**Exhibit4.4**

**EMPLOYMENTAGREEMENT OF Dr. DAVID MAZZO**

** **

**ÆTERNAZENTARIS INC.**

** **

**Dated March 23,2007**

 

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**EMPLOYMENTAGREEMENT**

 

 
| **BETWEEN:** |   | **ÆTERNA ZENTARIS INC.,**  a Corporation duly incorporated, having its head office at 1405  Parc-Technologique Blvd., Québec,  QC GIP 4P5, |
|--------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
|         |   |                                                                                                                                                 |
|         |   |                                                                                                                                                 |
|         |   | (hereinafter the **“Corporation”**)                                                                                                        |
|         |   |                                                                                                                                                 |
|         |   |                                                                                                                                                 |
| **AND:**     |   | **DAVID J. MAZZO,**  Ph.D. domiciled at [civic address                                                                                               |
|         |   | redacted for privacy reasons], New Jersey, U.S.A.                                                                                                    |
|         |   |                                                                                                                                                 |
|         |   | (hereinafter the **“Executive”**)                                                                                                          |

 

**SECTION 1 – PURPOSE**

 

1.1                              TheCorporation wishes to employ the Executive as its President and Chief ExecutiveOfficer, starting on April 9, 2007. The Executive is willing to be employed bythe Corporation, on the terms and conditions set forth herein in thisEmployment Agreement (the **“Agreement”**).The Executive shall report to the Board of Directors of the Corporation (the **“Board”**). In addition to the duties and responsibilitiesinherent to his position, the Executive shall have any powers and carry outmandates that may be entrusted to him by the Board from time to time.

 

**SECTION 2 – DUTIES**

 

2.1                              TheExecutive agrees to devote his full business time to the Corporation, to makeevery effort necessary to perform adequately the duties that are assigned tohim and to act in the best interests of the Corporation at all times. TheEmployee shall refrain from any activity that could be prejudicial to theCorporation’s interests. In performing his duties with the Corporation, theExecutive shall act faithfully and honestly at all times.

 

2.2                              TheExecutive shall carry out his duties from New Jersey, USA. However, theExecutive acknowledges that his position will require traveling, including toCanada and Europe, and the Executive agrees to devote the necessary andreasonable time to such traveling.

 

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2.3                              TheExecutive declares that he has no obligation toward any person, including hisformer employers, that would be incompatible with this Agreement or that couldbe an impediment to the performance of his duties with the Corporation.

 

2.4                              TheExecutive agrees to comply with all the instructions, policies and/or rules thatare established verbally or in writing by the Corporation.

 

2.5                              TheExecutive shall be entitled to sit on a board of directors of anothercorporation, solely with the prior written authorization of the Board. TheBoard agrees that the Executive may maintain his current board assignments(i.e., with Avanir Pharmaceuticals, Inc. and pSivida, Ltd.) but willresign such positions as soon as it is appropriate or necessary.

 

**SECTION 3 – COMPENSATION**

** **

3.1                              Salary

 

TheCorporation shall pay the Executive, for the duration of this Agreement, a baseannual salary (the **“Base Salary”)**ofFOUR HUNDRED AND FIFTY THOUSAND US DOLLARS (US$450,000.00), payable inaccordance with the Corporation’s standard payroll practice. Such Base Salaryshall be reviewed annually and may be increased in accordance with theCorporation’s policy.

 

3.2                              Bonus

 

During theterm of this Agreement, the Executive shall be eligible to receive an annuallump sum cash bonus (the **“Annual Bonus”)**inrespect of each full or partial fiscal year of the Corporation, which is from January 1to December 31. The Annual Bonus for the 2007 fiscal year, which shall notbe prorated, shall be TWO HUNDRED AND FIFTY THOUSAND US DOLLARS(US$250,000.00). The Annual Bonus for subsequent years will be at leastequivalent to the Annual Bonus for 2007 with the Annual Bonus amount subject toreview and potential increase in accordance with the policy of the Corporation.Except for the 2007 fiscal year, if an Annual Bonus is to be paid hereunder inrespect of a period that is a partial fiscal year, such Annual Bonus shall beprorated for service through the Executive’s date of termination. In all cases,the Executive’s eligibility for such Annual Bonus is conditional upon theattainment of objectives, which shall be mutually agreed upon within one monthof the commencement of the Executive’s employment for year 2007 and thereafteryearly. According the Corporation’s policy, the granting of Annual Bonus isbased upon an assessment of each individual’s performance as well as theperformance of the Corporation and requires Board approval.

