<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]
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Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
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[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The Gillette Company
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(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
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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<PAGE>
[Gillette Logo]
World-Class Brands, Products, People Prudential Tower Building
Boston, MA 02199
NOTICE OF ANNUAL MEETING OF THE STOCKHOLDERS
The 1998 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 16, 1998, at 10:00 a.m. for the following
purposes:
1. To elect four directors for terms to expire at the 2001 Annual
Meeting of the stockholders.
2. In connection with a proposed 2-for-1 stock split, in the form of
a 100% stock dividend, to vote on the approval of an amendment to
the Certificate of Incorporation to increase the authorized $1 par
value common stock from 1,160,000,000 shares to 2,320,000,000
shares, as described in the accompanying proxy statement.
3. To vote on the approval of the appointment of auditors for the
year 1998.
4. 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 27, 1998, 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, 1998
<PAGE>
[Gillette Logo]
World-Class Brands, Products, People Prudential Tower Building
Boston, MA 02199
March 13, 1998
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors for the 1998 Annual Meeting of the
stockholders of the Company on April 16, 1998. The Notice of Annual Meeting,
this proxy statement and the accompanying proxy are being mailed to stockholders
on or about March 13, 1998. 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, BankBoston, N.A.,
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 9, 1998, 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 2001 ANNUAL MEETING OF THE
STOCKHOLDERS
At the meeting, four directors, Wilbur H. Gantz, Jorge Paulo Lemann, Richard R.
Pivirotto and Alfred M. Zeien, are to be elected to serve for terms that expire
at the 2001 Annual Meeting of the stockholders. Juan M. Steta, whose term as a
director will expire at the 1998 Annual Meeting, is not standing for reelection,
having reached the mandatory retirement age for directors. Jorge Paulo Lemann is
standing for election for the first time. Information regarding the Board's four
nominees to this class is set forth at page 0. Information regarding the
directors whose terms expire in 1999 and 2000 is set forth at pages 0 and 0.
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 2001 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 2001 ANNUAL MEETING OF THE STOCKHOLDERS
[Photo of Wilbur H. Gantz]
WILBUR H. GANTZ Director since 1992
Mr. Gantz, 60 years of age, is Chairman of the Board and Chief
Executive Officer of PathoGenesis Corporation, a
biopharmaceutical company. He served as President of Baxter
International, Inc., a manufacturer and marketer of health
care products, from 1987 to 1992. He joined Baxter
International, Inc. in 1966 and held various management
positions prior to becoming its Chief Operating Officer in
1983. Mr. Gantz is a director of W.W. Grainger and Company;
Harris Bankcorp and Harris Trust and Savings Bank.
[Photo of Jorge Paulo Lemann]
JORGE PAULO LEMANN
Mr. Lemann, 58 years of age, is the founder and a Senior Partner
of Banco de Investimentos Garantia S.A., a Brazilian investment
bank. He is a board member and controlling shareholder of
Compania Cervejaria Brahma, Brazil's largest brewery, Lojas
Americanas S.A., a Brazilian discount department store chain,
and G.P. Investimentos, a buyout and restructuring firm. He is a
board member of Fundacao Estudar, a provider of scholarships to
needy students. Mr. Lemann is Chairman of the Latin American
Advisory Board of the New York Stock Exchange.
[Photo of Richard R. Pivirotto]
RICHARD R. PIVIROTTO Director since 1980
Mr. Pivirotto, 67 years of age, is President of Richard R.
Pivirotto Co., Inc., a management consulting firm. He served as
President of Associated Dry Goods Corporation, a retail
department store chain, from 1972 to 1976 and as Chairman of its
Board of Directors from 1976 to February 1981. He is a director
of General American Investors Company, Inc.; Immunomedics, Inc.;
New York Life Insurance Company; The Greenwich Bank & Trust
Company; and CBS Corporation.
[Photo of Alfred M. Zeien]
ALFRED M. ZEIEN Director since 1980
Mr. Zeien, 68 years of age, is Chairman of the Board and Chief
Executive Officer. He joined the Company in 1968 and served as
Chairman of the Board of Management of Braun AG, a Gillette
subsidiary, from 1976 to 1978 and as Senior Vice President,
Technical Operations, from 1978 to 1981. He was elected Vice
Chairman of the Board in 1981. In that capacity, he served as
the Company's senior technical officer and headed the new
business development group until November 1987, when he assumed
responsibility for Gillette International and the Diversified
Companies. He was elected President and Chief Operating Officer
in January 1991 and Chairman and Chief Executive Officer in
February 1991. Mr. Zeien is a director of BankBoston
Corporation; BankBoston, N.A.; 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*
[Photo of Warren E. Buffett]
WARREN E. BUFFETT Director since 1989
Mr. Buffett, 67 years of age, is Chairman of the Board and Chief
Executive Officer of Berkshire Hathaway Inc., a company engaged
in a number of diverse business activities, the most important
of which is the property and casualty insurance business. Prior
to assuming those positions in 1970, he was a general partner of
Buffett Partnership, Ltd. He is a director of The Coca-Cola
Company and The Washington Post Company.
