Document:

eh1300794_ex0402.htm

EXHIBIT 4.2

 

 

PERFORMANCE SHARE UNIT PLAN FOR ELIGIBLE EMPLOYEES

 

OF

 

CANADIAN PACIFIC RAILWAY LIMITED

 

 

 

Adopted with effect from February 17, 2009, as amended February 22, 2013

 

 

 

 

  

- 1 -

  

 

1.   PREAMBLE AND DEFINITIONS

 

	
  

	
1.1

	
Title.

 

The Plan described in this document shall be called the “Performance Share Unit Plan for Eligible Employees of Canadian Pacific Railway Limited”.

 

	
  

	
1.2

	
Purposes of the Plan.

 

The purposes of the Plan are:

 

	
  

	
a.

	
to promote a further alignment of interests between employees and the shareholders of the Corporation;

 

	
  

	
b.

	
to associate a portion of employees’ compensation with the returns achieved by shareholders of the Corporation over the medium term; and

 

	
  

	
c.

	
to attract and retain employees with the knowledge, experience and expertise required by the Corporation

 

	
  

	
d.

	
to motivate and focus the executive’s attention on key performance drivers and indicators of the Corporation.

 

	
  

	
1.3

	
Definitions.

 

	
  

	
1.3.1

	
“Applicable Law” means any applicable provision of law, domestic or foreign, including, without limitation, applicable tax and securities legislation, together with all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder, and Stock Exchange Rules.

 

	
  

	
1.3.2

	
“Beneficiary” means, subject to Applicable Law, an individual who has been designated by an Eligible Employee, in such form and manner as the Committee may determine, to receive benefits payable under the Plan upon the death of the Eligible Employee, or, where no such designation is validly in effect at the time of death, the Eligible Employee’s legal representative.

 

	
  

	
1.3.3

	
“Board” means the Board of Directors of the Corporation.

 

	
  

	
1.3.4

	
“Cause” in respect of an Eligible Employee means

 

	
  

	
(a)

	
the continued failure by the Eligible Employee to substantially perform his or her duties in connection with his or her 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 

 

  

- 2 -

  

 

	
  

	
 

	
Subsidiary has given the Eligible Employee reasonable written notice of such failure and a reasonable opportunity to correct it;

 

	
  

	
(b)

	
the engaging by the Eligible Employee in any act which is materially injurious to the Corporation or its reputation, financially or otherwise;

 

	
  

	
(c)

	
the engaging by the Eligible Employee in any act resulting or intended to result, directly or indirectly, in personal gain to the Eligible Employee at the expense of the Corporation;

 

	
  

	
(d)

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

 

	
  

	
(e)

	
any other conduct that constitutes “cause” at common law.

 

	
  

	
1.3.5

	
“Change in Control” means the occurrence of any of the following events:

 

	
  

	
(a)

	
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 person or persons, constitutes, in the aggregate, more than 20% of all outstanding voting securities of the Corporation;

 

	
  

	
(b)

	
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;

 

	
  

	
(c)

	
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

 

	
  

	
(d)

	
a change in the composition of the Board over any twelve-month period commencing after the applicable Grant Date 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 as a result of normal attrition.

 

  

- 3 -

  

 

	
  

	
1.3.6

	
“Committee” means the Management Resources and Compensation Committee of the Board or such other committee of the Board which may be appointed by the Board to, among other things, interpret, administer and implement the Plan.

 

	
  

	
1.3.7

	
“Corporation” means Canadian Pacific Railway Limited and any successor corporation whether by amalgamation, merger or otherwise.

 

	
  

	
1.3.8

	
“Disability” means an Eligible Employee’s physical or mental incapacity that prevents him from substantially fulfilling his duties and obligations on behalf of the Corporation or, if applicable, a Subsidiary, and in respect of which the Eligible Employee commences receiving, or is eligible to receive, disability benefits under the Corporation’s or a Subsidiary’s short-term or long-term disability plan.

 

	
  

	
1.3.9

	
“Disability Date” means, in relation to an Eligible Employee, that date on which the Corporation determines that the Eligible Employee is suffering from Disability.

 

	
  

	
1.3.10

	
“Eligible Employee” means such employee of the Corporation or a Subsidiary as the Committee may designate as eligible to participate in the Plan.

