EXHIBIT 10.4



 








Exhibit 10.4



2004 MOODY’S CORPORATION



COVERED EMPLOYEE CASH INCENTIVE PLAN



 


		
	1.	
    Purpose of the Plan



     
The purpose of the Plan is to advance the
interests of the Company and its stockholders by providing
incentives in the form of periodic cash bonus awards to certain
management employees of the Company and its Subsidiaries,
thereby motivating such employees to attain performance goals
established pursuant to the Plan.



 


		
	2.	
    Definitions



     
The following capitalized terms used in the Plan
have the respective meanings set forth in this Section:




		
	 	     
    (a) Act:     The
    Securities Exchange Act of 1934, as amended, or any successor
    thereto.
    
	 
	 	     
    (b) Award:     A
    periodic cash bonus award granted pursuant to the Plan.
    
	 
	 	     
    (c) Beneficial
    Owner:     As such term is defined
    in Rule 13d-3 under the Act (or any successor rule thereto).
    
	 
	 	     
    (d) Board:     The
    Board of Directors of the Company.
    
	 
	 	     
    (e) Change in
    Control:     The occurrence of any
    of the following events:
    





		
	 	     
    (i) any “Person” as such term is
    used in Section 13(d) and 14(d) of the Act (other than the
    Company, any trustee or other fiduciary holding securities under
    an employee benefit plan of the Company, or any company owned,
    directly or indirectly, by the stockholders of the Company in
    substantially the same proportions as their ownership of stock
    of the Company), becomes the Beneficial Owner, directly or
    indirectly, of securities of the Company representing 20% or
    more of the combined voting power of the Company’s then
    outstanding securities;
    
	 
	 	     
    (ii) during any period of twenty-four months
    (not including any period prior to the Effective Date),
    individuals who at the beginning of such period constitute the
    Board, and any new director (other than (A) a director
    nominated by a Person who has entered into an agreement with the
    Company to effect a transaction described in
    Sections 2(e)(i), (iii) or (iv) of the Plan,
    (B) a director nominated by any Person (including the
    Company) who publicly announces an intention to take or to
    consider taking actions (including, but not limited to, an
    actual or threatened proxy contest) which if consummated would
    constitute a Change in Control or (C) a director designated
    by any Person who is the Beneficial Owner, directly or
    indirectly, of securities of the Company representing 10% or
    more of the combined voting power of the Company’s
    securities) whose election by the Board or nomination for
    election by the Company’s stockholders was approved in
    advance by a vote of at least two-thirds ( 2/3) of the
    directors then still in office who either were directors at the
    beginning of the period or whose election or nomination for
    election was previously so approved, cease for any reason to
    constitute at least a majority thereof;
    
	 
	 	     
    (iii) the stockholders of the Company
    approve a merger or consolidation of the Company with any other
    corporation, other than a merger or consolidation (A) which
    would result in the voting securities of the Company outstanding
    immediately prior thereto continuing to represent (either by
    remaining outstanding or by being converted into voting
    securities of the surviving entity) more than 50% of the
    combined voting power of the voting securities of the Company or
    such surviving entity outstanding immediately after such merger
    or consolidation and (B) after which no Person would hold
    20% or more of the combined voting power of the then outstanding
    securities of the Company or such surviving entity; or
    




 







 




		
	 	     
    (iv) the stockholders of the Company approve
    a plan of complete liquidation of the Company or an agreement
    for the sale or disposition by the Company of all or
    substantially all of the Company’s assets.
    





		
	 	     
    (f) Code:     The
    Internal Revenue Code of 1986, as amended, or any successor
    thereto.
    
	 
	 	     
    (g) Committee:     The
    Governance and Compensation Committee of the Board, or any
    successor thereto or any other committee designated by the Board
    to assume the obligations of the Committee hereunder.
    
	 
	 	     
    (h) Company:     Moody’s
    Corporation, a Delaware corporation.
    
	 
	 	     
    (i) Covered
    Employee:     An employee who is,
    or who is anticipated to become, a covered employee, as such
    term is defined in Section 162(m) of the Code (or any
    successor section thereto) and the Treasury Regulations
    promulgated thereunder.
    
	 
	 	     
    (j) Effective
    Date:     The date on which the
    Plan takes effect, as defined pursuant to Section 13 of the
    Plan.
    
	 
	 	     
    (k) Participant:     A
    Covered Employee of the Company or any of its Subsidiaries who
    is selected by the Committee to participate in the Plan pursuant
    to Section 4 of the Plan.
    
	 
	 	     
    (l) Performance
    Period:     The calendar year or
    any other period that the Committee, in its sole discretion, may
    determine.
    
	 
	 	     
    (m) Person:     As
    such term is used for purposes of Section 13(d) or 14(d) of
    the Act or any successor sections thereto.
    
