THE GILLETTE COMPANY
1971 STOCK OPTION PLAN, AS AMENDED
l. PURPOSE. The purpose of the 1971 Stock Option Plan (hereinafter
referred to as the "Plan") is to provide a special incentive to selected key
salaried employees of The Gillette Company (hereinafter referred to as the
"Company") and of its subsidiaries and to the non-employee members of the Board
of Directors of the Company to promote the Company's business. The Plan is
designed to accomplish this purpose by offering such employees and non-employee
directors a favorable opportunity to purchase shares of the common stock of the
Company so that they will share in the success of the Company's business. For
purposes of the Plan a subsidiary is any corporation in which the Company owns,
directly or indirectly, stock possessing fifty percent or more of the total
combined voting power of all classes of stock or over which the Company has
effective operating control.
2. ADMINISTRATION. The Plan shall be administered by the Personnel
Committee heretofore established by the Board of Directors of the Company, no
member of which shall be an employee of the Company or of any subsidiary. The
Committee shall have authority, not inconsistently with the Plan, (a) to
determine which of the key salaried employees of the Company and its
subsidiaries shall be granted options; (b) to determine whether the options
granted to any employees shall be incentive stock options within the meaning of
the Internal Revenue Code or non-qualified stock options or both; provided,
however, that with respect to options granted after December 31, 1986, in no
event shall the fair market value of the stock (determined at the time of grant
of the options) subject to incentive stock options within the meaning of the
Internal Revenue Code which first became exercisable by any employee in any
calendar year exceed $100,000 (and, to the extent such fair market value exceeds
$100,000, the later granted options shall be treated as non-qualified stock
options); (c) to determine the time or times when options shall be granted to
employees and the number of shares of common stock to be subject to each such
option provided, however, subject to adjustment as provided in Section 9 of the
Plan, in no event shall any employee be granted options covering more than
200,000 shares of common stock in any calendar year; (d) with respect to options
granted to employees, to determine the option price of the shares subject to
each option and the method of payment of such price; (e) with respect to options
granted to employees, to determine the time or times when each option becomes
exercisable and the duration of the exercise period; (f) to prescribe the form
or forms of the instruments evidencing any options granted under the Plan and of
any other instruments required under the Plan and to change such forms from time
to time; (g) to make all determinations as to the terms of any sales of common
stock of the Company to employees under Section 8; (h) to adopt, amend and
rescind rules and regulations for the administration of the Plan and the options
and for its own acts and proceedings; and (i) to decide all questions and settle
all controversies and disputes which may arise in connection with the Plan. All
decisions, determinations and interpretations of the Committee shall be binding
on all parties concerned.
3. PARTICIPANTS. The participants in the Plan shall be such key
salaried employees of the Company or of any of its subsidiaries, whether or not
also officers or directors, as may be selected from time to time by the
Committee in its discretion, subject to the provisions of Section 8. In
addition, each non-employee director shall be a participant in the Plan. In any
grant of options after the initial grant, or any sale made under Section 8 after
the initial sale, employees who were previously granted options or sold shares
under the Plan may be included or excluded.
4. LIMITATIONS. No option shall be granted under the Plan and no sale
shall be made under Section 8 after April 15, 1999, but options theretofore
granted may extend beyond that date. Subject to adjustment as provided in
Section 9 of the Plan, the number of shares of common stock of the Company which
may be delivered under the Plan shall not exceed 28,200,000 in the aggregate. To
the extent that any option granted under the Plan shall expire or terminate
unexercised or for any reason become unexercisable as to any shares subject
thereto, such shares shall thereafter be available for further grants under the
Plan, within the limit specified above.
5. STOCK TO BE DELIVERED. Stock to be delivered under the Plan may
constitute an original issue of authorized stock or may consist of previously
issued stock acquired by the Company, as shall be determined by the Board of
Directors. The Board of Directors and the proper officers of the Company shall
take any appropriate action required for such delivery.
