-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, UBewLCfOwCJyM/ajt4dK44HJVl1iPos9vEZraYm5f7cvOJjWTX4ZsVcSzlwo4Y14 UAu5ZQ4Z5iqfT9oXkIBaGw== 0000950156-95-000043.txt : 19950518 0000950156-95-000043.hdr.sgml : 19950518 ACCESSION NUMBER: 0000950156-95-000043 CONFORMED SUBMISSION TYPE: PRER14A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19950217 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GILLETTE CO CENTRAL INDEX KEY: 0000041499 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 041366970 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRER14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-00922 FILM NUMBER: 95513592 BUSINESS ADDRESS: STREET 1: 3900 PRUDENTIAL TOWER BLDG CITY: BOSTON STATE: MA ZIP: 02199 BUSINESS PHONE: 6174217000 MAIL ADDRESS: STREET 1: PRUDENTIAL TOWER BLDG CITY: BOSTON STATE: MA ZIP: 02199 FORMER COMPANY: FORMER CONFORMED NAME: GILLETTE SAFETY RAZOR CO DATE OF NAME CHANGE: 19660911 PRER14A 1 THE GILLETTE COMPANY NOTICE AND PROXY March 16,1995 Gillette Stockholders: You are cordially invited to attend the 1995 Annual Meeting of the stockholders of The Gillette Company to be held at 10:00 a.m. on Thursday, April 20, 1995, at the John F. Kennedy Library and Museum, Columbia Point, Boston, Massachusetts. At the meeting, we will vote on the proposals described in the accompanying Notice and Proxy Statement. We will also report to you on the operations of the Company. You will have the opportunity to ask questions about the business that may be of general interest to stockholders. Your vote is important regardless of how many shares you own. Please take a few minutes now to review the proxy statement and to sign and date your proxy and return it in the envelope provided. You may attend the meeting and vote in person even if you have previously returned your proxy. I look forward to seeing you at the meeting. Very truly yours, NOTICE OF ANNUAL MEETING OF THE STOCKHOLDERS The 1995 Annual Meeting of the stockholders of The Gillette Company will be held at the John F. Kennedy Library and Museum, Columbia Point, Boston, Massachusetts, on Thursday, April 20, 1995, at 10:00 a.m. for the following purposes: 1. To elect four directors for terms to expire at the 1998 Annual Meeting of the stockholders. 2. To elect a director to the class of directors whose term expires at the 1997 Annual Meeting of the stockholders. 3. In connection with a proposed 2-for-1 stock split, in the form of a 100% common stock dividend, to vote on the approval of an amendment to the Certificate of Incorporation to increase the Authorized $1 par value common stock from 580,000,000 shares to 1,160,000,000 shares, as described in the accompanying proxy statement 4. To vote on the proposed amendment of the 1971 Stock Option Plan as described in the accompanying proxy statement. 5. To vote on the approval of the appointment of auditors for the year 1995. 6. To transact such other business as may properly come before the meeting and any and all adjournments thereof. The Board of Directors has fixed the close of business on March 1, 1995, as the record date for the determination of the stockholders entitled to notice of and to vote at the meeting. A list of such stockholders will be available at the time and place of the meeting and, during the ten days prior to the meeting, at the office of the Secretary of the Company at the above address. If you indicate that you plan to attend the meeting by marking the appropriate space on the proxy card, an admission ticket will be sent approximately one week in advance of the meeting. You should bring a form of personal identification to the meeting with you. If your shares are held of record by a broker, bank or other nominee and you wish to attend the meeting, you must obtain a letter from the broker, bank or other nominee confirming your beneficial ownership of the shares and bring it to the meeting. In order to vote your shares at the meeting, you must obtain from the record holder a proxy issued in your name. Whether or not you expect to attend, WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. By order of the Board of Directors Jill C. Richardson, Secretary Boston, Massachusetts March 16,1995 March 16,1995 PROXY STATEMENT INTRODUCTION This proxy statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors for the 1995 Annual Meeting of the stockholders of the Company on April 20, 1995. The Notice of Annual Meeting, this proxy statement and the accompanying proxy are being mailed to stockholders on or about March 16,1995. You can ensure that your shares are voted at the meeting by signing and dating the enclosed proxy and returning it in the envelope provided. Sending in a signed proxy will not affect your right to attend the meeting and vote in person. You may revoke your proxy at any time before it is voted by notifying the Company's Transfer Agent, The First National Bank of Boston, P.O. Box 471, Boston, Massachusetts 02102-9901 in writing, or by executing a subsequent proxy, which revokes your previously executed proxy. The enclosed proxy will also serve as a confidential voting instruction with respect to the Company's employees' savings plans, Employee Stock Ownership Plan ("ESOP") and Global Employee Stock Ownership Plan ("GESOP"). If voting instructions have not been received from a participant by April 12, 1995, the shares allocated to the participant's account(s) and ESOP and GESOP shares that have not been allocated to participant accounts will be voted on each issue in proportion to the shares as to which voting instructions have been returned by other participants of each respective plan. 1. ELECTION OF DIRECTORS FOR TERMS TO EXPIRE AT THE 1998 ANNUAL MEETING OF THE STOCKHOLDERS At the meeting, four directors, Wilbur H. Gantz, Richard R. Pivirotto, Juan M. Steta and Alfred M. Zeien, are to be elected to serve for terms that expire at the 1998 Annual Meeting of the stockholders. Mr. Zeien has agreed, at the request of the Board of Directors, to remain as Chairman and Chief Executive Officer beyond his normal retirement date of March 1, 1995. Information regarding the Board's four nominees for directors to this class is set forth at page 2. The accompanying proxy will be voted for the election of the Board's nominees unless contrary instructions are given. If any nominee is unable to serve, which is not anticipated, the persons named as proxies intend to vote for the remaining Board nominees and, unless the number of directors is reduced by the Board of Directors, for such other person as the Board of Directors may designate. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS FOR TERMS TO EXPIRE AT THE 1998 ANNUAL MEETING OF STOCKHOLDERS WHICH IS DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY. 2. ELECTION OF DIRECTOR TO THE CLASS OF DIRECTORS WHOSE TERM EXPIRES AT THE 1997 ANNUAL MEETING OF THE STOCKHOLDERS At the meeting, Mr. Hawley, Executive Vice President of the Company, is to be elected to serve for a term that expires at the 1997 Annual Meeting of the stockholders. The Board of Directors intends to elect Mr. Hawley President and Chief Operating Officer on April 20, 1995, subject to his election as a director. Additional information regarding Mr. Hawley, the Board's nominee to this class, is set forth at page 4. The accompanying proxy will be voted for the election of the Board's nominee unless contrary instructions are given. If the nominee is unable to serve, which is not anticipated, the persons named as proxies intend, unless the number of directors is set to reflect that development by the Board of Directors, to vote for such other person as the Board of Directors may designate. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF A DIRECTOR FOR A TERM TO EXPIRE AT THE 1997 ANNUAL MEETING, WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON THE ENCLOSED PROXY. Information regarding the seven directors whose terms expire in 1996 and 1997 is set forth at pages 3 and 4 . NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS FOR THREE-YEAR TERMS TO EXPIRE AT THE 1998 ANNUAL MEETING OF THE STOCKHOLDERS WILBUR H. GANTZ Director since 1992 "Photo of Mr. Gantz" Mr. Gantz, 57 years of age, is President, Chief Executive Officer and a director of PathoGenesis Corporation, a biopharmaceutical company. He served as President of Baxter International, Inc., a manufacturer and marketer of health care products, from 1987 to 1992. He joined Baxter International, Inc. in 1966 and held various management positions prior to becoming its Chief Operating Officer in 1983. Mr. Gantz is a director of W.W. Grainger and Company; Bank of Montreal; Harris Bankcorp; and Harris Trust and Savings Bank. RICHARD R. PIVIROTTO Director since 1980 "Photo of Mr. Pivirotto" Mr. Pivirotto, 64 years of age, is President of Richard R. Pivirotto Co., Inc., a management consulting firm. He served as President of Associated Dry Goods Corporation, a retail department store chain, from 1972 to 1976 and as Chairman of its Board of Directors from 1976 to February 1981. He is a director of General American Investors Company, Inc.; Immunomedics, Inc.; New York Life Insurance Company; and Westinghouse Electric Corporation. JUAN M. STETA Director since 1987 "Photo of Mr. Steta" Mr. Steta, 68 years of age, is of counsel to the law firm of Santamarina y Steta, Mexico City, which is engaged in a general business practice. He joined the firm in 1949, was elected a partner in 1956 and served in that capacity until 1992. He is Chairman of the Board of Quimicos y Derivados and T & N de Mexico and is a director of several other Mexican corporations, including General Motors de Mexico, B.I.P. Plastics and Grupo IDESA. He is also a director of Barnes Group Inc. in Bristol, Connecticut. ALFRED M. ZEIEN Director since 1980 "Photo of Mr. Zeien" Mr. Zeien, 65 years of age, is Chairman of the Board and Chief Executive Officer. He joined the Company in 1968 and served as Chairman of the Board of Management of Braun AG, a Gillette subsidiary, from 1976 to 1978 and as Senior Vice President, Technical Operations, from 1978 to 1981. He was elected Vice Chairman of the Board in 1981. In that capacity, he served as the Company's senior technical officer and headed the new business development group until November 1987, when he assumed responsibility for Gillette International and the Diversified Companies. He was elected President and Chief Operating Officer in January 1991 and Chairman and Chief Executive Officer in February 1991. Mr. Zeien is a director of Bank of Boston Corporation; The First National Bank of Boston; Massachusetts Mutual Life Insurance Company; Polaroid Corporation; Raytheon Company; and Repligen Corporation. MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE TERMS EXPIRE AT THE 1996 ANNUAL MEETING OF THE STOCKHOLDERS WARREN E. BUFFETT Director since 1989 "Photo of Mr. Buffett" Mr. Buffett, 64 years of age, is Chairman of the Board and Chief Executive Officer of Berkshire Hathaway Inc., a company engaged in a number of diverse business activities, the most important of which is the property and casualty insurance business. Prior to assuming those positions in 1970, he was a general partner of Buffett Partnership, Ltd. He is a director of Capital Cities/ABC, Inc., The Coca-Cola Company, Salomon Inc and US Air Group. MICHAEL B. GIFFORD Director since 1993 "Photo of Mr. Gifford" Mr. Gifford, 59 years of age, is Managing Director and Chief Executive of The Rank Organisation Plc, London, England, a leisure and entertainment company. He has served in that capacity since 1983. He was Finance Director of Cadbury Schweppes plc from 1978 to 1983 and Chief Executive of Cadbury Schweppes Australia from 1975 to 1978. He is also a director of English China Clays plc. CAROL R. GOLDBERG Director since 1990 "Photo of Mrs. Goldberg" Mrs. Goldberg, 63 years of age, is President of The Avcar Group, Ltd., a management consulting firm. She was President and Chief Operating Officer