McCORMICK & COMPANY, INCORPORATED

 

2004 LONG-TERM INCENTIVE PLAN

 

Article I. - Purpose:

 

The purpose of the 2004 Long-Term Incentive Plan (the “Plan”) is to enhance the ability of McCormick & Company, Incorporated (the “Company”) and its subsidiaries and affiliates to attract and retain highly talented and experienced directors, officers, other key employees, and independent contractors, to motivate Plan participants to perform at their highest level of proficiency and to achieve the Company’s long-term goals and objectives, to provide competitive incentive compensation opportunities, and to induce participants to acquire a proprietary interest in the Company and thereby strengthen their identification with the interests of the Company’s stockholders.  The Plan is intended to permit the payment of incentive compensation that is not subject to the limitation on the tax deductibility of executive compensation prescribed under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and should be viewed as a program that permits the payment of remuneration that is “performance-based compensation” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder.

 

Article II. - Administration:

 

The Compensation Committee of the Board of Directors shall administer the Plan for those participants who are members of the Company’s Board of Directors, “officers” of the Company as defined in Rule 16a–1(f) under the Securities Exchange Act of 1934 (the “Exchange Act”), and for such other key employees as may be designated by the Compensation Committee as Plan participants (such directors, officers and key employees hereinafter referred to as “Senior Participants”).  All determinations with respect to the participation of such Senior Participants in the Plan, and the form, amount and timing of any Awards (as defined in Article IV) to be granted to any such participants under the Plan, and the payment of any such Awards shall be made solely by the Compensation Committee.  The Company’s Management Committee shall administer the Plan for all other participants and shall have responsibility for all determinations with respect to the participation of any such employees in the Plan, and the form, amount and timing of any Awards to be granted to any such participants under the Plan, and the payment of any such Awards.  All references to the “Committee” in the Plan shall include both the Compensation Committee and the Management Committee.  Each Committee is authorized in its sole discretion to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the administration of the Plan, and to make such other determinations as it may deem necessary or advisable in connection with the performance of its duties and responsibilities under the Plan in respect of the participants for which each Committee is responsible.

 

The Committee may delegate to the officers or other employees of the Company the authority to execute and deliver instruments and documents, and to do such other acts and things and to take such other steps as may be deemed necessary, advisable or convenient for the effective administration of the Plan in accordance with its terms and purpose, except that the Compensation Committee may not delegate any discretionary authority to grant or amend an Award, or to make substantive decisions relating to the timing, eligibility, pricing, amount or other material terms of  Awards granted to Senior Participants.  In making any determination or in taking or not taking any action under the Plan, the Committee may obtain and may rely upon the advice of experts, including professional advisors to the Company.

 

Article III. - Participants:

 

The Committee shall designate those employees of the Company (or any subsidiary, affiliate or joint venture in which the Company either owns at least fifty percent of the voting stock or has a right to at least fifty percent of the profits), and non-employee members of the Company’s Board of Directors, and officers or owners of stockholders or partners of the Company’s affiliated entities, and independent contractors who provide services to the Company (or to any subsidiary, affiliate or joint venture in which the Company either owns at least fifty percent of the voting stock or has a right to at least fifty percent of the profits) who will participate in the Plan and be granted one or more Awards under the Plan.  In determining eligibility to receive an Award and the type and the amount of the Award to any eligible individual, the Committee shall consider the position and responsibilities of the individual, the nature and value of such individual’s services and accomplishments, the present and potential contribution of the individual to the success of the Company and such other factors as the Committee may deem appropriate.

 

Article IV. - Awards:

 

A.    Types of Awards.  The types of Awards that may be granted under the Plan consist of Share-Based Awards and Cash-Based Awards.  The Committee may grant any of the following Awards, either singly or in combination with other Awards:

 

1.     Share-Based Awards:

 

(a)   Non-Qualified Stock Options.  A Non-Qualified Stock Option is an Award in the form of an option to purchase shares of the Company’s Common Stock and/or Common Stock Non-Voting (the “Stock”).  A Non-Qualified Stock Option does not qualify for the special tax treatment accorded to incentive stock options under Code Section 422. The option exercise price for each Non-Qualified Stock Option granted under the Plan shall not be less than the fair market value of a share of Stock as of the date on which such option is granted.  For purposes of the Plan, the “fair market value” of a share of Stock shall not be less than the closing sale price of such share of Stock on the New York Stock Exchange on the date specified.  All

 

Non-Qualified Stock Options shall be treated as Performance-Based Awards subject to the applicable restrictions of Article IV.B.

 

(b)   Incentive Stock Options.  An Incentive Stock Option is an Award in the form of an option to purchase shares of Stock that is intended to comply with the requirements of Code Section 422, or any successor section of the Code. The option exercise price for each Incentive Stock Option granted under the Plan shall not be less than the fair market value of a share of Stock as of the date on which such option is granted. To the extent that the aggregate “fair market value” of Stock with respect to which one or more incentive stock options first become exercisable by a participant in any calendar year exceeds $100,000, taking into account both Stock subject to Incentive Stock Options under the Plan and Stock subject to incentive stock options under all other plans of the Company and other entities referenced in Code Section 422(d)(1), the stock options shall be treated as Non-Qualified Stock Options.  For this purpose, the fair market value of the Stock subject to an Incentive Stock Option is determined as of the date on which the Incentive Stock Option is granted.

 

(c)   Stock Appreciation Rights.  A Stock Appreciation Right is an Award in the form of a right to receive cash or Stock, upon surrender of the Stock Appreciation Right, in an amount equal to the appreciation in the value of the Stock over a base price established in the Award.  The Committee may grant Stock Appreciation Rights either independently of stock options, or in tandem with stock options such that the exercise of the stock option or Stock Appreciation Right cancels the tandem Stock Appreciation Right or stock option.  The Committee shall grant Stock Appreciation Rights at such times and upon such conditions as may be determined by the Committee. The minimum base price of a Stock Appreciation Right granted under the Plan shall not be less than the fair market value of the underlying Stock as of the date on which the Stock Appreciation Right is granted, or, in the case of a Stock Appreciation Right related to a stock option (whether already outstanding or concurrently granted), the exercise price of the related stock option. All Stock Appreciation Rights shall be treated as Performance-Based Awards subject to the applicable restrictions under Article IV.B.

 

(d)   Restricted Stock and Restricted Stock Units.  Restricted Stock is an Award of shares of Stock that is granted subject to the satisfaction of such conditions and restrictions as the Committee may determine (such as a condition that participants pay a stipulated purchase price for each share of Stock, a condition that certain Performance Goals established by the Committee pursuant to Article IV.B. hereof be achieved, a condition that the participant’s right to the Restricted Stock shall not vest for a period of time during which service is to be provided or Performance Goals are to be achieved, a condition that the Award be subject to forfeiture upon the occurrence of certain specified events, and/or restrictions on the transfer and/or

 

other incidents of ownership.  In lieu of, or in addition to any Awards of Restricted Stock, the Committee may grant Restricted Stock Units to any participant subject to the same conditions and restrictions as the Committee would have imposed in connection with any Award of Restricted Stock.  Each Restricted Stock Unit shall have a value equal to the fair market value of one share of Stock.  Restricted Stock Units may be paid at such time as the Committee may determine in its discretion and payments may be made in a lump sum or in installments, in cash, Stock, or any combination thereof, as determined by the Committee in its discretion.

