Stock Option Plan

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 voting shares.

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

  • the granting of non-assignable options to purchase Class B subordinate voting 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, 224,641,195; 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 voting 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 voting shares at the determined exercise price;
  • the exercise price equals the weighted average trading price of the Class B subordinate voting 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 10 business days following the expiration of a blackout period, such expiration date shall automatically be extended for a period of 10 business days following the end of the blackout period; and
  • 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.

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 voting shares issuable from treasury, together with the Class B subordinate voting 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 voting shares and Class A shares;
  • the total number of Class B subordinate voting shares issuable from treasury to insiders and their associates, together with the Class B subordinate voting 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 voting shares;
  • the number of Class B subordinate voting shares issued from treasury to insiders and their associates, together with the Class B subordinate voting 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 voting shares;
  • a single person cannot hold DSUs covering, or options to acquire, as the case may be, more than 5% of the Class B subordinate voting shares issued and outstanding; and
  • the total number of stock options issued in the financial year ended December 31, 2016 (being 29,195,107 stock options), as a percentage of the total number of Class A shares and Class B subordinate voting shares that were issued and outstanding as at December 31, 2016, is 1.3%.

As of March 14, 2017, the status is as follows:

  Plan Issued Issuable under DSUs granted OR stock options granted but unexercised Issuable for future DSUs OR stock option grants (2)
Total number of Class B subordinate voting shares Stock Option Plan 43,267,681 (1)
98,265,063 79,651,144
2010 DSUP 651,756 2,805,551 20,542,693
% of total number of Class A shares and Class B subordinate shares issued and outstanding Stock Option Plan 1.93% 4.37% 3.55%
2010 DSUP 0.03% 0.12% 0.91%
  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, 224,641,195.

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 obtaining 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, 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 voting 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, subdivision, consolidation, reclassification, or any other change with respect to the Class B subordinate voting shares;
  • amend the 2010 DSUP or the Stock Option Plan or an award thereunder 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 voting 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 voting shares from the number of Class B subordinate voting shares reserved for issuance under the Stock Option Plan;
  • a reduction in the purchase price for the Class B subordinate voting 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 voting 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 voting 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 voting shares reserved for the issuance under the 2010 DSUP.

On August 4, 2016, the Board of Directors approved certain amendments to the Stock Option Plan, which amendments have been approved by the TSX, but were not subject to shareholder approval in accordance with the amending provisions of the Stock Option Plan. Specifically, these amendments include

  • changes to the period during which stock options may be exercised, terminated and cancelled in the event of the death of a participant, without any extension of the original term of stock options (the “SOP Changes”), and
  • in recognition of the President and Chief Executive Officer’s dedicated work and ongoing efforts towards the success of the Corporation and the execution of its current transformation plan, amendments made to the periods during which, and terms on which, individual stock options held by, or already approved for grant to, the President and Chief Executive Officer, Mr. Alain Bellemare, may be exercised, terminated, cancelled and adjusted in certain circumstances following his cessation of employment, without any extension of the original term of stock options (the “CEO Changes” and, together with the SOP Changes, the “Amendments”).

The SOP Changes shall apply to new stock option grants, as well as stock options previously granted under the Stock Option Plan to the extent that such options have not been wholly exercised and are still outstanding. The Amendments have been reflected on the “Termination and Change of Control Provisions” page.

Hedging Prohibition

The Code of Ethics 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”; and
  • employees shall not sell Bombardier securities that they do not own (“short sale).

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 to link their interests with those of the shareholders. 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. Consequently, a value equal to at least five times their base salary is required for the Executive Chairman of the Board of Directors and President and Chief Executive Officer, three times their base salary for the Presidents of business segments, and two to three times their base salary for other executives depending on the 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.

Since Bombardier shares are traded only 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 stock options granted on or after June 2009 or after they become subject to the SOG until they have reached their individual target, except to cover the cost of acquiring the shares and the applicable taxes.