0000080424-95-000027.txt : 19950915 0000080424-95-000027.hdr.sgml : 19950915 ACCESSION NUMBER: 0000080424-95-000027 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950913 SROS: CSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROCTER & GAMBLE CO CENTRAL INDEX KEY: 0000080424 STANDARD INDUSTRIAL CLASSIFICATION: SOAP, DETERGENT, CLEANING PREPARATIONS, PERFUMES, COSMETICS [2840] IRS NUMBER: 310411980 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00434 FILM NUMBER: 95573483 BUSINESS ADDRESS: STREET 1: ONE PROCTER & GAMBLE PLZ CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5139831100 10-K 1 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ==================== ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED JUNE 30, 1995 ****************************************** UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------------------ ANNUAL REPORT ON FORM 10-K PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1995 Commission File No. 1-434 -------------------------------------------------------- THE PROCTER & GAMBLE COMPANY One Procter & Gamble Plaza, Cincinnati, Ohio 45202 Telephone (513) 983-1100 IRS Employer Identification No. 31-0411980 State of Incorporation: Ohio -------------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each Exchange on which registered ----------------------------- ------------------------------------------ Common Stock, without Par Value New York, Cincinnati, Amsterdam, Paris, Basle, Geneva, Lausanne, Zurich, Frankfurt, Antwerp, Brussels, Tokyo Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No . ------ ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ----------- There were 686,947,278 shares of Common Stock outstanding as of August 11, 1995. The aggregate market value of the voting stock held by non- affiliates amounted to $51 billion on August 11, 1995. Documents Incorporated By Reference ----------------------------------- Portions of the Annual Report to Shareholders for the fiscal year ended June 30, 1995 are incorporated by reference into Part I and Part II of this report. Portions of the Proxy Statement for the 1995 Annual Meeting of Shareholders are incorporated by reference into Part III of this report. -1- PART I ------ Item 1. Business. --------- General Development of Business ------------------------------- The Procter & Gamble Company was incorporated in Ohio in 1905, having been built from a business founded in 1837 by William Procter and James Gamble. Today, the Company manufactures and markets a broad range of consumer products in many countries throughout the world. Unless the context indicates otherwise, the term the "Company" as used herein refers to The Procter & Gamble Company (the registrant) and its subsidiaries. Additional information required by this item is incorporated herein by reference to the Letter to Shareholders, which appears on pages 1-5 of the Annual Report to Shareholders for the fiscal year ended June 30, 1995. Financial Information About Industry Segments --------------------------------------------- The Company's products fall into five business segments: Laundry and Cleaning, Paper, Beauty Care, Food and Beverage, and Health Care. Additional information required by this item is incorporated herein by reference to Note 12 Segment Information, which appears on pages 35 and 36 of the Annual Report to Shareholders for the fiscal year ended June 30, 1995. Narrative Description of Business ---------------------------------- The Company's business, represented by the aggregate of its Laundry and Cleaning, Paper, Beauty Care, Food and Beverage, and Health Care segments, is essentially homogeneous. For the most part, the factors necessary for an understanding of these five segments are essentially identical. The markets in which the Company's products are sold are highly competitive. The products of the Company's business segments compete with many large and small companies, and there is no dominant competitor or competitors. Advertising is used in conjunction with an extensive sales force because the Company believes this combination provides the most efficient method of marketing these types of products. Product quality, performance, value and packaging are also important competitive factors. Most of the Company's products in each of its segments are distributed through grocery stores and other retail outlets. The Laundry category and Diaper category constitute 21% and 13% of consolidated 1995 sales, respectively. These categories constituted approximately the same percentages of consolidated sales in the preceding two fiscal years. The creation of new products and the development of new performance benefits for consumers on the Company's existing products are vital ingredients in its continuing progress in the highly competitive markets in which it does business. Basic research and product development activities continued to carry a high priority during the past fiscal year. While many of the benefits from these efforts will not be realized until future years, the Company believes these activities demonstrate its commitment to future growth. -2- The Company has registered trademarks and owns or has licenses under patents which are used in connection with its business in all segments. Some of these patents or licenses cover significant product formulation and processing of the Company's products. The trade names of all major products in each segment are registered trademarks. In part, the Company's success can be attributed to the existence of these trademarks, patents and licenses. Most of the raw materials used by the Company are purchased from others. Additionally, some raw materials, primarily chemicals, are produced by the Company for further use in the manufacturing process. The Company purchases and produces a substantial variety of raw materials, no one of which is material to the Company's business taken as a whole. Expenditures in fiscal year 1995 for compliance with Federal, State and local environmental laws and regulations were not materially different from such expenditures in the prior year, and no material increase is expected in fiscal year 1996. Operations outside the United States are generally characterized by the same conditions discussed in the description of the business above and may also be affected by additional elements including changing currency values and different rates of inflation and economic growth. The effect of these additional elements is less significant in the Food and Beverage segment than in the Company's other business segments. The Company provides an Employee Stock Ownership Plan ("ESOP") which is part of The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan. Convertible preferred stock of the Company and other assets owned by the ESOP are held through a trust (the "ESOP Trust"). The ESOP Trust has issued certain debt securities to the public. The Company has guaranteed payment of principal and interest on these debt securities. Holders of these debt securities have no recourse against the assets of the ESOP Trust except with respect to cash contributions made by the Company to the ESOP Trust, and earnings attributable to such contributions. Such cash contributions are made by the Company only to the extent that dividends on the convertible preferred stock are inadequate to fund repayment of the debt securities. Any such contributions and subsequent payments to holders are made on a same-day basis and such contributions would therefore not be held by the ESOP Trust unless there was a default in payment on the debt securities by the ESOP Trust after having received such contributions from the Company. Such a default is not likely to occur and there is therefore little likelihood that there would be assets available to satisfy the claims of any holders of the debt securities. A summary description of the liabilities of the ESOP Trust and of the dividends paid by the Company on the convertible preferred stock and cash payments from the Company to the ESOP Trust for the three years ended June 30, 1995 are incorporated by reference to Note 9 Retirement Plans, which appears on pages 32-34 of the Annual Report to Shareholders for the fiscal year ended June 30, 1995. Additional information required by this item is incorporated herein by reference to the Letter to Shareholders, which appears on pages 1-5, Note 12 Segment Information, which appears on pages 35 and 36, the Financial Highlights, which appear on page 37, and Management's Discussion and Analysis, which appears on pages 18-22 of the Annual Report to Shareholders for the fiscal year ended June 30, 1995. -3- Financial Information About Foreign and Domestic Operations ----------------------------------------------------------- The information required by this item is incorporated herein by reference to Note 12 Segment Information, which appears on pages 35 and 36 of the Annual Report to Shareholders for the fiscal year ended June 30, 1995. Item 2. Properties. ----------- In the United States, the Company owns and operates manufacturing facilities at 39 locations in 20 states. In addition, it owns and operates 90 manufacturing facilities in 42 other countries. Laundry and Cleaning products are produced at 37 of these locations, Paper products at 35, Health Care products at 30, Beauty Care products at 47, and Food and Beverage products at 16. Management believes that the Company's production facilities are adequate to support the business efficiently and that the properties and equipment have been well maintained. Item 3. Legal Proceedings. ------------------ The Company is involved in clean-up efforts at off-site Superfund locations, many of which are in the preliminary stages of investigation. The amount accrued at June 30, 1995 representing the Company's probable future costs that can be reasonably estimated was $8 million. The Company is also involved in certain other environmental proceedings. No such proceeding is expected to result in material monetary or other sanctions being imposed by any governmental entity, or in other material liabilities. However, the Company has agreed to participate in the Toxic Substances Control Act ("TSCA") Section 8(e) Compliance Audit Program of the United States Environmental Protection Agency ("EPA"). As a participant, the Company has agreed to audit its files for materials which under current EPA guidelines would be subject to notification under Section 8(e) of TSCA and to pay stipulated penalties for each report submitted under this program. It is anticipated that the Company's liability under the Program will be $1,000,000. No administrative proceeding is pending; however the Company anticipates being required to enter an Administrative Order on Consent pursuant to this Program in late 1995. In addition, the EPA issued to a subsidiary of the Company a Finding and Notice of Violation ("NOV") dated June 16, 1994, based on Section 113(a) of the Clean Air Act (as amended), for alleged violations of the California State Implementation Plan by the subsidiary's manufacturing plant in Sacramento, California. The violations relate to 1) a plant expansion project that was implemented on the basis of calculated emission data that later proved to be inaccurate, with the result that the project allegedly failed to observe the federal construction ban and certain "new source review" provisions; and 2) the subsequent installation of a material recovery unit that is now alleged to be pollution control equipment for which a permit was required. The subsidiary and EPA have tentatively agreed that this matter (together with a relatively minor Superfund Amendments and Reauthorization Act ("SARA") reporting deficiency) would be resolved upon the payment of a civil penalty of less than $500,000. Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- Not applicable. -4- Executive Officers of the Registrant -------------------------------------------- The names, ages and positions held by the executive officers of the Company on August 11, 1995 are: Elected to Present Name Position Age Position ---------------- ------------------------- ---- ------------ John E. Pepper Chairman of the Board and 57 1995 Chief Executive. Director since June 12, 1984. Durk I. Jager President and Chief Operating 52 1995 Officer. Director since December 12, 1989. Wolfgang C. Berndt Executive Vice President. 52 1995 Harald Einsmann Executive Vice President. 61 1995 Director since June 10, 1991. Alan G. Lafley Executive Vice President. 48 1995 Jorge P. Montoya Executive Vice President. 49 1995 Benjamin L. Bethell Senior Vice President. 55 1991 Robert T. Blanchard Group Vice President. 50 1991 Gordon F. Brunner Senior Vice President. 56 1987 Director since March 1, 1991. Bruce L. Byrnes Group Vice President. 47 1991 R. Kerry Clark Group Vice President. 43 1995 Larry G. Dare Group Vice President. 55 1990 Stephen P. Donovan, Jr. Group Vice President. 54 1986 Todd A. Garrett Group Vice President. 53 1995 Jacobus Groot Group Vice President. 44 1995 James J. Johnson Senior Vice President 48 1992 and General Counsel. -5- Elected to Present Name Position Age Position ---------------- ------------------------- ---- ------------ Jeffrey D. Jones Group Vice President. 42 1992 Fuad O. Kuraytim Group Vice President. 54 1995 Gary T. Martin Senior Vice President. 50 1991 Claude L. Meyer Group Vice President. 52 1995 Lawrence D. Milligan Senior Vice President. 59 1990 Thomas A. Moore Group Vice President. 44 1992 Erik G. Nelson Senior Vice President. 55 1993 John O'Keeffe Group Vice President. 45 1995 Herbert Schmitz Group Vice President. 58 1995 Robert L. Wehling Senior Vice President. 56 1994 Edwin H. Eaton, Jr. Vice President and 57 1987 Comptroller. All of the above Executive officers are members of the Executive Committee of The Procter & Gamble Company and have been employed by the Company over five years. PART II ------------- Item 5. Market for the Common Stock and Related Stockholder Matters ----------------------------------------------------------- The information required by this item is incorporated by reference to the Shareholder Information, which appears on page 40 of the Annual Report to Shareholders for the fiscal year ended June 30, 1995. Item 6. Selected Financial Data ----------------------- The information required by this item is incorporated by reference to the Financial Highlights, which appear on page 37 of the Annual Report to Shareholders for the fiscal year ended June 30, 1995. -6- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ----------------------------------------------------------------------- The information required by this item is incorporated by reference to Management's Discussion and Analysis, which appears on pages 18-22, Note 11 Commitments and Contingencies and Note 12 Segment Information, which appear on pages 35 and 36, and the Letter to Shareholders, which appears on pages 1-5, of the Annual Report to Shareholders for the fiscal year ended June 30, 1995. Item 8. Financial Statements and Supplemental Data ------------------------------------------ The financial statements and supplemental data are incorporated by reference to pages 23-37 of the Annual Report to Shareholders for the fiscal year ended June 30, 1995. Item 9. Disagreements on Accounting and Financial Disclosure ---------------------------------------------------- Not applicable. PART III --------- Item 10. Directors and Executive Officers -------------------------------- The information required by this item is incorporated by reference to pages 3-5 and 18 of the proxy statement filed since the close of the fiscal year ended June 30, 1995, pursuant to Regulation 14A which involved the election of directors. Pursuant to Item 401(b) of Regulation S-K, Executive Officers of the Registrant are reported in Part I of this report. Item 11. Executive Compensation ---------------------- The information required by this item is incorporated by reference to pages 7-13 of the proxy statement filed since the close of the fiscal year ended June 30, 1995, pursuant to Regulation 14A which involved the election of directors. Item 12. Security Ownership of Certain Beneficial Owners and Management -------------------------------------------------------------- The information required by this item is incorporated by reference to pages 15-17 of the proxy statement filed since the close of the fiscal year ended June 30, 1995, pursuant to Regulation 14A which involved the election of directors. Item 13. Certain Relationships and Related Transactions ---------------------------------------------- The information required by this item is incorporated by reference to page 18 of the proxy statement filed since the close of the fiscal year ended June 30, 1995, pursuant to Regulation 14A which involved the election of directors. -7- PART IV ------- Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K ----------------------------------------------------------------- A. 1. Financial Statements: The following consolidated financial statements of The Procter & Gamble Company and subsidiaries and the report of independent accountants are incorporated by reference in Part II, Item 8. - Report of independent accountants - Consolidated statement of earnings -- for years ended June 30, 1995, 1994 and 1993 - Consolidated balance sheet -- as of June 30, 1995 and 1994 - Consolidated statement of retained earnings -- for years ended June 30, 1995, 1994 and 1993 - Consolidated statement of cash flows -- for years ended June 30, 1995, 1994 and 1993 - Notes to consolidated financial statements 2. Financial Statement Schedules: These schedules are omitted because of the absence of the conditions under which they are required or because the information is set forth in the financial statements or notes thereto. 3. Exhibits: Exhibit (3-1) -- Amended Articles of Incorporation (Incorporated by reference to Exhibit (3-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (3-2) -- Regulations (Incorporated by reference to Exhibit (3-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). Exhibit (4) -- Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission. Exhibit (10-1) -- The Procter & Gamble 1992 Stock Plan (as amended December 14, 1993) which was adopted by the shareholders at the annual meeting on October 13, 1992 (Incorporated by reference to Exhibit (10-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 1994). -8- (10-2) -- The Procter & Gamble 1983 Stock Plan (as amended May 11, 1993) which was adopted by the shareholders at the annual meeting on October 11, 1983 (Incorporated by reference to Exhibit (10-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-3) -- The Procter & Gamble Executive Group Life Insurance Policy (each executive officer is covered for an amount equal to annual salary plus bonus) (Incorporated by reference to Exhibit (10-3) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-4) -- Additional Remuneration Plan (as amended June 12, 1990) which was adopted by the Board of Directors on April 12, 1949 (Incorporated by reference to Exhibit (10-4) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-5) -- The Procter & Gamble Deferred Compensation Plan for Directors which was adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-5) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-6) -- The Procter & Gamble Retirement Plan for Directors which was adopted by the Board of Directors on December 12, 1989 (Incorporated by reference to Exhibit (10-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-7) -- The Procter & Gamble Board of Directors Charitable Gifts Program which was adopted by the Board of Directors on November 12, 1991 (Incorporated by Reference to Exhibit (10-7) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-8) -- The Procter & Gamble 1993 Non-Employee Directors' Stock Plan which was adopted by the shareholders at the annual meeting on October 11, 1994 and which was amended on January 10, 1995, by the Board of Directors, subject to the ratification by the shareholders at the annual meeting on October 10, 1995 (Incorporated by reference to Appendix A of the proxy statement filed since the close of the fiscal year ended June 30, 1995). -9- Exhibit (10-9) -- Richardson-Vicks Inc. Special Stock Equivalent Incentive Plan which was authorized by the Board of Directors of The Procter & Gamble Company and adopted by the Board of Directors of Richardson- Vicks Inc. on December 31, 1985 (Incorporated by reference to Exhibit (10-9) of the Company's Annual Report on Form 10-K for the year ended June 30, 1994). Exhibit (11) -- Computation of earnings per share. Exhibit (12) -- Computation of ratio of earnings to fixed charges. Exhibit (13) -- Annual Report to Shareholders. (Pages 1-5, 18-37, and 40) Exhibit (21) -- Subsidiaries of the registrant. Exhibit (23) -- Consent of Deloitte & Touche LLP. Exhibit (27) -- Financial Data Schedule. Exhibit (99-1) -- Directors and Officers Liability Policy (the "Policy Period" has been extended to 6/30/98). (99-2) -- Directors and Officers (First) Excess Liability Policy (the "Policy Period" has been extended to 6/30/96). (99-3) -- Directors and Officers (Second) Excess Liability Policy (the "Policy Period" has been extended to 6/30/96). (99-4) -- Directors and Officers (Third) Excess Liability Policy (the "Policy Period" has been extended to 6/30/96). (99-5) -- Directors and Officers (Fourth) Excess Liability Policy (the "Policy Period" has been extended to 6/30/96). (99-6) -- Fiduciary Responsibility Insurance Policy (the "Policy Period" has been extended to 6/30/96). The exhibits listed are filed with the Securities and Exchange Commission but are not included in this booklet. Copies of these exhibits may be obtained by sending a request to: Linda D. Rohrer, Assistant Secretary, The Procter & Gamble Company, P. O. Box 599, Cincinnati, Ohio 45201 B. Reports on Form 8-K: None. -10- SIGNATURES ------------------ Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the city of Cincinnati, State of Ohio. THE PROCTER & GAMBLE COMPANY By /S/JOHN E. PEPPER ------------------------------------ John E. Pepper Chairman of the Board and Chief Executive September 12, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date --------- ----- ----- _____ /s/JOHN E. PEPPER Chairman of the Board and | ----------------- Chief Executive and Director | (John E. Pepper) (Principal Executive Officer) | | /s/ERIK G. NELSON Senior Vice President | ----------------- (Principal Financial Officer) | (Erik G. Nelson) | | /s/EDWIN H. EATON, JR. Vice President and Comptroller | ----------------- (Principal Accounting Officer) | (Edwin H. Eaton, Jr.) September 12, 1995 | | ----------------- Director | (David M. Abshire) | | /s/EDWIN L. ARTZT | ----------------- Director | (Edwin L. Artzt) | | /s/NORMAN R. AUGUSTINE | ----------------- Director | (Norman R. Augustine) ____| -11- Signature Title Date --------- ----- ----- _____ | /s/DONALD R. BEALL | ------------------ Director | (Donald R. Beall) | | /s/GORDON F. BRUNNER | ------------------ Director | (Gordon F. Brunner) | | /s/RICHARD B. CHENEY | ------------------ Director | (Richard B. Cheney) | | /s/HARALD EINSMANN | ------------------ Director | (Harald Einsmann) | | /s/RICHARD J. FERRIS | ------------------ Director | (Richard J. Ferris) | | /s/JOSEPH T. GORMAN | ------------------ Director September 12, 1995 (Joseph T. Gorman) | | /s/DURK I. JAGER | ------------------ Director | (Durk I. Jager) | | /s/JERRY R. JUNKINS | ------------------ Director | (Jerry R. Junkins) | | /s/CHARLES R. LEE | ------------------ Director | (Charles R. Lee) | | /s/LYNN M. MARTIN | ----------------- Director | (Lynn M. Martin) ____| -12- Signature Title Date --------- ----- ----- _____ /s/JOHN F. SMITH, JR. | --------------------- Director | (John F. Smith, Jr.) | | /s/RALPH SNYDERMAN | --------------------- Director | (Ralph Snyderman) September 12, 1995 | /s/ROBERT D. STOREY | --------------------- Director | (Robert D. Storey) | | /s/MARINA v.N. WHITMAN | --------------------- Director | (Marina v.N. Whitman) ____| -13- EXHIBIT INDEX -------------- Exhibit (3-1) -- Amended Articles of Incorporation (Incorporated by reference to Exhibit (3-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (3-2) -- Regulations (Incorporated by reference to Exhibit (3-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). Exhibit (4) -- Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission. Exhibit (10-1) -- The Procter & Gamble 1992 Stock Plan (as amended December 14, 1993) which was adopted by the shareholders at the annual meeting on October 13, 1992 (Incorporated by reference to Exhibit (10-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 1994). (10-2) -- The Procter & Gamble 1983 Stock Plan (as amended May 11, 1993) which was adopted by the shareholders at the annual meeting on October 11, 1983 (Incorporated by reference to Exhibit (10-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-3) -- The Procter & Gamble Executive Group Life Insurance Policy (each executive officer is covered for an amount equal to annual salary plus bonus) (Incorporated by reference to Exhibit (10-3) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-4) -- Additional Remuneration Plan (as amended June 12, 1990) which was adopted by the Board of Directors on April 12, 1949 (Incorporated by reference to Exhibit (10-4) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-5) -- The Procter & Gamble Deferred Compensation Plan for Directors which was adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-5) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-6) -- The Procter & Gamble Retirement Plan for Directors which was adopted by the Board of Directors on December 12, 1989 (Incorporated by reference to Exhibit (10-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). -14- Exhibit (10-7) -- The Procter & Gamble Board of Directors Charitable Gifts Program which was adopted by the Board of Directors on November 12, 1991 (Incorporated by Reference to Exhibit (10-7) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993). (10-8) -- The Procter & Gamble 1993 Non-Employee Directors' Stock Plan which was adopted by the shareholders at the annual meeting on October 11, 1994 and which was amended on January 10, 1995, by the Board of Directors, subject to the ratification by the shareholders at the annual meeting on October 10, 1995 (Incorporated by reference to Appendix A of the proxy statement filed since the close of the fiscal year ended June 30, 1995). (10-9) -- Richardson-Vicks Inc. Special Stock Equivalent Incentive Plan which was authorized by the Board of Directors of the Procter & Gamble Company and adopted by the Board of Directors of Richardson- Vicks Inc. on December 31, 1985 (Incorporated by Reference to Exhibit (10-9) of the Company's Annual Report on Form 10-K for the year ended June 30, 1994). Exhibit (11) -- Computation of earnings per share. Exhibit (12) -- Computation of ratio of earnings to fixed charges. Exhibit (13) -- Annual Report to Shareholders. (Pages 1-5, 18-37 and 40) Exhibit (21) -- Subsidiaries of the registrant. Exhibit (23) -- Consent of Deloitte & Touche LLP. Exhibit (27) -- Financial Data Schedule. Exhibit (99-1) -- Directors and Officers Liability Policy (the "Policy Period" has been extended to 6/30/98). (99-2) -- Directors and Officers (First) Excess Liability Policy (the "Policy Period" has been extended to 6/30/96). (99-3) -- Directors and Officers (Second) Excess Liability Policy (the "Policy Period" has been extended to 6/30/96). (99-4) -- Directors and Officers (Third) Excess Liability Policy (the "Policy Period" has been extended to 6/30/96). (99-5) -- Directors and Officers (Fourth) Excess Liability Policy (the "Policy Period" has been extended to 6/30/96). (99-6) -- Fiduciary Responsibility Insurance Policy (the "Policy Period" has been extended to 6/30/96). -15- EX-11 2 EXHIBIT (11)
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= Computation of Earnings Per Share --------------------------------- Dollars and Share Amounts in Millions Years Ended June 30 -------------------------------------------------- NET EARNINGS PER SHARE 1991 1992 1993 1994 1995 ---------------------- ------ ------ ------ ------ ------ Net Earnings/(Loss) $1,773 $1,872 $ (656) $2,211 $2,645 Deduct preferred stock dividends 78 94 102 102 102 ------ ------ ------ ------ ------ Net Earnings/(Loss) Applicable to Common Stock 1,695 1,778 (758) 2,109 2,543 ---------------------------------------------- Average number of common shares outstanding 689.5 677.4 680.4 683.1 686.0 Per Share --------- Net earnings before prior years' effect of accounting changes $ 0.25 Prior year effect of accounting changes $(1.36) Net Earnings/(Loss) per share $ 2.46 $ 2.62 $(1.11) $ 3.09 $ 3.71 NET EARNINGS PER SHARE ASSUMING FULL DILUTION ------------------------------- Net Earnings/(Loss) $1,773 $1,872 $ (656) $2,211 $2,645 Deduct differential -- preferred vs. common dividends 52 60 57 51 45 ------ ------ ------ ------ ------ Net Earnings/(Loss) Applicable to Common Stock 1,721 1,812 (713) 2,160 2,600 ---------------------------------------------- Average number of common shares outstanding 689.5 677.4 680.4 683.1 686.0 Add potential effect of: Exercise of options 7.7 7.5 7.2 6.0 8.5 Conversion of preferred stock 48.0 55.2 54.7 53.9 52.8 ------ ------ ------ ------ ------ Average number of common shares outstanding, assuming full dilution 745.2 740.1 742.3 743.0 747.3 Per Share Assuming full dilution -------------------------------- Net earnings before prior years' effect of accounting changes $ 0.29 Prior year effect of accounting changes $(1.25) Net Earnings/(Loss) $ 2.31 $ 2.45 $(0.96) $ 2.91 $ 3.48
EX-12 3 EXHIBIT (12)
THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= Computation of Ratio of Earnings to Fixed Charges ------------------------------------------------- Millions of Dollars Years Ended June 30 ------------------------------------------------- 1991 1992 1993 1994 1995 ------ ------ ------ ------ ------ EARNINGS AS DEFINED ------------------- Earnings from operations before income taxes after eliminating undistributed earnings of 20% to 50% owned affiliates $2,652 $2,870 $ 294 $3,307 $4,022 Fixed charges excluding capitalized interest 435 584 631 569 571 ------ ------ ------ ------ ------ TOTAL EARNINGS, AS DEFINED $3,087 $3,454 $ 925 $3,876 $4,593 ====== ====== ====== ====== ====== FIXED CHARGES, AS DEFINED ------------------------- Interest expense $ 395 $ 510 $ 552 $ 482 $ 488 1/3 of rental expense 40 74 79 87 83 ------ ------ ------ ------ ------ 435 584 $ 631 $ 569 $ 571 Capitalized interest 17 25 25 19 23 ------ ------ ------ ------ ------ TOTAL FIXED CHARGES, AS DEFINED $ 452 $ 609 $ 656 $ 588 $ 594 ====== ====== ====== ====== ====== RATIO OF EARNINGS TO FIXED CHARGES 6.8 5.7 1.4 6.6 7.7
EX-13 4 Exhibit 13 ---------- Annual Report to Shareholders. (Pages 1-5, 18-37, and 40) TO OUR SHAREHOLDERS PROCTER & GAMBLE'S CONTINUED FOCUS ON DELIVERING CONSUMER VALUE LED TO ACCELERATED GROWTH IN 1994/95. Good value is the foundation of our business. It builds consumer loyalty to P&G brands - and brand loyalty builds market leadership. That's why value is a permanent, fundamental strategy at Procter & Gamble. Our commitment to the essentials of good value has never been stronger. We are providing superior products at a competitive price, and we're doing that by staying focused on the basics: continuous product innovation and relentless cost control. As a result of this focus, 1994/95 was an extraordinary year for the Company and its shareholders. Net earnings for fiscal year 1994/95 achieved a record level of $2.6 billion, with earnings per share of $3.71, up 20% versus year ago. HIGHLIGHTS OF THE YEAR - NET EARNINGS were $2.7 billion, up 17%, over earnings of $2.3 billion in 1993/94. This compares with an average annual earnings growth rate of 10% over the previous five years. - EARNINGS PER SHARE were $3.78, up 17%. - AFTER-TAX PROFIT MARGIN was 8.1%. This is the highest level in 45 years. - UNIT VOLUME grew 10%. This compares to average annual volume growth of 6% over the previous five years. - NET SALES of $33.4 billion were up 10%. - CASH FLOW from operations was $3.6 billion. Over the past five years, cash flow has increased at an average annual rate of 15%. - DIVIDENDS INCREASED 13% to $1.40 per share. Beginning with the August 1995 dividend, the annual dividend rate will be raised an additional 14% to $1.60 per share, marking the 40th consecutive year of increased dividend payments. - RETURN ON EQUITY was 23.4% - the highest level in 45 years. These highlights exclude the following unusual items: the $50 million charge against 1994/95 net earnings to cover costs associated with the Kobe, Japan earthquake, and the $102 million charge against 1993/94 net earnings related to two interest rate swaps. (Picture of John Pepper, Chairman of the Board and Chief Executive; Ed Artzt, Chairman of the Executive Committee of the Board; and Durk Jager, President and Chief Operating Officer.) 1 BROAD-BASED GROWTH ACROSS THE REGIONS - NORTH AMERICA - the United States and Canada - is in good shape. Unit volume for the region increased 6%. The principal contributors to U.S. volume growth were Laundry, Hair Care and Tissue and Towel. In Laundry, the Company's new color protection technology helped Tide (Caption in second paragraph stating "1994/95 WAS AN EXTRAORDINARY YEAR FOR THE COMPANY AND ITS SHAREHOLDERS.") and Cheer build P&G's total U.S. Laundry volume to a record level. Hair Care volume in the U.S. was up 11% behind strong consumer acceptance of Pantene Pro-V and new products, packages and marketing programs on Vidal Sassoon, Pert Plus and Head & Shoulders shampoos. And the Tissue and Towel businesses grew behind Bounty's Extra Durable and Fun Prints and Charmin Ultra. Canada's volume grew 6%, tracking closely with performance in the U.S. The greatest volume gains came from Tide laundry detergent and Pantene Pro- V. The first time introductions of Bounty towels and Folgers coffee are off to a strong start. (Picture of P&G Products - Pantene Pro-V, Ariel, Pampers Uni and Tide) - EUROPE, MIDDLE EAST AND AFRICA recorded strong growth, with unit volume up 15%. Europe, like the U.S., experienced strong market share growth in Laundry Detergents, Paper and Hair Care. The top brand performers included Ariel Futur, a new compact, high performance laundry detergent. Pampers also had an excellent year in Europe, reaching an all-time high share despite the introduction of new competitive brands. Alldays Pantyliners strengthened Always' leadership across the entire region. Pantene Pro-V led the continued growth of the European Hair Care business. Eastern Europe was a dynamic area of growth for the Company, increasing share in all core categories. The most significant gains were in Laundry, Hair Care, Feminine Protection and Diapers. - ASIA recorded 24% volume growth led by excellent progress in China and India. China remained the fastest-growing business in Asia, with China's largest gains in Hair Care and Laundry. Rejoice shampoo increased its market leadership and, supported by the national expansion of Tide and Ariel, P&G's Laundry detergent volume tripled in the last year. In India, the success of Ariel Supersoaker was an important contributor to P&G's growing business in this huge market. 1995 has been a tremendously challenging year for P&G's 2 Japanese organization, which managed to build the business despite the ravaging effects of the Kobe earthquake. Our Japan Technical Center and Headquarters on Kobe Island was damaged, manufacturing lines at our Akashi paper plant were disrupted and many retailers and distributors shut down. Our Japanese organization overcame these obstacles, returning the Akashi plant to full production within a month after the earthquake, working with distributors and retailers to restore distribution, and moving back into the Japan Technical Center in June. Even in the midst of this recovery effort, Japan increased volume 7% for the fiscal year - an achievement that is a real tribute to the dedication and capability (Caption in second paragraph stating "AS THIS YEAR'S BROAD-BASED GROWTH DEMONSTRATES, P&G'S VALUE STRATEGIES ARE WORKING.") of the men and women of our Japanese organization. - Latin America had a very good year, despite the difficulties of the Mexican peso crisis. Unit volume was up 6% with especially strong increases in Brazil, Peru and Argentina. In Brazil, Pampers Uni - P&G's economy-priced diaper - scored a solid success with consumers. Two years ago, prior to the introduction of Uni, P&G's diaper share in Brazil was 13%. Since then, Pampers' share has tripled, retaining the number one position in a market that has grown five- fold. Results in Mexico were good, particularly in the face of the nearly 50% devaluation of the peso and the resulting impact on the Mexican economy. P&G's business could have been severely affected by the financial effect of this situation and the associated decline in consumer purchasing power. But our Mexican organization worked side-by-side with government officials, suppliers and customers to navigate their way through the crisis. As a result of their outstanding work, the Mexican business fully offset the earnings impact of the peso devaluation. VALUE STRATEGIES ARE WORKING As this year's broad-based growth demonstrates, P&G's value strategies are working. We are building consumer loyalty to our brands throughout the world with superior products at competitive prices. The resulting growth in our business is contributing directly to better value for our shareholders. In fact, total shareholder return, which averaged 17% over the 3 (Caption at top of page stating "VOLUME GROWTH, DELIVERED BY INNOVATION AND LOWER PRICES, IS AN IMPORTANT CONTRIBUTOR TO HIGHER EARNINGS.") previous five years, was 38% in 1994/95. The key to maintaining our current level of growth is to stay focused on delivering better value. First and foremost, this means continuously innovating to provide superior products. Ariel Futur, Pantene Pro-V and carezyme color protection technology are good examples. Competitive prices are also critical. This is true in every part of the world - in developing and developed markets alike. - ON A WORLDWIDE BASIS, WE HAVE REDUCED PRICES on many of our products while also building margins and improving overall product performance. Since 1992/93, list prices (excluding coffee) have declined $1 billion. This price reduction largely reflects the move to value pricing, as we have eliminated inefficient promotion costs by rolling them into lower list prices. Through this structural change, we have been able to significantly reduce the net price consumers pay for our products. In addition to price reductions on established brands, we are also introducing economy-priced brands in markets where consumer purchasing power is most restricted. Pampers Uni in Latin America is a good example, and there are others. In Eastern Europe, the Company's Feminine Protection business in Poland is up six-fold behind the introduction of Always Classic, a lower- priced feminine protection pad. And in India, we've tripled our Bar Soap volume with new Camay Popular - an economy-priced version of Camay. Whether we're reducing prices on established brands or introducing new, economy-priced products, the strategy is the same: to offer superior performance at a competitive price. And the strategy is working: in 1994/95, nearly three-fourths of P&G's global categories worldwide maintained or grew market share. BETTER VALUE FOR CONSUMERS - AND HIGHER EARNINGS FOR P&G Volume growth, driven by innovation and lower prices, is an important contributor to higher earnings. An essential element of this has been sharp cost control throughout the organization - which we have pursued aggressively for the past several years. For example, Product Supply - P&G's purchasing, engineering, manufacturing and distribution organizations - has led a breakthrough effort to reduce the total delivered costs of our products. Their goal, established in 1991, was to hold these costs flat on a per case basis for four years. They have exceeded this goal, not only offsetting inflation and the cost of product improvements, but actually reducing costs by over $1 per case, versus the 1990/91 base. This equates to approximately $1.6 billion in savings, further enhancing our ability to price competitively while building margins. - THE WORLDWIDE PLANT CONSOLIDATION AND ORGANIZATION RESTRUCTURING announced in 1993 has also contributed to effective cost control. We committed to save at least $500 million after tax per year by 1995/96. We have already achieved $400 million or 80% of that total in less than two years. As with total delivered cost reductions, these savings have allowed us to price competitively, to increase research and development spending, and to improve profit margins. In short, P&G brands are a better value for consumers and are more profitable at the same time. As a result, P&G has 4 delivered volume and earnings growth well above historical averages and the highest profit margins in 45 years. P&G PEOPLE DELIVER ACCELERATED GROWTH As always, the Company's ability to deliver this kind of breakthrough performance comes from the strength and commitment of our people. The quality and depth of the men and women building our business today are unprecedented. We can see this strength in the way our Company responded to extraordinary challenges in 1994/95 - recovering from the earthquake in Japan, responding to the peso crisis in Mexico, and winning against fierce competition in every part of the world. We are stronger today than we've ever been and we are well positioned to build on this strength in the years ahead. Respectfully, /s/EDWIN L. ARTZT Edwin L. Artzt Chairman of the Executive Committee of the Board (Retired Chairman of the Board and Chief Executive - July 1, 1995) /s/JOHN E. PEPPER John E. Pepper Chairman of the Board and Chief Executive /s/DURK I. JAGER Durk I. Jager President and Chief Operating Officer August 10, 1995 MANAGEMENT CHANGES On July 1, 1995, Edwin L. Artzt retired as chairman of the board and chief executive after more than 41 years of service with Procter & Gamble. John E. Pepper assumed responsibility as chairman of the board and chief executive and Durk I. Jager assumed the newly created position of president and chief operating officer. "We have top-flight people to step up and sustain the momentum of this business," said Artzt. "John Pepper, along with Durk Jager and the newly appointed team under both of them, will provide strong leadership for the Company into the 21st century." Mr. Artzt continues to serve as a director of the Company and, effective July 1, became chairman of the board's Executive Committee, succeeding John G. Smale, who retired from the board. "John Smale served Procter & Gamble with great distinction for more than 42 years," said Artzt. "He is an extraordinary leader who has guided the company's rapid growth and globalization. We will miss his involvement in the business." 