EXHIBIT (10-6)
The Procter & Gamble 1992 Stock Plan (Belgian Version)

 

--------------------------------------------------------------------------------

 

(PROCTER&GAMBLE LOGO) [l32996al3299600.gif]
The Procter & Gamble Company
Executive Offices
1 Procter & Gamble Plaza, Cincinnati, Ohio 45202-3315
December 11, 2001
To:        Participants in The Procter & Gamble 1992 Stock Plan (Belgian
Version)
     This document provides a copy of The Procter & Gamble 1992 Stock Plan
(Belgian Version) followed by important Additional Information. Please save this
with your stock option materials.
Very truly yours,
-s- Terry L. Overbey [l32996al3299602.gif]
Terry L. Overbey
Secretary            
This document constitutes part of a prospectus covering securities that have
been registered under the Securities Act of 1933.
(P&G REWARDS OF LEADERSHIP LOGO) [l32996al3299651.gif]

 

--------------------------------------------------------------------------------

 

THE PROCTER & GAMBLE 1992 STOCK PLAN (BELGIAN VERSION)
(as amended December 11, 2001)
1,000,000 Shares of Common Stock of The Procter & Gamble Company
and
1,000,000 Options to Purchase Common Stock of The Procter & Gamble Company
ARTICLE A — Purpose.
     The purpose of The Procter & Gamble 1992 Stock Plan (Belgian Version)
(hereinafter referred to as the “Plan”) is to encourage those employees of The
Procter & Gamble Company (hereinafter referred to as the “Company”) and its
subsidiaries who are largely responsible for the long-term success and
development of the business to strengthen the alignment of interests between
employees and the Company’s shareholders through the increased ownership of
shares of the Company’s Common Stock, and to encourage those employees to remain
in the employ of the Company and its subsidiaries. This will be accomplished
through the granting or sale to employees of options to purchase shares of the
Common Stock of the Company, payment of a portion of the employees’ remuneration
in shares of the Common Stock, and the granting to them by the Company and a
subsidiary, if appropriate, of deferred awards related to the increase in the
price of the Common Stock of the Company as provided by the terms and conditions
set forth in the Plan.
ARTICLE B — Administration.
     1. The Plan shall be administered by the Compensation Committee
(hereinafter referred to as the “Committee”) of the Board of Directors of the
Company (hereinafter referred to as the “Board”), or such other committee as may
be designated by the Board. The Committee shall consist of not less than three
(3) members of the Board who are neither officers nor employees, or members of
the Board who are “Non-Employee Directors” as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (hereinafter referred to as the
“1934 Act”), or any successor rule or definition adopted by the Securities and
Exchange Commission, to be appointed by the Board from time to time and to serve
at the discretion of the Board.
     2. It shall be the duty of the Committee to administer this Plan in
accordance with its provisions, to report thereon not less than once each year
to the Board and to make such recommendations of amendments or otherwise as it
deem necessary or appropriate. A decision by a majority of the Committee shall
govern all actions of the Committee.
     3. Subject to the express provisions of this Plan, the Committee shall have
authority: to grant or offer for sale nonstatutory and incentive stock options;
to grant to recipients stock appreciation rights either freestanding, in tandem
with simultaneously granted or sold stock options, or in parallel with
simultaneously granted or sold stock options; to award a portion of a
recipient’s remuneration in shares of Common Stock of the Company subject to
such conditions or restrictions, if any, as the Committee may determine; to
determine all the terms and provisions of the respective stock option, stock
appreciation right, and stock award agreements including setting the dates when
each stock option or stock appreciation right or part thereof may be exercised
and determining the conditions and restrictions, if any, of any shares of Common
Stock acquired through the exercise of any stock option; and to make all other
determinations it deems necessary or advisable for administering this Plan;
provided, however, the Committee shall have the further authority at time of
grant to:

  (a)   waive the provisions of Article F, paragraph l(a);     (b)   waive the
provisions of Article F, paragraph l(b);     (c)   waive the provisions of
Article G, paragraph 4(a) and (b); and

