-----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, N+As9j83i7CVYTVTwM7wMEF8sTlDZa2D/wypxrEvllLwcZwv3NTKTRbNftl0naF+ G3Hp+RZ8bvhf5SApr42/Xw== 0000950135-94-000197.txt : 19940325 0000950135-94-000197.hdr.sgml : 19940325 ACCESSION NUMBER: 0000950135-94-000197 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GILLETTE CO CENTRAL INDEX KEY: 0000041499 STANDARD INDUSTRIAL CLASSIFICATION: 3420 IRS NUMBER: 041366970 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-00922 FILM NUMBER: 94517573 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 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, 1993 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 (sec.229.405 of this chapter) is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. The aggregate market value of Gillette Common Stock held by non-affiliates as of March 1, 1994 was approximately $11,906,000,000.* The number of shares of Gillette Common Stock outstanding as of March 1, 1994 was 220,979,835. 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 1993 Annual Report to Stockholders (The "1993 Annual Report")............................................................ Parts I and II 2. The Gillette Company 1994 Proxy Statement (The "1994 Proxy Statement")..... Part III
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- * This amount does not include the value of 164,216.1969 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. 2 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 1993 Annual Report on the inside of the front cover and at pages 3 through 5 under the caption "Letter to Stockholders" and at page 42 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 1993 Annual Report at page 39 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 1993 Annual Report at page 37 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 1993 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 these categories, Gillette competitors also have significant patent positions. The patents and licenses held by the Company are of varying remaining durations. TRADEMARKS In general, the Company's principal trademarks have been registered in the United States and throughout the world where the Company's products are sold. Gillette products are marketed outside 1 3 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 33,400 persons, three-quarters of them outside the United States. RESEARCH AND DEVELOPMENT In 1993, research and development expenditures were $133.1 million, compared with $123.8 million in 1992 and $108.9 million in 1991. 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:
1993 1992 1991 ------------------ ---------------- ---------------- NET NET NET SALES PROFIT SALES PROFIT SALES PROFIT ------ ------- ----- ------ ----- ------ United States......................... 33% 29% 31% 30% 32% 31% Foreign............................... 67% 71% 69% 70% 68% 69%
"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 1993 Annual Report under the same captions at page 37 and are incorporated by reference. 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 14,041,000 square feet of floor space, of which 76%, or about 10,690,000 square feet, is devoted to the Company's principal manufacturing operations. 2 4 Additional premises, such as sales and administrative offices, research laboratories, and warehouse, distribution and other manufacturing facilities account for about 24% of Gillette's principal property holdings, or about 3,370,000 square feet. Gillette's executive offices are located in the Prudential Center, Boston, Massachusetts, where the Company holds a long-term lease covering approximately 300,000 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 833,000 Westlake Village, California 181,000 Stationery Products Santa Monica, California 320,000 Janesville, Wisconsin 215,000 Oral-B Products Iowa City, Iowa 258,000 ------------- Total 3,850,000 ------------- -------------
Approximately 84% 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 308,000 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 4.7 million square feet of floor space, about 87% of which is on land owned by Gillette. Many of the international facilities are engaged in the manufacture of products from 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)............................ 1,200,000 Spain............................................. 400,000 Ireland........................................... 200,000 Mexico............................................ 300,000 France............................................ 30,000 ------------ Total................................... 2,130,000 ------------ ------------
Approximately 85% of these facilities and 94% 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 200,000 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 80,000 square feet. The above facilities are in good repair, adequately meet the Company's needs and operate at reasonable levels of production capacity. 3 5 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 or results of operations of the Company. The previously reported class action titled In re Gillette Securities Litigation filed in the Federal District Court in Boston has been settled subject to the final approval of the court. The previously reported derivative action titled Albert B. Evans v. Colman M. Mockler, Jr., et al. filed in the same court has been dismissed with prejudice. The previously reported environmental suits filed in the Federal District Court in Boston titled United States v. Charles George Trucking Company, Inc., et al. and Commonwealth of Massachusetts v. Charles George Trucking Company, Inc., et al. have been settled and consent decrees have been entered. Certain parties have appealed the settlements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ------------------------ 4 6 EXECUTIVE OFFICERS OF REGISTRANT Information regarding the Executive Officers of the Company as of March 17, 1994 is set out below.
NAME AND CURRENT POSITION FIVE-YEAR BUSINESS HISTORY AGE ------------------------- -------------------------- --- Alfred M. Zeien Chairman of the Board and Chief Executive Officer 64 Chairman of the Board and Chief since February 1991; President and Chief Executive Officer 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 November 1990; 60 Vice Chairman of the Board Senior Vice President, Legal, April 1977 - November 1990; Vice President, September 1973 - April 1977; General Counsel, September 1973 - September 1990 Jacques Lagarde Executive Vice President, Diversified Group since 55 Executive Vice President October 1993; Vice President, February 1990 - September 1993; Chairman, Board of Management, Braun AG, February 1990 - September 1993; Deputy Chairman, Board of Management, Braun AG, July 1989 - January 1990; President, Oral-B Laboratories, Inc., November 1985 - June 1989 Michael C. Hawley Executive Vice President, International Group 55 Executive Vice President since December 1993; President, Oral-B Laboratories, Inc., May 1989 - November 1993; Vice President, Administrative Services, January 1989 - April 1989 Robert J. Murray Executive Vice President, North Atlantic Group 52 Executive Vice President since January 1991; Vice President, October 1987 - January 1991; Chairman, Board of Management, Braun AG, November 1985 - January 1990 William J. McMorrow Senior Vice President, Administration since 62 Senior Vice President December 1987 Thomas F. Skelly Senior Vice President, Finance since May 1980 60 Senior Vice President Anthony S. Lucas Vice President since July 1983; Controller since 61 Vice President and Controller 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 1993 Annual Report on the inside back cover and at page 39 under the caption, "Quarterly Financial Information," and is incorporated by reference. As of March 1, 1994, the record date for the 1994 Annual Meeting, there were 29,067 Gillette stockholders of record. ITEM 6. SELECTED FINANCIAL DATA The information required by this item appears in the 1993 Annual Report at pages 40 and 41 under the caption, "Historical Financial Summary," and is incorporated by reference. 5 7 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item appears in the 1993 Annual Report at pages 23 through 25 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 1993 Annual Report at the pages indicated below and are incorporated by reference. (1) Independent Auditors' Report..................................... Page 38 (2) Consolidated Statement of Income and Earnings Reinvested in the Business for the Years Ended December 31, 1993, 1992 and 1991.... Page 26 (3) Consolidated Balance Sheet at December 31, 1993 and 1992......... Page 27 (4) Consolidated Statement of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991................................. Page 28 (5) Notes to Consolidated Financial Statements....................... Pages 29 through 37 (6) Quarterly Financial Information.................................. Page 39
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 1994 Proxy Statement at pages 1 through 4, at page 7 under the caption "Certain Transactions with Directors and Officers" and at page 24 under the caption "Compliance with Section 16(a) of the Exchange Act," 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 1994 Proxy Statement at page 8 under the caption "Compensation of Directors" and at pages 11 through 17 under the captions "Compensation of Chief Executive Officer" and "Executive Compensation" and is incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item concerning the security ownership of certain beneficial owners and management appears in the 1994 Proxy Statement at pages 6 through 7 under the caption, "Stock Ownership of Certain Beneficial Owners and Management," and is incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item appears in the 1994 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 8 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 1993 Annual Report at the pages indicated below and are incorporated into Part II by reference. (1) Independent Auditors' Report..................................... Page 38 (2) Consolidated Statement of Income and Earnings Reinvested in the Business for the Years Ended December 31, 1993, 1992 and 1991.... Page 26 (3) Consolidated Balance Sheet at December 31, 1993 and 1992......... Page 27 (4) Consolidated Statement of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991................................. Page 28 (5) Notes to Consolidated Financial Statements....................... Pages 29 through 37
SCHEDULES The following schedules appear at pages 11 through 15 of this report: V. Property, Plant and Equipment VI. Accumulated Depreciation and Obsolescence of Property, Plant and Equipment VIII. Valuation and Qualifying Accounts IX. Short-Term Borrowings X. Supplementary Income Statement Information
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 9 (f) Instruments relating to long-term debt. Credit agreement dated August 19, 1988, amended and restated as of October 16, 1989, and amended as of December 10, 1990 among The Gillette Company and a group of United States and international banks, filed as Exhibit 4(f) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. I-922, incorporated by reference herein. 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 filed herewith, and the Trust Indenture filed therewith as Exhibit 4.1, 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 filed herewith, and the Trust Indenture filed therewith as Exhibit 4.1, 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 filed herewith, 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, 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 21, 1994, filed herewith. *(b) The Gillette Company Stock Equivalent Unit Plan, as amended, subject to the approval of the stockholders at their annual meeting on April 21, 1994, filed herewith. *(c) The Gillette Company Incentive Bonus Plan, as amended, filed herewith. *(d) The Gillette Company Outside Directors' Stock Ownership Plan, subject to the approval of the stockholders at their annual meeting on April 21, 1994, filed herewith. *(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 herewith. (i) Stock Purchase Agreement dated November 24, 1986, between The Gillette Com- pany 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. *(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.
8 10 *(l) Description of agreement between The Gillette Company and Gaston R. Levy dated December 27, 1993, filed herewith. *(m) Description of agreement between The Gillette Company and Lorne R. Waxlax dated September 30, 1993, filed herewith. *(n) Description of The Gillette Company Estate Preservation Plan, filed herewith. *(o) Description of The Gillette Company Estate Planning Program, filed herewith. 11 Computation of per share earnings, filed herewith. 13 Portions of the 1993 Annual Report to Stockholders of The Gillette Company incorporated by reference in this Form 10-K. 22 List of subsidiaries of The Gillette Company, filed herewith. 23 Independent Auditors' Consent. 24 Power of Attorney. - --------------- * 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 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; and (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. 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. 9 11 INDEPENDENT AUDITORS' REPORT The Stockholders and Board of Directors of The Gillette Company: Under date of January 27, 1994, we reported on the consolidated balance sheet of The Gillette Company and subsidiary companies as of December 31, 1993 and 1992, 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, 1993, as contained in the 1993 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 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules listed on page 7 of this report. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK Boston, Massachusetts January 27, 1994 10 12 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991 (MILLIONS OF DOLLARS)
BALANCE RETIRE- OTHER BALANCE AT MENTS CHANGES AT BEGINNING ADDITIONS OR ADD END OF CLASSIFICATION OF YEAR AT COST SALES (DEDUCT) YEAR -------------- ------- --------- ------- -------- ------- 1993 $ 1.6 (A) Land............................. $ 28.2 $ .4 $ .1 (.9)(B) $ 29.9 .7 (C) 10.8 (A) Buildings........................ 388.7 34.0 2.1 (24.1)(B) 420.5 13.2 (C) (12.4)(A) Machinery and equipment.......... 1,996.7 317.6 74.4 (129.0)(B) 2,125.5 27.0 (C) -------- ------ ------ -------- -------- Total....................... $2,413.6 $352.0 $ 76.6 $ (113.1) $2,575.9 -------- ------ ------ -------- -------- -------- ------ ------ -------- -------- 1992 $ -- (A) Land............................. $ 24.7 $ 2.0 $ .1 .2 (B) $ 28.2 1.4 (C) 5.0 (A) Buildings........................ 328.7 41.1 3.9 12.8 (B) 388.7 5.0 (C) (5.0)(A) Machinery and equipment.......... 1,771.6 278.3 101.0 46.0 (B) 1,996.7 6.8 (C) -------- ------ ------ -------- -------- Total....................... $2,125.0 $321.4 $105.0 $ 72.2 $2,413.6 -------- ------ ------ -------- -------- -------- ------ ------ -------- -------- 1991 $ -- (A) Land............................. $ 20.2 $ 5.7 $ .6 (.7)(B) $ 24.7 .1 (C) .1 (A) Buildings........................ 319.8 21.5 3.8 (9.5)(B) 328.7 .6 (C) (.1)(A) Machinery and equipment.......... 1,646.1 258.8 67.5 (70.8)(B) 1,771.6 5.1 (C) -------- ------ ------ -------- -------- Total....................... $1,986.1 $286.0 $ 71.9 $ (75.2) $2,125.0 -------- ------ ------ -------- -------- -------- ------ ------ -------- --------
- --------------- (A) -- Transfers between accounts. (B) -- Foreign currency exchange fluctuations from beginning of year to end of year. (C) -- Acquisitions. 11 13 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES SCHEDULE VI -- ACCUMULATED DEPRECIATION AND OBSOLESCENCE OF PROPERTY, PLANT AND EQUIPMENT YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (MILLIONS OF DOLLARS)
ADDITIONS CHARGED TO BALANCE BALANCE AT PROFIT OTHER AT BEGINNING AND RETIREMENTS CHANGES END OF DESCRIPTION OF YEAR LOSS OR SALES ADD (DEDUCT) YEAR --------- --------- ---------- ------------ --------- 1993 $ 3.2 (A) Buildings..................... $ 164.3 $ 14.7 $ .8 (10.3)(B) $ 171.1 (3.2)(A) Machinery and equipment....... 1,173.9 174.3 65.0 (89.7)(B) 1,190.3 -------- ------- ------ -------- -------- Total.................... $1,338.2 $ 189.0 $ 65.8 $ (100.0) $1,361.4 -------- ------- ------ -------- -------- -------- ------- ------ -------- -------- 1992 $ (.5)(A) Buildings..................... $ 149. 0 $ 12.0 $ 2.8 6.6 (B) $ 164.3 .5 (A) Machinery and equipment....... 1,044.6 176.0 89.9 42.7 (B) 1,173.9 -------- ------- ------ -------- -------- Total.................... $1,193.6 $ 188.0 $ 92.7 $ 49.3 $1,338.2 -------- ------- ------ -------- -------- -------- ------- ------ -------- -------- 1991 $ 3.4 (A) Buildings..................... $ 139.0 $ 13.0 $ 1.5 (4.9)(B) $ 149.0 (3.4)(A) Machinery and equipment....... 985.5 159.4 55.1 (41.8)(B) 1,044.6 -------- ------- ------ -------- -------- Total.................... $1,124.5 $ 172.4 $ 56.6 $ (46.7) $1,193.6 -------- ------- ------ -------- -------- -------- ------- ------ -------- --------
- --------------------- (A) -- Transfers between accounts. (B) -- Foreign currency exchange fluctuations from beginning of year to end of year.
Note -- Depreciation is computed primarily on a straight-line basis over the estimated useful lives of assets which are as follows: Buildings and land improvements......... 10 to 50 years Furniture and fixtures.................. 5 to 15 years Machinery, equipment and vehicles....... 3 to 15 years
12 14 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (MILLIONS OF DOLLARS)
ADDITIONS DEDUCTIONS --------------------- ---------- BALANCE CHARGED LOSSES BALANCE AT TO CHARGED CHARGED AT BEGINNING PROFIT TO TO END OF DESCRIPTION OF YEAR AND LOSS OTHER RESERVES YEAR ----------- --------- --------- --------- ---------- --------- 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 ----- ----- ----- ------ ----- ----- ----- ----- ------ ----- 1991 Reserves deducted from assets: Receivables...................... $46.1 $19.5 $ -- $ 14.9 $50.7 ----- ----- ----- ------ ----- ----- ----- ----- ------ -----
* Acquisition balances 13 15 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES SCHEDULE IX -- SHORT-TERM BORROWINGS YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (MILLIONS OF DOLLARS)
WEIGHTED YEAR END AVERAGE BALANCE WEIGHTED MAXIMUM AVERAGE INTEREST AT END AVERAGE OUTSTANDING OUTSTANDING RATE OF INTEREST DURING DURING DURING YEAR RATE THE YEAR THE YEAR THE YEAR ------- ------------ ----------- ----------- ------------ 1993 Banks and Financial Institutions................. $341.0 5% $ 236.9 $ 260.7 7% Commercial Paper................ 54.0 3 477.0 140.2 3 ------ -- ------- ------- -- Total................... $395.0 4% $ 713.9 $ 400.9 5% ------ -- ------- ------- -- ------ -- ------- ------- -- 1992 Banks and Financial Institutions................. $265.2 9% $ 265.2 $ 186.1 10% Commercial Paper................ 42.0 4 42.0 55.4 4 ------ -- ------- ------- -- Total................... $307.2 8% $ 307.2 $ 241.5 8% ------ -- ------- ------- -- ------ -- ------- ------- -- 1991 Banks and Financial Institutions................. $194.4 10% $ 297.4 $ 233.5 18% Commercial Paper................ 13.0 5 26.0 33.5 6 ------ -- ------- ------- -- Total................... $207.4 10% $ 323.4 $ 267.0 17% ------ -- ------- ------- -- ------ -- ------- ------- --
- --------------- NOTE: Short-term borrowings, excluding commercial paper, represent primarily foreign currency debt. The maximum and average amounts outstanding during the year are based on quarter-end total outstanding balances and are representative of the year. Average interest rates on short-term borrowings in all three years have been materially impacted by high interest rates in the hyperinflationary economies. Borrowings in these economies have been significantly reduced compared with 1991. 14 16 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (MILLIONS OF DOLLARS)
1993 1992 1991 ------- ------ ------ Maintenance and repairs...................................... $ 42.3 $ 47.8* $ 47.3* ------ ------ ------ ------ ------ ------ Taxes, other than payroll and income taxes................... $ 42.6 $ 39.3 $ 34.9 ------ ------ ------ ------ ------ ------ Advertising costs............................................ $428.0 $446.8 $402.2 ------ ------ ------ ------ ------ ------
- --------------- * Restated to reflect reported years on a comparable basis. 15 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE GILLETTE COMPANY (Registrant) By THOMAS F. SKELLY ------------------------------- Thomas F. Skelly Senior Vice President and Chief Financial Officer Date: March 22, 1994 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 March 22, 1994 ----------------------------------------- of Directors, Chief Executive Alfred M. Zeien Officer and Director JOSEPH E. MULLANEY Vice Chairman of the Board and March 22, 1994 ----------------------------------------- Director Joseph E. Mullaney THOMAS F. SKELLY Senior Vice President and March 22, 1994 ----------------------------------------- Chief Financial Officer Thomas F. Skelly ANTHONY S. LUCAS Vice President, March 22, 1994 ----------------------------------------- Controller and Principal Anthony S. Lucas Accounting Officer WARREN E. BUFFETT Director March 22, 1994 ----------------------------------------- Warren E. Buffett LAWRENCE E. FOURAKER Director March 22, 1994 ----------------------------------------- Lawrence E. Fouraker WILBUR H. GANTZ Director March 22, 1994 ----------------------------------------- Wilbur H. Gantz MICHAEL B. GIFFORD Director March 22, 1994 ----------------------------------------- Michael B. Gifford CAROL R. GOLDBERG Director March 22, 1994 ----------------------------------------- Carol R. Goldberg HERBERT H. JACOBI Director March 22, 1994 ----------------------------------------- Herbert H. Jacobi RICHARD R. PIVIROTTO Director March 22, 1994 ----------------------------------------- Richard R. Pivirotto JUAN M. STETA Director March 22, 1994 ----------------------------------------- Juan M. Steta ALEXANDER B. TROWBRIDGE Director March 22, 1994 ----------------------------------------- Alexander B. Trowbridge JOSEPH F. TURLEY Director March 22, 1994 ----------------------------------------- Joseph F. Turley
By THOMAS F. SKELLY -------------------------- Thomas F. Skelly as Attorney-In-Fact 16 EX-4.F 2 INSTRUMENTS RELATING TO LONG TERM DEBT 1 Exhibit 4(f) [FACE OF NOTE] Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. Unless and until it is exchanged in whole or in part for Notes in definitive registered form, this Note may not be transferred except as a whole by the Depositary to the nominee of the Depositary or by a nominee of the Depositary to the Depositary or another Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. CUSIP No. 375766AB8 No.__ $150,000,000.00 The Gillette Company 4.75% Note due August 15, 1996 The Gillette Company, a Delaware corporation (the "Issuer"), for value received, hereby promises to pay to Cede & Co. or registered assigns, at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, the principal sum of One Hundred Fifty Million ($150,000,000.00) Dollars on August 15, 1996. Interest Payment Dates: February 15 and August 15, commencing February 15, 1994. Record Dates: February 1 and August 1. Reference is made to the further provisions of this Note set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Trustee under the Indenture referred to on the reverse hereof. 2 IN WITNESS WHEREOF, The Gillette Company has caused this instrument to be signed by its duly authorized officers and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: August 16, 1993 The Gillette Company By /s/ Lloyd B. Swaim ------------------------------- By /s/ Anthony S. Lucas --------------------------------- -2- 3 [TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture. Morgan Guaranty Trust Company of New York, as Trustee By --------------------------------- Authorized Signature [REVERSE OF NOTE] The Gillette Company 4.75% Note due August 15, 1996 This Note is one of a duly authorized issue of debentures, notes, bonds or other evidences of indebtedness of the Issuer (hereinafter called the "Securities") of the series hereinafter specified, all issued or to be issued under and pursuant to an indenture dated as of November 23, 1992 (herein called the "Indenture"), duly executed and delivered by the Issuer to Morgan Guaranty Trust Company of New York, as Trustee (herein called the "Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Issuer and the holders of the Securities. The Securities may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest (if any) at different rates, may be subject to different redemption provisions (if any), may be subject to different sinking, purchase or analogous funds (if any) and may otherwise vary as in the Indenture provided. The Note is one of a series designated as the 4.75% Notes due August 15, 1996 of the Issuer, limited in aggregate principal amount to $150,000,000.00. The Issuer promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest will be payable semiannually on February 15 and August 15 of each year, commencing February 15, 1994, on said principal sum at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, and will accrue at the rate per annum shown above, from the most recent date to which interest has been paid, or if no interest has been paid on these Notes, from August 16, 1993, until payment of said principal sum has been made or duly provided for; provided, that payment of interest may be made at the option of the Issuer by check mailed to the address of the person entitled thereto as such address shall appear on the -3- 4 Security register. Notwithstanding the foregoing, if the date of this Note is after the 1st day of February or August, as the case bay be, and before the immediately following February 15 or August 15, this Note shall bear interest from such February 15 or August 15; provided, that if the Issuer shall default in the payment of interest due on such February 15 or August 15, then this Note shall bear interest from the immediately preceding February 15 or August 15, to which interest has been paid or, if no interest has been paid on these Notes, from August 16, 1993. The interest so payable on any February 15 or August 15 will, subject to certain exceptions provided in the Indenture referred to herein, be paid to the person in whose name this Note is registered at the close of business on the February 1 or August 1, as the case may be, next preceding such February 15 or August 15. Interest will be computed on the basis of a 360-day year of twelve 30-day months. In case an Event of Default with respect to the 4.75% Notes due August 15, 1996, as defined in the Indenture, shall have occurred and be continuing, the principal hereof may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Issuer and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding (as defined in the Indenture) of all series to be affected (voting as one class), evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Securities of each such series; provided, however, that no such supplemental indenture shall (i) extend the final maturity of any Security, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of any interest thereon, or impair or affect the rights of any Holder to institute suit for the payment thereof, without the consent of the Holder of each Security so affected, or (ii) reduce the aforesaid percentage of Securities the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holder of each Security affected. It is also provided in the Indenture that, with respect to certain defaults or Events of Default regarding the Securities of any series, prior to any declaration accelerating the maturity of such securities, the Holders of a majority in aggregate principal amount Outstanding of the Securities of such series may on behalf the Holders of all the Securities of such series waive any such past default or Event of Default and its consequences. The preceding sentence shall not, however, apply to a default in the payment of the principal of or premium, if any, or interest on -4- 5 any of the Securities. Any such consent or waiver by the Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and any Notes which may be issued in exchange or substitution herefor, irrespective of whether or not any notation thereof is made upon this Note or such other Notes. The Indenture contains provisions for defeasance at any time of the entire indebtedness on this Note upon compliance by the Issuer with certain conditions set forth therein, which provisions apply to this Note. No reference herin to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and any premium and interest on this Note in the manner, at the respective times, at the rate and in the coin or currency herein prescribed. The Notes are issuable in registered form without coupons in denominations of $1,000 and any multiple of $1,000 at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, and in the manner and subject to the limitations provided in the Indenture, but without the payment of any service charge except for any tax or other governmental charge imposed in connection therewith, notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations. Upon due presentment for registration of transfer of this Note at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, a new Note or Notes of authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange therefor, subject to the limitations provided in the Indenture, without charge except for any tax or other governmental charge imposed in connection therewith. The Issuer, the Trustee and any authorized agent of the Issuer or the Trustee may deem and treat the registered Holder thereof as the absolute owner of this Note (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon), for the purpose of receiving payment of, or on account of, the principal hereof and premium, if any, and subject to the provisions on the face hereof, interest hereon, and for all other purposes, and neither the Issuer nor the Trustee nor any authorized agent of the Issuer or the Trustee shall be affected by any notice to the contrary. No recourse under or upon any obligation, covenant or agreement of the Issuer in the Indenture or any indenture supplemental thereto or in any Note, or because of the creation -5- 6 of any indebtedness represented thereby, shall be had against any incorporator, any past, present or future stockholder, officer or director, as such, of the Issuer or of any successor corporation, either directly or through the Issuer or any successor corporation, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance hereof and as part of the consideration for the issue hereof. Terms used herein which are defined in the Indenture shall have the respective meanings assigned thereto in the Indenture. ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM-as tenants in common TEN ENT-as tenants by the entireties JT TEN-as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - Custodian -------------------------------------------------- (Cust) (Minor) Under Uniform Gifts to Minors Act ------------------------------------ (State) Additional abbreviations may also be used though not in the above list. -6- 7 ASSIGNMENT FORM To assign this Security, fill in the form below: (I) or (we) assign and transfer this Security to: - -------------------------------------------------------------------------------- (insert assignee's social security or tax I.D. number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (print or type assignee's name, address and zip code) and irrevocable appoint ------------------------------------------------------- agent to transfer this Security on the books of the Issuer. - ---------------- The agent may substitute another to act for him. Dated: Signature: ---------------------------------- ---------------------------- (Sign exactly as your name appears on the other side of this Security) -7- 8 [FACE OF NOTE] Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has and interest herein. Unless and until it is exchanged in whole or in part for Notes in definitive registered form, this Note may not be transferred except as a whole by the Depositary to the nominee of the Depositary or by a nominee of the Depositary to the Depositary or another Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. CUSIP No. 375766AC6 No._____ $150,000,000.00 The Gillette Company 6.25% Note due August 15, 2003 The Gillette Company, a Delaware corporation (the "Issuer"), for value received, hereby promises to pay to Cede & Co. or registered assigns, at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, the principal sum of One Hundred Fifty Million ($150,000,000.00) Dollars on August 15, 2003. Interest Payment Dates: February 15 and August 15, commencing February 15, 1994. Record Dates: February 1 and August 1. Reference is made to the further provisions of this Note set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Trustee under the Indenture referred to on the reverse hereof. 9 IN WITNESS WHEREOF, The Gillette Company has caused this instrument to be signed by its duly authorized officers and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: August 16, 1993 The Gillette Company By /s/ Lloyd B. Swaim ---------------------------------- By /s/ Anthony S. Lucas ---------------------------------- -2- 10 [TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture. Morgan Guaranty Trust Company of New York, as Trustee By --------------------------------- Authorized Signatory [REVERSE OF NOTE] The Gillette Company 6.25% Note due August 15, 2003 This Note is one of a duly authorized issue of debentures, notes, bonds or other evidences of indebtedness of the Issuer (hereinafter called the "Securities") of the series hereinafter specified, all issued or to be issued under and pursuant to an indenture dated as of November 23, 1992 (herein called the "Indenture"), duly executed and delivered by the Issuer to Morgan Guaranty Trust Company of New York, as Trustee (herein called the "Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Issuer and the holders of the Securities. The Securities may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest (if any) at different rates, may be subject to different redemption provisions (if any), may be subject to different sinking, purchase or analogous funds (if any) and may otherwise vary as in the Indenture provided. This Note is one of a series designated as the 6.25% Notes due August 15, 2003 of the Issuer, limited in aggregate principal amount to $150,000,000.00. The Issuer promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest will be payable semiannually on February 15 and August 15 of each year, commencing February 15, 1994, on said principal sum at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, and will accrue at the rate per annum shown above, from the most recent date to which interest has been paid, or if no interest has been paid on these Notes, from August 16, 1993, until payment of said principal sum has been made or duly provided for; provided, that payment of interest may be made at the option of the Issuer by check mailed to the address of the person entitled thereto as such address shall appear on the -3- 11 Security register. Notwithstanding the foregoing, if the date of this Note is after the 1st day of February or August, as the case may be, and before the immediately following February 15 or August 15, this Note shall bear interest from such February 15 or August 15; provided, that if the Issuer shall default in the payment of interest due on such February 15 or August 15, then this Note shall bear interest from the immediately preceding February 15 or August 15, to which interest has been paid or, if no interest has been paid on these Notes, from August 16, 1993. The interest so payable on any February 15 or August 15 will, subject to certain exceptions provided in the Indenture referred to herein, be paid to the person in whose name this Note is registered at the close of business on the February 1 or August 1, as the case may be, next preceding such February 15 or August 15. Interest will be computed on the basis of a 360-day year of twelve 30-day months. In case an Event of Default with respect to the 6.25% Notes due August 15, 2003, as defined in the Indenture, shall have occurred and be continuing, the principal hereof may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Issuer and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding (as defined in the Indenture) of all series to be affected (voting as one class), evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Securities of each such series; provided, however, that no such supplemental indenture shall (i) extend the final maturity of any Security, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of any interest thereon, or impair or affect the rights of any Holder to institute suit for the payment thereof, without the consent of the Holder of each Security so affected, or (ii) reduce the aforesaid percentage of Securities the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holder of each Security affected. It is also provided in the Indenture that, with respect to certain defaults or Events of Default regarding the Securities of any series, prior to any declaration accelerating the maturity of such Securities, the Holders of a majority in aggregate principal Amount Outstanding of the Securities of such series may on behalf of the Holders of all the securities of such series waive any such past default or Event of Default and its consequences. The preceding sentence shall not, however, apply to a default in the payment of the principal of or premium, if any, or interest on -4- 12 any of the Securities. Any such consent or waiver by the Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and any Notes which may be issued in exchange or substitution herefor, irrespective of whether or not any notation thereof is made upon this Note or such other Notes. The Indenture contains provisions for defeasance at any time of the entire indebtedness on this Note upon compliance by the Issuer with certain conditions set forth therein, which provisions apply to this Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and any premium and interest on this Note in the manner, at the respective times, at the rate and in the coin or currency herein prescribed. The Notes are issuable in registered form without coupons in denominations of $1,000 and any multiple of $1,000 at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, and in the manner and subject to the limitations provided in the Indenture, but without the payment of any service charge except for any tax or other governmental charge imposed in connection therewith, notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations. Upon due presentment for registration of transfer of this Note at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, a new Note or Notes of authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange therefor, subject to the limitations provided in the Indenture, without charge except for any tax or other governmental charge imposed in connection therewith. The Issuer, the Trustee and any authorized agent of the Issuer or the Trustee may deem and treat the registered Holder hereof as the absolute owner of this Note (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon), for the purpose of receiving payment of, or on account of, the principal hereof and premium, if any, and subject to the provisions on the face hereof, interest hereon, and for all other purposes, and neither the Issuer nor the Trustee nor any authorized agent of the Issuer or the Trustee shall be affected by any notice to the contrary. No recourse under or upon any obligation, covenant or agreement of the Issuer in the Indenture or any indenture supplemental thereto or in any Note, or because of the creation -5- 13 of any indebtedness represented thereby, shall be had against any incorporator, any past, present or future stockholder, officer or director, as such, of the Issuer or of any successor corporation, either directly or through the Issuer or any successor corporation, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance hereof and as part of the consideration for the issue hereof. Terms used herein which are defined in the Indenture shall have the respective meanings assigned thereto in the Indenture. ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM-as tenants in common TEN ENT-as tenants by the entireties JT TEN-as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - Custodian -------------------------------------------------- (Cust) (Minor) Under Uniform Gifts to Minors Act ------------------------------------- (State) Additional abbreviations may also be used though not in the above list. -6- 14 ASSIGNMENT FORM To assign this Security, fill in the form below: (I) or (we) assign and transfer this Security to: - -------------------------------------------------------------------------------- (insert assignee's social security or tax I.D. number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (print or type assignee's name, address and zip code) and irrevocably appoint -------------------------------------------------------- agent to transfer this Security on the books of the Issuer. The agent may substitute another to act for him. Dated: Signature: ------------------------ ------------------------------------ (Sign exactly as your name appears on the other side of this Security) -7- 15 [FACE OF NOTE] Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. Unless and until it is exchanged in whole or in part for Notes in definitive registered form, this Note may not be transferred except as a whole by the Depositary to the nominee of the Depositary or by a nominee of the Depositary to the Depositary or another Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. CUSIP No.375766 AD 4 Registered No. 3 $150,000,000.00 The Gillette Company 5.75% Note due October 15, 2005 The Gillette Company, a Delaware corporation (the "Issuer"), for value received, hereby promises to pay to , or registered assigns, at the office or agency or the Issuer in the Borough of Manhattan, The City of New York, the principal sum of One Hundred Fifty Million ($150,000,000.00) Dollars on October 15, 2005. Interest Payment Dates: April 15 and October 15, commencing April 15, 1994. Record Dates: April 1 and October 1. Reference is made to the further provisions of this Note set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Trustee under the Indenture referred to on the reverse hereof. 