[Photo of Michael B. Gifford]
MICHAEL B. GIFFORD Director since 1993
Mr. Gifford, 62 years of age, was Managing Director and Chief
Executive of The Rank Organization plc, London, England, a
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.
[Photo of Carol R. Goldberg]
CAROL R. GOLDBERG Director since 1990
Mrs. Goldberg, 66 years of age, is President of The Avcar Group,
Ltd., a management consulting firm. She was President and Chief
Operating Officer of The Stop & Shop Companies, Inc., a retail
store chain, from 1985 to 1989. She joined Stop & Shop in 1959
and served in various management positions prior to her election
as Executive Vice President and Chief Operating Officer in 1982.
She served as a director of that Company from 1972 to 1989. She
serves as a director of America Service Group, Inc.; Barry's
Jewelers, Inc.; the Kennedy Library Foundation; The Forum
Corporation; and Selfcare, Inc.
[Photo of Joseph E. Mullaney]
JOSEPH E. MULLANEY Director since 1990
Mr. Mullaney, 64 years of age, is Vice Chairman of the Board. He
joined the Company in 1972 as Associate General Counsel and was
elected General Counsel in 1973, Vice President in 1975, Senior
Vice President with responsibilities for legal and governmental
affairs in 1977 and Vice Chairman in 1990. He serves as a
director of Boston Municipal Research Bureau; the Greater Boston
Legal Services Corporation; the Greater Boston Chamber of
Commerce; the New England Legal Foundation and the World Affairs
Council of Boston. He is also a member of the Board of Trustees
of the Massachusetts Taxpayers Foundation, Inc. and a Trustee of
the Public Library of the City of Boston.
*Mr. Mullaney intends to retire as Vice Chairman of the Board
and resign as a director following the April 16, 1998 Annual
Meeting. The directors intend to reduce the total number of
directors to 11 so there will be three directors with terms
expiring at the 1999 Annual Meeting.
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRE AT THE 2000 ANNUAL MEETING OF THE STOCKHOLDERS
[Photo of Michael C. Hawley]
MICHAEL C. HAWLEY Director since 1995
Mr. Hawley, 60 years of age, is President and Chief Operating
Officer. He joined the Company in 1961 and was named Business
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 Arthur D. Little,
Inc., the John Hancock Mutual Life Insurance Company and Texaco,
Inc.
[Photo of Herbert H. Jacobi]
HERBERT H. JACOBI Director since 1981
Mr. Jacobi, 63 years of age, has been Chairman of the Managing
Partners of Trinkaus & Burkhardt KGaA, a German bank, since
1981. The Bank is a member of the HSBC 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; Guyerzeller
Bank AG; 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.
[Photo of Henry R. Kravis]
HENRY R. KRAVIS Director since 1996
Mr. Kravis, 54 years of age, is a General Partner of Kohlberg
Kravis Roberts & Co., L.P. and KKR Associates, L.P. He is a
director of Amphenol Corporation; Borden, Inc.; Bruno's Inc.;
Evenflo & Spalding Holdings, Corporation; IDEX Corporation;
KinderCare Learning Centers; KSL Recreation Corporation; Merit
Behavioral Care Corporation; Newsquest Capital, PLC; Owen-
Illinois, Inc.; Owens-Illinois Group, Inc.; Primedia, Inc.;
Randall's Food Markets, Inc.; Safeway Inc.; Sotheby's; Union
Texas Petroleum Holdings, Inc.; and World Color Press, Inc.
[Photo of Alexander B. Trowbridge]
ALEXANDER B. TROWBRIDGE Director since 1990
Mr. Trowbridge, 68 years of age, is President of Trowbridge
Partners Inc., a management consulting firm. He was President 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; IRI
International; New England Life Insurance Company; The Rouse
Company; The Sun Company, Inc.; E.M. Warburg Pincus Counsellors
Funds; and Waste Management Inc. He is a charter trustee of
Phillips Academy, Andover.
BOARD MEETINGS
The Board of Directors held eight meetings in 1997.
