**COREL CORPORATION****EQUITY INCENTIVE PLAN****SECTION 1. PURPOSE.**The purposes of this Corel Corporation Equity Incentive Plan (the “Plan”) areto encourage selected employees, officers, directors and consultants of, and other individualsproviding services to, Corel Corporation (together with any successor, the “Company”) and itsAffiliates (as defined below) to acquire a proprietary interest in the growth and performance ofthe Company, to generate an increased incentive to contribute to the Company’s future success andprosperity thus enhancing the value of the Company for the benefit of its shareholders, and toenhance the ability of the Company and its Affiliates to attract and retain exceptionally qualifiedindividuals upon whom, in large measure, the sustained progress, growth and profitability of theCompany depend.**SECTION 2. DEFINITIONS.**As used in the Plan, the following terms will have the meanings set outbelow:“**Affiliate**” means, with respect to any entity, any entity that, directly or through one or moreintermediaries, is controlled by such entity, including any entity in which such entity owns asignificant equity interest, as determined by the Committee.“**Award**” means any Option, Share Appreciation Right, Restricted Share, Restricted Share Unit,Performance Share Unit, or Other Share-Based Award granted under the Plan.“**Award Agreement**” means any written agreement, contract or other instrument or document evidencingany Award granted under the Plan.“**Blackout Period**” means the period imposed by the Company, during which a Participant may not tradein the Company’s securities and includes any period during which a Participant has materialnon-public information, but does not include any period when a regulator has halted trading in theCompany’s securities.“**Board**” means the Board of Directors of the Company.“**Cause**”, as used in connection with the termination of a Participant’s employment, means (1) withrespect to any Participant employed under a written employment agreement with the Company or anAffiliate of the Company which agreement includes a definition of “cause,” “cause” as defined inthat agreement or, if that agreement contains no such definition, a material breach by theParticipant of that agreement, or (2) with respect to any other Participant, the failure to performadequately in carrying out the Participant’s employment responsibilities, including any directivesfrom the Board, or the Participant engaging in behavior in the Participant’s personal or businesslife as to lead the Committee in its reasonable judgment to determine that it is in the bestinterests of the Company to terminate the Participant’s employment.“**Code**” means the *Internal Revenue Code of 1986*, as amended from time to time, and the regulationspromulgated under it.“**Committee**” means the Compensation Committee of the Board, provided, however, to the extent deemednecessary or appropriate, a committee other than the Compensation Committee may be designated bythe Board to administer the Plan and such other committee may be vested with any of the powers andresponsibilities hereunder and shall be considered the Committee for any and all of such purposeshereunder. To the extent the Company desires to grant Incentive Stock Options, such committee shallbe composed of not less than two directors of the Company, neither of whom shall be employees ofthe Company or its Affiliates and each of whom shall otherwise be “outside directors” for purposesof Section 162(m) of the Code. To the extent the Company is no longer a “foreign private issuer” asdefined in Exchange Act Rule 3b-4 and wishes to have a “Qualified Plan” as defined in Rule16b-3(b)(4), such committee shall be composed of not less than two directors of the Company, eachof whom are “non-employee directors” for purposes of Exchange Act Section 16 and Rule 16b-3thereunder.

 

- 2 -“**Common Shares**” means any or all, as applicable, of the common shares of the Company and any othersecurities or property as may become the subject of Awards, or become subject to Awards, pursuantto an adjustment made under Section 4(b) of the Plan and any other securities of the Company or anyAffiliate or any successor that may be so designated by the Committee.“**Consultant**” means any consultant of, or other individual providing services to, the Company or anyAffiliate, provided that, for purposes of Awards made to individuals in Canada, a consultant meansa person that (1) is engaged to provide services to the Company and/or an Affiliate, other thanservices provided in relation to a distribution of securities, (2) provides the services under awritten contract with the Company and/or the Affiliate and (3) spends or will spend a significantamount of time and attention on the affairs and business of the Company and/or the Affiliate.“**Control Person**” means, with respect to any entity, a person that controls such entity.“**Employee**” means any employee of the Company or of any Affiliate.“**Exchange**Act” means the *United States Securities Exchange Act of 1934*, as amended.“**Fair Market Value**” means (1) with respect to any property other than the Common Shares, the fairmarket value of that property determined by those methods or procedures as may be established fromtime to time by the Committee and (2) with respect to the Common Shares, the closing sale pricereported for such Common Shares on the date of reference on the Principal Market. If there is noclosing sale price reported on any such date, the Fair Market Value will be determined by theCommittee in accordance with the regulations promulgated under Section 2031 of the Code, or by anyother appropriate method selected by the Committee.“**Good Reason**”, as used in connection with the termination of a Participant’s employment, means (1)with respect to any Participant employed under a written employment agreement with the Company oran Affiliate of the Company, “good reason” or similar term as defined in that written agreement or,if such agreement contains no such definition, a material breach by the Company of that agreement,or (2) with respect to any other Participant, a failure by the Company to pay that Participant anyamount otherwise vested and due and a continuation of that failure for 30 business days followingnotice to the Company of that failure.“**Incentive Stock Option**” means an option granted under Section 6(a) of the Plan that is intended tomeet the requirements of Section 422 of the Code or any successor provision.“**insider**” has the same meaning as found in the *Securities Act (Ontario)*, as amended, and alsoincludes associates and affiliates of the insider; and “issuances to insiders” includes direct andindirect issuances to insiders.“**Non-Qualified Stock Option**” means an option granted under Section 6(a) of the Plan that is notintended to be an Incentive Stock Option. Any stock option granted by the Committee which is notdesignated an Incentive Stock Option will be deemed a Non-Qualified Stock Option.“**Option**” means an Incentive Stock Option or a Non-Qualified Stock Option.“**Other Share-Based Award**” means any right granted under Section 6(e)(i) of the Plan.“**Participant**” means any individual granted an Award under the Plan.“**Performance Share Unit**” means any right granted under Section 6(e) of the Plan.“**Person**” means any individual, corporation, partnership, association, joint-stock company, trust,unincorporated organization, or government or political subdivision of a government.“**Principal Market**” means the principal stock exchange, quotation system or other market on whichthe Common Shares are listed, admitted to trading, posted for trading or quoted upon which hasoccurred the greatest trading

