Document:

Exhibit

CANADIAN PACIFIC RAILWAY LIMITED

EMPLOYEE SHARE PURCHASE PLAN
(US)

Plan Terms and Conditions

July 1, 2006

Table Of Contents

Section 1 -- Definitions .................................................................................................

Section 2 – Establishment of the Plan ..........................................................................

Section 3 – Participation and Enrollment .....................................................................

Section 4 – Participant Contribution to the Plan ..........................................................

Section 5 – Company Contribution to the Plan ............................................................

Section 6 – Asset Fund..................................................................................................

Section 7 -- Investment .................................................................................................

Section 8 – Withdrawals/Sales of Shares .....................................................................

Section 9 – Termination of Participation in the Plan....................................................

Section 10 – Administration of the Plan.......................................................................

Section 11 – Plan Amendment and Termination ..........................................................

Section 12 – Market Fluctuation.....................................................................

Section 13 – Income Taxes.............................................................................

Section 14 – No Trading on Undisclosed Information.........................................

Section 15 – General Provisions.....................................................................

Section 1 — Definitions

For the purpose of the Plan:

“Account” means any real or notional account held in the name of a Participant by the Plan Administrator recording Shares purchased with Participant Contributions or Company Contributions.

“Administrative Agreement” means any agreement or agreements executed from time to time between CPR and the Plan Administrator.

“Affiliate” means any affiliate of CPR designated by CPR for the purposes of the Plan.

“Asset Fund” means the assets of the Plan held by the Plan Administrator, consisting of Participant Contributions, Company Contributions, the Shares and any dividends, interest, or gains derived therefrom, as more fully set out in Section 6.

“Basic Administration Expenses”, as determined in CPR’s sole discretion, may include, but shall not be limited to, the establishment and tracking of Accounts, payroll deductions, quarterly statements, ancillary administration costs and any brokerage fees applicable to the purchase of Shares.

“Board” means the Board of Directors of CPR as constituted from time to time.

“Business Day” means a day on which the Stock Exchange is open for business in the US.

“CPR” means Canadian Pacific Railway Limited and its majority owned subsidiaries who adopt this Plan. Any reference herein to any action to be taken by CPR means action by or under the authority of the Board.

“Code” means the US Internal Revenue Code as amended from time to time.

“Company Contributions” means contributions made to the Plan by CPR or an Affiliate pursuant to Section 5.

“Continuous Service” means an uninterrupted period of continuous employment by an Eligible Employee as determined by the rules of CPR in effect from time to time. An Eligible Employee’s Continuous Service shall not be considered interrupted by CPR-approved leaves of absence or periods in which an Eligible Employee is on furlough, guaranteed extra board, reserve board or is laid-off with recall rights (until the recall period has expired).

“Eligible Bargaining Unit” means any bargaining unit representing CPR employees in the US that has consented to participate in the Plan.

“Eligible Bargaining Unit Representative” means a full-time representative of an Eligible Bargaining Unit on leave from CPR with the right to return to work for CPR.

“Eligible Earnings” means the regular base pay of an employee paid through the CPR or Affiliate payroll system for the relevant period, excluding overtime, bonus, arbitraries, protection pay, reserve board pay, sub payments and other special or one-time payments received in that period as determined by CPR in accordance with its regular practices in effect; and means deemed earnings for Eligible Bargaining Unit Representatives defined as a monthly amount equal to one-twelfth of the maximum compensation on which an employer is required to pay Tier 2 taxes under Chapter 22 of the Code as in effect during the calendar year.

“Eligible Employee” means each CPR employee in the US who:
i)     is a regular full-time or part time non-union employee; or
		
	ii) 
	is a regular full-time, part time or seasonal employee in an Eligible Bargaining Unit; or

iii)     is an Eligible Bargaining Unit Representative;
and
		
	iv) 
	is in receipt of Eligible Earnings; and

		
	v) 
	has reached the age of majority under the laws applicable to such employee; and

		
	vi) 
	is in the Continuous Service of CPR, or an Affiliate, and has been designated as eligible to participate in the Plan and such designation has not been revoked;

but does not include:
		
	vii) 
	any employee in respect of whom a decision to cease employment has been made; or

		
	viii) 
	any individual whose services have been engaged by CPR on a temporary basis and who is not eligible to participate in other CPR benefit programs (including but not limited to consultants, casual, students or fixed term employees); or

		
	ix)
	any employees on Severance or Separation Payments.

“Enrolment/Change Form” means the enrolment/change form in such form as may be determined by CPR from time to time.

“Legal Representative” means executor or executrix appointed under a deceased's will or Court-appointed administrator or trustee of a deceased's estate.

“Market Price” means, for purchases and sales of Shares, the prices at which Shares are purchased or sold on the relevant day on the Stock Exchange.

“Participant” means a person who is an Eligible Employee, who has elected to participate in the Plan and who makes contributions to the Plan from Eligible Earnings pursuant to Section 4 herein.

“Participant Contributions” means contributions made to the Plan by Participants pursuant to Section 4 herein.

“Pay Period” means a Participant’s pay period as defined within the CPR pay system (i.e. weekly, biweekly, semi-monthly, monthly, etc.).

“Plan” means this employee share purchase plan (US), as it may be amended from time to time.

“Plan Administrator” means such trust company or companies and/or other corporations appointed by CPR from time to time to administer the Plan on behalf of CPR.

“Plan Reserve” means that portion of the Asset Fund consisting of unallocated Company Contributions; interest earned on contributed funds; dividends payable on Unvested Shares; and forfeited Shares or any resultant proceeds from sale of forfeited Shares, which proceeds shall be for the benefit of CPR. Plan Reserve does not include Participant Contributions or dividends payable on Shares purchased with Participant Contributions even if not yet formally allocated to Participant Accounts.

“Plan Year” means the period of twelve calendar months commencing on January 1 and ending on December 31 of each year, or such other period as may be determined by CPR.

“Restricted Shares” means Shares in a Participant’s Account purchased with Participant Contributions at any time within the previous four (4) consecutive full calendar quarters and for which the contingent Unvested Shares purchased with Company Contributions have not vested in accordance with Paragraph 8.4.

“Retirement” means the cessation of employment at a time when the Participant is entitled to an immediate unreduced pension in accordance with the provisions of the Defined Benefit option of the Canadian Pacific Railway Company Pension Plan (the "CPR Pension Plan"); and further provided that if the Participant does not participate in the CPR Pension Plan, the Participant shall be deemed to have retired if at the time of
cessation of the Participant's employment, the Participant would have been entitled to an immediate unreduced pension under the provisions of the Defined Benefit option of the CPR Pension Plan if that Participant had otherwise participated in the CPR Pension Plan and if all of the service of that Participant with CPR (and predecessor employers with respect to which CPR recognizes service for any purpose under a pension plan that covers that Participant) had been deemed to constitute "Service" (as that term is defined in the CPR Pension Plan) in respect of which all contributions had been made under the CPR Pension Plan. For Eligible Bargaining Unit Representatives, service as a bargaining unit representative during the period of time that the Eligible Bargaining Unit Representative is on leave from CPR with the right to return to CPR shall be treated as Union Service under the CPR Pension Plan for purposes of determining an Eligible Bargaining Unit Representative's right to an unreduced pension under the Defined Benefit option of the CPR Pension Plan.

“Shares” means CPR common shares previously issued and traded through the facilities of the Stock Exchange. This term may also be extended to mean either Restricted Shares and/or Unvested Shares, as applicable, for purposes of describing the purchase of such shares in accordance with the Plan.

“Stock Exchange” means the New York Stock Exchange, or such other stock exchange in the United States, on which the Shares are listed and posted for trading.

“Unrestricted Shares” mean the Shares in a Participant’s Account that are not Unvested Shares or Restricted Shares.

“Unvested Shares” means Shares in a Participant’s Account purchased with Company Contributions at any time during the previous four (4) consecutive full calendar quarters, except in the circumstances described in Section 9.

“US” means the United States of America.

“Withdrawal/Termination Form” means the withdrawal/termination form in such form as may be determined by CPR from time to time.

Section 2 — Establishment of the Plan

2.1 Purpose

The purpose of this Plan is to provide Eligible Employees with an opportunity to participate in the ownership of CPR on an on-going basis through purchases of Shares.

2.2 Effective date of the Plan

The effective date of the Plan, which was amended and restated as of July 1, 2006 is October 1, 2001.

2.3 Government Regulations

The terms and conditions of this Plan, including the acquisition, sale and delivery of Shares, are subject to compliance with all applicable laws, regulatory requirements and approvals.

Section 3 — Participation and Enrolment

Eligible Employees may elect to enrol as Participants in the Plan in any calendar month in which they are eligible. To enrol, the Eligible Employee must complete and deliver to the Plan Administrator an Enrolment/Change Form. Enrolment in the Plan will be effected as soon as practicable once the completed Enrolment/Change Form is received and processed by both the Plan Administrator and CPR. Delivery of a duly executed Enrolment/Change Form shall constitute acceptance by the Eligible Employee of all the terms and conditions of the Plan as set forth herein and of any regulations adopted or to be adopted pursuant to Section 11 herein. 

The Plan Administrator will send a written letter of confirmation of enrolment to the Participant where applicable as soon as practicable.

