-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, IGURO3XBqiE0kaCK5BrBZsYPWg25n7jVenNw76XCfhIHSnS41hglpIlY6uvM45V6 TEOVTt20OGAYiq4fFKAmVQ== 0000950109-95-000815.txt : 19950616 0000950109-95-000815.hdr.sgml : 19950616 ACCESSION NUMBER: 0000950109-95-000815 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950321 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GILLETTE CO CENTRAL INDEX KEY: 0000041499 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 041366970 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00922 FILM NUMBER: 95522068 BUSINESS ADDRESS: STREET 1: 3900 PRUDENTIAL TOWER BLDG CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: 6174217000 MAIL ADDRESS: STREET 1: PRUDENTIAL TOWER BLDG CITY: BOSTON STATE: MA ZIP: 02199 FORMER COMPANY: FORMER CONFORMED NAME: GILLETTE SAFETY RAZOR CO DATE OF NAME CHANGE: 19660911 10-K 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ---------------- (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, 1994 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 -------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) INCORPORATED IN DELAWARE 04-1366970 ------------------------ ---------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) PRUDENTIAL TOWER BUILDING, BOSTON, MASSACHUSETTS 02199 ------------------------------------------------ ----- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 617-421-7000 ------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ------------------------ COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE BOSTON STOCK EXCHANGE MIDWEST STOCK EXCHANGE PACIFIC STOCK EXCHANGE 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 ((S)229.405 of this chapter) is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X]. The aggregate market value of Gillette Common Stock held by non-affiliates as of March 1, 1995 was approximately $15,555,000,000.00.* The number of shares of Gillette Common Stock outstanding as of March 1, 1995 was 221,523,587. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the following documents have been incorporated by reference into the 10-K Parts indicated: DOCUMENTS 10-K PARTS --------- ---------- 1. The Gillette Company 1994 Annual Report to Stockholders (the "1994 Annual Report")......................................... Parts I and II 2. The Gillette Company 1995 Proxy Statement (The "1995 Proxy Statement")................................................... Part III - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- * This amount does not include the value of 162,823.2659 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. PART I ITEM 1. DESCRIPTION OF BUSINESS GENERAL The Gillette Company was incorporated under the laws of the State of Delaware in 1917 as the successor of a Massachusetts corporation incorporated in 1912 which corporation was the successor of a Maine corporation organized in 1901 by King C. Gillette, inventor of the safety razor. A description of the Company and its businesses appears in the 1994 Annual Report at page 2, and at pages 3 through 5 under the caption "Letter to Stockholders" and at page 44 under the caption "Principal Divisions and Subsidiaries," the texts of which are incorporated by reference. See also Item 7, Management's Discussion. BUSINESS SEGMENTS The approximate percentages of consolidated net sales and segment profit from operations during the last five years for each of the Company's business segments appear in the 1994 Annual Report at page 42 under the caption, "Business Segments," and are incorporated by reference. "Financial Information by Business Segment," and "Segment and Area Commentary" containing information on net sales, profit from operations, identifiable assets, capital expenditures and depreciation for each of the last three years, appear in the 1994 Annual Report at page 40 and are incorporated by reference. The Company's businesses range across several industry segments, including blades and razors, toiletries and cosmetics, stationery products, electric shavers, small household appliances, hair care appliances, oral care appliances and oral care products. Descriptions of those businesses appear in the 1994 Annual Report at pages 6 through 15, the text of which is incorporated by reference. DISTRIBUTION In the Company's major markets, traditional Gillette product lines are sold to wholesalers, chain stores and large retailers and are resold to consumers primarily through food, drug, discount, stationery, tobacco and department stores. Jafra skin care products are sold directly to consumers by independent consultants, primarily at classes in the home. Waterman and Parker products are sold to wholesalers and retailers and are resold to consumers through fine jewelry, fine stationery and department stores, pen specialists and other retail outlets. Braun products are sold to wholesalers and retailers and are resold to consumers mainly through department, discount, catalogue and specialty stores. In many small Gillette International and Braun markets, products are distributed through local distributors and sales agents. Oral-B products are marketed directly to dental professionals for distribution to patients and also are sold to wholesalers, chain stores and large retailers for resale to consumers through food, drug and discount stores. PATENTS Certain of the Company's patents and licenses in the blade and razor segment are of substantial value and importance when considered in the aggregate. Additionally, the Company holds significant patents in the toiletries and cosmetics, writing instruments and Braun business segments. No patent or license held by the Company is considered to be of material importance when judged from the standpoint of the Company's total business. Gillette has licensed many of its blade and razor patents to other manufacturers. In all of these categories, Gillette competitors also have significant patent positions. The patents and licenses held by the Company are of varying remaining durations. TRADEMARKS In general, the Company's principal trademarks have been registered in the United States and throughout the world where the Company's products are sold. Gillette products are marketed 1 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 business segments. The Company's rights in these trademarks endure for as long as they are used or registered. COMPETITION The blades and razors segment is marked by competition in product performance, innovation and price, as well as by competition in marketing, advertising and promotion to retail outlets and to consumers. The Company's major competitors worldwide are Warner-Lambert Company, with its Schick and Wilkinson Sword (in North America and Europe) product lines, and Societe Bic S.A., a French company. Additional competition in the United States is provided by the American Safety Razor Company, Inc. under its own brands and a number of private label brands. The toiletries and cosmetic segment is highly competitive in terms of price, product innovation and market positioning, with frequent introduction of new brands and marketing concepts, especially for products sold through retail outlets, and with product life cycles typically shorter than in the other business segments of the Company. Competition in the stationery products segment, particularly in the writing instruments market, is marked by a high degree of competition from domestic and foreign suppliers and low entry barriers, and is focused on a wide variety of factors including product performance, design and price, with price an especially important factor in the commercial sector. Competition in the electric shaver, small household, hair care and oral care appliances segments is based primarily on product performance, innovation and price, with numerous competitors in the small household and hair care appliances segments. Competition in the oral care product segment is focused on product performance, price and dental profession endorsement. EMPLOYEES At year-end, Gillette employed approximately 32,800 persons, three-quarters of them outside the United States. RESEARCH AND DEVELOPMENT In 1994, research and development expenditures were $136.9 million, compared with $133.1 million in 1993 and $123.8 million in 1992. RAW MATERIALS The raw materials used by Gillette in the manufacture of products are purchased from a number of outside suppliers, and substantially all such materials are readily available. OPERATIONS BY GEOGRAPHIC AREA The following table indicates the geographic sources of consolidated net sales and profit from operations of the Company for the last three years:
1994 1993 1992 ------------ ------------ ------------ NET NET NET SALES PROFIT SALES PROFIT SALES PROFIT ----- ------ ----- ------ ----- ------ United States............................ 32% 30% 33% 29% 31% 30% Foreign.................................. 68% 70% 67% 71% 69% 70%
"Financial Information by Geographic Area" and "Segment and Area Commentary" containing information on net sales, profit from operations and identifiable assets for each of the last three years appear in the 1994 Annual Report under the same captions at page 40 and are incorporated by reference. 2 ITEM 2. DESCRIPTION OF PROPERTY The Company owns and leases manufacturing facilities and other important properties in the United States and abroad consisting of approximately 14,965,000 square feet of floor space, of which 75%, or about 11,159,000 square feet, is devoted to the Company's principal manufacturing operations. Additional premises, such as sales and administrative offices, research laboratories, and warehouse, distribution and other manufacturing facilities account for about 25% of Gillette's principal property holdings, or about 3,806,000 square feet. Gillette's executive offices are located in the Prudential Center, Boston, Massachusetts, where the Company holds a long-term lease covering approximately 278,000 square feet. In the United States, Gillette's principal manufacturing facilities consist of the following:
APPROXIMATE AREA BUSINESS SEGMENT LOCATION (SQUARE FEET) ---------------- -------- ------------- Blades and Razors Boston, Massachusetts 1,450,000 Toiletries and Cosmetics Andover, Massachusetts 593,000 St. Paul, Minnesota 959,000 Westlake Village, California 150,000 Stationery Products Santa Monica, California 320,000 Janesville, Wisconsin 215,000 Oral-B Products Iowa City, Iowa 260,000 --------- Total 3,947,000 =========
Approximately 88% of these U.S. manufacturing facilities and the land they occupy are owned by Gillette. The Santa Monica property is leased in its entirety and 258,000 square feet of the St. Paul facility is located on leased land. Foreign manufacturing subsidiaries of Gillette, excluding Braun and Oral-B, operate plants with an aggregate of approximately 4,581,000 square feet of floor space, about 84% of which is on land owned by Gillette. Many of the international facilities are engaged in the manufacture of products for two or more of the Company's major business segments. Braun's executive offices are located in Kronberg, Germany, and the locations and approximate areas of its principal manufacturing facilities are as follows:
APPROXIMATE AREA (SQUARE LOCATION FEET) -------- ----------- Germany (3 facilities)...................................... 1,386,000 Spain....................................................... 410,000 Ireland..................................................... 238,000 Mexico...................................................... 253,000 France...................................................... 28,000 --------- Total................................................... 2,315,000 =========
Approximately 90% of these facilities and 98% of the land they occupy are owned by Braun. Oral-B's executive offices are in leased space in Redwood City, California. In addition to its Iowa City plant, it owns or leases approximately 236,000 square feet of manufacturing facilities in four countries outside the United States. Miscellaneous manufacturing operations in North Chicago, Illinois and other locations account for approximately 82,000 square feet. The above facilities are in good repair, adequately meet the Company's needs and operate at reasonable levels of production capacity. 3 ITEM 3. LEGAL PROCEEDINGS The Company is subject to legal proceedings and claims arising out of its business, which cover a wide range of matters, including antitrust and trade regulation, product liability, contracts, environmental issues, patent and trademark matters and taxes. Management, after review and consultation with counsel considers that any liability from all of these legal proceedings and claims would not materially affect the consolidated financial position, results of operations or liquidity of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ---------------- 4 EXECUTIVE OFFICERS OF REGISTRANT Information regarding the Executive Officers of the Company as of March 16, 1995 is set out below.
NAME AND CURRENT POSITION FIVE-YEAR BUSINESS HISTORY AGE ------------------------- -------------------------- --- Alfred M. Zeien Chairman of the Board and Chief 65 Chairman of the Board and Chief Executive Officer since February Executive Officer 1991; President and Chief Operating Officer, January 1991 - February 1991; Vice Chairman of the Board, International/Diversified Operations, November 1987 - January 1991 Joseph E. Mullaney Vice Chairman of the Board since 61 Vice Chairman of the Board November 1990; Senior Vice President, Legal, April 1977 - November 1990; General Counsel, September 1973 - September 1990 Michael C. Hawley Executive Vice President, 57 Executive Vice President International Group since December 1993; President, Oral-B Laboratories, Inc., May 1989 - November 1993 Jacques Lagarde Executive Vice President, 56 Executive Vice President Diversified Group since October 1993; Vice President, February 1990 - September 1993; Chairman, Board of Management, Braun AG, February 1990 - September 1993 Robert J. Murray Executive Vice President, North 53 Executive Vice President Atlantic Group since January 1991; Vice President, October 1987 - January 1991 Robert E. DiCenso Senior Vice President, Personnel 54 Senior Vice President and Administration, since July 1994; Vice President, Investor Relations, January 1993 - July 1994; Vice President, Planning and Administration, Diversified Group, July 1988 - December 1992 Thomas F. Skelly Senior Vice President, Finance 61 Senior Vice President since May 1980 Anthony S. Lucas Vice President since July 1983; 62 Vice President and Controller Controller since June 1980
The Executive Officers hold office until the first meeting of the Board of Directors following the annual meeting of the stockholders and until their successors are respectively elected or appointed and qualified, unless a shorter period shall have been specified by the terms of their election or appointment, or until their earlier resignation, removal or death. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The information required by this item appears in the 1994 Annual Report on the inside back cover under the caption "common stock" and at page 42 under the caption, "Quarterly Financial Information," and is incorporated by reference. As of March 1, 1995, the record date for the 1995 Annual Meeting, there were 30,821 Gillette stockholders of record. ITEM 6. SELECTED FINANCIAL DATA The information required by this item appears in the 1994 Annual Report at page 43 under the caption, "Historical Financial Summary," and is incorporated by reference. 5 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item appears in the 1994 Annual Report at pages 25 through 27 under the caption, "Management's Discussion," 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 1994 Annual Report at the pages indicated below and are incorporated by reference. (1) Independent Auditor's Report.............................. Page 41 (2) Consolidated Statement of Income and Earnings Reinvested in the Business for the Years Ended December 31, 1994, 1993 and 1992............................................. Page 28 (3) Consolidated Balance Sheet at December 31, 1994 and 1993.. Page 29 (4) Consolidated Statement of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992.......................... Page 30 (5) Notes to Consolidated Financial Statements................ Pages 31 through 40 (6) Quarterly Financial Information........................... Page 42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS The information required by this item with respect to the Directors of the Company appears in the 1995 Proxy Statement at pages 2 through 5 and at page 7 under the caption "Certain Transactions with Directors and Officers", the texts of which are incorporated by reference. The information required for Executive Officers of the Company appears at the end of Part I of this report at page 5. ITEM 11. EXECUTIVE COMPENSATION The information required by this item appears in the 1995 Proxy Statement at page 8 under the caption "Compensation of Directors", at pages 12 and 13 under the caption "Incentive Payment and Award" and at pages 13 through 16 under the caption "Executive Compensation" and is incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item concerning the security ownership of certain beneficial owners and management appears in the 1995 Proxy Statement at pages 6 and 7 under the caption "Stock Ownership of Certain Beneficial Owners and Management" and at pages 12 and 13 under the caption "Incentive Payment and Award" and is incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item appears in the 1995 Proxy Statement at page 7 under the caption "Certain Transactions with Directors and Officers" and at page 8 under the caption "Compensation of Directors" and is incorporated by reference. 6 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 1994 Annual Report at the pages indicated below and are incorporated into Part II by reference. (1) Independent Auditor's Report.............................. Page 41 (2) Consolidated Statement of Income and Earnings Reinvested in the Business for the Years Ended December 31, 1994, 1993 and 1992............................................. Page 28 (3) Consolidated Balance Sheet at December 31, 1994 and 1993.. Page 29 (4) Consolidated Statement of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992.......................... Page 30 (5) Notes to Consolidated Financial Statements................ Pages 31 through 40
SCHEDULES The following schedule appears at page 12 of this report: II. Valuation and Qualifying Accounts Schedules other than those listed above are omitted because they are either not required or not applicable. EXHIBITS 3(a) Composite Certificate of Incorporation of The Gillette Company, as amended, filed as Exhibit 3(a) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. I-922, incorporated by reference herein. (b) The Bylaws of The Gillette Company, as amended April 15, 1993, filed as Exhibit 3(b) to the Gillette Company Quarterly Report on Form 10-Q for the period ended March 31, 1993, incorporated by reference herein. 4(a) Specimen of form of certificate representing ownership of The Gillette Company Common Stock, $1.00 par value, as adopted by the Board of Directors of the Company on December 15, 1977, filed as Exhibit 4(a) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1986, Commission File No. I-922, incorporated by reference herein. (b) Form of Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of the Gillette Company filed as Exhibit A to Exhibit 1 to The Gillette Company Current Report on Form 8-K, dated December 30, 1985, Commission File No. I-911, incorporated by reference herein. (c) Rights Agreement dated as of November 26, 1986, and amended and restated as of January 17, 1990, between The Gillette Company and The First National Bank of Boston, filed as Exhibit 1 to The Gillette Company Form 8, dated January 18, 1990, incorporated by reference herein. (d) Certificate of Designation of the Series C ESOP Convertible Preferred Stock of The Gillette Company, dated January 17, 1990, filed as Exhibit 4(e) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. I-922, incorporated by reference herein. (e) Certificate of Amendment relating to an increase in the amount of authorized shares of preferred stock and common stock, filed as Exhibit 3(e) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. I-922, incorporated by reference herein. 7 (f) Instruments relating to long-term debt. Multi-year Credit agreement dated as of June 21, 1994 among The Gillette Company and a group of United States and international banks, filed herewith. Form of $150,000,000 4.75% note due August 15, 1996 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, incorporated by reference herein. 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, incorporated by reference herein. 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. 33- 54974 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, incorporated by reference herein. (Others not filed, but the registrant agrees to file a copy of such instruments upon the request of the Securities and Exchange Commission.) 10 Material Contracts *(a) The Gillette Company 1971 Stock Option Plan, as amended, subject to the approval of the stockholders at their annual meeting on April 20, 1995, filed herewith. *(b) The Gillette Company Stock Equivalent Unit Plan, as amended, filed as Exhibit 10(b) to The Gillette Company Annual Report on Form 10- K for the year ended December 31, 1993, incorporated by reference herein. *(c) The Gillette Company Incentive Bonus Plan, as amended, filed as Exhibit 10(c) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1993, incorporated by reference herein. *(d) The Gillette Company Outside Directors' Stock Ownership Plan, filed as Exhibit 10(d) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1993, incorporated by reference herein. *(e) Description of The Gillette Company Executive Life Insurance Program, filed as Exhibit 10(d) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. I-922, incorporated by reference herein. (f) Directors and Officers and Company Reimbursement Indemnity Insurance and Pension and Welfare Fund Fiduciary Responsibility Insurance policy, filed herewith. *(g) The Retirement Plan for Directors of The Gillette Company, as amended, filed as Exhibit 10(f) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1987, Commission File No. I-922, incorporated by reference herein. *(h) The Deferred Compensation Plan for Directors of The Gillette Company, as amended, filed as Exhibit 10(h) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1993, incorporated by reference herein. (i) Stock Purchase Agreement dated November 24, 1986, between The Gillette Company and a group of entities consisting of Revlon Group Incorporated, MacAndrews & Forbes, Incorporated and certain of their affiliates, filed as Exhibit No. 28.2 to The Gillette Company Current Report on Form 8-K dated November 24, 1986, Commission File No. I-922, incorporated by reference herein. 8 *(j) Description of severance pay and benefit arrangements for employees in the event of a change in control, filed as Exhibit 10(j) to The Gillette Company Annual Report on Form 10-K for the year ending December 31, 1989, Commission File No. I-922, incorporated by reference herein. (k) 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. I-922, incorporated by reference herein. *(l) Description of agreement between The Gillette Company and Gaston R. Levy dated December 27, 1993, filed as Exhibit 10(l) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1993, incorporated by reference herein. *(m) Description of agreement between The Gillette Company and Lorne R. Waxlax dated September 30, 1993, filed as Exhibit 10(m) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1993, incorporated by reference herein. *(n) Description of The Gillette Company Estate Preservation Plan, filed as Exhibit 10(n) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1993, incorporated by reference herein. *(o) 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, incorporated by reference herein. *(p) Description of incentive payment to Alfred M. Zeien, filed herewith. *(q) The Gillette Company Supplemental Retirement Plan, as amended and restated June 16, 1994, filed herewith. *(r) The Gillette Company Supplemental Savings Plan, as amended and restated effective July 1, 1993, filed herewith. 11 Computation of per share earnings, filed herewith. 12 Computation of the ratios of current assets to current liabilities for the years 1994, 1993 and 1992, filed herewith. 13 Portions of the 1994 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). - -------- * Filed pursuant to Item 14(c). B. REPORTS ON FORM 8-K There were no reports on Form 8-K filed by the Company during the last quarter of the period covered by this report. OTHER MATTERS For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into the following Registration Statements of the registrant on Form S-8 (1) No. 33-27916, filed April 10, 1989, and amended thereafter, which incorporates by reference therein Registration Statements on Form S-8 Nos. 2-90276, 2-63951 and 1-50710, and all amendments thereto, all relating to shares issuable and deliverable under The Gillette Company 1971 Stock Option Plan and 1974 Stock Purchase Plan and on Form S-7 No. 2-41016 relating to shares issuable and deliverable under The Gillette 9 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; and (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. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than the payments by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 10 INDEPENDENT AUDITORS' REPORT The Stockholders and Board of Directors of THE GILLETTE COMPANY: Under date of January 26, 1995, we reported on the consolidated balance sheet of The Gillette Company and subsidiary companies as of December 31, 1994 and 1993, and the related consolidated statements of income and earnings reinvested in the business and cash flows for each of the years in the three-year period ended December 31, 1994, as contained in the 1994 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 1994. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedule listed on page 7 of this report. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG Peat Marwick LLP Boston, Massachusetts January 26, 1995 11 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (MILLIONS OF DOLLARS)
ADDITIONS DEDUCTIONS --------------------- ----------- BALANCE AT CHARGED TO LOSSES BALANCE AT BEGINNING PROFIT CHARGED TO CHARGED END OF DESCRIPTION OF YEAR AND LOSS OTHER TO RESERVES YEAR ----------- ---------- ---------- ---------- ----------- ---------- 1994 Reserves deducted from assets: Receivables........... $45.9 $22.8 $ -- $16.6 $52.1 ===== ===== ===== ===== ===== 1993 Reserves deducted from assets: Receivables........... $41.8 $18.0 $2.5* $16.4 $45.9 ===== ===== ===== ===== ===== 1992 Reserves deducted from assets: Receivables........... $50.7 $ 8.2 $ -- $17.1 $41.8 ===== ===== ===== ===== =====
* Acquisition balances 12 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) Thomas F. Skelly By ___________________________________ Thomas F. Skelly Senior Vice President and Chief Financial Officer Date: March 16, 1995 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. SIGNATURES TITLE DATE * Alfred M. Zeien Chairman of the Board of March 16, 1995 - ------------------------------------ Directors, Chief Executive ALFRED M. ZEIEN Officer and Director * Joseph E. Mullaney Vice Chairman of the Board March 16, 1995 - ------------------------------------ and Director JOSEPH E. MULLANEY Thomas F. Skelly Senior Vice President and March 16, 1995 - ------------------------------------ Chief Financial Officer THOMAS F. SKELLY * Anthony S. Lucas Vice President, Controller March 16, 1995 - ------------------------------------ and Principal Accounting ANTHONY S. LUCAS Officer * Warren E. Buffett Director March 16, 1995 - ------------------------------------ WARREN E. BUFFETT * Wilbur H. Gantz Director March 16, 1995 - ------------------------------------ WILBUR H. GANTZ * Michael B. Gifford Director March 16, 1995 - ------------------------------------ MICHAEL B. GIFFORD * Carol R. Goldberg Director March 16, 1995 - ------------------------------------ CAROL R. GOLDBERG * Herbert H. Jacobi Director March 16, 1995 - ------------------------------------ HERBERT H. JACOBI * Richard R. Pivirotto Director March 16, 1995 - ------------------------------------ RICHARD R. PIVIROTTO * Alexander B. Trowbridge Director March 16, 1995 - ------------------------------------ ALEXANDER B. TROWBRIDGE * Joseph F. Turley Director March 16, 1995 - ------------------------------------ JOSEPH F. TURLEY Thomas F. Skelly By ___________________________________ * THOMAS F. SKELLY AS ATTORNEY-IN-FACT 13 EXHIBIT 11 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, SHARES IN MILLIONS)
1994 1993 1992 ---- ---- ---- NET INCOME PER COMMON SHARE--ASSUMING NO DILUTION - ------------------------------------------------- Net income as reported................................ $698.3 $288.3 $513.4 Less: Preferred Stock Dividends, net of tax benefit... (4.7) (4.7) (4.8) ------ ------ ------ Net income available to Common Shareholders........... $693.6 $283.6 $508.6 ====== ====== ====== Average common shares outstanding..................... 221.2 220.4 219.5 Reported net income per common share.................. $ 3.14 $ 1.29 $ 2.32 NET INCOME PER COMMON SHARE--ASSUMING FULL DILUTION - --------------------------------------------------- Net income available to Common Shareholders (as above)............................................... $693.6 $283.6 $508.6 Add: Series C ESOP Preferred Stock dividend, net of tax benefit.......................................... 4.7 4.7 4.8 Deduct: Additional ESOP costs, net of tax benefit..... (2.2) (2.7) (2.5) ------ ------ ------ Adjusted net income available to common shareholders.. $696.1 $285.6 $510.9 ====== ====== ====== Average common shares outstanding..................... 221.2 220.4 219.5 Add: Conversion of Series C ESOP Preferred Stock...... 3.3 3.3 3.3 Net additional common shares upon exercise of stock options............................................. 2.1 1.8 2.0 ------ ------ ------ Adjusted average common shares outstanding............ 226.6 225.5 224.8 ====== ====== ====== Net income per common share -- assuming full dilution. $ 3.07 $ 1.27 $ 2.27
14 EXHIBIT 22 THE GILLETTE COMPANY SUBSIDIARIES OF REGISTRANT DECEMBER 31, 1994
ORGANIZED UNDER NAME LAWS OF ---- --------- Compania Gillette de Argentina..................................... Delaware Its Subsidiaries: Compania Gillette de Argentina S.A............................... Argentina SylvaPen Distribuidora S.A.C.I. y F.............................. Argentina Gillette Australia Pty Ltd......................................... Australia Braun Inc.......................................................... Delaware Gillette Beteiligungs -- GmbH...................................... Germany Its subsidiaries: Gillette Deutschland GmbH & Co................................... Germany Helit Innovative Buroproduckte Gmbh.............................. Germany Societe de Participations Financieres Gillette................... France Its subsidiary: Waterman S.A................................................... France Braun AG......................................................... Germany Its subsidiaries: Braun Electric Austria Gesellschaft mbH........................ Austria Braun Canada Ltd./Ltee......................................... Canada Braun Espanola, S.A............................................ Spain Braun Finland Oy............................................... Finland Braun France S.A............................................... France Braun Ireland Ltd.............................................. Ireland Braun Italia S.r.l............................................. Italy Braun Japan K.K................................................ Japan Braun de Mexico y Cia. de C.V.................................. Mexico Braun Nederland B.V............................................ Netherlands Braun (U.K.) Ltd............................................... England Gillette do Brasil, Inc. and Jafra Comercio Participacoes e Servicos, Inc. ................................................... Delaware Their subsidiary: Gillette do Brasil & Cia......................................... Brazil Its subsidiary: Gillette da Amazonia S.A....................................... Brazil Fabrica Amazonense de Componentes Plasticos e Metalicos Ltda... Brazil Gillette Canada Inc................................................ Canada Its subsidiaries: Oral-B Laboratories Pty. Limited................................. Australia Oral-B Laboratories Inc./Laboratories Oral-B Inc................. Canada Oral-B Laboratories GmbH......................................... Germany Oral-B Laboratorios, S.A. de C.V................................. Mexico Oral-B Laboratories Limited...................................... England Gillette de Colombia S.A........................................... Colombia Colton Development, Inc............................................ Delaware Colton Gulf Coast, Inc............................................. Delaware Colton East, Inc. ................................................. Delaware Colton North Central, Inc. ........................................ Delaware Colton West, Inc. ................................................. Delaware
15 THE GILLETTE COMPANY SUBSIDIARIES OF REGISTRANT--(CONTINUED)
ORGANIZED UNDER NAME LAWS OF ---- --------- Gillette Capital Corporation...................................... Delaware Its subsidiaries: Jafra Cosmetics International, Inc. ............................ California Silkcare, Incorporated.......................................... Minnesota Gillette Direct Response Group, Inc............................... Massachusetts Gillette Espanola, S.A............................................ Spain Gillette Far East Trading Limited................................. Hong Kong Gillette Foreign Sales Corporation Limited........................ Jamaica Gillette France S.A............................................... France Gilfin B.V. ...................................................... Netherlands Parkfin Limited................................................... England Compania Giva, S.A................................................ Delaware Its subsidiary: Compania Gillette de Venezuela S.A.............................. Venezuela Indian Shaving Products Limited................................... India Compania Interamericana Gillette, S.A............................. Panama Gillette Egypt S.A.E.............................................. Egypt Gillette Pakistan Limited......................................... Pakistan Inversiones Gilco (Chile) Limitada................................ Chile Gillette Group Italy S.p.A........................................ Italy Grupo Jafra, S.A. de C.V. ........................................ Mexico Gillette (Japan) Inc. ............................................ Delaware Gillette Manufacturing (USA), Inc. ............................... Massachusetts Gillette de Mexico, Inc. and Mexico Manufacturing Company......... Delaware Their subsidiary: Gillette de Mexico S.A. de C.V.................................. Mexico Gillette del Peru, Inc. and Lima Manufacturing Company............ Delaware Partners in: Gillette del Peru, S.C. ........................................ Peru Gillette (Philippines), Inc. ..................................... Philippines Gillette Sanayi ve Ticaret A.S. .................................. Turkey Gillette (Shanghai) Limited....................................... China Shenmei Daily Use Products Limited Company........................ China Gillette South Africa Limited..................................... South Africa Gillette (Switzerland) AG......................................... Switzerland Gillette Industries Plc........................................... England Its subsidiaries: Gillette U.K. Limited........................................... England Jafra Cosmetics International Limited........................... England Parker Pen Holdings Limited..................................... England The Gillette Company (USA), Inc. ................................. Massachusetts Gillette Poland S.A. ............................................. Poland
All of the voting securities of each subsidiary listed above are owned by its parent company or parent partners except that the percentage ownership in Indian Shaving Products Limited, Shenmei Daily Use Products Limited Company, Gillette (Shanghai) Limited, Gillette Pakistan Limited, Gillette Egypt S.A.E., Gillette Poland S.A., Gillette France S.A., and the Waterman S.A. group of companies is 51%, 50%, 70%, 75%, 83.3%, 99.9%, 99.9% and 99.8%, respectively. There are a number of additional subsidiaries in the United States and foreign countries which, considered in the aggregate, do not constitute a significant subsidiary. 16 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT The Stockholders and Board of Directors of The Gillette Company: We consent to incorporation by reference in the following registration statements of The Gillette Company (1) No. 33-9495 on Form S-8, (2) No. 2-93230 on Form S-8, (3) Nos. 33-56218 and 33-27916 on Form S-8 which incorporate by reference therein registration statements on Form S-8 Nos. 2-90276, 2-63951 and 1-50710 and No. 2-41016 on Form S-7, (4) No. 33-54974 on Form S-3, (5) No. 33- 50303 on Form S-3, (6) No. 33-52465 on Form S-8, (7) No. 33-53257 on Form S-8, (8) No. 33-53258 on Form S-8 and (9) No. 33-55051 on Form S-3, of our reports dated January 26, 1995, relating to the consolidated balance sheet of The Gillette Company and subsidiary companies as of December 31, 1994 and 1993, and the related consolidated statements of income and earnings reinvested in the business, and cash flows and related schedule for each of the years in the three-year period ended December 31, 1994, which reports appear or are incorporated by reference in the December 31, 1994 Annual Report on Form 10-K of The Gillette Company. Our reports refer to a change in accounting for income taxes, postretirement and medical benefits and postemployment benefits. KPMG Peat Marwick LLP Boston, Massachusetts March 20, 1995 17 EXHIBIT 24 POWER OF ATTORNEY We, the undersigned hereby constitute Thomas F. Skelly and Joseph E. Mullaney, or either of them, our true and lawful attorneys with full power to sign for us in our name and in the capacity indicated below the Annual Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, filed for the Company with the Securities and Exchange Commission for the year ended December 31, 1994, 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. SIGNATURES TITLE DATE Alfred M. Zeien Chairman of the Board of March 16, 1995 - ------------------------------------ Directors, Chief Executive ALFRED M. ZEIEN Officer and Director Joseph E. Mullaney Vice Chairman of the Board March 16, 1995 - ------------------------------------ and Director JOSEPH E. MULLANEY Thomas F. Skelly Senior Vice President and March 16, 1995 - ------------------------------------ Chief Financial Officer THOMAS F. SKELLY Anthony S. Lucas Vice President, Controller March 16, 1995 - ------------------------------------ and Principal Accounting ANTHONY S. LUCAS Officer Warren E. Buffett Director March 16, 1995 - ------------------------------------ WARREN E. BUFFETT Wilbur H. Gantz Director March 16, 1995 - ------------------------------------ WILBUR H. GANTZ Michael B. Gifford Director March 16, 1995 - ------------------------------------ MICHAEL B. GIFFORD Carol R. Goldberg Director March 16, 1995 - ------------------------------------ CAROL R. GOLDBERG Herbert H. Jacobi Director March 16, 1995 - ------------------------------------ HERBERT H. JACOBI Richard R. Pivirotto Director March 16, 1995 - ------------------------------------ RICHARD R. PIVIROTTO Alexander B. Trowbridge Director March 16, 1995 - ------------------------------------ ALEXANDER B. TROWBRIDGE Joseph F. Turley Director March 16, 1995 - ------------------------------------ JOSEPH F. TURLEY 18 EX-4.F 2 MULTI-YEAR CREDIT AGREEMENT Exhibit 4(f) EXECUTION COPY $350,000,000 MULTI-YEAR CREDIT AGREEMENT dated as of June 21, 1994 among The Gillette Company, The Banks Listed Herein and Morgan Guaranty Trust Company of New York, as Agent CREDIT AGREEMENT AGREEMENT dated as of June 21, 1994 among THE GILLETTE COMPANY, the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent. The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have ----------- the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted CD Rate" has the meaning set forth in Section 2.07(b). "Adjusted Consolidated Earnings Before Interest and Taxes" means, for any fiscal period, (i) Consolidated Earnings Before Interest and Taxes for such fiscal period less (ii) interest expense attributable to Brazilian Debt to the ---- extent that such interest expense is included in the calculation of Gross Interest Expense for such fiscal period. "Adjusted Gross Interest Expense" means, for any fiscal period, (i) Gross Interest Expense for such fiscal period less (ii) interest expense ---- attributable to Brazilian Debt to the extent that such interest expense is included in the calculation of Gross Interest Expense for such fiscal period. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Company) duly completed by such Bank. "Agent" means Morgan Guaranty Trust Company of New York in its capacity as agent for the Banks hereunder, and its successors in such capacity. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Assessment Rate" has the meaning set forth in Section 2.07(b). 11.06(c). "Assignee" has the meaning set forth in Section 11.06(c). "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 11.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/ 2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means a Committed Loan to be made by a Bank as a Base Rate Loan in accordance with the applicable Notice of Committed Borrowing or pursuant to Article VIII. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group and not excepted by Section 4(b) of ERISA. "Borrower" means the Company or any Eligible Subsidiary, as the context may require, and their respective successors, and "Borrowers" means all of the foregoing. "Borrowing" has the meaning set forth in Section 1.03. "Brazilian Debt" means Debt of the Company or any of its Consolidated Subsidiaries (i) that is denominated solely in lawful money of the Federal Republic of Brazil and (ii) the proceeds of which are (or have been) used to finance the operations from time to time located in Brazil of the Company or any of its Subsidiaries. "CD Base Rate" has the meaning set forth in Section 2.07(b). 2 "CD Loan" means a Committed Loan to be made by a Bank as a CD Loan in accordance with the applicable Notice of Committed Borrowing. "CD Margin" has the meaning set forth in Section 2.07(b). "CD Reference Banks" means The First National Bank of Boston, The First National Bank of Chicago and Morgan Guaranty Trust Company of New York. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time pursuant to Sections 2.09 and 2.10. "Committed Loan" means a loan made by a Bank pursuant to Section 2.01. "Company" means The Gillette Company, a Delaware corporation, and its successors. "Company's 1993 Form 10-K" means the Company's annual report on Form 10-K for 1993, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Company's Latest Form 10-Q" means the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1994, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Consolidated Assets" means at any date the consolidated assets of the Company and its Consolidated Subsidiaries determined as of such date. "Consolidated Earnings Before Interest and Taxes" means, for any fiscal period, the sum of (i) Consolidated Net Income plus (ii) Gross Interest Expense plus (iii) to the extent deducted in determining Consolidated Net Income, provision for taxes on income, all determined on a consolidated basis for the Company and its Consolidated Subsidiaries for such fiscal period. "Consolidated Net Income" means, for any fiscal period, the net income (before preferred and common stock dividends) of the Company and its Consolidated Subsidiaries, determined on a consolidated basis for such fiscal period. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Company in its consolidated 3 financial statements if such statements were prepared as of such date. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person, and (vi) all Debt of others Guaranteed by such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Derivatives Obligations" of any Person means all obligations of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions, excluding any amounts which the Borrower is entitled to set-off against its obligations under applicable law. "Dollars" and the sign "$" mean lawful money of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City or Boston, Massachusetts are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Company and the Agent; provided that any Bank may so designate -------- separate Domestic Lending Offices for its Base Rate Loans, on the one 4 hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b). "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Election to Participate" means an Election to Participate substantially in the form of Exhibit G hereto. "Election to Terminate" means an Election to Terminate substantially in the form of Exhibit H hereto. "Eligible Subsidiary" means any Substantially-Owned Consolidated Subsidiary of the Company as to which an Election to Participate shall have been delivered to the Agent and as to which an Election to Terminate shall not have been delivered to the Agent. Each such Election to Participate and Election to Terminate shall be duly executed on behalf of such Substantially-Owned Consolidated Subsidiary and the Company in such number of copies as the Agent may request. The delivery of an Election to Terminate shall not affect any obligation of an Eligible Subsidiary theretofore incurred. The Agent shall promptly give notice to the Banks of the receipt of any Election to Participate or Election to Terminate. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute . "ERISA Group" means the Company, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at 5 its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Agent. "Euro-Dollar Loan" means a Committed Loan to be made by a Bank as a Euro-Dollar Loan in accordance with the applicable Notice of Committed Borrowing. "Euro-Dollar Margin" has the meaning set forth in Section 2.07(c). "Euro-Dollar Reference Banks" means the principal London offices of The First National Bank of Boston, Credit Suisse and Morgan Guaranty Trust Company of New York. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). "Event of Default" has the meaning set forth in Section 6.01. "Existing 1988 Agreement" means the Credit Agreement dated as of August 19, 1988, as amended and restated as of October 16, 1989 and as further amended December 10, 1990, among the Company, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/lOOth of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic -------- Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business 6 Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company of New York on such day on such transactions as determined by the Agent. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(ii)) or any combination of the foregoing. "Gross Interest Expense" means, for any fiscal period, the consolidated interest expense of the Company and its Consolidated Subsidiaries for such period (calculated without deducting or otherwise netting consolidated interest income of the Company and its Consolidated Subsidiaries). "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions, by "comfort letter" or other similar undertaking of support or otherwise) or (ii) entered into for the purpose of assuring in any other manner the holder of such Debt of the payment thereof or to protect such holder against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection - -------- or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Indemnitee" has the meaning set forth in Section 11.03(b). "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: -------- (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (c) below, be extended to the next succeeding Euro-Dollar Business Day unless such Euro- Dollar Business Day falls in another calendar 7 month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (2) with respect to each CD Borrowing, the period commencing on the date of such Borrowing and ending 30, 60, 90, or 180 days thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: -------- (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (b) below, be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (3) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending 30 days thereafter; Provided that: -------- (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (b) below be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (4) with respect to each Money Market LIBOR Borrowing, the period commencing on the date of such Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.03; provided that: -------- (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (c) below, be extended to the next succeeding Euro-Dollar Business Day unless such Euro- Dollar Business Day falls in another calendar 8 month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (5) with respect to each Money Market Absolute Rate Borrowing, the period commencing on the date of such Borrowing and ending such number of days thereafter (but not less than 15 days) as the Borrower may elect in accordance with Section 2.03; Provided that: -------- (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (b) below, be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). 9 "Material Debt" means Debt (other than the Notes) of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $50,000,000. "Material Financial Obligations" means a principal amount of Debt and/or payment obligations in respect of Derivatives Obligations of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, exceeding in the aggregate $50,000,000,. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $50,000,000. "Material Subsidiary" means any Subsidiary which either (A) is an Eligible Subsidiary or (B) has consolidated assets, together with its Subsidiaries, exceeding 5% of Consolidated Assets at the date of determination of its status hereunder. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Company and the Agent; provided that any Bank may from time to time by notice to the -------- Company and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(ii)). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(d). 10 "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Notes" means promissory notes of a Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of such Borrower to repay the Loans made to it, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 11.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. 11 "Pricing Schedule" means the Schedule attached hereto identified as such. "Prime Rate" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Refunding Borrowing" means a Committed Borrowing which, after application of the proceeds thereof, results in no net increase in the outstanding principal amount of Committed Loans made by any Bank to any Borrower. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having at least 66 2/3% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 66 2/3% of the aggregate unpaid principal amount of the Loans. "Revolving Credit Period" means the period from and including the Effective Date to but excluding the Termination Date. "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "Subsidiary" means a Subsidiary of the Company. "Substantially-Owned Consolidated Subsidiary" means any Consolidated Subsidiary not less than 90% of the outstanding shares of each class of capital stock or other ownership interests of which are at the time directly or indirectly owned by the Company. "Termination Date" means June 20, 1999, or, if such day is not a Euro- Dollar Business Day, the next preceding Euro-Dollar Business Day. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by 12 the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise ----------------------------------- specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Company notifies the Agent that the Company -------- wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Company that the Required Banks wish to amend Article V for such purpose), then the Company's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the ------------------- aggregation of Loans of one or more Banks to be made to a single Borrower pursuant to Article II on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" ---- is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article II under which participation therein is determined (i.e., a ---- "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the 13 Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend. During the Revolving Credit Period ------------------- each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Company or any Eligible Subsidiary pursuant to this Section from time to time in amounts such that the aggregate principal amount of Committed Loans by such Bank at any one time outstanding to all Borrowers shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $15,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b)) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, a Borrower may borrow under this Section, repay or, to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit Period under this Section. SECTION 2.02. Notice of Committed Borrowing. The Borrower shall give ----------------------------- the Agent notice (a "Notice of Committed Borrowing") not later than 10:15 A.M. (New York City time) on (x) the date of each Base Rate Borrowing, (y) the Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to be CD Loans, Base Rate Loans or Euro-Dollar Loans, and (d) in the case of a Fixed Rate Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. 14 SECTION 2.03. Money Market Borrowings. ------------------------ (a) The Money Market Option. In addition to Committed Borrowings ----------------------- pursuant to Section 2.01, any Borrower may, as set forth in this Section, request the Banks during the Revolving Credit Period to make offers to make Money Market Loans to such Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When a Borrower wishes to request -------------------------- offers to make Money Market Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 10:00 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and the Agent shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $15,000,000 or a larger multiple of $1,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Company and the Agent may agree) of any other Money Market Quote Request. 15 (c) Invitation for Money Market Quotes. Promptly upon receipt of a ---------------------------------- Money Market Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. (d) Submission and Contents of Money Market Quotes. (i) Each Bank may ---------------------------------------------- submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices in or pursuant to Section 11.01 not later than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and the Agent shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that -------- Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000 (y) may not exceed the principal amount of Money Market Loans 16 for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Agent shall promptly notify the Borrower ------------------ of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent's notice to the Borrower shall 17 specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted (f) Acceptance and Notice by Borrower. Not later than 10:15 A.M. (New --------------------------------- York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and the Agent shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: -------- (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $15,000,000 or a larger multiple of $1,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. (g) Allocation by Agent. If offers are made by two or more Banks with ------------------- the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as 18 possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. SECTION 2.04. Notice to Banks; Funding of Loans. --------------------------------- (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 12:00 Noon (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 11.01. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will make the funds so received from the Banks available to the Borrower at the Agent's aforesaid address. (c) If any Bank makes a new Loan hereunder to a Borrower on a day on which such Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed by such Borrower and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (b), or remitted by such Borrower to the Agent as provided in Section 2.12, as the case may be. (d) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the 19 Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. SECTION 2.05. Notes. (a) The Loans of each Bank to each Borrower shall ----- be evidenced by a single Note of such Borrower payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans to such Borrower. (b) Each Bank may, by notice to a Borrower and the Agent, request that its Loans of a particular type to such Borrower be evidenced by a separate Note of such Borrower in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to a "Note" or the "Notes" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(b) or 3.03(a), the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount, type and maturity of each Loan made by it to each Borrower and the date and amount of each payment of principal made with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note of any Borrower, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan to such Borrower then outstanding; provided that the failure of any -------- Bank to make any such recordation or endorsement shall not affect the obligations of any Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by each Borrower so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. Each Loan included in any Borrowing ----------------- shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear -------------- interest on the outstanding principal amount thereof, for each day from the date such Loan is made 20 until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the rate otherwise applicable to Base Rate Loans for such day. (b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to such Interest Period; provided that if any CD Loan or -------- any portion thereof shall, as a result of clause (2)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such portion shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the higher of (i) the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to the Interest Period for such Loan and (ii) the rate applicable to Base Rate Loans for such day. "CD Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate - ---------- * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1% 21 The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. (S) 327.3(e) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. 22 "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (d) Any overdue principal of or interest on any EuroDollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the higher of (i) the sum of 1% plus the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to the Interest Period for such Loan and (ii) the sum of 1% plus the Euro-Dollar Margin for such day plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than six months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro- Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 1% plus the rate applicable to Base Rate Loans for such day). (e) Subject to Section 8.01(ii), each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall 23 be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (f) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.08 FEES. ---- (a) Commitment Fee. During the Revolving Credit Period, the Company -------------- shall pay to the Agent for the account of the Banks ratably in proportion to their Commitments a commitment fee at the Commitment Fee Rate (determined daily in accordance with the Pricing Schedule) on the daily amount by which the aggregate amount of the Commitments exceeds the aggregate outstanding principal amount of the Loans. Such commitment fee shall acrue from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety). (b) Facility Fee. The Company shall pay to the Agent for the account ------------ of the Banks ratably a facility fee at the Facility Fee Rate (determined daily in accordance with the Pricing Schedule). Such facility fee shall accrue (i) from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily aggregate amount of the Commitments (whether used or unused) and (ii) from and including the Termination Date or such earlier date of termination to but excluding the date the Loans shall be repaid in their entirety, on the daily aggregate outstanding principal amount of the Loans. (c) Payments. Accrued fees under this Section shall be payable -------- quarterly on each March 31, June 30, 24 September 30 and December 31, beginning with September 30, 1994, and upon the date of termination of the Commitments in their entirety (and, if later, the date the Loans shall be repaid in their entirety). SECTION 2.09. Optional Termination or Reduction of Commitments. During ------------------------------------------------ the Revolving Credit Period, the Company may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple thereof, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. SECTION 2.10. Scheduled Termination of Commitments. The Commitments ------------------------------------ shall terminate on the Termination Date, and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.11. Optional Prepayments. (a) A Borrower may, by notice to -------------------- the Agent prior to 10:00 A.M. (New York City time) at least one Domestic Business Day before the date for which prepayment under this Section is sought, prepay any Base Rate Borrowing (or any Money Market LIBOR Borrowing bearing interest at the Base Rate pursuant to Section 8.01(ii)) by it in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing. (b) Except as provided in Section 8.02, no Borrower may prepay all or any portion of the principal amount of any Fixed Rate Loan prior to the maturity thereof. