Document:

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                                  EXHIBIT 4.2
                          FORM OF EMPLOYMENT AGREEMENT

                              EMPLOYMENT AGREEMENT

This Employment Agreement dated and effective as of September 3, 1999 (the
"Agreement"), is made between

DIGITAL PROJECTION LIMITED a corporation organized
under the laws of England
(hereinafter referred to as the "Company")

                                                  OF THE FIRST PART

And

IMAX CORPORATION
a corporation organized
under the laws of Canada

(Imax Corporation, together with all its subsidiaries and affiliates are
hereinafter referred to as "Imax")

                                                  OF THE SECOND PART

And

[O]
of the City of [O]in the
Country of [O]

(hereinafter referred to as the "Employee")

                                                  OF THE THIRD PART

         WHEREAS, the Company wishes to enter into this Agreement to engage the
Employee to provide services to the Company, and the Employee wishes to be so
engaged, pursuant to the terms and conditions hereinafter set forth;

         AND WHEREAS the Employee is engaged to provide services as [O]of the
Company;

         NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:

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1.                EMPLOYMENT AND DUTIES

1.1  Employment. The Company hereby agrees to employ the Employee, and the
Employee hereby agrees to serve, as [O]of the Company, upon the terms and
conditions herein contained. The Employee agrees to serve the Company faithfully
and to the best of his ability under the direction of [O]. The Employee shall
report to the [O] on all of his activities.

1.2  Exclusive Services. Except as may otherwise be approved in advance by the
senior operating officer of Imax, the Employee shall devote his full working
time throughout the Employment Term (as defined in Section 1.3) to the services
required of him hereunder. The Employee shall render his services exclusively to
the Company and its parent(s), subsidiaries and affiliates during the Employment
Term, and shall use his best efforts to improve and advance the business and
interests of Imax and the Company in a manner consistent with the duties of his
position.

1.3  Term of Employment. The Employee's employment under this Agreement shall
commence on the date hereof (the "Commencement Date") and shall continue for a
period of two (2) years until September 3, 2001 and thereafter unless and until
terminated by either party in accordance with the terms of this Agreement and in
any event on the Employee reaching the normal retirement age for the purposes of
the Company's pension scheme from time to time (hereinafter referred to as the
"Employment Term.") The Employee's continuous service shall be treated as having
begun on [O].

1.4  Place of Employment. During the Employment Term the Employee will
principally work at the Company's offices in [O] and will undertake such normal
and reasonable work-related travel as is reasonably requested or as is required
by any relevant circumstances, including attending at the offices of Imax in
Mississauga, Canada and elsewhere.

1.5  Reimbursement of Expenses. The Company shall reimburse the Employee for
reasonable travel and other business expenses incurred by him in the fulfilment
of his duties hereunder in accordance with Company practices consistently
applied.

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2.       COMPENSATION

2.1  Base Salary. During his employment under this Agreement, the Employee shall
be paid an annual base salary ("Base Salary") of no less than pound sterling [O]
subject to annual review, the first such review to take place in January 2000
and subsequent reviews to be undertaken annually thereafter. Upon the annual
review the Employee shall be entitled to an increase of at least the increase in
the Retail Prices Index (or Consumer Prices Index as appropriate) over the
previous year. The Employee shall be paid no less frequently than monthly in
accordance with the Company's payroll practices.

2.2  Contingent Signing Bonus. At the Commencement Date, the Employee shall
receive as a contingent signing bonus the total of US$ [O] (the "Contingent
Signing Bonus"). This bonus is contingent, and shall vest, upon satisfactory
completion of the development by Imax and the Company of the IMAX digital
projector which shall be satisfactory for use in IMAX theatres (the
"Contingency"); provided however, that if Imax shall, in its sole and absolute
discretion, terminate the development of such digital projector, then the
Contingent Signing Bonus shall vest upon the date in which such development is
terminated. If the Employee resigns or his employment is terminated for Cause
prior to the Contingency or prior to termination of the development of the
digital projector, the Contingent Signing Bonus shall be returned to the Company
by means of offset by the Company and/or Imax against the Bonus Shares and in
the case of resignation of the Employee, where the Company exercises its rights
under Section 4.3, the amount of the Bonus Shares which shall vest (and
therefore be available for offset) shall be that which has vested as at the date
of termination of employment and any additional Bonus Shares which would have
vested but for the exercise by the Company of its rights under Section 4.3 (see
Section 2.5).

2.3  Bonus. In addition to the Base Salary, during the Employment Term the
Employee shall be entitled to participate in a bonus plan with a target annual
bonus (according to the terms of this bonus plan) of up to [O]% of his Base
Salary (the Target Bonus). The Employee acknowledges that the said bonus plan
may be changed from time to time (without prejudice to the % entitlement) by the
Company without notice to or any requirement to obtain the consent of the
Employee and without the Employee having any claim against the Company with
respect to any changes thereto, including any claims of Constructive Dismissal.
Following any changes to this said plan, the Employee will be given notice of
the changes in the same manner as are other Employees of the Company of the
Employee's stature in this same bonus plan. The Employee may also be eligible
for share option benefits in accordance with the Imax Stock Option Plan (the
"Option Plan").

