Document:

Exhibit 10.12

 

IPSCO Inc.

2005 Form 10-K

 

RESTRICTED SHARE AND

PERFORMANCE UNIT AWARD AGREEMENT

 

THIS AGREEMENT made the 26th 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

 

	
   

  	
   

  	
   

  	
   

  	
  >75%ile

  	
   

  	
  0

  	
  %

  	
  100

  	
  %

  	
  150

  	
  %

  	
  175

  	
  %

  	
  200

  	
  %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Performance Relative to Peers
   3-YR Average ROCE

  	
   

  	
  62.5%ile

  	
   

  	
  0

  	
  %

  	
  75

  	
  %

  	
  125

  	
  %

  	
  150

  	
  %

  	
  175

  	
  %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Performance X

  Shares or Units

  Granted:

  	
   

  	
  (%ile of peers)

  	
   

  	
  Median

  	
   

  	
  0

  	
  %

  	
  50

  	
  %

  	
  100

  	
  %

  	
  125

  	
  %

  	
  150

  	
  %

  	
  

  =

  	
   

  	
  Number
  of

  Units

  Earned

  	
   

  	
  

  X

  	
   

  	
  Stock

  Price at

  End of

  Period

  	
   

  	
  

  =

  	
   

  	
  ACTUAL

  AWARD

  VALUE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  37.5%ile

  	
   

  	
  0

  	
  %

  	
  0

  	
  %

  	
  50

  	
  %

  	
  75

  	
  %

  	
  100

  	
  %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  <25%ile

  	
   

  	
  0

  	
  %

  	
  0

  	
  %

  	
  25

  	
  %

  	
  38

  	
  %

  	
  50

  	
  %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  <5

  	
  %

  	
  5

  	
  %

  	
  8

  	
  %

  	
  11

  	
  %

  	
  14

  	
  %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

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:

 

	
   

  	
   

  	
   

  	
   

  	
  After-tax operating profit +
  tax-affected Depreciation/Amortization charge

  	
   

  
	
  ROCE

  	
   

  	
  =

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Total Net Assets –
  Non-interest-bearing current Liabilities – Cash and Cash Equivalents + $50m
  base cash + Accumulated Depreciation and Amortization – Construction in
  Progress

  	
   

  

 

•                  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 may be approved
by the Board of Directors;

 

All Restricted Shares shall vest
immediately. The Performance Units will vest as follows: the Participant shall
receive a pro-rata portion of the Performance Units awarded on the Commencement
Date calculated pursuant to Paragraph 3 of this Agreement, based upon the
number of whole months employed prior to the cessation of employment pursuant
to this Paragraph 7(a) over the number of months in the Performance
Period.

 

(b)                                 If the
Participant ceases to be an employee (and, if the Participant is an officer,
the Participant ceases to be an officer) of the Company (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) in any circumstance
other than as described in paragraph (a) of this Section 7 (including
termination by the Company with or without cause and termination by the
Participant), all of the Restricted Shares and 

 

5

 

Performance Units shall immediately lapse and be
terminated and cancelled. For greater certainty, the Participant’s employment
shall not be considered to terminate where there is a transfer of the
Participant’s employment without an intervening period from the Company to a
Subsidiary or vice versa, or from one Subsidiary to another, or by reason of an
approved leave of absence under circumstances set forth in Paragraph 14 herein.

 

8.                                      Payment of Restricted Shares

 

Upon vesting of the Restricted
Shares in accordance with Section 4 and Section 7 hereof, the
Participant shall become entitled to payment in respect of the Restricted
Shares. Payment shall be made by the delivery by the Company of one newly
issued Common Share for each Restricted Share held by the Participant. Such
newly issued Common Share shall be issued without restrictive legend.

 

9.                                      Payment of Performance Units
and Dividend Equivalents

 

Upon vesting of the Performance
Units in accordance with Sections 5 and 7 hereof, the Participant shall become
entitled to payment in respect of the Performance Units. Payment shall be made
by delivery by the Company to the Participant of one newly issued Common Share
for each Performance Unit held by the Participant.

 

At the time payment is made by
the Company to the Participant under this Section 9, the Company shall
also pay to the Participant a dividend equivalent in an amount equal to the
number of the Participant’s Performance Units multiplied by the total dividends
per Common Share declared by the Company between the Commencement Date and the
applicable date of vesting. Such payment shall be made by the Company in cash
as soon as practicable after the Vesting Date.

 

Where the Participant has died,
all references in this Section 9 to “Participant” shall be deemed to
include the Participant’s legal representative.