of The Stop & Shop Companies, Inc., a retail store chain, from 1985 to 1989. She joined Stop & Shop in 1959 and served in various management positions prior to her election as Executive Vice President and Chief Operating Officer in 1982. She served as a director of that Company from 1972 to 1989. She also serves as a director of America Service Group, Inc., Boston Municipal Research Bureau and the Kennedy Library Foundation. JOSEPH E. MULLANEY Director since 1990 "Photo of Mr. Mullaney" Mr. Mullaney, 61 years of age, is Vice Chairman of the Board. He joined the Company in 1972 as Associate General Counsel and was elected General Counsel in 1973, Vice President in 1975, Senior Vice President with responsibilities for legal and governmental affairs in 1977 and Vice Chairman in 1990. He serves as a director of Boston Municipal Research Bureau, the Greater Boston Legal Services Corporation, the Greater Boston Chamber of Commerce, the New England Legal Foundation and the World Affairs Council of Boston. He is also a member of the Board of Trustees of the Massachusetts Taxpayers Foundation, Inc. MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE TERMS EXPIRE AT THE 1997 ANNUAL MEETING OF THE STOCKHOLDERS HERBERT H. JACOBI Director since 1981 "Photo of Mr. Jacobi" Mr. Jacobi, 60 years of age, has been Chairman of the Managing Partners of Trinkaus & Burkhardt, a German bank, since 1981. The Bank is affiliated with Britain's Midland Bank plc, a member of the Hongkong Bank Group. He was a managing partner of Berliner Handels- und Frankfurter Bank from 1977 until 1981 and an Executive Vice President of Chase Manhattan Bank from 1975 to 1977. Mr. Jacobi is a director of Amtrol, Inc.; Atlanta AG; Braun AG, a Gillette subsidiary; and Midland Bank plc. He is also a member of the Partnership Council of Freshfields, a U.K. law firm, and Vice Chairman of Midland Bank France S.A. He is President of the Northrhine-Westfalia Stock Exchange in Duesseldorf and a director of Deutsche Boerse AG in Frankfurt. ALEXANDER B. TROWBRIDGE Director since 1990 "Photo of Mr. Trowbridge" Mr. Trowbridge, 65 years of age, is President of Trowbridge Partners Inc., a management consulting firm. He was President of National Association of Manufacturers, a trade organization, from 1980 through 1989. He was Vice Chairman of Allied Chemical Corporation (now Allied-Signal Corporation) from 1976 to 1980, President of The Conference Board, Inc. from 1970 to 1976, President of American Management Association from 1968 to 1970 and U.S. Secretary of Commerce from 1967 to 1968. Mr. Trowbridge is a director of Harris Corporation; ICOS Corporation; New England Mutual Life Insurance Company; PHH Corporation; The Rouse Company; The Sun Company, Inc.; SunResorts International N.A. Ltd.; E.M. Warburg Pincus Counsellors Funds; and WMX Technologies Inc. He is a charter trustee of Phillips Academy, Andover. JOSEPH F. TURLEY Director since 1980 "Photo of Mr. Turley" Mr. Turley, 69 years of age, was President and Chief Operating Officer of the Company until his retirement in 1988. He joined the Company in 1960 and served as General Manager of the Gillette subsidiary in Spain, as President of Gillette Canada and, from 1971 to 1976, as President of the Safety Razor Division. He was Executive Vice President in charge of Gillette North America from 1976 to February 1981, when he became President and Chief Operating Officer. Mr. Turley is a director of Copley Properties, Inc. and EG&G, Inc., and is a trustee of five groups of mutual funds sponsored by New England Mutual Life Insurance Company. NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS FOR A TWO-YEAR TERM TO EXPIRE AT THE 1997 ANNUAL MEETING OF THE STOCKHOLDERS MICHAEL C. HAWLEY "Photo of Mr. Hawley" Mr. Hawley, 57 years of age, is Executive Vice President of the Company's International Group. He joined the Company in 1961, and served as General Manager of Gillette Colombia from 1972 to 1975 and Group General Manager of the Asia Pacific Group beginning in 1976. In 1985 he was elected President, Oral-B Laboratories, Inc., a Gillette subsidiary. Mr. Hawley was elected to his present position in December 1993. BOARD MEETINGS The Board of Directors held ten meetings in 1994. COMMITTEES OF THE BOARD The Board of Directors has the following standing committees, which are composed entirely of directors who are not employees of the Company, except that the Chief Executive Officer is an ex officio member of the Executive Committee. Audit Committee The members are Mr. Steta (Chairman), Mr. Buffett, Mr. Gifford, Mrs. Goldberg and Mr. Turley. The Audit Committee recommends the appointment of the Company's independent auditors, meets with the auditors to review their report on the financial operations of the business, and approves the audit services and any other services to be provided. It reviews the Company's internal audit function and the performance and adequacy of the Company's benefit plan fund managers. It also reviews compliance with the Company's statement of policy as to the conduct of its business. Four meetings of the Committee were held in 1994. Executive Committee The members are Mr. Buffett (Chairman), Mrs. Goldberg, Mr. Steta, Mr. Turley and Mr. Zeien. The Executive Committee, acting with the Finance Committee, reviews and makes recommendations on significant capital investment proposals. It is also available to review and make recommendations to the Board with respect to the nature of the business, plans for future growth, senior management succession and stockholder relations. The Committee has the added functions of reviewing the composition and responsibilities of the Board and its committees and recommending to the Board nominees for election as directors. It will consider nominations by stockholders, which should be submitted in writing to the Chairman of the Committee in care of the Secretary of the Company. Ten meetings of the Committee were held in 1994. Finance Committee The members are Mr. Jacobi (Chairman), Mr. Gantz, Mr. Gifford, Mr. Pivirotto and Mr. Trowbridge. The Finance Committee reviews and makes recommendations with respect to the Company's financial policies, including cash flow, borrowing and dividend policy and the financial terms of acquisitions and dispositions. Acting with the Executive Committee, it reviews and makes recommendations on significant capital investment proposals. Nine meetings of the Committee were held in 1994. Personnel Committee The members are Mr. Pivirotto (Chairman), Mr. Gantz, Mr. Jacobi and Mr. Trowbridge. The Personnel Committee reviews and makes recommendations to the management or Board on personnel policies and plans or practices relating to compensation. It also administers the Company's executive incentive compensation plans and approves the compensation of all officers and certain other senior executives. Nine meetings of the Committee were held in 1994 OUTSTANDING VOTING SECURITIES On March 1, 1995, the record date for the 1995 Annual Meeting of the stockholders, there were outstanding and entitled to vote 000,000,000 shares of the $1 par value common stock of the Company, entitled to one vote per share, and 000,000 shares of Series C ESOP Convertible Preferred Stock, entitled to 20 votes per share. The holders of the Company's common and preferred stock vote together as one class on all matters being submitted to a vote of the stockholders at the 1995 Annual Meeting. STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of March 1, 1995, Berkshire Hathaway Inc., located at 1440 Kiewit Plaza, Omaha, Nebraska 68131, beneficially owned, through six insurance subsidiaries, 24,000,000 shares, which constitute 10.9% of the outstanding common stock of the Company and 10.7% of the votes entitled to be cast by the holders of the outstanding voting securities of the Company. One of the six Berkshire Hathaway Inc. subsidiaries, National Indemnity Company, 3024 Harney Street, Omaha, Nebraska 68131, owned directly 15,000,000 of the 24,000,000 shares, or 6.8% of the outstanding common stock and 6.7% of the votes entitled to be cast by the holders of the outstanding voting securities of the Company. The capital stock of Berkshire Hathaway Inc. is beneficially owned approximately 41.6% by Mr. Buffett and a trust of which he is trustee but in which he has no economic interest and 3.2% by his wife, Susan T. Buffett. As of March 1, 1995, State Street Bank and Trust Company, P.O. Box 5259, Boston, Massachusetts 02101 ("State Street") held as Trustee of The Gillette Company Employee Stock Ownership Plan on behalf of Plan participants, 000,000 shares of Series C ESOP Convertible Preferred Stock which represent 100% of that class and 1.5% of the votes entitled to be cast by the holders of the Company's outstanding voting securities. State Street exercises shared voting and dispositive power over the shares. The following table sets forth the number of Gillette shares beneficially owned on March 1, 1995, by (i) each director, (ii) each of the executive officers named in the Summary Compensation Table at page 00 and (iii) all directors and current executive officers as a group. All individuals listed in the table have sole voting and investment power over the shares reported as owned, except as otherwise stated.
Unrestricted Stock Beneficially Title of Owned, Excluding Option Shares Exercisable Name Class Options Within 60 days - ---- -------- ------- -------------- Warren E. Buffett Common 24,000,000 3,000 Wilbur H. Gantz Common 0 3,000 Michael B. Gifford Common 0 2,000 Carol R. Goldberg Common 0 3,000 Michael C. Hawley Common 0 54,000 Series C Pfd. 0 -- Herbert H. Jacobi Common 0 3,000 Jacques Lagarde Common 0 97,500 Series C Pfd. 0 -- Joseph E. Mullaney Common 0 91,500 Series C Pfd. 0 -- Robert J. Murray Common 0 136,800 Series C Pfd. 0 -- Richard R. Pivirotto Common 0 3,000 Juan M. Steta Common 0 3,000 Alexander B. Trowbridge Common 2,800 Joseph F. Turley Common 0 3,000 Alfred M. Zeien Common 0 245,000 Series C Pfd. 0 -- All directors and current executive Common 0 762,700 officers as a group Series C Pfd. 0 -- Except as indicated in note (2) below, the total number of shares beneficially owned in each class constitutes less than 1% of the outstanding shares in that class. Owned by insurance subsidiaries of Berkshire Hathaway Inc., a company which Mr. Buffett may be deemed to control. Mr. Buffett shares voting and investment power over the shares, which represent 10.9% of the outstanding common stock, as described under this item at page 0. Mrs. Goldberg has no voting and investment power over 0 of the shares reported as owned and disclaims beneficial ownership with respect to those shares. Includes common shares held under the Company's Employees' Savings Plan as follows: Mr. Hawley 0 shares; Mr. Lagarde 0 shares; Mr. Mullaney 0 shares; Mr. Murray 0 shares; Mr. Zeien 0 shares; and the total of all employee directors and all current executive officers, including the named current executive officers, as a group 0 shares. Under the Employees' Savings Plan and ESOP, participants may direct the voting of shares held in their accounts in accordance with the shared voting procedure described at page 1 and share investment power with the plans' trustees in accordance with the terms of the plans. In addition, Mr. Mullaney shares voting and investment power over 0 of the common shares reported as owned by him; Mr. Murray has no voting and investment power over 0 of the shares reported as owned by him and disclaims beneficial ownership with regard to those shares; and one executive officer shares voting and investment power over 0 of the total number of common shares reported as owned by the group and disclaims beneficial ownership with regard to 0 of the total number of common shares reported as owned by the group. Mr. Steta has no voting and investment power over 0 of the shares reported as owned by him and disclaims beneficial ownership with regard to those shares.
