EXHIBIT 10-1
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THE PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION PLAN
(AS ADJUSTED FOR STOCK SPLIT ON MAY 21, 2004
AND AMENDED ON FEBRUARY 14, 2006)
ARTICLE A -- PURPOSE.
The purposes of The Procter & Gamble 2001 Stock and Incentive Compensation
Plan (the "Plan") are to strengthen the alignment of interests between those
employees of The Procter & Gamble Company (the "Company") and its subsidiaries
who are largely responsible for the success of the business (the "Participants")
and the Company's shareholders through ownership behavior and the increased
ownership of shares of the Company's common stock (the "Common Stock"), and to
encourage the Participants to remain in the employ of the Company and its
subsidiaries. This will be accomplished through the granting of options to
purchase shares of Common Stock, the granting of performance related awards, the
payment of a portion of the Participants' remuneration in shares of Common
Stock, the granting of deferred awards related to the increase in the price of
Common Stock, and the granting of restricted stock units ("RSUs") or other
awards that are related to the price of Common Stock.
ARTICLE B -- ADMINISTRATION.
1. The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"), or such
other committee as may be designated by the Board. The Committee shall consist
of not fewer than three (3) members of the Board who are "Non-Employee
Directors" as defined in Rule 16b-3 under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), or any successor rule or definition adopted by the
Securities and Exchange Commission, to be appointed by the Board from time to
time and to serve at the discretion of the Board. The Committee may establish
such regulations, provisions, and procedures within the terms of the Plan as, in
its opinion, may be advisable for the administration and operation of the Plan,
and may designate the Secretary of the Company or other employees of the Company
to assist the Committee in the administration and operation of the Plan and may
grant authority to such persons to execute documents on behalf of the Committee.
The Committee shall report to the Board on the administration of the Plan not
less than once each year.
2. Subject to the express provisions of the Plan, the Committee shall have
authority: to grant nonstatutory and incentive stock options; to grant stock
appreciation rights either freestanding or in tandem with simultaneously granted
stock options; to grant Performance Awards (as defined in Article J); to award a
portion of a Participant's remuneration in shares of Common Stock subject to
such conditions or restrictions, if any, as the Committee may determine; to
award RSUs or other awards that are related to the price of Common Stock; to
determine all the terms and provisions of the respective stock option, stock
appreciation right, stock award, RSU, or other award agreements including
setting the dates when each stock option or stock appreciation right or part
thereof may be exercised and determining the conditions and restrictions, if
any, of any shares of Common Stock acquired through the exercise of any stock
option; to provide for special terms for any stock options, stock appreciation
rights, stock awards, RSUs or other awards granted to Participants who are
foreign nationals or who are employed by the Company or any of its subsidiaries
outside of the United States of America in order to fairly accommodate for
differences in local law, tax policy or custom and to approve such supplements
to or amendments, restatements or alternative versions of the Plan as the
Committee may consider necessary or appropriate for such purposes (without
affecting the terms of the Plan for any other purpose); and to make all other
determinations it deems necessary or advisable for administering the Plan. In
addition, at the time of grant the Committee shall have the further authority
to:
(a) waive the provisions of Article F, Paragraph 1(a);
(b) waive the provisions of Article F, Paragraph 1(b);
(c) waive the provisions of Article G, Paragraph 4(a), 4(b) and 4(c); and
(d) impose conditions in lieu of those set forth in Article G, Paragraphs 4
through 7, for nonstatutory stock options, stock appreciation rights,
stock awards, RSUs, or Performance Awards which do not increase or
extend the rights of the Participant.
ARTICLE C -- PARTICIPATION.
The Committee shall select as Participants those employees of the Company
and its subsidiaries who, in the opinion of the Committee, have demonstrated a
capacity for contributing in a substantial manner to the success of such
companies.
ARTICLE D -- LIMITATION ON NUMBER OF SHARES AVAILABLE UNDER THE PLAN.
1. Unless otherwise authorized by the shareholders and subject to Paragraph
2 of this Article D, the maximum aggregate number of shares available for award
under the Plan shall be one hundred ninety million (190,000,000) shares. Any of
the authorized shares may be used for any of the types of awards described in
the Plan, except that no more than fifteen percent (15%) of the authorized
shares may be awarded as restricted or unrestricted stock.
