Document:

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EXHIBIT
4.2

ENBRIDGE INC.

INCENTIVE STOCK OPTION PLAN (2007)

	1.	 	PURPOSE

The purpose of the Incentive Stock Option Plan (2007) (the “Plan”) is to:

	 	(a)	 	focus Participants on the share price appreciation in alignment with the
long-term focus of the Corporation;
	 
	 	(b)	 	assist in attracting, retaining, engaging and rewarding Participants, including
officers, of the Corporation and its Subsidiaries; and
	 
	 	(c)	 	provide an opportunity for Participants to earn competitive total compensation.

	2.	 	DEFINED TERMS

In this Plan (including any schedules to this Plan):

	 	(a)	 	“affiliate” has the meaning ascribed to that term in the Securities Act
(Alberta);
	 
	 	(b)	 	“associate” has the meaning ascribed to that term in the Securities Act
(Alberta);
	 
	 	(c)	 	“Blackout Period” means a period of time imposed by the Corporation where
Participants holding Options may not trade in securities of the Corporation;
	 
	 	(d)	 	“Board” means the Board of Directors of the Corporation;
	 
	 	(e)	 	“CEO” means the Chief Executive Officer of the Corporation;
	 
	 	(f)	 	“Change of Control” means:

	 	(i)	 	the sale to a person or acquisition by a person not affiliated
with the Corporation or its Subsidiaries of assets of the Corporation or its
Subsidiaries having a value greater than 50% of the fair market value of the
assets of the Corporation and its Subsidiaries determined on a consolidated
basis prior to such sale whether such sale or acquisition occurs by way of
reconstruction, reorganization, recapitalization, consolidation, amalgamation,
arrangement, merger, transfer, sale or otherwise;
	 
	 	(ii)	 	any change in the holding, direct or indirect, of shares of the
Corporation by a person not affiliated with the Corporation as a result of
which such person, or a group of persons, or persons acting in concert, or
persons associated or affiliated with any such person or group within the
meaning of the Securities Act (Alberta), are in a position to exercise effective

 

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	 	 	control of the Corporation whether such change in the holding of such shares
occurs by way of takeover bid, reconstruction, reorganization,
recapitalization, consolidation, amalgamation, arrangement, merger,
transfer, sale or otherwise; and for the purposes of this Plan, a person or
group of persons holding shares or other securities in excess of the number
which, directly or following conversion thereof, would entitle the holders
thereof to cast 20% or more of the votes attaching to all shares of the
Corporation which, directly or following conversion of the convertible
securities forming part of the holdings of the person or group of persons
noted above, may be cast to elect directors of the Corporation shall be
deemed, other than a person holding such shares or other securities in the
ordinary course of business as an investment manager who is not using such
holding to exercise effective control, to be in a position to exercise
effective control of the Corporation;

	 	(iii)	 	any reconstruction, reorganization, recapitalization,
consolidation, amalgamation, arrangement, merger, transfer, sale or other
transaction involving the Corporation where shareholders of the Corporation
immediately prior to such reconstruction, reorganization, recapitalization,
consolidation, amalgamation, arrangement, merger, transfer, sale or other
transaction hold less than 50% of the shares of the Corporation or of the
continuing corporation following completion of such reconstruction,
reorganization, recapitalization, consolidation, amalgamation, arrangement,
transfer, sale or other transaction;
	 
	 	(iv)	 	the Corporation ceases to be a distributing corporation as that
term is defined in the Canada Business Corporations Act;
	 
	 	(v)	 	any event or transaction which the Board, in its discretion,
deems to be a Change of Control; or
	 
	 	(vi)	 	Incumbent Directors ceasing to be a majority of the Board;
provided that:
	 
	 	(vii)	 	any transaction whereby shares held by shareholders of the
Corporation are transferred or exchanged for units or securities of a trust,
partnership or other entity which trust, partnership or other entity continues
to own directly or indirectly all of the shares of the Corporation previously
owned by the shareholders of the Corporation and the former shareholders of the
Corporation continue to be beneficial holders of such units or securities in
the same proportions following the transaction as they were beneficial holders
of shares of the Corporation prior to the transaction will be deemed not to
constitute a change of control; and
	 
	 	(viii)	 	any change of control initiated or commenced by the Board (and whether or not
such transaction was initiated or commenced by the Board shall be

 

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	 	 	 	conclusively determined by the Board) will not constitute a change of control for purposes
of this Plan;

	 	(g)	 	“Code” means the United States Internal Revenue Code of 1986, as amended;
	 
	 	(h)	 	“constructive dismissal” means, unless consented to by the Participant, any
action that constitutes constructive dismissal of the Participant, including without
limiting the generality of the foregoing:

	 	(i)	 	where the Participant ceases to be an officer of the
Corporation, unless the Participant is appointed as an officer of a successor
to a material portion of the assets of the Corporation;
	 
	 	(ii)	 	a material decrease in the title, position, responsibilities,
powers or reporting relationships of the Participant;
	 
	 	(iii)	 	a reduction in the base salary (excluding any annual incentive
bonus) of the Participant; or
	 
	 	(iv)	 	any material reduction in the value of the Participant’s
employee benefits, plans and programs (other than any annual incentive bonus);

	 	(i)	 	“Corporation” means Enbridge Inc., and includes any successor entity thereto;
	 
	 	(j)	 	“Director” means a director of the Corporation;
	 
	 	(k)	 	“Fair Market Value” means, as of a particular day, the weighted average of the
board lot trading prices per Share on the Toronto Stock Exchange, or the New York Stock
Exchange, for the last five Trading Days immediately prior to such day;
	 
	 	(l)	 	“For Cause” includes “just cause” as defined in the common law and also
includes any circumstance in which the Participant shall have been convicted of a
criminal act of dishonesty resulting or intending to result directly or indirectly in
gain or personal enrichment of the Participant;
	 
	 	(m)	 	“Grant Date” has the meaning set forth in Section 6(c);
	 
	 	(n)	 	“Grant Price” has the meaning set forth in Section 6(c);
	 
	 	(o)	 	“HRC Committee” means the Human Resources & Compensation Committee of the
Board, established and duly authorized to act in accordance with the By-Laws of the
Corporation;
	 
	 	(p)	 	“Incumbent Director” means any member of the Board who was a member of the
Board immediately prior to the occurrence of the transaction, elections or
appointments giving rise to a Change of Control and any successor to an Incumbent
Director who was recommended for election at a meeting of

 

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	 	 	 	shareholders of the
Corporation, or elected or appointed to succeed any Incumbent Director, by the
affirmative vote of the Directors, which affirmative vote includes a majority of the
Incumbent Directors then on the Board;

	 	(q)	 	“Insider” means:

	 	(i)	 	an insider, as defined in the Securities Act (Alberta); and
	 
	 	(ii)	 	an associate of any person who is an insider by virtue of (i)
above;

	 
	 	(r)	 	“Notice Period” means the notice period for termination of employment agreed to
between the Corporation (or its Subsidiary) and the Participant, or, in the absence of
any such agreement, the notice period required under applicable law;
	 
	 	(s)	 	“Option” means an Option to purchase Shares granted to the Participant in
accordance with the terms and conditions of this Plan;
	 
	 	(t)	 	“Participant” means any employee, including an officer, of the Corporation or a
Subsidiary who has been designated by the HRC Committee to receive and be granted
Options in accordance with Section 5;
	 
	 	(u)	 	“Plan” means the Incentive Stock Option Plan (2007) of the Corporation
described in this document, and as the same may be duly amended or varied from time to
time in accordance with the provisions of this Plan;
	 
	 	(v)	 	“Retirement Plan” means a pension plan of the Corporation established or in
effect from time to time which applies when an employee retires from the employment of
the Corporation or any of its Subsidiaries;
	 
