Document:

Exhibit 4.1

 

Appendix 1

 

SERVICES
AGREEMENT

 

THIS AGREEMENT is
made as of January 1, 2009

 

B E T W E E N:

 

CELESTICA INC.,

a corporation existing under the laws of the
Province of Ontario

(hereinafter referred to as “Celestica”)

 

-and-

 

ONEX CORPORATION,

a corporation existing under the laws of the Province of Ontario

(hereinafter referred to as “Onex”)

 

This Agreement witnesses that in
consideration of the respective covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties covenant and agree as follows:

 

1.                                       Scope of
Services.  Onex hereby agrees to provide
to Celestica the services of Mr. Gerald W. Schwartz’ as a director of
Celestica, subject to his election as a director of Celestica at its annual
general meeting.

 

2.                                       Fees.  In
consideration of the services to be rendered by Onex as described herein,
Celestica shall pay to Onex a fee of USD 200,000.00 per year (the “Fees”) in
deferred share units (each, a “DSU”) payable in equal quarterly instalments in
arrears, as calculated in accordance with paragraph 2(a).  Each DSU will entitle Onex to receive, in
accordance with either paragraph 2(c) or 2(d), a subordinate voting share
of Celestica (a “Share”) or a cash payment equal to the value of a Share
following the date on which this Agreement terminates.

 

a.             DSU Calculation.  Onex shall receive: (i) in respect of
each fiscal quarter of services rendered under this Agreement, a number of DSUs
equal to the quarterly instalment of USD 50,000.00 divided by the closing price
of Shares on the New York Stock Exchange on the last trading day of the fiscal
quarter in respect of which the instalment is to be paid; or (ii) if this
Agreement is terminated during a fiscal quarter pursuant to section 5, a number
of DSUs equal to the pro-rated amount of such quarterly instalment that
reflects Mr. Schwartz’ actual period of service as a director of Celestica
from the commencement of the applicable fiscal quarter to the date of
termination of this Agreement divided by the closing price of Shares on the New
York Stock Exchange on the last trading day of the immediately preceding fiscal
quarter.

 

b.             DSU Account.  Celestica shall keep or cause to be kept
records for Onex, including an account (the “Account”) showing the number of
DSUs, as determined in accordance with paragraph 2(a), and in each case rounded
to two decimal places, that Onex has been granted.

 

 

c.             Delivery of Shares.  Subject to paragraph 2(d), on the date that
is 45 days following this Agreement’s effective date of termination, or the
following business day if such 45th day is not a
business day (“Valuation Date”), or as soon as practicable thereafter (but in
all cases within 90 days following the effective date of termination of this
Agreement), Celestica shall deliver to Onex the number of Shares that equals
the number of DSUs in Onex’s Account on the Valuation Date, less such number of
Shares the value of which is sufficient to satisfy withholding taxes and source
deductions, if any.  Celestica shall, in
accordance with the instructions of Onex, deliver to Onex a certificate
representing such Shares, or credit such Shares to an account with a broker in
the name of Onex, as soon as practicable thereafter.  Onex shall comply with all applicable
securities regulations, and policies of Celestica, relating to the purchase and
sale of Shares.

 

d.             Cash Payment.  Celestica shall have the right, in its sole
discretion, to pay all or a portion of the value of the DSUs to Onex in a lump
sum cash payment in an amount equal to the product obtained by multiplying the
number of DSUs in Onex’s Account on the Valuation Date by the closing price of
the Shares on the NYSE on the Valuation Date, less applicable withholding taxes
and source deductions if any, and in the event there is no public market for
the Shares, on the basis of a valuation of the market value of an equivalent
number of Shares.  Such lump sum cash
payment will be made on the Valuation Date, or as soon as practical thereafter
(but in all cases within 90 days following the effective date of termination of
this Agreement).

