35 million, $23 million and $18 million for 1999, 1998 and
1997, respectively.
SUPPLEMENTAL BALANCE SHEET INFORMATION
INVENTORIES
================================================================================
December 31, December 31,
(Millions) 1999 1998
================================================================================
Raw materials and supplies.......... $ 229 $ 244
Work in process..................... 192 232
Finished goods...................... 1,200 1,119
-----------------------------------
$1,621 $1,595
===================================
PROPERTY, PLANT AND EQUIPMENT
================================================================================
================================================================================
Land................................ $ 68 $ 69
Buildings........................... 743 745
Machinery and equipment............. 5,151 4,891
-----------------------------------
5,962 5,705
Less accumulated depreciation....... 2,295 2,233
-----------------------------------
$3,667 $3,472
===================================
Interest on funds used to finance construction of significant additions to
tangible property and equipment is capitalized and amortized over the remaining
life of the related asset. The capitalized interest is recorded as part of the
asset to which it relates and will be amortized over the asset's estimated
useful life. During 1999, 1998 and 1997, interest cost was capitalized in the
amounts of $13 million, $18 million and $10 million, respectively.
24
<PAGE> 13
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTANGIBLE ASSETS
================================================================================
December 31, December 31,
(Millions) 1999 1998
================================================================================
Goodwill ($44 not subject
to amortization)..................... $2,052 $2,068
Other intangible assets................ 1,204 1,194
----------------------------
3,256 3,262
Less accumulated amortization.......... 898 814
----------------------------
$2,358 $2,448
============================
Other intangible assets consists primarily of capitalized amounts related to
trademarks, trade names, patents and other similar items.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
================================================================================
================================================================================
Accounts payable....................... $ 513 $ 606
Advertising and sales promotion........ 451 391
Payroll and payroll taxes.............. 169 175
Other taxes............................ 98 85
Dividends payable on
common stock......................... 157 141
Reorganization/realignment expense..... 139 308
Miscellaneous.......................... 631 464
----------------------------
$2,158 $2,170
============================
OTHER LONG-TERM LIABILITIES
================================================================================
================================================================================
Pensions............................... $ 207 $ 242
Postretirement medical................. 296 305
Incentive plans........................ 166 183
Reorganization/realignment expense..... -- 38
Miscellaneous.......................... 126 130
----------------------------
$ 795 $ 898
============================
DEBT
LOANS PAYABLE
================================================================================
================================================================================
Commercial paper (6.0% and 5.4%)....... $ 2,408 $ 1,657
Payable to banks (6.3% and 3.8%)....... 132 424
Amount reclassified as long-term
debt................................. (1,100) (1,100)
---------------------------
$ 1,440 $ 981
===========================
LONG-TERM DEBT
================================================================================
December 31, December 31,
(Millions) 1999 1998
================================================================================
Commercial paper....................... $1,100 $1,100
5.00% Notes due 2006................... 300 300
5.75% Notes due 2005................... 200 200
3.25% Euro notes due 2004.............. 302 --
1.30% Synthetic Euro obligation
due 2003............................. 429 --
6.25% Notes due 2003................... 150 150
1.00% Synthetic Euro obligation
due 2002............................. 302 --
5.75% Notes due 2001................... 200 200
6.00% Notes due 2000................... 300 300
8.03% Guaranteed ESOP notes due
through 2000......................... 5 13
Other, multicurrency borrowings........ 1 2
--------------------------
Total long-term debt................... 3,289 2,265
Less current portion................... 358 9
--------------------------
Long-term portion...................... $2,931 $2,256
==========================
The Company's commercial paper program is supported by its revolving credit
facilities. The Company has a $2.0 billion revolving bank credit agreement that
expires in October 2000 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 .039% per annum. At year-end 1999 and 1998, there were no
borrowings under such agreements.
Based on the Company's intention and ability to maintain its $1.1 billion
revolving credit agreement beyond 2000, $1.1 billion of commercial paper
borrowing was classified as long-term debt at December 31, 1999, and December
31, 1998.
Aggregate maturities of total long-term debt for the five years subsequent
to December 31, 1999, are $358 million in 2000, $1,364 million in 2001, $291
million in 2002, $474 million in 2003 and $302 million in 2004. Those maturities
include the amortization of a portion of the synthetic Euro obligations.
Unused lines of credit, including the revolving bank credit agreements,
amounted to $3.9 billion at December 31, 1999.
25
<PAGE> 14
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are summarized
below.
Notional Carrying Fair
(Millions) Amount Amount Value
================================================================================
DECEMBER 31, 1999
Long-term investments ................. $ 188 $ 188
Long-term debt ........................ (3,289) (3,186)
Derivative instruments:
Debt-related contracts .............. $ 2,196 140 93
Currency options .................... 119 1 1
Equity contracts .................... 56 1 1
Commodity contracts ................. 29 -- 5
DECEMBER 31, 1998
Long-term investments ................. $ 177 $ 177
Long-term debt ........................ (2,265) (2,277)
Derivative instruments:
Debt-related contracts .............. $ 1,881 7 16
Currency options .................... 111 4 4
Equity contracts .................... 62 15 15
Commodity contracts ................. 22 -- (4)
Notional amounts are a unit of measure specified in a derivative instrument.
The carrying amounts and fair values of the debt-related contracts include
interest receivables of $24 million and $26 million at December 31, 1999 and
1998, respectively. 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 rates currently offered to the Company for debt of the same remaining
maturities. The estimated fair values of interest rate, foreign currency, equity
and commodity contracts are calculated based on market rates. These values
represent the estimated amounts the Company would receive or pay to terminate
agreements, taking into consideration current market rates and the current
creditworthiness of the counterparties.