	 	(w)	 	“Share” means a common share in the capital of the Corporation;
	 
	 	(x)	 	“Share Reserve” has the meaning ascribed to that term in Section 4;
	 
	 	(y)	 	“Subsidiary” means:

	 	(i)	 	any corporation that is a subsidiary (as such term is defined
in the Canada Business Corporations Act) of the Corporation, as such provision
is from time to time amended, varied or re-enacted;
	 
	 	(ii)	 	any partnership or limited partnership that is controlled by
the Corporation (the Corporation will be deemed to control a partnership or
limited partnership if the Corporation possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of such
partnership or limited partnership, whether through the ownership of voting
securities, by contract or otherwise); and
	 
	 	(iii)	 	subject to regulatory approval, any corporation, partnership,
limited partnership, trust, limited liability company or other form of business

 

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	 	 	 	entity that the HRC Committee determines ought to be treated as a subsidiary
for purposes of the Plan, provided that the HRC Committee shall have the sole
discretion to determine that any such entity has ceased to be a subsidiary for
purposes of the Plan;

	 	(z)	 	“Term” has the meaning ascribed to that term in Section 6;
	 
	 	(aa)	 	“Trading Day” means any day on which the Toronto Stock Exchange or the New York
Stock Exchange, as the case may be, is open for trading; and
	 
	 	(bb)	 	“United States Incentive Stock Option” has the meaning set forth in Section
8(a).

	3.	 	GOVERNANCE

	 	(a)	 	Subject to any determinations or approvals required to be made by the Board,
the HRC Committee will administer the Plan in its sole discretion. The HRC Committee
shall have the full power and sole responsibility to interpret the provisions of the
Plan and to make regulations and formulate administrative provisions for its
implementation, and to make such changes in the regulations and administrative
procedures as, from time to time, the HRC Committee deems proper and in the best
interests of the Corporation. Such regulations and provisions may include the
delegation to any Director or Directors or any officer or officers of the Corporation
or its Subsidiaries of such administrative duties and powers of the HRC Committee as it
may, in its sole discretion, deem fit. The determinations of the HRC Committee in the
administration of the Plan shall be final and conclusive.
	 
	 	(b)	 	The HRC Committee is also authorized to approve, for each Option granted under
the Plan, the terms for vesting any Option granted under the Plan.
	 
	 	(c)	 	Subject to Section 12, the HRC Committee may waive any restrictions with
respect to participation in the Plan or vesting with respect to any specific
Participants where, in the opinion of the HRC Committee, it is reasonable to do so and
such waiver does not prejudice the rights of the Participant under the Plan.
	 
	 	(d)	 	Subject to Section 12, the HRC Committee may amend the Plan for any general
administrative matters, correct, remedy or reconcile any errors, inconsistencies or
ambiguities, cashless exercise, vesting or termination provisions, and recommend to the
Board for its approval any other amendments.
	 
	 	(e)	 	Grants to Participants will be considered each year, unless otherwise
determined in the sole discretion of the HRC Committee.

	4.	 	SHARES AND SHARE RESERVE

The Shares subject to the Options and other provisions of the Plan shall be authorized and
unissued common shares of the Corporation. The total number of Shares reserved to be

 

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issued under the Plan (and its predecessors) and the Performance Stock Option Plan (2007) shall not
exceed in the aggregate 16,500,000 Shares (the “Share Reserve”), subject to the adjustment
provisions set forth in Section 9. Shares subject to Options which are terminated,
cancelled or expire prior to exercise shall be available for the grant of further Options
hereunder.

Any changes to the Share Reserve, shall be recommended by the CEO to the HRC Committee for
its review and recommendation to the Board. Any increase in the Share Reserve shall be
subject to the approval of the shareholders of the Corporation in accordance with the rules
of the Toronto Stock Exchange.

	5.	 	PARTICIPATION AND GRANT OF OPTIONS

	 	(a)	 	The CEO may from time to time recommend to the HRC Committee employees of the
Corporation or its Subsidiaries for participation in the Plan and the extent and terms
of their participation. The HRC Committee shall consider such recommendations and may
approve such recommended employees for participation in the Plan and the extent and
terms of their participation, subject to the following:

	 	(i)	 	the total number of Shares reserved for issuance to any one
Participant pursuant to all security based compensation arrangements of the
Corporation shall not exceed in the aggregate 5% of the number of Shares
outstanding at the time of reservation;
	 
	 	(ii)	 	the total number of Shares reserved for issuance to Insiders
pursuant to all security based compensation arrangements of the Corporation
shall not exceed 10% of the number of Shares outstanding at the time of
reservation;
	 
	 	(iii)	 	the total number of Shares issued to Insiders pursuant to all
security based compensation arrangements of the Corporation within any one-year
period shall not exceed 10% of the number of Shares outstanding at the time of
issuance (excluding any other shares issued under all security based
compensation arrangements of the Corporation during such one-year period); and
	 
	 	(iv)	 	the total number of Shares issued to any one Insider and such
Insider’s associates (as defined in the Securities Act (Alberta)) pursuant to
all security based compensation arrangements of the Corporation within any
one-year period shall not exceed 5% of the number of Shares outstanding at the
time of issuance (excluding any other shares issued under all security based compensation arrangements of the Corporation during such
one-year period).

For the purposes of (ii), (iii) and (iv) above, any entitlement to acquire Shares
granted pursuant to the Plan prior to the Participant becoming an Insider are to be
excluded from the calculation.

 

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	 	(b)	 	The CEO:

	 	(i)	 	may issue inducement grants to any new employee of the
Corporation, or a Subsidiary other than new employees that report directly to
the CEO and may with the approval of the HRC Committee issue inducement grants
to new employees that report directly to the CEO, provided that the number of
Options comprising any such grant shall not exceed the lesser of: (i) the
amount provided for in the policies of the HRC Committee from time to time; and
(ii) 2% of the number of outstanding Shares (on a non-dilutive basis) at the
applicable date, and such inducement grant will be reported to the HRC
Committee at the next committee meeting; and
	 
	 	(ii)	 	shall recommend to the HRC Committee specific grants to
Participants who report directly to the CEO and the total grants for all other
levels of Participants.

	 	(c)	 	The HRC Committee shall:

	 	(i)	 	determine and recommend to the Board, for its approval, the
grant date of Options;
	 
	 	(ii)	 	determine and recommend to the Board, for its approval, the
grants to be made to the CEO; and
	 
	 	(iii)	 	review and recommend to the Board, for its approval, any other
grants made pursuant to the Plan.

	 	(d)	 	Directors who are not full-time employees of the Corporation or a Subsidiary
shall not be eligible to become Participants.
	 
	 	(e)	 	A designated employee shall have the right not to participate in the Plan, and
any decision not to participate shall not affect his or her employment with the
Corporation or a Subsidiary. Participation in the Plan does not confer upon the
Participant any right to continued employment with the Corporation or a Subsidiary.

	6.	 	OPTION TERMS 

	 	(a)	 	Term

The term (“Term”) during which an Option shall be exercisable shall be fixed by the
HRC Committee at the time of grant, but in no case shall a term exceed 10 years, and
each Option shall be subject to earlier termination, as provided in Section 7;
provided that when the Term expires in a Blackout Period the Term shall be extended
to a date that is five Trading Days after the end of the Blackout Period.

 

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	 	(b)	 	Exercise

An Option shall vest and become exercisable in accordance with the terms set by the
HRC Committee at the time of grant. A Participant may exercise vested installments
of his or her Option in whole or in part at any time and from time to time during
the Term.

