dsuplan.htm


    ZARLINK SEMICONDUCTOR INC.

     

    DEFERRED
SHARE UNIT PLAN

     

    ARTICLE
1

     

    INTRODUCTION

     

    
      	
              1.1  

            	
              Purpose

            


    

     

    The
purpose of this Deferred Share Unit Plan is to provide non-employee directors of
Zarlink Semiconductor Inc. with the opportunity to acquire Deferred Share Units
of the Company in order to allow them to participate in the long-term success of
the Company and to promote a greater alignment of their interests with the
interests of the Company’s shareholders.

     

    ARTICLE
2

     

    INTERPRETATION

     

    
      	
              2.1  

            	
              Definitions

            


    

     

    For
purposes of the Plan:

     

    
      	
              (a)  

            	
              “Affiliate” means any
      entity that must be aggregated with the Company under Code section 409A of
      the U.S. Internal Revenue Code of
1986;

            


    

     

    
      	
              (b)  

            	
              “Annual Retainer” means,
      with respect to any Eligible Director, the retainer payable to an Eligible
      Director for service as a member of the Board during a calendar year,
      including all committee fees, committee chair fees and Board and committee
      meeting fees;

            


    

     

    
      	
              (c)  

            	
              “Applicable Withholding
      Amounts” is defined in Section 4.6 of
      the Plan;

            


    

     

    
      	
              (d)  

            	
              “Award Date” means any
      date on which the Annual Retainer or any portion thereof in respect of the
      Performance Period is payable to a
Participant;

            


    

     

    
      	
              (e)  

            	
              “Award Market Value”
      means the volume weighted average trading price of the Shares on the TSX
      on the five (5) trading days immediately preceding the Award
      Date;

            


    

     

    
      	
              (f)  

            	
              “Board” means the Board
      of Directors of the Company;

            


    

     

    
      	
              (g)  

            	
              “Committee” means the
      Compensation and Human Resources Development Committee of the Board or
      such other Committee of the Board as may be appointed by the Board to
      administer the Plan, provided, however, that if no Compensation and Human
      Resources Development Committee is in existence at any particular time and
      the Board has not appointed another committee of the Board to administer
      the Plan, all references in the Plan to “Committee” shall at such time be
      in reference to the Board;

            


    

     

    
      	
              (h)  

            	
              “Company” means Zarlink
      Semiconductor Inc. and its successors and
  assigns;

            


    

     

    
      	
              (i)  

            	
              “Deferred Share Unit” or
      “DSU” means a unit
      equivalent in value to a Share, credited by means of a bookkeeping entry
      in the books of the Company in accordance with Article
  4;

            


    

     

    
      	
              (j)  

            	
              “Distribution Date” is
      defined in Section 4.5;

            


    

     

    
      	
              (k)  

            	
              “Distribution Value”
      means, with respect to each Deferred Share Unit credited to a
      Participant’s account, the volume weighted average trading price of the
      Shares on the TSX for the five (5) trading days immediately preceding the
      Distribution Date;

            


    

     

    
      	
              (l)  

            	
              “Dividend Equivalents”
      means a bookkeeping entry whereby each Deferred Share Unit is credited
      with the equivalent amount of the dividend paid on a Share in accordance
      with Section 4.2;

            


    

     

    
      	
              (m)  

            	
              “Dividend Market Value”
      means the volume weighted average trading price of the Shares on the TSX
      for the five (5) trading days immediately following the dividend record
      date for the payment of any dividend made on the
  Shares;

            


    

     

    
      	
              (n)  

            	
              “Election Form” means a
      document substantially in the form of Schedule
  “B”;

            


    

     

    
      	
              (o)  

            	
              “Eligible Director” means
      an individual who is, at the relevant time, a member of the Board but who
      is not also a full-time employee of the Corporation or any of its
      Affiliates;

            


    

     

    
      	
              (p)  

            	
              “Participant” means an
      Eligible Director who has elected to participate in the Plan in accordance
      with Section 3.5;

            


    

     

    
      	
              (q)  

            	
              “Payment Amount” is
      defined in Section 4.6 of the
      Plan;

            


    

     

    
      	
              (r)  

            	
              “Performance Period”
      means a calendar year;

            


    

     

    
      	
              (s)  

