Exhibit 10.5

 

UHS HOLDCO, INC.

 

FORM OF OPTION AGREEMENT
EVIDENCING A GRANT OF AN OPTION UNDER
THE 2007 STOCK OPTION PLAN

 

This Option Agreement (this “Agreement”) is made [                      ],
20    , between UHS Holdco, Inc., a Delaware corporation (the “Company”), and
[                      ] (“Grantee”).  Capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Plan (as defined
below).

 

1.             Grant of Option.  Pursuant to the UHS Holdco, Inc. Stock Option
Plan (the “Plan”), the Company hereby grants to Grantee, as of the date hereof,
a stock option (the “Option”) to purchase from the Company [        ] shares
(the “Shares”) of the Company’s common stock, $0.01 par value per share (the
“Common Stock”), at the exercise price per share of $[          ] (the “Exercise
Price”), subject to the terms and conditions set forth herein and in the Plan. 
Upon certain events, the number of Shares and/or the Exercise Price may be
adjusted as provided in the Plan.

 

2.             Grantee Bound by Plan.  The Plan is incorporated herein by
reference and made a part hereof.  Grantee hereby acknowledges receipt of a copy
of the Plan and agrees to be bound by all the terms and provisions thereof.  The
Plan should be carefully examined before any decision is made to exercise the
Option.

 

3.             Exercise of Option.  Subject to the terms and conditions
contained herein, including Section 7 hereof, and in the Plan, the Option may be
exercised, in whole or in part, to the extent it has become vested, by written
notice to the Company at any time and from time to time after the date of
grant.  The Option may not be exercised for a fraction of a share of Common
Stock.  Options are subject to cancellation as provided in the Plan.

 

4.             Expiration of Option.

 

(a)           The Option shall not be exercisable in any event ten years after
the date hereof.  Any part of the Option that is not vested on the Termination
Date shall expire and be forfeited on such date, and any part of the Option that
is vested on the Termination Date shall also expire and be forfeited to the
extent not exercised on or before 90 days following the Termination Date or such
shorter period if such 90-day period would exceed the original term of the
Option; provided, that in the event of the death or disability of the Grantee,
any part of the Option that is vested on the date of the Termination Date shall
expire and be forfeited to the extent not exercised on or before 180 days
following the Termination Date or such shorter period if such 180-day period
would exceed the original term of the Option.

 

(b)           Subject to Section 5(d), all unvested Performance Vesting Options
shall terminate in their entirety, without any action on the part of the
Company, upon the occurrence of a Sale of the Company.

 

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5.             Vesting of Performance Vesting Options.

 

(a)           A portion of the Option granted under this Agreement representing
the right to purchase [                      ] Shares (the “Performance Vesting
Options”) shall vest in whole or in part and become exercisable with respect to
the Shares prior to the tenth anniversary of the date hereof upon the attainment
of certain goals and upon certain events as described in this Section 5.

 

(b)           The Performance Vesting Option shall vest and become exercisable
with respect to 16.66% of the Shares (rounded to the nearest whole share) on
each December 31 after the date hereof (a “Performance Vesting Date”) during the
period beginning on the date hereof and ending on December 31, 20[    ](1) (such
period of time is referred to as the “Performance Vesting Period”), if and only
if, (i) the Grantee remains continuously employed with the Company and/or any of
its Subsidiaries during the period beginning on the date hereof and ending on
the applicable Performance Vesting Date and (ii) the Company’s Adjusted EBITDA
(as defined below) for such fiscal year equals or exceeds the Adjusted Target
EBITDA (as defined below) for such fiscal year; provided, however, at the end of
each fiscal year of the Company during the Performance Vesting Period, if the
sum of the Company’s Adjusted EBITDA for the fiscal year ending on such
Performance Vesting Date and the Company’s Adjusted EBITDA for each of the
previous fiscal years during the Performance Vesting Period equals at least 100%
of the sum of the Adjusted Target EBITDA for the fiscal year ending on such
Performance Vesting Date and the Adjusted Target EBITDA for each of the previous
fiscal years during the Performance Vesting Period (such determination is
referred to herein as the “Aggregate Test”), then the Performance Vesting
Options shall vest and become exercisable for the number of Shares which will
result in the aggregate number of Shares which are vested as of the end of such
fiscal year being equal to the greater of (A) the number of Shares that would
have otherwise vested and become exercisable as determined without regard to the
Aggregate Test and (B) the number of Shares which would have vested if 16.66% of
the Shares vested on each Performance Vesting Date ending on or prior to the
Performance Vesting Date which is the last day of such fiscal year.