	 	(c)	 	Grant and Price

Subject to the following sentence, the price (the “Grant Price”) at which Shares
will be issued to a Participant pursuant to the Option shall be determined on the
date (the “Grant Date”) that the Option is awarded and the Grant Price shall not be
less than 100% of the Fair Market Value determined as at the Grant Date. If an
Option is awarded at a time when a Blackout Period is in effect, the Grant Price of
the Option will be set on and the Grant Date will be the sixth Trading Day following
the termination of the Blackout Period; provided that where another Blackout Period
commences within such six Trading Days, the determination of the Grant Price and the
Grant Date will be further postponed and will be set as provided above in this
sentence (and so on from time to time).

	 	(d)	 	Payment

Participants shall be required to make payment in full for any Shares purchased upon
the exercise, in whole or in part, of any Option granted under the Plan and no
Shares shall be issued until full payment has been made. Payment must be in the
currency of Canada or the United States of America.

	 	(e)	 	Share Settled Options

If approved by the Board, in lieu of paying the Grant Price for the Shares to be
issued pursuant to such exercise, the Participant may elect to acquire the number of
Shares determined by subtracting the Grant Price from the Fair Market Value of the
Shares on the date of exercise, multiplying the difference by the number of Shares
in respect of which the Option was otherwise being exercised and then dividing that
product by such Fair Market Value of the Shares. In such event, the number of
Shares as so determined (and not the number of Shares to be issued under the Option)
will be deemed to be issued under the Plan.

	 	(f)	 	Share Ownership Guidelines

If on exercise of any Options the number of Shares held by the Participant is less
than the number of Shares to be held by him or her pursuant to any share ownership
guidelines of the Corporation in effect from time to time and applicable to such
Participant, then the Participant shall be required to retain Shares acquired on
exercise of Options (net of Shares that are required to be sold by the Participant
to meet any tax liabilities arising on exercise of the Options) to meet the
requirements of such share ownership guidelines.

 

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	 	(g)	 	Transferability

Options are not transferable or assignable other than by will or according to the
laws of descent and distribution.

	7.	 	TERMINATION 

	 	(a)	 	Voluntary Termination 

If a Participant voluntarily terminates his or her employment with the Corporation
or a Subsidiary, all unexercised and vested Options held by such Participant as at
the last day of such Participant’s employment with the Corporation (or its
Subsidiary) shall remain exercisable until the earlier of: (i) 30 days following the
Participant’s last day of employment with the Corporation (or its Subsidiary); and
(ii) the expiry of the Term of the Options; following which any unexercised and
vested Options shall be cancelled.

All unvested Options held by the Participant as at the last day of the Participant’s
employment with the Corporation (or its Subsidiary) shall be cancelled on the
Participant’s last day of employment with the Corporation (or its Subsidiary).

	 	(b)	 	Involuntary Termination Not For Cause

If the employment of a Participant is terminated by the Corporation or a Subsidiary
other than For Cause, all unexercised and vested Options held by such Participant as
at the Participant’s last day of employment with the Corporation (or its Subsidiary)
shall remain exercisable until the earlier of: (i) 30 days following the expiration
of any Notice Period; and (ii) the expiry of the Term of the Options; following
which any vested and unexercised Options shall be cancelled.

All unvested Options held by the Participant on the last day of employment with the
Corporation (or its Subsidiary) shall continue to vest in accordance with the Plan
and shall be exercisable until the earlier of: (i) 30 days following the expiry of
the Notice Period; and (ii) the expiry of the Term of the Options; following which
all vested and unexercised Options and all unvested Options shall be cancelled.

For the purposes of this subsection 7(b), if a Participant’s employment terminates
due to the constructive dismissal of the Participant, such termination shall be
treated as an involuntary termination by the Corporation or a Subsidiary other than
For Cause.

	 	(c)	 	Involuntary Termination For Cause

If the employment of a Participant is terminated by the Corporation or a Subsidiary
For Cause, all Options held by such Participant as at the date of such termination,
whether vested or unvested, shall be cancelled on the Participant’s last day of
active employment with the Corporation (or its Subsidiary).

 

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	 	(d)	 	Death

If the employment of a Participant with the Corporation or a Subsidiary is
terminated as a result of the death of such Participant, all unvested Options held
by such Participant shall vest on the date of such Participant’s death. All
outstanding Options held by such Participant as at the date of termination of the
Participant shall remain exercisable until the earlier of: (i) 12 months following
the date of such Participant’s death; and (ii) the expiry of the Term of the
Options; following which any unexercised Options shall be cancelled.

	 	(e)	 	Retirement

If a Participant has attained the age of 55 and retires from his or her employment
with the Corporation or a Subsidiary pursuant to a Retirement Plan and he or she is
eligible for benefits under a Retirement Plan, all Options (vested and unvested)
held by such Participant as at the Participant’s last day of employment with the
Corporation (or its Subsidiary) shall continue in accordance with the Plan,
including vesting as provided in the Plan; provided that Options may only be
exercised until the earlier of: (i) three years following the date of such
Participant’s retirement; and (ii) the expiry of the Term of the Options; following
which any unexercised and vested Options and unvested Options shall be cancelled.

	 	(f)	 	Disability

If the employment of a Participant with the Corporation (or a Subsidiary) is
terminated as a result of the “disability” of such Participant, all Options held by
such Participant on the last day of the Participant’s employment with the
Corporation (or its Subsidiary) shall continue in accordance with the terms of such
Options as if the Participant continued to be actively employed by the Corporation
(or its Subsidiary).

For purposes of the foregoing, a Participant shall be considered to be suffering
from a “disability” if he or she is eligible for benefits under a
Corporation-sponsored long term disability benefits plan.

	 	(g)	 	Leaves of Absence

If a Participant is on a parental or other leave of absence approved by the
Corporation or a Subsidiary for a period of greater than three months, all
unexercised and vested Options held by such Participant as at the Participant’s last
day of active employment prior to such parental or other leave shall continue to be
exercisable in accordance with the terms of such Options, following which all
unexercised and vested Options held by such Participant shall be cancelled. All
unvested Options held by such Participant as at the Participant’s last day of active
employment prior to such parental or other leave shall continue to vest during such
Participant’s leave, provided that if the Participant does not return to active
employment by the end of the leave, all vested and unvested Options as at

 

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the end of
the leave of absence shall be treated in accordance with the second paragraph of
subsection 7(a) on the assumption that the Participant’s last day of employment is
the end of the leave of absence. Unless otherwise determined by the HRC Committee,
no additional Option grants shall be made to any Participant during such
Participant’s leave of absence.

	 	(h)	 	Secondments

If a Participant is seconded to an entity other than a Subsidiary, the HRC Committee
(in the case of Participants that report directly to the CEO) and the CEO (in the
case of all other Participants) shall determine the manner in which all Options,
vested and unvested, held by the Participant as at the date of the secondment shall
be treated under the Plan.

	 	(i)	 	Change of Control

In the event of a Change of Control, all unvested Options held by a Participant
shall vest on a date, as determined by the HRC Committee, that is not more than 30
days and not less than five days prior to the date of the Change of Control. In
connection with any Change of Control, the HRC Committee will allow, where necessary
in the circumstances, for the conditional vesting and exercise of Options and where
such conditions are not met and the Change of Control does not occur the Options
shall continue as if no vesting or exercise had occurred.

	 	(j)	 	No Future Grants; No Cash Payment

Upon the occurrence of any of the foregoing events listed under subsections 7(a) to
(f) in respect of a Participant, such Participant shall not be entitled to receive
any further Option grants or the value of any grants foregone as a consequence of
any such event and, except as set forth herein, shall not be entitled to receive any
cash payment for the value of any unexercised Options, vested or unvested, held by
the Participant as at the date of occurrence of such event.

