THE GILLETTE COMPANY
1971 STOCK OPTION PLAN
(Amended and Restated as of December 13, 2005)
1. PURPOSE. The purpose of the 1971 Stock Option Plan (hereinafter referred
to as the "Plan") is to provide a special incentive to selected key salaried
employees of The Gillette Company (hereinafter referred to as the "Company") and
of its subsidiaries and to the non-employee members of the Board of Directors of
the Company to promote the Company's business. The Plan is designed to
accomplish this purpose by offering such employees and non-employee directors a
favorable opportunity to purchase shares of the common stock of the Company so
that they will share in the success of the Company's business. For purposes of
the Plan a subsidiary is any corporation in which the Company owns, directly or
indirectly, stock possessing fifty percent or more of the total combined voting
power of all classes of stock or over which the Company has effective operating
control.
1.1 ASSUMPTION OF THE PLAN. As of the Effective Time, The Procter & Gamble
Company, an Ohio corporation, has assumed the Plan according to the Merger
Agreement. Unless otherwise specified, amendments to the Plan made in connection
with the Merger Agreement shall be effective upon the Effective Time. Should the
Merger not become effective, the Plan shall revert to the form as last amended
by The Gillette Company through October 2004, without prejudice to any Awards
then outstanding.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
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
1,250,000 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 of the Plan;
(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 of the Plan. 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 of the Plan
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 of the Plan after April 21, 2005, 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 198,800,000 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 Committee.
The Committee 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 Paragraphs (3)
and (4) of Section 6(c) below. 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 of the Plan) 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 of 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 should 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) 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 Section 6(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.
(4)(a) Notwithstanding any other provision of this Plan, upon the
occurrence of a Change of Control, as hereinafter defined, all
outstanding options held by employee Participants and non-employee
directors 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 except as otherwise provided under Section 6(i).
(b) In the event that, within two years of a Change of Control, the
employment of an employee Participant is terminated by the Company for
any reason other than for Cause, or the employee Participant terminates
employment for Good Reason, or the service as a director of a
non-employee director is terminated, the applicable exercise period for
all options, other than options granted prior to June 21, 2001 and
designated as incentive stock options hereunder, then held by him shall
be the greater of (i) a period of two years from the date of
termination, and (ii) the post-termination exercise period otherwise
applicable to the employee Participant under Section 6(f), or to the
non-employee director under Section 12(d); provided, however, that in no
event shall any option be exercisable beyond ten years from its date of
grant.
(c) A Change of Control shall mean the occurrence of any of the
following events:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (A)
the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting
power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); PROVIDED, HOWEVER, that,
for purposes of this Paragraph (1), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any of its
subsidiaries or (iv) any acquisition by any corporation pursuant to
a transaction that complies with clauses (A), (B) and (C) of
Paragraph (3) below;
(2) Individuals who, as of December 16, 1999, constitute the
Board of Directors (the "Board") of the Company (the "Incumbent
Board") cease for any reason to constitute at least a majority of
the Board; PROVIDED, HOWEVER, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved
by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board;
(3) Consummation of a reorganization, merger, consolidation or
sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (A) all or substantially all
of the individuals and entities that were the beneficial owners of
the Outstanding Company Common Stock and the Outstanding Company
Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the
then-outstanding shares of common stock and the combined voting
power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including,
without limitation, a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the
Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the
then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting
power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior
to the Business Combination, and (C) at least a majority of the
members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement or of the action
of the Board providing for such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(d) For the purposes of the Plan, unless otherwise provided under
the terms of an employment agreement with the Company or any of its
subsidiaries, in which case the definition contained therein shall
control, an employee Participant shall be treated as terminating his
employment for "Good Reason" if he does so as a direct result of:
(i) the assignment to the Participant of any duties materially
inconsistent in any respect with the Participant's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as in effect immediately
prior to the Change of Control, or any other action by the Company
or its subsidiaries that results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad
faith and that is promptly remedied by the Company and/or the
subsidiary;
(ii) a decrease in the Participant's compensation, other than
an isolated, insubstantial and inadvertent failure not occurring in
bad faith and that is promptly remedied by the Company and/or the
subsidiary; or
(iii) the Company's or the subsidiary's requiring the
Participant to be based at any office or location other than (A)
the office or where the Participant was based and performed
services immediately prior to the Change of Control or (B) any
other location less than 35 miles from such office, or the
Company's or the subsidiary's requiring the Participant to travel
on business to a substantially greater extent than required
immediately prior to the Change of Control.
