THE PROCTER & GAMBLE COMPANY
AND SUBSIDIARIES
====================
ANNUAL REPORT ON FORM 10-K
TO THE
SECURITIES AND EXCHANGE COMMISSION
FOR THE
YEAR ENDED JUNE 30, 1994
******************************************<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------------
ANNUAL REPORT ON FORM 10-K PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1994 Commission File No. 1-434
--------------------------------------------------
THE PROCTER & GAMBLE COMPANY
One Procter & Gamble Plaza, Cincinnati, Ohio 45202
Telephone (513) 983-1100
IRS Employer Identification No. 31-0411980
State of Incorporation: Ohio
---------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each Exchange on which registered
- - ------------------------------- -----------------------------------------
Common Stock, without Par Value New York, Cincinnati, Amsterdam, Paris,
Basle, Geneva, Lausanne, Zurich,
Frankfurt, Antwerp, Brussels, Tokyo
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _________
There were 684,700,179 shares of Common Stock outstanding as of August 12,
1994. The aggregate market value of the voting stock held by non-
affiliates amounted to $41 billion on August 12, 1994.
Documents Incorporated By Reference
----------------------------------------------
Portions of the Annual Report to Shareholders for the fiscal year ended
June 30, 1994 are incorporated by reference into Part I and Part II of this
report.
Portions of the Proxy Statement for the 1994 Annual Meeting of Shareholders
are incorporated by reference into Part III of this report.
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<PAGE>
PART I
----------
Item 1. Business.
---------
General Development of Business
-----------------------------------
The Procter & Gamble Company is primarily a manufacturer and
distributor of household products. Its products are sold throughout the
United States and abroad. The Company was incorporated in Ohio in 1905 and
was the outgrowth of a business founded in 1837 by William Procter and
James Gamble.
Unless the context indicates otherwise, the term the "Company" as used
herein refers to The Procter & Gamble Company (the registrant) and its
subsidiaries.
Additional information required by this item is incorporated by
reference to the letter to shareholders which appears on pages 1-5 of the
Annual Report to Shareholders for the fiscal year ended June 30, 1994.
Financial Information About Industry Segments
-------------------------------------------------
The information required by this item is incorporated by reference to
Note 10. Segment Information which appears on pages 30 and 31 of the Annual
Report to Shareholders for the fiscal year ended June 30, 1994.
Narrative Description of Business
-------------------------------------
The products of Laundry and Cleaning, Personal Care and Food and
Beverage segments are distributed primarily through grocery stores and
other retail outlets. The products of the Pulp and Chemicals segment are
sold direct and through jobbers. In March 1992 the Company established a
plan to divest its commercial pulp business. The sale of the timberlands
in July 1994 completed this plan. The class of products information
required by this item is incorporated by reference to Note 10. Segment
Information which appears on pages 30 and 31 of the Annual Report to
Shareholders for the fiscal year ended June 30, 1994.
Among the well-known names under which the Company's products are sold
are: Ace, Always, Ariel, Attends, Bold, Bounce, Bounty, Camay, Cascade,
Charmin, Cheer, Cover Girl, Crest, Crisco, Dash, Dawn, Downy, Duncan Hines,
Era, Fairy, Flash, Folgers, Gain, Hawaiian Punch, Head and Shoulders,
Ivory, Jif, Lenor, Luvs, Max Factor, Mr. Proper, Olay, Old Spice, Pampers,
Pantene, Pert, Pringles, Punica, Rejoice, Safeguard, Scope, Secret, Sunny
Delight, Tide, Vicks, Vidal Sassoon, Whisper, and Zest.
The Company's business, represented by the aggregate of the four
segments, is essentially homogeneous. For the most part, the factors
necessary for an understanding of these four segments are essentially
identical. The markets in which the Company's products are sold are highly
competitive. The products of the Company's business segments compete with
many large and small companies and there is no dominant competitor or
competitors. Advertising is used in conjunction with an extensive sales
force because the Company believes this combination provides the most
efficient method of marketing these types of products. Product quality,
performance, value and packaging are also important competitive factors.
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<PAGE>
The creation of new products and the development of new performance
benefits for consumers on the Company's existing products are vital
ingredients in its continuing progress in the highly competitive markets in
which it does business. Basic research and product development activities
continued to carry a high priority during the past fiscal year. The
Company spent $1,059 million in fiscal year 1994, $956 million in 1993 and
$861 million in 1992 on such activities. While many of the benefits from
these efforts will not be realized until future years, the Company believes
these activities demonstrate its commitment to future growth.
The Company has registered trademarks and owns or has licenses under
patents which are used in connection with its business in all segments.
Some of these patents or licenses cover significant product formulation and
processing of the Company's products. The trade names of all major
products in each segment are registered trademarks. In part, the Company's
success can be attributed to the existence of these trademarks, patents and
licenses.
Most of the raw materials used by the Company are purchased from
others. The Company purchases a substantial variety of raw materials, no
one of which is material to the Company's business taken as a whole. The
price volatility of agricultural commodities is, at particular periods, of
importance to the products manufactured and sold in the Food and Beverage
products segment.
Expenditures in fiscal year 1994 for compliance with Federal, State
and local environmental laws and regulations were not materially different
from such expenditures in the prior year, and no material increase is
expected in fiscal year 1995.
International operations are generally characterized by the same
conditions discussed in the description of the business above and may also
be affected by additional elements including changing currency values and
different rates of inflation and rates of economic growth. The effect of
these additional elements is more significant in the Laundry and Cleaning
and Personal Care products segments which comprise most of the Company's
international business.
The Company has approximately 96,500 employees.
The Company provides an Employee Stock Ownership Plan ("ESOP") which
is part of The Procter & Gamble Profit Sharing Trust and Employee Stock
Ownership Plan. Convertible preferred stock of the Company and other
assets owned by the ESOP are held through a trust (the "ESOP Trust"). The
ESOP Trust has issued certain debt securities to the public. The Company
has fully, unconditionally and irrevocably guaranteed payment of principal
and interest on these debt securities. Holders of these debt securities
have no recourse against the assets of the ESOP Trust except with respect
to cash contributions made by the Company to the ESOP Trust, and earnings
attributable to such contributions. Such cash contributions are made by
the Company only to the extent that dividends on the convertible preferred
stock are inadequate to fund repayment of the debt securities. Any such
contributions and subsequent payments to holders are made on a same-day
basis and such contributions would therefore not be held by the ESOP Trust
unless there was a default in payment on the debt securities by the ESOP
Trust after having received such contributions
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<PAGE>
from the Company. Such a default is not likely to occur and there is
therefore little likelihood that there would be assets available to satisfy
the claims of any holders of the debt securities. A summary description of
the liabilities of the ESOP Trust and of the dividends paid by the Company
on the convertible preferred stock and cash payments from the Company to
the ESOP Trust for the three years ended June 30, 1994 are incorporated by
reference to Note 8 of "Notes to Consolidated Financial Statements" on
pages 26-28 of the 1994 Annual Report to Shareholders.
Additional information required by this item is incorporated by
reference to the letter to shareholders which appears on pages 1-5 and
Financial Condition which appears on page 35 and 36 of the Annual Report to
Shareholders for the fiscal year ended June 30, 1994.
Financial Information About Foreign and Domestic Operations
------------------------------------------------------------
The information required by this item is incorporated by reference to
Note 10. Segment Information which appears on pages 30 and 31 of the Annual
Report to Shareholders for the fiscal year ended June 30, 1994.
Item 2. Properties.
-----------
In the United States, the Company owns and operates manufacturing
facilities at 45 locations in 22 states. In addition, it owns and operates
89 manufacturing facilities in 39 other countries. Laundry and Cleaning
products are produced at 39 of these locations; Personal Care products at
90; and Food and Beverage products at 20. Pulp and Chemicals are produced
at 18 locations. The management considers that the Company's production
facilities are adequate to support the business efficiently, and that the
properties and equipment have been well maintained.
Item 3. Legal Proceedings.
------------------
The Company is involved in clean-up efforts at off-site Superfund
locations, many of which are in the preliminary stages of investigation.
The amount accrued at June 30, 1994 representing the Company's probable
future costs that can be reasonably estimated was $8 million.
The Company is also involved in certain other environmental
proceedings. No such proceeding is expected to result in material monetary
or other sanctions being imposed by any governmental entity, or in other
material liabilities. However, the Company has agreed to participate in
the Toxic Substances Control Act ("TSCA") Section 8(e) Compliance Audit
Program of the United States Environmental Protection Agency ("EPA"). As a
participant, the Company has agreed to audit its files for materials which
under current EPA guidelines would be subject to notification under Section
8(e) of TSCA and to pay stipulated penalties for each report submitted
under this program. It is anticipated that the Company's liability under
the Program will be $1,000,000. No administrative proceeding is pending;
however the Company anticipates being required to enter an Administrative
Order on Consent pursuant to this Program in late 1995. In addition, the
EPA issued to a subsidiary of the Company a Finding and Notice of Violation
(NOV") dated June 16, 1994, based on Section 113(a) of the Clean Air Act
(as amended), for alleged violations of the California State Implementation
Plan by the subsidiary's manufacturing plant in Sacramento, California.
The violations relate to 1) a plant expansion project that was implemented
on the basis of calculated emission data that later proved to be
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<PAGE>
inaccurate, with the result that the project allegedly failed to observe
the federal construction ban and certain "new source review" provisions;
and 2) the subsequent installation of a material recovery unit that is now
alleged to be pollution control equipment for which a permit was required.
The NOV does not specify the relief that will be sought by EPA, but any
penalties are not expected to be material to the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
Not applicable.
Executive Officers of the Registrant
--------------------------------------
The names, ages and positions held by the executive officers of the
Company on August 12, 1994 are:
Elected to
Present
Name Position Age Position
- - ------------- -------------------- --- -----------
Edwin L. Artzt Chairman of the Board and 64 1989
Chief Executive.
Director from 1972-75 and
since October 14, 1980.
John E. Pepper President. 56 1986
Director since June 12, 1984.
Durk I. Jager Executive Vice President. 51 1989
Director since December 12, 1989.
Michael J. Allen Group Vice President. 56 1991
Wolfgang C. Berndt Group Vice President. 51 1986
Benjamin L. Bethell Senior Vice President. 54 1991
Robert T. Blanchard Group Vice President. 49 1991
Gordon F. Brunner Senior Vice President. 55 1987
Director since March 1, 1991.
Bruce L. Byrnes Group Vice President. 46 1991
Larry G. Dare Group Vice President. 54 1989
-5-
<PAGE>
Elected to
Present
Name Position Age Position
- - ------------- -------------------- --- ---------
Stephen P. Donovan, Jr. Group Vice President. 53 1986
Harald Einsmann Group Vice President. 60 1984
Director since June 10, 1991.
Robert J. Herbold Senior Vice President. 52 1990
James J. Johnson Senior Vice President 47 1992
and General Counsel.
Jeffrey D. Jones Group Vice President. 41 1992
Alan G. Lafley Group Vice President. 47 1992
Gary T. Martin Senior Vice President. 49 1991
Lawrence D. Milligan Senior Vice President. 58 1990
Jorge P. Montoya Group Vice President. 48 1991
Thomas A. Moore Group Vice President. 43 1992
Erik G. Nelson Senior Vice President. 54 1993
Robert L. Wehling Senior Vice President. 55 1994
Edwin H. Eaton, Jr. Vice President and 56 1987
Comptroller.
Todd A. Garrett Vice President, Procter 52 1992
& Gamble Worldwide.
All of the above Executive officers are members of the Executive Committee
of The Procter & Gamble Company and have been employed by the Company over
five years.
PART II
----------
Item 5. Market for the Common Stock and Related Stockholder Matters
-----------------------------------------------------------
The stock exchanges on which the common stock is listed, the quarterly
price range and dividends for the past two years and the number of common
shareholders are incorporated by reference to page 42 of the Annual Report
to Shareholders for the fiscal year ended June 30, 1994.
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<PAGE>
Item 6. Selected Financial Data
-----------------------
<TABLE>
<CAPTION>
(millions of dollars except per share amounts)
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $24,081 $27,026 $29,362 $30,433 $30,296
Net earnings/(Loss) 1,602 1,773 1,872 (656) 2,211
Net earnings/(Loss) per common share 2.25 2.46 2.62 (1.11) 3.09
Net earnings/(Loss) per common share
assuming full dilution 2.13 2.31 2.45 (.96) 2.91
Dividends per common share .875 .975 1.025 1.10 1.24
Total assets 18,487 20,468 24,025 24,935 25,535
Long-term debt 3,588 4,111 5,223 5,174 4,980
</TABLE>
In 1993 the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers Accounting for Postretirement Benefits Other
Than Pensions" and Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". The effect of these accounting changes was
to reduce net earnings by $988 million ($1.45 per share).
During 1993 the Company announced one-time charges of $2,402 million
for manufacturing consolidations and organizational restructuring and $303
million related to the divestiture of the 100% juice business. The after-
tax effect of these provisions is $1,746 million or $2.57 per share.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
----------------------------------------------------------------
This information is incorporated by reference to the Analysis and
Discussion and Financial Condition shown on pages 32-36 and the letter to
shareholders on pages 1-5 of the Annual Report to Shareholders for the
fiscal year ended June 30, 1994.
Item 8. Financial Statements and Supplemental Data
------------------------------------------
The financial statements and supplemental data are incorporated by
reference to pages 16-31 of the Annual Report to Shareholders for the
fiscal year ended June 30, 1994.
Item 9. Disagreements on Accounting and Financial Disclosure
----------------------------------------------------
Not applicable.
PART III
----------
Item 10. Directors and Executive Officers
--------------------------------
The information required by this item is incorporated by reference to
pages 3-5 and 17-18 of the proxy statement filed since the close of the
fiscal year ended June 30, 1994, pursuant to Regulation 14A which involved
the election of directors. Pursuant to Item 401(b) of Regulation S-K,
Executive Officers of the Registrant are reported in Part I of this report.
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<PAGE>
Item 11. Executive Compensation
----------------------
The information required by this item is incorporated by reference to
pages 7-14 of the proxy statement filed since the close of the fiscal year
ended June 30, 1994, pursuant to Regulation 14A which involved the election
of directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The information required by this item is incorporated by reference to
pages 15-17 of the proxy statement filed since the close of the fiscal year
ended June 30, 1994, pursuant to Regulation 14A which involved the election
of directors.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The information required by this item is incorporated by reference to
page 18 of the proxy statement filed since the close of the fiscal year
ended June 30, 1994, pursuant to Regulation 14A which involved the election
of directors.
PART IV
---------
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
-----------------------------------------------------------------
A. 1. Financial Statements:
The following consolidated financial statements of The Procter
& Gamble Company and subsidiaries and the report of
independent accountants are incorporated by reference in Part
II, Item 8.
- Report of independent accountants
- Consolidated statement of earnings -- for years ended
June 30, 1994, 1993 and 1992
- Consolidated balance sheet -- as of June 30, 1994 and
1993
- Consolidated statement of retained earnings -- for years
ended June 30, 1994, 1993 and 1992
- Consolidated statement of cash flows -- for years ended
June 30, 1994, 1993 and 1992
- Notes to consolidated financial statements
2. Financial Statement Schedules:
Schedule V -- Property, plant, and equipment - page 15
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<PAGE>
Schedule VI -- Accumulated depreciation - page 16
Schedule IX -- Short-term borrowings - page 17
Schedule X -- Supplementary income statement information
- page 18
The schedules other than those listed above are omitted
because of the absence of the conditions under which they are
required, or because the information is set forth in the
financial statements or notes thereto.
3. Exhibits:
Exhibit (3-1) -- Amended Articles of Incorporation
(Incorporated by reference to Exhibit (3-1)
of the Company's Annual Report on Form 10-K
for the year ended June 30, 1993).
(3-2) -- Regulations (Incorporated by reference to
Exhibit (3-2) of the Company's Annual Report
on Form 10-K for the year ended June 30,
1993).
Exhibit (4) -- Registrant agrees to file a copy of documents
defining the rights of holders of long-term
debt upon request of the Commission.
Exhibit (10-1) -- The Procter & Gamble 1992 Stock Plan (as
amended December 14, 1993) which was adopted
by the shareholders at the annual meeting on
October 13, 1992.
(10-2) -- The Procter & Gamble 1983 Stock Plan (as
amended May 11, 1993) which was adopted by
the shareholders at the annual meeting on
October 11, 1983 (Incorporated by reference
to Exhibit (10-2) of the Company's Annual
Report on Form 10-K for the year ended June
30, 1993).
(10-3) -- The Procter & Gamble Executive Group Life
Insurance Policy (each executive officer is
covered for an amount equal to annual salary
plus bonus) (Incorporated by reference to
Exhibit (10-3) of the Company's Annual Report
on Form 10-K for the year ended June 30,
1993).
(10-4) -- Additional Remuneration Plan (as amended June
12, 1990) which was adopted by the Board of
Directors on April 12, 1949 (Incorporated by
reference to Exhibit (10-4) of the Company's
Annual Report on Form 10-K for the year ended
June 30, 1993).
(10-5) -- The Procter & Gamble Deferred Compensation
Plan for Directors which was adopted by the
Board of Directors on September 9, 1980
(Incorporated by reference to Exhibit (10-5)
of the Company's Annual Report on Form 10-K
for the year ended June 30, 1993).
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<PAGE>
Exhibit (10-6) -- The Procter & Gamble Retirement Plan for
Directors which was adopted by the Board of
Directors on December 12, 1989 (Incorporated
by reference to Exhibit (10-6) of the
Company's Annual Report on Form 10-K for the
year ended June 30, 1993).
(10-7) -- The Procter & Gamble Board of Directors
Charitable Gifts Program which was adopted by
the Board of Directors on November 12, 1991
(Incorporated by Reference to Exhibit (10-7)
of the Company's Annual Report on Form 10-K
for the year ended June 30, 1993).
(10-8) -- The Procter & Gamble 1993 Non-Employee
Directors' Stock Plan which was on November
9, 1993, approved by the Board of Directors
for submission to the Shareholders on October
11, 1994 (Incorporated by reference to
Appendix A of the proxy statement filed since
the close of the fiscal year ended June 30,
1994).
(10-9) -- Richardson-Vicks Inc. Special Stock
Equivalent Incentive Plan which was
authorized by the Board of Directors of The
Procter & Gamble Company and adopted by the
Board of Directors of Richardson-Vicks Inc.
on December 31, 1985.
Exhibit (11) -- Computation of earnings per share.
Exhibit (12) -- Computation of ratio of earnings to fixed
charges.
Exhibit (13) -- Annual Report to shareholders. (Pages 1-5,
16-36, and 42)
Exhibit (21) -- Subsidiaries of the registrant.
Exhibit (23) -- Consent of Deloitte & Touche LLP.
Exhibit (27) -- Financial Data Schedule.
Exhibit (99-1) -- Directors and Officers Liability Policy (the
"Policy Period" has been extended to
6/30/97).
(99-2) -- Directors and Officers (First) Excess
Liability Policy (the "Policy Period" has
been extended to 6/30/95).
(99-3) -- Directors and Officers (Second) Excess
Liability Policy (the "Policy Period" has
been extended to 6/30/95).
(99-4) -- Fiduciary Responsibility Insurance Policy
(the "Policy Period" has been extended to
6/30/95).
The exhibits listed are filed with the Securities and Exchange
Commission but are not included in this booklet. Copies of these
exhibits may be obtained by sending a request to: Linda D.
Rohrer, Assistant Secretary, The Procter & Gamble Company, P. O.
Box 599, Cincinnati, Ohio 45201
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<PAGE>
B. Reports on Form 8-K:
An 8-K Report containing an exhibit under Item 7 entitled "Press
Release Issued by Registrant on April 12, 1994" was filed on April
13, 1994.
SIGNATURES
--------------
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized in the city of
Cincinnati, State of Ohio.
THE PROCTER & GAMBLE COMPANY
By /s/EDWIN L. ARTZT
---------------------------
Edwin L. Artzt
Chairman of the Board and Chief Executive
September 13, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
- - --------- ----- -----
_______
/s/EDWIN L. ARTZT Chairman of the Board and |
- - -------------------- Chief Executive and Director |
(Edwin L. Artzt) (Principal Executive Officer) |
|
/s/ERIK G. NELSON Senior Vice President |
- - -------------------- (Principal Financial Officer) |
(Erik G. Nelson) September 13, 1994
|
/s/EDWIN H. EATON, JR. Vice President and Comptroller |
- - -------------------- (Principal Accounting Officer) |
(Edwin H. Eaton, Jr.) |
|
/s/DAVID M. ABSHIRE |
- - -------------------- Director |
(David M. Abshire) |
|
/s/NORMAN R. AUGUSTINE |
- - -------------------- Director |
(Norman R. Augustine) ___________|
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<PAGE>
Signature Title Date
- - --------- ------ ----
__________
|
/s/DONALD R. BEALL |
- - -------------------- Director |
(Donald R. Beall) |
|
/s/GORDON F. BRUNNER |
- - -------------------- Director |
Gordon F. Brunner) |
|
/s/RICHARD B. CHENEY |
- - -------------------- Director |
(Richard B. Cheney) |
|
/s/HARALD EINSMANN |
- - -------------------- Director |
(Harald Einsmann) |
|
|
- - -------------------- Director |
(Richard J. Ferris) |
|
/s/JOSEPH T. GORMAN |
- - -------------------- Director September 13, 1994
(Joseph T. Gorman) |
|
/s/ROBERT A. HANSON |
- - -------------------- Director |
/s/(Robert A. Hanson) |
|
/s/DURK I. JAGER |
- - -------------------- Director |
(Durk I. Jager) |
|
/s/JERRY R. JUNKINS |
- - -------------------- Director |
(Jerry R. Junkins) |
|
/s/JOSHUA LEDERBERG |
- - -------------------- Director |
(Joshua Lederberg) |
|
/s/CHARLES R. LEE |
- - -------------------- Director |
(Charles R. Lee) |
__________
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<PAGE>
Signature Title Date
- - --------- ------ -----
_________
/s/JOHN E. PEPPER |
- - ------------------- Director |
(John E. Pepper) |
|
/s/JOHN G. SMALE |
- - ------------------- Director |
(John G. Smale) September 13, 1994
|
/s/ROBERT D. STOREY |
- - ------------------- Director |
(Robert D. Storey) |
|
/s/MARINA v.N. WHITMAN |
- - ------------------- Director |
(Marina v.N. Whitman) _______|
-13-
DELOITTE & TOUCHE LLP
250 East Fifth Street
Post Office Box 5340
Cincinnati, Ohio 45201
(513) 784-7100
REPORT OF INDEPENDENT ACCOUNTANTS
- - --------------------------------------------------------------
The Procter & Gamble Company:
We have audited the consolidated financial statements of The Procter &
Gamble Company and subsidiaries as of June 30, 1994 and 1993, and for each
of the three years in the period ended June 30, 1994, and have issued our
report thereon dated August 10, 1994 (expressing an unqualified opinion and
including an explanatory paragraph regarding the changes in accounting for
other post retirement benefits and income taxes effective July 1, 1992);
such financial statements and report are included in your 1994 Annual
Report to Shareholders and are incorporated herein by reference. Our
audits also included the financial statement schedules of The Procter &
Gamble Company and subsidiaries, listed in Item 14. These financial
statement schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our
opinion, such financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, present
fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
August 10, 1994
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<PAGE>
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
===============================
SCHEDULE V - PROPERTY, PLANT, AND EQUIPMENT
FOR THE YEARS ENDED JUNE 30, 1994, 1993 and 1992
- - --------------------------------------------------------------------------------------------------
<CAPTION>
MACHINERY
AND
Millions of Dollars BUILDINGS EQUIPMENT LAND TIMBERLANDS TOTAL
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1993 $2,703 $11,607 $494 $ 73 $14,877
Additions at cost 296 1,510 31 4 1,841
Retirements or sales (48) (950) (5) (1) (1,004)
Cost of timber harvested -
credited to asset account (6) (6)
Foreign currency translation
adjustments 59 92 21 0 172
Other changes - debit (credit) 17 (10) 9 0 16(a)
-------- ---------- ------ ----- -----------
Balance, June 30, 1994 $3,027 $12,249 $550 $ 70 $15,896
====== ======= ====== ===== ===========
Balance, June 30, 1992 $2,478 $12,092 $439 $175 $15,184
Additions at cost 420 1,441 34 16 1,911
Retirements or sales (173) (1,632) (12) (168) (1,985)
Cost of timber harvested -
credited to asset account (15) (15)
Foreign currency translation
adjustments (33) (300) 26 0 (307)
Other changes - debit (credit) 11 6 7 65 89(a)
--------- ---------- ------ ----- ----------
Balance, June 30, 1993 $2,703 $11,607 $494 $ 73 $14,877
========= ========== ====== ===== ==========
Balance, June 30, 1991 $2,019 $10,593 $250 $172 $13,034
Additions at cost 250 1,621 14 26 1,911
Retirements or sales (21) (610) (1) (2) (634)
Cost of timber harvested -
credited to asset account (18) (18)
Foreign currency translation
adjustments 99 359 34 0 492
Other changes - debit (credit) 131 129 142 (3) 399(a)
--------- ---------- ------ ------ ----------
Balance, June 30, 1992 $2,478 $12,092 $439 $175 $15,184
========= ========== ====== ====== ==========
<FN>
(a) Primarily acquisitions and reclassifications
</TABLE>
Rates for Depreciation of Properties for financial accounting purposes
are generally as follows:
Buildings 1.5% to 10%
Machinery & Equipment 3% to 33.3%
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<PAGE>
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
================================
SCHEDULE VI - ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED JUNE 30, 1994, 1993 and 1992
- - --------------------------------------------------------------------------
<CAPTION>
MACHINERY
AND
Millions of Dollars EQUIPMENT
BUILDINGS ETC. TOTAL
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JUNE 30, 1993 $657 $4,735 $5,392
Additions charged to costs
and expenses 92 901 993
Retirements (23) (538) (561)
Foreign currency translation
adjustments 11 53 64
Other changes - (debit) credit 4 (20) (16)(a)
----- -------- --------
BALANCE, JUNE 30, 1994 $741 $5,131 $5,872
===== ======== ========
BALANCE, JUNE 30, 1992 $660 $4,828 $5,488
Additions charged to costs
and expenses 82 899 981
Retirements (66) (857) (923)
Foreign currency translation
adjustments (22) (126) (148)
Other changes - (debit) credit 3 (9) (6)(a)
----- -------- --------
BALANCE, JUNE 30, 1993 $657 $4,735 $5,392
===== ======== ========
BALANCE, JUNE 30, 1991 $561 $4,200 $4,761
Additions charged to costs
and expenses 70 822 892
Retirements (10) (363) (373)
Foreign currency translation
adjustments 28 155 183
Other changes - (debit) credit 11 14 25(a)
----- -------- --------
BALANCE, JUNE 30, 1992 $660 $4,828 $5,488
===== ======== ========
<FN>
(a) Primarily acquisitions and reclassifications
</TABLE>
-16-
<PAGE>
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
===============================
SCHEDULE IX - SHORT-TERM BORROWINGS
JUNE 30, 1994, 1993 AND 1992
Millions of Dollars
<CAPTION>
Weighted Maximum
Average Amount Average Weighted
Interest Outstanding Amount Average
Balance at Rate at End at Any Outstanding Interest Rate
Category of Borrowing End of Period of Period Month End During Year During Year*
- - ---------------------------- ------------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1994
- - ----------------------------
U.S. commercial paper $ 350 3.9% $ 916 $ 694 3.4%
Bank loans, principally of
international subsidiaries 531 8.0% 723 619 8.3%
Year Ended June 30, 1993
- - ----------------------------
U.S. commercial paper 477 3.2% 1,227 864 3.3%
Bank loans, principally of
international subsidiaries 685 9.2% 1,117 879 10.0%
Year Ended June 30, 1992
- - ----------------------------
U.S. commercial paper 354 5.3% 1,721 913 5.4%
Bank loans, principally of
international subsidiaries 1,126 10.7% 1,702 1,286 10.8%
<FN>
*Actual interest expense on short-term debt divided by average short-term debt outstanding
during year.
</TABLE>
-17-
<PAGE>
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
===============================
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED JUNE 30, 1994, 1993 and 1992
- - ---------------------------------------------------------------------------
<CAPTION>
COLUMN A COLUMN B
ITEM CHARGED TO COSTS AND EXPENSES
Millions of Dollars
- - ---------------------------------------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
MAINTENANCE AND REPAIRS $ 532 $ 628 $ 671
TAXES, OTHER THAN INCOME TAXES 637 660 603
ADVERTISING COSTS 2,996 2,973 2,693
</TABLE>
-18-
<PAGE>
EXHIBIT INDEX
--------------
Exhibit (3-1) -- Amended Articles of Incorporation (Incorporated by
reference to Exhibit (3-1) of the Company's Annual
Report on Form 10-K for the year ended June 30, 1993).
(3-2) -- Regulations (Incorporated by reference to Exhibit (3-2)
of the Company's Annual Report on Form 10-K for the
year ended June 30, 1993).
Exhibit (4) -- Registrant agrees to file a copy of documents defining
the rights of holders of long-term debt upon request of
the Commission.
Exhibit (10-1) -- The Procter & Gamble 1992 Stock Plan (as amended
December 14, 1993) which was adopted by the
shareholders at the annual meeting on October 13, 1992.
(10-2) -- The Procter & Gamble 1983 Stock Plan (as amended May
11, 1993) which was adopted by the shareholders at the
annual meeting on October 11, 1983 (Incorporated by
reference to Exhibit (10-2) of the Company's Annual
Report on Form 10-K for the year ended June 30, 1993).
(10-3) -- The Procter & Gamble Executive Group Life Insurance
Policy (each executive officer is covered for an amount
equal to annual salary plus bonus) (Incorporated by
reference to Exhibit (10-3) of the Company's Annual
Report on Form 10-K for the year ended June 30, 1993).
(10-4) -- Additional Remuneration Plan (as amended June 12, 1990)
which was adopted by the Board of Directors on April
12, 1949 (Incorporated by reference to Exhibit (10-4)
of the Company's Annual Report on Form 10-K for the
year ended June 30, 1993).
(10-5) -- The Procter & Gamble Deferred Compensation Plan for
Directors which was adopted by the Board of Directors
on September 9, 1980 (Incorporated by reference to
Exhibit (10-5) of the Company's Annual Report on Form
10-K for the year ended June 30, 1993).
(10-6) -- The Procter & Gamble Retirement Plan for Directors
which was adopted by the Board of Directors on December
12, 1989 (Incorporated by reference to Exhibit (10-6)
of the Company's Annual Report on Form 10-K for the
year ended June 30, 1993).
-19-
<PAGE>
Exhibit (10-7) -- The Procter & Gamble Board of Directors Charitable
Gifts Program which was adopted by the Board of
Directors on November 12, 1991 (Incorporated by
Reference to Exhibit (10-7) of the Company's Annual
Report on Form 10-K for the year ended June 30, 1993).
(10-8) -- The Procter & Gamble 1993 Non-Employee Directors' Stock
Plan which was on November 9, 1993, approved by the
Board of Directors for submission to the Shareholders
on October 11, 1994 (Incorporated by reference to
Appendix A of the proxy statement filed since the close
of the fiscal year ended June 30, 1994).
(10-9) -- Richardson-Vicks Inc. Special Stock Equivalent
Incentive Plan which was authorized by the Board of
Directors of the Procter & Gamble Company and adopted
by the Board of Directors of Richardson-Vicks Inc. on
December 31, 1985.