The Company uses derivative financial instruments primarily to optimize
borrowing costs under its financing strategy and to a lesser extent to hedge
certain foreign currency, equity-linked employee compensation and commodity
exposures. These contracts hedge transactions and balances for periods
consistent with their underlying exposures and do not constitute investments
independent of these exposures. The Company does not hold or issue financial
instruments for trading purposes.
The Company enters into derivative contracts that effectively change the
interest rate and currency of its borrowings. At December 31, 1999 and 1998,
interest and currency swaps converted $1.15 billion of U.S. dollar fixed rate
debt into floating rate U.S. dollar obligations of $800 million and $800
million, and floating rate Euro obligations of $282 million and $328 million,
respectively. The terms of the swaps match the terms of the underlying debt. The
floating interest rate payments under these swaps are based on three-month
LIBOR rates. In addition, at December 31, 1999 and 1998, forward contracts
converted $1,046 million and $731 million, respectively, of U.S. dollar
commercial paper to principally Euro borrowings of $998 million and $786
million, respectively. In 2000, $1,033 million of forwards mature and in 2001,
$13 million mature. Interest to be paid or received on these contracts currently
adjusts interest expense.
The currency swaps and forwards are designated as hedges, and effectively
hedge the Company's net investment in foreign subsidiaries. Resulting currency
gains and losses on these contracts are reported as foreign currency translation
adjustments in accumulated other comprehensive income. The Company's total debt
after the effects of the associated contracts, which were receivables of $116
million at December 31, 1999, and payables of $33 million at December 31, 1998,
follows.
1999 1998
---------------- ------------------
(Millions) Amount Rate Amount Rate
===============================================================================
U.S. dollar floating rate ........ $2,203 6.0% $1,786 5.2%
U.S. dollar fixed rate ........... 5 8.0 13 8.0
Euro floating rate ............... 1,127 3.9 1,316 3.3
Euro fixed rate .................. 1,033 1.8 -- --
Other floating rate .............. 245 3.1 164 2.6
---------------- ------------------
$4,613 4.4% $3,279 4.3%
================ ==================
The Company purchases foreign currency put options to assist in protecting
its U.S. dollar earnings. The initial amounts paid are reflected in other
current assets. Changes in fair values of outstanding contracts are reflected in
profit from operations. The option outstanding at December 31, 1999, is
denominated in Yen and expires in December 2000. The option outstanding at
December 31, 1998, was denominated in Yen and expired unexercised in 1999.
The Company has also fixed the cost of certain employee compensation
expenses linked to its stock price by entering into equity swap and option
contracts that mature in 2000, 2002 and 2003. Outstanding contracts are stated
at fair value. Changes in fair value are reflected in profit from operations and
offset changes in the value of the underlying liabilities.
26
<PAGE> 15
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition, the Company enters into commodity swaps to fix the price of a
portion of certain raw materials used in the manufacturing process. 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 commodity swaps as of year-end 1999 mature through December 2000.
The equity put options associated with the share repurchase program are
described separately in the Share Repurchase Program note.
Several major international financial institutions are counterparties to the
Company's financial instruments. It is Company practice to monitor the financial
standing of the counterparties and to limit the amount of exposure with any one
institution. The Company may be exposed to credit loss in the event of
nonperformance by the counterparties to these contracts, but does not anticipate
such nonperformance.
With respect to trade receivables, concentration of credit risk is limited,
due to the diverse geographic areas covered by Gillette operations. Any possible
bad debt loss has been provided for in the allowance for doubtful accounts.
COMMITMENTS AND CONTINGENCIES
Minimum rental commitments under noncancellable leases, primarily for office and
warehouse facilities, are $72 million in 2000, $56 million in 2001, $48 million
in 2002, $42 million in 2003, $34 million in 2004 and $37 million for years
thereafter. Rental expense amounted to $100 million in 1999, $103 million in
1998 and $93 million in 1997.
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, advertising, 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.
BUSINESS COMBINATIONS AND DIVESTITURES
In 1998, the Company sold its Jafra skin care and color cosmetics business for
$200 million. The transaction did not have a material impact on financial
results.
Also during 1998, the Company acquired two businesses in the Duracell
segment, in South Korea and India, for an aggregate purchase price of $100
million. These two acquisitions have been accounted for by the purchase method
of accounting. Their results of operations since acquisition, 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.
REORGANIZATION AND REALIGNMENT
On September 28, 1998, the Company announced a reorganization to realign its
worldwide operations. In connection with the reorganization and realignment, and
in accordance with EITF issue 94-3 and SFAS 121, the Company recorded in the
third quarter of 1998 a charge to operating expenses of $535 million ($347
million after taxes, or $.30 in net income per common share, fully diluted).
There have been no material modifications to the scope of the original plan. The
program will be substantially complete at the end of the first quarter of 2000.
Spending levels for specific program activities have varied from original
estimates. Estimated spending has decreased for severance payments and increased
for distributor buyout costs, as shown in the table below. Total program
spending, however, is expected to remain unchanged from the initial provision of
$535 million. Employee-related expenses for severance payments and other
benefits, which were not treated separately at the program's inception, have
been reclassified in the initial provision.
Details of the reorganization and realignment charge follow. The other
benefits portion of employee-related expenses, shown below, includes fringe
benefits, outplacement fees and special termination benefits related to
pensions.