CERTAIN TRANSACTIONS WITH DIRECTORS AND OFFICERS Berkshire Hathaway Inc. and the Company continue to be subject to their agreement of July 20, 1989. Management, after consultation with legal and financial advisors, determined that the terms of the agreement, as described below, were fair to the Company. The agreement provides that, without the approval of the Company's Board of Directors, until July 20, 1999, Berkshire Hathaway Inc. will not acquire shares giving it a total of more than 14.1% of the voting power of the Company's outstanding voting securities (other than through the exercise of rights, warrants or convertible securities received by Berkshire Hathaway Inc. with respect to its common stock) or become a participant in a proxy solicitation or a member of another group within the meaning of Section 13(d) of the Securities Exchange Act of 1934 with respect to the Company. Berkshire Hathaway Inc. also remains subject to its agreement to use its best efforts not to knowingly sell securities representing more than 3% of the voting power of the Company's outstanding voting securities to any one entity or group except in certain specified circumstances related to a change in control of the Company, and to give the Company certain rights of first refusal in the event of sales of the Company's voting securities by Berkshire Hathaway Inc. If the Company does not exercise its right of first refusal, Berkshire Hathaway Inc. has the right to have the Company register, either in its entirety or in increments of $100,000,000 or more from time to time, one or more public offerings of the Gillette common stock held by Berkshire Hathaway Inc. While Berkshire Hathaway Inc. owns at least 5% of the voting power of the Company's securities, the Company's directors will also continue to be subject to their agreement to use their best efforts to secure the election to the Board by the shareholders of Mr. Buffett or such other individual reasonably acceptable to the Company as Berkshire Hathaway Inc. might nominate. Fees paid during 1994 to the law firm of Santamarina y Steta, of which Mr. Steta is of counsel, are reported under Compensation of Directors below. COMPENSATION OF DIRECTORS Directors who are not employees of the Company or its subsidiaries are paid an annual Board retainer fee of $25,000 plus a fee of $1,000 for attendance at each meeting of the Board of Directors or of its committees. Under the Outside Directors' Stock Ownership Plan one half of all annual Board retainer fees is paid in common stock of the Company. Committee Chairmen receive an additional retainer of $3,000 a year. The directors may defer payment of all or any portion of cash retainers or fees until after retirement or resignation from the Board or until an earlier change in control. Deferred amounts accrue interest equivalents. Upon the death of a director, any unpaid amounts become payable in a lump sum. Directors who are not employees of the Company or its subsidiaries also may be paid for service as directors of Company subsidiaries. During 1994 Mr. Jacobi received standard outside director fees totaling $10,481 for his services as a director of Braun AG. Each non-employee director receives an automatic stock option grant, effective two business days following the date of the annual meeting of the stockholders, to purchase 1,000 shares of the common stock of the Company at a price equal to the fair market value on the date of grant. In 1994 the grants were made on April 25 at a price of $66.94 per share. Options granted to non-employee directors are designated as non-ISO's, the terms of which are generally similar to those granted to employees, which are described at page 00. A director who has attained age 70 cannot stand for reelection to the Board. Directors who have served as Board members for five or more years receive an annual retirement benefit which is equal to the annual retainer in effect when they leave the Board and is payable for a period equal to their years of service. No credit is given for service as a director while an employee of the Company. Payment of the benefit commences when service ends, or at age 65 if a director leaves the Board at an earlier age. Upon the death of a director, the present value of any unpaid amount becomes payable in a lump sum. In the event of a change in control, a director leaving the Board would be entitled to receive immediate payment of the present value of the full retirement benefit. A director who at any time acts in a manner contrary to the best interests of the Company risks forfeiture of the future retirement benefit. During 1994 the Company and its Mexican subsidiaries received legal advice from the law firm of Santamarina y Steta, of which Mr. Steta is of counsel, and paid the firm a total of $453,675 for its services. The Company believes that all such services were provided on terms at least as favorable to the Company as those of comparable firms retained to provide similar legal services to the Company. It is expected that Santamarina y Steta will continue to provide legal services to the Company and its subsidiaries during 1995. GILLETTE COMPARATIVE FIVE-YEAR INVESTMENT PERFORMANCE The following chart compares the total return on $100 invested in Gillette common stock for the five-year period from December 31, 1989 through December 31, 1994 with a similar investment in the Standard & Poor's 500 Stock Index and with a peer group consisting of ten consumer products companies of generally similar size.
1989 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- ---- Gillette $100 $130 $235 $241 $256 $326 Peer Group $100 $118 $173 $159 $157 $175 S&P 500 $100 $ 97 $126 $136 $150 $152
Peer Group Companies: Bristol-Myers Squibb Company Procter & Gamble Company American Home Products Corporation Colgate-Palmolive Company Rubbermaid Incorporated Avon Products, Inc. Johnson & Johnson Warner-Lambert Company The Black & Decker Corporation Pfizer Inc.
PERSONNEL COMMITTEE REPORT ON EXECUTIVE COMPENSATION Overall Objectives and Programs The objective of the Company's executive compensation program is to provide compensation that will attract and retain executives, to motivate each executive toward the achievement of the Company's short and long-term financial and other goals, as reflected in its statement of mission and values and in its strategic business plan, and to recognize individual contributions as well as overall business results. In order to achieve this objective, the primary focus of the Personnel Committee has been on the competitiveness of each of the key elements of executive compensation -- base salary, bonus and stock option grants -- and the compensation package as a whole. In general, the Committee also believes that total compensation should reflect the fact that the Company's performance compares very favorably with that of the peer group companies and with that of the broader group of companies represented in the Standard & Poor's 500 Stock Index. Overall executive compensation is dependent upon performance against goals assigned to each executive under the Company's management by objectives program. These objectives are designed to further the Company's strategic business plan and mission and values. Objectives include quantitative factors that directly improve the Company's short-term financial performance, as well as qualitative factors that strengthen the Company's ability to enhance profitable growth over the long term, such as demonstrated leadership ability, management development, insuring compliance with law and Company policies, and anticipating and responding to changing market and economic conditions. Each year the Committee reviews a report prepared by independent compensation consultants assessing the competitiveness of the Company's program for the past year with the peer group used for compensation comparisons ("the Compensation Peer Group") to determine whether the Company has achieved its executive compensation program objective and to help the Committee determine whether there is a need to make prospective adjustments in the compensation of executive officers. The Compensation Peer Group includes most of the companies listed on page 0, as well as a number of other companies with which the Company competes for executive talent. Despite the substantial similarities between the two groups, the companies included in the Compensation Peer Group are not identical to those included in the peer group index in the Investment Performance Graph included in this proxy statement because the Committee believes that the group of companies with which the Company competes for executive talent is broader and not identical to that appropriate for comparing investment performance. Over the last several years the Personnel Committee has sought to relate an increasingly greater percentage of total executive compensation directly to the financial performance of the Company and to the part each executive played in achieving that performance. This has resulted in a compensation package in which a greater portion of each executive officer's compensation is contingent upon the achievement of specific financial targets for the year. For 1994 the bonus represented approximately 39% of total direct compensation (base salary plus bonus), a proportion believed to be generally in line with that of the Compensation Peer Group. It has also been the Committee's objective that, in any year in which a budgeted bonus pool is earned under the Incentive Bonus Plan and the Company's performance compares favorably with those shown on the Investment Performance Graph, the total direct compensation of the executive officers should be well above the median of direct compensation paid by the Compensation Peer Group. For the most recent period for which information is available, the total direct compensation of the executive officers was well above the median of direct compensation of the Compensation Peer Group. The Personnel Committee approves the base salary of the executive officers and, at its discretion, awards bonuses under the Incentive Bonus Plan and grants stock options under the Stock Option Plan. Base Salary In determining the salary of an executive officer, a salary range is assigned under a worldwide system of job evaluation based upon the level of responsibility, the qualifications and experience required and the need to provide, together with the Incentive Bonus Plan, competitive direct compensation. Salary increases are based upon periodic reevaluations of these factors and the performance of the executive in meeting individually assigned objectives. Incentive Bonus Plan Under the Incentive Bonus Plan, the Personnel Committee establishes bonus pools based on budgeted goals set at the outset of the year relating to profit from operations, return on assets, and sales (weighted 70%, 15% and 15%, respectively, for 1994) and establishes the minimum, budgeted, and maximum Company-wide aggregate bonus pools that may be earned based upon the achievement of those Company goals. For 1995 the weighting of the factors remains unchanged. In order for a bonus pool to be earned, a minimum profit from operations goal for the Company must be met. The actual amount of any pool is determined based upon the level of achievement of Company goals for the year. Company goals are translated to operating unit, staff and individual objectives and assigned to executives under the Company's management by objectives program. For the year 1994, the Plan provided for awards ranging from 5% to 70% of year-end salary based upon the performance of each executive officer against individually assigned objectives for the year, with the Committee having discretion to award a higher amount under special circumstances. At the time goals are set, a reserve equivalent to no more than 35% of the amount of the budgeted bonus pool may be established by the Committee from which bonuses may be awarded to eligible employees in operating units that achieve assigned objectives, even if the overall minimum profit from operations goal for the Company is not met. In addition, the Committee may, within certain limits, carry forward a portion of the bonus pool earned in any year for its discretionary use in the future. Stock Option Plan Stock option grants are intended to provide long-term incentives for the achievement of the Company's strategic business plan and mission and values and to align the executive officers' interests with those of the shareholders. The Stock Option Plan is the Company's sole long-term incentive plan for executive officers. Under the Plan, the Personnel Committee may award stock options for terms not to exceed ten years at no less than the fair market value of Gillette common stock on the date of grant. The size of any stock option grant is related to the individual's level of responsibility within the organization, and awards are made on a basis designed to be at or above the median value of grants under similar programs of companies in the Compensation Peer Group. Other Benefits In order to attract, motivate and retain employees, the Company also maintains a competitive benefits package, participation in which is not dependent upon performance. In general executive officers participate on the same basis as other employees in the Company's broad-based employee benefit plans: the Employees' Savings Plans, the Employee Stock Ownership Plan, and the Retirement Plans. Information on these plans is provided on pages 00 through 00. The executive officers, along with certain other executives, participate in an Executive Life Insurance Program and Estate Preservation Plan. Information on these programs is included in the footnotes to the Summary Compensation Table at page 00. The Personnel Committee has reviewed the impact of Section 162(m) of the Internal Revenue Code which, beginning in 1994, limits the deductibility of certain otherwise deductible compensation in excess of $1 million paid to the CEO and the next four most highly compensated executive officers. It is the policy of the Company to attempt to have all compensation treated as tax-deductible compensation wherever, in the judgement of the Personnel Committee, to do so would be consistent with the objectives of the compensation plan