Stock Option Plan for Executive Officers

The objective of the Stock Option Plan of Bombardier is to reward executives with an incentive to enhance shareholder value by providing them with a form of compensation that is tied to increases in the market value of the Class B subordinate shares.

The granting of stock options is subject to the following rules:

  • the granting of non-assignable options to purchase Class B subordinate shares may not exceed, taking into account the aggregate number of Class B subordinate voting shares issuable under any other security based compensation arrangement of the Corporation, 135,782,688; and
  • in any given one-year period, any insider or his or her associates may not be issued a number of shares exceeding 5% of all issued and outstanding Class B subordinate shares.

The main rules of the Stock Option Plan are as follows:

  • a grant of stock options represents the right to purchase an equal number of Class B subordinate shares of Bombardier at the determined exercise price;
  • the exercise price equals the weighted average trading price of the Class B subordinate shares traded on the TSX on the five trading days immediately preceding the day on which an option is granted;
  • options have a maximum term of seven years and vest at a rate of 100% at the end of the third anniversary of the date of grant; the three-year vesting period aligns with the vesting schedules of the RSU/PSU/DSU plans;
  • if the expiration date of an option falls during, or within ten (10) business days following the expiration of a blackout period, such expiration date shall automatically be extended for a period of ten (10) business days following the end of the blackout period; and
  • please refer to the “Termination and Change of Control Provisions” pages for the treatment of stock options in such cases.

In addition, the Stock Option Plan provides that no option or any right in respect thereof shall be transferable or assignable otherwise than by will or pursuant to the laws of succession.

In the case of stock options granted in 2008-2009, performance vesting conditions established at the time of grant required that the volume weighted average trading price of the Class B subordinate voting shares reach a target price threshold of $8.00 Cdn for at least 21 consecutive trading days following the grant date. As such target price threshold was not attained, none of these stock options were exercised and they all expired on August 20, 2015.

Additional restrictions and other information in respect of the 2010 DSUP and the Stock Option Plan

Under the terms of the 2010 DSUP and the Stock Option Plan:

  • the total number of Class B subordinate shares issuable from treasury, together with the Class B subordinate shares issuable from treasury under all of the Corporation’s other security based compensation arrangements, at any time, may not exceed 10% of the total issued and outstanding Class B subordinate shares;
  • the total number of Class B subordinate shares issuable from treasury to insiders and their associates, together with the Class B subordinate shares issuable from treasury to insiders and their associates under all of the Corporation’s other security based compensation arrangements, at any time, may not exceed 5% of the total issued and outstanding Class B subordinate shares;
  • the number of Class B subordinate shares issued from treasury to insiders and their associates, together with the Class B subordinate shares issued from treasury to insiders and their associates under all of the Corporation’s other security based compensation arrangements, within any given one-year period, may not exceed 10% of the total issued and outstanding Class B subordinate shares; and
  • a single person cannot hold DSUs covering, or options to acquire, as the case may be, more than 5% of the Class B subordinate shares issued and outstanding; and
  • the total number of stock options issued in the financial year ended December 31, 2015 (being 49,704,570 stock options), as a percentage of the total number of Class A shares and Class B subordinate shares that were issued and outstanding as at December 31, 2015, is 2.21%.

As of March 7, 2016, the status is as follows:

  Plan Issued Issuable under DSUs granted but not vested OR options granted but unexercised Issuable for future DSU OR option grants (2)
Total number of Class B subordinate shares Stock Option Plan 43,267,681 (1)
74,801,926 11,686,697
2010 DSUP 487,289 5,539,095 11,686,697
% of total number of Class A shares and Class B subordinate shares issued and outstanding Stock Option Plan 1.93% 3.33% 0.52%
2010 DSUP 0.02 % 0.25% 0.80%
  1. Including a number of 403,000 shares which were issued pursuant to the exercise of stock options granted under the Stock Option Plan for the benefit of the non-executive directors of Bombardier, which was abolished effective October 1, 2003.
  2. The aggregate number of Class B subordinate voting shares issuable under the Stock Option Plan and the 2010 DSUP may not exceed, taking into account the aggregate number of Class B subordinate voting shares issuable under any other security based compensation arrangement of the Corporation, 135,782,688.

Right to Amend the 2010 DSUP or the Stock Option Plan

The Board of Directors may, subject to receiving the required regulatory and stock exchange approvals, amend, suspend or terminate the 2010 DSUP and any DSUs granted thereunder or the Stock Option Plan and any outstanding stock option, as the case may be, without the prior approval of the shareholders of the Corporation; however, no such amendment or termination shall affect the terms and conditions applicable to unexercised stock options previously granted without the consent of the relevant optionees, unless the rights of such optionees shall have been terminated or exercised at the time of the amendment or termination.