 

3.3                              StockOptions

 

Subject toregulatory approval, the Corporation shall grant to the Executive, no laterthan the date of signature of this Agreement, 400,000 options under theCorporation’s Stock Option Plan (the **“Plan”).**These stock options shall vest equally over a period of four (4) yearsfrom the date of the original grant. The said options, the exercise price, theperiod

 

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during which they may be exercised and theother terms and conditions attaching to their exercise shall be subject to theterms and conditions of the Plan.

 

3.4                              SigningBonus

 

The Executiveshall receive a signing bonus, payable on or before April 9, 2007, of ONEHUNDRED THOUSAND US DOLLARS (US$100,000.00) with the provision that the signingbonus will be repayable to the Corporation unless the Executive provides theCorporation with satisfactory evidence to the effect that he has acquiredCommon Shares of the Corporation on the market for an aggregate amount of ONEHUNDRED AND THIRTY THOUSAND US DOLLARS (US$130,000.00), within the first monthfollowing the signature of this Agreement, subject to compliance with the Corporation’sinsider trading and blackout policies and all relevant securities regulations.Should the Executive be prevented from purchasing said shares during the firstmonth of his employment by policies of the Corporation or securitiesregulations, then the signing bonus becomes repayable to the Corporation onlyafter 7 days have elapsed into the first available window of time during whichthe Executive may purchase said shares while remaining in compliance withpolicies of the Corporation and relevant securities regulations.

 

3.5                              CarAllowance

 

TheCorporation shall pay the Executive an annual taxable car allowance of TWENTY-FIVE THOUSAND US DOLLARS (US$25,000.00). In addition, the Corporation willassume all related operating costs of the vehicle (including insurance,registration, maintenance, repairs and fuel).

 

3.6                              BusinessExpenses

 

TheCorporation shall reimburse the Executive, upon presentation of vouchers, forreasonable entertainment, traveling and other expenses incurred by him onbehalf of the Corporation, in accordance with the Corporation’s policies andrules.

 

**SECTION 4 – VACATION**

 

The Executiveshall be entitled to paid annual vacation of four (4) weeks, in accordancewith the Corporation’s policy, which vacation is to be taken at times prearrangedwith the Corporation. Vacation must be taken during the year and shall not becumulative. The full vacation for 2007 is vested for the Executive uponexecution of this agreement.

 

**SECTION 5 – GROUP INSURANCE**

 

5.1                              Medical/Dental Insurance

 

The Corporationshall pay the monthly premium for family medical/dental insurance, similar tothe Corporation’s existing plan (no deductible, reimbursement of 80% ofeligible drug and paramedical expenses; as for dental, no deductible,reimbursement of

 

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80% of generalexpenses and 50% of specialized expenses such as endodontic treatments,periodontic treatments). It is agreed, until such time as a plan for theCorporation is in effect for the New Jersey site, that the Corporation will paythe premiums for the Executive’s existing USA-based family medical/dentalcoverage, subject to the provisions above.

 

5.2                              LifeInsurance

 

TheCorporation shall pay for coverage of TWO HUNDRED THOUSAND US DOLLARS(US$200,000.00). The cost of any additional coverage shall be assumed by theExecutive.

 

5.3                              DisabilityInsurance

 

TheCorporation shall pay for coverage of an amount of SEVEN THOUSAND FIVE HUNDREDUS DOLLARS (US$7,500.00) per month. The cost of any additional coverage shallbe assumed by the Executive.

 

**SECTION 6 – DURATION AND TERMINATION**

 

6.1          Duration

 

This contractis for an indeterminate term.

 

6.2                              Automatictermination

 

The Executive’semployment shall terminate automatically, without the Corporation being boundto pay any compensation whatsoever, upon the death of the Executive or the dateupon which his resignation becomes effective.

 

TheExecutive’s employment may also be terminated by the Corporation for cause uponsimple notice in writing transmitted to the Executive, without the Corporationbeing bound to pay any compensation whatsoever, in the following cases,hereinafter referred to as **“Cause”**:

 

(a)                             Ifthe Executive is declared bankrupt or insolvent or makes an assignment of his propertyor is placed under protective supervision, which situations the Executiveacknowledges to be incompatible with the continuation of his employment.

 

(b)                            If theExecutive becomes physically or mentally disabled to such an extent as to makehim unable to perform his duties normally and adequately for an aggregate ofsix (6) months during a period of twelve (12) consecutive months. In sucha case, the Executive may continue to benefit under short-term and long-termdisability insurance plans, subject to the terms of such plans, if any.

 

(c)                             Ifthe Executive breaches the terms of this Agreement.

 

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(d)                                 If the Executivecommits any fraud, theft, embezzlement or other criminal act of a similarnature.

 

(e)                                  If the Executive hascommitted serious misconduct or willful negligence in the performance of hisduties.

 

(f)                                    If the Executiverefuses or fails to follow reasonable directives of the Corporation.