(d) NONTRANSFERABILITY OF OPTIONS.
(1) Except as provided in Paragraphs (2) and (3) below, no option
may be transferred by a Participant otherwise than by will or the laws
of descent and distribution, and during the Participant's lifetime the
option may be exercised only by him.
(2) In the case of options other than (i) those options designated
as incentive stock options or (ii) those options excluded from the
application of this Paragraph pursuant to a Schedule to this Plan, the
Committee in its sole and exclusive discretion may provide in the
option agreement covering an option granted hereunder (either at the
time of grant or, with the consent of the Participant, at any time
thereafter) that the Participant may transfer by gift all or any part
of such option to (x) his spouse, child, grandchild or other "family
member" (as such term is defined for purposes of applicable securities
and tax laws), to a trust having only family members as beneficiaries
or to a partnership or company having only family members as partners
or owners, or (y) a charitable organization described in Section
501(c)(3) of the Internal Revenue Code. Any options so transferred
shall remain subject to the otherwise applicable terms of the option
agreement and this Plan, and also shall be subject to such terms and
conditions as the Committee may prescribe. Subsequent transfers of
options shall be permitted under this Paragraph only to the extent, and
subject to the rules, prescribed by the Committee.
(3) A Participant may transfer all or any part of an option
granted hereunder to a former spouse pursuant to the terms of a
qualified domestic relations order. Any options so transferred shall
remain subject to the otherwise applicable terms of the option
agreement and this Plan. No subsequent transfers of options shall be
permitted under this Paragraph.
(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. The provisions of this Subsection (f)
shall govern in the event of the termination of a Participant's employment
with the Company and its subsidiaries. If the employment of an employee
Participant terminates for any reason other than his death, he may (unless
discharged for Cause as hereinafter defined) thereafter exercise his option
as provided below:
(i) If such termination of employment is voluntary on the part of
the employee Participant, he may exercise his option only within 30
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 employee Participant, he may exercise his option only within
three months after the date of termination of his employment.
(iii) If such termination of employment is on account of the
employee Participant's total and permanent disability, he may exercise
(I) any option granted prior to January 1, 2002 within the period
ending one year after the date of termination of his employment, and
(II) any option granted after December 31, 2001 within the period
ending three years after the date of termination of his employment.
(iv) If such termination of employment is on account of the
employee Participant's retirement (as defined below), he may exercise
(I) any option granted prior to January 1, 1994, other than an option
designated as an incentive stock option hereunder, within the period
ending two years after his retirement date, (II) any option granted
after December 31, 1993 and prior to April 17, 1997, other than an
option designated an incentive stock option hereunder, within the
period ending three years after his retirement date, (III) any option
granted prior to April 17, 1997 and designated an incentive stock
option hereunder within the period ending three months after his
retirement date, (IV) any option granted after April 16, 1997 and prior
to January 1, 2002 within the period ending five years after his
retirement date and (V) any option granted after December 31, 2001 over
the remaining option period, provided that an option described in
clause (IV) or (V) which was designated at grant as an incentive stock
option shall cease to qualify as an incentive stock option under the
Internal Revenue Code if not exercised within three months after his
retirement date. For the purposes of his Plan, an employee
Participant's termination of employment is on account of "retirement"
if either (A) at the time the Participant leaves the employ of the
Company and its subsidiaries, the Participant qualifies for an early or
normal retirement pension under the terms of a retirement plan
maintained by or to which the Company or any subsidiary contributes for
the benefit of the Participant, (B) the Participant leaves the employ
of a subsidiary that does not maintain or contribute to a retirement
plan for the benefit of the Participant, and at such time the
Participant would have qualified for an early or normal retirement
pension under the terms of The Gillette Company Retirement Plan had the
individual been a participant of that plan, or (C) solely in the case
of a Company-initiated termination of employment (other than for
Cause), at the time the Participant leaves the employ of the Company
and its subsidiaries, the sum of Participant's attained age and years
of service (each measured in full and partial years) totals at least
80. An employee Participant's "retirement date", as used in this
paragraph, means the first day the Participant is no longer on the
active payroll of the Company or any subsidiary following the
Participant's retirement.