 

(c)           Notwithstanding anything contained herein to the contrary, (i) if
the Company or any of it Subsidiaries consummates an acquisition of another
Person, a disposition of the Company or any of its Subsidiaries to another
Person or any similar transaction during any fiscal year of the Company or
(ii) if the accounting policies, procedures or rules to which the Company is
subject change, in either case during the Performance Vesting Period, then the
Adjusted Target EBITDA for the remainder of such fiscal year after such
transaction or the effective date of such change and all subsequent fiscal years
during the Performance Vesting Period will be adjusted in good faith by the
Committee, and each such adjusted and approved Adjusted Target EBITDA shall be
deemed the applicable Adjusted Target EBITDA for such fiscal year and each such
subsequent fiscal years for all purposes hereunder during the Performance
Vesting Period.  Any such adjustment to the Adjusted Target EBITDA will not

 

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(1)          This will refer to the fifth year after the year during which
grants are made (e.g., for grants made in 2010, insert “15”).

 

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affect the Adjusted Target EBITDA or the Aggregate Test with respect to any
fiscal years (or a portion of any fiscal year) prior to the consummation of such
transaction.

 

(d)           In the event of a Sale of the Company, so long as the Grantee
remains continuously employed by the Company and/or any of its Subsidiaries
during the period beginning on the date hereof and ending on the date that such
Sale of the Company is consummated [(or if the Grantee is terminated without
Cause or the Grantee resigns for Good Reason in the 30 days period prior to the
consummation of such Sale of the Company, the Grantee shall be deemed to have
been continuously employed by the Company and/or any of its Subsidiaries during
the period beginning on the date hereof and ending on the date that such Sale of
the Company is consummated for purposes of this Section 5(d) only)] the
Performance Vesting Options shall vest and become immediately exercisable with
respect to 100% of the Shares and, subject to Sections 5.10 and 6.4 of the Plan,
shall remain exercisable for a period of 90 days following such Sale of the
Company.

 

(e)           For purposes of this Section 5, the following terms have the
following meanings:

 

(i)            “Adjusted EBITDA” means, with respect to the Company and its
Subsidiaries, on a consolidated basis, for any fiscal year, the sum of: (A) the
net income for such fiscal year (before the payment of any dividends and
excluding the effect of any extraordinary gains or losses during such period and
the effect of any purchase accounting adjustments as a result of the acquisition
of UHS by the Company), plus (B)  interest expense, federal, state, foreign and
local income, franchise, and other similar taxes, depreciation and amortization
for such fiscal year, plus (C) any management fees paid to Irving Place Capital
Merchant Manager III, L.P. (formerly known as Bear Stearns Merchant Manager III,
L.P., formerly known as Bear Stearns Merchant Manager III (Cayman), L.P.) or its
Affiliates (collectively, “BSMB”) pursuant to the Amended and Restated
Professional Services Agreement, dated as of February 1, 2008, by and between
UHS and Irving Place Capital Merchant Manager III, L.P. (formerly known as Bear
Stearns Merchant Manager III, L.P., formerly known as Bear Stearns Merchant
Manager III (Cayman), L.P.), as amended, modified or restated from time to time
(the “Services Agreement”), any management fees paid to any other institutional
investor that owns shares of Common Stock and any director fees paid to members
of the Board, in each case, during such fiscal year, plus (D) any non-cash
charges to the extent that such charges will not result in a cash charge in any
future period (including any non-cash expenses relating to the options under FAS
123(R)) during such fiscal year, plus (E) any fees paid by the Company or UHS to
David Dovenberg, but not to exceed $250,000 in any fiscal year, plus (or minus)
(F) any unusual and non-recurring losses (or gains) for such fiscal year, minus
(G) any non-cash gains during such fiscal year, in each case, as determined in
accordance with United States generally accepted accounting principles and as
set forth on the Company’s financial statements for such fiscal year which have
been approved by the Board.

