McCORMICK & COMPANY, INCORPORATED
18 LOVETON CIRCLE
SPARKS, MARYLAND 21152
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 20, 2002
The Annual Meeting of the Stockholders of McCormick & Company,
Incorporated will be held at the Hunt Valley Inn, Hunt Valley, Maryland at
10:00 a.m., March 20, 2002, for the purpose of considering and acting upon:
(a) the election of directors to act until the next Annual Meeting of
Stockholders or until their respective successors are duly elected and
qualified;
(b) the approval of the 2002 McCormick Mid-Term Incentive Plan, which is
attached as Exhibit A to the Proxy Statement and which has been adopted
by the Compensation Committee and the Board of Directors subject to the
approval of the stockholders;
(c) the ratification of the appointment of Ernst & Young LLP as independent
auditors of the Company to serve for the 2002 fiscal year; and
(d) any other matters that may properly come before such meeting or any
adjournments thereof.
The Board of Directors has fixed the close of business on January 31, 2002
as the record date for the determination of stockholders entitled to notice
of, and to vote at, the Meeting or any adjournments thereof. ONLY HOLDERS OF
COMMON STOCK SHALL BE ENTITLED TO VOTE. Holders of Common Stock Non-Voting
are welcome to attend and participate in this meeting.
IF YOU ARE A HOLDER OF COMMON STOCK, A PROXY CARD IS ENCLOSED. PLEASE VOTE
YOUR PROXY PROMPTLY BY TELEPHONE, BY INTERNET OR BY MAIL AS DIRECTED ON THE
PROXY CARD IN ORDER THAT YOUR STOCK MAY BE VOTED AT THIS MEETING. THE PROXY
MAY BE REVOKED BY YOU AT ANY TIME BEFORE IT IS VOTED.
February 15, 2002 Robert W. Skelton
Secretary
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished on or about February 15, 2002 to the
holders of Common Stock in connection with the solicitation by the Board of
Directors of the Company of proxies to be voted at the Annual Meeting of
Stockholders or any adjournments thereof. Any proxy given may be revoked at
any time insofar as it has not been exercised. Such right of revocation is
not limited or subject to compliance with any formal procedure. The shares
represented by all proxies received will be voted in accordance with the
instructions contained in the respective proxies. The cost of the
solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, officers and regular employees
of the Company may solicit proxies by telephone, electronic mail or personal
interview. The Company also may request brokers and other custodians,
nominees, and fiduciaries to forward proxy soliciting material to the
beneficial owners of shares held of record by such persons, and the Company
may reimburse them for their expenses in so doing.
At the close of business on January 31, 2002, there were outstanding
7,912,180 shares of Common Stock which represent all of the outstanding
voting securities of the Company. Except for certain voting limitations
imposed by the Company's Charter on beneficial owners of ten percent or more
of the outstanding Common Stock, each of said shares of Common Stock is
entitled to one vote. Only holders of record of Common Stock at the close of
business on January 31, 2002 will be entitled to vote at the meeting or any
adjournments thereof.
PRINCIPAL STOCKHOLDERS
On January 31, 2002, the assets of The McCormick 401(k) Retirement Plan
(the "Plan") included 2,310,461 shares of the Company's Common Stock, which
represented 29.2% of the outstanding shares of Common Stock. The address for
the Plan is 18 Loveton Circle, Sparks, Maryland 21152. The Plan is not the
beneficial owner of the Common Stock for purposes of the voting limitations
described in the Company's Charter. Each Plan participant has the right to
vote all shares of Common Stock allocated to such participant's Plan account.
The Plan's Investment Committee possesses investment discretion over the
shares, except that, in the event of a tender offer, each participant of the
Plan is entitled to instruct the Investment Committee as to whether to tender
Common Stock allocated to such participant's account. Membership on the
Investment Committee consists of three directors, Francis A. Contino, Carroll
D. Nordhoff, and Karen D. Weatherholtz, and the Company's Vice President &
Controller, Kenneth A. Kelly, Jr., the Company's Vice President & Treasurer,
Christopher J. Kurtzman and the Company's Vice President, General Counsel &
Secretary, Robert W. Skelton.
2
Harry K. Wells and his wife Lois L.Wells, whose address is P. O. Box 409,
Riderwood, Maryland 21139, held in two trusts 536,623 shares of Common Stock
as of January 31, 2002, representing 6.8% of the outstanding shares of Common
Stock.
ELECTION OF DIRECTORS
The persons listed in the following table have been nominated for election
as directors to serve until the next Annual Meeting of Stockholders or until
their respective successors are duly elected and qualified. Management has no
reason to believe that any of the nominees will be unavailable for election.
In the event a vacancy should occur, the proxy holders reserve the right to
reduce the total number of nominations for election. There is no family
relationship between any of the nominees.
The following table shows, as of January 31, 2002, the names and ages of
all nominees, the principal occupation and business experience of each
nominee during the last five years, the year in which each nominee was first
elected to the Board of Directors, the amount of securities beneficially
owned by each nominee, and directors and executive officers as a group, and
the nature of such ownership. Except as shown in the table, no nominee owns
more than one percent of either class of the Company's Common Stock.
REQUIRED VOTE OF STOCKHOLDERS. The favorable vote of at least a majority of
the shares of Common Stock of the Company present in person or by proxy at a
meeting at which a quorum is present is required for the election of each
nominee.
3
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE
NOMINEES LISTED BELOW.