The Committee may, in its sole discretion, terminate any such
option at or any time after the date of termination of the
Participant's employment (and prior to the expiration of the exercise
periods specified above), if it deems such action to be in the best
interests of the Company. In no event may any Participant exercise any
option that was not exercisable on the date he ceased to be an
employee, except (A) as to options granted prior to January 1, 2002,
those options granted at least one year prior to Participant's
cessation of employment on account of retirement or total and permanent
disability and (B) as to options granted after December 31, 2001, if
the Participant's cessation of employment is on account of retirement
or total and permanent disability. In no event may any Participant
exercise any option after the expiration of the option period. For the
purposes of this Subsection (f), 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.
If an employee Participant is discharged for Cause, as hereinafter
defined, all his options shall immediately be cancelled effective as of
the date of termination of his employment. For the purposes of the
Plan, unless otherwise provided under the terms of an employment
agreement with the Company or any of its subsidiaries, in which case
the definition contained therein shall control, a discharge for "Cause"
shall have occurred where a Participant is terminated because of:
(A) the Participant's continued failure to perform
substantially his duties with the Company or any of its
subsidiaries (other than any such failure resulting from
incapacity due to physical or mental illness), after a written
demand for performance is delivered to Participant by an officer
or a senior manager of the Company or the subsidiary which
identifies the manner in which the Board or the elected officer or
manager believes that Participant has not performed his duties;
(B) the Participant's engaging in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the
Company or the subsidiary; or
(C) the Participant's conviction of a felony or a plea of nolo
contendere by Participant with respect thereto.
(g) DEATH. In the event a Participant dies while holding options granted
hereunder, (I) any option granted prior to January 1, 2002 may be exercised
within a period not to exceed one year after the date of death, and (II) any
option granted after December 31, 2001 may be exercised within a period not
to exceed three years after the date of death, as to all or any of the
shares covered by such option, by his executor or administrator of 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 the
option shall expire after the expiration of such period. In no event,
however, may any option be exercised after the expiration of the option
period.
(h) DEFERRAL ELECTION. In accordance with such rules and procedures as
the Committee may prescribe from time to time, if provided by the Committee,
in its sole and exclusive discretion, in the option agreement covering an
option granted hereunder, a Participant may elect to defer the delivery of
the shares acquired upon the exercise of the option; provided that such
election may not be made with respect to any incentive stock option or any
option transferred pursuant to the provisions of Section 6(d) above. The
Participant's deferral election must be made at least six months prior to
the date such option is exercised or at such other time as the Committee may
specify. Payment of the option exercise price must be made in the form of
shares of common stock which the Participant has held for at least six
months. Deferral elections will be allowed only for option exercises that
occur while the Participant is an active employee of the Company and its
subsidiaries or is actively serving as a non-employee director, as the case
may be. Any election to defer the delivery of the stock shall be irrevocable
as long as the Participant remains an employee of the Company and its
subsidiaries or a non-employee director, as the case may be.
