**Exhibit4.7**

**EMPLOYMENT AGREEMENT OF NICHOLAS J. PELLICCIONE**

** **

**ÆTERNA ZENTARIS INC.**

** **

**Dated May 7, 2007**

 

----

 

**EMPLOYMENT AGREEMENT**

 

 
| **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:**     | ** ** | **NICHOLAS J. PELLICCIONE,**domiciled at [civic address redacted for  privacy reasons], New York, USA                                              |
|         |       |
|         |       |                                                                                                                                               |
|         |       | (hereinafter  the “**Executive**”)                                                                                                       |

 

**SECTION 1 – PURPOSE**

 

1.1             The Corporation wishes to employ theExecutive as its Senior Vice President, Regulatory and Quality Assurance,starting on May 7, 2007. The Executive is willing to be employed by theCorporation, on the terms and conditions set forth herein in this EmploymentAgreement (the “**Agreement**”). TheExecutive shall report to the President and Chief Executive Officer of theCorporation.

 

**SECTION 2 – DUTIES**

 

2.1             The Executive agrees to devote his fullbusiness time to the Corporation, to make every effort necessary to performadequately the duties that are assigned to him and to act in the best interestsof the Corporation at all times. The Employee shall refrain from any activitythat could be prejudicial to the Corporation’s interests. In performing hisduties with the Corporation, the Executive shall act faithfully and honestly atall times.

 

2.2             The Executive shall carry out his duties fromNew Jersey, USA. However, the Executive acknowledges that his position willrequire traveling, including to Canada and Europe, and the Executive agrees todevote the necessary and reasonable time to such traveling.

 

2.3             The Executive declares that he has noobligation toward any person, including his former employers, that would beincompatible with this Agreement or that could be an impediment to theperformance of his duties with the Corporation.

 

----

 

2.4             The Executive agrees to comply with all theinstructions, policies and/or rules that are established verbally or inwriting by the Corporation.

 

2.5             The Executive shall be entitled to sit on aboard of directors of another corporation, solely with the prior writtenauthorization of the Board.

 

**SECTION 3 – COMPENSATION**

** **

3.1             Salary

 

The Corporation shall pay the Executive, for the duration of thisAgreement, a base annual salary (the “**BaseSalary**”) of THREE HUNDRED AND TEN THOUSAND US DOLLARS(US$310,000.00), payable in accordance with the Corporation’s standard payrollpractice. Such Base Salary shall be reviewed annually and may be increased inaccordance with the Corporation’s policy.

 

3.2             Bonus

 

During the term of this Agreement, the Executive shall be eligible toreceive an annual lump sum cash bonus (the “**AnnualBonus**”) in respect of each full or partial fiscal year of theCorporation, which is from January 1 to December 31. The Annual Bonusfor the 2007 fiscal year, which shall be prorated, shall be equal to an amountrepresenting thirty-five (35%) of the Base Salary. If an Annual Bonus is to bepaid hereunder in respect of a period that is a partial fiscal year, suchAnnual Bonus shall be prorated for service through the Executive’s date oftermination. In all cases, the Executive’s eligibility for such Annual Bonus isconditional upon the attainment of objectives, which shall be mutually agreedupon within one month of the commencement of the Executive’s employment foryear 2007 and thereafter yearly. According the Corporation’s policy, thegranting of Annual Bonus is based upon an assessment of each individual’sperformance as well as the performance of the Corporation and requires Boardapproval.

 

3.3             Stock Options

 

Subject to regulatory approval, the Corporation shall grant to theExecutive, no later than the date of signature of this Agreement, 25,000options under the Corporation’s Stock Option Plan (the “**Plan**”). These stock options shall vest equallyover a period of three (3) years from the date of the original grant. Thesaid options, the exercise price, the period during which they may be exercisedand the other terms and conditions attaching to their exercise shall be subjectto the terms and conditions of the Plan.

