<PAGE>
COLGATE-PALMOLIVE COMPANY
A Delaware Corporation
300 Park Avenue
New York, NY 10022
Reuben Mark
Chairman and Chief Executive Officer
March 1994
Dear Fellow Employee:
The Board of Directors joins me in thanking you for your creative and
energetic accomplishments. 1993 was most challenging, particularly in the
developed world. Yet your committed efforts made for another successful year
in every area: our financial performance, our ability to successfully deal
with the changing business environment of the 1990's, and our progress in
becoming the best truly global consumer products company.
Some highlights:
- -- Colgate achieved new earnings and sales records, with profits advancing
15% and earning per share growing 16%.
- -- Unit volume grew 5%, our 11th consecutive year of volume growth.
- -- We accelerated the flow of new products to consumers: 25% of total sales
in 1993 were from new products introduced in the last five years, up
from 21% in 1992.
We all can take pride in the success of Colgate Total plaque-fighting
toothpaste, which so far has been introduced in 49 countries; the
triple-action Colgate Precision toothbrush, which is adding to our Number One
position, both in the USA and globally; Ajax Compact 4-in-1 cleaner; Irish
Spring deodarant; Hill's Science Diet Treats for dogs, and countless other
technologically innovative new products. This year we will increase new product
activity and levels of advertising support worldwide.
Since it is your efforts that make Colgate the success it is, I hope you read
the enclosed Annual Report on the Company's recent achievements and future
direction with the same pride and enthusiasm that I do. As always, I look
forward to working together with you as we reach to make Colgate the world's
best.
Thanks and best regards,
[Reuben Mark Signature]
<PAGE>
<PAGE>
COLGATE-PALMOLIVE COMPANY
STOCK SAVINGS PLAN
To: Plan Participants
As a participant in the above Plan, you may direct the manner in which shares
of Company Common Stock allocable to your interest in the funds established
under such Plan shall be voted by the appropriate Trustee/Custodian at the
annual meeting of stockholders to be held at New York, New York on May 5,
1994 or at any adjournment thereof.
Election of Directors, Nominees:
V.R. Alden, J.K. Conway, R.E. Ferguson,
E.M. Hancock, D.W. Johnson,
J.P. Kedall, D.E. Lewis, R. Mark,
H.B. Wentz, Jr.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. If a signed card is
not returned, shares allocable to your interest in the Plan will be voted in
the same proportion as shares for which instruction cards are received.
(Continued and to be signed on other side).
<PAGE>
<PAGE>
4061
[X] Please mark your votes as in this example.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted in accordance with
the Board's recommendations.
The Board of Directors recommends a vote FOR items 1, 2, 3 and 4..
[ ] FOR [ ] WITHHELD
1. Election of Directors (see reverse)
FOR, except vote withheld from the following nominee(s):
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Approve selection of Arthur Anderson & Co. as Auditors.
3. Approve the Non-Employee Director Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approve the Amended Executive Incentive Compensation Plan.
The Board recommends a vote AGAINST item 5.
5. Stockholder Proposal: Blank Check Preference Stock.
In his discretion, the Proxy Committee is authorized to vote upon such other
business as may properly come before the meeting.
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
SIGNATURE(S) DATE
FOLD AND DETACH HERE
ANNUAL MEETING OF COLGATE-PALMOLIVE COMPANY SHAREOWNERS
Thursday, May 5, 1994
- --Your vote is important to us. Please detach the above proxy, sign the card
and insert it in the enclosed envelope at your earliest convenience. Further,
be advised that your vote is held in confidence by our outside tabulator, the
First Chicago Trust Company of New York.
<PAGE>
<PAGE>
COLGATE-PALMOLIVE COMPANY
EMPLOYEES SAVINGS AND INVESTMENT PLAN
To: Plan Participants
As a participant in the above Plan, you may direct the manner in which shares
of Company Common Stock and/or Convertible Preferernce Stock allocable to
your interest in the Trust Funds established under such Plan shall be voted
by the appropriate Trustee at the annual meeting of stockholders to be held
at New York, New York on May 5, 1994 or at any adjournment thereof.
Election of Directors, Nominees:
V.R. Alden, J.K. Conway, R.E. Ferguson,
E.M. Hancock, D.W. Johnson,
J.P. Kedall, D.E. Lewis, R. Mark,
H.B. Wentz, Jr.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. If a signed card is
not returned, shares allocable to your interest in the Plan will be voted in
the same proportion as shares for which instruction cards are received.
(Continued and to be signed on other side).
<PAGE>
<PAGE>
0124
[X] Please mark your votes as in this example.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted in accordance with
the Board's recommendations.
The Board of Directors recommends a vote FOR items 1, 2, 3 and 4..
[ ] FOR [ ] WITHHELD
1. Election of Directors (see reverse)
FOR, except vote withheld from the following nominee(s):
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Approve selection of Arthur Anderson & Co. as Auditors.
3. Approve the Non-Employee Director Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approve the Amended Executive Incentive Compensation Plan.
The Board recommends a vote AGAINST item 5.
5. Stockholder Proposal: Blank Check Preference Stock.
In his discretion, the Proxy Committee is authorized to vote upon such other
business as may properly come before the meeting.
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
SIGNATURE(S) DATE
FOLD AND DETACH HERE
ANNUAL MEETING OF COLGATE-PALMOLIVE COMPANY SHAREOWNERS
Thursday, May 5, 1994
Marriott Marquis
10:00 a.m.
Broadway Ballroom
1535 Broadway
(45th Street and Broadway)
New York, NY
- --Your vote is important to us. Please detach the above proxy, sign the card
and insert it in the enclosed envelope at your earliest convenience.
- --If you intend to attend the meeting, please fill out and mail separately
the enclosed ticket request.
<PAGE>
<PAGE>
COLGATE-PALMOLIVE COMPANY
300 Park Avenue, New York, NY 10022
Proxy Solicited by the Board of Directors
for Annual Meeting on May 5, 1994
P R O X Y
The undersigned hereby appoints as proxies, with full power of substitution
to each, REUBEN MARK, VERNON R. ALDEN and HOWARD B. WENTZ, JR. (the Proxy
Committee) to vote as designated below, all shares which the undersigned
would be entitled to vote at the annual meeting of stockholders of the
Company to be held at new York, New York on May 5, 1994 or at any
adjournments thereof. Action hereunder may be taken by a majority of said
proxies or their substitutes who are present or if only one be present, then
by that one.
Election of Directors, Nominees:
V.R. Alden, J.K. Conway, R.E. Ferguson,
E.M. Hancock, D.W. Johnson,
J.P. Kedall, D.E. Lewis, R. Mark,
H.B. Wentz, Jr.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxy Committee
cannot vote your shares unless you sign and return this card.
(Continued and to be signed on other side).
<PAGE>
<PAGE>
1957
[X] Please mark your votes as in this example.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted in accordance with
the Board's recommendations.
The Board of Directors recommends a vote FOR items 1, 2, 3 and 4..
[ ] FOR [ ] WITHHELD
1. Election of Directors (see reverse)
FOR, except vote withheld from the following nominee(s):
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Approve selection of Arthur Anderson & Co. as Auditors.
3. Approve the Non-Employee Director Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approve the Amended Executive Incentive Compensation Plan.
The Board recommends a vote AGAINST item 5.
5. Stockholder Proposal: Blank Check Preference Stock.
In his discretion, the Proxy Committee is authorized to vote upon such other
business as may properly come before the meeting.
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
SIGNATURE(S) DATE
FOLD AND DETACH HERE
<PAGE>
<PAGE>
[COLGATE-PALMOLIVE CORPORATE LOGO] COLGATE-PALMOLIVE COMPANY
March 21, 1994
Dear Colgate Stockholder:
On behalf of the Board of Directors and management, I cordially invite you to
attend the Annual Meeting of Stockholders on Thursday, May 5, 1994, at 10:00
a.m. in the Broadway Ballroom of the Marriott Marquis Hotel, 1535 Broadway,
between 45th and 46th Streets, New York, New York 10036.
In addition to the election of directors and approval of the selection of
auditors, the principal items of business will be approval of a Non-Employee
Director Stock Option Plan, approval of an Amended Executive Incentive
Compensation Plan and the consideration of a stockholder proposal on blank
check preference stock. Additional details about the meeting are in the
accompanying Notice of Annual Meeting and Proxy Statement. At the meeting, I
will also report on the progress of the Company during the past year and
answer stockholder questions.
It is important that your stock be represented at the meeting. Whether or not
you plan to attend personally, please complete and mail the enclosed proxy
card in the return envelope.
Very truly yours,
[Reuben Mark signature]
Reuben Mark
Chairman of the Board and
Chief Executive Officer
<PAGE>
<PAGE>
[COLGATE-PALMOLIVE CORPORATE LOGO] COLGATE-PALMOLIVE COMPANY
March 21, 1994
NOTICE OF MEETING
The Annual Meeting of Stockholders of Colgate-Palmolive Company, a Delaware
corporation, will be held on Thursday, May 5, 1994, at 10:00 a.m. in the
Broadway Ballroom of the Marriott Marquis Hotel, 1535 Broadway, between 45th
and 46th Streets, New York, New York 10036.
Items of business will be as follows:
1. Election of directors.
2. Approval of selection of auditors.
3. Approval of the Non-Employee Director Stock Option Plan.
4. Approval of an Amended Executive Incentive Compensation Plan.
5. Stockholder proposal on blank check preference stock.
6. Such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 10, 1994 are
entitled to notice of and to vote at the meeting.
Andrew D. Hendry
Senior Vice President, General Counsel and Secretary
300 Park Avenue
New York, New York 10022
1
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<PAGE>
COLGATE-PALMOLIVE COMPANY
300 Park Avenue
New York, New York 10022
March 21, 1994
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of
Colgate-Palmolive Company, a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held in New York City on May 5,
1994, and at any adjournment thereof. The proxy may be revoked at any time
before it is voted. If no contrary instruction is received, signed proxies
returned by stockholders will be voted in accordance with the Board of
Directors' recommendations.
This proxy statement and accompanying proxy are first being sent to
stockholders on or about the date set forth above.
Because respect for the rights and privacy of stockholders has always been a
practice at the Company, we have adopted a policy to assure that all proxies,
ballots and vote tabulations that identify stockholders are kept
confidential. Proxy cards will be returned in envelopes addressed to an
independent tabulator, which will receive, inspect and tabulate the proxies.
The identity of the vote of any stockholder will not be disclosed without the
consent of the stockholder except for use by the independent tabulator, for
solicitations for change of control of the Company and to meet legal
requirements.
Stockholders of record at the close of business on March 10, 1994 are
entitled to vote at the meeting. On that date, the Company had outstanding
147,450,387 shares of Common Stock (the "Common Stock"), 125,000 shares of
$4.25 Preferred Stock (the "$4.25 Preferred Stock") and 6,171,954 shares of
Series B Convertible Preference Stock (the "Series B Convertible Preference
Stock"). Each outstanding share of Common Stock and $4.25 Preferred Stock has
one vote, and each outstanding share of Series B Convertible Preference Stock
has two votes, corresponding to its conversion ratio.
The holders of a majority of the votes entitled to be cast present in person
or by proxy shall constitute a quorum for purposes of the 1994 Annual Meeting
of Stockholders. Absentions and broker non-votes are counted for purposes of
determining whether a quorum is present on any matter. A plurality vote is
required for the election of directors. Accordingly, abstentions and broker
non-votes will not affect the outcome of the election. All other matters to
be voted on will be decided by the affirmative vote of a majority of the
votes of the shares represented at the meeting, either in person or by proxy,
and entitled to vote. On any such matter, an abstention will have the same
effect as a negative vote but, because shares held by brokers will not be
considered to be entitled to vote on matters as to which the brokers withhold
authority, a broker non-vote will have no effect on the vote.
The Company will pay the cost of soliciting proxies for the meeting. Proxies
may be solicited by regular employees of the Company in person, or by mail,
courier, telephone or facsimile. In addition, the Company has retained D.F.
King & Co. Inc. to solicit proxies by mail, courier, telephone and facsimile
and to request brokerage houses and other nominees to forward soliciting
material to beneficial owners. For these services the Company will pay a fee
of approximately $22,000 plus expenses.
2
<PAGE>
<PAGE>
1. ELECTION OF DIRECTORS
The Board of Directors proposes the election of the following nine nominees
as directors, to serve until their successors have been elected and have
qualified.
Nominees
The name, age and principal occupation of each nominee, the nominee's length
of service as a director of the Company, the names of the other public
companies of which the nominee is a director and certain other biographical
information are set forth below:
Reuben Mark, 55
Chairman and Chief Executive Officer of the Company. Mr. Mark joined the
Company in 1963 and held a series of significant positions in the United
States and abroad. He was appointed Vice President and General Manager of the
Household Products Division in 1975. From March 1979 to March 1981, he was
Group Vice President of domestic operations. In March 1981, he was elected
Executive Vice President and became President and a director of the Company
on March 1, 1983. Mr. Mark was elected Chief Executive Officer in May 1984
and Chairman in May 1986. Mr. Mark is also a director of Pearson, plc, Toys
"R" Us, Inc., Time Warner, Inc. and the New York Stock Exchange.
Director since 1983
Vernon R. Alden, 70
Mr. Alden was Chairman of the Board and Executive Committee of The Boston
Company, Inc., a financial services company, from 1969 to 1978. He was
President of Ohio University from 1962 to 1969 and, prior thereto, he was
theAssociate Dean and a member of the faculty of the Harvard Graduate School
of Business Administration. Mr. Alden has been serving as a director of Augat
Inc., Digital Equipment Corporation, Intermet Corporation and Sonesta
International Hotels Corporation. Mr. Alden is currently the Independent
General Partner of ML-Lee Acquisition Fund, L.P., ML-Lee Acquisition Fund II,
L.P. and ML-Lee Acquisition Fund (Retirement Accounts) II, L.P. He is also a
trustee of several cultural and educational organizations, as well as The
Honorary Consul General for the Kingdom of Thailand and Chairman of the Japan
Society of Boston.
Director since 1974
3
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<PAGE>
Jill K. Conway, 59
Visiting Scholar, Program in Science, Technology and Society, Massachusetts
Institute of Technology since 1985. Mrs. Conway was President of Smith
College from 1975 to 1985. She was Vice President, Internal Affairs,
University of Toronto, from 1973 to 1975 and a member of its graduate faculty
from 1971 to 1975. She has served as a member of the Harvard Board of
Overseers and The Conference Board and as a trustee of Hampshire College,
Northfield Mt. Hermon School and The Clarke School of the Deaf. Mrs. Conway
is a member of the boards of Merrill Lynch & Co., Inc., Arthur D. Little,
Inc., Nike, Inc., the Allen Group and Lend Lease International. She is also a
trustee of the Asia Society, the New England Medical Center, Mt. Holyoke
College, The Knight Foundation and the Kresge Foundation.
