Document:

EX-10.2

 

Exhibit 10-2

 

The Procter & Gamble Company

Executive Offices

1 Procter & Gamble Plaza, Cincinnati, Ohio 45202-3315

August 14, 2007

To: Participants in The Procter & Gamble 2001 Stock and Incentive Compensation Plan

     This document provides a copy of The Procter & Gamble 2001 Stock and Incentive Compensation
Plan followed by important Additional Information. Please save this with your stock option
materials.

Very truly yours,

James J. Johnson

Secretary

This document constitutes part of a prospectus covering securities that have been registered under
the Securities Act of 1933.

R e w a r d s   o f   L e a d e r s h i p

 

 

THE PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION PLAN

(as adjusted for stock split on May 21, 2004 and amended on October 10, 2006)

ARTICLE A — Purpose.

     The purposes of The Procter & Gamble 2001 Stock and Incentive Compensation Plan (the “Plan”)
are to strengthen the alignment of interests between those employees of The Procter & Gamble
Company (the “Company”) and its subsidiaries who are largely responsible for the success of the
business (the “Participants”) and the Company’s shareholders through ownership behavior and the
increased ownership of shares of the Company’s common stock (the “Common Stock”), and to encourage
the Participants to remain in the employ of the Company and its subsidiaries. This will be
accomplished through the granting of options to purchase shares of Common Stock, the granting of
performance related awards, the payment of a portion of the Participants’ remuneration in shares of
Common Stock, the granting of deferred awards related to the increase in the price of Common Stock,
and the granting of restricted stock units (“RSUs”) or other awards that are related to the price
of Common Stock.

ARTICLE B — Administration.

     1. The Plan shall be administered by the Compensation Committee (the “Committee”) of the Board
of Directors of the Company (the “Board”), or such other committee as may be designated by the
Board. The Committee shall consist of not fewer than three (3) members of the Board who are
“Non-Employee Directors” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (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. The Committee may establish such regulations, provisions, and procedures within the
terms of the Plan as, in its opinion, may be advisable for the administration and operation of the
Plan, and may designate the Secretary of the Company or other employees of the Company to assist
the Committee in the administration and operation of the Plan and may grant authority to such
persons to execute documents on behalf of the Committee. The Committee shall report to the Board
on the administration of the Plan not less than once each year.

     2. Subject to the express provisions of the Plan, the Committee shall have authority: to grant
nonstatutory and incentive stock options; to grant stock appreciation rights either freestanding or
in tandem with simultaneously granted stock options; to grant Performance Awards (as defined in
Article J); to award a portion of a Participant’s remuneration in shares of Common Stock subject to
such conditions or restrictions, if any, as the Committee may determine; to award RSUs or other
awards that are related to the price of Common Stock; to determine all the terms and provisions of
the respective stock option, stock appreciation right, stock award, RSU, or other 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; to provide for special terms for any stock
options, stock appreciation rights, stock awards, RSUs or other awards granted to Participants who
are foreign nationals or who are employed by the Company or any of its subsidiaries outside of the
United States of America in order to fairly accommodate for differences in local law, tax policy or
custom and to approve such supplements to or amendments, restatements or alternative versions of
the Plan as the Committee may consider necessary or appropriate for such purposes (without
affecting the terms of the Plan for any other purpose); and to make all other determinations it
deems necessary or advisable for administering the Plan. In addition, at the time of grant 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), 4(b) and 4(c); and
	 
	 	(d)	 	impose conditions in lieu of those set forth in Article G, Paragraphs 4 through 7,
for nonstatutory stock options, stock appreciation rights, stock awards, RSUs, or
Performance Awards which do not increase or extend the rights of the Participant.

ARTICLE C — Participation.

     The Committee shall select as Participants 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.

ARTICLE D — Limitation on Number of Shares Available Under the Plan.

     1. Unless otherwise authorized by the shareholders and subject to Paragraph 2 of this Article
D, the maximum aggregate number of shares available for award under the Plan shall be one hundred
ninety million (190,000,000) shares. Any of the authorized shares may be used for any of the types
of awards described in the Plan, except that no more than fifteen percent (15%) of the authorized
shares may be awarded as restricted or unrestricted stock.

     2. In addition to the shares authorized for award by Paragraph 1 of this Article, the
following shares may be awarded under the Plan:

          (a) shares that were authorized to be awarded under The Procter & Gamble 1992 Stock Plan (the
“1992 Plan”), but that were not awarded under the 1992 Plan;

          (b) shares awarded under the Plan or the 1992 Plan that are subsequently forfeited in
accordance with the Plan or the 1992 Plan, respectively;

          (c) shares tendered by a Participant in payment of all or part of the exercise price of a
stock option awarded under the Plan or the 1992 Plan;

          (d) shares tendered by or withheld from a Participant in satisfaction of withholding tax
obligations with respect to a stock option awarded under the Plan or the 1992 Plan.