Participation in the Plan is voluntary. CPR is not making any representations or warranties as to the value of Shares at any time, nor recommending to employees 

as to whether or not they should participate in the Plan. Employees considering participation in the Plan should consult their own accountant, legal counsel or other financial advisors regarding participation in the Plan.

Section 4 — Participant Contributions to the Plan

4.1 Amount of Contributions

Participants may contribute, via payroll deductions, a percentage of their Eligible Earnings ranging from a minimum of one per cent (1%) to a maximum of ten per cent (10%) (based on whole percentages) for investment under the Plan. The Participant shall indicate the percentage amount of Participant Contributions on the Enrolment/Change Form. Participant Contributions up to six per cent (6%) of Eligible Earnings shall be eligible for Company Contribution pursuant to Paragraph 5.1.

In the event that the Eligible Earnings of a Participant vary at any time in the course of a Plan Year, the Participant Contributions of such Participant shall be automatically adjusted accordingly in order to remain equal to the selected percentage of the Participant’s Eligible Earnings as set out in the Enrolment/ Change Form.

4.2 Payroll Deductions

Each Participant shall make Participant Contributions to the Plan by regularly scheduled payroll deductions at the end of each Pay Period for the percentage indicated on the Enrolment/Change Form. The Participant Contributions in any given Plan Year shall be made on the basis of the year of receipt of the Eligible Earnings from which such Participant Contributions are deducted. Payroll deductions shall commence as soon as
practicable once the completed Enrolment/Change Form is received and processed by both the Plan Administrator and CPR.

4.3 Continuing Contributions

With the exception of a Participant’s voluntary suspension of Participant Contributions as provided for in Paragraph 4.8, Participant Contributions via payroll deductions shall continue indefinitely while the Participant continues to receive Eligible Earnings. Should a Participant cease to receive Eligible Earnings from time to time, payroll deductions will cease and shall resume following the receipt of Eligible Earnings.

4.4 Union Representative Participant Contributions

In the case of Eligible Bargaining Unit Representatives where contributions via payroll deductions are not possible, contributions may be made via post-dated checks provided to CPR, subject to the provisions of Paragraph 4.1. Contributions by this method may be made only on a monthly basis. Upon request, CPR shall notify Eligible Bargaining Unit Representatives of the amount of Eligible Earnings available for determination of contribution amounts and CPR will bring all such Eligible Bargaining Unit Representatives to the Plan Administrator’s attention.

4.5 No Retroactive Contributions

A Participant may not make retroactive Participant Contributions to the Plan, unless CPR determines otherwise.

4.6 No Lump Sum Contributions

A Participant may not make lump sum Participant Contributions to the Plan, unless CPR determines otherwise.

4.7 Changes to a Participant’s Contribution Level

A Participant may change contribution levels, in whole percentages, once per calendar quarter by providing to the Plan Administrator an Enrolment/Change Form indicating the desired change no later than two (2) weeks prior to the last day of that quarter. The change will be implemented as soon as practicable once the completed Enrolment/Change Form is received and processed by both the Plan Administrator and CPR at which time the Participant Contributions shall be adjusted accordingly, provided such adjustment conforms with Paragraph 4.1.

4.8 Voluntary Suspension of Contributions

A Participant may at any time, by completing and delivering to the Plan Administrator an Enrolment/Change Form, request that Participant Contributions be suspended. The suspension will be implemented as soon as practicable once the completed Enrolment/Change Form is received and processed by both the Plan Administrator and CPR. Participant Contributions shall also be suspended during any period of time that
such suspension is required in connection with a hardship withdrawal under any pension plan of CPR qualified under section 401(a) of the Code (“Hardship Suspension”). A Hardship Suspension shall be treated as a voluntary suspension under this Paragraph 4.8. However, in the event of a suspension under this Paragraph 4.8, the Participant shall not be allowed to resume making Participant Contributions until a waiting period of six (6) consecutive months (which shall be treated as running concurrently with any
Hardship Suspension) has passed. Upon expiration of the six (6) month waiting period the Participant will have the option of resuming Participant Contributions by completing and delivering to the Plan Administrator a new Enrolment/Change Form. Participant Contributions shall resume as soon as practicable once the completed Enrolment/Change Form is received and processed by both the Plan Administrator and CPR at which time the Participant Contributions shall be adjusted accordingly, provided such adjustment conforms with Paragraph 4.1. If the voluntary suspension exceeds a period of four (4) consecutive full calendar quarters, CPR shall terminate the participation in the Plan of the Participant in accordance with the provisions of Paragraph 9.2.

4.9 Leaves of Absence

Subject to Paragraphs 4.1 and 4.3, a Participant shall continue to make Participant Contributions during any leave of absence for which the Participant continues to receive Eligible Earnings unless such Participant has completed and delivered to the Plan Administrator an Enrolment/Change Form indicating a desire to suspend Participant 

Contributions, during the period of such absence, in which event Paragraph 4.8 shall become applicable where appropriate and with the necessary changes.

If at any time prior to or during such leave of absence the Participant ceases to receive Eligible Earnings the Participant Contributions of the Participant will cease and shall resume following the receipt of Eligible Earnings. Should the cessation of contributions under this Paragraph 4.9 extend for a period exceeding four (4) consecutive full calendar quarters, the provisions of Paragraph 9.2 shall apply.

4.10 Remittance of Participant Contributions

Participant Contributions withheld through payroll deduction by CPR and Affiliates in each Pay Period shall be remitted by CPR and Affiliates to the Plan Administrator as soon as practicable but not later than the fifth (5) Business Day following the date such withholding is effected. Participant Contributions described in Paragraph 4.4 shall be remitted by CPR to the Plan Administrator no later than the fifth (5) Business Day following the date of the post-dated check. All Participant Contributions remitted to the Plan Administrator shall be invested solely in Restricted Shares.

4.11 Continued Participation in Plan

During any suspension of Participant Contributions under Section 4 a Participant shall remain eligible to receive Company Contributions earned prior to such suspension of Participant Contributions.

Section 5 — Company Contributions to the Plan

5.1 Company Contributions

In any month during which a Participant has made Participant Contributions, CPR shall remit to the Plan Administrator, in accordance with the provisions of Paragraph 4.10, a Company Contribution. Such Company Contribution shall be equal to thirty-three (33%) percent of the amount of any Participant Contributions being remitted during such period up to six per cent (6%) of Eligible Earnings. For greater certainty Participant Contributions in excess of six per cent (6%) of Eligible Earnings shall not be eligible for corresponding Company Contribution.

The vesting of any Shares purchased with such Company Contributions is contingent upon holding the corresponding Restricted Shares within the Participant Account during the vesting period in accordance with Paragraph 8.4. Actual Company Contributions may be reduced from time to time by the value of forfeited Shares in the Plan Reserve. Shares purchased with Participant Contributions in excess of six per cent (6%) of Eligible Earnings shall be deemed to be Unrestricted Shares.

5.2 Use of Funds

All Company Contributions shall be invested solely in Unvested Shares.

Section 6 – Asset Fund

6.1 Assets of the Asset Fund

The Plan Administrator shall receive from CPR, or its Affiliates, the Participant Contributions of all the Participants made in accordance with Section 4 and the Company Contributions made to the Plan in accordance with Section 5. Participant Contributions, Company Contributions, and the Shares acquired therewith and any dividends paid on Restricted Shares and Unrestricted Shares thereon, from the date of
receipt by the Plan Administrator, shall constitute the Asset Fund of the Plan and shall be held, invested, managed, administered and dealt with by the Plan Administrator pursuant to the terms of the Plan.

6.2 Allocations to Participant Accounts

The Plan Administrator shall maintain a separate Account for each Participant. The Plan Administrator shall credit to the Account of a Participant all Company Contributions made for the benefit of the said Participant, all Participant Contributions made by such Participant, and all Shares acquired therewith. The Plan Administrator shall allocate either absolutely or contingently to each Participant all capital gains realized, and
capital losses sustained by the Asset Fund on their Account at such time or times as the Plan Administrator may determine, but in any event, at least annually. The Plan Administrator shall credit to the Plan Reserve all Unvested Shares forfeited by Participants in accordance with Paragraph 8.5.

Section 7 — Investment

7.1 Acquisition of Shares with Participant Contributions

The Plan Administrator shall use Participant Contributions eligible for Company Contribution to purchase Restricted Shares and shall use Participant Contributions not eligible for Company Contribution to purchase Unrestricted Shares, only on the open market through the Stock Exchange. 

The Plan Administrator will purchase the requisite number of Restricted Shares and Unrestricted Shares as soon as practicable, as determined by the Plan Administrator, but in no circumstances less than once per calendar month or any other such period as required by securities legislation, stock exchange rules, or other relevant rules. The Plan Administrator will allocate the Restricted Shares and Unrestricted Shares to the appropriate Participant Accounts after each purchase.

7.2 Acquisition of Unvested Shares

The Plan Administrator shall use Company Contributions to purchase Unvested Shares on the open market through the Stock Exchange. 

The Plan Administrator will purchase the requisite number of Unvested Shares as soon as practicable, as determined by the Plan Administrator, but in no circumstances less than once per calendar month or any other such period as required by securities legislation, Stock Exchange rules, or other relevant rules.