 

- 3 -volume of the Common Shares for the six months (or, to the extent the Common Shares have not beenlisted, admitted to trading, posted for trading or quoted for at least six months, the next longestperiod since the Common Shares were initially listed, admitted to trading, posted for trading orquoted) prior to the date of reference, provided, however, that to the extent deemed necessary orappropriate, the Principal Market shall be as determined by the Committee in accordance withapplicable law, rules and regulations.“**Released Securities**” means securities that were Restricted Shares but with respect to which allapplicable restrictions have expired, lapsed or been waived in accordance with the terms of thePlan or the applicable Award Agreement.“**Restricted Shares**” means any Common Shares granted under Section 6(c) of the Plan, any rightgranted under Section 6(c) of the Plan that is denominated in Common Shares or any other Awardunder which issued and outstanding Common Shares are held subject to certain restrictions.“**Restricted Share Unit**” means a right to receive a Common Share or the Fair Market Value of aCommon Share granted under Section 6(d) of the Plan.“**Securities Act**” means the *United States Securities Act of 1933*, as amended.“**Share Appreciation Right**” means any right granted under Section 6(b) of the Plan.“**Significant Event**” means, unless otherwise defined in an Award Agreement or a written employmentagreement between the Company and a Participant (which definition shall govern), the occurrence ofany of the following events: (1) a person or group of persons becomes the beneficial owner ofsecurities of the Company constituting 50% or more of the voting power of all outstanding votingsecurities of the Company, (2) a majority of the Company’s Board as of the date of adoption of thisPlan (including any successors approved by the then existing Board) cease to constitute a majorityof the Board; (3) a merger, consolidation, amalgamation or arrangement of the Company (or a similartransaction) occurs, unless after the event, 50% or more of the voting power of the combinedcompany is beneficially owned by the same person or group of persons as immediately before theevent; or (4) the Company’s shareholders approve a plan of complete liquidation or winding-up ofthe Company, or the sale or disposition of all or substantially all the Company’s assets (otherthan a transfer to an Affiliate of the Company); provided that the following shall not constitute aSignificant Event: (i) any person or group of persons becoming the beneficial owner of thethreshold of securities specified in (1) as a result of the acquisition of securities by theCompany or a subsidiary which, by reducing the number of securities outstanding, increases theproportional number of securities beneficially held by that person or group of persons, (ii) anyacquisition of securities directly from the Company in connection with a bona fide financing orseries of financings by the Company, (iii) any acquisition by an employee benefit plan (or relatedtrust) sponsored or maintained by the Company or its Affiliates or (iv) beneficial ownership byCorel Holdings, L.P., its Affiliates and/or its Control Persons or any increased ownership by anyof them.“**U.S. Participant**” means any Participant residing in the United States or who is a U.S. citizen.**SECTION 3. ADMINISTRATION.** (a) The Plan will be administered by the Committee subject to the Committeereporting to the Board as required by the Committee’s mandate.  (b) Subject to the terms of the Plan and applicable law, and in addition to otherexpress powers and authorizations conferred on the Committee by the Plan, the Committeewill have full power and authority to, subject to the Plan: (1) designate Participants;(2) determine the type or types of Awards to be granted to an eligible Employee orother individual under the Plan; (3) determine the number and classification of CommonShares to be covered by (or with respect to which payments, rights or other matters areto be calculated in connection with) Awards; (4) determine the terms and conditions ofany Award; (5) determine whether, to what extent, and under what circumstances Awardsmay be settled or exercised in cash, Common Shares, other securities, other

 