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 determined by the Board and may consist, in whole or in part, of
authorized but unissued shares or treasury shares. 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 the Plan, restricted or unrestricted stock awarded or issued following
redemption of RSUs under the terms of the Plan shall be authorized but unissued shares, treasury
shares, or shares acquired in the open market 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 the
Plan, each Participant agrees as follows:

	 	(a)	 	The right to exercise any stock option or stock appreciation right shall be
conditional upon certification by the Participant at time of exercise that the
Participant intends to remain in the employ of the Company or one of its subsidiaries for
at least one (1) year following the date of the exercise of the stock option or stock
appreciation right (provided that termination of employment due to Retirement or Special
Separation shall not constitute a breach of such certification), 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 its subsidiaries’ trade secrets and
confidential information and thereby help insure the long-term success of the business,
the Participant, 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 Participant’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 Participant, as a
consequence of the Participant’s employment with the Company or one of its subsidiaries,
to be in development):

	 	(1)	 	with respect to which the Participant’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 Participant, as a
consequence of the Participant’s job performance and duties, acquired knowledge of
trade secrets or other confidential information of the Company or its subsidiaries.

	 	 	 	For purposes of this paragraph, it shall be conclusively presumed that Participants 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 Participant (which Participant hereby acknowledges) to not
use or disclose the Company’s or its subsidiaries’ trade secrets and confidential
information known to the Participant until any particular trade secret or confidential
information become generally known (through no fault of the Participant), 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 Participants who have job
responsibilities outside of the United States, the appropriate foreign country or
countries’ industry. As used in this Article, “trade secrets and other confidential
information” also includes personnel knowledge about a manager, or managers, of the
Company or its subsidiaries gained in the course of Participant’s

 

 

	 	 	 	employment with the Company or its subsidiaries (including personnel ratings or
rankings, manager or peer evaluations, performance records, special skills or abilities,
compensation, work and development plans, training, nature of specific project and work
assignments, or specialties developed as a result of such assignments) which directly or
indirectly affords the Participant a confidential basis to solicit, encourage, or
participate in soliciting any manager, or managers, of the Company or any subsidiary to
terminate his or her relationship with the Company or that subsidiary.
	 
	 	(d)	 	By acceptance of any offered stock option or stock appreciation rights granted
under the terms of the Plan, the Participant acknowledges that if the Participant 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
Participant from doing so. The Participant 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 Participant 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 Participant, 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 F shall for any reason, whether
by application of existing law or law which may develop after the Participant’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 Participant 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 a Participant has been granted a stock option or a stock appreciation right
under the Plan shall not limit the right of the employer to terminate the Participant’s employment
at any time.

          Because a main purpose of the Plan is to strengthen the alignment of interests between
employees of the Company (including all subsidiaries) and its shareholders to ensure the continued
success of the Company, the Committee is authorized to suspend or terminate any outstanding stock
option or stock appreciation right of a Participant if the Committee determines the Participant has
acted significantly contrary to the best interests of the Company or its subsidiaries. For
purposes of this paragraph, an action taken “significantly contrary to the best interests of the
Company or its subsidiaries” includes without limitation any action taken or threatened by the
Participant that the Committee determines has, or is reasonably likely to have, a significant
adverse impact on the reputation, goodwill, stability, operation, personnel retention and
management, or business of the Company or any subsidiary. This paragraph is in addition to any
remedy the Company or a subsidiary may have at law or in equity, including without limitation
injunctive and other appropriate relief.

     3. The maximum number of shares with respect to which stock options or stock appreciation
rights may be granted to any Participant in any calendar year shall not exceed 2,000,000 shares.

 

 

     4. The aggregate fair market value (determined at the time when the incentive stock option is
exercisable for the first time by a Participant during any calendar year) of the shares for which
any Participant may be granted incentive stock options under the 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 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 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 on the date of grant.

     8. Unless otherwise authorized by the shareholders of the Company, neither the Board nor the
Committee shall authorize the amendment of any outstanding stock option or stock appreciation right
to reduce the exercise price.

     9. No stock option or stock appreciation right shall be cancelled and replaced with awards
having a lower exercise price without the prior approval of the shareholders of the Company. This
Article F, Paragraph 9 is intended to prohibit the repricing of “underwater” stock options and
stock appreciation rights and shall not be construed to prohibit the adjustments permitted under
Article K of the Plan.

     10. The Committee may require any Participant to accept any stock options or stock
appreciation rights by means of electronic signature.

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 Participant.

     3. Unless a transfer has been duly authorized by the Committee pursuant to Article G,
Paragraph 6 of the Plan, during the lifetime of the Participant, stock options and stock
appreciation rights may be exercised only by the Participant personally, or, in the event of the
legal incompetence of the Participant, by the Participant’s duly appointed legal guardian.

     4. In the event that a Participant 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 Participant; (2) Retirement or Special Separation 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).