Director since 1984
Ronald E. Ferguson, 52
Chairman, President and Chief Executive Officer of General Re Corporation.
Mr. Ferguson was elected Chairman and Chief Executive Officer in 1987 and has
been with General Re since 1969. Mr. Ferguson is also a director of General
Signal Corporation.
Director since 1987
Ellen M. Hancock, 50
Senior Vice President and Group Executive, International Business Machines
Corporation. Mrs. Hancock joined IBM as a programmer in 1966 and served in
various staff, managerial and executive positions. She was elected an IBM
Vice President in September 1985 and in December 1985 was named Vice
President, Telecommunications Systems, Communication Products Division. She
was named President, Communication Products Division, in 1986 and General
Manager, Networking Systems, in 1988. She was elected an IBM Senior Vice
President in November 1992 and assumed her present position in 1993. Mrs.
Hancock is on the board of directors of the ARDIS Company, a joint venture of
IBM and Motorola, and ROLM Company. She is also on the board of trustees of
Marist College.
Director since 1988
4
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<PAGE>
David W. Johnson, 61
Chairman, President and Chief Executive Officer of Campbell Soup Company. Mr.
Johnson began his business career as a management trainee at Colgate
Australia in 1959 and received a series of promotions at the Company,
becoming General Manager of Colgate's South Africa subsidiary in 1967. He
then held several positions with Warner-Lambert from 1972 to 1982, including
President of their Asian Management Center, President of their Personal
Products Division and President of American Chicle Division. In 1982, Mr.
Johnson became President and Chief Executive Officer of Entenmann's, Inc.
From 1987 to 1989, he served as Chairman, Chief Executive Officer and
President of Gerber Products Company and from 1989 to 1990 he served as
Chairman and Chief Executive Officer of Gerber. Mr. Johnson was elected
Chairman of Campbell Soup Company in 1993 and has been its President, Chief
Executive Officer and a Director since January 1990.
Director since 1991
John P. Kendall, 65
Officer, Faneuil Hall Associates, Inc., a private investment company, since
1973. Mr. Kendall is a former Chairman of The Kendall Company and a former
director of the Shawmut Bank of Boston, N.A.
Director since 1972
Delano E. Lewis, 55
Chief Executive Officer and President, National Public Radio. From 1973
through 1988, Mr. Lewis held positions of increasing responsibility with
Chesapeake & Potomac Telephone Company, including Vice President responsible
for External Affairs. From 1988 through 1993, until he assumed his present
position, Mr. Lewis was the President and Chief Executive Officer of
Chesapeake & Potomac Telephone Company. Mr. Lewis has also served on the
Peace Corps staff in Africa and on the staff of the United States Equal
Employment Opportunity Commission and the United States Department of
Justice. Mr. Lewis is also a director of GEICO Corporation and Chase
Manhattan Corp. and has served on the boards of many civic, educational and
public service organizations, including Catholic University, the United Negro
College Fund, the Washington Performing Arts Society and the Greater
Washington Board of Trade.
Director since 1991
5
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<PAGE>
Howard B. Wentz, Jr., 64
Chairman of ESSTAR Incorporated since July 1989 and Chairman of Tambrands
Inc. since June 1993. Previously, he was Chairman, President and Chief
Executive Officer of Amstar Corporation. Mr. Wentz joined Amstar in 1969 as
Vice President of Operations for its subsidiary, Duff-Norton Company, Inc. He
was elected President of Duff-Norton in 1970, Vice President of Amstar in
1972, a director in 1976 and Executive Vice President and Chief Operating
Officer in 1979. He assumed the additional responsibilities of President in
1981, Chief Executive Officer in 1982 and Chairman in 1983. In 1984, Mr.
Wentz was appointed President and a director of Amstar Holdings, Inc. Prior
to becoming Chairman, Mr. Wentz was already a director of Tambrands Inc. and
he is also a director of Crompton & Knowles Corporation.
Director since 1982
The Board recommends a vote IN FAVOR of the nominees for director listed
above.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of Common Stock and Series
B Convertible Preference Stock by each director, executive officer named in
the Summary Compensation Table and directors and executive officers as a
group. No director or executive officer owns any $4.25 Preferred Stock.
<TABLE>
<CAPTION>
Common Stock Series B Convertible
Amount of Preference
Beneficial Ownership(1,2) Stock (ESOP)
Name of Directly Exercisable Amount of
Beneficial Owner Owned Options Beneficial Ownership(2,3)
<S> <C> <C> <C>
Reuben Mark(4)............................... 486,085 1,356,774 1,869
William S. Shanahan.......................... 134,179 118,873 1,135
William G. Cooling........................... 89,773 50,335 936
Robert M. Agate.............................. 75,433 29,033 1,259
David A. Metzler............................. 34,375 81,870 1,105
Vernon R. Alden(5)........................... 9,544 0 --
Jill K. Conway............................... 3,555 0 --
Ronald E. Ferguson........................... 9,123 0 --
Ellen M. Hancock(6).......................... 3,236 0 --
David W. Johnson............................. 2,302 0 --
John P. Kendall(7)........................... 174,708 0 --
Delano E. Lewis.............................. 1,054 0 --
Howard B. Wentz, Jr.......................... 11,469 0 --
All directors and executive officers as a
group (28 persons) ......................... 1,499,807 2,075,729 17,948
</TABLE>
(1)Information regarding Common Stock holdings is as of February 22, 1994,
except for holdings in the Savings and Investment Plan which is as of
December 31, 1993. Unless otherwise indicated, beneficial ownership of Common
Stock is direct, and the person indicated has sole voting and investment
power.
Footnotes continue on following page.
6
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<PAGE>
(2)Each indicated person beneficially owns less than one percent of the
outstanding Common Stock and Series B Convertible Preference Stock, except
for Mr. Mark who beneficially owns (including direct ownership, exercisable
options and Savings and Investment Plan holdings) 1.2% of the outstanding
Common Stock. All directors and executive officers as a group beneficially
own 2.4% of the outstanding Common Stock and less than 1% of the outstanding
Series B Convertible Preference Stock.
(3)Information regarding Series B Convertible Preference Stock holdings is
as of December 31, 1993. Series B Convertible Preference Stock is issued to a
trustee acting on behalf of the Company's Savings & Investment Plan.
Participants in such plan, including the executive officers named in the
Summary Compensation Table, have sole voting power over such shares, subject
to the trustee's right to vote such shares if the participant fails to do so,
but no investment power until distribution in accordance with the terms of
such plan, subject to statutory diversification requirements.
(4)Mr. Mark has limited rights exercisable in conjunction with 631,300 of
his stock options which permit him to realize the accumulated value of such
options in the event of a change in control.
(5)Mr. Alden's holdings do not include 2,000 shares of Common Stock held by
his spouse, as to which he disclaims beneficial ownership.
(6)Mrs. Hancock's holdings include 200 shares of Common Stock owned jointly
with her spouse.
(7)Mr. Kendall's holdings do not include 310,502 shares of Common Stock held
by trusts in which he has a contingent remainderman's interest and 57,690
shares of Common Stock held by trusts in which he has a limited power of
appointment. He has no voting or investment power in these trusts, and he
disclaims beneficial ownership of such shares.
Based on a review of the forms and written representations received by the
Company pursuant to Section 16(a) of the Securities Exchange Act of 1934, the
Company believes that, during 1993, its executive officers and directors
complied with all applicable Section 16 filing requirements.
Board of Directors and Committees
The Board of Directors met ten times during 1993.
The standing committees of the Board are the Audit Committee, Finance
Committee, Personnel and Organization Committee and Committee on Directors.
The Audit Committee oversees management's discharge of its financial
reporting responsibilities and recommends appointment of the Company's
independent public accountants. To insure independence, the independent
public accountants, internal auditors and general counsel meet with the Audit
Committee with and without the presence of management representatives. Its
current members are: Ronald E. Ferguson (Chair), Vernon R. Alden, Jill K.
Conway, John P. Kendall (Deputy Chair) and Howard B. Wentz, Jr. It met three
times in 1993.
The Finance Committee oversees the financial policies and practices of the
Company. It also reviews the financial statements of the Company, makes
recommendations to the Board regarding financial and strategic matters and
oversees the Company's finance, treasury and related functions. Its current
members are: Howard B. Wentz, Jr. (Chair), Ronald E. Ferguson, Ellen M.
Hancock (Deputy Chair), John P. Kendall and Reuben Mark. It met six times in
1993.
7
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<PAGE>
The Personnel and Organization Committee oversees organizational, personnel,
compensation and benefits policies and practices of the Company. It reviews
the compensation of the executive officers and recommends to the Board the
compensation of the Chief Executive Officer. The Committee administers the
1977 and 1987 Stock Option Plans, the Executive Incentive Compensation Plan
and the Executive Severance Plan. It also oversees the Company's social
responsibility programs. Its current members are: Jill K. Conway (Chair),
Vernon R. Alden, Ronald E. Ferguson, David W. Johnson (Deputy Chair), John P.
Kendall and Delano E. Lewis. It met seven times in 1993.
The Committee on Directors recommends nominees for the Board of Directors. It
also makes recommendations to the Board regarding board and committee
structure and reviews Board member performance. Its current members are:
Vernon R. Alden (Chair), Jill K. Conway, John P. Kendall, Delano E. Lewis
(Deputy Chair) and Howard B. Wentz, Jr. It met three times in 1993. The
Committee on Directors will consider nominees recommended by stockholders.
Nominations by stockholders must be made in accordance with the information
and timely notice requirements of the Company's By-Laws, a copy of which may
be obtained from the Secretary of the Company. Such nominations must be in
writing and, for consideration at the 1994 Annual Meeting, received by the
Secretary no later than March 31, 1994.
All directors attended more than 86% of the meetings of the Board and the
committees on which they served in 1993.
Compensation of Directors
In 1993, directors (other than Mr. Mark) received an annual retainer of
$18,000 and, under the Stock Compensation Plan for Non-Employee Directors,
275 shares of Common Stock. For each meeting of the Board of Directors or a
committee attended, directors (other than Mr. Mark) received an attendance
fee of $1,000. The chair of each committee also received an annual retainer
of $3,000, and the deputy chair of each committee an annual retainer of
$1,500.
Commencing in 1994, directors (other than Mr. Mark) will receive an annual
stock option grant of 1,000 shares, subject to stockholder approval of the
Non-Employee Director Stock Option Plan. See Item 3 below.
Under the Company's Deferred Compensation Plan for Non-Employee Directors,
directors may elect to defer payment of all or a part of their total cash
compensation as directors and committee members. Deferred fees are credited
to a phantom Common Stock account which is adjusted to reflect changes in the
market price of the Common Stock and dividends paid. Distributions are made
in cash, either in annual installments or by lump sum, after the retirement
or resignation of the director.
Under the Company's Stock Purchase Plan for Non-Employee Directors, directors
may elect to have all or a portion of their non-deferred cash compensation
used to purchase Common Stock. Shares of Common Stock which represent
retainer and committee chairperson fees are purchased prospectively at the
beginning of the year; shares which represent attendance fees are purchased
retroactively after the end of the year. In each case, such purchases are
made on behalf of directors on the open market following the Company's annual
public earnings release. The Company pays brokerage fees and other
transaction-related costs.
Under the Company's Pension Plan for Outside Directors, a non-employee
director who retires after reaching age 74 and who has served a minimum of
nine years as a director receives, in cash, an annual pension equal in value
to 100% of the annual retainers paid for the twelve-month period prior to
retirement. For this
8
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<PAGE>
purpose, Common Stock received under the Stock Compensation Plan for
Non-Employee Directors is valued at the fair market value on the day on which
it is granted to the director. A non-employee director who becomes
permanently disabled and has five or more years of service as a director
receives an undiscounted pension from the date of such disability. A
non-employee director who retires before reaching age 74 with at least nine
years of service as a director may receive a pension with the approval of the
Board. All such pensions are paid quarterly for the lifetime of the director.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the 1993, 1992 and 1991 compensation of the
Chief Executive Officer and the four other most highly compensated executive
officers of the Company (the "Named Officers"):
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted All
Compensa- Stock Securities LTIP Other
Name and Salary Bonus tion Awards(s) Underlying Payouts Compen-
Principal Position Year ($) ($)(1) ($)(2) ($)(3,4) Options(#)(5) ($) sation ($)7
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Reuben Mark 1993 900,833 1,264,000 -- 2,141,552 1,000,000(6) 0 93,949
Chairman of the Board 1992 852,443 1,150,000 -- 1,946,250 277,793 0 84,583
and Chief Executive 1991 781,610 966,000 -- 1,370,625 0 0 --
Officer
William S. Shanahan 1993 606,667 590,000 587,248 44,000 0 58,298
President and Chief 1992 537,860 525,000 -- 523,606 125,910 0 45,481
Operating Officer 1991 477,860 472,000 -- 411,188 43,000 0 --
William G. Cooling 1993 378,500 286,000 -- 319,521 78,820 0 32,845
Chief of Specialty 1992 358,633 265,000 -- 284,542 80,735 0 29,666
Marketing Operations 1991 330,240 230,000 -- 251,281 25,000 0 --
Robert M. Agate 1993 344,500 270,000 -- 319,521 42,080 0 38,968
Chief FinancialOfficer 1992 319,527 241,000 -- 284,542 84,692 0 36,035
1991 290,360 190,000 -- 205,593 21,000 0 --
David A. Metzler 1993 313,333 214,875 -- 211,555 35,662 0 32,712
President 1992 258,693 238,694 -- 167,310 23,521 0 28,047
Colgate-Europe 1991 225,360 128,764 -- 123,356 15,000 0 __
</TABLE>
(1 )Amounts include bonuses earned for the years indicated, paid on or before
March 15 of the following year, consistent with past practice.
Footnotes continue on following page.
9
<PAGE>
<PAGE>
(2)None of the Named Officers received perquisites or other personal
benefits in an amount large enough to require reporting in this column or any
other compensation required to be reported in this column.
(3)Amounts include awards earned for the years indicated, paid on or before
March 15 of the following year, consistent with past practice. Awards for
1991 vest in five years except for Mr. Metzler's award which vests in three
years. Awards for 1992 and 1993 vest in three years except for Mr. Mark's
1992 award which vests in five years. Dividend equivalents accrue on the
restricted stock during the vesting period. As of March 14, 1994, the date of
the award for the 1993 year, the Named Officers as a group held an aggregate
of 305,919 shares of restricted stock, with a value of $19,081,698 based on
the closing market price of the Common Stock on December 31, 1993.
The number and value of the restricted stock holdings of each of the Named
Officers is set forth below:
<TABLE>
<CAPTION>
# of Shares $ Value
<S> <C> <C>
Reuben Mark................................. 191,575 11,949,491
William S. Shanahan......................... 49,185 3,067,914
William G. Cooling.......................... 29,510 1,840,686
Robert M. Agate............................. 24,388 1,521,202
David A. Metzler............................ 11,261 702,405
</TABLE>
(4)In 1992, the Company established the Long Term Global Growth Program,
discussed on page 19. The 1992 and 1993 restricted stock awards granted under
this program reflect the achievement of certain financial goals (growth in
net sales and earnings per share) over a measurement period (one year for
1992 and two years for 1993).
