SUNCOR ENERGY INC. STOCK OPTION PLAN

 

TABLE OF CONTENTS

 

		Page
ARTICLE 1 DEFINITIONS		K-3
ARTICLE 2 GENERAL		K-5
2.1	Purpose	K-5
2.2	Administration	K-5
2.3	Interpretation	K-6
2.4	Selection for Participation	K-6
2.5	Types of Awards under this Plan	K-6
2.6	Shares Subject to this Plan	K-6
2.7	Award Agreements	K-7
2.8	Non-transferability	K-7
ARTICLE 3 SHARE OPTIONS AND SHARE APPRECIATION RIGHTS		K-8
3.1	Award of Options and SARs	K-8
3.2	Exercise Term	K-8
3.3	Exercise Price	K-8
3.4	Payment of Exercise Price	K-8
3.5	Share Appreciation Rights	K-8
3.6	Death of a Participant	K-8
3.7	Permitted Leave	K-8
3.8	Retirement of Participant	K-9
3.9	Termination for Cause	K-9
3.10	Other Involuntary Termination of Employment	K-9
3.11	Voluntary Termination of Employment	K-9
3.12	Discretion to Permit Exercise	K-9
ARTICLE 4 LIMITED APPRECIATION RIGHTS		K-9
4.1	Award of LARs	K-9
ARTICLE 5 OTHER SHARE-BASED AWARDS		K-10
5.1	Other Share-Based Awards under this Plan	K-10
5.2	Consideration for Other Share-Based Awards	K-10
5.3	Payment of Consideration	K-10
5.4	Maximum Number of Shares Issuable for Non-Cash Consideration	K-10
ARTICLE 6 NON-DISCRETIONARY AWARDS TO NON-EMPLOYEE DIRECTORS		K-10
6.1	General	K-10
ARTICLE 7 ISSUANCE OF SHARES ON ACCOUNT OF DIRECTORS’ FEES		K-10
7.1	General	K-10
ARTICLE 8 REORGANIZATION OF THE COMPANY		K-10
8.1	General	K-10
8.2	Reorganization of Company’s Capital	K-11
8.3	Other Events Affecting the Company	K-11
8.4	Immediate Exercise of Awards	K-11
8.5	Issue by Company of Additional Shares	K-11
ARTICLE 9 MISCELLANEOUS PROVISIONS		K-11
9.1	Legal Requirement	K-11
9.2	Rights of Participant	K-11
9.3	Amendment or Discontinuance	K-12
9.4	Indemnification	K-12
9.5	Effective Date	K-12
9.6	Governing Law	K-12
APPENDIX “A” LIMITED APPRECIATION RIGHTS AWARDS		K-13
APPENDIX “B” NON-DISCRETIONARY AWARDS TO NON-EMPLOYEE DIRECTORS		K-15
APPENDIX “C” ISSUANCE OF SHARES ON ACCOUNT OF DIRECTORS’ FEES		K-16

 

 

ARTICLE 1

 

DEFINITIONS

 

When used herein, the following terms shall have the following meanings:

 

(a)                                 “ Annual Grant ” has the meaning attributed thereto in paragraph 2(a) of Appendix “B”;

 

(b)                                “ Annual Share Payment ” has the meaning attributed thereto in paragraph 1 of Appendix “C”;

 

(c)                                 “ Associated Company ” means any subsidiary or partnership of the Company;

 

(d)                                “ Award ” means an award granted or permitted to be granted under this Plan as contemplated by paragraph 2.5 of this Plan;

 

(e)                                 “ Award Agreement ” means a signed written agreement evidencing the terms and conditions upon which an Award may be granted under this Plan, or a certificate issued by the Company, in such form as may be approved by the Board or Committee from time to time, which evidences the grant of an Award;

 

(f)                                   “ Blackout ” means a temporary trading ban announced by the Company pursuant to its trading policies, whether a regularly scheduled trading ban in connection with the release of quarterly financial information, or an ad hoc trading ban, but excludes any period during which a regulator has halted trading in the Company’s securities;

 

(g)                                “ Blackout Exercise Term ” means, with respect to holders of Options, ten (10) days after the expiry of a Blackout if the Exercise Term of the Options expired: (i) during the Blackout; or (ii) within three (3) days of the Blackout expiring, if the holder of such Options was subject to the Blackout;

 

(h)                                “ Board ” means the Board of Directors of the Company;

 

(i)                                    “ CEO ” means the Chief Executive Officer of the Company;

 

