2001 Stock and Incentive Compensation Plan - Procter & Gamble Co.


The Procter & Gamble 2001 Stock and Incentive Compensation Plan


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THE PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION PLAN


ARTICLE A -- PURPOSE.

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

ARTICLE B -- ADMINISTRATION.

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

2. Subject to the express provisions of the Plan, the Committee shall
have authority: to grant nonstatutory and incentive stock options; to 
grant stock appreciation rights either freestanding or in tandem with 
simultaneously granted stock options; to grant Performance Awards (as 
defined in Article J); to award a portion of a Participant's 
remuneration in shares of Common Stock subject to such conditions or 
restrictions, if any, as the Committee may determine; to determine all 
the terms and provisions of the respective stock option, stock 
appreciation right, and stock award agreements including setting
the dates when each stock option or stock appreciation right or part 
thereof may be exercised and determining the conditions and 
restrictions, if any, of any shares of Common Stock acquired through 
the exercise of any stock option; to provide for special terms for 
any stock options, stock appreciation rights or stock awards granted 
to Participants who are foreign nationals or who are employed by the 
Company or any of its subsidiaries outside of the United States
of America in order to fairly accommodate for differences in local 
law, tax policy or custom and to approve such supplements to or 
amendments, restatements or alternative versions of the Plan as the 
Committee may consider necessary or appropriate for such purposes 
(without affecting the terms of the Plan for any other purpose); and 
to make all other determinations it deems necessary or advisable for 
administering the Plan. In addition, at the time of grant the
Committee shall have the further authority to:

      (a)   waive the provisions of Article F, Paragraph 1(a);

      (b)   waive the provisions of Article F, Paragraph 1(b);

      (c)   waive the provisions of Article G, Paragraph 4(a), 4(b) and 4(c);
            and



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      (d)   impose conditions in lieu of those set forth in Article G,
            Paragraphs 4 through 7, for nonstatutory stock options, stock
            appreciation rights, stock awards, or Performance Awards which do
            not increase or extend the rights of the Participant.

ARTICLE C -- PARTICIPATION.

       The Committee shall select as Participants those employees of the Company
and its subsidiaries who, in the opinion of the Committee, have demonstrated a
capacity for contributing in a substantial manner to the success of such
companies.

ARTICLE D -- LIMITATION ON NUMBER OF SHARES AVAILABLE UNDER THE PLAN.

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

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

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

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

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

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

ARTICLE E -- SHARES SUBJECT TO USE UNDER THE PLAN.

         1. The shares to be delivered by the Company upon exercise of stock
options or stock appreciation rights shall be determined by the Board and may
consist, in whole or in part, of authorized but unissued shares or treasury
shares. In the case of redemption of stock appreciation rights by one of the
Company's subsidiaries, such shares shall be shares acquired by that subsidiary.
Notwithstanding any terms or conditions contained herein, the shares to be
delivered by the Company upon exercise of stock options or stock appreciation
rights by a Participant located in Italy shall be authorized but unissued
shares.

         2. For purposes of the Plan, restricted or unrestricted stock awarded
under the terms of the Plan shall be authorized but unissued shares, treasury
shares, or shares acquired in the open market by the Company or a subsidiary, as
determined by the Board.

ARTICLE F -- STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.

         1. In addition to such other conditions as may be established by the
Committee, in consideration of the granting of stock options or stock
appreciation rights under the terms of the Plan, each Participant agrees as
follows:




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      (a)   The right to exercise any stock option or stock appreciation right
            shall be conditional upon certification by the Participant at time
            of exercise that the Participant intends to remain in the employ of
            the Company or one of its subsidiaries for at least one (1) year
            following the date of the exercise of the stock option or stock
            appreciation right (provided that termination of employment due to
            Retirement or Special Separation shall not constitute a breach of
            such certification), and,

      (b)   In order to better protect the goodwill of the Company and its
            subsidiaries and to prevent the disclosure of the Company's or its
            subsidiaries' trade secrets and confidential information and thereby
            help insure the long-term success of the business, the Participant,
            without prior written consent of the Company, will not engage in any
            activity or provide any services, whether as a director, manager,
            supervisor, employee, adviser, consultant or otherwise, for a period
            of three (3) years following the date of the Participant's
            termination of employment with the Company (except for terminations
            of employment resulting from Retirement or Special Separation), in
            connection with the manufacture, development, advertising,
            promotion, or sale of any product which is the same as or similar to
            or competitive with any products of the Company or its subsidiaries
            (including both existing products as well as products known to the
            Participant, as a consequence of the Participant's employment with
            the Company or one of its subsidiaries, to be in development):

            (1)   with respect to which the Participant's work has been directly
                  concerned at any time during the two (2) years preceding
                  termination of employment with the Company or one of its
                  subsidiaries or

            (2)   with respect to which during that period of time the
                  Participant, as a consequence of the Participant's job
                  performance and duties, acquired knowledge of trade secrets or
                  other confidential information of the Company or its
                  subsidiaries.