Upon the exercise of an option as to which a deferral election has been
made in accordance with this Subsection (h), the Company shall credit to a
bookkeeping account a number of deferred stock units equal to the number of
shares that otherwise would have been delivered to the Participant. During
the period of deferral, the deferred stock units shall accrue dividends at
the rate paid upon the Company's common stock, which dividend equivalents
shall be credited in the form of additional deferred stock units. Deferred
stock units shall be distributed in shares of common stock (with cash
payment in lieu of any fractional share) upon the Participant's termination
of employment with the Company and its subsidiaries or following the date
the Participant's membership on the Board of Directors ceases, as the case
may be, or if the Participant's termination is on account of retirement, at
such other date or dates as may be approved by the Committee over a period
extending no later than 10 years following such termination date.
The Committee may, in its sole discretion, allow for the early
distribution of an employee Participant's deferred stock units in the event
of an immediate and heavy financial hardship or in the event of the death or
disability of the Participant. Distribution on account of financial hardship
shall be limited to the amount necessary to satisfy the hardship. In
addition, the Committee in its discretion may direct the distribution of an
employee Participant's deferred stock units if it believes such action is in
the best interest of the Company. Deferred stock units shall not be assigned
or alienated by any Participant, and shall not be subject to attachment,
garnishment, encumbrance, pledge or charge of any nature.
(i) ADDITIONAL CONDITIONS OF OPTION AWARDS. Unless otherwise provided
pursuant to an employment agreement between an employee Participant and the
Company, the following additional provisions shall govern options awarded
under the Plan.
(1) With respect to any option granted prior to June 21, 2001, and
to any option granted on June 21, 2001 under The Gillette U.K. Approved
Stock Option Plan ("2001 UK approved option"), the Committee may, in
its sole discretion, cancel any such option at or any time after the
date of termination of an employee Participant's employment (and prior
to the expiration of the exercise periods specified above), if it deems
such action to be in the best interests of the Company.
(2) With respect to any option granted on or after June 21, 2001
(other than any 2001 UK approved option) ("covered option"), the
following terms and conditions shall apply:
(a) Unless otherwise provided pursuant to a termination
settlement agreement with the Company or any of its subsidiaries,
while the Participant is employed by the Company and for a period
of eighteen (18) months after the termination or cessation of such
employment for any reason, the Participant shall not directly or
indirectly:
(i) as an employee, consultant, independent contractor,
officer, director, individual proprietor, investor, partner,
stockholder, agent, principal, joint venturer, or in any other
capacity whatsoever (other than as the holder of not more than
one percent of the combined voting power of the outstanding
stock of a publicly held corporation or company), be employed,
work, consult, advise, assist, or engage in any activity
regarding any business, product, service or other matter
which: (A) is substantially similar to or competes with any
business, product, service or other matter regarding which the
Participant worked for the Company, or any of its
subsidiaries, during the three (3) years prior to
Participant's termination of employment; or (B) concerns
subject matters about which Participant gained proprietary
information of the Company, or any of its subsidiaries, during
the three (3) year period prior to the Participant's
termination of employment;
(ii) either alone or in association with others, solicit,
divert or take away, or attempt to divert or to take away, the
business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts, of
the Company which were contacted, solicited or served,
directly or indirectly, by Participant while employed by the
Company; or
(iii) either alone or in association with others: (A)
solicit or encourage any employee or independent contractor of
the Company to terminate his/her relationship with the
Company; or (B) recruit, hire or solicit for employment or for
engagement as an independent contractor, any person who is or
was employed by the Company at any time during the
Participant's employment with the Company; provided, that this
Paragraph (iii) shall not apply to such person whose
employment with the Company has been terminated for a period
of six months or longer.
(b) The Participant shall not disclose or use at any time any
secret or confidential information or knowledge obtained or
acquired by the Participant during, after, or by reason of,
employment with the Company or any of its subsidiaries, as
provided under applicable law and any and all agreements between
the Participant and the Company or any of its subsidiaries
regarding Participant's employment with the Company or the
subsidiary.
