Exhibit 10.2 - 10-Q JAS 2006


    
      

        Short
          Term Achievement Reward Program

        


        The
          Short
          Term Achievement Reward (“STAR”) Program is the Company’s annual incentive bonus
          program designed to support outstanding business results of The Procter
&
Gamble Company (the “Company” or “P&G”). Awards are made within the
          authority of the Additional Remuneration Plan and the 2001 Stock and Incentive
          Compensation Plan. 

        


        I.    ELIGIBILITY

        


        Eligibility
          is based on job level and the requirement of working at least four weeks
          during
          the fiscal year. STAR participants who do not work a full time schedule
          for the
          entire fiscal year may have awards pro-rated. Separating employees must
          be
          active as of June 30 (the close of the fiscal year for which the award
          is
          payable) to receive an award, unless due to retirement or special circumstances
          agreed in advance.

        


        II.    CALCULATION 

        


        The
          individual STAR Award Calculation is: (STAR Target) x (Business Unit Performance
          Factor) x (Corporate Adjustment Factor) x (Gillette Factor)

        


        	·  	
                The
                  STAR
                  Target for
                  each participant is calculated as: (Base Salary) x (STAR Target
                  percent)

              


        


        Base
          Salary
          as of
          the end of June is used to calculate the STAR award. If a participant’s level
          changes, the highest band level and salary during the fiscal year is used
          to
          determine the STAR Target. 

        


        The
          STAR
          Target Percent
          is
          dependent on job level in the organization and will fall between 6% and
          155%.

         

                 
          Job Band      STAR
          Target as % of Base

         

                        3          
           6%
          in
          2005/06; 8% in 2006/07 and beyond

                4         
15%

                5         
25%

                6         
45%

                7         
70%

                8         
75%

                9        155%

        


        	·  	
                The
                  Business
                  Unit Performance Factor
                  is
                  assigned to each STAR business unit as a measure of success for
                  the fiscal
                  year. The factors range from 53% to 167% with the target at 100%.
                  A STAR
                  Committee, comprised of a small number of senior executives (who
                  do not
                  determine their own awards), conducts a retrospective assessment
                  of the
                  performance of each business unit according to one or more of the
                  following measures and makes a recommendation to the Compensation
&
                  Leadership Development Committee: Operating
                  Total Shareholder Return, Key Competitor Comparison, After Tax
                  Profit,
                  Operating Cash Flow, Value Share, Volume, Net Outside Sales, Value
                  Contribution, Organization Head Self Assessment, and Cross Organization
                  Assessment. There may also be other
                  factors significantly affecting unit results.


              


         

        	·  	
                The
                  Corporate
                  Adjustment Factor
                  measures the total Company success and ranges from 80% to 130%,
                  with a
                  100% target. The same Corporate Adjustment Factor is applied to
                  all STAR
                  award calculations. It is determined by a matrix that measures
                  P&G’s
                  market total shareholder return (“TSR”) ranking relative to a competitive
                  peer group and diluted earnings per share (“EPS”) growth. Market TSR
                  reflects the return shareholders could earn during the year - stock
                  appreciation and dividends - from an investment in the Company’s
                  stock.

              


        


        	·  	
                The
                  Gillette
                  Factor
                  is
                  derived from a review and recommendation by the STAR Committee
                  based on
                  the results of the success of the Gillette integration. The factor
                  ranges
                  from 80% to 130% with 100% as the target. The same Gillette Factor
                  will
                  apply to all STAR award calculations. It will be determined by
                  assessing
                  performance during the fiscal year on various metrics including:
                  sustaining the overall health of both the P&G and Gillette businesses
                  during this period (based on market share and earnings progress);
                  achieving sales, research and administrative budget and synergy
                  objectives; meeting enrollment targets; and staying within integration
                  cost and restructuring estimates. The Gillette Factor will be applied
                  starting with the results of fiscal year 2005/06. STAR awards for
                  fiscal
                  year 2004/05 will be based on only the Business Unit Performance
                  Factor
                  and the Corporate Adjustment Factor, as in prior years.
                  