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

      (c)   The provisions of this Article are not in lieu of, but are in
            addition to the continuing obligation of the Participant (which
            Participant hereby acknowledges) to not use or disclose the
            Company's or its subsidiaries' trade secrets and confidential
            information known to the Participant until any particular trade
            secret or confidential information become generally known (through
            no fault of the Participant), whereupon the restriction on use and
            disclosure shall cease as to that item. Information regarding
            products in development, in test marketing or being marketed or
            promoted in a discrete geographic region, which information the
            Company or one of its subsidiaries is considering for broader use,
            shall not be deemed generally known until such broader use is
            actually commercially implemented. As used in this Article,
            "generally known" means known throughout the domestic U. S. industry
            or, in the case of Participants who have job responsibilities
            outside of the United States, the appropriate foreign country or
            countries' industry.

      (d)   By acceptance of any offered stock option or stock appreciation
            rights granted under the terms of the Plan, the Participant
            acknowledges that if the Participant were, without authority, to use
            or disclose the Company's or any of its subsidiaries' trade secrets
            or confidential information or threaten to do so, the Company or one
            of its subsidiaries would be entitled to injunctive and other
            appropriate relief to prevent the Participant from doing so. The
            Participant acknowledges that the harm caused to the Company by the
            breach or anticipated breach of this Article is by its nature
            irreparable because, among other things, it 



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            is not readily susceptible of proof as to the monetary harm that
            would ensue. The Participant consents that any interim or final
            equitable relief entered by a court of competent jurisdiction shall,
            at the request of the Company or one of its subsidiaries, be entered
            on consent and enforced by any court having jurisdiction over the
            Participant, without prejudice to any rights either party may have
            to appeal from the proceedings which resulted in any grant of such
            relief.

      (e)   If any of the provisions contained in this Article shall for any
            reason, whether by application of existing law or law which may
            develop after the Participant's acceptance of an offer of the
            granting of stock appreciation rights or stock options, be
            determined by a court of competent jurisdiction to be overly broad
            as to scope of activity, duration, or territory, the Participant
            agrees to join the Company or any of its subsidiaries in requesting
            such court to construe such provision by limiting or reducing it so
            as to be enforceable to the extent compatible with then applicable
            law. If any one or more of the terms, provisions, covenants, or
            restrictions of this Article shall be determined by a court of
            competent jurisdiction to be invalid, void or unenforceable, then
            the remainder of the terms, provisions, covenants, and restrictions
            of this Article shall remain in full force and effect and shall in
            no way be affected, impaired, or invalidated.

         2. The fact that a Participant has been granted a stock option or a
stock appreciation right under the Plan shall not limit the right of the
employer to terminate the Participant's employment at any time. The Committee is
authorized to suspend or terminate any outstanding stock option or stock
appreciation right for actions taken by a Participant prior to termination of
employment if the Committee determines the Participant has acted significantly
contrary to the best interests of the Company or its subsidiaries.

         3. The maximum number of shares with respect to which stock options or
stock appreciation rights may be granted to any Participant in any calendar year
shall not exceed 1,000,000 shares.

         4. The aggregate fair market value (determined at the time when the
incentive stock option is exercisable for the first time by a Participant during
any calendar year) of the shares for which any Participant may be granted
incentive stock options under the Plan and all other stock option plans of the
Company and its subsidiaries in any calendar year shall not exceed $100,000 (or
such other amount as reflected in the limits imposed by Section 422(d) of the
Internal Revenue Code of 1986, as it may be amended from time to time).

         5. If the Committee grants incentive stock options, all such stock
options shall contain such provisions as permit them to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as may be amended from time to time.

         6. With respect to stock options granted in tandem with stock
appreciation rights, the exercise of either such stock options or such stock
appreciation rights will result in the simultaneous cancellation of the same
number of tandem stock appreciation rights or stock options, as the case may be.

         7. The exercise price for all stock options and stock appreciation
rights shall be established by the Committee at the time of their grant and
shall be not less than one hundred percent (100%) of the fair market value of
the Common Stock on the date of grant.

