THE PROCTER & GAMBLE COMPANY
AND SUBSIDIARIES
================================
ANNUAL REPORT ON FORM 10-K
TO THE
SECURITIES AND EXCHANGE COMMISSION
FOR THE
YEAR ENDED JUNE 30, 1998
******************************************
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
--------------------------------------------------
ANNUAL REPORT ON FORM 10-K PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1998 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
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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, 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 1,337,755,222 shares of Common Stock outstanding as of July 31, 1998.
The aggregate market value of the voting stock held by non-affiliates amounted
to $106 billion on July 31, 1998.
Documents Incorporated By Reference
-----------------------------------
Portions of the Annual Report to Shareholders for the fiscal year ended June 30,
1998 are incorporated by reference into Part I, Part II and Part IV of this
report.
Portions of the Proxy Statement for the 1998 Annual Meeting of Shareholders are
incorporated by reference into Part III of this report.
PART I
------
Item 1. Business.
---------
General Development of Business
-------------------------------
The Procter & Gamble Company was incorporated in Ohio in 1905, having been
built from a business founded in 1837 by William Procter and James Gamble.
Today, the Company manufactures and markets a broad range of consumer products
in many countries throughout the world.
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 herein by
reference to the Letter to Shareholders, which appears on pages 1-3, New to the
World Brands on pages 4-5, and New to the Brand Innovations on pages 6-7 of the
Annual Report to Shareholders for the fiscal year ended June 30, 1998.
Financial Information About Industry Segments
---------------------------------------------
The Company's products fall into five business segments: Laundry and
Cleaning, Paper, Beauty Care, Food and Beverage, and Health Care.
Additional information required by this item is incorporated herein by
reference to Note 11 Segment Information of the Notes to the Consolidated
Financial Statements, which appears on page 32, and Financial Review, which
appears on pages 9-17 of the Annual Report to Shareholders for the fiscal year
ended June 30, 1998.
Narrative Description of Business
---------------------------------
The Company's business, represented by the aggregate of its Laundry and
Cleaning, Paper, Beauty Care, Food and Beverage, and Health Care segments, is
essentially homogeneous. For the most part, the factors necessary for an
understanding of these five 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. Most of the Company's products in each of its segments are
distributed through grocery stores and other retail outlets.
The Laundry category and Diaper category constitute approximately 20% and
12% of consolidated fiscal 1998 sales, respectively. These categories
constituted approximately the same percentages of consolidated sales in the
preceding two fiscal years. 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. 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 trademarks of all major products in each segment
are registered. 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.
Additionally, some raw materials, primarily chemicals, are produced by the
Company for further use in the manufacturing process. The Company purchases and
produces a substantial variety of raw materials, no one of which is material to
the Company's business taken as a whole.
Expenditures in fiscal year 1998 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 1999.
Operations outside the United States 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 economic growth. The effect of these additional
elements is less significant in the Food and Beverage segment than in the
Company's other business segments. In addition, several countries in Europe will
be converting their currencies to a common European currency, the euro. This
change and the cost of modification of business systems and processes, is not
expected to have a material impact on the Company's results of operations,
financial position or cash flows.
The Company has approximately 110,000 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 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 from the Company. Such a default is not likely to
occur and therefore there is little likelihood that there would not 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, 1998 are
incorporated by reference to Note 7 Postretirement Benefits and Note 8 Employee
Stock Ownership Plan, which appear on pages 29-31 of the Annual Report to
Shareholders for the fiscal year ended June 30, 1998.
Additional information required by this item is incorporated herein by
reference to Note 11 Segment Information, which appears on page 32, Note 1
Summary of Significant Accounting Policies - Major Customer on page 25,
Financial Highlights, which appears on page 33, and Financial Review, which
appears on pages 9-17 of the Annual Report to Shareholders for the fiscal year
ended June 30, 1998.
Financial Information About Foreign and Domestic Operations
-----------------------------------------------------------
The information required by this item is incorporated herein by reference
to Note 11 Segment Information, which appears on page 32, and Financial Review,
which appears on pages 9-17 of the Annual Report to Shareholders for the fiscal
year ended June 30, 1998.
Item 2. Properties.
-----------
In the United States, the Company owns and operates manufacturing
facilities at 38 locations in 22 states. In addition, it owns and operates 97
manufacturing facilities in 46 other countries. Laundry and Cleaning products
are produced at 44 of these locations; Paper products at 51; Health Care
products at 26; Beauty Care products at 45; and Food and Beverage products at
19. Management believes 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, 1998 representing the Company's probable future costs
that can be reasonably estimated was $8 million.
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 July 31, 1998 are:
<TABLE>
<CAPTION>
Elected to
Present
Name Position Age Position
- ----------------------- ------------------------------------------ --- -------------
<S> <C> <C> <C>
John E. Pepper Chairman of the Board and 59 1995
Chief Executive.
Director since June 12, 1984.
Durk I. Jager President and Chief Operating Officer. 55 1995
Director since December 12, 1989.
Wolfgang C. Berndt Executive Vice President. 55 1995
Harald Einsmann Executive Vice President. 64 1995
Director since June 10, 1991.
Alan G. Lafley Executive Vice President. 51 1995
Jorge P. Montoya Executive Vice President. 52 1995
Richard L. Antoine Senior Vice President. 52 1998
Robert T. Blanchard Group Vice President. 53 1991
Gordon F. Brunner Senior Vice President. 59 1987
Director since March 1, 1991.
Brian J. Buchan Group Vice President. 46 1998
Bruce L. Byrnes Group Vice President. 50 1991
R. Kerry Clark Group Vice President. 46 1995
Michael Clasper Group Vice President. 45 1998
Larry G. Dare Group Vice President. 58 1990
Stephen N. David Senior Vice President. 49 1998
Stephen P. Donovan, Jr. Group Vice President. 57 1986
Todd A. Garrett Senior Vice President. 56 1996
James J. Johnson Senior Vice President and General Counsel. 51 1992
Jeffrey D. Jones Group Vice President. 45 1992
Mark D. Ketchum Group Vice President. 48 1996
Fuad O. Kuraytim Group Vice President. 57 1995
Gary T. Martin Senior Vice President. 53 1991
Claude L. Meyer Group Vice President. 55 1995
Erik G. Nelson Senior Vice President. 58 1993
Martin J. Nuechtern Group Vice President. 44 1997
John O'Keeffe Group Vice President. 48 1995
Charlotte R. Otto Senior Vice President. 44 1996
Dimitri Panayotopoulos Group Vice President. 46 1997
Herbert Schmitz Group Vice President. 61 1995
David R. Walker Vice President and Comptroller. 43 1997
Robert L. Wehling Senior Vice President. 59 1994
</TABLE>
All of the above Executive officers, except David R. Walker, are members of the
Executive Committee of The Procter & Gamble Company and have been employed by
the Company for more than five years.
PART II
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Item 5. Market for the Common Stock and Related Stockholder Matters
-----------------------------------------------------------
The information required by this item is incorporated by reference to
Shareholder Information, which appears on page 36 of the Annual Report to
Shareholders for the fiscal year ended June 30, 1998.
Item 6. Selected Financial Data
-----------------------
The information required by this item is incorporated by reference to
Financial Highlights, which appears on page 33 of the Annual Report to
Shareholders for the fiscal year ended June 30, 1998.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------
The information required by this item is incorporated by reference to
Financial Review, which appears on pages 9-17, Note 10 Commitments and
Contingencies, which appears on page 31, and Note 11 Segment Information, which
appears on page 32 of the Annual Report to Shareholders for the fiscal year
ended June 30, 1998, and supplemented by the press release dated September 9,
1998 included as Exhibit 20. The Company has made certain forward-looking
statements in the Annual Report to Shareholders for the fiscal year ended June
30, 1998, and has and will make such statements in other contexts, relating to
volume growth, increases in market shares, Year 2000 compliance, financial goals
and cost reduction, among others. These forward-looking statements represent
challenging goals for the Company and are based on certain assumptions and
estimates regarding the worldwide economy, technological innovation, competitive
activity, pricing, currency movements, product introductions, governmental
action and the development of certain markets. Among the key factors necessary
to achieve the Company's goals are: (1) the achievement of lower costs and
increases in reliability and capacity utilization, resulting from simplification
and standardization; (2) the ability to improve results despite high levels of
competitive activity and the economic downturn in Asia; (3) the successful
implementation of ECR and the ability to maintain key customer relationships in
important developed markets; (4) the continuation of substantial growth in
significant developing markets such as China, Mexico, Brazil and the countries
of Central and Eastern Europe; (5) obtaining successful outcomes in regulatory,
tax and legal matters; (6) the ability to continue technological innovation; and
(7) the timely resolution of the Year 2000 issue by the Company and its
customers and suppliers. If the Company's assumptions and estimates are
incorrect or do not come to fruition, or if the Company does not achieve all of
these key factors, then the Company's actual performance could vary materially
from the forward-looking statements made herein.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The information required by this item is incorporated by reference to
Financial Review, which appears on pages 9-17, and Note 5 Risk Management
Activities, which appears on pages 26-28 of the Annual Report to Shareholders
for the fiscal year ended June 30, 1998.
Item 8. Financial Statements and Supplemental Data
------------------------------------------
The financial statements and supplemental data are incorporated by
reference to pages 18-33 of the Annual Report to Shareholders for the fiscal
year ended June 30, 1998.
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
2-8 and 22 of the proxy statement filed since the close of the fiscal year ended
June 30, 1998, 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.
Item 11. Executive Compensation
----------------------
The information required by this item is incorporated by reference to pages
9-17 of the proxy statement filed since the close of the fiscal year ended June
30, 1998, 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
19-21 of the proxy statement filed since the close of the fiscal year ended June
30, 1998, 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
22 of the proxy statement filed since the close of the fiscal year ended June
30, 1998, pursuant to Regulation 14A which involved the election of directors.
PART IV
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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 statements of earnings -- for years ended
June 30, 1998, 1997 and 1996
- Consolidated balance sheets -- as of June 30, 1998 and
1997
- Consolidated statements of shareholders' equity -- for
years ended June 30, 1998, 1997 and 1996
- Consolidated statements of cash flows -- for years ended
June 30, 1998, 1997 and 1996
- Notes to consolidated financial statements
2. Financial Statement Schedules:
These schedules 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.
(3-2) -- Regulations.
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 May 12, 1998) 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.
(10-3) -- The Procter & Gamble Executive
Group Life Insurance Policy (each
executive officer is covered for an
amount equal to annual salary plus
bonus).
(10-4) -- Additional Remuneration Plan (as amended
June 12, 1990) which was adopted by the
Board of Directors on April 12, 1949.
(10-5) -- The Procter & Gamble Deferred
Compensation Plan for Directors
which was adopted by the Board of
Directors on September 9, 1980.
(10-6) -- The Procter & Gamble Board of
Directors Charitable Gifts Program
which was adopted by the Board of
Directors on November 12, 1991.
(10-7) -- The Procter & Gamble 1993
Non-Employee Directors' Stock Plan
which was adopted by the
shareholders at the annual meeting
on October 11, 1994 and which was
amended on January 10, 1995, by the
Board of Directors, and ratified by
the shareholders at the annual
meeting on October 10, 1995, and
which was further amended by the
Board of Directors on June 11, 1996
to be effective on January 1, 1997,
and which was also amended on August
22, 1997 for the 2-for-1 stock
split.
(10-8) -- 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 (Incorporated
by reference to Exhibit (10-9) of
the Company's Annual Report on Form
10-K for the year ended June 30,
1994).
(10-9) -- The Procter & Gamble Executive Group Life
Insurance Policy (Additional Policy).
Exhibit (11) -- Computation of earnings per share.
Exhibit (12) -- Computation of ratio of earnings to fixed
charges.
Exhibit (13) -- Annual Report to Shareholders (Pages 1-33,
36).
Exhibit (20) -- Press Release dated September 9, 1998.
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
6/30/01).
(99-2) -- Directors and Officers (First) Excess
Liability Policy (the "Policy Period" has
been extended to 6/30/99).
(99-3) -- Directors and Officers (Second)
Excess Liability Policy (the "Policy
Period" has been extended to 6/30/99).
(99-4) -- Directors and Officers (Third) Excess
Liability Policy (the "Policy Period" has
been extended to 6/30/99).
(99-5) -- Directors and Officers (Fourth)
Excess Liability Policy (the "Policy
Period" has been extended to 6/30/99).
(99-6) -- Fiduciary Responsibility Insurance
Policy (the "Policy Period" has been
extended to 6/30/99).
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
B. Reports on Form 8-K:
The Company filed no Current Reports on Form 8-K during the
quarter ended June 30, 1998 and through the date of this filing.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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 JOHN E. PEPPER
----------------------------------------------------
John E. Pepper
Chairman of the Board and Chief Executive
September 8, 1998
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
--------- ----- ----
JOHN E. PEPPER Chairman of the Board and |
- ----------------------- Chief Executive and Director |
(John E. Pepper) (Principal Executive Officer) |
|
ERIK G. NELSON Senior Vice President |
- ----------------------- (Principal Financial Officer) |
(Erik G. Nelson) |
|
DAVID R. WALKER Vice President and Comptroller |
- ----------------------- (Principal Accounting Officer) |
(David R. Walker) |
|
EDWIN L. ARTZT |
- ----------------------- Director |
(Edwin L. Artzt) |
|
NORMAN R. AUGUSTINE |
- ----------------------- Director |
(Norman R. Augustine) |
|
|
- ----------------------- Director |
(Donald R. Beall) |
|
GORDON F. BRUNNER |
- ----------------------- Director |
(Gordon F. Brunner) |
|
RICHARD B. CHENEY |
- ----------------------- Director |
(Richard B. Cheney) |
|
HARALD EINSMANN |
- ----------------------- Director |
(Harald Einsmann) |
|
RICHARD J. FERRIS |
- ----------------------- Director |
(Richard J. Ferris) |
|
JOSEPH T. GORMAN |
- ----------------------- Director September 8, 1998
(Joseph T. Gorman) |
|
DURK I. JAGER |
- ----------------------- Director |
(Durk I. Jager) |
|
CHARLES R. LEE |
- ----------------------- Director |
(Charles R. Lee) |
|
LYNN M. MARTIN |
- ----------------------- Director |
(Lynn M. Martin) |
|
JOHN C. SAWHILL |
- ----------------------- Director |
(John C. Sawhill) |
|
JOHN F. SMITH, JR. |
- ----------------------- Director |
(John F. Smith, Jr.) |
|
RALPH SNYDERMAN |
- ----------------------- Director |
(Ralph Snyderman) |
|
ROBERT D. STOREY |
- ----------------------- Director |
(Robert D. Storey) |
|
|
- ----------------------- Director |
(Marina v.N. Whitman) |
EXHIBIT INDEX
-------------
Exhibit (3-1) -- Amended Articles of Incorporation.
(3-2) -- Regulations.
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 May 12,
1998) 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.
(10-3) -- The Procter & Gamble Executive Group Life Insurance Policy
(each executive officer is covered for an amount equal to
annual salary plus bonus).
(10-4) -- Additional Remuneration Plan (as amended June 12, 1990) which
was adopted by the Board of Directors on April 12, 1949.
(10-5) -- The Procter & Gamble Deferred Compensation Plan for Directors
which was adopted by the Board of Directors on September 9,
1980.
(10-6) -- The Procter & Gamble Board of Directors Charitable Gifts
Program which was adopted by the Board of Directors on
November 12, 1991.
(10-7) -- The Procter & Gamble 1993 Non-Employee Directors' Stock Plan
which was adopted by the shareholders at the annual meeting
on October 11, 1994 and which was amended on January 10,
1995, by the Board of Directors, and ratified by the
shareholders at the annual meeting on October 10, 1995, and
which was further amended by the Board of Directors on
June 11, 1996 to be effective on January 1, 1997, and which
was also amended on August 22, 1997 for the 2-for-1 stock
split.
(10-8) -- 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 (Incorporated by
reference to Exhibit (10-9) of the Company's Annual Report on
Form 10-K for the year ended June 30, 1994).
(10-9) -- The Procter & Gamble Executive Group Life Insurance Policy
(Additional Policy).
Exhibit (11) -- Computation of earnings per share.
Exhibit (12) -- Computation of ratio of earnings to fixed
charges.
Exhibit (13) -- Annual Report to Shareholders (Pages 1-33, 36).
Exhibit (20) -- Press Release dated September 9, 1998.
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 6/30/01).
(99-2) -- Directors and Officers (First) Excess Liability Policy (the
"Policy Period" has been extended to 6/30/99).
(99-3) -- Directors and Officers (Second) Excess Liability Policy (the
"Policy Period" has been extended to 6/30/99).
(99-4) -- Directors and Officers (Third) Excess Liability Policy (the
"Policy Period" has been extended to 6/30/99).
(99-5) -- Directors and Officers (Fourth) Excess Liability Policy (the
"Policy Period" has been extended to 6/30/99).
(99-6) -- Fiduciary Responsibility Insurance Policy (the "Policy
Period" has been extended to 6/30/99).
Ehibit 3-1
-----------
AMENDED ARTICLES OF INCORPORATION
OF
THE PROCTER & GAMBLE COMPANY
THE PROCTER & GAMBLE COMPANY, a corporation under the laws of the State
of Ohio, adopts these Amended Articles of Incorporation to supersede and take
the place of its existing Amended Articles of Incorporation, and all amendments
thereof, that are in force at this time, and for such purpose certifies as
follows:
First: The name of the corporation is The Procter & Gamble Company.
Second: The place in the State of Ohio where its principal office is
located is in the City of Cincinnati, in Hamilton County.
Third: The purposes for which it is formed are to produce, manufacture,
buy, sell, merchandise and generally deal in the following:
1. Soap, soap products, cleansers, detergents and cleaning products of
any and all kinds, for any and all uses and purposes.
2. Cosmetics, perfumes, toilet powders, toilet waters, and all other
toilet preparations and articles.
3. Fats and oils, hydrogenated fats and oils, and derivatives of fats and
oils for any and all uses and purposes.
4. Cottonseed, soybeans, other oilseeds, oilseed meals, linters, cotton,
hulls and any products and any by-products resulting from the processing
of any of these or any products made therefrom.
5. Cellulose, cellulose products, purified cellulose, forest products,
fibrous products, paper and paper products of any and all kinds, and any
products and any by-products resulting from the processing of any of
these or any products made therefrom.
6. Food products of any and all kinds.
7. Candles, stearine, stearic acid, glycerine, silicate of soda, cuastic
soda and any similar or related products.
8. Organic and inorganic chemicals, chemical compounds, drugs and
pharmaceuticals.
9. All substances and products, kindred to or competitive with any or all
of the foregoing and all that may result from or be convenient to the
production, manufacture, sale and dealing in any or all of the foregoing
substances and products.
10. All substances, materials, and articles made from or containing any
or all of the foregoing products or entering into or convenient for the
manufacture and sale of any or all of the foregoing products.
The purpose for which it is formed also include the power to do all other
things necessary or incident to any or all of the foregoing purposes, including
provision for insurance, financial and other services and of means for the
development, promotion, advertising, marketing and transportation of raw
materials, intermediate or finished products and the power to purchase, acquire,
hold, convey, lease, mortgage or dispose of stock, securities and property, real
or personal, tangible or intangible, in connection therewith or in furtherance
thereof.
In addition to the foregoing specified purposes and not limited in any
manner thereby, the purpose for which it is formed is to engage in any lawful
act or activity for which corporations may be formed under Sections 1701.01 to
1701.98, inclusive, of the Ohio Revised Code.
Fourth: The authorized number of shares without par value is five billion
eight hundred million (5,800,000,000) of which six hundred million (600,000,000)
are classified and designated as Class A Preferred Stock, two hundred million
(200,000,000) are classified and designated as Class B Preferred Stock and five
billion (5,000,000,000) are classified and designated as Common Stock.
1. The express terms and provisions of the shares classified and
designated as Class A Preferred Stock and Class B Preferred Stock are as
follows:
(a) The holders of the shares classified and designated as Class A
Preferred Stock shall be entitled to one (1) vote per share at all
meetings of the shareholders of the Company. The holders of the
shares classified and designated as Class B Preferred Stock shall
not be entitled to vote at meetings of shareholders of the
Company, other than as provided by law.
(b) The Board of Directors is authorized, subject to any
limitations prescribed by law and to the provisions of this
Article Fourth, to adopt amendments to these Amended Articles of
Incorporation in respect of any unissued or treasury shares of the
Class A Preferred Stock and Class B Preferred Stock and thereby to
fix or change: the division of such shares into series and the
designation and authorized number of shares of each series; the
dividend rate; the dates of payment of dividends and the dates
from which they are cumulative; liquidation price; redemption
rights and price; sinking fund requirements; conversion rights;
and restrictions on the issuance of such shares or any series
thereof. In addition the Board of Directors is hereby authorized
to similarly fix or change any or all other express terms in
respect of the Class A Preferred Stock and Class B Preferred Stock
as may be permitted or required by law.
(c) Upon the conversion of any share of Class A Preferred Stock
and Class B Preferred Stock, the stated capital of the Company
shall be reduced or increased in such a manner and at such a rate
so that the stated capital attributable to any share issued upon
the exercise of such conversion rights shall be the same as any
other share of its class and not the stated capital of the share
so converted.
(d) The holders of the shares of Class A Preferred Stock and Class
B Preferred Stock shall receive dividends, when and as declared by
the Board of Directors, out of funds available for the payment of
dividends, before any dividend shall be paid on the shares of
Common Stock. Such dividends shall be payable at the rate per
share per annum, and no more, and pursuant to the other terms as
shall have been fixed by the Board of Directors, and no dividends
shall be paid on the shares of Common Stock unless the current
dividend, and all the arrears of dividends, if any, on the
outstanding shares of the Class A Preferred Stock and Class B
Preferred Stock shall have been paid or provision shall have been
made for the payment thereof.
(e) In case of the dissolution or liquidation of the Company,
before any payment shall be made to the holders of the Common
Stock, the holders of the Class A Preferred Stock and Class B
Preferred Stock shall be entitled to be paid from the assets
available therefor the liquidation price fixed by the Board of
Directors, and all accrued and unpaid dividends thereon, but shall
not be entitled to participate any further in the distribution of
the assets of the Company.
(f) Pursuant to subsection (b) of this Section 1, there is hereby
established a series of the Class A Preferred Stock with nine
million ninety thousand nine hundred nine (9,090,909) shares
authorized which is designated as "Series A ESOP Convertible Class
A Preferred Stock" with express terms as set forth in Appendix A
attached hereto and incorporated herein as if fully set forth
herein.<F1>
(g) Pursuant to subsection (b) of this Section 1, there is hereby
established a series of the Class A Preferred Stock with nineteen
million, one hundred forty-two thousand, four hundred eighteen
(19,142,418) shares authorized which is designated as "Series B
ESOP Convertible Class A Preferred Stock" with express terms as
set forth in Appendix B attached hereto and incorporated herein as
if fully set forth herein.<F2>
2. The express terms and provisions of the shares classified and
designated as Common Stock are as follows:
(a) The holders of said shares shall be entitled to one (1) vote
per share at all meetings of the shareholders of the Company.
(b) After the payment to the holders of all Class A Preferred
Stock and Class B Preferred Stock of the preferential amounts to
which they shall be entitled in the event of the dissolution or
liquidation of the Company, the holders of the shares of Common
Stock shall be entitled to all of the residue of the assets and
shall receive payment thereof in proportion to the shares held by
them respectively.
(c) Subject to the express terms and provisions of the shares
designated as Class A Preferred Stock and Class B Preferred Stock,
the holders of the shares of Common Stock shall have all, and all
other rights, interests, powers and privileges of shareholders of
corporations for profit as provided by law, without any
restrictions, qualifications or limitations thereof.
Fifth: The stated capital of the Company shall be the aggregate stated
capital of all classes of outstanding shares:
(a) The stated capital of shares with par value shall be the par
value of such shares.
(b) The stated capital of shares without par value shall be One
Dollar ($1.00) per share or such other amount required by law.
Sixth: The following provisions are hereby agreed to for the purpose of
defining, limiting and regulating the exercise of the authority of the Company,
or of its shareholders, or of any class of shareholders, or of its directors, or
for the purpose of creating and defining rights and privileges of the
shareholders among themselves:
1. The Company may purchase, hold, sell, and reissue any of its shares
and to the extent that the authority to do the same may be granted under
these Articles, the Board of Directors shall have power to do all said
acts, without any action by shareholders, except as otherwise provided
below in this Article Sixth.
2. No holder of shares of any class shall have any right, pre-emptive or
other, to subscribe for or to purchase from the Company any of the shares
of any class of the Company hereafter issued or sold.
3. (a) Except as otherwise provided in Subsection (b) of this Section
3 the following transactions shall require the affirmative vote of
the holders of at least eighty percent (80%) of the outstanding
shares of capital stock of the Company entitled to vote thereon,
considered for the purposes of this Section 3 as one class:
(i) the purchase by the Company of any of its shares of any
class from any Related Person, if any such shares have been
beneficially owned by the Related Person less than two years
prior to the date of such purchase or any agreement in
respect thereof;
(ii) any merger or consolidation of the Company or a
subsidiary of the Company with or into any Related Person,
in each case without regard to which entity is the surviving
entity;
(iii) any sale, lease, exchange, transfer or other
disposition of all or any substantial part of the assets of
the Company or a subsidiary of the Company to or with any
Related Person;
(iv) the purchase by the Company from any Related Person of
any assets or securities, or a combination thereof, except
assets or securities or a combination thereof so acquired in
a single transaction or a series of related transactions
having an aggregate fair market value of less than Fifty
Million Dollars ($50,000,000);
(v) the issuance or transfer of any securities of the
Company to any Related Person for cash;
(vi) the adoption of any plan or proposal for the voluntary
dissolution, liquidation, spin-off, or split-up of any kind
of the Company or a subsidiary of the Company, or a
recapitalization or reclassification of any securities of
the Company, proposed by or on behalf of any Related Person;
or
(vii) any other material transaction involving the Company
or a subsidiary of the Company with, or proposed by or on
behalf of, any Related Person.
Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that some lesser percentage may
be specified, by law or in any agreement with any national
securities exchange.
(b) The provisions of this Section 3 shall not apply to any
purchase described in Subsection (a)(i) of this Section 3 if the
purchase would be made as part of any purchase by the Company of
its shares made on the same terms to all holders of the shares to
be purchased and complying with the applicable requirements of the
Securities Exchange Act of 1934. the provisions of this Section 3
shall also not apply to any transaction described in Subsection
(a)(ii) through (vii) of this Section 3 if the Board of Directors
of the Company shall by resolution have approved a memorandum of
understanding with such Related Person with respect to and
substantially consistent with such transaction prior to the time
the Related Person became such, or if the transaction is approved
by a resolution adopted by the affirmative vote of at least
two-thirds (2/3) of the members of the whole Board of Directors of
the Company at any time prior to the consummation thereof.
(c) For the purposes of this Section 3, and as guidance to the
Board of Directors for the purpose of Subsection (d) hereof, the
term "Related Person" shall mean (1) any individual, firm,
corporation or other entity, or group thereof acting or agreeing
to act in the manner set forth in Rule 13d-5 under the Securities
Exchange Act of 1934 (the "Act") as in effect on October 8, 1985,
who is the beneficial owner, directly or indirectly, of five
percent (5%) or more of the outstanding shares of capital stock of
the Company entitled to vote generally in the election of
directors and (2) any "Affiliate" or "Associate" of any of the
above or of any entity or group (or any member thereof) described
in Clause (1) above, whether or not acting as a Director of the
Company. The terms "Affiliate" and "Associate" as used herein
shall have the respective meanings ascribed to such terms in The
General Rules and Regulations under the Act as in effect on
October 8, 1985, and shall include any person otherwise acting in
the capacity of an "Associate" or "Affiliate". The Term "Related
Person" shall not include the Company, any subsidiary of the
Company, any employee benefit plan of the Company or of a
subsidiary of the Company, or any trustee of or fiduciary with
respect to any such plan acting in such capacity. In addition to
all shares beneficially owned, directly or indirectly, a Related
Person shall also be deemed to be the beneficial owner of any
shares of capital stock of the Company (1) which it has the right
to acquire pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise; or (2) which
are beneficially owned, directly or indirectly (including shares
deemed owned through application of Clause (1) above), (A) by its
"Affiliate" or "Associate" or (B) by any other individual, firm
corporation, or other entity (or any "Affiliate" or "Associate"
thereof) with which it or its "Affiliate" or "Associate" of (B) by
any other individual, firm, corporation, or other entity (or any
"Affiliate" or "Associate" thereof) with which it or its
"Affiliate" or "Associate" has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of capital stock of the Company. For the purposes of
this Section 3, (A) the outstanding shares of any class of capital
stock of the Company shall include shares deemed owned through the
application of Clauses (1) and (2) of the preceding sentence but
shall not include any other shares which may be issuable pursuant
to any agreement, or upon exercise of conversion rights, warrants
or options, or otherwise, and (B) subsidiary shall mean any
corporation of which the Company owns, directly or indirectly,
fifty percent (50%) or more of the voting stock.
(d) The Board of Directors of the Company shall have the power and
duty to determine for the purposes of this Section 3, on the basis
of information then known to it, whether (1) any individual, firm,
corporation, or other entity is a Related Person or is an
"Affiliate" or an "Associate", or a group thereof; (2) any
proposed sale, lease, exchange or other disposition of part of the
assets of the Company or a subsidiary of the Company involves all
or any substantial part of the assets of the Company or a
subsidiary of the Company; (3) any assets or securities, or a
combination thereof, to be acquired by the Company, have an
aggregate fair market value of less than Fifty Million Dollars
($50,000,000) and whether the same are proposed to be acquired in
a single transaction or a series of related transactions; (4) any
plan or proposal is for the voluntary dissolution, liquidation,
spin-off or split-up of any kind of the Company or a subsidiary of
the Company, or is a recapitalization or reclassification of any
securities of the Company, and whether any plan or proposal is
proposed by or on behalf of any Related Person; (5) any
transaction involving the Company or a subsidiary of the Company
with, or proposed by or on behalf of any Related Person is
material, and whether any such transaction is proposed by or on
behalf of any Related Person; and (6) the memorandum of
understanding referred to above is substantially consistent with
the transaction to which it relates.
(e) The Board of Directors of the Company, when evaluating any
material, unsolicited offer of another party to (1) merge or
consolidate the Company or a subsidiary of the Company with or
into another corporation; (2) purchase or otherwise acquire all or
any substantial part of the assets of the Company or a subsidiary
of the Company; (3) sell any assets or securities to the Company;
(4) purchase any securities from the Company or from the holders
thereof in a tender offer; (5) dissolve, liquidate, spin off or
split up the Company or a subsidiary of the Company, or to
recapitalize or reclassify any securities of the Company; or (6)
involve the Company or a subsidiary of the Company in any other
material transaction, shall, in connection with the exercise of
its judgment in determining what is in the best interests of the
Company and its shareholders, give due consideration to (A) all
relevant factors, including without limitation the financial and
managerial resources and future prospects of the other party and
the social, legal, environmental and economic effects on the
employees, customers, suppliers and other affected persons, firms
and corporations and on the communities and geographical areas in
which the Company and its subsidiaries operate or are located and
on any of the business and properties of the Company or any of its
subsidiaries, as well as such other factors as the Directors deem
relevant; and (B) the amount and form of the consideration being
offered in relation to the then current market price for the
Company's outstanding shares of capital stock, in relation to the
then current value of the Company in a freely negotiated
transaction or transactions and in relation to the Board of
Directors' estimate of the future value of the Company (including
the unrealized value of its properties and assets) as in
independent concern. In evaluating any such offer, the Board of
Directors shall be deemed to be performing their duly authorized
duties and acting in good faith and in the best interests of the
Company within the meaning of Section 1701.13 of the Ohio Revised
Code, as it may be amended from time to time, and the Company's
Regulations.
4. The statutes of Ohio require that action on certain specified matters
at a shareholders' meeting shall be taken by the affirmative vote of the
holders of more than a majority of shares entitled to vote thereon,
unless other provision is made in the Articles of Incorporation. On all
these specified matters action may be taken by the affirmative vote of a
majority of shares entitled to vote thereon or, if the vote is required
to be by classes, by the affirmative vote of a majority of each class of
shares entitled to vote thereon as a class, except that any amendment,
alteration, addition to or repeal of this Article Sixth and of any of the
matters specified above in Section 3 of this Article Sixth as requiring a
vote other than the affirmative vote of the holders of a majority of the
shares entitled to vote thereon, may only be taken, (1) prior to the date
of the annual meeting in 1990, by the affirmative vote of the holders of
at least eighty percent (80%) of the outstanding shares of capital stock
of the Company entitled to vote thereon, considered for the purposes of
this Section 4 as one class; (2) from the date of the annual meeting in
1990 to, and including the date of the annual meeting in 2000, by the
affirmative vote of the holders of at least a majority of the outstanding
shares of capital stock of the Company entitled to vote thereon,
considered for the purposes of this Section 4 as one class, provided that
during such period said vote may be increased at any time to the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of capital stock of the Company by a resolution
adopted by at least two-thirds (2/3) of the members of the whole Board of
Directors<F3>; (3) after the date of the annual meeting in 2000, by the
affirmative vote of the holders of at least a majority of the outstanding
shares of capital stock of the Company entitled to vote thereon,
considered for the purposes of this Section 4 as one class.
Seventh: No holder of shares of any class shall have the right to vote
cumulatively in the election of Directors.
IN WITNESS WHEREOF, said John E. Pepper, Chairman of the Board and Chief
Executive, and Terry L. Overbey, Secretary, of The Procter & Gamble Company,
acting for and on behalf of said corporation, have hereunto subscribed their
names and caused the seal of said corporation to be hereunto affixed this 14th
day of October, 1997.
THE PROCTER & GAMBLE COMPANY
BY JOHN E. PEPPER
Chairman of the Board and
Chief Executive
BY TERRY L. OVERBEY
Secretary
[FN]
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<F1> As a result of three two-for-one stock splits on the Common Stock
effective October 10, 1989, May 15, 1992 and August 22, 1997, the number
of shares of Series A ESOP Convertible Class A Preferred Stock authorized
was automatically increased to 72,727,272 in accordance with the terms of
paragraph 9(A)(1) of Appendix A. (This footnote is not a part of the
Company's Amended Articles of Incorporation, but is included to provide
up-to-date information on the status of Series A ESOP Convertible Class A
Preferred Stock.)
<F2> As a result of the two-for-one stock split effective August 22, 1997, the
number of shares of Series B ESOP Convertible Class A Preferred Stock
authorized was automatically increased to 38,284,836 in accordance with
the terms of paragraph 9(A)(1) of Appendix B. (This footnote is not a part
of the Company's Amended Articles of Incorporation, but is included to
provide up-to-date information on the status of Series B ESOP Convertible
Class A Preferred Stock.)
<F3> On October 9, 1990, in accordance with this provision, the vote required
was increased to 80% of the outstanding shares of capital stock of the
Company. (This footnote is not a part of the Company's Amended Articles of
Incorporation, but is included to provide up-to-date information.)
</FN>
APPENDIX A<F4>
SERIES A ESOP CONVERTIBLE CLASS A PREFERRED STOCK
(hereinafter referred to as Series A Preferred Stock)
1. ISSUANCE AND CANCELLATION.
(A) All shares of Series A Preferred Stock redeemed or purchased by the
Company shall be retired and shall be restored to the status of authorized but
unissued shares of Class A Preferred Stock.
(B) Shares of Series A Preferred Stock shall be issued only to a trustee
or trustees acting on behalf of an employee stock ownership trust or plan or
other employee benefit plan of the Company. In the event of any transfer of
shares of Series A Preferred Stock to any person other than any such plan
trustee or trustees, the shares of Series A Preferred Stock so transferred, upon
such transfer and without any further action by the Company or the holder, shall
be automatically converted into shares of Common Stock on the terms otherwise
provided for the conversion of shares of Series A Preferred Stock into shares of
Common Stock pursuant to Section 5 hereof and no such transferee shall have any
of the voting powers, preferences and relative, participating, optional or
special rights ascribed to shares of Series A Preferred Stock hereunder but,
rather, only the powers and rights pertaining to the Common Stock into which
such shares of Series A Preferred Stock shall be so converted. Certificates
representing shares of Series A Preferred Stock shall be legended to reflect
such restrictions on transfer. Notwithstanding the foregoing provisions of this
Section 1, shares of Series A Preferred Stock (i) may be converted into shares
of Common Stock as provided by Section 5 hereof and the shares of Common Stock
issued upon such conversion may be transferred by the holder thereof as
permitted by law and (ii) shall be redeemable by the Company upon the terms and
conditions provided by Sections 6, 7 and 8 hereof.
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series A Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors out of funds legally available
therefor, cash dividends ("Preferred Dividends") in an amount per share
initially equal to $8.124 per share per annum, subject to adjustment from time
to time as hereinafter provided, (such amount, as adjusted from time to time,
being hereinafter referred to as the "Preferred Dividend Rate"), payable
quarterly, one-fourth on the third day of March, one-fourth on the third day of
June, one-fourth on the third day of September, and one-fourth on the third day
of December of each year (each a "Dividend Payment Date") commencing on June 3,
1989, to holders of record at the start of business on such Dividend Payment
Date, provided that if the Board of Directors has declared since the prior
Dividend Payment Date a quarterly dividend on the Common Stock at a rate that
exceeds one-fourth of the Preferred Dividend Rate in effect on such day, the
holders of record on the start of business on the payment date for such dividend
on the Common Stock shall be entitled to receive a cash dividend in an amount
per share equal to the quarterly dividend declared on a share of Common Stock,
payable on the same date as such dividend on the Common Stock, and provided
further that the Dividend Payment Date for the Series A Preferred Stock shall
thereafter be the same date as the payment date for the dividend on the Common
Stock or if no dividend is declared on the Common Stock in any quarter, the
Dividend Payment Date shall be, as appropriate, the fifteenth day of February,
May, August or November or if such days are not a day on which the New York
Stock Exchange is open for business, then the next preceding day when the New
York Stock Exchange is open for business. Preferred Dividends shall begin to
accrue on outstanding shares of Series A Preferred Stock from the date of
issuance of such shares of Series A Preferred Stock. Preferred Dividends shall
accrue on a daily basis, based on the Preferred Dividend Rate in effect on such
day, whether or not the Company shall have earnings or surplus at the time, but
Preferred Dividends accrued after March 3, 1989 on the shares of Series A
Preferred Stock for any period less than a full quarterly period between
Dividend Payment Dates shall be computed on the basis of a 360-day year of
30-day months. A full quarterly dividend payment of $2.034 per share shall
accrue for the period from the date of issuance until June 3, 1989. Accumulated
but unpaid Preferred Dividends shall cumulate as of the Dividend Payment Date on
which they first become payable, but no interest shall accrue on accumulated but
unpaid Preferred Dividends.
(B)(1) No full dividends shall be declared or paid or set apart for
payment on any shares ranking, as to dividends, on a parity with or junior to
the Series A Preferred Stock, for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Series A
Preferred Stock for all Dividend Payment Dates occurring on or prior to the date
of payment of such full dividends. When dividends are not paid in full, as
aforesaid, upon the shares of Series A Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share on Series A Preferred
Stock and such other parity shares shall in all cases bear to each other the
same ratio that accumulated dividends per share on the shares of Series A
Preferred Stock and such other parity shares bear to each other. Except as
otherwise provided in these Articles, holders of shares of Series A Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or shares, in excess of full cumulative dividends, as herein provided, on Series
A Preferred Stock.
(2) So long as any shares of Series A Preferred Stock are outstanding, no
dividend (other than dividends or distributions paid in shares of, or options,
warrants or rights to subscribe for or purchase shares of, Common Stock or other
shares ranking junior to Series A Preferred Stock as to dividends and other than
as provided in paragraph (B)(1) of this Section 2) shall be declared or paid or
set aside for payment or other distribution declared or made upon the Common
Stock or upon any other shares ranking junior to or on a parity with Series A
Preferred Stock as to dividends, nor shall any Common Stock or any other shares
of the Company ranking junior to or on a parity with Series A Preferred Stock as
to dividends be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any such shares) by the Company (except by conversion into or
exchange for shares of the Company ranking junior to Series A Preferred Stock as
to dividends) unless, in each case, the full cumulative dividends on all
outstanding shares of Series A Preferred Stock shall have been paid.
(3) Any dividend payment made on shares of Series A Preferred Stock shall
first be credited against the earliest accumulated but unpaid dividend due with
respect to shares of Series A Preferred Stock.
3. LIQUIDATION PREFERENCE.
(A) In the event of any dissolution or liquidation of the Company,
whether voluntary or involuntary, before any payment or distribution of the
assets of the Company (whether capital or surplus) shall be made to or set apart
for the holders of any series or class or classes of stock of the Company
ranking junior to Series A Preferred Stock upon dissolution or liquidation, the
holders of Series A Preferred Stock shall be entitled to receive the Liquidation
Price (as hereinafter defined) per share in effect at the time of dissolution or
liquidation plus an amount equal to all dividends accrued (whether or not
accumulated) and unpaid thereon to the date of final distribution to such
holders; but such holders shall not be entitled to any further payments. The
Liquidation Price per share which holders of Series A Preferred Stock shall
receive upon dissolution or liquidation shall be $110.004, subject to adjustment
as hereinafter provided. If, upon any dissolution or liquidation of the Company,
the assets of the Company, or proceeds thereof, distributable among the holders
of Series A Preferred Stock shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any other shares
ranking as to dissolution or liquidation, on a parity with Series A Preferred
Stock, then such assets, or the proceeds thereof, shall be distributed among the
holders of Series A Preferred Stock and any such other shares ratably in
accordance with the respective amounts which would be payable on such shares of
Series A Preferred Stock and any such other shares if all amounts payable
thereon were paid in full. For the purposes of this Section 3, a consolidation
or merger of the Company with one or more corporations shall not be deemed to be
a dissolution or liquidation, voluntary or involuntary.
(B) Subject to the rights of the holders of shares of any series or class
or classes of stock ranking on a parity with or prior to Series A Preferred
Stock upon dissolution or liquidation, upon any dissolution or liquidation of
the Company, after payment shall have been made in full to the holders of Series
A Preferred Stock as provided in this Section 3, but not prior thereto, any
other series or class or classes of stock ranking junior to Series A Preferred
Stock upon dissolution or liquidation shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holders of Series A Preferred Stock
shall not be entitled to share therein.
4. RANKING OF SHARES.
Any shares of the Company shall be deemed to rank:
(A) prior to Series A Preferred Stock as to dividends or as to
distribution of assets upon dissolution or liquidation, if the holders of such
class shall be entitled to the receipt of dividends or of amounts distributable
upon dissolution or liquidation, as the case may be, in preference or priority
to the holders of Series A Preferred Stock;
(B) on a parity with Series A Preferred Stock as to dividends or as to
distribution of assets upon dissolution or liquidation, whether or not the
dividend rates, dividend payment dates, or redemption or liquidation prices per
share thereof be different from those of Series A Preferred Stock, if the
holders of such class of stock and Series A Preferred Stock shall be entitled to
the receipt of dividends or of amounts distributable upon dissolution or
liquidation, as the case may be, in proportion to their respective dividend or
liquidation amounts, as the case may be, without preference or priority one over
the other; and
(C) junior to Series A Preferred Stock as to dividends or as to the
distribution of assets upon dissolution or liquidation, if such shares shall be
Common Stock or if the holders of Series A Preferred Stock shall be entitled to
receipt of dividends or of amounts distributable upon dissolution or
liquidation, as the case may be, in preference or priority to the holders of
such shares.
5. CONVERSION INTO COMMON STOCK.
(A) A holder of shares of Series A Preferred Stock shall be entitled, at
any time prior to the close of business on the date fixed for redemption of such
shares pursuant to Sections 6, 7, or 8 hereof, to cause any or all of such
shares to be converted into shares of Common Stock. The number of shares of
Common Stock into which each share of the Series A Preferred Stock may be
converted shall be determined by dividing the Liquidation Price in effect at the
time of conversion by the Conversion Price (as hereinafter defined) in effect at
the time of conversion. The Conversion Price per share at which shares of Common
Stock shall be initially issuable upon conversion of any shares of Series A
Preferred Stock shall be $110.004, subject to adjustment as hereinafter
provided.
(B) Any holder of shares of Series A Preferred Stock desiring to convert
such shares into shares of Common Stock shall surrender, if certificated, the
certificate or certificates representing the shares of Series A Preferred Stock
being converted, duly assigned or endorsed for transfer to the Company (or
accompanied by duly executed stock powers relating thereto), or if
uncertificated, a duly executed stock power relating thereto, at the principal
executive office of the Company or the offices of the transfer agent for the
Series A Preferred Stock or such office or offices in the continental United
States or an agent for conversion as may from time to time be designated by
notice to the holders of the Series A Preferred Stock by the Company or the
transfer agent for the Series A Preferred Stock, accompanied by written notice
of conversion. Such notice of conversion shall specify (i) the number of shares
of Series A Preferred Stock to be converted and the name or names in which such
holder wishes the Common Stock and any shares of Series A Preferred Stock not to
be so converted to be issued, and (ii) the address to which such holder wishes
delivery to be made of a confirmation of such conversion, if uncertificated, or
any new certificates which may be issued upon such conversion if certificated.
(C) Upon surrender, if certificated, of a certificate representing a
share or shares of Series A Preferred Stock for conversion, or if
uncertificated, of a duly executed stock power relating thereto, the Company
shall issue and send by hand delivery (with receipt to be acknowledged) or by
first class mail, postage prepaid, to the holder thereof or to such holder's
designee, at the address designated by such holder, if certificated, a
certificate or certificates for, or if uncertificated, confirmation of, the
number of shares of Common Stock to which such holder shall be entitled upon
conversion. In the event that there shall have been surrendered shares of Series
A Preferred Stock, only part of which are to be converted, the Company shall
issue and deliver to such holder or such holder's designee, if certificated, a
new certificate or certificates representing the number of shares of Series A
Preferred Stock which shall not have been converted, or if uncertificated,
confirmation of the number of shares of Series A Preferred Stock which shall not
have been converted.
(D) The issuance by the Company of shares of Common Stock upon a
conversion of shares of Series A Preferred Stock into shares of Common Stock
made at the option of the holder thereof shall be effective as of the earlier of
(i) the delivery to such holder or such holder's designee of the certificates
representing the shares of Common Stock issued upon conversion thereof if
certificated or confirmation if uncertificated or (ii) the commencement of
business on the second business day after the surrender of the certificate or
certificates, if certificated, or a duly executed stock power, if
uncertificated, for the shares of Series A Preferred Stock to be converted. On
and after the effective date of conversion, the person or persons entitled to
receive Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock, but no
allowance or adjustment shall be made in respect of dividends payable to holders
of Common Stock of record on any date prior to such effective date. The Company
shall not be obligated to pay any dividends which shall have been declared and
shall be payable to holders of shares of Series A Preferred Stock on a Dividend
Payment Date if such Dividend Payment Date for such dividend shall be on or
subsequent to the effective date of conversion of such shares.
(E) The Company shall not be obligated to deliver to holders of Series A
Preferred Stock any fractional share or shares of Common Stock issuable upon any
conversion of such shares of Series A Preferred Stock, but in lieu thereof may
make a cash payment in respect thereof in any manner permitted by law.
(F) The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock or treasury Common Stock, solely for
issuance upon the conversion of shares of Series A Preferred Stock as herein
provided, such number of shares of Common Stock as shall from time to time be
issuable upon the conversion of all the shares of Series A Preferred Stock then
outstanding.
6. REDEMPTION AT THE OPTION OF THE COMPANY.
(A) The Series A Preferred Stock shall be redeemable, in whole or in
part, at the option of the Company at any time after March 3, 1994 (or on or
before March 3, 1994 if permitted by, and at the redemption price provided in,
paragraph (C) of this Section 6) at the following redemption prices per share:
During the
Twelv-Month
Period
Beginning Price Per
March 4, Share
1989 107.3750% of Liquidation Price in effect on date fixed for
redemption
1990 106.6375% "
1991 105.9000% "
1992 105.1625% "
1993 104.4250% "
1994 103.6875% "
1995 102.9000% "
1996 102.2125% "
1997 101.4750% "
1998 100.7375% "
and thereafter at 100% of the Liquidation Price per share in effect on the date
fixed for redemption, plus, in each case (including in the case of redemptions
pursuant to paragraph (C) of this Section 6), an amount equal to all accrued
(whether or not accumulated) and unpaid dividends thereon to the date fixed for
redemption. Payment of the redemption price shall be made by the Company in cash
or shares of Common Stock, or a combination thereof, as permitted by paragraph
(D) of this Section 6. From and after the date fixed for redemption, dividends
on shares of Series A Preferred Stock called for redemption will cease to
accrue, such shares will no longer be deemed to be outstanding and all rights in
respect of such shares of the Company shall cease, except the right to receive
the redemption price. If less than all of the outstanding shares of Series A
Preferred Stock are to be redeemed, the Company shall either redeem a portion of
the shares of each holder determined pro rata based on the number of shares held
by each holder or shall select the shares to be redeemed by lot, as may be
determined by the Board of Directors of the Company.
(B) Unless otherwise required by law, notice of redemption will be sent
to the holders of Series A Preferred Stock at the address shown on the books of
the Company or any transfer agent for Series A Preferred Stock by first class
mail, postage prepaid, mailed not less than twenty (20) days nor more than sixty
(60) days prior to the redemption date. Each notice shall state: (i) the
redemption date; (ii) the total number of shares of the Series A Preferred Stock
to be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates, if certificated,
for such shares are to be surrendered for payment of the redemption price; (v)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date; (vi) the conversion rights of the shares to be redeemed, the
period within which conversion rights may be exercised, and the Conversion Price
and number of shares of Common Stock issuable upon conversion of a share of
Series A Preferred Stock at the time. Upon surrender of the certificates, if
certificated, for any shares so called for redemption and not previously
converted, or upon the date fixed for redemption if uncertificated, such shares
shall be redeemed by the Company at the date fixed for redemption and at the
redemption price set forth in this Section 6.
(C) In the event of (i) a change in the federal tax law of the United
States of America which has the effect of precluding the Company from claiming
any of the tax deductions for dividends paid on the Series A Preferred Stock
when such dividends are used as provided under Section 404(k)(2) of the Internal
Revenue Code of 1986, as amended and in effect on the date shares of Series A
Preferred Stock are initially issued, or (ii) The Procter & Gamble Profit
Sharing Trust and Employee Stock Ownership Plan, as authorized by the Board of
Directors of the Company on January 10, 1989, and as amended from time to time
thereafter failing to receive a determination from the Internal Revenue Service
that it is a qualified plan within the meaning of Section 401(a) or is an
employee stock ownership plan as described in Section 4975(e)(7) of the Internal
Revenue Code of 1986, as amended, and in effect on the date shares of Series A
Preferred Stock are initially issued, then, in either such event, the Company
may, in its sole discretion and notwithstanding anything to the contrary in
paragraph (A) of this Section 6, elect to redeem such shares for the Liquidation
Price in effect on the date fixed for redemption, plus, in each case, an amount
equal to all accrued (whether or not accumulated) and unpaid dividends thereon
to the date fixed for redemption. In the event the Company terminates the
employee stock ownership plan of The Procter & Gamble Profit Sharing Trust and
Employee Stock Ownership Plan, the Company may, in its sole discretion and
notwithstanding anything to the contrary in paragraph (A) of this Section 6,
elect to redeem such shares at the redemption prices per share provided in
paragraph (A) of this Section 6.