 

	
  

	
1.3.11

	
“Employed” means, with respect to an Eligible Employee, that:

 

	
  

	
(a)

	
he is performing work at a workplace of the Corporation or a Subsidiary or at one or more locations approved by the Corporation or a Subsidiary (in this Section 1.3.11, an “approved workplace”); or he is not actively at work at an approved workplace due to an approved leave of absence where the period of leave is less than three months; or

 

	
  

	
(b)

	
he is not actively at work at an approved workplace due to an approved leave of absence where the period of leave is or is expected to be at least three months, maternity or parental leave or Disability.

 

For greater certainty, except as expressly provided herein, an individual whose employment has been terminated without Cause by the Corporation or a Subsidiary shall not be considered to be “Employed” for purposes of the Plan during any statutory, contractual or common law notice period and shall be considered to have ceased to be “Employed” for purposes of the Plan on the date on which he or she 

 

  

- 4 -

  

 

receives notice of termination of employment from the Corporation or a Subsidiary, as the case may be. Notwithstanding the foregoing, an individual who receives a notice of termination of employment from the Corporation or a Subsidiary shall continue to be considered “Employed” for the purposes of the Plan while he continues to perform work at a workplace of the Corporation or a Subsidiary during a working notice period.

 

	
  

	
1.3.12

	
“Grant” means a grant of PSUs made pursuant to Section 4.1.

 

	
  

	
1.3.13

	
“Grant Agreement” means an agreement between the Corporation and an Eligible Employee under which a PSU is granted, as contemplated by Section 4.1, together with such schedules, amendments, deletions or changes thereto as are permitted under the Plan.

 

	
  

	
1.3.14

	
“Grant Date” means the effective date of a Grant.

 

	
  

	
1.3.15

	
“Market Value” means, with respect to any particular date, the average closing price per Share on the Stock Exchange during the immediately preceding 30 Trading Days.

 

	
  

	
1.3.16

	
“Performance Criteria” means such financial and/or personal performance criteria as may be determined by the Committee in respect of a Grant to any Eligible Employee or Eligible Employees and set out in a Grant Agreement. Performance Criteria may apply to the Corporation, a Subsidiary, the Corporation and its Subsidiaries as a whole, a business unit of the Corporation or group comprised of the Corporation and some of its Subsidiaries or a group of Subsidiaries, either individually, alternatively or in any combination, and measured in total, incrementally or cumulatively over a specified performance period, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparator group, or otherwise.

 

	
  

	
1.3.17

	
“Performance Period” means, with respect to a Grant, the period commencing on January 1 of the year that includes the Grant Date of the Grant and ending on December 31 of the second calendar year after the year that includes the Grant Date of the Grant.

 

	
  

	
1.3.18

	
“Plan” means this Performance Share Unit Plan for Eligible Employees of Canadian Pacific Railway Limited, including any schedules or appendices hereto, as amended from time to time.

 

	
  

	
1.3.19

	
“PSU” means a right, granted to an Eligible Employee in accordance with Section 4 hereof, to receive the Market Value of one Share, that becomes Vested, if at all, subject to the attainment of Performance Criteria and satisfaction of such other conditions to Vesting, if any, as may be determined by the Committee.

 

  

- 5 -

  

 

	
  

	
1.3.20

	
“PSU Account” has the meaning set out in Section 5.1.

 

	
  

	
1.3.21

	
“Retirement” means the Eligible Employee’s cessation of employment with the Corporation or a Subsidiary, as applicable, at or after the normal or early retirement age established by the Corporation or a Subsidiary from time to time, where the Eligible Employee gives notice to the Corporation or a Subsidiary in accordance with the retirement policy established by the Corporation or a Subsidiary from time to time.

 

	
  

	
1.3.22

	
“Settlement Date” means, with respect to a Grant, the date following the end of the Performance Period for such Grant fixed by the Committee for settlement of PSUs covered by such Grant that have Vested.

 

	
  

	
1.3.23

	
“Share” means a common share of the Corporation and such other share as may be substituted for it as a result of amendments to the articles of the Corporation, arrangement, reorganization or otherwise, including any rights that form a part of the common share or substituted share.

 

	
  

	
1.3.24

	
“Stock Exchange” means The Toronto Stock Exchange, or if the Shares are not listed on The Toronto Stock Exchange, such other stock exchange on which the Shares are listed, or if the Shares are not listed on any stock exchange, then on the over-the-counter market.

