<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN A PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The Gillette Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0- 11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
[Logo]
World-Class Brands, Products, People Prudential Tower Building
Boston, MA 02199
NOTICE OF ANNUAL MEETING OF THE STOCKHOLDERS
The 1997 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 17, 1997, at 10:00 a.m. for
the following purposes:
1. To elect four directors for terms to expire at the 2000 Annual
Meeting of the stockholders.
2. To vote on the proposed amendment of the 1971 Stock Option Plan,
as described in the accompanying proxy statement.
3. To vote on the proposed amendment of the Stock Equivalent Unit
Plan, as described in the accompanying proxy statement.
4. To vote on the approval of the appointment of auditors for the
year 1997.
5. 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 February 28,
1997, 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 would like to attend the meeting and your shares are held by a
broker, bank or other nominee, you must bring to the meeting a recent
brokerage statement or a letter from the nominee confirming your
beneficial ownership of the shares. You must also bring a form of
personal identification. In order to vote your shares at the meeting,
you must obtain from the nominee 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 13, 1997
<PAGE>
[Logo]
World-Class Brands, Products, People Prudential Tower Building
Boston, MA 02199
March 13, 1997
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors for the 1997 Annual
Meeting of the stockholders of the Company on April 17, 1997. The
Notice of Annual Meeting, this proxy statement and the accompanying
proxy are being mailed to stockholders on or about March 13, 1997. 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, c/o Boston EquiServe, P.O. Box 9374, Boston,
Massachusetts 02205-9945 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 10, 1997, 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 2000 ANNUAL
MEETING OF THE STOCKHOLDERS
At the meeting, four directors, Michael C. Hawley, Herbert H. Jacobi,
Henry R. Kravis and Alexander B. Trowbridge, are to be elected to serve
for terms that expire at the 2000 Annual Meeting of the stockholders.
Joseph F. Turley, whose term as a director will expire at the 1997
Annual Meeting, is not standing for reelection, having reached the
mandatory retirement age for directors. Information regarding the
Board's four nominees to this class is set forth at page 2. Information
regarding the eight directors whose terms expire in 1998 and 1999 is
set forth at pages 3 and 4.
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 2000 ANNUAL MEETING OF THE STOCKHOLDERS,
WHICH IS DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY.
<PAGE>
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR THREE-YEAR TERMS TO EXPIRE AT THE 2000 ANNUAL MEETING OF THE
STOCKHOLDERS
- -------------- MICHAEL C. HAWLEY Director since 1995
Photo of Mr. Hawley, 59 years of age, is President and Chief Operating
Michael C. Officer. He joined the Company in 1961 and was named Business
Hawley Development Manager for Gillette International in the United
Kingdom in 1970. He served as General Manager of Gillette
Colombia from 1972 until 1976, when he became Group General
- -------------- Manager of the Asia-Pacific Group, based in Sydney, Australia.
In 1985 he was elected a Corporate Vice President responsible
for all blade, razor and writing instrument engineering, as
well as technical support for Gillette factories worldwide. He
served as President of Oral-B Laboratories from June 1989
until his election as Executive Vice President, International
Group in November 1993. In April 1995 he was elected President
and Chief Operating Officer. Mr. Hawley is a director of the
John Hancock Mutual Life Insurance Company and Texaco, Inc.
- -------------- HERBERT H. JACOBI Director since 1981
Photo of Mr. Jacobi, 62 years of age, has been Chairman of the Managing
Herbert H. Partners of Trinkaus & Burkhardt KGaA, a German bank, since
Jacobi 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 Atlanta AG; Braun AG,
a Gillette subsidiary; Midland Bank plc and WILO-Salmson AG. He
is also a member of the Partnership Council of Freshfields, a
U.K. law firm, and Group General Manager of HSBC Holdings plc.
He is President of the North Rhine-Westfalia Stock Exchange in
Duesseldorf and a director of Deutsche Boerse AG in Frankfurt.
- -------------- HENRY R. KRAVIS Director since 1996
Photo of Mr. Kravis, 53 years of age, is a General Partner of Kohlberg
Henry R. Kravis Roberts & Co., L.P. and KKR Associates, L.P. He is a
Kravis director of AutoZone, Inc.; Borden, Inc.; Bruno's Inc.;
Flagstar Companies, Inc.; Flagstar Corporation; IDEX
Corporation; K-III Communications Corp.; Owen-Illinois, Inc.;
- -------------- Owens-Illinois Group, Inc.; Safeway Inc.; Sotheby's; Union Texas
Petroleum Holdings, Inc. and World Color Press. Inc.
- -------------- ALEXANDER B. TROWBRIDGE Director since 1990
Photo of Mr. Trowbridge, 67 years of age, is President of Trowbridge
Alexander B. Partners Inc., a management consulting firm. He was President
Trowbridge of the 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 Life Insurance
Company; The Rouse Company; The Sun Company, Inc.; E.M.
Warburg Pincus Counsellors Funds and WMX Technologies Inc. He
is a charter trustee of Phillips Academy, Andover.
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRE AT THE 1998 ANNUAL MEETING OF THE STOCKHOLDERS
- -------------- WILBUR H. GANTZ Director since 1992
Photo of Mr. Gantz, 59 years of age, is President, Chief Executive
Wilbur H. Officer and a director of PathoGenesis Corporation, a
Gantz 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, 66 years of age, is President of Richard R.
Richard R. Pivirotto Co., Inc., a management consulting firm. He served
Pivirotto 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, 70 years of age, is of counsel to the law firm of
Juan M. Santamarina y Steta, Mexico City, which is engaged in a
Steta 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, SKF de
Mexico 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, 67 years of age, is Chairman of the Board and Chief
Alfred M. Executive Officer. He joined the Company in 1968 and served as
Zeien 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 and Raytheon Company.
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRE AT THE 1999 ANNUAL MEETING OF THE STOCKHOLDERS
- -------------- WARREN E. BUFFETT Director since 1989
Photo of Mr. Buffett, 66 years of age, is Chairman of the Board and
Warren E. Chief Executive Officer of Berkshire Hathaway Inc., a company
Buffett 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 The Coca-Cola Company, Salomon Inc. and The Washington Post
Company.
- -------------- MICHAEL B. GIFFORD Director since 1993
Photo of Mr. Gifford, 61 years of age, was Managing Director and Chief
Michael B. Executive of The Rank Organisation Plc, London, England, a
Gifford leisure and entertainment company from 1983 to 1996. 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 a director of English China Clays plc.
- -------------- CAROL R. GOLDBERG Director since 1990
Photo of Mrs. Goldberg, 65 years of age, is President of The Avcar
Carol R. Group, Ltd., a management consulting firm. She was President
Goldberg 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 serves as a director of America
Service Group, Inc.; Barry's Jewelers, Inc.; the Kennedy
Library Foundation and Selfcare, Inc.
- -------------- JOSEPH E. MULLANEY Director since 1990
Photo of Mr. Mullaney, 63 years of age, is Vice Chairman of the Board.
Joseph E. He joined the Company in 1972 as Associate General Counsel and
Mullaney 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. and a Trustee of the Public Library of the City of
Boston.
<PAGE>
BOARD MEETINGS
The Board of Directors held ten meetings in 1996.
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. Gifford, Mrs. Goldberg, Mr. Kravis 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 fund managers for the Company's benefit
plans. It also reviews compliance with the Company's statement of policy as to
the conduct of its business. Three meetings of the Committee were held in 1996.
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 1996.
Finance Committee
The members are Mr. Jacobi (Chairman), Mr. Gantz, Mr. Gifford, Mr. Kravis, 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 1996.
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 1996.
OUTSTANDING VOTING SECURITIES
On February 28, 1997, the record date for the 1997 Annual Meeting of the
stockholders, there were outstanding and entitled to vote 556,920,066 shares of
the $1 par value common stock of the Company, entitled to one vote per share,
and 157,643 shares of Series C ESOP Convertible Preferred Stock, entitled to 40
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 1997 Annual Meeting.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 28, 1997, Berkshire Hathaway Inc., located at 1440 Kiewit Plaza,
Omaha, Nebraska 68131, beneficially owned, through six insurance subsidiaries,
48,000,000 shares, which constitute 8.6% of the outstanding common stock of the
Company and 8.5% 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 30,000,000 of the 48,000,000 shares, or 5.4% of
the outstanding common stock and 5.3% 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 38.8% by Mr.
Buffett and a trust of which he is trustee but in which he has no economic
interest and 3% by his wife, Susan T. Buffett.
As of February 28, 1997, KKR Associates L.P., a New York partnership, located at
9 West 57th Street, New York, New York 10019, beneficially owned through two
limited partnerships, KKR Partners II, L.P. and DI Associates, L.P. (the "KKR
Stockholders"), 37,154,399 shares, which constitute 6.7% of the outstanding
common stock of the company and 6.6% of the votes entitled to be cast by the
holders of the outstanding voting securities of the Company. Mr. Kravis is a
general partner of KKR Associates L.P. and disclaims beneficial ownership of
these shares.
