exv10w1






Exhibit 10.1




CENOVUS ENERGY INC.

EMPLOYEE STOCK OPTION PLAN

(made as of November 30, 2009)

(formerly the Employee Stock Option Plan of

7050372 Canada Inc., a predecessor by way of

amalgamation to Cenovus Energy Inc.)




1. PURPOSES OF THE PLAN




The principal purposes of the Employee Stock Option Plan (the “Plan”) of Cenovus Energy Inc. (the
“Company”) and its subsidiaries are:




	(a)	 	to promote a proprietary interest in the Company among its employees;
	 
	(b)	 	to attract and retain the qualified employees the Company requires;
	 
	(c)	 	to provide a long-term incentive element in overall compensation of employees; and
	 
	(d)	 	to promote the long-term profitability of the Company.





2. ADMINISTRATION




The Plan shall be administered by such committee of the Board of Directors of the Company as is
designated from time to time by the Board (the “Committee”). The Committee shall have full and
complete authority to interpret the Plan and to prescribe such rules and regulations and make such
other determinations as it deems necessary or desirable for the administration of the Plan.



3. SHARES




The shares that may be issued pursuant to the exercise of options under the Plan are common shares
of the Company (“Shares”). The maximum number of Shares that may be issued pursuant to the
exercise of options granted under the Plan is 64,000,000.



4. GRANT OF OPTIONS AND STOCK APPRECIATION RIGHTS




The Committee may from time to time designate employees who, in the opinion of the Committee, are
qualified employees of the Company or its subsidiaries to whom options to purchase Shares shall be
granted. The Committee shall determine the number of Shares to be optioned to each employee and
all other terms, conditions and limitations of the grant of the options, subject always to the
provisions of this Plan (“Options”).



At the discretion of the Committee, an Option to purchase Shares may have associated with it a
tandem stock appreciation right (“TSAR”) in respect of each Share covered by such Option. Each
TSAR shall entitle the optionee to surrender to the Company, unexercised, the right to exercise
their Option to purchase a specified number of Shares and to receive in exchange from the Company,
cash or Shares (at the Company’s choice) in an amount equal to the excess of the closing price of
the Shares on the Toronto Stock Exchange (“TSX”) on the last trading day preceding the date of
surrender of the Option and contemporaneous exercise of the TSAR, over the Grant Price (defined
below) for the Shares (“Appreciated Value”). Each TSAR shall be subject to the same terms and
conditions as the related Option.



An Option granted under the Plan will not be exercisable by an optionee until such Option has been
evidenced by a written option agreement duly executed and delivered by the Company and such
optionee. An optionee may hold more than one Option at any time.



 









 





			
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	Employee Stock Option Plan	 	 
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All grants of Options shall be subject to the following terms and conditions:




	(a)	 	the aggregate number of Shares issuable, at any time, to or for the benefit of insiders
pursuant to Options, when combined with the number of Shares issuable to insiders pursuant to
all other security based compensation arrangements of the Company, shall not exceed 10% of the
issued and outstanding Shares (on a non-diluted basis); and
	 
	(b)	 	there may not be issued to insiders, within any one-year period, a number of Shares that,
when combined with the number of Shares issued to insiders pursuant to all other security
based compensation arrangements of the Company, would exceed 10% of the issued and outstanding
Shares (on a non-diluted basis).





For the purpose of this Plan, the term “insider” has the meaning ascribed thereto in the TSX
Company Manual.



5. GRANT PRICE




The grant price for each Share that may be purchased through the exercise of an Option (the “Grant
Price”) shall be fixed by the Committee for each Option, but shall not be less than the Market
Value of the Shares. For this purpose, “Market Value” means the closing price for one Share on the
TSX on the trading day immediately preceding the date on which the option agreement granting the
option is made, or, if at least one Share shall not have been traded that day, on the next
preceding day on which one Share was traded.



6. OPTION PERIOD




Each Option (unless sooner terminated in accordance with the terms, conditions and limitations of
the Option determined by the Committee) shall be exercisable during such period, not exceeding 5
years from the date the Option was granted, as the Committee may determine (the “Option Period”).
The Committee may, with the consent of the Optionee and the prior consent of the TSX, cancel the
unexercised balance of any Option. All rights under the Option unexercised at the expiry or
termination of the Option Period shall be forfeited. All Shares reserved for Options that are
forfeited or cancelled shall be available for subsequent grant of Options.



7. EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS




An Option or its associated TSAR may be exercised from time to time by delivery to the Company at
its principal office in Calgary, Alberta or to such person designated by the Company, of a written
notice of exercise specifying the number of Shares with respect to which the Option or TSAR is
being exercised and, if the Option is being exercised, accompanied by payment in full of the
purchase price of the Shares then being purchased. If a TSAR associated with the Option is being
exercised, the Company will then issue cash or Shares (at the Company’s option) for the Appreciated
Value to the optionee. No person shall have any of the rights of a shareholder in respect of any
Shares subject to an Option or TSAR until such Shares have been paid for in full and issued.



8. NON-ASSIGNABILITY




No option or any right conferred by an Option shall be assignable, negotiable or otherwise
transferable other than by will or the laws of descent and distribution. Options or rights
conferred by an Option shall be exercisable during the optionee’s lifetime only by such optionee
or, after death or incapacitation, by the optionee’s guardian or legal representative.



 









 





			
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	Employee Stock Option Plan	 	 
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9. EFFECTS OF ALTERATION OF SHARE CAPITAL




In the event of any change in the outstanding common shares of the Company by reason of any stock
dividend, split, recapitalization, merger, consolidation, combination or exchange of shares or
other similar corporate change, equitable adjustments shall be made in the maximum number and kind
of Shares issuable under the Plan and in the maximum number and kind of and the Grant Price for
Shares issuable under outstanding Options. Such adjustments shall be made by the Committee and
shall be conclusive and binding for all purposes of the Plan.