 

 

	 	(b)	 	Any exercisable portions thereof are then void, except in the case of: (1) death
of the Participant; (2) Retirement or Special Separation; or (3) any option as to which
the Committee has waived, at the time of grant, the provisions of this Article G,
Paragraph 4(b).
	 
	 	(c)	 	In the case of a Special Separation which occurs prior to October 2, 2007, any
stock option or stock appreciation right must be exercised within the time specified in
the original grant or five (5) years from the date of Special Separation, whichever is
shorter. For a Special Separation which occurs on or after October 2, 2007, any stock
option or stock appreciation right must be exercised within the time specified in the
original grant.

     5. In the case of the death of a Participant, 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 Participant, at any time prior to
the expiration date of the stock options or stock appreciation rights.

     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 Participant, the duly appointed executors and
administrators of the estate of the deceased Participant 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 Participant’s estate. Notwithstanding the foregoing, the Committee
may authorize the transfer of stock options and stock appreciation rights upon such terms and
conditions as the Committee may require. Such transfer shall become effective only upon the
Committee’s complete satisfaction that the proposed transferee has strictly complied with such
terms and conditions, and both the original Participant and the transferee shall be subject to the
same terms and conditions hereunder as the original Participant.

     7. Upon the exercise of stock appreciation rights, the Participant 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 Common Stock 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 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.

     8. Time spent on leave of absence shall be considered as employment for the purposes of the
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.

     9. 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 the Company as 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.

     10. The Committee may require any Participant to exercise any stock options or stock
appreciation rights by means of electronic signature.

ARTICLE H — Payment for Stock Options and Tax Withholding.

 

 

     Upon the exercise of a stock option, payment in full of the exercise price shall be made by
the Participant. As determined by the Committee, the stock option exercise price may be paid by
the Participant either in cash, shares of Common Stock valued at their fair market value on the
date of exercise, a combination thereof, or such other method as determined by the Committee. In
addition to payment of the exercise price, the Committee may authorize the Company to charge a
reasonable administrative fee for the exercise of any stock option. Furthermore, to the extent the
Company is required to withhold federal, state, local or foreign taxes in connection with any
Participant’s stock option exercise, the Committee may require the Participant to make such
arrangements as the Company may deem necessary for the payment of such taxes required to be
withheld (including, without limitation, relinquishment of a portion of such stock options or
relinquishment of a portion of the proceeds received by the Participant in a simultaneous exercise
and sale of stock during a “cashless” exercise). In no event, however, shall the Committee be
permitted to require payment from a Participant in excess of the maximum required tax withholding
rates.

ARTICLE I — Grant of Unrestricted Stock, Restricted Stock or RSUs.

     The Committee may grant Common Stock or RSUs to Participants under the Plan subject to such
conditions or restrictions, if any, as the Committee may determine. To the extent the Company is
required to withhold federal, state, local or foreign taxes in connection with the lapse of
restrictions on any Participant’s shares of Common Stock, the Committee may require the Participant
to make such arrangements as the Company may deem necessary for the payment of such taxes required
to be withheld (including, without limitation, relinquishment of a portion of such shares of Common
Stock). In no event, however, shall the Committee be permitted to require payment from a
Participant in excess of the maximum required tax withholding rates.

ARTICLE J — Performance Related Awards.

     1. The Committee, in its discretion, may establish performance goals for selected Participants
and authorize the granting of cash, stock options, stock appreciation rights, Common Stock, RSUs or
other awards that are related to the price of Common Stock, other property, or any combination
thereof (“Performance Awards”) to such Participants upon achievement of such established
performance goals during a specified time period (the “Performance Period”). The Committee, in its
discretion, shall determine the Participants eligible for Performance Awards, the performance goals
to be achieved during each Performance Period, the amount of any Performance Awards to be paid, and
the method of payment for any Performance Awards. Performance Awards may be granted either alone
or in addition to other grants made under the Plan.

     2. Notwithstanding the foregoing, any Performance Awards granted under Article J, Paragraph 1
to any Participant subject to the restrictions set forth in Section 162(m) of the Internal Revenue
Code of 1986, as amended (the “Code”) shall comply with all of the following requirements:

     (a) Each grant shall specify the specific performance objectives (the “Performance
Objectives”) which, if achieved, will result in payment or early payment of the Performance Award.
The Performance Objectives may be described in terms of Company-wide objectives that are related to
the individual Participant or objectives that are related to a subsidiary, division, department,
region, function or business unit of the Company in which the Participant is employed, and may
consist of one or more or any combination of the following criteria: stock price, market share,
sales revenue, cash flow, earnings per share, return on equity, total shareholder return, gross
margin, stock price growth measures, operating total shareholder return, net earnings or net income
(before or after taxes), return on assets or capital, earnings (before or after interest, taxes,
depreciation and/or amortization), operating margin, acquisition integration metrics, economic
value added, and/or costs. The Performance Objectives may be made relative to the performance of
other corporations. The Committee, in its discretion, may change or

 

 

modify these criteria, however, at all times the criterion must be valid performance criterion for
purposes of Section 162(m) of the Code. The Committee may not change the criteria or Performance
Objectives for any Performance Period that has already been approved by the Committee. The
Committee may cancel a Performance Period or replace a Performance Period with a new Performance
Period, provided that any such cancellation or replacement shall not cause the Performance Award to
fail to meet the requirements of Section 162(m) of the Code.