under which the compensation is paid. Accordingly, the Stock Option Plan and Stock Equivalent Unit Plan, as amended by the Board of Directors and approved at the 1994 Annual Meeting of stockholders and the Stock Option Plan as proposed to be amended at this meeting, fulfill the requirements for treatment as tax deductible compensation. The Committee has determined that to attempt to amend the Incentive Bonus Plan so that bonuses meet the definition of tax deductible compensation would require changes which would be contrary to the compensation philosophy underlying that plan and which would seriously impede the Committee's ability to administer the plan as designed in accordance with the judgement of the Committee. The Incentive Bonus Plan was deliberately designed so that individual bonuses were not to be dependent solely on objective or numerical criteria, thus allowing the Committee the flexibility to apply its independent judgement to reflect performance against qualitative strategic objectives. COMPENSATION OF CHIEF EXECUTIVE OFFICER As Chairman and Chief Executive Officer, Mr. Zeien's compensation, like that of the other executive officers of the Company, is set in accordance with the foregoing policies. Base Salary Mr. Zeien's base salary represents an effort by the Personnel Committee, after consideration of data contained in a report from the independent compensation consultants, to place his base salary at or above the median of salaries of chief executive officers in the Compensation Peer Group. Incentive Bonus Plan Mr. Zeien is responsible for the entire scope of the Company's worldwide business. His 1994 bonus was based upon his successful leadership in managing the business and balancing the Company's long and short-term objectives as described below. The Company's sales grew by 12%, to $6.07 billion in 1994, a record level. As compared to 1993 results before the effect of the 1993 realignment charges and the 1993 effect of mandated accounting changes, profit from operations in 1994 was $1,227 million, a 13% increase from the $1,087 million reported a year earlier; net income of $698 million was 18% higher than the $591 million of the same period in 1993; and earnings per common share rose at a rate of 18% over those of 1993. Return on average assets for 1994 held steady at 13%. The total market value of Gillette common stock increased by more than $3 billion to $16.6 billion as of the year ended December 31, 1994. The Company's financial position improved in 1994, with net debt declining 17% to $1,041 million and stockholders' equity increasing 36% to $2,017 million. These improvements were recognized by the major credit agencies raising the Company's long-term debt ratings to Aa3 (Moody's) and AA- (Standard & Poor's) and the Company's commercial paper rating to A1+ (Standard & Poor's). Significant progress was made during 1994 toward achievement of the Company's long-term growth goals -- clear worldwide leadership in core business categories and geographic expansion. The Company's continuing emphasis on technology-driven new products also continued to be apparent in 1994. In addition to strong growth in the newer geographic areas, a steady stream of new products was launched during the year. Investment in the three principal "growth drivers" -- research and development, capital spending and advertising -- in combination rose 14% over 1993 levels, exceeding the Company's sales growth rate, partly as a result of the reinvestment of funds made available by the realignment program announced in January 1994. As an indicator of the effectiveness of this investment in "growth drivers", 45% of the Company's 1994 sales came from products introduced in the last five years. The realignment program, with minor exceptions, is being implemented, and realignment activities are planned to be ongoing through the fourth quarter of 1995. Mr. Zeien is also responsible for insuring the Company's compliance with applicable laws and Company policies. Stock Option Plan The 1994 stock option grant to Mr. Zeien was based upon the Committee's judgement that stock options are designed as the Company's sole long-term incentive for executive officers and that the option granted, which was increased from 75,000 shares to 100,000 shares in 1994 after having remained unchanged in 1993 compared to the prior year, represents an amount believed by the Committee to be competitive in value with long-term incentives granted other chief executive officers of the companies in the Compensation Peer Group. Incentive Payment and Award At meetings on February 16, 1995, the Executive Committee recommended and the Board of Directors approved a plan to have Mr. Zeien, at the request of the Board, remain as Chairman of the Board and Chief Executive Officer of the Company and not retire from the Company on his normal retirement date of March 1, 1995, after which, if retired, he would receive pension payments under the Company's Retirement Plan as described at page 00. In order to provide an incentive to Mr. Zeien to continue his employment in these capacities, the Personnel Committee recommended and the Board approved a payment to Mr. Zeien of $500,000 if he continues as Chairman of the Board and Chief Executive Officer of the Company through March 1, 1996, with any such amount being payable to Mr. Zeien after his retirement, and made an option grant to Mr. Zeien effective February 21, 1995, of 75,000 shares which will become exercisable on February 21, 1996. The independent compensation consultants for the Company have advised the Personnel Committee that both the design and the level of this additional compensation for Mr. Zeien are well within current marketplace practices in similar situations. Richard R. Pivirotto (Chairman) Wilbur H. Gantz Herbert H. Jacobi Alexander B. Trowbridge 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
Long-Term All Other Annual Compensation Compensation Compensation ------------------- ------------------------------- ------------ Other # of Stock Long-Term Annual Options Incentive Name and Principal Position Year Salary Bonus Compensation Granted Payouts - --------------------------- ---- ------ ----- ------------ ------- ------- Alfred M. Zeien 1994 $1,000,000 $1,000,000 -- 100,000 -- $0 Chairman and Chief 1993 908,333 675,000 -- 75,000 -- 157,253 Executive Officer 1992 780,000 600,000 -- 75,000 -- 95,961 Joseph E. Mullaney 1994 445,000 200,000 -- 25,000 -- 0 Vice Chairman of the 1993 415,000 180,000 -- 25,000 -- 55,238 Board 1992 390,500 170,000 -- 25,000 -- 32,101 Michael C. Hawley 1994 377,917 250,000 $ 5,488 32,000 -- 0 Executive Vice President 1993 324,600 190,000 228,233 22,500 -- 33,371 Jacques Lagarde 1994 473,750 240,000 -- 32,000 -- 0 Executive Vice President 1993 417,250 170,000 109,399 30,000 $ 74,053 46,049 Robert J. Murray 1994 510,000 315,000 722 34,000 229,930 0 Executive Vice President 1993 470,000 265,000 1,567 32,000 385,267 52,824 1992 435,000 230,000 14,135 32,000 436,517 41,451 - --------------- Other Annual Compensation amounts represent taxes reimbursed by the Company relating to non-deductible relocation expenses incurred by the named individuals. Long-Term Incentive Payouts represent Stock Equivalent Unit Plan amounts paid or payable but deferred with respect to segments of awards vesting in 1994, plus amounts representing the growth in 1994 on prior years' deferrals. Awards granted to executive officers after 1984 were contingent upon the achievement of future performance goals. In 1990, it was decided to utilize larger grants of stock options as long-term incentives for executive officers and to discontinue granting Stock Equivalent Unit Plan awards to this group of officers. The amounts reported as All Other Compensation include the following payments or accruals under the Company's benefit and incentive plans: (i) Company contributions during 1994 under the Employees' Savings Plan and Supplemental Savings Plan as follows: Mr. Zeien $50,000, Mr. Mullaney $31,250, Mr. Hawley $23,967, Mr. Lagarde $32,188 and Mr. Murray $25,500. Under the plans, the Company contributes 50 cents for each dollar up to a maximum of 10% of salary and bonus saved by participants. In general, regular U.S. employees are eligible to participate. Certain limitations on the amount of benefits under tax-qualified plans such as the Employees' Savings Plan were imposed by the Employee Retirement Income Security Act of 1974, the Tax Equity and Fiscal Responsibility Act of 1982, the Tax Reform Act of 1986 and the Revenue Reconciliation Act of 1993. The Company adopted the Supplemental Savings Plan, as permitted by law, for the payment of amounts to employees who may be affected by those limitations, so that, in general, total benefits will continue to be calculated as before on the basis approved by the stockholders. (ii) Savings plan equivalents credited on 1994 Incentive Bonus Plan deferrals as follows: Mr. Zeien $50,000 and Mr. Murray $15,750. Before being selected to receive a bonus, participants have the option to defer until a future year or retirement, or until an earlier change in control, payment of all or a portion of any bonus that may be awarded. Savings plan equivalents represent amounts which would have been credited as Company contributions under the Employees' Savings Plan or Supplemental Savings Plan had payment of the bonuses not been deferred. (iii) For each of the named executive officers $0 which represents the value of Series C ESOP preferred shares allocated under the Employee Stock Ownership Plan ("ESOP") to each of their accounts. The ESOP was adopted in January 1990 as part of the Company's modified U.S. retiree medical benefit program. Since September 30, 1990, Series C ESOP preferred shares have been allocated quarterly to the accounts of eligible employees, generally on the basis of an equal amount per participant. In general, regular U.S. employees participate in the ESOP after completing one year of service with the Company. (iv) Company cost for the Executive Life Insurance Program as follows: Mr. Zeien $27,450, Mr. Mullaney $4,574, Mr. Hawley $2385, Mr. Lagarde $556 and Mr. Murray $2,742. The program provides coverage during employment equal to four times annual salary, subject to a $600,000 minimum and a $2,000,000 maximum, with the participant paying the premium for coverage equal to two times salary or $250,000, whichever is less. During retirement, a Company-paid death benefit equal to annual salary, subject to a $150,000 minimum and a $500,000 maximum, continues in effect for the life of the participant. (v) Company cost for the Estate Preservation Plan as follows: Mr. Zeien $16,247, Mr. Mullaney $13,050, Mr. Hawley $9,008, Mr. Lagarde $6,927 and Mr. Murray $7,732. The executive officers, as well as certain other officers, may participate in the Estate Preservation Program, under which the Company and the executive officer will share equally the cost of life insurance in the amount of $1,000,000 payable on the death of the survivor of each executive and his or her spouse, with the Company recovering its contribution at the end of a 15-year period, or if earlier, when the survivor of the executive and the executive's spouse dies.
Stock Options Granted in 1994
Grant Date Individual Grants Value - -------------------------------------------------------------------------------------- ----------- % Of Total Options Granted Grant Date Number of To Employees Per Share Present Value Name Options Granted In 1994 Exercise Price Expiration Date ($) - ---- --------------- ------- ----------------------------------- ------ Alfred M. Zeien 100,000 6.11% $68.00 06/15/04 $2,161,000 Joseph E. Mullaney 25,000 1.53% 68.00 06/15/04 540,250 Michael C. Hawley 32,000 1.95% 68.00 06/15/04 691,520 Jacques Lagarde 32,000 1.95% 68.00 06/15/04 691,520 Robert J. Murray 34,000 2.08% 68.00 06/15/04 734,740 - ----------- The exercise price of a stock option is equal to the average of the high and the low prices of Gillette shares traded on the date the option is granted. Payment upon exercise is made in cash or in shares of the Company's common stock or partially in cash and partially in shares. Options were valued using a Black-Scholes-based option pricing model, which generates a theoretical value based upon certain factors and assumptions. Therefore, the value which is calculated is not intended to predict future prices of the Corporation's common stock. The actual value of a stock option, if any, is dependent on the future price of the stock, overall stock market conditions and continued service with the Company since options remain exercisable for only a limited period following retirement, death or disability. There can be no assurance that the values reflected in this table or any other value will be achieved. In addition to stock value at the date of grant and the exercise price, which are identical, and the ten-year term of each option, the following assumptions were used to calculate the values reflected in the table: stock price volatility of 24% based on a one year daily stock price history, dividend yield of 1.2% based on the most recent quarter's annualized yield, and risk-free rate of return of 7% equal to the yield on a 10-year U.S. Treasury bond with a maturity matching the option term. The assumptions and calculations used were provided by independent compensation consultants. Options become exercisable one year from the date of grant. The options granted in 1994 become exercisable on June 16, 1995. At the time of grant, options may be designated as incentive stock options ("ISOs"), a type of option authorized under the 1981 amendments to the Internal Revenue Code. Options not so designated are granted as "non-ISOs". Options generally remain exercisable for ten years from the date of grant provided the recipient remains employed throughout that period. The post-retirement exercise period for employees is generally three months for an ISO, two years for a non-ISO granted before 1994 and three years for a non-ISO granted after 1993. If termination of employment occurs within one year after a change in control, as that term is described at page 00, any options held by the optionee that were not otherwise exercisable when employment ceased would become immediately exercisable.