Exhibit (11) -- Computation of earnings per share.
Exhibit (12) -- Computation of ratio of earnings to fixed charges.
Exhibit (13) -- Annual Report to shareholders. (Pages 1-5, 16-36, and
42)
Exhibit (21) -- Subsidiaries of the registrant.
Exhibit (23) -- Consent of Deloitte & Touche LLP.
Exhibit (27) -- Financial Data Schedule.
Exhibit (99-1) -- Directors and Officers Liability Policy (the "Policy
Period" has been extended to 6/30/97).
(99-2) -- Directors and Officers (First) Excess Liability Policy
(the "Policy Period" has been extended to 6/30/95).
(99-3) -- Directors and Officers (Second) Excess Liability Policy
(the "Policy Period" has been extended to 6/30/95).
(99-4) -- Fiduciary Responsibility Insurance Policy (the "Policy
Period" has been extended to 6/30/95).
-20-
<PAGE>
Exhibit (10-1)
-----------------
THE PROCTER & GAMBLE 1992 STOCK PLAN
(as approved by the shareholders on October 13, 1992
and last amended December 14, 1993)
ARTICLE A -- PURPOSE.
The purpose of The Procter & Gamble 1992 Stock Plan (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 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 "disinterested persons" 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 nonstatutory and incentive stock options; to grant
to recipients stock appreciation rights either freestanding, in tandem with
simultaneously granted stock options, or in parallel with simultaneously
granted 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 to:
<PAGE>
(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
(d) impose conditions at time of grant 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 foreign 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. 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 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 25,000,000 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.
<PAGE>
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 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, 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
<PAGE>
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 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 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 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 prior to or after termination of
employment if the
<PAGE>
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 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 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.
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 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 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 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 and
shall be not less than one hundred percent (100%) of the fair market value
of the Common Stock of the Company on the date of grant.
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 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 (3) any option as
to which the Committee has waived, at the time of grant, 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, or Special Separation (as defined in section 6
of this Article G) of the recipient.
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, of any person who is not a current or former member of the Executive
Committee of the Company if it is certified in writing by a member of the
Executive Committee of the Company, with the concurrence of the appropriate
Vice President-Human Resources, that the termination should be treated as a
Special Separation under this Plan. 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. 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
<PAGE>
which stock appreciation rights are being exercised shall not be available
for granting 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 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, or a combination thereof.
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
<PAGE>
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. In addition, an
employee may be required, following termination of employment other
than by retirement or disability, to render limited consulting and
advisory services and to refrain from conduct deemed contrary to
the best interests of the Company.
ARTICLE J -- ADJUSTMENTS.
The amount of shares authorized to be issued annually under this Plan
will be subject to appropriate adjustments in their numbers in the event of
future stock splits, stock dividends, or other changes in capitalization of
the Company occurring after the date of approval of this Plan by the
Company's shareholders to prevent the dilution or enlargement of rights
under this 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. The number of shares and exercise prices covered by
outstanding stock options and stock appreciation rights shall be adjusted
to give effect to any such stock splits, stock dividends, or other changes
in the capitalization.
ARTICLE K -- ADDITIONAL PROVISIONS.
1. The Board may, at any time, repeal this Plan or may amend it from
time to time except that no such amendment may amend this paragraph,
increase the annual aggregate number of shares subject to this Plan, reduce
the price at which stock options or stock appreciation rights may be
granted, exercised, or surrendered, 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. 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 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
<PAGE>
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 or transferred to him or her. Nothing in this Plan
shall preclude the issuance 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 fifty percent (50%) or more
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 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 the shareholders or 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 prior thereto or to whom shares
have been transferred prior to such termination.
<PAGE>
Exhibit (10-9)
--------------
RICHARDSON-VICKS INC.
SPECIAL STOCK EQUIVALENT INCENTIVE PLAN
--------------------------------------------
(As authorized by the Board of Directors
of The Procter & Gamble Company
and adopted by the Board of Directors of Richardson-Vicks Inc.
on 12/31/85.)
ARTICLE A - THE PLAN AND ITS OBJECTIVES
In retaining top caliber personnel, it is important for Richardson-Vicks
Inc. (the "Company") to be in a position to pay a part or all of the
additional remuneration portion of an employee's aggregate remuneration in
Procter & Gamble Common Stock equivalents ("Contingent Stock Awards"). The
granting of Contingent Stock Awards will strengthen the identity of their
interests with those of other shareholders. Only those executives will
participate in the Plan who will substantially contribute to the success and
development of the business and upon whom the future of the Company chiefly
depends.
ARTICLE B - ADMINISTRATION
1. The Company, with the concurrence of the appropriate officers of
The Procter & Gamble Company ("Procter & Gamble") as authorized by the Board
of Directors of Procter & Gamble (the "P&G Board"), has determined those
employees and officers of the Company initially eligible to participate in
the Plan effective as of January 1, 1986, the amount of their participation
and the terms, conditions and restrictions applicable to Contingent Stock
Awards granted to such participants pursuant to the Plan, such terms,
conditions and restrictions to be set forth in a Statement of Conditions and
Restrictions (the "Statement") to accompany each grant. Future grants may be
made in accordance with the procedures set forth in the preceding sentence.
2. A contingent Stock Awards Committee appointed by the Board of the
Company with the concurrence of the P&G Board as set forth in paragraph 1
above, (the "Committee") will have full authority in the operation,
administration and interpretation of the Plan and may issue rules and
regulations governing the administration of the Plan. The Committee shall be
composed of three members, at least two of whom shall be senior executive
officers of the Company as of October 24, 1985, (the executive officers so
serving being hereinafter referred to as the "RVI Executives"), or their
successors designated by the RVI Executive(s) and approved by the Board of
Directors of the
<PAGE>
Company (the "RVI Board"), which approval shall not be unreasonably withheld.
The Committee may designate employees of the Company or of Procter & Gamble
to assist the Committee in the administration of the Plan and may grant
authority to such persons to execute documents upon behalf of the Committee.
3. The Committee may consult with the participants, but nevertheless
the Committee has full authority to act and the Committee's action shall be
final.
ARTICLE C - SHARES SUBJECT TO THE PLAN
The shares of Procter & Gamble Common Stock (the "Common Stock")
transferred under this Plan will be authorized but unissued shares, treasury
shares or shares acquired for purposes of the Plan by Procter & Gamble or the
Company.
ARTICLE D - LIMITATION ON NUMBER OF CONTINGENT STOCK AWARDS FOR THE PLAN
1. Subject to adjustment pursuant to Article D, paragraph 2 below, the
aggregate number of Contingent Stock Awards granted under the Plan shall not
exceed 150,000 units, with each unit representing one share of Common Stock.
2. Contingent Stock Awards granted or reserved for purposes of the
Plan will be subject to appropriate adjustment in the event of future stock
splits, stock dividends or other changes in capitalization; following any
such change, the term "Contingent Stock Awards" or "Common Stock," as used in
the Plan, shall be deemed to refer to such interests, class of shares or
other securities as may be applicable.
ARTICLE E - GENERAL PROVISIONS
The granting of Contingent Stock Awards or the transfer of shares of
Common Stock under the Plan shall be by the Company. Nothing in the Plan
shall affect the right of the Company to terminate the employment of any
employee with or without cause (subject to possible acceleration of the lapse
of conditions and restrictions in accordance with the provisions of the
Statement). 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 Contingent Stock Awards except
as to such Contingent Stock Awards, if any, as shall have been granted to
him. Any Contingent Stock Awards reserved for purposes of the Plan shall,
unless and until granted pursuant to the Plan, constitute and remain the
property of the Company. Nothing in the Plan shall preclude the issuance or
transfer of shares of Common Stock to employees under any other plan or
arrangement now or hereafter in effect.
<PAGE>
ARTICLE F - AMENDMENT AND TERMINATION
The Plan or the Statement may at any time or from time to time be
amended by the RVI Board with the concurrence of the P&G Board in the manner
set forth in Article B, paragraph 1 above, except that no such amendment may
amend this Article or Article B, paragraph 2 or may increase the aggregate
limitations on the number of Contingent Stock Awards as set forth above, or
may, without the written consent of the participant, adversely affect the
rights of anyone to whom Contingent Stock Awards have been granted prior to
such amendment. The Plan may be terminated at any time by vote of a majority
of the entire RVI Board, but no such termination shall affect the rights of
the Company or of anyone to whom Contingent Stock Awards have been granted
prior to such termination.
<PAGE>
<TABLE>
EXHIBIT (11)
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
=============================================
Computation of Earnings Per Share
------------------------------------------
Dollars and Share Amounts in Millions
<CAPTION>
Years Ended June 30
------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET EARNINGS PER SHARE 1990 1991 1992 1993 1994
- - ---------------------- ---- ---- ---- ---- ----
Net Earnings/(Loss) $1,602 $1,773 $1,872 $(656) $2,211
Deduct preferred stock dividends 47 78 94 102 102
------ ------ ------ ------ ------
Net Earnings/(Loss) Applicable to Common Stock 1,555 1,695 1,778 (758) 2,109
- - ---------------------------------------------
Average number of common shares
outstanding 692.1 689.5 677.4 680.4 683.1
Per Share
- - ---------
Net earnings before prior years' effect
of accounting changes -- -- -- $0.25 --
Prior year effect of accounting changes -- -- -- $(1.36) --
Net Earnings/(Loss) per share $2.25 $2.46 $2.62 $(1.11) $3.09
NET EARNINGS PER SHARE ASSUMING
FULL DILUTION
- - -------------------------------
Net Earnings/(Loss) $1,602 $1,773 $1,872 $(656) $2,211
Deduct differential -- preferred
vs. common dividends 26 52 60 57 51
------ ------ ------ ------- ------
Net Earnings/(Loss) Applicable to Common Stock 1,576 1,721 1,812 (713) 2,160
- - ----------------------------------------------
Average number of common shares
outstanding 692.1 689.5 677.4 680.4 683.1
Add potential effect of:
Exercise of options 10.0 7.7 7.5 7.2 6.0
Conversion of preferred stock 36.5 48.0 55.2 54.7 53.9
-------- -------- -------- -------- -------
Average number of common shares
outstanding, assuming full dilution 738.6 745.2 740.1 742.3 743.0
Per Share Assuming full dilution
- - --------------------------------
Net earnings before prior years' effect
of accounting changes -- -- -- $0.29 --
Prior year effect of accounting changes -- -- -- $(1.25) --
Net Earnings/(Loss) $2.13 $2.31 $2.45 $(0.96) $2.91
</TABLE>
<PAGE>
<TABLE>
EXHIBIT (12)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
---------------------------------------------------
Millions of Dollars
<CAPTION>
Years Ended June 30
-------------------------------------------------
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
EARNINGS AS DEFINED
- - -------------------
Earnings from operations before income taxes
after eliminating undistributed earnings
of 20% to 50% owned affiliates $2,401 $2,652 $2,870 $ 294 $3,307
Fixed charges excluding capitalized interest 480 435 584 631 569
-------- -------- -------- -------- --------
TOTAL EARNINGS, AS DEFINED $2,881 $3,087 $3,454 $ 925 $3,876
====== ====== ====== ====== ======
FIXED CHARGES, AS DEFINED
- - -------------------------
Interest expense $ 442 $ 395 $ 510 $ 552 $ 482
1/3 of rental expense 38 40 74 79 87
------- ------- ------- ------- -------
480 435 584 $ 631 $ 569
Capitalized interest 3 17 25 25 19
------- ------- ------- ------- -------
TOTAL FIXED CHARGES, AS DEFINED $ 483 $ 452 $ 609 $ 656 $ 588
====== ====== ====== ====== ======
RATIO OF EARNINGS TO FIXED CHARGES 6.0 6.8 5.7 1.4 6.6
</TABLE>
Exhibit (13)
------------
Annual Report to shareholders. (Pages 1-5, 16-36, and 42)
<PAGE>
TO OUR SHAREHOLDERS
Your company made strong progress in fiscal 1993/94 against its four
primary business objectives: increasing the flow of innovative new products
to the market place; expanding the global presence of P&G brands; offering
better value to consumers; and increasing the efficiency and productivity
of our operations.
The Combination of these and many other efforts by our superb P&G
organization produced another year of healthy growth in volume and
earnings.
Net earnings for fiscal year 1993/94 achieved a record level of $2.2
billion, or $3.09 per common share. This compares to a loss of $.7 billion
in 1992/93, when results were significantly reduced by a provision for
restructuring and the prior years' effect of accounting changes.
Excluding these charges from our year-ago results, 1993/94 earnings
were up 10%, equalling the average growth rate over the last 35 years.
Earnings growth for 1993/94 was depressed 5% by a $102 million charge to
write off the option portion of two interest rate swaps.
HIGHLIGHTS OF THE YEAR
- - - NET EARNINGS were $2.3 billion, up 15% over earnings of $2.0 billion in
1992/93, excluding the unusual items in both years.
- - - EARNINGS PER SHARE, excluding unusual items in both years, were $3.24, up
15%.
- - - AFTER-TAX PROFIT MARGIN in 1993/94 was 7.6%, excluding the derivatives
write-off, the highest level in 21 years.
- - - UNIT VOLUME, excluding the impact of acquisitions and divestitures, grew
5%, with International up 7% and the United States up 4%. Every business
sector and geographic region increased unit volume versus year ago.
- - - NET SALES of $30.3 billion were about even with the prior year. Less
favorable foreign currency exchange rates reduced sales 4%. The
divestiture of our pulp and 100% juice businesses and lower pricing reduced
sales 1%. Excluding these effects, sales would have been up 5%, in line
with volume growth.
- - - CASH FLOW from operations set a new record at $3.6 billion. The
improvement reflects higher earnings and continued reduction in working
capital. This enabled the Company to reduce debt and further strengthen
its financial condition.
- - - DIVIDENDS increased 13% to $1.24 per share. Beginning with the August
1994 dividend, the annual dividend rate will be raised an additional 13% to
$1.40 per share, marking the 39th consecutive year of increased dividend
payments.
- - - RETURN ON EQUITY was 23%, excluding unusual items. This is the highest
level in 44 years, reflecting improved profitability and the write-off of
underperforming assets included in the 1993 restructuring reserve.
(Picture of Edwin L. Artzt, Chairman of the Board and Chief Executive)
1
<PAGE>
P&G ACHIEVING RESTRUCTURING GOALS
Among the most important achievements of 1993/94 was the Company's
exceptional progress toward our plant consolidation and "Strengthening
Global Effectiveness" (SGE) overhead reduction goals. Last year, P&G set
aside $1.5 billion from net earnings to cover the cost of a worldwide
restructuring that would result in a 20% reduction in the number of
manufacturing plants and a 12% reduction in worldwide enrollment.
The Company is making steady progress toward its restructuring goals
and is already seeing benefits. In 1993/94, we achieved about a third of
the $500 million ongoing after-tax savings goal for this program. These
savings have enabled us to reduce pricing to provide better value for
consumers and contributed to record margins.
U.S. BUSINESS CONTINUES HEALTHY GROWTH TREND
The U.S. business had an excellent year in 1993/94.
Earnings were up 9% and unit volume was up 4%, even though total
consumer purchases in our categories grew only 1% during the year.
- - - LAUNDRY AND HOUSEHOLD CLEANING'S Hard Surface Cleaners business rolled
out eight new products and turned in its strongest year of volume growth
since the introduction of Mr. Clean in 1959. Fabric conditioners also
turned in record volume behind new products on Bounce and Ultra Downy
triple-concentrate.
- - - BEAUTY CARE built volume in Hair Care with Pantene Pro-V and new shampoo,
conditioning and styling products and packaging on Vidal Sassoon.
Cover Girl strengthened its market leadership with continued share
growth, though unit volume declined for cosmetics and fragrances overall,
largely due to reductions in market size and the discontinuation of the
unprofitable Clarion brand. Max Factor International completed the
introduction of an all-new line of cosmetics worldwide and early consumer
response has been encouraging.
We expect the planned acquisition of Giorgio Beverly Hills Inc.,
announced in July 1994, to strengthen P&G's cosmetics and fragrances
business. This acquisition will give the Company a strong foothold in the
U.S. fine fragrance market, with leadership brands and a strong management
team.
- - - HEALTH CARE'S respiratory business grew both volume and market share,
largely with the introduction of Vicks DayQuil Allergy and DayQuil Sinus.
In addition, P&G entered the over-the-counter analgesics category with
Aleve. This new P&G brand, a joint venture with Syntex, is a non-
prescription strength, fast-acting form of the medicine in Naprosyn, the
number one selling brand in its class for 10 years.
Our pharmaceutical business delivered strong volume growth in 1993/94,
led by its Didro-Kit therapy for osteoporosis which is now approved for use
in nine countries outside the U.S. Asacol, a treatment for ulcerative
colitis, achieved category leadership in the U.S. in the past year. And
early results were very encouraging for Ziac, a new prescription blood
pressure medication that P&G Pharmaceuticals is marketing with Lederle
Laboratories.
- - - PAPER'S Tissue and Towel category achieved outstanding results, exceeding
last year's record volume and
(Stylized picture of globe with caption "Unit volume was up 4% and
earnings were up 9% versus 1992/93 for the U.S. business.")
<PAGE>
profit performance. This marks the seventh consecutive year of volume and
profit growth for the Category.
Our Bath Tissue business completed national expansion of Charmin Ultra
and our Paper Towel business began national expansion of Bounty Extra
Durable last quarter.
Both of these introductions utilize a proprietary papermaking
technology which enables us to improve absorbency, softness and strength
while reducing manufacturing costs.
Although diaper volume declined for the year, we've taken steps to
improve consumer value through lower prices and have accelerated the pace
of product innovation.
During the year, we applied our new "curly fiber" technology to
Pampers and Luvs, producing a diaper that is 50% thinner and more
absorbent.
Pampers Trainers was introduced nationally and, as the fiscal year
ended, two new products entered test markets--Pampers Stretch and Luvs with
Dri-Weave. Pampers Stretch has an elastic side panel for better fit and
the new Luvs diaper has a dri-weave topsheet similar to the one on Always
that keeps wetness away from the skin.
- - - FOOD AND BEVERAGE continued to make excellent profit progress and in
1993/94 achieved its longstanding goal of delivering profit margins in line
with the Company's average.
The business is growing behind products such as Sunny Delight juice
drink, which is now one of the Company's 10 largest U.S. brands, and
Pringles potato crisps, which delivered strong growth in the U.S. and
abroad. Pringles is now P&G's biggest export to international markets.
INTERNATIONAL BUILDS WORLDWIDE LEADERSHIP THROUGH PRODUCT INNOVATION
Despite sluggish economic conditions in key market, International had
another good year in 1993/94. Every region achieved volume gains.
Overall, unit volume was up 7%.
Acquisitions added another three percentage points, bringing
International's total volume growth to 10% above the prior year. Volume
growth and improved profit margins, reflecting good cost control, led to a
15% increase in earnings.
As in the U.S., International growth reflects a steady stream of
product innovations, complemented by geographic expansions and better
consumer value.
- - - IN EUROPE, P&G's largest International business, the laundry category
continued to build share with the introduction of a major product
improvement for oily and greasy stains on market-leading Ariel. While the
European laundry market remains intensely competitive, we are meeting this
challenge through continued product innovation.
- - - EUROPEAN HEALTH AND BEAUTY CARE achieved market leadership for the first
time in shampoo--behind Pantene Pro-V. Europe also made significant gains
in Cosmetics and Fragrances, increasing volume behind the successful
launches of Boss Elements and Roma Uomo fragrances and continued good
performance by Ellen Betrix cosmetics in Germany and Max Factor
International in the United Kingdom.
- - - EUROPEAN PAPER recorded strong growth led by Always, the region's leading
feminine protection business. Europe now sells 38% of P&G's worldwide
volume in feminine
(Caption in second paragraph stating "The Company is making steady
progress toward its restructuring goals and is already seeing
benefits.")
3
<PAGE>
protection and diaper products. During 1993/94, the European organization
introduced Always Pantiliners into much of the region as well as consumer-
preferred Pampers Baby Dry, Pampers Ultra Dry Thins and Pampers Trainers.
- - - NEW TISSUE/TOWEL BUSINESS--More recently, P&G expanded its growth
opportunities in Europe by entering the $5.5 billion tissue/towel market
with the July 1994 acquisition of VP-Schickedanz. This is the Company's
first move into the tissue business outside North America. VPS has an
experienced organization with modern manufacturing facilities and high
quality, profitable brands such as Tempo, the leading European paper
handkerchief, and Bess bath tissue, the leading brand in Germany. Based on
proven technology and successful brands in the U.S., along with significant
growth potential in a market where per capita tissue usage is well below
U.S. levels, we expect to significantly build this business over time.
- - - EASTERN EUROPE continued its strong growth with volume up 20% in 1993/94.
Laundry detergents are the Company's largest business in this region. P&G
is the market leader in the Czech and Slovak Republics, with brands such as
Tix, Tide and Ariel. In Russia, Tide is the best-selling western laundry
detergent after only six months on the market.
Pampers is the number one diaper in Hungary and Poland and is a strong
second in the Czech and Slovak Republics. P&G also strengthened its
dentifrice business in 1993/94. Blend-aMed is the number one dentifrice
brand in Hungary and Poland.
- - - ASIA/PACIFIC recorded 25% volume growth, led by gains in China, Taiwan,
Malaysia, Singapore, Korea, Indonesia, Thailand and India.
Japan remains the largest business in Asia/Pacific and set new volume
records, despite a tough competitive climate and weak economic conditions.
The introduction of the new Vidal Sassoon hair care line was a major factor
in the broad-based growth in this region. Feminine protection products
were also an important contributor.
China was the fastest-growing country in the region. P&G is China's
market leader in hair care and, with the completion of the three joint
ventures during this fiscal year, is now the largest detergent manufacturer
in China, as well. Our other Chinese businesses--Skin Care, Feminine
Protection and Personal Cleansing--are also growing.
- - - LATIN AMERICA continued broad-based volume growth. Mexico delivered the
biggest volume gains on existing businesses, while acquisitions played an
important role in the growth of other Latin American markets.
The Company strengthened its position in the feminine protection
category with the acquisition of the Higibras/ProHigiene companies in
Brazil. In addition, we expanded our core laundry and dishwashing business
through acquisition of the Quimica and Llauro companies in Argentina.
- - - CANADA continued to build its Laundry and Cleaning business with the
introduction of Tide with Advanced Color Guard. Paper led Canada in unit
volume growth as P&G's technologies were applied to the Royale bath tissue,
kitchen towel and facial tissue products.
(Caption in paragraph "- New Tissue/Towel Business" stating "P&G
people are characterized by their innovation, speed and ability to
work together across both functional and geographic boundaries.")
(Stylized picture of globe with caption "International earnings grew
15%, unit volume was up 7%--or 10% including acquisitions.")
<PAGE>
P&G POSITIONED FOR THE FUTURE
Never has the Company been as well positioned in as many product categories
and in as many regions of the world as it is today.
The key to our success is and always has been our ability to develop
and advance our people. That's why we're particularly proud of the
Opportunity 2000 Award just given to P&G by the United States Department of
Labor. This award, which is presented to a single company each year,
recognizes the efforts of men and women throughout our organization to
promote and advance employees of all origins and backgrounds.
P&G has the strongest group of employees in any consumer goods company
in the world--people who are characterized by their innovation, speed and
ability to work together across both functional and geographic boundaries.
These characteristics have always been our Company's greatest
strength, and will continue to be Procter & Gamble's most valued resource
in the years ahead.
Respectfully,
/s/EDWIN L. ARTZT
Edwin L. Artzt
Chairman of the Board
and Chief Executive
/s/JOHN E. PEPPER
John E. Pepper
President
August 10, 1994
5
<PAGE>
THE FINANCIAL STATEMENTS
RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
------------------------------------------------------------
Company management is responsible for the preparation, accuracy and
integrity of the financial statements and other financial information
included in this Annual Report. This responsibility includes preparing the
statements in accordance with generally accepted accounting principles and
necessarily includes estimates that are based on management's best
judgments.
To help insure the accuracy and integrity of Company financial data,
management maintains internal controls which are designed to provide
reasonable assurance that transactions are executed as authorized and
accurately recorded and that assets are properly safeguarded. These
controls are monitored by an extensive and ongoing program of internal
audits. It is essential for all Company employees to conduct their business
affairs in keeping with the highest ethical standards as outlined in our
code of conduct, P&G, Your Personal Responsibility. Careful selection of
employees, and appropriate divisions of responsibility, also help us to
achieve our control objectives.
The financial statements have been audited by the Company's
independent public accountants, Deloitte & Touche. Their report is also
shown on this page.
The Board of Directors, acting through its Audit Committee composed
entirely of outside directors, oversees the adequacy of the Company's
control environment. The Audit Committee meets periodically with
representatives of Deloitte & Touche, and internal financial management to
review accounting, control, auditing and financial reporting matters. The
independent auditors and the internal auditors also have full and free
access to meet privately with the Committee.
/s/EDWIN L. ARTZT /s/ERIK G. NELSON
Edwin L. Artzt Erik G. Nelson
Chairman of the Board and Chief Executive Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
-------------------------------------------------------------
DELOITTE & 250 East Fifth Street
TOUCHE Cincinnati, Ohio 45202
----------------
D&T logo
To the Board of Directors and Shareholders of The Procter & Gamble Company:
We have audited the accompanying consolidated balance sheets of The Procter
& Gamble Company and subsidiaries as of June 30, 1994 and 1993 and the
related consolidated statements of earnings, retained earnings, and cash
flows for each of the three years in the period ended June 30, 1994. These
financial statements are the responsibility of the companies' management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the companies
at June 30, 1994 and 1993 and the results of their operations and their
cash flows for each of the three years in the period ended June 30, 1994,
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, effective July 1,
1992, the Company changed its methods of accounting for other post
retirement benefits and income taxes.
/s/DELOITTE & TOUCHE
August 10, 1994
16
<PAGE>
<PAGE>
The Procter & Gamble Company and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENT
OF EARNINGS
<CAPTION>
Years Ended June 30 (Millions of Dollars Except Per Share Amounts) 1994 1993 1992
__________________________________________________________________________________________________
<S> <C> <C> <C>
NET SALES $30,296 $30,433 $29,362
Cost of products sold 17,355 17,683 17,324
Marketing, administrative, and other operating expenses 9,361 9,589 9,171
Provision for restructuring -- 2,705 --
__________________________________________________________________________________________________
OPERATING INCOME 3,580 456 2,867
Interest expense 482 552 510
Other income/expense, net 248 445 528
__________________________________________________________________________________________________
EARNINGS BEFORE INCOME TAXES & PRIOR YEARS'
EFFECT OF ACCOUNTING CHANGES 3,346 349 2,885
Income taxes 1,135 80 1,013
__________________________________________________________________________________________________
NET EARNINGS BEFORE PRIOR YEARS' EFFECT OF
ACCOUNTING CHANGES 2,211 269 1,872
Prior years' effect of accounting changes -- (925) --
__________________________________________________________________________________________________
NET EARNINGS/(LOSS) $ 2,211 $ (656) $ 1,872
__________________________________________________________________________________________________
_______ _________ ________
PER COMMON SHARE:
NET EARNINGS BEFORE PRIOR YEARS' EFFECT OF
ACCOUNTING CHANGES $ 3.09 $ 0.25 $ 2.62
Prior years' effect of accounting changes -- $ (1.36) --
NET EARNINGS/(LOSS) $ 3.09 $ (1.11) $ 2.62
NET EARNINGS/(LOSS) ASSUMING FULL DILUTION $ 2.91 $ (0.96) $ 2.45
DIVIDENDS $ 1.24 $ 1.10 $ 1.025
AVERAGE SHARES OUTSTANDING (IN MILLIONS) 683.1 680.4 677.4
__________________________________________________________________________________________________
</TABLE>
<TABLE>
CONSOLIDATED STATEMENT
OF RETAINED EARNINGS
<CAPTION>
Years Ended June 30 (Millions of Dollars) 1994 1993 1992
__________________________________________________________________________________________________
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $ 6,248 $ 7,810 $ 6,775
Net earnings/(loss) 2,211 (656) 1,872
Dividends to shareholders
Common (847) (748) (694)
Preferred, net of related tax benefit (102) (102) (94)
Excess of cost over the stated value of common shares
purchased for treasury (14) (56) (49)
__________________________________________________________________________________________________
BALANCE AT END OF YEAR $ 7,496 $ 6,248 $ 7,810
__________________________________________________________________________________________________
_______ ________ ________
</TABLE>
See accompanying Notes To Consolidated Financial Statements.
17
<PAGE>
The Procter & Gamble Company and Subsidiaries
<TABLE>
CONSOLIDATED BALANCE SHEET
<CAPTION>
June 30 (Millions of Dollars) 1994 1993
_______________________________________________________________________________________________
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,373 $ 2,322
Marketable securities 283 306
Accounts receivable 3,115 3,111
Inventories 2,877 2,903
Deferred income taxes 716 740
Prepaid expenses and other current assets 624 593
_______________________________________________________________________________________________
9,988 9,975
PROPERTY, PLANT, AND EQUIPMENT 10,024 9,485
GOODWILL AND OTHER INTANGIBLE ASSETS 3,754 3,762
OTHER ASSETS 1,769 1,713
_______________________________________________________________________________________________
TOTAL $25,535 $24,935
_______________________________________________________________________________________________
_______ _______
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 2,604 $ 2,269
Accounts payable - other 660 642
Accrued liabilities 2,961 2,838
Taxes payable 440 726
Debt due within one year 1,375 1,812
_______________________________________________________________________________________________
8,040 8,287
LONG-TERM DEBT 4,980 5,174
OTHER LIABILITIES 3,336 3,850
DEFERRED INCOME TAXES 347 183
_______________________________________________________________________________________________
16,703 17,494
_______________________________________________________________________________________________
SHAREHOLDERS' EQUITY
Convertible Class A preferred stock 1,942 1,969
Common stock - shares outstanding: 1994 - 684,348,359;
1993 - 681,754,226 684 682
Additional paid-in capital 560 477
Currency translation adjustments (63) (99)
Reserve for employee stock ownership plan debt retirement (1,787) (1,836)
Retained earnings 7,496 6,248
_______________________________________________________________________________________________
8,832 7,441
_______________________________________________________________________________________________
TOTAL $25,535 $24,935
_______________________________________________________________________________________________
_______ _______
</TABLE>
See accompanying Notes To Consolidated Financial Statements.