(5)Amounts include reload options granted during 1993 and 1992 pursuant to
the Accelerated Ownership Feature of the 1987 Stock Option Plan, which was
approved by stockholders at the 1992 Annual Meeting. This feature was
implemented to promote increased employee share ownership by encouraging the
early exercise of options and retention of shares. Under this feature, if an
employee uses shares he or she already owns to pay the exercise price of a
stock option or the related taxes withheld, he or she receives a new option
for an equal number of shares at the then current market price with the same
expiration date as the original option.The incremental shares received upon
exercise of the stock option over the shares surrendered are restricted from
sale for a period of two years. The new, or reload, option grant does not
result in an increase in the combined total number of shares and options held
by an employee prior to the exercise.
The number of reload options included in the amounts shown in column (g) for
1993 and 1992, respectively, are as follows: Mr. Mark, 0 and 277,793; Mr.
Shanahan, 0 and 81,910; Mr. Cooling, 55,320 and 55,735; Mr. Agate, 20,080 and
63,692 and Mr. Metzler, 18,622 and 6,521. See also 1993 Option Grants on page
12.
(6 )The amount shown represents an upfront grant of "above-market" stock
options in place of grants that would otherwise have been made during the
period 1993-1998. See also "1993 Chief Executive Officer Compensation" on
page 19-21.
10
<PAGE>
<PAGE>
(7)Amounts shown in All Other Compensation, column (i), are pursuant to
programs available to all employees generally, as follows:
<TABLE>
<CAPTION>
Savings Supplemental
& Savings &
Investment Investment Value of
Plan Retiree Success Plan Company Paid
Company Insurance Sharing Company Life Insurance
Named Officer Match Account Account Match Premiums
<S> <C> <C> <C> <C> <C>
Reuben Mark...... 7,560 8,353 2,500 68,507 7,029
William S.
Shanahan ....... 7,560 4,176 2,500 36,547 7,515
William G.
Cooling ........ 7,560 2,088 2,500 17,675 3,022
Robert M. Agate.. 7,560 8,353 2,500 14,508 6,047
David A. Metzler. 7,560 8,353 2,500 10,226 4,073
</TABLE>
The amounts shown as Savings & Investment Plan Company Match, Retiree
Insurance Account and Success Sharing Account represent the value (as of the
time of allocation) of shares of Series B Convertible Preference Stock
allocated to the Named Officers' Accounts under the Savings and Investment
Plan. Premium payments for life insurance were not made pursuant to split
dollar life insurance arrangements.
1993 Option Exercises And Year-End Values
The following table shows information regarding the exercise of stock options
during 1993 by the Named Officers and the number and value of any unexercised
stock options as of December 31, 1993.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-The-Money
Acquired Options at Options at
On Value FY-End (#) FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Executive Officer (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Reuben Mark...... 22,569 119,898 1,445,474/ 35,380,987/
846,669 7,202,914
William S. 0 0 293,514/ 6,874,221/
Shanahan ....... 87,668 912,830
William G. 73,804 1,295,269 127,721/ 1,309,433/
Cooling ........ 48,501 507,036
Robert M. Agate.. 25,866 414,568 97,772/ 896,075/
43,000 449,063
David A. Metzler. 31,175 878,590 82,917/ 1,859,479/
33,334 342,025
</TABLE>
The option values shown above reflect an increase in the market value of the
Company from $2.7 billion as of December 31, 1987 (the earliest grant year of
the options reported above) to $ 9.3 billion on December 31, 1993. The option
values do not reflect exercises by the Named Officers in February 1994 which
reduced the option numbers and values set forth in columns (d) and (e) above.
The exercises reduced the aggregate
11
<PAGE>
<PAGE>
value of the options from those shown in column (e) above by the following
amounts: Mr. Mark, $10,613,650; Mr. Shanahan, $5,627,820; Mr. Cooling,
$1,001,652; Mr. Agate, $638,515; and Mr. Metzler, $5,562. Including the
February transactions, the number of exercisable options beneficially owned
by the Named Officers are as shown on the Security Ownership Table on page 6.
1993 Option Grants
The following table shows information regarding grants of stock options in
1993 to the Named Officers. The table includes both new options granted in
1993 and reload options granted automatically under the Accelerated Ownership
Feature of the 1987 Stock Option Plan described on page 10 in footnote 5. Use
of the Accelerated Ownership Feature does not result in an increase in the
total combined number of shares and options held by an employee. The Company
did not grant any stock appreciation rights during 1993.
<TABLE>
<CAPTION>
Individual Grants
(a) (b) (c) (d) (e) (f)
Number % of Total
of Options
Securities Granted to Exercise
Underlying Employees Or Base Grant Date
Options in Fiscal Price Exp. Present
Executive Officer Granted Year ($/SH) Date Value ($)(6)
<S> <C> <C> <C> <C> <C>
Reuben Mark
Special Grant(1) ... 100,000 3.42% 60.9813 (1) 1,136,000
100,000 3.42% 66.5250 (1) 989,000
100,000 3.42% 72.0688 (1) 864,000
100,000 3.42% 77.6125 (1) 758,000
100,000 3.42% 83.1563 (1) 666,000
100,000 3.42% 88.7000 (1) 588,000
400,000 13.66% 99.7875 (1) 1,848,000
TOTAL ........... 1,000,000 34.18% 6,849,000
William S. Shanahan
1993 Grant(2) ...... 44,000 1.50% 52.1250 9/1/03 474,760
William G. Cooling
1993 Grant(2)..... 23,500 0.80% 52.1250 9/1/03 253,565
8/93 Reload
Options(3)....... 55,320 1.89% 49.8750 (3) 341,324
TOTAL ........... 78,820 2.69% 594,889
Robert M. Agate
1993 Grant(2) ...... 22,000 0.75% 52.1250 9/1/03 237,380
7/93 Reload
Options(4)....... 20,080 0.69% 51.0000 (4) 127,709
TOTAL ........... 42,080 1.44% 365,089
David A. Metzler
1993 Grant(2) .... 17,000 0.58% 52.1250 9/1/03 183,430
7/93 Reload
Options(5)....... 18,622 0.64% 49.8125 (5) 115,084
TOTAL ........... 35,622 1.22% 298,514
</TABLE>
12
<PAGE>
<PAGE>
(1)In 1993, Mr. Mark received an upfront grant of 1,000,000 "above-market"
stock options in lieu of grants that would otherwise have been granted during
the period 1993-1998. These options are exercisable for a minimum of six
years up to a maximum of ten years, depending upon whether during this period
the closing price of the Common Stock exceeds specified premiums over the
market price on the date the options were granted. See also "1993 Chief
Executive Officer Compensation" on pages 19-21.
(2)The 1993 option grants (other than options granted pursuant to the
Accelerated Ownership Feature) become exercisable in increments of one-third
annually commencing on the first anniversary date of the option grant and
become fully exercisable on the third anniversary date thereof. Accelerated
Ownership options become fully exercisable six months after the date of grant
and terminate on the expiration date of the original option. See also
footnote 5 on page 10.
(3)Includes the following options received pursuant to the Accelerated
Ownership Feature: 21,706 options expiring on September 13, 1999; 26,150
options expiring on September 12, 2000; and 7,464 options expiring on October
10, 2001.
(4)Includes the following options received pursuant to the Accelerated
Ownership Feature: 13,905 options expiring on September 12, 2000; and 6,175
options expiring on October 10, 2001.
(5)Includes the following options received pursuant to the Accelerated
Ownership Feature: 6,524 options expiring on June 12, 1996; 3,027 options
expiring on June 13, 1996; 1,802 options expiring on September 9, 1997; and
7,269 options expiring on September 7, 1998.
(6)Amounts shown have been calculated by Hewitt Associates using a
Black-Scholes based option valuation model. The material assumptions and
adjustments incorporated into the Black-Scholes based model in estimating the
value of the options include the exercise price of the option, the option
term, an interest rate factor based on the U.S. Treasury rate over the option
term, a volatility factor based on the price of the Common Stock for the one
year period prior to the grant date, a dividend rate based on the annualized
dividends paid on a share of Common Stock at the grant date and the
probability of a shortened option term due to the availability of the
Accelerated Ownership Feature. To value Mr. Mark's 1993 option grants, the
Black-Scholes model also includes an additional factor to reflect the
probability of meeting the hurdles required to extend the option terms beyond
six and eight years. The actual value of the options, if any, will depend on
the extent to which the market value of the Common Stock exceeds the price of
the option on the date of exercise. Management believes that the
Black-Scholes model was not developed for the purpose of valuing employee
stock options, particularly those having rights such as the Accelerated
Ownership Feature. There can be no assurance that this Black-Scholes based
model will approximate the value the executive will actually realize.
Retirement Plan
Table A below shows the estimated maximum annual retirement benefit payable
to persons retiring in 1994 under the "final average earnings" formula of the
Colgate Employees' Retirement Income Plan (the "Retirement Plan"). Table B
shows the estimated annual retirement benefit for each of the Named Officers
payable under the Colgate Personal Retirement Account ("PRA") formula, which
was added to the Retirement Plan on July 1, 1989. All salaried employees of
the Company employed at June 30, 1989 (including the Named Officers) were
offered a one-time election to maintain the Retirement Plan's benefit under
the "final average earnings" formula by making monthly contributions of 2% of
recognized earnings (described below) up to the Social Security wage base and
4% of recognized earnings in excess of the wage base. All of the Named
13
<PAGE>
<PAGE>
Officers made this one-time election in 1989. The Named Officers and other
employees who so elected are entitled at retirement to receive the greater of
the benefit under the "final average earnings" benefit formula (Table A) or
the benefit under the PRA formula (Table B).
TABLE A
(Expressed in $)
<TABLE>
<CAPTION>
Years of Service
Remuneration(1,
2, 3) 15 20 25 30 35 40
<S> <C> <C> <C> <C> <C> <C>
500,000....... 135,000 180,000 225,000 270,000 315,000 360,000
600,000....... 162,000 216,000 270,000 324,000 378,000 432,000
1,000,000....... 270,000 360,000 450,000 540,000 630,000 720,000
1,500,000....... 405,000 540,000 675,000 810,000 945,000 1,080,000
1,750,000....... 472,500 630,000 787,500 945,000 1,102,500 1,260,000
2,000,000....... 540,000 720,000 900,000 1,080,000 1,260,000 1,440,000
2,250,000....... 607,500 810,000 1,012,500 1,215,000 1,417,500 1,620,000
</TABLE>
(1)Remuneration equals "final average earnings" or, in other words, the
average of the individual's highest consecutive three years of "recognized
earnings" out of the ten years immediately preceding retirement. For the
Named Officers, "recognized earnings" is the sum of regular annual salary as
of January 1, plus incentive and bonus payments paid during the preceding
calendar year.
(2)The number of years of credited service under the Retirement Plan as of
January 1, 1994 for the Named Officers are: Mr. Mark -- 30 years 7 months;
Mr. Shanahan -- 28 years 5 months; Mr. Cooling -- 21 years 9 months; Mr.
Agate -- 32 years 11 months; and Mr. Metzler -- 28 years 11 months.
(3)Includes payments under the Supplemental Employees' Retirement Plan in
excess of limitations under the Internal Revenue Code of 1986, as amended.
Benefits are computed by multiplying "final average earnings" by the product
of years of credited service and 1.8%. Benefits payable under the
Supplemental Employees' Retirement Plan are subject to a maximum of 70% of
the sum of the individual's base salary at retirement and bonus for the
calendar year immediately preceding retirement less benefits payable under
the basic Retirement Plan. Benefits are subject to an offset for Social
Security benefits and certain other enumerated benefits.
Benefits under the PRA are determined as follows: On July 1, 1989, an account
with an opening balance was established for each eligible person employed on
June 30, 1989, equal to the greater of (i) the lump-sum value of the pension
then accrued under the Retirement Plan's "final average earnings" formula or
(ii) an amount calculated by aggregating the monthly pay-based credits which
would have been made to the employee's account had the PRA always been in
effect. Thereafter, and with respect to PRA accounts established for any
eligible employee hired on or after July 1, 1989, monthly pay-based credits
are accumulated in an employee's account, being determined as a percentage of
the employee's monthly recognized earnings in accordance with the following
formula:
14
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Up to 1/4 of Over 1/4 of
Social Security the Social Security
Years of Service Wage Base Wage Base
<S> <C> <C>
0-9........................................ 2.50% 3.75%
10-14....................................... 3.00% 4.50%
15-19....................................... 4.00% 6.00%
20-24....................................... 5.35% 8.00%
25 or more.................................. 7.50% 11.25%
</TABLE>
In addition, the employee's account is credited monthly with interest at 2%
over the current six-month Treasury bill rate, adjusted quarterly.
TABLE B
Table B shows the estimated annual retirement benefits payable under the PRA
for each of the Named Officers, based on 1994 recognized earnings and
assuming no future increases in such earnings and an annuity rate of 9%:
<TABLE>
<CAPTION>
Year Amount of
Reaching Level
Age 65 Annuity ($)1
<S> <C> <C>
Reuben Mark................................. 2004 763,631
William S. Shanahan......................... 2005 418,480
William G. Cooling.......................... 2009 262,925
Robert M. Agate............................. 2001 197,827
David A. Metzler............................ 2008 243,830
</TABLE>
(1)Includes payments in excess of Internal Revenue Code limitations under
the Supplemental Employees' Retirement Plan. Benefits payable under the
Supplemental Employees' Retirement Plan are subject to a maximum of 70% of
the sum of the individual's base salary at retirement and bonus for the
calendar year immediately preceding retirement less benefits payable under
the basic Retirement Plan.
Executive Severance Plan and Other Arrangements
The Executive Severance Plan (the "Severance Plan") was adopted by the Board
of Directors effective September 1, 1985, and was last amended as of June 11,
1992. The Severance Plan is administered by the Personnel and Organization
Committee (the "P&O Committee"). The P&O Committee selects participants from
among the executive officers and other key personnel of the Company and has
selected the Named Officers, among others, as participants.
If within two years of a change of control of the Company (as defined in the
Severance Plan), an executive participating in the Severance Plan terminates
employment due to an adverse change in conditions of employment or the
Company terminates the executive's employment other than for cause (defined
as serious willful misconduct likely to result in material economic damage to
the Company), the executive is entitled to receive, in a lump sum, an amount
equal to between 12 and 36 months of compensation and a pro rata cash bonus
under the Executive Incentive Compensation Plan for the period prior to
termination. Compensation is defined to include the executive's base salary
as of the termination date plus his or her highest
15
<PAGE>
<PAGE>
cash award under the Executive Incentive Compensation Plan within the last
five years. If an outside accounting firm determines that receipt of such a
lump sum under the Severance Plan would subject the executive to tax under
Section 4999 of the Internal Revenue Code, he or she may elect to receive in
lieu of such lump sum a reduced amount resulting in equal or greater net
after-tax aggregate payments than would be received by payment of the lump
sum.