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.12. General Provisions as to Payments. (a) The Borrowers --------------------------------- shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Dollars in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 11.01. The Agent will promptly distribute to each 25 Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro- Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro- Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from a Borrower prior to the date on which any payment is due from such Borrower to the Banks hereunder that such Borrower will not make such payment in full, the Agent may assume that such Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that such Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.13. Funding Losses. If a Borrower makes any payment of -------------- principal with respect to any Fixed Rate Loan (pursuant to Article VI or VIII or otherwise) on any day other than the last day of the Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.07(d), or if a Borrower fails to borrow any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), such Borrower shall reimburse each Bank on demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow, provided that such Bank shall have -------- delivered to such Borrower a certificate as to the amount of such loss or 26 expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.14. Computation of Interest and Fees. Interest based on the -------------------------------- Prime Rate and commitment fees hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and all facility fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.15. Judgment Currency. If for the purpose of obtaining ----------------- judgment in any court it is necessary to convert a sum due from any Borrower hereunder or under any of the Notes in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase Dollars with such other currency at the Agent's New York office on the Domestic Business Day preceding that on which final judgment is given. The obligations of each Borrower in respect of any sum due to any Bank or the Agent hereunder or under any Note shall, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Domestic Business Day following receipt by such Bank or the Agent (as the case may be) of any sum adjudged to be so due in such other currency such Bank or the Agent (as the case may be) may in accordance with normal banking procedures purchase Dollars with such other currency; if the amount of Dollars so purchased is less than the sum originally due to such Bank or the Agent, as the case may be, in Dollars, each Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or the Agent, as the case may be, against such loss, and if the amount of Dollars so purchased exceeds (a) the sum originally due to any Bank or the Agent, as the case may be, and (b) any amounts shared with other Banks as a result of allocations of such excess as a disproportionate payment to such Bank under Section 11.04, such Bank or the Agent, as the case may be, agrees to remit such excess to the appropriate Borrower. SECTION 2.16. Foreign Withholding Taxes and Other Costs. (a) All ----------------------------------------- payments by an Eligible Subsidiary of principal of and interest on its Notes and of all other amounts payable under this Agreement are payable without deduction for or on account of any present or future taxes, duties or other charges levied or imposed by the government 27 of any jurisdiction outside the United States or by any political subdivision or taxing authority thereof or therein through withholding or deduction with respect to any such payments. If any such taxes, duties or other charges are so levied or imposed, such Eligible Subsidiary will pay additional interest or will make additional payments in such amounts so that every net payment of principal of and interest on its Notes and of all other amounts payable by it under this Agreement, after withholding or deduction for or on account of any such present or future taxes, duties or other charges, will not be less than the amount provided for herein. Such Eligible Subsidiary shall furnish promptly to the Agent official receipts evidencing such withholding or deduction. (b) If the cost to any Bank of making or maintaining any Loan to an Eligible Subsidiary is increased, or the amount of any sum received or receivable by any Bank (or its Applicable Lending Office) is reduced by an amount deemed by such Bank to be material, by reason of the fact that such Eligible Subsidiary is incorporated in, or conducts business in, a jurisdiction outside the United States the Borrower shall indemnify such Bank for such increased costs or reduction within 15 days after demand by such Bank (with a copy to the Agent and the Company). A certificate of such Bank claiming compensation under this subsection (b) and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. (c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge that will entitle such Bank to additional interest or payments pursuant to subsection (b) and will designate a different Applicable Lending Office, if, in the judgment of such Bank, such designation will avoid the need for, or reduce the amount of, such compensation and will not be otherwise disadvantageous to such Bank. SECTION 2.17. Regulation D Compensation. Each Bank may require any ------------------------- Borrower to pay, contemporaneously with each payment of interest on the Euro- Dollar Loans to such Borrower, additional interest on the related Euro-Dollar Loan to such Borrower of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i) (A) the applicable London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over ----- (ii) the applicable London Interbank Offered Rate. Any Bank wishing to require payment of such additional interest (x) shall so notify such Borrower and the Agent, in which case such additional interest on the Euro-Dollar Loans to such Borrower of such Bank shall be payable to such Bank at 28 the place indicated in such notice with respect to each Interest Period commencing at least three Euro-Dollar Business Days after the giving of such notice, and (y) shall notify such Borrower at least five Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans to such Borrower of the amount then due it under this Section. SECTION 2.18. Withholding Tax Exemption. At least five Domestic ------------------------- Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Bank, each Bank that is not incorporated under the laws of the United States or a state thereof agrees that it will deliver to each of the Company and the Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Bank is entitled to receive payments from the Company under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Company and the Agent two additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Company or the Agent, in each case certifying that such Bank is entitled to receive payments from the Company under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank advises the Company and the Agent that it is not capable of receiving such payments without any deduction or withholding of United States federal income tax. ARTICLE III CONDITIONS SECTION 3.01. Effectiveness. This Agreement shall become effective on ------------- the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 11.05): 29 (a) receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex, facsimile transmission or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Agent for the account of each Bank of a duly executed Note of the Company dated on or before the Effective Date complying with the provisions of Section 2.05; (c) receipt by the Agent of an opinion of the General Counsel of the Company (or other counsel for the Company reasonably satisfactory to the Agent), substantially in the form of Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) receipt by the Agent of an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (e) receipt by the Agent of all documents it may reasonably request relating to the existence of the Company, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent; and (f) receipt by the Agent of evidence satisfactory to it of the payment of all amounts payable under the Existing 1988 Agreement; provided that this Agreement shall not become effective or be binding on any - -------- party hereto unless all of the foregoing conditions are satisfied not later than June 30, 1994. The Agent shall promptly notify the Company and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. The Banks that are parties to the Existing 1988 Agreement, comprising the "Required Banks" as defined therein, and the Borrowers agree to eliminate the requirement under Section 2.09 of the Existing 1988 Agreement that notice of optional termination of the commitments thereunder be given three Domestic Business Days in advance. The Company hereby irrevocably notifies Morgan 30 Guaranty Trust Company of New York, in its capacity as agent under the Existing 1988 Agreement, of the termination of the commitments thereunder in their entirety on the Effective Date of this Agreement in accordance with Section 2.09 of the Existing 1988 Agreement as amended hereby. SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on ---------- the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (b) the fact that, immediately after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (c) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (d) the fact that the representations and warranties of the Company and the Borrower (if other than the Company) contained in this Agreement (except, in the case of a Refunding Borrowing, the representations and warranties set forth in Sections 4.05 and 4.07 as to any matter which has theretofore been disclosed in writing by the Company to the Banks) shall be true in all material respects on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Company and the Borrower (if other than the Company) on the date of such Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section. SECTION 3.03. First Borrowing by Each Eligible Subsidiary. The ------------------------------------------- obligation of each Bank to make a Loan on the occasion of the first Borrowing by each Eligible Subsidiary is subject to the satisfaction of the following further conditions: (a) receipt by the Agent for the account of each Bank of a duly executed Note of such Eligible Subsidiary, dated on or before the date of such Borrowing complying with the provisions of Section 2.05; 31 (b) receipt by the Agent of an opinion of counsel for such Eligible Subsidiary acceptable to the Agent, substantially in the form of Exhibit I hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; and (c) receipt by the Agent of all documents which it may reasonably request relating to the existence of such Eligible Subsidiary, the corporate authority for and the validity of the Election to Participate of such Eligible Subsidiary, this Agreement and the Notes of such Eligible Subsidiary, and any other matters relevant thereto, all in form and substance satisfactory to the Agent. The documents referred to in this Section 3.03 shall be delivered to the Agent by an Eligible Subsidiary no later than the date of the first Borrowing by such Eligible Subsidiary. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants that: SECTION 4.01. Corporate Existence and Power. The Company is a ----------------------------- corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.02. Corporate and Governmental Authorization; Contravention. ------------------------------------------------------- The execution, delivery and performance by the Company of this Agreement and its Notes are within the Company's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Company or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and -------------- binding agreement of the Company and 32 its Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Company, in each case enforceable in accordance with their respective terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. SECTION 4.04. Financial Information. (a) The consolidated balance --------------------- sheet of the Company and its Consolidated Subsidiaries as of December 31, 1993 and the related consolidated statements of income and cash flows for the fiscal year then ended, reported on by KPMG Peat Marwick and set forth in the Company's Annual Report to Shareholders for 1993 incorporated by reference in the Company's 1993 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries as of March 31, 1994 and the related unaudited consolidated statements of income and cash flows for the three months then ended, set forth in the Company's Latest Form 10-Q, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such three- month period (subject to normal year-end adjustments). SECTION 4.05. No Material Adverse Change. Since March 31, 1994 there --------------------------- has been no material adverse change in the business, operations or financial condition of the Company and its Consolidated Subsidiaries, considered as a whole. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group ---------------------- has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or 33 Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, if such failure or amendment has resulted, or there is a reasonable possibility that it could result, in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. SECTION 4.07. Litigation. Except as disclosed in the Company's 1993 ---------- Form 10-K and the Company's Latest Form 10-Q, there is no action, suit, investigation or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, operations or financial condition of the Company and its Consolidated Subsidiaries, taken as a whole, or which in any manner draws into question the validity of this Agreement or the Notes. SECTION 4.08. Taxes. The Company has filed (or has obtained extensions ----- of the time by which it is required to file) all United States federal income tax returns and all other material tax returns required to be filed by it and has paid all taxes shown due on the returns so filed as well as all other material taxes, assessments and governmental charges which have become due, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. SECTION 4.09. Full Disclosure. All information heretofore furnished by --------------- the Company to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Company to the Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified. The Company has disclosed to the Banks in writing any and all facts which materially and adversely affect or may affect (to the extent the Company can now reasonably foresee), the business, operations or financial condition of the Company and its Consolidated Subsidiaries, taken as a whole, or the ability of the Company to perform its obligations under this Agreement. 34 ARTICLE V COVENANTS The Company agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Company will deliver to each of the ----------- Banks: (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by KPMG Peat Marwick or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company, (i) a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such quarter, (ii) the related consolidated statements of income for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter and (iii) the related consolidated statement of cash flows for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in cases (ii) and (iii) in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the principal accounting officer of the Company; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the principal accounting officer of the Company (i) setting forth in reasonable detail the calculations required to establish whether the Company was in compliance with the requirements of Section 5.05 on the date of such financial statements and (ii) stating 35 whether there exists on the date of such certificate any Default and, if any Default then exists, setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements (i) stating whether anything has come to their attention to cause them to believe that there existed on the date of such statements any Default and (ii) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to clause (c) above; (e) forthwith upon the occurrence of any Default, a certificate of the chief financial officer or the principal accounting officer of the Company setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports which the Company shall have filed with the Securities and Exchange Commission; (h) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might reasonably constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) 36 in respect of, or appoint a trustee to administer any Plan, a copy of such notice; or (iv) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement, if such failure or amendment has resulted, or there is a reasonable possibility that it could result, in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code, a certificate of the chief financial officer, the principal accounting officer or the treasurer of the Company setting forth details as to such occurrence and action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take; (i) promptly upon any change in the rating by Standard & Poor's Corporation, Inc. or Moody's Investors Service, Inc. of the Company's outstanding public senior unsecured long-term debt securities or the Company's outstanding commercial paper, a notice reporting such change and stating the date on which such change was announced by the relevant rating agency; and (j) from time to time such additional information regarding the business, operations or financial condition of the Company and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Maintenance of Property; Insurance. The Company will ---------------------------------- keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted; will maintain, and will cause each Subsidiary to maintain (either in the name of the Company or in such Subsidiary's own name) with financially sound and reputable insurance companies, insurance on all their property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business; and will furnish to the Banks, upon written request from the Agent, such information as may be reasonably requested as to the insurance carried. SECTION 5.03. Conduct of Business and Maintenance of Existence. The ------------------------------------------------ Company will preserve, renew and keep in full force and effect its corporate existence and its rights, privileges and franchises necessary or desirable in the normal conduct of business. 37 SECTION 5.04. Compliance with Laws. The Company will comply, and cause -------------------- each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, ERISA and the rules and regulations thereunder) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 5.05. Earnings to Interest Expense Ratio. At the end of each ---------------------------------- fiscal quarter of the Company, the ratio of (x) Adjusted Consolidated Earnings Before Interest and Taxes for the four fiscal quarters then ended to (y) Adjusted Gross Interest Expense for the four fiscal quarters then ended will not be less than 6.50:1. SECTION 5.06. Negative Pledge. Neither the Company nor any Subsidiary --------------- will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date hereof securing Debt outstanding on the date hereof in an aggregate principal amount not exceeding $25,000,000; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within -------- 90 days after the acquisition thereof; (d) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Company or a Subsidiary and not created in contemplation of such event; (e) any Lien existing on any asset prior to the acquisition thereof by the Company or a Subsidiary and not created in contemplation of such acquisition; (f) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is -------- not secured by any additional assets; 38 (g) any Lien arising pursuant to any order of attachment, distraint or similar legal process arising in connection with court proceedings so long as the execution or other enforcement thereof is effectively stayed and the claims secured thereby are being contested in good faith by appropriate proceedings; (h) Liens incidental to the conduct of its business or the ownership of its assets which (i) do not secure Debt or Derivatives Obligations and (ii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (i) Liens on cash and cash equivalents securing Derivatives Obligations, provided that the aggregate amount of cash and cash -------- equivalents subject to such Liens may at no time exceed $25,000,000; and (j) Liens not otherwise permitted by the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not to exceed 5% of Consolidated Assets. SECTION 5.07. Consolidations Mergers and Sales of Assets. The Company ------------------------------------------ will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any other Person; provided that the Company may merge with a Subsidiary if (A) the Company -------- is the corporation surviving such merger and (B) immediately after giving effect to such merger, no Default shall have occurred and be continuing. SECTION 5.08. Material Subsidiary Cash Flow. The Company will not, and ----------------------------- will not permit any Material Subsidiary to, enter into any arrangement which restricts the ability of any Material Subsidiary, directly or indirectly, to make funds available to the Company, whether by way of dividend or other distribution, advance or otherwise. SECTION 5.09. Use of Proceeds. The proceeds of Loans hereunder will be --------------- used by the Borrowers for their general corporate purposes, including without limitation, any purchase, redemption, retirement or acquisition of outstanding shares of capital stock of the Company ("Stock Repurchases"). Except for permitted Stock Repurchases referred to in the immediately preceding sentence, none of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of 39 purchasing or carrying any "margin stock" within the meaning of Regulation U. ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. If one or more of the following ----------------- events ("Events of Default") shall have occurred and be continuing: (a) any principal of any Loan shall not be paid when due, or any interest, any fees or any other amount payable hereunder shall not be paid within five days of the due date thereof; (b) the Company shall fail to observe or perform any covenant contained in Sections 5.05 to 5.09, inclusive; (c) any Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after written notice thereof has been given to the Company by the Agent at the request of any Bank; (d) any representation, warranty, certification or statement made or deemed to have been made by any Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Company or any Subsidiary shall fail to make any payment in respect of any Material Debt or any Material Financial Obligations when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; (g) the Company or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, 40 insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Company or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due (including any approved extensions) an amount or amounts aggregating in excess of $50,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $50,000,000; (j) a judgment or order for the payment of money in excess of $50,000,000 shall be rendered against the 41 Company or any Material Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or (k) any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 30% or more of the outstanding shares of voting stock of the Company; or, during any two-year period, the individuals who were serving on the board of directors of the Company at the beginning of such period or who were nominated for election or elected to such board during such period with the affirmative vote of at least two-thirds of such individuals still in office cease to constitute a majority of such board; then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Company terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Company declare the Notes (together with accrued interest thereon and all accrued fees and other amounts payable by any Borrower hereunder) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower; provided that in the case of -------- any of the Events of Default specified in clause (g) or (h) above with respect to any Borrower, without any notice to any Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon and all accrued fees and other amounts payable by any Borrower hereunder) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower. SECTION 6.02. Notice of Default. The Agent shall give notice to the ----------------- Company under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. 42 ARTICLE VII THE AGENT SECTION 7.01. Appointment and Authorization. Each Bank irrevocably ----------------------------- appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of -------------------- New York shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with any Borrower or any Subsidiary or affiliate of any Borrower as if it were not the Agent hereunder. SECTION 7.03. Action by Agent. The obligations of the Agent hereunder --------------- are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI. SECTION 7.04. Consultation with Experts. The Agent may consult with ------------------------- legal counsel (who may be counsel for any Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Agent. Neither the Agent nor any of its ------------------- affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks (or when expressly required hereby, all the Banks) or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of any Borrower; (iii) the satisfaction of any condition specified 43 in Article III, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex, facsimile transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance --------------- with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrowers) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with its role as Agent hereunder or any action taken or omitted by such indemnitees in connection therewith. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, --------------- independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Agent. The Agent may resign at any time by ---------------- giving notice thereof to the Banks and the Company. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this 44 Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. SECTION 7.09. Agent's Fee. The Company shall pay to the Agent for its ----------- own account fees in the amounts and at the times previously agreed upon between the Company and the Agent. ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or ------------------------------------------------- Unfair. If on or prior to the first day of any Interest Period for any Fixed - ------ Rate Borrowing: (a) the Agent is advised by the Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of a Committed Borrowing, Banks having 50% or more of the aggregate amount of the Commitments advise the Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Agent shall forthwith give notice thereof to the Borrowers and the Banks, whereupon until the Agent notifies the Borrowers that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make CD Loans or EuroDollar Loans, as the case may be, shall be suspended. Unless a Borrower notifies the Agent at least one Domestic Business Day before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. 45 SECTION 8.02. Illegality. If, on or after June 21, 1994, the adoption ---------- of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to any Borrower and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and such Borrower, whereupon until such Bank notifies such Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans to such Borrower shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to such Borrower to maturity and shall so specify in such notice, such Borrower shall immediately prepay in full the then outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, such Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after --------------------------------- (x) June 21, 1994, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: 46 (i) shall subject any Bank (or its Applicable Lending Office) to any tax, duty or other charge with respect to its Fixed Rate Loans, its Notes or its obligation to make Fixed Rate Loans, or shall change the basis of taxation of payments to any Bank (or its Lending Office) of the principal of or interest on its Fixed Rate Loans or any other amounts due under this Agreement in respect of its Fixed Rate Loans or its obligation to make Fixed Rate Loans (except for changes in the rate of tax on the overall net income of such Bank or its Applicable Lending Office imposed by the jurisdiction in which such Bank's principal executive office or Applicable Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (i) with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement reflected in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States for market certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Notes or its obligation to make Fixed Rate Loans; and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after June 21, 1994, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any 47 such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after June 21, 1994, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate --------------------------------------------------- Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans to any - ----- Borrower has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) with respect to its CD Loans or Euro-Dollar Loans and a Borrower shall, by at least three Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies such Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist: (a) all Loans to such Borrower which would otherwise be made by such Bank as CD Loans or Euro-Dollar Loans, as the case may be, shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and 48 (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, to such Borrower has been repaid, all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans to such Borrower instead. ARTICLE IX REPRESENTATIONS AND WARRANTIES OF ELIGIBLE SUBSIDIARIES Each Eligible Subsidiary shall be deemed by the execution and delivery of its Election to Participate to have represented and warranted as of the date thereof that: SECTION 9.01. Corporate Existence and Power. It is a corporation duly ----------------------------- incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as then conducted. SECTION 9.02. Corporate and Governmental Authorization: Contravention. ------------------------------------------------------- The execution and delivery by it of its Election to Participate and its Notes, and the performance by it of this Agreement and its Notes, are within its corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of its certificate of incorporation or by-laws or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or such Eligible Subsidiary or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. SECTION 9.03. Binding Effect. This Agreement constitutes a valid and -------------- binding agreement of such Eligible Subsidiary and its Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of such Eligible Subsidiary, in each case enforceable in accordance with their respective terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. 49 SECTION 9.04. Taxes. Except as disclosed to the Banks in writing prior ----- to the delivery of such Election to Participate, there is no income, stamp or other tax of any country, or any taxing authority thereof or therein, imposed by or in the nature of withholding or otherwise, which is imposed on any payment to be made by such Eligible Subsidiary pursuant hereto or on its Notes, or is imposed on or by virtue of the execution, delivery or enforcement of its Election to Participate, this Agreement or its Notes. ARTICLE X GUARANTY SECTION 10.01. The Guaranty. The Company hereby unconditionally ------------ guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by any Eligible Subsidiary pursuant to this Agreement, and the full and punctual payment of all other amounts payable by any Eligible Subsidiary under this Agreement. Upon failure by any Eligible Subsidiary to pay punctually any such amount, the Company shall forthwith on demand pay the amount not so paid at the place and in the manner specified in this Agreement. SECTION 10.02. Guaranty Unconditional. The obligations of the Company ---------------------- hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of any Eligible Subsidiary under this Agreement or any Note, by operation of law or otherwise; (ii) any modification or amendment of or supplement to this Agreement or any Note; (iii) any release, impairment, non-perfection or invalidity of any direct or indirect security for any obligation of any Eligible Subsidiary under this Agreement or any Note; (iv) any change in the corporate existence, structure or ownership of any Eligible Subsidiary, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Eligible Subsidiary or 50 its assets, or any resultant release or discharge of the obligations of any Eligible Subsidiary hereunder or under any Note; (v) the existence of any claim, set-off or other rights which the Company may have at any time against any Eligible Subsidiary, the Agent, any Bank or any other Person, whether in connection herewith or any unrelated transactions, provided that nothing herein shall prevent the -------- assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against any Eligible Subsidiary for any reason of this Agreement or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by any Eligible Subsidiary of the principal of or interest on any Note or any other amount payable by it under this Agreement; or (vii) any other act or omission to act or delay of any kind by any Eligible Subsidiary, the Agent, any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to the Company's obligations hereunder. SECTION 10.03. Discharge Only Upon Payment In Full; Reinstatement In ----------------------------------------------------- Certain Circumstances. The Company's obligations hereunder shall remain in full - --------------------- force and effect until the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts payable by the Company and each Eligible Subsidiary under this Agreement shall have been paid in full. If at any time any payment of any principal of or interest on any Note or any other amount payable by any Eligible Subsidiary under this Agreement is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of any Eligible Subsidiary or otherwise, the Company's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. SECTION 10.04. Waiver by the Company. The Company irrevocably waives --------------------- acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against any Eligible Subsidiary or any other Person. SECTION 10.05. No Subrogation. If the Company makes any payment under --------------- this Article X in respect of any 51 obligation of an Eligible Subsidiary, the Company shall not be subrogated to the rights of the holder of such obligation against such Eligible Subsidiary with respect to such payment. SECTION 10.06. Stay of Acceleration. In the event that acceleration of -------------------- the time for payment of any amount payable by any Eligible Subsidiary under this Agreement or the Notes is stayed upon the insolvency, bankruptcy or reorganization of such Eligible Subsidiary, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Company hereunder forthwith on demand by the Agent made at the request of the Required Banks. ARTICLE XI MISCELLANEOUS SECTION 11.01. Notices. All notices, requests and other communications ------- to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of any Borrower or the Agent, at its address, facsimile number or telex number set forth on the signature pages hereof (or, in the case of an Eligible Subsidiary, its Election to Participate), (y) in the case of any Bank, at its address, facsimile number or telex number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address, facsimile number or telex number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (iii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iv) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent under -------- Article II or Article VIII shall not be effective until received. SECTION 11.02. No Waivers. No failure or delay by the Agent or any ---------- Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise 52 thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 11.03. Expenses: Indemnification, (a) The Company shall pay ------------------------- (i) all out-of-pocket expenses of the Agent, including reasonable fees and disbursements of special counsel for the Agent, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent or any Bank, including (without duplication) the reasonable fees and disbursements of outside counsel and the allocated cost of inside counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. The Company shall indemnify each Bank against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Agreement, any Election to Participate or Election to Terminate or any Note. (b) The Company agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to -------- be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. SECTION 11.04. Sharing of Set-Offs. Each Bank agrees that if it shall, ------------------- by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to the Note of any Borrower held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to the Note of such Borrower held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the 53 Notes of such Borrower held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes of such Borrower held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right -------- of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of a Borrower other than its indebtedness hereunder. Each Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of such Borrower in the amount of such participation. SECTION 11.05. Amendments and Waivers. Any provision of this Agreement ---------------------- or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that -------- no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement or (v) change the provisions of Article X; provided further that no such amendment, waiver or modification -------- ------- shall, unless signed by an Eligible Subsidiary, (w) subject such Eligible Subsidiary to any additional obligation, (x) increase the principal of or rate of interest on any outstanding Loan of such Eligible Subsidiary, (y) accelerate the stated maturity of any outstanding Loan of such Eligible Subsidiary or (z) change this proviso. -------- SECTION 11.06. Successors and Assigns. (a) The provisions of this ----------- Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that no Borrower may assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. 54 (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrowers and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrowers and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrowers hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided -------- that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 11.05 without the consent of the Participant. The Borrowers agree that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part (equivalent to an initial Commitment of not less than $5,000,000) of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit J hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Company and the Agent; provided that if an Assignee is an affiliate of such transferor Bank -------- or was a Bank immediately prior to such assignment, no such consent shall be required, but the Assignee and the transferor Bank shall provide prompt notice of such assignment, together with information concerning addresses and related information with respect to the Assignee, to the Agent; and provided further -------- ------- that such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall 55 have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrowers shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States or a state thereof, it shall deliver to the Company and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.18. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 or 11.03(a) than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Company's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (f) If any Reference Bank transfers its Notes to an unaffiliated institution, the Agent shall, in consultation with the Company and with the consent of the Required Banks, appoint another Bank to act as a Reference Bank hereunder. SECTION 11.07. Collateral. Each of the Banks represents to the Agent ---------- and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 11.08. Governing Law: Submission to Jurisdiction: Service of ----------------------------------------------------- Process. This Agreement, each Election to Participate, each Election to - ------- Terminate and each Note shall be governed by and construed in accordance with the laws of the State of New York. Each Borrower hereby submits to the nonexclusive jurisdiction of the United 56 States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Each Borrower hereby appoints CT Corporation System its authorized agent to accept and acknowledge service of any and all processes which may be served in any suit, action or proceeding of the nature referred to in this Section 11.08 and consents to process being served in any such suit, action or proceeding upon CT Corporation System in any manner or by the mailing of a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to such Borrower's address referred to in Section 11.01; and (d) agrees that such service (i) shall be deemed in every respect effective service of process upon it in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon and personal delivery to it. A copy of any summons or complaint served on an Eligible Subsidiary pursuant to the foregoing shall be sent to the Company by registered or certified mail. Each Eligible Subsidiary represents and warrants that CT Corporation System has agreed in writing to accept such appointment and that true copies of such acceptance will be furnished to the Agent prior to or concurrently with delivery of such Eligible Subsidiary's Election to Participate. Nothing in this Section 11.08 shall affect the right of any Bank to serve process in any manner permitted by law or limit the right of any Bank to bring proceedings against the Company or any Eligible Subsidiary in the courts of any jurisdiction or jurisdictions. SECTION 11.09. Counterparts: Integration. This Agreement may be signed ------------------------- in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 11.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENT -------------------- AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 57 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. THE GILLETTE COMPANY By ------------------------------ Title: Vice President and Treasurer Prudential Tower Building Boston, MA 02199 Attn: Treasurer Telex number: 6817060 GILCOUW Facsimile number: (617) 421-7699
Commitments - ----------- $45,500,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By ------------------------------ Title: 60 Wall Street New York, NY 10260-0060 Attn: Loan Department Telex number: 177615 MGT UT Facsimile number: (212) 648-5018
58
Commitments - ----------- $38,500,000 CREDIT SUISSE By ------------------------------- Title: DEMIAN M. GAGE KRISTINA CATLIN ASSOCIATE ASSOCIATE $35,000,000 THE FIRST NATIONAL BANK OF BOSTON By ------------------------------- Title: $35,000,000 THE FIRST NATIONAL BANK OF CHICAGO By ------------------------------- Title: $21,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By ------------------------------- Title: $21,000,000 THE BANK OF NOVA SCOTIA By ------------------------------- Title: $21,000,000 BANQUE PARIBAS By ------------------------------- Title:
59
Commitments - --------------- $21,000,000 CHEMICAL BANK By ------------------------------- Title: $21,000,000 FLEET BANK OF MASSACHUSETTS, N.A. By ------------------------------- Title: $21,000,000 SHAWMUT BANK N.A. By ------------------------------- Title: $14,000,000 MELLON BANK, N.A. By ------------------------------- Title: $14,000,000 NATIONAL WESTMINSTER BANK PLC By ------------------------------- Title: $14,000,000 NATIONSBANK OF NORTH CAROLINA, N.A. By ------------------------------- Title:
60
Commitments - --------------- $14,000,000 ROYAL BANK OF CANADA By ------------------------------- Title: $14,000,000 WACHOVIA BANK OF GEORGIA, N.A. By ------------------------------- Title: - ----------------- Total Commitments $350,000,000 ============ MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By ------------------------------- Title: 60 Wall Street New York, New York 10260-0060 Attention: Loan Department Telex number: 177615 MGT UT Facsimile number: (212) 648-5018
61 PRICING SCHEDULE The "Euro-Dollar Margin", "CD Margin", "Commitment Fee Rate" and "Facility Fee Rate" for any day are the respective per annum percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day:
================================================================================ Level Level Level Level Level Status I II III IV V ================================================================================ Commitment Fee Rate .0250 .0250 .0250 .0250 .0500 - -------------------------------------------------------------------------------- Facility Fee Rate .0750 .0900 .1250 .2000 .2500 - -------------------------------------------------------------------------------- Euro-Dollar Margin If Utilization is equal to or less than 50% .1750 .2850 .3250 .3625 .4375 If Utilization exceeds 50% .2500 .2850 .3250 .3625 .4375 - -------------------------------------------------------------------------------- CD Margin If Utilization is equal to or less than 50% .3000 .4100 .4500 .4875 .5625 If Utilization exceeds 50% .3750 .4100 .4500 .4875 .5625 ================================================================================
For purposes of this Schedule, the following terms have the following meanings: 62 "Level I Status" exists at any date if, at such date, the Company's long-term debt is rated A or higher by S&P or A2 or higher by Moody's. "Level II Status" exists at any date if, at such date, the Company's long-term debt is rated A- by S&P and A3 by Moody's. "Level III Status" exists at any date if, at such date, (i) the Company's long-term debt is rated BBB+ or higher by S&P or Baa1 or higher by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Company's long-term debt is rated BBB or higher by S&P or Baa2 or higher by Moody's and (ii) none of Level I Status, Level II Status and Level III Status exists. "Level V Status" exists at any date if, at such date, no other Status exists. "Moody's" means Moody's Investors Service, Inc. "S&P" means Standard & Poor's Corporation. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status exists at any date. "Utilization" means at any date the percentage equivalent of a fraction (i) the numerator of which is the aggregate outstanding principal amount of the Loans at such date, after giving effect to any borrowing or payment on such date, and (ii) the denominator of which is the aggregate amount of the Commitments at such date, after giving effect to any reduction of the Commitments on such date. For purposes of this Schedule, if for any reason any Loans remain outstanding after termination of the Commitments, the utilization for each date on or after the date of such termination shall be deemed to be greater than 50%. The credit ratings to be utilized for purposes of this Schedule are those assigned to the senior unsecured long-term debt securities of the Company without third-party credit enhancement, and any rating assigned to any other debt security of the Company shall be disregarded. The 63 rating in effect at any date is that in effect at the close of business on such date. 64 EXHIBIT A NOTE New York, New York , 19 For value received, [name of Borrower], a [jurisdiction of incorporation] corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the last day of the Interest Period relating to such Loan. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation -------- or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Multi-Year Credit Agreement dated as of June 21, 1994 among The Gillette Company, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. The Gillette Company has, pursuant to the provisions of the Credit Agreement, unconditionally guaranteed the payment in full of the principal of and interest on this note.* [NAME OF BORROWER] BY ------------------------- Title - -------------------- * To be deleted in case of Notes executed and delivered by the Company. Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL
- -------------------------------------------------------------------------------- Amount of Amount of Type of Principal Maturity Notation Date Loan Loan Repaid Date Made by - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
EXHIBIT B Form of Money Market Quote Request ---------------------------------- [Date] To: Morgan Guaranty Trust Company of New York (the "Agent") From: [Name of Borrower] Re: Multi-Year Credit Agreement (the "Credit Agreement") dated as of June 21, 1994 among The Gillette Company, the Banks listed on the signature pages thereof and the Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: ---------------------------------------- Principal Amount* Interest Period** Maturity Date - ---------------- --------------- ------------- $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] - ---------------- *Amount must be $15,000,000 or a larger multiple of $1,000,000. **Not less than one month (LIBOR Auction) or not less than 15 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. Terms used herein have the meanings assigned to them in the Credit Agreement. [NAME OF BORROWER] By ---------------------------- Title: EXHIBIT C Form of Invitation for Money Market Quotes ------------------------------------------ To: [Name of Bank] Re: Invitation for Money Market Quotes to [Name of Borrower] (the "Borrower") Pursuant to Section 2.03 of the Multi-Year Credit Agreement dated as of June 21, 1994 among The Gillette Company, the Banks parties thereto and the undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing( s): Date of Borrowing: ------------------ Principal Amount Interest Period Maturity Date - ---------------- --------------- ------------- $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [2:00 P.M.] [9:15 A.M.] (New York City time) on [date]. MORGAN GUARANTY TRUST COMPANY OF NEW YORK By ------------------------- Authorized Officer EXHIBIT D Form of Money Market Quote -------------------------- To: Morgan Guaranty Trust Company of New York, as Agent Re: Money Market Quote to [Name of Borrower] (the "Borrower") In response to your invitation on behalf of the Borrower dated _________, _____ , 19 , we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ------------------------------------------------- 2. Person to contact at Quoting Bank: ------------------------------- 3. Date of Borrowing: * -------------------- 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Money Market Amount** Period*** [Margin****] [Absolute Rate*****] - --------- --------- ---------------------------------- $ $ [Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $ .]** ----------- ---------- * As specified in the related Invitation. ** Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the (notes continued on following page) We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Multi-Year Credit Agreement dated as of June 21, 1994 among The Gillette Company, the Banks listed on the signature pages thereof and yourselves, as Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated: By: ----------------- --------------------------- Authorized Officer - ------------- amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. *** Not less than one month or not less than 15 days, as specified in the related Invitation. No more than five bids are permitted for each Interest Period. **** Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/ 10,000 of 1%) and specify whether "PLUS" or "MINUS". ***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%). EXHIBIT E OPINION OF COUNSEL FOR THE COMPANY ----------------------- [Effective Date] To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260 Dear Sirs: I am Vice Chairman of the Board of The Gillette Company (the "Company"), and I am rendering this opinion pursuant to Section 3.01(c) of the Multi-Year Credit Agreement dated as of June 21, 1994 among the Company, the banks parties thereto and Morgan Guaranty Trust Company of New York, as Agent (the "Credit Agreement"). Terms defined in the Credit Agreement are used herein as therein defined. I have examined or caused to be examined by counsel retained by or on the staff of the Company, among other things, originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted or have had conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. I am admitted to practice in the State of Ohio and the Commonwealth of Massachusetts. No opinion is expressed herein with respect to or as to the effect of any laws other than the laws of the Commonwealth of Massachusetts, the federal laws of the United States of America and the General Corporation Law of the State of State of Delaware. Upon the basis of the foregoing, I am of the opinion that: 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 2. The execution, delivery and performance by the Company of the Credit Agreement and the Notes issued by it are within the Company's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Company or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company and known to me or, to the best of my knowledge, result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. 3. The provision in Section 11.08 of the Credit Agreement that the Credit Agreement and each Note shall be construed in accordance with and governed by the law of the State of New York is a valid choice of law provision under Massachusetts law and should be respected by a court sitting in Massachusetts. 4. If a court sitting in Massachusetts were to apply Massachusetts law as the law governing the Credit Agreement and the Notes, the Credit Agreement would constitute a valid and binding agreement of the Company and the Notes issued by it would constitute valid and binding obligations of the Company, in each case enforceable in accordance with their respective terms. 5. Except as disclosed in the Company's 1993 Form 10-K and the Company's Latest Form 10-Q, there is no action, suit or proceeding pending against, or to the best of my knowledge threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, operations or financial condition of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of the Credit Agreement or the Notes. My opinion in paragraph 4 above as to the enforceability of the Credit Agreement and the Notes issued by the Company is subject to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of creditors' rights in general and the general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). With respect to the foregoing, I express no opinion, however, as to the enforceability of Section 11.03(b) of the Credit Agreement to the extent the rights to indemnification provided for therein are violative of any law, rule or regulation (including any federal or state securities law, rule or regulation) or public policy. To the extent that the obligations of the Company may be dependent upon such matters, I assume for purposes of this opinion that each Bank is duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation; and that the Credit Agreement has been duly authorized, executed and delivered by the Banks and constitutes the legal, valid and binding obligation of the Banks, enforceable against the Banks in accordance with its terms. I do not express any opinion as to the effect of the compliance by any of the Banks with any state or federal laws or as to the regulatory status or nature of the business of any of the Banks. This opinion is rendered solely to you in connection with the above matter. This opinion may not relied upon by you for any other purpose or relied upon by any other person without my prior written consent. Very truly yours, Joseph E. Mullaney EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENT -------------------------------------- [Effective Date] To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260 Dear Sirs: We have participated in the preparation of the Multi-Year Credit Agreement (the "Credit Agreement") dated as of June 21, 1994 among The Gillette Company, a Delaware corporation (the "Company"), the banks parties thereto (the "Banks") and Morgan Guaranty Trust Company of New York, as Agent (the "Agent"), and have acted as special counsel for the Agent for the purpose of rendering this opinion pursuant to Section 3.01(d) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Company of the Credit Agreement and its Notes are within the Company's corporate powers and have been duly authorized by all necessary corporate action. 2. The Credit Agreement constitutes a valid and binding agreement of the Company and each Note issued by it constitutes a valid and binding obligation of the Company, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent. Very truly yours, EXHIBIT G FORM OF ELECTION TO PARTICIPATE , 19 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent for the Banks named in the Multi-Year Credit Agreement dated as of June 21, 1994 among The Gillette Company, such Banks and such Agent (as amended from time to time, the "Credit Agreement") Dear Sirs: Reference is made to the Credit Agreement described above. Terms not defined herein which are defined in the Credit Agreement shall have for the purposes hereof the meaning provided therein. The undersigned, [name of Eligible Subsidiary], a [jurisdiction of incorporation] corporation, hereby elects to be an Eligible Subsidiary for purposes of the Credit Agreement, effective from the date hereof until an Election to Terminate shall have been delivered on behalf of the undersigned in accordance with the Credit Agreement. The undersigned confirms that the representations and warranties set forth in Article IX of the Credit Agreement are true and correct as to the undersigned as of the date hereof, and the undersigned hereby agrees to perform all the obligations of an Eligible Subsidiary under, and to be bound in all respects by the terms of, the Credit Agreement, including without limitation Sections 11.08 and 11.10 thereof, as if the undersigned were a signatory party thereto. [Tax disclosure pursuant to Section 9.04, if any] The address to which all notices to the undersigned Eligible Subsidiary under the Credit Agreement should be directed is: . This instrument shall be construed in accordance with and governed by the laws of the State of New York. Very truly yours, [NAME OF ELIGIBLE SUBSIDIARY] By ---------------------------- Title: The undersigned hereby confirms that [name of Eligible Subsidiary] is an Eligible Subsidiary for purposes of the Credit Agreement described above. THE GILLETTE COMPANY By ---------------------------- Title: Receipt of the above Election to Participate is hereby acknowledged on and as of the date set forth above. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By ---------------------------- Title: EXHIBIT H FORM OF ELECTION TO TERMINATE , 19 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent for the Banks named in the Multi-Year Credit Agreement dated as of June 21, 1994 among The Gillette Company, such Banks and such Agent (as amended from time to time, the "Credit Agreement") Dear Sirs: Reference is made to the Credit Agreement described above. Terms not defined herein which are defined in the Credit Agreement shall have for the purposes hereof the meaning provided therein. The undersigned, [name of Eligible Subsidiary], a [jurisdiction of incorporation] corporation, hereby elects to terminate its status as an Eligible Subsidiary for purposes of the Credit Agreement, effective as of the date hereof. The undersigned hereby represents and warrants that all principal and interest on all Notes of the undersigned and all other amounts payable by the undersigned pursuant to the Credit Agreement have been paid in full on or prior to the date hereof. Notwithstanding the foregoing, this Election to Terminate shall not affect any obligation of the undersigned under the Credit Agreement or under any Note heretofore incurred. This instrument shall be construed in accordance with and governed by the laws of the State of New York. Very truly yours, [NAME OF ELIGIBLE SUBSIDIARY] By ---------------------------- Title: The undersigned hereby confirms that the status of [name of Eligible Subsidiary] as an Eligible Subsidiary for purposes of the Credit Agreement described above is terminated as of the date hereof. THE GILLETTE COMPANY By ---------------------------- Title: Receipt of the above Election to Terminate is hereby acknowledged on and as of the date set forth above. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By ---------------------------- Title: EXHIBIT I OPINION OF COUNSEL FOR THE BORROWER (BORROWINGS BY ELIGIBLE SUBSIDIARIES) [date] To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260 Dear Sirs: I am counsel to [name of Eligible Subsidiary, jurisdiction of incorporation] (the "Borrower") and give this opinion pursuant to Section 3.03(b) of the Multi-Year Credit Agreement (as amended to the date hereof, the "Credit Agreement") dated as of June 21, 1994 among The Gillette Company (the "Company"), the banks parties thereto and Morgan Guaranty Trust Company of New York, as Agent. Terms defined in the Credit Agreement are used herein as therein defined. I have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, I am of the opinion that: l. The Borrower is a corporation validly existing and in good standing under the laws of [jurisdiction of incorporation] and is a Substantially-Owned Consolidated Subsidiary of the Company. 2. The execution and delivery by the Borrower of its Election to Participate and its Notes and the performance by the Borrower of the Credit Agreement and its Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower. 3. The execution and delivery by the Borrower of its Election to Participate and its Notes and the performance by the Borrower of the Credit Agreement and its Notes do not contravene, or constitute a default under, any provision of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or any of its Subsidiaries and known to me or, to the best of my knowledge, result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. 4. The Credit Agreement constitutes a valid and binding agreement of the Borrower and its Notes constitute valid and binding obligations of the Borrower, in each case enforceable in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. Very truly yours, - ------------ * The opinion in this paragraph may be given by Counsel for the Company. EXHIBIT J ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), THE GILLETTE COMPANY (the "Company") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent"). W I T N E S S E T H - - - - - - - - - - WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Multi-Year Credit Agreement dated as of June 21, 1994 among the Company, the Assignor and the other Banks party thereto, as Banks, and the Agent (as amended and in effect on the date hereof, the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Committed Loans made by the Assignor under the Credit Agreement in the aggregate principal amount of $___________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of [a portion of] its Commitment thereunder in an amount equal to $____________ (the "Assigned Amount"), together with [a corresponding portion of] its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined ----------- herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the ---------- Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Company and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale -------- contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.* It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. [SECTION 4. Consent of the Company and the Agent. This Agreement is ------------------------------------ conditioned upon the consent of the Company and the Agent pursuant to Section 11.06(c) of the Credit Agreement. The execution of this Agreement by the Company and the Agent is evidence of this consent. Pursuant to Section 11.06(c) the Borrower agrees to execute and - -------------- *Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. deliver a Note [and to cause each Eligible Subsidiary to execute and deliver a Note] payable to the order of the Assignee to evidence the assignment and assumption provided for herein.]* SECTION 5. Non-Reliance on Assignor. The Assignor makes no ------------------------ representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of any Borrower, or the validity and enforceability of the obligations of any Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrowers. SECTION 6. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of ------------ counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By ------------------------------ Title: - -------------- *Consent is required if the Assignee is not an affiliate of the Assignor and was not a Bank immediately prior to the assignment. [ASSIGNEE] By ------------------------------ Title: [THE GILLETTE COMPANY] By ------------------------------ Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By ------------------------------ Title: EX-10.A 3 1971 OPTION PLAN Exhibit 10(a) SUBJECT TO APPROVAL AT THE APRIL 20, 1995 ANNUAL MEETING OF STOCKHOLDERS 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 200,000 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 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 is, 1999, 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 28,200,000 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 -1- 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 100 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 or 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. (c) Exercise of Option. ------------------- (1) Each option held by a participant other than a non-employee director shall 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 1954, 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 subsidiary as a -2- 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 (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. -3- (f) Termination of Employment. If the employment of a 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 Participant, he may exercise his option only within seven 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 Participant, he may exercise his option only within three months after the date of termination of his employment. (iii) Notwithstanding the above, if a Participant retires under The Gillette Company Retirement Plan or the retirement plan of a subsidiary, or if a Participant terminates his employment with a subsidiary that does not maintain a retirement plan and he would have been eligible to retire under the terms of The Gillette Company Retirement Plan had he been a Participant in that Plan, he may exercise any option granted prior to January 1, 1994, other than an incentive stock option within the meaning of the Internal Revenue Code, within a period not to exceed two years after his retirement date, any option granted after December 31, 1993 other than an incentive stock option within the meaning of the Internal Revenue Code within a period not to exceed three years after his retirement date, and any incentive stock option within a period not to exceed three months after his retirement date. The Committee may, in its sole discretion, terminate any such option at or at any time after the time when that option would otherwise have terminated as a result of the termination of a 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 which was not exercisable on the date he ceased to be an employee, or after the expiration of the option period. For purposes of this subsection (g) 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 at a time when he is entitled to ----- exercise an option, 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 which the Participant was entitled to purchase immediately prior to his death, by his executor or administrator or 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 such option shall expire at the end of such period. In no event, however, may any option be exercised after the expiration of the option period or, in the case of an incentive stock option within the meaning of the Internal Revenue Code after the expiration of any period of exercise for such options specified in the Internal Revenue Code or the regulations thereunder. 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 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. -4- 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 200,000 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 entitics 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) 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 -5- 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 1,000 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. (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 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 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. APRIL 1995 -6- EX-10.F 4 LLOYDS POLICY - -------------------------------------------------------------------------------- Exhibit 10(f) [LOGO OF LLOYD'S POLICY APPEARS HERE] LLOYD'S POLICY - -------------------------------------------------------------------------------- WE, UNDERWRITING MEMBERS of the syndicates whose definitive numbers and proportions are shown in the Table attached hereto (hereinafter referred to as 'the Underwriters'), hereby agree, in consideration of the payment to Us by or on behalf of the Assured of the premium specified in the Schedule, to insure against loss, including but not limited to associated expenses specified herein, if any, to the extent and in the manner provided in this Policy. THE UNDERWRITERS hereby bind themselves severally and not jointly, each for his own part and not one for another, and therefore each of the Underwriters (and his heirs, Executors and Administrators) shall be liable only for his own share of his syndicate's proportion of any such loss and of any such expenses. The identity of each of the Underwriters and the amount of his share may be ascertained by the Assured or the Assured's representative on application to Lloyd's Policy Signing Office, quoting the Lloyd's Policy Signing Office number and date shown in the Table. If the Assured shall make any claim knowing the same to be false or fraudulent, as regards amount or otherwise, this Policy shall become void and all claim hereunder shall be forfeited. IN WITNESS whereof the General Manager of Lloyd's Policy Signing Office has signed this Policy on behalf of each of Us. /s/ [LLOYD'S POLICY LLOYD'S POLICY SIGNING OFFICE SIGNING OFFICE General Manager EMBOSSMENT APPEARS HERE ON ORIGINAL DOCUMENT] J(A) NMA 2421 (26/9/91) Form approved by Lloyd's Underwriters' Non-Marine Association Limited Set and Printed by CBC City Print Limited 071-353-1000 THE GILLETTE COMPANY DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT POLICY This is a claims made and reported policy. Please read it carefully. DOCR92 AMENDED-MANUSCRIPT FORM DECLARATIONS DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT 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 60 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 completed and signed Application and the Policy with endorsements shall constitute the contract between the Assureds and Underwriters. Policy No.: 757/FD940228 Item A. Parent Company: THE GILLETTE COMPANY Principal Address: The Prudential Center, Boston, MA 02199, USA State of Incorporation: Delaware Item B. Policy Period 1st June 1994 to 1st June 1995 both days at 12:01 a.m. Standard Time at the Principal Address stated in Item A. Item C. Limit of Liability: US$ 10,000,000 in the aggregate for the Policy. Item D. Retentions: US$ Nil each of the Directors and Officers each Claim but in no event exceeding US$ Nil in the aggregate each Claim all Directors and Officers under Insuring Clause I.A. US$ 1,000,000 each Claim under Insuring Clause I.B. 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. Item F. Premium: US$ 261,458.10 part of US$ 290,509.00 Item G. (1) Premium for Optional Extension Period: 50% of the total premium as provided in Clause VIII. (2) Length of Optional Extension Period: 365 days. Item H. Notification pursuant to Clause VI shall be given to: Hanson & Peters, 311 South Wacker Drive, Suite 3500 Chicago, Illinois 60606, U.S.A. Item I. Consolidated assets of Company: US$ 5,102,300,000 Dated in London: 5th August 1994 DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT POLICY In consideration of the payment of the premium, in reliance on the statements in the Application 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 during the Policy Period for a Wrongful Act. B. Underwriters shall reimburse the Company for Loss which the Company pays as idemnification to any of the Directors and Officers resulting from any Claim first made during the Policy Period for a Wrongful Act. II. DEFINITIONS The following terms whenever used in this Policy in boldface type shall have the meanings indicated. A. Application means: (1) the application for this Policy or any Policy or which this Policy is a renewal, and (2) any materials submitted therewith, which shall be retained on file by Underwriters and be deemed attached hereto, as if physically attached hereto. B. Assureds means the Company and the Directors and Officers. C. Claim means any judicial or administrative proceeding initiated against any of the Directors and Officers in which they may be subjected to a binding adjudication of liability for damages or other relief, including any appeal therefrom. D. Company means: (1) the Parent Company, and (2) any Subsidiary (3) the entities scheduled in question No. 5(c) of the application dated June 6th 1994 in which 50% or less of the outstanding shares representing the present right to vote for the election of directors are owned by the Parent Company or one or more of its Subsidiaries at the inception of this policy. (4) any unincorporated division (5) Gillette Charitable Foundation. E. Corporate Takeover 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, or (3) the consolidation of the Parent Company with another entity, or the acquisition of substantially all of the assets of the Parent Company by another entity, or (4) the appointment of a conservator, receiver or administrator to manage the affairs of the Parent Company, or (5) the Parent Company ceasing to be publicly held. F. Costs, Charges and Expenses means reasonable and necessary legal fees and expenses incurred by the Directors and Officers in defense and investigation of any Claim and cost of attachment or similar bonds but shall not include: (1) salaries, wages, overhead or benefit expenses associated with officers or employees of the Company, or (2) any amounts incurred in defense of any Claim for which any other insurer has a duty to defend and is so defending. G. 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. or their equivalent in countries where not so titled including their estates, heirs, legal representatives or assigns in the event of their death, incapacity or bankruptcy. (2) the lawful spouse of a director or officer, but only to the extent such person is a party of any Claim solely in his or her capacity as spouse of any director or officer of the Company and only for the purposes of any Claim seeking damages recoverable from marital community property, property jointly held by the director or officer and spouse, or property transferred from the director of officer to the spouse. H. 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. I. Loss means damages, settlements and Costs, Charges and Expenses incurred by any of the Directors and Officers, but shall not include: (1) punitive or exemplary damages or that portion of any multiplied damages award which exceeds the amount multiplied; (2) taxes, criminal or civil fines or penalties imposed by law; or (3) matters deemed uninsurable under the law pursuant to which this Policy shall be construed. J. Optional Extension Period means the period described in Clause VIII.A. K. Parent Company means the entity named in item A. of the Declarations. L. 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. M. Subsidiary means any corporate entity while more that 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, 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; or (2) was so owned on the inception date of this Policy and is named in the Application; or (3) becomes so owned after the inception date of this Policy provided the assets of the entity do not exceed 20% of the consolidated assets of the Company as set forth in item I. of the Declarations; or (4) becomes so owned after the inception date of this Policy provided that if the assets of the entity exceed 20% of the consolidated assets of the Company as set forth in item I of the Declarations the provisions of Clause VII.B. must be fulfilled. N. Wrongful Act means any actual or alleged error, omission, misstatement, misleading statement, neglect, breach of duty or negligent act by any of the Directors and Officers, while acting solely in their capacity as (1) a director or officer of the Company. (2) a director of officer or trustee of a) Boston Municipal Research Bureau Greater Boston Chamber of Commerce Greater Boston Legal Services Corporation Massachusetts Taxpayers Foundation New England Legal Foundation Park Street Corporation World Affairs Council Boston but only in the case of Mr. Joseph E. Mullaney, b) Massachusetts Business Roundtable Massachusetts Mutual Life Insurance Co Polaroid Corporation Repligen Corporation University Hospital The Square D Company but only in the case of Mr. Alfred M. Zeien. (3) solely for the purposes of the coverage provided through Insuring Clause 1A a director or officer or trustee of Bank of Boston Corporation First National Bank of Boston Raytheon Corporation but only in the case of Mr. Alfred M. Zeien. or any matter claimed against him solely by reason of his serving in such insured capacity. III. EXCLUSIONS Underwriters shall not be liable to make any payment in connection with any Claim: A. for actual or alleged bodily injury, sickness, disease, death, false arrest, false imprisonment, assault, battery, invasion of privacy, or damage to or destruction of tangible property (including loss of use thereof); and, except to the extent a Claim is made for wrongful termination of employment, wrongful discharge, retaliatory discharge, discrimination on the basis of age or gender or race or religion or handicap or national origin, reverse discrimination or wrongful interference with expectation of continued employment, libel, slander, defamation, mental anguish and emotional distress. 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 policy, whether such 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 unless such other policy is written only as specific excess insurance over this 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; 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 statutory or common law in connection with any employment benefit or welfare plan(s) subject to ERISA and sponsored by the Company; F. by, on behalf of, or at the direction of any of the Assureds, except and to the extent such Claim a) is brought derivatively by a security holder of the Company who, when such Claim is first made, is acting independently of all of the Assureds, or b) alleges wrongful termination of employment, wrongful discharge, retaliatory discharge, discrimination on the basis of age or gender or race or religion or handicap or national origin, reverse discrimination or wrongful interference with expectation of continued employment. c) is brought or maintained by one of the Directors and Officers for contribution or indemnity, if the Claim directly results from another Claim covered under this Policy. G. brought about or contributed to in fact 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; 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 held by the court to be in violation of the law; I. against any of the Directors and Officers of 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; It is provided, however, that this Exclusion shall not apply to Parker Pen Company. J. based upon, arising out of, directly or indirectly, resulting from on in consequence of, or in any way involving, any Wrongful Act actually or allegedly committed subsequent to a Corporate Takeover; K. based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving, their services as directors, officers or employees of any entity other that 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 Clause II DEFINITION N. 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 person for the purpose of determining the applicability of Exclusions G. and H. IV. LIMIT OF LIABILITY AND RETENTIONS A. 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. B. The amount shown in Item C. of the Declarations shall be the maximum aggregate Limit of Liability of Underwriters under the Policy. 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 Wrongfull Act or Interrelated Wrongful Acts shall be deemed to have been made pursuant to Clause VI.B. D. In the event a Claim is covered in part under both Insuring Clauses I.A. and I.B. 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 Retention applicable to Insuring Clause I.B. E. The Retention applicable to Insuring Clause I.B. shall apply to Loss resulting from any Claim 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. F. Payments of Loss by Underwriters shall reduce the Limit of Liability. G. Underwriters shall reimburse Loss pursuant to Insuring Clause I.B. only upon the final disposition of any Claim. Underwriters shall pay Costs, Charges and Expenses pursuant to Insuring Clause I.A. no more than once every 90 days. V. SETTLEMENTS AND DEFENSE A. No settlements 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 Directors and Officers 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 but in no event later than 60 days after the end of the Policy Period. B. If during the Policy Period the Assureds first become aware of a specific Wrongful Act, and if the Assureds during the Policy Period give written notice to Underwriters of: (1) the specific Wrongful Act, and (2) the consequences which have resulted or may result therefrom, and (3) the circumstances by which the Assureds first became aware thereof, then any Claim made subsequently arising out 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 the particulars and statements contained in the Application, a copy of which is attached hereto, are the basis of this Policy and are to be considered as incorporated into and constituting a part of this Policy. By acceptance of this Policy the Assureds agree: (1) that the statements in the Application are their representations that they shall be deemed material to the acceptance of the risk or the hazard assumed by Underwriters under this Policy and that this Policy is issued in reliance upon the truth of such representations; (2) that in the event that the Application contains misrepresentations made with the actual intent to deceive, which materially affect either the acceptance of the risk or the hazard assumed by Underwriters under this Policy, this Policy in its entirety shall be void and of no effect whatsoever, and (3) that this Policy shall be deemed to be a single unitary contract and a not 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 as part of the Application. 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, and such acquisition or merger involves assets that exceed 20% of the consolidated assets of the Company as set forth in Item I of the coverage declarations, or creates or acquires a Subsidiary as defined in clause II.M. (4) after the inception of this Policy, no coverage shall be afforded for any Loss in any way involving the assets acquired or the assets, liabilities, directors or employees of the entity acquired or merged with, or such Subsidiary unless: (a) written notice of such transaction or event is given to Underwriters by the Parent Company, and (b) the Parent Company provides Underwriters with such information in connection therewith as Underwriters may deem necessary, and (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 ceased to be a Subsidiary as defined herein after the inception date of this Policy, or of any policy of which this Policy is a renewal or replacement, this Policy, subject to its terms shall continue to apply to any of the Directors and Officers who were directors or officers of such Subsidiary with respect to Claims first made during the Policy Period for Wrongful Acts committed or allegedly committed prior to the time such entity ceased to be a Subsidiary. 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) This Policy may be cancelled by Underwriters by mailing to the Parent Company written notice stating when, not less than 90 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. 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 Authorization 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. VIII. OPTIONAL EXTENSION PERIOD A. If this Policy is cancelled pursuant to Clause VII.C.(2) or if Underwriters refuse to renew this Policy for reasons other than non- payment of premium or non-compliance with the terms and conditions of this Policy, 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 effective date of such cancellation or, in the event of such refusal to renew, after the Policy expiration date, but only with respect to any Wrongful Act committed before such date. B. The quotation of a different premium, retention or limit of liability for renewal does not constitute a cancellation or refusal to renew for the purposes of this provision. C. 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 effective date of cancellation, or, in the event of a refusal to renew, 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. D. In the event of the purchase of the Optional Extension Period, the entire premium therefor shall be deemed earned at its commencement. E. 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. F. 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 cooperation as Underwriters or their counsel may reasonable 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 payments 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 cooperation 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 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 organization 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 of 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 the Underwriters hereon to pay any amount claimed to be due hereunder, the Underwriters hereon at the request of the insured (or Reinsured), will submit to the jurisdiction of a Court or competent jurisdiction within the United States. 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 a 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 Mendes & Mount, 750 Seventh Avenue, New York, New York 10019- 6829, and that in such suit instituted against any one of them upon this contract. Underwriters will abide by the final decision of such court or of any Appellate Court in the event of an appeal. The above-named are authorized and directed to accept service of process on behalf of Underwriters in any such suit and/or upon the request of the Insured (or Reinsured) to give a written undertaking to the Insured (or Reinsured) that they 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 therefore, Underwriters hereon hereby designate the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or 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 the Insured (or Reinsured) or any beneficiary hereunder arising out of this contract of insurance (or reinsurance), and hereby designate the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof. U.S.A. - ------ NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - DIRECT (BROAD) (Approved by Lloyd's Underwriters' Non-Marine Association) For attachment to insurances of the following classifications in the U.S.A., its Territories and Possessions, Puerto Rico and the Canal Zone:- Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability), not being insurances of the classifications to which the Nuclear Incident Exclusion Clause - Liability - Direct (Limited) applies. This Policy* - ----------- does not apply:- 1. Under any Liability Coverage, to injury, sickness, disease, death or destruction (a) with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or (b) resulting from the hazardous properties of nuclear material and with respect to which (1) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the insured is, or had this policy not been issued would be, entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization. 2. Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating to immediate medical or surgical relief, to expenses incurred with respect to bodily injury, sickness, disease or death resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization. 3. Under any Liability Coverage, to injury, sickness, disease, death or destruction resulting from the hazardous properties of nuclear material, if (a) the nuclear material (1) is at any nuclear facility owned by, or operated by or on behalf of, an insured or (2) has been discharged or dispersed therefrom; (b) the nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or (c) the injury, sickness, disease, death or destruction arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the United States of America, its territories or possessions or Canada, this exclusion (c) applies only to injury to or destruction of property at such nuclear facility. 4. As used in this endorsement: "hazardous properties" include radioactive, toxic or explosive properties; "nuclear material" means source material, special nuclear material or byproduct material; "source material", "special nuclear material", and "byproduct material" have the meanings given them in the Atomic Energy Act 1954 or in any law amendatory thereof' "spent fuel" means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; "waste" means any waste material (1) containing byproduct material and (2) resulting from the operation by any person or organization of any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; "nuclear facility" means (a) any nuclear reactor, (b) any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling, processing or packaging waste, (c) any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235, (d) any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste, and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; "nuclear reactor" means any appparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material. With respect to injury to or destruction of property, the word "injury" or "destruction" includes all forms of radioactive contamination of property. It is understood and agreed that, except as specifically provided in the foregoing to the contrary, this clause is subject to the terms, exclusions, conditions and limitations of the Policy to which it is attached. *NOTE:-As respects policies which afford liability coverages and other forms of coverage in addition, the words underlined should be amended to designate the liability coverage to which this clause is to apply. 17/3/60 N.M.A. 1256 U.S.A. - ------ RADIOACTIVE CONTAMINATION EXCLUSION CLAUSE - LIABILITY - DIRECT (Approved by Lloyd's Underwriters' Non-Marine Association) For attachment (in addition to the appropriate Nuclear Incident Exclusion Clause - Liability - Direct) to liability insurances affording worldwide coverage. In relation to liability arising outside the U.S.A. its Territories or Possessions, Puerto Rico or the Canal Zone, this Policy does not cover any liability of whatsoever nature directly or indirectly caused by or contributed to by or arising from ionising radiations or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuel. 13/2/64 N.M.A. 1477 LINES CLAUSE This Insurance, being signed for 90.00%, of 100% insures only that proportion of --- any loss, whether total or partial, including but not limited to that proportion of associated expenses, if any, to the extent and in the manner provided in this Insurance. The percentages signed in the Table are percentages of 100% of the amount(s) of --- insurance stated herein. N.M.A. 2419 SEVERAL LIABILITY NOTICE The subscribing insurers' obligations under policies to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing insurers are not responsible for the subscription of any co-subscribing insurer who for any reason does not satisfy all or part of its obligations. LSW 1001 (THIS IS AN APPLICATION FOR A CLAIMS MADE POLICY) RENEWAL APPLICATION FOR DIRECTORS' AND OFFICERS' AND COMPANY REIMBURSEMENT INDEMNITY POLICY NOTICE: THE POLICY FOR WHICH APPLICATION IS MADE (THE "POLICY"), SUBJECT TO ITS TERMS, APPLIES ONLY TO ANY "CLAIM" (AS DEFINED IN THE POLICY) MADE AGAINST THE DIRECTORS AND OFFICERS DURING THE POLICY PERIOD. THE LIMIT OF LIABILITY AVAILABLE TO PAY DAMAGES OR SETTLEMENTS SHALL BE REDUCED AND MAY BE EXHAUSTED BY AMOUNTS INCURRED AS "COSTS, CHARGES, AND EXPENSES" ("AS DEFINED IN THE POLICY") AND "COSTS, CHARGES, AND EXPENSES" SHALL BE APPLIED TO THE RETENTIONS. THE POLICY DOES NOT PROVIDE FOR ANY DUTY BY UNDERWRITERS TO DEFEND THOSE INSURED UNDER THE POLICY. - -------------------------------------------------------------------------------- GENERAL INSTRUCTIONS FOR COMPLETING THIS APPLICATION: 1. Please type or print in ink. 2. Please read carefully and answer all questions. If a question is not --- applicable, so state. If space is insufficient to answer any question fully, attach a separate sheet. 3. The original Renewal Application must be submitted. 4. The Chairman of the Board or the President must sign and date this Renewal Application. -1- 5. This Renewal Application and all exhibits shall be held in confidence. 6. Please read the Policy for which application is made (the "Policy") prior to completing this Renewal Application. 7. The terms as used herein shall have the meaning stated in Paragraph II, Definitions, of the Policy. - -------------------------------------------------------------------------------- 1. Name of Parent Company The Gillette Company ---------------------------------------------------- Address Prudential Tower Building ------------------------------------------------------------------- (Number) (Street) Boston MA 02199-3799 ---------------------------------------------------------------- (City) (State) (Zip Code) 2. The Parent Company has continuously been in business since / 1901 ----------------------- (Month) (Year) 3. The Parent Company has continually paid cash dividends on its: (a) Common Stock since 1905 (b) Preferred Stock ------------ since 12/31/90 (Series C). --------------------------------------- -2- 4. Complete the following in respect of all classes of shares issued by the Parent Company: as of 03/01/94.
1 2 3 4 -- -- -- -- Series C Class of shares Common Preferred ------ ----- --------- ----- Number of shares outstanding 220,979,835 164,216 ----------- ----- ------- ----- Number of shares owned by Directors (directly and/or beneficially) 24,449,189 18 ----------- ----- ------- ----- Number of shares owned by Executive Officers who are not directors (directly and/or beneficially) 235,195 77 ----------- ----- ------- -----
5. (a) Total number of wholly owned Subsidiaries as of March 1, 1994: Domestic 58 Foreign 175 -------- -------- List all such Subsidiaries for which coverage is requested and the date created or acquired: -------------------------------------------- 1) Coverage requested for all subsidiaries - see December 15, 1993 --------------------------------------------------------------------- listing attached; ---------------------------------------------------------------------- 2) Coverage requested for all unincorporated divisions of the listed ---------------------------------------------------------------------- subsidiaries. ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- (b) Total number of controlled Subsidiaries (more than 50% but less than 100% owned) as of March 1, 1994: Domestic 0 Foreign 8 -------- -------- -3- 5. (c) List all such Subsidiaries for which coverage is requested and the date created or acquired: ----------------------------------------- Coverage requested for all - details on attached listing dated ------------------------------------------------------------------ April 5, 1994, including the following subsidiaries in which ------------------------------------------------------------------ The Gillette Company has an interest of 50% or less: ------------------------------------------------------------------ Intermaghreb (80% of 51% through Gillette Interlame S.A.) ------------------------------------------------------------------ Shenmei Daily Use Products Limited Company (50%) ------------------------------------------------------------------ ------------------------------------------------------------------ 6. (a) Does any person or entity (other than the Company) own 10% or more of any entity described in 5.(b) above? Yes X No ----- ----- If yes, give details: (as of March 15, 1994) Societe Matron 12% Gillette Morocco Shanghai Razor Blade Factory 30% Gillette (Shanghai) Limited House of Poddar 19.9% Indian Shaving Products Societe Matron 29% Intermaghreb Professeur M. Benomar 20% Intermaghreb National Investment Trust 23.25% Interpak Shaving Products E. Trismitro 25% P.T. Gillette Indonesia Leninets 35% Petersburg Products International Shenyang Daily Use Metal Industry Co. 50% Shenmei Daily Use Products Limited Company (b) Does any person or entity own 10% or more of any class of shares issued by the Parent Company? Yes X No ----- ----- If yes, give details: ------------------------------------------------ Berkshire Hathaway, Inc., 1440 Kiewit Plaza, Omaha, Nebraska, --------------------------------------------------------------------- beneficially owns 24,000,000 shares of the company's common stock --------------------------------------------------------------------- (10.9% of the outstanding common stock of the Company). The Gillette --------------------------------------------------------------------- Company's 1990 Employee Stock Ownership Plan owns 100% of the --------------------------------------------------------------------- outstanding shares of the company's Series C cumulative convertible --------------------------------------------------------------------- preferred stock. --------------------------------------------------------------------- -4- 7. (a) Complete the following for each of the Parent Company's last four fiscal years (use consolidated figures):
($ Millions) Year 1993 1992 1991 1990 ---- ---- ---- ---- Total Consolidated Assets 5,102.3 4,189.9 $3,886.7 3,671.3 ------- ------- ------- ------- Current Assets 2,528.0 2,336.2 2,177.8 2,093.5 ------- ------- ------- ------- Current Liabilities 1,760.3 1,560.8 1,484.6 1,307.9 ------- ------- ------- ------- Shareholders Equity 1,479.0 1,496.4 1,157.1 265.4 ------- ------- ------- ------- Net Income 288.3 513.4 427.4 367.9 ------- ------- ------- ------- Net Income Per Share 1.29 2.32 1.94 1.60 ------- ------- ------- ------- Dividends Per Share .84 .72 .62 .54 ------- ------- ------- ------- Sales/Revenues 5,410.8 5,162.8 4,683.9 4,344.6 ------- ------- ------- ------- Long Term Debt 840.1 554.2 742.2 1,045.7 ------- ------- ------- ------- Short Term Debt 917.0 475.8 460.0 370.3 ------- ------- ------- -------
(b) Has the Company at any time over the last five years been in breach of any of its debts covenants or loan agreements? Yes No X ------ ------ 8. Has the Company at any time over the last five years been involved in any policy dispute with any of its insurers (on any class of business)? Yes X No ------ ------ If yes, give details: Commercial Union Insurance Company over coverage -------------------------------------------------- for CERCLA liability arising out of two Superfund sites. The matter was ----------------------------------------------------------------------- settled without litigation. ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- -5- 9. Give details of the Company's current directors' and officers' insurance: (1) (2) (3) (4) (5) Insurer: Lloyds London Cos. Aetna C&S CODA ACE ---------------------------------------------------------------- Limit: $10,000,000 $10,000,000 $20,000,000 $20,000,000 $10,000,000 ---------------------------------------------------------------- Period: 6/1/93-4 6/1/93-4 6/1/93-4 06/01/93-6/01/96 6/01/93-4 ---------------------------------------------------------------- Retention: $1,000,000 Corporate Reimbursement ---------------------------------------------------------------- Annual Premium: $476,303 $179,546 $300,000 $140,000 $155,000 ---------------------------------------------------------------- 10. (a) Has the Company under consideration at the present time or does it contemplate any acquisitions, tender offers or mergers? Yes No X ------ ------ If yes, give details: None that have been publicly disclosed. ------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- (b) Complete the following for all acquisitions made over the last five years which have increased the total assets of the Company by 5% or more:
Asset Entity Date Value at Purchase Method of Acquired Acquired Date Acquired Price Payment Parker Pen May 7, 1993 (Book Value Borrowing ----------- ----------- ------------ --------- ------------ Holdings (Approx.) See Page 5 ----------- ----------- ------------ --------- ------------ Limited $220,000,000 $450,000,000 of 09/30/93 ----------- ----------- ------------ ------------ ------------ 10Q ----------- ----------- ------------ --------- ------------
-6- 11. Has the Company ever repurchased its own shares at a price in excess of the market value at the time? Yes No ----- ----- If yes, give details: Please refer to previous Applications. ------------------------------------------------ --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- 12. Has the Company at any time over the last five years changed its accountants or external general counsel? Yes No X ----- ----- If yes, give details including reasons for changes: ------------------ --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- 13. Has the Company: (a) filed within the past 18 months or contemplated filing within the next 12 months any registration statement with the Securities and Exchange Commission for a public offering of securities? Yes X No ----- ----- If yes, furnish copy of prospectus. See Forms S-3 and Form S-8. -7- (b) issued within the past 18 months or contemplated issuing within the next 12 months any share (common or otherwise)? Yes X No ----- ----- If yes, give details: See Form S-8. ------------------------------------------------ --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- 14. The following officer of the Parent Company is designated to receive any and all notices from Underwriters of their authoized representative(s) concerning this insurance: ------------------------------------------ Lloyd B. Swaim, Vice President and Treasurer --------------------------------------------------------------------- --------------------------------------------------------------------- 15. List the date at the end of each of the last eight calendar quarters and the corresponding closing price for shares of the Parent Company's common stock: DATE PRICE ---- ----- 06/30/92 47 5/8 -------- ------ 09/30/92 57 3/8 -------- ------ 12/31/92 56 7/8 -------- ------ 03/31/93 60 1/2 -------- ------ 06/30/93 55 1/8 -------- ------ 09/30/93 57 1/2 -------- ------ 12/31/93 59 5/8 -------- ------ 03/31/94 63 1/4 -------- ------ -8- 16. Have any filings been made concerning the Company pursuant to Section 13.(d) of the Securities Exchange Act of 1934 during the last two years? Yes No X ----- ----- 17. Has the Company made any filing pursuant to Section 13.(d) of the Securities Exchange Act of 1934 during the last two years? Yes No X ----- ----- If yes, attach a copy of each such filing. 18. What percentage of the Parent Company's common stock was sold and purchased during the last 12 months? 59% For the year ended December 31, 1993 ------------------------------------------------ 19. The Company has not been involved in or had any knowledge of any pending anti-trust, price-fixing, tax, copyright, patent litigation or governmental regulatory or administrative proceedings since the date of the previous application except as follows (if answer is none, so state): 1) Antitrust: Suit brought by Scripto-Tokai Corporation related to a patent --------------------------------------------------------------------------- infringement suit brought by the Company against Scripto-Tokai --------------------------------------------------------------------------- Corporation alleging among other things, monopolization of erasable ink --------------------------------------------------------------------------- pen market by obtaining and defending patents for erasable ink pens. --------------------------------------------------------------------------- 2) Patents: None other than previously noted. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- -9- 20. It is agreed that this Renewal Application is supplemental to Application(s) for all policies of which the Policy would be a renewal, and that such Application(s), together with the Renewal Application and any materials submitted herewith (which shall be retained on file by Underwriters and shall be deemed attached hereto, as if physically attached hereto) constitute the complete Application which shall be the basis of the Policy and will be attached to and become part of the Policy. 21. It is agreed that in the event there is any material change in the answers to the questions contained herein prior to the effective date of the Policy, the applicant will notify Underwriters and, at the sole discretion of Underwriters, any outstanding quotations may be modified or withdrawn. 22. Attached and made a part of the Renewal Application by reference are the following materials regarding the Parent Company: (a) two copies of the Last Annual Report to Stockholders (b) two certified copies of the provisions of the Charter or By-Laws covering Indemnification of Directors and Officers, and (c) two copies of the Notice to Stockholders and the Proxy Statement for either the last or the next annual meeting. Underwriters are hereby authorized to make any investigation and inquiry in connection with this Renewal Application as they may deem necessary. 23. The undersigned declares that to the best of his/her knowledge the statements herein are true. Signing of this Renewal Application does not bind the undersigned to complete the insurance, but it is agreed that this Renewal Application, shall be the basis of the contract should a Policy be issued, and this Renewal Application will be attached to and become a part of such Policy, if issued. Underwriters are hereby authorized to make any investigation and inquiry in connection with this Renewal Application as they may deem necessary. -10- Signed /s/ Alfred M. Zeien ---------------------------------- Must be Signed By Chairman of the Board or President of Parent Company Capacity Chairman of the Board and --------------------------------- Chief Executive Officer -------------------------------- Company The Gillette Company ---------------------------------- Date June 6, 1994 ------------------------------------- Submitted by ---------------------------- (Agent) Date ----------------------------------- -11- - -------------------------------------------------------------------------------- [LOGO APPEARS HERE] The Table of Syndicates referred to on the face of this Policy follows:
- ----------------------------------------------------------------------------------------------------------- FOR LPSO USE ONLY BROKER LPSO No. & DATE FOR LPSO USE ONLY BROKER LPSO No. & DATE 27 0757 61378 30/08/94 28 0757 61378 30/08/94 - ----------------------------------------------------- ----------------------------------------------------- AMOUNT, PERCENTAGE SYNDICATE UNDERWRITER'S PAGE AMOUNT, PERCENTAGE SYNDICATE UNDERWRITER'S PAGE OR PROPORTION REFERENCE 1 OR PROPORTION REFERENCE 2 ---- ---- PERCENT PERCENT 15.0000 79 424YADB7251A 0.8505 991 0093294AA000 15.0000 839 8416BC799040 0.5443 546 TB600D94A414 10.0000 861 11A41817V02B 6.8037 1173 ALDPAA41004P 4.0000 484 XSP292D0012Q 0.6804 1003 C671C0062038 2.0000 858 XSP292D0012Q 4.0822 190 0837N01468 5.1028 1007 GC951N94A409 11.3494 1212 AC645A94AD43 2.3813 623 L0799V94ANPD 3.4018 435 25105800 THE LIST OF UNDERWRITING MEMBERS 1.3607 1047 Y0191Z94A OF LLOYDS IS NUMBERED 1994/ 8 1.3607 205 481N00242FPA 1.0206 672 C75XAE30403D 0.5103 122 CN463D94A200 1.1906 1215 426FD00546AA 1.3607 1038 RCCN03658JPL 2.0000 204 06683656401 - ----------------------------------------------------- ----------------------------------------------------- TOTAL LINE NO. OF SYND. FOR LPSO USE ONLY TOTAL LINE NO. OF SYND. FOR LPSO USE ONLY 90.0000 21 USE 1 14804
[STAMP APPEARS HERE] [STAMP APPEARS HERE] [TO COME] Date: 8th August 1994 Policy No: 757/FD940228 THE SCHEDULE - -------------------------------------------------------------------------------- The Insured: THE GILLETTE COMPANY. Premium: US$29,050.90 part of US$290,509.00 Limits of Liability: 10.00% of US$10,000,000 in the aggregate each policy year Excess of:- US$NIL/US$NIL Directors and Officers Liability US$1,000,000 Reimbursement Liability. The Interest Insured: DIRECTORS AND OFFICERS LIABILITY -------------------------------- AND REIMBURSEMENT FOR DIRECTORS ------------------------------- AND OFFICERS LIABILITY. ----------------------- As more fully set forth in the co-insuring Lloyd's policy. Period of Insurance: From: 1st June 1994 To: 1st June 1995 both days at 12.01 a.m. Local Standard Time and for such further period or periods as may be mutually agreed. - -------------------------------------------------------------------------------- COINSURANCE CLAUSE It is warranted that this Policy shall run concurrently with and be subject to the same terms, provisions, and limitations as are contained in Policy No. 757/FD940228 issued by certain underwriting members at Lloyd's of London covering the identical subject matter and risk. - -------------------------------------------------------------------------------- LIRMA Company The Insurers Number Proportion Reference - -------------------------------------------------------------------------------- NEW HAMPSHIRE INSURANCE COMPANY (PER AIG EUROPE (UK) LIMITED) N4395 10.00% 3370020294 SEVERAL LIABILITY NOTICE The subscribing insurers' obligations under contracts of insurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing insurers are not responsible for the subscription of any co-subscribing insurer who for any reason does not satisfy all or part of its obligations. LSW1001 08/94 (INSURANCE) [LETTERHEAD OF LLOYD'S POLICY SIGNING OFFICE APPEARS HERE] We, Underwriting Members of the syndicates whose definitive numbers and proportions are shown in the Table attached hereto (hereinafter referred to as 'the Underwriters'), hereby agree, in consideration of the payment to Us by or on behalf of the Assured of the premium specified in the Schedule, to insure against loss, including but not limited to associated expenses specified herein, if any, to the extent and in the manner provided in this Policy. The Underwriters hereby bind themselves severally and not jointly, each for his own part and not one for another, and therefore each of the Underwriters (and his heirs, Executors and Administrators) shall be liable only for his own share of his syndicate's proportion of any such loss and of any such expenses. The identity of each of the Underwriters and the amount of his share may be ascertained by the Assured or the Assured's representative on application to Lloyd's Policy Signing Office, quoting the Lloyd's Policy Signing Office number and date shown in the Table. If the Assured shall make any claim knowing the same to be false or fraudulent, as regards amount or otherwise, this Policy shall become void and all claim hereunder shall be forfeited. In Witness whereof the General Manager of Lloyd's Policy Signing Office has signed this Policy on behalf of each of Us. [Stamp Appears LLOYD'S Here] /s/ POLICY SIGNING LLOYD'S POLICY SIGNING OFFICE OFFICE General Manager EMBOSSMENT APPEARS HERE ON ORIGINAL DOCUMENT THE GILLETTE COMPANY EXCESS DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT POLICY DOXS89 AMENDED - MANUSCRIPT FORM DECLARATIONS EXCESS DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT INDEMNITY POLICY NOTICE: THIS POLICY SUBJECT TO ITS TERMS APPLIES TO ANY CLAIM MADE AGAINST THE DIRECTORS AND OFFICERS DURING THE POLICY PERIOD. THE LIMIT OF LIABILITY AVAILABLE TO PAY DAMAGES OR SETTLEMENTS SHALL BE REDUCED AND MAY BE EXHAUSTED BY AMOUNTS INCURRED AS REASONABLE AND NECESSARY LEGAL FEES AND EXPENSES IN DEFENDING THE DIRECTORS AND OFFICERS. THIS POLICY DOES NOT PROVIDE FOR ANY DUTY BY UNDERWRITERS TO DEFEND THOSE INSURED HEREUNDER. These Declarations along with the completed signed Application, including attachments, and the Policy with Endorsements shall constitute the contract between those insured hereunder and Underwriters. Policy No.: 757/FD940229 Item A. Named Insured: THE GILLETTE COMPANY Principal Address: Prudential Tower Building Boston, MA 02199, USA. Item B. Policy Period: 1st June 1994 to 1st June 1995 both days at 12:01 a.m. Standard Time At The Principal Address Stated in Item A. Item C. Limit of Liability: US$ 5,000,000 in the aggregate, each Policy Year. Item D. Premium: US$ 62,240.66 part of US$ 74,991.00 Item E. Notification to Underwriters pursuant to Clause V. shall be given to Hanson and Peters, 311 South Wacker Drive, Suite 5500, Chicago, Illinois 60606, USA. Item F. Form numbers of endorsements attached at issuance: NMA 1256 - Nuclear Incident Exclusion Clause NMA 1477 - Radioactive Contamination Exclusion Clause Item G. Primary Policy: Primary Insurer: Lloyd's Underwriters and Companies. Policy No: FD940228 Limits of Liability: US$ 10,000,000 Retentions/Deductibles: Nil/Nil/US$ 1,000,000 Participation/Co-Insurance: Nil Policy Period: from 1st June 1994 to 1st June 1995 Item H. Underlying Excess Policies: Not Applicable EXCESS DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT INDEMNITY POLICY In consideration of the payment of the premium, in reliance upon the statements in the Application attached hereto and made a part hereof, subject to the Declarations made a part hereof and subject to all of the terms of this Policy, Underwriters agree as follows:- I. CONFORMANCE WITH PRIMARY POLICY ------------------------------- Except as regards: (1) the premium, and (2) the amounts and limits of liability, and (3) the subject matter of Clauses II, III, IV, V, VI and VII, and additional endorsements as attached hereon (4) as otherwise may be provided herein, this Policy is subject to the same insuring clauses, definitions, terms, conditions, exclusions and other provisions as those set forth in the Primary Policy as described in the materials submitted to Underwriters in connection with the application for this Policy. No changes to the Primary Policy as so described shall be binding upon Underwriters under this Policy unless specifically endorsed hereon. II. DEFINITIONS ----------- The following terms whenever used in this Policy shall have the meanings indicated. A. "Primary Policy" shall mean the policy identified in Item G. of the Declarations. B. "Underlying Policies" shall mean the policies identified in Items G. and H. of the Declarations. C. "Underlying Limit of Liability" shall mean the combined limits of liability of the Underlying Policies as set forth in Item G. and H. of the Declarations, less any reduction or exhaustion of said limits of liability due to payment of loss under said policies. III. MAINTENANCE OF UNDERLYING POLICIES ---------------------------------- This Policy provides excess coverage only. It is a condition precedent to the coverage afforded under this Policy that those insured hereunder maintain the Underlying Policies with retentions/deductibles, participation/co-insurance and limits of liability (subject to reduction or exhaustion as a result of loss payments), as set forth in Items G. and H. of the Declarations. This Policy does not provide coverage for any loss not covered by the Underlying Policies except and to the extent that such loss is not paid under the Underlying Policies solely by reason of the reduction or exhaustion of the Underlying Limits of Liability through payments of loss thereunder. In the event the insurer under one or more of the Underlying Policies fails to pay loss in connection with any claim as a result of the insolvency, bankruptcy or liquidation of said insurer, then those insured hereunder shall be deemed self-insured for the amount of the limit of liability of said insurer which is not paid as a result of such insolvency, bankruptcy or liquidation. IV. LIMIT OF LIABILITY ------------------ A. Subject to Clause IV.B., Underwriters shall be liable to pay loss which is in excess of (1) The Underlying Limit of Liability plus (2) the applicable retention or deductible under the Primary Policy up to the Limit of Liability as shown under Item C. of the Declarations resulting from each claim made against the directors and officers. B. The amount shown in Item C. of the Declarations shall be the maximum aggregate Limit of Liability of Underwriters for all loss resulting from all claims made against the directors and officers during the Policy Period, together with all claims made against the directors and officers which, in accordance with Clause IV.E. or Clause V.B., shall be deemed to have been made during the Policy Period. C. Underwriters shall be liable hereunder only after the insurers under each of the Underlying Policies have paid or have been held liable to pay the full amount of the Underlying Limit of Liability. D. Subject to Clause IV.B., in the event of the reduction or exhaustion of the Underlying Limit of Liability by reason of payment of loss, this Policy shall: (1) in the event of reduction, pay excess of the reduced limits and (2) in the event of exhaustion, continue in force as primary insurance; provided, however that in the case of exhaustion this Policy shall only pay excess of the retention or deductible applicable to the Primary Policy as set forth in Item G. of the Declarations, which shall be applied to any subsequent loss in the same manner as specified in this Primary Policy. E. More than one claim involving the same wrongful act or related wrongful acts of one or more directors and officers shall be deemed to constitute a single claim and such single claim shall be deemed to have been made at the earliest of the following times: (1) the time the earliest claim involving the same wrongful act or related wrongful acts is first made, or (2) the time the claim involving the same wrongful act or related wrongful acts shall be deemed to have been made pursuant to Clause V.B., if applicable. V. 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 but in no event later than 60 days after the end of the Policy Period. B. If during the Policy Period the Assureds first become aware of a specific Wrongful Act, and if the Assureds during the Policy Period give written notice to Underwriters of: (1) the specific Wrongful Act, and (2) the consequences which have resulted or may result therefrom, and (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. VI. WARRANTY CLAUSE --------------- It is warranted that the particulars and statements contained in the Application, a copy of which is attached hereto, are the basis of this Policy and are to be considered as incorporated into and constituting a part of this Policy. By acceptance of this Policy the Assureds agree: (1) that the statements in the Application are their representations that they shall be deemed material to the acceptance of the risk or the hazard assumed by Underwriters under this Policy and that this Policy is issued in reliance upon the truth of such representations; (2) that in the event that the Application contains misrepresentations made with the actual intent to deceive, which materially affect either the acceptance of the risk or the hazard assumed by Underwriters under this Policy, this Policy in its entirety shall be void and of no effect whatsoever, and (3) that this Policy shall be deemed to be a single unitary contract and a not a severable contract of insurance or a series of individual contracts of insurance with each of the Assureds. VII. SERVICE OF SUIT --------------- It is agreed that in the event of the failure of the Underwriters hereon to pay any amount claimed to be due hereunder, the Underwriters hereon at the request of the Insured (or Reinsured), will submit to the jurisdiction of a Court or competent jurisdiction within the United States. 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 a 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 Mendes & Mount, 750 Seventh Avenue, New York, New York 10019-6829 and that in such suit instituted against any one of them upon this contract, Underwriters will abide by the final decision of such court or of any Appellate Court in the event of an appeal. The above-named are authorized and directed to accept service of process on behalf of Underwriters in any such suit and/or upon the request of the Insured (or Reinsured) to give a written undertaking to the Insured (or Reinsured) that they 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 therefore, Underwriters hereon hereby designate the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or 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 the Insured (or Reinsured) or any beneficiary hereunder arising out of this contract of insurance (or reinsurance), and hereby designate the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof. U.S.A. - ------ NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - DIRECT (BROAD) (Approved by Lloyd's Underwriters' Non-Marine Association) For attachment to insurances of the following classifications in the U.S.A., its Territories and Possessions, Puerto Rico and the Canal Zone:- Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage Liability), not being insurances of the classifications to which the Nuclear Incident Exclusion Clause - Liability - Direct (Limited) applies. This Policy* - ----------- does not apply:- 1. Under any Liability Coverage, to injury, sickness, disease, death or destruction (a) with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or (b) resulting from the hazardous properties of nuclear material and with respect to which (1) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the insured is, or had this policy not been issued would be, entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the United States of America, or any agency thereof, with any person or organization. 2. Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating to immediate medical or surgical relief, to expenses incurred with respect to bodily injury, sickness, disease or death resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization. 3. Under any Liability Coverage, to injury, sickness, disease, death or destruction resulting from the hazardous properties of nuclear material, if (a) the nuclear material (1) is at any nuclear facility owned by, or operated by or on behalf of, an insured or (2) has been discharged or dispersed therefrom; (b) the nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or (c) the injury, sickness, disease, death or destruction arises out of the furnishing by an insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the United States of America, its territories or possessions or Canada, this exclusion (c) applies only to injury to or destruction of property at such nuclear facility. 4. As used in this endorsement: "hazardous properties" include radioactive, toxic or explosive properties; "nuclear material" means source material, special nuclear material or byproduct material; "source material"; "special nuclear material", and "byproduct material" have the meanings given them in the Atomic Energy Act 1954 or in any law amendatory thereof; "spent fuel" means any fuel element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; "waste" means any waste material (1) containing byproduct material and (2) resulting from the operation by any person or organization or any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; "nuclear facility" means (a) any nuclear reactor, (b) any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling, processing or packaging waste, (c) any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 of any combination thereof, or more than 250 grams of uranium 235, (d) any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste, and includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations; "nuclear reactor" means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material. With respect to injury to or destruction of property, the word "injury" or "destruction" includes all forms of radioactive contamination of property. It is understood and agreed that, except as specifically provided in the foregoing to the contrary, this clause is subject to the terms, exclusions, conditions and limitations of the Policy to which it is attached. *NOTE:- As respects policies which afford liability coverages and other forms of coverage in addition, the words underlined should be amended to designate the liability coverage to which this clause is to apply. 17/3/60 N.M.A. 1256 U.S.A. - ------ RADIOACTIVE CONTAMINATION EXCLUSION CLAUSE-LIABILITY-DIRECT (Approved by Lloyd's Underwriters' Non-Marine Association) For attachment (in addition to the appropriate Nuclear Incident Exclusion Clause-Liability-Direct) to liability insurances affording worldwide coverage. In relation to liability arising outside the U.S.A. its Territories or Possessions, Puerto Rico or the Canal Zone, this Policy does not cover any liability of whatsoever nature directly or indirectly caused by or contributed to by or arising from ionising radiations or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuel. 13/2/64 N.M.A. 1477 LINES CLAUSE This Insurance, being signed for 82.9975%, of 100% insures only that proportion --- of any loss, whether total or partial, including but not limited to that proportion of associated expenses, if any, to the extent and in the manner provided in this Insurance. The percentages signed in the Table are percentages of 100% of the amount(s) of --- Insurance stated herein. N.M.A. 2419 SEVERAL LIABILITY NOTICE The subscribing insurers' obligations under policies to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing insurers are not responsible for the subscription of any co-subscribing insurer who for any reason does not satisfy all or part of its obligations. LSW 1001 (STAMP APPEARS HERE) (THIS IS AN APPLICATION FOR A CLAIMS MADE POLICY) RENEWAL APPLICATION FOR DIRECTORS' AND OFFICERS' AND COMPANY REIMBURSEMENT INDEMNITY POLICY NOTICE: THE POLICY FOR WHICH APPLICATION IS MADE (THE "POLICY"), SUBJECT TO ITS TERMS, APPLIES ONLY TO ANY "CLAIM" (AS DEFINED IN THE POLICY) MADE AGAINST THE DIRECTORS AND OFFICERS DURING THE POLICY PERIOD. THE LIMIT OF LIABILITY AVAILABLE TO PAY DAMAGES OR SETTLEMENTS SHALL BE REDUCED AND MAY BE EXHAUSTED BY AMOUNTS INCURRED AS "COSTS, CHARGES, AND EXPENSES" ("AS DEFINED IN THE POLICY") AND "COSTS, CHARGES, AND EXPENSES" SHALL BE APPLIED TO THE RETENTIONS. THE POLICY DOES NOT PROVIDE FOR ANY DUTY BY UNDERWRITERS TO DEFEND THOSE INSURED UNDER THE POLICY. - -------------------------------------------------------------------------------- GENERAL INSTRUCTIONS FOR COMPLETING THIS APPLICATION: 1. Please type or print in ink. 2. Please read carefully and answer all questions. If a question is not --- applicable, so state. If space is insufficient to answer any question fully, attach a separate sheet. 3. The original Renewal Application must be submitted. 4. The Chairman of the Board or the President must sign and date this Renewal Application. 5. This Renewal Application and all exhibits shall be held in confidence. 6. Please read the Policy for which application is made (the "Policy") prior to completing this Renewal Application. 7. The terms as used herein shall have the meaning stated in Paragraph II, Definitions, of the Policy. - -------------------------------------------------------------------------------- 1. Name of Parent Company The Gillette Company ----------------------------------------------------- Address Prudential Tower Building -------------------------------------------------------------------- (Number) (Street) Boston MA 02199-3799 ------------------------------------------------------------------- (City) (State) (Zip Code) 2. The Parent Company has continuously been in business since / 1901 --------------------- (Month) (Year) 3. The Parent Company has continually paid cash dividends on its: (a) Common Stock since 1905 (b) Preferred Stock ---------- since 12/31/90 (Series C). ---------------------------------- -2- 4. Complete the following in respect of all classes of shares issued by the Parent Company: as of 03/01/94.