 

(ii)           “Adjusted Target EBITDA” means, for any fiscal year of the
Company during the Performance Vesting Period, the Base Target EBITDA (as set
forth or

 

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provided for in Annex I attached hereto) for such year; provided, that the
Committee shall make appropriate adjustments to any Adjusted Target EBITDA
(i) to the extent that there are material deviations in the amount of capital
expenditures actually incurred by the Company during any fiscal year from the
Capital Expenditures Target (as set forth or provided for in Annex I attached
hereto) for such fiscal year and (ii) in accordance with Section 5(c) above.

 

6.             Vesting of Time Vesting Options.

 

(a)           A portion of the Option granted under this Agreement representing
the right to purchase [              ] Shares shall be subject to vesting (the
“Time Vesting Options”) in the manner described in this Section 6.

 

(b)           The Time Vesting Options shall fully vest and become exercisable
with respect to the applicable number of Shares set forth below if and only if
the Termination Date does not occur during the period beginning on the date
hereof and ending on the applicable vesting date determined below.  The Time
Vesting Options shall cumulatively vest and become exercisable with respect to
16.66% of the Shares (rounded to the nearest one-thousandth (0.001) of a share
of Common Stock) on each December 31 after the date hereof during the period
beginning on the date hereof and ending on December 31, 20[    ](2).

 

(c)           Upon (i) a Change in Control (as defined below) or (ii) a Sale of
the Company pursuant to clause (ii) of the definition thereof set forth in the
Plan, 100% of any portion of the Time Vesting Options that is not vested as of
the date of such Change in Control or such Sale of the Company, as applicable,
shall become vested and immediately exercisable and, subject to Sections 5.10
and 6.4 of the Plan, shall remain exercisable for a period of 90 days following
such Change in Control or such Sale of the Company, as applicable.  For the
purposes  hereof, “Change in Control” means any (i) sale or issuance (or series
of sales or issuances) of Common Stock or the right to acquire Common Stock by
the Company or any holders thereof which results in any Person or group of
Affiliated Persons (other than the owners of Common Stock or the right to
acquire Common Stock as of the date hereof and Affiliates of such Persons)
owning and/or having the right to acquire more than 50% of the Common Stock on a
fully diluted basis at the time of such sale or issuance (or series of sales or
issuances), other than in connection with a Public Offering or (ii) merger,
share exchange, reorganization, recapitalization or consolidation to which the
Company is a party (other than a merger in which the Company is the surviving
entity, or a share exchange in which capital stock of the Company is issued,
that does not result in more than 49% of the Company’s outstanding capital stock
possessing the voting power (under ordinary circumstances) to elect a majority
of the Board being owned of record or beneficially by persons or entities other
than the holders of such capital stock immediately prior to such merger or share
exchange).

 

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(2)   This will refer to the fifth year after the year during which grants are
made (e.g., for grants made in 2010, insert “15”).

 

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7.             Conditions to Exercise.  The Option may not be exercised by
Grantee unless the following conditions are met:

 

(a)           The Option has become vested with respect to the Shares to be
acquired pursuant to such exercise;

 

(b)           Legal counsel for the Company must be satisfied at the time of
exercise that the issuance of shares of Common Stock upon exercise will be in
compliance with the Securities Act and applicable United States federal, state,
local and foreign laws; and

 

(c)           Grantee must pay at the time of exercise the full Exercise Price
for the Shares being acquired hereunder in the form elected by Grantee, plus any
withholding tax (which shall be paid only in cash) required in connection with
such exercise, in each case, in accordance with the terms of the Plan[;
provided, that the Withholding Amount relating to the Options, at the Grantee’s
election, shall reduce the number of Shares (based on the Fair Market Value of
such Shares) that are issuable upon exercise of such portion of the Option;
provided, however, that the number of Shares used to satisfy the Withholding
Amount shall not exceed the minimum withholding tax obligation under applicable
federal and state law in effect at such time].

