exv10w4






Exhibit 10.4




CENOVUS ENERGY INC.

REPLACEMENT STOCK OPTION AGREEMENT




Participant Name:

Grant Name:




Previous Grant:





	 	•	 	                     Options with TSARs granted pursuant to an Option and Tandem Stock
Appreciation Rights Agreement between EnCana and the Participant dated in 2007,
2008 and/or 2009
	 
	 	(collectively, the “Original Options” and the “Original Grant Agreement”)





Original Issue Date:

Expiry Date:

Grant Price:




Total Number of Replacement Options with TSARs:



THIS REPLACEMENT STOCK OPTION AND TANDEM STOCK APPRECIATION RIGHTS AGREEMENT is made between
Cenovus Energy Inc. (the “Corporation”) and the Participant listed above (the “Participant”).



WHEREAS EnCana Corporation (“EnCana”) had, prior to the 2009 Arrangement (as defined below),
granted the Original Options to the Participant;



AND WHEREAS each of the Original Options was exchanged, pursuant to the 2009 Arrangement, in part,
for the grant by the Corporation of a Cenovus Replacement Stock Option (a “Replacement Option”) and
in part for the grant by EnCana of an EnCana Replacement Stock Option (as defined below), such
that, for each common share in the capital of EnCana that the Participant would have been entitled
to acquire pursuant to an Original Option, the Participant is instead entitled to acquire one Share
pursuant to the corresponding Replacement Option and one common share of EnCana pursuant to the
corresponding EnCana Replacement Option;



AND WHEREAS the Grant Price (as defined below) of each Replacement Option was determined in
accordance with the 2009 Arrangement and the other terms and conditions of each such Replacement
Option are identical to the terms and conditions of the respective exchanged Original Option,
except for appropriate adjustments to any performance-based and other vesting conditions which are
to be determined in accordance with the Plan and this Agreement;



NOW THEREFORE in consideration of the mutual premises and covenants and agreements contained herein
and in the 2009 Arrangement (the receipt and sufficiency of which are hereby irrevocably
acknowledged by each of the parties hereto), it is agreed by and between the parties hereto as
follows:



1. DEFINITIONS




In this Agreement, the capitalized terms shall have the meanings set forth in Schedule “A” hereto.
“Original Issue Date” as stated above means the “Original Date of Grant” as used in this
Agreement.



 









 





2. GRANT OF REPLACEMENT OPTIONS AND STOCK APPRECIATION RIGHTS




In accordance with the 2009 Arrangement, and subject to the terms and conditions herein, the
Corporation hereby confirms the grant to the Participant of the Replacement Options effective at
the Option Exchange Time. Each Replacement Option shall entitle the Participant to acquire one
Share, in accordance with the terms and conditions hereof. Each Replacement Option shall have a
Tandem Stock Appreciation Right (“TSAR”) associated with it. Except as otherwise noted herein,
each associated TSAR shall be subject to the same terms and conditions as the underlying
Replacement Option.



The Participant hereby acknowledges that nothing in this Agreement shall be construed to require
the Corporation to grant an additional option or options beyond the Options granted hereunder. The
grant of an additional option by the Corporation shall, in each case, constitute a new and separate
agreement between the Participant and the Corporation in respect of such additional option.



3. EVIDENCE OF GRANT




This Agreement shall evidence the grant by the Corporation to the Participant of the Replacement
Options effective at the Option Exchange Time.



4. CLASSIFICATION OF REPLACEMENT OPTIONS




The Replacement Options granted to the Participant hereunder are classified as follows:




	(a)	 	One-third of the Replacement Options shall constitute “Time-Based Options”
	 
	(b)	 	One-third of the Replacement Options shall constitute “Performance Options”; and
	 
	(c)	 	One-third of the Replacement Options shall constitute “Bonus Options”.





5. VESTING OF REPLACEMENT OPTIONS





	(a)	 	Subject to Section 5(b) and Sections 6 to 11, the Replacement Options shall vest in the
Participant and become Vested Options as follows:






	 	(i)	 	in respect of the Time-Based Options:






	 	(A)	 	30 percent of the Time-Based Options shall vest on the first
Anniversary Date;
	 
	 	(B)	 	an additional 30 percent of the Time-Based Options shall vest on
the second Anniversary Date; and
	 
	 	(C)	 	an additional 40 percent of the Time-Based Options shall vest on
the third Anniversary Date;






	 	(ii)	 	in respect of the Performance Options:






	 	(A)	 	a number of Performance Options shall vest on the later of the
first Anniversary Date and the day immediately following the Committee Meeting
Date in the year immediately following the First Performance Period equal to:




 









 












	 	1.	 	where the Achieved Performance Criteria for the First
Performance Period is equal to or less than the Minimum Performance
Critieria, nil;
	 
	 	2.	 	where the Achieved Performance Criteria for the First
Performance Period is greater than the Minimum Performance Critieria but is
less than the Median Performance Criteria, the amount calculated in
accordance with the following formula: 30 percent of the Performance Options
X (Achieved Performance Criteria — Minimum Performance Critieria);
	 
	 	3.	 	where the Achieved Performance Criteria for the First
Performance Period is equal to or greater than the Median Performance
Critieria, 30 percent of the Performance Options;






	 	(B)	 	an additional number of Performance Options shall vest on the later
of the second Anniversary Date and the day immediately following the Committee
Meeting Date in the year immediately following the Second Performance Period
equal to:






	 	1.	 	where the Achieved Performance Criteria for the Second
Performance Period is equal to or less than the Minimum Performance
Criteria, nil;
	 
	 	2.	 	where the Achieved Performance Criteria for the Second
Performance Period is greater than the Minimum Performance Critieria but is
less than the Median Performance Critieria, the amount calculated in
accordance with the following formula: 30 percent of the Performance Options
X (Achieved Performance Criteria — Minimum Performance Criteria);
	 
	 	3.	 	where the Achieved Performance Criteria for the Second
Performance Period is equal to or greater than the Median Performance
Criteria, 30 percent of the Performance Options;






	 	(C)	 	an additional number of Performance Options shall vest on the later
of the third Anniversary Date and the day immediately following the Committee
Meeting Date in the year immediately following the Third Performance Period equal
to:






	 	1.	 	where the Achieved Performance Criteria for the Third
Performance Period is equal to or less than the Minimum Performance
Criteria, nil;
	 
	 	2.	 	where the Achieved Performance Criteria for the Third
Performance Period is greater than the Minimum Performance Criteria but is
less than the Median Performance Criteria, the amount calculated in
accordance with the following formula: 40 percent of the Performance
Options X (Achieved Performance Criteria — Minimum Performance Criteria);
	 
	 	3.	 	where the Achieved Performance Criteria for the Third
Performance Period is equal to or greater than the Median Performance
Criteria, 40 percent of the Performance Options;






	 	(iii)	 	in respect of the Bonus Options:






	 	(A)	 	a number of Bonus Options shall vest on the later of the first
Anniversary Date and the day immediately following the Committee Meeting Date in
the year immediately following the First Performance Period equal to:




 









 












	 	1.	 	where the Achieved Performance Criteria for the First
Performance Period is equal to or less than the Median Performance Criteria,
nil;
	 