Aggregated Stock Option Exercises During 1994 And 1994 Year-End Stock Option Values
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 At Fiscal Year-End Fiscal Year-End - ---- ----------------- ---------- --------------------- ------------------ Alfred M. Zeien 64,358 $2,664,695 Exercisable 245,000 $8,200,075 Unexercisable 100,000 712,500 Joseph E. Mullaney 11,500 570,025 Exercisable 91,500 3,304,328 Unexercisable 25,000 178,125 Michael C. Hawley 0 0 Exercisable 54,000 1,727,140 Unexercisable 32,000 228,000 Jacques Lagarde 0 0 Exercisable 97,500 3,511,598 Unexercisable 32,000 228,000 Robert J. Murray 1,000 43,280 Exercisable 136,800 5,073,736 Unexercisable 34,000 242,250 - ----------- The amounts shown are the total values realized by the named persons on exercises of options held for periods ranging from 5 to 8 years. The annualized values for the options exercised, calculated by dividing the total value realized by the number of years from the date of grant to the date of exercise, are as follows: Mr. Zeien $526,303, Mr. Mullaney $99,213 and Mr. Murray $5,410.
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.
Average Annual Compensation Annual Pension Used as Basis for 15 Years of 20 Years of 25 Years or More Computing Pension Service Service of Service - --------------------------- ----------- --------------- ---------------- $ 400,000 $120,000 $160,000 $200,000 600,000 180,000 240,000 300,000 800,000 240,000 320,000 400,000 1,000,000 300,000 400,000 500,000 1,200,000 360,000 480,000 600,000 1,400,000 420,000 560,000 700,000 1,600,000 480,000 640,000 800,000 1,800,000 540,000 720,000 900,000
In general, the benefit upon retirement at or after age 65 with 25 years or more of service is equal to 50% of the employee's average annual compensation (salary plus bonus, if any, as reported in the Summary Compensation Table at page 00) during the five calendar years of highest compensation included in the last ten calendar years of employment, minus 75% of primary social security benefits. Certain limitations on the amount of benefits under tax-qualified plans, such as the Retirement Plan, were imposed by the Employee Retirement Income Security Act of 1974, the Tax Equity and Fiscal Responsibility Act of 1982, the Tax Reform Act of 1986 and the Revenue Reconciliation Act of 1993. The Company adopted the Supplemental Retirement Plan, as permitted by law, for the payment of amounts to employees who may be affected by those limitations, so that, in general, total benefits will continue to be calculated on the basis approved by the stockholders, as described above. As of December 31, 1994, the persons named in the Summary Compensation Table at page 00 had the following years of service under the Retirement Plan: Mr. Zeien 27 years; Mr. Mullaney 23 years; Mr. Hawley 31 years; Mr. Lagarde 24 years and Mr. Murray 34 years. Change in Control and Severance Arrangements The Board of Directors has adopted a severance pay and benefit arrangement to become effective in the event of a change in control. In general, the arrangement would obligate any acquirer to continue long-standing Gillette practice regarding severance payments to terminated employees. Severance payments to U.S. employees whose employment is terminated under certain circumstances after a change in control would be based on seniority and position level, subject to a minimum for certain key employees, including certain executive officers. Severance payments to employees in foreign countries would comply with local law and follow past Gillette practice. The maximum amount payable under the severance pay arrangement, including any benefit plan payments resulting from a change in control, is 2.99 times average annual compensation for the five-year period preceding termination of employment. For most employees, including the named persons, it is unlikely that payments would reach the maximum. The aggregate of severance pay excluding benefit plan payments to the persons named in the Summary Compensation Table at page 00 on December 31, 1994, in the event of a change in control on that date, would have been $5,730,000, or 2 times the amount of their base salary on that date. In general, benefit plan payments resulting from a change in control are dependent upon salary, but vary with seniority and position level. A change in control is defined in certain of the Company's benefit plans and, in general, means those events by which control of the Company passes to another person or corporation. Those events include a purchase of the Company's stock pursuant to a tender offer, the acquisition of 20% or more of the Company's stock by a person or group, a merger, or a sale of substantially all of the assets of the Company. In addition, a change in control would occur if, during any two-year period, the individuals who were serving on the Board of Directors of the Company at the beginning of the period or who were nominated for election or elected to the Board during the period with the affirmative vote of at least two-thirds of such individuals still in office, ceased to constitute a majority of the Board. Benefits generally comparable to those applicable in the event of a change in control of the Company have been extended to employees, including officers, whose employment terminates pursuant to the Company's Realignment Plan announced in January 1994. 3. AMENDMENT TO ARTICLE 4 OF THE CERTIFICATE OF INCORPORATION ADDITIONAL COMMON STOCK -- STOCK SPLIT IN THE FORM OF A 100% COMMON STOCK DIVIDEND The Board of Directors recommends an amendment to the Certificate of Incorporation which would increase the authorized $1 par value common stock from 580,000,000 shares to 1,160,000,000 shares. Subject to the approval of this amendment by the stockholders, the Board has authorized the issuance to stockholders of record on June 1, 1995, of one additional $1 par value share of common stock as a dividend on each issued common share. The Board of Directors believes that the stock split in the form of a 100% common stock dividend, is in the best interests of the stockholders because it will place the market price of the common stock in a range more attractive to investors, particularly individuals, and may result in a broader market for the stock and more widespread ownership of the Company. The authorized common stock was last increased in 1991, when the stockholders approved an amendment to the Certificate of Incorporation increasing the authorized common stock by 290,000,000 shares to the present 580,000,000 shares, with the authorized preferred stock remaining at the present 5,000,000 shares. As of March 1, 1995, of the authorized preferred stock, 400,000 shares were reserved for issuance as Series A Junior Convertible Preferred Shares in connection with the Corporation's Preferred Stock Purchase Rights Plan; 000,000 were the Series C ESOP Convertible Preferred Shares described on page 00; and the remaining 0,000,000 authorized preferred shares were uncommitted. Of the authorized common stock, 000,000,000 shares were uncommitted as shown below: Common Stock As of March 1, 1995 Pro Forma Before Amendment After Amendment ---------------- -------------- Authorized 580,000,000 1,160,000,000 Issued and Outstanding (000,000,000) (000,000,000) Held in Treasury (00,000,000) (000,000,000) Reserved for issuance: Stock Option Plan (00,000,000) (00,000,000) Stock Purchase Plan (000,000) (00,000) Series C ESOP Convertible Preferred Stock (0,000,000) (0,000,000) Outside Directors' Stock Ownership Plan (00,000) (00,000) Unissued and unreserved 000,000,000 (000,000,000) =========== ============== The number of common shares reserved for issuance upon the conversion of the Company's convertible preferred shares and under the Stock Option, Stock Purchase and Outside Directors' Stock Ownership Plans will be adjusted as appropriate to reflect the stock split in the form of a 100% stock dividend, if the amendment is approved. Otherwise, no specific transaction is now contemplated which would result in the issuance of additional shares. However, it is the Company's policy to explore on a continuing basis favorable acquisition and financing possibilities which could at any time lead to the issuance of shares of the Company's stock. In addition, it is desirable to have authorized stock available for possible additional future stock dividends or stock splits or for other corporate purposes. Accordingly, it is proposed to amend the first paragraph of Article 4 of the Company's Certificate of Incorporation to read as follows: "4. The total number of shares of all classes of stock which the corporation shall have authority to issue is One Billion One Hundred Sixty-Five Million (1,165,000,000) shares, of which Five Million (5,000,000) shares shall be shares of the class of Preferred Stock without par value (hereinafter called "Preferred stock"), and One Billion One Hundred Sixty Million (1,160,000,000) shares shall be shares of the class of Common Stock with the par value of $1 per share (hereinafter called "common stock")." The Board of Directors would have sole discretion to issue the additional shares of common stock from time to time for any corporate purpose, including in reaction to any unsolicited acquisition proposal, without further action by the stockholders. The terms of any one or more additional series of preferred stock, including dividend rates, conversion prices, voting rights, redemption prices, maturity dates and similar matters would also be determined solely by the Board of Directors. Any preferred stock issued would be senior to common stock with respect to dividends, liquidation rights and other attributes. Holders of stock of the Company are not now and will not be entitled to preemptive rights. In connection with the stock split in the form of a 100% stock dividend, a transfer of $1 for each additional share of common stock issued, or approximately $000,000,000, will be made from the Company's additional paid-in capital account to its common stock account as of June 1, 1995, the date on which stockholders of record will be entitled to the additional shares, so that the additional shares to be issued will be fully paid. The amounts so transferred will no longer be legally available for distribution to stockholders as dividends; however, it is estimated that the amount of surplus which will be legally available for dividends after this transfer will exceed $000,000,000. Following the increase of capital in the common stock account becoming effective, certificates representing the additional shares will be distributed by the Corporation to stockholders of record as of June 1, 1995, without any further action by the stockholders. The Corporation will apply for listing on the New York Stock Exchange and other exchanges on which the Company's shares are listed of the additional shares of common stock to be issued. As a result of the proposed stock split in the form of a 100% stock dividend, brokerage commissions and transfer taxes on any subsequent trades of the stock may increase. In the opinion of counsel for the Company, the adoption of the proposed amendment and the issuance of the additional shares in connection with the stock split in the form of a 100% stock dividend will result in no gain or loss or any other form of taxable income for United States federal income tax purposes. The laws of jurisdictions other than the United States may impose income taxes on the issuance of the additional shares in connection with the stock split in the form of a 100% stock dividend, and stockholders subject to those laws are urged to consult their tax advisors. Recommendation of the Board of Directors An affirmative majority of the votes entitled to be cast at the meeting is required for approval of the proposed amendment to Article 4 of the Certificate of Incorporation. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO ARTICLE 4 OF THE CERTIFICATE OF INCORPORATION, WHICH IS DESIGNATED AS PROPOSAL 3 ON THE ENCLOSED PROXY CARD. 4. PROPOSED AMENDMENT OF THE 1971 STOCK OPTION PLAN Subject to the approval of the stockholders, the Board of Directors, on the recommendation of its Personnel Committee, has amended the 1971 Stock Option Plan. The proposed amendment increases from 100,000 to 200,000 the number of shares upon which options can be granted to any participant in any calendar year. The 100,000 share limit was added to the plan in 1994. This amendment was made to comply with the requirement of Section 162(m) of the Internal Revenue Code which requires that the plan provisions indicate a maximum annual option grant per individual in order to qualify for treatment as tax-deductible compensation. The proposed amendment does not increase the total number of shares upon which stock options may be granted under the plan or make any other changes to the plan. Since 1990 the Company has utilized larger grants of stock options as long-term incentives for executive officers and certain other high-level employees of the Company in lieu of Stock Equivalent Unit Plan awards previously made to these groups. If approved, the amendment will provide greater flexibility to the Company in continuing to give increased weight to the long-term incentive component of overall compensation. The Board of Directors is of the opinion that the Stock Option Plan has helped the Company compete for, motivate and retain high caliber directors, executives and other key employees, and that it is in the best interests of the Company to amend the plan as proposed. In particular, the amendment would permit future option grants to Mr. Zeien of a size consistent with the existing policies and practices outlined in the Personnel Committee Report on Executive Compensation on pages 0 through 0. This would not otherwise be possible because of the special award to him described on page 00. The material provisions of the plan and other information relating to the plan are described below and in the New Plan Benefits table on page 00. The plan is administered by the Personnel Committee which, in its discretion, but subject to a limit of 100,000 shares upon which options may be granted to any participant in any calendar year, may award options for terms up to ten years to purchase the common stock of the Company to selected key salaried employees of the Company and its subsidiaries, including those who may also serve as officers or directors. The proposed amendment would increase this limit to 200,000 shares upon which options may be granted to any participant in any calendar year. At any given time, this group is expected to represent approximately 3% of all employees. Options have been granted