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2.4  Additional Bonus. In addition to the Base Salary and Bonus, during the
Employment Term the Employee shall be entitled to participate in an additional
bonus plan related to his work on the Company's digital projection systems for
electronic cinema. In accordance with this additional bonus plan, the Employee
shall receive a total of US$ [O] for each digital projector sold by the Company
for electronic cinema application throughout the Employment Term and throughout
any period which would have been a period of notice but for the Company
exercising its right under Section 4.3.

2.5  Annual Bonus Shares. The Employee shall receive an annual bonus of [O]
fully paid-up and non-assessable shares of common stock of Imax (the "Bonus
Shares") at no cost to the Employee (with the exception of payment of any amount
pursuant to Section 7.5 herein), on each of the first five anniversary dates of
the Commencement Date throughout the Employee's term of employment with the
Company. Each such grant of Bonus Shares shall vest and become exercisable on
each respective anniversary date of the Commencement Date (the preceding
constituting the "Vesting Schedule", and each such anniversary date constituting
a "Grant Date"). The Vesting Schedule shall be subject to no other restrictions
or qualifications1, unless the Employee's employment is terminated by the
Company for Cause (as herein defined) or he resigns, in which case all Bonus
Shares not vested, as at the relevant date of the termination of employment,
shall be forfeited except for any Bonus Shares which would have vested during
any period of notice that would otherwise have been worked had the Company not
exercised its rights under Section 4.3. If the Employee's employment is
terminated not for Cause, all Bonus Shares (not already vested) shall vest with
immediate effect. The Company and Imax shall use best endeavors to assist the
Employee, or his personal representative as appropriate, in his ability to
realize the full value of such Bonus Shares, including, but not limited to,
registering vested Bonus Shares with the relevant stock exchange as soon as
practical. Notwithstanding anything contained in this Section 2.5 to the
contrary, until the vesting of the Contingent Signing Bonus pursuant to the
terms of Section 2.2 above, the Employee may not receive any Bonus Shares, as
assessed on its Grant Date and by reference to the price of Imax shares as
listed on the NASD stock exchange (and taking account of the exchange rate from
US dollars to pounds sterling at 9:00 a.m. on that date) exceeds the value of
the Contingency Signing Bonus.

2.6  Stock Options. Effective as soon as is practicable after the Commencement
Date, the Employee shall be granted (subject to the rules of the Option Plan)
non-qualified options (the "Options") to purchase [O] shares of common stock of
Imax (the "Common Shares"), at an exercise price per Common Share equal to the
Fair Market Value on the Commencement Date, as defined in the Option Plan.
Twenty percent (20%) of the Options shall vest and become exercisable on each of
the first five anniversary dates of the Commencement Date. All Options must be
exercised within nine (9) years after the Commencement Date. (this final
sentence is subject to approval of the Imax Board of Directors).

--------
1 except for those restrictions or qualifications contained in that certain
Stock Acquisition Agreement dated August 4, 1999 between the Company, the
Vendors (as defined therein) and Digital Projection International PLC.

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2.7   Acceleration. Upon the termination of employment by reason of death,
permanent disability (i.e. physical or mental disability or infirmity of the
Employee that prevents the normal performance of substantially all his duties
under this Agreement as an Employee of the Company which disability or infirmity
shall exist for a continuous period of 180 days) or termination by the Company
without cause, all Bonus Shares (not already vested) shall vest immediate
effect. For the purposes of this Section 2.7, a termination of the Employee's
employment by the Company under Section 4.3 following the Employee's resignation
shall not be a dismissal without cause.

3.   EMPLOYEE BENEFITS

3.1  General. The Employee shall, during the Employment Term, receive employment
benefits including vacation time, medical benefits, disability and life
insurance. Without limitation, however, the Employee shall be entitled to the
following benefits:

     (i)  [O] days' paid vacation, together with all statutory holidays declared
          in the country of England. The Employee may carry forward up to 13
          unused vacation days from a relevant year into the following year
          provided such vacation day is taken within the first four (4) months
          of the following year;

     (ii) [O] weeks continuous sick leave in any twelve (12) month period,
          provided that the Employee shall supply the Company with medical
          certificates covering any period of sickness or incapacity exceeding
          five days. Payment of the Employee's salary pursuant to the sick leave
          plan shall be inclusive of any Statutory Sick Pay to which the
          Employee may be entitled. If the Employee's absence is occasioned by
          the actionable negligence of a third party in respect of which damages
          are recoverable, then all sums paid by the Company shall constitute
          loans to the Employee, who shall refund to the Company such sums, not
          exceeding the lesser of the sums advanced to him in respect of the
          period of incapacity and the amount of damages recovered by him under
          any compromise, settlement or judgement;

     (iii) a car allowance of up to pound sterling [O] with which to purchase
          for his use for business and private purposes a motor car. The
          frequency of car replacement shall be no less than three (3) years or
          60,000 miles (whichever shall be earlier).The equivalent lease rate
          (pound sterling [O]) is based on a three (3) year term and 12,000
          miles per annum and shall be adjusted to reflect the actual level of
          mileage driven by the Employee. The Employee may make an additional
          contribution to improve the quality of the car provided. The Employee
          may at his discretion take a cash allowance (pound sterling [O]) in
          lieu of allowance for car purchase or lease. Such allowance shall be
          paid annually. The Company shall tax, comprehensively insure and pay
          the costs of running, servicing and repairing the car. The Employee
          shall be permitted to use the car for private journeys. This allowance
          shall be the subject of annual review on comparable terms to the
          annual review of Base Salary pursuant to Section 2.1 herein.