 

(g)                                 Ifthe Executive’s demonstrates willful or reckless conduct causing material damageto the Corporation or the Corporation’s business.

 

(h)                                 If the Executivemisuses or abuses alcohol, drugs or controlled substances.

 

6.3                              Terminationwithout Cause

 

The Corporation may also terminate theExecutive’s employment, without cause, by paying him the following:

 

(a)                                  Ifthe Executive’s employment is terminated by the Corporation on or before the datethat is the eighteen (18)-month anniversary of the date of this Agreement:

 

(i)                           Anamount equivalent to twelve (12) months of the Executive’s annual Base Salary;and

 

(ii)                        An amountequivalent to the Annual Bonus received by the Executive for the last completedfiscal year prior to the termination date.

 

(iii)                     An amountequivalent to twelve (12) months of the cost of the benefits which were inforce at the time of termination of the Executive’s employment, calculated on ayearly basis, excluding the car allowance and operating costs. However, StockOptions are expressly excluded from this provision and the Executive shall betreated, in this regard, in accordance with the terms of the Plan.

 

(b)                                 Ifthe Executive’s employment is terminated by the Corporation after the date thatis the eighteen (18)-month anniversary of the date of this Agreement:

 

(i)                           anamount equivalent to twenty-four (24) months of the Executive’s annual BaseSalary; and

 

(ii)                        An amountequivalent to twice the Annual Bonus received by the Executive for the lastcompleted fiscal year prior to the termination date.

 

(iii)                     An amountequivalent to twelve (12) months of the cost of the benefits which were inforce at the time of termination of the Executive’s employment, calculated on ayearly basis, excluding the car allowance and

 

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operating costs. However, Stock Options areexpressly excluded from this provision and the Executive shall be treated, inthis regard, in accordance with the terms of the Plan.

 

(c)                               TheExecutive acknowledges that the said payments are fair and sufficient and, inconsideration of the Corporation giving him such payments in the event of thetermination of his employment without cause, the Executive shall grant theCorporation and its directors, officers, employees, shareholders,representatives and agents, and the directors, officers, employees,shareholders, representatives and agents of any affiliate of the Corporation, afull and final release and discharge from any and all claims, past, present orfuture, that he has or may have, arising directly or indirectly from thetermination of his employment, whether for prior notice of termination,severance pay, damages in lieu thereof or for any other reason.

 

6.4                              Resignation

 

In the event that the Executive wishes toterminate his employment, he shall give the Corporation prior written notice ofat least 6 weeks.

 

**SECTION 7 – TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE OFCONTROL**

 

7.1                              Ifthe employment of the Executive is terminated by the Corporation within twelve(12) months following a Change of Control, without Cause by the Corporation orby the Executive for Good Reason, the whole as defined in Appendix 1, theExecutive shall receive the following:

 

(a)                            Anamount equivalent to twenty-four (24) months of his annual Base Salary; and

 

(b)                           Anamount equivalent to twice the Annual Bonus, if any, which the Executive wouldhave been entitled to receive in the year during which the Change of Controloccurred; and

 

(c)                            Anamount equivalent to twenty-four (24) months of the cost of the benefits whichwere in force at the time of termination of the Executive’s employment,calculated on a yearly basis, including the car allowance, but excludingoperating costs. However, Stock Options are expressly excluded from thisprovision and the Executive shall be treated, in this regard, in accordancewith the terms of the Plan.

 

**SECTION 8 – NO COMPETITION, NO SOLICITATION AND LOYALTY**

 

8.1                              TheExecutive shall not compete with the Corporation, directly nor indirectly.  He shall not participate in any capacitywhatsoever in a business that would directly or indirectly 

 

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compete withthe Corporation, namely one involved in the development and commercializationof the specific endocrine therapies and oncology treatments which theCorporation is actively developing, including, without limitation, as an executive,director, officer, employer, principal, agent, fiduciary, administrator ofanother’s property, associate, independent contractor, franchisor, franchisee,distributor or consultant unless such participation is fully disclosed to theCorporation and approved in writing in advance by the Board. In addition, theExecutive shall not have any interest whatsoever in such an enterprise,including, without limitation, as owner, shareholder, partner, limited partner,lender or silent partner. This no competition covenant is limited as follows :

 

8.1.1                     **As to the time period**, to the duration of the Executive’semployment and for a period of one (1) year as of the date of terminationof his employment;

 

8.1.2                     **As to the geographical area**, the territory in which a specificproduct had been actively exploited by the Corporation during the two yearspreceding the termination date. For purposes of this clause, the Corporation isdeemed to have actively exploited such territory for such product if, duringthe two (2) years immediately preceding the termination date:

 

(i)                              Distributionrights for this product were granted to a distributor of the Corporation,pursuant to a distribution agreement (exclusive or non-exclusive) except ifsuch distribution agreement ceased to have effect, prior to the terminationdate, with the Corporation’s consent and provided that the Corporation did notactively search for other distributors for the territory covered by thisAgreement; or if

 

(ii)                           TheCorporation has completed phase II clinical development work for this productin this territory, or searched for commercial partners or applied to protectits intellectual property rights in relation to the product and its use,including patent applications in relation to the product or its use, whichapplications referred to these territories.