 

e.             Reorganizations.  In respect of Celestica, in the event of a (i) capital
reorganization, (ii) merger, (iii) amalgamation, (iv) offer for
shares of Celestica which if successful would entitle the offeror to acquire
all of the shares of Celestica or all of one or more particular class(es) of
shares of Celestica to which the offer relates, (v) sale of a material
portion of the assets of Celestica, (vi) arrangement or other scheme of
reorganization or proposed reorganization, or (vii) an increase or
decrease in the outstanding Shares as a result of a stock split, consolidation,
subdivision, reclassification or recapitalization but, for greater certainty,
not as a result of the issuance of Shares for additional consideration, by way
of a stock dividend or other distribution in the ordinary course or as a result
of a rights offering, Celestica may adjust the Account of Onex in such matter
as Celestica determines, in its discretion, is equitable to reflect such
event.  Any adjustment so made by
Celestica shall be conclusive and binding for all purposes of this Agreement,
and Onex shall have no other rights as a result of any change in the Shares or
of any other event.

 

3.                                       Expenses. 
Celestica shall pay to Onex, as and when invoiced from time to time, the
reasonable out-of-pocket expenses payable to Mr. Schwartz in connection
with his services as a director of Celestica, in accordance with the “Celestica
Director Expense Policy”, as amended from time to time.

 

4.                                       Term. 
This Agreement shall have an initial term beginning January 1, 2009
and ending December 31, 2009 and shall automatically renew for successive
one-year terms unless either Celestica or Onex provides notice of intent not to
renew, in writing, at least 60 days prior to the expiration of the then current
term.

 

2

 

5.                                       Automatic Termination.  This Agreement shall terminate automatically
and the rights of Onex to receive Fees (other than accrued and unpaid Fees)
will terminate (a) 30 days after the first day on which Onex ceases to
hold at least one multiple voting share in the capital of Celestica or any
successor company or (b) the date Mr. Schwartz ceases to be a director
of Celestica, for any reason.

 

6.                                       Indemnification.  It is the parties’ understanding that
Celestica is not required to make any withholdings or deductions in relation to
payments hereunder. Should any  withholdings or deductions in relation to
payments be required by law at the time of payment, Onex shall indemnify
Celestica in respect of any and all liabilities and expenses in respect of any
failure of Celestica to make any such withholdings or deductions.

 

7.                                       Notice.  Any
notice required or permitted to be given under this Agreement and shall be
given by delivering the same or by sending it by facsimile transmissions, in
the case of Onex, to 161 Bay Street, 49th Floor, Canada
Trust Tower, Toronto, Ontario, M5J 2S1, Attention: Donald Lewtas, fax: (416) 362-5765
and, in the case of Celestica, to 12 Concorde Place, 5th Floor, Toronto, Ontario, M3C 3R8, Attention:
Chief Executive Officer, fax (416) 448-4758. 
A notice so given shall be deemed to have been given and received on the
business day on which it is delivered or sent by facsimile transmission.  Either party may change its address for
service from time to time by notice given in accordance with the foregoing.

 

8.                                       Entire Agreement.  This Agreement constitutes the entire
agreement between the parties hereto relating to the subject matter
hereof.  This Agreement may not be
amended or modified in any way except by the written consent of the parties
hereto.

 

9.                                       Further Assurance.  Each party shall from time to time and at all
times hereafter do such further acts and things and execute such further
documents and instruments as shall be reasonably required in order to perform
fully and carry out the terms of this Agreement.

 

10.                                 Time of the Essence.  Time shall be of the essence of this
Agreement.

 

11.                                 Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the Province of Ontario and the
federal laws of Canada applicable therein, and the parties hereto herby
irrevocably attorn to the non-exclusive jurisdiction of the courts of the
Province of Ontario.

 

12.                                 Execution in Counterparts.  This Agreement may be executed in
counterparts, each of which shall constitute an original, and all of which
taken together shall constitute one and the instrument.

 

13.                                 No Effect on Director’s Duties.  Nothing herein affects Mr. Schwartz’
obligations, duties, rights and powers as a director of Celestica.

 

3

 

IN WITNESS WHEREOF this Agreement has been
executed by the parties hereto as of the date first above written.

 

	
   

  	
  CELESTICA INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Craig Muhlhauser

  
	
   

  	
  Name:

  	
  Craig Muhlhauser

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ONEX CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Donald Lewtas

  
	
   

  	
  Name:

  	
  Donald Lewtas

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  

 

4Exhibit 4.5

 

CELESTICA INC.