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     (iv) life insurance coverage of not less than four times annual earnings;

     (v)  a medical expenses insurance scheme in respect of the Employee, spouse
          and children under 21 and a permanent health insurance scheme for the
          Employee. If the company does not operate such schemes the Employee
          shall be entitled to the reimbursement of premiums paid to effect such
          insurance for himself;

     (vi) membership in the Company's non-contributory final salary pension
          scheme based on 1/50th of final basic salary for each year of service.
          If the Company's current scheme is discontinued then the Company or
          Imax will ensure an alternative scheme is established to provide
          equivalent benefit;

    (vii) use of a mobile phone, home telephone and fax machine, the costs of
          which will be borne by the Company;

4.   TERMINATION OF EMPLOYMENT

4.1  The Company may terminate the Employee's employment by giving to him not
     less than [O] months' prior notice in writing. The Employee may terminate
     his employment with the Company by giving to it not less than [O] months'
     prior written notice in writing. In any case where notice to terminate the
     employment is given in accordance with this clause 4.1, such notice shall
     not be given so as to expire before September 3, 2001. [Notwithstanding the
     foregoing, the Company may terminate the Employee's employment by giving
     him not less than [O] months' prior notice in writing given at any time
     while the Employee shall have been incapacitated by reason of ill health or
     accident from performing his duties under this Agreement for a period of or
     periods aggregating 365 days in the preceding 12 months.]

4.2  Notwithstanding the provisions of Sections 1.1 and 1.2 the Company may at
     any time following the giving of notice by either party to terminate this
     Agreement and for such period as it may specify not exceeding the length of
     notice given cease to provide work for the Employee, in which event during
     such period the other provisions of this Agreement including those relating
     to the Employee's compensation and benefits shall continue to have full
     force and effect (subject to anything else to the contrary in this
     Agreement or the rules of any relevant scheme or plan which makes up the
     Employee's compensation) but the Employee shall not be entitled to access
     to any premises of the Company or Imax nor shall contact any of their
     customers or suppliers.

4.3  The Company may, at its sole and absolute discretion, terminate the
     Employee's employment forthwith at any time by serving a notice under this
     Section 4.3 stating that this Agreement is being terminated in accordance
     with this Section 4.3 and undertaking to pay to the Employee, in four equal
     installments, the first such installment being paid within 14 days of the
     date of termination and the remaining installments at regular intervals
     over the period that would otherwise have been the notice period worked,
     Base Salary plus an additional payment of 30% of Base Salary (in respect of
     benefits and Target Bonus) in lieu of any required period of notice or
     unexpired part thereof (subject to tax and National Insurance) together
     with any accrued holiday entitlement

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     and any unreimbursed expenses as outlined in Section 1.5. For the avoidance
     of doubt, payments under this Section shall be subject to the provisions of
     Section 5.

4.4  The Employee agrees that at termination, the Company shall have the right
     to offset against compensation owed to the Employee, or deduct from it, any
     sums owed by the Employee to the Company.

4.5  The parties confirm that the notice and pay in lieu of notice provisions
     contained in this Section 4. are fair and reasonable and the parties agree
     that upon any termination of this Agreement in accordance with such terms,
     the Employee shall have no action, cause of action, claim or demand against
     the Company or Imax or any other person as a consequence of such
     termination other than to enforce the obligations under this Section 4
     (provided that this clause shall not prejudice the Employee's statutory
     employment rights).

4.6  If, during the period referred to in Sections 4.1 or 4.2, or during any
     period when the Employee is entitled to receive instalment payments under
     Section 4.3, the Employee breaches his obligations under Section 1 of
     Schedule 1 of this Agreement, the Company may, upon written notice to the
     Employee, in the case of Sections 4.1 and 4.2, terminate the Employee's
     employment forthwith and cease, in the case of Sections 4.1, 4.2 or 4.3, to
     make any further payments (whether by instalments or otherwise) or provide
     any further benefits to him.

4.7  The Company shall be entitled to terminate the Employee's employment
     hereunder at any time (herein referred to as termination for "Cause")
     without any claim for compensation, damages or otherwise if:

     (i)  the Employee is prevented from working legally in the United Kingdom
          other than for reasons not within the Employee's reasonable control;

     (ii) the Employee commits any act or omission which is capable of amounting
          to a repudiatory breach of this Agreement (for example, but without
          limitation, fraud or dishonesty);

     (iii) there is: (A) a continued failure, after warning, or (B) refusal by
          the Employee to perform the duties reasonably required of him as Chief
          Executive Officer and Managing Director;

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     (iv) there is any material violation by the Employee of any United Kingdom
          law or regulation, which violation, when assessed objectively,
          significantly injures the financial condition or business reputation
          of the Company or Imax, or the Employee is convicted of any criminal
          offence (other than an offence under the Road Traffic Acts for which a
          penalty of imprisonment cannot be imposed) which, when viewed
          objectively, could result in injury to the financial condition or
          business reputation of the Company or in circumstances where a
          custodial sentence of not less than 3 months is imposed; provided,
          however, that this section shall not apply to any instance wherein the
          Employee is charged or convicted with violation of a law or regulation
          which charge or conviction arises directly from the Employee's
          performance of his duties hereunder and/or from actions taken solely
          at the direction of the Company.