 

(e)   Performance Shares and Performance Units.  Performance Shares and Performance Units are Awards granted to participants subject to the achievement of Performance Goals established by the Committee pursuant to Article IV.B. hereof.  Each Performance Share shall have an initial value equal to the fair market value of one share of Stock on the date that it is granted.  Each Performance Unit shall have an initial dollar value that is determined by the Committee on the date of grant.  The number and/or value of the Performance Shares or Performance Units to be paid to a participant shall depend on the extent to which the Performance Goals have been achieved.  The Performance Shares or Performance Units may be paid in the form of Stock or cash, or in some combination thereof, based on the fair market value of the Stock on the last trading day immediately before the close of the period during which the Performance Goals are to be achieved.  Performance Shares may be granted subject to any restrictions deemed appropriate by the Committee.

 

2.       Cash-Based Awards:  Cash-Based Awards are Awards that provide participants with the opportunity to earn a cash payment based upon the achievement of one or more Performance Goals for a period of years (the “Award Cycle”) determined by the Committee. For each Award Cycle, the Committee shall determine the relevant performance criteria (see Article IV.B.), the Performance Goal for each performance criterion, the level or levels of achievement necessary for Awards to be paid, the weighting of the Performance Goals if more than one Performance Goal is applicable, and the size of the Awards.

 

B.    Special Performance-Based Awards.  Without limiting the generality of the foregoing, any of the Awards listed in Article IV.A. may be granted as Awards that satisfy the requirements for “performance-based compensation” within the meaning of Code Section 162(m) (“Performance-Based Awards”).  In order to qualify as “performance-based compensation,” the grant of the Award, the vesting of the Award, or the payment of the Award must be contingent upon the achievement of pre-established Performance Goals.  The Performance Goals must be established by the Committee and may be for the Company, or a Company subsidiary, affiliate or other Company operating unit or department, or a combination of such units or departments.  The Performance Goal shall be

based on one or more performance criteria selected by the Committee.  The performance criteria shall be selected from among the following: net sales, operating income, pre- or after-tax income, cash flow, net income, earnings per share, return on equity, return on invested capital, return on assets, economic value added (or an equivalent measure), share price performance, total shareholder return, improvement in or achievement of expense levels, improvement in or achievement of working capital levels, and innovation as measured by a percentage of sales of new products.  Notwithstanding anything contained in this Article IV.B. to the contrary, Non-Qualified Stock Options, Incentive Stock Options and Stock Appreciation Rights need to satisfy only the requirements of Article IV.B.1. and Article V.B. in order for such Awards to qualify as Performance-Based Awards under this Article IV.B. (with such Awards hereinafter referred to as a “Qualifying Stock Option” or a “Qualifying Stock Appreciation Right,” respectively).  With the exception of any Qualifying Stock Option or Qualifying Stock Appreciation Right, an Award that is intended to satisfy the requirements of this Article IV.B. shall be designated as a Performance-Based Award at the time of grant.  Nothing in the Plan shall limit the ability of the Committee to grant stock options or Stock Appreciation Rights with an exercise price or a base price greater than the fair market value of a share of Stock on the date of grant or to make the vesting of the stock options or Stock Appreciation Rights subject to the achievement of pre-established Performance Goals or other business objectives.

 

1.     Eligible Class.  All participants shall be eligible for Awards under this Article IV.B.

 

2.     Performance Goals.  The Performance Goals for any Award under this Article IV.B. (other than Qualifying Stock Options and Qualifying Stock Appreciation Rights) shall be based on one or more of the above-mentioned performance criteria. The specific Performance Goal(s) and the applicable performance criteria must be established by the Committee in advance of the deadlines applicable under Code Section 162(m) and while the achievement of the Performance Goal(s) remains substantially uncertain.

 

3.     Committee Certification.  Before any Performance-Based Award under this Article IV.B. (other than Qualifying Stock Options and Qualifying Stock Appreciation Rights) is paid, the Committee must certify in writing (by resolution or otherwise) that the applicable Performance Goal(s) and any other material terms of the Performance-Based Award have been satisfied; provided that a Performance-Based Award may be paid without regard to the satisfaction of the applicable Performance Goal in the event of a change in control as provided in Article VII.

 

4.     Terms and Conditions of Awards; Committee Discretion to Reduce Performance Awards.  The Committee shall have discretion to determine the conditions, restrictions or other limitations, in accordance with, and subject to, the terms of the Plan and Code Section 162(m), on the payment of individual Performance-Based Awards under this Article IV.B.  To the extent set forth in an Award Agreement, the Committee may reserve the right to reduce (but not to increase) the amount payable in accordance with

 

 

any standards or on any other basis (including the Committee’s discretion), as the Committee may determine.

 

5.     Adjustments for Material Changes.  In the event of (a) a change in corporate capitalization, a corporate transaction (including a restructuring or a sale of a part of the Company’s business), or a complete or partial corporate liquidation, or (b) any extraordinary gain or loss or other event that is treated for accounting purposes as an extraordinary item under generally accepted accounting principles, or (c) any material change in accounting policies or practices affecting the Company and/or the Performance Goals or performance criteria, the Committee may make adjustments to the Performance Goals and/or performance criteria, applied as of the date of the event, and based solely on objective criteria, so as to neutralize, in the Committee’s judgment, the effect of the event on the applicable Performance-Based Award.

 

6.     Interpretation.  Except as specifically provided in this Article IV.B., the provisions of this Article IV.B. shall be interpreted and administered by the Committee in a manner consistent with the requirements for exemption of Performance-Based Awards granted to “officers” of the Company as “performance-based compensation” under Code Section 162(m) and the regulations thereunder.

 

C.    Maximum Term of Awards.  No Award that contemplates exercise or conversion may be exercised or converted to any extent, and no other Award that defers vesting, shall remain outstanding and unexercised, unconverted or unvested, more than ten years after the date the Award was initially granted.

 

D.    Deferrals.  The Committee may permit or require a participant to defer receipt of the payment of cash or the delivery of Stock that would otherwise be due pursuant to (1) the exercise of a Stock Option, Stock Appreciation Right, (2) the lapse or waiver of conditions and restrictions with respect to Restricted Stock or Restricted Stock Units, or (3) the satisfaction of any requirements or Performance Goals with respect to Performance Shares or Units or in connection with any other Awards.  If any such deferral is required or permitted, the Committee shall, in its discretion, establish rules and procedures for such deferrals.  Such rules and procedures may include a provision for crediting interest on deferred cash payments and dividend equivalents for deferred payments denominated in Stock.  At the discretion of the Committee, a participant may be offered an election to substitute an Award for another Award or Awards of the same or different type.

 

E.     Dividend Equivalents.  Dividends or dividend equivalent rights may be extended to and made a part of any Award denominated in Stock or Stock Units subject to such terms, conditions and restrictions as the Committee may establish.