(j)                                    “ Change of Control ” means a transaction or series of transactions whereby any person or combination of persons, acting jointly or in concert, beneficially owns, directly or indirectly, or exercises control or direction over, thirty-five percent (35%) or more of the outstanding voting securities of the Company or any person formed by the merger, amalgamation, consolidation or statutory arrangement of the Company with or into any other person; provided that for the purposes of the LARs only held by persons who are U.S. Taxpayers, in the event the foregoing definition is inconsistent with the definition of “change of control” for the purposes of application of section 409A (or any amended or successor provision thereof) of the U.S. Tax Code, the definition of “change of control” in section 409A (or any amended or successor provision thereof) of the U.S. Tax Code shall apply. For the purposes of this definition, “person” includes an individual, partnership, association, organization, government or governmental body, body corporate or other entity;

 

(k)                                 “ Change of Control Transaction ” means, for the purposes of determining a Participant’s entitlement in respect of any outstanding LARs, a transaction in which there is a Change of Control which generally effects all common shareholders of the Company and provides such shareholders with an opportunity to realize an equal amount per share in respect of their proportionate holdings of Shares. In the event that there is any question as to whether a change of control transaction has occurred in any circumstances, the Board shall determine the matter and any such determination of the Board shall be final and conclusive for the purposes of this Plan;

 

(l)                                    “ Committee ” means a committee of the members of the Board;

 

(m)                              “ Company ” means Suncor Energy Inc., a corporation amalgamated under the Canada Business Corporations Act and any successor company;

 

(n)                                “ Designated Person ” has the meaning attributed thereto in paragraph 2.2(c);

 

(o)                                “ Director ” means an individual member of the Board;

 

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(p)                                “ Director’s Annual Retainer ” means the basic annual retainer fee payable to each Director who has not waived payment thereof in respect of his or her services as a member of the Board, as determined by the Company from time to time;

 

(q)                                “ Disability Benefits ” means benefits other than normal sick leave payments from payroll to which a Participant becomes entitled under a disability program of the Company or an Associated Company;

 

(r)                                   “ Effective Date ” means the effective date of the arrangement as defined in the arrangement agreement dated March 22, 2009 between Suncor Energy Inc. and Petro-Canada;

 

(s)                                 “ Employee ” means a person who provides services to the Company or an Associated Company and from whose remuneration the Company deducts and withholds Canada Pension Plan and Employment Insurance remittances, or similar withholdings under applicable law of any jurisdiction other than Canada relating to source withholding from pay by an employer;

 

(t)                                   “ Executives ” means executives and senior managers of the Company or its Associated Companies and includes, where applicable, the relevant Directors;

 

(u)                                “ Exercise Notice ” means a notice in writing signed by the Participant stating the Participant’s intention to exercise a particular Option, SAR, LAR or other Award;

 

(v)                                “ Exercise Price ” means the price at which a Share may be purchased pursuant to the exercise of an Option or SAR;

 

(w)                              “ Exercise Term ” means the period of time during which Options, SARs, LARs or other Awards may be exercised;

 

(x)                                  “ Initial Grant ” has the meaning attributed thereto in paragraph 2(a) of Appendix “B”;

 

(y)                                “ LAR ” has the meaning attributed thereto by paragraph 4.1 and Appendix “A” to this Plan;

 

(z)                                  “ Market Value ” means the value represented by the simple average of the high and low prices at which Shares were traded in one or more board lots on the TSX on the day prior to the relevant date or, if the Shares were not so traded on that day, the value represented by the simple average of the high and low prices at which the Shares were traded in one or more board lots on the TSX on the first day prior to the relevant date on which Shares were so traded;

 

(aa)                           “ Non-Employee Director ” means at any particular time, any Director at such time who is not an officer of the Company or one of its Associated Companies or an Employee;

 

(bb)                         “ Option ” means an Award that may be granted to a Participant which allows the Participant to purchase Shares at a set price for a future period which does not exceed seven (7) years;

 

(cc)                           “ Other Share-Based Awards ” has the meaning attributed thereto in paragraph 5.1;

 

(dd)                         “ Participants ” means those Employees whose selection to participate in this Plan is approved by the Board, regardless of whether he or she serves as such in an executive capacity or on a full- or part-time basis, and also includes, for purposes of Articles 6 and 7 and the related appendices only, the relevant Directors;

 

(ee)                           “ Pension Plans ” means all foreign and domestic pension plans of the Company, including but not limited to, the Suncor Energy Pension Plan, the Suncor Energy U.S. Pension Plan and the Petro-Canada pension plans, and any pension plan(s) of the Company that may be in effect from time to time, as applicable;

 

(ff)                               “ Permitted Leave ” means any period of absence from normal work due to a leave of absence of greater than sixty (60) days in duration, during which the Participant continues to maintain his or her status as an Employee as conclusively determined by the Company in its discretion. For certainty, any maternity or paternity leave, education leave, or Employee receiving Disability Benefits, in each case of greater than sixty (60) days in duration, shall be deemed to be a “Permitted Leave” within the meaning of this Plan;