7.3 Number of Shares Purchased

The number of Restricted Shares, Unrestricted Shares and Unvested Shares purchased depends upon the Market Price of the Shares at the time purchases are made and the total amount of contributed funds available for each of the respective purchases. To the extent set forth in Section 10.6, CPR will be responsible for the payment of all brokerage commissions or similar fees incurred in connection with such purchases.

The maximum number of Shares that may be purchased pursuant to this Plan is 1,000,000.  

Notwithstanding the provisions of Paragraphs 7.1 and 7.2 and Section 8, the Plan Administrator, in its discretion, may limit the daily volume of its purchases of Shares and sales of Shares or make such purchases and sales over several trading days to the extent that such action is deemed by it to be in the best interests of Participants. Should the purchase or sale of Shares by the Plan Administrator in any given month be at various prices, the Plan Administrator shall establish an average weighted purchase or sale price, as the case may be, applicable for each Share in the relevant month.

7.4 Registration of Shares

At the time of purchases, all Participants shall acquire beneficial ownership of all Restricted Shares and Unrestricted Shares and of any fractional interest in Restricted Shares and Unrestricted Shares acquired for their Account. Notwithstanding any other provisions of this Plan, no fractional common share certificates will be issued.

All Shares purchased by the Plan Administrator on behalf of a Participant pursuant to this Plan shall be registered in the name of the Plan Administrator, on behalf of such Participant. Provided Unvested Shares have not been forfeited pursuant to Paragraph 8.5 and are governed by the provisions of the Plan, they shall be held by the Plan Administrator on behalf of Participants. All rights and privileges, however, with respect
to Shares, including voting rights, shall be exercised by Participants through the Plan Administrator, and any dividends shall be credited to Participant Accounts.

7.5 Allocation of Shares

Allocations of Restricted Shares and Unrestricted Shares shall be made to each Participant’s Account in proportion to the contributions received in respect of such Participant. Allocations shall be made in whole and fractional Shares. Restricted Shares and Unrestricted Shares purchased with Participant Contributions shall be held for the Account of Participants. Participants shall not be allowed under any circumstance to withdraw a fraction of a Share. The value of any such fractional Share will be paid in cash.

7.6 Dividends

In the event a cash dividend is paid to holders of Shares, the net amount of such cash dividend attributable to Shares allocated to Plan Accounts, excluding any Unvested Shares, shall be applied to purchase Unrestricted Shares for the benefit of Participants. The net amount of the cash dividend that is available for the purchase of Shares shall be determined after deduction from the gross amount of the cash dividend of such amount of income and employment tax (if any) as is required to be withheld in accordance with applicable law (including foreign law) to the extent applicable to the Participant in question.

Each Participant shall receive quarterly confirmation from the Plan Administrator, which will include all changes, if any, in the amount of common shares held for the Participant’s Account.

7.7 Interest

All Participant Contributions and Company Contributions remitted to the Plan Administrator shall, prior to the acquisition of Restricted Shares, Unrestricted Shares or Unvested Shares, earn interest. Any such interest earned on contributions between the time of receipt, by the Plan Administrator, and their subsequent investment in Shares shall be applied to offset Basic Administration Expenses, to the extent possible, in accordance with all applicable laws and regulations.

7.8 Shares acquired at end of Plan Year

Where Participant Contributions and/or purchases are made in respect of a Plan Year, but are not settled until after the end of that Plan Year, such Shares will be reflected in the new Plan Year.

Section 8 — Withdrawals/Sales of Shares

8.1 Sale of Shares

Upon completion and delivery to the Plan Administrator of a completed Withdrawal/Termination Form, a Participant may direct the Plan Administrator to sell some or all of the Unrestricted Shares or Restricted Shares in their Account. Upon such sale, the Plan Administrator shall pay to the Participant an amount equal to the net proceeds from the sale of such Shares. Any fees applicable to the sale of Shares shall be paid by Participants and withheld from settlement of the sale by the Plan Administrator.

For the purpose of the Plan, a Participant shall be deemed to sell all Unrestricted Shares in the Account prior to the sale of Restricted Shares in the Account. For purposes of the Plan, Restricted Shares shall be deemed to be sold on a “first in, first out” basis for purposes of determining forfeiture of Unvested Shares in accordance with Paragraph 8.5.

The price of fractional Shares will be the same as the price of whole Shares. Fractional Shares may only be sold by a Participant upon termination of participation in the Plan.

8.2 Withdrawal of Shares

Upon completion and delivery to the Plan Administrator of a completed Withdrawal/Termination Form, a Participant may direct the Plan Administrator to withdraw some or all of the Unrestricted Shares and/or Restricted Shares in the Account. Upon such withdrawal, the Plan Administrator shall transfer title and deliver to the Participant those Shares that have been withdrawn at the Participant’s direction. Any fees applicable to the withdrawal of Shares shall be payable by the Participant and withheld from settlement by the Plan Administrator.

For the purpose of the Plan, a Participant shall be deemed to withdraw the Unrestricted Shares in the Account prior to the withdrawal of Restricted Shares in the Account. For purposes of the Plan, Restricted Shares shall be deemed to be withdrawn on a “first in, first out” basis for purposes of determining forfeiture of Unvested Shares in accordance with Paragraph 8.5.

The price of fractional Shares will be the same as the price of whole Shares. Fractional Shares may only be withdrawn by a Participant upon termination of participation in the Plan.

8.3 Restriction on Sale and Withdrawal

A Participant may not direct the Plan Administrator to sell or withdraw any Unvested Shares. In the event a Participant sells or withdraws any Restricted Shares, the Participant shall forfeit all Unvested Shares contingent on such Restricted Shares in accordance with Paragraph 8.5.

Should a Participant make more than two (2) transactions being either a sale or withdrawal during a Plan Year such Participant shall be suspended from contributing to the Plan for a period of six (6) consecutive months from the date of such transaction, provided that the foregoing restriction shall not apply to Unrestricted Shares for which there were no corresponding Unvested Shares purchased with a Company Contribution. For greater certainty, any Unrestricted Shares purchased on behalf of a participant with Participant Contributions in excess of six per cent (6%) of Eligible Earnings may be sold or withdrawn by the Participant at any time without suspension of Participant from contributing to the Plan.

The Participant shall have the option of resuming Participant Contributions in accordance with the provisions of Paragraph 4.8 as if the suspension were deemed to be a voluntary suspension.

8.4 Vesting of Unvested Shares

All Unvested Shares shall immediately vest to become Unrestricted Shares on the first day of the calendar quarter after a holding period of four (4) consecutive full calendar quarters has passed subsequent to their purchase provided that the corresponding 

Restricted Shares upon which the Unvested Shares are contingent have, at all times during this period, been held for the Account of the Participant. Upon vesting of Unvested Shares all Restricted Shares upon which such Unvested Shares were contingent shall immediately become Unrestricted Shares.

8.5 Forfeiture of Unvested Shares

In the event a Participant chooses to sell or withdraw any Restricted Shares, such Participant shall forfeit all Unvested Shares contingent on such Restricted Shares and shall not be entitled to title to, or any proceeds of, such sale. Such Unvested Shares shall be credited to the Plan Reserve and may be utilized to satisfy future Company Contributions.

8.6 Compliance with Securities Laws

Any sale, withdrawal or other transfer of Shares pursuant to the Plan may only be made in compliance with applicable securities laws and Stock Exchange rules.

Section 9 –Termination of Participation in the Plan

9.1 Voluntary Termination of Participation

Participants may, at their discretion, terminate their participation in the Plan at any time by providing to the Plan Administrator a Termination/Withdrawal Form. The termination will be implemented as soon as practicable once the completed Termination/Withdrawal Form is received and processed by both the Plan Administrator and CPR. Upon such termination the Participant’s Account will be closed by the Plan Administrator in accordance with the provisions of Paragraph 9.3.

9.2 Automatic Termination

The Plan Administrator shall, on behalf of CPR, terminate the participation in the Plan of any Participant who has had nil (zero) balances or has not made any Participant Contributions for a consecutive period exceeding four (4) consecutive full calendar quarters unless stated otherwise. The Plan Administrator shall monitor Participants who have not made contributions for such period and will, on behalf of CPR, terminate the participation in the Plan of such Participants. In the event of such termination the closure of the Participant’s Account shall be handled in accordance with the provisions of Paragraph 9.3.

Dividends received within the period as a result of Share holdings within the Account do not qualify as contributions for the purposes of determining inactivity.

9.3 Account Closure Upon Termination

Upon the termination of a Participant’s participation in the Plan for any reason the Plan Administrator will effect the closure of the Participant’s Account and shall either transfer and deliver or sell all of the Unrestricted Shares and Restricted Shares in the 

Participant’s Account, at the option of the Participant, or Legal Representative in the event of death of the Participant. The transfer and delivery of the Shares or payment of the net proceeds of sale, as the case may be, shall be effected as soon as practicable but in no event later than thirty (30) days from the date the Plan Administrator receives notification of such termination. Any fees applicable to the issuance of share certificates or the sale transaction will be payable by the Participant, or the Participant’s estate in the event of death of the Participant and shall be withheld from settlement by the Plan Administrator.

If the Participant or Legal Representative fails to make an election, or if no Legal Representative comes forward to CPR, within ninety (90) calendar days of the termination of the Participant’s participation in the Plan, the Plan Administrator shall issue a share certificate for all whole Shares recorded in such Account, plus a cash payment equal to the value of any fraction of a Share. The Plan Administrator shall send the share certificate and any cash payment to the last known address of such Participant or Legal Representative, as the case may be.