              


        


        The
          STAR
          Committee makes recommendations to the Compensation & Leadership Development
          Committee regarding the actual awards to be made. The final awards are
          approved
          by the Compensation & Leadership Development Committee. STAR Awards for
          members of the Star Committee are determined exclusively by the Compensation
          & Leadership Development Committee 

        without
          any recommendation from the STAR Committee.

        


        


        III.    TIMING
          AND
          FORM 

        


        STAR
          awards are determined after the close of the fiscal year and are paid on
          or
          about September 15. The award form choices and relevant considerations
          are
          explained in payment preference materials generally in the form of Appendix
          1.
          Participants receive written notice of their award detailing the calculation,
          generally in the form of Appendix
          2.
          The
          grant letters are generally in the form of Appendix
          3.
          

        


        Generally,
          STAR awards are paid in cash. However, before the end of the calendar year
          preceding the award date, participants on record can choose their upcoming
          award
          in forms other than cash, such as stock options, stock appreciation rights
          or
          restricted stock units (for participants also in the Business Growth Program),
          depending on local regulations. To pay a STAR award in stock options, the
          Company compares current cash value to stock option value with a conversion
          factor that is reviewed annually. 


        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        


        Business
          Growth Program

         

        The
          Business Growth Program (“BGP”) is a part of the Company’s long-term incentive
          plan and is designed to provide additional focus on key Company measures
          for top
          executives with senior management responsibility for total Company results.
          Awards are made within the authority of the Additional Remuneration Plan
          and the
          2001 Stock and Incentive Compensation Plan. 

        


        I.    ELIGIBILITY

        


        The
          CEO,
          Vice-Chairs, Presidents, Global Function Heads, Senior Vice Presidents
          and
          equivalents may participate, as recommended by management and approved
          by the
          Compensation & Leadership Development Committee. 

        


        II.    CALCULATION

        


        A
          BGP
          Award may be payable for the three-year performance period running July
          1, 2005
          through June 30, 2008. Interim awards may also be payable at the conclusion
          of
          the first and second years of the program. The Compensation & Leadership
          Development Committee reviews and approves awards relative to the base
          period of
          fiscal year 2004/05. It assesses Company performance according to the
          pre-established financial measures of diluted earnings per share (“EPS”) growth
          and operating total shareholder return (“OTSR”). 

        


        Adjustments
          may be made for significant acquisitions and divestitures, major equity
          investments, or other unusual items not reflected in the Company’s operating
          plan or base year results. In all cases, the Compensation & Leadership
          Development Committee retains discretion to determine whether certain items
          should be included or excluded from award calculations and to verify that
          awards
          are appropriate and consistent with the long-term interests of shareholders.
          The
          Committee may reduce awards if it determines that payouts do not correspond
          to
          actual business results.

        


        	·  	
                The
                  Three-Year Award is
                  calculated as: (Payout Factor) X (Participant's Target Award).
                  

              


        


        The
          Award
          Payout Factor
          ranging
          from 0% to 200% is assessed relative to a performance level of EPS growth
          and
          OTSR. 

        


        A
          Participant’s
          Target Award
          is based
          on a multiple of the executive’s base salary at the time of entry into the
          program. For the Chairman of the Board and CEO, the target is two times
          base
          salary, times three (the number of years in the performance period). For
          all
          others, the target is one times base salary times the number of years
          participating in the program. 

        


        	·  	
                Interim
                  Awards
                  are payable only if EPS growth and OTSR meets or exceeds target
                  relative
                  to the base period at the end of the first year and the first two
                  years
                  combined, respectively. Interim awards are calculated using the
                  same
                  factors as the three-year award. However, each interim award is
                  only a
                  partial progress payment, paid at 30% of the full three-year calculation.
                  Any interim payments are subtracted from the full three-year award
                  when
                  calculating the final BGP payment.

              


        


        III.    TIMING
          AND FORM

        


        BGP
          awards are delivered on or about September 15th
          for
          the
          fiscal year just completed. Each year’s award, if payable, will be delivered
          half in three-year restricted stock units (“Required RSUs”) and half in cash.
          Participants may elect to receive restricted stock units in place of the
          cash
          portion (“Elected RSUs”). The award form choices and relevant considerations are
          explained in payment preference materials generally in the form of Appendix
          1.
          Participants receive written notice of their award detailing the calculation,
          generally in the form of Appendix
          4.
          The
          grant letters are generally in the form of Appendix
          5.
          