 

8.1.3                     **As to the nature of the activities**, to duties or activitieswhich are identical or substantially similar to those performed or carried onby the Executive during the twenty-four (24) months preceding the terminationof his employment.

 

8.2                              Theforegoing stipulation shall nevertheless not prevent the Executive from buyingor holding shares or other securities of a Corporation whose securities arepublicly traded on a recognized stock exchange where the securities so held bythe Executive do not represent more than five percent (5%) of the voting sharesof such Corporation and do not allow for its control.

 

8.3                              TheExecutive also undertakes, for the same period and in respect of the sameterritory referred to hereinabove in sub-sections 8.1.1 and 8.1.2, not tosolicit clients of the 

 

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Corporation,directly or indirectly, not to permit the use of his name in order to solicitsaid clients or do anything whatsoever to induce or to lead any person todecide to put an end, in whole or in part, to his business relations with theCorporation.

 

8.4                              TheExecutive also undertakes, for the same period and in respect of the sameterritory referred to hereinabove in sub-sections 8.1.1 and 8.1.2, not toinduce, attempt to induce or otherwise interfere in the relations which theCorporation has with its distributors, suppliers, representatives, agents andother parties with whom the Corporation deals.

 

8.5                              TheExecutive also undertakes, for the same period and in respect of the sameterritory referred to hereinabove in sub-sections 8.1.1 and 8.1.2 not toinduce, attempt to induce or otherwise solicit the personnel of the Corporationto leave their employment with the Corporation nor to hire the personnel of theCorporation for any enterprise in which the Executive has an interest.

 

8.6                              TheExecutive acknowledges that the provisions of this section 8 are limited as tothe time period, the geographic area and the nature of the activities to whatthe parties deem necessary to protect the legitimate interests of theCorporation, while allowing the Executive to earn his living.

 

8.7                              Nothingin this section shall operate to reduce nor to extinguish the obligations ofthe Executive arising at law or under this contract which survive at thetermination of the contract in reason of their nature and, in particular,without limiting the foregoing, the Executive’s duty of loyalty and obligationto act faithfully and honestly.

 

**SECTION 9 – CONFIDENTIALITY**

 

9.1                              TheExecutive acknowledges that he has received and will receive or conceive, in carryingon or in the course of his work during his employment with the Corporation,confidential information pertaining to the activities, the technologies, theoperations and the business, past, present and future, of the Corporation orits subsidiaries or related or associated companies which information is not inthe public domain. The Executive acknowledges that such confidentialinformation belongs to the Corporation and that its disclosure or unauthorizeduse could be prejudicial to the Corporation and contrary to its interests.

 

Accordingly,the Executive agrees to respect the confidentiality of such information and notto make use of or disclose or discuss it to or with any person, other than inthe course of his duties with the Corporation, without the explicit priorwritten authorization of the Corporation.

 

Thisundertaking to respect the confidentiality of such information and not to makeuse of or disclose or discuss it to or with any person shall continue to havefull effect notwithstanding the termination of the Executive’s employment withthe Corporation, so long as such confidential information does not becomepublic as a result of an act by the Corporation or a third party which act doesnot involve the fault of one its Executives.

 

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9.2           The term “confidentialinformation” includes among other things:

 

9.2.1        products,formulae, processes and composition of products, as well as raw materials andingredients, of whatever kind, that are used in their manufacture;

 

9.2.2        technicalknowledge and methods, quality control processes, inspection methods,laboratory and testing methods, information processing programs and systems;manufacturing processes, plans, drawings, tests, test reports and software;

 

9.2.3        equipment,machinery, devices, tools, instruments and accessories;

 

9.2.4        financialinformation, production cost data, marketing strategies, raw materialssupplies, suppliers, staff and client lists and related information, marketingplans, sales techniques and policies, including pricing policies, sales anddistribution data and present and future expansion plans; and

 

9.2.5        research,experiments, inventions, discoveries, developments, improvements, ideas,industrial secrets and “know-how”.