     (v)  there is any other action by the Employee which he knew or ought
          reasonably to have known could have caused, when assessed objectively,
          significant injury to the financial condition or business reputation
          of the Company or Imax, or which he knew or reasonably should have
          known was likely to result in a violation by the Company or Imax of
          any United Kingdom, Canadian or United States federal, provincial,
          state or local law or regulation applicable to the business of the
          Company or Imax, which violation is injurious to the financial
          condition or business reputation of the Company or Imax.

     (vi) the Employee is disqualified from holding office as Director in the
          Company or Imax under the Insolvency Act 1986 or the Company Directors
          Disqualification Act 1986 (or equivalent legislation in any other
          relevant jurisdiction) or he is disqualified or disbarred from
          membership of, or subject to any serious disciplinary sanction by, any
          professional or other body, which undermines the confidence of the
          board of Imax in the Employee's continued employment with the Company.

     For the purposes of Sections 2.2 and 2.5 only, a termination of the
     Employee's employment pursuant to Section 4.7 (iii)(A) shall be considered
     to be a termination not for Cause; provided, however, that upon a
     termination of the Employee's employment pursuant to Section 4.7 (iii)(A),
     all Bonus Shares (not already vested) shall not vest with immediate effect,
     but, rather, shall vest in accordance with the Vesting Schedule in Section
     2.5, which shall remain uninterrupted.

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4.8  In order to investigate a complaint against the Employee, the Company
     reserves the right to suspend the Employee on full compensation and
     benefits and to exclude him from any premises of the Company and Imax for
     so long as it deems necessary to carry out a proper investigation and to
     hold any appropriate disciplinary hearings.

4.9  The Employee agrees that he shall resign from the board of the Company and
     the board of any other Imax company of which he is director:

     4.9.1 if at any time during the Employment Term the Employee is prevented
           from performing his duties for a consecutive period of not less than
           100 days whether through sickness or otherwise or because the Company
           has exercised its rights under clause 4.2 and in either case only
           where the Company requires the Employee to resign; and in any event.

     4.9.2 at the end of the Employment Term

     and the Employee authorizes the Company to appoint someone on his behalf
     and as his attorney to effect such resignation if the Employee fails to
     resign within 5 working days of being so requested or of the end of the
     Employment Term.

5.   MITIGATION

     Subject always to the restrictions set out in Schedule 1 and taking such
     restrictions into account, the Employee shall be required, following any
     termination of his employment under Section 4.3 seek other employment or
     other work reasonably comparable to his duties hereunder. Accordingly, any
     payment to be made by the Company under Section 4.3 (other than in relation
     to accrued holiday pay or unreimbursed expenses) will be reduced by the
     amount of the Employee's entitlement to remuneration from such employment
     or other work in respect of any period during which the Employee is
     receiving the payments from the Company under Section 4.3 (whether such
     remuneration is paid or not to the Employee during such period) or
     forfeited in circumstances when the Employee has failed to make reasonable
     efforts to find such employment or other work. The Employee shall be
     required as a condition of any payment under Section 4.3 (other than in
     relation to accrued holiday pay or unreimbursed expenses) promptly to
     disclose to the Company details of any such remuneration, or if
     appropriate, details of his efforts to seek such employment or other work.

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6.   RESTRICTIONS

     The Employee agrees and undertakes that he shall be bound by the provisions
     contained in Schedule 1.

7.   MISCELLANEOUS

7.1  Notices. All notices or communications hereunder shall be in writing,
     addressed as follows:

To the Company:            Digital Projection Limited
                           Greenside Way, Middleton,
                           Manchester, M24 1XX

                           Telecopier No:   44 (0) 161 684 9786

To Imax:                   Imax Corporation
                           2525 Speakman Drive
                           Mississauga,  Ontario
                           L5K 1B1

                           Telecopier No:   (905) 403-6468
                           Attention: Legal Department

To the Employee:

                           [O]

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

All such notices shall be conclusively deemed to be received and shall be
effective, (i) if sent by hand delivery, upon receipt or (ii) if sent by
registered or certified mail, on the fifth day after the day on which such
notice is mailed.

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7.2  Severability. Each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. The parties agree that Sections 2, 4, 5,
6, 7 and Schedule 1 shall survive the termination of this Agreement.

7.3 Assignment. This Agreement shall be binding upon and inure to the benefit of
the heirs and representatives of the Employee and the assigns and successors of
the Company and Imax, if any are permitted by law and provided that the Company
and Imax and its assignee shall each remain liable to the Employee in the event
of any assignment, but neither this Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation by the Employee. The Employee
expressly agrees that each of Imax and the Company may assign any of its rights,
interest or obligations hereunder to any affiliate of either of them without the
consent of the Employee; provide, however, that no such assignment shall relieve
the assignor of any of its obligations hereunder.

7.4  Entire Agreement: Amendment. This Agreement represents the entire agreement
of the parties and shall supersede any and all previous contracts, arrangements
or understandings between the Company and the Employee in relation to his
employment. This Agreement may only be amended at any time by mutual written
agreement of the parties hereto.

7.5  Withholding. The payment of any amount pursuant to this Agreement shall be
subject to any applicable withholding and payroll taxes, and such other
deductions as may be required under applicable law or the Company's Employee
benefit plans, if any

7.6 Governing Law. This Agreement (save in respect of the provisions of
Schedule 1) shall be governed by and construed in accordance with the laws of
England and Wales. Schedule 1 shall be governed by and construed in accordance
with the laws of the Province of Ontario and the laws of Canada applicable
therein without regard to the principles of conflicts of laws.