     (b) Each grant shall specify the minimum level of achievement required by the Participant
relative to the Performance Objectives to qualify for a Performance Award. In doing so, the grant
shall establish a formula for determining the percentage of the Performance Award to be awarded if
performance is at or above the minimum level, but falls short of full achievement of the specified
Performance Objectives. Each grant may also establish a formula for determining an additional
award above and beyond the Performance Award to be granted to the Participant if performance is at
or above the specified Performance Objectives. Such additional award shall also be established as
a percentage of the Performance Award. The Committee may decrease a Performance Award as
determined by the Performance Objectives, but in no case may the Committee increase any Performance
Award as determined by the Performance Objectives.

     (c) The maximum Performance Award that may be granted to any Participant for any one-year
Performance Period shall not exceed $20,000,000 or 800,000 shares of Common Stock (the “Annual
Maximum”). The maximum Performance Award that may be granted to any Participant for a Performance
Period greater than one year shall not exceed the Annual Maximum multiplied by the number of full
years in the Performance Period.

ARTICLE K — 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, stock appreciation rights or RSUs
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 L — Additional Provisions and Definitions.

     1. The Board may, at any time, repeal the Plan or may amend it except that no such amendment
may amend this paragraph, increase the total aggregate number of shares subject to the Plan, reduce
the price at which stock options or stock appreciation rights may be granted or exercised, 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. Participants 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 materially affected adversely, notice thereof shall be
given to the Participants holding such stock options and stock appreciation rights and such
amendments shall not be applicable without such Participant’s written consent. If the 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 granted pursuant to the Plan shall continue to be subject to such
conditions or restrictions.

     2. In the case of a Participant who is an employee of a subsidiary of the Company, performance
under the Plan, including the granting of shares of the Company, may be by the subsidiary. Nothing
in

 

 

the 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, transferee 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
the Plan except as to such shares, if any, as shall have been granted or transferred to him or her.
Nothing in the Plan shall preclude the awarding or granting 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 more than fifty percent (50%) of the total combined
voting power of all classes of stock is owned, directly or indirectly, by the Company or, if the
company does not issue stock, more than fifty percent (50%) of the total combined ownership
interest is owned, directly or indirectly, by the Company. In addition, the Board may designate
for participation in the 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 fifty percent (50%) or less of the total combined voting power of all
classes of such company’s stock, or, if the company does not issue stock, the Company’s direct or
indirect ownership is fifty percent (50%) or less of the company’s total combined ownership
interest.

     4. Notwithstanding anything to the contrary in the Plan, stock options and stock appreciation
rights granted hereunder shall vest immediately and any conditions or restrictions on Common Stock
shall lapse upon a “Change in Control.” A “Change in Control” shall mean the occurrence of any of
the following:

	 	(a)	 	An acquisition (other than directly from the Company) of any voting securities of
the Company (the “Voting Securities”) by any “Person” (as the term person is used for
purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such
Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty percent (20%) or more of the then outstanding shares or the
combined voting power of the Company’s then outstanding Voting Securities; provided,
however, in determining whether a Change in Control has occurred pursuant to this
Paragraph 4(a), shares or Voting Securities which are acquired in a “Non-Control
Acquisition” (as hereinafter defined) shall not constitute an acquisition which would
cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (i)
an employee benefit plan (or a trust forming a part thereof) maintained by (A) the
Company or (B) any corporation or other Person of which a majority of its voting power or
its voting equity securities or equity interest is owned, directly or indirectly, by the
Company (for purposes of this definition, a “Related Entity”), (ii) the Company or any
Related Entity, or (iii) any Person in connection with a “Non-Control Transaction” (as
hereinafter defined);
	 
	 	(b)	 	The individuals who, as of July 10, 2001 are members of the Board (the “Incumbent
Board”), cease for any reason to constitute at least half of the members of the Board;
or, following a Merger (as hereinafter defined) which results in a Parent Corporation (as
hereinafter defined), the board of directors of the ultimate Parent Corporation;
provided, however, that if the election, or nomination for election by the Company’s
common stockholders, of any new director was approved by a vote of at least two-thirds of
the Incumbent Board, such new director shall, for purposes of the Plan, be considered as
a member of the Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed office as
a result of either an actual or threatened “Election Contest” (as described in Rule
14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”)
including by reason of any agreement intended to avoid or settle any Election Contest or
Proxy Contest; or

 

 

	 	(c)	 	The consummation of:

	 	(i)	 	A merger, consolidation or reorganization with or into the Company or
in which securities of the Company are issued (a “Merger”), unless such Merger is a
“Non-Control Transaction.” A “Non-Control Transaction” shall mean a Merger where:

	 	(A)	 	the stockholders of the Company, immediately before such
Merger own directly or indirectly immediately following such Merger at least
fifty percent (50%) of the combined voting power of the outstanding voting
securities of (x) the corporation resulting from such Merger (the “Surviving
Corporation”) if fifty percent (50%) or more of the combined voting power of
the then outstanding voting securities of the Surviving Corporation is not
Beneficially Owned, directly or indirectly by another Person (a “Parent
Corporation”), or (y) if there is one or more Parent Corporations, the
ultimate Parent Corporation;
	 
	 	(B)	 	the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such Merger
constitute at least half of the members of the board of directors of (x) the
Surviving Corporation, if there is no Parent Corporation, or (y) if there is
one or more Parent Corporations, the ultimate Parent Corporation; and
	 
	 	(C)	 	no Person other than (1) the Company, (2) any Related
Entity, (3) any employee benefit plan (or any trust forming a part thereof)
that, immediately prior to such Merger was maintained by the Company or any
Related Entity, or (4) any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of twenty percent
(20%) or more of the then outstanding Voting Securities or shares, has
Beneficial Ownership of twenty percent (20%) or more of the combined voting
power of the outstanding voting securities or common stock of (x) the
Surviving Corporation if there is no Parent Corporation, or (y) if there is
one or more Parent Corporations, the ultimate Parent Corporation;

	 	(ii)	 	A complete liquidation or dissolution of the Company; or
	 
	 	(iii)	 	The sale or other disposition of all or substantially all of the
assets of the Company to any Person (other than a transfer to a Related Entity or
under conditions that would constitute a Non-Control Transaction with the
disposition of assets being regarded as a Merger for this purpose or the
distribution to the Company’s stockholders of the stock of a Related Entity or any
other assets).

     Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because
any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount
of the then outstanding shares or Voting Securities as a result of the acquisition of shares or
Voting Securities by the Company which, by reducing the number of shares or Voting Securities then
outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons,
provided that if a Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of shares or Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional
shares or Voting Securities which increases the percentage of the then outstanding shares or Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.

 

 

     5. The term “Special Separation” shall mean any termination of employment that occurs prior to
the time a Participant is eligible to retire, except a termination for cause or a voluntary
resignation that is not initiated or encouraged by the Company.

     6. The term “Retirement” shall mean: (a) retirement in accordance with the provisions of any
appropriate retirement plan of the Company or any of its subsidiaries; or (b) termination of
employment under the permanent disability provision of any retirement plan of the Company or any of
its subsidiaries.

ARTICLE M — Consent.

     Every Participant who receives a stock option, stock appreciation right, RSU, or grant of
shares pursuant to the Plan shall be bound by the terms and provisions of the Plan and of the stock
option, stock appreciation right, RSU, or grant of shares agreement referable thereto, and the
acceptance of any stock option, stock appreciation right, RSU, or grant of shares pursuant to the
Plan shall constitute a binding agreement between the Participant and the Company and its
subsidiaries and any successors in interest to any of them. Every Person who receives a stock
option, stock appreciation right, RSU, or grant of shares from a Participant pursuant to the Plan
shall, in addition to such terms and conditions as the Committee may require upon such grant, be
bound by the terms and provisions of the Plan and of the stock option, stock appreciation right,
RSU, or grant of shares agreement referable thereto, and the acceptance of any stock option, stock
appreciation right, RSU, or grant of shares by such Person shall constitute a binding agreement
between such Person and the Company and its subsidiaries and any successors in interest to any of
them. The Plan shall be governed by and construed in accordance with the laws of the State of
Ohio, United States of America.

ARTICLE N — Purchase of Shares or Stock Options.

     The Committee may authorize any Participant to convert cash compensation otherwise payable to
such Participant into stock options or shares of Common Stock under the Plan upon such terms and
conditions as the Committee, in its discretion, shall determine. Notwithstanding the foregoing, in
any such conversion the shares of Common Stock shall be valued at no less than one hundred percent
(100%) of their fair market value.

ARTICLE O — Duration of Plan.

     The Plan will terminate on July 10, 2011 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 the 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 or RSUs have been
transferred prior to such termination.

 

 

ADDITIONAL INFORMATION

	1.	 	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.

	2.	 	U.S. Tax Effects
	 
	 	 	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, restricted stock units 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 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.

	3.	 	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.

	4.	 	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 most recent fiscal year ended
June 30;
	 
	 	2.	 	The Company’s Quarterly Report on Form 10-Q for the most recent quarter(s); and
	 
	 	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. Jay A. Ernst, Manager,
Shareholder Services, The Procter & Gamble Company, P.O. Box 5572, Cincinnati, Ohio 45201, (513)
983-3413.