            	
              “Person” means any
      individual, sole proprietorship, partnership, firm, entity, unincorporated
      association, unincorporated syndicate, unincorporated organization, trust,
      body corporate, fund, organization or other group of organized persons,
      government, government regulatory authority, governmental department,
      agency, commission, board, tribunal, dispute settlement panel or body,
      bureau, court, and where the context requires any of the foregoing when
      they are acting as trustee, executor, administrator or other legal
      representative;

            


    

     

    
      	
              (t)  

            	
              “Plan” means this
      Deferred Share Unit Plan as amended, restated, supplemented or otherwise
      modified from time to time;

            


    

     

    
      	
              (u)  

            	
              “Separation Date” means
      the date on which the Participant ceases service as a director of, and is
      not at that time an employee or officer, of the Company and all its
      Affiliates;

            


    

     

    
      	
              (v)  

            	
              “Share” means a common
      share of the Company or, in the event of an adjustment contemplated by
      Section 4.8, such other number or type of
      securities as the Committee may determine;
and

            


    

     

    
      	
              (w)  

            	
              “TSX” means the Toronto
      Stock Exchange.

            


    

     

    
      	
              2.2  

            	
              Certain
      Rules of Interpretation

            


    

     

    
      	
              (a)  

            	
              Whenever
      the Board or, where applicable, the Committee or any sub-delegate of the
      Committee is to exercise discretion in the administration of the terms and
      conditions of this Plan, the term “discretion” means the sole and absolute
      discretion of the Board or the Committee or the sub-delegate of the
      Committee, as the case may be.

            


    

     

    
      	
              (b)  

            	
              As
      used herein, the terms “Article” and “Section” mean and refer to the
      specified Article or Section of this
Plan.

            


    

     

    
      	
              (c)  

            	
              Words
      importing the singular include the plural and vice versa and words
      importing any gender include any other
gender.

            


    

     

    
      	
              (d)  

            	
              Unless
      otherwise specified, all references to money amounts are to Canadian
      currency.

            


    

     

    ARTICLE
3

     

    ADMINISTRATION
OF THE PLAN

     

    
      	
              3.1  

            	
              Administration
      of the Plan

            


    

     

    
      	
              (a)  

            	
              This
      Plan will be administered by the Board and the Board has sole and complete
      authority, in its discretion, to:

            


    

     

    
      	
              (i)  

            	
              interpret
      the Plan and prescribe, modify and rescind rules and regulations relating
      to the Plan;

            


    

     

    
      	
              (ii)  

            	
              exercise
      rights reserved to the Company under the
Plan;

            


    

     

    
      	
              (iii)  

            	
              prescribe
      forms for notices to be prescribed by the Company under the Plan;
      and

            


    

     

    
      	
              (iv)  

            	
              make
      all other determinations and take all other actions as it considers
      necessary or advisable for the implementation and administration of the
      Plan.

            


    

     

    The
Board’s determinations and actions under this Plan are final, conclusive and
binding on the Company, the Participants and all other Persons.

     

    
      	
              (b)  

            	
              To
      the extent permitted by applicable law, the Board may, from time to time,
      delegate to the Committee all or any of the powers of the Board under the
      Plan, including the power to sub-delegate to the extent permitted by
      applicable law, to any specified officer of the Company all or any of the
      powers delegated to the Committee.  In such event, the Committee
      or specified officer will exercise the powers delegated to it by the Board
      and, if applicable, the Committee in the manner and on the terms
      authorized by the Board and, if applicable, the Committee.  Any
      decision made or action taken by the Committee or the specified officer
      arising out of or in connection with the administration or interpretation
      of this Plan in this context is final, binding and conclusive on the
      Company, the Participants and all other
Persons.

            


    

     

    
      	
              3.2  

            	
              Determination
      of Value if Shares Not Publicly
Traded

            


    

     

    If the
Shares are not publicly traded on the TSX at the relevant time such that the
Distribution Value and/or the Award Market Value and/or the Dividend Market
Value cannot be determined in accordance with the definitions of those terms,
such values shall be determined by the Committee acting in good faith, or in the
absence of the Committee, by the Board acting in good faith.

     

    
      	
              3.3  

            	
              Eligibility

            


    

     

    Any
individual who at the relevant time is an Eligible Director is eligible to
participate in the Plan.  Eligibility to participate does not confer
upon any individual a right to receive an award of Deferred Share Units pursuant
to the Plan.