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                                   Schedule 1

1.   NON-SOLICITATION, CONFIDENTIALITY, NON-COMPETITION

For the purposes of this Schedule 1, "Company" shall mean Imax and any and all
of its subsidiaries and affiliates including, for the avoidance of doubt,
Digital Projection International Limited

1.1 NON-SOLICITATION: For so long as the Employee is employed by the Company or
receiving payment hereunder and continuing for [O] years thereafter,
notwithstanding whether the Employee's employment is terminated with or without
Cause or whether the Employee resigns, the Employee shall not, without the prior
written consent of the Company, directly or indirectly, for the Employee's own
benefit or the benefit of any other person, whether as a sole proprietor, member
of a partnership, stockholder or investor (other than a stockholder or investor
owning not more than a 5% interest), officer or director of a corporation, or as
a trustee, employee, associate, consultant, principal or agent of any person,
partnership, corporation or other business organization or entity other than the
Company: (x) solicit or endeavour to entice away from the Company, any person or
entity (unless such person or entity has been terminated from the Company not
for Cause) who is, or, during the then most recent 12-month period, was employed
by, or had served as an agent or consultant of, the Company; or (y) solicit,
endeavour to entice away or gain the custom of, canvass or interfere in the
Company's relationship with any person or entity (unless such person or entity
has been terminated from the Company not for Cause) who is, or was within the
then most recent 12-month period, a supplier, customer or client (or reasonably
anticipated to become a supplier, customer or client) of the Company and with
whom the Employee had dealings during his employment with the Company, provided
this shall not apply to consultants or suppliers where such relationship would
not interfere with the Company's relationship with such consultant or supplier.

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1.2  NON-COMPETITION:

     (a)  For so long as the Employee is employed by the Company or receiving
          payment hereunder and continuing for [O] years thereafter,
          notwithstanding whether the Employee's employment is terminated with
          or without Cause or whether the Employee resigns, the Employee shall
          not, without the prior written consent of the Company, directly or
          indirectly anywhere within Canada, the United States, Europe or Asia,
          as a sole proprietor, member of a partnership, stockholder or investor
          (other than a stockholder or investor owning not more than a 5%
          interest), officer or director of a corporation, or as a trustee,
          employee, associate, consultant, principal or agent of any person,
          partnership, corporation or other business organization or entity
          other than the Company, render any service to or in any way be
          affiliated with a direct competitor of the Company (or any person or
          entity that is, at the time the Employee would otherwise commence
          rendering services to or become, affiliated with such person or
          entity, reasonably anticipated to become a direct competitor) (a
          "Competitor"), which competitor or affiliate is engaged or reasonably
          anticipated to become engaged in designing or supplying image capture,
          post capture image processing and projection display systems for large
          format theatres (the term "large format" as used herein shall mean a
          theatre where the size of the screen is larger in proportion to the
          audience than a conventional 35 millimetre cinema experience) or
          designing or distributing projection systems (subject to subparagraph
          (b) below).

     (b)  The term "projection systems", where it appears in Paragraph 2(a)
          above, shall mean all manner of projection which are, comprise or are
          connected with or related to (i) large format film projection systems
          exhibiting a film format larger than 70 millimetre, 5 perforation
          standard academy aperture; or (ii) "High Brightness Digital Projection
          Systems," which are defined as systems for the projection of images or
          data producing equal to or greater than 5,000 ANSI lumens when
          projected onto a screen.

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1.3 CONFIDENTIALITY: The Employee covenants and agrees with the Company that he
will not at any time during employment hereunder or thereafter, except in
performance of his obligations to the Company hereunder or with the prior
written consent of the senior operation officer of the Company, directly or
indirectly, disclose or use any secret or confidential information that he may
learn or has learned by reason of his association with the Company. The term
"confidential information' includes information not previously disclosed to the
public or to the trade by the Company's management, or otherwise in the public
domain, with respect to the Company's products, facilities, applications and
methods, trade secrets and other intellectual property, systems, procedures,
manuals, confidential reports, product price lists, customer lists, technical
information, financial information, business plans, prospects or opportunities,
but shall exclude any information which (i) is or becomes available to the
public or is generally known in the industry or industries in which the Company
operates other than as a result of disclosure by the Employee in violation of
his agreements under this Paragraph 3 or (ii) the Employee is required to
disclose under any applicable laws, regulations or directives of any government
agency, tribunal or authority having jurisdiction in the matter or under
subpoena or other process of law.

1.4 INJUNCTIVE RELIEF: Without intending to limit the remedies available to the
Company, the Employee acknowledges that a material breach of any of the
covenants contained in Paragraph 1.2 of this Schedule 1 will result in material
and irreparable injury to the Company for which there is no adequate remedy at
law, that it will not be possible to measure damages for such injuries precisely
and that, in the event of such a breach or threat thereof, the Company shall be
entitled to seek a temporary restraining order and/or a preliminary, interim or
permanent injunction restraining the Employee from engaging in activities
prohibited by Paragraph 1.2 of this Schedule 1 or such other relief as may be
required specifically to enforce any of the covenants in Paragraph 1.2 of this
Schedule 1. If for any reason it is held that the restrictions under Paragraph
1.2 of this Schedule 1 are not reasonable or that consideration therefor is
inadequate, such restrictions shall be interpreted or modified to include as
much of the duration and scope identified in Paragraph 1.2 of this Schedule 1 as
will render such restrictions valid and enforceable.