 

--------------------------------------------------------------------------------

 

  (d)   impose conditions in lieu of those set forth in Article G, paragraphs 4
through 7, for nonstatutory stock options, stock appreciation rights, and stock
award grants which do not increase or extend the rights of the recipient,

to take into consideration the differences, limitations, and requirements of
non-United States laws or conditions including tax regulations, exchange
controls or investment restrictions, possible unenforceability of any part of
this Plan, or other matters deemed appropriate by it.
     4. The Committee may establish from time to time such regulations,
provisions, and procedures within the terms of this Plan as, in its opinion, may
be advisable in the administration of this Plan.
     5. The Committee may designate the Secretary of the Company or other
employees of the Company to assist the Committee in the administration of this
Plan and may grant authority to such persons to execute documents on behalf of
the Committee.
ARTICLE C — Participation.
     The Committee shall select those employees of the Company and its
subsidiaries who, in the opinion of the Committee, have demonstrated a capacity
for contributing in a substantial manner to the success of such companies and
shall determine the number of shares of the Common Stock of the Company to be
transferred under this Plan subject to such conditions or restrictions as the
Committee may determine and the number of shares with respect to which stock
options or stock appreciation rights will be granted or sold. The Committee may
consult with the Chief Executive, but nevertheless the Committee has the full
authority to act, and the Committee’s actions shall be final.
ARTICLE D — Limitation on Number of Shares for the Plan.
     1. Unless otherwise authorized by the shareholders, the maximum aggregate
number of shares available for award under this Plan for each calendar year the
Plan is in effect, when combined with the maximum aggregate number of shares
available for award under The Procter & Gamble 1992 Stock Plan in such calendar
year, shall be one percent (1%) of the total issued shares of Common Stock of
the Company as of June 30 of the immediately preceding fiscal year.
     2. Any of the authorized shares may be used in respect of any of the types
of awards described in this Plan, except that no more than twenty-five percent
(25%) of the authorized shares in any calendar year may be issued as restricted
or unrestricted stock and no more than 1,000,000 of the authorized shares during
the term of the Plan may be issued as incentive stock options.
     3. Any authorized shares not used in a calendar year shall be available for
awards under this Plan in succeeding calendar years.
ARTICLE E — Shares Subject to Use Under the Plan.
     1. The shares to be delivered by the Company upon exercise of stock options
or stock appreciation rights shall be either authorized but unissued shares or
treasury shares, as determined by the Board. In the case of redemption of stock
appreciation rights by one of the Company’s subsidiaries, such shares shall be
shares acquired by that subsidiary.
     2. For purposes of this Plan, restricted or unrestricted stock awarded
under the terms of this Plan shall be authorized but unissued shares, treasury
shares, or shares acquired for purposes of the Plan by the Company or a
subsidiary, as determined by the Board.

 

--------------------------------------------------------------------------------

 

ARTICLE F — Stock Options and Stock Appreciation Rights.
     1. In addition to such other conditions as may be established by the
Committee, in consideration of the granting or sale of stock options or stock
appreciation rights under the terms of this Plan, the recipient agrees as
follows:

  (a)   The right to exercise any stock option or stock appreciation right shall
be conditional upon certification by the recipient at time of exercise that the
recipient intends to remain in the employ of the Company or one of its
subsidiaries (except in cases of retirement, disability or Special Separation as
defined in section 6 of Article G) for at least one (1) year following the date
of the exercise of the stock option or stock appreciation right, and,     (b)  
In order to better protect the goodwill of the Company and its subsidiaries and
to prevent the disclosure of the Company’s or it subsidiaries’ trade secrets and
confidential information and thereby help insure the long-term success of the
business, the recipient, without prior written consent of the Company, will not
engage in any activity or provide any services, whether as a director, manager,
supervisor, employee, adviser, consultant or otherwise, for a period of three
(3) years following the date of the recipient’s termination of employment with
the Company (except for terminations of employment resulting from retirement or
Special Separation), in connection with the manufacture, development,
advertising, promotion, or sale of any product which is the same as or similar
to or competitive with any products of the Company or its subsidiaries
(including both existing products as well as products known to the recipient, as
a consequence of the recipient’s employment with the Company or one of its
subsidiaries, to be in development):