(c) In accordance with any and all agreements between the
Participant and the Company or any of its subsidiaries regarding
the Participant's employment, the Participant shall disclose
promptly and transfer and assign to the Company all improvements
and inventions in certain fields made or conceived by the
Participant during employment with the Company or the subsidiary
and within the prescribed periods thereafter.
(d) To the extent permitted by law, the Participant shall not
make, publish or state, or cause to be made, published or stated,
any defamatory or disparaging statement, writing or communication
pertaining to the character, reputation, business practices,
competence or conduct of the Company, its subsidiaries,
shareholders, directors, officers, employees, agents,
representatives or successors.
(3) The geographic scope of the provisions of Paragraph (2)(a)
above shall extend to anywhere the Company or any of its subsidiaries
is doing business, has done business or intends to do business.
(4) If any restriction set forth in Paragraph (2)(a) above is
found by any court of competent jurisdiction to be unenforceable
because it extends for too long a period of time or over too great a
range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
(5) In the event of a Change of Control, the restrictions
contained in Paragraphs (2)(a)(i), (2)(a)(iii) and (2)(d) above shall
cease and the Participant shall no longer be bound by the obligations
thereunder.
(6) If the Company reasonably determines that a Participant has
materially violated any of the Participant's obligations under
Paragraph (2) above, or if a Participant is terminated for Cause, then,
in addition to any other remedies at law or in equity it may have, the
Company shall have the following rights and remedies:
(a) The Company may cancel any and all covered options granted
to the Participant, including grants that according to their terms
are vested, effective as of the date on which such violation began
(the "Violation Date"); and
(b) The Company may demand the return of any gain realized by
the Participant as a result of the Participant's exercise of any
covered option during the period commencing one year prior to the
Participant's termination of employment and continuing through the
Violation Date. Upon demand, the Participant shall pay to the
Company the amount of any gain realized or payment received as a
result of such exercises. At the option of the Company, such
payment shall be made by returning to the Company the number of
shares of common stock of the Company which the Participant
received in connection with such exercise (with the Company then
refunding the option price paid by the Participant), or in cash in
the amount of the gain realized. If after such demand the
Participant fails to return said shares or amounts, the Company
shall have the right to offset said amounts against any amounts,
including compensation, owed to the Participant by the Company or
to commence judicial proceedings against the Participant to
recover said shares or amounts.
(7) The non-competition restrictions set forth in Paragraph (2)(a)
supersede any non-competition restrictions of less than eighteen (18)
months in duration set forth in any agreement between a Participant and
the Company or any subsidiary or predecessor.
7. REPLACEMENT OPTIONS. The Company may grant options under the Plan on
terms differing from those provided for in Section 6 of the Plan 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 of the Plan 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) of the Plan.
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 1,250,000 shares of common stock
and may provide that the purchase price be paid over a period of not more than
ten years, with or without interest, and that such employees have the right,
with or without payment of a specified premium, to require the seller of the
shares to repurchase such shares at the same price, subject to specified
conditions. Such arrangements may also include provisions deemed appropriate as
to acceleration or prepayment of the balance of the purchase price, restrictions
on the transfer of the shares by the employee, representations or agreements by
the employee about his investment purposes and other miscellaneous matters.
9. CHANGES IN STOCK. In the event of a stock dividend, split-up or
combinations of shares, recapitalization or merger in which the Company is the
surviving corporation, or other similar capital change, the number and kind of
shares of stock or securities of the Company to be subject to the Plan and to
options then outstanding or to be granted thereunder, the maximum number of
shares or securities which may be issued or sold under the Plan, the maximum
annual grant for each participant, the automatic annual grant for each
non-employee director, the option price and other relevant provisions shall be
appropriately adjusted by the Board of Directors of the Company, whose
determination shall be binding on all persons. In the event of a consolidation
or a merger in which the Company is not the surviving corporation or which
results in the acquisition of substantially all the Company's outstanding stock
by a single person or entity or by a group of persons and/or entities acting in
concert, or in the event of complete liquidation of the Company, all outstanding
options shall thereupon terminate, provided that (i) at least twenty days prior
to the effective date of any such consolidation or merger, the Board of
Directors shall with respect to employee participants either (a) make all
outstanding options immediately exercisable, or (b) arrange to have the
surviving corporation grant replacement options to the employee Participants and
(ii) in the case of option grants to non-employee directors, all outstanding
options not otherwise exercisable shall become exercisable on the twentieth day
prior to the effective date of the merger.