10. EFFECTIVE DATE OF THE PLAN




The Plan shall have effect from and after November 30, 2009 (“Effective Date”).



11. AMENDMENT OR TERMINATION OF PLAN




The Board of Directors of the Company may, at any time and from time to time, amend, suspend,
discontinue or terminate the Plan in whole or in part; provided, however, no such amendment,
suspension, discontinuance or termination may, without the consent of the optionee, adversely alter
or impair the rights under any Option previously granted to an optionee under the Plan. Any
amendment to be made to the Plan or an Option under the Plan is subject to the prior approval of
the TSX. The Board shall have the power and authority to approve amendments relating to the Plan
or a specific Option without further approval of the shareholders of the Company, examples of which
include but are not limited to:




	(a)	 	extending or, in the event of a change in control, retirement, death or disability,
accelerating the terms of vesting applicable to any Option or group of Options;
	 
	(b)	 	altering the terms and conditions of vesting applicable to any Option or group of Options;
	 
	(c)	 	changing the termination provisions of the Plan or any Option, provided that the change does
not provide for an extension beyond the original expiry date of such Option, as provided for
in Section 6 hereof;
	 
	(d)	 	accelerating the expiry date in respect of an Option;
	 
	(e)	 	determining the adjustment provisions pursuant to Section 9 hereof;
	 
	(f)	 	amending the definitions contained within the Plan and other amendments of a “housekeeping”
nature; and
	 
	(g)	 	amending or modifying the mechanics of exercise of an Option or TSAR.





Approval by the shareholders of the Company will be required for amendments that relate to:




	 	(i)	 	accelerating the terms of vesting applicable to any Option or group of Options
other than in the event of a change in control, retirement, death or disability;
	 
	 	(ii)	 	any increase in the number of shares reserved for issuance under the Plan,
including an increase to a fixed maximum number of Common Shares, or a change from a
fixed maximum number of Common Shares to a fixed maximum percentage;




 









 











			
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	Employee Stock Option Plan	 	 
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	 	(iii)	 	any reduction in Grant Price or cancellation and reissue of Options;
	 
	 	(iv)	 	any extension of the term of an Option beyond the original expiry date, except
as permitted under Section 14 hereof;
	 
	 	(v)	 	any amendment to Section 14 that increases the length of the Blackout Extension
Period;
	 
	 	(vi)	 	the inclusion of non-employee directors, on a discretionary basis, as eligible
participants under the Plan;
	 
	 	(vii)	 	any allowance for the transferability or assignability of Options other than
for estate settlement purposes as outlined in Section 8;
	 
	 	(viii)	 	amendments required to be approved by shareholders under applicable law (including,
without limitation, the rules, regulations and policies of the TSX); and
	 
	 	(ix)	 	amendments to this Section 11.





In the event of any conflict between subsections (a) to (g) and (i) to (ix) above, the latter shall
prevail to the extent of any conflict.



No amendment, suspension, discontinuance or termination of the Plan may contravene the requirements
of the TSX or any securities commission or regulatory body to which the Plan or the Company is now
or may hereafter be subject.



12. FORMER ENCANA CORPORATION OPTIONHOLDERS




Options under this Plan include the options and associated TSARs granted by 7050372 Canada Inc.
pursuant to the arrangement under Section 192 of the Canada Business Corporation Act (“CBCA”)
involving the Company described in the information circular of EnCana Corporation (“EnCana”) dated
October 20, 2009 (the “2009 Arrangement”) (referred to in the 2009 Arrangement as “Cenovus
Replacement Stock Options”) in partial consideration for the replacement of options and associated
tandem stock appreciation rights previously granted under the Key Employee Stock Option Plan of
EnCana, which Cenovus Replacement Stock Options became the Options and associated TSARs of the
Company pursuant to an amalgamation under the 2009 Arrangement. Such Options and TSARs are
subject to the provisions of this Plan, with the necessary changes, provided that none of the
provisions of this Plan will operate so as to adversely affect the rights of the optionholder as
set forth in the Key Employee Stock Option Plan of EnCana.



13. FORMER CANADIAN PACIFIC LIMITED OPTIONHOLDERS




Options under this Plan include options and accompanying share appreciation rights issued under the
key employee stock option plan of Canadian Pacific Limited (“CPL”) which were replaced with options
and accompanying share appreciation rights of EnCana (formerly named PanCanadian Energy
Corporation) pursuant to the arrangement under Section 192 of the CBCA described in the management
proxy circular of CPL dated August 3, 2001 (the “2001 Arrangement”) and which were subsequently
partially replaced with Options and associated TSARs under Section 12 above. Such Options and
TSARs are subject to the provisions of this Plan, with the necessary changes, provided that none of
the provisions of this Plan will operate so as to adversely affect the rights of the optionholder
as set forth in the key employee stock option plan of CPL. If the Optionholder is not an officer
or employee of or a consultant to the



 









 





			
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	Employee Stock Option Plan	 	 
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Company, then the early expiry provisions of the Cenovus
Replacement Stock Options will become effective when the Optionholder’s employment or engagement
with a former subsidiary of CPL terminates.



14. BLACKOUT PERIOD




Notwithstanding Section 6, if the Option Period of an Option expires during, or within ten (10)
business days following, a blackout period imposed by the Company under the Company’s Policy on
Disclosure, Confidentiality and Employee Trading (the “Blackout Period”), then the Option Period of
such Option shall be extended to the date which is ten (10) business days after the last day of the
Blackout Period (the “Blackout Extension Period”), after which time such Option shall expire and
terminate.



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