 

3.4             Signing Bonus

 

The Executive shall receive a signing bonus, of an amount representingthe value of 2,500 Corporation’s Common Shares. This amount will be grossed upto take into account the income taxes and will be payable only if the Executiveacquire the same number of Common Shares of the Corporation on the market,within the first month

 

2

----

 

following the signature of this Agreement,subject to compliance with the Corporation’s insider trading and blackoutpolicies and all relevant securities regulations.

 

3.5             Car Allowance

 

The Corporation shall pay the Executive an annual taxable car allowanceof TWENTY THOUSAND US DOLLARS (US$20,000.00). In addition, the Corporation willassume all related operating costs of the vehicle (including insurance,registration, maintenance, repairs and fuel).

 

3.6             Business Expenses

 

The Corporation shall reimburse the Executive, upon presentation ofvouchers, for reasonable entertainment, traveling and other expenses incurredby him on behalf of the Corporation, in accordance with the Corporation’spolicies and rules.

 

**SECTION 4 – VACATION**

 

The Executive shall be entitled to paid annual vacation of four (4) weeks,in accordance with the Corporation’s policy, which vacation is to be taken attimes prearranged with the Corporation. Vacation must be taken during the yearand shall not be cumulative. The full vacation for 2007 is vested for theExecutive upon execution of this agreement.

 

**SECTION 5 – GROUP INSURANCE**

 

5..1          Medical/Dental Insurance, Life and Disability Insurance

 

The Corporation shall pay the monthly premium for family benefits planinsurance according the Corporation’s existing plan Insurance

 

**SECTION 6– DURATION AND TERMINATION**

 

6..1          Duration

 

This contract is for an indeterminate term.

 

6.2             Automatic termination

 

The Executive’s employment shall terminate automatically, without theCorporation being bound to pay any compensation whatsoever, upon the death ofthe Executive or the date upon which his resignation becomes effective.

 

The Executive’s employment may also be terminated by the Corporationfor cause upon simple notice in writing transmitted to the Executive, withoutthe Corporation being bound to pay any compensation whatsoever, in thefollowing cases, hereinafter referred to as “**Cause**”:

 

3

----

 

(a)                                  If the Executive is declared bankrupt orinsolvent or makes an assignment of his property or is placed under protectivesupervision, which situations the Executive acknowledges to be incompatiblewith the continuation of his employment.

 

(b)                                 If the Executive becomes physically ormentally disabled to such an extent as to make him unable to perform his dutiesnormally and adequately for an aggregate of six (6) months during a periodof twelve (12) consecutive months. In such a case, the Executive may continueto benefit under short-term and long-term disability insurance plans, subjectto the terms of such plans, if any.

 

(c)                                  If the Executive breaches the terms of thisAgreement.

 

(d)                                 If the Executive commits any fraud, theft,embezzlement or other criminal act of a similar nature.

 

(e)                                  If the Executive has committed seriousmisconduct or willful negligence in the performance of his duties.

 

(f)                                    If the Executive refuses or fails to followreasonable directives of the Corporation.

 

(g)                                 If the Executive’s demonstrates willful orreckless conduct causing material damage to the Corporation or the Corporation’sbusiness.

 

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

 

6.3             Termination without Cause

 

The Corporation may alsoterminate the Executive’s employment, without cause, by paying him thefollowing:

 

(a)                                  If the Executive’s employment is terminatedby the Corporation on or before the date that is the twelve (12)-monthanniversary of the date of this Agreement, an amount equivalent of monthsworked of:

 

(i)                                     the Executive’s annual Base Salary;

 

(ii)                                  the annualized Annual Bonus received or toreceive by the Executive for 2007; and

 

(iii)                               the cost of the benefits which were in forceat the time of termination of the Executive’s employment, calculated on ayearly basis, including the car allowance but excluding the related operatingcosts. However, Stock Options are expressly excluded from this provision andthe Executive shall be treated, in this regard, in accordance with the terms ofthe Plan.