        


        Program
          participants have their long-term incentives split between BGP and equity
          awards
          under the 2001 Stock and Incentive Compensation Plan. Their key manager
          awards
          under the latter plan are reduced in value by one-third of their three-year
          BGP
          target. 


        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        


        Appendix
          1: Payment Preference Materials for BGP / STAR Awards

        


        [DATE]

        [NAME]

        


        Subject: 
          Preferences
          for [YEAR] STAR and BGP Payments and Deferred Compensation
          Choices

        


        Your
          choices for the awards are:

        


        September
          [YEAR] STAR Award 

        	·  	
                Cash
                  

              


        	·  	
                Stock
                  Options 

              


        	·  	
                Restricted
                  Stock Units (for BGP participants only) - no forfeiture provision
                  

              


        	·  	
                Deferred
                  Compensation (for BGP participants only)

              


        


        September
          [YEAR] BGP Award (if applicable)

        	·  	
                Three-Year
                  Restricted Stock Units (50% of award required in this
                  form)

              


        	·  	
                Cash,
                  Restricted Stock Units - no forfeiture provision, or Deferred Compensation
                  (50% of award subject to this election)

              


        


        Attached
          you will find an election form to be returned to [NAME]. 

        


        Please
          keep the following in mind as you consider your choices:

        	·  	
                It
                  is recommended that you consult legal/tax/financial advisors to
                  determine
                  the appropriate award form(s) for your personal
                  situation.

              


        	·  	
                While
                  your selection will be given consideration, it is not binding on
                  the
                  Company until approved by the Compensation & Leadership Development
                  Committee of the Board of Directors.

              


        


        IF
          YOU
          MISS THE [DATE] DEADLINE, YOU WILL RECEIVE THE DEFAULT (CASH).

        


        [NAME]


        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        


        


        [YEAR]
          EXECUTIVE COMPENSATION AWARD FORM PREFERENCES

        


        [YEAR]
          STAR Award Payable [DATE] [YEAR] Preference Selection

        
          	
                  Cash

                	
                  ______%

                	 
	
                  Stock
                    Options 

                	
                  ______%

                	 
	
                  Restricted
                    Stock Units

                	
                  ______%

                	
                  _______________
                    (Select year you want shares delivered, e.g., [YEAR], or one
                    year after
                    retirement)

                
	
                  Deferred
                    Compensation

                	
                  ______%

                	 
	
                  Total

                	
                  100%

                	 


        

        


        [YEAR]
          Payment BGP Award Payable [YEAR] Preference Selection 

        (Complete
          for remaining 50%)

        
          	
                  Three-Year
                    Restricted Stock Units (if you leave the Company within 3 years
                    of grant
                    for reasons other than retirement, you forfeit these
                    units)

                	
                  ____50%
                    (required)

                	
                  _______________
                    (Select year you want shares delivered, e.g., [three years after
                    grant
                    date, any year later than three years after grant date, or one
                    year after
                    retirement)

                
	
                  Cash

                	
                  ______%

                	 
	
                  Restricted
                    Stock Units

                	
                  ______%

                	
                  _______________
                    (Select year you want shares delivered, e.g., [YEAR], or one
                    year after
                    retirement)

                
	
                  Deferred
                    Compensation 

                	
                  ______%

                	 
	
                  Total

                	
                  100%

                	 


        

        


        	·  	
                You
                  must be an active employee as of the award date to receive any
                  non-cash
                  award

              


        	·  	
                All
                  elections are irrevocable after [DATE].