to employees at not less than the fair market value of the Company's stock on the date of grant and are exercisable as determined by the Committee, except that options must be exercised within ten years from the date of grant. All outstanding options have ten-year terms and are exercisable commencing one year from the date of grant, provided the optionee is still an employee. In 1992 the plan was amended to provide for an automatic annual option grant for the purchase of 1,000 shares of the common stock of the Company to each non-employee director of the Company at the fair market value of the stock on the date of grant. Upon the election of directors at the 1995 Annual Meeting of the stockholders, there will be nine non-employee members of the Board of Directors. The date of grant for options granted to non-employee directors is fixed under the terms of the plan as the second business day after the annual meeting of stockholders. Options granted to non-employee directors are similar to those available to key salaried employees except that the timing of option grants, the number of shares granted, the option price of each grant and certain other provisions are fixed by the plan. In contrast, the timing and terms of option grants made to employees are subject to the discretion of the Personnel Committee. The Committee may designate options granted to employees (including officers and employee directors) as incentive stock options ("ISOs"), a type of option authorized under the 1981 amendments to the Internal Revenue Code. Options not so designated are granted as "non-ISOs". Options granted to non-employee directors are designated as non-ISOs. Options generally remain exercisable for a limited period following the termination of employment of an employee optionee, including an employee who may be an officer or a director. The post-retirement exercise period of a non-ISO is three years for options granted after 1993 (two years for options granted prior to 1994), unless a shorter period is specified by the Personnel Committee. The comparable period for an ISO is three months. If the termination of employment occurs within one year after a change in control, any options held by the employee optionee that were not otherwise exercisable when employment ceased will become immediately exercisable. Non-employee director options remain exercisable following termination of Board membership on a basis generally comparable to non-ISOs granted to employees and similarly become immediately exercisable upon termination of Board membership within one year after a change in control. Shares delivered on the exercise of an option may be either authorized and unissued shares or treasury shares. Payment on exercise is made in cash or, at the discretion of the Secretary of the Personnel Committee, in shares of the Company's common stock or partially in cash and partially in shares. An employee who is not an officer or a director of the Company may pay the purchase price in cash installments over a five-year period at a rate no less than the minimum rate of interest provided under the Internal Revenue Code for such compensation related loans. On approval by the Board of Directors, options may provide for a loan, guarantee or other assistance by the Company. No such loan, guarantee or other assistance has been provided to any officer or employee director while serving in that capacity or to any non-employee director. The Board may terminate the plan or may amend it or any outstanding option, but stockholder approval is required to increase the number of shares available under the plan, to increase the maximum annual grant per participant, to reduce the price at which options may be granted to below 95% of the fair market value on the date of grant, to reduce the option price of outstanding options, to extend the term of an option beyond ten years, to extend the period during which options may be granted or to amend those provisions of the plan relating to options granted to non-employee directors. No amendment may adversely affect the rights of any optionee under an outstanding option or, after a change in control, may deprive an optionee of a right which became operative upon a change in control. In the event of changes resulting from stock dividends, stock splits or exchange rights, the number of shares subject to the plan may be adjusted by the Board. Federal Income Tax Consequences Upon Issuance and Exercise of Options After consultation with tax counsel, the Company is of the opinion that: An optionee does not realize any taxable income under the Internal Revenue Code upon the grant of an option. The exercise of a non-ISO results in immediate taxable income to the optionee in an amount equal to the difference between the option price and the market price on the date of exercise. This same amount is deductible by the Company as compensation, provided income taxes are withheld from or deposited by the optionee. The exercise of an ISO results in no tax consequences either to the optionee or the Company. Although the difference between the option price and the market price on the date of exercise is not taxable to the optionee upon exercise, it is a tax preference item, which, under certain circumstances, may give rise to an alternative minimum tax liability on the part of the optionee. The sale within one year of stock acquired by the exercise of an ISO will be deductible by the Company as compensation in an amount equal to the difference between the option price and the lesser of the market price on the date of exercise or the net proceeds of the sale. The sale of stock acquired through the exercise of an ISO held for more than one year after exercise does not result in such a deduction for the Company. As options expire unexercised they again become available for grant. On March 1, 1995, options on 0,000,000 shares, granted at option prices ranging from $0.00 to $00.00 per share after adjustment for stock splits (a weighted average price of $00.00 per share), will expire at various dates up to February 20, 2005. The closing price of the common stock of the Company on March 1, 1995, as quoted on a composite basis was $00.000. NEW PLAN BENEFITS Other than stock option grants to outside directors, the benefits or amounts that will be received or allocated in the future under the Stock Option Plan are not determinable. The table below indicates the number of shares granted under the plan for the year 1994. Stock Option Plan Number of Name and Position Shares Granted - ----------------- ---------------- Alfred M. Zeien Chairman and Chief Executive Officer 100,000 Joseph E. Mullaney Vice Chairman of the Board 25,000 Michael C. Hawley Executive Vice President 32,000 Jacques Lagarde Executive Vice President 32,000 Robert J. Murray Executive Vice President 34,000 All current executive officers as a group 264,500 All non-executive outside directors as a group 9,000 All non-executive officer employees as a group 1,373,200 * See also Stock Options Granted and Aggregated Stock Option Exercises tables on pages 00 and 00 and the Personnel Committee Report on pages 00 through 00. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE 1971 STOCK OPTION PLAN, WHICH IS DESIGNATED AS PROPOSAL NO. 4 ON THE ENCLOSED PROXY. 5. APPOINTMENT OF AUDITORS On the recommendation of the Audit Committee of the Board of Directors, the Board has appointed KPMG Peat Marwick LLP as auditors for the year 1995, subject to approval by the stockholders. KPMG Peat Marwick LLP has audited the books of the Company for many years. Representatives of KPMG Peat Marwick LLP will attend the 1995 Annual Meeting of the stockholders, where they will have the opportunity to make a statement if they wish to do so and will be available to answer appropriate questions from the stockholders. Should the appointment of auditors be disapproved by the stockholders, the Board of Directors will review its selection. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE APPOINTMENT OF AUDITORS, WHICH IS DESIGNATED AS PROPOSAL NO. 5 ON THE ENCLOSED PROXY. SOLICITATION OF PROXIES The cost of soliciting proxies will be borne by the Company. In addition to solicitation by mail, solicitations may also be made by personal interview, telegram and telephone. The Company has retained Georgeson & Company Inc., New York, New York, to assist in the solicitation of proxies using the means referred to above at a cost of $00,000 plus reasonable expenses. Arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy material to their principals, and the Company will reimburse them for their expenses in so doing. In addition, directors, officers and other regular employees of the Company may request the return of proxies by telephone or telegram, or in person. VOTING OF PROXIES Under the by-laws of the Company, as permitted by Delaware law, the required quorum for the meeting is 33 1/3% in interest of the shares outstanding and entitled to vote at the meeting, a plurality of the votes properly cast for the election of directors by the stockholders attending the meeting in person or by proxy will elect directors to office and an affirmative majority of the votes entitled to be cast at the meeting is required for approval of proposal 3 and an affirmative majority of the votes properly cast at the meeting in person or by proxy is required for approval of proposals 4 and 5. When your proxy is returned properly signed, the shares represented will be voted in accordance with your directions. Where specific choices are not indicated, proxies will be voted for proposals 1 through 5. If a proxy or ballot indicates that a stockholder, broker, or other nominee abstains from voting or that shares are not to be voted on a particular proposal, the shares will not be counted as having been voted on that proposal although such shares will be counted as in attendance at the meeting for purposes of a quorum. Abstentions will not be reflected in the final tally of the votes cast with regard to whether the Election of Directors (Proposals 1 and 2) or the Appointment of Auditors (Proposal 5) are approved under Delaware law and the by-laws of the Company. However, abstentions and broker non votes will have the effect of a negative vote in determining whether the proposed amendment to the Certificate of Incorporation (Proposal 3) is approved under Delaware law and the by-laws of the Company, because that proposal requires an affirmative majority of the votes entitled to be cast at the meeting for approval. Abstentions will also have the effect of a negative vote in determining whether the proposed amendment to the 1971 Stock Option (Proposal 4) has been approved by the shareholders for purposes of Rule 16 b-3 of the Securities and Exchange Commission, because that Rule requires approval by the affirmative vote of a majority of the shares present or represented by proxy at the meeting in order for transactions under such plans to be exempt from its application. For purposes of Rule 16 b-3, broker non votes, although counted for quorum purposes, will have no other effect. CONFIDENTIAL VOTING The Board of Directors has determined that the Company's confidential voting policy employed for the last several years will apply to the Corporation's annual meeting. The Company's policy requires that proxies and ballots be kept confidential from officers, directors and employees of the Company and from third parties. Certain outside agents, such as those serving as proxy solicitors, who have agreed to comply with this policy, but not Company employees, directors or officers, may be permitted access to proxies and ballots to facilitate their participation in soliciting proxies and conducting the meeting. The policy will not prevent Company officers, directors or other employees or representatives from determining which stockholders have not voted so that they could be urged to vote. The policy will not apply in the event of a proxy contest or other solicitation based on an opposition proxy statement. ANNUAL REPORT The Annual Report of the Company for the year ended December 31, 1994, is being mailed with this proxy statement. STOCKHOLDER PROPOSALS Stockholder proposals intended to be considered for inclusion in the proxy statement for presentation at the 1996 Annual Meeting must be received by the Company in advance of November 18, 1995. In general, stockholder proposals intended to be presented at an annual meeting, including proposals for the nomination of directors, must be received by the Company 60 days in advance of the meeting, or prior to February 19, 1996, to be considered for the 1996 Annual Meeting. The requirements for submitting such proposals are set forth in the Company's by-laws. OTHER MATTERS Except for matters described in this proxy statement, the Board of Directors does not know of any matter that will or may be presented at the meeting. With respect to any such proposals not now known to the Board of Directors, the persons named as proxies intend to vote the shares they represent in accordance with their judgment. THE GILLETTE COMPANY PRUDENTIAL TOWER BUILDING BOSTON, MA 02199 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY The undersigned (a) revokes all prior proxies and appoints and authorizes Jill C. Richardson and Robert E. DiCenso and each of them with power of substitution, as the Proxy Committee, to vote the stock of the undersigned at the 1995 Annual Meeting of the stockholders of The Gillette Company on April 20, 1995, and any adjournment thereof, as specified on the reverse side of this card on proposals 1 through 5 and in their discretion on all other matters coming before the meeting and, if applicable, (b) directs, as indicated on the reverse, the voting of the shares allocated to the account(s) of the undersigned at the 1995 Annual Meeting and at any adjournment thereof. Plan shares for which no directions are received, and ESOP and GESOP shares which have not been allocated to participant accounts, will be voted on each issue in proportion to those shares allocated to participant accounts of the same plan for which voting instructions on that issue have been received. Each trustee is authorized to vote in its judgment or to empower the Proxy Committee to vote in accordance with the Proxy Committee's judgment on such other business as may properly come before the meeting and any adjournment thereof. (Important - To be signed and dated on reverse side) SEE REVERSE SIDE This proxy will be voted as directed by the stockholder, but if no choice is specified, it will be voted FOR proposals 1 through 5. The Board of Directors recommends a vote FOR proposals 1 through 5.