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 and Mr.
Kravis.
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 1997.
Executive Committee
The members are Mr. Buffett (Chairman), Mrs. Goldberg, Mr. Steta, Mr.
Trowbridge 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. Seven
meetings of the Committee were held in 1997.
Finance Committee
The members are Mr. Jacobi (Chairman), Mr. Gantz, Mr. Gifford, Mr. Kravis and
Mr. Pivirotto.
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. Eight meetings of the Committee were held in 1997.
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.
Eight meetings of the Committee were held in 1997.
OUTSTANDING VOTING SECURITIES
On February 27, 1998, the record date for the 1998 Annual Meeting of the
stockholders, there were outstanding and entitled to vote 000,000,000 shares of
the $1 par value common stock of the Company, entitled to one vote per share,
and 000,000 shares of Series C ESOP Convertible Preferred Stock, entitled to 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 1998 Annual Meeting.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 27, 1998, Berkshire Hathaway Inc., located at 1440 Kiewit Plaza,
Omaha, Nebraska 68131, beneficially owned, through six insurance subsidiaries,
48,000,000 shares, which constitute 0.0% of the outstanding common stock of the
Company and 0.0% 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 0.0% of
the outstanding common stock and 0.0% 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 38.5% by Mr.
Buffett and certain trusts of which he is trustee but in which he has no
economic interest and 3.0% by his wife, Susan T. Buffett.
As of February 27, 1998, State Street Bank and Trust Company, P.O. Box 5259,
Boston, Massachusetts 02101 ("State Street") held as Trustee of The Gillette
Company Employee Stock Ownership Plan on behalf of Plan participants, 000,000
shares of Series C ESOP Convertible Preferred Stock which represent 100% of that
class and 0.0% 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 27, 1998, by (i) each director, (ii) each of the executive officers
named in the Summary Compensation Table at page 00 and (iii) all directors and
current executive officers as a group. All individuals listed in the table have
sole voting and investment power over the shares reported as owned, except as
otherwise stated.
<TABLE>
<CAPTION>
Unrestricted Stock
Title of Beneficially Owned, Option Shares Exercisable
Name Class(1) Excluding Options Within 60 days
<S> <C> <C> <C>
Warren E. Buffett(2)(6) Common 0 12,000
Wilbur H. Gantz(6) Common 0 12,000
Michael B. Gifford(6) Common 0 10,000
Carol R. Goldberg(3)(6) Common 0 12,000
Michael C. Hawley(4) Common 0 0
Series C Pfd. 0 --
Herbert H. Jacobi(6) Common 0 12,000
Robert G. King(4) Common 0 0
Series C Pfd. 0 --
Henry R. Kravis(5)(6) Common 0 2,000
Jacques Lagarde(4) Common 0 0
Series C Pfd. 0 --
Jorge Paulo Lemann Common 0 0
Joseph E. Mullaney(4) Common 0 0
Series C Pfd. 0 --
Richard R. Pivirotto(6) Common 0 12,000
Juan M. Steta(6) Common 0 12,000
Alexander B. Trowbridge(6) Common 0 11,600
Alfred M. Zeien(4) Common 0 0
Series C Pfd. 0 --
All directors and current Common 0 0
executive officers as a
group(4)(7) Series C Pfd. 0 --
</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
0.0% of the outstanding common stock, as described above.
(3) Mrs. Goldberg has no voting and investment power over 000 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 00,000 shares; Mr. King 00,000; Mr. Lagarde 00,000
shares; Mr. Mullaney 00,000 shares; Mr. Zeien 000,000 shares; and a total of
000,000 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 00,000 of the common shares
reported as owned by him and certain executive officers have no voting and
investment power over 00,000 of the common shares reported as owned by the
group and disclaim beneficial ownership with respect to those 00,000 shares.
(5) 00,000,000 of the shares are owned by KKR Associates, L.P. through two
limited partnerships, KKR Partners II, L.P. and DI Associates, L.P. (the
"KKR Stockholders"). Mr. Kravis as a general partner of KKR Associates, L.P.
may be deemed to share beneficial ownership of such shares, which represent
0.0% of the outstanding common stock. The remaining 00,000 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 0 under Compensation of Directors. As of February 27,
1998, the number of units credited to each director's account was as
follows: Mr. Buffett 0,000 units, Mr. Gantz 000 units, Mr. Gifford 000
units, Mrs. Goldberg 0,000 units, Mr. Jacobi 0,000 units, Mr. Kravis 000
units, Mr. Pivirotto 0,000 units, Mr. Steta 0,000 units and Mr.