2. In addition to the shares authorized for award by Paragraph 1 of this
Article, the following shares may be awarded under the Plan:
(a) shares that were authorized to be awarded under The Procter & Gamble
1992 Stock Plan (the "1992 Plan"), but that were not awarded under the
1992 Plan;
(b) shares awarded under the Plan or the 1992 Plan that are subsequently
forfeited in accordance with the Plan or the 1992 Plan, respectively;
(c) shares tendered by a Participant in payment of all or part of the
exercise price of a stock option awarded under the Plan or the 1992
Plan;
(d) shares tendered by or withheld from a Participant in satisfaction of
withholding tax obligations with respect to a stock option awarded
under the Plan or the 1992 Plan.
ARTICLE E -- SHARES SUBJECT TO USE UNDER THE PLAN.
1. The shares to be delivered by the Company upon exercise of stock options
or stock appreciation rights shall be determined by the Board and may consist,
in whole or in part, of authorized but unissued shares or treasury shares. In
the case of redemption of stock appreciation rights by one of the Company's
subsidiaries, such shares shall be shares acquired by that subsidiary.
2. For purposes of the Plan, restricted or unrestricted stock awarded or
issued following redemption of RSUs under the terms of the Plan shall be
authorized but unissued shares, treasury shares, or shares acquired in the open
market by the Company or a subsidiary, as determined by the Board.
ARTICLE F -- STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
1. In addition to such other conditions as may be established by the
Committee, in consideration of the granting of stock options or stock
appreciation rights under the terms of the Plan, each Participant agrees as
follows:
(a) The right to exercise any stock option or stock appreciation right
shall be conditional upon certification by the Participant at time of
exercise that the Participant intends to remain in the employ of the
Company or one of its subsidiaries for at least one (1) year following
the date of the exercise of the stock option or stock appreciation
right (provided that termination of employment due to Retirement or
Special Separation shall not constitute a breach of such
certification), and,
(b) In order to better protect the goodwill of the Company and its
subsidiaries and to prevent the disclosure of the Company's or its
subsidiaries' trade secrets and confidential information and thereby
help insure the long-term success of the business, the Participant,
without prior written consent of the Company, will not engage in any
activity or provide any services, whether as a director, manager,
supervisor, employee, adviser, consultant or otherwise, for a period of
three (3) years following the date of the Participant's termination of
employment with the Company, in connection with the manufacture,
development, advertising, promotion, or sale of any product which is
the same as or similar to or competitive with any products of the
Company or its subsidiaries (including both existing products as well
as products known to the Participant, as a consequence of the
Participant's employment with the Company or one of its subsidiaries,
to be in development):
(1) with respect to which the Participant's work has been directly
concerned at any time during the two (2) years preceding
termination of employment with the Company or one of its
subsidiaries or
(2) with respect to which during that period of time the Participant,
as a consequence of the Participant's job performance and duties,
acquired knowledge of trade secrets or other confidential
information of the Company or its subsidiaries.
For purposes of this paragraph, it shall be conclusively presumed that
Participants have knowledge of information they were directly exposed
to through actual receipt or review of memos or documents containing
such information, or through actual attendance at meetings at which
such information was discussed or disclosed.
(c) The provisions of this Article are not in lieu of, but are in addition
to the continuing obligation of the Participant (which Participant
hereby acknowledges) to not use or disclose the Company's or its
subsidiaries' trade secrets and confidential information known to the
Participant until any particular trade secret or confidential
information become generally known (through no fault of the
Participant), whereupon the restriction on use and disclosure shall
cease as to that item. Information regarding products in development,
in test marketing or being marketed or promoted in a discrete
geographic region, which information the Company or one of its
subsidiaries is considering for broader use, shall not be deemed
generally known until such broader use is actually commercially
implemented. As used in this Article, "generally known" means known
throughout the domestic U. S. industry or, in the case of Participants
who have job responsibilities outside of the United States, the
appropriate foreign country or countries' industry. As used in this
Article, "trade secrets and other confidential information" also
includes personnel knowledge about a manager, or managers, of the
Company or its subsidiaries gained in the course of Participant's
employment with the Company or its subsidiaries (including personnel
ratings or rankings, manager or peer evaluations, performance records,
special skills or abilities, compensation, work and development plans,
training, nature of specific project and work assignments, or
specialties developed as a result of such assignments) which directly
or indirectly affords the Participant a confidential basis to solicit,
encourage, or participate in soliciting any manager, or managers, of
the Company or any subsidiary to terminate his or her relationship with
the Company or that subsidiary.