(D) The Company, at its option, may make payment of the redemption price
required upon redemption of shares of Series A Preferred Stock in cash or in
shares of Common Stock, or in a combination of such shares and cash, any such
shares of Common Stock to be valued for such purpose at the average of the high
and low reported sales price, or, in case no sale takes place on such day, the
average reported closing bid and asked price, in either case as reported on the
New York Stock Exchange Tape on the date of redemption, or if not listed or
admitted to trading on the New York Stock Exchange, in accordance with the
valuation methods provided in paragraph 9(F)(2).
7. REDEMPTION AT THE OPTION OF THE HOLDER.
Unless otherwise provided by law, shares of Series A Preferred Stock
shall be redeemed by the Company for cash or, if the Company so elects, in
shares of Common Stock, or a combination of such shares and cash, any such
shares of Common Stock to be valued for such purpose as provided by paragraph
(D) of Section 6, at the Liquidation Price per share in effect on the date fixed
for redemption plus all accrued (whether or not accumulated) and unpaid
dividends thereon to the date fixed for redemption, at the option of the holder,
at any time and from time to time upon notice to the Company given not less than
five (5) business days prior to the date fixed by the holder in such notice for
redemption, when and to the extent necessary for such holder to provide for
distributions required to be made under, or to satisfy an investment election
provided to participants in accordance with, The Procter & Gamble Profit Sharing
Trust and Employee Stock Ownership Plan, as the same may be amended, or any
successor plan (the "Plan").
8. CONSOLIDATION, MERGER, ETC.
(A) In the event that the Company shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged solely for or changed,
reclassified or converted solely into shares of any successor or resulting
company (including the Company) that constitutes "qualifying employer
securities" with respect to a holder of Series A Preferred Stock within the
meanings of Section 4975(e)(8) of the Internal Revenue Code of 1986, as amended,
and Section 407(d)(5) of the Employee Retirement Income Security Act of 1974, as
amended, or any successor provision of law, and, if applicable, for a cash
payment in lieu of fractional shares, if any, then, in such event, the terms of
such consolidation or merger or similar transaction shall provide that the
shares of Series A Preferred Stock of such holder shall be submitted for and
shall become preferred shares of such successor or resulting company, having in
respect of such company insofar as possible the same powers, preferences and
relative, participating, optional or other special rights (including the
redemption rights provided by Sections 6, 7, and 8 hereof), and the
qualifications, limitations or restrictions thereon, that the Series A Preferred
Stock had immediately prior to such transaction; provided, however, that after
such transaction each share of the Series A Preferred Stock shall be
convertible, pursuant to the terms and conditions provided by Section 5 hereof,
into the qualifying employer securities so receivable by a holder of the number
of shares of Common Stock into which such shares of Series A Preferred Stock
could have been converted immediately prior to such transaction (provided that,
if the kind or amount of qualifying employer securities receivable upon such
transaction is not the same for each non-electing share, then the kind and
amount of qualifying employer securities receivable upon such transaction for
each non-electing share shall be the kind and amount so receivable per share by
a plurality of the non-electing shares). The rights of the Series A Preferred
Stock as preferred shares of such successor or resulting company shall
successively be subject to adjustments pursuant to Section 9 hereof after any
such transaction as nearly equivalent to the adjustments provided for by such
section prior to such transaction. The Company shall not consummate any such
merger, consolidation or similar transaction unless all the terms of this
paragraph 8(A) are complied with.
(B) In the event that the Company shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged for or changed,
reclassified or converted into other shares or securities or cash or any other
property, or any combination thereof, other than any such consideration which is
constituted solely of qualifying employer securities (as referred to in
paragraph (A) of this Section 8) and cash payments, if applicable, in lieu of
fractional shares, outstanding shares of Series A Preferred Stock shall, without
any action on the part of the Company or any holder thereof (but subject to
paragraph (C) of this Section 8), be deemed converted by virtue of such merger,
consolidation or similar transaction immediately prior to such consummation into
the number of shares of Common Stock into which such shares of Series A
Preferred Stock could have been converted at such time and each share of Series
A Preferred Stock shall, by virtue of such transaction and on the same terms as
apply to the holders of Common Stock, be converted into or exchanged for the
aggregate amount of shares, securities, cash or other property (payable in like
kind) receivable by a holder of the number of shares of Common Stock into which
such shares of Series A Preferred Stock could have been converted immediately
prior to such transaction if such holder of Common Stock failed to exercise any
rights of election as to the kind or amount of shares, securities, cash or other
property receivable upon such transaction (provided that, if the kind or amount
of shares, securities, cash or other property receivable upon such transaction
is not the same for each non-electing share, then the kind and amount of shares,
securities, cash or other property receivable upon such transaction for each
non-electing share shall be the kind and amount so receivable per share by a
plurality of non-electing shares).
(C) In the event the Company shall enter into any agreement providing for
any consolidation or merger or similar transaction described in paragraph (B) of
this Section 8, then the Company shall as soon as practicable thereafter (and in
any event at least ten (10) business days before consummation of such
transaction) give notice of such agreement and the material terms thereof to
each holder of Series A Preferred Stock and each such holder shall have the
right to elect, by written notice to the Company, to receive, upon consummation
of such transaction (if and when such transaction is consummated), from the
Company or the successor of the Company, in redemption and retirement of such
Series A Preferred Stock, a cash payment equal to the Liquidation Price in
effect on the date set for redemption plus all accrued (whether or not
accumulated) and unpaid dividends. No such notice of redemption shall be
effective unless given to the Company prior to the close of business on the
fifth business day prior to consummation of such transaction, unless the Company
or the successor of the Company shall waive such prior notice, but any notice of
redemption so given prior to such time may be withdrawn by notice of withdrawal
given to the Company prior to the close of business on the fifth business day
prior to consummation of such transaction.
9. ANTI-DILUTION ADJUSTMENTS.
(A)(1) Subject to the provisions of paragraph 9(D), in the event the
Company shall, at any time or from time to time while any of the shares of the
Series A Preferred Stock are outstanding, (i) pay a dividend or make a
distribution in respect of the Common Stock in shares of Common Stock or (ii)
subdivide or combine the outstanding shares of Common Stock into a greater or
lesser number of shares, in each case whether by reclassification of shares,
recapitalization of the Company (excluding a recapitalization or
reclassification effected by a merger or consolidation to which Section 8 hereof
applies) or otherwise, then, in such event, each share of Series A Preferred
Stock will automatically, without any action on the part of the holder thereof
or the Company, become that number of shares of Series A Preferred Stock (the
"Non-dilutive Share Amount") equal to an amount which is a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock outstanding immediately before such event. An adjustment
pursuant to this paragraph 9(A)(1) shall be effective upon payment of such
dividend or distribution in respect of the Common Stock and in the case of a
subdivision or combination shall become effective immediately as of the
effective date thereof. Concurrently with the automatic adjustment pursuant to
this paragraph 9(A)(1), the Conversion Price, the Liquidation Price and the
Preferred Dividend Rate of all shares of Series A Preferred Stock shall be
adjusted by dividing the Conversion Price, the Liquidation Price and the
Preferred Dividend Rate, respectively, in effect immediately before the event by
the Non-dilutive Share Amount determined pursuant to this paragraph 9(A)(1).
(2) The Company and the Board of Directors shall each use its best
efforts to take all necessary steps or to take all actions as are necessary or
appropriate for implementation of the automatic adjustment provided in paragraph
9(A)(1). In the event for any reason the Company is precluded from giving full
effect to the automatic adjustment provided in paragraph 9(A)(1), then no such
automatic adjustment shall occur, but instead the Conversion Price shall
automatically be adjusted by dividing the Conversion Price in effect immediately
before the event by the Non-dilutive Share Amount determined pursuant to
paragraph 9(A)(1), and the Liquidation Price and the Preferred Dividend Rate
will not be adjusted. An adjustment to the Conversion Price made pursuant to
this paragraph 9(A)(2) shall be given effect, upon payment of such a dividend or
distribution, as of the record date for the determination of shareholders
entitled to receive such dividend or distribution (on a retroactive basis) and
in the case of a subdivision or combination shall become effective immediately
as of the effective date thereof. If subsequently the Company is able to give
full effect to the automatic adjustment as provided in paragraph 9(A)(1), then
such automatic adjustment will proceed in accordance with the provisions of
paragraph 9(A)(1) and the adjustment in the Conversion Price as provided in this
paragraph 9(A)(2) will automatically be reversed and nullified prospectively.
(B)(1) Subject to the provisions of paragraph 9(D), in the event the
Company shall, at any time or from time to time while any of the shares of
Series A Preferred Stock are outstanding, issue to holders of shares of Common
Stock as a dividend or distribution, including by way of a reclassification of
shares or a recapitalization of the Company, any right or warrant to purchase
shares of Common Stock (but not including as such a right or warrant any
security convertible into or exchangeable for shares of Common Stock) at a
purchase price per share less than the Fair Market Value (as hereinafter
defined) of a share of Common Stock on the date of issuance of such right or
warrant, then, in such event, each share of Series A Preferred Stock will
automatically, without any action on the part of the holder thereof or the
Company, become that number of shares of Series A Preferred Stock (the
"Non-dilutive Share Amount") equal to an amount which is a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the maximum number
of shares of Common Stock that could be acquired upon exercise in full of all
such rights and warrants and the denominator of which is the number of shares of
Common Stock outstanding immediately before such issuance of rights or warrants
plus the number of shares of Common Stock which could be purchased at the Fair
Market Value of a share of Common Stock at the time of such issuance for the
maximum aggregate consideration payable upon exercise in full of all such rights
or warrants. Concurrently with the automatic adjustment pursuant to this
paragraph 9(B)(1), the Conversion Price, the Liquidation Price and the Preferred
Dividend Rate of all shares of Series A Preferred Stock shall be adjusted by
dividing the Conversion Price, the Liquidation Price and the Preferred Dividend
Rate, respectively, in effect immediately before such issuance of rights or
warrants by the Non-dilutive Share Amount determined pursuant to this paragraph
9(B)(1).
(2) The Company and the Board of Directors shall each use its best
efforts to take all necessary steps or to take all actions as are necessary or
appropriate for implementation of the automatic adjustment provided in paragraph
9(B)(1). In the event for any reason the Company is precluded from giving full
effect to the automatic adjustment provided in paragraph 9(B)(1), then no such
automatic adjustment shall occur, but instead the Conversion Price shall
automatically be adjusted by dividing the Conversion Price in effect immediately
before such issuance of rights or warrants by the Non-Dilutive Share Amount
determined pursuant to paragraph 9(B)(1), and the Liquidation Price and
Preferred Dividend Rate will not be adjusted. If subsequently the Company is
able to give full effect to the automatic adjustment as provided in paragraph
9(B)(1), then such automatic adjustment will proceed in accordance with the
provisions of paragraph 9(B)(1) and the adjustment in the Conversion Price as
provided in this paragraph 9(B)(2) will automatically be reversed and nullified
prospectively.
(C)(1) Subject to the provisions of paragraph 9(D), in the event the
Company shall, at any time or from time to time while any of the shares of
Series A Preferred Stock are outstanding, make an Extraordinary Distribution (as
hereinafter defined) in respect of the Common Stock, whether by dividend,
distribution, reclassification of shares or recapitalization of the Company
(including recapitalization or reclassification effected by a merger or
consolidation to which Section 8 hereof does not apply) or effect a Pro Rata
Repurchase (as hereinafter defined) of Common Stock, then, in such event, each
share of Series A Preferred Stock will automatically, without any action on the
part of the holder thereof or the Company, become that number of shares of
Series A Preferred Stock (the "Non-dilutive Share Amount") equal to an amount
which is a fraction the numerator of which is the product of (a) the number of
shares of Common Stock outstanding immediately before such Extraordinary
Distribution or Pro Rata Repurchase minus, in the case of a Pro Rata Repurchase,
the number of shares of Common Stock repurchased by the Company multiplied by
(b) the Fair Market Value of a share of Common Stock on the record date with
respect to an Extraordinary Distribution or on the applicable expiration date
(including all extensions thereof) of any tender offer which is a Pro Rata
Repurchase or on the date of purchase with respect to any Pro Rata Repurchase
which is not a tender offer, as the case may be, and the denominator of which is
(i) the Fair Market Value of a share of Common Stock on the record date with
respect to an Extraordinary Distribution, or on the applicable expiration date
(including all extensions thereof) of any tender offer which is a Pro Rata
Repurchase, or on the date of purchase with respect to any Pro Rata Repurchase
which is not a tender offer, as the case may be, minus (ii) the Fair Market
Value of the Extraordinary Distribution or the aggregate purchase price of the
Pro Rata Repurchase, as the case may be. The Company shall send each holder of
Series A Preferred Stock (i) notice of its intent to make any dividend or
distribution and (ii) notice of any offer by the Company to make a Pro Rata
Repurchase, in each case at the same time as, or as soon as practicable after,
such offer is first communicated (including by announcement of a record date in
accordance with the rules of any stock exchange on which the Common Stock is
listed or admitted to trading) to holders of Common Stock. Such notice shall
indicate the intended record date and the amount and nature of such dividend or
distribution, or the number of shares subject to such offer for a Pro Rata
Repurchase and the purchase price payable by the Company pursuant to such offer,
as well as the Conversion Price and the number of shares of Common Stock into
which a share of Series A Preferred Stock may be converted at such time.
Concurrently with the automatic adjustment pursuant to this paragraph 9(C)(1),
the Conversion Price, the Liquidation Price and the Preferred Dividend Rate of
all shares of Series A Preferred Stock shall be adjusted by dividing the
Conversion Price, the Liquidation Price and the Preferred Dividend Rate,
respectively, in effect immediately before such Extraordinary Distribution or
Pro Rata Repurchase by the Non-dilutive Share Amount determined pursuant to this
paragraph 9(C)(1).
(2) The Company and the Board of Directors shall each use its best
efforts to take all necessary steps or to take all actions as are necessary or
appropriate for implementation of the automatic adjustment provided in paragraph
9(C)(1). In the event for any reason the Company is precluded from giving full
effect to the automatic adjustment provided in paragraph 9(C)(1), then no such
automatic adjustment shall occur, but instead the Conversion Price shall
automatically be adjusted by dividing the Conversion Price in effect immediately
before such Extraordinary Distribution or Pro Rata Repurchase by the
Non-dilutive Share Amount, and the Liquidation Price and the Preferred Dividend
Rate will not be adjusted. If subsequently the Company is able to give full
effect to the automatic adjustment as provided in paragraph 9(C)(1), then such
automatic adjustment will proceed in accordance with the provisions of paragraph
9(C)(1) and the adjustment in the Conversion Price as provided in this paragraph
9(C)(2) will automatically be reversed and nullified prospectively.
(D) Notwithstanding any other provisions of this Section 9, the Company
shall not be required to make (i) any adjustment of the number of issued shares
of Series A Preferred Stock, the Conversion Price, the Liquidation Price or the
Preferred Dividend Rate unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of shares of Series A
Preferred Stock outstanding, or, (ii) if no additional shares of Series A
Preferred Stock are issued, any adjustment of the Conversion Price unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the Conversion Price. Any lesser adjustment shall be carried forward and shall
be made no later than the time of, and together with, the next subsequent
adjustment which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least one percent (1%) of
the number of Series A Preferred Shares outstanding or, if no additional shares
of Series A Preferred Stock are being issued, an increase or decrease of at
least one percent (1%) of the Conversion Price, whichever the case may be.
(E) If the Company shall make any dividend or distribution on the Common
Stock or issue any Common Stock, other capital stock or other security of the
Company or any rights or warrants to purchase or acquire any such security,
which transaction does not result in an appropriate adjustment to the number of
shares of Series A Preferred Stock outstanding or the Conversion Price pursuant
to the foregoing provisions of this Section 9, the Board of Directors of the
Company may, in its sole discretion, consider whether such action is of such a
nature that some type of equitable adjustment should be made in respect of such
transaction. If in such case the Board of Directors of the Company determines
that some type of adjustment should be made, an equitable adjustment not
repugnant to law and for the protection of the conversion rights of the Series A
Preferred Stock shall be made effective as of such date, as determined by the
Board of Directors of the Company. The determination of the Board of Directors
of the Company as to whether some type of adjustment should be made pursuant to
the foregoing provisions of this paragraph 9(E), and, if so, as to what
adjustment should be made and when, shall be final and binding on the Company
and all shareholders of the Company. The Company shall be entitled to make such
additional adjustments, in addition to those required by the foregoing
provisions of this Section 9, as shall be necessary in order that any dividend
or distribution in shares of capital stock of the Company, subdivision,
reclassification or combination of shares of the Company or any recapitalization
of the Company shall not be taxable to holders of the Common Stock.
(F) For purposes of this Appendix A, the following definitions shall
apply:
(1) "Extraordinary Distribution" shall mean any dividend or other
distribution (effected while any of the shares of Series A Preferred Stock are
outstanding) of (i) cash, where the aggregate amount of such cash dividend or
distribution together with the amount of all cash dividends and distributions
made during the preceding period of twelve (12) months, when combined with the
aggregate amount of all Pro Rata Repurchases [for this purpose, including only
that portion of the aggregate purchase price of such Pro Rata Repurchase which
is in excess of the Fair Market Value of the Common Stock repurchased as
determined on the applicable expiration date (including all extensions thereof)
of any tender offer or exchange offer which is a Pro Rata Repurchase, or the
date of purchase with respect to any other Pro Rata Repurchase which is not a
tender offer or exchange offer] made during such period, exceeds twelve and
one-half percent (12 1/2%) of the aggregate Fair Market Value of all shares of
Common Stock outstanding on the record date for determining the shareholders
entitled to receive such Extraordinary Distribution and (ii) any shares of
capital stock of the Company (other than shares of Common Stock), other
securities of the Company (other than securities of the type referred to in
paragraph (B) of this Section 9), evidences of indebtedness of the Company or
any other person or any other property (including shares of any subsidiary of
the Company), or any combination thereof. The Fair Market Value of an
Extraordinary Distribution for purposes of paragraph (C) of this Section 9 shall
be the sum of the Fair Market Value of such Extraordinary Distribution plus the
aggregate amount of any cash dividends or distributions which are not
Extraordinary Distributions made during such twelve month period and not
included in the calculation of any previous adjustment pursuant to paragraph (C)
of this Section 9.
(2) "Fair Market Value" shall mean, as to shares of Common Stock or any
other class of capital stock or securities of the Company or any other issuer
which are publicly traded, the average of the Current Market Prices (as
hereinafter defined) of such shares or securities for each day of the Adjustment
Period (as hereinafter defined). "Current Market Price" of publicly traded
shares of Common Stock or any other class of capital stock or other security of
the Company or any other issuer for a day shall mean the last reported sales
price, regular way, or, in case no sale takes place on such day, the average
reported closing bid and asked prices, regular way, in either case as reported
on the New York Stock Exchange Composite Tape or, if such security is not listed
or admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which such security is listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on the
NASDAQ National Market System or, if such security is not quoted on such
National Market System, the average of the closing bid and asked prices on each
such day in the over-the-counter market as reported by NASDAQ or, if bid and
asked prices for such security on each such day shall not have been reported
through NASDAQ, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm regularly making a market
in such security selected for such purpose by the Board of Directors of the
Company or the Executive Committee of the Board of Directors of the Company on
each trading day during the Adjustment Period. "Adjustment Period" shall mean
the period of five (5) consecutive trading days, selected by the Board of
Directors or the Executive Committee of the Board of Directors of the Company,
during the twenty (20) trading days preceding, and including, the date as of
which the Fair Market Value of a security is to be determined. The "Fair Market
Value" of any security which is not publicly traded or of any other property
shall mean the fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of such securities or
property selected in good faith by the Board of Directors or the Executive
Committee of the Board of Directors of the Company, or, if no such investment
banking or appraisal firm is in the good faith judgment of the Board of
Directors or the Executive Committee of the Board of Directors available to make
such determination, as determined in good faith by the Board of Directors or the
Executive Committee of the Board of Directors of the Company.
(3) "Pro Rata Repurchase" shall mean any purchase of shares of Common
Stock by the Company or any subsidiary thereof, whether for cash, shares of
capital stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other person or any other property (including
shares of a subsidiary of the Company), or any combination thereof, effected
while any of the shares of Series A Preferred Stock are outstanding, pursuant to
any tender offer or exchange offer subject to Section 13(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision of law, or pursuant to any other offer available to substantially all
holders of Common Stock; provided, however, that no purchase of shares by the
Company or any subsidiary thereof made in open market transactions shall be
deemed a Pro Rata Repurchase. For purposes of this paragraph 9(F), shares shall
be deemed to have been purchased by the Company or any subsidiary thereof "in
open market transactions" if they have been purchased substantially in
accordance with the requirements of Rule 10b-18 as in effect under the Exchange
Act on the date shares of Series A Preferred Stock are initially issued by the
Company or on such other terms and conditions as the Board of Directors or the
Executive Committee of the Board of Directors of the Company shall have
determined are reasonably designed to prevent such purchases from having a
material effect on the trading market for the Common Stock.
(G) Whenever an adjustment increasing the number of shares of Series A
Preferred Stock outstanding is required pursuant to this Appendix A, the Board
of Directors shall take such action as is necessary so that a sufficient number
of shares of Series A Preferred Stock are designated with respect to such
increase resulting from such adjustment. Whenever an adjustment to the
Conversion Price, the Liquidation Price or the Preferred Dividend Rate of the
Series A Preferred Stock is required pursuant to this Appendix A, the Company
shall forthwith place on file with the transfer agent for the Common Stock and
the Series A Preferred Stock if there be one, and with the Treasurer of the
Company, a statement signed by the Treasurer or Assistant Treasurer of the
Company stating the adjusted Conversion Price, Liquidation Price and Preferred
Dividend Rate determined as provided herein. Such statement shall set forth in
reasonable detail such facts as shall be necessary to show the reason and the
manner of computing such adjustment, including any determination of Fair Market
Value involved in such computation. Promptly after each adjustment to the number
of shares of Series A Preferred Stock outstanding, the Conversion Price, the
Liquidation Price or the Preferred Dividend Rate, the Company shall mail a
notice thereof and of the then prevailing number of shares of Series A Preferred
Stock outstanding, the Conversion Price, the Liquidation Price and the Preferred
Dividend Rate to each holder of shares of Series A Preferred Stock.
10. MISCELLANEOUS.
(A) All notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier of receipt thereof
or three (3) business days after the mailing thereof if sent by registered mail
(unless first-class mail shall be specifically permitted for such notice under
the terms of this Appendix A) with postage prepaid, addressed: (i) if to the
Company, to its office at One Procter & Gamble Plaza, Cincinnati, Ohio 45202
(Attention: Treasurer) or to the transfer agent for the Series A Preferred
Stock, or other agent of the Company designated as permitted by this Appendix A
or (ii) if to any holder of the Series A Preferred Stock or Common Stock, as the
case may be, to such holder at the address of such holder as listed in the stock
record books of the Company (which may include the records of any transfer agent
for the Series A Preferred Stock or Common Stock, as the case may be) or (iii)
to such other address as the Company or any such holder, as the case may be,
shall have designated by notice similarly given.
(B) The term "Common Stock" as used in this Appendix A means the
Company's Common Stock without par value, as the same exists at the date of
filing of the Amendment to the Company's Amended Articles of Incorporation first
designating Series A Preferred Stock, or any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to without par value, or from without
par value to par value. In the event that, at any time as a result of an
adjustment made pursuant to Section 9 of this Appendix A, the holder of any
share of the Series A Preferred Stock upon thereafter surrendering such shares
for conversion shall become entitled to receive any shares or other securities
of the Company other than shares of Common Stock, the anti-dilution provisions
contained in Section 9 hereof shall apply in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock, and
the provisions of Sections 1 through 8 and 10 of this Appendix A with respect to
the Common Stock shall apply on like or similar terms to any such other shares
or securities.
(C) The Company shall pay any and all stock transfer and documentary
stamp taxes that may be payable in respect of any issuance or delivery of shares
of Series A Preferred Stock or shares of Common Stock or other securities issued
on account of Series A Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Company shall not, however, be
required to pay any such tax which may be payable in respect of any transfer
involved in the issuance or delivery of shares of Series A Preferred Stock or
Common Stock or other securities in a name other than that in which the shares
of Series A Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities other than a payment
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Company the amount of any
such tax or has established, to the satisfaction of the Company, that such tax
has been paid or is not payable.
(D) In the event that a holder of shares of Series A Preferred Stock
shall not by written notice designate the name in which shares of Common Stock
to be issued upon conversion of such shares should be registered or to whom
payment upon redemption of shares of Series A Preferred Stock should be made or
the address to which the certificate or certificates representing such shares,
or such payment, should be sent, the Company shall be entitled to register such
shares, and make such payment, in the name of the holder of such Series a
Preferred Stock as shown on the records of the Company and to send the
certificate or certificates or other documentation representing such shares, or
such payment, to the address of such holder shown on the records of the Company.
(E) The Company may appoint, and from time to time discharge and change,
a transfer agent for the Series A Preferred Stock. Upon any such appointment or
discharge of a transfer agent, the Company shall send notice thereof by
first-class mail, postage prepaid, to each holder of record of Series A
Preferred Stock.
[FN]
<F4> As a result of three two-for-one stock splits on the Common Stock
effective October 10, 1989, May 15, 1992 and August 22, 1997, the
Conversion Price, Liquidation Price and Preferred Dividend Rate were
all adjusted in accordance with the terms of paragraph 9(A)(1) of this
Appendix A to be as follows: Conversion Price -- $13.75; Liquidation
Price -- $13.75; Preferred Dividend Rate -- $1.015 per share per annum,
with a corresponding change in the quarterly dividend payment. (This
footnote is not a part of the Company's Amended Articles of
Incorporation but is included to provide up-to-date information on the
status of Series A ESOP Convertible Class A Preferred Stock.)
</FN>
APPENDIX B<F5>
SERIES B ESOP CONVERTIBLE CLASS A PREFERRED STOCK
(hereinafter referred to as Series B Preferred Stock)
1. CANCELLATION.
All shares of Series B Preferred Stock redeemed or purchased by the
Company shall be retired and shall be restored to the status of authorized but
unissued shares of Class A Preferred Stock.
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series B Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors out of funds legally available
therefor, cash dividends ("Series B Preferred Dividends") in an amount per share
initially equal to $4.125 per share per annum, subject to adjustment from time
to time as hereinafter provided, (such amount, as adjusted from time to time,
being hereinafter referred to as the "Series B Preferred Dividend Rate"),
payable quarterly, one-fourth on the twenty-seventh day of November, one-fourth
on the twenty-seventh day of February, one-fourth on the twenty-seventh day of
May, and one-fourth on the twenty-seventh day of August of each year (each a
"Series B Dividend Payment Date") commencing on August 27, 1993, to holders of
record at the close of business on the second Friday of the relevant Series B
Dividend Payment Date month, provided that if the Board of Directors has
declared since the prior Dividend Payment Date a quarterly dividend on the
Common Stock at a rate that exceeds one-fourth of the Preferred Dividend Rate in
effect on such day, the holders of record on the start of business on the
payment date for such dividend on the Common Stock shall be entitled to receive
a cash dividend in an amount per share equal to the quarterly dividend declared
on a share of Common Stock, payable on the same date as such dividend on the
Common Stock, and provided further that the Dividend Payment Date for the Series
B Preferred Stock shall thereafter be the same date as the payment date for the
dividend on the Common Stock or if no dividend is declared on the Common Stock
in any quarter, the Dividend Payment Date shall be, as appropriate, the
fifteenth day of February, May, August or November or if such days are not a day
on which the New York Stock Exchange is open for business, then the next
preceding day when the New York Stock Exchange is open for business. Series B
Preferred Dividends shall begin to accrue on outstanding shares of Series B
Preferred Stock from the date of issuance of such shares of Series B Preferred
Stock. Series B Preferred Dividends shall accrue on a daily basis, based on the
Series B Preferred Dividend Rate in effect on such day, whether or not the
Company shall have earnings or surplus at the time, but Series B Preferred
Dividends accrued after June 30, 1993 on the shares of Series B Preferred Stock
for any period less than a full quarterly period between Series B Dividend
Payment Dates shall be computed on the basis of a 360-day year of 30-day months.
A partial dividend payment of $.649355 per share shall accrue for the period
from the date of issuance until August 27, 1993. Accumulated but unpaid Series B
Preferred Dividends shall cumulate as of the Series B Dividend Payment Date on
which they first become payable, but no interest shall accrue on accumulated but
unpaid Series B Preferred Dividends.
(B)(1) No full dividends shall be declared or paid or set apart for
payment on any shares ranking, as to dividends, on a parity with or junior to
the Series B Preferred Stock, for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Series B
Preferred Stock for all Series B Dividend Payment Dates occurring on or prior to
the date of payment of such full dividends. When dividends are not paid in full,
as aforesaid, upon the shares of Series B Preferred Stock and any other shares
ranking, as to dividends, on a parity with Series B Preferred Stock, all
dividends declared upon shares of Series B Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share on Series B Preferred
Stock and such other parity shares shall in all cases bear to each other the
same ratio that accumulated dividends per share on the shares of Series B
Preferred Stock and such other parity shares bear to each other. Except as
otherwise provided in these Articles, holders of shares of Series B Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or shares, in excess of full cumulative dividends, as herein provided, on Series
B Preferred Stock.
(2) So long as any shares of Series B Preferred Stock are outstanding, no
dividend (other than dividends or distributions paid in shares of, or options,
warrants or rights to subscribe for or purchase shares of, Common Stock or other
shares ranking junior to Series B Preferred Stock as to dividends and other than
as provided in paragraph (B)(1) of this Section 2) shall be declared or paid or
set aside for payment or other distribution declared or made upon the Common
Stock or upon any other shares ranking junior to or on a parity with Series B
Preferred Stock as to dividends, nor shall any Common Stock or any other shares
of the Company ranking junior to or on a parity with Series B Preferred Stock as
to dividends be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any such shares) by the Company (except by conversion into or
exchange for shares of the Company ranking junior to Series B Preferred Stock as
to dividends) unless, in each case, the full cumulative dividends on all
outstanding shares of Series B Preferred Stock shall have been paid.
(3) Any dividend payment made on shares of Series B Preferred Stock shall
first be credited against the earliest accumulated but unpaid dividend due with
respect to shares of Series B Preferred Stock.
3. LIQUIDATION PREFERENCE.
(A) In the event of any dissolution or liquidation of the Company,
whether voluntary or involuntary, before any payment or distribution of the
assets of the Company (whether capital or surplus) shall be made to or set apart
for the holders of any series or class or classes of stock of the Company
ranking junior to Series B Preferred Stock upon dissolution or liquidation, the
holders of Series B Preferred Stock shall be entitled to receive the Series B
Liquidation Price (as hereinafter defined) per share in effect at the time of
dissolution or liquidation plus an amount equal to all dividends accrued
(whether or not accumulated) and unpaid thereon to the date of final
distribution to such holders; but such holders shall not be entitled to any
further payments. The Series B Liquidation Price per share which holders of
Series B Preferred Stock shall receive upon dissolution or liquidation shall be
$52.245, subject to adjustment as hereinafter provided. If, upon any dissolution
or liquidation of the Company, the assets of the Company, or proceeds thereof,
distributable among the holders of Series B Preferred Stock shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other shares ranking as to dissolution or liquidation, on a
parity with Series B Preferred Stock, then such assets, or the proceeds thereof,
shall be distributed among the holders of Series B Preferred Stock and any such
other shares ratably in accordance with the respective amounts which would be
payable on such shares of Series B Preferred Stock and any such other shares if
all amounts payable thereon were paid in full. For the purposes of this Section
3, a consolidation or merger of the Company with one or more corporations shall
not be deemed to be a dissolution or liquidation, voluntary or involuntary.
(B) Subject to the rights of the holders of shares of any series or class
or classes of stock ranking on a parity with or prior to Series B Preferred
Stock upon dissolution or liquidation, upon any dissolution or liquidation of
the Company, after payment shall have been made in full to the holders of Series
B Preferred Stock as provided in this Section 3, but not prior thereto, any
other series or class or classes of stock ranking junior to Series B Preferred
Stock upon dissolution or liquidation shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holders of Series B Preferred Stock
shall not be entitled to share therein.
4. RANKING OF SHARES.
Any shares of the Company shall be deemed to rank:
(A) prior to Series B Preferred Stock as to dividends or as to
distribution of assets upon dissolution or liquidation, if the holders of such
class shall be entitled to the receipt of dividends or of amounts distributable
upon dissolution or liquidation, as the case may be, in preference or priority
to the holders of Series B Preferred Stock;
(B) on a parity with Series B Preferred Stock as to dividends or as to
distribution of assets upon dissolution or liquidation, whether or not the
dividend rates, dividend payment dates, or redemption or liquidation prices per
share thereof be different from those of Series B Preferred Stock, if the
holders of such class of stock and Series B Preferred Stock shall be entitled to
the receipt of dividends or of amounts distributable upon dissolution or
liquidation, as the case may be, in proportion to their respective dividend or
liquidation amounts, as the case may be, without preference or priority one over
the other; and
(C) junior to Series B Preferred Stock as to dividends or as to the
distribution of assets upon dissolution or liquidation, if such shares shall be
Common Stock or if the holders of Series B Preferred Stock shall be entitled to
receipt of dividends or of amounts distributable upon dissolution or
liquidation, as the case may be, in preference or priority to the holders of
such shares.
5. CONVERSION INTO COMMON STOCK.
(A) A holder of shares of Series B Preferred Stock shall be entitled, at
any time prior to the close of business on the date fixed for redemption of such
shares pursuant to Sections 6, 7, or 8 hereof, to cause any or all of such
shares to be converted into shares of Common Stock. The number of shares of
Common Stock into which each share of the Series B Preferred Stock may be
converted shall be determined by dividing the Series B Liquidation Price in
effect at the time of conversion by the Series B Conversion Price (as
hereinafter defined) in effect at the time of conversion. The Series B
Conversion Price per share at which shares of Common Stock shall be initially
issuable upon conversion of any shares of Series B Preferred Stock shall be
$52.245, subject to adjustment as hereinafter provided.
(B) Any holder of shares of Series B Preferred Stock desiring to convert
such shares into shares of Common Stock shall surrender, if certificated, the
certificate or certificates representing the shares of Series B Preferred Stock
being converted, duly assigned or endorsed for transfer to the Company (or
accompanied by duly executed stock powers relating thereto), or if
uncertificated, a duly executed stock power relating thereto, at the principal
executive office of the Company or the offices of the transfer agent for the
Series B Preferred Stock or such office or offices in the continental United
States or an agent for conversion as may from time to time be designated by
notice to the holders of the Series B Preferred Stock by the Company or the
transfer agent for the Series B Preferred Stock, accompanied by written notice
of conversion. Such notice of conversion shall specify (i) the number of shares
of Series B Preferred Stock to be converted and the name or names in which such
holder wishes the Common Stock and any shares of Series B Preferred Stock not to
be so converted to be issued, and (ii) the address to which such holder wishes
delivery to be made of a confirmation of such conversion, if uncertificated, or
any new certificates which may be issued upon such conversion if certificated.
(C) Upon surrender, if certificated, of a certificate representing a
share or shares of Series B Preferred Stock for conversion, or if
uncertificated, of a duly executed stock power relating thereto, the Company
shall issue and send by hand delivery (with receipt to be acknowledged) or by
first class mail, postage prepaid, to the holder thereof or to such holder's
designee, at the address designated by such holder, if certificated, a
certificate or certificates for, or if uncertificated, confirmation of, the
number of shares of Common Stock to which such holder shall be entitled upon
conversion. In the event that there shall have been surrendered shares of Series
B Preferred Stock, only part of which are to be converted, the Company shall
issue and deliver to such holder or such holder's designee, if certificated, a
new certificate or certificates representing the number of shares of Series B
Preferred Stock which shall not have been converted, or if uncertificated,
confirmation of the number of shares of Series B Preferred Stock which shall not
have been converted.
(D) The issuance by the Company of shares of Common Stock upon a
conversion of shares of Series B Preferred Stock into shares of Common Stock
made at the option of the holder thereof shall be effective as of the earlier of
(i) the delivery to such holder or such holder's designee of the certificates
representing the shares of Common Stock issued upon conversion thereof if
certificated or confirmation if uncertificated or (ii) the commencement of
business on the second business day after the surrender of the certificate or
certificates, if certificated, or a duly executed stock power, if
uncertificated, for the shares of Series B Preferred Stock to be converted. On
and after the effective date of conversion, the person or persons entitled to
receive Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock, but no
allowance or adjustment shall be made in respect of dividends payable to holders
of Common Stock of record on any date prior to such effective date. The Company
shall not be obligated to pay any dividends which shall have been declared and
shall be payable to holders of shares of Series B Preferred Stock on a Series B
Dividend Payment Date if such Series B Dividend Payment Date for such dividend
shall be on or subsequent to the effective date of conversion of such shares.
(E) The Company shall not be obligated to deliver to holders of Series B
Preferred Stock any fractional share or shares of Common Stock issuable upon any
conversion of such shares of Series B Preferred Stock, but in lieu thereof may
make a cash payment in respect thereof in any manner permitted by law.
(F) The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock or treasury Common Stock, solely for
issuance upon the conversion of shares of Series B Preferred Stock as herein
provided, such number of shares of Common Stock as shall from time to time be
issuable upon the conversion of all the shares of Series B Preferred Stock then
outstanding.
6. REDEMPTION AT THE OPTION OF THE COMPANY.
(A) The Series B Preferred Stock shall be redeemable, in whole or in
part, at the option of the Company at any time after November 27, 1995 (or on or
before November 27, 1995 if permitted by, and at the redemption price provided
in, paragraph (C) of this Section 6) at the following redemption prices per
share:
During the
Twelve Month
Period
Beginning Price Per
November 28, Share
1993 105.5125% of Series B Liquidation Price in effect on date
fixed for redemption
1994 104.7250% "
1995 103.9375% "
1996 103.1500% "
1997 102.3625% "
1998 101.5750% "
1999 100.7875% "
and thereafter at 100% of the Series B Liquidation Price per share in effect on
the date fixed for redemption, plus, in each case (including in the case of
redemptions pursuant to paragraph (C) of this Section 6), an amount equal to all
accrued (whether or not accumulated) and unpaid dividends thereon to the date
fixed for redemption. Payment of the redemption price shall be made by the
Company in cash or shares of Common Stock, or a combination thereof, as
permitted by paragraph (D) of this Section 6. From and after the date fixed for
redemption, dividends on shares of Series B Preferred Stock called for
redemption will cease to accrue, such shares will no longer be deemed to be
outstanding and all rights in respect of such shares of the Company shall cease,
except the right to receive the redemption price. If less than all of the
outstanding shares of Series B Preferred Stock are to be redeemed, the Company
shall either redeem a portion of the shares of each holder determined pro rata
based on the number of shares held by each holder or shall select the shares to
be redeemed by lot, as may be determined by the Board of Directors of the
Company.
(B) Unless otherwise required by law, notice of redemption will be sent
to the holders of Series B Preferred Stock at the address shown on the books of
the Company or any transfer agent for Series B Preferred Stock by first class
mail, postage prepaid, mailed not less than twenty (20) days nor more than sixty
(60) days prior to the redemption date. Each notice shall state: (i) the
redemption date; (ii) the total number of shares of the Series B Preferred Stock
to be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates, if certificated,
for such shares are to be surrendered for payment of the redemption price; (v)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date; (vi) the conversion rights of the shares to be redeemed, the
period within which conversion rights may be exercised, and the Series B
Conversion Price and number of shares of Common Stock issuable upon conversion
of a share of Series B Preferred Stock at the time. Upon surrender of the
certificates, if certificated, for any shares so called for redemption and not
previously converted, or upon the date fixed for redemption if uncertificated,
such shares shall be redeemed by the Company at the date fixed for redemption
and at the redemption price set forth in this Section 6.
(C) In the event of (i) a change in the federal tax law of the United
States of America which has the effect of precluding the Company from claiming
any of the tax deductions for dividends paid on the Series B Preferred Stock
when such dividends are used as provided under Section 404(k)(2) of the Internal
Revenue Code of 1986, as amended and in effect on the date shares of Series B
Preferred Stock are initially issued, or (ii) The Procter & Gamble Profit
Sharing Trust and Employee Stock Ownership Plan, as authorized by the Board of
Directors of the Company on May 7, 1990, and as amended from time to time
thereafter failing to receive a determination from the Internal Revenue Service
that it is a qualified plan within the meaning of Section 401(a) or is an
employee stock ownership plan as described in Section 4975(e)(7) of the Internal
Revenue Code of 1986, as amended, and in effect on the date shares of Series B
Preferred Stock are initially issued, then, in either such event, the Company
may, in its sole discretion and notwithstanding anything to the contrary in
paragraph (A) of this Section 6, elect to redeem such shares for the Series B
Liquidation Price in effect on the date fixed for redemption, plus, in each
case, an amount equal to all accrued (whether or not accumulated) and unpaid
dividends thereon to the date fixed for redemption. In the event the Company
terminates the employee stock ownership plan of The Procter & Gamble Profit
Sharing Trust and Employee Stock Ownership Plan or the portion thereof
associated with retiree medical benefits, the Company may, in its sole
discretion and notwithstanding anything to the contrary in paragraph (A) of this
Section 6, elect to redeem such shares at the redemption prices per share
provided in paragraph (A) of this Section 6.
(D) The Company, at its option, may make payment of the redemption price
required upon redemption of shares of Series B Preferred Stock in cash or in
shares of Common Stock, or in a combination of such shares and cash, any such
shares of Common Stock to be valued for such purpose at the average of the high
and low reported sales price, or, in case no sale takes place on such day, the
average reported closing bid and asked price, in either case as reported on the
New York Stock Exchange Tape on the date of redemption, or if not listed or
admitted to trading on the New York Stock Exchange, in accordance with the
valuation methods provided in paragraph 9(F)(2).
7. REDEMPTION TO SATISFY OBLIGATIONS OF THE PROCTER & GAMBLE PROFIT SHARING
TRUST AND EMPLOYEE STOCK OWNERSHIP PLAN.
Unless otherwise provided by law, shares of Series B Preferred Stock
shall be redeemed by the Company for cash or, if the Company so elects, in
shares of Common Stock, or a combination of such shares and cash, any such
shares of Common Stock to be valued for such purpose as provided by paragraph
(D) of Section 6, at the Series B Liquidation Price per share in effect on the
date fixed for redemption plus all accrued (whether or not accumulated) and
unpaid dividends thereon to the date fixed for redemption, at the option of the
holder, at any time and from time to time upon notice to the Company given not
less than five (5) business days prior to the date fixed by the holder in such
notice for redemption, when and to the extent necessary for such holder to
provide for distributions required to be made under, or to satisfy an investment
election provided to participants in accordance with, The Procter & Gamble
Profit Sharing Trust and Employee Stock Ownership Plan, as the same may be
amended, or any successor plan (the "Plan").
8. CONSOLIDATION, MERGER, ETC.
(A) In the event that the Company shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged solely for or changed,
reclassified or converted solely into shares of any successor or resulting
company (including the Company) that constitutes "qualifying employer
securities" with respect to a holder of Series B Preferred Stock within the
meanings of Section 4975(e)(8) of the Internal Revenue Code of 1986, as amended,
and Section 407(d)(5) of the Employee Retirement Income Security Act of 1974, as
amended, or any successor provision of law, and, if applicable, for a cash
payment in lieu of fractional shares, if any, then, in such event, the terms of
such consolidation or merger or similar transaction shall provide that the
shares of Series B Preferred Stock of such holder shall be submitted for and
shall become preferred shares of such successor or resulting company, having in
respect of such company insofar as possible the same powers, preferences and
relative, participating, optional or other special rights (including the
redemption rights provided by Sections 6, 7, and 8 hereof), and the
qualifications, limitations or restrictions thereon, that the Series B Preferred
Stock had immediately prior to such transaction; provided, however, that after
such transaction each share of the Series B Preferred Stock shall be
convertible, pursuant to the terms and conditions provided by Section 5 hereof,
into the qualifying employer securities so receivable by a holder of the number
of shares of Common Stock into which such shares of Series B Preferred Stock
could have been converted immediately prior to such transaction (provided that,
if the kind or amount of qualifying employer securities receivable upon such
transaction is not the same for each non-electing share, then the kind and
amount of qualifying employer securities receivable upon such transaction for
each non-electing share shall be the kind and amount so receivable per share by
a plurality of the non-electing shares). The rights of the Series B Preferred
Stock as preferred shares of such successor or resulting company shall
successively be subject to adjustments pursuant to Section 9 hereof after any
such transaction as nearly equivalent to the adjustments provided for by such
section prior to such transaction. The Company shall not consummate any such
merger, consolidation or similar transaction unless all the terms of this
paragraph 8(A) are complied with.
(B) In the event that the Company shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged for or changed,
reclassified or converted into other shares or securities or cash or any other
property, or any combination thereof, other than any such consideration which is
constituted solely of qualifying employer securities (as referred to in
paragraph (A) of this Section 8) and cash payments, if applicable, in lieu of
fractional shares, outstanding shares of Series B Preferred Stock shall, without
any action on the part of the Company or any holder thereof (but subject to
paragraph (C) of this Section 8, be deemed converted by virtue of such merger,
consolidation or similar transaction immediately prior to such consummation into
the number of shares of Common Stock into which such shares of Series B
Preferred Stock could have been converted at such time and each share of Series
B Preferred Stock shall, by virtue of such transaction and on the same terms as
apply to the holders of Common Stock, be converted into or exchanged for the
aggregate amount of shares, securities, cash or other property (payable in like
kind) receivable by a holder of the number of shares of Common Stock into which
such shares of Series B Preferred Stock could have been converted immediately
prior to such transaction if such holder of Common Stock failed to exercise any
rights of election as to the kind or amount of shares, securities, cash or other
property receivable upon such transaction (provided that, if the kind or amount
of shares, securities, cash or other property receivable upon such transaction
is not the same for each non-electing share, then the kind and amount of shares,
securities, cash or other property receivable upon such transaction for each
non-electing share shall be the kind and amount so receivable per share by a
plurality of non-electing shares).
(C) In the event the Company shall enter into any agreement providing for
any consolidation or merger or similar transaction described in paragraph (B) of
this Section 8, then the Company shall as soon as practicable thereafter (and in
any event at least ten (10) business days before consummation of such
transaction) give notice of such agreement and the material terms thereof to
each holder of Series B Preferred Stock and each such holder shall have the
right to elect, by written notice to the Company, to receive, upon consummation
of such transaction (if and when such transaction is consummated), from the
Company or the successor of the Company, in redemption and retirement of such
Series B Preferred Stock, a cash payment equal to the Series B Liquidation Price
in effect on the date set for redemption plus all accrued (whether or not
accumulated) and unpaid dividends. No such notice of redemption shall be
effective unless given to the Company prior to the close of business on the
fifth business day prior to consummation of such transaction, unless the Company
or the successor of the Company shall waive such prior notice, but any notice of
redemption so given prior to such time may be withdrawn by notice of withdrawal
given to the Company prior to the close of business on the fifth business day
prior to consummation of such transaction.
9. ANTI-DILUTION ADJUSTMENTS.
(A)(1) Subject to the provisions of paragraph 9(D), in the event the
Company shall, at any time or from time to time while any of the shares of the
Series B Preferred Stock are outstanding, (i) pay a dividend or make a
distribution in respect of the Common Stock in shares of Common Stock or (ii)
subdivide or combine the outstanding shares of Common Stock into a greater or
lesser number of shares, in each case whether by reclassification of shares,
recapitalization of the Company (excluding a recapitalization or
reclassification effected by a merger or consolidation to which Section 8 hereof
applies) or otherwise, then, in such event, each share of Series B Preferred
Stock will automatically, without any action on the part of the holder thereof
or the Company, become that number of shares of Series B Preferred Stock (the
"Non-dilutive Share Amount") equal to an amount which is a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock outstanding immediately before such event. An adjustment
pursuant to this paragraph 9(A)(1) shall be effective upon payment of such
dividend or distribution in respect of the Common Stock and in the case of a
subdivision or combination shall become effective immediately as of the
effective date thereof. Concurrently with the automatic adjustment pursuant to
this paragraph 9(A)(1), the Series B Conversion Price, the Series B Liquidation
Price and the Series B Preferred Dividend Rate of all shares of Series B
Preferred Stock shall be adjusted by dividing the Series B Conversion Price, the
Series B Liquidation Price and the Series B Preferred Dividend Rate,
respectively, in effect immediately before the event by the Non-dilutive Share
Amount determined pursuant to this paragraph 9(A)(1).
(2) The Company and the Board of Directors shall each use its best
efforts to take all necessary steps or to take all actions as are necessary or
appropriate for implementation of the automatic adjustment provided in paragraph
9(A)(1). In the event for any reason the Company is precluded from giving full
effect to the automatic adjustment provided in paragraph 9(A)(1), then no such
automatic adjustment shall occur, but instead the Series B Conversion Price
shall automatically be adjusted by dividing the Series B Conversion Price in
effect immediately before the event by the Non-dilutive Share Amount determined
pursuant to paragraph 9(A)(1), and the Series B Liquidation Price and the Series
B Preferred Dividend Rate will not be adjusted. An adjustment to the Series B
Conversion Price made pursuant to this paragraph 9(A)(2) shall be given effect,
upon payment of such a dividend or distribution, as of the record date for the
determination of shareholders entitled to receive such dividend or distribution
(on a retroactive basis) and in the case of a subdivision or combination shall
become effective immediately as of the effective date thereof. If subsequently
the Company is able to give full effect to the automatic adjustment as provided
in paragraph 9(A)(1), then such automatic adjustment will proceed in accordance
with the provisions of paragraph 9(A)(1) and the adjustment in the Series B
Conversion Price as provided in this paragraph 9(A)(2) will automatically be
reversed and nullified prospectively.
(B)(1) Subject to the provisions of paragraph 9(D), in the event the
Company shall, at any time or from time to time while any of the shares of
Series B Preferred Stock are outstanding, issue to holders of shares of Common
Stock as a dividend or distribution, including by way of a reclassification of
shares or a recapitalization of the Company, any right or warrant to purchase
shares of Common Stock (but not including as such a right or warrant any
security convertible into or exchangeable for shares of Common Stock) at a
purchase price per share less than the Fair Market Value (as hereinafter
defined) of a share of Common Stock on the date of issuance of such right or
warrant, then, in such event, each share of Series B Preferred Stock will
automatically, without any action on the part of the holder thereof or the
Company, become that number of shares of Series B Preferred Stock (the
"Non-dilutive Share Amount") equal to an amount which is a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the maximum number
of shares of Common Stock that could be acquired upon exercise in full of all
such rights and warrants and the denominator of which is the number of shares of
Common Stock outstanding immediately before such issuance of rights or warrants
plus the number of shares of Common Stock which could be purchased at the Fair
Market Value of a share of Common Stock at the time of such issuance for the
maximum aggregate consideration payable upon exercise in full of all such rights
or warrants. Concurrently with the automatic adjustment pursuant to this
paragraph 9(B)(1), the Series B Conversion Price, the Series B Liquidation Price
and the Series B Preferred Dividend Rate of all shares of Series B Preferred
Stock shall be adjusted by dividing the Series B Conversion Price, the Series B
Liquidation Price and the Series B Preferred Dividend Rate, respectively, in
effect immediately before such issuance of rights or warrants by the
Non-dilutive Share Amount determined pursuant to this paragraph 9(B)(1).