- 4 -   Awards or other property, or canceled, forfeited or suspended, and the method ormethods by which Awards may be settled, exercised, canceled, forfeited or suspended;(6) determine requirements for the vesting or exercisability of Awards orperformance criteria to be achieved in order for Awards to vest, the acceleration ofvesting or the waiver of forfeiture or other restrictions on awards; (7) determinewhether, to what extent and under what circumstances cash, Common Shares, othersecurities, other Awards, other property and other amounts payable with respect toan Award under the Plan will be deferred either automatically or at the election ofthe holder or of the Committee; (8) interpret and administer the Plan and anyinstrument or agreement relating to, or Award made under, the Plan; (9) establish,amend, suspend or waive any rules and regulations and appoint any agents as it willdeem appropriate for the proper administration of the Plan; (10) determine whetherawards will be adjusted for dividend entitlements; (11) amend or adjust the termsand conditions of outstanding Awards; (12) implement an Award exchange program, (13)arrange for financing by broker-dealers (including payment by the Company ofcommissions) and establish award exercise procedures, (14) establish procedures forpayment of withholding tax obligations with cash or shares and (15) make any otherdetermination and take any other action that the Committee deems necessary ordesirable for the administration of the Plan.  (c) Unless otherwise expressly provided in the Plan, all designations,determinations, interpretations and other decisions under or with respect to the Planor any Award will be within the sole discretion of the Committee, may be made at anytime and will be final, conclusive and binding upon all Persons, including the Company,any Affiliate, any Participant, any holder or beneficiary of any Award, any shareholderand any Employee.  (d) Any reference in this Plan to the date of termination or cessation or aParticipant’s employment shall mean the Participant’s last day of active employment andshall not include any period of statutory, contractual or reasonable notice or anyperiod of deemed employment.  (e) Notwithstanding the foregoing, the maximum number of Common Shares underlyingor relating to Awards which may be granted to any one Participant under this Plan inany calendar year will not exceed 500,000 Common Shares, subject to the adjustmentsprovided in Section 4(b), and no Awards under this Plan will be granted after December31, 2015.  (f) Notwithstanding anything to the contrary in this Plan: (i) the maximum number of securities of the Company issuable toinsiders at any time under (A) this Plan and (B) all of the Company’s othersecurity based compensation arrangements, shall not exceed ten percent (10%) ofthe Company’s total issued and outstanding securities, subject to theadjustments provided in Section 4(b); and  (ii) the maximum number of securities of the Company issued toinsiders within any one year period under (A) this Plan and (B) all of theCompany’s other security based compensation arrangements, shall not exceed tenpercent (10%) of the Company’s total issued and outstanding common shares,subject to the adjustments provided inSection 4(b).**SECTION 4. COMMON SHARES AVAILABLE FOR AWARDS.** (a) Common Shares Available. Subject to adjustment as provided in Section4(b): (i) Calculation of Number of Common Shares Available. The number ofCommon Shares available for granting Awards under the Plan will be 6,850,000any or all of which Awards may be or may be based on Common Shares, any otherrelated security or any combination. In addition, no more than 500,000 CommonShares may be issued on the exercise of Incentive Stock Options and no morethan 700,000 Common Shares may be issued as Restricted Shares.

 

- 5 - (ii) Shares Becoming Again Available. If, after the effective dateof the Plan, any Common Shares covered by an Award granted under the Plan or towhich such an Award relates lapses, expires, terminates or is forfeited; aresettled in cash; or otherwise terminate or are canceled without the delivery ofCommon Shares or other consideration, and Common Shares surrendered to theCompany as payment of exercise price, withholding tax or as part of an Awardexchange program will to that extent again be, or will become, available forgranting Awards under the Plan.  (iii) Accounting for Awards. For purposes of this Section 4, (A) if an Award is denominated in or based uponCommon Shares, the number of Common Shares covered by that Award or towhich that Award relates will be counted on the date of grant of thatAward against the total number of Common Shares available for grantingAwards under the Plan and against the maximum number of Awardsavailable to any Participant; and  (B) Awards not denominated in Common Shares may becounted against the total number of Common Shares available forgranting Awards under the Plan and against the maximum number of Awardsavailable to any participant in that amount and at such time as theCommittee determines under procedures adopted by the Committeeconsistent with the purposes of the Plan;   provided, however, that Awards that operate in tandem with (whether grantedsimultaneously with or at a different time from), or that are substitutedfor, other Awards may be counted or not counted under procedures adopted bythe Committee in order to avoid double counting.    Any Common Shares that are delivered by the Company, and any Awards that aregranted by, or become obligations of, the Company, through the assumption bythe Company or an Affiliate of, or in substitution for, outstanding awardspreviously granted by an acquired company will, in the case of Awardsgranted to Participants who are executive officers or directors of theCompany, be counted against the Common Shares available for granting Awardsunder the Plan.  (iv) Sources of Common Shares Deliverable Under Awards. Any CommonShares delivered pursuant to an Award may consist, in whole or in part, ofauthorized and unissued Common Shares or of outstanding Common Shares acquiredon the open market. (b) Adjustments. In the event that the Committee determines that anydividend or other distribution (whether in the form of cash, Common Shares, othersecurities or other property), recapitalization, stock split, stock dividend, reversestock split, reorganization, merger, consolidation, split-up, spin-off, combination,repurchase or exchange of Common Shares or other securities of the Company, issuance ofwarrants or other rights to purchase Common Shares or other securities of the Company,or other similar corporate transaction or event affects the Common Shares such that anadjustment is determined by the Committee to be appropriate in order to preventdilution or enlargement of the benefits or potential benefits intended to be madeavailable under the Plan, then the Committee will, in any manner as it may deemequitable, adjust any or all of (1) the number and kind of Common Shares (or othersecurities or property) which thereafter may be made the subject of Awards, (2) thenumber and kind of Common Shares (or other securities or property) subject tooutstanding Awards, and (3) the grant or exercise price with respect to any Award or,if deemed appropriate, make provision for a cash payment to the holder of anoutstanding Award; provided, however, that the number of Common Shares subject to anyAward denominated in Common Shares will always be a whole number.  (c) Significant Events. If a Significant Event occurs, and unless otherwiseprovided in an Award Agreement or a written employment contract between the Company anda Participant and except