Utilized
Initial ------------ Other
(Millions) Provision 1998 1999 Changes Balance
================================================================================
Employee-related expenses
Severance payments .................. $265 $ 12 $129 $(16) $108
Other benefits ...................... 120 39 60 -- 21
Asset impairments
Property, plant and equipment ....... 122 122 -- -- --
Other assets ........................ 13 13 -- -- --
Distributor buyout
costs ............................. 15 3 18 16 10
-------------------------------------
Total ................................. $535 $189 $207 $ -- $139
=====================================
The effect of suspending depreciation for impaired assets was $9 million in
1999 and $3 million in 1998.
In accordance with EITF issue 94-3, certain expenses related to the program,
primarily employee and equipment
27
<PAGE> 16
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
relocation, were not provided for in the reorganization and realignment reserve.
Those expenses, which are therefore recognized as incurred, amounted to $61
million in 1999. In addition, a gain of $22 million on the sale of land and a
building was recognized in 1999. Both the expenses and the gain are included in
selling, general and administrative expenses.
INCOME TAXES
Deferred taxes result from the different treatments accorded financial statement
accounting and tax accounting, known as temporary differences. The Company
records the tax effect of these temporary differences as deferred tax assets,
which generally may be used as a tax deduction or credit in future periods, and
as deferred tax liabilities, for which the Company receives a tax deduction that
is not as yet recorded in the income statement.
Income before income taxes and income tax expense are summarized below.
(Millions) 1999 1998 1997
================================================================================
Income before income taxes
United States ....................... $1,127 $ 1,026 $1,119
Foreign ............................. 803 643 1,102
----------------------------------
Total income before
income taxes ........................ $1,930 $ 1,669 $2,221
==================================
Current tax expense
Federal ............................. $ 183 $ 340 $ 247
Foreign ............................. 246 330 311
State ............................... 22 58 59
Deferred tax expense
Federal ............................. 135 (56) 77
Foreign ............................. 83 (76) 87
State ............................... 1 (8) 13
----------------------------------
Total income tax expense .............. $ 670 $ 588 $ 794
==================================
A reconciliation of the statutory Federal income tax rates to the Company's
effective tax rate follows.
1999 1998 1997
================================================================================
Statutory Federal tax rate ................. 35.0% 35.0% 35.0%
Goodwill amortization ...................... .3 .3 .3
Rate differential on
foreign income ........................... 2.0 1.6 .4
Effect of foreign currency
translation .............................. .5 .2 .1
State taxes (net of
Federal tax benefits) .................... .8 1.9 2.1
Benefit of foreign tax credits ............. (3.5) (3.3) (3.9)
Other differences .......................... (.3) (.4) 1.8
---------------------------
Effective tax rate ......................... 34.8% 35.3% 35.8%
===========================
The components of deferred tax assets and deferred tax liabilities are
shown below.
1999 1998
----------------------- ---------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
(Millions) Assets Liabilities Assets Liabilities
==============================================================================
CURRENT
Advertising and sales
promotion ................ $ 19 $ -- $ 23 $ --
Benefit plans .............. 52 -- 81 --
Merger-related costs and
certain realignment
programs ................. 67 -- 161 --
Miscellaneous reserves
and accruals ............. 62 -- 81 --
Operating loss and credit
carryforwards ............ 14 -- 11 --
Other ...................... 103 -- 160 --
------------------- ----------------
Total current .............. 317 $ -- $ -- 517
------------------- ----------------
Net current ................ $317 $517
==== ====
NONCURRENT
Benefit plans .............. $111 $ -- $180 $ --
Intangibles ................ -- 195 -- 210
Merger-related costs and
certain realignment
programs ................. -- -- 13 --
Operating loss and credit
carryforwards ............ 51 -- 31 --
Property, plant and
equipment ................ -- 326 -- 385
Other ...................... -- 45 -- 11
------------------- ----------------
Total noncurrent ........... 162 566 224 606
------------------- ----------------
Valuation allowance ........ $(19) $ (29)
==== ====
Net noncurrent ............. $423 $411
==== ====
TOTAL
Net deferred tax
assets/liabilities ....... $106 $106
==== ====
28
<PAGE> 17
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PENSION PLANS AND OTHER RETIREE BENEFITS
The Company has various retirement programs, including defined benefit, defined
contribution and other plans, that cover most employees worldwide. In 1998, the
Company began funding its pension plans in Germany by contributing $252 million
to a newly established pension trust. Other retiree benefits are health care and
life insurance benefits provided to eligible retired employees, principally in
the United States. The components of benefit expense follow.
<TABLE>
<CAPTION>
Pension Benefits Other Retiree Benefits
-------------------------------- ------------------------------
(Millions) 1999 1998 1997 1999 1998 1997
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET BENEFIT EXPENSE:
Service cost-benefits earned .................... $ 69 $ 67 $ 64 $ 6 $ 6 $ 5
Interest cost on benefit obligation ............. 116 123 115 16 17 17
Estimated return on assets ...................... (166) (157) (118) (4) (3) (2)
Net amortization ................................ 13 6 6 (7) (7) (8)
Plan curtailments and other ..................... (7) -- -- -- -- --
--------------------------------- -----------------------------
25 39 67 11 13 12
Defined contribution plans ...................... 6 2 4 -- -- --
Other foreign defined benefit plans ............. 9 10 8 -- -- --
--------------------------------- -----------------------------
Total benefit expense ............................. $ 40 $ 51 $ 79 $11 $13 $12
================================= =============================
</TABLE>
The funded status of the Company's principal defined benefit and other retiree
benefit plans and the amounts recognized in the balance sheet at December 31
follow.