  (1)   with respect to which the recipient’s work has been directly concerned
at any time during the two (2) years preceding termination of employment with
the Company or one of its subsidiaries or     (2)   with respect to which during
that period of time the recipient, as a consequence of the recipient’s job
performance and duties, acquired knowledge of trade secrets or other
confidential information of the Company or its subsidiaries.

      For purposes of this section, it shall be conclusively presumed that
recipients have knowledge of information they were directly exposed to through
actual receipt or review of memos or documents containing such information, or
through actual attendance at meetings at which such information was discussed or
disclosed.

  (c)   The provisions of this Article are not in lieu of, but are in addition
to the continuing obligation of the recipient (which recipient hereby
acknowledges) to not use or disclose the Company’s or its subsidiaries’ trade
secrets and confidential information known to the recipient until any particular
trade secret or confidential information become generally known (through no
fault of the recipient), whereupon the restriction on use and disclosure shall
cease as to that item. Information regarding products in development, in test
marketing or being marketed or promoted in a discrete geographic region, which
information the Company or one of its subsidiaries is considering for broader
use, shall not be deemed generally known until such broader use is actually
commercially implemented. As used in this Article, “generally known” means known
throughout the domestic U. S. industry or, in the case of recipients who have
job responsibilities outside of the United States, the appropriate foreign
country or countries’ industry.     (d)   By acceptance of any offered stock
option or stock appreciation rights granted or sold under the terms of this
Plan, the recipient acknowledges that if the recipient were, without authority,
to use or disclose the Company’s or any of its subsidiaries’ trade secrets or
confidential information or threaten to do so, the Company or one of its
subsidiaries would be entitled to injunctive and other appropriate relief to
prevent the recipient from doing so.

 

--------------------------------------------------------------------------------

 

      The recipient acknowledges that the harm caused to the Company by the
breach or anticipated breach of this Article is by its nature irreparable
because, among other things, it is not readily susceptible of proof as to the
monetary harm that would ensue. The recipient consents that any interim or final
equitable relief entered by a court of competent jurisdiction shall, at the
request of the Company or one of its subsidiaries, be entered on consent and
enforced by any court having jurisdiction over the recipient, without prejudice
to any rights either party may have to appeal from the proceedings which
resulted in any grant of such relief.     (e)   If any of the provisions
contained in this Article shall for any reason, whether by application of
existing law or law which may develop after the recipient’s acceptance of an
offer of the granting or sale of stock appreciation rights or stock options, be
determined by a court of competent jurisdiction to be overly broad as to scope
of activity, duration, or territory, the recipient agrees to join the Company or
any of its subsidiaries in requesting such court to construe such provision by
limiting or reducing it so as to be enforceable to the extent compatible with
then applicable law. If any one or more of the terms, provisions, covenants, or
restrictions of this Article shall be determined by a court of competent
jurisdiction to be invalid, void or unenforceable, then the remainder of the
terms, provisions, covenants, and restrictions of this Article shall remain in
full force and effect and shall in no way be affected, impaired, or invalidated.