5 FINANCIAL REVIEW MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS: 1995 COMPARED TO 1994 Worldwide net earnings were $2,645 million, a 20% increase over year ago, including a $50 million after-tax charge for incremental costs associated with the January earthquake in Japan. Net earnings for the prior year were $2,211 million, including a $102 million after-tax charge related to two interest rate swap contracts. Excluding the unusual items in both periods, net earnings increased 17%. (Bar graph showing Net Earnings (Billions of Dollars) and Net Margin. 1991 Net Earnings $1.773 billion and Net Margin 6.6%; 1992 Net Earnings $1.872 billion and Net Margin 6.4%; 1993 Net Earnings $2.015 billion and Net Margin 6.6%; 1994 Net Earnings $2.211 billion and Net Margin 7.3%; and 1995 Net Earnings $2.645 billion and Net Margin 7.9%.) Excluding the effect of restructuring ($1,746 million) and the prior years' effect of accounting changes ($925 million). Worldwide net sales for the year increased 10% to $33,434 million. This sales increase reflects year-to-year unit volume growth of 10%, with acquisitions contributing approximately 2%. More favorable foreign exchange rates positively impacted net sales by 2%, but the effect was offset by lower pricing in certain markets. Years Ended June 30, 1995 1994 1993 -------------------------------------------------------- Gross Margin 41.3% 42.7% 41.9% Marketing, Administration and Other/Sales 28.8% 30.9% 31.5% Operating Margin 12.5% 11.8% 10.4% Net Earnings Margin 7.9% 7.3% 6.6% Excluding the effect of restructuring and prior years' effect of accounting changes. The decline in gross margin from 42.7% to 41.3% is primarily due to higher green coffee bean costs, net of related pricing. Increased research and development costs and higher raw material prices, most importantly pulp, more than offset the incremental benefits of restructuring activities and other cost reduction programs. The Company's margin trends are also affected by pricing policies. Since fiscal year 1993, the Company's value pricing initiative has reduced list prices by approximately $1 billion (excluding coffee). Marketing, administrative and other expenses were 28.8% of sales, down from 30.9% in the prior year. This reflects the benefit of continued cost control efforts, as well as an incremental benefit from restructuring actions. (Bar graph showing Sales (Billions of Dollars), Operating Income (Billions of Dollars) and Operating Margin. 1993 Sales $30.4 billion, Operating Income $3.2 billion and Operating Margin 10.4%; 1994 Sales $30.3 billion, Operating Income $3.6 billion and Operating Margin 11.8%; and 1995 Sales $33.4 billion, Operating Income $4.2 billion and Operating Margin 12.5%.) Excluding the effect of restructuring ($2,705 million pre-tax) 18 The Procter & Gamble Company and Subsidiaries Consolidated Operating Results - Net Sales ----------------------------------------------------- (Millions of Dollars) 1995 1994 1993 ----------------------------------------------------- North America $16,213 $15,147 $15,100 Europe, Middle East and Africa 11,019 9,739 10,336 Asia 3,619 3,134 2,775 Latin America 2,184 2,256 1,990 Corporate 399 20 232 ----------------------------------------------------- Total 33,434 30,296 30,433 Consolidated Operating Results - Net Earnings ----------------------------------------------------- (Millions of Dollars) 1995 1994 1993 ----------------------------------------------------- North America $1,871 $1,710 $1,500 Europe, Middle East and Africa 687 563 494 Asia 203 145 161 Latin America 215 145 107 Corporate (331) (352) (247) ----------------------------------------------------- Total 2,645 2,211 2,015 Excludes a charge for restructuring: North America - $1,223; Europe, Middle East and Africa - $342; Asia - $53; Latin America - $50; and Corporate - $78; Total - $1,746 and prior years' effect of accounting changes of $925. Other income of $309 million includes a $77 million pre-tax charge related to the Kobe Japan earthquake. The prior year amount of $248 million contains a $157 million pre-tax charge related to two interest rate swap contracts. Net earnings margin increased from 7.3% in 1994 to 7.9% in 1995, including the effect of unusual items in both years, reflecting continued emphasis on cost control and volume growth. The following discussion of segment results reflects the new segment presentation included in Note 12 to the Consolidated Financial Statements. NORTH AMERICA Net sales for the North American region, which includes the United States and Canada, increased 7% to $16,213 million on 6% unit volume growth. The Paper segment led the unit volume growth, with double digit gains in the Tissue and Towel category. This growth was partly offset by a year- to-year volume decline in Diapers. Fourth quarter results indicated modest Diaper volume recovery, reflecting new initiatives. The Laundry and Cleaning and Beauty Care segments also experienced unit volume growth above the region average. The gains were driven by the Laundry and Hair Care categories. Unit volume growth in the Food and Beverage segment was hampered by the continued effect on coffee of the crop freezes in Brazil. Unit volume growth in the Snacks and Juice categories mitigated this impact. Unit volume in the Health Care segment, which represents approximately 5% of the North American volume, increased 1% year-to-year. North American net earnings increased 9% to $1,871 million, reflecting volume growth and continued cost control benefits. The net profit margin was 11.5% compared to 11.3% in the prior year. Most segments experienced double-digit net earnings growth, led by the Beauty Care segment. The net earnings of the Paper segment were negatively impacted by higher pulp prices and lower pricing on diapers. The Health Care segment results were affected by continued investment in research and development and reduced pricing. EUROPE, MIDDLE EAST AND AFRICA The Europe, Middle East and Africa region sales were $11,019 million, a 13% increase. Unit volume grew 15% during the year, including 5% due to acquisitions. The Laundry and Cleaning segment led the unit volume growth. Favorable exchange rate effects increased sales by 6%, but this was offset by lower pricing in certain markets. Net earnings increased 22% to $687 million. This reflects a net profit margin of 6.2% compared to 5.8% in the prior year. This growth is due to continued cost control efforts, incremental benefits associated with restructuring actions, and favorable product mix effects. ASIA Net sales for Asia were $3,619 million, up 15%. Unit volume grew 24%. Favorable foreign exchange rate movements had a positive 7% impact on sales, 19 MANAGEMENT'S DISCUSSION AND ANALYSIS although lower pricing and mix effects limited sales growth. Double digit unit volume growth was achieved in all business segments, led by Laundry and Cleaning. The Beauty Care segment also experienced significant unit volume gains, on the strength of the Hair Care category. Net earnings in Asia increased 40% to $203 million. Net profit margins have grown from 4.6% in the prior year to 5.6% in 1995. This increase results from strong unit volume growth, combined with continued emphasis on cost control. The Hair Care and Feminine Protection categories continue to drive the region's growth and profitability. LATIN AMERICA Unit volume in Latin America grew 6%. Unfavorable foreign exchange rate impacts more than offset the effect of positive pricing actions and volume growth, resulting in a 3% sales decline to $2,184 million. The Paper segment led the unit volume increase, importantly in the Diaper category, reflecting the introduction of Pampers Uni. Net earnings for the region were $215 million, a 48% increase from the prior year. This earnings growth was achieved despite difficult economic conditions in Mexico and Venezuela and is primarily attributable to aggressive cost increase recovery. In addition, risk management activities neutralized the effect of foreign exchange rate changes. The net profit margin increased to 9.8% from 6.4%. Significant net earnings growth was achieved in the Diaper and Hair Care categories. CORPORATE Corporate items include interest income and expense, segment eliminations, and other general corporate income and expense. WORLDWIDE BUSINESS SEGMENTS The following table supplements the information provided in Note 12, Segment Information, to provide 1995 unit volume growth for the Company's business segments. UNIT VOLUME GROWTH IN 1995 Laundry and Cleaning 7% Paper 18% Beauty Care 12% Food and Beverage 7% Health Care 3% FINANCIAL CONDITION: JUNE 30, 1995 COMPARED TO JUNE 30, 1994 Cash flow from operations was $3,568 million in 1995, continuing to provide the primary source of funds to finance operating needs and capital expenditures. Cash and cash equivalents declined $345 million, primarily due to increased capital spending. Debt repayments, net of additions, were $490 million, and dividends of $1,062 million were paid. Cash outflows for acquisitions, net of proceeds from asset sales, were $313. (Bar graph showing CUMULATIVE OPERATING CASH FLOWS (Billions of Dollars). 1991 - $2.0 billion; 1992 - $5.0 billion; 1993 - $8.4 billion; 1994 - $12.0 billion; and 1995 $15.6 billion.) During the year, the Company initiated a share repurchase program to mitigate the dilutive impact of management compensation programs. Under the repurchase program, the Company is authorized to purchase up to 5 million shares annually. During the current year, purchases were $114 million. 20 The Company has additional sources of liquidity available. During the year, the Company filed a shelf registration statement for $500 million of debt securities and warrants. Securities pursuant to this registration statement may be offered as determined appropriate in light of market conditions. In addition, the Company has the ability to issue commercial paper at favorable rates if necessary to meet short-term liquidity needs. Capital expenditures were $2,146 million in 1995, compared to $1,841 million in 1994. Capital expenditures are expected to remain at about this level in 1996. Dividends of $1.40 per share were paid in the current year, up from $1.24 per share in the prior year. For the coming year, the annual dividend rate will increase to $1.60 per share. This will mark the 40th consecutive year of increased common share dividend payments. The Company has announced a program to divest certain minor, non- strategic brands over the coming year in order to focus organizational resources on the Company's core businesses. These brands account for less than one-half of one percent of the Company's annual sales. This program is not expected to have a material effect on the Company's results of operations, financial condition, or cash flows. RESTRUCTURING RESERVE STATUS In 1993, the restructuring provision includes a reserve of $2,402 million to cover a worldwide restructuring effort to consolidate manufacturing systems and reduce overhead costs. The primary elements of this reserve were costs related to fixed asset disposals and separation-related costs (86% of the total). Original Balance Balance (Millions of Dollars) Reserve 6/30/94 Charges 6/30/95 Separation- related costs $ 965 $ 596 $ 227 $ 369 Disposals of Fixed Assets 1,109 960 363 597 Other 328 227 33 194 ------------------------------------------------------------------- 2,402 1,783 623 1,160 Includes separation allowances and related benefits, out placement services, and personnel relocation costs. Includes closing, environmental remediation and contract termination costs for sites shut down or divested, offset by proceeds from asset sales. No cost element within this category exceeds 5% of the total reserve. Execution of the restructuring program continues to be on track. The cost of completing the program is expected to approximate the original estimate. As anticipated, charges for the disposal of fixed assets will lag behind spending for separation-related programs. About two-thirds of the sites and production modules to be closed have been announced in order to provide advance notice to employees. Benefits continue to be realized from the restructuring program. Fiscal year 1995 incremental savings are estimated at $240 million after- tax, bringing cumulative restructuring savings to approximately 80% of the $500 million after-tax objective established in June 1993. These amounts reflect estimated gross savings, which have been offset to some degree by lower pricing and other actions to build the business. RESULTS OF OPERATIONS: 1994 COMPARED TO 1993 Worldwide net earnings in 1994 were $2,211 million, including a $102 million after-tax charge related to two interest rate swap contracts. In the previous year, an after-tax loss of $656 million was recorded due to two unusual items: restructuring reserves totaling $1,746 million after-tax and the prior years' effects of two accounting changes amounting to $925 million. Excluding these unusual items in both years, net earnings would have been $2,313 million in 1994, up 15% over earnings of $2,015 million in the previous year. Net sales were $30,296 million, about even with sales of $30,433 million in the previous year. The growth in unit volume increased net sales by 5%, but was offset by less favorable foreign exchange rates, 4%, and the divestiture of the pulp and 100% juice businesses and lower selling prices, 1%. Gross margin was 42.7%, which compares with 41.9% for the preceding year. Restructuring savings contributed to this increase, as plant sourcing savings from lower depreciation and enrollment reductions began to be realized. Marketing, administrative and other operating expenses were 30.9% of sales, down from 31.5% in the previous year which can be ascribed entirely to 21 MANAGEMENT'S DISCUSSION AND ANALYSIS restructuring savings, primarily from enrollment reductions. Interest expense decreased $70 million from the previous year due to lower borrowing rates and lower debt outstanding. Other income decreased $197 million from the prior year, reflecting the $157 million loss on two interest swaps in 1994 and $41 million one-time profit in 1993 from the sale of businesses. The effective tax rate was 33.9% for 1994, which compares with 22.9% for 1993. The 1993 restructuring reserve reduced pre-tax earnings significantly and accentuated the percent impact of certain cost elements not tax affected at the 34% U.S. statutory rate. Excluding the restructuring reserve, the 1993 effective tax rate would have been 34.0%. In the following year-to-year comparison of segment results, 1993 earnings have been adjusted upward to exclude the impact of restructuring reserves. NORTH AMERICA Net sales and unit volume for the region were flat from year-to-year, reflecting the divestiture of the pulp and 100% juice businesses and, to a lesser degree, lower pricing. Excluding the impact on sales of the businesses divested, unit volume growth was offset by pricing actions. North American after-tax earnings were $1,710 million, up 14% versus the previous year. Net profit margins improved to a record 11.3%, with restructuring benefits and other cost improvements contributing to the increase over the previous year's 9.9% margin. Such restructuring benefits provided the ability to neutralize the short-term impact of the Company's value pricing initiative. EUROPE, MIDDLE EAST AND AFRICA Net sales for Europe, Middle East and Africa were $9,739 million, a decline of 6% due to unfavorable exchange rate movements. Unit volume increased 6%. Net earnings increased 14% to $563 million. ASIA Sales in Asia grew 13% to $3,134 million. Unit volume increased 20%. Net earnings for the segment were $145 million, a decline of 10%, reflecting the increased investment committed to new business initiatives. LATIN AMERICA Latin American unit volume increased 10% as sales grew to $2,256 million, a 13% increase. Net earnings increased 36% to $145 million, reflecting aggressive cost cutting efforts. FINANCIAL CONDITION: JUNE 30, 1994 COMPARED TO JUNE 30, 1993 Cash and cash equivalents totaled $2,373 million, an increase of $51 million from the previous year. Cash flow from operating activities reached a record $3,649 million up $311 million over the previous year, despite the negative cash impact of executing the projects contained in the 1993 restructuring reserves. Charges in 1994 to the restructuring reserve established in June 1993 totaled $600 million of which $360 million impacted cash, primarily due to separation costs. Increased earnings and continuing reductions in working capital were key factors in offsetting these charges. Total debt excluding exchange effects decreased $664 million from the previous year-end, reflecting reductions in both short term and long term debt. Regarding investing activities, capital expenditures were $1,841 million and $1,911 million for 1994 and 1993, respectively. Dividends of $1.24 per common share were paid during the past year, up from $1.10 and $1.025 per share in the previous two years. In July 1994, the Company announced a 13% increase in the annual rate from $1.24 to $1.40 per common share, effective with the quarterly dividend paid in mid-August to shareholders of record on July 22, 1994. 22 FINANCIAL STATEMENTS RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Company management is responsible for the preparation, accuracy and integrity of the financial statements and other financial information included in this Annual Report. This responsibility includes preparing the statements in accordance with generally accepted accounting principles and necessarily includes estimates that are based on management's best judgments. To help insure the accuracy and integrity of Company financial data, management maintains internal controls which are designed to provide reasonable assurance that transactions are executed as authorized and accurately recorded and that assets are properly safeguarded. These controls are monitored by an extensive and ongoing program of internal audits. It is essential for all Company employees to conduct their business affairs in keeping with the highest ethical standards as outlined in our code of conduct, "P&G, Your Personal Responsibility." Careful selection of employees, and appropriate divisions of responsibility, also help us to achieve our control objectives. The financial statements have been audited by the Company's independent public accountants, Deloitte & Touche LLP. Their report is also shown on this page. The Board of Directors, acting through its Audit Committee composed entirely of outside directors, oversees the adequacy of the Company's control environment. The Audit Committee meets periodically with representatives of Deloitte & Touche LLP, and internal financial management to review accounting, control, auditing and financial reporting matters. The independent auditors and the internal auditors also have full and free access to meet privately with the Committee. /S/JOHN E. PEPPER /S/ERIK G. NELSON John E. Pepper Erik G. Nelson Chairman of the Board Chief Financial Officer and Chief Executive --------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS DELOITTE & 250 East Fifth Street TOUCHE LLP Cincinnati, Ohio 45202 To the Board of Directors and Shareholders of The Procter & Gamble Company: We have audited the accompanying consolidated balance sheets of The Procter & Gamble Company and subsidiaries as of June 30, 1995 and 1994 and the related consolidated statements of earnings, retained earnings, and cash flows for each of the three years in the period ended June 30, 1995. These financial statements are the responsibility of the companies' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the companies at June 30, 1995 and 1994 and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1995, in conformity with generally accepted accounting principles. As discussed in Note 1 to the financial statements, effective July 1, 1992, the Company changed its methods of accounting for other post retirement benefits and income taxes. /S/DELOITTE & TOUCHE LLP August 10, 1995 23 The Procter & Gamble Company and Subsidiaries CONSOLIDATED STATEMENT OF EARNINGS
Years Ended June 30 (Millions of Dollars Except Per Share Amounts) 1995 1994 1993 -------------------------------------------------------------------------------------------------- NET SALES $33,434 $30,296 $30,433 Cost of products sold 19,623 17,355 17,683 Marketing, administrative, and other operating expenses 9,632 9,361 9,589 Provision for restructuring -- -- 2,705 -------------------------------------------------------------------------------------------------- OPERATING INCOME 4,179 3,580 456 Interest expense 488 482 552 Other income, net 309 248 445 -------------------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES & PRIOR YEARS' EFFECT OF ACCOUNTING CHANGES 4,000 3,346 349 Income taxes 1,355 1,135 80 -------------------------------------------------------------------------------------------------- NET EARNINGS BEFORE PRIOR YEARS' EFFECT OF ACCOUNTING CHANGES 2,645 2,211 269 Prior years' effect of accounting changes -- -- (925) --------------------------------------------------------------------------------------------------- NET EARNINGS/(LOSS) $ 2,645 $ 2,211 $ (656) --------------------------------------------------------------------------------------------------- PER COMMON SHARE: NET EARNINGS BEFORE PRIOR YEARS' EFFECT OF ACCOUNTING CHANGES $ 3.71 $ 3.09 $ 0.25 Prior years' effect of accounting changes -- -- $ (1.36) NET EARNINGS/(LOSS) $ 3.71 $ 3.09 $ (1.11) NET EARNINGS/(LOSS) ASSUMING FULL DILUTION $ 3.48 $ 2.91 $ (0.96) DIVIDENDS $ 1.40 $ 1.24 $ 1.10 AVERAGE SHARES OUTSTANDING (IN MILLIONS) 686.0 683.1 680.4 --------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
Years Ended June 30 (Millions of Dollars) 1995 1994 1993 BALANCE AT BEGINNING OF YEAR $7,496 $6,248 $7,810 Net earnings/(loss) 2,645 2,211 (656) Dividends to shareholders Common (960) (847) (748) Preferred, net of related tax benefit (102) (102) (102) Excess of cost over the stated value of treasury shares (114) (14) (56) -------------------------------------------------------------------------------------------------- BALANCE AT END OF YEAR $8,965 $7,496 $6,248 -------------------------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements.
24 The Procter & Gamble Company and Subsidiaries CONSOLIDATED BALANCE SHEET
June 30 (Millions of Dollars) 1995 1994 --------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,028 $ 2,373 Investment securities 150 283 Accounts receivable 3,562 3,115 Inventories 3,453 2,877 Deferred income taxes 804 716 Prepaid expenses and other current assets 845 624 --------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 10,842 9,988 PROPERTY, PLANT, AND EQUIPMENT 11,026 10,024 GOODWILL AND OTHER INTANGIBLE ASSETS 4,572 3,754 OTHER ASSETS 1,685 1,769 --------------------------------------------------------------------------------- TOTAL ASSETS $28,125 $25,535 --------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable - trade $ 2,891 $ 2,604 Accounts payable - other 725 660 Accrued liabilities 3,494 2,961 Taxes payable 568 440 Debt due within one year 970 1,375 --------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 8,648 8,040 LONG-TERM DEBT 5,161 4,980 OTHER LIABILITIES 3,196 3,336 DEFERRED INCOME TAXES 531 347 --------------------------------------------------------------------------------- TOTAL LIABILITIES 17,536 16,703 --------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Convertible Class A preferred stock 1,913 1,942 Common stock - shares outstanding: 1995 - 686,574,055; 1994 - 684,348,359 687 684 Additional paid-in capital 693 560 Currency translation adjustments 65 (63) Reserve for employee stock ownership plan debt retirement (1,734) (1,787) Retained earnings 8,965 7,496 --------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 10,589 8,832 --------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $28,125 $25,535 --------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements.
25 The Procter & Gamble Company and Subsidiaries CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended June 30 (Millions of Dollars) 1995 1994 1993 --------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $ 2,373 $ 2,322 $ 1,776 --------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net earnings before prior years' effect of accounting changes 2,645 2,211 269 Provision for restructuring -- -- 2,705 Depreciation and amortization 1,253 1,134 1,140 Deferred income taxes 181 196 (1,065) Change in accounts receivable (225) 40 (9) Change in inventories (401) 25 97 Increase in payables and accrued liabilities 435 98 55 Change in other liabilities (157) (353) 67 Other (163) 298 79 --------------------------------------------------------------------------------------------------- TOTAL OPERATING ACTIVITIES 3,568 3,649 3,338 --------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Capital expenditures (2,146) (1,841) (1,911) Proceeds from asset sales 310 105 725 Acquisitions (623) (295) (138) Change in investment securities 96 23 (306) --------------------------------------------------------------------------------------------------- TOTAL INVESTING ACTIVITIES (2,363) (2,008) (1,630) --------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Dividends to shareholders (1,062) (949) (850) Reduction of short-term debt (429) (281) (277) Additions to long-term debt 449 414 1,001 Reduction of long-term debt (510) (797) (939) Proceeds from stock options 66 36 77 Purchase of treasury shares (114) (14) (55) --------------------------------------------------------------------------------------------------- TOTAL FINANCING ACTIVITIES (1,600) (1,591) (1,043) --------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 50 1 (119) --------------------------------------------------------------------------------------------------- CHANGE IN CASH AND CASH EQUIVALENTS (345) 51 546 --------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,028 $ 2,373 $ 2,322 --------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE Cash payments for: Interest, net of amount capitalized $ 444 $ 487 $ 592 Income taxes 1,047 1,225 1,035 Non-cash transactions: Reductions in employee stock ownership plan debt guaranteed by the Company 53 49 46 Liabilities assumed in acquisitions 575 65 83 Conversion of preferred to common shares 29 27 20 --------------------------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements.
26 The Procter & Gamble Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars except per share amounts) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION: The consolidated financial statements include The Procter & Gamble Company and its controlled subsidiaries (the Company). Investments in companies that are at least 20% to 50% owned and over which the Company exerts significant influence but does not control the financial and operating decisions are accounted for by the equity method. These investments are managed as integral parts of the Company's segment operations; accordingly, the Company's share of their results is included in net sales and in earnings for the related segments. ACCOUNTING CHANGES: Effective July 1, 1992, the Company adopted Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits Other than Pensions. This Statement requires accrual of postretirement health care and life insurance benefits during an employee's years of active service rather than on the previous pay-as-you- go basis during the retirement years. Effective July 1, 1992, the Company adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. This Statement requires that deferred taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and amounts recognized for tax purposes, using currently enacted tax laws and rates. CURRENCY TRANSLATION: For most subsidiaries outside the U.S., the local currency is the functional currency and translation adjustments are accumulated in a separate component of shareholders' equity. For subsidiaries whose economic environment is highly inflationary, the U.S. dollar is the functional currency, and gains or losses that result from remeasurement are included in earnings. In addition, transactional foreign currency impacts are included in earnings. The losses included in net earnings were $38 in 1995, $27 in 1994, and $42 in 1993. CASH EQUIVALENTS: Highly liquid investments with maturities of three months or less when purchased are considered to be cash equivalents. DERIVATIVE INSTRUMENTS: The Company enters into derivative instruments to manage exposure to fluctuations in interest rates, foreign exchange rates, and certain raw material prices. The interest rate differential on interest rate swap contracts used to hedge underlying debt obligations is reflected as an adjustment to interest expense over the life of the swaps. Written options are marked-to-market on a current basis through income. Gains and losses related to qualifying hedges of foreign currency firm commitments or anticipated transactions are recognized in income when the hedged transaction occurs. Gains or losses on currency swaps or foreign currency denominated debt that qualify as hedges of net assets in foreign subsidiaries are offset against the translation reflected in shareholders' equity. Other foreign exchange contracts are marked-to-market on a current basis through income. Commodity instruments are accounted for as hedges, with any realized gains or losses included in inventory, to the extent they are designated and are effective as hedges of anticipated commodity purchases. INVENTORY VALUATION: Inventories are valued at cost, which is not in excess of current market. Cost is primarily determined by the average cost method, with a lesser portion determined by the last-in, first-out method. The replacement cost of LIFO inventories exceeds carrying value by approximately $225. GOODWILL AND OTHER INTANGIBLE ASSETS: The cost of intangible assets is amortized, principally on a straight-line basis, over the estimated periods benefited (not exceeding 40 years). The average remaining life is 33 years. The realizability of goodwill and other intangibles is evaluated periodically as events or circumstances indicate a possible inability to recover their carrying amount. Such evaluation is based on various analyses, including cash flow and profitability projections that incorporate the impact on existing 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars except per share amounts) Company businesses. The analyses necessarily involve significant management judgment to evaluate the capacity of an acquired business to perform within projections. Historically, the Company has generated sufficient returns from acquired businesses to recover the cost of the intangible assets. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are recorded at cost reduced by accumulated depreciation. Depreciation expense is provided based on historical cost and estimated useful lives. The Company uses the straight-line method for calculating depreciation. OTHER OPERATING EXPENSES: Research and development costs are charged to earnings as incurred and were $1,257 in 1995, $1,059 in 1994 and $956 in 1993. Advertising costs are charged to earnings as incurred and amounted to $3,284 in 1995, $2,996 in 1994, and $2,973 in 1993. NET EARNINGS PER COMMON SHARE: Net earnings less preferred dividends (net of related tax benefits) are divided by the average number of common shares outstanding during the year to derive net earnings per common share. Fully diluted earnings per share are calculated using the treasury stock method to give effect to stock options and convertible preferred stock and include an adjustment for preferred stock dividend requirements. RECLASSIFICATIONS: Certain reclassifications of prior years' amounts have been made to conform with the current year presentation. 2. PROVISION FOR RESTRUCTURING Restructuring provisions totaling $2,705, which reduced after-tax earnings by $1,746 or $2.57 per share, were established in fiscal 1993. A charge of $2,402 covered a worldwide restructuring effort to consolidate manufacturing systems and reduce overhead costs, and a $303 charge related to the divestiture of the 100% juice business. The restructuring provisions were determined based on estimates prepared at the time the restructuring actions were approved by management and the Board of Directors. The cost of completing the restructuring programs is expected to approximate the original estimates. 3. ACQUISITIONS In the first quarter of fiscal year 1995, the Company completed the purchase acquisition of the European tissue business of Vereinigte Papierwerke Schickedanz AG and the prestige fragrance business of Giorgio Beverly Hills, Inc. These acquisitions had an aggregate purchase price of $598. Other acquisitions accounted for as purchases totaled $25, $295, and $138 in 1995, 1994 and 1993, respectively. 4. BALANCE SHEET INFORMATION June 30 1995 1994 ------------------------------------------------------------------- INVENTORIES Raw materials $ 1,315 $ 1,087 Work in process 247 213 Finished products 1,891 1,577 -------------------------------------------------------------------- 3,453 2,877 PROPERTY, PLANT AND EQUIPMENT Buildings 3,364 3,027 Machinery and equipment 13,734 12,249 Land 641 620 -------------------------------------------------------------------- 17,739 15,896 Less accumulated depreciation 6,713 5,872 -------------------------------------------------------------------- 11,026 10,024 GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill 4,474 3,564 Trademarks and other intangible assets 1,008 946 -------------------------------------------------------------------- 5,482 4,510 Less accumulated amortization 910 756 -------------------------------------------------------------------- 4,572 3,754 ACCRUED LIABILITIES Marketing expenses 1,135 842 Compensation expenses 419 393 Restructuring reserves 828 870 Other 1,112 856 -------------------------------------------------------------------- 3,494 2,961 OTHER LIABILITIES Postretirement benefits 1,402 1,432 Restructuring reserves 466 1,035 Pension benefits 777 495 Other 551 374 -------------------------------------------------------------------- 3,196 3,336 28 The Procter & Gamble Company and Subsidiaries 5. LONG-TERM DEBT The following presents the carrying value of outstanding long-term debt, including ESOP debt guaranteed by the Company: June 30 1995 1994 ------------------------------------------------------------------ 6.85% notes due 1997 $ 200 $ 200 9 1/2% notes due 1998 200 200 8% notes due 2003 200 200 8% notes due 2024 200 -- 8.7% notes due 2001 175 175 7 3/8% debentures due 2023 175 175 10 7/8% Canadian dollar bonds due 2001 146 145 5.2% notes due 1995 150 150 9 5/8% notes due 2001 150 150 8 1/2% notes due 2009 149 149 7.1% notes due 1994 -- 200 6 1/4% notes due 1995 -- 200 Commercial paper 922 765 9.36% ESOP debentures due 2021 1,000 1,000 8.12%-8.33% serial ESOP notes, due 1995-2004 734 787 Other 1,254 978 ------------------------------------------------------------------- 5,655 5,474 Less current portion (494) (494) ------------------------------------------------------------------- Total long-term debt 5,161 4,980 The following payments are required during the next five fiscal years: 1996 - $494; 1997 - $552; 1998 - $365; 1999 - $335 and 2000 - $273. The fair value of the underlying long-term debt, excluding the current portion, was $5,662 and $5,205 at June 30, 1995 and 1994, respectively. At June 30, 1995 and 1994, the weighted average interest rate of short-term borrowings was 9.5% and 6.5%, respectively. The increase in 1995 is the result of more short-term borrowings in developing countries and reduced short-term borrowings in the United States. Certain commercial paper balances have been classified as long term debt based on the Company's intent and ability to renew the obligations on a long-term basis. The Company has entered into derivatives that convert these commercial paper obligations into fixed-rate obligations. 6. RISK MANAGEMENT ACTIVITIES The Company is exposed to market risk from changes in interest rates, currency exchange rates, and certain commodity prices. To manage the volatility relating to these exposures, the Company enters into various derivative transactions pursuant to the Company's policies in areas such as counterparty exposure and hedging practices. Positions are monitored using techniques such as market value and sensitivity analyses. The Company does not hold or issue derivative financial instruments for trading purposes and is not a party to leveraged instruments. INTEREST RATE MANAGEMENT The Company's policy is to manage interest cost using a mix of fixed and variable rate debt. To manage this mix in a cost efficient manner, the Company enters into interest rate swaps, in which the Company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. The following table presents information for outstanding interest rate swaps. 1995 1994 ------------- -------------- 1995- Beyond 1994- Beyond June 30 2000 2000 1999 1999 ------------------------------------------------------------------ Pay Fixed: Notional amount $845 $914 $593 $881 Weighted average receive rate 4.9% 5.8% 5.4% 6.2% Weighted average pay rate 5.9% 7.0% 6.1% 7.8% Pay Variable: Notional amount $535 $171 $504 $171 Weighted average receive rate 6.3% 9.3% 6.2% 9.2% Weighted average pay rate 6.8% 7.7% 5.7% 6.0% Options and warrants may also be used to manage the Company's overall risk profile. The notional amounts of such instruments have declined to $300 at June 30, 1995 from $1,394 at June 30, 1994, 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars except per share amounts) reflecting actions by management to reduce the exposure to written options. The following table presents information for all interest rate instruments. The notional amount does not necessarily represent amounts exchanged by the parties and, therefore, is not a direct measure of the exposure of the Company through its use of derivatives. The fair value approximates the cost to settle the outstanding contracts. The carrying value includes the net amount due to counterparties under swap contracts, currency translation associated with currency interest rate swaps, and any marked-to-market value of instruments. The effect of a weaker dollar represents the majority of the fair values and carrying values presented below. Because the currency interest rate swaps are designated as a hedge of the Company's related foreign net asset exposures, the currency effects are reflected in the currency translation adjustment section of shareholders' equity, offsetting a portion of the translation of the net assets. June 30 1995 1994 ------------------------------------------- Notional amount $2,765 $3,543 Fair value-Loss 373 239 Carrying value 298 193 Unrecognized Loss 75 46 Although derivatives are an integral part of the Company's interest rate management, their incremental effect on interest expense for 1995 and 1994 was insignificant. Based on the Company's overall variable rate exposure at June 30, 1995, including interest rate instruments, a 300 basis point interest rate change would not have a material effect on earnings. CURRENCY RATE MANAGEMENT The primary purpose of the Company's foreign currency hedging activities is to protect against the volatility associated with local currency purchase transactions. Corporate policy prescribes the range of hedging activity into which the subsidiary operations may enter. To execute this policy, the Company primarily utilizes forward exchange contracts and options with durations of generally less than 12 months. Because of the decentralized management of these activities, the incremental impact is not determinable. However, any change in the fair value of the instruments generally is offset by a corresponding change in the related exposure. In addition, the Company enters into foreign currency swaps to hedge intercompany financing transactions and purchases foreign currency options to hedge against the effect of exchange rate fluctuations on royalties and foreign source income. Currency instruments outstanding at June 30 are as follows: Notional Carrying Fair June 30 Amount Value Value --------------------------------------------------------- 1995 Forward Contracts $3,423 $ (8) $(20) Purchased Options 2,419 61 38 Currency Swaps 863 (140) (140) 1994 Forward Contracts $1,873 $ (10) $ (3) Purchased Options 1,138 10 14 Currency Swaps 646 (62) (62) The aggregate notional amount of currency instruments outstanding at June 30, 1995 increased over the prior year primarily due to expanded risk management activities in response to exchange rate movements during the third quarter. The impact of a weaker dollar at year end also increased the notional value of instruments in dollars. The major currency exposures hedged by the Company at June 30, 1995 include the German mark ($2,465 notional amount), U.S. dollar ($824 notional amount), British pound sterling ($811 notional amount), Belgian franc ($631 notional amount), and French franc ($535 notional amount). Currency exposure related to the net assets of subsidiaries is managed primarily through local currency financing and foreign currency denominated financing instruments entered into by the parent company. At June 30, 1995, the Company's total foreign net assets were $7,263. Of this, approximately 20% is denominated in the German mark. The Japanese yen, 30 The Procter & Gamble Company and Subsidiaries Canadian dollar, British pound, Italian lira, and Mexican peso each represent between approximately 5% and 10% of the total. No other individual country represents more than 5% of the total. The Company has designated $1,386 of foreign currency instruments as hedges of its net asset exposure in certain foreign subsidiaries. These hedges offset $115 of translation effects reflected in shareholders' equity for the year ended June 30, 1995. COMMODITY PRICE MANAGEMENT Because market prices of certain raw materials depend on a number of unpredictable factors, such as weather, the Company's policy is to manage the resulting volatility using commodities contracts. At June 30, 1995 and 1994, the Company had commodities contracts outstanding, with a fair value of $(5) and $11, respectively. 