(2) The Company and the Board of Directors shall each use its best
efforts to take all necessary steps or to take all actions as are necessary or
appropriate for implementation of the automatic adjustment provided in paragraph
9(B)(1). In the event for any reason the Company is precluded from giving full
effect to the automatic adjustment provided in paragraph 9(B)(1), then no such
automatic adjustment shall occur, but instead the Series B Conversion Price
shall automatically be adjusted by dividing the Series B Conversion Price in
effect immediately before such issuance of rights or warrants by the
Non-Dilutive Share Amount determined pursuant to paragraph 9(B)(1), and the
Series B Liquidation Price and Series B Preferred Dividend Rate will not be
adjusted. If subsequently the Company is able to give full effect to the
automatic adjustment as provided in paragraph 9(B)(1), then such automatic
adjustment will proceed in accordance with the provisions of paragraph 9(B)(1)
and the adjustment in the Series B Conversion Price as provided in this
paragraph 9(B)(2) will automatically be reversed and nullified prospectively.
(C)(1) Subject to the provisions of paragraph 9(D), in the event the
Company shall, at any time or from time to time while any of the shares of
Series B Preferred Stock are outstanding, make an Extraordinary Distribution (as
hereinafter defined) in respect of the Common Stock, whether by dividend,
distribution, reclassification of shares or recapitalization of the Company
(including recapitalization or reclassification effected by a merger or
consolidation to which Section 8 hereof does not apply) or effect a Pro Rata
Repurchase (as hereinafter defined) of Common Stock, then, in such event, each
share of Series B Preferred Stock will automatically, without any action on the
part of the holder thereof or the Company, become that number of shares of
Series B Preferred Stock (the "Non-dilutive Share Amount") equal to an amount
which is a fraction the numerator of which is the product of (a) the number of
shares of Common Stock outstanding immediately before such Extraordinary
Distribution or Pro Rata Repurchase minus, in the case of a Pro Rata Repurchase,
the number of shares of Common Stock repurchased by the Company multiplied by
(b) the Fair Market Value of a share of Common Stock on the record date with
respect to an Extraordinary Distribution or on the applicable expiration date
(including all extensions thereof) of any tender offer which is a Pro Rata
Repurchase or on the date of purchase with respect to any Pro Rata Repurchase
which is not a tender offer, as the case may be, and the denominator of which is
(i) the product of (x) the number of shares of Common Stock outstanding
immediately before such Extraordinary Distribution or Pro Rata Repurchase
multiplied by (y) the Fair Market Value of a share of Common Stock on the record
date with respect to an Extraordinary Distribution, or on the applicable
expiration date (including all extensions thereof) of any tender offer which is
a Pro Rata Repurchase, or on the date of purchase with respect to any Pro Rata
Repurchase which is not a tender offer, as the case may be, minus (ii) the Fair
Market Value of the Extraordinary Distribution or the aggregate purchase price
of the Pro Rata Repurchase, as the case may be. The Company shall send each
holder of Series B Preferred Stock (i) notice of its intent to make any dividend
or distribution and (ii) notice of any offer by the Company to make a Pro Rata
Repurchase, in each case at the same time as, or as soon as practicable after,
such offer is first communicated (including by announcement of a record date in
accordance with the rules of any stock exchange on which the Common Stock is
listed or admitted to trading) to holders of Common Stock. Such notice shall
indicate the intended record date and the amount and nature of such dividend or
distribution, or the number of shares subject to such offer for a Pro Rata
Repurchase and the purchase price payable by the Company pursuant to such offer,
as well as the Series B Conversion Price and the number of shares of Common
Stock into which a share of Series B Preferred Stock may be converted at such
time. Concurrently with the automatic adjustment pursuant to this paragraph
9(C)(1), the Series B Conversion Price, the Series B Liquidation Price and the
Series B Preferred Dividend Rate of all shares of Series B Preferred Stock shall
be adjusted by dividing the Series B Conversion Price, the Series B Liquidation
Price and the Series B Preferred Dividend Rate, respectively, in effect
immediately before such Extraordinary Distribution or Pro Rata Repurchase by the
Non-dilutive Share Amount determined pursuant to this paragraph 9(C)(1).
(2) The Company and the Board of Directors shall each use its best
efforts to take all necessary steps or to take all actions as are necessary or
appropriate for implementation of the automatic adjustment provided in paragraph
9(C)(1). In the event for any reason the Company is precluded from giving full
effect to the automatic adjustment provided in paragraph 9(C)(1), then no such
automatic adjustment shall occur, but instead the Series B Conversion Price
shall automatically be adjusted by dividing the Series B Conversion Price in
effect immediately before such Extraordinary Distribution or Pro Rata Repurchase
by the Non-dilutive Share Amount, and the Series B Liquidation Price and the
Series B Preferred Dividend Rate will not be adjusted. If subsequently the
Company is able to give full effect to the automatic adjustment as provided in
paragraph 9(C)(1), then such automatic adjustment will proceed in accordance
with the provisions of paragraph 9(C)(1) and the adjustment in the Series B
Conversion Price as provided in this paragraph 9(C)(2) will automatically be
reversed and nullified prospectively.
(D) Notwithstanding any other provisions of this Section 9, the Company
shall not be required to make (i) any adjustment of the number of issued shares
of Series B Preferred Stock, the Series B Conversion Price, the Series B
Liquidation Price or the Series B Preferred Dividend Rate unless such adjustment
would require an increase or decrease of at least one percent (1%) in the number
of shares of Series B Preferred Stock outstanding, or, (ii) if no additional
shares of Series B Preferred Stock are issued, any adjustment of the Series B
Conversion Price unless such adjustment would require an increase or decrease of
at least one percent (1%) in the Series B Conversion Price. Any lesser
adjustment shall be carried forward and shall be made no later than the time of,
and together with, the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to an increase or
decrease of at least one percent (1%) of the number of Series B Preferred Shares
outstanding or, if no additional shares of Series B Preferred Stock are being
issued, an increase or decrease of at least one percent (1%) of the Series B
Conversion Price, whichever the case may be.
(E) If the Company shall make any dividend or distribution on the Common
Stock or issue any Common Stock, other capital stock or other security of the
Company or any rights or warrants to purchase or acquire any such security,
which transaction does not result in an appropriate adjustment to the number of
shares of Series B Preferred Stock outstanding or the Series B Conversion Price
pursuant to the foregoing provisions of this Section 9, the Board of Directors
of the Company may, in its sole discretion, consider whether such action is of
such a nature that some type of equitable adjustment should be made in respect
of such transaction. If in such case the Board of Directors of the Company
determines that some type of adjustment should be made, an equitable adjustment
not repugnant to law and for the protection of the conversion rights of the
Series B Preferred Stock shall be made effective as of such date, as determined
by the Board of Directors of the Company. The determination of the Board of
Directors of the Company as to whether some type of adjustment should be made
pursuant to the foregoing provisions of this paragraph 9(E), and, if so, as to
what adjustment should be made and when, shall be final and binding on the
Company and all shareholders of the Company. The Company shall be entitled to
make such additional adjustments, in addition to those required by the foregoing
provisions of this Section 9, as shall be necessary in order that any dividend
or distribution in shares of capital stock of the Company, subdivision,
reclassification or combination of shares of the Company or any recapitalization
of the Company shall not be taxable to holders of the Common Stock.
(F) For purposes of this Appendix B, the following definitions shall
apply:
(1) "Extraordinary Distribution" shall mean any dividend or other
distribution (effected while any of the shares of Series B Preferred Stock are
outstanding) of (i) cash, where the aggregate amount of such cash dividend or
distribution together with the amount of all cash dividends and distributions
made during the preceding period of twelve (12) months, when combined with the
aggregate amount of all Pro Rata Repurchases [for this purpose, including only
that portion of the aggregate purchase price of such Pro Rata Repurchase which
is in excess of the Fair Market Value of the Common Stock repurchased as
determined on the applicable expiration date (including all extensions thereof)
of any tender offer or exchange offer which is a Pro Rata Repurchase, or the
date of purchase with respect to any other Pro Rata Repurchase which is not a
tender offer or exchange offer] made during such period, exceeds twelve and
one-half percent (12 1/2%) of the aggregate Fair Market Value of all shares of
Common Stock outstanding on the record date for determining the shareholders
entitled to receive such Extraordinary Distribution and (ii) any shares of
capital stock of the Company (other than shares of Common Stock), other
securities of the Company (other than securities of the type referred to in
paragraph (B) of this Section 9), evidences of indebtedness of the Company or
any other person or any other property (including shares of any subsidiary of
the Company), or any combination thereof. The Fair Market Value of an
Extraordinary Distribution for purposes of paragraph (C) of this Section 9 shall
be the sum of the Fair Market Value of such Extraordinary Distribution plus the
aggregate amount of any cash dividends or distributions which are not
Extraordinary Distributions made during such twelve month period and not
included in the calculation of any previous adjustment pursuant to paragraph (C)
of this Section 9.
(2) "Fair Market Value" shall mean, as to shares of Common Stock or any
other class of capital stock or securities of the Company or any other issuer
which are publicly traded, the average of the Current Market Prices (as
hereinafter defined) of such shares or securities for each day of the Adjustment
Period (as hereinafter defined). "Current Market Price" of publicly traded
shares of Common Stock or any other class of capital stock or other security of
the Company or any other issuer for a day shall mean the last reported sales
price, regular way, or, in case no sale takes place on such day, the average
reported closing bid and asked prices, regular way, in either case as reported
on the New York Stock Exchange Composite Tape or, if such security is not listed
or admitted to trading on the New York Stock Exchange, on the principal national
securities exchange on which such security is listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on the
NASDAQ National Market System or, if such security is not quoted on such
National Market System, the average of the closing bid and asked prices on each
such day in the over-the-counter market as reported by NASDAQ or, if bid and
asked prices for such security on each such day shall not have been reported
through NASDAQ, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm regularly making a market
in such security selected for such purpose by the Board of Directors of the
Company or the Executive Committee of the Board of Directors of the Company on
each trading day during the Adjustment Period. "Adjustment Period" shall mean
the period of five (5) consecutive trading days, selected by the Board of
Directors or the Executive Committee of the Board of Directors of the Company,
during the twenty (20) trading days preceding, and including, the date as of
which the Fair Market Value of a security is to be determined. The "Fair Market
Value" of any security which is not publicly traded or of any other property
shall mean the fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of such securities or
property selected in good faith by the Board of Directors or the Executive
Committee of the Board of Directors of the Company, or, if no such investment
banking or appraisal firm is in the good faith judgment of the Board of
Directors or the Executive Committee of the Board of Directors available to make
such determination, as determined in good faith by the Board of Directors or the
Executive Committee of the Board of Directors of the Company.
(3) "Pro Rata Repurchase" shall mean any purchase of shares of Common
Stock by the Company or any subsidiary thereof, whether for cash, shares of
capital stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other person or any other property (including
shares of a subsidiary of the Company), or any combination thereof, effected
while any of the shares of Series B Preferred Stock are outstanding, pursuant to
any tender offer or exchange offer subject to Section 13(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision of law, or pursuant to any other offer available to substantially all
holders of Common Stock; provided, however, that no purchase of shares by the
Company or any subsidiary thereof made in open market transactions shall be
deemed a Pro Rata Repurchase. For purposes of this paragraph 9(F), shares shall
be deemed to have been purchased by the Company or any subsidiary thereof "in
open market transactions" if they have been purchased substantially in
accordance with the requirements of Rule 10b-18 as in effect under the Exchange
Act on the date shares of Series B Preferred Stock are initially issued by the
Company or on such other terms and conditions as the Board of Directors or the
Executive Committee of the Board of Directors of the Company shall have
determined are reasonably designed to prevent such purchases from having a
material effect on the trading market for the Common Stock.
(G) Whenever an adjustment increasing the number of shares of Series B
Preferred Stock outstanding is required pursuant to this Appendix B, the Board
of Directors shall take such action as is necessary so that a sufficient number
of shares of Series B Preferred Stock are designated with respect to such
increase resulting from such adjustment. Whenever an adjustment to the Series B
Conversion Price, the Series B Liquidation Price or the Series B Preferred
Dividend Rate of the Series B Preferred Stock is required pursuant to this
Appendix B, the Company shall forthwith place on file with the transfer agent
for the Common Stock and the Series B Preferred Stock if there be one, and with
the Treasurer of the Company, a statement signed by the Treasurer or Assistant
Treasurer of the Company stating the adjusted Series B Conversion Price, Series
B Liquidation Price and Series B Preferred Dividend Rate determined as provided
herein. Such statement shall set forth in reasonable detail such facts as shall
be necessary to show the reason and the manner of computing such adjustment,
including any determination of Fair Market Value involved in such computation.
Promptly after each adjustment to the number of shares of Series B Preferred
Stock outstanding, the Series B Conversion Price, the Series B Liquidation Price
or the Series B Preferred Dividend Rate, the Company shall mail a notice thereof
and of the then prevailing number of shares of Series B Preferred Stock
outstanding, the Series B Conversion Price, the Series B Liquidation Price and
the Series B Preferred Dividend Rate to each holder of shares of Series B
Preferred Stock.
10. MISCELLANEOUS.
(A) All notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier of receipt thereof
or three (3) business days after the mailing thereof if sent by registered mail
(unless first-class mail shall be specifically permitted for such notice under
the terms of this Appendix B) with postage prepaid, addressed: (i) if to the
Company, to its office at One Procter & Gamble Plaza, Cincinnati, Ohio 45202
(Attention: Treasurer) or to the transfer agent for the Series B Preferred
Stock, or other agent of the Company designated as permitted by this Appendix B
or (ii) if to any holder of the Series B Preferred Stock or Common Stock, as the
case may be, to such holder at the address of such holder as listed in the stock
record books of the Company (which may include the records of any transfer agent
for the Series B Preferred Stock or Common Stock, as the case may be) or (iii)
to such other address as the Company or any such holder, as the case may be,
shall have designated by notice similarly given.
(B) The term "Common Stock" as used in this Appendix B means the
Company's Common Stock without par value, as the same exists at the date of
filing of the Amendment to the Company's Amended Articles of Incorporation first
designating Series B Preferred Stock, or any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to without par value, or from without
par value to par value. In the event that, at any time as a result of an
adjustment made pursuant to Section 9 of this Appendix B, the holder of any
share of the Series B Preferred Stock upon thereafter surrendering such shares
for conversion shall become entitled to receive any shares or other securities
of the Company other than shares of Common Stock, the anti-dilution provisions
contained in Section 9 hereof shall apply in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock, and
the provisions of Sections 1 through 8 and 10 of this Appendix B with respect to
the Common Stock shall apply on like or similar terms to any such other shares
or securities.
(C) The Company shall pay any and all stock transfer and documentary
stamp taxes that may be payable in respect of any issuance or delivery of shares
of Series B Preferred Stock or shares of Common Stock or other securities issued
on account of Series B Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Company shall not, however, be
required to pay any such tax which may be payable in respect of any transfer of
the Series B Preferred or Common Stock or other Securities by the holder thereof
to a subsequent holder resulting in the issuance or delivery of shares of Series
B Preferred Stock or Common Stock or other securities in a name other than that
in which the shares of Series B Preferred Stock with respect to which such
shares or other securities are issued or delivered were registered, or in
respect of any payment to any person with respect to any such shares or
securities other than a payment to the registered holder thereof, and shall not
be required to make any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or payment has paid to the
Company the amount of any such tax or has established, to the satisfaction of
the Company, that such tax has been paid or is not payable.
(D) In the event that a holder of shares of Series B Preferred Stock
shall not by written notice designate the name in which shares of Common Stock
to be issued upon conversion of such shares should be registered or to whom
payment upon redemption of shares of Series B Preferred Stock should be made or
the address to which the certificate or certificates representing such shares,
or such payment, should be sent, the Company shall be entitled to register such
shares, and make such payment, in the name of the holder of such Series B
Preferred Stock as shown on the records of the Company and to send the
certificate or certificates or other documentation representing such shares, or
such payment, to the address of such holder shown on the records of the Company.
(E) The Company may appoint, and from time to time discharge and change,
a transfer agent for the Series B Preferred Stock. Upon any such appointment or
discharge of a transfer agent, the Company shall send notice thereof by
first-class mail, postage prepaid, to each holder of record of Series B
Preferred Stock.
[FN]
<F5> As a result of the two-for-one stock split on the Common Stock
effective August 22, 1997, the Conversion Price, Liquidation Price and
Preferred Dividend Rate were all adjusted in accordance with the terms
of paragraph 9(A)(1) of this Appendix B to be as follows: Conversion
Price -- $26.12; Liquidation Price -- $26.12; Preferred Dividend Rate
-- $2.06 per share per annum, with a corresponding change in the
quarterly dividend payment. (This footnote is not a part of the
Company's Amended Articles of Incorporation but is included to provide
up-to-date information on the status of Series B ESOP Convertible Class
A Preferred Stock.)
</FN>
Exhibit (3-2)
-------------
REGULATIONS
OF
THE PROCTER & GAMBLE COMPANY
[CORPORATE LOGO]
As amended October 8, 1985
First Code of Regulations Adopted
May 12, 1905
Code of Regulations Adopted in
Present Form August 3, 1929
Amended October 10, 1934
Amended October 13, 1948
Amended October 11, 1950
Amended October 9, 1956
Amended February 11, 1964
Amended October 13, 1964
Amended October 8, 1968
Amended October 14, 1969
Amended October 12, 1971
Amended October 9, 1979
Amended October 8, 1985
THE PROCTER & GAMBLE COMPANY
REGULATIONS
-----------
ARTICLE I
SEAL
SECTION 1. Form. The seal of the Company shall have upon it the name and
words, "The Procter & Gamble Company. Incorporated 1905," arranged in a circle
with the trademark of the Company, to wit, a crescent and thirteen stars set
within the space thus enclosed.
ARTICLE II
SHAREHOLDERS
SECTION 1. Place of Meeting. Meetings of the shareholders shall be held at
the principal office of the Company in Cincinnati, Hamilton County, Ohio, but
the shareholders or the Board of Directors shall have authority to provide for
the holding of meetings of shareholders elsewhere within or without the State of
Ohio, except the annual meeting, or a meeting to elect Directors.
SECTION 2. Annual Meeting. The annual meeting of the shareholders shall be
held on the second Tuesday of October in each year, at which time there shall be
elected in accordance with the laws of the State of Ohio and ARTICLE III of
these Regulations, a Board of Directors. Reports of officers, committees and
Directors shall be received and considered at such meeting.
SECTION 3. Special Meetings. Special meetings of the shareholders may be
called and held as provided by law.
SECTION 4. Notice of Meetings. A notice, as required by law, of each
regular or special meeting of shareholders shall be given in writing by the
President or a Vice-President, or the Secretary, or an Assistant Secretary, not
less than ten (10) days before the meeting.
SECTION 5. Quorum. The shareholders present in person or by proxy at any
meeting shall constitute a quorum unless a larger proportion is required to take
the action stated in the notice of the meeting, in which case, to constitute a
quorum, there shall be present in person or by proxy the holders of record of
shares entitling them to exercise the voting power required by the Articles of
the Company to take the action stated.
SECTION 6. Organization. The Chairman of the Board shall preside at all
meetings of the shareholders, but in his absence the Board of Directors may
appoint any officer to act as presiding officer at the meeting. The Secretary of
the Company shall act as Secretary of all meetings of the shareholders, but in
his absence the presiding officer may appoint any person to act as Secretary of
the meeting.
SECTION 7. Order of Business. At all shareholders' meetings the order of
business shall be as follows:
1. Reading minutes of previous meeting and acting thereon.
2. Report of Directors or committees.
3. Reports of officers.
4. Unfinished business.
5. Election of Directors.
6. New or miscellaneous business.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. Number. The Board of Directors shall be composed of seventeen
(17) persons unless this number is changed by: (1) the shareholders by the
affirmative vote of the holders of shares of the Company entitling them to
exercise at least eighty percent (80%) of the voting power of the Company voting
as a single class at a meeting of shareholders called for the purpose of
electing Directors or (2) the affirmative vote of at least two-thirds (2/3) of
the whole authorized number of Directors. The Directors may increase the number
to not more than nineteen (19) persons and may decrease the number to not less
than fifteen (15) persons. Any Director's office created by the Directors by
reason of an increase in their number may be filled by action of a majority of
the Directors in office.
SECTION 2. Election and Term. Except as otherwise provided by law, the
Articles of the Company or these Regulations, Directors shall be elected at the
annual meeting of shareholders to serve until the end of the term to which they
are elected and until their successors are elected and qualify. The number of
Directors of the Company shall be fixed from time to time in accordance with
these Regulations and may be increased or decreased as herein provided. The
Board of Directors shall be divided into three classes, as nearly equal in
number as the then total number of Directors constituting the whole Board
permits, it not being required that each class have the same number of members
if such is mathematically impossible, with the term of office of one class
expiring each year. At the annual meeting of shareholders in 1985, Directors of
the first class shall be elected to hold office for a term expiring at the next
succeeding annual meeting, Directors of the second class shall be elected to
hold office for a term expiring at the second succeeding annual meeting and
Directors of the third class shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Thereafter, at each annual meeting of
shareholders the successors to the class of Directors whose term shall then
expire shall be elected to hold office for a term expiring at the third
succeeding annual meeting after such election. In the event of an increase in
the number of Directors of the Company, the additional Director or Directors
shall be so classified that all classes of Directors shall be as nearly equal as
may be possible. In the event of any decrease in the number of Directors of the
Company, all classes of Directors shall be decreased as nearly equally as may be
possible.
SECTION 3. Removal, Vacancies. Directors may be removed from office, as
provided by law, by the vote of the holders of at least eighty percent (80%) of
the voting power of the Company, voting as a single class, entitling them to
elect Directors in place of those to be removed. Vacancies in the Board of
Directors for any unexpired term shall be filled by the remaining Directors,
though less than a majority of the whole authorized number of Directors, by the
vote of a majority of their number.
SECTION 4. Meetings. Unless otherwise determined by the Board of Directors,
the Board shall meet once a month, except the month of August, at such times and
places, either within or without the State of Ohio, as may be determined by the
Board. Special meetings of the Board of Directors may be called at any time by
the Chairman of the Board, the President, any other officer who is a member of
the Board or by the majority of the Board.
SECTION 5. Notice of Meetings. The Board shall decide what notice, if any,
shall be given and the length of time prior to the meeting that such notice
shall be given of all meetings. Any meeting at which all of the Directors are
present shall be a valid meeting whether notice thereof was given or not, and
any business may be transacted at such a meeting.
SECTION 6. Quorum. A majority of the Board of Directors shall constitute a
quorum for the transaction of business, and if at any meeting of the Board there
be less than a quorum present, a majority of those present may adjourn the
meeting from time to time.
SECTION 7. Compensation of Directors and Members of the Executive
Committee. The Board of Directors is authorized to fix, from time to time, their
own compensation for attendance at the meetings of the Board, and the
compensation of members of the Executive Committee for attendance at meetings of
such Committee, which may include expenses of attendance when meetings are not
held at the place of residence of any attending Director or member.
SECTION 8. Indemnification of Directors and Officers. The Company shall
indemnify each present and future Director and officer, his heirs, executors and
administrators against all costs, expenses (including attorneys' fees),
judgments, and liabilities, reasonably incurred by or imposed on him in
connection with or arising out of any claim or any action, suit or proceeding,
civil or criminal, in which he may be or become involved by reason of his being
or having been a Director or officer of the Company, or of any of its subsidiary
companies, or of any other company in which he served or serves as a Director or
officer at the request of the Company, irrespective of whether or not he
continues to be a Director or an officer at the time he incurs or becomes
subjected to such costs, expenses (including attorneys' fees), judgments, and
liabilities; but such indemnification shall not be operative with respect to any
matter as to which in any such action, suit or proceeding he shall have been
finally adjudged to have been derelict in the performance of his duties as such
Directors or officer. Such indemnification shall apply when the adjudication in
such action, suit or proceeding is otherwise than on the merits and also shall
apply when a settlement or compromise is effected, but in such cases
indemnification shall be made only if the Board of Directors of the Company,
acting at a meeting at which a majority of the quorum of the Board is unaffected
by self interest, shall find that such Director or officer has not been derelict
in the performance of his duty as such Director or officer with respect to the
matter involved, and shall adopt a resolution to that effect and in cases of
settlement or compromise shall also approve the same; in cases of settlement or
compromise such indemnification shall not include reimbursement of any amounts
which by the terms of the settlement or compromise are paid or payable to the
Company itself by the Director or officer (or in the case of a Director or
officer of a subsidiary or another company in which such Director or officer is
serving at the request of the Company any amounts paid or payable by such
Director or officer to such company). If the Board of Directors as herein
provided refuses or fails to act or is unable to act due to the self interest of
some or all of its members, the Company at its expense shall obtain the opinion
of counsel and indemnification shall be had only if it is the opinion of such
counsel that the Director or officer has not been derelict in the performance of
his duties as such Director or officer with respect to the matter involved.
The right of indemnification provided for in this section shall not be
exclusive of other rights to which any Director or officer may be entitled as a
matter of law and such rights, if any, shall also inure to the benefit of the
heirs, executors or administrators of any such Director or officer.
ARTICLE IV
EXECUTIVE COMMITTEE
SECTION 1. Executive Committee. The Board of Directors may, by resolution,
designate not less than three (3) of its number to constitute an Executive
Committee, but may repeal said resolution and dispense with said Committee at
any time.
SECTION 2. Powers of Executive Committee. The Executive Committee shall
have charge of the management of the business and affairs of the Company in the
interim between meetings of the Directors, and generally shall have all of the
authority of the Board in the transaction of such business of the Company as in
the judgment of the Committee may require action before the next regular meeting
of the Board.
SECTION 3. Limitation of Powers of Executive Committee. The Board of
Directors shall have authority to limit or qualify the powers of the Executive
Committee at any time, and may rescind any action of the Executive Committee to
the extent that no rights of third persons shall have intervened.
SECTION 4. Record of Executive Committee. The Executive Committee shall
keep a record of its proceedings and make a report of its acts and transactions
to the Board of Directors, all of which shall form part of the records of the
Company.
ARTICLE V
OFFICERS
SECTION 1. Number. The officers of the Company shall be a Chairman of the
Board, a President, one or more Vice-Presidents, a Secretary, one or more
Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and a
Comptroller. Any two or more of the offices may be held by the same person, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity if such instrument is required to be executed, acknowledged or verified
by two or more officers.
SECTION 2. Other Officers. The Board of Directors is authorized in its
discretion to provide for such other officers and agents as it shall deem
necessary from time to time and may dispense with any offices and agencies at
any time except those required by law.
SECTION 3. Election, Term and Removal. At the first meeting of the Board of
Directors after their election annually, the Board shall select all officers of
the Company. All officers of the Company shall hold their offices during the
pleasure of the Board, or until their successor or successors are elected and
qualified, and the Board may remove or suspend any officer at any time, without
notice, by the affirmative vote of a majority of the entire Board.
SECTION 4. Vacancies and Absence. If any office shall become vacant by
reason of the death, resignation, disqualification or removal of the incumbent
thereof, or other cause the Board of Directors may elect a successor to hold
office for the unexpired term in respect to which such vacancy occurred or was
created. In case of the absence of any officer of the Company or for any reason
that the Board of Directors may determine as sufficient, the said Board may
delegate the powers and duties of such officer to any other officer, or to any
Director, except where otherwise provided by these Regulations or by statute,
for the time being.
ARTICLE VI
DUTIES OF OFFICERS
SECTION 1. Chairman of the Board. The Chairman of the Board of Directors
shall preside at all meetings of the Board, appoint all special or other
committees (unless otherwise ordered by the Board), shall confer with and advise
all other officers of the Company, and shall perform such other duties as may be
delegated to him by the Board or the officer designated as Chief Executive.
SECTION 2. President. The President shall perform such duties and have
such responsibilities as may be delegated or assigned to him by the Board or the
officer designated as Chief Executive.
SECTION 3. Chief Executive. The Board of Directors shall designate either
the Chairman of the Board or the President to be the Chief Executive of the
Company. The officer so designated shall be responsible for the supervision,
general control and management of all the Company's business and affairs,
subject only to the authority of the Board of Directors. He shall make periodic
reports to the Board of Directors, making such recommendations as he thinks
proper, and shall bring before the Board of Directors such information as may be
required relating to the Company's business and affairs. The Board of Directors
may designate one of the officers of the Company who is a Director to perform
the duties and have the powers of the officer who is the Chief Executive in his
absence, and during his absence the officer so designated shall be authorized to
exercise all of his responsibilities.
SECTION 4. Other Officers. All other officers shall perform such duties and
have such responsibilities as may be delegated or assigned to them by the Board
of Directors or the officer designated as Chief Executive.
SECTION 5. Bonds of Officers. The Board of Directors or the Executive
Committee shall determine which officers of the Company shall give bond, and the
amount thereof, the expense to be paid by the Company.
ARTICLE VII
CERTIFICATES FOR SHARES OF STOCK
SECTION 1. Mutilated and Lost Certificates. If any certificate for shares
of the Company become worn, defaced or mutilated, the Board of Directors upon
production or surrender thereof may order the same cancelled, and a new
certificate issued in lieu thereof. If any certificate for shares be lost or
destroyed, a new certificate may be issued upon such terms and under such
regulations as may be adopted by the Board of Directors.
ARTICLE VIII
GENERAL WELFARE
SECTION 1. Policy. It is declared to be the policy of the Company to
recognize that its interests and those of its employees are inseparable, and are
best developed and maintained by the adoption of such measures as will assure
the employees of the Company of this fact. To this end the Board of Directors is
authorized, in its discretion, to inaugurate and maintain a profit-sharing or
other similar plan, an adequate pension and benefit plan, and to grant to the
employees such voice in the conduct of the business as may seem to the Board to
be right and proper.
SECTION 2. Stock Ownership by Employees. The Board of Directors is
authorized to devise and carry into effect such plans as it may deem advisable,
to assist the employees to become shareholders of the Company by the purchase of
its shares.
ARTICLE IX
AMENDMENTS
SECTION 1. Amendments. These Regulations or any of them, may be altered,
amended, added to or repealed as provided by law, except that ARTICLE III,
Sections 1, 2, 3 and 8 and this ARTICLE IX may only be altered, amended, added
to or repealed at a meeting held for such purpose (1) prior to the date of the
annual meeting in 1990, by the affirmative vote of the holders of at least
eighty percent (80%) of the outstanding shares of capital stock of the Company
entitled to vote thereon, considered for purposes of this Section 1 as one
class; (2) from the date of the annual meeting in 1990 to and including the date
of the annual meeting in 2000, by the affirmative vote of the holders of at
least a majority of the outstanding shares of capital stock of the Company
entitled to vote thereon, considered for purposes of this Section 1 as one
class, provided that during such period said vote may be increased at any time
to the affirmative vote of at least eighty percent (80%) of the outstanding
shares of capital stock of the Company by a resolution adopted by at least
two-thirds (2/3) of the members of the whole Board of Directors<F1>; and
(3) after the date of the annual meeting in 2000, by the affirmative vote of the
holders of at least a majority of the outstanding shares of capital stock of the
Company entitled to vote thereon, considered for the purposes of this Section 1
as one class.
ARTICLE X
ASSENT OF SHAREHOLDERS
SECTION 1. Effect. Any person becoming a shareholder in this Company shall
be deemed to assent to these Regulations, and any alterations, amendments, or
additions thereto, lawfully adopted, and shall designate to the Secretary or
appointed Transfer Agents of the Company, the address to which he desires that
the notices herein required to be given may be sent, and all notices mailed to
such address with postage prepaid, shall be considered as duly given at the date
of mailing, provided, however, that in the event that any shareholder shall have
failed to so designate an address to which notices shall be sent, then said
notices shall be sent to any address where the Secretary believes he may be
reached, otherwise to "General Delivery, Cincinnati, Ohio." The mailing of any
notice to "General Delivery, Cincinnati, Ohio," shall be conclusive that the
Secretary knows of no address where he believes said shareholder may be reached.
[FN]
- ------------------------
<F1> On October 9, 1990, in accordance with this provision, the vote
required was increased to 80% of the outstanding shares of capital stock
of the Company. (This footnote is not a part of the Company's Regulations,
but is included herein to provide up-to-date information.)
</FN>
Exhibit 10-1
------------
THE PROCTER & GAMBLE 1992 STOCK PLAN
(AS AMENDED MAY 12, 1998)
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:
(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 50,000,000 of the authorized shares
during the term of the Plan may be issued as incentive stock options.
3. Any authorized shares not used in a calendar year shall be available for
awards under this Plan in succeeding calendar years.
ARTICLE E -- SHARES SUBJECT TO USE UNDER THE PLAN.
1. The shares to be delivered by the Company upon exercise of stock options
or stock appreciation rights shall be either authorized but unissued shares or
treasury shares, as determined by the Board. In the case of redemption of stock
appreciation rights by one of the Company's subsidiaries, such shares shall be
shares acquired by that subsidiary. Notwithstanding any terms or conditions
contained herein, the shares to be delivered by the Company upon exercise of
stock options or stock appreciation rights by a participant located in Italy
shall be authorized but unissued shares.
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 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 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, 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 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, a combination thereof, or such other method as determined by the
Committee.
ARTICLE I -- TRANSFER OF SHARES.
1. The Committee may transfer Common Stock of the Company under the Plan
subject to such conditions or restrictions, if any, as the Committee may
determine. The conditions and restrictions may vary from time to time and with
respect to particular employees or group of employees and may be set forth in
agreements between the Company and the employee or in the awards of stock to
them, all as the Committee determines. It is contemplated that the conditions
and restrictions established by the Committee will be consistent with the
objectives of this Plan and may be of the following types. In giving these
examples, it is not intended to restrict the Committee's authority to impose
other restrictions or conditions, or to waive restrictions or conditions under
circumstances deemed by the Committee to be appropriate and not contrary to the
best interests of the Company.
(a) Restrictions
The employee will not be able to sell, pledge, or dispose of the shares
during a specified period except in accordance with the agreement or
award. Such restrictions will lapse either after a period of, for
example, five years, or in fifteen or fewer annual installments
following retirement or termination of employment, as the Committee
from time to time may determine. However, upon the transfer of shares
subject to restrictions, an employee will have all incidents of
ownership in the shares, including the right to dividends (unless
otherwise restricted by the Committee), to vote the shares, and to make
gifts of them to family members (still subject to the restrictions).
(b) Lapse of Restrictions
In order to have the restrictions lapse, an employee may be required to
continue in the employ of the Company or a subsidiary for a prescribed
period of time. Exemption from this requirement may be prescribed in
the case of death, disability, or retirement, or as otherwise
prescribed by the Committee. 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 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.
Exhibit (10-2)
--------------
THE PROCTER & GAMBLE 1983 STOCK PLAN
(AS ADJUSTED FOR STOCK SPLIT EFFECTIVE OCTOBER 20, 1989
AND AMENDED EFFECTIVE MAY 11, 1993)
ARTICLE A - PURPOSE.
The purpose of The Procter & Gamble 1983 Stock Plan (hereinafter referred to
as the"Plan") is to encourage those key employees of The Procter & Gamble
Company (herein referred to as the "Company") and its subsidiaries who are
largely responsible for the long-term success and development of the business to
increase their proprietary and other interest in the Company's progress, and to
remain in the employ of the Company and its subsidiaries, by the granting to
them by the Company of options to purchase shares of the Common Stock of the
Company 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 in this Plan.
ARTICLE B - ADMINISTRATION.
1. The Plan shall be administered by the Compensation Committee (herein
referred to as the "Committee") of the Board of Directors of the Company (herein
referred to as the "Board"). The Committee shall operate, administer, and
interpret the Plan and shall be composed of three or more members of the Board
to be appointed by the Board from time to time to serve until they resign, die,
or are removed by resolution of the Board. No member of the Committee shall
participate or be eligible to participate in this Plan, but he or she may
exercise stock options or stock appreciation rights previously granted to him or
her in accordance with the terms of said stock options or stock appreciation
rights.
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
may 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 who are nonresidents of the United States on the date of grant stock
appreciation rights either freestanding, in tandem with simultaneously granted
stock options or in parallel with simultaneously granted stock options; to
determine all the terms and provisions of the respective stock option and stock
appreciation right agreements including setting the dates when each stock option
or stock appreciation right or part thereof may be exercised; and to make all
other determinations it deems necessary or advisable for administering this
Plan; provided, however, for recipients who are nonresidents of the United
States on the date of any grant, the Committee shall have the further authority
to:
(a) waive the provisions of Article G, paragraph 1(b);
(b) except in the case of a recipient who is an executive officer of the
Company subject to Section 16 of the Securities Exchange Act of 1934,
waive the provisions of Article G, paragraph 1(a);
(c) impose conditions in lieu of those set forth in Article J, paragraphs
4 through 7, for nonstatutory stock options and stock appreciation
rights grants which do not increase or extend the rights of the
recipient, to take into consideration the differences, limitations and
requirements of local foreign laws or conditions including, but not
limited to, tax regulations, exchange controls, investment
restrictions, possible unenforceability of any part of this Plan and
other similar 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 key 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 with respect to which stock options or
stock appreciation rights are to be granted to each, the type of stock options
or stock appreciation rights to be granted and the number of shares under each
type. The Committee may consult with the Chairman of the Board or the President,
but nevertheless the Committee has full authority to act, and the Committee's
actions shall be final.
ARTICLE D - NUMBER OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
1. The aggregate number of shares of the Common Stock of the Company which
may be issued or transferred under all stock options to be granted, or with
respect to which stock appreciation rights may be granted, pursuant to this Plan
shall not exceed 25,996,446 shares.
2. 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.
ARTICLE E - SHARES SUBJECT TO USE UNDER THE PLAN.
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.
ARTICLE F - PRICE.
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 - AGREEMENT OF OPTIONEE AND CONDITIONS OF 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) To remain in the employ of the Company or one of its subsidiaries for at
least one (1)year following the date of the granting of the stock option
or stock appreciation right, and,
(b) In order to better protect the goodwill of the Company and prevent the
disclosure of the Company's trade secrets and other confidential
information and thereby help insure the long-term success and development
of the business, the recipient will not engage in competitive employment
for a period of three (3) years following the date of the granting of a
stock option or a stock appreciation right without first obtaining
written permission from the Company. "Engage in competitive employment"
means rendering services, or becoming associated in any way or in any
capacity in 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 one of its subsidiaries (including existing
products and products known to the recipient to be in development) 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 any of its subsidiaries or with respect to which during
that period of time recipient acquired knowledge of trade secrets or
other confidential information.
2. The fact that an employee has been granted a stock option or a stock
appreciation right under this Plan shall not affect or qualify the right of the
employer to terminate the recipient's employment at any time. In the event the
recipient breaches or violates section 1 above, the Company may seek injunctive
or other appropriate relief.
ARTICLE H - LIMITATIONS.
1. 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
shall not exceed five percent (5%) of the number of shares which can be issued
or transferred hereunder.
2. The aggregate fair market value (determined at the time of the grant of
the stock option)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 plus any
unused limit carry-over to such year as provided for in Section 422A(c)(4) of
the Internal Revenue Code of 1954, as amended. (This amount will automatically
change to reflect the limits imposed by Section 422A(b)(8) of the Internal
Revenue Code of 1954 as it may be amended from time to time.)
3. 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 422A of the Internal Revenue Code of
1954, as amended by the Economic Recovery Tax Act of 1981, and as the same may
from time to time be amended.
4. Resale of securities offered under this Plan by Directors and executive
officers of the Company subject to Section 16 of the Securities Exchange Act of
1934 must be pursuant to a valid registration statement on other than Form S-8
or pursuant to an exemption from registration provided under the Securities Act
of 1933, as amended. Other employees of the Company or its subsidiaries are free
to make resales of the securities offered hereunder without further
registration.
ARTICLE I - ADJUSTMENTS.
Appropriate adjustments in the number of shares of stock options and stock
appreciation rights which can be granted under this Plan and in the numbers and
exercise prices covered by outstanding stock options and stock appreciation
rights shall be made to give effect to any stock splits, stock dividends or
other changes in the Common Stock of the Company occurring after October 11,
1983, the date of approval of this Plan by the Company's shareholders.
ARTICLE J - 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. Stock options and
stock appreciation rights are not assignable and are not transferable otherwise
than by will or by the laws of descent and distribution.
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 death of the recipient or in the case of any option as to which the
Committee has waived, at the time of grant, the provisions of Article
G, paragraph 1(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 7 of this
Article J) 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 anytime prior to the expiration date of the stock option or stock
appreciation right.
6. Stock options and stock appreciation rights are not transferable other
than by will or by the laws of descent and distribution. For the purpose of
exercising stock options or stock appreciation rights after the death of the
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 had after
distribution to them from the deceased recipient's estate.
7. Termination of employment under the permanent disability settlement
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 options or rights which were unexercisable at time of the
retirement or Special Separation.
8. Upon the exercise of stock appreciation rights, the recipient shall be
entitled to receive a redemption differential for each such stock appreciation
right which shall be the difference between the then fair market value of one
share of the Common Stock of the Company and the exercise price of one stock
appreciation right then being exercised. In the case of the redemption of stock
appreciation rights by a subsidiary of the Company not located in the United
States the redemption differential shall be calculated in United States dollars
and converted to the appropriate local currency on the exercise date. As
determined by the Committee, the redemption differential may be paid in cash,
Common Stock of the Company to be valued at its fair market value on the date of
exercise, any other mode of payment deemed appropriate by the Committee or any
combination thereof. The number of shares with respect to which stock
appreciation rights are being exercised shall not be available for granting
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 optionor 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 K - 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 L - ADDITIONAL PROVISIONS.
1. The Board may, at any time, repeal this Plan and may amend it from time to
time except that no such amendment may amend this paragraph, increase the
aggregate number of shares subject to this Plan or reduce the price at which
stock options or stock appreciation rights may be granted, exercised or
surrendered, or alter the class of employees eligible to receive stock options.
The recipient of stock options and stock appreciation rights 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.
2. In case any stock option or stock appreciation right is surrendered before
exercise or for any reason other than exercise ceases to be exercisable, except
as specifically required by the terms of this Plan, the shares reserved therefor
shall continue to be set aside for, and be subject to, use under this Plan.
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 M - CONSENT.
Every recipient of a stock option or stock appreciation right granted under
this Plan shall be bound by the terms and provisions of this Plan and of the
stock option or stock appreciation right agreement referable thereto, and the
acceptance of any stock option or stock appreciation right agreement shall
constitute a binding agreement between the recipient and the Company and its
subsidiaries and any successors in interest to any of them.
ARTICLE N - DURATION OF THE PLAN.
This Plan will terminate on June 14, 1993 unless a different termination date
is fixed by action of the Board, but all stock options or stock appreciation
rights granted prior thereto may be exercised in accordance with their terms.
Exhibit (10-3)
The Procter & Gamble Group Life Insurance Policy
Policy No. G-95265
MEMORANDUM OF UNDERSTANDING
---------------------------
This memorandum dated as of December 30, 1997, reflects the understanding and
agreement between The Procter & Gamble company as policyholder
("Policyholder/P&G") of a Flexible Premium Group Variable Life Insurance Policy
(the "Policy") and Metropolitan Life Insurance Company ("Carrier/Metropolitan").
Policyholder and Carrier understand and agree that the following is in no way
inconsistent with the Policy:
QUALIFICATION OF THE POLICY AS LIFE INSURANCE (IRC SECTIONS 7702 AND 101)
- -------------------------------------------------------------------------
Assuming insurable interest by the Policyholder, Carrier will administer the
Policy to qualify as a life insurance contract under Section 7702 of the
Internal Revenue Code (the "IRC"), to have a bona fide element of risk, and to
provide death benefits under the Policy that will be excludable from taxable
income to the extent provided under IRC section 101(a). On or before the date of
this memorandum, Carrier has provided an opinion from outside counsel addressed
to Policyholder that the Policy complies with the requirements of section 7702.
See Exhibit 1.
QUALIFICATION OF THE POLICY AS A VARIABLE CONTRACT
- --------------------------------------------------
Subject to the conditions stated below, Carrier will administer the Policy to
(a) be a "variable contract" within the meaning of Section 817(d) of the
Internal Revenue Code and (b) be based on one or more segregated asset accounts,
the assets of which are owned by Carrier and are adequately diversified, as
required by Internal Revenue Code Section 817(h).
Policyholder may determine the percentage of premium payments and/or policy cash
value that is allocated to a specific separate account and will have the right
to reallocate amounts among the separate accounts as provided in the Policy. The
Policyholder shall not have the right to manage the assets of the separate
accounts or to direct the purchase or sale of specific investment assets and
will not communicate directly or in any manner with respect to these separate
accounts with any of the managers or sub investment managers of the separate
accounts.
Metropolitan will be the investment manager for any Separate Accounts under this
Policy. Separate Accounts may have sub-investment managers chosen by
metropolitan.
The Policy will state that the assets held in each Separate Account will be
maintained solely for the liabilities of the participants in that Separate
Account. The Carrier will make provision that the income, gains and losses of
each Separate Account shall be credited to or charged against that Separate
Account's assets and none of the assets held in a Separate Account will be
charged or chargeable with liabilities arising out of any other business of the
Carrier or used for purposes unrelated to the terms and provisions of that
Separate Account. On or before the date of this memorandum, Carrier has provided
a letter from its counsel addressed to Policyholder on these issues. See Exhibit
2.
UNDERWRITING
- ------------
Based on the census in the November 11, 1998 illustrations, current participants
who are domestic actives and retirees will be covered under Carrier's Guaranteed
Issue program for the plan benefit and cost recovery amounts in effect on the
date the Policy is issued.
Future new participants will be subject to the following "Active at Work"
criteria:
(bullet) by reason of promotional increases verified by P&G, and
(bullet) by up to 15% per year (with any unused portion of such increment
rolling forward for five years on a cumulative basis) to reflect
compensation (salary and bonus) increases,
subject to a lifetime guaranteed issue limit of $5,000,000 per life, which limit
will be reviewed at least every five years and (absent retention, reinsurance or
adverse selection constraints) adjusted to accommodate anticipated plan benefit
and cost recovery amounts. Amounts in excess of the guaranteed issue limits
will, at Carrier's request, be subject to underwriting.
Carrier will not deny claims by reason of the suicide exclusion provision of the
Policy. Carrier acknowledges, accepts and agrees to be bound by consents to
insurance, beneficiary designations and assignments in effect under P&G's
executive life insurance program.
COST OF TERM INSURANCE CHARGES
- ------------------------------
The Cost of Term Insurance charges ("COI") for current active population and new
entrants (meeting the "active at work" requirements) will be based on 90% of
Carrier's current Corporate Universal Life Guaranteed Issue, Sex Distinct,
Unismoker rates. The current retirees will have rates equal to 120% of Carrier's
Corporate Universal Life Guaranteed Issue, Sex Distinct, Unismoker rates.
P&G will have COI rates equal to the foregoing unless Carrier's Corporate
Universal Life Guaranteed Issue, Sex Distinct, Unismoker rates are increased to
the maximum rates of 1980 CSO table (Table A for males and Table G for females).
Only at that time will the rates under this Policy for actives and new entrants
be increased to up to 100% of Corporate Universal Life Guaranteed Issue, Sex
Distinct, Unismoker rates, with a corresponding change in the COI for current
retirees. Any future changes in COI rates will be determined based on changes in
Corporate Universal Life Guaranteed Issue Rates. Metropolitan shall inform the
Policyholder in writing at least 60 days in advance of any changes in such
rates.
The Guaranteed Issue, Sex Distinct COI rates are the rates that Metropolitan
charges in Individual Executive Pooled Policies which are selected by the
Guaranteed Issue Underwriting procedure and are filed with the state Insurance
Departments. The Corporate Universal Life Product is one of those policies
included in this pool. Any changes in these rates are required to be filed with
the state Insurance Departments and must be justifiable in terms of experience
of the Guaranteed Issue mortality pool. Therefore, the insured employees of this
Policy join the mortality pool which the aggregate of all insured executives who
are selected by the Guaranteed Issue Underwriting procedure. The future
determination of the COI of this pool is by the mortality experience of the pool
in total and is not by the mortality experience of each case or a subgroup of
insured lives of the pool. Any changes in these rates must apply to all policies
which are charged the Guaranteed Issue COI rates, including the Policy.
Upon reasonable notice from Policyholder, Metropolitan will develop COI charges,
retention and retrospective deductions based on the demographics of insured
lives in the plan at that time.
The guaranteed maximum COI will never exceed those based on the 1980 CSO Table
(Table A for males and Table G for females).
ENHANCED POLICY ADMINISTRATION
- ------------------------------
At Policyholder's request, Carrier will provide enhanced administrative services
with respect to the Policy. Such services will include:
A. Program Analysis
1. Prepare feasibility studies and recommendations of various funding level
alternatives.
2. Provide financial analysis of the program.
B. Program Establishment
1. Provide specimen documents to and reviewing specimen documents with
Policyholder's legal counsel and auditors.
2. Prepare financial projections and, where applicable, proxy statement text
with respect to the program.
3. Coordinate and establish program implementation and administration, and
set up records and other systems for the program.
4. Process section 1035 exchange.
C. Program Documentation. Provide program documentation, including:
1. Program explanation (including original assumptions).
2. Insurance schedule.
3. Funding assumptions and corporate composite projections.
4. Participant census.
5. Individual participant information.
6. Definition of Payment procedures.
a. Premiums
b. Death benefits
c. Withdrawals/surrenders
d. Loans
D. Program Servicing
1. Provide periodic reports on program and policy financial status.
2. Provide information for possible program modifications.
3. Provide ongoing program coordination.
4. Compile updated program data with assistance from Policyholder.
a. New participants
b. Terminations
c. Retirees
d. Deaths
5. Determine current and ongoing funding requirements.
6. Assist with enrollment of new participants.
7. Prepare detailed annual reviews of program experience to include:
a. Corporate composite projections
b. Program participant census including insurance amount
8. Compile composite billing for program.
9. Timely provide assistance to accountants and auditors for reporting
program transactions on financial statements and/or tax return and other
reports or analyses as reasonably required from time to time by
Policyholder.
10. Advise the Policyholder of transactions necessary or desirable to meet
program goals and commitments.
11. Execute quarterly social security sweeps.
12. Annually determine and provide to Policyholder the amount of imputed
taxable income for each participant.
13. Conduct annual performance review.
E. Performance Criteria
Policyholder may terminate Carrier's enhanced policy administration at any
time on written notice.