16 IN WITNESS WHEREOF, The Gillette Company has caused this instrument to be signed by its duly authorized officers and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: The Gillette Company By /s/ Lloyd B. Swain ---------------------------- [TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture. Morgan Guaranty Trust Company of New York, as Trustee By ---------------------------- Authorized Signatory -2- 17 [REVERSE OF NOTE] The Gillette Company 5.75% Note due October 15, 2005 This Note is one of a duly authorized issue of debentures, notes, bonds or other evidences of indebtedness of the Issuer (hereinafter called the "Securities") of the series hereinafter specified, all issued or to be issued under and pursuant to an indenture dated as of November 23, 1992 (herein called the "Indenture"), duly executed and delivered by the Issuer to Morgan Guaranty Trust Company of New York, as Trustee (herein called the "Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Issuer and the holders of the Securities. The Securities may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest (if any) at different rates, may be subject to different redemption provisions (if any), may be subject to different sinking, purchase or analogous funds (if any) and may otherwise vary as in the Indenture provided. This note is one of a series designated as the 5.75% Notes due October 15, 2005 of the Issuer, limited in aggregate principal amount to $200,000,000.00. The Issuer promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest will be payable semiannually on April 15 and October 15 of each year, commencing April 15, 1994, on said principal sum at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, and will accrue at the rate per annum shown above, from the most recent date to which interest has been paid, or if no interest has been paid on these Notes, from October 25, 1993, until payment of said principal sum has been made or duly provided for; provided, that payment of interest may be made at the option of the Issuer by check mailed to the address of the person entitled thereto as such address shall appear on the Security register. Notwithstanding the foregoing, if the date of this Note is after the 1st day of April or October, as the case may be, and before the immediately following April 15 or October 15, this Note shall bear interest from such April 15 or October 15; provided, that if the Issuer shall default in the payment of interest due on such April 15 or October 15, then this Note shall bear interest from the immediately preceding April 15 or October 15, to which interest has been paid or, if no interest has been paid on these Notes, from October 25, 1993. The interest so payable on any April 15 or October 15 will, subject to certain exceptions provided in the Indenture referred to herein, be paid to the person in whose name this Note is registered at the close -3- 18 of business on the April 1 or October 1, as the case may be, next preceding such April 15 or October 15. Interest will be computed on the basis of a 360-day year of twelve 30-day months. In case an Event of Default with respect to the 5.75% Notes due October 15, 2005, as defined in the Indenture, shall have occurred and be continuing, the principal hereof may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Issuer and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding (as defined in the Indenture) of all series to be affected (voting as one class), evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Securities of each such series; provided, however, that no such supplemental indenture shall (i) extend the final maturity of any Security, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of any interest thereon, or impair or affect the rights of any Holder to institute suit for the payment thereof, without the consent of the Holder of each Security so affected, or (ii) reduce the aforesaid percentage of Securities the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holder of each Security affected. It is also provided in the Indenture that, with respect to certain defaults or Events of Default regarding the Securities of any series, prior to any declaration accelerating the maturity of such Securities, the Holders of a majority in aggregate principal amount Outstanding of the Securities of such series may on behalf of the Holders of all the Securities of such series waive any such past default or Event of Default and its consequences. The preceding sentence shall not, however, apply to a default in the payment of the principal of or interest on any of the Securities. Any such consent or waiver by the Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and any Notes which may be issued in exchange or substitution herefor, irrespective of whether or not any notation thereof is made upon this Note or such other Notes. The Indenture contains provisions for defeasance at any time of the entire indebtedness on this Note upon compliance by the Issuer with certain conditions set forth therein, which provisions apply to this Note. -4- 19 No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and any premium and interest on this Note in the manner, at the respective times, at the rate and in the coin or currency herein prescribed. The Notes are issuable in registered form without coupons in denominations of $1,000 and any multiple of $1,000 at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, and in the manner and subject to the limitations provided in the Indenture, but without the payment of any service charge except for any tax or other governmental charge imposed in connection therewith, Notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations. Upon due presentment for registration of transfer of this Note at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, a new Note or Notes of authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange therefor, subject to the limitations provided in the Indenture, without charge except for any tax or other governmental charge imposed in connection therewith. The Issuer, the Trustee and any authorized agent of the Issuer or the Trustee may deem and treat the registered Holder hereof as the absolute owner of this Note (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon), for the purpose of receiving payment of, or on account of, the principal hereof and premium, if any, and subject to the provisions on the face hereof, interest hereon, and for all other purposes, and neither the Issuer nor the Trustee nor any authorized agent of the Issuer or the Trustee shall be affected by any notice to the contrary. No recourse under or upon any obligation, covenant or agreement of the Issuer in the Indenture or any indenture supplemental thereto or in any Note, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, any past, present or future stockholder, officer or director, as such, of the Issuer or of any successor corporation, either directly or through the Issuer or any successor corporation, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance hereof and as part of the consideration for the issue hereof. Terms used herein which are defined in the Indenture shall have the respective meanings assigned thereto in the Indenture. -5- 20 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM-as tenants in common TEN ENT-as tenants by the entireties JT TEN-as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - Custodian --------------------------------------- (Cust) (Minor) Under Uniform Gifts to Minors Act ------------------------- (State) Additional abbreviations may also be used though not in the above list. -6- 21 ASSIGNMENT FORM To assign this Security, fill in the form below: (I) or (we) assign and transfer this Security to: - -------------------------------------------------------------------------------- (insert assignee's social security or tax I.D. number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________agent to transfer this Security on the books of the Issuer. The agent may substitute another to act for him. Dated: Signature: ------------------------------- ----------------------------- (Sign exactly as your name appears on the other side of this Security) -7- 22 [FACE OF NOTE] Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. Unless and until it is exchanged in whole or in part for Notes in definitive registered form, this Note may not be transferred except as a whole by the Depositary to the nominee of the Depositary or by a nominee of the Depositary to the Depositary or another Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. CUSIP No.375766 AD 4 Registered No. 8 $50,000,000.00 The Gillette Company 5.75% Note due October 15, 2005 The Gillette Company, a Delaware corporation (the "Issuer"), for value received, hereby promises to pay to , or registered assigns, at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, the principal sum of Fifty Million ($50,000,000.00) dollars on October 15, 2005. Interest Payment Dates: April 15 and October 15, Commencing April 15, 1994. Record Dates: April 1 and October 1. Reference is made to the further provisions of this Note set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Trustee under the Indenture referred to on the reverse hereof. 23 IN WITNESS WHEREOF, The Gillette Company has caused this instrument to be signed by its duly authorized officers and has caused its corporate seal to be affixed hereunto or imprinted hereon. Dated: The Gillette Company By /s/ Lloyd B. Swain ---------------------------------- [TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Securities of the series designated herein referred to in the within-mentioned indenture. Morgan Guaranty Trust Company of New York, as Trustee By ---------------------------------- Authorized Signatory - 2 - 24 [REVERSE OF NOTE] The Gillette Company 5.75% Note due October 15, 2005 This Note is one of a duly authorized issue of debentures, notes, bonds or other evidences of indebtedness of the Issuer (hereinafter called the "Securities") of the series hereinafter specified, all issued or to be issued under and pursuant to an indenture dated as of November 23, 1992 (herein called the "Indenture"), duly executed and delivered by the Issuer to Morgan Guaranty Trust Company of New York, as Trustee (herein called the "Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Issuer and the holders of the Securities. The Securities may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest (if any) at different rates, may be subject to different redemption provisions (if any), may be subject to different sinking, purchase or analogous funds (if any) and may otherwise vary as in the Indenture provided. This Note is one of a series designated as the 5.75% Notes due October 15, 2005 of the Issuer, limited in aggregate principal amount to $200,000,000.00 The Issuer promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest will be payable semiannually on April 15 and October 15 of each year, commencing April 15, 1994, on said principal sum at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, and will accrue at the rate per annum shown above, from the most recent date to which interest has been paid, or if no interest has been paid on these Notes, from October 25, 1993, until payment of said principal sum has been made or duly provided for; provided, that payment of interest may be made at the option of the Issuer by check mailed to the address of the person entitled thereto as such address shall appear on the Security register. Notwithstanding the foregoing, if the date of this Note is after the 1st day of April or October, as the case may be, and before the immediately following April 15 or October 15, this Note shall bear interest from such April 15 or October 15; provided, that if the Issuer shall default in the payment of interest due on such April 15 or October 15, then this Note shall bear interest from the immediately preceding April 15 or October 15, to which interest has been paid or, if no interest has been paid on these Notes, from October 25, 1993. The interest so payable on any April 15 or October 15 will, subject to certain exceptions provided in the Indenture referred to herein, be paid - 3 - 25 to the person in whose name this Note is registered at the close of business on the April 1 or October 1, as the case may be, next preceding such April 15 or October 15. Interest will be computed on the basis of a 360-day year of twelve 30-day months. In case an Event of Default with respect to the 5.75% Notes due October 15, 2005, as defined in the Indenture, shall have occurred and be continuing, the principal hereof may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Issuer and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding (as defined in the Indenture) of all series to be affected (voting as one class), evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Securities of each such series; provided, however, that no such supplemental indenture shall (i) extend the final maturity of any security, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of any interest thereon, or impair or affect the rights of any Holder to institute suit for the payment thereof, without the consent of the Holder of each Security so affected, or (ii) reduce the aforesaid percentage of Securities the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holder of each Security affected. It is also provided in the Indenture that, with respect to certain defaults or Events of Default regarding the Securities of any series, prior to any declaration accelerating the maturity of such Securities, the Holders of a majority in aggregate principal amount Outstanding of the Securities of such series may on behalf of the Holders of all the Securities of such series waive any such past default or Event of Default and its consequences. The preceding sentence shall not, however, apply to a default in the payment of the principal of or interest on any of the Securities. Any such consent or waiver by the Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners binding upon such Holder and upon all future Holders and owners of this Note and any Notes which may be issued in exchange or substitution herefor, irrespective of whether or not any notation thereof is made upon this Note or such other Notes. The Indenture contains provisions for defeasance at any time of the entire indebtedness on this Note upon compliance by the Issuer with certain conditions set forth therein, which provisions apply to this Note. - 4 - 26 No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and any premium and interest on this Note in the manner, at the respective times, at the rate and in the coin or currency herein prescribed. The Notes are issuable in registered form without coupons in denominations of $1,000 and any multiple of $1,000 at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, and in the manner and subject to the limitations provided in the Indenture, but without the payment of any service charge except for any tax or other governmental charge imposed in connection therewith, Notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations. Upon due presentment for registration of transfer of this Note at the office or agency of the Issuer in the Borough of Manhattan, The City of New York, a new Note or Notes of authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange therefor, subject to the limitations provided in the Indenture, without charge except for any tax or other governmental charge imposed in connection therewith. The Issuer, the Trustee and any authorized agent of the Issuer or the Trustee may deem and treat the registered Holder hereof as the absolute owner of this Note (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon), for the purpose of receiving payment of, or on account of, the principal hereof and premium, if any, and subject to the provisions on the face hereof, interest hereon, and for all other purposes, and neither the Issuer nor the Trustee nor any authorized agent of the Issuer or the Trustee shall be affected by any notice to the contrary. No recourse under or upon any obligation, covenant or agreement of the Issuer in the Indenture or any indenture supplemental thereto or in any Note, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, any past, present or future stockholder, officer or director, as such, of the Issuer or of any successor corporation, either directly or through the Issuer or any successor corporation, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance hereof and as part of the consideration for the issue hereof. Terms used herein which are defined in the Indenture shall have the respective meanings assigned thereto in the Indenture. - 5 - 27 ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM-as tenants in common TEN ENT-as tenants by the entireties JT TEN-as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - Custodian ------------------------------------------- (Cust) (Minor) Under Uniform Gifts to Minors Act------------------------------ (State) Additional abbreviation may also be used though not in the above list. - 6 - 28 ASSIGNMENT FORM To assign this Security, fill in the form below: (I) or (we) assign and transfer this Security to: - ------------------------------------------------------------------------------ (insert assignee's social security or tax I.D. number) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ (print or type assignee's name, address and zip code) and irrevocably appoint _______________________________________ agent to transfer this Security on the books of the Issuer. The agent may substitute another to act for him. Dated: Signature: ------------------ ---------------------------- (Sign exactly as your name appears on the other side of this Security) - 7 - EX-10.A 3 1971 STOCK OPTION PLAN 1 Exhibit 10(a) SUBJECT TO THE APPROVAL OF THE STOCKHOLDERS AT THEIR ANNUAL MEETING ON APRIL 21, 1994 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 nonqualified 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 100,000 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, effective upon shareholder approval at the 1992 Annual Meeting of Shareholders of the Company , 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. 1 2 4. LIMITATIONS. No option shall be granted under the Plan and no sale shall be made under Section 8 after April 15, 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 appropriate to accomplish the purposes of the Plan: (a) Option Price. The option price under each option shall be determined by the Committee and shall be not less than l00 percent of the fair market value per share at the time the option is granted. If the Committee so directs, an option may provide that if an employee Participant who was an employee participant at the time of the grant of the option and who is not an officer or director of the Company at the time of any exercise of the option, he shall not be required to make payment in cash or equivalent at that time for the shares acquired on such exercise, but may at his election pay the purchase price for such shares by making a payment in cash or equivalent of not less than five percent of such price and entering into an agreement, in a form prescribed by the Committee, providing for payment of the balance of such price, with interest at a specified rate, but not less than four percent, over a period not to exceed five years and containing such other provisions as the Committee in its discretion determines. In addition, if the Committee so directs, an option may provide for a guarantee by the Company 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. 2 3 (b) Period of Options. The period of an option shall not exceed ten years from the date of grant. (c) Exercise of Option. (l) 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 l954, as amended) any incentive stock option (as that term is defined in said Code) which was granted to the Participant before the granting of this option to purchase stock in his employer corporation (whether The Gillette Company or a parent or subsidiary corporation thereof), or in a corporation which at the time of the granting of this option is a parent or subsidiary corporation of the employer corporation, or in a predecessor corporation of any such corporation. Each incentive stock option within the meaning of the Internal Revenue Code granted after December 31, 1986 shall not be subject to the above provision. (4) Payment for Delivery of Shares. Upon exercise of any option, payment in full in the form of cash or a certified bank, or cashier's check or, with the approval of the Secretary of the Committee, in whole or part Common Stock of the Company at fair market value, which for this purpose shall be the closing price on the business day preceding the date of exercise, shall be made at the time of such exercise for all shares then being purchased thereunder, except in the case of an exercise to which the provisions of the second sentence of subsection (a) above are applicable. 3 4 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 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; 4 5 (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. 5 6 (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. 6 7 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. 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 100,000 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. 7 8 9. CHANGES IN STOCK. In the event of a stock dividend, split-up or combinations of shares, recapitalization or merger in which the Company is the surviving corporation, or other similar capital change, the number and kind of shares of stock or securities of the Company to be subject to the Plan and to options then outstanding or to be granted thereunder, the maximum number of shares or securities which may be issued or sold under the Plan, the maximum annual grant for each participant, the automatic annual grant for each non-employee director, the option price and other relevant provisions shall be appropriately adjusted by the Board of Directors of the Company, whose determination shall be binding on all persons. In the event of a consolidation or a merger in which the Company is not the surviving corporation or which results in the acquisition of substantially all the Company's outstanding stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of complete liquidation of the Company, all outstanding options shall thereupon terminate, provided that (i) at least twenty days prior to the effective date of any such consolidation or merger, the Board of Directors shall with respect to employee participants either (a) 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. l0. 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. ll. THE COMMITTEE MAY AT ANY TIME DISCONTINUE GRANTING OPTIONS UNDER THE PLAN. The Board of Directors of the Company or the Personnel Committee of the Board of Directors if and to the extent authorized, may at any time or times amend the Plan or amend any outstanding option or options or arrangements established under Section 8 for the purpose of satisfying the requirements of any changes in applicable laws or regulations or for any other purpose which may at the time be permitted by law, provided that (except to the extent required or permitted under Section 9 and, with respect to clauses (b) and (f) below, except to the extent required or permitted under Section 7) no such amendment shall, without the approval of the stockholders of the Company, (a) increase the maximum number of shares available under the Plan or the maximum annual grant per participant other than as permitted under Section 9, (b) reduce the minimum option price of options thereafter to be granted below the price provided for in Section 6(a), except that the Plan may be amended to provide that the minimum option price of non-qualified stock options thereafter to be granted to employees may be not less than 95% of the fair market value at the date of grant if the Board determines that such amendment is necessary for tax reasons to carry out the objectives of the Plan, (c) reduce the price at which shares of common stock of the Company may be sold under Section 8 below the price provided for in Section 8, (d) reduce the option price of outstanding options, (e) extend the time within which options may be granted, (f) extend the period of an outstanding option beyond ten years from the date of grant, (g) amend the provisions of Section 12 with respect to the terms and conditions of options to non-employee directors and further provided no such amendment shall adversely affect the rights of any Participant (without his consent) under any option theretofore granted or other contractual arrangements theretofore entered into or after a Change in Control deprive any Participant of any right or benefit which became operative in the event of a Change in Control. Notwithstanding the above, in no event may the provisions of Section 12 be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. 8 9 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 from the date membership on the Board of Directors ceases. If a non-employee director dies at the time when the non-employee director is entitled to exercise an option, then at any time or times within one year after that non-employee director's death that non-employee director's option may be exercised in accordance with the provisions of Section 6 Paragraph (g) of the Plan. In no event shall any option be exercised after the expiration of the option period. (d) Payment for Delivery of Shares. Payment for the shares shall be made in accordance with the provisions of Section 6 Paragraph c Subparagraph 4 of this Plan. (e) Nontransferability of Options. No option may be transferred by a non-employee director otherwise than by will or by the laws of descent and distribution, and during the non-employee director's lifetime the option may be exercised only by the non-employee director. 9 EX-10.B 4 STOCK EQUIVALENT UNIT PLAN 1 EXHIBIT 10(b) SUBJECT TO THE APPROVAL OF THE STOCKHOLDERS AT THEIR ANNUAL MEETING ON APRIL 21, 1994 THE GILLETTE COMPANY Stock Equivalent Unit Plan, as amended 1. PURPOSE. The purpose of the Stock Equivalent Unit Plan is to provide an incentive and reward to key salaried employees of The Gillette Company and its subsidiaries who can make substantial contributions to the success of the business. To that end, the Plan provides an opportunity for such key salaried employees to participate in that success through awards of stock equivalent units, subject to the conditions set forth in the Plan. 2. DEFINITIONS. Unless the context otherwise requires, the following words have the following meanings for purposes of the Plan. 2.1 Basic stock unit - A stock equivalent unit awarded to a participant pursuant to Section 4.2. 2.2 Committee - The Personnel Committee established by the Board of Directors of the Company. 2.3 Company - The Gillette Company, a Delaware corporation. 2.4 Disability - Mental or physical disability, either occupational or non-occupational in cause, which, in the opinion of the Committee, on the basis of medical evidence satisfactory to it, prevents the employee from engaging in any occupation or employment for wage or profit and is likely to be permanent. 2.5 Dividend equivalent unit - A stock equivalent unit which is credited to a participant's account as the result of conversion of amounts credited to the account in respect of dividends, as provided in Section 5.2. 2.6 Employee - Any person, whether or not an officer or director of the Company or any subsidiary, who is regularly employed by the Company or a subsidiary on a salaried full-time basis, or who, under conditions approved by the Committee, is regularly employed by the Company or subsidiary on a salaried part-time basis. 2.7.1 Maturity date (with respect to awards made on or before 12/31/83) - When used with respect to an award, March l5 of the tenth calendar year following the calendar year in which the award was made. 1 2 2.7.2 Maturity date (with respect to awards made after 12/31/83) - When used with respect to an award, March 15 of the seventh calendar year following the calendar year in which the award was made. 2.8 Normal retirement date - In the case of any participant, the date prescribed under the Retirement plan maintained by his employer as his normal retirement date (or, if no such plan is maintained by his employer, the normal retirement date prescribed under The Gillette Company Retirement Plan). 2.9 Plan - The Stock Equivalent Unit Plan set forth herein, as from time to time amended. 2.10 Share - A share of the Company's common stock as the same is constituted from time to time. 2.11 Stock equivalent unit - A measure of value equal in amount to the value of one share at the time of reference. 2.12 Subsidiary - Any corporation in which the Company owns, directly or indirectly, stock possessing fifty percent or more of the total combined voting power of all classes of stock or over which the company has effective operating control. 2.13 (A) Total credits - When used with respect to an individual account, the sum of (a) the excess, if any, of (i) the value of that number of shares which is equal to the number of basic stock units credited to the account in respect of awards in designated years, after adjustment for any prior payments, over (ii) the value on the date of the respective awards of that number of shares which corresponds, after adjustment for stock splits, stock dividends and similar capital changes, to the number of basic stock units referred to in (i), except that for awards made after 12/31/78, the amount of the excess cannot exceed an amount equal to the value on the date of the respective awards of that number of shares which corresponds, after adjustment for stock splits, stock dividends and similar capital changes, to the number of basic stock units referred to in (i), plus (b) the value of that number of shares which is equal to the number of dividend equivalent units then credited to the account in respect of such awards plus (c) any amounts then credited to the account based on dividend payments attributable to such awards which have not been converted into dividend equivalent units. 2 3 2.14 Value - When used with respect to a share (a) On the date of an award of basic stock units, the average of the reported high and low sales prices of the shares as quoted on a composite basis; (b) For purposes of converting dividend credits into dividend equivalent units, the average of the reported closing prices of the shares as quoted on a composite basis on the last business day of the months of December, January, and February immediately preceding the March l5 on which such conversion occurs; (c) For purposes of determining the amount payable in respect of an interest which becomes vested or for purposes of determining the amount payable, in cases not covered by (d) or (e) below, in respect of an interest which previously became vested, the average of the reported closing prices of the shares as quoted on a composite basis on the last business day of the twelve calendar months immediately preceding the March l5 on which such vesting occurs or the month in which such payment becomes payable; (d) For purposes of determining the amount payable to a terminating participant or to the estate of a deceased participant, the average of the reported closing prices of the shares as quoted on a composite basis on the last business day of the twelve calendar months immediately preceding the month in which the participant's employment terminates or the participant dies or the twelve consecutive calendar months including and ending with that month if such termination or death occurs on or after the last business day of that month; (e) For purposes of determining the amount payable with respect to an award on or after the maturity date thereof, the average of the reported closing prices of the shares as quoted on a composite basis on the last business day of the twelve calendar months immediately preceding such maturity date; 2.15 Unapproved Change in Control shall mean the happening of any one of the following events, which, in each case, was not recommended to the shareholders by a vote of at least two-thirds of the non-employee directors of the Company then still in office who were in office two years prior to such event: 3 4 (a) Any person within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "1934 Act"), other than the Company or any of its subsidiaries, has become the beneficial owner, within the meaning of Rule 13d-3 under the 1934 Act, of 20% or more of the combined voting securities; (b) A tender offer or exchange offer, other than an offer by the Company, pursuant to which shares of the Company's common stock have been purchased; (c) The stockholders or directors of the Company have approved an agreement to merge or consolidate with or into another corporation and the Company is not the surviving corporation or an agreement to sell or otherwise dispose of all or substantially all of the Company's assets (including a plan of liquidation); or (d) During any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors cease for any reason to constitute at least a majority thereof. For this purpose, new directors who were elected, or nominated (or approved for nomination in the case of nomination by a Committee of the Board) for election by shareholders of the Company, by at least two thirds of the directors then still in office who were, or are deemed to have been directors at the beginning of the period, shall be deemed to have been directors at the beginning of the period. 2.16 Approved Change in Control shall mean the happening of any one of the following events, which, in each case was recommended to the shareholders by a vote of at least two-thirds of the non-employee directors of the Company then still in office who were in office two years prior to such event: (a) Any person within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "1934 Act"), other than the Company or any of its subsidiaries, has become the beneficial owner, within the meaning of Rule 13d-3 under the 1934 Act, of 20% or more of the combined voting securities; 4 5 (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. 3. ADMINISTRATION. 3.1 The Plan shall be administered by the Personnel Committee heretofore established by the Board of Directors of the Company no member of which shall be an employee of the Company or of any subsidiary. The Committee shall have authority, not inconsistently with the Plan, (a) to determine which of the eligible Employees of the Company and its subsidiaries shall be awarded basic stock units; (b) to determine the times when basic stock units shall be awarded and the number of basic stock units to be awarded to each participant; (c) to determine the time or times when amounts may become payable with respect to stock equivalent units within the limits provided in the Plan; (d) to prescribe the form of the instruments evidencing any basic stock units awarded under the Plan (which forms need not be identical); (e) to adopt, amend and rescind rules and regulations for the administration of the Plan and the stock equivalent units and for its own acts and proceedings; and (f) to decide all questions and connection settle all controversies and disputes which may arise in with the Plan. All decisions, determinations and interpretations of the Committee shall be binding on all parties concerned. 3.2 The maximum number of basic stock units which may be awarded under the Plan is 20,700,000 subject to adjustment as provided under Section 8.3. No basic stock units may be awarded under the Plan after April 15, 1999. 5 6 4. PARTICIPATION. 4.1 The participants in the Plan shall be such key salaried Employees as may be selected from time to time by the Committee. Directors who are not employees shall not be eligible. The Employees to whom basic stock units are awarded at any time may include Employees to whom basic stock units were previously granted under the Plan. 4.2 Awards of basic stock units shall be made from time to time by the Committee in its discretion. In addition, with respect to any award, the Committee shall have discretion to provide that all or any portion of that award shall be contingent on achievement by the participant or by any unit or units of the Company of any performance goal or goals over any period or periods of time ending before March 15 of the third year following the date of the award. Notwithstanding the above, the Committee may not award more than 50,000 basic stock units to any participant in any calendar year subject to adjustment as provided under Section 8.3. 5. INDIVIDUAL ACCOUNTS. 5.1 The Committee shall maintain a separate account for each award made under the Plan. Each such account shall show the information necessary to compute the participant's total credits in respect of each award, including the number of basic stock units awarded to the participant, the value of an equal number of shares on the date of the award, the amount credited to the account in respect of dividends, as provided below, the number of dividend equivalent units credited to the account and details as to any payments under the Plan which are deducted from the account. 6 7 5.2 Whenever the Company pays a dividend (other than a stock dividend) upon its outstanding common stock, there shall be credited to the separate account for each award a dollar amount equal to the value of such dividend per share multiplied by the number of stock equivalent units credited to the account on the record date for such dividend. However, no such credits shall be made with respect to any award after the maturity date thereof or after the date on which the participant ceases to be an employee. As of March 15 in each year the aggregate of the amounts so credited to the account since the prior March 15 shall be converted into a number of dividend equivalent units by dividing such aggregate by the value of a share. 5.3 In the event of a dividend payable in shares, or in the event of a stock split or combination of shares, the Committee shall make a corresponding change in the number of basic stock units and dividend equivalent units then credited to the account. 5.4 On the maturity date of an award, the total amount payable with respect to such award shall become a fixed amount which will not change thereafter except that the Committee may provide for the payment of interest beginning at maturity on amounts whose payment is deferred to a date thereafter. Such fixed amount shall be the total credits in respect of such award on such maturity date. 5.5 Whenever a payment is made under the Plan to a participant with respect to any award, there shall be a corresponding reduction in the number of stock equivalent units and other amounts credited to the participant's account in respect of such award, or in the case of a payment after maturity date or after the date on which the participant ceases to be an employee, in the amount then credited to the account. A similar reduction shall be made if a participant forfeits any portion of his interest in any awards. 6. PAYMENT. 6.1 Payments to a participant under the Plan may be made from time to time when segments of his total credits in respect of an award become vested, or payment may be deferred, all in accordance with rules established from time to time by the Committee. 7 8 6.2.1 With respect to awards made on or before 12/31/83 fifteen percent of the total credits in respect of an award shall become vested on March 15 of the fourth calendar year following the calendar year of the award, an additional fifteen percent thereof (or, in cases of vesting after one or more prior payments under Section 6.3, the applicable vesting percentage thereof as provided below) shall become vested on March 15 of the fifth, sixth, seventh, eighth, and ninth calendar years following the calendar year of the award, and any unvested balance thereof shall become vested on the maturity date of such award. 6.2.2 With respect to awards made after 12/31/83 twenty percent of the total credits in respect of an award shall become vested on March 15 of the third calendar year following the calendar year of the award, an additional twenty percent thereof (or, in cases of vesting after one or more prior payments under Section 6.3, the applicable vesting percentage thereof as provided below) shall become vested on March 15 of the fourth, fifth, and sixth calendar years following the calendar year of the award, and any unvested balance thereof shall become vested on the maturity date of such award. 6.2.3 Such vesting as described above shall occur only if the participant is an employee on the date of vesting and has been an employee continuously since the date of the award. The total credits in respect of all awards not at that time subject to any contingency pursuant to Section 4.2 shall become fully vested if the participant, while an employee, dies, incurs a disability, retires prior to his normal retirement date with the consent of the Company and under conditions approved by the Committee, or retires on or after his normal retirement date, and the total amount payable with respect thereto shall become a fixed amount which will not change thereafter, except that the Committee may provide for the payment of interest on amounts whose payment is deferred to a date thereafter. If the employment of a participant terminates as a result of the merger, sale or other absorption or termination of operations of a subsidiary or a division, all credits in respect of any such participant's award not at that time subject to any contingency pursuant to Section 4.2 may become vested if the Committee, in its sole discretion, determines such action to be in the best interests of the Company, and the total amount payable with respect thereto shall become a fixed amount which will not change thereafter, except that the Committee may provide for the payment of interest on amounts whose payment is deferred to a date thereafter. In connection with the determination of any participant's vested rights under this paragraph 6.2.3, the Committee may retroactively remove any contingency in effect pursuant to Section 4.2. Notwithstanding the above, in the event of an Unapproved or Approved Change in Control, if a participant retires prior to his normal retirement date the consent of the Company shall not be required and all credits and all contingencies with respect to the awards of such participant shall become fully vested and immediately payable. 8 9 6.2.3.l In the event of an Unapproved Change in Control, all contingencies then in effect pursuant to Section 4.2 shall be automatically removed and the total credits in respect of all awards of a participant shall become fully vested and payable (1) upon termination of the employment of a participant for any reason within one year following the Unapproved Change in control, or (2) upon termination of the employment of a participant at any time after an Unapproved Change in Control if such termination (a) is initiated by the Company, except that termination for willful misconduct shall not be treated as a termination under this subparagraph (2), or (b) is initiated by the participant for Good Reason. In the event of an Approved Change in Control, all contingencies then in effect pursuant to Section 4.2 shall be automatically removed and the total credits in respect of all awards of a participant shall become fully vested and payable upon termination of the employment of a participant after an Approved Change in Control if such termination is (i) initiated by the Company, except that termination for willful misconduct shall not be treated as a termination under this sentence, or (ii) initiated by the participant for Good Reason. Good Reason, as used herein, shall mean any of the following: Assignment of any duties inconsistent with the position, duties, responsibilities and status of the employee or reduction or adverse change in the nature or status of responsibilities of the employee from those which existed on the date immediately preceding an Approved or Unapproved Change in Control; any reduction by the Company or any successor entity in the employees' compensation including benefits, other than such reduction required by law or required to maintain the tax-qualified status of any benefit Plan, from those which existed on the date immediately preceding an Approved or Unapproved Change in Control; or the Company or any successor entity requiring the employee to be based at a location in excess of fifty miles from the location where the employee is based on the date immediately preceding an Approved or Unapproved Change in Control. 9 10 6.2.3.2 Notwithstanding any other provision of this Plan, (a) upon an employer-initiated termination of employment of a participant pursuant to the Restructuring Plan approved by the Board of Directors of the Company at its meeting on December 18, 1986, the Reorganization Plan approved by the Board of Directors of the Company at its meeting on December 14, 1989 or the 1994 Realignment Plan and Parker Integration Plan, or (b) upon the sale or other disposition of the unit, division or subsidiary in which a participant is employed pursuant to the Restructuring Plan approved by the Board of Directors of the Company at its meeting on December 18, 1986, or the Reorganization Plan approved by the Board of Directors of the Company at its meeting on December 14, 1989, which sale or other disposition results in the participant no longer being employed by the Company or any of its subsidiaries, all contingencies then in effect pursuant to Section 4.2 shall be automatically removed except with respect to contingencies which expire on February 19, 1987. Further, in such event, the total credits in respect of all awards of a participant for which no contingencies remain in effect shall become fully vested and the amount of such awards shall be fixed and payable. With respect to awards or segments of awards which become vested under this subparagraph or any other award or segment thereof which becomes payable by reason of the participant's termination of employment, the participant may elect to receive such awards upon termination of employment or may, prior to the date participant's employment with the Company or any subsidiary terminates, elect to defer such award in accordance with the provisions of Paragraph 6.2.3 and rules established from time to time by the Committee. Notwithstanding the above, the removal of contingencies and the granting of vesting and deferral rights provided for in this Paragraph 6.2.3.2 shall serve as partial consideration for a settlement of all claims and disputes which the participant may have against the Company, its subsidiaries, employees and agents and shall be subject to the execution by the participant of a release and settlement agreement in a form to be prescribed by the Committee. 6.2.4 In order to make proper adjustment for any previous payments under Section 6.3, the applicable vesting percentage to be used in computing vested segments under the foregoing provisions of this Section 6.2 and in computing the amount of a payment under Section 6.3 or Section 6.4 shall be determined as follows 10 11 (a) In computing such vested segment or the amount or a payment under section 6.3 for awards made prior to 12/31/83, the applicable vesting percentage to be applied to the total credits in respect of a particular award shall be equal in value to a fraction whose numerator is fifteen (or ten in the case of the final vested installment) and whose denominator is (i) 100 minus (ii) fifteen multiplied by the number of vested segments previously paid to the participant under Section 6.3. Payment of each vested segment shall be considered a separate payment. (b) In the case of a payment under section 6.4 for awards made prior to 12/31/83, the applicable vesting percentage to be applied to the total credits in respect of a particular award shall be equal in value to a fraction whose numerator is (i) fifteen multiplied by the number of segments of the award which have become vested in accordance with the foregoing provisions prior to the date on which the participant ceases to be an employee (but not more than 100) minus (ii) fifteen multiplied by the number of vested segments previously paid to the participant under Section 6.3, and whose denominator is 100 minus (ii) above. (c) In computing such vested segment or the amount of a payment under section 6.3 for awards made after 12/31/83, the applicable vesting percentage to be applied to the total credits in respect of a particular award shall be equal in value to a fraction whose numerator is twenty and whose denominator is (i) 100 minus (ii) twenty multiplied by the number of vested segments previously paid to the participant under Section 6.3. Payment of each vested segment shall be considered a separate payment. (d) In the case of a payment under section 6.4 for awards made after 12/31/83, the applicable vesting percentage to be applied to the total credits in respect of a particular award shall be equal in value to a fraction whose numerator is (i) twenty multiplied by the number of segments of the award which have become vested in accordance with the foregoing provisions prior to the date on which the participant ceases to be an employee (but not more than 100) minus (ii) twenty multiplied by the number of vested segments previously paid to the participant under Section 6.3, and whose denominator is 100 minus (ii) above. 11 12 6.3 Prior to any date on which a participant is to acquire a vested interest or additional vested interest in the total credits in respect of an award, the participant shall make an election, at the time and in a manner specified by the Committee, as to the time when payment is to be made of the segment or segments of such total credits which may become vested on such date. The participant may elect (a) to receive payment within a reasonable time after such date or (b) to defer payment in accordance with rules established from time to time by the Committee. In the event of an Approved or Unapproved Change in Control, the participant may, upon any date, revoke his election to defer receipt of any or all interests in respect of an award and the Company shall make payment to the participant of the value of any vested interest or interests, within a reasonable time after such revocation and with respect to interests which have not yet vested as of the date of such revocation, within a reasonable time after such interests become vested. If no such election is made, payment shall be made within a reasonable time after the date on which such vested interest or additional vested interest is acquired. The amount of any payment shall be computed by multiplying the total credits in respect of the award at the time of payment, or in the case of revocation of an election to defer, at the time of such revocation, by the applicable vesting percentage. The Committee may provide for the payment of interest beginning upon maturity for amounts deferred beyond maturity. 