7. FINANCIAL INSTRUMENTS Financial instruments include cash equivalents, investment securities, risk management instruments, and certain other assets and liabilities. INVESTMENTS Pursuant to FASB Statement No. 115, the Company has classified its readily marketable debt and equity securities, the majority of which are current assets, as available for sale. The fair value of $241 approximates the original cost. CREDIT RISK Credit risk arising from the inability of a counterparty to meet the terms of the Company's financial instruments contracts is generally limited to the amounts, if any, by which the counterparties' obligations exceed the obligations of the Company. It is the Company's policy to only enter into financial instruments with a diversity of creditworthy counterparties. Therefore, the Company does not expect to incur significant credit losses on financial instruments. MARKET VALUATION METHODS The estimated fair values of financial instruments, including risk management instruments, have been determined using available market information and valuation methodologies, primarily discounted cash flow analysis. Such estimates require considerable judgment in interpreting market data, and changes in assumptions or estimation methods may significantly affect the fair value estimates. The carrying value of financial instruments, excluding risk management instruments which are discussed in Note 6, approximates fair value at June 30, 1995 and 1994. 8. SHAREHOLDERS' EQUITY (Share Amounts in Thousands) PREFERRED STOCK The Company has 600,000 shares of authorized Class A preferred stock (Series A and Series B), with a stated value of $1 per share. Series A shares are held by the Employee Stock Ownership Plan. Each issued share has a liquidation value equal to the issue price of $27.50 per share. The shares are convertible at the option of the holder into one share of the Company's common stock. June 30 1995 1994 1993 --------------------------------------------------------- Series A: Outstanding, June 30 33,218 34,269 35,246 Converted to common shares and retired 1,051 977 626 --------------------------------------------------------- There were 19,142 shares of series B shares outstanding for all periods, held by the Employee Stock Ownership Plan. Each share has a liquidation value equal to the issuance price of $52.24 per share and is convertible at the option of the holder into one share of the Company's common stock. At June 30, 1995 there were 200,000 shares of authorized and unissued Class B preferred stock (nonvoting) with a stated value of $1 per share. 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars except per share amounts) COMMON STOCK The Company has authorized 2,000,000 shares of common stock with a stated value of $1 per share. Changes in outstanding shares were as follows: 1995 1994 1993 --------------------------------------------------------------- Shares outstanding, July 1 684,348 681,754 678,794 Purchased for treasury (1,708) (255) (1,401) Issued for employee plans 3,934 2,849 4,361 --------------------------------------------------------------- Shares outstanding, June 30 686,574 684,348 681,754 Treasury shares were 54,829, 54,501, and 55,521 at June 30, 1995, 1994 and 1993, respectively. Under the Company's stock option plans, options have been granted to key employees and directors to purchase common shares of the Company within a ten-year term at the market value on the dates of the grants. Stock option activity was as follows: 1995 1994 1993 -------------------------------------------------------------- OPTIONS Outstanding, July 1 30,556 28,497 27,822 Granted 3,926 3,880 4,279 Exercised (2,639) (1,673) (3,380) Canceled (151) (148) (224) -------------------------------------------------------------- Outstanding, June 30 31,692 30,556 28,497 Exercisable, June 30 27,777 26,685 24,255 Available For Grant 9,755 6,418 3,095 AVERAGE PRICE Outstanding, June 30 42.72 38.23 34.73 Granted 66.21 56.81 51.56 Exercised 25.18 21.35 21.08 ------------------------------------------------------------- ADDITIONAL PAID-IN CAPITAL Increases in additional paid-in capital resulted from the conversion of preferred shares, and the excess amount realized over the stated value of common shares issued pursuant to stock option and remuneration plans. This amounted to $133, $83 and $112 for the years ended June 30, 1995, 1994 and 1993, respectively. CURRENCY TRANSLATION ADJUSTMENTS Amounts credited/(charged) to shareholders' equity were $128, $36 and ($211) during the years ended June 30, 1995, 1994 and 1993, including tax effects of $73, $30 and ($1). 9. RETIREMENT PLANS The Company maintains defined contribution profit sharing plans which provide retirement benefits to a significant number of employees. These are funded through the Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan and by cash contributions from the Company. The Procter & Gamble PST and ESOP is the largest plan and covers most employees in the United States. Annual credits to participants' accounts are based on individual base salaries and years of service. The total credited to all accounts does not exceed 15% of salaries and wages of participants. Within this plan, a leveraged employee stock ownership trust borrowed $1,000 in 1989 and the Company has guaranteed this debt. The proceeds were used to buy Series A ESOP Convertible Class A Preferred Stock and shares are allocated each year to individual accounts. Amounts credited to these plans were: Years Ended June 30 1995 1994 1993 ------------------------------------------------------------ Preferred shares of P&G stock allocated at market value $155 $117 $111 Profit sharing expense (cash contributions) 112 157 167 ------------------------------------------------------------ Benefits earned by participants 267 274 278 Principal and interest payments of $117 on the borrowed funds are paid each fiscal year by the trust from dividends on preferred shares and cash payments as follows: 32 The Procter & Gamble Company and Subsidiaries Preferred Company Total Debt Years Ended June 30 Dividends Payment Service --------------------------------------------------------------------------- 1995 Principal $53 $-- $ 53 Interest 16 48 64 --------------------------------------------------------------------------- Total 69 48 117 1994 Principal $49 $-- $ 49 Interest 22 46 68 --------------------------------------------------------------------------- Total 71 46 117 1993 Principal $46 $-- $ 46 Interest 26 45 71 --------------------------------------------------------------------------- Total 72 45 117 PENSION PLANS Other employees, primarily outside the U.S., are covered by local pension or retirement plans. OBLIGATIONS AND ASSETS June 30 1995 1994 --------------------------------------------------------------- Vested benefit obligation $ 1,250 $ 979 Non-vested benefit obligation 178 146 Accumulated benefit obligation 1,428 1,125 Effect of projected salaries 375 363 --------------------------------------------------------------- Projected benefit obligation 1,803 1,488 Plan assets at market value (890) (806) --------------------------------------------------------------- Unfunded pension benefit obligation 913 682 Unrecognized: Net transition obligation (37) (30) Prior service cost (45) (45) Net losses (30) (90) --------------------------------------------------------------- Accrued pension costs 801 517 Funded plan assets are held in restricted trusts or foundations that are segregated from the assets of the Company. The assets are in stocks, bonds, insurance contracts and other investments within the limits prescribed by local laws, and in line with local investment practices for pension and retirement plans. Funding policies vary by country and consider such factors as actuarial reports, tax regulations and local practices. In the U.S., plan assets exceeded the projected benefit obligation by $21 in 1995 and $2 in 1994. PENSION EXPENSE Years Ended June 30 1995 1994 1993 ------------------------------------------------------------------- Benefits earned during the year $ 89 $ 84 $ 66 Interest on projected benefit obligation 116 97 86 Actual return on plan assets (74) (63) (71) Net amortization and other 10 3 15 ------------------------------------------------------------------- Pension expense 141 121 96 The actuarial assumptions vary by country and consider such factors as economic conditions and nature of plan assets. The following table presents a summary of assumptions reflecting an average for the Company: ASSUMPTIONS Years Ended June 30 1995 1994 1993 ------------------------------------------------------------------- Long-term rate of return on plan assets 9% 9% 9% Increase in compensation 6% 6% 6% Discount rate 7% 7.4% 8% ------------------------------------------------------------------- OTHER RETIREE BENEFITS The Company provides certain health care and life insurance benefits for substantially all domestic employees who become eligible for these benefits when they meet minimum age and service requirements. Generally, the health care plans require contributions from retirees and pay a stated percentage of expenses reduced by deductibles and other coverages. Retiree contributions change annually in line with medical cost trends. In fiscal year 1991, the Procter & Gamble PST and ESOP borrowed $1,000 which the Company has guaranteed and is reflected as debt on the Company's balance sheet. The proceeds were used to buy shares of Series B ESOP Convertible Class A Preferred Stock for the purpose of partially funding retiree medical benefits. The fair values of the shares at June 30, 1995 and 1994 were $1,376 and $1,022. There were also other employee benefit trust assets of $65 and $40 on June 30, 1995 and 1994. Interest payments on the loan amounted to $94 for each of the years ended 1995, 1994 and 1993, with $79 funded each year by preferred stock dividends and the remainder by Company 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars except per share amounts) cash payments. The preferred stock dividends were considered a reduction of benefit expense. Effective July 1, 1992, the Company implemented SFAS No. 106. The effect of the accounting change on prior years, or accumulated benefit obligation, was $1,422, or $900 after tax, at July 1, 1992. ACCUMULATED BENEFIT OBLIGATION AND NET LIABILITY June 30 1995 1994 ------------------------------------------------------------------- Retirees $ 611 $ 512 Employees eligible to retire 133 126 Other active employees 681 603 ------------------------------------------------------------------- Accumulated benefit obligation 1,425 1,241 Unrecognized gain/(loss) 458 293 Plan assets at market value (440) (61) ------------------------------------------------------------------- Net liability 1,443 1,473 BENEFIT EXPENSE Years Ended June 30 1995 1994 1993 ------------------------------------------------------------------- Benefits earned during the year $ 43 $ 60 $ 59 Interest on accumulated benefit obligation 98 116 113 Actual return on plan assets (364) (21) -- Net amortization and other 241 (79) (90) ------------------------------------------------------------------- Sub-total 18 76 82 Dividends on plan's preferred stock (79) (79) (79) ------------------------------------------------------------------- Benefit expense (61) (3) 3 ASSUMPTIONS Years Ended June 30 1995 1994 1993 ------------------------------------------------------------------- Discount rate 7.5% 8% 8% Long term rate of return on plan assets 9% 9% 9% Initial health care cost trend rate* 10.5% 11% 12.7% -------------------------------------------------------------------- * Assumed for 1995 and 1994 to decline gradually to 5% in 2006 and thereafter. Assumed for 1993 to decline gradually to 6% in 2008 and thereafter. The pre-tax effect of a 1% increase in the assumed health care cost trend rate would increase the accumulated benefit obligations at June 30, 1995 and 1994 by approximately $200 and $185, along with increases of $24 and $33 in the 1995 and 1994 annual costs. 10. INCOME TAXES Effective July 1, 1992, the Company adopted SFAS No. 109, Accounting for Income Taxes. The cumulative effect of the accounting change in prior years was $25 of added tax expense. EARNINGS BEFORE INCOME TAXES Years Ended June 30 1995 1994 1993 -------------------------------------------------------------------- United States $2,683 $2,216 $ 318 Foreign 1,317 1,130 31 -------------------------------------------------------------------- Total 4,000 3,346 349 INCOME TAX PROVISIONS Years Ended June 30 1995 1994 1993 -------------------------------------------------------------------- Current tax expense U.S. Federal $ 718 $ 574 $ 635 Foreign 399 298 432 U.S. State & Local 57 67 78 -------------------------------------------------------------------- 1,174 939 1,145 Deferred tax expense U.S. Federal 124 118 (489) Foreign & Other 57 78 (576) -------------------------------------------------------------------- 181 196 (1,065) Total provision for income taxes 1,355 1,135 80 Taxes credited to Shareholders' Equity for the years ended June 30, 1995 and 1994 were $144 and $91. Taxes generally are provided currently on undistributed earnings of foreign subsidiaries, except when those earnings are considered to be reinvested indefinitely ($3,047 at June 30, 1995). The effective income tax rates, excluding prior years' effect of accounting changes were 33.9%, 33.9% and 22.9% in 1995, 1994 and 1993 compared to the U.S. statutory rate of 35% for 1995 and 1994, and 34% for 1993. In 1993, the effective rate was increased 4.2% by state and local taxes and 5.1% by goodwill and other acquisition effects, and decreased 15.0% by the impact of international rates and credits. 34 The Procter & Gamble Company and Subsidiaries DEFERRED INCOME TAX ASSETS AND LIABILITIES June 30 1995 1994 ------------------------------------------------------------------ Current deferred tax assets: Restructuring reserve $ 293 $ 274 Other 511 442 ------------------------------------------------------------------ Total current deferred tax assets 804 716 ------------------------------------------------------------------ Non-current deferred tax assets: Restructuring reserve $ 170 $ 364 Postretirement benefits 550 540 Loss carryforwards 276 282 ------------------------------------------------------------------ 996 1,186 Valuation allowance (263) (262) ------------------------------------------------------------------ 733 924 Non-current deferred tax liabilities: Depreciation (1,164) (1,173) Other (100) (98) ------------------------------------------------------------------ (1,264) (1,271) ------------------------------------------------------------------ Net non-current deferred income taxes (531) (347) 11. COMMITMENTS AND CONTINGENCIES The Company has various purchase commitments for materials, supplies and items of permanent investment incidental to the ordinary conduct of business. In the aggregate, such commitments are not at prices in excess of current market. The Company is subject to various lawsuits and claims with respect to matters such as governmental regulations, income taxes and other actions arising out of the normal course of business. While the effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists, in the opinion of management and Company counsel, the ultimate liabilities resulting from such claims will not materially affect the consolidated financial position, results of operations, or cash flows of the Company. The Company is also subject to contingencies pursuant to environmental laws and regulations that in the future may require the Company to take action to correct the effects on the environment of prior manufacturing and disposal practices. Accrued environmental liabilities for remediation and closure costs at June 30, 1995 were $113 and, in management's opinion, such accruals are appropriate based on existing facts and circumstances. Under the most adverse circumstances, however, this potential liability could be higher. In the event that future remediation expenditures are in excess of the amounts accrued, management does not anticipate that they will have a material adverse effect on the consolidated financial position, results of operations, or cash flows of the Company. Current year expenditures were not material. 12. SEGMENT INFORMATION The Company has changed its segments for financial reporting purposes. All prior year amounts have been restated to reflect the following changes. Geographic segments are now aligned into four regions: North America - including the United States and Canada; Europe - including Europe, Middle East and Africa; Asia; and Latin America. Business segments now are aligned as follows: Laundry and Cleaning - laundry, dishcare, hard surface cleaners and fabric conditioners. Representative brands include Ariel, Tide, Cascade, Dawn, Mr. Proper, Downy. Paper - tissue/towel, feminine protection, and diapers. Representative brands include Bounty, Charmin, Always, Whisper, Pampers. Beauty Care - hair care, deodorants, personal cleansing, skin care and cosmetics and fragrances. Representative brands include Pantene, Vidal Sassoon, Secret, Safeguard, Olay, Cover Girl. Food and Beverage - coffee, peanut butter, juice, snacks, shortening and oil, baking mixes and commercial services. Representative brands include Folgers, Jif, Sunny Delight, Pringles, Crisco, Duncan Hines. Health Care - oral care, gastro-intestinal, respiratory care, analgesics and pharmaceuticals. Representative brands include Crest, Scope, Metamucil, Vicks, Aleve. The Company's operations are characterized by interrelated raw materials and manufacturing facilities and centralized research and staff functions. Accordingly, separate profit determination by segment is dependent upon assumptions regarding allocations. 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars except per share amounts) Corporate items include interest income and expense, segment eliminations, and other general corporate income and expense. Corporate assets consist primarily of cash and cash equivalents.
GEOGRAPHIC SEGMENTS Europe, Middle East North America and Africa Asia Latin America Corporate Total --------------------------------------------------------------------------------------------------------------------------------- Net Sales 1995 $16,213 $11,019 $3,619 $2,184 $ 399 $33,434 1994 15,147 9,739 3,134 2,256 20 30,296 1993 15,100 10,336 2,775 1,990 232 30,433 --------------------------------------------------------------------------------------------------------------------------------- Net Earnings Before 1995 1,871 687 203 215 (331) 2,645 Prior Years' Effect of 1994 1,710 563 145 145 (352) 2,211 Accounting Changes 1993 1,500 494 161 107 (247) 2,015 --------------------------------------------------------------------------------------------------------------------------------- Identifiable Assets 1995 11,375 7,446 3,311 1,305 4,688 28,125 1994 10,699 5,576 2,690 1,302 5,268 25,535 1993 10,809 5,486 2,375 1,067 5,198 24,935 --------------------------------------------------------------------------------------------------------------------------------- Excludes an after-tax charge for restructuring: North America - $1,223, Europe, Middle East and Africa - $342, Asia - $53, Latin America - $50, and Corporate - $78. Total - $1,746.
BUSINESS SEGMENTS Laundry and Beauty Food and Health Cleaning Paper Care Beverage Care Corporate Total ---------------------------------------------------------------------------------------------------------------------------------- Net Sales 1995 $10,224 $9,291 $6,507 $3,988 $3,025 $ 399 $33,434 1994 9,838 8,282 5,912 3,261 2,983 20 30,296 1993 10,013 8,307 5,562 3,343 2,976 232 30,433 ---------------------------------------------------------------------------------------------------------------------------------- Earnings Before 1995 1,695 1,131 736 513 360 (435) 4,000 Income Taxes and 1994 1,485 1,085 578 361 358 (521) 3,346 Accounting Changes 1993 1,404 952 357 240 402 (301) 3,054 ---------------------------------------------------------------------------------------------------------------------------------- Identifiable Assets 1995 5,375 7,082 5,511 2,148 3,321 4,688 28,125 1994 4,777 5,521 4,936 2,049 2,984 5,268 25,535 1993 4,453 5,274 5,045 2,190 2,775 5,198 24,935 ---------------------------------------------------------------------------------------------------------------------------------- Capital 1995 608 731 341 150 295 21 2,146 Expenditures 1994 590 663 247 136 182 23 1,841 1993 575 741 238 110 176 71 1,911 ---------------------------------------------------------------------------------------------------------------------------------- Depreciation 1995 279 500 189 108 144 33 1,253 and 1994 252 435 177 113 131 26 1,134 Amortization 1993 235 403 189 144 110 59 1,140 Excludes a pre-tax charge for restructuring: Laundry and Cleaning - $559, Paper - $626, Beauty Care - $614, Food and Beverage - $450, Health Care - $333, and Corporate - $123. Total - $2,705.
(Pie graph showing 1995 Net Sales by Business Segment. Laundry and Cleaning 31%; Paper 28%; Beauty Care 19%; Food and Beverage 12%; Health Care 9%; and Corporate 1%.) 36 The Procter & Gamble Company and Subsidiaries
13. QUARTERLY RESULTS (UNAUDITED) ------------------------------------------------------------------------------------------------- Quarters Ended --------------------------------------- Total Sept. 30 Dec. 31 Mar. 31 Jun. 30 Year ------------------------------------------------------------------------------------------------- Net sales 1994-95 $8,161 $8,467 $8,312 $8,494 $33,434 1993-94 7,564 7,788 7,441 7,503 30,296 ------------------------------------------------------------------------------------------------- Operating income 1994-95 1,254 1,190 1,057 678 4,179 1993-94 1,085 1,023 923 549 3,580 ------------------------------------------------------------------------------------------------- Net earnings 1994-95 792 750 631 472 2,645 1993-94 670 653 482 406 2,211 ------------------------------------------------------------------------------------------------- Net earnings 1994-95 1.12 1.06 .88 .65 3.71 per common share 1993-94 .95 .92 .66 .56 3.09 ------------------------------------------------------------------------------------------------- Fully diluted net earnings 1994-95 1.05 .99 .81 .63 3.48 per common share 1993-94 .89 .85 .64 .53 2.91 --------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Dollars in Millions Except Per Share Amounts) 1995 1994 1993 1992 1991 -------------------------------------------------------------------------------------------------------- Net Sales 33,434 30,296 30,433 29,362 27,026 Operating Income 4,179 3,580 456 2,867 2,702 Net Earnings/(Loss) 2,645 2,211 (656) 1,872 1,773 Net Earnings/(Loss) per Common Share 3.71 3.09 (1.11) 2.62 2.46 Dividend per Common Share 1.40 1.24 1.10 1.025 .975 Research and Development Expense 1,257 1,059 956 861 786 Advertising Expense 3,284 2,996 2,973 2,693 2,511 Total Assets 28,125 25,535 24,935 24,025 20,468 Long-term Debt 5,161 4,980 5,174 5,223 4,111 Net Earnings Margin 7.9% 7.3% -- 6.4% 6.6% Cash Flow from Operations 3,568 3,649 3,338 3,025 2,009 Employees 99,200 96,500 103,500 106,000 94,000 -------------------------------------------------------------------------------------------------------- Operating income includes a pre-tax charge totaling $2,705 for restructuring Net earnings and per share earnings include an after-tax charge total $1,746 or $2.57 per share for restructuring and an after-tax charge of $925 or $1.36 per share for the prior years' effect of accounting changes 37 The Procter & Gamble Company and Subsidiaries SHAREHOLDER INFORMATION
COMMON STOCK PRICE RANGE AND DIVIDENDS Price Range Dividends --------------------------------------------------------------- ---------------------- 1994-95 1993-94 1994-95 1993-94 --------------------------------------------------------------- ---------------------- Quarter Ended High Low High Low --------------------------------------------------------------- ---------------------- September 30 $60.88 $53.13 $53.63 $45.25 $.35 $.31 December 31 64.63 58.25 58.88 46.88 .35 .31 March 31 70.38 60.63 60.00 51.25 .35 .31 June 30 74.25 65.88 58.63 51.75 .35 . 31
SHAREHOLDER RECORDS Shareholder records are maintained by the Company. Questions concerning shareholder accounts, stock transfer or name changes should be directed to the Shareholder Services Department address shown at right or by calling 1-800-742-6253. Stock certificates are valuable and should be safeguarded since replacement takes time and requires a service charge to the shareholder. If a stock certificate is lost, stolen or destroyed, notify the Shareholder Services Department promptly. Please also notify Shareholder Services in writing of any address change. This will help prevent returned dividend checks and other financial mailings. DUPLICATE MAILINGS Financial reports must be mailed for each separate account unless you instruct us otherwise. If you wish to help us reduce costs by discontinuing multiple mailings to your address, please contact Shareholder Services. SHAREHOLDER INVESTMENT PROGRAM This programs allows participants to reinvest their dividends and make optional cash purchases of Procter & Gamble Common Stock directly through the Program. For a copy of the prospectus, please contact Shareholder Services. DIRECT DEPOSIT OF DIVIDENDS Shareholders of record may have their dividends electronically deposited into their bank account. If you are interested in this service, please contact Shareholder Services. SHAREHOLDERS' MEETING The next annual meeting of the shareholders will be held on Tuesday, October 10, 1995, at the Company's General Offices, Two Procter & Gamble Plaza, Cincinnati, OH 45202. CORPORATE HEADQUARTERS The Procter & Gamble Company P.O. Box 599 Cincinnati, Ohio 45201-0599 TRANSFER AGENT/SHAREHOLDER SERVICES The Procter & Gamble Company Shareholder Services Department P.O. Box 5572 Cincinnati, Ohio 45201-5572 REGISTRAR PNC Bank, Ohio, N.A. P.O. Box 1198 Cincinnati, Ohio 45201-1198 EXCHANGE LISTING New York, Cincinnati, Amsterdam, Paris, Basle, Geneva, Lausanne, Zurich, Frankfurt, Antwerp, Brussels, Tokyo. SHAREHOLDERS OF COMMON STOCK There were 193,066 Common Stock shareholders of record, including participants in the Shareholder Investment Program, as of July 21, 1995. FORM 10-K Beginning in October 1995, shareholders may obtain a copy of the Company's 1995 report to the Securities and Exchange Commission on Form 10-K by sending a request to Mr. Robert J. Thompson, Manager, Shareholder Services, at the above Shareholder Services address. COMPANY INFORMATION Copies of P&G's global Environmental Report, corporate contributions and diversity program reports, corporate brochure and fact sheets are available by writing to Corporate Communications at the Corporate headquarters address above. This report printed on recycled paper made from 50% recycled fiber including 10% post-consumer waste. 40 EX-21 5 EXHIBIT (21) Page 1 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================ Subsidiaries of the Registrant ------------------------------ The Procter & Gamble Company [Ohio] Anjali Corporation [Delaware] Kangra Valley Enterprises Ltd. [Delaware] The Mandwa Company, Inc. [Delaware] Ramalayam Investments Company [Delaware] Yamuna Investments Company [Delaware] Arbora Capital, S.A. [Spain] Arbora Holding, S.A. [Spain] Ausonia Higiene, S.L. [Spain] Ausonia Portuguesa-Productos de Higiene, S.A. [Portugal] Richvest B.V. [Netherlands] Cotonificio Medical S.A. [Spain] Deterperu S.A. [Peru] Deterperu Industrial S.A. [Peru] Fabricas de Aceite San Jacinto Limitada S.A. [Peru] Fisher Nut Company [Ohio] The Folger Coffee Company [Ohio] P&G Consultoria E Servicos Ltda. [Brazil] FPG Oleochemicals Sdn. Bhd. [Malaysia] Giorgio Beverly Hills, Inc.[Delaware] Giorgio Beverly Hills (Europe) Ltd. [United Kingdom] Hostess Coffee Company [Delaware] Industria de Concentrados Crush Limitada [Uruguay] Industrias Inextra, S.A. [Colombia] Inversiones Procter & Gamble de Venezuela, C.A. [Venezuela] Inversiones Industrias Mammi, C.A. [Venezuela] Midway Holdings Ltd. [Cayman Islands] Marcvenca Inversiones, C.A. [Venezuela] Procter & Gamble de Venezuela, C.A. [Venezuela] Jetco Chemicals, Inc. [Texas] Karm, S.A. [Liechtenstein] Leading Overseas Products Limited [U.K.] The Malabar Company [Delaware] Temple Trees [India] Noxell Corporation [Maryland] Cover Girl Cosmetics Limited [U.K.] Cover Girl Magazines, Books & Publishing Limited [U.K.] Eurocos U.S.A., Inc. [Delaware] Max Factor & Co. [Delaware] Noxell (Australia) Pty. Limited [Australia] Noxell (Barbados) Limited [Barbados] [ ] Brackets indicate state or country of incorporation and do not form part of corporate name. EXHIBIT (21) Page 2 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= Subsidiaries of the Registrant ------------------------------ Noxell (Panama) S.A. [Panama] Noxell (Thailand) Limited [Thailand] Noxell de Venezuela, C.A. [Venezuela] P&G Brands Comercio S.A. [Brazil] Procter & Gamble do Brasil S.A. [Brazil] Phebo do Nordeste S/A [Brazil] P&G Holding B.V. [Netherlands] Blendax Holland B.V. [Netherlands] Richardson-Vicks B.V. [Netherlands] Richardson-Vicks Overseas Finance N.V. [Netherlands Antilles] Shulton B.V. [Netherlands] P&G Tissues AG [Switzerland] Bess Hygiene AG [Switzerland] Tempo AG [Switzerland] P&G Tissues B.V. [Netherlands] Procter & Gamble A.G. [Switzerland] Betrix (Schweiz) AG [Switzerland] Detergent Products A.G. [Switzerland] Modern Industries Company - Dammam [Saudi Arabia] Modern Industries Company - Jeddah [Saudi Arabia] Modern Products Company - Jeddah [Saudi Arabia] Deurocos Cosmetic AG [Switzerland] Exquisit - Kosmetik GmbH [Germany] Moroccan Modern Industries [Morocco] Pantene A.G. [Switzerland] Procter & Gamble Austria GmbH [Austria] The Procter & Gamble Company of South Africa (Proprietary) Limited [S. Africa] Procter & Gamble South Africa Proprietary Limited [South Africa] Procter & Gamble Development Company A.G. Glarus [Switzerland] Procter & Gamble (East Africa) Limited [Kenya] Procter & Gamble Egypt [Egypt] Procter & Gamble (Egypt) Industrial and Commercial Company [Egypt] Procter & Gamble (Egypt) Manufacturing Company [Egypt] Procter & Gamble Hellas A.E. (Chemical Industries) [Greece] Procter & Gamble-Hutchison Ltd. [Hong Kong] Procter & Gamble (Chengdu) Ltd. [People's Republic of China] Procter & Gamble (China) Ltd. [People's Republic of China] Procter & Gamble Detergent (Guangzhou) Ltd. [People's Republic of China] Procter & Gamble (Guangzhou) Ltd. [People's Republic of China] Procter & Gamble Lonkey (Guangzhou) Ltd. [People's Republic of China] Procter & Gamble Lonkey (Shaoguan) Ltd. [People's Republic of China] [ ] Brackets indicate state or country of incorporation and do not form part of corporate name. EXHIBIT (21) Page 3 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================ Subsidiaries of the Registrant ------------------------------ Procter & Gamble Panda Detergent Co. Ltd Beijing [People's Republic of China] Procter & Gamble Paper (Guangzhou) Ltd. [People's Republic of China] Procter & Gamble Personal Cleansing (Tianjin) Ltd. [People's Republic of China] Procter & Gamble Jamaica Ltd. [Jamaica] The Procter & Gamble Manufacturing Company of Lebanon, S.A.L.[Lebanon] Procter & Gamble Marketing A.G. [Switzerland] Procter & Gamble Maroc [Morocco] Procter & Gamble Nigeria Limited [Nigeria] Procter & Gamble OY [Finland] Procter & Gamble Pakistan (Private) Limited [Pakistan] Procter & Gamble de Panama, S.A. [Panama] Procter & Gamble (Yemen) Ltd [Yemen] Societe Immobiliere Les Colombettes, S.A. [Switzerland] VP-Schickedanz GmbH [Austria] Procter & Gamble Asia Pacific Ltd. [Hong Kong] Procter & Gamble Benelux [Belgium] VP-Schickedanz S.A./N.V. [Belgium] Procter & Gamble do Brazil, Inc. [Delaware] Procter & Gamble do Brasil & Cia [Brazil] The Procter & Gamble Cellulose Company [Delaware] Procter & Gamble Chile, Inc. [Ohio] The Procter & Gamble Commercial Company [Ohio] PROGAM Leasing, Inc. [Puerto Rico] Procter & Gamble Commercial de Cuba, S.A. [Cuba] The Procter & Gamble Distributing Company [Ohio] Procter & Gamble FSC (Barbados) Inc. [Barbados] Procter & Gamble Foreign Sales Corporation Limited [Jamaica] Procter & Gamble Eastern Europe, Inc. [Ohio] Hyginett KFT [Hungary] Novomoskovskbytkhim [Russia] Procter & Gamble Czech Republic v.o.s. [Czech Republic] Procter & Gamble Bulgaria Ltd. [Bulgaria] Procter & Gamble Hungary Wholesale Trading Partnership (KKT)[Hungary] Alvorada BT [Hungary] Beta BT [Hungary] Carlos BT [Hungary] Diego BT [Hungary] Elysee BT [Hungary] Ferraris BT [Hungary] Frank BT [Hungary] [ ] Brackets indicate state or country of incorporation and do not form part of corporate name. EXHIBIT (21) Page 4 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================ Subsidiaries of the Registrant ------------------------------ Helga BT [Hungary] Olga BT [Hungary] Pal BT [Hungary] Stan BT [Hungary] Varadi BT [Hungary] Procter & Gamble Kereskedelmi BT [Hungary] Procter & Gamble Marketing & Commercial Activities d.o.o. [Slovenia] Procter & Gamble Marketing Latvia Ltd. [Latvia] Procter & Gamble Marketing Romania SRL [Romania] Procter & Gamble Manufacturing Romania SRL [Romania] Procter & Gamble Operations Polska - Spolka Akcyjna [Poland] Procter & Gamble Poll Ltd. [Poland] Procter & Gamble Polska Sp. zo.o [Poland] Procter & Gamble T.O.O. [Russia] Procter & Gamble Spol. s.r.o. (Ltd) [Slovenia] Procter & Gamble Ukraine [Ukraine] Rakona A.S. [Czech Republic] Procter & Gamble European Technical Center S.A. [Belgium] Procter & Gamble Far East, Inc. [Ohio] Max Factor K.K. [Japan] American Cosmetics K.K. [Japan] Betrix Japan K.K. [Japan] Max Factor Hanbai K.K. [Japan] Procter & Gamble Godrej Private Limited [India] Procter & Gamble India Holdings, Inc. [Ohio] Procter & Gamble Bangladesh Private Limited [Bangladesh] Procter & Gamble Home Products (India) Limited [India] Procter & Gamble Sri Lanka Private Limited [Sri Lanka] Procter & Gamble Korea Inc. [Korea] Procter & Gamble Manufacturing Korea Co. [Korea] Procter & Gamble NPD, Inc. [Ohio] Procter & Gamble Taiwan Limited [Taiwan] Procter & Gamble (Vietnam) Ltd. [Vietnam] Procter & Gamble FED, Inc. [Delaware] Procter & Gamble Finance Corporation [Canada] Procter & Gamble S.A. [France] Dittmeyer France S.A. [France] Fonciere des 96 et 104 Avenue Charles de Gaulle [France] Laboratoire Lachartre SNC [France] Procter & Gamble Amiens SNC [France] Procter & Gamble France S.N.C.[France] Procter & Gamble Hygiene Beaute France SNC [France] Procter & Gamble Pharmaceuticals France S.A. [France] [ ] Brackets indicate state or country of incorporation and do not form part of corporate name. EXHIBIT (21) Page 5 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= Subsidiaries of the Registrant ------------------------------ VP Schickedanz S.A. [France] Laboratoires Sofabel S.A.R.L. [France] The Procter & Gamble Global Finance Company [Ohio] Procter & Gamble Inc. [Canada] Crest Toothpaste Inc. [Canada] Procter & Gamble Financial Services [Ireland] Procter & Gamble Mississauga Real Estate Company [Canada] Procter & Gamble Services Company S.A. [Belgium] Shulton de Venezuela, C.A. S.A.[Venezuela] The Procter & Gamble Ingredient Company [Ohio] Procter & Gamble Inversiones S.A. [Chile] Productos Sanitarios S.A. [Chile] Procter & Gamble Investment Corporation [Canada] Procter & Gamble Italia, S.p.A. [Italy] Eurocos Italia S.p.A. [Italy] Fater S.p.A. [Italy] Fameccanica Data S.p.A. [Italy] Fatecnica S.p.A. [Italy] Procter & Gamble Holding [Italy] Procter & Gamble Pescara Technical Center S.p.A. [Italy] Procter & Gamble Pharmaceuticals Italia S.p.A. [Italy] Procter & Gamble Portugal S.A. [Portugal] Neoblanc-Productos de Higiene e Limpeza Lda. [Portugal] Procter & Gamble Tissues Italia S.p.A. [Italy] Procter & Gamble Tuketim Mallari Sanayii A.S. [Turkey] Eczacibasi Procter & Gamble Dagitim Ve Satis A.S. [Turkey] Panel Piyasa Arastima Ve Danismanlik A.S. [Turkey] Progasud S.p.A. [Italy] Rapik S.p.A. [Italy] PROGAVI S.p.A. [Italy] Sanipak Saglik Urunleri Sanayi Ve Ticaret A.S. [Turkey] Procter & Gamble Limited [U.K.] European Beauty Products (U.K.) Limited [U.K.] Max Factor & Co. (U.K.) Ltd. [Bermuda] Max Factor Limited [U.K.] Anne Russ Cosmetics Limited [U.K.] EBP Profumi Limited [U.K.] Gala Cosmetics & Fragrances Limited [U.K.] Gala Cosmetics International Limited [U.K.] Komal Manufacturing Chemists Ltd. [India] [ ] Brackets indicate state or country of incorporation and do not form part of corporate name. EXHIBIT (21) Page 6 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================ Subsidiaries of the Registrant ------------------------------- Gala of London Limited [U.K.] Girl Cosmetics Ltd. [U.K.] Mary Quant Cosmetics Limited [U.K.] Miner's Make Up Limited (U.K.] Max Factor Manufacturing Ltd. [U.K.] Procter & Gamble (Enterprise Fund) Limited [United Kingdom] Procter & Gamble (Health & Beauty Care) Limited [U.K.] Noxell Limited [U.K.] Noxell (Malaysia) Sdn. Bhd. [Malaysia] Noxell (Singapore) Pte. Ltd. [Singapore] Procter & Gamble (Cosmetics and Fragrances) Limited [U.K.] Shulton (Great Britain) Ltd. [U.K.] Colfax Laboratories (India) Ltd. [India] Vick International Limited [U.K.] Procter & Gamble (NTC) Limited [U.K.] Procter & Gamble Pharmaceuticals UK, Limited [U.K.] Procter & Gamble (Properties) Ltd. [U.K.] Vidal Sassoon Holdings Ltd. [U.K.] The Procter & Gamble Manufacturing Company [Ohio] Procter & Gamble Manufacturing (Thailand) Limited [Thailand] Procter & Gamble de Mexico, S.A. de C.V. [Mexico] Max Factor Mexicana, S.A. de C.V. [Mexico] The Procter & Gamble Paper Products Company [Ohio] Procter & Gamble Philippines, Inc. [Philippines] Progam Realty & Development Corporation [Philippines] Procter & Gamble Productions, Inc. [Ohio] Fountain Square Music Publishing Co., Inc. [Ohio] Riverfront Music Publishing Co., Inc. [Ohio] Sycamore Productions, Inc. [Ohio] Procter & Gamble Scandinavia, Inc. [Ohio] Procter & Gamble Hygien AB [Sweden] N.C.Nielsen Hospitalsudstyr A/S [Denmark] Procter & Gamble Hygien A/S [Norway] Procter & Gamble Hygien OY [Finland] Productos Sanitarios S.A. [Argentina] Eguimad S.A. [Argentina] Topsy S.A. [Argentina] Inversiones Linlinao S.A. [Argentina] Promotora de Bienes y Valores, S.A. de C.V. [Mexico] REVAC 2 Corp. [Delaware] [ ] Brackets indicate state or country of incorporation and do not form part of corporate name. EXHIBIT (21) Page 7 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= Subsidiaries of the Registrant ------------------------------ Richardson-Vicks Inc. [Delaware] Celtic Insurance Company Limited [Bermuda] Industrias Modernas, S.A. [Guatemala] Olay Company, Inc. [Delaware] OY Richardson-Vicks A.B. [Finland] P&G do Brasil Comercial Ltda. [Brazil] Procter & Gamble Australia Proprietary Limited [Australia] Procter & Gamble (NBD) Pty. Ltd. [Australia] Procter & Gamble Espana S.A. [Spain] Procter & Gamble GmbH [Germany] Beautycos Cosmetic GmbH [Germany] Betrix Cosmetic GmbH [Germany] Blendax Unterstutzungskasse GmbH [Germany] Buescher GmbH [Germany] Cover Girl Cosmetic GmbH [Germany] Eurocos Cosmetic GmbH [Germany] Eurocos Cosmetic Warenvertrieb GmbH [Austria] Euro-Juice GmbH [Germany] Euro-Juice y Compania, S. en C. [Spain] Havelland-Fruchtsaft GmbH [Germany] HELIX Spedition-und Lagerei GmbH [Germany] IST Intelligent Safety Technologies GmbH [Germany] Medimas Media-und Marketing Service GmbH [Germany] Procter & Gamble Eastern Europe Service GmbH [Germany] Procter & Gamble Pharmaceuticals-Germany GmbH [Germany] Rohm Pharma GmbH [Germany] Egnaro Arzneimittel GmbH [Germany] Rohm Pharma GmbH Wien [Austria] Rolf H. Dittmeyer GmbH [Germany] SCS Sales + Cosmetic Service GmbH [Germany] Shulton GmbH [Germany] TRAPOFA Leonhard-Speditions GmbH [Germany] Trapofa GmbH [Austria] Procter & Gamble Health & Beauty Care-Europe Limited [U.K.] Procter & Gamble Health & Beauty Care Sweden AB [Sweden] Procter & Gamble Health Care K.K. [Japan] Procter & Gamble Health Products, Inc. [Delaware] Procter-Syntex Health Products Company [California] Procter & Gamble Hong Kong Limited [Hong Kong] Procter & Gamble India Limited [India] Procter & Gamble Interamericas Inc. [Delaware] [ ] Brackets indicate state or country of incorporation and do not form part of corporate name. EXHIBIT (21) Page 8 THE PROCTER & GAMBLE COMPANY AND SUBSIDIARIES ============================================= Subsidiaries of the Registrant ------------------------------ Alejandro Llauro E Hijos S.A.I.C. [Argentina] Compania Quimica S.A. [Argentina] Procter & Gamble Ecuador Compania Anonima [Ecuador] Procter & Gamble Interamericas de Costa Rica S.A. [Costa Rica] Procter & Gamble Interamericas de Nicaragua S.A. [Nicaragua] Procter & Gamble (Malaysia) Sdn. Berhad [Malaysia] Procter & Gamble Pharmaceuticals, Inc. [Ohio] Norwich Overseas, Inc. [Delaware] Norwich Eaton (Hellas) Commercial and Industrial S.A. [Greece] Norwich Pharmacal Company del Peru [Peru] Procter & Gamble Pharmaceuticals Australia Pty. Limited [Australia] Procter & Gamble Pharmaceuticals Canada, Inc. [Canada] S.A. Procter & Gamble Pharmaceuticals N.V. [Belgium] Procter & Gamble Pharmaceuticals Puerto Rico, Inc. [Delaware] Procter & Gamble (Singapore) Pte. Ltd. [Singapore] P. T. Procter & Gamble Indonesia [Indonesia] Richardson-Vicks do Brasil Quimica e Farmaceutica S.A.. [Brazil] Richardson-Vicks Limited [Thailand] Richardson-Vicks Real Estate Inc. [Ohio] R-V Chemicals Holdings Ltd. [Ireland] Procter & Gamble (Ireland) Limited [Ireland] Procter & Gamble (Manufacturing) Ireland Limited [Ireland] Vick International Corporation [Delaware] Vick Nigeria Limited [Nigeria] Rosemount Corporation [Delaware] Sacoma, S.A. [Argentina] Shulton, Inc. [New Jersey] Shulton (Australia) Pty. Limited [Australia] Shulton S.A. [Guatemala] Shulton (New Zealand) Limited [New Zealand] Shulton (Thailand) Ltd. [Thailand] Sundor Brands Inc. [Florida] Sundor Canada Inc. [Delaware] Sycamore Investment Company [Ohio] Thomas Hedley & Co. Limited [U.K.] [ ] Brackets indicate state or country of incorporation and do not form part of corporate name. EX-23 6 Exhibit (23) ------------ Consent of Deloitte & Touche LLP DELOITTE & TOUCHE LLP 250 East Fifth Street Post Office Box 5340 Cincinnati, Ohio 45201-5340 Telephone: (513) 784-7100 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ---------------------------------------------------------------------------- We consent to the incorporation by reference in the following documents of our report dated August 10, 1995 (expressing an unqualified opinion and including an explanatory paragraph regarding the changes in accounting for other post retirement benefits and income taxes effective July 1, 1992), incorporated by reference in this Annual Report on Form 10-K of The Procter & Gamble Company for the year ended June 30, 1995. 1. Amendment No. 2, Post-Effective Amendment No. 2 to Registration Statement No. 33-26514 on Form S-8 for The Procter & Gamble 1983 Stock Plan; 2. Amendment No. 1 on Form S-8 to Registration Statement No. 33-31855 on Form S-4 (now S-8) for the 1982 Noxell Employees' Stock Option Plan and the 1984 Noxell Employees' Stock Option Plan; 3. Amendment No. 1, Post-Effective Amendment No. 1 to Registration Statement No. 33-32111 on Form S-3 for The Procter & Gamble Stock Investment Program; 4. Amendment No. 1, Post-Effective Amendment No. 1 to Registration Statement No. 33-48835 for The Procter & Gamble Company Debt Securities and Warrants; 5. Amendment No. 1, Post-Effective Amendment No. 1 to Registration Statement No. 33-49289 on Form S-8 for The Procter & Gamble 1992 Stock Plan; 6. Registration Statement No. 33-47656 on Form S-8 for The Procter & Gamble International Stock Ownership Plan; 7. Registration Statement No. 33-49081 on Form S-8 for The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan; 8. Registration Statement No. 33-49111 on Form S-3 for The Procter & Gamble Stock Investment Program; 9. Registration Statement No. 33-50273 on Form S-8 for The Procter & Gamble Commercial Company Employees' Savings Plan; 10. Registration Statement No. 33-51469 on Form S-8 for The Procter & Gamble 1993 non-employee Directors' Stock Plan; 11. Registration Statement No. 33-59257 on Form S-3 for The Procter & Gamble Company Shareholder Investment Program; and 12. Amendment No. 1 to Registration Statement No. 33-55471 on Form S-3 for The Procter & Gamble Company Debt Securities and Warrants. /S/DELOITTE & TOUCHE LLP September 12, 1995 EX-27 7
