Exhibit 10.1
THE LUBRIZOL CORPORATION 2005 STOCK INCENTIVE PLAN
Section 1. Purpose.
The purposes of The Lubrizol Corporation 2005 Stock Incentive Plan are to
encourage selected employees of The Lubrizol Corporation and its Subsidiaries
and Outside Directors of the Company to acquire a proprietary and vested
interest in the growth and performance of the Company, to generate an increased
incentive to contribute to the Company's future success and prosperity, thus
enhancing the value of the Company for the benefit of shareholders, and to
enhance the ability of the Company and its Subsidiaries to attract and retain
individuals of exceptional talent upon whom, in large measure, the sustained
progress, growth and profitability of the Company depends.
Section 2. Definitions.
As used in the Plan, the following terms have the meanings set forth
below:
(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, Restricted Stock Unit Award, or Stock Award granted pursuant
to the provisions of the Plan.
(b) "Award Agreement" means a written document evidencing any Award
granted hereunder, signed by the Company and delivered to the Participant
or Outside Director, as the case may be.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" means a committee of not less than three (3) Outside
Directors of the Board, each of whom must be a "disinterested person"
within the meaning of Rule 16b-3(d)(3) promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any successor rule or statute.
(f) "Company" means The Lubrizol Corporation.
(g) "Employee" means any employee of the Company or of any
Subsidiary.
(h) "Fair Market Value" means the average of the high and low price
of a Share on the New York Stock Exchange on the Grant Date (in the case
of a Grant), or any other relevant date.
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(i) "Full-value Awards" means Awards that result in the Company
transferring the full value of any underlying Share issued in the
transaction. Full-value Awards will include all Restricted Stock Awards,
performance shares, performance rights, Stock-settled SARs, and certain
other stock based Awards.
(j) "Grant Date" means the date on which the Board approves the
grant of an Option, Stock Appreciation Right, Restricted Stock Award,
Restricted Stock Unit Award or Stock Award, and, with respect to a
Restricted Stock Unit Award granted to an Outside Director, the date
specified pursuant to Section 10 on which such Award is granted.
(k) "Incentive Stock Option" means an Option that is intended to
meet the requirements of Section 422A of the Code or any successor
provision thereto.
(l) "Non-Statutory Stock Option" means an Option that is not
intended to be an Incentive Stock Option.
(m) "Option" means an option to purchase Shares granted hereunder.
(n) "Option Price" means the purchase price of each Share under an
Option.
(o) "Outside Director" means a member of the Board who is not an
employee of the Company or of any Subsidiary.
(p) "Participant" means an Employee who is selected by the Committee
to receive an Award under the Plan.
(q) "Plan" means The Lubrizol Corporation 2005 Stock Incentive Plan.
(r) "Restricted Stock Award" means an award of restricted Shares
under Section 8 hereof.
(s) "Restricted Stock Unit Award" means an award of restricted stock
units under Section 10 hereof.
(t) "Restriction Period" means the period of time specified in an
Award Agreement during which the following conditions remain in effect:
(i) certain restrictions on the sale or other disposition of Shares
awarded under the Plan, (ii) subject to the terms of the applicable Award
Agreement, the continued employment of the Participant, and (iii) other
conditions forth in the applicable Award Agreement.
(u) "Shareholders' Meeting" means the annual meeting of shareholders
of the Company in each year.
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(v) "Shares" means common shares without par value of the Company.
(w) "Stock Appreciation Right" means the right to receive a payment
in cash or in Shares, or in any combination thereof, from the Company
equal to the excess of the Fair Market Value of a stated number of Shares
at the exercise date over a fixed price for such Shares.
(x) "Stock Award" means the grant of Shares under the Plan.
(y) "Stock-settled SAR" means the grant of a Stock Appreciation
Right whereby the appreciation of the underlying Shares (the value to the
Employee from the exercise of any Stock Appreciation Right grant) is
settled in Shares, either for the full number of Shares or the
appreciation net of any tax obligation.
(z) "Subsidiary" means a corporation which is at least 80% owned,
directly or indirectly, by the Company.
(aa) "Voting Stock" means the then-outstanding securities entitled
to vote generally in the election of directors of the Company.
Section 3. Administration.
The Plan is administered by the Committee. Members of the Committee are
appointed by and serve at the pleasure of the Board, and may resign by written
notice filed with the Chairman of the Board or the Secretary of the Company. A
vacancy on the Committee will be filled by the appointment of a successor member
by the Board. Subject to the express provisions of this Plan, the Committee has
conclusive authority to select Employees to be Participants for Awards and
determine the type and number of Awards to be granted, to construe and interpret
the Plan, any Award granted hereunder, and any Award Agreement entered into
hereunder, and to establish, amend, and rescind rules and regulations for the
administration of this Plan and has additional authority as the Board may from
time to time determine to be necessary or desirable. Notwithstanding the
foregoing, the Committee does not have the discretion with respect to Restricted
Stock Awards granted to Outside Directors pursuant to Section 10 as to prevent
any Award granted under this Plan from meeting the requirements for exemption
from Section 16(b) of the Exchange Act, as set forth in Rule 16b-3 thereunder or
any successor rule or statute.
Section 4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in the Plan, the maximum
number of shares as to which Awards may be granted under this Plan is
4,000,000 Shares, of which no more than 2,000,000 Shares can be settled as
full-value Awards. In addition to the stated maximums described above,
this Plan provides the Committee with the flexibility to convert the
Shares reserved solely for Options and the grant of Stock Appreciation
Rights into "full value" awards (e.g., restricted stock, performance
shares, etc.). Specifically:
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(i) For every Option or Stock Appreciation Right granted, the
number of Shares available for grant shall be reduced by one Share
for every one Share granted;
(ii) For each of the first 2,000,000 Shares granted as Awards
other than Options or the grant of a Stock Appreciation Right, the
number of Shares available for grant shall be reduced by one Share
for every one Share granted;
(iii) For any Awards settled as a full-value Award in excess
of the 2,000,000 Share limit, the number of Shares available for
grant shall be reduced by three Shares for every one Share granted
For example, if we issue 2,000,000 Shares as performance shares
prior to exhausting our pool of shares for Options, the Committee
has the flexibility to convert a portion of the remaining options
into other Award types, but it must be consistent with the 3-to-1
ratio described above.