10. EMPLOYMENT RIGHTS. The adoption of the Plan does not confer upon any
employee of the Company or a subsidiary any right to continued employment with
the Company or a subsidiary, as the case may be, nor does it interfere in any
way with the right of the Company or a subsidiary to terminate the employment of
any of its employees at any time.
11. AMENDMENT OF PLAN OR OPTIONS. The Board of Directors of the Company, or
the Compensation 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 of the Plan 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 of the
Plan and, with respect to clauses (b) and (f) below, except to the extent
required or permitted under Section 7 of the Plan) 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 of the Plan, (b) reduce
the minimum option price of options thereafter to be granted below the price
provided for in Section 6(a) of the Plan, 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 of the
Plan below the price provided for in said Section 8, (d) reduce the option price
of outstanding options, (e) extend the time within which options may be granted,
or (f) extend the period of an outstanding option beyond ten years from the date
of grant; 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 of Control deprive any Participant of any right or benefit which became
operative in the event of a Change of Control.
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 4,000 shares
(5,000 shares for options granted after 2001 and before 2004, and 7,500 shares
for options granted after 2003) of the common stock of the Company under the
generally applicable provisions of the Plan and upon the following specific
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 as reported
by the New York Stock Exchange.
(b) OPTION PERIOD. The period of an option shall be ten years from the
date of grant.
(c) OPTION EXERCISABILITY. Each option granted prior to 2001 shall become
exercisable in full on the earlier of the first Annual Meeting following
the date of grant or the first anniversary of the date of grant, except as
otherwise provided under Paragraph (4) of Section 6(c) of the Plan. Each
option granted after 2000 shall become exercisable ratably over a three
year period (for options granted after 2003, this means 2,500 after one
year, an additional 2,500 after two years and the remaining 2,500 after
three years) on the earlier of the Annual Meeting or the anniversary of the
date of grant in each such year, except as otherwise provided under
Paragraph (4) of Section 6(c) of the Plan.
(d) EXERCISE PERIOD. 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; provided that, in the case
where the non-employee director either has attained age 65 or has served as
a non-employee director for at least five years when membership on the
Board of Directors ends, all of that non-employee director's options shall
be exercisable for a period of two years with respect to options granted
before 1994, three years for options granted after 1993 and before 2001,
five years for options granted after 2000 and before 2002, and the
remaining option period for options granted after 2001, each such period
commencing on the date membership on the Board of Directors ceases.
If a non-employee director dies while a member of the Board of Directors,
or following the date membership on the Board of Directors ceases while an
option remains exercisable in accordance with the preceding paragraph, then
(I) for options granted before 2002, at any time or times within one year
after that non-employee director's death, and (II) for options granted
after 2001, at any time or times within three years after that non-employee
director's death, that non-employee director's option may be exercised in
accordance with the provisions of Section 6(g) of the Plan. In no event
shall any option be exercised after the expiration of the option period.
13. GOVERNING LAW.
(a) PRIOR TO EFFECTIVE TIME: Except as to matters concerning the issuance
of shares or other matters of corporate governance, which shall be
construed under the General Corporation Law of the State of Delaware, the
Plan and each Award issued under it shall be governed by the laws of the
Commonwealth of Massachusetts, excluding any conflicts or choice of law
rule or principle that might otherwise refer construction or interpretation
of the Plan to the substantive law of another jurisdiction. Recipients of
an option under the Plan are deemed to submit to the exclusive jurisdiction
and venue of the federal or state courts of Massachusetts, to resolve any
and all issues that may arise out of or relate to the Plan or any option.
