(c) the remaining one-third of the SARs shall become exercisable on the thirdanniversary of the Grant Date if the Grantee shall have retained Continuous Status as anEmployee or Consultant through such date.In calculating the one-third amounts described above, fractional SARs shall be rounded down to thenearest whole SAR for each of the first two anniversaries of the Grant Date, and the remaining SARsshall be included with those SARs that become exercisable on the third anniversary of the GrantDate. To the extent exercisable, the SARs may be exercised from time to time in accordance withthe Plan and this Agreement. To the extent the SARs or any portion thereof do not becomeexercisable as provided in this **Section 2**, such unexercisable SARs or portion thereof shallbe forfeited to the Company for no consideration.     3. Exercise of SARs.     (a) To the extent exercisable as provided in **Section 2** of this Agreement, theSARs may be exercised in whole or in part by delivery to the Company of a written statementin form and substance satisfactory to the Committee specifying the number of SARs to beexercised.     (b) Upon exercise, the Company will issue to the Grantee the number of Shares equal tothe quotient of (i) the product of (A) the Spread multiplied by (B) the number of SARsexercised divided by (ii) the Fair Market Value of a Share on the date of exercise, withsuch quotient rounded down to the nearest whole Share.     4. Termination of SARs. The SARs shall terminate upon the earliest to occur of thefollowing:     (a) **90 days**after the Grantee ceases to retain Continuous Status as an Employee orConsultant other than upon the Grantee’s death or Disability;     (b) **90 days**after the Grantee ceases to retain Continuous Status as an Employee orConsultant as a result of the Grantee’s Disability;     (c) **90 days**after the Grantee ceases to retain Continuous Status as an Employee orConsultant as a result of the Grantee’s death; and     (d) Five years from the Grant Date.     5. Effect of Change in Control. In the event of a Change in Control, the SARs will beaffected in accordance with Section 15 of the Plan.     6. Transferability. No SAR may be transferred by the Grantee other than by will or thelaws of descent and distribution. The SARs may be exercised during a Grantee’s lifetime only bythe Grantee or, in the event of the Grantee legal incapacity, by the Grantee’s guardian or legalrepresentative acting in a fiduciary capacity on behalf of the Grantee under state law and courtsupervision. The SARs may be exercised after the Grantee’s death by (a) the Grantee’s designatedbeneficiary, provided such beneficiary has been designated prior to the Grantee’s death in a formacceptable to the Committee, or (b) the personal representative of the Grantee’s
 

 
estate or by the person(s) to whom the SARs are transferred pursuant to the Grantee’s will or inaccordance with the laws of descent and distribution.     7. Compliance with Law. The SARs shall not be exercisable if such exercise wouldinvolve a violation of any applicable federal or state securities law, and the Company herebyagrees to make reasonable efforts to comply with any applicable federal and state securities law.     8. Adjustments. The SARs shall be subject to adjustment in accordance with Section 15of the Plan.     9. Withholding Taxes. To the extent that the Company is required to withhold federal,state, local or foreign taxes in connection with the exercise of the SARs, and the amountsavailable to the Company for such withholding are insufficient, it shall be a condition to suchexercise that the Grantee make arrangements satisfactory to the Company for payment of the balanceof such taxes required to be withheld. The Grantee may elect that all or any part of suchwithholding requirement be satisfied by retention by the Company of a portion of the Shares to bedelivered to the Grantee. If such election is made, the Shares so retained shall be creditedagainst such withholding requirement at the Fair Market Value of a Share on the date of suchexercise, with any fractional Shares that would otherwise be delivered being rounded up to the nextnearest whole Share. In no event shall the Fair Market Value of Shares to be withheld and/ordelivered pursuant to this **Section 9** to satisfy applicable withholding taxes in connectionwith the benefit exceed the minimum amount of taxes required to be withheld.     10. Notices. Any notices required or permitted by the terms of this Agreement or thePlan must be in writing, shall be delivered to the Grantee at his or her address on file with theCompany or to the Company addressed as follows (or to such other address or addresses of whichnotice in the same manner has previously been given), and will be deemed to have been duly given(a) when delivered in person, (b) when dispatched by electronic facsimile transfer (if confirmed inwriting by mail simultaneously dispatched), (c) one business day after having been dispatched by anationally recognized overnight courier service or (d) three business days after being sent byregistered or certified mail, return receipt requested, postage prepaid:Lancaster Colony Corporation