The Company believes this provision provides for the maximum equity
plan design flexibility while continuing to protect the long-term
interests of shareholders.
(b) Any Shares issued hereunder may consist, in whole or in part, of
authorized and unissued Shares or treasury shares. If: (i) any Shares
subject to any Award granted hereunder are forfeited, (ii) any Award
otherwise terminates without the issuance of Shares or payment of other
consideration in lieu of Shares; (iii) Shares are used to pay the exercise
price of an Option; or (iv) Shares are withheld from issuance to pay
withholding taxes, the Shares subject to the Award, to the extent of any
such forfeiture, termination or withholding, will again be available for
issuance under the Plan.
(c) The number of Shares which remain available for issuance
pursuant to this Plan, together with Shares subject to outstanding Awards,
at the time of any change in the Company's capitalization, including stock
splits, stock dividends, mergers, reorganizations, consolidations,
recapitalizations, or other changes in corporate structure will be
appropriately and proportionately adjusted to reflect such change in
capitalization.
Section 5. Eligibility.
Any Employee is eligible to be selected as a Participant.
Section 6. Stock Options.
Non-Statutory Stock Options and Incentive Stock Options may be granted
hereunder to Participants either separately or in conjunction with other Awards
granted
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under the Plan. Any Option granted to a Participant under the Plan will be
evidenced by an Award Agreement in the form as the Committee may from time to
time approve. Any Option will be subject to the following terms and conditions
and to any additional terms and conditions, not inconsistent with the provisions
of the Plan, as the Committee deems desirable.
(a) Option Price. The purchase price per Share under an Option will
be fixed by the Committee in its sole discretion; provided that the
purchase price will not be less than one hundred percent (100%) of the
Fair Market Value of the Share on the Grant Date of the Option. Payment of
the Option Price may be made in cash, Shares, or a combination of cash and
Shares, as provided in the Award Agreement relating thereto.
(b) Option Period. The term of each Option will be fixed by the
Committee in its sole discretion; provided that no Incentive Stock Option
may be exercisable after the expiration of ten years from the Grant Date.
(c) Exercise of Option. Options may be exercisable to the extent of
fifty percent (50%) of the Shares subject thereto after one year from the
Grant Date, seventy-five percent (75%) of such Shares after two years from
the Grant Date, and one hundred percent (100%) of such Shares after three
years from the Grant Date, subject to any provisions respecting the
exercisability of Options that may be contained in an Award Agreement.
(d) Incentive Stock Options. The aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options held by any
Participant which are exercisable for the first time by such Participant
during any calendar year under the Plan (and under any other benefit plans
of the Company, of any parent corporation, or Subsidiary) will not exceed
$100,000 or, if different, the maximum limitation in effect at the Grant
Date under Section 422A of the Code, or any successor provision, and any
regulations promulgated thereunder. The terms of any Incentive Stock
Option granted hereunder will comply in all respects with the provisions
of Section 422A of the Code, or any successor provision, and any
regulations promulgated thereunder.
Section 7. Stock Appreciation Rights.
Stock Appreciation Rights may be granted hereunder to Participants either
separately or in conjunction with other Awards granted under the Plan and may,
but need not, relate to a specific Option granted under Section 6. The
provisions of Stock Appreciation Rights need not be the same with respect to
each Participant. Any Stock Appreciation Right related to a Non-Statutory Stock
Option may be granted at the same time such Option is granted or at any time
thereafter before exercise or expiration of such Option. Any Stock Appreciation
Right related to an Incentive Stock Option must be granted at the same time such
Option is granted. Any Stock Appreciation Right related to an Option will be
exercisable only to the extent the related Option is exercisable. In the case of
any Stock Appreciation Right related to any Option, the Stock Appreciation Right
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or applicable portion thereof terminates and is no longer exercisable upon the
termination or exercise of the related Option. Similarly, upon exercise of a
Stock Appreciation Right as to some or all of the Shares covered by a related
Option, the related Option will be canceled automatically to the extent of the
Stock Appreciation Rights exercised, and such Shares will not thereafter be
eligible for grant under Section 4(a). The Committee may impose any conditions
or restrictions on the exercise of any Stock Appreciation Right as it deems
appropriate.
Section 8. Restricted Stock Awards.
(a) Issuance. Restricted Stock Awards may be issued hereunder to
Participants, either separately or in conjunction with other Awards
granted under the Plan. Each Award under this Section 8 will be evidenced
by an Award document from the Company which will specify the vesting
schedule, any rights of acceleration and such other terms and conditions
as the Board determines, which need not be the same with respect to each
Participant.
(b) Registration. Shares issued under this Section 8 will be
evidenced by issuance of a stock certificate or certificates registered in
the name of the Participant bearing the following legend and any other
legend required by, or deemed appropriate under, any federal or state
securities laws:
The sale or other transfer of the common shares represented by this
certificate is subject to certain restrictions set forth in the
Award document granted to ___________________ (the registered owner)
by The Lubrizol Corporation dated _______________, under The
Lubrizol Corporation 2005 Stock Incentive Plan. A copy of the Plan
and Award document may be obtained from the Secretary of The
Lubrizol Corporation.
Unless otherwise provided in the Award document from the Company, the
certificates will be retained by the Company until the expiration of the
Restriction Period. Upon the expiration of the Restriction Period, the
Company will (i) have the legend removed from the certificates for the
Shares to which a Participant is entitled in accordance with the Award
document from the Company and (ii) release the Shares to the custody of
the Participant.
