Adopted March 15, 2000

Amended April 30, 2007

Amended January 1, 2008

Amended January 1, 2009

Amended January 1, 2010

Amended January 1, 2011

Amended February 22, 2012

Amended March 11, 2012

 

Short-Term

Incentive Plan

 

Effective January 1, 2000

 

Potash Corporation of

Saskatchewan Inc.

 

 

 

 

 

Signature:   /s/ John Estey Date   March 11, 2012

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Contents

 

 

Section 1—Establishment of the Plan

     1   

1.01    Purpose

     1   

1.02    Effective Date

     1   

Section 2—Definitions

     1   

2.01    Accrued Incentive Awards

     1   

2.02    Adjusted Cash Flow Return (ACFR)

     2   

2.03    Average Accumulated Amortization

     2   

2.04    Average Accumulated Depreciation

     2   

2.05    Average Assets

     2   

2.06    Average Non-Interest Bearing Current Liabilities

     3   

2.07    Award Payment

     3   

2.08    Award Percentage

     3   

2.09    Board

     3   

2.10    Cash Flow Return (CFR)

     4   

2.11    Current Taxes

     4   

2.12    CEO

     4   

2.13    Committee

     4   

2.14    Corporation

     4   

2.15    Depreciation and Amortization

     5   

2.16    Eligible Employee

     5   

2.17    Entitled Employee

     5   

2.18    Hourly Employee

     5   

2.19    Non-recurring/Unusual Items

     5   

2.20    Operating Income

     5   

2.21    PCS Inc.

     5   

2.22    Plan

     6   

2.23    Salary

     6   

2.24    Target CFR

     6   

2.25    Target Percentage

     6   

2.26    Unrealized Gains/Losses on Derivative Instruments Included in Net Income

     6   

2.27    Year

     6   

Section 3—Participation

     6   

3.01    Participation Requirements

     6   

Section 4—Award Payments

     7   

4.01    Eligibility

     7   

4.02    Calculation of Award Payment

     7   

4.03    Entitled Operations Employees

     7   

4.04    Entitled Corporate Office Employees and Entitled Corporate Executives

     8   

4.05    Limitation of Award Payments and General Discretion

     9   

4.06    Timing of Award Payments

     9   

4.07    Recoupment Policy

     9   

Section 5—Administration of the Plan

     10   

5.01    Administration

     10   

 

 

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Section 6—Transfer of Employment

     10   

6.01    Transfer of Employment

     10   

Section 7—General Provisions

     10   

7.01    Assignment or Alienation

     10   

7.02    Amendment or Termination

     11   

7.03    Effect of Amendment or Termination

     11   

7.04    No Enlargement of Contractual Rights

     11   

7.05    Interpretation

     11   

7.06    Withholding of Taxes

     11   

7.07    Binding on Successors

     11   

7.08    Currency

     11   

Section 8—Change in Control

     12   

8.01    Definition of Change in Control

     12   

8.02    Prior Year CIC STIP Award Payment

     12   

8.03    CIC STIP Award Payment

     12   

Appendix “A”—Award Percentage

     14   

 

 

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Section 1—Establishment of the Plan

 

 

1.01 Purpose

  This Annual Incentive Plan is established for the purpose of rewarding
eligible employees on an annual basis for their efforts and contributions in the
attainment of certain performance measures that contribute materially to the
success of the business interests of Potash Corporation of Saskatchewan Inc.

 

1.02 Effective Date

  Subject to Section 7.02 (Amendment or Termination), this Plan shall be
effective on and after January 1, 2000.

 

  The amendments made to the Plan effective April 30, 2007, including the
addition of all permanent salaried employees, shall only be effective on and
after April 30, 2007.

 

  The amendments made to the Plan effective January 1, 2008, including the
addition of all permanent Canadian and US Hourly Employees, shall only be
effective on and after January 1, 2008.

 

  The amendments made to the Plan effective January 1, 2009, including the
addition of specified Trinidad Employees with jobs valued at Hay Point Level 366
up to Hay Point Level 774, and all PCS Sales employees with jobs valued at Hay
Point Level 775 and above who were not previously eligible shall be included in
this Plan effective on and after January 1, 2009.