6. TERMS AND CONDITIONS OF OPTIONS GRANTED TO EMPLOYEES. All options
granted to either non-employee directors or employees shall be subject to
Section 6 Paragraph (c) Subparagraphs (4) and (5). All options granted to
employees under the Plan shall be subject to all the following additional terms
and conditions (except as provided in Sections 7 and 8 below) and to such other
terms and conditions as the Committee shall determine to be appropriate to
accomplish the purposes of the Plan:
(a) Option Price. The option price under each option shall be
determined by the Committee and shall be not less than l00 percent of
the fair market value per share at the time the option is granted. If
the Committee so directs, an option may provide that if an employee
Participant who was an employee participant at the time of the grant
of the option and who is not an officer or director of the Company at
the time of any exercise of the option, he shall not be required to
make payment in cash or equivalent at that time for the shares
acquired on such exercise, but may at his election pay the purchase
price for such shares by making a payment in cash or equivalent of not
less than five percent of such price and entering into an agreement,
in a form prescribed by the Committee, providing for payment of the
balance of such price, with interest at a specified rate, but not less
than four percent, over a period not to exceed five years and
containing such other provisions as the Committee in its discretion
determines. In addition, if the Committee so directs, an option may
provide for a guarantee by the Company or repayment of amounts
borrowed by the Participant in order to exercise the option, provided
he is not an officer or director of the Company at the time of such
borrowing, or may provide that the Company may make a loan, guarantee,
or otherwise provide assistance as the Committee deems appropriate to
enable the Participant to exercise the option, provided that no such
loan, guarantee, or other assistance shall be made without approval of
the Board of Directors as required by law.
(b) Period of Options. The period of an option shall not exceed ten
years from the date of grant.
(c) Exercise of Option.
(1) Each option held by a participant other than a
non-employee director shall be made exercisable at such time or times,
whether or not in installments, as the Committee shall prescribe at
the time the option is granted. In the case of an option held by a
participant other than a non-employee director which is not
immediately exercisable in full, the Committee may at any time
accelerate the time at which all or any part of the option may be
exercised.
(2) Options intended to be incentive stock options, as defined
in the Internal Revenue Code, shall contain and be subject to such
provisions relating to the exercise and other matters as are required
of incentive stock options under the applicable provisions of the
Internal Revenue Code and Treasury Regulations, as from time to time
in effect, and the Secretary of the Committee shall inform optionees
of such provisions.
(3) Each incentive stock option within the meaning of the
Internal Revenue Code granted on or before December 31, 1986 shall
contain and be subject to the following provision:
This option shall not be exercisable while there is
outstanding (within the meaning of Section 422A(c)7 of the Internal
Revenue Code of l954, as amended) any incentive stock option (as that
term is defined in said Code) which was granted to the Participant
before the granting of this option to purchase stock in his employer
corporation (whether The Gillette Company or a parent or subsidiary
corporation thereof), or in a corporation which at the time of the
granting of this option is a parent or subsidiary corporation of the
employer corporation, or in a predecessor corporation of any such
corporation.
Each incentive stock option within the meaning of the Internal
Revenue Code granted after December 31, 1986 shall not be subject to
the above provision.
(4) Payment for Delivery of Shares. Upon exercise of any
option, payment in full in the form of cash or a certified bank, or
cashier's check or, with the approval of the Secretary of the
Committee, in whole or part Common Stock of the Company at fair market
value, which for this purpose shall be the closing price on the
business day preceding the date of exercise, shall be made at the time
of such exercise for all shares then being purchased thereunder,
except in the case of an exercise to which the provisions of the
second sentence of subsection (a) above are applicable.
The purchase price payable by any person, other than a
non-employee director, who is not a citizen or resident of the United
States of America and who is an employee of a foreign subsidiary at
the time payment is due shall, if the Committee so directs, be paid to
such subsidiary in the currency of the country in which such
subsidiary is located, computed at such exchange rate as the Committee
may direct. The amount of each such payment may, in the discretion of
the Committee, be accounted for on the books of such subsidiary as a
contribution to its capital by the Company. The Company shall not be
obligated to deliver any shares unless and until, in the opinion of
the Company's counsel, all applicable federal and state laws and
regulations have been complied with, nor, in the event the outstanding
common stock is at the time listed upon any stock exchange, unless and
until the shares to be delivered have been listed or authorized to be
added to the list upon official notice of issuance upon such exchange,
nor unless or until all other legal matters in connection with the
issuance and delivery of shares have been approved by the Company's
counsel. Without limiting the generality of the foregoing, the Company
may require from the Participant such investment representation or
such agreement, if any, as counsel for the Company may consider
necessary in order to comply with the Securities Act of 1933 and may
require that the Participant agree that any sale of the shares will be
made only on the New York Stock Exchange or in such other manner as is
permitted by the Committee and that he will notify the Company when he
makes any disposition of the shares whether by sale, gift, or
otherwise. The Company shall use its best efforts to effect any such
compliance and listing, and the Participant shall take any action
reasonably requested by the Company in such connection. A Participant
shall have the rights of a shareholder only as to shares actually
acquired by him under the Plan.