In addition, the Company has made commitments to participants in the
Severance Plan that if it terminates the employment of a participant at its
convenience rather than as a result of a change of control, it will continue
the participant's base salary and certain benefits for a period ranging from
nine to 36 months. No payments are made in the event of a voluntary
termination (which does not include termination due to an adverse change in
conditions of employment) or termination for cause. In addition, the period
during which salary is continued and benefits are paid does not extend beyond
attainment of age 65 or attainment of 85 or more combined years of age and
service with the Company.
Other arrangements relating to a change of control contained in existing
Company benefits plans are as follows. Under the 1977 and 1987 Stock Option
Plans, all outstanding stock options held by employees, whether or not then
currently exercisable, become immediately exercisable upon a change of
control. In addition, under the Executive Incentive Compensation Plan, the
Board of Directors has the discretion to accelerate the vesting of restricted
stock awards to executive officers. With respect to the Supplemental
Employees' Retirement Plan, which is an unfunded plan, the Company has
arranged for a letter of credit which requires the issuing bank to fund the
accrued benefits payable under such plan in the event of a change of control
of the Company and the Company's refusal to pay the benefit. Funding will be
made by payments to a trust, which currently is subject to the claims of the
Company's creditors in the event of an insolvency.
COMPENSATION COMMITTEE INTERLOCKS AND CERTAIN TRANSACTIONS
As discussed above, the members of the P&O Committee during 1993 were Mrs.
Conway and Messrs. Alden, Ferguson, Johnson, Kendall and Lewis. All six
members are non-management directors, and none has any direct or indirect
material interest in or relationship with the Company, other than
stockholdings as discussed above and as related to his or her position as
director. None of the executive officers of the Company has served on the
Board of Directors or compensation committee of any other entity, any of
whose officers served either on the Company's Board of Directors or the P&O
Committee.
The Company purchases and leases computer equipment, software and services
from IBM Corporation. These transactions are all entered into in the ordinary
course of the Company's business, are made on customary terms and conditions
and in total are not material to the Company or IBM Corporation. Ellen
Hancock, a director of the Company, is a Senior Vice President of IBM
Corporation. In light of the foregoing, the Company believes that Ms. Hancock
has no direct or indirect material interests in these transactions.
In 1993, the Company entered into an agreement with General Re Financial
Products Corporation (a subsidiary of General Re Corporation), the effect of
which is to convert $35 million of the Company's debt from floating to fixed
rate obligations. Transactions of this type are part of the normal business
of General Re Corporation and its subsidiaries. This transaction was entered
into in the ordinary course of the Company's business, was made on customary
terms and conditions and is not material to the Company or General Re
Corporation. Ronald Ferguson, a director of the Company, is the Chairman of
the Board and Chief Executive Officer of General Re Corporation. In light of
the foregoing, the Company believes that Mr. Ferguson has no direct or
indirect material interest in the transaction.
16
<PAGE>
<PAGE>
P&O COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Pursuant to the rules of the SEC, set forth below is the report of the
Compensation Committee regarding its compensation policies for 1993 for the
Company's executive officers, including the Chief Executive Officer. This
report shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 (the "Securities Act") or the Securities Exchange Act
of 1934 (the "Exchange Act") except to the extent that the Company
specifically incorporates this information by reference and shall not
otherwise be deemed filed under such acts.
The Company's executive compensation practices are designed to support its
business goals of fostering profitable growth and increasing shareholder
value. The Company seeks to align the interests of executives and
stockholders through the use of stock-based compensation plans. In addition,
the Company's policy is to pay for performance; that is, the better the
individual, team, business unit and/or global performance against established
goals and objectives, the greater the compensation reward. Finally, each
element of the Company's compensation package is designed to be competitive
with the compensation practices of other leading consumer products and
industrial companies.
As noted above, the P&O Committee is composed entirely of non-management
directors. In addition to Company sources, the P&O Committee periodically
retains the services of independent compensation consultants to help it
assess the competitiveness and effectiveness of the Company's executive
compensation practices in general and for the Chief Executive Officer in
particular. Most recently, in 1991 Hewitt Associates conducted a
comprehensive review of the Company's executive compensation practices at all
levels. In 1992, Towers Perrin reviewed the current and long term incentive
compensation of the Chief Executive Officer, as discussed later in this
report. In 1994, Towers Perrin consulted with the P&O Committee in its review
of new Section 162(m) of the Internal Revenue Code and in developing
modifications to existing compensation plans to qualify compensation paid to
its executive officers for deductibility, as discussed later in this report.
The P&O Committee determined the compensation of Reuben Mark, the Chairman
and Chief Executive Officer of the Company, subject to the approval of the
non-management directors. In addition, the P&O Committee reviewed and
approved the compensation awarded to the other executive officers of the
Company. The key elements of compensation used by the Company are base salary
and performance based incentives including annual cash bonuses, stock options
and other long term incentives. This report discusses the Company's practices
regarding each of these elements as applied to the executive officers
generally and concludes with a separate discussion of Mr. Mark's compensation
in particular.
Base Salary
The Company's practice is to pay salaries which are competitive with a
comparison group of other leading consumer products and industrial companies
(the "Comparison Group"). The companies in the Comparison Group are selected
by the Company's Human Resources department based on the recommendation of
independent compensation consultants and are reviewed and approved by the P&O
Committee. While the Comparison Group is comprised primarily of consumer
products companies, companies outside the consumer products field are also
included because the Company believes, and the P&O Committee concurs, that
the market for executive talent is broader than simply other consumer
products companies. The composition of the Comparison Group is updated
periodically.
17
<PAGE>
<PAGE>
The midpoint of the salary range for executive officers is set at the median
of the Comparison Group, with salaries above the median available to
exceptional performers and key contributors to the success of the Company.
Annual salary adjustments are based on individual performance, assumption of
new responsibilities, competitive data from the Comparison Group and the
Company's overall annual salary budget guidelines. If an executive officer is
responsible for a particular business unit, such unit's financial results are
taken into account. In addition, non-financial performance measures, such as
improvements in customer service, faster product development, improving the
market share of Colgate brands, global expansion and productivity increases,
are considered.
Annual Cash Bonus
In 1993, the Company's executive officers were eligible for annual cash
bonuses under the Executive Incentive Compensation Plan (the "EICP Plan")
previously approved by stockholders. The EICP Plan has contained an aggregate
dollar limit based on the consolidated net income of the Company applicable
to annual bonuses and restricted stock awards. Changes are being proposed to
this plan in light of Section 162(m) of the Internal Revenue Code, as
discussed later in this report.
Individual bonuses were determined by a formula based on the financial
performance of the entire company as a whole or the business unit to which an
executive was assigned as well as performance against specific individual and
team goals. The Company-wide financial performance measure was an earnings
per share goal, and the business unit financial measure was sales and
profits. In each case, the goal was equal to or greater than the annual
budget so as to create an incentive to continuously improve performance.
Executive officers were assigned threshold, target and maximum bonus award
opportunities based on their grade levels. Target award opportunities are
generally set at the median of the Comparison Group. If the Company or
business unit exceeds its earnings per share or sales and profits goals,
above-target bonuses may be granted. If the minimum financial goals have not
been met, bonuses, if any, would be below the target level. In addition to
the formula measurement and competitive comparisons, the Chief Executive
Officer exercised discretion in recommending to the P&O Committee 1993 annual
bonuses for the executive officers who report directly to him based on the
principle that awards to these officers, although performance based, should
not be strictly formula-driven. In no case did the bonuses awarded to these
officers exceed the award generated by the formula measurement.
Long Term Performance-Based Incentives
Colgate has two principal compensation vehicles for encouraging the long term
growth and performance of the Company. The first is stock options granted
under the 1987 Stock Option Plan, and the second is restricted stock awards
under the Long Term Global Growth Program of the EICP Plan.
The 1987 Stock Option Plan
Under the Company's 1987 Stock Option Plan, stock options are generally
granted annually to executive officers. Guidelines for the size of stock
option awards are developed based on factors similar to those used to
determine salary and bonus, including a review of the practices of the
Comparison Group. Since the Company, with the concurrence of the P&O
Committee, views stock options as a way to obtain competitive compensation
advantage, target award levels are set from the median to the 75th percentile
of the Comparison Group. In the event of poor corporate performance, the P&O
Committee has the discretion to reduce the target award levels or decide not
to grant annual stock options.
18
<PAGE>
<PAGE>
Stock options (other than options granted under the Accelerated Ownership
Feature described on page 10 in footnote 5 and 1993 options granted to Mr.
Mark described on page 13 in footnote 1) are granted with an exercise price
equal to the market price of the Common Stock on the date of grant and have a
ten-year term. They vest in equal annual installments over three years. This
approach is designed to motivate the creation of stockholder value over the
long term since the full benefit of the stock option grant cannot be realized
unless stock price appreciation occurs over a number of years. In addition,
the Accelerated Ownership Feature of the 1987 Stock Option Plan (as
previously approved by stockholders) facilitates ownership and retention of
the Common Stock by executive officers of the Company.
The Long Term Global Growth Program
In 1992, the P&O Committee adopted the Long Term Global Growth Program under
the EICP Plan as a replacement for the annual discretionary grant of
restricted shares. The P&O Committee believes that this program is an
improvement over the annual discretionary grant because awards are determined
based on the Company's achievement of specific pre-determined financial
criteria over a longer time horizon. Changes are being proposed to this
Program in light of new Section 162(m) of the Internal Revenue Code, as
discussed later in this report.
Under the Long Term Global Growth Program, long term incentive awards are
dependent on Company achievement of targeted levels of growth in compounded
global annual net sales and earnings per share over a three-year measurement
period. In addition to these financial measures, supplemental measures
dealing with non-financial business fundamentals are established from time to
time.
Each year an executive officer is assigned a threshold, target and maximum
award opportunity which is realizable if the Company meets or exceeds
specific financial goals, e.g., sales and earnings per share, over the
following three years. The target award opportunities are set in dollars as a
percentage of salary at the median of the Comparison Group, except for the
Chairman's target which is expressed as a specific number of shares. At the
end of the measurement period, awards are made in the form of restricted
stock based on the fair market value of the Common Stock on the date the
award is actually made. Awards are subject to the discretion of the P&O
Committee and the aggregate limits set forth in the EICP Plan. Once awarded
after the three-year measurement period, the restricted stock grants are
subject to possible forfeiture for an additional three year period if the
executive's employment with the Company is terminated during that time.
For transition purposes, the P&O Committee granted awards to executive
officers under the Long Term Global Growth Program for 1993 based on sales
and earnings per share growth in 1992 and 1993.
1993 Chief Executive Officer Compensation
In setting Mr. Mark's 1993 base salary, the key factor the P&O Committee
considered was the Company's pre-established guidelines for determining
salary increases throughout the Company. Other factors included the Company's
success in exceeding its sales and profit goals in 1992, Mr. Mark's tenure as
Chief Executive Officer, his outstanding individual performance and
contributions to the continuing success and increased value of the Company
and a comparison of base salaries of other chief executive officers in the
Comparison Group. In light of these considerations, during 1993, the P&O
Committee increased Mr. Mark's annual salary by 5%.
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<PAGE>
In setting Mr. Mark's 1993 annual bonus, the P&O Committee's principal
consideration was that in 1993 the Company's earnings per share increased by
16% and earnings rose 15%. The Committee also took into account the increase
in worldwide unit volume, the performance of the Common Stock and a review of
bonuses paid to other chief executive officers in the Comparison Group. Based
on these factors, Mr. Mark was awarded an annual bonus of $1,264,000, an
increase of 9.9% over the previous year.
In 1992, the P&O Committee retained Towers Perrin to design a new long term
incentive program for Mr. Mark for 1993 and beyond. Towers Perrin recommended
a new plan which was approved by all non-management directors in 1993 and was
described in last year's proxy. The purpose of the new plan is to give the
Chief Executive Officer strong incentive to lead the Company to achieve
exceptional results. The program is thus structured to provide a substantial
benefit to Mr. Mark if the performance of the Company is outstanding, but a
modest benefit or no benefit at all if the Company's performance is average
or below average.
Under the new program, Mr. Mark received an upfront grant of "above-market"
stock options in lieu of grants that would otherwise have been made during
the period 1993-1998. Options on one million shares were granted, all at
prices above the market price of the Common Stock on the date of grant
(January 13, 1993), as shown below:
<TABLE>
<CAPTION>
Number
of Options Premium Exercise Price
<S> <C>
100,000..................................... 10% above market price
100,000..................................... 20% above market price
100,000..................................... 30% above market price
100,000..................................... 40% above market price
100,000..................................... 50% above market price
100,000..................................... 60% above market price
400,000..................................... 80% above market price
</TABLE>
For these options to result in gains for Mr. Mark, the stock price must grow
in excess of the applicable price premium during the term of the options.
Although the stock options granted to employees by the Company generally are
exercisable for ten years, Mr. Mark's new options are exercisable only for
six years, unless at any point during this period the closing price of the
Common Stock reaches or exceeds a 60% premium over the market price on the
date the options were granted. If the Common Stock price reaches this 60%
premium, the options are exercisable for eight years. If the Common Stock
price reaches or exceeds an 80% premium, the options are exercisable for ten
years. The P&O Committee believes that the net effect is to heighten the risk
for Mr. Mark while providing potential for significant gain, but only if
stock price appreciation is substantial.
As part of the new long term incentive program developed for Mr. Mark, the
P&O Committee also recommended and all the non-management directors approved
Mr. Mark's eligibility in 1993 and thereafter for awards under the Long Term
Global Growth Program described above. As described in last year's proxy
statement, Mr. Mark's target award opportunity under this program, stated in
shares of Common Stock rather than cash, for the measurement cycles 1992-1993
and 1992-1994 is 22,500 shares for each period. Mr. Mark was granted 33,364
restricted shares for the 1992-1993 measurement period in light of the
Company's
20
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<PAGE>
performance against the objectives established for this period. The actual
grant of his 1994 award will depend upon attainment of the sales and earnings
per share growth rates established under the Long Term Global Growth Program
for the 1992-1994 measurement period and the aggregate limits put forth in
the EICP Plan.
Discussion of Policy Regarding Qualifying Compensation Paid to Executive
Officers for Deductibility under Section 162(m) of the Internal Revenue Code
The P&O Committee has carefully considered Section 162(m) of the Internal
Revenue Code. The Committee believes that its long standing
pay-for-performance practices have ensured that executive compensation
payments are strongly tied to Company performance. Nevertheless, the
Committee believes that it is in the best interests of the Company's
stockholders to comply with the new tax law to the fullest possible extent
while still maintaining the goals of the Company's executive compensation
program, thereby maximizing the deductibility of the Company's executive
compensation payments.
