EXHIBIT (10-7)
The Procter & Gamble 1992 Stock Plan (Belgian Version)
THE PROCTER & GAMBLE 1992 STOCK PLAN (BELGIAN VERSION)
(as amended December 11, 2001)
1,000,000 Shares of Common Stock of The Procter & Gamble Company
and
1,000,000 Options to Purchase Common Stock of The Procter & Gamble Company
ARTICLE A -- Purpose.
The purpose of The Procter & Gamble 1992 Stock Plan (Belgian Version)
(hereinafter referred to as the "Plan") is to encourage those employees of The
Procter & Gamble Company (hereinafter referred to as the "Company") and its
subsidiaries who are largely responsible for the long-term success and
development of the business to strengthen the alignment of interests between
employees and the Company's shareholders through the increased ownership of
shares of the Company's Common Stock, and to encourage those employees to remain
in the employ of the Company and its subsidiaries. This will be accomplished
through the granting or sale to employees of options to purchase shares of the
Common Stock of the Company, payment of a portion of the employees' remuneration
in shares of the Common Stock, and the granting to them by the Company and a
subsidiary, if appropriate, of deferred awards related to the increase in the
price of the Common Stock of the Company as provided by the terms and conditions
set forth in the Plan.
ARTICLE B -- Administration.
1. The Plan shall be administered by the Compensation Committee
(hereinafter referred to as the "Committee") of the Board of Directors of the
Company (hereinafter referred to as the "Board"), or such other committee as may
be designated by the Board. The Committee shall consist of not less than three
(3) members of the Board who are neither officers nor employees, or members of
the Board who are "Non-Employee Directors" as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (hereinafter referred to as 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.
2. It shall be the duty of the Committee to administer this Plan
in accordance with its provisions, to report thereon not less than once each
year to the Board and to make such recommendations of amendments or otherwise as
it deem necessary or appropriate. A decision by a majority of the Committee
shall govern all actions of the Committee.
3. Subject to the express provisions of this Plan, the Committee
shall have authority: to grant or offer for sale nonstatutory and incentive
stock options; to grant to recipients stock appreciation rights either
freestanding, in tandem with simultaneously granted or sold stock options, or in
parallel with simultaneously granted or sold stock options; to award a portion
of a recipient's remuneration in shares of Common Stock of the Company subject
to such conditions or restrictions, if any, as the Committee may determine; to
determine all the terms and provisions of the respective stock option, stock
appreciation right, and stock 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; and to make all other
determinations it deems necessary or advisable for administering this Plan;
provided, however, the Committee shall have the further authority at time of
grant 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) and (b); and
(d) impose conditions in lieu of those set forth in Article G,
paragraphs 4 through 7, for nonstatutory stock options, stock
appreciation rights, and stock award grants which do not
increase or extend the rights of the recipient,
to take into consideration the differences, limitations, and requirements of
non-United States laws or conditions including tax regulations, exchange
controls or investment restrictions, possible unenforceability of any part of
this Plan, or other matters deemed appropriate by it.
4. The Committee may establish from time to time such
regulations, provisions, and procedures within the terms of this Plan as, in its
opinion, may be advisable in the administration of this Plan.
5. The Committee may designate the Secretary of the Company or
other employees of the Company to assist the Committee in the administration of
this Plan and may grant authority to such persons to execute documents on behalf
of the Committee.
ARTICLE C -- Participation.
The Committee shall select 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 and
shall determine the number of shares of the Common Stock of the Company to be
transferred under this Plan subject to such conditions or restrictions as the
Committee may determine and the number of shares with respect to which stock
options or stock appreciation rights will be granted or sold. The Committee may
consult with the Chief Executive, but nevertheless the Committee has the full
authority to act, and the Committee's actions shall be final.
ARTICLE D -- Limitation on number of shares for the plan.
1. Unless otherwise authorized by the shareholders, the maximum
aggregate number of shares available for award under this Plan for each calendar
year the Plan is in effect, when combined with the maximum aggregate number of
shares available for award under The Procter & Gamble 1992 Stock Plan in such
calendar year, shall be one percent (1%) of the total issued shares of Common
Stock of the Company as of June 30 of the immediately preceding fiscal year.
2. Any of the authorized shares may be used in respect of any of
the types of awards described in this Plan, except that no more than twenty-five
percent (25%) of the authorized shares in any calendar year may be issued as
restricted or unrestricted stock and no more than 1,000,000 of the authorized
shares during the term of the Plan may be issued as incentive stock options.