     2. The fact that an employee has been granted or sold a stock option or a
stock appreciation right under this Plan shall not limit the right of the
employer to terminate the recipient’s employment at any time. The Committee is
authorized to suspend or terminate any outstanding stock option or stock
appreciation right for actions taken prior to termination of employment if the
Committee determines the recipient has acted significantly contrary to the best
interests of the Company.
     3. More than one stock option or stock appreciation right may be granted or
sold to any employee under this Plan but the maximum number of shares with
respect to which stock options or stock appreciation rights may be granted or
sold to any employee in any calendar year shall not exceed five percent (5%) of
the number of shares which can be issued or transferred annually hereunder, when
combined with the maximum aggregate number of shares available for award under
The Procter & Gamble 1992 Stock Plan in such calendar year.
     4. The aggregate fair market value (determined at the time when the
incentive stock option is exercisable for the first time by an employee during
any calendar year) of the shares for which any employee may be granted or sold
incentive stock options under this Plan and all other stock option plans of the
Company and its subsidiaries in any calendar year shall not exceed $100,000 (or
such other amount as reflected in the limits imposed by Section 422(d) of the
Internal Revenue Code of 1986, as it may be amended from time to time).
     5. If the Committee grants or sells incentive stock options, all such stock
options shall contain such provisions as permit them to qualify as “incentive
stock options” within the meaning of Section 422 of the Internal Revenue Code of
1986, as may be amended from time to time.
     6. With respect to stock options granted or sold in tandem with or parallel
to stock appreciation rights, the exercise of either such stock options or such
stock appreciation rights will result in the simultaneous cancellation of the
same number of tandem or parallel stock appreciation rights or stock options, as
the case may be.
     7. The exercise price for all stock options and stock appreciation rights
shall be established by the Committee at the time of their grant or, in the case
of stock options to be sold, at the time of offer of such stock options for
sale, and shall be not less than one hundred percent (100%) of the fair market
value of the Common Stock of the Company on such date.
ARTICLE G — Exercise of Stock Options and Stock Appreciation Rights.

 

--------------------------------------------------------------------------------

 

     1. All stock options and stock appreciation rights granted or sold
hereunder shall have a maximum life of no more than fifteen (15) years from the
date of grant or, in the case of stock options to be sold, from the date of the
offer of such options for sale.
     2. No stock options or stock appreciation rights shall be exercisable
within one (1) year from their date of grant or, in the case of stock options to
be sold, from the date of the offer of such options for sale, except in the case
of the death of the recipient.
     3. During the lifetime of the recipient, stock options and stock
appreciation rights may be exercised only by the recipient personally, or, in
the event of the legal incompetence of the recipient, by the recipient’s duly
appointed legal guardian.
     4. In case a recipient of stock options or stock appreciation rights ceases
to be an employee of the Company or any of its subsidiaries while holding an
unexercised stock option or stock appreciation right:

  (a)   Any unexercisable portions thereof are then void, except in the case of:
(1) death of the recipient; (2) any Special Separation (as defined in section 6
of this Article G) that occurs more than six months from the date the options
were granted or, in the case of stock options to be sold, from the date of the
offer of such options for sale; or (3) any option as to which the Committee has
waived, at the time of grant or, in the case of stock options to be sold, at the
time of the offer of such options for sale, the provisions of this Article G,
paragraph 4(a) pursuant to the authority granted by Article B, paragraph 3.    
(b)   Any exercisable portions thereof are then void, except in the case of
death, retirement in accordance with the provisions of any appropriate profit
sharing or retirement plan of the Company or any of its subsidiaries, Special
Separation (as defined in section 6 of this Article G) of the recipient, or any
option as to which the Committee has waived, at the time of grant or, in the
case of stock options to be sold, at the time of offer of such options for sale,
the provisions of this Article G, paragraph 4(b) pursuant to the authority
granted by Article B, paragraph 3.