Year First
Principal Occupation & Elected Amount and Nature* of
Name Age Business Experience Director Beneficial Ownership
---------------------------------------------------------------------------------------------------------------------
Common
Non-
Common Voting
--------------------
Barry H. Beracha 59 Executive Vice President, Sara Lee 2000 1,898 250
Corporation, and Chief Executive
Officer, Sara Lee Bakery Group
(August 2001 to present); Chairman
of the Board & Chief Executive Officer,
The Earthgrains Company (1993 to 2001)
James T. Brady 61 Managing Director - Mid- 1998 1,911 3,510
Atlantic, Ballantrae International,
Ltd. (1999 to present); Consultant,
(1998 to 1999); Secretary,
Maryland Department of Business
and Economic Development
(1995 to 1998)
Francis A. Contino 56 Executive Vice President & 1998 72,055 21,032
Chief Financial Officer (1998
to present); Managing Partner
(Baltimore Office), Ernst &Young
LLP (1995 to 1998)
Robert G. Davey 52 President - Global Industrial Group 1994 116,410 36,240
(1998 to present);
Executive Vice President &
Chief Financial Officer (1996 to
1998);
Edward S. Dunn, Jr. 58 President and Chief Executive Officer, 1998 2,929 3,649
Colonial Williamsburg Company
(June, 2001 to present); C.J. McNutt
Chair in Food Marketing, St. Joseph's
University (1998 to 2001); President,
Dunn Consulting (1997 to present);
President, Harris Teeter, Inc.
(1989 to 1997)
4
J. Michael Fitzpatrick 55 President & Chief Operating Officer, 2001 53 0
Rohm and Haas Company (1999 to
present); Vice President & Chief
Technology Officer, Rohm and Haas
Company (1995 to 1999)
Freeman A. Hrabowski, III 51 President, University of 1997 5,518 3,796
Maryland Baltimore County
(1992 to present)
Robert J. Lawless 55 Chairman of the Board (1999 to 1994 278,717 87,606
present); President (1996 to present); (3.5%)
Chief Executive Officer (1997 to
present) & Chief Operating Officer
(1995 to present); Executive Vice
President (1995 to 1996)
John C. Molan 55 President - Europe, Middle East & 2000 116,449 39,637
Africa (October 2000 to present);
Group Vice President & Managing
Director - Europe & Asia (1998 to
2000); Vice President & Managing
Director - Europe (1996 to 1998)
Carroll D. Nordhoff 56 Executive Vice President 1991 120,330 32,859
(1994 to present)
Robert W. Schroeder 56 President - U.S. Consumer 1996 89,747 30,058
Products Division (1999 to present);
Vice President & General Manager
McCormick/Schilling Division
(1995 to 1999)
William E. Stevens 59 Chairman, BBI Group (2000 to 1988 7,039 11,700
present); Chairman and Chief
Executive Officer, Wesmark Group
(1999 to 2001); Executive Vice
President, Mills & Partners,
(1996 to 1999)
Karen D. Weatherholtz 51 Senior Vice President - Human 1992 50,709 13,846
Relations (1999 to present);
Vice President - Human Relations
(1988 to 1999)
Directors and Executive Officers as a Group
(18 persons)..................................................................... 1,036,916 359,774
(12.1%)
5
* Includes shares of Common Stock and Common Stock Non-Voting known to be
beneficially owned by directors and executive officers alone or jointly with
spouses, minor children and relatives (if any) who have the same home as the
director or executive officer. Also includes the following numbers of shares
which could be acquired within 60 days of January 31, 2002 pursuant to the
exercise of stock options: Mr. Beracha - 250 shares of Common Stock, 250
shares of Common Stock Non-Voting; Mr. Brady - 750 shares of Common Stock,
750 shares of Common Stock Non-Voting; Mr. Contino - 61,951 shares of Common
Stock, 20,651 shares of Common Stock Non-Voting; Mr. Davey - 90,148 shares of
Common Stock, 30,050 shares of Common Stock Non-Voting; ; Mr. Dunn - 1,500
shares of Common Stock, 1,500 shares of Common Stock Non-Voting; Dr.
Hrabowski - 3,400 shares of Common Stock, 3,500 shares of Common Stock
Non-Voting; Mr. Lawless - 218,925 shares of Common Stock, 72,975 shares of
Common Stock Non-Voting; Mr. Molan -112,275 shares of Common Stock, 37,424
shares of Common Stock Non-Voting; Mr. Nordhoff - 67,238 shares of Common
Stock, 22,413 of Common Stock Non-Voting; Mr. Schroeder - 72,787 shares of
Common Stock, 24,262 of Common Stock Non-Voting; Mr. Stevens - 3,500 shares
of Common Stock, 3,500 shares of Common Stock Non-Voting; Ms. Weatherholtz -
32,774 shares of Common Stock, 10,924 shares of Common Stock Non-Voting; and
directors and executive officers as a group -778,536 shares of Common Stock,
265,878 shares of Common Stock Non-Voting. Also includes shares of Common
Stock which are beneficially owned by virtue of participation in the
McCormick 401(k) Retirement Plan: Mr. Contino - 6,893 shares of Common Stock;
Mr. Davey - 4,814 shares of Common Stock; Mr. Lawless -8,061 shares of Common
Stock; Mr. Nordhoff - 8,901 shares of Common Stock; Mr. Schroeder - 4,773
shares of Common Stock; Ms. Weatherholtz - 9,339 shares of Common Stock; and
directors and executive officers as a group - 52,353 shares of Common Stock.
Also includes shares of Common Stock which are beneficially owned by virtue
of participation in the Deferred Compensation Plan: Mr. Beracha -1,522
shares of Common Stock; Mr. Dunn - 661 shares of Common Stock; Dr.