<TABLE>
<CAPTION>
Pension Benefits Other Retiree Benefits
------------------- ----------------------
(Millions) 1999 1998 1999 1998
====================================================================================================================
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Balance at beginning of year ................................. $2,022 $1,790 $ 240 $ 248
Benefit payments ............................................. (97) (105) (15) (14)
Service and interest costs ................................... 185 191 22 23
Amendments ................................................... 5 48 21 1
Actuarial (gains) losses ..................................... 16 88 (1) (16)
Plan settlements and other items ............................. (99) -- -- --
Currency translation adjustment .............................. (76) 10 (6) (2)
--------------------- ----------------------
Balance at end of year ....................................... 1,956 2,022 261 240
CHANGE IN FAIR VALUE OF PLAN ASSETS:
Balance at beginning of year ................................. 1,957 1,540 36 33
Actual return on plan assets ................................. 275 204 5 6
Employer contribution ........................................ 39 299 -- (3)
Benefit payments ............................................. (78) (86) -- --
Plan settlements ............................................. (91) -- -- --
Currency translation adjustment .............................. (50) -- -- --
--------------------- ----------------------
Balance at end of year ....................................... 2,052 1,957 41 36
Plan assets greater (less) than benefit obligation ............ 96 (65) (220) (204)
Unrecognized prior service cost and transition obligation ..... 50 57 19 (1)
Unrecognized net loss (gain) .................................. (56) 54 (95) (100)
Minimum liability adjustment included in:
Intangible assets ............................................ (13) (17) -- --
Stockholders' equity ......................................... (30) (47) -- --
--------------------- ----------------------
Net prepaid (accrued) benefit cost included in consolidated
balance sheet ................................................. $ 47 $ (18) $(296) $(305)
===================== ======================
</TABLE>
29
<PAGE> 18
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The values at December 31 for pension plans with accumulated benefit
obligations in excess of plan assets follow.
(Millions) 1999 1998
============================================================
Projected benefit obligation................ $516 $570
Accumulated benefit obligation.............. 453 506
Fair value of plan assets................... 283 304
The weighted average assumptions used in determining related obligations of
pension benefit plans are shown below.
(Percent) 1999 1998 1997
================================================================================
Discount rate................................... 6.8 6.3 7.1
Long-term rate of return on assets.............. 9.1 8.6 9.3
Rate of compensation increases.................. 4.7 3.9 4.9
The weighted average assumptions used in determining related obligations of
other retiree benefit plans are shown below.
(Percent) 1999 1998 1997
================================================================================
Discount rate................................... 7.5 6.5 7.0
Long-term rate of return on assets.............. 10.0 9.0 9.0
The assumed health care cost trend rate for 2000 is 6.0%, decreasing to
5.0% in 2001. A one percentage point increase in the trend rate would have
increased the accumulated postretirement benefit obligation by 13%, and interest
and service cost by 18%. A one percentage point decrease in the trend rate would
have decreased the accumulated postretirement benefit obligation by 10%, and
interest and service cost by 14%.
The Employee Stock Ownership Plan (ESOP) was established to assist Gillette
employees in financing retiree medical costs. ESOP shares allocated to eligible
participants reduce the Company's obligations over the period of allocation.
Account balances are assumed to have an annual yield of 12%. A retiree health
benefits account within the Company's principal domestic pension plan will also
be used to pay these costs.
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 80 common shares at $7.536 per share. At
December 31, 1999, 141,254 Series C shares were outstanding, of which 135,500
shares were allocated to employees and the remaining shares were held in the
ESOP trust for future allocations. The Series C shares are equivalent to
11,300,290 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 Company has the option and the intention to redeem Series C stock
solely in common stock.
The ESOP purchased the Series C shares with borrowed funds guaranteed by
the Company. Gillette 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 follow.
(Millions) 1999 1998 1997
========================================================================
Compensation expense........................... $- $ 2 $ 3
Cash contributions and dividends paid.......... 9 10 11
Principal payments............................. 8 9 9
Interest payments.............................. 1 1 2
30
<PAGE> 19
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STOCK COMPENSATION PLANS AND CAPITAL STOCK
At December 31, 1999, the Company had stock-based compensation plans described
below that include the pre-merger plans of Duracell.
STOCK OPTION PLANS
================================================================================
Stock option plans authorize the granting of options on shares of the Company's
common stock to selected key employees, including 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. For options granted after April 16, 1997, one-third of the
options become vested on each of the first three anniversaries of the stock
option award 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, net income would
have been reduced by $146 million in 1999, $100 million in 1998 and $88 million
in 1997. The impact of this charge on net income per common share, both basic
and assuming full dilution, would have been $.13, $.09 and $.08 in 1999, 1998
and 1997, respectively. The weighted average fair value of options granted was
$14.64 in 1999, $14.12 in 1998 and $12.92 in 1997. 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 1999, 1998 and 1997.
1999 1998 1997
================================================================================
Risk-free interest rates.......... 6.1% 5.7% 6.6%
Expected option lives............. 4.7 years 4.5 years 4.6 years
Expected volatilities............. 30.4% 19.2% 19.2%
Expected dividend yields.......... 1.3% .9% .9%
A summary of the status of the Company's stock option plans at December 31,
1999, 1998 and 1997, follows.
