EXHIBIT 4.35
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                      EXFO ELECTRO-OPTICAL ENGINEERING INC.

                            LONG TERM INCENTIVE PLAN


1.       PURPOSE OF THE PLAN

1.1      The purpose of the long-term incentive plan (the "PLAN") for directors,
         executive officers,  employees and other persons or companies providing
         ongoing management or consulting  services (the  "CONSULTANTS") to EXFO
         Electro-Optical  Engineering Inc. (the  "CORPORATION") or to any of the
         Subsidiaries  of the  Corporation is to secure for the  Corporation and
         its  shareholders  the  benefit  of an  incentive  to  partake in share
         ownership  by  directors,  executive  officers  and  employees  of  the
         Corporation  and its  Subsidiaries,  as the case may be, and by certain
         Consultants  who  provide  services  on a  continuous  basis.  For  the
         purposes of the Plan, "SUBSIDIARIES" shall mean (i) any legal entity of
         which the Corporation is the holder or the beneficiary,  at the time of
         the granting of the option or RSUs,  directly or indirectly,  otherwise
         than by way of security  only, of securities to which are attached over
         50% of the votes  enabling it to elect the majority of the directors of
         such entity as well as any subsidiary of such legal entity and (ii) any
         legal  entity  in  which  the   Corporation  or  a  subsidiary  of  the
         Corporation  holds at least 50% of the voting rights or in which it has
         a majority interest and of which the Corporation or a subsidiary of the
         Corporation manages the operations.

2.       DEFINITIONS

         For the  purposes  of this Plan,  the  following  terms  shall have the
         following meanings:

         "Award"  means the RSUs  granted to an Eligible  Participant  under the
         Plan on an Award Date,  evidenced by an Award  Agreement and subject to
         the terms and conditions of the Plan and the Award Agreement;

         "Award Agreement" means an agreement,  substantially in the form of the
         agreement  set out in  Schedule  2 to  this  Plan,  entered  into by an
         Eligible  Participant and the Corporation pursuant to which an Award is
         granted to the Eligible  Participant  in accordance  with the Plan, and
         containing such additional terms and conditions not  inconsistent  with
         the Plan as the Board shall deem desirable;

         "Award  Date" means the date on which an Award is  granted,  which date
         may be on or, if  determined  by the Board at the time of grant,  after
         the date that the Board resolves to grant the Award;

         "Board" means the board of directors of the Corporation;

         "Change of Control" shall have the meaning as set forth in Section 7;

         "Committee"  means the Human  Resources  Committee  composed  solely of
         non-employee   members  or  any  other  committee  composed  solely  of
         non-employee  members  constituted  from  time to  time at the  Board's
         discretion to administrate the Plan;

         "Continuing  Directors"  shall have the meaning as set forth in Section
         7.2;


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         "Consultants"  means persons or companies  providing ongoing management
         or consulting services to the Corporation;

         "Corporation" means EXFO Electro-Optical Engineering Inc.;

         "DSU" means  Deferred Share Units that may be granted from time to time
         to non employee Directors of the Corporation pursuant to the provisions
         of a Deferred Share Unit Plan for the Directors;

         "Early  Expiry  Date"  shall  have the  meaning as set forth in Section
         5.3.2;

         "Early Vesting or Expiry Awards" shall have the meaning as set forth in
         Section 6.4;

         "Eligible  Participant"  means  any  officer,  employee,   non-employee
         director of the  Corporation or Consultants  designated by the Board as
         eligible to participate in the Plan;

         "Grant  Date" means the date on which an Option is granted,  which date
         may be on or, if  determined  by the Board at the time of grant,  after
         the date that the Board resolves to grant the Option;

         "Option"  means an option to  subscribe  Shares  granted to an Eligible
         Participant pursuant to the terms of the Plan;

         "Optionee"   means  the   directors,   officers  or  employees  of  the
         Corporation  or any of its  Subsidiaries,  as the case  may be,  or the
         Consultants to whom Options are granted;

         "Option Period" shall have the meaning as set forth in Section 5.3.1;

         "Plan"  means  the Long  Term  Incentive  Plan of the  Corporation,  as
         amended;