(b) UPON AND FOLLOWING EFFECTIVE TIME: The Plan and each option issued
under it shall be governed by and construed in accordance with the laws of
the State of Ohio, United States of America, excluding any conflicts or
choice of law rule or principle that might otherwise refer construction or
interpretation of the Plan to the substantive law of another jurisdiction.
Recipients of an option under the Plan are deemed to submit to the
exclusive jurisdiction and venue of the federal or state courts of Ohio, to
resolve any and all issues that may arise out of or relate to the Plan or
any option.
14. SPECIAL MERGER PROVISIONS
14.1 ACCELERATION OF OPTIONS. Notwithstanding any other provision in the
Plan, each option outstanding under the Plan (the "Accelerated Options") shall
be vested and fully exercisable effective immediately prior to the Effective
Time as determined by the Authorized Officer.
14.2 SPECIAL MERGER ELECTIONS. Under procedures established by the
Authorized Officer, each holder of an Accelerated Option may exercise such
Accelerated Option immediately prior to the Effective Time, in whole or in part,
and in respect thereof shall be entitled to receive, at such holder's election,
either (i) the Merger Shares or (ii) a cash payment equal to the product of (A)
the excess (if any) of the per share value of the Merger Shares over the per
share exercise price, multiplied by (B) the number of Shares with respect to
which the Accelerated Option is exercised, in each case subject to applicable
withholding taxes.
14.3 TERMINATION FOLLOWING THE EFFECTIVE TIME. Unless otherwise provided
under the terms of an employment agreement with the Company or its subsidiaries,
notwithstanding any other provision in the Plan, a termination of employment for
Good Reason within two (2) years of the Effective Time shall be treated for
purposes of Accelerated Options the same as (A) a Special Separation or (B) in
the case of a Participant eligible for retirement under the Company's benefit
plans, as a Retirement.
14.4 POST-MERGER CONVERSION OF OUTSTANDING ACCELERATED OPTIONS. Each
Accelerated Option outstanding at the Effective Time (together, "Gillette Stock
Options") shall cease to represent a right to acquire Shares and, after the
Effective Time, shall be deemed an option to acquire, on the same terms and
conditions as were applicable under the Gillette Stock Option (but taking into
account any applicable changes thereto provided for in this Plan as revised or
by reason of the Merger Agreement), that number of Shares of Parent Common Stock
determined by multiplying the number of Shares subject to such Gillette Stock
Option by the Exchange Ratio, rounded, if necessary, to the nearest whole share
of Parent Common Stock, at a price per share (rounded to the nearest
one-hundredth of a cent) equal to the per share exercise price specified in such
Gillette Stock Option divided by the Exchange Ratio; PROVIDED, HOWEVER, that in
the case of any Gillette Stock Option to which Section 421 of the Code applies
by reason of its qualification under Section 422 of the Code, the option price,
the number of shares subject to such option and, except to the extent otherwise
required by the Plan as revised, the terms and conditions of exercise of such
option shall be determined in a manner consistent with the requirements of
Section 424(a) of the Code.
14.5 PROVISIONS CONCERNING OPTIONS TO NONEMPLOYEE DIRECTORS. Options held
by Nonemployee Directors of The Gillette Company immediately prior to the
Effective Time must be exercised within the term of the original grant or within
five (5) years from the Effective Time, whichever is shorter.
14.6 ASSUMPTION OF GILLETTE STOCK OPTIONS AND CERTAIN UNDERTAKINGS.
Subject to the terms of the Merger Agreement, on the Effective Time The Procter
& Gamble Company shall assume the Plan (as revised herein) and each Gillette
Stock Option. To the extent permitted by law but not in derogation of the
provisions of this Article 14, The Procter & Gamble Company shall take such
reasonable steps as may be necessary to cause the Gillette Stock Options which
qualified under Section 422 of Code as incentive stock options prior to the
Effective Time to continue to qualify as incentive stock options of The Procter
& Gamble Company after the Effective Time.