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                                      -15-

2.   INTELLECTUAL PROPERTY

     (i) In exchange for the consideration of one pound, the Employee hereby
     agrees that any invention, improvement, design, process, information,
     copyright work, trademark, trade name, get-up, trade secret or know how
     ("Intellectual Property") made, created or discovered by the Employee
     during the Term of Employment (whether capable of being patented or
     registered or not and whether or not made of discovered in the course of
     his employment) in conjunction with or in any way affecting, relating to or
     connected with the business of Imax, the Company or DP, or any of their
     affiliates or subsidiaries, or capable of being used or adapted for use
     therein or in connection therewith shall forthwith be disclosed to the
     Company and shall belong to and be the absolute property of the Company or
     such affiliate or subsidiary of the Company as it may designate, subject to
     all applicable laws and regulations. Whenever requested to do so by the
     Company in connection with any Intellectual Property, the Employee shall
     (at the Company's expense):

     A.   apply or join with the Company or such designated affiliate or
          subsidiary in applying for patent or other registration, whether in
          the United States, Canada, the United Kingdom or any other part of the
          world the Company shall designate; and

     B.   execute and do all things necessary for vesting such patent or other
          registration and all right, title and interest to the same absolutely
          and as sole beneficial owner in the Company or such affiliate or
          subsidiary of the Company as it may designate.

<PAGE>   16

                                      -16-

IN WITNESS WHEREOF, the Company, Imax and the Employee have duly executed and
delivered this Agreement as of the 3rd day of September, 1999.

                                        DIGITAL PROJECTION  LIMITED:

                                        By:                                 seal
                                               ---------------------------------
                                               Name:
                                               Title:

                                        By:
                                               ---------------------------------
                                               Name:
                                               Title:

                                        IMAX CORPORATION:

                                        By:                                 seal
                                               ---------------------------------
                                               Name:
                                               Title:

                                        By:
                                               ---------------------------------
                                               Name:
                                               Title:

SIGNED, SEALED AND DELIVERED            EMPLOYEE:
in the presence of:

---------------------------------       ----------------------------------------
Witness                                 [O]<PAGE>   1

                                   EXHIBIT 4.2

                                IMAX CORPORATION

                                STOCK OPTION PLAN

<PAGE>   2

                                IMAX CORPORATION

                                STOCK OPTION PLAN

   1.       PURPOSE

            The purposes of the Imax Stock Option Plan (the "Plan") are to
   attract, retain and motivate directors, officers, key employees and
   consultants of the Company and its Subsidiaries and to provide to such
   persons incentives and awards for superior performance.

   2.       DEFINITIONS

            As used in this Plan the following terms have the following
meanings:

            (a)     "Agreement" has the meaning set forth in Section 6 below.

            (b)     "Award" means an Option.

            (c)     "Board" means the Board of Directors of the Company.

            (d) "Cause" means a termination of the Participant's employment with
   the Company or one of its Subsidiaries (a) for "cause" as defined in an
   employment agreement applicable to the Participant, or (b) in the case of a
   Participant who does not have an employment agreement that defines "cause",
   because of: (i) any act or omission that constitutes a material breach by the
   participant of any of his obligations under his employment agreement with the
   Company or one of its Subsidiaries or the applicable Agreement; (ii) the
   continued failure or refusal of the Participant to substantially perform the
   duties reasonably required of him as an employee of the Company or one of its
   Subsidiaries; (iii) any wilful and material violation by the Participant of
   any law or regulation applicable to the business of the Company or one of its
   Subsidiaries, or the Participant's conviction of a felony, or any wilful
   perpetration by the Participant of a common law fraud; or (iv) any other
   wilful misconduct by the Participant which is materially injurious to the
   financial condition or business reputation of, or is otherwise materially
   injurious to, the Company or any of its Subsidiaries.

            (e)     "Code" means the Internal Revenue Code of 1986, as amended.

            (f)     "Committee"  means a committee of the Board  comprised of
   at least two directors selected by the Board to administer the Plan.

            (g)     "Common Share" means a share of common stock, no par value,
   of the Company.

            (h)     "Company" means Imax Corporation, a corporation organized
   under the laws of Canada.

            (i) "Date of Grant" means the date specified by the Committee on
   which an Award shall become effective (which date shall not be earlier than
   the date on which the Committee takes action with respect thereto).

            (j) "Fair Market Value" of a Common Share on a given date means the
   higher of the closing price of a Common Share on such date (or the most
   recent trading date if such date is not a trading date)

<PAGE>   3

   on the NASDAQ/National Market System, The Toronto Stock Exchange and such
   national exchange, if any, as may be designated by the Board.

            (k) "Option Price" means the purchase price per Common Share payable
   on exercise of an Option, as determined by the Committee in its sole
   discretion (subject to the terms of the Plan) and as set forth in the
   applicable Agreement.

            (l) "Option" means the right to purchase a Common Share upon
   exercise of a stock option granted pursuant to the Plan.

            (m) "Participant" means a person to whom an Award is to be made
   under the Plan and who is at the time of such Award an officer, employee or
   consultant of the Company, or any of its Subsidiaries, or a person who is a
   director of the Company or any of its Subsidiaries and who is not also an
   employee of the Company or any of its Subsidiaries at the Date of Grant, or a
   person who has agreed to commence serving in any such capacity within 90 days
   of the Date of Grant, or any personal holding corporation controlled by any
   such person, the shares of which are held directly or indirectly by such
   person or such person's spouse, minor children or minor grandchildren, or any
   registered retirement savings plan or registered educational savings plan for
   the sole benefit of any such person.