Fitzpatrick - 53 shares of Common Stock; and Dr. Hrabowski - 1,016 shares of
Common Stock.
BOARD COMMITTEES
The Board of Directors has established the following committees to perform
certain specific functions. There is no Nominating Committee of the Board of
Directors. Board Committee membership as of February 15, 2002 is listed below.
AUDIT COMMITTEE. This Committee reviews the plan for and the results of the
independent audit and internal audit, reviews the Company's financial
information and internal accounting and management controls, and performs
other related duties. The following directors are currently members of the
Committee and serve at the pleasure of the Board of Directors: Messrs. Brady
and Stevens and Dr. Hrabowski. The Audit Committee held four meetings during
the last fiscal year.
COMPENSATION COMMITTEE. This Committee establishes and oversees executive
compensation policy; makes decisions about base pay, incentive pay and any
supplemental benefits for the Chief
6
Executive Officer, other members of the Executive Committee, and any other
executives listed in the proxy statement as one of the five highest paid
executives; and approves the grant of stock options, the timing of the
grants, the price at which the options are to be offered, and the number of
shares for which options are to be granted to employee directors and
officers. In addition, the Committee oversees the process of CEO succession
planning and reviews the Company's strategy for succession to other key
leadership positions. The following directors are members of the Committee
and serve at the pleasure of the Board of Directors: Messrs. Beracha, Dunn
and Stevens and Dr. Fitzpatrick and Dr. Hrabowski. None of the Committee
members is an employee of the Company or is eligible to participate in any
Company stock option program that is administered by the Committee. The
Compensation Committee held four meetings during the last fiscal year.
EXECUTIVE COMMITTEE. This Committee possesses authority to exercise all of
the powers of the Board of Directors in the management and direction of the
affairs of the Company between meetings of the Board of Directors, subject to
specific limitations and directions of the Board of Directors and subject to
limitations of Maryland law. This Committee also reviews and approves all
benefits and salaries of a limited group of senior executives and reviews and
approves individual awards under approved stock option plans for all persons
except directors and officers (see Compensation Committee). The following
directors are currently members of the Committee and serve at the pleasure of
the Board of Directors: Messrs. Contino, Davey, Lawless and Nordhoff. The
Executive Committee held 20 meetings during the last fiscal year.
ATTENDANCE AT MEETINGS
During the last fiscal year, there were seven meetings of the Board of
Directors. All of the Directors were able to attend at least 75% of the total
number of meetings of the Board and the Board Committees on which they served.
OTHER DIRECTORSHIPS
Certain individuals nominated for election to the Board of Directors hold
directorships in other companies. Mr. Beracha is a director of The Pepsi
Bottling Group, Inc. and Transora, Inc. Mr. Brady is a director of
Constellation Energy Group, Inc. and Allfirst Financial, Inc. Dr. Fitzpatrick
is a director of Rohm and Haas Company and Carpenter Technology
Corporation. Dr. Hrabowski is a director of Constellation Energy Group, Inc.,
The Baltimore Equitable Society and Mercantile Shareholders
Corporation. Mr. Lawless is a director of The Baltimore Life Insurance
Company, Carpenter Technology Corporation and Constellation Energy Group,
Inc. Mr. Stevens is a director of MEMC Electronic Materials, Inc.
7
REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Company's compensation program is designed (a) to attract, retain and
motivate highly talented individuals through a combination of base pay and
performance-based incentive awards; (b) to enhance the identity of the
employees' interests with the interests of the Company's stockholders; and
(c) to reward individual performance based on the achievement of the
Company's financial goals and strategic objectives. The structure and
benefits of the compensation program must be competitive with other programs
for similarly placed employees of food and other manufacturing companies of a
size similar to the Company. Independent compensation consultants are
retained from time to time for advice and guidance in assessing whether the
Company's compensation program is competitive. Most recently, Sibson &
Company was retained to conduct a study for such purposes and, based on the
study, concluded that, although enhancements may be appropriate for certain
aspects of the Company's longer term incentive awards, the Company's
compensation program is generally competitive.
SALARIES
Salaries of the Company's senior management employees are reviewed, and
where appropriate, adjusted annually. Salary ranges are established for each
senior management position based on the marketplace median for that position
and a salary is assigned to the manager within that range based on individual
performance, prior experience and contribution to the financial goals and
strategic objectives of the Company. Salaries for the Company's chief
executive officer and its five other highest paid executive officers are
reviewed and approved by the Compensation Committee. Salaries for other
senior management employees are reviewed and approved by the Executive
Committee.
INCENTIVE AWARDS
Annual bonuses are paid to senior management employees pursuant to a
formula. A limited number of corporate executives are paid a bonus based upon
the achievement of specified levels of earnings growth. Other corporate
executives and general managers of subsidiaries and divisions are paid a
bonus based on the achievement of specified operating profit and working
capital targets as well as earnings growth targets. If the targeted
performance is achieved, a bonus is paid in an amount equal to either a
percentage of salary or a percentage of the midpoint of the salary range for
the employee's position. If performance exceeds targeted levels, an employee
may be paid up to twice that amount. If the targets are not achieved, no
bonus is paid. Annual bonuses for the Company's chief executive officer and
its five other highest paid executive officers are reviewed and approved by
the Compensation Committee. Bonuses for other senior management employees are
reviewed and approved by the Executive Committee.