14.7 SPECIAL SEPARATION. In the case of a Special Separation, any option
must be exercised within the term of the original grant or five (5) years from
the date of Special Separation, whichever is shorter.
15. DEFINITIONS. Whenever used in the Plan, the following terms shall
have the meanings set forth below, and when the meaning is intended, the initial
letter of the word shall be capitalized.
15.1 "ACCELERATED OPTIONS" has the meaning accorded such term in Article 14.
15.2 "AUTHORIZED OFFICER" means each of (i) the Chairman, Chief Executive
Officer and President, (ii) the Vice Chairman, (iii) the Senior Vice President,
Finance, and Chief Financial Officer, (iv) the Senior Vice President, Strategy
and Business Development, (v) the Senior Vice President and General Counsel,
(vi) the Secretary and (vii) such other officers of the Company as any of the
foregoing may designate in writing.
15.3 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
15.4 "CLOSING" means the closing of the Merger upon the terms and subject to
the conditions set forth in Article 6 of the Merger Agreement
15.5 COMMITTEE" means:
(A) If describing rights, obligations, conditions, and/or circumstances
prior to the Effective Time, the Compensation and Human Resources Committee
of the Board of The Gillette Company.
(B) If describing rights, obligations, conditions, and/or circumstances
at or following the Effective Time, the Compensation & Leadership
Development Committee (or its functional successor by another name) of The
Procter & Gamble Company
15.6 "COMPANY" means:
(a) If describing rights, obligations, conditions, and/or circumstances
prior to the Effective Time, The Gillette Company, a Delaware corporation;
(b) If describing rights, obligations, conditions, and/or circumstances
at or following the Effective Time, The Procter & Gamble Company, an Ohio
corporation.
15.7 "EFFECTIVE TIME" has the meaning accorded such term in the Merger
Agreement.
15.8 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
15.9 "EXCHANGE RATIO" has the meaning accorded such term in the Merger
Agreement.
15.10 "MERGER" means the consummation of the transactions contemplated by
the Merger Agreement.
15.11 "MERGER AGREEMENT" means the Agreement and Plan of Merger dated as of
January 27, 2005 among The Procter & Gamble Company, Aquarium Acquisition Corp.
and The Gillette Company.
15.12 "MERGER SHARES" has the meaning accorded such term in the Merger
Agreement.
15.13 "NONEMPLOYEE DIRECTOR" has the same meaning set forth in Rule 16b-3
promulgated under the Exchange Act, or any successor definition adopted by the
United States Securities and Exchange Commission.
15.14 "PARENT" means The Procter & Gamble Company.
15.15 "PARENT COMMON STOCK" has the meaning accorded such term in the Merger
Agreement.
15.16 "PARTICIPANT" means any eligible person to whom an Award is granted.
15.17 "PLAN" means The Gillette Company 1971 Stock Option Plan as from time
to time amended and in effect.
15.18 "RETIREMENT" means: (a) retirement in accordance with the provisions
of any appropriate retirement plan of the Company or any of its subsidiaries; or
(b) termination of employment under the total and permanent disability provision
of any retirement or disability plan of the Company or any of its subsidiaries
or any plan to which the Company or its subsidiaries contribute for purposes of
the retirement or disability of Employees.
15.19 "SHARE" means a Share of common stock of the Company
15.20 "SPECIAL SEPARATION" means any termination of employment that occurs
prior to the time a Participant is eligible to retire, except a termination for
Cause or a voluntary resignation that is not initiated or encouraged by the
Company.
15.21 "SUBSIDIARY" means any corporation or other entity, whether domestic
or foreign, in which the Company has or obtains, directly or indirectly, a
proprietary interest of more than fifty percent (50%) by reason of stock
ownership or otherwise.