The Participant shall not be entitled to title to, or proceeds of, sale of their Unvested Shares. Such Shares shall be credited to the Plan Reserve and may be utilized to satisfy future Company Contributions.
 
In the event of a transfer and delivery of Shares, the Plan Administrator will issue a share certificate for all whole Shares recorded in a Participant’s Account, plus a cash payment equal to the value of any fraction of a Share as determined in accordance with the provisions of Paragraph 8.2.

The Plan Administrator shall send a written letter of confirmation of termination from the Plan to the Participant where applicable as soon as practicable.

9.4 Rejoining the Plan

Any former Participant who chooses to re-join the Plan will be subject to a mandatory six (6) month waiting period prior to re-enrolment. The Plan Administrator will keep track of such period and will, on behalf of CPR, re-enrol any former Participant who has completed such waiting period and submits a new Enrolment/Change Form as per Section 3. The re-enrolment of such Participant shall be effected as soon as practicable once the completed Enrolment/Change Form is received and processed by both the Plan Administrator and CPR.

9.5 Resignation or Termination for Cause

In the event that the employment of a Participant is terminated for cause or a Participant resigns, such Participant’s participation in the Plan shall be terminated on the termination or resignation date, as the case may be. Upon notification of a termination or resignation the Plan Administrator shall effect the closure of the Participant’s Account in accordance with Paragraph 9.3.

9.6 Termination in other circumstances

In the event of the death, Retirement or involuntary termination without cause of a Participant, such Participant’s participation in the Plan will be terminated effective on the date of death or the date of retirement or termination, as the case may be. Upon notification of such termination, the Plan Administrator shall effect the closure of the Participant’s Account in accordance with Paragraph 9.3 with the exception that all Unvested Shares shall vest immediately and all proceeds or title shall accrue to the benefit of the Participant.

9.7 Company Contributions Upon Certain Terminations

In the event of the death, Retirement or involuntary termination without cause of a Participant, CPR or the relevant Affiliate shall, not later than thirty (30) days following receipt of satisfactory evidence of death, Retirement or involuntary termination without cause remit to the Plan Administrator for the benefit of such Participant, any outstanding Company Contribution in accordance with Sections 5 and 8 and any such Company Contributions previously remitted, but not yet allocated for the benefit of the Participant, shall be immediately so allocated.

Section 10 — Administration of the Plan

10.1 Responsibility for Administration

CPR will be responsible for the administration of the Plan and for the interpretation of its provisions. Where any reference in the Plan is made to any action to be taken, consent, approval or opinion to be given, direction or decision to be exercised or made by CPR, it shall be read as Canadian Pacific Railway Limited acting directly or through its subsidiaries and through their authorized officers or any other person authorized by the
Board, where required for the purposes of the Plan.

10.2 Maintenance of Records

The Plan Administrator will maintain records of the Plan Accounts held in the name of each Participant and all transactions with respect to such Plan Accounts, including a record of whole and fractional Shares allocated, the dates of allocation and the price at which such allocations are made and shall hold, for a period mutually agreed upon by CPR and the Plan Administrator, all forms of authorization and designation, as
specified by CPR from time to time, submitted by CPR employees.

10.3 Appointment of Plan Administrator

CPR shall appoint (and by their participation in the Plan, Participants authorize CPR to appoint) one or more Plan Administrators to perform such functions as may be specified in the Administrative Agreement(s). Any reference in the Plan to the purchase or sale of Shares by the Plan Administrator shall be read to include the purchase or sale of Shares effected through such broker(s) or agent(s) as may be appointed by the Plan Administrator from time to time.

10.4 Rules and Procedure

CPR may from time to time adopt rules and procedures in respect of the administration of the Plan, provided that all such rules and procedures shall be consistent with the provisions of the Plan as in effect from time to time. Such rules and procedures may vary for different employees. The rules and procedures shall be binding on all Participants and Eligible Employees in respect of whom such rules and procedures are applicable.

10.5 Delegation of Administrative Responsibilities

CPR may delegate to third parties, including the Plan Administrator, the whole or any part of the administration of the Plan and shall determine the scope of such delegation in its sole discretion. Any decision taken by CPR or its delegate in carrying out responsibilities with respect to the administration of the Plan, including the interpretation or application of any rules or procedures adopted, pursuant to Paragraph 11.1, shall be final and binding on the Participants and their beneficiaries.

10.6 Costs and Expenses

CPR shall pay net Basic Administration Expenses in connection with the operation of the Plan as determined by CPR. Basic Administration Expenses shall be reduced, to the extent possible, by any dividends on Unvested Shares and the amount of any interest earned on contributed funds, prior to their investment in Shares, in accordance with Paragraph 7.7. All fees exclusive of Basic Administration Expenses, including, without limitation, any brokerage or other charges in connection with the sale of Shares, issuance of share certificates or transfer of Shares shall be payable by the Participant in accordance with Section 8. Any fees charged in connection with the Participant’s use of the Plan Administrator’s service call center shall be payable by the Participant.

10.7 Participant Statements

Each Participant shall receive from the Plan Administrator a statement at the end of each calendar quarter (or such other times as may be determined by CPR), which statement shall contain such information in respect of such Participant’s Plan Accounts as CPR may determine from time to time or as otherwise may be required by law (including foreign law) to the extent applicable to the Participant in question. 

Should a Participant request an up-to-date statement of account, such statement may be made available at such other time as may be agreed upon between CPR and the Plan Administrator.

10.8 Reports and Voting Rights

The Plan Administrator shall furnish or cause to be furnished to each Participant who has Shares allocated in any Plan Account a copy of all notices sent to shareholders in respect of shareholder meetings at which the Shares are entitled to be voted and shall request from each such Participant instructions as to the voting at such meeting of the aggregate number of the Participant’s whole Shares allocated to the Participant’s
Account on the record date of such meeting. If the Participant furnishes such instructions to the Plan Administrator on a timely basis, the Plan Administrator shall vote such 

number of whole Shares in accordance with the instructions of the Participant. If the Participant fails to furnish timely instructions to the Plan Administrator, the Plan Administrator shall not vote the Participant’s whole Shares. The Plan Administrator shall not vote any fractional Shares allocated to Participant’s Plan Accounts and shall not vote
any Shares not allocated to Participant Accounts as of the record date. The Plan Administrator shall keep confidential the voting instructions of the Participants and shall not disclose the same to CPR except to the extent required by law.

Section 11 — Plan Amendment and Termination

11.1 Plan Amendment

CPR reserves the right to amend the Plan, in whole or in part, at any time at its discretion without the consent of Participants, provided that no such amendment shall have the effect of reducing any benefits accrued to any Participant as of the date of amendment.

11.2 Plan Termination

CPR reserves the right to terminate the Plan at any time, in which event Participants’ rights will be governed by Paragraph 9.6 as if the Participants’ Retirements had all occurred on the date of the termination of the Plan. Any amount remaining in the Plan Reserve after the Participants have been allocated the amounts required pursuant to Paragraph 9.6 shall revert to CPR.

11.3 Plan Administrator Duties

No amendment, change, or modification shall be made to the Plan that will alter the duties of the Plan Administrator, without CPR’s and the Plan Administrator’s written consents.

11.4 The Plan Administrator

CPR, as agent for each Participant, may at any time remove the Plan Administrator and appoint a successor or successors to fill any vacancy arising for any reason whatever.

The Plan Administrator may, with CPR’s written approval, delegate to any corporation authorized to carry on the business of a trust company in Canada, or the US, the duty to maintain records and to furnish statements in connection with all aspects of the Plan.

The Plan Administrator shall be indemnified and held harmless by CPR against and from any and all loss, cost, liability or expense resulting from any claim, action, suit or proceeding to which it may be a party or in which it may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by it in any settlement thereof (with CPR’s written approval) or paid by it in satisfaction of a judgment in any such action, suit or proceeding against it. The Plan Administrator shall in writing give CPR a reasonable opportunity, at CPR’s expense, to handle and defend such action within a time frame to be specified by the Plan 

Administrator, before the Plan Administrator undertakes to handle and defend such claim, action, suit or proceeding on its own behalf. CPR and the Participants shall be
indemnified and held harmless by the Plan Administrator against and from any and all loss, cost, liability or expense resulting from the willful misconduct, negligence or bad faith of the Plan Administrator or of any person (other than CPR) to which the Plan Administrator has delegated any of its duties hereunder. 

Section 12 — Market Fluctuation

CPR makes no representations or warranties to Participants with respect to the Plan or the Shares whatsoever. CPR shall not indemnify any Participant under the Plan against loss resulting from fluctuations in the price of Shares. Participants are expressly advised that all Participant Contributions and Company Contributions will be invested in Shares and the value of any Participant’s Shares in the Plan will fluctuate as the trading price of the Shares fluctuates.

In seeking the benefits of participation in the Plan, a Participant solely accepts the risk of a decline in the market price of Shares in the Participant’s Account.

Section 13 — Income Taxes

CPR and Participants acknowledge that sale of Shares by a Participant may result in income tax consequences including, without limitation, a taxable capital gain, or an allowable capital loss to the Participant under US tax law.