6.4 If a participant ceases to be an employee for any reason not specified in Section 6.2, his vested interest in respect of each award shall thereupon become a fixed amount which will not change thereafter. Such fixed amounts shall be determined by multiplying the total credits in respect of each award on the date of termination of employment by the applicable vesting percentage. The participant shall thereupon forfeit his interest in any amounts then credited to his account to the extent his interest has not become vested. Payment of vested interests shall be made in accordance with rules established from time to time by the Committee. 12 13 6.5 If a participant dies prior to termination of his employment, an amount equal to his total credits in respect of all awards not subject to any contingency pursuant to Section 4.2 shall be paid to his executor or administrator or as otherwise provided by law valued as of the date of death. 6.6 All payments will be made in cash and will be subject to any required tax withholdings. 7. AMENDMENT AND TERMINATION. 7.1 The Board of Directors of the Company or the Personnel Committee of the Board of Directors if and to the extent authorized may at any time amend the Plan for the purposes of satisfying the requirements of any changes in applicable laws or regulations or for any other purpose which may be permitted by law, except that neither the Board of Directors or the Personnel Committee of the Board of Directors may, without the approval of the stockholders of the Company, increase the maximum number of basic stock units that may be awarded under the Plan or the maximum annual grant for each participant (subject to Section 8.3) or increase the time within which basic stock units may be awarded, as provided in Section 3.2, or extend the maturity date of an award beyond March 15 of the tenth calendar year following the calendar year in which the award was made. Notwithstanding the above, in the event of an Approved or Unapproved Change in Control, no amendment to the Plan which provides for prospective Plan benefits and other terms and conditions any less favorable to Plan participants than those which existed prior to the amendment shall be effective unless it provides that all contingencies which are then in existence be removed and all awards which are unvested prior to such amendment shall become immediately vested and payable. 7.2 The Board of Directors of the Company may terminate the Plan at any time except that after an Approved or Unapproved Change in Control such Plan may not be terminated without providing that all contingencies then in existence shall be removed and all unvested awards shall become immediately vested and payable. 7.3 No such amendment or termination shall adversely affect the rights of any participant (without his consent) under any award previously made or after an Approved Change in Control deprive a participant of a benefit or right which became operative upon an Approved Change in Control or after an Unapproved Change in Control deprive a participant of a benefit or right which became operative upon an Unapproved Change in Control. 13 14 8. MISCELLANEOUS. 8.1 The interest under the Plan of any participant, his heirs or legatees shall not be alienable by the participant, his heirs or legatees by assignment or any other method and shall not be subject to being taken by his creditors by any process whatsoever. 8.2 The Plan shall not be deemed to give any participant or employee the right to be retained in the employ of the Company or any subsidiary nor shall the Plan interfere with the right of the Company or any subsidiary to discharge any employee at any time. 8.3 In the event of a stock dividend, split-up or combinations of shares, recapitalization 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 used as a basis for granting awards under the Plan, the units then outstanding or to be granted thereunder, the maximum number of basic stock units which may be granted, the maximum annual grant for each participant, the unit value and other relevant provisions shall be appropriately adjusted by the Board of Directors of the Company, whose determination shall be binding on all persons. In the event of a consolidation or a merger in which the Company is not the surviving corporation or complete liquidation of the Company, all outstanding basic stock units and dividend equivalent units shall thereafter accrue no further value, provided that at least twenty days prior to the effective date of any such consolidation or merger, the Board of Directors shall either (a) make all outstanding basic units and dividend equivalent units immediately vested and payable, or (b) arrange to have the surviving corporation grant replacement units to the participants. 14 EX-10.C 5 INCENTIVE BONUS PLAN 1 Exhibit 10(c) THE GILLETTE COMPANY -------------------- INCENTIVE BONUS PLAN -------------------- Amended As of March 17, 1994 ---------------------------- I. Purpose ------- The purpose of this Incentive Bonus Plan is to foster continuing long-term growth in earnings of The Gillette Company by rewarding key management for outstanding performance in the accomplishment of assigned goals under the Company's Management by Objectives Program through awards of cash bonuses. II. Definitions ----------- PROFIT FROM OPERATIONS - The amount reported as profit from operations in the annual financial statements of the Company after adjustments to exclude the results of operations of businesses acquired or disposed of during the incentive year and any other adjustment, all as determined by the Committee to be necessary or appropriate to insure comparability between profit from operations figures from year to year for the purposes of this Plan. BASE SALARY EARNINGS - The actual base salary, exclusive of any bonus awards made under this Plan and any other payments, earned by the participant during the fiscal year of his or her employing unit ending during the incentive year of the Plan as reported on the Company's records. BASE SALARY - The eligible employee's annual base salary rate of earnings in effect as of December 31 of any Incentive Year. BONUS AWARD - An amount awarded to a participant as determined pursuant to Paragraph V. BONUS POOL - An amount earned in any incentive year as determined pursuant to Paragraph III, from which bonus awards may be paid. CHAIRMAN - The Chairman of the Board of Directors of the Company. COMMITTEE - The Personnel Committee established by the Board of Directors of the Company. COMPANY - The Gillette Company, a Delaware Corporation. INCENTIVE YEAR - A fiscal year of the Company in which the Plan is in effect. MANAGEMENT REPORTING FORM - The annual written review of individual performance and assignment of goals conducted under the Company's Management by Objectives Program. ELIGIBLE POSITION - For each incentive year, a key management position which the Chairman and President determine to have a significant impact on the attainment of the Company's objectives. Restated to Reflect Plan in Effect: March 17, 1994 -1- 2 ELIGIBLE EMPLOYEE - For each incentive year, a person whether or not an officer or director of the Company or any subsidiary, who is regularly employed by the Company or a subsidiary on a full-time basis, or who, under conditions approved by the Committee, is regularly employed by the Company or a subsidiary on a part-time basis, who (a) has been notified of his or her eligibility, (b) has been assigned goals under the Company's Management by Objectives Program to be accomplished during the incentive year, (c) holds an eligible position for all or a substantial part of the incentive year except in the case of a Partial Plan Year as provided under Section XIII of the Plan, or is transferred during the incentive year from an eligible position to an ineligible position for career developmental purposes as determined by the Company, and (d) is an employee on the date of the granting of awards (or is an employee whose employment is terminated by death, retirement or disability or as a direct result of action initiated by the Company pursuant to the Restructuring Plan approved by the Board of Directors of the Company at its meeting on December 18, 1986 or the Reorganization Plan approved by the Board of Directors at its meeting on December 14, 1989 or after an approved Change in Control or for any reason after an Unapproved Change in Control). PARTICIPANT - An eligible employee who has been granted an award under the Plan. PLAN - The Incentive Bonus Plan as set forth herein, as from time to time amended. PRESIDENT - The President of the Company. PROJECTED BONUS POOL - Projected bonus pool in any given year shall mean the amount of the bonus pool which would be earned assuming the Growth Goals for that year are achieved. RETIREMENT ELIGIBILITY DATE - The earliest date upon which a participant becomes eligible to retire under the terms of The Gillette Company Retirement Plan or, with respect to individuals not participating in that Plan, the earliest date upon which that individual could have become eligible to retire under the terms of The Gillette Company Retirement Plan had he or she been a participant in that Plan. SAVINGS PLAN EQUIVALENCY - An amount computed by multiplying an employee's rate of contributions (up to a maximum of 5%) under The Gillette Company Employees' Savings Plan or one half of the employee's rate of savings under The Gillette Company Ltd./Ltee Retirement Income Savings Plan, as applicable, as of the January l immediately preceding the date of an award, by the amount of that award that is deferred under Paragraph VI (a) and (c) of this Incentive Bonus Plan. SUBSIDIARY - Any corporation (1) in which the Company owns, directly or indirectly, stock possessing 50 percent or more of the total combined voting power of all classes of stock, (2) over which the Company has effective operating control, or (3) in which the Company has a material interest. SALES GROWTH - The amount reported as growth in net sales in the annual financial statements of the Company after adjustments as determined by the Committee to be necessary or appropriate to insure comparability between net sales from year to year for the purposes of the Plan. Restated to Reflect Plan in Effect: March 17, 1994 -2- 3 RETURN ON ASSETS - Return on Assets shall be defined as hereinafter determined by the Committee from time to time in its discretion. GROWTH GOALS - Growth Goals shall mean the specific percentage of increase in Profit from Operations, Sales Growth and Return on Assets determined by the Committee for any given year which if achieved would result in a bonus pool being earned. III. Bonus Pool and Reserve ---------------------- If Growth Goals for any fiscal year the Plan is in effect are met, a bonus pool shall be earned. Such Growth Goals shall be determined by the Committee as soon as is practicable after the commencement of each incentive year. With respect to any incentive year after l990, the Committee may, within its sole discretion, establish a contingency reserve which, in any given incentive year shall not exceed thirty five percent (35%) of the amount of the projected bonus pool for that incentive year, from which contingency reserve bonus awards may be made to recognize outstanding performance in that incentive year should a bonus pool not otherwise be earned. In addition, with respect to any plan year after 1990 the Committee may, within its sole discretion, elect to carry forward up to fifteen percent (15%) of the bonus pool earned in that year to any one or more of the next ensuing three years with the Committee having sole discretion as to whether to distribute all or a portion of such carried forward amounts in any one or more of those three years. IV. Eligibility ----------- The Chairman and the President shall make the selection of eligible positions and eligible employees, except with respect to themselves, for each incentive year. Selection as an eligible employee in any incentive year shall not bind the Company to select the individual in any other incentive year. Selection of any individual in any incentive year shall not bind the Company to select any other individual holding the same position in the same or any other incentive year. V. Amount of Bonus Award --------------------- As soon as is practicable after the end of the incentive year, the amount, if any, of the award of each eligible employee shall be determined by the Chairman and the President, except with respect to themselves, after evaluating the eligible employee's performance in relation to his or her assigned goals as contained in his or her Management Reporting Form relating to the incentive year. Bonus awards shall be determined as a percentage of the eligible employee's base salary earnings, however, in no event shall the percentage be less than 5 percent nor more than 70 percent. Proposed awards to officers of the Company and other senior management employees whose compensation is regularly reviewed by the Committee shall be subject to review and approval of the Committee. In addition, in connection with any bonus award the Committee shall have discretion to make an award or awards under this Corporation's Stock Equivalent Unit Plan and to provide that all or any portion of any such award shall be contingent on achievement by the participant or by any unit or units of the Company of any performance goal or goals over any period or periods of time ending before March l5 of the third year following the date of the award. Notwithstanding the above, commencing with the 1994 plan year, the Personnel Committee, in its sole discretion, in special circumstances may grant an eligible employee a bonus award which is greater than 70 percent of the eligible employee's base salary earnings. Restated to Reflect Plan in Effect: March 17, 1994 -3- 4 VI. Deferral, Vesting and Payment of Awards --------------------------------------- Awards are payable in cash. (a) With respect to awards relating to the l979 Incentive Year, a percentage of each award equal to twice the percentage the award bears to the base salary earnings of the participant (up to a maximum of 40 percent (40%) of the award) and with respect to awards relating to any Incentive Year after 1979, but before 1984 a percentage of each award equal to one and one half times the percentage the award bears to the base salary earnings of the participant (up to a maximum of 30 percent (30%) of the award) shall be deferred. Such mandatorily deferred amounts shall vest at the end of the third calendar year following the close of the incentive year for which the bonus award was earned or upon the retirement eligibility date of the participant, whichever occurs first. Such vested amounts shall become payable when the participant ceases to be an employee if the participant has reached his or her retirement eligibility date at cessation of employment, or at age 65 if the participant has not reached his or her retirement eligibility date at cessation of employment provided, however, that a participant who has reached his or her retirement eligibility date at cessation of employment may elect, prior to cessation of employment, to defer such amounts beyond retirement in accordance with rules to be prescribed by the Committee. Notwithstanding the above, in the event an employee's employment with the Company or any of its subsidiaries is terminated as a direct result of action initiated by the Company pursuant to the Restructuring Plan approved by the Board of Directors of the Company at its meeting on December 18, 1986, or the Reorganization Plan approved by the Board of Directors of the Company at its meeting on December 14, 1989, and such employee retires under a Company-sponsored retirement plan at cessation of employment, the employee may elect to receive all amounts which would become payable by reason of such termination of employment in up to ten approximately equal consecutive annual installments. Such election must be made prior to the employee's termination of employment in accordance with rules to be prescribed by the Committee and if no such election is made, payment of such amounts shall be made within a reasonable time after the date of termination. (b) The remainder of the bonus award described in (a) above and all of any award made with respect to the Incentive Year 1984 and thereafter shall vest immediately upon the grant of the award and be payable as soon as is practicable after the financial statements for the incentive year are available. (c) As prescribed by the rules pursuant to this Plan, an individual may elect to defer payment of all or a portion of any award payable under Subparagraph (b) above to March 1 of any future year or to retirement. Notwithstanding any prior voluntary deferral, all amounts so deferred shall become payable when the participant ceases to be an employee for any reason other than retirement under a Company-sponsored retirement plan upon cessation of employment. With respect to participants whose employment ceases and who, upon cessation of employment, retire under a Company- Restated to Reflect Plan in Effect: March 17, 1994 -4- 5 sponsored retirement plan, such participants may, prior to termination of employment, elect to defer payment of any awards beyond retirement in accordance with rules to be prescribed by the Committee and if no such election is made, payment of such amounts shall be made within a reasonable time after the date of termination of employment. Notwithstanding the above, in the event an employee's employment with the Company or any of its subsidiaries is terminated as a direct result of action initiated by the Company pursuant to the Restructuring Plan approved by the Board of Directors of the Company at its meeting on December 18, 1986, or the Reorganization Plan approved by the Board of Directors at its meeting on December 14, 1989, the employee may elect to receive all amounts which would become payable by reason of such termination of employment in up to ten approximately equal consecutive annual installments but in no event may payments end beyond March 1, of the tenth year following termination of employment, with respect to employees who have not retired under a Company-sponsored retirement plan upon cessation of employment. Such election must be made prior to the employee's termination of employment in accordance with rules to be prescribed by the Committee and if no such election is made, payment of such amounts shall be made within a reasonable time after the date of termination. Notwithstanding the provisions of this subparagraph, the right to defer payment beyond termination shall serve as partial consideration for a settlement of all claims which the participant may have against the Company, its subsidiaries, employees and agents and shall be subject to execution by the participant of a release and settlement agreement in a form to be prescribed by the Committee. (d) Amounts deferred under subparagraph (a) and (c) above shall be credited to an individual account in the name of the participant. The account of an employee who is participating in The Gillette Employees' Savings Plan or The Gillette Company Ltd/Ltee Retirement Income Savings Plan shall also be credited with a Savings Plan Equivalency based on the participant's rate of contributions under The Gillette Company Employees' Savings Plan or savings under The Gillette Company Ltd./Ltee Retirement Income Savings Plan, as applicable, on the January l immediately preceding the date of an award. Amounts equivalent to interest at the rate applicable to the Guaranteed Fund of The Gillette Company Employees' Savings Plan shall be credited to the total amount in the employee's account in so far as the Company shall deem practicable in the same manner as such amounts are credited under The Gillette Company Employees' Savings Plan. Upon payment to the participant of an amount deferred under subparagraph (a) or (c) above, the related Savings Plan Equivalency and amounts equivalent to interest credited thereon will be paid. A participant whose employment ceases prior to his or her retirement eligibility date will forfeit unvested amounts deferred under subparagraph (a) above, as well as the related Savings Plan Equivalency and amounts equivalent to interest credited thereon. In the event that the Savings Plan Equivalency no longer exists by virtue of Restated to Reflect Plan in Effect: March 17, 1994 -5- 6 termination of the Savings Plan and/or The Guaranteed Fund of the Savings Plan, the amounts in each employee's account shall be credited with a rate of return adjusted each January 2 to reflect the interest rate in effect on January 2 for two year United States Treasury Notes. (e) If a participant dies or becomes totally and permanently disabled while an employee of the Company or a subsidiary, an amount equal to all deferred amounts, vested and unvested, Savings Plan Equivalency amounts and amounts equivalent to interest accrued thereon shall be paid to the participant or, in the case of death, to the participant's executor or administrator or as otherwise provided by law. (f) All payments shall be subject to any required withholdings. (g) Prior to the happening of a Change in Control, either Approved or Unapproved, as those terms are defined in The Gillette Company Employees' Savings Plan, with respect to amounts deferred pursuant to subparagraph (c), an individual who has made such deferral may, in accordance with rules prescribed by the Committee, revoke all deferral elections in the event of a Change in Control of the Corporation, with such revocation to take effect, at the option of the participant, if a Change in Control occurs prior to January 1, 1988, upon the happening of any Change in Control or January 1, 1998, or if a Change in Control occurs on or after January 1, 1988, upon the happening of a Change in Control and the Company shall make payment to the participant of such deferred amounts for which such deferral has been revoked plus interest as provided in subparagraph (d) above. (h) In the event of a Change in Control, either Approved or Unapproved, as those terms are defined in The Gillette Company Employees' Savings Plan, amounts deferred pursuant to subparagraph (a) above will become immediately payable. VII. Amendment and Termination ------------------------- The Board of Directors of the Company, or the Personnel Committee of the Board of Directors, if and to the extent authorized, in absolute discretion of the body so acting and without notice, may at any time amend or terminate the Plan, provided that no such amendment or termination shall adversely affect the rights of any participant under any award previously granted. Further, neither the Board of Directors nor the Personnel Committee of the Board of Directors shall have the discretion once a plan year has commenced not to make awards if a bonus pool is earned for that plan year or after a contingency reserve has been established in any plan year not to make awards from such contingency reserve. VIII. Assignment ---------- Bonus payments under this Plan shall be paid only to participants. No bonus payment herein provided, nor any part thereof, and no right or claim to any of the monies payable pursuant to the provisions of this Plan shall be anticipated, assigned, or otherwise encumbered, nor be subject to attachment, garnishment, execution or levy of any kind, prior to the actual payment and delivery of said amount to the Plan participant and any attempted assignment or other encumbrance or attachment, garnishment, execution or levy shall be of no force or effect, except as otherwise provided by law. Notwithstanding the above, if a participant is adjudged incompetent, the Committee may direct that any amounts payable be paid to the participant's guardian or legal representative. Restated to Reflect Plan in Effect: March 17, 1994 -6- 7 IX. Employment and Plan Rights -------------------------- The Plan shall not be deemed to give any eligible employee or participant the right to be retained in the employ of the Company or any subsidiary nor shall the Plan interfere with the right of the Company or any subsidiary to discharge any employee at any time nor shall the Plan be deemed to give any employee any right to any award until such award is actually made. X. Administration and Authority ---------------------------- The Plan shall be administered by the Committee except as otherwise provided herein. The Committee shall have the authority, consistent with the Plan, to (a) determine adjustments to Profit from Operations, Net Sales and Return on Assets as provided in Paragraph II of this Plan, (b) determine the percentage increase of annual Profit from Operations, Net Sales, and Return on Assets, i.e., Growth Goals, necessary to earn a bonus pool, if any, for each incentive year, (c) establish an earned reserve and approve payments of awards from the earned reserve in accordance with Paragraph III of the Plan, (d) review and approve bonus awards made to officers and other senior management employees whose compensation is regularly reviewed by it, (e) determine the amount of any bonus awards to be granted to the Chairman and the President, (f) adopt, amend and rescind rules and regulations for the administration of the Plan and for its own acts and proceedings and (g) decide all questions and settle all controversies and disputes which may arise in connection with the Plan. The Committee may delegate any or all responsibilities assigned to it pursuant to subparagraph (f). The Chairman and the President, except with respect to themselves, shall have authority, consistent with the Plan, (a) to select eligible positions, eligible employees, and participants under the Plan, (b) to recommend to the Committee the amount of bonus awards to participants listed under (d) in the preceding paragraph, (c) to determine the amount of bonus awards to participants other than those listed in (d) of the preceding paragraph, and (e) evaluate the performance or review evaluations of the performance of eligible employees in the accomplishment of assigned objectives. The Chairman and President may delegate any or all administrative responsibilities delegated to them by the Committee. All decisions, determinations and interpretations of the Committee or the Chairman and the President or their delegees with respect to the exercise of their respective responsibilities shall be binding on all parties concerned. XI. Individual Accounts ------------------- The Committee shall maintain a separate account under the Plan for each participant. Each account shall show the amount awarded, vested and unvested portions of awards, amounts deferred, Savings Plan Equivalency amounts, if applicable, and amounts equivalent to interest credited thereon. XII. Forfeitures ----------- Subject to Section III of this Plan, all amounts forfeited by participants under the terms of this Plan shall revert to the Company. Restated to Reflect Plan in Effect: March 17, 1994 -7- 8 XIII. Partial Plan Year in the Event of Change in Control --------------------------------------------------- Notwithstanding any other provisions of this Plan to the contrary, in the event of a Change in Control, either Approved or Unapproved, as those terms are defined in The Gillette Company Employees' Savings Plan or if the Company is merged, dissolved or otherwise ceases to exist after July 1, of any plan year, the Board of Directors or the Personnel Committee of the Board of Directors shall pay participants awards from the Bonus Pool or Contingency Reserve, if applicable, adjusted as follows: The achievement of the Growth Goals for that year from the beginning of the plan year to the happening of its first or any of the aforementioned events (the "Partial Plan year") shall be compared against the results for the same period of the preceding year and the bonus pool will be determined on a prorated basis for the Partial Plan Year. Restated to Reflect Plan in Effect: March 17, 1994 -8- EX-10.D 6 OUTSIDE DIRECTORS STOCK OWNERSHIP PLAN 1 Exhibit 10(d) SUBJECT TO THE APPROVAL OF THE STOCKHOLDERS AT THEIR ANNUAL MEETING ON APRIL 21, 1994 THE GILLETTE COMPANY OUTSIDE DIRECTORS' STOCK OWNERSHIP PLAN 1. PURPOSE. The purpose of The Gillette Company Outside Directors' Stock Ownership Plan (the "Plan") is to advance the interests of the Company and its shareholders by helping to attract and retain highly qualified outside directors and providing compensation which aligns the interests of the directors with those of the shareholders. The Plan shall be interpreted and implemented in a manner so that eligible directors will not fail, by reason of the Plan or its implementation, to be "disinterested persons" within the meaning of Rule 16(b)3 of the Securities Exchange Act of 1934, as such Rule and such Act may be amended. 2. DEFINITION. Unless the context clearly indicates otherwise, the following terms when used in the Plan shall have the meanings set forth in this section: a. "Board of Directors" shall mean the Board of Directors of the Company. b. "Company" shall mean The Gillette Company, a Delaware corporation, or its successor. c. "Director" shall mean any member of the Board of Directors of the Company who is not also an employee or officer of the Company or any of its affiliates and who serves as a director on or after January 1, 1994. d. "Common Stock" shall mean the shares of common stock of the Company, $1 par value per share. e. "Dividend Reinvestment Plan" shall mean the Dividend Reinvestment and Stock Purchase Plan maintained by the Company's transfer agent for the Company's Common Stock. f. "Retainer(s)" shall mean the annual retainer(s) paid quarterly, in advance, to each Director for services on the Board of Directors. 3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN. Common Stock may be shares of the Company's authorized but unissued Common Stock, treasury shares of Common Stock or shares of Common Stock purchased on the open market. 2 4. ELIGIBILITY. Only Directors of the Company shall participate in the Plan. 5. ACQUISITION OF COMMON STOCK. With respect to all Director Retainers earned for Board service on and after January 1, 1994, payment of fifty percent of all Retainers shall be made in the form of Common Stock in accordance with provisions set out below and further administrative procedures to be determined by the Personnel Committee of the Board of Directors of the Company. In the event that Common Stock is to be purchased on the open market on behalf of the Director, the Company shall, on the first business day of each quarter, transfer a sum of money for each Director equal to fifty percent of his or her quarterly Retainer to an account established in the name of each Director under the Dividend Reinvestment Plan. Such Retainers shall be used to purchase Common Stock and the dividends paid thereon also shall be invested in Common Stock all in accordance with the terms of the Dividend Reinvestment Plan. In the event that Common Stock is to be issued by the Company from its authorized but unissued shares or from its treasury, the value of the shares shall be based upon the average of the high and low prices for the Common Stock as reported on the New York Stock Exchange composite index on the date that the shares would otherwise have been purchased under the Dividend Reinvestment Plan. Shares issued by the Company are to be deposited in the Director's account under the Dividend Reinvestment Plan. Notwithstanding the above, 50% of the Retainer(s) for Board service payable on January 1 and April 1, 1994 shall be retained by the Company and shall be used to purchase Common Stock on the open market on April 25, 1994 subject to approval of the Plan by the shareholders. Such shares shall be deposited in the Dividend Reinvestment Plan account established for each Director under this plan. When a Director's service as a Director of the Company ceases the Director may continue or terminate participation in the Dividend Reinvestment Plan. 3 6. GENERAL PROVISIONS. a. No Director and no beneficiary or other person claiming under or through such Director shall have any right, title or interest by reason of this Plan or any share of Common Stock to any particular assets of the Company. The Company shall not be required to establish any fund or make any other segregation of assets to assure the award of Common Stock hereunder. b. No right under the Plan shall be subject to anticipation, sale, assignment, pledge, encumbrance or charge except by will or the law of descent and distribution. c. Notwithstanding any other provision of the Plan or agreements made pursuant hereto, the Company shall not be required to issue, purchase or deliver any certificate for shares of Common Stock under this Plan prior to fulfillment of all of the following conditions: 1. Any required listing or approval upon notice of issuance or purchase of such shares on any securities exchange on which the Common Stock may then be traded. 2. Any registration or other qualification of such shares under any state or federal law or regulation or other qualification which the Board of Directors shall upon the advice of counsel deem necessary or advisable. 3. The obtaining of any other required consent or approval or permit from any state or federal government agency. d. In no event shall the Company be required to issue a fractional share hereunder. e. The issuance to or purchase of shares for Directors or their legal representatives shall be subject to any applicable taxes or other laws or regulations of the United States of America or any state having jurisdiction thereover. 4 7. ADMINISTRATION. This Plan shall be administered by the Personnel Committee of the Board of Directors of the Company. The Committee shall have the authority, consistent with the Plan to adopt, amend and rescind rules and regulations for the administration of the Plan and for its own acts and proceedings and decide all questions and settle all controversies and disputes which may arise in connection with the Plan. The Personnel Committee may delegate any or all responsibilities assigned to it. All decisions, determinations and interpretations of the Personnel Committee or its delegates with respect to the exercise of their respective responsibilities shall be binding on all parties concerned. 8. EFFECTIVE DATE; TERMINATION AND AMENDMENT. a. This Plan shall become effective upon its approval by the holders of an affirmative majority of the votes properly cast at the 1994 Annual Meeting of the shareholders of the Company. The term of the Plan shall be indefinite. b. The Board of Directors may terminate the Plan or make such modifications or amendments to the Plan as it may deem advisable, provided, however, that the Board of Directors may not amend the Plan: (1) more often than once every six months, other than to comply with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder; and (2) without the approval of the shareholders of the Company if such approval is required to maintain the Plan's compliance under Section 16 of the Securities and Exchange Act or is otherwise required pursuant to any applicable law or rule. EX-10.F 7 DIRECTORS & OFFICERS REINBURSEMENT 1 Exhibit 10(f) [LOGO] 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. "WARNING: DO NOT AMEND COVERAGE WITHOUT CHECKING ALL PRIMARY AND EXCESS COVERAGES." /s/ [??] LLOYD'S --------------------------------- POLICY SIGNING LLOYD'S POLICY SIGNING OFFICE OFFICE General Manager EMBOSSMENT APPEARS HERE ON ORIGINAL DOCUMENT 2 DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT INDEMNITY POLICY L88RL 3 DECLARATIONS DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT INDEMNITY POLICY NOTICE: THIS POLICY SUBJECT TO ITS TERMS APPLIES ONLY TO ANY "CLAIM" (AS DEFINED HEREIN) 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 HEREIN) AND "COSTS, CHARGES AND EXPENSES"SHALL BE APPLIED TO THE RETENTIONS. THIS POLICY DOES NOT PROVIDE FOR ANY DUTY BY UNDERWRITERS TO DEFEND THOSE INSURED UNDER THE POLICY. These Declarations along with the completed signed Application, including attachments, and the Policy with Endorsements shall constitute the contract between the Company, its Directors and Officers and Underwriters. POLICY NO. 757/DJ.930040 Item A. Parent Company: THE GILLETTE COMPANY Principal Address: Prudential Tower Building Boston, MA 02199, USA State of Incorporation: Delaware Item B. Policy Period: From 1st June 1993 to lst June 1994 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 each Policy year Item D. Retentions: US$ Nil each Director or Officer each Claim but in no event exceeding US$ Nil in the aggregate each Claim all Directors and Officers under Insuring Clause I.A. and 4 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$ 283,570.95 part of US$ 495,000.00 It is understood and agreed that a premium allocation of US$ 12.00 is payable by each Director or Officer of each of the Australian Subsidiaries of the Parent Company in Item A. of the Declarations. Such Premium allocation is part of and not in addition to the premium amount shown above. Item G. Premium for Optional Extension Period: 100% of the total premium as provided in Clause VIII., to be paid only if the eligibility requirements are met and the option is exercised. Item H. Notification to Underwriters pursuant to Clause VI. shall be given to Peterson and Ross, attention Theodore A. Boundas, 200 E Randolph Drive, Suite 7300, Chicago, Illinois 60601-6969. Item I. Consolidated assets of Parent Company: US$ 4,189,900,000 Item J. Form numbers of endorsements attached at issuance: NMA 1256 Nuclear Incident Exclusion Clause NMA 1477 Radioactive Contamination Exclusion Clause NMA 1168 Small Additional or Return Premiums Clause 01.01 Company Definition Amendment 02.01 Directors and Officers Definition Amendment 57.01 Exclusion Deletion Endorsement 270.01 Amended Notification Clause 270.02 Special Exclusion 270.03 Exclusion E Amended 270.04 Amended Cancellation Clause 270.05 Subsidiary Definition Amendment 270.06 Wrongful Act Definition Amendment 270.07 Special Endorsement 5 270.08 Amendment to Exclusion G 270.09 Amendment to Exclusion F 270.10 Special Endorsement 500.01 Amendment to Exclusion G 51.01 Outside Service Extension DATED IN LONDON: 25th October 1993 6 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 INSURING CLAUSE A. To reimburse the Directors and Officers for Loss not exceeding the Limit of Liability in excess of the applicable Retention set forth in Item D. of the Declarations sustained by such Directors and Officers resulting from any Claim first made during the Policy Period or the Optional Extension Period, if applicable, against any of them for a Wrongful Act, except for such Loss which the Company actually pays to the Directors and Officers as indemnification, and except for such Loss which the Company is required or permitted by law to indemnify the Directors and Officers unless and to the extent that the Company is unable to make actual indemnification solely by reason of its financial insolvency. B. To reimburse the Company for Loss not exceeding the Limit of Liability in excess of the applicable Retention set forth in Item D. of the Declarations for which the Company shall have lawfully indemnified or is required or permitted by law to indemnify the Directors and Officers resulting from any Claim first made during the Policy Period or the Optional Extension Period, if applicable, against any of them for a Wrongful Act. II DEFINITIONS The following terms whenever used in this Policy shall have the meanings indicated. A. "Claim" shall mean any judicial or administrative proceeding initiated against a Director or Officer in which such Director or Officer may be subjected to a binding adjudication of liability for damages or other relief, including any appeal therefrom. B. "Company" shall mean:- (1) the Parent Company, and (2) any Subsidiary. C. "Corporate Takeover" shall mean:- (1) the acquisition of more than 50% of the outstanding securities of 7 the Parent Company representing the Present right to vote for the election of directors by any person or entity, 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 (4) acquisition of substantially all of the assets of the Parent Company by another entity, or (5) The Parent Company ceasing to be publicly held. D. "Costs, Charges and Expenses" shall mean reasonable and necessary legal fees and expenses incurred by the Directors and Officers in defense of any Claim and appeals therefrom, and cost of attachment or similar bonds; provided, however, Costs, Charges and Expenses 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, regardless of whether or not such other insurer undertakes such duty. E. "Directors and Officers" shall mean any persons who were, now are, or shall be directors or officers of the Company including their estates, heirs, legal representatives or assigns in the event of their death, incapacity or bankruptcy. F. "Interrelated Wrongful Acts" shall mean Wrongful Acts which have as a common nexus any fact, circumstance, situation, event, transaction or series of facts, circumstances, situations, events or transactions. G. "Loss" shall mean damages, settlements and Costs, Charges and Expenses, provided, however that Loss shall not include:- (1) punitive or exemplary damages or that portion of any multiplied damages award which exceeds the amount multiplied, (2) criminal or civil fines or penalties imposed by law, (3) taxes; or (4) matters deemed uninsurable under the law pursuant to which this Policy shall be construed. 8 H. "Parent Company" shall mean the entity named in Item A. of the Declarations. I. "Policy Period" shall mean the period from the effective date and hour of this Policy as set forth in Item B. of the Declarations, to the Policy expiration date set forth in Item B. of the Declarations, or its earlier cancellation date, if any. J. "Policy Year" shall mean the period of twelve months following the effective date and hour of this Policy or the period of twelve months falling within the Policy Period following any anniversary date of such effective date, or, if the period between the effective date or any anniversary date and the cancellation date of the Policy is less than twelve months, such lesser period. If the Optional Extension Period option is exercised in accordance with Clause VIII. then such period shall be part of and not in addition to the last Policy Year. K. "Subsidiary" shall mean:- (1) any entity more than 50% of whose outstanding securities representing the present right to vote for the election of directors are owned by the Parent Company and/or one or more of its Subsidiaries at the inception date of this Policy and which Subsidiary is named in the application for this Policy, or (2) any entity more than 50% of whose outstanding securities representing the present right to vote for the election of directors were owned by the Parent Company and/or one or more of its Subsidiaries prior to the inception date of this Policy and which Subsidiary was insured under any policy issued by Underwriters of which this Policy is a renewal thereof, or (3) any entity acquired or created subsequent to the effective date of this Policy in which more than 50% of whose outstanding securities representing the present right to vote for the election of directors are owned by the Parent Company and/or one or more of its Subsidiaries, and whose assets do not exceed 10% of the consolidated assets of the Company as set forth in Item I. of the Declarations, or (4) any entity which is acquired or created subsequent to the effective date of this Policy in which more than 50% of whose outstanding securities representing the present eight to vote for the election of directors are owned by the Parent Company and/or one or more of its Subsidiaries, and whose assets exceed 10% of the consolidated assets of the Company as set forth in Item of the Declarations, subject, however, to the provisions of Clause VII.B. 9 L. "Wrongful Act" shall mean any actual or alleged negligent act, error, omission, misstatement, misleading statement, neglect or breach of duty by the Directors or Officers, individually or collectively, in the discharge of their duties solely in their capacity as Directors or Officers of the Company. III EXCLUSIONS Underwriters shall not be liable to make any payment for Loss in connection with any Claim made against the Directors or Officers:- A. for any actual or alleged libel, slander, other defamation or any actual or alleged bodily injury, sickness, disease or death of any person, or any actual or alleged damage to or destruction of any tangible property including loss of use thereof, or any actual or alleged invasion of privacy, wrongful entry, eviction, false arrest, false imprisonment, malicious prosecution, assault, battery, mental anguish, emotional distress, or loss of consortium; 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 effective date of this Policy under any prior 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 or policies, whether such other 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 or policies; 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 or policies where such Claim is not otherwise excluded by the terms of 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 (or any regulations promulgated thereunder) or similar provisions of any federal, state or local statutory law or common law; F. by or at the behest of the Company, or any affiliate of the Company, or by any security holder of the Company whether directly or derivatively 10 except where such security holder bringing such Claim is acting totally independently of, and totally without the solicitation of, or assistance of, or participation of, or intervention of, any Director or Officer, or the Company or any affiliate of the Company; G. by or on behalf of any other Director of Officer except and to the extent that such Claim is in the form of a crossclaim, third party claim or otherwise for contribution or indemnity which is part of and results directly from a Claim which is not otherwise excluded by the terms of this Policy; H. brought about or contributed to in fact by any dishonest or fraudulent act or omission or any criminal act or omission; I. based upon or attributable to the Directors and Officers gaining in fact any personal profit or advantage to which they were not legally entitled; J. for the return by the Directors or Officers of any remuneration paid to them without the previous approval of the stockholders of the Company, which payment without such previous approval shall be held by the court to be in violation of the law; K. 