<PAGE>
March 16,1995
Gillette Stockholders:
You are cordially invited to attend the 1995 Annual Meeting of the stockholders
of The Gillette Company to be held at 10:00 a.m. on Thursday, April 20, 1995, at
the John F. Kennedy Library and Museum, Columbia Point, Boston, Massachusetts.
At the meeting, we will vote on the proposals described in the accompanying
Notice and Proxy Statement. We will also report to you on the operations of the
Company. You will have the opportunity to ask questions about the business that
may be of general interest to stockholders.
Your vote is important regardless of how many shares you own. Please take a few
minutes now to review the proxy statement and to sign and date your proxy and
return it in the envelope provided. You may attend the meeting and vote in
person even if you have previously returned your proxy.
I look forward to seeing you at the meeting.
Very truly yours,
<PAGE>
NOTICE OF ANNUAL MEETING OF THE STOCKHOLDERS
The 1995 Annual Meeting of the stockholders of The Gillette Company will be held
at the John F. Kennedy Library and Museum, Columbia Point, Boston,
Massachusetts, on Thursday, April 20, 1995, at 10:00 a.m. for the following
purposes:
1. To elect four directors for terms to expire at the 1998 Annual Meeting
of the stockholders.
2. To elect a director to the class of directors whose term expires at the
1997 Annual Meeting of the stockholders.
3. In connection with a proposed 2-for-1 stock split, in the form of a
100% common stock dividend, to vote on the approval of an amendment to
the Certificate of Incorporation to increase the Authorized $1 par
value common stock from 580,000,000 shares to 1,160,000,000 shares, as
described in the accompanying proxy statement
4. To vote on the proposed amendment of the 1971 Stock Option Plan as
described in the accompanying proxy statement.
5. To vote on the approval of the appointment of auditors for the year
1995.
6. To transact such other business as may properly come before the meeting
and any and all adjournments thereof.
The Board of Directors has fixed the close of business on March 1, 1995, as the
record date for the determination of the stockholders entitled to notice of and
to vote at the meeting. A list of such stockholders will be available at the
time and place of the meeting and, during the ten days prior to the meeting, at
the office of the Secretary of the Company at the above address.
If you indicate that you plan to attend the meeting by marking the appropriate
space on the proxy card, an admission ticket will be sent approximately one week
in advance of the meeting. You should bring a form of personal identification to
the meeting with you. If your shares are held of record by a broker, bank or
other nominee and you wish to attend the meeting, you must obtain a letter from
the broker, bank or other nominee confirming your beneficial ownership of the
shares and bring it to the meeting. In order to vote your shares at the meeting,
you must obtain from the record holder a proxy issued in your name.
Whether or not you expect to attend, WE URGE YOU TO SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.
By order of the Board of Directors
Jill C. Richardson, Secretary
Boston, Massachusetts
March 16,1995
<PAGE>
March 16,1995
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors for the 1995 Annual Meeting of the
stockholders of the Company on April 20, 1995. The Notice of Annual Meeting,
this proxy statement and the accompanying proxy are being mailed to stockholders
on or about March 16,1995. You can ensure that your shares are voted at the
meeting by signing and dating the enclosed proxy and returning it in the
envelope provided. Sending in a signed proxy will not affect your right to
attend the meeting and vote in person. You may revoke your proxy at any time
before it is voted by notifying the Company's Transfer Agent, The First National
Bank of Boston, P.O. Box 471, Boston, Massachusetts 02102-9901 in writing, or by
executing a subsequent proxy, which revokes your previously executed proxy.
The enclosed proxy will also serve as a confidential voting instruction with
respect to the Company's employees' savings plans, Employee Stock Ownership Plan
("ESOP") and Global Employee Stock Ownership Plan ("GESOP"). If voting
instructions have not been received from a participant by April 12, 1995, the
shares allocated to the participant's account(s) and ESOP and GESOP shares that
have not been allocated to participant accounts will be voted on each issue in
proportion to the shares as to which voting instructions have been returned by
other participants of each respective plan.
1. ELECTION OF DIRECTORS FOR TERMS TO EXPIRE AT THE 1998 ANNUAL MEETING OF THE
STOCKHOLDERS
At the meeting, four directors, Wilbur H. Gantz, Richard R. Pivirotto, Juan M.
Steta and Alfred M. Zeien, are to be elected to serve for terms that expire at
the 1998 Annual Meeting of the stockholders. Mr. Zeien has agreed, at the
request of the Board of Directors, to remain as Chairman and Chief Executive
Officer beyond his normal retirement date of March 1, 1995. Information
regarding the Board's four nominees for directors to this class is set forth at
page 2.
The accompanying proxy will be voted for the election of the Board's nominees
unless contrary instructions are given. If any nominee is unable to serve, which
is not anticipated, the persons named as proxies intend to vote for the
remaining Board nominees and, unless the number of directors is reduced by the
Board of Directors, for such other person as the Board of Directors may
designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS FOR TERMS
TO EXPIRE AT THE 1998 ANNUAL MEETING OF STOCKHOLDERS WHICH IS DESIGNATED AS
PROPOSAL NO. 1 ON THE ENCLOSED PROXY.
2. ELECTION OF DIRECTOR TO THE CLASS OF DIRECTORS WHOSE TERM EXPIRES AT THE 1997
ANNUAL MEETING OF THE STOCKHOLDERS
At the meeting, Mr. Hawley, Executive Vice President of the Company, is to be
elected to serve for a term that expires at the 1997 Annual Meeting of the
stockholders. The Board of Directors intends to elect Mr. Hawley President and
Chief Operating Officer on April 20, 1995, subject to his election as a
director. Additional information regarding Mr. Hawley, the Board's nominee to
this class, is set forth at page 4.
The accompanying proxy will be voted for the election of the Board's nominee
unless contrary instructions are given. If the nominee is unable to serve, which
is not anticipated, the persons named as proxies intend, unless the number of
directors is set to reflect that development by the Board of Directors, to vote
for such other person as the Board of Directors may designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF A DIRECTOR FOR A
TERM TO EXPIRE AT THE 1997 ANNUAL MEETING, WHICH IS DESIGNATED AS PROPOSAL NO. 2
ON THE ENCLOSED PROXY.
Information regarding the seven directors whose terms expire in 1996 and 1997 is
set forth at pages 3 and 4 .
<PAGE>
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR THREE-YEAR TERMS TO EXPIRE AT THE 1998 ANNUAL MEETING OF THE STOCKHOLDERS
WILBUR H. GANTZ Director since 1992
"Photo of Mr. Gantz" Mr. Gantz, 57 years of age, is President, Chief
Executive Officer and a director of PathoGenesis
Corporation, a biopharmaceutical company. He served
as President of Baxter International, Inc., a
manufacturer and marketer of health care products,
from 1987 to 1992. He joined Baxter International,
Inc. in 1966 and held various management positions
prior to becoming its Chief Operating Officer in
1983. Mr. Gantz is a director of W.W. Grainger and
Company; Bank of Montreal; Harris Bankcorp; and
Harris Trust and Savings Bank.
RICHARD R. PIVIROTTO Director since 1980
"Photo of Mr. Pivirotto" Mr. Pivirotto, 64 years of age, is President of
Richard R. Pivirotto Co., Inc., a management
consulting firm. He served as President of Associated
Dry Goods Corporation, a retail department store
chain, from 1972 to 1976 and as Chairman of its Board
of Directors from 1976 to February 1981. He is a
director of General American Investors Company, Inc.;
Immunomedics, Inc.; New York Life Insurance Company;
and Westinghouse Electric Corporation.
JUAN M. STETA Director since 1987
"Photo of Mr. Steta" Mr. Steta, 68 years of age, is of counsel to the law
firm of Santamarina y Steta, Mexico City, which is
engaged in a general business practice. He joined the
firm in 1949, was elected a partner in 1956 and
served in that capacity until 1992. He is Chairman of
the Board of Quimicos y Derivados and T & N de Mexico
and is a director of several other Mexican
corporations, including General Motors de Mexico,
B.I.P. Plastics and Grupo IDESA. He is also a
director of Barnes Group Inc. in Bristol,
Connecticut.
ALFRED M. ZEIEN Director since 1980
"Photo of Mr. Zeien" Mr. Zeien, 65 years of age, is Chairman of the Board
and Chief Executive Officer. He joined the Company in
1968 and served as Chairman of the Board of
Management of Braun AG, a Gillette subsidiary, from
1976 to 1978 and as Senior Vice President, Technical
Operations, from 1978 to 1981. He was elected Vice
Chairman of the Board in 1981. In that capacity, he
served as the Company's senior technical officer and
headed the new business development group until
November 1987, when he assumed responsibility for
Gillette International and the Diversified Companies.
He was elected President and Chief Operating Officer
in January 1991 and Chairman and Chief Executive
Officer in February 1991. Mr. Zeien is a director of
Bank of Boston Corporation; The First National Bank
of Boston; Massachusetts Mutual Life Insurance
Company; Polaroid Corporation; Raytheon Company; and
Repligen Corporation.
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRE AT THE 1996 ANNUAL MEETING OF THE STOCKHOLDERS
WARREN E. BUFFETT Director since 1989
"Photo of Mr. Buffett" Mr. Buffett, 64 years of age, is Chairman of the
Board and Chief Executive Officer of Berkshire
Hathaway Inc., a company engaged in a number of
diverse business activities, the most important of
which is the property and casualty insurance
business. Prior to assuming those positions in 1970,
he was a general partner of Buffett Partnership, Ltd.
He is a director of Capital Cities/ABC, Inc., The
Coca-Cola Company, Salomon Inc and US Air Group.
MICHAEL B. GIFFORD Director since 1993
"Photo of Mr. Gifford" Mr. Gifford, 59 years of age, is Managing Director
and Chief Executive of The Rank Organisation Plc,
London, England, a leisure and entertainment company.
He has served in that capacity since 1983. He was
Finance Director of Cadbury Schweppes plc from 1978
to 1983 and Chief Executive of Cadbury Schweppes
Australia from 1975 to 1978. He is also a director of
English China Clays plc.
CAROL R. GOLDBERG Director since 1990
"Photo of Mrs. Goldberg" Mrs. Goldberg, 63 years of age, is President of The
Avcar Group, Ltd., a management consulting firm. She
was President and Chief Operating Officer of The Stop
& Shop Companies, Inc., a retail store chain, from
1985 to 1989. She joined Stop & Shop in 1959 and
served in various management positions prior to her
election as Executive Vice President and Chief
Operating Officer in 1982. She served as a director
of that Company from 1972 to 1989. She also serves as
a director of America Service Group, Inc., Boston
Municipal Research Bureau and the Kennedy Library
Foundation.
JOSEPH E. MULLANEY Director since 1990
"Photo of Mr. Mullaney" Mr. Mullaney, 61 years of age, is Vice Chairman of
the Board. He joined the Company in 1972 as Associate
General Counsel and was elected General Counsel in
1973, Vice President in 1975, Senior Vice President
with responsibilities for legal and governmental
affairs in 1977 and Vice Chairman in 1990. He serves
as a director of Boston Municipal Research Bureau,
the Greater Boston Legal Services Corporation, the
Greater Boston Chamber of Commerce, the New England
Legal Foundation and the World Affairs Council of
Boston. He is also a member of the Board of Trustees
of the Massachusetts Taxpayers Foundation, Inc.