As of February 28, 1997, 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, 157,643
shares of Series C ESOP Convertible Preferred Stock which represent 100% of that
class and 1.1% 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 February 28, 1997, by (i) each director, (ii) each of the executive officers
named in the Summary Compensation Table at page 14 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
Owned, Option Shares
Title of Excluding Exercisable
Name Class(1) Options Within 60 days
------ ---------- --------- ----------------
<S> <C> <C> <C>
Warren E. Buffett(2),(6) Common 48,000,919 10,000
Wilbur H. Gantz(6) Common 4,319 10,000
Michael B. Gifford(6) Common 1,516 8,000
Carol R. Goldberg(3),(6) Common 3,319 10,000
Michael C. Hawley(4) Common 79,591 229,000
Series C
Pfd. 18 --
Herbert H. Jacobi(6) Common 14,123 10,000
Henry R. Kravis(5),(6) Common 37,199,599 --
Jacques Lagarde(4) Common 32,832 292,622
Series C
Pfd. 16 --
Joseph E. Mullaney(4) Common 118,409 228,000
Series C
Pfd. 16 --
Richard R. Pivirotto(6) Common 4,118 10,000
Thomas F. Skelly(4) Common 98,800 170,000
Series C
Pfd. 16 --
Juan M. Steta(6) Common 12,633 10,000
Alexander B. Trowbridge(6) Common 1,919 9,600
Joseph F. Turley(6) Common 105,261 10,000
Alfred M. Zeien(4) Common 748,339 960,000
Series C
Pfd. 16 --
All directors and current Common 86,552,280 2,600,782
executive officers as a Series C
group(4), (7) Pfd. 178 --
</TABLE>
- ----------
(1) Except as indicated in notes (2), (5) and (7) below, the total number of
shares beneficially owned in each class constitutes less than 1% of the
outstanding shares in that class.
(2) 48,000,000 of the shares are 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
8.6% of the outstanding common stock, as described above.
(3) Mrs. Goldberg has no voting and investment power over 400 of the shares
reported as owned and disclaims beneficial ownership with respect to those
shares.
(4) Includes common shares held under the Company's Employees' Savings Plan as
follows: Mr. Hawley 54,318 shares; Mr. Lagarde 12,806 shares; Mr. Mullaney
32,403 shares; Mr. Skelly 20,957 shares; Mr. Zeien 178,871 shares; and a
total of 374,967 shares held under the Employees' Savings Plan and GESOP by
all employee directors and all current executive officers as a group. Under
the Employees' Savings Plan, GESOP 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 20,548 of the common shares
reported as owned by him; Mr. Skelly shares voting and investment power over
41,766 of the common shares reported by him, has no voting and investment
power over 30,644 of the common shares reported as owned by him and
disclaims beneficial ownership with respect to those 30,644 shares; and
certain executive officers have no voting and investment power over 13,251
of the common shares reported as owned by the group and disclaim beneficial
ownership with respect to those 13,251 shares.
(5) 37,154,399 of the shares are owned by KKR Associates, L.P. through two
limited partnerships. Mr. Kravis as a general partner of KKR Associates,
L.P. may be deemed to share beneficial ownership of such shares, which
represent 6.7% of the outstanding common stock, as described above. The
remaining 45,200 shares are held directly by a trust for the benefit of
members of Mr. Kravis' family. Mr. Kravis disclaims beneficial ownership
with respect to all the shares.
(6) In addition to the common stock reported as owned, the directors have
converted the present value of vested pension benefits and have invested all
or a portion of their retainers and attendance fees in Deferred Stock Units
under the Deferred Compensation Plan for Outside Directors, as described
beginning on page 8 under Compensation of Directors. As of February 28,
1997, the number of units credited to each director's account was as
follows: Mr. Buffett 2,575 units, Mr. Gantz 865 units, Mr. Gifford 761
units, Mrs. Goldberg 2,526 units, Mr. Jacobi 2,437 units, Mr. Kravis 165
units, Mr. Pivirotto 3,422 units, Mr. Steta 2,964 units, Mr. Trowbridge
1,983 units and Mr. Turley 2,802 units.
(7) The number of common shares beneficially owned by all directors and current
executive officers as a group represents 15.5% of the outstanding common
stock.
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 1996 to the law firm of Santamarina y Steta, of which Mr. Steta
is of counsel, are reported on page 9.
On December 31, 1996, pursuant to a merger agreement dated September 12, 1996,
Duracell International Inc. became a wholly-owned subsidiary of Gillette. Under
the merger agreement, each of the 121,369,663 outstanding shares of Duracell
common stock was converted into the right to receive .904 of one share of
Gillette common stock and each of the 4,854,932 outstanding options to purchase
a share of Duracell common stock was converted into an option to purchase
Gillette stock on the same basis. Prior to the merger, the KKR Stockholders
beneficially owned 41.1 million shares of Duracell common stock, representing
approximately 34% of the outstanding Duracell common stock.
At the time of the signing of the merger agreement the KKR Stockholders agreed,
among other things, to vote their shares of Duracell common stock in favor of
the merger and delivered an irrevocable proxy to vote their shares in accordance
with that agreement (the "Stockholders" Agreement").
In consideration of its advisory services to Duracell in connection with the
merger, Kohlberg, Kravis and Roberts & Co., L.P. ("KKR") received an advisory
fee of $20,000,000 for the merger. Mr. Kravis is a general partner of KKR
Associates L.P., a general partner of KKR.
Effective immediately following completion of the merger, Mr. Kravis, who was
previously a director of Duracell, was elected a director of Gillette by the
Gillette Board of Directors.
The directors and executive officers of Gillette and Duracell and each of the
KKR Stockholders have executed agreements providing that they will not transfer
(i) any Gillette Common Stock received in the merger, except in compliance with
the Securities Act of 1933, as amended and (ii) any securities of Gillette in
the period ending at such time as results covering at least 30 days of combined
operations of Duracell and Gillette have been published by Gillette.
The KKR Stockholders have certain demand and piggyback registration rights
pursuant to which they may, subject to certain terms and conditions, require
Gillette to register under the Securities Act of 1933 all or part of the
Gillette Common Stock received by the KKR Stockholders in connection with the
merger, including up to five such demands to register at least $325,000,000 in
aggregate market value of such stock.
Duracell agreed to indemnify KKR and its affiliates (including Mr. Kravis)
against liability related to or arising out of any services rendered in
connection with the merger, the engagement of KKR or the performance by KKR of
its services (including reasonable attorneys' fees) except for liability caused
by KKR's bad faith or gross negligence. Duracell also confirmed to the KKR
Stockholders certain rights to indemnification, including such rights with
respect to their entering into or performing their obligations under the
Stockholders' Agreement. Gillette has agreed to honor these obligations.
The merger agreement provides for Gillette to indemnifiy and hold harmless each
present and former director, officer or employee of Duracell and its
subsidiaries (including Mr. Kravis) against any claims arising out of the
merger, or otherwise, and to maintain the Duracell directors' and officers'
liability insurance for six years.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its subsidiaries are paid an
annual Board retainer fee of $35,000 ($28,000 prior to January 1997) plus a fee
of $1,200 for attendance at each meeting of the Board of Directors or of its
committees. Committee Chairmen receive an additional retainer of $4,000 a year.
Under the Deferred Compensation Plan for Outside Directors one half of all
annual Board retainer fees is paid in Deferred Stock Units. The directors may
defer payment of all or any portion of the cash retainers or cash fees to a
Deferred Stock Unit account or to a cash account until after retirement or
resignation from the Board or until an earlier change in control. Each Deferred
Stock Unit is treated as equivalent to one share of the Company's common stock,
and the directors receive dividend equivalent units as dividends are paid and
appreciation, if any, in the market value of the stock. Deferred cash accounts
accrue interest equivalents. Upon the death of a director, any unpaid amounts
become payable in a lump sum.
Under the Outside Directors' Stock Ownership Plan, which was approved by the
stockholders at the 1994 Annual Meeting, one half of all Board retainer fees was
paid in common stock of the Company. Effective January 1, 1997, the Board voted
to eliminate the Outside Directors' Stock Ownership Plan and replace it with the
Deferred Compensation Plan for Outside Directors, as described in the paragraph
above. No contributions were made to the Outside Directors' Stock Ownership Plan
after October 31, 1996; however, these acounts will be maintained and the shares
of common stock held in these accounts will continue to earn dividends.
Directors who are not employees of the Company or its subsidiaries also may be
paid for service as directors of Company subsidiaries. During 1996 Mr. Jacobi
received standard outside director fees totaling $11,358 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 2,000 shares of the common stock of the Company at a price equal to
the fair market value on the date of grant. In 1996 the grants were made on
April 22 at a price of $54.25 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 16.
A director who has attained age 70 cannot stand for reelection to the Board.