 

	
  

	
1.3.25

	
“Stock Exchange Rules” means the applicable rules of any stock exchange upon which shares of the Corporation are listed.

 

	
  

	
1.3.26

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

 

	
  

	
1.3.27

	
“Termination” or “Date of Termination” (or any derivative thereof) shall mean (i) the date of termination of an Eligible Employee’s active employment with the Corporation or a Subsidiary (other than in connection with the Participant’s transfer to employment with the Corporation or another Subsidiary), being the date on which the Eligible Employee ceases to render services to the Corporation or Subsidiary, as applicable, whether such termination is lawful or otherwise, without giving effect to any period of notice or compensation in lieu of notice, but not including any period during which the Eligible Employee remains Employed within the meaning of Section 1.3.11, and (ii) in the case of an Eligible Employee who does not return to active employment with the Corporation or a Subsidiary immediately following a period of absence due to vacation, temporary illness, authorized leave of absence or Disability, the last day of such period of absence.

 

  

- 6 -

  

 

	
  

	
1.3.28

	
“Trading Day” means any date on which the Stock Exchange is open for the trading of Shares and on which Shares are actually traded.

 

	
  

	
1.3.29

	
“Vested” (or any applicable derivative term) shall mean, with respect to a PSU, that the applicable conditions with respect to continued employment, passage of time, achievement of Performance Criteria as determined by the Committee and/or any other conditions established by the Committee have been satisfied or, to the extent permitted under the Plan, waived, whether or not the Eligible Employee’s rights with respect to such PSUs may be conditioned upon prior or subsequent compliance with any confidentiality, non-competition or non-solicitation obligations.

 

2.           CONSTRUCTION AND INTERPRETATION

 

	
  

	
2.1

	
Gender, Singular, Plural. In the Plan, references to the masculine include the feminine; and references to the singular shall include the plural and vice versa, as the context shall require.

 

	
  

	
2.2

	
Governing Law. The Plan shall be governed and interpreted in accordance with the laws of the Province of Alberta and any actions, proceedings or claims in any way pertaining to the Plan shall be commenced in the courts of the Province of Alberta.

 

	
  

	
2.3

	
Severability. If any provision or part of the Plan is determined to be void or unenforceable in whole or in part, such determination shall not affect the validity or enforcement of any other provision or part thereof.

 

	
  

	
2.4

	
Headings, Sections. Headings wherever used herein are for reference purposes only and do not limit or extend the meaning of the provisions herein contained. A reference to a section or schedule shall, except where expressly stated otherwise, mean a section or schedule of the Plan, as applicable.

 

3.           EFFECTIVE DATE AND EMPLOYMENT RIGHTS

 

	
  

	
3.1

	
Effective Date. The Corporation is establishing the Plan effective on February 17, 2009.

 

	
  

	
3.2

	
No Employment Rights. Nothing contained in the Plan shall be deemed to give any person the right to be retained as an employee of the Corporation or of a Subsidiary.

 

  

- 7 -

  

 

4.           GRANTS AND PERFORMANCE CRITERIA

 

	
  

	
4.1

	
Grant of PSUs. Each Eligible Employee may receive a Grant of PSUs in such number as may be specified by the Committee, with effect from such date(s) as the Committee may specify. Each grant and the participation of an Eligible Employee in the Plan shall be evidenced by a Grant Agreement between the Corporation and the Eligible Employee in the form approved by the Committee. Each Grant Agreement shall set forth, at a minimum, the type and Grant Date of the Grant evidenced thereby, the number of PSUs subject to such Grant, the applicable Vesting conditions, the applicable Performance Criteria, the applicable Performance Period(s) and the treatment of the Grant upon Termination and may specify such other terms and conditions consistent with the terms of the Plan as the Committee shall determine or as shall be required under any other provision of the Plan. The Committee may include in a Grant Agreement terms or conditions pertaining to confidentiality of information relating to the Corporation’s operations or businesses which must be complied with by an Eligible Employee including as a condition of the grant or Vesting of PSUs.