	 	2.	 	where the Achieved Performance Criteria for the First
Performance Period is greater than the Median Performance Criteria but is
less than the Maximum Performance Criteria, the amount calculated in
accordance with the following formula: 30 percent of the Bonus Options X
(Achieved Performance Criteria — Median Performance Criteria);
	 
	 	3.	 	where the Achieved Performance Criteria for the First
Performance Period is equal to or greater than the Maximum Performance
Criteria, 30 percent of the Bonus Options;






	 	(B)	 	an additional number of Bonus Options shall vest on the later of
the second Anniversary Date and the day immediately following the Committee
Meeting Date in the year immediately following the Second Performance Period
equal to:






	 	1.	 	where the Achieved Performance Criteria for the Second
Performance Period is equal to or less than the Median Performance Criteria,
nil;
	 
	 	2.	 	where the Achieved Performance Criteria for the Second
Performance Period is greater than the Median Performance Criteria but is
less than the Maximum Performance Criteria, the amount calculated in
accordance with the following formula: 30 percent of the Bonus Options X
(Achieved Performance Criteria — Median Performance Criteria);
	 
	 	3.	 	where the Achieved Performance Criteria for the Second
Performance Period is equal to or greater than the Maximum Performance
Criteria, 30 percent of the Bonus Options;






	 	(C)	 	an additional number of Bonus Options shall vest on the later of
the third Anniversary Date and the day immediately following the Committee
Meeting Date in the year immediately following the Third Performance Period equal
to:






	 	1.	 	where the Achieved Performance Criteria for the Third
Performance Period is equal to or less than the Median Performance Criteria,
nil;
	 
	 	2.	 	where the Achieved Performance Criteria for the Third
Performance Period is greater than the Median Performance Criteria but is
less than the Maximum Performance Criteria, the amount calculated in
accordance with the following formula: 40 percent of the Bonus Options X
(Achieved Performance Criteria — Median Performance Criteria);
	 
	 	3.	 	where the Achieved Performance Criteria for the Third
Performance Period is equal to or greater than the Maximum Performance
Criteria, 40 percent of the Bonus Options.






	(b)	 	Upon application of the vesting conditions in Section 5(a), the number of Time-Based Options,
Performance Options, or Bonus Options, as applicable, that shall become Vested Options shall
be determined by rounding the result up to the nearest whole number of Time-Based Options,
Performance Options, or Bonus Options, as applicable, to a maximum of the total number of
Options granted under this Agreement. No fractional Options shall become Vested Options and
no cash or other compensation shall be paid to the Participant at any time in lieu of any
fractional Options.




 









 












	(c)	 	Subject to Sections 6 to 11, the Participant shall be entitled to exercise or surrender all
or any number of the Vested Options, in accordance with Section 13, during the period
extending from the Vesting Date of such Vested Option pursuant to Section 5(a) to the Expiry
Date or such earlier termination date of the Vested Option as provided herein.






	(d)	 	As an alternative to the exercise of a Vested Option, the Participant is eligible to
surrender any Vested Option pursuant to an associated TSAR, in accordance with Section 13
hereof. Upon the Participant surrendering to the Corporation the Vested Options to purchase a
specified number of Shares, the Participant shall receive a cash payment equal to the
Appreciated Value multiplied by the number of Vested Options surrendered, less required
applicable statutory and other withholdings. Thereafter, for greater certainty, such number
of Vested Options so surrendered with respect to such specified number of Shares shall be
cancelled and terminated and the Participant will have no further right, title or interest in
such surrendered Vested Options.





6. TERMINATION OF EMPLOYMENT





	(a)	 	Upon the occurrence of a Termination of Employment, the Participant shall be entitled to
exercise or surrender any Vested Options during the Termination Exercise Period, but only to
the extent that such Vested Options have become Vested Options pursuant to Section 5(a) on or
prior to the Date Employment Ceases.






	(b)	 	For greater certainty, notwithstanding Section 5(a), Options which do not become Vested
Options on or prior to the Date Employment Ceases shall not thereafter become Vested Options.





7. DEATH OR RETIREMENT OF PARTICIPANT





	(a)	 	Where the Participant is an employee of the Corporation or an Affiliated Entity or within the
EnCana Group, as applicable, on the Effective Date, then in the event the Participant ceases
to be an employee of the Corporation or an Affiliated Entity or within the EnCana Group, as
applicable, after the Effective Date by reason of the Participant’s death or Retirement on a
date that is prior to the date that the Participant attains the age of 60 years:






	 	(i)	 	the Participant shall be entitled to exercise or surrender any Vested Options
during the Death or Retirement Exercise Period, but only to the extent that such Vested
Options have become Vested Options pursuant to Section 5(a) on or prior to the date of
the Participant’s death or Date of Retirement, as applicable; and
	 
	 	(ii)	 	notwithstanding Section 5(a), Replacement Options which do not become Vested
Options on or prior to the date of the Participant’s death or Date of Retirement, as
applicable, shall not thereafter become Vested Options.






	(b)	 	Where the Participant is an employee of the Corporation or an Affiliated Entity or within the
EnCana Group, as applicable, on the Effective Date, then in the event the Participant ceases
to be an employee of the Corporation or an Affiliated Entity or within the EnCana Group, as
applicable, by reason of the Participant’s death or Retirement on a date that occurs on or
after the date the Participant attains the age of 60 years but before the date that the
Participant attains the age of 65 years:






	 	(i)	 	Time-Based Options shall continue to be and become Vested Options in accordance
with the provisions of Section 5(a)(i) and the Participant shall be entitled to
exercise or surrender any Time-Based Options which become Vested Options until the
Expiry Date; and




 









 












	 	(ii)	 	Performance Options and Bonus Options shall continue to be and become Vested
Options in accordance with the provisions of Sections 5(a)(ii) and 5(a)(iii),
respectively, and the Participant shall be entitled to exercise or surrender any
Performance Options or Bonus Options which become Vested Options until the Expiry Date;






	(c)	 	Where the Participant is an employee of the Corporation or an Affiliated Entity or within the
EnCana Group, as applicable, on the Effective Date, then in the event the Participant ceases
to be an employee of the Corporation or an Affiliated Entity or within the EnCana Group, as
applicable, by reason of the Participant’s death or Retirement on a date that occurs on or
after the date the Participant attains the age of 65 years, then:






	 	(i)	 	the Participant shall be entitled, during the period extending from the date of
the Participant’s death or Date of Retirement, as applicable, to the Expiry Date, to
exercise or surrender, in full or in part, any unexercised Time-Based Option
(irrespective of whether such Replacement Option has become a Vested Option in
accordance with Section 5(a)(i)); and
	 
	 	(ii)	 	Performance Options and Bonus Options shall continue to be and become Vested
Options in accordance with the provisions of Sections 5(a)(ii) and 5(a)(iii),
respectively, and the Participant shall be entitled to exercise or surrender any
Performance Options or Bonus Options which become Vested Options until the Expiry Date.