 

Article V. - Shares Subject to the Plan and Maximum Awards; Adjustments:

 

A.    Number of Shares Available for Awards.  Subject to adjustment as provided in Article V.F., 4,875,000 shares of the Company’s Common Stock and 1,625,000 shares of Common Stock Non-Voting shall be reserved for issuance under Awards granted under the Plan.  Of such total number of shares of Stock, not more than 6,250,000 shares of Stock may be used for Awards other than stock options.

 

B.    Annual Share Limit for Stock Options and Stock Appreciation Rights.  Subject to Article V.A., the maximum number of shares of Stock that may be subject to stock options (including Incentive Stock Options) and Stock Appreciation Rights granted or issued in any calendar year is three (3) percent of the Company’s issued and outstanding shares of Stock on November 30 of the calendar year immediately preceding the date of grant of the Award, calculated in a manner consistent with the method for calculating outstanding shares for reporting in the Company’s Annual Report on Form 10-K. The number of shares of Stock available for grant or issuance under this Article V.B. in any calendar year shall be increased by the number of shares of Stock available for grant or issuance in previous calendar years but not covered by stock options or Stock Appreciation Rights granted or exercised in previous calendar years.  The maximum aggregate number of shares of Stock for which stock options and Stock Appreciation Rights may be granted in any calendar year to an individual participant shall not exceed the lesser of one (1) percent of the total number of shares of Stock issued and outstanding as of November 30 of the calendar year immediately preceding the date of the grant of the Award, or 1,400,000 shares of Stock.

 

C.    Annual Share Limit for Restricted Stock and Restricted Stock Units.  Subject to Article V.A., the maximum number of shares of Stock that may be subject to Restricted Stock and Restricted Stock Units granted or issued in any calendar year is three (3) percent of the Company’s issued and outstanding shares of Stock on November 30 of the calendar year immediately preceding the date of grant of the Award, calculated in a manner consistent with the method for calculating outstanding shares for reporting in the Company’s Annual Report on Form 10-K. The number of shares of Stock available for grant or issuance under this Article V.C. in any calendar year shall be increased by the number of shares of Stock available for grant or issuance in previous calendar years but not covered by Restricted Stock and Restricted Stock Units granted or exercised in previous calendar years.  The maximum aggregate number of shares of Stock for which Restricted Stock and Restricted Stock Unit Awards may be granted in any calendar year to an individual participant shall not exceed the lesser of one (1) percent of the total number of shares of Stock issued and outstanding as of November 30 of the calendar year immediately preceding the date of the grant of the Award, or 1,400,000 shares of Stock.

 

D.    Annual Share Limit for Performance Share and Performance Units.  Subject to Article V.A., the maximum number of shares of Stock that may be subject to Performance Shares

 

 

and Performance Units granted or issued in any calendar year is three (3) percent of the Company’s issued and outstanding shares of Stock on November 30 of the calendar year immediately preceding the date of grant of the Award, calculated in a manner consistent with the method for calculating outstanding shares for reporting in the Company’s Annual Report on Form 10-K. The number of shares of Stock available for grant or issuance under this Article V.D. in any calendar year shall be increased by the number of shares of Stock available for grant or issuance in previous calendar years but not covered by Performance Shares and Performance Units granted or exercised in previous calendar years.  The maximum aggregate number of shares of Stock for which Performance Shares and Performance Share Unit Awards may be granted in any calendar year to an individual participant shall not exceed the lesser of one (1) percent of the total number of shares of Stock issued and outstanding as of November 30 of the calendar year immediately preceding the date of the grant of the Award, or 1,400,000 shares of Stock.

 

E.     Reissue of Shares and Stock Units.  Shares of Stock and Stock Units covered by Share-Based Awards that are not earned, either wholly or in part, or that expire or are forfeited, terminated, canceled, settled in cash, payable solely in cash or exchanged for other Awards, shall be available for future issuance under Share-Based Awards, whether or not the participant has received benefits of ownership (such as dividends or dividend equivalents or voting rights) during the period in which the participant’s ownership was restricted or otherwise not vested.  Further, shares of Stock tendered to or withheld by the Company in connection with the exercise of Stock Options, or the payment of tax withholding on any Award, shall also be available for future issuance under Share-Based Awards.  Shares authorized for use under stock option plans previously approved by the Company’s stockholders and not reserved for issuance pursuant to the exercise of previously granted stock options may be used for Awards to be granted under the Plan.

 

F.     Adjustments.  In the event of any recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, merger, combination, consolidation, or other reorganization or any extraordinary dividend or other extraordinary distribution in respect of the Stock (whether in the form of cash, Stock or other property), or any split-up, spin-off, split-off, extraordinary redemption, or exchange of outstanding Stock, or any other similar corporate transaction or event in respect of the Stock, or a sale of substantially all the assets of the Company as an entirety, then the Committee shall, in the manner and to the extent, if any, as it may deem appropriate and equitable to the participants and consistent with the terms of the Plan, and taking into consideration the effect of the event on the holders of the Stock, proportionately adjust any or all of the following:

 

1.     the number and type of shares of Stock that thereafter may be made the subject of Awards (including the specific maximum and numbers of shares of Stock set forth elsewhere in the Plan); provided that adjustments for limits that apply to the Plan as a whole shall be made exclusively by the Compensation Committee;

 

2.     the number and type of shares of Stock or the amount of cash subject to any or all  outstanding Awards;

 

3.     the grant, purchase, base or exercise price, or conversion ratio of any or all outstanding Awards;

 

4.     subject to Article IV.B., the Performance Goals or performance criteria applicable to any outstanding “Performance-Based” Awards; or

 

5.     any other terms that are affected by the event.

 

Notwithstanding the foregoing, in the case of an Incentive Stock Option, no adjustment shall be made that would cause the Plan to violate Section 424(a) of the Code or any successor provisions thereto, without the written consent of the participant adversely affected thereby.  The Committee may act prior to an event described in this Article V.F. (including at the time of an Award by means of more specific provisions in the Award Agreement) if deemed necessary or appropriate to permit the participant to realize the benefits intended to be conveyed by an Award in respect of the Stock in the case of an event described in this Article V.F.

 

G.    Interpretive Issues.  Additional rules for determining the number of shares of Stock authorized for Awards under the Plan from time to time may be adopted by the Committee, as it deems necessary or appropriate.

 

H.    Source of Shares; No Fractional Shares.  The Stock that may be issued (which term includes Stock reissued or otherwise delivered) pursuant to an Award under the Plan shall be authorized but unissued Stock.  No fractional shares of Stock shall be issued under the Plan, but fractional interests may be accumulated pursuant to the terms of an Award.