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRE AT THE 1997 ANNUAL MEETING OF THE STOCKHOLDERS
HERBERT H. JACOBI Director since 1981
"Photo of Mr. Jacobi" Mr. Jacobi, 60 years of age, has been Chairman of the
Managing Partners of Trinkaus & Burkhardt, a German
bank, since 1981. The Bank is affiliated with
Britain's Midland Bank plc, a member of the Hongkong
Bank Group. He was a managing partner of Berliner
Handels- und Frankfurter Bank from 1977 until 1981
and an Executive Vice President of Chase Manhattan
Bank from 1975 to 1977. Mr. Jacobi is a director of
Amtrol, Inc.; Atlanta AG; Braun AG, a Gillette
subsidiary; and Midland Bank plc. He is also a member
of the Partnership Council of Freshfields, a U.K. law
firm, and Vice Chairman of Midland Bank France S.A.
He is President of the Northrhine-Westfalia Stock
Exchange in Duesseldorf and a director of Deutsche
Boerse AG in Frankfurt.
ALEXANDER B. TROWBRIDGE Director since 1990
"Photo of Mr. Trowbridge" Mr. Trowbridge, 65 years of age, is President of
Trowbridge Partners Inc., a management consulting
firm. He was President of National Association of
Manufacturers, a trade organization, from 1980
through 1989. He was Vice Chairman of Allied Chemical
Corporation (now Allied-Signal Corporation) from 1976
to 1980, President of The Conference Board, Inc. from
1970 to 1976, President of American Management
Association from 1968 to 1970 and U.S. Secretary of
Commerce from 1967 to 1968. Mr. Trowbridge is a
director of Harris Corporation; ICOS Corporation; New
England Mutual Life Insurance Company; PHH
Corporation; The Rouse Company; The Sun Company,
Inc.; SunResorts International N.A. Ltd.; E.M.
Warburg Pincus Counsellors Funds; and WMX
Technologies Inc. He is a charter trustee of Phillips
Academy, Andover.
JOSEPH F. TURLEY Director since 1980
"Photo of Mr. Turley" Mr. Turley, 69 years of age, was President and Chief
Operating Officer of the Company until his retirement
in 1988. He joined the Company in 1960 and served as
General Manager of the Gillette subsidiary in Spain,
as President of Gillette Canada and, from 1971 to
1976, as President of the Safety Razor Division. He
was Executive Vice President in charge of Gillette
North America from 1976 to February 1981, when he
became President and Chief Operating Officer. Mr.
Turley is a director of Copley Properties, Inc. and
EG&G, Inc., and is a trustee of five groups of mutual
funds sponsored by New England Mutual Life Insurance
Company.
NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A TWO-YEAR TERM TO EXPIRE AT THE 1997 ANNUAL MEETING OF THE STOCKHOLDERS
MICHAEL C. HAWLEY
"Photo of Mr. Hawley" Mr. Hawley, 57 years of age, is Executive Vice
President of the Company's International Group. He
joined the Company in 1961, and served as General
Manager of Gillette Colombia from 1972 to 1975 and
Group General Manager of the Asia Pacific Group
beginning in 1976. In 1985 he was elected President,
Oral-B Laboratories, Inc., a Gillette subsidiary. Mr.
Hawley was elected to his present position in
December 1993.
<PAGE>
BOARD MEETINGS
The Board of Directors held ten meetings in 1994.
COMMITTEES OF THE BOARD
The Board of Directors has the following standing committees, which are composed
entirely of directors who are not employees of the Company, except that the
Chief Executive Officer is an ex officio member of the Executive Committee.
Audit Committee
The members are Mr. Steta (Chairman), Mr. Buffett, Mr. Gifford, Mrs. Goldberg
and Mr. Turley.
The Audit Committee recommends the appointment of the Company's independent
auditors, meets with the auditors to review their report on the financial
operations of the business, and approves the audit services and any other
services to be provided. It reviews the Company's internal audit function and
the performance and adequacy of the Company's benefit plan fund managers. It
also reviews compliance with the Company's statement of policy as to the conduct
of its business. Four meetings of the Committee were held in 1994.
Executive Committee
The members are Mr. Buffett (Chairman), Mrs. Goldberg, Mr. Steta, Mr. Turley and
Mr. Zeien.
The Executive Committee, acting with the Finance Committee, reviews and makes
recommendations on significant capital investment proposals. It is also
available to review and make recommendations to the Board with respect to the
nature of the business, plans for future growth, senior management succession
and stockholder relations. The Committee has the added functions of reviewing
the composition and responsibilities of the Board and its committees and
recommending to the Board nominees for election as directors. It will consider
nominations by stockholders, which should be submitted in writing to the
Chairman of the Committee in care of the Secretary of the Company. Ten meetings
of the Committee were held in 1994.
Finance Committee
The members are Mr. Jacobi (Chairman), Mr. Gantz, Mr. Gifford, Mr. Pivirotto and
Mr. Trowbridge.
The Finance Committee reviews and makes recommendations with respect to the
Company's financial policies, including cash flow, borrowing and dividend policy
and the financial terms of acquisitions and dispositions. Acting with the
Executive Committee, it reviews and makes recommendations on significant capital
investment proposals. Nine meetings of the Committee were held in 1994.
Personnel Committee
The members are Mr. Pivirotto (Chairman), Mr. Gantz, Mr. Jacobi and Mr.
Trowbridge.
The Personnel Committee reviews and makes recommendations to the management or
Board on personnel policies and plans or practices relating to compensation. It
also administers the Company's executive incentive compensation plans and
approves the compensation of all officers and certain other senior executives.
Nine meetings of the Committee were held in 1994
OUTSTANDING VOTING SECURITIES
On March 1, 1995, the record date for the 1995 Annual Meeting of the
stockholders, there were outstanding and entitled to vote 000,000,000 shares of
the $1 par value common stock of the Company, entitled to one vote per share,
and 000,000 shares of Series C ESOP Convertible Preferred Stock, entitled to 20
votes per share. The holders of the Company's common and preferred stock vote
together as one class on all matters being submitted to a vote of the
stockholders at the 1995 Annual Meeting.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 1, 1995, Berkshire Hathaway Inc., located at 1440 Kiewit Plaza,
Omaha, Nebraska 68131, beneficially owned, through six insurance subsidiaries,
24,000,000 shares, which constitute 10.9% of the outstanding common stock of the
Company and 10.7% of the votes entitled to be cast by the holders of the
outstanding voting securities of the Company. One of the six Berkshire Hathaway
Inc. subsidiaries, National Indemnity Company, 3024 Harney Street, Omaha,
Nebraska 68131, owned directly 15,000,000 of the 24,000,000 shares, or 6.8% of
the outstanding common stock and 6.7% of the votes entitled to be cast by the
holders of the outstanding voting securities of the Company. The capital stock
of Berkshire Hathaway Inc. is beneficially owned approximately 41.6% by Mr.
Buffett and a trust of which he is trustee but in which he has no economic
interest and 3.2% by his wife, Susan T. Buffett.
As of March 1, 1995, State Street Bank and Trust Company, P.O. Box 5259, Boston,
Massachusetts 02101 ("State Street") held as Trustee of The Gillette Company
Employee Stock Ownership Plan on behalf of Plan participants, 000,000 shares of
Series C ESOP Convertible Preferred Stock which represent 100% of that class and
1.5% of the votes entitled to be cast by the holders of the Company's
outstanding voting securities. State Street exercises shared voting and
dispositive power over the shares.
The following table sets forth the number of Gillette shares beneficially owned
on March 1, 1995, by (i) each director, (ii) each of the executive officers
named in the Summary Compensation Table at page 00 and (iii) all directors and
current executive officers as a group. All individuals listed in the table have
sole voting and investment power over the shares reported as owned, except as
otherwise stated.
<TABLE>
<CAPTION>
Unrestricted
Stock Beneficially
Title of Owned, Excluding Option Shares Exercisable
Name Class<F1> Options Within 60 days
- ---- -------- ------- --------------
<S> <C> <C> <C>
Warren E. Buffett Common 24,000,000<F2> 3,000
Wilbur H. Gantz Common 0 3,000
Michael B. Gifford Common 0 2,000
Carol R. Goldberg Common 0<F3> 3,000
Michael C. Hawley Common 0<F4> 54,000
Series C Pfd. 0 --
Herbert H. Jacobi Common 0 3,000
Jacques Lagarde Common 0<F4> 97,500
Series C Pfd. 0 --
Joseph E. Mullaney Common 0<F4> 91,500
Series C Pfd. 0 --
Robert J. Murray Common 0<F4> 136,800
Series C Pfd. 0 --
Richard R. Pivirotto Common 0 3,000
Juan M. Steta Common 0<F5> 3,000
Alexander B. Trowbridge Common 2,800
Joseph F. Turley Common 0 3,000
Alfred M. Zeien Common 0<F4> 245,000
Series C Pfd. 0 --
All directors and
current executive Common 0<F4> 762,700
officers as a group Series C Pfd. 0 --
<FN>
<F1> Except as indicated in note (2) below, the total number of shares
beneficially owned in each class constitutes less than 1% of the
outstanding shares in that class.
<F2> Owned by insurance subsidiaries of Berkshire Hathaway Inc., a company which
Mr. Buffett may be deemed to control. Mr. Buffett shares voting and
investment power over the shares, which represent 10.9% of the outstanding
common stock, as described under this item at page 0.
<F3> Mrs. Goldberg has no voting and investment power over 0 of the shares
reported as owned and disclaims beneficial ownership with respect to those
shares.
<F4> Includes common shares held under the Company's Employees' Savings Plan as
follows: Mr. Hawley 0 shares; Mr. Lagarde 0 shares; Mr. Mullaney 0 shares;
Mr. Murray 0 shares; Mr. Zeien 0 shares; and the total of all employee
directors and all current executive officers, including the named current
executive officers, as a group 0 shares. Under the Employees' Savings Plan
and ESOP, participants may direct the voting of shares held in their
accounts in accordance with the shared voting procedure described at page 1
and share investment power with the plans' trustees in accordance with the
terms of the plans. In addition, Mr. Mullaney shares voting and investment
power over 0 of the common shares reported as owned by him; Mr. Murray has
no voting and investment power over 0 of the shares reported as owned by
him and disclaims beneficial ownership with regard to those shares; and one
executive officer shares voting and investment power over 0 of the total
number of common shares reported as owned by the group and disclaims
beneficial ownership with regard to 0 of the total number of common shares
reported as owned by the group.
<F5> Mr. Steta has no voting and investment power over 0 of the shares reported
as owned by him and disclaims beneficial ownership with regard to those
shares.
</TABLE>
CERTAIN TRANSACTIONS WITH DIRECTORS AND OFFICERS
Berkshire Hathaway Inc. and the Company continue to be subject to their
agreement of July 20, 1989. Management, after consultation with legal and
financial advisors, determined that the terms of the agreement, as described
below, were fair to the Company.
The agreement provides that, without the approval of the Company's Board of
Directors, until July 20, 1999, Berkshire Hathaway Inc. will not acquire shares
giving it a total of more than 14.1% of the voting power of the Company's
outstanding voting securities (other than through the exercise of rights,
warrants or convertible securities received by Berkshire Hathaway Inc. with
respect to its common stock) or become a participant in a proxy solicitation or
a member of another group within the meaning of Section 13(d) of the Securities
Exchange Act of 1934 with respect to the Company.
Berkshire Hathaway Inc. also remains subject to its agreement to use its best
efforts not to knowingly sell securities representing more than 3% of the voting
power of the Company's outstanding voting securities to any one entity or group
except in certain specified circumstances related to a change in control of the
Company, and to give the Company certain rights of first refusal in the event of
sales of the Company's voting securities by Berkshire Hathaway Inc. If the
Company does not exercise its right of first refusal, Berkshire Hathaway Inc.
has the right to have the Company register, either in its entirety or in
increments of $100,000,000 or more from time to time, one or more public
offerings of the Gillette common stock held by Berkshire Hathaway Inc.
