Exhibit 10(a)
THE GILLETTE COMPANY
1971 STOCK OPTION PLAN
(WITH AMENDMENTS ADOPTED THROUGH DECEMBER 2001)
1. PURPOSE. The purpose of the 1971 Stock Option Plan (hereinafter referred
to as the "Plan") is to provide a special incentive to selected key salaried
employees of The Gillette Company (hereinafter referred to as the "Company") and
of its subsidiaries and to the non-employee members of the Board of Directors of
the Company to promote the Company's business. The Plan is designed to
accomplish this purpose by offering such employees and non-employee directors a
favorable opportunity to purchase shares of the common stock of the Company so
that they will share in the success of the Company's business. For purposes of
the Plan a subsidiary is any corporation in which the Company owns, directly or
indirectly, stock possessing fifty percent or more of the total combined voting
power of all classes of stock or over which the Company has effective operating
control.
2. ADMINISTRATION. The Plan shall be administered by the 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.
-2-
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,
-3-
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
-4-
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) Notwithstanding the provisions of Section 6(f), 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 a period of two years from the date
of termination; 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
-5-
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
-6-
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
-7-
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
-8-
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
-9-
(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
-10-
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
-11-
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:
-12-
(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.
-13-
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
-14-
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) 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 2001, this means 1,666 after one year, an
additional 1,666 after two
15
years and the remaining 1,668 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.
December 13, 2001