To satisfy Section 162(m) of the Internal Revenue Code, stockholders must
approve the criteria for determining payments under the EICP Plan's annual
bonus and long term incentive programs, and the maximum awards payable under
these programs. See Item 4 for a discussion of the proposal incorporating
these requirements. The full text of the Plan is attached as Appendix B.
No modifications are required at this time for compensation paid under the
1987 Stock Option Plan to qualify for deductibility.
The foregoing report has been furnished by Mrs. Conway (Chair) and Messrs.
Alden, Ferguson, Johnson, Kendall and Lewis.
21
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<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph compares cumulative total stockholder returns on the
Common Stock against the S&P Composite-500 Stock Index and a peer company
index for a five-year period ending December 31, 1993.
[TABULAR REPRESENTATION OF LINE GRAPH]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C> <C>
Colgate-Palmolive 100 139 166 226 264 302
Peer Group 100 124 145 192 211 237
S&P 500 100 132 128 166 179 197
</TABLE>
The companies included in the peer company index compete with the Company in
one or more of its primary businesses. They are as follow: Avon Products,
Inc., Clorox Company, The Dial Corp., Dow Chemical Company (Dow Brands),
Eastman Kodak Company (Lehn & Fink), Gillette Company, Ralston Purina Company
(Pet Foods Division), The Procter & Gamble Company, Quaker Oats Company (Pet
Foods Division) and Unilever N.V. The Comparison Group discussed in the P&O
Committee Report earlier in this Proxy Statement includes other industrial
companies in addition to consumer products companies for reasons discussed in
the report.
2. APPROVAL OF SELECTION OF AUDITORS
The Board of Directors, on the recommendation of the Audit Committee, has
selected Arthur Andersen & Co. as auditors for the year ending December 31,
1994. Arthur Andersen & Co. has audited the accounts of the Company since its
incorporation. The Board of Directors considers it desirable to continue the
services of Arthur Andersen & Co. Representatives of Arthur Andersen & Co.
are expected to be present at
22
<PAGE>
<PAGE>
the meeting. They will have the opportunity to make a statement and will be
available to respond to appropriate questions. If the stockholders should
fail to approve the selection of auditors, auditors will be designated by the
Board of Directors.
The Board recommends a vote IN FAVOR of the approval of the selection of
Arthur Andersen & Co. as auditors.
3. ADOPTION OF NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Board of Directors is submitting to the stockholders for approval, the
adoption of the Company's Non-Employee Director Stock Option Plan (the
"Plan"), the full text of which is set forth in Appendix A hereto. At the
present time, only employees of the Company are eligible to receive stock
options under the Company's 1987 Stock Option Plan. Under the Plan, directors
who are not officers or employees of the Company or any subsidiary of the
Company ("Non-Employee Directors") will be eligible to receive stock options.
A brief summary of the Plan is set forth below. Stockholders should refer to
Appendix A for a detailed statement of the terms and conditions of the Plan.
The Board believes that the success of the Company depends largely on its
continued ability to attract and retain directors with relevant and
beneficial experience who are motivated to exert their best efforts on behalf
of the Company. The Board has reviewed the Company's current arrangements for
compensation of directors and, upon the recommendation of management,
believes that a program that permits the grant of stock options to
Non-Employee Directors will promote the long term financial success of the
Company by further aligning the interests of Non-Employee Directors with the
interests of the Company and its stockholders.
Brief Description of the Plan
The Plan will be administered by the Board or by a duly appointed committee
of the Board having powers as shall be specified by the Board. The Board (or
such committee) will have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan to
interpret the terms and provisions of the Plan and any stock option issued
under the Plan (and any agreement relating thereto) and to otherwise
supervise the administration of the Plan.
The total number of shares of the Company's Common Stock for which options
may be granted under the Plan will not exceed 150,000 shares while the Plan
is in effect, subject to certain adjustments described in the Plan. As of the
date hereof, each Non-Employee Director has been granted options under the
Plan to purchase 1,000 shares of Common Stock, subject to stockholder
approval of the Plan.
Each Non-Employee Director shall, on the first meeting of the Board following
his or her first election as a director of the Company, and on or about
February 17 of each year thereafter during such director's term,
automatically be granted an option to purchase 1,000 shares of Common Stock,
having an exercise price of 100% of the Fair Market Value of the Common Stock
at the date of grant. Fair Market Value means as of any given date, the mean
between the highest and lowest reported sales prices of the Common Stock on
the New York Stock Exchange Composite Tape.
The term of each stock option shall be 10 years unless earlier terminated by
reason of death, disability, retirement or termination of the director status
of a Non-Employee Director. The stock options shall vest in equal
installments over three years. The stock options granted under the Plan may
not be assigned or transferred
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<PAGE>
<PAGE>
except by will, applicable laws of descent and distribution or pursuant to a
qualified domestic relations order.
In the event of a Change of Control (as defined in the Plan) any option
granted under the Plan may be (i) exercised in whole or in part, whether or
not the options were then fully exercisable and vested or (ii) under certain
circumstances, surrendered to receive cash equal to the spread between the
exercise price of the stock option and the Change of Control Price (as
defined in the Plan) times the number of shares of Common Stock granted under
the stock options surrendered.
Only Non-Employee Directors are eligible to participate in the Plan. As of
March 21, 1994, the Company had 8 Non-Employee Directors eligible for grants
under the Plan.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN BENEFITS
<TABLE>
<CAPTION>
Name Dollar Value ($)(1) Number of Stock Options
<S> <C> <C>
Vernon R. Alden 563 1,000
Jill K. Conway 563 1,000
Ronald E. Ferguson 563 1,000
Ellen M. Hancock 563 1,000
David W. Johnson 563 1,000
John P. Kendall 563 1,000
Delano E. Lewis 563 1,000
Howard B. Wentz 563 1,000
Non-Executive Director Group 4,504
(8 persons)
</TABLE>
(1)The dollar value shown above reflects the increase of $.563 in the Fair
Market Value of the Common Stock between February 17, 1994, the date of
grant, and March 7, 1994.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (i) impair the rights
of an optionee under a stock option without the optionee's or recipient's
consent, except such an amendment made to cause the Plan to qualify for the
exemption provided by Rule 16b-3 under the Exchange Act or (ii) disqualify
the Plan from the exemption provided by Rule 16b-3 under the Exchange Act. In
addition, (i) no amendment shall be made without the approval of the
Company's stockholders to the extent such approval is required by law or
agreement and (ii) the Plan shall not be amended more often than once every
six months.
Federal Tax Aspects
The principal federal income tax consequences of the Plan to the participants
and to the Company are set forth below.
Stock options under the Plan are non-qualified stock options for Internal
Revenue Code purposes. The grant of non-qualified stock options does not
result in any taxable income to the participant or any tax deduction to the
Company. Upon the exercise of a non-qualified stock option, the excess of the
market value of the shares acquired over their cost to the participant is
taxable to the participant as ordinary income and is deductible by the
Company. The participant's tax basis for the shares is their fair market
value at the time
24
<PAGE>
<PAGE>
of exercise. Income realized on the exercise of a non-qualified stock option
is subject to federal and (where applicable) state and local withholding
taxes.
Recommendation
The Board recommends a vote IN FAVOR of the adoption of the Non-Employee
Director Stock Option Plan.
4. ADOPTION OF AMENDED EXECUTIVE INCENTIVE COMPENSATION PLAN
The Board of Directors is submitting to the stockholders for approval an
amended Executive Incentive Compensation Plan. The Executive Incentive
Compensation Plan ("EICP Plan"), as originally adopted, was approved by the
stockholders. Below is a summary of the amended EICP Plan ("Amended EICP")
and the full text of the Amended EICP is contained in Appendix B to this
proxy statement. Stockholders should refer to Appendix B for a detailed
statement of the terms and conditions of the Amended EICP.
Introduction
As discussed above in the P&O Committee Report on Executive Compensation on
pages 17-21 (the "P&O Report"), annual bonuses and long term incentive awards
under the EICP Plan are already closely tied to the Company's performance.
Annual bonuses have been determined by a formula based on the financial
performance of the entire Company or the business unit to which an executive
is assigned, as well as an evaluation of his or her performance against
specific individual and team goals. Under the Long Term Global Growth Program
described in the P&O Report, long term incentive awards under the EICP Plan
have been, for 90% annually of the total target award, formula driven and
based on the sales and earnings growth of the Company.
Section 162(m) of the Internal Revenue Code ("Section 162(m)") was enacted
into law last year. Section 162(m) imposes certain requirements in order to
maintain the tax deductibility to the Company of all payments in excess of $1
million to Covered Employees under the EICP Plan. In general, "Covered
Employees" for a given year are those employees whose names are required to
be set forth in the Summary Compensation Table of the annual proxy statement
of the Company. The Section 162(m) requirements include basing compensation
on the attainment of performance measurements approved by stockholders,
establishing the maximum awards payable under the plan for Covered Employees
and complying with certain criteria for membership in the committee
administering the plan. The Amended EICP will incorporate the Section 162(m)
requirements into the EICP Plan and thereby maximize the deductibility of the
annual bonuses and long term incentive awards under the EICP Plan.
Generally speaking, to meet the requirements of Section 162(m), the Amended
EICP formally incorporates into the EICP Plan the practices under the Long
Term Global Growth Program and annual bonus programs currently in use by the
Company. The Amended EICP will mandate the use of those incorporated
practices for the Chief Executive Officer and other executives who may
qualify as Covered Employees under Section 162(m) and who are designated by
at least two members of the P&O Committee prior to the applicable measurement
period. Further references to Covered Employees refer to the Chief Executive
Officer and this designated group of executives in any given year or other
measurement period. Specifically, the Amended EICP formally incorporates into
the EICP Plan the following current practices:
(1) Annual bonuses for Covered Employees will only be payable to the extent
pre-established annual performance goals are met.
25
<PAGE>
<PAGE>
(2) Long term incentive awards for Covered Employees will only be payable to
the extent specific pre-established performance goals measured over a period
of more than one year are met.
Additionally, to meet the requirements of Section 162(m), the Amended EICP
sets a maximum annual amount payable to any Covered Employee as an annual
bonus or long term incentive award. Finally, the requirements prescribed by
Section 162(m) for membership in the P&O Committee are incorporated into the
Amended EICP.
As discussed below, the Amended EICP also eliminates the current formula for
determining the amount available for all awards under the plan. In its place,
the Amended EICP imposes a limit on the maximum cash bonus payable to any
Covered Employee, the maximum number of shares, or their cash equivalent,
payable to any Covered Employee and the aggregate number of shares of Common
Stock available for annual grants under the plan, based on a percentage of
the total number of outstanding shares of Common Stock of the Company.
Brief Description of the EICP Plan
The EICP Plan was approved by the stockholders and is administered by the P&O
Committee. The purpose of the plan is to attract, reward and retain the high
caliber management talent needed by the Company. The EICP Plan provides for
incentive awards to officers and other executives, payable in cash and/or
shares of Common Stock as determined by the P&O Committee.
Awards under the EICP Plan depend, in part, upon the executive's position
within the Company. Currently, annual cash bonuses, long term incentive stock
awards under the Long Term Global Growth Program and limited special
incentive stock awards are made pursuant to the EICP Plan. As discussed above
and in the P&O Report, the Company's practice has been to tie these awards
strongly to Company performance.
Awards are payable in cash, in Common Stock, or partly in cash and partly in
Common Stock. Stock awards under the EICP Plan may be paid immediately or
deferred, as determined by the Committee at the time of the award. Deferred
awards payable in Common Stock may take the form of restricted stock.
Deferred awards may be paid in up to fifteen annual installments, as
determined by the Committee, and such awards are non-forfeitable. However,
deferred stock awards may also be subject to conditions set by the Committee,
such as continued employment. Deferred stock awards earn dividend
equivalents. At each year end prior to termination of employment or payment
of the award, if earlier, and also upon termination of employment, stock
awards are credited with shares equal in value to the dividends the
participant would have received had the shares been registered in the
participant's name. These dividend equivalents are then considered part of
the award for the purpose of computing future dividend credits. After
termination of employment or for the year during which the award is paid, if
earlier, dividend equivalents are paid in cash pending delivery of the shares
to the participant.
All or some stock awards may be held in a trust. If any awards are so held,
then, upon a change of control of the Company, the Company has the right to
purchase all such shares from the trustee at fair market value for cash for a
period of 30 days beginning on the first business day following the change of
control. The trustee would hold such cash for the account of participants and
pay such amounts to them in accordance with the EICP Plan.
Awards under the EICP Plan may be made to officers and other employees of the
Company. Approximately 1,000 employees will be eligible to participate in the
Amended EICP.
26
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<PAGE>
Amendments to the EICP Plan
Annual Bonus Program
In order to comply with new Section 162(m), a section is being added to the
EICP Plan, subject to stockholder approval, to require that annual bonuses to
Covered Employees be made only upon the successful attainment of specific
performance measures established in advance of each year by the P&O
Committee. Awards to Covered Employees will be based upon a percentage or
multiple applied to a target award which is either fixed, or determined
pursuant to a formula established by the P&O Committee, prior to the start of
the year. The annual bonus is payable based upon the degree of achievement of
the pre-established performance objectives over the year.
The performance objectives will be comprised of one or more of the specific
financial performance measures specified in the Amended EICP. For 1994,
awards for the Covered Employees will be based on preestablished earnings per
share criteria.
Under the Amended EICP, annual cash bonuses to Covered Employees must be
based upon the degree of achievement of the annual performance objectives.
Annual bonuses will be granted to Covered Employees in accordance with the
prescribed formula in amounts ranging from 0% to 200% of their target award
or such lesser amount that the P&O Committee deems appropriate under the
circumstances.
The maximum annual bonus payable under this program to any Covered Employee
is $2,000,000, adjusted annually for inflation.
Long Term Incentives
To comply with Section 162(m), a section is also being added to the EICP
Plan, subject to stockholder approval, to require that long term incentive
awards to Covered Employees be made only upon successful attainment of
specific performance goals established in writing by the P&O Committee prior
to the start of a multi-year measurement period. Awards to Covered Employees
will be based upon a percentage or multiple applied to a target award which
is either fixed, or determined pursuant to a formula established by the P&O
Committee prior to the measurement period. The long term incentive award is
payable based upon the degree of achievement of the pre-established
performance objectives over the specified measurement period.
As discussed in last year's proxy and again above, the Long Term Global
Growth Program, which has been used by the P&O Committee as the standard for
granting annual long term incentive awards under the EICP Plan, also includes
award opportunities, representing up to 10% annually of the total target
award, for performance against supplemental measures dealing with
non-financial business fundamentals established from time to time, such as
customer service, marketing/advertising excellence and people/organizational
excellence. To comply with Section 162(m), those supplemental measures have
been eliminated as factors in determining awards for Covered Employees,
although they may remain as factors in determining the awards for other
participants in the Amended EICP.