	8.	 	TERMS AND CONDITIONS OF UNITED STATES INCENTIVE STOCK OPTIONS 

	 	(a)	 	Designated employees of any Subsidiary located in the United States of America
may be granted “incentive stock options” within the meaning of Section 422 of the Code
(“United States Incentive Stock Options”). The maximum number of Shares that may be
issued under the Plan as United States Incentive Stock Options shall not be greater
than 2,000,000 Shares. An Option that is a United States Incentive Stock Option will
be designated as such in the applicable Option agreement and no Option that is not so
designated will be treated as a United States Incentive Stock Option under the Plan.
	 
	 	(b)	 	No United States Incentive Stock Options shall be granted to any Participant
if, as a result of such grant, the aggregate Fair Market Value (as of the time the
Option is proposed to be granted) of the Shares covered by all the United States
Incentive

 

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	 	 	 	Stock Options granted under this Plan, and any other plan of the Corporation
or any Subsidiary, to the Participant, which are or will become exercisable for the
first time by the Participant in a single calendar year, exceeds US $100,000 or such
amount as shall be specified in Section 422 of the Code.

	 	(c)	 	The exercise price of a United States Incentive Stock Option shall not be less
than 100% of Grant Price as at the Grant Date.
	 
	 	(d)	 	No United States Incentive Stock Option may be granted under the Plan to any
individual who, at the time the option is granted, owns stock possessing more than 10%
of the total combined voting power of all classes of stock of his or her employer
corporation or of its parent or subsidiary corporations (as such ownership may be
determined for purposes of Section 422(b)(6) of the Code), unless (i) at the time such
United States Incentive Stock Option is granted, the Grant Price is at least 110% of
the Fair Market Value of the Shares subject thereto and (ii) the United States
Incentive Stock Option by its terms is not exercisable after the expiration of five
years from the date granted.
	 
	 	(e)	 	Notwithstanding the provisions of this Section 8, exercise periods for United
States Incentive Stock Options on the happening of an event described in Sections 7(b),
(d), (e) and (f) shall be as set forth in the applicable Option agreement.
	 
	 	(f)	 	United States Incentive Stock Options shall otherwise be subject to the terms
and conditions as set forth in this Plan.

	9.	 	ADJUSTMENTS

	 	(a)	 	In the event that the number of outstanding Shares is increased or decreased,
or changed into, or exchanged for a different number or kind of shares or other
securities of the Corporation or another corporation, whether through a stock dividend,
stock split, consolidation, recapitalization, amalgamation, reorganization, arrangement
or other transaction effected without receipt of consideration, the HRC Committee or the Board may make appropriate adjustment in the
number or kind of shares or securities available for Options pursuant to the Plan
and, as regards Options previously granted or to be granted pursuant to the Plan, in
the number and kind of shares or securities and the purchase price thereof and the
manner in which installments of the Options vest and become exercisable.
	 
	 	(b)	 	The appropriate adjustments in the number of Shares under Option, the Grant
Price per share and the period during which each Option may be exercised may be made by
the Board in its discretion and in order to give effect to the adjustments in the
number of shares of the Corporation resulting from the implementation and operation of
the Shareholder Rights Plan Agreement dated as of November 9, 1995 between the
Corporation and CIBC Mellon Trust Company, as amended, restated or revised from time to
time.

 

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	10.	 	EFFECT OF REORGANIZATION

In the event of any take-over bid or any proposal, offer or agreement for a merger,
consolidation, amalgamation, arrangement, recapitalization, liquidation, dissolution or
similar transaction or other business combination that is not a Change of Control in which
the Corporation is not the surviving or continuing corporation (a “Reorganization”), all
Options granted hereunder and outstanding on the date of such Reorganization, shall be
assumed by the surviving or continuing corporation, provided that the HRC Committee or the
Board may make appropriate adjustment in the manner in which installments of the Options
become exercisable prior to such assumption. If, in the event of any such Reorganization,
provision for such assumption satisfactory to the HRC Committee or the Board is not made by
the surviving or continuing corporation, each Participant shall have distributed to him or
her within 30 days after the Reorganization in full satisfaction in the case of an unexpired
Option, or part thereof, whether or not exercisable, cash representing the excess, if any,
of the Fair Market Value of the Shares determined as at the third Trading Day immediately
preceding the closing date of such Reorganization over the exercise price of such Option
(less applicable tax withholdings).

	11.	 	TAXES AND REPORTING

Notwithstanding anything else contained herein, each Participant shall be responsible for
the payment of all applicable taxes, including, but not limited to, income taxes payable in
connection with the exercise of any Options under the Plan and the Corporation, its
employees and agents shall bear no liability in connection with the payment of such taxes.

	12.	 	AMENDMENT OF THE PLAN

The HRC Committee may at any time recommend to the Board for its approval the revision,
suspension or discontinuance of this Plan in whole or in part. The Board may also at any
time amend, revise or repeal any terms of this Plan and any Option granted under this Plan
(any such change, an “amendment”) without obtaining approval of the
shareholders. Notwithstanding the foregoing, the Corporation will obtain the approval of
the shareholders of the Corporation for an amendment relating to:

	 	(a)	 	the maximum number of shares reserved for issuance under the Plan;
	 
	 	(b)	 	a reduction in the Grant Price for any Options;
	 
	 	(c)	 	the cancellation of any Options and the reissue of or replacement of such
Options with Options having a lower Grant Price;
	 
	 	(d)	 	an extension to the term of any Option;
	 
	 	(e)	 	any change allowing other than full-time employees of the Corporation or a
Subsidiary to become Participants in the Plan;

 

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	 	(f)	 	any change whereby Options would become transferable or assignable other than
by will or according to the laws of descent and distribution.

	13.	 	CONFLICT WITH WRITTEN EMPLOYMENT AGREEMENT

In the event of a conflict between the terms of this Plan and the terms of any written
employment agreement between a Participant and the Corporation, the terms of the written
employment agreement shall prevail.

	14.	 	EFFECTIVE DATE

The Plan shall be effective as of January 1, 2007, provided that any Option issued under
this Plan may not be exercised until this Plan has been approved by the Shareholders of the
Corporation in accordance with the rules of the Toronto Stock Exchange (and where
applicable, the rules of other stock exchanges on which the Shares may be listed and posted
for trading). On the effective date, the Incentive Stock Option Plan (2002) (the “Prior
Plan”) shall be discontinued, except with respect to unexercised Options outstanding under
the Prior Plan.exv4w3

 

EXHIBIT
4.3

ENBRIDGE INC.

PERFORMANCE STOCK OPTION PLAN (2007)

	1.	 	PURPOSE

The purpose of the Performance Stock Option Plan (2007) (the “Plan”) is to:

	 	(a)	 	focus Participants on the attainment of the Corporation’s long-term strategy
and share price appreciation;
	 
	 	(b)	 	assist in attracting, retaining, engaging and rewarding senior executives of
the Corporation and its Subsidiaries; and
	 
	 	(c)	 	provide an opportunity for Participants to earn competitive total compensation
based on achieving the performance goals set out in this Plan.