            (n) "Permanent Disability" means a physical or mental disability or
   infirmity of the Participant that prevents the normal performance of
   substantially all his duties as an employee of the Company or any Subsidiary,
   which disability or infirmity shall exist for any continuous period of 180
   days within any twelve-month period.

            (o) "Rule 16b-3" means Rule 16b-3 under the Securities Exchange Act
   of 1934, as amended, and the rules and regulations thereunder.

            (p) "Subsidiary" means any corporation or other entity in which the
   Company owns or controls, directly or indirectly, not less than 50% of the
   total combined voting power represented by all voting securities or other
   voting interests in such entity.

            (q)     "Vested  Options"  means,  as of any date,  Options which
   by their terms are  exercisable  on such date.

   3.       ADMINISTRATION OF THE PLAN

            (a) The Plan shall be administered, and Awards shall be granted
   hereunder, by or under the authority of the Committee. A majority of the
   Committee shall constitute a quorum, and the action of the members of the
   Committee present at any meeting at which a quorum is present, or acts
   unanimously approved in writing, shall be the acts of the Committee.

            (b) The interpretation and construction by the Committee of any
   provision of the Plan or of any Agreement, and any determination by the
   Committee pursuant to any provision of this Plan or of any Agreement shall be
   final and conclusive. No member of the Committee shall be liable for any such
   action or determination made in good faith.

   4.       SHARES AVAILABLE UNDER PLAN

         The maximum number of Common Shares which may be issued upon the
exercise of Options granted under the Plan is 7,710,836 Shares, subject to
adjustment as provided in Paragraph 9. Such shares

<PAGE>   4

may be shares previously issued or treasury shares or a combination of the
foregoing. Any Common Shares which are subject to Options which expire or which
have been surrendered without being exercised in full shall again be available
for issuance under this Plan.

5.       OPTIONS

         The Committee may, from time to time and upon such terms and conditions
as it may determine, authorize the granting to Participants of Options provided,
however, that: (i) at no time shall the number of Common Shares reserved for
issuance to any one Participant under the Plan or any other share compensation
arrangement exceed 5% of the outstanding issue of Common Shares; (ii) at no time
shall the number of Common Shares reserved for issuance pursuant to stock
options granted to "insiders" (as that term is defined in Section 627 of The
Toronto Stock Exchange Company Manual) exceed 10% of the outstanding issue of
Common Shares; (iii) under no circumstances shall insiders be issued in excess
of 10% of the outstanding issue of Common shares within any one-year period
pursuant to the exercise of Options granted under the Plan or any other share
compensation arrangement; and (iv) under no circumstances shall any one insider
and that insider's associates be issued in excess of 5% of the outstanding issue
of Common Shares within any one-year period pursuant to the exercise of Options
granted under the Plan or any other share compensation arrangement.

6.       AGREEMENT

         The terms and conditions of each Option shall be embodied in a written
agreement (the "Agreement") in a form approved by the Committee which shall
contain terms and conditions not inconsistent with the Plan and which shall
incorporate the Plan by reference. Options granted under the Plan shall comply
with the following terms and conditions:

         (i)      Each Agreement shall specify the number of Common Shares for
which Options have been granted.

         (ii) Each Agreement shall specify the Option Price, which shall not be
less than 100% of the Fair Market Value per Common Share on the Date of Grant.

         (iii) Each Agreement shall specify that the Option Price shall be
payable (a) in cash or by cheque acceptable to the Company, (b) by the transfer
to the Company of Common Shares having an aggregate Fair Market Value per Common
Share at the date of exercise equal to the aggregate Option Price or (c) by a
combination of such methods of payment.

         (iv) Successive grants may be made to the same Participant whether or
not any Options previously granted to such Participant remain unexercised.

         (v) Each Agreement shall specify the applicable vesting schedule and
the effective term of the Option. In the event of a termination of a
Participant's employment by reason of death or Permanent Disability, 50% of such
Participant's Options shall become Vested Options if such Options were less than
50% vested at the time of such termination.

         (vi) Options granted under the Plan are not intended to qualify as
"incentive stock options" within the meaning of Section 422A of the Code.

         (vii) No Option shall be exercisable more than ten years from the date
of Grant.

<PAGE>   5

         (viii) Each Option granted under the Plan shall be subject to such
additional terms and conditions, not inconsistent with the Plan, which are
prescribed by the Committee and set forth in the applicable Agreement.

         (ix) As soon as practicable following the exercise of any Options, a
certificate evidencing the number of Common Shares issued in connection with
such exercise shall be issued in the name of the Participant or as the
Participant shall otherwise, in writing, direct.

7.       TERMINATION OF EMPLOYMENT, CONSULTING AGREEMENT OR TERM OF OFFICE

         (a) In the event that a Participant's employment, consulting
arrangement or term of office with the Company or one of its Subsidiaries
terminates for any reason, unless the Committee or the Board determines
otherwise, any Options which have not become Vested Options shall terminate and
be cancelled without any consideration being paid therefor.