While Berkshire Hathaway Inc. owns at least 5% of the voting power of the
Company's securities, the Company's directors will also continue to be subject
to their agreement to use their best efforts to secure the election to the Board
by the shareholders of Mr. Buffett or such other individual reasonably
acceptable to the Company as Berkshire Hathaway Inc. might nominate.
Fees paid during 1994 to the law firm of Santamarina y Steta, of which Mr. Steta
is of counsel, are reported under Compensation of Directors below.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its subsidiaries are paid an
annual Board retainer fee of $25,000 plus a fee of $1,000 for attendance at each
meeting of the Board of Directors or of its committees. Under the Outside
Directors' Stock Ownership Plan one half of all annual Board retainer fees is
paid in common stock of the Company. Committee Chairmen receive an additional
retainer of $3,000 a year. The directors may defer payment of all or any portion
of cash retainers or fees until after retirement or resignation from the Board
or until an earlier change in control. Deferred amounts accrue interest
equivalents. Upon the death of a director, any unpaid amounts become payable in
a lump sum.
Directors who are not employees of the Company or its subsidiaries also may be
paid for service as directors of Company subsidiaries. During 1994 Mr. Jacobi
received standard outside director fees totaling $10,481 for his services as a
director of Braun AG.
Each non-employee director receives an automatic stock option grant, effective
two business days following the date of the annual meeting of the stockholders,
to purchase 1,000 shares of the common stock of the Company at a price equal to
the fair market value on the date of grant. In 1994 the grants were made on
April 25 at a price of $66.94 per share. Options granted to non-employee
directors are designated as non-ISO's, the terms of which are generally similar
to those granted to employees, which are described at page 00.
A director who has attained age 70 cannot stand for reelection to the Board.
Directors who have served as Board members for five or more years receive an
annual retirement benefit which is equal to the annual retainer in effect when
they leave the Board and is payable for a period equal to their years of
service. No credit is given for service as a director while an employee of the
Company. Payment of the benefit commences when service ends, or at age 65 if a
director leaves the Board at an earlier age. Upon the death of a director, the
present value of any unpaid amount becomes payable in a lump sum. In the event
of a change in control, a director leaving the Board would be entitled to
receive immediate payment of the present value of the full retirement benefit. A
director who at any time acts in a manner contrary to the best interests of the
Company risks forfeiture of the future retirement benefit.
During 1994 the Company and its Mexican subsidiaries received legal advice from
the law firm of Santamarina y Steta, of which Mr. Steta is of counsel, and paid
the firm a total of $453,675 for its services. The Company believes that all
such services were provided on terms at least as favorable to the Company as
those of comparable firms retained to provide similar legal services to the
Company. It is expected that Santamarina y Steta will continue to provide legal
services to the Company and its subsidiaries during 1995.
GILLETTE COMPARATIVE FIVE-YEAR INVESTMENT PERFORMANCE
The following chart compares the total return on $100 invested in Gillette
common stock for the five-year period from December 31, 1989 through December
31, 1994 with a similar investment in the Standard & Poor's 500 Stock Index and
with a peer group consisting of ten consumer products companies of generally
similar size.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gillette $100 $130 $235 $241 $256 $326
Peer Group $100 $118 $173 $159 $157 $175
S&P 500 $100 $ 97 $126 $136 $150 $152
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Peer Group Companies: Bristol-Myers Squibb Company Procter & Gamble Company
American Home Products Corporation Colgate-Palmolive Company Rubbermaid Incorporated
Avon Products, Inc. Johnson & Johnson Warner-Lambert Company
The Black & Decker Corporation Pfizer Inc.
</TABLE>
PERSONNEL COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overall Objectives and Programs
The objective of the Company's executive compensation program is to provide
compensation that will attract and retain executives, to motivate each executive
toward the achievement of the Company's short and long-term financial and other
goals, as reflected in its statement of mission and values and in its strategic
business plan, and to recognize individual contributions as well as overall
business results. In order to achieve this objective, the primary focus of the
Personnel Committee has been on the competitiveness of each of the key elements
of executive compensation -- base salary, bonus and stock option grants -- and
the compensation package as a whole. In general, the Committee also believes
that total compensation should reflect the fact that the Company's performance
compares very favorably with that of the peer group companies and with that of
the broader group of companies represented in the Standard & Poor's 500 Stock
Index.
Overall executive compensation is dependent upon performance against goals
assigned to each executive under the Company's management by objectives program.
These objectives are designed to further the Company's strategic business plan
and mission and values. Objectives include quantitative factors that directly
improve the Company's short-term financial performance, as well as qualitative
factors that strengthen the Company's ability to enhance profitable growth over
the long term, such as demonstrated leadership ability, management development,
insuring compliance with law and Company policies, and anticipating and
responding to changing market and economic conditions.
Each year the Committee reviews a report prepared by independent compensation
consultants assessing the competitiveness of the Company's program for the past
year with the peer group used for compensation comparisons ("the Compensation
Peer Group") to determine whether the Company has achieved its executive
compensation program objective and to help the Committee determine whether there
is a need to make prospective adjustments in the compensation of executive
officers. The Compensation Peer Group includes most of the companies listed on
page 0, as well as a number of other companies with which the Company competes
for executive talent. Despite the substantial similarities between the two
groups, the companies included in the Compensation Peer Group are not identical
to those included in the peer group index in the Investment Performance Graph
included in this proxy statement because the Committee believes that the group
of companies with which the Company competes for executive talent is broader and
not identical to that appropriate for comparing investment performance.
Over the last several years the Personnel Committee has sought to relate an
increasingly greater percentage of total executive compensation directly to the
financial performance of the Company and to the part each executive played in
achieving that performance. This has resulted in a compensation package in which
a greater portion of each executive officer's compensation is contingent upon
the achievement of specific financial targets for the year. For 1994 the bonus
represented approximately 39% of total direct compensation (base salary plus
bonus), a proportion believed to be generally in line with that of the
Compensation Peer Group.
It has also been the Committee's objective that, in any year in which a budgeted
bonus pool is earned under the Incentive Bonus Plan and the Company's
performance compares favorably with those shown on the Investment Performance
Graph, the total direct compensation of the executive officers should be well
above the median of direct compensation paid by the Compensation Peer Group. For
the most recent period for which information is available, the total direct
compensation of the executive officers was well above the median of direct
compensation of the Compensation Peer Group.
The Personnel Committee approves the base salary of the executive officers and,
at its discretion, awards bonuses under the Incentive Bonus Plan and grants
stock options under the Stock Option Plan.
Base Salary
In determining the salary of an executive officer, a salary range is assigned
under a worldwide system of job evaluation based upon the level of
responsibility, the qualifications and experience required and the need to
provide, together with the Incentive Bonus Plan, competitive direct
compensation. Salary increases are based upon periodic reevaluations of these
factors and the performance of the executive in meeting individually assigned
objectives.
Incentive Bonus Plan
Under the Incentive Bonus Plan, the Personnel Committee establishes bonus pools
based on budgeted goals set at the outset of the year relating to profit from
operations, return on assets, and sales (weighted 70%, 15% and 15%,
respectively, for 1994) and establishes the minimum, budgeted, and maximum
Company-wide aggregate bonus pools that may be earned based upon the achievement
of those Company goals. For 1995 the weighting of the factors remains unchanged.
In order for a bonus pool to be earned, a minimum profit from operations goal
for the Company must be met. The actual amount of any pool is determined based
upon the level of achievement of Company goals for the year. Company goals are
translated to operating unit, staff and individual objectives and assigned to
executives under the Company's management by objectives program. For the year
1994, the Plan provided for awards ranging from 5% to 70% of year-end salary
based upon the performance of each executive officer against individually
assigned objectives for the year, with the Committee having discretion to award
a higher amount under special circumstances.
At the time goals are set, a reserve equivalent to no more than 35% of the
amount of the budgeted bonus pool may be established by the Committee from which
bonuses may be awarded to eligible employees in operating units that achieve
assigned objectives, even if the overall minimum profit from operations goal for
the Company is not met. In addition, the Committee may, within certain limits,
carry forward a portion of the bonus pool earned in any year for its
discretionary use in the future.
Stock Option Plan
Stock option grants are intended to provide long-term incentives for the
achievement of the Company's strategic business plan and mission and values and
to align the executive officers' interests with those of the shareholders. The
Stock Option Plan is the Company's sole long-term incentive plan for executive
officers. Under the Plan, the Personnel Committee may award stock options for
terms not to exceed ten years at no less than the fair market value of Gillette
common stock on the date of grant. The size of any stock option grant is related
to the individual's level of responsibility within the organization, and awards
are made on a basis designed to be at or above the median value of grants under
similar programs of companies in the Compensation Peer Group.
Other Benefits
In order to attract, motivate and retain employees, the Company also maintains a
competitive benefits package, participation in which is not dependent upon
performance. In general executive officers participate on the same basis as
other employees in the Company's broad-based employee benefit plans: the
Employees' Savings Plans, the Employee Stock Ownership Plan, and the Retirement
Plans. Information on these plans is provided on pages 00 through 00.
The executive officers, along with certain other executives, participate in an
Executive Life Insurance Program and Estate Preservation Plan. Information on
these programs is included in the footnotes to the Summary Compensation Table at
page 00.
The Personnel Committee has reviewed the impact of Section 162(m) of the
Internal Revenue Code which, beginning in 1994, limits the deductibility of
certain otherwise deductible compensation in excess of $1 million paid to the
CEO and the next four most highly compensated executive officers. It is the
policy of the Company to attempt to have all compensation treated as
tax-deductible compensation wherever, in the judgement of the Personnel
Committee, to do so would be consistent with the objectives of the compensation
plan under which the compensation is paid. Accordingly, the Stock Option Plan
and Stock Equivalent Unit Plan, as amended by the Board of Directors and
approved at the 1994 Annual Meeting of stockholders and the Stock Option Plan as
proposed to be amended at this meeting, fulfill the requirements for treatment
as tax deductible compensation.
The Committee has determined that to attempt to amend the Incentive Bonus Plan
so that bonuses meet the definition of tax deductible compensation would require
changes which would be contrary to the compensation philosophy underlying that
plan and which would seriously impede the Committee's ability to administer the
plan as designed in accordance with the judgement of the Committee. The
Incentive Bonus Plan was deliberately designed so that individual bonuses were
not to be dependent solely on objective or numerical criteria, thus allowing the
Committee the flexibility to apply its independent judgement to reflect
performance against qualitative strategic objectives.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
As Chairman and Chief Executive Officer, Mr. Zeien's compensation, like that of
the other executive officers of the Company, is set in accordance with the
foregoing policies.
Base Salary
Mr. Zeien's base salary represents an effort by the Personnel Committee, after
consideration of data contained in a report from the independent compensation
consultants, to place his base salary at or above the median of salaries of
chief executive officers in the Compensation Peer Group.
Incentive Bonus Plan
Mr. Zeien is responsible for the entire scope of the Company's worldwide
business. His 1994 bonus was based upon his successful leadership in managing
the business and balancing the Company's long and short-term objectives as
described below.
The Company's sales grew by 12%, to $6.07 billion in 1994, a record level. As
compared to 1993 results before the effect of the 1993 realignment charges and
the 1993 effect of mandated accounting changes, profit from operations in 1994
was $1,227 million, a 13% increase from the $1,087 million reported a year
earlier; net income of $698 million was 18% higher than the $591 million of the
same period in 1993; and earnings per common share rose at a rate of 18% over
those of 1993. Return on average assets for 1994 held steady at 13%. The total
market value of Gillette common stock increased by more than $3 billion to $16.6
billion as of the year ended December 31, 1994.