1. Election of directors for 3-year terms W.H. Gantz, R.R. Pivirotto, J.M. Steta, A.M. Zeien FOR AGAINST ABSTAIN For All Nominees Withhold from all Nominees 3. Approval of amendment to Certificate of Incorporation ____ ____ ____ ----- ----- For, except withhold vote from the following nominee(s). 4. Amendment of the 1971 Stock Option Plan ____ ____ ____ --------------------------------- 5. Approval of the appointment of KMPG Peat Marwick LLP as 2. Election of M.C. Hawley as a director for a 2-year term: Auditors. ____ ____ ____ For Withhold ------ -----
EX-99.SOP 2 STOCK OPTION PLAN THE GILLETTE COMPANY 1971 STOCK OPTION PLAN, AS AMENDED l. PURPOSE. The purpose of the 1971 Stock Option Plan (hereinafter referred to as the "Plan") is to provide a special incentive to selected key salaried employees of The Gillette Company (hereinafter referred to as the "Company") and of its subsidiaries and to the non-employee members of the Board of Directors of the Company to promote the Company's business. The Plan is designed to accomplish this purpose by offering such employees and non-employee directors a favorable opportunity to purchase shares of the common stock of the Company so that they will share in the success of the Company's business. For purposes of the Plan a subsidiary is any corporation in which the Company owns, directly or indirectly, stock possessing fifty percent or more of the total combined voting power of all classes of stock or over which the Company has effective operating control. 2. ADMINISTRATION. The Plan shall be administered by the Personnel Committee heretofore established by the Board of Directors of the Company, no member of which shall be an employee of the Company or of any subsidiary. The Committee shall have authority, not inconsistently with the Plan, (a) to determine which of the key salaried employees of the Company and its subsidiaries shall be granted options; (b) to determine whether the options granted to any employees shall be incentive stock options within the meaning of the Internal Revenue Code or non-qualified stock options or both; provided, however, that with respect to options granted after December 31, 1986, in no event shall the fair market value of the stock (determined at the time of grant of the options) subject to incentive stock options within the meaning of the Internal Revenue Code which first became exercisable by any employee in any calendar year exceed $100,000 (and, to the extent such fair market value exceeds $100,000, the later granted options shall be treated as non-qualified stock options); (c) to determine the time or times when options shall be granted to employees and the number of shares of common stock to be subject to each such option provided, however, subject to adjustment as provided in Section 9 of the Plan, in no event shall any employee be granted options covering more than 200,000 shares of common stock in any calendar year; (d) with respect to options granted to employees, to determine the option price of the shares subject to each option and the method of payment of such price; (e) with respect to options granted to employees, to determine the time or times when each option becomes exercisable and the duration of the exercise period; (f) to prescribe the form or forms of the instruments evidencing any options granted under the Plan and of any other instruments required under the Plan and to change such forms from time to time; (g) to make all determinations as to the terms of any sales of common stock of the Company to employees under Section 8; (h) to adopt, amend and rescind rules and regulations for the administration of the Plan and the options and for its own acts and proceedings; and (i) to decide all questions and settle all controversies and disputes which may arise in connection with the Plan. All decisions, determinations and interpretations of the Committee shall be binding on all parties concerned. 3. PARTICIPANTS. The participants in the Plan shall be such key salaried employees of the Company or of any of its subsidiaries, whether or not also officers or directors, as may be selected from time to time by the Committee in its discretion, subject to the provisions of Section 8. In addition, each non-employee director shall be a participant in the Plan. In any grant of options after the initial grant, or any sale made under Section 8 after the initial sale, employees who were previously granted options or sold shares under the Plan may be included or excluded. 4. LIMITATIONS. No option shall be granted under the Plan and no sale shall be made under Section 8 after April 15, 1999, but options theretofore granted may extend beyond that date. Subject to adjustment as provided in Section 9 of the Plan, the number of shares of common stock of the Company which may be delivered under the Plan shall not exceed 28,200,000 in the aggregate. To the extent that any option granted under the Plan shall expire or terminate unexercised or for any reason become unexercisable as to any shares subject thereto, such shares shall thereafter be available for further grants under the Plan, within the limit specified above. 5. STOCK TO BE DELIVERED. Stock to be delivered under the Plan may constitute an original issue of authorized stock or may consist of previously issued stock acquired by the Company, as shall be determined by the Board of Directors. The Board of Directors and the proper officers of the Company shall take any appropriate action required for such delivery. 6. TERMS AND CONDITIONS OF OPTIONS GRANTED TO EMPLOYEES. All options granted to either non-employee directors or employees shall be subject to Section 6 Paragraph (c) Subparagraphs (4) and (5). All options granted to employees under the Plan shall be subject to all the following additional terms and conditions (except as provided in Sections 7 and 8 below) and to such other terms and conditions as the Committee shall determine to be appropriate to accomplish the purposes of the Plan: (a) Option Price. The option price under each option shall be determined by the Committee and shall be not less than l00 percent of the fair market value per share at the time the option is granted. If the Committee so directs, an option may provide that if an employee Participant who was an employee participant at the time of the grant of the option and who is not an officer or director of the Company at the time of any exercise of the option, he shall not be required to make payment in cash or equivalent at that time for the shares acquired on such exercise, but may at his election pay the purchase price for such shares by making a payment in cash or equivalent of not less than five percent of such price and entering into an agreement, in a form prescribed by the Committee, providing for payment of the balance of such price, with interest at a specified rate, but not less than four percent, over a period not to exceed five years and containing such other provisions as the Committee in its discretion determines. In addition, if the Committee so directs, an option may provide for a guarantee by the Company or repayment of amounts borrowed by the Participant in order to exercise the option, provided he is not an officer or director of the Company at the time of such borrowing, or may provide that the Company may make a loan, guarantee, or otherwise provide assistance as the Committee deems appropriate to enable the Participant to exercise the option, provided that no such loan, guarantee, or other assistance shall be made without approval of the Board of Directors as required by law. (b) Period of Options. The period of an option shall not exceed ten years from the date of grant. (c) Exercise of Option. (1) Each option held by a participant other than a non-employee director shall be made exercisable at such time or times, whether or not in installments, as the Committee shall prescribe at the time the option is granted. In the case of an option held by a participant other than a non-employee director which is not immediately exercisable in full, the Committee may at any time accelerate the time at which all or any part of the option may be exercised. (2) Options intended to be incentive stock options, as defined in the Internal Revenue Code, shall contain and be subject to such provisions relating to the exercise and other matters as are required of incentive stock options under the applicable provisions of the Internal Revenue Code and Treasury Regulations, as from time to time in effect, and the Secretary of the Committee shall inform optionees of such provisions. (3) Each incentive stock option within the meaning of the Internal Revenue Code granted on or before December 31, 1986 shall contain and be subject to the following provision: This option shall not be exercisable while there is outstanding (within the meaning of Section 422A(c)7 of the Internal Revenue Code of l954, as amended) any incentive stock option (as that term is defined in said Code) which was granted to the Participant before the granting of this option to purchase stock in his employer corporation (whether The Gillette Company or a parent or subsidiary corporation thereof), or in a corporation which at the time of the granting of this option is a parent or subsidiary corporation of the employer corporation, or in a predecessor corporation of any such corporation. Each incentive stock option within the meaning of the Internal Revenue Code granted after December 31, 1986 shall not be subject to the above provision. (4) Payment for Delivery of Shares. Upon exercise of any option, payment in full in the form of cash or a certified bank, or cashier's check or, with the approval of the Secretary of the Committee, in whole or part Common Stock of the Company at fair market value, which for this purpose shall be the closing price on the business day preceding the date of exercise, shall be made at the time of such exercise for all shares then being purchased thereunder, except in the case of an exercise to which the provisions of the second sentence of subsection (a) above are applicable. The purchase price payable by any person, other than a non-employee director, who is not a citizen or resident of the United States of America and who is an employee of a foreign subsidiary at the time payment is due shall, if the Committee so directs, be paid to such subsidiary in the currency of the country in which such subsidiary is located, computed at such exchange rate as the Committee may direct. The amount of each such payment may, in the discretion of the Committee, be accounted for on the books of such subsidiary as a contribution to its capital by the Company. The Company shall not be obligated to deliver any shares unless and until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, nor, in the event the outstanding common stock is at the time listed upon any stock exchange, unless and until the shares to be delivered have been listed or authorized to be added to the list upon official notice of issuance upon such exchange, nor unless or until all other legal matters in connection with the issuance and delivery of shares have been approved by the Company's counsel. Without limiting the generality of the foregoing, the Company may require from the Participant such investment representation or such agreement, if any, as counsel for the Company may consider necessary in order to comply with the Securities Act of 1933 and may require that the Participant agree that any sale of the shares will be made only on the New York Stock Exchange or in such other manner as is permitted by the Committee and that he will notify the Company when he makes any disposition of the shares whether by sale, gift, or otherwise. The Company shall use its best efforts to effect any such compliance and listing, and the Participant shall take any action reasonably requested by the Company in such connection. A Participant shall have the rights of a shareholder only as to shares actually acquired by him under the Plan. (5) Notwithstanding any other provision of this Plan, if within one year of a Change in Control, as hereinafter defined, the employment of an employee Participant is terminated for any reason other than willful misconduct or the service as a director of a non-employee director is terminated, all his outstanding options which are not yet exercisable shall become immediately exercisable and all the rights and benefits relating to such options including, but not limited to, periods during which such options may be exercised shall become fixed and not subject to change or revocation by the Company; provided, that in the case of any incentive stock option (the "second option") which is not exercisable by reason of a previously granted incentive stock option which is still "outstanding" within the meaning of section 422A(c)(7) of the Internal Revenue Code (as in effect before the amendments made by the Tax Reform Act of 1986), the second option shall not be exercisable until the earlier outstanding option is exercised in full or expires by reason of the lapse of time. For purposes of the foregoing, a Change in Control shall mean the happening of any of the following events: (A) Any person within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "1934 Act"), other than the Company or any of its subsidiaries, has become the beneficial owner, within the meaning of Rule 13d-3 under the 1934 Act, of 20% or more of the combined voting securities of the Company; (B) A tender offer or exchange offer, other than an offer by the Company, pursuant to which shares of the Company's common stock have been purchased; (C) The stockholders or directors of the Company have approved an agreement to merge or consolidate with or into another corporation and the Company is not the surviving corporation or an agreement to sell or otherwise dispose of all or substantially all of the Company's assets (including a plan of liquidation); or (D) During any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors cease for any reason to constitute at least a majority thereof. For this purpose, new directors who were elected, or nominated (or approved for nomination in the case of nomination by a Committee of the Board) for election by shareholders of the Company, by at least two thirds of the directors then still in office who were, or are deemed to have been directors at the beginning of the period, shall be deemed to have been directors at the beginning of the period. (d) Nontransferability of Options. No option may be transferred by the Participant otherwise than by will or by the laws of descent and distribution, and