 

 

 

LONG TERM INCENTIVE PLAN

 

 

June 28,
1998

 

As
amended and restated as of December 9, 2004, April 21, 2005, July 26,
2006,

December 13, 2006 and March 12, 2007

 

 

CELESTICA INC.

 

LONG TERM INCENTIVE PLAN

 

PART I

 

1.                             PURPOSE

 

1.1                           This Long Term Incentive Plan has been
established by the Company to provide incentives to certain of its employees
and consultants and its directors, to foster a responsible balance between
short term and long term results, and to build and maintain a strong spirit of
performance and entrepreneurship.

 

2.                             PLAN DEFINITIONS AND
INTERPRETATIONS

 

2.1                           In this Long Term Incentive Plan, the
following terms have the following meanings:

 

(a)           “Applicable Law” means any applicable
provision of law, domestic or foreign, including, without limitation, the Securities Act (Ontario), the U.S. Securities
Act of 1933, as amended, and the U.S. Securities
Exchange Act 1934, as amended, together with all regulations, rules,
policy statements, rulings, notices, orders or other instruments promulgated
thereunder and Stock Exchange Rules;

 

(b)           “Beneficiary” means any person designated
by the Participant by written instrument filed with the Company to receive any
amount, securities or property payable under the Plan in the event of a
Participant’s death or, failing any such effective designation, the Participant’s
estate;

 

(c)           “Blackout Period” means a period of time
during which the Participant cannot exercise an Option, or sell Shares, due to
applicable law or policies of the Company in respect of insider trading;

 

(d)           “Board” means the Board of Directors of
the Company;

 

(e)           “Change in Control” means the occurrence
of any of the following after the date hereof:

 

(i)            the acquisition by any person of
beneficial ownership of securities of the Company which, directly or following
conversion or exercise thereof, would entitle the holder thereof to cast more
than 50% of the votes attaching to all securities of the Company which may be
cast to elect directors of the Company, other than the additional acquisition
of securities by a person beneficially owning such number of securities on the
date hereof;

 

 

(ii)           Incumbent Directors ceasing to constitute
a majority of the Board as a consequence of the solicitation of proxies through
a proxy circular by persons other than management; or

 

(iii)          the
consummation of an amalgamation, arrangement, merger or other consolidation of
the Company with another company or a sale of all or substantially all of the
assets of the Company to another company pursuant to which, and such that, all
the persons who, immediately prior to such consummation, beneficially owned all
of the securities of the Company which could be cast to elect directors of the
Company, immediately thereafter do not beneficially own securities of the
successor or continuing company or company acquiring the assets which would
entitle such persons, directly or following conversion or exercise thereof, to
cast more than 50% of the votes attaching to all securities of such company which
may be cast to elect directors of that company;

 

(f)            “Committee” means the committee of the
Board, as constituted from time to time, which may be appointed by the Board
to, inter alia, interpret, administer and
implement the Plan, and includes any successor committee appointed by the Board
for such purposes;

 

(g)           “Company” means Celestica Inc. and its
respective successors and assigns, and any reference in the Plan to action by
the Company means action by or under the authority of the Board or any person or
committee that has been designated for the purpose by the Company including,
without limitation, the Committee;

 

(h)           “Consultant” means a consultant as
defined in the Rule excluding investor consultants and associated
consultants as defined in the Rule;

 

(i)            “Date of Grant” of an Option, a Right or
a Performance Unit, as the case may be, means the date the Option, Right or
Performance Unit is granted to a Participant under the Plan;

 

(j)            “Designated Affiliated Entity” means a
person (including a trust or a partnership) or company in which the Company has
a significant investment and which the Company designates as such for the
purposes of this Plan;

 

(k)           “Director means a member of the Board;

 

(l)            “Earliest Exercise Date” in respect of an
Option or Right as the case may be, means the earliest date on which the Option
or Right may be exercised, as designated by the Company at the time the Option
or Right is granted;

 

(m)          “Fiscal Year” means the financial year of
the Company;

 

(n)           “including” means including without
limitation;