18
<PAGE>
The Procter & Gamble Company and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENT
OF CASH FLOWS
<CAPTION>
Years Ended June 30 (Millions of Dollars) 1994 1993 1992
__________________________________________________________________________________________________
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $ 2,322 $ 1,776 $ 1,384
__________________________________________________________________________________________________
OPERATING ACTIVITIES
Net earnings before prior years' effect of
accounting changes 2,211 269 1,872
Provision for restructuring -- 2,705 --
Depreciation, depletion and amortization 1,134 1,140 1,051
Deferred income taxes 196 (1,065) 125
Change in accounts receivable 40 (9) 23
Decrease in inventories 25 97 160
Increase in payables and accrued liabilities 98 55 45
Change in other liabilities (353) 67 (48)
Other 298 79 (203)
__________________________________________________________________________________________________
3,649 3,338 3,025
__________________________________________________________________________________________________
INVESTING ACTIVITIES
Capital expenditures (1,841) (1,911) (1,911)
Proceeds from asset sales and retirements 105 725 291
Acquisitions (295) (138) (1,240)
Change in marketable securities 23 (306) --
__________________________________________________________________________________________________
(2,008) (1,630) (2,860)
__________________________________________________________________________________________________
FINANCING ACTIVITIES
Dividends to shareholders (949) (850) (788)
Change in short-term debt (281) (277) (156)
Additions to long-term debt 414 1,001 1,608
Reduction of long-term debt (797) (939) (433)
Proceeds from stock options 36 77 71
Purchase of treasury shares (14) (55) (49)
__________________________________________________________________________________________________
(1,591) (1,043) 253
__________________________________________________________________________________________________
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 1 (119) (26)
__________________________________________________________________________________________________
INCREASE IN CASH AND CASH EQUIVALENTS 51 546 392
__________________________________________________________________________________________________
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,373 $ 2,322 $ 1,776
__________________________________________________________________________________________________
_______ _______ _______
SUPPLEMENTAL DISCLOSURE
Cash payments for:
Interest, net of amount capitalized $ 487 $ 592 $ 475
Income taxes 1,225 1,035 811
Non-cash transactions:
Reductions in employee stock ownership plan debt,
guaranteed by the Company 49 46 43
Liabilities assumed in acquisitions 65 83 660
Conversion of preferred to common shares 27 20 9
__________________________________________________________________________________________________
</TABLE>
See accompanying Notes To Consolidated Financial Statements.
19
<PAGE>
The Procter & Gamble Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The financial statements include the
accounts of The Procter & Gamble Company and its majority-owned
subsidiaries. Investments in 20% to 50% owned affiliates in which
significant management control is exercised are included at original
cost adjusted for the change in equity since acquisition. Other
investments are carried at cost.
ACCOUNTING CHANGES: Effective July 1, 1992, the Company adopted
Statement of Financial Accounting Standards No. 106, Accounting for
Postretirement Benefits Other than Pensions. The new Statement requires
accrual of postretirement health care and life insurance benefits
during an employee's years of active service rather than on the
previous pay-as-you-go basis during the retirement years.
Effective July 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The new
Statement requires deferred taxes on the Balance Sheet to be stated at
enacted tax rates expected to be in effect when these balances reverse,
i.e. when taxes actually will be paid or recovered. Previously,
deferred taxes were based on the enacted tax rate when these amounts
were first recognized.
Effective July 1, 1994, the Company will adopt Statement of Financial
Accounting Standards No. 112, Employers' Accounting for Postemployment
Benefits, and Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities. The
effects of adoption of these new standards are not expected to be
material.
CURRENCY TRANSLATION: Assets and liabilities denominated in most
foreign currencies are translated into U.S. dollars at year-end
exchange rates and related gains and losses are reflected in
shareholders' equity. Significant currencies include the German mark,
Belgian franc, British pound, Canadian dollar and Japanese yen, with
any related exposure managed primarily through local financing. Gains
and losses from foreign currency transactions and translation of
balance sheets in highly inflationary economies are determined based on
historical or current exchange rates as appropriate, and are included
in earnings. Losses included in net earnings for 1994, 1993 and 1992
were $27, $42 and $50, respectively.
CASH EQUIVALENTS: Highly liquid investments with maturities of three
months or less when purchased are considered to be cash equivalents.
INVENTORY VALUATION: Inventories are valued at the lower of cost or
market. Cost for inventories is primarily determined by the last-in,
first-out method or the average cost method.
Futures contracts are purchased primarily to hedge certain
agricultural commodity requirements. Gains and losses on these
contracts are included in earnings when the related products are sold.
GOODWILL AND OTHER INTANGIBLE ASSETS: The cost of intangible assets is
amortized on a straight-line basis over the estimated periods
benefited, but not exceeding 40 years with an average remaining life of
28 years. The realizability of goodwill and other intangibles is
evaluated periodically as events or circumstances indicate a possible
inability to recover their carrying amount. Such evaluation is based on
various analyses, including cash flow and profitability projections
that incorporate, as applicable, the impact on existing company
businesses. The analyses necessarily involve significant management
judgment to evaluate the capacity of an acquired business to perform
within projections. Historically, the Company has generated sufficient
returns from acquired businesses to recover the cost of their
intangible assets.
DEPRECIATION: For financial accounting purposes, depreciation is
calculated on a straight-line basis over the estimated useful lives of
the assets.
20
<PAGE>
OTHER EXPENSES: Research and development expenses are charged to
earnings in the year incurred and were $1,059, $956 and $861 for the
years ending June 30, 1994, 1993 and 1992.
NET EARNINGS PER COMMON SHARE: Net earnings less preferred dividends
(net of related tax benefits) are divided by the average number of
common shares outstanding during the year to derive net earnings per
common share. Fully diluted earnings per share are calculated using the
treasury stock method and include an adjustment for preferred stock
dividend requirements.
RECLASSIFICATIONS: Certain reclassifications of prior years' amounts
have been made to conform with the current year presentation.
2. PROVISION FOR RESTRUCTURING
A restructuring provision of $2,705 which reduced after-tax earnings by
$1,746 or $2.57 per share, was established in fiscal 1993. A charge of
$2,402 covers a worldwide restructuring effort to optimize product
supply systems and reduce overhead costs, and a $303 charge related to
the divestiture of the 100% juice business. The provision includes
costs associated with the closure or disposal of facilities, employee
separation and exit from certain non-strategic businesses.
The restructuring provision was determined based on estimates
prepared at the time the restructuring actions were approved by
management and the Board of Directors. The cost of completing the
restructuring program is expected to approximate the original
estimates.
3. ACQUISITIONS
In fiscal 1992 the Company purchased Revlon, Inc.'s worldwide Max
Factor and Betrix lines of cosmetics and fragrances for $1,025, net of
cash acquired, including goodwill and other intangible assets of $927.
Other acquisitions accounted for as purchases totaled $295, $138, and
$215 in 1994, 1993 and 1992, respectively. The increase in goodwill and
other intangible assets amounted to $209, $57, and $93 in those years.
The pro forma full year effect of the above acquisitions on
consolidated earnings would not have been material in the respective
years.
4. BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
June 30 1994 1993
_______________________________________________________________________
<S> <C> <C>
INVENTORIES
Raw materials and supplies $ 1,087 $ 1,154
Work in process 213 196
Finished products 1,577 1,553
_______________________________________________________________________
2,877 2,903
Replacement cost of LIFO inventories 663 1,097
Stated value of LIFO inventories 462 1,013
_______________________________________________________________________
Excess of replacement cost over the stated value 201 84
PROPERTY, PLANT, AND EQUIPMENT
Buildings 3,027 2,703
Machinery and equipment 12,249 11,607
Land 550 494
Timberlands, less depletion 70 73
_______________________________________________________________________
15,896 14,877
Less accumulated depreciation 5,872 5,392
_______________________________________________________________________
10,024 9,485
<CAPTION>
21
<PAGE>
The Procter & Gamble Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share amounts)
4. BALANCE SHEET INFORMATION (continued)
June 30 1994 1993
_______________________________________________________________________
<S> <C> <S>
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill $ 3,564 $ 3,472
Trademarks and other intangible assets 946 957
_______________________________________________________________________
4,510 4,429
Less accumulated amortization 756 667
_______________________________________________________________________
3,754 3,762
Marketing expenses 842 753
Compensation expenses 393 395
Restructuring reserves 870 817
Other 856 873
_______________________________________________________________________
2,961 2,838
OTHER LIABILITIES
Postretirement health care and life insurance
benefits 1,432 1,410
Restructuring reserves 1,035 1,810
Other 869 630
_______________________________________________________________________
3,336 3,850
</TABLE>
5. LONG-TERM DEBT
<TABLE>
The following presents the carrying value of outstanding long-term
debt:
<CAPTION>
June 30 1994 1993
_______________________________________________________________________
<S> <C> <C>
9 1/2% notes due 1998 $ 200 $ 200
6 1/4% notes due 1995 200 200
8% notes due 2003 200 200
7.1% notes due 1994 200 200
6.85% notes due 1997 200 200
7 3/8% debentures due 2023 175 175
8.7% notes due 2001 175 175
5.2% notes due 1995 150 150
9 5/8% notes due 2001 150 150
8 1/2% notes due 2009 149 149
10 7/8% Canadian dollar bonds due 2001 145 157
Commercial paper 765 423
9.36% ESOP debentures, Series A, due 2021,
guaranteed by the Company 1,000 1,000
8.08%-8.33% serial ESOP notes, due 1994-2004,
guaranteed by the Company 787 836
Other, due in varying amounts through 2036 978 1,609
_______________________________________________________________________
5,474 5,824
Less amounts included in debt due within one year 494 650
_______________________________________________________________________
Total long-term debt 4,980 5,174
_______________________________________________________________________
</TABLE>
The following payments are required during the next five fiscal years:
1995-$494; 1996-$468; 1997-$416; 1998-$322; and 1999-$293.
The fair value of the underlying long-term debt, excluding amounts due
within one year, was $5,205 and $5,656 at June 30, 1994 and 1993,
respectively.
Certain commercial paper balances have been classified as long-term
debt. The Company has the intent and ability to renew the commercial
paper obligations on a long-term basis and has entered into swap
arrangements that convert them to fixed rate obligations.
22
<PAGE>
6. FINANCIAL INSTRUMENTS
The Company is subject to market rate risk from exposure to changes in
interest rates and currency exchange rates and enters into various
financial instrument transactions to manage these exposures. Financial
instruments used for these purposes are evaluated against the Company's
policies in areas such as counterparty exposure and hedging practices,
and are monitored using techniques such as market value and sensitivity
analyses.
INTEREST RATE INSTRUMENTS
The Company's financing and cash management activities entail market
rate risk from exposure to changes in interest rates. The Company
assesses the exposure of its overall financing position on a net basis,
after considering the extent to which variable rate liabilities can be
offset with variable rate assets, typically cash equivalents and
marketable securities. The Company's objective is to optimize interest
expense consistent with maintaining an acceptable level of exposure to
the risk of interest rate fluctuation. In order to achieve this
objective, the Company targets a mix of fixed and variable rate debt
based on an assessment of interest rate trends. To obtain this mix in a
cost efficient manner, the Company primarily utilizes interest rate
swaps, including foreign currency interest rate swaps, that have the
effect of converting specific debt obligations of the Company from
fixed to variable rate, or vice versa, as required. Amounts due to or
from the counterparties to interest rate swaps are reflected in
interest expense in the periods in which they accrue.
A portion of interest rate exposure is managed through the use of
options to manage the Company's overall risk profile and reduce
interest expense. When using written option contracts, the Company
receives a premium in exchange for providing a counterparty the right
to enter into a swap. Gains and losses on such options are recognized
currently. The notional amounts of such instruments were $1,094 and
$845 at June 30, 1994 and 1993, respectively. The fair values were $40
at June 30, 1994 and $14 at June 30, 1993, reflecting the approximate
cost to terminate the options.
The net effect of interest rate instruments on interest expense for
1994 and 1993 was insignificant, but this measurement does not capture
the value to the Company of managing to a targeted mix of fixed and
variable rate debt.
The option portion of the two out-of-policy leveraged interest rate
swaps entered into during 1994 were closed in the January-March
quarter. The related $157 charge in the quarter to close these options
is reflected in other income/expense, net. Leveraged options can
magnify the impact of interest rate changes. At June 30, 1994 no such
instruments were in our portfolio and it is the Company's intent not to
enter such leveraged contracts in the future.
Based on the Company's overall variable rate exposure at June 30,
1994, including interest rate swaps and options, a 300 basis point
interest rate change would not have a material effect on earnings.
The following information includes all interest rate instruments. The
notional amount is the reference point for determining amounts due or
receivable under the contracts. The fair value approximates the cost to
settle the outstanding contracts. The carrying value includes the net
amount due to counterparties under swap contracts, the marked-to-market
value of written options, and currency translation associated with
currency interest rate swaps.
23
<PAGE>
The Procter & Gamble Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share amounts)
<TABLE>
<CAPTION>
June 30 1994 1993
_______________________________________________________________________
<S> <C> <C>
Notional amount $ 3,543 $ 3,773
_______________________________________________________________________
Fair value: gains 13 77
losses 252 199
_______________________________________________________________________
Net fair value 239 122
Less: carrying value 193 74
_______________________________________________________________________
Estimated unrealized loss 46 48
_______________________________________________________________________
</TABLE>
The estimated unrealized losses shown above represent the incremental
charge to earnings to immediately settle all interest rate swaps.
However, it is the Company's current intention to leave these
instruments outstanding until maturity over various periods extending
to the year 2004, in which case no incremental charge to earnings will
be realized.
CURRENCY INSTRUMENTS
The Company is subject to market rate risk from exposure to changes in
currency exchange rates primarily in three areas: commercial
transactions, intercompany financings and net investments in foreign
subsidiaries.
The primary purpose of the Company's foreign currency hedging
activities is to protect against the risk that local currency cash
flows associated with purchase transactions will be adversely affected
by changes in exchange rates. Although this foreign currency exposure
is managed locally, corporate policy prescribes the range of hedging
activity into which the subsidiary operations may enter. To execute
this policy, the Company utilizes forward exchange contracts and
options with durations of generally less than twelve months. The impact
of changes in the value of these instruments typically offsets changes
in the value of the underlying transactions. For accounting purposes,
gains and losses on option contracts that hedge identifiable
anticipated transactions and on forward contracts that hedge firm
commitments are included in the measurement of the related transaction.
Gains and losses on instruments used for other purposes are recognized
currently.
The Company manages its foreign exchange exposure associated with
intercompany financing transactions primarily using foreign currency
swaps. Gains and losses on such instruments mitigate the impact on
earnings of currency exchange rate changes on the underlying
transactions.
The impact of net asset exposures related to investments in foreign
subsidiaries are managed primarily through local currency financing,
and by foreign currency denominated debt issued by the parent company.
As discussed in the interest rate instruments section, the Company has
also entered into currency interest rate swaps, which effectively
convert the principal and interest cash flows of certain existing debt
to foreign currency obligations. The currency translation associated
with these obligations is designated as a hedge of the net investment
in the foreign subsidiaries and reflected in the currency translation
adjustment in shareholders' equity.
Currency instruments outstanding at June 30, 1994 were as follows:
( ) = Liability Notional Amount Carrying Value
____________________________________________________________________
Forward contracts $1,873 $ (10)
Currency options 1,138 10
Currency swaps 646 (62)
______ ______
3,657 (62)
24
<PAGE>
The aggregate notional amount of currency instruments with off-balance
sheet risk at June 30, 1993 was $2,409. The aggregate notional amount
of currency instruments outstanding at June 30, 1994 increased over the
prior year primarily due to an increased level of transaction hedging
activity by our international subsidiaries, a timing change related to
certain purchased option contracts, and the impact of a weaker dollar
at year end which increased the notional value in dollars. The major
currency exposures hedged by the Company include the German mark,
Japanese yen and British pound sterling.
The aggregate fair value of currency instruments at June 30, 1994 and
1993 included the following unrealized amounts: $11 in net gains ($16
in gains, offset by $5 in losses), and $17 in net gains ($36 in gains,
offset by $19 in losses), respectively.
OTHER FINANCIAL INSTRUMENTS
The carrying value of other financial instruments approximated fair
value at June 30, 1994 and 1993.
CREDIT RISK
Credit risk arising from the inability of a counterparty to meet the
terms of the contracts is generally limited to the amounts, if any, by
which the counterparties' obligations exceed the obligations of the
Company. It is the Company's policy to only enter into financial
instruments with a diversity of creditworthy counterparties. Therefore,
the Company does not expect to incur credit losses on financial
instruments.
MARKET VALUATION METHODS
The estimated fair value amounts of financial instruments presented
have been determined using available market information and valuation
methodologies, primarily discounted cash flow analysis. Such estimates
require considerable judgments in interpreting market data, and changes
in assumptions or estimation methods may significantly affect the fair
value estimates.
7. SHAREHOLDERS' EQUITY (Share Amounts in Thousands)
PREFERRED STOCK
Authorized Class A preferred stock is 600,000 shares without par value
with stated value of $1 per share.
There were 34,269, 35,246, and 35,872 outstanding shares of Series
A ESOP Convertible Class A Preferred Stock issued at $27.50 per share
and held by the employee stock ownership plan at June 30, 1994, 1993
and 1992, respectively. There were 977, 626, and 324 shares converted
into common shares and retired in 1994, 1993, and 1992 respectively.
Each issued share has a liquidation value of $27.50 and is
convertible at the option of the holder into one share of the
Company's common stock.
There were 19,142 shares of Series B ESOP Convertible Class A
Preferred Stock issued to the employee stock ownership plan in
December 1990 at $52.24 per share and are currently outstanding. Each
issued share has a liquidation value of $52.24 and is convertible at
the option of the holder into one share of the Company's common
stock.
At June 30, 1994 there were 200,000 shares of authorized and unissued
Class B preferred stock (non-voting) without par value with stated
value of $1 per share.
COMMON STOCK
Authorized common stock is 2,000,000 shares without par value and with
stated value of $1 per share. Changes in outstanding shares were as
follows:
25
<PAGE>
The Procter & Gamble Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share amounts)
<TABLE>
<CAPTION>
Years ended June 30 1994 1993 1992
____________________________________________________________________________________
<S> <C> <C> <C>
Shares outstanding beginning of year (excludes
55,521, 55,866 and 55,956 treasury shares) 681,754 678,794 676,179
Purchased for treasury (255) (1,401) (1,270)
Issued for employee plans (includes 1,275,
1,746 and 1,360 treasury shares) 2,849 4,361 3,885
____________________________________________________________________________________
Shares outstanding end of year (excludes
54,501, 55,521 and 55,866 treasury shares) 684,348 681,754 678,794
</TABLE>
Under the Company's stock option plans, options have been granted to
key employees to purchase common shares of the Company within a
ten-year term at the market value on the dates of the grants. Stock
option activity was as follows:
<TABLE>
<CAPTION>
Years Ended June 30 1994 1993 1992
______________________________________________________________________________________________
Average Average Average
Shares Price Shares Price Shares Price
______________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 28,497 $34.73 27,822 $30.56 26,820 $25.97
Options granted 3,880 56.81 4,279 51.56 4,616 51.02
Options exercised (1,673) 21.35 (3,380) 21.08 (3,341) 21.34
Options canceled (148) 43.16 (224) 43.94 (273) 38.34
_______________________________________________________________________________________________
Outstanding at end of year 30,556 38.23 28,497 34.73 27,822 30.56
Options exercisable at June 30 26,685 24,255 23,254
</TABLE>
There were 6,418, 3,095, and 11,791 shares available for the granting
of options at June 30, 1994, 1993, and 1992, respectively.
ADDITIONAL PAID-IN CAPITAL
Increases in additional paid-in capital resulted from the conversion of
preferred shares and the excess amount realized over the stated value
of common shares issued pursuant to employee stock option and
remuneration plans and amounted to $83, $112 and $99 for the years
ended June 30, 1994, 1993 and 1992, respectively. The transfer to
common shares and related expenses of the two-for-one stock split
reduced additional paid-in capital by $342 in 1992.
CURRENCY TRANSLATION ADJUSTMENTS credited/(charged) to shareholders'
equity amounted to $36, ($211) and $168 during the years ended June 30,
1994, 1993 and 1992, including tax effects of $30, ($1) and $39.
RESERVE FOR EMPLOYEE STOCK OWNERSHIP PLAN DEBT RETIREMENT was reduced
by $49, $46 and $43 during the years ended June 30, 1994, 1993 and 1992
for repayments of the Series A ESOP debt principal.
8. RETIREMENT PLANS
PROFIT SHARING PLANS
The Company maintains defined contribution profit sharing plans which
provide retirement benefits to a significant number of employees.
Amounts credited to these plans were:
<TABLE>
<CAPTION>
Years Ended June 30 1994 1993 1992
_________________________________________________________________________________
<S> <C> <C> <C>
Preferred shares of Procter & Gamble stock allocated
at market value $117 $111 $104
Profit sharing expense-cash contributions 157 167 172
Benefits earned by participants 274 278 276
</TABLE>
26
<PAGE>
The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership
Plan is the largest plan and covers most employees in the United
States. Annual credits to participants' accounts are based on
individual base salary and years of service. The total credited to all
accounts does not exceed 15% of total salaries and wages of
participants. Within this plan, a leveraged employee stock ownership
trust borrowed $1 billion in 1989 and the Company has guaranteed this
debt. The proceeds were used to buy Series A ESOP Convertible Class A
Preferred Stock and shares are allocated each year to individual
accounts.
Principal and interest payments of $117 on the borrowed funds were
paid each fiscal year by the trust from dividends on preferred shares
and cash payments from the Company as follows:
<TABLE>
<CAPTION>
Years Ended June 30 1994 1993 1992
_____________________________________________________________________________________________________
Interest Principal Total Interest Principal Total Interest Principal Total
________ _________ _____ ________ _________ _____ ________ _________ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Preferred dividends $22 $49 $71 $26 $46 $72 $30 $43 $73
Company payment 46 -- 46 45 -- 45 44 -- 44
_____________________________________________________________________________________________________
Total debt service 68 49 117 71 46 117 74 43 117
</TABLE>
PENSION PLANS
Other employees, primarily outside the U.S., are covered by local
pension or retirement plans. Pension expense included:
<TABLE>
<CAPTION>
Years Ended June 30 1994 1993 1992
____________________________________________________________________________
<S> <C> <C> <C>
Benefits earned by participants during the year $ 84 $ 66 $ 57
Interest on projected benefit obligations 97 86 73
Return on plan assets (63) (71) (53)
Net amortizations and other 3 15 (1)
____________________________________________________________________________
Pension expense 121 96 76
</TABLE>
Funded plan assets are held in restricted trusts or foundations that
are segregated from the assets of the Company. The assets are held in
stocks, bonds, insurance contracts and other investments within the
limits prescribed by local laws and in line with local investment
practices for pension and retirement plans. Funding policies vary by
country and consider such factors as actuarial reports, tax regulations
and local practices.
Obligations and assets at year-end were:
<TABLE>
<CAPTION>
June 30 1994 1993 1992
______________________________________________________________________________
<S> <C> <C> <C>
Accumulated benefit obligation $1,125 $ 870 $ 857
Vested benefit obligation 979 770 760
Net assets at market value 806 690 636
Projected benefit obligation 1,488 1,158 1,126
Unrecognized prior service costs and losses 165 84 162
Accrued pension costs 517 384 328
</TABLE>
Benefit obligations were based on a long term rate of return on plan
assets of 9% and a rate of increase in compensation of 6% for all years
presented; the average discount rate was 7.4% for 1994, and 8.0% for
1993 and 1992.
OTHER RETIREE BENEFITS
The Company provides certain health care and life insurance benefits
for substantially all of the Company's domestic employees who become
eligible for these benefits when they meet minimum age and service
requirements. Generally, the health care plans require contributions
from retirees and pay a stated percentage of expenses reduced by
deductibles and other coverages. Retiree contributions change annually
in line with medical cost trends.
27
<PAGE>
The Procter & Gamble Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions except per share amounts)
In 1990, The P&G Profit Sharing Trust and Employee Stock Ownership
Plan borrowed $1,000 which is guaranteed and carried as debt by the
Company. The proceeds were used to buy plan assets of 19.142 million
shares of Series B ESOP Convertible Class A Preferred Stock of the
Company for the purpose of partially funding retiree medical benefits.
The fair values of the shares at June 30, 1994 and 1993 were $1,022 and
$1,000. There were also other employee benefit trust assets of $40 and
$21 on June 30, 1994 and 1993. Interest payments on the loan amounted
to $94, $94 and $101 in 1994, 1993 and 1992, with $79 funded each year
by preferred stock dividends and the remainder by Company cash
payments. The preferred stock dividends were presented as a reduction
of interest expense in 1992; beginning in 1993, concurrent with the
adoption of Statement of Financial Accounting Standards (SFAS) No. 106,
Accounting For Postretirement Benefits Other Than Pensions, these
dividends were considered a reduction of benefit expense.
Effective July 1, 1992, the Company implemented SFAS No. 106, which
requires earlier recognition of costs on an accrual basis rather than
the previous cash, or pay-as-you-go, basis. The effect of the
accounting change on prior years, or accumulated benefit obligation,
was $1,422, or $900 after tax, at July 1, 1992. The accumulated benefit
obligation and net liability at year-end were:
ACCUMULATED BENEFIT OBLIGATION AND NET LIABILITY
June 30 1994 1993
_______________________________________________________________
Retirees $ 512 $ 463
Employees eligible to retire 126 186
Other active employees 603 903
______ ______
Accumulated benefit obligation 1,241 1,552
Unrecognized gain/(loss) 293 (80)
Less: plan assets (61) (21)
______ ______
Net liability 1,473 1,451
In 1992, benefit expense was $31. In 1994 and 1993 expenses were:
BENEFIT EXPENSE
Years Ended June 30 1994 1993
_______________________________________________________________
Benefits earned by employees during the year $ 60 $ 59
Interest cost on accumulated benefit obligation 116 113
Return on plan assets (21) --
Net amortization and deferral (79) (90)
______ ______
Sub-total 76 82
Dividends on plan's preferred stock (79) (79)
______ ______
Benefit expense (3) 3
Expense is determined by using preceding year-end rate assumptions as
follows:
1994 1993
_________________________________________________________________
Discount rate 8.0% 8.0%
Assumed rate of return on plan assets 9.0% 9.0%
Initial health care cost trend rate* 11.0% 12.7%
*Assumed at June 30, 1994 to decline gradually to 5% in 2006 and
thereafter. Assumed at June 30, 1993 to decline gradually to 6% in
2008 and thereafter.
The pre-tax effect of a 1% increase in the assumed health care cost
trend rate would increase the accumulated benefit obligations at June
30, 1994 and 1993 by approximately $185 and $243, along with increases
of $33 and $34 in the 1994 and 1993 annual costs.
28
<PAGE>
9. INCOME TAXES
Effective July 1, 1992, the Company adopted SFAS #109, Accounting for
Income Taxes. The cumulative effect of the accounting change in prior
years was $25 added tax expense.
The components of earnings before income taxes and prior years'
effects of accounting changes were:
<TABLE>
<CAPTION>
Years Ended June 30 1994 1993 1992
_______________________________________________________________________________
<S> <C> <C> <C>
United States $2,216 $ 318 $ 2,166
International 1,130 31 719
_______________________________________________________________________________
Total 3,346 349 2,885
</TABLE>
Income tax expenses including prior years' effect of accounting
changes were:
<TABLE>
Years Ended June 30 1994 1993 1992
_______________________________________________________________________________
<S> <C> <C> <C>
Current tax expense
United States Federal $ 574 $ 635 $ 556
International 298 432 242
Other 67 78 90
_______________________________________________________________________________
Total 939 1,145 888
Deferred tax expense
United States Federal 118 (489) 76
International & other 78 (576) 49
_______________________________________________________________________________
Total 196 (1,065) 125
Deferred Taxes on prior years' effect of accounting
changes -- (497) --
</TABLE>
Taxes credited to Shareholders' Equity for the years ended June 30,
1994 and 1993 were $91 and $74.
Taxes generally are provided currently on undistributed earnings of
foreign subsidiaries, except when those earnings are considered to be
reinvested indefinitely ($2,731 at June 30, 1994).
The components of deferred income tax expense were:
<TABLE>
<CAPTION>
Years Ended June 30 1994 1993 1992
_______________________________________________________________________________
<S> <C> <C> <C>
Depreciation $ 84 $ 73 $ 77
Provision for restructuring 223 (912) 52
Other (111) (226) (4)
_______________________________________________________________________________
Total 196 (1,065) 125
</TABLE>
Deferred tax assets and liabilities included:
<TABLE>
<CAPTION>
June 30 1994 1993
_________________________________________________________________________________________________
Assets Liabilities Total Assets Liabilities Total
______ ___________ _____ ______ ___________ _____
<S> <C> <C> <C> <C> <C> <C>
Current deferred taxes
Restructuring reserve $ 274 $ -- $ 274 $ 234 $ -- $ 234
Other 442 -- 442 506 -- 506
______________________________________________________________________________________________
Total 716 -- 716 740 -- 740
Non-current deferred taxes
Depreciation -- (1,173) (1,173) -- (1,133) (1,133)
Restructuring reserve 364 -- 364 623 -- 623
Postretirement benefits 540 -- 540 522 -- 522
Loss carryforwards 282 -- 282 226 -- 226
Valuation reserves (262) -- (262) (226) -- (226)
Other -- (98) (98) -- (195) (195)
______________________________________________________________________________________________
Total 924 (1,271) (347) 1,145 (1,328) (183)
</TABLE>
29
<PAGE>
The effective income tax rates, excluding prior years' effect of
accounting changes were 33.9%, 22.9% and 35.1% in 1994, 1993 and 1992
compared to the U.S. statutory rate of 35% for 1994 and 34% for 1993
and 1992. In 1993, the effective rate was increased 4.2% by state and
local taxes, and 5.1% by goodwill and other acquisition effects; and
decreased 15.0% by the impact of international rates and credits. In
1992, state and local taxes increased the rate by 1.8%.
10. SEGMENT INFORMATION
The Company's operations are characterized by interrelated raw
materials and manufacturing facilities and centralized research and
administrative staff functions, making any separate profit
determination by product group dependent upon the assumptions
regarding the allocation of common costs. Different assumptions or
physical or organizational arrangements would produce different
results.
Sales between geographic areas and those between business segments
included in net sales are made at prices approximating market and are
eliminated from total net sales. Corporate earnings include interest
income and expense and other general corporate income and expense.
Corporate assets include primarily cash and cash equivalents.
Laundry and Cleaning Products include detergents, hard surface
cleaners and fabric conditioners. Personal Care Products include
personal cleansing products, deodorants, hair care products, skin care
products, cosmetics, oral care products, paper tissue products,
disposable diapers, digestive health products, respiratory care
products, and other pharmaceuticals. Sales of disposable diapers
represented approximately 15%, 15% and 16% of consolidated sales in
1994, 1993 and 1992 respectively. Food and Beverage Products include
shortening and oil, snacks, prepared baking mixes, peanut butter,
coffee, and juice products. Products of the Laundry and Cleaning,
Personal Care, and Food and Beverage segments are distributed
primarily through grocery stores and other retail outlets. Pulp and
Chemicals are sold direct to customers and through jobbers. Net sales
of Pulp and Chemicals include intersegment sales amounting to $146 in
1994, $309 in 1993 and $449 in 1992.
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS
International
__________________________________
Canada, Asia,
Latin America
Years Ended June 30 United States Europe and Other Total Corporate Total
____________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales 1992 $15,579 $8,371 $6,211 $14,582 $ (799) $29,362
1993 15,362 9,206 6,650 15,856 (785) 30,433
1994 15,019 8,671 7,387 16,058 (781) 30,296
____________________________________________________________________________________________________________
Net Earnings Before 1992 1,461 362* 263 625 (214) 1,872
Prior Years' Effect 1993** 415 28 59 87 (233) 269
of Accounting Changes 1994 1,691 424 343 767 (247)*** 2,211
____________________________________________________________________________________________________________
Assets 1992 10,811 6,329 4,060 10,389 2,825 24,025
1993 10,027 5,471 4,641 10,112 4,796 24,935
1994 9,948 5,535 5,153 10,688 4,899 25,535
<FN>
*Includes a 1992 gain of $61 on the sale of an Italian coffee business.