8
The Company also has a mid-term incentive program which was first adopted,
with the approval of the Company's stockholders, in 1998. The 1998 plan is
described in the Company's proxy statement dated February 18, 1998. In
November 2001, the Compensation Committee adopted, subject to stockholder
approval, the 2002 Mid-Term Incentive Plan, a copy of which is attached to
this proxy statement as Exhibit A. Please see pages 17 to 19 of this proxy
statement for a summary of the Plan. Benefits under this program are paid
upon the achievement of established targets for sales growth and total
shareholder return over a period of three years. The targets are established
prior to the commencement of each three year cycle. The Company believes that
this program plays an important role in aligning the compensation of
executives with the key financial goals which drive the Company's success and
create shareholder value. Participation in the program is limited to those
few executives who are in positions which have a significant impact on the
achievement of the goals and who must provide the long term strategic
leadership necessary to accomplish the goals. The mid-term incentive program
is administered by the Compensation Committee.
The Company has regularly granted stock options to its key management
employees since the mid-1960's. The Company continues to believe that the
stock option programs are an effective vehicle for causing its key management
employees to identify with the interests of its stockholders. The number of
shares for which an option is granted is determined by the wage grade
assigned to the executive although additional shares are occasionally awarded
to an individual for exemplary performance. Each of the option agreements
contains a vesting schedule which provides an inducement to employees to
remain in the employment of the Company in order to maximize the economic
benefit of the option. The Compensation Committee is responsible for the
administration of the stock option plan with respect to the Company's
officers and directors. The Executive Committee administers the plan for all
other participants.
CHIEF EXECUTIVE OFFICER COMPENSATION
Compensation for the Company's chief executive officer is structured the
same as compensation for other senior management employees. As disclosed in
the Table on page 11 of this proxy statement, Mr. Lawless' compensation for
2001 consisted of a salary, a cash bonus and
9
a grant of an option under the Company's stock option plan. In addition, he
was paid a fee for his membership on the Board of Directors. The criteria
used by the Committee in determining the amount of compensation paid to Mr.
Lawless were the same as those previously disclosed in this Report for other
senior management employees.
Submitted by:
COMPENSATION COMMITTEE EXECUTIVE COMMITTEE
William E. Stevens, Chairman Robert J. Lawless, Chairman
Barry H. Beracha Francis A. Contino
Edward S. Dunn, Jr. Robert G. Davey
J. Michael Fitzpatrick Carroll D. Nordhoff
Freeman A. Hrabowski, III
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until the appointment of Dr. Fitzpatrick in November 2001, the
Compensation Committee consisted of Messrs. Stevens, Beracha and Dunn and Dr.
Hrabowski. No member of the Committee is an officer or an employee of the
Company or any of its subsidiaries, and no member has any interlocking or
insider relationships with the Company which are required to be reported
under applicable rules and regulations of the Securities and Exchange
Commission.
At the close of fiscal year 2001, members of the Executive Committee were
Messrs. Lawless, Contino, Davey and Nordhoff. All are employees and executive
officers of the Company. The table beginning at page 4 of this proxy
statement sets forth the business experience of each of the members.
10
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company and
its subsidiaries for services rendered during each of the fiscal years ended
November 30, 2001, 2000 and 1999 to the Chief Executive Officer of the
Company and each of the four most highly compensated executive officers who
were executive officers on the last day of the 2001 fiscal year, determined
by reference to total salary and bonus paid to such individuals for the 2001
fiscal year.
-------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
-------------------------------------------------------------------------------------------------------
Awards Payouts
------------------------
Fiscal (1) (1) Other Annual Securities (2) (3)
Name and Principal Year Salary Bonus Compensation Underlying LTIP All Other
Position ($) ($) ($) Options/SARs Payouts Compensation
(#) ($) ($)
-------------------------------------------------------------------------------------------------------------------------
ROBERT J. LAWLESS 2001 701,367 1,120,000 (4) 143,000 0 19,507
Chairman of the Board, 2000 633,033 899,600 113,000 955,500 13,958
President & Chief 1999 583,033 786,200 83,800 0 9,745
Executive Officer
ROBERT G. DAVEY 2001 434,700 473,000 (4) 65,000 0 15,407
President-Global 2000 405,117 422,000 58,000 336,000 9,909
Industrial Group 1999 380,950 395,200 42,700 0 7,816
FRANCIS A. CONTINO 2001 365,700 360,000 (4) 50,000 0 14,096
Executive Vice 2000 347,367 355,000 43,000 262,500 5,383
President & 1999 326,367 301,000 31,800 0 3,136
Chief Financial Officer
CARROLL D. NORDHOFF 2001 319,117 313,000 (4) 50,000 0 13,717
Executive Vice 2000 306,373 310,000 43,000 309,750 8,254
President 1999 292,283 301,000 31,800 0 6,910
ROBERT W. SCHROEDER 2001 350,950 269,598 (4) 48,000 0 14,066
President-U.S. 2000 318,033 176,748 33,500 246,750 7,828
Consumer Products 1999 285,967 191,000 26,400 0 6,426
Division
------------------------------------------------------------------------------------------------------------------------------
(1) Includes Corporate Board of Directors fees and service awards.
Compensation deferred at the election of the named officer is included in
the category and year it would have otherwise
11
been reported had it not been deferred.
(2) Amounts shown as "LTIP Payouts" are payments under the three-year cycle
of the Mid-Term Incentive Program for the period ended November 30, 2000.
Awards were paid in shares of restricted stock of the Company based on
the stock price on November 30, 2000.