     

    
      	
              3.4  

            	
              Exemption
      from Plan Participation

            


    

     

    Notwithstanding
any other provision of the Plan, if a Participant is resident in a jurisdiction
in which an award of Deferred Share Units under the Plan might be considered to
be income which is subject to taxation at the time of such award, the
Participant may elect not to participate in the Plan by providing a written
notice to the Corporate Secretary of the Company.

     

    
      	
              3.5  

            	
              Election
      to Participate

            


    

     

    Each
individual who is eligible to participate in the Plan may elect, in respect of a
Performance Period, to participate in the Plan by delivering a duly signed
Election Form to the Committee which will constitute written notice of the
individual’s election to participate in the Plan. By delivering a timely
Election Form, the Participant agrees to be bound by all the terms and
conditions of the Plan.  In the Election Form, the Participant shall
specify whether the Participant wishes to receive all of, or a specified
percentage (in increments of not less than 10%) of, the Participant’s Annual
Retainer in the form of Deferred Share Units.

     

    
      	
              3.6  

            	
              Time
      of Election

            


    

     

    Each
Participant shall have the right to elect once in respect of each Performance
Period the manner in which the Participant wishes to receive the Participant’s
Annual Retainer by completing, signing and delivering to the Corporate Secretary
of the Company the Election Form:

     

    
      	
              (a)  

            	
              in
      the case of an existing Eligible Director, by the end of the Performance
      Period preceding the Performance Period to which such election is to
      apply; or

            


    

     

    
      	
              (b)  

            	
              in
      the case of a new Eligible Director, within twenty-one (21) days after
      commencing service with the Company as an Eligible Director, with such
      election to apply in respect of the portion of the Performance Period that
      follows the date of such election.

            


    

     

    Notwithstanding
the foregoing, for the 2010 Performance Period,
the first year of the Plan, existing Eligible Directors must make such election
by February 15, 2010.  If an election is not received in time, payment
of the Participant’s Annual Retainer in respect of the Performance Period shall
be in cash.

     

    ARTICLE
4

     

    DEFERRED
SHARE UNITS

     

    
      	
              4.1  

            	
              Number
      of Deferred Share Units

            


    

     

    Deferred
Share Units shall be credited to accounts maintained for each Participant on the
books of the Company, as of the Award Date.  The number of Deferred
Share Units (including fractional Deferred Share Units) to be credited as of the
Award Date in respect of the Participant’s Annual Retainer shall be determined
by dividing (a) the amount of the Participant’s Annual Retainer to be paid in
Deferred Share Units by (b) the Award Market Value, with fractions computed to
three decimal places.  The number of Deferred Share Units on the Award
Date (including fractional Deferred Share Units) to be credited as of the Award
Date in respect of a discretionary grant under Section 4.3 shall be the number
of Deferred Share Units as determined by the Board as of the Award
Date.

     

    
      	
              4.2  

            	
              Credits
      for Dividends

            


    

     

    A
Participant’s account shall be credited with Dividend Equivalents in the form of
additional Deferred Share Units as of each dividend payment date in respect of
which normal cash dividends are paid on the Shares.  Such Dividend
Equivalents shall be computed by dividing: (a) the amount obtained by
multiplying the amount of the dividend declared and paid per Share by the number
of Deferred Share Units recorded in the Participant’s account on the record date
for the payment of such dividend, by (b) the Dividend Market Value, with
fractions computed to three decimal places.  The foregoing does not
obligate the Company to declare or pay dividends on Shares and nothing in this
Plan shall be interpreted as creating such an obligation.

     

    
      	
              4.3  

            	
              Discretionary
      Grants

            


    

     

    In
addition to the payment of Deferred Share Units as contemplated by Sections 4.1
and 4.2, the Board may, from time to time, subject to the provisions of this
Plan and such other terms and conditions as the Board may prescribe, grant
additional Deferred Share Units to any Participant.  A discretionary
grant of Deferred Share Units for a Performance Period to a Participant shall be
evidenced by notice in writing from the Company to the Participant.

     

    
      	
              4.4  

            	
              Reporting
      of Deferred Share Units

            


    

     

    Statements
of the Deferred Share Unit accounts will be provided to Participants on an
annual basis.