<FN>
**Includes 1993 after-tax provisions for restructuring in the United States $1,138; Europe $314; Canada, Asia,
Latin America and Other - $266; and Corporate - $28. Total - $1,746.
<FN>
***Includes a 1994 after-tax charge of $102 to close out the written option portion of two leveraged interest rate
swaps.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
BUSINESS SEGMENTS
Product Groups
_______________________________________________
Laundry and Personal Food and Pulp and
Years Ended June 30 Cleaning Care Beverage Chemicals Corporate Total
__________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales 1992 $ 9,531 $15,142 $3,709 $1,429 $ (449) $29,362
1993 10,061 16,238 3,271 1,172 (309) 30,433
1994 9,762 16,640 3,290 750 (146) 30,296
____________________________________________________________________________________________________________
Earnings Before Income 1992 1,278 1,651 229* 74 (347) 2,885
Taxes & Prior Years' Effect 1993** 837 117 (195) (59) (351) 349
of Accounting Changes 1994 1,483 1,946 371 26 (480)*** 3,346
____________________________________________________________________________________________________________
Assets 1992 4,399 12,630 2,492 1,679 2,825 24,025
1993 4,422 12,811 2,173 733 4,796 24,935
1994 4,690 13,184 2,054 708 4,899 25,535
____________________________________________________________________________________________________________
Capital 1992 467 1,125 151 143 25 1,911
Expenditures 1993 575 1,134 107 80 15 1,911
1994 588 1,060 136 40 17 1,841
____________________________________________________________________________________________________________
Depreciation, 1992 215 593 129 108 6 1,051
Depletion and 1993 233 675 144 78 10 1,140
Amortization 1994 248 720 113 40 13 1,134
<FN>
*Includes a 1992 gain of $103 on the sale of an Italian coffee business.
<FN>
**Includes 1993 provisions for restructuring of Laundry and Cleaning - $559; Personal Care - $1,539; Food and
Beverage - $450; Pulp and Chemicals - $123; and Corporate - $34. Total - $2,705.
<FN>
***Includes a 1994 charge of $157 to close out the written option portion of two leveraged interest rate swaps.
</TABLE>
11. QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
Millions of Dollars Except Per Share Amounts Quarter Ended Total
____________________________________________________________________________________
Sept. 30 Dec. 31 Mar. 31 Jun. 30 Year
_______________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Net sales 1993-94 $7,564 $7,788 $7,441 $7,503 $30,296
1992-93 7,879 7,839 7,350 7,365 30,433
Operating income 1993-94 1,085 1,023 923 549 3,580
1992-93 720 914 767 (1,945) 456
Earnings/(Loss) before income 1993-94 1,054 1,005 726 561 3,346
taxes & prior years' effect of 1992-93 657 882 747 (1,937) 349
accounting changes
*Net earnings 1993-94 670 653 482 406 2,211
1992-93 (515) 576 502 (1,219) (656)
Per common share:
*Net earnings/(loss) before 1993-94 .95 .92 .66 .56 3.09
prior years' effect of 1992-93 .57 .81 .70 (1.83) .25
accounting changes
*Net earnings/(loss) 1993-94 .95 .92 .66 .56 3.09
1992-93 (.79) .81 .70 (1.83) (1.11)
*Net earnings/(loss) 1993-94 .89 .85 .64 .53 2.91
assuming full dilution 1992-93 (.71) .76 .66 (1.67) (.96)
<FN>
*1992-93 includes a restructuring charge of $200 after tax in September and $1,546 after tax in June,
and a $925 charge for the prior years' effect of accounting changes in the September quarter.
</TABLE>
31
<PAGE>
FINANCIAL REVIEW 1979-1994
<TABLE>
<CAPTION>
Years Ended June 30 (Millions of Dollars Except Per Share Amounts)
1979 1980 1981 1982 1983 1984
____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Net Sales $9,329 $10,772 $11,416 $11,994 $12,452 $12,946
Operating Income $1,044 $ 1,123 $ 1,201 $ 1,365 $ 1,529 $ 1,387
Net Earnings $ 575 $ 640 $ 593** $ 777 $ 866 $ 890
Net Earnings Per Common Share $ .87 $ .97 $ .90** $ 1.17 $ 1.30 $ 1.34
Net Earnings as Percent of
Net Sales 6.2% 5.9% 5.2%** 6.5% 7.0% 6.9%
Dividends Per Common Share $ .388 $ .425 $ .475 $ .513 $ .563 $ .60
<FN>
*Includes in 1987 a pre-tax charge of $805 for restructuring reserve and in 1993 a pre-tax charge
of $2,705 for a restructuring reserve.
<FN>
**Includes in 1981 an extraordinary charge of $75 ($.12 per common share) associated with the
suspension of sale of Rely tampons; in 1987, a charge of $459 ($.68 per common share) for a
restructuring reserve; in 1993, a charge of $1,746 ($2.57 per share) for restructuring reserves
and a charge for the prior years' effect of accounting changes of $925 ($1.36 per common share);
and in 1994, a charge of $102 ($.15 per common share) to write-off the option portion of two
interest rate swaps.
Net earnings and dividends per common share have been adjusted for the stock splits in 1983,
1989 and 1992.
</TABLE>
ANALYSIS AND DISCUSSION
1994 -- Worldwide net earnings were $2,211 million including a $102
million after-tax charge for writing off the option portion of two
interest rate swap contracts. In the previous year, an after-tax loss
of $656 million was recorded due to two unusual items: restructuring
reserves totaling $1,746 million after-tax, and the prior years'
effects of two accounting changes amounting to $925 million. Excluding
these unusual items in both years, net earnings would have been $2,313
million in 1994, up 15% over earnings of $2,015 million in the
previous year. Foreign exchange rates reduced net earnings by less
than 3%.
Net sales for the year just ended were $30.3 billion, about even
with sales of $30.4 billion in the previous year. Growth in unit
volume increased net sales by 5%. This increase was offset by less
favorable foreign exchange rates, 4%, and the divestiture of our pulp
and 100% juice businesses and lower selling prices, 1%.
Excluding acquisitions and divestitures, worldwide unit volumes were
up 5%, 4% in the United States and 7% in International. Including
acquisitions and divestitures, worldwide unit volume would be up 5%,
with U.S. up 1% and International up 10%.
Cost of products sold as a percentage of net sales was 57.3%, which
compares with 58.1% for the preceding year. Restructuring savings
contributed .2% of this .8% decline as plant sourcing savings from
lower depreciation and enrollment reductions are beginning to be
realized.
Marketing, administrative and other operating expenses were 30.9% of
sales, down from 31.5% in the previous year which can entirely be
ascribed to restructuring savings, primarily from enrollment
reductions.
Operating income, excluding restructuring reserves in the prior
year, was up 13%, and pretax operating margins were 11.8% compared to
10.4% a year ago.
Interest expenses decreased $70 million from the previous year due
to lower borrowing rates and lower debt outstanding. Other
income/expense, net decreased $197 million from the prior year
reflecting the $157 million loss on two interest swaps this past year
and $41 million one-time profit in the previous year from the sale of
businesses.
The effective tax rate was 33.9% for 1994, which compares with 22.9%
for 1993. The 1993 restructuring reserve reduced pre-tax earnings
significantly and accentuated the percent impact of certain cost
elements not tax affected at the 34% U.S. statutory rate. Excluding
the restructuring reserve, the 1993 effective tax rate would have been
34.0%.
32
<PAGE>
The Procter & Gamble Company and Subsidiaries
<TABLE>
<CAPTION>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
___________________________________________________________________________________________________________________________
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$13,552 $15,439 $17,000 $19,336 $21,398 $24,081 $27,026 $29,362 $30,433 $30,296
$ 976 $ 1,305 $ 807* $ 1,796 $ 2,039 $ 2,302 $ 2,702 $ 2,867 $ 456* $ 3,580
$ 635 $ 709 $ 327** $ 1,020 $ 1,206 $ 1,602 $ 1,773 $ 1,872 $ (656)** $ 2,211**
$ .95 $ 1.05 $ .47** $ 1.49 $ 1.78 $ 2.25 $ 2.46 $ 2.62 $ (1.11)** $ 3.09**
4.7% 4.6% 1.9%** 5.3% 5.6% 6.7% 6.6% 6.4% -- 7.3%**
$ .65 $ .656 $ .675 $ .688 $ .75 $ .875 $ .975 $ 1.025 $ 1.10 $ 1.24
</TABLE>
In the following year-to-year comparison of geographic and business
segments, the previous year's earnings have been adjusted upward to
exclude the cost impact of restructuring reserves and all volume
comparisons exclude the impact of acquisitions and divestures to more
comparably present on-going results of the year just ended with those
of the prior year.
In the United States, after-tax earnings were up 9% versus the
previous year. Net profit margins improved to a record 11.3% with
restructuring benefits and other cost improvements contributing to the
increase over the previous year's 10.1% margin. Unit volume increased
4%, while net sales declined 2%, primarily due to the divestiture of
the pulp and 100% juice businesses and, to a lesser degree, lower
pricing.
Total International after-tax earnings were up 15% over the previous
year's results with net profit margins improving by 14%, from 4.2% to
4.8%. International unit volume increased 7%, and net sales were up
just 1% from the prior year due primarily to the impact of exchange
rates.
Net earnings in Europe were up 24% on a unit volume gain of 5%
primarily due to lower product cost. Net sales were down 6% due to
exchange rates. Excluding exchange effects, sales in Europe would have
been up 5%. In the balance of International, net earnings were up 6%
on a unit volume increase of 9%. Net sales were up 11%.
Worldwide laundry and cleaning products earnings were up 6% on unit
volume growth of 3%, primarily in the U.S. Unit shipment increases in
the global laundry and fabric conditioner categories accounted for the
largest increases in unit volumes shipped, while hard surface cleaners
led the U.S. in the percentage increase of units shipped. Net sales
were down 3% due to exchange rate effects and lower pricing.
Personal Care earnings were up 18% on an 8% unit volume increase.
The global hair care business contributed about 50% of the unit volume
growth largely due to the growth of Pantene Pro-V and Vidal Sassoon.
The Personal Care net sales increase of 2% was depressed by the impact
of exchange rates and lower pricing.
Food and Beverage earnings were up 45% to a record $371 million,
importantly due to the full year effect of the 100% juice divestiture
in fiscal 1993. The profit margin was 11%, in line with the Company
average. Unit volume was up 1% due largely to the growth of Sunny
Delight juice in the U.S. and Pringles worldwide.
33
<PAGE>
ANALYSIS AND DISCUSSION (continued)
The recent crop freezes in Brazil will reduce the supply of coffee
which has resulted in higher green coffee bean prices. The freeze did
not negatively impact earnings in the year just ended. However, higher
selling prices could contract the size of the coffee market in 1994/95
and beyond. Although this could negatively impact coffee profits, the
effect is not expected to be material to the Company's earnings.
Pulp and Chemicals earnings and sales declined substantially due to
the sale of all but the timberland portion of our pulp business. This
resulted in a total decline of $38 million in earnings and $422
million in sales. The sale of the timberlands was concluded in July
1994.
The $163 million decline in pre-tax earnings in the Corporate
segment is primarily due to the previously discussed $157 million
pre-tax loss from closing the option portion of two interest rate
swaps.
1993 -- Worldwide, the Company had a $656 million after-tax loss due
to two unusual items, the restructuring reserves and accounting
changes described below:
- A $1,746 million after-tax provision for restructuring was
established including (1) $1,546 million in the fourth quarter
to cover worldwide manufacturing consolidations and an overhead
reduction initiative through organizational restructuring under
the Strengthening Global Effectiveness (SGE) program; and (2)
an after-tax reserve of $200 million in September 1992 for
divestiture of the 100% juice business.
- Two new mandatory accounting standards covering retiree health
and life insurance benefits, and deferred taxes, SFAS No.106
and No.109, respectively, were retroactively adopted effective
July, 1992. The current and prior years' impacts on net
earnings were $63 million and $925 million, respectively.
Excluding the restructuring reserves and the prior years' effect of
accounting changes, net earnings would have been $2,015 million. Also,
excluding the $63 million current year effect of accounting changes,
1993 net earnings would have been $2,078 million up 11% from the
previous year.
Net sales exceeded $30 billion for the first time and were up 4%
compared with the previous year. Worldwide unit volume grew 3% led by
a 10% increase in the International businesses. United States unit
volume excluding the divested juice and pulp business was up only 1%
for the full year, but improved during each quarter of the year with
volume up 6% in the April-June quarter.
Worldwide cost of products sold as a percentage of net sales was
58.1% which compared with 59.0% for the previous year. Marketing,
administrative and other expenses as a percentage of net sales was
31.5%, up from 31.2% in the previous year.
Operating Income excluding the restructuring provision was up 10%
from the previous year, and the operating margin was 10.4% in 1993, up
from 9.8% and 10.0% in the previous two years.
Interest expense increased $42 million. This included $79 million
from preferred dividends no longer reducing interest expense for
accounting purposes beginning in 1993, partially offset by $37 million
lower interest expense primarily from lower borrowing rates. Other
income/expense, net decreased $83 million, primarily due to a $103
million gain on the sale of the Italian coffee business in the
previous year.
The unusually low 22.9% effective tax rate in 1993 was due to the
pre-tax restructuring reserve reducing before tax earnings to a
relatively small amount which accentuated the percentage impact of
certain cost elements not tax affected at the 34% U.S. statutory rate.
Excluding the restructuring reserve, the 1993 effective tax rate would
have been 34.0% which compares with 35.1% and 34.0% for the previous
two years.
34
<PAGE>
The Procter & Gamble Company and Subsidiaries
In the following year-to-year comparisons of geographic and business
segments, 1993 earnings have been adjusted upward to exclude the cost
impact of the restructuring reserves and the current and prior years'
effect of accounting changes to make the ongoing results for 1993 and
1992 more comparable.
In the United States, after-tax earnings were $1,558 million, up 7%
from the previous year. The net profit margin for the year was 10.1%,
the highest level achieved over the past decade and up from 9.4% in
1992. Notable margin improvements were realized by laundry and
cleaning products and food and beverage products, primarily coffee and
peanut butter.
International after-tax earnings were $681 million, up 9% over the
previous year. International again established a unit volume record,
with double-digit increases in Latin America, Asia-Pacific, European
paper and citrus products, and the Middle East-Africa-General Export
businesses.
Worldwide laundry and cleaning earnings were $1,389 million, up 9%
versus the previous year. The profit margin was 13.8%, up slightly
from 13.4% in the previous year. Segment sales grew 6% to $10 billion
on an 8% increase in unit volumes, led by double digit gains in
International.
Personal care earnings were virtually the same as the previous year.
Lower domestic diaper earnings offset earnings growth elsewhere in the
segment. Segment sales increased 7% to $16 billion in 1993.
International sales were up 13% and broadly based. U.S. sales were up
1% with lower diaper volumes slowing the growth in domestic sales.
Food and beverage segment earnings were up 98% to $249 million
versus $126 million in the previous year, excluding the one-time 1992
gain from sale of the Italian coffee business. The profit margin more
than doubled, increasing to 7.6% in 1993 due primarily to the
divestiture of the 100% juice business. Sales were down $438 million,
due to a 7% decline in shipment volume, primarily reflecting the
divestiture of the 100% juice business.
Pulp and chemicals earnings were down $12 million to $62 million and
sales were down 18% with the declines largely attributable to the
divestiture of the pulp business in 1993.
During the year, the Company entered into agreements to dispose of
most of its commercial pulp business. Although the pulp business has
been profitable, Company strategy no longer recognizes an advantage to
vertical integration of the pulp supply for its consumer paper brands.
These assets have been sold to focus efforts on and to fund the growth
of the Company's consumer businesses. The sales, which include pulp
plants and timberlands, are expected to bring a total price of $1.2
billion, including $.7 billion received in 1993. The impact on 1993
earnings was not material, and the impact from the remaining sales is
not expected to be material.
FINANCIAL CONDITION
JUNE 30, 1994
The Company's balance sheet remains strong. Cash and cash equivalents
totaled $2,373 million, an increase of $51 million from the previous
year. Cash flow from operating activities reached a record $3,649
million up $311 million over the previous year, despite the negative
cash impact of executing the projects contained in the 1993
restructuring reserves. Charges in 1994 to the restructuring reserve
established in June 1993 totaled $600 million of which $360 million
impacted cash primarily due to separation costs. Increased earnings
and continuing reductions in working capital were key factors in
offsetting these charges.
Total debt excluding exchange effects decreased $664 million from
the previous year-end, reflecting reductions in both short term and
long term debt.
Accrued environmental liabilities for on-site remediation and
certain settlement costs at June 30, 1994 and 1993 amounted to $127
million and $133 million respectively. At both year-
35
<PAGE>
The Procter & Gamble Company and Subsidiaries
FINANCIAL CONDITION (continued)
ends, the majority of these liabilities were anticipated exit costs
accrued in the 1993 restructuring reserve and related to the closing
of manufacturing facilities. In addition, the Company is involved in
clean-up efforts at off-site Superfund locations, many of which are
still in the preliminary stages of investigation. The related off-site
liabilities for these efforts at June 30, 1994 and 1993 were $8
million and $9 million respectively, with a high end of the range at
June 30, 1994 of $12 million. Remediation and settlement expenses at
all sites were not material during the past fiscal year.
Regarding investing activities, capital expenditures were
approximately the same level for each of the past three years and were
$1.8 billion and $1.9 billion for 1994 and 1993 respectively. A
similar level of capital expenditures is anticipated in the coming
year.
Dividends of $1.24 per common share were paid during the past year,
up from $1.10 and $1.025 per share in the previous two years. In July
1994, the Company announced a 13% increase in the annual rate from
$1.24 to $1.40 per common share, effective with the quarterly dividend
paid in mid-August to shareholders of record on July 22, 1994. This
marks the 39th consecutive fiscal year of increased common share
dividend payments.
The effects of inflation have not been a significant factor on
earnings growth in recent years.
In July 1994, the Company completed the acquisition of the European
tissue business of Vereinigte Papierwerke Schickedanz AG which is
primarily centered in Germany. This includes Tempo, the leading
European paper handkerchief brand and Bess, the leading bath tissue
brand in Germany. Also in July 1994, the Company announced the planned
acquisition of the Giorgio Beverly Hills Inc. prestige fragrance
business from Avon Products, Inc. This included the Giorgio, Red and
Wings fragrances for men and women. Both of these acquisitions, with a
purchase price totaling about $600 million, are being financed
primarily from available cash funds. Also, in July 1994 the Company
sold its timberland properties and thereby completed the divestiture
of the commercial pulp business. As previously indicated, this
divestiture did not have a material impact on earnings.
JUNE 30, 1993
Cash and cash equivalents were $2,322 million, an increase of $546
million over the previous year-end. In addition, marketable securities
of $306 million were added to the short-term investment portfolio
during the year and carried on the balance sheet as a current asset.
Cash flow from operating activities amounted to $3,338 million, up
$313 million from the previous year. Reductions in working capital
accounted for $143 million of this increase, and included a $97
million reduction in inventories.
The increase of $611 million in other assets on the balance sheet
was due to increases in joint venture investments and increased
receivables from asset sales.
In fiscal 1993, the Company established restructuring reserves of
$2.7 billion, including $2.4 billion for manufacturing consolidations
and other organizational restructuring. Of the latter amount, $1.2
billion related to non-cash charges, primarily the carrying value of
anticipated disposals of fixed assets from manufacturing plant
closings. The remaining $1.2 billion is anticipated cash outlays,
primarily employee separations and costs related to separation
partially offset by cash anticipated from asset disposals. These
outlays will continue over the next several years and are expected to
be funded from cash generated from operations.
<PAGE>
The Procter & Gamble Company
SHAREHOLDER INFORMATION
<TABLE>
COMMON STOCK PRICE RANGE AND DIVIDENDS
<CAPTION>
Price Range Dividends
_____________________________________________ __________________
1993-94 1992-93 1993-94 1992-93
_____________________________________________ __________________
Quarter Ended High Low High Low
_____________________________________________ __________________
<S> <C> <C> <C> <C> <C> <C>
September 30 $53.63 $45.25 $51.50 $45.88 $.310 $.275
December 31 58.88 46.88 55.75 47.50 .310 .275
March 31 60.00 51.25 54.38 49.00 .310 .275
June 30 58.63 51.75 52.38 45.25 .310 .275
____________________________________________________________________
</TABLE>
SHAREHOLDER RECORDS
Shareholder records are maintained by the Company. Questions
concerning shareholder accounts, stock transfer or name changes should
be directed to the Shareholder Services Department address shown at
right or by calling 1-800-742-6253.
Stock certificates are valuable and should be safeguarded since
replacement takes time and requires a service charge to the
shareholder. If a stock certificate is lost, stolen or destroyed,
notify the Shareholder Services Department promptly.
Please also notify Shareholder Services in writing of any address
change. This will help prevent returned dividend checks and other
financial mailings.
DUPLICATE MAILINGS
Financial reports must be mailed for each separate account unless you
instruct us otherwise. If you wish to help us reduce costs by
discontinuing multiple mailings to your address, please contact
Shareholder Services.
DIVIDEND REINVESTMENT
A Dividend Reinvestment Plan is available to shareholders of record.
If interested, contact the Shareholder Services Department.
SHAREHOLDERS' MEETING
The next annual meeting of the shareholders will be held on Tuesday,
October 11, 1994, at the Company's General Offices, Two Procter &
Gamble Plaza, Cincinnati, OH 45202.
TRANSFER AGENT
The Procter & Gamble Company
Shareholder Services Department
P.O. Box 599
Cincinnati, Ohio 45201-0599
REGISTRAR
PNC Bank, Ohio, N.A.
P.O. Box 1198
Cincinnati, Ohio 45201-1198
EXCHANGE LISTING
New York, Cincinnati, Amsterdam, Paris, Basle, Geneva, Lausanne,
Zurich, Frankfurt, Antwerp, Brussels, Tokyo.
SHAREHOLDERS OF COMMON STOCK
There were 198,078 Common Stock shareholders of record, including
participants in the Dividend Reinvestment Plan and the Stock
Investment Program, as of July 22, 1994.
FORM 10-K
Beginning in October 1994, shareholders may obtain a copy of the
Company's 1994 report to the Securities and Exchange Commission on
Form 10-K by sending a request to Mr. Robert J. Thompson, Manager,
Shareholder Services, at the above Shareholder Services address.
COMPANY INFORMATION
Copies of P&G's global Environmental Report, corporate contributions
and diversity program reports, corporate brochure and fact sheets are
available by writing to the Shareholder Services address above.
This report printed on recycled paper made from 50% recycled fiber
including 10% post-consumer waste.
<PAGE>
EXHIBIT (21)
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
================================
Subsidiaries
---------------
Organized Under
the Laws of
--------------------
The Procter & Gamble Manufacturing Company Ohio
The Procter & Gamble Distributing Company Ohio
The Procter & Gamble Paper Products Company Ohio
The Folger Coffee Company Ohio
Procter & Gamble Far East, Inc. Ohio
Richardson-Vicks Inc. Delaware
Procter & Gamble Benelux Belgium
Procter & Gamble Inc. Canada
Procter & Gamble France France
Procter & Gamble GmbH Germany
Procter & Gamble Italia, S.p.A. Italy
Procter & Gamble de Mexico, S.A. de C.V. Mexico
Procter & Gamble Philippines, Inc. Philippines
Procter & Gamble A.G. Switzerland
Procter & Gamble Limited United Kingdom
Procter & Gamble de Venezuela, C.A. Venezuela
In addition to the subsidiaries listed above there are other subsidiary
companies and 50% owned affiliates which if considered in the aggregate,
would not constitute a significant subsidiary.
<PAGE>
Exhibit (23)
----------------
Consent of Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
250 East Fifth Street
Post Office Box 5340
Cincinnati, Ohio 45201-5340
Telephone: (513) 784-7100
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- - ---------------------------------------------------
We consent to the incorporation by reference in the following documents of
our reports dated August 10, 1994 (expressing an unqualified opinion and
including an explanatory paragraph regarding the changes in accounting for
other post retirement benefits and income taxes effective July 1, 1992),
appearing in and incorporated by reference in this Annual Report on Form
10-K of The Procter & Gamble Company for the year ended June 30, 1994.
1. Amendment No. 2, Post-Effective Amendment No. 2 to Registration
Statement No. 33-26514 on Form S-8 for The Procter & Gamble 1983 Stock
Plan;
2. Amendment No. 1 on Form S-8 to Registration Statement No. 33-31855 on
Form S-4 (now S-8) for the 1982 Noxell Employees' Stock Option Plan and
the 1984 Noxell Employees' Stock Option Plan;
3. Amendment No. 1, Post-Effective Amendment No. 1 to Registration
Statement No. 33-32111 on Form S-3 for The Procter & Gamble Stock
Investment Program;
4. Amendment No. 1, Post-Effective Amendment No. 1 to Registration
Statement No. 33-48835 for The Procter & Gamble Company Debt Securities
and Warrants;
5. Amendment No. 1, Post-Effective Amendment No. 1 to Registration
Statement No. 33-49289 on Form S-8 for The Procter & Gamble 1992 Stock
Plan;
6. Registration Statement No. 33-47656 on Form S-8 for The Procter & Gamble
International Stock
Ownership Plan;
7. Registration Statement No. 33-49081 on Form S-8 for The Procter & Gamble
Profit Sharing Trust and Employee Stock Ownership Plan;
8. Registration Statement No. 33-49111 on Form S-3 for The Procter & Gamble
Stock Investment Program;
9. Registration Statement No. 33-50273 on Form S-8 for The Procter & Gamble
Commercial Company Employees' Savings Plan; and
10. Registration Statement No. 33-51469 on Form S-8 for The Procter & Gamble
1993 non-employee Directors' Stock Plan.
DELOITTE & TOUCHE LLP
September 14, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000080424
<NAME> THE PROCTER & GAMBLE COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-01-1993
<PERIOD-END> JUN-30-1994
<EXCHANGE-RATE> 1
<CASH> 2,373
<SECURITIES> 283
<RECEIVABLES> 3,115
<ALLOWANCES> 0
<INVENTORY> 2,877
<CURRENT-ASSETS> 9,988
<PP&E> 15,896
<DEPRECIATION> 5,872
<TOTAL-ASSETS> 25,535
<CURRENT-LIABILITIES> 8,040
<BONDS> 4,980
<COMMON> 684
1,942
0
<OTHER-SE> 6,206
<TOTAL-LIABILITY-AND-EQUITY> 25,535
<SALES> 30,296
<TOTAL-REVENUES> 30,296
<CGS> 17,355
<TOTAL-COSTS> 9,361
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 482
<INCOME-PRETAX> 3,346
<INCOME-TAX> 1,135
<INCOME-CONTINUING> 2,211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,211
<EPS-PRIMARY> 3.09
<EPS-DILUTED> 2.91
</TABLE>
<PAGE>
Exhibit (99-1)
--------------
Directors and Officers Liability Policy
<PAGE>
DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICY
Issued By
CODA
CORPORATE OFFICERS & DIRECTORS ASSURANCE LTD.
In Hamilton, Bermuda
THIS IS A CLAIMS FIRST MADE POLICY. DEFENSE AND OTHER COSTS
ARE INCLUDED IN THE LIMIT OF LIABILITY.
THIS IS A THREE-YEAR POLICY WITH AN AUTOMATIC
EXTENSION PROVISION.
PLEASE READ THIS POLICY CAREFULLY.
Words and phrases that appear below in all capital letters have
the special meanings set forth in Clause 2 (Definitions).
DECLARATIONS
Policy No. PG-106C
Item I COMPANY: The Procter & Gamble Company
The Procter & Gamble Fund
Principal Address: One Procter & Gamble Plaza
Cincinnati, OH 45202
Item II POLICY PERIOD: From Mar 15, 1987 to June 30, 1996
12:01 a.m. Standard Time at the
address of the Company stated above.
Item III LIMIT OF LIABILITY:
$25,000,000 Aggregate LIMIT OF LIABILITY for all
LOSS paid on behalf of all INSUREDS
arising from all CLAIMS first made
during each POLICY YEAR.
Item IV PREMIUM:
At inception of first POLICY YEAR: 850,000
(prepaid total for three years)
6/30/93-94 Year - $325,000
6/30/94-95 Year - $340,000
6/30/95-96 Year - $345,000
At each anniversary thereafter: Subject to adjustment on
each anniversary date in
accordance with Clause 7
(Automatic Extension) of
this POLICY.
CODA 01
ED 05/92
<PAGE>
Item V Any notice to the COMPANY or, except in accordance with
Clause 17 (Representation) of this POLICY, to the
INSUREDS, shall be given or made to the individual listed
below, if any, or otherwise to the individual designated
in the APPLICATION, if any, or otherwise to the signer of
the APPLICATION, and shall be given or made in accordance
with Clause 16 (Notice) of this POLICY.
__________________________________________________________
__________________________________________________________
__________________________________________________________
Item VI Any notice to be given or payment to be made to the
INSURER under this POLICY shall be given or made to
Corporate Officers & Directors Assurance Ltd., The ACE
Building, 30 Woodbourne Avenue, Hamilton HM 08, Bermuda,
Fax 809-295-5221, Telex 3543 ACEILBA, and shall be given
or made in accordance with Clause 16 (Notice) of this
POLICY.
This POLICY shall constitute the entire contract between the INSUREDS, the
COMPANY, and the INSURER.
Endorsements 1 to 7 are made part of this POLICY at POLICY issuance.
Countersigned at Hamilton, Bermuda
on August 16, 1993
by /s/CHARLES D. SMITH
Signature of Authorized Representative
ii
<PAGE>
TABLE OF CONTENTS
Clause Page
1. Insuring Clause. . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Appeals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6. Assistance and Cooperation . . . . . . . . . . . . . . . . . . . 5
7. Automatic Extension. . . . . . . . . . . . . . . . . . . . . . . 5
8. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9. Changes and Assignments. . . . . . . . . . . . . . . . . . . . . 7
10. Payment of LOSS. . . . . . . . . . . . . . . . . . . . . . . . . 7
11. Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
12. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
13. INSUREDS' Reporting Duties . . . . . . . . . . . . . . . . . . . 7
14. LOSS Provisions. . . . . . . . . . . . . . . . . . . . . . . . . 7
15. Other Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 8
16. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
17. Representation . . . . . . . . . . . . . . . . . . . . . . . . . 8
18. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 8
19. Special POLICY Revisions . . . . . . . . . . . . . . . . . . . . 8
20. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
21. Acquisition, Creation or Disposition of a Subsidiary . . . . . . 9
iii
<PAGE>
DIRECTORS AND OFFICERS LIABILITY INSURANCE
In consideration of the payment of the premium and in reliance on all
statements made and information furnished by the COMPANY to the INSURER in
the APPLICATION, which is hereby made a part hereof, and subject to the
foregoing Declarations and to all other terms of this POLICY, the COMPANY,
the INSUREDS, and the INSURER agree as follows:
1. INSURING CLAUSE
The INSURER shall pay on behalf of the INSUREDS or any of them, any
and all LOSS that the INSUREDS shall become legally obligated to pay
by reason of any CLAIM or CLAIMS first made against the INSUREDS or
any of them during the POLICY PERIOD, for any WRONGFUL ACTS that are
actually or allegedly caused, committed, or attempted prior to the end
of the POLICY PERIOD by the INSUREDS, not exceeding the LIMIT OF
LIABILITY.