	 
	 	     
    (n) Plan:     The
    2004 Moody’s Corporation Covered Employee Cash Incentive
    Plan.
    
	 
	 	     
    (o) Shares:     Shares
    of common stock, par value $0.01 per Share, of the Company.
    
	 
	 	     
    (p) Subsidiary:     A
    subsidiary corporation, as defined in Section 424(f) of the
    Code (or any successor section thereto).
    




 


		
	3.	
    Administration



     
The Plan shall be administered by the Committee
or such other persons designated by the Board. The Committee may
delegate its duties and powers in whole or in part to any
subcommittee thereof consisting solely of at least two
individuals who are each “non-employee directors”
within the meaning of Rule 16b-3 of the Act (or any
successor rule thereto) and “outside directors” within
the meaning of Section 162(m) of the Code (or any successor
section thereto) and the Treasury Regulations promulgated
thereunder. The Committee shall have the authority to select the
Covered Employees to be granted Awards under the Plan, to
determine the size and terms of an Award (subject to the
limitations imposed on Awards in Section 5 below), to
modify the terms of any Award that has been granted (except for
any modification that would increase the amount of the Award),
to determine the time when Awards will be made and the
Performance Period to which they relate, to establish
performance objectives in respect of such Performance Periods
and to certify that such performance objectives were attained;
provided, however, that any such action shall be
consistent with the applicable provisions of Section 162(m)
of the Code. The Committee is authorized to interpret the Plan,
to establish, amend and rescind any rules and regulations
relating to the Plan, and to make any other determinations that
it deems necessary or desirable for the administration of the
Plan; provided, however, that any action permitted to be
taken by the Committee may be taken by the Board, in its
discretion, to the extent that any such action taken by the
Board is consistent with the applicable provisions of
Section 162(m) of the Code. The Committee may correct any
defect or omission or reconcile any inconsistency in the Plan in
the manner and to the extent the Committee deems necessary or
desirable. Any decision of the Committee in the interpretation
and administration of the Plan, as described herein, shall lie
within its sole and absolute discretion and shall be final,
conclusive and binding on all parties concerned. Determinations
made by the Committee under the Plan need not be uniform and may
be made selectively among Participants, whether or not such
Participants are similarly situated. The Committee shall have
the right to deduct from any payment



 








 




made under the Plan any federal, state, local or
foreign income or other taxes required by law to be withheld
with respect to such payment. To the extent consistent with the
applicable provisions of Sections 162(m) of the Code, the
Committee may delegate to one or more employees of the Company
or any of its Subsidiaries the authority to take actions on its
behalf pursuant to the Plan.




 


		
	4.	
    Eligibility and Participation



     
The Committee shall designate those persons who
shall be Participants for each Performance Period. Participants
shall be selected from among the Covered Employees of the
Company and any of its Subsidiaries who are in a position to
have a material impact on the results of the operations of the
Company or of one or more of its Subsidiaries.



 


		
	5.	
    Awards



     
(a) Performance Goals. A
Participant’s Award shall be determined based on the
attainment of one or more pre-established, objective performance
goals established in writing by the Committee, for a Performance
Period established by the Committee, (i) at a time when the
outcome for the Performance Period is substantially uncertain
and (ii) not later than 90 days after the commencement
of the Performance Period to which the performance goal relates,
but in no event after 25 percent of the relevant Performance
Period has elapsed. The performance goals shall be based upon
one or more or the following criteria: (i) earnings before
or after taxes (including earnings before interest, taxes,
depreciation and amortization); (ii) net income;
(iii) operating income; (iv) earnings per Share;
(v) book value per Share; (vi) return on
stockholders’ equity; (vii) expense management;
(viii) return on investment before or after the cost of
capital; (iv) improvements in capital structure;
(x) profitability of an identifiable business unit or
product; (xi) maintenance or improvement of profit margins;
(xii) stock price; (xiii) market share;
(xiv) revenues or sales; (xv) costs; (xvi) cash
flow; (xvii) working capital; (xviii) changes in net
assets (whether or not multiplied by a constant percentage
intended to represent the cost of capital); and
(xix) return on assets. The foregoing criteria may relate
to the Company, one or more of its Subsidiaries or one or more
of its divisions, units, partnerships, joint ventures or
minority investments, product lines or products or any
combination of the foregoing, and may be applied on an absolute
basis and/or be relative to one or more peer group companies or
indices, or any combination thereof, all as the Committee shall
determine. In addition, to the degree consistent with
Section 162(m) of the Code (or any successor section
thereto), the performance goals may be calculated without regard
to extraordinary items. The maximum amount of an Award to any
Participant with respect to a fiscal year of the Company shall
be $5,000,000.