(5) Notwithstanding any other provision of this Plan, if
within one year of a Change in Control, as hereinafter defined, the
employment of an employee Participant is terminated for any reason
other than willful misconduct or the service as a director of a
non-employee director is terminated, all his outstanding options
which are not yet exercisable shall become immediately exercisable
and all the rights and benefits relating to such options including,
but not limited to, periods during which such options may be
exercised shall become fixed and not subject to change or revocation
by the Company; provided, that in the case of any incentive stock
option (the "second option") which is not exercisable by reason of a
previously granted incentive stock option which is still
"outstanding" within the meaning of section 422A(c)(7) of the
Internal Revenue Code (as in effect before the amendments made by the
Tax Reform Act of 1986), the second option shall not be exercisable
until the earlier outstanding option is exercised in full or expires
by reason of the lapse of time. For purposes of the foregoing, a
Change in Control shall mean the happening of any of the following
events:
(A) Any person within the meaning of Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the
"1934 Act"), other than the Company or any of its
subsidiaries, has become the beneficial owner, within the
meaning of Rule 13d-3 under the 1934 Act, of 20% or more
of the combined voting securities of the Company;
(B) A tender offer or exchange offer, other than an
offer by the Company, pursuant to which shares of the
Company's common stock have been purchased;
(C) The stockholders or directors of the Company
have approved an agreement to merge or consolidate with or
into another corporation and the Company is not the
surviving corporation or an agreement to sell or otherwise
dispose of all or substantially all of the Company's
assets (including a plan of liquidation); or
(D) During any period of two consecutive years,
individuals who at the beginning of such period
constituted the board of directors cease for any reason to
constitute at least a majority thereof. For this purpose,
new directors who were elected, or nominated (or approved
for nomination in the case of nomination by a Committee of
the Board) for election by shareholders of the Company, by
at least two thirds of the directors then still in office
who were, or are deemed to have been directors at the
beginning of the period, shall be deemed to have been
directors at the beginning of the period.
(d) Nontransferability of Options. No option may be
transferred by the Participant otherwise than by will or
by the laws of descent and distribution, and during the
Participant's lifetime the option may be exercised only by
him.
(e) Nontransferability of Shares. If the Committee so
determines, an option granted to an employee may provide
that, without prior consent of the Committee, shares
acquired by exercise of the option shall not be
transferred, sold, pledged or otherwise disposed of within
a period not to exceed one year from the date the shares
are transferred to the Participant upon his exercise of
the option or prior to the satisfaction of all
indebtedness with respect thereto, if later.
(f) Termination of Employment. If the employment of a
Participant terminates for any reason other than his
death, he may, unless discharged for cause which in the
opinion of the Committee casts such discredit on him as to
justify termination of his option, thereafter exercise his
option as provided below. (i) If such termination of
employment is voluntary on the part of the Participant, he
may exercise his option only within seven days after the
date of termination of his employment (unless a longer
period not in excess of three months is allowed by the
Committee). (ii) If such termination of employment is
involuntary on the part of the Participant, he may
exercise his option only within three months after the
date of termination of his employment. (iii)
Notwithstanding the above, if a Participant retires under
The Gillette Company Retirement Plan or the retirement
plan of a subsidiary, or if a Participant terminates his
employment with a subsidiary that does not maintain a
retirement plan and he would have been eligible to retire
under the terms of The Gillette Company Retirement Plan
had he been a Participant in that Plan, he may exercise
any option granted prior to January 1, 1994, other than an
incentive stock option within the meaning of the Internal
Revenue Code, within a period not to exceed two years
after his retirement date, any option granted after
December 31, 1993 other than an incentive stock option
within the meaning of the Internal Revenue Code within a
period not to exceed three years after his retirement
date, and any incentive stock option within a period not
to exceed three months after his retirement date. The
Committee may, in its sole discretion, terminate any such
option at or at any time after the time when that option
would otherwise have terminated as a result of the
termination of a Participant's employment, if it deems
such action to be in the best interests of the Company. In
no event, however, may any Participant exercise any option
which was not exercisable on the date he ceased to be an
employee, or after the expiration of the option period.
For purposes of this subsection (g) a Participant's
employment shall not be considered terminated in the case
of a sick leave or other bona fide leave of absence
approved by the Company or a subsidiary in conformance
with the applicable provisions of the Internal Revenue
Code or Treasury Regulations, or in the case of a transfer
to the employment of a subsidiary or to the employment of
the Company.