 

8.             Transferability.  The Option (including the right to receive the
Shares) may not be Transferred or assigned by Grantee, other than by will or the
laws of descent and distribution and, during the lifetime of Grantee, the Option
may be exercised only by Grantee (or, if Grantee is incapacitated, by Grantee’s
legal guardian or legal representative).  In the event of the death of Grantee,
the Option, to the extent it has not vested on the date of death, shall
terminate; and the exercise of the Option, to the extent it has vested as of the
date of death, may be made only by the executor or administrator of Grantee’s
estate or the Person or Persons to whom Grantee’s rights under the Option pass
by will or the laws of descent and distribution.  If Grantee or anyone claiming
under or through Grantee attempts to violate this Section 8, such attempted
violation shall be null and void and without effect, and the Company’s
obligation hereunder shall terminate.  Any Issued Stock received upon exercise
of the Option is subject to the [repurchase right], restrictions on Transfer and
other rights and obligations set forth in the Plan[; provided, that,
notwithstanding anything contained in the Plan, any Shares received by Grantee
upon exercise of the Option shall not be subject to the repurchase rights set
forth in Section 5.7 of the Plan].

 

9.             Administration.  Any action taken or decision made by the
Company, the Board, or the Committee or its delegates arising out of or in
connection with the construction, administration, interpretation or effect of
the Plan or this Agreement shall lie within its sole and absolute discretion, as
the case may be, and shall be final, conclusive and binding on Grantee and all
persons claiming under or through Grantee, except as expressly provided in
Grantee’s employment agreement, if any, with the Company or any of its
Subsidiaries.  By accepting this grant or other benefit under the Plan, Grantee
and each person claiming under or through Grantee shall be conclusively deemed
to have indicated acceptance and ratification of, and consent to, any action
taken under the Plan by the Company, the Board or the Committee or its
delegates.

 

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10.           No Rights as Stockholder.  Unless and until a certificate or
certificates representing such shares of Common Stock shall have been issued to
Grantee (or any person acting under Section 7 above), Grantee shall not be or
have any of the rights or privileges of a stockholder of the Company with
respect to shares of Common Stock acquirable upon exercise of the Option.

 

11.           Investment Representation.  Grantee hereby acknowledges that the
shares of Common Stock which Grantee may acquire by exercising the Option shall
not be Transferred in the absence of an effective registration statement for the
shares of Common Stock under the Securities Act and applicable state securities
laws or an applicable exemption from the registration requirements of the
Securities Act and any applicable state securities laws.  Grantee also agrees
that the shares of Common Stock which Grantee may acquire by exercising the
Option will not be sold or otherwise disposed of in any manner which would
constitute a violation of any applicable federal or state securities laws.

 

12.           Rights of Grantee.  Neither this Agreement nor the Plan creates
any employment rights in Grantee and neither the Company nor any of its
Subsidiaries shall have any liability arising out of the Plan or this Agreement
for terminating Grantee’s employment or reducing Grantee’s responsibilities.

 

13.           Notices.  Any notice hereunder to the Company shall be addressed
to the Company’s principal executive office, Attention: General Counsel, and any
notice hereunder to Grantee shall be addressed to Grantee at Grantee’s last
address on the records of the Company, subject to the right of either party to
designate at any time hereafter in writing some other address.  Any notice shall
be deemed to have been duly given when delivered personally, one day following
dispatch if sent by reputable overnight courier, fees prepaid, or three days
following mailing if sent by registered mail, return receipt requested, postage
prepaid and addressed as set forth above.

 

14.           Binding Effect.  This Agreement shall be binding upon and inure to
the benefit of any successors and assigns to the Company and all persons
lawfully claiming under Grantee.

 

15.           [Non-Competition and Non-Solicitation.