 

  The amendments made to the Plan effective January 1, 2011, including the
reduction of the Target Percentage in Appendix “A” for Lanigan, Cory, Patience
Lake and Allan unionized Hourly Employees, shall only be effective on and after
January 1, 2011.

 

  The amendments made to the Plan on February 22, 2012, including the addition
of the Change in Control provision, shall be effective on and after January 1,
2012.

 

  The amendments made to the Plan on March 11, 2012, including the addition of
the Entitled Corporate Office Employee and Entitled Corporate Executive
provisions, shall be effective on and after January 1, 2012.

Section 2—Definitions

 

The following terms, when capitalized, shall be defined as follows:

 

2.01 Accrued Incentive Awards

  “Accrued Incentive Awards” means the amounts accrued during the Year that
represent expected payments under this Plan, the Medium Term Incentive Plan, and
other group incentive plans as appropriate.

 

 

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2.02 Adjusted Cash Flow Return (ACFR)

  “Adjusted Cash Flow Return” or “ACFR” means an amount derived from the
following formula:

 

    ACFR = (CFR divided by Target CFR) multiplied by 100,

 

  and used in the table in Appendix “A” to calculate an Entitled Employee’s
Award Percentage for a given Year.

 

2.03 Average Accumulated Amortization

  “Average Accumulated Amortization” means the average consolidated accumulated
amortization of PCS Inc. during a given Year, calculated by dividing (a) by
(b) where:

 

  (a) equals the sum of the consolidated accumulated amortization of PCS Inc. at
the beginning of the Year, the consolidated accumulated amortization of PCS Inc.
at the beginning of the second quarter of the Year, the consolidated accumulated
amortization of PCS Inc. at the beginning of the third quarter of the Year, the
consolidated accumulated amortization of PCS Inc. at the beginning of the fourth
quarter of the Year and the consolidated accumulated amortization of PCS Inc. at
the end of the Year; and,

 

  (b) equals five (5).

 

2.04 Average Accumulated Depreciation

  “Average Accumulated Depreciation” means the average consolidated accumulated
depreciation of PCS Inc. during a given Year, calculated by dividing (a) by
(b) where:

 

  (a) equals the sum of consolidated accumulated depreciation of PCS Inc. at the
beginning of the Year, the consolidated accumulated depreciation of PCS Inc. at
the beginning of the second quarter of the Year, the consolidated accumulated
depreciation of PCS Inc. at the beginning of the third quarter of the Year, the
consolidated accumulated depreciation of PCS Inc. at the beginning of the fourth
quarter of the Year and the consolidated accumulated depreciation of PCS Inc. at
the end of the Year; and,

 

  (b) equals five (5).

 

2.05 Average Assets

  “Average Assets” means the average book value of PCS Inc.’s consolidated
assets during a given Year, calculated by dividing (a) by (b) where:

 

  (a) equals the sum of the book value of the consolidated assets of PCS Inc. at
the beginning of the Year, the book value of the consolidated assets of PCS Inc.
at the beginning of the second quarter of the Year, the book value of the
consolidated assets of PCS Inc. at the beginning of the third quarter of the
Year, the book value of the consolidated assets of PCS Inc. at the beginning of
the fourth quarter of the Year and the book value of the consolidated assets of
PCS Inc. at the end of the Year; and,

 

  (b) equals five (5).

 

 

2

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2.06 Average Non-Interest Bearing Current Liabilities

  “Average Non-Interest Bearing Current Liabilities” means the average
consolidated non-interest bearing current liabilities of PCS Inc. during a given
Year, calculated by dividing (a) by (b) where:

 

  (a) equals the sum of the consolidated non-interest bearing current
liabilities of PCS Inc. at the beginning of the Year, the consolidated
non-interest bearing current liabilities of PCS Inc. at the beginning of the
second quarter of the Year, the consolidated non-interest bearing current
liabilities of PCS Inc. at the beginning of the third quarter of the Year, the
consolidated non-interest bearing current liabilities of PCS Inc. at the
beginning of the fourth quarter of the Year and the consolidated non-interest
bearing current liabilities of PCS Inc. at the end of the Year; and,

 

  (b) equals five (5).