(g) Death. If a Participant dies at a time when he is
entitled to exercise an option, then at any time or times
within one year after his death (or with respect to
employee participants such further period as the Committee
may allow) such option may be exercised, as to all or any
of the shares which the Participant was entitled to
purchase immediately prior to his death, by his executor
or administrator or the person or persons to whom the
option is transferred by will or the applicable laws of
descent and distribution, and except as so exercised such
option shall expire at the end of such period. In no
event, however, may any option be exercised after the
expiration of the option period or, in the case of an
incentive stock option within the meaning of the Internal
Revenue Code after the expiration of any period of
exercise for such options specified in the Internal
Revenue Code or the regulations thereunder.
7. REPLACEMENT OPTIONS. The Company may grant options under the Plan
on terms differing from those provided for in Section 6 where such options are
granted in substitution for options held by employees of other corporations who
concurrently become employees of the Company or a subsidiary as the result of a
merger or consolidation of the employing corporation with the Company or
subsidiary, or the acquisition by the Company or a subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
options be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.
Notwithstanding anything contained in this Plan, the Committee shall
have authority, with respect to any options granted or to be granted to
employees or outstanding installment Purchase Agreements of participants other
than non-employee directors under this Plan, to extend the time for payment of
any and all installments, to modify the amount of any installment, to amend
outstanding option certificates to provide for installment payments or to take
any other action which it may, in its discretion, deem necessary, provided that:
(1) interest on the unpaid balance under any outstanding Purchase Agreement at
the rate of at least four percent (4%) per annum shall continue to be due and
payable quarterly during the period of any deferral of payment; (2) all such
installment Purchase Agreements and unexercised options, shall at all times be
in accordance with the applicable provisions of Regulation G of the Board of
Governors of the Federal Reserve System, as from time to time amended, and with
all other applicable legal requirements; (3) no such action by the Committee
shall jeopardize the status of stock options as incentive stock options under
the Internal Revenue Code.
8. FOREIGN EMPLOYEES. The Company may grant options under the Plan on
terms differing from those provided for in Section 6 where such options are
granted to employee Participants who are not citizens or residents of the United
States of America if the Committee determines that such different terms are
appropriate in view of the circumstances of such Participants, provided,
however, that such options shall not be inconsistent with the provisions of
Section 6(a) or Section 6(b).
In addition, if the Committee determines that options are
inappropriate for any key salaried employees who are not citizens or residents
of the United States of America, whether because of the tax laws of the foreign
countries in which such employees are residents or for other reasons, the Board
of Directors may authorize special arrangements for the sale of shares of common
stock of the Company to such employees, whether by the Company, or a subsidiary,
or other person. Such arrangements may, if approved by the Board of Directors,
include the establishment of a trust by the foreign subsidiary which is the
employer of the key salaried employees, designated by such subsidiary, to whom
the shares are to be sold. Such arrangements shall provide for a purchase price
of not less than the fair market value of the stock at the date of sale and a
maximum annual grant per participant of options to purchase 200,000 shares of
common stock and may provide that the purchase price be paid over a period of
not more than ten years, with or without interest, and that such employees have
the right, with or without payment of a specified premium, to require the seller
of the shares to repurchase such shares at the same price, subject to specified
conditions. Such arrangements may also include provisions deemed appropriate as
to acceleration or prepayment of the balance of the purchase price, restrictions
on the transfer of the shares by the employee, representations or agreements by
the employee about his investment purposes and other miscellaneous matters.
9. CHANGES IN STOCK. In the event of a stock dividend, split-up or
combinations of shares, recapitalization or merger in which the Company is the
surviving corporation, or other similar capital change, the number and kind of
shares of stock or securities of the Company to be subject to the Plan and to
options then outstanding or to be granted thereunder, the maximum number of
shares or securities which may be issued or sold under the Plan, the maximum
annual grant for each participant, the automatic annual grant for each
non-employee director, the option price and other relevant provisions shall be
appropriately adjusted by the Board of Directors of the Company, whose
determination shall be binding on all persons. In the event of a consolidation
or a merger in which the Company is not the surviving corporation or which
results in the acquisition of substantially all the Company's outstanding stock
by a single person or entity or by a group of persons and/or entities acting in
concert, or in the event of complete liquidation of the Company, all outstanding
options shall thereupon terminate, provided that (i) at least twenty days prior
to the effective date of any such consolidation or merger, the Board of
Directors shall with respect to employee participants either (a) make all
outstanding options immediately exercisable, or (b) arrange to have the
surviving corporation grant replacement options to the employee Participants and
(ii) in the case of option grants to non-employee directors, all outstanding
options not otherwise exercisable shall become exercisable on the twentieth day
prior to the effective date of the merger.