(d) By acceptance of any offered stock option or stock appreciation rights
granted under the terms of the Plan, the Participant acknowledges that
if the Participant were, without authority, to use or disclose the
Company's or any of its subsidiaries' trade secrets or confidential
information or threaten to do so, the Company or one of its
subsidiaries would be entitled to injunctive and other appropriate
relief to prevent the Participant from doing so. The Participant
acknowledges that the harm caused to the Company by the breach or
anticipated breach of this Article is by its nature irreparable
because, among other things, it is not readily susceptible of proof as
to the monetary harm that would ensue. The Participant consents that
any interim or final equitable relief entered by a court of competent
jurisdiction shall, at the request of the Company or one of its
subsidiaries, be entered on consent and enforced by any court having
jurisdiction over the Participant, without prejudice to any rights
either party may have to appeal from the proceedings which resulted in
any grant of such relief.
(e) If any of the provisions contained in this Article F shall for any
reason, whether by application of existing law or law which may develop
after the Participant's acceptance of an offer of the granting of stock
appreciation rights or stock options, be determined by a court of
competent jurisdiction to be overly broad as to scope of activity,
duration, or territory, the Participant agrees to join the Company or
any of its subsidiaries in requesting such court to construe such
provision by limiting or reducing it so as to be enforceable to the
extent compatible with then applicable law. If any one or more of the
terms, provisions, covenants, or restrictions of this Article shall be
determined by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants,
and restrictions of this Article shall remain in full force and effect
and shall in no way be affected, impaired, or invalidated.
2. The fact that a Participant has been granted a stock option or a stock
appreciation right under the Plan shall not limit the right of the employer to
terminate the Participant's employment at any time.
Because a main purpose of the Plan is to strengthen the alignment of
interests between employees of the Company (including all subsidiaries) and its
shareholders to ensure the continued success of the Company, the Committee is
authorized to suspend or terminate any outstanding stock option or stock
appreciation right of a Participant if the Committee determines the Participant
has acted significantly contrary to the best interests of the Company or its
subsidiaries. For purposes of this paragraph, an action taken "significantly
contrary to the best interests of the Company or its subsidiaries" includes
without limitation any action taken or threatened by the Participant that the
Committee determines has, or is reasonably likely to have, a significant adverse
impact on the reputation, goodwill, stability, operation, personnel retention
and management, or business of the Company or any subsidiary. This paragraph is
in addition to any remedy the Company or a subsidiary may have at law or in
equity, including without limitation injunctive and other appropriate relief.
3. The maximum number of shares with respect to which stock options or
stock appreciation rights may be granted to any Participant in any calendar year
shall not exceed 2,000,000 shares.
4. The aggregate fair market value (determined at the time when the
incentive stock option is exercisable for the first time by a Participant during
any calendar year) of the shares for which any Participant may be granted
incentive stock options under the Plan and all other stock option plans of the
Company and its subsidiaries in any calendar year shall not exceed $100,000 (or
such other amount as reflected in the limits imposed by Section 422(d) of the
Internal Revenue Code of 1986, as it may be amended from time to time).
5. If the Committee grants incentive stock options, all such stock options
shall contain such provisions as permit them to qualify as "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as may be amended from time to time.
6. With respect to stock options granted in tandem with stock appreciation
rights, the exercise of either such stock options or such stock appreciation
rights will result in the simultaneous cancellation of the same number of tandem
stock appreciation rights or stock options, as the case may be.
7. The exercise price for all stock options and stock appreciation rights
shall be established by the Committee at the time of their grant and shall be
not less than one hundred percent (100%) of the fair market value of the Common
Stock on the date of grant.
8. Unless otherwise authorized by the shareholders of the Company, neither
the Board nor the Committee shall authorize the amendment of any outstanding
stock option or stock appreciation right to reduce the exercise price.
9. No stock option or stock appreciation right shall be cancelled and
replaced with awards having a lower exercise price without the prior approval of
the shareholders of the Company. This Article F, Paragraph 9 is intended to
prohibit the repricing of "underwater" stock options and stock appreciation
rights and shall not be construed to prohibit the adjustments permitted under
Article K of the Plan.
10. The Committee may require any Participant to accept any stock options
or stock appreciation rights by means of electronic signature.
ARTICLE G -- EXERCISE OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
1. All stock options and stock appreciation rights granted hereunder shall
have a maximum life of no more than ten (10) years from the date of grant.
2. No stock options or stock appreciation rights shall be exercisable
within one (1) year from their date of grant, except in the case of the death of
the Participant.
3. Unless a transfer has been duly authorized by the Committee pursuant to
Article G, Paragraph 6 of the Plan, during the lifetime of the Participant,
stock options and stock appreciation rights may be exercised only by the
Participant personally, or, in the event of the legal incompetence of the
Participant, by the Participant's duly appointed legal guardian.