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 (2) any Wrongful Act occurring subsequent to the date such entity became a Subsidiary which, together with a Wrongful Act occurring prior to the date such entity became a Subsidiary, would constitute Interrelated Wrongful Acts; L. based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving, the failure to effect or maintain insurance; M. based upon, arising out of, directly or indirectly, resulting from or in consequence of, or in any way involving, any Wrongful Act actually or allegedly committed subsequent to a Corporate Takeover; N. based upon, arising out of, directly or indirectly, resulting from or in consequence of, or in any way involving, any offer to purchase, or purchase of, securities of the Company at a premium over their then-current market value, made by the Company or by the Directors or Officers, except:- (1) where such offer or purchase extends to all security holders of the Company, or 11 (2) where an independent legal counsel provided its prior written opinion that such contemplated offer to purchase or purchase would constitute a proper exercise of the Company's business judgement, and an independent investment banking firm provided its prior written opinion that such contemplated offer to purchase or purchase would involve fair and adequate consideration; 0. based upon, arising out of, directly or indirectly, resulting from or in consequence of, or in any way involving, their service as directors, officers, or employees of any entity other than the Company, even if directed or requested to serve by the Company as directors, officers, or employees of such other entity. Any Wrongful Act pertaining to any Director or Officer shall not be imputed to any other person for the purposes of determining the applicability of Exclusions H., I. and J. IV. LIMITS OF LIABILITY A. Subject to Clause IV.B., Underwriters shall be liable to pay the percentage set forth in Item E. of the Declarations of Loss which is in excess of the amount of the applicable Retention as determined under Clause IV.D. up to the Limit of Liability as shown under Item C. of the Declarations resulting from each Claim made against the Directors and Officers, it being warranted that the remaining percentage of such Loss shall be uninsured. B. The amount shown in Item C. of the Declarations shall be the maximum aggregate Limit of Liability of Underwriters in each Policy Year for all Loss resulting from all Claims made against the Directors and Officers during each such Policy Year, together with all Claims made against the Directors and Officers which, in accordance with Clause IV.C. or Clause VI.B., shall be deemed to have been made during each such Policy Year. C. More than one Claim involving the same Wrongful Act or Interrelated 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 solely within the earliest of the following Policy Years:- (1) the Policy Year in which the earliest Claim involving the same Wrongful Act or Interrelated Wrongful Acts is first made, or (2) the Policy Year in which the Claim involving the same Wrongful Act or Interrelated Wrongful Acts shall be deemed to have been made pursuant to Clause VI.B., if applicable. 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 12 applied separately to that part of the Loss resulting from such Claim covered by each Insuring Clause and the sum of the Retentions so applied shall constitute the Retention applicable to such Claim provided, however, the total Retention as finally determined shall in no event exceed the 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 solely by reason of its insolvency. F. Cost, Charges and Expenses shall be part of and not in addition to the Limit of Liability as shown under Item C. of the Declarations, and such Costs, Charges and Expenses shall reduce the Limit of Liability as shown under Item C. of the Declarations. G. Except as provided hereinbelow, Underwriters shall reimburse Loss only upon the final disposition of any Claim made against the Directors and Officers. However, if: (1) the Directors and Officers incur Costs, Charges and Expenses, and (2) the Company cannot advance or indemnify such Costs, Charges and Expenses solely because of the provisions of its charter, bylaws or applicable statutes and not because of the failure or refusal of its Board of Directors or other governing body or person to authorize such advancement or indemnification, then, Underwriters shall advance to the Directors and Officers no more than once every ninety (90) days all such Costs, Charges and Expenses, subject to the applicable Retention, Limit of Liability and Exclusions and all of the other terms and conditions of this Policy. V SETTLEMENTS AND DEFENSE A. No settlement shall be made 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 made against the Directors and Officers, provided that no Costs, Charges or Expenses shall be incurred without Underwriters' consent, such consent not to be unreasonably withheld. In the event of such consent being given, subject to all other terms and provisions of this Policy and except as provided in Clause IV.G. of this 13 Policy, Underwriters shall reimburse Costs, Charges and Expenses only upon the final disposition of any Claim. VI NOTIFICATION A. If during the Policy Period or Optional Extension Period, if applicable, any Claim is made against any Director or Officer, the Company and the Directors and Officers shall, as a condition precedent to their right to be reimbursed under this Policy, give to Underwriters notice in writing as soon as practicable of any such Claim, but in no event later than sixty (60) days after such Claim is first made. B. If during the Policy Period or the Optional Extension Period, if applicable, the Directors and Officers or the Company first become aware of a specific Wrongful Act, and if the Directors and Officers or the Company shall, during such period, give written notice to Underwriters as soon as practicable of: (1) the specific Wrongful Act, and (2) the consequences which have or may result therefrom, and (3) the circumstances by which the Directors and Officers or the Company first became aware thereof, then any Claim not otherwise excluded by the terms of this Policy subsequently made against the Directors and Officers arising out of such Wrongful Act or any other Wrongful Act which, together with such Wrongful Act, would constitute Interrelated Wrongful Acts, shall be deemed for the purposes of this Policy to have made during the Policy Year in which 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 for this Policy or contained in the application for any policy issued by Underwriters of which this Policy is a renewal thereof (any such applications herein collectively referred to as the "Application") a copy of which is attached hereto, and any material submitted therewith (which shall be retained on file by Underwriters and be deemed attached hereto, as if physically attached hereto), are the basis of this Policy and are to be considered as incorporated into and constituting a part of this Policy. 14 By acceptance of this Policy the Directors and Officers and the Company agree:- (1) that the statements in the Application or in any materials submitted therewith 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, including materials submitted therewith, contains misrepresentations made with the actual intent to deceive, or contains misrepresentations 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 not a severable contract of insurance or a series of individual contracts of insurance with each of the Directors or Officers. 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 said Company is the surviving entity, or creates or acquires a Subsidiary as defined in Clause II.K(4), after the inception of this Policy, no coverage shall be afforded under this Policy for any Loss in any way involving the assets acquired or the assets, liabilities, directors, officers or employees of the entity acquired or merged with, or such Subsidiary unless: (a) written notice of such transaction or event is given to Underwriters by the Parent Company within thirty (30) days of the effective date of such transaction or event, and (b) the Parent Company provides Underwriters with such information in connection therewith as Underwriters may deem necessary, and (c) the company accepts 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 15 (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 issued by Underwriters of which this Policy is a renewal or replacement thereof, this Policy, subject to its terms, shall continue to apply to all persons who were Directors or Officers of such Subsidiary with respect to Claims first made during the Policy Period or the Optional Extension Period if applicable against such Directors of Officers for Wrongful Acts committed or allegedly committed prior to the time such entity ceased to be a Subsidiary. There shall be no coverage for Claims made against the Directors and Officers of such Subsidiary based on Wrongful Acts committed or allegedly committed after such entity ceased to be a Subsidiary. C. CANCELLATION CLAUSE (1) By acceptance of this Policy, the Company and the Directors and Officers hereby confer the exclusive power and authority to cancel this Policy on their behalf to the Parent Company. Such entity may 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 thirty (30) days thereafter, such cancellation shall be effective. The mailing of such notice shall be sufficient notice and the effective date of cancellation stated in the notice shall become the end of the Policy Period. Delivery of such written notice by Underwriters shall be equivalent to mailing. If the foregoing notice period is in conflict with any governing law or regulation, then such period shall be amended to afford the minimum notice period permitted thereunder. (3) If this Policy is cancelled pursuant to (1) hereinabove, Underwriters shall retain the customary short rate proportion of the premium hereon. 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, but payment shall be made as soon as practicable. 16 D. COMPANY AUTHORIZATION CLAUSE By acceptance of this Policy the Directors and Officers and the Company agree that the Parent Company will act on behalf of the Directors and Officers and the Company with respect to giving of all notices to Underwriters as provided herein, the receiving of notices from Underwriters, the payment of the premiums and the receiving of any return premiums that may become due under this Policy. 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 the Company's nonpayment 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. 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 against the Directors and Officers during the period of ninety (90) days after the effective date of such cancellation or, in the event of such refusal to renew, after the date upon which the Policy Period ends, but only with respect to any Wrongful Act committed before such date and otherwise covered by this Policy. This ninety (90) days period shall be referred to in this Policy as the "Option al Extension Period." B. The quotation of a different premium and/or retention and/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 of this Policy must have been paid. The right to purchase the Optional Extension Period shall terminate unless written notice is given to Underwriters within ten (10) days after the effective date of cancellation, or, in the event of a refusal to renew, within ten (10) days after the Policy Period ends, together with payment of the premium for the Optional Extension Period. If such notice and premium payment is not so given to Underwriters, the Parent Company shall not at a later date be able to exercise the 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 and in the event the Company terminates the Optional Extension Period before its term for any reason other than that set forth in the Clause E. hereinbelow, Underwriters shall not be liable to return any portion of the premium paid for the Optional Extension Period. E. In the event the Optional Extension Period is purchased, it shall 17 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 by reason of the issuance of a replacement contract of insurance or indemnity Underwriters shall refund pro rata any unearned premium for the unexpired period of such extension. F. The fact that this Policy may be extended by virtue of the exercise of the Optional Extension Period shall not in any way increase the applicable Limit of Liability set forth in the Declarations. IX SUBROGATION In the event of any payments under this Policy, Underwriters shall be subrogated to the extent of such payment to all of the Directors' and Officers' and the Company's rights of recovery therefor against any person or entity, and the Directors and Officers and the Company 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 ACTION AGAINST UNDERWRITERS No action shall lie against Underwriters unless, as a condition precedent thereto, the Directors and Officers and the Company shall have fully complied with all of the terms of this Policy, nor until the amount of the Directors' and Officers' and the Company's 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. Any person or organization or the legal representative thereof who has secured such judgement or written agreement shall thereafter be entitled to recover under this Policy to the extent of the insurance afforded by this Policy. Nothing contained herein shall give any person or organization any right to join Underwriters as a party to any Claim against the Directors and Officers and the Company to determine their liability, nor shall Underwriters be impleaded by the Company or the Directors and Officers or their legal representative in any Claim. XI CHANGES Notice to any agent or knowledge possessed by any agent or other person acting on behalf of Underwriters shall not effect a waiver or 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 to form a part of this Policy. 18 XII ASSIGNMENT OF INTEREST Assignment of interest under this Policy shall not bind Underwriters unless their consent is endorsed hereon. XIII ENTIRE AGREEMENT By acceptance of this Policy, the Directors and Officers and the Company agree that this Policy embodies all agreements existing between them and Underwriters or any of their agents relating to this insurance. XIV ASSISTANCE AND COOPERATION IN THE EVENT OF LOSS The Directors and Officers and the Company agree to provide Underwriters with such information, assistance and cooperation as Underwriters and/or their counsel may reasonably request, and they further agree that they shall not take any action which in any way increases Underwriters' exposure for Loss under this Policy resulting from any Claim. XV 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 of 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 and Mount, 750 Seventh Avenue, New York, N.Y. 10019-6829, U.S.A., 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 authorised 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 therefor, 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 19 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 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 20 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 of 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 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 21 "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 Central 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 U.S.A. SMALL ADDITIONAL OR RETURN PREMIUMS CLAUSE NOTWITHSTANDING anything to the contrary contained herein and in consideration of the premium for which this Insurance is written, it is understood and agreed that whenever an additional or return premium of US$2 or less becomes due from or to the Assured on account of the adjustment of a deposit premium, or of an alteration in coverage or rate during the term or for any other reason, the collection of such premium from the Assured will be waived or the return of such premium to the Assured will not be made, as the case may be. N.M.A. 1168 22 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY COMPANY DEFINITION AMENDMENT (01.01) In consideration of the premium charged for this Policy, it is hereby understood and agreed that Clause II. DEFINITIONS B is deleted and the following is substituted therefor: "B. "Company" shall mean: (1) the Parent Company (2) any Subsidiary, (3) any unincorporated division, (4) Gillette Charitable Foundation but only in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1991. 23 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY DIRECTORS AND OFFICERS DEFINITION AMENDMENT (02.01) In consideration of the premium charged for this Policy, it is hereby understood and agreed that Clause II. DEFINITIONS E is deleted and the following is substituted therefor: "E. "Directors and Officers" shall mean any persons who were, now are, or shall be: (1) directors or officers of the Company, (2) 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 or incapacity or bankruptcy. 24 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY EXCLUSION DELETION ENDORSEMENT (57.01) In consideration of the premium charged for this Policy, it is hereby understood and agreed that Clause III. EXCLUSIONS L. is deleted. 25 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY AMENDED NOTIFICATION CLAUSE (270.01) In consideration of the premium charged for this Policy, it is hereby understood and agreed that Clause VI. NOTIFICATION A. is deleted and the following is substituted therefor: A) If during the Policy Period or Optional Extension Period, if applicable, any Claim is made against any Director or Officer, the Company and the Directors and Officers shall, as a condition precedent to their right to be reimbursed under this policy, give to Underwriters notice in writing as soon as practicable of any such Claim, but in no event later than sixty (60) days after the date the Corporate Risk Management Department is aware of such Claim. 26 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY SPECIAL EXCLUSION (270.02) In consideration of the premium charged for this Policy, it is hereby understood and agreed that Clause III. EXCLUSIONS is amended by the addition of the following: P. In connection with any Claim or Claims made against the Insured arising out of facts underlying or alleged in a complaint filed in the United States District Court of Boston charging the Gillette Company that the acquisition of Braun is a violation of The Clayton Act. 27 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY EXCLUSION E AMENDED (270.03) In consideration of the premium charged for this Policy, it is hereby understood and agreed that Clause III. EXCLUSIONS E is deleted and the following is substituted therefor: E. for violation of the Employee Retirement Income Security Act of 1974 (or any regulations promulgated thereunder) or similar provisions of any federal, state, or local statutory law or common law in connection with any employee benefit or welfare plan(s) subject to ERISA and sponsored by the Company. 28 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY AMENDED CANCELLATION CLAUSE (270.04) In consideration of the premium charged for this Policy, it is hereby understood and agreed that Clause VII. GENERAL CONDITIONS C.(2) is deleted and the following is substituted therefor: 2) This Policy may be cancelled by Underwriters by mailing to the Parent Company notice stating when, not less than sixty (60) 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 required thereunder. 29 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY SUBSIDIARY DEFINITION AMENDED (270.05) In consideration of the premium charged for this Policy, it is hereby and agreed that. 1. DEFINITIONS K. (4) is amended by the addition of "or" at the end thereof. 2. Clause II. DEFINITIONS K. is amended by the addition of the following at the end thereof: (5) the entities as scheduled in question 5(c) of the Application dated 50% or less of whose outstanding securities representing the present right to vote for the election of directors are owned by the Parent Company and/or one or more of its Subsidiaries at the inception of this Policy. 30 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY WRONGFUL ACT DEFINITION AMENDED (270.06) In consideration of the premium charged for this Policy it is hereby understood and agreed that: 1. Clause II DEFINITIONS L is deleted and the following is substituted therefor: "L Wrongful Act" shall mean any actual or alleged act, error, omission, misstatement, misleading statement, neglect or breach of duty by the Directors or Officers, individually or collectively, in the discharge of their duties solely in their capacity as Directors or Officers of the Company." 2. Clause III EXCLUSIONS H is deleted and the following is substituted therefor: "H brought about or contributed to in fact by any dishonest, fraudulent or criminal Wrongful Act or by any Wrongful Act committed with actual knowledge of its wrongful nature or with actual intent to cause damage." 31 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY SPECIAL ENDORSEMENT (270.07) It is hereby understood and agreed that notwithstanding the provisions of Exclusion C. Underwriters note coverage hereon is on a primary basis and Underwriters acknowledge the existence of excess and D.I.C. Policy No. GS-212-C arranged with C.O.D.A. Ltd., and other excess policies. 32 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY AMENDMENT TO EXCLUSION G (270.08) In consideration of the premium charged for this Policy it is hereby understood and agreed that Clause III EXCLUSIONS G is amended by the addition of the following at the end thereof: "provided however that this Exclusion shall not apply to employment related Claims brought by person sholding positions of assistant vice president and below." 33 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY AMENDMENT TO EXCLUSION F (270.09) In consideration of the premium charged for this Policy, it is hereby understood and agreed that Clause III EXCLUSIONS F is deleted and the following is substituted therefor: "F. by or at the behest of the Company, or by any security holder of the Company whether directly or derivatively except where such security holder bringing such Claim is acting totally independently of, and totally without the solicitation of, or assistance of, or participation of, or intervention of, any Director or Officer or the Company." 34 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY SPECIAL ENDORSEMENT (270.10) In consideration of the premium charged for this Policy it is hereby understood and agreed that Clause II DEFINITIONS K (2) is deleted and the following is substituted therefor: "K. (2) an entity more than 50% of whole outstanding securities representing the present right to vote for the election of directors were owned by the Parent Company and/or one or more of its Subsidiaries prior to the inception date of this Policy and which Subsidiary was insured or reinsured under any Policy issued by Underwriters of which this Policy is a renewal thereof, or." 35 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY AMENDMENT TO OPTIONAL EXTENSION PERIOD (500.01) In consideration of the premium charged for this Policy it is hereby understood and agreed that Clause VIII OPTIONAL EXTENSION PERIOD A. is deleted and the following is substituted therefor: VIII. OPTIONAL EXTENSION PERIOD A. If this Policy is cancelled pursuant to Clause VII.C(2) or VII. V.(3) of this Policy or if Underwriters refuse to renew this Policy, for reasons other than the Company's 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. 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 against the Directors and Officers during the period of three hundred and sixty five (365) days after the effective date of such cancellation or, in the event of such refusal to renew, after the date upon which the Policy Period ends, but only with respect to any Wrongful Act committed before such date and otherwise covered by this Policy. This three hundred and sixty five day period shall be referred to in this Policy as the "Optional Extension Period." 36 Attaching to and forming part of Policy No. 757/DJ930040 THE GILLETTE COMPANY OUTSIDE SERVICE EXTENSION (51.01) In consideration of the premium charged for this Policy, it is hereby understood and agreed as follows: 1. Clause II DEFINITIONS L is amended by the addition of the following: "L. (1) a director, officer or trustee of (A) Polaroid Corporation (B) University Hospital (C) Massachusetts Mutual Life Insurance Company but only in the case of Mr. Alfred M. Zeien. (2) a director, officer or trustee of Square D Company but only in the case of Mr. Alfred M. Zeien and only in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1991. Solely for the purposes of the coverage provided through Clause 1.A. (3) a director, officer or trustee of Repligen Corporation but only in the case of Mr. Alfred M. Zeien and only in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1992. (4) a director, officer or trustee of (A) New England Legal Foundation (B) Park Street Corporation (C) Greater Boston Legal Svcs Corporation (D) World Affairs Council, Boston (E) Greater Boston Chamber of Commerce (F) Boston Municipal Research Bureau but only in the case of Mr. Joseph E. Mullaney". (5) a director, officer of trustee of Mass. Taxpayers Foundation but only in the case of Mr. Joseph E. Mullaney and only in respect of Wrongful Acts actually or allegedly committed subsequent to December 18th 1992. (6) a director, officer or trustee of (A) Boston College 37 (B) St. Elizabeth's Hospital (C) The Boston Symphony Orchestra but only in the case of Mr. Robert J. Murray and only in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1993. (7) a director, officer or trustee of (A) Arts Boston (B) Black Achievers Commission (C) Old North Foundation (D) St Margarets Hospital but only in the case of Mr. William J. McMorrow and only in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1993. (8) a director, officer or trustee of the National Association of Manufacturers but only in the case of Lorne R. Waxlax and only in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1993. (9) a director, officer or trustee of (A) Marine Biological Laboratory (B) Massachusetts Business Roundtable but only in the case of Mr. Alfred M. Zeien and only in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1993. 2. Clause III EXCLUSIONS O is amended by inserting the following at the end thereof: "provided, however, this Exclusion shall not apply to Loss resulting from any Claim to the extent that: (1) such Claim is based on the service of (i) Mr. Alfred M. Zeien as a director, officer or trustee of (A) Polaroid Corporation (B) University Hospital (C) Massachusetts Mutual Life Insurance Company (ii) Mr. Alfred M. Zeien as a director, officer or trustee of Square D Company in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1991 or (iii) Mr. Alfred M. Zeien as a director, officer or trustee of Repligen 38 Corporation in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1992 or (iv) Mr. Joseph E. Mullaney as a director, officer or trustee of (A) New England Legal Foundation (B) Park Street Corporation (C) Greater Boston Legal Svcs Corporation (D) World Affairs Council, Boston (E) Greater Boston Chamber of Commerce (F) Boston Municipal Research Bureau (v) Mr. Joseph E Mullaney as a director, officer or trustee of Mass. Taxpayers Foundation in respect of Wrongful Acts actually or allegedly committed subsequent to December 18th 1992. (vi) Mr. Robert J. Murray as a director, officer or trustee of Boston College, St Elizabeths Hospital or The Boston Symphony Orchestra in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1993. (vii) Mr. William J. McMorrow as a director, officer or trustee of Arts Boston, Black Achievers Commission, Old North Foundation or St Margarets Hospital in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1993. (viii) Lorne R. Waxlax as a director, officer or trustee of The National Association of Manufacturers in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1993. (ix) Mr. Alfred M. Zeien as a director, officer or trustee of Marine Biological Laboratory or Massachusetts Business Roundtable in respect of Wrongful Acts actually or allegedly committed subsequent to June 1st 1993. (2) such loss is not indemnified by the above entities or any of their insurers". 3. Item C of the Declarations is deleted and the following is substituted therefor: "Item C Limit of Liability $10,000,000 in the aggregate each Policy year, provided, however, that the Limit of Liability shall be $1,000,000 in the aggregate each Policy year for all claims brought against Mr. Alfred M. Zeien in his capacity as a director, officer or trustee of Repligen Corporation provided, however, that such $1,000,000 shall be part of and not in addition to the aforementioned $10,000,000 overall Limit of Liability of this Policy." 39 LINES CLAUSE This Insurance, being signed for 60.983%, 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 40 (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- 41 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- 42 4. Complete the following in respect of all classes of shares issued by the Parent Company: as of 03/01/93.
1 2 3 4 ----- ----- ----- ----- Series C Class of shares Common Preferred ------ ------ Number of shares outstanding 220,218,660 164,604 ------ ------ Number of shares owned by Directors (directly and/or beneficially) 24,459,346 14 ------ ------ Number of shares owned by Executive Officers who are not directors (directly and/or beneficially) 209,084 42 ------ ------
5. (a) Total number of wholly owned Subsidiaries as of March, 1993: Domestic 57 Foreign 163 List all such Subsidiaries for which coverage is requested and the date created or acquired: ---------------------------------------- 1) Coverage requested for all subsidiaries - see March 15, 1993 listing attached; 2) Coverage requested for Parker Pen Holdings Limited and its subsidiaries which were required on May 7, 1993; 3) 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, 1993: Domestic 0 Foreign 10 -3- 43 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 March 15, 1993, including the following subsidiaries in which The Gillette Company has an interest of 50% or less: Gillette Continental Trading 50% Intermaghreb (80% of 51% through Gillette Interlame S.A.) Shenmei Daily Use Co. 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, 1993) Industry - Beteiligungs - Gesellschaft mbH 50% Gillette Continental Trading Co. Societe Matron 12% Gillette Interlame Shanghai Razor Blade Factory 30% Gillette (Shanghai) Limited House of Poddar 19.9% Indian Shaving Products Societe Matron 29% lntermaghreb Professeur M. Benomar 20% Intermaghreb National Investment Trust 23.5% 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 Co. State Treasury of Poland 20% Wizamet S.A.
(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). -4- 44 7. (a) Complete the following for each of the Parent Company's last four fiscal years (use consolidated figures):
($ Millions) Year 1992 1991 1990 1989 Total Consolidated Assets 4,189.9 $3,886.7 3,671.3 3,114.0 ------- ------- ------- ------- Current Assets 2,336.2 2,177.8 2,093.5 1,854.5 ------- ------- ------- ------- Current Liabilities 1,560.8 1,484.6 1,307.9 1,061.3 ------- ------- ------- ------- Shareholders Equity 1,496.4 1,157.1 265.4 70.0 ------- ------- ------- ------ Net Income 513.4 427.4 367.9 284.7 ------ ------ ------ ------- Net Income Per Share 2.32 1.94 1.60 1.35 ------ ------ ------ ------ Dividends Per Share .72 .62 .54 .48 ----- ------ ----- ----- Sales/Revenues 5,162.8 4,683.9 4,344.6 3,818.5 ------- ------- ------- ------- Long Term Debt 554.2 742.2 1,045.7 1,041.0 ------ ------ ------- ------- Short Term Debt 475.8 460.0 370.3 340.7 ------ ------ ------- ------
(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 ins.urers (on any class of business)? Yes X No __________ If yes, give details: The Company was a plaintiff in a lawsuit against Seaboard Surety concerning coverage for an advertising liability claim. The lawsuit was settled in 1990. -5- 45 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: 6/1/92-3 6/1/92-3 6/1/92-3 11/21/92-6/01/95 6/01/92-3 -------------------------------------------------------------------------------------------- Retention: $1,000,000 Corporate Reimbursement ---------------------------------------------------------------------------------------- Annual Premium: $476,776 $180,013 $300,000 $143,000 $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: Gillette purchased 100% of the stock of Parker Pen Holdings Limited on May 7, 1993. Refer to enclosed 8-K dated May 7, 1993 for details. None other publicly announced. (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.) (Refer to -------- ---------- ----------- ---------- ---------- Limited $220,000,000 $450,000,000 5/7/93 8-K ------- ---------- ------------ ------------ ---------- For Details) ------- ---------- ------------ ------------ ------------
-6- 46 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 X If yes, furnish copy of prospectus. See attached copies of (a) Press Release regarding a shelf registration dated November 24, 1992, which has not yet become effective and (b) Form S-8 filed December 23, 1992. -7- 47 (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 1992 Annual Report financial note regarding Common Stock and Additional Paid-in Capital (p. 33). 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 06/30/91 34 1/4 -------- ------ 09/30/91 40 7/8 -------- ------ 12/31/91 56 1/8 -------- ------ 03/31/92 47 1/4 -------- ------ 06/30/92 47 5/8 -------- ------ 09/30/92 57 3/8 -------- ------ 12/31/92 56 7/8 -------- ------ 03/31/93 60 1/2 -------- ------
-8- 48 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? 53.15% (March 3, 1992 - 93) 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 except as follows (if answer is none, so state): 1) Wilkinson Sword counter claim was dismissed as part of the resolution of antitrust proceedings related to the Wilkinson business in Europe. 2) Summary of Wafer Shave Claim was attached to '91 Application. 3) The U.S. Tax Court ruled favorably on The Oral-B Tax matter mentioned in the 1992 Application. See p. 9 of the September 30, 1992 10-Q for details. 4) Certain environmental proceedings in the U.S. arising out of operations. Management considers the potential liability to be immaterial. 5) See attached 8-K re purchase of Parker Pen Holdings Limited. -9- 49 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- 50 Signed /s/ [??] ---------------------------------------------- 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 May 28, 1993 ------------------------------------------------ Submitted by ---------------------------------------- (Agent) Date ------------------------------------------------ -11- 51 [LOGO] 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 2910 0757 61163 03/09/93 0757 61163 03/09/93 41 42 ------------------------------------------------------------------------------------------------------------------- AMOUNT, PERCENTAGE SYNDICATE UNDERWRITER'S PAGE AMOUNT, PERCENTAGE SYNDICATE UNDERWRITER'S PAGE OR PROPORTION REFERENCE OR PROPORTION REFERENCE 1 2 PERCENT PERCENT 15.000 1068 9300792D0GBH 0.274 212 078631310201 10.000 1145 681X35405X93 0.320 991 0093293AA000 5.000 484 XSP292B0009N 0.457 56 Q4007J93AXXT 9.150 1173 ALDPAA40703E 0.366 179 411LL870011 2.745 79 322FB002564A 0.046 573 81230531TND 2.745 1007 FD867K93A403 0.457 510 EDF093ADCS 1.830 204 078631310201 0.137 1105 EDF093ADCS 1.144 322 93X54293 0.320 1003 LTXSM0200030 1.372 205 481N00242FNA 5.000 435 08066300 0.915 588 11E23288F03 0.915 406 U82XWD05000H THE LIST OF UNDERWRTING MEMBERS 0.915 1047 Y0031K93A OF LLOYDS IS NUMBERED 1993/ 9 0.457 375 7231N09326NN 0.686 122 CJ888N93A200 0.732 546 TB60OD93B418
TOTAL LINE No. of SYND FOR LPSO USE ONLY TOTAL LINE No. of SYND FOR LPSO USE ONLY 60.983 24 USE 1 13835
52 J(A) FORM THE INSTITUTE OF LONDON UNDERWRITERS [LOGO] COMPANIES POLICY WE, THE COMPANIES, 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 damage liability or expense in the proportions and manner, hereinafter provided. Each Company shall be liable only for its own respective proportion. 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 and Secretary of The Institute of London Underwriters has subscribed his name on behalf of each Company. /S/ [??] ---------------------------------- [STAMP] CHIEF EXECUTIVE General Manager and Secretary The Institute of London Underwriters 53 SCHEDULE POLICY NUMBER 757/DJ930040 NAME AND ADDRESS THE GILLETTE COMPANY OF THE ASSURED Prudential Tower Building, Boston, MA 02199 USA THE PERIOD OF INSURANCE From 1st June 1993 1st June 1994 at 12.01 a.m. Standard Time at the address stated above. THE RISK AND SUM INSURED HEREUNDER Directors and Officers Liability and Reimbursement for Directors and Officers Liability. As more fully set forth in the co-insuring Lloyd's policy. 0. 915% 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. Warranted that this Policy shall run concurrently with, and shall be subject to the same terms, conditions, limitations and endorsements as are more fully set forth in or as may be added to Policy No.757/DJ930040 subscribed by Lloyd's Underwriters covering the identical subject matter and risk. PREMIUM US$4,254.75 part of US$465,000.00 54 ILU REFERENCE PROPORTION CODE COMPANY AND REFERENCE TOTAL (T) or FORWARD (F) 55 LIRMA POLICY IN CONSIDERATION of the Insured named in the Schedule hereto having paid or promised to pay the premium stated in the said Schedule to the Insurers named herein who have hereunto subscribed their names ("the Insurers"). THE INSURERS HEREBY SEVERALLY AGREE each for the proportion set against its own name to indemnify the Insured or the Insured's Executors and Administrators against loss, damage or liability to the extent and in the manner set forth herein. Provided that the aggregate liability of the Insurers shall not exceed the Sum Insured or other limits as are set forth in the Schedule. If the Insured 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 Director of Policy Signing Service of LONDON INSURANCE AND REINSURANCE MARKET ASSOCIATION ("LIRMA") has subscribed his name on behalf of each of the LIRMA Companies and (where the Companies Collective Signing Agreement ("CCSA") is being implemented) on behalf of the Leading CCSA Company which is a LIRMA member and authorised to sign this Policy (either itself or by delegation to LIRMA) on behalf of all the other CCSA Companies. Signed: /s/ Sanders ----------------------------------- Director of Policy Signing Services Date as in the Schedule. 56 Date: 21st July 1993 Policy No: 757/DJ930040 THE SCHEDULE The insured: THE GILLETTE COMPANY Premium: US$114,324.90 Part of US$465,000.00 Limits of Liability: 24.586% 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 1993 To: 1st June 1994 both days at 12.01 a.m. local 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/DJ930040 issued by certain underwriting members at Lloyd's of London covering the identical subject matter and risk. - -------------------------------------------------------------------------------- 57
LIRMA COMPANY THE INSURERS NUMBER PROPORTION REFERENCE - --------------------------------------------------------------------------- CNA INTERNATIONAL REINSURANCE LTD C4009 9.150% 354564931 AEGON INSURANCE CO (UK) LTD E2001 1.372% K01SC301530093F LIBERTY MUTUAL INS. CO. (UK) LTD L2706 5.490% 339218 ZURICH RE (UK) LTD Z4508 4.000% Z67300391493 NEW HAMPSHIRE INSURANCE COMPANY N4395 4.574% 3370002993 ------- 24.586% -------
58 [LOGO] 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. "WARNING: DO NOT AMEND COVERAGE WITHOUT CHECKING ALL PRIMARY AND EXCESS COVERAGES." /s/ [??] LLOYD'S POLICY SIGNING OFFICE General Manager LLOYD'S POLICY SIGNING OFFICE EMBOSSMENT APPEARS HERE ON ORIGINAL DOCUMENT 59 EXCESS DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT POLICY JOHNSON & HIGGINS This document has been checked By: Name: /s/ J. [??] Date: 1/19/94 60 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/DJ930041 Item A. Named Insured: THE GILLETTE COMPANY Principal Address: Prudential Tower Building Boston, MA 02199, USA Item B. Policy Period: From lst June 1993 to 1st June 1994 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 each Policy year. Item D. Premium: US$ 113,662.50 part of US$ 175,000.00 It is understood and agreed that a premium allocation of US$12.00 is payable by each Director or Officer of each of the Australian Subsidiaries of the Parent Company in Item A of this Declaration. Such premium allocation is a part of and not in addition to the premium amount shown above. Item E. Notification to Underwriters pursuant to Clause V. shall be given to Peterson, Ross, Schloerb & Seidel, attention Theodore A. Boundas, 200 E. Randolph Drive, Suite 7300, Chicago, Illinois 60601-6969. 61 Item F. Form numbers of endorsements attached at issuance: NMA 1256 Nuclear Incident Exclusion Clause NMA 1477 Radioactive Contamination Exclusion Clause 270.01 Amended Notification Clause Item G. Primary Policy: Primary Insurer: Certain Underwriting Members of Lloyd's and Various Insurance Companies Policy No: 757/DJ930040 Limits of Liability: US$ 10,000,000 Retentions/Deductibles: Nil/Nil/US$ 1,000,000 Participation/ Co-Insurance: Nil Policy Period: From 1st June 1993 to 1st June 1994 - -------------------------------------------------------------------------------- DATED IN LONDON: 29th July 1993 - -------------------------------------------------------------------------------- 62 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 (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 63 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: 64 (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. If during the Policy period or any optional extension period, if applicable, any claim is made against any director or officer, those insured hereunder shall, as a condition precedent to their right to be reimbursed under this Policy, give to Underwriters notice in writing as soon as practicable of any such claim, but in no event later than sixty (60) days after such claim is first made. B. If during the Policy Period or any optional extension period, if applicable, those insured hereunder first become aware of a specific wrongful acts, and if those insured hereunder shall, during such period, give written notice to Underwriters as soon as practicable of: (1) the specific wrongful act, and (2) the consequences which have or may result therefrom, and (3) the circumstances by which those insured hereunder first became aware thereof, then any claim not otherwise excluded by the terms of this Policy subsequently made against the directors and officers arising out of such wrongful act or any related 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 this Clause V. shall be given to the firm shown under Item E. of the Declarations. VI. WARRANTY CLAUSE It is warranted that the particulars and statements contained in the application for this Policy or contained in any application for any policy issued by Underwriters of which this Policy is a renewal thereof, a copy of which is attached hereto, and any material submitted therewith (which shall be retained on file by Underwriters and be deemed attached hereto, as if physically attached hereto), are the basis of this Policy and are to be considered as incorporated in to and constituting a part of this Policy. This Policy shall be deemed to be a single unitary contract and not a severable contract of insurance or a series of individual contracts of insurance with each of the persons or entities insured hereunder. 65 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 and Mount, 750 Seventh Avenue, New York, N.Y. 10019-6829, U.S.A., 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. 66 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 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 67 (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 of 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 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 68 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 Central 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 69 Attaching to and forming part of Policy No. 757/DJ930041 THE GILLETTE COMPANY AMENDED NOTIFICATION CLAUSE (270.01) In consideration of the premium charged for this Policy, it is hereby understood and agreed that Clause V. NOTIFICATION A. is deleted and the following is substituted therefor: A. If during the Policy Period or Optional Extension Period, if applicable, any Claim is made against any Director or Officer, the Company and the Directors and Officers shall, as a condition precedent to their right to be reimbursed under this policy, give to Underwriters notice in writing as soon as practicable of any such Claim, but in no event later than sixty (60) days after the date the Corporate Risk Management department is aware of such Claim. All other terms and conditions remain unchanged 70 LINES CLAUSE This Insurance, being signed for 64.950%, 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 71 (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. 72 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- 73 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- 74 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 March 15, 1993, including the following subsidiaries in which The Gillette Company has an interest of 50% or less: Gillette Continental Trading 50% Intermaghreb (80% of 51% through Gillette Interlame S.A.) Shenmei Daily Use Co. 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, 1993) Industry - Beteiligungs - Gesellschaft mbH 50% Gillette Continental Trading Co. Societe Matron 12% Gillette Interlame 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 23.5% 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 Co. State Treasury of Poland 20% Wizamet S.A.