l0. EMPLOYMENT RIGHTS. The adoption of the Plan does not confer upon
any employee of the Company or a subsidiary any right to continued employment
with the Company or a subsidiary, as the case may be, nor does it interfere in
any way with the right of the Company or a subsidiary to terminate the
employment of any of its employees at any time.
ll. THE COMMITTEE MAY AT ANY TIME DISCONTINUE GRANTING OPTIONS UNDER
THE PLAN. The Board of Directors of the Company or the Personnel Committee of
the Board of Directors if and to the extent authorized, may at any time or times
amend the Plan or amend any outstanding option or options or arrangements
established under Section 8 for the purpose of satisfying the requirements of
any changes in applicable laws or regulations or for any other purpose which may
at the time be permitted by law, provided that (except to the extent required or
permitted under Section 9 and, with respect to clauses (b) and (f) below, except
to the extent required or permitted under Section 7) no such amendment shall,
without the approval of the stockholders of the Company, (a) increase the
maximum number of shares available under the Plan or the maximum annual grant
per participant other than as permitted under Section 9, (b) reduce the minimum
option price of options thereafter to be granted below the price provided for in
Section 6(a), except that the Plan may be amended to provide that the minimum
option price of non-qualified stock options thereafter to be granted to
employees may be not less than 95% of the fair market value at the date of grant
if the Board determines that such amendment is necessary for tax reasons to
carry out the objectives of the Plan, (c) reduce the price at which shares of
common stock of the Company may be sold under Section 8 below the price provided
for in Section 8, (d) reduce the option price of outstanding options, (e) extend
the time within which options may be granted, (f) extend the period of an
outstanding option beyond ten years from the date of grant, (g) amend the
provisions of Section 12 with respect to the terms and conditions of options to
non-employee directors and further provided no such amendment shall adversely
affect the rights of any Participant (without his consent) under any option
theretofore granted or other contractual arrangements theretofore entered into
or after a Change in Control deprive any Participant of any right or benefit
which became operative in the event of a Change in Control. Notwithstanding the
above, in no event may the provisions of Section 12 be amended more than once
every six months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act, or the rules thereunder.
12. TERMS AND CONDITIONS OF OPTIONS GRANTED TO NON-EMPLOYEE
DIRECTORS. Effective at the close of business on the second business day after
the 1992 Annual Meeting of Shareholders of the Company and on the second
business day after each Annual Meeting thereafter, each non-employee director
shall be automatically granted a non-incentive stock option to purchase 1,000
shares of the common stock of the Company upon the following terms and
conditions:
(a) Option Price. The option price under each option shall be the
fair market value on the date of grant, which for this purpose is
defined as the average between the high and the low price of the
common stock on the NYSE Composite Transaction listing.
(b) Option Period. The period of an option shall be ten years from
the date of grant.
(c) Option Exercise. Each option shall become exercisable on the
first anniversary of the date of grant except as otherwise provided
under Section 6 Paragraph c Subparagraph 5 of this Plan. Any option,
otherwise exercisable, may be exercised during the period a
non-employee director remains a member of the Board of Directors and
for a period of three months following the date a non-employee
director ceases to be a director except in the case where the
non-employee director is or will be eligible to receive benefits
under the Company's Retirement Plan for Directors when membership on
the Board of Directors ends and where the non-employee director
continues to be so eligible as of the date of exercise, that
non-employee director's options shall be exercisable for a period of
two years with respect to options granted before 1994 and three years
for options granted after 1993 from the date membership on the Board
of Directors ceases.
If a non-employee director dies at the time when the non-employee
director is entitled to exercise an option, then at any time or times
within one year after that non-employee director's death that
non-employee director's option may be exercised in accordance with
the provisions of Section 6 Paragraph (g) of the Plan. In no event
shall any option be exercised after the expiration of the option
period.
(d) Payment for Delivery of Shares. Payment for the shares shall be
made in accordance with the provisions of Section 6 Paragraph c
Subparagraph 4 of this Plan.
(e) Nontransferability of Options. No option may be transferred by a
non-employee director otherwise than by will or by the laws of
descent and distribution, and during the non-employee director's
lifetime the option may be exercised only by the non-employee
director.
APRIL 1995