Weighted
Average
Options Exercise
(Thousands) Price
================================================================================
Outstanding at December 31, 1996 ............... 38,536 $18.71
Granted ........................................ 10,586 47.15
Exercised ...................................... (10,094) 15.59
Cancelled ...................................... (200) 37.49
-----------------------
Outstanding at December 31, 1997 ............... 38,828 $27.18
Granted ........................................ 10,984 56.29
Exercised ...................................... (5,635) 17.53
Cancelled ...................................... (518) 48.59
-----------------------
Outstanding at December 31, 1998 ............... 43,659 $35.49
Granted ........................................ 15,322 45.19
Exercised ...................................... (5,745) 18.94
Cancelled ...................................... (1,280) 51.52
-----------------------
Outstanding at December 31, 1999 ............... 51,956 $39.79
=======================
The number of outstanding options that were exercisable at year-end 1999,
1998 and 1997 were 26,962 thousand, 26,321 thousand and 28,334 thousand,
respectively.
The following table summarizes information about fixed stock options
outstanding at December 31, 1999.
<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------------------------ --------------------------
Weighted
Average
Remaining Weighted Weighted
Range of Years of Average Average
Exercise Options Contractual Exercise Options Exercise
Prices (Thousands) Life Price (Thousands) Price
==================================================================== ==========================
<S> <C> <C> <C> <C> <C>
$ 4-14 3,317 2.6 $10.88 3,317 $10.88
16-21 7,754 5.0 19.40 7,754 19.40
21-30 6,079 6.3 29.11 6,079 29.11
35-48 24,467 8.8 45.87 6,429 46.97
50-60 10,339 8.5 56.25 3,383 56.35
------------------------------------------- ---------------------
$ 4-60 51,956 7.5 $39.79 26,962 $31.75
=========================================== =====================
</TABLE>
STOCK EQUIVALENT UNIT PLAN
================================================================================
Eligible Gillette employees participate in the Stock Equivalent Unit Plan, which
provides for awards of basic stock units to key employees. 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
$10 million in 1999, $9 million in 1998 and $21 million in 1997.
31
<PAGE> 20
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHARE REPURCHASE PROGRAM
================================================================================
On September 18, 1997, the Company's Board of Directors authorized a share
repurchase program to buy up to 50 million shares in the open market or in
privately negotiated transactions, depending on market conditions and other
factors. This repurchase was completed in July 1999. On June 17, 1999, the
Company's Board of Directors authorized an expansion of the share repurchase
program from 50 million to 75 million shares, with a subsequent expansion on
October 21, 1999, from 75 million to 100 million shares.
In 1999, the Company repurchased 47 million shares in the open market for
$2,054 million. From the inception of the program through December 31, 1999, the
Company repurchased 69 million shares in the open market for $3,173 million. The
Company plans to purchase the remaining authorized shares over the next 12 to 15
months in the open market or in privately negotiated transactions, depending on
market conditions and other factors.
In 1999, the Company continued to sell equity put options as an enhancement
to its ongoing share repurchase program and earned $72 million in premiums.
These options provide the Company with an additional opportunity to supplement
open-market purchases of its common stock if the options expire "in the money"
(the option strike price is greater than the closing price for Gillette common
stock on the expiration date). In addition, the premiums received are a source
of funding for share purchases. The options are exercisable only on the last day
of their term. The Company, at its discretion, may elect to settle by paying net
cash or by purchasing the shares. To date, the Company has purchased shares upon
settlement and intends to continue this practice.
The option prices were based on the market value of the Company's stock at
the date of issuance. The redemption value of the outstanding 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, 1999 and 1998, no
"in the money" obligations existed on outstanding options.
PREFERRED STOCK PURCHASE RIGHTS
================================================================================
At December 31, 1999, the Company had 538 million preferred stock purchase
rights outstanding as follows: one-half right for each share of common stock
outstanding and a total of 6 million rights for the outstanding Series C
preferred stock. Each right may be exercised to purchase one ten-thousandth of a
share of junior participating preferred stock for $225. The rights will only
become exercisable, or separately transferable, on the earlier of the tenth
business day after the Company announces that a person has acquired 15% or more,
or the tenth business day after a tender offer commences that could result in
ownership of more than 15%, of the Company's common stock.
If any person acquires 15% or more of the common stock (except in an offer
for all common stock that has been approved by the Board of Directors), or in
the event of certain mergers or other transactions involving a 15% or more
stockholder, each right not owned by that person or related parties will enable
its holder to purchase, at the right's exercise price, common stock (or a
combination of common stock and other assets) having double that value. In the
event of certain merger or asset sale transactions with another party, similar
terms would apply to the purchase of that party's common stock.
The rights, which have no voting power, expire on December 14, 2005,
subject to extension. Upon approval by the Board of Directors, the rights may be
redeemed for $.01 each under certain conditions, which may change after any
person becomes a 15% stockholder.
At December 31, 1999, there were authorized 5,000,000 shares of preferred
stock without par value, of which 141,254 Series C shares were issued and
outstanding and 400,000 Series A shares were reserved for issuance upon exercise
of the rights.
32
<PAGE> 21
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OPERATING SEGMENTS AND RELATED INFORMATION
The following table presents certain operating segment information.
