Exhibit 10.4

ENBRIDGE INC.

PERFORMANCE STOCK OPTION PLAN (2007)

 

1. PURPOSE

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

 

  (a) focus Participants on the attainment of the Corporation’s long-term
strategy and share price appreciation;

 

  (b) assist in attracting, retaining, engaging and rewarding senior executives
of the Corporation and its Subsidiaries; and

 

  (c) provide an opportunity for Participants to earn competitive total
compensation based on achieving the performance goals set out in this Plan.

 

2. DEFINED TERMS

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

 

  (a) “affiliate” has the meaning ascribed to that term in the Securities Act
(Alberta);

 

  (b) “associate” has the meaning ascribed to that term in the Securities Act
(Alberta);

 

  (c) “Blackout Period” means a period of time imposed by the Corporation where
Participants holding Options may not trade in securities of the Corporation;

 

  (d) “Board” means the Board of Directors of the Corporation;

 

  (e) “CEO” means the Chief Executive Officer of the Corporation;

 

  (f) “Change of Control” means:

 

  (i) the sale to a person or acquisition by a person not affiliated with the
Corporation or its Subsidiaries of assets of the Corporation or its Subsidiaries
having a value greater than 50% of the fair market value of the assets of the
Corporation and its Subsidiaries determined on a consolidated basis prior to
such sale whether such sale or acquisition occurs by way of reconstruction,
reorganization, recapitalization, consolidation, amalgamation, arrangement,
merger, transfer, sale or otherwise;

 

  (ii)

any change in the holding, direct or indirect, of shares of the Corporation by a
person not affiliated with the Corporation as a result of which such person, or
a group of persons, or persons acting in concert, or persons associated or
affiliated with any such person or group within the meaning of the Securities
Act (Alberta), are in a position to exercise effective

--------------------------------------------------------------------------------

 

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

 

  (iii) any reconstruction, reorganization, recapitalization, consolidation,
amalgamation, arrangement, merger, transfer, sale or other transaction involving
the Corporation where shareholders of the Corporation immediately prior to such
reconstruction, reorganization, recapitalization, consolidation, amalgamation,
arrangement, merger, transfer, sale or other transaction hold less than 50% of
the shares of the Corporation or of the continuing corporation following
completion of such reconstruction, reorganization, recapitalization,
consolidation, amalgamation, arrangement, transfer, sale or other transaction;

 

  (iv) the Corporation ceases to be a distributing corporation as that term is
defined in the Canada Business Corporations Act;

 

  (v) any event or transaction which the Board, in its discretion, deems to be a
Change of Control; or

 

  (vi) Incumbent Directors ceasing to be a majority of the Board;

provided that:

 

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

 

  (ii) any change of control initiated or commenced by the Board (and whether or
not such transaction was initiated or commenced by the Board shall be
conclusively determined by the Board) will not constitute a change of control
for purposes of this Plan;

 

- 2 -

--------------------------------------------------------------------------------

  (g) “Code” means the United States Internal Revenue Code of 1986, as amended;

 

  (h) “constructive dismissal” means, unless consented to by the Participant,
any action that constitutes constructive dismissal of the Participant, including
without limiting the generality of the foregoing:

 

  (i) where the Participant ceases to be an officer of the Corporation, unless
the Participant is appointed as an officer of a successor to a material portion
of the assets of the Corporation;

 

  (ii) a material decrease in the title, position, responsibilities, powers or
reporting relationships of the Participant;

 

  (iii) a reduction in the base salary (excluding any annual incentive bonus) of
the Participant; or

 

  (iv) any material reduction in the value of the Participant’s employee
benefits, plans and programs (other than any annual incentive bonus);

 

  (i) “Corporation” means Enbridge Inc., and includes any successor entity
thereto;

 

  (j) “Director” means a director of the Corporation;

 

  (k) “Fair Market Value” means, as of a particular day, the weighted average of
the board lot trading prices per Share on the Toronto Stock Exchange, or the New
York Stock Exchange, for the last five Trading Days immediately prior to such
day;

 

  (l) “For Cause” includes “just cause” as defined in the common law and also
includes any circumstance in which the Participant shall have been convicted of
a criminal act of dishonesty resulting or intending to result directly or
indirectly in gain or personal enrichment of the Participant;

 

  (m) “Grant Date” has the meaning set forth in Section 7(c);

 

  (n) “Grant Price” has the meaning set forth in Section 7(c);

 