Trowbridge 0,000 units.
(7) The number of common shares beneficially owned by all directors and current
executive officers as a group represents 00.0% 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 1997 to the law firm of Santamarina y Steta, of which Mr. Steta
is of counsel, are reported on page 0.
On December 31, 1996, pursuant to a merger agreement dated September 12, 1996,
Duracell International Inc. became a wholly-owned subsidiary of Gillette.
The directors and executive officers of Duracell and each of the KKR
Stockholders have executed agreements providing that they will not transfer any
Gillette common stock received in the merger, except in compliance with the
Securities Act of 1933, as amended.
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 four such remaining 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 by Duracell as an advisor on
the merger 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 pursuant to which
the KKR Stockholders agreed, among other things, to vote their Duracell shares
in favor of the merger. Gillette has agreed to honor these obligations.
The merger agreement provides for Gillette to indemnify 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 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.
Directors who are not employees of the Company or its subsidiaries also may be
paid for service as directors of Company subsidiaries. During 1997 Mr. Jacobi
received standard outside director fees totaling $10,129 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 1997 the grants were made on
April 21 at a price of $78.81 per share. Options granted to non-employee
directors are designated as non-ISO's, the terms of which are generally similar
to those granted to employees, which are described at page 00.
A director who has attained age 70 cannot stand for reelection to the Board.
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 Deferred 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 1997 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 $343,208 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 1998.
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, 1992 through December
31, 1997 with a similar investment in the Standard & Poor's 500 Stock Index and
with a peer group consisting of ten consumer products companies of generally
similar size. The cumulative return includes reinvestment of dividends. The S&P
500 Stock Index is sourced from The Wyatt Company.
[Graphic Omitted]
- --------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
Gillette $100 $106 $135 $190 $286 $373
Peer Group $100 $ 98 $111 $161 $208 $324
S&P 500 $100 $110 $112 $153 $188 $251
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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 00, as well as a number of other companies with which the Company competes
for executive talent. Despite the substantial similarities between the two
groups, the companies included in the Compensation Peer Group are not identical
to those included in the peer group index in the Investment Performance Graph
included in this proxy statement because the Committee believes that the group
of companies with which the Company competes for executive talent is broader
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 1997 the bonus
represented approximately 00% 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 1997) 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
1997, the plan provided for awards ranging from 5% to 75% of year-end salary
based upon the performance of each executive officer against individually
assigned objectives for the year, with the Committee having discretion to award
a higher amount under special circumstances.
At the time goals are set, a reserve equivalent to no more than 35% of the
amount of the budgeted bonus pool may be established by the Committee from which
bonuses may be awarded to eligible employees in operating units that achieve
assigned objectives even if the overall minimum profit from operations goal for
the Company is not met. In addition, the Committee may, within certain limits,
carry forward a portion of the bonus pool earned in any year for its
discretionary use in the future.
Stock Option Plan
Stock option grants are intended to provide long-term incentives for the
achievement of the Company's strategic business plan and mission and values and
to align the executive officers' interests with those of the shareholders. The
Stock Option Plan is the Company's sole long-term incentive plan for executive
officers. Under the plan, the Personnel Committee may award stock options for
terms not to exceed ten years at no less than the fair market value of Gillette
common stock on the date of grant. The size of any stock option grant is related
to the individual's level of responsibility within the organization, and awards
are made on a basis designed to be at or above the median value of grants under
similar programs of companies in the Compensation Peer Group.
Other Benefits
In order to attract, motivate and retain employees, the Company also maintains a
competitive benefits package, participation in which is not dependent upon
performance. In general, executive officers participate on the same basis as
other employees in the Company's broad-based employee benefit plans: the
Employees' Savings Plans, the Employee Stock Ownership Plan, and the Retirement
Plans. Information on these plans is provided on pages 00 through 00.
The executive officers, along with certain other executives, participate in an
Executive Life Insurance Program and Estate Preservation Plan. Information on
these programs is included in the footnotes to the Summary Compensation Table at
page 00.
The Personnel Committee has reviewed the impact of Section 162(m) of the
Internal Revenue Code which, beginning in 1994, limits the deductibility of
certain otherwise deductible compensation in excess of $1 million paid to the
CEO and the next four most highly compensated executive officers. It is the
practice of the Committee to attempt to have all compensation treated as
tax-deductible compensation wherever, in the judgment 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 judgment 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 judgment 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 1997 bonus was based upon his successful leadership in managing
the business and balancing the Company's long and short-term objectives as
described below.
Significant in 1997 was the achievement of integration synergies related to the
merger with Duracell International Inc. which was completed at the end of 1996.