 

	
  

	
(i)

	
Vesting Terms. PSUs shall become Vested at such times, in such installments and subject to such terms and conditions as may be determined by the Committee and set forth in the applicable Grant Agreement, provided that the conditions to Vesting of PSUs shall be based on the satisfaction of Performance Criteria either alone or in addition to any other Vesting conditions as may be determined by the Committee and may be graduated such that different percentages (which may be greater or less than 100%) of the PSUs credited to an Eligible Employee’s PSU Account on a particular Grant Date will become Vested depending upon the extent to which one or more such conditions are satisfied.

 

	
  

	
4.2

	
Administration. The Committee shall administer the Plan in accordance with its terms. Subject to and consistent with the terms of the Plan, in addition to any authority of the Committee specified under any other terms of the Plan, the Committee shall have full and complete discretionary authority to:

 

	
  

	
(i)

	
interpret the Plan and Grant Agreements;

 

	
  

	
(ii)

	
prescribe, amend and rescind such rules and regulations and make all determinations necessary or desirable for the administration and interpretation of the Plan and Grant Agreements;

 

	
  

	
(iii)

	
determine those Eligible Employees who may be granted PSUs, grant one or more PSUs to such Eligible Employees and approve or authorize the applicable form and terms of the related Grant Agreements;

 

  

- 8 -

  

 

	
  

	
(iv)

	
determine the terms and conditions of PSUs granted to any Participant, including, without limitation, (A) the number of PSUs subject to a Grant, (B) the Performance Period(s) applicable to a Grant, (C) the conditions to the Vesting of any PSUs granted hereunder, including terms relating to the Performance Period for PSUs and the conditions, if any, upon which Vesting of any PSU will be waived or accelerated without any further action by the Committee, (D) the circumstances upon which a PSU shall be forfeited, cancelled or expire and (E) the consequences of a Termination with respect to a PSU;

 

	
  

	
(v)

	
determine whether and the extent to which any Performance Criteria or other conditions applicable to the Vesting of an PSU have been satisfied or shall be waived or modified;

 

	
  

	
(vi)

	
amend the terms of any outstanding PSU granted under the Plan or Grant Agreement provided that such amendment shall not materially adversely affect the rights of any Eligible Employee, without the consent of the Eligible Employee or except as provided in Section 4.2(v), with respect to PSUs that have been granted as of the date on which the amendment is made;

 

	
  

	
(vii)

	
determine whether, and the extent to which, adjustments shall be made pursuant to Section 5.3 and the terms of any such adjustments.

 

	
  

	
4.3

	
Discretion of the Committee. Notwithstanding any other provision hereof or of any applicable instrument of grant, the Committee may accelerate or waive any condition to the Vesting of any Grant, all Grants, any class of Grants or Grants held by any group of Eligible Employees.

 

	
  

	
4.4

	
Effects of Committee’s Decision. Any interpretation, rule, regulation, determination or other act of the Committee hereunder shall be made in its sole discretion and shall be conclusively binding upon all persons.

 

	
  

	
4.5

	
Liability Limitation. No member of the Committee or the Board of Directors shall be liable for any action or determination made in good faith pursuant to the Plan or any instrument of grant evidencing any PSU granted under the Plan. To the fullest extent permitted by law, the Corporation and its Subsidiaries shall indemnify and save harmless each person made, or threatened to be made, a party to any action or proceeding in respect of the Plan by reason of the fact that such person is or was a member of the Committee or is or was a member of the Board of Directors.

 

	
  

	
4.6

	
Delegation and Administration. The Committee may, in its discretion, delegate such of its powers, rights and duties under the Plan, in whole or in part, to any 

 

  

- 9 -

  

 

	
  

	
 

	
committee or any one or more directors, officers or employees of the Corporation as it may determine from time to time, on terms and conditions as it may determine, except the Committee shall not, and shall not be permitted to, delegate any such powers, rights or duties to the extent such delegation is not consistent with Applicable Law. The Committee may also appoint or engage a trustee, custodian or administrator to administer or implement the Plan or any aspect of it, except that the Committee shall not, and shall not be permitted to, appoint or engage such a trustee, custodian or administrator to the extent such appointment or engagement is not consistent with Applicable Law.