 

- 6 -   as otherwise set out in this paragraph, the Committee, in its sole discretion, mayprovide that (1) the successor corporation will assume each Award or replace it witha substitute Award, (2) the Awards will become exercisable or vested in whole or inpart upon written notice, (3) the Awards will be surrendered for a cash payment, or(4) any combination of the foregoing will occur. Awards to Participants who aredirectors of the Company shall automatically become exercisable and vested in fullon the occurrence of a Significant Event. If a U.S. Participant is entitled toreceive payments that would qualify as excess “parachute payments’“ under Section280G of the Code, those payments may be reduced so that the participant is notsubject to the excise tax under Section 4999 of the Code if such a reduction wouldresult in the U.S. Participant receiving a greater after-tax payment.**SECTION 5. ELIGIBILITY.**Any Employee, including any officer or employee-director of the Company orof any Affiliate, and any Consultant of the Company or any Affiliate will be eligible to bedesignated a Participant. A non-employee director will be eligible to receive Non-Qualified StockOptions under the Plan. No more than 500,000 Common Shares may be the subject of the total Awardsgranted to any one Participant in any calendar year. In the case of any “specified employee” who isa U.S. Participant, distributions may not be made prior to the date which is 6 months after thedate of separation from service (or, if earlier, the date of death of the Employee). For purposesof the preceding sentence, a specified employee is a key employee (as defined in section 416(i) ofthe Code without regard to paragraph (5) thereof).**SECTION 6. AWARDS.** (a) Options. The Committee is hereby authorized to grant to eligibleindividuals options to purchase Common Shares (each, an “Option”) which will containthe following terms and conditions and with any additional terms and conditions, ineither case not inconsistent with the provisions of the Plan, as the Committeedetermines: (i) *Exercise Price*. The purchase price per Common Share purchasableunder an Option will be determined by the Committee; provided, however, thatthe exercise price will not be less than one hundred percent (100%) of the FairMarket Value of a Common Share on the date of grant of that Option, or anyother price as required underSection 6(a)(iv).  (ii) *Time and Method of Exercise.*Subject to the terms of Section6(a)(iii), the Committee will determine the time or times at which an Optionmay be exercised in whole or in part, and the method or methods by which, andthe form or forms (including, without limitation, cash, Common Shares,outstanding Awards, or other property, or any combination thereof, having aFair Market Value on the exercise date equal to the relevant exercise price) inwhich, payment of the exercise price with respect thereto may be made or deemedto have been made.  (iii) *Exercisability Upon Death, Retirement and Termination ofEmployment*. Subject to the condition that no Option may be exercised in wholeor in part after the later of: (1) the expiration of the Option periodspecified in the applicable Award Agreement; and (2) 10 days immediatelyfollowing the end of a Blackout Period where a Unit would expire during orwithin 10 days following the expiration of the Blackout Period: (A) Subject to the terms of paragraph (D) below,upon the death of a Participant while employed or within three (3)months of retirement or disability as defined in paragraph (B) below,the Person or Persons to whom such Participant’s rights with respect toany Option held by such Participant are transferred by will or the lawsof descent and distribution may, prior to the expiration of the earlierof: (1) the outside exercise date determined by the Committee at thetime of granting the Option, or (2) twelve (12) months after suchParticipant’s death, purchase any or all of the Common Shares withrespect to which such Participant was entitled to exercise such Optionimmediately prior to such Participant’s death,

 