8. DISABILITY OF PARTICIPANT




In the event of the Participant’s Short-Term Disability or Long-Term Disability, Replacement
Options shall continue to be and become Vested Options in accordance with the provisions of Section
5(a) and the Participant shall be entitled to exercise or surrender any Vested Options during the
period of such Short-Term Disability or Long-Term Disability and thereafter, unless there occurs a
Termination of Employment during such period, in which case the provisions of Section 6 shall
apply, or unless the Participant’s death or Retirement occurs during such period, in which case the
provisions of Section 7 shall apply.



9. LEAVES OF ABSENCE and FAMILY LEAVE





	(a)	 	In the event the Participant is on a Paid Leave of Absence or is on Family Leave, Replacement
Options shall continue to be and become Vested Options in accordance with the provisions of
Section 5(a) and the Participant shall be entitled to exercise or surrender any Vested Options
during the period of such Paid Leave of Absence or Family Leave and thereafter, unless there
occurs a Termination of Employment during such period, in which case the provisions of Section
6 shall apply, or unless the Participant’s death or Retirement occurs during such period, in
which case the provisions of Section 7 shall apply.
	 
	(b)	 	In the event the Participant is on an Unpaid Leave of Absence:







	 	(i)	 	Replacement Options shall continue to be and become Vested Options in
accordance with the provisions of Section 5(a) during the period commencing on the Date
of Unpaid Leave of Absence and ending on the 31st calendar day following the
Date of Unpaid Leave of Absence, unless there occurs a Termination of Employment during
such period, in which case the provisions of Section 6 shall apply, or unless the
Participant’s death or Retirement occurs during such period, in which case the
provisions of Section 7 shall apply;




 









 












	 	(ii)	 	notwithstanding Section 5(a), Replacement Options which do not become Vested
Options on or prior to the 31st calendar day following the Date of Unpaid
Leave of Absence shall not become Vested Options during the balance of the
Participant’s Unpaid Leave of Absence, unless the Participant’s death or Retirement
occurs during such period, in which case the provisions of Section 7 shall apply;
	 
	 	(iii)	 	notwithstanding Section 5(a), Replacement Options which do not become Vested
Options on or prior to the 31st calendar day following the Date of Unpaid
Leave of Absence shall become Vested Options on the Participant’s Return to Service
Date, but only to the extent that such Replacement Options would have become Vested
Options pursuant to Section 5(a) on or prior to the Return to Service Date if the
period of Unpaid Leave of Absence had not occurred and provided that the Return to
Service Date occurs prior to the Expiry Date;
	 
	 	(iv)	 	in the event that the Participant’s Return to Service Date occurs prior to the
Expiry Date, any Replacement Options which did not become Vested Options on or prior to
the 31st calendar day following the Date of Unpaid Leave of Absence or
pursuant to Section 9(b)(iii) shall become Vested Options solely in accordance with the
provisions of Section 5(a); and
	 
	 	(v)	 	from the Date of Unpaid Leave of Absence until the Expiry Date, the Participant
shall be entitled to exercise or surrender any Vested Options which become Vested
Options in accordance with the provisions hereof, unless there occurs a Termination of
Employment during such period of Unpaid Leave of Absence, in which case the provisions
of Section 6 shall apply, or unless the Participant’s death or Retirement occurs during
such period, in which case the provisions of Section 7 shall apply.





10. FORFEITURE AND TERMINATION OF OPTIONS





	(a)	 	Subject to the passing by the Committee or the Board of a resolution pursuant to Sections
11(a) or 11(b), a Performance Option which does not become a Vested Option by a Vesting Date
contemplated in Section 5(a)(ii) as a result of the Achieved Performance Criteria for the
particular Performance Period being less than the Median Performance Criteria shall be
forfeited by the Participant and shall terminate on the day that would otherwise be the
Vesting Date for such Performance Option and, thereafter, the Participant will have no further
right, title or interest in such Performance Option.






	(b)	 	Subject to the passing by the Committee or the Board of a resolution pursuant to Sections
11(a) or 11(b), a Bonus Option which does not become a Vested Option by a Vesting Date
contemplated in Section 5(a)(iii) as a result of the Achieved Performance Criteria for the
particular Performance Period being less than the Maximum Performance Criteria shall be
forfeited by the Participant and shall terminate on the day that would otherwise be the
Vesting Date for such Bonus Option and, thereafter, the Participant will have no further
right, title or interest in such Bonus Option.






	(c)	 	Unless previously forfeited in accordance with the provisions hereof, upon the occurrence of
a Termination of Employment, Replacement Options which have not become Vested Options on or
prior to the Date Employment Ceases shall be forfeited by the Participant and shall terminate
on the Date Employment Ceases and, thereafter, the Participant will have no further right,
title or interest in such Replacement Options.






	(d)	 	Upon the occurrence of a Termination of Employment, Vested Options which are not exercised or
surrendered by the end of the Termination Exercise Period shall be forfeited by the
Participant and shall terminate on the last day of the Termination Exercise Period




 









 






	 	 	and, thereafter, the Participant will have no further right, title or interest in such
Vested Options.






	(e)	 	Where the Participant ceases to be an employee of the Corporation or an Affiliated Entity, or
of the EnCana Group, as applicable, by reason of the Participant’s death or Retirement on a
date that is prior to the date that the Participant attains the age of 60 years, unless
previously forfeited in accordance with the provisions hereof, Replacement Options which have
not become Vested Options on or prior to the date of death or Date of Retirement, as
applicable, shall be forfeited by the Participant and shall terminate on the date of death or
Date of Retirement, as applicable, and, thereafter, the Participant will have no further
right, title or interest in such Replacement Options.






	(f)	 	Where the Participant ceases to be an employee of the Corporation or an Affiliated Entity, or
of the EnCana Group, as applicable, by reason of the Participant’s death or Retirement on a
date that is prior to the date that the Participant attains the age of 60 years, Vested
Options which are not exercised or surrendered by the end of the Death or Retirement Exercise
Period shall be forfeited by the Participant and shall terminate on the last day of the Death
or Retirement Exercise Period and, thereafter, the Participant will have no further right,
title or interest in such Vested Options.






	(g)	 	On the Expiry Date, all Replacement Options which have not been exercised or surrendered or
otherwise terminated pursuant to the provisions hereof shall expire and be of no further force
or effect whatsoever.






	(h)	 	After the occurrence of any of the events in Sections 10(a) — (g), this Agreement shall
terminate and be of no further force or effect whatsoever with respect to those Replacement
Options which have been forfeited and terminated or have expired and the Participant shall
have no cause of action nor make any claim against any one, some or all of the Corporation or
any Affiliated Entity or the EnCana Group for damages or for loss of opportunity arising from
the forfeiture and termination or expiry of such Replacement Options or the termination of
this Agreement insofar as it relates to such Replacement Options pursuant to this Section 10.





11. EARLY EXERCISE AND ACCELERATED VESTING





	(a)	 	Notwithstanding any other provision of this Agreement, prior to the date on which a
Performance Period in respect of a particular Performance Option or Bonus Option ends, the
Committee or the Board may pass a resolution which extends such Performance Period, provided
that no such extension shall be past the Expiry Date.