         "Restricted  Share  Unit"  or "RSU"  means  the  right  of an  Eligible
         Participant  to whom a grant of such unit is made to receive a Share on
         the Vesting Date (or Early  Vesting  Date, as the case may be) upon the
         attainment of specified performance  objectives,  if any, as determined
         by the Board in  accordance  with  section 6, unless such unit  expires
         prior to its Vesting Date. The  Corporation  shall have the option,  at
         its entire  discretion,  and in  replacement  of Share,  to provide the
         Eligible Participant with a cash equivalent to the EXFO Market Value of
         such Share on the Vesting Date (or Early  Vesting Date, as the case may
         be);

         "RSU Holder" shall have the meaning as set forth in Section 6.2;

         "RSU Shares"  means the Shares that an RSU Holder may receive  pursuant
         to a particular Award Agreement;

         "Shares" means the Subordinate Voting Shares of the Corporation;

         "Subscription  Price"  shall  have the  meaning as set forth in Section
         5.2;

         "Subsidiaries" shall have the meaning as set forth in Section 1.


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3.       ADMINISTRATION

         The  Plan  shall  be  administered  by  the   Corporation's   Board  of
         non-employee  Directors (the "BOARD") or at the Board's decision by the
         Human Resources  Committee  composed solely of non-employee  members or
         any other committee composed solely of non-employee members constituted
         from time to time (the  "Committee").  The Board or the Committee shall
         have full and complete  latitude to interpret the Plan and to establish
         the  rules  and  regulations  applying  to it and  to  make  all  other
         determinations  it deems necessary or useful for the  administration of
         the Plan,  including  without  limiting the scope of the  foregoing and
         subject to subsection 5.3.3, to change an Early Expiry Date (as defined
         hereinafter) provided that such interpretations, rules, regulations and
         determinations  shall be consistent with the relevant policy statements
         of the  competent  securities  authorities  and the  rules of the stock
         exchanges on which the securities of the Corporation are listed.

4.       SHARES SUBJECT TO THE PLAN

         The shares subject to the Plan are the  Subordinate  Voting Shares (the
         "SHARES")  of the  Corporation.  The total number of Shares that may be
         issued  under the Plan and under the  Deferred  Share Unit Plan for the
         Directors shall not exceed 6,306,153 Shares of the Corporation, subject
         to the adjustment  under Section 8, and no Eligible  Participant  shall
         hold in total options to purchase and RSUs representing more than 5% of
         the number of Shares issued and  outstanding  from time to time. All of
         the  Shares  covered  by  options  that will have  expired or have been
         cancelled  shall become  reserved Shares for the purposes of options or
         RSUs that may be subsequently granted under the terms of the Plan.

         For greater  clarity,  the  issuance of Shares  under the Plan shall be
         subject to the following:

         (i)      the number of Shares reserved for issuance pursuant to options
                  and RSUs  granted to  insiders  of the  Corporation  shall not
                  exceed 10% of the total issued and outstanding Shares;

         (ii)     the  issuance  to  insiders,  within a one-year  period,  of a
                  number of Shares  shall not exceed 10% of the total issued and
                  outstanding Shares; and

         (iii)    the issuance to any one insider and such insider's associates,
                  within a  one-year  period,  of a number of  Shares  shall not
                  exceed 5% of the total issued and outstanding Shares.


5.       OPTIONS

5.1      GRANT OF OPTIONS

         The  Board or the  Committee  shall  from  time to time  designate  the
         directors,  officers  or  employees  of the  Corporation  or any of its
         Subsidiaries,  as the case may be, or the  Consultants  to whom Options
         shall be granted (an  "OPTIONEE")  and the number of Shares  covered by
         each of such option.  Any  Optionee may hold more than one option.  The
         granting  of each  option  shall  be  evidenced  by a  letter  from the
         Corporation  addressed  to the  Optionee  setting  forth the  number of
         Shares covered by such option,  the  subscription  price, the terms and
         conditions of exercise of the option and the option period.


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5.2      SUBSCRIPTION PRICE

         The  subscription  price of the Shares  subject  to an option  shall be
         established  by the Board of Directors or its  designated  Committee at
         the time of the grant, but such price shall not be less than the market
         price of the  Shares at the date of the  granting  of the  option  (the
         "GRANT  DATE"),  calculated as the greater of the closing prices of the
         Shares on The Toronto Stock Exchange and the NASDAQ  National Market on
         the last trading day preceding the Grant Date or, if the Shares did not
         trade on such last trading day, the greater of the average, rounded off
         to the  nearest  cent,  of the bid and ask prices for the Shares on The
         Toronto Stock Exchange and the NASDAQ  National  Market at the close of
         trading  on such  last  trading  day  preceding  the  Grant  Date  (the
         "SUBSCRIPTION PRICE").