Effective January 1, 1997, the directors voted to eliminate the Retirement Plan
for Non-Employee Directors. Directors who had reached age 65 as of December 31,
1996, were given a one time election to convert the present value of vested
pension benefits into Deferrred Stock Units or to freeze the pension as of
December 31, 1996, with no credit for future service. The pension benefits for
directors who had not reached age 65 at December 31, 1996, were automatically
converted to Deferred Stock Units. No retirement benefit will be given to any
director who becomes a director on or after December 31, 1996.
During 1996 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 $306,445 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 1997.
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, 1991 through December
31, 1996 with a similar investment in the Standard & Poor's 500 Stock Index and
with two peer groups consisting of ten consumer products companies of generally
similar size. The New Peer Group Index has been changed from the Former Peer
Group Index used in the 1996 proxy statement. Ralston Purina Company has been
added to provide a company in the consumer battery business segment for
comparison with Gillette following its merger with Duracell International Inc.
American Home Products has been deleted since its business focus has shifted
from consumer products following its merger with American Cyanamid. The
five-year performance graph has been restated to reflect this change. The
compounded total return of the previous peer group during the five-year period
since 12/31/91 is 13.9% compared to the 14.1% return of the new peer group
during the same period. The compounded total return of Gillette during that
period is 24.0%.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gillette $100 $103 $109 $139 $195 $294
Former Peer Group $100 $ 92 $ 91 $101 $149 $191
New Peer Group $100 $ 93 $ 92 $103 $150 $194
S&P 500 $100 $108 $118 $120 $165 $203
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Former Peer Group Companies: Bristol-Myers Squibb Company Procter & Gamble Company
American Home Products Colgate-Palmolive Company Rubbermaid Incorporated
Avon Products, Inc. Johnson & Johnson Warner-Lambert Company
The Black & Decker Corporation Pfizer Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
New Peer Group Companies: Colgate-Palmolive Company Ralston Purina Company
Avon Products Inc. Johnson & Johnson Rubbermaid Incorporated
The Black & Decker Corporation Pfizer Inc. Warner-Lambert Company
Bristol-Myers Squibb Company Procter & Gamble Company
- -----------------------------------------------------------------------------------------------------------------------------------
</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 10, 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 indices 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 than 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 1996 the
bonus represented approximately 47% 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 1996) and establishes the minimum, budgeted, and maximum
Company-wide aggregate bonus pools that may be earned based upon the
achievement of those Company goals.
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
1996, 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 15 through
18.
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 14.
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
practice of the Committee to attempt to have all compensation treated as tax-
deductible compensation wherever, in the judgement of the Committee, to do so
would be consistent with the objectives of the compensation plan under which
the compensation is paid. Accordingly, the Stock Option and Stock Equivalent
Unit Plans 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 of the companies in the Compensation Peer Group.
Incentive Bonus Plan
Mr. Zeien is responsible for the entire scope of the Company's worldwide
business. His 1996 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 most significant event of 1996 was the successful merger with Duracell
International Inc. which was completed at year end. The Company's sales grew
by 10% to $9.7 billion in 1996, a record level, with both the pre-merger
Gillette and Duracell businesses up 10%. Before special merger-related
charges, profit from operations improved 14% to $2.05 billion from the $1.80
billion level of a year ago; net income of $1.23 billion was 15% higher than
the $1.07 billion in 1995; and earnings per common share rose to $2.22, 14%
above the 1995 level of $1.94. For the pre-merger Gillette shareholder,
earnings per share before one-time merger related costs advanced 20% compared
with 1995 reported earnings of $1.85. Special one-time, merger-related charges
taken in the fourth quarter reduced profit from operations by $413 million,
net income by $283 million and net income per share by $.51 in the quarter and
the year. Gillette stock again outperformed the stock market averages with an
annual return of 50%, nearly double the returns of the Dow Jones Industrial
Average and the Standard and Poor's 500. Since the end of 1990, the market
value of Gillette stock has increased by more than $36 billion.
The Duracell merger is an excellent fit with the Company's mission -- to
achieve or enhance clear leadership, worldwide, in the core consumer product
categories in which we choose to compete -- giving the Company clear world
leadership in the fast growing alkaline battery category. In 1996, 81% of
Gillette's sales came from the thirteen product categories in which the
Company holds the world leadership position. In addition to further geographic
expansion, the accelerated pace of new product introductions continued with
more than 20 new products launched in 1996. Investment in the three principal
"growth drivers" -- research and development, capital spending and advertising
- -- in combination rose 18%, well ahead of the Company's sales growth rate. As
an indicator of the effectiveness of this investment in "growth drivers", 41%
of the Company's sales came from products introduced in the past five years,
47% excluding Duracell, an all-time high. The Company also made two smaller
acquisitions in 1996, blade manufacturers in Russia and the Czech Republic,
which further strengthened our worldwide blade market share. A joint venture
with India's leading writing instrument marketer will give the Company
broadened distribution in this growing market.
Mr. Zeien is also responsible for insuring the Company's compliance with
applicable laws and Company policies.
Stock Option Plan
The June 1996 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 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. An additional stock option grant made to Mr. Zeien is
described below.
Incentive Payment and Award
At its meeting on February 20, 1997, the Personnel Committee recommended and
the Board approved an additional compensation package for Mr. Zeien, to
provide an incentive to him not to retire and to continue his employment as
Chairman of the Board and Chief Executive Officer of the Company, consisting
of a payment to Mr. Zeien of $500,000 if he continues in these capacities
through February 28, 1998, with any such amount being payable to Mr. Zeien
after his retirement, and an option grant to Mr. Zeien effective February 20,
1997, of 100,000 shares at an exercise price of $85.25 per share, the fair
market value of the stock on that date, which will become exercisable on
February 20, 1998. The additional compensation package for Mr. Zeien was
reviewed by the Company's independent compensation consultants who have
advised the Personnel Committee that both its design and level are well within
current marketplace practices in similar situations. This additional
compensation package is similar to the one-year packages approved by the Board
of Directors on February 16, 1995, and February 15, 1996, and disclosed in the
March 16, 1995, and March 14, 1996, proxy statements consisting of payments of
$500,000 to be made to Mr. Zeien after his retirement and stock options on
150,000 shares and 100,000 shares, respectively.
Richard R. Pivirotto (Chairman)
Wilbur H. Gantz
Herbert H. Jacobi
Alexander B. Trowbridge
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>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------------------------------------------------ ---------------
Other # of Stock
Name and Principal Annual Options All Other
Position Year Salary Bonus Compensation(1) Granted Compensation(2)
- ------------------ ---- ------ ----- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Alfred M. Zeien 1996 $1,275,000 $1,700,000 -- 350,000 $190,367
Chairman and Chief 1995 1,125,000 1,300,000 -- 350,000 176,741
Executive Officer 1994 1,000,000 1,000,000 -- 200,000 147,110
Michael C. Hawley 1996 $ 606,666 $ 535,000 -- 100,000 $ 84,172
President & Chief 1995 514,375 390,000 $ 3,354 120,000 59,112
Operating Officer 1994 377,917 250,000 5,488 64,000 38,864
Joseph E. Mullaney 1996 $ 497,500 $ 250,000 -- 50,000 $ 66,218
Vice Chairman of 1995 475,000 220,000 -- 50,000 60,382
the Board 1994 445,000 200,000 -- 50,000 52,287
Jacques Lagarde 1996 $ 568,333 $ 380,000 $ 44,588 75,000 $ 60,488
Executive Vice President 1995 531,313 300,000 14,274 68,000 53,171
1994 473,750 240,000 109,399 64,000 43,084
Thomas F. Skelly 1996 $ 449,750 $ 230,000 -- 45,000 $ 76,883
Senior Vice President 1995 428,000 205,000 -- 45,000 68,341
1994 397,500 185,000 -- 45,000 54,230
</TABLE>
- ------------
(1) Other Annual Compensation amounts represent taxes reimbursed by the
Company relating to non-deductible relocation expenses incurred by the
named individuals.
(2) 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 1996 under the Employees' Savings Plan
and Supplemental Savings Plan as follows: Mr. Zeien $63,750, Mr.
Hawley $49,833, Mr. Mullaney $35,875, Mr. Lagarde $43,417 and Mr.
Skelly $32,738. 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 1996 Incentive Bonus Plan
deferrals of $13,375 for Mr. Hawley and $85,000 for Mr. Zeien. 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) The value of Series C ESOP preferred shares allocated under the
Employee Stock Ownership Plan ("ESOP") to each of their accounts as
follows: Mr. Zeien $6,134, Mr. Hawley $6,230, Mr. Mullaney $6,134,
Mr. Lagarde $6,134 and Mr. Skelly $6,134. 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 $21,321, Mr. Hawley $6,882, Mr. Mullaney $12,834, Mr.
Lagarde $4,900 and Mr. Skelly $27,445. 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
$14,162, Mr. Hawley $7,852, Mr. Mullaney $11,375, Mr. Lagarde $6,037
and Mr. Skelly $10,566. 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 $1,000,000 payable on the
death of the survivor of each executive and his or her spouse, with
the Company recovering its contribution at the end of a 15-year
period, or if earlier, when the survivor of the executive and the
executive's spouse dies.