              


        


        


        ____________________________________     ________________________

        Signature          Date

        


        Return
          form to [NAME]

        


        


        



        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        


        Appendix
          2: STAR Award Letter

        


        [DATE]

        Fellow
          P&G Leaders:

        


        I
          am
          pleased to announce the average STAR award for [YEAR] is [NUMBER] % of
          target.
          STAR awards are a combination of your individual business unit awards,
          the
          Company factor and the Gillette factor. Unit awards are decided by the
          STAR
          Committee based on a retrospective assessment of each unit’s performance. The
          Company factor is calculated based on P&G’s market TSR ranking in the peer
          group and earnings per share. The Gillette factor is based on a review
          done by
          the STAR Committee considering the results of the success of the Gillette
          integration. [EXPLANATION OF COMPANY RESULTS and COMPARISON TO PREVIOUS
          YEAR]

        


        Actual
          STAR awards as a percentage of target [HISTORICAL COMPARISON OF RESULTS
          TO
          PREVIOUS YEAR(S)]

        


        By
          remaining choiceful, focused, and disciplined, we can look forward to future
          success. Well done! Thanks.

        [NAME]

        


        Personal
          & Confidential

        Individual
          Award Summary

        [NAME]

        


        Your
          STAR
          Award is [NUMBER] payable in [FORM]

        


        
          	
                  [Number]

                	
                  x

                	
                  [Number]%

                	
                  x

                	
                  [Number]%

                	
                  x

                	
                  [Number]%

                	
                  =

                	
                  Number

                
	
                  STAR
                    Target

                	
                  x

                	
                  Business
                    Unit Performance Factor

                	
                  x

                	
                  Corporate
                    Adjustment Factor

                	
                  x

                	
                  Gillette
                    Factor

                	
                  =

                	
                  STAR
                    Award

                


        

        


        STAR
          Target

        Based
          on      June
          30
          [YEAR] Base Salary:      
[NUMBER]

        June
          30
          [YEAR] Band:           [NUMBER]

        STAR
          Target Percent for Band:    [NUMBER]

        Based
          x
          STAR Target Percent:     [NUMBER]

        Your
          STAR
          Target:             
[NUMBER]

        


        Business
          Unit Performance

        Business
          Unit  Weight        Performance
          Factor

        [Business
          Unit]     [NUMBER]          [NUMBER]
          %

        


        Corporate
          Adjustment Factor

        TSR
          One
          Year Ranking                [NUMBER]

        Earnings
          Per Share                           
          [NUMBER]

        Corporate
          Adjustment Factor            [NUMBER]
          %

        


        Gillette
          Factor                      [NUMBER]%

        


        Your
          STAR
          Award is [NUMBER] % of STAR Target


        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        


        Appendix
          3: Cover letter for STAR Grant 

        in
          Stock Options and Stock Appreciation Rights

        


        


        
          	
                  TO:

                	
                  Short
                    Term Achievement Reward (STAR) Recipients of P&G Stock Options and
                    Stock Appreciation Rights*

                


        

        


        The
          attached stock option grant letter refers to your STAR award. The grant
          was
          determined by dividing the gross award amount to be paid in stock options
          (shown
          on your award summary previously distributed) by the [DATE] average stock
          price
          of $ [NUMBER]. The result was rounded up to the next full share, with those
          full
          shares multiplied by [NUMBER]. No further action to accept this grant is
          required.

        


        You
          may
          retain these STAR stock options until their expiration date in [NUMBER]
          years
          even if you leave the Company, as long as you are in good standing. This
          is true
          for STAR stock options only as they represent payment for the award that
          you
          have already earned. These options will vest in [NUMBER] years.

        


        Stock
          options are granted under the terms and conditions of the 2001 Procter
&
Gamble Stock and Incentive Compensation Plan. The updated plan prospectus
          is
          available via the [WEBSITE].

        


        Please
          keep a copy of the grant letter for your records. If you have any questions
          about the award granted, please direct them to [NAME]. Questions related
          to the
          exercise process should be directed to [NAME].

        


        [NAME]

        


        *
          Recipients of stock appreciation rights should see their subsidiary Chief
          Financial Officer regarding the procedure for redeeming such
          rights.