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000080424 THE PROCTER & GAMBLE COMPANY 1,000,000 U.S. DOLLARS 12-MOS JUN-30-1995 JUL-01-1994 JUN-30-1995 1 2,028 150 3,562 0 3,453 10,842 17,739 6,713 28,125 8,648 5,161 687 0 1,913 7,989 28,125 33,434 33,434 19,623 9,632 0 0 488 4,000 1,355 2,645 0 0 0 2,645 3.71 3.48
EX-99.1 8 Exhibit (99.1) -------------- Directors and Officers Liability Policy DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICY Issued By CODA CORPORATE OFFICERS & DIRECTORS ASSURANCE LTD. In Hamilton, Bermuda THIS IS A CLAIMS FIRST MADE POLICY. DEFENSE AND OTHER COSTS ARE INCLUDED IN THE LIMIT OF LIABILITY. THIS IS A THREE-YEAR POLICY WITH AN AUTOMATIC EXTENSION PROVISION. PLEASE READ THIS POLICY CAREFULLY. Words and phrases that appear below in all capital letters have the special meanings set forth in Clause 2 (Definitions). DECLARATIONS Policy No. PG-106C Item I COMPANY: The Procter & Gamble Company The Procter & Gamble Fund Principal Address: One Procter & Gamble Plaza Cincinnati, OH 45202 Item II POLICY PERIOD: From Mar 15, 1987 to June 30, 1996 12:01 a.m. Standard Time at the address of the Company stated above. Item III LIMIT OF LIABILITY: $25,000,000 Aggregate LIMIT OF LIABILITY for all LOSS paid on behalf of all INSUREDS arising from all CLAIMS first made during each POLICY YEAR. Item IV PREMIUM: At inception of first POLICY YEAR: $850,000 (prepaid total for three years) 6/30/93-94 Year - $325,000 6/30/94-95 Year - $340,000 6/30/95-96 Year - $345,000 At each anniversary thereafter: Subject to adjustment on each anniversary date in accordance with Clause 7 (Automatic Extension) of this POLICY. Item V Any notice to the COMPANY or, except in accordance with Clause 17 (Representation) of this POLICY, to the INSUREDS, shall be given or made to the individual listed below, if any, or otherwise to the individual designated in the APPLICATION, if any, or otherwise to the signer of the APPLICATION, and shall be given or made in accordance with Clause 16 (Notice) of this POLICY. ___________________________________________________________ __________________________________________________________ _________________________________________________________ Item VI Any notice to be given or payment to be made to the INSURER under this POLICY shall be given or made to Corporate Officers & Directors Assurance Ltd., The ACE Building, 30 Woodbourne Avenue, Hamilton HM 08, Bermuda, Fax 809-295- 5221, Telex 3543 ACEILBA, and shall be given or made in accordance with Clause 16 (Notice) of this POLICY. This POLICY shall constitute the entire contract between the INSUREDS, the COMPANY, and the INSURER. Endorsements 1 to 7 are made part of this POLICY at POLICY issuance. Countersigned at Hamilton, Bermuda on August 16, 1993 by /s/CHARLES D. SMITH Signature of Authorized Representative TABLE OF CONTENTS Clause Page 1. Insuring Clause 2. Definitions 3. Exclusions 4. Appeals 5. Arbitration 6. Assistance and Cooperation 7. Automatic Extension 8. Cancellation 9. Changes and Assignments 10. Payment of LOSS 11. Currency 12. Headings 13. INSUREDS' Reporting Duties 14. LOSS Provisions 15. Other Insurance 16. Notice 17. Representation 18. Severability 19. Special POLICY Revisions 20. Subrogation 21. Acquisition, Creation or Disposition of a Subsidiary DIRECTORS AND OFFICERS LIABILITY INSURANCE In consideration of the payment of the premium and in reliance on all statements made and information furnished by the COMPANY to the INSURER in the APPLICATION, which is hereby made a part hereof, and subject to the foregoing Declarations and to all other terms of this POLICY, the COMPANY, the INSUREDS, and the INSURER agree as follows: 1. INSURING CLAUSE The INSURER shall pay on behalf of the INSUREDS or any of them, any and all LOSS that the INSUREDS shall become legally obligated to pay by reason of any CLAIM or CLAIMS first made against the INSUREDS or any of them during the POLICY PERIOD, for any WRONGFUL ACTS that are actually or allegedly caused, committed, or attempted prior to the end of the POLICY PERIOD by the INSUREDS, not exceeding the LIMIT OF LIABILITY. 2. DEFINITIONS (a) "APPLICATION" shall mean the signed, written application for this POLICY, the schedules thereto and all supplementary information submitted in connection therewith, and all underwriting data submitted in connection with the automatic extension of this POLICY, all of which materials shall be deemed attached hereto, as if physically attached hereto, and incorporated herein. (b) "CLAIM" shall mean: (1) any demand or any judicial or administrative suit or proceeding against any INSURED which seeks monetary, equitable or other relief, including any appeal therefrom; or (2) written notice to the INSURER by the INSUREDS and/or the COMPANY during the POLICY PERIOD describing circumstances that are likely to give rise to a CLAIM being made against the INSUREDS. Multiple demands, suits or proceedings arising out of the same WRONGFUL ACT shall be deemed to be a single CLAIM, which shall be treated as a CLAIM first made during the POLICY YEAR in which the first of such multiple demands, suits or proceedings is made against any INSURED or in which notice of circumstances relating thereto is first given in accordance with subpart (b) of Clause 14 (LOSS Provisions) below, whichever occurs first. (c) "COMPANY" shall mean the company shown in Item I of the Declarations, any company that was a predecessor company to the company shown in Item I of the Declarations, any SUBSIDIARY of either such company and, if covered in accordance with subpart (a) of Clause 21 (Acquisition, Creation or Disposition of a Subsidiary) below, any other subsidiary. (d) "INSUREDS" shall mean one or more of the following: (1) all persons who were, now are, or shall be duly elected or appointed directors or officers of the COMPANY; or (2) the estates, heirs, legal representatives or assigns of deceased INSUREDS and the legal representatives or assigns of INSUREDS in the event of their incompetency, insolvency or bankruptcy. (e) "INSURER" shall mean Corporate Officers & Directors Assurance, Ltd., Hamilton, Bermuda. (f) "LIMIT OF LIABILITY" shall mean the amount described in Item III of the Declarations. Regardless of the time of payment of LOSS by the INSURER, the LIMIT OF LIABILITY as stated in Item III of the Declarations shall be the maximum liability of the INSURER for all LOSS arising from all CLAIMS first made during each POLICY YEAR. Reasonable and necessary attorneys fees incurred in investigating and defending a CLAIM shall be part of and not in addition to the LIMIT OF LIABILITY as stated in Item III of the Declarations, and payment by the INSURER of such attorneys fees shall reduce the LIMIT OF LIABILITY. (g) "LOSS" shall mean any and all amounts that the INSUREDS are legally obligated to pay by reason of a CLAIM made against the INSUREDS for any WRONGFUL ACT, and shall include but not be limited to compensatory, exemplary, punitive and multiple damages, judgments, settlements and reasonable and necessary costs of investigation and defense of CLAIMS and appeals therefrom (including but not limited to attorneys fees but excluding all salaries and office expenses of the COMPANY, amounts paid to counsel as general retainer fees, and all other expenses that cannot be directly allocated to a specific CLAIM), and cost of attachment or similar bonds, providing always, however, LOSS shall not include taxes, fines or penalties imposed by law, or matters that may be deemed uninsurable under the law pursuant to which this POLICY shall be construed. ("Fines or penalties" do not include punitive, exemplary, or multiple damages). (h) "POLICY" shall mean this insurance policy, including the APPLICATION, the Declarations, and any endorsements hereto issued by the INSURER. (i) "POLICY PERIOD" shall mean the period of time stated in Item II of the Declarations, as may be automatically extended in accordance with Clause 7 (Automatic Extension) below. If this POLICY is cancelled in accordance with subpart (c) or (d) of Clause 8 (Cancellation) below, the POLICY PERIOD shall end upon the effective date of such cancellation. (j) "POLICY YEAR" shall mean a period of one year, within the POLICY PERIOD, commencing each year on the day and hour first named in Item II of the Declarations, or if the time between the inception date, or any anniversary date and the termination date of this POLICY is less than one year, then such lesser period. (k) "SUBSIDIARY" shall mean any corporation in which more than 50% of the outstanding securities representing the present right to vote for election of directors is owned, directly or indirectly, in any combination, by the COMPANY and/or by one or more of its SUBSIDIARIES, at the starting date of the POLICY PERIOD. (l) "WRONGFUL ACT" shall mean any actual or alleged error, misstatement, misleading statement or act, omission, neglect, or breach of duty by the INSUREDS while acting in their individual or collective capacities as directors or officers of the COMPANY, or any other matter claimed against them by reason of their being directors or officers of the COMPANY. All such errors, misstatements, misleading statements or acts, omissions, neglects, or breaches of duty actually or allegedly caused, committed, or attempted by or claimed against one or more of the INSUREDS arising out of or relating to the same or series of related facts, circumstances, situations, transactions or events shall be deemed to be a single WRONGFUL ACT. 3. EXCLUSIONS The INSURER shall not be liable to make any payment for LOSS in connection with that portion of any CLAIM made against the INSUREDS: (a) for which the COMPANY actually pays or indemnifies or is required or permitted to pay on behalf of or to indemnify the INSUREDS pursuant to the charter or other similar formative document or by- laws or written agreements of the COMPANY duly effective under applicable law, that determines and defines such rights of indemnity; provided, however, this exclusion shall not apply if: (1) the COMPANY refuses to indemnify or advance defense or other costs as required or permitted, or if the COMPANY is financially unable to indemnify; and (2) the INSUREDS comply with Clause 20 (Subrogation) below; (b) based upon or attributable to the INSUREDS having gained any personal profit to which they were not legally entitled if a judgment or other final adjudication adverse to the INSUREDS or any arbitration proceeding pursuant to Clause 5 (Arbitration) below establishes that the INSUREDS in fact gained any such personal profit; (c) for the return by the INSUREDS of any improper or illegal remuneration paid in fact to the INSUREDS if it shall be determined by a judgment or other final adjudication adverse to the INSUREDS that such remuneration is improper or illegal or if such remuneration is to be repaid to the COMPANY under a settlement agreement; (d) for an accounting of profits in fact made from the purchase or sale by the INSUREDS of securities of the COMPANY within the meaning of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any state statutory law or common law; (e) brought about or contributed to by the dishonesty of the INSUREDS if a judgment or other final adjudication adverse to the INSUREDS or any arbitration proceeding pursuant to Clause 5 (Arbitration) below establishes that acts of active and deliberate dishonesty committed by the INSUREDS with actual dishonest purpose and intent were material to the CLAIM; (f) which is insured by any other existing valid policy or policies under which payment of the LOSS is actually made except in respect of any excess beyond the amounts of payments under such other policy or policies; (g) for which the INSUREDS are indemnified by reason of having given notice of a CLAIM or of any circumstance which might give rise to a CLAIM under any policy or policies of which this POLICY is a renewal or replacement or which it may succeed in time; (h) for personal injury, advertising injury, bodily injury, sickness, disease, or death of any person, or for damage to or destruction of any tangible property, including the loss of use thereof; however, this exclusion shall not apply to any derivative action brought against any INSURED; (i) by, on behalf of, at the behest of, or in the right of the COMPANY, if initiated by the management of the COMPANY; however, this exclusion shall not apply if, between the starting date of the POLICY PERIOD and the date of the CLAIM, the COMPANY shall have undergone any of the events listed in subpart (a) or (b) of Clause 8 (Cancellation) below, and the CLAIM is initiated by the management of the COMPANY after the date of such event; or (j) for any actual or alleged error, misstatement, misleading statement or act, omission, neglect or breach of duty by the INSUREDS while acting in their capacities as directors, officers, trustees, governors, partners, employees or agents of any entity other than the COMPANY or by reason of their being directors, officers, trustees, governors, partners, employees or agents of such other entity. It is agreed that any fact pertaining to any INSURED shall not be imputed to any other INSURED for the purpose of determining the application of the Exclusions. 4. APPEALS In the event the INSUREDS elect not to appeal a judgment, the INSURER may elect to make such appeal at its own expense, and shall be liable for any increased award, taxable costs and disbursements and any additional interest incidental to such appeal, to the extent such payments are not covered by other valid and collectible insurance. 5. ARBITRATION (a) Any dispute arising in connection with this POLICY shall be fully determined in Bermuda under the provisions of the Bermuda Arbitration Act of 1986, as amended and supplemented, by a Board of Arbitration composed of three arbitrators who shall all be disinterested, active or retired business executives having knowledge relevant to the matters in dispute, and who shall be selected for each controversy as follows: Either party to the dispute may, once a CLAIM or demand on his part has been denied or remains unsatisfied for a period of twenty (20) calendar days by the other party, notify the other of its desire to arbitrate the matter in dispute and at the time of such notification the party desiring arbitration shall notify the other party of the name of the arbitrator selected by it. The other party who has been so notified shall within ten (10) calendar days thereafter select an arbitrator and notify the party desiring arbitration of the name of such second arbitrator. If the party notified of a desire for arbitration shall fail or refuse to nominate the second arbitrator within ten (10) calendar days following the receipt of such notification, the party who first served notice of a desire to arbitrate will, within an additional period of ten (10) calendar days, apply to the Supreme Court of Bermuda for the appointment of a second arbitrator and in such a case the arbitrator appointed by such a judge shall be deemed to have been nominated by the party who failed to select the second arbitrator. The two arbitrators, chosen as above provided, shall within ten (10) calendar days after the appointment of the second arbitrator choose a third arbitrator. In the event of the failure of the first two arbitrators to agree on a third arbitrator within the said ten (10) calendar day period, either of the parties may within a period of ten (10) calendar days thereafter, after notice to the other party, apply to the Supreme Court of Bermuda for the appointment of a third arbitrator and in such case the person so appointed shall be deemed and shall act as a third arbitrator. Upon acceptance of the appointment by said third arbitrator, the Board of Arbitration for the controversy in question shall be deemed fixed. (b) The Board of Arbitration shall fix, by a notice in writing to the parties involved, a reasonable time and place for the hearing and may prescribe reasonable rules and regulations governing the course and conduct of the arbitration proceeding, including without limitation discovery by the parties. (c) This POLICY shall be governed by and construed and enforced in accordance with the internal laws of Bermuda, except insofar as such laws may prohibit payment in respect of punitive damages hereunder; provided, however, that the provisions, stipulations, exclusions and conditions of this POLICY are to be construed in an evenhanded fashion as between the parties; without limitation, where the language of this POLICY is deemed to be ambiguous or otherwise unclear, the issue shall be resolved in the manner most consistent with the relevant provisions, stipulations, exclusions and conditions (without regard to authorship of the language, without any presumption or arbitrary interpretation or construction in favor of either the INSUREDS or the INSURER) and in accordance with the intent of the parties. (d) The Board of Arbitration shall, within ninety (90) calendar days following the conclusion of the hearing, render its decision on the matter or matters in controversy in writing and shall cause a copy thereof to be served on all the parties thereto. In case the Board of Arbitration fails to reach a unanimous decision, the decision of the majority of the members of said Board shall be deemed to be the decision of the Board. (e) Each party shall bear the expense of its own arbitrator. The remaining costs of the arbitration shall be borne equally by the parties to such arbitration. (f) All decisions and awards by the Board of Arbitration shall be final and binding upon the parties. The parties hereby agree to exclude any right of appeal under Section 29 of the Bermuda Arbitration Act of 1986 against any award rendered by the Board of Arbitration and further agree to exclude any application under Section 30(1) of the Bermuda Arbitration Act of 1986 for a determination of any question of law by the Supreme Court of Bermuda. (g) All awards made by the Board of Arbitration may be enforced in the same manner as a judgment or order from the Supreme Court of Bermuda and judgment may be entered pursuant to the terms of the award by leave from the Supreme Court of Bermuda. (h) The INSURER and the INSUREDS agree that in the event that claims for indemnity or contribution are asserted in any action or proceeding against the INSURER by any of the INSUREDS' other insurers in any jurisdiction or forum other than that set forth in this Clause 5, the INSUREDS will in good faith take all reasonable steps requested by the INSURER to assist the INSURER in obtaining a dismissal of these claims (other than on the merits) and will, without limitation, undertake to the court or other tribunal to reduce any judgment or award against such other insurers to the extent that the court or tribunal determines that the INSURER would have been liable to such insurers for indemnity or contribution pursuant to this POLICY. The INSUREDS shall be entitled to assert claims against the INSURER for coverage under this POLICY, including, without limitation, for amounts by which the INSUREDS reduced its judgment against such other insurers in respect of such claims for indemnity or contribution, in an arbitration between the INSURER and the INSUREDS pursuant to this Clause 5; provided, however, that the INSURER in such arbitration in respect of such reduction of any judgment shall be entitled to raise any defenses under this POLICY and any other defenses (other than jurisdictional defenses) as it would have been entitled to raise in the action or proceeding with such insurers. 6. ASSISTANCE AND COOPERATION The INSURER has no duty to defend any CLAIM and shall not be called upon to assume charge of the investigation, settlement or defense of any CLAIM, but the INSURER shall have the right and shall be given the opportunity to associate with the INSUREDS and the COMPANY in the investigation, settlement, defense and control of any CLAIM relative to any WRONGFUL ACT where the CLAIM is or may be covered in whole or in part by this POLICY. At all times, the INSUREDS and the COMPANY and the INSURER shall cooperate in the investigation, settlement and defense of such CLAIM. The failure of the COMPANY to assist and cooperate with the INSURER shall not impair the rights of the INSUREDS under this POLICY. The INSUREDS shall not settle or admit any liability with respect to any CLAIM which involves or appears reasonably likely to involve this POLICY without the INSURER'S consent, which shall not be unreasonably withheld. 7. AUTOMATIC EXTENSION Except in the event this POLICY is cancelled in whole or in part in accordance with Clause 8 (Cancellation) below, on each anniversary of this POLICY, upon submission of the extension application and payment of the charged premium, this POLICY shall automatically be continued to a date one year beyond its previously stated expiration date, unless written notice is given by the INSURER to the COMPANY, or by the COMPANY to the INSURER, that such POLICY extension is not desired. Such written notice may be given at any time prior to the anniversary of the POLICY, except that such notice by the INSURER to the COMPANY may be given only during the period commencing ninety (90) days and ending ten (10) days prior to such anniversary, in which case the POLICY shall automatically expire two years from such anniversary date. Such written notice shall be given by the INSURER to the COMPANY only if it is determined to be appropriate by an affirmative vote of 2/3 of the INSURER'S entire Executive Committee at a meeting of said Committee prior to mailing of such notice. Any non-extension by the INSURER shall be revoked as of the next meeting of the INSURER'S Board of Directors if the Board at such meeting so determines by an affirmative vote of a majority of the entire Board. If any such non- extension is so revoked or if during the remainder of the POLICY PERIOD the INSURER agrees to extend coverage, this POLICY shall be continued or such agreed coverage may be extended, respectively, to the expiration date which would otherwise be applicable if such notice of non-extension had not been given, provided the COMPANY submits the extension application and pays the charged premium. If the COMPANY or the INSURER gives written notice that the POLICY extension is not desired, the COMPANY shall pay on or before each of the two remaining anniversary dates the charged premium for the next succeeding POLICY YEAR respectively less a premium credit equal to the premium paid at inception of the POLICY for Year 2 and Year 3 of the POLICY, respectively. If any such premium credit exceeds the charged premium, the INSURER shall refund to the COMPANY the difference within ten days following such anniversary date. The premium charged on each anniversary of this POLICY shall be determined by the rating plan and by-laws of the INSURER in force at such anniversary date. 8. CANCELLATION This POLICY shall not be subject to cancellation except as follows: (a) In the event during the POLICY PERIOD: (1) the company named in Item I of the Declarations shall merge into or consolidate with another organization in which the company named in Item I of the Declarations is not the surviving entity, or (2) any person or entity or group of persons and/or entities acting in concert shall acquire securities or voting rights which results in ownership or voting control by such person or entity or group of persons or entities of more than 50% of the outstanding securities representing the present right to vote for election of directors of the company named in Item I of the Declarations, this POLICY shall not apply to any WRONGFUL ACTS actually or allegedly taking place after the effective date of said merger, consolidation or acquisition; however, this POLICY shall remain in force for the remainder of the POLICY PERIOD as to CLAIMS based upon WRONGFUL ACTS alleged to have been committed prior to such date. All premiums paid or due at the time of said merger, consolidation or acquisition shall be fully earned and in no respect refundable. (b) In the event of the appointment by any state or federal official, agency or court of any receiver, conservator, liquidator, trustee, rehabilitator or similar official to take control of, supervise, manage or liquidate any entity included within the definition of the COMPANY, or in the event such entity becomes a debtor in possession, this POLICY shall not apply to any WRONGFUL ACTS by the directors and officers of such entity actually or allegedly taking place after the date of such event. This POLICY shall remain in force for the remainder of the POLICY PERIOD from said date as to CLAIMS for (i) WRONGFUL ACTS by any other INSUREDS, and (ii) WRONGFUL ACTS by the directors and officers of such entity alleged to have been committed prior to the date of such event. All premiums paid or due at the time of such event shall be fully earned, and in no respect refundable. With respect to CLAIMS first made after the date of such event for WRONGFUL ACTS by the directors and officers of such entity, (i) the LIMIT OF LIABILITY of this POLICY for the remainder of the POLICY PERIOD shall be a continuation of the same limit, and not a separate limit, as was in effect during the POLICY YEAR in which such event occurred; and (ii) such CLAIMS shall be deemed to have been first made during the POLICY YEAR in which such event occurred for purposes of the LIMIT OF LIABILITY. (c) This POLICY may be cancelled by mutual agreement and consent of the INSURER, the COMPANY, and the INSUREDS, upon such terms and conditions as respects return premium and/or future premium adjustments and/or loss adjustments as the parties may agree upon at the time of said cancellation. (d) This POLICY may be cancelled by the INSURER upon granting of 365 days written notice, providing such cancellation is determined to be appropriate by an affirmative vote of 3/4 of the INSURER'S entire Board at a meeting of said Board prior to mailing of said notice. Payment or tender of any unearned premium by the INSURER shall not be a condition precedent to the effectiveness of cancellation, but return of the pro rata unearned premium shall be made as soon as practicable. (e) In the event the charged premium for any POLICY YEAR is not paid as provided in Clause 7 (Automatic Extension), above, this POLICY shall not apply to any WRONGFUL ACTS actually or allegedly taking place after the anniversary date on which the additional premium was due; however, this POLICY shall remain in force for the remainder of the POLICY PERIOD as to CLAIMS first made during the POLICY PERIOD for WRONGFUL ACTS actually or allegedly caused, committed or attempted prior to such anniversary date. With respect to all CLAIMS first made after such anniversary date, one LIMIT OF LIABILITY shall apply for the remainder of the POLICY PERIOD. Such LIMIT OF LIABILITY shall be separate from the LIMIT OF LIABILITY provided during the POLICY YEAR immediately preceding such anniversary date. All premiums paid as of such anniversary date shall be fully earned and in no respect refundable. 9. CHANGES AND ASSIGNMENTS The terms and conditions of this POLICY shall not be waived or changed, nor shall an assignment of interest under this POLICY be binding, except by an endorsement to this POLICY issued by the INSURER. 10. PAYMENT OF LOSS Except in those instances when the INSURER has denied liability for the CLAIM because of the application of one or more exclusions, or other coverage issues, if the COMPANY refuses or is financially unable to advance LOSS costs, the INSURER shall, upon request and if proper documentation accompanies the request, advance on behalf of the INSUREDS, or any of them, LOSS costs that they have incurred in connection with a CLAIM, prior to disposition of such CLAIM. In the event that the INSURER so advances LOSS costs and it is finally established that the INSURER has no liability hereunder, such INSUREDS on whose behalf advances have been made and the COMPANY, to the full extent legally permitted, agree to repay to the INSURER, upon demand, all monies advanced. 11. CURRENCY All premium, limits, retentions, LOSS and other amounts under this POLICY are expressed and payable in the currency of the United States of America. 12. HEADINGS The descriptions in the headings and sub-headings of this POLICY are inserted solely for convenience and do not constitute any part of the terms or conditions hereof. 13. INSUREDS' REPORTING DUTIES The INSUREDS and/or the COMPANY shall give written notice to the INSURER as soon as practicable of any: (a) CLAIM described in subpart (b)(1) of Clause 2 (Definitions) above, which notice shall include the nature of the WRONGFUL ACT, the alleged injury, the names of the claimants, and the manner in which the INSUREDS or COMPANY first became aware of the CLAIM; or (b) event described in subpart (a) or (b) of Clause 8 (Cancellation) above, and shall cooperate with the INSURER and give such additional information as the INSURER may reasonably require. 14. LOSS PROVISIONS (a) The time when a CLAIM shall be made for purposes of determining the application of Clause 1 (Insuring Clause) above shall be the date on which the CLAIM is first made against the INSURED. (b) If during the POLICY PERIOD, the INSUREDS or the COMPANY shall become aware of any circumstances that are likely to give rise to a CLAIM being made against the INSUREDS and shall give written notice to the INSURER of the circumstances and the reasons for anticipating a CLAIM, with particulars as to dates and persons involved, then any CLAIM that is subsequently made against the INSUREDS arising out of such circumstances shall be treated as a CLAIM made during the first POLICY YEAR in which the INSUREDS or the COMPANY gave such notice. (c) The COMPANY and the INSUREDS shall give the INSURER such information and cooperation as it may reasonably require and as shall be in the COMPANY'S and the INSUREDS' power. 15. OTHER INSURANCE Subject to subparts (f) and (g) of Clause 3 (Exclusions) above, if other valid and collectible insurance with any other insurer, whether such insurance is issued before, concurrent with, or after inception of this POLICY, is available to the INSUREDS covering a CLAIM also covered by this POLICY, other than insurance that is issued specifically as insurance in excess of the insurance afforded by this POLICY, this POLICY shall be in excess of and shall not contribute with such other insurance. Nothing herein shall be construed to make this POLICY subject to the terms of other insurance. 16. NOTICE All notices under any provision of this POLICY shall be in writing and given by prepaid express courier or electronic service properly addressed to the appropriate party at the respective addresses as shown in Items V and VI of the Declarations. Notice so given shall be deemed to be received and effective upon actual receipt thereof by the party or one day following the date such notice is sent, whichever is earlier. 17. REPRESENTATION By acceptance of this POLICY, the company named in Item I of the Declarations agrees to represent the INSUREDS with respect to all matters under this POLICY, including, but not limited to, the giving and receiving of notice of CLAIM or cancellation or desire not to extend the POLICY, the payment of premiums, the receiving of LOSS payments and any return premiums that may become due under this POLICY, the requesting, receiving, and acceptance of any endorsement to this POLICY, and the submission of a dispute to arbitration. The INSUREDS agree that said company shall represent them but, for purposes of the investigation, defense, settlement, or appeal of any CLAIM, the INSUREDS who are named as defendants in the CLAIM may, upon their unanimous agreement and upon notice to the INSURER, replace said company with another agent to represent them with respect to the CLAIM, including giving and receiving of notice of CLAIM and other correspondence, the receiving of LOSS payments, and the submission of a dispute to arbitration. 18. SEVERABILITY (a) The APPLICATION for coverage shall be construed as a separate APPLICATION for coverage by each INSURED. With respect to the declarations and statements contained in such APPLICATION for coverage, no statement in the APPLICATION or knowledge possessed by any one INSURED shall be imputed to any other INSURED for the purpose of determining the availability of coverage with respect to CLAIMS made against any other INSURED. The acts, omissions, knowledge, or warranties of any INSURED shall not be imputed to any other INSURED with respect to the coverages applicable under this POLICY. (b) In the event that any provision of this POLICY shall be declared or deemed to be invalid or unenforceable under any applicable law, such invalidity or unenforceability shall not affect the validity or enforceability of the remaining portion of this POLICY. 19. SPECIAL POLICY REVISIONS The INSURER may change this POLICY at any time by an affirmative vote of a majority of the shareholders of the INSURER, in accordance with the by-laws of the INSURER. 20. SUBROGATION In the event of any payment under this POLICY, the INSURER shall be subrogated to the extent of such payment to all the INSUREDS' rights of recovery, and the INSUREDS shall execute all papers reasonably required and shall take all reasonable actions that may be necessary to secure such rights including the execution of such documents necessary to enable the INSURER effectively to bring suit in the name of the INSUREDS, including but not limited to an action against the COMPANY for nonpayment of indemnity due and owing to the INSUREDS by the COMPANY. 21. ACQUISITION, CREATION OR DISPOSITION OF A SUBSIDIARY (a) Coverage shall apply to the directors and officers of any subsidiary corporation in which more than 50% of the outstanding securities representing the present right to vote for election of directors is owned, directly or indirectly, in any combination, by the COMPANY and/or one or more of its SUBSIDIARIES, and which is acquired or created after the inception of this POLICY, if written notice is given to the INSURER within 30 days after the acquisition or creation, and any additional premium required by the INSURER is paid within thirty days of the request therefor by the INSURER. The INSURER waives the obligation to provide notice and to pay any additional premium if the assets of such newly created or acquired company are not more than 10% of the total assets of the COMPANY or $250,000,000, whichever is less. The coverage provided for the directors and officers of such new subsidiary shall be limited to CLAIMS for WRONGFUL ACTS actually or allegedly taking place subsequent to the date of acquisition or creation of the subsidiary. (b) Coverage shall not apply to directors and officers of any subsidiary, including a SUBSIDIARY as defined in Clause 2 (Definitions) above, for CLAIMS for WRONGFUL ACTS actually or allegedly taking place subsequent to the date that the COMPANY and/or one or more of its SUBSIDIARIES, directly or indirectly, in any combination, ceases to own more than 50% of the outstanding securities representing the present right to vote for election of directors in such subsidiary. IN WITNESS WHEREOF, the INSURER has caused this POLICY to be signed by its President and Secretary and countersigned on the Declarations Page by a duly authorized agent of the INSURER. /s/C. GRANT HALL /s/D. E. SNYDER Secretary President CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 1 Effective Date of Endorsement June 30, 1993 Attached to and forming part of POLICY No. PG-106C COMPANY The Procter & Gamble Company The Procter & Gamble Fund It is understood and agreed that this POLICY is hereby amended as indicated below. All other terms of this POLICY remain unchanged. REVISED THREE-YEAR POLICY FORM ENDORSEMENT __________________________________________ (Replacement Policy Form) It is understood and agreed that pursuant to Clause 19 "Special Policy Revisions" and with the consent of the company named in Item I of the Declarations, this POLICY is changed as of the effective date set forth above by cancelling the POLICY form (including endorsements) in effect as of the effective date of this Endorsement and reissuing the revised POLICY form (including revised endorsement forms) to which this Endorsement is attached. Coverage under this POLICY for all CLAIMS first made against the INSUREDS prior to the effective date of this Endorsement shall be governed by such prior POLICY form (including endorsements thereto). Coverage under this POLICY for all CLAIMS first made against the INSUREDS on or after the effective date of this Endorsement shall be governed by the POLICY form (including endorsements) to which this Endorsement is attached. Except as may be agreed to by the INSURER in writing, such change in POLICY form shall not change the inception date, anniversary date, LIMIT OF LIABILITY, or POLICY YEAR of this POLICY. The maximum liability of the INSURER for all LOSS arising from all CLAIMS first made during the POLICY YEAR in which this Endorsement becomes effective shall be the amount described in Item III of the Declarations. _______________________________ /s/CHARLES D. SMITH Signature of Authorized Signature of Authorized Representative of COMPANY Representative of INSURER CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 2 Effective Date of Endorsement March 15, 1990 Attached to and forming part of POLICY No. PG-106C COMPANY The Procter & Gamble Company The Procter & Gamble Fund It is understood and agreed that this POLICY is hereby amended as indicated below. All other terms of this POLICY remain unchanged. OUTSIDE POSITIONS ENDORSEMENT: SUBLIMIT, NON-SPECIFIC INDIVIDUALS (A) Subject to the sublimit of liability set forth in (C) below, the definition of "INSUREDS" is hereby extended to include: (1) all persons who were, are, or shall be serving as directors, officers, trustees, governors, partners or the equivalent thereof for any corporation, partnership, joint venture, eleemosynary institution, non-profit organization, industry association, or foundation, (any such enterprises referred to below as "Entity"), if: (a) such activity is part of their duties regularly assigned by the COMPANY, or (b) they are a member of a class of persons so directed to serve by the COMPANY. (2) the estates, heirs, legal representatives or assigns of deceased persons who were INSUREDS, as defined in subpart (A)(1) above, and the legal representatives or assigns of INSUREDS in the event of their incompetency, insolvency or bankruptcy. (B) It is further understood and agreed that this extension of coverage: (1) is to be excess of any other insurance and excess of any director or officer liability insurance and/or company reimbursement insurance any conditions in such other insurance notwithstanding; (2) shall not apply to any LOSS for which such Entity or the COMPANY actually pays or indemnifies or is required or permitted to pay on behalf of or to indemnify the INSUREDS pursuant to the charter or other similar formative document or by-laws or written agreements of such Entity or the COMPANY duly effective under applicable law, that determines and defines such rights of indemnity; provided, however, this subpart (2) shall not apply if: (a) such Entity and the COMPANY refuse to indemnify or advance defense or other costs as required or permitted, or if such Entity and the COMPANY are financially unable to indemnify; and (b) the INSUREDS comply with Clause 20 (Subrogation) of the POLICY; (3) shall not apply to any LOSS in connection with any CLAIM made against the INSUREDS in their capacity as directors or officers of Corporate Officers & Directors Assurance Ltd. or Corporate Officers & Directors Assurance Holding, Ltd.; and (4) is not to be construed to extend to the Entity nor to any other director, officer, trustee, governor, partner or employee of such Entity. (C) In lieu of the LIMIT OF LIABILITY stated in Item III of the Declarations, the limit of liability of the INSURER for this extension of coverage shall be $25,000,000 in the aggregate for all LOSS which is covered by reason of this extension of coverage and which is paid on behalf of all INSUREDS arising from all CLAIMS first made during each POLICY YEAR. It is understood that the amount stated in Item III of the Declarations is the maximum amount payable by the INSURER under this POLICY for all CLAIMS first made during each POLICY YEAR, and that this Endorsement extends coverage with a sublimit which further limits the INSURER'S liability and does not increase the INSURER'S maximum liability beyond the LIMIT OF LIABILITY stated in Item III the Declarations. It is further understood that such sublimit is separate from and payment of LOSS pursuant to this Endorsement does not reduce the sublimit or limit contained in any other Outside Positions Endorsement to this POLICY. (D) Solely for purposes of this extension of coverage, the definition of "WRONGFUL ACT" is hereby modified to replace the word "COMPANY" with the word "Entity" wherever the word "COMPANY" appears. (E) Solely for purposes of applying subparts (i) and (j) of Clause 3 (Exclusions) of the POLICY to this extension of coverage, the definition of "COMPANY" is hereby modified to include such Entity. /s/CHARLES D. SMITH Signature of Authorized Representative CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 3 Effective Date of Endorsement March 15, 1987 Attached to and forming part of POLICY No. PG-106C COMPANY The Procter & Gamble Company The Procter & Gamble Fund It is understood and agreed that this POLICY is hereby amended as indicated below. All other terms of this POLICY remain unchanged. Divisional Managers Endorsement _______________________________ Subpart (d) of Clause 2 (Definitions) of the POLICY is hereby deleted in its entirety and replaced with the following: (d) "INSUREDS" shall mean: (1) all persons who were, now are, or shall be duly elected or appointed directors, officers or divisional managers of the Company; or (2) the estates, heirs, legal representatives or assigns of deceased INSUREDS who were directors, officers or divisional managers of the COMPANY at the time of the WRONGFUL ACT upon which such CLAIMS are based were committed, and the legal representatives or assigns of INSUREDS in the event of their incompetency, insolvency or bankruptcy. By /s/CHARLES D. SMITH Authorized Representative CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 4 Effective Date of Endorsement March 15, 1987 Attached to and forming part of POLICY No. PG-106C COMPANY The Procter & Gamble Company/The Procter & Gamble Fund It is hereby understood and agreed exclusion 3(h) is amended to read as follows:- (h) for bodily injury, sickness, disease, or death of any person, or for damage to or destruction of any tangible property, including the loss of use thereof; however, this exclusion shall not apply to any derivative action brought against any INSURED. All other terms and conditions remain unchanged. By /s/CHARLES D. SMITH Authorized Representative CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 5 Effective Date of Endorsement March 15, 1991 Attached to and forming part of POLICY No. PG-106C COMPANY The Procter & Gamble Company/The Procter & Gamble Fund IN CONSIDERATION OF THE PREMIUM CHARGED, IT IS HEREBY UNDERSTOOD AND AGREED THAT ITEM 1 ON THE DECLARATIONS IS AMENDED TO INCLUDE:- "OFFICERS OF OPERATING UNITS OF PROCTER AND GAMBLE COMPANY" ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED. By /s/CHARLES D. SMITH Authorized Representative CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 6 Effective Date of Endorsement March 15, 1992 Attached to and forming part of POLICY No. PG-106C COMPANY The Procter & Gamble Company/The Procter & Gamble Fund/ Officers of Operating Units of Procter & Gamble Company IN CONSIDERATION OF THE ADDITIONAL PREMIUM OF $95,000 IT IS HEREBY UNDERSTOOD AND AGREED THAT THE "POLICY PERIOD" OF THIS POLICY IS EXTENDED TO JUNE 30, 1994. ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED. By /s/CHARLES D. SMITH Authorized Representative CODA CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 7 Effective Date of Endorsement June 30, 1993 Attached to and forming part of POLICY No. PG-106C COMPANY The Procter & Gamble Company/The Procter & Gamble Fund Officers of Operating Units of Procter & Gamble Company It is understood and agreed that this POLICY is hereby amended as indicated below. All other terms of this POLICY remain unchanged. THREE-YEAR POLICY REVISION GRANDFATHER ENDORSEMENT Clause 8(e) of the POLICY is deleted in its entirety and Clause 7 of the POLICY is amended to read in its entirety as follows: Except in the event this POLICY is canceled in whole or in part in accordance with Clause 8 (Cancellation) below, on each anniversary of this POLICY, upon submission of the extension application and payment of the charged premium, this POLICY shall automatically be continued to a date one year beyond its previously stated expiration date, unless written notice is given by the INSURER to the COMPANY, or by the COMPANY to the INSURER, that such POLICY extension is not desired. Such written notice may be given at any time prior to the anniversary of the POLICY, except that such notice by the INSURER to the COMPANY may be given only during the period commencing ninety (90) days and ending ten (10) days prior to such anniversary, in which case the POLICY shall automatically expire two years from such anniversary date. Such written notice shall be given by the INSURER to the COMPANY only if it is determined to be appropriate by an affirmative vote of a majority of the INSURER's entire Board at a meeting of said Board prior to mailing of such notice. The premium charged on each anniversary of this POLICY shall be determined by the rating plan and by-laws of the INSURER in force at such anniversary date. As of the second anniversary of the Effective Date of this Endorsement, (i) the foregoing deletion of Clause 8(e) and amendment of Clause 7 shall terminate, (ii) Clause 8(e) shall read in its entirety as set forth in the POLICY form to which this Endorsement is attached, and (iii) Clause 7 shall read in its entirety as follows: Except in the event this POLICY is canceled in whole or in part in accordance with Clause 8 (Cancellation) below, on each anniversary of this POLICY, upon submission of the extension application and payment of the charged premium, this POLICY shall automatically be continued to a date one year beyond its previously stated expiration date, unless written notice is given by the INSURER to the COMPANY, or by the COMPANY to the INSURER, that such POLICY extension is not desired. Such written notice may be given at any time prior to the anniversary of the POLICY, except that such notice by the INSURER to the COMPANY may be given only during the period commencing ninety (90) days and ending ten (10) days prior to such anniversary, in which case the POLICY shall automatically expire two years from such anniversary date. Such written notice shall be given by the INSURER to the COMPANY only if it is determined to be appropriate by an affirmative vote of 2/3 of the INSURER'S entire Executive Committee at a meeting of said Committee prior to mailing of such notice. Any non- extension by the INSURER shall be revoked as of the next meeting of the INSURER'S Board of Directors if the Board at such meeting so determines by an affirmative vote of a majority of the entire Board. If any such non-extension is so revoked or if during the remainder of the POLICY PERIOD the INSURER agrees to extend coverage, this POLICY shall be continued or such agreed coverage may be extended, respectively, to the expiration date which would otherwise be applicable if such notice of Non-extension had not been given, provided the COMPANY submits the extension application and pays the charged premium. If the COMPANY or the INSURER gives written notice that the POLICY extension is not desired, the COMPANY shall pay on or before each of the two remaining anniversary dates the charged premium for the next succeeding POLICY YEAR respectively less a premium credit equal to the premium paid for the two respective POLICY YEARS remaining in the POLICY PERIOD as of the effective date of this Endorsement. If any such premium credit exceeds the charged premium, the INSURER shall refund to the COMPANY the difference within ten days following such anniversary date. The premium charged on each anniversary of this POLICY shall be determined by the rating plan and by-laws of the INSURER in force at such anniversary date. /s/CHARLES D. SMITH Authorized Representative CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 8 Effective Date of Endorsement March 15, 1990 Attached to and forming part of POLICY No. PG-106C COMPANY The Procter & Gamble Company/The Procter & Gamble Fund Officers of Operating Units of Procter & Gamble Company In consideration of the premium charged it is hereby understood and agreed that on the outside positions Endorsements Section A(1) is amended to read after the word "foundation" as follows:- Employee Stock Ownership Trust of the Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan. All other terms and conditions remain unchanged. By /s/CHARLES D. SMITH Authorized Representative CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD. Endorsement No. 9 Effective Date of Endorsement June 30, 1994 Attached to and forming part of POLICY No. PG-106C COMPANY The Procter & Gamble Company/The Procter & Gamble Fund Officers of Operating Units of Procter & Gamble Company It is understood and agreed that this POLICY is hereby amended as indicated below. All other terms of this POLICY remain unchanged. AUTOMATIC EXTENSION ENDORSEMENT ------------------------------- (Extension Premium: $350,000) In consideration of payment of the above-referenced premium, it is understood and agreed that this POLICY shall be continued and the POLICY PERIOD shall be extended to June 30, 1997, 12:01 A.M. Standard Time at the address of the Company as stated in Item I of the Declarations. It is further understood and agreed that the above-referenced premium has been allocated and paid as follows: Policy Year Following Effective Date of this Endorsement Premium ------------------------ ------- Year 94-95 340,000 Year 95-96 345,000 Year 96-97 350,000 ----------- $ 1,035,000 Less Prepaid Premium on hand $ 685,000 ----------- Additional Premium $ 350,000 ----------- ----------- By /s/PATRICK D. TANNOCK Authorized Representative EX-99.2 9 Exhibit (99.2) -------------- Directors and Officers (First) Excess Liability Policy Form X.L. D&O-003B Policy No. XLD+O-00364-94 XL X.L. INSURANCE COMPANY, LTD. Producer: PARK INTERNATIONAL LIMITED In favor of: THE PROCTER & GAMBLE COMPANY Address: ONE PROCTER & GAMBLE PLAZA CINCINNATI, OHIO 45202-3314 U.S.A. Type of Coverage: DIRECTORS AND OFFICERS LIABILITY In the amount as stated in Item 2 of the Declarations. Term: Beginning at 12:01 A.M. on the 30th day of June, 1994 prevailing time at the address of the Named Insured and in accordance with terms and conditions of the form(s) attached. PREMIUM: $150,000 IN WITNESS WHEREOF, this Policy has been made, entered into and executed by the undersigned in Hamilton, Bermuda this 20th day of SEPTEMBER, 1994. By: /s/PAUL B. MILLER PAUL B. MILLER Title: VICE PRESIDENT DATE: SEPTEMBER 20, 1994 POLICY NO: XLD+O-00364-94 X.L. INSURANCE COMPANY, LTD. POLICY FOR DIRECTORS AND OFFICERS LIABILITY IMPORTANT: THIS COVERAGE IS ON A CLAIMS MADE AND CLAIMS REPORTED BASIS. PLEASE READ THIS POLICY CAREFULLY. DECLARATIONS Item 1: (a) Named Company: THE PROCTER & GAMBLE COMPANY (b) Address of Named Company: ONE PROCTER & GAMBLE PLAZA CINCINNATI, OHIO 45202 U.S.A. Item 2: Aggregate Limit of Liability: $25,000,000 each policy period in excess of $25,000,000 each policy year. Item 3: Policy Period: JUNE 30, 1994 - JUNE 30, 1995 The Declarations along with the completed Application and this Policy and any Schedules hereto shall constitute the contract among the Named Company, the Designated Companies, the Directors and Officers and the Company. Item 4: Schedule of Current and Known Prospective Underlying Insurance: Policy MM Policy Carrier Number Limits Year ------- ------ ------ ------ i. Underlying Second Excess ii. Underlying Excess. . . . iii. Primary Insurer(s) . . . CODA PG-106C 25 JUNE 30, 1994 - 97 Uninsured Retention under Primary Insurance: $NIL each Director or Officer each loss, but in no event exceeding $NIL in the aggregate each loss all Directors and Officers Liability. Item 5: Policy to be followed: CODA - POLICY NO. PG-106C Item 6: Representative of Named Company: THE PROCTER & GAMBLE COMPANY Item 7: Notice: X.L. Insurance Company, Ltd., Cumberland House, 1 Victoria St., P.O. Box HM 2245, Hamilton, Bermuda HM JX. Telex: 3626 XL BA Item 8: (a) Discovery Coverage Premium: 100% of policy period premium hereunder. (b) Discovery Coverage Period: 365 days. Item 9: Notice Cancellation Period: 60 days. Said insurance is subject to the provisions, stipulations, exclusions and conditions contained in this form and the representations and warranties contained in the Named Company's application for this policy of insurance, which is hereby made a part of said insurance, together with other provisions, stipulations, exclusions and conditions as may be endorsed on said policy or added thereto as therein provided (collectively hereinafter referred to as the "Policy"). DIRECTORS AND OFFICERS LIABILITY INSURANCE Named Company: As stated in Item 1 of the Declarations forming a part hereof (hereinafter called the "Named Company"). INSURING AGREEMENTS I. COVERAGE The X.L. Insurance Company, Ltd. (the "Company") hereby agrees with the Directors and Officers of the Named Company and any other companies listed in Schedule A hereto ("Designated Companies"), subject to the limitations, terms, exclusions and conditions hereinafter mentioned that, if during the policy period any claim or claims are made against any of the Directors and Officers for a Wrongful Act, and reported to the Company, the Company in accordance with its limits of liability shall pay on behalf of such Directors and Officers all loss which such Directors and Officers shall become legally obligated to pay, except for such loss which the Designated Companies shall indemnify such Directors and Officers. II. LIMIT OF LIABILITY A. It is expressly agreed that liability for any loss shall attach to the Company only after the Primary and Underlying Excess Insurers shall have paid, admitted or been held liable to pay the full amount of their respective liability and the Directors and Officers shall have paid the full amount of self-insured retentions, if any, as set forth in Item 4 of the Declarations (hereinafter referred to as the "Schedule of Underlying Insurance"), and the Company shall then be liable to pay only additional amounts for any and all losses up to its Aggregate Limit of Liability ("aggregate limit") as set forth in Item 2 of the Declarations, which shall be the maximum liability of the Company for all covered losses (with respect to Directors and Officers, collectively) during the policy period irrespective of the time of payment by the Company. B. In the event and only in the event of the reduction or exhaustion of the aggregate limits of liability under the said Primary and Underlying Excess Policies and under self-insured retentions, if any (as if such retentions were subject to the same terms, conditions, exclusions and structure of limits of liability as said policies) by reason of losses paid thereunder, this coverage shall: (i) in the event of reduction, pay the excess of the reduced Primary and Underlying Excess Limits, and (ii) in the event of exhaustion, continue in force as Primary Insurance; provided always that in the latter event this coverage shall only pay excess of the retention applicable to such Primary Insurance for such policy year as set forth in Item 4 (iii) of the Declarations, which shall be applied to any subsequent loss in the same manner as specified in such Primary Insurance. Except insofar as aggregate limits of liability under the Primary and Underlying Excess Policies have been reduced or exhausted by reason of losses paid thereunder and self-insured retentions, if any, have been fully paid (as if such retentions were subject to the same terms, conditions, exclusions and structure of limits of liability as said policies), this coverage shall apply only as if all Primary and Underlying Policies and self-insured retentions, if any, listed on the Schedule of Underlying Insurance covered and were fully collectable for any loss hereunder. III. PRIMARY AND UNDERLYING INSURANCE This Policy is subject to the same warranties, terms, conditions and exclusions (except as regards the premium, the amount and limits of liability, the policy period and except as otherwise provided herein) as are contained in or as may be added to the policy set forth in Item 5 of the Declarations or, if no policy is set forth therein, the policy of the Primary Insurer(s) as respects coverage of the Directors and Officers. It is a condition of this Policy that the policies of the Primary and Underlying Excess Insurers shall be maintained in full effect during the policy year(s) listed in the Schedule of Underlying Insurance except for any reduction of the aggregate limits contained therein by reason of losses paid thereunder (as provided for in Paragraph II(B) above). This Policy shall automatically terminate upon the failure to satisfy this condition (i.e., when any of such listed policies ceases to be in full effect) unless otherwise agreed by the Company in writing. If the Named Company notifies the Company in writing of cancellation of any of the policies listed on the Schedule of Underlying Insurance at least thirty (30) days prior to the effectiveness thereof, the Company agrees that within twenty (20) days thereafter it will review the situation and formulate a proposal for the terms, conditions, exclusions, underlying amount, limit and premium for continuation of this Policy upon such cancellation; provided, however, that (i) the underlying amount shall be at least $20,000,000, (ii) the limit shall be a maximum of $25,000,000 and (iii) this Policy shall not continue after such cancellation unless there is an agreement in writing between the Named Company and the Company providing therefor. IV. COSTS, CHARGES AND EXPENSES No costs, charges or expenses shall be incurred or settlements made without the Company's consent, such consent not to be unreasonably withheld; however, in the event of such consent being given, the Company will pay, subject to the provisions of Article II, such costs, settlements, charges or expenses. V. NOTIFICATION A. If during the policy period or extended discovery period any claim is made against any Director or Officer, the Directors and Officers shall, as a condition precedent to their right to be indemnified under this Policy, give to the Company notice in writing as soon as practicable of such claims. B. If during the policy period or extended discovery period: (1) the Directors and Officers shall receive written or oral notice from any party that it is the intention of any such party to hold the Directors and Officers, or any of them, responsible for a Wrongful Act; or (2) the Directors and Officers shall become aware of any fact, circumstance or situation which may subsequently give rise to a claim being made against the Directors and Officers, or any of them, for a Wrongful Act; and shall in either case during such period give written notice as soon as practicable to the Company of the receipt of such written or oral notice under Clause (1) or of such fact, circumstance or situation under Clause (2), then any claim, which may subsequently be made against the Directors and Officers, arising out of such Wrongful Act shall for the purpose of this Policy be treated as a claim made during the policy period. C. Notice to the Company shall be given to the person or firm shown under Item 7 of the Declarations. Notice shall be deemed to be received if sent by prepaid mail properly addressed. VI. GENERAL CONDITIONS A. DEFINITIONS: The terms "Directors and Officers", "Wrongful Act", "Loss", "Subsidiary", and "Policy Year" shall be deemed to have the same meanings in this Policy as are attributed to them in the policy set forth in Item 5 of the Declarations or, if no policy is set forth therein, the policy of the Primary Insurer(s). The term "Company" shall mean the X.L. Insurance Company, Ltd. The term "policy period" shall mean the period stated in Item 3 of the Declarations. B. DISCOVERY CLAUSE: If the Company shall cancel or refuse to renew this Policy, the Named Company or the Directors and Officers shall have the right, upon payment of the additional premium set forth in Item 8(a) of the Declarations to a continuation of the coverage granted by this Policy in respect of any claim or claims which may be made against the Directors and Officers during the period stated in Item 8(b) of the Declarations after the date of cancellation or non-renewal, but only in respect of any Wrongful Act committed before the date of cancellation or non-renewal of this Policy. This right of extension shall terminate unless written notice is given to the Company within ten (10) days after the effective date of cancellation or non-renewal. C. APPLICATION OF RECOVERIES: All recoveries or payments recovered or received subsequent to a loss settlement under this Policy shall be applied as if recovered or received prior to such settlement and all necessary adjustments shall then be made between the Named Company or the Directors and Officers and the Company, provided always that nothing in this Policy shall be construed to mean that losses under this Policy are not payable until the Directors' and Officers' ultimate net loss has been finally ascertained. D. CANCELLATION CLAUSE: This coverage may be cancelled by the Named Company at any time by written notice or surrender of this Policy. This coverage may also be cancelled by, or on behalf of, the Company by delivering to the Named Company or by mailing to the Named Company by registered, certified or other first class mail, at the Named Company's address shown in Item 1 of the Declarations, written notice stating when, not less than the number of days set forth in Item 9 of the Declarations, the cancellation shall become effective. The mailing of such notice as aforesaid shall be sufficient proof of notice, and this Policy shall terminate at the date and hour specified in such notice. If this Policy shall be cancelled by the Named Company, the Company shall retain the customary short rate proportion of premium hereon. If this Policy shall be cancelled by or on behalf of the Company, the Company shall retain the pro rata proportion of the premium hereon. Payment or tender of any unearned premium by the Company shall not be a condition precedent to the effectiveness of cancellation, but such payment shall be made as soon as practicable. E. COOPERATION: The Named Company, the Designated Companies and the Directors and Officers shall give the Company such information and cooperation as it may reasonably require. F. PREMIUM: The premium under this Policy is a flat premium and is not subject to adjustment except as otherwise provided herein. The premium shall be paid to the Company. G. WRONGFUL ACT EXCLUSION: Notwithstanding any other provision of this Policy, this Policy shall not apply with respect to a Wrongful Act by any Director or Officer of the Company in his capacity as such. H. NUCLEAR EXCLUSION: This Policy shall not apply to, and the Company shall have no liability hereunder in respect of liability or alleged liability for: (1) personal injury, property damage or advertising liability in the United States, its territories or possessions, Puerto Rico or the Canal Zone (A) with respect to which the Named Company, the Designated Companies and/or Officers and Directors (collectively, the "Certain Parties") is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limited liability or (B) resulting from the hazardous properties of nuclear material and with respect to which (i) any person or organization is required to maintain financial protection pursuant to the Atomic Energy Act of 1954 or any law amendatory thereof or (ii) a Certain Party is, or had this Policy not been issued, would be entitled to indemnity from United States of America or any agency thereof under any agreement entered into by the United States of America or any agency thereof with any person or organization; (2) medical or surgical relief or expenses incurred with respect to bodily injury, sickness, disease or death resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization in the United States, its territories or possessions, Puerto Rico or the Canal Zone; (3) injury, sickness, disease, death or destruction resulting from hazardous properties of nuclear material, if (A) the nuclear material (i) is at any nuclear facility owned by or operated by or on behalf of any of the Certain Parties in the United States, its territories or possessions, Puerto Rico or the Canal Zone or (ii) has been discharged or dispersed therefrom, (B) such nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed by or on behalf of any of the Certain Parties in the United States, its territories or possessions, Puerto Rico or the Canal Zone or (C) the injury arises out of the furnishing by any of the Certain Parties of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of a nuclear facility, but if such facility is located within the United States of America, its territories or possessions or Canada, this clause (3)(C) applies only to injury to or destruction of property at such nuclear facility; (4) As used in this Section (H): (A) "hazardous properties" included radioactive, toxic or explosive properties; "nuclear material" means source material, special nuclear material or by-product material; "source material," "special nuclear material" and "by-product material" have the meanings given them by the Atomic Energy Act of 1954 or in law amendatory thereof; "spent fuel" means any fuel element or fuel component, solid or liquid which has been used or exposed to radiation in a nuclear reactor; "waste" means any waste material (i) containing by-product materials and (ii) resulting from the operation by a person or organization of nuclear facility included within the definition of nuclear facility under clauses (B)(i) or (B)(ii) (below): (B) "nuclear facility" means (i) any nuclear reactor; (ii) any equipment or device designed or used for (x) separating the isotopes of uranium or plutonium, (y) processing or utilizing spent fuel, or (z) handling processing or packaging waste; (iii) any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the Insured at such premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or combination thereof or more than 250 grams of uranium 235; (iv) any structure, basin, excavation, premises or place prepared for the storage or disposal of waste. (C) "Nuclear facility" includes the site on which any of the foregoing is located, all operations conducted on such site and all premises used for such operations. (D) "Nuclear reactor" means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain critical mass of fissionable material. (E) With respect to injury or destruction of property, the word "injury" or "destruction" includes all forms of radioactive contamination of property or loss of use thereof or liability or alleged liability of whatsoever nature directly or indirectly caused by or contributed to by or arising from ionizing radiations or contamination by radioactivity outside the United States, its territories or possessions, Puerto Rico or the Canal Zone from any nuclear fuel or from any nuclear waste from the combustion, fission or fusion of nuclear fuel. I. EMPLOYEE BENEFITS PROGRAMS EXCLUSION: Notwithstanding any other provision of this Policy, this coverage shall not apply with respect to: (1) any liability or alleged liability arising out of or alleged to arise out of any negligent act, error or omission of any Director or Officer, or any other person for whose acts any Director or Officer is legally liable, in the administration of Employee Benefits Programs, as defined in subsection (2) below, including, without limitation, liability or alleged liability under the Employee Retirement Income Security Act of 1974, as amended. (2) As used in this Section I, the term "Employee Benefits Programs" means group life insurance, group accident or health insurance, profit sharing plans, pension plans, employee stock subscription plans, workers' compensation, unemployment insurance, social benefits, disability benefits, and any other similar employee benefits. (3) As used in this Section I, the unqualified word "administration" means: (A) giving counsel to employees with respect to the Employee Benefits Programs; (B) interpreting the Employee Benefits Programs; (C) handling of records in connection with the Employee Benefits Programs; and/or (D) effective enrollment, termination or cancellation of employees under the Employee Benefits Programs. J. INDEMNITY BY DESIGNATED COMPANIES: The Designated Companies agree with the Company to indemnify their respective Directors and Officers to the full extent permitted by applicable law. The Directors and Officers agree that to the extent of any payment of loss on their behalf or indemnification of them hereunder they will assign, convey, set over, transfer and deliver to the Company any and all rights and claims they may have to indemnification from the Designated Companies and will take all further steps requested by the Company to assist in prosecution of such rights and claims, and the Designated Companies hereby consent to any such assignment, conveyance, set over, transfer or delivery and agree that any payment by the Company on behalf of or to indemnify any Director or Officer shall not be raised as a defense to the Director's or Officer's right to indemnification from the Designated Companies as asserted by the Company pursuant hereto. K. OTHER CONDITIONS: This Policy is subject to the following additional conditions: (1) REPRESENTATION Except as respects the giving of notice to exercise extended discovery under Paragraph VI(B), the Named Company or such other person as it shall designate in Item 6 of the Declarations shall represent the Named Company, each of the Designated Companies and each Officer and Director of the Named Company and the Designated Companies in all matters under this Policy, including, without limitation, payment of premium, negotiation of the terms of renewal and/or reinstatement and the adjustment, settlement and payment of claims. (2) CHANGES Notice to or knowledge possessed by any person shall not effect waiver or change in any part of this Policy or estop the Company from asserting any right under the terms of this Policy; nor shall the terms of this Policy be waived or changed, except by endorsement issued to form a part hereof, signed by the Company or its authorized representative. (3) ASSIGNMENT Assignment of interest under this Policy shall not bind the Company unless and until consent is endorsed hereon. (4) ARBITRATION Any dispute arising under this Policy shall be finally and fully determined in London, England under the provisions of the English Arbitration Act of 1950, as amended and supplemented, by a Board composed of three arbitrators to be selected for each controversy as follows: Any party to the dispute may, once a claim or demand on his part has been denied or remains unsatisfied for a period of twenty (20) calendar days by any other, notify the others of its desire to arbitrate the matter in dispute and at the time of such notification the party desiring arbitration shall notify any other party or parties of the name of the arbitrator selected by it. Any party or parties who have been so notified shall within ten (10) calendar days thereafter select an arbitrator and notify the party desiring arbitration of the name of such second arbitrator. If the party or parties notified of a desire for arbitration shall fail or refuse to nominate the second arbitrator within ten (10) calendar days following the receipt of such notification, the party who first served notice of a desire to arbitrate will, within an additional period of ten (10) calendar days, apply to a judge of the High Court of England for the appointment of a second arbitrator and in such a case the arbitrator appointed by such a judge shall be deemed to have been nominated by the party or parties who failed to select the second arbitrator. The two arbitrators, chosen as above provided, shall within ten (10) calendar days after the appointment of the second arbitrator choose a third arbitrator. In the event of the failure of the first two arbitrators to agree on a third arbitrator within said ten (10) calendar day period, any of the parties may within a period of ten (10) calendar days thereafter, after notice to the other party or parties, apply to a judge of the High Court of England for the appointment of a third arbitrator and in such case the person so appointed shall be deemed and shall act as the third arbitrator. Upon acceptance of the appointment by said third arbitrator, the Board of Arbitration for the controversy in question shall be deemed fixed. All claims, demands, denials of claims and notices pursuant to this Section (K)(iv) shall be deemed made if in writing and mailed to the last known address of the other party or parties. The Board of Arbitration shall fix, by a notice in writing to the parties involved, a reasonable time and place for the hearing and may in said written notice or at the time of the commencement of said hearing, at the option of said Board, prescribe reasonable rules and regulations governing the course and conduct of said hearing. The Board shall, within ninety (90) calendar days following the conclusion of the hearing, render its decision on the matter or matters in controversy in writing and shall cause a coy thereof to be served on all the parties thereto. In case the Board fails to reach a unanimous decision, the decision of the majority of the members of the Board shall be deemed to be the decision of the Board and the same shall be final and binding on the parties thereto, and such decision shall be a complete defense to any attempted appeal or litigation of such decision in the absence of fraud or collusion. All costs of arbitration shall be borne equally by the parties to such arbitration. The Company and the Insured agree that in the event that claims for indemnity or contribution are asserted in any action or proceeding against the Company by any of the Insured's other insurers in any jurisdiction or forum other than that set forth in this Section (K)(iv), the Insured will in good faith take all reasonable steps requested by the Company to assist the Company in obtaining a dismissal of these claims (other than on the merits) and will, without limitation, undertake to the court or other tribunal to reduce any judgment or award against such other insurers to the extent that the court or tribunal determines that the Company would have been liable to such insurers for indemnity or contribution pursuant to this Policy. The Insured shall be entitled to assert claims against the Company for coverage under this Policy, including, without limitation, for amounts by which the Insured reduced its judgment against such other insurers in respect of such claims for indemnity or contribution in an arbitration between the Company and the Insured pursuant to this Section (K)(iv); provided, however, that the Company in such arbitration in respect of such reduction of any judgment shall be entitled to raise any defenses under this Policy and any other defenses (other than jurisdictional defenses) as it would have been entitled to raise in the action or proceeding with such insurers. (5) GOVERNING LAW AND INTERPRETATION This Policy shall be governed by and construed in accordance with the internal laws of the State of New York, except insofar as such laws may prohibit payment in respect of punitive damages hereunder; provided, however, that the provisions, stipulations, exclusions and conditions of this Policy are to be construed in an evenhanded fashion as between the Insured and the Company; without limitation, where the language of this Policy is deemed to be ambiguous or otherwise unclear, the issue shall be resolved in the manner most consistent with the relevant provisions, stipulations, exclusions and conditions (without regard to authorship of the language, without any presumption or arbitrary interpretation or construction in favor of either the Insured or the Company and without reference to parol evidence). (6) LIABILITY OF THE COMPANY The Named Company, the Designated Companies and the Directors and Officers agree that the liability and obligations of the Company hereunder shall be satisfied from the funds of the Company alone and that the individual shareholders of the Company shall have no liability hereunder. (7) HEADINGS The descriptions in the headings and subheadings of this Policy are inserted solely for convenience and do not constitute any part of the terms and conditions hereof. X.L. INSURANCE COMPANY, LTD. By: /s/PAUL B. MILLER PAUL B. MILLER Title: VICE PRESIDENT Date: SEPTEMBER 20, 1994 SCHEDULE A All Subsidiaries of the Named Insured Insured: THE PROCTER & GAMBLE COMPANY Policy No: XLD+0-00364-94 Endorsement No: 1 Effective Date: JUNE 30, 1994 __________________________________________________________________________ POLICY INTERPRETATION ENDORSEMENT It is agreed that Condition K(5) is hereby deleted and the following is substituted therefore: "(5) Law of Construction and Interpretation "This Policy shall be construed in accordance with the internal laws of the State of New York, except insofar as such laws: "(a) may prohibit indemnity in respect of punitive damages hereunder; "(b) pertain to regulation under the New York Insurance Law, or regulations issued by the Insurance Department of the State of New York pursuant thereto, applying to insurers doing insurance business, or issuance, delivery or procurement of policies of insurance, within the State of New York or as respects risks or insureds situated in the State of New York; or "(c) are inconsistent with any provision of this Policy; "provided, however, that the provisions, stipulations, exclusions and conditions of this Policy are to be construed in an evenhanded fashion as between the Insured and the Company; without limitation, where the language of this Policy is deemed to be ambiguous or otherwise unclear, the issue shall be resolved in the manner most consistent with the relevant provisions, stipulations, exclusions and conditions (without regard to authorship of the language, without any presumption or arbitrary interpretation or construction in favor of either the Insured or the Company and without reference to parol or other extrinsic evidence)." X.L. INSURANCE COMPANY, LTD. By: /s/PAUL B. MILLER PAUL B. MILLER Title: VICE PRESIDENT Date: SEPTEMBER 20, 1994 Ref: OD247.01 XL Insured: THE PROCTER & GAMBLE COMPANY Policy No: XLD+0-00364-94 Endorsement No: 2 Effective Date: JUNE 30, 1994 ___________________________________________________________________________ DIRECTORS' AND OFFICERS' COVERAGE ENDORSEMENT Notwithstanding any other provision of the Policy or this Endorsement, if the Lead Policy provides coverage for any person acting in the capacity as a Director or Officer of a company or entity which is not an Insured Company under the Policy and this Endorsement, no such coverage shall be provided pursuant to the Policy and/or this Endorsement unless (a) it is indicated below that "Outside Positions" coverage is being afforded, (b) such coverage is subject to a retention (whether self-insured and/or covered by underlying policy(ies)) in the amount listed below which shall be deemed to be listed in Item 4 of the Declarations, and such coverage in any event shall apply in excess of all Primary and Underlying Excess Insurance listed in Item 4 of the Declarations, and (c) such coverage is subject to an aggregate sublimit in the amount listed below, which sublimit shall be the maximum liability of the Company for all losses in respect of such coverage during the policy period irrespective of the time of payment by the Company and shall be a sublimit included within and shall not increase the Aggregate Limit of Liability stated in Item 2 of the Declarations. It is further understood and agreed that this extension of cover shall not apply to any person acting as a Director or Officer of the following companies: (a) Corporate Officers and Directors Assurance Ltd. (b) Corporate Officers and Directors Assurance Holdings Ltd. (c) Exel Ltd. (d) X. L Insurance Company, Ltd. Outside Positions Coverage: YES - As per schedule provided by the Named Insured Outside Positions Coverage (Self-Insured) Retention: $25,000,000 Outside Positions Coverage Aggregate Sublimit: $25,000,000 X.L. INSURANCE COMPANY, LTD. By: /s/PAUL B. MILLER PAUL B. MILLER Title: VICE PRESIDENT Date: SEPTEMBER 20, 1994 Ref: 0D234.01-R XL Insured: THE PROCTER & GAMBLE COMPANY Policy No: XLD+0-00364-94 Endorsement No: 3 Effective Date: JUNE 30, 1994 ___________________________________________________________________________ AMENDMENT TO DECLARATIONS PAGE It is agreed that as of the Effective Date shown above, Item 1(a) NAMED COMPANY of the Declarations is amended to include OFFICERS OF OPERATING UNITS OF THE PROCTER & GAMBLE COMPANY. X.L. INSURANCE COMPANY, LTD. By: /s/PAUL B. MILLER PAUL B. MILLER Title: VICE PRESIDENT Date: SEPTEMBER 20, 1994 Ref: 0D242.01 XL EX-99.3 10 Exhibit (99.3) -------------- Directors and Officers (Second) Excess Liability Policy PARK INTERNATIONAL LIMITED A.C.E. INSURANCE COMPANY, LTD. DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICY THIS IS A CLAIMS MADE POLICY. Except as otherwise provided herein, this policy covers only claims first made against the Insureds during the Policy Period. PLEASE READ THIS POLICY CAREFULLY. DECLARATIONS ____________ Policy No.: PG-7331D Item 1. Insured Company: THE PROCTER & GAMBLE COMPANY/ OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY Principal Address: One Procter & Gamble Plaza Cincinnati, Ohio 45202 U.S.A. Item 2. Schedule of Underlying Policies: Insurer Policy Limits Policy Number Period _______ ______ ______ ______ Primary Policy CODA PG-106C $25M 6/30/94-97 Excess Policies X.L. XLD&O-00364-94 $25M 6/30/94-95 Uninsured retention under primary insurance: $NIL each Insured Person each Loss, but in no event exceeding $NIL in the aggregate each Loss for all Insured Persons and $ N/A each Loss for the Insured Company. Item 3. Followed Policy: Insurer: CODA Policy No.: PG-106C Item 4. Policy Period: From 12:01 A.M. JUNE 30, 1994 To 12:01 A.M. JUNE 30, 1995 Standard Time at the address of the Insured. Item 5. Aggregate Limit of Liability $45,000,000 U.S. dollars each Policy Year for all Loss paid on behalf of all Insureds arising from all claims first made during such Policy Year. Item 6. One Year Premium: $140,000 Three Year Premium: $ N/A (Prepaid) Discovery Period Premium: 100% of the Policy Period Premium Item 7. Insurer: A.C.E. Insurance Company, Ltd. P.O. Box HM 1015 Hamilton, Bermuda HM DX Telex: 3543 ACEILBA