 

5.           ACCOUNTS, DIVIDEND EQUIVALENTS AND REORGANIZATION

 

	
  

	
5.1

	
PSU Account. An account, called a “PSU Account”, shall be maintained by the Corporation, or a Subsidiary, as specified by the Committee, for each Eligible Employee and will be credited with such notional grants of PSUs as are received by an Eligible Employee from time to time pursuant to Section 4.1 and any dividend equivalent PSUs pursuant to Section 5.2. PSUs that fail to vest pursuant to Section 6, or that are paid out to the Eligible Employee or his Beneficiary, shall be cancelled and shall cease to be recorded in the Eligible Employee’s PSU Account as of the date on which such PSUs are forfeited or cancelled under the Plan or are paid out, as the case may be.

 

	
  

	
5.2

	
Dividend Equivalent PSUs. Unless otherwise specified in the Grant Agreement each Grant shall be deemed to provide for the accrual of dividend equivalent amounts for the account of an Eligible Employee as hereinafter provided with respect to cash dividends paid in the ordinary course to shareholders in respect of outstanding Shares. Subject to the terms of the Grant Agreement, if and when cash dividends are paid with respect to Shares (other than any extraordinary dividend) to shareholders of record as of a record date occurring during the period from the Grant Date to the Settlement Date under the Grant Agreement, a number of additional PSUs shall be granted to the Eligible Employee who is a party to such Grant Agreement equal to the product of (i) the cash dividend paid with respect to a Share multiplied by (ii) the number of PSUs subject to such Grant as of the record date for the dividend, divided by the closing price of a Share on the Stock Exchange on the date on which the dividend is paid. The additional PSUs granted to a Participant shall be subject to the same terms and conditions, including Vesting and settlement terms, as the corresponding PSUs.

 

	
  

	
5.3

	
Adjustments. In the event of any stock dividend, stock split, combination or exchange of Shares, merger, consolidation, spin-off or other distribution (other than normal cash dividends) of the Corporation’s assets to shareholders, or any other change in the capital of the Corporation affecting the Shares, such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change, shall be made with respect to the number of PSUs outstanding under the Plan.

 

  

- 10 -

  

 

6.           VESTING AND SETTLEMENT OF SHARE UNITS

 

	
  

	
6.1

	
Settlement. Subject to Section 6.6, PSUs relating to a Performance Period shall be settled upon or as soon as reasonably practicable following the end of the Performance Period applicable to such PSUs, and in any event prior to December 31 of the calendar year immediately following the Performance Period, subject to the Committee’s determination of the extent to which the Performance Criteria or other Vesting conditions, if any, for such Performance Period have been satisfied. Settlement of Vested PSUs shall be made by payment in cash or in CP Common Shares at the discretion of the Chief Executive Officer, subject to payment or other satisfaction of all related withholding obligations in accordance with Section 9.2 and the terms of the applicable Grant Agreement, of an aggregate amount equal to the product of:

 

A           the Market Value on the last day of the Performance Period,

 

multiplied by

 

B           the number of PSUs then being settled.

 

	
  

	
6.2

	
Failure to Vest and Minimum Participation Period. For greater certainty, an Eligible Employee must be Employed in accordance with Section 1.3.11(a) (rounded up to the nearest whole number of months); for a minimum participation period of six (6) months during a Performance Period to receive a cash payment or any other compensation for Vested PSUs. Further, an Eligible Employee shall have no right to receive a cash payment or any other compensation with respect to any PSUs that do not Vest.

 

	
  

	
6.3

	
Continued Employment. Subject to Sections 4.2, 6.4, 6.5 and Section 6.6, Vested PSUs relating to a Grant shall be settled in accordance with Section 6.1 provided that the Eligible Employee is Employed on the Settlement Date in respect of such Grant. For greater certainty, an Eligible Employee shall not be considered to be Employed on a Settlement Date if, prior to such Settlement Date, such Eligible Employee received a payment in lieu of notice of Termination of employment, whether under a contract of employment, as damages or otherwise, or if such Eligible Employee experienced a Disability Date. Further, in the event an Eligible Employee has been Employed in accordance with Section 1.3.11(b) during the Performance Period in respect of a Grant, the number of PSUs relating to such Grant that become Vested shall be determined by the formula A x B/C, where

 

 

  

- 11 -

  

 

	
  

	
A

	
equals the total number of PSUs relating to such Grant that would have Vested had the Eligible Employee been Employed in accordance with Section 1.3.11(a) throughout such Performance Period;

 

	
  

	
B

	
equals the total number of months during such Performance Period in which the Eligible Employee was Employed in accordance with Section 1.3.11(a) (rounded up to the nearest whole number of months); and

 

	
  

	
C

	
equals total number of months in the Performance Period relating to such Grant.