The Company's financial position improved in 1994, with net debt declining 17%
to $1,041 million and stockholders' equity increasing 36% to $2,017 million.
These improvements were recognized by the major credit agencies raising the
Company's long-term debt ratings to Aa3 (Moody's) and AA- (Standard & Poor's)
and the Company's commercial paper rating to A1+ (Standard & Poor's).
Significant progress was made during 1994 toward achievement of the Company's
long-term growth goals -- clear worldwide leadership in core business categories
and geographic expansion. The Company's continuing emphasis on technology-driven
new products also continued to be apparent in 1994. In addition to strong growth
in the newer geographic areas, a steady stream of new products was launched
during the year. Investment in the three principal "growth drivers" -- research
and development, capital spending and advertising -- in combination rose 14%
over 1993 levels, exceeding the Company's sales growth rate, partly as a result
of the reinvestment of funds made available by the realignment program announced
in January 1994. As an indicator of the effectiveness of this investment in
"growth drivers", 45% of the Company's 1994 sales came from products introduced
in the last five years. The realignment program, with minor exceptions, is being
implemented, and realignment activities are planned to be ongoing through the
fourth quarter of 1995.
Mr. Zeien is also responsible for insuring the Company's compliance with
applicable laws and Company policies.
Stock Option Plan
The 1994 stock option grant to Mr. Zeien was based upon the Committee's
judgement that stock options are designed as the Company's sole long-term
incentive for executive officers and that the option granted, which was
increased from 75,000 shares to 100,000 shares in 1994 after having remained
unchanged in 1993 compared to the prior year, represents an amount believed by
the Committee to be competitive in value with long-term incentives granted other
chief executive officers of the companies in the Compensation Peer Group.
Incentive Payment and Award
At meetings on February 16, 1995, the Executive Committee recommended and the
Board of Directors approved a plan to have Mr. Zeien, at the request of the
Board, remain as Chairman of the Board and Chief Executive Officer of the
Company and not retire from the Company on his normal retirement date of March
1, 1995, after which, if retired, he would receive pension payments under the
Company's Retirement Plan as described at page 00. In order to provide an
incentive to Mr. Zeien to continue his employment in these capacities, the
Personnel Committee recommended and the Board approved a payment to Mr. Zeien of
$500,000 if he continues as Chairman of the Board and Chief Executive Officer of
the Company through March 1, 1996, with any such amount being payable to Mr.
Zeien after his retirement, and made an option grant to Mr. Zeien effective
February 21, 1995, of 75,000 shares which will become exercisable on February
21, 1996. The independent compensation consultants for the Company have advised
the Personnel Committee that both the design and the level of this additional
compensation for Mr. Zeien are well within current marketplace practices in
similar situations.
Richard R. Pivirotto
(Chairman)
Wilbur H. Gantz
Herbert H. Jacobi
Alexander B. Trowbridge
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned by or paid or awarded to
the Chief Executive Officer and the next four most highly compensated executive
officers of the Company for all services rendered in all capacities for the
periods shown.
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term All Other
Annual Compensation Compensation Compensation<F3>
------------------- ------------------------------- ------------
Other # of Stock Long-Term
Annual Options Incentive
Name and Principal Position Year Salary Bonus Compensation<F1> Granted Payouts<F2>
- --------------------------- ---- ------ ----- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Alfred M. Zeien 1994 $1,000,000 $1,000,000 -- 100,000 -- $0
Chairman and Chief 1993 908,333 675,000 -- 75,000 -- 157,253
Executive Officer 1992 780,000 600,000 -- 75,000 -- 95,961
Joseph E. Mullaney 1994 445,000 200,000 -- 25,000 -- 0
Vice Chairman of the 1993 415,000 180,000 -- 25,000 -- 55,238
Board 1992 390,500 170,000 -- 25,000 -- 32,101
Michael C. Hawley 1994 377,917 250,000 $ 5,488 32,000 -- 0
Executive Vice President 1993 324,600 190,000 228,233 22,500 -- 33,371
Jacques Lagarde 1994 473,750 240,000 -- 32,000 -- 0
Executive Vice President 1993 417,250 170,000 109,399 30,000 $ 74,053 46,049
Robert J. Murray 1994 510,000 315,000 722 34,000 229,930 0
Executive Vice President 1993 470,000 265,000 1,567 32,000 385,267 52,824
1992 435,000 230,000 14,135 32,000 436,517 41,451
<FN>
- ---------------
<F1> Other Annual Compensation amounts represent taxes reimbursed by the Company
relating to non-deductible relocation expenses incurred by the named
individuals.
<F2> Long-Term Incentive Payouts represent Stock Equivalent Unit Plan amounts
paid or payable but deferred with respect to segments of awards vesting in
1994, plus amounts representing the growth in 1994 on prior years'
deferrals. Awards granted to executive officers after 1984 were contingent
upon the achievement of future performance goals. In 1990, it was decided
to utilize larger grants of stock options as long-term incentives for
executive officers and to discontinue granting Stock Equivalent Unit Plan
awards to this group of officers.
<F3> The amounts reported as All Other Compensation include the following
payments or accruals under the Company's benefit and incentive plans:
(i) Company contributions during 1994 under the Employees' Savings Plan
and Supplemental Savings Plan as follows: Mr. Zeien $50,000, Mr.
Mullaney $31,250, Mr. Hawley $23,967, Mr. Lagarde $32,188 and Mr.
Murray $25,500. Under the plans, the Company contributes 50 cents for
each dollar up to a maximum of 10% of salary and bonus saved by
participants. In general, regular U.S. employees are eligible to
participate. Certain limitations on the amount of benefits under
tax-qualified plans such as the Employees' Savings Plan were imposed
by the Employee Retirement Income Security Act of 1974, the Tax
Equity and Fiscal Responsibility Act of 1982, the Tax Reform Act of
1986 and the Revenue Reconciliation Act of 1993. The Company adopted
the Supplemental Savings Plan, as permitted by law, for the payment
of amounts to employees who may be affected by those limitations, so
that, in general, total benefits will continue to be calculated as
before on the basis approved by the stockholders.
(ii) Savings plan equivalents credited on 1994 Incentive Bonus Plan
deferrals as follows: Mr. Zeien $50,000 and Mr. Murray $15,750.
Before being selected to receive a bonus, participants have the
option to defer until a future year or retirement, or until an
earlier change in control, payment of all or a portion of any bonus
that may be awarded. Savings plan equivalents represent amounts which
would have been credited as Company contributions under the
Employees' Savings Plan or Supplemental Savings Plan had payment of
the bonuses not been deferred.
(iii) For each of the named executive officers $0 which represents the
value of Series C ESOP preferred shares allocated under the Employee
Stock Ownership Plan ("ESOP") to each of their accounts. The ESOP was
adopted in January 1990 as part of the Company's modified U.S.
retiree medical benefit program. Since September 30, 1990, Series C
ESOP preferred shares have been allocated quarterly to the accounts
of eligible employees, generally on the basis of an equal amount per
participant. In general, regular U.S. employees participate in the
ESOP after completing one year of service with the Company.
(iv) Company cost for the Executive Life Insurance Program as follows: Mr.
Zeien $27,450, Mr. Mullaney $4,574, Mr. Hawley $2385, Mr. Lagarde
$556 and Mr. Murray $2,742. The program provides coverage during
employment equal to four times annual salary, subject to a $600,000
minimum and a $2,000,000 maximum, with the participant paying the
premium for coverage equal to two times salary or $250,000, whichever
is less. During retirement, a Company-paid death benefit equal to
annual salary, subject to a $150,000 minimum and a $500,000 maximum,
continues in effect for the life of the participant.
(v) Company cost for the Estate Preservation Plan as follows: Mr. Zeien
$16,247, Mr. Mullaney $13,050, Mr. Hawley $9,008, Mr. Lagarde $6,927
and Mr. Murray $7,732. The executive officers, as well as certain
other officers, may participate in the Estate Preservation Program,
under which the Company and the executive officer will share equally
the cost of life insurance in the amount of $1,000,000 payable on the
death of the survivor of each executive and his or her spouse, with
the Company recovering its contribution at the end of a 15-year
period, or if earlier, when the survivor of the executive and the
executive's spouse dies.
</TABLE>
<TABLE>
Stock Options Granted in 1994
<CAPTION>
Grant Date
Individual Grants Value
- -------------------------------------------------------------------------------------- -----------
% Of Total
Options Granted Grant Date
Number of To Employees Per Share Present Value
Name Options Granted In 1994 Exercise Price<F1> Expiration Date ($)<F2>
- ---- --------------- ------- ----------------------------------- ------
<S> <C> <C> <C> <C> <C>
Alfred M. Zeien 100,000 6.11% $68.00 06/15/04 $2,161,000
Joseph E. Mullaney 25,000 1.53% 68.00 06/15/04 540,250
Michael C. Hawley 32,000 1.95% 68.00 06/15/04 691,520
Jacques Lagarde 32,000 1.95% 68.00 06/15/04 691,520
Robert J. Murray 34,000 2.08% 68.00 06/15/04 734,740
<FN>
- -----------
<F1> The exercise price of a stock option is equal to the average of the high
and the low prices of Gillette shares traded on the date the option is
granted. Payment upon exercise is made in cash or in shares of the
Company's common stock or partially in cash and partially in shares.
<F2> Options were valued using a Black-Scholes-based option pricing model, which
generates a theoretical value based upon certain factors and assumptions.
Therefore, the value which is calculated is not intended to predict future
prices of the Corporation's common stock. The actual value of a stock
option, if any, is dependent on the future price of the stock, overall
stock market conditions and continued service with the Company since
options remain exercisable for only a limited period following retirement,
death or disability. There can be no assurance that the values reflected in
this table or any other value will be achieved. In addition to stock value
at the date of grant and the exercise price, which are identical, and the
ten-year term of each option, the following assumptions were used to
calculate the values reflected in the table: stock price volatility of 24%
based on a one year daily stock price history, dividend yield of 1.2% based
on the most recent quarter's annualized yield, and risk-free rate of return
of 7% equal to the yield on a 10-year U.S. Treasury bond with a maturity
matching the option term. The assumptions and calculations used were
provided by independent compensation consultants.
Options become exercisable one year from the date of grant. The options granted
in 1994 become exercisable on June 16, 1995. At the time of grant, options may
be designated as incentive stock options ("ISOs"), a type of option authorized
under the 1981 amendments to the Internal Revenue Code. Options not so
designated are granted as "non-ISOs". Options generally remain exercisable for
ten years from the date of grant provided the recipient remains employed
throughout that period. The post-retirement exercise period for employees is
generally three months for an ISO, two years for a non-ISO granted before 1994
and three years for a non-ISO granted after 1993. If termination of employment
occurs within one year after a change in control, as that term is described at
page 00, any options held by the optionee that were not otherwise exercisable
when employment ceased would become immediately exercisable.