(3) Amounts paid or accrued under the Company's 401(k) Retirement Plan for
the accounts of such individuals. The stated figures represent the
amounts that would have been contributed to the individual's account
under the Company's 401(k) Retirement Plan but for certain limits imposed
by the Internal Revenue Code. Amounts in excess of these limits were paid
in cash to these individuals as follows: In 2001, for Messrs. Contino,
Davey, Lawless, Nordhoff and Schroeder the excess amounts were $3,037,
$4,347, $8,448, $2,658 and $3,007, respectively; in 2000 for Messrs.
Davey, Lawless, Nordhoff and Schroeder the excess amounts were $4,526,
$8,575, $2,871 and $2,445, respectively; in 1999 for Messrs. Davey,
Lawless, Nordhoff and Schroeder the excess amounts were $2,433, $4,362,
$1,528 and $1,237, respectively.
(4) There is no amount of other annual compensation that is required to be
reported.
COMPENSATION OF DIRECTORS
Corporate Board of Directors fees are paid at the rate of $7,200 per year
for each director who is an employee of the Company. Fees paid to each
director who is not an employee of the Company consist of an annual retainer
fee of $25,000 in cash, $10,000 in Common Stock of the Company, and $1,250
for each Board meeting attended. Non-employee directors serving on Board
Committees receive $1,000 for each Committee meeting attended, with Committee
chairs receiving an additional $250 for each Committee meeting attended.
Under the Directors' Non-Qualified Stock Option Plan, each year non-employee
directors are granted options for 1,250 shares of Common Stock and 1,250
shares of Common Stock Non-Voting.
12
PENSION PLAN TABLE
The following table shows the estimated annual benefits (on a single-life
basis), including supplemental benefits, payable upon retirement (assuming
retirement at age 65) to participants in the designated average compensation
and years of service classifications:
---------------------------------------------------------------------------------------------------
AVERAGE YEARS OF SERVICE
COMPENSATION 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 Years
---------------------------------------------------------------------------------------------------
$500,000 $83,886 $125,828 $167,770 $209,713 $251,655 $294,222
$600,000 $101,286 $151,928 $202,570 $253,213 $303,855 $355,122
$700,000 $118,686 $178,028 $237,370 $296,713 $356,055 $416,022
$800,000 $136,086 $204,128 $272,170 $340,213 $408,255 $476,922
$900,000 $153,486 $230,228 $306,970 $383,713 $460,455 $537,822
$1,000,000 $170,886 $256,328 $341,770 $427,213 $512,655 $598,722
$1,100,000 $188,286 $282,428 $376,570 $470,713 $564,855 $659,622
$1,200,000 $205,686 $308,528 $411,370 $514,213 $617,055 $720,522
$1,300,000 $223,086 $334,628 $458,170 $557,713 $687,255 $802,422
$1,400,000 $240,486 $360,728 $480,970 $601,213 $721,455 $842,322
---------------------------------------------------------------------------------------------------
The Company's Pension Plan is non-contributory. A majority of the
employees of the Company and participating subsidiaries are eligible to
participate in the Plan upon completing one year of service and attaining age
21. The Plan provides benefits (which are reduced by an amount equal to 50%
of the participant's Social Security benefit) based on an average of the
participant's highest five consecutive 12-month periods of compensation,
excluding any cash bonuses, and length of service. The Company has a
supplement to its Pension Plan to provide a limited group of its senior
executives with an inducement to retire before age 65. That group of senior
executives will receive credit for additional service for employment after
age 55. The supplement includes a significant portion of the senior
executives' bonuses in the calculation of pension benefits and provides that
if a senior executive with Company service outside the U.S. retires after
serving at least his or her last three years in the U.S., all of the
executive's years of Company service, including years of service with foreign
subsidiaries of the Company, will be counted in calculating pension benefits.
The group of senior executives includes those listed in the table on page 11.
For purposes of calculating the pension benefit, the average of the
highest five consecutive 12-month periods of compensation for the executives
listed in the compensation table as of November 30, 2001 is as follows: Mr.
Contino - $614,595; Mr. Davey - $696,995; Mr. Lawless - $1,269,248; Mr.
Nordhoff - $538,059; Mr. Schroeder - $476,385. The years of credited service
for these executives as of the same date (including, for Messrs. Lawless and
Davey, service with foreign subsidiaries of the Company) are: Mr. Contino
-3.5; Mr. Davey - 24.5; Mr. Lawless - 25; Mr. Nordhoff - 31; Mr. Schroeder
-16.
13
In 1999, the Company adopted a deferred compensation plan which allows a
limited number of management employees to defer the payment of portions of
salary and bonus. Plan participants may invest their deferred compensation in
any one or a combination of the plan's investment funds. In most cases,
deferred amounts plus earnings are paid out upon the participant's retirement
or termination of employment.