(c) Forfeiture. Except as otherwise determined by the Committee at
the Grant Date, upon separation of service of the Participant for any
reason during the Restriction Period, all Shares still subject to
restriction will be forfeited by the Participant and retained by the
Company; provided that in the event of a Participant's retirement,
permanent disability, death, or in cases of special circumstances, the
Committee may, in its sole discretion, when it finds that a waiver would
be in the best interests of the Company, waive in whole or in part any or
all remaining restrictions with respect to the Participant's Shares. In
such case, unrestricted Shares will be issued to the Participant at the
time determined by the Committee.
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(d) Rights as Shareholders. At all times during the Restriction
Period, Participants will be entitled to full voting rights with respect
to all Shares awarded under this Section 8 and will be entitled to
dividends with respect to the Shares.
Section 9. Stock Awards.
Awards of Shares may be granted hereunder to Participants, either
separately or in conjunction with other Awards granted under the Plan. Subject
to the provisions of the Plan, the Committee has the sole and complete authority
to determine (i) the Employees to whom Awards will be granted, (ii) the time or
times at which the Awards will be granted, (iii) the number of Shares to be
granted pursuant to the Awards, and (iv) all other conditions of the Awards.
Conditions may include issuance of Shares at the time of the Award is granted or
issuance of Shares at a time or times subsequent to the time the Award is
granted, which subsequent times may be specifically established by the Committee
and/or may be determined by reference to the satisfaction of one or more
performance measures specified by the Committee. The provisions of Stock Awards
need not be the same with respect to each Participant.
Section 10. Outside Directors' Restricted Stock Unit Awards.
On the close of business on the date of each Annual Meeting of
Shareholders, each Outside Director will automatically be granted a number
of Restricted Stock Units equal to an amount calculated by dividing
$60,000 by the Fair Market Value of a Share on the Grant Date, which will
be subject to the following terms and conditions and to any additional
terms and conditions, not inconsistent with the provisions of the Plan, as
are contained in the applicable Award Agreement.
(a) Vesting. Restricted Stock Unit Awards granted pursuant to this
Section 10 will vest upon the earliest to occur of the following dates:
(i) one year after the Grant Date;
(ii) separation from service under a retirement plan or policy
of the Company;
(iii) death while serving as a director; or
(iv) Change of Control pursuant to Section 11.
Section 11. Change in Control.
Notwithstanding the provisions of Sections 6(c) and 10(a), outstanding
Options will become 100% exercisable and any other outstanding Awards hereunder
will become fully vested and without any restrictions upon the occurrence of any
Change in Control (as
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hereafter defined) of the Company; except that no Option may be exercised prior
to the end of six months from the Grant Date.
Notwithstanding the provisions of Section 8 and the applicable Award
Agreement, any outstanding Restricted Stock Awards will become fully vested and
without any restrictions upon the occurrence of any Change in Control of the
Company.
For all purposes of the Plan, a "Change in Control" will occur if any of
the following events occurs:
(a) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person, and immediately after such
merger, consolidation or reorganization less than a majority of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such transaction are held in the
aggregate by the holders of Voting Stock of the Company immediately prior
to such transaction;
(b) The Company sells all or substantially all of its assets to any
other corporation or other legal person, and less than a majority of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such sale are held in the
aggregate by the holders of Voting Stock of the Company immediately prior
to such sale;
(c) There is a report filed on Schedule 13D or Schedule 14D-l (or
any successor schedule, form or report), each as promulgated pursuant to
the Exchange Act, disclosing that any person (as the term "person" is used
in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become
the beneficial owner (as the term "beneficial owner" is defined under Rule
13(d)(3) or any successor rule or regulation promulgated under the
Exchange Act) of securities representing 20% or more of the Voting Stock;
(d) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing
in response to Form 8-K or Schedule 14A (or any successor schedule, form
or report or item therein) that a change in control of the Company has or
may have occurred or will or may occur in the future pursuant to any
then-existing contract or transaction; or
(e) If during any period of two consecutive years, individuals who
at the beginning of any such period constitute the Directors of the
Company cease for any reason to constitute at least a majority thereof,
provided, however, that for purposes of this Section 11(e), each Director
who is first elected, or first nominated for election by the Company's
stockholders, by a vote of at least two thirds of the Directors of the
Company (or a committee thereof) then still in office who were Directors
of the Company at the beginning of any such period will be deemed to have
been a Director of the Company at the beginning of such period.
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Notwithstanding the foregoing provisions of Section 11(c) or 11(d) hereof,
unless otherwise determined in a specific case by majority vote of the Board, a
"Change in Control" will not occur for purposes of the Plan solely because (i)
the Company, (ii) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the voting securities, or (iii) any employee
stock ownership plan or any other employee benefit plan sponsored by the
Company, either files or becomes obligated to file a report or a proxy statement
under or in response to Schedule 13D, Schedule 14D-l, Form 8-K or Schedule 14A
(or any successor schedule, form or report or item therein) under the Exchange
Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in
excess of 20% or otherwise, or because the Company reports that a change in
control of the Company has or may have occurred or will or may occur in the
future by reason of such beneficial ownership.
Section 12. Amendments and Termination.
The Board may, at any time, amend, alter or terminate the Plan, but no
amendment, alteration, or termination may be made that would impair the rights
of an Outside Director or Participant under an Award previously granted, without
the Outside Director's or Participant's consent, or that without the approval of
the shareholders would:
(a) except as is provided in Sections 4(b) and 13(c) of the Plan,
increase the total number of Shares which may be issued under the Plan;
(b) change the class of employees eligible to participate in the
Plan; or
(c) materially increase the benefits accruing to Participants under
the Plan;
so long as such approval is required by law or regulation; provided that, as
long as required by law or regulation, the provisions of Section 10 hereof may
not be amended or altered more than once every six (6) months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act,
or the rules thereunder.
The Committee may amend the terms of any Award heretofore granted (except,
with respect to Restricted Stock Awards granted pursuant to Section 10 hereof,
only to the extent not inconsistent with Rule 16b-3 under the Exchange Act or
any successor rule or statute), prospectively or retroactively, but no such
amendment may impair the rights of any Participant or Outside Director without
his consent.
Section 13. General Provisions.