(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). -4- 75 7. (a) Complete the following for each of the Parent Company's last four fiscal years (use consolidated figures):
($ Millions) Year 1992 1991 1990 1989 Total Consolidated Assets 4,189.9 $3,886.7 3,671.3 3,114.0 ------- ------- ------- ------- Current Assets 2,336.2 2,177.8 2,093.5 1,854.5 ------- ------- ------- ------- Current Liabilities 1,560.8 1,484.6 1,307.9 1,061.3 ------- ------- ------- ------- Shareholders Equity 1,496.4 1,157.1 265.4 70.0 ------- ------- ------ ----- Net Income 513.4 427.4 367.9 284.7 ------ ------ ------ ------ Net Income Per Share 2.32 1.94 1.60 1.35 ------ ------ ------ ------ Dividends Per Share .72 .62 .54 .48 ----- ----- ----- ----- Sales/Revenues 5,162.8 4,683.9 4,344.6 3,818.5 ------- ------- ------- ------- Long Term Debt 554.2 742.2 1,045.7 1,041.0 ------ ------ ------- ------- Short Term Debt 475.8 460.0 370.3 340.7 ------ ------ ------ ------
(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: The Company was a plaintiff in a lawsuit against Seaboard Surety concerning coverage for an advertising liability claim. The lawsuit was settled in 1990. -5- 76 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/l/92-3 6/l/92-3 6/lZ92-3 11/21/92-6/01/95 6/01/92-3 --------------------------------------------------------------------------------- Retention: $1,000,000 Corporate Reimbursement --------------------------------------------------------------------------------- Annual Premium: $476,776 $180,013 $300,000 $143,000 $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: Gillette purchased 100% of the stock of Parker Pen Holdings Limited on May 7, 1993. Refer to enclosed 8-K dated May 7, 1993 for details. None other publicly announced. (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.) (Refer to ---------- ---------- ------------ ------------ ------------ Limited $220,000,000 $450,000,000 5/7/93 8-K ---------- ---------- ------------ ------------ ------------ For Details) ---------- ---------- ------------ ------------ ------------
-6- 77 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 attached copies of (a) Press Release regarding a shelf registration dated November 24, 1992, which has not yet become effective and (b) Form S-8 filed December 23, 1992. -7- 78 (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 1992 Annual Report financial note regarding Common Stock and Additional Paid-In Capital (p. 33). 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 06/30/91 34 1/4 ----------- --------- 09/30/91 40 7/8 ----------- --------- 12/31/91 56 1/8 ----------- --------- 03/31/92 47 1/4 ----------- --------- 06/30/92 47 5/8 ----------- --------- 09/30/92 57 3/8 ----------- --------- 12/31/92 56 7/8 ----------- --------- 03/31/93 60 1/2 ----------- ---------
-8- 79 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? 53.15% (March 3, 1992 - 93) 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 except as follows (if answer is none, so state): 1) Wilkinson Sword counter claim was dismissed as part of the resolution of antitrust proceedings related to the Wilkinson business in Europe. 2) Summary of Wafer Shave Claim was attached to '91 Application. 3) The U.S. Tax Court ruled favorably on The Oral-B Tax matter mentioned in the 1992 Application. See P. 9 of the September 30, 1992 10-Q for details. 4) Certain environmental proceedings in the U.S. arising out of operations. Management considers the potential liability to be immaterial. 5) See attached 8-K re purchase of Parker Pen Holdings Limited. 80 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- 81 Signed /s/ ----------------------------- 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 May 28, 1993 ----------------------- Submitted by (Agent) ------------------- Date --------------------------- -11- 82 [SEAL] 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 0757 61104 051 08193 UX01 0908 0757 61104 051 08193 343 344 ___________________________________________________________________________________________________________________________________ AMOUNT, PERCENTAGE SYNDICATE UNDERWRITER'S PAGE AMOUNT, PERCENTAGE SYNDICATE UNDERWRITER'S PAGE OR PROPORTION REFERENCE 1 OR PROPORTION REFERENCE 2 PERCENT PERCENT 12.50 1068 9300793DOGBH 1.00 923 QD567K93B64F 1.00 1145 681X35406X93 0.75 724 NA4395326M21 6.00 1038 9300770DOGA1 0.35 1003 LTXSM0203010 2.00 219 954P3137 0.05 573 81230531WNY 6.00 219 254P3137 1.50 435 13500400 4.00 79 322FB402564B 10.00 1067 9360458DOGA1 5.00 406 C14XWD05003B 0.50 1066 9300154DOGA1 7.50 1173 ALDTAA40903E 1.50 205 481NO2228BNA THE LIST OF UPDERWRITING MEMBERS 1.00 1047 Y0147Z93A OF LLOYDS IS NUMBERED 1993/ 8 1.00 588 11E23291PO3 1.00 375 7233NO9326NN 1.00 204 079504220001 0.30 212 079504220001 1.00 947 QD567K93A64X ___________________________________________________________________________________________________________________________________ TOTAL LINE NO. OF SYND. FOR LPSO USE ONLY TOTAL LINE NO. OF SYND. FOR LPSO USE ONLY 64.95 22 NUX5 14716
83 COMPANIES INSURANCE POLICY WHEREAS the Assured named in the Schedule having paid the Premium specified in the Schedule to Us, the Insurance Companies subscribing to this Policy (hereinafter collectively referred to as the "Insurers"), to insure against loss as stated herein during the period of insurance stated in the Schedule. NOW KNOW YE that We the Insurers do hereby bind ourselves each COMPANY for itself and not one for another, to pay or make good to the Assured or the Assured's Executors, Administrators and Assigns, all such loss not exceeding the sum insured or other limits as stated in the Schedule that the Assured may sustain during the said period after such loss is proved and that the liability of each of Us, the Insurers, shall be limited to the individual proportion set against our name. Warranted that this policy shall run concurrently with and shall be subject to the same gross rate, terms, conditions, definitions and Endorsements, if any, approved by the Insurers, appearing in the Policy numbered and subscribed by the Warranty Underwriters/Company stated in the Schedule and covering the identical subject matter and risk. 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 I, being a representative of the Leading Company and authorized by the said Company and by all other Companies appearing hereon to sign this Policy on their behalf, have hereunto subscribed my name this 16th day of August, 1993. [SEAL] 84 POLICY NO: 757/DJ930041 THE SCHEDULE THE NAME OF THE ASSURED: THE GILLETTE COMPANY OF: Prudential Tower Building, Boston, MA 02199, USA PREMIUM: US$7,875.00 Part of US$175,000.00 LIMIT OF LIABILITY: US$10,000,000 in the aggregate each Policy year which is excess of US$10,000,000 in the aggregate each Policy year. Which is excess of: - US$NIL/US$NIL Directors and Officers Liability US$1,000,000 Reimbursement Liability. THE PERILS AND 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 1993 TO: 1st June 1994 Both days at 12.01 a.m. standard time. DETAILS OF WARRANTY POLICY: NUMBER: 757/DJ930041 WARRANTY UNDERWRITERS: Certain Underwriting members at Lloyd's of London. This Policy, being for 4.5000% of 100% insures its pro-rata proportion of the Limit of Liability as set forth above and the individual proportions signed hereon are percentages of the Limit of Liability as set forth above. 85
- ------------------------------------------------------------------------------ The Insurers Proportion Reference - ------------------------------------------------------------------------------ COMMERCIAL UNION ASSURANCE COMPANY PLC 1.5000% A9235596 (THE LEADING COMPANY) UNITED NATIONAL INSURANCE COMPANY (PER HARRIS & DIXON LTD) 3.0000% NR933316
86 COMPANIES INSURANCE POLICY WHEREAS the Assured named in the Schedule having paid the Premium specified in the Schedule to Us, the Insurance Companies subscribing to this Policy (hereinafter collectively referred to as the "Insurers"), to insure against loss as stated herein during the period of insurance stated in the Schedule. NOW KNOW YE that We the Insurers do hereby bind ourselves each COMPANY for itself and not one for another, to pay or make good to the Assured or the Assured's Executors, Administrators and Assigns, all such loss not exceeding the sum insured or other limits as stated in the Schedule that the Assured may sustain during the said period after such loss is proved and that the liability of each of Us, the Insurers, shall be limited to the individual proportion set against our name. Warranted that this policy shall run concurrently with and shall be subject to the same gross rate, terms, conditions, definitions and Endorsements, if any, approved by the Insurers, appearing in the Policy numbered and subscribed by the Warranty Underwriters/Company stated in the Schedule and covering the identical subject matter and risk. 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 I, being a representative of the Leading Company and authorized by the said Company and by all other Companies appearing hereon to sign this Policy on their behalf, have hereunto subscribed my name this 20th day of August, 1993 THREADNEEDLE INSURANCE COMPANY LIMITED /s/ 87 POLICY NO: 757/DJ930041 THE SCHEDULE THE NAME OF THE ASSURED: THE GILLETTE COMPANY OF: Prudential Tower Building, Boston, MA 02199, USA PREMIUM: US$437.50 Part of US$175,000.00 LIMIT OF LIABILITY: US$10,000,000 in the aggregate each Policy year which is excess of US$10,000,000 in the aggregate each Policy year. Which is excess of:- US$NIL/US$NIL Directors and Officers Liability. US$1,000,000 Reimbursement Liability. THE PERILS AND 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 1993 TO: 1st June 1994 Both days at 12.01 a.m. standard time. DETAILS OF WARRANTY POLICY: NUMBER: 757/DJ930041 WARRANTY UNDERWRITERS: Certain Underwriting members at Lloyd's of London. This Policy, being for 0.2500% of 100% insures its pro-rata proportion of the Limit of Liability as set forth above and the individual proportions signed hereon are percentages of the Limit of Liability as set forth above. 88
- ------------------------------------------------------------------------------- THE INSURERS PROPORTION REFERENCE - ------------------------------------------------------------------------------- THREADNEEDLE INSURANCE COMPANY LTD 0.2500% 25936043600
89 COMPANIES INSURANCE POLICY WHEREAS the Assured named in the Schedule having paid the Premium specified in the Schedule to Us, the Insurance Companies subscribing to this Policy (hereinafter collectively referred to as the "Insurers"), to insure against loss as stated herein during the period of insurance stated in the Schedule. NOW KNOW YE that We the Insurers do hereby bind ourselves each COMPANY for itself and not one for another, to pay or make good to the Assured or the Assured's Executors, Administrators and Assigns, all such loss not exceeding the sum insured or other limits as stated in the Schedule that the Assured may sustain during the said period after such loss is proved and that the liability of each of Us, the Insurers, shall be limited to the individual proportion set against our name. Warranted that this policy shall run concurrently with and shall be subject to the same gross rate, terms, conditions, definitions and Endorsements, if any, approved by the Insurers, appearing in the Policy numbered and subscribed by the Warranty Underwriters/Company stated in the Schedule and covering the identical subject matter and risk. 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 I, being a representative of the Leading Company and authorized by the said Company and by all other Companies appearing hereon to sign this Policy on their behalf, have hereunto subscribed my name this 26th day of August, 1993 /s/ [SEAL] 90 POLICY NO: 757/DJ930041 THE SCHEDULE THE NAME OF THE ASSURED: THE GILLETTE COMPANY OF: Prudential Tower Building, Boston, MA 02199, USA PREMIUM: US$11,375.00 Part of US$175,000.00 LIMIT OF LIABILITY: US$10,000,000 in the aggregate each Policy year. Which is excess of US$10,000,000 in the aggregate each Policy year. Which is excess of:- US$NIL/US$NIL Directors and Officers Liability US$1,000,000 Reimbursement Liability. THE PERILS AND 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 1993 TO: 1st June 1994 Both days at 12.01 a.m. standard time. DETAILS OF WARRANTY POLICY: NUMBER: 757/DJ930041 WARRANTY UNDERWRITERS: Certain Underwriting members at Lloyd's of London. This Policy, being for 6.500% of 100% insures its pro-rata proportion of the Limit of Liability as set forth above and the individual proportions signed hereon are percentages of the Limit of Liability as set forth above. /s/ 26 Aug. 93 91
- -------------------------------------------------------------------------------- THE INSURERS PROPORTION REFERENCE - -------------------------------------------------------------------------------- CHUBB INSURANCE COMPANY OF EUROPE 6.500% 81424330
[SEAL] /s/ 26 Aug. 93 92 J (A) FORM THE INSTITUTE OF LONDON UNDERWRITERS [LOGO] COMPANIES POLICY WE, THE COMPANIES, 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 damage liability or expense in the proportions and manner hereinafter provided. Each Company shall be liable only for its own respective proportion. 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 and Secretary of The Institute of London Underwriters has subscribed his name on behalf of each Company. /s/ ........................................ CHIEF EXECUTIVE General Manager and Secretary The Institute of London Underwriters 93 SCHEDULE POLICY NUMBER 757/DJ930041 NAME AND ADDRESS OF THE ASSURED THE GILLETTE COMPANY Prudential Tower Building Boston MA 02199 USA THE PERIOD OF INSURANCE From 1st June 1993 to 1st June 1994 at 12.01 a.m. Standard Time at the address stated above. THE RISK AND SUM INSURED HEREUNDER 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. 0.500% of US$10,000,000 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. Warranted that this Policy shall run concurrently with, and shall be subject to the same terms, conditions, limitations and endorsements as are more fully set forth in or as may be added to Policy No.757/DJ930041 subscribed by Lloyd's Underwriters covering the identical subject matter and risk. PREMIUM US$875.00 part of US$175,000.00 94 [STAMP] THE INSTITUTE OF LONDON UNDERWRITERS ILU REFERENCE PMC 93 223157 24 8 93 PROPORTION CODE COMPANY AND REFERENCE 0.5000000 3030/01/8 SPHERE DRAKE INSURANCE PLC NO 1. A/D 93LJBTD07814 TOTAL (T) or FORWARD (F) 0,5000000% T 95 LIRMA POLICY IN CONSIDERATION of the Insured named in the Schedule hereto having paid or promised to pay the premium stated in the said Schedule to the Insurers named herein who have hereunto subscribed their names ("the Insurers"). THE INSURERS HEREBY SEVERALLY AGREE each for the proportion set against its own name to indemnify the Insured or the Insured's Executors and Administrators against loss, damage or liability to the extent and in the manner set forth herein. Provided that the aggregate liability of the Insurers shall not exceed the Sum Insured or other limits as are set forth in the Schedule. If the Insured 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 Director of Policy Signing Services of LONDON INSURANCE AND REINSURANCE MARKET ASSOCIATION ("LIRMA") has subscribed his name on behalf of each of the LIRMA Companies and (where the Companies Collective Signing Agreement ("CCSA") is being implemented) on behalf of the Leading CCSA Company which is a LIRMA member and authorised to sign this Policy (either itself or by delegation to LIRMA) on behalf of all the other CCSA Companies. Signed /s/ ............................................... Director of Policy Signing Services Date as in the Schedule. 96 DATE: 20th July 1993 POLICY NO: 757/DJ930041 THE SCHEDULE THE INSURED: THE GILLETTE COMPANY PREMIUM: US$40,775.00 Part of US$175,000.00 LIMITS OF LIABILITY: 23.300% of US$10,000,000 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 1993 TO: 1st June 1994 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/DJ930041 issued by certain underwriting members at Lloyd's of London covering the identical subject matter and risk. 97
LIRMA COMPANY THE INSURERS NUMBER PROPORTION REFERENCE - -------------------------------------------------------------------------- CNA REINSURANCE OF LONDON LTD C4009 5.0000% 3546391 AEGON INS CO. (UK) LTD E2001 1.0000% K01SC301540093G ZURICH REINSURANCE (UK) LTD Z4508 8.3300% Z67115993193 NEW HAMPSHIRE INS CO. N4395 8.9700% 3370002393 -------- 23.300% --------
98 [LOGO] THIS IS AN EXCESS CLAIMS MADE 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 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 PRINCIPAL ADDRESS: ITEM 2. POLICY PERIOD: The Gillette Company (a) From 6/1/1993 Prudential Tower Building (b) To 6/1/1994 Boston, MA 02199 at 12:01 a.m. Standard Time both dates at the Principal Address in Item 1. ITEM 3. LIMIT OF LIABILITY (Inclusive of DEFENSE EXPENSES): $20,000,000.00 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 727/DJ930040 $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 727/DJ930041 $10,000,000.00
ITEM 5. PREMIUM: $300,000.00 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. 0. 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 (Attoney-in-Fact) 02/03/1994 /s/ INSURED'S COPY F-1727-A (12-90) 99 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 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 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-301.0 Endorsement No. 1 (11-89) 100 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 charged, the phrase "thirty (30) days" in the 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. 2 101 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 $ 4,189,900,000 - Liabilities $ 2,693,500,000 Date: 12/31/92 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. (See April 15, 1993 Press Release and 1992 Annual Report.) 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 ---- ---- --- --- ---- --- --- ---- --- --- ---- --- --- 1992 54 7/8 46 3/8 23.8 52 1/2 43 7/8 22.5 58 3/4 47 1/2 25.7 61 1/4 54 1/2 24.5 ---- ------ ------ ---- ------ ------ ---- ------ ------ ---- ------ ------ ----
102 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. Mr. Michael B. Gifford elected to Board of Directors 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? It 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. 1993 Audit Plan attached. 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 X No 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? 4 times (1992) e) Have there been any changes 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 (ii) The composition of the audit committee or the audit department; or Yes (iii) The scope of the audit procedures. No If yes, provide details in a separate attachment to this application. (ii) Current committee consists of Mr. Steta, Mr. Buffet, Mrs. Goldberg, Mr. Gantz, Mr. Gifford, and Mr. Turley. Mr. Trowbridge is no longer a member of the committee. 103 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 - (10.9%) 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 implementation to occur within the next 12 months? __Yes __No X Not Applicable 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 ___ 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 ___ No None Other Publicly See 8-K re acquisition of stock of Announced Parker Pen Holdings Limited. c) Sale, distribution or divestiture of any assets other than in the ordinary course of business involving more than 10% of Applicant's consolidated assets. __Yes __ 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. X Yes ___ No See Press Release dated November 24, 1992, re shelf registration for issuance of debt securities. (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 B3(e) above and attached form S-8 filed December 23, 1992. Also, registration statements may be filed in the future with reference to shares issued to fulfill the requirements of stockholder approved employee benefit plans. 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 104 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 1O-K report, 10-Q reports flied 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. Text of the Chairman of the Board's April 15, 1993 Annual Meeting presentation submitted in lieu of the 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 1991 KPMG letters attached. Summary of 1992 letters will be available after June 1, 1993. 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 1992 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. 105 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 $ 3,887,000,000 Liabilities $ 2,730,000,000 Date: 12/31/91 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. (See Attachments re increase.) 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 1991* 2nd Quarter 1991* 3rd Quarter 1991 4th Quarter 1991 ----------- ---------------- ----------- ---------------- Year High Low P/E High Low P/E High Low P/E High Low P/E ---- ---- --- --- ---- --- --- ---- --- --- ---- --- --- 1991 39 3/8 28 1/8 22.2 40 3/8 33 1/2 19.2 44 1/4 33 7/8 22.5 56 1/8 37 3/4 28.9 ---- ------ ------ ---- ------ ------ ---- ------ ------ ---- ------ ------ ---- * After 2 for 1 stock split effective 05/01/91.
106 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. Mr. Wilbur H. Gantz elected to Board of Directors 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. 1992 Audit Plan attached. b) Are there any areas in the audit procedures of the Applicant that the outside auditors have criticized, or recommended changing that have not been changed? __ Yes X No 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 changes 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 (ii) The composition of the audit committee or the audit department; or Yes (iii) The scope of the audit procedures. No If yes, provide details in a separate attachment to this application. (ii) Current committee consists of Mr. Steta (Chair), Mr. Buffet, Mrs. Goldberg, Mr. Trowbridge, and Mr. Gantz. Mr. Jacobi is no longer a member of the committee. 107 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 - (10.9%) 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 implementation to occur within the next 12 months? __ Yes __ No X Not Applicable 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 ___ 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 __ No None 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 consolidated assets. ___ Yes ___ 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? __ Yes __ No Registration statements may be filed in the future with reference to shares issued to fulfill the requirements of stockholder approved employee benefit plans. 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 108 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. e) Any reports prepared by outside financial analysts or consultants within the past 12 months. f) Latest CPA letter to management on internal controls and any written response thereto. 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 1991 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. 109 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 May 8, 1992 BY (Chairman and/or President Signature TITLE DATE 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 Center Plaza Boston, MA 02108 ADDRESS (No. Street, City, State, and Zip Code) 110 [LOGO] 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 $3,705.5 Billion Liabilities $2,750.6 Billion Date: 3/31/91 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. (See Attachment Re Increase) b) Provide the price range per share and closing P/E ratio for the Applicant's common stock for each quarter of the last four quarters:
1st Quarter - 1991 2nd Quarter - 1990 3rd Quarter - 1990 4th Quarter - 1990 ----------- ----------- ----------- ----------- Year High Low P/E High Low P/E High Low P/E High Low P/E ---- ---- --- --- ---- --- --- ---- --- --- ---- --- --- 78 3/4 56 3/8 22.2 60 5/8 50 5/8 22.0 65# 47 3/8 17.5 63 1/8 50# 19.6 ---- ------ ------ ---- ------ ------ ---- --- ------ ---- ------ --- ----
111 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. 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 implementation to occur within the next 12 months? ___ Yes ___ No X Not Applicable 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 of 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 ___ 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 ___ No None 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 consolidated assets. ___ Yes ___ 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 (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? __ Yes X No If yes, attach a copy of the registration statement. 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? X Yes ___ No If yes, provide complete details in an attachment to this application. Refer to enclosed Press Release concerning redemption of Series B Preferred Stock held by Berkshire Hathaway. Also, see 1990 Annual Report note on "Employee Stock Ownership Plan", page 22. 112 C 1. Have there been any fidelity bond claims greater than $100,00 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 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. Mr. Zeien's April 18, 1991 presentation attached. e) Any reports prepared by outside financial analysts or consultants within the past 12 months. Representative reports attached. f) Latest CPA letter to management on internal controls and any written response thereto. Summary to be submitted +/- 7/1 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 1990 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 11/18/87, 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. 113 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 APPLICATN 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 $4,189,900,000 Liabilities $2,693,500,000 Date: 12/31/92 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. (See April 15, 1993 Press Release and 1992 Annual Report.) 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 ---- ---- --- --- ---- --- --- ---- --- --- ---- --- --- 1992 54 7/8 46 3/8 23.8 52 1/2 43 7/8 22.5 58 3/4 47 1/2 25.7 61 1/4 54 1/2 24.5 ---- ------ ------ ---- ------ ------ ---- ------ ------ ---- ------ ------ ----
114 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 - (10.9%) ------------------------------------------------------------------------- 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 implementation to occur within the next 12 months? ___ Yes ___ No X Not Applicable 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 ___ 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 ___ No None Other Publicly Announced See 8-K re acquisition of stock of Parker Pen Holdings Limited. c) Sale, distribution or divestiture of any assets other than in the ordinary course of business involving more than 10% of Applicant's consolidated assets. ___ Yes ___ 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. X Yes ___ No See Press Release dated November 24, 1992, re shelf registration issuance of debt securities. 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 B3(e) above and attached form S-8 filed December 23,1992. Also, registration statements may be filed in the future with reference to shares issued to fulfill the requirements of stockholder approved employee benefit plans. 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 115 C 1. Have there been any fidelity bond claims greater than $100,000 in the last 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 S-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. Text of the Chairman of the Board's April 15, 1993 Annual Meeting presentation submitted in lieu of the 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 1991 KPMG letters attached. Summary of 1992 letters will be available after June 1, 1993. 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 1992 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. 116 ACTIVITY REPORT TRANSMISSION OK TN # 7307 CONNECTION TEL 16172273107 CONNECTION ID JOHNSON & HIGGIN START TIME 05/25 13:24 USAGE TIME 00' 57 PAGES 2
117 EXECUTIVE RISK MANAGEMENT 82 HOPMEADOW STREET P.O. BOX 2002 SIMSBURY, CT 06070 FAX COVER SHEET (IF THERE IS A PROBLEM WITH THIS FAX PLEASE CALL (203)244-8900) TO: Joan Goldberg FROM: S. Acorn FAX#: 617-227-3107 NUMBER OF PAGES INCLUDING THIS PAGE ------- MESSAGE: As requested 118 [JOHNSON & HIGGINS LETTERHEAD] May 25, 1993 TELEFAX Ms. Stephanie Acorn Executive Risk Management Associates 82 Hopmeadow Street P.O. Box 2002 Simsbury, CT 06070 Re: The Gillette Company Excess D&O 6/1/93 renewal date Dear Stephanie: Thanks for your May 21, 1993 fax outlining the renewal terms. It conforms with our discussion, except with respect to the requirement that the completed and signed application be in your hands prior to binding. You agreed that we could get it to you sometime during the week of June 5th. Would you mind sending out a revised indication or alternatively a fax confirming that it is coverage will be bound subject to your receipt, review and acceptance of the signed application sometime during the week of the 5th. We are still trying to tie up one or two loose ends with London underwriters and will be In touch once we finalize the underlying program. Thanks for getting back to me at your earliest convenience. Sincerely, /S/ Joan Goldberg - ----------------- Joan Goldberg Vice President [5/25/93 agreed /S/ S. T. Acorn ------------------------------- [UNISON LOGO] 119 [AETNA LETTERHEAD] 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 SMALL 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 $ 3,705.5 Billion Liabilities $2,750.6 Billion Date: 3/31/91 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. (SEE ATTACHMENT RE INCREASE) b) Provide the price range per share and closing P/E ratio for the Applicant's common stock for each quarter of the last four quarters:
1st Quarter - 1991 2nd Quarter - 1990 3rd Quarter - 1990 4th Quarter - 1990 ----------- ----------- ----------- ----------- Year High Low P/E High Low P/E High Low P/E High Low P/E ---- ---- --- --- ---- --- --- ---- --- --- ---- --- --- 78 3/4 56 3/8 22.2 60 5/8 50 5/8 22.0 65 1/4 47 3/8 17.5 63 1/8 50 1/2 19.6
120 B 1. As an attachment to this applications 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. 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 implementation to occur within the next 12 months? [ ] Yes [ ] No [X] Not Applicable 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 of 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 [ ] 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 [ ] No None 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 consolidated assets. [ ] Yes [ ] 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? [ ] Yes [X] No If yes, attach a copy of the registration statement. 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 [X] Yes [ ] No If yes, provide complete details in an attachment to this application. Refer to enclosed Press Release concerning redemption of Series B Preferred Stock held by Berkshire Hathaway. Also, see 1990 Annual Report note on 'Employee Stock Ownership Plan", page 22. 3 121 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. Mr. Zeien's April 18, 1991 presentation attached. e) Any reports prepared by outside financial analysts or consultants within the past 12 months. Representative reports attached f) Latest CPA letter to management on internal controls and any written response thereto. Summary to be submitted +/-7/1 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 1990 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 STATEMENT 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 11/18/87, 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. 4 122 [AETNA LOGO] 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 AGREE 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 if this condition had 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. 5 123 COPY CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 18 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 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, area 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 ccmmitted, 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 /s/ Terry F. Smith -------------------------------------- Authorized Representative 124 [COPY] CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 17 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 M. 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 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 125 (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 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/ Terry F. Smith ---------------------------------------------- Signature of Authorized Representative 126 COPY CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 16 Effective Date of Endorsement August 1, 1990 -------------- -------------------- Attached to and forming part of POLICY No. GS-212C ------------------------------------- COMPANY THE GILLETTE COMPANY ----------------------------------------------------------------------- It is hereby understood and agreed that section (H) of the EXCESS AND DIFFERENCE IN CONDITIONS ENDORSEMENT (Endorsement # 2) is deleted in its entirety and replaced with the following: (H) Schedule of Underlying Directors and officers insurance:
Policy Policy Layer Carrier Number Year Limits Retention ----- ------- ------ ---- ------ --------- Primary London 576/P39008500 8/1/90-6/1/91 $20M NIL/NIL/$1,000,000 576/P39008600 1st Excess Aetna 095LB100654391BCA 8/1/90-6/1/91 $20M Underlying
All other terms and conditions remain unchanged. By /s/ Terry F. Smith -------------------------------------- Authorized Representative 127 COPY CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 15 EFFECTIVE DATE OF ENDORSEMENT JUNE 1, 1992 ----------------- ----------------- ATTACHED TO AND FORMING PART OF POLICY NO. GS-212C ------------------------------------- COMPANY THE GILLETTE COMPANY ----------------------------------------------------------------------- It is hereby understood and agreed that section (H) of the EXCESS AND DIFFERENCE IN CONDITIONS ENDORSEMENT (Endorsement # 2) is deleted in its entirety and replaced with the following: (H) Schedule of Underlying Directors and Officers Insurance:
Policy Policy Layer Carrier Number Year Limits Retention ----- ------- ------ ---- ------ --------- Primary London 757/W920040 6/1/92-93 $10M NIL/NIL/$1,000,000 1st Excess London 757/W920041 6/1/92-93 $10M Underlying 2nd Excess Aetna 095LB100654391BCA 6/1/92-93 $20M "
All other terms and conditions remain unchanged. By /s/ Terry F. Smith ------------------------------------- Authorized Representative 128 COPY CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 14 EFFECTIVE DATE OF ENDORSEMENT JUNE 1, 1992 ------------ --------------------- 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. AUTOMATIC EXTENSION ENDORSEMENT (Extension Premium: $155,000) In consideration of payment of the above-referenced premium, it is understood and agreed that this POLICY shall be continued and the POLICY PERIOD shall be extended to June 1, 1995 12:01 A.M. Standard Time at the address of the Company as stated in Item I of the Declarations It is further understood and agreed that the above-referenced premium has been allocated and paid as follows:
Policy Year Following Effective Date of this Endorsement Premium ------------------------ ------- Year 92-93 125,000 Year 93-94 150,000 Year 94-95 155,000 -------- $ 430,000 Less Prepaid Premium on hand $ 285,000 -------- Additional Premium $ 145,000 ========
By /s/ Terry F. Smith ------------------------------------- Authorized Representative 129 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 13 EFFECTIVE DATE OF ENDORSEMENT JUNE 1, 1991 ATTACHED TO AND FORMING PART OF POLICY NO. GS-212C COMPANY E GILLETTE COMPANY It is hereby understood and agreed that section (H) of the EXCESS AND DIFFERENCE IN CONDITIONS ENDORSEMENT (Endorsement #2) is deleted in its entirety and replaced with the following: (H) Schedule of Underlying Directors and Officers Insurance:
Policy Policy Layer Carrier Number Year Limits Retention ----- ------- ------ ------ ------ --------- Primary London 757/DJ910040 6/1/91-92 $20M NIL/NIL/$1,000,000 757/DJ910041 1st Excess Aetna 095LB100654391BCA 6/l/91-92 $20M Underlying
All other terms and conditions remain unchanged. By /s/ ------------------------- Authorized Representative 130 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 12. 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. AUTOMATIC EXTENSION ENDORSEMENT (Extension Premium: $150,000) In consideration of payment of the above-referenced premium, it is understood and agreed that this POLICY shall be continued and the POLICY PERIOD shall be extended to June 1, 1994 12:01 A.M. Standard Time at the address of the Company as stated in Item I of the Declarations. It is further understood and agreed that the above-referenced premium has been allocated and paid as follows:
Policy Year Following Effective Date of this Endorsement Premium ------------------------ ------- Year 91-92 125,000 Year 92-93 135,000 Year 93-94 150,000 -------- $410,000 Less Prepaid Premium on hand $270,000 -------- Additional Premium $140,000 ========
By /s/ ------------------------- Authorized Representative 131 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 11 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 (A) Subject to the sublimit of liability set forth in (C) below, the definition of "INSUREDS" is hereby extended to include: (1) all directors, officers, or employees of the COMPANY who were, are, or shall be serving as directors, officers, trustees, or governors for any eleemosynary institution, non-profit organization, industry association, foundation, or business corporation, if: (a) such activity is part of their regularly assigned duties or is consistent with COMPANY policy, and (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)(1) above, at the time the WRONGFUL ACT upon which such CLAIMS are based was committed, 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 and/or any indemnification provided for, to or by the eleemosynary institution, association, foundation, or business corporation, any conditions in such other insurance notwithstanding; and (2) is not to be construed to extend to the outside organization in which the INSURED is serving or has served, nor to any other director, officer, or employee of such outside organization. (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 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 for each POLICY YEAR, and that this Endorsement extends coverage with a sublimit which further limits the INSURER'S liability and 132 does not increase the INSURER'S maximum liability beyond the LIMIT OF LIABILITY stated in Item III the Declarations. (D) For purposes of subpart (A)(2) above, the definitions of "WRONGFUL ACT" is hereby modified to replace the word "COMPANY" with the words "the eleemosynary or non-profit institution, industry association, foundation, or business corporation" wherever the word "COMPANY" appears. /s/ -------------------------------------- Signature of Authorized Representative 133 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 10 EFFECTIVE DATE OF ENDORSEMENT AUGUST 20, 1990 ATTACHED TO AND FORMING PART OF POLICY NO. GS-212C COMPANY THE GILLETTE COMPANY In consideration of the additional premium of $76,300 it is understood and agreed that the policy period on endorsement no. 8 is amended to read as follows:- ....Policy Period shall be extended to June 1, 1993, 12:01 a.m. standard time.... All other terms and conditions remain unchanged. By /s/ ------------------------- Authorized Representative 134 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 9 EFFECTIVE DATE OF ENDORSEMENT NOVEMBER 21, 1989 ATTACHED TO AND FORMING PART OF POLICY NO. GS-212C COMPANY The Gillette Company It is hereby understood and agreed that section (H) of the EXCESS AND DIFFERENCE IN CONDITIONS ENDORSEMENT (Endorsement #6) is deleted in its entirety and replaced with the following: (H) Schedule of Underlying Directors and Officers Insurance:
Policy Policy Layer Carrier Number Year Limits Retention - ----- ------- ------ ---- ------ --------- Primary London 576/P29008500) 11/21/89-90 $20M $2500/$25,000/$1,000,000 576/P29008600) 1st Excess Aetna 095LB100435854BCA 11/21/89-90 $20M Underlying
All other terms and conditions remain unchanged. By /s/ ------------------------- Authorized Representative 135 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 8 EFFECTIVE DATE OF ENDORSEMENT NOVEMBER 21, 1989 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. AUTOMATIC EXTENSION ENDORSEMENT ( Extension Premium: $ 135,000 ) In consideration of payment of the above-referenced premium, it is understood and agreed that this POLICY shall be continued and the POLICY PERIOD shall be extended to November 21, 1992, 12:01 A.M. Standard Time at the address of the Company as stated in Item I of the Declarations. It is further understood and agreed that the above-referenced premium has been allocated and paid as follows:
Policy Year Following Effective Date of This Endorsement Premium ------------------------ ------- Year 89 - 90 130,000 Year 90 - 91 135,000 Year 91 - 92 135,000 -------- $400,000 Less Prepaid Premium On Hand $275,000 -------- Additional Premium $125,000 ========
By /S/ ------------------------- Authorized Representative 136 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 7 EFFECTIVE DATE OF ENDORSEMENT SEPTEMBER 27, 1989 ATTACHED TO AND FORMING PART OF POLICY NO. GS-212C COMPANY THE GILLETTE COMPANY IT IS HEREBY UNDERSTOOD AND AGREED THAT ENDORSEMENT NO. 4 (OUTSIDE POSITIONS ENDORSEMENT) IS DELETED IN ITS ENTIRETY. All other terms and conditions remain unchanged. By /s/ ------------------------- Authorized Representative 137 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 6 EFFECTIVE DATE OF ENDORSEMENT November 21, 1988 ATTACHED TO AND FORMING PART OF POLICY NO. GS-212C COMPANY THE GILLETTE COMPANY It is hereby understood and agreed that section (H) of the EXCESS AND DIFFERENCE IN CONDITIONS ENDORSEMENT (Endorsement # 2) is deleted in its entirety and replaced with the following: (H) Schedule of Underlying Directors and Officers Insurance:
Policy Policy Layer Carrier Number Year Limits Retention - ----- ------- ------ ---- ------ --------- Primary Lloyds & Cos. P190085 11/21/88-89 $10,000,000 5,000/30,000/lM lst Excess Lloyds & Cos. P190086 11/21/88-89 $10,000,000 Underlying 2nd Excess Aetna Casualty 095LB100435854BCA 11/21/88-89 $20,000,000 Underlying
All other terms and conditions remain unchanged. By ------------------------- Authorized Representative 138 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 5 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, Gillette International, Asia-Pacific Group - President, Blade and Razor Group, North America Division - President, Oral-B Laboratories - President, Jafra Cosmetics - President Directeur General, Financiere Gillette Societe Participation - President, Blade and Razor Group, European Division - President, Personal Care Group, European Division - President, Stationery Products Group, European Division - President, Stationery Products Group, North America Division - President, Personal Care 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 139 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 4 EFFECTIVE DATE OF ENDORSEMENT November 21, 1988 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 (A) Subject to the sublimit of liability set forth in (C) below, the definition of "INSUREDS" is hereby extended to include: (1) all directors, officers, or employees of the COMPANY who were, are, or shall be serving as directors, officers, trustees, or governors for any eleemosynary institution, non-profit organization, industry association, foundation, or business corporation, if: (a) such activity is part of their regularly assigned duties or is consistent with COMPANY policy, and (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)(1) above, at the time the WRONGFUL ACT upon which such CLAIMS are based was committed, 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 and/or any indemnification provided for, to or by the eleemosynary institution, association, foundation, or business corporation, any conditions in such other insurance notwithstanding; and (2) is not to be construed to extend to the outside organization in which the INSURED is serving or has served, nor to any other director, officer, or employee of such outside organization. (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 paid on behalf of all INSUREDS arising from all CLAIMS first made during eachPOLICY YEAR. It is understood that the amount stated in Item III of the Declarations is the maximum amount payable for each POLICY YEAR. and that this Endorsement extends coverage with a sublimit which further limits the INSURER'S liability and 140 does not increase the INSURER'S maximum liability beyond the LIMIT OF LIABILITY stated in Item III the Declarations. (D) For purposes of subpart (A)(2) above, the definitions of "WRONGFUL ACT" is hereby modified to replace the word "COMPANY" with the words "the eleemosynary or non-profit institution, industry association, foundation, or business corporation" wherever the word "COMPANY" appears. /s/ -------------------------------------- Signature of Authorized Representative 141 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 3 EFFECTIVE DATE OF ENDORSEMENT November 21, 1988 ATTACHED TO AND FORMING PART OF POLICY NO. GS-212C COMPANY THE GILLETTE COMPANY In accordance with Clause 7 (Automatic Extension) of this POLICY and in payment of the additional premium as shown below, the POLICY PERIOD is amended to read from November 21, 1988 to November 21, 1991, 12:01 a.m. Standard Time at the address of the COMPANY referred to herein. The premium for the POLICY PERIOD above stated is as follows: Year 2 - $ 130,000 Year 3 - $ 140,000 Year 4 - $ 135,000 ---------- $ 405,000 Premium prepaid for Years 2-3 - $ 280,000 ---------- Additional premium $ 125,000 ==========