 

2.07 Award Payment

  “Award Payment” means a cash payment to an Entitled Employee calculated
pursuant to Section 4 (Award Payments).

 

  (a) Corporate Award Payment is the payment calculated based upon the Corporate
ACFR measure of CFR relative to Target CFR.

 

  (b) Operations Award Payment is the payment calculated based upon operations
performance factors as established in accordance with Section 4.03 for the
benefit of Entitled Operations Employees.

 

  (c) Safety Award Payment is the payment calculated based upon safety
performance factors as established in accordance with Section 4.04 for the
benefit of Entitled Corporate Office Employees and Entitled Corporate
Executives.

 

2.08 Award Percentage

  “Award Percentage” means the percentage of an Entitled Employee’s Salary
derived from the table contained in Appendix “A”. The Award Percentages
applicable to an Entitled Employee, as set out in the table in Appendix “A”,
shall be recommended by the CEO and approved by the Committee.

 

2.09 Board

  “Board” means the Board of Directors of PCS Inc.

 

 

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2.10 Cash Flow Return (CFR)

  “Cash Flow Return” or “CFR” means the amount derived from the following
formula:

 

  (a) Operating Income, plus/minus

 

    Non-recurring/Unusual Items, plus/minus

 

    Change in Unrealized Gains/Losses on Derivative Instruments Included in Net
Income, plus

 

    Accrued Incentive Awards, plus

 

    Depreciation and Amortization, minus

 

    Current Taxes

DIVIDED BY

 

  (b) Average Assets (plus/minus the fair value adjustment for investments in
available-for-sale securities and minus the fair value of derivative instrument
assets), plus

 

    Average Accumulated Depreciation, plus

 

    Average Accumulated Amortization, minus

 

    Average Cash and Cash Equivalents, minus

 

    Average Non-Interest Bearing Current Liabilities, excluding Derivatives,

 

  and used in the table at Appendix “A” to calculate an Entitled Employee’s
Award Percentage for a given Year.

 

2.11 Current Taxes

  “Current Taxes” means the current income taxes accrued for a given Year, less
provision for deferred income taxes as set out in the audited consolidated
financial statements of PCS Inc. for that Year.

 

2.12 CEO

  “CEO” means the Chief Executive Officer of PCS Inc.

 

2.13 Committee

  “Committee” means the Compensation Committee of the Board.

 

2.14 Corporation

  “Corporation” means Potash Corporation of Saskatchewan Inc. and its direct and
indirect subsidiaries.

 

 

4

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2.15 Depreciation and Amortization

  “Depreciation and Amortization” means the depreciation and amortization
expense for a given Year, as set out in the audited consolidated financial
statements of PCS Inc. for that Year.

 

2.16 Eligible Employee

  “Eligible Employee” means an employee, including an Hourly Employee, who has
satisfied the eligibility requirements set out in Section 4.01 (Eligibility).

 

2.17 Entitled Employee

  “Entitled Employee” means an Eligible Employee who is recommended by the CEO
and approved by the Committee to participate in this Plan.

 

  (a) Entitled Corporate Executive

    “Entitled Corporate Executive” means an Entitled Employee who would
otherwise be an Entitled Corporate Office Employee, but for the fact that he or
she has been designated by the Committee as an Entitled Corporate Executive.

 

  (b) Entitled Corporate Office Employee

    “Entitled Corporate Office Employee” means an Entitled Employee who is
attached to one of the corporate facilities of PCS Inc. or its direct or
indirect subsidiaries at either Saskatoon or Northbrook, but in each case other
than an Entitled Corporate Executive.

 

  (c) Entitled Operations Employee

    “Entitled Operations Employee” means an Entitled Employee who is attached to
one of the operating facilities of PCS Inc. or its direct or indirect
subsidiaries.