  (o) “HRC Committee” means the Human Resources & Compensation Committee of the
Board, established and duly authorized to act in accordance with the By-Laws of
the Corporation;

 

  (p) “Incumbent Director” means any member of the Board who was a member of the
Board immediately prior to the occurrence of the transaction, elections or
appointments giving rise to a Change of Control and any successor to an
Incumbent Director who was recommended for election at a meeting of shareholders
of the Corporation, or elected or appointed to succeed any Incumbent Director,
by the affirmative vote of the Directors, which affirmative vote includes a
majority of the Incumbent Directors then on the Board;

 

- 3 -

--------------------------------------------------------------------------------

  (q) “Insider” means:

 

  (i) an insider, as defined in the Securities Act (Alberta); and

 

  (ii) an associate of any person who is an insider by virtue of (i) above;

 

  (r) “Notice Period” means the notice period for termination of employment
agreed to between the Corporation (or its Subsidiary) and the Participant, or,
in the absence of any such agreement, the notice period required under
applicable law;

 

  (s) “Option” means an Option to purchase Shares granted to the Participant in
accordance with the terms and conditions of this Plan;

 

  (t) “Participant” means any employee, including an officer, of the Corporation
or a Subsidiary who has been designated by the HRC Committee to receive and be
granted Options in accordance with Section 5;

 

  (u) “Performance Vesting Requirement” has the meaning ascribed to that term in
Section 7(b);

 

  (v) “Plan” means the Performance Stock Option Plan (2007) of the Corporation
described in this document, and as the same may be duly amended or varied from
time to time in accordance with the provisions of this Plan;

 

  (w) “Pro-rated Option” means a grant of Options where the number of Options
subject to the grant has been reduced in accordance with Section 8(a), (b),
(d) or (e);

 

  (x) “Retirement Plan” means a pension plan of the Corporation established or
in effect from time to time which applies when an employee retires from the
employment of the Corporation or any of its Subsidiaries;

 

  (y) “Share” means a common share in the capital of the Corporation;

 

  (z) “Share Reserve” has the meaning ascribed to that term in Section 4;

 

  (aa) “Subsidiary” means:

 

  (i) any corporation that is a subsidiary (as such term is defined in the
Canada Business Corporations Act) of the Corporation, as such provision is from
time to time amended, varied or re-enacted;

 

- 4 -

--------------------------------------------------------------------------------

  (ii) any partnership or limited partnership that is controlled by the
Corporation (the Corporation will be deemed to control a partnership or limited
partnership if the Corporation possesses, directly or indirectly, the power to
direct or cause the direction of the management or policies of such partnership
or limited partnership, whether through the ownership of voting securities, by
contract or otherwise); and

 

  (iii) subject to regulatory approval, any corporation, partnership, limited
partnership, trust, limited liability company or other form of business entity
that the HRC Committee determines ought to be treated as a subsidiary for
purposes of the Plan, provided that the HRC Committee shall have the sole
discretion to determine that any such entity has ceased to be a subsidiary for
purposes of the Plan;

 

  (bb) “Term” has the meaning ascribed to that term in Section 7;

 

  (cc) “Time Vesting Period” means the aggregate number of months from the Grant
Date of the Option to the date that all Time Vesting Requirements have been met;

 

  (dd) “Time Vesting Requirement” has the meaning ascribed to that term in
Section 7(b);

 

  (ee) “Trading Day” means any day on which the Toronto Stock Exchange or the
New York Stock Exchange, as the case may be, is open for trading; and

 

  (ff) “United States Incentive Stock Option” has the meaning set forth in
Section 9(a).

 

3. GOVERNANCE

 

  (a) Subject to any determinations or approvals required to be made by the
Board, the HRC Committee will administer the Plan in its sole discretion. The
HRC Committee shall have the full power and sole responsibility to interpret the
provisions of the Plan and to make regulations and formulate administrative
provisions for its implementation, and to make such changes in the regulations
and administrative procedures as, from time to time, the HRC Committee deems
proper and in the best interests of the Corporation. Such regulations and
provisions may include the delegation to any Director or Directors or any
officer or officers of the Corporation or its Subsidiaries of such
administrative duties and powers of the HRC Committee as it may, in its sole
discretion, deem fit. The determinations of the HRC Committee in the
administration of the Plan shall be final and conclusive.