Subject to but without limiting the generality of the foregoing, the Board of Directors may:

  • wind up, suspend or terminate the 2010 DSUP or the Stock Option Plan:
  • terminate an award granted under the 2010 DSUP or the Stock Option Plan;
  • modify the eligibility for, and limitations on, participation in the 2010 DSUP or the Stock Option Plan;
  • modify periods during which the options may be exercised under the Stock Option Plan;
  • modify the terms on which the awards may be granted, exercised, terminated, cancelled and adjusted and, in the case of stock options only, exercised;
  • amend the provisions of the 2010 DSUP or the Stock Option Plan to comply with applicable laws, the requirements of regulatory authorities or applicable stock exchanges;
  • amend the provisions of the 2010 DSUP or the Stock Option Plan to modify the maximum number of Class B subordinate shares which may be offered for subscription and purchase under the 2010 DSUP or the Stock Option Plan following the declaration of a stock dividend, a subdivision, consolidation, reclassification, or any other change with respect to the Class B subordinate shares;
  • amend the 2010 DSUP or the Stock Option Plan or an award to correct or rectify an ambiguity, a deficient or inapplicable provision, an error or an omission; and
  • amend a provision of the 2010 DSUP or the Stock Option Plan relating to the administration or technical aspects of the plan.

However, notwithstanding the foregoing, the following amendments must be approved by the shareholders of the Corporation:

1.     In the case of the Stock Option Plan or outstanding options:

  • an amendment allowing the issuance of Class B subordinate shares to an optionee without the payment of a cash consideration, unless provision has been made for a full deduction of the underlying Class B subordinate shares from the number of Class B subordinate shares reserved for issuance under the Stock Option Plan;
  • a reduction in the purchase price for the Class B subordinate shares in respect of any option or an extension of the expiration date of any option beyond the exercise periods provided by the Stock Option Plan;
  • the inclusion, on a discretionary basis, of non-employee directors of the Corporation as participants in the Stock Option Plan;
  • an amendment allowing an optionee to transfer options other than by will or pursuant to the laws of succession;
  • the cancellation of options for the purpose of issuing new options;
  • the grant of financial assistance for the exercise of options;
  • an increase in the number of Class B subordinate shares reserved for issuance under the Stock Option Plan; and
  • any amendment to the method for determining the purchase price for the Class B subordinate shares, in respect of any option. 

2.    In the case of the 2010 DSUP or DSUs granted thereunder:

  • An amendment allowing a participant to transfer DSUs, other than by will or pursuant to the laws of succession; and
  • An increase in the number of treasury Class B subordinate shares reserved for the issuance under the 2010 DSUP.

As mentioned under the heading “Amendments to the Stock Option Plan of Bombardier” in Section 2: “Business of the Meeting” of the 2016 Proxy, the Board of Directors approved on February 16, 2016 the First Stock Option Plan Amendment and the Second Stock Option Plan Amendment, which in each case received requisite regulatory and shareholder approval in the manner described under the heading “Amendments to the Stock Option Plan of Bombardier” in Section 2: “Business of the Meeting” of the 2016 Proxy.

The Board of Directors also approved, on February 16, 2016, adjustments necessary as a result of the Second Stock Option Plan Amendment to the limitation on the number of Class B subordinate voting shares issuable, in the aggregate, pursuant to the Stock Option Plan and any other security-based compensation arrangement of the Corporation to insiders, at any time, in order to ensure that such limitation remains unaffected by the adoption of the Second Stock Option Plan Amendment. Such adjustments were not subject to shareholder approval.

The Board of Directors also approved, on February 16, 2016, amendments to the Stock Option Plan of a “housekeeping” or clerical nature, which amendments have also been approved by the TSX, but were not subject to shareholder approval, in order to delete inapplicable provisions of the plan, including all references in the Stock Option Plan to the Corporation’s former “Directors’ Plan” (being the stock option plan for the benefit of the directors of the Corporation which was abolished effective October 1, 2003) and to stock options granted before June 1, 2009 (none of which are still outstanding), as well as any and all related provisions. Apart from the “housekeeping” or clerical amendments adopted by the Board of Directors, other amendments were made to the Stock Option Plan by the Board of Directors on February 16, 2016 and have been approved by the TSX, but were not subject to shareholder approval. These amendments include (i) an amendment to modify the eligibility for participation in the Stock Option Plan to include, in addition to officers, senior employees and key employees in full employment by the Corporation or one of its subsidiaries, officers, senior employees and key employees in full employment by any other company, partnership or other legal entity designated by the HRCC from time to time (with necessary adaptations made as a consequence of such amendment to the terms on which the options may be granted, exercised, terminated, cancelled and adjusted), and (ii) an amendment to subsection 7.1.2(i) of the Stock Option Plan to clarify that if an optionee retires between age 55 and 60 after at least 5 years of continuous service with the Corporation or its subsidiaries or any other company, partnership or other legal entity designated by the HRCC from time to time, the options held by such optionee, or part thereof, shall become exercisable or expire, as the case may be, in the events and manner described in subsection 7.1.2(i), regardless of whether such optionee was a participant under an approved retirement plan. As mentioned under the heading “Amendments to the 2010 Deferred Share Unit Plan of Bombardier” in Section 2: “Business of the Meeting” of the 2016 Proxy, as a necessary consequence of the Second Stock Option Plan Amendment, the Board of Directors also approved the 2010 DSUP Amendment, subject to receipt of requisite regulatory and shareholder approval in the manner described under the heading “Amendments to the 2010 Deferred Share Unit Plan of Bombardier” in Section 2: “Business of the Meeting”.