As proposed, the measurement period for determining a long term incentive
award will be three years, unless the P&O Committee establishes another
period to apply to the grant of a long term incentive award. The performance
objectives will be comprised of one or more of the specific financial
performance mea-
27
<PAGE>
<PAGE>
sures specified in the Amended EICP. For the 1994 through 1996 measurement
period, awards for the Covered Employees will be based on pre-established
sales and earnings per share criteria.
Under the Amended EICP, long term incentive awards to Covered Employees must
be based upon the degree of achievement of the long term performance
objectives. Long term incentive awards will be granted in accordance with the
prescribed formula in amounts ranging from 0% to 175% of their target award;
or such lesser amount that the P&O Committee deems appropriate under the
circumstances.
The maximum award payable to any Covered Employee under the Amended EICP for
a given measurement period is 50,000 shares of Common Stock of the Company,
subject to adjustment for stock splits and other events specifically
described in the Amended EICP. The P&O Committee may also provide in writing
at the time of the grant when awards will be payable following a measurement
period and it may impose forfeiture or vesting requirements.
Awards to be Made Under the Amended EICP
Because the Amended EICP bases awards to Covered Employees on the degree of
achievement of objective performance goals over a measurement period, awards
under this plan are not determinable until the end of the applicable
measurement period. Annual bonuses in 1993 and prior years to the Named
Officers have taken into account and not exceeded an amount determined by a
formula based on the financial performance of the entire Company or the
business unit to which an executive is assigned, as well as evaluation of
individual performance. Annual bonus amounts shown in the Summary
Compensation Table on page 9 generally reflect what the Named Officers would
have received under the Amended EICP as proposed to be administered. In 1993,
the executive officers as a group received an aggregate of $4,956,000 in
annual cash bonuses under the EICP Plan and all other employees who will be
eligible for annual cash bonuses under the Amended EICP received annual cash
bonuses aggregating $21,179,000.
Similarly, under the Long Term Global Growth Program adopted by the P&O
Committee in 1992, the P&O Committee granted restricted stock to executive
officers for 1993 based on sales and earnings per share growth in 1992 and
1993. The values of 1993 restricted stock awards to the Named Officers under
this program are as set forth in the Summary Compensation Table on page 9.
Under this program, the executive officers as a group received restricted
stock awards in 1993 of 91,213 shares, having a dollar value of $5,854,734 as
of March 14, 1994. All other executives eligible to receive restricted stock
awards under this program received 60,102 shares of restricted stock in 1993,
having a dollar value of $3,857,797 as of March 14, 1994.
Certain other EICP Plan Changes
Certain technical changes have been incorporated into the Amended EICP to
conform the plan to new provisions under Rule 16b-3 of the Exchange Act,
which imposes certain reporting obligations and restrictions relating to
purchases and sales of the Company's stock by its executive officers. The new
rules will only apply to the Amended EICP when the Board elects to adopt the
rules for all of the Company's employee benefit plans.
In addition, the Amended EICP eliminates the provisions of the current EICP
Plan which provide a formula for determining the maximum amount available
each year for all awards under the plan. That formula has been based on a
percentage of net income available to common shareholders to the extent it
exceeds 5 1/2% of shareholders' equity. In its place, the Amended EICP
provides, for Covered Employees, that awards are formula driven based on
pre-established performance objectives and that the amount of awards
28
<PAGE>
<PAGE>
paid under the plan in any year will now be based largely on the degree of
attainment of the performance objectives. Also, the Amended EICP limits the
aggregate number of shares of Common Stock that are available for grant under
the plan in any year to four tenths percent (.4%) of the total number of
shares of Common Stock outstanding. As described in the plan, shares not
granted in any year are available for grant in subsequent years. The Amended
EICP also sets a maximum on the amount that may be granted in any year to any
executive under the plan, either in the form of long term incentives or
annual bonus.
Finally, the current EICP Plan contains restrictions on the payment of awards
before retirement or other termination of employment and requirements that
the first $15,000 of any award be paid in the form of cash. Under the EICP
Plan, these restrictions and requirements are subject to the P&O Committee's
discretion to determine the payment terms of any award and, as currently
administered, payments under the EICP Plan have been made before retirement
and made payable wholly in Common Stock. The Amended EICP eliminates these
restrictions and requirements in order to conform the plan to current
practice. A provision in the EICP Plan making it the exclusive bonus plan for
participants has also been eliminated.
The Board recommends a vote IN FAVOR of the adoption of the Amended Executive
Incentive Compensation Plan.
STOCKHOLDER PROPOSAL
Management carefully considers all proposals and suggestions from
stockholders and supports proposals which it believes are in the best
interests of the Company and its stockholders. However, management opposes
the following proposal for the reasons indicated below.
Stockholder proposals for inclusion in the proxy materials relating to the
1995 Annual Meeting of Stockholders must be received by the Company no later
than November 20, 1994.
5. STOCKHOLDER PROPOSAL ON BLANK CHECK PREFERENCE STOCK
Management has been advised that College Retirement Equities Fund, 730 Third
Avenue, New York, New York 10017, owner of 1,577,886 shares of Common Stock,
intends to submit the following proposal at the meeting.
CREF Shareholder Resolution
WHEREAS, the Company's Board of Directors has authority under the Company's
charter to issue one or more classes of so-called "blank check" preference
stock, having such voting and other rights as the Board, in its sole
discretion, may determine;
WHEREAS, the Board may be able to deter unsolicited acquisition offers by
placing blank check preference stock in friendly hands without seeking
shareholder approval;
WHEREAS, Delaware's anti-takeover statute enhances the Board's ability to
deter unsolicited takeover bids by placing a block of blank check preference
stock in friendly hands;
WHEREAS, such use of blank check preference stock by the Board could deprive
shareholders of the opportunity to consider valuable offers for their stock;
RESOLVED that the shareholders request that the Board:
Adopt a policy of seeking shareholder approval before placing preference
stock with any person or group except for the purpose of raising capital in
the ordinary course of business or making acquisitions and without a view to
effecting a change in voting power.
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Proponent's Supporting Statement
I. The Board can limit shifts in control of the Company by placing a block of
preference stock in friendly hands without shareholder approval.
The Board can issue blank check preference stock for capital raising,
acquisitions or as an anti-takeover device, without shareholder approval. The
Board can use blank check preference stock as an anti-takeover device to
deter unsolicited tender offers favorable to shareholders. For example, the
Board could issue blank check preference stock to dilute the stock ownership
of, or create voting impediments for, an unsolicited acquirer. Since such
uses of blank check preference stock could potentially diminish the value of
the shareholders' investment and decrease the market price of the Company's
shares, shareholder approval should be obtained before the Board uses blank
check preference stock as an anti-takeover device.
II. Delaware's anti-takeover statute enhances the Board's ability to deter
takeovers by undertaking blocking transactions.
Delaware's anti-takeover statute enhances the Board's ability to deter a
takeover by placing blank check preference stock in friendly hands. The
statute provides generally that unless an unsolicited acquirer obtains 85% of
the Company's voting stock in the transaction by which it obtains 15%, it is
barred for three years from consummating a business combination with the
Company. The Board can thus effectively deter unsolicited bids by placing a
significant block of blank check preference stock in friendly hands, making
it much harder (if not impossible) for an unsolicited bidder to attain the
85% ownership needed to be exempted from the Delaware statute.
III. Blank check preference stock should not be used by the Board to
disadvantage shareholders without their consent.
The Board's discretionary authority to issue blank check preference stock
should only be exercised for corporate purposes demonstrably in shareholders'
best interests. Good corporate governance requires that holders of a majority
of voting stock approve the use of blank check preferred as a deterrent to
unsolicited tender offers -- a use that is not necessarily in the best
interest of shareholders.
Management Statement on the Proposal
The Board of Directors recommends that you vote AGAINST the proposal.
At last year's Annual Meeting, voting on the same stockholder proposal which
the proponent raises for the second time this year, the stockholders
reaffirmed their previous decision to authorize the creation of blank check
preference stock and the Board's ability to issue such stock when it is in
the best interests of the Company and its stockholders. The stockholders
originally authorized the creation of the blank check preference stock at the
1988 Annual Meeting.
A central purpose of the preference stock is to enable the Company to respond
promptly to financing, acquisition and other opportunities and situations and
not lose them because of delays inherent in obtaining stockholder approval.
The Board believes that retaining its flexibility to issue blank check
preference stock in appropriate circumstances continues to be in the best
interests of the Company and its stockholders.
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The proposal, if adopted, will severely limit this flexibility and the
Board's ability to take advantage of strategic business opportunities as they
arise.
The proponent's rationale for attempting to impose this limitation on the
Board is that if the Company were ever faced with a takeover attempt, the
Board might seek to issue preference stock in a manner disadvantageous to
stockholders. To the contrary, the Board of Directors has a fiduciary
responsibility and is committed to act in the best interest of the Company
and its stockholders. This duty applies to all actions, including issuances
of preference stock. Moreover, the use of preference stock in a takeover
situation is subject to special scrutiny under the heightened standard of
care applied by the courts to actions taken in response to an offer. In
addition, the rules of the New York Stock Exchange limit the amount of
preference stock convertible into Common Stock that may be issued without
stockholder approval to 20% of the then outstanding voting stock.
As illustrated by Colgate-Palmolive's strong growth and impressive financial
performance (see the Performance Graph on page 22 of this proxy statement),
the Company's Board and management have consistently acted in the
stockholders' interest, delivering a total return to stockholders over the
past five years of 202%. During this five-year period, the Company
outperformed both the S&P 500 and the Peer Group Index. Except for the
Chairman, the Board is composed entirely of independent, non-management
directors.The Board has clearly and successfully demonstrated its commitment
to acting in the best interest of stockholders.
The Board believes that the above major safeguards ensure that the
stockholders' best interests will continue to be preserved and protected. In
contrast, while the proponent suggests that the proposal is only intended to
limit the use of preference stock as a takeover deterrent, the actual effect
of the policy would be much broader and potentially detrimental to the
Company and its stockholders.
For example, the proposal requires that the issuance of preference stock to
raise capital without stockholder approval be "in the ordinary course of
business". Since "ordinary course of business" is not defined, uncertainty
may exist as to whether a particular financing satisfies the standard and can
be done without stockholder approval. In addition, the requirement that an
issuance of preference stock without stockholder approval not effect a change
in voting power also creates uncertainty because any issuance of voting
preference stock -- even absent a takeover proposal -- could effect a change
in voting power to some degree.
These types of uncertainties will hamper the Company's ability to use
preference stock for financing and strategic acquisitions which are in the
best interests of the Company and its stockholders. Because prompt response
to financing conditions and acquisition opportunities is often essential to
their successful completion, these opportunities may not only be delayed by
the proposal, but permanently lost. The Board believes that this is what the
stockholders sought to avoid by approving the blank check preference stock in
1988 and reaffirming this approval last year.
The Company believes that an appropriate balance between Board authority and
stockholder approval was achieved when stockholders approved the blank check
preference stock. This balance enables the Board, within the parameters of
legal principles of fiduciary duty to stockholders and New York Stock
Exchange Rules to act in the best interests of stockholders while retaining
the maximum flexibility to take advantage of business opportunities as they
arise.
The Board recommends that you vote AGAINST the proposal.
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OTHER BUSINESS
Management has no present intention of submitting any matters to the meeting
other than those set forth above. It knows of no additional matters that will
be presented by others. However, with respect to any other business that may
come before the meeting, the persons designated in the enclosed proxy will
vote in accordance with their best judgment.
By order of the Board of Directors.
Andrew D. Hendry
Senior Vice President, General Counsel and Secretary
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APPENDIX A
COLGATE-PALMOLIVE COMPANY
NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN
SECTION 1. Purpose; Definitions.
The purpose of the Plan is to provide compensation to Non-Employee Directors
in the form of Stock Options.
For purposes of the Plan, the following terms are defined as set forth below:
"Board" means the Board of Directors of the Company.
"Change of Control" and "Change of Control Price" have the meanings set forth
in Sections 6(b) and 6(c), respectively.
"Code" means the Internal Revenue Code of 1986, as amended from time to time,
and any successor thereto.
"Common Stock" means common stock, par value $1.00 per share, of the Company.
"Company" means the Colgate-Palmolive Company, a Delaware corporation.
"Disability" with respect to a Participant means physical or mental
disability, whether total or partial, that prevents the Participant from
performing his duties as a member of the Board for a period of six
consecutive months.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor thereto.
"Fair Market Value" means as of any given date, the mean between the highest
and lowest reported sales prices of the Common Stock on the New York Stock
Exchange Composite Tape or, if not listed on such exchange, on any other
national exchange on which the Stock is listed or on NASDAQ. If there is no
regular public trading market for such Common Stock, the Fair Market Value of
the Common Stock shall be determined by the Committee in good faith.
"Non-Employee Director" means a person who as of any applicable date is a
member of the Board and is not an officer or employee of the Company or any
subsidiary of the Company.
"Participant" means a Non-Employee Director who is granted a Stock Option
hereunder.
"Plan" means the Colgate-Palmolive Company Non-Employee Director Stock Option
Plan as set forth herein and as hereinafter amended from time to time.
"Retirement" means retirement from active employment under a pension plan of
the Company or any of its subsidiaries, or termination of an individual's
directorship at or after age 65 with at least nine years of service as a
member of the Board.
"Stock Option" means a non-qualified option to purchase shares of Common
Stock.
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"Termination of Directorship" means the date upon which any Participant
ceases to be a member of the Board for any reason whatsoever.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
SECTION 2. Administration.
The Plan shall be administered by the Board or by a duly appointed committee
of the Board having such powers as shall be specified by the Board. The Board
(or such committee) shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable, to interpret the terms and
provisions of the Plan and any Stock Option issued under the Plan (and any
agreement relating thereto) and to otherwise supervise the administration of
the Plan.
SECTION 3. Stock Subject to Plan
Subject to adjustment as provided herein, the total number of shares of
Common Stock of the Company available for grant under the Plan while it is in
effect shall be 150,000.
In the event of any merger, reorganization, consolidation, recapitalization,
stock dividend, stock split, extraordinary distribution with respect to the
Common Stock or other change in corporate structure affecting the Common
Stock, the aggregate number of shares of Common Stock reserved for issuance
under the Plan and the number and option price of shares of Common Stock
subject to outstanding Stock Options shall be appropriately adjusted;
provided, however, that the number of shares subject to any Stock Option
shall always be a whole number.
SECTION 4. Eligibility.
Only individuals who are Non-Employee Directors are eligible to be granted
Stock Options under the Plan.
SECTION 5. Stock Options.