3. Any authorized shares not used in a calendar year shall be
available for awards under this Plan in succeeding calendar years.
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 either authorized but
unissued shares or treasury shares, as determined by the Board. 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 this Plan, restricted or unrestricted stock
awarded under the terms of this Plan shall be authorized but unissued shares,
treasury shares, or shares acquired for purposes of the Plan 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 or sale of stock options or
stock appreciation rights under the terms of this Plan, the recipient agrees as
follows:
(a) The right to exercise any stock option or stock appreciation
right shall be conditional upon certification by the recipient
at time of exercise that the recipient intends to remain in
the employ of the Company or one of its subsidiaries (except
in cases of retirement, disability or Special Separation as
defined in section 6 of Article G) for at least one (1) year
following the date of the exercise of the stock option or
stock appreciation right, 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
it subsidiaries' trade secrets and confidential information
and thereby help insure the long-term success of the business,
the recipient, 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 recipient's termination of
employment with the Company (except for terminations of
employment resulting from retirement or Special Separation),
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 recipient, as a consequence of the
recipient's employment with the Company or one of its
subsidiaries, to be in development):
(1) with respect to which the recipient'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
recipient, as a consequence of the recipient's job
performance and duties, acquired knowledge of trade
secrets or other confidential information of the
Company or its subsidiaries.
For purposes of this section, it shall be conclusively
presumed that recipients 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 recipient (which
recipient hereby acknowledges) to not use or disclose the
Company's or its subsidiaries' trade secrets and confidential
information known to the recipient until any particular trade
secret or confidential information become generally known
(through no fault of the recipient), 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 recipients who have job responsibilities outside of the
United States, the appropriate foreign country or countries'
industry.
(d) By acceptance of any offered stock option or stock
appreciation rights granted or sold under the terms of this
Plan, the recipient acknowledges that if the recipient 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 recipient from doing so.
The recipient 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 recipient 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 recipient, 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 shall for
any reason, whether by application of existing law or law
which may develop after the recipient's acceptance of an offer
of the granting or sale 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 recipient 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 an employee has been granted or sold a stock
option or a stock appreciation right under this Plan shall not limit the right
of the employer to terminate the recipient's employment at any time. The
Committee is authorized to suspend or terminate any outstanding stock option or
stock appreciation right for actions taken prior to termination of employment if
the Committee determines the recipient has acted significantly contrary to the
best interests of the Company.
3. More than one stock option or stock appreciation right may be
granted or sold to any employee under this Plan but the maximum number of shares
with respect to which stock options or stock appreciation rights may be granted
or sold to any employee in any calendar year shall not exceed five percent (5%)
of the number of shares which can be issued or transferred annually hereunder,
when combined with the maximum aggregate number of shares available for award
under The Procter & Gamble 1992 Stock Plan in such calendar year.
4. The aggregate fair market value (determined at the time when
the incentive stock option is exercisable for the first time by an employee
during any calendar year) of the shares for which any employee may be granted or
sold incentive stock options under this 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 or sells 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 or sold in tandem with
or parallel to 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 or parallel 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 or, in the case of stock options to be sold, at the time of offer of such
stock options for sale, and shall be not less than one hundred percent (100%) of
the fair market value of the Common Stock of the Company on such date.
ARTICLE G -- Exercise of stock options and stock appreciation rights.
1. All stock options and stock appreciation rights granted or
sold hereunder shall have a maximum life of no more than fifteen (15) years from
the date of grant or, in the case of stock options to be sold, from the date of
the offer of such options for sale.
2. No stock options or stock appreciation rights shall be
exercisable within one (1) year from their date of grant or, in the case of
stock options to be sold, from the date of the offer of such options for sale,
except in the case of the death of the recipient.
3. During the lifetime of the recipient, stock options and stock
appreciation rights may be exercised only by the recipient personally, or, in
the event of the legal incompetence of the recipient, by the recipient's duly
appointed legal guardian.
4. In case a recipient of stock options or stock appreciation
rights 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 recipient; (2) any Special
Separation (as defined in section 6 of this Article G) that
occurs more than six months from the date the options were
granted or, in the case of stock options to be sold, from the
date of the offer of such options for sale; or (3) any option
as to which the Committee has waived, at the time of grant or,
in the case of stock options to be sold, at the time of the
offer of such options for sale, the provisions of this Article
G, paragraph 4(a) pursuant to the authority granted by Article
B, paragraph 3.