1 2 3 4 --- --- --- --- Series C Class of shares Common Preferred ------ ----- --------- ----- Number of shares outstanding 220,979,835 164,216 ----------- ----- ------- ----- Number of Shares owned by Directors (directly and/or beneficially) 24,449,189 18 ---------- ----- ------- ----- Number of shares owned by Executive Officers who are not directors (directly and/or beneficially) 235,195 77 ------- ----- ------- -----
5. (a) Total number of wholly owned Subsidiaries as of March 1, 1994: Domestic 58 Foreign 175 ---------- ------------ List all such Subsidiaries for which coverage is requested and the date created or acquired: --------------------------------------------------- 1) Coverage requested for all subsidiaries - see December 15, 1993 ----------------------------------------------------------------------- listing attached; ----------------------------------------------------------------------- 2) Coverage requested for all unincorporated divisions of the listed ----------------------------------------------------------------------- subsidiaries. ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- (b) Total number of controlled Subsidiaries (more than 50% but less than 100% owned) as of March 1, 1994: Domestic 0 Foreign 8 ---------- ------------ -3- 5. (c) List all such Subsidiaries for which coverage is requested and the date created or acquired: --------------------------------------------- Coverage requested for all - details on attached listing dated ---------------------------------------------------------------------- April 5, 1994, including the following subsidiaries in which ---------------------------------------------------------------------- The Gillette Company has an interest of 50% or less: ---------------------------------------------------------------------- Intermaghreb (80% of 51% through Gillette Interlame S.A.) ---------------------------------------------------------------------- Shenmei Daily Use Products Limited Company (50%) ---------------------------------------------------------------------- ---------------------------------------------------------------------- 6. (a) Does any person or entity (other than the Company) own 10% or more of any entity described in 5.(b) above? Yes X No ------ ------ If yes, give details: (as of March 15, 1994) Societe Matron 12% Gillette Morocco Shanghai Razor Blade Factory 30% Gillette (Shanghai) Limited House of Poddar 19.9% Indian Shaving Products Societe Matron 29% Intermaghreb Professeur M. Benomar 20% Intermaghreb National Investment Trust 23.25% Interpak Shaving Products E. Trismitro 25% P. T. Gillette Indonesia Leninets 35% Petersburg Products International Shenyang Daily Use Metal Industry Co. 50% Shenmei Daily Use Products Limited Company (b) Does any person or entity own 10% or more of any class of shares issued by the Parent Company? Yes X No ------ ------ If yes, give details: ------------------------------------------------- Berkshire Hathaway, Inc., 1440 Kiewit Plaza, Omaha, Nebraska, ---------------------------------------------------------------------- beneficially owns 24,000,000 shares of the company's common stock ---------------------------------------------------------------------- (10.9% of the outstanding common stock of the Company). The Gillette ---------------------------------------------------------------------- Company's 1990 Employee Stock Ownership Plan owns 100% of the ---------------------------------------------------------------------- outstanding shares of the company's Series C cumulative convertible ---------------------------------------------------------------------- preferred stock. ---------------------------------------------------------------------- -4- 7. (a) Complete the following for each of the Parent Company's last four fiscal years (use consolidated figures):
($ Millions) Year 1993 1992 1991 1990 ---- ---- ---- ---- Total Consolidated Assets 5,102.3 4,189.9 $3,886.7 3,671.3 ------- ------- ------- ------- Current Assets 2,528.0 2,336.2 2,177.8 2,093.5 ------- ------- ------- ------- Current Liabilities 1,760.3 1,560.8 1,484.6 1,307.9 ------- ------- ------- ------- Shareholders Equity 1,479.0 1,496.4 1,157.1 265.4 ------- ------- ------- ------- Net Income 288.3 513.4 427.4 367.9 ------- ------- ------- ------- Net Income Per Share 1.29 2.32 1.94 1.60 ------- ------- ------- ------- Dividends Per Share .84 .72 .62 .54 ------- ------- ------- ------- Sales/Revenues 5,410.8 5,162.8 4,683.9 4,344.6 ------- ------- ------- ------- Long Term Debt 840.1 554.2 742.2 1,045.7 ------- ------- ------- ------- Short Term Debt 917.0 475.8 460.0 370.3 ------- ------- ------- -------
(b) Has the Company at any time over the last five years been in breach of any of its debts covenants or loan agreements? Yes No X ------ ------ 8. Has the Company at any time over the last five years been involved in any policy dispute with any of its insurers (on any class of business)? Yes X No ------ ------ If yes, give details: Commercial Union Insurance Company over coverage -------------------------------------------------- for CERCLA liability arising out of two Superfund sites. The matter was ----------------------------------------------------------------------- settled without litigation. ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- -5- 9. Give details of the Company's current directors' and officers' insurance: (1) (2) (3) (4) (5) Insurer: Lloyds London Cos. Aetna C&S CODA ACE ---------------------------------------------------------------- Limit: $10,000,000 $10,000,000 $20,000,000 $20,000,000 $10,000,000 ---------------------------------------------------------------- Period: 6/1/93-4 6/1/93-4 6/1/93-4 06/01/93-6/01/96 6/01/93-4 ---------------------------------------------------------------- Retention: $1,000,000 Corporate Reimbursement ---------------------------------------------------------------- Annual Premium: $476,303 $179,546 $300,000 $140,000 $155,000 ---------------------------------------------------------------- 10. (a) Has the Company under consideration at the present time or does it contemplate any acquisitions, tender offers or mergers? Yes No X ------ ------ If yes, give details: None that have been publicly disclosed. ------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- (b) Complete the following for all acquisitions made over the last five years which have increased the total assets of the Company by 5% or more:
Asset Entity Date Value at Purchase Method of Acquired Acquired Date Acquired Price Payment Parker Pen May 7, 1993 (Book Value Borrowing ----------- ----------- ------------ --------- ----------- Holdings (Approx.) See Page 5 ----------- ----------- ------------ --------- ----------- Limited $220,000,000 $450,000,000 of 09/30/93 ----------- ----------- ------------ ------------ ----------- 10Q ----------- ----------- ------------ --------- -----------
-6- 11. Has the Company ever repurchased its own shares at a price in excess of the market value at the time? Yes No ------ ------ If yes, give details: Please refer to previous Applications. ---------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 12. Has the Company at any time over the last five years changed its accountants or external general counsel? Yes No X ------ ------ If yes, give details including reasons for changes: ---------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 13. Has the Company: (a) filed within the past 18 months or contemplated filing within the next 12 months any registration statement with the Securities and Exchange Commission for a public offering of securities? Yes X No ------ ------ If yes, furnish copy of prospectus. See Forms S-3 and Form S-8. -7- (b) issued within the past 18 months or contemplated issuing within the next 12 months any share (common or otherwise)? Yes X No ----- ----- If yes, give details: See Form S-8. ------------------------------------------------ --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- 14. The following officer of the Parent Company is designated to receive any and all notices from Underwriters of their authorized representative(s) concerning this insurance: ------------------------------------------ Lloyd B. Swaim, Vice President and Treasurer --------------------------------------------------------------------- --------------------------------------------------------------------- 15. List the date at the end of each of the last eight calendar quarters and the corresponding closing price for shares of the Parent Company's common stock: DATE PRICE 06/30/92 47 5/8 -------- ------ 09/30/92 57 3/8 -------- ------ 12/31/92 56 7/8 -------- ------ 03/31/93 60 1/2 -------- ------ 06/30/93 55 1/8 -------- ------ 09/30/93 57 1/2 -------- ------ 12/31/93 59 5/8 -------- ------ 03/31/94 63 1/4 -------- ------ -8- 16. Have any filings been made concerning the Company pursuant to Section 13.(d) of the Securities Exchange Act of 1934 during the last two years? Yes No X ----- ----- 17. Has the Company made any filing pursuant to Section 13.(d) of the Securities Exchange Act of 1934 during the last two years? Yes No X ----- ----- If yes, attach a copy of each such filing. 18. What percentage of the Parent Company's common stock was sold and purchased during the last 12 months? 59% For the year ended December 31, 1993 ------------------------------------------------ 19. The Company has not been involved in or had any knowledge of any pending anti-trust, price-fixing, tax, copyright, patent litigation or governmental regulatory or administrative proceedings since the date of the previous application except as follows (if answer is none, so state): 1) Antitrust: Suit brought by Scripto-Tokai Corporation related to a patent --------------------------------------------------------------------------- infringement suit brought by the Company against Scripto-Tokai --------------------------------------------------------------------------- Corporation alleging among other things, monopolization of erasable ink --------------------------------------------------------------------------- pen market by obtaining and defending patents for erasable ink pens. --------------------------------------------------------------------------- 2) Patents: None other than previously noted. --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- -9- 20. It is agreed that this Renewal Application is supplemental to Application(s) for all policies of which the Policy would be a renewal, and that such Application(s), together with the Renewal Application and any materials submitted herewith (which shall be retained on file by Underwriters and shall be deemed attached hereto, as if physically attached hereto) constitute the complete Application which shall be the basis of the Policy and will be attached to and become part of the Policy. 21. It is agreed that in the event there is any material change in the answers to the questions contained herein prior to the effective date of the Policy, the applicant will notify Underwriters and, at the sole discretion of Underwriters, any outstanding quotations may be modified or withdrawn. 22. Attached and made a part of this Renewal Application by reference are the following materials regarding the Parent Company: (a) two copies of the Last Annual Report to Stockholders (b) two certified copies of the provisions of the Charter or By-Laws covering Indemnification of Directors and Officers, and (c) two copies of the Notice to Stockholders and the Proxy Statement for either the last or the next annual meeting. Underwriters are hereby authorized to make any investigation and inquiry in connection with this Renewal Application as they may deem necessary. 23. The undersigned declares that to the best of his/her knowledge the statements herein are true. Signing of this Renewal Application does not bind the undersigned to complete the insurance, but it is agreed that this Renewal Application, shall be the basis of the contract should a Policy be issued, and this Renewal Application will be attached to and become a part of such Policy, if issued. Underwriters are hereby authorized to make any investigation and inquiry in connection with this Renewal Application as they may deem necessary. -10- Signed (signature appears here) ---------------------------------- Must be Signed By Chairman of the Board or President of Parent Company Capacity Chairman of the Board and -------------------------------- Chief Executive Officer -------------------------------- Company The Gillette Company --------------------------------- Date June 6, 1994 ------------------------------------ Submitted by ---------------------------- (Agent) Date ------------------------------------ -11- - -------------------------------------------------------------------------------- [LOGO APPEARS HERE] The Table of Syndicates referred to on the face of this Policy follows:
- ------------------------------------------------------------------------------------------------------------ FOR LPSO USE ONLY BROKER LPSO No. & DATE FOR LPSO USE ONLY BROKER LPSO No. & DATE UX01 1409 0757 61406 30/08/94 0757 61406 30/08/94 21 22 - ----------------------------------------------------- ------------------------------------------------------ AMOUNT, PERCENTAGE SYNDICATE UNDERWRITER'S PAGE AMOUNT, PERCENTAGE SYNDICATE UNDERWRITER'S PAGE OR PROPORTION REFERENCE 1 OR PROPORTION REFERENCE 2 ---- ---- PERCENT PERCENT 5.0000 79 424YA1B7251B 0.6595 724 NA4390428F21 7.0000 839 8416BF616020 6.5955 1173 ALDTAA40904P 6.5000 861 11A41818Y02 0.8794 1003 C677C0063029 1.7588 219 954P3137 6.5954 190 0838N01468 5.2764 219 254P3137 1.7588 183 187DWW9078CA 2.6382 1007 HE231L94A409 0.7475 456 206393EXBYDT 4.8367 1038 RCCN00770LPD 10.0000 1212 AC626V94AD43 1.7588 1047 Y0147Z94A 1.3191 435 13500400 1.7588 205 481N02228BPA 10.0000 1213 AC626V94BD43 2.6382 672 C75XAE30404B 1.7588 204 050832306501 THE LIST OF UNDERWRITING MEMBERS 0.8794 947 QD567K94A64X OF LLOYDS IS NUMBERED 1994/ 8 0.4397 923 QD567K94B64X 1.3191 623 L0804S94ACPD 0.8794 1215 425FD00546AB - ----------------------------------------------------- ------------------------------------------------------ TOTAL LINE No. OF SYND. FOR LPSO USE ONLY TOTAL LINE No. OF SYND. FOR LPSO USE ONLY 82.9975 24 USE 1 16687
[STAMP APPEARS HERE] [STAMP APPEARS HERE] [COPY TO COME] Date: 15th September 1994 Policy No: 757/FD940229 THE SCHEDULE - -------------------------------------------------------------------------------- The Insured: THE GILLETTE COMPANY. Premium: US$12,750.34 part of US$74,991.00 Limits of Liability: 17.0025% of US$5,000,000 in the aggregate each policy year excess of US$10,000,000 in the aggregate each policy year Excess of:- US$NIL/US$NIL Directors and Officers Liability US$1,000,000 Reimbursement Liability. The Interest Insured: EXCESS DIRECTORS AND OFFICERS ----------------------------- LIABILITY AND EXCESS REIMBURSEMENT ---------------------------------- FOR DIRECTORS AND OFFICERS -------------------------- LIABILITY. ---------- As more fully set forth in the co-insuring Lloyd's policy. Period of Insurance: From: 1st June 1994 To: 1st June 1995 both days at 12:01 a.m. Local Standard Time and for such further period or periods as may be mutually agreed. - -------------------------------------------------------------------------------- COINSURANCE CLAUSE It is warranted that this Policy shall run concurrently with and be subject to the same terms, provisions, and limitations as are contained in Policy No. 757/FD940229 issued by certain underwriting members at Lloyd's of London covering the identical subject matter and risk. - --------------------------------------------------------------------------------
LIRMA Company The Insurers Number Proportion Reference - ------------------------------------------------------------------------------- NEW HAMPSHIRE INSURANCE COMPANY (PER AIG EUROPE (UK) LIMITED) N4395 17.0025% 3370020394
SEVERAL LIABILITY NOTICE The subscribing insurers' obligations under contracts of insurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing insurers are not responsible for the subscription of any co-subscribing insurer who for any reason does not satisfy all or part of its obligations. LSW 1001 (Insurance) 08/94 [LETTERHEAD OF CHUBB GROUP APPEARS HERE] Item 1. Parent Corporation: Policy Number 8138-54-11 The Gillette Company and its subsidiaries Item 2. Principal Address: FEDERAL INSURANCE COMPANY Prudential Tower Building Incorporated under the laws of New Boston, MA 02199-3799 Jersey a stock insurance company herein called the Company Item 3. Limit of Liability: Each Policy Year $15,000,000. Item 4. Underlying Policy(ies): (A) Primary Policy: Lloyd's Policy #: FD 940228 Policy Period: June 1, 1994 to June 1, 1995 (B) Other Policy(ies): Lloyd's and Other Underwriters (AIG) Policy #: FD 940229 Policy Period: June 1, 1994 to June 1, 1995 Item 5. Policy Period: From June 1, 1994 To June 1, 1995 Item 6. Endorsement(s) Effective At Inception: Nos. 1 and 2 Item 7. Termination of Prior Policy(ies): None IN WITNESS WHEREOF, the Company issuing this policy has caused this policy to be signed by its Authorized Officers, but it shall not be valid unless also signed by a duly authorized representative of the Company. FEDERAL INSURANCE COMPANY /s/ /s/ Secretary President ------------------------------ Authorized Representative bas-06/15/94.14 ------------------------------ Date The Company shall be given notice in writing as soon as is practicable (a) in the event of the cancellation of any Underlying Insurance and (b) of any notice given or additional or return premiums charged or paid in connection with any Underlying Insurance. Notice of any claim shall be given in writing to the Company at 51 John F. Kennedy Parkway, Short Hills, New Jersey 07078. By acceptance of this policy, the Parent Corporation named in Item 1 of the Declarations agrees to act on behalf of all the Insureds with respect to the giving and receiving of notice of claim or cancellations, the payment of premiums and the receiving of any return premiums that may become due under this policy and the Insureds agree that the Parent Corporation shall act on their behalf. No change in or modification of this policy shall be effective except when made by written endorsement signed by an authorized employee of Chubb & Son, Inc. This policy may be cancelled by the Parent Corporation at any time by written notice or by surrender of this policy to the Company. This policy may also be cancelled by or on behalf of the Company by delivery to the Parent Corporation or by mailing to the Parent Corporation, by registered, certified or other first class mail, at the address shown in item 2 of the Declarations, written notice stating when, not less than thirty days thereafter, the cancellation shall become effective. The mailing of such notice as aforesaid shall be sufficient proof of notice and this policy shall terminate at the date and hour specified in such notice. If the period of limitation relating to the giving notice is prohibited or made void by any law controlling the construction thereof. Such period shall be deemed to be amended so as to be equal to the minimum period of limitation permitted by such law. The Company shall refund the unearned premium computed at customary short rates if the policy is terminated in its entirety by the Parent Corporation. Under any other circumstances the refund shall be computed pro rata. This policy shall terminate immediately upon the termination of the Primary Policy, whether by the Insureds or the primary insurer. Notice of cancellation of non-renewal of the Primary Policy duly given by the primary insurer shall serve as notice of the cancellation or non-renewal of this policy by the Company. The taking effect of this policy shall terminate, if not already terminated, the policy(ies) specified in item 7 of the Declarations. Insureds means those persons or organizations insured under the Primary Policy. Primary Policy means the policy scheduled in item 4(A) of the Declarations or any policy of the same insurer replacing or renewing such policy. Policy Year means the one year period between the anniversaries of the Primary Policy, provided that (1) the first Policy Year of this policy shall be the period between the inception of this policy and the next subsequent anniversary of the Primary Policy, and (2) the last Policy Year of this policy shall be the [CHUBB GROUP LETTERHEAD APPEARS HERE] Company: Effective date of this endorsement: June 1, 1994 Endorsement No. To be attached to and form part of Policy No. Issued to: The Gillette Company It is agreed that: 1. The "Policy Termination" section, as set forth on page of , shall be amended by adding the following preamble: "This policy may be terminated prior to the expiration of the , period, as set forth in Item 5 of the Declarations page, by any of the methods contained in the following paragraphs." ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED _________________________ AUTHORIZED REPRESENTATIVE __________________________ DATE [LETTERHEAD OF CHUBB GROUP OF INSURANCE COMPANIES APPEARS HERE] Company: Effective date of this endorsement: June 1, 1994 Endorsement No. To be attached to and form part of Policy No. 8138-54 Issued to: The Gillette Company It is agreed that: The "INSURING CLAUSE" as set forth on page 3 of 4 shall be deleted in its entirety and replaced with the following: "The Company shall provide the "INSUREDS" with insurance during the policy period excess of the "UNDERLYING INSURANCE". Coverage hereunder shall only after all such "UNDERLYING INSURANCE" has been exhausted and shall then apply in conformance with the terms, conditions, exclusions and endorsements of the "PRIMARY POLICY", together with all limitations, restrictions exclusions contained in or added by endorsement to any other "UNDERLYING INSURANCE", except as specifically set forth in the terms and conditions endorsements of this policy. In no event shall this policy grant coverage than would be provided by any of the exhausted "UNDERLYING INSURANCE." ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED _________________________ AUTHORIZED REPRESENTATIVE bas _________________________ DATE THIS IS AN EXCESS CLAIMS MADE INDEMNITY POLICY WITH EXPENSES INCLUDED IN THE LIMIT OF LIABILITY [LOGO OF AETNA COMPANY PLEASE READ THE ENTIRE POLICY CAREFULLY APPEARS HERE] THE AETNA CASUALTY AND SURETY COMPANY DIRECTORS AND OFFICERS LIABILITY AND REIMBURSEMENT EXCESS POLICY DECLARATIONS POLICY NUMBER 095 LB 100 654 391 BCA NOTICE: THIS POLICY, SUBJECT TO ALL TERMS, CONDITIONS AND LIMITATIONS, APPLIES ONLY TO ANY CLAIM FIRST MADE OR DEEMED MADE PURSUANT TO THE TERMS HEREOF AGAINST THE INSUREDS DURING THE POLICY PERIOD. THE LIMIT OF LIABILITY AVAILABLE TO PAY DAMAGES OR SETTLEMENTS SHALL BE REDUCED BY AMOUNTS INCURRED AS DEFENSE EXPENSES. THIS POLICY DOES NOT PROVIDE FOR ANY DUTY BY THE UNDERWRITER TO DEFEND ANY OF THE INSUREDS. - -------------------------------------------------------------------------------- ITEM 1. PARENT ORGANIZATION NAME AND ITEM 2. POLICY PERIOD: PRINCIPAL ADDRESS: (a) From 6/1/1994 The Gillette Company (b) To 6/1/1995 Prudential Tower Building at 12:01 a.m. Standard Time Boston, MA 02199 both dates at the Principal Address in Item 1. - -------------------------------------------------------------------------------- ITEM 3. LIMIT OF LIABILITY (Inclusive of Defense Expenses): $10,000,000.00 maximum aggregate Limit of Liability for the Policy Period. - -------------------------------------------------------------------------------- ITEM 4. SCHEDULE OF UNDERLYING POLICIES a. Primary Policy ---------------------------------------------------------------------------- Underwriter Policy Number Limit Retention ----------------------------------------------------------------------------- Lloyd's of London 757/FD940228 $10,000,000.00 $0.00/$0.00/$1,000,000.00 ----------------------------------------------------------------------------- Other Policy(ies), if any: ----------------------------------------------------------------------------- Underwriter(s) Policy Number(s) Limit(s) Retention(s) ----------------------------------------------------------------------------- Lloyd's of London 757/FD940229 $5,000,000.00 Federal Insurance Company 8138-54-11 $15,000,000.00 ----------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 5. PREMIUM: $110,000.00 one year prepaid premium. - -------------------------------------------------------------------------------- ITEM 6. NOTICE REQUIRED TO BE GIVEN TO THE UNDERWRITER SHALL BE ADDRESSED TO Vice President of Claims Executive Risk Management Associates P. O. Box 2002 Simsbury, CT 06070 - -------------------------------------------------------------------------------- ITEM 7. ENDORSEMENTS ATTACHED AT ISSUANCE X-301.0 X-401.0 - -------------------------------------------------------------------------------- These Declarations, the completed signed Application and the Policy with Endorsements shall constitute the contract between the Insureds and the Underwriter. - -------------------------------------------------------------------------------- THE AETNA CASUALTY AND SURETY COMPANY By (Attorney-in-Fact) 01/25/1995 - -------------------------------------------------------------------------------- INSURED'S COPY PRIOR AND PENDING LITIGATION EXCLUSION To be attached to and form part of Policy No. 095 LB 100 654 391 BCA, issued to The Gillette Company. In consideration of the premium charged, the Underwriter shall not be liable to make any payment for loss in connection with any claim made against any of the insureds based on, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving: (a) any prior and/or pending litigation as of 11-21-87; or (b) any fact, circumstance or situation underlying or alleged in any prior and/or pending litigation as of 11-21-87. All other terms, conditions and limitations of this Policy shall remain unchanged, including, but not limited to, the maximum aggregate Limit or Liability set forth in Item 3 of the Declarations. - -------------------------------------------------------------------------------- Complete Only When This Endorsement is Not Prepared With The Policy Or is Not To -- Be Effective With The Policy Effective Date Of This Endorsement: THE AETNA CASUALTY AND SURETY COMPANY By: ---------------------------------- Attorney-In-Fact - -------------------------------------------------------------------------------- AMEND NOTICE OF CANCELLATION ENDORSEMENT To be attached to and form part of Policy No. 095 LB 100 654 391 BCA, issued to The Gillette Company. In consideration of the premium charge, the phrase "thirty (30) days" in fourth line of the first paragraph of Section XI is amended to read "sixty (60) days." All other terms, conditions and limitations of this Policy shall remain unchanged, including, but not limited to, the maximum aggregate Limit of Liability set forth in Item 3 of the Declarations. - -------------------------------------------------------------------------------- Complete Only When This Endorsement is Not Prepared With The Policy Or is Not To Be Effective With The Policy. Effective Date Of This Endorsement: THE AETNA CASUALTY AND SURETY COMPANY By:______________________________ Attorney-In-Fact - -------------------------------------------------------------------------------- X-401.0 (11-89) Endorsement No. 2 AETNA The Aetna Casualty and Surety Company Hartford, Connecticut 06156 (Herein referred to as Underwriter) RENEWAL APPLICATION DESIGNATED INSURED PERSONS AND COMPANY REIMBURSEMENT INSURANCE USE THIS FORM FOR ALL RENEWALS EXCEPT DEPOSITORY INSTITUTIONS NOTICE: THE POLICY FOR WHICH RENEWAL APPLICATION IS MADE, SUBJECT TO ITS TERMS, APPLIES ONLY TO ANY "CLAIM" (AS DEFINED IN THE POLICY) FIRST MADE OR DEEMED MADE AGAINST THE "INSURED PERSONS" (AS DEFINED IN THE POLICY) DURING THE POLICY PERIOD. THE LIMIT OF LIABILITY AVAILABLE TO PAY DAMAGES OR SETTLEMENTS SHALL BE REDUCED BY THE AMOUNTS INCURRED AS "DEFENSE EXPENSES" (AS DEFINED IN THE POLICY), AND SUCH DEFENSE EXPENSES SHALL BE SUBJECT TO THE DEDUCTIBLE AMOUNT. THE POLICY DOES NOT PROVIDE FOR ANY DUTY BY THE UNDERWRITER TO DEFEND THE INSURED PERSONS. Complete and correct information must be supplied by the Applicant whether or not such information is deemed confidential by the Applicant. This application is divided into three sections (A, B, and C). Part B is detachable and may be sent under separate cover. A 1. a) Name of Applicant: The Gillette Company ----------------------------------------------- (whenever used, Applicant shall mean the Parent Corporation) b) Principal address: Prudential Tower Building ----------------------------------------------- Boston, MA 02199 ------------------------------------------------------------------- c) State of incorporation or charter: Delaware ------------------------------- d) Name and title of the officer of the Applicant designated as the representative to receive notices from the Underwriter on behalf of all persons and entities proposed for this insurance: Lloyd B. Swaim, Vice President and Treasurer ------------------------------------------------------------------- e) Total consolidated assets and liabilities of Applicant and all Subsidiaries as of the close of the most recent quarter: Assets $5,102,300,000 Liabilities $3,623,300,000 Date: 12/31/93 -------------- -------------- -------- A 2. a) Has the Applicant increased or decreased the amount of, or suspended the payment of, dividends on its preferred or common stock since the date of the last application for directors and officers liability insurance? X Yes No --- --- If yes, explain in an attachment to this application. Common stock ------------ dividends increased from $.72 to $.84. -------------------------------------- b) Provide the price per share and closing P/E ratio for the Applicant's common stock for each quarter of the last four quarters: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ----------- ----------- ----------- ----------- Year High Low P/E High Low P/E High Low P/E High Low P/E - ---- ---- --- --- ---- --- --- ---- --- --- ---- --- --- 1993 61 3/8 52 1/2 25.4 60 7/8 47 3/8 22.6 59 1/4 50.0 22.9 63 3/4 57 1/8 22.4 Note: See Provision for Realignment on Page One of Annual Report. A 3. a) If not provided in the annual report to shareholders or the proxy statement, provide a list of the names and affiliations of all directors of the Applicant and the names and official titles of all officers of the Applicant in an attachment to this application. b) Describe any changes in the board of directors or senior management of the Applicant since the date of the last annual report. Lawrence E. Fouraker, Director, retired April 21, 1994. ------------------------------------------------------------------- Jacques Lagarde, Executive Vice President, replaced Lorne R. Waxlax in 1993. ------------------------------------------------------------------- Michael C. Hawley, Executive Vice President, replaced Gaston R. Levy in 1993. ------------------------------------------------------------------- Jill C. Richardson, Secretary, replaced Kathyrn DeMoss in 1993. ------------------------------------------------------------------- A 4. Has the Applicant changed its outside legal counsel within the last 12 months? If so, give details: No ----------------------------------------------------------------------- A 5. Has the Applicant changed its outside auditors within the last 12 months? If so give details: No ----------------------------------------------------------------------- A 6. If permitted under state law or statute, has the Applicant adopted a provision limiting the personal liability of its directors? X Yes No Not Permitted --- --- --- A 7. Has the board of directors established formal, written policies and procedures for reporting claims against directors or officers of the Applicant or claims against the Applicant that are periodically reviewed? Yes X No --- --- If yes, provide complete claims details in an attachment to this application. A 8. a) Does the Applicant have an internal audit procedure? X Yes NO --- --- If yes, and if not previously described in the application for the policy as to which the coverage applied for now would be a renewal, describe the audit procedure in detail, in a separate attachment to this application. Previously described in prior applications. ------------------------------------------- b) Are there any significant areas in the audit procedures of the Applicant that the outside auditors have criticized, or recommended changing that have not been changed? Yes No X ----- ----- If yes, provide details in an attachment to this application. c) Are any members of the audit committee of the board of directors also officers of the Applicant? Yes X No ----- ----- If yes, specify names, titles and operational responsibilities: --------------------------------------------------------------------- d) How often has the audit committee met in the last 12 months? 3 times --------------------------------------------- e) Have there been any changed in the procedures of the audit committee since the date of the last application for directors and officers liability insurance with respect to the following: (i) The head of the audit committee or of the audit department; No Change (ii) The composition of the audit committee or the audit department; or Yes (iii) The scope of the audit procedures. No Change If yes, provide details in a separate attachment to this application. (ii) Certain directors have rotated both on and off the audit committee and a normal level of staff changes within the audit department have occurred during the past year. B 1. As an attachment to this application, provide the names and number of shares for all persons or entities that presently own or control or have stated the intention to acquire, of record or beneficially, more than 5% of the Applicant's outstanding stock. If not applicable or if there has been no change since the last available notice of shareholders meeting and proxy statement, indicate here. Berkshire Hathaway Inc. - 24,000,000 shares -------------------------------------------------------------------------- B 2. If the Applicant is a cooperative or mutual association, has a conversion of cooperative or mutual ownership to stock ownership been considered or concluded in the past or is such a conversion being considered for imple- mentation to occur within the next 12 months? Yes No X Not App- --- --- --- licable If yes, attach a copy or a draft of the official circular. B 3. State whether the Applicant or any Subsidiary has in the past 12 months contemplated or agreed to, or contemplates within the next 12 months, any of the following, whether or not such transactions were or will be completed in such period (If yes, describe the terms or each such transaction in an attachment to this application): a) Merger or consolidation with another entity whose assets prior to such merger or consolidation exceed 10% of the Applicant's consolidated assets. Yes X No None Publicly Announced --- --- b) Acquisition or disposition of any assets or stock of any other corporation or interests in any partnership or joint venture where such acquisition or disposition increased or decreased or would increase or decrease the Applicant's consolidated assets by more than 10%. Yes X No None Other Publicly Announced --- --- c) Sale, distribution or divestiture of any assets other than in the ordinary course of business involving more than 10% of Applicant's assets. Yes X No None Publicly Announced --- --- d) Reorganization or arrangement with creditors under federal or state law. Yes X No --- --- e) Borrowing of funds or incurring indebtedness where the transaction increased, or would increase, the Applicant's consolidated liabilities by 10% or more. Yes X No --- --- f) (i) Placing anti-takeover provisions in the Applicant's certificate of incorporation or by-laws. Yes X No --- --- (ii) If yes, describe each such provision. ---------------------------------------------------------------- ---------------------------------------------------------------- (iii) If yes, have such provisions been approved by the shareholders? YES NO --- --- B 4. Has the Applicant or any Subsidiary filed or contemplated filing any registration statement for an offering of securities with any governmental authority within the past 18 months or within the next 12 months? X Yes No See Form S-3 and Form S-8. --- --- B 5. Does the Applicant or any Subsidiary have any contingent liabilities that exceed 10% of the Applicant's consolidated stockholders' equity other than those disclosed in the financial statements submitted with this application? Yes X No --- --- If yes, provide complete details in an attachment to this application. B 6. Has the Applicant or any Subsidiary within the last 12 months acquired or considered the acquisition of any of its own securities? Yes X No --- --- C 1. Have there been any fidelity bond claims greater than $100,000 in the past 12 months? Yes X No ---- ---- If yes, provide details in an attachment to this application. C 2. As part of this application, submit the following documents with respect to the Applicant: a) Last annual report including audited financial statements with all notes and schedules. b) Quarterly reports to shareholders subsequent to the last annual report to shareholders. c) Latest 10-K report, 10-Q reports filed subsequent to the last annual report, and any 8-K reports filed with the SEC within the last 12 months. d) The text of any presentation, together with all supporting documents, by management to securities analysts in the last 12 months. Chairman of the Board's April 21, 1994 Annual Meeting presentation will be submitted in lieu of requested information. e) Any reports prepared by outside financial analysts or consultants within the past 12 months. Examples of recent reports attached. f) Latest CPA letter to management on internal controls and any written response thereto. Summary of 1993 letters will be available after June 1, 1994. g) Most recent prospectus. h) Last notice of regular shareholders meeting and all notices of any special shareholders meetings, with accompanying proxy statements. i) Indemnification provision in the certificate of incorporation or corporate by-laws. C 3. As part of this application, submit a schedule of all material litigation with a brief description of each case filed within the last 12 months or since the date of the last application for directors and officers liability insurance, as well as any adverse judgments that have been rendered against the Applicant or any of its Subsidiaries in the past 12 months. See 1993 Form 10-K - Item 3 C 4. Has any director or officer of the Applicant or any Subsidiary been charged with or convicted of any criminal act within the last 12 months, or is any director or officer the subject of any pending criminal or administrative investigation? Yes X No Based on annual survey ---- ---- of Corporate Directors and certain key Corporate Officers. If yes, provide details as an attachment to this application. THE UNDERSIGNED AUTHORIZED AGENT OF THE PERSONS AND ENTITY(IES) PROPOSED FOR THIS INSURANCE FOR THE PURPOSE OF THIS APPLICATION DECLARES THAT TO THE BEST OF HIS/HER KNOWLEDGE THE STATEMENTS HEREIN ARE TRUE. SIGNING THIS APPLICATION DOES NOT BIND THE UNDERSIGNED TO COMPLETE THE INSURANCE BUT IT IS AGREED THAT THIS APPLICATION SHALL BE THE BASIS OF THE CONTRACT SHOULD A POLICY BE ISSUED, AND THIS APPLICATION WILL BECOME A PART OF SUCH POLICY, IF ISSUED, AND WILL BE ATTACHED THERETO. THE UNDERWRITER IS HEREBY AUTHORIZED TO MAKE ANY INVESTIGATION AND INQUIRY IN CONNECTION WITH THIS APPLICATION AS IT MAY DEEM NECESSARY. SUBMISSION OF THIS APPLICATION DOES NOT BIND THE UNDERWRITER TO ISSUE ANY COVERAGE: HOWEVER, IT IS AGREED THAT THIS APPLICATION AND ANY MATERIALS SUBMITTED HEREWITH, TOGETHER WITH THE APPLICATION DATED NOVEMBER 18, 1987, ARE THE BASIS FOR ISSUANCE OF ANY POLICY WHICH MAY BE ISSUED TO THE APPLICANT BY THE UNDERWRITER PURSUANT TO THIS APPLICATION. IT IS AGREED THAT IN THE EVENT THERE IS ANY MATERIAL CHANGE IN THE ANSWERS TO THE QUESTIONS CONTAINED HEREIN PRIOR TO THE EFFECTIVE DATE OF THE POLICY, THE APPLICANT WILL NOTIFY THE UNDERWRITER AND, AT THE SOLE DISCRETION OF THE UNDERWRITER, ANY OUTSTANDING QUOTATIONS MAY BE MODIFIED OR WITHDRAWN. THE UNDERSIGNED AUTHORIZED AGENT OF THE PERSONS AND ENTITY(IES) PROPOSED FOR THIS INSURANCE FOR THE PURPOSE OF THIS APPLICATION DECLARES THAT THE APPLICANT HAS RECEIVED AND READ A SPECIMEN FORM OF THE INSURANCE CONTRACT FOR WHICH APPLICATION IS MADE. The Gillette Company - -------------------------------------------------------------------------------- APPLICANT Chairman of the Board and /s/?????????????????????? Chief Executive Officer June 6, 1994 - -------------------------------------------------------------------------------- BY (Chairman and/or President TITLE DATE Signature - -------------------------------------------------------------------------------- NOTE: This application must be signed by the chairman and/or president of the Applicant acting as the authorized agent of the persons and entity(ies) proposed for this insurance. - -------------------------------------------------------------------------------- /s/?????????????????????? - -------------------------------------------------------------------------------- SUBMITTED BY (Insurance Agency) INSURANCE AGENCY TAXPAYER ID. OR SOCIAL SECURITY NO. 3 Ceuler Plaza - -------------------------------------------------------------------------------- ADDRESS (No. Street, City, State, and Zip Code) Boston, MA 02108 - -------------------------------------------------------------------------------- THIS IS A CLAIMS MADE INDEMNITY POLICY WITH EXPENSES INCLUDED IN THE LIMIT OF LIABILITY PLEASE READ THE ENTIRE POLICY CAREFULLY. THE AETNA CASUALTY AND SURETY COMPANY DIRECTORS AND OFFICERS LIABILITY AND REIMBURSEMENT LIABILITY EXCESS POLICY In consideration of the payment of the premium and in reliance on all statements made and information furnished to The AEtna Casualty and Surety Company (hereinafter called the "Underwriter"), and to the Underlying Insurers of the Underlying Insurance, including the statements made in the Application made a part hereof and subject to all of the terms, conditions and limitations of this Policy, the Underwriter and the Insureds agrees as follows: I. INSURING AGREEMENT The Underwriter shall provide the Insureds with insurance coverage during the Policy Period set forth in Item 2 of the Declarations excess of the Underlying Insurance in Item 4 of the Declarations. Coverage hereunder shall attach only after all such Underlying Insurance has been exhausted and shall then apply in conformance with the terms, conditions and limitations of the Policy immediately underlying this Policy except as specifically set forth in the terms, conditions and limitations of this Policy. II. POLICY DEFINITIONS Application means the written application attached hereto and forming part of this Policy, including any materials submitted therewith, and deemed a part of and attached to this Policy as if physically attached to this Policy. Insureds means those persons or organizations insured under the Policy immediately underlying this Policy. Parent Corporation means the entity named in Item 1 of the Declarations. Primary Policy means the Policy scheduled in Item 4(a) of the Declarations. Underlying Insurance means all those Policies scheduled in Item 4 of the Declarations and any Policies replacing them. III. MAINTENANCE OF UNDERLYING INSURANCE All of the Underlying Insurance scheduled in Item 4 of the Declarations shall be maintained during the Policy Period in full effect and affording coverage at least as broad as the Primary Policy, except for any reduction of the aggregate limit(s) of liability available under the Underlying Insurance solely by reason of payment of losses thereunder. Failure to comply with the foregoing shall not invalidate this Policy but the Underwriter shall not be liable to a greater extent than is this condition has been complied with, provided that nothing in this provision shall be deemed to negate Paragraph XII of this Policy. In the event of any actual or alleged (a) failure by the Insureds to give notice or to exercise any extensions under any Underlying Insurance or (b) misrepresentation or breach of warranties by any of the Insureds with respect to any Underlying Insurance, the Underwriter shall not be liable hereunder to a greater extent than it would have been in the absence of such actual or alleged failure, misrepresentation or breach. IV. DEPLETION OF UNDERLYING LIMIT(S) In the event of the depletion of the limit(s) of liability of the Underlying Insurance solely as the result of actual payment of losses thereunder by the applicable insurers, this Policy shall, subject to the limit of liability of the Underwriter and to the other terms of this Policy, continue to apply to losses as excess insurance over the amount of insurance remaining under such Underlying Insurance. In the event of the exhaustion of all of the limit(s) of liability of such Underlying Insurance solely as a result of payment of losses thereunder, the remaining limits available under this Policy shall, subject to the limit of liability of the Underwriter and to the other terms, conditions and limitations of this Policy, continue for subsequent losses as primary insurance and any retention specified in the Primary Policy shall be imposed under this Policy as to each claim made; otherwise no retention shall be imposed under this Policy. V. LIMIT OF LIABILITY The amount set forth in item 3 of the Declarations is the limit of liability of the Underwriter and shall be the maximum aggregate limit of liability of the Underwriter for the Policy Period. VI. CLAIM PARTICIPATION The Underwriter may, at its sole discretion, elect to participate in the investigation, settlement or defense of any claim against any of the Insureds for matter covered by this Policy even if the Underlying Insurance has not been exhausted. VII. SUBROGATION-RECOVERIES In that this Policy is "Excess Coverage", the Insureds' and the Underwriter's right of recovery against any person or other entity may not be exclusively subrogated. Despite the foregoing, in the event of any payment under this Policy, the Underwriter shall be subrogated to all the Insureds' rights of recovery against any person or organization, and the Insureds shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. Any amounts recovered after payment of loss hereunder shall be apportioned in the inverse order of payment to the extent of actual payment. The expenses of all such recovery proceedings shall be apportioned in the ratio of respective recoveries. VIII. NOTICE The Underwriter shall be given notice as soon as is practicable (a) in the event of the cancellation of any Underlying Insurance, (b) of any notice of claim or any situation that could give rise to a claim under any Underlying Insurance, or (c) any additional return premiums charged or allowed in connection with any Underlying Insurance. Such notice shall be given in writing to the entity set forth in Item 6 of the Declarations. IX. CORPORATION AUTHORIZATION CLAUSE By acceptance of this Policy, the Parent Corporation agrees to act on behalf of all the Insureds with respect to the giving and receiving of notices of claim or cancellations, the payment of premiums and the receiving of any return premiums that may become due under this Policy; and the Insureds agree that the Parent Corporation shall in all cases be authorized to act on their behalf. X. ALTERATION No change in or modification of this Policy shall be effective except when made by endorsement signed by an authorized employee of the Underwriter or any of its agents relating to this policy. XI. POLICY TERMINATION This Policy may be cancelled by the Parent Corporation at any time by written notice or by surrender of this Policy to the Underwriter. This Policy may also be cancelled by or on behalf of the Underwriter by delivery to the Parent Corporation or by mailing to the Parent Corporation, by registered, certified or other first class mail, at the address shown in Item 1 of the Declarations, written notice stating when, not less than thirty (30) days thereafter, the cancellation shall become effective. The mailing of such notice as aforesaid shall be sufficient proof of notice and this Policy shall terminate at the date and hour specified in such notice. If the period of limitation relating to the giving of notice is prohibited or made void by any law controlling the construction thereof, such period shall be deemed to be amended so as to be equal to the minimum period of limitation permitted by such law. The Underwriter shall refund the unearned premium computed at customary short rates if the Policy is terminated in its entirety by the Parent Corporation. Under any other circumstances the refund shall be computed pro rata. XII. TERMINATION OF UNDERLYING INSURANCE This Policy shall terminate immediately upon the termination of any one of the policies scheduled in Item 4 of the Declarations whether by the Insureds or the applicable Underlying Insurer. Notice of cancellation or non-renewal of any one of the aforementioned policies duly given by any aforementioned Underlying Insurer, shall serve as notice of the cancellation or non-renewal of this Policy by the Underwriter. DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICY Issued By (LETTERHEAD OF CODA APPEARS HERE) In Hamilton, Bermuda THIS IS A CLAIMS FIRST MADE POLICY. DEFENSE AND OTHER COSTS ARE INCLUDED IN THE LIMIT OF LIABILITY. THIS IS A THREE-YEAR POLICY WITH AN AUTOMATIC EXTENSION PROVISION. PLEASE READ THIS POLICY CAREFULLY. Words and phrases that appear below in all capital letters have the special meanings set forth in Clause 2 (Definitions). DECLARATIONS Policy No. GS-212C --------- Item I COMPANY: THE GILLETTE COMPANY ---------------------------------------------------------- Principal Address: Prudential Tower Building ----------------------------------------------- Boston, MA 02199, U.S.A. ----------------------------------------------- Item II POLICY PERIOD: From July 21, 1988 to June 1, 1996 ------------- ------------- 12:01 a.m. Standard Time at the address of the Company stated above. Item III LIMIT OF LIABILITY: $20,000,000 Aggregate LIMIT OF LIABILITY for all LOSS paid ----------------- on behalf of all INSUREDS arising from all CLAIMS first made during each POLICY YEAR. Item IV PREMIUM: At inception of first POLICY YEAR: $320,000 (prepaid total for three years). ------------------ 6/1/93-94 Year - 140,000 --------------- 6/1/94-95 Year - 155,000 --------------- 6/1/95-96 Year - 165,000 --------------- At each anniversary thereafter: Subject to adjustment on each anniversary date in accordance with Clause 7 (Automatic Extension) of this POLICY CODA 03 ED 05 92 Item V Any notice to the COMPANY or, except in accordance with Clause 17 (Representation) of this POLICY, to the INSUREDS, shall be given or made to the individual listed below, if any or otherwise to the individual designated in the APPLICATION, if any, or otherwise to the signer of the APPLICATION, and shall be given or made in accordance with Clause 16 (Notice) of this POLICY. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Item VI Any notice to be given or payment to be made to the INSURER under this POLICY shall be given or made to Corporate Officers & Directors Assurance Ltd. The ACE Building, 30 Woodbourne Avenue, Hamilton HM 08, Bermuda, Fax 809-295-5221. Telex 3543 ACEILBA, and shall be given or made in accordance with Clause 16 (Notice) of this POLICY. Item VII Schedule of Underlying Directors and Officers Insurance: Policy Policy Layer Carrier Number Year Limits Retention - -------------------------------------------------------------------------------- Primary Lloyds 757/DJ930040 6/1/93-94 $10M NIL/NIL/$1,000,000 1st excess Lloyds 757/DJ930041 6/1/93-94 $10M Underlying 2nd excess Aetna 095LB100654391BCA 6/1/93-94 $20M Underlying This POLICY shall constitute the entire contract between the INSUREDS, the COMPANY, and the INSURER. Endorsements 1 to 6 are made part of this POLICY at POLICY issuance. Countersigned at Hamilton, Bermuda on May 2nd, 1994 ----------------------------------------- by ----------------------------------------- Signature of Authorized Representative TABLE OF CONTENTS Clause Page 1. Insuring Clause.......................................................... 1 2. Definitions.............................................................. 2 3. Exclusions............................................................... 3 4. Appeals.................................................................. 4 5. Arbitration.............................................................. 5 6. Assistance and Cooperation............................................... 6 7. Automatic Extension...................................................... 6 8. Cancellation............................................................. 7 9. Changes and Assignments.................................................. 8 10. Payment of LOSS.......................................................... 8 11. Currency................................................................. 8 12. Headings................................................................. 8 13. INSUREDS' Reporting Duties............................................... 8 14. LOSS Provisions.......................................................... 9 15. Other Insurance.......................................................... 9 16. Notice................................................................... 9 17. Representation........................................................... 10 18. Severability............................................................. 10 19. Special POLICY Revisions................................................. 10 20. Subrogation.............................................................. 10 21. Acquisition, Creation or Disposition of a Subsidiary..................... 11 DIRECTORS AND OFFICERS LIABILITY INSURANCE In consideration of the payment of the premium and in reliance on all statements made and information furnished by the COMPANY to the INSURER in the APPLICATION, which is hereby made a part hereof, and subject to the foregoing Declarations and to all other terms of this POLICY, the COMPANY, the INSUREDS, and the INSURER agree as follows: 1. INSURING CLAUSE (a) The INSURER shall pay on behalf of the INSUREDS or any of them, any and all LOSS that the INSUREDS shall become legally obligated to pay by reason of any CLAIM or CLAIMS first made against the INSUREDS or any of them during the POLICY PERIOD, for any WRONGFUL ACTS that are actually or allegedly caused, committed, or attempted prior to the end of the POLICY PERIOD by the INSUREDS, in excess of the amounts payable under, or for which no amounts are payable with respect to such LOSS under, or for which the insurer(s) wrongfully refuses or is financially unable to pay under, the UNDERLYING INSURANCE, and not exceeding the LIMIT OF LIABILITY: provided the INSURER shall not be liable for any portion of LOSS unless: (1) the insurer(s) of the UNDERLYING INSURANCE: a. wrongfully refuses to indemnify the INSUREDS as required under the terms of the UNDERLYING INSURANCE; or b. is financially unable to indemnify the INSUREDS; or (2) according to the terms and conditions of the UNDERLYING INSURANCE, the insurer(s) of the UNDERLYING INSURANCE are not liable for such portion of the LOSS; or (3) the limit(s) of liability of the UNDERLYING INSURANCE has been exhausted by reason of LOSSES paid thereunder. (b) in the event that: (1) part of all of a LOSS would be payable under the UNDERLYING INSURANCE, but the limits of liability of the UNDERLYING INSURANCE have been exhausted by reason of payments made thereunder; or (2) part of a LOSS is paid by the UNDERLYING INSURANCE. then the INSURER shall be liable only for that part of LOSS otherwise covered under this POLICY in excess of any required retention and co- insurance amounts under such UNDERLYING INSURANCE, such liability not to exceed the LIMIT OF LIABILITY. (c) In the event that the INSUREDS or any of them suffer a LOSS: (1) that is covered by the UNDERLYING INSURANCE, or (2) that would be covered by the UNDERLYING INSURANCE except that such insurance has been exhausted or reduced by reason of payments thereunder and the excess of which LOSS would be payable under this POLICY except for terms and conditions of this POLICY that are not consistent with the UNDERLYING INSURANCE, then notwithstanding anything in this POLICY to the contrary except: the LIMIT OF LIABILITY, subpart (a) of Clause 3 (Exclusions), Clause 4 (Appeals), Clause 5 (Arbitration), Clause 6 (Assistance and Cooperation), Clause 8 (Cancellation) reason of a CLAIM made against the INSUREDS for any WRONGFUL ACT, and shall include but not be limited to compensatory, exemplary, punitive and multiple damages, judgments, settlements, and reasonable and necessary costs of investigation and defense of CLAIMS and appeals therefrom (including but not limited to attorneys fees but excluding all salaries and office expenses of the COMPANY, amounts paid to counsel as general retainer fees, and all other expenses that cannot be directly allocated to a specific CLAIM), and cost of attachment or similar bonds, providing always, however, LOSS shall not include taxes, fines or penalties imposed by law, or matters that may be deemed uninsurable under the law pursuant to which this POLICY shall be construed. ("Fines or penalties" do not include punitive, exemplary, or multiple damages). (h) "POLICY" shall mean this insurance policy, including the APPLICATION, the Declarations, and any endorsements hereto issued by the INSURER. (i) "POLICY PERIOD" shall mean the period of time stated in Item II of the Declarations, as may be automatically extended in accordance with Clause 7 (Automatic Extension) below. If this POLICY is cancelled in accordance with subpart (c) or (d) of Clause 8 (Cancellation) below, the POLICY PERIOD shall end upon the effective date of such cancellation. (j) "POLICY YEAR" shall mean a period of one year, within the POLICY PERIOD, commencing each year on the day and hour first named in Item II of the Declarations, or if the time between the inception date, or any anniversary date and the termination date of this POLICY is less than one year, then such lesser period. (k) "SUBSIDIARY" shall mean any corporation in which more than 50% of the outstanding securities representing the present right to vote for election of directors is owned, directly or indirectly, in any combination, by the COMPANY and/or by one or more of its SUBSIDIARIES, at the starting date of the POLICY PERIOD. (l) "UNDERLYING INSURANCE" shall mean the directors and officers liability insurance policies scheduled in Item VII of the Declarations. (m) "WRONGFUL ACT" shall mean any actual or alleged error, misstatement, misleading statement or act, omission, neglect, or breach of duty by the INSUREDS while acting in their individual or collective capacities as directors or officers of the COMPANY, or any other matter claimed against them by reason of their being directors or officers of the COMPANY. All such errors, misstatements, misleading statements or acts, omissions, neglects or breaches of duty actually or allegedly caused, committed, or attempted by or claimed against one or more of the INSUREDS arising out of or relating to the same or series of related facts, circumstances, situations, transactions or events shall be deemed to be a single WRONGFUL ACT. 3. EXCLUSIONS The INSURER shall not be liable to make any payment for LOSS in connection with that portion of any CLAIM made against the INSUREDS: (a) for which the COMPANY actually pays or indemnifies or is required or permitted to pay on behalf of or to indemnify the INSUREDS pursuant to the charter or other similar formative document or by-laws or written agreements of the COMPANY duly effective under applicable law, that determines and defines such rights of indemnity; provided, however, this exclusion shall not apply if: (1) the COMPANY refuses to indemnify or advance defense or other costs as required or permitted, or if the Company is financially unable to indemnify; and 3 5. ARBITRATION (a) Any dispute arising in connection with this POLICY shall be fully determined in Bermuda under the provisions of the Bermuda Arbitration Act of 1986, as amended and supplemented, by a Board of Arbitration composed of three arbitrators who shall all be disinterested, active or retired business executives having knowledge relevant to the matters in dispute, and who shall be selected for each controversy as follows: Either party to the dispute may, once a CLAIM or demand on his part has been denied or remains unsatisified for a period of twenty (20) calendar days by the other party, notify the other of its desire to arbitrate the matter in dispute and at the time of such notification the party desiring arbitration shall notify the other party of the name of the arbitrator selected by it. The other party who has been so notified shall within ten (10) calendar days thereafter select an arbitrator and notify the party desiring arbitration of the name of such second arbitrator. If the party notified of a desire for arbitration shall fail or refuse to nominate the second arbitrator within ten (10) calendar days following the receipt of such notification, the party who first served notice of a desire to arbitrate will, within an additional period of ten (10) calendar days, apply to the Supreme Court of Bermuda for the appointment of a second arbitrator and in such a case the arbitrator appointed by such a judge shall be deemed to have been nominated by the party who failed to select the second arbitrator. The two arbitrators, chosen as above provided, shall within ten (10) calendar days after the appointment of the second arbitrator choose a third arbitrator. In the event of the failure of the first two arbitrators to agree on a third arbitrator within the said ten (10) calendar day period, either of the parties may within a period of ten (10) calendar days thereafter, after notice to the other party, apply to the Supreme Court of Bermuda for the appointment of a third arbitrator and in such case the person so appointed shall be deemed and shall act as a third arbitrator. Upon acceptance of the appointment by said third arbitrator, the Board of Arbitration for the controversy in question shall be deemed fixed. (b) The Board of Arbitration shall fix, by a notice in writing to the parties involved, a reasonable time and place for the hearing and may prescribe reasonable rules and regulations governing the course and conduct of the arbitration proceeding, including without limitation discovery by the parties. (c) This POLICY shall be governed by and construed and enforced in accordance with the internal laws of Bermuda, except insofar as such laws may prohibit payment in respect of punitive damages hereunder; provided, however, that the provisions, stipulations, exclusions and conditions of this POLICY are to be construed in an evenhanded fashion as between the parties; without limitation, where the language of this POLICY is deemed to be ambiguous or otherwise unclear, the issue shall be resolved in the manner most consistent with the relevant provisions, stipulations, exclusions and conditions (without regard to authorship of the language, without any presumption or arbitrary interpretation or construction in favor of either the INSUREDS or the INSURER) and in accordance with the intent of the parties. (d) The Board of Arbitration shall, within ninety (90) calendar days following the conclusion of the hearing, render its decision on the matter or matters in controversy in writing and shall cause a copy thereof to be served on all the parties thereto. In case the Board of Arbitration fails to reach a unanimous decision, the decision of the majority of the members of said Board shall be deemed to be the decision of the Board. (e) Each party shall bear the expense of its own arbitrator. The remaining costs of the arbitration shall be borne equally by the parties to such arbitration. (f) All decisions and awards by the Board of Arbitration shall be final and binding upon the parties. The parties hereby agree to exclude any right of appeal under Section 29 of the Bermuda Arbitration Act of 1986 against any award rendered by the Board of Arbitration and further agree revoked or if during the remainder of the POLICY PERIOD the INSURER agrees to extend coverage, this POLICY shall be continued or such agreed coverage may be extended, respectively, to the expiration date which would otherwise be applicable if such notice of non-extension had not been given, provided the COMPANY submits the extension application and pays the charged premium. If the COMPANY or the INSURER gives written notice that the POLICY extension is not desired, the COMPANY shall pay on or before each of the two remaining anniversary dates the charged premium for the next succeeding POLICY YEAR respectively less a premium credit equal to the premium paid at inception of the POLICY for Year 2 and Year 3 of the POLICY, respectively. If any such premium credit exceeds the charged premium, the INSURER shall refund to the COMPANY the difference within ten days following such anniversary date. The premium charged on each anniversary of this POLICY shall be determined by the rating plan and by laws of the INSURER in force at such anniversary date. 8. CANCELLATION This POLICY shall not be subject to cancellation except as follows: (a) In the event during the POLICY PERIOD: (1) the company named in Item I of the Declarations shall merge into or consolidate with another organization in which the company named in Item I of the Declarations is not the surviving entity, or (2) any person or entity or group of persons and/or entities acting in concert shall acquire securities or voting rights which results in ownership or voting control by such person or entity or group of persons or entities of more than 50% of the outstanding securities representing the present right to vote for election of directors of the company named in Item I of the Declarations. This POLICY shall not apply to any WRONGFUL ACTS actually or allegedly taking place after the effective date of said merger, consolidation or acquisition; however, this POLICY shall remain in force for the remainder of the POLICY PERIOD as to CLAIMS based upon WRONGFUL ACTS alleged to have been committed prior to such date. All premiums paid or due at the time of said merger, consolidation or acquisition shall be fully earned and in no respect refundable. (b) In the event of the appointment by any state or federal official, agency or court of any receiver, conservator, liquidator, trustee, rehabilitator or similar official to take control of, supervise, manage or liquidate any entity included within the definition of the COMPANY, or in the event such entity becomes a debtor in possession, this POLICY shall not apply to any WRONGFUL ACTS by the directors and officers of such entity actually or allegedly taking place after the date of such event. This POLICY shall remain in force for the remainder of the POLICY PERIOD from said date as to CLAIMS for (i) WRONGFUL ACTS by any other INSUREDS, and (ii) WRONGFUL ACTS by the directors and officers of such entity alleged to have been committed prior to the date of such event. All premiums paid or due at the time of such event shall be fully earned, and in no respect refundable. With respect to CLAIMS first made after the date of such event for WRONGFUL ACTS by the directors and officers of such entity, (i) the LIMIT OF LIABILITY of this POLICY for the remainder of the POLICY PERIOD shall be a continuation of the same limit, and not a separate limit, as was in effect during the POLICY YEAR in which such event occurred, and (ii) such CLAIMS shall be deemed to have been first made during the POLICY YEAR in which such event occurred for purposes of the LIMIT OF LIABILITY. (c) This POLICY may be cancelled by mutual agreement and consent of the INSURER, the COMPANY, and the INSUREDS upon such terms and conditions as respects return premium nature of the WRONGFUL ACT, the alleged injury, the names of the claimants, and the manner in which the INSUREDS or COMPANY first became aware of the CLAIM; or (b) event described in subpart (a) or (b) of Clause 8 (Cancellation) above, and shall cooperate with the INSURER and give such additional information as the INSURER may reasonably require. The INSUREDS and/or the COMPANY shall give written notice to the INSURER of any: (a) material change in the terms or conditions of the UNDERLYING INSURANCE; or (b) nonrenewal or cancellation of the UNDERLYING INSURANCE. within 30 days after the INSUREDS and/or the COMPANY receive or have notice of such change, nonrenewal or cancellation and any additional premium reasonably required by the INSURER as a result of such change, nonrenewal or cancellation shall be paid within 30 days of the request therefor by the INSURER. 14. LOSS PROVISIONS (a) The time when a CLAIM shall be made for purposes of determining the application of Clause 1 (Insuring Clause) above shall be the date on which the CLAIM is first made against the INSURED. (b) If during the POLICY PERIOD, the INSUREDS or the COMPANY shall become aware of any circumstances that are likely to give rise to a CLAIM being made against the INSUREDS, and shall give written notice to the INSURER of the circumstances and the reasons for anticipating a CLAIM, with particulars as to dates and persons involved, then any CLAIM that is subsequently made against the INSUREDS arising out of such circumstances shall be treated as a CLAIM made during the first POLICY YEAR in which the INSUREDS or the COMPANY gave such notice. (c) The COMPANY and the INSUREDS shall give the INSURER such information and cooperation as it may reasonably require and as shall be in the COMPANY's and the INSUREDS' power. 15. OTHER INSURANCE Subject to subparts (f) and (g) of Clause 3 (Exclusions), if other valid and collectible insurance with any other insurer, whether such insurance is issued before, concurrent with, or after inception of this POLICY, is available to the INSUREDS covering a CLAIM also covered by this POLICY, other than the UNDERLYING INSURANCE and insurance that is issued specifically as insurance in excess of the insurance afforded by this POLICY, this POLICY shall be in excess of and shall not contribute with such other insurance. Except as allowed by subpart (c) of Clause 1 (Insuring Clause), nothing herein shall be construed to make this POLICY subject to the terms of other insurance. 16. NOTICE All notices under any provision of this POLICY shall be in writing and given by prepaid express courier or electronic service properly addressed to the appropriate party at the respective addresses as shown in Items V and VI of the Declarations. Notice so given shall be deemed to be received and effective upon actual receipt thereof by the party or one day following the date such notice is sent, whichever is earlier. 9 21. ACQUISITION, CREATION OR DISPOSITION OF A SUBSIDIARY (a) Coverage shall apply to the directors and officers of any subsidiary corporation in which more than 50% of the outstanding securities representing the present right to vote for election of directors is owned, directly or indirectly, in any combination, by the COMPANY and/or one or more of its SUBSIDIARIES, and which is acquired or created after the inception of this POLICY, if written notice is given to the INSURER within 30 days after the acquisition or creation, and any additional premium required by the Insurer paid within thirty days of the request therefor by the INSURER. The INSURER waives the obligation to provide notice and to pay any additional premium if the assets of such newly created or acquired company are not more than 10% of the total assets of the COMPANY or $250,000,000, whichever is less. The coverage provided for the directors and officers of such new subsidiary shall be limited to CLAIMS for WRONGFUL ACTS actually or allegedly taking place subsequent to the date of acquisition or creation of the subsidiary. (b) Coverage shall not apply to directors and officers of any subsidiary, including a SUBSIDIARY as defined in Clause 2 (Definitions) above, for CLAIMS for WRONGFUL ACTS actually or allegedly taking place subsequent to the date that the COMPANY and/or more of its SUBSIDIARIES, directly or indirectly, in any combination, ceases to own more than 50% of the outstanding securities representing the present right to vote for election of directors in such subsidiary. IN WITNESS WHEREOF, the INSURER has caused this POLICY to be signed by its President and Secretary and countersigned on the Declarations Page by a duly authorized agent of the INSURER. /s/ /s/ - -------------------------------------- ---------------------------------------- Secretary President CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 1 Effective Date of Endorsement June 1, 1993 ----------- ------------------------- Attached to and forming part of POLICY NO. GS-212C -------------------------------------- COMPANY THE GILLETTE COMPANY ------------------------------------------------------------------------- It is understood and agreed that this POLICY is hereby amended as indicated below. All other terms of this POLICY remain unchanged. REVISED THREE-YEAR POLICY FORM ENDORSEMENT ------------------------------------------ (Replacement Policy Form) It is understood and agreed that pursuant to Clause 19 "Special Policy Revisions" and with the consent of the company named in Item I of the Declarations, this POLICY is changed as of the effective date set forth above by cancelling the POLICY form (including endorsements) in effect as of the effective date of this Endorsement and reissuing the revised POLICY form (including revised endorsement forms) to which this Endorsement is attached. Coverage under this POLICY for all CLAIMS first made against the INSUREDS prior to the effective date of this Endorsement shall be governed by such prior POLICY form (including endorsements thereto). Coverage under this POLICY for all CLAIMS first made against the INSUREDS on or after the effective date of this Endorsement shall be governed by the POLICY form (including endorsements) to which this Endorsement is attached. Except as may be agreed to by the INSURER in writing, such change in POLICY form shall not change the inception date, anniversary date, LIMIT OF LIABILITY, or POLICY YEAR of this POLICY. The maximum liability of the INSURER for all LOSS arising from all CLAIMS first made during the POLICY YEAR in which this Endorsement becomes effective shall be the amount described in Item III of the Declarations. /s/ - ------------------------------------ ------------------------------------- Signature of Authorized Signature of Authorized Representative of COMPANY Representative of INSURER CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 2 Effective Date of Endorsement August 20, 1990 ---------- ------------------------ Attached to and forming part of POLICY No. GS-212C ------------------------------------- COMPANY THE GILLETTE COMPANY ------------------------------------------------------------------------- It is understood and agreed that this POLICY is hereby amended as indicated below. All other terms of this POLICY remain unchanged. OUTSIDE POSITIONS ENDORSEMENT: SUBLIMIT, NON-SPECIFIC INDIVIDUALS (A) Subject to the sublimit of liability set forth in (C) below, the definition of "INSUREDS" is hereby extended to include: (1) all persons who were, are, or shall be serving as directors, officers, trustees, governors, partners or the equivalent thereof for any corporation, partnership, joint venture, eleemosynary institution, non-profit organization, industry association, or foundation, (any such enterprises referred to below as "Entity"), if: (a) such activity is part of their duties regularly assigned by the COMPANY, or (b) they are a member of a class of persons so directed to serve by the COMPANY (2) the estates, heirs, legal representatives or assigns of deceased persons who were INSUREDS, as defined in subpart (A)(I) above, and the legal representatives or assigns of INSUREDS in the event of their incompetency, insolvency or bankruptcy. (B) It is further understood and agreed that this extension of coverage: (1) is to be excess of any other insurance and excess of any director or officer liability insurance and or company reimbursement insurance any conditions in such other insurance notwithstanding: (2) shall not apply to any LOSS for which such Entity or the COMPANY actually pays or indemnities or is required or permitted to pay on behalf of or to indemnify the INSUREDS pursuant to the charter or other similar formative document or by-laws or written agreements of such Entity or the COMPANY duly effective under applicable law, that determines and defines such rights of indemnity; provided, however, this subpart (2) shall not apply if: (a) such Entity and the COMPANY refuse to indemnify or advance defense or other costs as required or permitted, or if such Entity and the COMPANY are financially unable to indemnify: and (b) the INSUREDS comply with Clause 20 (Subrogation) of the POLICY: (3) shall not apply to any LOSS in connection with any CLAIM made against the INSUREDS in their capacity as directors or officers of Corporate Officers & Directors Assurance Ltd. or Corporate Officers & Directors Assurance Holding, Ltd: and (4) is not to be construed to extend to the Entity nor to any other director, officer, trustee, governor, partner or employee of such Entity. (C) In lieu of the LIMIT OF LIABILITY stated in Item III of the Declarations, the limit of liability of the INSURER for this extension of coverage shall be $ 5,000,000 in the aggregate for all LOSS which is covered by reason of this extension of coverage and which is paid on behalf of all INSUREDS arising from all CLAIMS first made during each POLICY YEAR. It is understood that the amount stated in Item III of the Declarations is the maximum amount payable by the INSURER under this POLICY for all CLAIMS first made during each POLICY YEAR, and that this Endorsement extends coverage with a submit which further limits the INSURER'S liability and does not increase the INSURER'S maximum liability beyond the LIMIT of LIABILITY stated in Item III the Declarations. It is further understood that such sublimit is separate from and payment of LOSS pursuant to this Endorsement does not reduce the sublimit or limit contained in any other Outside Positions Endorsement to this POLICY. (D) Solely for purposes of this extension of coverage, the definition of "WRONGFUL ACT" is hereby modified to replace the word "COMPANY" with the word "ENTITY" wherever the word "COMPANY" appears. (E) Solely for purposes of applying subparts (i) and (j) of Clause 3 (Exclusions) of the POLICY to this extension of coverage, the definition of "COMPANY" is hereby modified to include such Entity. /s/ ----------------------------------------- Signature of Authorized Representative CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 3 Effective Date of Endorsement June 1, 1991 ------ ---------------- Attached to and forming part of POLICY No. GS-212C -------------------------------- COMPANY THE GILLETTE COMPANY ------------------------------------------------------------------- It is understood and agreed that this POLICY is hereby amended as indicated below. All other terms of this POLICY remain unchanged. OUTSIDE POSITIONS ENDORSEMENT: SUBLIMIT, SPECIFIC INDIVIDUALS (A) Subject to the sublimit of liability set forth in (C) below, the definition of "INSUREDS" is hereby extended to include: (1) the following persons who were, are, or shall be serving as directors, officers, trustees, governors, partners or the equivalent thereof for any corporation, partnership, joint venture, eleemosynary institution, non-profit organization, industry association, or foundation, (any such enterprises referred to below as "Entity"): MR. ALFRED M. ZEIEN -------------------------------------------------------------------- MR. JOSEPH E. MULLANEY -------------------------------------------------------------------- -------------------------------------------------------------------- provided, however, that: (a) such activity is part of their duties regularly assigned by the COMPANY, or (b) they are so directed to serve by the COMPANY. (2) the estates, heirs, legal representatives or assigns of deceased persons who were INSUREDS, as defined in subpart (A)(1) above, and the legal representatives or assigns of INSUREDS in the event of their incompetency, insolvency or bankruptcy. (B) It is further understood and agreed that this extension of coverage: (1) is to be excess of any other insurance and excess of any director or officer liability insurance and/or company reimbursement insurance any conditions in such other insurance notwithstanding: (2) shall not apply to any LOSS for which such Entity or the COMPANY actually pays or indemnifies or is required or permitted to pay on behalf of or to indemnify the INSUREDS pursuant to the charter or other similar formative document or by-laws or written agreements of such Entity or the COMPANY duly effective under applicable law, that determines and defines such rights of indemnity; provided, however, this subpart (2) shall not apply if: (a) such Entity and the COMPANY refuse to indemnify or advance defense or other costs as required or permitted, or if such Entity and the COMPANY are financially unable to indemnify; and (b) the INSUREDS comply with Clause 20 (Subrogation) of the POLICY; (3) shall not apply to any LOSS in connection with any CLAIM made against the INSUREDS in their capacity as directors or officers of Corporate Officers & Directors Assurance Ltd. or Corporate Officers & Directors Assurance Holding, Ltd.; and (4) is not to be construed to extend to the Entity nor to any other director, officer, trustee, governor, partner or employee of such Entity. (C) In lieu of the LIMIT OF LIABILITY stated in Item III of the Declarations, the limit of liability of the INSURER for the extension of coverage afforded by this Endorsement shall be $15,000,000 in the aggregate for all LOSS which is covered by reason of this Endorsement and which is paid on behalf of all INSUREDS arising from all CLAIMS first made during each POLICY YEAR. It is understood that the amount stated in Item III of the Declarations is the maximum amount payable by the INSURER under this POLICY for all CLAIMS first made during each POLICY YEAR, and that this Endorsement extends coverage with a sublimit which further limits the INSURER'S liability and does not increase the INSURER'S maximum liability beyond the LIMIT OF LIABILITY stated in Item III the Declarations. It is further understood that such sublimit is separate from, and payment of LOSS pursuant to this Endorsement does not reduce, the sublimit or limit contained in any other Outside Positions Endorsement to this POLICY. (D) Solely for purposes of this extension of coverage, the definition is of "WRONGFUL ACT" is hereby modified to replace the word "COMPANY" with the word "Entity" wherever the word "COMPANY" appears. (E) Solely for purposes of applying subparts (i) and (j) of Clause 3 (Exclusions) of the POLICY to this extension of coverage, the definition of "COMPANY" is hereby modified to include such Entity. -------------------------------------------- Signature of Authorized Representative CODA Letterhead goes here Endorsement No. 4 Effective Date of Endorsement June 1, 1993 ----------- ----------------------- Attached to and forming part of POLICY No. GS-212C -------------------------------------- COMPANY The GILLETTE COMPANY ------------------------------------------------------------------------- It is understood and agreed that this POLICY is hereby amended as indicated below. All other terms of this POLICY remain unchanged. THREE-YEAR POLICY REVISION GRANDFATHER ENDORSEMENT Clause 8(e) of the POLICY is deleted in its entirety and Clause 7 of the POLICY is amended to read in its entirety as follows: Except in the event this POLICY is canceled in whole or in part in accordance with Clause 8 (Cancellation) below, on each anniversary of this POLICY, upon submission of the extension application and payment of the charged premium, this Policy shall automatically be continued to a date one year beyond its previously stated expiration date, unless written notice is given by the INSURER to the COMPANY, or by the COMPANY to the INSURER, that such POLICY extension is not desired. Such written notice may be given at any time prior to the anniversary of the POLICY, except that such notice by the INSURER to the COMPANY may be given only during the period commencing ninety (90) days and ending ten (10) days prior to such anniversary, in which case the POLICY shall automatically expire two years from such anniversary date. Such written notice shall be given by the INSURER to the COMPANY only if it is determined to be appropriate by an affirmative vote of a majority of the INSURER's entire Board at a meeting of said Board prior to mailing of such notice. The premium charged on each anniversary of this POLICY shall be determined by the rating plan and by-laws of the INSURER in force at such anniversary date. As of the second anniversary of the Effective Date of this Endorsement, (i) the foregoing deletion of Clause 8 (e) and amendment of Clause 7 shall terminate, (ii) Clause 8 (e) shall read in its entirety as set forth in the POLICY form to which this Endorsement is attached, and (iii) Clause 7 shall read in its entirety as follows: Except in the event this POLICY is canceled in whole or in part in accordance with Clause 8 (Cancellation) below, on each anniversary of this POLICY, upon submission of the extension application and payment of the charged premium, this POLICY shall automatically be continued to a date one year beyond its previously stated expiration date, unless written notice is given by the INSURER to the COMPANY, or by the COMPANY to the INSURER, that such POLICY extension is not desired. Such written notice may be given at any time prior to the anniversary of the POLICY, except that such notice by the INSURER to the COMPANY may be given only during the period commencing ninety (90) days and ending ten (10) days prior to such anniversary, in which case the POLICY shall automatically expire two years from such anniversary date. Such written notice shall be given by the INSURER to the COMPANY only if it is determined to be appropriate by an affirmative vote of 2/3 of the INSURER'S entire Executive Committee at a meeting of said Committee prior to mailing of such notice. Any non-extension by the INSURER shall be revoked as of the next meeting of the INSURER'S Board of Directors if the Board at such meeting so determines by an affirmative vote of a majority of the entire Board. It any such non- extension is so revoked or if during the remainder of the POLICY PERIOD the INSURER agrees to extend coverage, this POLICY shall be continued or such agreed coverage may be extended, respectively, to the expiration date which would otherwise be applicable if such notice of Non-extension had not been given, provided the COMPANY submits the extension application and pays the charged premium. If the COMPANY or the INSURER gives written notice that the POLICY extension is not desired, the COMPANY shall pay on or before each of the two remaining anniversary dates the charged premium for the next succeeding POLICY YEAR respectively less a premium credit equal to the premium paid for the two respective POLICY YEARS remaining in the POLICY PERIOD as of the effective date of this Endorsement. If any such premium credit exceeds the charged premium, the INSURER shall refund to the COMPANY the difference within ten days following such anniversary date. The premium charged on each anniversary of this POLICY shall be determined by the rating plan and by-laws of the INSURER in force at such anniversary date. --------------------------------------- Signature of Authorized Representative CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 5 Effective Date of Endorsement June 1, 1991 --- --------------------------- Attached to and forming part of POLICY No. GS-212C --------------------------------- COMPANY THE GILLETTE COMPANY -------------------------------------------------------------------- It is understood and agreed that this POLICY is hereby amended as indicated below. All other terms of this POLICY remain unchanged. INSURED DEFINITION ENDORSEMENT ------------------------------ Subpart (d) of Clause 2 (Definitions) of this POLICY is hereby deleted in its entirety and replaced with the following: (d) "INSUREDS" shall mean: (1) all persons who were, now are, or shall be duly elected or appointed directors, officers, operating division presidents, functional vice presidents, general managers, area general managers and group general managers of the COMPANY or any unincorporated divisions of the COMPANY; or (2) the estates, heirs, legal representatives or assigns of deceased INSUREDS who were directors, officers, operating division presidents, functional vice presidents, general managers, are general managers and group general managers of the COMPANY or any unincorporated divisions of the COMPANY at the time of the WRONGFUL ACT upon which such CLAIMS are based were committed, and the legal, representatives or assigns of INSUREDS in the event of their incompetency, insolvency or bankruptcy. All other terms and conditions remain unchanged. By ------------------------------------- Authorized Representative CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 6 Effective Date of Endorsement November 17, 1988 ------- ----------------------------- Attached to and forming part of POLICY No. GS-212C -------------------------------------- COMPANY THE GILLETTE COMPANY ------------------------------------------------------------------------- It is hereby understood and agreed that Clause 2.(d) (Definition of Insureds), is extended to include those individuals serving in the following positions: - Group General Manager, - President, Blade and Razor Group, Gillette International, North America Division Asia-Pacific Group - President, Jafra Cosmetics - President, Oral-B Laboratories - President, Blade and Razor Group, - President Directeur General, European Division Financiere Gillette Societe Participation - President, Stationary Products Group, European Division - President, Personal Care Group, European Division - President, Personal Care Group, North America Division - President, Stationery Products Group, North America Division - Group General Manager, Gillette International, Latin American Group - Group General Manager, Gillette International, Africa, Middle East and Eastern Europe All other terms and conditions remain unchanged. By /s/ ----------------------------- Authorized Representative [LETTERHEAD OF JOHNSON & HIGGINS APPEARS HERE] June 1, 1994 Mr. Thomas Welgoss Manager, Corporate Insurance The Gillette Company Prudential Tower Building Boston, MA 02199 USA Dear Mr. Welgoss: RE: THE GILLETTE COMPANY ACE/CODA D & O LIABILITY ACE and CODA have confirmed binding D&O Liability coverage as follows: Quote - ----- ACE Insurance Co. Ltd. is pleased to acknowledge receipt of Dlrs 155,000 and confirm binding the following: Policy Period: June 1, 1994-1995 Limit of Liability: Dlrs 10m xs Dlrs 6m D&O and Dlrs 10m xs Dlrs 40m C.R. Structure: NAME LIMITS ---- ------ D&O C.R. London 15m 15m Chubb 15m 15m Aetna 10m 10m CODA 20m - ACE 10m (GS-7295D) 10m (GS-7296D) Continued/ - ------------------------------------------------------------------------------- Page 2 Followed policies are London C.R., CODA D&O. Coverage is D&O and C.R. Cover will be issued on policy form D&O 6-88, policy numbers shown above. Endorsements to be included: - Discovery Period Endorsement - Cancellation Endorsement - Excess DIC Endorsement - Endorsement amending Clause III B (i) and (ii) - Specific Combined Limit of Liability Endorsement - Endorsement amending section II - A&C Unquote - ------- Quote - ----- CODA is pleased to acknowledge receipt of $155,000 and confirm binding Extension of XS/DIC cover as follows: Policy Period: June 1, 1996-1997 Limit of Liability: $20 Million Premium: $155,000 Minus $10,000 XS/DIC Structure: NAME LIMITS ---- ------ London 15m Chubb 15m Aetna 10m Endorsements to be included: As expiring. Specific Inclusions: Prior Acts cover for Directors & Officers of Parker Pens. UNQUOTE - ------- Continued/ Page 3 This Policy is issued as an offshore placement. The insurance is placed with an Insurer not admitted to write insurance by any State. The Insurer is not under the jurisdiction of, or subject to supervision, regulation, or examination by the States. In case of insolvency, payment of claims is not guaranteed and you will not be protected by any State Guarantee Funds. Any applicable taxes, including but not limited to Federal Excise Tax, are the responsibility of the Insured to settle are in addition to the premium. We look forward to receiving copies of the underlying policies as they become available. Should you have any questions, please call. Yours sincerely, /s/ Gaynelle - ------------------ Gaynelle Williams Account Executive cc: Joan Goldberg - J & H Boston SS3656:GPW PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY SPECIAL ENDORSEMENT NO. 6 To be attached to and form part of: Policy No. 06 FF 100887749 BCA Issued to: THE GILLETTE COMPANY RETIREMENT PLAN It is agreed that: 1. Section V. Policy Period: Territory, is hereby deleted in its entirety and replaced with the following as respects the plans outlined in the schedule below: This insurance applies to claims first made during the policy period described in the Declarations occurring anywhere in the world, except as provided in subsection (c), of this endorsement, provided that with respect to any claim for damages brought outside the United States of America, its territories or possessions, Canada or the United Kingdom, (a) It shall be the duty of the Insured and not the duty of the Company to defend or settle such claim or suit brought against the Insured, provided that no expenses shall be incurred without the Company's consent, such consent not to be unreasonably withheld. (b) In the event that a claim is made for which coverage is provided by Section 1. Insuring Agreement, and consent is then given pursuant to item 1 (a) of this Special Endorsement, the Company shall pay defense expenses with respect to such a covered claim on a current basis upon such terms as the Company may reasonably require, provided that such reimbursement shall not be deemed to waive any rights or defenses of the Company or reservations of such rights or defenses, including, but not limited to, the right of the Company to recover any such reimbursement if it is determined that it was not payable under this Policy. The Company will reimburse the Insured for the reasonable cost of defense expenses in excess of the deductible amount stated in the Declarations, all subject to and within the applicable limit of the Company's liability. Such reimbursement shall be made in United States currency at the rate of exchange prevailing on the date the judgment is rendered or the amount of the settlement is agreed upon or the date expenditure is made. (c) The policy shall not apply to any claim brought in any country not maintaining active diplomatic relations with the United States of America at the time claim is first made in writing. The Company is not an admitted or authorized insurer outside of the United States of America, its territories or possessions, or Canada, and the Company assumes no responsibility for the furnishing of certificates or evidence of insurance, or bonds in any country in which it is not admitted or authorized. The Company shall not be liable for any fine or penalty imposed upon the Insured for failing to insure with an admitted or authorized insurer nor for any other failure of the Insured to comply with an insurance law of a country, state, province, territory or possession in which the Company is not an admitted authorized insurer. DESIGNATED FOREIGN PLAN SCHEDULE -------------------------------- From and after the time this endorsement becomes effective, the Name of the Designated Trust or Plan includes: Gillette de Argentina Defined Benefit Plan (executives) Gillette Australia Combination Defined Benefit/Defined Contribution Plan Oral-B Labs (Australia) Defined Contribution Plan Braun Electric Austria Defined Benefit Plan Gillette (Austria) and Jafra Austria Defined Benefit Plan Braun Belgium Defined Benefit Plan Gillette Belgium Defined Benefit Plan Gillette do Brasil & Cia Defined Benefit Plan Braun Denmark Defined Contribution Plan PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY Gillette A/S (Denmark) Defined Benefit Plan Braun Finland Oy Defined Benefit Plan Oy Gillette Finland Ab Defined Benefit Plan Braun France S.A. Defined Contribution Plan Gillette France (Annecy) Defined Contribution Plan Oral-B Labs (France) Defined Contribution Plan Waterman S.A. (France) Defined Contribution Plan Braun AG (Germany) Defined Benefit Plan Gillette Deutschland Defined Benefit Plan Jafra Cosmetics Gmbh Defined Benefit Plan Oral-B Labs. Gmbh Defined Contribution Plan Parker Pen Gmbh Defined Benefit Plan Braun Nederland (Holland) Defined Benefit Plan Gillette Nederland and Jafra BV (Holland) Defined Benefit Plan Gillette (Hong-Kong) Ltd. & Far East Trading Defined Contribution Plan Gillette Indonesia and Oral-B Indonesia Defined Benefit Plan Braun Ireland Ltd. Defined Benefit Plan Oral-B Labs Ireland Defined Benefit Plan Gillette Group Italy SpA Defined Benefit Plan (for the Dirigenti) Gillette Caribbean Ltd. (Jamaica) Defined Benefit Plan Braun Japan Defined Benefit Plan Gillette (Japan) Inc. and Parker Pen Japan Defined Benefit Plan Gillette Interproducts Ltd. (Kenya) Defined Contribution Plan Gillette Malaysia Defined Contribution Plan Gillette de Mexico SA Defined Benefit Plan (fund for legal indemnity) Gillette (New Zealand) Defined Contribution Plan Braun Norge A/S (Norway) Defined Benefit Plan Gillette Norge A/S Defined Benefit Plan Interpak Shaving Products Ltd. (Pakistan) Combination Defined Benefit/Defined Contribution Plan Gillette Philippines Defined Benefit Plan Gillette South Africa Defined Benefit Plan Oral-B Labs (South Africa) Defined Contribution Plan Gillette Espanola (Spain) Defined Benefit Plan Gillette (Switzerland) AG Defined Benefit Plan Gillette Thailand Ltd. Defined Contribution Plan, and any other Employee Welfare Benefit Plan or Welfare Plan sponsored by a non U.S./non Canadian/non United Kingdom subsidiary of The Gillette Company or any foreign Welfare Benefit Plan or Welfare Plan sponsored by The Gillette Company or a domestic subsidiary; in addition, any Pension Plan or Trust created or acquired by a non U.S./non Canadian/non United Kingdom subsidiary of The Gillette Company, or any foreign Pension Plan or Trust created or acquired by The Gillette Company or a domestic subsidiary, provided written notice of such created or acquired plan(s) is given to the Company in writing within 90 days unless the newly created or acquired plan(s) assets are $25,000,000 (TWENTY FIVE MILLION AND NO/100s Dollars) or less which then requires annual reporting to the Company at the policy anniversary. 2. As respects this Special Endorsement, Section VIII, Supplementary Payments is eliminated in its entirety and replaced with: "The Company will pay as part of the Limit of Liability shown in the Declarations all costs, charges, and expenses incurred by the Company in the investigation, settlement, defense, and negotiation of any claim coming within the terms of this insurance. The Company will pay as part of the Limit of Liability shown in the Declarations reasonable expenses incurred by the Insured at the Company's consent." 3. This extension of coverage shall be a part of and not in addition to the "annual aggregate limit of liability" available for settlement or adjudication of such claim. PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY 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 forms a part of the Policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 15 - ------------------------------------------------------------------------------ (Complete only when this endorsement is not prepared with the policy or is not to be effective with the policy.) Issued to (Designated Trust or Plan) Endorsement effective THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) ------------------------------- Authorized Representative Accepted by: FIDUCIARY RESPONSIBILITY INSURANCE POLICY [LOGO OF AETNA APPEARS HERE] SPECIAL ENDORSEMENT NO. 5 ------------------------- To be attached to and form part of Policy No: 06 FF 100887749 BCA Issued to: THE GILLETTE COMPANY RETIREMENT PLAN It is agreed that: 1. Section V. Policy Period: Territory, is hereby deleted in its entirety and replaced with the following: This insurance applies only to claims first made during the policy period described in the Declarations within the United States of America, its territories or possessions, Canada or the United Kingdom. 2. Nothing contained herein shall vary, alter, or extend any of the terms, conditions, and limitations of the Policy except as stated above. This endorsement forms a part of the Policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 14 - -------------------------------------------------------------------------------- (Complete only when this endorsement is not prepared with the policy or is not to be effective with the policy.) Issued to (Designated Trust or Plan) Endorsement effective THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) --------------------------------- Authorized Representative Accepted by: - --------------------------------- Insurance Representative TERRITORY ENDORSEMENT Aetna FIDUCIARY RESPONSIBILITY INSURANCE POLICY Letter- Head SPECIAL ENDORSEMENT NO. 4 To be attached to and form part of: Policy No.: 06 FF 100887749 BCA Issued to: THE GILLETTE COMPANY RETIREMENT PLAN It is agreed that: 1. From and after the time this endorsement becomes effective, the Name of Designated Trust or Plan referred to in Item 1. of the Declarations is: Any Employee Welfare Benefit Plan or Welfare Plan, sponsored by the employer listed in Item 2., below, or jointly sponsored by said employer and a labor organization, for the exclusive benefit of the employees of said employer, located in the United Kingdom or Canada. 2. THE GILLETTE COMPANY -------------------- Name of Employer This endorsement forms a part of the Policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 13 - -------------------------------------------------------------------------------- (Complete only when this endorsement is not prepared with the policy or is not to be effective with the policy.) Issued to (Designated Trust or Plan) Endorsement effective THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) ---------------------------------- Authorized Representative Accepted by: - --------------------------------------- Insurance Representative OMNIBUS WELFARE PLAN ENDORSEMENT FOR THE UNITED KINGDOM AND CANADA For use with Aetna Casualty & Surety Fiduciary Responsibility Insurance Policy FIDUCIARY RESPONSIBILITY INSURANCE POLICY [LOGO OF AETNA APPEARS HERE] SPECIAL ENDORSEMENT NO. 3 ------------------------- To be attached to and form part of Policy No: 06 FF 100887749 BCA Issued to: THE GILLETTE COMPANY RETIREMENT PLAN It is agreed that: 1. Section III, Definition of Insured, item (1) is hereby amended deleting the words..." or any interest owned or controlled by said sole sponsor, "...and substituting the words..." or by any interest owned or controlled by said sole sponsor or which herein includes those affiliated companies managed by said sole sponsor even though said sole sponsor may own less than 50% of the voting stock,"... 