         The closing  price of the Shares or, as the case may be, the average of
         the bid and ask  prices of the  Shares at the close of  trading  on the
         NASDAQ National Market shall be converted into Canadian  dollars at the
         noon buying rate of Federal  Reserve Bank of New York on the Grant Date
         when such conversion is required.

5.3      OPTION PERIOD

5.3.1    Subject to the provisions of subsections  5.3.2 and 5.3.3,  each option
         shall be  exercisable  during a period  established by the Board or the
         Committee (the "OPTION PERIOD");  such period shall commence no earlier
         than the Grant Date and shall  terminate  no later than ten years after
         such date.

5.3.2    Notwithstanding the provisions of subsection 5.3.1, an option shall not
         be  exercisable by an Optionee from and after each and every one of the
         following  dates (an  "EARLY  EXPIRY  DATE"),  unless  the Board or the
         Committee decides otherwise:

         5.3.2(a) in the case where the  Optionee is an officer or an  employee,
                  the date on which the Optionee  resigns and  voluntary  leaves
                  his   employment   with   the   Corporation   or  one  of  its
                  Subsidiaries,  as the  case may be,  or the date on which  the
                  employment of the Optionee with the  Corporation or one of its
                  Subsidiaries is terminated for a good and sufficient cause, as
                  the case may be;

         5.3.2(b) in  the  case  where  the   Optionee  is  a  director  of  the
                  Corporation  or one of its  Subsidiaries,  as the case may be,
                  but is not  employed by either the  Corporation  or one of its
                  subsidiaries,  30  days  following  the  date  on  which  such
                  Optionee  ceases to be a member of the Board of Directors  for
                  any reason other than death;

         5.3.2(c) (i) in the case where the  Optionee is an officer or employee,
                  6 months following the date on which the Optionee's employment
                  with the Corporation or any of its  Subsidiaries,  as the case
                  may be, is  terminated  by reason of death or (ii) in the case
                  where the Optionee is a director of the  Corporation or any of
                  its  Subsidiaries,  as the case may be, but is not employed by
                  either the  Corporation or any of its  Subsidiaries,  6 months
                  following  the  date on which  such  Optionee  ceases  to be a
                  member of the Board of Directors by reason of death;


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         5.3.2(d) in the case where the Optionee is an officer or  employee,  30
                  days  following  the date on which the  Optionee's  employment
                  with the Corporation or any of its  Subsidiaries,  as the case
                  may be, is terminated for any cause or reason other than those
                  mentioned  in  paragraphs  5.3.2(a) and  5.3.2(c),  including,
                  without  limiting  the  scope  of the  foregoing,  disability,
                  illness,  retirement or early retirement.  Notwithstanding the
                  foregoing,  in case of  retirement  or early  retirement of an
                  officer or employee, the Board or the Committee may at its own
                  discretion  but subject to Section 3, extend the Early  Expiry
                  Date mentioned in this paragraph 5.3.2(d);

         5.3.2(e) in the  case  where  the  Optionee  is a  Consultant,  30 days
                  following  the date on which his contract as a  Consultant  is
                  terminated  or,  as the case  may be,  30 days  following  the
                  receipt by the  Consultant  of a notice  from the  Corporation
                  indicating  that the options must be exercised  within 30 days
                  from the date of receipt of the notice.

5.3.3    The rules set forth in paragraph 5.3.2 shall not be interpreted in such
         a manner as to extend the Option Period beyond 10 years.

5.3.4    All rights  conferred by an option not exercised at the  termination of
         the  Option  Period or from and after any Early  Expiry  Date  shall be
         forfeited.

5.3.5    EXERCISE OF OPTIONS

(a)      Subject to the provisions of section 5.3, an option may be exercised in
         whole,  at any time, or in part,  from time to time,  during the Option
         Period,  but in all cases in  accordance  with the  exercise  frequency
         established by the Board or the Committee and applicable at the time of
         the grant.