<TABLE>
<CAPTION>
Stock Options Granted in 1996
Individual Grants Grant Date
- ------------------------------------------------------------------------------------------------ Value
% Of Total --------------
Options Granted Grant Date
Number of To Employees Per Share Present Value
Name Options Granted In 1996 Exercise Price(1) Expiration Date ($)(2)
- --- ------------------- ------------------- --------------------- ------------------- --------------
<S> <C> <C> <C> <C> <C>
Alfred M.
Zeien 100,000 2.47% $56.25 2/14/06 $1,580,000
250,000 6.17% 58.81 6/19/06 4,565,000
Michael
C. Hawley 100,000 2.47% 58.81 6/19/06 1,826,000
Joseph E.
Mullaney 50,000 1.23% 58.81 6/19/06 913,000
Jacques
Lagarde 75,000 1.85% 58.81 6/19/06 1,369,500
Thomas F.
Skelly 45,000 1.11% 58.81 6/19/06 821,700
</TABLE>
- ------------
(1) These awards were made pursuant to the 1971 Stock Option Plan. The options
become exercisable one year from the date of grant and generally remain
exercisable for ten years from the date of grant provided the recipient
remains employed throughout that period. The exercise price is equal to
the average of the high and low prices of Gillette shares traded on the
date the options were granted. 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". The post-retirement exercise
period for employees is generally three months for an ISO and three years
for a non-ISO. If termination of employment occurs within one year after a
change in control, as that term is described at page 18, any options held
by the optionee that were not otherwise exercisable when employment ceased
would become immediately exercisable.
(2) 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. The
assumptions and calculations used were provided by independent
compensation consultants. 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: for options with an exercise price of $56.25,
stock price volatility of 20.3% based on a one year daily stock price
history, dividend yield of 1.07% based on the most recent quarter's
annualized yield, and risk-free rate of return of 5.81% equal to the yield
on a 10-year U.S. Treasury bond with a maturity matching the option term;
for options with an exercise price of $58.81, stock price volatility of
21.9% 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 6.91% equal to the yield on a 10-year U.S. Treasury bond
with a maturity matching the option term.
Aggregated Stock Option Exercises During 1996 And 1996 Year-End Stock Option
Values
<TABLE>
<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(1) At Fiscal Year-End Fiscal Year-End
- --- --------------------- -------------- ---------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
Alfred M. Zeien 80,000 $3,606,515 Exercisable 860,000 $37,744,800
Unexercisable 350,000 6,535,000
Michael C.
Hawley 25,000 1,011,700 Exercisable 229,000 9,255,325
Unexercisable 100,000 1,794,000
Joseph E.
Mullaney 26,600 1,155,889 Exercisable 228,000 10,917,590
Unexercisable 50,000 897,000
Jacques Lagarde 14,914 667,995 Exercisable 292,622 14,161,326
Unexercisable 75,000 1,345,500
Thomas F.
Skelly 40,000 2,112,450 Exercisable 170,000 7,761,150
Unexercisable 45,000 807,300
</TABLE>
- ------------
(1) The amounts shown are the total values realized by the named persons on
exercises of options held for periods ranging from 3 to10 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 $601,087, Mr. Hawley $202,340,
Mr. Mullaney $174,091, Mr. Lagarde $119,325 and Mr. Skelly $368,585.
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.
Annual Pension
Average Annual Compensation -----------------------------------------------
Used as Basis for 15 Years of 20 Years of 25 Years or More
Computing Pension Service Service of Service
- ------------------------------- ------------- -------------- ----------------
$ 400,000 $120,000 $ 160,000 $ 200,000
800,000 240,000 320,000 400,000
1,200,000 360,000 480,000 600,000
1,600,000 480,000 640,000 800,000
2,000,000 600,000 800,000 1,000,000
2,400,000 720,000 960,000 1,200,000
2,800,000 840,000 1,120,000 1,400,000
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 14) 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, 1996, the persons named in the Summary Compensation Table at
page 14 had the following years of service under the Retirement Plan: Mr. Zeien
29 years; Mr. Mullaney 25 years; Mr. Hawley 33 years; Mr. Lagarde 26 years and
Mr. Skelly 30 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 14 on December 31, 1996, in the event of a change
in control on that date, would have been $6,944,000, or two 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 or as a result of the Duracell merger.
2. 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 extends the period for grants to employees and
non-employee directors under the plan to April 18, 2002, increases by
23,000,000 the number of shares upon which stock options may be granted under
the plan and clarifies the date on which options granted to outside directors
become exercisable.
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. As of February 28, 1997, 4,915,204 of the 16,000,000 additional
shares authorized for grant in 1994 (adjusted to reflect splits) remain
available for grant. If approved, taking into account the fact that Stock
Equivalent Unit Plan awards have been discontinued to senior management, the
amendment will make available for grant over the next five years a number of
shares which will allow the Company to increase its average grant size as a
percent of shares outstanding to an amount more in line with that of the peer
group used for compensation comparisons. The number of newly authorized shares
on which options could be granted under the 1971 Stock Option Plan during the
proposed additional five-year period will represent approximately 4.1% of the
currently outstanding shares of the Company's stock.
The stockholders adopted the plan in 1971 and amended it in 1977, 1979, 1984,
1989 and 1994 to extend the period for grants and, except in 1977, to increase
the number of options which could be granted under the plan. In 1992 the plan
was amended by the stockholders to provide for an automatic annual grant of
options on 2,000 shares (adjusted to reflect splits) to each of the Company's
non-employee directors; in 1994, the plan was amended to extend the period for
grants, clarify the definition of eligible employee and limit to 200,000
(adjusted to reflect splits) the number of shares upon which options can be
granted to any participant in a calendar year; and in 1995, the plan was
amended to increase to 400,000 (adjusted to reflect splits) the number of
shares upon which options can be granted to any participant in any calendar
year.
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 to align their interests with the
interests of the stockholders, and that it is in the best interests of the
Company to amend the plan as proposed. Consistent with the Company's
compensation objectives, rewards under the Stock Option Plan are dependent on
those factors which directly benefit the Company's stockholders, dividends
paid and appreciation in the market value of Company stock.
The amendment will permit the continuation of option grants, thereby providing
long-term incentives to the directors, executive officers and other key
salaried employees of the Company who have the potential to direct and manage
the business of the Company successfully in the future.
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 22.
The plan is administered by the Personnel Committee, which, in its discretion,
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. At
any given time, this group is expected to represent approximately 5% 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 2,000 shares of the common stock of the Company (adjusted
to reflect splits) to each non-employee director of the Company at the fair
market value of the stock on the date of grant. The date of grant 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. Upon the election of directors at the 1997 Annual
Meeting, there will be nine non-employee members of the Board of Directors.
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. Options
on 14,638,609 shares, granted at option prices ranging from $9.515 to $85.25
per share after adjustment for stock splits (a weighted average price of
$38.93 per share), will expire at various dates up to February 19, 2007.
The closing price of the common stock of the Company on February 28, 1997, as
quoted on a composite basis was $79.13.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE 1971 STOCK
OPTION PLAN, WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON THE ENCLOSED PROXY.
3. PROPOSED AMENDMENT OF THE STOCK EQUIVALENT UNIT PLAN
Subject to the approval of the stockholders, the Board of Directors, on the
recommendation of its Personnel Committee, has amended the Stock Equivalent
Unit Plan. The proposed amendment extends the period for grants of awards
under the plan to April 18, 2002.
As of February 28, 1997, 1,713,267 of the additional basic units authorized
for grant in 1989 and 1994 (adjusted to reflect splits) remain available for
grant, a number of units estimated to be necessary to continue the plan for
the key employees of the Company (excluding the executive officers) to whom
grants are made over the next five-year period. This number of units (adjusted
to reflect splits) is well below the number of units available during each of
the three prior five-year periods of the plan. It has been the Company's
recent practice and its present intention to utilize grants of units in lieu
of stock options to key employees located in countries where grants of options
cannot be made and to key employees generally below the senior management
level.
The stockholders adopted the plan in 1971 and amended it in 1977, 1979, 1984,
and 1989 to extend the period for grants and to increase the number of units
which may be awarded under the plan. In 1994, the stockholders amended the
plan to extend the period for grants, to increase the number of basic stock
units that may be awarded under the plan, to clarify the definition of
eligible employee and to limit to 100,000 (adjusted to reflect splits) the
number of basic stock units which can be awarded to any participant in a
calendar year.
The Board of Directors is of the opinion that this plan has helped the Company
compete for, motivate and retain high caliber executives and key employees,
and that it is in the best interests of the Company to amend the plan as
proposed. Consistent with the Company's compensation objectives, rewards under
the plan are dependent on the same factors as those which directly benefit the
Company's stockholders, dividends paid and appreciation in the market value of
the Company's stock. The plan is administered by the Personnel Committee,
which is composed of directors who are not employees and not eligible to
participate in the plan. The amendment will permit the Committee to continue
to grant basic stock unit awards under the plan, thereby providing long-term
incentives to key salaried employees who have the potential to manage the
business of the Company successfully in the future.