(a) No Option or other Award may be assignable or transferable by a
Participant or an Outside Director otherwise than by will or the laws of
descent and distribution, and Options and Stock Appreciation Rights may be
exercised during the Participant's lifetime only by the Participant, or,
if permissible under applicable law, by the guardian or legal
representative of the Participant.
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(b) The term of each Award will be for a period of months or years
from its Grant Date as may be determined by the Committee or as set forth
in the Plan; provided that in no event may the term of any Incentive Stock
Option or any Stock Appreciation Right related to any Incentive Stock
Option exceed a period of ten (10) years from the Grant Date.
(c) In the event of a merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate structure
such that Shares are changed into or become exchangeable for a larger or
smaller number of Shares, thereafter the number of Shares subject to
outstanding Awards granted to Participants and to any Shares subject to
Awards to be granted to Participants pursuant to this Plan will be
increased or decreased, as the case may be, in direct proportion to the
increase or decrease in the number of Shares by reason of such change in
corporate structure; provided, however, that the number of Shares will
always be a whole number, and the purchase price per Share of any
outstanding Options will, in the case of an increase in the number of
Shares, be proportionately reduced, and, in the case of a decrease in the
number of Shares, be proportionately increased. The above adjustment will
also apply to any Shares subject to Restricted Stock Awards granted to
Outside Directors pursuant to the provisions of Section 10.
(d) No Employee may have any claim to be granted any Award under the
Plan and there is no obligation for uniformity of treatment of Employees
or Participants under the Plan.
(e) The prospective recipient of any Award under the Plan will not,
with respect to the Award, be deemed to have become a Participant, or to
have any rights with respect to the Award, until and unless the recipient
complies with the then applicable terms and conditions.
(f) All certificates for Shares delivered under the Plan pursuant to
any Award will be subject to any stock-transfer orders and other
restrictions as the Committee deems advisable under the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Shares are then listed, and
any applicable federal or state securities law, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
(g) Except as otherwise required in any applicable Award document or
by the terms of the Plan, Participants will not be required, under the
Plan, to make any payment other than the rendering of services.
(h) The Company is authorized to withhold from any payment under the
Plan, whether the payment is in Shares or cash, all withholding taxes due
in respect of the payment hereunder and to take such other action as may
be necessary in the opinion of the Company to satisfy all obligations for
the payment of such taxes.
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(i) Nothing contained in this Plan prevents the Board from adopting
other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
(j) Nothing in the Plan interferes with or limit in any way the
right of the Company or any Subsidiary to terminate any Participant's
employment at any time, nor does the Plan confer upon any Participant any
right to continued employment with the Company or any Subsidiary.
Section 14. Effective Date of the Plan.
The Plan will be effective upon adoption of the Plan by the Board of
Directors of the Company. The Plan will be submitted to the shareholders of the
Company for approval within one year after its adoption by the Board of
Directors, and if the Plan is not approved by the shareholders, the Plan will be
void and of no effect. Any Awards granted under the Plan prior to the date the
Plan is submitted for approval by the shareholders will be void if the
shareholders do not approve the Plan.
Section 15. Expiration of the Plan.
Awards may be granted under this Plan at any time prior to April 1, 2010,
on which date the Plan will expire but without affecting any outstanding awards.
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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
OUTSIDE DIRECTOR
RESTRICTED STOCK UNIT AWARD
THIS RESTRICTED STOCK UNIT AWARD, dated this ______ day of ______________,
2_____, (the "Grant Date") by The Lubrizol Corporation (the "Company") to
_________________________________, a member of the Board of Directors of the
Company who is not an Director of the Company or a Subsidiary (as defined in the
Plan).
The following terms and provisions apply to this Restricted Stock Unit Award:
1. This Award grants to you, under the provisions of the Company's 2005 Stock
Incentive Plan, as amended (the "Plan"), the number of Stock Units ("Units")
equal to the amount, set forth in Section 2, which is calculated by dividing
$60,000.00 by the Fair Market Value of a Share of Lubrizol common stock, on the
date of the most recent Annual Meeting of Shareholders, subject to the
restrictions, terms and conditions as hereinafter set forth.
2. The aggregate number of Units granted under this Award is ________.
4. (a) The Restriction Period is one year beginning on the Grant Date and ending
on the first anniversary of the Grant Date.
(b) If you separate from service as a director of the Company for any reason
prior to the end of the Restriction Period, you will forfeit to the Company all
Units for which the Restriction Period has not expired, provided that in cases
of special circumstances, the Committee (as defined in the Plan) may, in its
sole discretion, when it finds that a waiver would be in the best interests of
the Company, determine that the Restriction Period for any or all of the Units
is deemed to have expired and Share certificates will be issued in accordance
with Section 6.
5. Notwithstanding the provisions of Section 4, the Restriction Period will end
upon: (a) your separation from service in accordance with any retirement plan or
policy of the Company then in effect; (b) your death; or (c) the occurrence of
any Change of Control (as defined in the Plan) of the Company.
6. At the end of the Restriction Period, a Share certificate(s) will be issued
to you in an amount equal to the number of Units subject to the Restriction
Period.
7. If there is a merger, reorganization, consolidation, recapitalization, stock
dividend or other change in corporate structure such that Company Common Shares
are changed into or become exchangeable for a larger or smaller number of
Company Common Shares, the number of Units specified in Section 2, above, will
be increased or decreased, as the case may be, in direct proportion to the
increase or decrease in the number of Company Common Shares by reason of the
change in corporate structure; provided, however, that the number of Units will
always be a whole number.
8. The Restriction Period will not expire if the lapse of restrictions would
violate:
(a any applicable state securities law;
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(b) any applicable registration or other requirements under the
Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended, or the listing
requirements of any stock exchange; or
(c) any similar legal requirement of any governmental authority
regulating the issuance of shares by the Company.