	(b)	 	Notwithstanding any other provision of this Agreement, the Committee or the Board may, at any
time prior to the Vesting Date of a particular Performance Option or Bonus Option, pass a
resolution which waives, in whole or in part, the requirements of Sections 5(a)(ii) and
5(a)(iii) that there be a specified Achieved Performance Criteria prior to a Performance
Option or Bonus Option becoming a Vested Option.






	(c)	 	Notwithstanding any other provision of this Agreement, but subject to Section 11(d), the
Committee or the Board may pass a resolution which accelerates the vesting of a Replacement
Option and which permits the Participant to exercise or surrender in full or in part any
unexercised Replacement Option, whether or not the Replacement Option has otherwise become a
Vested Option, at such time or times and/or in such manner following the passing of such
resolution as is specified in the resolution, which resolution may be passed for any reason as
determined by the Committee or the Board which, in the sole opinion of the Committee or the
Board, warrants altering the provisions pursuant to which a 




 









 






	 	 	Replacement Option vests or is exercisable or can be surrendered, including, without
limitation, in respect of Bonus Options, upon the occurrence of a Change in Control,
including a Take-Over Bid which would, if successful, result in a Change in Control, and may
provide in such resolution that the provisions of Section 11(d)(ii) shall apply, mutatis
mutandis, in respect of that portion of the Bonus Options in respect of which such
resolution has been passed.






	(d)	(i)	 	notwithstanding any other provision of this Agreement but subject to Section 11(d)(ii),
upon the occurrence of a Change in Control, the Participant shall be entitled, on the date of
the Change in Control, to exercise or surrender in full or in part any unexercised Time-Based
Option and Performance Option (irrespective of whether such Time-Based Option or Performance
Option has become a Vested Option in accordance with Section 5(a)(i) or (ii) as applicable)
until the Expiry Date.






	 	(ii)	 	if a “take-over bid” (within the meaning of applicable securities legislation)
made by any person for the voting securities of the Corporation (a “Take-over Bid”)
would, if successful, result in a Change in Control, then:






	 	(A)	 	the Corporation will promptly notify the Participant of the
Take-over Bid and the Participant’s rights under this Section 11(d);
	 
	 	(B)	 	vesting of all Time-Based Options and Performance Options that
have not yet become Vested Options pursuant to Section 5(a)(i) and (ii) at the
time a formal Take-over Bid offer has been made will be accelerated so as to be
and become Vested Options (irrespective of whether such Time-Based Options or
Performance Options have become Vested Options in accordance with Section
5(a)(i) or (ii) as applicable) on the date the formal Take-over Bid offer is
made;
	 
	 	(C)	 	the Participant shall be entitled to exercise, in full or in
part, the Time-Based Options and Performance Options in the manner set out in
this Agreement, with any necessary modifications (or such other manner as may be
prescribed by the Committee or the Board including, but not limited to, a form
of cashless exercise), during the period ending on the earlier of the expiration
of the Take-over Bid and the Expiry Date, for the purpose of tendering the
Shares acquired pursuant to the exercise of the Time-Based Options or
Performance Options to the Take-over Bid;
	 
	 	(D)	 	the Participant shall be entitled to deal with the Time-Based
Options and Performance Options in such other manner (in addition to the
exercise set out in paragraph 11(d)(ii)(C)) as may be prescribed by the
Committee or the Board, in its discretion; and
	 
	 	(E)	 	if the Shares acquired pursuant to the exercise of the Time-Based
Options and Performance Options are not deposited by the Participant pursuant to
the Take-over Bid or, if deposited, are subsequently withdrawn by the
Participant or not all taken up and paid for by the offeror or if the offeror
fails to take-up and pay for the Shares pursuant to the terms of the Take-over
Bid or if the Take-over Bid fails to close for any other reason, then the
Participant shall promptly return such Shares (or the portion that are not taken
up and paid for) to the Corporation for cancellation. Such Shares shall be
deemed not to have been issued and the related Time-Based Options and
Performance Options shall be deemed not to have been exercised, and the
Corporation shall refund to the Participant, if applicable, the aggregate




 









 






	 	 	 	Exercise Price for the Time-Based Options and Performance Options. In such
event, Time-Based Options and Performance Options will become
Vested Time-Based Options and Vested Performance Options solely in accordance
with Section 5(a)(i) and (ii) as applicable, and any other action by the
Participant permitted in accordance with Section 11(d)(ii)(D) shall be deemed
not to have occurred.





12. EFFECTS OF ALTERATION OF SHARE CAPITAL




In the event of any change in the Shares by reason of any stock dividend, split, recapitalization,
merger, consolidation, combination or exchange of shares or other similar corporate change,
equitable adjustments may be made in the number of Replacement Options, the type of shares or
securities subject to the Replacement Options, the Grant Price and the formula for determining the
cash payable upon the surrender of Replacement Options pursuant to associated TSARs. The Committee
shall determine which adjustments shall be made in any such event in its sole discretion and its
determination shall be conclusive and binding for all purposes of this Agreement; provided that
such adjustments shall not result in any adverse Canadian or United States federal income tax
consequences.



13. METHOD OF EXERCISE OR SURRENDER OF OPTIONS




Any Vested Option may be exercised or surrendered by the Participant or, after death or
incapacitation, by the Participant’s duly appointed legal guardian or legal personal
representative, in a manner prescribed by the Corporation from time to time as published on the
Corporation’s internal employee website or otherwise communicated in writing to the Participant
from time to time.



14. OBLIGATIONS OF THE PARTICIPANT




Nothing contained in this Agreement or done pursuant to this Agreement shall oblige the Participant
to purchase and pay for any Shares except those Shares underlying the Replacement Options that the
Participant has exercised in the manner provided in this Agreement.



The Participant agrees and acknowledges (and shall be conclusively deemed to have so acknowledged
and agreed by participating in the Plan) that the Participant will, at all times, act in strict
compliance with Applicable Law and all Corporation Policies applicable to the Participant in
connection with the Plan. Such Applicable Law and Corporation Policies shall include, without
limitation, those governing “insiders” or “reporting issuers” as those terms are construed for the
purposes of applicable securities laws, regulations, and rules.



15. PARTICIPANT INFORMATION





	(a)	 	The Participant hereby agrees to provide the Corporation with all information (including
personal information) the Committee requires in order to administer the Replacement Options
evidenced by this Agreement, the employment relationship as a whole and such matters arising
therefrom (the “Participant Information”).






	(b)	 	The Participant agrees and acknowledges that the Corporation may from time to time transfer
or provide access to Participant Information to EnCana for the purposes of enabling EnCana to
administer any EnCana Replacement Stock Options granted to such Participant.






	(c)	 	Where the Participant is an employee of an entity within the EnCana Group immediately after
the Effective Date, the Participant agrees and acknowledges that the Corporation may from time
to time transfer or provide access to Participant Information to EnCana for the 




 









 






	 	 	purpose of obtaining reimbursement from EnCana, where agreed between the Corporation and EnCana.






	(d)	 	Where the Participant is an employee of an entity within the EnCana Group immediately after
the Effective Date, the Participant agrees and acknowledges that the Corporation may from time
to time access Participant Information and other personal information provided by the
Participant to EnCana from EnCana for the purposes of enabling the Corporation to administer
the Replacement Options.