The Company's sales grew by 4% to $10.1 billion in 1997, a record level. Profit
from operations improved 13% to $2.32 billion from the $2.05 billion level of a
year ago; net income of $1.43 billion was 16% higher than the $1.23 billion in
1996; and basic earnings per common share rose to $2.55, 15% above the 1996
level of $2.22. All profit comparisons are before special one-time,
merger-related charges taken in the fourth quarter of 1996 which reduced profit
from operations by $413 million, net income by $283 million and basic net income
per share by $.51 in the quarter and the year. The total return on Gillette
stock in 1997 was 30%, well ahead of the Dow Jones Industrial Average. Since
1990, the compound annual return to shareholders has been 32%, compared with 20%
for both 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
$50 billion.
In 1997, 74% of Gillette's sales came from the eleven 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 1997. Investment in the
three principal "growth drivers" -- research and development, capital spending
and advertising -- in combination rose 5%, slightly ahead of the Company's sales
growth rate. As an indicator of the effectiveness of this investment in "growth
drivers", a record 49% of the Company's sales came from products introduced in
the past five years.
Mr. Zeien is also responsible for insuring the Company's compliance with
applicable laws and Company policies.
Stock Option Plan
The June 1997 stock option grant to Mr. Zeien was based upon the Committee's
judgment 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 19, 1998, 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, 1999,
with any such amount being payable to Mr. Zeien after his retirement, and made
an option grant to Mr. Zeien effective February 23, 1998, of 150,000 shares at
an exercise price of $00.00 per share, the fair market value of the stock on
that date, which will become exercisable as described in footnote (1) on page
00. 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, February 15, 1996 and February 20, 1997, and disclosed in the March 16,
1995, March 14, 1996 and March 13, 1997, proxy statements consisting of payments
of $500,000 to be made to Mr. Zeien after his retirement and stock options on
150,000 shares, 100,000 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.
Summary Compensation Table
<TABLE>
<CAPTION>
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 1997 $1,466,667 $1,950,000 -- 350,000 $000,000
Chairman and Chief 1996 1,275,000 1,700,000 -- 350,000 690,367
Executive Officer 1995 1,125,000 1,300,000 -- 350,000 176,741
Michael C. Hawley 1997 $ 683,333 $ 675,000 -- 125,000 $ 00,000
President & Chief 1996 606,666 535,000 -- 100,000 84,172
Operating Officer 1995 514,375 390,000 $ 3,354 120,000 59,112
Joseph E. Mullaney 1997 $ 520,000 $ 250,000 -- 50,000 $000,000
Vice Chairman of 1996 497,500 250,000 -- 50,000 66,218
the Board 1995 475,000 220,000 -- 50,000 60,382
Robert G. King 1997 $ 463,750 $ 260,000 -- 75,000 $ 00,000
Executive Vice President 1996 385,000 240,000 -- 60,000 42,912
1995 342,603 210,000 -- 60,000 35,362
Jacques Lagarde 1997 $ 596,667 $ 360,000 -- 75,000 $ 00,000
Executive Vice President 1996 568,333 380,000 $44,588 75,000 60,488
1995 531,313 300,000 14,274 68,000 53,171
</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 1997 under the Employees' Savings
Plan and Supplemental Savings Plan as follows: Mr. Zeien $73,333,
Mr. Hawley $47,542, Mr. Mullaney $38,500, Mr. King $35,188 and
Mr. Lagarde $48,833. 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 1997 Incentive Bonus Plan
deferrals of $ for Mr. Zeien and $ for Mr. Hawley. 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 $0,000, Mr. Hawley $0,000, Mr. Mullaney
$0,000, Mr. King $0,000 and Mr. Lagarde $0,000. 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 $45,906, Mr. Hawley $21,937, Mr. Mullaney $31,996 and
Mr. Lagarde $8,112. 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 $13,338, Mr. Hawley $7,395, Mr. Mullaney $10,713, Mr. King
$4,417 and Mr. Lagarde $5,686. 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 $1,000,000 payable on the death of the survivor of each
executive and his or her spouse, with the Company recovering its
contribution at the end of a 15-year period, or if earlier, when
the survivor of the executive and the executive's spouse dies.
(vi) The amounts described on page 00 under Incentive Payment and
Award.