- 7 -   and any Options not so exercisable will lapse on the date of suchParticipant’s death;  (B) Subject to the terms of paragraph (D) below,upon termination of a Participant’s employment with the Company (x) asa result of retirement pursuant to a retirement plan of the Company oran Affiliate or disability (as determined by the Committee) of suchParticipant, (y) by the Company other than for Cause, or (z) by theParticipant with Good Reason, such Participant may, prior to theexpiration of the earlier of: (1) the outside exercise date determinedby the Committee at the time of granting the Option, or (2) three (3)months after the date of such termination, purchase any or all of theCommon Shares with respect to which such Participant was entitled toexercise any Options immediately prior to such termination, and anyOptions not so exercisable will lapse on such date of termination;  (C) Subject to the terms of paragraph (D) below,upon termination of a Participant’s employment with the Company underany circumstances not described in paragraphs (A) or (B) above, suchParticipant’s Options will be immediately canceled to the extent nottheretofore exercised;  (D) Upon (i) the death of the Participant, or (ii)termination of the Participant’s employment with the Company (x) by theCompany other than for Cause (y) by the Participant with Good Reason or(z) as a result of retirement or disability as defined in paragraph (B)above, the Company will have the right to cancel all of the Optionssuch Participant was entitled to exercise at the time of such death ortermination (subject to the terms of paragraphs (A) or (B) above) for apayment in cash equal to the excess, if any, of the Fair Market Valueof one Common Share on the date of death or termination over theexercise price of such Option for one Common Share times the number ofCommon Shares subject to the Option and exercisable at the time of suchdeath or termination.  (E) Upon expiration of the respective periods setout in each of paragraphs (A) through (B) above, the Options of aParticipant who has died or whose employment has been terminated willbe canceled to the extent not theretofore canceled or exercised.  (F) For purposes of paragraphs (A) through (D)above, the period of service of an individual as a director orConsultant of the Company or an Affiliate will be deemed the period ofemployment. (iv) *Incentive Stock Options*. The following provisions will applyonly to Incentive Stock Options granted under the Plan: (A) No Incentive Stock Option will be granted toany eligible Employee who, at the time such Option is granted, ownssecurities possessing more than ten percent (10%) of the total combinedvoting power of all classes of securities of the Company or of anyAffiliate, except that such an Option may be granted to such anEmployee if, at the time the Option is granted, the exercise price isat least one hundred ten percent (110%) of the Fair Market Value of theCommon Shares (determined in accordance with Section 2) subject to theOption, and the Option by its terms is not exercisable after theexpiration of five (5) years from the date the Option is granted; and  (B) To the extent that the aggregate Fair MarketValue of the Common Shares with respect to which Incentive StockOptions (without regard to this subsection) are exercisable for thefirst time by any individual during any calendar year (under

 

- 8 -   all plans of the Company and its Affiliates) exceeds $100,000, suchOptions will be treated as Non-Qualified Stock Options. Thissubsection will be applied by taking Options into account in theorder in which they were granted. If some but not all Options grantedon any one day are subject to this subsection, then such Options willbe apportioned between Incentive Stock Option and Non-Qualified StockOption treatment in such manner as the Committee will determine.For purposes of this subsection, the Fair Market Value of any Common Shares will bedetermined, in accordance with Section 2, as of the date the Option with respect to suchCommon Shares is granted. (b) Share Appreciation Rights. The Committee is hereby authorized to grantto eligible Employees “Share Appreciation Rights.” Each Share Appreciation Right willconsist of a right to receive the excess of (1) the Fair Market Value of one CommonShare on the date of exercise or, if the Committee will so determine in the case of anysuch right other than one related to any Incentive Stock Option, at any time during aspecified period before or after the date of exercise over (2) the grant price of theright as specified by the Committee, which will not be less than one hundred percent(100%) of the Fair Market Value of one Common Share on the date of grant of the ShareAppreciation Right, which amount will be satisfied in cash or in Common Shares with aFair Market Value determined as at the applicable date, equal to such amount or in acombination thereof. Subject to the terms of the Plan and any applicable AwardAgreement, the grant price, term, methods of exercise, methods of settlement and anyother terms and conditions of any Share Appreciation Right granted under the Plan willbe as determined by the Committee. The Committee may impose such conditions orrestrictions on the exercise of any Share Appreciation Right as it may deemappropriate, provided that Share Appreciation Rights may be payable on a deferred basisonly to the extent provided for in the applicable Award Agreement. Share AppreciationRights may be granted in conjunction with a related Option or separately as afree-standing Share Appreciation Right.  (c) Restricted Shares. (i) *Issuance*. The Committee is hereby authorized to grant toeligible Employees “Restricted Shares” which will consist of the right toreceive, by purchase or otherwise, Common Shares which are subject to suchrestrictions as the Committee may impose (including, without limitation, anylimitation on the right to vote such Common Shares or the right to receive anydividend or other right or property), which restrictions may lapse separatelyor in combination at such time or times, in such installments or otherwise, asthe Committee may deem appropriate.  (ii) *Registration*. Restricted Shares granted under the Plan may beevidenced in such manner as the Committee may deem appropriate, including,without limitation, book-entry registration or issuance of a share certificateor certificates. In the event any share certificate is issued in respect ofRestricted Shares granted under the Plan, that certificate will be registeredin the name of the Participant and will bear an appropriate legend referring tothe terms, conditions and restrictions applicable to those Restricted Shares.  (iii) *Forfeiture*. Except as otherwise determined by the Committee,upon termination of a Participant’s employment for any reason during theapplicable restriction period, all of the Participant’s Restricted Shares whichhad not become Released Securities by the date of termination of employmentwill be forfeited and reacquired by the Company; provided, however, that theCommittee may, when it finds that a waiver would be in the best interests ofthe Company, waive in whole or in part any or all remaining restrictions withrespect to the Participant’s Restricted Shares. Unrestricted Common Shares,evidenced in any manner as the Committee will deem appropriate, will be issuedto the holder of Restricted Shares promptly after those Restricted Sharesbecome Released Securities.

