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