In addition, if a Registration Statement with respect to Shares distributable
under this Plan is not in effect or if counsel for the Company deems it
necessary or desirable in order to avoid possible violation of the Securities
Act, the Company may require, as a condition to its issuance and delivery of
certificate(s) for the Shares, the delivery to the Company of a commitment in
writing by you that at the Grant Date and at the time of expiration of the
Restriction Period it is your intention to acquire such Shares for your own
account for investment only and not with a view to, or for resale in connection
with, the distribution thereof other than in a transaction that does not require
registration under the Securities Act (which may, but will not be required to,
be conclusively determined for the purposes of this Agreement based upon written
advice of counsel for the Company or the Director); that you understand the
Shares distributable hereunder may be "restricted securities" as defined in Rule
144 of the Securities and Exchange Commission; and that any resale, transfer or
other disposition of the Shares will be accomplished only in compliance with
Rule 144, the Securities Act, or other or subsequent applicable Rules and
Regulations thereunder. In these circumstances (except as aforesaid), the
Company may place on the certificate(s) an appropriate legend reflecting the
aforesaid commitment and the Company may refuse to permit transfer of the
certificate(s) until it has been furnished evidence satisfactory to it that no
violation of the Securities Act or the Rules and Regulations thereunder would be
involved in such transfer.
9. The Committee has conclusive authority, subject to the express provisions of
the Plan as in effect from time to time and this Award to interpret this Award
and the Plan, and to establish, amend and rescind rules and regulations for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this Award in the manner and to the
extent it deems expedient to carry the Plan into effect, and it is the sole and
final judge of such expediency. The Board of Directors of the Company may from
time to time grant to the Committee further powers and authority as the Board
determines to be necessary or desirable. Notwithstanding any other provision of
this Agreement to the contrary, no amendment, construction, establishment,
rescission or correction of the type referenced above which is made or adopted
following a Change in Control, and which amendment, construction, establishment
or correction adversely affects your rights, will be effective without your
express prior written consent.
10. Notwithstanding any other provision of this Award, the Units will be subject
to all of the provisions of the Plan in force from time to time.
THE LUBRIZOL CORPORATION
By
------------------------
J. L. Hambrick
President and CEO
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THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
NONSTATUTORY STOCK OPTION AWARD AGREEMENT
THIS STOCK OPTION AWARD AGREEMENT, dated this ______ day of
______________, 2_____, (the "Grant Date") by The Lubrizol Corporation (the
"Company") to _________________________________ (the "Employee"), an employee of
the Company and/or a Subsidiary (as defined in the Plan).
The parties to this Agreement agree to the following terms and provisions:
1. The Company grants to you, under the provisions of Company's 2005 Stock
Incentive Plan, as amended (the "Plan"), the option of purchasing the number of
Company Common Shares ("Shares") indicated in Section 2, at the price and
subject to the terms and conditions described in this Agreement. The option
rights described in this Agreement will be called "Option Rights". This Option
award is not intended to be an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended.
2. The number of Shares you may purchase is ________.
3. The option price is $______ per Share.
4. (a) Except as provided in Sections 4(b), 4(c), 4(d), 4(e), 4(f), 4(g) and
8 hereof, you cannot exercise any of the Option Rights until you have
remained continuously employed by the Company and/or any of its
subsidiaries for one year after the Grant Date. After one year, you can
exercise the Option Rights up to 50% of the Shares specified above. After
two years you can exercise up to 75% of the Shares and after three years,
you can exercise up to 100% of the Shares.
(b) Notwithstanding Section 4(a), the Option Rights will become, and for
the period specified in Section 6, will remain, 100% exercisable upon any
Change in Control (as defined in the Plan) of the Company.
(c) If you separate from service due to retirement from the Company or any
of its subsidiaries in accordance with any retirement plan or policy of
your employer (1) you, at any time within the period specified in Section
6, may exercise the Option Rights and (2) if there is a Change in Control
within seven (7) months following your retirement (but within the period
specified in Section 6), you may, in accordance with Section 9, exercise
the LSARs (as defined below), in either case as follows: (A) if you have
reached the normal retirement age you may exercise the Option Rights and
LSARs up to 100% of the Shares, and (B) if you have not reached the normal
retirement age but elect to retire pursuant to "early retirement"
provisions of any applicable retirement plan or policy of your employer,
you may exercise the Option Rights and LSARs to the extent you were
entitled to exercise them immediately prior to your early retirement, or
if the Organization and Compensation Committee of the Board of Directors
of Lubrizol ("Committee"), upon the recommendation of the Chief Executive
Officer of Lubrizol, specifically approves, you may exercise the Option
Rights and LSARs up to 100% of the Shares.
1
(d) If you separate from service with Lubrizol or any of its subsidiaries
for any reason other than retirement or death, then you, at any time
within three months following your separation from service (but within the
period specified in Section 6), (1) may exercise the Option Rights and/or
(2) may, in accordance with Section 9, exercise the LSARs, in each case to
the extent you were entitled to exercise them immediately prior to your
cessation of employment, or if the Committee, upon the recommendation of
the Chief Executive Officer, specifically approves, you may exercise the
Option Rights and LSARs up to 100% of the Shares.
(e) If you die while employed by Lubrizol or any of its subsidiaries, then
(1) for 12 months following the date of death, (but within the period
specified in Section 6), the executor or administrator of your estate or
the person entitled by will or the applicable laws of descent and
distribution may exercise the Option Rights and (2) if there is Change in
Control within seven months after your death, the person entitled by will
or by the applicable laws of descent and distribution may, in accordance
with Section 9, exercise the LSARs, in each case up to of 100% of the
Shares.