</TABLE>
<TABLE>
Aggregated Stock Option Exercises During 1994 And 1994 Year-End Stock Option
Values
<CAPTION>
Total Value
Of Unexercised
Number Of Number Of Unexercised In-The-Money Stock
Shares Underlying Value Stock Options Held Options Held At
Name Options Exercised Realized<F1> At Fiscal Year-End Fiscal Year-End
- ---- ----------------- ---------- --------------------- ------------------
<S> <C> <C> <C> <C>
Alfred M. Zeien 64,358 $2,664,695 Exercisable 245,000 $8,200,075
Unexercisable 100,000 712,500
Joseph E. Mullaney 11,500 570,025 Exercisable 91,500 3,304,328
Unexercisable 25,000 178,125
Michael C. Hawley 0 0 Exercisable 54,000 1,727,140
Unexercisable 32,000 228,000
Jacques Lagarde 0 0 Exercisable 97,500 3,511,598
Unexercisable 32,000 228,000
Robert J. Murray 1,000 43,280 Exercisable 136,800 5,073,736
Unexercisable 34,000 242,250
<FN>
- -----------
<F1> The amounts shown are the total values realized by the named persons on
exercises of options held for periods ranging from 5 to 8 years. The
annualized values for the options exercised, calculated by dividing the
total value realized by the number of years from the date of grant to the
date of exercise, are as follows: Mr. Zeien $526,303, Mr. Mullaney $99,213
and Mr. Murray $5,410.
</TABLE>
RETIREMENT PLAN
The following table sets forth the total annual pension benefits payable in the
form of a straight-life annuity before reduction for social security benefits
for employees who retire at or after age 65 under the Company's Retirement Plan
and Supplemental Retirement Plan.
<TABLE>
<CAPTION>
Average Annual Compensation Annual Pension
Used as Basis for 15 Years of 20 Years of 25 Years or More
Computing Pension Service Service of Service
- --------------------------- ----------- --------------- ----------------
<S> <C> <C> <C>
$ 400,000 $120,000 $160,000 $200,000
600,000 180,000 240,000 300,000
800,000 240,000 320,000 400,000
1,000,000 300,000 400,000 500,000
1,200,000 360,000 480,000 600,000
1,400,000 420,000 560,000 700,000
1,600,000 480,000 640,000 800,000
1,800,000 540,000 720,000 900,000
</TABLE>
In general, the benefit upon retirement at or after age 65 with 25 years or more
of service is equal to 50% of the employee's average annual compensation (salary
plus bonus, if any, as reported in the Summary Compensation Table at page 00)
during the five calendar years of highest compensation included in the last ten
calendar years of employment, minus 75% of primary social security benefits.
Certain limitations on the amount of benefits under tax-qualified plans, such as
the Retirement Plan, were imposed by the Employee Retirement Income Security Act
of 1974, the Tax Equity and Fiscal Responsibility Act of 1982, the Tax Reform
Act of 1986 and the Revenue Reconciliation Act of 1993. The Company adopted the
Supplemental Retirement Plan, as permitted by law, for the payment of amounts to
employees who may be affected by those limitations, so that, in general, total
benefits will continue to be calculated on the basis approved by the
stockholders, as described above.
As of December 31, 1994, the persons named in the Summary Compensation Table at
page 00 had the following years of service under the Retirement Plan: Mr. Zeien
27 years; Mr. Mullaney 23 years; Mr. Hawley 31 years; Mr. Lagarde 24 years and
Mr. Murray 34 years.
Change in Control and Severance Arrangements
The Board of Directors has adopted a severance pay and benefit arrangement to
become effective in the event of a change in control. In general, the
arrangement would obligate any acquirer to continue long-standing Gillette
practice regarding severance payments to terminated employees. Severance
payments to U.S. employees whose employment is terminated under certain
circumstances after a change in control would be based on seniority and position
level, subject to a minimum for certain key employees, including certain
executive officers. Severance payments to employees in foreign countries would
comply with local law and follow past Gillette practice.
The maximum amount payable under the severance pay arrangement, including any
benefit plan payments resulting from a change in control, is 2.99 times average
annual compensation for the five-year period preceding termination of
employment. For most employees, including the named persons, it is unlikely that
payments would reach the maximum. The aggregate of severance pay excluding
benefit plan payments to the persons named in the Summary Compensation Table at
page 00 on December 31, 1994, in the event of a change in control on that date,
would have been $5,730,000, or 2 times the amount of their base salary on that
date. In general, benefit plan payments resulting from a change in control are
dependent upon salary, but vary with seniority and position level.
A change in control is defined in certain of the Company's benefit plans and, in
general, means those events by which control of the Company passes to another
person or corporation. Those events include a purchase of the Company's stock
pursuant to a tender offer, the acquisition of 20% or more of the Company's
stock by a person or group, a merger, or a sale of substantially all of the
assets of the Company. In addition, a change in control would occur if, during
any two-year period, the individuals who were serving on the Board of Directors
of the Company at the beginning of the period or who were nominated for election
or elected to the Board during the period with the affirmative vote of at least
two-thirds of such individuals still in office, ceased to constitute a majority
of the Board.
Benefits generally comparable to those applicable in the event of a change in
control of the Company have been extended to employees, including officers,
whose employment terminates pursuant to the Company's Realignment Plan announced
in January 1994.
3. AMENDMENT TO ARTICLE 4 OF THE CERTIFICATE OF INCORPORATION
ADDITIONAL COMMON STOCK -- STOCK SPLIT IN THE FORM OF A 100% COMMON STOCK
DIVIDEND
The Board of Directors recommends an amendment to the Certificate of
Incorporation which would increase the authorized $1 par value common stock from
580,000,000 shares to 1,160,000,000 shares. Subject to the approval of this
amendment by the stockholders, the Board has authorized the issuance to
stockholders of record on June 1, 1995, of one additional $1 par value share of
common stock as a dividend on each issued common share. The Board of Directors
believes that the stock split in the form of a 100% common stock dividend, is in
the best interests of the stockholders because it will place the market price of
the common stock in a range more attractive to investors, particularly
individuals, and may result in a broader market for the stock and more
widespread ownership of the Company.
The authorized common stock was last increased in 1991, when the stockholders
approved an amendment to the Certificate of Incorporation increasing the
authorized common stock by 290,000,000 shares to the present 580,000,000 shares,
with the authorized preferred stock remaining at the present 5,000,000 shares.
As of March 1, 1995, of the authorized preferred stock, 400,000 shares were
reserved for issuance as Series A Junior Convertible Preferred Shares in
connection with the Corporation's Preferred Stock Purchase Rights Plan; 000,000
were the Series C ESOP Convertible Preferred Shares described on page 00; and
the remaining 0,000,000 authorized preferred shares were uncommitted. Of the
authorized common stock, 000,000,000 shares were uncommitted as shown below:
Common Stock
As of
March 1, 1995 Pro Forma
Before Amendment After Amendment
---------------- --------------
Authorized 580,000,000 1,160,000,000
Issued and Outstanding (000,000,000) (000,000,000)
Held in Treasury (00,000,000) (000,000,000)
Reserved for issuance:
Stock Option Plan (00,000,000) (00,000,000)
Stock Purchase Plan (000,000) (00,000)
Series C ESOP Convertible
Preferred Stock (0,000,000) (0,000,000)
Outside Directors' Stock
Ownership Plan (00,000) (00,000)
Unissued and unreserved 000,000,000 (000,000,000)
=========== ==============
The number of common shares reserved for issuance upon the conversion of the
Company's convertible preferred shares and under the Stock Option, Stock
Purchase and Outside Directors' Stock Ownership Plans will be adjusted as
appropriate to reflect the stock split in the form of a 100% stock dividend, if
the amendment is approved. Otherwise, no specific transaction is now
contemplated which would result in the issuance of additional shares. However,
it is the Company's policy to explore on a continuing basis favorable
acquisition and financing possibilities which could at any time lead to the
issuance of shares of the Company's stock. In addition, it is desirable to have
authorized stock available for possible additional future stock dividends or
stock splits or for other corporate purposes.
Accordingly, it is proposed to amend the first paragraph of Article 4 of the
Company's Certificate of Incorporation to read as follows:
"4. The total number of shares of all classes of stock which the
corporation shall have authority to issue is One Billion One Hundred
Sixty-Five Million (1,165,000,000) shares, of which Five Million
(5,000,000) shares shall be shares of the class of Preferred Stock
without par value (hereinafter called "Preferred stock"), and One
Billion One Hundred Sixty Million (1,160,000,000) shares shall be
shares of the class of Common Stock with the par value of $1 per share
(hereinafter called "common stock")."
The Board of Directors would have sole discretion to issue the additional shares
of common stock from time to time for any corporate purpose, including in
reaction to any unsolicited acquisition proposal, without further action by the
stockholders. The terms of any one or more additional series of preferred stock,
including dividend rates, conversion prices, voting rights, redemption prices,
maturity dates and similar matters would also be determined solely by the Board
of Directors. Any preferred stock issued would be senior to common stock with
respect to dividends, liquidation rights and other attributes. Holders of stock
of the Company are not now and will not be entitled to preemptive rights.
In connection with the stock split in the form of a 100% stock dividend, a
transfer of $1 for each additional share of common stock issued, or
approximately $000,000,000, will be made from the Company's additional paid-in
capital account to its common stock account as of June 1, 1995, the date on
which stockholders of record will be entitled to the additional shares, so that
the additional shares to be issued will be fully paid. The amounts so
transferred will no longer be legally available for distribution to stockholders
as dividends; however, it is estimated that the amount of surplus which will be
legally available for dividends after this transfer will exceed $000,000,000.
Following the increase of capital in the common stock account becoming
effective, certificates representing the additional shares will be distributed
by the Corporation to stockholders of record as of June 1, 1995, without any
further action by the stockholders.
The Corporation will apply for listing on the New York Stock Exchange and other
exchanges on which the Company's shares are listed of the additional shares of
common stock to be issued. As a result of the proposed stock split in the form
of a 100% stock dividend, brokerage commissions and transfer taxes on any
subsequent trades of the stock may increase.
In the opinion of counsel for the Company, the adoption of the proposed
amendment and the issuance of the additional shares in connection with the stock
split in the form of a 100% stock dividend will result in no gain or loss or any
other form of taxable income for United States federal income tax purposes. The
laws of jurisdictions other than the United States may impose income taxes on
the issuance of the additional shares in connection with the stock split in the
form of a 100% stock dividend, and stockholders subject to those laws are urged
to consult their tax advisors.
Recommendation of the Board of Directors
An affirmative majority of the votes entitled to be cast at the meeting is
required for approval of the proposed amendment to Article 4 of the Certificate
of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO ARTICLE 4 OF THE
CERTIFICATE OF INCORPORATION, WHICH IS DESIGNATED AS PROPOSAL 3 ON THE ENCLOSED
PROXY CARD.
4. PROPOSED AMENDMENT OF THE 1971 STOCK OPTION PLAN
Subject to the approval of the stockholders, the Board of Directors, on the
recommendation of its Personnel Committee, has amended the 1971 Stock Option
Plan. The proposed amendment increases from 100,000 to 200,000 the number of
shares upon which options can be granted to any participant in any calendar
year. The 100,000 share limit was added to the plan in 1994. This amendment was
made to comply with the requirement of Section 162(m) of the Internal Revenue
Code which requires that the plan provisions indicate a maximum annual option
grant per individual in order to qualify for treatment as tax-deductible
compensation. The proposed amendment does not increase the total number of
shares upon which stock options may be granted under the plan or make any other
changes to the plan.
Since 1990 the Company has utilized larger grants of stock options as long-term
incentives for executive officers and certain other high-level employees of the
Company in lieu of Stock Equivalent Unit Plan awards previously made to these
groups. If approved, the amendment will provide greater flexibility to the
Company in continuing to give increased weight to the long-term incentive
component of overall compensation. The Board of Directors is of the opinion that
the Stock Option Plan has helped the Company compete for, motivate and retain
high caliber directors, executives and other key employees, and that it is in
the best interests of the Company to amend the plan as proposed. In particular,
the amendment would permit future option grants to Mr. Zeien of a size
consistent with the existing policies and practices outlined in the Personnel
Committee Report on Executive Compensation on pages 0 through 0. This would not
otherwise be possible because of the special award to him described on page 00.