<PAGE>
<TABLE>
<CAPTION>
Stock Options Granted in 1997
Individual Grants Grant Date
- ---------------------------------------------------------------------------------------------------- Value
% Of Total ------------
Options Granted Grant Date
Number of To Employees Per Share Present Value
Name Options Granted In 1997 Exercise Price(1) Expiration Date ($)(2)
- ---- ------------------- ------------------- --------------------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Alfred M. Zeien 100,000 1.90% $85.25 2/20/07 $2,807,000
250,000 4.74% 94.69 6/19/07 7,512,975
Michael C. Hawley 125,000 2.37% 94.69 6/19/07 3,756,725
Joseph E. Mullaney 50,000 0.95% 94.69 6/19/07 1,502,975
Robert G. King 15,000 0.28% 80.38 2/04/07 392,700
60,000 1.14% 94.69 6/19/07 1,803,475
Jacques Lagarde 75,000 1.42% 94.69 6/19/07 2,254,225
</TABLE>
- ------------
(1) These awards were made pursuant to the 1971 Stock Option Plan. In general,
options granted to employees on or after June 19, 1997 become exercisable as
to one third on each of the first three anniversaries of the grant and all
options generally remain exercisable for ten years from the date of grant
provided the recipient remains employed throughout that period, although as
of retirement, all options which are at least one year old become
exercisable and incentive stock options ("ISO's"), a type of option
authorized under the 1981 amendments to the Internal Revenue Code, which
were granted on or after June 19, 1997 and are not exercised within three
months after retirement are automatically converted to non-ISOs exercisable
for five years after retirement. Non-ISO options granted before June 19,
1997, to employees and options granted or to be granted to non-employee
directors become exercisable in full one year from date of grant, and remain
exercisable for three years following retirement (2 years for options
granted prior to 1994 and 3 months for ISO's granted before June 19, 1997.)
The exercise price for all options is equal to the average of the high and
low prices of Gillette shares traded on the date the options were granted.
If termination of employment occurs within one year after change in control,
as that term is described at page 00, any options held by the optionee that
were not otherwise exercisable when employment ceased would become
immediately exercisable.
(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 $80.38 stock price volatility of 23.927% based on a one
year daily stock price history, dividend yield of 0.90% based on the most
recent quarter's annualized yield, and risk-free rate of return of 6.42%
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 $85.25, stock price
volatility of 24.123% based on a one year daily stock price history,
dividend yield of 0.84% based on the most recent quarter's annualized yield,
and risk-free rate of return of 6.42% equal to the yield on a 10-year U.S.
Treasury bond with a maturity matching the option term and for options with
an exercise price of $94.69 stock price volatility of 24.42% based on a one
year daily stock price history, dividend yield of 0.76% based on the most
recent quarter's annualized yield, and risk-free rate of return of 6.49%
equal to the yield on a 10-year U.S. Treasury bond with a maturity matching
the option term.
Aggregated Stock Option Exercises During 1997 And 1997 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 76,000 $5,311,470 Exercisable 1,134,000 $67,419,330
Unexercisable 350,000 3,096,500
Michael C. Hawley 0 0 Exercisable 329,000 18,974,935
Unexercisable 125,000 768,750
Joseph E. Mullaney 48,000 3,242,810 Exercisable 230,000 14,577,600
Unexercisable 50,000 307,000
Robert G. King 36,940 2,507,858 Exercisable 137,060 7,210,265
Unexercisable 75,000 675,900
Jacques Lagarde 36,600 2,958,678 Exercisable 331,022 21,162,649
Unexercisable 75,000 461,250
</TABLE>
- ------------
(1) The amounts shown are the total values realized by the named persons on
exercises of options held for periods ranging from 5 to 9 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 $1,041,617, Mr. Mullaney
$559,333, Mr. King $464,407 and Mr. Lagarde $358,231.
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 25 Years or
Used as Basis for 15 Years of 20 Years of 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
3,200,000 960,000 1,280,000 1,600,000
3,600,000 1,080,000 1,440,000 1,800,000
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 00 and
the amounts described on page 00 under Incentive Payment and Award), 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, 1997, the persons named in the Summary Compensation Table
at page 00 had the following years of service under the Retirement Plan: Mr.
Zeien 30 years; Mr. Mullaney 26 years; Mr. Hawley 34 years; Mr. King 29 years
and Mr. Lagarde 27 years.
Change in Control and Severance Arrangements
The Board of Directors has adopted a severance pay and benefit arrangement to
become effective in the event of a change in control. In general, the
arrangement would obligate any acquirer to continue long-standing Gillette
practice regarding severance payments to terminated employees. Severance
payments to U.S. employees whose employment is terminated under certain
circumstances after a change in control would be based on seniority and position
level, subject to a minimum for certain key employees, including certain
executive officers. Severance payments to employees in foreign countries would
comply with local law and follow past Gillette practice.