Participants shall be responsible to pay any and all income taxes resulting from participation in the Plan or the sale of Shares, including without limitation:
a)     taxes from a capital gain;
b)     taxes from the payment and receipt of dividends;
		
	c) 
	taxes from Company Contributions or the payment by CPR of brokerage or other fees where deemed under applicable law to be a taxable benefit to the Participant.

CPR shall have the right to withhold from any payment, including any payment of Eligible Earnings or other earnings, sufficient amounts to cover required withholding and income or employment taxes with respect to the Plan. If a Participant, including an Eligible Bargaining Unit Representative, does not have sufficient earnings available from which CPR can make any required withholdings, CPR may condition the allocation of Unvested Shares to the Account of the Participant on the receipt of the amount required for CPR to meet its withholding obligations, or may instruct the Plan Administrator to reduce the amount otherwise allocated to the Participant (or sell Shares allocated to the Participant on behalf of the Participant) and remit to CPR the amount required to meet CPR’s withholding obligation (and any balance to the Participant). The provisions of Paragraphs 8.1 and 8.3 shall govern any sale of Shares pursuant to this Section.

Participants are expressly advised that US and Canadian tax laws are complex and subject to change and each Participant is solely responsible to contact his or her own 

accountant, legal representative or qualified financial advisor to determine what current effect any applicable tax legislation may have with respect to his or her participation in the Plan or the sale of Shares and to determine any tax consequences. The Plan Administrator will provide all Participants with all appropriate tax forms and receipts.

Section 14 — No Trading on Undisclosed Information

No Participant shall in any manner participate in the trading of Shares based upon insider or undisclosed material corporate information as prohibited by law. Any trading based on undisclosed material information by Participants may be subject to prosecution and may result in discipline by CPR up to and including termination of a Participant’s employment with CPR. Participants should consult the Insider Trading Policy of CPR available from CPR.

Section 15 — General Provisions

15.1 No Additional Rights to Employment

		
	(a) 
	The opportunity to participate in this Plan does not constitute a contract of employment, nor does the existence of a contract of employment between any person and CPR give such person any right or entitlement to participate in the Plan or any expectation that an opportunity to participate in the Plan will be offered to the person subject to any conditions or at all.

		
	(b) 
	The rights and obligations of a Participant under the terms of any contract of employment with CPR shall not be affected by participation in this Plan.

		
	(c) 
	The opportunity to acquire Shares pursuant to the Plan shall not afford a Participant or any Eligible Employee any rights or additional rights to compensation or damages in consequence of the loss or termination of the Participant's office or employment with CPR for any reason whatsoever.

		
	(d) 
	A Participant shall not be entitled to any compensation for damages for any loss or potential loss which they may suffer by reason of being or becoming unable to acquire Shares under the Plan in consequence of the loss or termination of his or her office or employment with CPR for any reason (including, without limitation, any breach of contract by CPR) or in any other circumstances whatsoever.

15.2 Employee Eligibility

CPR reserves the right to restrict participation in the Plan to any employee or employee groups at any time in its sole discretion, including, but not limited to, the right to refuse to offer employees or employee groups the opportunity to participate in the Plan in any jurisdiction where operating the Plan in such jurisdiction or in respect of such employees is or becomes onerous (including, without limitation, having regard to the costs involved), impossible, illegal or impracticable, as determined by CPR in its sole discretion.

15.3 Liability

No Participant shall make any claim or demand against CPR or the Plan Administrator and Participants agree and acknowledge that CPR and the Plan Administrator shall not be liable with respect to:

		
	(a) 
	the performance of Shares on the Stock Exchange at or during any period of time;

		
	(b) 
	changes in the local currency value of Shares held by a Participant, where applicable, resulting from fluctuations in the exchange rates between the US dollar and any other currency;

(c)     income taxes payable in respect of the Plan, except to the extent that:

		
	(i)
	CPR withholds any such amounts either from a Participant's Eligible Earnings, other earnings, or payments under the Plan; or

		
	(ii) 
	CPR (but not the employee) is liable for such payment under applicable law.

15.4 Participant’s Agreement to be bound by Plan Terms

Participation in the Plan by any Participant shall be construed as acceptance by the Participant of the terms and conditions of the Plan and all rules and procedures adopted hereunder and as amended from time to time, and as the Participant's agreement to be bound thereby.

15.5 Indemnification

By electing to participate in the Plan a Participant agrees to indemnify:

(a)     CPR; and
(b)     the Plan Administrator; and
		
	(c) 
	any other person who is or becomes liable to account for tax, social security contributions or any other regulatory or statutory contributions on behalf of the Participant against any amount of or representing tax, or any other regulatory or statutory contributions for which CPR (or such other person) is liable to account in respect of or in consequence of the facilitation of Participant Contributions, for the benefit of such Participant and which (as between the Participant and CPR or such other person) is the liability of the Participant but which CPR or such other person cannot otherwise lawfully recover from the Participant (whether by way of deduction from payroll or otherwise).

15.6 Assignment Exemption from Seizure and Bankruptcy

Except as may otherwise be specifically provided by applicable law, no right of a person under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge and any attempt by anyone to anticipate, 

alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void, and any Shares or money to which any person is entitled under the Plan are exempt from execution, seizure and attachment. Any Shares withdrawn from any Plan Account may only be transferred (including any transfer pursuant to Paragraph 8.2) in accordance with applicable securities laws. 

If, notwithstanding the foregoing, a Participant is deprived by applicable law of interests in Shares or ceases to retain beneficial interest in the Shares, then all rights under the Plan will cease forthwith and no further Shares will be allocated under the Plan to that Participant.

15.7 Share Certificates

Share certificates, if issued pursuant to any provision of the Plan, shall bear any legend that is necessary or is deemed advisable in order to comply with applicable securities laws, including any legends referring to restrictions on transfer in any jurisdiction.

15.8 Mental or Legal Incapacity of the Participant

If any payment is to be made under the Plan to a minor or other person who is mentally or legally incompetent, the Plan Administrator shall pay the same to the parent or guardian or other person having legal custody of, or being the legally appointed representative of, such person, to be applied by such parent, guardian, person having custody or legally appointed representative for the benefit of such person, without
the Plan Administrator being further liable to see to the application thereof and so that any such payment shall be a complete discharge of any liability under the Plan and of CPR.

15.9 Governing Law and Compliance with Laws

The Plan shall be governed by and construed in accordance with the laws of the state of Minnesota, US without regard to conflict of law principles, except that with respect to the issuance of securities, the laws of the jurisdiction of CPR shall govern. Notwithstanding any provision of this Plan, CPR shall operate the Plan in compliance with all applicable laws and regulations of all jurisdictions where CPR has, in accordance with the terms of this Plan, decided to offer the Plan.

15.10 Discretionary Relief

Notwithstanding any other provision of the Plan, CPR may, at its discretion, waive any condition of the Plan if specific individual circumstances warrant such waiver.

AMENDMENT
TO 
CANADIAN PACIFIC RAILWAY LIMITED
EMPLOYEE SHARE PURCHASE PLAN (US)

Amendment to Plan terms and conditions effective as of January 1, 2015

WHEREAS, Canadian Pacific Railway Limited (the “Company”) and certain of its majority controlled subsidiaries have adopted the Canadian Pacific Railway Limited Employee Share Purchase Plan (US) (the “ESPP” or “Plan”);

AND WHEREAS, effective April 3, 2009 the ESPP was amended to suspend the Company’s match;

NOW, THEREFORE, the ESPP was amended effective January 1, 2015 as follows:

		
	1.
	Section 5. Company Contributions.  Effective for Participant Contributions made January 1, 2015 and thereafter by a CPR employee in the U.S. who is an Eligible Bargaining Unit Representative or a regular full-time, part-time or seasonal employee in an Eligible Bargaining Unit, in each case provided such person is a member of the Transportation Division of SMART bargaining unit, the Company Contribution shall be restored in accordance with Section 5.1 Company Contributions as in effect prior to the April 2009 amendment to the Plan.  For purposes of Section 5.1, a “Participant” shall continue to not include any other Eligible Bargaining Unit Representative or regular full-time, part-time or seasonal employee in an Eligible Bargaining Unit.

		
	2.
	Section 8. Withdrawal/Sale of Shares.  Effective January 1, 2015 and thereafter, for a CPR employee in U.S. who is an Eligible Bargaining Unit Representative or a regular full-time, part-time or seasonal employee in an Eligible Bargaining Unit, the holding period in Section 8.4 for Unvested Shares purchased after such date shall be eight (8) consecutive full calendar quarters instead of four (4).

		
	3.
	Section 9.7. Company Contributions upon Certain Terminations.  The suspension of this Section is hereby lifted with respect to Participants eligible for the restoration of Company Contributions under paragraph 1 of this Amendment.

In all further respects the Plan will remain in full force and effect.