     

    
      	
              4.5  

            	
              Distribution
      Date Election

            


    

     

    A
Participant shall have the right to elect to receive payment in respect of
Deferred Share Units recorded in the Participant’s account in accordance with
Section 4.6 on one of the following dates (the “Distribution
Date”):

     

    
      	
              (a)  

            	
              the
      Separation Date; or

            


    

     

    
      	
              (b)  

            	
              such
      later date as the Participant may elect by written notice delivered to the
      Corporate Secretary of the Company prior to the Separation Date, provided
      that in no event shall a Participant be permitted to elect a date which is
      later than December 1 of the calendar year following the calendar year in
      which the Separation Date occurs.

            


    

     

    
      	
              4.6  

            	
              Distribution
      of Deferred Share Units

            


    

     

    
      	
              (a)  

            	
              Subject
      to and in accordance with Section 4.6(b), a Participant shall receive a
      payment equal in value to the number of Deferred Share Units recorded in
      the Participant’s account on the Distribution Date multiplied by the
      Distribution Value of a Share (the “Payment
      Amount”).  The Company is authorized to deduct from the
      Payment Amount an amount equivalent to the minimum amount of taxes and
      other minimum amounts as the Company may be required by law to withhold,
      as the Company determines (the “Applicable Withholding
      Amounts”).  Upon payment in full of the value of the
      Deferred Share Units, less the Applicable Withholding Amounts, the
      Deferred Share Units shall be cancelled and no further payments shall be
      made to the Participant under the
Plan.

            


    

     

    
      	
              (b)  

            	
              The
      Payment Amount, less any Applicable Withholding Amounts, will be paid to
      the Participant, or in the event of the Participant’s death, his
      beneficiary or legal representative in accordance with Section 4.7 herein,
      in cash within ten (10) business days after the Distribution
      Date.

            


    

     

    
      	
              4.7  

            	
              Death
      of Participant Prior to
Distribution

            


    

     

    Upon the
death of a Participant prior to the distribution of the Deferred Share Units
credited to the account of such Participant under the Plan, a cash payment shall
be made to the estate of such Participant on or about the thirtieth (30th) day
after the Company is notified of the death of the Participant or on a later date
elected by the Participant’s estate in the form prescribed for such purposes by
the Company and delivered to the Company Secretary no later than twenty (20)
days after the Company is notified of the death of the Participant, provided
that such elected date is no later than the last business day of the calendar
year following the calendar year in which the Participant dies so that payment
can be made on or before such last business day.  Such cash payment
shall be equivalent to the amount which would have been paid to the Participant
pursuant to and subject to Section 4.6, calculated on the basis that the day on
which the Participant dies, or the date elected by the estate, as applicable, is
the Distribution Date.  Upon payment in full of the value of all of
the Deferred Share Units that become payable under this Section 4.7, less any
Applicable Withholding Amounts, the Deferred Share Units shall be cancelled and
no further payments will be made from the Plan in relation to the
Participant.

     

    
      	
              4.8  

            	
              Adjustments
      to Deferred Share Units

            


    

     

    In the
event of any subdivision, consolidation, stock dividend, capital reorganization,
reclassification, exchange, or other change with respect to the Shares, or a
consolidation, amalgamation, merger, spin-off, sale, lease or exchange of all or
substantially all of the property of the Company or other distribution of the
Company’s assets to shareholders (other than the payment of dividends in respect
of the Shares as contemplated by Section 4.2), the
account of each Participant and the Deferred Share Units outstanding under the
Plan shall be adjusted in such manner, if any, as the Board may in its
discretion deem appropriate to preserve, proportionally, the interests of
Participants under the Plan.

     

    ARTICLE
5

     

    GENERAL

     

    
      	
              5.1  

            	
              Amendment,
      Suspension, or Termination of Plan

            


    

     

    
      	
              (a)  

            	
              The
      Board may from time to time amend or suspend the Plan in whole or in part
      and may at any time terminate the Plan without prior
      notice.  However, any such amendment, suspension or termination
      shall not adversely affect the Deferred Share Units previously granted to
      a Participant at the time of such amendment, suspension or termination,
      without the consent of the affected
Participant.

            


    

     

    
      	
              (b)  

            	
              If
      the Board terminates or suspends the Plan, no new Deferred Share Units
      (other than Deferred Share Units referred to in Section 4.2) will be
      credited to the account of a
Participant.