2. DEFINITIONS
(a) "APPLICATION" shall mean the signed, written application for this
POLICY, the schedules thereto and all supplementary information
submitted in connection therewith, and all underwriting data
submitted in connection with the automatic extension of this
POLICY, all of which materials shall be deemed attached hereto,
as if physically attached hereto, and incorporated herein.
(b) "CLAIM" shall mean:
(1) any demand or any judicial or administrative suit or
proceeding against any INSURED which seeks monetary,
equitable or other relief, including any appeal therefrom;
or
(2) written notice to the INSURER by the INSUREDS and/or the
COMPANY during the POLICY PERIOD describing circumstances
that are likely to give rise to a CLAIM being made against
the INSUREDS.
Multiple demands, suits or proceedings arising out of the
same WRONGFUL ACT shall be deemed to be a single CLAIM,
which shall be treated as a CLAIM first made during the
POLICY YEAR in which the first of such multiple demands,
suits or proceedings is made against any INSURED or in which
notice of circumstances relating thereto is first given in
accordance with subpart (b) of Clause 14 (LOSS Provisions)
below, whichever occurs first.
(c) "COMPANY" shall mean the company shown in Item I of the
Declarations, any company that was a predecessor company to the
company shown in Item I of the Declarations, any SUBSIDIARY of
either such company and, if covered in accordance with subpart
(a) of Clause 21 (Acquisition, Creation or Disposition of a
Subsidiary) below, any other subsidiary.
(d) "INSUREDS" shall mean one or more of the following:
(1) all persons who were, now are, or shall be duly elected or
appointed directors or officers of the COMPANY; or
(2) the estates, heirs, legal representatives or assigns of
deceased INSUREDS and the legal representatives or assigns
of INSUREDS in the event of their incompetency, insolvency
or bankruptcy.
(e) "INSURER" shall mean Corporate Officers & Directors Assurance,
Ltd., Hamilton, Bermuda.
(f) "LIMIT OF LIABILITY" shall mean the amount described in Item III
of the Declarations. Regardless of the time of payment of LOSS
by the INSURER, the LIMIT OF LIABILITY as stated in Item III of
the Declarations shall be the maximum liability of the INSURER
for all LOSS arising from all CLAIMS first made during each
POLICY YEAR. Reasonable and necessary attorneys fees incurred in
investigating and defending a CLAIM shall be part of and not in
addition to the
1
<PAGE>
LIMIT OF LIABILITY as stated in Item III of the Declarations, and
payment by the INSURER of such attorneys fees shall reduce the
LIMIT OF LIABILITY.
(g) "LOSS" shall mean any and all amounts that the INSUREDS are
legally obligated to pay by reason of a CLAIM made against the
INSUREDS for any WRONGFUL ACT, and shall include but not be
limited to compensatory, exemplary, punitive and multiple
damages, judgments, settlements and reasonable and necessary
costs of investigation and defense of CLAIMS and appeals
therefrom (including but not limited to attorneys fees but
excluding all salaries and office expenses of the COMPANY,
amounts paid to counsel as general retainer fees, and all other
expenses that cannot be directly allocated to a specific (CLAIM)
and cost of attachment or similar bonds, providing always,
however, LOSS shall not include taxes, fines or penalties imposed
by law, or matters that may be deemed uninsurable under the law
pursuant to which this POLICY shall be construed. ("Fines or
penalties" do not include punitive, exemplary, or multiple
damages).
(h) "POLICY" shall mean this insurance policy, including the
APPLICATION, the Declarations, and any endorsements hereto issued
by the INSURER.
(i) "POLICY PERIOD" shall mean the period of time stated in Item II
of the Declarations, as may be automatically extended in
accordance with Clause 7 (Automatic Extension) below. If this
POLICY is cancelled in accordance with subpart (c) or (d) of
Clause 8 (Cancellation) below, the POLICY PERIOD shall end upon
the effective date of such cancellation.
(j) "POLICY YEAR" shall mean a period of one year, within the POLICY
PERIOD, commencing each year on the day and hour first named in
Item II of the Declarations, or if the time between the inception
date, or any anniversary date and the termination date of this
POLICY is less than one year, then such lesser period.
(k) "SUBSIDIARY" shall mean any corporation in which more than 50% of
the outstanding securities representing the present right to vote
for election of directors is owned, directly or indirectly, in
any combination, by the COMPANY and/or by one or more of its
SUBSIDIARIES, at the starting date of the POLICY PERIOD.
(l) "WRONGFUL ACT" shall mean any actual or alleged error,
misstatement, misleading statement or act, omission, neglect, or
breach of duty by the INSUREDS while acting in their individual
or collective capacities as directors or officers of the COMPANY,
or any other matter claimed against them by reason of their being
directors or officers of the COMPANY.
All such errors, misstatements, misleading statements or acts,
omissions, neglects, or breaches of duty actually or allegedly
caused, committed, or attempted by or claimed against one or more
of the INSUREDS arising out of or relating to the same or series
of related facts, circumstances, situations, transactions or
events shall be deemed to be a single WRONGFUL ACT.
3. EXCLUSIONS
The INSURER shall not be liable to make any payment for LOSS in
connection with that portion of any CLAIM made against the INSUREDS:
(a) for which the COMPANY actually pays or indemnifies or is required
or permitted to pay on behalf of or to indemnify the INSUREDS
pursuant to the charter or other similar formative document or
by-laws or written agreements of the COMPANY duly effective under
applicable law, that determines and defines such rights of
indemnity; provided, however, this exclusion shall not apply if:
(1) the COMPANY refuses to indemnify or advance defense or other
costs as required or permitted, or if the COMPANY is
financially unable to indemnify; and
(2) the INSUREDS comply with Clause 20 (Subrogation) below;
2
<PAGE>
(b) based upon or attributable to the INSUREDS having gained any
personal profit to which they were not legally entitled if a
judgment or other final adjudication adverse to the insureds or
any arbitration proceeding pursuant to Clause 5 (Arbitration)
below establishes that the INSUREDS in fact gained any such
personal profit;
(c) for the return by the INSUREDS of any improper or illegal
remuneration paid in fact to the INSUREDS if it shall be
determined by a judgment or other final adjudication adverse to
the INSUREDS that such remuneration is improper or illegal or if
such remuneration is to be repaid to the COMPANY under a
settlement agreement;
(d) for an accounting of profits in fact made from the purchase or
sale by the INSUREDS of securities of the COMPANY within the
meaning of Section 16(b) of the Securities Exchange Act of 1934
and amendments thereto or similar provisions of any state
statutory law or common law;
(e) brought about or contributed to by the dishonesty of the INSUREDS
if a judgment or other final adjudication adverse to the INSUREDS
or any arbitration proceeding pursuant to Clause 5 (Arbitration)
below establishes that acts of active and deliberate dishonesty
committed by the INSUREDS with actual dishonest purpose and
intent were material to the CLAIM;
(f) which is insured by any other existing valid policy or policies
under which payment of the LOSS is actually made except in
respect of any excess beyond the amounts of payments under such
other policy or policies;
(g) for which the INSUREDS are indemnified by reason of having given
notice of a CLAIM or of any circumstance which might give rise to
a CLAIM under any policy or policies of which this POLICY is a
renewal or replacement or which it may succeed in time;
(h) for personal injury, advertising injury, bodily injury, sickness,
disease, or death of any person, or for damage to or destruction
of any tangible property, including the loss of use thereof;
however, this exclusion shall not apply to any derivative action
brought against any INSURED;
(i) by, on behalf of, at the behest of, or in the right of the
COMPANY, if initiated by the management of the COMPANY; however,
this exclusion shall not apply if, between the starting date of
the POLICY PERIOD and the date of the CLAIM, the COMPANY shall
have undergone any of the events listed in subpart (a) or (b) of
Clause 8 (Cancellation) below, and the CLAIM is initiated by the
management of the COMPANY after the date of such event; or
(j) for any actual or alleged error, misstatement, misleading
statement or act, omission, neglect or breach of duty by the
INSUREDS while acting in their capacities as directors, officers,
trustees, governors, partners, employees or agents of any entity
other than the COMPANY or by reason of their being directors,
officers, trustees, governors, partners, employees or agents of
such other entity.
It is agreed that any fact pertaining to any INSURED shall not be imputed
to any other INSURED for the purpose of determining the application of the
Exclusions.
4. APPEALS
In the event the INSUREDS elect not to appeal a judgment, the INSURER
may elect to make such appeal at its own expense, and shall be liable
for any increased award, taxable costs and disbursements and any
additional interest incidental to such appeal, to the extent such
payments are not covered by other valid and collectible insurance.
5. ARBITRATION
(a) Any dispute arising in connection with this POLICY shall be fully
determined in Bermuda under the provisions of the Bermuda
Arbitration Act of 1986, as amended and supplemented, by a Board
of Arbitration composed of three arbitrators who shall all be
disinterested, active or retired
3
<PAGE>
business executives having knowledge relevant to the matters in
dispute, and who shall be selected for each controversy as
follows:
Either party to the dispute may, once a CLAIM or demand on his
part has been denied or remains unsatisfied for a period of
twenty (20) calendar days by the other party, notify the other of
its desire to arbitrate the matter in dispute and at the time of
such notification the party desiring arbitration shall notify the
other party of the name of the arbitrator selected by it. The
other party who has been so notified shall within ten (10)
calendar days thereafter select an arbitrator and notify the
party desiring arbitration of the name of such second arbitrator.
If the party notified of a desire for arbitration shall fail or
refuse to nominate the second arbitrator within ten (10) calendar
days following the receipt of such notification, the party who
first served notice of a desire to arbitrate will, within an
additional period of ten (10) calendar days, apply to the Supreme
Court of Bermuda for the appointment of a second arbitrator and
in such a case the arbitrator appointed by such a judge shall be
deemed to have been nominated by the party who failed to select
the second arbitrator. The two arbitrators, chosen as above
provided, shall within ten (10) calendar days after the
appointment of the second arbitrator choose a third arbitrator.
In the event of the failure of the first two arbitrators to agree
on a third arbitrator within the said ten (10) calendar day
period, either of the parties may within a period of ten (10)
calendar days thereafter, after notice to the other party, apply
to the Supreme Court of Bermuda for the appointment of a third
arbitrator and in such case the person so appointed shall be
deemed and shall act as a third arbitrator. Upon acceptance of
the appointment by said third arbitrator, the Board of
Arbitration for the controversy in question shall be deemed
fixed.
(b) The Board of Arbitration shall fix, by a notice in writing to the
parties involved, a reasonable time and place for the hearing and
may prescribe reasonable rules and regulations governing the
course and conduct of the arbitration proceeding, including
without limitation discovery by the parties.
(c) This POLICY shall be governed by and construed and enforced in
accordance with the internal laws of Bermuda, except insofar as
such laws may prohibit payment in respect of punitive damages
hereunder; provided, however, that the provisions, stipulations,
exclusions and conditions of this POLICY are to be construed in
an evenhanded fashion as between the parties; without limitation,
where the language of this POLICY is deemed to be ambiguous or
otherwise unclear, the issue shall be resolved in the manner most
consistent with the relevant provisions stipulations, exclusions
and conditions (without regard to authorship of the language,
without any presumption or arbitrary interpretation or
construction in favor of either the INSUREDS or the INSURER) and
in accordance with the intent of the parties.
(d) The Board of Arbitration shall, within ninety (90) calendar days
following the conclusion of the hearing, render its decision on
the matter or matters in controversy in writing and shall cause a
copy thereof to be served on all the parties thereto. In case
the Board of Arbitration fails to reach a unanimous decision, the
decision of the majority of the members of said Board shall be
deemed to be the decision of the Board.
(e) Each party shall bear the expense of its own arbitrator. The
remaining costs of the arbitration shall be borne equally by the
parties to such arbitration.
(f) All decisions and awards by the Board of Arbitration shall be
final and binding upon the parties. The parties hereby agree to
exclude any right of appeal under Section 29 of the Bermuda
Arbitration Act of 1986 against any award rendered by the Board
of Arbitration and further agree to exclude any application under
Section 30(1) of the Bermuda Arbitration Act of 1986 for a
determination of any question of law by the Supreme Court of
Bermuda.
(g) All awards made by the Board of Arbitration may be enforced in
the same manner as a judgment or order from the Supreme Court of
Bermuda and judgment may be entered pursuant to the terms of the
award by leave from the Supreme Court of Bermuda.
(h) The INSURER and the INSUREDS agree that in the event that claims
for indemnity or
4
<PAGE>
contribution are asserted in any action or proceeding against the
INSURER by any of the INSUREDS' other insurers in any
jurisdiction or forum other than that set forth in this Clause 5,
the INSUREDS will in good faith take all reasonable steps
requested by the INSURER to assist the INSURER in obtaining a
dismissal of these claims (other than on the merits) and will,
without limitation, undertake to the court or other tribunal to
reduce any judgment or award against such other insurers to the
extent that the court or tribunal determines that the INSURER
would have been liable to such insurers for indemnity or
contribution pursuant to this POLICY. The INSUREDS shall be
entitled to assert claims against the INSURER for coverage under
this POLICY, including, without limitation, for amounts by which
the INSUREDS reduced its judgment against such other insurers in
respect of such claims for indemnity or contribution, in an
arbitration between the INSURER and the INSUREDS pursuant to this
Clause 5; provided, however, that the INSURER in such arbitration
in respect of such reduction of any judgment shall be entitled to
raise any defenses under this POLICY and any other defenses
(other than jurisdictional defenses) as it would have been
entitled to raise in the action or proceeding with such insurers.
6. ASSISTANCE AND COOPERATION
The INSURER has no duty to defend any CLAIM and shall not be called
upon to assume charge of the investigation, settlement or defense of
any CLAIM, but the INSURER shall have the right and shall be given the
opportunity to associate with the INSUREDS and the COMPANY in the
investigation, settlement, defense and control of any CLAIM relative
to any WRONGFUL ACT where the CLAIM is or may be covered in whole or
in part by this POLICY. At all times, the INSUREDS and the COMPANY
and the INSURER shall cooperate in the investigation, settlement and
defense of such CLAIM. The failure of the COMPANY to assist and
cooperate with the INSURER shall not impair the rights of the INSUREDS
under this POLICY. The INSUREDS shall not settle or admit any
liability with respect to any CLAIM which involves or appears
reasonably likely to involve this POLICY without the INSURER'S
consent, which shall not be unreasonably withheld.
7. AUTOMATIC EXTENSION
Except in the event this POLICY is cancelled in whole or in part in
accordance with Clause 8 (Cancellation) below, on each anniversary of
this POLICY, upon submission of the extension application and payment
of the charged premium, this POLICY shall automatically be continued
to a date one year beyond its previously stated expiration date,
unless written notice is given by the INSURER to the COMPANY, or by
the COMPANY to the INSURER, that such POLICY extension is not desired.
Such written notice may be given at any time prior to the anniversary
of the POLICY, except that such notice by the INSURER to the COMPANY
may be given only during the period commencing ninety (90) days and
ending ten (10) days prior to such anniversary, in which case the
POLICY shall automatically expire two years from such anniversary
date.
Such written notice shall be given by the INSURER to the COMPANY only
if it is determined to be appropriate by an affirmative vote of 2/3 of
the INSURER'S entire Executive Committee at a meeting of said
Committee prior to mailing of such notice. Any non-extension by the
INSURER shall be revoked as of the next meeting of the INSURER'S Board
of Directors if the Board at such meeting so determines by an
affirmative vote of a majority of the entire Board. If any such non-
extension is so revoked or if during the remainder of the POLICY
PERIOD the INSURER agrees to extend coverage, this POLICY shall be
continued or such agreed coverage may be extended, respectively, to
the expiration date which would otherwise be applicable if such notice
of non-extension had not been given, provided the COMPANY submits the
extension application and pays the charged premium.
If the COMPANY or the INSURER gives written notice that the POLICY
extension is not desired, the COMPANY shall pay on or before each of
the two remaining anniversary dates the charged premium for the next
succeeding POLICY YEAR respectively less a premium credit equal to the
premium paid at inception of the POLICY for Year 2 and Year 3 of the
POLICY, respectively. If any such premium credit exceeds the charged
premium, the INSURER shall refund to the COMPANY the difference within
ten days following such anniversary date.
5
<PAGE>
The premium charged on each anniversary of this POLICY shall be
determined by the rating plan and by-laws of the INSURER in force at
such anniversary date.
8. CANCELLATION
This POLICY shall not be subject to cancellation except as follows:
(a) In the event during the POLICY PERIOD:
(1) the company named in Item I of the Declarations shall merge
into or consolidate with another organization in which the
company named in Item I of the Declarations is not the
surviving entity, or
(2) any person or entity or group of persons and/or entities
acting in concert shall acquire securities or voting rights
which results in ownership or voting control by such person
or entity or group of persons or entities of more than 50%
of the outstanding securities representing the present right
to vote for election of directors of the company named in
Item I of the Declarations,
this POLICY shall not apply to any WRONGFUL ACTS actually or
allegedly taking place after the effective date of said merger,
consolidation or acquisition; however, this POLICY shall remain
in force for the remainder of the POLICY PERIOD as to CLAIMS
based upon WRONGFUL ACTS alleged to have been committed prior to
such date. All premiums paid or due at the time of said merger,
consolidation or acquisition shall be fully earned and in no
respect refundable.
(b) In the event of the appointment by any state or federal official,
agency or court of any receiver, conservator, liquidator,
trustee, rehabilitator or similar official to take control of,
supervise, manage or liquidate any entity included within the
definition of the COMPANY, or in the event such entity becomes a
debtor in possession, this POLICY shall not apply to any WRONGFUL
ACTS by the directors and officers of such entity actually or
allegedly taking place after the date of such event. This POLICY
shall remain in force for the remainder of the POLICY PERIOD from
said date as to CLAIMS for (i) WRONGFUL ACTS by any other
INSUREDS, and (ii) WRONGFUL ACTS by the directors and officers of
such entity alleged to have been committed prior to the date of
such event. All premiums paid or due at the time of such event
shall be fully earned, and in no respect refundable. With
respect to CLAIMS first made after the date of such event for
WRONGFUL ACTS by the directors and officers of such entity, (i)
the LIMIT OF LIABILITY of this POLICY for the remainder of the
POLICY PERIOD shall be a continuation of the same limit, and not
a separate limit, as was in effect during the POLICY YEAR in
which such event occurred; and (ii) such CLAIMS shall be deemed
to have been first made during the POLICY YEAR in which such
event occurred for purposes of the LIMIT OF LIABILITY.
(c) This POLICY may be cancelled by mutual agreement and consent of
the INSURER, the COMPANY, and the INSUREDS, upon such terms and
conditions as respects return premium and/or future premium
adjustments and/or loss adjustments as the parties may agree upon
at the time of said cancellation.
(d) This POLICY may be cancelled by the INSURER upon granting of 365
days written notice, providing such cancellation is determined to
be appropriate by an affirmative vote of 3/4 of the INSURER'S
entire Board at a meeting of said Board prior to mailing of said
notice. Payment or tender of any unearned premium by the INSURER
shall not be a condition precedent to the effectiveness of
cancellation, but return of the pro rata unearned premium shall
be made as soon as practicable.
(e) In the event the charged premium for any POLICY YEAR is not paid
as provided in Clause 7 (Automatic Extension), above, this POLICY
shall not apply to any WRONGFUL ACTS actually or allegedly taking
place after the anniversary date on which the additional premium
was due; however, this POLICY shall remain in force for the
remainder of the POLICY PERIOD as to CLAIMS first made during the
POLICY PERIOD for WRONGFUL ACTS actually or allegedly
6
<PAGE>
caused, committed or attempted prior to such anniversary date.
With respect to all CLAIMS first made after such anniversary
date, one LIMIT OF LIABILITY shall apply for the remainder of the
POLICY PERIOD. Such LIMIT OF LIABILITY shall be separate from
the LIMIT OF LIABILITY provided during the POLICY YEAR
immediately preceding such anniversary date. All premiums paid
as of such anniversary date shall be fully earned and in no
respect refundable.
9. CHANGES AND ASSIGNMENTS
The terms and conditions of this POLICY shall not be waived or
changed, nor shall an assignment of interest under this POLICY be
binding, except by an endorsement to this POLICY issued by the
INSURER.
10. PAYMENT OF LOSS
Except in those instances when the INSURER has denied liability for
the CLAIM because of the application of one or more exclusions, or
other coverage issues, if the COMPANY refuses or is financially unable
to advance LOSS costs, the INSURER shall, upon request and if proper
documentation accompanies the request, advance on behalf of the
INSUREDS, or any of them, LOSS costs that they have incurred in
connection with a CLAIM, prior to disposition of such CLAIM. In the
event that the INSURER so advances LOSS costs and it is finally
established that the INSURER has no liability hereunder, such INSUREDS
on whose behalf advances have been made and the COMPANY, to the full
extent legally permitted, agree to repay to the INSURER, upon demand,
all monies advanced.
11. CURRENCY
All premium, limits, retentions, LOSS and other amounts under this
POLICY are expressed and payable in the currency of the United States
of America.
12. HEADINGS
The descriptions in the headings and sub-headings of this POLICY are
inserted solely for convenience and do not constitute any part of the
terms or conditions hereof.
13. INSUREDS' REPORTING DUTIES
The INSUREDS and/or the COMPANY shall give written notice to the
INSURER as soon as practicable of any:
(a) CLAIM described in subpart (b)(1) of Clause 2 (Definitions)
above, which notice shall include the nature of the WRONGFUL ACT,
the alleged injury, the names of the claimants, and the manner in
which the INSUREDS or COMPANY first became aware of the CLAIM; or
(b) event described in subpart (a) or (b) of Clause 8 (Cancellation)
above,
and shall cooperate with the INSURER and give such additional
information as the INSURER may reasonably require.
14. LOSS PROVISIONS
(a) The time when a CLAIM shall be made for purposes of determining
the application of Clause 1 (Insuring Clause) above shall be the
date on which the CLAIM is first made against the INSURED.
(b) If during the POLICY PERIOD, the INSUREDS or the COMPANY shall
become aware of any circumstances that are likely to give rise to
a CLAIM being made against the INSUREDS and shall give written
notice to the INSURER of the circumstances and the reasons for
anticipating a CLAIM, with particulars as to dates and persons
involved, then any CLAIM that is subsequently
7
<PAGE>
made against the INSUREDS arising out of such circumstances shall
be treated as a CLAIM made during the first POLICY YEAR in which
the INSUREDS or the COMPANY gave such notice.
(c) The COMPANY and the INSUREDS shall give the INSURER such
information and cooperation as it may reasonably require and as
shall be in the COMPANY'S and the INSUREDS' power.
15. OTHER INSURANCE
Subject to subparts (f) and (g) of Clause 3 (Exclusions) above, if
other valid and collectible insurance with any other insurer, whether
such insurance is issued before, concurrent with, or after inception
of this POLICY, is available to the INSUREDS covering a CLAIM also
covered by this POLICY, other than insurance that is issued
specifically as insurance in excess of the insurance afforded by this
POLICY, this POLICY shall be in excess of and shall not contribute
with such other insurance. Nothing herein shall be construed to make
this POLICY subject to the terms of other insurance.
16. NOTICE
All notices under any provision of this POLICY shall be in writing and
given by prepaid express courier or electronic service properly
addressed to the appropriate party at the respective addresses as
shown in Items V and VI of the Declarations. Notice so given shall be
deemed to be received and effective upon actual receipt thereof by the
party or one day following the date such notice is sent, whichever is
earlier.
17. REPRESENTATION
By acceptance of this POLICY, the company named in Item I of the
Declarations agrees to represent the INSUREDS with respect to all
matters under this POLICY, including, but not limited to, the giving
and receiving of notice of CLAIM or cancellation or desire not to
extend the POLICY, the payment of premiums, the receiving of LOSS
payments and any return premiums that may become due under this
POLICY, the requesting, receiving, and acceptance of any endorsement
to this POLICY, and the submission of a dispute to arbitration. The
INSUREDS agree that said company shall represent them but, for
purposes of the investigation, defense, settlement, or appeal of any
CLAIM, the INSUREDS who are named as defendants in the CLAIM may, upon
their unanimous agreement and upon notice to the INSURER, replace said
company with another agent to represent them with respect to the
CLAIM, including giving and receiving of notice of CLAIM and other
correspondence, the receiving of LOSS payments, and the submission of
a dispute to arbitration.
18. SEVERABILITY
(a) The APPLICATION for coverage shall be construed as a separate
APPLICATION for coverage by each INSURED. With respect to the
declarations and statements contained in such APPLICATION for
coverage, no statement in the APPLICATION or knowledge possessed
by any one INSURED shall be imputed to any other INSURED for the
purpose of determining the availability of coverage with respect
to CLAIMS made against any other INSURED.
The acts, omissions, knowledge, or warranties of any INSURED
shall not be imputed to any other INSURED with respect to the
coverages applicable under this POLICY.
(b) In the event that any provision of this POLICY shall be declared
or deemed to be invalid or unenforceable under any applicable
law, such invalidity or unenforceability shall not affect the
validity or enforceability of the remaining portion of this
POLICY.
19. SPECIAL POLICY REVISIONS
The INSURER may change this POLICY at any time by an affirmative vote
of a majority of the shareholders of the INSURER, in accordance with
the by-laws of the INSURER.
8
<PAGE>
20. SUBROGATION
In the event of any payment under this POLICY, the INSURER shall be
subrogated to the extent of such payment to all the INSUREDS' rights
of recovery, and the INSUREDS shall execute all papers reasonably
required and shall take all reasonable actions that may be necessary
to secure such rights including the execution of such documents
necessary to enable the INSURER effectively to bring suit in the name
of the INSUREDS, including but not limited to an action against the
COMPANY for nonpayment of indemnity due and owing to the INSUREDS by
the COMPANY.
21. ACQUISITION, CREATION OR DISPOSITION OF A SUBSIDIARY
(a) Coverage shall apply to the directors and officers of any
subsidiary corporation in which more than 50% of the outstanding
securities representing the present right to vote for election of
directors is owned, directly or indirectly, in any combination,
by the COMPANY and/or one or more of its SUBSIDIARIES, and which
is acquired or created after the inception of this POLICY, if
written notice is given to the INSURER within 30 days after the
acquisition or creation, and any additional premium required by
the INSURER is paid within thirty days of the request therefor by
the INSURER. The INSURER waives the obligation to provide notice
and to pay any additional premium if the assets of such newly
created or acquired company are not more than 10% of the total
assets of the COMPANY or $250,000,000, whichever is less. The
coverage provided for the directors and officers of such new
subsidiary shall be limited to CLAIMS for WRONGFUL ACTS actually
or allegedly taking place subsequent to the date of acquisition
or creation of the subsidiary.
(b) Coverage shall not apply to directors and officers of any
subsidiary, including a SUBSIDIARY as defined in Clause 2
(Definitions) above, for CLAIMS for WRONGFUL ACTS actually or
allegedly taking place subsequent to the date that the COMPANY
and/or one or more of its SUBSIDIARIES, directly or indirectly,
in any combination, ceases to own more than 50% of the
outstanding securities representing the present right to vote for
election of directors in such subsidiary.
IN WITNESS WHEREOF, the INSURER has caused this POLICY to be signed by its
President and Secretary and countersigned on the Declarations Page by a
duly authorized agent of the INSURER.
/s/C. GRANT HALL /s/D. E. SNYDER
Secretary President
9
<PAGE>
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 1 Effective Date of Endorsement June 30, 1993
Attached to and forming part of POLICY No. PG-106C
COMPANY The Procter & Gamble Company
The Procter & Gamble Fund
It is understood and agreed that this POLICY is hereby amended as indicated
below. All other terms of this POLICY remain unchanged.
REVISED THREE-YEAR POLICY FORM ENDORSEMENT
__________________________________________
(Replacement Policy Form)
It is understood and agreed that pursuant to Clause 19 "Special Policy
Revisions" and with the consent of the company named in Item I of the
Declarations, this POLICY is changed as of the effective date set forth
above by cancelling the POLICY form (including endorsements) in effect as
of the effective date of this Endorsement and reissuing the revised POLICY
form (including revised endorsement forms) to which this Endorsement is
attached.
Coverage under this POLICY for all CLAIMS first made against the
INSUREDS prior to the effective date of this Endorsement shall be governed
by such prior POLICY form (including endorsements thereto). Coverage under
this POLICY for all CLAIMS first made against the INSUREDS on or after the
effective date of this Endorsement shall be governed by the POLICY form
(including endorsements) to which this Endorsement is attached.
Except as may be agreed to by the INSURER in writing, such change in
POLICY form shall not change the inception date, anniversary date, LIMIT OF
LIABILITY, or POLICY YEAR of this POLICY. The maximum liability of the
INSURER for all LOSS arising from all CLAIMS first made during the POLICY
YEAR in which this Endorsement becomes effective shall be the amount
described in Item III of the Declarations.
_______________________________ /s/CHARLES D. SMITH
Signature of Authorized Signature of Authorized
Representative of COMPANY Representative of INSURER
<PAGE>
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 2 Effective Date of Endorsement March 15, 1990
Attached to and forming part of POLICY No. PG-106C
COMPANY The Procter & Gamble Company
The Procter & Gamble Fund
It is understood and agreed that this POLICY is hereby amended as indicated
below. All other terms of this POLICY remain unchanged.
OUTSIDE POSITIONS ENDORSEMENT:
SUBLIMIT, NON-SPECIFIC INDIVIDUALS
(A) Subject to the sublimit of liability set forth in (C) below, the
definition of "INSUREDS" is hereby extended to include:
(1) all persons who were, are, or shall be serving as directors,
officers, trustees, governors, partners or the equivalent thereof
for any corporation, partnership, joint venture, eleemosynary
institution, non-profit organization, industry association, or
foundation, (any such enterprises referred to below as "Entity"),
if:
(a) such activity is part of their duties regularly assigned by
the COMPANY, or
(b) they are a member of a class of persons so directed to serve
by the COMPANY.
(2) the estates, heirs, legal representatives or assigns of deceased
persons who were INSUREDS, as defined in subpart (A)(1) above,
and the legal representatives or assigns of INSUREDS in the event
of their incompetency, insolvency or bankruptcy.
(B) It is further understood and agreed that this extension of coverage:
(1) is to be excess of any other insurance and excess of any director
or officer liability insurance and/or company reimbursement
insurance any conditions in such other insurance notwithstanding;
(2) shall not apply to any LOSS for which such Entity or the COMPANY
actually pays or indemnifies or is required or permitted to pay
on behalf of or to indemnify the INSUREDS pursuant to the charter
or other similar formative document or by-laws or written
agreements of such Entity or the COMPANY duly effective under
applicable law, that determines and defines such rights of
indemnity; provided, however, this subpart (2) shall not apply
if:
(a) such Entity and the COMPANY refuse to indemnify or advance
defense or other costs as required or permitted, or if such
Entity and the COMPANY are financially unable to indemnify;
and
(b) the INSUREDS comply with Clause 20 (Subrogation) of the
POLICY;
(3) shall not apply to any LOSS in connection with any CLAIM made
against the INSUREDS in their capacity as directors or officers
of Corporate Officers & Directors Assurance Ltd. or Corporate
Officers & Directors Assurance Holding, Ltd.; and
END 06
ED 05 89
<PAGE>
(4) is not to be construed to extend to the Entity nor to any other
director, officer, trustee, governor, partner or employee of such
Entity.