 

2

 

(o)           “Incumbent Director” means any member of
the Board who was a member of the Board immediately prior to the occurrence of
a transaction, transactions or elections giving rise to a Change in Control
(other than a transaction approved by the Board) and any successor to an
Incumbent Director who is recommended or elected or appointed to succeed an
Incumbent Director by the affirmative vote of a majority of the Incumbent
Directors then on the Board;

 

(p)           “Independent Broker” means a registered
broker which is independent under Stock Exchange Rules;

 

(o.1)        “Insider” means an insider of the Company as defined by
the rules of the TSX for the purposes of the TSX’s rules relating to
security-based compensation arrangements;

 

(q)           “Latest Exercise Date” means the latest
date on which an Option or Right as the case may be, may be exercised, as
designated by the Company at the time the Option or Right is granted;

 

(r)            “Market Price” shall mean the weighted
average price per Share (or the mean of the closing bid and ask prices, if not
traded) on the TSX during the period five trading days preceding the date of
the determination;

 

(s)           “Option” means a right granted under the
Plan to a Participant to purchase Shares in accordance with the Plan; and

 

(t)            “Option Program” means the Stock Option
Program, consisting of Part II of the Plan, as amended and restated from
time to time;

 

(u)           “Participant” means

 

  (i)          a
Director,

 

 (ii)          a
permanent employee of the Company, a Subsidiary or a Designated Affiliated
Entity, or

 

(iii)          a
Consultant of the Company, a Subsidiary, or a Designated Affiliated Entity,

 

who has been designated by the Company for
participation in the Plan and who has agreed to participate in the Plan or any
Program thereof on such terms as the Company may specify;

 

(v)           “Performance Share Program” means the
Performance Share Unit Program, consisting of Part IV of the Plan, as
amended and restated from time to time;

 

(w)          “Performance Unit” means a unit allocated
to a Participant in accordance with the Performance Share Program;

 

3

 

(x)            “Plan” means this Long Term Incentive
Plan, consisting of the Option Program, the Rights Program and the Performance
Share Program, as amended and restated from time to time;

 

(y)           “Program” means the Option Program, the
Rights Program or the Performance Share Program, as applicable;

 

(z)            “Reorganization” means any (i) capital
reorganization, (ii) merger, (iii) amalgamation, (iv) offer for
shares of the Company which if successful would entitle the offeror to acquire
all of the shares of the Company or all of one or more particular class(es) of
shares of the Company to which the offer relates, (v) sale of a material
portion of the assets of the Company, or (i) arrangement or other scheme
of reorganization;

 

(aa)         “Right” means a stock appreciation right
granted under the Rights Program to a Participant in accordance with the Rights
Program;

 

(bb)         “Retirement” means the retirement of a
Participant from employment with the Company, a Subsidiary or a Designated
Affiliated Entity in accordance with the normal retirement policy of his or her
employer;

 

(cc)         “Rights Program” means the Stock
Appreciation Rights Program, consisting of Part III of the Plan, as
amended and restated from time to time;

 

(dd)         “Rule” means Part 2, Division 4 of
National Instrument 45-106 - Prospectus and Registration Exemptions, as it may
be amended or replaced;

 

(ee)         “Shares” means the Subordinate Voting
Shares in the capital of the Company, and includes any shares of the Company
into which such shares may be converted, reclassified, redesignated,
subdivided, consolidated, exchanged or otherwise changed, pursuant to a
Reorganization or otherwise;

 

(ff)           “Stock Exchange Rules” means the
applicable rules of any stock exchange upon which shares of the Company
are listed;

 

(gg)         “Subsidiary” means a subsidiary of the
Company as defined by the Business Corporations Act
(Ontario);

 

(hh)         “TSX” means The Toronto Stock Exchange;
and

 

(ii)           “Year” in respect of an Option, Right or
Performance Unit, as the case may be, means a calendar year commencing on the
Date of Grant of the Option, Right or Performance Unit, as the case may be, or
on any anniversary of such date.

 

2.2                           Certain other defined terms used herein
have the meanings ascribed to them in the Option Program, the Rights Program or
the Performance Share Program.