POLICY EXPENSES
- ---------------
(bullet) Front End Load Charges
1. State Premium Tax - state premium tax will be handled as a
pass-through. Taxes will be assessed based upon the Insureds'
state of residence as of the date of issue of the Policy.
2. Policy DAC Tax - 1.20%.
3. Other Charge - if enhanced policy administration is in effect, a
one time set-up charge of $100,000 in the aggregate for all
Policies in the program, in the first policy year.
(bullet) Mortality and Expense (M&E) Charge
The M&E risk charge is assessed against the average monthly value
of the total policy cash value in all separate accounts and is
deducted monthly. The following M&E risk charge is based upon a
4-tier sliding scale and applies for any period when enhanced policy
administration is in effect:
First $50 million 0.250%
Next $200 million 0.150%
Next $250 million 0.125%
Over $500 million 0.100%
Under the foregoing schedule, Carrier will not take into
consideration the combined assets in both policies (VEBA Plan and
the Split Dollar Plan) for purposes of calculating the monthly M&E
expenses for this Policy. Carrier would, however, take the assets
under this Policy into consideration when determining the M&E under
the VEBA policy.
For any period when enhanced policy administration is not in effect,
the M&E risk charge is as follows:
First $250 million 0.175%
Next $500 million 0.150%
Next $250 million 0.125%
Over $1000 million 0.100%
Under this schedule, Carrier will take into consideration the
combined assets on both policies (VEBA Plan and the Split Dollar
Plan) in calculating the monthly M&E risk charge for both policies.
(bullet) Investment Management Fees
Investment management fees for each separate account are assessed
against the average monthly value of the policy cash value in a
separate account. In calculating the monthly fee per separate
account Carrier will take into consideration the combined assets in
both policies (VEBA Plan and the Split Dollar Plan) which are
invested in the same separate account(s). The investment management
fees for the current commingled separate accounts can be found in
the Offering Memorandum.
(bullet) Custody and Securities Accounting/Valuation
There are no separate charges for these functions for the commingled
separate accounts. However, there are pass through charges for these
functions for single customer accounts.
(bullet) Policy Administration Charge
Currently, and as illustrated, the Policy Administration Charge is a
per insured life charge of $5.00 per month in all policy years. The
current charge may be reduced by the Carrier from time to time, and
reductions in the Carrier's costs incurred to service the Policy
will be commensurately reflected in the current charge. The
guaranteed maximum monthly charge for administration is $5.00 per
insured.
CHANGES IN PRICING FOR OTHER THAN THE COST OF INSURANCE CHARGES
- ---------------------------------------------------------------
Carrier will not change the charges or fees related to factors under its
control. Changes based on external factors may be reflected in the Policy.
For purposes of this paragraph, Carrier's profit goals and the contribution of
Specialized Benefit Resources organization to overhead are not external factors.
The external factors that may be reflected include (i) Federal and State
legislation and state insurance statutory and regulatory changes, and (ii) after
the first three policy years, increase in investment management, custody and
securities accounting/valuation charges pertaining to P&G single-customer
accounts by the providers of these services.
Any increase in price due to external factors will be documented and the price
increase, if appropriate, will be only to recover the increased cost of the
Carrier. With respect to any increase in charges pursuant to this section. P&G
may audit the relevant records of Metropolitan pursuant to an appropriate
nondisclosure document.
GOVERNING LAW
- -------------
The validity, construction, interpretation, and effect of this memorandum of
understanding and the Policy shall be governed by the laws of the state of Ohio,
without regard to Ohio's choice of law rules
CHANGES TO THIS MEMORANDUM
- --------------------------
Except with respect to changes mandated by state and federal law and as
otherwise specifically provided in this Memorandum or the Policy, this
Memorandum may be changed only by mutual agreement among the affected parties.
NOTICES
- -------
Unless and until the parties give written notice otherwise, whenever this
Memorandum provides for notices or consents in writing to be given by one of the
parties hereto to the other, such notices or consent will be given when
addressed and delivered to the following or their successors:
(1) The Procter & Gamble Company (2) Metropolitan Life Insurance Co.
Global Pensions Specialized Benefit Resources
Two Procter & Gamble Plaza 485B Route One South, Suite 420
Cincinnati, Ohio 45202-3315 Iselin, New Jersey 08830
Attn: Clare Clark Attn: G. Denis Dwyer
Group Manager Vice President
All such notices or consents must be sent by U.S. Certified Mail, Return Receipt
Requested.
Agreed:
THE PROCTER & GAMBLE COMPANY METROPOLITAN LIFE
INSURANCE COMPANY
By: /s/C. S. CLARK By: /s/JOHN J. RYAN
------------------------------- ------------------------------
Group Manager - Global Pensions Vice President
------------------------------- ------------------------------
(Title) (Title)
Dec. 30, 1997 Dec. 30, 1997
------------------------------- ------------------------------
(Date) (Date)
Exhibit (10-4)
--------------
ADDITIONAL REMUNERATION PLAN
----------------------------
The Procter & Gamble Company
RESOLVED, That the following plan for additional remuneration of the
Chairman of the Board and such other officers and employees of The Procter &
Gamble Company and subsidiary companies who, in the opinion of the Chief
Executive, are largely responsible for the success and development of the
business, be and the same is hereby adopted providing for additions to their
compensation in relation to the consolidated profit of the Company for the
fiscal year and the contribution by those persons to the operation of the
Company. Such additional remuneration may be paid in recognition of the
contribution of such persons during that year, and/or their contribution to
earnings growth over the current and prior years. Credits to a fund established
for this purpose are to be based upon a percentage of the annual consolidated
profit of the companies.
1. Each fiscal year there shall be set aside in an additional remuneration
fund an amount equal to five percent of the consolidated profit before
providing for foreign and United States Federal Income Taxes, based on
income of The Procter & Gamble Company and its subsidiary companies
included in its Consolidated Statement of Profit and Loss for such fiscal
year, conditional upon there being left for consolidated net profit an
amount at least equal to the sum of the dividends on the outstanding
Preferred Stock of The Procter & Gamble Company, plus the sum of the
dividends on the outstanding Common Stock of The Procter & Gamble Company
for said fiscal year, prior deductions having been provided for of the full
amount of the contributions to the Profit Sharing Trust and Employee Stock
Ownership Plan; provided, however, that if at the end of any fiscal year
the full amount equal to said five percent cannot be set aside on account
of the condition above stated, then the amount to be set aside shall be
reduced to the extent necessary to meet said condition. Unawarded balances
in any year shall remain in said fund and be available in later years;
provided, however, that this Board reserves the right to withdraw from said
fund any unawarded balances or part thereof remaining after the award at
the end of any fiscal year.
2. For each fiscal year the Compensation Committee of the Board of Directors
shall determine the method of payment and the amount of the additional
remuneration to be awarded from said fund to each principal officer elected
by the Board of Directors. The Chief Executive shall determine which other
persons are to receive additional remuneration out of said fund and the
method of payment and the amount to be awarded to each.
3. Awards may be made by the Chief Executive to any employee, including
principal officers elected by the Board of Directors except the Chairman of
the Board, upon the termination of their employment or the granting of a
leave of absence where their last year of employment is less than the full
fiscal year. Normally such awards will be made only if the period of
employment for such fiscal year is three months or more. The Chief
Executive may delegate to an appropriate Vice President the authority to
make such awards to persons who are not principal officers.
4. The consolidated profit and the consolidated net profit of The Procter &
Gamble Company and the subsidiary companies consolidated for each year
shall be determined in accordance with generally accepted principles of
accounting and approved by the independent certified public accountants
selected by this Board, and no person who may, at any time, be selected to
share in the fund provided for in paragraph 1 above shall have any right to
question the consolidated profit or the consolidated net profit so
determined.
5. While the amount received by any one individual for any year under this
resolution shall be considered as earned remuneration in addition to salary
paid, it shall be understood that this plan does not give to any officer or
employee any contract rights, express or implied, against any Company for
any award from the Fund or for compensation in addition to the salary paid
to him, or any right to question the action of the Board of Directors, the
Compensation Committee or the Chief Executive.
6. This Board reserves the right to amend this plan at any time, but no
amendment shall affect any outstanding but unpaid awards.
7. This Board reserves the right to terminate this plan at any time during any
fiscal year and any unawarded balance remaining in the fund shall be
withdrawn.
8. This plan is an amendment of the Plan adopted by this Board on April 12,
1949, amended on September 12, 1950, June 14, 1960, June 13, 1961, June 10,
1975, March 13, 1979, May 13, 1980, April 14, 1981, July 12, 1983, June 11,
1985, and June 10, 1986, and June 14, 1988 and June 12, 1990 and all
provisions of said original plan which are not herein set forth are hereby
repealed. The effective date of this amendment shall be June 12, 1990, and
this Plan shall continue until terminated as provided in paragraph 7 above.
Exhibit (10-5)
--------------
DEFERRED COMPENSATION PLAN FOR DIRECTORS
----------------------------------------
Principal Features of Plan
--------------------------
1) Effective Date - October 1, 1980.
2) Eligibility - All outside Directors.
3) Amounts Available for Deferral - All or part of retainer and meeting fees.
4) Period of Deferral - Until retirement as Director or after Director's
seventy-first birthday, at option of Director.
5) Valuation of Deferred Compensation Account - The amounts deferred will earn
hypothetical interest compounded monthly from date of deferral until
December 31 of year prior to year of payment. Interest will be payable on
the basis of the prime rate in effect at Morgan Guaranty at time of
crediting.
6) Payment Options - Lump sum or up to 5 annual installments, paid or
commencing January 15 of year following year of retirement as Director or
the January 15 following the Director's 71st birthday, as elected. All
payments are in cash.
7) Death of Director - Payment made in lump sum to beneficiary designated by
Director, or if no designation, to Director's estate.
8) Administration - Administrator is Secretary of Company.
9) Amendment or Termination - Board of Directors, or Executive Committee of the
Board, can amend or terminate at any time so long as vested rights are not
interfered with.
THE PROCTER & GAMBLE COMPANY
----------------------------
DEFERRED COMPENSATION PLAN FOR DIRECTORS
----------------------------------------
1. Name and Purpose - This plan shall be known as The Procter & Gamble Company
Deferred Compensation Plan for Directors ("Plan"). It is the purpose of this
Plan to enable certain Directors of The Procter & Gamble Company ("Company")
to elect to defer some or all of the fees which may be payable to the
Director for future services to be performed by him/her on this Board of
Directors or any committee thereof.
2. Eligibility - Any Director of the Company who is not also an employee of the
Company or of a subsidiary of the Company shall be eligible to participate
in the Plan.
3. Compensation Eligible for Deferral - Any eligible Director ("Participant")
may elect to defer receipt of all or a specified portion of the compensation
(exclusive of expense reimbursements) otherwise payable to him/her for
serving on the Board of Directors of the Company or for attending meetings
or Committee meetings thereof. Such compensation shall be credited to the
Participant's Deferred Compensation Account described hereafter on the date
the compensation would otherwise be payable.
4. Deferred Compensation Account - There shall be established for each
Participant who so elects a Deferred Compensation Account. Interest shall be
credited to such Account on the last day of each month by applying the prime
rate of Morgan Guaranty Trust Company of New York then in effect to the
balance in such Account on the first day of the month in question. All
interest so credited shall become part of the balance of such Account at the
close of business on the day of crediting.
5. Value of Deferred Compensation Account - the value of each Participant's
Deferred Compensation Account will include the compensation deferred plus
accumulated interest credited to such Account to the date of withdrawal. For
this purpose, the date of withdrawal shall be deemed to be the last day of
the month preceding payment in accordance with this Plan.
6. Time of Election of Deferral - An election to defer compensation must be
made prior to the time such compensation is earned. Once made, an election
shall continue in effect until the end of the Participant's service as a
Director or until the Company is notified in writing of the cancellation of
the election, whichever shall occur first.
7. Manner of Electing Deferral - A Participant may elect to defer compensation
by giving notice to the Secretary of the Company on a form provided by it.
Such notice shall include:
A. The type, e.g. retainer, meeting fees, or both, and the amount or
percentage of compensation to be deferred.
B. An election of a lump sum payment or a number of annual installments
(not to exceed 5) for the payment of the deferred compensation.
C. The date of the first installment payment, which shall be either
January 15 in the year following the year in which service as a Director
terminates or the January 15 following the electing Director's 71st
birthday.
8. Beneficiary Designation - A Participant may, from time to time, furnish a
form to the Secretary of the Company designating any person or persons to
whom payments are to be made if the Participant dies before receiving
payment of all amounts due hereunder. A beneficiary designation form will be
effective only after the signed form is filed with the Secretary of the
Company while the Participant is alive but will cancel any beneficiary
designation forms signed and filed earlier.
9. Manner of Payment - No withdrawal may be made from the Participant's
Deferred Compensation Account except as provided in this section. The value
of a Participant's Deferred Compensation Account is payable in cash in
either a lump sum or in annual installments as provided in paragraph 7. If
annual installments are elected, the amount of each payment shall be a
fraction of the value of the Participant's Deferred Compensation Account as
of December 31 of the year preceding payment, the numerator of which is 1
and the denominator of which is the total number of installments elected
minus the number of installments previously paid.
In the event of a Participant's death, the value of his/her Deferred
Compensation Account (including accrued interest) determined as of the date
of death shall be paid in cash in a single payment to the beneficiary
previously designated by the Participant, or to his/her estate if no
beneficiary has been designated, on the first January 15 or July 15
following such death or as soon as reasonably possible thereafter.
10. Participant's Rights - The right of any Participant to receive payments
under the provisions of this Plan shall be unsecured claim against the
general assets of the Company. The right of a Participant to receive
payments of deferred compensation as provided in this Plan shall not be
assigned, transferred, pledged or encumbered or be subject in any manner to
alienation or anticipation.
11. Statement of Account - Statements will be sent to Participants during
February of each year as to the value of their Deferred Compensation
Accounts as of the end of December of the previous year.
12. Administration - The Administrator of this Plan shall be the Secretary of
the Company. The Administrator shall have authority to adopt rules and
regulations for carrying out the Plan and to interpret, construe and
implement provisions thereof. Decisions by the Administrator as to
interpretation of the Plan shall be binding and conclusive on all affected
parties.
13. Governing Law - The provisions of this Plan shall be interpreted and
construed in accordance with the laws of the State of Ohio.
14. Amendment and Termination - The Plan shall become effective October 1, 1980.
It may at any time be amended, modified or terminated by the Board of
Directors, or the Executive Committee of the Board of Directors, of the
Company. No amendment, modification or termination shall, without the
consent of the Participant, adversely affect such Participant's rights with
respect to amounts theretofore accrued in his/her Deferred Compensation
Account.
Attachment
THE PROCTER & GAMBLE COMPANY
----------------------------
DEFERRED COMPENSATION PLAN FOR DIRECTORS
----------------------------------------
To: The Procter & Gamble Company
In accordance with the provisions of The Procter & Gamble Company Deferred
Compensation Plan for Directors, I hereby elect to defer future compensation
(excluding expense reimbursements) otherwise payable to me for services as a
Director of The Procter & Gamble Company. This election shall remain in effect
until cancelled by me in writing delivered to the Secretary of the Company.
Amount of Deferral (fill in one):
$___________________ (amount per year)
or
____________________ (percentage per year -- up to 100%)
=== Retainer Fee
=== Meeting Fees
The compensation deferred is to be paid to me in cash in __________ (insert
number not to exceed five) annual installments, the first of which is to be made
on (choose one)
---
___ the January 15 of the calendar year following the year in
which my services terminate.
---
___ the January 15 following ______________________, 19__
(my 71st birthday).
If I die before receiving all of the deferred payments due me, the value of my
deferred compensation account shall be paid in a single payment to the
beneficiary(ies) designated by me, or if no beneficiary(ies) has (have) been
designated, to my estate. This election is subject to the terms of The Procter &
Gamble Company Deferred Compensation Plan for Directors, adopted September 9,
1980 and on file with the records of the Company.
Received on the ______________ day ___________________________________
of_________________________, 19__, Signature of Director
on behalf of The Procter &
Gamble Company Date_______________________________
By_______________________________
Secretary
THE PROCTER & GAMBLE COMPANY
----------------------------
DEFERRED COMPENSATION PLAN FOR DIRECTORS
----------------------------------------
In case of my death while a Participant in this Plan, I hereby designate as my
beneficiary(ies) to whom payments shall be made as provided in the Plan:
Name Relationship Address Proportion to Each
- ---- ------------ ------- ------------------
- -------------------------------------------------------------------------------
I understand that the above designation(s) shall remain in effect until I give
written notice of change to the Secretary of The Procter & Gamble Company.
NOTE:
----
1. Many states have laws bearing on beneficiary designations. Participants
may desire to consult their advisors before making a designation.
2. Write name of beneficiary in full. If a married woman, show her given,
maiden and surname; thus, Mary Williamson Smith, not Mrs. John Smith.
3. Suggested Beneficiary Designations:
Mary Williamson Smith Wife 1 Main Ave., Milwaukee, Wis. 100%
or
Mary Williamson Smith Wife " " 100%
If she survives me, otherwise
My children, per stirpes* Equally
or
My Estate
*This provides that if any of the children should predecease the
Participant or former Participant, that child's share will go to
his/her children.
I understand that the value of my Deferred Compensation Account (including
accrued interest) determined as of the date of death will be paid in cash in a
single payment to the beneficiary(ies) designated above in accordance with the
terms of the Plan.
Signature__________________________
Director
Date Signed________________________
Acknowledgment:
Received as of__________________________________
Signature_______________________________________
Secretary, The Procter & Gamble Company
This Form should be submitted in duplicate. One copy will be returned for your
records after acknowledgment by the Secretary.
Exhibit (10-6)
--------------
BOARD OF DIRECTORS CHARITABLE GIFTS PROGRAM
-------------------------------------------
(Benefit at Death)
The Procter & Gamble Company
----------------------------
Purpose
- -------
The purpose of the Charitable Gifts Program ("Program"), established for
non-employee members of the Board of Directors and for the Chairman of the Board
and Chief Executive of The Procter & Gamble Company ("participants"), is to
provide opportunity for the Company and the participants to share in a program
for charitable giving.
Administration
- --------------
The Program shall be administered by the Secretary of the Company with
contribution payments made by Public Affairs.
Eligibility
- -----------
All non-employee Directors and the Chairman and Chief Executive of the Company
are eligible for this Program.
Charitable Contribution
- -----------------------
The Company will contribute a total of $1,000,000 following the death of the
participant to be allocated in accordance with each participant's
recommendations among up to five charitable organizations with a minimum amount
of $100,000 per charity.
The donation(s) will be made in the participant's name. The donation(s) will be
made as soon as practicable following the participant's death.
Charity Selection
- -----------------
Each participant will complete a Charitable Beneficiary Recommendation Form to
recommend the organization(s) to receive donations from the Company after his or
her death. The form will be acknowledged by the Company and a copy will be
returned to the participant.
Each charity recommended by a participant must be a tax-exempt organization
under Section 501(c)(3) of the Internal Revenue Code, including appropriate
recipients recognized as such pursuant to applicable Tax Treaty. Private
foundations are not eligible to receive donations under the program.
The recommendation of a charitable beneficiary may be withdrawn or revised by a
participant at any time before his/her death.
If any charity recommended by a participant ceases to qualify as a tax-exempt
organization and a revised recommendation is not submitted before his/her death,
the amount requested for that organization shall be prorated among the remaining
qualified charities. If all charities cease to qualify, the Company will select
a beneficiary or beneficiaries to receive donations in the name of the deceased
Director.
Upon the request of a participant, the Company will notify any recommended
charity of its intention of making the requested contribution in the name of the
participant at the participant's death, subject to revision or withdrawal of
such request by the participant and subject to action by the Board of Directors
at any later date to amend or terminate the Program. Letters of notification may
include designation of particular purposes for use of contributions when
received, when and as requested by participants.
Funding
- -------
The Company intends to fund the Program by purchasing joint life insurance
policies on the lives of the participants. The Company will pay the premiums for
each life insurance policy and will be the owner and beneficiary thereof.
Miscellaneous Provisions
- ------------------------
A participant's rights and interest under this Program may not be assigned or
transferred.
No contribution will be required of any participant.
This Program has been adopted by action of the Board of Directors on November
12, 1991, to be effective January 1, 1992. The Program may be amended or
terminated at any time by the Board of Directors whenever the Board, in its sole
discretion, determines that such action is in the best interest of the Company.
MEMORANDUM OF UNDERSTANDING
---------------------------
By and between The Procter & Gamble Company (P&G) and (Director's name).
-----------------
Whereas, P&G has adopted The Director's Charitable Gift Program and intends to
make a future charitable contribution to not more than five charities of my
choice; and
Whereas, P&G will be owner and beneficiary of a life insurance policy on joint
lives of myself and another Director; and
Whereas, the Program is believed to be in the best interest of the
Corporation,its Directors, and its shareholders.
Accordingly, with my consent, P&G has applied for a joint life insurance policy
on my life and that of a fellow Director. I recognize that P&G is the owner and
beneficiary of the life insurance policy, and that I have no rights under that
policy.
I understand it is the intent of the Director's Charitable Gift Program for P&G
to make charitable contributions in the total amount of $1,000,000 at the time
of my death to the charitable/non-profit organizations of my choice.
I further understand that I have the right to revoke my current charitable
preference at any time prior to my death. I also understand that I am authorized
to designate only organizations that are qualified under Section 501(c)(3) of
the Internal Revenue Code and are not private foundations.
I understand the Plan may be amended or terminated at any time by the Board of
Directors as the Board may deem advisable.
--------------------------------
Director's Name
--------------------------------
Director's Signature
The Procter & Gamble Company:
---------------------------------
Secretary's Name
----------------------------------
Secretary's Signature
CHARITABLE BENEFICIARY RECOMMENDATION FORM
------------------------------------------
Pursuant to the provisions of the Director's Charitable Gift Program and
recognizing The Procter & Gamble Company's intent to make posthumous charitable
contributions aggregating $1,000,000 to the charitable/non-profit organization
of my choice, and that each organization I select is qualified as tax-exempt
under Section 501(c)(3) of the Internal Revenue Code and is not a private
foundation.
In recognition of all of the above, I hereby make the following beneficiary
designations as of the date set forth herein:
Amount
Charitable Organization Address of Organization ($100,000 minimum)
1. ______________________ _______________________ __________________
2. ______________________ _______________________ __________________
3. ______________________ _______________________ __________________
4. ______________________ _______________________ __________________
5. ______________________ _______________________ __________________
Please indicate here the name of any selected organization which should be
notified:
---------------------------
---------------------------
---------------------------
---------------------------
---------------------------
I understand this beneficiary designation is revocable on my part at any time
prior to my death. This designation will, in fact, be revoked if I complete a
Charitable Beneficiary Recommendation Form of later date and file it with the
Secretary of The Procter & Gamble Company. I understand that in order to make
this change of beneficiary designation valid, I must receive in writing a
confirmation from the Secretary of The Procter & Gamble Company. If any charity
I designate ceases to be a tax-exempt organization qualified under Section
501(c)(3) of the Internal Revenue Code, and I do not submit a revised Charitable
Beneficiary Recommendation Form before my death, the amount I have designated to
be donated to that charity shall instead be donated to my remaining designated
qualified beneficiaries on a prorated basis. If none of my designated
organizations qualify, the donation will be made to the organization(s) selected
by The Procter & Gamble Company.
Dated: _____________________________ ______________________________
Director's Name
------------------------------
Director's Signature
Acknowledged for The Procter & Gamble Company:
Dated: _____________________________ _____________________________
Secretary's Name
-----------------------------
Secretary's Signature
Exhibit (10-7)
THE PROCTER & GAMBLE 1993 NON-EMPLOYEE DIRECTORS'
STOCK PLAN
(as adjusted for stock split effective August 22, 1997)
ARTICLE A -- PURPOSE.
The purpose of The Procter & Gamble 1993 Non-Employee Directors' Stock Plan
(hereinafter referred to as the "Plan") is to strengthen the alignment of
interests between non-employee Directors (hereinafter referred to as
"Participants") and the shareholders of The Procter & Gamble Company
(hereinafter referred to as the "Company") through the increased ownership of
shares of the Company's Common Stock. This will be accomplished by allowing
Participants to elect voluntarily to convert a portion or all of their cash fees
for services as a Director into Common Stock, by granting Participants a fixed
value of shares of Common Stock restricted until retirement (hereinafter
referred to as "Retirement Shares") and by granting Participants non-qualified
options to purchase shares of Common Stock (hereinafter referred to as "Stock
Options").
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 and to make such recommendations of amendments or
otherwise as it deems 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 allow Participants the right to elect to receive fees for services
as a director in either cash or an equivalent amount of whole shares of Common
Stock of the Company, or partly in cash and partly in whole shares of the Common
Stock of the Company, subject to such conditions or restrictions, if any, as the
Committee may determine. The Committee also has the authority to make all other
determinations it deems necessary or advisable for administering this Plan.
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.
Participation in the Plan shall be limited to all non-employee Directors of
the Company.
ARTICLE D -- LIMITATION ON NUMBER OF SHARES FOR THE PLAN.
The total number of shares of Common Stock of the Company that may be
awarded each year shall not exceed 70,000 shares.
ARTICLE E -- SHARES SUBJECT TO USE UNDER THE PLAN.
Shares of Common Stock to be awarded under the terms of this Plan shall be
treasury shares.
ARTICLE F -- RETIREMENT SHARES.
1. On January 2, 1997 each Participant shall receive a one-time award of
Retirement Shares with a fair market value equal to the value of each
Participant's accrued retirement benefit as set forth in Exhibit I to this Plan.
2. Commencing January 2, 1997 and on the first business day in each January
thereafter, each Participant shall receive Retirement Shares with a fair market
value of $20,000 on the date of grant.
3. All shares awarded under this Article shall be valued as set forth in
Article I.
ARTICLE G -- STOCK OPTIONS.
1. Each Participant shall, on the last business day in each February during
such Participant's term, automatically be granted a Stock Option to purchase
2,000 shares of Common Stock (with such amount subject to adjustment as set
forth in Article H) having an exercise price of one hundred percent (100%) of
the fair market value of the Common Stock on the date of grant.
2. The Stock Options shall have a term of ten (10) years from the date of
grant, subject to earlier termination as provided herein, and shall be
exercisable one (1) year from the date of grant, except in the case of death, in
which case the Stock Options shall be immediately exercisable.
3. Stock Options are not transferable other than by will or by the laws of
descent and distribution. Legatees, distributees and duly appointed executors
and administrators of the estate of a deceased Participant shall have the right
to exercise such Stock Options at any time prior to the expiration date of the
Stock Options.
4. If a Participant ceases to be a Director while holding unexercised
Stock Options, such stock options are then void, except in the case of (i)
death, (ii) disability, (iii) retirement after attaining the age of sixty-nine
(69) or (iv) resignation from the Board for reasons of the antitrust laws or the
conflict of interest or continued service policies.
5. Upon the exercise of a Stock Option, payment in full of the exercise
price shall be made by the Participant. The exercise price may be paid for by
the Participant 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 H -- ADJUSTMENTS.
The amount of shares authorized to be issued annually under this Plan will
be subject to appropriate adjustment in the event of future stock splits, stock
dividends, or other changes in capitalization of the Company 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 the number of shares to be granted as
Stock Options pursuant to Article F, paragraph 1 shall be adjusted to give
effect to any such stock splits, stock dividends, or other changes in the
capitalization.
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 may be
set forth in agreements between the Company and the Participant or in the awards
of stock to them, all as the Committee determines.
2. The shares awarded shall be valued at the average of the high and
low quotations for Common Stock of the Company on the New York Stock Exchange on
the day of the transfer to a Participant. All shares awarded shall be full
shares, rounded up to the nearest whole share.
ARTICLE J -- 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, or alter the persons
eligible to participate in this Plan. The Participants and the Company shall be
bound by any such amendments as of their effective dates, but if any outstanding
awards are affected, notice thereof shall be given to the holders of such awards
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
awarded shares subject to conditions or restrictions transferred pursuant to
this Plan shall continue to be subject to such conditions or restrictions.
2. Article G (paragraph 1) shall not be amended more than once every six
(6) months, other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules thereunder.
3. Every recipient of shares pursuant to this Plan shall be bound by the
terms and provisions of this Plan and of the transfer of shares agreement
referable thereto, and the acceptance of any transfer of shares pursuant to this
Plan shall constitute a binding agreement between the recipient and the Company.
ARTICLE K -- DURATION OF PLAN.
This Plan shall be effective as of January 1, 1994. This Plan will
terminate on December 31, 2003 unless a different termination date is fixed by
the shareholders or by action of the Board but no such termination shall affect
the prior rights under this Plan of the Company or of anyone to whom shares have
been transferred prior to such termination.
Plan adopted November 9, 1993
Plan Amended January 10, 1995
Plan Amended June 11, 1996
Adjusted for August 22, 1997 stock split
Exhibit (10-9)
-----------------
The Procter & Gamble Executive Group Life Insurance Policy (Additional Policy)
Group Control No. 363417
AETNA LIFE INSURANCE COMPANY
HARTFORD, CONNECTICUT
(Herein called the Insurance Company)
Group Policy No.: GL-363417 Policy Delivered In: Ohio
(State or other Jurisdiction)
Policy holder: THE PROCTER & GAMBLE COMPANY
Policy Signed: June 14, 1977 To Take Effect: April 13, 1977
This policy is a contract between the Policyholder and the Insurance Company and
shall be construed in accordance with the law of the jurisdiction in which it is
delivered.
In consideration of the payment by the Policyholder of premiums in the amounts
and at the times hereinafter provided, the Insurance company hereby agrees with
the Policyholder, subject to the terms appearing on this and the following pages
of this policy (including, if any, the riders, endorsements, and amendments, to
this policy which are signed by the Insurance Company), to pay benefits in
accordance with the terms of this policy. The obligations and the rights of all
persons under this policy shall be determined in accordance with the terms of
this policy.
In witness whereof the Insurance Company has signed this policy at Hartford,
Connecticut.
Aetna Life Insurance Company
/S/HARVEY P. BERMAN /S/WILLIAM O. BAILEY
Secretary President
/S/HELEN N. MATIJCZYK
Registrar
GROUP LIFE INSURANCE POLICY
RIDER
Group Control No. 363417
ATTACHED TO AND MADE A PART OF GROUP POLICY NO. GC-363417 A CONTRACT
BETWEEN AETNA LIFE INSURANCE COMPANY AND THE POLICY HOLDER
THE PROCTER & GAMBLE COMPANY
It is understood and agreed that any rider effecting a change in this policy
which is approved by an executive officer of the Insurance Company shall be
valid, and shall not require formal acceptance by the Policyholder, in any of
the following instances:
(1) The change has been negotiated by means of a request by the
Policyholder assented to by the Insurance Compny.
(2) The change is required to bring the policy into conformance with any
applicable law, regulation or ruling of
(a) a jurisdiction affecting any individual covered under this
policy; or
(b) the Federal Government.
Nothing contained in this rider shall be held to alter or affect any of the
terms of the policy other than as herein specifically stated.
IN WITNESS WHEREOF THE AETNA LIFE INSURANCE COMPANY, has signed this rider at
HARTFORD, CONNECTICUT, to become effective as of the effective date of the
group policy.
Signed by the Insurance Company as of the effective date of the group policy.
/s/ALICE L. STEPPE /s/LEWIS R. MERVINE
Registrar Secretary
INDEX
Page
Article I-GENERAL PROVISIONS.
Article II-BENEFITS.
Article III-TERMINATION OF INSURANCE.
Article IV-PREMIUMS.
Article V-DISCONTINUANCE OF POLICY.
Article VI-MISCELLANEOUS PROVISIONS.
COPY OF APPLICATION
Article I-GENERAL PROVISIONS 363417
Section 1. General Definitions
As used in this policy:
(a) The term "Employee Coverage" means only insurance as to an
employee.
(b) The term "date of issue" means the date this policy took
effect as shown on Page 1 of this policy.
(c) Commencing January 1, 1978, "policy anniversaries" shall be
deemed to occur on said date, and on the same day in each
succeeding year.
(d) The term "policy year" means a period commencing with the date
of issue of this policy, or a policy anniversary, and
terminating immediately prior to the next succeeding policy
anniversary.
(e) A "policy month" shall commence on the date of issue. Each
"policy month" thereafter shall be deemed to commence on the
first day of the calendar month.
(f) "Contributory insurance" means insurance for which an employee
makes written request to his Participant Employer and agrees
to make the required contributions to his Participant
Employer. "Non-contributory insurance" is insurance for which
an employee does not make written request nor contribute
toward the cost. This policy provides insurance on the
non-contributory basis.
(g) The term "Added Compensation" means the total amount of
additional remuneration:
1) awarded by the Board of Directors of The Procter & Gamble
Company, the Compensation Committee of The Procter &
Gamble Company or the Procter & Gamble Chief Executive
Officers and heads of the various subsidiary companies,
and
2) charges against the Executive Additional Remuneration
Reserve, but excluding any supplemental awards which are
made because of the limits imposed by the Employee
Retirement Income Security Act of 1974 on credits to the
Profit Sharing Trust Plan.
(h) The term "Total Compensation" means the sum of (a) base
salary plus, (b) added compensation.
Section 2. List of Participant Employers
An Employer shall be eligible to be included in this list as a
Participant Employer if such inclusion is not contrary to any
applicable insurance law of the state or other jurisdiction in which
this contract is delivered.
The Policyholder may act for and on behalf of any and all of the
Employers included in this list in all matters pertaining to this
contract, and every act done by the Policyholder, agreement made
between the Insurance company and the Policyholder, or notice given by
the Insurance Company to the Policyholder or by the Policyholder to the
Insurance Company, shall be binding on all such Employers.
Any eligible Employer may be added to this list as a Participant
Employer only upon written agreement between the Policyholder and the
Insurance Company and upon terms mutually agreeable to them.
An Employer shall be eliminated automatically from this list when this
contract is discontinued with respect to employees of such Employer, as
provided for elsewhere in this contract, but termination of an
Employer's status as a Participant Employer shall not relieve such
Employer from any obligations to the Insurance Company with respect to
the time such Employer was a Participant Employer under this contract.
This list shall, at any time, consist of those Employers which have
been included under this contract by written agreement between the
Policyholder and the Insurance Company, and which have not been
removed, in accordance with the above terms of this section.
Section 3. Employees to be Insured
(I) Employee Coverage
A. Employees Eligible:
All employees of a Participant Employer shall be eligible for
Employee Coverage except employees in the following classes:
(a) temporary or substitute employees (i.e.,
employees who are not classified by
such Employer as permanent employees);
(b) employees who are actively working for such
Employer on a part-time basis, but this
exceptions shall not apply in the case of a
regular, full-time, active employee of such
Employer if and while he is only temporarily
working for such Employer on a part-time
basis;
(c) regular full-time active employees who are
not key executives of The Procter &
Gamble Company or its subsidiaries.
Each employee in an eligible class who has completed six
months or more of continuous service on the date of issue
shall become eligible for Employee Coverage on that date, and
each other employee in an eligible class shall become eligible
for Employee Coverage on the date on which he completes six
months of continuous service.
Anything to the contrary notwithstanding, if an individual is
in the employ of or connected with two or more Participant
Employers, he shall not be eligible for multiple coverage
under this policy, but shall be treated the same as if he were
in the employ of or connected with a single Participant
Employer; the amount of insurance for which any such
individual shall be eligible under this policy shall under no
circumstances exceed the amount which would apply if all of
the Participant Employers with which he is employed or
connected were a single Participant Employer and if the
aggregate of the remuneration being paid to him by all such
Participant Employers were being paid to him by a single
Participant Employer. If any Participant Employer is a
partnership, the natural-person partners thereof shall be
considered to be employees within the meaning of this policy
if and while they are actively engaged in and devoting their
time on a substantially full-time basis to the conduct of the
business of the partnership. If any Participant Employer is an
individual proprietorship, the natural-person proprietor
thereof shall be considered to be an employee within the
meaning of this policy on the same terms as those applicable
to partners of a partnership.
B. Effective Dates of Insurance:
(1) As to contributory insurance, each employee who makes
written request to his Participant Employer for
Employee Coverage and agrees to make the required
contributions therefor to his Participant Employer is
to be insured for Employee Coverage on the date he
becomes eligible for Employee Coverage or on the date
he makes such request, whichever is later; provided,
however, that
(a) the Employee Coverage of any employee who makes
such written request after thirty-one days from the
date he becomes eligible, or who revokes any written
request previously made, shall become effective only
if and when the Insurance Company gives its written
consent; and
(b) any employee who is both disabled (i.e., ill or
injured) and away from work on the date Employee
Coverage is to become effective shall not be insured
until he actually returns to work on a full-time
basis.
(2) As to non-contributory insurance, each employee is to be
insured for Employee Coverage on the date he becomes eligible
therefor; provided, however, that any employee who is both
disabled (i.e., ill or injured) and away from work on the date
Employee Coverage is to become effective shall not be insured
until he actually returns to work on a full-time basis.
Section 4. Changes in Amounts of Insurance
The initial amount of insurance for an employee under any Title of this policy
shall conform to that provided for his classification.
As to contributory insurance, if, for any reason, the terms of any Title of this
policy warrant an amount of insurance for any employee greater or less than that
for which he is then insured, the amount of his insurance shall be increased or
reduced as follows: Any reduction in insurance because of attainment of a
specified age or because of retirement shall become effective on the employee's
"reduction date"; any other reduction in insurance shall become effective on the
date the employee makes a request therefor to his Participant Employer: any
increase in insurance shall become effective only in conformity with the terms
applicable with respect to the effecting of the initial insurance of employees
as set forth in Section 3 of Article I of this policy.
As to non-contributory insurance, if, for any reason, the terms of any Title of
this policy warrant an amount of insurance for any employee greater or less than
that for which he is then insured, the amount of his insurance shall be
increased or reduced to the applicable amount as specified in such Title;
provided, however, that in any instance in which an employee is both disables
(i.e., ill or injured) and not working on the date his insurance would otherwise
be increased, the effective date of the increase in insurance shall be deferred
until he actually returns to active work on a full-time basis.
A retroactive change in an employee's rate of earnings shall be deemed to be
effective on the date of the determination of the change in the rate of
earnings.
If the terms of Title ELIC provide for a reduction in the amount of any
employee's insurance under that Title because of attainment of a specified age
or because of retirement, no further increases or reduction will be made in the
amount of such employee's insurance under that Title because of a change in the
employee's classification or because of a change in the Schedule of Insurance in
accordance with the terms of this section after the first reduction because of
age or retirement becomes effective.
Article II-BENEFITS
TITLE ELIC-EMPLOYEES' LIFE INSURANCE COVERAGE
Section 1. Life Insurance Benefit
If an employee shall die while Employee Coverage is in force for the employee,
the Insurance Company shall pay, upon receipt of due proof of the death of such
employee-to the beneficiary determined in accordance with the terms of this
policy-the amount determined in accordance with the terms of this policy.
Schedule of Insurance
---------------------
Classification Amount of Insurance
-------------- -------------------
All employees An amount equal to 100% of the
employee's total compensation, the
resulting amount, if not an integral
multiple of $500 is to be taken to
the nearest integral multiple of
$500, but in no event shall the
amount of insurance be more than
$1,000,000 nor less than $4,000.
Continuation of Coverage for Retired Employees
If an employee, while insured under this Title, becomes retired from the service
of a Participant Employer, his employment, for the purposes of this policy, will
be continued while the Policyholder continues to make premium payments for such
employee's insurance, provided the following requirements are met:
The employee retires in accordance with the terms of his Participant
Employer's Qualified Pension Plan and will receive pension
consideration (other than a deferred vested pension) thereunder.
Employees retired prior to January 1, 1981 and eligible only for the amounts of
insurance shown in the schedule of insurance below.
Schedule of Insurance
---------------------
Classification Amount of Insurance
-------------- -------------------
All employees An amount equal to 100% of the
employee's Annual Rate of Basic
Earnings, the resulting amount, if
not an integral multiple of $500, to
be taken to the nest higher integral
multiple of $500, but in no event
shall the amount of insurance be
more than $400,000 nor less than
$4,000.
Article III-TERMINATION OF INSURANCE
Section 1. Employee Coverage
All insurance of any employee under this policy shall terminate at the earliest
time specified below:
(1) Upon discontinuance of the policy.
(2) Immediately when the employee's employment with a Participant
employer in the classes of employees eligible for insurance
terminates. Cessation of active work by an employee shall be
deemed to be termination of his employment, except that
(a) in the case of an absence from active work because of
sickness or injury, his employment may, for the
purposes of insurance under this policy, be deemed to
continue until terminated by his Participant
Employer, but in no case beyond twelve months from
the date such absence from active work started, or
(b) in the case of absence of an employee from active
work because of temporary lay-off or leave of absence
(other than leave for military service), his
employment may, for the purposes of insurance under
this policy, be deemed to continue until terminated
by his Participant Employer but in no case beyond 12
months from the date such lay-off or leave of absence
commenced.
In the case of any of the exceptions in the foregoing
paragraph, the insurance under this policy for such employee
shall automatically cease on the date of such termination of
his employment by his Participant Employer, as evidenced to
the Insurance Company by the Policyholder, whether by
notification or by cessation of premium payment on account of
such employee's insurance hereunder. Any maximum period of
continuation permitted by the foregoing paragraph may be
extended by written mutual agreement between the Policyholder
and the Insurance Company.
In no event may any insurance provided on a contributory basis be continued
beyond the end of the period for which the employee has made to his Participant
Employer the contributions required.
Article IV-PREMIUMS
Section 1. PREMIUM RATES
EMPLOYEE COVERAGE
<TABLE>
TABLE OF PREMIUM RATES
<CAPTION>
Age on Monthly Age on Monthly Age on Monthly Age on Monthly
Birthday Premium Birthday Premium Birthday Premium Birthday Premium
Nearest Per Nearest Per Nearest Per Nearest Per
Beginning $1,000 Beginning $1,000 Beginning $1,000 Beginning $1,000
of the of of the of of the of of the of
Policy Year Insurance Policy Year Insurance Policy Year Insurance Policy Year Insurance
<S> <C> <C> <C> <C> <C> <C> <C>
15 $ .19 35 $ .32 55 $1.65 75 $ 8.56
16 .20 36 .34 56 1.80 76 9.24
17 .21 37 .36 57 1.97 77 10.00
18 .22 38 .38 58 2.14 78 10.86
19 .23 39 .41 59 2.32 79 11.81
20 .23 40 .45 60 2.51 80 12.83
21 .24 41 .49 61 2.72 81 13.93
22 .24 42 .53 62 2.96 82 15.07
23 .25 43 .58 63 3.21 83 16.26
24 .25 44 .63 64 3.48 84 17.50
25 .25 45 .68 65 3.78 85 18.80
26 .25 46 .74 66 4.11 86 20.16
27 .26 47 .81 67 4.48 87 21.60
28 .26 48 .89 68 4.89 88 23.13
29 .26 49 .97 69 5.34 89 24.79
30 .27 50 1.06 70 5.81 90 26.62
31 .27 51 1.16 71 6.32 91 28.68
32 .28 52 1.26 72 6.84 92 31.03
33 .29 53 1.38 73 7.38 93 33.75
34 .30 54 1.51 74 7.95 94 36.95
95 40.98
</TABLE>
For annual, semi-annual, or quarterly premiums multiply the monthly premiums
determined from the above table by 11.83, 5.96 or 2.99 respectively.
Policy Charge
The premium calculated as above shall be increased by a policy charge of $.20
for each $1,000 of insurance in force hereunder at the beginning of the then
current policy year for each policy month which occurs during the premium paying
period, provided that the policy charge shall not exceed $8.00 in respect of any
month.
During the first policy year, the policy charge shall be waived and the total
premium is subject to a reduction of 35%.
Advance Expense Adjustment
For the first policy year the total premium, including the policy charge, shall
be reduced by the applicable advance expense adjustment indicated below (for
annual, semi-annual or quarterly premiums, divide the total premium, including
the policy charge by 12, 6, or 8, respectively, before entering this table):
Total Monthly Advance Expense Total Monthly Advance Expense
Premium Before Adjustment Premium Before Adjustment
Advance Expense Advance Expense
Adjustment Adjustment
Under $125 0% $ 700- 899 26%
$125-149 10 900- 1,399 27
150-174 11 1,400- 2,499 28
175-199 13 2,500- 3,999 29
200-224 14 4,000- 7,499 30
225-249 16 7,500-11,999 31
250-299 17 12,000-26,999 32
300-349 19 27,000-59,999 33
350-399 20 60,000-79,999 34
400-449 21 80,000 and over 35
450-499 22
500-549 23
550-599 24
600-699 25
Section 2. Premium Calculations and Experience Rating
Portion Applicable to Employee Coverage Only:
At the beginning of each policy year the Insurance Company shall compute an
aggregate annual, semi-annual, quarterly, or monthly premium, as the case may
be, based upon the frequency of premium payments then agreed upon between the
Policyholder and the Insurance Company, which shall be the sum of the individual
premiums for the employees then insured, calculated according to the table of
premium rates then in effect hereunder on the basis of the ages (nearest
birthday) then attained by the employees insured for Employee Coverage and their
respective amounts of insurance. From such computation an average premium rate
shall be determined by dividing the aggregate premium by the aggregate amount of
insurance then in force, and such average premium rate shall remain in effect,
and shall be used in calculating premiums under this policy, until a new one is
determined. Each premium due during the policy year shall be calculated by
multiplying the amount of insurance in force at the beginning of the
premium-paying period by the average premium rate in effect on the premium-due
date.
Portion Having General Application:
The premium due under this policy on any premium-due date shall be the sum of
the premium charges for the insurance provided under the Titles then forming a
part of this policy.
If premiums are payable monthly, any insurance becoming effective shall, except
as hereinafter provided, be charged for from the first day of the policy month
coinciding with or next following the date the insurance takes effect, and
premium charges for any insurance terminated shall cease as of the first day of
the policy month coinciding with or next following the date the insurance
terminates. If premiums are payable quarterly, semi-annually, or annually,
premium charges or credits for a fraction of a premium-paying period required by
the foregoing terms of this paragraph shall, except as hereinafter provided, be
made on a pro-rate basis for the number of policy months between the date
premium charges commence or cease and the end of the premium-paying period. If
this policy is amended to provide additional coverage, or any increase in
coverage, and if the effective date of such amendment is other than the first
day of a premium-paying period, a pr-rate premium in respect of such coverage
shall become due and payable as of such date, to cover the period beginning on
that date and ending immediately prior to the commencement of the next
premium-paying period.
The premium charges for the insurance under any Title forming a part of this
policy shall be calculated at the premium rates specified above, subject to such
reductions or increases as the Insurance Company shall determine to be warranted
by experience or by reason of any change in factors bearing on the risk assumed.
Each reduction or increase in any premium rate shall be made by written
notification to the Policyholder by the Insurance Company.
No experience reduction or increase in premium rates shall become effective less
than twelve months after the effective date of this policy.
As of the end of any policy year the Insurance Company may declare an experience
credit in such amount as the Insurance Company shall determine. The amount of
each experience credit declared by the Insurance Company shall be refunded to
the Policyholder, or upon request by the Policyholder, a part or all of the
experience credit shall be applied against the payment of any premium or
premiums.
If at any time the aggregate of employee contributions theretofore made for
group insurance shall exceed the aggregate of premiums theretofore paid for
group insurance (after giving effect to any experience credits allowed the
Policyholder), such excess shall be applied by the Policyholder for the sole
benefit of employees, but the Insurance Company shall not be obliged to see to
the application of any such excess.
Instead of the method of calculation of premiums above provided, premiums may be
calculated by any method which produces approximately the same total amount of
premiums and is mutually agreeable to the Insurance Company and the
Policyholder.
Section 3. Premiums, How Payable
Premiums shall be payable by the Policyholder in advance at the Home Office of
the Insurance Company or to its authorized agent.
The first premium under this policy shall be due and payable as of the date of
issue to cover the period beginning on that date and ending on the last day of
the first policy month and thereafter premiums shall be due and payable on the
first day of each policy month. The Policyholder may change the frequency of
premium payments as of any premium-due date with the written consent of the
Insurance Company.
Section 4. Grace Period
A grace period of thirty-one days following the due-date shall be allowed the
Policyholder for the payment of each premium.
Article V-DISCONTINUANCE OF POLICY
The Policyholder may discontinue this policy with respect to all employees of
any one or more Participant Employers, and any Participant Employer may
discontinue this policy with respect to all employees of such Employer, by
giving to the Insurance Company written notice stating when, after the date of
such notice, such discontinuance shall become effective; but no such
discontinuance shall become effective with respect to employees of any
Participant Employer during any period for which a premium has been paid to the
Insurance Company with respect to employees of such Employer.
The Insurance Company reserves the right to discontinue this policy.
(a) with respect to all employees of any Participant Employer, at
any time after the end of the grace period allowed for payment
of a premium with respect to employees of such Employer which
has not been paid, by giving written notice to the
Policyholder stating when such discontinuance shall become
effective;
(b) either in its entirety or with respect to all employees of any
Participant Employer, at any time, by giving to the
Policyholder written notice stating the date as of which such
discontinuance shall become effective but such date shall not
be one that occurs earlier than thirty-one days after the date
of such notice unless mutually satisfactory to the
Policyholder and the Insurance Company.
If this policy discontinues with respect to any of the employees of a
Participant Employer, the Policyholder and the Employer shall be jointly and
severally liable to the Insurance Company for all unpaid premiums for the period
during which this policy was in force with respect to any of the employees of
such Employer.
Article VI-MISCELLANEOUS PROVISIONS
Section 1. Assignment
No assignment of any present or future right or interest, under this policy by
the Policyholder or by any Participant Employer shall bind the Insurance Company
without its written consent.
Neither the employees nor their beneficiaries may assign any of the insurance or
other benefits under this policy; provided, however, that if the Policyholder
and the Insurance Company consent in writing, the employee or his assignee may,
as a gift, transfer by absolute and irrevocable assignment all of his incidents
of ownership and all of his other right, title, and interest, both present and
future, in and to insurance under this policy, including but not limited to the
right to designate and change the beneficiary, the right to make any requisite
contributions to maintain the insurance in force under this policy, and the
right to exercise any conversion privilege provided under this policy.
No assignment shall be binding upon the Insurance Company unless the assignment
meets the foregoing conditions and requirements, is in form approved by the
Insurance Company, and it or a duplicate thereof is filed with the Insurance
Company at its Home Office in Hartford, Connecticut.
Neither the Insurance Company nor the Policyholder guarantees or assumes any
obligation as to the validity, sufficiency, or effect of any assignment.
Section 1-A. Claims of Creditors
Except so far as may be contrary to the laws of any state having jurisdiction in
the premises, the insurance and other benefits under this policy shall be exempt
from execution, attachment, garnishment, or other legal or equitable process,
for the debts of the employees or their beneficiaries.
Nothing in this section, however, shall be construed so as to prejudice the
right of any person to receive payment pursuant to the beneficiary provisions of
this policy.
Section 2. Employees' Certificates
The Insurance Company will issue to the Policyholder, for delivery to each
insured employee, an individual certificate setting forth a summary of the
essential features of the insurance coverage to which the employee is entitled
and stating to whom the benefits are payable, together with a statement of the
"Conversion Privilege" set forth in Section 7 of this Article.