 

2.18 Hourly Employee

  “Hourly Employee” means an employee employed at either a Canadian or U.S.
operation who is paid on an hourly wage rate basis, including both employees who
are and who are not covered by a collective bargaining agreement.

 

2.19 Non-recurring/Unusual Items

  “Non-recurring/Unusual Items” means exceptional transactions that are
considered non-routine, unique, and not expected to be repeated in a normal
course of the Corporation’s operating cycle. Such items may result in a
measurable charge or increase to income and may or may not be triggered by a
management decision.

 

2.20 Operating Income

  “Operating Income” means the operating income for a given Year, as set out in
the audited consolidated financial statements of PCS Inc. for that Year.

 

2.21 PCS Inc.

  “PCS Inc.” means Potash Corporation of Saskatchewan Inc.

 

 

5

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2.22 Plan

  “Plan” means this Annual Incentive Plan, as amended from time to time.

 

2.23 Salary

  “Salary” means:

 

  (a) For Entitled Employees who are exempt from the overtime requirements of
U.S. wage and hour legislation, other than Canadian Hourly Employees, the annual
base salary in effect at the end of a given Year.

 

  (b) For Entitled Employees who are Canadian Hourly Employees, the actual total
base pay for the given Year, excluding, but not limited to, overtime, bonuses,
shift differentials and premiums.

 

  (c) For Entitled Employees who are U.S. employees and who are non-exempt from
the overtime requirements of U.S. wage and hour legislation, total earned
income, including overtime and shift differentials, for the given Year.

 

2.24 Target CFR

  “Target CFR” means the CFR projected in the annual budget approved by the
Board and used in the table at Appendix “A” to calculate an Entitled Employee’s
Award Percentage for a given Year.

 

2.25 Target Percentage

  “Target Percentage” means the percentage assigned to the Tier Level for
Entitled Employees within that Tier, as shown in the table contained in
Appendix “A”.

 

2.26 Unrealized Gains/Losses on Derivative Instruments Included in Net Income

  “Unrealized Gains/Losses on Derivative Instruments Included in Net Income”
means the mark to market adjustments on the company’s derivative instrument
assets and liabilities, including but not limited to, natural gas non-hedging
and foreign exchange non-hedging, that are required to be recognized under
accounting standards for reporting purposes.

 

2.27 Year

  “Year” means the fiscal year of PCS Inc.

Section 3—Participation

 

 

3.01 Participation Requirements

  Participation in the Plan is limited to Eligible Employees.

 

 

6

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Section 4—Award Payments

 

 

4.01 Eligibility

  A full-time permanent employee of the Corporation who:

 

  a) is employed for at least three months during a Year, and who is in the
employ of the Corporation at the end of a Year, and

 

  b) who is not a participant in another annual cash bonus plan sponsored by the
Corporation for the same period during the Year as covered by this Plan

 

  shall become an Eligible Employee.

 

4.02 Calculation of Award Payment

  Subject to Section 4.05 (Limitation of Award Payments and General Discretion),
for purposes of Section 4.03 or 4.04, as applicable, the portion of an Entitled
Employee’s Award Payment calculated pursuant to this Section 4.02 shall be equal
to the Entitled Employee’s Award Percentage multiplied by his or her Salary.

 

  a) The Corporate Award Percentage is calculated as follows:

 

    If ACFR equals or exceeds 50% and up to 100%, the calculation is:

Target Percentage X ACFR = Corporate Award Percentage

 

    If ACFR exceeds 100% and up to 150%, the calculation is:

 

    (Two times the Target Percentage multiplied by ACFR) minus Target Percentage
= Corporate Award Percentage

 

  b) The portion of an Entitled Employee’s Award Payment calculated in
accordance with this Section 4.02 is subject to an adjustment of plus or minus
30% depending upon the Entitled Employee’s job performance, as determined by his
or her supervisor, and approved in accordance with the provisions of this Plan.

 

  c) No Corporate Award Percentage is calculated for ACFR less than 50% and for
Corporate Award Percentage calculations, ACFR is limited to 150%.