4. In the event that a Participant ceases to be an employee of the Company
or any of its subsidiaries while holding an unexercised stock option or stock
appreciation right:
(a) Any unexercisable portions thereof are then void, except in the case
of: (1) death of the Participant; (2) Retirement or Special Separation
that occurs more than six months from the date the options were
granted; or (3) any option as to which the Committee has waived, at the
time of grant, the provisions of this Article G, Paragraph 4(a).
(b) Any exercisable portions thereof are then void, except in the case of:
(1) death of the Participant; (2) Retirement or Special Separation; or
(3) any option as to which the Committee has waived, at the time of
grant, the provisions of this Article G, Paragraph 4(b).
(c) In the case of Special Separation, any stock option or stock
appreciation right must be exercised within the time specified in the
original grant or five (5) years from the date of Special Separation,
whichever is shorter.
5. In the case of the death of a Participant, the persons to whom the stock
options or stock appreciation rights have been transferred by will or the laws
of descent and distribution shall have the privilege of exercising remaining
stock options, stock appreciation rights or parts thereof, whether or not
exercisable on the date of death of such Participant, at any time prior to the
expiration date of the stock options or stock appreciation rights.
6. Stock options and stock appreciation rights are not transferable other
than by will or by the laws of descent and distribution. For the purpose of
exercising stock options or stock appreciation rights after the death of the
Participant, the duly appointed executors and administrators of the estate of
the deceased Participant shall have the same rights with respect to the stock
options and stock appreciation rights as legatees or distributees would have
after distribution to them from the Participant's estate. Notwithstanding the
foregoing, the Committee may authorize the transfer of stock options and stock
appreciation rights upon such terms and conditions as the Committee may require.
Such transfer shall become effective only upon the Committee's complete
satisfaction that the proposed transferee has strictly complied with such terms
and conditions, and both the original Participant and the transferee shall be
subject to the same terms and conditions hereunder as the original Participant.
7. Upon the exercise of stock appreciation rights, the Participant shall be
entitled to receive a redemption differential for each such stock appreciation
right which shall be the difference between the then fair market value of one
share of Common Stock and the exercise price of one stock appreciation right
then being exercised. In the case of the redemption of stock appreciation rights
by a subsidiary of the Company not located in the United States, the redemption
differential shall be calculated in United States dollars and converted to the
appropriate local currency on the exercise date. As determined by the Committee,
the redemption differential may be paid in cash, Common Stock to be valued at
its fair market value on the date of exercise, any other mode of payment deemed
appropriate by the Committee or any combination thereof.
8. Time spent on leave of absence shall be considered as employment for the
purposes of the Plan. Leave of absence means any period of time away from work
granted to any employee by his or her employer because of illness, injury, or
other reasons satisfactory to the employer.
9. The Company reserves the right from time to time to suspend the exercise
of any stock option or stock appreciation right where such suspension is deemed
by the Company as necessary or appropriate for corporate purposes. No such
suspension shall extend the life of the stock option or stock appreciation right
beyond its expiration date, and in no event will there be a suspension in the
five (5) calendar days immediately preceding the expiration date.
10. The Committee may require any Participant to exercise any stock options
or stock appreciation rights by means of electronic signature.
ARTICLE H -- PAYMENT FOR STOCK OPTIONS AND TAX WITHHOLDING.
Upon the exercise of a stock option, payment in full of the exercise price
shall be made by the Participant. As determined by the Committee, the stock
option exercise price may be paid by the Participant either in cash, shares of
Common Stock valued at their fair market value on the date of exercise, a
combination thereof, or such other method as determined by the Committee. In
addition to payment of the exercise price, the Committee may authorize the
Company to charge a reasonable administrative fee for the exercise of any stock
option. Furthermore, to the extent the Company is required to withhold federal,
state, local or foreign taxes in connection with any Participant's stock option
exercise, the Committee may require the Participant to make such arrangements as
the Company may deem necessary for the payment of such taxes required to be
withheld (including, without limitation, relinquishment of a portion of such
stock options or relinquishment of a portion of the proceeds received by the
Participant in a simultaneous exercise and sale of stock during a "cashless"
exercise). In no event, however, shall the Committee be permitted to require
payment from a Participant in excess of the maximum required tax withholding
rates.
ARTICLE I -- GRANT OF UNRESTRICTED STOCK, RESTRICTED STOCK OR RSUS.
The Committee may grant Common Stock or RSUs to Participants under the Plan
subject to such conditions or restrictions, if any, as the Committee may
determine. To the extent the Company is required to withhold federal, state,
local or foreign taxes in connection with the lapse of restrictions on any
Participant's shares of Common Stock, the Committee may require the Participant
to make such arrangements as the Company may deem necessary for the payment of
such taxes required to be withheld (including, without limitation,
relinquishment of a portion of such shares of Common Stock). In no event,
however, shall the Committee be permitted to require payment from a Participant
in excess of the maximum required tax withholding rates.