 

9.3           The Executiveundertakes to keep the terms of this Agreement confidential.

 

**SECTION 10– OWNERSHIP OF INTELLECTUAL PROPERTY**

 

10.1         TheExecutive hereby assigns and agrees to assign to the Corporation all hisintellectual property rights as of their creation and to make full and promptdisclosure to the Corporation of all information relating to anything made ordesigned by him or that may be made or designed by him during the periodof his employment, whether alone or jointly with other persons, or within aperiod of two (2) years following the termination of his employment andresulting from or arising out of any work performed by the Executive on behalfof the Corporation or connected with any matter relating or possibly relatingto any business in which the Corporation or any of its subsidiaries or relatedor associated companies is involved unless specifically released from suchobligation in writing by the Board.

 

In addition, the Executive renounces all moral rights in any documentor work realized during the period of his employment. The Executiveacknowledges that the Corporation has the right to use, modify or reproduce anydocument or work realized by the Executive, at its entire discretion, withoutthe Executive’s authorization and without his name being mentioned.

 

10.2         Atany time during the period of his employment or after the termination of hisemployment, the Executive shall sign, acknowledge and deliver, at theCorporation’s expense, but without compensation other than a reasonable sum forhis time devoted thereto if his employment has then terminated, any documentrequired by the Corporation to give effect to section 10.1, includingpatent applications and documents evidencing the

 

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assignment of ownership. The Executive shall also provide such otherassistance as the Corporation may require with respect to any proceedingor litigation relating to the protection or defense of intellectual propertyrights belonging to the Corporation.

 

10.3         Thissection shall be binding on the Executive’s heirs, assignees and legalrepresentatives.

 

**SECTION 11 –OWNERSHIP OF FILES AND OTHER PROPERTY**

 

11.1         Anyfile, sketch, drawing, letter, report, memo or other document, any equipment,machinery, tool, instrument or other device, any diskette, recording tape,compact disc or software or any other property which comes into the Executive’spossession during his employment with the Corporation, in the performance or inthe course of his duties, regardless of whether he has participated in itspreparation or design, how it may have come into his possession andwhether or not it is an original or a copy, shall at all times remain theproperty of the Corporation and, upon the termination of the Executive’semployment, shall be returned to the Corporation or its designatedrepresentative before the Executive leaves his place of work. The Executive may notkeep a copy or give one to a third party.

 

**SECTION 12 – TERMINATION OF PRIORCONTRACTS**

 

12.1         Asof the effective date hereof, this Agreement supersedes and cancels any prioragreement, verbal or written, with respect to the Executive’s employment withthe Corporation.

 

**SECTION 13 – AMENDMENT OF THE AGREEMENT**

 

13.1         Tobe valid, any amendment to this Agreement must be confirmed in writing by theCorporation and by the Executive.

 

**SECTION 14 – NOTICES**

 

14.1         Anynotice given hereunder shall be given in writing and sent by registered orcertified mail or hand delivered. If such notice is sent by registered orcertified mail, it shall be deemed to have been received five (5) businessdays following the date of its mailing if the postal services are workingnormally. If such is not the case, the notice must be hand delivered or servedby bailiff, at the discretion of the sender. In the case of hand delivery orservice, the notice shall be deemed to have been received the same day. It isagreed that if the delivery date is a non-business day, the notice shall bedeemed to have been received on the following business day.

 

**SECTION 15 – ELECTION OF DOMICILE**

 

15.1         Forthe purposes of the exercise of any rights flowing from this Agreement and theinstitution of legal proceedings, the parties elect domicile in the judicialdistrict of Québec

 

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**SECTION 16– SUCCESSORS**

 

16.1         ThisAgreement shall be binding on the successors, heirs, assignees and legalrepresentatives of the parties.

 

**SECTION 17– INTERPRETATION**

 

17.1         ThisAgreement shall be governed by and interpreted in accordance with the laws ofthe province of Québec.

 

**SECTION 18– LANGUAGE**

 

The parties have expressly requested that this Agreement be drafted inthe English language. *Les parties ontexpress*é*ment requis que cette convention d’emploi soit r*é*dig*é*een anglais.*

 

**INWITNESS WHEREOF** theparties hereto have duly signed this Agreement on this 23rd day of March, 2007.

 

 
| **ÆTERNA ZENTARIS INC.** | ** **      | ** ** |
|-------------------------------|-----------------|------------|
| ** **                    | ** **      | ** ** |
| ** **                    | ** **      | ** ** |
| By:                           | /s/ Eric Dupont |       |  /s/ David J. Mazzo, Ph.D. |
|                          | Eric Dupont     |       |  David J. Mazzo, Ph.D. |

 

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**ANNEX 1**

 

**CHANGE OF CONTROL PROGRAM (the “Program”)**

 

**1.**             **Applicability of the Program**

 

The Executive shall be entitled to the benefit of the Program if bothconditions mentioned below occur:

 

(A)          thereis a **“Change of Control”**of theCorporation, as defined below; and

 