 

  (b) Prior to the CEO requesting any grants under the Plan, the CEO will
recommend to the HRC Committee for its approval the performance measures and the
levels of achievement for 100% of the Options to vest and the level below which
no Options will vest. The HRC Committee is authorized to approve, for each
Option granted under the plan, the terms for vesting any Option granted under
the Plan. The HRC Committee shall also have the authority to approve any
amendments to such performance measures and the expected levels of performance.

 

- 5 -

--------------------------------------------------------------------------------

  (c) Subject to Section 13, the HRC Committee may waive any restrictions with
respect to participation in the Plan or vesting with respect to any specific
Participants where, in the opinion of the HRC Committee, it is reasonable to do
so and such waiver does not prejudice the rights of the Participant under the
Plan.

 

  (d) Subject to Section 13, the HRC Committee may amend the Plan for any
general administrative matters, correct, remedy or reconcile any errors,
inconsistencies or ambiguities, cashless exercise, vesting or termination
provisions or any performance measures and recommend to the Board for its
approval any other amendments.

 

  (e) Grants to Participants will be made in the sole discretion of the HRC
Committee.

 

4. SHARES AND SHARE RESERVE

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

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

 

5. PARTICIPATION AND GRANT OF OPTIONS

 

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

 

  (i) the total number of Shares reserved for issuance to any one Participant
pursuant to all security based compensation arrangements of the Corporation
shall not exceed in the aggregate 5% of the number of Shares outstanding at the
time of reservation;

 

  (ii) the total number of Shares reserved for issuance to Insiders pursuant to
all security based compensation arrangements of the Corporation shall not exceed
10% of the number of Shares outstanding at the time of reservation;

 

- 6 -

--------------------------------------------------------------------------------

  (iii) the total number of Shares issued to Insiders pursuant to all security
based compensation arrangements of the Corporation within any one-year period
shall not exceed 10% of the number of Shares outstanding at the time of issuance
(excluding any other shares issued under all security based compensation
arrangements of the Corporation during such one-year period); and

 

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

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

 

  (b) The CEO:

 

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

 

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

 

  (c) The HRC Committee shall:

 

  (iii) determine and recommend to the Board, for its approval, the grant date
of Options;

 

  (iv) determine and recommend to the Board, for its approval, the grants to be
made to the CEO; and

 

  (v) review and recommend to the Board, for its approval, any other grants made
pursuant to the Plan.

 

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

 

- 7 -

--------------------------------------------------------------------------------

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

 

6. PERFORMANCE MEASURES

The CEO shall advise the Chair of the HRC Committee upon the Human Resources,
Accounting and Finance Groups and the CEO jointly concurring that the
performance measures for an Option grant have been achieved, and the number of
Options that have become exercisable as a result.

 

7. OPTION TERMS

 

  (a) Term

The term (“Term”) during which an Option shall be exercisable shall be fixed by
the HRC Committee at the time of grant, but in no case shall a term exceed 10
years, and each Option shall be subject to earlier termination, as provided in
Section 8; provided that when the Term expires in a Blackout Period the Term
shall be extended to a date that is five Trading Days after the end of the
Blackout Period.

 

  (b) Exercise

An Option shall vest and become exercisable in accordance with the terms set by
the HRC Committee at the time of grant. The Option shall vest and become
exercisable when the time period, if any, established by the HRC Committee since
the date of the grant has expired (the “Time Vesting Requirement”) and the
performance measures in Section 6 (the “Performance Vesting Requirement”) have
been met or have been deemed to be met; provided that the Time Vesting
Requirement shall be deemed to be met in respect of any Pro-rated Option. A
Participant may exercise vested instalments of his or her Option in whole or in
part at any time and from time to time during the Term.

 

  (c) Grant and Price

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

 

- 8 -

--------------------------------------------------------------------------------

  (d) Payment

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

 

  (e) Share Settled Options

If approved by the Board, in lieu of paying the Grant Price for Shares to be
issued pursuant to such exercise, the Participant may elect to acquire the
number of Shares determined by subtracting the Grant Price from the Then Fair
Market Value of the Shares on the date of exercise, multiplying the difference
by the number of Shares in respect of which the Option was otherwise being
exercised and then dividing that product by the Then Fair Market Value of the
Shares. For this purpose, the “Then Fair Market Value” means the price at which
the Shares could be sold or are sold on the Toronto Stock Exchange or the New
York Stock Exchange on the date of exercise of the Option. In such event, the
number of Shares as so determined (and not the number of Shares to be issued
under the Option) will be deemed to be issued under the Plan.