ARTICLE J -- PERFORMANCE RELATED AWARDS.
1. The Committee, in its discretion, may establish performance goals for
selected Participants and authorize the granting of cash, stock options, stock
appreciation rights, Common Stock, RSUs or other awards that are related to the
price of Common Stock, other property, or any combination thereof ("Performance
Awards") to such Participants upon achievement of such established performance
goals during a specified time period (the "Performance Period"). The Committee,
in its discretion, shall determine the Participants eligible for Performance
Awards, the performance goals to be achieved during each Performance Period, the
amount of any Performance Awards to be paid, and the method of payment for any
Performance Awards. Performance Awards may be granted either alone or in
addition to other grants made under the Plan.
2. Notwithstanding the foregoing, any Performance Awards granted to the
Chief Executive and the Company's other four highest paid executive officers (as
reported in the Company's proxy statement pursuant to Regulation S-K, Item
402(a)(3)) under Article J, Paragraph 1 shall comply with all of the following
requirements:
(a) Each grant shall specify the specific performance objectives (the
"Performance Objectives") which, if achieved, will result in payment or
early payment of the Performance Award. The Performance Objectives may
be described in terms of Company-wide objectives that are related to
the individual Participant or objectives that are related to a
subsidiary, division, department, region, function or business unit of
the Company in which the Participant is employed, and may consist of
one or more or any combination of the following criteria: stock price,
market share, sales revenue, cash flow, earnings per share, return on
equity, total shareholder return, gross margin, and/or costs. The
Performance Objectives may be made relative to the performance of other
corporations. The Committee, in its discretion, may change or modify
these criteria, however, at all times the criterion must be valid
performance criterion for purposes of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Committee may not
change the criteria or Performance Objectives for any Performance
Period that has already been approved by the Committee. The Committee
may cancel a Performance Period or replace a Performance Period with a
new Performance Period, provided that any such cancellation or
replacement shall not cause the Performance Award to fail to meet the
requirements of Section 162(m) of the Code.
(b) Each grant shall specify the minimum level of achievement required by
the Participant relative to the Performance Objectives to qualify for a
Performance Award. In doing so, the grant shall establish a formula for
determining the percentage of the Performance Award to be awarded if
performance is at or above the minimum level, but falls short of full
achievement of the specified Performance Objectives. Each grant may
also establish a formula for determining an additional award above and
beyond the Performance Award to be granted to the Participant if
performance is at or above the specified Performance Objectives. Such
additional award shall also be established as a percentage of the
Performance Award. The Committee may decrease a Performance Award as
determined by the Performance Objectives, but in no case may the
Committee increase any Performance Award as determined by the
Performance Objectives.
(c) The maximum Performance Award that may be granted to any Participant
for any one-year Performance Period shall not exceed $20,000,000 or
800,000 shares of Common Stock (the "Annual Maximum"). The maximum
Performance Award that may be granted to any Participant for a
Performance Period greater than one year shall not exceed the Annual
Maximum multiplied by the number of full years in the Performance
Period.
ARTICLE K -- ADJUSTMENTS.
In the event of any future reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation, rights offering,
share exchange, reclassification, distribution, spin-off or other change
affecting the corporate structure, capitalization or Common Stock of the Company
occuring after the date of approval of the Plan by the Company's shareholders,
(i) the amount of shares authorized to be issued under the Plan and (ii) the
number of shares and/or the exercise prices covered by outstanding stock
options, stock appreciation rights or RSUs shall be adjusted appropriately and
equitably to prevent dilution or enlargement of rights under the Plan. Following
any such change, the term "Common Stock" shall be deemed to refer to such class
of shares or other securities as may be applicable.
ARTICLE L -- ADDITIONAL PROVISIONS AND DEFINITIONS.
1. The Board may, at any time, repeal the Plan or may amend it except that
no such amendment may amend this paragraph, increase the total aggregate number
of shares subject to the Plan, reduce the price at which stock options or stock
appreciation rights may be granted or exercised, alter the class of employees
eligible to receive stock options, or increase the percentage of shares
authorized to be transferred as restricted or unrestricted stock. Participants
and the Company shall be bound by any such amendments as of their effective
dates, but if any outstanding stock options or stock appreciation rights are
materially affected adversely, notice thereof shall be given to the Participants
holding such stock options and stock appreciation rights and such amendments
shall not be applicable without such Participant's written consent. If the Plan
is repealed in its entirety, all theretofore granted unexercised stock options
or stock appreciation rights shall continue to be exercisable in accordance with
their terms and shares subject to conditions or restrictions granted pursuant to
the Plan shall continue to be subject to such conditions or restrictions.