	2.	 	DEFINED TERMS

     In this Plan (including any schedules to this Plan):

	 	(a)	 	“affiliate” has the meaning ascribed to that term in the Securities Act
(Alberta);
	 
	 	(b)	 	“associate” has the meaning ascribed to that term in the Securities Act
(Alberta);
	 
	 	(c)	 	“Blackout Period” means a period of time imposed by the Corporation where
Participants holding Options may not trade in securities of the Corporation;
	 
	 	(d)	 	“Board” means the Board of Directors of the Corporation;
	 
	 	(e)	 	“CEO” means the Chief Executive Officer of the Corporation;
	 
	 	(f)	 	“Change of Control” means:

	 	(i)	 	the sale to a person or acquisition by a person not affiliated
with the Corporation or its Subsidiaries of assets of the Corporation or its
Subsidiaries having a value greater than 50% of the fair market value of the
assets of the Corporation and its Subsidiaries determined on a consolidated
basis prior to such sale whether such sale or acquisition occurs by way of
reconstruction, reorganization, recapitalization, consolidation, amalgamation,
arrangement, merger, transfer, sale or otherwise;
	 
	 	(ii)	 	any change in the holding, direct or indirect, of shares of the
Corporation by a person not affiliated with the Corporation as a result of
which such person, or a group of persons, or persons acting in concert, or persons
associated or affiliated with any such person or group within the meaning of
the Securities Act (Alberta), are in a position to exercise effective

 

- 2 -

	 	 	 	control of the Corporation whether such change in the holding of such shares
occurs by way of takeover bid, reconstruction, reorganization,
recapitalization, consolidation, amalgamation, arrangement, merger,
transfer, sale or otherwise; and for the purposes of this Plan, a person or
group of persons holding shares or other securities in excess of the number
which, directly or following conversion thereof, would entitle the holders
thereof to cast 20% or more of the votes attaching to all shares of the
Corporation which, directly or following conversion of the convertible
securities forming part of the holdings of the person or group of persons
noted above, may be cast to elect directors of the Corporation shall be
deemed, other than a person holding such shares or other securities in the
ordinary course of business as an investment manager who is not using such
holding to exercise effective control, to be in a position to exercise
effective control of the Corporation;

	 	(iii)	 	any reconstruction, reorganization, recapitalization,
consolidation, amalgamation, arrangement, merger, transfer, sale or other
transaction involving the Corporation where shareholders of the Corporation
immediately prior to such reconstruction, reorganization, recapitalization,
consolidation, amalgamation, arrangement, merger, transfer, sale or other
transaction hold less than 50% of the shares of the Corporation or of the
continuing corporation following completion of such reconstruction,
reorganization, recapitalization, consolidation, amalgamation, arrangement,
transfer, sale or other transaction;
	 
	 	(iv)	 	the Corporation ceases to be a distributing corporation as that
term is defined in the Canada Business Corporations Act;
	 
	 	(v)	 	any event or transaction which the Board, in its discretion,
deems to be a Change of Control; or
	 
	 	(vi)	 	Incumbent Directors ceasing to be a majority of the Board;

provided that:

	 	(i)	 	any transaction whereby shares held by shareholders of the
Corporation are transferred or exchanged for units or securities of a trust,
partnership or other entity which trust, partnership or other entity continues
to own directly or indirectly all of the shares of the Corporation previously
owned by the shareholders of the Corporation and the former shareholders of the
Corporation continue to be beneficial holders of such units or securities in
the same proportions following the transaction as they were beneficial holders
of shares of the Corporation prior to the transaction will be deemed not to
constitute a change of control; and
	 
	 	(ii)	 	any change of control initiated or commenced by the Board (and
whether or not such transaction was initiated or commenced by the Board shall
be

 

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	 	 	 	conclusively determined by the Board) will not constitute a change of
control for purposes of this Plan;

	 	(g)	 	“Code” means the United States Internal Revenue Code of 1986, as amended;
	 
	 	(h)	 	“constructive dismissal” means, unless consented to by the Participant, any
action that constitutes constructive dismissal of the Participant, including without
limiting the generality of the foregoing:

	 	(i)	 	where the Participant ceases to be an officer of the
Corporation, unless the Participant is appointed as an officer of a successor
to a material portion of the assets of the Corporation;
	 
	 	(ii)	 	a material decrease in the title, position, responsibilities,
powers or reporting relationships of the Participant;
	 
	 	(iii)	 	a reduction in the base salary (excluding any annual incentive
bonus) of the Participant; or
	 
	 	(iv)	 	any material reduction in the value of the Participant’s
employee benefits, plans and programs (other than any annual incentive bonus);

	 	(i)	 	“Corporation” means Enbridge Inc., and includes any successor entity thereto;
	 
	 	(j)	 	“Director” means a director of the Corporation;
	 
	 	(k)	 	“Fair Market Value” means, as of a particular day, the weighted average of the
board lot trading prices per Share on the Toronto Stock Exchange, or the New York Stock
Exchange, for the last five Trading Days immediately prior to such day;
	 
	 	(l)	 	“For Cause” includes “just cause” as defined in the common law and also
includes any circumstance in which the Participant shall have been convicted of a
criminal act of dishonesty resulting or intending to result directly or indirectly in
gain or personal enrichment of the Participant;
	 
	 	(m)	 	“Grant Date” has the meaning set forth in Section 7(c);
	 
	 	(n)	 	“Grant Price” has the meaning set forth in Section 7(c);
	 
	 	(o)	 	“HRC Committee” means the Human Resources & Compensation Committee of the
Board, established and duly authorized to act in accordance with the By-Laws of the
Corporation;
	 
	 	(p)	 	“Incumbent Director” means any member of the Board who was a member of the
Board immediately prior to the occurrence of the transaction, elections or
appointments giving rise to a Change of Control and any successor to an Incumbent
Director who was recommended for election at a meeting of

 

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	 	 	 	shareholders of the
Corporation, or elected or appointed to succeed any Incumbent Director, by the
affirmative vote of the Directors, which affirmative vote includes a majority of the
Incumbent Directors then on the Board;

	 	(q)	 	“Insider” means:

	 	(i)	 	an insider, as defined in the Securities Act (Alberta); and
	 
	 	(ii)	 	an associate of any person who is an insider by virtue of (i)
above;

	 	(r)	 	“Notice Period” means the notice period for termination of employment agreed to
between the Corporation (or its Subsidiary) and the Participant, or, in the absence of
any such agreement, the notice period required under applicable law;
	 
	 	(s)	 	“Option” means an Option to purchase Shares granted to the Participant in
accordance with the terms and conditions of this Plan;
	 
	 	(t)	 	“Participant” means any employee, including an officer, of the Corporation or a
Subsidiary who has been designated by the HRC Committee to receive and be granted
Options in accordance with Section 5;
	 
	 	(u)	 	“Plan” means the Performance Stock Option Plan (2007) of the Corporation
described in this document, and as the same may be duly amended or varied from time to
time in accordance with the provisions of this Plan;
	 
	 	(v)	 	“Retirement Plan” means a pension plan of the Corporation established or in
effect from time to time which applies when an employee retires from the employment of
the Corporation or any of its Subsidiaries;
	 
	 	(w)	 	“Share” means a common share in the capital of the Corporation;
	 
	 	(x)	 	“Share Reserve” has the meaning ascribed to that term in Section 4;
	 
	 	(y)	 	“Subsidiary” means:

	 	(i)	 	any corporation that is a subsidiary (as such term is defined
in the Canada Business Corporations Act) of the Corporation, as such provision
is from time to time amended, varied or re-enacted;
	 
	 	(ii)	 	any partnership or limited partnership that is controlled by
the Corporation (the Corporation will be deemed to control a partnership or
limited partnership if the Corporation possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of such
partnership or limited partnership, whether through the ownership of voting
securities, by contract or otherwise); and
	 
	 	(iii)	 	subject to regulatory approval, any corporation, partnership,
limited partnership, trust, limited liability company or other form of business

 

- 5 -

	 	 	 	entity that the HRC Committee determines ought to be treated as a subsidiary
for purposes of the Plan, provided that the HRC Committee shall have the sole
discretion to determine that any such entity has ceased to be a subsidiary for
purposes of the Plan;

	 	(z)	 	“Term” has the meaning ascribed to that term in Section 7;
	 
	 	(aa)	 	“Trading Day” means any day on which the Toronto Stock Exchange or the New York
Stock Exchange, as the case may be, is open for trading; and
	 
	 	(bb)	 	“United States Incentive Stock Option” has the meaning set forth in Section
9(a).