(b)      An option may be exercised by forwarding a duly  executed  subscription
         form as attached hereto as Schedule 1 (the "Subscription  Form") to the
         Secretary of the Corporation.  Such  Subscription  Form shall set forth
         the number of Shares so  subscribed  and the address to which the Share
         Certificate  is to be delivered.  The  Subscription  Form shall also be
         accompanied  by a certified  cheque made payable to the  Corporation in
         the amount of the  Subscription  Price.  The Corporation  shall cause a
         certificate for the number of Shares specified in the Subscription Form
         to be issued in the name of the Optionee  and  delivered to the address
         specified  in the  Subscription  Form no later  than 10  business  days
         following the receipt of such Subscription Form and cheque.

5.3.6    NO ASSIGNMENT

         No option or  interest  therein  shall be  assignable  for  purpose  of
         transfer of guarantee  or otherwise by the Optionee  other than by will
         or the operation of applicable legal dispositions regarding succession.

5.3.7    NOT A SHAREHOLDER

         An Optionee  shall have no rights as a shareholder  of the  Corporation
         with respect to any Shares covered by his/her option until he/she shall
         have become the holder of record of such Shares.


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<PAGE>

6.       GRANT OF RSU AWARDS

6.1      GRANT OF AWARDS

         The Board shall from time to time  designate the Eligible  Participants
         to whom a grant of RSUs shall be made and shall determine the number of
         RSUs granted under the Award.  The Board shall further have  discretion
         to establish at the time of grant, within the restrictions set forth in
         the Plan, the Award Date, the Vesting Date, the performance  objectives
         which  must be  attained  for the  Award to  vest,  if any,  and  other
         particulars applicable to an Award granted hereunder.

6.2      AWARD AGREEMENT

         Upon  the  grant of an  Award,  the  Corporation  will  deliver  to the
         Eligible  Participant selected to receive same an Award Agreement dated
         as of the Award Date, containing the terms of the Award and executed by
         the  Corporation,  and upon  delivery to the  Corporation  of the Award
         Agreement  executed  by  the  Eligible  Participant  in  question,  the
         Eligible  Participant  in question will be an RSU Holder under the Plan
         and, subject to vesting,  have the right to receive the RSU Shares (or,
         at the  Corporation's  option,  cash equal to the EXFO Market  Value of
         such Shares on the Vesting Date (or the Early Vesting Date, as the case
         may be) on the terms set out in the Award Agreement and in the Plan.

6.3      VESTING DATE

         The  Vesting  Date of an Award will be  determined  by the Board at the
         time of grant,  subject  however to a minimum term of three years and a
         maximum  term of ten years  from the Award  Date and will be subject to
         the provisions of section 6.4 relating to early vesting or expiry.

6.4      EARLY VESTING OR EXPIRY OF AWARDS

(a)      Unless otherwise determined by the Board at or after the time of grant,
         and subject to the minimum and maximum term  referred to at section 6.3
         hereof,  except for events  described in section 6.4 (b) where  minimum
         term is not applicable:

         (i)      Where  vesting  of an Award is subject  to the  attainment  of
                  performance  objectives,  such Award,  or part thereof,  shall
                  expire on the Vesting Date if such performance objectives have
                  not been  attained or shall be  postpone at a further  Vesting
                  Date as determined  by the Board from time to time,  the whole
                  in accordance  with the terms and conditions of the applicable
                  Award Agreement.

         (ii)     Any  Award,  whether  or  not  subject  to the  attainment  of
                  performance objectives,  shall expire immediately upon the RSU
                  Holder  thereof  ceasing to be an  Eligible  Participant  as a
                  result of being  dismissed  from his office or employment  for
                  cause.