 

	
  

	
6.4

	
Termination of Employment for Cause and Resignation. In the event an Eligible Employee’s employment is Terminated for Cause by the Corporation, or a Subsidiary, as applicable, or the Eligible Employee otherwise ceases to be Employed for any reason other than as provided in Section 6.5 prior to the Settlement Date relating to a Grant, no PSUs relating to such Grant and no dividend equivalent PSUs in respect of such PSUs shall Vest.

 

	
  

	
6.5

	
Termination of Employment without Cause, Disability, Death or Retirement. Unless otherwise determined by the Committee, subject to Section 6.6, in the event an Eligible Employee ceases to be Employed by reason of Termination of employment without Cause, death or Retirement, or experiences a Disability prior to the end of the Performance Period relating to a Grant, a number of PSUs (the “Pro-Rated PSUs”) determined by the formula A x B/C, where

 

	
  

	
A

	
equals the total number of PSUs relating to such Grant, being the number of PSUs credited to the Eligible Employee’s PSU Account as at the Grant Date in respect of such Grant, without giving effect to any potential increase or decrease in such number as a result of graduated Vesting conditions pursuant to clause (iv) of Section 4.2;

 

	
  

	
B

	
equals the total number of months between the first day of the Performance Period for such Grant and the date the Eligible Employee ceases to be Employed or the Eligible Employee’s Disability Date, as the case may be, (rounded up to the nearest whole number of months); and

 

	
  

	
C

	
equals total number of months in the Performance Period relating to such Grant, 

 

together with any dividend equivalent PSUs relating to such Pro-Rated PSUs shall be eligible to become Vested PSUs subject to satisfaction or waiver by the Committee of the Performance Criteria relating to such Grant. Pro Rated PSUs under this Section 6.5 that become Vested PSUs shall be settled in accordance with Section 6.1.

 

  

- 12 -

  

 

	
  

	
6.6

	
Change in Control. In the event of a Change in Control prior to the end of the Performance Period for a Grant, PSUs subject to such Grant shall not be affected and shall continue to vest as per the terms hereof, unless an Eligible Employee ceases to be Employed by reason of a termination of employment without Cause after such Change in Control. If this occurs a number of PSUs determined by the formula A x B/C, where

 

	
  

	
A

	
equals the total number of PSUs relating to such Grant;

 

	
  

	
B

	
equals the total number of months between the first day of the Performance Period for such Grant and the Termination Date (rounded up to the nearest whole number of months); and

 

	
  

	
C

	
equals total number of months in the Performance Period relating to such Grant,

 

shall become Vested PSUs on the applicable vesting date provided that, for the purpose of factor A, the total number of PSUs relating to such Grant shall be the number of PSUs credited to the Eligible Employee’s PSU Account as at the Grant Date in respect of such Grant, without giving effect to any potential increase or decrease in such number as a result of graduated Vesting conditions pursuant to clause (iv) of Section 4.2, together with any related dividend equivalent PSUs credited to the Eligible Employee’s PSU Account at the effective date of the Change in Control. PSUs that become Vested PSUs in connection with a Change in Control shall be settled by payment in cash, subject to payment or other satisfaction of all related withholding obligations in accordance with Section 9.2 and the terms of the applicable Grant Agreement, of an aggregate amount equal to the product of:

 

A           the Market Value on the effective date of the Change in Control,

 

multiplied by

 

B           the number of Vested PSUs determined in accordance with this Section 6.6.

 

7.           CURRENCY

 

	
  

	
7.1

	
Currency. Except where expressly provided otherwise, all references in the Plan to currency refer to lawful Canadian currency.

 

  

- 13 -

  

 

8.           SHAREHOLDER RIGHTS

 

	
  

	
8.1

	
No Rights to Shares. PSUs are not Shares and the grant of PSUs will not entitle an Eligible Employee to any shareholder rights, including, without limitation, voting rights, dividend entitlement or rights on liquidation.