The material provisions of the plan and other information relating to the plan
are described below and in the New Plan Benefits table on page 00.
The plan is administered by the Personnel Committee which, in its discretion,
but subject to a limit of 100,000 shares upon which options may be granted to
any participant in any calendar year, may award options for terms up to ten
years to purchase the common stock of the Company to selected key salaried
employees of the Company and its subsidiaries, including those who may also
serve as officers or directors. The proposed amendment would increase this limit
to 200,000 shares upon which options may be granted to any participant in any
calendar year. At any given time, this group is expected to represent
approximately 3% of all employees. Options have been granted to employees at not
less than the fair market value of the Company's stock on the date of grant and
are exercisable as determined by the Committee, except that options must be
exercised within ten years from the date of grant. All outstanding options have
ten-year terms and are exercisable commencing one year from the date of grant,
provided the optionee is still an employee.
In 1992 the plan was amended to provide for an automatic annual option grant for
the purchase of 1,000 shares of the common stock of the Company to each
non-employee director of the Company at the fair market value of the stock on
the date of grant. Upon the election of directors at the 1995 Annual Meeting of
the stockholders, there will be nine non-employee members of the Board of
Directors.
The date of grant for options granted to non-employee directors is fixed under
the terms of the plan as the second business day after the annual meeting of
stockholders. Options granted to non-employee directors are similar to those
available to key salaried employees except that the timing of option grants, the
number of shares granted, the option price of each grant and certain other
provisions are fixed by the plan. In contrast, the timing and terms of option
grants made to employees are subject to the discretion of the Personnel
Committee. The Committee may designate options granted to employees (including
officers and employee directors) as incentive stock options ("ISOs"), a type of
option authorized under the 1981 amendments to the Internal Revenue Code.
Options not so designated are granted as "non-ISOs". Options granted to
non-employee directors are designated as non-ISOs.
Options generally remain exercisable for a limited period following the
termination of employment of an employee optionee, including an employee who may
be an officer or a director. The post-retirement exercise period of a non-ISO is
three years for options granted after 1993 (two years for options granted prior
to 1994), unless a shorter period is specified by the Personnel Committee. The
comparable period for an ISO is three months. If the termination of employment
occurs within one year after a change in control, any options held by the
employee optionee that were not otherwise exercisable when employment ceased
will become immediately exercisable. Non-employee director options remain
exercisable following termination of Board membership on a basis generally
comparable to non-ISOs granted to employees and similarly become immediately
exercisable upon termination of Board membership within one year after a change
in control.
Shares delivered on the exercise of an option may be either authorized and
unissued shares or treasury shares. Payment on exercise is made in cash or, at
the discretion of the Secretary of the Personnel Committee, in shares of the
Company's common stock or partially in cash and partially in shares. An employee
who is not an officer or a director of the Company may pay the purchase price in
cash installments over a five-year period at a rate no less than the minimum
rate of interest provided under the Internal Revenue Code for such compensation
related loans. On approval by the Board of Directors, options may provide for a
loan, guarantee or other assistance by the Company. No such loan, guarantee or
other assistance has been provided to any officer or employee director while
serving in that capacity or to any non-employee director.
The Board may terminate the plan or may amend it or any outstanding option, but
stockholder approval is required to increase the number of shares available
under the plan, to increase the maximum annual grant per participant, to reduce
the price at which options may be granted to below 95% of the fair market value
on the date of grant, to reduce the option price of outstanding options, to
extend the term of an option beyond ten years, to extend the period during which
options may be granted or to amend those provisions of the plan relating to
options granted to non-employee directors. No amendment may adversely affect the
rights of any optionee under an outstanding option or, after a change in
control, may deprive an optionee of a right which became operative upon a change
in control. In the event of changes resulting from stock dividends, stock splits
or exchange rights, the number of shares subject to the plan may be adjusted by
the Board.
Federal Income Tax Consequences Upon Issuance and Exercise of Options
After consultation with tax counsel, the Company is of the opinion that:
An optionee does not realize any taxable income under the Internal Revenue Code
upon the grant of an option.
The exercise of a non-ISO results in immediate taxable income to the optionee in
an amount equal to the difference between the option price and the market price
on the date of exercise. This same amount is deductible by the Company as
compensation, provided income taxes are withheld from or deposited by the
optionee.
The exercise of an ISO results in no tax consequences either to the optionee or
the Company. Although the difference between the option price and the market
price on the date of exercise is not taxable to the optionee upon exercise, it
is a tax preference item, which, under certain circumstances, may give rise to
an alternative minimum tax liability on the part of the optionee.
The sale within one year of stock acquired by the exercise of an ISO will be
deductible by the Company as compensation in an amount equal to the difference
between the option price and the lesser of the market price on the date of
exercise or the net proceeds of the sale. The sale of stock acquired through the
exercise of an ISO held for more than one year after exercise does not result in
such a deduction for the Company.
As options expire unexercised they again become available for grant. On March 1,
1995, options on 0,000,000 shares, granted at option prices ranging from $0.00
to $00.00 per share after adjustment for stock splits (a weighted average price
of $00.00 per share), will expire at various dates up to February 20, 2005.
The closing price of the common stock of the Company on March 1, 1995, as quoted
on a composite basis was $00.000.
NEW PLAN BENEFITS
Other than stock option grants to outside directors, the benefits or amounts
that will be received or allocated in the future under the Stock Option Plan are
not determinable. The table below indicates the number of shares granted under
the plan for the year 1994.
Stock Option Plan
Number of
Name and Position Shares Granted
- ----------------- ----------------
Alfred M. Zeien
Chairman and Chief Executive Officer 100,000
Joseph E. Mullaney
Vice Chairman of the Board 25,000
Michael C. Hawley
Executive Vice President 32,000
Jacques Lagarde
Executive Vice President 32,000
Robert J. Murray
Executive Vice President 34,000
All current executive officers as a group 264,500
All non-executive outside directors as a
group 9,000
All non-executive officer employees as a
group 1,373,200
* See also Stock Options Granted and Aggregated Stock Option Exercises tables on
pages 00 and 00 and the Personnel Committee Report on pages 00 through 00.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE 1971 STOCK
OPTION PLAN, WHICH IS DESIGNATED AS PROPOSAL NO. 4 ON THE ENCLOSED PROXY.
5. APPOINTMENT OF AUDITORS
On the recommendation of the Audit Committee of the Board of Directors, the
Board has appointed KPMG Peat Marwick LLP as auditors for the year 1995, subject
to approval by the stockholders. KPMG Peat Marwick LLP has audited the books of
the Company for many years.
Representatives of KPMG Peat Marwick LLP will attend the 1995 Annual Meeting of
the stockholders, where they will have the opportunity to make a statement if
they wish to do so and will be available to answer appropriate questions from
the stockholders. Should the appointment of auditors be disapproved by the
stockholders, the Board of Directors will review its selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE APPOINTMENT OF
AUDITORS, WHICH IS DESIGNATED AS PROPOSAL NO. 5 ON THE ENCLOSED PROXY.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, solicitations may also be made by personal interview,
telegram and telephone. The Company has retained Georgeson & Company Inc., New
York, New York, to assist in the solicitation of proxies using the means
referred to above at a cost of $00,000 plus reasonable expenses. Arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to their principals, and the
Company will reimburse them for their expenses in so doing. In addition,
directors, officers and other regular employees of the Company may request the
return of proxies by telephone or telegram, or in person.
VOTING OF PROXIES
Under the by-laws of the Company, as permitted by Delaware law, the required
quorum for the meeting is 33 1/3% in interest of the shares outstanding and
entitled to vote at the meeting, a plurality of the votes properly cast for the
election of directors by the stockholders attending the meeting in person or by
proxy will elect directors to office and an affirmative majority of the votes
entitled to be cast at the meeting is required for approval of proposal 3 and an
affirmative majority of the votes properly cast at the meeting in person or by
proxy is required for approval of proposals 4 and 5.
When your proxy is returned properly signed, the shares represented will be
voted in accordance with your directions. Where specific choices are not
indicated, proxies will be voted for proposals 1 through 5. If a proxy or ballot
indicates that a stockholder, broker, or other nominee abstains from voting or
that shares are not to be voted on a particular proposal, the shares will not be
counted as having been voted on that proposal although such shares will be
counted as in attendance at the meeting for purposes of a quorum. Abstentions
will not be reflected in the final tally of the votes cast with regard to
whether the Election of Directors (Proposals 1 and 2) or the Appointment of
Auditors (Proposal 5) are approved under Delaware law and the by-laws of the
Company. However, abstentions and broker non votes will have the effect of a
negative vote in determining whether the proposed amendment to the Certificate
of Incorporation (Proposal 3) is approved under Delaware law and the by-laws of
the Company, because that proposal requires an affirmative majority of the votes
entitled to be cast at the meeting for approval. Abstentions will also have the
effect of a negative vote in determining whether the proposed amendment to the
1971 Stock Option (Proposal 4) has been approved by the shareholders for
purposes of Rule 16 b-3 of the Securities and Exchange Commission, because that
Rule requires approval by the affirmative vote of a majority of the shares
present or represented by proxy at the meeting in order for transactions under
such plans to be exempt from its application. For purposes of Rule 16 b-3,
broker non votes, although counted for quorum purposes, will have no other
effect.
CONFIDENTIAL VOTING
The Board of Directors has determined that the Company's confidential voting
policy employed for the last several years will apply to the Corporation's
annual meeting. The Company's policy requires that proxies and ballots be kept
confidential from officers, directors and employees of the Company and from
third parties. Certain outside agents, such as those serving as proxy
solicitors, who have agreed to comply with this policy, but not Company
employees, directors or officers, may be permitted access to proxies and ballots
to facilitate their participation in soliciting proxies and conducting the
meeting. The policy will not prevent Company officers, directors or other
employees or representatives from determining which stockholders have not voted
so that they could be urged to vote. The policy will not apply in the event of a
proxy contest or other solicitation based on an opposition proxy statement.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 1994, is being
mailed with this proxy statement.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered for inclusion in the proxy
statement for presentation at the 1996 Annual Meeting must be received by the
Company in advance of November 18, 1995.
In general, stockholder proposals intended to be presented at an annual meeting,
including proposals for the nomination of directors, must be received by the
Company 60 days in advance of the meeting, or prior to February 19, 1996, to be
considered for the 1996 Annual Meeting. The requirements for submitting such
proposals are set forth in the Company's by-laws.
OTHER MATTERS
Except for matters described in this proxy statement, the Board of Directors
does not know of any matter that will or may be presented at the meeting. With
respect to any such proposals not now known to the Board of Directors, the
persons named as proxies intend to vote the shares they represent in accordance
with their judgment.
<PAGE>
THE GILLETTE COMPANY PRUDENTIAL TOWER BUILDING
BOSTON, MA 02199
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned (a) revokes all prior proxies and appoints and authorizes Jill
C. Richardson and Robert E. DiCenso and each of them with power of substitution,
as the Proxy Committee, to vote the stock of the undersigned at the 1995 Annual
Meeting of the stockholders of The Gillette Company on April 20, 1995, and any
adjournment thereof, as specified on the reverse side of this card on proposals
1 through 5 and in their discretion on all other matters coming before the
meeting and, if applicable, (b) directs, as indicated on the reverse, the voting
of the shares allocated to the account(s) of the undersigned at the 1995 Annual
Meeting and at any adjournment thereof. Plan shares for which no directions are
received, and ESOP and GESOP shares which have not been allocated to participant
accounts, will be voted on each issue in proportion to those shares allocated to
participant accounts of the same plan for which voting instructions on that
issue have been received. Each trustee is authorized to vote in its judgment or
to empower the Proxy Committee to vote in accordance with the Proxy Committee's
judgment on such other business as may properly come before the meeting and any
adjournment thereof.