 

- 9 - (d) Restricted Share Units. The Committee is hereby authorized to grant toeligible Employees “Restricted Share Units” each of which will consist of the right toreceive one Common Share or cash equal to the Fair Market Value of one Common Share,subject to the terms of any applicable Award Agreement and which are subject to suchrestrictions as the Committee may impose which restrictions may lapse separately or incombination at any time or times, in such installments or otherwise, as the Committeemay deem appropriate. The Committee may impose any conditions or restrictions on theexercise of Restricted Share Units as it may deem appropriate. The Committee may alsogrant Restricted Share Units that are designated as “Deferred Share Units”, which mayhave all of the rights and restrictions that may be applicable to Restricted ShareUnits, except that the Deferred Share Units may not be redeemed for Common Shares orcash equal to the Fair Market Value of Common Shares until the Participant has ceasedto hold all offices, employment and directorships with the Company and its Affiliates.  (e) Performance Share Units. (i) The Committee is hereby authorized to grant to eligibleEmployees “Performance Share Units.” Each Performance Share Unit will consistof a right, (i) denominated or payable in cash, Common Shares, other securitiesor other property (including, without limitation, Restricted Shares), and (ii)which will confer on the holder thereof rights valued as determined by theCommittee and payable to, or exercisable by, the holder of the PerformanceShare Unit, in whole or in part, upon the achievement of such performance goalsduring such performance periods as the Committee will establish.  (ii) The initial value of a Performance Share Unit will beestablished by the Committee at the date of grant and, to the extent related toCommon Shares, other securities or other property will initially be equal to100% of the Fair Market Value of a Common Share, such other security or suchother property on the date of grant.  (iii) Subject to the terms of the Plan and any applicable AwardAgreement, the performance goals to be achieved during any performance period,the length of any performance period, the amount of any Performance Share Unitgranted, the termination of a Participant’s employment and the amount of anypayment or transfer to be made pursuant to any Performance Share Unit will bedetermined by the Committee and by the other terms and conditions of anyPerformance Share Unit.  (iv) The Committee will issue performance goals prior to thecommencement of the performance period to which such performance goals pertain.The performance goals may be based upon the achievement of corporation-wide,divisional or individual goals, or any other basis determined by the Committee.The Committee may modify the performance goals as necessary to align them withthe Company’s corporate objectives if there is a subsequent material change inthe Company’s business, operations or capital or corporate structure. (f) Other Share-Based Awards. The Committee is hereby authorized to grantto eligible Employees “Other Share-Based Awards.” Each Other Share-Based Award willconsist of a right (1) which is other than an Award or right described in Section 6(a),(b), (c), (d) or (e) above and (2) which is denominated or payable in, valued in wholeor in part by reference to, or otherwise based on or related to, Common Shares(including, without limitation, securities convertible into Common Shares) as aredeemed by the Committee to be consistent with the purposes of the Plan; provided,however, that such right will comply, to the extent deemed desirable by the Committee,with applicable law. Subject to the terms of the Plan and any applicable AwardAgreement, the Committee will determine the terms and conditions of Other Share-BasedAwards. Common Shares or other securities delivered pursuant to a purchase rightgranted under this Section 6(e)(i) will be purchased for such consideration, which maybe paid by such method or methods and in such form or forms, including, withoutlimitation, cash, Common Shares, other securities, other Awards, other property, or anycombination thereof, as the Committee will determine.

 

- 10 - (g) General. (i) *No Cash Consideration for Awards*. Awards may be granted for nocash consideration or for such minimal cash consideration as may be required byapplicable law.  (ii) *Awards May Be Granted Separately or Together*. Awards may, inthe discretion of the Committee, be granted either alone or in addition to, intandem with, or in substitution for any other Award, except that in no eventwill an Incentive Stock Option be granted together with a Non-Qualified StockOption in such a manner that the exercise of one Option affects the right toexercise the other. Awards granted in addition to or in tandem with otherAwards may be granted either at the same time as or at a different time fromthe grant of such other awards.  (iii) *Forms of Payment Under Awards*. Subject to the terms of thePlan and of any applicable Award Agreement, payments or transfers to be made bythe Company or an Affiliate upon the grant, exercise or payment of an Award maybe made in such form or forms as the Committee will determine, including,without limitation, cash, Common Shares, other securities, other Awards, orother property, or any combination thereof, and may be made in a single paymentor transfer, in installments, or on a deferred basis, in each case inaccordance with rules and procedures established by the Committee. Such rulesand procedures may include, without limitation, provisions for the payment orcrediting of reasonable interest on installment or deferred payments. Inaccordance with the above, the Committee may elect (1) to pay a Participant (orsuch Participant’s permitted transferee) upon the exercise of an Option inwhole or in part, in lieu of the exercise thereof and the delivery of CommonShares thereunder, an amount of cash equal to the excess, if any, of the FairMarket Value of one Common Share on the date of such exercise over the exerciseprice of such Option for one Common Share times the number of Common Sharessubject to the Option or portion thereof so exercised or (2) to settle othershare-denominated Awards in cash. The Committee may provide for financing bybroker-dealers (including payment by the Company of commissions) and mayestablish procedures (including broker-dealer assisted cashless exercise) forpayment of withholding tax obligations in cash or in Common Shares.  (iv) *Limits on Transfer of Awards*. (A) No award (other than Released Securities), andno right under any such Award, may be assigned, alienated, pledged,attached, sold or otherwise transferred or encumbered by a Participantotherwise than by will or by the laws of descent and distribution (or,in the case of Restricted Shares, to the Company) and any suchpurported assignment, alienation, pledge, attachment, sale or othertransfer or encumbrance will be void and unenforceable against theCompany or any Affiliate.  (B) Each award, and each right under any Award,will be exercisable during the Participant’s lifetime only by theParticipant or, if permissible under applicable law, by theParticipant’s guardian or legal representative. (v) *Terms of Awards*. The term of each Award will be for suchperiod as may be determined by the Committee; provided, however, that in noevent will the term of any Option exceed a period of ten years from the date ofits grant.  (vi) *Common Share Certificates*. All certificates for Common Sharesdelivered under the Plan pursuant to any Award or the exercise thereof will besubject to any stop transfer orders and other restrictions as the Committee maydeem advisable under the Plan or the rules, regulations, and other requirementsof the Securities and Exchange Commission, any stock exchange upon which suchCommon Shares are then listed, and any applicable