 

4.03 Entitled Operations Employees

  Subject to Section 4.05 (Limitation of Award Payments and General Discretion),
an Entitled Operations Employee shall be entitled to an Award Payment equal to
the sum of paragraphs (a) and (b) below:

 

  (a) the award calculated pursuant to Section 4.02 (Calculation of Award
Payment), divided by two (2); and,

 

 

7

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  (b) an amount equal to the Target Percentage of the Salary of the Entitled
Operations Employee, adjusted by applying a formula to be developed from time to
time by the CEO in consultation with the Vice President, Human Resources &
Administration and the appropriate subsidiary President which formula shall
reasonably reflect the actual results of the operating facility to which the
employee is attached compared to the approved target for that operating
facility, subject to achieving a threshold of at least 25% of the operating
facility’s targets, and thereafter dividing such amount by two (2).

 

  (c) The total individual Award Payment calculated in accordance with this
Section 4.03, other than for Hourly Employees, is subject to an adjustment of
plus or minus 30% depending upon the Entitled Employee’s job performance, as
determined by his or her supervisor, and approved in accordance with the
provisions of this Plan.

 

  (d) There will be no adjustment for job performance for Entitled Operations
Employees who are Hourly Employees.

 

4.04 Entitled Corporate Office Employees and Entitled Corporate Executives

  Subject to Section 4.05 (Limitation of Award Payments and General Discretion),
an Entitled Corporate Office Employee or an Entitled Corporate Executive shall
be entitled to an Award Payment equal to the sum of paragraphs (a) and
(b) below:

 

  (a) the award calculated pursuant to Section 4.02 (Calculation of Award
Payment), multiplied by 0.95; and

 

  (b) an amount equal to the Target Percentage of the Salary of the Entitled
Corporate Office Employee or the Entitled Corporate Executive, adjusted by
applying a methodology to be developed from time to time by the CEO in
consultation with the Vice President, Human Resources & Administration which
methodology shall reasonably reflect the actual safety performance of the
Corporation compared to the approved target level(s), subject to a payout of
100% at the target achievement level, no payout at the threshold achievement
level and a payout of 200% at the maximum achievement level, and thereafter
dividing such amount by twenty (20).

 

  (c) Notwithstanding the foregoing, the portion of the award calculated
pursuant to Section 4.04(b) above shall be limited to payout at the target
achievement level for (i) Entitled Corporate Office Employees in the event of a
life-altering injury (as determined by the Committee) at any of the corporate
facilities of PCS Inc. or its direct or indirect subsidiaries at either
Saskatoon or Northbrook at any time during the applicable Year and (ii) Entitled
Corporate Executives in the event of a life-altering injury (as determined by
the Committee) at any of the facilities of PCS Inc. or its direct or indirect
subsidiaries at any time during the applicable Year.

 

  (d) The total individual Award Payment calculated in accordance with this
Section 4.04 is subject to an adjustment of plus or minus 30% depending upon the
Entitled Employee’s job performance, as determined by his or her supervisor, and
approved in accordance with the provisions of this Plan.

 

 

8

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4.05 Limitation of Award Payments and General Discretion

  (a) Generally, no Award Payment shall be granted under this Plan with respect
to any Year in which the CFR is less than 50% of the Target CFR. However, the
Committee may elect, in its discretion, to grant Award Payments in any Year,
regardless of the CFR.

 

  (b) The Award Payment for any Entitled Employee may exceed or be below the
amount calculated in accordance with this Section 4. Award Payments falling
outside the established range shall be reviewed and approved by the Board and
Committee for the CEO and the CEO and Committee for direct reports to the CEO.
For all others, approval of the CEO is required.

 

  (c) An Entitled Employee who has been employed by the Corporation for less
than one year shall have his or her Award Payment prorated in accordance with
his or her period of employment.