 

(a)           In consideration of the Company’s grant of the Option hereunder,
the Grantee acknowledges that, during the course of the Grantee’s employment
with the Company and its Subsidiaries (the “Term”), the Grantee shall become
familiar with the trade secrets of the Company and its Subsidiaries and other
Confidential Information (as defined below) concerning the Company and its
Subsidiaries (and their respective predecessor companies) and that the Grantee’s
services have been and shall be of special, unique and extraordinary value to
the Company and its Subsidiaries.  Accordingly, the Grantee agrees that during
the Term and thereafter until the end of the first anniversary of the Grantee’s
Termination Date, the Grantee shall not directly or indirectly own any interest
in, manage, control, participate in, consult with, render services for, or in
any manner engage in any Competing Business (as defined below) in the United
States; provided, that the foregoing shall not prohibit Grantee from owning
stock as a

 

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passive investor in any publicly traded corporation so long as Grantee’s
ownership in such corporation, directly or indirectly, is less than 2% of the
voting stock of such corporation.  For purposes of this paragraph, “Competing
Business” means any business activity involving the outsourcing or rental of
movable medical equipment and related services to the health care industry.

 

(b)           During the Term and thereafter until the end of the second
anniversary of the Date of Termination, the Grantee shall not directly or
indirectly through another Person (i) induce or attempt to induce any employee
of the Company or any Subsidiary to leave the employ of the Company or such
Subsidiary, or in any way interfere with the relationship between the Company or
any Subsidiary and any employee thereof, (ii) hire any person who was an
employee of the Company or any Subsidiary at any time within the one (1) year
period before the Grantee’s Termination Date, or (iii) induce or attempt to
induce any customer, supplier, licensee, licensor, franchisee or other business
relation of the Company or any Subsidiary to cease doing business with the
Company or such Subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee or business relation and the
Company or any Subsidiary, except with the prior written consent of the Board,
which consent will be given at the sole discretion of the Board.]

 

16.           [Non-Disclosure. The Grantee agrees that during and at all times
after the Term, the Grantee will keep secret all confidential matters and
materials of the Company (including its Subsidiaries and Affiliates), including,
without limitation, know-how, trade secrets, real estate plans and practices,
individual office results, customer lists, pricing policies, operational
methods, any information relating to the Company (including any of its
Subsidiaries and Affiliates) products, processes, customers and services and
other business and financial affairs of the Company (collectively, “Confidential
Information”), to which the Grantee had or may have access and will not disclose
such Confidential Information to any Person other than (i) the Company, its
respective authorized employees and such other Persons to whom the Grantee has
been instructed to make disclosure by the Board, (ii) as appropriate (as
determined by the Grantee in good faith) to perform the Grantee’s duties to the
Company or its Subsidiaries, or (iii) in compliance with legal process or
regulatory requirements.  “Confidential Information” will not include any
information which is in the public domain during or after the Term to the extent
that such information is not in the public domain as a consequence of disclosure
by the Grantee in violation of this Option Agreement.]

 

17.           [Intellectual Property, Inventions and Patents.  The Grantee
acknowledges that all discoveries, concepts, ideas, inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports,
patent applications, copyrightable work and mask work (whether or not including
any Confidential Information) and all registrations or applications related
thereto, all other proprietary information and all similar or related
information (whether or not patentable) which relate to the actual or
anticipated business, research and development or existing or future products or
services of the Company or its Subsidiaries and which are conceived, developed
or made by the Grantee (whether individually or jointly with others) while
employed by the Company or its Subsidiaries (or their respective predecessors)
(“Work Product”), belong to the Company or its Subsidiaries.  The Grantee shall
promptly disclose such Work Product to the Board and, at the Company’s expense,
perform all

 

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actions reasonably requested by the Board (whether during or after the Term) to
establish and confirm such ownership (including, without limitation,
assignments, consents, powers of attorney and other instruments).]

 

18.           [Modification.  The Grantee agrees and acknowledges that the
duration and scope of the covenants described in Section 15, 16 or 17 are fair,
reasonable and necessary in order to protect the goodwill and other legitimate
interests of the Company and its Subsidiaries, that adequate consideration has
been received by the Grantee for such obligations, and that these obligations do
not prevent the Grantee from earning a livelihood.  If, however, for any reason
any court of competent jurisdiction determines that any restriction contained in
Section 15, 16 or 17 are not reasonable, that consideration is inadequate, such
restriction will be interpreted, modified or rewritten to include as much of the
duration, scope and geographic area identified in Section 15, 16 or 17 as will
render such restrictions valid and enforceable.]