	5.	 	Additional Information

     Additional information about the Plan and its administrators may be obtained from Mr. E.J.
Wunsch, Assistant Secretary, The Procter & Gamble Company, One Procter & Gamble Plaza, Cincinnati,
Ohio 45202, (513) 983-4370.EX-10.3

 

Exhibit 10-3

THE PROCTER & GAMBLE 2003 NON-EMPLOYEE DIRECTORS’

STOCK PLAN

(as amended October 9, 2007)

ARTICLE A — Purpose.

     The purposes of The Procter & Gamble 2003 Non-Employee Directors’ Stock Plan (the “Plan”) are
to strengthen the alignment of interests between the non-employee Directors (“Participants”) and
the shareholders of The Procter & Gamble Company (the “Company”) through ownership behavior and the
increased ownership of shares of the Company’s common stock (“Common Stock”). This will be
accomplished by allowing each Participant to elect voluntarily to convert a portion or all of
his/her cash fees for services as a Director into Common Stock or RSUs (as hereinafter defined),
and by granting Participants (i) restricted stock units or other awards related to the price of
Common Stock (“RSUs”), (ii) shares of Common Stock restricted in a manner determined by the
Committee (“Restricted Shares”), (iii) non-qualified options to purchase shares of Common Stock
(“Stock Options”), and/or (iv) stock appreciation rights (“SARs”).

ARTICLE B — Administration.

	1.	 	The Plan shall be administered by the Compensation Committee of the Board of Directors of the
Company (the “Board”), or such other committee as may be designated by the Board (the
“Committee”). The Committee shall consist of not less than three (3) members of the Board who
are “Non-Employee Directors” as defined in Rule 16b-3 under the Securities Exchange Act of
1934 (the “1934 Act”), as amended, or any successor rule or definition adopted by the
Securities and Exchange Commission, or such other number of Non-Employee Directors required
from time to time by such rule or any successor rule 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. The Committee may establish such regulations, provisions, and procedures within
the terms of the Plan as, in its opinion, may be advisable for the administration and
operation of the Plan, and may designate the Secretary of the Company or other employees of
the Company to assist the Committee in the administration and operation of the Plan and may
grant authority to such persons to execute documents on behalf of the Committee. The
Committee shall report to the Board on the administration of the Plan not less than once each
year.
	 
	2.	 	Subject to the express provisions of the Plan, the Committee shall have authority: (i) 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 or RSUs of the Company, or partly
in cash and partly in whole shares of the Common Stock or RSUs of the Company, subject to such
conditions or restrictions, if any, as the Committee may determine; (ii) to grant Participants
Restricted Shares, subject to such conditions or restrictions, if any, as the Committee may
determine; (iii) to grant RSUs, subject to such conditions or restrictions, if any, as the
Committee may determine; (iv) to grant Participants Stock Options, subject to such conditions
or restrictions, if any, as the Committee may determine; (v) to grant Participants SARs,
subject to such conditions or restrictions, if any, as the Committee may determine; (vi) to
make all other determinations it deems necessary or advisable for administering the Plan; and
(vii) to provide for special terms for any RSUs, Restricted Shares, Stock Options, SARs or
other awards granted to Participants who are foreign nationals or who reside outside of the
United States of

 

 

	 	 	America in order to fairly accommodate for differences in local law, tax policy or custom
and to approve such supplements to or amendments, restatements or alternative versions of
the Plan as the Committee may consider necessary or appropriate for such purposes (without
affecting the terms of the Plan for any purpose); and to make all other determinations it
deems necessary or advisable for administering the Plan.

ARTICLE C — Participation.

     Participation in the Plan shall be limited to non-employee Directors of the Company.

ARTICLE D — Limitation on Number of Shares Available Under the Plan.

	1.	 	The maximum aggregate number of shares available for grant under the Plan shall be 1,000,000
shares.
	 
	2.	 	In addition to the shares authorized for award by Paragraph 1 of this Article, the following
shares may be awarded under the Plan:

	 	(a)	 	shares that were authorized to be awarded under The Procter & Gamble 1993
Non-Employee Directors’ Stock Plan (the “1993 Plan”), but that were not awarded under
the 1993 Plan;
	 
	 	(b)	 	shares awarded under the Plan or the 1993 Plan that are subsequently
forfeited in accordance with the Plan or the 1993 Plan, respectively; or shares
tendered by or withheld from a Participant in payment of all or part of the exercise
price of a stock option awarded under the Plan or the 1993 Plan.

ARTICLE E — Shares Subject to Use Under the Plan.

     Shares of Common Stock to be granted by the Company or delivered by the Company upon exercise
of Stock Options shall be treasury shares.

ARTICLE F —Stock Options and SARs

	1.	 	The Committee may, from time to time, grant Participants one or more Stock Options to
purchase shares of Common Stock, each having an exercise price equal to no less than the
average of the high and low quotations for Common Stock on the New York Stock Exchange on the
day of the grant.
	 