The Board of Directors also approved, on February 16, 2016, adjustments necessary as a result of the 2010 DSUP Amendment to the limitation on the number of Class B subordinate voting shares issuable, in the aggregate, pursuant to the 2010 DSUP and any other security-based compensation arrangement of the Corporation to insiders, at any time, in order to ensure that such limitation remains unaffected by the adoption of the 2010 DSUP Amendment. Such adjustments were not subject to shareholder approval.

Another amendment was made to the 2010 DSUP by the Board of Directors on February 16, 2016 and has been approved by the TSX, but was not subject to shareholder approval. Specifically, the Board of Directors approved an amendment to modify the eligibility for participation in the 2010 DSUP to include, in addition to senior officers of the Corporation or its subsidiaries, senior officers of any other company, partnership or other legal entity designated by the HRCC from time to time (with necessary adaptations made as a consequence of such amendment to the terms on which the DSUs may be granted, terminated, cancelled and adjusted).

Restrictions Regarding Trading of Bombardier Securities and Hedging Prohibition

The Code of Ethics and Business Conduct of Bombardier provides the following restrictions on the trading of any Bombardier securities:

  • employees shall not engage in hedging activities or in any form of transactions of publicly-traded options in Bombardier securities, or any other form of derivatives relating to Bombardier shares, including “puts” and “calls”;
  • employees shall not sell Bombardier securities that they do not own ( “short sale); and
  • employees shall only trade in Bombardier shares within predetermined trading periods which start on the fifth working day following the publication of the Bombardier’s quarterly or annual financial statements and end 25 calendar days later; these trading periods are internally published and communicated to all employees who shall not trade in Bombardier shares if they have knowledge of undisclosed material information.

The Stock Option Plan also provides that optionees may not enter into any monitization transaction or other hedging procedures.

Stock Ownership Guidelines

Bombardier has adopted Stock Ownership Guidelines (SOG) for executives in order to link their interests with those of the shareholders, which guidelines are reviewed by the HRCC whenever necessary. The SOG requirements apply to the following group of executives:

  • the Executive Chairman of the Board of Directors
  • the President and Chief Executive Officer;
  • the President of business segments;
  • the Vice President, Product Development and Chief Engineer, Aerospace; and
  • the executives over determined salary grades reporting directly to the President and Chief Executive Officer, the Presidents of the business segments and the Vice President, Product Development and Chief Engineer, Aerospace, as the case may be, and who are members of their leadership teams.

Each of these executives is required to build and hold a portfolio of Class A shares or Class B subordinate voting shares with a value equal to at least the applicable multiple of his/her base salary as described in the following table:

Position held Multiple of annual base salary
Executive Chairman of the Board of Directors and President and Chief Executive Officer 5 x
President of business segments 3 x
Other executives

3 x or 2 x

depending on salary grade

The value of the portfolio is determined based on the greater of the value at the time of acquisition or the market value of the Bombardier shares held on December 31st of each calendar year. For the purpose of assessing the level of ownership, Bombardier includes the value of shares owned plus vested DSUs and granted RSUs net of estimated taxes. The HRCC monitors, each year, the progress in value of the share portfolios.

Since Bombardier shares are only traded in Canadian dollars, the actual base salary is used at par for executives paid in Canadian or US dollars. For executives paid in other currencies, the base salary at the mid-point of the Canadian salary scale for their equivalent position in Canada is used as the basis to determine their stock ownership target.

There is no prescribed period to reach the stock ownership target. However, executives are not allowed to sell shares acquired through the settlement of RSUs/PSUs or exercise of options granted on or after June 2009 or after executives become subject to the SOG until they have reached their individual target, except in order to cover the cost of acquiring the shares and the applicable local taxes.

The following table presents the SOG target of the NEOs as a multiple of base salary and the actual multiple of base salary represented by the aggregate value of shares and granted RSUs net of estimated taxes and vested DSUs held by the NEOs that were still active employees of Bombardier(1) as of December 31, 2015: 

NEOs Target multiple of base salary Actual multiple of base salary as of December 31, 2015
Pierre Beaudoin 5 x 7.52  (target attained)
Alain Bellemare 5 x 1.34
John Di Bert 3 x 0.60
Frederick Cromer 3 x 0.24
David Coleal 3 x 0.23
Laurent Troger 3 x 0.95
  1. Mr. Pierre Alary, former Senior Vice President and Chief Financial Officer, retired from the Corporation on November 1st, 2015 and Mr. Lutz Bertling, former President of Bombardier Transportation left the Corporation on December 9, 2015.