2. In the case of a Participant who is an employee of a subsidiary of the
Company, performance under the Plan, including the granting of shares of the
Company, may be by the subsidiary. Nothing in the Plan shall affect the right of
the Company or any subsidiary to terminate the employment of any employee with
or without cause. None of the Participants, either individually or as a group,
and no beneficiary, transferee or other person claiming under or through any
Participant, shall have any right, title, or interest in any shares of the
Company purchased or reserved for the purpose of the Plan except as to such
shares, if any, as shall have been granted or transferred to him or her. Nothing
in the Plan shall preclude the awarding or granting of shares of the Company to
employees under any other plan or arrangement now or hereafter in effect.
3. "Subsidiary" means any company in which more than fifty percent (50%) of
the total combined voting power of all classes of stock is owned, directly or
indirectly, by the Company or, if the company does not issue stock, more than
fifty percent (50%) of the total combined ownership interest is owned, directly
or indirectly, by the Company. In addition, the Board may designate for
participation in the Plan as a "subsidiary," except for the granting of
incentive stock options, those additional companies affiliated with the Company
in which the Company's direct or indirect stock ownership is fifty percent (50%)
or less of the total combined voting power of all classes of such company's
stock, or, if the company does not issue stock, the Company's direct or indirect
ownership is fifty percent (50%) or less of the company's total combined
ownership interest.
4. Notwithstanding anything to the contrary in the Plan, stock options and
stock appreciation rights granted hereunder shall vest immediately and any
conditions or restrictions on Common Stock shall lapse upon a "Change in
Control." A "Change in Control" shall mean the occurrence of any of the
following:
(a) An acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the
Exchange Act), immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of the then outstanding
shares or the combined voting power of the Company's then outstanding
Voting Securities; PROVIDED, HOWEVER, in determining whether a Change
in Control has occurred pursuant to this Paragraph 4(a), shares or
Voting Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would
cause a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust forming a part
thereof) maintained by (A) the Company or (B) any corporation or other
Person of which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or indirectly, by the
Company (for purposes of this definition, a "Related Entity"), (ii) the
Company or any Related Entity, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(b) The individuals who, as of July 10, 2001 are members of the Board (the
"Incumbent Board"), cease for any reason to constitute at least half of
the members of the Board; or, following a Merger (as hereinafter
defined) which results in a Parent Corporation (as hereinafter
defined), the board of directors of the ultimate Parent Corporation;
PROVIDED, however, that if the election, or nomination for election by
the Company's common stockholders, of any new director was approved by
a vote of at least two-thirds of the Incumbent Board, such new director
shall, for purposes of the Plan, be considered as a member of the
Incumbent Board; PROVIDED FURTHER, HOWEVER, that no individual shall be
considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(c) The consummation of:
(i) A merger, consolidation or reorganization with or into the
Company or in which securities of the Company are issued (a
"Merger"), unless such Merger is a "Non-Control Transaction." A
"Non-Control Transaction" shall mean a Merger where:
(A) the stockholders of the Company, immediately before such
Merger own directly or indirectly immediately following such
Merger at least fifty percent (50%) of the combined voting
power of the outstanding voting securities of (x) the
corporation resulting from such Merger (the "Surviving
Corporation") if fifty percent (50%) or more of the combined
voting power of the then outstanding voting securities of
the Surviving Corporation is not Beneficially Owned,
directly or indirectly by another Person (a "Parent
Corporation"), or (y) if there is one or more Parent
Corporations, the ultimate Parent Corporation;
(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement
providing for such Merger constitute at least half of the
members of the board of directors of (x) the Surviving
Corporation, if there is no Parent Corporation, or (y) if
there is one or more Parent Corporations, the ultimate
Parent Corporation; and
(C) no Person other than (1) the Company, (2) any Related
Entity, (3) any employee benefit plan (or any trust forming
a part thereof) that, immediately prior to such Merger was
maintained by the Company or any Related Entity, or (4) any
Person who, immediately prior to such merger, consolidation
or reorganization had Beneficial Ownership of twenty percent
(20%) or more of the then outstanding Voting Securities or
shares, has Beneficial Ownership of twenty percent (20%) or
more of the combined voting power of the outstanding voting
securities or common stock of (x) the Surviving Corporation
if there is no Parent Corporation, or (y) if there is one or
more Parent Corporations, the ultimate Parent Corporation;
(ii) A complete liquidation or dissolution of the Company; or
(iii) The sale or other disposition of all or substantially all of the
assets of the Company to any Person (other than a transfer to a
Related Entity or under conditions that would constitute a
Non-Control Transaction with the disposition of assets being
regarded as a Merger for this purpose or the distribution to the
Company's stockholders of the stock of a Related Entity or any
other assets).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then outstanding shares or
Voting Securities as a result of the acquisition of shares or Voting Securities
by the Company which, by reducing the number of shares or Voting Securities then
outstanding, increases the proportional number of shares Beneficially Owned by
the Subject Persons, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of shares or
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional
shares or Voting Securities which increases the percentage of the then
outstanding shares or Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.