 

(gg)                         “ Petro-Canada Options ” means the 24,276,389 options to purchase shares of Petro-Canada which were granted under the Petro-Canada Plan and which were outstanding as at April 27, 2009, which, following the Effective Date,

 

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would, if all such options remained outstanding at the Effective Date, represent options to purchase 31,073,778 Shares;

 

(hh)                         “ Petro-Canada Plan ” means the Petro-Canada Employee Stock Option Plan, as amended and restated to April 26, 2005;

 

(ii)                                 “ Plan ” means this Stock Option Plan, including all appendices thereto, as same may be amended or restated from time to time;

 

(jj)                                 “ Plan Maximum ” has the meaning attributed thereto in paragraph 2.6(a);

 

(kk)                           “ Related Option ” has the meaning attributed thereto in paragraph 2(b) of Appendix “A”;

 

(ll)                                 “ Retirement ” means, in the case of a Participant who is not a Director, a Participant’s termination of employment on a date on which such Employee would be eligible for an immediately payable benefit pursuant to the terms of the Pension Plans, or such other date the Employee is deemed to be eligible for retirement as defined in the applicable Pension Plan, or, termination of employment of any Employee at or over the age of fifty-five (55) whom the Company deems shall be treated as a retiree under the provisions of this Plan and, in the case of a Director, shall mean the date on which such person shall cease to be a Director;

 

(mm)                     “ SAR ” has the meaning attributed thereto in paragraph 3.5 and includes Tandem SARs as the context requires;

 

(nn)                         “ Settlement Day ” means the third Trading Day following the date of exercise in respect of any particular exercise of an Option;

 

(oo)                         “ Shares ” means the common shares of the Company;

 

(pp)                         “ Specified Percentage ” has the meaning attributed thereto in paragraph 1 of Appendix “C”;

 

(qq)                         “ Tandem SARs ” has the meaning attributed thereto in paragraph 3.5;

 

(rr)                               “ Termination Date ” has the meaning attributed thereto in paragraph 2.3(c);

 

(ss)                           “ Trading Day ” means a day on which the TSX is open for trading in securities;

 

(tt)                               “ TSX ” means The Toronto Stock Exchange; and

 

(uu)                         “ U.S. Taxpayer ” means a person who is required by the laws of the United States of America to file a U.S. federal income tax return.

 

ARTICLE 2

 

GENERAL

 

2.1                              Purpose

 

The principal purpose of this Plan is to provide Employees with an opportunity to receive a variety of different forms of compensation awards. The Plan is designed to be flexible in order to provide recipients of Awards hereunder with incentives for continued improved performance thereby promoting the long term financial success of the Company and materially increasing shareholder value by: (i) attracting and retaining individuals of exceptional ability; (ii) strengthening the Company’s capability to develop, maintain and direct a competent management team; (iii) motivating Executives and other Employees, by means of performance related incentives, to achieve long-range performance goals; (iv) providing incentive compensation opportunities competitive with those of other major oil and gas companies; and (v) enabling individuals who receive Awards hereunder to participate in the long-term growth and financial success of the Company.

 

2.2                              Administration

 

(a)                                 The Plan shall be administered by the Board.

 

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(b)                                Except for matters governed by Articles 6 and 7 of this Plan, and Appendices “B” and “C” relating thereto, in respect of which the Board shall have limited authority as provided therein, the Board shall have the sole and complete authority: (i) to approve the selection of Participants; (ii) to make Awards in such forms and amounts as it shall determine; (iii) to impose such limitations, restrictions, and conditions upon such Awards as it shall deem appropriate; (iv) to interpret this Plan and to adopt, amend and rescind administrative guidelines and other rules and regulations relating to this Plan; and (v) to make all other determinations and take all other actions necessary or advisable for the implementation and administration of this Plan. The Board’s determinations and actions within its authority under this Plan shall be conclusive and binding upon the Company and all other persons.

 

(c)                                 To the extent permitted by law, the Board may from time to time delegate to a Committee or, where appropriate, to the CEO all or any of the powers conferred on the Board under this Plan, with the authority of the Committee or CEO, as applicable, to further delegate such powers from time to time to the senior officer responsible for human resources of the Company (the “ Designated Person ”). In such event, the Committee, CEO or Designated Person shall exercise the delegated powers in the manner and on the terms authorized by the Board, and all references herein to the Board or to the Committee shall include the Board, the Committee, the CEO or Designated Person, as applicable. Any decision made or action taken by the Board, the Committee, the CEO or Designated Person arising out of or in connection with the administration or interpretation of this Plan in this context shall be final and conclusive.