     5. In the case of the death of a recipient of stock options or stock
appreciation rights while an employee of the Company or any of its subsidiaries,
the persons to whom the stock options or stock appreciation rights have been
transferred by will or the laws of descent and distribution shall have the
privilege of exercising remaining stock options, stock appreciation rights or
parts thereof, whether or not exercisable on the date of death of such employee,
at any time prior to the expiration date of the stock options or stock
appreciation rights.
     6. Termination of employment under the permanent disability provision of
any appropriate profit sharing or retirement plan of the Company or any of its
subsidiaries shall be deemed the same as retirement. Special Separation means
any termination of employment, except a termination for cause or a voluntary
resignation that is not initiated or encouraged by the Company, that occurs
prior to the time a recipient is eligible to retire. The death of a recipient of
stock options or stock appreciation rights subsequent to retirement or Special
Separation shall not render exercisable stock options or stock appreciation
rights which were unexercisable at the time of the retirement or Special
Separation. The persons to whom the exercisable stock options or stock
appreciation rights have been transferred by will or the laws of descent and
distribution shall have the privilege of exercising such remaining stock
options, stock appreciation rights or parts thereof, at any time prior to the
expiration date of the stock options or stock appreciation rights.
     7. Stock options and stock appreciation rights are not transferable other
than by will or by the laws of descent and distribution and they may not be
assigned or hypothecated. For the purpose of exercising stock options or stock
appreciation rights after the death of the recipient, the duly appointed
executors and administrators of the estate of the deceased recipient shall have
the same rights with

 

--------------------------------------------------------------------------------

 

respect to the stock options and stock appreciation rights as legatees or
distributees would have after distribution to them from the recipient’s estate.
     8. Upon the exercise of stock appreciation rights, the recipient shall be
entitled to receive a redemption differential for each such stock appreciation
right which shall be the difference between the then fair market value of one
share of the Common Stock of the Company and the exercise price of one stock
appreciation right then being exercised. In the case of the redemption of stock
appreciation rights by a subsidiary of the Company not located in the United
States, the redemption differential shall be calculated in United States dollars
and converted to the appropriate local currency on the exercise date. As
determined by the Committee, the redemption differential may be paid in cash,
Common Stock of the Company to be valued at its fair market value on the date of
exercise, any other mode of payment deemed appropriate by the Committee or any
combination thereof. The number of shares with respect to which stock
appreciation rights are being exercised shall not be available for granting or
selling future stock options or stock appreciation rights under this Plan.
     9. The Committee may, in its sole discretion, permit a stock option which
is being exercised either (a) by an optionee whose retirement is imminent or who
has retired or (b) after the death of the optionee, to be surrendered, in lieu
of exercise, for an amount equal to the difference between the stock option
exercise price and the fair market value of shares of the Common Stock of the
Company on the day the stock option is surrendered, payment to be made in shares
of the Company’s Common Stock which are subject to this Plan valued at their
fair market value on such date, cash, or a combination thereof, in such
proportion and upon such terms and conditions as shall be determined by the
Committee. The difference between the number of shares subject to stock options
so surrendered and the number of shares, if any, issued upon such surrender
shall represent shares which shall not be available for granting or selling
future stock options under this Plan.
     10. Time spent on leave of absence shall be considered as employment for
the purposes of this Plan. Leave of absence means any period of time away from
work granted to any employee by his or her employer because of illness, injury,
or other reasons satisfactory to the employer.
     11. The Company reserves the right from time to time to suspend the
exercise of any stock option or stock appreciation right where such suspension
is deemed by it necessary or appropriate for corporate purposes. No such
suspension shall extend the life of the stock option or stock appreciation right
beyond its expiration date, and in no event will there be a suspension in the
five (5) calendar days immediately preceding the expiration date.
ARTICLE H — Payment for Stock Options.
     Upon the exercise of a stock option, payment in full of the exercise price
shall be made by the optionee. As determined by the Committee, the stock option
exercise price may be paid for by the optionee either in cash, shares of the
Common Stock of the Company to be valued at their fair market value on the date
of exercise, a combination thereof, or such other method as determined by the
Committee.
ARTICLE I — Transfer of Shares.
     1. The Committee may transfer Common Stock of the Company under the Plan
subject to such conditions or restrictions, if any, as the Committee may
determine. The conditions and restrictions may vary from time to time and with
respect to particular employees or group of employees and may be set forth in
agreements between the Company and the employee or in the awards of stock to
them, all as the Committee determines. It is contemplated that the conditions
and restrictions established by the Committee will be consistent with the
objectives of this Plan and may be of the following types. In giving these
examples, it is not intended to restrict the Committee’s authority to impose
other restrictions or conditions, or to waive restrictions or conditions under
circumstances deemed by the Committee to be appropriate and not contrary to the
best interests of the Company.