 

I.      Purchase or Exercise Price; Withholding.  The exercise or purchase price (if any) of the Stock issuable pursuant to any Award and any withholding obligation under applicable tax laws shall be paid in cash or, subject to the Committee’s express authorization and such terms, restrictions, conditions and procedures as the Committee may in its sole discretion impose (subject to Article X.D.), any one or combination of (1) cash, (2) the delivery of shares of Stock, (3) a reduction in the amount of Stock or other amounts otherwise issuable or payable pursuant to such Award, (4) the delivery of a promissory note, or other obligation for the future payment of money, or (5) in the case of purchase price only, labor or service as an employee to be performed or actually performed. In the case of a payment by the means described in clause (2) or (3) above, the Stock to be so delivered or offset shall be determined by reference to the fair market value of the Stock on the date as of which the payment or offset is made.  Notwithstanding the foregoing, no “executive officer” shall be permitted to satisfy the purchase or exercise price or withholding obligation with respect to an Award by using a method of payment otherwise authorized

 

under the Plan or an Award Agreement if such method of payment would constitute a personal loan under Section 13(k) of the Exchange Act.  If an Award Agreement to a participant who is not an “executive officer” authorizes a method of payment that would constitute a personal loan under Section 13(k) of the Exchange Act and the participant subsequently becomes an “executive officer,” then the payment method shall no longer be available to the participant and the Committee shall take whatever steps are necessary to make such payment method void as to such participant, including but not limited to requiring the immediate payment of any note or loan previously obtained in connection with an Award.

 

J.     Third Party Assisted Exercise.  Subject to any restrictions on “executive officers” pursuant to Section 13(k) of the Exchange Act, the Committee may permit the exercise of the Award and payment of any applicable withholding tax in respect of an Award by delivery of notice, subject to the Company’s receipt from a third party of payment (or commitment to make payment) in full in cash for the exercise price and the applicable withholding prior to issuance of Stock, in the manner and subject to such procedures as may be established by the Committee.

 

Article VI. - Award Agreements:

 

Each Award under the Plan shall be evidenced by an Award Agreement in a form approved by the Committee setting forth, in the case of Share-Based Awards, the number of shares of Stock to which the Award applies or on which the Award is based, as applicable, and the price (if any) and term of the Award and, in the case of Performance-Based Awards, any applicable Performance Goals. The Award Agreement also shall set forth such other material terms and conditions as the Committee may deem applicable to the Award as determined by the Committee consistent with the limitations of the Plan.  Such other terms and conditions may include provisions describing the treatment of an Award in the event of the death, disability, retirement, divestiture or other termination of a participant’s employment with or services to the Company, provisions relating to the vesting, exercisability, forfeiture or cancellation of the Awards, requirements for continued employment, other restrictions or conditions (including performance requirements and holding periods) of the Award and the method by which the restrictions or conditions lapse, subject, in the case of  Performance-Based Awards, to the requirements for “performance-based compensation” under Code Section 162(m).  In the event of any conflict between an Award Agreement and any non-discretionary provisions of the Plan, the terms of the Plan shall govern.

 

Article VII. -  Change in Control; Acquisitions:

 

A.    Change in Control.  In the event of a change in control, all conditions and restrictions on the exercise of all Awards (excluding stock options and Stock Appreciation Rights that are not “in the money”) then outstanding (including but not limited to vesting schedules requiring a specified period of service and Performance Goals requiring the satisfaction of specific performance criteria) shall be waived and such Awards shall become exercisable

 

 

or payable immediately for the full amount of the Shares of Stock and/or any cash payment covered by such Awards.  In addition to any action required or authorized by the Plan and the terms of an Award, the Committee may take any other action it deems appropriate to ensure the equitable treatment of participants in the event of, or in anticipation of a change in control, including but not limited to any one or more of the following with respect to any or all Awards:   (1) provision for the settlement of the Awards for their equivalent cash value, as determined by the Committee, as of the date of the change in control; and (2) such other modification or adjustment to the Awards as the Committee deems appropriate to maintain and protect the rights and interests of participants upon or following the change in control. The Committee also may accord any participant a right to refuse any acceleration of exercisability, vesting or benefits, whether pursuant to the Award Agreement or otherwise, in such circumstances as the Committee may approve.

 

B.    Change in Control Definition.  For purposes of the Plan, a “change in control” shall be deemed to occur upon one or more of the following events:

 

1.     the consolidation or merger of the Company with or into another entity where the Company is not the continuing or surviving corporation, or pursuant to which shares of the Company’s capital stock are converted into cash, securities or other property, except for any consolidation or merger of the Company in which the holders (excluding any “Substantial Stockholders” as defined in Section 4, “Common Stock”, subsection (b)(2)(H) of the Certificate of Incorporation of the Company as in effect as of the date hereof (the “Charter”)) of the Company’s (1) voting common stock, (2) non-voting common stock, and (3) other classes of voting stock, if any, immediately before the consolidation or merger shall, upon consummation of the consolidation or merger, own in excess of 50% of the voting stock of the surviving corporation;

 

2.     any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company;

 

3.     any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act, as amended) shall as of the date hereof become the beneficial owner (as defined in Section 4, “Common Stock”, subsection (b)(2)(C) of the Charter), directly or indirectly, of securities of the Company representing more than 13% (the “Specified Percentage”) of the voting power of all the outstanding securities of the Company having the right to vote in an election of the Board (after giving effect, to the extent applicable, to the operation of Section 4, “Common Stock”, subsection (b) of the Charter) (including, without limitation, any securities of the Company that any such person has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, which shall be deemed beneficially owned by such person), provided, however, that in the event that the vote limitation with respect to Substantial Stockholders set forth in Section 4, “Common

 

Stock”, subsection (b) of the Charter becomes inoperative by virtue of the operation of Section 4, “Common Stock”, subsection (b)(12) of the Charter, or otherwise, the “Specified Percentage” shall be increased, without requirement for further action, to 35%; or

 

4.     individuals, who as of the date hereof constitute the entire Board and any new directors whose election by the Board, or whose nomination by the Board to stand for election by the Company’s stockholders, shall have been approved by a vote of at least a majority of the directors then in office (which directors then in office either were directors as of the date hereof or whose election or nomination for election shall have been so approved), shall cease for any reason to constitute a majority of the members of the Board.

 

C.    Business Acquisitions.  Awards may be granted under the Plan on terms and conditions as the Committee considers appropriate, which may differ from those otherwise required by the Plan to the extent necessary to reflect a substitution for or assumption of stock incentive awards held by employees of other entities who become employees of the Company or a subsidiary as the result of a merger of the employing entity with, or the acquisition of the property or stock of the employing entity by, the Company or a subsidiary, directly or indirectly.

 

Article VIII. – Waivers:

 

In addition to the Committee’s authority under other provisions of the Plan (including Articles VII. and IX.), the Committee shall have the authority to accelerate the vesting of an Award, to extend the term or waive early termination provisions of an Award (subject to the maximum ten-year term under Article IV.D., and to waive the Company’s rights with respect to an Award or restrictive conditions of an Award (including forfeiture conditions), in any case in such circumstances as the Committee deems appropriate, except where expressly prohibited by the Plan.

 

Article IX. - Amendment and Termination of the Plan:

 

The Board of Directors may at any time terminate, suspend or discontinue the Plan.  The Board of Directors may amend the Plan at any time, provided that any material amendment to the Plan shall not be effective unless approved by the Company’s stockholders.  For this purpose, a material amendment is any amendment that would (A) materially increase the number of shares of Stock available under the Plan or issuable to a participant (other than a change in the number of shares made pursuant to Article V.F or VII.A.); (B) add to the types of awards that may be granted under the Plan; (C) expand the class of persons eligible to receive awards or otherwise participate in the Plan; or (D) require stockholder approval pursuant to the New York Stock Exchange Listed Company Manual (so long as the Company is a listed company on the New York Stock Exchange) or applicable law.  The Committee may at any time alter or amend any or all Award Agreements under the Plan in any manner that would be authorized for a new Award under the Plan, including

 

 

but not limited to any manner set forth in Article VIII., so long as such an amendment would not require approval of the Company’s stockholders, if such amendment were made to the Plan. Notwithstanding the foregoing, no such action by the Board or the Committee shall, in any manner adverse to a participant other than as expressly permitted by the terms of an Award Agreement, affect any Award then outstanding and evidenced by an Award Agreement without the consent in writing of the participant or a beneficiary who has become entitled to an Award.