 

9.           MISCELLANEOUS

 

	
  

	
9.1

	
Compliance with Laws and Policies. The Corporation’s issuance of any PSUs and its obligation to make any payments is subject to compliance with Applicable Law. Each Eligible Employee shall acknowledge and agree (and shall be conclusively deemed to have so acknowledged and agreed by participating in the Plan) that the Eligible Employee will, at all times, act in strict compliance with Applicable Law and all other laws and any policies of the Corporation applicable to the Eligible Employee in connection with the Plan including, without limitation, furnishing to the Corporation all information and undertakings as may be required to permit compliance with Applicable Law.

 

	
  

	
9.2

	
Withholdings. So as to ensure that the Corporation or a Subsidiary, as applicable, will be able to comply with the applicable provisions of any federal, provincial, state or local law relating to the withholding of tax or other required deductions, including on the amount, if any, includable in the income of an Eligible Employee, the Corporation, or a Subsidiary, as applicable, shall withhold or cause to be withheld from any amount payable to an Eligible Employee, either under this Plan, or otherwise, such amount as may be necessary to permit the Corporation or the Subsidiary, as applicable, to so comply.

 

	
  

	
9.3

	
No Additional Rights. Neither the designation of an employee as an Eligible Employee nor the grant of any PSUs to any Eligible Employee entitles any person to the grant, or any additional grant, as the case may be, of any PSUs under the Plan.

 

	
  

	
9.4

	
Amendment, Termination. The Plan may be amended or terminated at any time by resolution of the Board in whole or in part, without the consent of any Eligible Employee, provided that no such amendment or termination may materially adversely affect the rights of any such Eligible Employee, without the consent of the Eligible Employee, with respect to PSUs that have been granted as of the date on which the amendment or termination resolution is made.

 

	
  

	
9.5

	
Administration Costs. The Corporation will be responsible for all costs relating to the administration of the Plan.

 

	
  

	
9.6

	
Unfunded Obligation. The obligation to make payments that may be required to be made under the Plan will be an unfunded and unsecured obligation of the Corporation or a Subsidiary, as applicable unless otherwise determined by the Corporation. The Plan, or any provision thereunder, shall not create (or be construed to create) any trust or other obligation to fund or secure amounts payable under the Plan in whole or in part.

 

  

- 14 -

  

 

10.           ASSIGNMENT

 

	
  

	
10.1

	
Assignment. The assignment or transfer of the PSUs, or any other benefits under this Plan, shall not be permitted other than by operation of law.

 

 

 

February 22, 2013

 

 

	 /s/ Peter Edwards 
	Peter Edwards 

Vice-President, Human Resources and 

     Industrial Relations

Canadian Pacific Railway Company

 

 

  

- 15 -

  

 

Appendix A

 

Supplemental Provisions Applicable to U.S. Taxpayers

 

To the extent an Eligible Employee is granted PSUs that are subject to taxation under the U.S. Internal Revenue Code of 1986, as amended (the “U.S. Code”), such PSUs shall be subject to the provisions set forth in this Appendix A.

 

A-1. Notwithstanding Section 6.1 of the Plan, PSUs relating to a Performance Period and settled pursuant to Section 6.1 shall in all events be settled during the first calendar year beginning after the last day of the Performance Period.

 

A-3. All PSUs that are subject to this Appendix A are intended to comply with the requirements of Section 409A of the U.S. Code, and the Plan and this Appendix A shall be interpreted and construed consistently with such intent; provided that in no event shall the Corporation be responsible for any taxes or penalties under Section 409A of the U.S. Code that arise in connection with any amounts payable under this Plan.

 

 

 

 

 

 

 - 16 -eh1300793_ex0402.htm

EXHIBIT 4.2

 

UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE JUNE 5, 2013.

 

 

STAND-ALONE OPTION AGREEMENT

 

THIS AGREEMENT is made as of the 4th day of February, 2013

 

BETWEEN:

 

CANADIAN PACIFIC RAILWAY LIMITED (the “Corporation”)

 

- and -

 

KEITH CREEL (the “Optionholder”)

 

WHEREAS the Options (as defined below) were granted by the Corporation to the Optionholder on February 4, 2013, conditional upon the Optionholder entering into an employment agreement and commencing employment with the Corporation, and conditional upon approval of the Toronto Stock Exchange;

 

AND WHEREAS the Corporation and the Optionholder entered into an executive employment agreement effective as of February 5, 2013 (the “Employment Agreement”) to define the terms of the Optionholder’s employment as President and Chief Operating Officer of the Corporation;