            


    

     

    
      	
              (c)  

            	
              On
      termination of the Plan, Deferred Share Units shall be paid out in
      accordance with the terms and conditions of the Plan existing at the time
      of termination.  The Plan will finally cease to operate for all
      purposes when the last remaining Participant receives payment of all
      Deferred Share Units recorded in the Participant’s
  account.

            


    

     

    
      	
              5.2  

            	
              Compliance
      with Laws

            


    

     

    The
administration of the Plan shall be subject to and made in conformity with all
applicable laws and any applicable regulations of a duly constituted regulatory
authority.  Should the Committee, in its sole discretion, determine
that it is not feasible or desirable to honour an election in favour of Deferred
Share Units due to such laws or regulations, its obligation shall be satisfied
by means of an equivalent cash payment (equivalence being determined on a
before-tax basis).

     

    
      	
              5.3  

            	
              Reorganization
      of the Company

            


    

     

    The
existence of any Deferred Share Units shall not affect in any way the right or
power of the Company or its shareholders to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company’s capital
structure or its business, or to create or issue any bonds, debentures, shares
or other securities of the Company or to amend or modify the rights and
conditions attaching thereto or to effect the dissolution or liquidation of the
Company, or any amalgamation, combination, merger or consolidation involving the
Company or any sale or transfer of all or any part of its assets or business, or
any other corporate act or proceeding, whether of a similar nature or
otherwise.

     

    
      	
              5.4  

            	
              Assignment

            


    

     

    Rights
and obligations under the Plan may be assigned by the Company to a successor in
the business of the Company, any company resulting from any amalgamation,
reorganization, combination, merger or arrangement of the Company, or any
company acquiring all or substantially all of the assets or business of the
Company.

     

    
      	
              5.5  

            	
              Units
      Non-Transferable

            


    

     

    Deferred
Share Units are non-transferable.  Certificates representing Deferred
Share Units will not be issued by the Company.

     

    
      	
              5.6  

            	
              Participation
      is Voluntary; No Additional Rights

            


    

     

    The
participation of any Participant in the Plan is entirely voluntary and not
obligatory and shall not be interpreted as conferring upon such Participant any
rights or privileges other than those rights and privileges expressly provided
in the Plan.  In particular, participation in the Plan does not
constitute a condition of employment or service nor a commitment on the part of
the Company to ensure the continued employment or service of such Participant.
Nothing in this Plan shall be construed to provide the Participant with any
rights whatsoever to participate or continue participation in this Plan or to
compensation or damages in lieu of participation, whether upon termination of
service as an Eligible Director or otherwise.  The Company does not
assume responsibility for the personal income or other tax consequences for the
Participants and they are advised to consult with their own tax
advisors.

     

    
      	
              5.7  

            	
              No
      Shareholder Rights

            


    

     

    Under no
circumstances shall Deferred Share Units be considered Shares or other
securities of the Company, nor shall they entitle any Participant to exercise
voting rights or any other rights attaching to the ownership of Shares or other
securities of the Company, nor shall any Participant be considered the owner of
Shares by virtue of the award of Deferred Share Units.

     

    
      	
              5.8  

            	
              Unfunded
      and Unsecured Plan

            


    

     

    Unless
otherwise determined by the Board, the Plan shall be
unfunded and the Company will not secure its obligations under the
Plan.  To the extent any Participant or his or her estate holds any
rights by virtue of a grant of Deferred Share Units under the Plan, such rights
(unless otherwise determined by the Board) shall be no greater than
the rights of an unsecured creditor of the Company.

     

    
      	
              5.9  

            	
              Market
      Fluctuations

            


    

     

    No amount
will be paid to, or in respect of, a Participant under the Plan to compensate
for a downward fluctuation in the price of Shares, nor will any other form of
benefit be conferred upon, or in respect of, a Participant for such
purpose.  The Company makes no representations or warranties to
Participants with respect to the Plan or the Shares whatsoever.  In
seeking the benefits of participation in the Plan, a Participant agrees to
accept all risks associated with a decline in the market price of
Shares.

     

    
      	
              5.10  

            	
              Participant
      Information

            


    

     

    Each
Participant shall provide the Company with all information (including personal
information) required by the Company in order to administer to the
Plan.  Each Participant acknowledges that information required by the
Company in order to administer the Plan may be disclosed to the Committee and
other third parties in connection with the administration of the
Plan.  Each Participant consents to such disclosure and authorizes the
Company to make such disclosure on the Participant’s behalf.