(Important - To be signed and dated on reverse side) SEE REVERSE SIDE
<PAGE>
This proxy will be voted as directed by the stockholder, but if no choice is
specified, it will be voted FOR proposals 1 through 5.
<TABLE>
The Board of Directors recommends a vote FOR proposals 1 through 5.
<CAPTION>
1. Election of directors for 3-year terms
W.H. Gantz, R.R. Pivirotto, J.M. Steta, A.M. Zeien FOR AGAINST ABSTAIN
<S> <C> <S> <C> <C> <C>
For All Nominees Withhold from all Nominees 3. Approval of amendment to
Certificate of Incorporation ____ ____ ____
----- -----
For, except withhold vote from the following nominee(s). 4. Amendment of the 1971
Stock Option Plan ____ ____ ____
---------------------------------
5. Approval of the appointment
of KMPG Peat Marwick LLP as
2. Election of M.C. Hawley as a director for a 2-year term: Auditors. ____ ____ ____
For Withhold
------ -----
</TABLE>
THE GILLETTE COMPANY
1971 STOCK OPTION PLAN, AS AMENDED
l. PURPOSE. The purpose of the 1971 Stock Option Plan (hereinafter
referred to as the "Plan") is to provide a special incentive to selected key
salaried employees of The Gillette Company (hereinafter referred to as the
"Company") and of its subsidiaries and to the non-employee members of the Board
of Directors of the Company to promote the Company's business. The Plan is
designed to accomplish this purpose by offering such employees and non-employee
directors a favorable opportunity to purchase shares of the common stock of the
Company so that they will share in the success of the Company's business. For
purposes of the Plan a subsidiary is any corporation in which the Company owns,
directly or indirectly, stock possessing fifty percent or more of the total
combined voting power of all classes of stock or over which the Company has
effective operating control.
2. ADMINISTRATION. The Plan shall be administered by the Personnel
Committee heretofore established by the Board of Directors of the Company, no
member of which shall be an employee of the Company or of any subsidiary. The
Committee shall have authority, not inconsistently with the Plan, (a) to
determine which of the key salaried employees of the Company and its
subsidiaries shall be granted options; (b) to determine whether the options
granted to any employees shall be incentive stock options within the meaning of
the Internal Revenue Code or non-qualified stock options or both; provided,
however, that with respect to options granted after December 31, 1986, in no
event shall the fair market value of the stock (determined at the time of grant
of the options) subject to incentive stock options within the meaning of the
Internal Revenue Code which first became exercisable by any employee in any
calendar year exceed $100,000 (and, to the extent such fair market value exceeds
$100,000, the later granted options shall be treated as non-qualified stock
options); (c) to determine the time or times when options shall be granted to
employees and the number of shares of common stock to be subject to each such
option provided, however, subject to adjustment as provided in Section 9 of the
Plan, in no event shall any employee be granted options covering more than
200,000 shares of common stock in any calendar year; (d) with respect to options
granted to employees, to determine the option price of the shares subject to
each option and the method of payment of such price; (e) with respect to options
granted to employees, to determine the time or times when each option becomes
exercisable and the duration of the exercise period; (f) to prescribe the form
or forms of the instruments evidencing any options granted under the Plan and of
any other instruments required under the Plan and to change such forms from time
to time; (g) to make all determinations as to the terms of any sales of common
stock of the Company to employees under Section 8; (h) to adopt, amend and
rescind rules and regulations for the administration of the Plan and the options
and for its own acts and proceedings; and (i) to decide all questions and settle
all controversies and disputes which may arise in connection with the Plan. All
decisions, determinations and interpretations of the Committee shall be binding
on all parties concerned.
3. PARTICIPANTS. The participants in the Plan shall be such key
salaried employees of the Company or of any of its subsidiaries, whether or not
also officers or directors, as may be selected from time to time by the
Committee in its discretion, subject to the provisions of Section 8. In
addition, each non-employee director shall be a participant in the Plan. In any
grant of options after the initial grant, or any sale made under Section 8 after
the initial sale, employees who were previously granted options or sold shares
under the Plan may be included or excluded.
4. LIMITATIONS. No option shall be granted under the Plan and no sale
shall be made under Section 8 after April 15, 1999, but options theretofore
granted may extend beyond that date. Subject to adjustment as provided in
Section 9 of the Plan, the number of shares of common stock of the Company which
may be delivered under the Plan shall not exceed 28,200,000 in the aggregate. To
the extent that any option granted under the Plan shall expire or terminate
unexercised or for any reason become unexercisable as to any shares subject
thereto, such shares shall thereafter be available for further grants under the
Plan, within the limit specified above.
5. STOCK TO BE DELIVERED. Stock to be delivered under the Plan may
constitute an original issue of authorized stock or may consist of previously
issued stock acquired by the Company, as shall be determined by the Board of
Directors. The Board of Directors and the proper officers of the Company shall
take any appropriate action required for such delivery.
6. TERMS AND CONDITIONS OF OPTIONS GRANTED TO EMPLOYEES. All options
granted to either non-employee directors or employees shall be subject to
Section 6 Paragraph (c) Subparagraphs (4) and (5). All options granted to
employees under the Plan shall be subject to all the following additional terms
and conditions (except as provided in Sections 7 and 8 below) and to such other
terms and conditions as the Committee shall determine to be appropriate to
accomplish the purposes of the Plan:
(a) Option Price. The option price under each option shall be
determined by the Committee and shall be not less than l00 percent of
the fair market value per share at the time the option is granted. If
the Committee so directs, an option may provide that if an employee
Participant who was an employee participant at the time of the grant
of the option and who is not an officer or director of the Company at
the time of any exercise of the option, he shall not be required to
make payment in cash or equivalent at that time for the shares
acquired on such exercise, but may at his election pay the purchase
price for such shares by making a payment in cash or equivalent of not
less than five percent of such price and entering into an agreement,
in a form prescribed by the Committee, providing for payment of the
balance of such price, with interest at a specified rate, but not less
than four percent, over a period not to exceed five years and
containing such other provisions as the Committee in its discretion
determines. In addition, if the Committee so directs, an option may
provide for a guarantee by the Company or repayment of amounts
borrowed by the Participant in order to exercise the option, provided
he is not an officer or director of the Company at the time of such
borrowing, or may provide that the Company may make a loan, guarantee,
or otherwise provide assistance as the Committee deems appropriate to
enable the Participant to exercise the option, provided that no such
loan, guarantee, or other assistance shall be made without approval of
the Board of Directors as required by law.
(b) Period of Options. The period of an option shall not exceed ten
years from the date of grant.
(c) Exercise of Option.
(1) Each option held by a participant other than a
non-employee director shall be made exercisable at such time or times,
whether or not in installments, as the Committee shall prescribe at
the time the option is granted. In the case of an option held by a
participant other than a non-employee director which is not
immediately exercisable in full, the Committee may at any time
accelerate the time at which all or any part of the option may be
exercised.
(2) Options intended to be incentive stock options, as defined
in the Internal Revenue Code, shall contain and be subject to such
provisions relating to the exercise and other matters as are required
of incentive stock options under the applicable provisions of the
Internal Revenue Code and Treasury Regulations, as from time to time
in effect, and the Secretary of the Committee shall inform optionees
of such provisions.
(3) Each incentive stock option within the meaning of the
Internal Revenue Code granted on or before December 31, 1986 shall
contain and be subject to the following provision:
This option shall not be exercisable while there is
outstanding (within the meaning of Section 422A(c)7 of the Internal
Revenue Code of l954, as amended) any incentive stock option (as that
term is defined in said Code) which was granted to the Participant
before the granting of this option to purchase stock in his employer
corporation (whether The Gillette Company or a parent or subsidiary
corporation thereof), or in a corporation which at the time of the
granting of this option is a parent or subsidiary corporation of the
employer corporation, or in a predecessor corporation of any such
corporation.
Each incentive stock option within the meaning of the Internal
Revenue Code granted after December 31, 1986 shall not be subject to
the above provision.
(4) Payment for Delivery of Shares. Upon exercise of any
option, payment in full in the form of cash or a certified bank, or
cashier's check or, with the approval of the Secretary of the
Committee, in whole or part Common Stock of the Company at fair market
value, which for this purpose shall be the closing price on the
business day preceding the date of exercise, shall be made at the time
of such exercise for all shares then being purchased thereunder,
except in the case of an exercise to which the provisions of the
second sentence of subsection (a) above are applicable.
The purchase price payable by any person, other than a
non-employee director, who is not a citizen or resident of the United
States of America and who is an employee of a foreign subsidiary at
the time payment is due shall, if the Committee so directs, be paid to
such subsidiary in the currency of the country in which such
subsidiary is located, computed at such exchange rate as the Committee
may direct. The amount of each such payment may, in the discretion of
the Committee, be accounted for on the books of such subsidiary as a
contribution to its capital by the Company. The Company shall not be
obligated to deliver any shares unless and until, in the opinion of
the Company's counsel, all applicable federal and state laws and
regulations have been complied with, nor, in the event the outstanding
common stock is at the time listed upon any stock exchange, unless and
until the shares to be delivered have been listed or authorized to be
added to the list upon official notice of issuance upon such exchange,
nor unless or until all other legal matters in connection with the
issuance and delivery of shares have been approved by the Company's
counsel. Without limiting the generality of the foregoing, the Company
may require from the Participant such investment representation or
such agreement, if any, as counsel for the Company may consider
necessary in order to comply with the Securities Act of 1933 and may
require that the Participant agree that any sale of the shares will be
made only on the New York Stock Exchange or in such other manner as is
permitted by the Committee and that he will notify the Company when he
makes any disposition of the shares whether by sale, gift, or
otherwise. The Company shall use its best efforts to effect any such
compliance and listing, and the Participant shall take any action
reasonably requested by the Company in such connection. A Participant
shall have the rights of a shareholder only as to shares actually
acquired by him under the Plan.
(5) Notwithstanding any other provision of this Plan, if
within one year of a Change in Control, as hereinafter defined, the
employment of an employee Participant is terminated for any reason
other than willful misconduct or the service as a director of a
non-employee director is terminated, all his outstanding options
which are not yet exercisable shall become immediately exercisable
and all the rights and benefits relating to such options including,
but not limited to, periods during which such options may be
exercised shall become fixed and not subject to change or revocation
by the Company; provided, that in the case of any incentive stock
option (the "second option") which is not exercisable by reason of a
previously granted incentive stock option which is still
"outstanding" within the meaning of section 422A(c)(7) of the
Internal Revenue Code (as in effect before the amendments made by the
Tax Reform Act of 1986), the second option shall not be exercisable
until the earlier outstanding option is exercised in full or expires
by reason of the lapse of time. For purposes of the foregoing, a
Change in Control shall mean the happening of any of the following
events:
(A) Any person within the meaning of Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the
"1934 Act"), other than the Company or any of its
subsidiaries, has become the beneficial owner, within the
meaning of Rule 13d-3 under the 1934 Act, of 20% or more
of the combined voting securities of the Company;
(B) A tender offer or exchange offer, other than an
offer by the Company, pursuant to which shares of the
Company's common stock have been purchased;
(C) The stockholders or directors of the Company
have approved an agreement to merge or consolidate with or
into another corporation and the Company is not the
surviving corporation or an agreement to sell or otherwise
dispose of all or substantially all of the Company's
assets (including a plan of liquidation); or
(D) During any period of two consecutive years,
individuals who at the beginning of such period
constituted the board of directors cease for any reason to
constitute at least a majority thereof. For this purpose,
new directors who were elected, or nominated (or approved
for nomination in the case of nomination by a Committee of
the Board) for election by shareholders of the Company, by
at least two thirds of the directors then still in office
who were, or are deemed to have been directors at the
beginning of the period, shall be deemed to have been
directors at the beginning of the period.
