Exhibit 10.12
IPSCO Inc.
2005 Form 10-K
RESTRICTED SHARE AND
PERFORMANCE UNIT AWARD AGREEMENT
THIS AGREEMENT
made the 26 th day of
August 2005,
BETWEEN:
IPSCO INC.,
a corporation incorporated under the
laws of Canada,
(hereinafter called the “Company” or
the “Corporation”),
OF THE FIRST PART,
-and-
DAVID SUTHERLAND
, of the City of Naperville, in the
State of Illinois,
(hereinafter called the
“Participant”),
OF THE SECOND PART.
WHEREAS the Company has established an Incentive Share
Plan (which, as amended from time to time by the Board of Directors
of the Company and approved by Shareholders, is hereinafter
referred to as the “Plan”) whereby certain designated
officers, employees and directors of the Company and its
subsidiaries may from time to time be granted options,
restricted shares and performance units, or any combination of the
foregoing;
AND WHEREAS
the Participant, as a senior officer
of the Company, has been designated to receive a grant of
Restricted Shares and Performance Units (as those terms are defined
herein), subject to and in accordance with the terms of this
Agreement and of the Plan;
NOW THEREFORE THIS AGREEMENT
WITNESSETH that in
consideration of the mutual covenants herein contained the parties
do hereby agree as follows:
1.
Grant
Pursuant to
Section 8 of the Plan, the Company hereby grants and awards to
the Participant Fourteen Thousand (14,000) restricted shares (the
“Restricted Shares” and pursuant to Section 9 of
the Plan Fourteen Thousand (14,000) performance units (the
“Performance Units”). Each Restricted Share and
Performance Unit shall be subject to the terms of the Plan and of
this Agreement, including the terms relating to the Performance
Period and the Restricted Share Objective and the Performance Units
Objective (as those terms are herein defined).
1
2.
Restricted Share Performance
Period
The Restricted Share Performance
Period shall begin on July 1, 2005 (the “Commencement
Date”) and end on June 30, 2008 (the “Performance
Period”).
3.
Performance Units
Objective
The performance period applicable to
the Performance Units shall be the period beginning on the
Commencement Date and ending on June 30, 2008 the Performance
Period. The Performance Objective applicable to the Performance
Units (the “Performance Objective”) is as
follows:
•
Participants are eligible to earn a
Performance Unit Payout at the end of the Performance Period based
on the 3-year average of IPSCO’s Return on Capital Employed
(“ROCE”) relative to 3-year average ROCE for a group of
steel industry peers as defined elsewhere in this
Agreement.
•
The actual number of shares earned
at the end of the Performance Period will range from 0% to 200% of
the Performance Units granted, depending on actual performance
relative to the goals established at the beginning of the
Performance Period.
Example: Plan Year
2005
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>75%ile
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0
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%
|
100
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%
|
150
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%
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175
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%
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200
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%
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Performance Relative to Peers 3-YR Average
ROCE
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62.5%ile
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0
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%
|
75
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%
|
125
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%
|
150
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%
|
175
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%
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Performance X
Shares or Units
Granted:
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(%ile of peers)
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Median
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0
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%
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50
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%
|
100
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%
|
125
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%
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150
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%
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=
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Number of
Units
Earned
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X
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Stock
Price at
End of
Period
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=
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ACTUAL
AWARD
VALUE
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37.5%ile
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0
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%
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0
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%
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50
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%
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75
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%
|
100
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%
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<25%ile
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0
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%
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0
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%
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25
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%
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38
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%
|
50
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%
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<5
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%
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5
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%
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8
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%
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11
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%
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14
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%
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Absolute Performance 3-year
average ROCE
•
Awards will be interpolated for
performance falling between discrete points on the matrix. However,
below 8% IPSCO ROCE, no awards will be paid for ROCE performance
below the median of peers. And below 5% IPSCO ROCE no awards will
be paid regardless of performance relative to peers.
2
•
Return on Capital Employed
(“ROCE”), the Absolute and Relative Performance
Measure, shall be measured based on the following definition and
related adjustments:
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After-tax operating profit +
tax-affected Depreciation/Amortization charge
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ROCE
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=
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Total Net Assets –
Non-interest-bearing current Liabilities – Cash and Cash
Equivalents + $50m base cash + Accumulated Depreciation and
Amortization – Construction in Progress
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|
•
Capital Employed (the denominator)
shall be averaged for the year;
•
The Performance Period shall average
ROCE over the three-year period;
•
Adjustments will be made to the ROCE
measure as follows:
•
Construction in progress is excluded
from the capital base until investments are operational.