Section 3. Data Required-Clerical Error-Misstatements-Non-Discrimination
The Policyholder and each of the Participant Employers shall furnish to the
Insurance Company all information which the Insurance Company may reasonably
require with regard to any matters pertaining to this policy. All documents,
books, and records which may have a bearing on the insurance or premiums shall
be open for inspection by the Insurance Company at all reasonable times during
the continuance of this policy and until the final determination of all rights
and obligations under this policy.
Neither clerical error (whether by the Policyholder, by any of the Participant
Employers, or by the Insurance Company) in keeping any records pertaining to the
insurance, nor delays in making entries thereon, shall invalidate insurance
otherwise validly in force or continue insurance otherwise validly terminated,
but upon discovery of such error or delay an equitable adjustment of premiums
shall be made.
If any relevant facts pertaining to any individual to whom the insurance relates
shall be found to have been misstated, an equitable adjustment of premiums shall
be made, and if such misstatement affects the existence or the amount of
insurance, the true facts shall be used in determining whether insurance is in
force under the terms of this policy and in what amount.
No refund of any premium or portion thereof, whether paid in error or otherwise,
shall be made for any period commencing earlier than (a) three months prior to
the date on which evidence that the particular refund should be made is received
by the Insurance Company, or (b) the beginning of the policy year in which such
evidence is received, whichever method (a) or (b) above would result in the
greater refund.
In connection with the administration of this policy, the Policyholder and the
Participant Employers shall act so as not to discriminate unfairly between
individuals in similar situations at the time of such action, but the Insurance
Company shall be entitled to rely upon any action of the Policyholder or of any
of the Participant Employers without being obliged to inquire into the
circumstances thereof.
Section 4. Entire Contract-Incontestability
This policy and the application of the Policyholder, a copy of which is attached
to this policy, constitutes the entire contract. All statements made by the
Policyholder or by the insured employees shall be deemed representations and not
warranties. No written statement made by any insured employee shall be used by
the Insurance Company in any contest unless a copy of the instrument containing
the statement is or has been furnished to such employee or to his beneficiary.
The validity of this policy shall not be contested, except for non-payment of
premiums, after it has been in force for two years from its effective date. No
statement made by any insured employee relating to his insurability shall be
used by the Insurance Company in contesting the validity of the insurance with
respect to which such statement was made after such insurance has been in force
prior to the contest for a period of two years during such employee's lifetime
nor unless such statement is contained in a written instrument signed by him.
This policy is issued in the non-participating department of the Insurance
Company. This policy may be changed at any time or times by written agreement
between the Insurance Company and the Policyholder, without the consent of any
employee or other person. All agreements made by the Insurance Company are
signed by an executive officer of the Insurance Company. No other person can
change or waive any of the terms of this policy or make any agreement which
shall be binding upon the Insurance Company.
Failure to insist upon compliance with any provision of this policy at any given
time or times on under any given set or sets of circumstances shall not operate
to waive or modify such provision, or in any manner whatsoever to render it
unenforceable, as to any other time or times or as to any other occurrence or
occurrences, whether the circumstances are, or are not, the same.
Section 5. Contribution By Employee
Contributory Insurance: The maximum amount that any employee shall be required
or permitted to contribute toward the cost of his contributory insurance, if
any, under Title ELIC shall be $0.60 per month for each One Thousand Dollars of
such insurance hereunder.
Non-contributory Insurance: No insured employee shall be required or permitted
to contribute toward the cost of non-contributory insurance, if any hereunder.
Section 6. Beneficiary and Mode of Settlement
Beneficiary
An employee, whether or not employment has terminated, may designate a
beneficiary, and from time to time change his designation of beneficiary, by
written request filed at the headquarters of the Policyholder or at the Home
Office of the Insurance Company. Such designation or change shall take effect as
of the date of execution of such request, whether or not the employee be living
at the time of such filing, but without prejudice to the Insurance Company on
account of any payments made by it before receipt of such request at its Home
Office.
Any amount payable to a beneficiary to a beneficiary shall be paid to the
beneficiary or beneficiaries designated by the employee, except that, unless
otherwise specifically provided by the employee in his beneficiary designation:
(a) if more than one beneficiary is designated, the designated
beneficiaries shall share equally;
(b) if any designated beneficiary predeceases the employee, the
share which such beneficiary would have received if surviving
the employee shall be payable equally to the remaining
designated beneficiary or beneficiaries, if any, who survive
the employee; and
(c) if no designated beneficiary survives the employee, or if no
beneficiary has been designated, payment shall be made to the
employee's widow or widower, if surviving the employee; if not
surviving the employee, in equal shares to the employee's
children who survive the employee; if none survives the
employee, to the employee's parents, equally, or to the
survivor; if neither survives the employee, in equal shares to
the employee's brothers and sisters who survive the employee;
or, if non survives the employee, to the employee's executors
or administrators.
Mode of Settlement
The whole or any part of any amount payable under Article II shall be paid in
accordance with that one of the following Methods (A) or (B) that shall be
elected by the employee, or in accordance with such other method of settlement
as shall be elected by the employee and agreed to by the Insurance Company. An
employee may revoke any such election at any time before payments commence upon
written notice filed at the Home Office of the Insurance Company. An employee
may change any such election at any time but only with the consent of the
Insurance Company.
In any case where the amount of any death benefit is payable in one sum, the
beneficiary may, after the death of the employee but before payment is made,
elect that the whole or any part of any death benefit be payable in accordance
with Method (B) below, or in accordance with such other method of settlement as
shall be elected by the beneficiary and agreed to by the Insurance Company. A
beneficiary may change or revoke any such election but only with the consent of
the Insurance Company.
METHOD (A): Payment in one sum. This method shall be automatic if no other
method is elected.
METHOD (B): Payment in monthly installments of any fixed amount specified
in the election (which shall be not less than $5.00 per month per
$1,000 so payable nor less than $10.00 per month regardless of the
amount so payable), until the amount so payable with interest is
exhausted. With respect to each such election of this method, the
rate of interest to be allowed on the unpaid balance shall be
determined by the Insurance Company but shall in no case be less
than the guaranteed rate of interest provided for with respect to
optional methods of settlements under the individual policies of
life insurance being issued by the Insurance Company on the date of
such election. At the death of the payee to whom payment is being
made under this method, the unpaid balance shall be paid in one sum
to the executors or administrators of the payee, unless otherwise
provided in the election.
If any payee for any benefit payment under this policy is a minor or is, in the
opinion of the Insurance Company, legally incapable of giving a valid receipt
and discharge for such benefit payment, the Insurance Company shall have the
option, unless claim has been made by a duly appointed guardian or committee of
such payee, of paying such benefit in monthly installments of not over $100 the
first month and not over $50 a month thereafter to the person or persons who, in
the opinion of the Insurance Company, are caring for and supporting such payee.
Payment made in accordance with the terms of this paragraph shall be a complete
discharge of the Insurance Company's obligations to the extent of such payment,
and the Insurance Company shall not be obligated to see to the application of
any payment so made.
Section 7. Conversion Privilege
Employee Coverage
If an employee's insurance under this policy, or any amount of such insurance,
ceases because of termination of employment or because of termination of
membership in the class or classes of employees eligible for insurance under
this policy, the employee shall be entitled to have issued to him by the
Insurance Company, without evidence of insurability, an individual policy of
life insurance without disability or other supplementary benefits, provided
written application for the individual policy shall be made, and the first
premium thereon paid, to the Insurance Company within thirty-one days after such
termination, and provided further that:
(a) the individual policy shall be on any of the forms, other than
term insurance, that shall be selected by the employee from
among the forms then customarily issued by the Insurance
Company at the age and for the amount applied for:
(b) the individual policy shall be in an amount equal to or, at
the option of the employee, an amount less than the amount of
the employee's life insurance which ceases under this policy
because of such termination;
(c) the premiums payable under the individual policy shall be at
the Insurance Company's then customary rate applicable to the
form and amount of the individual policy, to the class of risk
to which the employee then belongs, and to his age (nearest
birthday) attained on the effective date of the individual
policy; and
(d) any individual policy issued under the terms of this section
shall take effect at the end of the thirty-one day period
during which application for the individual policy may be
made.
If this policy discontinues, whether by its terms or by agreement between the
Insurance Company and the Employer, and whether with respect to all employees or
with respect to any class or classes of employees insured hereunder, any
employee insured under this policy at the date of such discontinuance who has
been continuously insured for group life insurance by the Insurance Company
under this policy for at least five years prior to such discontinuance shall, if
his insurance this policy, or any portion of such insurance, ceased because of
such discontinuance, be entitled to the conversion privilege as though his
employment had terminated on the date of such discontinuance, except that the
amount of the individual policy shall not exceed the smaller of (a) the amount
of the employee's life insurance which ceases under this policy because of such
discontinuance, less the amount of any life insurance for which he is or becomes
eligible within thirty-one days after such discontinuance under any group
policy, whether issued by the Insurance Company or by any other insurer, and (b)
$2,000.
If an employee dies during the thirty-one day period within which he is entitled
to have an individual policy issued to him in accordance with this section and
before any insurance such individual policy has become effective, the amount of
life insurance which the employee is entitled to have issued to him under such
individual policy shall be payable as a claim under Title ELIC, whether or not
application for the individual policy or the payment of the first premium
therefor has been made.
When any insurance becomes effective under an individual policy issued under the
conversion privilege, it shall be in exchange for all privileges and benefits
under the group policy.
Aetna Life Insurance Company
Hartford, Connecticut
(Herein called the Insurance Company)
Group Policy No.: GC-363417 Policy Delivered In: Ohio
State of other jurisdiction)
Policyholder: THE PROCTER & GAMBLE COMPANY
Policy Signed: November 11, 1981 To Take Effect: October 1, 1981
This policy is a contract between the Policyholder and the Insurance Company and
shall be construed in accordance with the law of the jurisdiction in which it is
delivered.
In consideration of the payment by the Policyholder of premiums in the amounts
and at the times hereinafter provided, the Insurance Company hereby agrees with
the Policyholder, subject to the terms appearing on this and the following pages
of this policy (including, if any, the riders, endorsements, and amendments, to
this policy which are signed by the Insurance Company), to pay benefits in
accordance with the terms of this policy. The obligations and the rights of all
persons under this policy shall be determined in accordance with the terms of
this policy.
In witness whereof the Insurance company has signed this policy at Hartford,
Connecticut.
Aetna Life Insurance Company
/S/LEWIS R MERVINE /S/WILLIAM O. BAILEY
Secretary President
/S/ALICE L. SHIPPE
Registrar
Countersigned at Cincinnati, Ohio, April 13, 1982
by ___________________________
Licensed Resident Agent
GROUP INSURANCE POLICY
INDEX
Page
Article I--GENERAL PROVISIONS
Article II--BENEFITS
Article III--TERMINATION OF INSURANCE
Article IV--PREMIUMS
Article V--DISCONTINUANCE OF POLICY
Article VI--MISCELLANEOUS PROVISIONS
COPY OF APPLICATION
ARTICLE I -- GENERAL PROVISIONS
Section 1. General Definitions
As used in this policy:
(a) The term "Employee Coverage means only insurance as to an
employee.
(b) The term "non-occupational disease" means a disease which
does not arise, and which is not caused or contributed to by,
or as a consequence of, any disease which arises, out of or
in the course of any employment or occupation for
compensation or profit; however if evidence satisfactory to
the Insurance Company is furnished that the individual
concerned is covered as an employee under any workmen's
compensation law, occupational disease law, or any other
legislation of similar purpose, or under the maritime
doctrine of maintenance, wages, and cure, but that the
disease involved is one not covered under the applicable laws
or doctrine, then such disease shall, for the purposes of
this policy, be regarded as a "non-occupational disease".
(c) The term "non-occupational injury" means an accidental bodily
injury which does not arise, and which is not caused or
contributed to by, or a as a consequence of, any injury which
arises, out of or in the course of any employment or
occupation for compensation or profit.
(d) The term "date of issue" means the date this policy took
effect shown on Page 1 of this policy.
(e) Commencing January 1, 1982, "policy anniversaries" shall be
deemed to occur on said date, and on the same day in each
succeeding year.
(f) The term "policy year" means a period commencing with the date
of issue of this policy, or a policy anniversary, and
terminating immediately prior to the next succeeding policy
anniversary.
(g) A "policy month" shall commence on the date of issue. Each
"policy month" thereafter shall be deemed to commence on the
first day of the calendar month.
(h) The term "physician" or "surgeon" means only a legally
qualified physician.
(i) "Contributory insurance" means insurance for which an employee
makes written request to his Participant Employer and agrees
to make the required contributions to his Participant
Employer. "Non-contributory insurance" is insurance for which
an employee does not make written request nor contribute
toward the cost. This policy provides insurance on the
non-contributory.
(j) The term "Added Compensation" means the total amount of
additional remuneration:
1) Awarded by the Board of Directors of The Procter &
Gamble Company, the Compensation Committee of The
Procter & Gamble Company or the Procter & Gamble
Chief Executive Officers and heads of the various
subsidiary companies, and
2) Charges against the Executive Additional Remuneration
Reserve, but excluding any supplemental awards which
are made because of the limits imposed by the
Employee Retirement Income Security Act of 1974 on
credits to the Profit Sharing Trust Plan.
(k) The term "Total Compensation" means the sum of (a) base
salary plus, (b) added compensation.
Section 2. List of Participant Employers
An Employer shall be eligible to be included in this list as a Participant
Employer if such inclusion is not contrary to any applicable insurance law of
the state or other jurisdiction in which this contract is delivered.
The Policyholder may act for and on behalf of any and all of the Employers
included in this list in all matters pertaining to this contract, and every act
done by the Policyholder, agreement made between the Insurance Company and the
Policyholder, or notice given by the Insurance Company to the Policyholder or by
the Policyholder to the Insurance Company, shall be binding on all such
Employers.
Any eligible Employer may be added to this list as a Participant Employer only
upon written agreement between the Policyholder and the Insurance Company and
upon terms mutually agreeable to them.
An Employer shall be eliminated automatically from this list when this contract
is discontinued with respect to employees of such Employer, as provided for
elsewhere in this contract, but termination of an Employer's status as a
Participant Employer shall not relieve such Employer from any obligations to the
Insurance Company with respect to the time such Employer was a Participant
Employer under this contract.
This list shall, at any time, consist of those Employers which have been
included under this contract by written agreement between the Policyholder and
the Insurance Company, and which have not been removed, in accordance with the
above terms of this section.
Section 3. Employees to be Insured
(I) Employee Coverage
A. Employees Eligible:
All employees of a Participant Employer shall be eligible for
Employee Coverage except employees in the following classes:
(a) temporary or substitute employees (i.e. employees
who are not classified by such Employer as
permanent employees);
(b) employees who are actively working for such
Employer on a part-time basis, but this exception
shall not apply in the case of a regular,
full-time, active employee of such Employer if
and while he is only temporarily working for such
Employer on a part-time basis;
(c) regular full-time employees who are not key
executives of The Procter & Gamble Company or
its subsidiaries.
Each employee in an eligible class who has completed six
months or more of continuous service on the date of issue
shall become eligible for Employee Coverage on that date, and
each other employee in an eligible class shall become eligible
for Employee Coverage on the date on which he completes six
months of continuous service.
Anything to the contrary notwithstanding, if an individual is
in the employ of or connected with two or more Participant
Employers, he shall not be eligible for multiple coverage
under this policy, but shall be treated the same as if he were
in the employ of or connected with a single Participant
Employer; the amount of insurance for which any such
individual shall be eligible under this policy shall under no
circumstances exceed the amount which would apply if all of
the Participant Employers with which he is employed or
connected were a single Participant Employer and if the
aggregate of the remuneration being paid to him by all such
Participant Employers were being paid to him by a single
Participant Employer.
If any Participant Employer is a partnership, the
natural-person partners thereof shall be considered to be
employees within the meaning of this policy if and while they
are actively engaged in and devoting their time on a
substantially full-time basis to the conduct of the business
of the partnership. If any Participant Employer is an
individual proprietorship, the natural-person proprietor
thereof shall be considered to be an employee within the
meaning of this policy on the same terms as those applicable
to partners of a partnership.
B. Effective Dates of Insurance:
(1) As to contributory insurance, each employee who makes
written request to his Participant Employer for
Employee Coverage and agrees to make the required
contributions therefor to his Participant Employer is
to be insured for Employee Coverage on the date he
becomes eligible for Employee Coverage or on the date
he makes such request, whichever is later; provided,
however, that
(a) the Employee Coverage of any employee who
makes such written request after thirty-one
days from the date he becomes eligible, or
who revokes any written request previously
made, shall become effective only if and
when the Insurance Company gives its written
consent; and
(b) any employee who is both disabled (i.e., ill
or injured) and away from work on the date
Employee Coverage is to become effective
shall not be insured until he actually
returns to work on a full-time basis.
(2) As to non-contributory insurance, each employee is to
be insured for Employee Coverage on the date he
becomes eligible therefor; provided, however, that
any employee who is both disabled (i.e., ill or
injured) and away from work on the date Employee
Coverage is to become effective shall not be insured
until he actually returns to work on a full-time
basis.
Section 4. Changes in Amounts of Insurance
EMPLOYEE COVERAGE
A retroactive change in an employee's rate of earnings or classification will
not result in a retroactive change in coverage. Any change in coverage will be
effective on the date the change in earnings or classification is determined.
This section will not apply to any reduction due to attainment of a specified
age. Any such rules appear in Title ADDC, if included in this policy. If any
rule which reduces an employee's Principal Sum due to attainment of a specified
age is changed so that an employee is eligible for an increased amount of
Principal Sum by reason of such change, such increase will become effective only
if the Insurance Company gives its written consent.
As to contributory insurance:
If, at any time, the employee's rate of earnings or classification changes so as
to warrant level of benefits different from that for which the employee is then
covered, the amount of his coverage will be changed as follows:
Any reduction under Title ADDC, if included in this policy, will become
effective on the date the employee requests his Participant Employer to
make the reduction.
Any other reduction will become effective automatically.
Any increase will become effective automatically; provided, however, that
the employee may, within thirty-one days of the date an increase would
become effective under Title ADDC, if included in this policy, refuse
such increase. If an employee refuses such increase, then no increase in
the employee's amount of Principal Sum by reason of a change in his rate
of earnings or classification will become effective until the Insurance
Company gives its written consent.
If, at any time, any schedule or level of benefits is changed so as to warrant
an amount different from that for which the employee is then covered, the amount
of his coverage will be increased or decreased automatically, However, the
employee may, within thirty-one days of the date an increase would become
effective under Title ADDC, if included in this policy, refuse such an increase.
The employee may at any thereafter elect that the increase become effective; it
will only be effective if the Insurance Company gives its written consent.
In any instance in which an employee is both disabled (i.e., ill or injured) and
not working on the date his coverage would otherwise be increased, the effective
date of the increase shall be deferred until he actually returns to active work
on a full-time basis.
As to non contributory insurance:
If, for any reason and at any time, the employee's rate of earnings or
classification, any schedule or any level of benefits is changed so as to
warrant an amount different from that for which the employee is then covered,
the amount of his coverage will be increased or decreased automatically as
warranted. However, in any instance in which an employee is both disabled (i.e.,
ill or injured) and not working on the date his coverage would otherwise be
increased, the effective date of the increase in insurance shall be deferred
until he actually returns to active work on a full-time basis.
Article II --BENEFITS
TITLE ADDC--ACCIDENTAL DEATH AND DISMEMBERMENT COVERAGE
Section 1. Accidental Death and Dismemberment Benefit
Schedule of Insurance
---------------------
Classification Principal Sum
-------------- -------------
All employees An amount equal to 100% of the employees
total compensation, the resulting amount, if
not an integral multiple of $500 is to be
taken to the nearest integral multiple of
$500, but in no event shall the amount of
insurance (Principal Sum) be more than
$1,000,000 nor less than $4,000.
If an employee suffers a bodily injury caused by an accident and as a direct
result of such injury and, to the exclusion of all other causes, sustains within
not more than ninety days after the date of the accident which causes such
injury any of the losses listed in the Table of Benefits in this section, then,
provided:
(a) the injury occurs while insurance is in force for the employee
under this Title; and
(b) the loss resulting from the injury is not excluded from coverage
in accordance with Section 2 of this Title;
the insurance Company shall, subject to the terms of this policy, pay a benefit
in the amount provided for such loss in said Table of Benefits but in no case
shall more than the Principal Sum be paid for all losses sustained by an
employee through any one accident.
Table of Benefits
-----------------
In the Event of Loss of The Benefit will be
- ----------------------- -------------------
Life The Principal Sum
A Hand One-Half The Principal Sum
A Foot One-Half The Principal Sum
An Eye One-Half The Principal Sum
Loss means, with regard to a hand or foot, actual severance through or
above the wrist or ankle joint; with regard to an eye, the entire and
irrecoverable loss of sight of such eye.
Section 2. Exclusions
The insurance provided under this Title does not include, and no payment shall
be made for, any loss resulting from any injury caused or contributed to by, or
as a consequence of, any of the following excluded risks, even though the
proximate or precipitating cause of loss is accidental bodily injury:
(a) bodily or mental infirmity; or
(b) disease, ptomaines or bacterial infections, of any kind, except
a pus-forming infection attributable solely to and occurring as
the proximate result of an injury not excluded by this Title; or
(c) medical or surgical treatment, except a loss covered by this
Title which results directly from a surgical operation made
necessary solely by an injury not excluded by this Title and
performed within ninety days after the date of such injury; or
(d) suicide or any attempt there at (whether sane or insane), or
intentionally self-inflicted injury; or
(e) war or any act of war (whether war is declared or not).
Section 3. Beneficiary
An employee, whether or not employment has terminated, may designate a
beneficiary, and from time to time change his designation of beneficiary, by
written request filed at the headquarters of the Policy holder or at the Home
Office of the Insurance Company. Such designation or change shall take effect as
of the date of execution of such request, whether or not the employee be living
at the time of such filing, but without prejudice to the Insurance Company on
account of any payments made by it before receipt of such request at its Home
Office.
Any amount payable to a beneficiary shall be paid to the beneficiary or
beneficiaries designated by the employee, except that, unless otherwise
specifically provided by the employee in his beneficiary designation;
(a) if more than one beneficiary is designated, the designated
beneficiaries shall hare equally;
(b) if any designated beneficiary predeceases the employee, the
share which such beneficiary would have received if surviving
the employee shall be payable equally to the remaining
designated beneficiary or beneficiaries, if any, who survive the
employee; and
(c) if no designated beneficiary survives the employee, or if no
beneficiary has been designated, payment shall be made to the
employee's widow or widower, if surviving the employee; if not
surviving the employee, in equal shares to the employee's
children who survive the employee; if none survives the
employee, to the employee's parents, equally, or to the
survivor; if neither survives the employee, in equal shares to
the employee's brothers and sisters who survive the employee;
or, if none survives the employee, to the employee's executors
or administrators.
Article III--TERMINATION OF INSURANCE
Section 1. Employee Coverage
All insurance of any employee under this policy shall terminate at the earliest
time specified below:
(1) Upon discontinuance of the policy.
(2) Immediately when the employee's employment with a Participant Employer in
the classes of employees eligible for insurance terminates. Cessation of
active work by an employee shall be deemed to be termination of his
employment, except that
(a) in the case of an absence from active work because of sickness
or injury, his employment may, for the purposes of insurance
under this policy, be deemed to continue until terminated by his
Participant Employer but in no case beyond twelve months from
the date such absence from active work started, or
(b) in the case of absence of an employee from active work because
of temporary lay-off or leave of absence (other than leave from
military service), his employment may, for the purposes of
insurance under this policy, be deemed to continue until
terminated by his Participant Employer but in no case beyond the
end of the policy month following the policy month in which such
lay-off or leave of absence commenced.
In the case of any of the exceptions in the foregoing paragraph, the
insurance under this policy for such employee shall automatically cease
on the date of such termination of his employment by his Participant
Employer, as evidenced to the Insurance Company by the Policyholder,
whether by notification or by cessation of premium payment on account of
such employee's insurance hereunder. Any maximum period of continuation
permitted by the foregoing paragraph may be extended by written mutual
agreement between the Policyholder and the Insurance Company in each
individual case.
In no event may any insurance provided on a contributory basis be continued
beyond the end of the period for which the employee has made to his Participant
Employer the contributions required.
Article IV--PREMIUMS
Section 1. Premium Rates
The premium rates are as follows, but are subject to change as hereinafter
provided: The premium rates shown are for a period of one month.
Title ADDC- Premium per $1,000 of Principal Sum: $ .02
Section 2. Premium Calculations and Experience Rating
The premium due under this policy on any premium-due date shall be the sum of
the premium charges for the insurance provided under the Titles then forming a
part of this policy. The premium charges for the insurance under any such Title
shall be calculated at the Premium Rates specified above, subject to such
reductions or increases as the Insurance Company shall determine to be warranted
by experience or by reason of any change in factors bearing on the risk assumed.
Each reduction or increase in any premium rate shall be made by written
notification to the Policyholder by the Insurance Company.
No experience reduction or increase in premium rates shall become effective less
than twelve months after the effective date of this policy.
As of the end of any policy year the Insurance Company may declare an experience
credit in such amount as the Insurance Company shall determine. The amount of
each experience credit declared by the Insurance Company shall be refunded to
the Policyholder, or upon request by the Policyholder, a part or all of the
experience credit shall be applied against the payment or any premium or
premiums.
If at any time the aggregate of employee contributions theretofore made for
group insurance shall exceed the aggregate of premiums theretofore paid for
group insurance (after giving effect to any experience credits allowed the
Policyholder), such excess shall be applied by the Policy holder for the sole
benefit of employees, but the Insurance Company shall not be obliged to see to
the application of any such excess.
If premiums are payable monthly, any insurance becoming effective shall, except
as hereinafter provided, be charged for from the first day of the policy month
coinciding with or next following the date the insurance takes effect, and
premium charges for any insurance terminated shall cease as of the first day of
the policy month coinciding with or next following the date the insurance
terminates. If premiums are payable quarterly, semi-annually, or annually,
premium charges or credits for a fraction of a premium-paying period required by
the foregoing terms of this paragraph shall except as hereinafter provided, be
made on a pro-rata basis for the number of policy months between the date
premium charges commence or cease and the end of the premium-paying period. If
this policy is amended to provide additional insurance, or any increase in
insurance and if the effective date of such amendment is other than the first
day of a premium-paying period, a pro-rata premium in respect of such insurance
shall become due and payable as of such date, to cover the period beginning on
that date and ending immediately prior to the commencement of the next
premium-paying period.
Instead of the method of calculation of premiums above provided, premiums may be
calculated by any method which produces approximately the same total amount of
premiums and is mutually agreeable to the Insurance Company and the
Policyholder.
Section 3. Premiums, How Payable
Premiums shall be payable by the Policyholder in advance at the Home Office of
the Insurance Company or to its authorized agent.
The first premium under this policy shall be due and payable as of the date of
issue to cover the period beginning on that date and ending on the last day of
the first policy month and thereafter premiums shall be due and payable on the
first day of each policy month.
Section 4. Grace Period
A grace period of thirty-one days following the due-date shall be allowed the
Policyholder for the payment of each premium.
Article V--DISCONTINUANCE OF POLICY
The Policyholder may discontinue this policy with respect to all employees of
any one or more Participant Employers, and any Participant Employer may
discontinue this policy with respect to all employees of such Employer, by
giving to the Insurance Company written notice stating when, after the date of
such notice, such discontinuance shall become effective; but no such
discontinuance shall become effective with respect to employees of any
Participant Employer during any period for which a premium has been paid to the
Insurance Company with respect to employees of such Employer.
The Insurance Company reserves the right to discontinue this policy,
(a) with respect to all employees of any Participant Employer, at
any time after the end of the grace period allowed for payment
of a premium with respect to employees of such Employer which
has not been paid, by giving written notice to the Policyholder
stating when such discontinuance shall become effective;
(b) either in its entirety or with respect to all respect to all
employees of any Participant Employer, at any time, by giving to
the Policyholder written notice stating the date as of which
such discontinuance shall become effective but such date shall
not be one that occurs earlier than thirty-one days after the
date of such notice unless mutually satisfactory to the
Policyholder and the Insurance Company.
If this policy discontinues with respect to any of the employees of a
Participant Employer, the Policyholder and the Employer shall be jointly and
severally liable to the Insurance Company for all unpaid premiums for the period
during which this policy was in force with respect to any of the employees of
such Employer.
Article VI--MISCELLANEOUS PROVISIONS
Section 1. Assignment
No assignment of any present or future right, interest, or benefit undre this
policy shall bind the Insurance Company without its written consent.
Section 2. Employees' Certificates
The Insurance Company will issue to the Policyholder, for delivery to each
insured employee, an individual certificate setting forth a summary of the
essential fetures of the insurance coverage to which the employee is entitled
and stating to whom the benefits are payable.
Section 3. Data Required--Clerical Error--Misstatements--Non-Discrimination
The Policyholder and each of the Participant Employers shall furnish to the
Insurance Company all information which the Insurance Company may reasonably
rquire with regard to any matters pertaining to this policy. All documents,
books, and records which may have a bearing on the insurance or premiums shall
be open for inspection by the Insurance Company at all reasonable times during
the continuance of this policy and until the final determination of all rights
and obligations under this policy.
Neither clerical error (whether by the Policyholder, by any of the Participant
Employers, or by the Insurance Company) in keeping any records pertaining to the
insurance, nor delays in making entries thereon, shall invalidate insurance
otherwise validly in force or continue insurance otherwise validly terminated,
but upon discovery of such error or delay an equitable adjustment of premiums
shall be made.
If any relevant facts pertaining to any individual to whom the insurance relates
shall be found to have been misstated, an equitable adjustment of premiums shall
be made, and if such misstatement affects the existence or the amount of
insurance, the true facts shall be used in determining whether insurance is in
force under the terms of this policy and in what amount.
No refund of any premium or portion thereof, whether paid in error or otherwise,
shall be made for any perido commencing earlier than (a) three months prior to
the date on which evidence that the particular refund should be made is received
by the Insurance Company, or (b) the beginning of the policy year in whch such
evidence is received, whichever method (a) or (b) above would result in the
greater refund.
In connection with the administration of this policy, the Policyholder and the
Participant Employers shall act so as not to discriminate unfairly between
individuals in similar situations at the time such action, but the Insurance
Company shall be entitled to rely upon any action of the Policyholder or of any
of the Participant Employers without being obliged to inquire into the
circumstances thereof.
Section 4. Entire Contract: Changes
This policy constitutes the entire contract between the parties, and any
statement made by the Policyholder or by any employee shall, i the absence of
fraud, be deemed a representation and not a warranty. No such statement shall
avoid the insurance or reduce the benefits under this policy or be used in
defense to a claim unless it is in writing, nor shall any such statement of the
Policyholder, except a fraudulent misstatement, be used to void this policy
after it has been in force for two years fro the date of its issue, nor shall
any such statement of any employee eligible for coverage under the policy,
except a fraudulent misstatement, be used in defense to a clai for loss incurred
or commencing after the insurance coverage with respect to which claim is made
has been in effect for two years.
This policy is issued in the non-participating department of the Insurance
Company. This policy may be changed at any tiem or times by written agreement
between the Insurance Company and Policyholder, without the conse of any
employee or other person. No change in this policy shall be valid unless
approved by an executive officer of the Insurance Company and unless such
approval be endorsed hereon or attached hereto. No agent has authority to
change this policy or to waive any of its provisions.
Failure to insist upon compliance with any provision of this policy at any
given time or times or under any given set or sets of circumstances shall not
operate to waive or modify such provision, or in any manner whatsoever to render
it unenforceable, as to any othr time or times or as to any other occurrence
or occurrences, whethr the circumstances are, or are not, the same.
Section 5. Time Limit on Certain Defenses
No claim for loss incurred or commencing after two years from the effective date
of the insurance coverage with respect to which claim is made shall be reduced
or denied on the ground that a disease or physical condition not excluded from
coverage by name or specific description effective on the date of loss, had
existed prior to the effective date of the coverage with respect to which claim
is made.
Section 6. Proofs of Loss
Written proof covering the occurrence, the character, and the extent of loss
must be furnished to the Insurance Company, in case of claim for loss under
Title WBC, if included in this policy, within 90 days after the termination of
the period for which the Insurance Company is liable, and in case of claim for
any other loss, within 90 days after the date of such loss. Failure to furnish
such proof within the time required shall not invalidate nor reduce any claim if
it was not reasonably possible to give proof within such time, provided such
proof is furnished as soon as reasonably possible and in no event, except in the
absence of legal capacity of the employee, later than one year from the time
proof is otherwise required. No action at law or in equity shall be brought to
recover on this policy after the expiration of three years after time written
proof of loss is required to be furnished.
Section 7. Payment of Claims
Benefits payable under this policy for any loss with be paid immediately upon
receipt of due written proof of loss.
The benefit, if any, for loss of life will be payable in accordance with the
beneficiary designation and the provisions respecting such payment. All other
benefits are payable to the insured employee.
If any benefit under any Title of this policy shall be payable to the estate of
the insured employee, or to an insured employee who is a minor or otherwise not
competent to give a valid release, the Insurance Company may pay such benefit up
to an amount not exceeding $1,000 to any relative by blood or connection by
marriage of the insured employee who is deemed by the Insurance Company to be
equitably entitled thereto. Any payment made by the Insurance Company in good
faith pursuant to this provision shall fully discharge the Insurance Company to
the extent of such payment.
Subject to any written direction of the insured employee in a request for
insurance or otherwise, all or a portion of the benefits, if any, provided by
this policy on account of hospital, nursing, medical, or surgical service may,
at the Insurance Company's option, and unless the insured employee requests
otherwise in writing not later than the time proof of loss is filed, be paid
directly to the hospital or person rendering such services, but it is not
required that the service be rendered by a particular hospital or person.
The Insurance Company at its own expense shall have the right and opportunity to
examine the person of any individual whose injury or sickness is the basis of
claim when and as often as it may reasonably require during the pendency of a
claim hereunder.
[Page 12 is missing]
Section 8. Conversion Privilege (Continued)
(4) the converted policy may include a provision whereby the Insurance
Company may request information at any premium due date of such policy of
any individual covered thereunder as to whether he is then covered by
another policy of hospital or surgical expense insurance or hospital
service or medical expense indemnity corporation subscriber contract
providing similar benefits or is then covered by a group contract or
policy providing similar benefits or is then provided with similar
benefits required by any statute or provided by any welfare plan or
program--if any such individual is so covered or so provided and fails to
furnish the details of such coverage when requested, the benefits payable
under the converted policy may be based on the hospital, surgical, or
medical expenses actually incurred after excluding expenses to the extent
they are payable under such other coverage or provided under such
statute, plan, or program; and
(5) the Insurance Company may decline to issue the converted policy
(i) if application therefor is not made in the jurisdiction in which
this group policy is delivered or in some other jurisdiction in
which the Insurance Company is authorized to issue or deliver the
converted policy; or
(ii) if termination of insurance under said Titles of this policy takes
place prior to the date the employee concerned has been insured
thereunder for at least three months; and
(6) the Insurance Company may decline
(i) to cover an individual who t is desired be included in the
converted policy, if the insurance under said Titles of this
policy terminated because such individual had exhausted the
maximum benefit available to him under said Titles; and
(ii) to cover an individual who it is desired be included in the
converted policy for any one or more of the benefits included in
the converted policy, if the provision of such benefit or
benefits, as the case may be, is prohibited by any application for
such policy is made; and
(7) the premium payable under the converted policy on its effective date
shall be at the Insurance Company's then customary rate applicable to the
class of risk to which the insured individual under the converted policy
belongs, to the age of such insured individual and to the form and amount
of insurance under the converted policy; and
(8) any converted policy issued under the terms of this section shall take
effect as of the date of termination of insurance under said Titles of
this policy.
Any converted policy issued pursuant to this section shall be in exchange for
all privileges and benefits under said Titles with respect to the person or
persons named in the converted policy.
EXHIBIT (11)
<TABLE>
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>
BASIC NET EARNINGS PER SHARE 1994 1995 1996 1997 1998
- ---------------------------- ------- -------- -------- ------- --------
Net Earnings/(Loss) $2,211 $2,645 $3,046 $3,415 $3,780
Deduct preferred stock dividends 102 102 103 104 104
-------- -------- -------- -------- --------
Net Earnings/(Loss) Applicable to Common Stock 2,109 2,543 2,943 3,311 3,676
- ----------------------------------------------
Average number of common shares
outstanding 1,366.2 1,372.0 1,372.6 1,360.3 1,343.4
Per Share
- ---------
Net earnings before prior years' effect
of accounting changes
Prior year effect of accounting changes
Basic Net Earnings/(Loss) per Share $1.54 $1.85 $2.14 $2.43 $2.74
DILUTED NET EARNINGS PER SHARE
- ------------------------------
Net Earnings/(Loss) $2,211 $2,645 $3,046 $3,415 $3,780
Deduct differential -- preferred
vs. common dividends 51 45 39 32 25
-------- -------- -------- -------- --------
Net Earnings/(Loss) Applicable to Common Stock 2,160 2,600 3,007 3,383 3,755
- ----------------------------------------------
Average number of common shares outstanding 1,366.2 1,372.0 1,372.6 1,360.3 1,343.4
Add potential effect of:
Exercise of options 12.0 17.0 19.8 24.8 22.3
Conversion of preferred stock 107.8 105.6 103.8 101.9 99.8
-------- -------- -------- -------- --------
Average number of common shares
outstanding 1,486.0 1,494.6 1,496.2 1,487.0 1,465.5
Per Share
- ---------
Net earnings before prior years' effect
of accounting changes
Prior year effect of accounting changes
Diluted Net Earnings/(Loss) per Share $1.45 $1.74 $2.01 $2.28 $2.56
</TABLE>
EXHIBIT (12)
<TABLE>
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
=============================================
Computation of Ratio of Earnings to Fixed Charges
-------------------------------------------------
Millions of Dollars
<CAPTION>
Years Ended June 30
------------------------------------------------------------
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
EARNINGS AS DEFINED
- -------------------
Earnings from operations before income taxes
after eliminating undistributed earnings
of equity method investees $3,307 $4,022 $4,695 $5,274 $5,704
Fixed charges, excluding capitalized interest 569 571 576 534 639
------ ------ ------ ------ ------
TOTAL EARNINGS, AS DEFINED $3,876 $4,593 $5,271 $5,808 $6,343
====== ====== ====== ====== ======
FIXED CHARGES, AS DEFINED
- -------------------------
Interest expense (including capitalized interest) $ 501 $ 511 $ 493 $ 457 $ 548
1/3 of rental expense 87 83 92 77 91
------ ------ ------ ------ ------
TOTAL FIXED CHARGES, AS DEFINED $ 588 $ 594 $ 585 $ 534 $ 639
====== ====== ====== ====== ======
RATIO OF EARNINGS TO FIXED CHARGES 6.6 7.7 9.0 10.9 9.9
</TABLE>
Exhibit (13)
------------
Annual Report to Shareholders. (Pages 1-33, 36)
(Top of page 1 - Picture of John E. Pepper with name and title)
John E. Pepper
Chairman and Chief Executive Officer
(Top of page 1 - Picture of Durk I. Jager with name and title)
Durk I. Jager
President and Chief Operating Officer
...AND OLEAN IS A VERY BIG IDEA. Maynard Danker, an Iowa farmer, remembers the
first day he heard about Olean. "The folks who make Crisco were going to start
with soybeans like mine to come up with a new kind of cooking oil. It fries up
snacks that are a little healthier, without adding any fat. Makes them taste
good, too. That's something that's never been done before." Improving consumers'
lives by doing things that have never been done before is what Procter & Gamble
is all about. In more than 140 countries around the world, we work to understand
what consumers want and need. Then we develop innovative brands to serve those
needs - creating new products, new categories and new growth opportunities for
our Company. More than 110,000 P&G employees around the world, committed to
breakthrough innovation and superior execution, drive our growth. Again this
year, we delivered record performance: net earnings of $3.78 billion, up 11%;
basic net earnings per common share of $2.74, up 13%; and worldwide net sales of
$37.2 billion, up 4% on 6% unit volume growth. These results fueled solid
performance in the areas that matter most to you, our shareholders. Over the
past three years, we've delivered an average annual Total Shareholder Return
(TSR) of 37%, compared to a TSR of 30% for the S&P 500. And we concluded the
1997/1998 fiscal year by increasing common share dividends 13% to $1.14 -
marking the 43rd consecutive year of increased dividend payments.
(Bottom of page 1, right-hand margin -- picture of Maynard Danker sitting on his
tractor)
(Middle of pages 2 and 3 -- picture of several people with the caption "WE
MAKE EVERY DAY BETTER IN EVERY WAY WE CAN FOR PEOPLE AROUND THE WORLD.")
FASTER, BIGGER INNOVATION
These results are good, yet we can and must do better. In particular, we are not
satisfied with our rate of volume and sales growth. We must significantly
accelerate our progress if we are to achieve the goals we've reported here in
previous years:
(bullet) To double our business in 10 years,
(bullet) To grow shares in categories representing the majority of
our volume, and
(bullet) To remain consistently among the top third of our peer
companies in TSR performance.
We know the key is faster, bigger innovation in every part of our business. And
we've made important strides in the past year to strengthen our pipeline of
innovations on established brands and on new brands entering test market. But
there is much more we intend to do. We must bring even better products to more
markets with greater speed than ever before. And we must release the untapped
power of our organization.
IMPORTANT CHANGES TO ACCELERATE GROWTH
For some time, we've been examining how our organization should evolve, and in
the coming weeks, we will announce details of a comprehensive plan to simplify
the way we're structured and to strengthen how we operate. The changes, while
consistent with the direction in which we've been growing, are significant and
will improve our ability to create and build even more profitable leadership
brands around the world.
Four changes, in particular, are worth noting here:
(bullet) We will move from our current regional business units
to product-based, global business units - a direction
we've been heading since the late 1980s with the
start of Global Category Management.
(bullet) We will strengthen our already-strong, country-based
organizations to provide even deeper knowledge of
local consumers and stronger partnerships with our
customers. These local market organizations will be
essential to bringing our product initiatives to
consumers with the highest impact possible.
(bullet) We will create a new Global Business Services
organization to support the global business units and
the local market organizations. This move will bring
together business services that are currently
dispersed throughout the organization. It will also
help us achieve significant economies of scale, while
improving the overall quality and speed of these
services.
(bullet) And finally, we will streamline our corporate staff.
We will align many corporate resources with the
business units and refocus others on developing the
cutting-edge, functional knowledge and innovation
important to our future growth and success.
To support these new structural advantages, we are also making important changes
in our culture and in our reward system - all to encourage greater speed,
innovation and flexibility in the organization. Taken together, we believe these
improvements will enable us to build stronger global brands; achieve faster,
bigger innovation; produce accelerated business growth; and result in greater
satisfaction for our people. These are the kinds of changes we've made
throughout P&G's 161-year history - changes always designed to get us closer to
consumers and to keep our business growing at a level we - and you - have every
right to expect, given the extraordinary caliber of the men and women of Procter
& Gamble.
A BIG IDEA
It's been a good year. And we are committed to making the future even better. We
owe it to people like Maynard Danker. And we owe it to you, the fellow owners of
our Company. We want to ensure that whenever and wherever people see P&G or its
brands, they can say to themselves, "Now that's a big idea."
/s/JOHN E. PEPPER /s/DURK I. JAGER
John E. Pepper Durk I. Jager
Chairman and Chief Executive Officer President and Chief Operating
Officer
July 30, 1998
Key Brands
Laundry & Cleaning Products
Ace Bleach
Ariel
Bounce
Cascade
Cheer
Dawn
Downy
Fairy
Joy
Lenor
Mr. Clean
Tide
Paper Products
Always/Whisper Bounty
Charmin
Luvs
Pampers
Pampers wipes
Puffs
Tampax
Tempo
Beauty Care Products
Cover Girl
Head & Shoulders
Ivory
Max Factor
Oil of Olay
Old Spice
Pantene Pro-V
Pert Plus
Rejoice
Safeguard
Secret
SK-II
Vidal Sassoon
Zest
Health Care Products
Asacol
Blend-A-Med
Chloraseptic
Crest
Didronel
Macrobid
NyQuil
Pepto-Bismol
Scope
Vicks Formula 44
Vicks VapoRub
Food & Beverage Products
Crisco
Folgers
Hawaiian Punch
Jif
Millstone
Olean
Pringles
Punica
Sunny Delight
(Top of page 4 -- picture of a man, a boy, ThermaCare heatwrap wrapped around a
person's back and ThermaCare product) THERMACARE: EASE YOUR PAIN -- WITH
WEARABLE HEAT ThermaCare ultra-thin wraps fit comfortably under your clothes for
soothing heat that helps relieve pain all day long.
(Bottom of page 4 -- picture of a lady holding a hanger with a blouse hung on it
and picture of Dryel product) DRYEL: CARE FOR "DRY CLEAN ONLY" FABRICS -- AT
HOME For less than a $1 a garment and about 30 minutes a load, Dryel helps clean
and freshen wool, rayon, silk and other "dry clean only" clothes in your home
dryer.
(Top of page 5 -- picture of a lady holding the following products: Ritz
crackers, Lay's Wow Chips and Pringles Fat Free Chips; Olean logo) OLEAN: ENJOY
GREAT-TASTING SNACKS -- WITH LESS FAT Our Crisco people came up with a cooking
oil that fries up great-tasting snacks, without adding any fat or a single
calorie.
(Middle of page 5 -- caption "NEW TO THE WORLD BRANDS . . .")
(Bottom of page 5 -- picture of a boy and a dog on a couch, 3 pictures of small
pieces of fabric with the caption "THE FINE MIST PENETRATES FIBERS, CLEANING
AWAY ODORS AS IT EVAPORATES." Picture of Febreze product) FEBREZE: CLEAN BAD
SMELLS OUT OF FABRICS -- FOR GOOD Just spray Febreze on furniture, carpets,
rugs, car interiors, clothing, even shoes -- and odors trapped in fabrics are
gone.
(Top of page 6 -- picture of two babies and Pampers Premium product)
PAMPERS: BREAKTHROUGH TECHNOLOGY ADVANCES BABY SKIN CARE
With its unique Gentle Touch Liner, Pampers has surpassed competition to become
the U.S. share leader in premium diapers.
(Middle of page 6 -- caption "NEW TO THE BRAND INNOVATIONS")
(Bottom of page six -- picture of a woman and a man, toothbrush with toothpaste
and Crest Extra Whitening Toothpaste product) CREST: BREAKTHROUGH INGREDIENT
INTRODUCED IN CREST EXTRA WHITENING Its patented, enamel-safe soft silica helps
remove surface stains to let the natural whiteness of your teeth shine through.
(Top of page 7 -- picture of Nelson Watts, M.D., Director, Osteoporosis Program,
Emory University, consults with a patient and a picture of Actonel product)
ACTONEL: NEW STANDARD OF CARE FOR PAGET'S DISEASE, THE SECOND MOST COMMON
METABOLIC BONE DISORDER FDA approves remission indication with only 1/3 the
treatment time of current leading therapies, moving Actonel closer to regulatory
submission for osteoporosis.
(Middle or page 7 -- picture of Fairy product)
FAIRY LIQUID: FIRST ANTI-BACTERIAL DISH SOAP IN THE U.K.
Fairy received Royal Institute of Public Health and Hygiene certification for
its innovative, germ-killing property that fights cross-contamination.
(Bottom of page 7 -- picture of a lady and Pantene Pro-V Elastesse Hairspray
product) PANTENE ELASTESSE: FIRST MAJOR BREAKTHROUGH IN HAIR SPRAY TECHNOLOGY IN
OVER 40 YEARS The natural, touchable, flexible hold meets consumer needs and
grows our global dollar share to #1.
FINANCIAL RESULTS
(Middle of page 8 -- pictures of Crisco, Tide, Pampers, Pert, Crest, Always and
Ariel products with the caption "A TRADITION OF GROWTH THROUGH INNOVATION.")
9 Financial Review
18 Responsibility for the Financial Statements and Report of Independent
Accountants
19 Consolidated Financial Statements
24 Notes to Consolidated Financial Statements
FINANCIAL REVIEW
RESULTS OF OPERATIONS
The Company achieved record sales, unit volume and net earnings for the year
ended June 30, 1998. Basic net earnings per common share increased 13% to $2.74.
Worldwide net earnings for the year were $3.78 billion, an 11% increase over the
prior year earnings of $3.42 billion.
(Middle of page 9, left-hand margin -- bar graph showing Net Earnings in
Billions of Dollars -- 1996 - 3.0, 1997 - 3.4 and 1998 - 3.8)
Worldwide net sales for the current year were $37.15 billion, an increase
of 4% on worldwide unit volume growth of 6%. The difference between the sales
and volume growth rates was primarily due to weaker currencies in Europe and
Asia. Excluding these impacts, sales increased 8%.
Worldwide gross margin for the current year was 43.3% compared to 42.7% in
the prior year. The current year improvement reflects cost savings, primarily
from the Company's ongoing simplification and standardization program, as
ongoing cost savings generated by the program exceeded the net cost to fund
current year projects.
Worldwide marketing, research and administrative expenses were $10.04
billion compared to $9.77 billion in the prior year. This equates to 27.0% of
sales, compared with 27.3% in the prior year. The 3% increase in total spending
was primarily due to increased marketing support behind new brands, such as
Tampax and Fat Free Pringles, and the expansion of existing brands into new
markets.
Operating income grew 10%, primarily reflecting sales growth and
cost-control efforts. The Company's net earnings margin increased from 9.5% to
10.2%, the highest level in 57 years.
Interest expense increased 20% to $548 million on increased debt, due
mainly to acquisitions. Other income, net, which consists primarily of interest
and investment income, contributed $201 million in the current year. In the
prior year, other income, net, was $218 million.
The Company's effective tax rate for the year was 33.8% compared to 34.9%
in the prior year. The decline reflects the benefits of lower tax rates in
Europe, increased research and development tax credits in North America, and
continued emphasis on effective tax planning.
In 1997, the Company completed its $2.4 billion restructuring program
started in 1993, with annual cost savings in excess of $600 million after tax.
The Company is continuing an ongoing program of simplification and
standardization, which includes projects to consolidate selected manufacturing
facilities, re-engineer manufacturing and distribution processes, redesign
organizations, simplify product line-ups and divest non-strategic brands and
assets. This program did not have a significant impact on 1998 net earnings, as
the aggregate pre-tax cost of projects was offset by gains on sales of
non-strategic brands and other assets. The net cost of these activities in 1997
was offset by increased licensing activity in the Health Care sector.
(Middle of page 9, right-hand margin -- bar graph showing Net Sales in Billions
of Dollars -- 1996 - 35.3, 1997 - 35.8 and 1998 - 37.2)
(Bottom of page 9, right-hand margin -- picture of Crisco product with caption
"1911: FIRST ALL-VEGETABLE SHORTENING")
The following provides perspective on the year ended June 30, 1997 versus the
prior year:
Worldwide net earnings increased 12% to $3.42 billion in 1997. Net earnings
for 1996 were $3.05 billion and included the settlement of the Bankers Trust
lawsuit, profit from the sale of the Company's share of a health care joint
venture, a reserve for estimated losses on a supply agreement entered into as
part of the previous divestiture of the commercial pulp business, and adoption
of FASB Statement No. 121 covering recognition of impairment of long-lived
assets. If these items had been excluded from 1996 earnings, the growth rate for
the year ended June 30, 1997 would have been 13%.