 

4

----

 

(b)                                 If the Executive’s employment is terminatedby the Corporation after the date that is the twelve (12)-month anniversary ofthe date of this Agreement:

 

(i)            an amount equivalent to twelve (12) months ofthe Executive’s annual Base Salary;

 

(ii)           An amount equivalent to the Annual Bonusreceived by the Executive for the last completed fiscal year prior to thetermination date calculated on a yearly basis; and

 

(iii)          An amount equivalent to twelve (12) months ofthe cost of the benefits which were in force at the time of termination of theExecutive’s employment, calculated on a yearly basis, including the carallowance but excluding the related 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)                                  The Executive acknowledges that the saidpayments are fair and sufficient and, in consideration of the Corporationgiving him such payments in the event of the termination of his employmentwithout cause, the Executive shall grant the Corporation and its directors,officers, employees, shareholders, representatives and agents, and thedirectors, officers, employees, shareholders, representatives and agents of anyaffiliate of the Corporation, a full and final release and discharge from anyand all claims, past, present or future, that he has or may have, arisingdirectly or indirectly from the termination of his employment, whether forprior notice of termination, severance pay, damages in lieu thereof or for anyother reason.

 

6.4             Resignation

 

In the event that the Executive wishes to terminate his employment, heshall give the Corporation prior written notice of at least 6 weeks.

 

**SECTION 7 – TERMINATION OF EMPLOYMENT FOLLOWING A CHANGEOF CONTROL**

 

7.1             If the employment of the Executive isterminated by the Corporation within twelve (12) months following a Change ofControl, without Cause by the Corporation or by the Executive for Good Reason,the whole as defined in Appendix 1, the Executive shall receive the following:

 

(a)                                  An amount equivalent to eighteen (18) monthsof his annual Base Salary;

 

5

----

 

(b)                                 An amount equivalent to 1.5 times the AnnualBonus, if any, which the Executive would have been entitled to receive in theyear during which the Change of Control occurred; and

 

(c)                                  An amount equivalent to eighteen (18) monthsof the cost of the benefits which were in force at the time of termination ofthe Executive’s employment, calculated on a yearly basis, including the carallowance, but excluding operating costs. However, Stock Options are expresslyexcluded from this provision and the Executive shall be treated, in thisregard, in accordance with the terms of the Plan.

 

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

 

8.1             The Executive shall not compete with theCorporation, directly nor indirectly. He shall not participate in any capacitywhatsoever in a business that would directly or indirectly compete with theCorporation, namely one involved in the development and commercialization ofthe specific endocrine therapies and oncology treatments which the Corporationis 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 specific producthad been actively exploited by the Corporation during the two years precedingthe termination date. For purposes of this clause, the Corporation is deemed tohave actively exploited such territory for such product if, during the two (2) yearsimmediately preceding the termination date:

 

(i)                                     Distribution rights for this product weregranted to a distributor of the Corporation, pursuant to a distributionagreement (exclusive or non-exclusive) except if such distribution agreementceased to have effect, prior to the termination date, with the Corporation’sconsent and provided that the Corporation did not actively search for otherdistributors for the territory covered by this Agreement; or if

 

(ii)                                  The Corporation has completed phase IIclinical development work for this product in this territory, or searched forcommercial partners or applied to protect its intellectual property rights inrelation to the product

 

6

----

 

andits use, including patent applications in relation to the product or its use,which applications referred to these territories.

 

8.1.3**                       ****As to the nature of theactivities**, to duties oractivities which are identical or substantially similar to those performed orcarried on by the Executive during the twenty-four (24) months preceding thetermination of his employment.

 

8.2             The foregoing stipulation shall neverthelessnot prevent the Executive from buying or holding shares or other securities ofa Corporation whose securities are publicly traded on a recognized stockexchange where the securities so held by the Executive do not represent morethan five percent (5%) of the voting shares of such Corporation and do notallow for its control.

 

8.3             The Executive also undertakes, for the sameperiod and in respect of the same territory referred to hereinabove insub-sections 8.1.1 and 8.1.2, not to solicit clients of the 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             The Executive also undertakes, for the sameperiod and in respect of the same territory referred to hereinabove insub-sections 8.1.1 and 8.1.2, not to induce, attempt to induce or otherwiseinterfere in the relations which the Corporation has with its distributors,suppliers, representatives, agents and other parties with whom the Corporationdeals.