	2.	 	The Committee may, from time to time, grant Participants one or more SARs each entitling the
Participant to receive, upon exercise, a redemption differential for each such SAR which shall
be the difference between the average of the high and low quotations for one share of Common
Stock on the New York Stock Exchange on the date of exercise and the exercise price of the SAR
then being exercised. The exercise price for each SAR granted under this Plan shall be the
average of the high and low quotations for Common Stock on the New York Stock Exchange on the
day of the grant.
	 
	3.	 	Stock Options and SARs shall have a term of not less than ten (10) years from the date of
grant, subject to earlier termination as provided herein, and shall be exerciseable one
hundred percent (100%) not less than one (1) year from the date of grant, except in the case
of death of a Participant, in which case such Participant’s Stock Options or SARs

 

 

	 	 	shall immediately vest and be exercisable in accordance with this Article F.
	 
	4.	 	In the case of death of a Participant, the persons to whom the Stock Options or SARs have
been transferred by will or the laws of descent and distribution shall have the privilege of
exercising remaining Stock Options or SARs or parts thereof, whether or not exercisable on the
date of death of such Participant, at any time prior to the expiration date of such Stock
Options or SARs.
	 
	5.	 	Stock Options are not transferable other than by will or by the laws of descent and
distribution. For the purpose of exercising Stock Options or SARs after the death of the
Participant, the duly appointed executors and administrators of the estate of the deceased
Participant shall have the same rights with respect to the Stock Options and SARs as legatees
or distributees would have after distribution to them from the Participant’s estate, subject
in all respects to Article J hereof.
	 
	6.	 	If a Participant ceases to be a Director while holding unexercised Stock Options or SARs,
such Stock Options or SARs are then void, except in the case of (i) death, in which case such
Stock Options or SARS may be transferred in accordance with this Article F and Article J
hereof, (ii) disability, (iii) retirement at the end of a term, (iv) retirement after
attaining the age of sixty nine (69), (v) resignation from the Board following a Participant’s
retirement from a principal employer in good standing under the terms of that employer’s
retirement plan, or (vi) resignation from the Board for reasons of antitrust laws or the
Company’s conflict of interest, corporate governance or continued service policies. In cases
covered by (ii), (iii), (iv), (v) and (vi) above, the Participant shall be immediately vested
in his or her Stock Options or SARs subject to all other terms of such Stock Options or SARs.
	 
	7.	 	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 Common Stock to be valued at their fair market value on the date of exercise, or a
combination thereof.

ARTICLE G — 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, (ii) the number of shares covered
by outstanding Stock Options, SARs, Restricted Shares or RSUs, and (iii) the exercise price of
stock options or the grant price of SARs 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 H —Grant of Common Stock, Restricted Shares or RSUs.

	1.	 	The Committee may grant Common Stock, Restricted Shares, or RSUs to Participants under the
Plan subject to such conditions or restrictions, if any, as the Committee may determine.

 

 

	2.	 	The shares granted under this Article H shall be valued at the closing price for Common Stock
on the New York Stock Exchange on the day of the grant to a Participant. All shares granted
shall be full shares, rounded up to the nearest whole share.

ARTICLE I — Additional Provisions.

	1.	 	The Board may, at any time, repeal the Plan or may amend it except that no such amendment may
amend this paragraph, increase the total aggregate number of shares subject to the Plan, alter
the persons eligible to receive shares under the Plan. Participants and the Company shall be
bound by any such amendments as of their effective dates, but if any outstanding grants are
materially affected adversely, notice thereof shall be given to Participants holding such
grants and such amendments shall not be applicable without such Participant’s written consent.
If the Plan is repealed in its entirety, all theretofore granted shares subject to conditions
or restrictions granted pursuant to the Plan shall continue to be subject to such conditions
or restrictions. Notwithstanding this or any other provision of this Plan, Stock Options and
SARs may not be re-priced or re-valued except in accordance with Article G hereof.
	 
	2.	 	Notwithstanding anything to the contrary in this Plan, Stock Options and SARs granted
hereunder shall vest immediately, and any conditions or restrictions on Common Stock,
Restricted Stock or RSUs shall lapse, upon a “Change in Control.” A “Change in Control” shall
mean the occurrence of any of the following:

	 	(a)	 	An acquisition (other than directly from the Company) of any voting securities of
the Company (the “Voting Securities”) by any “Person” (as the term person is used for
purposes of Section 13(d) or 14(d) of the 1934 Act), immediately after which such Person
has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the 1934
Act) of twenty percent (20%) or more of the then outstanding shares or the combined
voting power of the Company’s then outstanding Voting Securities; provided, however, in
determining whether a Change in Control has occurred pursuant to this Section 2(a),
shares or Voting Securities which are acquired in a “Non-Control Acquisition” (as
hereinafter defined) shall not constitute an acquisition which would cause a Change in
Control. A “Non-Control Acquisition” shall mean an acquisition by (i) an employee
benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B)
any corporation or other Person of which a majority of its voting power or its voting
equity securities or equity interest is owned, directly or indirectly, by the Company
(for purposes of this definition, a “Related Entity”), (ii) the Company or any Related
Entity, or (iii) any Person in connection with a “Non-Control Transaction” (as
hereinafter defined);
	 