(Millions) Blades & Duracell
1999 Razors Toiletries Products
================================================================================
Net sales ............................ $3,167 $1,062 $2,726
Profit from operations ............... 1,206 85 606
Identifiable assets .................. 3,532 696 3,310
Capital expenditures ................. 459 85 145
Depreciation ......................... 186 29 56
1998
- --------------------------------------------------------------------------------
Net sales ............................ $3,028 $1,214 $2,576
Profit from operations ............... 1,153 54 597
Identifiable assets .................. 3,378 771 3,288
Capital expenditures ................. 453 69 144
Depreciation ......................... 167 27 51
1997
- --------------------------------------------------------------------------------
Net sales ............................ $2,881 $1,410 $2,478
Profit from operations ............... 1,186 124 526
Identifiable assets .................. 3,006 1,004 3,138
Capital expenditures ................. 423 88 165
Depreciation ......................... 111 37 58
================================================================================
(Millions) Oral-B Braun Stationery All
1999 Products Products Products Other Total
================================================================================
Net sales ..................... $616 $1,583 $ 743 $ -- $ 9,897
Profit from operations ........ 77 154 18 (41) 2,105
Identifiable assets ........... 663 1,602 1,214 769 11,786
Capital expenditures .......... 40 130 43 30 932
Depreciation .................. 23 83 21 22 420
1998
- --------------------------------------------------------------------------------
Net sales ..................... $642 $1,740 $ 856 $ -- $10,056
Profit from operations ........ 101 291 108 (515) 1,789
Identifiable assets ........... 680 1,679 1,330 776 11,902
Capital expenditures .......... 62 135 48 89 1,000
Depreciation .................. 18 73 24 13 373
1997
- --------------------------------------------------------------------------------
Net sales ..................... $624 $1,744 $ 924 $ 1 $10,062
Profit from operations ........ 85 304 156 (57) 2,324
Identifiable assets ........... 622 1,544 1,299 251 10,864
Capital expenditures .......... 45 126 40 86 973
Depreciation .................. 17 77 23 7 330
================================================================================
Each operating segment is individually managed and has separate financial
results that are reviewed by the Company's chief operating decision-makers. Each
segment contains closely related products that are unique to the particular
segment.
The Blades & Razors segment consists of blades and razors. The Toiletries
segment includes deodorants/ antiperspirants, shave preparations, after-shaves
and hair care products. The Duracell Products segment consists of consumer
batteries. The Oral-B Products segment primarily comprises toothbrushes and
interdental products. Included in the Braun Products segment are electric
shavers and hair epilators, as well as oral care, household, hair care and
personal diagnostic appliances. The Stationery Products segment consists of
writing instruments and correction products.
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
the effect of exchange.
In calculating profit from operations for individual operating segments,
substantial administrative 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 segments.
All intercompany transactions, primarily merchandise transfers, have been
eliminated, and intersegment revenues are not significant.
The $535 million charge to profit from operations in 1998 for reorganization
and realignment expenses is not assigned to the operating segments in the
accompanying table, since the elements of the charge are managed separately from
the segments.
Had the Company allocated the charge by segment, the amounts would have been
as follows: Blades & Razors, $117 million; Toiletries, $47 million; Duracell
Products, $128 million; Oral-B Products, $68 million; Braun Products, $69
million; Stationery Products, $95 million; and All Other, $11 million.
The All Other column includes items not allocated to operating segments.
Profit from operations includes the $535 million charge for reorganization and
realignment expenses in 1998 and all unallocated income/expense items, including
corporate headquarters expenses. Identifiable assets includes deferred income
tax assets, nonqualified benefit trusts, construction-in-progress costs related
to Corporate Information Technology initiatives and other financial instruments
managed by the Corporate Treasury Department. Capital expenditures is primarily
related to Corporate Information Technology initiatives.
33
<PAGE> 22
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net sales by geographic area follow.
(Millions) 1999 1998 1997
================================================================================
Foreign ........................ $5,944 $ 6,241 $ 6,380
United States .................. 3,953 3,815 3,682
--------------------------------------
$9,897 $10,056 $10,062
======================================
Long-lived assets at December 31 follow.
(Millions) 1999 1998 1997
================================================================================
Germany ........................ $ 656 $ 575 $ 438
Other Foreign .................. 1,278 1,261 1,202
--------------------------------------
Total Foreign .................. 1,934 1,836 1,640
United States .................. 1,733 1,636 1,464
--------------------------------------
$3,667 $3,472 $3,104
======================================
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
(Millions, except per share amounts) ---------------------------------------------------
1999 March 31 June 30 September 30 December 31 Total Year
============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net sales ................................................ $1,939 $2,414 $2,509 $3,035 $ 9,897
Gross profit ............................................. 1,246 1,502 1,563 1,875 6,186
Profit from operations ................................... 447 492 590 576 2,105
Income before income taxes ............................... 412 459 541 518 1,930
Net income ............................................... 269 300 352 339 1,260
Net income per common share, basic (a) ................... .24 .27 .33 .32 1.15
Net income per common share, assuming full dilution ...... .24 .26 .32 .32 1.14
Dividends declared per common share ...................... -- .14 3/4 .14 3/4 .29 1/2 .59
Stock price range: (composite basis)
High .................................................... 64.38 60.19 48.38 45.44 64.38
Low ..................................................... 44.75 40.50 33.06 33.88 33.06
1998 (b)
============================================================================================================================
Net sales ................................................ $2,025 $2,325 $2,531 $3,175 $10,056
Gross profit ............................................. 1,242 1,443 1,557 1,961 6,203
Profit from operations ................................... 434 595 40 720 1,789
Income before income taxes ............................... 414 575 9 671 1,669
Net income ............................................... 268 372 6 435 1,081
Net income per common share, basic ....................... .24 .33 -- .39 .96
Net income per common share, assuming full dilution ...... .23 .33 -- .39 .95
Dividends declared per common share ...................... -- .12 3/4 .12 3/4 .25 1/2 .51
Stock price range: (composite basis)
High .................................................... 61.09 62.66 62.56 49.38 62.66
Low ..................................................... 48.59 54.75 35.31 37.06 35.31
============================================================================================================================
</TABLE>
(a) Earnings per common share are computed independently for each of the
quarters presented and, therefore, do not add up to the total for the year.