The maximum amount payable under the severance pay arrangement, including any
benefit plan payments resulting from a change in control, is 2.99 times average
annual compensation for the five-year period preceding termination of
employment. For most employees, including the named persons, it is unlikely that
payments would reach the maximum. The aggregate of severance pay excluding
benefit plan payments to the persons named in the Summary Compensation Table at
page 00 on December 31, 1997, in the event of a change in control on that date,
would have been $7,670,000, or 2 times the amount of their base salary on that
date. In general, benefit plan payments resulting from a change in control are
dependent upon salary, but vary with seniority and position level.
A change in control is defined in certain of the Company's benefit plans and, in
general, means those events by which control of the Company passes to another
person or corporation. Those events include a purchase of the Company's stock
pursuant to a tender offer, the acquisition of 20% or more of the Company's
stock by a person or group, a merger, or a sale of substantially all of the
assets of the Company. In addition, a change in control would occur if, during
any two-year period, the individuals who were serving on the Board of Directors
of the Company at the beginning of the period or who were nominated for election
or elected to the Board during the period with the affirmative vote of at least
two-thirds of such individuals still in office, ceased to constitute a majority
of the Board.
2. AMENDMENT TO ARTICLE 4 OF THE CERTIFICATE OF INCORPORATION
ADDITIONAL COMMON STOCK -- STOCK SPLIT IN THE FORM OF A 100% COMMON STOCK
DIVIDEND The Board of Directors recommends an amendment to the Certificate of
Incorporation which would increase the authorized $1 par value common stock from
1,160,000,000 shares to 2,320,000,000 shares. Subject to the approval of this
amendment by the stockholders, the Board has authorized the issuance to
stockholders of record on May 15, 1998, of one additional $1 par value share of
common stock as a dividend on each issued common share. The Board of Directors
believes that the stock split in the form of a 100% common stock dividend, is in
the best interests of the stockholders because it will place the market price of
the common stock in a range more attractive to investors, particularly
individuals, and may result in a broader market for the stock and more
widespread ownership of the Company.
The authorized common stock was last increased in 1995, when the stockholders
approved an amendment to the Certificate of Incorporation increasing the
authorized common stock by 580,000,000 shares to the present 1,160,000,000
shares, with the authorized preferred stock remaining at the present 5,000,000
shares. As of February 27, 1998, of the authorized preferred stock, 400,000
shares were reserved for issuance as Series A Junior Convertible Preferred
Shares in connection with the Corporation's Preferred Stock Purchase Rights
Plan; 000,000 were the Series C ESOP Convertible Preferred Shares described on
page 00; and the remaining 0,000,000 authorized preferred shares were
uncommitted. Of the authorized common stock, 000,000,000 shares were uncommitted
as shown below:
<TABLE>
<CAPTION>
Common Stock
As of
February 27, 1998 Pro Forma
Before Amendment After Amendment
<S> <C> <C>
Authorized 1,160,000,000 2,320,000,000
Issued and Outstanding (000,000,000) (000,000,000)
Held in Treasury (00,000,000) (000,000,000)
Reserved for issuance:
1971 Stock Option Plan (00,000,000) (00,000,000)
Duracell Shares Plan (0,000,000) (0,000,000)
Stock Option Plan for Key Employees of (000,000) (0,000,000)
Duracell International Inc.
Stock Purchase Plan (000,000) (00,000)
Series C ESOP Convertible Preferred Stock (0,000,000) (0,000,000)
Unissued and unreserved 000,000,000 (000,000,000)
============= =============
</TABLE>
The number of common shares reserved for issuance upon the conversion of the
Company's convertible preferred shares and under the 1971 Stock Option Plan,
Duracell Shares Plan, Stock Option Plan for Key Employees of Duracell
International Inc. and the Stock Purchase Plan will be adjusted as appropriate
to reflect the stock split in the form of a 100% stock dividend, if the
amendment is approved. Otherwise, no specific transaction is now contemplated
which would result in the issuance of additional shares. However, it is the
Company's policy to explore on a continuing basis favorable acquisition and
financing possibilities which could at any time lead to the issuance of shares
of the Company's stock. In addition, it is desirable to have authorized stock
available for possible additional future stock dividends or stock splits or for
other corporate purposes.