2. Nothing contained herein shall vary, alter, or extend any of the terms, conditions, and limitations of the Policy except as stated above. This endorsement forms a part of the Policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 12 - -------------------------------------------------------------------------------- (Complete only when this endorsement is not prepared with the policy or is not to be effective with the policy.) Issued to (Designated Trust or Plan) Endorsement effective THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) --------------------------------- Authorized Representative Accepted by: - --------------------------------- Insurance Representative MANAGED COMPANIES ENDORSEMENT [LOGO OF AETNA FIDUCIARY RESPONSIBILITY INSURANCE POLICY APPEARS HERE] SPECIAL ENDORSEMENT NO. 2 ------------------------- To be attached to and form part of Policy No: 06 FF 100887749 BCA Issued to: THE GILLETTE COMPANY RETIREMENT PLAN It is agreed that: 1. Subsection (1) of Section III DEFINITION OF INSURED is amended by substituting a comma for the period at the end of said subsection and by adding the following: "however, written notice shall not be required if the aggregate asset value of such newly created Trust(s) or Employee Benefit Plan(s) and any other Trust(s) or Employee Benefit Plan(s) hereafter acquired through consolidation, merger or takeover of any one specific firm by the sole sponsor or by any interest owned or controlled by said sole sponsor is less than TWENTY FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00)." 2. Subsection (5) of Section III DEFINITION OF INSURED is amended by deleting the word "provided:" at the end of the fourth line of said subsection and by substituting the following: "however, if the aggregate asset value of any Trust(s) or Employee Benefit Plan(s) hereafter acquired through consolidation, merger or takeover of any one specific firm and any additional Trust(s) or Employee Benefit Plan(s) created during the policy period by the sole sponsor referred to in Item (2) above, or by any interest owned or controlled by said sole sponsor is TWENTY FIVE MILLION AND NO/100 DOLLARS ($25,000,000.) or greater, then such Trust(s) and Employee Benefit Plan(s) is an Insured, provided:" 3. Nothing contained herein shall vary, alter, or extend any of the terms, conditions, and limitations of the Policy except as stated above. This endorsement forms a part of the Policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 11 Policy No. 06 FF 100887749 BCA - -------------------------------------------------------------------------------- (Completed only when this endorsement is not prepared with the policy or is not to be effective with the policy) Issued to (Designated Trust or Plan) Endorsement effective THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) --------------------------------- Authorized Representative Accepted by: - ------------------------------ Insurance Representative NOTICE REQUIREMENT THRESHOLD ENDORSEMENT FIDUCIARY RESPONSIBILITY INSURANCE POLICY [LOGO OF AETNA APPEARS HERE] SPECIAL ENDORSEMENT NO. 1 ------------------------- To be attached to and form part of: Policy No: 06 FF 100887749 BCA Issued to: THE GILLETTE COMPANY RETIREMENT PLAN It is agreed that: 1. Exclusion (4) of Section II EXCLUSIONS is hereby deleted and replaced by the following: "Arising out of the Insured's failure to comply with any law concerning Workers' Compensation, Unemployment Insurance, Social Security or Disability Benefits, or any similar law, but this exclusion shall not apply to any claim arising out of the Insured's failure to comply with the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended;" 2. Nothing contained herein shall vary, alter, or extend any of the terms, conditions, and limitations of the Policy except as stated above. This endorsement forms a part of the Policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 10 - -------------------------------------------------------------------------------- (Complete only when this endorsement is not prepared with the policy or is not to be effective with the policy.) Issued to (Designated Trust or Plan) Endorsement effective THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) --------------------------------- Authorized Representative Accepted by: - --------------------------------- Insurance Representative COBRA ENDORSEMENT [LETTERHEAD OF AETNA APPEARS HERE] PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY To be attached to and form part of: Policy No: 06 FF 100887749 BCA Issued to: THE GILLETTE COMPANY RETIREMENT PLAN It is agreed that: 1. Section IV OTHER DEFINITIONS (3)(a) is amended by adding the following, "except for civil penalties resulting from Section 502(i) of the Employee Retirement Income Security Act of 1974." 2. This extension of coverage shall be a part of and not in addition to the "Annual Aggregate Limit of Liability" available for settlement or adjudication of such claim. Payment under this endorsement is limited to 5% of the settlement or adjudicated amount and shall not, in the aggregate, exceed 5% of the "Annual Aggregate Limit of Liability." 3. Nothing contained herein shall vary, alter, or extend any of the terms, conditions, and limitations of the Policy except as stated above. This endorsement forms a part of the policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 9 - -------------------------------------------------------------------------------- (Complete only when this endorsement is not prepared with the policy or is not to be effective with the policy.) Effective date of this endorsement THE AETNA CASUALTY AND SURETY COMPANY (SIGNATURE WAIVED) By:------------------------------------- Authorized Representative - ------------------------------------------------------------------------------- SECTION 502(i) ENDORSEMENT For use with Aetna Casualty & Surety Fiduciary Responsibility Insurance Policy. [LOGO OF AETNA PENSION AND WELFARE FUND APPEARS HERE] FIDUCIARY RESPONSIBILITY INSURANCE POLICY It is agreed that the policy is amended as follows: 1. The Name of the Designated Trust or Plan referred in Item 1 of the Declarations shall include the merged and/or terminated plans enumerated in the SCHEDULE below, but only as respects Wrongful Acts which have occurred prior to the date of such merger and/or termination. SCHEDULE The Gillette Company Jafra Cosmetics, Inc. Retirement Plan (#004) Sickness and Accident Insurance Plan for Factory Employees (#513) The Gillette Company Payroll Employee Stock Ownership Plan (#006) 2. The total limit of the Company's liability to pay Damages under this endorsement is TWENTY MILLION AND NO/100 ($20,000,000.00) DOLLARS and shall be part of and not in addition to the "Annual Aggregate Limit of Liability" --- shown in Item 4 of the Declarations. 3. Nothing contained herein shall vary, alter or extend any of the terms, conditions, and limitations of the Policy except as stated above. 4. This endorsement forms part of the policy to which it is attached effective as of 12:01 a.m. on July 1, 1994. Endorsement No. 8 Policy Number: 06 FF 100887749 BCA - -------------------------------------------------------------------------------- THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) --------------------------------------- Authorized Representative Accepted: ------------------------------ Designated Trust or Plan By: ------------------------------ Insurance Representative - -------------------------------------------------------------------------------- MERGED/TERMINATED PLAN ENDORSEMENT For use with Aetna Casualty & Surety Fiduciary Responsibility Insurance Policy. F-2144 (09-90) [LETTERHEAD OF AETNA APPEARS HERE] PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY It is agreed that: 1. From and after the time this endorsement becomes effective, the Name of Designated Trust or Plan referred to in Item 1. of the Declaration is: Any Employee Welfare Benefit Plan or Welfare Plan, as defined in Subsection (1) of Section 3., Definitions of the Employee Retirement Income Security Act of 1974, sponsored by the employer listed in Item 2., below, or jointly sponsored by said employer and a labor organization, for the exclusive benefit of the employees of said employer. 2. THE GILLETTE COMPANY -------------------- Name of employer This endorsement forms a part of the Policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 7 Policy No. 06 FF 100887749 BCA - -------------------------------------------------------------------------------- (Complete only when this endorsement is not prepared with the policy or is not to be effective with the policy.) Issued to (Designated Trust or Plan) Effective Date of this endorsement THE AETNA CASUALTY AND SURETY COMPANY (SIGNATURE WAIVED) By:------------------------------------- Authorized Representative - ------------------------------------------------------------------------------- OMNIBUS WELFARE PLAN ENDORSEMENT For use with Aetna Casualty & Surety Fiduciary Responsibility Insurance Policy. F-2142 (09-90) Aetna PENSION AND WELFARE FUND Letter- Head FIDUCIARY RESPONSIBILITY INSURANCE POLICY be attached to and form part of: Policy No: 06 FF 100887749 BCA Issued to: THE GILLETTE COMPANY RETIREMENT PLAN It is agreed that: 1. Section IV OTHER DEFINITIONS (3) (a) is amended by adding the following, "except for civil penalties resulting from Section 502(l) of the Employee Retirement Income Security Act of 1974." 2. This extension of coverage shall be a part of and not in addition to the "Annual Aggregate Limit of Liability" available for settlement or adjudication of such claim. Payment under this endorsement is limited 20% of the settlement or adjudicated amount and shall not, in the aggregate, exceed 20% of the "Annual Aggregate Limit of Liability." 3. Nothing contained herein shall vary, alter, or extend any of the terms, conditions, and limitations of the Policy except as stated above. This endorsement forms a part of the policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 6 - -------------------------------------------------------------------------------- (Complete only when this endorsement is not prepared with the policy or is not to be effective with the policy.) Effective Date of this endorsement THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) ---------------------------------- Authorized Representative - -------------------------------------------------------------------------------- SECTION 502(l) ENDORSEMENT For use with Aetna Casualty & Surety Fiduciary Responsibility Insurance Policy. F-2067 (09-90) Cat.902381 [LOGO OF AETNA FIDUCIARY RESPONSIBILITY INSURANCE POLICY APPEARS HERE] To be attached to and form part of: Policy No: 06 FF 100887749 BCA Issued to: THE GILLETTE COMPANY RETIREMENT PLAN It is agreed that: 1. Section II of the attached policy, EXCLUSIONS, is amended by adding the following exclusion: (9) Based on, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving, actual or alleged seepage, pollution or contamination of any kind. This endorsement forms a part of the policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 5 - -------------------------------------------------------------------------------- (The information below is required only when this endorsement is issued subsequent to preparation of the policy.) Effective Date of this endorsement THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) --------------------------------- Authorized Representative Accepted: --------------------------- Designated Trust or Plan By: ---------------------------- Insurance Representative - -------------------------------------------------------------------------------- POLLUTION EXCLUSION ENDORSEMENT For use with Aetna Casualty & Surety Fiduciary Responsibility Insurance Policy. F-2035 (Ed. 11-89) [LOGO OF AETNA PENSION AND WELFARE FUND APPEARS HERE] FIDUCIARY RESPONSIBILITY INSURANCE POLICY To be attached to and form part of: Policy No: 06 FF 100887749 BCA Issued to: THE GILLETTE COMPANY RETIREMENT PLAN It is agreed that: 1. The attached policy is amended by adding an additional section thereto as follows: "XII DEDUCTIBLE AMOUNT ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) applicable to each Insured as defined in Items (3) and (4) of Section III, (hereinafter referred to as Deductible Amount) shall be deducted from the amount of each claim covered hereunder, including all defense expense incurred, and the Company shall be liable only in excess of such Deductible Amount. Claims based on or arising out of the same Wrongful Act or interrelated Wrongful Acts of one or more of Insureds shall be considered a single claim and the Deductible Amount shall be applied to each Insured shall be considered a single claim and the Deductible Amount shall apply to each Insured, provided, however, that the total of all such Deductible Amounts for any single claim shall not exceed ONE HUNDRED THOUSAND AND NO/100 ($100,000.00) DOLLARS. Subject to Section IX. CONSENT TO SETTLE, of this policy, the Company may pay any part or all of the Deductible Amount to effect settlement of any claim or suit and upon notification of the action taken, the Insured shall promptly reimburse the Company for such part of the Deductible amount as has been paid by the Company." This endorsement forms a part of the policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 4 - -------------------------------------------------------------------------------- (Complete only when this endorsement is not prepared with the policy or is not to be effective with the policy.) Effective Date of this endorsement THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) --------------------------------------- Authorized Representative Accepted: ----------------------------------- Name of Designated Trust or Plan By: ----------------------------------- Insurance Representative DEDUCTIBLE ENDORSEMENT To be attached to Pension and Welfare Fund Fiduciary Responsibility Policies to apply a Deductible to each Insured Person Subject to an aggregate Deductible Amount. F-1695-A(Ed. 11-89) PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY It is agreed that as of the effective date hereof the complete name of the Designated Trust or Plan under the attached policy is: The Gillette Company Retirement Plan (#001) The Gillette Company Employees Savings Plan (#002) The Gillette Company Employee Stock Ownership Plan (#007) Oral-B Laboratories, Inc. Pension Plan for Hourly Employees Owens Brush Co. (#001) Oral-B Laboratories, Inc. Savings Plan (#005) The Parker Pen Pension Plan The Parker Pen Retirement Plan for Production Workers The Parker Pen Retirement Plan for Skilled Workers The Parker Pen 401(K) Plan The Parker Pen Pension Plan, as sponsored by Parker Pen UK Ltd., Parker Pen Holdings Ltd. & Parker Pen Ltd. Pension Agreement Between Oral-B Labs, Iowa City Plant & Chauffeurs, Teamsters & Helpers Local Union 238 Braun Canada Ltd. Defined Contribution Plan Gillette Canada Inc. and Oral-B Labs (Canada) Defined Benefit Plan Gillette UK Ltd., Jafra, and Braun UK Defined Benefit Plan Oral-B Labs (UK) Defined Benefit Plan Parker Pen Holdings (UK) Defined Benefit/Defined Contribution Plan This endorsement forms a part of the Policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 3 Policy No. 06 FF 100887749 BCA - -------------------------------------------------------------------------------- (Complete only when this endorsement is not prepared with the policy or is not to be effective with the policy.) Issued to (Designated Trust or Plan) Endorsement effective THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) --------------------------------- Authorized Representative Accepted by: - ----------------------------------- Insurance Representative NAME OF DESIGNATED TRUST OR PLAN ENDORSEMENT For use with Aetna Casualty & Surety Fiduciary Responsibility Insurance Policy. F-1658(Ed.3-86) Aetna PENSION AND WELFARE FUND Letter- Head FIDUCIARY RESPONSIBILITY INSURANCE POLICY It is agreed that the policy is amended as follows: 1. By deleting paragraph (1) of Section II. EXCLUSIONS and substituting the following therefor: (1) Arising out of any dishonest, fraudulent or criminal act, or willful violation of any statute, but this exclusion does not apply to a claim upon which suit may be brought by reason of any alleged dishonesty on the part of the Insured, unless: 2. By deleting Section X. EXTENSION CLAUSE in its entirety and substituting the following therefor: X. EXTENSION CLAUSE. It is agreed that if the Company terminates or refuses to renew this policy, the Insured may give to the Company notice that it desires to be insured for an additional period of twelve (12) months after the effective date of termination or nonrenewal, provided that written notice of its desire to be insured for said additional period is given to the Company prior to the effective date of termination or nonrenewal of the policy by the Company or within 10 days following the effective date of termination or nonrenewal. If the Insured terminates this policy or declines to accept renewal, the Insured may give the Company notice that it desires to be insured for an additional period of twelve (12) months after the effective date of termination or nonrenewal, provided that written notice of its desire to be insured for said additional period is given to the Company prior to the effective date of termination or nonrenewal. The Company, at its sole option, may grant further extension periods beyond the twelve 12 (months) provided for herein. The insurance afforded during any extension period or periods shall apply to claims made against the Insured during the said extension period or periods by reason of a Wrongful Act committed or alleged to have been committed prior to the effective date of termination or nonrenewal and which would otherwise be insured by this policy, subject to the following provisions: (a) Such additional period shall be deemed part of the policy period and not an addition thereto: (b) Such additional period of time shall terminate forthwith on the effective date of any other insurance obtained by the Insured or its successors in business, replacing in whole or in part the insurance afforded by this policy. Where such other policy provides no coverage for loss sustained prior to its effective date, it shall not be deemed to be a replacement of this policy. The Insured shall pay to the Company an additional premium of 25% of the equivalent annual premium hereunder for each 12 month period of extension. 3. By deleting subsection (1)(a) of section XI. CONDITIONS and substituting the following therefor: (a) In the event the Insured shall first become aware of any claim or allegation of a Wrongful Act, written notice of such claim or allegation shall be given by or for the Insured to the Company or any of its authorized agents as soon as practicable and the Insured shall give the Company such information concerning such claim or allegation as the Company shall reasonably require. This endorsement forms a part of the policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 2 Policy No. 06 FF 100887749 BCA - -------------------------------------------------------------------------------- (The information below is required only when this endorsement is issued subsequent to preparation of the policy.) Issued to (Designated Trust or Plan) Effective Date of this endorsement THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) ----------------------------------- Authorized Representative ENDORSEMENT FR-1 For use with Aetna Casualty & Surety Fiduciary Responsibility Insurance Policy. F-1401 (Ed. 1-83) [LOGO OF AETNA PENSION AND WELFARE FUND APPEARS HERE] FIDUCIARY RESPONSIBILITY INSURANCE POLICY It is agreed that the policy is amended as follows: Section I. INSURING AGREEMENT is deleted in its entirety and the following is substituted therefor: I. INSURING AGREEMENT. The Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as Damages on account of any claim made against the insured for any Wrongful Act committed or alleged to have been committed by the Insured or by any natural person for whose Wrongful Act the Insured is legally liable. The Company shall have the right and duty to defend the Insured in any claim seeking pecuniary or nonpecuniary relief for a Wrongful Act even if the allegations of the claim are groundless, false or fraudulent, and may make such investigation and settlement of any claim as it deems expedient, or may, at its sole option, give its written consent to the defense by the Insured of such claim, but the Company shall not be obligated to pay any claim or judgment or to defend any suit, nor pay for the defense of any suit being conducted by the Insured with the Company's written consent, after the applicable limit of the Company's liability has been exhausted by payment of judgments or settlements. This endorsement forms a part of the Policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. 1 Policy No. 06 FF 100887749 BCA - ------------------------------------------------------------------------------- (Complete only when this endorsement is not prepared with the policy or is not to be effective with the policy.) Issued to (Designated Trust or Plan) Effective Date of this endorsement THE AETNA CASUALTY AND SURETY COMPANY By: (SIGNATURE WAIVED) ---------------------------------- Authorized Representative ENDORSEMENT FR-2 For use with Aetna Casualty & Surety Fiduciary Responsibility Insurance Policy F-1400(Ed. 1-83) [LETTERHEAD OF CHUBB GROUP OF INSURANCE COMPANIES APPEARS HERE] Company: Federal Insurance Company Effective date of this endorsement: July 1, 1994 Endorsement No. 2 To be attached to and form part of policy No. 81344529-A Issued to: The Gillette Company 1. It is understood and agreed that the policy is amended to include the following provision: DEFINITIONS Attachment Point means the total of all the Annual Aggregate Limits of Liability for the Underlying Insurance and any deductibles or retentions applicable to those Annual Aggregate Limits of Liability. Insured means those persons or organizations insured under the Primary Policy. Primary Policy means the policy scheduled in Item 2. (A) of the DECLARATIONS or any policy of the same insurer replacing or renewing such policy. Underlying Insurance means all those policies scheduled in Item 2 of the DECLARATIONS and any policies replacing them. II. It is understood and agreed that the provision entitled EXCESS INSURANCE COVERAGE set forth on page 2 of 3 shall be deleted in its entirety and replaced with the following: INSURING CLAUSE The Company shall provide the Insured with insurance during the Policy Period excess of the Attachment Point. Coverage hereunder shall apply in conformance with the terms, conditions, exclusions and endorsements of the Primary Policy, together with all limitations, restrictions or exclusions contained in or added by endorsement to any other Underlying Insurance, except as specifically set forth in the terms and conditions and endorsements of this Policy. In no event shall this policy grant broader coverage than would be provided by any of the Underlying Insurance. [LETTERHEAD OF CHUBB GROUP OF INSURANCE COMPANIES APPEARS HERE] Company: Federal Insurance Company Effective date of this endorsement: July 1, 1994 Endorsement No. 2 - Continued To be attached to and form part of Policy No. 81344529-A Issued to: The Gillette Company III. It is understood and agreed that the provision entitled MAINTENANCE OF UNDERLYING INSURANCE set forth on page 2 of 3 shall be deleted in its entirety and replaced with the following: All of the Underlying Insurance scheduled in Item 2 of the DECLARATIONS shall be maintained during the Policy Period in full effect except for any reduction of the aggregate limit(s) of liability available under the Underlying Insurance solely by reason of payment of losses thereunder. Failure to comply with the foregoing shall not invalidate this policy, but the Company shall not be liable to a greater extent than if this condition had been complied with. IV. It is understood and agreed that the provision entitled NOTICE AND PROOF set forth on page 2 of 3 shall be deleted in its entirety and replaced with the following: NOTICE OF CLAIM The Insured shall, as a condition precedent to its rights to be indemnified under this policy, give the Company notice as soon as practicable in writing of any claim made against it which might be covered by this policy or any Underlying Insurance policy. The Insured shall give the Company such information and cooperation as the Company shall reasonably require and shall be in the Insured's power, including attendance at hearings and assistance in securing and giving evidence and obtaining the attendance of witnesses. Notice hereunder shall be given to the Company at 15 Mountain View Road, Warren, New Jersey 07060 Attn: National D&O Claims Department V. It is understood and agreed that the paragraph entitled Claim Participation set forth on page 2 of 3 shall be deleted in its entirety. bas-07/08/94.11 [LETTERHEAD OF CHUBB GROUP OF INSURANCE COMPANIES APPEARS HERE] Company: Federal Insurance Company Effective date of this endorsement: July 1, 1994 Endorsement No. 2 - Continued To be attached to and form part of Policy No. 81344529-A Issued to: The Gillette Company VI. It is understood and agreed that the following provision is added to the policy: UNDERLYING LIMITS The Company shall be liable only for those Damages which exceed the Attachment Point and are not excluded under this policy, for purposes of determining the Attachment Point any Damages excluded by this policy but covered by the Underlying Insurance, regardless of whether such Damages are actually paid, shall not be considered as having reduced or depleted the Attachment Point. VII. For purposes of the coverage provided by this policy, Section VIII. SUPPLEMENTARY PAYMENTS of the Primary Policy does not apply. VIII. For purposes of the coverage provided by this policy, Section IV. OTHER DEFINITIONS of the Primary Policy, paragraph (3) "Damages" is deleted in its entirety and replaced with the following: (3) "Damages" shall mean (a) sums of money payable as compensation for loss or in discharge of an obligation of an Insured to make good a shortage in the Insured Trust of Employer Benefit Plan and (b) costs, charges, expenses (other than regular or overtime wages, salaries or fees of the directors, officers or employees of the Insured) incurred in defending, investigating, negotiating or monitoring legal actions, claims or proceedings and appeals therefrom and the cost of appeal, attachment or similar bonds. The word "Damages" shall not include (c) fines, penalties, taxes or punitive or exemplary damages or (d) benefits due or to become due under the terms of the Trust or Plan, unless and to the extent that recovery for such benefits is based upon wrongful Act and is payable as a personal obligation of an Insured. [LETTERHEAD OF CHUBB GROUP OF INSURANCE COMPANIES APPEARS HERE] Company: Federal Insurance Company Effective date of this endorsement: July 1, 1994 Endorsement No. 2 - Continued To be attached to and form part of Policy No. 81344529-A Issued to: The Gillette Company IX. It is understood and agreed that the following provision is added to this policy: LIMIT OF LIABILITY The total limit of Federal Insurance Company to pay Damages under this policy shall not exceed the amount set forth in Item 1 of the DECLARATIONS. Federal Insurance Company and the Insured agree that for purposes of the coverage provided under this policy, sums paid by Federal Insurance Company for costs, charges, expenses (other than regular or overtime wages. Salaries or fees of the directors, officers or employees of the Insured) incurred in defending, investigation, negotiating or monitoring legal actions, claims or proceedings and appeals therefrom and the cost of appeal, attachment or similar bonds are included as part of and are not in addition to the Limit of Liability stated in Item 1 of the DECLARATIONS. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED __________________________ AUTHORIZED REPRESENTATIVE bas-07/08/94.13 __________________________ DATE [LETTERHEAD OF CHUBB GROUP OF INSURANCE COMPANIES APPEARS HERE] Company: Federal Insurance Company Effective date of this endorsement: July 1, 1994 Endorsement No. 1 To be attached to and form a part of Policy No. 81344529-A Issued to: The Gillette Company It is agreed that: In addition to the exclusions included and made a part of the "Primary Policy", the following exclusions shall apply to this policy: Arising from any litigation, claims, demands, causes of action, legal or quasi-legal proceedings, decrees or judgments against any "Insured(s)", occurring prior to, or pending as of August 5, 1992, of which any "Insured(s)" had received notice or otherwise had knowledge as of such date; Arising from any subsequent litigation, claims, demands, causes of action, legal or quasi-legal proceedings, decrees or judgments against any "Insured(s)" arising from, or based on substantially the same matters as alleged in the pleadings of such prior or pending litigation, claims, demands, causes of action, legal or quasi-legal proceedings, decrees or judgments against any "Insured(s)"; or Arising from any act of any "Insured(s)" which gave rise to such prior or pending litigation, claims, demands, causes of action, legal or quasi-legal proceedings, decrees or judgments against any "Insured(s)." ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED ----------------------------- AUTHORIZED REPRESENTATIVE bas-07/08/94.09 ----------------------------- DATE OMNIBUS WELFARE PLAN ENDORSEMENT To be attached to and form part of: Policy No: Issued to: It is agreed that: 1. From and after the time this endorsement becomes effective, the Name of Designated Trust or Plan referred in Item 1 of the Declarations includes: Any Employee Welfare Benefit Plan or Welfare Plan, sponsored by the employer listed in Item 2., below, or jointly sponsored by said employer and a labor organization, for the exclusive benefit of the employees of said employer, located in the United Kingdom or Canada. 2. --------------------------------------------------------------------------- (Name of Employer) --------------------------------------------------------------------------- This endorsement forms a part of the policy to which attached, effective on the date of the policy unless otherwise stated herein. This endorsement will be in addition to the existing Omnibus Welfare Plan Endorsement currently on the policy. SPECIAL ENDORSEMENT #___________________ To be attached to and form part of: Policy No. 06 FF Issued to: The Gillette Company Retirement Plan (See Designated Name of Insured Endorsement) It is agreed that: 1. Section V. Policy Period: Territory, is hereby deleted in its entirety and replaced with the following as respects the plans outlined in schedule below: This insurance applies to claims first made during the policy period described in the Declaration occurring anywhere in the world, except as provided in subsection (c), provided that with respect to any claim for damages brought outside the United States of America, its territories or possessions, Canada or the United Kingdom: (a) It shall be the duty of the Insured and not the duty of the Company to defend or settle such claim or suit brought against the Insured, provided that no expenses shall be incurred without the Company's consent, such consent not to be unreasonably withheld. (b) In the event that a claim is made for which coverage is provided by Section 1. Insuring Agreement, and consent is then given pursuant to item 1 (a) of this Special Endorsement, the Company shall pay defense expenses with respect to such a covered claim on a current basis upon such terms as the Company may reasonably require, provided that such reimbursement shall not be deemed to waive any rights or defenses of the Company or reservations of such rights or defenses, including, but not limited to, the right of the Company to recover any such reimbursement if it is determined that it was not payable under this Policy. The Company will reimburse the Insured for the reasonable cost of defense expenses in excess of the deductible amount stated in the Declarations, all subject to and within the applicable limit of the Company's liability. Such reimbursement shall be made in United States currency at the rate of exchange prevailing on the date the judgment is rendered or the amount of the settlement is agreed up on or the date expenditure is made. (c) The policy shall not apply to any claim brought in any country not maintaining active diplomatic relations with the United States of America at the time claim is first made in writing. The Company is not an admitted or authorized insurer outside of the United States of America, its territories or possessions, or Canada, and the Company assumes no responsibility for the furnishing of certificates or evidence of insurance, or bonds in any country in which it is not admitted or authorized. The Company shall not be liable for any fine or penalty imposed upon the Insured for failing to insure with an admitted or authorized insurer nor for any other failure of the Insured to comply with an insurance law of a country, state, province, territory or possession in which the Company is not an admitted authorized insurer. DESIGNATED FOREIGN PLAN SCHEDULE -------------------------------- From and after the time this endorsement becomes effective, the Name of the Designated Trust or Plan includes: (List all foreign plans know to date in this area EXCEPT those that are sponsored by a UK entity........) (Walter: after the last foreign plan is list, place a comma, then...this omnibus lang.) and any other Employee Welfare Benefit Plan or Welfare Plan sponsored by a non U.S./non Canadian/non United Kingdom subsidiary of The Gillette Company; in addition, any Pension Plan or Trust created or acquired by a non U.S./non Canadian subsidiary of The Gillette Company, provided written notice of such created or acquired plan(s) is given to the Company in writing within 90 days unless the newly created or acquired plan(s) assets are $25,000,000 (TWENTY FIVE MILLION AND NO/100s Dollars) or less which then requires annual reporting to the Company at the policy anniversary. 2. As respects this Special Endorsement, Section VIII, Supplementary Payments is eliminated in its entirety and replaced with: "The Company will pay as part of the Limit of Liability shown in the Declarations all costs, charges, and expenses incurred by the Company in the investigation, settlement, defense, and negotiation of any claim coming within the terms of this insurance. The Company will pay as part of the Limit of Liability shown in the Declarations reasonable expenses incurred by the Insured at the Company's consent." 3. This extension of coverage shall be a part of and not in addition to the "annual aggregate limit of liability" available for settlement or adjudication of such claim. 4. Nothing contained herein shall vary, alter, or extend any of the terms, conditions, and limitations of the policy except as stated above. 5. This endorsement forms part of the policy to which it is attached effective as of ___________________________. The Aetna Casualty and Surety Company By __________________________________ EX-10.P 5 INCENTIVE PAYMENT Exhibit 10 (p) DESCRIPTION OF INCENTIVE PAYMENT TO ALFRED M. ZEIEN --------------------------------------------------- At a meeting held February 16, 1995, The Board of Directors approved a plan to have Mr. Zeien remain as Chairman of the Board and Chief Executive Officer of the Company and not retire from the Company on his normal retirement date of March 1, 1995, after which, if retired, he would receive pension payments under the Company's Retirement Plan. In order to provide an incentive to Mr. Zeien to continue his employment in these capacities, the Board approved a payment to Mr. Zeien of $500,000 if he continues as Chairman of the Board and Chief Executive Officer of the Company through March 1, 1996, with any such amount being payable to Mr. Zeien after his retirement, and made an option grant to Mr. Zeien effective February 21, 1995, of 75,000 shares which will become exercisable on February 21, 1996. EX-10.Q 6 RETIREMENT PLAN Exhibit 10(q) THE GILLETTE COMPANY SUPPLEMENTAL RETIREMENT PLAN (As Amended and Restated June 16, 1994) --------------------------------------- 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. 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 -2- 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 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 an Approved or Unapproved Change in Control of the Company, provided that no amendment or termination shall adversely affect the rights and benefits of Participants with respect to compensation deferred or benefits accrued pursuant to the Plan prior to such action. After an Approved or Unapproved Change in Control of the Company: (1) no amendment -3- 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 an Approved or Unapproved Change in Control. 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/ ---------------- ----------------------------- Title: S.V.P - Personnel & Admin. EX-10.R 7 SUPP. SAVINGS PLAN Exhibit 10(r) THE GILLETTE COMPANY SUPPLEMENTAL SAVINGS PLAN FOR CONTRIBUTIONS AFTER APRIL 30, 1991 (As Amended and Restated Effective July 1, 1993) ------------------------------------------------ 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 is intended to constitute an "excess benefit plan" within the meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and an unfunded plan of deferred compensation described in Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and in Sections 3121(v)(2) and 3306(r)(2) of the Code. 2. Eligible Employees. Employees eligible to participate in this Plan for any ------------------- calendar year shall be those employees of the Company and Participating Subsidiaries who are eligible to participate in the Savings Plan and (i) whose Annual Additions are limited for such year by reason of Section 415 of the Code, based on actual participation in the Savings Plan, or (ii) who are determined by the Committee to be management or highly compensated employees for such year and whose contributions or Compensation taken into account under the Savings Plan are limited for such year by reason of another provision of the Code, based on actual participation in the Savings Plan. 3. Participants. Participants are eligible employees who elect to participate in ------------- the Plan, at such time and in such manner prescribed by the Committee, as of the next practicable payroll period by executing and delivering to the Company a Participation and Salary Deferral Agreement, in a form prescribed by the Committee. Participation in the Plan may be discontinued by a Participant at any time, effective as of the next practicable payroll period, by executing and delivering to the Company a revocation of such Participation and Salary Deferral Agreement. Such revocation shall operate prospectively and shall have no effect on prior 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. -2- 4. Deferrals and Additional Credits. -------------------------------- (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(e) 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 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 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) 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 Tax Deferred Savings invested under the Savings Plan. 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 Company Contributions invested under the Savings Plan. (d) Transfers elected by a Participant among the Investment Funds in which such Participant's Tax Deferred Savings are invested under the Savings Plan shall operate automatically as a transfer of credits among the funds in which the Participant's Supplemental Savings Account is deemed invested under the Plan. When eligible under the terms of the Savings Plan, transfers elected by a Participant among the Investment Funds in which such Participant's Company Contributions are invested under the Savings Plan shall operate automatically as a transfer of credits among the funds in which the Participant's Supplemental Company Contribution Account is deemed invested under the Plan. Notwithstanding the foregoing, with respect to each Participant who is an officer of the Company (a "Section 16 Officer") subject to Section 16 of the -3- Securities Exchange Act of 1934 (the "Exchange Act"), no transfer of credits relating to a deemed investment in the Gillette Company Stock Fund shall be permitted notwithstanding a corresponding election to such effect by such Participant under the Savings Plan, if and to the extent that a similar transfer under this Plan might cause interests in the Plan to be treated as "derivative securities" under the Exchange Act and the rules and regulations promulgated thereunder. (e) For the purposes of Section 4(a) above, the applicable provisions of the Code are (i) the Section 415 limitations on Annual Additions, (ii) the Section 402(g) limitation on Tax Deferred Savings, (iii) the Section 401(a)(17) limitation on Compensation, and (iv) if and to the extent determined by the Committee for a given year, the Section 401(k) and (m) limitations on contributions by and on behalf of Highly Compensated Employees. 5. 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 (other than any Participant who is a Section 16 Officer to the extent provided in Section 5(e) below) 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 5(b) or (c) below or unless Section 5(d) or (e) 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 (other than any Participant who is a Section 16 Officer to the extent provided in Section 5(e) below) may elect to defer payment of his accounts under the Plan to any date subsequent to the date of the Participant's termination of employment with the Company and all Participating Subsidiaries, but not later than April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2, provided (i) the Participant's termination of employment is on account of retirement or total and permanent disability (such terms having the same meanings as used under the Savings Plan), (ii) the value of the Participant's vested account balance under the Plan as of the close of the date of termination is at least $25,000, and (iii) the Participant's deferral election is made at least twelve months prior to the date of such termination. Such deferred payment shall be valued as of the close of the -4- 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 Savings Plan accounts are then invested (or, if the Participant elects a distribution of his entire Savings Plan account, which the Participant designates for purposes of calculating such credits or debits). (c) A Participant (other than any Participant who is a Section 16 Officer to the extent provided in Section 5(e) below) 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 Savings Plan accounts are then invested (or, if the Participant elects a distribution of his entire Savings Plan account, which the Participant designates for purposes of calculating such credits or debits). (d) After an Approved or Unapproved Change in Control, upon the termination of this Plan or the Savings Plan or an amendment to this Plan or the Savings Plan which amendment adversely affects the rights and benefits of Participants, all unvested accounts under this Plan shall vest and, except for the accounts of Participants who are Section 16 Officers to the extent provided in Section 5(e) below, all accounts shall be paid to the Participants. (e) With respect to each Participant who is a Section 16 Officer, no request for payment or election pursuant to Section 5(a)-(d) above shall be permitted or given effect with respect to that portion of the Participant's accounts under the Plan deemed to be invested in the Gillette Company Stock Fund. All vested amounts credited to such portion of the Participant's accounts shall instead be paid in the form of five annual installments commencing in the calendar year following the year of the Participant's termination of employment 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), and (ii) the value of the Participant's entire vested account -5- balance under the Plan as of the close of the date of termination is at least $25,000. 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 subject to this Section 5(e) shall continue to be credited or debited with amounts equivalent to gains and losses realized by the Gillette Company Stock Fund (or such other investment Funds which the Participant may designate for purposes of calculating such credits or debits). Anything contained in this Plan to the contrary notwithstanding, no payment shall be made under the Plan to any Section 16 Officer which payment might cause the interests in the Plan to be treated as "derivative securities" under the Exchange Act and the rules and regulations promulgated thereunder. (f) 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. (g) All determinations of value of Participants' accounts under the Plan shall be made in accordance with the relevant provisions of the Savings Plan. (h) All payments under the Plan shall be subject to any required withholding of Federal, state and local taxes. 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 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. 7. Plan Amendment and Termination. The Plan may be amended or terminated by the ------------------------------- Company at any time and in any manner prior to an Approved or Unapproved Change in Control of the Company, provided that no amendment or termination shall adversely affect the rights and benefits of Participants with respect to Compensation deferred or deducted pursuant to the Plan prior to such action. After an Approved or Unapproved Change in Control of the Company: (1) 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; (2) the Plan may not be terminated or amended in a manner to provide less favorable prospective benefits unless all benefits under this Plan which are unvested become immediately vested and the account balances of all Participants -6- (other than Section 16 Officers to the extent provided in Section 5(e) above) become immediately payable and are paid to all such Participants; and (3) no amendment may be made with respect to any provision of the Plan which becomes operative upon an Approved or Unapproved Change in Control. 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 Savings Plan Committee -------------- appointed by the Board of Directors of the Company (the "Committee"), which shall have the discretionary power and authority to construe and interpret the provisions of the Plan, to determine the eligibility of employees to participate in the Plan and the amount and timing of payment of any benefits due under the Plan, and to determine 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. 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. Securities Law Savings Provision. Nothing contained in this Plan or in the --------------------------------- administration or operation thereof shall be interpreted or effectuated that would cause interests in the Plan to be treated as "derivative securities" under the Exchange Act and the rules and regulations promulgated thereunder. 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. 13. Applicability of Document. This document shall govern the Plan rules -------------------------- applicable to contributions made after April 30, 1991. THE GILLETTE COMPANY Date: 3/30/93 By: /s/ William J. McMorrow ----------- ---------------------------------- William J. McMorrow Senior Vice President - Administration EX-12 8 CALC. OF CURRENT RATIO EXHIBIT 12 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES STATEMENT RE: CALCULATION OF CURRENT RATIO Years Ended December 31, 1994, 1993 and 1992 (Millions of Dollars)
1994 1993 1992 ---- ---- ---- Current Assets $ 2747.4 $ 2528.0 $ 2336.2 Current Liabilities $ 1783.2 $ 1760.3 $ 1560.8 Current Ratio 1.54 1.44 1.50
EX-13 9 ANNUAL REPORT Exhibit 13 Founded in 1901, The Gillette Company is the world leader in male grooming products, a category that includes blades and razors, shaving preparations and electric shavers. Gillette also holds the number one position worldwide in selected female grooming products, such as wet shaving products and hair epilation appliances. The Company is the world's top seller of writing instruments and correction products. In addition, the Company is the world leader in toothbrushes and oral care appliances. Gillette manufacturing operations are conducted at 57 facilities in 28 countries, and products are distributed through wholesalers, retailers and agents in over 200 countries and territories. LETTER TO STOCKHOLDERS The Gillette Company achieved new highs in sales and earnings in 1994, continuing the strong momentum of the last several years. Business growth was broadly based, with new product introductions, geographic expansion and the vitality of our established brands all contributing to this record performance. Total sales increased 12% to $6.07 billion. Net income and earnings per common share advanced at a faster pace of 18% to $698 million and $3.14 per share. These profit measures are compared with 1993 results before special charges. For the 89th consecutive year, the Company paid cash dividends on its common stock. Dividends declared increased 19% to $1.00 per share, up from 84 cents in 1993. The double-digit improvements in Gillette financial results in 1994 are consistent with the longer-term pattern of continued progress. During the five-year period from 1989 to 1994, sales have grown at a 10% compounded annual rate, net income at 20%, earnings per common share at 18% and dividends per common share at 16%. The Company's sustained profitable growth has been reflected in the outstanding performance of Gillette common stock. In 1994, Gillette stock outperformed the stock market averages by a wide margin in terms of total return. The annual return to shareholders on Gillette common stock was 27% in 1994, compared with returns of 5% for the Dow Jones Industrial Average and 1% for the Standard & Poor's 500. [ART APPEARS HERE] Furthermore, this superior performance has been maintained over an extended period. During the last five years, the compounded annual return to shareholders on Gillette stock has been 27%, significantly outpacing the returns of 10% for the DJIA and 9% for the S&P 500. In terms of total dollars, Gillette stock has added over $11 billion in market value in the last five years -- from $5.4 billion at the end of 1989 to $16.6 billion at the end of 1994. The Company's stock continued to be an excellent long-term investment, with a 30% annual rate of return over the last 10 years. The value of a $1,000 investment in Gillette stock at the end of 1984 grew to $13,499 by the end of 1994, three times the value of a comparable investment in either of the market averages.