5. The term "Special Separation" shall mean any termination of employment
that occurs prior to the time a Participant is eligible to retire, except a
termination for cause or a voluntary resignation that is not initiated or
encouraged by the Company.
6. The term "Retirement" shall mean: (a) retirement in accordance with the
provisions of any appropriate retirement plan of the Company or any of its
subsidiaries; or (b) termination of employment under the permanent disability
provision of any retirement plan of the Company or any of its subsidiaries.
ARTICLE M -- CONSENT.
Every Participant who receives a stock option, stock appreciation right,
RSU, or grant of shares pursuant to the Plan shall be bound by the terms and
provisions of the Plan and of the stock option, stock appreciation right, RSU,
or grant of shares agreement referable thereto, and the acceptance of any stock
option, stock appreciation right, RSU, or grant of shares pursuant to the Plan
shall constitute a binding agreement between the Participant and the Company and
its subsidiaries and any successors in interest to any of them. Every Person who
receives a stock option, stock appreciation right, RSU, or grant of shares from
a Participant pursuant to the Plan shall, in addition to such terms and
conditions as the Committee may require upon such grant, be bound by the terms
and provisions of the Plan and of the stock option, stock appreciation right,
RSU, or grant of shares agreement referable thereto, and the acceptance of any
stock option, stock appreciation right, RSU, or grant of shares by such Person
shall constitute a binding agreement between such Person and the Company and its
subsidiaries and any successors in interest to any of them. The Plan shall be
governed by and construed in accordance with the laws of the State of Ohio,
United States of America.
ARTICLE N - PURCHASE OF SHARES OR STOCK OPTIONS.
The Committee may authorize any Participant to convert cash compensation
otherwise payable to such Participant into stock options or shares of Common
Stock under the Plan upon such terms and conditions as the Committee, in its
discretion, shall determine. Notwithstanding the foregoing, in any such
conversion the shares of Common Stock shall be valued at no less than one
hundred percent (100%) of their fair market value.
ARTICLE O -- DURATION OF PLAN.
The Plan will terminate on July 10, 2011 unless a different termination
date is fixed by the shareholders or by action of the Board of Directors, but no
such termination shall affect the prior rights under the Plan of the Company (or
any subsidiary) or of anyone to whom stock options or stock appreciation rights
were granted prior thereto or to whom shares or RSUs have been transferred prior
to such termination.
ADDITIONAL INFORMATION
1. SHARES AWARDED AS A PORTION OF REMUNERATION
Any shares of Common Stock of the Company awarded as a portion of a
participant's remuneration shall be valued at not less than one hundred percent
(100%) of the fair market value of the Company's Common Stock on the date of the
award. These shares may be subject to such conditions or restrictions as the
Committee may determine, including a requirement that the participant remain in
the employ of the Company or one of its subsidiaries for a set period of time,
or until retirement. Failure to abide by any applicable restriction will result
in forfeiture of the shares.
2. U.S. TAX EFFECTS
INCENTIVE STOCK OPTIONS
With regard to tax effects which may accrue to the optionee, counsel
advises that if the optionee has continuously been an employee from the
time an option has been granted until at least three months before it is
exercised, under existing law no taxable income results to the optionee
from the exercise of an incentive stock option at the time of exercise.
However, the spread at exercise is an "adjustment" item for alternative
minimum tax purposes.
Any gain realized on the sale or other disposition of stock acquired
on exercise of an incentive stock option is considered as long-term capital
gain for tax purposes if the stock has been held more than two years after
the date the option was granted and more than one year after the date of
exercise of the option. If the stock is disposed of within one year after
exercise, the lesser of any gain on such disposition or the spread at
exercise (i.e., the excess of the fair market value of the stock on the
date of exercise over the option price) is treated as ordinary income, and
any appreciation after the date of exercise is considered long-term or
short-term capital gain to the optionee depending on the holding period
prior to sale. However, the spread at exercise (even if greater than the
gain on the disposition) is treated as ordinary income if the disposition
is one on which a loss, if sustained, is not recognized--e.g., a gift, a
"wash" sale or a sale to a related party. The amount of ordinary income
recognized by the optionee is treated as a tax deductible expense to the
Company. No other amount relative to an incentive stock option is a tax
deductible expense to the Company.