 

AND WHEREAS the Toronto Stock Exchange has given its conditional listing approval in respect of the common shares of the Corporation issuable upon exercise of the Options;

 

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:

 

  

1

  

 

	
  

	
(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

 

  

2

  

 

	
  

	
(iv)

	
a change in the composition of the Board over any twelve month period commencing after 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 February 4, 2013;

 

	
  

	
(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 Keith Creel;

 

  

3

  

 

	
  

	
(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; and

 

	
  

	
(v)

	
“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, and conditional upon approval of the Toronto Stock Exchange, granted options (the “Options”) to purchase 159,100 Common Shares (the “Optioned Shares”) at a price (the “Exercise Price”) of CAD$115.78 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 February 4, 2023 (the “Expiry Date”).

 

  

4

  

 

ARTICLE 3

PARTICULARS OF GRANT

 

3.1                         Time of Exercise

 

3.1.1                      Subject to Sections 3.3 and 3.7, (i) the Options may not be exercised by the Optionholder until vested in accordance with Section 3.1.2; and (ii) after being vested, the Options may be exercised from time to time in whole or in part until the Expiry Date.

 

3.1.2                      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.

 

3.1.3                      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

 

                      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(c)), then only the portion of the Options that is exercisable at the date of resignation or termination may be exercised by the Optionholder and any such exercise must be during the period 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 Options will continue to become exercisable by the Optionholder pursuant to Section 3.1 after the Date of Termination and any exercise of the Options must be during the period ending on the earlier of:

 

	
  

	
(i)

	
six months after the Date of Termination; and

 

	
  

	
(ii)

	
the Expiry Date,

 

after which period the Options will expire;

 

  

5

  

 

	
  

	
(c)

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

 

	
  

	
(d)

	
if the Optionholder’s employment ceases due to permanent disability, then the Options will continue to become exercisable pursuant to Section 3.1 and will expire on the Expiry Date;

 

	
  

	
(e)

	
if the Optionholder retires upon attaining the mandatory or early retirement age established by the Corporation from time to time (“Retires”) and gives notice of retirement (the “Retirement Notice”) to the Corporation in accordance with policy established by the Corporation from time to time, then the Options will continue to become exercisable pursuant to Section 3.1 and will expire on the earlier of:

 

	
  

	
(i)

	
the date that is five (5) years after the Optionholder Retires; and

 

	
  

	
(ii)

	
the Expiry Date,

 

after which period the Options will expire.

 

If the Optionholder Retires without giving the Retirement Notice, the provisions of Section 3.3(a) shall apply; and

 

	
  

	
(f)

	
if the Optionholder dies, the Options will vest immediately after the death of the Optionholder, 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)

	
12 months after the death of the Optionholder; and

 

	
  

	
(ii)

	
the Expiry Date,

 

after which period the Options will expire,

  

6

  

 

subject to the right of the Board to, after the Grant Date, set a shorter (with the consent of the Optionholder) or longer period for exercise (not later than the Expiry Date).

 

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 

 

  

7

  

 

	
  

	
 

	
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 

 

  

8

  

 

	
  

	
 

	
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 

 

  

9

  

 

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 Options, 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.

 

 

  

10

  

 

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:

 

20639 West High Ridge Drive

Kildeer, IL  60047

 

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.

 

  

11

  

 

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.

 

 

IN WITNESS WHEREOF the Corporation and the Optionholder have entered into this Option Agreement as of February 4, 2013.

 

	 	

CANADIAN PACIFIC RAILWAY LIMITED

 

	 
	 	 	 	 
	
 

	
By: 

	/s/ E. Hunter Harrison	 
	 	 	Name:   E. Hunter Harrison	 
	 	 	Title:     Chief Executive Officer	 
	 	 	 	 
	 	By:	/s/ Peter Edwards	 
	 	 	Name:   Peter Edwards	 
	 	 	Title:	Vice President, Human Resources and Industrial Relations	 

	  	  	  	 /s/ Keith Creel
	
 Witness Name:

	  	  	
Keith Creel

	  	  	  	  

 

  

12

  

 

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 February 4, 2013, between Canadian Pacific Railway Limited (the “Corporation”) and Keith Creel (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.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00217-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00217-of-00352.parquet"}]]