Investment Value Compounded 12/31/84 12/31/94 Rate of Return - ------------------------------------------------------------------------------ Gillette $1,000 $13,499 30% DJIA $1,000 $ 4,480 16% S&P 500 $1,000 $ 3,815 14% - ------------------------------------------------------------------------------
The strong long-term performance of our stock reflects not only the past growth of the business, but the perception by investors that Gillette is well-positioned for future growth. Both actual results and perceptions of the future are largely due to our continuing focus on carrying out the Company's mission to achieve or enhance clear leadership, worldwide, in the core 2 "GILLETTE STOCK HAS ADDED OVER $11 BILLION IN MARKET VALUE IN FIVE YEARS." consumer product categories in which we choose to compete. In 1994, three-fourths of the Company's total sales came from product categories in which Gillette holds the worldwide leadership position. This is up sharply from five years ago, when the comparable proportion was just over one-half of sales. To attain these results, we emphasize geographic expansion and three principal growth drivers-research and development, capital spending and advertising. In combination, these growth drivers should rise at least as fast as sales over the long term to assure future growth. (In 1994, they rose 14%, compared with 12% for sales.) We also look to increase the level of incremental spending on these growth drivers over time by as much as we add to profit from operations. As an indication of the effectiveness of this approach, 45% of our 1994 sales came from products introduced in the last five years -- exceeding the 37% ratio achieved in 1993 and the 35% ratio in 1991 and 1992. The pace of new product activity has accelerated to an all-time high, with more than 20 new products introduced in 1994. [GRAPH APPEARS HERE] The high level of activity will continue in 1995, along with extending the geographic rollout of major products such as the SensorExcel and Sensor for Women shaving systems, the Gillette Series male grooming line and the Braun Supervolume hair dryer. An important element of the Company's long-term growth plans is the development of our business in "new geographies" such as Eastern Europe, Russia and China. The latest example is a Braun shaver production facility established in China during 1994. Gillette sales in all international markets outside of Western Europe advanced by 18% this year. Gillette ranks among the most global of Fortune 500 corporations, with approximately 70% of total sales and operating profit generated outside the United States. The review of operations section of this Annual Report describes the performance of all of our product lines, but I'd like to highlight a few areas of outstanding progress that illustrate how the Company's mission is being carried out. . The Sensor shaving system franchise has continued to grow vigorously and now accounts for almost 40% of total Gillette blade and razor sales dollars. The success of the original Sensor razor and cartridge, which now have complete worldwide distribution, has been enhanced by the excellent acceptance of the Sensor for Women and SensorExcel shaving systems. The Sensor for Women system, introduced in the United States in mid-1992, substantially broadened its geographic availability this year with highly successful introductions in European, Latin American and Asian markets. The SensorExcel system, introduced in Continental Europe and Canada in the second half of 1993, has achieved rapid growth, accounting for one-third of total Sensor sales in these markets after one year. In 1994, SensorExcel introductions were made in several major markets such as the United Kingdom, Japan and, in the fourth quarter, the United States. In all markets, it is establishing a new standard of shaving excellence. . The innovative clear gel technology developed by Gillette scientists for deodorants and antiperspirants has been the primary contributor to the vitality of the Company's business in this category. 3 "THREE-FOURTHS OF 1994 SALES CAME FROM CATEGORIES IN WHICH WE HOLD THE WORLDWIDE LEADERSHIP." The clear gel technology, which debuted in the Gillette Series male grooming line in late 1992, was incorporated into the Right Guard line a year later and into Soft & Dri and Dry Idea antiperspirants in 1994. In the three markets where they first were introduced -- the United States, Canada and the United Kingdom -- these gel products have boosted total Gillette brand shares by four points and now account for over one-fourth of Gillette consumer sales in the deodorant/antiperspirant category. . The Braun Oral-B plaque remover, now in its fourth year, has strengthened its position as the world-wide leader in oral care appliances, outselling the closest competitor by more than two-to-one. As sales of the Braun Oral-B appliances have grown, there has been a considerable build-up in the number of satisfied, loyal users, resulting in steadily increasing demand for our replacement brushes. The cooperative efforts of Braun and Oral-B in developing products, gaining dental profession endorsements and assuring wide retail distribution have made a major contribution to the rapid growth of the Company's oral care appliance business. . The acquisition of Parker Pen in mid-1993 substantially increased the size and strength of our stationery products franchise. This has been a year of integrating, reorganizing and realigning the stationery products business to take advantage of opportunities offered by the Parker acquisition. The initial challenges have been met successfully, and operating profit margins for this product segment improved significantly in 1994. With the integration process still under way, there appear to be further opportunities to enhance the growth and profitability of this business, now the clear worldwide leader in writing instruments and correction products. . . Two recent developments in 1995 are noteworthy: . Michael C. Hawley has been named President and Chief Operating Officer, to be effective at the annual meeting on April 20. Mr. Hawley is currently Executive Vice President, International Group, and has served in a wide variety of domestic and overseas management posts during his 34 years with the Company. . In February 1995, the Board of Directors recommended to the stockholders an increase in the Company's authorized common stock. If this is approved at the annual meeting on April 20, the Board will declare a two-for-one stock split in the form of a 100% stock dividend. The Board also has proposed an increase of 20% in the annual dividend rate, the largest percentage increase in over 30 years. "45% OF OUR 1994 SALES CAME FROM PRODUCTS INTRODUCED IN THE LAST FIVE YEARS. . . Our record of success is based on the combined strength of the world-class brands, products and people that define Gillette as a company. These strengths are not only the fundamental source of our past and present performance -- they underlie our confidence in The Gillette Company's future worldwide growth and prosperity. /s/ Alfred M. Zeien Alfred M. Zeien Chairman of the Board March 1, 1995 4 BLADES & RAZORS Building on the record results of 1993, Gillette again achieved notable growth in its principal line of business. This performance continued the strong momentum of the past five years, during which blades and razors generated annual gains averaging 14% in sales and 15% in profits. Reflecting the exceptional success of the Sensor family of shaving systems, the Company further strengthened its global leadership position in the blade and razor business. [ART APPEARS HERE] The most recent addition to the Sensor franchise, the SensorExcel shaving system, achieved excellent increases in sales and market share in Continental Europe and Canada, areas where it made its debut in 1993. This innovative system, whose patented technology offers unrivaled shaving closeness and comfort, was introduced during the year in the United States, United Kingdom and Japan. Trade and consumer response has been outstanding, and distribution throughout international markets is planned for 1995. The Sensor for Women shaving system also contributed to the upward trend, posting substantial sales advances and significantly enlarging its share of market, particularly in North America and Europe. Rapid geographic expansion is continuing. The Sensor shaving system, introduced in 1990, remained the top seller in the United States and many other key markets throughout the world. [GRAPH APPEARS HERE] With the resounding success of the Sensor family of products, sales of the Atra and Trac II twin blade shaving systems, leading brands since the 1970's, gradually are slowing. However, these brands continued to hold sizable share positions worldwide. Gillette twin blade disposable razor sales climbed well above those of a year ago, fueled by the strong performance of CustomPlus razors for men and women. Introduced in 1994, primarily in North America and Europe, the new disposable razor offers an improved lubricating strip and a longer handle for greater control. The worldwide rollout of this product is under way. Among established brands, the Good News razor remained the best-selling disposable razor in the United States for the 19th consecutive year. Abroad, Gillette disposables were again the leaders in Canada, Europe and Latin America. [ART APPEARS HERE] In the double edge blade business, which showed little change in sales, the Company maintained its long-established leadership worldwide. During 1994, Gillette increased blade market value worldwide by building the Sensor franchise and by upgrading consumers in emerging markets from double edge blades to better-performing twin blade products. The Company also expanded geographically with new and established products. Successful execution of these two global business strategies provides a sound basis to accelerate future growth. THE GILLETTE SENSOREXCEL SHAVING SYSTEM(right arrow) 5 TOILETRIES & COSMETICS Buoyed by substantial progress in several major product categories, the toiletries and cosmetics business turned in a strong performance in 1994. Sales rose considerably, and profits climbed even more rapidly. The Gillette Series men's toiletries line, introduced in 1993, was a major factor in these gains. [ART APPEARS HERE] Deodorants/antiperspirants are the Company's principal toiletries category. Worldwide growth in both sales and unit volume was significant, chiefly due to excellent consumer response to the Company's innovative clear gel technology. In the United States, clear gel versions of the Right Guard and Gillette Series brands posted sizable sales advances, while Soft & Dri and Dry Idea clear gel deodorants/antiperspirants met with strong acceptance following their midyear introduction. These gains enabled the Company to improve its share of market considerably. Abroad, Gillette Series deodorants/antiperspirants showed particular strength, and distribution is being extended to some 20 additional countries in 1995. A SELECTION OF GILLETTE SERIES MALE [LEFT ARROW] GROOMING PRODUCTS Paced by rapid growth overseas, shave preparation sales rose markedly. Progress was especially strong in Europe, where sales of the Gillette Series brand more than tripled following its rollout on the Continent. Reflecting these gains, the Company expanded its leading position in the worldwide shave preparation market. Early in 1995, Gillette broadened its product range with the launch of Satin Care for Women, the first non-soap-based shaving gel formulated exclusively for women. SALES OF PRODUCT LINE $ MILLIONS Sales of Gillette Series after-shave products climbed substantially, due primarily to the excellent performance of after-shave fragrances in Cool Wave and Wild Rain scents. Gillette Series after-shave skin conditioners also recorded a significant sales advance, as distribution was extended throughout Europe. Among hair care products, the Company continued to emphasize White Rain, the number two volume brand in the United States. Sales of this brand registered a good increase, reflecting sharply higher sales of White Rain Essentials shampoos and conditions and the successful launch of the White Rain Exotics line. [ART APPEARS HERE] Jafra skin care and cosmetic products, sold by consultants at classes in the home or office, are an important part of the toiletries and cosmetics line. Sales rose slightly in 1994, due chiefly to Jafra's largest market, Mexico. With sales well above those of 1993, Jafra continued to hold a top position among direct sellers in the growing Mexican skin care and color cosmetics market. Operating in the United States and 10 countries abroad, Jafra increased its consultant force by 20,000 in 1994, to a worldwide total of nearly 217,000. This expansion, together with new products that reflect its commitment to state-of-the-art formulations, will be the primary drivers of future Jafra growth. 6 STATIONERY PRODUCTS In 1994, the Company was again the clear worldwide leader in the highly competitive businesses of writing instruments and correction products. Both sales and profits of the stationery products line rose sharply, due in large part to the inclusion of full-year results of Parker Pen, acquired in mid-1993. The integration and development of Parker Pen within the Gillette stationery products business continued throughout the year, both in the United States and abroad. This integration, affecting virtually every aspect of the business, substantially increased worldwide operating efficiency. During the year, Parker introduced the Sonnet "C" range of writing instruments to excellent trade and consumer response. [ART APPEARS HERE] With the Parker, Paper Mate and Waterman franchises, the Company holds a strong position within all writing systems, price levels, distribution channels and geographic areas. Worldwide sales of Paper Mate writing instruments grew moderately, with much of the advance driven by a considerable increase in sales of low-priced disposable pens. The Flexgrip family of refillable pens also contributed, achieving good sales gains in the United States and Latin America. The Dynagrip pen line, led by the strong performance of a disposable version introduced in late 1993, posted a significant advance in sales. Another plus was the Rubberstik disposable pen, which recorded sharply higher domestic sales and was introduced successfully in several international markets. [GRAPH APPEARS HERE] Sales of the Waterman line of luxury writing instruments were somewhat lower, primarily reflecting decreased sales in France, Waterman's largest market. This shortfall, related in part to weak economic conditions, overshadowed Waterman's good sales progress in North America and its sizable growth in Latin America and the Asia-Pacific region. During the year, Waterman introduced new writing instrument entries -- under the Reflex, Hemisphere and Preface names -- in several price ranges. Initial trade and consumer reaction has been encouraging. [ART APPEARS HERE] Led by a strong showing in the United States, sales of Liquid Paper correction products moved ahead considerably. This was due chiefly to a steep increase in domestic sales of Liquid Paper correction fluids, which retained their traditional number one market position. Another factor was sharply higher sales of Liquid Paper correction pens in the United States, Latin America and Southeast Asia. Liquid Paper DryLine correction films also showed notable sales gains, supported by the successful introduction of a disposable version. In addition to the superior performance of the Company's stationery products, a major contributor to this line's future prospects is its increasingly strong global presence, in terms of both geographic reach and brand name recognition. With these strengths, the stationery products line is poised for sustained profitable growth in the years ahead. THE WATERMAN PREFACE FOUNTAIN PEN(right arrow) 7 BRAUN With innovative new products contributing to substantial sales in the United States and Asia-Pacific markets, Braun sales in 1994 moved well above those of a year ago. Profits rose significantly from the prior year's level. [ART APPEARS HERE] THE BRAUN MULTIMIX HANDMIXER Braun shaving products achieved a moderate sales increase in 1994. Men's electric shaver sales were somewhat higher, led by the strong growth of the FlexControl family of shavers. During the year, Braun also successfully launched a range of mid-priced shavers in cord and rechargeable models. This performance enabled Braun to strengthen its worldwide sales leadership of the foil shaver market. In October, Braun introduced in Japan the new Flex Integral electric shaver, which provides faster, more comfortable shaves by incorporating a middle cutter positioned between two shaving foils mounted on a pivoting head. This top-of-the-line shaver range is being distributed worldwide in 1995. THE BRAUN FLEX INTEGRAL [LEFT ARROW] ELECTRIC SHAVER Reflecting sales well above those of 1993, the Braun Silk-epil electric hair epilator for women strengthened its number one market standing worldwide. The Silk-epil facial hair epilator, launched in 1993, recorded significant sales progress. Household appliance sales climbed well above those of the prior year. Braun expanded its worldwide leadership position in hand blenders, with especially good sales gains in Asia-Pacific countries. The FlavorSelect coffeemaker achieved great success in many countries, while the versatile Braun Multimix handmixer recorded excellent sales results in its debut. [GRAPH APPEARS HERE] Sales of personal care appliances, which include oral care and hair care appliances, increased rapidly. Amid intensifying competition, the Braun Oral-B plaque remover continued its extraordinary success, with sales again rising sharply. The plaque remover gained the number one position in the United States, significantly strengthening its worldwide market leadership and outselling its nearest competitor by more than two-to-one. An improved model achieved highly promising initial results. [ART APPEARS HERE] THE SUPERVOLUME HAIR DRYER AND IMPROVED BRAUN ORAL-B PLAQUE REMOVER Hair care appliance sales climbed substantially, due primarily to the Super-volume hair dryer. This innovative product generated sizable sales advances in Europe, enabling Braun to increase its market leadership, and surpassed all expectations in the United States, where it was launched in September. New products introduced in the last five years accounted for two-thirds of total Braun sales in 1994. This commitment to innovation has been accompanied by geographic expansion, most recently Braun's entry into China during the year. Promising new markets, an accelerating flow of superior products and momentum from 1994's strong performance offer excellent growth prospects. 8 ORAL-B Despite intense competitive activity, Oral-B in 1994 boosted sales to a level considerably above that of the year before, due to the excellent reception given several new products. Spending in support of these product introductions reduced profits substantially. In a strong partnership with dental professionals, Oral-B develops, markets and distributes worldwide a broad array of innovative oral care products. These include toothbrushes, interdental products, specialty toothpastes, mouth rinses and professional dental products. [ART APPEARS HERE] Oral-B toothbrushes -- the brand used by more dentists than any other in the United States and many countries abroad -- are the foundation of the company's thriving oral care business. Worldwide sales achieved good progress, due primarily to the strong showing of the Advantage toothbrush, introduced at year-end 1993. Two additional new products also contributed to the sales advance. The Advantage Control Grip toothbrush features a dual-material handle with rubberized grip for greater comfort and control. The Contura toothbrush is designed to attract value-oriented consumers by offering traditional Oral-B quality at a lower price. Both products were launched in the United States in 1994 and will be distributed throughout international markets in 1995. Supported by these gains, Oral-B remained the number one brand in the worldwide toothbrush market. [GRAPH APPEARS HERE] Worldwide sales of Oral-B interdental products rose markedly for the seventh consecutive year, led by the new Ultra Floss brand. This innovative dental floss features a network of shred-resistant interlocking fibers that stretch thin to fit between teeth and then spring back to brush away plaque. Initial response from the trade and consumers has been excellent. Sales of other Oral-B dental flosses were well above those of the year before, and both dental tape and inter-dental brushes posted sizable sales gains. In the fast-growing specialty toothpaste and mouth rinse markets, Oral-B sales climbed significantly as distribution of several new products was broadened. Both Oral-B Tooth & Gum Care toothpaste, featuring a patented stabilized stannous fluoride formula, and Sensitive with Fluoride toothpaste contributed to the growth. Led by the alcohol-free version of Oral-B anti-plaque rinse, mouth rinse sales moved much higher. [ART APPEARS HERE] Sales of Oral-B professional products were considerably above those of a year ago. Fueling the gain was the Minute Foam fluoride treatment for use by dentists in their offices. Oral-B's growth strategy is based on superior new products, increased investment in research and technology and geographic expansion. Following its entry into China in 1993, Oral-B opened the markets of Vietnam and Pakistan in 1994, bringing to 32 the number of new markets entered in the past five years. THE ORAL-B ADVANTAGE CONTROL GRIP TOOTHBRUSH (FOREGROUND) AND ORIGINAL ADVANTAGE TOOTHBRUSH (right arrow) 9 FINANCIAL REVIEW MANAGEMENT'S DISCUSSION ..................... 25 FINANCIAL STATEMENTS ........................ 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ........................ 31 RESPONSIBILITY FOR FINANCIAL STATEMENTS ........................ 41 INDEPENDENT AUDITORS' REPORT ................ 41 OTHER FINANCIAL INFORMATION ................. 42 HISTORICAL FINANCIAL SUMMARY ................ 43 10 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION RESULTS OF OPERATIONS In 1994, the Company achieved record levels of net sales, profit from operations, net income and net income per common share. SALES Net sales in 1994 climbed 12% to $6.07 billion, compared with $5.41 billion in 1993. The growth was due to an 11% increase from volume and new products, including Parker Pen, and a 1% gain from the combined effect of changes in selling prices and fluctuations in exchange rates. In 1993, these factors affected sales by a 7% increase and a 2% decrease, respectively. Without Parker Pen, 1994 net sales increased 9%. Sales in the United States advanced 11% in both 1994 and 1993. Foreign sales rose 13% in 1994, following a 2% gain in 1993. Sales in Europe during 1994 were well above those of 1993, due to improving economic conditions and strengthening European currencies. Sales of operations outside the United States accounted for 68% of sales in 1994 and 67% in 1993. An analysis of sales by business segment follows.
% Increase/ (Millions of dollars) (Decrease) ------------------------ ------------- 94 93 92 94/93 93/92 - ------------------------------------------------------------------------------ Blades & Razors $2,351 $2,118 $1,978 11 7 Toiletries & Cosmetics 1,162 1,047 971 11 8 Stationery Products 807 633 520 27 22 Braun Products 1,348 1,249 1,326 8 (6) Oral-B Products 402 363 366 11 (1) Other -- 1 2 -- (34) ------------------------ ------------ $6,070 $5,411 $5,163 12 5 ------------------------ ------------
Further information by business segment is set forth on pages 6 through 15. Sales of blades and razors were considerably higher than those of a year earlier. The continued growth of the Gillette Sensor franchise, including the Sensor for Women shaving system and the successful launch of the SensorExcel brand, contributed to gains in all major geographic regions. In 1993, the Gillette Sensor system was the major contributor to sales growth. In 1994, sales of toiletries and cosmetics rose appreciably, with increases in all major markets, including Europe, where sales were substantially higher than in 1993. Contributing to the sales growth were deodorant/antiperspirant products, reflecting the introduction of clear gel technology in the Soft & Dri and Dry Idea brands in the United States, and the launch of the Gillette Series male toiletries line in Continental Europe. In 1993, sales were well above those of the prior year, due to the strength of the Gillette Series line and other deodorant/antiperspirant brands. Sales of stationery products increased substantially in 1994, due primarily to the inclusion of Parker Pen. Without Parker Pen, sales rose slightly, as higher sales in the United States and most overseas regions offset shortfalls in Europe. In 1993, sales climbed significantly, reflecting the inclusion of Parker Pen for the last six months. Without Parker Pen, both domestic and foreign sales were lower. In 1994, sales of Braun products were well above those of the prior year. Sales grew sharply in the United States, primarily in the oral care and household businesses, and in Japan, due to the improved shaver business, while sales in Europe were virtually unchanged. In 1993, sales declined from those of 1992, as substantial sales increases in the United States were overshadowed by significantly lower sales in Europe as a result of the economic recession and weaker European currencies. Sales of Oral-B products advanced in all major geographic regions, aided by new products, including the Advantage and Contura toothbrushes, Ultra Floss dental floss, and specialty rinses and toothpastes. In 1993, sales were virtually unchanged. Domestic sales were lower, due to competition in the premium toothbrush category, while foreign sales were level. GROSS PROFIT Gross profit increased $482 million in 1994 and $230 million in 1993. As a percent of sales, gross profit continued to show a positive trend, increasing to 63.4% in 1994, as compared with 62.2% and 60.8% in 1993 and 1992, respectively. The improving trend reflected sales increases in products with higher profit margins, such as those in the Gillette Sensor franchise, the Braun Flex Control shaver and the Braun Oral-B plaque remover. Improved production efficiencies for these and other products also contributed to the positive trend. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses amounted to 43.2% of sales, compared with 42.1% in 1993 and 42.0% in 1992. In absolute terms, these expenses increased 15% in 1994, 5% in 1993 and 13% in 1992. 11 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION These increases reflected the higher level of marketing support given to major brands, particularly the Gillette Sensor franchise, the Gillette Series line and the new Oral-B products. In 1994, $545 million was spent on advertising, including sampling, and $533 million on sales promotion, for a total of $1,078 million, an increase of 23% over 1993. This compares with 1993 amounts of $428 million, $450 million and $878 million, respectively. In 1992, these were $447 million, $409 million and $856 million, respectively. The spending in 1994 represented 17.8% of sales, compared with 16.2% in 1993 and 16.6% in 1992. Spending for research and development grew 3% in 1994, compared with 8% and 14% in 1993 and 1992, respectively. Other marketing and administrative expenses rose 11% in 1994, 6% in 1993 and 9% in 1992. PROFIT FROM OPERATIONS Profit from operations was $1,227 million, compared with $825 million in 1993 and $967 million in 1992. Included in 1993 results was a realignment provision of $263 million. Compared with 1993 profit from operations before realignment expense, 1994 profit from operations increased 13%, representing 20.2% of sales, compared with 20.1% and 18.7% in 1993 and 1992, respectively. Within the United States, profit from operations rose 16%, compared with 10% in 1993 and 9% in 1992. Outside the United States, it increased 12%, compared with gains of 13% in 1993 and 14% in 1992. In the fourth quarter of 1993, the Company recorded charges for a realignment plan to take advantage of opportunities created by the continuing trend to more open world trade and the growth of the Company's global operations, and to improve the competitive position of the Company's business. Additional information concerning the realignment plan is included on pages 38 and 39. An analysis of profit from operations by business segment follows.
% Increase/ (Millions of dollars) (Decrease) ----------------------------- ------------------------ 94 93/(a)/ 93/(b)/ 92 94/93/(b)/ 93/92/(b)/ - --------------------------------------------------------------------------------------------- Blades & Razors.............. $ 878 $692 $ 797 $ 665 10 20 Toiletries & Cosmetics....... 79 (6) 58 89 36 (35) Stationery Products.......... 95 27 64 49 47 32 Braun Products............... 200 146 167 163 20 3 Oral-B Products.............. 25 17 45 47 (45) (3) ------------------------------- ------------------- 1,277 876 1,131 1,013 13 12 ------------------------------- ------------------- Corporate.................... (50) (51) (44) (46) ------------------------------- $1,227 $825 $1,087 $ 967 ===============================
(a) after charges for realignment (b) before charges for realignment See Notes to Consolidated Financial Statements for geographic area and segment data. In 1994 and 1993, profits for the blade and razor segment rose, due to sales growth, improved product mix and lower product costs. In 1994, gains were partly offset by higher marketing expenses. The strong gain in the toiletries and cosmetics segment, primarily in the United States, was due to sales growth which offset costs associated with new products. In the prior year, profits were lower, due to the introductory marketing support given to the Gillette Series line and to established brands. In 1994, as in 1993, profits of the stationery segment increased substantially, reflecting the inclusion of Parker Pen. This growth was partly offset by the continued economic weakness in Europe, primarily in France. The Braun segment reported a significant advance in profits in 1994, due to increased sales of products with higher profit margins, primarily in the United States and Japan, and lower operating expenses. In 1993, the increase in profits was due to improved product mix and lower product costs, which offset lower sales and the adverse impact of weaker European currencies. The decline in 1994 for Oral-B, as in 1993, reflected the higher costs associated with new products. NONOPERATING CHARGES/INCOME In 1994, net interest expense (interest expense less interest income) amounted to $42 million, higher than the $33 million in 1993, but lower than the $56 million in 1992. The increase in 1994 reflected lower interest income, higher interest rates and a slightly higher average borrowing level, due to the full-year impact of the financing related to the Parker Pen acquisition in May 1993. Net exchange losses of $77 million, compared with the 1993 and 1992 totals of $105 million and $69 million, respectively, were attributable principally to subsidiaries in highly inflationary countries. The decrease in 1994 reflected the favorable impact of the economic recovery plan implemented in Brazil in mid-1994. Translation adjustments resulting from currency fluctuations in non-highly inflationary countries are accumulated in a separate section of stockholders' equity, as noted on page 31. Due principally to the improvement of European currencies against the U.S. dollar, the 1994 adjustment was a favorable $38 million, compared with the negative adjustments of $150 million and $48 million in 1993 and 1992, respectively. 12 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION TAXES AND NET INCOME In 1994, the effective tax rate on income was 36.8%, compared with rates of 37.5% and 38.1% in 1993 and 1992, respectively. Net income for 1994 was $698 million, compared with $288 million in 1993 and $513 million in 1992. Net income per common share in 1994 was $3.14, compared with $1.29 and $2.32 in 1993 and 1992, respectively. In 1993, net income and net income per common share were reduced by $139 million and $63, respectively, for the cumulative one-time effect of adopting mandated accounting changes for income taxes, postretirement benefits other than pensions and postemployment benefits. Compared with 1993, before the charges for realignment and the cumulative effect of adopting accounting changes, both 1994 net income and net income per common share increased 18%. Management is unaware of any trends or conditions that could adversely affect the Company's consolidated financial position, future results of operations or liquidity. FINANCIAL CONDITION The Company's financial condition strengthened further in 1994. Net debt was reduced by $216 million through strong operating cash flow, and the credit ratings of the Company were again upgraded by the credit rating agencies. Net debt (total debt, net of associated swaps, less cash and short-term investments) at December 31, 1994, amounted to $1,041 million, compared with $1,257 million in 1993 and 1994 million in 1992. The increase in 1993 was the result of the acquisition of Parker Pen. The market value of Gillette equity was over $16 billion at the end of 1994. The Company's book equity position amounted to $2,017 million at the end of 1994, compared with $1,479 million at the end of 1993 and $1,496 million at the end of 1992. Net cash provided by operating activities in 1994 was $806 million, compared with $732 million in 1993 and $620 million in 1992. Requirements for net working capital increased in all three years, reflecting the growth of the business. The Company's current ratio for 1994 was 1.54, compared with ratios of 1.44 and 1.50 for 1993 and 1992, respectively. Capital spending in 1994 amounted to $400 million, compared with $352 million and $321 million in 1993 and 1992, respectively. Spending in all three years was principally for the Sensor system franchise, other twin blade shaving products and Braun products. For 1995, it is expected that spending for property, plant and equipment will increase over the 1994 level, reflecting additional production capacity for twin blade shaving, Braun and toiletries and cosmetics products. Spending will be financed primarily by funds from operations. At year-end 1994, there was $292 million outstanding under the U.S. commercial paper program and no borrowings under the Company's $500 million revolving credit agreements. At year-end 1993 and 1992, there was $154 million and $42 million, respectively, in debt outstanding under the commercial paper program. At year-end 1993 and 1992, there was no debt outstanding under the revolving credit agreement. During 1994, the Company replaced its $350 million revolving credit agreement with new revolving facilities provided by a syndicate of 15 banks for $150 million, expiring June 20, 1995, and $350 million, expiring June 20, 1999. The Company generally borrows through the commercial paper market, and these facilities primarily provide back-up to that program. Both Moody's and Standard & Poor's upgraded the Company's long-term credit ratings in 1994. Moody's raised the Company's long-term debt rating from A1 to Aa3, while Standard & Poor's increased the rating from A+ to AA-. These commercial paper rating was increased to A1+ by Standard & Poor's. Moody's rates the Company's commercial paper at P1. In 1994, the Company spent $26 million to increase its interests in certain core businesses. In 1993, the Company spend $481 million for acquisitions in certain existing core businesses, primarily Parker Pen. In 1992, the Company invested $66 million in acquisitions. In 1994, no long-term debt was issued. In 1993, the Company issued $500 million in long-term notes under $600 million in shelf registrations filed with the Securities and Exchange Commission. This indebtedness was primarily used for the Parker Pen acquisition and for maturing long-term debt. Gillette continues to have access to substantial sources of capital in world financial markets. The Company's ability to generate funds internally, its substantial unused lines of credit and its access to worldwide credit markets are ample to cover all anticipated needs. 13 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME AND EARNINGS REINVESTED IN THE BUSINESS
(Millions of dollars, except per share amounts) Years Ended December 31, 1994, 1993 and 1992 1994 1993 1992 - ------------------------------------------------------------------------------- Net Sales ................................... $6,070.2 $5,410.8 $5,162.8 Cost of Sales ............................... 2,221.9 2,044.3 2,025.8 -------------------------------- Gross Profit ................................ 3,848.3 3,366.5 3,137.0 Selling, General and Administrative Expenses . 2,621.6 2,279.2 2,169.9 Realignment Expense ......................... -- 262.6 -- -------------------------------- Profit from Operations ...................... 1,226.7 824.7 967.1 Nonoperating Charges (Income) ............... Interest income ........................... (19.0) (27.3) (27.3) Interest expense .......................... 61.1 59.8 83.3 Other charges -- net ...................... 80.5 109.5 81.4 -------------------------------- 122.6 142.0 137.4 -------------------------------- Income before Income Taxes and Cumulative Effect of Accounting Changes .............. 1,104.1 682.7 829.7 Income Taxes ................................ 405.8 255.8 316.3 -------------------------------- Income before Cumulative Effect of Accounting Changes ................................... 698.3 426.9 513.4 Cumulative Effect of Accounting Changes ..... -- (138.6) -- -------------------------------- Net Income .................................. 698.3 288.3 513.4 Preferred Stock dividends, net of tax benefit ................................... 4.7 4.7 4.8 -------------------------------- Net Income Available to Common Stockholders . 693.6 283.6 508.6 Earnings Reinvested in the Business at beginning of year ......................... 2,357.9 2,259.6 1,909.3 -------------------------------- 3,051.5 2,543.2 2,417.9 Common Stock dividends declared ............. 221.3 185.3 158.3 -------------------------------- Earnings Reinvested in the Business at end of year ................................... $2,830.2 $2,357.9 $2,259.6 ================================ Income per Common Share before Cumulative Effect of Accounting Changes .............. $ 3.14 $ 1.92 $ 2.32 Cumulative Effect of Accounting Changes ..... -- (.63) -- -------------------------------- Net Income per Common Share ................. $ 3.14 $ 1.29 $ 2.32 ================================ Dividends declared per common share ......... $ 1.00 $ .84 $ .72 Weighted average number of common shares outstanding (millions) .................... 221.2 220.4 219.5 - -------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 14 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET
(Millions of dollars) December 31, 1994 and 1993 1994 1993 - ------------------------------------------------------------------------------------------------------------------ Assets Current Assets Cash and cash equivalents............................................................. $ 43.8 $ 37.1 Short-term investments, at cost, which approximates market value...................... 2.3 1.5 Receivables, less allowances: 1994, $52.1; 1993, $45.9................................ 1,379.5 1,226.9 Inventories........................................................................... 941.2 874.6 Deferred income taxes................................................................. 267.6 291.5 Prepaid expenses...................................................................... 113.0 96.4 ----------------------- Total Current Assets................................................................ 2,747.4 2,528.0 ----------------------- Property, Plant and Equipment, at cost less accumulated depreciation.................... 1,411.0 1,214.5 Intangible Assets, less accumulated amortization........................................ 887.4 916.9 Deferred Income Taxes................................................................... 133.6 136.9 Other Assets............................................................................ 314.6 306.0 ----------------------- $ 5,494.0 $ 5,102.3 ======================= Liabilities and Stockholders' Equity Current Liabilities Loans payable......................................................................... $ 344.4 $ 395.0 Current portion of long-term debt..................................................... 28.1 46.2 Accounts payable and accrued liabilities.............................................. 1,178.2 1,122.4 Deferred income taxes................................................................. 47.0 6.2 Income taxes.......................................................................... 185.5 190.5 ----------------------- Total Current Liabilities........................................................... 1,783.2 1,760.3 ----------------------- Long-Term Debt.......................................................................... 715.1 840.1 Deferred Income Taxes................................................................... 186.7 166.1 Other Long-Term Liabilities............................................................. 774.3 835.5 Minority Interest....................................................................... 17.4 21.3 Stockholders' Equity 8.0% Cumulative Series C ESOP Convertible Preferred, without par value, Issued: 1994--162,928 shares; 1993--164,243 shares.................................. 98.2 99.0 Unearned ESOP compensation............................................................ (44.2) (53.8) Common stock, par value $1 per share Authorized 580,000,000 shares Issued: 1994--279,121,205 shares; 1993--278,587,610 shares.......................... 279.1 278.6 Additional paid-in capital............................................................ 277.7 259.4 Earnings reinvested in the business................................................... 2,830.2 2,357.9 Cumulative foreign currency translation adjustments................................... (377.1) (415.0) Treasury stock, at cost: 1994--57,671,702 shares; 1993--57,697,990 shares..................................... (1,046.6) (1,047.1) ----------------------- Total Stockholders' Equity.......................................................... 2,017.3 1,479.0 ----------------------- $ 5,494.0 $ 5,102.3 =======================
- -------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements. 15 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars) Years Ended December 31, 1994, 1993 and 1992 1994 1993 1992 - -------------------------------------------------------------------------------------------------------------------------------- Operating Activities Net income............................................................................ $ 698.3 $ 288.3 $ 513.4 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting changes............................................. -- 138.6 -- Provision for realignment expense................................................... -- 164.1 -- Depreciation and amortization....................................................... 215.4 218.5 210.9 Other............................................................................... 15.1 51.8 10.7 Changes in assets and liabilities, net of effects from acquisition of businesses: Accounts receivable............................................................... (147.4) (101.8) (146.8) Inventories....................................................................... (66.7) (56.0) (77.5) Accounts payable and accrued liabilities.......................................... 93.7 10.8 58.0 Other working capital items....................................................... 37.4 (30.7) 2.9 Other noncurrent assets and liabilities........................................... (40.3) 48.1 48.8 ------------------------------------- Net cash provided by operating activities....................................... 805.5 731.7 620.4 ------------------------------------- Investing Activities Additions to property, plant and equipment............................................ (399.8) (352.0) (321.4) Disposals of property, plant and equipment............................................ 24.9 10.2 15.6 Acquisition of businesses, less cash acquired......................................... (25.6) (452.9) (64.5) Other................................................................................. 16.9 (35.6) (10.7) ------------------------------------- Net cash used in investing activities........................................... (383.6) (830.3) (381.0) ------------------------------------- Financing Activities Proceeds from exercise of stock option and purchase plans............................. 18.4 24.5 22.2 Proceeds from long-term debt.......................................................... -- 500.0 -- Reduction of long-term debt........................................................... (200.7) (414.8) (239.2) Increase (decrease) in loans payable.................................................. (12.9) 177.5 117.1 Dividends paid........................................................................ (217.1) (183.3) (157.4) ------------------------------------- Net cash provided by (used in) financing activities............................. (412.3) 103.9 (257.3) ------------------------------------- Effect of Exchange Rate Changes on Cash................................................. (2.9) (3.5) .4 ------------------------------------- Increase (Decrease) in Cash and Cash Equivalents........................................ 6.7 1.8 (17.5) Cash and Cash Equivalents at Beginning of Year.......................................... 37.1 35.3 52.8 ------------------------------------- Cash and Cash Equivalents at End of Year................................................ $ 43.8 $ 37.1 $ 35.3 ===================================== Supplemental disclosure of cash paid for: Interest............................................................................ $ 61.6 $ 72.5 $ 87.9 Income taxes........................................................................ $ 240.6 $ 180.9 $ 198.2 Noncash investing and financing activities: Acquisition of businesses Fair value of assets acquired..................................................... $ 19.0 $ 705.8 $ 62.3 Cash paid......................................................................... 25.6 481.1 65.9 ------------------------------------- Liabilities assumed............................................................. $ (6.6) $ 224.7 $ (3.6) ===================================== - --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 16 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions are eliminated. Accounts of subsidiaries outside the United States and Canada are included on the basis of fiscal years generally ending November 30, except for the Braun group of companies, whose fiscal year ends September 30. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash, time deposits and all highly liquid debt instruments with an original maturity of three months or less. INVENTORIES Inventories are stated at the lower of cost or market. In general, cost is currently adjusted standard cost, which approximates actual cost on a first-in, first-out basis. DEPRECIATION Depreciation is computed primarily on a straight-line basis over the estimated useful lives of assets. INTANGIBLE ASSETS Intangible assets principally consist of goodwill, which is being amortized to expense using the straight-line method generally over a period of 40 years. Other intangible assets are being amortized to expense on the straight-line method over a weighted average period of approximately 19 years. The carving amounts of intangible assets are assessed for impairment when operating profit from the applicable related business indicates that the carrying amount of the assets may not be recoverable. NET INCOME PER COMMON SHARE Net income per common share is calculated by dividing net income less dividends on preferred stock, net of tax benefits, by the weighted average number of common shares outstanding. The calculation of fully diluted net income per common share assumes conversion of the preferred stock into common stock, and also adjusts net income for the ESOP debt service expense due to the assumed replacement of the preferred stock dividends with common stock dividends. The dilutive effect is not significant. INCOME TAXES The Company reinvests unremitted earnings of foreign operations and, accordingly, does not provide for Federal income taxes which could result from the remittance of such earnings. The unremitted earnings amounted to $1,955 million at December 31, 1994. Beginning in 1993, deferred taxes are provided using the asset and liability method for temporary differences between financial and tax reporting. ACQUISITIONS AND DIVESTITURES In 1994, the Company increased it's interest in several businesses at a total cost of $26 million. On May 7, 1993, the Company acquired Parker Pen Holdings Limited (Parker Pen), a worldwide writing instruments company headquartered in England. The acquisition has been accounted for by the purchase method of accounting. The purchase price and other costs of the acquisition were $484 million, substantially all of which was allocated to goodwill. The Company consolidated Parker Pen's results of operations commencing with the third quarter of 1993, including amortization of the associated goodwill over a 40-year period. The following unaudited pro forma summary for 1993 and 1992 presents combined results of operations of the Company and Parker Pen as if the acquisition had occurred at the beginning of each period presented. The results do not purport to indicate what would have occurred had the acquisition been made on those dates, or what results may be in the future.
(Millions of dollars, except per share amounts) 1993(a) 1993(b) 1992 - --------------------------------------------------------------------------------------------------- Net sales..................................................... $5,562 $5,562 $5,496 Before cumulative effect of accounting changes: Income...................................................... $ 435 $ 599 $ 523 Income per common share..................................... $ 1.95 $ 2.69 $ 2.36
(a) after charges for realignment (b) before charges for realignment FOREIGN CURRENCY TRANSLATION Net exchange gains or losses resulting from the translation of assets and liabilities of foreign subsidiaries, except those in highly inflationary economies, are accumulated in a separate section of stockholders' equity titled, "Cumulative foreign currency translation adjustments." Also included are the effects of exchange rate changes on intercompany transactions of a long-term investment nature and transactions designated as hedges of net foreign investments. An analysis of this account follows.