 

  (f) Share Ownership Guidelines

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

 

  (g) Transferability

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

 

8. TERMINATION

 

  (a) Voluntary Termination

If a Participant voluntarily terminates his or her employment with the
Corporation or a Subsidiary, the number of Options in a grant of Options shall
be reduced to the number obtained by multiplying the number of Options granted
by a fraction the numerator of which is the number of full calendar months of
active employment of the Participant since the grant date of the Option and the
denominator of which is the total number of months in the Time Vesting Period.
Subject to the Performance Vesting Requirements being satisfied, such number of
Options shall remain exercisable until the earlier of: (i) 30 days following the
Participant’s last day of employment with the Corporation (or its Subsidiary);
and (ii) the expiry of the term of the Options; following which all Options
shall be cancelled.

 

- 9 -

--------------------------------------------------------------------------------

  (b) Involuntary Termination Not For Cause

If the employment of a Participant is terminated by the Corporation or a
Subsidiary other than For Cause, the number of Options in a grant of Options
shall be reduced to the number obtained by multiplying the number of Options
granted by a fraction the numerator of which is the number of full calendar
months of active employment of the Participant since the Grant Date of the
Option and the denominator of which is the total number of months in the Time
Vesting Period (and for this purpose the Notice Period shall be counted as
active employment). Subject to the Performance Vesting Requirements being
satisfied, such number of Options shall be exercisable until the earlier of:
(i) 30 days following the expiry of the Notice Period; and (ii) the expiry of
the Term of the Options; following which all vested and unexercised Options and
all unvested Options shall be cancelled.

For the purposes of this subsection 8(b), if a Participant’s employment
terminates due to the constructive dismissal of the Participant, such
termination shall be treated as an involuntary termination by the Corporation or
a Subsidiary other than For Cause.

 

  (c) Involuntary Termination For Cause

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

 

  (d) Death

If the employment of a Participant with the Corporation or a Subsidiary is
terminated as a result of the death of such Participant, the number of Options
in a grant of Options shall be reduced to the number obtained by multiplying the
number of Options granted by a fraction the numerator of which is the number of
full calendar months of active employment of the Participant since the Grant
Date of the Options and the denominator of which is the total number of months
in the Time Vesting Period. Such number of Options shall be exercisable on the
assumption that the performance measures have been met until the earlier of:
(i) 12 months following the date of such Participant’s death; and (ii) the
expiry of the Term of the Options; following which all vested and unexercised
Options and all unvested Options shall be cancelled.

 

- 10 -

--------------------------------------------------------------------------------

  (e) Retirement

If a Participant has attained the age of 55 and retires from his or her
employment with the Corporation or a Subsidiary pursuant to a Retirement Plan
and he or she is eligible for benefits under a Retirement Plan, the number of
Options in a grant of Options shall be reduced to the number obtained by
multiplying the number of Options granted by a fraction the numerator of which
is the number of full calendar months of active employment of the Participant
since the Grant Date of the Option to the total number of months in the Time
Vesting Period. Subject to the Performance Vesting Requirements being satisfied,
such number of Options shall be exercisable until the earlier of: (i) three
years following the date of such Participant’s retirement; and (ii) the expiry
of the Term of the Options; following which all vested and unexercised Options
and all unvested Options shall be cancelled.

 

  (f) Disability

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

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

 

  (g) Leaves of Absence

If a Participant is on a parental or other leave of absence approved by the
Corporation or a Subsidiary for a period of greater than three months, all
unexercised and vested Options held by such Participant as at the Participant’s
last day of active employment prior to such parental or other leave shall
continue to be exercisable in accordance with the terms of such Options,
following which all unexercised and vested Options held by such Participant
shall be cancelled. All unvested Options held by such Participant as at the
Participant’s last day of active employment prior to such parental or other
leave shall continue to vest during such Participant’s leave, provided that if
the Participant does not return to active employment by the end of the leave,
all vested and unvested Options as at the end of the leave of absence shall be
treated in accordance with the second paragraph of subsection 8(a) on the
assumption that the Participant’s last day of employment is the end of the leave
of absence. Unless otherwise determined by the HRC Committee, no additional
Option grants shall be made to any Participant during such Participant’s leave
of absence.