(b) In the third quarter of 1998, a charge for reorganization and
realignment expenses reduced profit from operations and income before
income taxes by $535 million, net income by $347 million, basic net
income per share by $.31 and net income per share, assuming full
dilution, by $.30.
34
<PAGE> 23
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
HISTORICAL FINANCIAL SUMMARY
HISTORICAL FINANCIAL SUMMARY
(Millions, except per share amounts and employees)
<TABLE>
<CAPTION>
1999 1998(a) 1997 1996(b) 1995 1994
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net Sales ....................................................... $ 9,897 10,056 10,062 9,698 8,834 7,935
Profit from Operations .......................................... $ 2,105 1,789 2,324 1,636 1,799 1,615
Income before Income Taxes ...................................... $ 1,930 1,669 2,221 1,525 1,700 1,458
Net Income ...................................................... $ 1,260 1,081 1,427 949 1,069 919
Average Common Shares Outstanding
Basic ......................................................... 1,089 1,117 1,118 1,107 1,100 1,096
Assuming Full Dilution ........................................ 1,111 1,144 1,148 1,140 1,129 1,121
PER COMMON SHARE DATA Net Income per Common Share:
Basic ......................................................... $ 1.15 .96 1.27 .85 .97 .83
Assuming Full Dilution ........................................ $ 1.14 .95 1.24 .83 .95 .82
Dividends Declared per Common Share:
Gillette ...................................................... $ .59 .51 .43 .36 .30 .25
Duracell ...................................................... $ .58 .52 .44
Stock Price, December 31 ........................................ $ 41.19 47.81 50.22 38.88 26.06 18.72
BALANCE SHEET
Net Property, Plant and Equipment ............................... $ 3,667 3,472 3,104 2,586 2,053 1,750
Total Assets .................................................... $11,786 11,902 10,864 10,415 8,918 7,766
Long-Term Debt .................................................. $ 2,931 2,256 1,476 1,490 1,048 1,073
Stockholders' Equity ............................................ $ 3,060 4,543 4,841 4,471 3,879 3,257
OTHER INFORMATION
Net Interest Expense ............................................ $ 129 86 69 67 73 68
Depreciation and Amortization ................................... $ 500 459 422 381 343 303
Capital Expenditures ............................................ $ 932 1,000 973 830 593 498
Employees ....................................................... 39,800 43,100 44,000 44,100 41,900 40,700
====================================================================================================================================
</TABLE>
Per common share amounts, shares outstanding and stock prices have been restated
to reflect two-for-one stock splits in 1998 and 1995.
(a) In 1998, a charge for reorganization and realignment expenses reduced profit
from operations and income before income taxes by $535 million, net income by
$347 million, basic net income per common share by $.31 and net income per
common share, assuming full dilution, by $.30.
(b) 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 $.26 and net income per common share, assuming
full dilution, by $.25.
35
<PAGE> 1
EXHIBIT 22
THE GILLETTE COMPANY
SUBSIDIARIES OF REGISTRANT
ORGANIZED
UNDER
NAME LAWS OF
---- ---------
Gillette Argentina S.A. .................................... Argentina
Gillette Australia Pty Ltd.................................. Australia
NV Duracell Batteries S.A................................... Belgium
Duracell SpA................................................ Italy
Gillette Beteiligungs -- GmbH............................... Germany
Gillette Deutschland GmbH & Co. ............................ Germany
Waterman S.A. .............................................. France
Braun -- GmbH............................................... Germany
Its subsidiaries:
Braun Electric Austria Gesellschaft mbH........... Austria
Braun Espanola, S.A. ............................. Spain
Braun Ireland Ltd. ............................... Ireland
Braun de Mexico y Cia. de C.V. ................... Mexico
Gillette do Brasil, Inc. ................................... Delaware
Its subsidiary:
Gillette do Brazil Ltda. ......................... Brazil
Gillette Canada Inc. ....................................... Canada
Its subsidiaries:
Oral-B Laboratories Pty. Limited....................... Australia
Oral-B Laboratories GmbH............................... Germany
Productos Gillette Chile Limitada........................... Chile
Duracell (China) Limited.................................... China
Gillette China Limited...................................... China
Its subsidiary:
Braun (Shanghai) Co. Ltd. ........................ China
Gillette de Colombia S.A. .................................. Colombia
Colton Gulf Coast, Inc. .................................... Delaware
Colton North Central, Inc. ................................. Delaware
Gillette Czech Inc. Delaware
Gillette Eastern Europe, Inc. .............................. Delaware
Grupo Gillette Espana S.L. ................................. Spain
Gillette Far East Trading Limited........................... Hong Kong
Gillette Foreign Sales Corporation Limited.................. Jamaica
Groupe Gillette France S.A. ................................ France
Gilfin B.V. ................................................ Netherlands
Its subsidiary:
Parkfin Limited........................................ United Kingdom
Compania Giva, S.A. ........................................ Delaware
Indian Shaving Products Limited............................. India
Compania Interamericana Gillette, S.A. ..................... Panama
Gillette Egypt S.A.E. ...................................... Egypt
Gillette Pakistan Limited................................... Pakistan
Inversiones Gilco (Chile) Limitada.......................... Chile
Gillette Group Italy S.p.A.................................. Italy
Braun Gillette Japan Incorporated........................... Delaware
Gillette Management Inc. ................................... Delaware
Grupo Gillette S.A. de C.V. ................................ Mexico
<PAGE> 2
THE GILLETTE COMPANY
SUBSIDIARIES OF REGISTRANT -- (CONTINUED)
ORGANIZED
UNDER
NAME LAWS OF
---- ---------
Its subsidiary:
Gillette de Mexico S.A. de C.V. ....................... Mexico
Gillette Norge A/S.......................................... Norway
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 Trading Limited.................................... South Africa
Gillette Group South Africa (pty) 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 Sverlge Aktiebolag................................. Sweden
Gillette (Switzerland) AG................................... Switzerland
Gillette Industries Plc..................................... United Kingdom
Its subsidiaries:
Gillette U.K. Limited.................................. United Kingdom
Parker Pen Holdings.................................... United Kingdom
Parker Pen Products.................................... United Kingdom
Braun (U.K.) Limited................................... United Kingdom
Its subsidiary:
Parker Pen Company........................... United Kingdom
Peterburg Products International zao........................ Russia
Gillette Poland S.A. ....................................... Poland
Gillette Home Diagnostics, Inc.............................. Delaware
Its subsidiary:
Thermoscan Inc......................................... Delaware
Oral B Laboratories International Inc. ..................... Delaware
Its subsidiary:
Oral B Laboratories Islands Ltd. ...................... Cayman Islands
Gillette Oral Care, Inc..................................... Delaware
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, Luxor Pen Company and
Petersburg Products International is 58%, 75%, 70%, 76.8%, 50% and 87.34%
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.