	(e)	 	The Participant agrees and acknowledges that the Corporation may from time to time transfer
or provide access to Participant Information to a third party service provider for purposes of
the administration of the Replacement Options provided that such service provider will be
provided with such information for the sole purpose of providing services to the Corporation
in connection with the operation and administration of the Replacement Options and the Plan.
The Corporation may also transfer and provide access to Participant Information to its
Affiliated Entities for purposes of preparing financial statements or other necessary reports
and facilitating payment or reimbursement of expenses.





16. SUBJECT TO APPLICABLE LAW




The grant of any Replacement Option hereunder and the obligation to make any payment (including the
delivery of Shares) in respect of any Replacement Option is subject to compliance with Applicable
Law. As a condition of participating in the Plan, each Participant agrees to comply with all such
Applicable Law and agrees to furnish to the Corporation all information and undertakings as may be
required to permit compliance with Applicable Law.



17. WITHHOLDINGS




The Corporation or any Affiliated Entity may withhold or cause to be withheld from any amount
payable to a Participant, either under the Plan or this Agreement, or otherwise, such amount as may
be necessary so as to ensure that the Corporation or any Affiliated Entity, as applicable, will be
able to comply with the applicable provisions of any federal, provincial, state or local law
relating to the withholding of tax or other required deductions, including on the amount, if any,
includable in the income of a Participant.



The Participant acknowledges that all taxes which may be payable by the Participant as a result of
the granting, exercise, or surrender of the Replacement Options are the Participant’s sole
responsibility and that it is the Participant’s duty and responsibility to comply with all
provisions of the law in relation to the reporting of the acquisition or exercise or surrender of
the Replacement Options and the trading of any Shares issued pursuant to this Agreement.



18. NO AGREEMENT TO EMPLOY




Nothing contained in this Agreement or done pursuant to this Agreement shall constitute or be
construed to constitute or to be evidence of an agreement or understanding, express or implied, on
the part of the Corporation or an Affiliated Entity, or of the EnCana Group, as applicable, to
retain the Participant in the Participant’s employment for any specific period of time or in any
specific capacity or position.



19. NON-QUALIFIED STOCK OPTIONS




The Replacement Options are non-qualified stock options for United States tax purposes.



 









 





20. NO REPRESENTATION AS TO PRICE




The Corporation makes no representation nor gives any warranty as to the price of the Shares and
shall not be held liable for any fluctuation in the price of the Shares either before or after the
exercise of any right conferred under the 2009 Arrangement and this Agreement.



21. NON-ASSIGNABILITY




The Replacement Option and the rights conferred hereby are not assignable, negotiable or otherwise
transferable by the Participant other than by will or the laws of descent and distribution. The
Replacement Option may be exercised or surrendered only during the Participant’s lifetime and only
by the Participant, except in the event of the Participant’s death or incapacity, in which case the
Replacement Option may be exercised or surrendered by the Participant’s duly appointed legal
guardian or legal personal representative as provided herein.



22. SUBJECT TO PLAN




The provisions of this Agreement shall be interpreted so as to be expressly subject to the
provisions of the Plan. The Participant acknowledges that the Committee or the Board has 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 in its
sole discretion and that any such rules, regulations or determinations shall be final and binding
on the parties to this Agreement.



23. AMENDMENT AND TERMINATION




Subject to Applicable Law and to Section 10 of the Plan, this Agreement and the Plan may be amended
or terminated at any time by the Board in whole or in part.



24. TIME OF ESSENCE




Time shall be of the essence of this Agreement.



25. NOTICES




Any notice to be given by the Participant hereunder shall be sent to the Corporation at:



     Cenovus Energy Inc.

     421 — 7 Avenue SW

     P.O. Box 766

     Calgary, Alberta T2P 0M5

     Attention: Corporate Human Resources




and any notice from the Corporation to the Participant shall be sent to the Participant at the
Participant’s office or residence address last known to the Corporation. Either party may change
the address to which notice may be given by mailing the same, postage prepaid, or delivering the
same to the Corporation or to the Participant, as the case may be, in accordance with the
foregoing. Any such notice if delivered shall be deemed to have been given or made on the date on
which it was delivered or if mailed shall be deemed to have been given or made on the third
business day following the date on which it was mailed. In the event of a general postal
disruption, notice shall be delivered.



The Participant hereby consents to the exchange of information and documents between the
Participant and the Corporation electronically over the Internet or by e-mail (if to the
Participant at



 









 







the e-mail address most recently provided by the Participant to the Corporation) and
it is hereby agreed and acknowledged that any such information and documents sent or received in
electronic form shall be the equivalent of original written paper documents.



26. GOVERNING LAW



This Agreement shall be governed by and construed in accordance with the laws in force in the
Province of Alberta and the federal laws of Canada as applicable herein. In the event of a
dispute, the Participant agrees to submit to the jurisdiction of the Alberta courts.



27. EXECUTION BY THE CORPORATION




This Agreement may be executed by application of the facsimile or authorized electronic signature
of the Executive Vice President, Corporate Services of the Corporation (or his or her written
designate) and such signature shall be as valid and effective as if such officer signed this
Agreement in person.



28. ACCEPTANCE BY PARTICIPANT




The Participant shall confirm acceptance of the terms and conditions of this Agreement by
electronically selecting and clicking on the button beside the words “I Accept” from the options
provided below. By indicating such acceptance, the Participant agrees to be legally bound by the
terms and conditions of this Agreement, and hereby agrees that such acceptance shall be as valid
and effective as of the Option Exchange Time as if the Participant signed this Agreement in person
at such time. In the event the Participant does not accept the terms and conditions of this
Agreement because an error exists in the Option information provided at the outset of this
Agreement, the Participant must electronically select and click on the button beside the words “I
Do Not Accept” from the options provided below, in which case the parties shall take all steps
necessary to correct any such error.



IN WITNESS WHEREOF this Agreement has been executed effective at the Option Exchange Time.




 











 





Schedule “A”




DEFINITIONS



In this Agreement, the following terms shall have the meanings respectively set forth below:





	(a)	 	“2009 Arrangement” means the arrangement under the Canada Business Corporations Act described
in the information circular relating to an arrangement involving EnCana, 7050372 Canada Inc.
and the Corporation dated October 20, 2009 which arrangement became effective on the Effective
Date and resulted in, inter alia, the existence of the Corporation as an independent
publicly-traded entity;
	 
	(b)	 	“Achieved Performance Criteria” means the Performance Criteria which have been satisfied, as
and when determined by the Committee, in respect of any particular Performance Period, and
which shall be published on the Corporation’s internal employee website or otherwise
communicated in writing to the Participant;
	 
	(c)	 	“Affiliated Entity” means, in respect of a particular corporation, another corporation which
is related, within the meaning of the Income Tax Act (Canada), to that corporation;
	 
	(d)	 	“Agreement” means this Replacement Stock Option and Tandem Stock Appreciation Rights
Agreement between the Corporation and the Participant;
	 
	(e)	 	“Anniversary Date” means, in respect of the Replacement Options, each anniversary of the
Original Date of Grant;
	 
	(f)	 	“Applicable Law” means any applicable provision of law, domestic or foreign, including,
without limitation, applicable securities legislation, together with all regulations, rules,
policy statements, rulings, notices, orders or other instruments promulgated thereunder, and
any rules of the Toronto Stock Exchange;
	 