(C) In lieu of the LIMIT OF LIABILITY stated in Item III of the
Declarations, the limit of liability of the INSURER for this extension
of coverage shall be $25,000,000 in the aggregate for all LOSS which
is covered by reason of this extension of coverage and which is paid
on behalf of all INSUREDS arising from all CLAIMS first made during
each POLICY YEAR. It is understood that the amount stated in Item III
of the Declarations is the maximum amount payable by the INSURER under
this POLICY for all CLAIMS first made during each POLICY YEAR, and
that this Endorsement extends coverage with a sublimit which further
limits the INSURER'S liability and does not increase the INSURER'S
maximum liability beyond the LIMIT OF LIABILITY stated in Item III the
Declarations. It is further understood that such sublimit is separate
from and payment of LOSS pursuant to this Endorsement does not reduce
the sublimit or limit contained in any other Outside Positions
Endorsement to this POLICY.
(D) Solely for purposes of this extension of coverage, the definition of
"WRONGFUL ACT" is hereby modified to replace the word "COMPANY" with
the word "Entity" wherever the word "COMPANY" appears.
(E) Solely for purposes of applying subparts (i) and (j) of Clause 3
(Exclusions) of the POLICY to this extension of coverage, the
definition of "COMPANY" is hereby modified to include such Entity.
/s/CHARLES D. SMITH
Signature of Authorized
Representative
END 06
ED 05/89
<PAGE>
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 3 Effective Date of Endorsement March 15, 1987
Attached to and forming part of POLICY No. PG-106C
COMPANY The Procter & Gamble Company
The Procter & Gamble Fund
It is understood and agreed that this POLICY is hereby amended as indicated
below. All other terms of this POLICY remain unchanged.
Divisional Managers Endorsement
_______________________________
Subpart (d) of Clause 2 (Definitions) of the POLICY is hereby deleted in
its entirety and replaced with the following:
(d) "INSUREDS" shall mean:
(1) all persons who were, now are, or shall be duly elected or
appointed directors, officers or divisional managers of the
COMPANY; or
(2) the estates, heirs, legal representatives or assigns of
deceased INSUREDS who were directors, officers or divisional
managers of the COMPANY at the time of the WRONGFUL ACT upon
which such CLAIMS are based were committed, and the legal
representatives or assigns of INSUREDS in the event of their
incompetency, insolvency or bankruptcy.
By /s/CHARLES D. SMITH
Authorized Representative
<PAGE>
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 4 Effective Date of Endorsement March 15, 1987
Attached to and forming part of POLICY No. PG-106C
COMPANY The Procter & Gamble Company/The Procter & Gamble Fund
It is hereby understood and agreed exclusion 3(h) is amended to read as
follows:-
(h) for bodily injury, sickness, disease, or death of any person, or
for damage to or destruction of any tangible property, including
the loss of use thereof; however, this exclusion shall not apply
to any derivative action brought against any INSURED.
All other terms and conditions remain unchanged.
By /s/CHARLES D. SMITH
Authorized Representative
<PAGE>
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 5 Effective Date of Endorsement March 15, 1991
Attached to and forming part of POLICY No. PG-106C
COMPANY The Procter & Gamble Company/The Procter & Gamble Fund
IN CONSIDERATION OF THE PREMIUM CHARGED, IT IS HEREBY UNDERSTOOD AND AGREED
THAT ITEM 1 ON THE DECLARATIONS IS AMENDED TO INCLUDE:-
"OFFICERS OF OPERATING UNITS OF PROCTER AND GAMBLE COMPANY"
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
By /s/CHARLES D. SMITH
Authorized Representative
<PAGE>
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 6 Effective Date of Endorsement March 15, 1992
Attached to and forming part of POLICY No. PG-106C
COMPANY The Procter & Gamble Company/The Procter & Gamble Fund/
Officers of Operating Units of Procter & Gamble Company
IN CONSIDERATION OF THE ADDITIONAL PREMIUM OF $95,000 IT IS HEREBY
UNDERSTOOD AND AGREED THAT THE "POLICY PERIOD" OF THIS POLICY IS EXTENDED
TO JUNE 30, 1994.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
By /s/CHARLES D. SMITH
Authorized Representative
<PAGE>
CODA
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 7 Effective Date of Endorsement June 30, 1993
Attached to and forming part of POLICY No. PG-106C
COMPANY The Procter & Gamble Company/The Procter & Gamble Fund
Officers of Operating Units of Procter & Gamble Company
It is understood and agreed that this POLICY is hereby amended as indicated
below. All other terms of this POLICY remain unchanged.
THREE-YEAR POLICY REVISION
GRANDFATHER ENDORSEMENT
Clause 8(e) of the POLICY is deleted in its entirety and Clause 7 of the
POLICY is amended to read in its entirety as follows:
Except in the event this POLICY is canceled in whole or in part
in accordance with Clause 8 (Cancellation) below, on each
anniversary of this POLICY, upon submission of the extension
application and payment of the charged premium, this POLICY shall
automatically be continued to a date one year beyond its
previously stated expiration date, unless written notice is given
by the INSURER to the COMPANY, or by the COMPANY to the INSURER,
that such POLICY extension is not desired. Such written notice
may be given at any time prior to the anniversary of the POLICY,
except that such notice by the INSURER to the COMPANY may be
given only during the period commencing ninety (90) days and
ending ten (10) days prior to such anniversary, in which case the
POLICY shall automatically expire two years from such anniversary
date. Such written notice shall be given by the INSURER to the
COMPANY only if it is determined to be appropriate by an
affirmative vote of a majority of the INSURER's entire Board at a
meeting of said Board prior to mailing of such notice.
The premium charged on each anniversary of this POLICY shall be
determined by the rating plan and by-laws of the INSURER in force
at such anniversary date.
As of the second anniversary of the Effective Date of this Endorsement, (i)
the foregoing deletion of Clause 8(e) and amendment of Clause 7 shall
terminate, (ii) Clause 8(e) shall read in its entirety as set forth in the
POLICY form to which this Endorsement is attached, and (iii) Clause 7 shall
read in its entirety as follows:
Except in the event this POLICY is canceled in whole or in part
in accordance with Clause 8 (Cancellation) below, on each
anniversary of this POLICY, upon submission of the extension
application and payment of the charged premium, this POLICY shall
automatically be continued to a date one year beyond its
previously stated expiration date, unless written notice is given
by the INSURER to the COMPANY, or by the COMPANY to the INSURER,
that such POLICY extension is not desired. Such written notice
may be given at any time prior to the anniversary of the POLICY,
except that such notice by the INSURER to the COMPANY may be
given only during the period commencing ninety (90) days and
ending ten (10) days prior to such anniversary, in which case the
POLICY shall automatically expire two years from such anniversary
date.
END 11
ED 05/92
<PAGE>
Such written notice shall be given by the INSURER to the COMPANY
only if it is determined to be appropriate by an affirmative vote
of 2/3 of the INSURER'S entire Executive Committee at a meeting
of said Committee prior to mailing of such notice. Any non-
extension by the INSURER shall be revoked as of the next meeting
of the INSURER'S Board of Directors if the Board at such meeting
so determines by an affirmative vote of a majority of the entire
Board. If any such non-extension is so revoked or if during the
remainder of the POLICY PERIOD the INSURER agrees to extend
coverage, this POLICY shall be continued or such agreed coverage
may be extended, respectively, to the expiration date which would
otherwise be applicable if such notice of Non-extension had not
been given, provided the COMPANY submits the extension
application and pays the charged premium.
If the COMPANY or the INSURER gives written notice that the
POLICY extension is not desired, the COMPANY shall pay on or
before each of the two remaining anniversary dates the charged
premium for the next succeeding POLICY YEAR respectively less a
premium credit equal to the premium paid for the two respective
POLICY YEARS remaining in the POLICY PERIOD as of the effective
date of this Endorsement. If any such premium credit exceeds the
charged premium, the INSURER shall refund to the COMPANY the
difference within ten days following such anniversary date.
The premium charged on each anniversary of this POLICY shall be determined
by the rating plan and by-laws of the INSURER in force at such anniversary
date.
/s/CHARLES D. SMITH
Authorized Representative
<PAGE>
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 8 Effective Date of Endorsement March 15, 1990
Attached to and forming part of POLICY No. PG-106C
COMPANY The Procter & Gamble Company/The Procter & Gamble Fund
Officers of Operating Units of Procter & Gamble Company
In consideration of the premium charged it is hereby understood and agreed
that on the outside positions Endorsements Section A(1) is amended to read
after the word "foundation" as follows:-
Employee Stock Ownership Trust of the Procter & Gamble Profit Sharing Trust
and Employee Stock Ownership Plan.
All other terms and conditions remain unchanged.
By /s/CHARLES D. SMITH
Authorized Representative
<PAGE>
Exhibit (99-2)
--------------
Directors and Officers (First) Excess Liability Policy
<PAGE>
Form X.L. D&O-003B Policy No. XLD+O-00364-93
XL
X.L. INSURANCE COMPANY, LTD.
Producer: PARK INTERNATIONAL LIMITED
In favor of: THE PROCTER & GAMBLE COMPANY
Address: ONE PROCTER & GAMBLE PLAZA
CINCINNATI, OHIO 45202
U.S.A.
Type of Coverage: DIRECTORS AND OFFICERS LIABILITY
In the amount as stated in Item 2 of the
Declarations.
Term: Beginning at 12:01 A.M. on the 30th day of June, 1993, prevailing
time at the address of the Named Insured and in accordance with
terms and conditions of the form(s) attached.
PREMIUM: $150,000
IN WITNESS WHEREOF, this Policy has
been made, entered into and executed
by the undersigned in Hamilton, Bermuda
this 21st day of FEBRUARY, 1993.
By: /s/PAUL B. MILLER
PAUL B. MILLER
Title: VICE PRESIDENT
<PAGE>
DATE: FEBRUARY 21, 1994 POLICY NO: XLD+O-00364-93
X.L. INSURANCE COMPANY, LTD.
POLICY FOR DIRECTORS AND OFFICERS LIABILITY
IMPORTANT: THIS COVERAGE IS ON A CLAIMS MADE AND CLAIMS
REPORTED BASIS. PLEASE READ THIS POLICY CAREFULLY.
DECLARATIONS
Item 1: (a) Named Company: THE PROCTER & GAMBLE COMPANY
(b) Address of Named Company:
ONE PROCTER & GAMBLE PLAZA
CINCINNATI, OHIO 45202
U.S.A.
Item 2: Aggregate Limit of Liability:
$25,000,000 each policy period in excess of $25,000,000 each policy
year.
Item 3: Policy Period: JUNE 30, 1993 - JUNE 30, 1994
The Declarations along with the completed Application and this
Policy and any Schedules hereto shall constitute the contract among
the Named Company, the Designated Companies, the Directors and
Officers and the Company.
Item 4: Schedule of Current and Known Prospective Underlying Insurance:
Policy MM Policy
Carrier Number Limits Year
------- ------ ------ ------
i. Underlying Second Excess
ii. Underlying Excess. . . .
iii. Primary Insurer(s) . . . CODA PG-106C 25 JUNE
30,
1993-
96
Uninsured Retention under Primary Insurance:
$NIL each Director or Officer each loss, but in no event exceeding
$NIL in the aggregate each losS all Directors and Officers
Liability.
Item 5: Policy to be followed: CODA - POLICY NO. PG-106C
Item 6: Representative of Named Company: THE PROCTER & GAMBLE COMPANY
Item 7: Notice: X.L. Insurance Company, Ltd., Cumberland House, 1
Victoria St., P.O. Box HM 2245, Hamilton, Bermuda HM JX.
Telex: 3626 XL BA
Item 8: (a) Discovery Coverage Premium: 100% of policy period premium
hereunder.
(b) Discovery Coverage Period: 365 days.
Item 9: Notice Cancellation Period: 60 days.
Said insurance is subject to the provisions, stipulations, exclusions and
conditions contained in this form and the representations and warranties
contained in the Named Company's application for this policy of insurance,
which is hereby made a part of said insurance, together with other
provisions, stipulations, exclusions and conditions as may be endorsed on
said policy or added thereto as therein provided (collectively hereinafter
referred to as the "Policy").
D&O-003B 2
<PAGE>
THE PROCTER & GAMBLE COMPANY
DIRECTORS AND OFFICERS LIABILITY INSURANCE
Named Company: As stated in Item 1 of the Declarations forming a part hereof
(hereinafter called the "Named Company").
INSURING AGREEMENTS
I. COVERAGE
The X.L. Insurance Company, Ltd. (the "Company") hereby agrees with the
Directors and Officers of the Named Company and any other companies
listed in Schedule A hereto ("Designated Companies"), subject to the
limitations, terms, exclusions and conditions hereinafter mentioned
that, if during the policy period any claim or claims are made against
any of the Directors and Officers for a Wrongful Act, and reported to
the Company, the Company in accordance with its limits of liability
shall pay on behalf of such Directors and Officers all loss which such
Directors and Officers shall become legally obligated to pay, except for
such loss which the Designated Companies shall indemnify such Directors
and Officers.
II. LIMIT OF LIABILITY
A. It is expressly agreed that liability for any loss shall attach to
the Company only after the Primary and Underlying Excess Insurers
shall have paid, admitted or been held liable to pay the full
amount of their respective liability and the Directors and Officers
shall have paid the full amount of self-insured retentions, if any,
as set forth in Item 4 of the Declarations (hereinafter referred to
as the "Schedule of Underlying Insurance"), and the Company shall
then be liable to pay only additional amounts for any and all
losses up to its Aggregate Limit of Liability ("aggregate limit")
as set forth in Item 2 of the Declarations, which shall be the
maximum liability of the Company for all covered losses (with
respect to Directors and Officers, collectively) during the policy
period irrespective of the time of payment by the Company.
B. In the event and only in the event of the reduction or exhaustion
of the aggregate limits of liability under the said Primary and
Underlying Excess Policies and under self-insured retentions, if
any (as if such retentions were subject to the same terms,
conditions, exclusions and structure of limits of liability as said
policies) by reason of losses paid thereunder, this coverage shall:
(i) in the event of reduction, pay the excess of the reduced
Primary and Underlying Excess Limits, and (ii) in the event of
exhaustion, continue in force as Primary Insurance; provided always
that in the latter event this coverage shall only pay excess of the
retention applicable to such Primary Insurance for such policy year
as set forth in Item 4 (iii) of the Declarations, which shall be
applied to any subsequent loss in the same manner as specified in
such Primary Insurance. Except insofar as aggregate limits of
liability under the Primary and Underlying Excess Policies have
been reduced or exhausted by reason of losses paid thereunder and
self-insured retentions, if any, have been fully paid (as if such
retentions were subject to the same terms, conditions, exclusions
and structure of limits of liability as said policies), this
coverage shall apply only as if all Primary and Underlying Policies
and self-insured retentions, if any, listed on the Schedule of
Underlying Insurance covered and were fully collectable for any
loss hereunder.
III. PRIMARY AND UNDERLYING INSURANCE
This Policy is subject to the same warranties, terms, conditions and
exclusions (except as regards the premium, the amount and limits of
liability, the policy period and except as otherwise provided herein) as
are contained in or as may be added to the policy set forth in item 5 of
the Declarations or, if no policy is set forth therein, the policy of
the Primary Insurer(s) as respects coverage of the Directors and
Officers.
It is a condition of this Policy that the policies of the Primary and
Underlying Excess Insurers shall be maintained in full effect during the
policy year(s) listed in the Schedule of Underlying Insurance except for
any reduction of the aggregate limits contained therein by reason of
losses paid thereunder (as
D&O-003B 3
<PAGE>
THE PROCTER & GAMBLE COMPANY
provided for in Paragraph II(B) above). This Policy shall automatically
terminate upon the failure to satisfy this condition (i.e., when any of
such listed policies ceases to be in full effect) unless otherwise
agreed by the Company in writing. If the Named Company notifies the
Company in writing of cancellation of any of the policies listed on the
Schedule of Underlying Insurance at least thirty (30) days prior to the
effectiveness thereof, the Company agrees that within twenty (20) days
thereafter it will review the situation and formulate a proposal for the
terms, conditions, exclusions, underlying amount, limit and premium for
continuation of this Policy upon such cancellation; provided, however,
that (i) the underlying amount shall be at least $20,000,000, (ii) the
limit shall be a maximum of $25,000,000 and (iii) this Policy shall not
continue after such cancellation unless there is an agreement in writing
between the Named Company and the Company providing therefor.
IV. COSTS, CHARGES AND EXPENSES
No costs, charges or expenses shall be incurred or settlements made
without the Company's consent, such consent not to be unreasonably
withheld; however, in the event of such consent being given, the Company
will pay, subject to the provisions of Article II, such costs,
settlements, charges or expenses.
V. NOTIFICATION
A. If during the policy period or extended discovery period any claim
is made against any Director or Officer, the Directors and Officers
shall, as a condition precedent to their right to be indemnified
under this Policy, give to the Company notice in writing as soon as
practicable of such claims.
B. If during the policy period or extended discovery period:
(1) the Directors and Officers shall receive written or oral
notice from any party that it is the intention of any such
party to hold the Directors and Officers, or any of them,
responsible for a Wrongful Act; or
(2) the Directors and Officers shall become aware of any fact,
circumstance or situation which may subsequently give rise to
a claim being made against the Directors and Officers, or any
of them, for a Wrongful Act;
and shall in either case during such period give written notice as
soon as practicable to the Company of the receipt of such written
or oral notice under Clause (1) or of such fact, circumstance or
situation under Clause (2), then any claim, which may subsequently
be made against the Directors and Officers, arising out of such
Wrongful Act shall for the purpose of this Policy be treated as a
claim made during the policy period.
C. Notice to the Company shall be given to the person or firm shown
under Item 7 of the Declarations. Notice shall be deemed to be
received if sent by prepaid mail properly addressed.
VI. GENERAL CONDITIONS
A. DEFINITIONS: The terms "Directors and Officers", "Wrongful Act",
"Loss", "Subsidiary", and "Policy Year" shall be deemed to have the
same meanings in this Policy as are attributed to them in the
policy set forth in Item 5 of the Declarations or, if no policy is
set forth therein, the policy of the Primary Insurer(s). The term
"Company" shall mean the X.L. Insurance Company, Ltd. The term
"policy period" shall mean the period stated in Item 3 of the
Declarations.
B. DISCOVERY CLAUSE: If the Company shall cancel or refuse to renew
this Policy, the Named Company or the Directors and Officers shall
have the right, upon payment of the additional premium set forth in
Item 8(a) of the Declarations to a continuation of the coverage
granted by this Policy in respect of any claim or claims which may
be made against the Directors and Officers during the period stated
in Item 8(b) of the Declarations after the date of cancellation or
non-renewal, but only in respect of any Wrongful Act committed
before the date of cancellation or non-renewal of this Policy.
This right of extension shall terminate unless written notice is
given to the Company within ten (10) days after the effective date
of cancellation or non-renewal.
D&O-003B 4
<PAGE>
THE PROCTER & GAMBLE COMPANY
C. APPLICATION OF RECOVERIES: All recoveries of payments recovered or
received subsequent to a loss settlement under this Policy shall be
applied as if recovered or received prior to such settlement and
all necessary adjustments shall then be made between the Named
Company or the Directors and Officers and the Company, provided
always that nothing in this Policy shall be construed to mean that
losses under this Policy are not payable until the Directors' and
Officers' ultimate net loss has been finally ascertained.
D. CANCELLATION CLAUSE: This coverage may be cancelled by the Named
Company at any time by written notice or surrender of this Policy.
This coverage may also be cancelled by, or on behalf of, the
Company by delivering to the Named Company or by mailing to the
Named Company by registered, certified or other first class mail,
at the Named Company's address shown in Item 1 of the Declarations,
written notice stating when, not less than the number of days set
forth in Item 9 of the Declarations, the cancellation shall become
effective. The mailing of such notice as aforesaid shall be
sufficient proof of notice, and this Policy shall terminate at the
date and hour specified in such notice. If this Policy shall be
cancelled by the Named Company, the Company shall retain the
customary short rate proportion of premium hereon. If this Policy
shall be cancelled by or on behalf of the Company, the Company
shall retain the pro rata proportion of the premium hereon.
Payment or tender of any unearned premium by the Company shall not
be a condition precedent to the effectiveness of cancellation, but
such payment shall be made as soon as practicable.
E. COOPERATION: The Named Company, the Designated Companies and the
Directors and Officers shall give the Company such information and
cooperation as it may reasonably require.
F. PREMIUM: The premium under this Policy is a flat premium and is
not subject to adjustment except as otherwise provided herein. The
premium shall be paid to the Company.
G. WRONGFUL ACT EXCLUSION: Notwithstanding any other provision of
this Policy, this Policy shall not apply with respect to a Wrongful
Act by any Director or Officer of the Company in his capacity as
such.
H. NUCLEAR EXCLUSION: This Policy shall not apply to, and the Company
shall have no liability hereunder in respect of liability or
alleged liability for:
(1) personal injury, property damage or advertising liability in
the United States, its territories or possessions, Puerto Rico
or the Canal Zone (A) with respect to which the Named Company,
the Designated Companies and/or Officers and Directors
(collectively, the "Certain Parties") is also an insured under
a nuclear energy liability policy issued by Nuclear Energy
Liability Insurance Association, Mutual Atomic Energy
Liability Underwriters or Nuclear Insurance Association of
Canada, or would be an insured under any such policy but for
its termination upon exhaustion of its limited liability or
(B) resulting from the hazardous properties of nuclear
material and with respect to which (i) any person or
organization is required to maintain financial protection
pursuant to the Atomic Energy Act of 1954 or any law
amendatory thereof or (ii) a Certain Party is, or had this
Policy not been issued, would be entitled to indemnity from
United States of America or any agency thereof under any
agreement entered into by the United States of America or any
agency thereof with any person or organization;
(2) medical or surgical relief or expenses incurred with respect
to bodily injury, sickness, disease or death resulting from
the hazardous properties of nuclear material and arising out
of the operation of a nuclear facility by any person or
organization in the United States, its territories or
possessions, Puerto Rico or the Canal Zone;
(3) injury, sickness, disease, death or destruction resulting from
hazardous properties of nuclear material, if (A) the nuclear
material (i) is at any nuclear facility owned by or operated
by or on behalf of any of the Certain Parties in the United
States, its territories or possessions Puerto Rico or the
Canal Zone or (ii) has been discharged or dispersed therefrom,
(B) such nuclear material is contained in spent fuel or waste
at any time possessed, handled, used, processed,
D&O-003B 5
<PAGE>
THE PROCTER & GAMBLE COMPANY
stored, transported or disposed by or on behalf of any of the
Certain Parties in the United States, its territories or
possessions, Puerto Rico or the Canal Zone or (C) the injury
arises out of the furnishing by any of the Certain Parties of
services, materials, parts or equipment in connection with the
planning, construction, maintenance, operation or use of a
nuclear facility, but if such facility is located within the
United States of America, its territories or possessions or
Canada, this clause (3)(C) applies only to injury to or
destruction of property at such nuclear facility;
(4) As used in this Section (H):
(A) "hazardous properties" included radioactive, toxic or
explosive properties; "nuclear material" means source
material, special nuclear material or by-product
material; "source material," "special nuclear material"
and "by-product material" have the meanings given them by
the Atomic Energy Act of 1954 or in law amendatory
thereof; "spent fuel" means any fuel element or fuel
component, solid or liquid which has been used or exposed
to radiation in a nuclear reactor; "waste" means any
waste material (i) containing by-product materials and
(ii) resulting from the operation by a person or
organization of nuclear facility included within the
definition of nuclear facility under clauses (B)(i) or
(B)(ii) (below):
(B) "nuclear facility" means
(i) any nuclear reactor;
(ii) any equipment or device designed or used for (x)
separating the isotopes of uranium or plutonium,
(y) processing or utilizing spent fuel, or (z)
handling processing or packaging waste;
(iii) any equipment or device used for the processing,
fabricating or alloying of special nuclear
material if at any time the total amount of such
material in the custody of the Insured at such
premises where such equipment or device is located
consists of or contains more than 25 grams of
plutonium or uranium 233 or combination thereof or
more than 250 grams of uranium 235;
(iv) any structure, basin, excavation, premises or
place prepared for the storage or disposal of
waste.
(C) "Nuclear facility" includes the site on which any of the
foregoing is located, all operations conducted on such
site and all premises used for such operations.
(D) "Nuclear reactor" means any apparatus designed or used to
sustain nuclear fission in a self-supporting chain
reaction or to contain critical mass of fissionable
material.
(E) With respect to injury or destruction of property, the
word "injury" or "destruction" includes all forms of
radioactive contamination of property or loss of use
thereof or liability or alleged liability of whatsoever
nature directly or indirectly caused by or contributed to
by or arising from ionizing radiations or contamination
by radioactivity outside the United States, its
territories or possessions, Puerto Rico or the Canal Zone
from any nuclear fuel or from any nuclear waste from the
combustion, fission or fusion of nuclear fuel.
I. EMPLOYEE BENEFITS PROGRAMS EXCLUSION: Notwithstanding any other
provision of this Policy, this coverage shall not apply with
respect to:
(1) any liability or alleged liability arising out of or alleged
to arise out of any negligent act, error or omission of any
Director or Officer, or any other person for whose acts any
Director or Officer is legally liable, in the administration
of Employee Benefits Programs, as defined in subsection (2)
below, including, without limitation, liability or alleged
liability under the Employee Retirement Income Security Act of
1974, as amended.
D&O-003B 6
<PAGE>
THE PROCTER & GAMBLE COMPANY
(2) As used in this Section I, the term "Employee Benefits
Programs" means group life insurance, group accident or health
insurance, profit sharing plans, pension plans, employee stock
subscription plans, workers' compensation, unemployment
insurance, social benefits, disability benefits, and any other
similar employee benefits.
(3) As used in this Section I, the unqualified word
"administration" means:
(A) giving counsel to employees with respect to the Employee
Benefits Programs;
(B) interpreting the Employee Benefits Programs;
(C) handling of records in connection with the Employee
Benefits Programs; and/or
(D) effective enrollment, termination or cancellation of
employees under the Employee Benefits Programs.
J. INDEMNITY BY DESIGNATED COMPANIES: The Designated Companies agree
with the Company to indemnify their respective Directors and
Officers to the full extent permitted by applicable law. The
Directors and Officers agree that to the extent of any payment of
loss on their behalf or indemnification of them hereunder they will
assign, convey, set over, transfer and deliver to the Company any
and all rights and claims they may have to indemnification from the
Designated Companies and will take all further steps requested by
the Company to assist in prosecution of such rights and claims, and
the Designated Companies hereby consent to any such assignment,
conveyance, set over, transfer or delivery and agree that any
payment by the Company on behalf of or to indemnify any Director or
Officer shall not be raised as a defense to the Director's or
Officer's right to indemnification from the Designated Companies as
asserted by the Company pursuant hereto.
K. OTHER CONDITIONS: This Policy is subject to the following
additional conditions:
(1) REPRESENTATION
Except as respects the giving of notice to exercise extended
discovery under Paragraph VI(B), the Named Company or such
other person as it shall designate in Item 6 of the
Declarations shall represent the Named Company, each of the
Designated Companies and each Officer and Director of the
Named Company and the Designated Companies in all matters
under this Policy, including, without limitation, payment of
premium, negotiation of the terms of renewal and/or
reinstatement and the adjustment, settlement and payment of
claims.
(2) CHANGES
Notice to or knowledge possessed by any person shall not
effect waiver or change in any part of this Policy or estop
the Company from asserting any right under the terms of this
Policy; nor shall the terms of this Policy be waived or
changed, except by endorsement issued to form a part hereof,
signed by the Company or its authorized representative.
(3) ASSIGNMENT
Assignment of interest under this Policy shall not bind the
Company unless and until consent is endorsed hereon.
(4) ARBITRATION
Any dispute arising under this Policy shall be finally and
fully determined in London, England under the provisions of
the English Arbitration Act of 1950, as amended and
supplemented, by a Board composed of three arbitrators to be
selected for each controversy as follows:
Any party to the dispute may, once a claim or demand on his
part has been denied or remains unsatisfied for a period of
twenty (20) calendar days by any other, notify the others of
its desire to arbitrate the matter in dispute and at the time
of such notification the party desiring arbitration shall
notify any other party or parties of the name of the
arbitrator selected by it. Any party or parties who have been
so notified shall within ten (10) calendar days thereafter
select an arbitrator and notify the party desiring arbitration
of the name of such second arbitrator. If the party or
parties notified of a desire for arbitration shall fail or
refuse to nominate the second arbitrator within ten (10)
calendar days following the receipt of such notification, the
party who
D&O-003B 7
<PAGE>
THE PROCTER & GAMBLE COMPANY
first served notice of a desire to arbitrate will, within an
additional period of ten (10) calendar days, apply to a judge
of the High Court of England for the appointment of a second
arbitrator and in such a case the arbitrator appointed by such
a judge shall be deemed to have been nominated by the party or
parties who failed to select the second arbitrator. The two
arbitrators, chosen as above provided, shall within ten (10)
calendar days after the appointment of the second arbitrator
choose a third arbitrator. In the event of the failure of the
first two arbitrators to agree on a third arbitrator within
said ten (10) calendar day period, any of the parties may
within a period of ten (10) calendar days thereafter, after
notice to the other party or parties, apply to a judge of the
High Court of England for the appointment of a third
arbitrator and in such case the person so appointed shall be
deemed and shall act as the third arbitrator. Upon acceptance
of the appointment by said third arbitrator, the Board of
Arbitration for the controversy in question shall be deemed
fixed. All claims, demands, denials of claims and notices
pursuant to this Section (K)(iv) shall be deemed made if in
writing and mailed to the last known address of the other
party or parties.
The Board of Arbitration shall fix, by a notice in writing to
the parties involved, a reasonable time and place for the
hearing and may in said written notice or at the time of the
commencement of said hearing, at the option of said Board,
prescribe reasonable rules and regulations governing the
course and conduct of said hearing.
The Board shall, within ninety (90) calendar days following
the conclusion of the hearing, render its decision on the
matter or matters in controversy in writing and shall cause a
coy thereof to be served on all the parties thereto. In case
the Board fails to reach a unanimous decision, the decision of
the majority of the members of the Board shall be deemed to be
the decision of the Board and the same shall be final and
binding on the parties thereto, and such decision shall be a
complete defense to any attempted appeal or litigation of such
decision in the absence of fraud or collusion.
All costs of arbitration shall be borne equally by the parties
to such arbitration.
The Company and the Insured agree that in the event that
claims for indemnity or contribution are asserted in any
action or proceeding against the Company by any of the
Insured's other insurers in any jurisdiction or forum other
than that set forth in this Section (K)(iv), the Insured will
in good faith take all reasonable steps requested by the
Company to assist the Company in obtaining a dismissal of
these claims (other than on the merits) and will, without
limitation, undertake to the court or other tribunal to reduce
any judgment or award against such other insurers to the
extent that the court or tribunal determines that the Company
would have been liable to such insurers for indemnity or
contribution pursuant to this Policy. The Insured shall be
entitled to assert claims against the Company for coverage
under this Policy, including, without limitation, for amounts
by which the Insured reduced its judgment against such other
insurers in respect of such claims for indemnity or
contribution in an arbitration between the Company and the
Insured pursuant to this Section (K)(iv); provided, however,
that the Company in such arbitration in respect of such
reduction of any judgment shall be entitled to raise any
defenses under this Policy and any other defenses (other than
jurisdictional defenses) as it would have been entitled to
raise in the action or proceeding with such insurers.