(b) Any exercisable portions thereof are then void, except in the
case of death, retirement in accordance with the provisions of
any appropriate profit sharing or retirement plan of the
Company or any of its subsidiaries, Special Separation (as
defined in section 6 of this Article G) of the recipient, or
any option as to which the Committee has waived, at the time
of grant or, in the case of stock options to be sold, at the
time of offer of such options for sale, the provisions of this
Article G, paragraph 4(b) pursuant to the authority granted by
Article B, paragraph 3.
5. In the case of the death of a recipient of stock options or
stock appreciation rights while an employee of the Company or any of its
subsidiaries, 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
employee, at any time prior to the expiration date of the stock options or stock
appreciation rights.
6. Termination of employment under the permanent disability
provision of any appropriate profit sharing or retirement plan of the Company or
any of its subsidiaries shall be deemed the same as retirement. Special
Separation means any termination of employment, except a termination for cause
or a voluntary resignation that is not initiated or encouraged by the Company,
that occurs prior to the time a recipient is eligible to retire. The death of a
recipient of stock options or stock appreciation rights subsequent to retirement
or Special Separation shall not render exercisable stock options or stock
appreciation rights which were unexercisable at the time of the retirement or
Special Separation. The persons to whom the exercisable stock options or stock
appreciation rights have been transferred by will or the laws of descent and
distribution shall have the privilege of exercising such remaining stock
options, stock appreciation rights or parts thereof, at any time prior to the
expiration date of the stock options or stock appreciation rights.
7. Stock options and stock appreciation rights are not
transferable other than by will or by the laws of descent and distribution and
they may not be assigned or hypothecated. For the purpose of exercising stock
options or stock appreciation rights after the death of the recipient, the duly
appointed executors and administrators of the estate of the deceased recipient
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 recipient's estate.
8. Upon the exercise of stock appreciation rights, the recipient
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 the Common Stock of the Company 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 of the Company 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. The number of shares with respect to which stock
appreciation rights are being exercised shall not be available for granting or
selling future stock options or stock appreciation rights under this Plan.
9. The Committee may, in its sole discretion, permit a stock
option which is being exercised either (a) by an optionee whose retirement is
imminent or who has retired or (b) after the death of the optionee, to be
surrendered, in lieu of exercise, for an amount equal to the difference between
the stock option exercise price and the fair market value of shares of the
Common Stock of the Company on the day the stock option is surrendered, payment
to be made in shares of the Company's Common Stock which are subject to this
Plan valued at their fair market value on such date, cash, or a combination
thereof, in such proportion and upon such terms and conditions as shall be
determined by the Committee. The difference between the number of shares subject
to stock options so surrendered and the number of shares, if any, issued upon
such surrender shall represent shares which shall not be available for granting
or selling future stock options under this Plan.
10. Time spent on leave of absence shall be considered as
employment for the purposes of this 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.
11. 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 it 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.
ARTICLE H -- Payment for stock options.
Upon the exercise of a stock option, payment in full of the exercise
price shall be made by the optionee. As determined by the Committee, the stock
option exercise price may be paid for by the optionee either in cash, shares of
the Common Stock of the Company to be valued at their fair market value on the
date of exercise, a combination thereof, or such other method as determined by
the Committee.
ARTICLE I -- Transfer of shares.
1. The Committee may transfer Common Stock of the Company under
the Plan subject to such conditions or restrictions, if any, as the Committee
may determine. The conditions and restrictions may vary from time to time and
with respect to particular employees or group of employees and may be set forth
in agreements between the Company and the employee or in the awards of stock to
them, all as the Committee determines. It is contemplated that the conditions
and restrictions established by the Committee will be consistent with the
objectives of this Plan and may be of the following types. In giving these
examples, it is not intended to restrict the Committee's authority to impose
other restrictions or conditions, or to waive restrictions or conditions under
circumstances deemed by the Committee to be appropriate and not contrary to the
best interests of the Company.
(a) Restrictions
The employee will not be able to sell, pledge, or dispose of
the shares during a specified period except in accordance with
the agreement or award. Such restrictions will lapse either
after a period of, for example, five years, or in fifteen or
fewer annual installments following retirement or termination
of employment, as the Committee from time to time may
determine. However, upon the transfer of shares subject to
restrictions, an employee will have all incidents of ownership
in the shares, including the right to dividends (unless
otherwise restricted by the Committee), to vote the shares,
and to make gifts of them to family members (still subject to
the restrictions).