 

10.                               Non-Assignability of
Restricted Shares and Performance Units

 

The Restricted Shares and
Performance Units granted hereunder shall not be transferable or assignable
(whether absolutely or by way of mortgage, pledge or other charge) by the
Participant other than by will or other testamentary instrument, the laws of
succession or other laws of general application and during the lifetime of the
Participant only the Participant shall be entitled to payment thereunder. The
foregoing provisions of this Paragraph 10 shall not prevent the grant of
Restricted Shares or Performance Units from being forfeited pursuant to the
terms and conditions of this Agreement and shall not prevent a participant from
designating a beneficiary to receive the Restricted Shares or Performance Units
in the event of the Participant’s death. Any such beneficiary shall receive
these amounts subject to all conditions and restrictions set forth in this
Agreement, including but not limited to, the forfeiture provisions set forth
herein.

 

6

 

11.                               Rights of Participant

 

The Participant shall have full
rights as a shareholder upon the grant of Restricted Shares but shall have no
rights whatsoever as a shareholder in respect of any Common Shares which are
the subject of the Performance Units held by the Participant (including,
without limitation, any right to receive dividends or other distributions from
the Company, voting rights, warrants or rights under any rights offering) until
such time as such shares have been recorded on the Company’s official
shareholder records as having been issued to the Participant.

 

Nothing contained in this
Agreement shall give the Participant or any other person, any interest or title
in or to any Common Shares which are the subject of the Performance Units or
any rights as a shareholder of the Company or any other legal or equitable
right against the Company whatsoever other than as set forth in this Agreement,
nor shall it confer upon the Participant any right to continue as an officer of
the Company or of its Subsidiaries.

 

12.                               Withholding Taxes

 

Prior to the payment by the
Company in respect of the Restricted Shares and Performance Units pursuant to
Sections 8 and 9, the Participant shall pay to the Company such amount as may be
requested by the Company for the purpose of satisfying any liability for
federal, provincial, state or other taxes with respect to such payment. Where
the Participant is subject to income tax, the amount shall be paid by the
Participant to the Company in cash or by cheque.

 

13.                               Alterations in Shares

 

In the event of a share dividend, share split, issuance of shares or
instruments convertible into shares (other than pursuant to the Plan) for less
than market value, share consolidation, share reclassification, exchange of
shares, recapitalization, amalgamation, merger, consolidation, corporate
arrangement, reorganization, liquidation or the like of or by the Company, the
Board of Directors may make such adjustment, if any, of the number of
Performance Units, as it shall deem appropriate to give proper effect to such
event, including to prevent, to the extent possible, substantial dilution or
enlargement of rights granted to the Participant. If because of a proposed
merger, amalgamation or other corporate arrangement or reorganization, the
exchange or replacement of shares in the Company for those in another company
is imminent, the Board of Directors may, in a fair and equitable manner, determine
the manner in which the Performance Units shall be treated including, for
example, requiring the acceleration of the time for payment by the Company in
respect of the Performance Units and of the time for the fulfilment of the
Performance Objectives. All determinations of the Board of Directors under this
Section 13 shall be conclusive and binding.

 

7

 

14.                               Leave of Absence

 

If the Participant is an employee of the Company and is granted a
temporary leave of absence by the Company, such leave of absence shall be
deemed a continuation of the employment of the Participant provided if and so
long as:

 

(a)                                  the Company consents in writing to such leave
of absence; and

 

(b)                                 the Participant thereafter returns to full-time
employment with the Company for a period of six months, notwithstanding the
possible expiration of the Performance Period.

 

For greater certainty, the
provisions of subsection (b) of this Section 14 shall be subject
always to (i) immediate vesting on the occurrence of a Change of Control
as described in Section 5 hereof and (ii) the deemed continuous
employment provisions of Section 7.

 

15.                               Notice

 

All notices, demands, payments
or other communications which may or are required to be given under this
Agreement shall be given in writing by personal delivery or ordinary prepaid
mail:

 

(a)                                  to the Company:

IPSCO Inc.

650 Warrenville Road

Suite 500

Lisle, IL 60532

Attention: Vice President, General Counsel

and Corporate Secretary

 

(b)                                 to the Participant:

Naperville, IL

 

or such other address as either party may give in writing from time
to time. Such notices if given by mail shall be deemed to have been received by
the party to whom they are addressed as described herein seventy-two (72) hours
after they have been put in the post, postage prepaid, provided that if postal
services are disrupted by labour disputes, such mailed notices shall be deemed
to have been given and received on the date of actual receipt by the addressee.

 

16.                               Plan to Apply

 

The Award is granted under the Plan and the Award and
this Agreement are subject to the terms and conditions of the Plan. In the
event of any inconsistent provisions between this Agreement and the Plan, the
provisions of the Plan shall control. Capitalized terms used in this Agreement
without definition have the 

 

8

 

meaning assigned to them in the Plan. References to the sections of this
Agreement are intended solely for convenience and no provision of this
Agreement is to be construed by reference to any title of any section. This
Agreement shall also be subject to the applicable requirements of the Toronto
Stock Exchange, the Canadian Securities Administrators, the United States
Securities and Exchange Commission and the New York Stock Exchange from time to
time.