     
(b) Payment. The Committee shall
determine whether, with respect to a Performance Period, the
applicable performance goals have been met with respect to a
given Participant and, if they have, to so certify in writing
and ascertain the amount of the applicable Award. No Awards will
be paid for such Performance Period until such certification is
made by the Committee. The amount of the Award actually paid to
a given Participant may be less than the amount determined by
the applicable performance goal formula (including zero), at the
discretion of the Committee. The amount of the Award determined
by the Committee for a Performance Period shall be paid to the
Participant at such time as determined by the Committee in its
sole discretion after the end of such Performance Period.



     
(c) Compliance with Section 162(m)
of the Code. The provisions of this Section 5 shall be
administered and interpreted in accordance with
Section 162(m) of the Code and the Treasury Regulations
promulgated thereunder to ensure the deductibility by the
Company or its Subsidiaries of the payment of Awards; provided,
however, that the Committee may, in its sole discretion,
administer the Plan in violation of Section 162(m) of the
Code.



     
(d) Termination of Employment. If a
Participant dies, retires, is assigned to a different position,
is granted a leave of absence, or if the Participant’s
employment is otherwise terminated (except with cause by the
Company, as determined by the Committee in its sole discretion)
during a Performance Period (other than a Performance Period in
which a Change in Control occurs), a pro-rata share of the
Participant’s award based on the period of actual
participation shall be paid to the Participant after the end of
the Performance



 







 




Period if it would have become earned and payable
had the Participant’s employment status not changed;
provided, however, that the amount of the Award actually
paid to a given Participant may be less than the amount
determined by the applicable performance goal formula (including
zero), at the discretion of the Committee.




 


		
	6.	
    Amendments or Termination



     
The Board or the Committee may amend, alter or
discontinue the Plan, but no amendment, alteration or
discontinuation shall be made which would impair any of the
rights or obligations under any Award theretofore granted to a
Participant under the Plan without such Participant’s
consent; provided, however, that the Board or the
Committee may amend the Plan in such manner as it deems
necessary to permit the granting of Awards meeting the
requirements of Section 162(m) of the Code or other
applicable laws. Notwithstanding anything to the contrary
herein, the Board may not amend, alter or discontinue the
provisions relating to Section 10(b) of the Plan after the
occurrence of a Change in Control.



 


		
	7.	
    No Right to Employment



     
Neither the Plan nor any action taken hereunder
shall be construed as giving any Participant or other person any
right to continue to be employed by or perform services for the
Company or any Subsidiary, and the right to terminate the
employment of or performance of services by any Participant at
any time and for any reason is specifically reserved to the
Company and its Subsidiaries.



 


		
	8.	
    Nontransferability of Awards



     
An award shall not be transferable or assignable
by the Participant otherwise than by will or by the laws of
descent and distribution.



 


		
	9.	
    Reduction of Awards



     
Notwithstanding anything to the contrary herein,
the Committee, in its sole discretion (but subject to applicable
law), may reduce any amounts payable to any Participant
hereunder in order to satisfy any liabilities owed to the
Company or any of its Subsidiaries by the Participant.



 


		
	10.	
    Adjustments Upon Certain Events



     
(a) Generally. In the event of any
change in the outstanding Shares by reason of any Share dividend
or split, reorganization, recapitalization, merger,
consolidation, spin-off, combination or exchange of Shares or
other corporate exchange, or any distribution to stockholders of
Shares other than regular cash dividends, the Committee in its
sole discretion and without liability to any person may make
such substitution or adjustment, if any, as it deems to be
equitable, as to any affected terms of outstanding Awards.



     
(b) Change in Control. In the event
that (i) a Participant’s employment is actually or
constructively terminated during a given Performance Period (the
“Affected Performance Period”) and (ii) a Change
in Control shall have occurred within the 365 days
immediately preceding the date of such termination, then such
Participant shall receive, promptly after the date of such
termination, payment pursuant to his or her Award for the
Affected Performance Period as if the performance goals for such
Performance Period had been achieved at 100%.



 


		
	11.	
    Miscellaneous Provisions



     
The Company is the sponsor and legal obligor
under the Plan and shall make all payments hereunder, other than
any payments to be made by any of the Subsidiaries (in which
case payment shall be made by such Subsidiary, as appropriate).



     
The Company shall not be required to establish
any special or separate fund or to make any other segregation of
assets to ensure the payment of any amounts under the Plan, and
the Participants’ rights to the



 








 




payment hereunder shall be no greater than the
rights of the Company’s (or Subsidiary’s) unsecured
creditors. All expenses involved in administering the Plan shall
be borne by the Company.




 


		
	12.	
    Governing Law



     
The interpretation, performance and enforcement
of this Plan and any disputes or controversies arising with
respect to the transactions contemplated herein, shall be
governed by the laws of the State of Delaware, irrespective of
Delaware’s choice of law principles that would apply the
law of any other jurisdiction.



 


		
	13.	
    Effective Date



     
The Plan shall be effective as of April 27,
2004.