	(g)	 	“Appreciated Value” means, in respect of each TSAR associated with a Replacement Option, an
amount equal to the excess of the closing price of a Share on the Toronto Stock Exchange on
the last Trading Day preceding the date of the surrender of the Replacement Option, over the
Grant Price;
	 
	(h)	 	“Bonus Options” has the meaning assigned by Section 4(c);
	 
	(i)	 	“Change in Control” means, for purposes of this Agreement, the date any of the following
occurs:






	 	(i)	 	any individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity, or any persons acting jointly or in
concert with the foregoing, is, or becomes, the beneficial owner, directly or
indirectly, of securities of the Corporation representing more than 20% of the combined
voting power of the Corporation’s then outstanding securities entitled to vote in the
election of the directors of the Corporation;
	 
	 	(ii)	 	the Corporation shall have disposed of: (A) all or substantially all of its
assets, such that shareholder approval was required or should have been required to be
obtained under the Canada Business Corporations Act, or (B) assets in any 12 month
period representing 50% or more of the total assets of the Corporation, determined as
of the date of the audited financial statements of the Corporation then most recently
published;




 









 






	 	(iii)	 	pursuant to a single election or appointment or a series of elections or
appointments over any period from and after the date of this Agreement (A) those
individuals who at the date of this Agreement constituted the Board, together with (B)
any new or additional director or directors whose nomination for election by the
Corporation’s shareholders, or whose appointment to the Board by the Board, has been
approved by at least 75% of the votes cast by all of the directors then still in
office, who either were directors at the date of this Agreement or whose appointment or
nomination for election was previously so approved, cease for any reason to constitute
a majority of the Board; or
	 
	 	(iv)	 	the Board, by resolution duly adopted by the affirmative vote of a simple
majority of the votes cast by the Board, determines that, for purposes of this
Agreement, a Change in Control of the Corporation has occurred.






Securities beneficially owned or controlled or directed by an employee plan or related trust
sponsored or maintained by the Corporation or any of its Affiliated Entities shall not be
taken into account in determining whether the threshold percentage in Section (i)(i) is
exceeded.




For the purposes of this Section (i):




	 	(i)	 	the term “acting jointly or in concert” shall have the meaning ascribed to it
in Section 159 of the Securities Act (Alberta), as amended; and
	 
	 	(ii)	 	the term “beneficial ownership” shall be interpreted in accordance with Section
158(4) of the Securities Act (Alberta) and “beneficial owner” shall have a
corresponding meaning, except that for purposes of this Agreement, options and
convertible securities granted by the Corporation to employees, officers or directors
shall not be included in determining beneficial ownership or beneficial owner.






For greater certainty, and except as specifically provided in Sections (i)(ii) and (i)(iv),
the sale, disposition or other divestiture of an Affiliated Entity, in whole or in part,
shall not constitute a Change in Control for the purposes of this Agreement.




	(j)	 	“Change in Control of EnCana” means an event which would constitute a “Change in Control” of
EnCana if the reference to “the Corporation” in the definition of “Change in Control” in this
Agreement were read as a reference to “EnCana”;
	 
	(k)	 	“Close of Business” means the close of trading on the Toronto Stock Exchange on any Trading
Day;
	 
	(l)	 	“Committee” means the Human Resources and Compensation Committee of the Board, or such other
committee of the board, as constituted from time to time, which may be designated by the Board
to, inter alia, interpret, administer and implement the Plan and this Agreement, and any
reference in this Agreement to action by the Committee means action by or under the authority
of the Committee or, if no Committee has been designated, by the Board;
	 
	(m)	 	“Committee Meeting Date” means the later of: (i) the date of the meeting of the Committee
held to review matters related to the Replacement Options, including the determination of
whether and the degree to which the Performance Criteria in respect of the Corporation for a
particular Performance Period have been satisfied and constitute “Achieved Performance
Criteria” for the Corporation, which meeting shall occur at least once annually; and (ii) the




 









 






	 	 	date that the Human Resources and Compensation Committee of the board of directors of EnCana
(or other committee of the board designated by EnCana) notifies the Committee in writing as
to the Performance Criteria in respect of EnCana for a particular Performance Period to be
used in the calculation of “Achieved Performance Criteria”; both of which events shall occur
by no later than June 1 of the year immediately following the relevant Performance Period;
	 
	(n)	 	“Corporation Policies” means, at a particular time, the policies and practices of the
Corporation (or, if applicable, the Affiliated Entity which employs the Participant or which
employed the Retired Participant), as published on the Corporation’s internal employee website
or otherwise communicated in writing to the employees (or, where necessary, to a Retired
Participant) of the Corporation and/or its Affiliated Entities, provided that, where the
Participant is an employee of an entity within the EnCana Group immediately after the
Effective Date, the reference to “the Corporation” and “Affiliated Entity” in the foregoing
shall be read as a reference to “EnCana” and an “Affiliated Entity of EnCana”, respectively;
	 
	(o)	 	“Date Employment Ceases” means:






	 	(i)	 	in the case of voluntary termination of employment initiated by the
Participant, the last date the Participant is, for the purposes of receiving his or her
regular salary, on the payroll of the Corporation or an Affiliated Entity;
	 
	 	(ii)	 	in the case of involuntary termination of the Participant’s employment by the
Corporation or an Affiliated Entity for cause (as determined by the Corporation or the
Affiliated Entity, as applicable), the date written notification of dismissal from
employment is delivered to the Participant;
	 
	 	(iii)	 	in the case of involuntary termination of the Participant’s employment by the
Corporation or an Affiliated Entity other than for cause (as determined by the
Corporation or the Affiliated Entity, as applicable), the date identified in the
written notification of termination of employment delivered to the Participant as the
“Termination Date” or “Departure Date” and, where both dates are so referred to, the
earlier thereof, and, where such date is not identified in the written notification,
the date written notification of dismissal from employment is delivered to the
Participant;
	 
	 	(iv)	 	in the case where the Participant is employed by an Affiliated Entity and for
any reason including, without limitation, by reason of sale, disposition or other
divestiture thereof, in whole or in part, such employer ceases to be an Affiliated
Entity of the Corporation, the effective date (in the case of a sale, disposition or
other divestiture, the closing date of such transaction or series of transactions, as
determined by the Corporation) upon which the Participant’s employer ceases to be an
Affiliated Entity;






but, for greater certainty, shall not include any notice period which arises or may be
deemed to arise upon the termination of employment of the Participant, and shall not include
the date the Participant ceases to be an employee of the Corporation or an Affiliated Entity
upon the Participant’s death or Retirement, or the date the Participant commences Short-Term
Disability, Long-Term Disability, a Paid Leave of Absence, an Unpaid Leave of Absence, or
Family Leave,




and provided that, where the Participant is an employee of an entity within the EnCana Group
immediately after the Effective Date, the reference to “the Corporation” and “Affiliated
Entity” in the foregoing shall be read as a reference to “EnCana” and an “Affiliated Entity
of EnCana”, respectively.