STOCK OPTIONS
During the last fiscal year, the Company has granted stock options to
certain employees, including executive officers, pursuant to stock option
plans approved by the Company's stockholders.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------------------------------------------------------------------------------------------
Potential
Realizable Value
At Assumed
Annual Rates of
Stock Price
Appreciation For
Option Term ($)**
-------------------------------------------------------------------------------------------------------------------------
Individual Grants*
-------------------------------------------------------------------------------------------------------------------------
Number of % of Total Exercise or Expiration
Securities Options/SARs Base Date
Name Underlying Granted To Price
Options/SARs Employees in ($/Shares)
Granted (#) Fiscal Year 0% 5% 10%
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Robert J. Lawless 143,000 6.48% $35.6875 1/22/2011 $0 $3,056,584 $7,889,959
-------------------------------------------------------------------------------------------------------------------------
Robert G. Davey 65,000 2.94% $35.6875 1/22/2011 $0 $1,389,356 $3,586,345
-------------------------------------------------------------------------------------------------------------------------
Francis A. Contino 50,000 2.27% $35.6875 1/22/2011 $0 $1,068,736 $2,758,727
-------------------------------------------------------------------------------------------------------------------------
Carroll D. Nordhoff 50,000 2.27% $35.6875 1/22/2011 $0 $1,068,736 $2,758,727
-------------------------------------------------------------------------------------------------------------------------
Robert W. Schroeder 48,000 2.17% $35.6875 1/22/2011 $0 $1,025,986 $2,648,378
-------------------------------------------------------------------------------------------------------------------------
* The stock options are exercisable cumulatively as follows: none of the
shares granted during the first year of the option; not more than 25% of
the shares granted during the second year of the option; not more than 50%
of the shares granted during the third year of the option, less any shares
for which the option has been previously exercised; not more than 75% of
the shares granted during the fourth year of the option, less any shares
for which the option has been previously exercised; and 100% of the shares
granted, less any portion of such option previously exercised, at any time
during the period between the end of the fourth year of the option and the
expiration date. All stock options granted under the stock option plans
become fully exercisable in the event of a change in control of the
Company. Approximately 500 employees of the Company were granted options
under the Company's option plans during the last fiscal year.
** The dollar amounts under these columns are the result of calculations at
0%, and at the 5% and 10% compounded annual rates set by the Securities
and Exchange Commission, and therefore are not
14
intended to forecast future appreciation, if any, in the price of the
Company's Common Stock. The potential realizable values illustrated at 5%
and 10% compound annual appreciation assume that the price of the
Company's Common Stock increases $21.37 and $55.17 per share,
respectively, over the 10-year term of the options. If the named
executives realize these values, the Company's stockholders will realize
aggregate appreciation in the price of the approximately 69.3 million
shares of the Company's Common Stock and Common Stock Non-Voting
outstanding as of January 31, 2002 of approximately $1.5 billion and $ 3.8
billion, over the same period.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTION/SAR VALUES
--------------------------------------------------------------------------------------------------------------------------
Value of Unexercised
Number of Shares In-the-Money
Shares Acquired Value Underlying Unexercised Options/SARs
Name on Exercise (#) Realized ($) Options/SARs at FY-End at FY-End ($)
(#) Exercisable/
Exercisable/Unexercisable Unexercisable
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
Robert J. Lawless 25,000 $361,661 181,879 / 294,721 $2,661,191/ $3,483,582
--------------------------------------------------------------------------------------------------------------------------
Robert G. Davey 42,277 $791,513 64,951 / 143,672 $854,472 / $1,794,661
--------------------------------------------------------------------------------------------------------------------------
Francis A. Contino 0 0 51,402 / 106,398 $705,182 / $1,277,293
--------------------------------------------------------------------------------------------------------------------------
Carroll D. Nordhoff 4,469 $74,141 74,979 / 110,221 $1,123,267 / 1,339,813
--------------------------------------------------------------------------------------------------------------------------
Robert W. Schroeder 14,800 $274,274 59,352 / 97,048 $878,091 / $1,145,531
--------------------------------------------------------------------------------------------------------------------------
15
PERFORMANCE GRAPH - SHAREHOLDER RETURN
Set forth below is a line graph comparing the yearly percent change in the
Company's cumulative total shareholder return (stock price appreciation plus
reinvestment of dividends) on the Company's Common Stock with (i) the
cumulative total return of the Standard & Poor's 500 Stock Price Index,
assuming reinvestment of dividends, and (ii) the cumulative total return of
the Standard & Poor's Food Products Index, assuming reinvestment of dividends.
1996 1997 1998 1999 2000 2001
McCormick 100 110 142 139 166 195
S&P 500 100 129 159 192 184 162
S&P Food 100 134 151 124 143 147
The graph assumes that $100 was invested on December 1, 1996 in McCormick &
Company, Incorporated Common Stock, the Standard & Poor's 500 Stock Price
Index and the Standard & Poor's Food Products Index, and that all dividends
were reinvested.
16
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10
percent of a registered class of the Company's equity securities, to file
with the SEC and the New York Stock Exchange, initial reports of ownership
and reports of changes in beneficial ownership of such equity securities of
the Company. To the Company's knowledge, based upon the reports filed and
written representations that no other reports were required, during the
fiscal year ended November 30, 2001, no director or executive officer of the
Company failed to file on a timely basis reports required by Section 16(a).
THE 2002 McCORMICK MID-TERM INCENTIVE PLAN
On March 18, 1998, stockholders approved the Company's first Mid-Term
Incentive Program. The Program was designed to create incentives for the
Company's most senior executive officers and other key employees to achieve
long-term key financial goals and strategic objectives for the Company,
thereby increasing stockholder value. The Compensation Committee believes
that the 1998 Program was successful in achieving its objectives and has
approved a new 2002 Mid-Term Incentive Plan ("MTIP"). Upon recommendation of
the Committee, the Board of Directors approved the MTIP on January 22, 2002,
subject to stockholder approval. The Company is seeking stockholder approval
of the MTIP to qualify compensation paid under the MTIP as "qualified
performance-based compensation," as defined in Section 162(m) of the Internal
Revenue Code (the "Code"). The following is only a summary of certain
material features of the MTIP. The full text of the MTIP is attached as
Exhibit A. The Compensation Committee recommends approval of the MTIP.