(f) If there is a Change in Control and your employment with the Company
or any of its subsidiaries terminates either (1) by your employer other
than for Cause (as defined below), or (2) by you for Good Reason (as
defined below) then, notwithstanding anything in this award to the
contrary, you, at any time within seven months following your termination
(but within the period specified in Section 6), (A) may exercise the
Option Rights and/or (B) may, in accordance with Section 9, exercise the
LSARs, in each case up to 100% of the Shares. The term "Cause" means that,
prior to your termination of the employment you committed: (I) an
intentional act of fraud, embezzlement or theft in connection with your
duties or in the course of your employment; (II) intentional wrongful
damage to the property of the Company or any of its subsidiaries; or (III)
intentional wrongful disclosure of secret processes or confidential
information of the Company or any of its subsidiaries; or (IV) intentional
wrongful engagement in any Competitive Activity (as defined below); and
any of these acts was materially harmful to the Company. No act or failure
to act on your part will be considered "intentional" if it was due
primarily to an error in judgment or negligence, but will be considered
"intentional" only if done, or omitted to be done, by you not in good
faith and without reasonable belief that the action or omission was in the
best interest of the Company. Notwithstanding the above, you will not be
considered to have been terminated for "Cause" unless there is delivered
to you a copy of a resolution duly adopted by the affirmative vote of at
least three-fourths of the Directors of the Company at a meeting of the
Directors called and held for that purpose (after reasonable notice to you
and an opportunity for you, together with your counsel, to be heard before
the Directors), finding that, in the good faith opinion of the Directors,
you had committed an act described above in this Section 4(f) and
specifying the particulars thereof in detail. Termination of employment by
you will be considered for "Good Reason" if you terminate employment and
any of the following events has occurred (regardless of whether any other
reason, other than for Cause, for the termination exists or has occurred,
including without limitation other employment):
(i). Failure to elect or reelect or otherwise maintain you in the
office or in the position, or a substantially equivalent office or
position, which you held immediately prior to a Change in Control,
or your removal as a Director of the Company (or any successor
thereto) if you were a Director of the Company immediately prior to
the Change in Control;
2
(ii). A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached
to the position you held immediately prior to the Change in Control,
a reduction in the aggregate of your annual compensation, or the
termination or denial of your rights to employee benefits in which
your similarly situated co-workers participate, or a reduction in
scope or value thereof without your prior written consent, any of
which is not remedied within ten calendar days after receipt by the
Company of your written notice of the change, reduction or
termination, as the case may be;
(iii). A determination you made in good faith that as a result of a
Change in Control and a change in circumstances thereafter
significantly affecting your position, including, a change in the
scope of the business or other activities for which you were
responsible immediately prior to a Change in Control, you have been
rendered substantially unable to carry out, have been substantially
hindered in the performance of, or have suffered a substantial
reduction in, any of the authorities, powers, functions,
responsibilities or duties attached to the position held by you
immediately prior to the Change in Control, which situation is not
remedied within ten calendar days after receipt by the Company of
your written notice of your determination; or
(iv). The Company relocates its principal executive offices, or
changes your principal location of work, to any location which is
more than 50 miles from the location immediately prior to the Change
of Control or to travel away from your office significantly more
than was required prior to the Change in Control without, in either
case, your prior written consent.
The term "Competitive Activity" means your participation, without the
written consent of an officer of the Company, in the management of any
business enterprise if that enterprise engages in substantial and direct
competition with the Company and the enterprise's sales of any product or
service competitive with any product or service of the Company amounted to
25% of such enterprise's net sales for its most recently completed fiscal
year and if the Company's net sales of said product or service amounted to
25% of the Company's net sales for its most recently completed fiscal
year. "Competitive Activity" does not include (i) the mere ownership of
securities in any such enterprise and exercise of rights appurtenant
thereto or (ii) participation in management of any such enterprise other
than in connection with the competitive operations of such enterprise.
(g) If you, after leaving the employ of the Company, die during one of the
periods described in Section 4(c), (d) or (f), the executor or
administrator of your estate, or the person entitled by will or the
applicable laws of descent and distribution, may exercise the Option
Rights held by you at the time of your death during the applicable period,
as follows:
(i). If Section 4(c) was in effect, for one (1) year after your
death;
(ii). If Section 4(d) was in effect, for three (3) months after
your death;
(iii). If Section 4(f) was in effect, for one (1) year after your
death;
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provided that, the Option Rights may not be exercised after the period
specified in Section 6.
5. The Option Rights and LSARs are not transferable other than by will or by the
laws of descent and distribution, and are exercisable during your lifetime only
by you or your guardian or legal representative. In addition, except as
otherwise provided by Sections 4(c), 4(d), 4(e), 4(f), 4(g) and 8, the Option
Rights and/or LSARs can be exercised only if you remain continuously employed by
Lubrizol or any of its subsidiaries from the Grant Date to the date of exercise.
6. Notwithstanding any other provision hereof, the Option Rights expire ten
years after the Grant Date, or earlier as described in Sections 4(c), 4(d),
4(e), 4(f), 4(g) or 8.
7. If there is a merger, reorganization, consolidation, recapitalization, stock
dividend or other change in corporate structure so that Company Common Shares
are changed into or become exchangeable for a larger or smaller number of
Company Common Shares, the number of Shares subject to this award will be
increased or decreased in direct proportion to the increase or decrease in the
number of Company Common Shares by reason of the change in corporate structure;
provided, however, that the purchase price per Share will, in the case of an
increase in the number of Shares, be proportionately reduced, and, in the case
of a decrease in the number of Shares, be proportionately increased. If there is
any other change in the number or kind of outstanding Company Common Shares or
other Company securities, or of any shares of stock or other securities into
which Company Common Shares have been changed or for which they have been
exchanged, then the Committee may make an adjustment in the number or kind of
shares of stock or other securities purchasable hereunder, and in the manner of
purchasing such stock or other securities and the price to be paid, as the
Committee determines is equitably required by the change, and the adjustment
will be effective and binding for all purposes of the Option Rights.
8. If the Company liquidates or dissolves, the Company will give to you at least
thirty (30) days' prior written notice, and you will have the right within the
thirty (30) day period (but within the period specified in Section 6) to
exercise the Option Rights to the extent you otherwise are entitled to exercise
the Option Rights. Any Option Rights which have not been exercised before the
effective date of the liquidation or dissolution will terminate.
