EXHIBIT (10-11)
Summary of the Company’s
Business Growth Program and related correspondence and terms and
conditions.
BUSINESS GROWTH PROGRAM
SUMMARY
The Business Growth Program
(“BGP”) is a part of The Procter & Gamble
Company’s (the “Company”) long-term incentive
compensation and is designed to provide additional focus on key
Company measures for top executives with senior management
responsibility for total Company results. BGP Awards are made
pursuant to authority delegated to the Compensation &
Leadership Development Committee (the “C&LD
Committee”) by the Board of Directors for determining
compensation for the Company’s principal officers and for
making awards under the Procter & Gamble 2001 Stock and
Incentive Compensation Plan (the “2001 Plan”) and
successor stock plans.
The Chairman of the Board and Chief
Executive Officer and those principal officers at Band 7 or above
recommended by management and approved by the C&LD Committee
are eligible to participate.
BGP Three-Year Awards are based on a
three-year performance period starting on July 1 and ending on
June 30 three years later (“Performance Period”).
The total BGP Three-Year Award will be made in up to three payments
with the possibility of Interim Payments at the conclusion of the
first and/or second years of any Performance Period and a Final
Payment at the end of the Performance Period. The amount of each
BGP Three-Year Award (including any Interim or Final Payments) is
based on the Company’s performance in each of the following
categories (each a “Performance Category”):
Earnings per share (EPS)
growth
Organic sales growth
Before-tax operating
profit
Free cash flow efficiency
The C&LD Committee compares the
Company’s results in each Performance Category for the first
year, for cumulative results of the first two years and for
cumulative results of the entire Performance Period to certain
pre-established targets set by the C&LD Committee based on the
fiscal year preceding the Performance Period (the
“Performance Goals”). Based on these comparisons, the
C&LD Committee creates a performance factor (a
“Performance Factor”) for each Performance Category
between 0% to 200% (e.g., an “EPS Factor,” “Sales
Factor,” “Profit Factor” and “Cash Flow
Factor,” respectively).
In all cases, the C&LD Committee
retains discretion to determine whether certain of the Performance
Categories should be included or excluded from BGP payment
calculations. The C&LD Committee also has discretion to change
the duration of the Performance Period, as appropriate, and may
reduce any payment if it determines that such payout is
inconsistent with long-term shareholders’
interests.
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BGP Three-Year
Awards are calculated so
that each Performance Category has equal weighting and pays out
individually using the formula set forth below.
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BGP Target Awards
are based on a multiple of each
participant’s base salary at the beginning of any Performance
Period. For the Chairman of the Board and Chief Executive Officer,
the Target Award is equal to twice base salary multiplied by three.
For all others, the Target Award is annual base salary multiplied
by three. Individuals who become eligible for BGP during a
Performance Period will participate for one, two or three years
depending on the timing of their eligibility. Their BGP Target
Award will be determined as described above using base salary when
participation begins, and multiplied by the number of years of
participation in that Performance Period. Each BGP Three-Year Award
is calculated in four separate segments as follows:
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1 / 4
of BGP Target Award
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×
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EPS
Factor
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=
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EPS
Award
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1 / 4
of BGP Target Award
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×
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Sales
Factor
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=
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Sales
Award
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1 / 4
of BGP Target Award
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×
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Profit
Factor
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=
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Profit
Award
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1 / 4
of BGP Target Award
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×
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Cash Flow Factor
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=
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Cash
Flow Award
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Interim Payments
may be made at the end of the first
year of the Performance Period and/or at the end of the first two
years of the Performance Period combined, depending on the
Company’s performance results during those periods. Interim
Payments are calculated using the same Performance Categories
described above, however the Performance Factor will be zero if
performance is below target and 100% if performance is at or above
target. No Interim Payments will be made for any Performance
Category that does not meet or exceed the Performance Goal for that
Performance Category during the applicable interim
period.
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Interim Payment 1 for the first
year and Interim Payment 2 for cumulative results of years 1 and 2
will be calculated as :
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1 / 4
of BGP Target Award
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×
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EPS Factor (0 or 100%)
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=
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EPS
Award
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1 / 4
of BGP Target Award
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×
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Sales Factor (0
or 100%)
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=
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+
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Sales
Award
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1 / 4
of BGP Target Award
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×
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Profit Factor
(0 or 100%)
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=
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+
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Profit
Award
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1 / 4
of BGP Target Award
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×
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Cash Flow
Factor (0 or 100%)
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=
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+
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Cash Flow
Award
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Total
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÷
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3
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Interim
Payment
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Final BGP
Payment for the
cumulative results of the Performance Period
:
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1 / 4
of BGP Target Award
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×
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EPS
Factor
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=
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EPS
Award
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1 / 4
of BGP Target Award
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×
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Sales
Factor
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=
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+
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Sales
Award
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1 / 4
of BGP Target Award
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×
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Profit
Factor
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=
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+
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Profit
Award
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1 / 4
of BGP Target Award
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×
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Cash Flow Factor
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=
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+
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Cash Flow
Award
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Prorated if
separated prior to the end of the Performance Period (see Section V
below)
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g
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Total
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value of
Interim Payment 1 on its payment date
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-
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value of
Interim Payment 2 on its payment date
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Final
Payment
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If the calculated BGP Three-Year
Award is less than the sum of the Interim Payments, each
participant will be required to return the overpayment to the
Company.