NONSTATUTORY STOCK OPTIONS
With regard to tax effects which may accrue to the optionee, counsel
advises that under existing tax law gain taxable as ordinary income to the
optionee is deemed to be realized at the date of exercise of the option,
the gain on each share being the difference between the market price on the
date of exercise and the option price. This amount is treated as a tax
deductible expense to the Company at the time of the exercise of the
option. Any appreciation in the value of the stock after the date of
exercise is considered a long-term or short-term capital gain to the
optionee depending on whether or not the stock was held for the appropriate
holding period prior to sale.
STOCK APPRECIATION RIGHTS
With regard to tax effects which may accrue to the recipient, counsel
advises that "United States persons," as defined in the Internal Revenue
Code of 1986 (the "I.R.C."), must recognize ordinary income as of the date
of exercise equal to the amount paid to the recipient, i.e., the difference
between the grant price and the value of the shares on the date of
exercise.
SHARES AWARDED AS A PORTION OF REMUNERATION
With regard to tax effects which may accrue to the recipient, counsel
advises that "United States persons" as defined in the Internal Revenue
Code of 1986 (the "I.R.C."), must recognize ordinary income in the first
taxable year in which the recipient's rights to the stock are transferable
or are not subject to a substantial risk of forfeiture, whichever is
applicable. Recipients who are "United States persons" may also elect to
include the income in their tax returns for the taxable year in which they
receive the shares by filing an election to do so with the appropriate
office of the Internal Revenue Service within 30 days of the date the
shares are transferred to them.
The amount includable in income is the fair market value of the shares
as of the day the shares are transferable or not subject to a substantial
risk of forfeiture, whichever is applicable; if the recipient has elected
to include the income in the year in which the shares are received, the
amount of income includable is the fair market value of the shares at the
time of transfer.
For non-United States persons, the time when income is realized, its
measurement and its taxation, will depend on the laws of the particular
countries in which the recipients are residents and/or citizens at the time
of transfer or when the shares are first transferable and not subject to a
substantial risk of forfeiture, as the case may be. "United States persons"
who receive shares awarded as a portion of remuneration may also have tax
consequences with respect to the receipt of shares or the expiration of
restrictions or substantial risk of forfeiture on such shares under the
laws of the particular country other than the United States of which such
person is a resident or citizen.
Notwithstanding the above advice received by the Company, it is each
individual recipient's responsibility to check with his or her personal tax
adviser as to the tax effects and proper handling of stock options, stock
appreciation rights, restricted stock units and Common Stock acquired. The above
advice relates specifically to the U.S. consequences of stock options, stock
appreciation rights and Common Stock acquired, including the U.S. consequences
to "United States persons" whether or not resident in the U.S. In addition to
U.S. tax consequences, for all persons who are not U.S. residents, the time when
income, if any, is realized, the measurement of such income and its taxation
will also depend on the laws of the particular country other than the U.S. of
which such persons are resident and/or citizens at the time of grant or the time
of exercise, as the case may be.
The Plan is not subject to the qualification requirements of Section 401(a)
of the I.R.C.
3. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA"), as amended.
4. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (File No. 1-434) pursuant to the 1934 Act are incorporated
into this document by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 2004;
2. The Company's Quarterly Report on Form 10-Q for the quarters ended
September 30, 2004 and December 31, 2004; and
3. All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus
and prior to the filing of a post-effective amendment which indicates
that all securities offered have been sold or which deregisters all
securities then remaining unsold.
The Company will provide without charge to each participant in the Plan,
upon oral or written request, a copy of any or all of these documents other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents. In addition, the Company will provide without
charge to such participants a copy of the Company's most recent annual report to
shareholders, proxy statement, and other communications distributed generally to
security holders of the Company. Requests for such copies should be directed to
Mr. Jay A. Ernst, Manager, Shareholder Services, The Procter & Gamble Company,
P.O. Box 5572, Cincinnati, Ohio 45201, (513) 983-3413.
5. ADDITIONAL INFORMATION
Additional information about the Plan and its administrators may be
obtained from Mr. Chris B. Walther, Assistant Secretary, The Procter & Gamble
Company, One Procter & Gamble Plaza, Cincinnati, Ohio 45202, (513) 983-7854.
2001 stock plan.doc