9. In accordance with the terms described in this Section 9, the Company grants
to you limited stock appreciation rights ("LSARs") with respect of each of the
Shares to which the Option Rights relate. Upon exercise of the LSARs, (a) you
will be entitled to receive a cash amount equal to the amount by which the Fair
Market Value (as defined below) of a Share exceeds the option price set forth in
Section 3 hereof, multiplied by the number of LSARs exercised, and (b) an equal
number of Option Rights will automatically be canceled. You may exercise a LSAR
only within sixty (60) days (but within the period specified in Section 6) after
you receive written notice from the Company that there has been a Change in
Control. You may exercise the LSARs by delivering to the Company at the office
of its Vice President, Human Resources, a signed written notice, of your
election to exercise in whole or in part the LSARs. The term "Fair Market Value"
means the higher of (1) the highest daily closing price (as reported on the New
York Stock Exchange Composite Transactions) for a Share during the period
beginning on the 60th day prior to the date on which the LSAR is exercised and
(2) the highest gross price paid or to be paid for a Share in any Change in
Control event described in Section 4(b).
4
10. (a) You may exercise the Option Rights by delivering to the Company at the
office of its Vice President, Human Resources, a signed written notice of
your election to exercise the Option Rights. You must include with the
notice payment of the full purchase price of the Shares to be purchased,
except as provided in Section 10(b). You must also pay, within the time
period specified by the Company, the amount, if any, of the tax to be
withheld for federal, state or local tax purposes on account of the
exercise of the Option Rights. You may pay the purchase price and any
withholding tax in cash (which may include withholding from your next
salary payment), in Company Common Shares or in any combination of cash
and Company Common Shares. If you use Company Common Shares to pay the
purchase price of Shares being purchased: (1) you may do so either by
actually delivering the share certificates or by attesting as to the
ownership of the Common Shares; and (2) you must have owned them at least
for six (6) months.
(b) You may elect to pay the purchase price upon the exercise of the
Option Rights by authorizing a third party to sell all the Shares (or a
sufficient portion of the Shares) acquired upon the exercise of the
Options Rights and to remit to the Company a sufficient portion of the
sale proceeds to pay the entire purchase price and any tax withholding
resulting from the exercise.
(c) All elections must be made in writing and be submitted to the
Company's Vice President, Human Resources. All elections by officers are
irrevocable and are subject to the approval of the Committee.
(d) The Company will withhold a sufficient number of Shares that will
provide for the federal, state and/or local income tax at the rates then
applicable for supplemental wages, unless otherwise requested by you, but
in no event less than the statutory minimums for tax withholding.
(e) For purposes of determining the number of Company Common Shares that
are to be used in payment of the purchase price or to be withheld to
provide for the tax withholding pursuant to Section 10(a), Company Common
Shares will be valued at the average of the high and low trading prices on
the New York Stock Exchange on the date you exercise the Option Rights. If
the determination of the tax withholding would require the withholding of
a fractional Share, the Company shall withhold the nearest whole number of
Shares needed to pay the tax withholding, rounded up, and remit to you in
cash the amount of the excess after the withholding taxes have been
satisfied. Upon payment of any tax withholding, as described above, the
Option Rights are considered to be exercised as of the date the Company
received your notice of the election to exercise the Option Rights, or, if
applicable, the date of the sale of Shares as described in Section 10(b).
Upon the proper exercise of the Option Rights, the Company will issue and
deliver to you, a certificate or certificates for the Shares purchased.
You agree that, as a holder of the Option Rights, you have no rights as a
shareholder with respect to any of the Shares as to which this Option
applies unless you effectively exercise your Option Rights in accordance
with the provisions in this Section 10.
11. Neither the Option Rights nor the LSARs will be exercisable if the
exercise would violate:
(a) any applicable state securities law;
5
(b) any applicable registration or other requirements under the Securities
Act of 1933, as amended (the "Securities Act"), the Securities Exchange
Act of 1934, as amended, or the listing requirements of any stock
exchange; or
(c) any similar legal requirement of any governmental authority regulating
the issuance of shares by the Company.
In addition, if a Registration Statement for Shares under this Plan is not in
effect or if the Company's counsel considers it necessary or desirable in order
to avoid possible violation of the Securities Act, the Company may require the
delivery to the Company of your written commitment that: (1) it is your
intention to acquire the Shares for your own account for investment purposes
only and not with a view to resell the Shares other than in a transaction that
does not require registration under the Securities Act; (2) you understand the
Shares may be "restricted securities" as defined in Rule 144 under the
Securities Act; and (3) that any resale, transfer or other disposition of the
Shares will be accomplished only in compliance with Rule 144 under the
Securities Act. In certain circumstances, the Company may place a legend on the
Shares certificates reflecting the commitment described above, and the Company
may refuse to permit transfer of the Share certificates until the Company has
been furnished with evidence satisfactory to it that the transfer would not
result in a violation of the Securities Act or the Rules and Regulations.
12. Notwithstanding any other provision of this Agreement, if you are terminated
from employment by the Company for Cause (as defined in Section 4(f) above), you
will forfeit all of your vested and non-vested Options granted under this
Agreement that are outstanding on the date of your termination.
13. The Committee has conclusive authority, subject to the express provisions of
the Plan as in effect from time to time and this award, to construe this award
and the Plan, and to establish, amend and rescind rules and regulations for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this award in the manner and to the
extent it considers expedient to carry the Plan into effect. The Board of
Directors of the Company may from time to time grant to the Committee further
powers and authority as the Board determines to be necessary or desirable.
Notwithstanding any other provision of this award to the contrary, no amendment,
construction, establishment, rescission or correction of the type referenced
above which is made or adopted following a Change in Control, and which
amendment, construction, establishment or correction adversely affects your
rights, will be effective without your express prior written consent.
14. You must hold any Shares that are distributed to you upon the exercise of
the Option under this Award, at least until you have met your Share ownership
guideline.
15. Notwithstanding any other provision of this award, the Option Rights will be
subject to all of the provisions of the Plan in force from time to time.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate as of the day and year first above written.