(a) Each Non-Employee Director shall, on the first meeting of the Board
following his or her first election as a director of the Company, and
thereafter on each 17th of February during such director's term or the first
business day thereafter, automatically be granted a Stock Option to purchase
1,000 shares of Common Stock (the "Annual Grant Amount") having an exercise
price of 100% of Fair Market Value of the Common Stock at the date of grant
of such Stock Option. In the event of any stock split or dividend the number
of shares of Common Stock to be awarded annually shall be adjusted by
multiplying the Annual Grant Amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such stock
split or dividend and the denominator of which is the number of such shares
outstanding immediately prior to such event.
(b) In the event that the number of shares of Common Stock available for
future grant under the Plan is insufficient to make all automatic grants
required to be made on a given date, then all Non-Employee Directors entitled
to a grant on such date shall share ratably in the number of Stock Options on
shares available for grant under the Plan.
(c) Stock Options granted under the Plan shall be subject to the following
terms and conditions in addition to those set forth above:
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(i) Option Term. The term of each Stock Option shall be 10 years from
the date the Stock Option is granted, subject to earlier termination as
provided herein.
(ii) Exercisability. Stock Options shall be exercisable as follows:
(A) beginning on the first anniversary of the date of grant, for up to
33-1/3% of the shares of Common Stock covered by the Stock Option;
(B) beginning on the second anniversary of the date of grant, for up to
66-2/3% of such shares; and
(C) beginning on the third anniversary of the date of grant and
thereafter until the expiration of the term of the Stock Option, for up to
100% of such shares.
Notwithstanding the foregoing, a Stock Option held by a Participant shall
become immediately exercisable in full upon the death, Disability or
Retirement of such Participant.
(iii) Method of Exercise. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Company specifying
the number of shares of Common Stock subject to the Stock Option to be
purchased.
Such notice shall be accompanied by payment in full of the purchase price by
certified or bank check or such other instrument as the Company may accept.
Payment in full or in part may also be made in the form of Common Stock
already owned by the optionee of the same class as the Common Stock subject
to the Stock Option.
No shares of Common Stock shall be issued until full payment therefor has
been made. An optionee shall have all of the rights of a stockholder of the
Company holding the class or series of Common Stock that is subject to such
Stock Option (including, if applicable, the right to vote the shares and the
right to receive dividends), when the optionee has given written notice of
exercise, has paid in full for such shares and, has given the representation
described in Section 8(a).
(iv) Non-transferability of Stock Options. No Stock Option shall be
transferable by the optionee other than (A) by will or by the laws of descent
and distribution or (B) pursuant to a qualified domestic relations order (as
defined in the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder).
All Stock Options shall be exercisable, during the optionee's lifetime, only
by the optionee or by the guardian or legal representative of the optionee,
it being understood that the terms "holder" and "optionee" include the
guardian and legal representative of the optionee named in the option
agreement and any person to whom an option is transferred by will or the laws
of descent and distribution or pursuant to a qualified domestic relations
order.
(v) Termination by Reason of Death, Disability or Retirement. If a
Termination of Directorship occurs by reason of the death, Disability or
Retirement of a Participant, any Stock Option held by such Participant may
thereafter be exercised for a period of three years from the date of such
Termination of Directorship or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.
(vi) Other Termination. If a Termination of Directorship occurs for any
reason other than the death, Disability or Retirement of a Participant, any
Stock Option held by such Participant shall thereupon terminate, except that
such Stock Option, to the extent then exercisable, may be exercised for the
lesser
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of three months from the date of such Termination of Directorship or the
balance of such Stock Option's term; provided, however, that if the optionee
dies within such three-month period, any unexercised Stock Option held by
such Participant shall, notwithstanding the expiration of such three-month
period, continue to be exercisable to the extent to which it was exercisable
at the time of death for a period of three years from the date of such death
or until the expiration of the stated term of such Stock Option, whichever
period is the shorter.
(vii) Limited Cash Out Rights. Notwithstanding any other provision of
the Plan, during the 60-day period from and after a Change of Control (the
"Exercise Period"), a Participant shall have the right, whether or not a
Stock Option is fully exercisable and in lieu of the payment of the exercise
price for the shares of Common Stock being purchased under the Stock Option
and by giving notice to the Company, to elect (within the Exercise Period) to
surrender all or part of the Stock Option to the Company and to receive cash,
within 30 days of such notice, in an amount equal to the amount by which the
Change of Control Price per share of Common Stock on the date of such
election shall exceed the exercise price per share of Common Stock under the
Stock Option (the "Spread") multiplied by the number of shares of Common
Stock granted under the Stock Option as to which the right granted under this
clause (vii) shall have been exercised; provided, however, that if the Change
of Control is within six months of the date of grant of a particular Stock
Option held by a Participant who is subject to Section 16(b) of the Exchange
Act no such election shall be made by such Participant with respect to such
Stock Option prior to six months from the date of grant. Notwithstanding any
other provision hereof, if the end of such 60-day period from and after a
Change of Control is within six months of the date of grant of a Stock Option
held by a Participant who is subject to Section 16(b) of the Exchange Act,
such Stock Option shall be cancelled in exchange for a cash payment to the
Participant, effected on the day which is six months and one day after the
date of grant of such Stock Option, equal to the Spread multiplied by the
number of shares of Common Stock granted under the Stock Option.
Notwithstanding the foregoing, if any right granted pursuant to this clause
(vii) would make a Change of Control transaction ineligible for pooling of
interests accounting under APB No. 16 that but for this clause (vii) would
otherwise be eligible for such accounting treatment, Common Stock (having a
Fair Market Value equal to the cash otherwise payable hereunder) shall be
substituted for the cash payable hereunder.
SECTION 6. Change of Control Provisions.
(a) Impact of Event. Notwithstanding any other provision of the Plan to the
contrary, in the event of a Change of Control, any Stock Options outstanding
as of the date such Change of Control is determined to have occurred and not
then exercisable and vested shall become fully exercisable and vested to the
full extent of the original grant.
(b) Definition of Change of Control. For purposes of the Plan, a "Change of
Control" shall mean the happening of any of the following events:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then outstanding shares of
Common Stock of the Company (the "Outstanding Company Common Stock") or (B)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding, however, the following:
(1) any acquisition directly from the Company, other than an acquisition by
virtue of the exercise of a conversion privilege unless the security being so
converted was itself acquired directly from the Company, (2) any acquisition
by the Company, (3)
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any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (4)
any acquisition by any corporation pursuant to a transaction which complies
with clauses (A), (B) and (C) of subsection (iii) of this Section 6(b); or
(ii) A change in the composition of the Board such that the individuals
who, as of February 17, 1994, constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, for purposes
of this Section 6(b), that any individual who becomes a member of the Board
subsequent to February 17, 1994, whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at least a majority
of those individuals who are members of the Board and who were also members
of the Incumbent Board (or deemed to be such pursuant to this proviso) shall
be considered as though such individual were a member of the Incumbent Board;
but, provided further, that any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board shall not be so
considered as a member of the Incumbent Board; or
(iii) The approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company ("Corporate Transaction");
excluding, however, such a Corporate Transaction pursuant to which (A) all or
substantially all of the individuals and entities who are the beneficial
owners, respectively, of the outstanding Common Stock and outstanding Company
voting securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of, respectively, the
outstanding shares of common stock, and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation which as
a result of such transaction owns the Company or all or substantially all of
the Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Corporate Transaction, of the outstanding Common Stock and outstanding
Company voting securities, as the case may be, (B) no Person (other than the
Company, any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Corporate Transaction) will beneficially own,
directly or indirectly, 20% or more of, respectively, the outstanding shares
of common stock of the corporation resulting from such Corporate Transaction
or the combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors except to
the extent that such ownership existed prior to the Corporate Transaction and
(C) individuals who were members of the Incumbent Board will constitute at
least a majority of the members of the board of directors of the corporation
resulting from such Corporate Transaction; or
(iv) The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(c) Change of Control Price. For purposes of the Plan, "Change of Control
Price" means the higher of (i) the highest reported sales price, regular way,
of a share of Common Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national exchange on which such shares are
listed or on NASDAQ during the 60-day period prior to and including the date
of a Change of Control or (ii) if the Change of Control is the result of a
tender or exchange offer or a merger or other similar corporate transaction,
the highest price per share of Common Stock paid in such tender or exchange
offer or other Transaction; provided, however, that in the case of a Stock
Option which (A) is held by an optionee who
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is subject to Section 16(b) of the Exchange Act and (B) was granted within
240 days of the Change of Control, then the Change of Control Price for such
Stock Option shall be the Fair Market Value of the Common Stock on the date
such Stock Option is exercised or deemed exercised.
SECTION 7. Term, Amendment and Termination.
The Plan will terminate on December 31, 2004. Under the Plan, Stock Options
outstanding as of December 31, 2004 shall not be affected or impaired by the
termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (a) impair the rights
of an optionee under a Stock Option without the optionee's or recipient's
consent, except such an amendment made to cause the Plan to qualify for the
exemption provided by Rule 16b-3, or (b) disqualify the Plan from the
exemption provided by Rule 16b-3. In addition (a) no amendment shall be made
without the approval of the Company's stockholders to the extent such
approval is required by law or agreement and (b) the Plan shall not be
materially amended more often than once every six months.
SECTION 8. General Provisions.
(a) Unless the shares have been registered under the Securities Act of 1933,
as amended, each person purchasing or receiving shares of Common Stock
pursuant to a Stock Option shall represent to and agree with the Company in
writing that such person is acquiring the shares of Common Stock without a
view to the distribution thereof. The certificates for such shares of Common
Stock shall include an appropriate legend to reflect the restrictions on
transfer.
(b) Nothing contained in the Plan shall prevent the Company or any subsidiary
from adopting other or additional compensation arrangements for its
Non-Employee Directors.
(c) No later than the date as of which an amount first becomes includible in
the gross income of the Participant for Federal income tax purposes with
respect to any Stock Option awarded under the Plan, the Participant shall pay
to the Company, or make arrangements satisfactory to the Company regarding
the payment of, any Federal, state, local or foreign taxes of any kind
required by law to be withheld with respect to such amount. Withholding
obligations may, at the election of the optionee (which election shall be
subject to compliance with requirements of Rule 16b-3 under the Exchange
Act), be settled with Common Stock, including Common Stock that is part of
the Stock Option that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment otherwise due
to the Participant.
(d) The Plan and all Stock Options awarded and actions taken with respect
thereto shall be governed by and construed in accordance with the laws of the
State of Delaware.
SECTION 9. Effective Date of Plan.
The Plan shall be adopted by the Board and be effective on February 17, 1994,
subject to approval by the stockholders of the Company. Stock Options may be
granted prior to such approval but are contingent upon such approval being
obtained.
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APPENDIX B
COLGATE-PALMOLIVE COMPANY
EXECUTIVE INCENTIVE COMPENSATION PLAN
As approved by the Stockholders April 25, 1962 and amended by the Board of
Directors through March 17, 1994.
Section 1. Purpose of the Plan. The purpose of the Plan is to provide an
incentive for executives and other key personnel who are in a position to
contribute materially to the success of the Company; to reward accomplishment
on their part; and to aid in attracting and holding executives of the caliber
necessary for the continued growth and profitability of the Company.
Section 2. Stock Subject to Plan. Subject to adjustment as provided herein,
the total number of shares of common stock available for grant under the Plan
during any given calendar year shall be four tenths percent (.4%) of the
total number of shares of common stock outstanding as of the first day of
each such year beginning after December 31, 1993 for which the Plan is in
effect; provided that any shares available for grant in a particular calendar
year which are not, in fact, granted in such year shall be added to the
shares available for grant in any subsequent calendar year.
Section 3. Awards. Awards pursuant to the Plan may be made to the persons who
served as officers of the Company during the year for which such awards are
made, and to other employees who served the Company during such period in
executive capacities or in key administrative or technical positions.
Subject to Section 7, the form and amount of each award to a Designated
Executive (as defined below) or any other officer of the Company shall be
determined by and in the discretion of at least two members of the Personnel
and Organization Committee (the "Committee"), each of whom shall be a
Disinterested Person (as defined below). The form and amount of each award to
an employee who is not a Designated Executive or an officer of the Company
shall be determined by the Chief Executive Officer of the Company with the
approval of the Committee and in accordance with such regulations as may be
prescribed from time to time by the Committee.
For the purposes of the Plan:
(1) "Company" means Colgate-Palmolive Company, a Delaware corporation,
together with, when the context requires, its directly or indirectly owned
subsidiaries.
(2) "Designated Executives" shall mean the Chairman and Chief Executive
Officer of the Company and each officer, executive or other key employee
designated in writing by the Committee prior to the commencement of the
measurement period applicable to any award under the Plan (or, in the case of
awards with respect to 1994, prior to April 1, 1994).
(3) "Disinterested Person" shall mean a member of the Board of Directors of
the Company who qualifies as a disinterested person as defined in Rule
16b-3(c)(2), as promulgated by the Securities and Exchange Commission or any
successor agency (the "Commission") under the Securities Exchange Act of
1934, as amended from time to time, and any successor thereto (the "Exchange
Act"), or any successor definition adopted by the Commission, and also
qualifies as an "outside director" for purposes of Section 162 (m)
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of the Internal Revenue Code of 1986, as amended from time to time, and any
successor thereto (the "Code").
Awards shall be made as soon as practicable after the close of the year for
which they are made or during the year (subject to Section 7), at the
Committee's discretion. They may be made payable in cash, in common stock of
the Company, or partly in cash and partly in common stock of the Company, and
may be made payable in whole or in part at the time the award is made or on a
deferred basis in each case as determined by the Committee at the time the
award is made. Deferred awards payable in common stock of the Company may
take the form of "restricted stock", the vesting of which may be subject to
such terms and conditions as the Committee may from time to time determine.
The Committee may condition the grant and vesting of an award, whether
payable in cash, common stock of the Company or otherwise, upon the
attainment of specified performance goals relating to the participant or the
Company or subsidiary, division or department of the Company for or within
which the participant is primarily employed, or upon such other factors or
criteria as the Committee shall determine, which goals may be different for
each award recipient. Awards of cash and common stock of the Company under
the Plan for Designated Executives who may be "covered employees" within the
meaning of Section 162 (m) of the Code shall be subject to preestablished
performance goals in accordance with Section 7 hereof. Except as so limited,
any or all deferred awards shall be made payable in one or more installments
over a period of not more than fifteen years, as determined by the Committee
when the awards are made. Subject to the same limitations, the Committee may
at any time accelerate or defer the time of payment of the deferred balance
of any award or awards made under the Plan.
If a participant dies, the balance of the award to him which remains unpaid
at the time of his death shall be paid to his personal representatives in the
same manner as if the participant were living.