 

--------------------------------------------------------------------------------

 

  (a)   Restrictions         The employee will not be able to sell, pledge, or
dispose of the shares during a specified period except in accordance with the
agreement or award. Such restrictions will lapse either after a period of, for
example, five years, or in fifteen or fewer annual installments following
retirement or termination of employment, as the Committee from time to time may
determine. However, upon the transfer of shares subject to restrictions, an
employee will have all incidents of ownership in the shares, including the right
to dividends (unless otherwise restricted by the Committee), to vote the shares,
and to make gifts of them to family members (still subject to the restrictions).
    (b)   Lapse of Restrictions         In order to have the restrictions lapse,
an employee may be required to continue in the employ of the Company or a
subsidiary for a prescribed period of time. Exemption from this requirement may
be prescribed in the case of death, disability, or retirement, or as otherwise
prescribed by the Committee.

ARTICLE J — Adjustments.
In the event of any future reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, rights offering, share
exchange, reclassification, distribution, spin-off or other change affecting the
corporate structure, capitalization or Common Stock of the Company occuring
after the date of approval of the Plan by the Company’s shareholders, (i) the
amount of shares authorized to be issued under the Plan and (ii) the number of
shares and/or the exercise prices covered by outstanding stock options and stock
appreciation rights shall be adjusted appropriately and equitably to prevent
dilution or enlargement of rights under the Plan. Following any such change, the
term “Common Stock” shall be deemed to refer to such class of shares or other
securities as may be applicable.
ARTICLE K — Additional Provisions.
     1. The Board may, at any time, repeal this Plan or may amend it from time
to time. The recipient of awards under this Plan and the Company shall be bound
by any such amendments as of their effective dates, but if any outstanding stock
options or stock appreciation rights are affected, notice thereof shall be given
to the holders of such stock options and stock appreciation rights and such
amendments shall not be applicable to such holder without his or her written
consent. If this Plan is repealed in its entirety, all theretofore granted or
sold unexercised stock options or stock appreciation rights shall continue to be
exercisable in accordance with their terms and shares subject to conditions or
restrictions transferred pursuant to this Plan shall continue to be subject to
such conditions or restrictions.
     2. In the case of an employee of a subsidiary company, performance under
this Plan, including the transfer of shares of the Company, may be by the
subsidiary. Nothing in this Plan shall affect the right of the Company or any
subsidiary to terminate the employment of any employee with or without cause.
None of the participants, either individually or as a group, and no beneficiary
or other person claiming under or through any participant, shall have any right,
title, or interest in any shares of the Company purchased or reserved for the
purpose of this Plan except as to such shares, if any, as shall have been
granted, sold or transferred to him or her. Nothing in this Plan shall preclude
the issuance, sale or transfer of shares of the Company to employees under any
other plan or arrangement now or hereafter in effect.
     3. “Subsidiary” means any company in which greater than fifty percent (50%)
of the total combined voting power of all classes of stock is owned, directly or
indirectly, by the Company. In addition, the Board may designate for
participation in this Plan as a “subsidiary,” except for the granting or selling
of incentive stock options, those additional companies affiliated with the
Company in which the Company’s direct or indirect stock ownership is less than
fifty percent (50%) of the total combined voting power of all classes of such
company’s stock.

 

--------------------------------------------------------------------------------

 

ARTICLE L — Consent.
     Every recipient of a stock option, stock appreciation right, or transfer of
shares pursuant to this Plan shall be bound by the terms and provisions of this
Plan and of the stock option, stock appreciation right, or transfer of shares
agreement referable thereto, and the acceptance of any stock option, stock
appreciation right, or transfer of shares pursuant to this Plan shall constitute
a binding agreement between the recipient and the Company and its subsidiaries
and any successors in interest to any of them. This Plan shall be governed by
and construed in accordance with the laws of the State of Ohio, United States of
America.
ARTICLE M — Duration of Plan.
     This Plan will terminate on July 14, 2002 unless a different termination
date is fixed by action of the Board of Directors, but no such termination shall
affect the prior rights under this Plan of the Company (or any subsidiary) or of
anyone to whom stock options or stock appreciation rights were granted or sold
prior thereto or to whom shares have been transferred prior to such termination.