The MTIP is designed to provide an incentive to a limited number of the
Company's most senior executives to take actions to cause the Company to
achieve targeted objectives for sales growth and total shareholder return.
The MTIP would be comprised of several three-year cycles. The commencement
date of each cycle is subject to the discretion of the Compensation
Committee, which has determined that the first three-year cycle would start
on December 1, 2001.
Prior to the commencement of each cycle, the Company will establish, with
the approval of the Compensation Committee, a goal for sales growth and total
shareholder return. As used in the MTIP, "total shareholder return" means the
increase (or decrease) in fair market value of a share of common stock,
together with dividends deemed reinvested, during the cycle. Total
shareholder return for the Company during a cycle will be compared to the
total shareholder return of other companies in the "Peer Group" defined in
the MTIP. For the first cycle, the Peer Group is the S&P Food Products Index.
The amount of benefit to be paid under the MTIP to participants depends on
the extent to which the sales growth target is achieved and also on the
relative
17
position of the Company, based on its total shareholder return for the
three-year cycle, as compared to other companies in the Peer Group. Payments
will be adjusted if actual performance over the cycle is greater than or less
than the goals. Payment will be in the form of shares of McCormick Common
Stock based on the value of such shares at the time that the payment is due.
The MTIP provides that the maximum benefit that may be paid to the highest
level participant at the end of any three-year cycle shall not exceed the
fair market value of one hundred thousand (100,000) shares of the Common
Stock of the Company.
The Compensation Committee will administer the MTIP and will designate as
participants those key executives who are in positions which have a
significant impact on the achievement of the Company's objectives for sales
growth and total shareholder return. Directors of the Company who are not
also employees of the Company are not eligible to participate in the MTIP.
For the cycle beginning December 1, 2001, the Company has named six key
executives as participants, including Messrs. Lawless, Contino, Davey,
Nordhoff and Schroeder.
Participants will become vested in MTIP benefits upon completion of each
three-year cycle, except for special circumstances, such as retirement, death
or disability. If a participant's employment terminates prior to the
completion of a cycle as a result of retirement, death or disability, a pro
rata benefit is paid based on the participant's length of service in the
cycle. If a participant terminates employment voluntarily or is terminated
involuntarily for cause during a cycle, all benefits under the current cycle
are forfeited.
In general, upon receipt of shares of stock pursuant to the MTIP, it is
expected that recipients will recognize ordinary income for U.S. income tax
purposes. Subject to the usual rules concerning reasonable compensation, and
assuming as expected that compensation paid under the MTIP is "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code, the Company will be entitled to a tax deduction for that same amount at
the time a participant recognizes ordinary income.
The shares of stock issued to MTIP participants will not be registered
under the Securities Act of 1933, and will, therefore, be "restricted"
securities upon issuance. Recipients will be required to make a Section 83(b)
election under the Internal Revenue Code.
REQUIRED VOTE OF STOCKHOLDERS
The affirmative vote of the holders of a majority of shares of Common
Stock, present in person or by proxy, voted at the meeting, is required for
approval of the MTIP.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF
THE 2002 MCCORMICK MID-TERM INCENTIVE PLAN.
18
NEW PLAN BENEFITS
Regulations of the Securities and Exchange Commission call for a table
setting forth the amounts that will be received by (i) the Chief Executive
Officer and the four other executive officers named on page 11 of this proxy
statement, (ii) the Company's executive officers as a group, (iii) directors
who are not executive officers as a group, and (iv) all employees, including
officers who are not executive officers, as a group, under the Plan being
submitted to the stockholders for approval, if such amounts are determinable.
If such amounts are not determinable, which is the case for the MTIP, the
Company is required to set out the amounts which would have been received for
the last fiscal year if the plans had been in effect. In the case of the
MTIP, the Company is unable to provide meaningful information as to amounts
which would have been received for the last fiscal year if the Plan had been
in effect, since payment, if any, is entirely dependent on comparing two
variables at a future point in time. The awards paid under earlier
performance cycles of the Mid-Term Incentive Program adopted in 1998 are
included under "LTIP Payouts" in the Summary Compensation Table on page 11.
19
REPORT OF AUDIT COMMITTEE
AND
FEES OF INDEPENDENT ACCOUNTANTS
REPORT OF AUDIT COMMITTEE
The Board of Directors of the Company has adopted a charter for the Audit
Committee that charges the Committee with the responsibility for, among other
things, reviewing the Company's audited financial statements and the
financial reporting process. In carrying out that responsibility, the
Committee has reviewed and discussed the Company's audited financial
statements with management and it has discussed the matters required to be
discussed by Statement of Auditing Standards 61, as amended, with the
independent auditors. In addition, the Committee has reviewed the written
disclosures required by Independence Standards Board Standard No. 1, which
were received from the Company's independent accountants, and has discussed
the independent accountants' independence with them. The Audit Committee has
reviewed the fees of the independent accountants for non-audit services and
believes that such fees are compatible with the independence of the
independent accountants.
Based on these reviews and discussions, the Committee recommended to the
Board of Directors that the Company's audited financial statements be
included in the Company's Annual Report on Form 10-K for the Company's fiscal
year ended November 30, 2001.
The members of the Audit Committee are "independent" as defined in
Sections 303.01(B)(2)(a) and (B)(3) of the New York Stock Exchange's listing
standards.