•
“Excess” cash is
excluded from the capital base — $50 million of cash is
required by the Company for ongoing operations; any cash in excess
of $50 million will be excluded for the 2005 Plan Year.
•
Acquisitions will be excluded from
the ROCE calculation until six months after transaction, or until
agreed upon with the MRCC.
•
Deferred tax liabilities are
considered a quasi-equity account and remain in the capital
base.
•
Peers include:
1.
AK Steel
2.
Carpenter Technology
3.
Commercial Metals
4.
Gerdau Ameristeel
5.
Lone Star Technologies
6.
Maverick Tube
7.
Nucor
8.
Oregon Steel
Mills, Inc.
9.
Quanex
10.
Reliance Steel and
Aluminum
11.
Ryerson Tull, Inc.
12.
Steel Dynamics
13.
Worthington Industries
•
If during the Performance Period any
of the Peer Companies ceases to trade on a Public Exchange, it will
be removed from the Peer Comparison Group for the entire
Performance Period.
3
4.
Restricted Share Performance
Objective
The Restricted Shares shall be 100%
vested at the end of three years by the achievement of cumulative
net income as reported by the Company from July 1, 2006
through June 30, 2008, which shall be the Restricted Share
Objective.
5.
Vesting of Restricted Shares
and Vesting of Performance Units
The Restricted Shares and the
Performance Units will vest (the “Vesting Date”) upon
the earlier of:
(a)
the date of a Change of Control;
and
(b)
August 5, 2008, provided that
the Restricted Shares Objective and the Performance Unit Objective
is met;
and, provided further that the Participant is
employed (or is deemed by Section 7 to be employed) by the
Company or a Subsidiary (as defined in the Plan) on that date and
has been (or is deemed by Section 7 to have been employed)
employed by the Company or a Subsidiary by the Vesting Date, or has
been (or is deemed by Section 8 to have been) continuously so
employed since the date hereof. Restricted Shares and Performance
Units not vested on or before the last day of the Performance
Period pursuant to the preceding sentence shall lapse and be
terminated and cancelled.
For the purposes of this
Section 5, the date of a Change of Control means the date on
which any one of the following occurs: (i) any person or
group of persons acting in concert acquires beneficial ownership
(within the meaning of The Securities Act, 1988 (Saskatchewan)), as
amended from time to time, of 20% or more of the outstanding Common
Shares of the Company, or securities convertible into 20% or more
of the outstanding Common Shares on a post-conversion basis;
(ii) during a period of not more than 24 months, a majority of
the Board of Directors ceases to consist of the existing membership
or successors nominated by the existing membership or their similar
successors; (iii) all or substantially all of the individuals
and entities who were the beneficial owners of the Company’s
outstanding securities entitled to vote do not own more than 50% of
such securities in substantially the same proportions following a
shareholder approved reorganization, merger, or consolidation; or
(iv) shareholder approval of either (a) a complete
liquidation or dissolution of the Company or (b) a sale or
other disposition of all or substantially all of the assets of the
Company, or a transaction having a similar effect. For purposes of
clause (iii) above, if an individual or entity owns stock in
both companies that enter into a merger, consolidation, purchase or
acquisition of stock or similar transaction, such shareholder is
considered to be acting as a group with other shareholders only
with respect to the ownership in that company prior to the
transaction giving rise to the change and not with respect to the
ownership interest in the other Company.
4
6.
Rights of Restricted
Shareholder
Except as set forth in this
Agreement, upon the issuance of the Restricted Shares a Participant
shall have all of the rights of the Shareholder, including the
right to vote the Restricted Shares and the right to receive
dividends thereon. The Company shall issue the Participant’s
Restricted Shares upon execution of this Agreement, the list (or
authorization of listing upon official notice of issuance) of the
Restricted Shares upon each stock exchange on which the Common
Shares are listed and there has been compliance with such laws and
regulations, as the Company may deem applicable. The Company
agrees to use reasonable commercial efforts to effect such listing
and compliance.
7.
Termination of
Employment
(a)
If the Participant ceases to be an
employee (and, if the Participant is an employee or officer of any
Subsidiary, the Participant also ceases to be an employee or
officer of the Subsidiary) as a result of:
(i)
disability (as defined in
Section 7(j)(i) of the Plan);
(ii)
retirement (as defined in
Section 7(j)(2) of the Plan;
(iii)
termination of employment after
either:
a.
attaining sixty-five years of age
or;
b.
attaining sixty-two years of age and
completing five years of continuous employment; or
(iv)
death of the Participant;
or
(v)
such other circumstance
as