 

--------------------------------------------------------------------------------

 

ADDITIONAL INFORMATION
1. Stock Options Offered for Purchase
     Stock options may be offered for purchase at a price of one dollar ($U.S.
1.00) per option (the “Purchased Stock Options”). Participants must pay for any
Purchased Stock Option within sixty (60) days after the date of acceptance
established by the Committee for such Purchased Stock Option by delivering cash
or a check to the Company or its applicable subsidiary. Each Purchased Stock
Option represents the right to acquire one share of Common Stock upon the
exercise of such Purchased Stock Option. The number of stock options, whether
Purchased Stock Options or otherwise, issued by the Company and outstanding as
of January 31, 1997 is 30,884,517. The Purchased Stock Options are not listed on
an exchange. For such Purchased Stock Options, the Committee, pursuant to
authority granted by Article B, paragraph 3 of the Plan, has waived the
conditions and restrictions of paragraphs 4(a) and (b) of Article G as follows:
the Purchased Stock Options will remain exercisable for up to one (1) month
following any termination of employment; provided that if termination of
employment occurs as a result of death, retirement or Special Separation, the
stock option will remain exercisable for its full term until its date of
expiration.
     There is no guarantee that the price of the Common Stock will exceed the
exercise price of any Purchased Stock Option, in which case such Purchased Stock
Option would have no value.
2. Shares Awarded as a Portion of Remuneration
     Any shares of Common Stock of the Company awarded as a portion of a
participant’s remuneration shall be valued at not less than one hundred percent
(100%) of the fair market value of the Company’s Common Stock on the date of the
award. These shares may be subject to such conditions or restrictions as the
Committee may determine, including a requirement that the participant remain in
the employ of the Company or one of its subsidiaries for a set period of time,
or until retirement. Failure to abide by any applicable restriction will result
in forfeiture of the shares.
3. U.S. Tax Treatment for U.S. Persons
     Incentive Stock Options
     With regard to tax effects which may accrue to the optionee, counsel
advises that if the optionee has continuously been an employee from the time an
option has been granted until at least three months before it is exercised,
under existing law no taxable income results to the optionee from the exercise
of an incentive stock option at the time of exercise. However, the spread at
exercise is an “adjustment” item for alternative minimum tax purposes.
     Any gain realized on the sale or other disposition of stock acquired on
exercise of an incentive stock option is considered as long-term capital gain
for tax purposes if the stock has been held more than two years after the date
the option was granted and more than one year after the date of exercise of the
option. If the stock is disposed of within one year after exercise, the lesser
of any gain on such disposition or the spread at exercise (i.e., the excess of
the fair market value of the stock on the date of exercise over the option
price) is treated as ordinary income, and any appreciation after the date of
exercise is considered long-term or short-term capital gain to the optionee
depending on the holding period prior to sale. However, the spread at exercise
(even if greater than the gain on the disposition) is treated as ordinary income
if the disposition is one on which a loss, if sustained, is not recognized—e.g.,
a gift, a “wash” sale or a sale to a related party. The amount of ordinary
income recognized by the optionee is treated as a tax deductible expense to the
Company. No other amount relative to an incentive stock option is a tax
deductible expense to the Company.