 

Article X. - Miscellaneous:

 

A.    Effective Date; Duration.  The Plan has been adopted by the Board of Directors of the Company and shall become effective upon, and shall be subject to, the approval of the Company’s stockholders.  The Plan shall remain in effect until any and all Awards under the Plan have been exercised, converted or terminated under the terms of the Plan and applicable Award Agreements.  Notwithstanding the foregoing, no Award may be granted under the Plan after March 24, 2014.  Notwithstanding the foregoing, any Award granted under the Plan on or prior to March 24, 2014 may be amended after such date in any manner that would have been permitted prior to such date, except that no such amendment shall increase the number of shares of Stock subject to, comprising or referenced in such Award (other than in accordance with Article V.F. or VII.A.)

 

B.    Disclaimer of Liability.  Neither the Company nor any member of the Board of Directors or of the Committee, nor any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability to any party for any action taken or not taken in good faith under the Plan or for the failure of an Award (or action in respect of an Award) to satisfy Code requirements as to incentive stock options or to realize other intended tax consequences, to qualify for exemption or relief under Rule 16b-3 or to comply with any other law, compliance with which is not required on the part of the Company.

 

C.    Unfunded Plan.  The Plan shall be unfunded.  Neither the Company, nor the Board of Directors nor the Committee shall be required to segregate any assets that may at any time be represented by Awards made pursuant to the Plan.  Neither the Company, nor the Board of Directors, nor the Committee shall be deemed to be a trustee of any amounts to be paid or securities to be issued under the Plan.

 

D.    Rights of Participants.

 

1.     Contract Rights, Forms and Signatures.  Obligations of the Company to any participant with respect to an Award shall be based solely upon contractual obligations created by an Award Agreement.  Subject to the provisions of Article X.K., no Award shall be enforceable until the Award Agreement, or an acknowledgement of receipt, has been signed by the participant and on behalf of the Company by an “executive officer” (other than the recipient) or his or her delegate.  By executing the Award Agreement or

 

an acknowledgement of receipt, a participant shall be deemed to have accepted and consented to the terms of the Plan and any action taken in good faith under the Plan by and within the discretion of the Committee, the Board of Directors or their delegates.

 

2.     No Right to an Award.  Status as an employee, Director or a provider of a service to the Company or a subsidiary or affiliate shall not be construed as a commitment that any one or more Awards will be made under the Plan to any such persons. Status as a participant shall not entitle the participant to any additional future Awards.

 

3.     No Assurance of Employment.  Nothing contained in the Plan (or in any other documents related to the Plan or to any Award) shall confer upon any employee or participant any right to continue in the employ or other service of the Company or any subsidiary or affiliate or constitute any contract (of employment or service) or limit in any way the right of the Company or any subsidiary or affiliate to change a person’s compensation or other benefits or to terminate the employment or service of a person with or without cause.

 

E.     Rights as Shareholder.  The grant of an Award to a participant under the Plan in the form of a stock option, Stock Appreciation Right, Restricted Stock or Restricted Stock Unit,  Performance Share or Performance Unit, shall not entitle the participant to any dividend, voting or other ownership right (unless expressly provided to the contrary in the Award Agreement) unless and until the date of issuance of the shares of Stock under the Plan.  Shares of Stock may be delivered to participants in either certificated or electronic form.

 

F.     Compliance with Laws.  The Plan, Award Agreement, and the grant, exercise, conversion, operation and vesting of Awards, and the issuance and delivery of shares of Stock and/or other securities or property or the payment of cash under the Plan, Awards or Award Agreements, are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal insider trading, registration, reporting and other securities laws and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable to comply with all legal requirements.  Any securities delivered under the Plan shall be subject to such restrictions (and the person acquiring such securities shall, if requested by the Company, provide such evidence, assurance and representations to the Company as to compliance with any thereof) as counsel to the Company may deem necessary or desirable to assure compliance with all applicable legal requirements.

 

G.    Listing and Registration of Shares.  If at any time the Board of Directors shall determine, in its discretion, that the listing, registration or qualification of any of the Stock subject to Awards under the Plan upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of or in connection with the purchase or issuance of Stock under the Plan, no

 

 

outstanding Awards that would result in the purchase or issuance of Stock may be exercised or otherwise settled unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board of Directors. The Board of Directors may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of the Stock in compliance with applicable law and shall have the authority to cause the Company at its expense to take any action related to the Plan which may be required in connection with such listing, registration, qualification, consent or approval.  The Company shall be under no obligation to any participant to register for offering or resale under the Securities Act of 1933, or register or qualify under any state securities laws, any shares of Stock, security, or interest in a security, paid or issued under or created by the Plan.

 

H.    Rule 16b-3 Conditions; Bifurcation of Plan.  It is the intent of the Company that the Plan and Share-Based Awards hereunder shall satisfy and be interpreted in a manner, that, in the case of participants who are or may be Senior Participants, satisfies any applicable requirements of Rule 16b-3, so that these persons will be entitled to the benefits of Rule 16b-3 or other exemptive rules under Section 16 under the Exchange Act and will not be subjected to avoidable liability thereunder as to Awards intended to be entitled to the benefits of Rule 16b-3 or such other exemptive rules under Section 16. If any provision of the Plan or of any Award would otherwise frustrate or conflict with the intent expressed in this Article X.D., that provision to the extent possible shall be interpreted and deemed amended so as to avoid such conflict. To the extent of any remaining irreconcilable conflict with this intent, the provision shall be deemed disregarded as to transactions under the Plan that are intended to be exempt under Rule 16b-3 or such other exemptive rules under Section 16. Notwithstanding anything to the contrary in the Plan, the provisions of the Plan may at any time be bifurcated by the Board or the Committee in any manner so that certain provisions of the Plan or any Award Agreement intended (or required in order) to satisfy the applicable requirements of Rule 16b-3 or such other exemptive rules under Section 16 are applicable only to Senior Participants and to those Awards to Senior Participants intended to satisfy the requirements of Rule 16b-3 or such other exemptive rules under Section 16.

 

I.      Applicable Law.  The Plan, Award Agreements and any related documents and matters shall be governed by and in accordance with the laws of the State of Maryland (disregarding the choice of law rules of any jurisdiction), except as to matters of federal law.

 

J.     Foreign Jurisdictions.  Without amending the Plan, the Committee may from time to time  grant Awards to participants who are foreign nationals on such different terms and conditions (by establishing one or more sub-plans or otherwise)as the Committee may deem necessary or desirable, and not inconsistent with the intent of the Plan, to foster and promote the purposes of the Plan and, in furtherance of such purposes, the Committee may

 

 

adopt, amend and terminate any such Awards, not inconsistent with the intent of the Plan, as it may deem necessary or desirable to make available tax or other benefits of laws of any foreign jurisdiction to participants who are subject to such laws and who receive Awards under the Plan.