The material provisions of the plan and other information about the plan are
described below and in the New Plan Benefits table on page 22.
Under the Stock Equivalent Unit Plan, a phantom stock plan, awards of basic
stock units are made, at the discretion of the Personnel Committee, to
selected key salaried employees of the Company and its subsidiaries.
Each basic stock unit is treated as equivalent to one share of the Company's
common stock, although in no case does the employee receive the original
market value of the basic units awarded. Instead, the employee's account is
credited with appreciation, if any, in the market value of the Company's
common stock and with dividend equivalent units as dividends are paid on the
stock. Amounts credited for appreciation on basic stock units are limited to
100% of the market value of the stock on the date of the award.
Awards of basic stock units may be made under the plan to a somewhat broader
group of key employees of the Company and its subsidiaries than those who are
eligible to receive stock options. At any given time, eligible employees are
expected to represent approximately 6% of all employees. Under the terms of
the plan, no awards may be made to non-employee directors of the Company. No
awards have been made to executive officers since 1989. With respect to
certain grants made after 1983, all or any portion of an award may, by its
terms, be contingent upon achievement of future performance goals.
Awards accrue benefits over seven years, vesting and becoming payable in
segments over the third through the seventh years of that period. Each award
is revalued annually until the award becomes fully vested and the value
becomes fixed and payable. Before each vesting, the employee may elect to
defer the amounts becoming payable. In general, awards become fully vested
upon the retirement, death or disability of the employee and, in the case of
retirement or disability, payment may be deferred by employee election to
future years. If a deferred amount represents the final value of a fully
vested award, the amount accrues interest equivalents until paid.
The plan provides that, upon a change in control, all performance-related
contingency provisions of awards will be removed, awards of employees whose
employment is terminated under certain circumstances as described in the plan
will become fully vested, and, in the event of a related liquidation, merger
or consolidation of the Company, all awards either will become fully vested or
will be replaced by the surviving corporation.
The Board of Directors may amend the plan, but stockholder approval is
required to extend the maturity date of an award or the period during which
awards may be made, to increase the maximum number of basic stock units
available under the plan or to increase the maximum annual grant per
participant. The Board may terminate the plan at any time, but no termination
or amendment may adversely affect the rights of participants under outstanding
awards or, after a change in control, deprive a participant 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 units
subject to the plan may be adjusted by the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE STOCK
EQUIVALENT UNIT PLAN, WHICH IS DESIGNATED AS PROPOSAL NO. 3 ON THE ENCLOSED
PROXY.
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 plans listed below
are not determinable. The table below indicates, where applicable, benefits or
amounts received or accrued under the plans for the year 1996.
<TABLE>
<CAPTION>
Stock Option Plan Stock Equivalent Unit Plan
Number of Number of
Name and Position Shares Granted* Units Awarded**
- ----------------- ----------------- ---------------------------
<S> <C> <C>
Alfred M. Zeien
Chairman and Chief Executive Officer 350,000 N/A
Michael C. Hawley
President and Chief Operating Officer 100,000 N/A
Joseph E. Mullaney
Vice Chairman of the Board 50,000 N/A
Jacques Lagarde
Executive Vice President 75,000 N/A
Thomas F. Skelly
Senior Vice President 45,000 N/A
All current executive officers as a group 805,000 N/A
All non-executive outside directors as a group 18,000 N/A
All non-executive officer employees as a group 3,248,800 300,200
</TABLE>
- ------------
* See also Stock Options Granted and Aggregated Stock Option Exercises tables
on pages 16 and 17.
** The amounts credited during 1996 to the vested accounts of all current
executive officers as a group and all other employees as a group were
$41,218 and $19,615,570, respectively.
4. 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 1997,
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 1997 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. 4 ON THE ENCLOSED PROXY.
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 properly cast at the meeting in person or by proxy is required for
approval of proposals 2 through 4.
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 4. 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 (Proposal 1) or the Appointment of
Auditors (Proposal 4) are approved under Delaware law and the by-laws of the
Company. However, abstentions have the effect of a negative vote in
determining whether the proposed amendments to the 1971 Stock Option Plan
(Proposal 2) or the Stock Equivalent Unit Plan (Proposal 3) have 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 1997 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 can 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, 1996, 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 1998 Annual Meeting must be received by the
Company on or before November 13, 1997.
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 by February 14, 1998, to
be considered for the 1998 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 judgement.
0450/PS
<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 1997 Annual
Meeting of the stockholders of The Gillette Company on April 17, 1997, and any
adjournment thereof, as specified on the reverse side of this card on proposal 1
through 4 and in their discretion on all other matters incident to the conduct
of the meeting and, if applicable, (b) directs, as indicated on the reverse, the
voting of the shares allocated to the benefit plan account(s) of the undersigned
at the 1997 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 ussue 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 other matters incident to the conduct of
the meeting and any adjournment thereof.
(Important - To be signed and dated on reverse side) SEE REVERSE SIDE
<PAGE>
This proxy will be voted and will be voted as specified by the stockholder, but
if no choice is specified, it will be voted FOR proposals 1 through 4.
The Board of Directors recommends a vote FOR proposals 1 through 4.
1. Election of directors for 3-year terms
M.C. Hawley, H.H. Jacobi,
H.R. Kravis, A.B. Trowbridge
FOR AGAINST ABSTAIN
Withhold
For All from all 2. Amendment of the 1971
Nominees Nominees Stock Option Plan [ ] [ ] [ ]
[ ] [ ]
For, except withold vote 3. Amendment of the Stock
from the following Equivalent Unit Plan [ ] [ ] [ ]
nominee(s)
_______________________ 4. Approval of the
appointment of KMPG
Peat Marwick LLP
as Auditors [ ] [ ] [ ]
<PAGE>
APPENDIX A
THE GILLETTE COMPANY
1971 STOCK OPTION PLAN, AS AMENDED
1. PURPOSE. The purpose of the 1971 Stock Option Plan (hereinafter
referred to as the "Plan") is to provide a special incentive to selected key
salaried employees of The Gillette Company (hereinafter referred to as the
"Company") and of its subsidiaries and to the non-employee members of the Board
of Directors of the Company to promote the Company's business. The Plan is
designed to accomplish this purpose by offering such employees and non-employee
directors a favorable opportunity to purchase shares of the common stock of the
Company so that they will share in the success of the Company's business. For
purposes of the Plan a subsidiary is any corporation in which the Company owns,
directly or indirectly, stock possessing fifty percent or more of the total
combined voting power of all classes of stock or over which the Company has
effective operating control.
2. ADMINISTRATION. The Plan shall be administered by the Personnel
Committee heretofore established by the Board of Directors of the Company, no
member of which shall be an employee of the Company or of any subsidiary. The
Committee shall have authority, not inconsistently with the Plan, (a) to
determine which of the key salaried employees of the Company and its
subsidiaries shall be granted options; (b) to determine whether the options
granted to any employees shall be incentive stock options within the meaning of
the Internal Revenue Code or non-qualified stock options or both; provided,
however, that with respect to options granted after December 31, 1986, in no
event shall the fair market value of the stock (determined at the time of grant
of the options) subject to incentive stock options within the meaning of the
Internal Revenue Code which first became exercisable by any employee in any
calendar year exceed $100,000 (and, to the extent such fair market value exceeds
$100,000, the later granted options shall be treated as non-qualified stock
options); (c) to determine the time or times when options shall be granted to
employees and the number of shares of common stock to be subject to each such
option provided, however, subject to adjustment as provided in Section 9 of the
Plan, in no event shall any employee be granted options covering more than
400,000 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 18, 2002, but options theretofore
granted may extend beyond that date. Subject to adjustment as provided in
Section 9 of the Plan, the number of shares of common stock of the Company which
may be delivered under the Plan shall not exceed 79,400,000 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 400,000 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.
10. EMPLOYMENT RIGHTS. The adoption of the Plan does not confer
upon any employee of the Company or a subsidiary any right to continued
employment with the Company or a subsidiary, as the case may be, nor does it
interfere in any way with the right of the Company or a subsidiary to terminate
the employment of any of its employees at any time.