 

8.5             The Executive also undertakes, for the sameperiod and in respect of the same territory referred to hereinabove insub-sections 8.1.1 and 8.1.2 not to induce, attempt to induce or otherwisesolicit the personnel of the Corporation to leave their employment with theCorporation nor to hire the personnel of the Corporation for any enterprise inwhich the Executive has an interest.

 

8.6             The Executive acknowledges that theprovisions of this section 8 are limited as to the time period, the geographicarea and the nature of the activities to what the parties deem necessary toprotect the legitimate interests of the Corporation, while allowing theExecutive to earn his living.

 

8.7             Nothing in this section shall operate toreduce nor to extinguish the obligations of the Executive arising at law orunder this contract which survive at the termination of the contract in reasonof their nature and, in particular, without limiting the foregoing, theExecutive’s duty of loyalty and obligation to act faithfully and honestly.

 

**SECTION 9 – CONFIDENTIALITY**

 

9.1             The Executive acknowledges that he hasreceived and will receive or conceive, in carrying on or in the course of hiswork during his employment with the Corporation, confidential informationpertaining to the activities, the technologies, the operations and

 

7

----

 

thebusiness, past, present and future, of the Corporation or its subsidiaries orrelated or associated companies which information is not in the public domain.The Executive acknowledges that such confidential information belongs to theCorporation and that its disclosure or unauthorized use could be prejudicial tothe 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.

 

9.2             The term “confidential information” includesamong other things:

 

9.2.1                        products, formulae, processes and compositionof products, as well as raw materials and ingredients, of whatever kind, thatare used in their manufacture;

 

9.2.2                        technical knowledge and methods, qualitycontrol 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                        financial information, production cost data,marketing strategies, raw materials supplies, suppliers, staff and client listsand related information, marketing plans, sales techniques and policies, includingpricing policies, sales and distribution data and present and future expansionplans; and

 

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

 

9..3          The Executive undertakes to keep the terms of this Agreementconfidential.

 

**SECTION 10 – OWNERSHIP OF INTELLECTUAL PROPERTY**

 

10.1       The Executive hereby assigns and agrees to assign to the Corporationall his intellectual property rights as of their creation and to make full andprompt disclosure to the Corporation of all information relating to anythingmade or designed by him or that may be made or designed by him during theperiod of his employment, whether alone or jointly with other persons, orwithin a period of two (2) years following the termination

 

8

----

 

ofhis employment and resulting from or arising out of any work performed by theExecutive on behalf of the Corporation or connected with any matter relating orpossibly relating to any business in which the Corporation or any of itssubsidiaries or related or associated companies is involved unless specificallyreleased from such obligation in writing by the Board.

 

Inaddition, the Executive renounces all moral rights in any document or workrealized during the period of his employment. The Executive acknowledges thatthe Corporation has the right to use, modify or reproduce any document or workrealized by the Executive, at its entire discretion, without the Executive’sauthorization and without his name being mentioned.

 

10.2        At any time during the period of his employment or after thetermination of his employment, the Executive shall sign, acknowledge anddeliver, at the Corporation’s expense, but without compensation other than areasonable sum for his time devoted thereto if his employment has thenterminated, any document required by the Corporation to give effect to section10.1, including patent applications and documents evidencing the assignment ofownership. The Executive shall also provide such other assistance as theCorporation may require with respect to any proceeding or litigation relatingto the protection or defense of intellectual property rights belonging to theCorporation.

 

10.3        This section shall be binding on theExecutive’s heirs, assignees and legal representatives. 

 

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

 

11.1       Any file, sketch, drawing, letter, report, memo or other document, anyequipment, machinery, tool, instrument or other device, any diskette, recordingtape, compact disc or software or any other property which comes into theExecutive’s possession during his employment with the Corporation, in theperformance or in the course of his duties, regardless of whether he hasparticipated in its preparation or design, how it may have come into hispossession and whether or not it is an original or a copy, shall at all timesremain the property of the Corporation and, upon the termination of theExecutive’s employment, shall be returned to the Corporation or its designatedrepresentative before the Executive leaves his place of work. The Executive maynot keep a copy or give one to a third party.