 









 






Notwithstanding any other provision in this Agreement, there shall be no “Date Employment
Ceases” where the Participant’s employment with the EnCana Group is involuntarily terminated
(other than for cause) within 12 months of a Change in Control of EnCana;




	(p)	 	“Date of Retirement” means the last day the Participant is, for the purposes of receiving his
or her regular salary, on the payroll of the Corporation or an Affiliated Entity immediately
prior to commencing Retirement, provided that, where the Participant is an employee of an
entity within the EnCana Group immediately after the Effective Date, the reference to “the
Corporation” and “Affiliated Entity” in the foregoing shall be read as a reference to “EnCana”
and an “Affiliated Entity of EnCana”, respectively,
	 
	(q)	 	“Death or Retirement Exercise Period” means the period of time extending from the date of the
Participant’s death or Date of Retirement, as applicable, to the earlier of: (i) the date that
is six months following the date of the Participant’s death or Date of Retirement, as
applicable; and (ii) the Expiry Date. Should the Death or Retirement Exercise Period
terminate on a date other than a Trading Day, the Death or Retirement Exercise Period shall
terminate on the Close of Business on the last Trading Day prior to that date;
	 
	(r)	 	“Effective Date” means November 30, 2009;
	 
	(s)	 	“EnCana” means EnCana Corporation;
	 
	(t)	 	“EnCana Group” means EnCana and any Affiliated Entity of EnCana;
	 
	(u)	 	“EnCana Replacement Stock Option” means a stock option granted by EnCana to the Participant
pursuant to the 2009 Arrangement in partial consideration for an Original Option;
	 
	(v)	 	“Expiry Date” means the Close of Business on the fifth Anniversary Date. Should the Expiry
Date fall on a date other than a Trading Day, the Expiry Date shall be the Close of Business
on the last Trading Day prior to that date;
	 
	(w)	 	“Family Leave” means a period during which, pursuant to the Corporation Policies or
Applicable Law, the Participant is considered to be on family leave, and does not provide
employment services to the Corporation or an Affiliated Entity, provided that, where the
Participant is an employee of an entity within the EnCana Group immediately after the
Effective Date, the reference to “the Corporation” and “Affiliated Entity” in the foregoing
shall be read as a reference to “EnCana” and an “Affiliated Entity of EnCana”, respectively;
	 
	(x)	 	“Grant Price” means the price payable per Share on the exercise by the Participant of a
Replacement Option determined in accordance with the 2009 Arrangement;
	 
	(y)	 	“Long-Term Disability” means any period of time during which the Participant receives, or is
determined to be entitled to receive, disability benefits under the Corporation’s or an
Affiliated Entity’s long-term disability plans, provided that, where the Participant is an
employee of an entity within the EnCana Group immediately after the Effective Date, the
reference to “the Corporation” and “Affiliated Entity” in the foregoing shall be read as a
reference to “EnCana” and an “Affiliated Entity of EnCana”, respectively;
	 
	(z)	 	“Maximum Performance Criteria” means the maximum Performance Criteria that had been
determined by the Human Resources and Compensation Committee of the Board of Directors of
EnCana as being applicable to the Original Options, the achievement of which in a particular
Performance Period shall entitle all of the Performance Options and Bonus Options granted to a
Participant which are eligible to become Vested Options in respect of such Performance Period
to become Vested Options, subject to the provisions of this Agreement, and which is set out in
Schedule “B” hereto and shall be published on the




 









 






	 	 	Corporation’s internal employee website or otherwise communicated in writing to the
Participant;






	(aa)	 	“Median Performance Criteria” means that median Performance Criteria that had been determined
by the Human Resources and Compensation Committee of the Board of Directors of EnCana as being
applicable to the Original Options, the achievement of which in a particular Performance
Period shall entitle all of the Performance Options granted to a Participant which are
eligible to become Vested Options in respect of such Performance Period to become Vested
Options, and the over-achievement of which shall entitle at least a portion of the Bonus
Options granted to a Participant which are eligible to become Vested Options in respect of
such Performance Period to become Vested Options, all subject to the provisions of this
Agreement, and which is set out in Schedule “B” hereto and shall be published on the
Corporation’s internal employee website or otherwise communicated in writing to the
Participant;
	 
	(bb)	 	“Minimum Performance Criteria” means that minimum Performance Criteria that had been
determined by the Human Resources and Compensation Committee of the Board of Directors of
EnCana as being applicable to the Original Options, the over-achievement of which in a
particular Performance Period shall entitle at least a portion of the Performance Options
granted to a Participant which are eligible to become Vested Options in respect of such
Performance Period to become Vested Options, subject to the provisions of this Agreement, and
which is set out in Schedule “B” hereto and shall be published on the Corporation’s internal
employee website or otherwise communicated in writing to the Participant;
	 
	(cc)	 	“Option Exchange Time” means the time on the Effective Date at which the Replacement Options
were granted to the Participant pursuant to the 2009 Arrangement;
	 
	(dd)	 	“Original Date of Grant” means the date upon which EnCana granted the Original Options to the
Participant, and as evidenced by the Original Grant Agreement, which term is sometimes
referenced as “Original Issue Date”;
	 
	(ee)	 	“Paid Leave of Absence” means a period during which, pursuant to the Corporation Policies or
Applicable Law, the Participant is considered to be on a leave of absence and continues to
receive his or her normal salary, but does not provide employment services to the Corporation
or an Affiliated Entity, provided that, where the Participant is an employee of an entity
within the EnCana Group immediately after the Effective Date, the reference to “the
Corporation” and “Affiliated Entity” in the foregoing shall be read as a reference to “EnCana”
and an “Affiliated Entity of EnCana”, respectively;
	 
	(ff)	 	“Participant Information” has the meaning assigned by Section 15(a) of this Agreement;
	 
	(gg)	 	“Performance Criteria” means, in respect of a Performance Option or a Bonus Option, that
performance criteria that had been determined by the Human Resources and Compensation
Committee of the Board of Directors of EnCana as being applicable to the Original Options and
which have been modified pursuant to the 2009 Arrangement and this Agreement, and which is set
out in Schedule “B” hereto and shall be published on the Corporation’s internal employee
website or otherwise communicated in writing to the Participant;
	 
	(hh)	 	“Performance Options” has the meaning assigned by Section 4(b);
	 
	(ii)	 	“Performance Period” means, in respect of a Performance Option or a Bonus Option, the period
in which the Performance Criteria must be satisfied in order for such Option to become a
Vested Option and, except as otherwise provided and subject to Section 11(a):




 









 












	 	(i)	 	the “First Performance Period” shall be the period extending from January 1 to
December 31 of the year in which the Original Date of Grant occurs;
	 
	 	(ii)	 	the “Second Performance Period” shall be the period extending from January 1 to
December 31 of the year immediately following the year in which the Original Date of
Grant occurs; and
	 
	 	(iii)	 	the “Third Performance Period” shall be the period extending from January 1 to
December 31 of the second year immediately following the year in which the Original
Date of Grant occurs;






	(jj)	 	“Retired Participant” means a Participant who ceases to be an employee of the Corporation or
an Affiliated Entity by reason of his or her Retirement, provided that, where the Participant
is an employee of an entity within the EnCana Group immediately after the Effective Date, the
reference to “the Corporation” and “Affiliated Entity” in the foregoing shall be read as a
reference to “EnCana” and an “Affiliated Entity of EnCana”, respectively;
	 