 

K.    Notices, Signature, Delivery.  Whenever a signature, notice or delivery of a document is required or appropriate under the Plan or pursuant to an Award Agreement, signature, notice or delivery may be accomplished by paper or written format, or to the extent authorized by the Committee, by electronic means.  In the event the Committee authorizes electronic means for the signature, notice or delivery of a document hereunder, the electronic record or confirmation of that signature, notice or delivery maintained by or on behalf of the Committee shall for purposes of the Plan and any applicable Award Agreement be treated as if it was a written signature or notice and was delivered in the manner provided herein for a written document.

 

L.     Successors.  All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or other business combination, of all or substantially all of the business and/or assets of the Company.

 

M.   Non-Exclusivity of Plan.  Nothing in the Plan shall limit or be deemed to limit the authority of the Company, the Board of Directors or the Committee to grant awards or authorize any other compensation, with or without reference to the Stock, under any other plan or authority.

 
 
 
 
 
 
 
 
 
 
 
 
 
2002 McCORMICK MID-TERM INCENTIVE PLAN
 
 
ARTICLE I. ESTABLISHMENT:
 
On November 20, 2001, the Compensation Committee of the Board of Directors of
McCormick & Company, Incorporated (the "Company") approved and adopted a
mid-term incentive plan for executives as described herein, which plan shall
be known as the "2002 McCormick Mid-Term Incentive Plan" (the "Plan"). The
Plan shall be effective for all Performance Cycles (as defined below)
commencing on or after December 1, 2001, subject to its approval by the
stockholders of the Company. No payments shall be made pursuant to the Plan
until after the Plan has been approved by the stockholders of the Company.
 
ARTICLE II. PURPOSE:
 
The Plan is designed to reinforce key strategic objectives of the Company and
advance the interests of the Company's stockholders by attracting and
retaining key executives, and by rewarding such executives for taking actions
which increase sales growth and enhance shareholder return over three-year
periods ("Performance Cycles").
 
ARTICLE III. ADMINISTRATION:
 
3.1   COMPOSITION OF THE COMMITTEE:  The Plan shall be administered by the
      Compensation Committee of the Company's Board of Directors, or a
      successor committee (the "Committee"), which shall consist of members
      appointed from time to time by the Board of Directors and shall be
      comprised of not less than such number of directors as shall be
      required to permit the Plan to satisfy the requirements of the
      performance-based compensation exception to Section 162(m) of the
      Internal Revenue Code of 1986, as amended (the "Code").  The Committee
      administering the Plan shall be composed solely of "outside directors"
      within the meaning of Section 162(m) of the Code.
 
3.2   POWER AND AUTHORITY OF THE COMMITTEE:  The Committee shall have full
      power and authority, subject to all the applicable provisions of the
      Plan and applicable law, to: (a) establish, amend, suspend, terminate
      or waive such rules and regulations and appoint such agents as it deems
      necessary or advisable for the proper administration of the Plan; (b)
      construe, interpret and administer the Plan, and any instrument or
      agreement relating thereto, or to an Award (as defined below in Section
      3.4) made under the Plan; and (c) make all other determinations and
      take all other actions necessary or advisable for the administration
      of the Plan.  Unless otherwise expressly provided in the Plan, each
      determination made and each action taken by the Committee pursuant to
      the Plan, or any instrument or agreement relating thereto, or to an
      Award made under the Plan shall be
 
      within the sole discretion of the Committee, may be made at any time
      and shall be final, binding and conclusive for all purposes on all
      persons, including, but not limited to, holders of Awards, and their
      legal representatives and beneficiaries, and employees of the Company
      or of any "Affiliate" of the Company.  For purposes of the Plan, and
      any instrument or agreement relating thereto, or to an Award made under
      the Plan, the term "Affiliate" shall mean any entity that, directly or
      indirectly, through one or more intermediaries, is controlled by the
      Company and any entity in which the Company has a significant equity
      interest, in each case as determined by the Committee in its sole
      discretion.
 
3.3   DELEGATION:  The Committee may delegate its powers and duties under the
      Plan to one or more officers of the Company or any Affiliate, or a
      committee of such officers, subject to such terms, conditions and
      limitations as the Committee may establish in its sole discretion;
      provided, however, that the Committee shall not delegate its power to
      (a) amend the Plan as provided in Article IX hereof, or (b) make
      determinations regarding Awards.
 
3.4   QUALIFIED PERFORMANCE-BASED COMPENSATION:  An opportunity to receive
      compensation pursuant to the Plan (hereinafter referred to as an
      "Award") is intended to be "qualified performance-based compensation"
      within the meaning of Section 162(m) of the Code. The following
      requirements shall apply to each Award made under the Plan:
 
      (a)   The Plan shall have been approved by the stockholders of the
            Company at the Company's 2002 annual meeting of stockholders.
 
      (b)   The right to receive payment pursuant to an Award shall be
            determined solely on account of the attainment of the
            pre-established objective performance goals selected by the
            Committee in connection with the grant of the Award.  Such goals
            shall be based on (i) cumulative consolidated net sales growth,
            and (ii) cumulative total shareholder return compared to
            pre-selected peer groups as described below in Article 5.2.
            While the amount of an Award may vary among Participants (as
            defined below in Article 4.2), the goals established by the
            Committee for an Award Cycle shall apply to all Participants in
            the same manner.
 
      (c)   The commencement date of each three-year Performance Cycle shall
            be determined by the Committee. New Performance  Cycles may be
            established by the Committee each year, or every second year, or
            at such other intervals as the Committee may deem appropriate.
 
      (d)   Not later than 90 days after the beginning of each Performance
            Cycle selected by the Committee, it shall: (i) designate the
            Performance Cycle and all Participants for such Performance
            Cycle; (ii) designate the Peer Group (as defined below in Article
            5.2(b)); and (iii) establish objective performance factors for
            all
 
            Participants for that Performance Cycle on the basis of
            cumulative sales growth and total shareholder returns for the
            selected Peer Group.
 
      (e)   Following the close of each Performance Cycle and prior to
            payment of any amount to any Participant under the Plan, the
            Committee must certify the attainment of the performance  factors
            upon which any Awards to Participants for that Performance Cycle
            are to be based.
 
      (f)   The maximum amount which may be paid to any Participant pursuant to
            any Award with respect to any Performance Cycle shall not exceed the
            fair market value of one hundred  thousand (100,000) shares of the
            Common Stock of the Company, determined in the manner provided in
            Article 5.2 (b)(ii) for  determining "fair market value" at the end
            of the Performance Cycle.
 
      (g)   Each of the foregoing provisions, and all of the other terms and
            conditions of the Plan as it applies to any Award, shall be
            interpreted in such a fashion so as to qualify all compensation
            paid thereunder as "qualified performance-based compensation"
            within the meaning of Section 162(m) of the Code.
 