 

**SECTION 12 – TERMINATION OF PRIOR CONTRACTS**

 

12.1       As of the effective date hereof, this Agreement supersedes and cancelsany prior agreement, verbal or written, with respect to the Executive’semployment with the Corporation.

 

**SECTION 13 – AMENDMENT OF THE AGREEMENT**

 

13.1       To be valid, anyamendment to this Agreement must be confirmed in writing by the Corporation andby the Executive.

 

9

----

** **

**SECTION 14 – NOTICES**

 

14.1                         Any noticegiven hereunder shall be given in writing and sent by registered or certifiedmail or hand delivered. If such notice is sent by registered or certified mail,it shall be deemed to have been received five (5) business days followingthe date of its mailing if the postal services are working normally. If such isnot the case, the notice must be hand delivered or served by bailiff, at thediscretion of the sender. In the case of hand delivery or service, the noticeshall be deemed to have been received the same day. It is agreed that if thedelivery date is a non-business day, the notice shall be deemed to have beenreceived on the following business day.

 

**SECTION 15 – ELECTION OF DOMICILE**

 

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

 

**SECTION 16 – SUCCESSORS**

 

16.1                         This Agreementshall be binding on the successors, heirs, assignees and legal representativesof the parties.

 

**SECTION 17 – INTERPRETATION**

 

17.1                       This Agreementshall be governed by and interpreted in accordance with the laws of the province of Québec.

 

**SECTION 18 – LANGUAGE**

 

The****parties****have expressly requestedthat this Agreement be drafted in the English language. *Les**parties ont expressément requis que cette**convention**d’emploi soit rédigée**enanglais.*

 

**IN WITNESS WHEREOF**the parties hereto have dulysigned this Agreement on this · day of 25 May,2007.

 

 

**ÆTERNA ZENTARIS INC.**

 
| By:                                    | /s/  David J. Mazzo |                            |   |
|----------------------------------------|---------------------|---------------------------------|--------|
|                                   |                |                            |   |
| David  J. Mazzo, Ph.D.                 |                | /s/  Nicholas J. Pelliccione    |
|                                   |                |                            |
| President  and Chief Executive Officer |                | Nicholas  J. Pelliccione, Ph.D. |

 

10

----

 

**ANNEX 1**

** **

**CHANGE OFCONTROL PROGRAM (the “Program”)**

** **

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

 

TheExecutive shall be entitled to the benefit of the Program if both conditionsmentioned below occur:

 

(A)                              there is a **“Change of Control”**of the Corporation, as defined below; and

 

(B)                                The Executive’semployment is terminated, within twelve (12) months following a Change ofControl :

 

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

 

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

 

**2.****                                   ****Definitions**

 

(A)                              For purposes ofthe Program and unless otherwise defined, the capitalized terms used hereinshall 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)                                Subject to theexceptions set out in Schedule A hereto, a Person shall be deemed the **“Beneficial Owner”**of or to **“BeneficiallyOwn”** (a) any securities of which such Person or any of suchPerson’s affiliates or associates, as such terms are defined in *National Instrument 45-106 – Prospectus andRegistration Exemptions*, is owner at law or in equity; (b) anysecurities which the Person or any of such Person’s affiliates or associateshas the right to acquire within 60 days (whether such right is exercisableimmediately or after the passage of not more than 60 days thereafter or uponthe occurrence of a contingency or the making of a payment) pursuant to anysecurities convertible into Voting Shares, agreement, arrangement, pledge orunderstanding, whether or not in writing (other than customary agreements withand between underwriters and/or banking group and/or selling group members withrespect to a distribution of securities or pledges of securities in theordinary course of the pledgee’s business); and (c) any securities thatare Beneficially Owned within the meaning of clauses (i) or (ii) ofthis Subsection 2(A)(ii) by any other Person with which such Person isacting jointly or in concert;

 

11

----

 

(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)                                For purposes ofthe Program, involuntary termination of employment **“for Cause”** includes the following:

 

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

 

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

 

(C)                                For purposes ofthe Program, **“Good Reason”** means the occurrence, without theExecutive’sexpress written consent, of any of the following acts:

 

(i)                                   a materialreduction of the Executive’s total compensation (including annual Base Salaryplus Annual Bonus, benefits and number of stock options) as in effect on thedate of this Agreement or as same may be increased from time to time ;

 

(ii)                                a materialreduction 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)                               a forcedrelocation; or

 

(iv)                              a materialchange in the terms and conditions of this Program.