In the event of a Change of Control of the Company, then notwithstanding any
provision of this Plan to the contrary, the Company, upon the direction of
the Committee, shall have the right to purchase from the trustee all the
deferred shares of Company common stock held in trust for cash for a period
of thirty days beginning on the first business day following a Change of
Control of the Company; provided, however, that the Company shall not have
the right to purchase deferred shares held for the account of any participant
subject to Section 16 of the Exchange Act, without such participant's
consent, if such purchase would cause the participant to incur liability
under Section 16 of the Exchange Act. Such purchases shall be at fair market
value on the date of the purchase, which shall be computed by taking the mean
between the high and low prices for such date on the composite tape. The
trustee shall hold such cash for the accounts of Plan participants and shall
pay such amounts to participants as directed by the Committee in accordance
with the Plan.
A "Change of Control" shall be deemed to have occurred upon the occurrence of
any of the following events, unless and except to the extent otherwise
determined by the Committee prior to the occurrence of such event (i) the
acquisition by a third person, including a "group" as defined in Section
13(d) (3) of the Act, of shares of the Company having 20% or more of the
total number of votes that may be cast for the election of directors of the
Company, (ii) shareholder approval of a transaction for the acquisition of
the Company, or substantially all of its assets, by another business entity
or for a merger, reorganization, consolidation or other business combination
to which the Company is a party, (iii) a change during any period of 24
months or less in the composition of a majority of the Board of Directors
where such change has not been approved by a majority of the Board as
constituted immediately prior to the commencement of such period or (iv) any
other event determined by the Committee to be a Change of Control for
purposes of the Plan.
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Section 4. Dividend Equivalents. On each December 31 which is after the date
of a deferred award in stock but prior to the date of termination of the
participant's employment, and on the date of termination, the Company shall
credit to the award shares of common stock of the Company of an aggregate
value (to be determined as provided in Section 6) equal to the amount of
dividends which the participant would have received since the date of the
award or of the last previous credit to the award pursuant to this Section,
whichever is later, if the number of shares payable in respect of the award
had been registered in the name of the participant on each of the record
dates for payment of any such dividends. The shares so credited to an award
shall thereafter be included in and deemed a part of such award for the
purpose of computing any future credit to the award pursuant to this Section
4.
On each date after termination of the participant's employment on which a
dividend on the common stock of the Company shall be paid, the record date
for which is after the date of a deferred award in stock and prior to the
date of registration in the name of the participant of all the shares so
payable in respect of such award, the Company shall pay to the participant
with respect to any shares then payable in respect of the award, an amount in
cash equal to the dividends which the participant would have received if such
shares had been registered in his name on the record date for such dividends.
If a dividend on the common stock of the Company is made payable in property
other than cash or common stock of the Company, the dividend equivalent with
respect thereto shall be based on the fair market value of such property, as
determined by the Committee in its discretion.
Section 5. Administration of the Plan. Full power to interpret, construe and
administer the Plan shall, except as otherwise provided in the Plan, be
vested in the Committee, which may adopt, alter, amend or revoke regulations
for such purpose. The Board of Directors shall have the right to modify the
Plan from time to time but no such modification shall, without prior approval
of the stockholders, materially increase the amount available for awards,
materially increase the benefits accruing to participants hereunder,
materially modify the requirements regarding eligibility for participation in
the Plan, or, without the consent of the participant affected, impair any
award made prior to the effective date of the modification. Without limiting
the generality of the foregoing, the Board of Directors, subject to the
foregoing limitations, may amend or rescind any provision of the Plan and the
Committee, subject to the foregoing limitations, may change the number of
installments in which awards are payable, accelerate or defer the payment of
installments, modify the conditions under which installments may be paid or
modify the Plan to the extent that it determines that the provisions of
Section 7, in whole or in part, are no longer required to preserve the
deductibility of the payments thereunder under then applicable laws, rules,
regulations and interpretations.
Section 6. General Provisions. Awards under the Plan shall constitute general
obligations of the Company in accordance with the terms of the Plan and no
recipient of an award shall be entitled to have his award satisfied out of
any particular assets of the Company or out of any particular shares of
treasury stock of the Company. No participant shall be deemed to be a
stockholder with respect to any shares included in an award, prior to the
registration of said shares in his name on the stock books of the Company.
Notwithstanding the foregoing, upon the direction of the Committee, the
Company may by agreement with one or more trustees to be selected by the
Committee, create a trust to receive and hold so many, as the Committee shall
determine from time to time, of deferred awards made to participants under
the Plan and dividend equivalents credited thereon and to make payments of
such awards to participants in accordance with the terms of the Plan. In the
event the Committee elects to create such a trust, the Committee shall
transfer and pay over to the trustee so many, as the Committee shall
determine from time to time, of the
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deferred awards (whether in cash or common stock of the Company) and dividend
equivalents presently held by the Company for the account of participants and
deferred awards and dividend equivalents hereafter made under the terms of
the Plan. The trustee will hold all such deferred awards and dividend
equivalents thereon in accordance with the terms of the trust agreement which
shall contain such terms and conditions (not inconsistent with the Plan) as
the Committee may deem advisable; provided, however, that the trust agreement
shall require that (i) the trustee is to make all distributions to
participants in accordance with the terms of the Plan; (ii) all trust assets
shall remain subject to the claims of the judgment creditors of the Company;
and (iii) no trust assets will be returned to the Company (except to satisfy
the claimsof judgment creditors) until all distributions due to participants
under the Plan have been paid orprovided for.
Shares of common stock which are awarded or credited to awards shall be
shares reacquired by the Company for this purpose and shall be valued for the
purpose of the award or credit, as the case may be, at the average cost per
share (including brokerage) of all shares awarded or credited at the same
time. Adjustments shall be made in cash for any fractional shares which would
otherwise be included in the awardor credit.
The amount of cash and the number of shares to be included in each
installment payable on a deferred basis shall be determined immediately prior
to payment of the first installment on such basis by dividing the amount of
cash and the number of shares which are payable on such basis by the number
of installments in which the award is payable. In the event that the number
of shares is not equally divisible by the number of installments, the number
of shares to be included in each installment other than the last shall be the
number which, when multiplied by the number of installments, most nearly
equals but does not exceed the total number of shares payable, and the last
installment shall consist of the total number of shares minus all shares to
be made payable prior thereto.
Subject to Section 7, if at any time after the date of an award in stock but
prior to payment in full of all shares included in the award, there shall be
a split-up, combination or reclassification of the shares of common stock of
the Company, or payment of a dividend on the common stock of the Company in
shares of common stock of the Company, or a consolidation, merger or sale of
substantially all of the assets of the Company, the Committee shall make such
change in the number and class of shares thereafter payable in respect of
such award as shall, in the judgment of the Committee, appropriately reflect
the effect of such split-up, combination, reclassification, stock dividend,
consolidation, merger or sale of assets.
Any taxes which are required to be withheld from payments shall be deducted
and withheld by the Company. In the case of awards of common stock of the
Company, the Committee may allow the participant to irrevocably elect to pay
such withholding (up to the maximum marginal tax rate applicable to the
award) (i) by cash or check, (ii) from any cash award then payable to the
participant, (iii) using previously-owned shares of Company common stock or
(iv) from the shares of Company common stock then payable to the participant.
In the case of participants subject to Section 16(b) of the Exchange Act,
such elections (i) may not be made within six months from the date of grant
of the award, except in the event of death, disability, retirement or other
termination of employment of the participant, (ii) may be made either (a)
during the period beginning on the third business day following the date of
release of a summary statement of the Company's annual or quarterly sales and
earnings and ending on the twelfth business day following such date of
release or (b) by making an irrevocable election at least six months prior to
the effective date of such election and (iii) may be disapproved by the
Committee.
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For the purposes of the Plan, retirement of a participant on January 1 of any
year shall be deemed to have taken place as of December 31 of the preceding
year.
Nothing contained in the Plan shall be deemed to limit or restrict the right
of the Company and its subsidiaries to compensate any of their employees in
whole or in part under separate commission or bonus plans or arrangements.
No right under the Plan shall be subject to anticipation, sale, assignment,
pledge, encumbrance or charge without the consent of the Committee. If any
participant shall be adjudicated a bankrupt or attempt to anticipate, sell,
assign, pledge or encumber any right hereunder without such consent, the
Committee in its discretion may terminate all rights of such participant and
may hold or apply the unpaid balance of the award, or any part thereof, for
the benefit of his legal representatives, spouse, children, or other
dependents, or any of them, in such manner and in such proportions as the
Committee may deem proper. Payment of any award assigned with the consent of
the Committee shall, in the event of the death of the assignor, be paid as
specified in such assignment which shall take precedence over the mode of
payment specified in the fourth paragraph of Section 3.
Section 7. Procedures for Certain Designated Executives. Annual and Long-Term
Incentive Awards of cash and common stock under the Plan for Designated
Executives who may be "Covered Employees" within the meaning of Section 162
(m) of the Code shall be subject to preestablished performance objectives as
set forth herein. Notwithstanding Section 6 hereof, the Committee shall not
have discretion to modify the terms of awards to such Designated Executives
except as specifically set forth in this Section 7. It is intended that all
payments hereunder to Designated Executives who are Covered Employees will
meet the requirements of 162 (m) and the regulations thereunder and will not
be disallowed thereunder.
(a) Annual Incentive Awards. (i) Annual Target Amount. Prior to January 1 of
each calendar year (or, in the case of annual incentive awards with respect
to 1994, prior to April 1, 1994), the Committee shall establish target
amounts for annual awards ("Annual Target Amounts") for such of the
Designated Executives who may be "covered employees", payment of which shall
be conditioned upon satisfaction of specific performance objectives for such
calendar year established by the Committee in writing at the time of
establishment of the Annual Target Amount. After the close of the calendar
year, the Committee shall grant an award (the "Annual Incentive Award") based
upon a percentage or multiple of the pre-established Annual Target Amount.
The Annual Target Amount will be established in writing by the Committee and
will either be a fixed amount or an amount determined pursuant to a formula.
The extent to which the Annual Incentive Award will be payable will be based
upon the degree of achievement of predetermined specific performance
objectives over the calendar year; provided, however, that the Committee may,
in its sole discretion, reduce the amount which would otherwise be payable
(under which circumstances the participant will not have the right to receive
the full Annual Incentive Award even if the annual performance objectives are
met).
(ii) Annual Performance Objectives. The performance objectives ("Annual
Performance Objectives") established in writing by the Committee at the time
the Annual Target Amount is established will be comprised of specified annual
levels of one or more of the following performance measures: earnings per
share, sales, net profit after tax, gross profit, operating profit, unit
volume, return on equity, change in working capital, return on capital or
shareholder return.
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(iii) Payment of Annual Incentive Awards. At the time the Annual Target
Amount is established, the Committee shall prescribe a formula to determine
the percentage of the Annual Target Amount which may be payable based upon
the degree of attainment of the Annual Performance Objectives, which shall be
determined as of the last day of the calendar year. Prior to payment of any
Annual Incentive Awards, the Committee must certify the degree of attainment
of the applicable Annual Performance Objectives. Payments shall be made in
cash or shares in accordance with the prescribed formula in amounts ranging
from 0% to 200% of the Annual Target Amount.
(iv) Maximum Payable. The maximum amount payable to such Designated
Executives for a given calendar year as an Annual Incentive Award is
$2,000,000 in cash. The maximum amount will be adjusted annually to reflect
increases in the Consumer Price Index-U published by the Bureau of Labor
Statistics for each twelve month period commencing January 1.
(b) Long-Term Incentive Awards. (i) Long-Term Target Amount. Prior to the
commencement of a measurement period (or in the case of awards having 1994 as
the first year of the measurement period, prior to April 1, 1994) the
Committee shall establish target amounts for long-term awards (the "Long-Term
Target Amount") to such of the Designated Executives who may be "covered
employees", payment of which shall be conditioned upon satisfaction of
specific performance objectives measured over a period of greater than one
year established by the Committee in writing at the time of establishment of
the Long-Term Target Amount. After the expiration of the applicable
measurement period, the Committee shall grant to each Designated Executive an
award (the "Long-Term Incentive Award") based upon a percentage or multiple
of the Long Term Target Amount. The Long-Term Target Amount will be
established in writing by the Committee and will either be a fixed amount or
an amount determined pursuant to a formula. The Long-Term Target Amount may
be denominated either in terms of a target dollar amount or a specified
target number of shares of common stock of the Company and may be payable in
cash or common stock of the Company regardless of the denomination of the
Long-Term Target Amount. The extent, if any, to which a Long-Term Incentive
Award will be payable will be based upon the degree of achievement of
predetermined performance objectives over a specified measurement period;
provided, however, that the Committee may, in its sole discretion, reduce the
amount which would otherwise be payable upon expiration of the measurement
period (under which circumstances the participant will not have the right to
receive the full amount of such Long-Term Incentive Award even if the
long-term performance objectives are met).
(ii) Measurement Period. The measurement period will be a period of three
calendar years, unless a longer or shorter period is otherwise selected and
established in writing by the Committee at the time any Long-Term Target
Amount is established (the period so specified being hereinafter referred to
as the "Measurement Period").
(iii) Long-Term Performance Objectives. The performance objectives for any
Measurement Period ("Long-Term Performance Objectives") established in
writing by the Committee at the time the Long-Term Target Amount is
established will be comprised of specified levels of one or more of the
following performance measures: earnings per share, sales, net profit after
tax, gross profit, operating profit, unit volume, return on equity, change in
working capital, return on capital or shareholder return.
(iv) Payment of a Long-Term Incentive Award. At the time the Long-Term Target
Amount is established, the Committee shall prescribe a formula to determine
the percentage of the Long-Term Target Amount which
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may be payable based upon the degree of attainment of the Long-Term
Performance Objectives which shall be determined as of the last day of the
Measurement Period. Prior to payment of any Long-Term Incentive Awards, the
Committee must certify the degree of attainment of the applicable Long-Term
Performance Objectives. Payments of Long-Term Incentive Awards shall be made
in accordance with the prescribed formula in amounts ranging from 0% to 175%
of the Long-Term Target Amount. To the extent a Long-Term Target Amount is
denominated in shares, after such Long-Term Target Amount is established and
prior to the payment of the applicable Long-Term Incentive Award, the amount
of shares payable to a Designated Executive will be adjusted to reflect a
change in corporate capitalization such as a stock split or a corporate
transaction such as a merger, spin-off or corporate split-up, reorganization,
consolidation or partial or complete liquidation.
(v) Maximum Payable. The maximum amount payable to a Designated Executive for
a given Measurement Period as a Long-Term Incentive Award is 50,000 shares of
common stock of the Company. The maximum will be adjusted to reflect a change
in corporate capitalization such as a stock split-up or a corporate
transaction such as a merger or sale of stock or assets, reorganization,
consolidation or partial or complete liquidation.
Section 8. Effective Date. The Plan shall be effective for the year 1962 and
for each year thereafter until terminated by the Board of Directors.
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[COLGATE-PALMOLIVE CORPORATE LOGO] COLGATE-PALMOLIVE COMPANY
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS AND PROXY STATEMENT
[recycled logo] Printed on Recycled Paper