(B)           TheExecutive’s employment is terminated, within twelve (12) months following aChange of Control :

 

(i)            involuntarily,at the request of the Corporation or its successors, except **“for Cause”**or

 

(ii)           by him, for **“Good Reason”.**

 

**2.**             **Definitions**

 

(A)          Forpurposes of the Program and unless otherwise defined, the capitalized terms usedherein shall have the following meaning:

 

(i)            **“Person”**includes any individual, firm,partnership, association, trust, trustee, executor, administrator, legalpersonal representative, government, governmental body or authority,corporation, or other incorporated or unincorporated organization, syndicate orother entity;

 

(ii)           Subjectto the exceptions set out in Schedule A hereto, a Person shall bedeemed the **“Beneficial Owner”**ofor to **“Beneficially Own”**(a) anysecurities of which such Person or any of such Person’s affiliates orassociates, as such terms are defined in *NationalInstrument 45-106 – Prospectus and Registration Exemptions,*is ownerat law or in equity; (b) any securities which the Person or any of suchPerson’s affiliates or associates has the right to acquire within 60 days(whether such right is exercisable immediately or after the passage of not morethan 60 days thereafter or upon the occurrence of a contingency or the makingof a payment) pursuant to any securities convertible into Voting Shares,agreement, arrangement, pledge or understanding, whether or not in writing(other than customary agreements with and between underwriters and/or bankinggroup and/or selling group members with respect to a distribution of securitiesor pledges of securities in the ordinary course of the pledgee’s business); and(c) any securities that are Beneficially Owned within the meaning ofclauses (i) or (ii) of this Subsection 2(A)(ii) by anyother Person with which such Person is acting jointly or in concert;

 

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(iii)          **“Voting Shares”**means the common shares andany other securities the holders of which are entitled to vote generally on theelection of directors of the Corporation.

 

(B)           Forpurposes of the Program, involuntary termination of employment **“for Cause”**includes the following:

 

(i)            ifthe Executive commits any fraud, theft, embezzlement or other criminal act of asimilar nature; or

 

(ii)           ifthe Executive is guilty of serious misconduct or willful negligence in the performanceof his duties.

 

(C)           Forpurposes of the Program, **“Good Reason”**meansthe occurrence, without the Executive’s express written consent, of any of thefollowing acts:

 

(i)            amaterial reduction of the Executive’s total compensation (including annual BaseSalary plus Annual Bonus, benefits and number of stock options) as in effect onthe date of this Agreement or as same may be increased from time to time ;

 

(ii)           amaterial reduction or change in the Executive’s duties, authority, responsibilities,accountability or a change in the business or corporate structure of theCorporation which materially affects his authority, compensation or ability toperform duties or responsibilities (such as shifting from a policy makingposition to a policy implementation position);

 

(iii)          aforced relocation; or

 

(iv)          amaterial change in the terms and conditions of this Program.

 

(D)          Forpurposes of the Program, a **“Change of Control”**shall be deemed to have occurred in any of the followingcircumstances:

 

(i)            subjectto the exceptions set out in Schedule Bhereto, upon the purchase or acquisition, in one or more transactions, by aPerson or one or more Persons who are affiliates of one another or who areacting jointly or in concert (as such expressions are defined in the *Securities Act*(Ontario)) (the **“Acquiring Person”)**of a beneficialinterest in securities of the Corporation representing in any circumstancefifty percent (50%) or more of the voting rights attaching to the thenoutstanding securities of the Corporation; or

 

(ii)           upona sale or other disposition of all or substantially all of the Corporation’sassets; or

 

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(iii)          upona plan of liquidation or dissolution of the Corporation; or

 

(iv)          if,for any reason, including an amalgamation, merger or consolidation of theCorporation with or into another company, the individuals who at the datehereof constitute the Board of Directors of the Corporation (and any newdirectors whose appointment by the Board of Directors of the Corporation orwhose nomination for election by the Corporation’s shareholders was approved bya vote of at least two-thirds (2/3) of the directors then still in office whoeither were directors at the date hereof or whose appointment or nomination forelection was previously so approved) cease to constitute a majority of themembers of the Board of Directors of the Corporation.

 

**3.**             **Payment**

 

In the event that the two (2) conditions mentioned in Section 1above are met, the Executive shall receive, in a lump sum, at the latest withinten (10) days of the effective date of the termination of employment, thepayment of the amounts mentioned in section 7 of the Agreement.

 

Should the Executive die before he has received the full payments, hisestate shall receive, immediately following his death, a cash amount equal tothe unpaid balance, less required statutory deductions.

 

It is understood that the Executive will not be required to mitigatethe amount of any payment hereunder by seeking other employment or otherwise.