 

  (d) An employee who for part of the Year was a full-time active employee but
for part of the Year was on long-term disability or an approved or unpaid leave
of absence, may be considered an Entitled Employee and eligible for a pro-rata
share of the Award Payment based upon the fraction of the Year the employee was
considered a full-time active employee. However, in situations where the
fractional portion of the Year worked is less than one-twelfth, the employee
will not be considered an Entitled Employee unless the CEO recommends and the
Committee approves the exception.

 

  (e) An Entitled Employee who was, during a Year, promoted or demoted from one
Group to another Group set forth in Appendix “A”, shall have his or her Award
Payment calculated on the basis of his or her Group as at the end of the Year.

 

  (f) Notwithstanding the Groups established in Appendix “A”, the Committee may
on the recommendation of the CEO, designate an Eligible Employee for inclusion
in one of such Groups when, but for such designation, the Eligible Employee
would not otherwise be included in such Group.

 

4.06 Timing of Award Payments

 

The Committee shall, on the recommendation of the CEO and within 30 days of the
end of a Year, approve the ACFR calculation and the amount of Award Payments for
each Entitled Employee who is a direct report to the CEO for any given Year. The
CEO’s Award Payment will be approved by the Board. Following approval of the
ACFR, final calculations for the remaining Entitled Employees will be prepared.
The Award Payments shall be paid to Entitled Employees within 30 days of the
Committee’s approval of the ACFR and no later than 2 1/2 months after the end of
the Year.

 

4.07 Recoupment Policy

  Notwithstanding any other provision under this Section, Entitled Employees who
also participate in the Corporation’s Medium-Term Incentive Plan shall be
subject to the terms and conditions of the Corporation’s Policy on Recoupment of
Unearned Compensation (as previously adopted and, from time to time, amended by
the Board), a copy of which shall be distributed to each such Entitled Employee
upon participation in the Medium-Term Incentive Plan.

 

 

9

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Section 5—Administration of the Plan

 

 

5.01 Administration

  The Committee shall conclusively interpret the provisions of this Plan and
decide all questions of fact arising in the application of the Plan.
Determinations and interpretations in individual cases may be made by the CEO
with due regard to consistency with any prior action by the Committee and such
determination shall be binding and conclusive upon the individual employees
concerned and persons claiming under them. The Committee shall be advised of any
such determination or interpretation made by the CEO. To the extent applicable,
the Plan shall be administered with respect to Entitled Employees subject to
U.S. law so as to avoid penalties pursuant to Section 409A of the Internal
Revenue Code.

Section 6—Transfer of Employment

 

 

6.01 Transfer of Employment

  If an Entitled Employee’s employment is transferred during a Year to a
different location, within the Corporation the Vice President, Human Resources &
Administration and the CEO shall determine whether the Entitled Employee’s Award
Payment is calculated in accordance with Section 4.03 (Entitled Operations
Employees), Section 4.04 (Entitled Corporate Office Employees and Entitled
Corporate Executives), or a combination of those sections.

Section 7—General Provisions

 

 

7.01 Assignment or Alienation

  Except as required by applicable laws, the right of an Entitled Employee to
receive an Award Payment under this Plan shall not be:

 

  (a) given as security;

 

  (b) subject to transfer, anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation; or

 

  (c) subject to execution, attachment, levy or similar process or assignment by
operation of law,

 

  and any attempt to effect any such action shall be null and void and of no
effect.

 

 

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7.02 Amendment or Termination

  Subject to Section 7.03 (Effect of Amendment or Termination), this Plan may be
amended in whole or in part from time to time or terminated by the Corporation.
Any amendment or termination shall be binding on the Corporation, Entitled
Employees, Eligible Employees and their respective beneficiaries.

 

7.03 Effect of Amendment or Termination

  Notwithstanding Section 7.02 (Amendment or Termination), no amendment or
termination of any provision of this Plan shall directly or indirectly deprive
any Entitled Employee or beneficiary of all or any portion of an Award Payment
earned with respect to any Year ending prior to the date of the amendment or
termination.

 

7.04 No Enlargement of Contractual Rights

  This Plan shall not give any Entitled Employee or Eligible Employee the right
to be retained in the service of the Corporation nor shall it interfere with the
right of the Corporation to terminate the employment of the Entitled Employee or
Eligible Employee. Participation in this Plan shall not give any Entitled
Employee or Eligible Employee any right or claim to any benefit, except to the
extent provided in this Plan.