	(kk)	 	“Retirement” means the early or normal retirement of the Participant from employment with the
Corporation or an Affiliated Entity in accordance with the Corporation Policies, provided
that, where the Participant is an employee of an entity within the EnCana Group immediately
after the Effective Date, the reference to “the Corporation” and “Affiliated Entity” in the
foregoing shall be read as a reference to “EnCana” and an “Affiliated Entity of EnCana”,
respectively;
	 
	(ll)	 	“Return to Service Date” means the date, following an Unpaid Leave of Absence, that the
Participant recommences the provision of employment services to the Corporation or an
Affiliated Entity, in full or in part, provided that, where the Participant is an employee of
an entity within the EnCana Group immediately after the Effective Date, the reference to “the
Corporation” and “Affiliated Entity” in the foregoing shall be read as a reference to “EnCana”
and an “Affiliated Entity of EnCana”, respectively;
	 
	(mm)	 	“Share” means a common share in the capital of the Corporation as is traded on the Toronto
Stock Exchange;
	 
	(nn)	 	“Short-Term Disability” means any period of time during which the Participant receives
disability benefits under the Corporation’s or an Affiliated Entity’s short-term disability
plans, provided that, where the Participant is an employee of an entity within the EnCana
Group immediately after the Effective Date, the reference to “the Corporation” and “Affiliated
Entity” in the foregoing shall be read as a reference to “EnCana” and an “Affiliated Entity of
EnCana”, respectively;
	 
	(oo)	 	“Take-over Bid” has the meaning assigned by Section 11(d)(ii);
	 
	(pp)	 	“Termination Exercise Period” means the period of time extending from the Date Employment
Ceases to the earlier of: (i) the Close of Business on the 60th Trading Day after
the Date Employment Ceases; and (ii) the Expiry Date;
	 
	(qq)	 	“Termination of Employment” means:







	 	(i)	 	where the Participant is an employee of the Corporation or an Affiliated Entity
immediately after the Effective Date, an event by which the Participant ceases to be an
employee of the Corporation or an Affiliated Entity but, for greater certainty, shall not
include an event whereby the Participant ceases to be an employee of the Corporation or an
Affiliated Entity upon the Participant’s death or Retirement or where the Participant
commences Short-Term Disability, Long-Term Disability, a Paid Leave of Absence, an Unpaid
Leave of Absence, or Family Leave;






 









 






	 	(ii)	 	where the Participant is an employee of an entity within the EnCana Group immediately
after the Effective Date, an event by which the Participant ceases to be an employee of the
EnCana Group but, for greater certainty, shall not include an event whereby the Participant
ceases to be an employee of the EnCana Group upon the Participant’s death or Retirement or
where the Participant commences Short-Term Disability, Long-Term Disability, a Paid Leave of
Absence, an Unpaid Leave of Absence, or Family Leave, and provided further that,
“Termination of Employment” shall not include an event by which the Participant ceases to be
an employee of the EnCana Group as a consequence of an involuntary termination (other than
for cause) within 12 months of a Change in Control of EnCana;






	(rr)	 	“Time-Based Options” has the meaning assigned by Section 4(a);
	 
	(ss)	 	“Trading Day” means a day on which the Toronto Stock Exchange is open for trading;
	 
	(tt)	 	“TSAR” means a tandem stock appreciation right which is associated with a Replacement Option
and which entitles the Participant to surrender a Vested Option in accordance with Section
5(d), subject to the terms and conditions hereof;
	 
	(uu)	 	“Unpaid Leave of Absence” means a period of time during which, pursuant to the Corporation
Policies or Applicable Law, the Participant is considered to be on a leave of absence and does
not continue to receive his or her salary or provide employment services to the Corporation or
an Affiliated Entity which, for the purposes of this Agreement, shall be deemed to commence on
the “Date of Unpaid Leave of Absence”, being the first day of the Participant’s Unpaid Leave
of Absence, as communicated in writing to the Participant by the Corporation or an Affiliated
Entity in accordance with the Corporation Policies, provided that, where the Participant is an
employee of an entity within the EnCana Group immediately after the Effective Date, the
reference to “the Corporation” and “Affiliated Entity” in the foregoing shall be read as a
reference to “EnCana” and an “Affiliated Entity of EnCana”, respectively;
	 
	(vv)	 	“Vested Option” means a Replacement Option which has vested and can be exercised by the
Participant to purchase a Share or, alternatively, can be surrendered by the Participant in
accordance with Section 5(d), subject to the terms and conditions hereof; and
	 
	(ww)	 	“Vesting Date” means the date on which a Replacement Option becomes a Vested Option.




 









 











Schedule “B”



The Replacement Options will become Vested Options only upon satisfaction of the vesting conditions
in Section 5 of the Agreement. For these purposes, the following shall apply to the terms
specified in Section 5 of the Agreement:





Performance Criteria is, for any Performance Period which ends after the Effective
Date:




(i) for any applicable Performance Period during which both the Corporation and
EnCana are independent publicly-traded entities, the Recycle Ratio that is calculated
by combining the Netback and Finding & Development Costs of each of the Corporation
and EnCana, as such measures are determined independently by the Human Resources and
Compensation Committee of the Board of Directors of each of the Corporation and
EnCana respectively, and including consideration of the other assumptions as are set
out below, and




(ii) for any applicable Performance Period during which EnCana is not an independent
publicly-traded entity, the Recycle Ratio of the Corporation.


Minimum Performance Criteria for each of the Performance Periods of 2009, 2010, and 2011 equals a
Recycle Ratio of 1.



Median Performance Criteria for each of the Performance Periods of 2009, 2010, and 2011 equals a
Recycle Ratio of 2.



Maximum Performance Criteria for each of the Performance Periods of 2009, 2010, and 2011 equals a
Recycle Ratio of 3.



Recycle Ratio is a key operating metric that measures a particular corporation’s ability to
generate operating cash flow in excess of the all-in cost of adding reserves. It is calculated on
a proved reserves basis and will generally exclude the impact of acquisitions and divestitures from
and after January 1, 2009. The Recycle Ratio calculation for the purposes of determining the 2009
Achieved Performance Criteria will also be adjusted such that 75 percent of the calculation will
exclude the impact of the Leor assets acquired in 2007 and the impact of the Foster Creek and
Christina Lake assets in respect of the ConocoPhillips joint venture. The other 25 percent of the
calculation will include the full impact of such assets. The formula for recycle ratio is:



Netback per thousand cubic feet equivalent (Mcfe) ÷

Finding & Development Costs per Mcfe = Recycle Ratio



The Recycle Ratio will be calculated by Wood Mackenzie Limited, or such similar entity, after the
end of each annual Performance Period, once the particular corporation’s total proved reserves have
been determined by the corporation’s external reserves evaluators. The Recycle Ratio will be
rounded to the nearest 0.05. Once determined and approved by the Committee, such achieved Recycle
Ratio will constitute the Achieved Performance Criteria for 2009, 2010, and 2011, as applicable.