Telecopy: (809) 295-5221 Countersigned at Hamilton, Bermuda: Date: October 28, 1994 /s/PAUL D. TANNOCK Authorized Representative THESE DECLARATIONS, TOGETHER WITH THE COMPLETED AND SIGNED APPLICATION AND THE POLICY FORM ATTACHED HERETO, CONSTITUTE THE INSURANCE POLICY. I. INSURING CLAUSE In consideration of the payment of the premium and in reliance upon all statements made in the application form including the information furnished in connection therewith, and subject to all terms, conditions, exclusions and limitations of this policy, the Insurer agrees to provide insurance coverage to the Insured Persons and, if applicable, the Insured Company in accordance with the terms, conditions, exclusions and limitations of the Followed Policy. II. LIMIT OF LIABILITY A. It is expressly agreed that liability for any covered Loss with respect to claims first made in each Policy Year shall attach to the Insurer only after the insurers of the Underlying Policies, the Insured Company and/or the Insured Persons shall have paid, admitted or been held liable to pay the full amount of the Underlying Limit for such Policy Year. The Insurer shall then be liable to pay only covered Loss in excess of such Underlying Limit up to its Aggregate Limit of Liability as set forth in Item 5 of the Declarations, which shall be the maximum aggregate liability of the Insurer under this policy with respect to all claims first made in each Policy Year against all Insured Persons irrespective of the time of payment by the Insurer. B. Multiple claims based upon or arising out of the same, repeated, interrelated or causally connected Wrongful Acts, whether made against the same or different Insured Persons, shall be deemed to be a single claim first made in the earliest Policy Year in which the first of such multiple claims is made against any Insured Person; the Aggregate Limit of Liability shall apply only once to such multiple claims. C. In the event and only in the event of the reduction or exhaustion of the Underlying Limit by reason of the insurers of the Underlying Policies, the Insured Company and/or the Insured Persons paying, admitting or being held liable to pay Loss otherwise covered hereunder, this policy shall: (i) in the event of reduction, pay excess of the reduced Underlying Limit, and (ii) in the event of exhaustion, continue in force as primary insurance; provided always that in the latter event this policy shall only pay excess of the retention applicable to the primary insurance as set forth in Item 2 of the Declarations, which retention shall be applied to any subsequent Loss in the same manner as specified in such primary insurance. D. Notwithstanding any of the terms of this policy which might be construed otherwise, this policy shall drop down only in the event of reduction or exhaustion of the Underlying Limit and shall not drop down for any other reason including, but not limited to, uncollectability (in whole or in part) of any underlying insurance. The risk of uncollectability of such underlying insurance (in whole or in part) whether because of financial impairment or insolvency of an underlying insurer or for any other reason, is expressly retained by the Insured Persons and the Insured Company and is not in any way or under any circumstances insured or assumed by the Insurer. III. UNDERLYING INSURANCE A. This policy is subject to the same warranties, terms, conditions, exclusions and limitations (except as regards the premium, the amount and limits of liability, the policy period and except as otherwise provided herein) as are contained in or as may be added to the Followed Policy. B. It is a condition of this policy that the Underlying Policies shall be maintained in full effect with solvent insurers during the policy period listed in Item 2 of the Declarations except for any reduction or exhaustion of the aggregate limits contained therein by reason of Loss paid thereunder (as provided for in Section II(C) above). Unless the Insurer otherwise agrees in writing, this policy shall: (i) immediately and automatically terminate on the date any of the Underlying Policies ceases to be in full effect; and (ii) automatically terminate 30 days following the date an insurer of any Underlying Policy becomes subject to a receivership, liquidation, dissolution, rehabilitation or any similar proceeding or is taken over by any regulatory authority unless the Insured Company obtains replacement coverage for such Underlying Policy within such 30 day period. In the event this policy automatically terminates pursuant to this Section III(B), the Insurer shall retain the pro- rata proportion of the premium. Payment or tender of any unearned premium by the Insurer shall not be a condition precedent to the effectiveness of such termination, but such payment shall be made as soon as practicable. C. If during the Policy Period or any discovery period the terms, conditions, exclusions or limitations of the Followed Policy are changed in any manner, the Insured Company or the Insured Persons shall as a condition precedent to their rights under this policy give to the Insurer as soon as practicable written notice of the full particulars thereof. This policy shall become subject to any such changes upon the effective date of the changes in the Followed Policy, provided that the Insured Company shall pay any additional premium reasonably required by the Insurer for such changes. IV. GENERAL CONDITIONS A. Discovery Period: If the Insurer or the Insured Company fails or refuses to renew or cancels this policy, or if this policy automatically terminates pursuant to Section III(B), the Insured Company or the Insured Persons shall have the right, upon payment of an additional premium as set forth in Item 6 of the Declarations, to elect an extension of the coverage granted by this policy, but only for any Wrongful Act committed, attempted or allegedly committed or attempted prior to the effective date of such nonrenewal, cancellation or termination. Any such election shall be made in writing in the time and manner and for the discovery period stated in the Followed Policy. B. Application of Recoveries: All recoveries or payments recovered or received subsequent to a Loss settlement under this policy shall be applied as if recovered or received prior to such settlement and all necessary adjustments shall then be made between the Insured Company or the Insured Person and the Insurer, provided always that the foregoing shall not affect the time when Loss under this policy shall be payable. C. Notice: All notices to the Insurer under any provisions of this policy shall be given by prepaid courier or electronic service properly addressed to the Insurer at its address as shown in the Declarations. Notice so given shall be deemed to be received by the Insurer on the next succeeding day. D. Cooperation: The Insured Company and the Insured Persons shall give the Insurer such information and cooperation as it may reasonably require. E. Premium: The premium under this policy is a flat premium and is not subject to adjustment except as otherwise provided herein. The premium shall be paid to the Insurer at its address as shown in the Declarations. F. Cancellation Clause: This policy may be cancelled by the Insured Company at any time by written notice or surrender of this policy to the Insurer. This policy may also be cancelled by, or on behalf of, the Insurer by delivering to the Insured Company or by mailing to the Insured Company by registered, certified or other first class mail, at the address shown in the Declarations, written notice stating when, not less than (365) days thereafter, the cancellation shall become effective. The mailing of such notice as aforesaid shall be sufficient proof of notice, and this policy shall terminate at the date and hour specified in such notice. If this policy shall be cancelled by the Insured Company, the Insurer shall retain the customary short rate proportion of premium hereon. If this policy shall be cancelled by or on behalf of the Insurer, the Insurer shall retain the pro- rata proportion of the premium hereon. Payment or tender of any unearned premium by the Insurer shall not be a condition precedent to the effectiveness of cancellation, but such payment shall be made as soon as practicable. G. Capacity: Notwithstanding any other provision of this policy, coverage hereunder shall not apply with respect to a Wrongful Act by any Insured Person in his capacity as director or officer of the Insurer. H. Changes: Notice to or knowledge possessed by any person shall not effect waiver or change in any part of this policy or estop the Insurer from asserting any right under the terms of this policy; nor shall the terms of this policy be waived or changed, except by endorsement issued to form a part hereof, signed by the Insurer or its authorized representative. I. Arbitration: Any dispute arising under or relating to this policy, or the breach thereof, shall be finally and fully determined in Hamilton, Bermuda under the provisions of the Bermuda Arbitration Act of 1986, as amended and supplemented, by an Arbitration Board composed of three arbitrators who shall be disinterested and active or retired business executives having knowledge relevant to the matters in dispute, and who shall be selected for each controversy as follows: Either party to the dispute, once a claim or demand on its part has been denied or remains unsatisfied for a period of twenty (20) calendar days by the other party, may notify the other party of its desire to arbitrate the matter in dispute and at the time of such notification the party desiring arbitration shall notify the other party of the name of the arbitrator selected by it. The other party who has been so notified shall within ten (10) calendar days thereafter select an arbitrator and notify the party desiring arbitration of the name of such second arbitrator. If the party notified of a desire for arbitration shall fail or refuse to nominate the second arbitrator within ten (10) calendar days following the receipt of such notification, the party who first served notice of a desire to arbitrate will, within an additional period of ten (10) calendar days, apply to the Supreme Court of Bermuda for the appointment of a second arbitrator and in such a case the arbitrator appointed by the Supreme Court of Bermuda shall be deemed to have been nominated by the party who failed to select the second arbitrator. The two arbitrators, chosen as above provided, shall within ten (10) calendar days after the appointment of the second arbitrator choose a third arbitrator. In the event of the failure of the first two arbitrators to agree on a third arbitrator within the said ten (10) calendar day period, either party may within a period of ten (10) calendar days thereafter, after notice to the other party, apply to the Supreme Court of Bermuda for the appointment of a third arbitrator and in such case the person so appointed shall be deemed and shall act as the third arbitrator. Upon acceptance of the appointment by said third arbitrator, the Arbitration Board for the controversy in question shall be deemed fixed. The Arbitration Board shall fix, by a notice in writing to the parties involved, a reasonable time and place for the hearing and may in said written notice or at the time of the commencement of said hearing, at the option of said Arbitration Board, prescribe reasonable rules and regulations governing the course and conduct of said hearing. The Board, shall, within ninety (90) calendar days following the conclusion of the hearing, render its decision on the matter or matters in controversy in writing and shall cause a copy thereof to be served on all parties thereto. In case the Board fails to reach a unanimous decision, the decision of the majority of the members of the Board shall be deemed to be the decision of the Board. Each party shall bear the expense of its own arbitrator. The remaining cost of the arbitration shall be borne equally by the parties to such arbitration. All awards made by the Arbitration Board shall be final and no right of appeal shall lie from any award rendered by the Arbitration Board. The parties agree that the Supreme Court of Bermuda: (i) shall not grant leave to appeal any award based upon a question of law arising out of the award; (ii) shall not grant leave to make an application with respect to an award; and (iii) shall not assume jurisdiction upon any application by a party to determine any issue of law arising in the course of the arbitration proceeding, including but not limited to whether a party has been guilty of fraud. All awards made by the Arbitration Board may be enforced in the same manner as a judgment or order from the Supreme Court of Bermuda and judgment may be entered pursuant to the terms of the award by leave from the Supreme Court of Bermuda. The Insurer and the Insureds agree that in the event that claims for indemnity or contribution are asserted in any action or proceeding against the Insurer by any of the Insureds' other insurers in any jurisdiction or forum other than that set forth in this clause, the Insureds will in good faith take all reasonable steps requested by the Insurer to assist the Insurer in obtaining a dismissal of these claims (other than on the merits) and will, without limitation, undertake to the court or other tribunal to reduce any judgment or award against such other insurers to the extent that the court or tribunal determines that the Insurer would have been liable to such insurers for indemnity or contribution pursuant to this policy. The Insureds shall be entitled to assert claims against the Insurer for coverage under this policy, including, without limitation, for amounts by which the Insureds reduced its judgment against such other insurers in respect of such claims for indemnity or contribution, in an arbitration between the Insurer and the Insureds pursuant to this clause; provided, however, that the Insurer in such arbitration in respect of such reduction of any judgment shall be entitled to raise any defenses under this policy and any other defenses (other than jurisdictional defenses) as it would have been entitled to raise in the action or proceeding with such insurers. J. Governing Law and Interpretation: This policy shall be construed and enforced in accordance with the internal laws of the State of New York (with the exception of Section IV(I), which shall be construed and enforced in accordance with the laws of Bermuda), except insofar as such laws may prohibit payment hereunder in respect of punitive damages; provided, however, that the terms, conditions, exclusions and limitations of this policy are to be construed in an evenhanded fashion as between the Insureds and the Insurer. Without limitation, where the language of this policy is deemed to be ambiguous or otherwise unclear, the issues shall be resolved in the manner most consistent with the relevant terms, conditions, exclusions and limitations (without regard to authorship of the language, without any presumption or arbitrary interpretation or construction in favour of either the Insureds or the Insurer and without reference to parol evidence). K. Liability of the Company: The Insured Company, the Insured Persons and the Insurer agree that the liability and obligations of the Insurer hereunder shall be satisfied from the funds of the Insurer alone and that the individual shareholders of the Insurer shall have no liability hereunder to the Insured Company or the Insured Persons. L. Headings: The descriptions in the headings and sub-headings of this policy are inserted solely for convenience and do not constitute any part of the terms or conditions hereof. M. Currency: The premiums and any Loss under this policy are payable in United States currency. N. Assignment: Assignment of interest under this policy shall not bind the Insurer unless and until its consent is endorsed hereon. V. DEFINITIONS A. The terms "Wrongful Act" and "Loss" shall have the same meanings in this policy as are attributed to them in the Followed Policy. The terms "Insurer", "Followed Policy", "Underlying Policies", "Policy Period" and "Aggregate Limit of Liability" shall have the meanings attributed to them in the Declarations. B. The term "Insured Persons" shall mean those directors, officers and other individuals insured by the Followed Policy. C. The term "Insured Company" shall mean the entity named in Item 1 of the Declarations and any subsidiaries or affiliates thereof insured by the Followed Policy. D. The term "Policy Year" shall mean the period of one year following the inception of this policy or any anniversary, or, if the time between inception or any anniversary and the termination of this policy is less than one year, the lesser period. If the discovery period hereunder is exercised as a result of the cancellation of or refusal to renew this policy by the Insurer, such period shall be considered a separate Policy Year. If the discovery period is otherwise exercised, such period shall be part of the last Policy Year and not an additional period. E. The term "Underlying Limit" shall mean an amount equal to the aggregate of all limits of liability as set forth in Item 2 of the Declarations for all Underlying Policies, plus the uninsured retention, if any, applicable to the primary insurance as set forth in Item 2 of the Declarations. IN WITNESS WHEREOF, this policy has been made, entered into and executed by the Insurer in Hamilton, Bermuda as of the date set forth in the Declarations. A.C.E. INSURANCE COMPANY, LTD. By: /s/K. P. WHITE /s/W. A. SCOTT Senior Vice President President ADDITIONAL/RETURN PREMIUM: NIL CANCELLATION ENDORSEMENT ------------------------ (1 YEAR POLICY) It is agreed and acknowledged that Section IV(F) of this policy is deleted in its entirety. It is further agreed and acknowledged that this policy shall not be subject to Clause 7 (Automatic Extension) of the Followed Policy. The effective date of this endorsement is June 30, 1994 All other terms and conditions remain unchanged. This endorsement is attached to and made a part of Policy No. PG-7331D of A.C.E. INSURANCE COMPANY, LTD. Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY Date of Issue: October 28, 1994 By /s/PATRICK D. TANNOCK AUTHORISED REPRESENTATIVE End No. 1 ADDITIONAL/RETURN PREMIUM NIL DISCOVERY PERIOD ENDORSEMENT It is agreed and acknowledged that Section IV(A) (Discovery Period) is deleted and replaced in its entirety by the following: IV(A)(1) If the INSURER elects not to renew, or the Insured Company cancels or elects not to renew this POLICY, then the INSURED persons or INSURED Company shall have the right, upon payment of an additional premium of 100% of the sum of all premiums otherwise paid or due for the POLICY YEAR in which such election is made, to a continuation of the reporting period of this POLICY in respect of any CLAIMS first made against the INSURED persons or INSURED Company or any of them during a period (hereinafter referred to as the "Discovery Period") after the end of the POLICY PERIOD, but only if the CLAIMS are based on WRONGFUL ACTS alleged to have been committed prior to the end of the POLICY PERIOD. Such CLAIMS shall be deemed to have been made during the last POLICY YEAR provided that notification of each CLAIM is in accordance with Clause IV C below. The right to elect the Discovery Period shall terminate, however, unless written notice of such election together with the additional premium is received by the INSURER within ten (10) days after the end of the POLICY PERIOD. Any premium paid for the Discovery Period is not refundable. (2) The length of the Discovery Period shall be the same amount of time as the length of the POLICY PERIOD, subject to a maximum Discovery Period of one year. (3) The offer by the INSURER of renewal at a premium different from the premiums for the expiring POLICY YEAR shall not constitute an election by the INSURER not to renew this POLICY. (4) The Discovery Period does not reinstate or increase the LIMIT OF LIABILITY of this POLICY. The effective date of this endorsement is June 30, 1994. All other terms and conditions remain unchanged. This endorsement is attached to and made a part of Policy No. PG-7331D of A.C.E. INSURANCE COMPANY, LTD. Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY Date of Issue: October 28, 1994 End. No. 2 By /s/PATRICK D. TANNOCK Authorized Representative ADDITIONAL/RETURN PREMIUM: NIL CLAUSE III B AMENDATORY ENDORSEMENT ----------------------------------- In consideration of the premium charged it is hereby understood and agreed that Clause IIIB (i) and (ii) is amended to read as follows: B. It is a condition of this policy that the Followed Policies shall be maintained in full effect with solvent insurers during the policy period listed in Item 2 of the Declarations except for any reduction or exhaustion of the aggregate limits contained therein by reason of Loss paid thereunder (as provided for in Section II (C) above). Unless the Insurer otherwise agrees in writing, this policy shall: (i) immediately and automatically terminate on the date any of the Followed Policies ceases to be in full effect; and (ii) automatically terminate 30 days following the date an insurer of any Followed Policy becomes subject to a receivership, liquidation, dissolution, rehabilitation or any similar proceeding or is taken over by any regulatory authority unless the Insured Company obtains replacement coverage for such Followed Policy within such 30 day period. In the event this policy automatically terminates pursuant to this Section III(B), the Insurer shall retain the pro-rata proportion of the premium. Payment or tender of any unearned premium by the Insurer shall not be a condition precedent to the effectiveness of such termination, but such payment shall be made as soon as practicable. The effective date of this endorsement is June 30, 1994 All other terms and conditions remain unchanged. This endorsement is attached to and made a part of Policy No. PG-7331D of A.C.E. INSURANCE COMPANY, LTD. Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY Date of Issue: October 28, 1994 End No. 3 By /s/PATRICK D. TANNOCK AUTHORISED REPRESENTATIVE ADDITIONAL/RETURN PREMIUM $ NIL IT IS UNDERSTOOD AND AGREED THAT SECTION II - A & C IS REPLACED BY THE FOLLOWING: A. IT IS EXPRESSLY AGREED THAT LIABILITY FOR ANY COVERED LOSS WITH RESPECT TO CLAIMS FIRST MADE IN EACH POLICY YEAR SHALL ATTACH TO THE INSURER ONLY AFTER THE INSURERS OF THE UNDERLYING POLICIES, THE INSURED COMPANY AND/OR THE INSURED PERSONS SHALL HAVE PAID, IN THE APPLICABLE LEGAL CURRENCY, THE FULL AMOUNT OF THE UNDERLYING LIMITS FOR SUCH POLICY YEAR. THE INSURER SHALL THEN BE LIABLE TO PAY ONLY COVERED LOSS IN EXCESS OF SUCH UNDERLYING LIMIT UP TO ITS AGGREGATE LIMIT OF LIABILITY AS SET FORTH IN ITEM 5 OF THE DECLARATIONS, WHICH SHALL BE THE MAXIMUM AGGREGATE LIABILITY OF THE INSURER UNDER THIS POLICY WITH RESPECT TO ALL CLAIMS FIRST MADE IN EACH POLICY YEAR AGAINST ALL INSURED PERSONS IRRESPECTIVE OF THE TIME OF PAYMENT BY THE INSURER. C. IN THE EVENT AND ONLY IN THE EVENT OF THE REDUCTION OR EXHAUSTION OF THE UNDERLYING LIMITS BY REASON OF THE INSURERS OF THE UNDERLYING POLICY, THE INSURED COMPANY AND/OR THE INSURED PERSONS PAYING, IN THE APPLICABLE LEGAL CURRENCY, LOSS OTHERWISE COVERED HEREUNDER, THIS POLICY SHALL: (i) IN THE EVENT OF REDUCTION, PAY EXCESS OF THE REDUCED UNDERLYING LIMIT, AND (ii) IN THE EVENT OF EXHAUSTION, CONTINUE IN FORCE AS PRIMARY INSURANCE; PROVIDED ALWAYS THAT IN THE LATTER EVENT THIS POLICY SHALL ONLY PAY EXCESS OF THE RETENTION APPLICABLE TO THE PRIMARY INSURANCE AS SET FORTH IN ITEM 2 OF THE DECLARATIONS, WHICH RETENTION SHALL BE APPLIED TO ANY SUBSEQUENT LOSS IN THE SAME MANNER AS SPECIFIED IN SUCH PRIMARY INSURANCE. NOTHING HEREIN CONTAINED SHALL BE HELD TO VARY, ALTER, WAIVE OR EXTEND ANY OF THE TERMS, CONDITIONS, EXCLUSIONS OR LIMITATIONS OF THE ABOVE-MENTIONED POLICY, EXCEPT AS EXPRESSLY STATED HEREIN. The effective date of this endorsement is June 30, 1994 All other terms and conditions remain unchanged. This endorsement is attached to and made a part of Policy No. PG-7331D of A.C.E. INSURANCE COMPANY, LTD. Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY Date of Issue: OCTOBER 28, 1994 End No. 4 By /s/PATRICK D. TANNOCK AUTHORISED REPRESENTATIVE ADDITIONAL/RETURN PREMIUM: NIL DIRECTORS AND OFFICERS LIABILITY ENDORSEMENT -------------------------------------------- In consideration of the premium charged it is hereby agreed and acknowledged that coverage afforded by this Policy is only in respect of Directors and Officers Liability and not Company Reimbursement. The effective date of this endorsement is June 30, 1994 All other terms and conditions remain unchanged. This endorsement is attached to and made a part of Policy No. PG-7331D of A.C.E. INSURANCE COMPANY, LTD. Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY Date of Issue: OCTOBER 28, 1994 End No. 5 By /s/PATRICK D. TANNOCK AUTHORISED REPRESENTATIVE EX-99.4 11 Exhibit (99.4) -------------- Directors and Officers (Third) Excess Liability Policy STARR EXCESS Liability Insurance Company, Ltd. --------------------------------- 29 Richmond Road, Pembroke HM 08, Hamilton, Bermuda EXCESS DIRECTORS AND OFFICERS INSURANCE POLICY NOTICE: EXCEPT TO SUCH EXTENT AS MAY OTHERWISE BE PROVIDED HEREIN, THE COVERAGE OF THIS POLICY IS LIMITED GENERALLY TO LIABILITY FOR ONLY THOSE CLAIMS THAT ARE FIRST MADE AGAINST THE INSUREDS AND REPORTED TO THE INSURER DURING THE POLICY PERIOD. PLEASE READ THE POLICY CAREFULLY AND DISCUSS THE COVERAGE THEREUNDER WITH YOUR INSURANCE AGENT OR BROKER. NOTICE: THE LIMIT OF LIABILITY AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS SHALL BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE. AMOUNTS INCURRED FOR LEGAL DEFENSE SHALL BE APPLIED AGAINST THE RETENTION AMOUNT. NOTICE: THE INSURER DOES NOT ASSUME ANY DUTY TO DEFEND. DECLARATIONS POLICY #: 700029 ITEM 1. NAMED CORPORATION: The Procter and Gamble Company MAILING ADDRESS: One Procter & Gamble Plaza, Cincinnati, OH 45202 STATE OF INCORPORATION OF THE NAMED CORPORATION: Ohio ITEM 2. FOLLOWED POLICY: INSURER: CODA POLICY NO: PG-106C ITEM 3. POLICY PERIOD: From: June 30, 1994 To: June 30, 1995 (12:01 A.M. standard time at the address stated in Item 1.) ITEM 4. LIMIT OF LIABILITY: $50,000,000 aggregate for coverages combined (including Defense Costs) EXCESS OF TOTAL UNDERLYING LIMITS OF: $95,000,000 ITEM 5. RETENTIONS: A. $nil per Director or Officer each Loss, but not exceeding B. $nil in the aggregate each Loss ITEM 6. SCHEDULE OF PRIMARY AND UNDERLYING EXCESS POLICIES: POLICY POLICY INSURER NUMBER LIMITS PERIOD PRIMARY POLICY: CODA PG-106C $25,000,000 6/30/94 to 6/30/97 EXCESS POLICIES: X.L. XLD+O-00364-94 $25,000,000 6/30/94 to 6/30/95 ACE PG-7331D $45,000,000 6/30/94 to 6/30/95 ITEM 7. PREMIUM: $125,000 ITEM 8. A. DISCOVERY PERIOD PREMIUM: 100% of Premium indicated in Item 7. B. DISCOVERY PERIOD: 365 days. ITEM 9. NOTICE OF CANCELLATION PERIOD: 60 days. ITEM 10. ADDRESS OF INSURER FOR ALL NOTICES UNDER THIS POLICY: STARR EXCESS LIABILITY INSURANCE COMPANY, LTD. P.O. BOX HM 152 HAMILTON, HM AX BERMUDA ITEM 11. POLICY FORM: EXCESS DIRECTORS AND OFFICERS INSURANCE POLICY SELIC DOO(6/94) ENDORSEMENTS: #1 /s/ DAVID F. ALLEN Authorized Representative Park International Limited P.O. Box HM 2064 Hamilton HM HX Bermuda EXCESS DIRECTORS AND OFFICERS INSURANCE POLICY In consideration of the payment of the premium, and in reliance upon the statements made to the Insurer by application forming a part hereof and its attachments and the material incorporated therein, STARR EXCESS LIABILITY INSURANCE COMPANY, LTD. herein called the "Insurer", agrees as follows: I. INSURING AGREEMENTS This policy shall provide the Insured(s) with Excess Directors and Officers Insurance coverage in accordance with the same warranties, terms, conditions, exclusions and limitations of the Followed Policy identified in Item 2 of the Declarations as they were in existence on the inception date of this policy (except as regards the premium, the amount and limits of liability and the policy period) subject to: (a) the warranties, terms, conditions, exclusions and limitations of this policy including any endorsement attached hereto, and (b) provided always that this policy shall, in no event and notwithstanding any other provision, provide coverage broader than that provided by the Followed Policy unless such broader coverage is specifically agreed to by the Insurer and identified as broader coverage in a written endorsement attached hereto. II. DEFINITIONS (a) The term "Director(s) or Officer(s)" and the term "Insured(s)" shall mean those directors, officers and other natural persons (if any) insured under the Followed Policy. (b) The term "Company" shall mean the Named Corporation designated in Item 1 of the Declarations. (c) The term "Loss" shall have the same meaning in this policy as is attributed to it in the Followed Policy except that the term "Loss" shall in no event include civil or criminal fines or penalties, punitive or exemplary damages, the multiplied portion of multiplied damages or any amount for which the Insureds are not financially liable or which are without legal recourse to the Insureds, or matters which may be deemed uninsurable under the law pursuant to which this policy shall be construed. (d) "Policy Period" shall mean the period of time from the inception date shown in Item 3 of the Declarations to the earlier of the expiration date shown in Item 3 of the Declarations or the effective date of cancellation of this policy. (e) The term "Underlying Policies" shall mean the Primary and Underlying Excess Policies set forth in Item 6 of the Declarations. The term "Underlying Insurer(s)" shall mean the insurer(s) of the Underlying Policies The term "Underlying Limit" shall mean an amount equal to the aggregate of all the limits of the Underlying Policies combined (excess of their retentions). (f) The term "Wrongful Act" and "Subsidiary" shall have the same meanings in this policy as are attributed to them in the Followed Policy. III. LIMIT OF LIABILITY The limit of liability stated in Item 4 of the Declarations is the limit of the Insurer's liability for all Loss under all Coverages combined, arising out of all claims first made against the Insureds and reported to the Insurer during the Policy Period and the Discovery period (if applicable); however, the limit of liability for the Discovery Period shall be part of, and not in addition to, the limit of liability for the Policy Period. Further ,any claim which is made subsequent to the Policy Period or Discovery Period (if applicable) which pursuant to Clause V(b) is considered made during the Policy Period or Discovery Period shall also be subject to the one aggregate limit of liability stated in item 4 of the Declarations. It is expressly agreed that liability for any covered Loss with respect to claims first made and reported during the Policy period shall attach to the Insurer only after the Underlying Limit, and the Insureds shall have paid or been held liable to pay the full amount of the Underlying Limit, and the Insureds shall have paid or been held liable to pay the full amount of the applicable Retention amount for such Policy Period. In the event and only in the event of the reduction or exhaustion of the Underlying Limit by reason of the Underlying Insurers, and/or the Insureds paying or being held liable to pay Loss otherwise covered hereunder, this policy shall: (i) in the event of reduction, pay excess of the reduced Underlying Limit, and (ii) in the event of exhaustion, continue in force as primary insurance; provided always that in the latter event this policy shall only pay excess of the Retention amounts set forth in Item 5 of the Declarations, which Retention amount shall be applied to any subsequent Loss in the same manner as specified in the Followed Policy; provided however, that the Retention amounts set forth in Item 5 shall not apply if the retention amount of any Underlying Policy has been applied to such Loss. This policy shall pay only in the event of reduction or exhaustion of the Underlying Limit as described above and shall not drop down for any reason including, but not limited to, uncollectability (in whole or in part) of the Underlying Limit, existence of a sub-limit of liability in any Underlying Policy, or any Excess Policy containing terms and conditions different from the Followed Policy. The risk of uncollectability of such underlying insurance (in whole or in part) whether because of financial impairment or insolvency of an Underlying Insurer, the application of any underlying sub-limit of liability or differing terms and conditions or for any other reason is expressly retained by the Insureds and is not in any way or under any circumstances insured or assumed by the Insurer. IV. UNDERLYING LIMITS It is a condition of this policy that the Underlying Policies shall be maintained in full effect with solvent insurers during the Policy Period except for any reduction or exhaustion of the aggregate limits contained therein by reason of Loss paid thereunder (as provided for in Clause III above). Failure to comply with the foregoing shall not invalidate this policy, but in the event of such failure, the Insurer shall be liable only to the extent that it would have been liable had the Insureds and the company complied with such condition. Unless the Insurer otherwise agrees in writing, this policy shall immediately and automatically terminate if the Company fails to notify the Insurer as set forth in Clause V(c) of this policy that any of the Underlying Policies has ceased to be in full effect. If such notification is made, then this policy shall continue in effect but the Insured(s) (or an insurer providing replacement coverage if such replacement coverage is obtained) shall be liable for the amount of the underlying limit of such ceased Underlying Policy and the Insurer shall be liable only to the extent that it would have been liable had the Underlying Policy not ceased. Unless the Insurer otherwise agrees in writing, this policy shall automatically terminate thirty (30) days following the date any Underlying Insurer becomes subject to a receivership, liquidation, dissolution, rehabilitation or any similar proceeding or is taken over by any regulatory authority unless the Named Corporation obtains replacement coverage for such Underlying Policy within such thirty (30) day period. If during the Policy Period or any Discovery Period the terms, conditions, exclusions or limitations of the Followed Policy are changed in any manner, the Company or the Insureds shall as a condition precedent to the Insureds rights under this policy give to the Insurer as soon as practicable written notice of the full particulars thereof. This policy shall become subject to any such changes upon the effective date of the changes in the Followed Policy, but only upon the condition that the Insurer agrees to follow such changes by written endorsement attached hereto and the Named Corporation agrees to any additional premium and/or amendment of the provisions of this policy required by the Insurer relating to such changes. Further, such new coverage is conditioned upon the Named Corporation paying when due any additional premium required by the Insurer relating to such changes. V. NOTICES AND CLAIM REPORTING PROVISIONS (a) The company or the Insureds shall, as a condition precedent to the obligations of the Insurer under this policy, give written notice to the Insurer at the address indicated in Item 10 of the Declarations and all Underlying Insurers as soon as practicable during the Policy Period, or during the Discovery Period (if applicable), of any claim made against the Insureds. (b) If during the Policy period or during the Discovery Period (if applicable) (i) written notice of a claim has been given to the Insurer pursuant to Clause V(a) above, or (ii) to the extent permitted by the terms and conditions of the Followed Policy, written notice of circumstances that might reasonably be expected to give rise to a claim, has been given to the Insurer and all Underlying Insurers, then any claim which is subsequently made against the Insureds and reported to the Insurer and all Underlying Insurers alleging, arising out of, based upon or attributable to the facts alleged in the claim or circumstances of which such notice has been given, or alleging any Wrongful Act which is the same as or related to any Wrongful Act alleged in the claim or circumstances of which such notice has been given, shall be considered made at the time such claim or circumstances has been given to the Insurer. (c) The Company or the Insureds shall, as a condition precedent to the obligations of the Insurer under this policy, give written notice to the Insurer of the following events as soon as practicable but in no event later than thirty (30) days of an Insured or the Company becoming aware of the event: (i) The cancellation, nonrenewal of any Underlying Policy or any Underlying Policy otherwise ceases to be in effect or uncollectible (in part or in whole); or (ii) Any insurer or any Underlying Policy becoming subject to a receivership, liquidation, dissolution, rehabilitation or any similar proceeding or being taken over by any regulatory authority; or (iii)The Named Corporation consolidating with or merging into, or selling all or substantially all of its assets to, any other person or entity or group of persons and/or entities acting in concert; or (iv) Any person or entity or group of persons and/or entities acting in concert acquiring an amount of the outstanding securities representing more than 50% of the voting power for the election of Directors of the Named Corporation, or acquiring the voting rights of such an amount of such securities. VI. CLAIM PARTICIPATION The Insurer shall have the right, in its sole discretion, but not the obligation to effectively associate with the Company and the Insureds in the defense and settlement of any claim that appears to the Insurer to be reasonably likely to involve the Insurer, including but not limited to effectively associating in the negotiation of a settlement. The Insureds shall defend and contest any such claim. The Company and the Insureds shall give the Insurer full cooperation and such information as it may reasonably require. The failure of the Insurer to exercise any right under this paragraph at any point in a claim shall not act as a waive or limit the right of the Insurer in any manner to exercise such rights at any other point in a claim including the right to effectively associate in the negotiation of a settlement. The Insurer does not under this policy assume any duty to defend. The Insureds shall not admit or assume any liability, enter into any settlement agreement, stipulate to any judgment or incur any Defense Costs without the prior written consent of the Insurer. Only those settlements, stipulated judgments and Defense Costs which have been consented to by the Insurer shall be recoverable as Loss under the terms of this policy. The Insurer's consent shall not be unreasonably withheld, provided that the Insurer shall be entitled to effectively associate in the defense and the negotiation of any settlement of any claim in order to reach a decision as to reasonableness. VII. DISCOVERY CLAUSE If the Insurer shall cancel or refuse to renew this policy the Named Corporation shall have the right, upon payment of the additional percentage set forth in Item 8A of the Declarations of the full annual premium, to the period set forth in Item 8B of the Declarations following the effective date of such cancellation or nonrenewal (herein referred to as the Discovery Period) in which to give written notice to the Insurer of claims first made against the Insureds during said period for any Wrongful Act occurring prior to the end of the Policy Period and otherwise covered by this policy. As used herein, "full annual premium" means the premium level in effect immediately prior to the end of the Policy Period. The rights contained in this clause shall terminate, however, unless written notice of such election together with the additional premium due is received by the Insurer within the time period and in the manner set forth in the Followed Policy. The Discovery Period is not available unless the Named Corporation has elected the Discovery Period (or Extended Reporting Period) in all Underlying Policies which have been canceled or non-renewed by their Underlying Insurers. The additional premium for the Discovery period shall be fully earned at the inception of the Discovery Period. The Discovery Period is not cancelable. The offer by the Insurer of renewal terms, conditions, limits of liability and/or premiums different from those of the expiring policy shall not constitute refusal to renew. VIII. CANCELLATION CLAUSE This policy may be canceled by the Named Corporation only by mailing written prior notice to the Insurer or by surrender of this policy to the Insurer or its authorized agent at the address set forth in Item 10 of the Declarations and within the time period and in the manner set forth in the Followed Policy. This policy may also be canceled by or on behalf of the Insurer by delivering to the Named Corporation or by mailing to the Named Corporation, by registered, certified, or other first class mail, at the Named Corporation's address set forth in the Declarations, written notice stating when, not less than the period set forth in Item 9 of the Declarations, thereafter the cancellation shall be effective. The mailing of such notice as aforesaid shall be sufficient proof of notice. The Policy Period terminates at the date and hour specified in such notice, or at the date and time of surrender. If this policy shall be canceled by the Named Corporation, the Insurer shall retain the customary short rate proportion of the premium hereon. If this policy shall be canceled by the Insurer, the Insurer shall retain the pro rata proportion of the premium hereon. Payment or tender of any unearned premium by the Insurer shall not be a condition precedent to the effectiveness of cancellation but such payment shall be made as soon as practicable. If the period of limitation relating to the giving of notice is prohibited or made void by any law controlling the construction thereof, such period shall be deemed to be amended so as to be equal to the minimum period of limitation permitted by such law. IX. OTHER CONDITIONS (a) SUBROGATION In the event of any payment under this policy, the Insurer shall be subrogated to the extent of such payment to all the Insureds' rights