Exhibit 10(e)
THE GILLETTE COMPANY
DEFERRED COMPENSATION PLAN FOR
OUTSIDE DIRECTORS
(As amended November 19, 1998)
1. Purpose
The purpose of this Deferred Compensation Plan for Outside Directors (the
"Plan") is to advance the interests of The Gillette Company (the "Company") by
enhancing the ability of the Company to attract and retain Directors who are in
a position to make significant contributions to the success of the Company and
to reward Directors for such contributions by payment of one half of their
annual Board retainer on a deferred basis. The Plan also provides a means
whereby Directors may, in addition, elect deferral of the payment of the
remainder of their annual Board retainer, as well as other retainers and fees
which may otherwise become payable to them.
2. Effective Date of Plan
The Plan shall become effective with respect to all Director retainers and
meeting fees earned on and after January 1, 1997.
3. Administration
The Plan shall be administered by the Personnel Committee of the Board of
Directors (the "Committee"). The Committee shall have the authority, not
inconsistent with the express provisions of the Plan, (1) to prescribe forms and
procedures in connection with any election or designation with respect to the
deferral of Directors' retainers and meeting fees, (2) to adopt, amend, and
rescind rules and regulations for the administration of the Plan and (3) to
interpret the Plan and decide any questions and settle any controversies or
disputes that may arise in connection with the Plan. Such interpretations,
determinations and actions of the Committee, and all other determinations and
actions made or taken by the Committee under authority of any provisions of the
Plan, shall be conclusive and binding on all parties.
4. Delegation of Authority
The Committee may delegate to designated officers of the Company its
duties under the Plan subject to such conditions and limitations as the
Committee may prescribe. The Senior Vice President - Personnel and
Administration of the Company, as the designee of the Committee, shall act as
the Administrator (the "Administrator") of the Plan and shall have authority to
prescribe forms and procedures in connection with any election to defer
compensation made under the Plan.
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5. Eligibility
Directors eligible to participate in the Plan ("Eligible Directors") shall
be any Director of the Company who receives retainers and fees as a Director of
the Company and is neither an officer nor an employee of the Company or any of
its subsidiaries.
6. Terms and Conditions
A. Mandatory Deferrals
As of the first day of each calendar quarter, for each Eligible Director,
fifty percent (50%) of the Board retainer accruing for such quarter shall be
mandatorily deferred and converted into Deferred Stock Units ("DSUs"), which
shall be credited to an account ("Deferred Stock Unit Account") maintained for
the Eligible Director on the books of the Company. The number of DSUs (rounded
to the nearest thousandth of a share) to be credited to each Eligible Director's
Deferred Stock Unit Account shall be calculated by dividing the amount of the
mandatorily deferred quarterly retainer by the Fair Market Value of the
Company's common stock for the applicable calendar quarter. The Fair Market
Value of the Company's common stock for a calendar quarter shall be based upon
the average of the high and the low prices for the stock as reported on the New
York Stock Exchange Composite Index for the second trading day following the
Company's release of reported earnings for the preceding calendar quarter unless
for good reason the Administrator determines an alternate date or dates for
calculating the DSUs to be credited for the applicable calendar quarter.
B. Voluntary Deferrals
Each Eligible Director may elect, in lieu of receiving current payment of
all or any portion of the remainder of the quarterly Board retainer and/or all
or a portion of any other retainer and meeting fees to which such Eligible
Director otherwise would be entitled, that such payment be deferred until after
the Eligible Director's retirement or resignation as a Director of the Company,
or in either case upon an earlier Change in Control (as that term is defined in
The Gillette Company Retirement Plan) as provided below. The Eligible Director
shall make such election (i) prior to December 15 of the year preceding the year
in which the retainer and fees would be earned or (ii) with respect to an
Eligible Director's first year or partial year of service as a Director, within
thirty days following the date on which such Director first became a Director.
The Eligible Director's election shall include (a) whether the deferred amounts
shall be converted into DSUs and credited to a Deferred Stock Unit Account, or
shall be credited to an account ("Deferred Cash Account", and together with the
Deferred Stock Unit Account, "Accounts") maintained for such Eligible Director
on the books of the Company, and (b) whether payment of the Eligible Director's
Accounts shall be accelerated upon the occurrence of a Change in Control. A
deferral election made by an Eligible Director shall remain in force for the
calendar year so elected and for each year thereafter until changed or revoked
prospectively by written notice to the Administrator not later than December 15
of the year preceding the year to which such change or revocation relates. A
deferral election may not be changed or revoked after the beginning of the year
to which it relates.
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While an Eligible Director's deferral election is in effect, as of the
first day of each calendar quarter with respect to Board retainers, or as of the
date when any other retainer or meeting fee is earned, the Company shall credit
the amount of voluntarily deferred retainers and fees for the applicable period
either (i) as DSUs to a Deferred Stock Unit Account, in the same manner as
described in Paragraph 6A above based upon the average of the high and the low
prices for the Company's common stock as reported on the New York Stock Exchange
Composite Index for the applicable date above or, in the case of any month in
which the Company's earnings or other material information are reported, for the
second trading day following the Company's release of reported earnings in the
month to which the deferred amounts relate, or (ii) to a Deferred Cash Account,
in accordance with the Eligible Director's election.
C. Additional Credits to Accounts
(1) Interest amounts shall be credited semiannually, on June 30 and
December 31, to each Eligible Director's Deferred Cash Account based upon the
balances in the Eligible Director's Deferred Cash Account during that calendar
year. Interest shall be credited at a rate equivalent to the average yield on
10-year U.S. Treasury Bills on the first trading day of each calendar year
("Interest Rate"). The Interest Rate shall be adjusted annually.