 

(D)                               For purposes ofthe Program, a **“Change of Control”** shall be deemed to haveoccurred in anyof the following circumstances:

 

(i)                                   subject to theexceptions set out in Schedule B hereto, upon the purchaseor acquisition,in one or more transactions, by a Person or one or more Persons who areaffiliates of one another or who are acting jointly or in concert (as suchexpressions are defined in the *SecuritiesAct* (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)                                upon a sale orother disposition of all or substantially all of the Corporation’s assets; or

 

12

----

 

(iii)                                  upon a plan ofliquidation or dissolution of the Corporation; or

 

(iv)                                 if, for anyreason, including an amalgamation, merger or consolidation of the Corporationwith or into another company, the individuals who at the date hereof constitutethe Board of Directors of the Corporation (and any new directors whoseappointment by the Board of Directors of the Corporation or whose nominationfor election by the Corporation’s shareholders was approved by a vote of atleast two-thirds (2/3) of the directors then still in office who either weredirectors at the date hereof or whose appointment or nomination for electionwas previously so approved) cease to constitute a majority of the members ofthe Board of Directors of the Corporation.

 

**3.****                                   ****Payment**

 

Inthe event that the two (2) conditions mentioned in Section 1 aboveare met, the Executive shall receive, in a lump sum, at the latest within ten (10) daysof the effective date of the termination of employment, the payment of theamounts mentioned in section 7 of the Agreement.

 

Shouldthe Executive die before he has received the full payments, his estate shallreceive, immediately following his death, a cash amount equal to the unpaidbalance, less required statutory deductions.

 

Itis understood that the Executive will not be required to mitigate the amount ofany payment hereunder by seeking other employment or otherwise.

 

**4.****                                   ****Release**

 

TheExecutive acknowledges that the full and complete execution of all obligationsundertaken by the Corporation and its successors under the Program, to theextent 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, arising directlyor indirectly from his employment and the termination thereof, whether forprior notice of termination, severance pay, damages in lieu thereof or for anyother reason.

 

**5.****                                   ****General**

 

TheExecutive’s participation in the Program shall end immediately upon thetermination of his employment with the Corporation or one of its affiliates forany reason whatsoever. The Program is for an indefinite term commencing on thedate 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

 

13

----

 

eachanniversary date thereafter. For example, the Corporation would be entitled toexercise its discretion to terminate the Executive’s participation in theProgram if, as of the date of the notice of termination, there has been duringsaid twelve (12)-month period a material reduction in the responsibilities ofthe Executive.

 

**6.****                                   ****Successors**

 

Theterms and conditions hereof shall bind the Corporation, its successors andassignees.

 

14

----

 

**Schedule A**

 

***Exceptions to the definition of “BeneficialOwner” and “Beneficially Own” (Section 2 (A)(ii)  of the Program)***

 

APerson shall not be deemed the **“Beneficial Owner”** of or to **“Beneficially Own”**any security:

 

(A)                            as a result ofsuch security having been deposited or tendered pursuant to a take-over bid (assuch term is defined in the *Securities Act*(Ontario)) made by such Person or any of such Person’s affiliates or associatesor any other Person acting jointly or in concert with such Person until suchdeposited or tendered security is taken up and paid for;

 

(B)                              as a result ofentering into an agreement, including a lock-up agreement, pursuant to which ithas been agreed that such security will be deposited or tendered until suchdeposited or tendered security is taken up and paid for;

 