11. THE COMMITTEE MAY AT ANY TIME DISCONTINUE GRANTING OPTIONS
UNDER THE PLAN. The Board of Directors of the Company or the Personnel Committee
of the Board of Directors if and to the extent authorized, may at any time or
times amend the Plan or amend any outstanding option or options or arrangements
established under Section 8 for the purpose of satisfying the requirements of
any changes in applicable laws or regulations or for any other purpose which may
at the time be permitted by law, provided that (except to the extent required or
permitted under Section 9 and, with respect to clauses (b) and (f) below, except
to the extent required or permitted under Section 7) no such amendment shall,
without the approval of the stockholders of the Company, (a) increase the
maximum number of shares available under the Plan or the maximum annual grant
per participant other than as permitted under Section 9, (b) reduce the minimum
option price of options thereafter to be granted below the price provided for in
Section 6(a), except that the Plan may be amended to provide that the minimum
option price of non-qualified stock options thereafter to be granted to
employees may be not less than 95% of the fair market value at the date of grant
if the Board determines that such amendment is necessary for tax reasons to
carry out the objectives of the Plan, (c) reduce the price at which shares of
common stock of the Company may be sold under Section 8 below the price provided
for in Section 8, (d) reduce the option price of outstanding options, (e) extend
the time within which options may be granted, (f) extend the period of an
outstanding option beyond ten years from the date of grant, (g) amend the
provisions of Section 12 with respect to the terms and conditions of options to
non-employee directors and further provided no such amendment shall adversely
affect the rights of any Participant (without his consent) under any option
theretofore granted or other contractual arrangements theretofore entered into
or after a Change in Control deprive any Participant of any right or benefit
which became operative in the event of a Change in Control. Notwithstanding the
above, in no event may the provisions of Section 12 be amended more than once
every six months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act, or the rules thereunder.
12. TERMS AND CONDITIONS OF OPTIONS GRANTED TO NON-EMPLOYEE
DIRECTORS. Effective at the close of business on the second business day after
the 1992 Annual Meeting of Shareholders of the Company and on the second
business day after each Annual Meeting thereafter, each non-employee director
shall be automatically granted a non-incentive stock option to purchase 2,000
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
earlier of the date of the first Annual Meeting of the stockholders
following the date of grant or the first anniversary of the date of
grant except as otherwise provided under Section 6 Paragraph c
Subparagraph 5 of this Plan. Any option, otherwise exercisable, may be
exercised during the period a non-employee director remains a member of
the Board of Directors and for a period of three months following the
date a non-employee director ceases to be a director except in the case
where the non-employee director is or will be eligible to receive
benefits under the Company's Retirement Plan for Directors when
membership on the Board of Directors ends and where the non-employee
director continues to be so eligible as of the date of exercise, that
non-employee director's options shall be exercisable for a period of two
years with respect to options granted before 1994 and three years for
options granted after 1993 from the date membership on the Board of
Directors ceases.
If a non-employee director dies at the time when the non-employee
director is entitled to exercise an option, then at any time or times
within one year after that non-employee director's death that
non-employee director's option may be exercised in accordance with the
provisions of Section 6 Paragraph (g) of the Plan. In no event shall any
option be exercised after the expiration of the option period.
(d) Payment for Delivery of Shares. Payment for the shares shall be
made in accordance with the provisions of Section 6 Paragraph c
Subparagraph 4 of this Plan.
(e) Nontransferability of Options. No option may be transferred by
a non-employee director otherwise than by will or by the laws of descent
and distribution, and during the non-employee director's lifetime the
option may be exercised only by the non-employee director.
APRIL 1997
<PAGE>
APPENDIX B
THE GILLETTE COMPANY
STOCK EQUIVALENT UNIT PLAN, AS AMENDED
l. PURPOSE. The purpose of the Stock Equivalent Unit Plan is to provide an
incentive and reward to employees of The Gillette Company and its
subsidiaries who can make substantial contributions to the success of the
business. To that end, the Plan provides an opportunity for such employees
to participate in that success through awards of stock equivalent units,
subject to the conditions set forth in the Plan.
2. DEFINITIONS. Unless the context otherwise requires, the following words
have the following meanings for purposes of the Plan.
2.1 Basic stock unit - A stock equivalent unit awarded to a
participant pursuant to Section 4.2.
2.2 Committee - The Personnel Committee established by the Board of
Directors of the Company.
2.3 Company - The Gillette Company, a Delaware corporation.
2.4 Disability - Mental or physical disability, either occupational
or non-occupational in cause, which, in the opinion of the
Committee, on the basis of medical evidence satisfactory to it,
prevents the employee from engaging in any occupation or
employment for wage or profit and is likely to be permanent.
2.5 Dividend equivalent unit - A stock equivalent unit which is
credited to a participant's account as the result of conversion
of amounts credited to the account in respect of dividends, as
provided in Section 5.2.
2.6 Employee - Any person, whether or not an officer or director of
the Company or any subsidiary, who is regularly employed by the
Company or a subsidiary on a full-time basis, or who, under
conditions approved by the Committee, is regularly employed by
the Company or subsidiary on a part-time basis.
2.7.1 Maturity date (with respect to awards made on or before 12/31/83)
- When used with respect to an award, March l5 of the tenth
calendar year following the calendar year in which the award was
made.
2.7.2 Maturity date (with respect to awards made after 12/31/83) - When
used with respect to an award, March 15 of the seventh calendar
year following the calendar year in which the award was made.
2.8 Normal retirement date - In the case of any participant, the date
established by his employer as his normal retirement date (or,if
no such plan is maintained by his employer, the normal retirement
date prescribed under The Gillette Company Retirement Plan).
2.9 Plan - The Stock Equivalent Unit Plan set forth herein, as from
time to time amended.
2.10 Share - A share of the Company's common stock as the same is
constituted from time to time.
2.11 Stock equivalent unit - A measure of value equal in amount to the
value of one share at the time of reference.
2.12 Subsidiary - Any corporation in which the Company owns, directly
or indirectly, stock possessing fifty percent or more of the
total combined voting power of all classes of stock or over which
the company has effective operating control.
2.13 (A) Total credits - When used with respect to an individual
account, the sum of (a) the excess, if any, of (i) the value of
that number of shares which is equal to the number of basic stock
units credited to the account in respect of awards in designated
years, after adjustment for any prior payments, over (ii) the
value on the date of the respective awards of that number of
shares which corresponds, after adjustment for stock splits,
stock dividends and similar capital changes, to the number of
basic stock units referred to in (i), except that for awards made
after 12/31/78, the amount of the excess cannot exceed an amount
equal to the value on the date of the respective awards of that
number of shares which corresponds, after adjustment for stock
splits, stock dividends and similar capital changes, to the
number of basic stock units referred to in (i), plus (b) the
value of that number of shares which is equal to the number of
dividend equivalent units then credited to the account in respect
of such awards plus (c) any amounts then credited to the account
based on dividend payments attributable to such awards which have
not been converted into dividend equivalent units.
2.14 Value - When used with respect to a share (a) On the date of an
award of basic stock units, the average of the reported high and
low sales prices of the shares as quoted on a composite basis;
(b) For purposes of converting dividend credits into dividend
equivalent units, the average of the reported closing prices of
the shares as quoted on a composite basis on the last business
day of the months of December, January, and February immediately
preceding the March l5 on which such conversion occurs; (c) For
purposes of determining the amount payable in respect of an
interest which becomes vested or for purposes of determining the
amount payable, in cases not covered by (d) or (e) below, in
respect of an interest which previously became vested, the
average of the reported closing prices of the shares as quoted on
a composite basis on the last business day of the twelve calendar
months immediately preceding the March l5 on which such vesting
occurs or the month in which such payment becomes payable; (d)
For purposes of determining the amount payable to a terminating
participant or to the estate of a deceased participant, the
average of the reported closing prices of the shares as quoted on
a composite basis on the last business day of the twelve calendar
months immediately preceding the month in which the participant's
employment terminates or the participant dies or the twelve
consecutive calendar months including and ending with that month
if such termination or death occurs on or after the last business
day of that month; (e) For purposes of determining the amount
payable with respect to an award on or after the maturity date
thereof, the average of the reported closing prices of the shares
as quoted on a composite basis on the last business day of the
twelve calendar months immediately preceding such maturity date;
2.15 Unapproved Change in Control shall mean the happening of any one
of the following events, which, in each case, was not recommended
to the shareholders by a vote of at least two-thirds of the
non-employee directors of the Company then still in office who
were in office two years prior to such event: (a) Any person
within the meaning of Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "1934 Act"), other than the Company or
any of its subsidiaries, has become the beneficial owner, within
the meaning of Rule 13d-3 under the 1934 Act, of 20% or more of
the combined voting securities; (b) A tender offer or exchange
offer, other than an offer by the Company, pursuant to which
shares of the Company's common stock have been purchased; (c) The
stockholders or directors of the Company have approved an
agreement to merge or consolidate with or into another
corporation and the Company is not the surviving corporation or
an agreement to sell or otherwise dispose of all or substantially
all of the Company's assets (including a plan of liquidation); or
(d) During any period of two consecutive years, individuals who
at the beginning of such period constituted the board of
directors cease for any reason to constitute at least a majority
thereof. For this purpose, new directors who were elected, or
nominated (or approved for nomination in the case of nomination
by a Committee of the Board) for election by shareholders of the
Company, by at least two thirds of the directors then still in
office who were, or are deemed to have been directors at the
beginning of the period, shall be deemed to have been directors
at the beginning of the period.