        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        


        Grant
          Letter for STAR Award in Stock Options 

        and
          Stock Appreciation Rights

        


        [DATE]

        [NAME]

        Subject: Non-Statutory
          Stock Option Series xx-STAR-xx

        


        In
          recognition of your contributions to the success of the business, the Company
          hereby grants you an option to purchase, in accordance with and subject
          to the
          terms of The Procter & Gamble 2001 Stock and Incentive Compensation Plan,
          the Regulations of the Compensation & Leadership Development Committee of
          the Board of Directors and the Exercise Instructions in place from time
          to time,
          shares of the Procter & Gamble Common Stock as follows:

        


        Grant
          Value:             
[NUMBER]

        Option
          Price per Share:     [NUMBER]

        Number
          of
          Shares:        [NUMBER]

        Date
          of
          Grant:          
[DATE]

        Expiration
          of Option:        
[DATE]

        Option
          Exercisable:          
[NUMBER]%
          after [DATE]

        


        You
          may
          access, download and/or print the terms, or any portion thereof, of the
          Plan by
          activating this hyperlink [LINK]. Nonetheless, if you would prefer to receive
          a
          paper copy of The Procter & Gamble 2001 Stock and Incentive Compensation
          Plan Prospectus, please send a written request via email to [EMAIL ADDRESS].
          Please understand that you will continue to receive future Plan prospectuses
          via
          electronic mail even though you may have requested a paper copy.

        


        This
          option is not transferable other than by will or the laws of descent and
          distribution and is exercisable during your life only by you. The Compensation
          & Leadership Development Committee has waived the provisions of Article G,
          paragraph 4 in the event of separation from the Company.

        


        Please
          note that when the issue or transfer of the Common Stock covered by this
          option
          may, in the opinion of the Company, conflict or be inconsistent with any
          applicable law or regulation of any governmental agency, the Company reserves
          the right to refuse to issue or transfer said Common Stock and that any
          outstanding stock options may be suspended or terminated if you engage
          in
          actions that are significantly contrary to the best interests of the Company
          or
          any of its subsidiaries.

        


        Under
          IRS
          standards of professional practice, certain tax advice must meet requirements
          as
          to form and substance. To assure compliance with these standards, we disclose
          to
          you that this communication is not intended or written to be used, and
          cannot be
          used, for the purpose of avoiding penalties, or promoting, marketing or
          recommending to another party any transaction or matter addressed
          herein.

        


        You
          do
          not need to do anything further to accept this award under the terms of
          the 2001
          Stock Plan.

        


        The
          Procter & Gamble Company

        [NAME]

        


        


        


        


         

        



        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        


        Grant
          Letter for STAR Award in RSUs 

        


        


        [DATE]

        [NAME]

        


        Subject: Award
          of Restricted Stock Units (STAR)

        


        This
          is
          to advise you that The Procter & Gamble Company, an Ohio corporation, is
          awarding you with Restricted Stock Units, on the dates and in the amounts
          listed
          below, pursuant to The Procter & Gamble 2001 Stock and Incentive
          Compensation Plan, and subject to the attached Statement of Terms and Conditions
          Form [CODE]

        


        Grant
          Date:              [DATE]

        Original
          Settlement Date:    [DATE]

        Number
          of
          Restricted Stock Units: [NUMBER

        


        Paragraph
          3(a) of Statement of Terms and Conditions Form [CODE] is not
          waived.

        


        As
          you
          will see from the Statement of Terms and Conditions Form [CODE], under
          certain
          circumstances you may agree with The Procter & Gamble Company to delay the
          settlement of your Restricted Stock Units beyond the Original Settlement
          Date.
          You may want to consult your personal tax advisor before making a decision
          about
          this matter.

        


        THE
          PROCTER & GAMBLE COMPANY

        [NAME]

        


        


        
          	
                  o

                	
                  I
                    hereby accept the Award of Restricted Stock Units set forth above
                    in
                    accordance with and subject to the terms of The Procter & Gamble 2001
                    Stock and Incentive Compensation Plan and the attached Statement
                    of Terms
                    and Conditions for Restricted Stock Units, with which I am familiar.
                    I
                    agree that the Award of Restricted Stock Units, The Procter & Gamble
                    2001 Stock and Incentive Compensation Plan, and the attached
                    Statement of
                    Terms and Conditions for Restricted Stock Units together constitute
                    an
                    agreement between the Company and me in accordance with the terms
                    thereof
                    and hereof, and I further agree that any legal action related
                    to this
                    Award of Restricted Stock Units may be brought in any federal
                    or state
                    court located in Hamilton County, Ohio, USA, and I hereby accept
                    the
                    jurisdiction of these courts and consent to service of process
                    from said
                    courts solely for legal actions related to this Award of Restricted
                    Stock
                    Units. 