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

         9. No stock option or stock appreciation right shall be cancelled and
replaced with awards having a lower exercise price without the prior approval of
the shareholders of the Company. This 



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Article F, Paragraph 9 is intended to prohibit the repricing of "underwater"
stock options and stock appreciation rights and shall not be construed to
prohibit the adjustments permitted under Article J of the Plan.

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

ARTICLE G -- EXERCISE OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.

         1. All stock options and stock appreciation rights granted hereunder
shall have a maximum life of no more than ten (10) years from the date of grant.

         2. No stock options or stock appreciation rights shall be exercisable
within one (1) year from their date of grant, except in the case of the death of
the Participant.

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

         4. In the event that a Participant ceases to be an employee of the
Company or any of its subsidiaries while holding an unexercised stock option or
stock appreciation right:

         (a)      Any unexercisable portions thereof are then void, except in
                  the case of: (1) death of the Participant; (2) Retirement or
                  Special Separation that occurs more than six months from the
                  date the options were granted; or (3) any option as to which
                  the Committee has waived, at the time of grant, the provisions
                  of this Article G, Paragraph 4(a).

         (b)      Any exercisable portions thereof are then void, except in the
                  case of: (1) death of the Participant; (2) Retirement or
                  Special Separation; or (3) any option as to which the
                  Committee has waived, at the time of grant, the provisions of
                  this Article G, Paragraph 4(b).

         (c)      In the case of Special Separation, any stock option or stock
                  appreciation right must be exercised within the time specified
                  in the original grant or five (5) years from the date of
                  Special Separation, whichever is shorter.

         5. In the case of the death of a Participant, the persons to whom the
stock options or stock appreciation rights have been transferred by will or the
laws of descent and distribution shall have the privilege of exercising
remaining stock options, stock appreciation rights or parts thereof, whether or
not exercisable on the date of death of such Participant, at any time prior to
the expiration date of the stock options or stock appreciation rights.

         6. Stock options and stock appreciation rights are not transferable
other than by will or by the laws of descent and distribution. For the purpose
of exercising stock options or stock appreciation rights after the death of the
Participant, the duly appointed executors and administrators of the estate of
the deceased Participant shall have the same rights with respect to the stock
options and stock appreciation rights as legatees or distributees would have
after distribution to them from the Participant's estate. Notwithstanding the
foregoing, the Committee may authorize the transfer of stock options and stock
appreciation rights upon such terms and conditions as the Committee may require.
Such transfer shall become effective only upon the Committee's complete
satisfaction that the proposed transferee has strictly complied with such terms
and conditions, and both the original Participant and the transferee shall be
subject to the same terms and conditions hereunder as the original Participant.




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         7. Upon the exercise of stock appreciation rights, the Participant
shall be entitled to receive a redemption differential for each such stock
appreciation right which shall be the difference between the then fair market
value of one share of Common Stock and the exercise price of one stock
appreciation right then being exercised. In the case of the redemption of stock
appreciation rights by a subsidiary of the Company not located in the United
States, the redemption differential shall be calculated in United States dollars
and converted to the appropriate local currency on the exercise date. As
determined by the Committee, the redemption differential may be paid in cash,
Common Stock to be valued at its fair market value on the date of exercise, any
other mode of payment deemed appropriate by the Committee or any combination
thereof.

         8. Time spent on leave of absence shall be considered as employment for
the purposes of the Plan. Leave of absence means any period of time away from
work granted to any employee by his or her employer because of illness, injury,
or other reasons satisfactory to the employer.

         9. The Company reserves the right from time to time to suspend the
exercise of any stock option or stock appreciation right where such suspension
is deemed by the Company as necessary or appropriate for corporate purposes. No
such suspension shall extend the life of the stock option or stock appreciation
right beyond its expiration date, and in no event will there be a suspension in
the five (5) calendar days immediately preceding the expiration date.

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

ARTICLE H -- PAYMENT FOR STOCK OPTIONS AND TAX WITHHOLDING.

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

ARTICLE I -- GRANT OF UNRESTRICTED OR RESTRICTED STOCK.

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

ARTICLE J -- PERFORMANCE RELATED AWARDS.