(d) Nontransferability of Options. No option may be
transferred by the Participant otherwise than by will or
by the laws of descent and distribution, and during the
Participant's lifetime the option may be exercised only by
him.
(e) Nontransferability of Shares. If the Committee so
determines, an option granted to an employee may provide
that, without prior consent of the Committee, shares
acquired by exercise of the option shall not be
transferred, sold, pledged or otherwise disposed of within
a period not to exceed one year from the date the shares
are transferred to the Participant upon his exercise of
the option or prior to the satisfaction of all
indebtedness with respect thereto, if later.
(f) Termination of Employment. If the employment of a
Participant terminates for any reason other than his
death, he may, unless discharged for cause which in the
opinion of the Committee casts such discredit on him as to
justify termination of his option, thereafter exercise his
option as provided below. (i) If such termination of
employment is voluntary on the part of the Participant, he
may exercise his option only within seven days after the
date of termination of his employment (unless a longer
period not in excess of three months is allowed by the
Committee). (ii) If such termination of employment is
involuntary on the part of the Participant, he may
exercise his option only within three months after the
date of termination of his employment. (iii)
Notwithstanding the above, if a Participant retires under
The Gillette Company Retirement Plan or the retirement
plan of a subsidiary, or if a Participant terminates his
employment with a subsidiary that does not maintain a
retirement plan and he would have been eligible to retire
under the terms of The Gillette Company Retirement Plan
had he been a Participant in that Plan, he may exercise
any option granted prior to January 1, 1994, other than an
incentive stock option within the meaning of the Internal
Revenue Code, within a period not to exceed two years
after his retirement date, any option granted after
December 31, 1993 other than an incentive stock option
within the meaning of the Internal Revenue Code within a
period not to exceed three years after his retirement
date, and any incentive stock option within a period not
to exceed three months after his retirement date. The
Committee may, in its sole discretion, terminate any such
option at or at any time after the time when that option
would otherwise have terminated as a result of the
termination of a Participant's employment, if it deems
such action to be in the best interests of the Company. In
no event, however, may any Participant exercise any option
which was not exercisable on the date he ceased to be an
employee, or after the expiration of the option period.
For purposes of this subsection (g) a Participant's
employment shall not be considered terminated in the case
of a sick leave or other bona fide leave of absence
approved by the Company or a subsidiary in conformance
with the applicable provisions of the Internal Revenue
Code or Treasury Regulations, or in the case of a transfer
to the employment of a subsidiary or to the employment of
the Company.
(g) Death. If a Participant dies at a time when he is
entitled to exercise an option, then at any time or times
within one year after his death (or with respect to
employee participants such further period as the Committee
may allow) such option may be exercised, as to all or any
of the shares which the Participant was entitled to
purchase immediately prior to his death, by his executor
or administrator or the person or persons to whom the
option is transferred by will or the applicable laws of
descent and distribution, and except as so exercised such
option shall expire at the end of such period. In no
event, however, may any option be exercised after the
expiration of the option period or, in the case of an
incentive stock option within the meaning of the Internal
Revenue Code after the expiration of any period of
exercise for such options specified in the Internal
Revenue Code or the regulations thereunder.
7. REPLACEMENT OPTIONS. The Company may grant options under the Plan
on terms differing from those provided for in Section 6 where such options are
granted in substitution for options held by employees of other corporations who
concurrently become employees of the Company or a subsidiary as the result of a
merger or consolidation of the employing corporation with the Company or
subsidiary, or the acquisition by the Company or a subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
options be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.
Notwithstanding anything contained in this Plan, the Committee shall
have authority, with respect to any options granted or to be granted to
employees or outstanding installment Purchase Agreements of participants other
than non-employee directors under this Plan, to extend the time for payment of
any and all installments, to modify the amount of any installment, to amend
outstanding option certificates to provide for installment payments or to take
any other action which it may, in its discretion, deem necessary, provided that:
(1) interest on the unpaid balance under any outstanding Purchase Agreement at
the rate of at least four percent (4%) per annum shall continue to be due and
payable quarterly during the period of any deferral of payment; (2) all such
installment Purchase Agreements and unexercised options, shall at all times be
in accordance with the applicable provisions of Regulation G of the Board of
Governors of the Federal Reserve System, as from time to time amended, and with
all other applicable legal requirements; (3) no such action by the Committee
shall jeopardize the status of stock options as incentive stock options under
the Internal Revenue Code.
8. FOREIGN EMPLOYEES. The Company may grant options under the Plan on
terms differing from those provided for in Section 6 where such options are
granted to employee Participants who are not citizens or residents of the United
States of America if the Committee determines that such different terms are
appropriate in view of the circumstances of such Participants, provided,
however, that such options shall not be inconsistent with the provisions of
Section 6(a) or Section 6(b).
In addition, if the Committee determines that options are
inappropriate for any key salaried employees who are not citizens or residents
of the United States of America, whether because of the tax laws of the foreign
countries in which such employees are residents or for other reasons, the Board
of Directors may authorize special arrangements for the sale of shares of common
stock of the Company to such employees, whether by the Company, or a subsidiary,
or other person. Such arrangements may, if approved by the Board of Directors,
include the establishment of a trust by the foreign subsidiary which is the
employer of the key salaried employees, designated by such subsidiary, to whom
the shares are to be sold. Such arrangements shall provide for a purchase price
of not less than the fair market value of the stock at the date of sale and a
maximum annual grant per participant of options to purchase 200,000 shares of
common stock and may provide that the purchase price be paid over a period of
not more than ten years, with or without interest, and that such employees have
the right, with or without payment of a specified premium, to require the seller
of the shares to repurchase such shares at the same price, subject to specified
conditions. Such arrangements may also include provisions deemed appropriate as
to acceleration or prepayment of the balance of the purchase price, restrictions
on the transfer of the shares by the employee, representations or agreements by
the employee about his investment purposes and other miscellaneous matters.
9. CHANGES IN STOCK. In the event of a stock dividend, split-up or
combinations of shares, recapitalization or merger in which the Company is the
surviving corporation, or other similar capital change, the number and kind of
shares of stock or securities of the Company to be subject to the Plan and to
options then outstanding or to be granted thereunder, the maximum number of
shares or securities which may be issued or sold under the Plan, the maximum
annual grant for each participant, the automatic annual grant for each
non-employee director, the option price and other relevant provisions shall be
appropriately adjusted by the Board of Directors of the Company, whose
determination shall be binding on all persons. In the event of a consolidation
or a merger in which the Company is not the surviving corporation or which
results in the acquisition of substantially all the Company's outstanding stock
by a single person or entity or by a group of persons and/or entities acting in
concert, or in the event of complete liquidation of the Company, all outstanding
options shall thereupon terminate, provided that (i) at least twenty days prior
to the effective date of any such consolidation or merger, the Board of
Directors shall with respect to employee participants either (a) make all
outstanding options immediately exercisable, or (b) arrange to have the
surviving corporation grant replacement options to the employee Participants and
(ii) in the case of option grants to non-employee directors, all outstanding
options not otherwise exercisable shall become exercisable on the twentieth day
prior to the effective date of the merger.
l0. EMPLOYMENT RIGHTS. The adoption of the Plan does not confer upon
any employee of the Company or a subsidiary any right to continued employment
with the Company or a subsidiary, as the case may be, nor does it interfere in
any way with the right of the Company or a subsidiary to terminate the
employment of any of its employees at any time.
ll. THE COMMITTEE MAY AT ANY TIME DISCONTINUE GRANTING OPTIONS UNDER
THE PLAN. The Board of Directors of the Company or the Personnel Committee of
the Board of Directors if and to the extent authorized, may at any time or times
amend the Plan or amend any outstanding option or options or arrangements
established under Section 8 for the purpose of satisfying the requirements of
any changes in applicable laws or regulations or for any other purpose which may
at the time be permitted by law, provided that (except to the extent required or
permitted under Section 9 and, with respect to clauses (b) and (f) below, except
to the extent required or permitted under Section 7) no such amendment shall,
without the approval of the stockholders of the Company, (a) increase the
maximum number of shares available under the Plan or the maximum annual grant
per participant other than as permitted under Section 9, (b) reduce the minimum
option price of options thereafter to be granted below the price provided for in
Section 6(a), except that the Plan may be amended to provide that the minimum
option price of non-qualified stock options thereafter to be granted to
employees may be not less than 95% of the fair market value at the date of grant
if the Board determines that such amendment is necessary for tax reasons to
carry out the objectives of the Plan, (c) reduce the price at which shares of
common stock of the Company may be sold under Section 8 below the price provided
for in Section 8, (d) reduce the option price of outstanding options, (e) extend
the time within which options may be granted, (f) extend the period of an
outstanding option beyond ten years from the date of grant, (g) amend the
provisions of Section 12 with respect to the terms and conditions of options to
non-employee directors and further provided no such amendment shall adversely
affect the rights of any Participant (without his consent) under any option
theretofore granted or other contractual arrangements theretofore entered into
or after a Change in Control deprive any Participant of any right or benefit
which became operative in the event of a Change in Control. Notwithstanding the
above, in no event may the provisions of Section 12 be amended more than once
every six months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act, or the rules thereunder.
12. TERMS AND CONDITIONS OF OPTIONS GRANTED TO NON-EMPLOYEE
DIRECTORS. Effective at the close of business on the second business day after
the 1992 Annual Meeting of Shareholders of the Company and on the second
business day after each Annual Meeting thereafter, each non-employee director
shall be automatically granted a non-incentive stock option to purchase 1,000
shares of the common stock of the Company upon the following terms and
conditions:
(a) Option Price. The option price under each option shall be the
fair market value on the date of grant, which for this purpose is
defined as the average between the high and the low price of the
common stock on the NYSE Composite Transaction listing.
(b) Option Period. The period of an option shall be ten years from
the date of grant.
(c) Option Exercise. Each option shall become exercisable on the
first anniversary of the date of grant except as otherwise provided
under Section 6 Paragraph c Subparagraph 5 of this Plan. Any option,
otherwise exercisable, may be exercised during the period a
non-employee director remains a member of the Board of Directors and
for a period of three months following the date a non-employee
director ceases to be a director except in the case where the
non-employee director is or will be eligible to receive benefits
under the Company's Retirement Plan for Directors when membership on
the Board of Directors ends and where the non-employee director
continues to be so eligible as of the date of exercise, that
non-employee director's options shall be exercisable for a period of
two years with respect to options granted before 1994 and three years
for options granted after 1993 from the date membership on the Board
of Directors ceases.
If a non-employee director dies at the time when the non-employee
director is entitled to exercise an option, then at any time or times
within one year after that non-employee director's death that
non-employee director's option may be exercised in accordance with
the provisions of Section 6 Paragraph (g) of the Plan. In no event
shall any option be exercised after the expiration of the option
period.
(d) Payment for Delivery of Shares. Payment for the shares shall be
made in accordance with the provisions of Section 6 Paragraph c
Subparagraph 4 of this Plan.
(e) Nontransferability of Options. No option may be transferred by a
non-employee director otherwise than by will or by the laws of
descent and distribution, and during the non-employee director's
lifetime the option may be exercised only by the non-employee
director.
APRIL 1995