(b) Lapse of Restrictions
In order to have the restrictions lapse, an employee may be
required to continue in the employ of the Company or a
subsidiary for a prescribed period of time. Exemption from
this requirement may be prescribed in the case of death,
disability, or retirement, or as otherwise prescribed by the
Committee.
ARTICLE J -- 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 and stock
appreciation rights 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 K -- Additional provisions.
1. The Board may, at any time, repeal this Plan or may amend it
from time to time. The recipient of awards under this Plan 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 affected, notice
thereof shall be given to the holders of such stock options and stock
appreciation rights and such amendments shall not be applicable to such holder
without his or her written consent. If this Plan is repealed in its entirety,
all theretofore granted or sold unexercised stock options or stock appreciation
rights shall continue to be exercisable in accordance with their terms and
shares subject to conditions or restrictions transferred pursuant to this Plan
shall continue to be subject to such conditions or restrictions.
2. In the case of an employee of a subsidiary company,
performance under this Plan, including the transfer of shares of the Company,
may be by the subsidiary. Nothing in this 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 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 this Plan except as to such shares, if any, as shall
have been granted, sold or transferred to him or her. Nothing in this Plan shall
preclude the issuance, sale or transfer 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 greater than fifty
percent (50%) of the total combined voting power of all classes of stock is
owned, directly or indirectly, by the Company. In addition, the Board may
designate for participation in this Plan as a "subsidiary," except for the
granting or selling of incentive stock options, those additional companies
affiliated with the Company in which the Company's direct or indirect stock
ownership is less than fifty percent (50%) of the total combined voting power of
all classes of such company's stock.
ARTICLE L -- Consent.
Every recipient of a stock option, stock appreciation right, or
transfer of shares pursuant to this Plan shall be bound by the terms and
provisions of this Plan and of the stock option, stock appreciation right, or
transfer of shares agreement referable thereto, and the acceptance of any stock
option, stock appreciation right, or transfer of shares pursuant to this Plan
shall constitute a binding agreement between the recipient and the Company and
its subsidiaries and any successors in interest to any of them. This Plan shall
be governed by and construed in accordance with the laws of the State of Ohio,
United States of America.
ARTICLE M -- Duration of plan.
This Plan will terminate on July 14, 2002 unless a different
termination date is fixed by action of the Board of Directors, but no such
termination shall affect the prior rights under this Plan of the Company (or any
subsidiary) or of anyone to whom stock options or stock appreciation rights were
granted or sold prior thereto or to whom shares have been transferred prior to
such termination.
ADDITIONAL INFORMATION
1. Stock Options Offered for Purchase
Stock options may be offered for purchase at a price of one dollar
($U.S. 1.00) per option (the "Purchased Stock Options"). Participants must pay
for any Purchased Stock Option within sixty (60) days after the date of
acceptance established by the Committee for such Purchased Stock Option by
delivering cash or a check to the Company or its applicable subsidiary. Each
Purchased Stock Option represents the right to acquire one share of Common Stock
upon the exercise of such Purchased Stock Option. The number of stock options,
whether Purchased Stock Options or otherwise, issued by the Company and
outstanding as of January 31, 1997 is 30,884,517. The Purchased Stock Options
are not listed on an exchange. For such Purchased Stock Options, the Committee,
pursuant to authority granted by Article B, paragraph 3 of the Plan, has waived
the conditions and restrictions of paragraphs 4(a) and (b) of Article G as
follows: the Purchased Stock Options will remain exercisable for up to one (1)
month following any termination of employment; provided that if termination of
employment occurs as a result of death, retirement or Special Separation, the
stock option will remain exercisable for its full term until its date of
expiration.
There is no guarantee that the price of the common stock will exceed
the exercise price of any purchased stock option, in which case such purchased
stock option would have no value.
2. 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.
3. U.S. Tax Treatment For U.S. Persons
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 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 sale 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.
4. 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.
5. 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, 2001;
2. The Company's Quarterly Reports on Form 10-Q for the quarter
ended September 30, 2001;
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. James C. Ashely, Manager, Shareholder Services,
The Procter & Gamble Company, P.O. Box 5572, Cincinnati, Ohio 45201, (513)
983-3413.
6. Additional Information
Additional information about the Plan and its administrators may be
obtained from Mr. Terry L. Overbey, Secretary, The Procter & Gamble Company, One
Procter & Gamble Plaza, Cincinnati, Ohio 45202, (513) 983-4463.