All other term and conditions remain unchanged. By /s/ [?] ------------------------------------ Authorized Representative 142 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT No. 2 EFFECTIVE DATE OF ENDORSEMENT July 21, 1988 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. EXCESS AND DIFFERENCE IN CONDITIONS ENDORSEMENT (A) Clause 1 (Insuring Clause) of this POLICY is hereby deleted in its entirety and replaced with the following: 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 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 while acting in their individual or collective capacities as directors or officers, 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 scheduled below, and not exceeding the LIMIT OF LIABILITY. (b) Regardless of the time of payment of LOSS by the INSURER, the LIMIT OF LIABILITY shall be the maximum liability of the INSURER for all LOSS arising from all CLAIMS first made during each POLICY YEAR. (c) The INSURER shall not be liable for any 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 any part of the LOSS; or (3) the limit(s) of liability of the Underlying Insurance has been exhausted or reduced by reason of LOSSES paid thereunder. (d) In the event that: (1) part or 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 the reunder: or 143 (2) part of a LOSS is paid by the Underlying Insurance, then the liability of the INSURER for the LOSS shall exclude any required retention and coininsurance amounts under such Underlying Insurance. (e) In the event that the INSUREDS 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, Clause 11 (Currency), Clause 1 4 (LOSS Provisions), and Clause 17 (Representation), and the Clauses in this endorsement, this POLICY is amended to follow and be subject to the terms and conditions of such Underlying Insurance in respect of such LOSS. Notwithstanding any provision of this endorsement to the contrary, the INSURER shall not cover the COMPANY for any amounts the COMPANY pays to indemnify, or pays on behalf of, the INSUREDS for any LOSS or expense. (B) Clause 4 (Appeals) of this POLICY is hereby deleted in its entirety and replaced with the following: 4. APPEALS In the event of the INSUREDS or the insurer(s) of the Underlying Insurance elect not to appeal a judgment, the INSURER may elect to make such appeal at its own expense, and shall be liable for any increased award, taxable costs and disbursements and any additional interest incidental to such appeal, to the extent such payments are not covered by other valid and collectible insurance. (C) Clause 6 (Assistance and Cooperation) of this POLICY is hereby deleted in its entirety and replaced with the following: 6. ASSISTANCE AND COOPERATION The INSURER has no duty to defend any CLAIM and shall not be called upon to assume charge of the investigation, settlement or defense of any demand, suit or proceeding, but the INSURER shall have the right and shall be given the opportunity to associate with the INSUREDS, the COMPANY, and the insurer(s) of the Underlying Insurance in the investigation, settlement, defense and control of any demand, suit or proceeding relative to any WRONGFUL ACT where the demand, suit or proceeding involves or may involve the INSURER. At all times, the INSUREDS and the COMPANY and the INSURER shall cooperate in the investigation, settlement, and defense of such demand, suit or proceeding. The failure of the COMPANY to assist and cooperate with the INSURER shall not impair the rights of the INSUREDS under this POLICY. (D) Clause 10 (Payment of LOSS) is hereby deleted in its entirety and replaced with the following: 10. PAYMENT OF LOSS Except in those instances when the INSURER has denied liability for the CLAIM because of the application of one or more exclusions, or other coverage issues, if the COMPANY and the insurer(s) 144 of the Underlying Insurance refuse to advance defense or other LOSS, or if such costs are not payable under the Underlying Insurance, the INSURER shall, upon request and if proper documentation accompanies the request, advance on behalf of the INSUREDS, or any of them, LOSS that they have incurred in connection with a CLAIM, prior to disposition of such CLAIM, provided always that in the event it is finally established that the INSURER has no liability hereunder, such INSURED agree to repay to the INSURER, upon demand, all monies advanced. (E) Clause 13 (INSURED'S Reporting Duties) of this POLICY is hereby modified by the addition of the following: 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 notice of such change, nonrenewal or cancellation. (F) Clause 15 (Other Insurance) of this POLICY is hereby deleted in its entirety and replaced with the following: 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 (e) of Clause 1 (Insuring Clause), nothing herein shall be construed to make this POLICY subject to the terms of other insurance. (G) Clause 2O (Subrogation) of this POLICY is hereby deleted in its entirety and replaced with the following: 20. SUBROGATION (a) Inasmuch as this POLICY is excess insurance, the INSUREDS' right of recovery against any person or organization cannot be exclusively subrogated to the INSURER. It is, therefore, understood and agreed that in case of any payment hereunder, the INSURER will act in concert with all other interests concerned (including the INSURED), in the exercise of such rights of recovery. The apportioning of any amounts that may be so recovered shall follow the principle that any interest (including the INSUREDS') that has paid an amount over and above any payment hereunder, shall first be reimbursed up to the amount paid by it; (a) the INSURER is then to be reimbursed out any balance then remaining up to the amount paid hereunder; lastly, the interests (including the INSUREDS') of which this coverage is in excess are entitled to claim the residue, if any. Expenses necessary to the recovery of any such amounts shall be apportioned between the interests concerned (including the INSUREDS'), in the proportion of their respective recoveries as finally settled. If there should be no recovery in proceedings instituted solely on the initiative of the INSURER, the expenses thereof shall be borne by the INSURER. (b) The INSUREDS shall execute all papers reasonably required and shall take all reasonable actions that may be necessary to secure the rights of the INSURER, including the execution of such documents necessary to enable the INSURER effectively to bring suit in the name of the INSUREDS, including but not limited to an action against the COMPANY or the insurer(s) of the 145 Underlying Insurance for nonpayment of indemnity due and owing to the INSUREDS by the COMPANY or the insurer(s), respectively. (H) Schedule of Underlying Directors and Officers Insurance:
Policy Policy Layer Carrier Number Year Limits Retention PRIMARY LONDON TBD 11/21/87-88 $20M $5,000/30,000/1,000,000 1ST EXCESS AETNA TBD 11/21/87-88 $20M UNDERLYING
/s/ [?] ----------------------------------------------------- Signature of Authorized Representative of INSURER 146 CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. ENDORSEMENT NO. 1 EFFECTIVE DATE OF ENDORSEMENT July 21, 1988 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. NUCLEAR ENERGY LIABILITY EXCLUSION ENDORSEMENT (BROAD FORM) It is agreed that: I. This POLICY does not apply: A. Under any Liability Coverage, to bodily injury or property damage (1) with respect to which the INSUREDS or COMPANY under this POLICY is also an insured under a nuclear energy liability policy issued by the Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or any of their successors, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or (2) resulting from the hazardous properties of nuclear material and with respect to which (a) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954 or any law amendatory thereof, or (b) the INSUREDS or COMPANY 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. B. Under any Medical Payments Coverage, or under any Supplementary Payments provision relating to first aid, to expenses incurred with respect to bodily injury resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization. C. Under any Liability Coverage, to bodily injury or property damage resulting from the hazardous properties of nuclear material, if (1) the nuclear material (a) is at any nuclear facility owned by, or operated by or on behalf of, the COMPANY or (b) has been discharged or dispersed therefrom; (2) 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 the COMPANY; or (3) the bodily injury or property damage arises out of the furnishing by the COMPANY 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 147 America, its territories or possessions or Canada, this exclusion (3) applies only to property damage to such nuclear facility and any property thereat. II. As used in this endorsement: "hazardous properties" include radioactive, toxic or explosive properties; "nuclear material" means source material, special nuclear material or by-product material; "source material", "special nuclear material", and "by-product material" have the meanings given them in the Atomic Energy Act of 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 (a) containing by-product material other than the tailings of wastes produced by the extraction or concentration of uranium or thorium from any ore processed primarily for its source material content, and (b) resulting from the operation by any person or organization of any nuclear facility included under the first two paragraphs of the definition of nuclear facility. "nuclear facility" means: (a) any nuclear reactor, (b) any equipment or device designed or used for (1) separating the isotopes or uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling, processing or packaging waste, (c) any equipment of device used in the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the COMPANY 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, or (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; "property damage" includes all forms of radioactive contamination or property. /s/ ----------------------------------- Signature of Authorized Representative 148 DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICY ISSUED BY CORPORATE OFFICERS & DIRECTORS ASSURANCE LTD. 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 ITEM II POLICY PERIOD: From July 21, 1988 to Nov. 21, 1990 (3 Years) 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 CLAIMS first made during each POLICY YEAR. ITEM IV PREMIUM: At inception of first POLICY YEAR: $ 320,000 (prepaid total for three years) Year 1- $40,000 Year 2- $140,000 Year 3- $140,000 149 At each anniversary thereafter: Subject to adjustment on each anniversary date in accordance with Clause 16 (Premium) of this POLICY. ITEM V Any notice to the COMPANY or, except in accordance with Clause 17 (Representation), 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 sent by airmail, express courier, telecopy or telex. ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 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., P.O. Box HM 1015, Craig Appin House, Wesley St., Hamilton, Bermuda HM OX, and shall be sent by airmail, express, courier, telecopy or telex. This POLICY shall constitute the entire contract between the INSUREDS, the COMPANY, and the INSURER. Endorsements 1 to 4 are made part of this POLICY at POLICY issuance. Countersigned at Hamilton, Bermuda on November 29, 1988 ------------------------------------- by /s/ ------------------------------------- Signature of Authorized Representative 150 TABLE OF CONTENTS
CLAUSE PAGE 1. Insuring Clause................................................... 1 2. Definitions....................................................... 1 3. Exclusions........................................................ 2 4. Appeals........................................................... 3 5. Arbitration....................................................... 3 6. Assistance and Cooperation........................................ 4 7. Automatic Extension............................................... 4 8. Cancellation...................................................... 5 9. Changes and Assignments........................................... 5 10. Payment of LOSS................................................... 5 11. Currency.......................................................... 5 12. Headings.......................................................... 6 13. INSUREDS' Reporting Duties........................................ 6 14. LOSS Provisions................................................... 6 15. Other Insurance................................................... 6 16. Premium........................................................... 6 17. Representation.................................................... 6 18. Severability...................................................... 7 19. Special POLICY Revisions.......................................... 7 20. Subrogaton........................................................ 7 21. Acquisition or Disposition of a SUBSIDIARY........................ 7
151 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 attached to and 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 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 CLAIMS first made against the INSUREDS or any of them during the POLICY PERIOD, for any WRONGFUL ACTS that are caused, committed, or attempted prior to the end of the POLICY PERIOD by the INSUREDS, not exceeding the LIMIT OF LIABILITY. 2. DEFINITIONS (a) "APPLICATION" shall mean the signed, written application for this POLICY, the schedule thereto and all supplementary information submitted in connection therewith, and all underwriting data submitted in connection with the automatic extension of the POLICY, all of which materials shall be deemed attached hereto, as if physically attached hereto. (b) "CLAIM" shall mean: (1) any proceeding, demand or suit against any INSURED by reason of any WRONGFAULT; or (2) written notice to the INSURER by the INSUREDS and/or the COMPANY, during the POLICY PERIOD describing circumstances that are likely to give rise to a CLAIM being made against the INSUREDS. Multiple proceedings, demands or suits arising out of the same WRONGFUL ACT shall be deemed to be a single CLAIM. (c) "COMPANY" shall mean the company shown in Item I of the Declarations, any company that was a predecessor company to the company shown in Item I of the Declarations, any SUBSIDIARY of either such company and, if covered in accordance with subpart (a) of Clause 21 (Acquisition or Disposition of a Subsidiary) below, any other subsidiary. (d) "INSUREDS" shall mean: (1) all persons who were, now are, or shall be duly elected or appointed directors or officers of the COMPANY; or (2) the estates, heirs, legal representatives or assigns of deceased INSUREDS who were directors or officers of the COMPANY at the time 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. (e) "INSURER" shall mean Corporate Officers & Directors Ltd., Hamilton, Bermuda. (f) "LIMIT OF LIABILITY" shall mean the amount described in Item III of the Declarations. Regardless of the time of payment of LOSS by the INSURER, the LIMIT OF LIABILITY as stated in Item III of the Declarations shall be the maximum liability of the INSURER for all LOSS arising from all CLAIMS first made during each POLICY YEAR. (g) "LOSS" shall mean any and all amounts that the INSUREDS are legally obligated to pay for a CLAIM made against the INSUREDS for any WRONGFUL ACT, and shall include but not be limited to damages, judgments, settlements, and reasonable and necessary costs of investigation and defense of CLAIMS, and appeals therefrom (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, 1 152 however, LOSS shall not include taxes, fines or penalties or matters which 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. (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 voting stock is owned, directly or indirectly, in any combination, by the COMPANY or by one or more of its SUBSIDIARIES, at the starting date of the POLICY PERIOD. (l) "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 interrelated 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 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 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 indemnity the INSUREDS pursuant to the charter or other similar formative document or by-laws or written agreements of the COMPANY duty 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 (2) the INSUREDS comply with Clause 2O (Subrogation) below; (b) that result in a judgment or other final adjudication adverse to the INSUREDS that establishes that the INSUREDS have gained any personal profit to which they were not legally entitled; (c) for the return by the INSUREDS of any remuneration paid to the INSUREDS without the previous approval of the stockholders of the COMPANY which payment without such previous approval shall be held by the courts to have been illegal; (d) for an accounting of profits in fact made from the purchase or sale by the INSUREDS of securities of the COMPANY within the meaning of Section 16 (b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any state statutory law or common law; (e) brought about or contributed to by the dishonesty of the INSUREDS; however, notwithstanding the foregoing, the INSUREDS shall be protected under the terms of this POLICY as to any CLAIM by reason of any alleged dishonesty on the part of the INSUREDS, unless a judgment or other final adjudication thereof adverse to the INSUREDS shall establish that acts of active and deliberate dishonesty committed by the INSUREDS with actual dishonest purpose and intent were material to the cause of action so adjudicated; 2 153 (f) that is insured by any other existing valid policy or policies under which payment of the LOSS is actually made except in respect of any excess beyond the amount or amounts of payments under such other policy or policies; (g) for which the INSUREDS are indemnified by reason of having given notice of a CLAIM or of any circumstance which might give rise to a CLAIM under any policy or policies of which this POLICY is a renewal or replacement or which it may succeed in time; (h) for personal injury, advertising injury, bodily injury, sickness, disease, or death of any person, or for damage to or destruction of any tangible property, including the loss of use thereof; however, this exclusion shall not apply to any derivative action brought against any INSURED; (i) by, on behalf of, at the behest of, or in the right of the COMPANY, if initiated by the management of the COMPANY; however, this exclusion shall not apply if, between the starting date of the POLICY PERIOD and the date of the CLAIM, the COMPANY shall have undergone one of the three events listed in subpart (a) of Clause 8 (Cancellation) or the event listed in subpart (b) of Clause 8 (Cancellation), and the CLAIM is initiated by the management of the COMPANY after the date of such event; or (j) that is excluded under the Nuclear Energy Liability Exclusion (endorsed hereon). It is agreed that any fact pertaining to any INSURED shall not be imputed to any other INSURED for the purpose of determining the application of the Exclusions. 4. APPEALS In the event the INSUREDS elect not to appeal a judgment, the INSURER may elect to make such appeal at its own expense, and shall be liable for any increased award, taxable costs and disbursements and any additional interest incidental to such appeal, to the extent such payments are not covered by other valid and collectible insurance. 5. ARBITRATION (a) Any dispute arising under this POLICY shall be fully determined in Hamilton, Bermuda under the provisions of the Bermuda Arbitration Act of 1986, as amended and supplemented, by a Board 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 unsatisfied 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 arbitrator 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 the third arbitrator. Upon acceptance of the appointment by said third arbitrator, the Board or Arbitration for the controversy in question shall be deemed fixed. All CLAIMS, denials of CLAIMS, and notices pursuant to this Clause 5 of this POLICY shall be deemed made if in writing and mailed to the last known address of the other party. 3 154 1. (b) The Board of Arbitration shall fix, by a notice in writing to the involved, a reasonable time and place for the hearing and may in said written notice or at the time of the commencement of said hearing, at the option of said Board, prescribe reasonable rules and regulations governing the course and conduct of said hearing. (c) This POLICY shall be governed by and construed 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 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 fails to reach a unanimous decision, the decision of the majority of the members of the 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) The INSURER and the INSUREDS agree that in the event that claims for indemnity or contribution are asserted in any action or proceeding against the INSURER by any of the INSUREDS' other insurers in any jurisdiction or forum other than that set forth in this Clause 5, the INSUREDS will in good faith take all reasonable steps requested by the INSURER to assist the INSURER in obtaining a dismissal of these claims (other than on the merits) and will, without limitation, undertake to the court or other tribunal to reduce any judgment or award against such other insurers to the extent that the court or tribunal determines that the INSURER would have been liable to such insurers for indemnity or contribution pursuant to this POLICY. The INSUREDS shall be entitled to assert claims against the INSURER for coverage under this POLICY, including, without limitation, for amounts by which the INSUREDS reduced its judgment against such other insurers in respect of such claims for indemnity or contribution, in an arbitration between the INSURER and the INSUREDS pursuant to this Clause 5; provided, however, that the INSURER in such arbitration in respect of such reduction of any judgment shall be entitled to raise any defenses under this POLICY and any other defenses (other than jurisdictional defenses) as it would have been entitled to raise in the action or proceeding with such insurers. 6. ASSISTANCE AND COOPERATION The INSURER has no duty to defend any CLAIM and shall not be called upon to assume charge of the investigation, settlement or defense of any CLAIM, but the INSURER shall have the right and shall be given the opportunity to associate with the INSUREDS and the COMPANY in the investigation, settlement, defense and control of any CLAIM relative to any WRONGFUL ACT where the CLAIM involves or may involve the INSURER. At all times, the INSUREDS and the COMPANY and the INSURER shall cooperate in the investigation, settlement and defense of such CLAIM. The failure of the COMPANY to assist and cooperate with the INSURER shall not impair the rights of the INSUREDS under this POLICY. 7. AUTOMATIC EXTENSION On each anniversary of this POLICY, upon payment of 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 during the period commencing ninety (90) days prior to the anniversary of the POLICY, 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. 4 155 8. CANCELLATION This POLICY shall not be subject to cancellation except as follows: (a) This POLICY shall be deemed cancelled immediately upon the of any of the following events: (1) acquisition of the company named in Item I of the Declarations by another entity, (2) merger into another organization in which the company name in Item I of the Declarations is not the surviving entity, or (3) consolidation of the company named in Item I of the Declarations with another entity. In any such instance described in (a) (1) through (3) of this Clause 8, this POLICY shall not apply to any WRONGFUL ACTS taking place after the date of said acquisition, merger, or consolidation: 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. (b) In the event of the COMPANY being taken over by a receiver or any State or Federal regulatory agency or official, this POLICY shall not apply to any WRONGFUL ACTS taking place after the date of filing of bankruptcy, insolvency, or assumption of operation. This POLICY shall remain in force for the remainder of the POLICY PERIOD from said date as to CLAIMS based upon WRONGFUL ACTS alleged to have been committed prior to the date of said bankruptcy, insolvency, or assumption of operation by the State or Federal agency. All premiums paid or due at the time of such taking over shall be fully earned, and in no respect refundable. 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 most recent POLICY YEAR. CLAIMS first made during the remainder of the POLICY PERIOD shall be deemed to have been first made during the final POLICY YEAR 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 and/or future premium adjustments and/or loss adjustments as the parties may agree upon at the time of said cancellation. (d) This POLICY may be cancelled by the INSURER upon granting of 365 days written notice, providing such cancellation is determined to be appropriate by an affirmative vote of 3/4 of the INSURER'S entire Board at a meeting of said Board prior to mailing of said notice. Payment or tender of any unearned premium by the INSURER shall not be a condition precedent to the effectiveness of cancellation, but return of the pro rata unearned premium shall be made as soon as practicable. 9. CHANGES AND ASSIGNMENTS The terms and conditions of this POLICY shall not be waived or changed, nor shall an assignment of interest under this POLICY be binding, except by an endorsement to this POLICY issued by the INSURER. 10. PAYMENT OF LOSS Except in those instances when the INSURER has denied liability for the CLAIM because of the application of one or more exclusions, or other coverage issues, the INSURER shall, upon request and if proper documentation accompanies the request, advance on behalf of the INSUREDS, or any of them, LOSS costs that they have incurred in connection with a CLAIM, prior to disposition of such CLAIM, provided always that in the event it is finally established that the INSURER has no liability hereunder, such INSUREDS agree to repay to the INSURER, upon demand, all monies advanced. 11. CURRENCY All premium, limits, retentions, and LOSS under this POLICY are in United States currency. 5 156 12. HEADINGS The descriptions in the headings and sub-headings of this POLICY are interested solely for convenience and do not constitute any part of the terms or conditions hereof. 13. INSUREDS' REPORTING DUTIES The INSUREDS and/or the COMPANY shall give written notice to the INSURER as soon as practicable of any: (a) CLAIM, which notice shall include the 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) change in the COMPANY as is described in Clause 8(a) and 8(b) (Cancellation) of this POLICY, and shall cooperate with the INSURER and give such additional information as the INSURER may reasonably require. 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 shall become aware of any circumstances that are likely to give rise to a CLAIM being made against them 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 POLICY YEAR in which the INSUREDS 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) above, 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 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. Nothing herein shall be construed to make this POLICY subject to the terms of other insurance. 16. PREMIUM It is understood that on each anniversary of this POLICY, a premium shall be charged for the Automatic Extension in accordance with Clause 7 (Automatic Extension). Such premium shall be determined by the rate schedules, experience modification, rating plan, and by-laws of the INSURER in force at said anniversary date. 17. REPRESENTATION By acceptance of this POLICY, the company named in Item I of the Declaration agrees to represent the INSUREDS with respect to all matters under this POLICY, including, but not limited to, the giving and receiving of notice of CLAIM or cancellation or desire not to extend the POLICY, the payment of premiums, the receiving of LOSS payments and any return premiums that may become due under this POLICY, the requesting, receiving, and acceptance of any endorsement to this POLICY, and the submission of a dispute to arbitration. The INSUREDS agree that said company shall represent them but, for purposes of the investigation, defense, settlement, or appeal of any CLAIM, the INSUREDS who are named as defendants 6 157 in the CLAIM may, [??] their unanimous agreement and upon [??] to the INSURER, replace the company with another agent to represent them with respect to the CLAIM, including giving and receiving of notice of CLAIM and other correspondence, the receiving of LOSS payments, and the submission of a dispute to arbitration. 18. SEVERABILITY The APPLICATION for coverage shall be constituted as a separate APPLICATION for coverage by each INSURED. With respect to the declarations and statements contained in such APPLICATION for coverage no statement in the APPLICATION or knowledge possessed by any one INSURED shall be imputed to any other INSURED for the purpose of determining the availability of coverage with respect to CLAIMS made against any other INSURED. The acts, omissions, knowledge, or warranties of any INSURED shall not be imputed to any other INSURED with respect to the coverages applicable under this POLICY. 19. SPECIAL POLICY REVISIONS The INSURER may change this POLICY at any time by an affirmative vote of a majority of the shareholders of the INSURER, in accordance with the by-laws of the INSURER. 20. SUBROGATION In the event of any payment under this POLICY, the INSURER shall be subrogated to the event of such payment to all the INSUREDS' rights of recovery, and the INSUREDS shall execute all papers reasonably required and shall take all reasonable actions that may be necessary to secure such rights including the execution of such documents necessary to enable the INSURER effectively to bring suit in the name of the INSUREDS, including but not limited to, an action against the COMPANY for nonpayment of indemnity due and owing to the INSUREDS by the COMPANY. 21. ACQUISITION 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 voting stock is owned, directly or indirectly, in any combination, by the COMPANY or one or more of its SUBSIDIARIES, and which is acquired or created after the inception of this POLICY, subject to written notice being given to the INSURER within 30 days after the acquisition or creation, and payment of any additional premium required. 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 such new subsidiary shall be limited to WRONGFUL ACTS subsequent to the date of acquisition or creation of the subsidiary and prior to the end of the POLICY PERIOD. (b) Coverage shall not apply to directors and officers of any subsidiary, including a SUBSIDIARY as defined in Clause 2 (Definitions) above, for CLAIMS arising out of WRONGFUL ACTS subsequent to the date that the COMPANY or one or more of its SUBSIDIARIES, directly or indirectly, in any combination, ceases to own more than 50% of the outstanding voting stock in such subsidiary. IN WITNESS WHEREOF, the INSURER has caused this POLICY to be signed by its President and Secretary, and countersigned on the Declaration Page by a duly authorized agent of the INSURER. /s/ [??] /s/ Joseph G. [??] - --------------------- ----------------------- Secretary President 7 158 [LETTERHEAD] [LOGO] JOHNSON & HIGGINS FAX TRANSMISSION FAX # 617-421-7123 NO. OF PAGES TRANSMITTED: 2 ATTN: William Mather DATE: June 1, 1993 Gillette FROM: Sally A. Weston SUBJ: Gillette - ACE D&O COPIES: Joan Goldberg, J&H, Boston (Fax # 617-227-3107) We have received the following renewal binder from ACE for Gillette: "ACE (CAY) is pleased to acknowledge receipt of Dlrs 155,000 and confirm bidding the following: Policy Period: June 1, 1993 - 1994 Limit of Liability: 10M xs 60M D&O and 10M xs 40M C.R. Structure: Name Limits ---- ------ D&O C.R. London 10m 10M London 10m xs 10M 10M xs 10M Aetna 20M xs 20M 20M xs 20M CODA 20M xs 40M - ACE 10M xs 60M - 10M xs 40M (GS-2678D) (GS-2679D) [UNISON LOGO] 159 -2- Followed Policies are London C.R. and CODA D&O. Coverage is D&O and C.R. Endorsements to be included: Discovery Period Endorsement Cancellation Endorsement Excess DIC Endorsement Endorsement amending Clause III B (i) and (ii) Endorsement amending Section II - A&C We look forward to receipt of the u/l policies." 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 and are in addition to the premium. Regards Sally Weston Broker SAW:pmw/002260 EX-10.H 8 DEFERRED COMPENSATION PLAN FOR DIRECTORS 1 EXHIBIT 10(h) THE GILLETTE COMPANY -------------------- DIRECTOR'S COMPENSATION DEFERRAL PROVISIONS ------------------------------------------- - - The directors may elect to defer payment of all or part of their cash compensation, whether retainers or attendance fees, beyond retirement or resignation from the Board to receive payment (i) in a lump sum in January of the year following retirement or resignation or (ii) in ten or less equal annual installments beginning in January of the year following retirement or resignation, or, in either case, upon an earlier Change in Control, as that term is defined in The Gillette Company Retirement Plan, as described below. - - The election to defer must be communicated in writing to the Treasurer before December 15 for amounts to be earned starting in the following year and must include payment instructions and whether upon a Change in Control of the Corporation the deferral election should continue in effect or the amounts so deferred plus interest equivalents accrued to date should be paid immediately in the form of a lump sum payment. - - An election to defer remains in effect from year to year unless revoked or amended by notice in writing to the Treasurer before December 15. - - With respect to the calendar year in which a director is first elected to the Board, the director may elect to defer amounts to be earned during that calendar year by delivering a deferral election to the Treasurer at any time prior to the date the director is elected to serve on the Board. - - Directors' deferred compensation earns an amount equivalent to interest at a rate fixed on the first trading day in October at the average yield on U.S. Treasury notes or bonds maturing in one year. That rate on October 1, 1993, was 3.4%. - - Interest equivalents are credited semiannually, on June 30 and December 31. Payment is deferred on the same basis as payment of retainers and fees. The unpaid balance remaining in a director's account after retirement or resignation continues to earn interest equivalents until the payment of all installments has been completed. - - In the event of death, payment will be made to the estate of the director in a lump sum representing the entire unpaid balance. - - Deferred retainers or attendance fees, plus accrued interest equivalents, paid to a director after retirement or resignation from the Board or upon a Change in Control are taxable as ordinary income in the year payment is received. - - Effective January 1, 1991 retainers and attendance fees are subject to taxation for Social Security in the year received. Between January 1, 1988 and December 31, 1990 retainers and attendance fees were subject to taxation for Social Security in the year earned. Since January 1, 1988 retainers and attendance fees have been included in the Social Security earnings test for benefits eligibility in the year earned. EX-10.L 9 AGREEMENT WITH GASTON R. LEVY 1 Exhibit 10 (l) DESCRIPTION OF AGREEMENT BETWEEN THE GILLETTE COMPANY AND GASTON R. LEVY DATED DECEMBER 27, 1993 Mr. Levy ceased to be an executive officer of the Company on November 30, 1993 and retired from the Company on January 1, 1994. Pursuant to a consulting and noncompetition agreement, he will receive consulting fees of $125,000 per year for the years 1994 and 1995. EX-10.M 10 AGREEMENT WITH LORNE R. WAXLAX 1 Exhibit 10 (m) DESCRIPTION OF AGREEMENT BETWEEN THE GILLETTE COMPANY AND LORNE R. WAXLAX DATED SEPTEMBER 30, 1993 Mr. Waxlax served as Executive Vice President through September 30, 1993. Pursuant to a three-year noncompetition agreement ending December 31, 1996, he will continue to be employed by the Company for two years ended December 31, 1995, during which period he will receive annual compensation of $725,000 per year and participate in certain Company benefits. In the event of a change in control of the Company, the compensation payable under the agreement would become immediately payable in a lump sum. EX-10.N 11 ESTATE PRESERVATION PLAN 1 EXHIBIT 10(n) THE GILLETTE COMPANY ESTATE PRESERVATION PLAN 1. PURPOSE. Effective January 1, 1993, The Gillette Company has adopted The Gillette Company Estate Preservation Plan for the purpose of providing eligible executive employees of the Company and its subsidiaries and affiliates the opportunity to purchase life insurance covering the lives of the employee and his or her spouse and providing a death benefit upon the second to die of the employee and such spouse. 2. DEFINITIONS. When used herein, the following terms shall have the respective meaning ascribed to them below. Terms expressed in the singular shall be construed to include the plural, and terms expressed in the masculine shall be construed to include the feminine unless the context plainly indicates otherwise. (a) "Beneficiary" means the person(s) or entity(ies) designated by the Owner of the Policy, to whom the death benefit provided for under such Policy shall be paid in accordance with Section 10. (b) "Collateral-Assignment" means the Collateral-Assignment executed by the Owner in favor of the Company with respect to the Company's interest in the Policy. A specimen form of Collateral-Assignment is annexed hereto and made a part hereof. (c) "Committee" means the Personnel Committee of the Board of Directors of the Company. (d) "Company" means The Gillette Company, a Delaware corporation. (e) "Effective Date" means January 1, 1993. (f) "Eligible Executive" means an executive employee of the Company or one of its subsidiaries or affiliates who is designated as being eligible to participate in the Plan in accordance with Section 3. (g) "Initial Enrollment Date" shall mean the first day of the month following an individual's designation as an Eligible Executive, but no earlier than the Effective Date. (h) "Insureds" means the Participant and his or her lawful spouse on the Policy Date. (i) "Insurer" means the insurance company that issues the Policy under the Plan. (j) "Owner" means the Participant, the Insureds or such other person(s) or entity(ies) designated by the Participant to be the owner of the Policy. (k) "Participant" means an Eligible Executive who elects to participate in the Plan and who satisfies the conditions for enrollment as set forth in Section 4. 2 (l) "Plan" means The Gillette Company Estate Preservation Plan as set forth herein, as it may be modified from time to time hereafter. (m) "Plan Administrator" means the Senior Vice President-Administration of the Company or such other officer of the Company designated by the Committee to administer the Plan. (n) "Plan Year" means the calendar year. (o) "Policy" means the insurance policy issued by the Insurer to the Owner pursuant to the terms of the Plan. (p) "Policy Date" means the effective date of a Policy. The Policy Date with respect to Policies issued during the initial enrollment period shall be January 1, 1993. (q) "Policy Year" means the 12-consecutive month period designated as such in a Policy. Policy Years shall commence on a Policy Date. (r) "Split Dollar Agreement" means the Split Dollar Agreement executed by the Owner, the Eligible Executive and the Company with respect to the Company's interest in the Policy. A specimen form of Split Dollar Agreement is annexed hereto and made a part hereof. 3. ELIGIBILITY. The Eligible Executives shall be those executive employees of the Company and its subsidiaries and affiliates who are designated as eligible under this Plan based upon their place of employment, job grade, officer status and/or other factors determined by the Plan Administrator, as set forth in Exhibit A hereto. The Plan does not constitute a contract of employment or a promise of continuing employment, and nothing in the Plan shall interfere with the right of the Company and its subsidiaries and affiliates to terminate the employment of any employee at any time. 4. ENROLLMENT IN PLAN. An Eligible Executive shall enroll in the Plan, and thereby become a Participant hereunder, by (i) completing an application to participate in the Plan, (ii) designating the Owner of the Policy to be purchased, (iii) completing the documents and instruments furnished by the Insurer for underwriting purposes, (iv) causing his or her spouse to complete the documents and instruments furnished by the Insurer, and to submit to a medical examination, for underwriting purposes, (v) executing, and if necessary causing his or her spouse to execute, the Split-Dollar Agreement and such other documents and instruments deemed necessary or desirable by the Company, and (vi) causing the Owner of the Policy to designate a Beneficiary and to execute the Split-Dollar Agreement, Collateral-Assignment and such other documents and instruments deemed necessary or desirable by the Insurer or the Company. If an Eligible Executive expresses an intention to participate and satisfies the requirements of (i) and (ii) above prior to his or her Initial Enrollment Date, the Policy issued with respect to such Participant shall have a Policy Date that is such Initial Enrollment Date. Otherwise, the Policy issued with respect to such Participant shall have a Policy Date that is the January 1 or 3 July 1 as of which the Eligible Executive enrolls in the Plan. 5. AMOUNT OF COVERAGE. The death benefit coverage that may be purchased under a Policy shall be the amount specified in Exhibit A hereto ("Coverage"). 6. COST OF COVERAGE. The cost of the Coverage under a Policy for each Policy Year shall be determined by the Insurer based upon the assumptions and guidelines agreed to by the Insurer and the Company. It is the Company's intent that differences in the cost of the Coverage for each of the Insureds covered by Policies having the same Policy Date shall be attributable solely to the respective attained ages of each Insured on such Policy Date. The portions of the cost of the Coverage under each Policy to be paid by each of the Owner thereof and the Company shall be determined in accordance with the terms of the related Split-Dollar Agreement and Collateral-Assignment, based upon the assumptions and guidelines set forth in Exhibit A hereto. 