 

4

 

2.3                           In this Plan, unless the context requires
otherwise, words importing the singular number may be construed to extend to
and include the plural number, and words importing the plural number may be
construed to extend to and include the singular number.

 

2.4                           The Option Price per Share or Market
Price may be expressed or designated in a currency other than Canadian dollars,
based on the noon day foreign exchange rate as quoted by the Bank of Canada on
the relevant date or such other foreign exchange rate basis as the Company may
determine to be appropriate.

 

2.5                           This Plan is established under the laws
of the Province of Ontario and the rights of all parties and the construction
of each and every provision of the Plan and any Options, Rights or Performance
Units granted hereunder shall be construed according to the laws of the
Province of Ontario.

 

2.6                           This Plan consists of four parts, the
first part (“Part I”) commencing with Section 1, consisting of
general provisions applicable to the Plan as a whole; the second part (“Part II”)
commencing with section 5, consisting of the Option Program; the third part (“Part III”)
commencing with section 12, consisting of the Rights Program and the fourth
part (“Part IV”) commencing with section 18, consisting of the Performance
Share Program.

 

3.                             GENERAL

 

3.1                           The transfer of an employee from the
Company to a Subsidiary or a Designated Affiliated Entity, from a Subsidiary or
a Designated Affiliated Entity to the Company, or from one Subsidiary or
Designated Affiliated Entity to another Subsidiary or Designated Affiliated Entity,
shall not be considered a termination of employment for the purposes of the
Plan, nor shall it be considered a termination of employment if a Participant
is placed on such other leave of absence which is considered by the Company as
continuing intact the employment relationship; in such a case, the employment
relationship shall be continued until the later of the date when the leave
equals ninety days or the date when a Participant’s right to reemployment shall
no longer be guaranteed either by law or by contract, except that in the event
active employment is not renewed at the end of the leave of absence, the
employment relationship shall be deemed to have ceased at the beginning of the
leave of absence.

 

3.2                           The number of Shares which may be issued
from the treasury of the Company under this Plan is limited to 29,000,000.  The number of Shares which may be reserved
for issue under Options, or Rights granted pursuant to this Plan, together with
Shares reserved for issue under any other employee-related plan of the Company
or options for services granted by the Company, to any one person shall not
exceed 5% of the outstanding voting securities of the Company.  The Company may from time to time designate
in each case such other maximum number for this purpose which, however, will
not in any event exceed the maximum number permitted from time to time under
Stock Exchange Rules.  The number of
Shares which may be issued from the treasury of the Company under this Plan to
Directors is limited to 2,000,000.  The number of Shares reserved for issue under
Options or Rights granted to Insiders pursuant to this Plan, together with
Shares reserved for issue to Insiders under any other existing share
compensation arrangement of the Company, shall not exceed 10% of the aggregate
outstanding Multiple Voting Shares and Subordinate Voting Shares of the Company. 
Within any one-year 

 

5

 

period,
the number of Shares issued to Insiders pursuant to this Plan and all other existing
share compensation arrangements of the Company shall not exceed 10% of the
aggregate outstanding Multiple
Voting Shares and Subordinate Voting Shares of the Company and the number of Shares issued to any one Insider and such
Insider’s Associates shall not exceed 5% of the aggregate outstanding Multiple
Voting Shares and Subordinate Voting Shares of
the Company.  If the number of
Shares of the Company shall be increased or decreased as a result of a stock
split, consolidation, reclassification or recapitalization and not as a result
of the issuance of Shares for additional consideration or by way of a stock
dividend in the ordinary course, the Company may make appropriate adjustments
to the maximum number of Shares which may be issued from the treasury of the
Company under the Plan.

 

3.3                           Within any one-year period, the aggregate
number of Options, Rights and Performance Units that may be granted to
Participants is limited such that the aggregate of:

 

(a)           in the case of Options, the number of
Shares issuable upon the exercise of such Options;

 

(b)           in the case of Rights, the Designated
Rights Amount; and

 

(c)           in the case of Performance Units, the
number of Performance Units,

 

shall not exceed 1.2% of the
average aggregate number of Shares and multiple voting shares of the Company
outstanding during that period.  If the
number of outstanding Shares shall be increased or decreased as a result of a
stock split, consolidation, reclassification or capitalization, the Company
shall make appropriate adjustments to the maximum aggregate number of Options,
Rights and Performance Units for the relevant period determined in accordance
with this Section 3.3.