(C)                              as a result of (a) suchPerson or any of the affiliates or associates of such Person holding suchsecurity provided that the ordinary business of any such Person (the **“Fund Manager”**)includes the management of investment funds for others and such security isheld by the Fund Manager in the ordinary course of such business in theperformance of such Fund Manager’s duties for the account of any other Person(a **“Client”**);(b) such Person (the **“Trust Company”**) being licensed tocarry on the business of a trust company under applicable laws and, as such, actingas trustee or administrator or in a similar capacity in relation to the estatesof deceased or incompetent Persons (each an **“Estate Account”**) or in relation toother accounts (each an **“Other Account”**) and holding suchsecurity in the ordinary course of such duties for such Estate Accounts or forsuch Other Accounts; (c) such Person (the **“Plan****Administrator****”**) being the administrator or the trustee of one or morepension funds or plans (a **“Plan”**) registered under the lawsof Canada or any province thereof or the laws of the United States of Americaor any state thereof and such security being held by the Plan Administrator orthe Plan in the ordinary course of such Plan Administrator’s or Plan’sactivities; (d) such Person (the **“Crown Agent”**) being established bystatute for purposes that include, and the ordinary business or activity ofsuch Person includes, the management of investment funds for employee benefitplans, pension plans or insurance plans of various public bodies and suchsecurity is held

 

15

----

 

by the Crown Agent in the ordinary course of the management of suchinvestment funds; or (e) such Person being a Plan and such security being heldby 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 maybe, 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)                             because suchPerson is a Client of the same Fund Manager as another Person on whose accountthe Fund Manager holds such security, or because such Person is an EstateAccount or an Other Account of the same Trust Company as another Person onwhose account the Trust Company holds such security, or because such Person isa Plan with the same Plan Administrator as another Plan on whose account thePlan Administrator holds such security;

 

(E)                               because suchPerson is a Client of a Fund Manager and such security is owned at law or inequity by the Fund Manager, or because such Person is an Estate Account or anOther Account of a Trust Company and such security is owned at law or in equityby the Trust Company, or because such Person is a Plan and such security isowned at law or in equity by the Plan Administrator; or

 

(F)                               because suchPerson is the registered holder of securities as a result of carrying on thebusiness of, or acting as, a nominee of a securities depositary.

 

16

----

 

**Schedule B**

 

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

 

**“****ACQUIRING PERSON****”** SHALL MEAN ANYPERSON WHO IS AT ANY TIME AFTER THE DATE HEREOF THE BENEFICIAL OWNER OF **FIFTY PERCENT (50%)** OR MORE OF THEOUTSTANDING VOTING SHARES OF THE CORPORATION; PROVIDED, HOWEVER, THAT THE TERM “ACQUIRINGPERSON” SHALL NOT INCLUDE:

 

(i)                                   the Corporationor any 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 underwriteror member of a banking or selling group acting in such capacity that becomesthe Beneficial Owner of **fifty percent (50%)**or more of the Voting Shares in connection with a distribution of securitiespursuant to an underwriting agreement with the Corporation;

 

Forpurposes of the Program, the capitalized terms used herein shall have thefollowing 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;

 

----

 

(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 acquisition by aPerson of Voting Shares pursuant to (i) any dividend reinvestment plan, such purchase plan or other planof the Corporation made available to all holders of Voting Shares (other thanholders resident in any jurisdiction where participation in such plan isrestricted or impractical as a result of applicable law); (ii) a stockdividend, a stock split or other event pursuant to which such Person becomesthe Beneficial Owner of Voting Shares on the same pro rata basis as all otherholders of Voting Shares of the same class or series; (iii) theacquisition or exercise of rights to purchase Voting Shares distributed to allholders of Voting Shares (other than holders resident in any jurisdiction wheresuch distribution or exercise is restricted or impractical as a result ofapplicable law) by the Corporation pursuant to a rights offering (but only ifsuch rights are acquired directly from the Corporation); or (iv) adistribution of Voting Shares or convertible securities in respect thereofoffered pursuant to a prospectus or by way of a private placement by theCorporation or a conversion or exchange of any such convertible security,provided that such Person does not thereby acquire a greater percentage ofVoting Shares or convertible securities so offered than the Person’s percentageof Voting Shares Beneficially Owned immediately prior to such acquisition.

 

2

----