7. PURCHASE OF POLICIES. The Policies shall be purchased by each Owner from the Insurer designated by the Company. The Company shall take all reasonable steps necessary to enable the Insurer to issue the Policies in conformance with the terms of this Plan. Each Owner shall be the sole and absolute owner of the Policy purchased by such Owner and may exercise all ownership rights granted by the terms of the Policy, subject to the terms of the related Split-Dollar Agreement and Collateral-Assignment. The benefit provided under the Plan is the opportunity for a Participant or designated Owner to purchase and own the Policy under the terms and conditions set forth therein. The actual benefits to be derived from ownership of the Policy are not guaranteed by the Company, the Plan Administrator or the Insurer (other than payment by the Insurer of the specified death benefit proceeds upon the death of the survivor of the Insureds in accordance with the terms of the Policy and any cash value increases as and when credited by the Insurer under the Policy). Neither the Company nor the Plan Administrator guarantees any specific level or rate of cash value accumulation under any Policy purchased under the Plan. 8. PAYMENT OF PREMIUMS. While the related Split-Dollar Agreement remains in effect, the Company shall remit to the Insurer the total premium due under the Policy for each Policy Year, which shall include the amount of the Company's contribution toward premium as set forth in the Split-Dollar Agreement. The Owner (or the Participant on behalf of the Owner) shall remit to the Company the balance of the premium due under the Policy for such Policy Year, in such manner and at such time or times as the Company and the Owner shall agree. In the event that the Owner (or the Participant on behalf of the Owner) fails to remit any amount due the Company for any Policy Year, the Company shall be deemed to have paid such amount for its own account in determining the Company's interest in the Policy pursuant to the related Split-Dollar Agreement and Collateral-Assignment. Following the termination of the Split-Dollar Agreement while either of the Insureds is alive, the Owner shall be responsible for payment to the Insurer of the total premium due (if any) under the Policy for each Policy Year thereafter. 9. COMPANY INTEREST IN POLICY. As a condition to a Participant's enrollment 4 in the Plan, the Participant and his or her designated Owner with respect to the Policy shall execute a Split-Dollar Agreement and the Owner shall execute a Collateral-Assignment, which documents shall establish the rights of the Company with respect to the death benefit proceeds and cash value under the Policy. The terms of the particular Split-Dollar Agreement and Collateral-Assignment executed by a Participant and related Owner shall apply solely to such Participant and Owner. At any time while the Split-Dollar Agreement is in effect, the Company's interest in each Policy shall be equal to the Company's cumulative contributions toward the premium under the Policy, including amounts deemed to have been paid for the Company's account in accordance with the terms of the Split-Dollar Agreement. Following the termination of the Split-Dollar Agreement, the Company shall receive from the Insurer the amount of the Company's cumulative contributions toward the premium under the Policy and, upon receipt of such amount, the Company shall have no further interest in or responsibility for the Policy. In the event that, upon the termination of the Split-Dollar Agreement, there is insufficient cash value under the Policy to satisfy the Company's interest therein, the Company shall have the right to receive the cash value or death benefit proceeds available at such time and any additional amounts available under the Policy thereafter (up to the dollar amount of the Company's remaining interest), and neither the Insureds nor the Owner shall have any liability to the Company for the unpaid balance (other than to the extent of amounts mistakenly received under the Policy prior to full satisfaction of the Company's interest). The Split-Dollar Agreement and Collateral-Assignment shall contain provisions implementing the foregoing paragraphs of this Section and such other provisions, including limitations on the Owner's rights and benefits under the Policy, as the Company determines to be necessary or desirable in order to secure and protect its interest in the Policy. Anything contained herein to the contrary notwithstanding, the Owner shall at all times have the right to cancel or surrender the Policy and thereby terminate the related Split-Dollar Agreement and Collateral-Assignment. 10. PAYMENT OF DEATH BENEFIT. Subject to the terms of the related Split-Dollar Agreement and Collateral-Assignment, the death benefit payable under a Policy upon the death of the survivor of the Insureds shall be paid to the Beneficiary in such form and at such time or times as the Beneficiary may elect in accordance with the terms of the Policy. 11. SOURCE OF BENEFITS. Any benefit payable to or on account of a Participant under this Plan shall be paid by the Insurer in accordance with the Policy and, if applicable, the related Split-Dollar Agreement and Collateral Assignment. 12. NON-ALIENATION OF BENEFITS. Except to the extent provided in the Policy and the related Split-Dollar Agreement and Collateral-Assignment, the benefits provided under this Plan may not be assigned or alienated and shall not be subject to attachment, garnishment or other legal or equitable process. 13. ADMINISTRATION. The Plan Administrator shall be the named fiduciary under the Plan, and shall have the discretionary authority to control and manage the operation and administration of the Plan, including but not limited to the power to construe and interpret the provisions of the Plan, to determine the 5 eligibility of employees to participate in the Plan and the benefit entitlements of Participants, and to establish rules and procedures (and to amend, modify or rescind the same) for the administration of the Plan. The Plan Administrator may delegate ministerial duties to other employees of the Company and to third parties. The Plan Administrator shall be eligible to participate in the Plan but shall not act upon any matter that relates solely to his interest in the Plan as a Participant. The Plan Administrator shall make all determinations concerning a Participant's entitlement to benefits under the Plan. If a Partipant believes that he has been denied a benefit under the Plan to which he is entitled, the Participant may file a written request for such benefit with the Plan Administrator, setting forth his claim. Any decision by the Plan Administrator denying a claim for benefits by a Participant shall be set forth in writing specifying the reasons for the denial in a manner calculated to be understood by the Participant and advising the Participant of his or her right to obtain a review of such decision. Participants may request a review of any decision denying a benefit claim by filing a request for such in writing to the Plan Administrator within 60 days of the Participant's receipt of the denial of his claim, otherwise he shall be barred and estopped from challenging such claim denial. The Plan Administrator shall conduct a full and fair review of the request for review and the underlying claim and shall render a decision thereon in writing, generally within 60 days of receiving the Participant's request for review (but may extend the period for rendering a decision to 120 days if special circumstances warrant the extension). The interpretation and construction of the Plan by the Plan Administrator, and any action taken thereunder, shall be binding and conclusive upon all persons and entities claiming to have an interest under the Plan. The Plan Administrator shall not be liable to any person for any action taken or omitted to be taken in connection with the interpretation, construction or administration of the Plan provided that such action or omission is made in good faith. 14. NOTICES. Any notice or document required to be given to or filed with the Company or the Plan Administrator shall be deemed given or filed if delivered by certified or registered mail, return receipt requested, to such party's attention at the Company's offices, Prudential Tower Building, Boston, Massachusetts 02199. 15. AMENDMENT AND TERMINATION. The Plan may be amended or terminated at any time and from time to time, in whole or in part, by the Plan Administrator; provided, however, that any amendment that would materially increase the cost of the Plan to the Company or would result in a material change in the nature of the benefits provided under the Plan, or any termination of the Plan, shall not be effective without the approval of the Committee. No such amendment or termination shall adversely affect the rights of any Participant (without his or her consent) under any Policy theretofore issued pursuant to the Plan or any related Split-Dollar Agreement and Collateral-Assignment theretofore entered into. 16. VALIDITY. In the event any provision of the Plan is held invalid, void or unenforceable, the same shall not affect in any respect the validity of the remaining provisions of the Plan. 6 17. GOVERNING DOCUMENTS. In the event of any inconsistency between the terms of the Plan set forth herein and the terms of any Policy purchased with respect to a Participant or the related Split-Dollar Agreement or Collateral-Assignment the terms of such Policy or agreement shall be controlling as to that Participant, his or her spouse, the designated Owner and Beneficiary, and any assignee or successor-in-interest of any of the foregoing persons. 18. APPLICABLE LAW. The provisions of the Plan shall be construed and administered in accordance with the laws of the Commonwealth of Massachusetts, except to the extent superseded by applicable Federal law. THE GILLETTE COMPANY By: William J. McMorrow Senior Vice President - Administration Date: 7 THE GILLETTE COMPANY ESTATE PRESERVATION PLAN EXHIBIT A Eligibility Requirements for Participation Grade level/Officer status: Grade 25 or above, or full by-law officer Other requirements: Employed in United States, or a U.S. citizen or resident on temporary foreign assignment Amount of Coverage $1,000,000 face amount per Participant and spouse $500,000 face amount per unmarried Participant Company/Owner Portions of Policy Premium The respective portions of the annual premium due under a Policy to be paid by each of the Company and the Owner initially shall be determined at the inception of the Policy on the basis that (1) the Company shall make five equal annual payments commencing on the Policy Date and each anniversary thereof, (2) the Owner shall make fifteen equal annual payments commencing on the Policy Date and each anniversary thereof, and (3) the present value (determined as of the Policy Date using a 7.5% pre-tax/4.5% post-tax per annum discount rate) of the cumulative payments to be made by each of the Company and the Owner shall be the same. The amount of the Company's contribution toward the annual premium under a Policy shall not change unless agreed to by the Company in writing. The amount of the Owner's portion of the annual premium due under a Policy may change from year to year in accordance with the terms of the Policy and the related Split-Dollar Agreement. Manner of Payment of Owner Portion of Premium The Owner's portion of the premium due under the Policy shall be paid to the Company either (1) in a single lump sum at the beginning of each Policy Year upon advance notification by the Company or (2) by payroll deduction from the Participant's regular salary, as shall be elected by the Participant. ATTACHMENTS Specimen form of Split-Dollar Agreement Specimen form of Collateral-Assignment Specimen form of Certification of Trustee(s) and Proposed Insureds - - PAGE 7- vction or administration of the Plan provided that such action or omission is made in good faith. EX-10.O 12 ESTATE PLANNING PROGRAM 1 Exhibit 10(o) ------------- Description of The Gillette Company Estate Planning Program ----------------------------------------------------------- Certain key employees, including the executive officers, are eligible to receive a one-time reimbursement for estate tax planning services not to exceed $3,000. EX-11 13 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, SHARES IN MILLIONS)
1993 1992 1991 ------ ------ ------ NET INCOME PER COMMON SHARE -- ASSUMING NO DILUTION Net income as reported..................................... $288.3 $513.4 $427.4 Less: Preferred Stock Dividends, net of tax benefit....... (4.7) (4.8) (18.0) ------ ------ ------ Net income available to Common Shareholders................ $283.6 $508.6 $409.4 ====== ====== ====== Average common shares outstanding.......................... 220.4 219.5 211.3 Reported net income per common share....................... $ 1.29 $ 2.32 $ 1.94 NET INCOME PER COMMON SHARE -- ASSUMING FULL DILUTION Net income available to Common Shareholders (as above)..... $283.6 $508.6 $409.4 Add: Series C ESOP Preferred Stock dividend, net of tax benefit............................................... 4.7 4.8 4.9 Deduct: Additional ESOP costs, net of tax benefit.......... (2.7) (2.5) (2.9) ------ ------ ------ Adjusted net income available to common shareholders....... $285.6 $510.9 $411.4 ====== ====== ====== Average common shares outstanding.......................... 220.4 219.5 211.3 Add: Conversion of Series C ESOP Preferred Stock........... 3.3 3.3 3.3 Net additional common shares upon exercise of stock options............................................... 1.8 2.0 1.8 ------ ------ ------ Adjusted average common shares outstanding................. 225.5 224.8 216.4 ====== ====== ====== Net income per common share -- assuming full dilution...... $ 1.27 $ 2.27 $ 1.90
17 EX-13 14 PORTIONS OF 1993 ANNUAL REPORT 1 Exhibit 13 THE GILLETTE COMPANY Founded in 1901, The Gillette Company is the world leader in blades and razors. The Company holds a major position in North America in sales of toiletries and is the world's top seller of writing instruments. Braun is the number one marketer of electric shavers in Germany and is among the leaders in Europe, North America and Japan. Oral-B is among the top sellers of toothbrushes in the United States and is the leader in several international markets. Manufacturing operations are conducted at 62 facilities in 28 countries, and products are distributed through wholesalers, retailers and agents in over 200 countries and territories. 2 LETTER TO STOCKHOLDERS The Gillette Company registered another outstanding sales and earnings performance in 1993. Beyond the strong financial results, the year was highlighted by an accelerating pace of new product introductions, continued geographic expansion and a major acquisition. * * * Total sales increased 5% to a record level of $5.41 billion. Profit from operations advanced 12% to $1.09 billion, with net income and earnings per common share growing at a faster rate of 15% to record highs of $591 million and $2.66, all before special charges. For the 88th consecutive year, the Company paid cash dividends on its common stock. Dividends declared increased 17% to 84 cents per share, up from 72 cents in 1992. Reported financial results for the year were significantly affected by two sets of special one-time charges. In the first quarter, adoption of mandated accounting changes resulted in a noncash aftertax charge of $139 million, primarily for postretirement benefits. Secondly, the Company's adoption of a comprehensive realignment plan resulted in an aftertax charge of $164 million in the fourth quarter. In combination, these charges were equivalent to $1.37 per common share. After these charges, reported net income amounted to $288 million and earnings per share, $1.29. The realignment plan has been adopted to take advantage of opportunities created by the continuing trend to more open world trade and the growth of the Company's global operations. Under the plan, which involves various facilities and business units, there will be both job additions and reductions over the next two years. Some 2,000 positions, or about 6% of the Company's worldwide total, will be affected -- largely outside the United States. The realignment plan should result in substantial ongoing operating efficiencies, the effect of which will be felt beginning primarily in 1995. The past year's sales growth of 5% in dollar terms was dampened significantly by the decline of exchange rates and the deep economic recession in Europe, a region that accounted for 36% of our business in 1993. The Company's dollar sales in Europe were 7% below those of the previous year; however, if European exchange rates had held constant at their average 1992 values, European sales would have matched the 1992 level. The reported sales decline in Europe was in sharp contrast to increases of 11% in the United States and 16% in the rest of the world. While Gillette sales rose more moderately in 1993 than in recent years, income growth was in line with the Company's longer-term progress. During the five years from 1988 to 1993, sales grew at a 9% annual rate, and income and earnings per common share at 17% (before special charges). The Company's sustained profitable growth has been reflected in the excellent performance of Gillette common stock over time. During the last five years, there has been a strong upward pattern underlying the short-term peaks and valleys of Gillette stock price movement. Year-end 1993 versus 1992 -- in a stock market that overreacted to pricing problems in the tobacco industry and tended to "rotate" from consumer stocks toward cyclicals -- Gillette's 5% price rise significantly outpaced consumer goods company averages. It is more notable that the compounded annual return to shareholders on Gillette stock over the last five years has been 31%, compared with returns of 15% for the Dow Jones Industrial Average and 14% for the Standard & Poor's 500. The quality of Gillette stock as a long-term investment is further demonstrated by noting the growth in value of a $1,000 investment in Gillette stock at the end of 1983. By the end of 1993, the value had increased to $12,892 -- three times the value of a comparable investment in either the Dow Jones Industrial Average or the S&P 500. The compounded annual rate of return on Gillette stock over the last 10 years has been 29%, nearly double that of the market averages.
Investment Value Compounded 12/31/83 12/31/93 Rate of Return Gillette $1,000 $12,892 29% DJIA $1,000 $4,319 16% S&P 500 $1,000 $3,998 15%
The strength of Gillette's long-term business results and stock market performance is largely due to our continuing focus on carrying out the Company's mission--to achieve or enhance clear leadership world-wide in the existing or new core consumer product categories in which we choose to compete. To achieve this, we emphasize geographic expansion and three primary "growth drivers" -- research and development, capital spending and 3 advertising. In combination, these growth drivers should rise at least as fast as sales over the long term to assure future growth. (In the last five years, they rose at a 9% annual rate, matching the Company's sales growth rate.) We also look to increase the level of incremental spending on these growth drivers over time by at least as much as we add to profit from operations. As an indicator of the effectiveness of this approach, 37% of our 1993 sales came from products introduced in the last five years -- higher than the 35% ratios achieved in 1991 and 1992. The pace of new product activity is at an all-time record. Seventeen new products were introduced in the second half of 1993, and a high level of activity also is planned for 1994, along with the geographic rollout of major products such as the Sensor for Women razor, the Gillette Series male grooming line and the Braun FlavorSelect coffeemaker. In addition to innovative new products, the Company also has been pursuing its mission through other approaches. In mid-1993, Parker Pen Holdings Limited was acquired, adding to our stationery products business a well-known writing instruments franchise. The Company also has established joint ventures with razor blade companies in Russia, Poland and China and a joint venture for manufacturing toothbrushes in China. These actions should produce significant long-term growth. The review of operations section of this Annual Report describes the performance of all our product lines, but I'd like to highlight a few areas of outstanding progress: o The Sensor shaving system franchise has continued to build substantially, and now accounts for one-third of total Gillette blade and razor sales dollars. This progress has been accelerated by the success of the Sensor for Women and SensorExcel shaving systems. The Sensor for Women system, introduced in the United States in mid-1992, has surpassed all our expectations, and production capacity is being expanded to extend distribution. The SensorExcel system, which raises the standard of quality in shaving once again, was launched in Continental Europe and Canada during the second half of 1993, and will be introduced in the U.S. and selected other markets in 1994. o The Gillette Series, a line of technologically advanced men's toiletries, was introduced in the United States, Canada and the United Kingdom under the same marketing theme that has proven so successful for the Sensor system -- "Gillette, The Best a Man Can Get." In all three countries, the Series line has improved Gillette market shares in the shaving preparation and deodorant/ antiperspirant categories and established the Company in after- shave conditioners. o Now in its third year, the Braun Oral-B plaque remover has become the worldwide leader in oral care appliance sales. The cooperative efforts of Braun and Oral-B in developing products, gaining dental profession endorsements and maximizing retail distribution have played an important role in achieving this outstanding success. Each of these product innovations embodies meaningful technological advances. For a fuller understanding of the importance of technical mastery in generating Gillette business growth, I urge you to read the special section on Technological Innovation that follows on pages 16-21. * * * My comments in this letter would be incomplete without noting the retirement and accomplishments of three longtime colleagues and thanking them for their many years of dedicated service. Lawrence E. Fouraker will not be standing for reelection to the Board this year, having reached the mandatory retirement age for directors. Larry has served with distinction for 21 years. His keen business insights and wise counsel have contributed importantly to the long-term progress of the Company. We will miss him. Gaston R. Levy, Executive Vice President -- International Group, and Lorne R. Waxlax, Executive Vice President -- Diversified Group, each retired at the end of 1993 after a distinguished career of 35 years with the Company. Their dedication and leadership skills in a wide variety of management positions have made major contributions to the Company's worldwide performance. * * * Gillette has a strong combination of technical, marketing and financial resources, and above all, talented and dedicated people, deployed across a broad geographic base. These fundamental strengths make us a world-class company that confidently looks forward to building an increasingly successful global enterprise. Alfred M. Zeien Chairman of the Board March 1, 1994 4 THE GILLETTE COMPANY BLADES & RAZORS Further strengthening its worldwide leadership position, Gillette again achieved record results in its blade and razor business in 1993. Sales rose well above those of a year ago. Profits climbed even more rapidly, prior to special charges related to realignment. * * * The Company's progress in its major line of business reflects the extraordinary market performance of its technologically superior products. Chief among these is the Sensor family of shaving systems, which has achieved unprecedented success. The Gillette Sensor shaving system, introduced in early 1990, continued its strong upward trend in 1993. Worldwide sales were sharply higher, and share positions were enlarged in every key market. Another major contributor to sales growth was the Sensor for Women shaving system, launched in mid-1992. This innovative product has generated exceptional increases in sales and market share in the United States, and has been very favorably received where introduced in international markets. Broadened distribution is planned for 1994. The latest addition to the Sensor franchise, the SensorExcel shaving system, features a revolutionary skin guard composed of five soft, flexible microfins that deliver unrivaled shaving closeness and comfort. The new system has received excellent trade and consumer acceptance in its introductory markets of Continental Europe and Canada. Distribution in other geographic areas, including the United States, will begin in 1994. With the growing success of the Sensor franchise, the Atra and Trac II twin blade shaving systems, top sellers since the 1970's, are gradually yielding their leading market positions. Both brands, however, continue to hold substantial shares in the United States and abroad. In the disposable razor category, the Company's worldwide sales were slightly above those of 1992. The Good News brand remained the number one disposable razor in the United States for the 18th consecutive year, and Gillette disposables were again the best sellers in Canada, Europe and Latin America. New in 1994 -- Gillette CustomPlus disposable razors for men and women. Complementing advances by twin blade systems and disposables, the Gillette double edge blade business also showed vitality. Reflecting the Company's increased presence in developing markets, worldwide sales of Gillette double edge blades rose moderately, and the Company maintained its traditional leadership in this category. In 1993, Gillette continued to pursue two growth strategies to strengthen its global leadership position in blades and razors. The first is to increase blade market value worldwide by building the Sensor franchise and by upgrading consumers in less developed areas from double edge blades to twin blade products. The second strategy is geographic expansion, and great progress was made during the year in China and Eastern Europe. 5 THE GILLETTE COMPANY TOILETRIES & COSMETICS Paced by the strong performance of Gillette Series male grooming products, sales of the toiletries and cosmetics line moved well ahead of the prior year's level. Spending in support of new product introductions, however, significantly reduced profits, before special charges related to realignment. * * * Deodorants/antiperspirants are the Company's principal toiletries products. Worldwide sales climbed markedly, due chiefly to the successful introduction of the Gillette Series in North America and the United Kingdom. Higher sales of Right Guard, Dry Idea and Soft & Dri deodorants/antiperspirants in the United States also contributed to the substantial sales increase. Reflecting these gains, Gillette achieved a notable rise in its share of the domestic market. Led by strong acceptance of the Gillette Series in the United States, Canada and the United Kingdom, shave preparations showed good sales progress in 1993, and Gillette increased its share of market in all three countries. Gillette Series after-shave skin conditioners also were very favorably received in introductory markets. At year-end, the Company launched the Gillette Series Wild Rain collection of nine male grooming products, providing a second fragrance to complement that offered by the original Series Cool Wave products. The Wild Rain introduction is expected to accelerate sales momentum of the Series line. Among hair care products, the Company continued to emphasize the White Rain brand, which generated a notable advance in sales. A major factor was the excellent showing of White Rain Essentials shampoos and conditioners, launched in late 1992. Jafra skin care and cosmetic products, sold by consultants at classes in the home or office, are an important component of the toiletries and cosmetics line. Sales in 1993 matched those of the year before. The top-performing market again was Mexico, where a considerable sales gain enabled Jafra Mexico to remain the leader in skin care and color cosmetics. During the year, Jafra began the introduction of its newly designed color cosmetics line, embarking on the final stage of a redesign of Jafra products that already has been completed for skin care and body care products. Enhancing prospects for the future, Jafra increased its consultant force by 10,000, to a worldwide total of nearly 200,000 consultants. Jafra also expanded geographically in 1993, starting operations in Canada and Hungary. 6 THE GILLETTE COMPANY STATIONERY PRODUCTS With the acquisition of Parker Pen at midyear, Gillette achieved the clear leadership position worldwide in the highly competitive writing instruments business. Reflecting this addition, sales of stationery products registered a sizable advance. Profits also climbed sharply, prior to special charges related to realignment. * * * The key event in the Company's stationery products business in 1993 was the acquisition of Parker Pen, whose heritage of technical excellence, well-recognized brand name and strong worldwide distribution makes it an excellent fit with Gillette. With the Paper Mate, Parker and Waterman franchises, the Company holds a strong position within all writing systems, price levels, distribution channels and geographic areas. Parker Pen's position in the mid- to high-priced range complements the lower-priced Paper Mate and premium-priced Waterman brands. Geographically, the vitality of Parker Pen in European markets outside of France, as well as in the Middle East and Far East, complements Paper Mate's strength in North America and Latin America, and Waterman's in France and other markets. During 1994, the integration and development of Parker Pen within the stationery products business will continue, generating a variety of operational efficiencies. Among the Company's traditional stationery products categories, low-priced pens posted worldwide sales somewhat lower than the prior year's level. During the year, the Rubberstik ball pen, which features a rubberized barrel for improved writing comfort, was introduced successfully in North America. Sales in the mid-priced range were well below those of 1992, despite the substantial sales growth achieved by the Paper Mate Flexgrip retractable and Paper Mate Dynagrip refillable pens. At year-end, a new, disposable version of the Dynagrip pen was well- received in the United States and Europe. The Waterman line of premium writing instruments recorded a sales decline in 1993, as significant shortfalls in Europe, related to economic recession and unfavorable exchange rates, overshadowed continued strong performances in the United States and the Asia- Pacific region, principally Japan. Sales of Liquid Paper correction products were much lower than in the previous year. This was chiefly attributable to a substantial decrease in domestic sales of Liquid Paper correction fluids, which remained the market leader. Volume comparisons were adversely affected by the timing of a major trade promotion. Liquid Paper correction pens achieved a sizable sales gain, especially in Latin America and Europe. 7 THE GILLETTE COMPANY BRAUN Supported by strong business fundamentals, Braun in 1993 achieved double-digit growth in key markets such as the United States and Japan, offsetting much of the negative impact of European recession and currency devaluation. Overall, Braun sales reported in U.S. dollars were lower, but profits grew slightly, before special charges related to realignment. * * * Electric shaver volume declined in 1993 in all major markets except the United States, as unfavorable economic conditions caused consumers to postpone purchases and the trade to reduce inventories. While total sales of Braun shavers were below those of the prior year, the Flex Control family of shavers featuring the unique twin foil pivoting head system again turned in a good performance, with sales well above those of 1992. Progress was especially strong in the United States. At midyear, Braun introduced successfully a range of lower-priced Flex Control shavers in Japan, and worldwide distribution is scheduled to be completed during 1994. Overall, Braun retained its traditional leading share of the electric shaver market in Germany and its sizable share positions throughout the rest of the world. New in 1993 - a lower- priced Flex Control rechargeable shaver. Among women's hair removal appliances, the Braun Silk-epil electric hair epilator was again the best seller, expanding its clear worldwide leadership. Household appliance sales posted a significant decline. However, Braun hand blenders showed good sales progress, and Braun strengthened its clear worldwide leadership position. Two major new household products, launched in late 1993, have been well- received in introductory markets. The Braun FlavorSelect coffee- maker incorporates the latest technology to brew coffee to an individual's particular taste, and the Braun 5-in-1 MultiSystem food preparation center combines five distinct kitchen appliances in one versatile unit. Worldwide distribution of both products is planned for 1994. The personal care appliance line includes oral care and hair care appliances. Sales recorded a very good advance, thanks to the continued outstanding success of the Braun Oral-B plaque remover. Paced by strong gains in the United States, where market share more than doubled, Braun achieved clear worldwide leadership in oral care appliances. Braun maintained its clear European market leadership in hair care appliances, although sales were substantially lower. The Braun Free Spirit styling iron. In addition to the superior technical performance of its products, a major contributor to future Braun growth is its increasingly strong global presence, in terms of both geographic reach and brand name recognition. These strengths, together with continued leadership in product innovation, design and quality, should help Braun achieve further success in the years to come. The Braun Oral-B plaque remover now features Indicator bristles that help monitor brushing performance. 8 THE GILLETTE COMPANY ORAL-B After several years of double-digit growth in sales and profits, Oral-B in 1993 essentially matched its record-setting 1992 performance. Sales were virtually unchanged, and profits dipped marginally, prior to special charges related to realignment. Oral-B closed the year strongly, introducing a significant array of new products in the fourth quarter. * * * In a well-established partnership with the dental profession, Oral-B develops, markets and distributes worldwide a broad range of superior oral care products, including toothbrushes, interdental products, specialty toothpastes, oral rinses and professional dental supplies. The Oral-B toothbrush is the brand used by more dentists than any other in the United States and many countries abroad. Sales were somewhat below those of a year ago, due to unfavorable exchange rates and intense competitive activity. At year-end, Oral-B enhanced its toothbrush line with the launch of the Advantage toothbrush, the best ever from Oral-B. The new product features unique Power Tip and Action Cup bristle configurations that remove plaque better and help protect against gum disease. The brush head contains blue Indicator bristles that signal the need for replacement, and the innovative handle provides maximum comfort and control while brushing. Overall, Oral-B toothbrushes retained a leading share position in the United States, and were again the best sellers in other large markets, including Australia, Canada, Mexico and the United Kingdom. During 1993, Oral-B continued to expand its presence in other fast-growing oral care categories. Worldwide sales of Oral-B interdental products climbed sharply for the sixth consecutive year, reflecting the excellent acceptance of new Oral-B dental flosses and dental tape -- the first floss products with fluoride in the United States. In the increasingly important specialty toothpaste and oral rinse categories, five new Oral-B products offering therapeutic benefits contributed to a sizable sales advance. Oral-B Tooth & Gum Care toothpaste and Sensitive with Fluoride toothpaste were very well-received, as was a line of anti-plaque and anti-cavity rinses for adults and children in low-alcohol or alcohol-free formulations. Broadened distribution of these new products is planned for 1994. To strengthen its position as a leading oral care business worldwide, Oral-B continues to rapidly increase investment in research and technology, assuring a sustained flow of innovative oral care products. Geographic growth also is accelerating through the utilization of Gillette's strong international distribution network and the opening of new markets. In 1993, Oral-B entered six markets, including China, where a joint venture manufacturing operation was established. Supporting these moves, Oral-B will continue to build upon its heritage of partnership with dental professionals as the cornerstone of its long-term global strategy. In 1993, Oral-B began manufacturing and marketing toothbrushes in China. 9 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION RESULTS OF OPERATIONS In 1993, the Company posted record net sales of $5.41 billion, compared with $5.16 billion in 1992. Profit from operations was higher than in 1992, before a special charge for the realignment program. This charge, along with the cumulative effect of accounting changes, adversely affected net income and net income per common share. Before the effect of the realignment program and the accounting changes, the Company achieved record levels in profit from operations, net income and net income per common share. SALES Net sales were $5.41 billion in 1993, compared with $5.16 billion in 1992. This gain of 5% reflected a 7% increase from volume and new products, partially offset by a 2% decrease from the combined effects of fluctuations in exchange rates and selling prices. In 1992, these factors contributed to sales growth by 4% and 6%, respectively. The continued economic weakness in Europe and the unfavorable impact of weaker European currencies adversely affected sales growth in both years. Sales of domestic operations rose 11% in 1993, compared with a 6% increase in 1992. Foreign sales advanced 2% in 1993 following a 12% increase in 1992. Sales of operations outside the United States accounted for 67% of sales in 1993 and 69% in 1992. An analysis of sales by business segment follows.
% Increase/ (Millions of dollars) (Decrease) 93 92 91 93/92 92/91 Blades & Razors $2,118 $1,978 $1,750 7 13 Toiletries & 1,047 Cosmetics 971 947 8 3 Stationery Products 633 520 460 22 13 Braun Products 1,249 1,326 1,216 (6) 9 Oral-B Products 363 366 308 (1) 19 Other 1 2 3 (34) (33) $5,411 $5,163 $4,684 5 10
Further information by business segment is set forth on pages 6 through 15. In 1993, sales growth of blades and razors was due to continued volume increases of the Gillette Sensor system, the growth of the Sensor for Women system, the introduction of SensorExcel razors and cartridges and further geographic expansion. Sales growth was hampered by the negative exchange effects in Europe. The Gillette Sensor system was the major contributor to sales growth in 1993, as well as in 1992. Sales of toiletries and cosmetics were well above those of the prior year. Domestic sales increased sharply, due to the Gillette Series male toiletries line and other deodorant/antiperspirant brands, offsetting a considerable decline of Jafra skin care products. Foreign sales of toiletries and cosmetics grew slightly in 1993. In 1992, sales increased modestly, reflecting lower domestic sales of deodorants/antiperspirants, but higher foreign sales of Jafra skin care products and shave preparations in Europe. In 1993, sales of stationery products were significantly higher, reflecting the inclusion of Parker Pen results. Without Parker Pen, domestic sales declined and foreign sales were considerably lower, due to the economic weakness in Europe. In 1992, sales climbed sharply, with advances in all categories and the addition of Helit desk accessories. Sales of Braun products declined from those of the prior year. Sales in the United States increased substantially, but were offset by significantly lower European sales that reflected the continuing economic recession and weaker currencies in Europe. In 1992, sales were sharply higher in the United States, while a lower growth rate in foreign sales was due to the economic slowdown in Europe and Japan. In 1993, sales of Oral-B products were virtually unchanged. Domestic sales were somewhat lower than those of the prior year, due to strong competition in the premium toothbrush category. Foreign sales maintained last year's level. The substantial Oral-B sales advance in 1992 reflected the success of new products in the United States and expansion into new foreign markets. GROSS PROFIT Gross profit increased $230 million between 1993 and 1992, and $352 million between 1992 and 1991. As a percent of sales, gross profit continued to show a positive trend, increasing to 62.2% in 1993, as compared with 60.8% and 59.5% in 1992 and 1991, respectively. Sales increases in products with higher profit margins, such as the Sensor system, Braun Flex Control shaver and Oral-B Indicator toothbrush, had a positive impact on gross profit. The improving trend also reflected increased production efficiencies for these and other products. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses amounted to 42.1% of net sales, compared with 42.0% in 1992 and 41.1% in 1991. In absolute terms, these expenses increased 5% in 1993 and 13% and 10% in 1992 and 1991, respectively. The increases reflect the higher level of marketing support given to major brands, particularly the Gillette Series. In 1993, $428 million was spent on advertising, including sampling, and $450 million on sales promotion, for a total of $878 million, an increase of 3% over 1992. This compares with 1992 10 amounts of $447 million, $409 million and $856 million, respectively. In 1991, these amounted to $402 million, $352 million and $754 million, respectively. The spending in 1993 represented 16.2% of sales, compared with 16.6% in 1992 and 16.1% in 1991. Spending on research and development grew 8% in 1993, and 14% in both 1992 and 1991. Other marketing and administrative expenses rose 6% in 1993, 9% in 1992 and 10% in 1991. PROFIT FROM OPERATIONS The Board of Directors approved 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. Under the plan, which involves various facilities and business units, there will be both job additions and job reductions. Over the next two years, some 2,000 positions, or about 6% of the Company's worldwide total, will be affected, primarily outside the United States. These actions resulted in a fourth quarter charge to profit from operations of $262.6 million ($164.1 million after taxes or $.74 per share). This charge includes estimated costs for employee severance of $140 million, $84 million for asset write-downs and $39 million for factory closings and the integration of operations. Management estimates the realignment program will require net cash expenditures of $27 million and $58 million in 1994 and 1995, respectively. Cash flow benefits will be primarily reinvested into research and development, capital spending and advertising to support product line development and expansion. Before the realignment charge, profit from operations in 1993 was $1,087 million, compared with $967 million in 1992 and $862 million in 1991. This represented 20.1% of net sales, compared with 18.7% and 18.4% in 1992 and 1991, respectively. Within the United States, profit from operations, before the realignment charge, increased 10%, compared with a 9% increase in 1992 and 6% in 1991. Outside the United States, it increased 13%, compared with 14% increases in 1992 and 1991. An analysis of profit from operations by business segment follows.
% Increase/ (Millions of dollars) (Decrease) 93((a)) 93((b)) 92 91 93/92((b)) 92/91 Blades&Razors $692 $797 $665 $556 20 20 Toiletries & Cosmetics (6) 58 89 114 (35) (22) Stationery Products 27 64 49 49 32 -- Braun Products 146 167 163 145 3 12 Oral-B Products 17 45 47 39 (3) 21 876 1,131 1,013 903 12 12 Corporate (51) (44) (46) (41) $825 $1,087 $967 $862 (a) after charge for realignment (b) before charge for realignment See Notes to Consolidated Financial Statements for geographic area and segment data.