         (iii)    Any  Award,  whether  or  not  subject  to the  attainment  of
                  performance objectives,  shall vest before its Vesting Date or
                  expire,  as the  case  may be,  in the  following  events  and
                  manner:


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                  (1)      if an RSU Holder  resigns  and  voluntary  leaves his
                           office  or  employment,  the  Award  held by such RSU
                           Holder  shall  expire  immediately  on  the  date  he
                           resigns and leaves his office or employment;

                  (2)      if an RSU  Holder is  dismissed  without  cause,  the
                           Award held by such RSU Holder shall vest  immediately
                           on the date of dismissal in  accordance  with section
                           6.4(b);

                  (3)      if an RSU  Holder  dies or his  employment  with  the
                           Corporation    is   terminated   due   to   Permanent
                           Disability,  the Award held by such RSU Holder  shall
                           vest  immediately on the date of the death of the RSU
                           Holder or on the date of termination, as the case may
                           be,  in   accordance   with  section   6.4(b)  or  as
                           established by the Board from time to time; and

                  (4)      if an RSU Holder  attains the normal  retirement  age
                           established by the Corporation from time to time, the
                           Award held by such RSU Holder shall vest  immediately
                           on the date of retirement in accordance  with section
                           6.4(b).

(b)      In the case of the  occurrence  of an event  contemplated  in  sections
         6.4(a)(iii)(2),  (3)  and  (4),  and  notwithstanding  anything  to the
         contrary herein  provided,  the RSU Holder (or, if deceased,  his legal
         representative)  of such  early  vesting  Award  shall be  entitled  to
         receive,  on the  date of the  death  of the RSU  Holder,  the  date of
         termination  due to Permanent  Disability,  the date of retirement  the
         date of dismissal  without  cause or the date of the Change of Control,
         as the case may be (each an "Early Vesting Date"), the number of Shares
         (or, at the Corporation's  option,  cash equal to the EXFO Market Value
         of such Shares on the Early Vesting Date) equal to:

<TABLE>
<S>                                      <C>     <C>
                                                  _____                                         ______
                                                 |                                                    |
                                                 |    Number of days elapsed between the Award        |
            The number of RSU Shares             |                  Date and the                      |
            underlying the Award          X      |               Early Vesting Date                   |
                                                 |   ---------------------------------------------    |
                                                 |     Number of days in the Vesting Period of        |
                                                 |                   such Award                       |
                                                 |_____                                         ______|

            unless otherwise determined by the Board at or after the time of the grant.
</TABLE>

6.5      NON-ASSIGNABLE

         An Award will not be assignable.  Notwithstanding the foregoing, in the
         case  where  an RSU  Holder  dies  and  the  vesting  of his  Award  is
         accelerated  in the  manner set forth in  section  6.4(a)(iii)(3),  his
         legal representative shall have the rights of such RSU Holder under the
         Plan and the Award Agreement.

6.6      NO IMPLIED RIGHTS

         An RSU Holder will only have rights as a shareholder of the Corporation
         with respect to those of the RSUs Shares,  if any,  that the RSU Holder
         has received upon the vesting of an Award in accordance with its terms.

         Nothing  in this  Plan or in any  Award  Agreement  will  confer  or be
         construed  as  conferring  on an RSU  Holder  any right to remain as an
         officer, key employee or non-employee  director of the Corporation,  or
         an  Eligible  Participant  the right to be  granted  Options  or Awards
         hereunder.


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6.7      VESTING OF THE AWARD

         Unless an Award has  expired in  accordance  with  sections  6.4(a)(i),
         (ii),  and (iii)  (1),  the  Corporation  shall not later than five (5)
         business  days after the Vesting Date (or after the Early Vesting Date,
         as the case may be):

(a)      issue from treasury the number of RSU Shares represented by such vested
         Award (or the number of Shares  determined in  accordance  with section
         6.4(b),  as the case may be) and direct its  transfer  agent to issue a
         certificate  in the name of the RSU Holder of such vested Award (or, if
         deceased,  his legal representative) which will be issued as fully paid
         and non-assessable Shares; or

(b)      purchase the number of RSU Shares  represented by such vested Award (or
         the number of Shares  determined in accordance with section 6.4(b),  as
         the case may be) on the secondary market for delivery to the RSU Holder
         of such vested Award (or, if deceased, his legal representative); or

(c)      unless the Award Agreement provides otherwise, pay to the RSU Holder of
         such  vested  Award (or, if  deceased,  his legal  representative),  an
         amount in cash equal to the EXFO Market  Value on the Vesting  Date (or
         the Early Vesting  Date, as the case may be) of the Shares  represented
         thereby.

         Whether an Award is settled in accordance with sections 6.7(a),  (b) or
         (c) shall be at the entire discretion of the Corporation.