(Middle of page 10, left-hand margin -- bar graph showing Net Earnings
Margin % -- 1996 - 8.6%, 1997 - 9.5% and 1998 - 10.2%)
Worldwide net sales in 1997 were $35.76 billion, up 1% from the prior year
on unit volume growth of 3%. The difference between sales and volume growth
rates was primarily due to weaker currencies in Europe and Asia.
Worldwide gross margin increased to 42.7% from 40.7% in 1996, reflecting
cost savings from the Company's simplification and standardization efforts and
the continuing benefits of the restructuring project initiated in 1993.
Worldwide marketing, research and administrative expenses were 27.3% of
sales compared with 27.0% in 1996, primarily due to increases in advertising and
research.
(Bottom of page 10, left-hand margin -- picture of Tide product with caption
"1946: FIRST HEAVY-DUTY SYNTHETIC LAUNDRY DETERGENT)
Other income, net, was $218 million in 1997. In 1996, other income, net,
was $338 million and included a $120 million benefit from reversing the reserve
for two interest rate swap contracts following settlement of a lawsuit against
Bankers Trust; a $185 million gain on the sale of the Company's 50% share of a
health care joint venture to its venture partner; and a $230 million charge to
increase the reserve for estimated losses on a supply agreement entered into as
part of the previous sale of the Company's commercial pulp business.
(Middle of page 10, right-hand margin -- bar graph showing Total Shareholder
Return Relative to S&P 500 -- Past 10 Years - Procter & Gamble - 26.8% and S&P
500 - 18.0%, Past 5 Years - Procter & Gamble - 31.5% and S&P 500 - 22.7% and
Past 3 Years - Procter & Gamble - 37.0% and S&P 500 - 29.7%)
Net earnings margin increased to 9.5% in 1997 from 8.6% in 1996, reflecting
unit volume growth and continued emphasis on cost control through the Company's
simplification and standardization program.
FINANCIAL CONDITION
Cash flow from operations was $4.89 billion, $5.88 billion and $4.16 billion in
1998, 1997 and 1996, respectively. Operating cash flow provided the primary
source of funds to finance operating needs, capital expenditures and the share
repurchase programs. Operating cash flow, combined with additional borrowings,
provided the primary source of funds to finance current year acquisitions.
Cash and cash equivalents decreased $801 million in the current year to
$1.55 billion, primarily due to acquisitions and increased capital expenditures.
Capital expenditures were $2.56 billion in 1998, $2.13 billion in 1997, and
$2.18 billion in 1996. Current year expenditures included capacity expansions in
the paper and food businesses, primarily in tissue and towel and snacks. Capital
expenditures are expected to increase during the upcoming year, reflecting
planned capacity increases and technological advances, primarily in the paper
and laundry businesses.
Net cash used for acquisitions completed during 1998 totaled $3.27 billion,
the highest level in the Company's history. Acquisitions were largely
concentrated in paper businesses, and included Tambrands, Inc. and its global
leading brand, Tampax, the Loreto y Pena paper company in Mexico, and the
Ssangyong Paper Company in Korea. The Company also increased ownership of
various ventures in Asia and Latin America. Current year acquisitions were
funded through a combination of existing cash balances and the issuance of debt.
Net cash used for acquisition activities in 1997 and 1996 totaled $150 million
and $358 million, respectively. The Company continued to divest certain
non-strategic brands in 1998 in order to focus organizational resources on the
Company's core businesses. The proceeds from these sales, the most significant
of which was Duncan Hines, and other asset sales, generated $555 million in cash
flow in the current year, compared to $520 million and $402 million in 1997 and
1996, respectively.
(Middle of page 11, left-hand margin -- bar graph showing Operating Cash Flow in
Billions of Dollars -- 1996 - 4.2, 1997 - 5.9 and 1998 - 4.9)
The Company initiated a share repurchase program in 1995 which authorized
the Company to purchase shares annually to mitigate the dilutive impact of
management compensation programs. The Company also initiated discretionary
buy-back programs to repurchase additional outstanding shares of up to $1
billion per year during 1997 and 1998, in addition to purchases made under the
1995 program. Current year purchases under the repurchase programs totaled $1.93
billion compared to $1.65 billion in the prior year. The Company has announced
plans to increase and accelerate its discretionary share repurchase programs in
1999 beyond its previous annual target of $1 billion.
Common share dividends grew 12% to $1.01 per share in 1998, compared to
$.90 and $.80 in 1997 and 1996, respectively. For the coming year, the annual
dividend rate will increase to $1.14 per common share, marking the forty-third
consecutive year of increased common share dividend payments. Total dividend
payments, to both common and preferred shareholders, were $1.46 billion, $1.33
billion and $1.20 billion in 1998, 1997 and 1996, respectively. Total debt was
up $3.06 billion to $8.05 billion, primarily due to the issuance of commercial
paper to fund current year acquisitions. Long-term borrowing available under the
Company's shelf registration statement filed in 1995, as amended in July 1997,
was $2.0 billion at June 30, 1998. Additionally, the Company has the ability to
issue commercial paper at favorable rates.
(Middle of page 11, right-hand margin -- pie chart showing Net Sales by
Geographic Region in Billions of Dollars -- North America - 18.5, Europe, Middle
East and Africa - 11.8, Asia - 3.5, Latin America - 2.6 and Corporate - 0.8)
The following pages provide perspective on the Company's geographic operating
segments. Geographic segments exclude corporate items, most notably certain
financing and employee benefit costs, goodwill amortization, segment
eliminations and projects related to the Company's simplification and
standardization program.
(Bottom of page 11, right-hand margin -- picture of Crest product with captin
"1955: FIRST FLUORIDE TOOTHPASTE CLINICALLY PROVEN TO PREVENT CAVITIES")
NORTH AMERICA REGION
The North America region continued to deliver solid progress, achieving record
sales, unit volume and net earnings.
Net sales for the year were $18.46 billion, an increase of 5% from the
prior year level of $17.63 billion, on unit volume growth of 4%.
Net earnings for the region were up 10% to $2.47 billion. The region
achieved this earnings growth through increased unit volume, a continued focus
on cost control through simplification and standardization, and a lower tax
rate, primarily related to increased research and development tax credits,
partially offset by increased spending on product initiatives. Prior year net
earnings were $2.25 billion, which represented a 15% increase over 1996. Net
earnings margin for the region was 13.4%, compared to 12.8% and 11.3% in 1997
and 1996, respectively.
(Middle of page 12, left-hand margin -- bar graph showing North America Net
Sales in Billions of Dollars -- 1996 - 17.2, 1997 - 17.6 and 1998 - 18.5)
The Paper sector led the region's current year volume progress, generating
10% unit volume growth versus the prior year and delivering over half of the
region's total unit volume increase. This unit volume growth was achieved behind
the strength of the feminine protection business, driven by the Tambrands
acquisition; diapers, due to initiative programs; and tissue and towel, as a
result of prior year capacity increases. The Paper sector also led the region's
profit improvements, driven by volume growth, increased pricing in tissue and
towel, and cost reduction from the ongoing simplification and standardization
program. In the prior year, operating results were driven by the diaper
category, behind the acquisition of baby wipes and the introduction of Pampers
Baby-Dry, and by tissue and towel capacity increases.
The Laundry and Cleaning sector was also a strong contributor to the
region's current year unit volume progress, with a 3% increase over a strong
prior year base period. The volume gains were driven by laundry, which also
contributed heavily to the sector's earnings progress, and by fabric
conditioners.
(Middle of page 12, right-hand margin -- bar graph showing North America Net
Earnings in Millions of Dollars -- 1996 - 1,953, 1997 - 2,253 and 1998 - 2,474)
The Food and Beverage sector achieved 1% unit volume growth in the current
year, despite reduced coffee volumes resulting from commodity-based price
increases and the sale of Duncan Hines. The snacks category posted the highest
increase, behind the launch of Fat Free Pringles. The sector's earnings were
negatively impacted by the loss of profit contribution from Duncan Hines, and by
investments in new initiatives. In 1997, unit volume growth was led by the
snacks category, which achieved double-digit growth behind new production
capacity.
Unit volume in the Beauty Care sector grew 2% during the year, led by hair
care and deodorants. Net earnings for the sector increased over a strong prior
year base, driven by the skin care and personal cleansing and the cosmetics and
fragrances categories. Earnings growth declined from the double-digit increases
of prior years, due to intense competition in hair care and deodorants, and
increased investments in the development of future product initiatives.
(Bottom of page 12, left-hand margin -- picture of Comet product with caption
"1956: FIRST SCOURING CLEANSER WITH EFFECTIVE BLEACHING")
Unit volume in the Health Care sector was down 1%, as volume softness
caused by intense competitive activity in oral care was partially offset by
improved volume in the pharmaceuticals category. The sector's unit volume posted
a 3% decline in 1997 compared to 1996. Earnings declined in 1998, as the sector
continued to invest in research and development, primarily in pharmaceuticals,
and in marketing support in the highly competitive oral care category. The
sector will continue to invest heavily in research and development, with a
pipeline for launching new pharmaceutical drugs in the coming years and a
renewed focus on future innovations in other health care products.
EUROPE, MIDDLE EAST AND AFRICA REGION
Record unit volume, sales and earnings in the Europe, Middle East and Africa
region were driven by continued expansion into developing markets, increased
pricing, cost improvements and lower tax rates.
Net sales grew 2% to $11.84 billion, on 8% unit volume growth. Excluding
the effects of unfavorable exchange rates, primarily in Western Europe, sales
grew 10%, ahead of volume. During the prior year, sales increased 1% to $11.59
billion, which trailed the 7% unit volume growth rate due to unfavorable
exchange rates.
(Bottom of page 13, left-hand margin -- bar graph showing Europe, Middle East
and Africa Net Sales in Billions of Dollars -- 1996 - 11.5, 1997 - 11.6 and 1998
- - 11.8)
The region's net earnings progress continued in the current year, growing
14% to $1.09 billion. Net earnings in 1997 were $956 million, a 21% increase
over 1996. Current year earnings growth was driven by the region's volume
growth, continued efforts to reduce cost via simplification and standardization
and lower tax rates, partially offset by negative exchange impacts. The net
earnings margin progress also continued in the current year to 9.2%, from 8.3%
and 6.9%, in 1997 and 1996, respectively.
Central and Eastern Europe led the region's unit volume growth, with a 25%
increase, driven by growth in emerging markets. This follows a 42% growth rate
in 1997. Earnings increased as a result of unit volume growth, reduced costs and
economies of scale, partially offset by continued investment in new product
initiatives and new markets to facilitate future growth.
(Middle of page 13, right-hand margin -- bar graph showing Europe, Middle East
and Africa Net Earnings in Millions of Dollars -- 1996 - 793, 1997 - 956 and
1998 - 1,092)
Middle East and Africa, which includes the region's snack business,
increased unit volume 18% over the prior year base period, which also generated
a double-digit increase over 1996. Unit volume progress was broadly based across
countries and key categories, led by increased snack sales.
Western Europe unit volume increased 2%, reflecting the net impact of the
Tambrands acquisition and the divestiture of non-strategic local brands,
primarily in health and beauty care. Net earnings increased well above volume
growth, due to cost savings, primarily in laundry and cleaning products, and
lower tax rates, partially offset by increased spending to promote new brand
launches.
(Bottom of page 13, right-hand margin -- picture of Head & Shoulders product
with caption "1961: FIRST PLEASANT-TO-USE SHAMPOO EFFECTIVE AGAINST DANDRUFF"
ASIA REGION
The Asia region was negatively impacted by a general market contraction caused
by the currency and economic crises in Korea and the ASEAN countries (Thailand,
Malaysia, Philippines, Indonesia and Singapore) and the continuing economic
recession in Japan.
Net sales for the region were $3.45 billion, 3% below the prior year on 4%
unit volume growth. Current year volume growth was driven by acquisitions,
including Ssangyong, a paper business in Korea, and increased ownership of a
venture in China, which more than offset volume declines in the rest of the
region. Net sales lagged volume growth as the impact of improved pricing and
product mix were more than offset by the impact of unfavorable exchange rate
movements. Excluding adverse exchange effects, sales grew 10%, primarily due to
pricing aimed at recovering the currency devaluation effects. In the prior year,
net sales declined 8% to $3.57 billion on a 7% unit volume decline. Excluding
exchange effects in 1997, sales were down 2% versus 1996.
(Middle of page 14, left-hand margin -- bar graph showing Asia Net Sales in
Billions of Dollars -- 1996 - 3.9, 1997 - 3.6 and 1998 - 3.5)
The region's net earnings were $174 million, a 37% decrease from the prior
year. Current year earnings were impacted by lower sales, increased investment
in new product initiatives and the currency crisis. The prior year net earnings
of $275 million represented a 1% increase over 1996. Net earnings margin for the
current year was 5.0%, compared to 7.7% in 1997 and 7.0% in 1996. The 1998
margin decline reflects lower sales, exchange impacts and initiative
investments.
Greater China's unit volume was up 6% versus the prior year. Volume
increases were driven by increased ownership of a joint venture. Net earnings
were higher as the impact of increased volume was partially offset by
unfavorable sales mix and investment behind new product introductions.
(Bottom of page 14, left-hand margin -- picture of Pampers product with the
caption "1961: FIRST SUCCESSFUL, MASS-MARKETED DISPOSABLE DIAPER)
In Japan, unit volume was relatively flat, reflecting the continued
depressed state of the Japanese economy. Despite the economic troubles, the
Company continued to invest in new product initiatives and was successful in
increasing market shares during the second half of the year. Net earnings were
lower due to unfavorable sales mix, investment in new products and the weakened
yen.
(Middle of page 14, right-hand margin -- bar graph showing Asia Net Earnings in
Millions of Dollars -- 1996 - 273, 1997 - 275 and 1998 - 174)
The balance of Asia was positively impacted by the acquisition of the
Ssangyong Paper Company in Korea. The increased volume in Korea resulting from
this acquisition more than offset volume declines brought about by the economic
crisis. Earnings, however, declined as a result of the currency crisis.
The Asian markets are expected to remain weak through at least fiscal 1999.
Because the Asia region accounted for less than 10% of the Company's total sales
and 5% of the Company's total earnings in fiscal 1998, the economic situation is
not expected to be significant to the Company's overall growth rate for the
coming year. While the region is expected to recover from these difficulties,
the depth and duration of the economic effects are still uncertain.
LATIN AMERICA REGION
Latin America continued its positive trends in net sales and net earnings, with
current year results being driven by acquisitions and the continued
strengthening in Mexico and Venezuela.
Net sales in the region grew 14% to $2.64 billion on 12% unit volume
growth, as pricing outpaced the negative impact of currency devaluation. Volume
gains resulted from the acquisition of Loreto y Pena, a paper company in Mexico,
the buy-out of a paper joint venture in the Southern Cone (Brazil, Argentina,
Chile), the prior year acquisition of a laundry and cleaning business in Brazil,
and the strengthening of the base business in Mexico, Venezuela and Argentina.
In the prior year, sales for the region grew 6% to $2.31 billion, while unit
volume was down 2%, reflecting inflation-driven pricing action. In Mexico, the
Company's largest operation in the region, business results were strong. Unit
volume increased 16%, behind the acquisition of the Loreto y Pena paper company
and a general economic recovery in the market.
(Top of page 15, left-hand margin -- bar graph showing Latin America Net Sales
in Billions of Dollars - 1996 - 2.2, 1997 - 2.3 and 1998 - 2.6)
Net earnings for the region were $274 million, a 7% increase. Current year
earnings lagged behind sales growth due to increased investment to support brand
expansion in the Southern Cone. Excluding these geographies, the balance of the
region's earnings grew in double digits. Prior year net earnings were $256
million, a 17% increase over 1996. Net earnings margin for the current year was
10.4% compared to 11.1% and 10.1% in 1997 and 1996, respectively, reflecting
initiative investments.
(Bottom of page 15, left-hand margin -- bar graph showing Latin America Net
Earnings in Millions of Dollars -- 1996 - 219, 1997 - 256 and 1998 - 274)
Prior to January 1, 1998, both Brazil and Peru were highly inflationary
economies, and accordingly, the results of the Company's subsidiaries in Brazil
and Peru were measured using the United States dollar as their functional
currency. Effective January 1, 1998, neither Brazil nor Peru qualified as a
highly inflationary economy. The impact of this change was not material.
HEDGING AND DERIVATIVE FINANCIAL INSTRUMENTS
The Company is exposed to market risk, including changes in interest rates,
currency exchange rates and commodity prices. To manage the volatility relating
to these exposures on a consolidated basis, the Company nets the exposures to
take advantage of natural offsets and enters into various derivative
transactions for the remaining exposures pursuant to the Company's policies in
areas such as counterparty exposure and hedging practices. The financial impacts
of these hedging instruments are offset by corresponding changes in the
underlying exposures being hedged. The Company does not hold or issue derivative
financial instruments for trading purposes. Note 5 to the consolidated financial
statements includes a discussion of the Company's accounting policies for
financial instruments.
Derivative positions are monitored using techniques including market value,
sensitivity analysis and a value at risk model. The tests for interest rate and
currency rate exposures discussed below are based on a variance/co-variance
value at risk model using a one-year horizon and a 95% confidence level. The
model assumes that financial returns are normally distributed and approximates
the financial return for options and other non-linear instruments. The model
also reflects the impact of correlation and diversification from holding
multiple currency and interest rate instruments. Estimates of volatility and
correlations of market factors are drawn from the JP Morgan
RiskMetrics(trademark) dataset as of June 30, 1998. In cases where data is
unavailable in RiskMetrics(trademark), a reasonable approximation is included.
The effect of these estimates did not significantly change the total value at
risk.
The Company's market risk exposures relative to interest and currency
rates, as discussed below, have not changed materially versus the previous
reporting period. In addition, the Company is not aware of any facts or
circumstances that would significantly impact such exposures in the near-term.
(Bottom of page 15, right-hand margin -- picture of Ariel product with caption
"1967: FIRST MASS-MARKETED LAUNDRY DETERGENT WITH ENZYMES FOR PRESOAKING AND
WASHING")
INTEREST RATE EXPOSURE
Interest rate swaps are used to hedge underlying debt obligations. Certain
currency interest rate swaps are designated to hedge the foreign currency
exposure of the Company's related foreign net investments.
Based on the Company's overall interest rate exposure as of and during the
year ended June 30, 1998, including derivative and other interest rate sensitive
instruments, a near-term change in interest rates, within a 95% confidence level
based on historical interest rate movements, would not materially affect the
consolidated financial position, results of operations or cash flows.
CURRENCY RATE EXPOSURES
The Company manufactures and sells its products in a number of countries
throughout the world and, as a result, is exposed to movements in foreign
currency exchange rates. The major foreign currency exposures involve the
markets in Western Europe, Mexico and Canada. The primary purpose of the
Company's foreign currency hedging activities is to protect against the
volatility associated with foreign currency purchases of materials and other
assets and liabilities created in the normal course of business. Corporate
policy prescribes the range of allowable hedging activity. The Company primarily
utilizes forward exchange contracts and purchased options with durations of
generally less than 12 months.
In addition, the Company enters into foreign currency swaps to hedge
intercompany financing transactions, and utilizes purchased foreign currency
options with durations of generally less than 18 months and forward exchange
contracts to hedge against the effect of exchange rate fluctuations on royalties
and foreign source income.
Based on the Company's overall currency rate exposure as of and during the
year ended June 30, 1998, including derivative and other foreign currency
sensitive instruments, a near-term change in currency rates, within a 95%
confidence level based on historical currency rate movements, would not
materially affect the consolidated financial position, results of operations or
cash flows.
(Bottom of page 16, left-hand margin -- picture of Pringles product with caption
"1968: FIRST UNIFORMLY SHAPED, STACKABLE POTATO CHIP")
COMMODITY PRICE EXPOSURE
Raw materials used by the Company are subject to price volatility caused by
weather, supply conditions and other unpredictable factors. The Company uses
futures and options contracts, primarily in food and beverage products, to
manage the volatility related to certain of these exposures. Gains and losses
relating to qualifying hedges of firm commitments or anticipated inventory
transactions are deferred in prepaid expenses and are included in the basis of
the underlying transactions. Commodity hedging activity is not material to the
Company's consolidated financial position, results of operations or cash flows.
ORGANIZATION 2005
The Company is currently designing Organization 2005, a realignment of the
organization structure, work processes and culture to accelerate growth and
innovation. While the details are not final, the design will likely include:
(bullet) A move from current geographic business units to product-based
Global Business Units (GBUs).
(bullet) The further strengthening of country-based organizations to
provide even greater focus on deep local level consumer and
customer knowledge.
(bullet) The establishment of centers of excellence for key administrative,
logistics and support functions.
(bullet) Changes in the culture and reward systems to encourage greater
speed, innovation and flexibility.
The nature, timing and implications related to this design change have not
yet been determined. The Company expects to finalize plans and to make available
further details of the Organization 2005 changes in Fall 1998.
YEAR 2000
The Company has developed plans to address the possible exposures related to the
impact on its computer systems of the Year 2000. Key financial, information and
operational systems, including equipment with embedded microprocessors, have
been inventoried and assessed, and detailed plans are in place for the required
systems modifications or replacements. Progress against these plans is monitored
and reported to management and to the Audit Committee of the Board of Directors
on a regular basis. Implementation of required changes to critical systems is
expected to be completed during fiscal 1999. Testing and certification of
critical systems, which includes review of documented remediation work and test
results by technical experts, key users and a central project team, is expected
to be successfully completed by December 31, 1999. In addition, the Company's
Internal Controls organization plans to review the testing and certification
process and observe the testing of selected critical systems in each region.
Critical Systems Description
% of Applications Year 2000 Compliant
--------------------------------------------
Actual as of Planned Planned
June 1998 December 1998 June 1999
- -------------------------------------------------------------------------
Critical manufacturing,
operating and
control systems 44% 90% 100%
All other critical systems 56% 100% 100%
Incremental costs, which include contractor costs to modify existing
systems and costs of internal resources dedicated to achieving Year 2000
compliance, are charged to expense as incurred. Costs are expected to total
approximately $100 million, of which 34% has been spent to date.
The Company is also in contact with suppliers and customers to assess the
potential impact on operations if key third parties are not successful in
converting their systems in a timely manner. Risk assessment, readiness
evaluation, action plans and contingency plans related to these third parties
are expected to be completed by December 1998.
The Company's risk management program includes emergency backup and
recovery procedures to be followed in the event of failure of a
business-critical system. These procedures will be expanded to include specific
procedures for potential Year 2000 issues. Contingency plans to protect the
business from Year 2000-related interruptions are being developed. These plans
will be complete by June 1999 and will include, for example, development of
backup procedures, identification of alternate suppliers and possible increases
in safety inventory levels.
The Company is taking reasonable steps to prevent major interruptions in
the business due to Year 2000 issues. The effect, if any, on the Company's
results of operations if the Company, its customers or its suppliers are not
fully Year 2000 compliant is not reasonably estimable. The Company believes its
global presence and broad-based manufacturing capability help mitigate the risk.
FORWARD-LOOKING STATEMENT
The Company has made and will make certain forward-looking statements in the
Annual Report and in other contexts relating to volume growth, increases in
market shares, Year 2000 compliance, financial goals and cost reduction, among
others.
These forward-looking statements represent challenging goals for the
Company and are based on certain assumptions and estimates regarding the
worldwide economy, technological innovation, competitive activity, pricing,
currency movements, product introductions, governmental action and the
development of certain markets. Among the key factors necessary to achieve the
Company's goals are: (1) the achievement of lower costs and increases in
reliability and capacity utilization, resulting from simplification and
standardization; (2) the ability to improve results despite high levels of
competitive activity and the economic downturn in Asia; (3) the successful
implementation of ECR and the ability to maintain key customer relationships in
important developed markets; (4) the continuation of substantial growth in
significant developing markets such as China, Mexico, Brazil and the countries
of Central and Eastern Europe; (5) obtaining successful outcomes in regulatory,
tax and legal matters; (6) the ability to continue technological innovation; and
(7) the timely resolution of the Year 2000 issue by the Company and its
customers and suppliers. If the Company's assumptions and estimates are
incorrect or do not come to fruition, or if the Company does not achieve all of
these key factors, then the Company's actual performance could vary materially
from the forward-looking statements made herein.
(Bottom of page 17, right-hand margin -- picture of Bounce product with caption
"1972: FIRST EFFECTIVE DRYER-ADDED FABRIC SOFTENER ")
RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
Consolidated financial statements and financial information included in this
report are the responsibility of Company management. This includes preparing the
statements in accordance with generally accepted accounting principles and
necessarily includes estimates based on management's best judgments.
To help insure the accuracy and integrity of Company financial data,
management maintains internal controls 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 ongoing
program of internal audits. These audits are supplemented by a self-assessment
program that enables individual organizations to evaluate the effectiveness of
their controls. Careful selection of employees and appropriate divisions of
responsibility are designed to achieve control objectives. The Company's
"Worldwide Business Conduct Manual" sets forth management's commitment to
conduct its business affairs with the highest ethical standards.
Deloitte & Touche LLP, independent public accountants, have audited and
reported on the Company's consolidated financial statements. Their audits were
performed in accordance with generally accepted auditing standards.
The Board of Directors, acting through its Audit Committee composed
entirely of outside directors, oversees the adequacy of internal controls. The
Audit Committee meets periodically with representatives of Deloitte & Touche LLP
and internal financial management to review internal control, auditing and
financial reporting matters. The independent auditors and the internal auditors
also have full and free access to meet privately with the Audit Committee.
/S/JOHN E. PEPPER /S/ERIK G. NELSON
John E. Pepper Erik G. Nelson
Chairman and Chief Executive Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
250 East Fifth Street
Cincinnati, Ohio 45202
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, 1998 and 1997 and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended June 30, 1998. These financial
statements are the responsibility of the Company's 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 Company at June 30, 1998
and 1997 and the results of its operations and cash flows for each of the three
years in the period ended June 30, 1998, in conformity with generally accepted
accounting principles.
/S/DELOITTE & TOUCHE LLP
July 30, 1998
CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended June 30
----------------------
Amounts in Millions Except Per Share Amounts 1998 1997 1996
==============================================================================
NET SALES $37,154 $35,764 $35,284
Cost of products sold 21,064 20,510 20,938
Marketing, research and administrative expenses 10,035 9,766 9,531
-------------------------
OPERATING INCOME 6,055 5,488 4,815
Interest expense 548 457 484
Other income, net 201 218 338
-------------------------
EARNINGS BEFORE INCOME TAXES 5,708 5,249 4,669
Income taxes 1,928 1,834 1,623
-------------------------
NET EARNINGS $ 3,780 $ 3,415 $ 3,046
=========================
BASIC NET EARNINGS PER COMMON SHARE $2.74 $2.43 $2.14
DILUTED NET EARNINGS PER COMMON SHARE $2.56 $2.28 $2.01
DIVIDENDS PER COMMON SHARE $1.01 $ .90 $ .80
=========================
See accompanying Notes to Consolidated Financial Statements.
(Bottom of page 19, right-hand margin -- picture of Dawn product with caption
"1972: FIRST DISHWASHING LIQUID WITH GREASE-CUTTING SUPERIORITY ")
CONSOLIDATED BALANCE SHEETS
June 30
----------------
Amounts in Millions Except Per Share Amounts 1998 1997
===========================================================================
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,549 $ 2,350
Investment securities 857 760
Accounts receivable 2,781 2,738
Inventories
Materials and supplies 1,225 1,131
Work in process 343 228
Finished goods 1,716 1,728
Deferred income taxes 595 661
Prepaid expenses and other current assets 1,511 1,190
----------------
TOTAL CURRENT ASSETS 10,577 10,786
PROPERTY, PLANT AND EQUIPMENT
Buildings 3,660 3,409
Machinery and equipment 15,953 14,646
Land 539 570
----------------
20,152 18,625
Accumulated depreciation (7,972) (7,249)
----------------
TOTAL PROPERTY, PLANT AND EQUIPMENT 12,180 11,376
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill 7,023 3,915
Trademarks and other intangible assets 1,157 1,085
----------------
8,180 5,000
Accumulated amortization (1,169) (1,051)
----------------
TOTAL GOODWILL AND OTHER INTANGIBLE ASSETS 7,011 3,949
OTHER NON-CURRENT ASSETS 1,198 1,433
----------------
TOTAL ASSETS $30,966 $27,544
================
See accompanying Notes to Consolidated Financial Statements.
(Bottom of page 20, left-hand margin -- picture of Luvs product with caption
"1975: FIRST CONTOUR-SHAPED DIAPER ")
June 30
----------------
Amounts in Millions Except Per Share Amounts 1998 1997
===========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,051 $ 2,203
Accrued and other liabilities 3,942 3,802
Taxes payable 976 944
Debt due within one year 2,281 849
----------------
TOTAL CURRENT LIABILITIES 9,250 7,798
LONG-TERM DEBT 5,765 4,143
DEFERRED INCOME TAXES 428 559
OTHER NON-CURRENT LIABILITIES 3,287 2,998
----------------
TOTAL LIABILITIES 18,730 15,498
----------------
SHAREHOLDERS' EQUITY
Convertible Class A preferred stock,
stated value $1 per share
(600 shares authorized) 1,821 1,859
Non-Voting Class B preferred stock,
stated value $1 per share (200 shares
authorized; none issued) - -
Common stock, stated value $1 per share
(5,000 shares authorized; shares outstanding:
1998-1,337.4 and 1997-1,350.8) 1,337 1,351
Additional paid-in capital 907 559
Reserve for employee stock ownership plan
debt retirement (1,616) (1,634)
Accumulated other comprehensive income (1,357) (819)
Retained earnings 11,144 10,730
----------------
TOTAL SHAREHOLDERS' EQUITY 12,236 12,046
----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $30,966 $27,544
================
(Bottom of page 21, right-hand margin -- picture of Didronel product with
caption "DIDRONEL, THE FIRST GLOBAL OSTEOPOROSIS DRUG ")
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Accumulated Total
Dollars in Common Additional Reserve for Other Compre-
Millions/Shares Shares Common Preferred Paid-in ESOP Debt Comprehensive Retained hensive
in Thousands Outstanding Stock Stock Capital Retirement Income Earnings Total Income
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE JUNE 30, 1995 1,373,148 $1,373 $1,913 $129 $(1,734) $65 $8,843 $10,589
----------- ------ --------- ---------- ----------- ------------- -------- -------
Net earnings 3,046 3,046 $3,046
Other comprehensive
income:
Currency translation,
net of $80 tax (483) (483) (483)
Other, net of tax 1 1 1
Reclassifications to
net earnings (1) (1) (1)
------
Total comprehensive
income $2,563
======
Dividends to share-
holders:
Common (1,099) (1,099)
Preferred, net of
tax benefit (103) (103)
Treasury purchases (10,468) (10) (422) (432)
Employee plan issuances 6,514 6 140 146
Preferred stock
conversions 1,952 2 (27) 25 0
ESOP debt guarantee
reduction 58 58
----------- ------ --------- ---------- ----------- ------------- -------- -------
BALANCE JUNE 30, 1996 1,371,146 1,371 1,886 294 (1,676) (418) 10,265 11,722
----------- ------ --------- ---------- ----------- ------------- -------- -------
Net earnings 3,415 3,415 $3,415
Other comprehensive
income:
Currency translation,
net of $38 tax (416) (416) (416)
Other, net of tax 13 13 13
Reclassifications to
net earnings 2 2 2
------
Total comprehensive
income $3,014
======
Dividends to share-
holders:
Common (1,225) (1,225)
Preferred, net of
tax benefit (104) (104)
Treasury purchases (30,875) (31) (1,621) (1,652)
Employee plan issuances 8,801 9 240 249
Preferred stock
conversions 1,771 2 (27) 25 0
E0SOP debt guarantee
reduction 42 42
----------- ------ --------- ---------- ----------- ------------- -------- -------
BALANCE JUNE 30, 1997 1,350,843 1,351 1,859 559 (1,634) (819) 10,730 12,046
----------- ------ --------- ---------- ----------- ------------- -------- -------
Net earnings 3,780 3,780 $3,780
Other comprehensive
income:
Currency translation,
net of $25 tax (537) (537) (537)
Other, net of tax (1) (1) (1)
------
Total comprehensive
income $3,242
======
Dividends to share-
holders:
Common (1,358) (1,358)
Preferred, net of
tax benefit (104) (104)
Treasury purchases (24,716) (25) (1,904) (1,929)
Employee plan issuances 8,777 9 312 321
Preferred stock
conversions 2,557 2 (38) 36 0
ESOP debt guarantee
reduction 18 18
----------- ------ --------- ---------- ---------- -------------- -------- -------
BALANCE JUNE 30, 1998 1,337,461 $1,337 $1,821 $907 $(1,616) $(1,357) $11,144 $12,236
=========== ====== ========= ========== ========== ============== ======== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
(Bottom of page 22, left-hand margin -- picture of Bounty product with caption
"1985: SUPERIOR PAPER-MAKING TECHNOLOGY YIELDS STRONGER, MORE ABSORBENT PAPER
TOWELS")
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended June 30
------------------------
Amounts in Millions 1998 1997 1996
=========================================================================================
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $2,350 $2,074 $2,028
OPERATING ACTIVITIES
Net earnings 3,780 3,415 3,046
Depreciation and amortization 1,598 1,487 1,358
Deferred income taxes (101) (26) 328
Change in accounts receivable 42 8 17
Change in inventories (229) (71) 202
Change in accounts payable, accrued and other liabilities (3) 561 (948)
Change in other operating assets and liabilities (65) 503 (134)
Other (137) 5 289
------ ------ ------
TOTAL OPERATING ACTIVITIES 4,885 5,882 4,158
INVESTING ACTIVITIES
Capital expenditures (2,559) (2,129) (2,179)
Proceeds from asset sales 555 520 402
Acquisitions (3,269) (150) (358)
Change in investment securities 63 (309) (331)
------ ------ ------
TOTAL INVESTING ACTIVITIES (5,210) (2,068) (2,466)
------ ------ ------
FINANCING ACTIVITIES
Dividends to shareholders (1,462) (1,329) (1,202)
Change in short-term debt 1,315 (160) 242
Additions to long-term debt 1,970 224 339
Reductions of long-term debt (432) (724) (619)
Proceeds from stock options 158 134 89
Treasury purchases (1,929) (1,652) (432)
------ ------ ------
TOTAL FINANCING ACTIVITIES (380) (3,507) (1,583
------ ------ ------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (96) (31) (63)
------ ------ ------
CHANGE IN CASH AND CASH EQUIVALENTS (801) 276 46
------ ------ ------
CASH AND CASH EQUIVALENTS, END OF YEAR $1,549 $2,350 $2,074
====== ====== ======
SUPPLEMENTAL DISCLOSURE
Cash payments for:
Interest, net of amount capitalized $536 $449 $459
Income taxes 2,056 1,380 1,339
Liabilities assumed in acquisitions 808 42 56
====== ====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
(Bottom of page 23, right-hand margin -- picture of Pampers product with caption
"1986: SUPER-ABSORBENT POLYMER TECHNOLOGY PROVIDES UNPARALLELED DRYNESS IN A
THIN DIAPER")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Millions of Dollars Except Per Share Amounts
1 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The consolidated financial statements include The Procter
& Gamble Company and its controlled subsidiaries (the Company). Investments in
companies that are at least 20% to 50% owned, and over which the Company exerts
significant influence but does not control the financial and operating
decisions, are accounted for by the equity method. These investments are managed
as integral parts of the Company's segment operations, and the Company's share
of their results is included in net sales for the related segments.
Use of Estimates: Preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying disclosures. These estimates are based on
management's best knowledge of current events and actions the Company may
undertake in the future. Actual results may ultimately differ from estimates.
Accounting Changes: In 1998, the Company adopted several FASB statements.
Statement No. 128, "Earnings per Share," which revises the manner in which
earnings per share is calculated, did not impact the Company's previously
reported earnings per share. Statement No. 130, "Reporting Comprehensive
Income," requires the components of comprehensive income to be disclosed in the
financial statements. Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information," requires certain information to be reported
about operating segments on a basis consistent with the Company's internal
organizational structure. Statement No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," revises the disclosures for
pensions and other postretirement benefits and standardizes them into a combined
format. Required disclosures have been made and prior years' information has
been reclassified for the impact of FASB Statements 130, 131 and 132.
New Pronouncements: In June 1998, the FASB issued Statement No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which revises the accounting
for derivative financial instruments. In March 1998, the AICPA issued SOP 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," which revises the accounting for software development costs and
will require the capitalization of certain costs which the Company has
historically expensed. The Company is currently analyzing the impacts of these
statements, which are required to be adopted in 2000, and does not expect either
statement to have a material impact on the Company's financial position, results
of operations or cash flows.
Currency Translation: Financial statements of subsidiaries outside the U.S.
generally are measured using the local currency as the functional currency.
Adjustments to translate those statements into U.S. dollars are accumulated in a
separate component of shareholders' equity. For subsidiaries operating in highly
inflationary economies, the U.S. dollar is the functional currency.
Remeasurement adjustments for highly inflationary economies and other
transactional exchange gains (losses) are reflected in earnings and were $0, $1
and $(28) for 1998, 1997 and 1996, respectively.
Cash Equivalents: Highly liquid investments with maturities of three months or
less when purchased are considered cash equivalents.
Inventory Valuation: Inventories are valued at cost, which is not in excess of
current market price. Cost is primarily determined by either the average cost or
the first-in, first-out method. The replacement cost of last-in, first-out
inventories exceeds carrying value by approximately $91 and $122 at June 30,
1998 and 1997, respectively.
Goodwill and Other Intangible Assets: The cost of intangible assets is
amortized, principally on a straight-line basis, over the estimated periods
benefited, generally 40 years for goodwill and periods ranging from 10 to 40
years for other intangible assets. The realizability of goodwill and other
intangibles is evaluated periodically when events or circumstances indicate a
possible inability to recover the carrying amount. Such evaluation is based on
various analyses, including cash flow and profitability projections that
incorporate the impact of 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 the goodwill
and other intangible assets.
(Bottom of page 24, left-hand margin -- picture of Pert product with caption
"1986: FIRST COMPLETE SHAMPOO AND CONDITIONER IN ONE ")
Property, Plant and Equipment: Property, plant and equipment are recorded at
cost reduced by accumulated depreciation. Depreciation expense is provided based
on estimated useful lives using the straight-line method.
Selected Operating Expenses: Research and development costs are charged to
earnings as incurred and were $1,546 in 1998, $1,469 in 1997 and $1,399 in 1996.
Advertising costs are charged to earnings as incurred and were $3,704 in 1998,
$3,466 in 1997 and $3,254 in 1996.
Net Earnings Per Common Share: Net earnings less preferred dividends (net of
related tax benefits) are divided by the weighted average number of common
shares outstanding during the year to calculate basic net earnings per common
share. Diluted net earnings per common share are calculated to give effect to
stock options and convertible preferred stock.
Basic and diluted net earnings per share are reconciled as follows:
Years Ended June 30
------------------------
1998 1997 1996
===================================================================
Net earnings available to
common shareholders $3,676 $3,311 $2,943
Effect of dilutive securities
Preferred dividends,
net of tax benefit 104 104 103
Preferred dividend
impact on funding
of ESOP (25) (32) (39)
--------------------------
Diluted net earnings 3,755 3,383 3,007
--------------------------
Basic weighted average
common shares
outstanding 1,343.4 1,360.3 1,372.6
Effect of dilutive securities
Conversion of
preferred shares 99.8 101.9 103.8
Exercise of stock options 22.3 24.8 19.8
---------------------------
Diluted weighted average
common shares
outstanding 1,465.5 1,487.0 1,496.2
Stock Split: In July 1997, the Company's board of directors approved a
two-for-one stock split that was effective for common and preferred shareholders
of record as of August 22, 1997. The financial statements, notes and other
references to share and per-share data reflect the stock split for all periods
presented.
Fair Values of Financial Instruments: Fair values of cash equivalents, short and
long-term investments and short-term debt approximate cost. The estimated fair
values of other financial instruments, including debt and risk management
instruments, have been determined using available market information and
valuation methodologies, primarily discounted cash flow analysis. These
estimates require considerable judgment in interpreting market data, and changes
in assumptions or estimation methods may significantly affect the fair value
estimates.
Major Customer: The Company's largest customer, Wal-Mart Stores, Inc. and its
affiliates, accounted for 11% and 10% of consolidated net sales in 1998 and
1997, respectively. These sales occurred primarily in the North America segment.
Reclassifications: Certain reclassifications of prior years' amounts have been
made to conform with the current year presentation, primarily related to certain
component parts of research and development costs.
2 | ACQUISITIONS
In July 1997, the Company acquired Tambrands, Inc., a company in the feminine
protection category, for approximately $1,844 in cash. Other acquisitions in
1998 totaled $1,425 and included the acquisition of paper businesses and
increased ownership in various ventures in Latin America and Asia. These
acquisitions, all of which were accounted for using the purchase method,
resulted in goodwill of $3,335. Acquisitions accounted for as purchases in 1997
and 1996 totaled $150 and $358, respectively.
The following table reflects unaudited pro forma combined results of
operations on the basis that the 1998 acquisitions had taken place at the
beginning of the year for each of the periods presented:
Years Ended June 30
-------------------
1998 1997
==========================================================
Pro forma amounts
Net sales $37,476 $37,008
Net earnings 3,756 3,409
Net earnings per common share
Basic 2.72 2.43
Diluted 2.55 2.27
In management's opinion, the unaudited pro forma combined results of
operations are not indicative of the actual results that would have occurred
under the ownership and management of the Company.
(Bottom of page 25, right-hand margin -- picture of Always product with caption
"1986: PATENTED "WINGS" TECHNOLOGY COMBINED WITH "DRI-WEAVE" TOPSHEET CREATES
SUPERIOR FEMININE PROTECTION")
3 | SUPPLEMENTAL BALANCE SHEET INFORMATION
June 30
---------------
1998 1997
======================================================
ACCRUED AND OTHER LIABILITIES
Marketing expenses $1,109 $1,129
Compensation expenses 485 461
Other 2,348 2,212
---------------
3,942 3,802
OTHER NON-CURRENT LIABILITIES
Postretirement benefits $1,193 $1,300
Pension benefits 843 815
Other 1,251 883
---------------
3,287 2,998
Currency
Translation Other Total
==========================================================================
ACCUMULATED OTHER
COMPREHENSIVE INCOME
Balance June 30, 1995 $64 $ 1 $ 65
Current period change (483) 0 (483)
--------------------------------
Balance June 30, 1996 (419) 1 (418)
Current period change (412) 11 (401)
--------------------------------
Balance June 30, 1997 (831) 12 (819)
Current period change (536) (2) (538)
--------------------------------
Balance June 30, 1998 (1,367) 10 (1,357)
4 | SHORT-TERM AND LONG-TERM DEBT
June 30
-------------
1998 1997
==============================================================
SHORT-TERM DEBT
U.S. obligations $1,435 $183
Foreign obligations 560 343
Current portion of long-term debt 286 323
-------------
2,281 849
The weighted average short-term interest rates were 6.2% and 6.9% as of
June 30, 1998 and 1997, respectively.
June 30
Average ----------------
Rate Maturities 1998 1997
========================================================================
LONG-TERM DEBT
U.S. notes and
debentures 6.96% 1998-2029 $2,897 $2,082
ESOP Series A 8.33% 1998-2004 545 613
ESOP Series B 9.36% 2021 1,000 1,000
U.S. commercial
paper 1,207 585
Foreign obligations 402 186
Current portion of
long-term debt (286) (323)
----------------
5,765 4,143
Long-term weighted average interest rates in the preceding table are as of
June 30, 1998 and include the effects of related interest rate swaps discussed
in Note 5. Certain commercial paper balances have been classified as long-term
debt based on the Company's intent and ability to renew the obligations on a
long-term basis. The Company has entered into derivatives that convert certain
of these commercial paper obligations into fixed-rate obligations. The fair
value of the long-term debt was $6,412 and $4,509 at June 30, 1998 and 1997,
respectively. Long-term debt maturities during the next five years are as
follows: 1999-$286; 2000-$387; 2001-$339; 2002-$427 and 2003-$1,141.
5 | RISK MANAGEMENT ACTIVITIES
The Company is exposed to market risk, including changes in interest rates,
currency exchange rates and commodity prices. To manage the volatility relating
to these exposures on a consolidated basis, the Company nets the exposures to
take advantage of natural offsets and enters into various derivative
transactions for the remaining exposures pursuant to the Company's policies in
areas such as counterparty exposure and hedging practices. The financial impacts
of these hedging instruments are offset by corresponding changes in the
underlying exposures being hedged. The Company does not hold or issue derivative
financial instruments for trading purposes.
Interest Rate Management
The Company's policy is to manage interest cost using a mix of fixed and
variable rate debt. To manage this mix in a cost-efficient manner, the Company
enters into interest rate swaps, in which the Company agrees to exchange, at
specified intervals, the difference between fixed and variable interest amounts
calculated by reference to an agreed-upon notional principal amount. These swaps
are designated to hedge underlying debt obligations. For qualifying hedges, the
interest rate differential is reflected as an adjustment to interest expense
over the life of the swaps.
Certain currency interest rate swaps are designated to hedge the foreign
currency exposure of the Company's related foreign net investments. Currency
effects of these hedges are reflected in the accumulated other comprehensive
income section of shareholders' equity, offsetting a portion of the translation
of the net assets.
(Bottom of page 26, left-hand margin -- picture of Tide product with caption
"1989: FIRST NORTH AMERICAN LAUNDRY DETERGENT WITH ACTIVATED BLEACH ")
The following table presents information for all interest rate instruments.
The notional amount does not necessarily represent amounts exchanged by the
parties and, therefore, is not a direct measure of the Company's exposure to
credit risk. The fair value approximates the cost to settle the outstanding
contracts. The carrying value includes the net amount due to counterparties
under swap contracts, currency translation associated with currency interest
rate swaps and any marked-to-market value adjustments of instruments.
June 30
----------------
1998 1997
============================================
Notional amount $2,149 $1,488
Fair value $ 7 $ (54)
Carrying value 28 (28)
----------------
Unrecognized loss (21) (26)
Although derivatives are an important component of the Company's interest
rate management program, their incremental effect on interest expense for 1998,
1997 and 1996 was not material.
Currency Rate Management
The Company manufactures and sells its products in a number of countries
throughout the world and, as a result, is exposed to movements in foreign
currency exchange rates. The major foreign currency exposures involve the
markets in Western Europe, Mexico and Canada. The primary purpose of the
Company's foreign currency hedging activities is to protect against the
volatility associated with foreign currency purchases of materials and other
assets and liabilities created in the normal course of business. Corporate
policy prescribes the range of allowable hedging activity. The Company primarily
utilizes forward exchange contracts and purchased options with durations of
generally less than 12 months.
In addition, the Company enters into foreign currency swaps to hedge
intercompany financing transactions, and utilizes purchased foreign currency
options with durations of generally less than 18 months and forward exchange
contracts to hedge against the effect of exchange rate fluctuations on royalties
and foreign source income.
Gains and losses related to qualifying hedges of foreign currency firm
commitments or anticipated transactions are deferred in prepaid expense and are
included in the basis of the underlying transactions. To the extent that a
qualifying hedge is terminated or ceases to be effective as a hedge, any
deferred gains and losses up to that point continue to be deferred and are
included in the basis of the underlying transaction. All other foreign exchange
contracts are marked-to-market on a current basis, generally to marketing,
research and administration expense. To the extent anticipated transactions are
no longer likely to occur, the related hedges are closed with gains or losses
charged to earnings on a current basis.
Currency instruments outstanding are as follows:
June 30
---------------
1998 1997
==========================================
Notional amount
Forward contracts $3,448 $2,607
Purchased options 1,262 1,643
Currency swaps 217 358
Fair value
Forward contracts $ 30 $ (2)
Purchased options 16 38
Currency swaps 8 (1)
The deferred gains and losses on these instruments were not material.
In addition, in order to hedge currency exposures related to the net
investments in foreign subsidiaries, the Company utilizes local currency
financing entered into by the subsidiaries, and currency interest rate swaps and
other foreign currency denominated financing instruments entered into by the
parent. Gains and losses on instruments designated as hedges of net investments
are offset against the translation effects reflected in shareholders' equity.
Currency interest rate swaps, foreign currency instruments and foreign
currency denominated debt that have been designated as hedges of the Company's
net investment exposure in certain foreign subsidiaries have notional amounts
totaling $1,138 and $936 at June 30, 1998 and 1997, respectively. These hedges
resulted in gains of $42 and $63, net of $25 and $38 in tax effects, reflected
in shareholders' equity.
(Bottom of page 27, right-hand margin -- picture of Ace product with caption
"1990: BREAKTHROUGH TECHNOLOGY IN A NON-CHLORINE, GENTLE BLEACH ")
Credit Risk
Credit risk arising from the inability of a counterparty to meet the terms of
the Company's financial instrument contracts is generally limited to the
amounts, if any, by which the counterparty's obligations exceed the obligations
of the Company. It is the Company's policy to enter into financial instruments
with a diversity of creditworthy counterparties. Therefore, the Company does not
expect to incur material credit losses on its risk management or other financial
instruments.
6 | STOCK OPTIONS
The Company has stock-based compensation plans under which stock options are
granted annually to key managers and directors at the market price on the date
of grant. The grants are fully exercisable after one year and have a ten-year
life. In 1998, the Company granted stock options to all eligible employees not
covered by the key manager and director plans. These grants, which comprised 8.7
million of the 20.3 million options granted in 1998, are fully exercisable after
five years and have a ten-year life. The Company issues stock appreciation
rights in countries where stock options have not been approved by local
governments.