	3.	 	GOVERNANCE

	 	(a)	 	Subject to any determinations or approvals required to be made by the Board,
the HRC Committee will administer the Plan in its sole discretion. The HRC Committee
shall have the full power and sole responsibility to interpret the provisions of the
Plan and to make regulations and formulate administrative provisions for its
implementation, and to make such changes in the regulations and administrative
procedures as, from time to time, the HRC Committee deems proper and in the best
interests of the Corporation. Such regulations and provisions may include the
delegation to any Director or Directors or any officer or officers of the Corporation
or its Subsidiaries of such administrative duties and powers of the HRC Committee as it
may, in its sole discretion, deem fit. The determinations of the HRC Committee in the
administration of the Plan shall be final and conclusive.
	 
	 	(b)	 	Prior to the CEO requesting any grants under the Plan, the CEO will recommend
to the HRC Committee for its approval the performance measures and the levels of
achievement for 100% of the Options to vest and the level below which no Options will
vest. The HRC Committee is authorized to approve, for each Option granted under the
plan, the terms for vesting any Option granted under the Plan. The HRC Committee shall
also have the authority to approve any amendments to such performance measures and the
expected levels of performance.
	 
	 	(c)	 	Subject to Section 13, the HRC Committee may waive any restrictions with
respect to participation in the Plan or vesting with respect to any specific
Participants where, in the opinion of the HRC Committee, it is reasonable to do so and
such waiver does not prejudice the rights of the Participant under the Plan.
	 
	 	(d)	 	Subject to Section 13, the HRC Committee may amend the Plan for any general
administrative matters, correct, remedy or reconcile any errors, inconsistencies or
ambiguities, cashless exercise, vesting or termination provisions or any
performance measures and recommend to the Board for its approval any other
amendments.
	 
	 	(e)	 	Grants to Participants will be made in the sole discretion of the HRC
Committee.

 

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	4.	 	SHARES AND SHARE RESERVE

The Shares subject to the Options and other provisions of the Plan shall be authorized and
unissued common shares of the Corporation. The total number of Shares reserved to be issued
under the Plan and the Incentive Stock Option Plan (2007) (and its predecessors) shall not
exceed in the aggregate 16,500,000 (the “Share Reserve”), subject to the adjustment
provisions set forth in Section 10. Shares subject to Options which are terminated,
cancelled or expire prior to exercise shall be available for the grant of further Options
hereunder.

Any changes to the Share Reserve shall be recommended by the CEO to the HRC Committee for
its review and recommendation to the Board. Any increase in the Share Reserve shall be
subject to approval of the shareholders of the Corporation in accordance with the rules of
the Toronto Stock Exchange.

	5.	 	PARTICIPATION AND GRANT OF OPTIONS 

	 	(a)	 	The CEO may from time to time recommend to the HRC Committee employees of the
Corporation or its Subsidiaries, for participation in the Plan, the extent and terms of
their participation and the performance measures applicable thereto. The HRC Committee
shall consider such recommendations and may approve such recommended employees for
participation in the Plan, the extent and terms of their participation and the
performance measures applicable thereto, subject to the following:

	 	(i)	 	the total number of Shares reserved for issuance to any one
Participant pursuant to all security based compensation arrangements of the
Corporation shall not exceed in the aggregate 5% of the number of Shares
outstanding at the time of reservation;
	 
	 	(ii)	 	the total number of Shares reserved for issuance to Insiders
pursuant to all security based compensation arrangements of the Corporation
shall not exceed 10% of the number of Shares outstanding at the time of
reservation;
	 
	 	(iii)	 	the total number of Shares issued to Insiders pursuant to all
security based compensation arrangements of the Corporation within any one-year
period shall not exceed 10% of the number of Shares outstanding at the time of
issuance (excluding any other shares issued under all security based
compensation arrangements of the Corporation during such one-year period); and
	 
	 	(iv)	 	the total number of Shares issued to any one Insider and such
Insider’s associates (as defined in the Securities Act (Alberta)) pursuant to
all security based compensation arrangements of the Corporation within any
one-year period shall not exceed 5% of the number of Shares outstanding at the
time of issuance (excluding any other shares issued under all

 

- 7 -

	 	 	 	security based
compensation arrangements of the Corporation during such one-year period).

For the purposes of (ii), (iii) and (iv) above, any entitlement to acquire Shares
granted pursuant to the Plan prior to the Participant becoming an Insider are to be
excluded from the calculation.

	 	(b)	 	The CEO:

	 	(i)	 	may issue inducement grants to any new employee of the
Corporation or a Subsidiary, other than new employees that report directly to
the CEO and may, with the approval of the HRC Committee issue inducement grants
to new employees that report directly to the CEO, provided that the number of
Options comprising any such grant shall not exceed the lesser of: (i) the
amount provided for in the policies of the HRC Committee from time to time; and
(ii) 2% of the number of outstanding Shares (on a non-dilutive basis) at the
applicable date, and such inducement grant will be reported to the HRC
Committee at the next committee meeting; and

	 	(ii)	 	shall recommend to the HRC Committee specific grants to
Participants who report directly to the CEO and the total grants for all other
levels of Participants.

	 	(c)	 	The HRC Committee shall:

	 	(iii)	 	determine and recommend to the Board, for its approval, the
grant date of Options;
	 
	 	(iv)	 	determine and recommend to the Board, for its approval, the
grants to be made to the CEO; and
	 
	 	(v)	 	review and recommend to the Board, for its approval, any other
grants made pursuant to the Plan.

	 	(d)	 	Directors who are not full-time employees of the Corporation or a Subsidiary
shall not be eligible to become Participants.

	 	(e)	 	A designated employee shall have the right not to participate in the Plan, and
any decision not to participate shall not affect his or her employment with the
Corporation or a Subsidiary. Participation in the Plan does not confer upon the
Participant any right to continued employment with the Corporation or a Subsidiary.

	6.	 	PERFORMANCE MEASURES

The CEO shall advise the Chair of the HRC Committee upon the Human Resources, Accounting and
Finance Groups and the CEO jointly concurring that the performance

 

 

- 8 -

	 	 	measures for an Option grant have been achieved, and the number of Options that have become exercisable as a
result.

	7.	 	OPTION TERMS

	 	(a)	 	Term
	 
	 	 	 	The term (“Term”) during which an Option shall be exercisable shall be fixed by the
HRC Committee at the time of grant, but in no case shall a term exceed 10 years, and
each Option shall be subject to earlier termination, as provided in Section 8;
provided that when the Term expires in a Blackout Period the Term shall be extended
to a date that is five Trading Days after the end of the Blackout Period.
	 
	 	(b)	 	Exercise
	 
	 	 	 	An Option shall vest and become exercisable in accordance with the terms set by the
HRC Committee at the time of grant. The Option shall vest and become exercisable
when the time period, if any, established by the HRC Committee since the date of the
grant has expired and the performance measures in Section 6 have been met or have
been deemed to be met. A Participant may exercise vested instalments of his or her
Option in whole or in part at any time and from time to time during the Term.
	 
	 	(c)	 	Grant and Price
	 
	 	 	 	Subject to the following sentence, the price (the “Grant Price”) at which Shares
will be issued to a Participant pursuant to the Option shall be determined on the
date (the “Grant Date”) that the Option is awarded and the Grant Price shall not be
less than 100% of the Fair Market Value determined as at the Grant Date. If an
Option is awarded at a time when a Blackout Period is in effect, the Grant Price of
the Option will be set on and the Grant Date will be the sixth Trading Day following
the termination of the Blackout Period; provided that where another Blackout Period
commences within such six Trading Days, the determination of the Grant Price and the
Grant Date will be further postponed and will be set as provided above in this
sentence (and so on from time to time).
	 