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

         2. Notwithstanding the foregoing, any Performance Awards granted to the
Chief Executive and the Company's other four highest paid executive officers (as
reported in the Company's proxy statement pursuant to Regulation S-K, Item
402(a)(3)) under Article J, Paragraph 1 shall comply with all of the following
requirements:

         (a) Each grant shall specify the specific performance objectives (the
"Performance Objectives") which, if achieved, will result in payment or early
payment of the Performance Award. The Performance Objectives may be described in
terms of Company-wide objectives that are related to the individual Participant
or objectives that are related to a subsidiary, division, department, region,
function or business unit of the Company in which the Participant is employed,
and may consist of one or more or any combination of the following criteria:
stock price, market share, sales revenue, cash flow, earnings per share, return
on equity, total shareholder return, gross margin, and/or costs. The Performance
Objectives may be made relative to the performance of other corporations. The
Committee, in its discretion, may change or modify these criteria, however, at
all times the criterion must be valid performance criterion for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The Committee may not change the criteria or Performance Objectives for any
Performance Period that has already been approved by the Committee. The
Committee may cancel a Performance Period or replace a Performance Period with a
new Performance Period, provided that any such cancellation or replacement shall
not cause the Performance Award to fail to meet the requirements of Section
162(m) of the Code.

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

         (c) The maximum Performance Award that may be granted to any
Participant for any one-year Performance Period shall not exceed $20,000,000 or
400,000 shares of Common Stock (the "Annual Maximum"). The maximum Performance
Award that may be granted to any Participant for a Performance Period greater
than one year shall not exceed the Annual Maximum multiplied by the number of
full years in the Performance Period.

ARTICLE K -- ADJUSTMENTS.

       The amount of shares authorized to be issued under the Plan will be
adjusted appropriately in the event of future stock splits, stock dividends, or
other changes in capitalization of the Company occurring after the date of
approval of the Plan by the Company's shareholders to prevent the dilution or
enlargement of rights under the Plan; following any such change, the term
"Common Stock" shall be 



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deemed to refer to such class of shares or other securities as may be
applicable. The number of shares and exercise prices covered by outstanding
stock options and stock appreciation rights shall be adjusted to give effect to
any such stock splits, stock dividends, or other changes in the capitalization.

ARTICLE L -- ADDITIONAL PROVISIONS AND DEFINITIONS.

         1. The Board may, at any time, repeal the Plan or may amend it except
that no such amendment may amend this paragraph, increase the total aggregate
number of shares subject to the Plan, reduce the price at which stock options or
stock appreciation rights may be granted or exercised, alter the class of
employees eligible to receive stock options, or increase the percentage of
shares authorized to be transferred as restricted or unrestricted stock.
Participants and the Company shall be bound by any such amendments as of their
effective dates, but if any outstanding stock options or stock appreciation
rights are materially affected adversely, notice thereof shall be given to the
Participants holding such stock options and stock appreciation rights and such
amendments shall not be applicable without such Participant's written consent.
If the Plan is repealed in its entirety, all theretofore granted unexercised
stock options or stock appreciation rights shall continue to be exercisable in
accordance with their terms and shares subject to conditions or restrictions
granted pursuant to the Plan shall continue to be subject to such conditions or
restrictions.

         2. In the case of a Participant who is an employee of a subsidiary of
the Company, performance under the Plan, including the granting of shares of the
Company, may be by the subsidiary. Nothing in the Plan shall affect the right of
the Company or any subsidiary to terminate the employment of any employee with
or without cause. None of the Participants, either individually or as a group,
and no beneficiary, transferee or other person claiming under or through any
Participant, shall have any right, title, or interest in any shares of the
Company purchased or reserved for the purpose of the Plan except as to such
shares, if any, as shall have been granted or transferred to him or her. Nothing
in the Plan shall preclude the awarding or granting of shares of the Company to
employees under any other plan or arrangement now or hereafter in effect.

         3. "Subsidiary" means any company in which more than fifty percent
(50%) of the total combined voting power of all classes of stock is owned,
directly or indirectly, by the Company or, if the company does not issue stock,
more than fifty percent (50%) of the total combined ownership interest is owned,
directly or indirectly, by the Company. In addition, the Board may designate for
participation in the Plan as a "subsidiary," except for the granting of
incentive stock options, those additional companies affiliated with the Company
in which the Company's direct or indirect stock ownership is fifty percent (50%)
or less of the total combined voting power of all classes of such company's
stock, or, if the company does not issue stock, the Company's direct or indirect
ownership is fifty percent (50%) or less of the company's total combined
ownership interest.