Pursuant to FASB Statement No. 123, "Accounting for Stock-Based
Compensation," the Company has elected to account for its employee stock option
plans under APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation cost has been recognized for these plans. Had
compensation cost for the plans been determined based on the fair value at the
grant date consistent with FASB Statement No. 123, the Company's net earnings
and earnings per share would have been as follows:
Years Ended June 30
-------------------------
1998 1997 1996
=============================================
Net earnings
As reported $3,780 $3,415 $3,046
Pro forma 3,472 3,305 2,981
Net earnings per
common share
Basic
As reported $ 2.74 $ 2.43 $ 2.14
Pro forma 2.51 2.35 2.10
Diluted
As reported 2.56 2.28 2.01
Pro forma 2.35 2.20 1.97
(Bottom of page 28, left-hand margin -- picture of Crest product with caption
"1990: FIRST TARTER CONTROL TOOTHPASTE ")
The fair value of each option grant is estimated on the date of grant using
the Binomial option-pricing model with the following weighted average
assumptions:
Years Ended June 30
----------------------
1998 1997 1996
================================================
Interest rate 5.6% 6.6% 6.1%
Dividend yield 2% 2% 2%
Expected volatility 26% 22% 20%
Expected life in years 6 6 6
Stock option activity was as follows:
Options in Thousands
-------------------------
1998 1997 1996
========================================================
Outstanding, July 1 68,514 66,657 63,384
Granted 20,315 10,409 9,605
Exercised (8,477) (8,357) (6,110)
Canceled (434) (195) (222)
-------------------------
Outstanding, June 30 79,918 68,514 66,657
Exercisable 59,610 58,098 57,048
Available for grant 31,558 28,538 24,418
Average price
Outstanding,
beginning of year $31.00 $24.79 $21.36
Granted 83.26 58.72 40.87
Exercised 18.57 16.02 14.52
Outstanding, end of year 45.58 31.00 24.79
Exercisable, end of year 32.74 26.03 22.09
Weighted average grant
date fair value of options 24.56 17.14 10.88
The following table summarizes information about stock options outstanding
at June 30, 1998:
Options Outstanding
---------------------------------------------------
Number Weighted-Avg
Range of Outstanding Weighted-Avg Remaining
Prices (Thousands) Exercise Price Contractual Life
=================================================================
$8 to 30 33,626 $22.69 3.4 years
33 to 46 16,821 37.85 7.1
57 to 71 9,349 60.42 8.5
71 to 85 20,122 83.39 9.5
The following table summarizes information about stock options exercisable
at June 30, 1998:
Options Exercisable
--------------------------------
Number
Range of Exercisable Weighted-Avg
Prices (Thousands) Exercise Price
==================================================
$8 to 30 33,626 $22.69
33 to 46 16,821 37.85
57 to 71 9,163 60.24
71 to 85 - -
7 | POSTRETIREMENT BENEFITS
The Company offers various postretirement benefits to its employees.
Defined Contribution Retirement Plans
Within the U.S., the most significant retirement benefit is the defined
contribution profit sharing plan funded by an employee stock ownership plan
(ESOP) and Company contributions. Annual credits to participants' accounts are
based on individual base salaries and years of service, and do not exceed 15% of
total participants' annual salaries and wages.
Years Ended June 30
----------------------
1998 1997 1996
=======================================================
ESOP preferred shares
allocated at market value $235 $247 $200
Company contributions 58 35 75
Benefits earned 293 282 275
Other Retiree Benefits
The Company also provides certain health care and life insurance benefits for
substantially all U.S. 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. These benefits are partially funded
by an ESOP, as well as certain other assets contributed by the Company.
Certain other employees, primarily outside the U.S., are covered by local
defined benefit pension, health care and life insurance plans.
Summarized information on the Company's postretirement plans is as follows:
Other
Pension Benefits Retiree Benefits
---------------- ----------------
Years Ended June 30
----------------------------------
1998 1997 1998 1997
==========================================================================
CHANGE IN BENEFIT
OBLIGATION
Benefit obligation at
beginning of year $1,991 $1,886 $1,460 $1,405
Service cost 106 100 42 45
Interest cost 148 131 102 109
Participants' contributions 3 5 11 12
Amendments 21 2 (6) 5
Actuarial loss (gain) 87 54 (71) (50)
Acquisitions 154 42 1 0
Curtailments 13 0 0 0
Currency exchange (85) (117) (7) (4)
Benefit payments (156) (112) (67) (62)
----------------------------------
Benefit obligation
at end of year 2,282 1,991 1,465 1,460
----------------------------------
CHANGE IN PLAN
ASSETS
Fair value of plan
assets at beginning
of year 1,229 1,019 1,828 838
Actual return on
plan assets 243 180 803 999
Acquisitions 131 42 0 0
Employer
contributions 103 83 37 41
Participants'
contributions 3 5 11 12
Currency exchange (30) 12 (1) 0
Benefit payments (156) (112) (67) (62)
----------------------------------
Fair value of plan
assets at end
of year 1,523 1,229 2,611 1,828
----------------------------------
FUNDED STATUS
Funded status at
end of year (759) (762) 1,146 368
Unrecognized net
actuarial gain (163) (95) (2,354) (1,691)
Unrecognized
transition amount 32 35 0 0
Unrecognized prior
service cost 75 43 (21) (17)
----------------------------------
Net amount recognized (815) (779) (1,229) (1,340)
==================================
Prepaid benefit cost $ 34 $ 52 $ 1 $ 0
Accrued benefit cost (849) (831) (1,230) (1,340)
----------------------------------
Net liability recognized (815) (779) (1,229) (1,340)
==================================
(Bottom of page 29, right-hand margin -- picture of Cheer product with caption
"1992: BREAKTHROUGH CAREZYME TECHNOLOGY PREVENTS FUZZING AND COLOR FADING ")
The Company's stock comprised $2,443 and $1,687 of other retiree plan
assets, net of Series B ESOP debt, as of June 30, 1998 and 1997, respectively.
Other
Pension Benefits Retiree Benefits
---------------- ----------------
Years Ended June 30
-----------------------------------
1998 1997 1998 1997
==========================================================================
WEIGHTED AVERAGE ASSUMPTIONS
Discount rate 7.0% 7.2% 6.8% 7.5%
Expected return on plan assets 9% 9% 9% 9%
Rate of compensation increase 5% 5% - -
Initial health care cost trend rate* - - 8% 9%
*Assumed to decrease gradually to 5% in 2006 and remain at that level
thereafter.
Other
Pension Benefits Retiree Benefits
---------------------- ----------------------
Years Ended June 30
-------------------------------------------------
1998 1997 1996 1998 1997 1996
===========================================================================
COMPONENTS OF
NET PERIODIC
BENEFIT COST
Service cost $106 $100 $ 96 $ 42 $ 45 $ 47
Interest cost 148 131 131 102 109 102
Expected return
on plan assets (103) (87) (75) (171) (138) (121)
Amortization of
prior service cost 7 5 6 (2) (2) (2)
Amortization of
transition amount 3 0 0 0 0 0
Curtailment loss 12 0 0 0 0 0
Recognized net
actuarial gain 0 (7) (3) (41) (18) (15)
-------------------------------------------------
Gross benefit cost 173 142 155 (70) (4) 11
Dividends on ESOP
preferred stock 0 0 0 (78) (79) (79)
-------------------------------------------------
Net periodic
benefit cost 173 142 155 (148) (83) (68)
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $1,206, $984 and $155, respectively, as of June
30, 1998, and $1,172, $899 and $158, respectively, as of June 30, 1997.
Assumed health care cost trend rates have a signi- ficant effect on the
amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:
1-Percentage- 1-Percentage-
Point Increase Point Decrease
Effect on total of service and
interest cost components $ 26 $ (22)
Effect on postretirement
benefit obligation 207 (181)
8 | EMPLOYEE STOCK OWNERSHIP PLAN
The Company maintains the Procter & Gamble Profit Sharing Trust and Employee
Stock Ownership Plan (ESOP) to provide funding for two primary postretirement
benefits described in Note 7: a defined contribution profit sharing plan and
certain U.S. postretirement health care benefits.
The ESOP borrowed $1,000 in 1989, which has been guaranteed by the Company.
The proceeds were used to purchase Series A ESOP Convertible Class A Preferred
Stock to fund a portion of the defined contribution plan. Principal and interest
requirements are $117 per year, paid by the trust from dividends on the
preferred shares and from cash contributions and advances from the Company. The
shares are convertible at the option of the holder into one share of the
Company's common stock. The liquidation value is equal to the issue price of
$13.75 per share.
In 1991, the ESOP borrowed an additional $1,000, also guaranteed by the
Company. The proceeds were used to purchase Series B ESOP Convertible Class A
Preferred Stock to fund a portion of retiree health care benefits. Debt service
requirements are $94 per year, funded by preferred stock dividends and cash
contributions from the Company. Each share is convertible at the option of the
holder into one share of the Company's common stock. The liquidation value is
equal to the issuance price of $26.12 per share.
Shares in Thousands
------------------------
1998 1997 1996
======================================================
Shares Outstanding
Series A 60,635 62,952 64,562
Series B 37,805 38,045 38,204
(Bottom of page 30, left-hand margin -- picture of Pantene product with caption
"1992: FIRST PENETRATING, PRO-VITAMIN FORMULA FOR HAIR WITH SUPERIOR SHINE ")
Shares of the ESOP are allocated at original cost based on debt service
requirements, net of advances made by the Company to the trust. The fair value
of the Series A shares serves to reduce the Company's cash contribution required
to fund the profit sharing plan contributions earned. The Series B shares are
considered plan assets of the other retiree benefits plan. Dividends on all
preferred shares, net of related tax benefit, are charged to retained earnings.
The preferred shares held by the ESOP are considered outstanding from inception
for purposes of calculating diluted net earnings per common share.
9 | INCOME TAXES
Earnings before income taxes consist of the following:
Years Ended June 30
------------------------
1998 1997 1996
===============================================
United States $3,632 $3,232 $3,023
International 2,076 2,017 1,646
------------------------
5,708 5,249 4,669
The income tax provision consists of the following:
Years Ended June 30
------------------------
1998 1997 1996
========================
Current tax expense
U.S. Federal $ 996 $ 967 $ 776
International 918 805 413
U.S. State & Local 115 88 106
------------------------
2,029 1,860 1,295
Deferred tax expense
U.S. Federal 51 1 220
International & other (152) (27) 108
------------------------
(101) (26) 328
------------------------
Total 1,928 1,834 1,623
Taxes credited to shareholders' equity for the years ended June 30, 1998
and 1997 were $147 and $97, respectively. Undistributed earnings of foreign
subsidiaries that are considered to be reinvested indefinitely were $6,739 at
June 30, 1998.
The effective income tax rate was 33.8%, 34.9% and 34.8% in 1998, 1997 and
1996, respectively, compared to the U.S. statutory rate of 35%.
Deferred income tax assets and liabilities are comprised of the following:
June 30
-------------------
1998 1997
=======================================================
Current deferred tax assets $ 595 $ 661
Non-current deferred tax
assets (liabilities)
Depreciation (1,058) (1,031)
Postretirement benefits 435 475
Loss carryforwards 167 84
Other 28 (87)
(428) (559)
Included in the above are total valuation allowances of $177 and $113 in
1998 and 1997, respectively. The valuation allowance increased in 1998 primarily
due to the generation of additional net operating loss carryforwards.
10 | COMMITMENTS AND CONTINGENCIES
The Company has purchase commitments for materials, supplies, and property,
plant and equipment incidental to the ordinary conduct of business. In the
aggregate, such commitments are not at prices in excess of current market.
The Company is subject to various lawsuits and claims with respect to
matters such as governmental regulations, income taxes and other actions arising
out of the normal course of business. The Company is also subject to
contingencies pursuant to environmental laws and regulations that in the future
may require the Company to take action to correct the effects on the environment
of prior manufacturing and waste disposal practices. Accrued environmental
liabilities for remediation and closure costs at June 30, 1998 were $66, and in
management's opinion, such accruals are appropriate based on existing facts and
circumstances. Current year expenditures were not material.
While the effect on future results of these items is not subject to
reasonable estimation because considerable uncertainty exists, in the opinion of
management and Company counsel, the ultimate liabilities resulting from such
claims will not materially affect the consolidated financial position, results
of operations or cash flows of the Company.
(Bottom of page 31, right-hand margin -- picture of Asacol product with caption
"1992: ASACOL LAUNCHED FOR TREATMENT OF ULCERATIVE COLITIS ")
11 | SEGMENT INFORMATION
The Company has adopted FASB Statement No. 131, "Disclosures about Segments of a
Business Enterprise and Related Information." The Company is managed in four
operating segments: North America, which includes the United States and Canada;
Europe, Middle East and Africa; Asia; and Latin America.
Corporate operations include certain financing and employee benefits costs,
goodwill amortization, other general corporate income and expense, segment
eliminations and projects included in the Company's ongoing simplification and
standardization program, which includes costs for consolidation of selected
manufacturing facilities, re-engineering of manufacturing and distribution
processes, organization redesign and simplified product line-ups, as well as
gains and losses on sales of non-strategic brands and assets. Corporate assets
include primarily cash, investment securities and goodwill.
<TABLE>
<CAPTION>
Europe,
North Middle East Latin
America and Africa Asia America Corporate Total
=================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales 1998 $18,456 $11,835 $3,453 $2,640 $ 770 $37,154
1997 17,625 11,587 3,573 2,306 673 35,764
1996 17,230 11,458 3,881 2,173 542 35,284
---- ------- ------- ------ ------ ------- -------
Net Earnings 1998 2,474 1,092 174 274 (234) 3,780
1997 2,253 956 275 256 (325) 3,415
1996 1,953 793 273 219 (192) 3,046
---- ------- ------- ------ ------ ------- -------
Earnings Before Income Taxes 1998 3,789 1,540 266 329 (216) 5,708
1997 3,516 1,446 400 326 (439) 5,249
1996 3,055 1,137 433 236 (192) 4,669
---- ------- ------- ------ ------ ------- -------
Identifiable Assets 1998 11,063 5,998 2,499 1,519 9,887 30,966
1997 10,280 5,433 2,726 1,389 7,716 27,544
1996 10,382 5,853 2,770 1,270 7,455 27,730
---- ------- ------- ------ ------ ------- -------
Capital Expenditures 1998 1,433 686 266 174 - 2,559
1997 1,163 547 287 132 - 2,129
1996 1,080 602 322 175 - 2,179
---- ------- ------- ------ ------ ------- -------
Depreciation and Amortization 1998 755 374 174 97 198 1,598
1997 693 405 167 83 139 1,487
1996 633 380 143 48 154 1,358
---- ------- ------- ------ ------ ------- -------
Interest Expense 1998 - - - - 548 548
1997 - - - - 457 457
1996 - - - - 484 484
</TABLE>
Product Net Sales Information
The following is supplemental information on net sales by product groups,
aligned as follows:
Laundry and Cleaning -- dishcare, fabric conditioners, hard surface
cleaners and laundry.
Paper -- diapers, feminine protection, incontinence, tissue and towel, and
wipes.
Beauty Care -- cosmetics and fragrances, deodorants, hair care, and skin
care and personal cleansing.
Food and Beverage -- coffee, commercial services, juice, peanut butter,
shortening and oil, and snacks.
Health Care -- gastrointestinal, oral care, pharmaceuticals and respiratory
care.
<TABLE>
<CAPTION>
Laundry and Beauty Food and Health Corporate
Cleaning Paper Care Beverage Care & Other Total
============================================================================================
<C> <C> <C> <C> <C> <C> <C> <C>
1998 $11,099 $10,862 $7,160 $4,376 $2,849 $808 $37,154
1997 10,892 10,101 7,101 4,107 2,895 668 35,764
1996 10,683 10,161 6,916 4,066 2,939 519 35,284
</TABLE>
(Bottom of page 32, left-hand margin -- picture of Macrobid product with caption
"1992: MACROBID LAUNCHED AS A URINARY TRACT ANTI-INFECTIVE ")
<TABLE>
12 | QUARTERLY RESULTS (UNAUDITED)
<CAPTION>
Quarters Ended
------------------------------------------------------ Total
Sept. 30 Dec. 31 Mar. 31 June 30 Year
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Sales 1997-98 $9,355 $9,641 $8,881 $9,277 $37,154
1996-97 8,903 9,142 8,771 8,948 35,764
------- ------ ------ ------ ------ -------
Operating Income 1997-98 1,739 1,688 1,516 1,112 6,055
1996-97 1,547 1,521 1,383 1,037 5,488
------- ------ ------ ------ ------ -------
Net Earnings 1997-98 1,087 1,046 961 686 3,780
1996-97 979 944 881 611 3,415
------- ------ ------ ------ ------ -------
Basic Net Earnings Per Common Share 1997-98 .79 .76 .69 .50 2.74
1996-97 .70 .67 .63 .43 2.43
------- ------ ------ ------ ------ -------
Diluted Net Earnings Per Common Share 1997-98 .73 .71 .65 .47 2.56
1996-97 .65 .63 .59 .41 2.28
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Millions of Dollars Except Per Share Amounts
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Sales 37,154 35,764 35,284 33,482 30,385
Operating Income 6,055 5,488 4,815 4,244 3,670
Net Earnings 3,780 3,415 3,046 2,645 2,211
Net Earnings Margin 10.2% 9.5% 8.6% 7.9% 7.3%
Basic Net Earnings Per Common Share 2.74 2.43 2.14 1.85 1.54
Diluted Net Earnings Per Common Share 2.56 2.28 2.01 1.74 1.45
Dividends Per Common Share 1.01 .90 .80 .70 .62
Research and Development Expense 1,546 1,469 1,399 1,304 1,162
Advertising Expense 3,704 3,466 3,254 3,284 2,996
Total Assets 30,966 27,544 27,730 28,125 25,535
Capital Expenditures 2,559 2,129 2,179 2,146 1,841
Long-Term Debt 5,765 4,143 4,670 5,161 4,980
Shareholders' Equity 12,236 12,046 11,722 10,589 8,832
</TABLE>
(Bottom of page 33, right-hand margin -- picture of Oil of Olay product with
caption "1994: FIRST BODY WASH WITH PUFF THAT CLEANS AND CONDITIONS YOUR SKIN")
IF...
(bullet) You need help with your account or if you need automated access to your
account
(bullet) You are interested in our Certificate Safekeeping service
(bullet) You need to change an address or discontinue duplicate mailings
(bullet) You want to arrange for direct deposit of dividends (bullet) A stock
certificate is lost, stolen or destroyed (bullet) You want to
participate in our Shareholder Investment Program...
CONTACT P&G'S SHAREHOLDER SERVICES
OFFICE IN CINCINNATI.
Call: 1-800-742-6253
1-513-983-3034 (outside the U.S.)
Write: The Procter & Gamble Company
Shareholder Services Department
P.O. Box 5572
Cincinnati, Ohio 45201-5572
Financial information is available 24 hours a day.
Just call 1-800-764-7483.
You can also visit us on the World Wide Web.
Our address is www.pg.com/investor
COMMON STOCK PRICE RANGE AND DIVIDENDS
Price Range Dividends
------------------------------- ----------------
1997-98 1996-97 1997-98 1996-97
---------------------------------------------------
Quarter Ended High Low High Low
=====================================================================
September 30 $77.56 $64.06 $48.75 $41.19 $.2525 $.2250
December 31 83.44 62.00 55.50 45.75 .2525 .2250
March 31 87.88 77.31 64.81 51.81 .2525 .2250
June 30 92.50 80.19 71.94 56.63 .2525 .2250
CORPORATE HEADQUARTERS
The Procter & Gamble Company
P.O. Box 599
Cincinnati, Ohio 45201-0599
TRANSFER AGENT/SHAREHOLDER SERVICES
The Procter & Gamble Company
Shareholder Services Department
P.O. Box 5572
Cincinnati, Ohio 45201-5572
REGISTRAR
PNC Bank, N.A.
P.O. Box 1198
Cincinnati, Ohio 45201-1198
EXCHANGE LISTING
New York, Cincinnati, Amsterdam, Paris, Basle,
Geneva, Lausanne, Zurich, Frankfurt, Brussels, Tokyo
SHAREHOLDERS OF COMMON STOCK
There were 272,723 Common Stock shareholders of record, including participants
in the Shareholder Investment Program, as of July 24, 1998.
FORM 10-K
Beginning in October 1998, shareholders may obtain a copy of the Company's 1998
report to the Securities and Exchange Commission on Form 10-K by going to P&G's
investor Web site at www.pg.com/investor or by calling us at 1-800-742-6253.
This information is also available at no charge by sending a request to
Shareholder Services at the address above.
SHAREHOLDERS' MEETING
The next annual meeting of shareholders will be held on Tuesday, October 13,
1998. A full transcript of the meeting will be available from Linda D. Rohrer,
Assistant Secretary, at a cost of $10. Ms. Rohrer can be reached at One P&G
Plaza, Cincinnati, Ohio 45202-3315.
Exhibit 20
----------
Press Release Dated September 9, 1998
FOR IMMEDIATE RELEASE
P&G PURSUES GREATEST GROWTH EVER
NEW GLOBAL ORGANIZATION DESIGN TO DRIVE BIGGER IDEAS
TO WORLD MARKETS FASTER
* * *
NAMES JAGER CHIEF EXECUTIVE, PEPPER CHAIRMAN, EFFECTIVE JAN. 1, 1999
CINCINNATI: Sept. 9, 1998: Procter & Gamble today announced far-reaching
changes to its organization structure, work processes, culture and reward
structure, to accelerate the company's growth by driving bigger, more stretching
goals and plans, more breakthrough innovations and greater speed throughout its
operation.
"We intend to accelerate sales and profit growth and returns to our
shareholders by increasing our capability to create and build large, profitable,
leadership brands globally, through greater stretch, innovation and speed," said
P&G Chairman and Chief Executive John Pepper. "We have been headed in the
direction of operating as a global company for many years, and the changes we're
making will now enable us to fulfill this goal."
PLAN GLOBALLY, WIN LOCALLY
There are five key elements of the initiative, called Organization 2005:
(bullet) Global Business Units (GBU) - P&G will move from four business units
based on geographic regions to seven Global Business Units based on
product lines. This change will drive greater innovation and speed by
centering strategy and profit responsibility globally on brands, rather
than on geographies.
(bullet) Market Development Organizations (MDO) - P&G will establish eight
Market Development Organization regions. MDOs will maximize the
business potential of P&G's entire portfolio in each local market by
developing innovative local market strategies, new strategic alliances
and distribution channels, superior retail customer relationships and
external relations programs.
"There is a BIG difference between selling products in 140 countries around
the world and truly planning and managing lines of business on a global basis,"
Pepper said. "We believe this difference can be measured, over time, in billions
of dollars in sales - for P&G and its retail customers - and we're organizing
ourselves to take better advantage of this opportunity.
"The key to operating globally is to be global and local at the same time.
By marrying the strategies, innovation and brands of Global Business Units with
the superior marketplace understanding and capability of the Market Development
Organizations, we accomplish this," continued Pepper. "We will be able to
deliver bigger innovations to consumers faster, better serve our global and
local customers, and build stronger market partnerships."
(bullet) Global Business Services (GBS) - P&G will establish a single, global
organization whose mission is to provide essential business services,
such as accounting, employee benefits and payroll, order management,
and information and technology services to the rest of the company.
GBS will enable P&G to achieve significant economies of scale, while
improving overall quality and speed of these services.
(bullet) Corporate Functions - Many individuals currently in corporate staff
roles will now do similar work, but will be realigned into GBUs, MDOs,
or GBS. The remaining corporate staff will focus on developing new,
cutting-edge functional knowledge and on transferring this rapidly
around the world. The Corporate Functions also will continue to provide
corporate services, such as financial reporting and shareholder
communications.
(bullet) Changing culture - P&G will overhaul reward systems, training programs
and other aspects of the corporate culture to create an environment
that produces bolder, more stretching goals and plans, bigger
innovations, and greater speed.
"Taken together, these changes position us for the most productive period
of growth in our 161-year history," Pepper said.
A list of the new organization units and the officers who will lead them is
attached.
JAGER NAMED CEO, EFFECTIVE JANUARY 1
P&G also announced today that the Company's Board of Directors has elected
Durk I. Jager, currently president and chief operating officer, to become
president and chief executive on January 1. Pepper will continue as chairman
from January until Sept. 1, 1999, to see the organization through the transition
to the new design. At that point, Jager will also assume the chairmanship.
Pepper will retire from the Company and, consistent with Company tradition, will
become chairman of the executive committee of the Board, succeeding Edwin L.
Artzt, who will retire from the Board.
"Durk Jager personifies the essential qualities that will be critical to
realizing the goals and vision we are pursuing," Pepper said. "He is an
outstanding strategic thinker and a passionate advocate for greater innovation
and speed. He has led truly fundamental strategic changes, such as Efficient
Consumer Response and simplification and standardization, that have had an
impact not only on P&G, but also have reshaped markets and changed the rules of
the game.
"I recommended to the Board of Directors that Durk assume this role in
January 1999 because of my belief that this major organization change should be
led from the beginning by the team who will be leading it in the years ahead.
Durk is the right person to lead the company at this time," Pepper said.
"I am very committed to the changes we are announcing today and honored by
the opportunity to help lead them," said Jager. "I believe they will enable P&G
to reach higher, get more out of our innovative capacity, and profit from
greater speed.
"It is also an honor to succeed John Pepper," continued Jager. "This
Company would not be nearly as strong or as global without John Pepper's
leadership and extraordinary commitment to P&G people. Under his leadership,
P&G's earnings per share has grown an average of 14 percent annually, and total
shareholder return has averaged 37 percent annually. I find great assurance
knowing we will continue to benefit from John's leadership through the
transition, and beyond," Jager said.
TRANSITION PLAN
The GBS leadership will formally assume their responsibilities on October
1. GBU, MDO and Corporate Function leaders will formally assume their new
responsibilities on Jan. 1, 1999. In addition, virtually all will maintain their
current responsibilities through July 1, 1999, to ensure continuity during the
transition. Effective July 1, 1999, the Company will officially begin managing
and reporting the business on the new basis.
FINANCIAL IMPACT
The Company said it anticipates there will be costs associated with this
reorganization that go beyond its current program of ongoing restructuring.
Design work remains to be completed over the next several months to better
determine the scope of these costs and related future profit benefits. The
company expects to provide an update late this fiscal year.
GREATER GROWTH AHEAD
Pepper concluded: "We've often expressed the view that as good as our
results have been, they are not as good as the quality and capability of Procter
& Gamble people would lead us to expect. I am confident that this change, and
the men and women who will lead it, will position Procter & Gamble for the
greatest growth in our Company's history."
Procter & Gamble markets approximately 300 brands to nearly five billion
consumers in over 140 countries. They include Tide, Ariel, Crest, Pantene Pro-V,
Always, Whisper, Pringles, Pampers, Oil of Olay, Vicks and Didronel. Based in
Cincinnati, Ohio, USA, P&G has on the ground operations in over 70 countries and
employs more than 110,000 employees worldwide.
* * *
PR Contacts: ON 9/9 ALL MEDIA CALLS TO 513/983-5489
AFTER 9/9: Simon Denegri -513/983-9332; Wendy Jacques-513/983-3889
Bios and photos available at http://www.pg.com/news
PROCTER & GAMBLE ORGANIZATION LEADERS, TITLES
GLOBAL BUSINESS UNITS
Unit Leader Title
Baby Care (Cincinnati) Mark Ketchum President-Global Baby Care
Beauty Care (Cincinnati) A. G. Lafley President-Global Beauty
Care and North America
Fabric & Home Care (Brussels) Wolfgang Berndt President-Global Fabric &
Home Care and Europe
Feminine Protection (Kobe) R. Kerry Clark President-Global Feminine
Protection and Asia
Food & Beverage (Caracas) Jorge Montoya President-Global Food &
Beverage and Latin America
Health Care & Corporate New Bruce Byrnes President-Global Health Care
Ventures (Cincinnati) and Corporate New Ventures
Tissues & Towel (Cincinnati) Gary Martin President-Global Tissues &
Towel and Global Product
Supply Officer
MARKET DEVELOPMENT ORGANIZATION REGIONS
Region Leader Title
North America (ex. Mexico) A. G. Lafley President-Global Beauty Care
and North America
Central & Eastern Europe Herbert Schmitz President-Central & Eastern
Europe
Middle East/Africa/General Fuad Kuraytim President-Middle East,
Export (MEAGE) Africa & General Export
Western Europe Toni Belloni President-Western Europe
ASEAN/India/Australasia Martin Nuechtern President-ASEAN, Australasia
& India
Japan/Korea Robert McDonald Vice President-Japan/Korea
Greater China Dimitri President-Greater China
Panayotopoulos
Latin America Jorge Montoya President-Global Food &
Beverage and Latin America
GLOBAL BUSINESS SERVICES
Leader Title
Michael Power Vice President
CORPORATE FUNCTIONS
Function Leader Title
Corporate Customer Business Steve David Global Customer Business
Development Development Officer
Corporate Finance Clayt Daley Chief Financial Officer
Corporate Human Resources Dick Antoine Global Human Resources
Officer
Corporate Information Todd Garrett Chief Information Officer
Technology
Corporate Legal Jim Johnson Chief Legal Officer
Corporate Marketing/Market Bob Wehling Global Marketing, Market
Research/ Government Research and Government
Relations Relations Officer
Corporate Product Supply Gary Martin President-Global Tissues &
Towel and Global Product
Supply Officer
Corporate Public Affairs Charlotte Otto Global Public Affairs
Officer
Corporate Research & Gordon Brunner Chief Technology Officer
Development
EXHIBIT (21)
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES
=============================================
Subsidiaries of the Registrant
------------------------------
The Procter & Gamble Company [Ohio]
Arbora Capital, S.A. [Spain]
Arbora Holding, S.A. [Spain]
Ausonia Higiene, S.L. [Spain]
Ausonia Portuguesa-Productos de Higiene, S.A. [Portugal]
Richvest B.V. [Netherlands]
The Dover Wipes Company [Ohio]
The Folger Coffee Company [Ohio]
P&G Consultoria E Servicos Ltda. [Brazil]
FPG Oleochemicals Sdn. Bhd. [Malaysia]
Giorgio Beverly Hills, Inc.[Delaware]
Industria de Concentrados Crush Limitada [Uruguay]
Inversiones Procter & Gamble de Venezuela, C.A. [Venezuela]
Inversiones Industrias Mammi, C.A. [Venezuela]
Midway Holdings Ltd. [Cayman Islands]
Marcvenca Inversiones, C.A. [Venezuela]
Procter & Gamble de Venezuela, C.A. [Venezuela]
Jetco Chemicals, Inc. [Texas]
Karm, S.A. [Liechtenstein]
Millstone Coffee, Inc. [Washington]
Noxell Corporation [Maryland]
Max Factor & Co. [Delaware]
Noxell (Barbados) Limited [Barbados]
Noxell (Panama) S.A. [Panama]
Noxell (Thailand) Limited [Thailand]
Noxell de Venezuela, C.A. [Venezuela]
Procter & Gamble do Brasil S.A. [Brazil]
Phebo do Nordeste S/A [Brazil]
Procter & Gamble Quimica S.A. [Brazil]
Procter & Gamble A.G. [Switzerland]
Betrix (Schweiz) AG [Switzerland]
Detergent Products A.G. [Switzerland]
Modern Industries Company - Dammam [Saudi Arabia]
Modern Industries Company - Jeddah [Saudi Arabia]
Modern Products Company - Jeddah [Saudi Arabia]
Deurocos Cosmetic AG [Switzerland]
Moroccan Modern Industries [Morocco]
Comunivers sa [Morocco]
Procter & Gamble Austria GmbH [Austria]
Eurocos Cosmetic Warenvertrieb GmbH [Austria]
The Procter & Gamble Company of South Africa (Proprietary) Limited [S. Africa]
Procter & Gamble South Africa Proprietary Limited [South Africa]
Procter & Gamble Development Company A.G. Glarus [Switzerland]
Procter & Gamble (East Africa) Limited [Kenya]
Procter & Gamble Egypt [Egypt]
Procter & Gamble (Egypt) Industrial and Commercial Company [Egypt]
Procter & Gamble (Egypt) Manufacturing Company [Egypt] (Partnership)
Procter & Gamble Hellas A.E. (Chemical Industries) [Greece]
Procter & Gamble-Hutchison Ltd. [Hong Kong]
Procter & Gamble (Chengdu) Ltd. [PRC]
Procter & Gamble (China) Ltd. [PRC]
Procter & Gamble Detergent (Guangzhou) Ltd. [PRC]
Procter & Gamble (Guangzhou) Ltd. [PRC]
Procter & Gamble Oral Care (Guangzhou) [China]
Procter & Gamble Lonkey (Guangzhou) Ltd. [PRC]
Procter & Gamble Lonkey (Shaoguan) Ltd. [PRC]
Procter & Gamble Manufacturing (Tianjin) Co. Ltd. [PRC]
Procter & Gamble Manufacturing Detergent (Tianjin) Co. Ltd. [PRC]
Procter & Gamble Manufacturing Paper (Tianjin) Co. Ltd. [PRC]
Procter & Gamble Panda Detergent Co. Ltd Beijing [PRC]
Procter & Gamble Paper (Guangzhou) Ltd. [PRC]
Procter & Gamble Personal Cleansing (Tianjin) Ltd. [PRC]
Procter & Gamble Jamaica Ltd. [Jamaica]
The Procter & Gamble Manufacturing Company of Lebanon, S.A.L.[Lebanon]
Procter & Gamble Marketing A.G. [Switzerland]
Procter & Gamble Maroc [Morocco]
Procter & Gamble Nigeria Limited [Nigeria]
Procter & Gamble Pakistan (Private) Limited [Pakistan]
Procter & Gamble de Panama, S.A. [Panama]
Procter & Gamble Tissues AG [Switzerland]
Procter & Gamble (Yemen) Ltd [Yemen]
Societe Immobiliere Les Colombettes, S.A. [Switzerland]
Procter & Gamble Asia Pacific Ltd. [Hong Kong]
Procter & Gamble Asia Pacific Ltd. Manila Regional Headquarters [Philippines]
Procter & Gamble do Brazil, Inc. [Delaware]
Procter & Gamble do Brasil & Cia [Brazil] (Partnership)
The Procter & Gamble Cellulose Company [Delaware]
Procter & Gamble Chile, Inc. [Ohio]
Procter & Gamble Colombia S.A. [Colombia]
The Procter & Gamble Commercial Company [Ohio]
PROGAM Leasing, Inc. [Puerto Rico]
Procter & Gamble del Peru S.A. [Peru]
Procter & Gamble Commercial de Cuba, S.A. [Cuba]
The Procter & Gamble Distributing Company [Ohio]
Procter & Gamble FSC (Barbados) Inc. [Barbados]
Procter & Gamble Eastern Europe, Inc. [Ohio]
Detergenti SA Timisoara [Romania]
Hyginett KFT [Hungary]
Novomoskovskbytkhim [Russia]
P&G Balkans, Inc. [Ohio]
P&G C&CA, Inc. [Ohio]
Procter & Gamble Bulgaria Ltd. [Bulgaria]
Procter & Gamble C&EE Investment, Inc. [Ohio]
Procter & Gamble Central &Eastern Europe GmbH [Germany]
Procter & Gamble Hungary Wholesale Trading Partnership (KKT) [Hungary]
Alvorada BT [Hungary]
Beta BT [Hungary]
Beauty-Care Beauty-Treatment Product Distribution Foreign Trade Ltd.[Hungary]
Carlos BT [Hungary]
Cleveland Export-Import Trading Ltd. [Hungary]
Diego BT [Hungary]
Elysee BT [Hungary]
Ferraris BT [Hungary]
Frank BT [Hungary]
Helga BT [Hungary]
Olga BT [Hungary]
Pal BT [Hungary]
Pannonia Trading Ltd. [Hungary]
Shampoo-Trade Export Import Trading Ltd. [Hungary]
Stan BT [Hungary]
Transylvania Trading Ltd. [Hungary]
Varadi BT [Hungary]
Procter & Gamble Kazakhstan [Kazakhstan]
Procter & Gamble Kereskedelmi BT [Hungary]
Procter & Gamble Limited Liability Company [Uzbekistan]
Procter & Gamble Marketing & Commercial Activities d.o.o. [Slovenia]
Procter & Gamble Marketing and Services d.o.o. [Yugoslavia]
Procter & Gamble Marketing Latvia Ltd. [Latvia]
Procter & Gamble Marketing Romania SRL [Romania]
Procter & Gamble Manufacturing Romania SRL [Romania]
Procter & Gamble Operations Polska - Spolka Akcyjna [Poland]
Procter & Gamble Polska Sp. zo.o [Poland]
Procter & Gamble O.O.O. [Russia]
Procter & Gamble Spol. s.r.o. (Ltd) [Slovak Republic]
Procter & Gamble Ukraine (Ukraine)
Procter & Gamble Rakona Ltd. [Czech Republic]
Procter & Gamble European Technical Center N.V. [Belgium]
P&G Holding B.V. [Netherlands]
P&G Tissues B.V. [Netherlands]
Procter & Gamble Nederland B.V. [Netherlands]
Richardson-Vicks B.V. [Netherlands]
Richardson-Vicks Overseas Finance N.V. [Netherlands Antilles]
Procter & Gamble European Supply Company N.V. [Belgium]
Procter & Gamble Belgium BVBA [Belgium]
Procter & Gamble Eurocor N.V. [Belgium]
Procter & Gamble Europe BVBA[ Belgium]
Procter & Gamble Manufacturing Belgium BVBA [Belgium]
Procter & Gamble Services Company S.A. [Belgium]
Procter & Gamble Far East, Inc. [Ohio]
Max Factor K.K. [Japan]
American Cosmetics K.K. [Japan]
Betrix Japan K.K. [Japan]
Max Factor Hanbai K.K. [Japan]
P&G Indochina [Vietnam]
Procter & Gamble Asia Pte. Ltd. [Singapore]
Procter & Gamble Distribution Company Limited [India]
Procter & Gamble Holdings Singapore Pte. Ltd. [Singapore]
Procter & Gamble India Holdings, Inc. [Ohio]
Procter & Gamble Bangladesh Private Ltd. [Bangladesh]
Procter & Gamble Home Products Limited [India]
Procter & Gamble Sri Lanka Private Ltd. [Sri Lanka]
Procter & Gamble Korea Inc. [Korea]
Procter & Gamble NPD, Inc. [Ohio]
Procter & Gamble Taiwan Limited [Taiwan]
Procter & Gamble Technology (Beijing) Co., Ltd. [PRC]
Procter & Gamble (Vietnam) Ltd. [Vietnam]
Procter & Gamble FED, Inc. [Delaware]
Procter & Gamble Finance Corporation [Canada]
The Procter & Gamble Global Finance Company [Ohio]
Procter & Gamble Holding S.A. [Argentina]
Productos Sanitarios S.A. [Argentina]
Topsy S.A. [Argentina]
Procter & Gamble Inc. [Ontario, Canada]
Crest Toothpaste Inc. [Canada]
Procter & Gamble Financial Services [Ireland]
Procter & Gamble Industrial e Comercial Ltda. [Brazil]
Procter & Gamble Mississauga Real Estate Company [Canada]
Shulton de Venezuela, C.A. [Venezuela]
Procter & Gamble Investment Corporation [Canada]
Procter & Gamble Italia, S.p.A. [Italy]
Rapik S.p.A. [Italy]
Procter & Gamble Limited [U.K.]
European Beauty Products (U.K.) Limited [U.K.]
Max Factor & Co. (U.K.) Ltd. [Bermuda]
Max Factor Limited [U.K.]
Eurocos Ltd [U.K.]
Gala Cosmetics International Limited [U.K.]
Komal Manufacturing Chemists Ltd. [India]
Gala of London Limited [U.K.]
Girl Cosmetics Ltd. (U.K.)
Max Factor Manufacturing Ltd. [U.K.]
Procter & Gamble (Enterprise Fund) Limited [U.K.]
Procter & Gamble (Health & Beauty Care) Limited [U.K.]
Giorgio Beverly Hills (Europe) Ltd. [U.K.]
Noxell Limited [U.K.] [453]
Procter & Gamble (Cosmetics and Fragrances) Limited [U.K.]
Procter & Gamble Product Supply (U.K.) Limited [U.K.]
Procter & Gamble Technical Centers Limited [U.K.]
Procter & Gamble U.K. [U.K.]
Shulton (Great Britain) Ltd. [U.K.]
Colfax Laboratories (India) Ltd. [India]
Tambrands Limited [U.K.]
Tambrands (Continental) Ltd. [U.K.]
Tambrands Investments Ltd. (U.K.) [U.K.]
Tambrands Ireland Limited [Ireland]
Procter & Gamble Distributing Limited [U.K.]
Procter & Gamble Health and Beauty Care-Europe Limited [U.K.]
Procter & Gamble Laundry & Cleaning Products Limited [U.K.]
Procter & Gamble (NTC) Limited [U.K.]
Procter & Gamble Pharmaceuticals U.K., Limited [U.K.]
Procter & Gamble (Properties) Ltd. [U.K.]
Vidal Sassoon Holdings Ltd. [U.K.]
The Procter & Gamble Manufacturing Company [Ohio]
Procter & Gamble Manufacturing (Thailand) Limited [Thailand]
The Procter & Gamble Paper Products Company [Ohio]
Procter & Gamble Philippines, Inc. [Philippines]
Progam Realty & Development Corporation [Philippines]
Procter & Gamble Productions, Inc. [Ohio]
Fountain Square Music Publishing Co., Inc. [Ohio]
Liberty Street Music Publishing Company, Inc. [Ohio]
Riverfront Music Publishing Co., Inc. [Ohio]
Sycamore Productions, Inc. [Ohio]
Procter & Gamble S.A. [Chile]
Procter & Gamble S.A. [France]
Fonciere des 96 et 104 Avenue Charles de Gaulle [France]
Laboratoire Lachartre SNC [France]
S. H. Equateur S.A.S. [France]
Procter & Gamble Amiens SNC [France]
Procter & Gamble Brionne S.N.C. [France]
Laboratoires Sofabel S.A.R.L. [France]
Procter & Gamble France S.N.C.[France]
Procter & Gamble MSV SAS [France]
Procter & Gamble Neuilly S.A.R.L. [France]
Procter & Gamble Orleans SAS [France]
Procter & Gamble Pharmaceuticals France S.A. [France]
Procter & Gamble Scandinavia, Inc. [Ohio]
Procter & Gamble Hygien AB [Sweden]
Procter & Gamble Hygien A/S [Norway]
Procter & Gamble Hygien OY [Finland]
Procter & Gamble S.p.A. [Italy]
Eczacibasi Yatirim Holding Ortakligi A.S. [Turkey]
Fater S.p.A. [Italy]
Fameccanica Data S.p.A. [Italy]
Procter & Gamble Distribution Company (Europe) N.V. [Belgium]
Procter & Gamble Tissues Italia S.p.A. [Italy]
Procter & Gamble Tuketim Mallari Sanayii Ltd. [Turkey]
Progasud S.p.A. [Italy]
Sanipak Saglik Urunleri Sanayi Ve Ticaret A.S. [Turkey]
Eczacibasi Procter & Gamble Dagitim Ve Satis AS [Turkey]
Promotora de Bienes y Valores, S.A. de C.V. [Mexico]
Procter & Gamble de Mexico, S.A. de C.V. [Mexico]
Max Factor Mexicana, S.A. de C.V. [Mexico]
P.T. Procter & Gamble Home Products Indonesia [Indonesia]
REVAC 2 Corp. [Delaware]
Richardson-Vicks Inc. [Delaware]
Celtic Insurance Company Limited [Bermuda]
Industrias Modernas, S.A. [Guatemala]
Olay Company, Inc. [Delaware]
P&G do Brasil Comercial Ltda. [Brazil]
Procter & Gamble Australia Proprietary Limited [Australia]
Procter & Gamble (NBD) Pty. Ltd. [Australia]
Procter & Gamble Espana S.A. [Spain]
Procter & Gamble Portugal S.A. (Portugal)
Neoblanc-Productos de Higiene e Limpeza Lda. [Portugal]
Procter & Gamble GmbH [Germany]
Betrix Cosmetic GmbH [Germany]
Blendax Dental Vertriebs-GmbH [Germany]
Blendax GmbH [Germany]
Blendax Unterstutzungskasse GmbH [Germany]
Buscher GmbH [Germany]
Cover Girl Cosmetic GmbH [Germany]
Eurocos Cosmetic GmbH [Germany]
EURO-Juice G.m.b.H. Import und Vertrieb [Germany]
Euro-Juice y Compania, S. en C. [Spain]
Herve Leger Parfums GmbH [Germany]
Procter & Gamble European Service GmbH [Germany]
Procter & Gamble GmbH & Co. Manufacturing OHG [Germany]
Noris Transport GmbH [Germany]
Papierhygiene GmbH [Germany]
Tempo AG [Switzerland]
Bess Hygiene AG [Switzerland]
Unterstutzungskasse der Vereinigte Papierwerke AG Nurnberg e.V. [Germany]
Procter & Gamble Pharmaceuticals-Germany GmbH [Germany]
Rohm Pharma GmbH [Germany]
Egnaro Arzneimittel GmbH [Germany]
Rohm Pharma GmbH Wien [Austria]
Rolf H. Dittmeyer GmbH [Germany]
SCS Sales + Cosmetic Service GmbH [Germany]
Shulton GmbH [Germany]
Ssangyong Paper [Korea]
TRAPOFA Leonhard-Speditions GmbH I.L. [Germany]
Procter & Gamble Health Products, Inc. [Delaware]
Procter & Gamble Hong Kong Limited [Hong Kong]
Procter & Gamble India Limited [India]
Procter & Gamble Interamericas Inc. [Delaware]
Alejandro Llauro E Hijos S.A.I.C. [Argentina]
Compania Quimica S.A. [Argentina]
Loreto y Pena Pobre, S.A. de C.V. [Mexico]
Procter & Gamble Interamericas de Costa Rica, S.A. [Costa Rica]
Procter & Gamble Interamericas de El Salvador, S.A. de C.V. [El Salvador]
Procter & Gamble Interamericas de Guatemala, S.A. [Guatemala]
Procter & Gamble Interamericas de Nicaragua, S.A. [Nicaragua]
Surfac S.A. [Peru]
Procter & Gamble (Malaysia) Sdn. Berhad [Malaysia]
Procter & Gamble Pharmaceuticals, Inc. [Ohio]
Norwich Overseas, Inc. [Delaware]
Procter & Gamble Pharmaceuticals Australia Pty. Limited [Australia]
Procter & Gamble Pharmaceuticals Canada, Inc. [Canada]
S.A. Procter & Gamble Pharmaceuticals N.V. [Belgium]
Procter & Gamble Pharmaceuticals Puerto Rico, Inc. [Delaware]
Procter & Gamble (Singapore) Pte. Ltd. [Singapore]
P. T. Procter & Gamble Indonesia [Indonesia]
Richardson-Vicks do Brasil Quimica e Farmaceutica S.A. [Brazil]
Richardson-Vicks Limited [Thailand]
Richardson-Vicks Real Estate Inc. [Ohio]
R-V Chemicals Holdings Ltd. [Ireland]
Procter & Gamble (Ireland) Limited [Ireland]
Procter & Gamble (Manufacturing) Ireland Limited [Ireland]
Vick Nigeria Limited [Nigeria]
Rosemount Corporation [Delaware]
Anjali Corporation [Delaware]
Kangra Valley Enterprises Ltd. [Delaware]
The Mandwa Company, Inc. [Delaware]
Ramalayam Investments Company [Delaware]
Yamuna Investments Company [Delaware]
The Malabar Company [Delaware]
Temple Trees [India]
Procter & Gamble Ecuador Compania Anonima [Ecuador]
Sacoma, S.A. [Argentina]
Shulton, Inc. [New Jersey]
Shulton S.A. [Guatemala]
Shulton (New Zealand) Limited [New Zealand]
Shulton (Thailand) Ltd. [Thailand]
Sundor Brands Inc. [Florida]
Sundor Canada Inc. [Delaware]
Sundor Brands Limited [U.K.]
Sycamore Investment Company [Ohio]
Thomas Hedley & Co. Limited [U.K.]
Vick International Corporation [Delaware]
Tambrands Inc. [Delaware]
Shenyang Tambrands Company Limited [PRC]
Tambrands Industria e Comercia Ltda. [Brazil]
Tambrands de Venezuela, C.A. [Venezuela]
Tambrands Polska Sp.z.o.o. [ Poland]
Tambrands Ukraine Ltd. [Ukraine]
Tambrands S.A. [Brazil]
Industrial Calentation Services (Pty.) Ltd. [S. Africa]
Tambrands South Africa (Pty.) Ltd. [S. Africa]
Tambrands Properties (Pty.) Ltd. [S. Africa]
Tambrands AG [Switzerland]
Tambrands Canada Inc. [Canada]
Tambrands France S.A. [France]
Tambrands GmbH [Germany]
ZAO Tambrands [Russia]
Adminser S.A. [Mexico]
Tambrands Dosmil, S.A. de C.V. [Mexico]
[ ] Brackets indicate state or country of incorporation and do not form part of
corporate name.
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
report dated July 30, 1998, incorporated by reference in this Annual Report on
Form 10-K of The Procter & Gamble Company for the year ended June 30, 1998.
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. 33-49289 on Form S-8 for The Procter & Gamble 1992 Stock Plan;
4. Registration Statement No. 33-47656 on Form S-8 for The Procter & Gamble
International Stock Ownership Plan;
5. Registration Statement No. 33-49111 on Form S-3 for The Procter & Gamble
Stock Investment Program;
6. Registration Statement No. 33-50273 on Form S-8 for The Procter & Gamble
Commercial Company Employees' Savings Plan;
7. Registration Statement No. 33-51469 on Form S-8 for The Procter & Gamble
1993 Non-Employee Directors' Stock Plan;
8. Registration Statement No. 333-03821 on Form S-3 for The Procter & Gamble
Company Debt Securities and Warrants;
9. Registration Statement No. 333-05715 on Form S-8 for The Procter & Gamble
Profit Sharing Trust and Employee Stock Ownership Plan;
10. Amendment No. 1, Post-Effective Amendment No. 1 to Registration Statement
No. 33-59257 on Form S-3 for The Procter & Gamble Shareholder Investment
Program;
11. Registration Statement No. 333-14381 on Form S-8 for Profit Sharing
Retirement Plan of The Procter & Gamble Commercial Company;
12. Registration Statement No. 333-14387 on Form S-8 for Giorgio Employee
Savings Plan;
13. Registration Statement No. 333-14389 on Form S-8 for Procter & Gamble
Pharmaceuticals Savings Plan;
14. Registration Statement No. 333-14391 on Form S-8 for Richardson-Vicks
Savings Plan;
15. Registration Statement No. 333-14397 on Form S-8 for Procter & Gamble
Subsidiaries Savings Plan;
16. Registration Statement No. 333-14395 on Form S-8 for Procter & Gamble
Subsidiaries Savings and Investment Plan;
17. Registration Statement No. 333-21783 on Form-8 for The Procter & Gamble
1992 Stock Plan (Belgian Version);
18. Registration Statement No. 333-30949 on Form S-3 for The Procter & Gamble
Company Debt Securities and Warrants;
19. Registration Statement No. 333-37905 on Form S-8 for The Procter & Gamble
Future Shares Plan;
20. Registration Statement No. 333-51213 on Form S-8 for Group Profit Sharing,
Incentive and Employer Contribution Plan (France);
21. Registration Statement No. 333-51219 on Form S-8 for Procter & Gamble
Ireland Employees Share Ownership Plan;
22. Registration Statement No. 333-51221 on Form S-8 for Employee Stock
Purchase Plan (Japan);
23. Registration Statement No. 333-51223 on Form S-8 for Savings and Thrift
Plan (Saudi Arabia); and
24. Registration Statement No. 333-51225 on Form S-8 for The Procter & Gamble
UK Matched Savings Share Purchase Plan.