	 	(d)	 	Payment
	 
	 	 	 	Participants shall be required to make payment in full for any Shares purchased upon
the exercise, in whole or in part, of any Option granted under the Plan and no
Shares shall be issued until full payment has been made. Payment must be in the
currency of Canada or the United States of America.
	 
	 	(e)	 	Share Settled Options
	 
	 	 	 	If approved by the Board, in lieu of paying the Grant Price for Shares to be issued
pursuant to such exercise, the Participant may elect to acquire the number of

 

- 9 -

	 	 	 	Shares determined by subtracting the Grant Price from the Fair Market Value of the Shares
on the date of exercise, multiplying the difference by the number of Shares in
respect of which the Option was otherwise being exercised and then dividing that
product by such Fair Market Value of the Shares. In such event, the number of
Shares as so determined (and not the number of Shares to be issued under the Option)
will be deemed to be issued under the Plan.
	 
	 	(f)	 	Share Ownership Guidelines
	 
	 	 	 	If on the exercise of any Options the number of Shares held by the Participant is
less than the number of Shares to be held by him or her pursuant to any share
ownership guidelines of the Corporation in effect from time to time and applicable
to such Participant, then the Participant shall be required to retain Shares
acquired on exercise of Options (net of Shares that are required to be sold by the
Participant to meet any tax liabilities arising on exercise of the Options) to meet
the requirements of such share ownership guidelines.
	 
	 	(g)	 	Transferability
	 
	 	 	 	Options are not transferable or assignable other than by will or according to the
laws of descent and distribution.

	8.	 	TERMINATION 

	 	(a)	 	Voluntary Termination 
	 
	 	 	 	If a Participant voluntarily terminates his or her employment with the Corporation
or a Subsidiary, all unexercised and vested Options held by such Participant as at
the last day of such Participant’s employment with the Corporation (or its
Subsidiary) shall remain exercisable until the earlier of: (i) 30 days following the
Participant’s last day of employment with the Corporation (or its Subsidiary); and
(ii) the expiry of the term of the Options; following which any unexercised and
vested Options shall be cancelled.
	 
	 	 	 	All unvested Options held by the Participant as at the last day of the Participant’s
employment with the Corporation (or its Subsidiary) shall be cancelled on the
Participant’s last day of employment with the Corporation (or its Subsidiary).
	 
	 	(b)	 	Involuntary Termination Not For Cause
	 
	 	 	 	If the employment of a Participant is terminated by the Corporation or a Subsidiary
other than For Cause, all unexercised and vested Options held by such Participant as
at the Participant’s last day of employment with the Corporation (or its Subsidiary)
shall remain exercisable until the earlier of: (i) 30 days following
the expiration of any Notice Period; and (ii) the expiry of the Term of the Options;
following which any vested and unexercised Options shall be cancelled.

 

- 10 -

	 	 	 	A number of unvested Options held by the Participant on the last day of employment
with the Corporation (or its Subsidiary) shall continue to vest in accordance with
the Plan. The number of unvested Options that shall continue to vest shall be
prorated based upon the number of full calendar months of active employment of the
Participant during the Term to the total number of months in the Term (and for this
purpose the Notice Period shall be counted as active employment). Such number of
Options shall be exercisable until the earlier of: (i) 30 days following the expiry
of the Notice Period; and (ii) the expiry of the Term of the Options; following
which all vested and unexercised Options and all unvested Options shall be
cancelled.
	 
	 	 	 	For the purposes of this subsection 8(b), if a Participant’s employment terminates
due to the constructive dismissal of the Participant, such termination shall be
treated as an involuntary termination by the Corporation or a Subsidiary other than
For Cause.
	 
	 	(c)	 	Involuntary Termination For Cause
	 
	 	 	 	If the employment of a Participant is terminated by the Corporation or a Subsidiary
For Cause, all Options held by such Participant as at the date of such termination,
whether vested or unvested, shall be cancelled on the Participant’s last day of
active employment with the Corporation (or its Subsidiary).
	 
	 	(d)	 	Death
	 
	 	 	 	If the employment of a Participant with the Corporation or a Subsidiary is
terminated as a result of the death of such Participant, all unexercised and vested
Options held by such Participant at the Participant’s date of death shall remain
exercisable until the earlier of: (i) 12 months following the date of such
Participant’s death; and (ii) the expiry of the Term of the Options; following which
any unexercised Options shall be cancelled.
	 
	 	 	 	A number of unvested Options held by the Participant on the date of death of the
Participant shall vest and be exercisable on the assumption that the performance
measures have been met. The number of unvested Options that shall vest on the date
of the Participant’s death shall be prorated based upon the number of full calendar
months of active employment of the Participant during the Term to the total number
of months in the Term. Such number of Options shall be exercisable until the
earlier of: (i) 12 months following the date of such Participant’s death; and (ii)
the expiry of the Term of the Options; following which all vested and unexercised
Options and all unvested Options shall be cancelled.
	 
	 	(e)	 	Retirement
	 
	 	 	 	If a Participant has attained the age of 55 and retires from his or her employment
with the Corporation or a Subsidiary pursuant to a Retirement Plan and he or she is
eligible for benefits under a Retirement Plan, all unexercised and vested Options
held by such Participant as at the Participant’s last day of employment

 

- 11 -

	 	 	 	with the Corporation (or its Subsidiary) shall continue in accordance with the Plan and may
be exercised until the earlier of: (i) three years following the date of such
Participant’s retirement; and (ii) the expiry of the Term of the Options; following
which any unexercised and vested Options shall be cancelled.
	 
	 	 	 	A number of unvested Options held by the Participant on the last day of employment
with the Corporation (or its Subsidiary) shall continue to vest in accordance with
the Plan. The number of unvested Options that shall continue to vest shall be
prorated based upon the number of full calendar months of active employment of the
Participant during the Term to the total number of months in the Term. Such number
of Options shall be exercisable until the earlier of: (i) three years following
the date of such Participant’s retirement; and (ii) the expiry of the Term of the
Options; following which all vested and unexercised Options and all unvested Options
shall be cancelled.
	 
	 	(f)	 	Disability
	 
	 	 	 	If the employment of a Participant with the Corporation (or a Subsidiary) is
terminated as a result of the “disability” of such Participant, all Options held by
such Participant on the last day of the Participant’s employment with the
Corporation (or its Subsidiary) shall continue in accordance with the terms of such
Options as if the Participant continued to be actively employed by the Corporation
(or its Subsidiary).
	 
	 	 	 	For purposes of the foregoing, a Participant shall be considered to be suffering
from a “disability” if he or she is eligible for benefits under a Corporation
sponsored long term disability benefits plan.
	 
	 	(g)	 	Leaves of Absence
	 
	 	 	 	If a Participant is on a parental or other leave of absence approved by the
Corporation or a Subsidiary for a period of greater than three months, all
unexercised and vested Options held by such Participant as at the Participant’s last
day of active employment prior to such parental or other leave shall continue to be
exercisable in accordance with the terms of such Options, following which all
unexercised and vested Options held by such Participant shall be cancelled. All
unvested Options held by such Participant as at the Participant’s last day of active
employment prior to such parental or other leave shall continue to vest during such
Participant’s leave, provided that if the Participant does not return to active
employment by the end of the leave, all vested and unvested Options as at the end of
the leave of absence shall be treated in accordance with the second
paragraph of subsection 8(a) on the assumption that the Participant’s last day of
employment is the end of the leave of absence. Unless otherwise determined by the
HRC Committee, no additional Option grants shall be made to any Participant during
such Participant’s leave of absence.