(Millions of dollars) 1994 1993 1992 - --------------------------------------------------------------------------------------------------- Balance at beginning of year....................................... $(415.0) $(265.2) $(216.9) Translation adjustments, including the effect of hedging............................................ 43.0 (154.2) (60.2) Related income tax effect.......................................... (5.1) 4.4 11.9 ------------------------------- Balance at end of year........................................... $(377.1) $(415.0) $(265.2) ===============================
17 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Included in Other charges were net exchange losses of $77.4 million, $105.4 million and $68.8 million for 1994, 1993 and 1992, respectively, primarily relating to subsidiaries in highly inflationary countries, principally Brazil.
INVENTORIES December 31, December 31, (Millions of dollars) 1994 1993 - -------------------------------------------------------------------------------- Raw materials and supplies........................... $ 207.3 $ 209.1 Work in process...................................... 95.0 90.8 Finished goods....................................... 638.9 574.7 -------------------------- $ 941.2 $ 874.6 ========================== PROPERTY, PLANT AND EQUIPMENT - -------------------------------------------------------------------------------- Land................................................. $ 36.9 $ 29.9 Buildings............................................ 465.8 420.5 Machinery and equipment.............................. 2,399.5 2,125.5 -------------------------- 2,902.2 2,575.9 Less accumulated depreciation........................ 1,491.2 1,361.4 -------------------------- $1,411.0 $1,214.5 ========================== INTANGIBLE ASSETS - -------------------------------------------------------------------------------- Goodwill ($43.7 million not subject to amortization). $ 905.0 $ 884.5 Other intangible assets.............................. 148.1 168.7 -------------------------- 1,053.1 1,053.2 Less accumulated amortization........................ 165.7 136.3 -------------------------- $ 887.4 $ 916.9 ========================== ACCOUNTS PAYABLE AND ACCRUED LIABILITIES - -------------------------------------------------------------------------------- Accounts payable..................................... $ 334.6 $ 268.9 Advertising and sales promotion...................... 218.0 170.1 Payroll and payroll taxes............................ 197.8 187.6 Other taxes.......................................... 45.5 48.9 Interest payable..................................... 12.2 9.9 Dividends payable on common stock.................... 55.4 46.4 Realignment expense.................................. 107.3 155.4 Miscellaneous........................................ 207.4 235.2 -------------------------- $1,178.2 $1,122.4 ========================== OTHER LONG-TERM LIABILITIES - -------------------------------------------------------------------------------- Pensions............................................. $ 368.4 $ 311.7 Postretirement medical............................... 193.1 193.9 Incentive plans...................................... 116.6 111.2 Realignment expense.................................. 15.0 107.2 Miscellaneous........................................ 91.2 111.5 -------------------------- $ 774.3 $ 835.5 ==========================
DEBT Loans payable at December 31, 1994 and 1993, included $142 million and $54 million, respectively, of commercial paper. The Company's commercial paper program is supported by its revolving credit facilities. Long-term debt is summarized as follows
December 31, December 31, (Millions of dollars) 1994 1993 - -------------------------------------------------------------------------------- Commercial paper, floating rates.................... $150.0 $100.0 5.75% Notes due 2005................................. 200.0 200.0 6.25% Notes due 2003................................. 150.0 150.0 4.75% Notes due 1996................................. 150.0 150.0 6% Deutschmark notes due 1994........................ -- 167.9 8.03% Guaranteed ESOP notes due through 2000......... 51.5 60.7 Other, primarily foreign currency borrowings......... 41.7 57.7 -------------------------- Total long-term debt................................. 743.2 886.3 Less current portion................................. 28.1 46.2 -------------------------- Long-term portion.................................... $715.1 $840.1 ==========================
At December 31, 1994, the Company had swap agreements that converted $500 million in U.S. dollar-denominated long-term fixed rate debt securities into multi-currency principal and floating interest rate obligations over the term of the respective issues. The $150 million notes due in 1996 were swapped into floating interest rate U.S. dollar obligations, the $150 million notes due in 2003 were swapped to Deutschmark principal and floating interest rate obligations and the $200 million notes due in 2005 were swapped to Deutschmark and French franc principal and floating interest rate obligations, resulting in an aggregate principal amount of $500 million at a weighted average interest rate of 5.6% at December 31, 1994. As of December 31, 1993, the Company had swap agreements that converted the interest obligations of the $500 million in U.S. dollar-denominated long-term debt securities from fixed to floating interest rates with a weighted average interest rate of 3.5%. In addition, at December 31, 1994, the Company had forward exchange contracts, maturing in 1995, that established Deutschmark and Yen principal and interest obligations with respect to $119 million of U.S. dollar commercial paper debt included in Long-Term Debt, with a weighted average interest rate of 3.7%. As of December 31, 1993, the Company also had swap agreements that established U.S. dollar principal and interest obligations for the Deutschmark notes due 1994 and certain European currency debt included in Loans payable. The aggregate U.S. dollar principal obligation at December 31, 1993, amounted to $400.3 million, with a weighted average interest rate of 3.2%. 18 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Exchange rate movements give rise to changes in the values of these agreements, which offset changes in the values of the underlying exposure. Amounts associated with these agreements were nil at December 31, 1994, and were liabilities of $14.6 million at December 31, 1993. The weighted average interest rate on Loans payable, including any associated swaps, was 6.5% at December 31, 1994, and 4.3% at December 31, 1993. The weighted average interest rate on total long-term debt, including associated swaps and excluding the guaranteed ESOP notes, was 5.3% at December 31, 1994, compared with 3.5% at December 31, 1993. The Company has a $150 million revolving bank credit agreement that expires in June 1995 and a $350 million revolving bank credit agreement expiring in June 1999, 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 a facility fee of .075% per annum on both agreements and a commitment fee of .025% on the unused portion of the $350 million credit facility. At year-end 1994 and 1993, there were no borrowings under the Company's revolving credit agreements. Based on the Company's intention and ability to maintain its $350 million revolving credit agreement beyond 1995, $150 million of commercial paper borrowings was classified as long-term debt at December 31, 1994. As of December 31, 1993, $100 million of commercial paper borrowings and $150 million of 1994 long-term debt maturities were so classified. Aggregate maturities of total long-term debt for the five years subsequent to December 31, 1994, are $28.1 million, $174.8 million, $14.5 million, $10.5 million and $8.7 million, respectively. Unused lines of credit, including the revolving credit facilities, amounted to $1.05 billion at December 31, 1994. FINANCIAL INSTRUMENTS The Company uses financial instruments, principally swaps, forward contracts and options, in its management of foreign currency and interest rate exposures. These contracts hedge transactions and balances for periods consistent with its committed exposures and do not constitute investments independent of these exposures. The Company does not hold or issue financial instruments for trading purposes. Realized and unrealized foreign exchange gains and losses on financial instruments are recognized and offset foreign exchange gains or losses on the underlying exposures. The interest differential paid or received on swap and forward agreements is recognized as an adjustment to interest expense. At December 31, 1994, the Company had $520 million of contracts outstanding, which mature during 1995. The 1994 amount consists of purchased, out-of-the-money, foreign currency put options which partially protect 1995 United States dollar results through the hedge of certain 1995 export transactions. The cost of these options was $5.7 million, which has been deferred and will be recognized in Cost of Sales during 1995, along with any gains on these contracts. In 1993, outstanding contracts amounted to $75 million. These contracts required the Company to purchase, sell or swap certain foreign currencies, either with or for United States dollars and Deutschmarks at the contracted rate. The 1994 and 1993 amounts exclude the swap and forward agreements described in the Debt 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 limit the amount of exposure with any one institution. The Company may be exposed to credit loss in the event of nonperformance by the counterparties to these contracts, but does not anticipate such nonperformance. With respect to trade receivables, concentration of credit risk is limited, due to the diverse geographic areas covered by Company operations. Any probable bad debt loss has been provided for in the allowance for doubtful accounts. The estimated fair values of the Company's financial instruments are summarized as follows.
Carrying Estimated (Millions of dollars) Amount Fair Value - -------------------------------------------------------------------------------- December 31, 1994 Long-term investments $ 63.8 $ 63.8 Total long-term debt (743.2) (685.3) Foreign currency and interest rate contracts 10.3 (53.6) December 31, 1993 Long-term investments $ 54.8 $ 58.5 Total long-term debt (886.3) (887.6) Foreign currency and interest rate contracts (4.7) (11.0)
The carrying amounts for cash, short-term investments, receivables, accounts payable and accrued liabilities, and loans payable approximate fair value because of the short maturity of these instruments. The fair value of long-term investments is estimated based on quoted market prices. The fair value of long-term debt, including the current portion, is estimated based on current rates offered to the Company for debt of the same remaining maturities. The fair values of foreign currency and interest rate contracts, including swaps and forward agreements described in the Debt note, are estimated based on dealer quotes. These values represent the estimated amount the Company would receive or pay to terminate agreements, taking into consideration current exchange and interest rates and the current creditworthiness of the counterparties. 19 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS INCOME TAXES Effective January 1, 1993, the Company changed its way of accounting for income taxes from the deferred method to the asset and liability method. Accordingly, deferred income taxes are recognized for the expected tax consequences of temporary differences by applying enacted statutory tax rates, applicable to future years, to differences between the financial reporting basis and tax basis of assets and liabilities. The cumulative effect of this change in 1993 was a charge of $13.0 million, or $.06 per common share. Prior periods were not restated. Income before income taxes and income tax expense are summarized below.
(Millions of dollars) 1994 1993 1992 - ------------------------------------------------------------------------------------------ Income before income taxes United States................................. $ 426.6 $271.7 $325.0 Foreign....................................... 677.5 411.0 504.7 ---------------------------------------- Total income before income taxes................ $1,104.1 $682.7 $829.7 ======================================== Current tax expense: Federal....................................... $ 81.6 $ 88.7 $ 88.3 Foreign....................................... 208.2 222.7 176.1 State......................................... 27.4 37.1 28.1 Deferred tax expense: Federal....................................... 42.4 (15.8) 25.7 Foreign....................................... 39.2 (73.9) (1.9) State......................................... 7.0 (3.0) -- ---------------------------------------- Total income tax expense........................ $ 405.8 $255.8 $316.3 ======================================== An analysis of deferred tax expense (benefit) follows. (Millions of dollars) 1994 1993 1992 - ------------------------------------------------------------------------------------------ Depreciation.................................... $ 6.2 $ 2.6 $(1.9) Stock equivalent unit plan...................... (2.3) .9 (2.3) Realignment program............................. 52.6 (98.5) -- Oil and gas operations.......................... -- -- (.4) Other........................................... 32.1 2.3 28.4 ---------------------------------------- Total deferred tax expense (benefit)............ $88.6 $(92.7) $23.8 ========================================
A reconciliation of the statutory Federal income tax rates to the Company's effective tax rates follows.
1994 1993 1992 - ------------------------------------------------------------------------ Statutory Federal tax rate.................. 35.0% 35.0% 34.0% Rate differential on foreign income......... 1.0 (3.4) (.8) Effect of foreign currency translation...... (.1) 4.1 1.2 State taxes (net of Federal tax benefits)... 2.0 3.2 2.2 Other differences........................... (1.1) (1.4) 1.5 ------------------------ Effective tax rate.......................... 36.8% 37.5% 38.1% ========================
The components of deferred tax assets and deferred tax liabilities are shown below.
1994 1993 -------------------------- -------------------------- Deferred Tax Deferred Tax Deferred Tax Deferred Tax (Millions of dollars) Assets Liabilities Assets Liabilities - ------------------------------------------------------------------------------------------------ Current Realignment program.............. $ 40.3 $ -- $ 58.3 $ -- Incentive plans.................. 38.6 -- 33.8 -- Advertising and sales promotion...................... 15.4 -- 15.5 -- Inventory reserves............... 17.6 -- 9.7 -- Miscellaneous reserves & accruals....................... 13.4 -- 25.6 -- All other........................ 142.3 47.0 148.6 6.2 ------------------- -------------------- Total Current.................. 267.6 47.0 291.5 6.2 ------------------- -------------------- Noncurrent Postretirement benefits.......... 67.7 9.7 64.6 -- Property, plant and equipment...................... 7.7 63.1 -- 74.8 Realignment program.............. 5.6 -- 40.2 -- Incentive plans.................. 36.2 33.0 17.8 -- All other........................ 16.4 80.9 14.3 91.3 ------------------- -------------------- Total Noncurrent............... 133.6 186.7 136.9 166.1 ------------------- -------------------- Total.............................. $401.2 $233.7 $428.4 $172.3 =================== ==================== Net Deferred Tax Assets............ $167.5 $256.1 ====== ======
20 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PENSION PLANS The Company has noncontributory defined benefit pension plans in effect for substantially all of its domestic employees. Benefits are based on age, years of service and the level of compensation during the final years of employment. The funding policy of the Company for these plans is to contribute annually the amount necessary to meet the minimum funding standards established by the Employee Retirement Income Security Act. In addition, the Company has various foreign retirement programs, including defined benefit, defined contribution and other plans, covering the majority of foreign employees. In Germany, under common local practice and enabling tax law, pension costs are accrued but unfunded. Total pension expense for 1994 was $69.6 million, compared with $57.0 million and $53.6 million in 1993 and 1992, respectively. The components of net pension expense follow.
1994 1993 1992 (Millions of dollars) Domestic Foreign Domestic Foreign Domestic Foreign - ------------------------------------------------------------------------------------------------------------------------------ Defined Benefit Plans Service cost--benefits earned............................ $ 15.0 $ 25.2 $ 12.3 $ 20.1 $ 11.8 $ 19.1 Interest cost on projected benefit obligation............ 42.0 40.1 38.1 35.5 34.9 35.3 Actual loss (return) on plan assets...................... 1.7 (28.3) (46.3) (64.5) (30.9) (12.2) Net amortization and deferral............................ (37.8) 3.2 9.9 46.0 (1.8) (9.2) ------------------ ------------------ ------------------ 20.9 40.2 14.0 37.1 14.0 33.0 Other Pension Costs Defined contribution plans............................... -- 3.0 -- 1.7 -- 1.9 Foreign plans not on SFAS 87............................. -- 5.5 -- 4.2 -- 4.7 ------------------ ------------------ ------------------ Total Pension Expense...................................... $ 20.9 $ 48.7 $ 14.0 $ 43.0 $ 14.0 $ 39.6 ================== ================== ==================
The funded status of the Company's principal defined benefit plans and the amounts recognized in the consolidated balance sheet at December 31 follow.
(Millions of dollars) - ------------------------------------------------------------------------------------------------------------------------------- Vested benefit............................................. $ 428.5 $ 480.7 $ 431.1 $ 438.8 $ 343.9 $ 340.6 Nonvested benefit.......................................... 78.9 25.1 70.4 22.0 25.8 17.5 ------------------ ------------------ ------------------ Accumulated benefit obligation............................. 507.4 505.8 501.5 460.8 369.7 358.1 Benefit obligation related to future compensation levels... 99.6 78.7 108.8 66.4 106.4 74.1 ------------------ ------------------ ------------------ Projected benefit obligation............................... 607.0 584.5 610.3 527.2 476.1 432.2 Fair value of plan assets, invested primarily in equities and debt securities...................................... 491.5 291.9 489.4 268.1 423.3 174.6 ------------------ ------------------ ------------------ Plan assets less than projected benefit obligation......... (115.5) (292.6) (120.9) (259.1) (52.8) (257.6) Unrecognized transition obligation (asset)................. 0.1 11.0 (2.3) 10.8 (2.6) 13.5 Unrecognized prior service cost............................ 24.6 11.3 27.4 9.5 17.8 6.3 Unrecognized net loss...................................... 124.5 37.6 117.1 44.3 54.4 36.2 Minimum liability adjustment............................... (2.4) (8.2) (8.9) (15.4) -- -- ------------------ ------------------ ------------------ Net prepaid (accrued) pension cost included in consolidated balance sheet............................... $ 31.3 $(240.9) $ 12.4 $(209.9) $ 16.8 $(201.6) ================== ================== ==================
The primary assumptions used in determining related obligations of the plans are shown below.
(Percent) - ---------------------------------------------------------------------------------------------------------------------------------- Discount rate.............................................. 8 1/2 5 - 9 7 5 - 9 8 5 -10 Increase in compensation levels............................ 5 3 1/2- 6 1/2 5 3 1/2- 7 1/2 5 1/2 3 1/2- 6 1/2 Long-term rate of return on assets......................... 9 5 -10 9 5 -10 9 5 -11 - ----------------------------------------------------------------------------------------------------------------------------------
21 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OTHER POSTRETIREMENT BENEFITS The Company and its subsidiaries also provide certain health care and life insurance benefits to retired employees. Substantially all of the Company's domestic employees and some employees in foreign countries become eligible for these benefits upon retirement. At the time of retirement, domestic employees who elect to participate are required to pay some portion of such medical costs if hired before July 1, 1990, or all of such costs if hired after that date. The Company's employee stock ownership plan (ESOP) was established to assist employees who retire after January 1, 1992, to finance their retiree medical costs. Effective January 1, 1993, the Company adopted SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," for U.S. operations and recognized immediately the aftertax transitional obligation of $109 million as a cumulative effect of an accounting change. This standard requires that the cost of these benefits be recognized in the financial statements during employees' active working lives. The other postretirement benefit expense for 1994 and 1993 was $12.1 million and $9.2 million, respectively. The components of the net expense follow.
(Millions of dollars) 1994 1993 - ------------------------------------------------------------------------------- Interest cost.............................................. $15.7 $14.7 Service cost (income)...................................... (4.4) (5.2) Actual loss (return) on assets............................. -- (.4) Net amortization and deferral.............................. .8 .1 ----------------- Other postretirement benefit expense $12.1 $ 9.2 ================= The status of the Company's plans and the amounts recognized in the balance sheet follow. - ------------------------------------------------------------------------------- Retirees................................................... $146.8 $113.0 Fully eligible active employees............................ 25.5 32.8 Other active employees..................................... 45.7 65.4 ------------------ Accumulated postretirement benefit obligation............. 218.0 211.2 Fair value of plan assets.................................. (10.3) (7.2) Unrecognized net loss...................................... (14.6) (10.1) ------------------ Accrued postretirement liability........................... $193.1 $193.9 ==================
The accumulated postretirement benefit obligation was determined using an assumed discount rate of 8.5% and 7% in 1994 and 1993, respectively. The assumed health care cost trend rate was 13% in 1993 and 12% in 1994, decreasing to 5% by the year 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 20%, in 1994. ESOP shares allocated to participants reduce Company obligations over the period of allocation. The account balance is assumed to have an annual yield of 12%. In addition, the Company established a retiree health benefits account within its domestic pension plan that will be used to partially fund health care benefits for future retirees. Adoption for foreign operations is not mandatory until 1995. Since most of the Company's foreign operations are covered by government-sponsored programs, the effect of adopting the statement is expected to be immaterial to the results of operations. EMPLOYEE STOCK OWNERSHIP PLAN Under this plan, the Company sold to the ESOP 165,872 shares of a new issue of Series C, cumulative convertible preferred stock for $100 million, or $602,875 per share. The Series C stock pays an annual dividend of 8% and is being allocated to eligible employees over a 10-year period, which began in September 1990. Each share of Series C stock is entitled to vote as if it were converted to common stock and is convertible into 20 common shares at $30.14375 per share. At December 31, 1994, 162,928 Series C shares were outstanding, of which 89,684 shares were allocated to employees and the remaining 73,244 shares were held in the ESOP trust for future allocations. The 162,928 Series C shares are equivalent to 3,258,558 shares of common stock, about 1.5% of the Company's outstanding voting stock. Each Series C share carries rights under the Company's preferred stock purchase rights plan and currently is entitled to five rights. The Series C stock is redeemable upon the occurrence of certain changes in control or other events, at the option of the Company or the holder, depending on the event, at varying prices not less than the purchase price plus accrued dividends. 22 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Proceeds received from the sale of Series C shares to the ESOP were used to retire Company debt. The ESOP purchased the Series C shares with borrowed funds. The ESOP loan principal and interest is being repaid on a semi-annual basis over a 10-year period by the Company contributions to the ESOP and by the dividends paid on the Series C shares. 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. Company cash contributions and dividend payments of $13.9 million, $15.8 million and $18.1 million were paid to the ESOP during 1994, 1993 and 1992, respectively. The ESOP made principal and interest payments of $9.2 million and $4.7 million during 1994, $10.3 million and $5.5 million during 1993, and $11.7 million and $6.5 million during 1992, respectively. The Company has guaranteed the ESOP's borrowings and has reported the unpaid balance of this loan as a liability of the Company. An unearned ESOP compensation amount is reported as an offset to the Series C share amount in the equity section. Compensation expense related to the plan is based upon the preferred shares allocated to participants and amounted to $6.4 million, $8.5 million and $11.1 million in 1994, 1993 and 1992, respectively. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL Changes in these capital accounts are summarized below.
(Thousands of shares) (Millions of dollars) ---------------------------------- -------------------------------- Common Stock Additional ---------------------------------- Common Paid-in Treasury Issued In Treasury Outstanding Stock Capital Stock - -------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1991..................... 276,901 (57,722) 219,179 $276.9 $213.0 $(1,047.5) Conversion of Series C ESOP Preferred Stock...... -- 17 17 -- .2 .3 Stock option and purchase plans.................. 973 -- 973 1.0 23.7 -- ---------------------------------- -------------------------------- Balance at December 31, 1992..................... 277,874 (57,705) 220,169 277.9 236.9 (1,047.2) Conversion of Series C ESOP Preferred Stock...... -- 7 7 -- .1 .1 Stock option and purchase plans.................. 714 -- 714 .7 22.4 -- ---------------------------------- -------------------------------- Balance at December 31, 1993..................... 278,588 (57,698) 220,890 278.6 259.4 (1,047.1) Conversion of Series C ESOP Preferred Stock...... -- 26 26 -- .3 .5 Stock option and purchase plans.................. 533 -- 533 .5 18.0 -- ---------------------------------- -------------------------------- Balance at December 31, 1994..................... 279,121 (57,672) 221,449 $279.1 $277.7 $(1,046.6) ================================== ================================
PREFERRED STOCK PURCHASE RIGHTS At December 31, 1994, the Company had 56,177,016 preferred stock purchase rights outstanding as follows: one-quarter of a right for each outstanding share of common stock and a total of 814,640 rights for the outstanding Series C preferred stock. Each right may be exercised to purchase one two-hundredth of a share of junior participating preferred stock for $160. The rights only become exercisable, or separately transferable, 10 days after a person acquires 20% or more, or 10 business days after a tender offer commences that could result in ownership of more than 30%, of the Company's stock. If any person acquires 30% 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 20% 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 9, 1996. 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 20% stockholder. At December 31, 1994, there were authorized 5,000,000 shares of preferred stock without par value, of which 162,928 Series C shares were issued and outstanding and 400,000 Series A shares were reserved for issuance upon exercise of the rights. 23 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STOCK OPTION AND STOCK EQUIVALENT UNIT PLANS Stock Option Plan activity is summarized below.
1994 1993 1992 ----------------------- ----------------------- ----------------------- Average Average Average Per Share Per Share Per Share (Thousands of shares) Shares Option Price Shares Option Price Shares Option Price - -------------------------------------------------------------------------------------------------------------------------------- Outstanding at beginning of year.............. 4,542 $37.17 4,347 $32.84 4,160 $26.22 Granted ...................................... 1,647 67.99 982 48.40 1,311 44.85 Exercised..................................... (577) 30.88 (765) 26.91 (1,116) 22.21 Cancelled..................................... (17) 61.14 (22) 39.88 (8) 38.54 ----- ----- ----- Outstanding at end of year.................... 5,595 46.82 4,542 37.17 4,347 32.84 ===== ===== ===== Shares reserved for future grants............. 6,432 62 1,022 ===== ===== =====
The Stock Option Plan authorizes the granting of options on shares of the Company's common stock to selected key employees, including those who also may be officers, and to nonemployee directors, at not less than the fair market value of the stock on the date of grant. All outstanding options have 10-year terms and are exercisable one year from the date of grant, provided the employee optionee is still employed or the director continues to serve. The plan also permits payment for options exercised in shares of the Company's common stock and the granting of incentive stock options. During 1994, stockholders approved increasing by 8,000,000 the number of shares on which stock options may be granted. The Stock Purchase Plan provides for the sale at fair market value of the Company's common stock to selected key employees, excluding officers and directors. At December 31, 1994, 154,374 shares were reserved for issuance under the plan. The Stock Equivalent Unit Plan provides for awards of basic stock units to key employees, excluding officers who are directors. 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. Stock Equivalent Unit Plan expense amounted to $19.1 million in 1994, $14.5 million in 1993 and $22.1 million in 1992. REALIGNMENT PLAN Beginning with the fourth quarter of 1993, the Company's financial statements reflect charges for a realignment plan designed to take advantage of opportunities created by the continuing trend to more open world trade and the growth of the Company's global operations, and to improve the competitive position of the Company's business. Under the plan, there are both job additions and reductions during 1994 and 1995, with the plan affecting some 2,000 positions, or about 6% of the Company's worldwide total, primarily outside the United States. These actions resulted in a 1993 fourth quarter charge to profit from operations of $262.6 million ($164.1 million after taxes, or $.74 per share). The provisions of the realignment plan were created according to definitions in Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies." All provisions were specific. There were no provisions for general contingencies or for any asset impairments other than those resulting from changes in the expected use of assets as a result of the realignment plan. Only specific incremental and direct costs clearly identifiable with various projects and which could be estimated with reasonable accuracy were included in the plan. The estimated costs included severance for terminated employees, as required by local country laws, union contracts and Company policies. All salaries and benefits for periods prior to termination under the realignment plan are being charged to operations, and are not part of the realignment charge. No costs related to new employees have been included in the realignment expense. 24 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The realignment charges included costs that are classified into two major categories as follows. 1. Costs associated with the closure and disposal of major manufacturing facilities in all business segments, due principally to excess manufacturing capacity caused by falling global trade barriers. These costs totaled $72.0 million and consisted primarily of severance costs of $62.3 million for terminated employees and $9.2 million in facility exit costs, distributor termination payments and lease termination costs. 2. Costs associated with organizational realignment and related work force reductions to improve the Company's competitive positioning of its business and adaptation to the continuing trend of more open world trade. Organizational realignment activities included the following: a) Integration of various headquarters, marketing and administrative functions in all business segments and geographical areas. b) Downsizing of factory and distribution operations in the worldwide blades and razors, toiletries and cosmetics, Braun and Oral-B business segments. c) Integration by Gillette of the newly acquired Parker Pen facilities and organizations into the worldwide Gillette organization. d) Various other asset impairments and other minor related projects in all business segments and geographical areas. Costs for these activities included the following:
Asset Severance Write- Integration (Pretax $ Millions) Costs downs Costs Total - ------------------------------------------------------------------------------------------------------------------------ a) Integration of various functions................ $30.2 $ 3.4 $ 8.0 $ 41.6 b) Downsizing of operations........................ 33.6 29.5 17.1 80.2 c) Integration of Parker Pen....................... 4.5 7.2 3.2 14.9 d) Other asset impairments......................... 9.2 43.8 .9 53.9 ----------------------------------------------------------------- Total........................................... $77.5 $83.9 $29.2 $190.6 =================================================================
Severance-related benefits are communicated to employees as the individual realignment programs are executed. Assets are written down to net realizable value for impairments due to expected changes in use of the assets as a result of the realignment plan. Integration costs are those incurred for the closing of smaller facilities, distributor termination payments and lease termination costs. The realignment program required cash expenditures (after income tax effects) of approximately $15 million in 1994 and is expected to require $54 million in 1995 and $10 million in 1996. Noncash costs, principally for the write-down of property, plant and equipment and other assets to net realizable values, amounted to $72 million in 1994, and in 1995 will total $13 million. The cash flow benefits of the realignment program, consisting principally of reduced salaries, wages and overhead costs, are being reinvested primarily into research and development, capital spending and advertising to support product line development and expansion. During 1994, the Company charged costs of $140.3 million to the realignment accrual established in 1993. Under provisions of the realignment program, 1,410 positions were eliminated by the end of 1994. The realignment program, with some minor exceptions, is being implemented, and realignment activities are planned to be ongoing, through the fourth quarter of 1995. CONTINGENCIES The Company is subject to legal proceedings and claims arising out of its business that cover a wide range of matters, including antitrust and trade regulation, contracts, environmental issues, product liability, patent and trademark matters and taxes. Management, after review and consultation with counsel, considers that any liability from all of these pending lawsuits and claims would not materially affect the consolidated financial position, results of operations or liquidity of the Company. LEASE COMMITMENTS Minimum rental commitments under noncancellable leases, primarily for office and warehouse facilities, are $39.6 million in 1995, $31.9 million in 1996, $26.8 million in 1997, $21.4 million in 1998, $17.9 million in 1999 and $23.1 million for years thereafter. Rental expense amounted to $63.2 million in 1994, $60.5 million in 1993 and $59.7 million in 1992. RESEARCH AND DEVELOPMENT Research and development costs, included in selling, general and administrative expenses, amounted to $136.9 million in 1994, $133.1 million in 1993 and $123.8 million in 1992. 25 RESPONSIBILITY FOR FINANCIAL STATEMENTS The Company is responsible for the objectivity and integrity of the accompanying consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles. The financial statements of necessity include the Company's estimates and judgments relating to matters not concluded by year-end. Financial information contained elsewhere in the Annual Report is consistent with that included in the financial statements. The Company maintains a system of internal accounting controls that includes careful selection and development of employees, division of duties, and written accounting and operating policies and procedures augmented by a continuing internal audit program. Although there are inherent limitations to the effectiveness of any system of accounting controls, the Company believes that its system provides reasonable, but not absolute, assurance that its assets are safeguarded from unauthorized use or disposition and that its accounting records are sufficiently reliable to permit the preparation of financial statements that conform in all material respects with generally accepted accounting principles. KPMG Peat Marwick LLP, independent auditors, are engaged to render an independent opinion regarding the fair presentation in the financial statements of the Company's financial condition and operating results. Their report appears below. Their examination was made in accordance with generally accepted auditing standards and included a review of the system of internal accounting controls to the extent they considered necessary to determine the audit procedures required to support their opinion. The Audit Committee of the Board of Directors is composed solely of directors who are not employees of the Company. The Committee meets periodically and privately with the independent auditors, with the internal auditor and with the financial officers of the Company to review matters relating to the quality of the financial reporting of the Company, the internal accounting controls and the scope and results of audit examinations. The Committee also reviews compliance with the Company's statement of policy as to the conduct of its business, including proper accounting and dealing with auditors. In addition, it is responsible for recommending the appointment of the Company's independent auditors, subject to stockholder approval. - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT [LOGO OF KPMG PEAT MARWICK LLP APPEARS HERE] 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, 1994 and 1993, and the related consolidated statements of income and earnings reinvested in the business and cash flows for each of the years in the three-year period ended December 31, 1994. 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, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in the Notes to Consolidated Financial Statements, in 1993 the Company changed its methods of accounting for income taxes, postretirement medical benefits and postemployment benefits. /s/ KPMG Peat Marwick LLP Boston, Massachusetts January 26, 1995 26 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL INFORMATION BY BUSINESS SEGMENT
(Millions of dollars) Blades & Toiletries & Stationary Braun Oral B 1994 Razors Cosmetics Products Products Products Other Corporate Total - -------------------------------------------------------------------------------------------------------------------------------- Net sales......................... $2,350.7 $1,162.0 $ 806.7 $1,348.2 $401.9 $ .7 $ -- $6,070.2 Profit from operations............ 878.2 79.3 94.9 200.4 25.0 (5) (50.6) 1,226.7 Identifiable assets............... 1,843.3 628.4 1,111.6 1,094.5 352.4 2.9 460.9 5,494.0 Capital expenditures.............. 181.1 33.0 30.4 110.0 38.2 .4 6.7 399.8 Depreciation...................... 72.5 20.2 23.8 57.3 8.0 .4 1.9 184.1 1993 - -------------------------------------------------------------------------------------------------------------------------------- Net sales......................... $2,117.6 $1,047.1 $ 633.1 $1,248.8 $363.1 $1.1 $ -- $5,410.8 Profit from operations*........... 692.2 (6.2) 27.0 146.4 16.9 (.6) ( 51.0) 824.7 Identifiable assets............... 1,643.7 624.2 1,070.7 959.5 307.9 1.2 495.1 5,102.3 Capital expenditures.............. 161.7 40.5 23.7 90.5 27.7 .1 7.8 352.0 Depreciation...................... 73.0 20.5 19.8 64.4 8.2 .3 2.8 189.0 *After realignment expense of..... 104.3 64.6 37.5 20.9 28.7 -- 6.6 262.6 1992 - -------------------------------------------------------------------------------------------------------------------------------- Net sales......................... $1,978.2 $ 970.9 $ 520.4 $1,325.6 $365.9 $1.8 $ -- $5,162.8 Profit from operations............ 665.3 89.4 48.9 162.7 46.8 (.3) (45.7) 967.1 Identifiable assets............... 1,533.9 545.8 469.5 1,057.1 261.2 5.2 317.2 4,189.9 Capital expenditures.............. 133.5 46.7 25.5 87.4 23.4 .6 4.3 321.4 Depreciation...................... 75.2 20.1 15.6 64.4 8.5 .3 3.9 188.0 - --------------------------------------------------------------------------------------------------------------------------------
FINANCIAL INFORMATION BY GEOGRAPHIC AREA
(Millions of dollars) Western Latin Total United 1994 Europe America Other Foreign States Corporate Total - -------------------------------------------------------------------------------------------------------------------------------- Net sales......................... $2,119.3 $859.8 $1,146.6 $4,125.7 $1,944.5 $ -- $6,070.2 Profit from operations............ 438.3 228.9 225.0 892.2 385.1 (50.6) 1,226.7 Identifiable assets............... 2,403.0 644.1 649.0 3,696.1 1,337.0 460.9 5,494.0 1993 - -------------------------------------------------------------------------------------------------------------------------------- Net sales......................... $1,948.9 $761.7 $ 940.7 $3,651.3 $1,759.5 $ -- $5,410.8 Profit from operations*........... 316.0 177.6 125.8 619.4 256.3 (51.0) 824.7 Identifiable assets............... 2,199.9 647.9 505.0 3,352.8 1,254.4 495.1 5,102.3 *After realignment expense of..... 109.8 39.6 30.6 180.0 76.0 6.6 262.6 1992 - -------------------------------------------------------------------------------------------------------------------------------- Net sales......................... $2,105.5 $646.6 $ 819.0 $3,571.1 $1,591.7 $ -- $5,162.8 Profit from operations............ 411.7 176.9 121.8 710.4 302.4 (45.7) 967.1 Identifiable assets............... 1,870.4 504.4 444.4 2,819.2 1,053.5 317.2 4,189.9 - --------------------------------------------------------------------------------------------------------------------------------
SEGMENT AND AREA COMMENTARY Profit from operations is net sales less cost of sales and selling, general and administrative expenses, but is not affected either by nonoperating charges/income or by income taxes. Nonoperating charges/income consists principally of net interest expense and exchange losses. In calculating profit from operations for individual business segments, substantial expenses incurred at the operating level which are common to more than one segment are allocated on a net sales basis. Certain headquarters expenses of an operational nature also are allocated to business segments and geographic areas. The principal products included in each of the Company's major business segments are described in the review of operations, which appears earlier. All intercompany transactions have been eliminated, and transfers of finished goods between geographic areas are not significant. Assets in the Corporate column include deferred income tax assets, primarily relating to the realignment program and to mandated accounting changes, prepaid and intangible pension assets, oil and gas investments, and nonqualified benefit trusts. 27 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES OTHER FINANCIAL INFORMATION BUSINESS SEGMENTS The percentages of consolidated net sales and segment profit from operations, before corporate expenses, during the last five years for each of the Company's major business segments are set forth below.
Blades & Toiletries & Stationery Braun Oral-B Razors Cosmetics Products Products Products --------------- --------------- -------------- -------------- ---------------- Net Segment Net Segment Net Segment Net Segment Net Segment Year Sales Profit Sales Profit Sales Profit Sales Profit Sales Profit - ---------------------------------------------------------------------------------------------------------------------------------- 1994................................. 39% 69% 19% 6% 13% 7% 22% 16% 7% 2% 1993*................................ 39% 70% 19% 5% 12% 6% 23% 15% 7% 4% 1992................................. 38% 66% 19% 9% 10% 5% 26% 16% 7% 4% 1991................................. 37% 62% 20% 13% 10% 5% 26% 16% 7% 4% 1990................................. 36% 60% 22% 13% 11% 8% 25% 15% 6% 4% *Segment profit percentages are before realignment expense.
- ----------------------------------------------------------------------------------------------------------------------------------
QUARTERLY FINANCIAL INFORMATION (Millions of dollars, except per share amounts) Three Months Ended -------------------------------------------------------------------------------- 1994 March 31 June 30 September 30 December 31 Total Year - ----------------------------------------------------------------------------------------------------------------------------------- Net sales............................ $1,361.1 $1,406.5 $1,503.4 $1,799.2 $6,070.2 Gross profit......................... 862.5 906.1 957.2 1,122.5 3,848.3 Profit from operations............... 297.1 293.0 297.7 338.9 1,226.7 Income before income taxes........... 259.3 256.5 272.2 316.1 1,104.1 Net income........................... 164.0 162.2 172.2 199.9 698.3 Net income per common share.......... .74 .73 .77 .90 3.14 Dividends declared per common share.. -- .25 .25 .50 1.00 Stock price range: (composite basis) High............................... 67 3/8 69 3/4 73 76 1/2 Low................................ 57 3/4 62 1/8 64 5/8 69 1/2 1993* - ---------------------------------------------------------------------------------------------------------------------------------- Net sales............................ $1,216.6 $1,237.3 $1,339.7 $1,617.2 $5,410.8 Gross profit......................... 753.1 773.6 839.0 1,000.8 3,366.5 Profit from operations............... 262.4 244.2 266.8 51.3 824.7 Income before income taxes and cumulative effect of accounting changes............................ 227.7 215.5 232.0 7.5 682.7 Income before cumulative effect of accounting changes................. 142.3 134.7 145.0 4.9 426.9 Cumulative effect of accounting changes............................ (138.6) -- -- -- (138.6) Net income........................... 3.7 134.7 145.0 4.9 288.3 Income per common share before cumulative effect of accounting changes............................ .64 .61 .65 .02 1.92 Cumulative effect of accounting changes............................ (.63) -- -- -- (.63) Net income per common share.......... .01 .61 .65 .02 1.29 Dividends declared per common share.. -- .21 .21 .42 .84 Stock price range: (composite basis) High............................... 61 3/8 60 5/8 59 1/4 63 3/4 Low................................ 52 1/2 47 3/8 50 57 1/8 *In the fourth quarter of 1993, charges for realignment expense reduced profit from operations and income before income taxes by $262.6 million, income by $164.1 million and income per common share by $.74. - ----------------------------------------------------------------------------------------------------------------------------------
28 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES HISTORICAL FINANCIAL SUMMARY (In millions, except per share amounts, stock price and employees)
Profit Income Net Depreciation Net from before Net interest and Total Capital Year sales operations taxes income expense amortization assets expenditures ======================================================================================================================== 1994 $6,070 $1,227 $1,104 $698 $ 42 $215 $5,494 $400 1993* 5,411 825 683 288 33 219 5,102 352 - ------------------------------------------------------------------------------------------------------------------------ 1992 5,163 967 830 513 56 211 4,190 321 1991 4,684 862 694 427 94 193 3,887 286 1990 4,345 773 593 368 120 177 3,671 255 1989 3,819 664 474 285 115 149 3,114 223 1988 3,581 614 449 269 101 141 2,868 189 1987 3,167 523 392 230 82 126 2,731 147 1986** 2,818 229 58 16 47 108 2,540 199 1985 2,400 371 272 160 48 88 2,425 157 1984 2,289 347 259 159 35 82 2,024 119 ========================================================================================================================
*In 1993, charges for realignment expense reduced profit from operations and income before income taxes by $263 million, net income by $164 million and net income per common share by $.74. In addition, in 1993, the cumulative effect of adopting mandated changes in the methods of accounting for income taxes, postretirement benefits and postemployment benefits reduced net income by $139 million and net income per common share by $.63.
Net Per Common Share Average property, --------------------- common Year-end plant and Long-term Stockholders' Net Dividends shares stock Year equipment debt equity income declared outstanding price Employees ======================================================================================================================= 1994 $1,411 $ 715 $2,017 $3.14 $1.00 221 $74 7/8 32,800 1993* 1,215 840 1,479 1.29 .84 220 59 5/8 33,400 - ----------------------------------------------------------------------------------------------------------------------- 1992 1,075 554 1,496 2.32 .72 220 56 7/8 30,900 1991 931 742 1,157 1.94 .62 211 56 1/8 31,200 1990 862 1,046 265 1.60 .54 194 31 3/8 30,400 1989 745 1,041 70 1.35 .48 193 24 5/8 30,400 1988 683 1,675 (85) 1.23 .43 219 16 5/8 29,600 1987 664 840 599 1.00 .39 1/4 230 14 1/8 30,100 1986** 637 915 461 .06 .34 255 12 3/8 32,100 1985 504 436 898 .65 .32 1/2 247 8 3/4 31,400 1984 430 443 791 .65 .31 246 7 1/8 31,400 ===========================================================================================================================
**In 1986, special charges for restructuring expense reduced profit from operations by $179 million and, along with tender offer response costs and a change in accounting for oil and gas investments, reduced income before taxes by $243 million, net income by $165 million and net income per common share by $.65. [GRAPHS APPEAR HERE] 29 CORPORATE AND STOCKHOLDER INFORMATION ANNUAL MEETING The Annual Meeting of stockholders will take place on Thursday, April 20, 1995, at the John F. Kennedy Library and Museum, Columbia Point, Boston, Massachusetts. The meeting will convene at 10 a.m. CORPORATE HEADQUARTERS Prudential Tower Building Boston, Massachusetts 02199 (617)421-7000 INCORPORATED State of Delaware COMMON STOCK Major stock exchanges: New York, Boston, Midwest, Pacific, London, Frankfurt, Zurich New york Stock Exchange Symbol: G At year-end, stockholders numbered 30,500, living in all 50 states and more than 30 countries abroad. TRANSFER AGENT AND REGISTRAR The First National Bank of Boston Shareholder Services Division P.O. Box 644 Mail Stop 45-02-09 Boston,Massachusetts 02102-0644 (617)575-3170 Toll free:(800)730-4001 Hearing impaired:(800)952-9245 (TTY/TDD) AUDITORS KPMG Peat Marwick LLP FORM 10-K The Company's 1994 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, is available without charge by written request from the office of the Secretary, or by calling toll-free (800)291-7615. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN All registered holders of Gillette stock are invited to participate in the Dividend Reinvestment and Stock Purchase Plan. The plan provides a convenient, economical and systematic means of acquiring additional shares of the Company's common stock through the reinvestment of cash dividends. Participants also may invest additional cash amounts in the purchase of share as frequently as once each month. Interested stockholders can obtain a descriptive brochure and enrollment card from: The First National Bank of Boston Dividend Reinvestment and Stock Purchase Plan P.O. Box 1681 Mail Stop 45-01-06 Boston, Massachusetts 02105-1681 (617)575-3170 Toll free: (800) 730-4001 Hearing impaired:(800)952-9245 (TTY/TDD) QUARTERLY REPORTS Currently, the Company mails quarterly reports only to registered holders of Gillette common stock. If your shares are registered in the name of a broker or other nominee, and you would like to receive the quarterly reports, the Company will gladly mail them directly to you. You may add your name to our mailing list by writing to the office of the Secretary, or by calling toll-free (800)291-7615. [RECYCLED LOGO APPEARS HERE] This annual report is printed on recycled paper. 30 EX-27 10 FINANCIAL DATA SCHEDULE
5 The data reported in this exhibit are based on audited statements and include all adjustments which the company considers necessary for a fair presentation of results for this period. 0000041499 THE GILLETTE COMPANY 1,000 12-MOS DEC-31-1994 DEC-31-1994 43,800 2,300 1,431,600 52,100 941,200 2,747,400 2,902,200 1,491,200 5,494,000 1,783,200 715,100 279,100 0 98,200 1,640,000 5,494,000 6,070,200 6,070,200 2,221,900 2,221,900 2,621,600 0 61,100 1,104,100 405,800 698,300 0 0 0 698,300 3.14 3.07
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