7.       CHANGE OF CONTROL

7.1      FOR THE PURPOSES OF THIS SECTION 7, "CHANGE OF CONTROL" SHALL MEAN:

         7.1.1    the  acquisition  by any person or entity,  or any  persons or
                  entities  acting  jointly or in concert,  whether  directly or
                  indirectly,  of voting  securities  of the  Corporation  which
                  together with all other voting  securities of the  Corporation
                  held  by  such  persons  or  entities,   constitute,   in  the
                  aggregate, either (a) fifty percent (50%) or more of the votes
                  attached  to  all   outstanding   voting   securities  of  the
                  Corporation,  or (b) forty  percent (40%) or more of the votes
                  attached  to  all   outstanding   voting   securities  of  the
                  Corporation and is followed within  twenty-four (24) months by
                  changes of the members of the Board  resulting  in a change of
                  the majority of the Board;

         7.1.2    an  amalgamation,   arrangement  or  other  form  of  business
                  combination  of the  Corporation  with  another  entity  which
                  results  in the  holders  of voting  securities  of that other
                  entity  holding,  in the  aggregate,  either (a) fifty percent
                  (50%) or more of the votes attached to all outstanding  voting
                  securities   of  the  entity   resulting   from  the  business
                  combination,  or (b) forty  percent (40%) or more of the votes
                  attached to all  outstanding  voting  securities of the entity
                  resulting from the business combination and is followed within
                  twenty-four (24) months by changes of the members of the Board
                  resulting in a change of the majority of the Board;


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         7.1.3    any event or series of events (which event or series of events
                  may  include,  without  limitation,  a proxy  fight  or  proxy
                  solicitation  with respect to the election of directors of the
                  Corporation made in opposition to the nominees  recommended by
                  the Continuing Directors during any period of twenty-four (24)
                  consecutive  months)  as a result of which a  majority  of the
                  members  of the  Board  consists  of  individuals  other  than
                  Continuing Directors; or

         7.1.4    the sale, lease or exchange of all or substantially all of the
                  property of the Corporation to another person or entity, other
                  than in the ordinary  course of business of the Corporation or
                  any of its Subsidiaries.

7.2      For the purposes of this section 7.2, "CONTINUING DIRECTORS" shall mean
         with respect to any period of twenty-four (24) consecutive  months, (a)
         any members of the Board on the first (1st) day of such period, (b) any
         members of the Board  elected after the first (1st ) day of such period
         at any annual meeting of  shareholders  who were nominated by the Board
         or a  committee  thereof,  if a majority of the members of the Board or
         such  committee  were   Continuing   Directors  at  the  time  of  such
         nomination,  and  (c) any  members  of the  Board  elected  to  succeed
         Continuing Directors by the Board or a committee thereof, if a majority
         of the members of the Board or such committee were Continuing Directors
         at the time of such election.

7.3      Notwithstanding  any provisions to the contrary contained in this Plan,
         the Board or the Committee  shall have the power to accelerate the time
         at which an  option or RSU may first be  exercised  or the time  during
         which an  option or RSU or any part  thereof  will  become  exercisable
         including,  without limitation, prior to or in connection with a Change
         of Control.

8.       EFFECTS OF ALTERATION OF SHARE CAPITAL

         In the event of any change in the number of  outstanding  Shares of the
         Corporation   by   reason   of  any  stock   dividend,   stock   split,
         recapitalization,  merger,  consolidation,  combination  or exchange of
         Shares or other similar  change,  subject to the prior  approval of the
         competent regulatory authorities, an equitable adjustment shall be made
         by the Board or the  Committee in the maximum  number or kind of Shares
         issuable under the Plan or subject to  outstanding  RSUs or options and
         in the  Subscription  Price of such Shares for purposes of the options.
         Such  adjustment  will be definitive  and mandatory for the purposes of
         the Plan.

9.       AMENDMENT AND TERMINATION

9.1      The Board or the Committee may, at any time, with the prior approval of
         the competent regulatory  authorities,  amend, suspend or terminate the
         Plan in whole or in part.  Subject to the  provisions of section 9, any
         material  amendment  (including  an increase  in the maximum  number of
         Shares  issuable  under the Plan) or a  reduction  in the  Subscription
         Price of an option (other than for standard anti-dilution  purposes) or
         a change in the terms of a RSU award shall be approved by a majority of
         votes cast at a meeting of shareholders of the Corporation.

