PETRO-CANADA EMPLOYEE STOCK OPTION PLAN (Amended July 31, 2009)

TABLE OF CONTENTS

1.              PURPOSE

The intention of the Employee Stock Option Plan is:

(a)            to promote employee commitment to Petro-Canada;

(b)            to encourage employees to further the development of Petro-Canada; and

(c)            to retain the key employees necessary for Petro-Canada’s long term success.

2.              INTERPRETATION

2.1           Definitions.

As hereinafter used in the Plan:

“ Cash Payment Alternative ” means the right of an Option holder to elect to receive cash equal to the amount by which the Market Price of the Share covered by a surrendered Option exceeds the Option Price of the Share to be acquired subject to such Option.

“ Committee ” means the Management Resources and Compensation Committee of the board of directors of the Company, or such other committee of the board of directors as may be given the responsibility to act on behalf of the board of directors with respect to the Plan, or, in the absence of any such committee, the board of directors itself.

“ Company ” means Petro-Canada, a company incorporated under the laws of Canada.

“ Eligible Party ” means an Employee or an estate entitled to participate in the Plan pursuant to Paragraph 6.1.

“ Employee ” means any person who is an employee of the Company or a Subsidiary of the Company.

“ Market Price ” means with respect to all Options approved by the Committee, the closing price of the Shares on the Relevant Stock Exchange on the Trading Day immediately preceding the day on which the Options are granted or the Cash Payment Alternative is exercised, as applicable, or, if the Shares did not trade on the Relevant Stock Exchange on such date, the Market Price shall be the average of the bid and ask prices in respect of the Shares at the close of trading on such date;

and for the purposes of the foregoing:

(i)             “ Trading Day ”, with respect to a stock exchange, means a day on which such stock exchange is open for business;

(ii)            “ Relevant Stock Exchange ” means the Toronto Stock Exchange or, if the shares are not then listed on the Toronto Stock Exchange, such stock exchange on which the Shares are listed as may be selected by the Committee for such purpose.

“ Option ” means an option to purchase Shares granted in accordance with the terms of the Plan, as described more fully in Paragraph 5.

“ Option Price ” means the price per Share at which Shares may be purchased under an Option, as the same may be adjusted from time to time in accordance with Paragraph 5.12.

“ Plan ” means this employee stock option plan as amended from time to time.

“ Shares ” means the common shares without nominal or par value in the capital of the Company, or any successor corporation.

2.2           Subsidiary

In the Plan a body corporate is a “ Subsidiary ” of another body corporate if:

(a)            it is controlled by

(i)             that other body corporate,

(ii)            that other body corporate and one or more bodies corporate each of which is controlled by that other body corporate, or

(iii)           two or more bodies corporate each of which is controlled by that other body corporate; or

(b)            it is a Subsidiary of a body corporate that is a Subsidiary of that other body corporate.

For this purpose a body corporate is controlled by a person or by two or more bodies corporate if:

(a)            securities of the body corporate to which are attached more than fifty per cent of the votes that may be cast to elect directors of the body corporate are held, other than by way of security only, by or for the benefit of that person or by or for the benefit of those bodies corporate; and

(c)            the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors of the body corporate.

2.3           Words, etc.

In this Plan; unless the context otherwise dictates, references to the masculine include the feminine and references to the singular include the plural and vice versa; the inclusion of headings is for convenience of reference only and shall not affect the construction hereof; and all money references are to Canadian currency.

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3.              ELIGIBILITY

All Eligible Parties may participate in the Plan on the basis described herein, subject to applicable legal, timing and other constraints which may preclude or limit participation. However no Eligible Party has the right to participate in the Plan and the Committee may decide on those Eligible Parties who may participate in the Plan and the extent of participation.

4.              PARTICIPATION

Participation in the Plan is voluntary and any decision not to participate shall not affect an Employee’s or other Option holder’s employment with the Company or a Subsidiary of the Company.  Nothing contained in this Plan shall give any Employee or other Option holder the right to be retained in the services of the Company or a Subsidiary of the Company, nor shall it interfere with the right of the Company or any Subsidiary of the Company, to discharge an Employee or other Option holder.  An Option holder shall have no entitlement by way of compensation or damages resulting from the termination of the office or employment by virtue which he is or may be eligible to participate in, or to exercise Options or a Cash Payment Alternative under the Plan for the loss of any right or benefit or prospective right or benefit under the Plan which he might otherwise have enjoyed whether the compensation is claimed for wrongful dismissal or otherwise.  Participation in the Plan will not give any Employee or other Option holder any right or claim to any benefit except to the extent provided in the Plan.

5.              OPTIONS

5.1           Shares Subject to, and Maximum Number of Shares Issuable Under, the Plan

Options may be granted in respect of authorized and unissued Shares.  The maximum number of Shares (the “ Specified Maximum ”) which may be issued upon exercise of Options granted under the Plan is twenty-nine million, nine-hundred and three thousand, one-hundred and seventy-three (29,903,173) .  For the purpose of this Paragraph 5.1 and the applicable rules of the stock exchanges on which the Shares are listed:

(a)            Shares which have been purchased or issued under the Plan prior to August 1, 2009 pursuant to share purchases made or Options which have been exercised prior to such date shall not be counted as Shares which have been purchased or issued under the Specified Maximum; and

(b)            Options which expire or are otherwise cancelled or terminated unexercised and the Shares which were issuable under such Options shall not be available for issuance under the Specified Maximum.

No fractional Shares may be purchased or issued under the Plan.

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5.2           Grant of Options

Options may be granted to any Employee.  Options may be granted by the Company pursuant to the decisions of the Committee provided and to the extent that such decisions are approved by the board of directors of the Company.  Options shall not be granted to non-executive directors of the Company.

5.3           Terms of Options

Subject as herein and otherwise specifically provided in this Paragraph 5, the number of Shares subject to each Option, the Option Price, the expiration date of each Option, the extent to which each Option is exercisable from time to time during the term of the Option and other terms and conditions relating to each such Option shall be determined by the Committee; provided, however, that if no specific determination is made by the Committee with respect to any of the following matters, each Option shall, subject to any other specific provisions of the Plan, contain the following terms and conditions:

(a)            the period during which the Option shall be exercisable shall be seven years from the date the Option is granted to the Optionee; and

(b)            not more than one-fourth of the Shares covered by the Option may be taken up during any one of the first four years of the term of the Option; provided, however, that if the number of Shares taken up under the Option in any of such years is less than one-fourth of the Shares covered by the Option, the Option holder shall have the right, at any time or from time to time during the remainder of the term of the Option, to purchase such number of shares subject to the Option which were purchasable, but not purchased by him, during such year; and provided further that in the event that, at any time, an offer is made to all holders of Shares to purchase some or all of their Shares, the Company will give notice of such offer to Option holders and all Options will become immediately exercisable.

5.4           Option Price

The Option Price on Shares which are the subject of Options shall not be lower than the Market Price.

5.5           Maximum Option Period

In no event may the term of an Option exceed ten years from the time of the grant of the Option.

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