CANADIAN PACIFIC RAILWAY LIMITED

By: /s/ Peter Edwards
Peter Edwards 
Vice President, Human 
Resources and Industrial Relations

AMENDMENT
TO 
CANADIAN PACIFIC RAILWAY LIMITED
EMPLOYEE SHARE PURCHASE PLAN (US)

Amendment to Plan terms and conditions effective as of January 1, 2016

WHEREAS, Canadian Pacific Railway Limited (the “Company”) and certain of its majority controlled subsidiaries have adopted the Canadian Pacific Railway Limited Employee Share Purchase Plan (US) (the “ESPP” or “Plan”);

AND WHEREAS, effective April 3, 2009 the ESPP was amended to suspend the Company’s match;

AND WHEREAS, the ESPP was amended effective January 1, 2015 as follows:

		
	1.
	Section 5. Company Contributions.  Effective for Participant Contributions made January 1, 2015 and thereafter by a CPR employee in the U.S. who is an Eligible Bargaining Unit Representative or a regular full-time, part-time or seasonal employee in an Eligible Bargaining Unit, in each case provided such person is a member of the Transportation Division of SMART bargaining unit, the Company Contribution shall be restored in accordance with Section 5.1 Company Contributions as in effect prior to the April 2009 amendment to the Plan.  For purposes of Section 5.1, a “Participant” shall continue to not include any other Eligible Bargaining Unit Representative or regular full-time, part-time or seasonal employee in an Eligible Bargaining Unit.

		
	2.
	Section 8. Withdrawal/Sale of Shares.  Effective January 1, 2015 and thereafter, for a CPR employee in U.S. who is an Eligible Bargaining Unit Representative or a regular full-time, part-time or seasonal employee in an Eligible Bargaining Unit, the holding period in Section 8.4 for Unvested Shares purchased after such date shall be eight (8) consecutive full calendar quarters instead of four (4).

		
	3.
	Section 9.7. Company Contributions upon Certain Terminations.  The suspension of this Section is hereby lifted with respect to Participants eligible for the restoration of Company Contributions under paragraph 1 of this Amendment.

NOW, THEREFORE, the ESPP was amended effective January 1, 2016 as follows:

		
	1.
	Section 5. Company Contributions.  Effective for Participant Contributions made January 1, 2015 and thereafter by a CPR employee in the U.S. who is an Eligible Bargaining Unit Representative or a regular full-time, part-time or seasonal employee in an Eligible Bargaining Unit, in each case provided such person is a member of the Transportation Division of SMART and the Brotherhood of Locomotive Engineers and Trainmen bargaining units, the Company Contribution shall be restored in accordance with Section 5.1 Company Contributions as in effect prior to the April 2009 amendment to the Plan.  For purposes of Section 5.1, a “Participant” shall continue to not include any other Eligible Bargaining Unit Representative or regular full-time, part-time or seasonal employee in an Eligible Bargaining Unit.

		
	2.
	Section 8. Withdrawal/Sale of Shares.  Effective January 1, 2015 and thereafter, for a CPR employee in U.S. who is an Eligible Bargaining Unit Representative or a regular full-time, part-time or seasonal employee in an Eligible Bargaining Unit, the holding period in Section 8.4 for Unvested Shares purchased after such date shall be eight (8) consecutive full calendar quarters instead of four (4).

		
	3.
	Section 9.7. Company Contributions upon Certain Terminations.  The suspension of this Section is hereby lifted with respect to Participants eligible for the restoration of Company Contributions under paragraph 1 of this Amendment.

In all further respects the Plan will remain in full force and effect.

CANADIAN PACIFIC RAILWAY LIMITED

     By:/s/ Peter Edwards
Peter Edwards 
Vice President, Human 
Resources and Industrial RelationsExhibit

UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE OCTOBER 27, 2012.

STAND-ALONE OPTION AGREEMENT
THIS AGREEMENT is made as of the 26th day of June, 2012
BETWEEN:
CANADIAN PACIFIC RAILWAY LIMITED (the “Corporation”) 
- and -
E. HUNTER HARRISON (the “Optionholder”) 
WHEREAS, the Options (as defined below) were granted by the Corporation to the Optionholder on June 26, 2012, conditional upon the Optionholder entering into an employment agreement and commencing employment with the Corporation;
AND WHEREAS, the Corporation and the Optionholder entered into an executive employment agreement effective as of June 28, 2012 (the “Employment Agreement”) to define the terms of the Optionholder’s employment as President and CEO of the Corporation;
AND WHEREAS, the Corporation and the Optionholder wish to enter into this Option Agreement to evidence and govern the terms of the Options granted to the Optionholder by the Corporation.
NOW THEREFORE, in consideration of the covenants and agreements set forth herein and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged by each of the Corporation and the Optionholder) the Corporation and the Optionholder agree as follows:
Article 1 
DEFINITIONS AND INTERPRETATION
1.1    Definitions
For the purposes of this Option Agreement, the following terms will have the following meanings:
		
	(a)
	“Blackout Period” means a period during which the Corporation self imposes a prohibition on directors and certain employees trading in the Corporation’s securities, including, without limitation, trading and/or exercising the Options;

		
	(b)
	“Board” means the board of directors of the Corporation;

		
	(c)
	“Cause” means:

		
	(i)
	the continued failure by the Optionholder to substantially perform his duties in connection with his employment by, or service to, the Corporation or any Subsidiary (other than as a result of physical or mental illness) after the Corporation or any Subsidiary has given the Optionholder reasonable written notice of such failure and a reasonable opportunity to correct it;

		
	(ii)
	the engaging by the Optionholder in any act which is injurious to the Corporation or its reputation, financially or otherwise;

		
	(iii)
	the engaging by the Optionholder in any act resulting or intended to result, directly or indirectly, in personal gain to the Optionholder at the expense of the Corporation;

		
	(iv)
	the conviction of the Optionholder by a court of competent jurisdiction on any charge involving fraud, theft or moral turpitude by the Optionholder in connection with the business of the Corporation; or

		
	(v)
	any other conduct that constitutes cause at common law;

		
	(d)
	“Change of Control” means:

		
	(i)
	the initial acquisition by any person, or any persons acting jointly or in concert (as determined by the Securities Act (Alberta)), whether directly or indirectly, of voting securities of the Corporation which, together with all other voting securities of the Corporation held by such persons, constitutes, in the aggregate, more than 20% of all outstanding voting securities of the Corporation;

		
	(ii)
	an amalgamation, arrangement or other form of business combination of the Corporation with another corporation which results in the holders of voting securities of that other corporation holding, in the aggregate, more than 50% of all outstanding voting securities of the corporation resulting from the business combination;

		
	(iii)
	a sale, disposition, lease or exchange to or with another person or persons (other than a Subsidiary) of property of the Corporation representing 50% or more of the net book value of the assets of the Corporation, determined as of the date of the most recently published audited annual or unaudited quarterly interim financial statements of the Corporation; or

		
	(iv)
	a change in the composition of the Board over any twelve month period beginning no earlier than twelve months from the date of this Option Agreement such that more than 50% of the persons who were directors of 

the Corporation at the beginning of the period are no longer directors at the end of the period, unless such change is a consequence of normal attrition;
		
	(e)
	“Common Shares” means common shares of the Corporation;

		
	(f)
	“Compensation Committee” means a compensation committee of the Board consisting of not less than three directors;

		
	(g)
	“Corporation” means Canadian Pacific Railway Limited, and any successor corporation thereto;

		
	(h)
	“Date of Termination” means the actual date of termination of employment of the Optionholder, and excludes any period during which the Optionholder is in receipt of or is eligible to receive any statutory, contractual or common law notice or compensation in lieu thereof or severance or damage payments following the actual date of termination;

		
	(i)
	“Employment Agreement” has the meaning ascribed thereto in the recitals.

		
	(j)
	“Exercise Price” has the meaning ascribed thereto in Section 2.1;

		
	(k)
	“Expiry Date” has the meaning ascribed thereto in Section 2.1;

		
	(l)
	“Family Trust” means a trust, of which at least one of the trustees is the Optionholder and the beneficiaries of which are one or more of the Optionholder and the spouse, minor children and minor grandchildren of the Optionholder;

		
	(m)
	“Grant Date” means June 26, 2012;

		
	(n)
	“Notice of Exercise” means a notice, (i) substantially in the form of the notice set out in Schedule A to this Option Agreement or (ii) such other form of notice as may be established by the Corporation, including by electronic means through a service provider selected by the Corporation from time to time, from the Optionholder to the Corporation giving notice of the exercise or partial exercise of the Options granted to the Optionholder pursuant to this Option Agreement;

		
	(o)
	“Options” means the options to purchase Common Shares granted to the Optionholder pursuant to the terms of this Option Agreement;

		
	(p)
	“Option Agreement” means this agreement, as amended from time to time;

		
	(q)
	“Optioned Shares” has the meaning ascribed thereto in Section 2.1;

		
	(r)
	“Optionholder” means E. Hunter Harrison;

		
	(s)
	“Personal Holding Corporation” means a corporation that is controlled by the Optionholder and the shares of which are beneficially owned by the Optionholder and/or the spouse, minor children or minor grandchildren of the Optionholder;

		
	(t)
	“person” has the meaning ascribed to such term in the Securities Act (Alberta);

		
	(u)
	“Retirement Trust” means a trust governed by a registered retirement savings plan or a registered retirement income fund established by and for the benefit of the Optionholder;

		
	(v)
	“Stock Option Plan” means the Corporation’s Amended and Restated Management Stock Option Incentive Plan dated February 28, 2012, as may be amended and/or restated from time to time; and

		
	(w)
	“Subsidiary” means any corporation that is a subsidiary of the Corporation as defined in the Securities Act (Alberta).