         (b) In the event that a Participant's employment with the Company or
one of its Subsidiaries is terminated without Cause, or the Participant's
employment is terminated by reason of the Participant's voluntary resignation
(including by reason of retirement), death or Permanent Disability, or upon the
termination of a Participants' consulting arrangement or term of office, the
Participant (or the Participant's estate) shall be entitled to exercise the
Participant's Options which have become Vested Options as of the date of
termination for a period of 30 days, or such longer period as the Committee or
the Board determines, following the date of termination.

         (c) In the event that a Participant's employment, consulting
arrangement or term of office with the Company or one of its Subsidiaries is
terminated for Cause, such Participant's Vested Options shall terminate and be
cancelled without any consideration being paid therefor.

8.       TRANSFERABILITY

         No Option shall be transferable by a Participant other than by will or
the laws of descent and distribution, provided, however, that Options may be
transferred if approved by the Committee or the Board and by any regulatory
authority having jurisdiction or stock exchange on which the common shares
subject to Options are listed. Options shall be exercisable during the
Participant's lifetime only by the Participant or by the Participant's guardian
or legal representative.

9.       ADJUSTMENTS

         The Committee may make or provide for such adjustments in the maximum
number of Common Shares specified in Paragraph 4, in the number of Common Shares
covered by outstanding Options granted hereunder, and/or in the Option Price
applicable to such Options as the Committee in its sole discretion may determine
is equitably required to prevent dilution or enlargement of the rights of
Participants that otherwise would result from any stock dividend, stock split,
combination of shares, recapitalization or other change in the capital structure
of the Company, merger, consolidation, spin-off, reorganization, partial or
complete liquidation, issuance of rights or warrants to purchase securities or
any other corporate transaction or event having an effect similar to any of the
foregoing.

10.      FRACTIONAL SHARES

         The Company shall not be required to issue any fractional Common Shares
pursuant to the Plan. The Committee may provide for the elimination of fractions
or for the settlement of fractions in cash.

<PAGE>   6

11.      WITHHOLDING TAXES

         The Company and its Subsidiaries shall have the right to require any
individual entitled to receive Common Shares pursuant to an Option to remit to
the Company, prior to the delivery of any certificates evidencing such shares,
any amount sufficient to satisfy any Canadian or United States federal, state,
provincial or local tax withholding requirements. Prior to the Company's
determination of such withholding liability, such individual may make an
irrevocable election to satisfy, in whole or in part, such obligation to remit
taxes by directing the Company to withhold Common Shares that would otherwise be
received by such individual. Such election may be denied by the Committee in its
discretion, or may be made subject to certain conditions specified by the
Committee, including, without limitation, conditions intended to avoid the
imposition of liability against the individual under Section 16(b) of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.

12.      REGISTRATION RESTRICTIONS

         An Option shall not be exercisable unless and until (i) a registration
statement under the Securities Act of 1933, as amended, has been duly filed and
declared effective pertaining to the Common Shares subject to such Option, such
Common Shares shall have been qualified under applicable state "blue sky" laws
and the Company has been a "reporting issuer" for purposes of the Ontario
Securities Act in good standing for not less than twelve months, or (ii) the
Committee, in its sole discretion determines that such registration,
qualification and status is not required as a result of the availability of an
exemption from such registration, qualification, and status under such laws.

13.      SHAREHOLDER RIGHTS

         A Participant shall have no rights as a shareholder with respect to any
Common Shares issuable upon exercise of an Option until a certificate or
certificates evidencing such shares shall have been issued to such Participant,
and no adjustment shall be made for dividends or distributions or other rights
in respect of any share for which the record date is prior to the date upon
which the Participant shall become the holder of record thereof.

14.      BREACH OF RESTRICTIVE COVENANTS

         If (i) a Participant is a party to an employment agreement with the
Company or any of its Subsidiaries or affiliates and (ii) such Participant
materially breaches any of the restrictive covenants set forth in such
employment agreement (including, without limitation, any restrictive covenants
relating to non-competition, non-solicitation or confidentiality), then all of
such Participant's Options (whether or not Vested Options) shall terminate and
be cancelled without consideration being paid therefor.

15.      AMENDMENTS, ETC.

         (a) The Board may at any time and from time to time alter, amend,
suspend or terminate the Plan in whole or in part, and the Committee may,
subject to applicable legal requirements at any time and from time to time waive
any provision of any Option or Agreement; provided, however, that no termination
or amendment of the Plan or any waiver of any provision of any Option or
Agreement may, without the consent of the Participant to whom any Award shall
previously have been granted, adversely affect the rights of such Participant in
such Award; provided further, however that amendments shall be subject to (x)
the approval of a majority of the Common Shares entitled to vote if the
Committee determines that such approval is necessary in order for the Company to
rely on the exemptive relief provided under Rule 16b-3

<PAGE>   7

and (y) all other approvals, whether regulatory, shareholder or otherwise, which
are required by law, The Toronto Stock Exchange or any other applicable
securities exchange.

         (b) The Plan shall not confer upon a Participant any right with respect
to continuance of employment or other service with the Company or any
Subsidiary, nor will it interfere in any way with any right the Company or any
Subsidiary would otherwise have to terminate such Participant's employment or
other service at any time.

16.      EFFECTIVE DATE

         The Plan shall be effective as of June 7, 1999.

17.      GOVERNING LAW

         The Plan and all rights hereunder shall be construed in accordance with
and governed by the laws of the Province of Ontario and the laws of Canada
applicable therein.

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