 

- 12 -

	 	(h)	 	Secondments
	 
	 	 	 	If a Participant is seconded to an entity other than a Subsidiary, the HRC Committee
(in the case of Participants that are Corporate Leadership Team members) and the CEO
(in the case of all other Participants) shall determine the manner in which all
Options, vested and unvested, held by the Participant as at the date of the
secondment shall be treated under the Plan.
	 
	 	(i)	 	Change of Control
	 
	 	 	 	In the event of a Change of Control, all unvested Options held by a Participant
shall vest on a date, as determined by the HRC Committee, that is not more than 30
days and not less than five days prior to the date of the Change of Control and the
performance measures shall be deemed to be met. In connection with any Change of
Control, the HRC Committee will allow, where necessary in the circumstances, for the
conditional vesting and exercise of Options and where such conditions are not met
and the Change of Control does not occur the Options shall continue as if no vesting
or exercise had occurred.
	 
	 	(j)	 	No Future Grants; No Cash Payment
	 
	 	 	 	Upon the occurrence of any of the foregoing events listed under subsections 8(a) to
(f) in respect of a Participant, such Participant shall not be entitled to receive
any further Option grants or the value of any grants foregone as a consequence of
any such event and, except as set forth herein, shall not be entitled to receive any
cash payment for the value of any unexercised Options, vested or unvested, held by
the Participant as at the date of occurrence of such event.

	9.	 	TERMS AND CONDITIONS OF UNITED STATES INCENTIVE STOCK OPTIONS

	 	(a)	 	Designated employees of any Subsidiary located in the United States of America
may be granted “incentive stock options” within the meaning of Section 422 of the Code
(“United States Incentive Stock Options”). The maximum number of Shares that may be
issued under the Plan as United States Incentive Stock Options shall not be greater
than 2,000,000 Shares. An Option that is a United States Incentive Stock Option will
be designated as such in the applicable Option agreement and no Option that is not so
designated will be treated as a United States Incentive Stock Option under the Plan.
	 
	 	(b)	 	No United States Incentive Stock Options shall be granted to any Participant
if, as a result of such grant, the aggregate Fair Market Value (as of the time the
Option is proposed to be granted) of the Shares covered by all the United States
Incentive Stock Options granted under this Plan, and any other plan of the Corporation or any
Subsidiary, to the Participant, which are or will become exercisable for the first
time by the Participant in a single calendar year, exceeds US $100,000 or such
amount as shall be specified in Section 422 of the Code.

 

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	 	(c)	 	The exercise price of a United States Incentive Stock Option shall not be less
than 100% of the Grant Price as at the Grant Date.
	 
	 	(d)	 	No United States Incentive Stock Option may be granted under the Plan to any
individual who, at the time the option is granted, owns stock possessing more than 10%
of the total combined voting power of all classes of stock of his or her employer
corporation or of its parent or subsidiary corporations (as such ownership may be
determined for purposes of Section 422(b)(6) of the Code), unless (i) at the time such
United States Incentive Stock Option is granted, the Grant Price is at least 110% of
the Fair Market Value of the Shares subject thereto and (ii) the United States
Incentive Stock Option by its terms is not exercisable after the expiration of five
years from the date granted.
	 
	 	(e)	 	Notwithstanding the provisions of this Section 7, exercise periods for United
States Incentive Stock Options on the happening of an event described in Sections 7(b),
(d), (e) and (f) shall be as set forth in the applicable Option agreement.
	 
	 	(f)	 	United States Incentive Stock Options shall otherwise be subject to the terms
and conditions as set forth in this Plan.

	10.	 	ADJUSTMENTS

	 	(a)	 	In the event that the number of outstanding Shares is increased or decreased,
or changed into, or exchanged for a different number or kind of shares or other
securities of the Corporation or another corporation, whether through a stock dividend,
stock split, consolidation, recapitalization, amalgamation, reorganization, arrangement
or other transaction effected without receipt of consideration, the HRC Committee or
the Board may make appropriate adjustment in the number or kind of shares or securities
available for Options pursuant to the Plan and, as regards Options previously granted
or to be granted pursuant to the Plan, in the number and kind of shares or securities
and the purchase price thereof and the manner in which installments of the Options vest
and become exercisable.
	 
	 	(b)	 	The appropriate adjustments in the number of Shares under Option, the Grant
Price per share and the period during which each Option may be exercised may be made by
the Board in its discretion and in order to give effect to the adjustments in the
number of shares of the Corporation resulting from the implementation and operation of
the Shareholder Rights Plan Agreement dated as of November 9, 1995 between the
Corporation and CIBC Mellon Trust Company, as amended, restated or revised from time to
time.

	11.	 	EFFECT OF REORGANIZATION

	 	 	In the event of any take-over bid or any proposal, offer or agreement for a merger,
consolidation, amalgamation, arrangement, recapitalization, liquidation, dissolution or
similar transaction or other business combination that is not a Change of Control in which
the Corporation is not the surviving or continuing corporation (a “Reorganization”), all

 

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	 	 	Options granted hereunder and outstanding on the date of such Reorganization, shall be
assumed by the surviving or continuing corporation, provided that the HRC Committee or the
Board may make appropriate adjustment in the manner in which installments of the Options
become exercisable prior to such assumption. If, in the event of any such Reorganization,
provision for such assumption satisfactory to the HRC Committee or the Board is not made by
the surviving or continuing corporation, each Participant shall have distributed to him or
her within 30 days after the Reorganization in full satisfaction in the case of an unexpired
Option, or part thereof, whether or not exercisable, cash representing the excess, if any,
of the Fair Market Value of the Shares determined as at the third Trading Day immediately
preceding the closing date of such Reorganization over the exercise price of such Option
(less applicable tax withholdings).

	12.	 	TAXES AND REPORTING

	 	 	Notwithstanding anything else contained herein, each Participant shall be responsible for
the payment of all applicable taxes, including, but not limited to, income taxes payable in
connection with the exercise of any Options under the Plan and the Corporation, its
employees and agents shall bear no liability in connection with the payment of such taxes.

	13.	 	AMENDMENT OF THE PLAN

	 	 	The HRC Committee may at any time recommend to the Board for its approval the revision,
suspension or discontinuance of this Plan in whole or in part. The Board may also at any
time amend, revise or repeal any terms of this Plan and any Option granted under this Plan
(any such change, an “amendment”) without obtaining approval of the shareholders.
Notwithstanding the foregoing, the Corporation will obtain the approval of the shareholders
of the Corporation for an amendment relating to:

	 	(a)	 	the maximum number of shares reserved for issuance under the Plan;
	 
	 	(b)	 	a reduction in the Grant Price for any Options;
	 
	 	(c)	 	the cancellation of any Options and the reissue of or replacement of such
Options with Options having a lower Grant Price;
	 
	 	(d)	 	an extension to the term of any Option;
	 
	 	(e)	 	any change allowing other than full-time employees of the Corporation or a
Subsidiary to become Participants in the Plan;
	 
	 	(f)	 	any change whereby Options would become transferable or assignable other than
by will or according to the laws of descent and distribution.

 

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	14.	 	CONFLICT WITH WRITTEN EMPLOYMENT AGREEMENT

	 	 	In the event of a conflict between the terms of this Plan and the terms of any written
employment agreement between a Participant and the Corporation, the terms of the written
employment agreement shall prevail.

	15.	 	EFFECTIVE DATE

	 	 	The Plan shall take effect on January 1, 2007, provided that any Options issued under this
Plan may not be exercised until this Plan has been approved by the shareholders of the
Corporation in accordance with the rules of the Toronto Stock Exchange. On the effective
date, the application of the Incentive Stock Option Plan (2002) (the “Prior Plan”) to
performance Options shall be discontinued, except with respect to unexercised performance
Options outstanding under the Prior Plan.

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