(5) GOVERNING LAW AND INTERPRETATION
This Policy shall be governed by and construed in accordance
with the internal laws of the State of New York, except
insofar as such laws may prohibit payment in respect of
punitive damages hereunder; provided, however, that the
provisions, stipulations, exclusions and conditions of this
Policy are to be construed in an evenhanded fashion as between
the Insured and the Company; without limitation, where the
language of this Policy is deemed to be ambiguous or otherwise
unclear, the issue shall be resolved in the manner most
consistent with the relevant provisions, stipulations,
exclusions and conditions (without regard to authorship of the
language, without any presumption or arbitrary interpretation
or construction in favor of either the Insured or the Company
and without reference to parol evidence).
D&O-003B 8
<PAGE>
THE PROCTER & GAMBLE COMPANY
(6) LIABILITY OF THE COMPANY
The Named Company, the Designated Companies and the Directors
and Officers agree that the liability and obligations of the
Company hereunder shall be satisfied from the funds of the
Company alone and that the individual shareholders of the
Company shall have no liability hereunder.
(7) HEADINGS
The descriptions in the headings and subheadings of this
Policy are inserted solely for convenience and do not
constitute any part of the terms and conditions hereof.
X.L. INSURANCE COMPANY, LTD.
By: /s/PAUL B. MILLER
PAUL B. MILLER
Title: VICE PRESIDENT
Date: FEBRUARY 21, 1994
D&O-003B 9
<PAGE>
THE PROCTER & GAMBLE COMPANY
SCHEDULE A
All Subsidiaries of the Named Insured
D&O-003B 10
<PAGE>
Insured: THE PROCTER & GAMBLE COMPANY
Policy No: XLD+0-00364-93
Endorsement No: 1
Effective Date: JUNE 30, 1993
__________________________________________________________________________
POLICY INTERPRETATION ENDORSEMENT
It is agreed that Condition K(5) is hereby deleted and the following is
substituted therefore:
"(5) Law of Construction and Interpretation
"This Policy shall be construed in accordance with the internal laws of
the State of New York, except insofar as such laws:
"(a) may prohibit indemnity in respect of punitive damages hereunder;
"(b) pertain to regulation under the New York Insurance Law, or
regulations issued by the Insurance Department of the State of New York
pursuant thereto, applying to insurers doing insurance business, or
issuance, delivery or procurement of policies of insurance, within the
State of New York or as respects risks or insureds situated in the State
of New York; or
"(c) are inconsistent with any provision of this Policy;
"provided, however, that the provisions, stipulations, exclusions and
conditions of this Policy are to be construed in an evenhanded fashion
as between the Insured and the Company; without limitation, where the
language of this Policy is deemed to be ambiguous or otherwise unclear,
the issue shall be resolved in the manner most consistent with the
relevant provisions, stipulations, exclusions and conditions (without
regard to authorship of the language, without any presumption or
arbitrary interpretation or construction in favor of either the Insured
or the Company and without reference to parol or other extrinsic
evidence)."
X.L. INSURANCE COMPANY, LTD.
By: /s/PAUL B. MILLER
PAUL B. MILLER
Title: VICE PRESIDENT
Date: FEBRUARY 21, 1994
Ref: OD247.01
XL
<PAGE>
Insured: THE PROCTER & GAMBLE COMPANY
Policy No: XLD+0-00364-93
Endorsement No: 2
Effective Date: JUNE 30, 1993
___________________________________________________________________________
DIRECTORS' AND OFFICERS' COVERAGE ENDORSEMENT
Notwithstanding any other provision of the Policy or this Endorsement,
if the Lead Policy provides coverage for any person acting in the capacity as
a Director or Officer of a company or entity which is not an Insured Company
under the Policy and this Endorsement, no such coverage shall be provided
pursuant to the Policy and/or this Endorsement unless (a) it is indicated
below that "Outside Positions" coverage is being afforded, (b) such coverage
is subject to a retention (whether self-insured and/or covered by underlying
policy(ies)) in the amount listed below which shall be deemed to be listed in
Item 4 of the Declarations, and such coverage in any event shall apply in
excess of all Primary and Underlying Excess Insurance listed in Item 4 of the
Declarations, and (c) such coverage is subject to an aggregate sublimit in
the amount listed below, which sublimit shall be the maximum liability of the
Company for all losses in respect of such coverage during the policy period
irrespective of the time of payment by the Company and shall be a sublimit
included within and shall not increase the Aggregate Limit of Liability
stated in Item 2 of the Declarations.
It is further understood and agreed that this extension of cover shall not
apply to any person acting as a Director or Officer of the following
companies:
(a) Corporate Officers and Directors Assurance Ltd.
(b) Corporate Officers and Directors Assurance Holdings Ltd.
(c) Exel Ltd.
(d) X. L Insurance Company, Ltd.
Outside Positions Coverage: YES - As per
schedule provided by
the Named Insured
Outside Positions Coverage (Self-Insured) Retention: $25,000,000
Outside Positions Coverage Aggregate Sublimit: $25,000,000
X.L. INSURANCE COMPANY, LTD.
By: /s/PAUL B. MILLER
PAUL B. MILLER
Title: VICE PRESIDENT
Date: FEBRUARY 21, 1994
Ref: 0D234.01-R
XL
<PAGE>
Insured: THE PROCTER & GAMBLE COMPANY
Policy No: XLD+0-00364-93
Endorsement No: 3
Effective Date: JUNE 30, 1993
___________________________________________________________________________
AMENDMENT TO DECLARATIONS PAGE
It is agreed that as of the Effective Date shown above, Item 1(a) NAMED
COMPANY of the Declarations is amended to include OFFICERS OF OPERATING UNITS
OF THE PROCTER & GAMBLE COMPANY.
X.L. INSURANCE COMPANY, LTD.
By: /s/PAUL B. MILLER
PAUL B. MILLER
Title: VICE PRESIDENT
Date: FEBRUARY 21, 1994
Ref: 0D242.01
XL
<PAGE>
Exhibit (99-3)
--------------
Directors and Officers (Second) Excess Liability Policy
<PAGE>
PARK INTERNATIONAL LIMITED
A.C.E. INSURANCE COMPANY (BERMUDA) LTD.
DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICY
THIS IS A CLAIMS MADE POLICY. Except as otherwise provided herein, this
policy covers only claims first made against the Insureds during the Policy
Period. PLEASE READ THIS POLICY CAREFULLY.
DECLARATIONS
____________
Policy No.: PG-6797D
Item 1. Insured Company: THE PROCTER & GAMBLE COMPANY
Principal Address: One Procter & Gamble Plaza
Cincinnati, Ohio 45202
U.S.A.
Item 2. Schedule of Underlying Policies:
Insurer Policy Limits Policy
Number Period
_______ ______ ______ ______
Primary Policy CODA PG-106C $25M 6/30/93-96
Excess Policies X.L. XLD&O-00364-93 $25M 6/30/93-94
Uninsured retention under primary insurance: $NIL each Insured Person
each Loss, but in no event exceeding $NIL in the aggregate each Loss for
all Insured Persons and $ N/A each Loss for the Insured Company.
Item 3. Followed Policy: Insurer: CODA
Policy No.: PG-106C
Item 4. Policy Period: From 12:01 A.M. JUNE 30, 1993
To 12:01 A.M. JUNE 30, 1994
Greenwich Mean Time
D & 0 12-88 (B) 1
<PAGE>
Item 5. Aggregate Limit of Liability $50,000,000 U.S. dollars each
Policy Year for all Loss paid on behalf of all Insureds
arising from all claims first made during such Policy Year.
Item 6. One Year Premium: $140,000
Three Year Premium: $ N/A
(Prepaid)
Discovery Period Premium: 100% of the Policy Period Premium
Item 7. Insurer: A.C.E. Insurance Company (Bermuda) Ltd.
P.O. Box HM 1015
Hamilton, Bermuda HM DX
Telex: 3543 ACEILBA
Telecopy: (809) 295-5221
Countersigned at Hamilton, Bermuda:
Date: March 15, 1994 /s/CHARLES D. SMITH
Authorized Representative
THESE DECLARATIONS, TOGETHER WITH THE COMPLETED AND SIGNED APPLICATION AND
THE POLICY FORM ATTACHED HERETO, CONSTITUTE THE INSURANCE POLICY.
D & O 12-88 (B) 2
<PAGE>
I. INSURING CLAUSE
In consideration of the payment of the premium and in reliance upon all
statements made in the application form including the information furnished
in connection therewith, and subject to all terms, conditions, exclusions and
limitations of this policy, the Insurer agrees to provide insurance coverage
to the Insured Persons and, if applicable, the Insured Company in accordance
with the terms, conditions, exclusions and limitations of the Followed
Policy.
II. LIMIT OF LIABILITY
A. It is expressly agreed that liability for any covered Loss with
respect to claims first made in each Policy Year shall attach to
the Insurer only after the insurers of the Underlying Policies, the
Insured Company and/or the Insured Persons shall have paid,
admitted or been held liable to pay the full amount of the
Underlying Limit for such Policy Year. The Insurer shall then be
liable to pay only covered Loss in excess of such Underlying Limit
up to its Aggregate Limit of Liability as set forth in Item 5 of
the Declarations, which shall be the maximum aggregate liability of
the Insurer under this policy with respect to all claims first made
in each Policy Year against all Insured Persons irrespective of the
time of payment by the Insurer.
B. Multiple claims based upon or arising out of the same, repeated,
interrelated or causally connected Wrongful Acts, whether made
against the same or different Insured Persons, shall be deemed to
be a single claim first made in the earliest Policy Year in which
the first of such multiple claims is made against any Insured
Person; the Aggregate Limit of Liability shall apply only once to
such multiple claims.
C. In the event and only in the event of the reduction or exhaustion
of the Underlying Limit by reason of the insurers of the Underlying
Policies, the Insured Company and/or the Insured Persons paying,
admitting or being held liable to pay Loss otherwise covered
hereunder, this policy shall: (i) in the event of reduction, pay
excess of the reduced Underlying Limit, and (ii) in the event of
exhaustion, continue in force as primary insurance; provided always
that in the latter event this policy shall only pay excess of the
retention applicable to the primary insurance as set forth in Item
2 of the Declarations, which retention shall be applied to any
subsequent Loss in the same manner as specified in such primary
insurance.
D. Notwithstanding any of the terms of this policy which might be
construed otherwise, this policy shall drop down only in the event
of reduction or exhaustion of the Underlying Limit and shall not
drop down for any other reason including, but not limited to,
uncollectability (in whole or in part) of any underlying insurance.
The risk of uncollectability of such underlying insurance (in whole
or in part) whether because of financial impairment or insolvency
of an underlying insurer or for any other reason, is expressly
retained by the Insured Persons and the Insured Company and is not
in any way or under any circumstances insured or assumed by the
Insurer.
III. UNDERLYING INSURANCE
A. This policy is subject to the same warranties, terms, conditions,
exclusions and limitations (except as regards the premium, the
amount and limits of liability, the policy period and except as
otherwise provided herein) as are contained in or as may be added
to the Followed Policy.
B. It is a condition of this policy that the Underlying Policies shall
be maintained in full effect with solvent insurers during the
policy period listed in Item 2 of the Declarations except for any
reduction or exhaustion of the aggregate limits contained therein
by reason of Loss paid thereunder (as provided for in Section II(C)
above). Unless the Insurer otherwise agrees in writing, this
policy shall: (i) immediately and automatically terminate on the
date any of the Underlying Policies ceases to be in full effect;
and (ii) automatically terminate 30 days following the date an
insurer of any Underlying Policy becomes subject to a receivership,
liquidation, dissolution, rehabilitation or any similar proceeding
or is taken over by any regulatory authority unless the Insured
Company obtains replacement coverage for such Underlying Policy
within such 30 day period. In the event this policy automatically
terminates pursuant to this Section III(B), the Insurer shall
retain the pro-rata proportion of the premium. Payment or tender
of any unearned premium by the Insurer shall not be a condition
precedent to the effectiveness of such termination, but such
payment shall be made as soon as practicable.
D & O 12-88 (B) 3
<PAGE>
C. If during the Policy Period or any discovery period the terms,
conditions, exclusions or limitations of the Followed Policy are
changed in any manner, the Insured Company or the Insured Persons
shall as a condition precedent to their rights under this policy
give to the Insurer as soon as practicable written notice of the
full particulars thereof. This policy shall become subject to any
such changes upon the effective date of the changes in the Followed
Policy, provided that the Insured Company shall pay any additional
premium reasonably required by the Insurer for such changes.
IV. GENERAL CONDITIONS
A. Discovery Period: If the Insurer or the Insured Company fails or
refuses to renew or cancels this policy, or if this policy
automatically terminates pursuant to Section III(B), the Insured
Company or the Insured Persons shall have the right, upon payment
of an additional premium as set forth in Item 6 of the
Declarations, to elect an extension of the coverage granted by this
policy, but only for any Wrongful Act committed, attempted or
allegedly committed or attempted prior to the effective date of
such nonrenewal, cancellation or termination. Any such election
shall be made in writing in the time and manner and for the
discovery period stated in the Followed Policy.
B. Application of Recoveries: All recoveries or payments recovered or
received subsequent to a Loss settlement under this policy shall be
applied as if recovered or received prior to such settlement and
all necessary adjustments shall then be made between the Insured
Company or the Insured Person and the Insurer, provided always that
the foregoing shall not affect the time when Loss under this policy
shall be payable.
C. Notice: All notices to the Insurer under any provisions of this
policy shall be given by prepaid courier or electronic service
properly addressed to the Insurer at its address as shown in the
Declarations. Notice so given shall be deemed to be received by
the Insurer on the next succeeding day.
D. Cooperation: The Insured Company and the Insured Persons shall
give the Insurer such information and cooperation as it may
reasonably require.
E. Premium: The premium under this policy is a flat premium and is
not subject to adjustment except as otherwise provided herein. The
premium shall be paid to the Insurer at its address as shown in the
Declarations.
F. Cancellation Clause: This policy may be cancelled by the Insured
Company at any time by written notice or surrender of this policy
to the Insurer. This policy may also be cancelled by, or on behalf
of, the Insurer by delivering to the Insured Company or by mailing
to the Insured Company by registered, certified or other first
class mail, at the address shown in the Declarations, written
notice stating when, not less than (365) days thereafter, the
cancellation shall become effective. The mailing of such notice as
aforesaid shall be sufficient proof of notice, and this policy
shall terminate at the date and hour specified in such notice. If
this policy shall be cancelled by the Insured Company, the Insurer
shall retain the customary short rate proportion of premium hereon.
If this policy shall be cancelled by or on behalf of the Insurer,
the Insurer shall retain the pro-rata proportion of the premium
hereon. Payment or tender of any unearned premium by the Insurer
shall not be a condition precedent to the effectiveness of
cancellation, but such payment shall be made as soon as
practicable.
G. Capacity: Notwithstanding any other provision of this policy,
coverage hereunder shall not apply with respect to a Wrongful Act
by any Insured Person in his capacity as director or officer of the
Insurer.
H. Changes: Notice to or knowledge possessed by any person shall not
effect waiver or change in any part of this policy or estop the
Insurer from asserting any right under the terms of this policy;
nor shall the terms of this policy be waived or changed, except by
endorsement issued to form a part hereof, signed by the Insurer or
its authorized representative.
I. Arbitration: Any dispute arising under or relating to this policy,
or the breach thereof, shall be finally and fully determined in
Hamilton, Bermuda under the provisions of the Bermuda Arbitration
Act of 1986, as amended and supplemented, by an Arbitration Board
composed of three arbitrators who shall be disinterested and active
or retired business executives having knowledge relevant to the
matters in dispute, and who shall be selected for each controversy
as follows:
Either party to the dispute, once a claim or demand on its part has
been denied or remains unsatisfied for a period of twenty (20)
calendar days by the other party, may notify the other party of its
desire to arbitrate the matter in dispute and at the time of such
notification the party desiring arbitration shall notify the other
party of the name of the arbitrator selected by it. The other
party who has been so
D & O 12-88 (B) 4
<PAGE>
notified shall within ten (10) calendar days thereafter select an
arbitrator and notify the party desiring arbitration of the name of
such second arbitrator. If the party notified of a desire for
arbitration shall fail or refuse to nominate the second arbitrator
within ten (10) calendar days following the receipt of such
notification, the party who first served notice of a desire to
arbitrate will, within an additional period of ten (10) calendar
days, apply to the Supreme Court of Bermuda for the appointment of
a second arbitrator and in such a case the arbitrator appointed by
the Supreme Court of Bermuda shall be deemed to have been nominated
by the party who failed to select the second arbitrator. The two
arbitrators, chosen as above provided, shall within ten (10)
calendar days after the appointment of the second arbitrator choose
a third arbitrator. In the event of the failure of the first two
arbitrators to agree on a third arbitrator within the said ten (10)
calendar day period, either party may within a period of ten (10)
calendar days thereafter, after notice to the other party, apply to
the Supreme Court of Bermuda for the appointment of a third
arbitrator and in such case the person so appointed shall be deemed
and shall act as the third arbitrator. Upon acceptance of the
appointment by said third arbitrator, the Arbitration Board for the
controversy in question shall be deemed fixed.
The Arbitration Board shall fix, by a notice in writing to the
parties involved, a reasonable time and place for the hearing and
may in said written notice or at the time of the commencement of
said hearing, at the option of said Arbitration Board, prescribe
reasonable rules and regulations governing the course and conduct
of said hearing.
The Board, shall, within ninety (90) calendar days following the
conclusion of the hearing, render its decision on the matter or
matters in controversy in writing and shall cause a copy thereof to
be served on all parties thereto. In case the Board fails to reach
a unanimous decision, the decision of the majority of the members
of the Board shall be deemed to be the decision of the Board.
Each party shall bear the expense of its own arbitrator. The
remaining cost of the arbitration shall be borne equally by the
parties to such arbitration.
All awards made by the Arbitration Board shall be final and no
right of appeal shall lie from any award rendered by the
Arbitration Board. The parties agree that the Supreme Court of
Bermuda: (i) shall not grant leave to appeal any award based upon
a question of law arising out of the award; (ii) shall not grant
leave to make an application with respect to an award; and (iii)
shall not assume jurisdiction upon any application by a party to
determine any issue of law arising in the course of the arbitration
proceeding, including but not limited to whether a party has been
guilty of fraud.
All awards made by the Arbitration Board may be enforced in the
same manner as a judgment or order from the Supreme Court of
Bermuda and judgment may be entered pursuant to the terms of the
award by leave from the Supreme Court of Bermuda.
The Insurer and the Insureds agree that in the event that claims
for indemnity or contribution are asserted in any action or
proceeding against the Insurer by any of the Insureds' other
insurers in any jurisdiction or forum other than that set forth in
this clause, the Insureds will in good faith take all reasonable
steps requested by the Insurer to assist the Insurer in obtaining
a dismissal of these claims (other than on the merits) and will,
without limitation, undertake to the court or other tribunal to
reduce any judgment or award against such other insurers to the
extent that the court or tribunal determines that the Insurer would
have been liable to such insurers for indemnity or contribution
pursuant to this policy. The Insureds shall be entitled to assert
claims against the Insurer for coverage under this policy,
including, without limitation, for amounts by which the Insureds
reduced its judgment against such other insurers in respect of such
claims for indemnity or contribution, in an arbitration between the
Insurer and the Insureds pursuant to this clause; provided,
however, that the Insurer in such arbitration in respect of such
reduction of any judgment shall be entitled to raise any defenses
under this policy and any other defenses (other than jurisdictional
defenses) as it would have been entitled to raise in the action or
proceeding with such insurers.
J. Governing Law and Interpretation: This policy shall be construed
and enforced in accordance with the internal laws of the State of
New York (with the exception of Section IV(i), which shall be
construed and enforced in accordance with the laws of Bermuda),
except insofar as such laws may prohibit payment hereunder in
respect of punitive damages; provided, however, that the terms,
conditions, exclusions and limitations of this policy are to be
construed in an evenhanded fashion as between the Insureds and the
Insurer. Without limitation, where the language of this policy is
deemed to be ambiguous or otherwise unclear, the issues shall be
resolved in the manner most consistent with the relevant terms,
conditions, exclusions and limitations (without regard to
authorship of the
D & O 12-88 (B) 5
<PAGE>
language, without any presumption or arbitrary interpretation or
construction in favour of either the Insureds or the Insurer and
without reference to parol evidence).
K. Liability of the Company: The Insured Company, the Insured Persons
and the Insurer agree that the liability and obligations of the
Insurer hereunder shall be satisfied from the funds of the Insurer
alone and that the individual shareholders of the Insurer shall
have no liability hereunder to the Insured Company or the Insured
Persons.
L. Headings: The descriptions in the headings and sub-headings of
this policy are inserted solely for convenience and do not
constitute any part of the terms or conditions hereof.
M. Currency: The premiums and any Loss under this policy are payable
in United States currency.
N. Assignment: Assignment of interest under this policy shall not
bind the Insurer unless and until its consent is endorsed hereon.
V. DEFINITIONS
A. The terms "Wrongful Act" and "Loss" shall have the same meanings in
this policy as are attributed to them in the Followed Policy. The
terms "Insurer", "Followed Policy", "Underlying Policies", "Policy
Period" and "Aggregate Limit of Liability" shall have the meanings
attributed to them in the Declarations.
B. The term "Insured Persons" shall mean those directors, officers and
other individuals insured by the Followed Policy.
C. The term "Insured Company" shall mean the entity named in Item 1 of
the Declarations and any subsidiaries or affiliates thereof insured
by the Followed Policy.
D. The term "Policy Year" shall mean the period of one year following
the inception of this policy or any anniversary, or, if the time
between inception or any anniversary and the termination of this
policy is less than one year, the lesser period. If the discovery
period hereunder is exercised as a result of the cancellation of or
refusal to renew this policy by the Insurer, such period shall be
considered a separate Policy Year. If the discovery period is
otherwise exercised, such period shall be part of the last Policy
Year and not an additional period.
E. The term "Underlying Limit" shall mean an amount equal to the
aggregate of all limits of liability as set forth in Item 2 of the
Declarations for all Underlying Policies, plus the uninsured
retention, if any, applicable to the primary insurance as set forth
in Item 2 of the Declarations.
IN WITNESS WHEREOF, this policy has been mae, entered into and executed
by the Insurer in Hamilton, Bermuda as of the date set forth in the
Declarations.
A.C.E. INSURANCE COMPANY (BERMUDA) LTD.
By: /s/CHARLES D. SMITH
Charles D. Smith
Title: Senior Vice President- Underwriting
D & O 12-88 (B) 6
<PAGE>
Endorsement No. 1 to
A.C.E. Insurance Company (Bermuda) Ltd.
Policy No. PG-6797D
Insured Company: THE PROCTER & GAMBLE
COMPANY
CANCELLATION ENDORSEMENT
------------------------
(1 Year Policy)
It is agreed and acknowledged that Section IV (F) of this policy is
deleted in its entirety.
It is further agreed and acknowledged that this policy shall not be
subject to Clause 7 (Automatic Extension) of the Followed Policy.
Nothing herein contained shall be held to vary, alter, waive or extend
any of the terms, conditions, exclusions or limitations of the above-
mentioned policy, except as expressly stated herein. This endorsement is
part of such policy and takes effect as of June 30, 1993.
/s/CHARLES D. SMITH
------------------------
Authorized Representative
<PAGE>
ADDITIONAL/RETURN PREMIUM NIL
DISCOVERY PERIOD ENDORSEMENT
It is agreed and acknowledged that Section IV(A) (Discovery Period) is
deleted and replaced in its entirety by the following:
IV(A)(1) If the INSURER or the Insured Company cancels or elects not to
renew this POLICY, then the INSURED persons or INSURED company
shall have the right, upon payment of an additional premium of 100%
of the sum of all premiums otherwise paid or due for the POLICY
YEAR in which such election is made, to a continuation of the
reporting period of this POLICY in respect of any CLAIMS first made
against the INSURED persons or INSURED company or any of them
during a period (hereinafter referred to as the "Discovery Period")
after the end of the Policy Period, but only if the CLAIMS are
based on WRONGFUL ACTS alleged to have been committed prior to the
end of the POLICY PERIOD. Such CLAIMS shall be deemed to have been
made during the last POLICY YEAR provided that notification of each
CLAIM is in accordance with Clause IV C below. The right to elect
the Discovery Period shall terminate, however, unless written
notice of such election together with the additional premium is
received by the INSURER within ten (10) days after the end of the
POLICY PERIOD. Any premium paid for the Discovery Period is not
refundable.
(2) The length of the Discovery Period shall be the same amount of time
as the length of the POLICY PERIOD, subject to a maximum Discovery
Period of one year.
(3) The offer by the INSURER of renewal at a premium different from the
premiums for the expiring POLICY YEAR shall not constitute an
election by the INSURER not to renew this POLICY.
(4) The Discovery Period does not reinstate or increase the LIMIT OF
LIABILITY of this POLICY.
The effective date of this endorsement is June 30, 1993.
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-6797D
of A.C.E. INSURANCE COMPANY (BERMUDA) LTD.
Issued to: THE PROCTER & GAMBLE COMPANY
Date of Issue: March 15, 1994
End. No. 2 By /s/CHARLES D. SMITH
Authorized Representative
<PAGE>
ADDITIONAL/RETURN PREMIUM NIL
CLAUSE III B AMENDATORY ENDORSEMENT
-----------------------------------
In consideration of the premium charged it is hereby understood and agreed
that Clause IIIB (i) and (ii) is amended to read as follows:
B. It is a condition of this policy that the Followed Policies shall be
maintained in full effect with solvent insurers during the policy period
listed in Item 2 of the Declarations except for any reduction or
exhaustion of the aggregate limits contained therein by reason of Loss
paid thereunder (as provided for in Section II (C) above). Unless the
Insurer otherwise agrees in writing, this policy shall: (i) immediately
and automatically terminate on the date any of the Followed Policies
ceases to be in full effect; and (ii) automatically terminate 30 days
following the date an insurer of any Followed Policy becomes subject to
a receivership, liquidation, dissolution, rehabilitation or any similar
proceeding or is taken over by any regulatory authority unless the
Insured Company obtains replacement coverage for such Followed Policy
within such 30 day period. In the event this policy automatically
terminates pursuant to this Section III(B), the Insurer shall retain the
pro-rata proportion of the premium. Payment or tender of any unearned
premium by the Insurer shall not be a condition precedent to the
effectiveness of such termination, but such payment shall be made as
soon as practicable.
The effective date of this endorsement is June 30, 1993
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-6797D
of A.C.E. INSURANCE COMPANY (BERMUDA) LTD.
Issued to: THE PROCTER & GAMBLE COMPANY
Date of Issue: March 15, 1994
End No. 3 By /s/CHARLES D. SMITH
Authorized Representative
<PAGE>
END.D.1.-7/91
ADDITIONAL/RETURN PREMIUM $ NIL
IT IS UNDERSTOOD AND AGREED THAT SECTION II - A & C IS REPLACED BY THE
FOLLOWING:
A. IT IS EXPRESSLY AGREED THAT LIABILITY FOR ANY COVERED LOSS WITH
RESPECT TO CLAIMS FIRST MADE IN EACH POLICY YEAR SHALL ATTACH TO
THE INSURER ONLY AFTER THE INSURERS OF THE UNDERLYING POLICIES, THE
INSURED COMPANY AND/OR THE INSURED PERSONS SHALL HAVE PAID, IN THE
APPLICABLE LEGAL CURRENCY, THE FULL AMOUNT OF THE UNDERLYING LIMITS
FOR SUCH POLICY YEAR. THE INSURER SHALL THEN BE LIABLE TO PAY ONLY
COVERED LOSS IN EXCESS OF SUCH UNDERLYING LIMIT UP TO ITS AGGREGATE
LIMIT OF LIABILITY AS SET FORTH IN ITEM 5 OF THE DECLARATIONS,
WHICH SHALL BE THE MAXIMUM AGGREGATE LIABILITY OF THE INSURER UNDER
THIS POLICY WITH RESPECT TO ALL CLAIMS FIRST MADE IN EACH POLICY
YEAR AGAINST ALL INSURED PERSONS IRRESPECTIVE OF THE TIME OF
PAYMENT BY THE INSURER.
C. IN THE EVENT AND ONLY IN THE EVENT OF THE REDUCTION OR EXHAUSTION
OF THE UNDERLYING LIMITS BY REASON OF THE INSURERS OF THE UNDERLYING POLICY,
THE INSURED COMPANY AND/OR THE INSURED PERSONS PAYING, IN THE APPLICABLE
LEGAL CURRENCY, LOSS OTHERWISE COVERED HEREUNDER, THIS POLICY SHALL: (i) IN
THE EVENT OF REDUCTION, PAY EXCESS OF THE REDUCED UNDERLYING LIMIT, AND (ii)
IN THE EVENT OF EXHAUSTION, CONTINUE IN FORCE AS PRIMARY INSURANCE; PROVIDED
ALWAYS THAT IN THE LATTER EVENT THIS POLICY SHALL ONLY PAY EXCESS OF THE
RETENTION APPLICABLE TO THE PRIMARY INSURANCE AS SET FORTH IN ITEM 2 OF THE
DECLARATIONS, WHICH RETENTION SHALL BE APPLIED TO ANY SUBSEQUENT LOSS IN THE
SAME MANNER AS SPECIFIED IN SUCH PRIMARY INSURANCE.
NOTHING HEREIN CONTAINED SHALL BE HELD TO VARY, ALTER, WAIVE OR EXTEND ANY OF
THE TERMS, CONDITIONS, EXCLUSIONS OR LIMITATIONS OF THE ABOVE-MENTIONED
POLICY, EXCEPT AS EXPRESSLY STATED HEREIN.
The effective date of this endorsement is June 30, 1993
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-6797D
of A.C.E. INSURANCE COMPANY (BERMUDA) LTD.
Issued to: THE PROCTER & GAMBLE COMPANY
Date of Issue: March 15, 1994
End No. 4 By /s/CHARLES D. SMITH
Authorized Representative
<PAGE>
ADDITIONAL/RETURN PREMIUM NIL
DIRECTORS AND OFFICERS LIABILITY ENDORSEMENT
--------------------------------------------
In consideration of the premium charged it is hereby agreed and acknowledged
that coverage afforded by this Policy is only in respect of Directors and
Officers Liability and not Company Reimbursement.
The effective date of this endorsement is June 30, 1993
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-6797D
of A.C.E. INSURANCE COMPANY (BERMUDA) LTD.
Issued to: THE PROCTER & GAMBLE COMPANY
Date of Issue: March 15, 1994
End No. 5 By /s/CHARLES D. SMITH
Authorized Representative
<PAGE>
ADDITIONAL/RETURN PREMIUM NIL
In consideration of the premium charged, it is hereby understood and agreed
that Item 1 on the declarations "INSURED COMPANY" is amended to include:-
"OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY"
The effective date of this endorsement is June 30, 1993
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-6797D
of A.C.E. INSURANCE COMPANY (BERMUDA) LTD.
Issued to: THE PROCTER & GAMBLE COMPANY
Date of Issue: March 15, 1994
End No. 6 By /s/CHARLES D. SMITH
Authorized Representative
<PAGE>
Exhibit (99-4)
--------------
Fiduciary Responsibility Insurance Policy
<PAGE>
Pension and Welfare Fund
Fiduciary Responsibility Insurance Declarations
1. Designated Trust or Plan Policy Number
The Procter & Gamble Company
68 FF 100827733 BCA
Profit Sharing Trust; etal
2. Mailing Address
One Procter & Gamble Plaza, Cincinnati, Ohio 45202
3. Policy Period
From 6/30/93 to 6/30/94 12:01 a.m.