 

- 11 -   federal, state, provincial or territorial securities laws, and the Committeemay cause a legend or legends to be put on any such certificates to makeappropriate reference to such restrictions.  (vii) *Delivery of Common Shares or Other Securities and Payment byParticipant of Consideration*. No Common Shares or other securities will bedelivered pursuant to any Award until payment in full of any amount required tobe paid pursuant to the Plan or the applicable Award Agreement is received bythe Company. Such payment may be made by such method or methods and in suchform or forms as the Committee will determine, including, without limitation,cash, Common Shares, other securities, other Awards or other property, or anycombination thereof; provided that the combined value, as determined by theCommittee, of all cash and cash equivalents and the Fair Market Value of anysuch Common Shares or other property so tendered to the Company, as of the dateof such tender, is at least equal to the full amount required to be paidpursuant to the Plan or the applicable Award Agreement to the Company.**SECTION 7. AMENDMENTS; ADJUSTMENTS AND TERMINATION.**Except to the extent prohibited by applicablelaw and unless otherwise expressly provided in an Award Agreement or in the Plan: (a) Amendments to the Plan. Subject to Section 7(g) and the requirementsof applicable law, rules and regulations, the Board may amend, alter, suspend,discontinue, or terminate the Plan without the consent of any shareholder, Participant,other holder or beneficiary of an Award, or other Person, provided, however, that,subject to the Company’s rights to adjust Awards under Section 7(e) and (f), anyamendment, alteration, suspension, discontinuation, or termination that would impairthe rights of any Participant, or any other holder or beneficiary of any Awardpreviously granted, will not to that extent be effective without the consent of thatParticipant, other holder or beneficiary of an Award, as the case may be. The Board orthe Committee may make any amendments to the Plan without seeking shareholder approvalexcept the following amendments for which shareholder approval will be required: (i) amendments to the number of Common Shares issuable under thePlan, including an increase to a fixed maximum number of Common Shares or achange from a fixed maximum number of Common Shares to a fixed maximumpercentage;  (ii) amendments to the Plan that increase the length of the periodafter a Blackout Period during which an Award may be exercised;  (iii) amendments which would reduce the exercise price of an Awardor would result in the exercise price for any Award granted under the Planbeing lower than the Fair Market Value of the Common Shares at the time theAward is granted, except a reduction in connection with any stock dividend,stock split, combination or exchange of shares, merger, consolidation, spin offor other distribution or other change in the capital of the Company affectingCommon Shares;  (iv) any amendment expanding the categories of eligible Participantwhich would have the potential of broadening or increasing insiderparticipation;  (v) any amendment extending the term of an Award held by an insiderbeyond its original expiry date except an extension of an Award that wouldotherwise expire during a Blackout Period, to 10 days following the end of theBlackout Period;  (vi) the addition of any other provision which results inparticipants receiving Common Shares while no cash consideration is received bythe Company; and  (vii) amendments required to be approved by shareholders underapplicable law.

 