9.2      In addition to the foregoing,  any material amendment to a RSU award or
         an option held by an insider  (within the meaning of the SECURITIES ACT
         (Quebec))  (other  than a person who is an insider  solely by virtue of
         being  a  director  or an  executive  officer  of a  Subsidiary  of the
         Corporation)  or an associate of an insider,  including a change in the


                                       9
<PAGE>

         Subscription  Price or expiry date,  shall be approved by a majority of
         votes cast at a meeting of shareholders of the Corporation,  other than
         votes  attaching  to Shares  beneficially  owned by the insider and the
         insider's associates.

9.3      For the purposes of this  section 9, an  amendment  does not include an
         accelerated  expiry of an  option  or RSU or change of the time  during
         which an option or RSU may first be  exercised  or time during which an
         option or RSU or any part thereof will become  exercisable  as provided
         for herein.

9.4      The  shareholders'  approval  of an  amendment  may be  given by way of
         confirmation at the next meeting of shareholders after the amendment is
         made,  provided that no Shares are issued pursuant to the amended terms
         prior thereto.

10.      FINAL PROVISIONS

10.1     The  Corporation's  obligation to issue options granted or Shares under
         the  terms  of the  Plan  is  subject  to all of the  applicable  laws,
         regulations  or rules of any  governmental  regulatory  agency or other
         competent  authority  in respect of the  issuance  or  distribution  of
         securities  and to the rules of any stock  exchange on which the Shares
         of the Corporation are listed. Each Optionee shall agree to comply with
         such laws,  regulations and rules and to provide to the Corporation any
         information  or   undertaking   required  to  comply  with  such  laws,
         regulations and rules.

10.2     The participation in the Plan of a director, an executive officer or an
         employee of the Corporation or any of its Subsidiaries,  as well as any
         Consultant,  shall be entirely optional and shall not be interpreted as
         conferring upon a director,  an executive officer or an employee of the
         Corporation or any of its Subsidiaries,  as well as any Consultant, any
         right or privilege whatsoever, except for the rights and privileges set
         out  expressly  in the Plan.  Neither the Plan nor any act that is done
         under the terms of the Plan shall be  interpreted  as  restricting  the
         right of the  Corporation or any of its  Subsidiaries  to terminate the
         employment of an executive  officer or employee at any time, as well as
         any  contractual  relationship  with  any  Consultant.  Any  notice  of
         dismissal given to an executive officer or employee,  as well as to any
         Consultant,  at the  time  his/her  employment  is  terminated,  or any
         payment in the place and stead of such notice,  or any  combination  of
         the two,  shall not have the effect of  extending  the  duration of the
         employment or the contractual relationship for purposes of the Plan.

10.3     No director, executive officer or employee of the Corporation or any of
         its  Subsidiaries,  as  well  as  any  Consultant,  shall  acquire  the
         automatic  right to be  granted  one or more  options or RSUs under the
         terms of the Plan by reason of any  previous  grant of  options or RSUs
         under the terms of the Plan.

10.4     The Plan does not provide for any  guarantee  in respect of any loss or
         profit that may result from fluctuations in the price of the Shares.

10.5     (i)      The   Corporation  and  its   Subsidiaries   shall  assume  no
                  responsibility   as   regards   the  tax   consequences   that
                  participation  in  the  Plan  will  have  for a  director,  an
                  executive  officer or an employee of the Corporation or any of
                  its Subsidiaries,  as well as any Consultant, and such persons
                  are urged to consult their own tax advisors in such regard.

         (ii)     A plan  participant  may be required to pay to the Corporation
                  or any subsidiary and the Corporation or any Subsidiary  shall
                  have the right and is hereby  authorized  to withhold from any
                  Shares or other property  deliverable  under any Option or RSU
                  or from  any  compensation  or other  amounts  owing to a plan


                                       10
<PAGE>

                  participant the amount (in cash or Shares) of any required tax
                  withholding  and  payroll  taxes in respect of an Option,  its
                  exercise,  or any  payment or  transfer  under an Option or in
                  respect  of a RSU  and to take  such  other  action  as may be
                  necessary  in the  opinion of the  Corporation  to satisfy all
                  obligations for the payment of such taxes.