of recovery therefor, and the Company and the Insureds shall execute all papers required and shall do everything that may be necessary to secure such rights including the execution of such documents necessary to enable the Insurer effectively to bring suit in the name of the Insureds. (b) OTHER INSURANCE Such insurance as is provided by this policy shall apply only as excess over any other valid and collectible insurance. Provided, however, that nothing in the foregoing shall be construed to compel the Insurer to drop down in the event of the invalidity or uncollectibility of any Underlying Policy. (c) NOTICE AND AUTHORITY It is agreed that the Named Corporation shall act on behalf of the Insureds with respect to the giving and receiving of notice of claim or cancellation, the payment of premiums and the receiving of any return premiums that may become due under this policy, the receipt and acceptance of any endorsements issued to form a part of this policy and the exercising or declining to exercise any right to a Discovery Period. (d) ASSIGNMENT This policy and any and all rights hereunder are not assignable without the written consent of the Insurer. (e) PREMIUM The premium under this policy is a flat premium and is not subject to adjustment except as otherwise provided herein. (f) CHANGES Notice to or knowledge possessed by any person shall not effect a waiver of or a change in any part of this policy or stop the Insurer from asserting any right under the terms of this policy; nor shall the terms of this policy be waived or changed, except by endorsement issued to form a part hereof, signed by the Insurer or its authorized representative. (g) CURRENCY The premiums and any Loss under this policy are payable in United States currency. (h) ARBITRATION Any dispute arising under or relating to this policy, or the breach thereof, shall be finally and fully determined in Hamilton, Bermuda under the provisions of the Bermuda Arbitration Act of 1986, as amended and supplemented, by an Arbitration Board composed of three arbitrators who shall be disinterested and active or retired business executives having knowledge relevant to the matters in dispute, and who shall be selected for each controversy as follows: Either party to the dispute, once a claim or demand on its part has been denied or remains unsatisfied for a period of twenty (20) calendar days by the other party, may notify the other party of its desire to arbitrate the matter in dispute and at the time of such notification the party desiring arbitration shall notify the other party of the name of the arbitrator selected by it. The other party who has been so notified shall within ten (10) calendar days thereafter select an arbitrator and notify the party desiring arbitration o the name of such second arbitrator. If the party notified of a desire for arbitration shall fail or refuse to nominate the second arbitrator within ten (10) calendar days following the receipt of such notification, the party who first served notice of a desire to arbitrate will, within an additional period of ten (10) calendar days, apply to the Supreme Court of Bermuda for the appointment of the second arbitrator and in such a case the arbitrator appointed by the Supreme Court of Bermuda shall be deemed to have been nominated by the party who failed to select the second arbitrator. The two arbitrators, chosen as above provided, shall within ten (10) calendar days after the appointment of the second arbitrator choose a third arbitrator. Upon acceptance of the appointment by said third arbitrator, the Arbitration Board for he controversy in question shall be deemed fixed. The Arbitration Board shall fix, by a notice in writing to the parties involved, a reasonable time and place for the hearing and may in said written notice or at the time of the commencement of said hearing, at the option of said Arbitration Board, prescribe reasonable rules and regulations governing the course and conduct of said hearing. The Board, shall, within ninety (90) calendar days following the conclusion of the hearing, render decision on the matter or matters in controversy in writing and shall cause a copy thereof to be served on all parties thereto. In case the Board fails to reach a unanimous decision, the decision of the majority of the members of the Board shall be deemed to be the decision of the Board. Each party shall bear the expense of its own arbitrator. The remaining cost of the arbitration shall be borne equally by the parties to such arbitration. All awards made by the Arbitration Board shall be final and no right of appeal shall lie from any award rendered by the Arbitration Board. The parties agree that the Supreme Court of Bermuda: (i0 shall not grant leave to appeal any award based upon a question of law arising out of the award; (ii) shall not grant leave to make an application with respect to an award; and (iii) shall not assume jurisdiction upon any application by a party to determine any issue of law arising in the course of the arbitration proceeding, including but not limited to whether a party has been guilty of fraud. All awards made by the Arbitration Board may be enforced in the same manner as a judgment or order from the Supreme Court of Bermuda and judgment may be entered pursuant to the terms of the award by leave from the Supreme Court of Bermuda. No person or organization shall have any right under this policy to join the Insurer as a party to any action against the Insureds or the company to determine the Insureds liability, nor shall the Insurer be impleaded by the Insureds or the Company or their legal representatives. The Insurer and the Insureds agree that in the event that claims for indemnity or contribution are asserted in any action or proceeding against the Insurer by any of the Insureds other insurers in a jurisdiction or forum other than that set forth in this clause, the Insureds will in good faith take all reasonable steps requested by the Insurer to assist the Insurer in obtaining a dismissal of these claims (other than on the merits). The Insureds and the Company will, without limitation, undertake to the court or other tribunal to reduce any judgment or award against such other insurers to the extent that the court or tribunal determines that the Insurer would have been liable to such insurers for indemnity or contribution pursuant to this policy. The Insureds shall be entitled to assert claims against the Insurer for coverage under this policy including, without limitation, for amounts by which the Insureds reduced judgment against such other insurers in respect of such claims for indemnity or contribution, in an arbitration between the Insurer and the Insureds pursuant to this clause; provided, however, that the Insurer in such arbitration in respect of such reduction of any judgment shall be entitled to raise any defenses under this policy and any other defenses (other than jurisdictional defenses) as it would have been entitled to raise in the action or proceeding with such insurers. (i) CHOICE OF LAW This policy shall be construed and enforced in accordance with the internal laws of the State of New York (with the exception of the procedural law set required by Clause IX(G), which shall be construed and enforced in accordance with the laws of Bermuda), provided, however, that, notwithstanding any legal principals to the contrary, the warranties, terms, conditions, exclusions and limitations of this policy are to be construed in an evenhanded fashion between the Insureds, the Company and the Insurer. Without limitation, where the language of this policy is deemed to be ambiguous or otherwise unclear, the issues shall be resolved in the manner most consistent with the warranties, terms, conditions, exclusions and limitations viewed as a whole (without regard to authorship of the language, without any presumption or arbitrary interpretation or construction in favor of either the Insureds, the Company or the Insurer). (j) HEADINGS The descriptions in the headings and any subheadings of this policy (including any titles given to any endorsement attached hereto) are inserted solely for convenience and do not constitute any part of the terms or conditions hereof. IN WITNESSETH WHEREOF, the Company has caused this policy to be signed by its President and a Secretary. /s/L. M. MURPHY /s/JOSEPH C. H. JOHNSON Secretary President ENDORSEMENT NO: 1 This endorsement, effective: June 30, 1994 forms a part of policy number: 700029 Issued to: The Procter and Gamble Company by: Starr Excess Liability Insurance Company, Ltd. In consideration of the premium charged, it is hereby understood and agreed that the Insurer shall not be liable for Loss in connection with any claim or claims made against the Directors or Officers: (a) alleging, arising out of, based upon or attributable to the facts alleged, or to the same or related Wrongful Acts alleged or contained, in any claim which has been reported, or in any circumstances of which notice has been given, under any policy, whether excess or underlying, of which this policy is a renewal or replacement or which it may succeed in time; (b) alleging, arising out of, based upon or attributable to any pending or prior litigation prior to June 13, 1994, or alleging or derived from the same or essentially the same facts as alleged in such pending or prior litigation; All other terms and conditions remain the same. Authorized Representative: /s/DAVID F. ALLEN DIRECTORS AND OFFICERS INSURANCE AND CORPORATE REIMBURSEMENT APPLICATION Starr Excess Liability Insurance Company, Ltd. ---------------------------------------------- Name of Insurance Company to which Application is made (herein called the Insurer) NOTICE: THE POLICY PROVIDES THAT THE LIMIT OF LIABILITY AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS SHALL BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE. FURTHER NOTE THAT AMOUNTS INCURRED FOR LEGAL DEFENSE SHALL BE APPLIED AGAINST THE RETENTION AMOUNT. IF A POLICY IS ISSUED, THE APPLICATION WILL BE ATTACHED TO AND BECOME A PART OF THE POLICY, THEREFORE IT IS NECESSARY THAT ALL QUESTIONS BE ANSWERED ACCURATELY AND COMPLETELY. IF A POLICY IS ISSUED, IT WILL BE ON A CLAIMS-MADE BASIS. -------------------------------------------------------------------------- 1. APPLICANT'S (a) Corporation name The Procter & Gamble Company (b) State of Incorporation Ohio (c) Date of Incorporation May 5, 1905 (d) Address One Procter & Gamble Plaza Cincinnati, OH 45202-3314 (e) Nature of business Consumer Products (f) Primary SIC code(s) (g) Corporation has continually been operating since 1837. (h) Total number of locations (please check): one two more than three X (i) Does the Applicant operate any retail outlets? Yes No X (if yes, total number of retail outlets: ) 2. (a) Amount of insurance requested: $50 Million (b) Self-insured retention desired (each loss): $95 Million 3. STOCK OWNERSHIP As of 8/12/94 (a) Total number of voting shares outstanding: 737,951,214 (b) Total number of voting shareholders: 199,750 (c) Total number of voting shares owned by its Directors (direct and beneficial): 2,260,251 (d) Total number of voting shares owned by its Officers (direct and beneficial) who are not Directors: 2,230,616 (e) Does any shareholder own five percent or more of the voting shares directly or beneficially? If so, designate name and percentage of holdings. (If no such shareholders, check here "none". ) P&G Profit Sharing and Employee Stock Ownership Plan: 11.4% (f) Are there any other securities convertible to voting stock. If so, describe fully. (If none, check here "none". ) Preferred stock is not traded, but is held for retirees. These shares are convertible to common stock upon retirement of the participant. 4. (a) Complete list of all Directors of the Corporation named in 1(a) above by name and affiliation with other corporations. (If included as an attachment herein, check here ) See Annual Report. (b) Complete list of all Officers of the Corporation named in 1(a) above by name and affiliation with other corporations. (If included as an attachment herein, check here ) See Annual Report. 5. LIST OF ALL DIRECT AND INDIRECT SUBSIDIARY CORPORATIONS: Business Percentage Date Domestic or Foreign or Type of of Acquired and Country of Name Operation Ownership or Created Incorporation ---- ---------- ---------- ---------- ------------------- See Attachment I Coverage to include all Subsidiaries? Yes X No . If yes, include complete list of Directors and Officers of each Subsidiary. If no, include complete list of Directors and Officers of each Subsidiary for which coverage is requested. If included as an attachment herein, check here . See Annual Report. 6. Are any plans for merger, acquisition or consolidation of or by the Applicant or any of its Subsidiaries being considered? Yes X No Procter & Gamble routinely considers acquisitions and mergers. Other than those that have been publicly announced, none have been approved by the Board. (a) If so, have they been approved by the board of directors? Yes No Date (b) If so, have they been submitted to the shareholders for approval? Yes No X Date for approval 7. Has the Applicant or any of its Subsidiaries filed any registration of securities under the Securities Act of 1933 or any other offering of securities within the last year? Yes X No ? Does it anticipate doing so within the next year? Yes X No . (If yes, give details and submit offering materials if available). See SEC attachments provided. 8. There has not been nor is there now pending any claim(s) against any person proposed for insurance in his or her capacity of either Director or Officer of the named Applicant or any of its Subsidiaries except as follows: (Attach complete details. If no such claims, check here "none". ). See Attachment II. 9. No Director or Officer has knowledge or information of any act, error or omission which might give rise to a claim under the proposed policy except as follows: (Attach complete details. If they have no such knowledge or information, check here "none". X ) 10. Has the Applicant, any of its Subsidiaries or any Director and/or Officer: (a) Been involved in any antitrust, copyright or patent litigation? Yes X No See Attachment II. (b) Been charged in any civil or criminal action or administrative proceeding with a violation of any federal or state antitrust or fair trade law? Yes X No See Attachment II (c) Been charged in any civil or criminal action or administrative proceeding with a violation of any federal or state securities law or regulation? Yes No X (d) Been involved in any representative actions, class actions, or derivative suites? Yes X No See Attachment II. (IF ANY OF THE ABOVE ARE ANSWERED YES, ATTACH FULL DETAILS.) It is agreed that with respect to Question 9 and 10 above, that if such knowledge, information or involvement exists, any claim or action arising therefrom is excluded from the proposed coverage. 11. PREVIOUS DIRECTORS AND OFFICERS INSURANCE N/A (a) Name of insurance company (b) Limit of liability (c) Self-insured retention (d) Policy expiration date (e) Premium (indicate one year or other) (f) Loss experience (Attach full details. If no losses, check here: ) 12. Has any insurance carrier refused, canceled or nonrenewed coverage? Yes No X (If yes, attach full details including when and reason). 13. Name of Risk Manager (or equivalent position) and number of years in current position: H. L. Maxson 14. Schedule of underlying insurance: List the underlying directors and officers liability insurance which will, or is being proposed to, be carried by the Company for the policy period being applied for: a) PRIMARY INSURANCE Limit of Name of Insurer Liability Retention Premium --------------- --------- --------- ------- CODA $25 Million / / $350,000 b) EXCESS INSURANCE (BY LAYER) Limit of Name of Insurer Liability Premium --------------- --------- ------- X. L. $25MM xs $25MM $150,000 ACE $45MM xs $50MM $140,000 15. ATTACH COPIES OF THE FOLLOWING FOR THE APPLICANT AND, TO THE EXTENT AVAILABLE, EACH OF ITS SUBSIDIARIES: (a) Latest annual report (b) Latest 10K report filed with the SEC (if the Company is publicly traded) (c) Latest interim financial statement available (d) All proxy statements and Notices of Annual Meeting of Stockholders within the last twelve months (e) All registration statements file with the SEC within the last twelve months (if the Company is Publicly traded) (f) Copy (certified by Corporate Secretary) of the indemnification provisions of the charter and the by-laws. Also attach a copy of any corporate indemnification agreement (g) Copies of all underlying insurance referred to in question 14 It is agreed that the Applicant will file with the Insurer, as soon as it becomes available, a copy of each registration statement and annual or interim report which the Applicant or any Subsidiary may from time to time file with the Securities and Exchange Commission. -------------------------------------------------------------------------- THE UNDERSIGNED AUTHORIZED OFFICER OF THE APPLICANT DECLARES THAT THE STATEMENTS SET FORTH HEREIN ARE TRUE. THE UNDERSIGNED AUTHORIZED OFFICER AGREES THAT IF THE INFORMATION SUPPLIED ON THIS APPLICATION CHANGES BETWEEN THE DATE OF THIS APPLICATION AND THE EFFECTIVE DATE OF THE INSURANCE, HE/SHE (UNDERSIGNED) WILL, IN ORDER FOR THE INFORMATION TO BE ACCURATE ON THE EFFECTIVE DATE OF THE INSURANCE, IMMEDIATELY NOTIFY THE INSURER OF SUCH CHANGES, AND THE INSURER MAY WITHDRAW OR MODIFY ANY OUTSTANDING QUOTATIONS AND/OR AUTHORIZATIONS OR AGREEMENTS TO BIND THE INSURANCE. SIGNING OF THIS APPLICATION DOES NOT BIND THE APPLICANT OR THE INSURER TO COMPLETE THE INSURANCE, BUT IT IS AGREED THAT THIS APPLICATION SHALL BE THE BASIS OF HE CONTRACT SHOULD A POLICY BE ISSUED, AND IT WILL BE ATTACHED TO AND BECOME PART OF THE POLICY. ALL WRITTEN STATEMENTS AND MATERIALS FURNISHED TO THE INSURER IN CONJUNCTION WITH THIS APPLICATION ARE HEREBY INCORPORATED BY REFERENCE INTO THIS APPLICATION AND MADE A PART HEREOF. NOTICE TO NEW YORK AND OHIO APPLICANTS: ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME. Signed /s/ EDWIN L. ARTZT (Applicant) Date October 3, 1994 Title: Chairman of the Board Corporation: The Procter & Gamble Company (must be signed by Chairman (Corporate Seal) of the Board or President) Attest Broker Address Please read the following statement carefully and sign on the next page where indicated. If a policy is issued, this signed statement will be attached to the policy. The undersigned authorized officer of the Applicant hereby acknowledges that he/she is aware that the limit of liability contained in this policy shall be reduced, and may be completely exhausted, by the costs of legal defense and, in such event, the Insurer shall not be liable for the costs of legal defense or for the amount of any judgment or settlement to the extent that such exceeds the limit of liability of this policy. The undersigned authorized officer of the Applicant hereby further acknowledges that he/she is aware that legal defense costs that are incurred shall be applied against the retention amount. Signed /s/ EDWIN L. ARTZT (Applicant) Date October 3, 1994 Title Chairman of the Board (must be signed by Chairman of the Board or President) EX-99.5 12 Exhibit (99.5) -------------- Directors and Officers (Fourth Excess Liability Policy PARK INTERNATIONAL LIMITED A.C.E. INSURANCE COMPANY, LTD. DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICY THIS IS A CLAIMS MADE POLICY. Except as otherwise provided herein, this policy covers only claims first made against the Insureds during the Policy Period. PLEASE READ THIS POLICY CAREFULLY. DECLARATIONS ____________ Policy No.: PG-7574D Item 1. Insured Company: THE PROCTER & GAMBLE COMPANY/ OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY Principal Address: One Procter & Gamble Plaza Cincinnati, Ohio 45202 U.S.A. Item 2. Schedule of Underlying Policies: Insurer Policy Limits Policy Number Period _______ ______ ______ ______ Primary Policy CODA PG-106C $25M 6/30/94-97 Excess Policies X.L. XLD&O-00364-94 $25M 6/30/94-95 A.C.E. PG-7331D $45M 6/30/94-95 STARR 700029 $50M 6/30/94-95 Uninsured retention under primary insurance: $NIL each Insured Person each Loss, but in no event exceeding $NIL in the aggregate each Loss for all Insured Persons and $ N/A each Loss for the Insured Company. Item 3. Followed Policy: Insurer: CODA Policy No.: PG-106C Item 4. Policy Period: From 12:01 A.M. JUNE 30, 1994 To 12:01 A.M. JUNE 30, 1995 Standard Time at the address of the Insured. Item 5. Aggregate Limit of Liability $5,000,000 U.S. dollars each Policy Year for all Loss paid on behalf of all Insureds arising from all claims first made during such Policy Year. Item 6. One Year Premium: $ Included under Policy PG-7331D Three Year Premium: $ N/A (Prepaid) Discovery Period Premium: 100% of the Policy Period Premium Item 7. Insurer: A.C.E. Insurance Company, Ltd. P.O. Box HM 1015 Hamilton, Bermuda HM DX Telex: 3543 ACEILBA Telecopy: (809) 295-5221 Countersigned at Hamilton, Bermuda: Date: January 23, 1995 /s/PATRICK D. TANNOCK Authorized Representative THESE DECLARATIONS, TOGETHER WITH THE COMPLETED AND SIGNED APPLICATION AND THE POLICY FORM ATTACHED HERETO, CONSTITUTE THE INSURANCE POLICY. I. INSURING CLAUSE In consideration of the payment of the premium and in reliance upon all statements made in the application form including the information furnished in connection therewith, and subject to all terms, conditions, exclusions and limitations of this policy, the Insurer agrees to provide insurance coverage to the Insured Persons and, if applicable, the Insured Company in accordance with the terms, conditions, exclusions and limitations of the Followed Policy. II. LIMIT OF LIABILITY A. It is expressly agreed that liability for any covered Loss with respect to claims first made in each Policy Year shall attach to the Insurer only after the insurers of the Underlying Policies, the Insured Company and/or the Insured Persons shall have paid, admitted or been held liable to pay the full amount of the Underlying Limit for such Policy Year. The Insurer shall then be liable to pay only covered Loss in excess of such Underlying Limit up to its Aggregate Limit of Liability as set forth in Item 5 of the Declarations, which shall be the maximum aggregate liability of the Insurer under this policy with respect to all claims first made in each Policy Year against all Insured Persons irrespective of the time of payment by the Insurer. B. Multiple claims based upon or arising out of the same, repeated, interrelated or causally connected Wrongful Acts, whether made against the same or different Insured Persons, shall be deemed to be a single claim first made in the earliest Policy Year in which the first of such multiple claims is made against any Insured Person; the Aggregate Limit of Liability shall apply only once to such multiple claims. C. In the event and only in the event of the reduction or exhaustion of the Underlying Limit by reason of the insurers of the Underlying Policies, the Insured Company and/or the Insured Persons paying, admitting or being held liable to pay Loss otherwise covered hereunder, this policy shall: (i) in the event of reduction, pay excess of the reduced Underlying Limit, and (ii) in the event of exhaustion, continue in force as primary insurance; provided always that in the latter event this policy shall only pay excess of the retention applicable to the primary insurance as set forth in Item 2 of the Declarations, which retention shall be applied to any subsequent Loss in the same manner as specified in such primary insurance. D. Notwithstanding any of the terms of this policy which might be construed otherwise, this policy shall drop down only in the event of reduction or exhaustion of the Underlying Limit and shall not drop down for any other reason including, but not limited to, uncollectability (in whole or in part) of any underlying insurance. The risk of uncollectability of such underlying insurance (in whole or in part) whether because of financial impairment or insolvency of an underlying insurer or for any other reason, is expressly retained by the Insured Persons and the Insured Company and is not in any way or under any circumstances insured or assumed by the Insurer. III. UNDERLYING INSURANCE A. This policy is subject to the same warranties, terms, conditions, exclusions and limitations (except as regards the premium, the amount and limits of liability, the policy period and except as otherwise provided herein) as are contained in or as may be added to the Followed Policy. B. It is a condition of this policy that the Underlying Policies shall be maintained in full effect with solvent insurers during the policy period listed in Item 2 of the Declarations except for any reduction or exhaustion of the aggregate limits contained therein by reason of Loss paid thereunder (as provided for in Section II(C) above). Unless the Insurer otherwise agrees in writing, this policy shall: (i) immediately and automatically terminate on the date any of the Underlying Policies ceases to be in full effect; and (ii) automatically terminate 30 days following the date an insurer of any Underlying Policy becomes subject to a receivership, liquidation, dissolution, rehabilitation or any similar proceeding or is taken over by any regulatory authority unless the Insured Company obtains replacement coverage for such Underlying Policy within such 30 day period. In the event this policy automatically terminates pursuant to this Section III(B), the Insurer shall retain the pro- rata proportion of the premium. Payment or tender of any unearned premium by the Insurer shall not be a condition precedent to the effectiveness of such termination, but such payment shall be made as soon as practicable. C. If during the Policy Period or any discovery period the terms, conditions, exclusions or limitations of the Followed Policy are changed in any manner, the Insured Company or the Insured Persons shall as a condition precedent to their rights under this policy give to the Insurer as soon as practicable written notice of the full particulars thereof. This policy shall become subject to any such changes upon the effective date of the changes in the Followed Policy, provided that the Insured Company shall pay any additional premium reasonably required by the Insurer for such changes. IV. GENERAL CONDITIONS A. Discovery Period: If the Insurer or the Insured Company fails or refuses to renew or cancels this policy, or if this policy automatically terminates pursuant to Section III(B), the Insured Company or the Insured Persons shall have the right, upon payment of an additional premium as set forth in Item 6 of the Declarations, to elect an extension of the coverage granted by this policy, but only for any Wrongful Act committed, attempted or allegedly committed or attempted prior to the effective date of such nonrenewal, cancellation or termination. Any such election shall be made in writing in the time and manner and for the discovery period stated in the Followed Policy. B. Application of Recoveries: All recoveries or payments recovered or received subsequent to a Loss settlement under this policy shall be applied as if recovered or received prior to such settlement and all necessary adjustments shall then be made between the Insured Company or the Insured Person and the Insurer, provided always that the foregoing shall not affect the time when Loss under this policy shall be payable. C. Notice: All notices to the Insurer under any provisions of this policy shall be given by prepaid courier or electronic service properly addressed to the Insurer at its address as shown in the Declarations. Notice so given shall be deemed to be received by the Insurer on the next succeeding day. D. Cooperation: The Insured Company and the Insured Persons shall give the Insurer such information and cooperation as it may reasonably require. E. Premium: The premium under this policy is a flat premium and is not subject to adjustment except as otherwise provided herein. The premium shall be paid to the Insurer at its address as shown in the Declarations. F. Cancellation Clause: This policy may be cancelled by the Insured Company at any time by written notice or surrender of this policy to the Insurer. This policy may also be cancelled by, or on behalf of, the Insurer by delivering to the Insured Company or by mailing to the Insured Company by registered, certified or other first class mail, at the address shown in the Declarations, written notice stating when, not less than (365) days thereafter, the cancellation shall become effective. The mailing of such notice as aforesaid shall be sufficient proof of notice, and this policy shall terminate at the date and hour specified in such notice. If this policy shall be cancelled by the Insured Company, the Insurer shall retain the customary short rate proportion of premium hereon. If this policy shall be cancelled by or on behalf of the Insurer, the Insurer shall retain the pro- rata proportion of the premium hereon. Payment or tender of any unearned premium by the Insurer shall not be a condition precedent to the effectiveness of cancellation, but such payment shall be made as soon as practicable. G. Capacity: Notwithstanding any other provision of this policy, coverage hereunder shall not apply with respect to a Wrongful Act by any Insured Person in his capacity as director or officer of the Insurer. H. Changes: Notice to or knowledge possessed by any person shall not effect waiver or change in any part of this policy or estop the Insurer from asserting any right under the terms of this policy; nor shall the terms of this policy be waived or changed, except by endorsement issued to form a part hereof, signed by the Insurer or its authorized representative. I. Arbitration: Any dispute arising under or relating to this policy, or the breach thereof, shall be finally and fully determined in Hamilton, Bermuda under the provisions of the Bermuda Arbitration Act of 1986, as amended and supplemented, by an Arbitration Board composed of three arbitrators who shall be disinterested and active or retired business executives having knowledge relevant to the matters in dispute, and who shall be selected for each controversy as follows: Either party to the dispute, once a claim or demand on its part has been denied or remains unsatisfied for a period of twenty (20) calendar days by the other party, may notify the other party of its desire to arbitrate the matter in dispute and at the time of such notification the party desiring arbitration shall notify the other party of the name of the arbitrator selected by it. The other party who has been so notified shall within ten (10) calendar days thereafter select an arbitrator and notify the party desiring arbitration of the name of such second arbitrator. If the party notified of a desire for arbitration shall fail or refuse to nominate the second arbitrator within ten (10) calendar days following the receipt of such notification, the party who first served notice of a desire to arbitrate will, within an additional period of ten (10) calendar days, apply to the Supreme Court of Bermuda for the appointment of a second arbitrator and in such a case the arbitrator appointed by the Supreme Court of Bermuda shall be deemed to have been nominated by the party who failed to select the second arbitrator. The two arbitrators, chosen as above provided, shall within ten (10) calendar days after the appointment of the second arbitrator choose a third arbitrator. In the event of the failure of the first two arbitrators to agree on a third arbitrator within the said ten (10) calendar day period, either party may within a period of ten (10) calendar days thereafter, after notice to the other party, apply to the Supreme Court of Bermuda for the appointment of a third arbitrator and in such case the person so appointed shall be deemed and shall act as the third arbitrator. Upon acceptance of the appointment by said third arbitrator, the Arbitration Board for the controversy in question shall be deemed fixed. The Arbitration Board shall fix, by a notice in writing to the parties involved, a reasonable time and place for the hearing and may in said written notice or at the time of the commencement of said hearing, at the option of said Arbitration Board, prescribe reasonable rules and regulations governing the course and conduct of said hearing. The Board, shall, within ninety (90) calendar days following the conclusion of the hearing, render its decision on the matter or matters in controversy in writing and shall cause a copy thereof to be served on all parties thereto. In case the Board fails to reach a unanimous decision, the decision of the majority of the members of the Board shall be deemed to be the decision of the Board. Each party shall bear the expense of its own arbitrator. The remaining cost of the arbitration shall be borne equally by the parties to such arbitration. All awards made by the Arbitration Board shall be final and no right of appeal shall lie from any award rendered by the Arbitration Board. The parties agree that the Supreme Court of Bermuda: (i) shall not grant leave to appeal any award based upon a question of law arising out of the award; (ii) shall not grant leave to make an application with respect to an award; and (iii) shall not assume jurisdiction upon any application by a party to determine any issue of law arising in the course of the arbitration proceeding, including but not limited to whether a party has been guilty of fraud. All awards made by the Arbitration Board may be enforced in the same manner as a judgment or order from the Supreme Court of Bermuda and judgment may be entered pursuant to the terms of the award by leave from the Supreme Court of Bermuda. The Insurer and the Insureds agree that in the event that claims for indemnity or contribution are asserted in any action or proceeding against the Insurer by any of the Insureds' other insurers in any jurisdiction or forum other than that set forth in this clause, the Insureds will in good faith take all reasonable steps requested by the Insurer to assist the Insurer in obtaining a dismissal of these claims (other than on the merits) and will, without limitation, undertake to the court or other tribunal to reduce any judgment or award against such other insurers to the extent that the court or tribunal determines that the Insurer would have been liable to such insurers for indemnity or contribution pursuant to this policy. The Insureds shall be entitled to assert claims against the Insurer for coverage under this policy, including, without limitation, for amounts by which the Insureds reduced its judgment against such other insurers in respect of such claims for indemnity or contribution, in an arbitration between the Insurer and the Insureds pursuant to this clause; provided, however, that the Insurer in such arbitration in respect of such reduction of any judgment shall be entitled to raise any defenses under this policy and any other defenses (other than jurisdictional defenses) as it would have been entitled to raise in the action or proceeding with such insurers. J. Governing Law and Interpretation: This policy shall be construed and enforced in accordance with the internal laws of the State of New York (with the exception of Section IV(I), which shall be construed and enforced in accordance with the laws of Bermuda), except insofar as such laws may prohibit payment hereunder in respect of punitive damages; provided, however, that the terms, conditions, exclusions and limitations of this policy are to be construed in an evenhanded fashion as between the Insureds and the Insurer. Without limitation, where the language of this policy is deemed to be ambiguous or otherwise unclear, the issues shall be resolved in the manner most consistent with the relevant terms, conditions, exclusions and limitations (without regard to authorship of the language, without any presumption or arbitrary interpretation or construction in favour of either the Insureds or the Insurer and without reference to parol evidence). K. Liability of the Company: The Insured Company, the Insured Persons and the Insurer agree that the liability and obligations of the Insurer hereunder shall be satisfied from the funds of the Insurer alone and that the individual shareholders of the Insurer shall have no liability hereunder to the Insured Company or the Insured Persons. L. Headings: The descriptions in the headings and sub-headings of this policy are inserted solely for convenience and do not constitute any part of the terms or conditions hereof. M. Currency: The premiums and any Loss under this policy are payable in United States currency. N. Assignment: Assignment of interest under this policy shall not bind the Insurer unless and until its consent is endorsed hereon. V. DEFINITIONS A. The terms "Wrongful Act" and "Loss" shall have the same meanings in this policy as are attributed to them in the Followed Policy. The terms "Insurer", "Followed Policy", "Underlying Policies", "Policy Period" and "Aggregate Limit of Liability" shall have the meanings attributed to them in the Declarations. B. The term "Insured Persons" shall mean those directors, officers and other individuals insured by the Followed Policy. C. The term "Insured Company" shall mean the entity named in Item 1 of the Declarations and any subsidiaries or affiliates thereof insured by the Followed Policy. D. The term "Policy Year" shall mean the period of one year following the inception of this policy or any anniversary, or, if the time between inception or any anniversary and the termination of this policy is less than one year, the lesser period. If the discovery period hereunder is exercised as a result of the cancellation of or refusal to renew this policy by the Insurer, such period shall be considered a separate Policy Year. If the discovery period is otherwise exercised, such period shall be part of the last Policy Year and not an additional period. E. The term "Underlying Limit" shall mean an amount equal to the aggregate of all limits of liability as set forth in Item 2 of the Declarations for all Underlying Policies, plus the uninsured retention, if any, applicable to the primary insurance as set forth in Item 2 of the Declarations. IN WITNESS WHEREOF, this policy has been made, entered into and executed by the Insurer in Hamilton, Bermuda as of the date set forth in the Declarations. A.C.E. INSURANCE COMPANY, LTD. By: /s/K. P. WHITE /s/W. A. SCOTT Senior Vice President President ADDITIONAL/RETURN PREMIUM: NIL CANCELLATION ENDORSEMENT ------------------------ (1 YEAR POLICY) It is agreed and acknowledged that Section IV(F) of this policy is deleted in its entirety. It is further agreed and acknowledged that this policy shall not be subject to Clause 7 (Automatic Extension) of the Followed Policy. The effective date of this endorsement is June 30, 1994 All other terms and conditions remain unchanged. This endorsement is attached to and made a part of Policy No. PG-7574D of A.C.E. INSURANCE COMPANY, LTD. Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY Date of Issue: January 23, 1995 By /s/PATRICK D. TANNOCK AUTHORISED REPRESENTATIVE End No. 1 ADDITIONAL/RETURN PREMIUM NIL DISCOVERY PERIOD ENDORSEMENT It is agreed and acknowledged that Section IV(A) (Discovery Period) is deleted and replaced in its entirety by the following: IV(A)(1) If the INSURER or the Insured Company cancels or elects not to renew this POLICY, then the INSURED persons or INSURED Company shall have the right, upon payment of an additional premium of 100% of the sum of all premiums otherwise paid or due for the POLICY YEAR in which such election is made, to a continuation of the reporting period of this POLICY in respect of any CLAIMS first made against the INSURED persons or INSURED Company or any of them during a period (hereinafter referred to as the "Discovery Period") after the end of the POLICY PERIOD, but only if the CLAIMS are based on WRONGFUL ACTS alleged to have been committed prior to the end of the POLICY PERIOD. Such CLAIMS shall be deemed to have been made during the last POLICY YEAR provided that notification of each CLAIM is in accordance with Clause IV C below. The right to elect the Discovery Period shall terminate, however, unless written notice of such election together with the additional premium is received by the INSURER within ten (10) days after the end of the POLICY PERIOD. Any premium paid for the Discovery Period is not refundable. (2) The length of the Discovery Period shall be the same amount of time as the length of the POLICY PERIOD, subject to a maximum Discovery Period of one year. (3) The offer by the INSURER of renewal at a premium different from the premiums for the expiring POLICY YEAR shall not constitute an election by the INSURER not to renew this POLICY. (4) The Discovery Period does not reinstate or increase the LIMIT OF LIABILITY of this POLICY. The effective date of this endorsement is June 30, 1994. All other terms and conditions remain unchanged. This endorsement is attached to and made a part of Policy No. PG-7574D of A.C.E. INSURANCE COMPANY, LTD. Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY Date of Issue: January 23, 1995 End. No. 2 By /s/PATRICK D. TANNOCK Authorized Representative ADDITIONAL/RETURN PREMIUM: NIL CLAUSE III B AMENDATORY ENDORSEMENT ----------------------------------- In consideration of the premium charged it is hereby understood and agreed that Clause IIIB (i) and (ii) is amended to read as follows: B. It is a condition of this policy that the Followed Policies shall be maintained in full effect with solvent insurers during the policy period listed in Item 2 of the Declarations except for any reduction or exhaustion of the aggregate limits contained therein by reason of Loss paid thereunder (as provided for in Section II (C) above). Unless the Insurer otherwise agrees in writing, this policy shall: (i) immediately and automatically terminate on the date any of the Followed Policies ceases to be in full effect; and (ii) automatically terminate 30 days following the date an insurer of any Followed Policy becomes subject to a receivership, liquidation, dissolution, rehabilitation or any similar proceeding or is taken over by any regulatory authority unless the Insured Company obtains replacement coverage for such Followed Policy within such 30 day period. In the event this policy automatically terminates pursuant to this Section III(B), the Insurer shall retain the pro-rata proportion of the premium. Payment or tender of any unearned premium by the Insurer shall not be a condition precedent to the effectiveness of such termination, but such payment shall be made as soon as practicable. The effective date of this endorsement is June 30, 1994 All other terms and conditions remain unchanged. This endorsement is attached to and made a part of Policy No. PG-7574D of A.C.E. INSURANCE COMPANY, LTD. Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY Date of Issue: January 23, 1995 End No. 3 By /s/PATRICK D. TANNOCK AUTHORISED REPRESENTATIVE ADDITIONAL/RETURN PREMIUM $ NIL IT IS UNDERSTOOD AND AGREED THAT SECTION II - A & C IS REPLACED BY THE FOLLOWING: A. IT IS EXPRESSLY AGREED THAT LIABILITY FOR ANY COVERED LOSS WITH RESPECT TO CLAIMS FIRST MADE IN EACH POLICY YEAR SHALL ATTACH TO THE INSURER ONLY AFTER THE INSURERS OF THE UNDERLYING POLICIES, THE INSURED COMPANY AND/OR THE INSURED PERSONS SHALL HAVE PAID, IN THE APPLICABLE LEGAL CURRENCY, THE FULL AMOUNT OF THE UNDERLYING LIMITS FOR SUCH POLICY YEAR. THE INSURER SHALL THEN BE LIABLE TO PAY ONLY COVERED LOSS IN EXCESS OF SUCH UNDERLYING LIMIT UP TO ITS AGGREGATE LIMIT OF LIABILITY AS SET FORTH IN ITEM 5 OF THE DECLARATIONS, WHICH SHALL BE THE MAXIMUM AGGREGATE LIABILITY OF THE INSURER UNDER THIS POLICY WITH RESPECT TO ALL CLAIMS FIRST MADE IN EACH POLICY YEAR AGAINST ALL INSURED PERSONS IRRESPECTIVE OF THE TIME OF PAYMENT BY THE INSURER. C. IN THE EVENT AND ONLY IN THE EVENT OF THE REDUCTION OR EXHAUSTION OF THE UNDERLYING LIMITS BY REASON OF THE INSURERS OF THE UNDERLYING POLICY, THE INSURED COMPANY AND/OR THE INSURED PERSONS PAYING, IN THE APPLICABLE LEGAL CURRENCY, LOSS OTHERWISE COVERED HEREUNDER, THIS POLICY SHALL: (i) IN THE EVENT OF REDUCTION, PAY EXCESS OF THE REDUCED UNDERLYING LIMIT, AND (ii) IN THE EVENT OF EXHAUSTION, CONTINUE IN FORCE AS PRIMARY INSURANCE; PROVIDED ALWAYS THAT IN THE LATTER EVENT THIS POLICY SHALL ONLY PAY EXCESS OF THE RETENTION APPLICABLE TO THE PRIMARY INSURANCE AS SET FORTH IN ITEM 2 OF THE DECLARATIONS, WHICH RETENTION SHALL BE APPLIED TO ANY SUBSEQUENT LOSS IN THE SAME MANNER AS SPECIFIED IN SUCH PRIMARY INSURANCE. NOTHING HEREIN CONTAINED SHALL BE HELD TO VARY, ALTER, WAIVE OR EXTEND ANY OF THE TERMS, CONDITIONS, EXCLUSIONS OR LIMITATIONS OF THE ABOVE-MENTIONED POLICY, EXCEPT AS EXPRESSLY STATED HEREIN. The effective date of this endorsement is June 30, 1994 All other terms and conditions remain unchanged. This endorsement is attached to and made a part of Policy No. PG-7574D of A.C.E. INSURANCE COMPANY, LTD. Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY Date of Issue: JANUARY 23, 1995 End No. 4 By /s/PATRICK D. TANNOCK AUTHORISED REPRESENTATIVE ADDITIONAL/RETURN PREMIUM: NIL DIRECTORS AND OFFICERS LIABILITY ENDORSEMENT -------------------------------------------- In consideration of the premium charged it is hereby agreed and acknowledged that coverage afforded by this Policy is only in respect of Directors and Officers Liability and not Company Reimbursement. The effective date of this endorsement is June 30, 1994 All other terms and conditions remain unchanged. This endorsement is attached to and made a part of Policy No. PG-7574D of A.C.E. INSURANCE COMPANY, LTD. Issued to: THE PROCTER & GAMBLE COMPANY/OFFICERS OF OPERATING UNITS OF PROCTER & GAMBLE COMPANY Date of Issue: JANUARY 23, 1995 End No. 5 By /s/PATRICK D. TANNOCK AUTHORISED REPRESENTATIVE EX-99.6 13 Exhibit (99.6) -------------- Fiduciary Responsibility Insurance Policy PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY To be attached to and form part of: THE PROCTER & GAMBLE COMPANY Policy No: 68 FF 100827733 BCA Issued to: THE PROCTER & GAMBLE COMPANY It is agreed that: 1. Section IV OTHER DEFINITIONS (3)(a) is amended by adding the following, "except for civil penalties resulting from Section 502(l) of the Employee Retirement Income Security Act of 1974." 2. This extension of coverage shall be a part of and not in addition to the "Annual Aggregate Limit of Liability" available for settlement or adjudication of such claim. Payment under this endorsement is limited to 20% of the settlement or adjudicated amount and shall not, in the aggregate, exceed 20% of the "Annual Aggregate Limit of Liability." 3. Nothing contained herein shall vary, alter, or extend any of the terms, conditions, and limitations of the Policy except as stated above. This endorsement forms a part of the policy to which attached, effective on the inception date of the policy unless otherwise stated herein. Endorsement No. Policy No. --------------------------------------------------------------------------- Complete Only When This Endorsement Is Not Prepared With The Policy Or Is Not To Be Effective With The Policy. Issued to (Designated Trust or Plan) Effective Date of This endorsement AETNA CASUALTY AND SURETY COMPANY By /s/ROBERT D. LANG Authorized Representative --------------------------------------------------------------------------- SECTION 502(l) ENDORSEMENT For use with Aetna C & S Fiduciary Responsibility Insurance Policy. RENEWAL CERTIFICATE XX The Aetna Casualty and Surety Company FIDUCIARY RESPONSIBILITY Hartford, Connecticut 06156 INSURANCE POLICY F-1191 The Standard Fire Insurance Company Hartford, Connecticut 06156 DESIGNATED TRUST OR PLAN POLICY NUMBER THE PROCTER & GAMBLE COMPANY PROFIT 68 FF 100827733 BCA SHARING TRUST; etal POLICY PERIOD FROM JUNE 30, 1994 TO JUNE 30, 1995 RENEWAL PREMIUM $139,100.00 -------------- PREMIUM PAYABLE CURRENT EACH ANNIVERSARY $139,100.00 $N/A In consideration of the stated renewal premium, the policy is renewed for the Policy Period indicated. The premium for this policy has been paid by the Designated Trust or Plan. The Company has the right of recourse pursuant to Condition (10). Endorsement (F-1280) is attached to eliminate recourse. Premium for elimination of recourse: $N/A (included in stated renewal premium) Payable In Advance Each Installment Endorsements made a part of this policy at renewal (Designated by Endorsement Number) /s/RONALD E. COMPTON Chairman and President Countersigned by: /s/ROBERT D. LANG RENEWAL CERTIFICATE XX The Aetna Casualty and Surety Company FIDUCIARY RESPONSIBILITY Hartford, Connecticut 06156 INSURANCE POLICY F-1191 The Standard Fire Insurance Company Hartford, Connecticut 06156 DESIGNATED TRUST OR PLAN POLICY NUMBER THE PROCTER & GAMBLE COMPANY PROFIT 068 FF 100827733 BCA SHARING TRUST; etal POLICY PERIOD FROM 6/30/95 TO 6/30/96 RENEWAL PREMIUM $145,000.00 -------------- PREMIUM PAYABLE CURRENT EACH ANNIVERSARY $145,000.00 $N/A In consideration of the stated renewal premium, the policy is renewed for the Policy Period indicated. The premium for this policy has been paid by the Designated Trust or Plan. The Company has the right of recourse pursuant to Condition (10). Endorsement (F-1280) is attached to eliminate recourse. Premium for elimination of recourse: $N/A (included in stated renewal premium) Payable In Advance Each Installment Endorsements made a part of this policy at renewal (Designated by Endorsement Number) F-1197 /s/RONALD E. COMPTON Chairman and President Countersigned by: /s/ROBERT D. LANG It is agreed that as of the effective date hereof the policy is amended or cancelled as indicated by X. X CHANGE ENDORSEMENT (Do not use this form to change Policy Effective/Expiry Dates or Policy Number.) 1. Name of Designated Trust or Plan form to 2. Mailing Address 3. X Insurance Representative - Name is hereby change to: H. L. Maxson 4. Add designated Trust or Plan 5. Add Designated Fiduciary Delete Designated Fiduciary 6. Other MIDTERM CANCELLATION NOTICE 7. Cancellation by Insured, effective 8. You are hereby notified that this Company elects to cancel this policy, effective , in accordance with the terms of said policy. This endorsement, issued by one of the below named companies, forms a part of the policy to which attached. Endorsement effective 6/30/95 Premium for elimination Document Premium of recourse (if applicable) Designated Trust or Plan The Procter & Gamble Company In Adv. $ In Adv. $ Profit Sharing Trust, et al 1st Anniv. $ 1st Anniv. $ 2nd Anniv. $ 2nd Anniv. $ Total Document Premium $ Policy No. 068 FF 100827733 BCA Additional Premium Return Premium Endorsement No. THE AETNA CASUALTY AND SURETY COMPANY Countersigned by /s/ROBERT D. LANG THE STANDARD FIRE INSURANCE COMPANY (Authorized Representative) Hartford, Connecticut 06156 Pension and Welfare Fund Fiduciary Responsibility Insurance Declarations 1. Designated Trust or Plan Policy Number The Procter & Gamble Company 68 FF 100827733 BCA Profit Sharing Trust; etal 2. Mailing Address One Procter & Gamble Plaza, Cincinnati, Ohio 45202 3. Policy Period From 6/30/93 to 6/30/94 12:01 a.m. Standard Time at the Mailing Address Stated in Item 2. 4. Annual Aggregate Limit of Liability Aetna Casualty and Surety Company $20,000,000 part of $30,000,000 Celtic Insurance Company $10,000,000 part of $30,000,000 5. Insurance Representative 6. Premium for the Policy Period $139,100 Gerald L. Leighton Premium Payable to The Aetna Casualty and Surety Company 7. Endorsements made a part of the policy (Designated by Endorsement Number) F-1282, F-1274, F-1401, F-1400, Deductible Endorsement, Impairment of Assets Endorsement, Pollution Exclusion Endorsement, Special Endorsement #1 Countersigned by /s/ROBERT D. LANG PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY THIS IS A CLAIMS MADE POLICY IN CONSIDERATION of the payment of the premium stated in the Declarations and subject to all of the terms, conditions, and limitations of this Policy, the Company agrees as follows: I. INSURING AGREEMENT. The Company will pay on behalf of the INSURED all sums which the INSURED shall become legally obligated to pay as DAMAGES on account of any claim made against the INSURED for any WRONGFUL ACT and the Company shall have the right and duty to defend such claim against the INSURED seeking such DAMAGES, even if any of the allegations of the claim are groundless, false or fraudulent, and may make such investigation and settlement of any claim as it deems expedient, but the Company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the Company's liability has been exhausted by payment of judgments or settlements. II. EXCLUSIONS. This insurance does not apply to any claim: (1) Arising out of any dishonest, fraudulent or criminal act, or willful or reckless violation of any statute, but this exclusion does not apply to a claim upon which suit may be brought by reason of any alleged dishonesty on the part of the INSURED, unless: (a) A judgment or other final adjudication thereof adverse to the INSURED shall establish that acts of active deliberate dishonesty committed by the INSURED was material to the cause of action so adjudicated or (b) The claim is a claim by or on behalf of a fidelity insurer against a natural person whose dishonesty has resulted in a loss which has been paid under a fidelity bond. (2) Arising out of libel or slander; (3) Arising out of bodily injury, sickness, disease or death, or loss of, injury to, destruction of, or loss of use of, any tangible property, including loss of currency, coins, bank notes, bullion, travelers checks, register checks, money orders, and all negotiable and non-negotiable instruments or contracts representing money; (4) Arising out of the INSURED'S failure to comply with any law concerning Workers' Compensation, Unemployment Insurance, Social Security or Disability Benefits, or any similar law; (5) Arising out of the failure to procure or maintain adequate insurance or bonds on assets or property of the Trust or Employee Benefit Plan designated in the Declarations; (6) Arising out of liability of others assumed by the INSURED under any contract or agreement, either oral or written, except in accordance with the Agreement and Declaration of Trust; (7) Arising out of the INSURED gaining in fact any personal profit or advantage to which such INSURED was not legally entitled or for the return by the INSURED of any remuneration paid in fact to such INSURED if payment of such remuneration shall be held by the courts to have been in violation of law; (8) For the failure to collect contributions owed to the Trust or Employee Benefit Plan described in the Declarations from employers unless such failure is due to the negligence of the INSURED or for the return of any contributions to an employer if such amounts are or could be chargeable to the Trust or Employee Benefit Plan, but this exclusion shall not apply to the Company's obligation to defend such claim nor pay the costs and expenses thereof. III. DEFINITION OF INSURED. Each of the following is an INSURED to the extent set forth below: (1) The Trust or Employee Benefit Plan designated in the Declarations and any additional Trust or Employee Benefit Plan created during the policy period by the sole sponsor referred to in Item (2) below, or by any interest owned or controlled by said sole sponsor, provided written notice of such is given to the Company within 90 days. (2) An employer who is the sole sponsor of such Trust or Employee Benefit Plan. (3) Any natural person who at any time holds or shall have held the position of: (a) Trustee of such Trust or Employee Benefit Plan. (b) Director, officer or employee of such Trust or Employee Benefit Plan or of such sole sponsor employer. (4) Any other person or organization designated in the Declarations as a Fiduciary. (5) Any other Trust or Employee Benefit Plan of any firm hereafter acquired through consolidation, merger or takeover by the sole sponsor or by any interest owned or controlled by said sole sponsor, provided: (a) Written notice of such acquisition is given to the Company within 90 days of the effective date of such acquisition, and (b) The INSURED pays the Company an additional premium computed pro-rata from the date of such acquisition to the end of the Policy Period, and (c) That specific Application on the Company's form in use at the time of acquisition is made to the Company as soon as practicable after the aforesaid notice is given. The insurance applies separately to each INSURED against whom claim is made or suit is brought except with respect to the application of the limits of liability, and it shall also apply to the estates, heirs and personal representatives of persons INSURED hereunder. IV. OTHER DEFINITIONS. (1) "WRONGFUL ACT" means a breach of fiduciary duty by the INSURED in the discharge of duties as respects the Trust or Employee Benefit Plan designated in the Declarations; the term includes any negligent act, error or omission of the INSURED in the "ADMINISTRATION" of "EMPLOYEE BENEFITS". "ADMINISTRATION" as used herein shall mean: (a) Giving counsel to employees with respect to EMPLOYEE BENEFITS; (b) Interpreting EMPLOYEE BENEFITS; (c) Handling records in connection with EMPLOYEE BENEFITS; (d) Effecting enrollment, termination or cancellation of employees under an EMPLOYEE BENEFITS program. "EMPLOYEE BENEFITS" as used herein shall mean the Trust or Employee Benefit Plan designated in the Declarations, Workers' Compensation Insurance, Unemployment Insurance, Social Security or Disability Benefits. (2) "INSURANCE REPRESENTATIVE" means the person designated in the Declarations as the exclusive agent to act on behalf of the INSUREDS, individually or collectively, in all matters relating to insurance under this policy. (3) "DAMAGES" shall mean sums of money payable as compensation for loss or in discharge of an obligation of an INSURED to make good a shortage in the INSURED Trust or Employee Benefit Plan. The word "DAMAGES" shall not include: (a) Fines, penalties, taxes or punitive or exemplary damage. (b) Benefits due or to become due under the terms of the Trust or Plan, unless and to the extent that recovery for such benefits is based upon a WRONGFUL ACT and is payable as a personal obligation of an INSURED. V. POLICY PERIOD: TERRITORY. This insurance applies only to claims first made during the policy period described in the Declarations within the United States of America, its territories or possessions or Canada; provided the INSURED at the effective date of this insurance had no knowledge of or could not have reasonably foreseen any circumstances which might result in such claim. VI. LIMITS OF LIABILITY. Regardless of the number of persons or organizations bringing claims or suits against the INSURED and regardless of the number of persons or organizations INSURED hereunder, the total limit of the Company's liability to pay DAMAGES because of all claims made against the INSURED during any single policy year shall not exceed the amount shown in the Declarations as "Annual Aggregate Limit of Liability", regardless of time of payment. If the policy period described in the Declarations is for a term of more than one year, said "Annual Aggregate Limit of Liability" shall apply separately to each consecutive annual period. VII. CLAIMS MADE EXTENSION CLAUSE. If, during the policy period hereof, the INSURED shall first become aware of any WRONGFUL ACT which may subsequently give rise to a claim against any INSURED and shall during the policy period hereof give written notice to the Company of such WRONGFUL ACT, then any such claim which is subsequently made against the INSURED arising out of such WRONGFUL ACT shall for the purposes of this policy be deemed to have been first made against the INSURED during the policy period. VIII. SUPPLEMENTARY PAYMENTS. The Company will pay in addition to the limits of liability shown in the Declarations all costs, charges and expenses incurred by the Company in the investigation, settlement, defense and negotiation of any claim coming within the terms of this insurance, but, in the event of any judgment in excess of the amount of the aggregate limit available under this policy, the Company's liability for the costs and expenses incurred by it or with its consent shall be such proportion thereof as the amount of the aggregate limit available under this policy bears to the amount paid to dispose of the claim. In no event shall the Company be obligated to pay any claim or judgment or to defend or continue the defense of any suit after the aggregate limit of the Company's liability has been exhausted by payment of judgments or settlements. The Company will pay in addition to the Limits of Liability shown in the Declarations reasonable expenses incurred by the INSURED at the Company's request. IX. CONSENT TO SETTLE. The Company may, with the written consent of the INSURED, make such settlement or such compromise of any claim or suit as the Company deems expedient, and if the INSURED shall refuse to consent to the settlement of any claim or suit recommended by the Company, based upon a judgment or a bonafide offer of settlement, the INSURED shall thereafter negotiate or defend such claim or suit independently of the Company and on said INSURED'S own behalf, and in such event the DAMAGES and expenses accruing or determined through litigation or otherwise in excess of the amount for which settlement could have been made as so recommended by the Company shall not be recoverable under this policy. X. EXTENSION CLAUSE. It is agreed that at any time prior to termination or cancellation of this policy as an entirety, whether by the INSURED or by the Company, the INSURED may give to the Company notice that it desires to be INSURED for an additional period of twelve (12) months after the effective date of termination or cancellation, at an additional premium of 25% of the premium hereunder, for claims made against the INSURED during the said twelve (12) month period by reason of a WRONGFUL ACT committed or alleged to have been committed prior to the effective date of termination or cancellation and which would be otherwise INSURED by this policy, subject to the following provisions: (a) Such additional period shall be deemed part of the policy period and not an addition thereto; (b) Such additional period of time shall terminate forthwith on the effective date of any other insurance obtained by the INSURED or its successors in business, replacing in whole or in part the insurance afforded by this policy. Where such other policy provides no coverage for loss sustained prior to its effective date, it shall not be deemed to be a replacement of this policy. If the policy period described in the Declarations is for a term of more than one year, the maximum premium for this extension shall be 25% of the equivalent annual premium. XI. CONDITIONS. (1) INSUREDS DUTIES IN THE EVENT OF OCCURRENCE, CLAIM OR SUIT. It is a condition precedent to the application of all insurance afforded herein that: (a) In the event the INSURED shall first become aware of any claim or allegation of a WRONGFUL ACT, or any occurrence which might reasonably give rise to such claim or allegation of a WRONGFUL ACT, written notice containing particulars sufficient to identify the INSURED and any claimant and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured parties and of available witnesses, shall be given by or for the INSURED to the Company or any of its authorized agents as soon as practicable; (b) If claim is made or suit is brought against an INSURED, the INSURED or INSURANCE REPRESENTATIVE shall immediately forward to the Company every demand, notice, summons or other process received; (c) The INSURED shall cooperate with the Company and, upon the Company's request, assist in making settlements, in the conduct of suits and in enforcing any right of contribution or indemnity against any person or organization who may be liable to the INSURED because of an act with respect to which insurance is afforded under this policy; and the INSURED shall attend hearings and trials and assist in securing and giving evidence and obtaining the attendance of witnesses. The INSURED shall not voluntarily assume or admit any liability, nor, except at said INSURED'S own cost, voluntarily make any payment, assume any obligations or incur any expense without the Company's prior written consent. (2) ACTION AGAINST THE COMPANY. No action shall lie against the Company unless, as a condition precedent thereto, there shall have been full compliance with all of the terms of this policy, nor until the amount of the INSURED'S obligation to pay shall have been finally determined either by judgment against the INSURED after actual trial or by written agreement of the INSURED, the claimant and the Company. Any person or organization or the legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by this policy. No person or organization shall have any right under this policy to join the Company as a party to any action against the INSURED to determine the INSURED'S liability nor shall the Company be impleaded by the INSURED or said INSURED'S legal representative. Bankruptcy or insolvency of the INSURED or of the INSURED'S estate shall not relieve the Company of any of its obligations hereunder. (3) OTHER INSURANCE. This insurance shall apply only as excess insurance over any other valid and collectible insurance available to the INSURED. (4) SUBROGATION. In the event of any payment under this policy, the Company shall be subrogated to all the INSURED'S rights of recovery therefor against any person or organization and the INSURED shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. The INSURED shall do nothing after loss to prejudice such rights. (5) CHANGES. Notice to any agent or knowledge possessed by any agent or by any other person shall not effect a waiver or a change in any part of this policy or estop the Company from asserting any right under the terms of this policy, nor shall the terms of this policy be waived or changed, except by endorsement issued to form a part of this policy. (6) ASSIGNMENT. Assignment of interest under this policy shall not bind the Company until its consent is endorsed hereon; if, however, the INSURED shall become incompetent or die, such insurance as is afforded by this policy shall apply to the INSURED'S legal representative as an INSURED, but only while acting within the scope of said INSURED'S duties as such. (7) CANCELLATION. This policy may be cancelled on behalf of the INSUREDS at any time by written notice to the Company. This policy may also be cancelled on behalf of the Company by mailing to the INSURANCE REPRESENTATIVE at the address of the Trust or Plan shown in the Declarations, written notice stating when, not less than thirty (30) days thereafter, the cancellation shall become effective. The mailing of such notice shall be sufficient proof of notice, and this policy shall terminate at the date and hour specified in such notice. If this policy shall be cancelled by the INSUREDS the Company shall retain the customary short rate proportion of the premium hereon. If this policy shall be cancelled by or on behalf of the Company, the Company shall retain the pro-rata proportion of the premium hereon. Payment or tender of any unearned premium by the Company shall not be a condition precedent to the effectiveness of cancellation, but such payment shall be made as soon as practicable. (8) DECLARATIONS. By acceptance of this policy, each INSURED agrees that the statements in the Application attached to this policy are said INSURED'S agreements and representations, that this policy is issued in reliance upon the truth of such representations and that this policy embodies all agreements existing between said INSURED and the Company or any of its agents relating to this insurance. (9) AUTHORIZATION. By acceptance of this policy, the INSURANCE REPRESENTATIVE agrees to act on behalf of all INSUREDS with respect to the payment of premiums and the receiving of any return premiums that may become due under this policy, and the receiving of all notices of cancellation, non-renewal or change of coverages and the INSUREDS agree that they have, individually and collectively, delegated this authority exclusively to the INSURANCE REPRESENTATIVE. Nothing herein shall relieve each INSURED from giving any notice to the Company that is required under Condition (1) of the policy. (10) RECOURSE. In the event that an INSURED breaches any fiduciary obligation imposed by the Employee Retirement Income Security Act of 1974, as it may be amended from time to time, it is agreed that the Company has the right of recourse against any such INSURED for any amount paid by the Company on account of such a breach of fiduciary obligation, but the Company shall have no such right of recourse if this policy has been purchased by an Employer or by an Employee organization. (11) LIBERALIZATION CLAUSE. If during the period that insurance is in force under this policy, or within 45 days prior to the inception date thereof, on behalf of the Company there be adopted, or filed with and approved or accepted by the insurance supervisory authorities, all in conformity with law, any changes in the form attached to this policy by which this form of insurance could be extended or broadened without increased premium charge by endorsement or substitution of form, then such extended or broadened insurance shall inure to the benefit of the INSURED hereunder as though such endorsement or substitution of form had been made. IN WITNESS WHEREOF, the Company has caused this policy to be signed by its President and a Secretary at Hartford, Connecticut, and countersigned on the Declarations page by a duly authorized agent of the Company. /s/LOUISE L. MCCORMICK /s/RONALD E. COMPTON Secretary President PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY OMNIBUS NAME OF DESIGNATED TRUST OR PLAN ENDORSEMENT (To be attached to and form part of Pension and Welfare Fund Fiduciary Responsibility Insurance Policy) It is agreed that: 1. From and after the time this endorsement becomes effective, the Name of Designated Trust or Plan referred to in Item 1. of the Declarations is: Any Employee Benefit Plan sponsored by the employer listed in Item 2., below, or jointly-sponsored by said employer and a labor organization, for the exclusive benefit of the employees of said employer; subject, however, to the notice requirement set forth in Section III (5) DEFINITION OF INSURED. 2. Name of employer: The Procter & Gamble Company This endorsement, issued by one of the below named companies, forms a part of the policy to which attached, effective on the inception date of the policy unless otherwise stated herein. (The information below is required only when this endorsement is issued subsequent to preparation of the policy.) Endorsement effective 6-30-93 Policy No. 68 FF 100827733 BCA Endorsement No. Name of Designated Trust or Plan The Procter & Gamble Company Profit Sharing Trust; etal Countersigned by /s/ROBERT D. LANG (Authorized Representative) The Aetna Casualty and Surety Company The Standard Fire Insurance Company Hartford, Connecticut 06156 PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY CONTINUITY OF COVERAGE ENDORSEMENT It is agreed that the policy is amended as follows: 1. By deleting Section V. POLICY PERIOD: TERRITORY. and substituting in lieu thereof the following: V. POLICY PERIOD: TERRITORY. This insurance applies only to claims first made during the policy period described in the Declarations within the United States of America, its territories or possessions or Canada; provided the INSURED at the effective date of this insurance, or at the time the INSURED first purchased PRIOR SIMILAR COVERAGE, had no knowledge of or could not have reasonably foreseen any circumstances which might result in such claim; but this insurance shall not apply to claims arising out of any WRONGFUL ACT of which the INSURED became aware while such PRIOR SIMILAR COVERAGE was in effect and which was reported to the company which provided such PRIOR SIMILAR COVERAGE. 2. By adding to Section IV. OTHER DEFINITIONS. the following new definition: (4) "PRIOR SIMILAR COVERAGE" shall mean insurance which provides in whole or in part the insurance afforded by this policy which the INSURED has maintained on an uninterrupted basis until the effective date of this policy. This endorsement forms a part of the policy to which attached, effective on the inception date of the policy unless otherwise stated herein. (The information below is required only when this endorsement is issued subsequent to preparation of the policy.) Endorsement effective 6-30-93 Policy No. 66 FF 100827733 BCA Endorsement No. Name of Designated Trust or Plan The Procter & Gamble Company Profit Sharing Trust; etal The Aetna Casualty and Surety Company Hartford, Connecticut 06156 Countersigned by /s/ROBERT D. LANG (Authorized Representative) PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY ENDORSEMENT FR-1 It is agreed that the policy is amended as follows: 1. By deleting paragraph (1) of Section II. EXCLUSIONS and substituting the following therefor: (1) Arising out of any dishonest, fraudulent or criminal act, or willful violation of any statute, but this exclusion does not apply to a claim upon which suit may be brought by reason of any alleged dishonesty on the part of the INSURED, unless: 2. By deleting Section X. EXTENSION CLAUSE in its entirety and substituting the following therefor: X. EXTENSION CLAUSE. It is agreed that if the Company terminates or refuses to renew this policy, the INSURED may give to the Company notice that it desires to be INSURED for an additional period of twelve (12) months after the effective date of termination or nonrenewal, provided that written notice of its desire to be INSURED for said additional period is given to the Company prior to the effective date of termination or nonrenewal of the policy by the Company or within 10 days following the effective date of termination or nonrenewal. If the INSURED terminates this policy or declines to accept renewal, the INSURED may give to the Company notice that it desires to be INSURED for an additional period of twelve (12) months after the effective date of termination or nonrenewal, provided that written notice of its desire to be INSURED for said additional period is given to the Company prior to the effective date of termination or nonrenewal. The Company, at its sole option, may grant further extension periods beyond the twelve (12) months provided for herein. The insurance afforded during any extension period or periods shall apply only to claims made against the INSURED during the said extension period or periods by reason of a WRONGFUL ACT committed or alleged to have been committed prior to the effective date of termination or nonrenewal and which would be otherwise INSURED by this policy, subject to the following provisions: (a) Such additional period shall be deemed part of the policy period and not an addition thereto; (b) Such additional period of time shall terminate forthwith on the effective date of any other insurance obtained by the INSURED or its successors in business, replacing in whole or in part the insurance afforded by this policy. Where such other policy provides no coverage for loss sustained prior to its effective date, it shall not be deemed to be a replacement of this policy. The INSURED shall pay to the Company an additional premium of 25% of the equivalent annual premium hereunder for each 12 month period of extension. 3. By deleting subsection (1)(a) of Section XI. CONDITIONS and substituting the following therefor: (a) In the event the INSURED shall first become aware of any claim or allegation of a WRONGFUL ACT, written notice of such claim or allegation shall be given by or for the INSURED to the Company or any of its authorized agents as soon as practicable and the INSURED shall give the Company such information concerning such claim or allegation as the Company shall reasonably require. This endorsement forms a part of the policy to which attached, effective on the inception date of the policy unless otherwise stated herein. (The information below is required only when this endorsement is issued subsequent to preparation of the policy.) Endorsement effective 6-30-93 Policy No. 68 FF 100827733 BCA Name of Designated Trust or Plan The Procter & Gamble Company Profit Sharing Trust; etal Countersigned by /s/ROBERT D. LANG (Authorized Representative) PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY ENDORSEMENT FR-2 It is agreed that the policy is amended as follows: Section I. INSURING AGREEMENT is deleted in its entirety and the following is substituted therefor: I. INSURING AGREEMENT. The Company will pay on behalf of the INSURED all sums which the INSURED shall become legally obligated to pay as DAMAGES on account of any claim made against the INSURED for any WRONGFUL ACT committed or alleged to have been committed by the INSURED or by any natural person for whose WRONGFUL ACT the INSURED is legally liable. The Company shall have the right and duty to defend the INSURED in any claim seeking pecuniary or nonpecuniary relief for a WRONGFUL ACT even if the allegations of the claim are groundless, false or fraudulent, and may make such investigation and settlement of any claim as it deems expedient, or may, at its sole option, give its written consent to the defense by the INSURED of such claim, but the Company shall not be obligated to pay any claim or judgment or to defend any suit, nor pay for the defense of any suit being conducted by the INSURED with the Company's written consent, after the applicable limit of the Company's liability has been exhausted by payment of judgments or settlements. This endorsement forms a part of the policy to which attached, effective on the inception date of the policy unless otherwise stated herein. (The information below is required only when this endorsement is issued subsequent to preparation of the policy.) Endorsement effective 6-30-93 Policy No. 68 FF 100827733 BCA Name of Designated Trust or Plan The Procter & Gamble Company Profit Sharing Trust; etal Countersigned by /s/ROBERT D. LANG (Authorized Representative) PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY To be attached to and form part of Policy No. 68 FF 100827733 BCA issued to The Procter & Gamble Company Profit Sharing Trust; et al It is agreed that: The attached policy is amended by adding an additional section thereto as follows: "XII DEDUCTIBLE AMOUNT **Twenty Five Thousand and 00/100------ ($25,000.00) (hereinafter referred to as Deductible Amount) shall be deducted from the amount of each claim covered hereunder, including all expense incurred, and the Company shall be liable only in excess of such Deductible Amount. Claims based on or arising out of the same Wrongful Act or interrelated Wrongful Acts of one or more of the INSUREDS shall be considered a single claim and only one Deductible Amount shall be applied to each single claim. Subject to Section IX, CONSENT TO SETTLE, of the attached policy, the Company may pay any part or all of the Deductible Amount to effect settlement of any claim or suit and upon notification of the action taken, the INSURED shall promptly reimburse the Company for such part of the Deductible Amount as has been paid by the Company. **This Endorsement has been amended as follows: The Deductible is to apply to defense costs only. THE AETNA CASUALTY AND SURETY COMPANY By: /s/ROBERT D. LANG Authorized Representative Accepted by: _____________________________ Insurance Representative (Excess over an underlying amount) ENDORSEMENT To be attached to and form part of Policy No. 68 FF 100827733 BCA issued to The Procter & Gamble Company Profit Sharing Trust; etal It is agreed that: 1. Section II of the attached policy, EXCLUSIONS, is amended by adding the following exclusion: (9) Arising out of plan terminations or restructures alleging impairment of assets, or alleging wrongful distribution of plan assets. This endorsement forms a part of the policy to which attached, effective on the inception date of the policy unless otherwise stated herein. (The information below is required only when this endorsement is issued subsequent to preparation of the policy.) Endorsement effective Policy No. Name of DESIGNATED TRUST OR PLAN Countersigned by /s/ROBERT D. LANG (Authorized Representative) Accepted by: _______________________________ Insurance Representative TO EXCLUDE LOSS ALLEGING IMPAIRMENT OR WRONGFUL DISTRIBUTION OF ASSETS ENDORSEMENT To be attached to and form part of Policy No. 68 FF 100827733 BCA issued to The Procter & Gamble Company Profit Sharing Trust; etal It is agreed that: 1. Section II of the attached policy, EXCLUSIONS, is amended by adding the following exclusion: (10) Based on, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving, actual or alleged seepage, pollution or contamination of any kind. This endorsement forms a part of the policy to which attached, effective on the inception date of the policy unless otherwise stated herein. (The information below is required only when this endorsement is issued subsequent to preparation of the policy.) Endorsement effective Policy No. Name of DESIGNATED TRUST OR PLAN Countersigned by /s/ROBERT D. LANG (Authorized Representative) Accepted by: _______________________________ Insurance Representative POLLUTION EXCLUSION ENDORSEMENT SPECIAL ENDORSEMENT #1 To be attached to and form part of Policy 68 FF 100827733 BCA issued by The Aetna Casualty and Surety Company (hereinafter called Controlling Company) in favor of The Procter & Gamble Profit Sharing Trust; et al. It is agreed that: 1. The term "Underwriter" as used in the attached policy shall be construed to mean, unless otherwise specified in this rider, all the Companies executing the attached policy. 2. Each of said Companies shall be liable for such proportion of any loss under the attached policy as the amount underwritten by such Company as specified in the Schedule forming a part hereof, bears to the Annual Aggregate Limit of Liability of the attached policy. 3. Each of said Companies shall be liable for any payments made pursuant to Section VIII, Supplementary Payments in proportion for which each Companies' respective Limit of Liability bears to the Annual Aggregate Limit of the policy. 4. In the absence of a request from any of said Companies to pay premiums directly to it, premiums for the attached policy may be paid to the Controlling Company for the account of all of said Companies. 5. In the absence of a request from any of said Companies that notice of claim and proof of loss be given to or filed directly with it, the giving of such notice to and the filing of such proof with, the Controlling Company shall be deemed to be in compliance with the conditions of the attached policy for the giving of notice of loss and the filing of proof of loss, if given and filed in accordance with said conditions. 6. The Controlling Company may give notice in accordance with the terms of the attached policy, terminating or canceling the attached policy, and any notice so given shall terminate or cancel the liability of all of said Companies. 7. Any Company other than the Controlling Company may give notice in accordance with the terms of the attached policy, terminating or canceling the entire liability of such other Company under the attached policy. 8. In the absence of a request from any of said Companies that notice of termination or cancellation by the INSURED of the attached policy in its entirety be given to or filed directly with it, the giving of such notice in accordance with the terms of the attached policy to the Controlling Company shall terminate or cancel the liability of all of said Companies as an entirety. The giving of notice for termination or cancellation in accordance with the terms of the attached bond to any Companies shall terminate or cancel the liability of the Controlling Company. 9. In the event of the termination or cancellation of the attached policy as an entirety, no Company shall be liable to the INSURED for a greater proportion of any return premium due the INSURED than the amount underwritten by such Company bears to the Annual Aggregate Limit of Liability of the attached policy. 10. In the event of the termination or cancellation of the attached policy as to any Company, such Company alone shall be liable to the INSURED for any return premium due the INSURED on account of such termination or cancellation. The termination or cancellation of the attached policy as to any Company other than the Controlling Company shall not terminate, cancel or otherwise affect the liability of the other Companies under the attached policy. 11. This rider shall become effective as of 12:01 a.m. on 6/30/93 standard time. Underwritten for the sum of $20,000,000 except as follows: Controlling Company By: The Aetna Casualty and Surety Company Attest: /s/DANIEL A. WALLA Underwritten for the sum of $10,000,000 except as follows: By: Celtic Insurance Company Attest: Accepted: INSURED By: The Procter & Gamble Company; etal