     

    
      	
              5.11  

            	
              Special
      Rules for U.S. Taxpayers

            


    

     

    Notwithstanding
anything to the contrary in the Plan, the rules set forth on Schedule A shall
apply to the Deferred Share Units that are subject to taxation under Section
409A of the U.S. Internal Revenue Code.

     

    
      	
              5.12  

            	
              Indemnification

            


    

     

    Every
director of the Company will at all times be indemnified and saved harmless by
the Company from and against all costs, charges and expenses whatsoever
including any income tax liability arising from any such indemnification, that
such director may sustain or incur by reason of any action, suit or proceeding,
taken or threatened against the director, otherwise than by the Company, for or
in respect of any act done or omitted by the director in respect of this Plan,
such costs, charges and expenses to include any amount paid to settle such
action, suit or proceeding or in satisfaction of any judgment rendered
therein.

     

    
      	
              5.13  

            	
              Effective
      Date of the Plan

            


    

     

    
      	
               
      

            	
              This
      Plan becomes effective on a date to be determined by the
      Board.

            


    

     

    
      	
              5.14  

            	
              Governing
      Law

            


    

     

    The Plan
shall be governed by, and interpreted in accordance with, the laws of the
Province of Ontario and the laws of Canada applicable therein, without regard to
principles of conflict of laws.

     

    APPROVED
by the Board this 28th day of January, 2010.

     


    
      
        
          
            	
                     

                  


          

          


        

         


      

      
         


        
          

        

      

      
         


        
          –  –

          


        

      

    


    SCHEDULE
A

     

    Terms
Applicable to U.S. Taxpayers

     

    This
Schedule A modifies the terms of the Plan and applies to Participants who are
U.S. Taxpayers to the extent their Deferred Share Units are subject to taxation
in the United States. Notwithstanding anything to the contrary in the Plan, with
respect to such Deferred Share Units:

     

    
      	
              1.  

            	
              “U.S. Taxpayer” means a
      Member who is a U.S. citizen, U.S. permanent resident or U.S. tax resident
      for the purposes of the U.S. Internal Revenue Code of 1986 (the “Code”) or
      person whose award of Deferred Share Units under this Plan would be
      otherwise subject to U.S. taxation under the Code. Such Member shall be
      considered a U.S. Taxpayer solely with respect to such
    award.

            


    

     

    
      	
              2.  

            	
              “Section 409A” means
      Section 409A of the Code and the authority and guidance issued
      thereunder.

            


    

     

    
      	
              3.  

            	
              “Termination of Service”
      shall mean the date on which the U.S. Taxpayer experiences a “separation
      from service” from the Company, within the meaning of Section
      409A.

            


    

     

    
      	
              4.  

            	
              Awards. Terms of awards
      shall be specified at the time of grant. In no event may an award of
      Deferred Share Units pursuant to Section 4.3 change the terms of any
      previously filed deferral election.

            


    

     

    
      	
              5.  

            	
              Payment of Deferred Share
      Units. Notwithstanding Sections 4.5 or 4.6 of the Plan, the U.S.
      Taxpayer shall not be entitled to elect a Distribution Date with respect
      to Deferred Share Units covered by this Schedule A.  Instead,
      the Distribution Date shall be the first Business Day that occurs at least
      90 days after the date of Termination of
      Service.    Notwithstanding the foregoing, if any U.S.
      Taxpayer is determined to be a “specified employee” (as determined under
      Section 409A of the Code) at the Separation Date, then the Distribution
      Date will be delayed until six (6) months following “separation from
      service”.

            


    

     

    
      	
              6.  

            	
              Payments upon Death.
      Notwithstanding anything to the contrary in Sections 4.7, all Deferred
      Share Units payable upon a Member’s death shall be paid on the first
      business day following the six month anniversary of a Member’s
      death.

            


    

     

    
      	
              7.  

            	
              Restrictions on Deferred Share
      Units of Certain Dual Taxpayers1.  This Section 7 shall only
      apply in respect of Deferred Share Units of a U.S. Taxpayer if, at the
      time a payment in respect of the DSUs is required to be made under the
      Plan, the U.S. Taxpayer would be liable to tax in respect of such payment,
      if made as otherwise provided, under the Income Tax Act (Canada) and the
      Income Tax Regulations made thereunder (including Regulation Section
      6801(d))(in this Section 7 referred to as the “Canadian Tax
      Rules”).