2.16 Approved Change in Control shall mean the happening of any one of
the following events, which, in each case was recommended to the
shareholders by a vote of at least two-thirds of the non-employee
directors of the Company then still in office who were in office
two years prior to such event: (a) Any person within the meaning
of Sections 13(d) and 14(d) of the Securities Exchange Act of
1934 (the "1934 Act"), other than the Company or any of its
subsidiaries, has become the beneficial owner, within the meaning
of Rule 13d-3 under the 1934 Act, of 20% or more of the combined
voting securities; (b) A tender offer or exchange offer, other
than an offer by the Company, pursuant to which shares of the
Company's common stock have been purchased; (c) The stockholders
or directors of the Company have approved an agreement to merge
or consolidate with or into another corporation and the Company
is not the surviving corporation or an agreement to sell or
otherwise dispose of all or substantially all of the Company's
assets (including a plan of liquidation); or (d) During any
period of two consecutive years, individuals who at the beginning
of such period constituted the board of directors cease for any
reason to constitute at least a majority thereof. For this
purpose, new directors who were elected, or nominated (or
approved for nomination in the case of nomination by a Committee
of the Board) for election by shareholders of the Company, by at
least two thirds of the directors then still in office who were,
or are deemed to have been directors at the beginning of the
period, shall be deemed to have been directors at the beginning
of the period.
3. ADMINISTRATION.
3.1 The Plan shall be administered by the Personnel Committee
heretofore established by the Board of Directors of the Company
no member of which shall be an employee of the Company or of any
subsidiary. The Committee shall have authority, not
inconsistently with the Plan, (a) to determine which of the
eligible employees of the Company and its subsidiaries shall be
awarded basic stock units; (b) to determine the times when basic
stock units shall be awarded and the number of basic stock units
to be awarded to each participant; (c) to determine the time or
times when amounts may become payable with respect to stock
equivalent units within the limits provided in the Plan; (d) to
prescribe the form of the instruments evidencing any basic stock
units awarded under the Plan (which forms need not be identical);
(e) to adopt, amend and rescind rules and regulations for the
administration of the Plan and the stock equivalent units and for
its own acts and proceedings; and (f) to decide all questions and
settle all controversies and disputes which may arise in
connection with the Plan. All decisions, determinations and
interpretations of the Committee shall be binding on all parties
concerned.
3.2 The maximum number of basic stock units which may be awarded
under the Plan is 41,400,000 subject to adjustment as determined
by the Committee in event of a dividend payable in shares, a
stock split or a combination of shares. No basic stock units may
be awarded under the Plan after April 18, 2002.
4. PARTICIPATION.
4.1 The participants in the Plan shall be such key employees as may
be selected from time to time by the Committee. Directors who are
not employees shall not be eligible. The employees to whom basic
stock units are awarded at any time may include employees to whom
basic stock units were previously granted under the Plan.
4.2 Awards of basic stock units shall be made from time to time by
the Committee in its discretion. In addition, with respect to any
award, the Committee shall have discretion to provide that all or
any portion of that award shall be contingent on achievement by
the participant or by any unit or units of the Company of any
performance goal or goals over any period or periods of time
ending before March 15 of the third year following the date of
the award. Notwithstanding the above, the Committee may not award
more than 100,000 basic stock units to any participant in any
calendar year subject to adjustment as provided under Section
8.3.
5. INDIVIDUAL ACCOUNTS.
5.1 The Committee shall maintain a separate account for each award
made under the Plan. Each such account shall show the information
necessary to compute the participant's total credits in respect
of each award, including the number of basic stock units awarded
to the participant, the value of an equal number of shares on the
date of the award, the amount credited to the account in respect
of dividends, as provided below, the number of dividend
equivalent units credited to the account and details as to any
payments under the Plan which are deducted from the account.
5.2 Whenever the Company pays a dividend (other than a stock
dividend) upon its outstanding common stock, there shall be
credited to the separate account for each award a dollar amount
equal to the value of such dividend per share multiplied by the
number of stock equivalent units credited to the account on the
record date for such dividend. However, no such credits shall be
made with respect to any award after the maturity date thereof or
after the date on which the participant ceases to be an employee.
As of March 15 in each year the aggregate of the amounts so
credited to the account since the prior March 15 shall be
converted into a number of dividend equivalent units by dividing
such aggregate by the value of a share.
5.3 In the event of a dividend payable in shares, or in the event of
a stock split or combination of shares, the Committee shall make
a corresponding change in the number of basic stock units and
dividend equivalent units then credited to the account.
5.4 On the maturity date of an award, the total amount payable with
respect to such award shall become a fixed amount which will not
change thereafter except that the Committee may provide for the
payment of interest beginning at maturity on amounts whose
payment is deferred to a date thereafter. Such fixed amount shall
be the total credits in respect of such award on such maturity
date.
5.5 Whenever a payment is made under the Plan to a participant with
respect to any award, there shall be a corresponding reduction in
the number of stock equivalent units and other amounts credited
to the participant's account in respect of such award, or in the
case of a payment after maturity date or after the date on which
the participant ceases to be an employee, in the amount then
credited to the account. A similar reduction shall be made if a
participant forfeits any portion of his interest in any awards.
6. PAYMENT.
6.1 Payments to a participant under the Plan may be made from time to
time when segments of his total credits in respect of an award
become vested, or payment may be deferred, all in accordance with
rules established from time to time by the Committee.
6.2.1 With respect to awards made on or before 12/31/83 fifteen percent
of the total credits in respect of an award shall become vested
on March 15 of the fourth calendar year following the calendar
year of the award, an additional fifteen percent thereof (or, in
cases of vesting after one or more prior payments under Section
6.3, the applicable vesting percentage thereof as provided below)
shall become vested on March 15 of the fifth, sixth, seventh,
eighth, and ninth calendar years following the calendar year of
the award, and any unvested balance thereof shall become vested
on the maturity date of such award.
6.2.2 With respect to awards made after 12/31/83 twenty percent of the
total credits in respect of an award shall become vested on March
15 of the third calendar year following the calendar year of the
award, an additional twenty percent thereof (or, in cases of
vesting after one or more prior payments under Section 6.3, the
applicable vesting percentage thereof as provided below) shall
become vested on March 15 of the fourth, fifth, and sixth
calendar years following the calendar year of the award, and any
unvested balance thereof shall become vested on the maturity date
of such award.
6.2.3 Such vesting as described above shall occur only if the
participant is an employee on the date of vesting and has been an
employee continuously since the date of the award. The total
credits in respect of all awards not at that time subject to any
contingency pursuant to Section 4.2 shall become fully vested if
the participant, while an employee, dies, incurs a disability,
retires prior to his normal retirement date with the consent of
the Company and under conditions approved by the Committee, or
retires on or after his normal retirement date, and the total
amount payable with respect thereto shall become a fixed amount
which will not change thereafter, except that the Committee may
provide for the payment of interest on amounts whose payment is
deferred to a date thereafter. If the employment of a participant
terminates as a result of the merger, sale or other absorption or
termination of operations of a subsidiary or a division, all
credits in respect of any such participant's award not at that
time subject to any contingency pursuant to Section 4.2 may
become vested if the Committee, in its sole discretion,
determines such action to be in the best interests of the
Company, and the total amount payable with respect thereto shall
become a fixed amount which will not change thereafter, except
that the Committee may provide for the payment of interest on
amounts whose payment is deferred to a date thereafter. In
connection with the determination of any participant's vested
rights under this paragraph 6.2.3, the Committee may
retroactively remove any contingency in effect pursuant to
Section 4.2. Notwithstanding the above, in the event of an
Unapproved or Approved Change in Control, if a participant
retires prior to his normal retirement date the consent of the
Company shall not be required and all credits and all
contingencies with respect to the awards of such participant
shall become fully vested and immediately payable.
6.2.3.1 In the event of an Unapproved Change in Control, all
contingencies then in effect pursuant to Section 4.2 shall be
automatically removed and the total credits in respect of all
awards of a participant shall become fully vested and payable (1)
upon termination of the employment of a participant for any
reason within one year of the Unapproved Change in control, or
(2) upon termination of the employment of a participant at any
time after an Unapproved Change in Control if such termination
(a) is initiated by the Company, except that termination for
willful misconduct shall not be treated as a termination under
this subparagraph (2), or (b) is initiated by the participant for
Good Reason. In the event of an Approved Change in Control, all
contingencies then in effect pursuant to Section 4.2 shall be
automatically removed and the total credits in respect of all
awards of a participant shall become fully vested and payable
upon termination of the employment of a participant after an
Approved Change in Control if such termination is (i) initiated
by the Company, except that termination for willful misconduct
shall not be treated as a termination under this sentence, or
(ii) initiated by the participant for Good Reason. Good Reason,
as used herein, shall mean any of the following: Assignment of
any duties inconsistent with the position, duties,
responsibilities and status of the employee or reduction or
adverse change in the nature or status of responsibilities of the
employee from those which existed on the date immediately
preceding an Approved or Unapproved Change in Control; any
reduction by the Company or any successor entity in the
employees' compensation including benefits, other than such
reduction required by law or required to maintain the tax-
qualified status of any benefit Plan, from those which existed on
the date immediately preceding an Approved or Unapproved Change
in Control; or the Company or any successor entity requiring the
employee to be based at a location in excess of fifty miles from
the location where the employee is based on the date immediately
preceding an Approved or Unapproved Change in Control.