 

7.05 Interpretation

  This Plan shall be interpreted pursuant to the laws of the Province of
Saskatchewan. Section headings are for convenience only and shall not be
considered provisions of the Plan. Words in the singular shall include the
plural, and vice versa, unless qualified by the context.

 

7.06 Withholding of Taxes

  The Corporation shall withhold all applicable taxes from any amounts paid
pursuant to this Plan.

 

7.07 Binding on Successors

  This Plan shall be binding on any successor or successors of PCS Inc. whether
by merger, consolidation or otherwise.

 

7.08 Currency

  The benefits payable pursuant to this Plan shall be paid in the same currency
as the Entitled Employee receives his or her Salary.

 

 

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Section 8—Change in Control

 

 

8.01 Definition of Change in Control

  For purposes of the Plan, the term “Change in Control” shall have the same
meaning as the term “change in control” in the Corporation’s 2012 Performance
Option Plan, as amended.

 

8.02 Prior Year CIC STIP Award Payment

  (a) Notwithstanding anything in the Plan to the contrary, upon the occurrence
of a Change in Control, an Entitled Employee with respect to the Year
immediately prior to the Year in which the Change in Control occurs (the “Prior
Year”) shall be entitled to receive for the Prior Year an amount equal to the
Entitled Employee’s Award Payment for the Prior Year; provided that an Award
Payment for the Prior Year was not previously paid to the Entitled Employee
prior to the effective date of the Change in Control; and provided further that
the pro-rata provisions of Sections 4.05(c) and (d) of the Plan shall continue
to apply with respect to the Prior Year (the “Prior Year STIP Award Payment”).

 

  (b)

Any Prior Year STIP Award Payment shall be paid within 30 calendar days
following the effective date of the Change in Control; provided, however, that
any Prior Year STIP Award Payment shall be paid no later than 2 1/2 months after
the end of the Prior Year.

 

8.03 CIC STIP Award Payment

  (a) Notwithstanding anything in the Plan to the contrary, upon the occurrence
of a Change in Control, an Entitled Employee (without regard to the requirement
set forth in Section 4.01(a) of the Plan that the employee be employed at the
end of the Year) shall be entitled to receive for the Year that includes the
effective date of the Change in Control an amount equal to the Entitled
Employee’s Award Payment for such Year, pro-rated for the portion of such Year
that elapsed prior to the Change in Control (determined by dividing (i) the
number of calendar days that elapsed during such Year from the commencement of
such Year through the effective date of the Change in Control by (ii) the number
of calendar days in such Year); provided that the pro-rata provisions of
Sections 4.05(c) and (d) of the Plan shall continue to apply with respect to the
period prior to the Change in Control during such Year (the “CIC STIP Award
Payment”).

 

  (b) For purposes of calculating an Entitled Employee’s CIC STIP Award Payment
(and the Adjusted Cash Flow Return), the Cash Flow Return for a given Year shall
be deemed to be equal to the greater of (i) the Target CFR with respect to such
Year, or (ii) the actual Cash Flow Return during the portion of such Year that
elapsed through the end of the month in which the Change in Control occurs.

 

  (c) For purposes of calculating an Entitled Operations Employee’s CIC STIP
Award Payment, the operating facility results for purposes of Section 4.03(b) of
the Plan for a given Year shall be deemed to be equal to the greater of (i) the
approved target of the operating facility with respect to such Year, or (ii) the
actual results of the operating facility during the portion of such Year that
elapsed through the end of the month in which the Change in Control occurs.

 

 

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  (d) For purposes of calculating an Entitled Corporate Office Employee’s or an
Entitled Corporate Executive’s CIC STIP Award Payment, the safety results for
purposes of Sections 4.04(b) and (c) of the Plan for a given Year shall be
deemed to be equal to the greater of (i) the approved target with respect to
such Year, or (ii) the actual safety results during the portion of such Year
that elapsed through the end of the month in which the Change in Control occurs.