 

17.                               Compliance With Law

 

The Company will make reasonable efforts to comply with all applicable
federal, state and provincial securities laws. However, the Company will not
issue any shares or other securities pursuant to this Agreement if their
issuance would result in a violation of any such law. If at any time the
Management Resources and Compensation Committee (the “Committee”) shall
determine, in its discretion, that the listing, registration or qualification
of any shares subject to this Award upon any securities exchange or under any
federal, state or provincial law, or the consent or approval of any government
or regulatory body is necessary or desirable the condition of, or in connection
with, the granting of this Award or the issuance of Common Shares hereunder, no
rights may be exercised and the Common Shares may not be delivered
pursuant to the Award, in full or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee and any delay
caused shall in no way affect the dates of vesting or forfeiture of the Award.

 

18.                               No Implied Promises

 

By accepting the Award and
executing this Agreement, the Participant recognizes and agrees that the
Company and its Subsidiaries, and each of their officers, directors, agents and
employees, including but not limited to the Board of Directors and the
Committee, in their oversight or conduct of the business and affairs of the
Company and its Subsidiaries may, in good faith, cause the Company and/or a
Subsidiary to act or omit to act in a manner that will, directly or indirectly,
prevent all or part of the Performance Units from being non-forfeitable. No
provision of this Agreement shall be interpreted or construed to impose any
liability upon the Company, any Subsidiary, or any officer, director, agent or
employee of the Company or Subsidiary, or the Board of Directors or the
Committee for any forfeiture of Performance Units that may result,
directly or indirectly, from any such action or omission, or shall be
interpreted or construed to impose any obligation on the part of any such
entity or person to refrain from any such action or omission.

 

19.                               Relation to Other Benefits

 

The benefits received by
Participant under this Agreement will not be taken into account in determining
any benefits to which the Participant may be entitled under any profit
sharing, retirement, life insurance or other benefit or compensation plan
maintained by the Company or its Subsidiaries.

 

9

 

20.                               Dispute

 

The Committee shall interpret
and construe this Agreement and make all determinations hereunder, and any such
interpretation, construction or determination by the Committee shall be binding
and conclusive on the Company or a Subsidiary (as the case may be), the
Participant and on any person or entity claiming under or through either of
them. Without limiting the generality of the foregoing, any determination of
whether the Participant’s employment terminates by reason of “Retirement” or
for “Disability” within the meaning of Section 7 hereof, shall be made by
and in the sole discretion of the Committee, whose decision shall be final and
binding on the Company or Subsidiary (as the case may be), the Participant
and any person or entity claiming under or through any of them.

 

21.                               Miscellaneous

 

(a)                                  Nothing in this Agreement shall confer upon the
Participant any right to continue in the employ or other service of the Company
or any Subsidiary, or shall limit in any manner the right of the Company or any
Subsidiary to terminate the employment or other service of the Participant or
adjust the compensation of the Participant.

 

(b)                                 The Participant shall forthwith and from time
to time do all such acts and things and execute and deliver all such
instruments, writings and assurances as may be necessary to carry out this
Agreement in accordance with its true intent.

 

(c)                                  This Agreement shall be binding upon the
successors, assigns, executors and administrators of the parties hereto and
upon any beneficiary of the Participant.

 

(d)                                 Any waiver by a party of another party’s
performance of, or compliance with, a term or condition of this Agreement shall
not operate or be construed as a waiver of any subsequent failure by such party
to perform or comply.

 

(e)                                  Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall not affect the validity or
enforceability or the remaining terms and provisions hereof, or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.

 

(f)                                    This Agreement shall be governed by the laws of
the State of Illinois without regard to conflicts of law principles.

 

[signature page to
follow]

 

10

 

IN WITNESS
WHEREOF the
parties hereto have executed this Agreement as of the day and year first above
written.

 

	
   

  	
  IPSCO INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Per: 

  	
  /s/ Leslie T. Lederer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per: 

  	
  /s/ Raymond J. Rarey

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARTICIPANT

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David Sutherland

  	
   

  
	
   

  	
  David Sutherland

  
						

 

11Exhibit 10.12a

 

IPSCO Inc.

2005 Form
10-K

 

2005
Restricted Share and Performance Unit Award Agreements with Executives

 

In accordance with the Instructions of Item 601 of Regulation S-K, the
registrant has omitted filing the 2005 Restricted Share and Performance Unit
Award Agreements by and between IPSCO Inc. and the following Executive as
exhibits to this Form 10-K because, except as noted, they are identical,
to the form of Restricted Share and Performance Unit Agreement filed as Exhibit 10.12
with this Form 10-K.

 

1.               John Tulloch, dated
as of September 29, 2005, award of 6,000 restricted shares and 6,000
performance units.

 

2.               Vicki Avril, dated
as of August 24, 2005, award of 5,000 restricted shares and 5,000
performance units.

 

3.               Joseph Russo, dated
August 26, 2005, award of 3,200 restricted shares and 3,200 performance
units.

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