during the Participant's lifetime the option may be exercised only by him. (e) Nontransferability of Shares. If the Committee so determines, an option granted to an employee may provide that, without prior consent of the Committee, shares acquired by exercise of the option shall not be transferred, sold, pledged or otherwise disposed of within a period not to exceed one year from the date the shares are transferred to the Participant upon his exercise of the option or prior to the satisfaction of all indebtedness with respect thereto, if later. (f) Termination of Employment. If the employment of a Participant terminates for any reason other than his death, he may, unless discharged for cause which in the opinion of the Committee casts such discredit on him as to justify termination of his option, thereafter exercise his option as provided below. (i) If such termination of employment is voluntary on the part of the Participant, he may exercise his option only within seven days after the date of termination of his employment (unless a longer period not in excess of three months is allowed by the Committee). (ii) If such termination of employment is involuntary on the part of the Participant, he may exercise his option only within three months after the date of termination of his employment. (iii) Notwithstanding the above, if a Participant retires under The Gillette Company Retirement Plan or the retirement plan of a subsidiary, or if a Participant terminates his employment with a subsidiary that does not maintain a retirement plan and he would have been eligible to retire under the terms of The Gillette Company Retirement Plan had he been a Participant in that Plan, he may exercise any option granted prior to January 1, 1994, other than an incentive stock option within the meaning of the Internal Revenue Code, within a period not to exceed two years after his retirement date, any option granted after December 31, 1993 other than an incentive stock option within the meaning of the Internal Revenue Code within a period not to exceed three years after his retirement date, and any incentive stock option within a period not to exceed three months after his retirement date. The Committee may, in its sole discretion, terminate any such option at or at any time after the time when that option would otherwise have terminated as a result of the termination of a Participant's employment, if it deems such action to be in the best interests of the Company. In no event, however, may any Participant exercise any option which was not exercisable on the date he ceased to be an employee, or after the expiration of the option period. For purposes of this subsection (g) a Participant's employment shall not be considered terminated in the case of a sick leave or other bona fide leave of absence approved by the Company or a subsidiary in conformance with the applicable provisions of the Internal Revenue Code or Treasury Regulations, or in the case of a transfer to the employment of a subsidiary or to the employment of the Company. (g) Death. If a Participant dies at a time when he is entitled to exercise an option, then at any time or times within one year after his death (or with respect to employee participants such further period as the Committee may allow) such option may be exercised, as to all or any of the shares which the Participant was entitled to purchase immediately prior to his death, by his executor or administrator or the person or persons to whom the option is transferred by will or the applicable laws of descent and distribution, and except as so exercised such option shall expire at the end of such period. In no event, however, may any option be exercised after the expiration of the option period or, in the case of an incentive stock option within the meaning of the Internal Revenue Code after the expiration of any period of exercise for such options specified in the Internal Revenue Code or the regulations thereunder. 7. REPLACEMENT OPTIONS. The Company may grant options under the Plan on terms differing from those provided for in Section 6 where such options are granted in substitution for options held by employees of other corporations who concurrently become employees of the Company or a subsidiary as the result of a merger or consolidation of the employing corporation with the Company or subsidiary, or the acquisition by the Company or a subsidiary of property or stock of the employing corporation. The Committee may direct that the substitute options be granted on such terms and conditions as the Committee considers appropriate in the circumstances. Notwithstanding anything contained in this Plan, the Committee shall have authority, with respect to any options granted or to be granted to employees or outstanding installment Purchase Agreements of participants other than non-employee directors under this Plan, to extend the time for payment of any and all installments, to modify the amount of any installment, to amend outstanding option certificates to provide for installment payments or to take any other action which it may, in its discretion, deem necessary, provided that: (1) interest on the unpaid balance under any outstanding Purchase Agreement at the rate of at least four percent (4%) per annum shall continue to be due and payable quarterly during the period of any deferral of payment; (2) all such installment Purchase Agreements and unexercised options, shall at all times be in accordance with the applicable provisions of Regulation G of the Board of Governors of the Federal Reserve System, as from time to time amended, and with all other applicable legal requirements; (3) no such action by the Committee shall jeopardize the status of stock options as incentive stock options under the Internal Revenue Code. 8. FOREIGN EMPLOYEES. The Company may grant options under the Plan on terms differing from those provided for in Section 6 where such options are granted to employee Participants who are not citizens or residents of the United States of America if the Committee determines that such different terms are appropriate in view of the circumstances of such Participants, provided, however, that such options shall not be inconsistent with the provisions of Section 6(a) or Section 6(b). In addition, if the Committee determines that options are inappropriate for any key salaried employees who are not citizens or residents of the United States of America, whether because of the tax laws of the foreign countries in which such employees are residents or for other reasons, the Board of Directors may authorize special arrangements for the sale of shares of common stock of the Company to such employees, whether by the Company, or a subsidiary, or other person. Such arrangements may, if approved by the Board of Directors, include the establishment of a trust by the foreign subsidiary which is the employer of the key salaried employees, designated by such subsidiary, to whom the shares are to be sold. Such arrangements shall provide for a purchase price of not less than the fair market value of the stock at the date of sale and a maximum annual grant per participant of options to purchase 200,000 shares of common stock and may provide that the purchase price be paid over a period of not more than ten years, with or without interest, and that such employees have the right, with or without payment of a specified premium, to require the seller of the shares to repurchase such shares at the same price, subject to specified conditions. Such arrangements may also include provisions deemed appropriate as to acceleration or prepayment of the balance of the purchase price, restrictions on the transfer of the shares by the employee, representations or agreements by the employee about his investment purposes and other miscellaneous matters. 9. CHANGES IN STOCK. In the event of a stock dividend, split-up or combinations of shares, recapitalization or merger in which the Company is the surviving corporation, or other similar capital change, the number and kind of shares of stock or securities of the Company to be subject to the Plan and to options then outstanding or to be granted thereunder, the maximum number of shares or securities which may be issued or sold under the Plan, the maximum annual grant for each participant, the automatic annual grant for each non-employee director, the option price and other relevant provisions shall be appropriately adjusted by the Board of Directors of the Company, whose determination shall be binding on all persons. In the event of a consolidation or a merger in which the Company is not the surviving corporation or which results in the acquisition of substantially all the Company's outstanding stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of complete liquidation of the Company, all outstanding options shall thereupon terminate, provided that (i) at least twenty days prior to the effective date of any such consolidation or merger, the Board of Directors shall with respect to employee participants either (a) make all outstanding options immediately exercisable, or (b) arrange to have the surviving corporation grant replacement options to the employee Participants and (ii) in the case of option grants to non-employee directors, all outstanding options not otherwise exercisable shall become exercisable on the twentieth day prior to the effective date of the merger. l0. EMPLOYMENT RIGHTS. The adoption of the Plan does not confer upon any employee of the Company or a subsidiary any right to continued employment with the Company or a subsidiary, as the case may be, nor does it interfere in any way with the right of the Company or a subsidiary to terminate the employment of any of its employees at any time. ll. THE COMMITTEE MAY AT ANY TIME DISCONTINUE GRANTING OPTIONS UNDER THE PLAN. The Board of Directors of the Company or the Personnel Committee of the Board of Directors if and to the extent authorized, may at any time or times amend the Plan or amend any outstanding option or options or arrangements established under Section 8 for the purpose of satisfying the requirements of any changes in applicable laws or regulations or for any other purpose which may at the time be permitted by law, provided that (except to the extent required or permitted under Section 9 and, with respect to clauses (b) and (f) below, except to the extent required or permitted under Section 7) no such amendment shall, without the approval of the stockholders of the Company, (a) increase the maximum number of shares available under the Plan or the maximum annual grant per participant other than as permitted under Section 9, (b) reduce the minimum option price of options thereafter to be granted below the price provided for in Section 6(a), except that the Plan may be amended to provide that the minimum option price of non-qualified stock options thereafter to be granted to employees may be not less than 95% of the fair market value at the date of grant if the Board determines that such amendment is necessary for tax reasons to carry out the objectives of the Plan, (c) reduce the price at which shares of common stock of the Company may be sold under Section 8 below the price provided for in Section 8, (d) reduce the option price of outstanding options, (e) extend the time within which options may be granted, (f) extend the period of an outstanding option beyond ten years from the date of grant, (g) amend the provisions of Section 12 with respect to the terms and conditions of options to non-employee directors and further provided no such amendment shall adversely affect the rights of any Participant (without his consent) under any option theretofore granted or other contractual arrangements theretofore entered into or after a Change in Control deprive any Participant of any right or benefit which became operative in the event of a Change in Control. Notwithstanding the above, in no event may the provisions of Section 12 be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. 12. TERMS AND CONDITIONS OF OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS. Effective at the close of business on the second business day after the 1992 Annual Meeting of Shareholders of the Company and on the second business day after each Annual Meeting thereafter, each non-employee director shall be automatically granted a non-incentive stock option to purchase 1,000 shares of the common stock of the Company upon the following terms and conditions: (a) Option Price. The option price under each option shall be the fair market value on the date of grant, which for this purpose is defined as the average between the high and the low price of the common stock on the NYSE Composite Transaction listing. (b) Option Period. The period of an option shall be ten years from the date of grant. (c) Option Exercise. Each option shall become exercisable on the first anniversary of the date of grant except as otherwise provided under Section 6 Paragraph c Subparagraph 5 of this Plan. Any option, otherwise exercisable, may be exercised during the period a non-employee director remains a member of the Board of Directors and for a period of three months following the date a non-employee director ceases to be a director except in the case where the non-employee director is or will be eligible to receive benefits under the Company's Retirement Plan for Directors when membership on the Board of Directors ends and where the non-employee director continues to be so eligible as of the date of exercise, that non-employee director's options shall be exercisable for a period of two years with respect to options granted before 1994 and three years for options granted after 1993 from the date membership on the Board of Directors ceases. If a non-employee director dies at the time when the non-employee director is entitled to exercise an option, then at any time or times within one year after that non-employee director's death that non-employee director's option may be exercised in accordance with the provisions of Section 6 Paragraph (g) of the Plan. In no event shall any option be exercised after the expiration of the option period. (d) Payment for Delivery of Shares. Payment for the shares shall be made in accordance with the provisions of Section 6 Paragraph c Subparagraph 4 of this Plan. (e) Nontransferability of Options. No option may be transferred by a non-employee director otherwise than by will or by the laws of descent and distribution, and during the non-employee director's lifetime the option may be exercised only by the non-employee director. APRIL 1995 -----END PRIVACY-ENHANCED MESSAGE-----