<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. 333-75517
on Form S-3, (2) No. 33-9495 on Form S-8, (3) No. 2-93230 on Form S-8, (4) etc
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 February 11, 2000, relating to the consolidated
balance sheet of The Gillette Company and subsidiary companies as of December
31, 1999 and 1998, consolidated statements of income, cash flows and
stockholders' equity for each of the years in the three-year period ended
December 31, 1999 and the Valuation and Qualifying Account Schedule, which
reports appear or are incorporated by reference in the December 31, 1999 Annual
Report on Form 10-K of The Gillette Company.
KPMG LLP
Boston, Massachusetts
March 30, 2000
<PAGE> 1
POWER OF ATTORNEY
We, the undersigned hereby constitute Charles W. Cramb and Richard K.
Willard, 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, 1999, 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>
/s/ MICHAEL C. HAWLEY Chairman of the Board March 16, 2000
- ----------------------------------------------------- of Directors, Chief Executive Officer
Michael C. Hawley and Director
/s/ CHARLES W. CRAMB Senior Vice President and Chief March 16, 2000
- ----------------------------------------------------- Financial Officer
Charles W. Cramb
/s/ MARK N. EDOFF Principal Accounting Officer March 16, 2000
- -----------------------------------------------------
Mark N. Edoff
/s/ WARREN E. BUFFETT Director March 16, 2000
- -----------------------------------------------------
Warren E. Buffett
/s/ WILBUR H. GANTZ Director March 16, 2000
- -----------------------------------------------------
Wilbur H. Gantz
/s/ MICHAEL B. GIFFORD Director March 16, 2000
- -----------------------------------------------------
Michael B. Gifford
/s/ CAROL R. GOLDBERG Director March 16, 2000
- -----------------------------------------------------
Carol R. Goldberg
/s/ DENNIS F. HIGHTOWER Director March 16, 2000
- -----------------------------------------------------
Dennis F. Hightower
/s/ HERBERT H. JACOBI Director March 16, 2000
- -----------------------------------------------------
Herbert H. Jacobi
/s/ HENRY R. KRAVIS Director March 16, 2000
- -----------------------------------------------------
Henry R. Kravis
/s/ JORGE PAULO LEMANN Director March 16, 2000
- -----------------------------------------------------
Jorge Paulo Lemann
/s/ RICHARD R. PIVIROTTO Director March 16, 2000
- -----------------------------------------------------
Richard R. Pivirotto
/s/ ALEXANDER B. TROWBRIDGE Director March 16, 2000
- -----------------------------------------------------
Alexander B. Trowbridge
/s/ MARJORIE M. YANG Director March 16, 2000
- -----------------------------------------------------
Marjorie M. Yang
/s/ ALFRED M. ZEIEN Director March 16, 2000
- -----------------------------------------------------
Alfred M. Zeien
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The data reported in this exhibit are based on unaudited statements but include
all adjustments which the company considers necessary for a fair presentation of
results for this period.
</LEGEND>
<CIK> 0000041499
<NAME> THE GILLETTE COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 80,000
<SECURITIES> 0
<RECEIVABLES> 2,507,000
<ALLOWANCES> 74,000
<INVENTORY> 1,621,000
<CURRENT-ASSETS> 5,132,000
<PP&E> 5,962,000
<DEPRECIATION> 2,295,000
<TOTAL-ASSETS> 11,786,000
<CURRENT-LIABILITIES> 4,180,000
<BONDS> 2,931,000
0
85,000
<COMMON> 1,364,000
<OTHER-SE> 1,611,000
<TOTAL-LIABILITY-AND-EQUITY> 11,786,000
<SALES> 9,897,000
<TOTAL-REVENUES> 9,897,000
<CGS> 3,711,000
<TOTAL-COSTS> 3,711,000
<OTHER-EXPENSES> 4,081,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136,000
<INCOME-PRETAX> 1,930,000
<INCOME-TAX> 670,000
<INCOME-CONTINUING> 1,260,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,260,000
<EPS-BASIC> 1.15
<EPS-DILUTED> 1.14
</TABLE>