James T. Brady, Chairman
Freeman A. Hrabowski, III
William E. Stevens
FEES OF INDEPENDENT ACCOUNTANTS
The aggregate fees billed for professional services rendered by Ernst &
Young LLP for the audit of the Company's annual financial statements for the
most recent fiscal year and the review of the financial statements included
in the Company's Quarterly Reports on Form 10-Q for the fiscal year were $1.1
million. Audit-related fees for the fiscal year were $2.4 million. No
professional services were rendered or fees billed by Ernst & Young LLP for
financial information systems design and implementation for the most recent
fiscal year. The aggregate fees billed for professional services rendered by
Ernst & Young LLP other than audit fees, (but including and audited-related
fees) for the most recent fiscal year were $3.8 million.
20
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed the accounting firm of Ernst & Young LLP to serve as the
independent auditors of the Company for the current fiscal year subject to
ratification by the stockholders of the Company. Ernst & Young LLP were first
appointed to serve as independent auditors of the Company in 1982 and are
considered by management of the Company to be well qualified.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting. They will have an opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
REQUIRED VOTE OF STOCKHOLDERS. The favorable vote of at least a majority of the
shares of Common Stock of the Company present in person or by proxy at a meeting
at which a quorum is present is required for ratification of the appointment of
independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION.
OTHER MATTERS
Management knows of no other matters that may be presented for
consideration at the meeting. However, if any other matters properly come
before the meeting, it is the intention of the persons named in the proxy to
vote such proxy in accordance with their judgment on such matters.
VOTING PROCEDURES
Each matter submitted to the stockholders for a vote is deemed approved if
a majority of the shares of Common Stock of the Company present in person or
by proxy at a meeting at which a quorum is present votes in favor of the
matter. The presence in person or by proxy of stockholders entitled to cast a
majority of all the votes entitled to be cast at the meeting constitutes a
quorum.
Stockholder votes are tabulated by Wells Fargo Bank Minnesota, N.A., the
Company's transfer agent. Broker non-votes are neither counted in
establishing a quorum nor voted for or against matters presented for
stockholder consideration; proxy cards that are executed and returned without
any designated voting direction are voted in the manner stated on the proxy
card. Abstentions and broker non-votes with respect to a proposal are not
counted as favorable votes, and therefore have the same effect as a vote
against the proposal.
21
HOUSEHOLDING OF ANNUAL DISCLOSURE DOCUMENTS
The Securities and Exchange Commission recently approved a new rule
governing the delivery of annual disclosure documents. The rule allows the
Company to send a single set of our annual report and proxy statement to any
household at which two or more stockholders reside if we believe that the
stockholders are members of the same family. This rule benefits both
stockholders and the Company. It reduces the volume of duplicate information
received at your house and helps to reduce the Company's expenses. Each
stockholder will continue to receive a separate proxy card.
If your household received a single set of disclosure documents for this
year, but you would prefer to receive your own copy, please contact our
transfer agent, Wells Fargo Bank Minnesota, N.A., by calling their toll-free
number, 800-468-9716.
If you would like to receive your own set of the Company's annual
disclosure documents in future years, please follow the directions below.
Similarly, if you share an address with another McCormick stockholder and
together both of you wish to receive only a single set of the Company's
annual disclosure documents, please follow these directions:
Please contact our transfer agent, Wells Fargo Bank, and inform them of
your request by calling them at 800-468-9716 or writing to them at P.O. Box
64854, St. Paul, MN 55164-0854.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Proposals of stockholders to be presented at the 2003 Annual Meeting must
be received by the Secretary of the Company prior to October 20, 2002 to be
considered for inclusion in the 2003 proxy material.
22
EXHIBIT A
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
23
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
24
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.
25
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.
26
(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
27
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.
28
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
29
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
30
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.
31
PROXY
MCCORMICK & COMPANY, INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert J. Lawless, Carroll D. Nordhoff
and Robert W. Skelton and each of them, the proxies of the undersigned, with
several power of substitution, to vote all shares of Common Stock which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
on March 20, 2002, and at any and all adjournments thereof, in accordance with
the following ballot and in accordance with their best judgment in connection
with such other business as may properly come before the Meeting:
IN THE ABSENCE OF SPECIFIC INSTRUCTIONS APPEARING ON THE PROXY, PROXIES WILL
BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE APPROVAL OF THE 2002
McCORMICK MID-TERM INCENTIVE PLAN AND FOR THE RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS AS SET FORTH HEREIN, AND IN THE BEST DISCRETION OF THE
PROXIES AS TO ANY OTHER MATTERS WHICH THE PROXIES DO NOT KNOW A REASONABLE
TIME BEFORE THE SOLICITATION ARE TO BE PRESENTED AT THE MEETING, OR AS MAY
OTHERWISE PROPERLY COME BEFORE THE MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3
1. ELECTION OF DIRECTORS:
- 01 B. H. Beracha
02 J. T. Brady
03 F. A. Contino
04 R. G. Davey
05 E. S. Dunn, Jr.
06 J. M. Fitzpatrick
07 F. A. Hrabowski, III
08 R. J. Lawless
09 J.C. Molan
10 C. D. Nordhoff
11 R. W. Schroeder
12 W. E. Stevens
13 K. D. Weatherholtz
VOTE FOR all nominees (except as marked)
VOTE WITHHELD from all nominees
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right)
WITHHELD _____________________________________________________________
2. PROPOSAL TO APPROVE THE 2002 McCORMICK MID-TERM INCENTIVE PLAN.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS.
THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR THE PROPOSAL.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Date:
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(Please sign exactly as your
name(s) appears on Proxy. If held
in joint tenancy, all persons must
sign. Trustees, administrators,
etc. should include title and
authority. Corporations should
provide the full name of
corporation and title of authorized
officer signing the proxy.