         (iii)    Without  limiting the  generality  of clause (ii) above a plan
                  participant  may satisfy,  in whole or in part,  the foregoing
                  withholding  liability (but no more than the minimum  required
                  withholding liability) by delivery of Shares owned by the plan
                  participant with a fair market value equal to such withholding
                  liability  (provided  that such  Shares are not subject to any
                  pledge or other security interest and have either been held by
                  the plan participant for 6 months,  previously acquired by the
                  plan  participant  on the  open  market  or  meet  such  other
                  requirements as the Committee may determine necessary in order
                  to avoid an  accounting  earnings  charge),  or by having  the
                  Corporation  withhold  from the  number  of  Shares  otherwise
                  issuable  pursuant to the exercise or settlement of the Option
                  or RSU award a number of Shares with a fair market value equal
                  to such withholding liability.

10.6     The Plan and any  option  or RSU  granted  under  the terms of the Plan
         shall be governed and interpreted according to the laws of the province
         of Quebec and the laws of Canada applicable thereto.

10.7     The Plan is dated as of May 25,  2000 and amended as of January 9, 2004
         and amended as of January 12, 2005.




                                       11
<PAGE>


                      EXFO ELECTRO-OPTICAL ENGINEERING INC.

                                STOCK OPTION PLAN

                                SUBSCRIPTION FORM


                                                                _______________
                                                                    (DATE)
EXFO ELECTRO-OPTICAL ENGINEERING INC.
400 Avenue Godin
Vanier, Quebec
G1M 2K2

ATTENTION OF THE SECRETARY

         I, the undersigned,_________________________,  hereby subscribe for out
         of the ______________Subordinate  Voting Shares of EXFO Electro-Optical
         Engineering  Inc.  (the  "Corporation")  to  which  I  am  entitled  to
         subscribe  pursuant to an option  granted on  ___________ in accordance
         with  the  terms  and  conditions  mentioned  in  paragraph  7.2 of the
         Corporation's Stock Option Plan. I enclose herewith my certified cheque
         (or money  order)  made  payable  to the order of EXFO  Electro-Optical
         Engineering  Inc.,  in the amount of  $________  in payment of the said
         subscription.

                                        (X)
                                        ----------------------------------------
                                        (SIGNATURE)


                                        ----------------------------------------
                                        (NUMBER)   (STREET)


                                        ----------------------------------------
                                        (CITY)     (PROVINCE)      (POSTAL CODE)


                                        (    )
                                        ----------------------------------------
                                        (TELEPHONE)



                                       12
<PAGE>

                      EXFO ELECTRO-OPTICAL ENGINEERING INC.

                                   SCHEDULE 2

                             FORM OF AWARD AGREEMENT
                            LONG TERM INCENTIVE PLAN

         This Award  Agreement is entered into between EXFO (the  "Corporation")
         and the RSU Holder named below pursuant to the Long Term Incentive Plan
         of the Corporation  (the "Plan"),  a copy of which is attached  hereto,
         and confirms that:

         1.       on______________________(the "Award Date");
         2.       ________________________(the "RSU Holder");
         3.       was granted _______________________ non-assignable restricted
                  shares units (the "Award");
         4.       vesting of the Award shall:
         |_|  not be subject to the attainment of performance objectives; or
         |_|  be subject to the attainment of the following performance
              objectives:

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

         ----------------------------------------------------------------------;

         5.       the Award shall vest at 5:00 P.M., Eastern Time

                  ________________________________
                  (the "Vesting Date");

         all on the terms and subject to the  conditions set out in the Plan. By
         signing this agreement,  the RSU Holder acknowledges that he or she has
         read and understands the Plan, and agrees to be bound thereby.

         This  Agreement  and all  related  documents  have been drawn up in the
         English  language at the  specific  request of the parties  hereto.  La
         presente  entente,  ainsi que tout autre  document y afferent,  ont ete
         rediges en langue anglaise a la demande expresse des parties.

         IN WITNESS  WHEREOF the  Corporation  and the RSU Holder have  executed
         this Award Agreement as of_________________________


                                       13
<PAGE>


By:_______________________________


By:_______________________________


__________________________________
Name of RSU Holder

__________________________________
Signature of RSU Holder




                                       14