 

--------------------------------------------------------------------------------

 

     Nonstatutory Stock Options
     With regard to tax effects which may accrue to the optionee, counsel
advises that under existing tax law gain taxable as ordinary income to the
optionee is deemed to be realized at the date of exercise of the option, the
gain on each share being the difference between the market price on the date of
exercise and the option price. This amount is treated as a tax deductible
expense to the Company at the time of the exercise of the option. Any
appreciation in the value of the stock after the date of exercise is considered
a long-term or short-term capital gain to the optionee depending on whether or
not the stock was held for the appropriate holding period prior to sale.
     Stock Appreciation Rights
     With regard to tax effects which may accrue to the recipient, counsel
advises that “United States persons,” as defined in the Internal Revenue Code of
1986 (the “I.R.C.”), must recognize ordinary income as of the date of exercise
equal to the amount paid to the recipient, i.e., the difference between the
grant price and the value of the shares on the date of exercise.
     Shares Awarded as a Portion of Remuneration
     With regard to tax effects which may accrue to the recipient, counsel
advises that “United States persons” as defined in the Internal Revenue Code of
1986 (the “I.R.C.”), must recognize ordinary income in the first taxable year in
which the recipient’s rights to the stock are transferable or are not subject to
a substantial risk of forfeiture, whichever is applicable. Recipients who are
“United States persons” may also elect to include the income in their tax
returns for the taxable year in which they receive the shares by filing an
election to do so with the appropriate office of the Internal Revenue Service
within 30 days of the date the shares are transferred to them.
     The amount includable in income is the fair market value of the shares as
of the day the shares are transferable or not subject to a substantial risk of
forfeiture, whichever is applicable; if the recipient has elected to include the
income in the year in which the shares are received, the amount of income
includable is the fair market value of the shares at the time of transfer.
     For non-United States persons, the time when income is realized, its
measurement and its taxation, will depend on the laws of the particular
countries in which the recipients are residents and/or citizens at the time of
transfer or when the shares are first transferable and not subject to a
substantial risk of forfeiture, as the case may be. “United States persons” who
receive shares awarded as a portion of remuneration may also have tax
consequences with respect to the receipt of shares or the expiration of
restrictions or substantial risk of forfeiture on such shares under the laws of
the particular country other than the United States of which such person is a
resident or citizen.
     Notwithstanding the above advice received by the Company, it is each
individual recipient’s responsibility to check with his or her personal tax
adviser as to the tax effects and proper handling of stock options, stock
appreciation rights and Common Stock acquired. The above advice relates
specifically to the U.S. consequences of stock options, stock appreciation
rights and Common Stock acquired, including the U.S. consequences to “United
States persons” whether or not resident in the U.S. In addition to U.S. tax
consequences, for all persons who are not U.S. residents, the time when income,
if any, is realized, the measurement of such income and its taxation will also
depend on the laws of the particular country other than the U.S. of which such
persons are resident and/or citizens at the time of grant or sale or the time of
exercise, as the case may be.
     The Plan is not subject to the qualification requirements of Section 401(a)
of the I.R.C.
4. Employee Retirement Income Security Act of 1974

 

--------------------------------------------------------------------------------

 

     The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 (“ERISA”), as amended.
5. Incorporation of Certain Documents by Reference
     The following documents filed by the Company with the Securities and
Exchange Commission (File No. 1-434) pursuant to the 1934 Act are incorporated
into this document by reference:

  1.   The Company’s Annual Report on Form 10-K for the fiscal year ended
June 30, 2001;     2.   The Company’s Quarterly Reports on Form 10-Q for the
quarter ended September 30, 2001;     3.   All other documents filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the
date of this Prospectus and prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold.

     The Company will provide without charge to each participant in the Plan,
upon oral or written request, a copy of any or all of these documents other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents. In addition, the Company will provide without
charge to such participants a copy of the Company’s most recent annual report to
shareholders, proxy statement, and other communications distributed generally to
security holders of the Company. Requests for such copies should be directed to
Mr. James C. Ashely, Manager, Shareholder Services, The Procter & Gamble
Company, P.O. Box 5572, Cincinnati, Ohio 45201, (513) 983-3413.
6. Additional Information
     Additional information about the Plan and its administrators may be
obtained from Mr. Terry L. Overbey, Secretary, The Procter & Gamble Company, One
Procter & Gamble Plaza, Cincinnati, Ohio 45202, (513) 983-4463.