 

19.           [Remedies. The Grantee acknowledges that the Company will suffer
irreparable harm as a result of a breach of this Option Agreement by the Grantee
for which an adequate monetary remedy does not exist and a remedy at law may
prove to be inadequate.  Accordingly, in the event of any actual or threatened
breach by the Grantee of any provision of this Option Agreement, the Company
will, in addition to any other remedies permitted by law, be entitled to obtain
remedies in equity, including without limitation specific performance,
injunctive relief, a temporary restraining order and/or a permanent injunction
in any court of competent jurisdiction, to prevent or otherwise restrain any
such breach without the necessity of proving damages, posting a bond or other
security.  Such relief will be in addition to and not in substitution of any
other remedies available to the Company.  The existence of any claim or cause of
action by the Grantee against the Company or any of its Subsidiaries, whether
predicated on this Option Agreement or otherwise, will not constitute a defense
to the enforcement by the Company of this Option Agreement.  The Grantee agrees
not to defend on the basis that there is an adequate remedy at law.]

 

20.          Governing Law. The validity, construction, interpretation,
administration and effect of the Plan, and of its rules and regulations, and
rights relating to the Plan and to this Agreement, shall be governed by the
substantive laws, but not the choice of law rules, of the State of Delaware. 
The parties hereto hereby irrevocably and unconditionally submit to the
exclusive jurisdiction of any Federal court sitting in the State of Minnesota
over any suit, action or proceeding arising out of or relating to this
Agreement.  The parties hereby agree that service of any process, summons,
notice or document by U.S. registered mail addressed to any such party shall be
effective service of process for any action, suit or proceeding brought against
a party in any such court.  The parties hereto hereby irrevocably and
unconditionally waive any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum.  The parties hereto agree that a final judgment in any such
suit, action or proceeding brought in any such court shall be conclusive and
binding upon any party and may be enforced in any other courts to whose
jurisdiction any party is or may be subject, by suit upon such judgment.

 

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21.           WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY
COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR
THE PLAN, OR THE ENFORCEMENT HEREOF OR THEREOF.  THE GRANTEE AGREES THAT THIS
SECTION 21 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES
THAT THE COMPANY WOULD NOT HAVE ENTERED INTO THIS AGREEMENT IF THIS SECTION 21
WERE NOT PART OF THIS AGREEMENT.

 

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IN WITNESS WHEREOF, the Company and Grantee have executed this Option Agreement
as of the date first above written.

 

 

UHS HOLDCO, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

GRANTEE:

 

 

 

 

 

 

 

[                                                  ]

 

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ANNEX I

 

Fiscal Year

 

Base Target EBITDA

 

Capital Expenditures Target

 

 

 

 

 

20[    ]

 

[N/A] [$              (3)]

 

[[N/A] [$              ](3)

 

 

 

 

 

20[    ]

 

[N/A] [$              (4)]

 

[N/A] [$              (4)]

 

 

 

 

 

20[    ]

 

[N/A] [$              (4)]

 

[N/A] [$              (4)]

 

 

 

 

 

20[    ]

 

[N/A] [$              (4)]

 

[N/A] [$              (4)]

 

 

 

 

 

20[    ]

 

[N/A] [$              (4)]

 

[N/A] [$              (4)]

 

 

 

 

 

20[    ]

 

[N/A] [$              (4)]

 

[N/A] [$              (4)]

 

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(3)          Note: Target to be determined by the Board or Committee on or prior
to the date of grant.

 

(4)          Note: Target may be determined by the Board or Committee after the
date of grant.  In such case, the applicable target will be so determined by
September 30 of the fiscal year preceding the fiscal year for which the target
applies.  Each such determination will be made by the Board or Committee in its
sole discretion, which determination will, subject to the provisions of Sections
5(c) and 5(e)(ii) of this Agreement, be final, conclusive and binding on the
Grantee and the Company.  The Company will notify the Grantee in writing of the
Board or Committee’s determination promptly following such determination.

 

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