	 	(b)	 	The individuals who, as of July 10, 2001 are members of the Board (the “Incumbent
Board”), cease for any reason to constitute at least half of the members of the Board;
or, following a Merger (as hereinafter defined) which results in a Parent Corporation
(as hereinafter defined), the board of directors of the ultimate Parent Corporation;
provided, however, that if the election, or nomination for election by the Company’s
common stockholders, of any new director was approved by a vote of at least two-thirds
of the Incumbent Board, such new director shall, for purposes of the Plan, be considered
as a member of the Incumbent Board; provided further, however, that no individual shall
be considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened “Election Contest” (as described in
Rule 14a-11 promulgated under the 1934 Act) or other actual or

 

 

	 	 	 	threatened solicitation of proxies or consents by or on behalf of a Person other than
the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
	 
	 	(c)	 	The consummation of:

	 	(i)	 	A merger, consolidation or reorganization with or into the Company or
in which securities of the Company are issued (a “Merger”), unless such Merger is
a “Non-Control Transaction”. A “Non-Control Transaction” shall mean a Merger
where:

	 	(A)	 	the stockholders of the Company, immediately before such
Merger own directly or indirectly immediately following such Merger at least
fifty percent (50%) of the combined voting power of the outstanding voting
securities of (x) the corporation resulting from such Merger (the “Surviving
Corporation”) if fifty percent (50%) or more of the combined voting power of
the then outstanding voting securities of the Surviving Corporation is not
Beneficially Owned, directly or indirectly by another Person (a “Parent
Corporation”), or (y) if there is one or more Parent Corporations, the
ultimate Parent Corporation;
	 
	 	(B)	 	the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such
Merger constitute at least half of the members of the board of directors of
(x) the Surviving Corporation, if there is no Parent Corporation, or (y) if
there is one or more Parent Corporations, the ultimate Parent Corporation;
and
	 
	 	(C)	 	no Person other than (1) the Company, (2) any Related
Entity, (3) any employee benefit plan (or any trust forming a part thereof)
that, immediately prior to such Merger was maintained by the Company or any
Related Entity, or (4) any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of twenty percent
(20%) or more of the then outstanding Voting Securities or shares, has
Beneficial Ownership of twenty percent (20%) or more of the combined voting
power of the outstanding voting securities or common stock of (x) the
Surviving Corporation if there is no Parent Corporation, or (y) if there is
one or more Parent Corporations, the ultimate Parent Corporation;

	 	(ii)	 	A complete liquidation or dissolution of the Company; or
	 
	 	(iii)	 	The sale or other disposition of all or substantially all of the
assets of the Company to any Person (other than a transfer to a Related Entity or
under conditions that would constitute a Non-Control Transaction with the
disposition of assets being regarded as a Merger for this purpose or the
distribution to the Company’s stockholders of the stock of a Related Entity or any
other assets).

     Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because
any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount
of the then outstanding shares or Voting Securities as a result of the acquisition of shares or
Voting Securities by the Company which, by reducing the number of shares or

 

 

Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned
by the Subject Persons, provided that if a Change in Control would occur (but for the operation of
this sentence) as a result of the acquisition of shares or Voting Securities by the Company, and
after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any
additional shares or Voting Securities which increases the percentage of the then outstanding
shares or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur.

ARTICLE J —Consent.

     Every Participant who receives a grant of Common Stock, Stock Options, SARs, Restricted Shares
or RSUs pursuant to the Plan shall be bound by the terms and provisions of the Plan and of any
grant agreement referable thereto, and the acceptance of any grant of shares or RSUs pursuant to
the Plan shall constitute a binding agreement between the Participant and the Company and any
successors in interest to any of them. Every person who receives Stock Options or SARs, in
accordance with Article F hereof, that a Participant received pursuant to the Plan shall, in
addition to such terms and conditions as the Committee may require upon such grant, be bound by the
terms and provisions of the Plan and of the grant of Stock Options or SARs referable thereto, and
the acceptance of any grant of shares or RSUs by such person shall constitute a binding agreement
between such person and the Company and any successors in interest to any of them. The Plan shall
be governed by and construed in accordance with the laws of the State of Ohio, United States of
America.

ARTICLE K — Duration of Plan.

     The Plan shall be effective as of January 1, 2004 and terminate on December 31, 2013 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 the Plan of the Company or of anyone to whom Common
Stock, Stock Options, SARs, Restricted Shares or RSUs have been granted prior to such termination.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00131-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00131-of-00352.parquet"}]]