(2) Each time a dividend is paid on the Company's common stock, the
Company shall make additional credits of DSUs to each Eligible Director's
Deferred Stock Unit Account. The number of DSUs to be credited shall be
calculated by multiplying the dividend amount per share of the Company's common
stock by the number of DSUs credited to the Eligible Director's account as of
the record date for the dividend, and dividing the result by the Fair Market
Value of the Company's common stock on the dividend payment date based upon the
average of the high and the low prices for the Company's common stock as
reported on the New York Stock Exchange Composite Index for that date.
D. Payment of Accounts
As of the date an Eligible Director ceases to serve as a Director of the
Company, the balance then credited to the Eligible Director's Deferred Stock
Unit Account shall be converted to a fixed amount calculated by multiplying the
number of DSUs in his or her Account by the Fair Market Value of the Company's
common stock (determined based upon the average of the high and low prices of
the stock as reported on the New York Stock Exchange Composite Index for the 20
trading days immediately preceding the applicable date). The resulting amount
shall be credited to the Eligible Director's Deferred Cash Account, which shall
continue to be credited with additional amounts as prescribed in Paragraph 6C(1)
above until paid in full.
The entire balance of an Eligible Director's Accounts shall be paid in
cash to the Eligible Director in ten approximately equal annual installments
beginning in January of the year after the Eligible Director ceases to serve as
a Director of the Company, unless
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the Eligible Director has elected, at least 12 months prior to the cessation of
his or her service as a Director of the Company, to have payment of the Accounts
made in a lesser number of approximately equal annual installments or in a
single lump sum.
Upon the death of an Eligible Director, any remaining amount then credited
to the Eligible Director's Accounts shall be paid in a single lump sum to the
beneficiary designated by the Eligible Director. If the designated beneficiary
does not survive the Eligible Director, or if the Eligible Director does not
designate a beneficiary under this paragraph, any remaining amount then credited
to the Eligible Director's Accounts at the death of the Eligible Director shall
be paid in a single lump sum to the estate of the Eligible Director. An Eligible
Director may designate or change a beneficiary at any time by completing and
delivering to the Administrator a beneficiary designation form as prescribed by
the Adminsitrator.
E. Change in Control
Upon the occurrence of a Change in Control, notwithstanding anything
contained in the Plan to the contrary, the amounts then credited to the Accounts
of each Eligible Director who has previously elected to have payment of his or
her Accounts accelerated hereunder shall be paid as soon as practicable
following the Change in Control. For the purposes of the preceding sentence,
DSUs credited to the Deferred Stock Unit Accounts subject to the payment
acceleration elections of Eligible Directors shall be valued based upon the
average of the high and low prices of the Company's common stock as reported on
the New York Stock Exchange Composite Index for the 20 trading days immediately
preceding the Change in Control.
7. Amendment and Termination
The Board of Directors may amend or terminate this Plan at any time;
however no such amendment shall reduce the then existing balance in any Eligible
Director's Account or extend the time during which the Director has elected to
receive payments. In the event of termination of the Plan, the Company may elect
to satisfy its obligations under this Plan by making an immediate lump sum
payment in cash or in such other manner as it determines appropriate.
8. Prior Plans
This Plan is intended to replace The Gillette Company Outside Directors'
Stock Ownership Plan ("ODSOP") and the Directors' Deferred Compensation
Provisions, subject to the following:
(1) No new contributions to Directors' ODSOP accounts shall be made after
October 31, 1996; however these accounts shall be maintained and the shares of
Company common stock held in these accounts shall continue to earn dividends.
(2) Eligible Directors may convert cash amounts previously deferred under
the Directors' Deferred Compensation Provisions into DSUs under this Plan by
making a
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written election before December 15, 1996. These cash deferrals shall be
converted to DSUs based the average of the high and low prices of the Company's
common stock as reported on the New York Stock Exchange Composite Index for last
trading day of the months of July through December, 1996, and shall be credited
to the Eligible Director's Deferred Stock Unit Account. If such an election is
not made, the Eligible Director's cash deferral balance under the Directors'
Deferred Compensation Provisions as of December 31, 1996 shall be credited to a
Deferred Cash Account under this Plan as of January 1, 1997.
9. Severability
If it shall ever be determined that, notwithstanding the Company's intent
and purpose for establishing and maintaining this Plan, an Eligible Director is
required to include all or part of any deferred amount in his or her gross
income for any tax purposes prior to the time that such amount would be required
to be paid under the terms of the Plan, whether by taxing authorities of the
United States or other sovereign nation or political subdivisions thereof, the
Administrator has the discretion to cause the amount equal to the consequent tax
liability to be paid to the Eligible Director from his or her Accounts.
10. Adjustment Provisions
In the event of a stock dividend, stock split or combination of shares,
recapitalization or other changes in the Company's common stock, or other
distribution to common stockholders other than regular cash dividends, after the
effective date of the Plan, the number of DSUs credited to Deferred Stock Unit
Accounts and other relevant provisions hereunder shall be adjusted accordingly
by the Committee.
11. Source of Payments
All amounts payable under the Plan shall be paid by the Company from its
general assets. Notwithstanding the maintenance of records on its books as
described in Paragraph 6 above, no Eligible Director shall have any right to or
interest in any assets of the Company other than as an unsecured general
creditor, and no separate fund shall be established in which any Eligible
Director has any right or interest. The foregoing shall not prevent the Company
from establishing a fund from which to satisfy its payment obligations under the
Plan.
12. No Assignment of Interest
The interest of any Eligible Director under the Plan may not be assigned,
alienated, encumbered or otherwise transferred, and shall not be subject to
attachment, garnishment, execution or levy; and any attempted assignment,
alienation, encumbrance, transfer, attachment, garnishment, execution or levy
shall be void and of no force or effect.
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