1.2    Interpretation
1.2.1    Time shall be the essence of this Option Agreement.
1.2.2    Words denoting the singular number include the plural and vice versa and words denoting any gender include all genders.
1.2.3    A Section, unless the context otherwise indicates, is a reference to a Section of this Option Agreement.
1.2.4    This Option Agreement and all matters to which reference is made herein will be governed by and interpreted in accordance with the laws of Alberta and the federal laws of Canada applicable therein.
ARTICLE 2 
OPTION GRANT
2.1    Option Grant
2.1.1    On the Grant Date, the Optionholder was, conditional upon the Optionholder entering into an employment agreement and commencing employment with the Corporation, granted options (the “Options”) to purchase 650,000 Common Shares (the “Optioned Shares”) at a price (the “Exercise Price”) of CAD$73.39 per Common Share and on the terms and subject to the conditions set out in this Option Agreement.
2.1.2    Subject to Sections 3.2 and 3.3, the Options will expire at 5:00 p.m. (Calgary time) on June 26, 2022 (the “Expiry Date”).
2.2    Vesting

2.2.1    The Options will vest as follows:
		
	(a)
	25% on the first anniversary of the Grant Date; and

		
	(b)
	25% on the second anniversary of the Grant Date; and

		
	(c)
	25% on the third anniversary of the Grant Date; and

		
	(d)
	the remaining 25% on the fourth anniversary of the Grant Date.

2.3    Further Grants
Unless otherwise approved by the Board, the Optionholder shall not be eligible to be considered for any further grants of options, whether pursuant to the Stock Option Plan or otherwise.
ARTICLE 3 
PARTICULARS OF GRANT
3.1    Time of Exercise
3.1.1    Subject to Sections 3.3.1(a) and 3.7, (i) the Options may not be exercised by the Optionholder in whole or in part until the first anniversary of the Date of Termination; and (ii) after the first anniversary of the Date of Termination, the Options may be exercised from time to time in whole or in part until the Expiry Date.
3.1.2    Notwithstanding Section 3.1.1, the Board may determine after the Grant Date that the Options will be exercisable in whole or in part on earlier dates for any reason.
3.2    Blackout Period Extension of Expiry Date
If the Expiry Date of the Options falls within a Blackout Period, the Expiry Date of the Options shall be extended to the date ten business days after the date on which Blackout Period ends, provided that if within ten business days of the end of a Blackout Period an additional Blackout Period commences the Expiry Date of the Options shall be further extended at the end of the additional Blackout Period so that the number of days during which the Optionholder is able to exercise the Options is extended for a total of ten business days. 
3.3    Early Expiry
3.3.1    The Options will continue in effect until their Expiry Date or expire before their Expiry Date, as the case may be, in the following events and manner:
		
	(a)
	if the Optionholder resigns from his employment (other than in the circumstances described in Section 3.3.1(c)), then the unexercised Options that had vested as at the Date of Termination may be exercised by the Optionholder and any such exercise 

must be, notwithstanding Section 3.1, during the period starting on the Date of Termination and ending on the earlier of: 
		
	(i)
	30 days after the Date of Termination; and 

		
	(ii)
	the Expiry Date,

after which period the Options will expire;
		
	(b)
	subject to Section 3.7, if the Optionholder’s employment is terminated by the Corporation without Cause, including a constructive dismissal, then the unexercised Options that had vested as at the Date of Termination may be exercised by the Optionholder and any such exercise must be during the period ending on the earlier of:

		
	(i)
	the date that is five years from the Date of Termination; and 

		
	(ii)
	the Expiry Date,

after which period the Options will expire;
		
	(c)
	if the Optionholder’s employment is terminated by the Corporation for Cause, including where the Optionholder resigns from his or her employment after being requested to do so by the Corporation as an alternative to being terminated for Cause, then all Options will immediately expire on the Date of Termination;

		
	(d)
	if the Optionholder’s employment ceases due to permanent disability, then the unexercised Options that had vested as at the Date of Termination may be exercised by the Optionholder and any such exercise must be during the period ending on the earlier of: 

		
	(i)
	the date that is five years from the Date of Termination; and 

		
	(ii)
	the Expiry Date,

after which period the Options will expire;
		
	(e)
	if the Optionholder dies, then the unexercised Options that had vested as at the Date of Termination may be exercised.  Any exercise of the Options must be effected by a legal representative of the Optionholder’s estate or by a person who acquires the Optionholder’s rights under the Options by bequest or inheritance, and any such exercise must be during the period ending on the earlier of:

		
	(i)
	the date that is 5 years from the Date of Termination; and

		
	(ii)
	the Expiry Date,

after which period the Options will expire; and
		
	(f)
	subject to Section 3.7, the unexercised Options that had not yet vested as at the Date of Termination will be forfeited and expire on the Date of Termination if the Optionholder’s employment ceases prior to the end of the term of the Employment Agreement.

3.4    Limited Assignment
3.4.1    The Options may not be assigned, except to:
		
	(a)
	the Optionholder’s Family Trust, Personal Holding Corporation or Retirement Trust (if permitted by applicable securities laws) (or between such entities or from either of such entities to the Optionholder); or

		
	(b)
	a legal representative of the Optionholder’s estate or a person who acquires the Optionholder’s rights under the Options by bequest or inheritance on death of the Optionholder;

in which case the assignee will thereafter be the Optionholder for the purposes of this Option Agreement, except in determining early expiry under Section 3.3.
3.4.2    If a Personal Holding Corporation to which the Options have been granted or assigned is no longer controlled by the Optionholder, or the shares of the Personal Holding Corporation are no longer beneficially owned by the Optionholder and persons who were the spouse, minor children or minor grandchildren of the Optionholder at the time of the grant or assignment, then the Options cannot be exercised until they are assigned by the Personal Holding Corporation to the Optionholder or another assignee permitted by Section 3.4.1.
3.5    No Rights as Shareholder or to Remain an officer or employee
3.5.1    The Optionholder will only have rights as a shareholder of the Corporation with respect to those of the Optioned Shares that the Optionholder has acquired through exercise of the Options in accordance with their terms.
3.5.2    Nothing in this Option Agreement will confer on the Optionholder any right to remain as an officer or employee of the Corporation or any Subsidiary.
3.6    Adjustments
3.6.1    Adjustments will be made to (i) the Exercise Price of the Options, and/or (ii) the number of Common Shares delivered to the Optionholder upon exercise of the Options in the following events and manner, subject to any required regulatory approvals and the right of the Board to make such other or additional adjustments, or to make no adjustments at all, as the Board considers to be appropriate in the circumstances:

		
	(a)
	upon (i) a subdivision of the Common Shares into a greater number of Common Shares, (ii) a consolidation of the Common Shares into a lesser number of Common Shares or (iii) the issue of a stock dividend to holders of the Common Shares (excluding a stock dividend paid in lieu of a cash dividend in the ordinary course), the Exercise Price will be adjusted accordingly and the Corporation will deliver upon exercise of the Options, in addition to or in lieu of the number of Optioned Shares in respect of which the right to purchase is being exercised, such greater or lesser number of Common Shares as result from the subdivision, consolidation or stock dividend;

		
	(b)
	upon (i) a capital reorganization, reclassification or change of the Common Shares, (ii) a consolidation, amalgamation, arrangement or other form of business combination of the Corporation with another person or corporation or (iii) a sale, lease or exchange of all or substantially all of the property of the Corporation, the Exercise Price will be adjusted accordingly and the Corporation will deliver upon exercise of the Options, in lieu of the Optioned Shares in respect of which the right to purchase is being exercised, the kind and amount of shares or other securities or property as results from such event;

		
	(c)
	upon the distribution by the Corporation to holders of the Common Shares of (i) shares of any class (whether of the Corporation or another corporation) other than Common Shares, (ii) rights, options or warrants, (iii) evidences of indebtedness or (iv) cash (excluding a cash dividend paid in the ordinary course), securities or other property or assets, the Exercise Price will be adjusted accordingly but no adjustment will be made to the number of Optioned Shares to be delivered upon exercise of the Options;

		
	(d)
	adjustments to the Exercise Price of the Options will be rounded up to the nearest one cent and adjustments to the number of Common Shares delivered to the Optionholder upon exercise of the Options will be rounded down to the nearest whole Common Share; and

		
	(e)
	an adjustment will take effect at the time of the event giving rise to the adjustment, and the adjustments provided for in this Section are cumulative.

3.7    Change of Control
3.7.1    If after the occurrence of a Change of Control, the Optionholder’s employment is terminated by the Corporation without Cause, including a constructive dismissal, the Optionholder may exercise all of the Options (including, for greater certainty, the Options that had vested as at the Date of Termination and the Options that had not yet vested as at the Date of Termination), notwithstanding Section 3.1, during the period ending on the Expiry Date, after which the Options will expire.