 

2.3                              Interpretation

 

(a)                                 Whenever the Board or, where permitted, the Committee, CEO or Designated Person is to exercise discretion in the administration of terms and conditions of this Plan, the term “discretion” shall mean the “sole and absolute discretion” of the Board, Committee, CEO or Designated Person, as the case may be.

 

(b)                                Whenever an Award may be granted pursuant to the terms and conditions of this Plan, or Appendix “A” hereto, the Committee, CEO or Designated Person may make recommendations for the Board’s consideration with respect to the granting of such Awards.

 

(c)                                 For the purposes of this Plan, a Participant shall be deemed to have ceased to be an Employee, and the Participant’s employment with the Company shall be deemed to be terminated: (i) in the case of resignation, Retirement or termination of a Participant’s employment by the Company, whether or not for cause and with or without reasonable or statutory notice or any period of salary continuance or deemed employment, on the date the Participant or the Company, as applicable, delivers notice of such resignation, Retirement or termination to the other party, which shall not include any period of reasonable or statutory notice or any period of salary continuance or deemed employment, or such date thereafter, if any, as the Participant and Company agree in writing shall be the effective date of resignation, Retirement or termination, as applicable, for incentive plan purposes; and (ii) in the case of a Participant’s death, on the date of the Participant’s death (the “ Termination Date ”).

 

2.4                              Selection for Participation

 

Participants shall be selected from those Employees who have the capacity to contribute to the success of the Company and its Associated Companies. In approving this selection, the Board or the Committee, CEO or Designated Person shall consider such factors as it deems relevant subject to the provisions of this Plan, as may be determined from time to time.

 

2.5                              Types of Awards under this Plan

 

Awards granted under this Plan may be in the form of any one or more of the following: (i) Options; (ii) SARs; (iii) Tandem SARs; (iv) LARs (in conjunction with Options), as described in Appendix “A”; and (v) Other Share-Based Awards.

 

2.6                              Shares Subject to this Plan

 

(a)                                 The Shares which are the subject of Awards shall be those Shares which the Board from time to time shall at its discretion have reserved and approved for issuance under this Plan. The aggregate number of Shares which may be issued under the Plan or reserved for issuance upon the exercise of Awards made under, or otherwise governed by, the Plan, shall be limited to 46,490,680 Shares (the “ Plan Maximum ”) which consists of the aggregate of (i) 31,073,778 Shares reserved for issuance pursuant to the exercise of Petro-Canada Options (whether such exercise were to occur on or prior to the Effective Date), and (ii) 15,416,902 additional Shares which are unallocated as at April 27, 2009 and the Effective Date, provided that, following the Effective Date, any such outstanding

 

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Petro-Canada Options shall continue to be subject to the terms and conditions of the Petro-Canada Plan until such time as they are exercised or terminated or they expire or are cancelled pursuant to the applicable terms and conditions of the Petro-Canada Plan; if for any reason, any Shares subject to purchase by exercising Options or Petro-Canada Options are not delivered or are reacquired by the Company, for reasons including but not limited to, termination, expiration or cancellation of an Option or Petro-Canada Option (pursuant to the terms and conditions of the Plan or the Petro-Canada Plan, respectively), such Shares shall again become available for the granting of Options under this Plan (and for greater certainty, the Shares reserved for issuance upon the exercise of Petro- Canada Options shall only become available for issuance in respect of Options granted under this Plan following the time, if any, at which a Petro-Canada Option is terminated, expires or is cancelled without the resulting issuance of a Share or a share of Petro-Canada, as applicable, including in respect of any such termination, cancellation or expiry which occurred between April 27, 2009 and the Effective Date). Of such Plan Maximum, the aggregate number of Shares which may be issued or reserved for issuance pursuant to the provisions of Appendices “B” and “C” of this Plan shall be 500,000 Shares. Notwithstanding the foregoing, the aggregate number of Shares which may be reserved for issuance under this Plan and under all other security based compensation arrangements of the Company: (i) must not exceed ten percent (10%) of the issued and outstanding Shares of the Company (on a non-diluted basis); (ii) to any one (1) person must not exceed five percent (5%) of the issued and outstanding Shares (on a non-diluted basis); and (iii) must not, within any one (1) year period be issued, or at any time under such security based compensation arrangements be issuable, to insiders of the Company in an amount exceeding ten percent (10%) of the Company’s total issued and outstanding securities (for the purposes of this paragraph, security based compensation arrangement and insider have the meanings attributed thereto in the TSX Company Manual).

 

(b)                                Subject to stock exchange approval where required, the Board may, in its discretion, decide to award shares of another authorized class or series of shares of the Company that are convertible into Shares or make such other shares subject to purchase under an Option, in which event the maximum number of Shares into which such oth