Standard Time at the Mailing Address Stated in Item 2.
4. Annual Aggregate Limit of Liability
Aetna Casualty and Surety Company
$20,000,000 part of $30,000,000
Celtic Insurance Company $10,000,000 part of $30,000,000
5. Insurance Representative 6.
Premium for the
Policy Period $139,100
Gerald L. Leighton Premium Payable to
The Aetna Casualty and Surety Company
7. Endorsements made a part of the policy (Designated by Endorsement
Number)
F-1282, F-1274, F-1401, F-1400, Deductible Endorsement, Impairment of
Assets Endorsement, Pollution Exclusion Endorsement, Special Endorsement
#1
Countersigned by /s/ROBERT D. LANG
<PAGE>
PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY
INSURANCE POLICY
THIS IS A CLAIMS MADE POLICY
IN CONSIDERATION of the payment of the premium stated in the Declarations and
subject to all of the terms, conditions, and limitations of this Policy, the
Company agrees as follows:
I. INSURING AGREEMENT.
The Company will pay on behalf of the Insured all sums which the
Insured shall become legally obligated to pay as Damages on account
of any claim made against the Insured for any Wrongful Act and the
Company shall have the right and duty to defend such claim against the
Insured seeking such Damages, even if any of the allegations of the
claim are groundless, false or fraudulent, and may make such
investigation and settlement of any claim as it deems expedient, but
the Company shall not be obligated to pay any claim or judgment or to
defend any suit after the applicable limit of the Company's liability
has been exhausted by payment of judgments or settlements.
II. EXCLUSIONS.
This insurance does not apply to any claim:
(1) Arising out of any dishonest, fraudulent or criminal act, or
willful or reckless violation of any statute, but this exclusion does
not apply to a claim upon which suit may be brought by reason of any
alleged dishonesty on the part of the Insured, unless:
(a) A judgment or other final adjudication thereof adverse to the
Insured shall establish that acts of active deliberate dishonesty
committed by the Insured was material to the cause of action so
adjudicated or
(b) The claim is a claim by or on behalf of a fidelity insurer
against a natural person whose dishonesty has resulted in a loss
which has been paid under a fidelity bond.
(2) Arising out of libel or slander;
(3) Arising out of bodily injury, sickness, disease or death, or loss
of, injury to, destruction of, or loss of use of, any tangible
property, including loss of currency, coins, bank notes, bullion,
travelers checks, register checks, money orders, and all negotiable
and non-negotiable instruments or contracts representing money;
(4) Arising out of the Insured's failure to comply with any law
concerning Workers' Compensation, Unemployment Insurance, Social
Security or Disability Benefits, or any similar law;
(5) Arising out of the failure to procure or maintain adequate
insurance or bonds on assets or property of the Trust or Employee
Benefit Plan designated in the Declarations;
(6) Arising out of liability of others assumed by the Insured under
any contract or agreement, either oral or written, except in
accordance with the Agreement and Declaration of Trust;
(7) Arising out of the Insured gaining in fact any personal profit or
advantage to which such Insured was not legally entitled or for the
return by the Insured of any remuneration paid in fact to such Insured
if payment of such remuneration shall be held by the courts to have
been in violation of law;
(8) For the failure to collect contributions owed to the Trust or
Employee Benefit Plan described in the Declarations from employers
unless such failure is due to the negligence of the Insured or for the
return of any contributions to an employer if such amounts are or
could be chargeable to the Trust or Employee Benefit Plan, but this
exclusion shall not apply to the Company's obligation to defend such
claim nor pay the costs and expenses thereof.
III. DEFINITION OF INSURED.
Each of the following is an Insured to the extent set forth below:
(1) The Trust or Employee Benefit Plan designated in the Declarations
and any additional Trust or Employee Benefit Plan created during the
policy period by the sole sponsor referred to in Item (2) below, or
by any interest owned or controlled by said sole sponsor, provided
written notice of such is given to the Company within 90 days.
(2) An employer who is the sole sponsor of such Trust or Employee
Benefit Plan.
(3) Any natural person who at any time holds or shall have held the
position of:
(a) Trustee of such Trust or Employee Benefit Plan.
(b) Director, officer or employee of such Trust or Employee
Benefit Plan or of such sole sponsor employer.
(4) Any other person or organization designated in the Declarations
as a Fiduciary.
(5) Any other Trust or Employee Benefit Plan of any firm hereafter
acquired through consolidation, merger or takeover by the sole sponsor
or by any interest owned or controlled by said sole sponsor, provided:
(a) Written notice of such acquisition is given to the Company
within 90 days of the effective date of such acquisition, and
(b) The Insured pays the Company an additional premium computed
pro-rata from the date of such acquisition to the end of the
Policy Period, and
(c) That specific Application on the Company's form in use at the
time of acquisition is made to the Company as soon as practicable
after the aforesaid notice is given.
The insurance applies separately to each Insured against whom claim
is made or suit is brought except with respect to the application of
the limits of liability, and it shall also apply to the estates, heirs
and personal representatives of persons insured hereunder.
IV. OTHER DEFINITIONS.
(1) "Wrongful Act" means a breach of fiduciary duty by the Insured in
the discharge of duties as respects the Trust or Employee Benefit Plan
designated in the Declarations; the term includes any negligent act,
error or omission of the Insured in the "Administration" of "Employee
Benefits".
"Administration" as used herein shall mean:
(a) Giving counsel to employees with respect to Employee
Benefits;
(b) Interpreting Employee Benefits;
(c) Handling records in connection with Employee Benefits;
(d) Effecting enrollment, termination or cancellation of
employees under an Employee Benefits program.
"Employee Benefits" as used herein shall mean the Trust or Employee
Benefit Plan designated in the Declarations, Workers' Compensation
Insurance, Unemployment Insurance, Social Security or Disability
Benefits.
(2) "Insurance Representative" means the person designated in the
Declarations as the exclusive agent to act on behalf of the Insureds,
individually or collectively, in all matters relating to insurance
under this policy.
(3) "Damages" shall mean sums of money payable as compensation for
loss or in discharge of an obligation of an Insured to make good a
shortage in the Insured Trust or Employee Benefit Plan. The word
"Damages" shall not include:
(a) Fines, penalties, taxes or punitive or exemplary damage.
(b) Benefits due or to become due under the terms of the Trust
or Plan, unless and to the extent that recovery for such benefits
is based upon a Wrongful Act and is payable as a personal
obligation of an Insured.
V. POLICY PERIOD: TERRITORY.
This insurance applies only to claims first made during the policy
period described in the Declarations within the United States of
America, its territories or possessions or Canada; provided the
Insured at the effective date of this insurance had no knowledge of
or could not have reasonably foreseen any circumstances which might
result in such claim.
VI. LIMITS OF LIABILITY.
Regardless of the number of persons or organizations bringing claims
or suits against the Insured and regardless of the
(F-1191-B) 6-80 2 CAT.796638
PRINTED IN U.S.A.
<PAGE>
number of persons or organizations insured hereunder, the total limit
of the Company's liability to pay Damages because of all claims made
against the Insured during any single policy year shall not exceed the
amount shown in the Declarations as "Annual Aggregate Limit of
Liability", regardless of time of payment.
If the policy period described in the Declarations is for a term of
more than one year, said "Annual Aggregate Limit of Liability" shall
apply separately to each consecutive annual period.
VII. CLAIMS MADE EXTENSION CLAUSE.
If, during the policy period hereof, the Insured shall first become
aware of any Wrongful Act which may subsequently give rise to a claim
against any Insured and shall during the policy period hereof give
written notice to the Company of such Wrongful Act, then any such
claim which is subsequently made against the Insured arising out of
such Wrongful Act shall for the purposes of this policy be deemed to
have been first made against the Insured during the policy period.
VIII. SUPPLEMENTARY PAYMENTS.
The Company will pay in addition to the limits of liability shown in
the Declarations all costs, charges and expenses incurred by the
Company in the investigation, settlement, defense and negotiation of
any claim coming within the terms of this insurance, but, in the event
of any judgment in excess of the amount of the aggregate limit
available under this policy, the Company's liability for the costs and
expenses incurred by it or with its consent shall be such proportion
thereof as the amount of the aggregate limit available under this
policy bears to the amount paid to dispose of the claim. In no event
shall the Company be obligated to pay any claim or judgment or to
defend or continue the defense of any suit after the aggregate limit
of the Company's liability has been exhausted by payment of judgments
or settlements.
The Company will pay in addition to the Limits of Liability shown in
the Declarations reasonable expenses incurred by the Insured at the
Company's request.
IX. CONSENT TO SETTLE.
The Company may, with the written consent of the Insured, make such
settlement or such compromise of any claim or suit as the Company
deems expedient, and if the Insured shall refuse to consent to the
settlement of any claim or suit recommended by the Company, based upon
a judgment or a bonafide offer of settlement, the Insured shall
thereafter negotiate or defend such claim or suit independently of the
Company and on said Insured's own behalf, and in such event the
Damages and expenses accruing or determined through litigation or
otherwise in excess of the amount for which settlement could have been
made as so recommended by the Company shall not be recoverable under
this policy.
X. EXTENSION CLAUSE.
It is agreed that at any time prior to termination or cancellation of
this policy as an entirety, whether by the Insured or by the Company,
the Insured may give to the Company notice that it desires to be
insured for an additional period of twelve (12) months after the
effective date of termination or cancellation, at an additional
premium of 25% of the premium hereunder, for claims made against the
Insured during the said twelve (12) month period by reason of a
Wrongful Act committed or alleged to have been committed prior to the
effective date of termination or cancellation and which would be
otherwise insured by this policy, subject to the following provisions:
(a) Such additional period shall be deemed part of the policy
period and not an addition thereto;
(b) Such additional period of time shall terminate forthwith on
the effective date of any other insurance obtained by the Insured
or its successors in business, replacing in whole or in part the
insurance afforded by this policy. Where such other policy
provides no coverage for loss sustained prior to its effective
date, it shall not be deemed to be a replacement of this policy.
If the policy period described in the Declarations is for a term of
more than one year, the maximum premium for this extension shall be
25% of the equivalent annual premium.
XI. CONDITIONS.
(1) Insureds Duties In The Event Of Occurrence, Claim Or Suit.
It is a condition precedent to the application of all insurance
afforded herein that:
(a) In the event the Insured shall first become aware of any
claim or allegation of a Wrongful Act, or any occurrence which
might reasonably give rise to such claim or allegation of a
Wrongful Act, written notice containing particulars sufficient
to identify the Insured and any claimant and also reasonably
obtainable information with respect to the time, place and
circumstances thereof, and the names and addresses of the injured
parties and of available witnesses, shall be given by or for the
Insured to the Company or any of its authorized agents as soon
as practicable;
(b) If claim is made or suit is brought against an Insured, the
Insured or Insurance Representative shall immediately forward to
the Company every demand, notice, summons or other process
received;
(c) The Insured shall cooperate with the Company and, upon the
Company's request, assist in making settlements, in the conduct
of suits and in enforcing any right of contribution or indemnity
against any person or organization who may be liable to the
Insured because of an act with respect to which insurance is
afforded under this policy; and the Insured shall attend hearings
and trials and assist in securing and giving evidence and
obtaining the attendance of witnesses. The Insured shall not
voluntarily assume or admit any liability, nor, except at said
Insured's own cost, voluntarily make any payment, assume any
obligations or incur any expense without the Company's prior
written consent.
(2) Action Against The Company.
No action shall lie against the Company unless, as a condition
precedent thereto, there shall have been full compliance with all of
the terms of this policy, nor until the amount of the Insured's
obligation to pay shall have been finally determined either by
judgment against the Insured after actual trial or by written
agreement of the Insured, the claimant and the Company.
Any person or organization or the legal representative thereof who has
secured such judgment or written agreement shall thereafter be
entitled to recover under this policy to the extent of the insurance
afforded by this policy. No person or organization shall have any
right under this policy to join the Company as a party to any action
against the Insured to determine the Insured's liability nor shall the
Company be impleaded by the Insured or said Insured's legal
representative. Bankruptcy or insolvency of the Insured or of the
Insured's estate shall not relieve the Company of any of its
obligations hereunder.
(3) Other Insurance.
This insurance shall apply only as excess insurance over any other
valid and collectible insurance available to the Insured.
(4) Subrogation.
In the event of any payment under this policy, the Company shall be
subrogated to all the Insured's rights of recovery therefor against
any person or organization and the Insured shall execute and deliver
instruments and papers and do whatever else is necessary to secure
such rights. The Insured shall do nothing after loss to prejudice
such rights.
(5) Changes.
Notice to any agent or knowledge possessed by any agent or by any
other person shall not effect a waiver or a change in any part of this
policy or estop the Company from asserting any right under the terms
of this policy, nor shall the terms of this policy be waived or
changed, except by endorsement issued to form a part of this policy.
(6) Assignment.
Assignment of interest under this policy shall not bind the Company
until its consent is endorsed hereon; if, however, the Insured shall
become incompetent or die, such insurance as is afforded by this
policy shall apply to the Insured's legal representative as an
Insured, but only while acting within the scope of said Insured's
duties as such.
(7) Cancellation.
This policy may be cancelled on behalf of the Insureds at any time by
written notice to the Company. This policy may also be cancelled on
behalf of the Company by mailing to the Insurance Representative at
the address of the Trust or Plan shown in the Declarations, written
notice stating when, not less than thirty (30) days thereafter, the
cancellation shall become effective. The mailing of such notice shall
be sufficient proof of notice, and this policy shall terminate at the
date and hour specified in such notice.
3
<PAGE>
If this policy shall be cancelled by the Insureds the Company shall
retain the customary short rate proportion of the premium hereon.
If this policy shall be cancelled by or on behalf of the Company, the
Company shall retain the pro-rata proportion of the premium hereon.
Payment or tender of any unearned premium by the Company shall not be
a condition precedent to the effectiveness of cancellation, but such
payment shall be made as soon as practicable.
(8) Declarations.
By acceptance of this policy, each Insured agrees that the statements
in the Application attached to this policy are said Insured's
agreements and representations, that this policy is issued in reliance
upon the truth of such representations and that this policy embodies
all agreements existing between said Insured and the Company or any
of its agents relating to this insurance.
(9) Authorization.
By acceptance of this policy, the Insurance Representative agrees to
act on behalf of all Insureds with respect to the payment of premiums
and the receiving of any return premiums that may become due under
this policy, and the receiving of all notices of cancellation, non-
renewal or change of coverages and the Insureds agree that they have,
individually and collectively, delegated this authority exclusively
to the Insurance Representative. Nothing herein shall relieve each
Insured from giving any notice to the Company that is required under
Condition (1) of the policy.
(10) Recourse.
In the event that an Insured breaches any fiduciary obligation imposed
by the Employee Retirement Income Security Act of 1974, as it may be
amended from time to time, it is agreed that the Company has the right
of recourse against any such Insured for any amount paid by the
Company on account of such a breach of fiduciary obligation, but the
Company shall have no such right of recourse if this policy has been
purchased by an Employer or by an Employee organization.
(11) Liberalization Clause.
If during the period that insurance is in force under this policy, or
within 45 days prior to the inception date thereof, on behalf of the
Company there be adopted, or filed with and approved or accepted by
the insurance supervisory authorities, all in conformity with law, any
changes in the form attached to this policy by which this form of
insurance could be extended or broadened without increased premium
charge by endorsement or substitution of form, then such extended or
broadened insurance shall inure to the benefit of the Insured
hereunder as though such endorsement or substitution of form had been
made.
IN WITNESS WHEREOF, the Company has caused this policy to be signed
by its President and a Secretary at Hartford, Connecticut, and countersigned
on the Declarations page by a duly authorized agent of the Company.
/s/LOUISE L. MCCORMICK /s/RONALD E. COMPTON
Secretary President
<PAGE>
PENSION AND WELFARE FUND
FIDUCIARY RESPONSIBILITY INSURANCE POLICY
OMNIBUS NAME OF DESIGNATED TRUST OR PLAN ENDORSEMENT
(To be attached to and form part of Pension and Welfare Fund
Fiduciary Responsibility Insurance Policy)
It is agreed that:
1. From and after the time this endorsement becomes effective, the Name
of Designated Trust or Plan referred to in Item 1. of the Declarations
is:
Any Employee Benefit Plan sponsored by the employer listed in Item 2.,
below, or jointly-sponsored by said employer and a labor organization,
for the exclusive benefit of the employees of said employer; subject,
however, to the notice requirement set forth in Section III (5)
DEFINITION OF INSURED.
2. Name of employer: The Procter & Gamble Company
This endorsement, issued by one of the below named companies, forms a part of
the policy to which attached, effective on the inception date of the policy
unless otherwise stated herein.
(The information below is required only when this endorsement is issued
subsequent to preparation of the policy.)
Endorsement effective 6-30-93 Policy No. 68 FF 100827733 BCA
Endorsement No.
Name of Designated Trust or Plan
The Procter & Gamble Company Profit Sharing Trust; etal
Countersigned by /s/ROBERT D. LANG
(Authorized Representative)
The Aetna Casualty and Surety Company
The Standard Fire Insurance Company
Hartford, Connecticut 06156
(F-1282) ed. 6-80 CAT.04640A
PRINTED IN U.S.A.
<PAGE>
PENSION AND WELFARE FUND
FIDUCIARY RESPONSIBILITY INSURANCE POLICY
CONTINUITY OF COVERAGE ENDORSEMENT
It is agreed that the policy is amended as follows:
1. By deleting Section V. POLICY PERIOD: TERRITORY. and substituting in
lieu thereof the following:
V. POLICY PERIOD: TERRITORY.
This insurance applies only to claims first made during the policy
period described in the Declarations within the United States of
America, its territories or possessions or Canada; provided the
Insured at the effective date of this insurance, or at the time the
Insured first purchased Prior Similar Coverage, had no knowledge of
or could not have reasonably foreseen any circumstances which might
result in such claim; but this insurance shall not apply to claims
arising out of any Wrongful Act of which the Insured became aware
while such Prior Similar Coverage was in effect and which was reported
to the company which provided such Prior Similar Coverage.
2. By adding to Section IV. OTHER DEFINITIONS. the following new
definition:
(4) "Prior Similar Coverage" shall mean insurance which provides in
whole or in part the insurance afforded by this policy which the
Insured has maintained on an uninterrupted basis until the effective
date of this policy.
This endorsement forms a part of the policy to which attached, effective on
the inception date of the policy unless otherwise stated herein.
(The information below is required only when this endorsement is issued
subsequent to preparation of the policy.)
Endorsement effective 6-30-93 Policy No. 66 FF 100827733 BCA
Endorsement No.
Name of Designated Trust or Plan
The Procter & Gamble Company Profit Sharing Trust; etal
The Aetna Casualty and Surety Company
Hartford, Connecticut 06156
Countersigned by /s/ROBERT D. LANG
(Authorized Representative)
CAT. 007900
(F-1274) ED. 1-80 PRINTED IN U.S.A.
<PAGE>
PENSION AND WELFARE FUND
FIDUCIARY RESPONSIBILITY INSURANCE POLICY
ENDORSEMENT FR-1
It is agreed that the policy is amended as follows:
1. By deleting paragraph (1) of Section II. EXCLUSIONS and substituting
the following therefor:
(1) Arising out of any dishonest, fraudulent or criminal act, or
willful violation of any statute, but this exclusion does not apply
a claim upon which suit may be brought by reason of any alleged
dishonesty on the part of the Insured, unless:
2. By deleting Section X. EXTENSION CLAUSE in its entirety and
substituting the following therefor:
X. EXTENSION CLAUSE.
It is agreed that if the Company terminates or refuses to renew this
policy, the Insured may give to the Company notice that it desires to
be insured for an additional period of twelve (12) months after the
effective date of termination or nonrenewal, provided that written
notice of its desire to be insured for said additional period is given
to the Company prior to the effective date of termination or
nonrenewal of the policy by the Company or within 10 days following
the effective date of termination or nonrenewal.
If the Insured terminates this policy or declines to accept renewal,
the Insured may give to the Company notice that it desires to be
insured for an additional period of twelve (12) months after the
effective date of termination or nonrenewal, provided that written
notice of its desire to be insured for said additional period is given
to the Company prior to the effective date of termination or
nonrenewal.
The Company, at its sole option, may grant further extension periods
beyond the twelve (12) months provided for herein.
The insurance afforded during any extension period or periods shall
apply only to claims made against the Insured during the said
extension period or periods by reason of a Wrongful Act committed or
alleged to have been committed prior to the effective date of
termination or nonrenewal and which would be otherwise insured by this
policy, subject to the following provisions:
(a) Such additional period shall be deemed part of the policy
period and not an addition thereto;
(b) Such additional period of time shall terminate forthwith on
the effective date of any other insurance obtained by the Insured
or its successors in business, replacing in whole or in part the
insurance afforded by this policy. Where such other policy
provides no coverage for loss sustained prior to its effective
date, it shall not be deemed to be a replacement of this policy.
The Insured shall pay to the Company an additional premium of 25% of
the equivalent annual premium hereunder for each 12 month period of
extension.
3. By deleting subsection (1)(a) of Section XI. CONDITIONS and
substituting the following therefor:
(a) In the event the Insured shall first become aware of any
claim or allegation of a Wrongful Act, written notice of such
claim or allegation shall be given by or for the Insured to the
Company or any of its authorized agents as soon as practicable
and the Insured shall give the Company such information
concerning such claim or allegation as the Company shall
reasonably require.
This endorsement forms a part of the policy to which attached, effective on
the inception date of the policy unless otherwise stated herein.
(The information below is required only when this endorsement is issued
subsequent to preparation of the policy.)
Endorsement effective 6-30-93 Policy No. 68 FF 100827733 BCA
Name of Designated Trust or Plan
The Procter & Gamble Company Profit Sharing Trust; etal
Countersigned by /s/ROBERT D. LANG
(Authorized Representative)
CAT. 610836
(F-1401) ED. 1-83 PRINTED IN U.S.A.
<PAGE>
PENSION AND WELFARE FUND
FIDUCIARY RESPONSIBILITY INSURANCE POLICY
ENDORSEMENT FR-2
It is agreed that the policy is amended as follows:
Section I. INSURING AGREEMENT is deleted in its entirety and the following is
substituted therefor:
I. INSURING AGREEMENT.
The Company will pay on behalf of the Insured all sums which the Insured
shall become legally obligated to pay as Damages on account of any claim made
against the Insured for any Wrongful Act committed or alleged to have been
committed by the Insured or by any natural person for whose Wrongful Act the
Insured is legally liable.
The Company shall have the right and duty to defend the Insured in any claim
seeking pecuniary or nonpecuniary relief for a Wrongful Act even if the
allegations of the claim are groundless, false or fraudulent, and may make
such investigation and settlement of any claim as it deems expedient, or may,
at its sole option, give its written consent to the defense by the Insured of
such claim, but the Company shall not be obligated to pay any claim or
judgment or to defend any suit, nor pay for the defense of any suit being
conducted by the Insured with the Company's written consent, after the
applicable limit of the Company's liability has been exhausted by payment of
judgments or settlements.
This endorsement forms a part of the policy to which attached, effective on
the inception date of the policy unless otherwise stated herein.
(The information below is required only when this endorsement is issued
subsequent to preparation of the policy.)
Endorsement effective 6-30-93 Policy No. 68 FF 100827733 bca
Name of Designated Trust or Plan
The Procter & Gamble Company Profit Sharing Trust; etal
Countersigned by /s/ROBERT D. LANG
(Authorized Representative)
CAT. 610844
(F-1400) ED. 1-83 PRINTED IN U.S.A.
<PAGE>
PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY
To be attached to and form part of Policy No. 68 FF 100827733 BCA
issued to The Procter & Gamble Company Profit Sharing Trust; et al
It is agreed that:
The attached policy is amended by adding an additional section thereto
as follows:
"XII DEDUCTIBLE AMOUNT
**Twenty Five Thousand and 00/100------ ($25,000.00) (hereinafter
referred to as Deductible Amount) shall be deducted from the
amount of each claim covered hereunder, including all expense
incurred, and the Company shall be liable only in excess of such
Deductible Amount. Claims based on or arising out of the same
Wrongful Act or interrelated Wrongful Acts of one or more of the
Insureds shall be considered a single claim and only one
Deductible Amount shall be applied to each single claim.
Subject to Section IX, CONSENT TO SETTLE, of the attached policy,
the Company may pay any part or all of the Deductible Amount to
effect settlement of any claim or suit and upon notification of
the action taken, the Insured shall promptly reimburse the
Company for such part of the Deductible Amount as has been paid
by the Company.
**This Endorsement has been amended as follows:
The Deductible is to apply to defense costs only.
THE AETNA CASUALTY AND SURETY COMPANY
By: /s/ROBERT D. LANG
Authorized Representative
Accepted by:
_____________________________
Insurance Representative
(Excess over an underlying amount)
<PAGE>
ENDORSEMENT
To be attached to and form part of
Policy No. 68 FF 100827733 BCA
issued to The Procter & Gamble Company Profit Sharing Trust; etal
It is agreed that:
1. Section II of the attached policy, Exclusions, is amended by
adding the following exclusion:
(9) Arising out of plan terminations or restructures alleging
impairment of assets, or alleging wrongful distribution of
plan assets.
This endorsement forms a part of the policy to which attached, effective on
the inception date of the policy unless otherwise stated herein.
(The information below is required only when this endorsement is issued
subsequent to preparation of the policy.)
Endorsement effective Policy No.
Name of Designated Trust or Plan
Countersigned by /s/ROBERT D. LANG
(Authorized Representative)
Accepted by:
_______________________________
Insurance Representative
TO EXCLUDE LOSS ALLEGING IMPAIRMENT
OR WRONGFUL DISTRIBUTION OF ASSETS
CAT. 852716
(F-2036) ED.11-89 PRINTED IN U.S.A.
<PAGE>
ENDORSEMENT
To be attached to and form part of Policy No. 68 FF 100827733 BCA
issued to The Procter & Gamble Company Profit Sharing Trust; etal
It is agreed that:
1. Section II of the attached policy, EXCLUSIONS, is amended by
adding the following exclusion:
(10) Based on, arising out of, directly or indirectly resulting
from, in consequence of, or in any way involving, actual or
alleged seepage, pollution or contamination of any kind.
This endorsement forms a part of the policy to which attached, effective on
the inception date of the policy unless otherwise stated herein.
(The information below is required only when this endorsement is issued
subsequent to preparation of the policy.)
Endorsement effective Policy No.
Name of Designated Trust or Plan
Countersigned by /s/ROBERT D. LANG
(Authorized Representative)
Accepted by:
_______________________________
Insurance Representative
POLLUTION EXCLUSION ENDORSEMENT
CAT.85266A
(F-2035) ED.11-89 PRINTED IN U.S.A.
<PAGE>
SPECIAL ENDORSEMENT #1
To be attached to and form part of Policy 68 FF 100827733 BCA
issued by The Aetna Casualty and Surety Company (hereinafter called
Controlling Company)
in favor of The Procter & Gamble Profit Sharing Trust; et al.
It is agreed that:
1. The term "Underwriter" as used in the attached policy shall be
construed to mean, unless otherwise specified in this rider, all the
Companies executing the attached policy.
2. Each of said Companies shall be liable for such proportion of any
loss under the attached policy as the amount underwritten by such Company as
specified in the Schedule forming a part hereof, bears to the Annual
Aggregate Limit of Liability of the attached policy.
3. Each of said Companies shall be liable for any payments made
pursuant to Section VIII, Supplementary Payments in proportion for which each
Companies' respective Limit of Liability bears to the Annual Aggregate Limit
of the policy.
4. In the absence of a request from any of said Companies to pay
premiums directly to it, premiums for the attached policy may be paid to the
Controlling Company for the account of all of said Companies.
5. In the absence of a request from any of said Companies that
notice of claim and proof of loss be given to or filed directly with it, the
giving of such notice to and the filing of such proof with, the Controlling
Company shall be deemed to be in compliance with the conditions of the
attached policy for the giving of notice of loss and the filing of proof of
loss, if given and filed in accordance with said conditions.
6. The Controlling Company may give notice in accordance with the
terms of the attached policy, terminating or canceling the attached policy,
and any notice so given shall terminate or cancel the liability of all of
said Companies.
7. Any Company other than the Controlling Company may give notice
in accordance with the terms of the attached policy, terminating or canceling
the entire liability of such other Company under the attached policy.
8. In the absence of a request from any of said Companies that
notice of termination or cancellation by the Insured of the attached policy
in its entirety be given to or filed directly with it, the giving of such
notice in accordance with the terms of the attached policy to the Controlling
Company shall terminate or cancel the liability of all of said Companies as
an entirety. The giving of notice for termination or cancellation in
accordance with the terms of the attached bond to any Companies shall
terminate or cancel the liability of the Controlling Company.
9. In the event of the termination or cancellation of the attached
policy as an entirety, no Company shall be liable to the
<PAGE>
68 FF 100827733 BCA
Insured for a greater proportion of any return premium due the Insured than
the amount underwritten by such Company bears to the Annual Aggregate Limit
of Liability of the attached policy.
10. In the event of the termination or cancellation of the attached
policy as to any Company, such Company alone shall be liable to the Insured
for any return premium due the Insured on account of such termination or
cancellation. The termination or cancellation of the attached policy as to
any Company other than the Controlling Company shall not terminate, cancel or
otherwise affect the liability of the other Companies under the attached
policy.
11. This rider shall become effective as of 12:01 a.m. on 6/30/93
standard time.
Underwritten for the sum of $20,000,000
except as follows:
Controlling Company
By: The Aetna Casualty and Surety Company
Attest: /s/DANIEL A. WALLA
Underwritten for the sum of $10,000,000
except as follows:
By: Celtic Insurance Company
Attest:
Accepted:
Insured
By: The Procter & Gamble Company; etal
<PAGE>
THE PROCTER & GAMBLE COMPANY
Cincinnati, Ohio
AUTHORIZE GUARANTEE OF OBLIGATIONS OF
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CELTIC INSURANCE COMPANY, LTD. AND
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OTHER CAPTIVE INSURANCE COMPANIES:
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RESOLVED, That this Company is here by authorized to act as the
Guarantor of the obligations of Celtic Insurance Company, Ltd. and other
captive insurance companies, provided that such obligations are limited to
those arising out of insurance coverage provided to this Company and its
affiliated companies or to selected contractors while they are providing
services to this Company and its affiliated companies and provided further
that this Company shall only act as a Guarantor to the extent that and for so
long as it is able to limit its exposure for any single occurrence to Twenty-
Five Million Dollars ($25,000,000) through the purchase from non-affiliated
companies of excess liability coverage; and
RESOLVED FURTHER, That the appropriate officers of this Company are
hereby authorized and directed to do or cause to be done all acts and things,
and to make, execute and deliver all such statements, documents, agreements
and instruments as they deem necessary or appropriate to fully effectuate the
foregoing resolution.
I, Rita M. Neago, Assistant Secretary of The Procter & Gamble Company
do hereby certify that the above resolution was approved by the Board of
Directors of The Procter & Gamble Company on December 8, 1992 and that said
resolution is still in full force and effect.
/s/RITA M. NEAGO
Assistant Secretary
Cincinnati, Ohio
December 10, 1992