6.2.3.2 Notwithstanding any other provision of this Plan, (a) upon an
employer-initiated termination of employment of a participant
pursuant to the Restructuring Plan approved by the Board of
Directors of the Company at its meeting on December 18, 1986, or
the Reorganization Plan approved by the Board of Directors of the
Company at its meeting on December 14, 1989 or the 1994
Realignment Plan and Parker Integration Plan, or (b) upon the
sale or other disposition of the unit, division or subsidiary in
which a participant is employed pursuant to the Restructuring
Plan approved by the Board of Directors of the Company at its
meeting on December 18, 1986, or the Reorganization Plan approved
by the Board of Directors of the Company at its meeting on
December 14, 1989, which sale or other disposition results in the
participant no longer being employed by the Company or any of its
subsidiaries, all contingencies then in effect pursuant to
Section 4.2 shall be automatically removed except with respect to
contingencies which expire on February 19, 1987. Further, in such
event, the total credits in respect of all awards of a
participant for which no contingencies remain in effect shall
become fully vested and the amount of such awards shall be fixed
and payable. With respect to awards or segments of awards which
become vested under this subparagraph or any other award or
segment thereof which becomes payable by reason of the
participant's termination of employment, the participant may
elect to receive such awards upon termination of employment or
may, prior to the date participant's employment with the Company
or any subsidiary terminates, elect to defer such award in
accordance with the provisions of Paragraph 6.2.3 and rules
established from time to time by the Committee. Notwithstanding
the above, the removal of contingencies and the granting of
vesting and deferral rights provided for in this Paragraph
6.2.3.2 shall serve as partial consideration for a settlement of
all claims and disputes which the participant may have against
the Company, its subsidiaries, employees and agents and shall be
subject to the execution by the participant of a release and
settlement agreement in a form to be prescribed by the Committee.
6.2.4 In order to make proper adjustment for any previous payments
under Section 6.3, the applicable vesting percentage to be used
in computing vested segments under the foregoing provisions of
this Section 6.2 and in computing the amount of a payment under
Section 6.3 or Section 6.4 shall be determined as follows: (a) In
computing such vested segment or the amount or a payment under
section 6.3 for awards made prior to 12/31/83, the applicable
vesting percentage to be applied to the total credits in respect
of a particular award shall be equal in value to a fraction whose
numerator is fifteen (or ten in the case of the final vested
installment) and whose denominator is (i) 100 minus (ii) fifteen
multiplied by the number of vested segments previously paid to
the participant under Section 6.3. Payment of each vested segment
shall be considered a separate payment. (b) In the case of a
payment under section 6.4 for awards made prior to 12/31/83, the
applicable vesting percentage to be applied to the total credits
in respect of a particular award shall be equal in value to a
fraction whose numerator is (i) fifteen multiplied by the number
of segments of the award which have become vested in accordance
with the foregoing provisions prior to the date on which the
participant ceases to be an employee (but not more than 100)
minus (ii) fifteen multiplied by the number of vested segments
previously paid to the participant under Section 6.3, and whose
denominator is 100 minus (ii) above. (c) In computing such vested
segment or the amount or a payment under section 6.3 for awards
made after 12/31/83, the applicable vesting percentage to be
applied to the total credits in respect of a particular award
shall be equal in value to a fraction whose numerator is twenty
and whose denominator is (i) 100 minus (ii) twenty multiplied by
the number of vested segments previously paid to the participant
under Section 6.3. Payment of each vested segment shall be
considered a separate payment. (d) In the case of a payment under
section 6.4 for awards made after 12/31/83, the applicable
vesting percentage to be applied to the total credits in respect
of a particular award shall be equal in value to a fraction whose
numerator is (i) twenty multiplied by the number of segments of
the award which have become vested in accordance with the
foregoing provisions prior to the date on which the participant
ceases to be an employee (but not more than 100) minus (ii)
twenty multiplied by the number of vested segments previously
paid to the participant under Section 6.3, and whose denominator
is 100 minus (ii) above.
6.3 Prior to any date on which a participant is to acquire a vested
interest or additional vested interest in the total credits in
respect of an award, the participant shall make an election, at
the time and in a manner specified by the Committee, as to the
time when payment is to be made of the segment or segments of
such total credits which may become vested on such date. The
participant may elect (a) to receive payment within a reasonable
time after such date or (b) to defer payment in accordance with
rules established from time to time by the Committee. In the
event of an Approved or Unapproved Change in Control, the
participant may, upon any date, revoke his election to defer
receipt of any or all interests in respect of an award and the
Company shall make payment to the participant of the value of any
vested interest or interests, within a reasonable time after such
revocation and with respect to interests which have not yet
vested as of the date of such revocation, within a reasonable
time after such interests become vested. If no such election is
made, payment shall be made within a reasonable time after the
date on which such vested interest or additional vested interest
is acquired.
The amount of any payment shall be computed by multiplying the
total credits in respect of the award at the time of payment, or
in the case of revocation of an election to defer, at the time of
such revocation, by the applicable vesting percentage. The
Committee may provide for the payment of interest beginning upon
maturity for amounts deferred beyond maturity.
6.4 If a participant ceases to be an employee for any reason not
specified in Section 6.2, his vested interest in respect of each
award shall thereupon become a fixed amount which will not change
thereafter. Such fixed amounts shall be determined by multiplying
the total credits in respect of each award on the date of
termination of employment by the applicable vesting percentage.
The participant shall thereupon forfeit his interest in any
amounts then credited to his account to the extent his interest
has not become vested. Payment of vested interests shall be made
in accordance with rules established from time to time by the
Committee.
6.5 If a participant dies prior to termination of his employment, an
amount equal to his total credits in respect of all awards not
subject to any contingency pursuant to Section 4.2 shall be paid
to his executor or administrator or as otherwise provided by law
valued as of the date of death.
6.6 All payments will be made in cash and will be subject to any
required tax withholdings.
7. AMENDMENT AND TERMINATION.
7.1 The Board of Directors of the Company or the Personnel Committee
of the Board of Directors if and to the extent authorized may at
any time amend the Plan for the purposes of satisfying the
requirements of any changes in applicable laws or regulations or
for any other purpose which may be permitted by law, except that
neither the Board of Directors or the Personnel Committee of the
Board of Directors may, without the approval of the stockholders
of the Company, increase the maximum number of basic stock units
that may be awarded under the Plan or increase the time within
which basic stock units may be awarded, as provided in Section
3.2, or extend the maturity date of an award beyond March 15 of
the tenth calendar year following the calendar year in which the
award was made. Notwithstanding the above, in the event of an
Approved or Unapproved Change in Control, no amendment to the
Plan which provides for prospective Plan benefits and other terms
and conditions any less favorable to Plan participants than those
which existed prior to the amendment shall be effective unless it
provides that all contingencies which are then in existence be
removed and all awards which are unvested prior to such amendment
shall become immediately vested and payable.
7.2 The Board of Directors of the Company may terminate the Plan at
any time except that after an Approved or Unapproved Change in
Control such Plan may not be terminated without providing that
all contingencies then in existence shall be removed and all
unvested awards shall become immediately vested and payable.
7.3 No such amendment or termination shall adversely affect the
rights of any participant (without his consent) under any award
previously made or after an Approved Change in Control deprive a
participant of a benefit or right which became operative upon an
Approved Change in Control or after an Unapproved Change in
Control deprive a participant of a benefit or right which became
operative upon an Unapproved Change in Control.
8. MISCELLANEOUS.
8.1 The interest under the Plan of any participant, his heirs or
legatees shall not be alienable by the participant, his heirs or
legatees by assignment or any other method and shall not be
subject to being taken by his creditors by any process
whatsoever.
8.2 The Plan shall not be deemed to give any participant or employee
the right to be retained in the employ of the Company or any
subsidiary nor shall the Plan interfere with the right of the
Company or any subsidiary to discharge any employee at any time.
8.3 In the event of a stock dividend, split-up or combinations of
shares, recapitalization or merger in which the Company is the
surviving corporation or other similar capital change, the number
and kind of shares of stock or securities of the Company to be
used as a basis for granting awards under the Plan, the units
then outstanding or to be granted thereunder, the maximum number
of basic stock units which may be granted, the unit value and
other relevant provisions shall be appropriately adjusted by the
Board of Directors of the Company, whose determination shall be
binding on all persons. In the event of a consolidation or a
merger in which the Company is not the surviving corporation or
complete liquidation of the Company, all outstanding basic stock
units and dividend equivalent units shall thereafter accrue no
further value, provided that at least twenty days prior to the
effective date of any such consolidation or merger, the Board of
Directors shall either (a) make all outstanding basic units and
dividend equivalent units immediately vested and payable, or (b)
arrange to have the surviving corporation grant replacement units
to the participants.
APRIL 1997