3.7.2    If a “take-over bid” (within the meaning of applicable securities legislation) made by any person for the voting securities of the Corporation would, if successful, result in a Change of Control, then:
		
	(a)
	the Corporation will promptly notify the Optionholder of the take-over bid and the rights of the Optionholder under this Section;

		
	(b)
	the Optionholder may exercise the Options (including, for greater certainty, the Options that had vested as at the Date of Termination and the Options that had not yet vested as at the Date of Termination), during the period ending on the earlier of the expiration of the take-over bid and the Expiry Date;

		
	(c)
	the exercise of the Options (including, for greater certainty, the Options that had vested as at the Date of Termination and the Options that had not yet vested as at the Date of Termination) shall only be for the purpose of depositing the Optioned Shares pursuant to the take-over bid; and

		
	(d)
	if the Optioned Shares are not deposited by the Optionholder pursuant to the take-over bid or, if deposited, are subsequently withdrawn by the Optionholder or not all taken up and paid for by the offeror, then the Optionholder shall promptly return the Optioned Shares (or the portion that are not taken up and paid for) to the Corporation for cancellation, the Options respecting such Optioned Shares shall be deemed not to have been exercised, the Optioned Shares shall be deemed not to have been issued and the Corporation shall refund to the Optionholder the aggregate Exercise Price for the Optioned Shares.

3.8    Accredited Investor
The Optionholder represents that he is an “accredited investor” (as such term is defined in National Instrument 45-106 – Prospectus and Registration Exemptions).
ARTICLE 4 
EXERCISE OF OPTIONS
4.1    Manner of Exercise
4.1.1    The Optionholder who wishes to exercise the Options may do so by delivering the following to the Corporation on or before the Expiry Date of the Options:
		
	(a)
	a completed Notice of Exercise; and

		
	(b)
	subject to Section 4.3, a cheque (which need not be a certified cheque) or bank draft payable to the Corporation for the aggregate Exercise Price of the Optioned Shares being acquired.

4.1.2    If the Optionholder is deceased or mentally disabled, the Options may be exercised by a legal representative of the Optionholder or the Optionholder’s estate or by a person who acquires 

the Optionholder’s rights under the Options by bequest or inheritance and who, in addition to delivering to the Corporation the Notice of Exercise and (if applicable) cheque or bank draft described above, must also deliver to the Corporation evidence of their status.
4.2    Delivery of Share Certificate
Not later than five business days after receipt by the Corporation, pursuant to Section 4.1, of the Notice of Exercise and payment in full for the Optioned Shares being acquired, the Corporation will direct its registrar and transfer agent to issue a certificate in the name of the Optionholder or an intermediary on behalf of the Optionholder (or, if deceased, his or her legal representative or beneficiary) for the number of Optioned Shares purchased by the Optionholder (or his or her legal representative or beneficiary), which will be issued as fully paid and non-assessable Common Shares.
4.3    Cashless Exercise
4.3.1    The Optionholder may elect “cashless” exercise in a Notice of Exercise if the Optioned Shares are to be immediately sold.  In such case, the Optionholder will not be required to deliver to the Corporation a cheque or bank draft in respect of the aggregate Exercise Price.  Instead, the following procedure will be followed, as detailed in a Cashless Exercise Instruction Form to be provided by the Corporation and completed by the Optionholder (or such other form of cashless exercise instruction as may be established by the Corporation, including by electronic means through a service provider selected by the Corporation from time to time):
		
	(a)
	the Optionholder will instruct a broker selected by the Optionholder to sell through the Toronto Stock Exchange the Common Shares issuable on exercise of the Options, as soon as possible and at the then applicable bid price for the Common Shares;

		
	(b)
	on the settlement date for the trade, the Corporation will direct its registrar and transfer agent to issue a certificate in the name of the broker (or as the broker may otherwise direct) for the number of Common Shares issued on exercise of the Options, against payment by the broker to the Corporation of the Exercise Price for such Common Shares; and

		
	(c)
	the broker will deliver to the Optionholder the remaining proceeds of sale, net of brokerage commission.

4.4    Withholding
If the Corporation determines that the satisfaction of taxes, including withholding tax, or other withholding liabilities is necessary or desirable in respect of the exercise of the Option, the exercise of the Options is not effective unless such taxes have been paid or withholdings made to the satisfaction of the Corporation.  The Corporation may require the Optionholder to pay to the Corporation, in addition to the Exercise Price for the Optioned Shares, any amount as the Corporation is obliged to remit to the relevant taxing authority in respect of the exercise of the Options.  Any such additional payment is due no later than the date on which any amount with respect to the 

Options exercised is required to be included in the gross income of the Optionholder for tax purposes.  For clarity, section 2(k) of the Employment Agreement (Tax Equalization) applies to any payments made in accordance with this section.

ARTICLE 5     
MISCELLANEOUS
5.1    Notice
All notices required or allowed to be given under this Option Agreement shall be made either personally or by mailing the same by prepaid registered post to:
The Optionholder:
2708 Sheltingham Drive
Wellington, Florida
33414
The Corporation:
Canadian Pacific Railway Limited
Suite 500, Gulf Canada Square
401 – 9th Avenue S.W.
Calgary, Alberta  T2P 4Z4
Attention:    Corporate Secretary
Notices delivered personally shall be deemed to be received on the day of delivery, Saturdays, Sundays and statutory holidays excepted; notices given by mail shall be deemed to have been received by the addressee on the tenth business day following the date of mailing.  Either party may change its address for notice hereunder in the above manner.
5.2    Counterparts
This Option Agreement may be executed in any number of counterparts, each of which will constitute an original, and all of which together will constitute one and the same instrument.
The parties hereto shall be entitled to rely upon delivery of an executed facsimile or similar executed electronic copy of this Agreement, and such facsimile or similar executed electronic copy shall be legally effective to create a valid and binding agreement between the parties.
5.3    Administration
5.3.1    Subject to the limitations of this Option Agreement, the Corporation has the authority to interpret this Option Agreement and determine all questions arising out of this Option Agreement and the Options granted pursuant hereto, which interpretations and determinations will be conclusive and binding on the Optionholder and all other affected persons.
5.4    Amendment of Options and Agreement

5.4.1    Subject to obtaining any required regulatory approval regarding consent by applicable regulatory bodies, including the Toronto Stock Exchange, the Board shall have the power and authority to approve amendments relating to the Options, including, without limitation, to the extent that such amendment is an amendment to the terms of the outstanding Options (including, without limitation, to cancel the Options or amend the date or dates on which the Options or a portion thereof vests or becomes exercisable), provided that:
		
	(a)
	the Board would have had the authority to initially grant the Options under terms as so amended; and

		
	(b)
	the consent of the Optionholder is obtained if the amendment would prejudice the rights of the Optionholder under the Options.

5.5    Acknowledgement
By executing this Option Agreement, the Optionholder acknowledges that he has read and understands the terms of this Agreement and accepts the Options in accordance with the terms of this Option Agreement.

[Remainder of page intentionally left blank.]

IN WITNESS WHEREOF the Corporation and the Optionholder have entered into this Option Agreement as of ___June 26________, 2012.

    
	
		
	CANADIAN PACIFIC RAILWAY
LIMITED

	By:
	/s/ Paul Haggis____________________

	 
	Name: Paul Haggis

	 
	Title: Chair, Board of Directors

	 
	 

	By:
	/s/ Stephen Tobias_________________

	 
	Name: Stephen Tobias

	 
	Title: Director

	 
	 

	By:
	/s/ Krystyna Hoeg_________________

	 
	Name: Krystyna Hoeg

	 
	Title: Director

	
				
	/s/ Mark Wallace
	 
	 
	/s/ E.H. Harrison

	Witness Name: Mark Wallace
	 
	 
	Hunter Harrison

	 
	 
	 
	 

[Option Agreement]

SCHEDULE A – FORM OF NOTICE OF EXERCISE
Canadian Pacific Railway Limited 

NOTICE OF EXERCISE
TO:    Canadian Pacific Railway Limited    Suite 500, Gulf Canada Square    401 – 9th Avenue S.W. 
    Calgary, Alberta  T2P 4Z4
Attention:    Corporate Secretary
Reference is made to the stand-alone option agreement (the “Option Agreement”) made as of June 26, 2012, between Canadian Pacific Railway Limited (the “Corporation”) and E. Hunter Harrison (the “Optionholder”).  Capitalized terms used herein and not defined shall have the meanings ascribed to such term in the Option Agreement.  The Optionholder hereby exercises the Options to purchase Common Shares of the Corporation as follows:
	
						
	Number of Optioned Shares for which Options are being exercised:
	 
	 

	 
	 
	 

	Exercise Price per Common Share:
	$
	 
	 

	 
	 

	Total Exercise Price:
	$
	 
	 

	 
	 
	 
	 

	Check here for exercise of the Options if a cheque (which need not be a certified cheque) or bank draft is tendered with this Notice of Exercise:
	 Ÿ
	 

	 
	 
	 
	 

	Check here for cashless exercise of the Options (in which case the shares will be sold and no cheque or bank draft needs to be tendered with this Notice of Exercise):1
	 Ÿ
	 

	 
	 
	 
	 

	Name of Optionholder as it is to appear on share certificate (except for cashless exercise):
	 

	 

	Address of Optionholder as it is to appear on the register of Common Shares and to which a certificate representing the Common Shares being purchased is to be delivered or, in the case of cashless exercise, to which a cheque is to be delivered:
	 

	 

	 

	 

	 

	 

Dated                 , 20    .
	
	
	Name of Optionholder

	Signature of Optionholder

	
					
	 
	 
	 
	 
	 

		
	1. 
	An optionholder electing cashless exercise will be required to submit a completed Cashless Exercise Instruction Form (or such other form of cashless exercise instruction as may be established by the Corporation, including by electronic means through a service provider selected by the Corporation from time to time) at the same time as this Notice of Exercise.  The Form may be obtained from the Corporation’s human resources department.

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