            


    

     

    A.  If
a payment in respect of DSUs of a U.S. Taxpayer would be required to be made at
any time but for this Section 7 and such payment would, if made, comply with the
Canadian Tax Rules but would otherwise violate the requirements of Section 409A,
then, notwithstanding any other provision of the Plan and this Schedule A,
unless the Committee determines that payments in respect of the DSUs can be made
in some other manner and at such other time in compliance with the Canadian Tax
Rules and Section 409A, the U.S. Taxpayer shall immediately forfeit the DSUs
(for the avoidance of doubt, without compensation therefor in any manner
whatsoever),

     

    B.  If
a payment in respect of DSUs of a U.S. Taxpayer is otherwise required to be made
at any time, but for this Section 7 and such payment would, if made, comply with
Section 409A but would violate the Canadian Tax Rules, then, notwithstanding any
other provision of the Plan and this Schedule A, unless the Committee determines
that payment in respect of the DSUs can be made in some other manner and at such
other time in compliance with Section 409A without violating the Canadian Tax
Rules, such payment shall be made to a trustee to be held in trust for the
benefit of the U.S. Taxpayer in a manner that causes the payment to be included
in the U.S. Taxpayer’s income under the Code and does not violate the Canadian
Tax Rules, and amounts shall thereafter be paid out of the trust for the benefit
of the U.S. Taxpayer at such time and in such manner as complies with the
requirements of the Canadian Tax Rules.

     

    
      	
              8.  

            	
              Miscellaneous.

            


    

     

    A.           Notwithstanding
anything to the contrary in the Plan, no consent to an amendment, suspension or
termination that adversely affects the Deferred Share Units previously granted
to a U.S. Taxpayer under Section 409A shall be required if such amendments are
considered by the Committee, on the advice of counsel, to be necessary or
desirable in order to avoid adverse U.S. tax consequences to the U.S.
Taxpayer.

     

    B.           No
provision of the Plan or amendment to the Plan may permit the acceleration of
payments under the Plan to U.S. Taxpayers contrary to the provisions of Section
409A.

     

    C.           In
the event of a termination of the Plan, no payments to U.S. Taxpayers shall be
made, except on the schedule permitted by Section 409A.

     

    D.           All
provisions of the Plan shall continue to apply to the U.S. Taxpayer to the
extent they have not been specifically modified by this Schedule
“A”.

    

      

    

    
      
        	
                1

              	
                This
      provision addresses a conflict that arises between U.S. and Canadian tax
      law because of the conflicting payment rules and 409A’s unique definition
      of termination of service.  In practical terms, the conflict can
      be avoided by managing the Director’s termination carefully, but both
      rules require the written plan to address this conflict: In the unlikely
      event that the Director ceases service on the board and continues service
      in another capacity (ie, as a consultant) the awards could not be paid
      under U.S. law, but are required to be paid under Canadian law.
      Alternatively, if the director reduces service to less than 20% of
      historical average service the awards are required to be paid under U.S.
      law, but forbidden to be paid under Canadian
  law.

              


      

      

        
          
            
              
                	
                         

                      


              

              


            

             


          

          
             


            
              

            

          

          
             


            
              –  –

              


            

          

        



    

    SCHEDULE
“B”

     

    DEFERRED
SHARE UNIT PLAN


     

    ELECTION
FORM

     

    I hereby
elect irrevocably to have my Annual Retainer for
the calendar year ending ___ payable as follows:

     

    A.           ____ % in Deferred Share
Units

     

    B.           ____ % in cash

     

    The
total amount of A and B must equal to 100%.  You must elect in
increments of 10% under A and B.

     

    I hereby
elect irrevocably to have my Meeting Fees for the
calendar year ending ___ payable as follows:

     

    A.           ____ % in Deferred Share
Units

     

    B.           ____ % in cash

     

    The
total amount of A and B must equal to 100%.  You must elect in
increments of 10% under A and B.

     

    


     

     
 

    Participant Signature

     
 

    


    Participant Name (please
print)

    


    


    Date

     

    Please
return this Election Form to the Corporate Secretary by the close of business on
 , 20  (Fax No. l ).

     

    If you do
not return this Election Form, 100% of your Annual Retainer and Meeting Fees
will be paid in cash.