In 1993, before the charge for realignment, the blade and razor and Braun segments, as in 1992, showed increases resulting from sales growth in the United States, improved product mix and lower product costs. In 1993, both segments were unfavorably affected by weaker European currencies. The gain in the stationery segment is attributable to the Parker Pen acquisition. Without Parker Pen, the segment reported a sharp decline reflecting lower sales, due primarily to economic weakness in Europe. In 1992, profits of stationery products were level, due to increased advertising expenditures. In 1993, as in 1992, toiletries and cosmetics reported lower profits, due primarily to marketing support given the Gillette Series line and established brands. The marginal 1993 decline in Oral-B profits was attributable to higher marketing spending. The gain in 1992 reflected sales growth and favorable product mix. NONOPERATING CHARGES/INCOME In 1993, net interest expense (interest expense less interest income) amounted to $33 million, a significant decrease from the 1992 and 1991 totals of $56 million and $94 million, respectively. The decrease, which occurred despite a slight increase in average borrowings related to the Parker Pen acquisition, reflects generally lower interest rates and the Company's strategy of converting its long-term borrowings into U.S. dollar floating rate debt through swaps. This strategy was selected considering the Company's relatively low leverage and its expectation of interest rate development. Net exchange losses amounted to $105 million, compared with $69 million in 1992 and $53 million in 1991. This was attributable to subsidiaries in highly inflationary countries, primarily Brazil. Translation adjustments resulting from currency fluctuations in non-highly inflationary countries are accumulated in a separate section of stockholders' equity, as noted on page 27. These negative adjustments amounted to $150 million in 1993, $48 million in 1992 and $7 million in 1991. The loss in 1993 was attributable to the strengthening of the U.S. dollar against European currencies. TAXES AND NET INCOME The effective tax rate of 37.5% in 1993 compared with rates of 38.1% in 1992 and 38.4% in 1991. Effective January 1, 1993, the Company adopted three Statements of Financial Accounting Standards (SFAS). The cumulative impact of these changes resulted in a noncash charge of $206 million, or $139 million after taxes, or $.63 per common share. SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," requires the Company to accrue the expected cost of providing these postretirement benefits during employees' working years, rather than the cash method of accounting. The cumulative effect of this change was a charge of $179 million, or $109 million after taxes, or $.50 per common share. 11 SFAS 109, "Accounting for Income Taxes," requires the use of the asset and liability method rather than the deferred method. The cumulative effect of this change was a charge of $13 million, or $.06 per common share. SFAS 112, "Employers' Accounting for Postemployment Benefits," requires the Company to accrue all types of benefits provided to former or inactive employees and their dependents. The cumulative effect of this change was a charge of $27 million, or $17 million after taxes, or $.07 per common share. Net income for 1993 was $288 million, compared with $513 million in 1992 and $427 million in 1991. Net income per common share for 1993 was $1.29, compared with $2.32 and $1.94 in 1992 and 1991, respectively. Excluding the charge for realignment and the cumulative effect of changes in accounting principles, net income increased 15% to $591 million, and net income per common share also increased 15% to $2.66. Management is unaware of any trends or conditions that could adversely affect the Company's consolidated financial position or future results of operations. FINANCIAL CONDITION Continuing the trend of recent years, the Company's financial condition remained strong in 1993. While net debt increased, related to the acquisition of Parker Pen, the Company's strong operating cash flow and long-term debt credit ratings improved. Net debt (total debt, net of associated swaps, less cash and short-term investments) at December 31, 1993, amounted to $1,257 million, compared with $994 million in 1992 and $1,099 million in 1991. Reflecting the 1993 charge for realignment and the cumulative effect of accounting changes noted above, the Company's book equity position amounted to $1,479 million at the end of 1993, compared with $1,496 million at the end of 1992 and $1,157 million at the end of 1991. The market value of Gillette equity stood at over $13 billion at year-end 1993. Net cash provided by operating activities in 1993 was $732 million, compared with $620 million in 1992 and $579 million in 1991. Requirements for net working capital increased in all three years, reflecting the growth of the business. The Company's current ratio for 1993, affected by the provision for realignment, was 1.44, compared with ratios of 1.50 and 1.47 for 1992 and 1991, respectively. Capital spending in 1993 amounted to $352 million, compared with $321 million and $286 million in 1992 and 1991, respectively. Spending in all three years was principally for the Sensor system franchise, other twin blade shaving products and Braun products. For 1994, it is expected that spending for property, plant and equipment will increase over the 1993 level, reflecting additional production capacity for twin blade shaving, Braun and Oral-B products. Spending will be financed primarily by funds from operations. At year-end 1993, there was $154 million outstanding under the U.S. commercial paper program and no borrowings under the Company's $350 million long-term revolving credit agreement. At year-end 1992 and 1991, there was $42 million and $13 million, respectively, in debt outstanding under the commercial paper program. At year-end 1992 and 1991, there was no debt outstanding under the revolving credit agreement. Both Moody's and Standard & Poor's upgraded the Company's long-term credit ratings in 1993. Moody's raised the Company's long-term debt rating from A2 to A1, while Standard & Poor's increased the rating from A to A+. Commercial paper ratings were increased to A1 by Standard & Poor's and to P1 by Moody's in 1991. In 1993, the Company spent $481 million for acquisitions in certain existing core businesses, primarily Parker Pen. In 1992, the Company invested $66 million in acquisitions, with $90 million invested in 1991. Under the $600 million of debt securities issuable pursuant to the shelf registrations filed with the Securities and Exchange Commission, which became effective during 1993, the Company issued $500 million in notes consisting of $150 million of 4.75% three-year notes due 1996, $150 million of 6.25% 10-year notes due 2003, and $200 million of 5.75% 12-year notes due 2005. The Company used the net proceeds to refinance existing indebtedness related to maturing long-term debt and short-term debt incurred for the Parker Pen acquisition and other general corporate purposes. At December 31, 1993, there remained $100 million of debt securities available under the shelf registration expiring October 5, 1995. 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. 12 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF INCOME AND EARNINGS REINVESTED IN THE BUSINESS
(Millions of dollars, except per share amounts) Years Ended December 31, 1993, 1992 and 1991 1993 1992 1991 Net Sales $5,410.8 $5,162.8 $4,683.9 Cost of Sales 2,044.3 2,025.8 1,898.7 Gross Profit 3,366.5 3,137.0 2,785.2 Selling, General and Administrative Expenses 2,279.2 2,169.9 1,923.6 Realignment Expense 262.6 -- -- Profit from Operations 824.7 967.1 861.6 Nonoperating Charges (Income) Interest income (27.3) (27.3) (21.7) Interest expense 59.8 83.3 115.3 Other charges - net 109.5 81.4 73.9 142.0 137.4 167.5 Income before Income Taxes and Cumulative Effect of Accounting Changes 682.7 829.7 694.1 Income Taxes 255.8 316.3 266.7 Income before Cumulative Effect of Accounting Changes 426.9 513.4 427.4 Cumulative Effect of Accounting Changes (138.6) -- -- Net Income 288.3 513.4 427.4 Preferred Stock dividends, net of tax benefit 4.7 4.8 18.0 Net Income Available to Common Stockholders 283.6 508.6 409.4 Earnings Reinvested in the Business at beginning of year 2,259.6 1,909.3 1,635.6 2,543.2 2,417.9 2,045.0 Common Stock dividends declared 185.3 158.3 135.7 Earnings Reinvested in the Business at end of year $2,357.9 $2,259.6 $1,909.3 Income per Common Share before Cumulative Effect of Accounting Changes $ 1.92 $ 2.32 $ 1.94 Cumulative Effect of Accounting Changes (.63) -- -- Net Income per Common Share $ 1.29 $ 2.32 $ 1.94 Dividends declared per common share $ .84 $ .72 $ .62 Average number of common shares outstanding (millions) 220.4 219.5 211.3
See accompanying Notes to Consolidated Financial Statements. 13 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET (Millions of dollars) December 31, 1993 and 1992 1993 1992 Assets Current Assets Cash and cash equivalents $ 37.1 $ 35.3 Short-term investments, at cost, which approximates market value 1.5 4.5 Receivables, less allowances: 1993, $45.9; 1992, $41.8 1,226.9 1,186.1 Inventories 874.6 852.4 Prepaid expenses, principally taxes 387.9 257.9 Total Current Assets 2,528.0 2,336.2 Property, Plant and Equipment, at cost less accumulated depreciation 1,214.5 1,075.4 Intangible Assets, less accumulated amortization 916.9 432.1 Other Assets 442.9 346.2 $5,102.3 $4,189.9 Liabilities and Stockholders' Equity Current Liabilities Loans payable $ 395.0 $ 307.2 Current portion of long-term debt 46.2 168.6 Accounts payable and accrued liabilities 1,122.4 928.9 Income taxes 196.7 156.1 Total Current Liabilities 1,760.3 1,560.8 Long-Term Debt 840.1 554.2 Deferred Income Taxes 166.1 103.0 Other Long-Term Liabilities 835.5 459.7 Minority Interest 21.3 15.8 Stockholders' Equity 8.0% Cumulative Series C ESOP Convertible Preferred, without par value, Issued: 1993 - 164,243 shares; 1992 - 164,608 shares 99.0 99.2 Unearned ESOP compensation (53.8) (64.8) Common stock, par value $1 per share Authorized 580,000,000 shares Issued: 1993 - 278,587,610 shares; 1992 - 277,874,114 shares 278.6 277.9 Additional paid-in capital 259.4 236.9 Earnings reinvested in the business 2,357.9 2,259.6 Cumulative foreign currency translation adjustments (415.0) (265.2) Treasury stock, at cost: 1993 - 57,697,990 shares; 1992 - 57,705,301 shares (1,047.1) (1,047.2) Total Stockholders' Equity 1,479.0 1,496.4 $5,102.3 $4,189.9
See accompanying Notes to Consolidated Financial Statements. 14 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Millions of dollars) Years Ended December 31, 1993, 1992 and 1991 1993 1992 1991 Operating Activities Net income $288.3 $513.4 $427.4 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 218.5 210.9 192.7 Other 51.8 10.7 31.2 Changes in assets and liabilities, net of effects from acquisition of businesses: Accounts receivable (101.8) (146.8) (99.0) Inventories (56.0) (77.5) (64.9) Accounts payable and accrued liabilities 10.8 58.0 6.3 Other working capital items (30.7) 2.9 45.4 Other noncurrent assets and liabilities 48.1 48.8 39.9 Net cash provided by operating activities 731.7 620.4 579.0 Investing Activities Additions to property, plant and equipment (352.0) (321.4) (286.0) Disposals of property, plant and equipment 10.2 15.6 17.5 Acquisition of businesses, less cash acquired (452.9) (64.5) (84.6) Other (35.6) (10.7) (3.9) Net cash used in investing activities (830.3) (381.0) (357.0) Financing Activities Proceeds from exercise of stock option and purchase plans 24.5 22.2 12.6 Proceeds from long-term debt 500.0 -- 1.0 Reduction of long-term debt (414.8) (239.2) (84.6) Increase (decrease) in loans payable 177.5 117.1 (27.7) Dividends paid (183.3) (157.4) (146.0) Net cash provided by (used in) financing activities 103.9 (257.3) (244.7) Effect of Exchange Rate Changes on Cash (3.5) .4 (5.0) Increase (Decrease) in Cash and Cash Equivalents 1.8 (17.5) (27.7) Cash and Cash Equivalents at Beginning of Year 35.3 52.8 80.5 Cash and Cash Equivalents at End of Year $ 37.1 $ 35.3 $ 52.8 Supplemental disclosure of cash paid for: Interest $ 72.5 $ 87.9 $111.5 Income taxes $180.9 $198.2 $156.9 Noncash investing and financing activities: Acquisition of businesses Fair value of assets acquired $705.8 $ 62.3 $163.1 Cash paid 481.1 65.9 90.2 Liabilities assumed $224.7 $ (3.6) $ 72.9
See accompanying Notes to Consolidated Financial Statements. 15 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. Inter-company 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. INVENTORY VALUATION Inventories are valued 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 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 carrying amount of intangible assets is assessed for impairment when operating profit from the applicable segment 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. These unremitted earnings amounted to $1,688 million at December 31, 1993. Commencing in 1993, deferred taxes are provided using the asset and liability method for temporary differences between financial and tax reporting. ACQUISITIONS AND DIVESTITURES 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 amounted to $458 million and have been allocated to goodwill pending an independent appraisal of Parker Pen's net assets acquired. The consolidated statement of income for 1993 includes Parker Pen's results from June 1, 1993, including amortization of a proportionate amount of the goodwill over a 40-year period. The following unaudited pro forma summary presents the 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 charge for realignment (b) before charge for realignment During 1992 and 1991, the Company also acquired or increased its interest in several businesses at a total cost of $54 million and $130 million, respectively. These acquisitions did not materially affect results of operations in those years. In 1993, the Netherlands company in which the Company owned a 22.9% nonvoting equity interest, and for which Gillette had provided part of the subordinated debt financing, sold its Wilkinson blade and razor business. This resolved all proceedings brought by the European antitrust authorities with respect to the Company's investment in the Netherlands company. The results of this 16 transaction had no material impact on the Company's results of operations. REALIGNMENT EXPENSE The Board of Directors approved 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. The realignment plan involves various facilities and business units of the Company. These actions resulted in a fourth quarter charge to profit from operations of $262.6 million ($164.1 million after taxes, or $.74 per share). This charge includes the accrual of estimated employee severance costs, provisions for the write-down of affected property, plant and equipment to net realizable values and other related costs. 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) 1993 1992 1991 Balance at beginning of year $(265.2) $(216.9) $(209.5) Translation adjustments, (154.2) including the effect of hedging (60.2) 6.5 Related income tax effect 4.4 11.9 (13.9) Balance at end of year $(415.0) $(265.2) $(216.9)
Included in other charges were net exchange losses of $105.4 million, $68.8 million and $53.4 million for 1993, 1992 and 1991, respectively, relating to subsidiaries in highly inflationary countries, primarily Brazil.
INVENTORIES December 31, December 31, 1993 1992 Raw materials and supplies $ 209.1 $ 192.4 Work in process 90.8 94.1 Finished goods 574.7 565.9 $ 874.6 $ 852.4 PROPERTY, PLANT AND EQUIPMENT Land $ 29.9 $ 28.2 Buildings 420.5 388.7 Machinery and equipment 2,125.5 1,996.7 2,575.9 2,413.6 Less accumulated depreciation 1,361.4 1,338.2 $1,214.5 $1,075.4 INTANGIBLE ASSETS Goodwill ($43.7 million not $ 884.5 subject to amortization) $ 398.6 Other intangible assets 168.7 143.5 1,053.2 542.1 Less accumulated amortization 136.3 110.0 $ 916.9 $ 432.1
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES December 31, December 31, (Millions of dollars) 1993 1992 Accounts payable $ 268.9 $ 305.7 Advertising and sales promotion 170.1 149.0 Payroll and payroll taxes 187.6 173.0 Other taxes 48.9 53.3 Interest payable 9.9 22.6 Dividends payable on 46.4 common stock 39.6 Realignment expense 155.4 -- Miscellaneous 235.2 185.7 $1,122.4 $ 928.9 OTHER LONG-TERM LIABILITIES Pensions $ 311.7 $ 284.3 Postretirement medical 193.9 -- Incentive plans 111.2 106.3 Realignment expense 107.2 -- Miscellaneous 111.5 69.1 $ 835.5 $ 459.7 DEBT
Loans payable at December 31, 1993 and 1992, included $54 million and $42 million, respectively, of commercial paper. The Company's commercial paper program is supported by its revolving credit facility. Long-term debt is summarized as follows. 17 Commercial paper, 3.38% $ 100.0 $ -- 5.75% Notes due 2005 200.0 -- 6.25% Notes due 2003 150.0 -- 4.75% Notes due 1996 150.0 -- 6% Deutschmark notes due 1994 167.9 180.9 6.375% Deutschmark bonds -- due 1993 148.9 9.625% Pound sterling notes -- due 1993 106.0 6.7%-6.725% Deutschmark -- notes due 1993 71.0 8.03% Guaranteed ESOP notes 60.7 due through 2000 71.0 7.5% ECU notes due 1993 -- 66.3 Other, primarily foreign 57.7 currency borrowings 78.7 Total long-term debt 886.3 722.8 Less current portion 46.2 168.6 Long-term portion $840.1 $554.2
In 1993, the Company's shelf registrations, filed with the Securities and Exchange Commission and providing for the issuance of up to $600 million in debt securities, became effective. During the year, under the shelf registrations, a total of $500 million in notes was issued, consisting of $150 million of 4.75% notes due 1996, $150 million of 6.25% notes due 2003 and $200 million of 5.75% notes due 2005. The Company used the net proceeds from these issues to refinance existing indebtedness and for other general corporate purposes. At December 31, 1993, there remained $100 million of debt securities available under the Company's shelf registration expiring October 5, 1995. The Company has swap agreements that effectively convert the interest obligations of the $500 million in debt securities issued under the shelf registrations from fixed to floating interest rates over the term of the respective issues, resulting in a weighted average interest rate of 3.5% at December 31, 1993. In addition, the Company has swap agreements, maturing in 1994, that effectively establish U.S. dollar-denominated principal and interest obligations of certain European currency debt. As of December 31, 1993 and 1992, the respective aggregate U.S. dollar principal amounts were $409.3 million, with a weighted average interest rate of 3.2%, and $474.1 million, with a weighted average interest rate of 4.3%. Amounts associated with these swap agreements were liabilities of $14.6 million at December 31, 1993, and $3.6 million at December 31, 1992. Exchange rate movements give rise to changes in the values of these agreements which offset changes in the values of the underlying debt obligations. The weighted average interest rate on total long-term debt, including associated swaps and excluding the guaranteed ESOP notes, was 3.5% at December 31, 1993, compared with 5.0% at December 31, 1992. The Company's $350 million revolving bank credit agreement that extends through June 1995 may be used for general corporate purposes, including stock repurchases. Under the agreement, the Company has the option to borrow at various interest rates, including the prime rate, and is required to pay a facility fee of 1/8 of 1% per annum. In addition, the Company must meet certain financial covenants relating to interest coverage and net worth. At December 31, 1993, the Company was in com- pliance with all financial covenants, and its net worth exceeded the amount required by $479.0 million. At year-end 1993 and 1992, there were no borrowings under this agreement. Based on the Company's intention and ability to maintain its revolving credit agreement beyond 1994, $100 million of commercial paper borrowings and $150 million of 1994 long-term debt maturities were classified as long-term at December 31, 1993. At December 31, 1992, $250 million of 1993 long-term debt maturities were so classified. Aggregate maturities of total long-term debt for the five years subsequent to December 31, 1993, are $196.2 million, $27.0 million, $173.6 million, $14.0 million and $10.4 million, respectively. Unused lines of credit, including the revolving credit facility, amounted to $799 million at December 31, 1993. 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. Realized and unrealized foreign exchange gains and losses are recognized and offset foreign exchange gains or losses on the underlying exposures. The interest differential paid or received on swap agreements is recognized as an adjustment to interest. At December 31, 1993, the Company had $75 million of contracts outstanding, which mature during 1994. In 1992, similar contracts amounted to $701 million. These amounts exclude the swap agreements described in the Debt note. The contracts primarily require the Company to purchase, sell or swap certain foreign currencies either with or for U.S. dollars and Deutschmarks at the contracted rate. 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. 18 With respect to trade receivables, concentration of credit risk is limited, due to the diverse geographic areas covered by Company operations. Any probable bad debt loss has been provided for in the allowance for doubtful accounts. The estimated fair values of the Company's financial instruments are summarized below.
Carrying Estimated (Millions of dollars) Amount Fair Value December 31, 1993 Long-term investments $ 54.8 $ 58.5 Total long-term debt (886.3) (887.6) Foreign currency and (4.7) interest rate contracts (11.0) December 31, 1992 Long-term investments $ 43.9 $ 50.9 Total long-term debt (722.8) (718.2) Foreign currency and interest rate contracts 4.7 3.8
19 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 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. 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 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) 1993 1992 1991 Income before income taxes United States $271.7 $325.0 $252.1 Foreign 411.0 504.7 442.0 Total income before $682.7 income taxes $829.7 $694.1 Current tax expense: Federal $ 88.7 $ 88.3 $ 89.5 Foreign 222.7 176.1 163.8 State 37.1 28.1 22.7 Deferred tax expense: Federal (15.8) 25.7 .2 Foreign (73.9) (1.9) (9.5) State (3.0) -- -- Total income tax expense $255.8 $316.3 $266.7
Income tax expense does not include the cumulative effect of accounting changes. The impact of this change relating solely to 1993 is immaterial and is also expected to be immaterial in subsequent years.
An analysis of deferred tax expense/(benefit) follows. (Millions of dollars) 1993 1992 1991 Depreciation $ 2.6 $(1.9) $ 7.4 Stock equivalent unit plan .9 (2.3) (5.1) Realignment program (98.5) -- -- Oil and gas operations -- (.4) .1 Other 2.3 28.4 (11.7) Total deferred tax $(92.7) expense $23.8 $(9.3)
A reconciliation of the statutory Federal income tax rate and the Company's effective tax rate follows. Statutory Federal tax rate 35.0% 34.0% 34.0% Lower effective tax rate on foreign income (3.4) (.8) (1.9) Effect of foreign currency 4.1 translation 1.2 2.4 State taxes (net of Federal tax benefits) 3.2 2.2 2.2 Other differences (1.4) 1.5 1.7 Effective tax rate 37.5% 38.1% 38.4%
The components of deferred tax assets and liabilities at December 31, 1993, are shown below.
Deferred Tax Deferred Tax (Millions of dollars) Assets Liabilities Current Realignment program $ 58.3 -- Incentive plans 33.8 -- Advertising and sales 15.5 promotion -- Inventory reserves 9.7 -- Misc. reserves & accruals 25.6 -- All other 148.6 6.2 Total Current 291.5 6.2 Noncurrent Postretirement benefits 64.6 -- Property, plant and equipment -- 74.8 Realignment program 40.2 -- Incentive plans 17.8 -- All other 14.3 91.3
20 Total Noncurrent 136.9 166.1 Total $428.4 $172.3 Net Deferred Tax Assets $256.1 Included in: $291.5 Prepaid expenses $291.5 $ -- Other assets 136.9 -- Income taxes -- 6.2 Deferred income taxes -- 166.1 $428.4 $172.3
21 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 1993 was $57.0 million, compared with $53.6 million and $50.2 million in 1992 and 1991, respectively. The components of net pension expense follow.
1993 1992 1991 (Millions of dollars) Domestic Foreign Domestic Foreign Domestic Foreign Defined Benefit Plans Service cost--benefits earned $12.3 $20.1 $11.8 $19.1 $ 9.6 $15.8 Interest cost on projected benefit obligation 38.1 35.5 34.9 35.3 31.8 29.0 Actual return on plan assets (46.3) (64.5) (30.9) (12.2) (80.5) (54.6) Net amortization and deferral 9.9 46.0 (1.8) (9.2) 53.8 39.1 14.0 37.1 14.0 33.0 14.7 29.3 Other Pension Costs Defined contribution plans -- 1.7 -- 1.9 -- 1.6 Foreign plans not on SFAS 87 -- 4.2 -- 4.7 -- 4.6 Total Pension Expense $14.0 $43.0 $14.0 $39.6 $14.7 $35.5
The funded status of the Company's principal defined benefit plans and the amounts recognized in the balance sheet at December 31 follow.
1993 1992 1991 (Millions of dollars) Domestic Foreign Domestic Foreign Domestic Foreign Vested benefit $431.1 $ 438.8 $343.9 $ 340.6 $327.7 $ 280.6 Nonvested benefit 70.4 22.0 25.8 17.5 22.0 15.2 Accumulated benefit obligation 501.5 460.8 369.7 358.1 349.7 295.8 Benefit obligation related to future compensation levels 108.8 66.4 106.4 74.1 101.2 85.0 Projected benefit obligation 610.3 527.2 476.1 432.2 450.9 380.8 Fair value of plan assets, invested primarily in equities and bonds 489.4 268.1 423.3 174.6 400.8 204.3 Plan assets less than projected benefit obligation (120.9) (259.1) (52.8) (257.6) (50.1) (176.5) Unrecognized transition obligation (asset) (2.3) 10.8 (2.6) 13.5 (2.9) 7.5 Unrecognized prior service cost 27.4 9.5 17.8 6.3 18.6 6.8 Unrecognized net loss 117.1 44.3 54.4 36.2 48.4 21.8 Minimum liability adjustment (8.9) (15.4) -- -- -- -- Net prepaid (accrued) pension cost included in consolidated balance sheet $ 12.4 $(209.9) $ 16.8 $(201.6) $ 14.0 $(140.4)
The primary assumptions used in determining related obligations of the plans are shown below.
1993 1992 1991 (Percent) Domestic Foreign Domestic Foreign Domestic Foreign Discount rate 7 5-9 8 5-10 8 5-11 Increase in compensation levels 5 3-1/2 - 7-1/2 5-1/2 3-1/2 - 6-1/2 5-1/2 3-1/2 - 8 Long-term rate of return on assets 9 5-10 9 5-11 9 5-11
22 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. Previously, they were recognized as claims were incurred and amounted to $10.6 million and $10.0 million in 1992 and 1991, respectively. The other postretirement benefit expense for 1993 was $9.2 million. The components of the net expense follow.
(Millions of dollars) 1993 Interest cost $14.7 Service cost (income) (5.2) Actual loss (return) on assets (.4) Net amortization and expense .1 Other postretirement benefit expense $9.2
The status of the Company's plans and the amounts recognized in the balance sheet at December 31, 1993, follow. Retirees $113.0 Fully eligible active employees 32.8 Other active employees 65.4 Accumulated postretirement benefit obligation 211.2 Fair value of plan assets (7.2) Unrecognized net loss (10.1) Accrued postretirement liability $193.9
The accumulated postretirement benefit obligation was determined using an assumed discount rate of 7%. The assumed health care cost trend rate was 13% in 1993, decreasing to 5% by the year 2001. A one percentage point increase in the health care cost trend would have increased the accumulated postretirement benefit obligation by $33 million and the cost for 1993 by $1.7 million. 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 percent. 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 will be 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, 1993, 164,243 Series C shares were outstanding. This was equivalent to 3,284,851 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. 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 will be repaid on a semi-annual basis over a 10-year period by Company contributions to the ESOP and by the dividends paid on the Series C shares. Company cash contributions and dividend payments of $15.8 million and $18.1 million were paid to the ESOP during 1993 and 1992, respectively. The ESOP made principal and interest payments of $10.3 million and $5.5 million during 1993, $11.7 million and $6.5 million during 1992, and $14.1 million and $7.6 million during 1991, 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 $8.5 million, $11.1 million and $14.5 million in 1993, 1992 and 1991, respectively. 23 COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL On April 1, 1991, the 600,000 shares of 8-3/4% Series B Cumulative Convertible Preferred Stock, held by insurance subsidiaries of Berkshire Hathaway Inc., were converted into 24,000,000 shares of the Company's common stock. Shares of common stock held in the Company's treasury were used in the conversion. 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, 1990 276,167 (81,730) 194,437 $276.2 $ 38.7 $(1,483.2) Conversion of Series B -- Preferred Stock 24,000 24,000 -- 161.4 435.5 Conversion of Series C ESOP -- Preferred Stock 8 8 -- .1 .2 Stock option and purchase plans 734 -- 734 .7 12.8 -- 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)
PREFERRED STOCK PURCHASE RIGHTS At December 31, 1993, the Company had 56,043,617 preferred stock purchase rights outstanding as follows: one-quarter of a right for each outstanding share of common stock and a total of 821,212 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 which 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 which 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, 1993, there were authorized 5,000,000 shares of preferred stock without par value, of which 164,243 Series C shares were issued and 400,000 Series A shares were reserved for issuance upon exercise of the rights. 24 STOCK AND STOCK EQUIVALENT UNIT PLANS Stock Option Plan activity is summarized below.
1993 1992 1991 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 4,347 $32.84 4,160 $26.22 3,988 $21.30 Granted 982 48.40 1,311 44.85 1,164 35.97 Exercised (765) 26.91 (1,116) 22.21 (905) 16.85 Cancelled (22) 39.88 (8) 38.54 (87) 28.95 Outstanding at end of year 4,542 37.17 4,347 32.84 4,160 26.22 Shares reserved for future grants 62 1,022 2,325
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. 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, 1993, 184,739 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 $14.5 million in 1993, $22.1 million in 1992 and $31.5 million in 1991. CONTINGENCIES 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, 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 or results of operations of the Company. LEASE COMMITMENTS Minimum rental commitments under noncancellable leases, primarily for office and warehouse facilities, are $40.6 million in 1994, $32.4 million in 1995, $26.2 million in 1996, $22.8 million in 1997, $20.3 million in 1998 and $32.1 million for years thereafter. Rental expense amounted to $60.5 million in 1993, $59.7 million in 1992 and $52.3 million in 1991. RESEARCH AND DEVELOPMENT Research and development costs, included in selling, general and administrative expenses, amounted to $133.1 million in 1993, $123.8 million in 1992 and $108.9 million in 1991. 26 25 PRINCIPAL DIVISIONS AND SUBSIDIARIES North Atlantic Group The North Atlantic Group manufactures and markets the Company's traditional shaving and personal care products in Western Europe and North America. Sales showed good progress, and profits moved considerably above those of the year before. Stationery Products Group The Stationery Products Group produces and sells the Company's stationery products in Western Europe and North America. In 1993, sales and profits increased substantially. International Group The International Group makes and markets the Company's traditional shaving, personal care and stationery products throughout the world except for Western Europe and North America. Sales and profits climbed sharply in 1993. Diversified Group The Diversified Group consists of Braun, Oral-B and Jafra, each organized on a worldwide product line basis. Sales were slightly lower in 1993, and profits posted a moderate gain. 26 CORPORATE AND STOCKHOLDER INFORMATION ANNUAL MEETING The Annual Meeting of the stockholders will take place on Thursday, April 21, 1994, 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 29,100, 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 (617) 575-2900 AUDITORS KPMG Peat Marwick FORM 10-K The Company's 1993 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 stockholders of record 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 shares 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 (617) 575-2900 QUARTERLY REPORTS If you are a registered holder of Gillette common stock, the Company mails quarterly reports directly to you. If your shares are held of record by a bank, broker or other nominee, however, you probably receive the Company's quarterly reports as much as a month later than a registered stockholder because the reports are first forwarded to your financial institution. Many stockholders have noted that, after such a delay, the quarterly information is of limited value--even though it costs the Company more to forward reports through financial institutions. In an effort to provide more timely information to all stockholders and as part of the Company's continuing effort to reduce costs, Gillette will continue to mail quarterly reports to stockholders of record, but, beginning in 1994, will no longer forward these reports through financial institutions. If your shares are registered in the name of a broker or other nominee, and you would like to continue 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. 27 FINANCIAL INFORMATION BY BUSINESS SEGMENT
Blades & Toiletries & Stationery Braun Oral-B (Millions of dollars) Razors Cosmetics Products Products Products Other Corporate Total 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 1991 Net sales $1,750.1 $ 946.9 $ 460.3 $1,215.8 $308.1 $2.7 $ -- $4,683.9 Profit from operations 555.6 114.1 48.8 145.3 38.8 (.1) (40.9) 861.6 Identifiable assets 1,477.9 486.9 423.2 883.2 248.4 2.3 364.8 3,886.7 Capital expenditures 126.5 37.6 27.8 78.0 11.1 -- 5.0 286.0 Depreciation 71.6 19.1 11.9 56.3 7.8 .3 5.4 172.4
FINANCIAL INFORMATION BY GEOGRAPHIC AREA
Western Latin Total United (Millions of dollars) Europe America Other Foreign States Corporate Total 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 1991 Net sales $1,896.7 $557.6 $733.8 $3,188.1 $1,495.8 $ -- $4,683.9 Profit from operations 364.0 156.3 105.1 625.4 277.1 (40.9) 861.6 Identifiable assets 1,723.5 449.3 460.6 2,633.4 888.5 364.8 3,886.7
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. In 1993, components of some geographic areas were redefined. Prior years were restated. 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. 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. 28 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES RESPONSIBILITY FOR 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, independent auditors, are engaged to render an independent opinion regarding the fair presentation in the financial statements of the Company's financial condition and operating results. Their report appears below. Their examination was made in accordance with generally accepted auditing standards and included a review of the system of internal accounting controls to the extent they considered necessary to determine the audit procedures required to support their opinion. The Audit Committee of the Board of Directors is composed solely of directors who are not employees of the Company. The Committee meets periodically and privately with the independent auditors, with the internal auditors and with the financial officers of the Company to review matters relating to the quality of the financial reporting of the Company, the internal accounting controls and the scope and results of audit examinations. The Committee also reviews compliance with the Company's statement of policy as to the conduct of its business, including proper accounting 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 Peat Marwick 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, 1993 and 1992, 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, 1993. 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, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. KPMG Peat Marwick Boston, Massachusetts January 27, 1994 29 29 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 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% 1989 32% 62% 27% 10% 11% 10% 24% 15% 6% 3% *Segment profit percentages are before realignment expense.
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES OTHER FINANCIAL INFORMATIONQUARTERLY FINANCIAL INFORMATION
(Millions of dollars, except per share amounts) Three Months Ended 1993 March 31 June 30 September 30 December 31* Total Year 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, a charge 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.
1992 Net sales $1,206.8 $1,198.9 $1,249.2 $1,507.9 $5,162.8 Gross profit 743.9 734.0 764.1 895.0 3,137.0 Profit from operations 248.5 226.5 236.6 255.5 967.1 Income before income taxes 210.4 192.6 206.9 219.8 829.7 Net income 129.4 120.5 128.2 135.3 513.4 Net income per common share .58 .55 .58 .61 2.32 Dividends declared per common share -- .18 .18 .36 .72 Stock price range: (composite basis) High 54-7/8 52-1/2 58-3/4 61-1/4 Low 46-3/8 43-7/8 47-1/2 54-1/2
30 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 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 1983 2,183 319 239 146 33 81 1,696 90 1982 2,239 319 225 135 46 80 1,667 91 * In 1993, a charge for realignment expense reduced profit from operations and income before income taxes by $263 million, income by $164 million and 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. ** 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.
31
Per Common Share Net property, Average com- Year-end plant and Long-term Stockholders' Net Dividends mon shares stock equipment debt equity income declared outstanding price Employees Year $1,215 $ 840 $1,479 $1.29 $.84 220 $59-5/8 33,400 *1993 1,075 554 1,496 2.32 .72 220 56-7/8 30,900 1992 931 742 1,157 1.94 .62 211 56-1/8 31,200 1991 862 1,046 265 1.60 .54 194 31-3/8 30,400 1990 745 1,041 70 1.35 .48 193 24-5/8 30,400 1989 683 1,675 (85) 1.23 .43 219 16-5/8 29,600 1988 664 840 599 1.00 .39-1/4 230 14-1/4 30,100 1987 637 915 461 .06 .34 255 12-3/8 32,100 **1986 504 436 898 .65 .32-1/2 247 8-3/4 31,400 1985 430 443 791 .65 .31 246 7-1/8 31,400 1984 406 278 757 .60 .29-5/8 244 6-1/8 29,400 1983 420 293 721 .56 .28-1/8 243 5-5/8 30,200 1982
EX-22 15 LIST OF SUBSIDIARIES 1 EXHIBIT 22 THE GILLETTE COMPANY SUBSIDIARIES OF REGISTRANT DECEMBER 31, 1993
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. Limited......................................... Australia Braun Inc................................................................. Delaware Gillette Beteiligungs -- GmbH............................................. Germany Its subsidiaries: Gillette Finance B.V................................................. Netherlands 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 Silk-Epil S.A................................................... France Gillette do Brasil, Inc. and Jafra Comercio Participacoes e Servicos, Delaware Inc..................................................................... 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
Gillette Capital Corporation.............................................. Delaware Its subsidiaries: Jafra Cosmetics, Inc................................................. California Lustrasilk Corporation of America, Inc............................... Minnesota
18 2 THE GILLETTE COMPANY SUBSIDIARIES OF REGISTRANT -- (CONTINUED)
ORGANIZED UNDER NAME LAWS OF ---- --------- 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 Interpak Shaving Products 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 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)................................................ Delaware Wizamet 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, Interpak Shaving Products Limited, Gillette Egypt S.A.E., Wizamet S.A., Gillette France S.A., and the Waterman S.A. group of companies is 51%, 50%, 70%, 75%, 80%, 93.4%, 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. 19 EX-23 16 INDEPENDENT AUDITORS CONSENT 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT The Stockholders and Board of Directors of THE GILLETTE COMPANY: We consent to incorporation by reference in the following registration statements of The Gillette Company (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, and (6) No. 33-52465 on Form S-8, of our report dated January 27, 1994, relating to the consolidated balance sheet of The Gillette Company and subsidiary companies as of December 31, 1993 and 1992, and the related consolidated statements of income and earnings reinvested in the business, and cash flows and related schedules for each of the years in the three-year period ended December 31, 1993, which reports appear or are incorporated by reference in the December 31, 1993 Annual Report on Form 10-K of The Gillette Company. KPMG PEAT MARWICK Boston, Massachusetts March 22, 1994 20 EX-23.A 17 CONSENT OF ACCOUNTANTS 1 EXHIBIT 23 (a) INDEPENDENT AUDITOR'S CONSENT The Stockholders and Board of Directors of The Gillette Company We consent to the incorporation in the 1993 Annual Report to Stockholders of The Gillette Company, and the incorporation by reference of that report in the 1993 Annual Report to the Securities and Exchange Commission of The Gillette Company on Form 10-K, of our report dated 12 May 1993 on our audit of the consolidated financial statements of Parker Pen Holdings Limited, as of 28 February 1993, and for the year ended 28 February 1993. COOPERS & LYBRAND - ----------------- Coopers & Lybrand Maidstone, England 23 March 1994 EX-24 18 POWER OF ATTORNEY 1 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, 1993, 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 March 17, 1994 __________________________________________ of Directors, Chief Executive Alfred M. Zeien Officer and Director JOSEPH E. MULLANEY Vice Chairman of the Board and March 17, 1994 __________________________________________ Director Joseph E. Mullaney THOMAS F. SKELLY Senior Vice President and March 17, 1994 __________________________________________ Chief Financial Officer Thomas F. Skelly ANTHONY S. LUCAS Vice President, March 17, 1994 __________________________________________ Controller and Chief Anthony S. Lucas Accounting Officer WARREN E. BUFFETT Director March 17, 1994 __________________________________________ Warren E. Buffett LAWRENCE E. FOURAKER Director March 17, 1994 __________________________________________ Lawrence E. Fouraker WILBUR H. GANTZ Director March 17, 1994 __________________________________________ Wilbur H. Gantz MICHAEL B. GIFFORD Director March 17, 1994 __________________________________________ Michael B. Gifford CAROL R. GOLDBERG Director March 17, 1994 __________________________________________ Carol R. Goldberg HERBERT H. JACOBI Director March 17, 1994 __________________________________________ Herbert H. Jacobi RICHARD R. PIVIROTTO Director March 17, 1994 __________________________________________ Richard R. Pivirotto JUAN M. STETA Director March 17, 1994 __________________________________________ Juan M. Steta ALEXANDER B. TROWBRIDGE Director March 17, 1994 __________________________________________ Alexander B. Trowbridge JOSEPH F. TURLEY Director March 17, 1994 __________________________________________ Joseph F. Turley
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