 

  (e) No job performance adjustment shall apply to the CIC STIP Award Payment
for purposes of Sections 4.02(b), 4.03(c) or 4.04(d) of the Plan, nor may the
CIC STIP Award Payment be below the amount calculated in accordance with
Section 4 of the Plan (and this Section 8.03) for purposes of Section 4.05(b) of
the Plan, nor shall any approval be required for purposes of Section 4.05(b) of
the Plan in the event that the CIC STIP Award Payment exceeds the amount
calculated in accordance with Section 4 of the Plan.

 

  (f) For purposes of Section 4.05(e) of the Plan, the CIC STIP Award Payment
shall be calculated on the basis of the Entitled Employee’s Group immediately
prior to the Change in Control.

 

  (g) The CIC STIP Award Payment shall be paid within 30 calendar days following
the effective date of the Change in Control.

 

  (h) Notwithstanding anything in the Plan to the contrary, to the extent that
an Entitled Employee receives an additional Award Payment under the Plan in
respect of any Year during which the Entitled Employee became entitled to
receive a CIC STIP Award Payment, any such additional Award Payment shall be
reduced (but not below zero) by the amount of the CIC STIP Award Payment.

 

 

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Appendix “A”—Award Percentage

 

Tier

  

Group

   Target
Percentage    Award Percentage
When CFR is Less
Than Target CFR    Award Percentage
When CFR Equals or is
Greater Than
Target CFR    Award Percentage
at Maximum
CFR (150% of
Target CFR) 1    Corporate President, and CEO    100%    100% multiplied

by ACFR

   (200% multiplied

by ACFR) minus
100%

   200% 2    Exec Level 8      70%    70% multiplied
by ACFR    (140% multiplied by
ACFR) minus 70%    140% 3    Exec Level 7      55%    55% multiplied

by ACFR

   (110% multiplied by
ACFR) minus 55%    110% 4   

Exec Levels 4, 5 & 6

Staff Hay Points 1900 +

     40%    40% multiplied
by ACFR    (80% multiplied by
ACFR) minus 40%      80% 5    Exec Level 3      35%    35% multiplied
by ACFR    (70% multiplied by
ACFR) minus 35%      70% 6   

Exec Level 2

Managing Dir., Trinidad

Staff Hay Points 1600 to 1899

     30%    30% multiplied

by ACFR

   (60% multiplied

by ACFR) minus
30%

     60% 7   

Exec Level 1

Staff Hay Points 1300 to 1599

     25%    25% multiplied

by ACFR

   (50% multiplied

by ACFR) minus
25%

    50% 8    Staff Hay Points 900 to 1299      20%    20% multiplied

by ACFR

   (40% multiplied

by ACFR) minus
20%

     40% 9    Staff Hay Points 650 to 899      15%    15% multiplied

by ACFR

   (30% multiplied

by ACFR) minus
15%

     30% 10    Staff Hay Points 366 to 649      10%    10% multiplied
by ACFR    (20% multiplied by
ACFR) minus 10%      20% 11   

Staff Hay Points 0 to 365

Hourly employees

     5%    5% multiplied
by ACFR    (10% multiplied by
ACFR) minus 5%      10% 12    Hourly Employees (excluding Lanigan, Cory,
Patience Lake and Allan unionized Hourly Employees) (No Manager +/- discretion)
       5%    5% multiplied
by ACFR    (10% multiplied by
ACFR) minus 5%      10% 13    Lanigan, Cory, Patience Lake and Allan unionized
Hourly Employees (No Manager +/-discretion)      4.5%    4.5% multiplied
by ACFR    (9% multiplied by
ACFR minus 4.5%)        9%

 

Notes:

 

1. Where the ACFR is greater than 150 (i.e. the maximum CFR), the ACFR is deemed
to be 150.

 

2. Subject to Section 4.05 (Limitation of Award Payments and General Discretion)
where the ACFR is less than 50, the ACFR is deemed to be zero (0).

 

 

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