 

**4.**             **Release**

 

The Executive acknowledges that the full and complete execution of allobligations undertaken by the Corporation and its successors under the Program,to the extent the Program becomes applicable pursuant to Section 1 of theProgram, constitutes adequate notice of termination and in consideration andsubject to the full and complete execution of all such obligations, theExecutive agrees to grant the Corporation, its affiliated and related companiesand their respective directors, officers, shareholders, representatives,employees, successors and assigns, a full and final release and discharge forall claims, past, present or future, that he has or may have, arisingdirectly or indirectly from his employment and the termination thereof, whetherfor prior notice of termination, severance pay, damages in lieu thereof or forany other reason.

 

**5.**             **General**

 

The Executive’s participation in the Program shall end immediately uponthe termination of his employment with the Corporation or one of its affiliatesfor any reason whatsoever. The Program is for an indefinite term commencing onthe date of this Agreement. Furthermore, the Corporation shall have the right priorto the occurrence of a Change of Control, in its sole discretion, to terminatethe Executive’s participation in the Program at the end of each twelve(12)-month period commencing on the date of this Agreement by sending him awritten notice of termination at least thirty (30) days prior to the firstanniversary date of this Agreement and of

 

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each anniversary date thereafter. For example, the Corporation would beentitled to exercise its discretion to terminate the Executive’s participationin the Program if, as of the date of the notice of termination, there has beenduring said twelve (12)-month period a material reduction in theresponsibilities of the Executive.

 

**6.**             **Successors**

 

The terms and conditions hereof shall bind the Corporation, itssuccessors and assignees.

 

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**Schedule A**

 

***Exceptions to the definition of “Beneficial Owner” and “BeneficiallyOwn” (Section 2 (A)(ii) of the Program)***

 

A Person shall not be deemed the **“BeneficialOwner”**of or to **“Beneficially Own”**any security:

 

(A)          asa result of such security having been deposited or tendered pursuant to a take-overbid (as such term is defined in the *SecuritiesAct*(Ontario)) made by such Person or any of such Person’saffiliates or associates or any other Person acting jointly or in concert withsuch Person until such deposited or tendered security is taken up and paid for;

 

(B)           asa result of entering into an agreement, including a lock-up agreement, pursuantto which it has been agreed that such security will be deposited or tendereduntil such deposited or tendered security is taken up and paid for;

 

(C)           asa result of (a) such Person or any of the affiliates or associates of suchPerson holding such security provided that the ordinary business of any suchPerson (the **“Fund Manager”)**includesthe management of investment funds for others and such security is held by theFund Manager in the ordinary course of such business in the performance of suchFund Manager’s duties for the account of any other Person (a **“Client”);**(b) such Person (the **“Trust Company”)**being licensed to carry onthe business of a trust company under applicable laws and, as such, acting astrustee or administrator or in a similar capacity in relation to the estates ofdeceased or incompetent Persons (each an **“EstateAccount”)**or in relation to other accounts (each an **“Other Account”)**and holding such securityin the ordinary course of such duties for such Estate Accounts or for suchOther Accounts; (c) such Person (the **“PlanAdministrator”)**being the administrator or the trustee of one ormore pension funds or plans (a **“Plan”)**registeredunder the laws of Canada or any province thereof or the laws of the UnitedStates of America or any state thereof and such security being held by the PlanAdministrator or the Plan in the ordinary course of such Plan Administrator’sor Plan’s activities; (d) such Person (the **“Crown Agent”)**being established by statute for purposes thatinclude, and the ordinary business or activity of such Person includes, themanagement of investment funds for employee benefit plans, pension plans orinsurance plans of various public bodies and such security is held

 

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by the Crown Agent in the ordinary course of the management of suchinvestment funds; or (e) such Person being a Plan and such security beingheld by the Plan in the ordinary course of such Plan’s activities; provided,however, that in any of the foregoing cases the Fund Manager, the TrustCompany, the Plan Administrator, the Crown Agent or the Plan, as the case may be,is not then making or has not then announced a current intention to make atake-over bid (as such term is defined in the *SecuritiesAct*(Ontario)), alone or by acting jointly or in concert with anyother Person, other than an offer to acquire the Voting Shares pursuant to adistribution by the Corporation or by means of market transactions made in theordinary course of business of such Person (including pre-arranged tradesentered into in the ordinary course of business of such Person) executedthrough the facilities of a stock exchange or organizedover-the-counter-market;

 

(D)          becausesuch Person is a Client of the same Fund Manager as another Person on whoseaccount the Fund Manager holds such security, or because such Person is anEstate Account or an Other Account of the same Trust Company as another Personon whose account the Trust Company holds such security, or because such Personis a Plan with the same Plan Administrator as another Plan on whose account thePlan Administrator holds such security;

 

(E)           becausesuch Person is a Client of a Fund Manager and such security is owned at law orin equity by the Fund Manager, or because such Person is an Estate Account oran Other Account of a Trust Company and such security is owned at law or inequity by the Trust Company, or because such Person is a Plan and such securityis owned at law or in equity by the Plan Administrator; or

 

(F)           becausesuch Person is the registered holder of securities as a result of carrying onthe business of, or acting as, a nominee of a securities depositary.