- 12 - (b) Section 409A of the Code. This Plan will be construed and interpretedto comply with Section 409A of the Code to the extent required to preserve the intendedtax consequences of this Plan. The Company reserves the right to amend this Plan to theextent it reasonably determines is necessary in order to preserve the intended taxconsequences of this Plan in light of Section 409A of the Code and any regulations orguidance under that section. In no event will the Company be responsible if Awardsunder this Plan result in penalties to a U.S. Participant under Section 409A of theCode.  (c) Section 162(m) of the Code. Performance-based awards to U.S.Participants must be made by an independent committee. Awards to any Participant whomthe independent committee determines to be a “covered employee” under Section 162(m) ofthe Code may be subject to restrictions, including the establishment of performancegoals, as necessary for the Award to meet the requirements set out in the Code forperformance-based compensation.  (d) Amendments to Awards. The Committee may waive any conditions or rightsunder, amend any terms of, or alter, suspend, discontinue, cancel or terminate, anyAward previously granted, prospectively or retroactively; provided, however, that,subject to the Company’s rights to adjust Awards under Section 7(e) and (f), anyamendment, alteration, suspension, discontinuation, cancellation or termination thatwould impair the rights of any Participant or holder or beneficiary of any Awardpreviously granted, will not to that extent be effective without the consent of theParticipant or holder or beneficiary of an Award, as the case may be.  (e) Adjustment of Awards Upon Certain Acquisitions. In the event theCompany or any Affiliate assumes outstanding employee awards or the right or obligationto make future awards in connection with the acquisition of another business or anothercorporation or business entity, the Committee may make any adjustments, notinconsistent with the terms of the Plan, in the terms of Awards as it deems appropriatein order to achieve reasonable comparability or other equitable relationship betweenthe assumed awards and the Awards granted under the Plan as so adjusted.  (f) Adjustments of Awards Upon the Occurrence of Certain Unusual orNonrecurring Events. The Committee is hereby authorized to make adjustments in theterms and conditions of, and the criteria included in, Awards in recognition of unusualor non-recurring events (including, without limitation, the events described in Section4(b) or Section 4(c)) affecting the Company, any Affiliate, or the financial statementsof the Company or any Affiliate, or of changes in applicable laws, regulations, oraccounting principles, whenever the Committee determines that those adjustments areappropriate in order to prevent dilution or enlargement of the benefits or potentialbenefits intended to be made available under the Plan.  (g) Termination. The Plan will automatically terminate on January 1, 2016unless we elect to terminate it sooner.**SECTION 8. GENERAL PROVISIONS.** (a) No Right to Awards. No Employee or other Person will have any claim tobe granted any Award under the Plan, and there is no obligation for uniformity oftreatment of Employees, or holders or beneficiaries of Awards under the Plan. The termsand conditions of Awards need not be the same with respect to each recipient.  (b) Delegation. Subject to the terms of the Plan and applicable law, theCommittee may delegate to one or more officers or managers of the Company or anyAffiliate, or to a committee of such officers or managers, the authority, subject tosuch terms and limitations as the Committee will determine, to grant Awards to, or tocancel, modify, waive rights with respect to, alter, discontinue, suspend, or terminateAwards.

 

- 13 - (c) Correction of Defects, Omissions, and Inconsistencies. The Committeemay correct any defect, supply any omission, or reconcile any inconsistency in the Planor any Award in the manner and to the extent it will deem desirable to carry the Planinto effect.  (d) Withholding. The Company or any Affiliate will be authorized towithhold from any Award granted, from any payment due or transfer made under any Awardor under the Plan or from any compensation or other amount owing to a Participant theamount (in cash, Common Shares, other securities, other Awards, or other property) ofwithholding, taxes or other amounts payable by the Company, any Affiliate or theParticipant and which are due or payable in respect of an Award, its exercise, or anypayment or transfer under such Award or under the Plan and to take any other action asmay be necessary in the opinion of the Company or Affiliate to satisfy all obligationsfor the payment of those taxes. Neither the Corporation nor any Participating Companyshall be held responsible for any tax or other liabilities or consequences which resultfrom the Participant’s participation in this Plan, including any employment relatedtaxes or benefit costs, whether or not such costs are the primary responsibility of theCorporation or any Participating Company.  (e) No Limit on Other Compensation Arrangements. Nothing contained in thePlan will prevent the Company or any Affiliate from adopting or continuing in effectother or additional compensation arrangements, and those arrangements may be eithergenerally applicable or applicable only in specific cases.  (f) No Right to Employment. The grant of an Award will not be construed asgiving a Participant the right to be retained in the employ, as an officer or directoror as a Consultant of the Company or any Affiliate. Further, the Company or anAffiliate may at any time dismiss a Participant from employment, as an office ordirector or as a Consultant, , free from any liability, or any claim under the Plan,unless otherwise expressly provided in the Plan or in any Award Agreement.  (g) Governing Law. The validity, construction, and effect of the Plan andany rules and regulations relating to the Plan will be determined in accordance withthe laws of the Province of Ontario and the federal laws of Canada applicable inOntario.  (h) Severability. If any provision of the Plan or any Award is or becomesor is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to anyPerson or Award under any law deemed applicable by the Committee, that provision willbe construed or deemed amended to conform to applicable laws, or if it cannot beconstrued or deemed amended without, in the determination of the Committee, materiallyaltering the intent of the Plan or the Award, that provision will be stricken as tothat jurisdiction, Person or Award and the remainder of the Plan and any such Awardwill remain in full force and effect.  (i) No Trust or Fund Created. Neither the Plan nor any Award will createor be construed to create a trust or separate fund of any kind or a fiduciaryrelationship between the Company or any Affiliate and a Participant or any otherPerson. To the extent that any Person acquires a right to receive payments from theCompany or any Affiliate pursuant to an Award, that right will be no greater than theright of any unsecured general creditor of the Company or any Affiliate.  (j) No Fractional Common Shares. No fractional Common Shares will beissued or delivered pursuant to the Plan or any Award, and the Committee will determinewhether cash, other securities, or other property will be paid or transferred in lieuof any fractional Common Shares or whether those fractional Common Shares or any rightsthereto will be canceled, terminated, or otherwise eliminated.  (k) Headings. Headings are given to the Sections and subsections of thePlan solely as a convenience to facilitate reference. Those headings will not be deemedin any way material or relevant to the construction or interpretation of the Plan orany provision of the Plan.

 

- 14 -**SECTION 9. ADOPTION, APPROVAL, EFFECTIVE DATE AND TERMINATION DATE OF THE PLAN.**The Plan will beadopted by the Board of Directors and the shareholders of the Company prior to the completion ofthe Company’s initial public offering (the “IPO”) and will become effective immediately prior tothe closing of the IPO.