ARTICLE IV. ELIGIBILITY AND PARTICIPATION:
 
4.1   ELIGIBILITY: The Plan is unfunded and is maintained by the Company for
      a select group of senior executives. In order to be eligible to
      participate in the Plan, an employee of the Company or of its
      Affiliates must be selected by the Committee. In determining the
      employees who will participate in the Plan, the Committee may take into
      account the nature of the services rendered by the respective
      employees, their present and potential contributions to the success of
      the Company and such other factors as the Committee, in its sole
      discretion, shall deem relevant. A director of the Company or of an
      Affiliate who is not also an employee of the Company or an Affiliate
      shall not be eligible to participate in the Plan. No member of the
      Committee shall be eligible to participate in the Plan.
 
4.2   PARTICIPATION: The Committee shall determine the employees to be
      granted an Award, the amount of each Award, the time or times when
      Awards will be made, the period of time to be included in each
      Performance Cycle, and all other terms and conditions of each Award.
      The Awards need not be the same for all recipients of an Award (the
      "Participant") or for Participants similarly situated, except that the
      performance goals applicable to each Award shall be applied to all
      Participants for an Award Cycle in the same manner, as described below
      in Article 5.2. The Committee's decision to approve an Award to an
      employee in any year shall not require the Committee to approve a
      similar Award or any Award at all to that employee or any other
      employee or person at any future date. The Company and the Committee
      shall not have any obligation for uniformity of treatment of any
      person, including, but not limited to, Participants and their legal
      representatives and beneficiaries and employees of the Company or of
      any Affiliate.
 
4.3   EMPLOYMENT: In the absence of any specific agreement to the contrary,
      no Award to a Participant under the Plan shall affect any right of the
      Company, or of any Affiliate of the Company, to terminate, with or
      without cause, the Participant's employment with the Company or any
      Affiliate at any time. Neither the establishment of the Plan, nor the
      granting of any Award hereunder, shall give any Participant (a) any
      rights to remain employed by the Company or any Affiliate; (b) any
      benefits not specifically provided for herein or in any Award granted
      hereunder; or (c) any rights to prevent the Company or any Affiliate
      from modifying, amending or terminating any of its other benefit plans
      of any nature whatsoever.
 
ARTICLE V. AWARDS:
 
5.1   GENERAL: The Committee shall determine the Award or Awards to be made
      to each Participant, and each Award shall be subject to the terms and
      conditions of the Plan. An Award shall be made solely in the form of a
      statement of a dollar amount based on attaining a specific targeted
      goal, subject to an increase in such amount for exceeding the targeted
      goal or a reduction for failing to meet the targeted goal but exceeding
      the minimum goal. Failure to attain the minimum goal causes the Award
      to be forfeited. Awards may be granted singly or in combination, or in
      addition to, in tandem with, or in substitution for, any grants or
      rights under any other employee or compensation plan of the Company or
      of any Affiliate.
 
5.2   AWARDS: Subject to the discretion of the Committee to reduce an Award,
      as provided below in Article 5.4, the payment to be made to a
      Participant on account of an Award shall be determined based on:
 
      (a)  Cumulative consolidated net sales growth of the Company during the
           Performance  Cycle (excluding the effects on sales growth of
           acquisitions and divestitures occurring during the Performance
           Cycle) compared to the objective set by the Committee for such
           sales growth at the commencement of the Performance Cycle; and
 
      (b)  Total shareholder return ranked against a peer group in the
           following manner:
 
           (i)   The Committee shall designate a number of companies listed on
                 the New York Stock Exchange or American Stock Exchange, or
                 quoted on NASDAQ, selected by the Committee in its sole
                 discretion as comparable to the Company (the "Peer Group").
                 In the event any Peer Group companies are not thereafter
                 listed on either the New York Stock Exchange or American
                 Stock Exchange, or quoted on NASDAQ, during the Performance
                 Cycle, such companies will drop out of the Peer Group, and
                 the size of the Peer Group shall be reduced accordingly.
           (ii)  The Committee shall determine fair market value of a share
                 of the common stock of each company in the Peer Group, and
                 of the Company, as of the beginning and the end of the
                 Performance Cycle. For purposes of the Plan, "fair market
                 value" shall be: (a) the average of the closing price of a
                 company's common stock on the New York Stock Exchange or on
                 the American Stock Exchange for the ten trading days
                 designated by the Committee at the beginning and end of the
                 Performance Cycle; and (b) if the common stock is not listed
                 on the New York Stock Exchange or the American Stock
                 Exchange but is quoted on NASDAQ, the average of the last
                 sale (National Market System) or the average between the
                 highest bid and lowest asked prices for a share of common
                 stock (National List) as quoted on NASDAQ for the ten
                 trading days designated by the Committee at the beginning
                 and end of the Performance Cycle.
 
           (iii) Within thirty days after the end of any Performance Cycle,
                 the Committee shall calculate the total shareholder return
                 for each company remaining in the Peer Group and for the
                 Company. For purposes of the Plan, "total shareholder
                 return" shall be calculated as follows for each company in
                 the Peer Group and for the Company. The fair market value of
                 a share of common stock shall be determined for each Peer
                 Group company and the Company at the beginning of the
                 Performance Period (the "Beginning Value"). During the
                 Performance Cycle each dividend paid by any Peer Group
                 company and the Company on a share of common stock shall be
                 deemed invested in that company's common stock at the
                 closing price of such stock on the date the dividend was
                 paid. At the end of the Performance Cycle, the fair market
                 value of a share of common stock plus the fair market value
                 of any additional whole or fractional share of common stock
                 deemed purchased with dividends shall be determined for each
                 remaining Peer Group company and the Company (the "Ending
                 Value"). In the event of stock splits or other
                 recapitalizations (excepting stock repurchases or issuances
                 of new stock for acquisitions), the Committee shall make
                 such adjustment as it deems appropriate to maintain
                 comparability between the Beginning Value and Ending Value.
                 The percentage increase (or decrease) of Ending Value
                 compared to Beginning Value is the total shareholder return.
 
           (iv)  The Peer Group companies and the Company will be ranked
                 according to total shareholder return during the Performance
                 Cycle. The Committee will apply the Company's ranking, in
                 such manner as the Committee may determine for any
                 Performance Cycle,  to determine the amount of the Award for
                 each Participant.
 
5.3   PAYMENT OF AWARDS: Before payment of an Award, the Committee shall
      certify the amount of the Award. Payment of Awards shall be made solely
      in shares of the
 
 
      Company's Common Stock. At the commencement of each Performance Cycle,
      potential Awards to be paid at the end of the Performance Cycle are
      expressed in dollars. At the end of each Performance Cycle, the cash
      amount of the Award is converted to shares of the Company's Common
      Stock based on the fair market value of such shares (as defined in
      Article 5.2(b)(ii) of the Plan) as of the end date of the Performance
      Cycle. The Award shares are not registered under the Securities Act of
      1933, as amended, or any state securities laws. The shares are
      therefore restricted and the certificates will bear a legend evidencing
      the restriction.
 
5.4   DISCRETIONARY REDUCTION: The Committee shall retain sole and full
      discretion to reduce, in whole or in part, the amount of any Award
      otherwise payable to any Participant under this Plan.
 