DELOITTE & TOUCHE LLP
September 9, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR
ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000080424
<NAME> THE PROCTER & GAMBLE COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,549
<SECURITIES> 857
<RECEIVABLES> 2,781
<ALLOWANCES> 0
<INVENTORY> 3,284
<CURRENT-ASSETS> 10,557
<PP&E> 20,152
<DEPRECIATION> 7,972
<TOTAL-ASSETS> 30,966
<CURRENT-LIABILITIES> 9,250
<BONDS> 5,765
0
1,821
<COMMON> 1,337
<OTHER-SE> 9,078
<TOTAL-LIABILITY-AND-EQUITY> 30,966
<SALES> 37,154
<TOTAL-REVENUES> 37,154
<CGS> 21,064
<TOTAL-COSTS> 10,035
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 548
<INCOME-PRETAX> 5,708
<INCOME-TAX> 1,928
<INCOME-CONTINUING> 3,780
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,780
<EPS-PRIMARY> 2.74
<EPS-DILUTED> 2.56
</TABLE>
Exhibit (99.1)
--------------
Directors and Officers Liability Policy
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.
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
TABLE OF CONTENTS
Clause Page
1. Insuring Clause......................................................
2. Definitions..........................................................
3. Exclusions...........................................................
4. Appeals..............................................................
5. Arbitration..........................................................
6. Assistance and Cooperation...........................................
7. Automatic Extension..................................................
8. Cancellation.........................................................
9. Changes and Assignments..............................................
10. Payment of LOSS......................................................
11. Currency.............................................................
12. Headings.............................................................
13. INSUREDS' Reporting Duties...........................................
14. LOSS Provisions......................................................
15. Other Insurance......................................................
16. Notice...............................................................
17. Representation.......................................................
18. Severability.........................................................
19. Special POLICY Revisions.............................................
20. Subrogation..........................................................
21. Acquisition, Creation or Disposition of a Subsidiary.................
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 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;
(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 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 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.
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 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 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.
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
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
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
(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
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
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
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
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
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.
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
Siganture of Authorized Representative
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
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 9 Effective Date of Endorsement June 30, 1994
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.
AUTOMATIC EXTENSION ENDORSEMENT
-------------------------------
(Extension Premium: $350,000)
In consideration of payment of the above-referenced premium, it is
understood and agreed that this POLICY shall be continued and the POLICY PERIOD
shall be extended to June 30, 1997, 12:01 A.M. Standard Time at the address of
the Company as stated in Item I of the Declarations.
It is further understood and agreed that the above-referenced premium
has been allocated and paid as follows:
Policy Year
Following Effective
Date of this Endorsement Premium
------------------------ -------
Year 94-95 340,000
Year 95-96 345,000
Year 96-97 350,000
-----------
$ 1,035,000
Less Prepaid Premium on hand $ 685,000
-----------
Additional Premium $ 350,000
-----------
-----------
By /s/PATRICK D. TANNOCK
Authorized Representative
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 10 Effective Date of Endorsement June 30, 1995
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.
AUTOMATIC EXTENSION ENDORSEMENT
-------------------------------
(Extension Premium: $355,000)
In consideration of payment of the above-referenced premium, it is understood
and agreed that this POLICY shall be continued and the POLICY PERIOD shall be
extended to June 30, 1998, 12:01 A.M. Standard Time at the address of the
Company as stated in Item I of the Declarations.
It is further understood and agreed that the above-referenced premium has been
allocated and paid as follows:
Policy Year
Following Effective
Date of this Endorsement Premium
------------------------ -------
Year 95-96 $ 355,000
Year 96-97 $ 345,000 Deposit Premium
Year 97-98 $ 350,000 Deposit Premium
----------
$1,050,000
Less Prepaid Premium on hand ($ 695,000)
------------
Additional Premium $ 350,000
-----------
-----------
By /s/PATRICK D. TANNOCK
Authorized Representative
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 11 Effective Date of Endorsement June 30, 1995
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 Endorsement (Endorsement No. 2.) Section A(1) is
amended to read after the word "foundation" as follows:-
Trustees of Procter & Gamble's Global Pension Funds
All other terms and conditions remain unchaged
By_____________________________
Authorized Representative
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 12 Effective Date of Endorsement June 30, 1996
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 hereby understood and agreed that this POLICY is hereby amended as
indicated below. All other terms of this POLICY remain unchanged.
AUTOMATIC EXTENSION ENDORSEMENT
-------------------------------
(Extension Premium: $355,000)
In consideration of payment of the above-referenced premium, it is understood
and agreed that this POLICY shall be continued and the POLICY PERIOD shall be
extended to June 30, 1999, 12:01 A.M. Standard Time at the address of the
Company as stated in Item I of the Declarations.
It is further understood and agreed that the above-referenced premium has been
allocated and paid as follows:
Policy Year
Following Effective
Date of this Endorsement Premium
------------------------ -------
Year 96-97 $ 355,000
Year 97-98 $ 345,000 Deposit Premium
Year 98-99 $ 350,000 Deposit Premium
----------
$1,050,000
Less Prepaid Premium on hand ($ 695,000)
------------
Additional Premium $ 350,000
-----------
-----------
By_______________________________
Authorized Representative
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 13 Effective Date of Endorsement June 30, 1997
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 hereby understood and agreed that this POLICY is hereby amended as
indicated below. All other terms of this POLICY remain unchanged.
AUTOMATIC EXTENSION ENDORSEMENT
-------------------------------
(Extension Premium: $325,000)
In consideration of payment of the above-referenced premium, it is understood
and agreed that this POLICY shall be continued and the POLICY PERIOD shall be
extended to June 30, 2000, 12:01 A.M. Standard Time at the address of the
Company as stated in Item I of the Declarations.
It is further understood and agreed that the above-referenced premium has been
allocated and paid as follows:
Policy Year
Following Effective
Date of this Endorsement Premium
------------------------ -------
Year 97-98 $ 325,000
Year 98-99 $ 345,000 Deposit Premium
Year 99-00 $ 350,000 Deposit Premium
----------
$1,020,000
Less Prepaid Premium on hand ($ 695,000)
------------
Additional Premium $ 325,000
-----------
-----------
By /s/PATRICK D. TANNOCK
Authorized Representative
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
Endorsement No. 14 Effective Date of Endorsement June 30, 1998
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 hereby understood and agreed that this POLICY is hereby amended as
indicated below. All other terms of this POLICY remain unchanged.
AUTOMATIC EXTENSION ENDORSEMENT
-------------------------------
(Extension Premium: $325,000)
In consideration of payment of the above-referenced premium, it is understood
and agreed that this POLICY shall be continued and the POLICY PERIOD shall be
extended to June 30, 2000, 12:01 A.M. Standard Time at the address of the
Company as stated in Item I of the Declarations.
It is further understood and agreed that the above-referenced premium has been
allocated and paid as follows:
Policy Year
Following Effective
Date of this Endorsement Premium
------------------------ -------
Year 97-98 $ 325,000
Year 98-99 $ 345,000 Deposit Premium
Year 99-00 $ 350,000 Deposit Premium
----------
$1,020,000
Less Prepaid Premium on hand ($ 695,000)
------------
Additional Premium $ 325,000
-----------
-----------
By ___________________________
Authorized Representative
Exhibit (99.2)
--------------
Directors and Officers (First) Excess Liability Policy
Insured: THE PROCTER & GAMBLE COMPANY/THE PROCTER & GAMBLE FUND
AND OFFICERS OF OPERATING UNITS OF PROCTER AND GAMBLE
COMPANY
Policy No: XLD+O-00364-98
Endorsement No: 3
Effective Date: JUNE 30, 1998
- ---------------------------------------------------------------------------
DELETION OF GENERAL CONDITION I.
In consideration of the premium charged, it is hereby understood and agreed that
Paragraph I, EMPLOYEE BENEFITS PROGRAM EXCLUSION, of Section VI. General
Conditions of the Policy is deleted in its entirety.
All other terms and conditions of the Policy remain unchange.
X.L. INSURANCE COMPANY, LTD.
By: /s/PAUL B. MILLER
PAUL B. MILLER
Title: SENIOR VICE PRESIDENT
Date: AUGUST 10, 1998
Ref: 0D999.01
XL
Insured: THE PROCTER & GAMBLE COMPANY/THE PROCTER & GAMBLE FUND
AND OFFICERS OF OPERATING UNITS OF PROCTER AND GAMBLE
COMPANY
Policy No: XLD+O-00364-98
Endorsement No: 2
Effective Date: JUNE 30, 1998
- ---------------------------------------------------------------------------
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
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: SENIOR VICE PRESIDENT
Date: AUGUST 10, 1998
Ref: 0D234.01R
XL
Insured: THE PROCTER & GAMBLE COMPANY/THE PROCTER & GAMBLE FUND AND
OFFICERS OF OPERATING UNITS OF PROCTER AND GAMBLE COMPANY
Policy No: XLD+O-00364-98
Endorsement No: 1
Effective Date: JUNE 30, 1998
- --------------------------------------------------------------------------
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: SENIOR VICE PRESIDENT
Date: AUGUST 10, 1998
Ref: OD247.01
XL
Form X.L. D&O-003B Policy No. XLD+O-00364-98
XL
X.L. INSURANCE COMPANY, LTD.
Producer: PARK INTERNATIONAL LIMITED
In favor of: THE PROCTER & GAMBLE COMPANY THE PROCTER AND GAMBLE
FUND AND OFFICERS OF OPERATING UNITS OF PROCTER AND
GAMBLE COMPANY
Address: ONE PROCTER & GAMBLE PLAZA
CINCINNATI, OHIO 45202-3314
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, 1998 prevailing time at
the address of the Named Insured and in accordance with terms and
conditions of the form(s) attached.
PREMIUM: $140,000
IN WITNESS WHEREOF, this Policy has made,
entered into and executed by the undersigned
in Hamilton, Bermuda 10th day of AUGUST, 1998.
By: /s/PAUL B. MILLER
PAUL B. MILLER
Title: SENIOR VICE PRESIDENT
DATE: AUGUST 10, 1998 POLICY NO: XLD+O-00364-98
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/
THE PROCTER AND GAMBLE FUND
OFFICERS OF OPERATING UNITS OF
PROCTER AND 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, 1998 - JUNE 30, 1999
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,
1998-2001
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").
THE PROCTER & GAMBLE COMPANY/THE PROCTER & GAMBLE FUND AND
OFFICERS OF OPERATING UNITS OF PROCTER AND 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 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.
C. 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 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, 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.
(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 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).
(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: SENIOR VICE PRESIDENT
Date: AUGUST 10, 1998
THE PROCTER & GAMBLE COMPANY/THE PROCTER & GAMBLE FUND AND
OFFICERS OF OPERATING UNITS OF PROCTER AND GAMBLE COMPANY
SCHEDULE A
All Subsidiaries of the names Insured
Exhibit (99.3)
--------------
Directors and Officers (Second) Excess Liability Policy
PARK INTERNATIONAL LIMITED
A.C.E. INSURANCE COMPANY, 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-8861D
Item 1. Insured Company: THE PROCTER & GAMBLE COMPANY/
OFFICERS OF OPERATING UNITS OF
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 6/30/98-01
Excess Policies X.L. XLD&O-00364-98 $25M 6/30/98-99
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, 1998
To 12:01 A.M. JUNE 30, 1999
Standard Time at the address of the
Insured.
Item 5. Aggregate Limit of Liability $45,000,000 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: $130,000
Three Year Premium: $ N/A
(Prepaid)
Discovery Period Premium: 100% of the Policy Period Premium
Item 7. Insurer: A.C.E. Insurance Company, Ltd.
P.O. Box HM 1015
Hamilton, Bermuda HM DX
Telex: 3543 ACEILBA
Telecopy: (809) 295-5221
Countersigned at Hamilton, Bermuda:
Date: August 18, 1998 -------------------------
Authorized Representative
THESE DECLARATIONS, TOGETHER WITH THE COMPLETED AND SIGNED APPLICATION AND THE
POLICY FORM ATTACHED HERETO, CONSTITUTE THE INSURANCE POLICY.
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.
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
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 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 made, entered into and
executed by the Insurer in Hamilton, Bermuda as of the date set forth in the
Declarations.
A.C.E. INSURANCE COMPANY, LTD.
By: /s/K. P. WHITE /s/W. A. SCOTT
Senior Vice President President
ADDITIONAL/RETURN PREMIUM: NIL
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.
The effective date of this endorsement is June 30, 1998
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-8861D
of A.C.E. INSURANCE COMPANY, LTD.
Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF
PROCTER & GAMBLE COMPANY
Date of Issue: August 18, 1998
By ---------------------
AUTHORISED REPRESENTATIVE
End No. 1
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 elects not to renew, 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, 1998
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-8861D
of A.C.E. INSURANCE COMPANY, LTD.
Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF
PROCTER & GAMBLE COMPANY
Date of Issue: August 18, 1998
End. No. 2 By ---------------------
Authorized Representative
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, 1998
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-8861D
of A.C.E. INSURANCE COMPANY, LTD.
Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF
PROCTER & GAMBLE COMPANY
Date of Issue: August 18, 1998
End No. 3 By ---------------------
AUTHORISED REPRESENTATIVE
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, 1998
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-8861D
of A.C.E. INSURANCE COMPANY, LTD.
Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF
PROCTER & GAMBLE COMPANY
Date of Issue: August 18, 1998
End No. 4 By ---------------------
AUTHORISED REPRESENTATIVE
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, 1998
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-8861D
of A.C.E. INSURANCE COMPANY, LTD.
Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF
PROCTER & GAMBLE COMPANY
Date of Issue: August 18, 1998
End No. 5 By ---------------------
AUTHORISED REPRESENTATIVE
Exhibit (99-4)
--------------
Directors and Officers (Third) Excess Liability Policy
CHUBB ATLANTIC INDEMNITY LTD.
EXCESS INSURANCE POLICY
DECLARATIONS
Item 1. Parent Corporation: The Procter & Gamble Company
Principal Address: Policy Number: (99) 3310-04049
One P&G Plaza
Cincinnati, Ohio
U.S.A. 45202 Issued by the stock insurance
company indicated below, herein
called the Company.
CHUBB ATLANTIC INDEMNITY LTD.
Item 2. Premium: $115,000 Incorporated under the laws of Bermuda.
Item 3. Limit of Liability: See Endorsement 1
Item 4. Underlying Policy(ies):
(A) PRIMARY POLICY:
Insurer CODA
Limit of Liability $25,000,000
Deductible amount NONE
Policy number PG-106C
(B) Other Policy(ies):
Insurer X.L.
Limit of Liability $25,000,000
Excess of $25,000,000
Policy number XLD+O-00364-98
(C) Insurer A.C.E.
Limit of Liability $45,000,000
Excess of $50,000,000
Policy number PG-8861D
Item 5. Policy Period: From: June 30, 1998
To:: June 30, 1999
12:01 a.m. Standard Time of the address
shown in Item 1.
Item 6. Endorsement(s) Effective at Inception: 1, 2, 3, 4 & 5
Item 7. Pending or Prior Date: See Endorsement 2 if applicable
Item 8. Termination of Prior Policy(ies): NONE
Item 9. Claims Notification: All notices to the Company, including
notices of loss or claim shall be sent via
mail to: Chubb Atlantic Indemnity Ltd.,
Belvedere Building, 4th Floor, 69 Pitts Bay
Road, Hamilton HM CX, Bermuda
IN WITNESS WHEREOF, this policy has been made, entered into, executed, issued
and delivered by the undersigned in Hamilton, Bermuda on this 24th day of
August, 1998.
/s/Christine L. Gomes Assistant Vice President
- --------------------- ------------------------
Authorized Officer Title
CHUBB ATLANTIC INDEMNITY LTD.
EXCESS INSURANCE POLICY
In consideration of payment of required premium and subject to the
Declarations made a part hereof and the limitations, conditions, provisions and
other terms of this policy, the Company agrees with the INSUREDS as follows:
INSURING CLAUSE
The Company shall provide the INSUREDS with insurance during the Policy
Period excess of the UNDERLYING INSURANCE. Coverage for any loss attach only
after: 1) all UNDERLYING INSURANCE carriers have paid in cash the full amount of
their respective liabilities, and 2) the full amount of the UNDERLYING INSURANCE
policies have been collected by the plaintiffs, the Insureds or the Insureds'
counsel and 3) all UNDERLYING INSURANCE has been exhausted. Coverage under this
policy shall then apply in conformance with the terms, conditions, exclusions
and endorsements of the PRIMARY POLICY, together with all limitations,
restrictions and exclusions contained in or added by endorsement to any other
UNDERLYING INSURANCE, except as specifically set forth in the terms, conditions,
exclusions and endorsements of this Policy. In no event shall this Policy grant
broader coverage than would be provided by any of the exhausted UNDERLYING
INSURANCE.
MAINTENANCE OF UNDERLYING INSURANCE
All of the Underlying Policy(ies) scheduled in Item 4. Of the
Declarations shall be maintained during the Policy Period in full effect and
affording coverage at least as broad as the PRIMARY POLICY, except for any
reduction of the aggregate limit(s) of liability available under the UNDERLYING
INSURANCE solely by reason of payment of losses thereunder. Failure to comply
with the foregoing shall not invalidate this policy but the Company shall not be
liable to a greater extent than if this condition had been complied with.
In the event of any actual or alleged (a) failure by the INSUREDS to
give notice or to exercise any extensions under any UNDERLYING INSURANCE or (b)
misrepresentation of breach of warranties by any of the INSUREDS with respect to
any UNDERLYING INSURANCE, the Company shall not be liable hereunder to a greater
extent than it would have been in the absence of such actual or alleged failure,
misrepresentation or breach.
DEPLETION OF UNDERLYING LIMIT(S)
In the event of the depletion of the limit(s) of liability of the
UNDERLYING INSURANCE solely as the result of payment of losses thereunder, this
policy shall, subject to the Company's limit of liability and to the other terms
of the policy, continue to apply for subsequent losses as excess insurance over
the amount of insurance remaining under such UNDERLYING INSURANCE. In the event
of the exhaustion of all of the limit(s) of liability of such UNDERLYING
INSURANCE solely as a result of payment of losses thereunder, the remaining
limits available under this policy shall, subject to the Company's limit of
liability and to the other terms of this policy, continue for subsequent losses
as primary insurance and any retention specified in the PRIMARY POLICY shall be
imposed under this policy; otherwise no retention shall be imposed under this
policy.
LIMIT OF LIABILITY
The amounts set forth in Endorsement Number 1, Item 3(A) and (B) is the
Limit of Liability of the Company and shall be the maximum liability for each
LOSS and maximum aggregate liability for each POLICY YEAR.
GOVERNING LAW, ARBITRATION AND JURISDICTION
This Policy shall be governed and construed in accordance with the laws
of Bermuda. However, the provisions, stipulations, exclusions and conditions of
this Policy shall be construed in an evenhanded fashion as between the Insured
and the Company. Without limitation, where the language of the 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 such language, without any
presumption or arbitrary interpretation or construction in favor of either the
Insured or the Company, and without reference to parol evidence.
Any dispute or difference arising out of or relating to this Policy, or
the breach, termination or validity thereof, shall be resolved and settled by
final and binding arbitration held in Bermuda in accordance with the provisions
of the Bermuda International Conciliation and Arbitration Act 1993 (exclusive of
the Conciliation Part of such Act), or any statutory modification or reenactment
thereof, and the United Nations Commission on International Trade Law
("UNCITRAL") Arbitration Rules in effect as of the date of this Policy.
Unless the parties agree upon the selection of a sole arbitrator within
forth-five (45) days after receipt of notice of intent to arbitrate, the sole
arbitrator shall be appointed in accordance with such UNCITRAL Arbitration
Rules. The arbitrator shall be a present or former officer of a property or
casualty insurance or reinsurance company. The appointing authority shall be the
International Centers for Arbitration (ICA), and the case shall be administered
by the ICA in accordance with its "Supplemental Rules and Procedures for
Administration of Disputes under the UNCITRAL Arbitration Rules." Such decision
by the arbitrator shall be a complete defense to any attempted appeal or
litigation of such decision in the absence of fraud or collusion.
This Policy is an honorable engagement and the arbitrator shall be
absolved from all judicial formalities with respect to the admissibility of
evidence and contractual interpretation and shall interpret this Policy with a
view to effecting its general purpose in a commercially reasonable manner.
Each party shall extend to the arbitrator full cooperation and
assistance in the obtaining of information relevant to determination of the
dispute. The absence or default of a party shall not prevent or hinder the award
unless the arbitrator shall otherwise determine.
Fees for the arbitrator shall be reasonable and shall be established by
the arbitrator in consultation with the parties.
The costs of arbitration, including attorney's fees, shall be borne by
the unsuccessful party. The arbitrator shall apportion each of such costs
between the parties in those situation where the arbitrator cannot determine,
taking into account the circumstances of the case, which party is the successful
party.
In the event a party hereunder seeks judicial intervention, the parties
agree to irrevocably submit to the jurisdiction of any Court of competent
jurisdiction within Bermuda and will comply with all requirements necessary to
give such Court jurisdiction and all matters arising thereunder shall be
determined in accordance with the law and practice of such Court. Service of
process in such suit may be made upon any legal representative or officer of the
Company and Insured, wherever located, and the parties will abide by the final
decision of such Court or of the Appellate Court in Bermuda or the United
Kingdom in the event of an appeal.
CLAIM PARTICIPATION
The Company may, at its sole discretion, elect to participate in the
investigation, settlement or defense of any claim against any of the INSUREDS
for matters covered by this policy even if the UNDERLYING INSURANCE has not been
exhausted.
SUBROGATION - RECOVERIES
In the event of any payment under this policy, the Company shall be
subrogated to all the INSUREDS' rights of recovery against any person or
organization, as state din the PRIMARY POLICY, and the INSUREDS shall execute
and deliver instruments and papers and do whatever else is necessary to secure
such rights.
Any amounts recovered after payment of loss hereunder shall be
apportioned in the inverse order of payment to the extent of actual payment. The
expenses of all such recover proceedings shall be apportioned in the ration of
respective recoveries.
The Company shall be given notice in writing as soon as is practicable
(a) in the event of the cancellation of any UNDERLYING INSURANCE and (b) of any
notice given or additional or return premiums charged or paid in connection with
any UNDERLYING INSURANCE.
Notice of any claim shall be given in writing to the Company.
COMPANY AUTHORIZATION CLAUSE
By acceptance of this policy, the Parent Corporation named in Item 1.
of the Declarations agrees to act on behalf of all the INSUREDS with respect to
the giving and receiving of notice of claim or cancellations, the payment of
premiums and the receiving of any return premium that may become due under this
policy; and the INSUREDS agree that the Parent Corporation shall act on their
behalf.
ALTERATION
No change in or modification of this policy shall be effective except
when made by written endorsements signed by an authorized officer of Chubb
Atlantic Indemnity Limited.
POLICY TERMINATION
This policy may be cancelled by the PARENT CORPORATION at any time by
written notice or by surrender of this policy to the Company. This policy may
also be cancelled by or on behalf of the Company by delivery to the PARENT
CORPORATION or by mailing to the PARENT CORPORATION, by registered, certified or
other first class mail, at the address shown in Item 2. of the Declarations,
written notice stating when, not less than thirty 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 the period of limitation relating to the giving of notice is
prohibited or made void by any law controlling the construction thereof, such
period shall be deemed to be amended so as to be equal to the minimum period of
limitation permitted by such law. The Company shall refund the unearned premium
computed at customary short rates if the policy is terminated in its entirety by
the PARENT CORPORATION. Under any other circumstances the refund shall be
computed pro rata.
TERMINATION OF PRIMARY POLICY
This policy shall terminate immediately upon the termination of the
PRIMARY POLICY, whether by the INSUREDS or the primary insurer. Notice of
cancellation or non-renewal of the PRIMARY POLICY duly given by the primary
insurer shall serve as notice of the cancellation or non-renewal of this policy
by the Company.
TERMINATION OF PRIOR POLICY(IES)
The taking effect of this policy shall terminate, if not already
terminated, the policy(ies) specified in Item 7. of the Declarations.
POLICY DEFINITIONS
INSUREDS means those persons insured under the PRIMARY POLICY.
PRIMARY POLICY means the policy scheduled in Item 4.(A) of the Declarations or
any policy of the same insurer replacing or renewing such policy.
POLICY YEAR means the one year period between the anniversaries of the PRIMARY
POLICY, provided that: (1) the first POLICY YEAR of this policy shall be the
period between the inception of this policy and the next subsequent anniversary
of the PRIMARY POLICY, and (2) the last POLICY YEAR of this policy shall be the
period between the termination of this policy and the anniversary of the PRIMARY
POLICY immediately preceding such termination. If any discovery period extension
is exercised such extension shall be treated as set forth in the PRIMARY POLICY.
UNDERLYING INSURANCE means all those policies scheduled in Item 4 of the
Declarations and any policies replacing them.
CHUBB ATLANTIC INDEMNITY LTD.
ENDORSEMENT
INSURED: The Procter & Gamble Company
ENDORSEMENT NO.: 1
DATE ISSUED: August 21, 1998
TO BE ATTACHED TO AND FORM PART OF POLICY NO. (99)3310-04-49
NAME OF COMPANY: Chubb Atlantic Indemnity Ltd.
PRODUCER: Park International Limited
EFFECTIVE DATE: June 30, 1998
AMENDED LIMIT OF LIABILITY
It is understood and agreed that Item 3., Limit of Liability, as set forth on
the Declarations Page, is deleted in its entirety and replaced with the
following:
Item 3. Limit of Liability (Inclusive of Defense Costs):
(A) Each LOSS $50,000,000
(B) Each POLICY YEAR $50,000,000
Excess of:
(A) Each LOSS $95,000,000
(B) Each POLICY YEAR $95,000,000
which in turn is excess of the Deductible/Retention
shown below:
Deductible/Retention Amount: $NIL
Noting herein contained shall be held to vary, alter, waive, or extend the
provisions of the above mentioned Policy other than as above stated.
/s/Christine L. Gomes August 24, 1998
- --------------------- ---------------
Authorized Representative Date
CHUBB ATLANTIC INDEMNITY LTD.
ENDORSEMENT
INSURED: The Procter & Gamble Company
ENDORSEMENT NO.: 2
DATE ISSUED: August 21, 1998
TO BE ATTACHED TO AND FORM PART OF POLICY NO. (99)3310-04-49
NAME OF COMPANY: Chubb Atlantic Indemnity Ltd.
PRODUCER: Park International Limited
EFFECTIVE DATE: June 30, 1998
PRIOR AND PENDING LITIGATION - EXCESS
It is understood and agreed that the company shall not be liable to make any
payment for Loss in connection with any Claim based upon, arising out of,
relating to, in consequence of, or in any way involving:
(1) any litigation, arbitration, claims, demands, causes of
action, equitable, legal or quasi-legal proceedings, decrees
or judgments (collectively referred to as litigation) against
any INSUREDS occurring prior to or pending as of June 30,
1994, of which the INSUREDS has received notice or otherwise
had knowledge as of such date; or
(2) any subsequent litigation arising from, or based on
substantially the same matters as alleged in the prior or
pending litigation included in (1) above; or
(c) any Wrongful Act of the INSUREDS which gave rise to the prior
or pending litigation included in (1) above.
Nothing herein contained shall be held to vary, alter, waive, or extend the
provisions of the above mentioned policy other than as above stated.
/s/Christine L. Gomes August 24, 1998
- --------------------- ---------------
Authorized Representative Date
CHUBB ATLANTIC INDEMNITY LTD.
ENDORSEMENT
INSURED: The Procter & Gamble Company
ENDORSEMENT NO.: 3
DATE ISSUED: August 21, 1998
TO BE ATTACHED TO AND FORM PART OF POLICY NO. (99)3310-04-49
NAME OF COMPANY: Chubb Atlantic Indemnity Ltd.
PRODUCER: Park International Limited
EFFECTIVE DATE: June 30, 1998
RESTATEMENT OF INSURING CLAUSE
It is hereby understood and agreed that the INSURING CLAUSE, as set forth on
Page 1 of 4, is deleted in its entirety and replaced with the following:
INSURING CLAUSE
The Company shall provide the INSUREDS with insurance during the Policy
Period excess of the UNDERLYING INSURANCE. Coverage thereunder shall
attach only after all such UNDERLYING INSURANCE has been exhausted and
shall then apply in conformance with the terms, conditions, exclusions
and endorsements of the PRIMARY POLICY, together with all limitations,
restrictions or exclusions contained in or added by endorsement to any
other UNDERLYING INSURANCE, except as specifically set forth in the
terms and conditions and endorsements of this Policy. In no event shall
this policy grant broader coverage than would be provided by any of the
exhausted UNDERLYING INSURANCE POLICIES.
Nothing herein contained shall be held to vary, alter, waive, or extend the
provisions of the above mentioned policy other than as above stated.
/s/Christine L. Gomes August 24, 1998
- --------------------- ---------------
Authorized Representative Date
CHUBB ATLANTIC INDEMNITY LTD.
ENDORSEMENT
INSURED: The Procter & Gamble Company
ENDORSEMENT NO.: 4
DATE ISSUED: August 21, 1998
TO BE ATTACHED TO AND FORM PART OF POLICY NO. (99)3310-04-49
NAME OF COMPANY: Chubb Atlantic Indemnity Ltd.
PRODUCER: Park International Limited
EFFECTIVE DATE: June 30, 1998
UNDERLYING/EXCESS COVERAGE CLARIFICATION
It is hereby understood and agreed that the failure or inability of any Insurer
issuing any of the UNDERLYING INSURANCE to pay any loss(es) thereunder shall
not:
1. Increase the Company's Liability,
2. Cause this policy to become primary insurance, or
3. Cause the Company to pay any of the unpaid loss(es) owing under the
UNDERLYING INSURANCE.
Nothing herein contained shall be held to vary, alter, waive, or extend the
provisions of the above mentioned policy other than as above stated.
/s/Christine L. Gomes August 24, 1998
- --------------------- ---------------
Authorized Representative Date
CHUBB ATLANTIC INDEMNITY LTD.
ENDORSEMENT
INSURED: The Procter & Gamble Company
ENDORSEMENT NO.: 5
DATE ISSUED: August 21, 1998
TO BE ATTACHED TO AND FORM PART OF POLICY NO. (99)3310-04-49
NAME OF COMPANY: Chubb Atlantic Indemnity Ltd.
PRODUCER: Park International Limited
EFFECTIVE DATE: June 30, 1998
It is hereby understood and agreed that the Company shall not be liable to make
any payment for Loss for which the Parent Corporation or its subsidiaries grants
indemnification to the INSUREDS.
Nothing herein contained shall be held to vary, alter, waive, or extend the
provisions of the above mentioned policy other than as above stated.
/s/Christine L. Gomes August 24, 1998
- --------------------- ---------------
Authorized Representative Date
Exhibit (99.5)
--------------
Directors and Officers (Fourth Excess Liability Policy
PARK INTERNATIONAL LIMITED
A.C.E. INSURANCE COMPANY, 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-8862-D
Item 1. Insured Company: THE PROCTER & GAMBLE COMPANY/
OFFICERS OF OPERATING UNITS OF
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 6/30/98-01
Excess Policies X.L. XLD&O-00364-98 $25M 6/30/98-99
A.C.E. PG-8861D $45M 6/30/98-99
Chubb Atlantic (99)3310-04-49 $50M 6/30/98-99
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, 1998
To 12:01 A.M. JUNE 30, 1999
Standard Time at the address of the Insured.
Item 5. Aggregate Limit of Liability $5,000,000 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: $ Included under Policy PG-8861D
Three Year Premium: $ N/A
(Prepaid)
Discovery Period Premium: 100% of the Policy Period Premium
Item 7. Insurer: A.C.E. Insurance Company, Ltd.
P.O. Box HM 1015
Hamilton, Bermuda HM DX
Telex: 3543 ACEILBA
Telecopy: (809) 295-5221
Countersigned at Hamilton, Bermuda:
Date: August 26, 1998 -------------------------
Authorized Representative
THESE DECLARATIONS, TOGETHER WITH THE COMPLETED AND SIGNED APPLICATION AND THE
POLICY FORM ATTACHED HERETO, CONSTITUTE THE INSURANCE POLICY.
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.
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
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 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 made, entered into and
executed by the Insurer in Hamilton, Bermuda as of the date set forth in the
Declarations.
A.C.E. INSURANCE COMPANY, LTD.
By: /s/K. P. WHITE /s/W. A. SCOTT
Senior Vice President President
ADDITIONAL/RETURN PREMIUM: NIL
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.
The effective date of this endorsement is June 30, 1998
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-8862D
of A.C.E. INSURANCE COMPANY, LTD.
Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF
PROCTER & GAMBLE COMPANY
Date of Issue: August 26, 1998
By -------------------------
AUTHORISED REPRESENTATIVE
End No. 1
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, 1998.
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-8862D
of A.C.E. INSURANCE COMPANY, LTD.
Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF
PROCTER & GAMBLE COMPANY
Date of Issue: August 26, 1998
End. No. 2 By -----------------------------
Authorized Representative
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, 1998
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-8862D
of A.C.E. INSURANCE COMPANY, LTD.
Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF
PROCTER & GAMBLE COMPANY
Date of Issue: August 26, 1998
End No. 3 By ---------------------
AUTHORISED REPRESENTATIVE
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, 1998
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-8862D
of A.C.E. INSURANCE COMPANY, LTD.
Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF
PROCTER & GAMBLE COMPANY
Date of Issue: August 26, 1998
End No. 4 By ---------------------------
AUTHORISED REPRESENTATIVE
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, 1998
All other terms and conditions remain unchanged.
This endorsement is attached to and made a part of Policy No. PG-8862D
of A.C.E. INSURANCE COMPANY, LTD.
Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF
PROCTER & GAMBLE COMPANY
Date of Issue: August 26, 1998
End No. 5 By -------------------------
AUTHORISED REPRESENTATIVE
Exhibit (99.6)
--------------
Fiduciary Responsibility Insurance Policy
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 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.
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
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
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)
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 to 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)
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)
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)
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
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
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 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
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
Gerald L. Leighton Policy Period $139,100
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
PENSION AND WELFARE FUND
FIDUCIARY RESPONSIBILITY INSURANCE POLICY
To be attached to and form part of: THE PROCTER & GAMBLE COMPANY
Policy No: 68 FF 100827733 BCA
Issued to: THE PROCTER & GAMBLE COMPANY
It is agreed that:
1. Section IV OTHER DEFINITIONS (3)(a) is amended by adding the following,
"except for civil penalties resulting from Section 502(l) of the Employee
Retirement Income Security Act of 1974."
2. This extension of coverage shall be a part of and not in addition to the
"Annual Aggregate Limit of Liability" available for settlement or
adjudication of such claim. Payment under this endorsement is limited to 20%
of the settlement or adjudicated amount and shall not, in the aggregate,
exceed 20% of the "Annual Aggregate Limit of Liability."
3. Nothing contained herein shall vary, alter, or extend any of the terms,
conditions, and limitations of the Policy except as stated above.
This endorsement forms a part of the policy to which attached, effective on the
inception date of the policy unless otherwise stated herein.
Endorsement No.
Policy No.
- ---------------------------------------------------------------------------
Complete Only When This Endorsement Is Not Prepared With The Policy Or Is Not To
Be Effective With The Policy.
Issued to (Designated Trust or Plan)
Effective Date of This endorsement
AETNA CASUALTY AND SURETY COMPANY
By /s/ROBERT D. LANG
Authorized Representative
- ---------------------------------------------------------------------------
SECTION 502(l) ENDORSEMENT
For use with Aetna C & S Fiduciary
Responsibility Insurance Policy.
RENEWAL CERTIFICATE XX The Aetna Casualty and Surety Company
FIDUCIARY RESPONSIBILITY Hartford, Connecticut 06156
INSURANCE POLICY F-1191
The Standard Fire Insurance Company
Hartford, Connecticut 06156
DESIGNATED TRUST OR PLAN POLICY NUMBER
THE PROCTER & GAMBLE COMPANY PROFIT 68 FF 100827733 BCA
SHARING TRUST; etal POLICY PERIOD
FROM JUNE 30, 1994 TO JUNE 30, 1995
RENEWAL PREMIUM
$139,100.00
- --------------
PREMIUM PAYABLE
CURRENT EACH ANNIVERSARY
$139,100.00 $N/A
In consideration of the stated renewal premium, the policy is renewed for the
Policy Period indicated.
The premium for this policy has been paid by the Designated Trust or Plan.
The Company has the right of recourse pursuant to Condition (10). Endorsement
(F-1280) is attached to eliminate recourse.
Premium for elimination of recourse: $N/A (included in stated renewal premium)
Payable In Advance Each Installment
Endorsements made a part of this policy at renewal (Designated by Endorsement
Number)
/s/RONALD E. COMPTON
Chairman and President Countersigned by: /s/ROBERT D. LANG
RENEWAL CERTIFICATE XX The Aetna Casualty and Surety Company
FIDUCIARY RESPONSIBILITY Hartford, Connecticut 06156
INSURANCE POLICY F-1191 The Standard Fire Insurance Company
Hartford, Connecticut 06156
DESIGNATED TRUST OR PLAN POLICY NUMBER
THE PROCTER & GAMBLE COMPANY PROFIT 068 FF 100827733 BCA
SHARING TRUST; etal POLICY PERIOD
FROM 6/30/95 TO 6/30/96
RENEWAL PREMIUM
$145,000.00
- --------------
PREMIUM PAYABLE
CURRENT EACH ANNIVERSARY
$145,000.00 $N/A
In consideration of the stated renewal premium, the policy is renewed for the
Policy Period indicated.
The premium for this policy has been paid by the Designated Trust or Plan.
The Company has the right of recourse pursuant to Condition (10). Endorsement
(F-1280) is attached to eliminate recourse.
Premium for elimination of recourse: $N/A (included in stated renewal premium)
Payable In Advance Each Installment
Endorsements made a part of this policy at renewal (Designated by Endorsement
Number)
F-1197
/s/RONALD E. COMPTON
Chairman and President Countersigned by: /s/ROBERT D. LANG
It is agreed that as of the effective date hereof the policy is amended or
cancelled as indicated by X.
X CHANGE ENDORSEMENT
(Do not use this form to change Policy Effective/Expiry Dates or Policy Number.)
1. Name of Designated Trust or Plan from ____________________________________
to _______________________________________________________________________
2. Mailing Address __________________________________________________________
3. X Insurance Representative - Name is hereby changed to: H. L. Maxson
4. Add designated Trust or Plan _____________________________________________
5. Add Designated Fiduciary _________________________________________________
Delete Designated Fiduciary ______________________________________________
6. Other ____________________________________________________________________
MIDTERM CANCELLATION NOTICE
7. Cancellation by Insured, effective _______________________________________
8. You are hereby notified that this Company elects to cancel this policy,
effective _______________________________________________ , in accordance
with the terms of said policy.
This endorsement, issued by one of the below named companies, forms a part of
the policy to which attached.
Endorsement effective 6/30/95 Premium for elimination Document Premium
of recourse
(if applicable)
Designated Trust or Plan
The Procter & Gamble Company In Adv. $ In Adv. $
Profit Sharing Trust, et al 1st Anniv. $ 1st Anniv. $
2nd Anniv. $ 2nd Anniv. $
Total Document Premium $
Policy No. 068 FF 100827733 BCA Additional Premium Return Premium
Endorsement No.
THE AETNA CASUALTY AND SURETY COMPANY Countersigned by /s/ROBERT D. LANG
THE STANDARD FIRE INSURANCE COMPANY (Authorized Representative)
Hartford, Connecticut 06156
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
(See Edns. F-1282)
It is agred that:
1) Section IV Other Definitions (3)(a) is amended:
(a) by deleting the period at the nd thereof, and
(b) by adding the following:
"except civil penalties imposed under Section 501(i) of the
Employee Retirement Income Security Act of 1974."
2) This extension of coverage shall be part of and not in addition to the
"Annual Aggregate Limit of Liability" available for settlement or
adjudication of such claim. Payment under this endorsement is limited to
5% civil penalties imposed upon an Insured as a fiduciary under Section 501
(i) of the Employee Retirement Income Security Act of 1974, or its
amendments, for inadvertent violation of Section 406 of the Act.
3) Nothing contained herein shall vary, alter, or extend any of the terms,
conditions, and limitations of the Policy except as stated above.
This endorsement forms part of the policy to which it is attached effective
as of 12:01 a.m. on June 30, 1996.
Policy No. 68 FF 100827733 BCA
THE AETNA CASUALTY AND SURETY COMPANY
By: /s/Judith M. Kera
(Authorized Representative)
Judith M. Kern, Attorney-in-Fact
SECTION 502(i) ENDORSEMENT
For use with Aetna C & S Fiduciary Responsibility Insurance Policy
CHANGE ENDORSEMENT OR MIDTERM CANCELLATION NOTICE
Agency/Broker - Code 2450 Name: W.P. Dolle, Inc. Comm. 100
Transaction E
Stat Plan 99
Territory Rate 000
Policy Eff. Date 6/30/96
Policy Expriry Date 6/30/97
Trans. Date 6/30/96
Date Typed/By 7/22/96 J
Dollar Amount $20,000,000.00
It is agreed that as of the effective date heeof the policy is amended or
cancelled as indicated by X.
X CHANGE ENDORSEMENT
(Do not use this form to change Policy Effective/Expiry Dates or Policy Number.)
1. Name of Designated Trust or Plan from ____________________________________
to _______________________________________________________________________
2. Mailing Address __________________________________________________________
3. Insurance Representative - Name __________________________________________
4. Add designated Trust or Plan _____________________________________________
5. Add Designated Fiduciary _________________________________________________
Delete Designated Fiduciary ______________________________________________
6. X Other Adding Endorsement F-2223 Section 501(i) Endorsement
MIDTERM CANCELLATION NOTICE
7. Cancellation by Insured, effective _______________________________________
8. You are hereby notified that this Company elects to cancel this policy,
effective _______________________________________________ , in accordance
with the terms of said policy.
This endorsement, issued by one of the below named companies, forms a part of
the policy to which attached.
Endorsement effective 6/30/96 Premium for elimination Document Premium
of recourse
(if applicable)
Designated Trust or Plan
The Procter & Gamble Company In Adv. $ In Adv. $
Profit Sharing Trust, et al 1st Anniv. $ 1st Anniv. $
(See Endorsement F-1282) 2nd Anniv. $ 2nd Anniv. $
Total Document Premium $
Policy No. 068 FF 100827733 BCA Additional Premium Return Premium
Endorsement No.
THE AETNA CASUALTY AND SURETY COMPANY Countersigned by /s/ROBERT D. LANG
THE STANDARD FIRE INSURANCE COMPANY (Authorized Representative)
Hartford, Connecticut 06156
RENEWAL CERTIFICATE XX The Aetna Casualty and Surety Company
FIDUCIARY RESPONSIBILITY Hartford, Connecticut 06156
INSURANCE POLICY F-1191 The Standard Fire Insurance Company
Hartford, Connecticut 06156
DESIGNATED TRUST OR PLAN POLICY NUMBER
THE PROCTER & GAMBLE COMPANY PROFIT 068 FF 100827733 BCA
SHARING TRUST (See Endorsement F-1282) POLICY PERIOD
FROM 6/30/96 TO 6/30/97
RENEWAL PREMIUM
$145,000.00
- --------------
PREMIUM PAYABLE
CURRENT EACH ANNIVERSARY
$145,000.00 $N/A
In consideration of the stated renewal premium, the policy is renewed for the
Policy Period indicated.
The premium for this policy has been paid by the Designated Trust or Plan.
The Company has the right of recourse pursuant to Condition (10). Endorsement
(F-1280) is attached to eliminate recourse.
Premium for elimination of recourse: $N/A (included in stated renewal premium)
Payable In Advance Each Installment
Endorsements made a part of this policy at renewal (Designated by Endorsement
Number)
F-1197-B
/s/RONALD E. COMPTON
Chairman and President Countersigned by: /s/ROBERT D. LANG
TRAVELERS Property Casualty One Tower Square Joseph P. Kiernan
A Member of Travelers Group Hartford, CT 06813-9062 Executive Vie President,
Bond
Dear Customer:
In April 1996 the property casualty business of The Travelers Indemity Company
and The Aetna Casualty and Surety Company and their property casualty affiliates
came together under the Travelers umbrealla. Effective July 1, 1997, we are
changing the name of various property casualty affiiates. This change, which
affects your bond, is being made to strengthen the identification of these
companies as member sof Travelers Property Casualty.
Below the cut line is a rider to amend your bond. Please attach the rider to
your bond and send a copy of this rider to the obligee(s) on the bond. This
name change has no affect on the premium for your bond and does not change the
coverage provided under your bond.
We are in the process of updating our systems to reflect the changes in company
names. In the meantime, you may notice that the former company name will
display on some bills and other documents. Until this process is completed, the
chart below can be used to determine the new company name should any document
display a name on the "Former Name" list.
If you have any questions, please contact your agent or insurance
representative.
Sincerely,
/s/Joseph P. Kiernan
- -------------------------------------------------------------------------------
THIS ENDORSEMENT/RIDER CHANGES THE POLICY OR BOND.
PLEASE READ IT CAREFULLY.
INSURER/SURETY AMENDMENT ENDORSEMENT/RIDER
The name of your Insurer or Surety is changed from the former name to the new
name listed below:
FORMER NAME NEW NAME
----------- --------
The Aetna Casualty and Surety Company Travelers Casualty and Surety Company*
Aetna Casualty & Surety Company of Travelers Casualty and Surety Company
America of America*
Aetna Casualty & Surety Company of Travelers Casualty and Surety Company
of Illinois of Illinois**
COMPANY ADDRESS:
- ----------------
*One Tower Square **2500 Cabot Drive
Hartford, Connecticut 06183 Lisle, Illinois 60532
This name change endorsement/rider does not alter the coverage provided by this
policy or obnd and has not affect on the premium for this policy or bond. This
name change is effective on the renewal dat eof your bond.
PENSION AND WELFARE FUND
FIDUCIARY RESPONSIBILITY INSURANCE POLICY
ACQUIRED PLANS ENDORSEMENT - PLAN SIZE THRESHOLD
To be attached to and form a part of
Policy No: 68 FF 100827733
Issued to: The Procter & Gamble Company
It is agreed that:
1. Section III. DEFINITION OF INSURED subsection (5) is deleted in its
entirety and replaced by the following:
(5) Any other Trust or Employee Benefit Plan with assets less than
$250,000,000 of any firm hereafter acquired through consolidation,
merger or takeover by the sole sponsor or by any interes owned or
controlled by said sole sponsor provided written notice of such
acquisition is given at the next renewal.
2. Section III. DEFINITION OF INSURED is amended by adding the following:
(6) Any other Trust or Employee Benefit Plan with assets equal to or
greater than $250,000,000 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 premiu 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.
3. Nothing contained herein shall vary, alter or extend the terms, conditions
and limitations of the policy except as stated above.
This endorsement forms a part of the policy to which it is attached, effective
on the inception of the policy unless otherwise stated herein.
- -------------------------------------------------------------------------------
Complete Only When This Endorsement Is Not Prepared With The Policy Or Is To Be
Effective On A Date Other Than The Inception Of The Policy.
Issued to (Name of Designated Trust or Plan) The Procter & Gamble Company
Effective Date of this endorsement: 6/30/97
By: WAIVED
(Authorized Representative)
_______________________________________________________________________________
ACQUIRED PLANS ENDORSEMENT - PLAN SIZE THRESHOLD
TRAVELERS CASUALTY AND SURETY COMPANY
OF AMERICA
Hartford, Connecticut 06183
X TRAVELERS CASUALTY AND SURETY COMPANY
Hartford, Connecticut 068183
It is agreed that as of the effective date hereof the policy is amended or
cancelled as indicated by X.
X CHANGE ENDORSEMENT
(Do not use this form to change Policy Effective/Expiry Dates or Policy Number.)
1. Name of Designated Trust or Plan from ____________________________________
to _______________________________________________________________________
2. Mailing Address __________________________________________________________
3. Insurance Representative - Name __________________________________________
4. Add designated Trust or Plan _____________________________________________
5. Add Designated Fiduciary _________________________________________________
Delete Designated Fiduciary ______________________________________________
6. X Other It is hereby understood and agreed endorsement F-2569 (5/95) is
added to the policy.
MIDTERM CANCELLATION NOTICE
7. Cancellation by Insured, effective _______________________________________
8. You are hereby notified that this Company elects to cancel this policy,
effective _______________________________________________ , in accordance
with the terms of said policy.
This endorsement, issued by one of the below named companies, forms a part of
the policy to which attached.
Endorsement effective 6/30/97 Premium for elimination Document Premium
of recourse
(if applicable)
Designated Trust or Plan
The Procter & Gamble Company In Adv. NIL In Adv. NIL
1st Anniv. NIL 1st Anniv. NIL
2nd Anniv. NIL 2nd Anniv. NIL
Total Document Premium NIL
Policy No. 68FF100827733 Additional Premium Return Premium
Accepted by: Signature Waived
---------------------------------
(Insurance Representative)
N/A
- ------------------------------- -----------------------------------
Countersigned by (if required) Authorized Company Representative
RENEWAL CERTIFICATE
FIDUCIARY RESPONSIBILITY
INSURANCE POLICY F-1191
DESIGNATED TRUST OR PLAN POLICY NUMBER
THE PROCTER & GAMBLE COMPANY PROFIT 68FF100827733 BCA
SHARING TRUST (See Endorsement F-1282) POLICY PERIOD
FROM 6/30/97 TO 6/30/98
RENEWAL PREMIUM
$145,000.00
- --------------
PREMIUM PAYABLE
CURRENT EACH ANNIVERSARY
$145,000.00 $N/A
In consideration of the stated renewal premium, the policy is renewed for the
Policy Period indicated.
The premium for this policy has been paid by the Designated Trust or Plan.
The Company has the right of recourse pursuant to Condition (10).
Endorsement (F-1280) is attached to eliminate recourse.
Premium for elimination of recourse: $N/A (included in stated renewal premium)
Payable In Advance Each Installment
Endorsements made a part of this policy at renewal (Designated by Endorsement
Number)
/s/RONALD E. COMPTON
Chairman and President Countersigned by: /s/ROBERT D. LANG
TRAVELERS PROPERTY CASUALTY FIDUCIARY RESPONSIBILITY
A Member of Travelrs Group INSURANE POLICY F-1191
RENEWAL CERTIFICATE
X TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA
TRAVELRS CASUALTY AND SURETY COMPANY
Hartford, Connecticut 06813-9062
TRAVELERS CASUALTY AND SURETY COMPANY OF ILLINOIS
Naperville, Illinois 60563-8458
DESIGNATED TRUST OR PLAN POLICY NUMBER
THE PROCTER & GAMBLE COMPANY PROFIT 068 FF 100827733 BMC
SHARING TRUST (See Endorsement F-1282) POLICY PERIOD
FROM 6/30/98 TO 6/30/99
RENEWAL PREMIUM
$138,439.00
- --------------
PREMIUM PAYABLE
CURRENT EACH ANNIVERSARY
$138,439.00 $N/A
In consideration of the stated renewal premium, the policy is renewed for the
Policy Period indicated.
The premium for this policy has been paid by the Designated Trust or Plan.
The Company has the right of recourse pursuant to Condition (10). Endorsement
(F-1280) is attached to eliminate recourse.
Premium for elimination of recourse: $N/A (included in stated renewal premium)
Payable In Advance Each Installment
Endorsements made a part of this policy at renewal (Designated by Endorsement
Number)
- ------------------------------------- --------------------------------------
Countersigned by: Authorized Company Representative