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

         (a)      An acquisition (other than directly from the Company) of any
                  voting securities of the Company (the "Voting Securities") by
                  any "Person" (as the term person is used for purposes of
                  Section 13(d) or 14(d) of the Exchange Act), immediately after
                  which such Person has "Beneficial Ownership" (within the
                  meaning of Rule 13d-3 promulgated under the Exchange Act) of
                  twenty percent (20%) or more of the then outstanding shares or
                  the combined voting power of the Company's then outstanding
                  Voting Securities; provided, however, in determining whether a
                  Change in Control has occurred pursuant to this Paragraph
                  4(a), shares or Voting Securities which are acquired in a
                  "Non-Control Acquisition" (as hereinafter defined) shall not
                  constitute an acquisition which would cause a Change in





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                  Control. A "Non-Control Acquisition" shall mean an acquisition
                  by (i) an employee benefit plan (or a trust forming a part
                  thereof) maintained by (A) the Company or (B) any corporation
                  or other Person of which a majority of its voting power or its
                  voting equity securities or equity interest is owned, directly
                  or indirectly, by the Company (for purposes of this
                  definition, a "Related Entity"), (ii) the Company or any
                  Related Entity, or (iii) any Person in connection with a
                  "Non-Control Transaction" (as hereinafter defined);

         (b)      The individuals who, as of July 10, 2001 are members of the
                  Board (the "Incumbent Board"), cease for any reason to
                  constitute at least half of the members of the Board; or,
                  following a Merger (as hereinafter defined) which results in a
                  Parent Corporation (as hereinafter defined), the board of
                  directors of the ultimate Parent Corporation; provided,
                  however, that if the election, or nomination for election by
                  the Company's common stockholders, of any new director was
                  approved by a vote of at least two-thirds of the Incumbent
                  Board, such new director shall, for purposes of the Plan, be
                  considered as a member of the Incumbent Board; provided
                  further, however, that no individual shall be considered a
                  member of the Incumbent Board if such individual initially
                  assumed office as a result of either an actual or threatened
                  "Election Contest" (as described in Rule 14a-11 promulgated
                  under the Exchange Act) or other actual or threatened
                  solicitation of proxies or consents by or on behalf of a
                  Person other than the Board (a "Proxy Contest") including by
                  reason of any agreement intended to avoid or settle any
                  Election Contest or Proxy Contest; or

         (c)      The consummation of:

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

                        (A)   the stockholders of the Company, immediately
                              before such Merger own directly or indirectly
                              immediately following such Merger at least fifty
                              percent (50%) of the combined voting power of the
                              outstanding voting securities of (x) the
                              corporation resulting from such Merger (the
                              "Surviving Corporation") if fifty percent (50%) or
                              more of the combined voting power of the then
                              outstanding voting securities of the Surviving
                              Corporation is not Beneficially Owned, directly or
                              indirectly by another Person (a "Parent
                              Corporation"), or (y) if there is one or more
                              Parent Corporations, the ultimate Parent
                              Corporation;

                        (B)   the individuals who were members of the Incumbent
                              Board immediately prior to the execution of the
                              agreement providing for such Merger constitute at
                              least half of the members of the board of
                              directors of (x) the Surviving Corporation, if
                              there is no Parent Corporation, or (y) if there is
                              one or more Parent Corporations, the ultimate
                              Parent Corporation; and

                        (C)   no Person other than (1) the Company, (2) any
                              Related Entity, (3) any employee benefit plan (or
                              any trust forming a part thereof) that,
                              immediately prior to such Merger was maintained by
                              the Company or any Related Entity, or (4) any
                              Person who, immediately prior to such merger,
                              consolidation or reorganization had Beneficial
                              Ownership of twenty percent (20%) or more of the
                              then outstanding Voting Securities or shares, has
                              Beneficial Ownership of twenty percent (20%) or
                              more of the combined voting power of the
                              outstanding voting securities or common stock of
                              (x) the Surviving Corporation if there is no
                              Parent Corporation, or (y) if there is one or more
                              Parent Corporations, the ultimate Parent
                              Corporation;





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            (ii)  A complete liquidation or dissolution of the Company; or

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

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

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

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






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ARTICLE M -- CONSENT.

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

ARTICLE N - PURCHASE OF SHARES OR STOCK OPTIONS.

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

ARTICLE O -- DURATION OF PLAN.

         The Plan will terminate on July 10, 2011 unless a different termination
date is fixed by the shareholders or by action of the Board of Directors, but no
such termination shall affect the prior rights under the Plan of the Company (or
any subsidiary) or of anyone to whom stock options or stock appreciation rights
were granted prior thereto or to whom shares have been transferred prior to such
termination.






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