THE LUBRIZOL CORPORATION EMPLOYEE
6
By
------------------------- ----------------------
J. L. Hambrick
President and CEO
7
THE LUBRIZOL CORPORATION
2005 STOCK INCENTIVE PLAN
PERFORMANCE SHARE AWARD
THIS PERFORMANCE SHARE AWARD, dated this ______ day of ______________,
2_____, (the "Grant Date") by The Lubrizol Corporation (the "Company") to
_________________________________ , an employee of the Company and/or a
Subsidiary (as defined in the Plan).
The following terms and provisions apply to this Performance Share Award:
1. The Company hereby grants to you, under the provisions of Section 9 of the
Company's 2005 Stock Incentive Plan, as amended (the "Plan"), the number of
Company Common Shares, without par value, in accordance with the three-year
performance target chart(s) as shown in Exhibit A attached to this Award. The
Company Common Shares granted hereunder are referred to herein as the "Shares".
2. If there is a Change of Control, as defined under the Plan, prior to the
receipt of Shares under Section 1, above, you will receive a pro-rata number of
Shares upon the Change of Control. The pro-rata number of Shares will be
determined as shown on Exhibit B attached to this Award.
3. If you separate from service due to retirement (either normal or early
retirement) prior to the receipt of Shares pursuant to Section 1, above, you
will receive a pro-rata number of Shares upon the end of the three-year cycle
based on the number of full months which have elapsed since the date of this
Award at the time or your separation from service or death. In no event will the
payment of Shares be made earlier than six months after your retirement.
If you separate from service due to death prior to the receipt of Shares
pursuant to Section 1, above, your beneficiary will receive a pro-rata number of
Shares upon the end of the three-year cycle based on the number of full months
which have elapsed since the date of this Award at the time or your service or
death. You may at any time specify in writing a beneficiary to receive the
Shares if you die before the receipt of Shares under this Award. If the Company
does not have a beneficiary election on file at the time of your death, the
Shares will be issued to your spouse, or if your spouse is not living at the
time of issuance, your children who are living, or if you have no living
children at the time of issuance, your estate.
If you separate from service (voluntarily or involuntarily) for any other
reason prior to the receipt of Shares pursuant to Section 1, above, you will
forfeit any Shares under this Award.
4. The Award is not transferable by you during your life.
5. Prior to the issuance of Shares to you, you will not be a shareholder of the
Company and you will have no rights under the Award as a shareholder of the
Company. No dividends or other amount will be allocated or paid to you with
respect to the Award.
6. If there is a stock split, reverse stock split or stock dividend, the number
of Shares specified in Section 1, above will be increased or decreased in direct
proportion to the increase or decrease in the number of Company Shares by reason
of the stock split, reverse stock split or stock dividend.
1
7. Shares will not be distributed under this Award if the issuance of the Shares
would violate:
(a) any applicable state securities law;
(b) any applicable registration or other requirements under the
Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended, or the listing
requirements of any stock exchange on which the Company's Shares are
listed; or
(c) any similar legal requirement of any governmental authority
regulating the issuance of shares by the Company.
Further, if a Registration Statement with respect to the Shares to be issued is
not in effect or if counsel for the Company deems it necessary or desirable in
order to avoid possible violation of the Securities Act, the Company may
require, as a condition to its issuance and delivery of certificates for the
Shares, that you deliver to the Company a statement in writing that you
understand the Shares may be "restricted securities" as defined in Rule 144 of
the Securities and Exchange Commission and that any resale, transfer or other
disposition of the Shares will be accomplished only in compliance with Rule 144,
the Securities Act, or other or subsequent applicable Rules and Regulations
thereunder. Further still, the Company may place on the certificates evidencing
the Shares an appropriate legend under Rule 144.
8. (a) When the Common Shares are distributable to you pursuant to Section 1,
above, you may be subject to income and other taxes on the value of the
Shares on the date of distribution. The Company will withhold a sufficient
number of Shares that will provide for the federal, state and/or local
income tax at the rates then applicable for supplemental wages, unless
otherwise requested by you, but in no event less than the statutory
minimums for tax withholding.
(b) For purposes of determining the number of Common Shares that are to be
withheld to provide for the tax withholding pursuant to Section 8(a),
Common Shares will be valued at the average of the high and low trading
prices on the New York Stock Exchange on the date Shares are distributable
to you. If the determination of the tax withholding requires the
withholding of a fractional Share, the Company shall withhold the nearest
whole number of Shares needed to pay the tax withholding, rounded up, and
remit to you in cash the amount of the excess after the withholding taxes
have been satisfied.
9. Prior to the distribution of Shares pursuant to Section 1, the Committee has
the right in its sole discretion to reduce the amount of this Award.
10. The Committee has conclusive authority, subject to the express provisions of
the Plan, as in effect from time to time, and this Award, to interpret this
Award and the Plan, and to establish, amend and rescind rules and regulations
for the administration of the Plan. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in this Award in the manner
and to the extent it deems expedient to carry the Plan into effect, and it is
the sole and final judge of such expediency. The Board of Directors of the
Company may from time to time grant to the Committee such further powers and
authority as the Board determines to be necessary or desirable.
2
11. You must hold any Shares that are distributed to you under this Award at
least until you have met your Share ownership guideline.
12. Notwithstanding any other provision of this Award, your Award will be
subject to all of the provisions of the Plan in force from time to time.
THE LUBRIZOL CORPORATION
By
-----------------------
James L. Hambrick
President and CEO
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Exhibit A
Performance Measure for the 2005-2007 Performance Period
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EXHIBIT B
Determination of Pro-Rata Common Shares Upon a Change of Control Under Section 2
Pursuant to the terms of Section 2, the number of pro-rata Common Shares
upon a Change of Control will be determined as follows:
1. No payout if 12 months has not elapsed since the date of this Award.
2. If more than 12 months has elapsed since the date of this Award:
(a) Determine the measurement growth rate for each full year that has
elapsed in the 3-year period as of the date of the Change of
Control,
(b) The 3-year cumulative measurement growth will be imputed as either
the 1-year measurement growth (if the Change of Controls occurs
during the second year) or the 2-year cumulative measurement growth
(if the Change of Control occurs during the third year).
(c) Payout is then pro-rated based on number of full months that have
elapsed since the date of this Award.
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