Accordingly, it is proposed to amend the first paragraph of Article 4 of the
Company's Certificate of Incorporation to read as follows:
"4. The total number of shares of all classes of stock which the corporation
shall have authority to issue is Two Billion Three Hundred Twenty-Five
Million (2,325,000,000) shares, of which Five Million (5,000,000) shares
shall be shares of the class of Preferred Stock without par value
(hereinafter called "Preferred stock"), and Two Billion Three Hundred Twenty
Million (2,320,000,000) shares shall be shares of the class of Common Stock
with the par value of $1 per share (hereinafter called "common stock")."
The Board of Directors would have sole discretion to issue the additional shares
of common stock from time to time for any corporate purpose, including in
reaction to any unsolicited acquisition proposal, without further action by the
stockholders. The terms of any one or more additional series of preferred stock,
including dividend rates, conversion prices, voting rights, redemption prices,
maturity dates and similar matters would also be determined solely by the Board
of Directors. Any preferred stock issued would be senior to common stock with
respect to dividends, liquidation rights and other attributes. Holders of stock
of the Company are not now and will not be entitled to preemptive rights.
In connection with the stock split in the form of a 100% stock dividend, a
transfer of $1 for each additional share of common stock issued, or
approximately $000,000,000, will be made from the Company's additional paid-in
capital account to its common stock account as of May 15, 1998, the date on
which stockholders of record will be entitled to the additional shares, so that
the additional shares to be issued will be fully paid. The amounts so
transferred will no longer be legally available for distribution to stockholders
as dividends; however, it is estimated that the amount of surplus which will be
legally available for dividends after this transfer will exceed $000,000,000.
Following the increase of capital in the common stock account becoming
effective, certificates representing the additional shares will be distributed
by the Corporation to stockholders of record as of May 15, 1998, without any
further action by the stockholders.
The Corporation will apply for listing on the New York Stock Exchange and other
exchanges on which the Company's shares are listed of the additional shares of
common stock to be issued. As a result of the proposed stock split in the form
of a 100% stock dividend, brokerage commissions and transfer taxes on any
subsequent trades of the stock may increase.
In the opinion of counsel for the Company, the adoption of the proposed
amendment and the issuance of the additional shares in connection with the stock
split in the form of a 100% stock dividend will result in no gain or loss or any
other form of taxable income for United States federal income tax purposes. The
laws of jurisdictions other than the United States may impose income taxes on
the issuance of the additional shares in connection with the stock split in the
form of a 100% stock dividend, and stockholders subject to those laws are urged
to consult their tax advisors.
Recommendation of the Board of Directors
An affirmative majority of the votes entitled to be cast at the meeting is
required for approval of the proposed amendment to Article 4 of the Certificate
of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO ARTICLE 4 OF THE
CERTIFICATE OF INCORPORATION, WHICH IS DESIGNATED AS PROPOSAL 2 ON THE ENCLOSED
PROXY.
3. 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 1998, 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 1998 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. 2 ON THE ENCLOSED PROXY.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, solicitations may also be made by personal interview,
telegram and telephone. The Company has retained Georgeson & Company Inc., New
York, New York, to assist in the solicitation of proxies using the means
referred to above at a cost of $18,000 plus reasonable expenses. Arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to their principals, and the
Company will reimburse them for their expenses in so doing. In addition,
directors, officers and other regular employees of the Company may request the
return of proxies by telephone or telegram, in person.
VOTING OF PROXIES
Under the by-laws of the Company, as permitted by Delaware law, the required
quorum for the meeting is 33 1/3% in interest of the shares outstanding and
entitled to vote at the meeting, a plurality of the votes properly cast for the
election of directors by the stockholders attending the meeting in person or by
proxy will elect directors to office, an affirmative majority of the votes
entitled to be cast at the meeting is required for approval of proposal 2 and an
affirmative majority of the votes properly cast at the meeting in person or by
proxy is required for approval of proposal 3.
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 3. 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 3) are approved under Delaware law and the by-laws of the Company.
However, abstentions and broker non-votes will have the effect of a negative
vote in determining whether the proposed amendment to Article 4 of the
Certificate of Incorporation (Proposal 2) is approved under Delaware law and the
by-laws of the Company, because that proposal requires an affirmative majority
of the votes entitled to be cast at the meeting for approval.
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 1998 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, 1997, 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 1999 Annual Meeting must be received by the
Company on or before November 13, 1998.
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 12, 1999, to be
considered for the 1999 Annual Meeting. The requirements for submitting such
proposals are set forth in the Company's by-laws.
OTHER MATTERS
Except for matters described in this proxy statement, the Board of Directors
does not know of any matter that will or may be presented at the meeting. With
respect to any such proposals not now known to the Board of Directors, the
persons named as proxies intend to vote the shares they represent in accordance
with their judgment.
450-PS-97