5.5   DELIVERY OF COMMON STOCK: Certificates for shares of Common Stock in
      the number that are determined by the Award amount will be delivered as
      soon as reasonably possible after the end of the Program Cycle. No
      fractional shares shall be delivered; any amount applicable to
      fractional shares will be credited to the amount of tax withholding due
      from a Participant. The Company shall have no liability to deliver any
      shares of Common Stock under the Program unless such delivery or
      distribution would comply with all applicable laws (including, without
      limitation, the requirements of the Securities Act of 1933, as
      amended), and the applicable requirements of any securities exchange or
      similar entity.
 
5.6   SHARE ADJUSTMENTS: In the event of any merger, consolidation,
      reorganization, stock split, stock dividend or other event affecting
      the Common Stock, an appropriate adjustment shall be made in the
      maximum number of shares specified in Article 3.4(f) which may be
      granted pursuant to an Award to any one Participant and the total
      number of shares available for Awards and in all other provisions of
      the Plan that include a reference to a number of shares, and in the
      numbers of shares covered by, and other terms and provisions of,
      outstanding Awards. The foregoing adjustments and the manner of
      application of the foregoing provisions shall be determined by the
      Committee in its sole discretion.
 
5.7   EARLY DISTRIBUTION OF BENEFITS: Notwithstanding any provision of
      the Plan to the contrary, the Committee, in its sole discretion, may
      authorize payment of an Award to a Participant in advance of the end of
      a Performance Cycle in any amount up to the full amount of the Award
      that would have been paid to the Participant at the end of the
      Performance Cycle upon attainment of the target goal for that
      Performance Cycle in any circumstance that, under section 162 of the
      Code and the regulations thereunder, would not disqualify the Plan as a
      performance-based compensation plan by reason of the exercise of such
      discretion by the Committee.
 
 
ARTICLE VI. TERMINATION OF EMPLOYMENT:
 
   In the event of the retirement, disability, or death of a Participant, or
in the event of an involuntary termination of a Participant's employment with
the Company or an Affiliate for reasons other than "Cause", prior to the end
of a Performance Cycle, an Award will be paid to the Participant based on a
pro rata adjustment of the target amount, adjusted for actual performance as
of the date of termination of employment. In the event of an involuntary
termination for "Cause" or a voluntary termination by the Participant prior
to the end of a Performance Cycle, all benefits under the Plan will be
forfeited by the Participant. For purposes of this Plan, "Cause" means any
willful and continuous failure by the Employee to substantially perform his
duties with the Company (unless the failure to perform is due to the
Employee's Disability) or any willful misconduct or gross negligence by the
Employee which results in material economic harm to the Company, or any
conviction of the Employee of a felony. No act or failure to act shall be
considered "willful" for purposes of this definition if the Employee
reasonably believed in good faith that such act or failure to act was in, or
not opposed to, the best interests of the Company. In the event of a willful
and continuous failure by the Employee to substantially perform his duties,
the Company shall notify the Employee in writing of such failure to perform
and the Employee shall have a period of thirty (30) days after such notice to
resume substantial performance of his duties.
 
ARTICLE VII. NON-TRANSFERABILITY:
 
   Except as may otherwise be permitted by the Committee, no Award shall be
sold, assigned, transferred, pledged, hypothecated or otherwise disposed of
during the time in which the requirement of attainment of performance
objectives has not been achieved. Each Award shall be paid during the
Participant's lifetime only to the Participant or, if permissible under
applicable law, to the Participant's legal representatives.
 
ARTICLE VIII. TAXES:
 
   In order to comply with all applicable federal or state income, social
security, payroll, withholding or other tax laws or regulations, the Company
may take such action, and may require a Participant to take such action, as
it deems appropriate to ensure that all applicable federal or state income,
social security, payroll, withholding or other taxes, which are the sole and
absolute responsibility of the Participant,  are withheld or collected from
such Participant.
 
ARTICLE IX. AMENDMENT AND TERMINATION:
 
9.1   AMENDMENTS TO AND TERMINATION OF PLAN: Except to the extent prohibited
      by applicable law and unless otherwise expressly provided in the Plan,
      the Committee may amend, alter, suspend, discontinue or terminate the
      Plan; provided, however, that notwithstanding any other provision of
      the Plan, without the approval of the stockholders of the Company, no
      such amendment, alteration, suspension, discontinuation or termination
      shall be made
      that, absent such approval, would cause any compensation paid pursuant
      to any Award granted pursuant to the Plan to no longer qualify as
      "qualified performance-based compensation" within the meaning of
      Section 162(m) of the Code.
 
9.2   CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES: Except to the
      extent prohibited by applicable law and unless otherwise expressly
      provided in the Plan, the Committee may correct any defect, supply any
      omission or reconcile any inconsistency in the Plan, and Award in the
      manner and to the extent it shall deem desirable to carry the Plan into
      effect.
 
 
ARTICLE X. MISCELLANEOUS:
 
10.1  GOVERNING LAW: The Plan shall be governed by and construed in
      accordance with the laws of the State of Maryland.
 
10.2  SEVERABILITY: If any provision of the Plan or any Award is or becomes
      or is deemed to be invalid, illegal or unenforceable in any
      jurisdiction or would disqualify the Plan, or any Award under any law
      deemed applicable by the Committee, such provision shall be construed
      or deemed amended to conform to applicable laws, or if it cannot be so
      construed or deemed amended without, in the determination of the
      Committee, materially altering the purpose or intent of the Plan, or
      the Award, such provision shall be stricken as to such jurisdiction,
      and the remainder of the Plan, or any such Award, shall remain in full
      force and effect.
 
10.3  NO TRUST OR FUND CREATED: Neither the Plan nor any Award shall create
      or be construed to create a trust or separate fund of any kind or a
      fiduciary relationship between the Company or any Affiliate and a
      Participant or any other person. To the extent that any person acquires
      a right to receive payments from the Company or any Affiliate pursuant
      to an Award, such right shall be no greater than the right of any
      unsecured general creditor of the Company or of any Affiliate.
 
10.4  NATURE OF PAYMENTS: Any and all payments pursuant to any Award granted
      hereunder shall constitute special incentive payments to the
      Participant, and, except as hereinafter provided, such payments shall
      not be taken into account in computing the amount of the Participant's
      remuneration for purposes of determining the amount of any benefit
      payable to or with respect to the Participant under any employee
      pension benefit plan or employee welfare benefit plan (as those terms
      are defined in Section 3 of ERISA) or under the supplemental executive
      retirement plan or in any agreement between the Company (or any
      Affiliate) and the Participant to provide similar benefits.
 
10.5  NO ILLEGAL TRANSACTIONS: The Plan and any Award granted hereunder are
      subject to all laws and regulations of any governmental authority which
      may be applicable thereto; and, notwithstanding any provision of the
      Plan or any Award, Participants shall not be entitled to receive the
      benefit of any Award, and the Company and any Affiliate shall not be
      obligated to pay any such benefits to a Participant, if such receipt or
      payment of benefits would constitute a violation by the Participant or
      the Company or any Affiliate of any provision of any such law or
      regulation.
 
10.6  HEADINGS: Headings are given to the Articles and sections of the Plan
      solely as a convenience to facilitate reference. Such headings shall
      not be deemed in any way material or relevant to the construction or
      interpretation of the Plan or any provision.