 

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**Schedule B**

 

***Exceptions to the definition of “Acquiring Person” (Section 2(D)(i) of the Program)***

 

**“ACQUIRING PERSON”**SHALLMEAN ANY PERSON WHO IS AT ANY TIME AFTER THE DATE HEREOF THE BENEFICIAL OWNEROF **FIFTY PERCENT (50%)**OR MORE OFTHE OUTSTANDING VOTING SHARES OF THE CORPORATION; PROVIDED, HOWEVER, THAT THETERM “ACQUIRING PERSON” SHALL NOT INCLUDE:

 

(ii)             the Corporation orany corporation controlled by the Corporation;

 

(ii)             any Person whobecomes the beneficial owner of **fifty percent(50%)**or more of the outstanding Voting Shares as a result of one orany combination of: (a) a Voting Share Reduction; (b) an ExemptAcquisition; or (c) a Pro Rata Acquisition; provided, however, that if aPerson shall become the Beneficial Owner of **fiftypercent (50%)**or more of the outstanding Voting Shares by reason ofone or any combination of a Voting Share Reduction, an Exempt Acquisition or aPro Rata Acquisition, and thereafter becomes the Beneficial Owner of anadditional one percent of any Voting Shares then outstanding (otherwise thanpursuant to an additional Voting Share Reduction, Exempt Acquisition or ProRata Acquisition), then, as of the date that such Person becomes a BeneficialOwner of such additional Voting Shares, such Person shall become an **“Acquiring Person”**; or

 

(iii)            an underwriter ormember of a banking or selling group acting in such capacity that becomes theBeneficial Owner of **fifty percent (50%)**ormore of the Voting Shares in connection with a distribution of securitiespursuant to an underwriting agreement with the Corporation;

 

For purposes of the Program, the capitalized terms used herein shallhave the following meaning:

 

(a)           **“Voting Share****Reduction”**means an acquisition orredemption by the Corporation or any corporation controlled by the Corporationof Voting Shares which, by reducing the number of Voting Shares outstanding,increases the percentage of Voting Shares Beneficially Owned by any Person tofifty percent (50%) or more of the Voting Shares then outstanding;

 

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(b)           **“Exempt****Acquisition”******meansanacquisitionwherebyaPersonbecameanAcquiringPersonbyinadvertenceandwithoutanyintentiontobecome,orknowledgethatitwouldbecome,anAcquiringPersonunderthisProgramand,intheeventthatawaiverisgrantedbytheBoardofDirectors,suchacquisitionshallbedeemednottohaveoccurredforthepurposeshereof.AnysuchwaivermayonlybegivenontheconditionthatsuchPerson,within10daysaftertheforegoingdeterminationbytheBoardofDirectorsorsuchlaterdateastheBoardofDirectorsmaydetermine(the“DispositionDate”),hasreduceditsBeneficialOwnershipofVotingSharessuchthatthePersonisnolongeranAcquiringPersonandsuchwaivershallonlybeeffectiveifthereductionhasoccurredwithinsuch10-dayperiod;**[NTD:****To****consider****whether****such****an****event****can****ever****occur]**

 

(c)           **“Pro Rata Acquisition”**means an acquisitionby a Person of Voting Shares pursuant to (i) any dividend reinvestmentplan, such purchase plan or other plan of the Corporation made available to allholders of Voting Shares (other than holders resident in any jurisdiction whereparticipation in such plan is restricted or impractical as a result ofapplicable law); (ii) a stock dividend, a stock split or other eventpursuant to which such Person becomes the Beneficial Owner of Voting Shares onthe same pro rata basis as all other holders of Voting Shares of the same class orseries; (iii) the acquisition or exercise of rights to purchase VotingShares distributed to all holders of Voting Shares (other than holders residentin any jurisdiction where such distribution or exercise is restricted orimpractical as a result of applicable law) by the Corporation pursuant to arights offering (but only if such rights are acquired directly from theCorporation); or (iv) a distribution of Voting Shares or convertiblesecurities in respect thereof offered pursuant to a prospectus or by way of aprivate placement by the Corporation or a conversion or exchange of any suchconvertible security, provided that such Person does not thereby acquire a greaterpercentage of Voting Shares or convertible securities so offered than thePerson’s percentage of Voting Shares Beneficially Owned immediately prior tosuch acquisition.

 

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