 

- 11 -

--------------------------------------------------------------------------------

  (h) Secondments

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

 

  (i) Change of Control

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

 

  (j) No Future Grants; No Cash Payment

Upon the occurrence of any of the foregoing events listed under subsections 8(a)
to (f) in respect of a Participant, such Participant shall not be entitled to
receive any further Option grants or the value of any grants foregone as a
consequence of any such event and, except as set forth herein, shall not be
entitled to receive any cash payment for the value of any unexercised Options,
vested or unvested, held by the Participant as at the date of occurrence of such
event.

 

9. TERMS AND CONDITIONS OF UNITED STATES INCENTIVE STOCK OPTIONS

 

  (a) Designated employees of any Subsidiary located in the United States of
America may be granted “incentive stock options” within the meaning of
Section 422 of the Code (“United States Incentive Stock Options”). The maximum
number of Shares that may be issued under the Plan as United States Incentive
Stock Options shall not be greater than 2,000,000 Shares. An Option that is a
United States Incentive Stock Option will be designated as such in the
applicable Option agreement and no Option that is not so designated will be
treated as a United States Incentive Stock Option under the Plan.

 

  (b) No United States Incentive Stock Options shall be granted to any
Participant if, as a result of such grant, the aggregate Fair Market Value (as
of the time the Option is proposed to be granted) of the Shares covered by all
the United States Incentive Stock Options granted under this Plan, and any other
plan of the Corporation or any Subsidiary, to the Participant, which are or will
become exercisable for the first time by the Participant in a single calendar
year, exceeds US $100,000 or such amount as shall be specified in Section 422 of
the Code.

 

- 12 -

--------------------------------------------------------------------------------

  (c) The exercise price of a United States Incentive Stock Option shall not be
less than 100% of the Grant Price as at the Grant Date.

 

  (d) No United States Incentive Stock Option may be granted under the Plan to
any individual who, at the time the option is granted, owns stock possessing
more than 10% of the total combined voting power of all classes of stock of his
or her employer corporation or of its parent or subsidiary corporations (as such
ownership may be determined for purposes of Section 422(b)(6) of the Code),
unless (i) at the time such United States Incentive Stock Option is granted, the
Grant Price is at least 110% of the Fair Market Value of the Shares subject
thereto and (ii) the United States Incentive Stock Option by its terms is not
exercisable after the expiration of five years from the date granted.

 

  (e) Notwithstanding the provisions of this Section 7, exercise periods for
United States Incentive Stock Options on the happening of an event described in
Sections 7(b), (d), (e) and (f) shall be as set forth in the applicable Option
agreement.

 

  (f) United States Incentive Stock Options shall otherwise be subject to the
terms and conditions as set forth in this Plan.

 

10. ADJUSTMENTS

 

  (a) In the event that the number of outstanding Shares is increased or
decreased, or changed into, or exchanged for a different number or kind of
shares or other securities of the Corporation or another corporation, whether
through a stock dividend, stock split, consolidation, recapitalization,
amalgamation, reorganization, arrangement or other transaction effected without
receipt of consideration, the HRC Committee or the Board may make appropriate
adjustment in the number or kind of shares or securities available for Options
pursuant to the Plan and, as regards Options previously granted or to be granted
pursuant to the Plan, in the number and kind of shares or securities and the
purchase price thereof and the manner in which installments of the Options vest
and become exercisable.

 

  (b) The appropriate adjustments in the number of Shares under Option, the
Grant Price per share and the period during which each Option may be exercised
may be made by the Board in its discretion and in order to give effect to the
adjustments in the number of shares of the Corporation resulting from the
implementation and operation of the Shareholder Rights Plan Agreement dated as
of November 9, 1995 between the Corporation and CIBC Mellon Trust Company, as
amended, restated or revised from time to time.

 

11. EFFECT OF REORGANIZATION

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

 

- 13 -

--------------------------------------------------------------------------------

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

 

12. TAXES AND REPORTING

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

 

13. AMENDMENT OF THE PLAN

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

 

  (a) the maximum number of shares reserved for issuance under the Plan;

 

  (b) a reduction in the Grant Price for any Options;

 

  (c) the cancellation of any Options and the reissue of or replacement of such
Options with Options having a lower Grant Price;

 

  (d) an extension to the term of any Option;

 

  (e) any change allowing other than full-time employees of the Corporation or a
Subsidiary to become Participants in the Plan;

 

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

 

- 14 -

--------------------------------------------------------------------------------

14. CONFLICT WITH WRITTEN EMPLOYMENT AGREEMENT

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

 

15. EFFECTIVE DATE

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

 

- 15 -