                


        

        


        
          	
                  o

                	
                  I
                    hereby reject the Award of Restricted Stock Units set forth
                    above.

                


        

        


        


        


        ___________________________________________________________________________

        Date                     Signature


        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        


        Appendix
          4: BGP Award Letter (Three-Year Award example)

        


        [DATE]

        


        TO: [NAME]

        


        Your
          award is calculated by multiplying your three-year target times the payout
          factor and subtracting any interim payments made to you in Year 1 and Year
          2.

        


        Three-Year
          Target:             
$[NUMBER]

        Payout
          Factor:     [NUMBER]%

        Total
          Award:     $[NUMBER]

        Interim
          Payment Year 1:      $[NUMBER]

        Interim
          Payment Year 2:      $[NUMBER]

        Final
          BGP
          Payment:           
$[NUMBER]

        


        Your
          final BGP award is $[NUMBER]. You will receive 50% of your award in three-year
          restricted stock units consistent with the program design. The other 50%
          will be
          delivered in the form shown below which you designated in your previous
          election(s). Your award will be paid on September 15.

        


        Payment
          Preference

        3-Year
          RSUs:                      
[NUMBER]

        Cash:    $[NUMBER]

        RSUs:                          
          [NUMBER]

        Deferred
          Compensation      $[NUMBER]

        


        Thank
          you
          for your leadership in achieving outstanding business and organizational
          results
          during the past three years.

        


        [NAME]


        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        


        Appendix
          5: Grant Letter for BGP Award in Restricted Stock
          Units

        


        


        [DATE]

        [NAME]

        


        Subject: Award
          of Restricted Stock Units
          - BGP [Three-Year / Elected]

        


        This
          is
          to advise you that The Procter & Gamble Company, an Ohio corporation, is
          awarding you with Restricted Stock Units, on the dates and in the amounts
          listed
          below, pursuant to The Procter & Gamble 2001 Stock and Incentive
          Compensation Plan, and subject to the attached Statement of Terms and Conditions
          Form [CODE]

        


        Grant
          Date:                                                         
[DATE]

        Forfeiture
          Date [for Three-Year RSUs only]:    [DATE]

        Original
          Settlement
          Date:                                     
[DATE]

        Number
          of
          Restricted Stock
          Units:                      
[NUMBER

        


        Paragraph
          3(a) of Statement of Terms and Conditions Form [CODE] is not waived.


        


        As
          you
          will see from the Statement of Terms and Conditions Form [CODE], under
          certain
          circumstances you may agree with The Procter & Gamble Company to delay the
          settlement of your Restricted Stock Units beyond the Original Settlement
          Date.
          You may want to consult your personal tax advisor before making a decision
          about
          this matter.

        


        THE
          PROCTER & GAMBLE COMPANY

        [NAME]

        


        


        
          	
                  o

                	
                  I
                    hereby accept the Award of Restricted Stock Units set forth above
                    in
                    accordance with and subject to the terms of The Procter & Gamble 2001
                    Stock and Incentive Compensation Plan and the attached Statement
                    of Terms
                    and Conditions for Restricted Stock Units, with which I am familiar.
                    I
                    agree that the Award of Restricted Stock Units, The Procter & Gamble
                    2001 Stock and Incentive Compensation Plan, and the attached
                    Statement of
                    Terms and Conditions for Restricted Stock Units together constitute
                    an
                    agreement between the Company and me in accordance with the terms
                    thereof
                    and hereof, and I further agree that any legal action related
                    to this
                    Award of Restricted Stock Units may be brought in any federal
                    or state
                    court located in Hamilton County, Ohio, USA, and I hereby accept
                    the
                    jurisdiction of these courts and consent to service of process
                    from said
                    courts solely for legal actions related to this Award of Restricted
                    Stock
                    Units. 

                


        

        


        
          	
                  o

                	
                  I
                    hereby reject the Award of Restricted Stock Units set forth
                    above.

                


        

        


        


        


        ___________________________________________________________________________

        Date                        Signature