 

3.4                           Subject to any Applicable Law, the
Company may, but is not obligated to, acquire issued and outstanding Shares in
the market for the purposes of providing Shares to Participants under the
Plan.  If it does so, the Company shall
utilize the services of an Independent Broker. 
The Shares acquired for this purpose shall not be included for the
purposes of the determining the maximum number of Shares to be issued under the
Plan in accordance with section 3.2.

 

3.5                           From time to time the Company may, in
addition to its powers under the Plan, add to or amend any of the provisions of
the Plan or terminate the Plan or amend the terms of any Option, Right or
Performance Unit granted under the Plan; provided, however, that:

 

(a)           the Company shall obtain approval of the
holders of the voting securities, by a majority of the votes cast in present or
by proxy at a meeting of shareholders, of the following:

 

  (i)          an
amendment to the Plan to increase the maximum number of Shares specified in
section 3.2 which may be issued under this Plan;

 

 (ii)          any
amendment to an Option that would reduce the Option Price of an outstanding
Option, (including the cancellation of an Option and, in 

 

6

 

conjunction with such cancellation, re-grant of an
Option at a reduced Option Price);

 

(iii)          any
amendment to an Option that would extend the term of any Option or Right
granted under this Plan beyond the Latest Exercise Date;

 

(iv)          an amendment which would expand the
rights of a Participant to assign or transfer an Option, Right or Performance
Unit other than as set forth in section 3.6;

 

 (v)          amending
the Plan to provide for other types of security-based compensation involving
the issue of equity;

 

(vi)          amending or deleting section 6.3 so as to
allow an Option to have a term of greater than 10 years except as contemplated
by section 6.3;

 

(vii)         increasing
or deleting the percentage limits relating to Shares issuable or issued to
insiders in section 3.2;

 

(viii)        increasing
or deleting the percentage limit on Shares reserved for issuance to any one
person pursuant to Options in section 3.2; and

 

  (ix)         adding
to the categories of Participants who may be designated for participation in
the Plan;

 

other than, for greater
certainty, a change resulting from a change in share capital or Reorganization
as contemplated by the provisions of this Plan; and

 

(b)           no such amendment or termination shall be
made at any time which has the effect of adversely affecting the existing
rights of a Participant under the Plan without his or her consent in writing
unless the Company, at its option, acquires such existing rights at an amount
equal to the fair market value of such rights at such time as verified by an
independent valuator.

 

For greater certainty, the Company may,
under the authority of the Board, without limitation, subject to clause (b),
and without shareholder approval under clause (a), otherwise amend the Plan or
the terms and conditions of Options, Rights or Performance Units granted under
the Plan.

 

3.6                           Notwithstanding Section 3.5, no
amendment shall be made to any provision of this Plan or to any Option granted hereunder
that has the effect of reducing the Option Price per Share of any
previously-granted Option.

 

3.7                           The determination by the Company of any
question which may arise as to the interpretation or implementation of the Plan
or any of the Options, Rights or Performance Units granted hereunder shall be
final and binding on all Participants and other persons claiming or deriving
rights through any of them.

 

7

 

3.8                           The Plan shall enure to the benefit of
and be binding upon the Company, its successors and assigns.  The interest of any Participant under the
Plan or in any Option, Right or Performance Unit shall not be transferable or
alienable by him or her either by pledge, assignment or in any other manner,
except to a spouse or a personal holding company or family trust controlled by
a Participant, the shareholders or beneficiaries of which, as the case may be,
are any combination of the Participant, the Participant’s spouse, the
Participant’s minor children or the Participant’s minor grandchildren, and
after his or her lifetime shall enure to the benefit of and be binding upon the
Participant’s Beneficiary.

 

3.9                           The Company’s obligation to issue or
provide Shares in accordance with the terms of the Plan and any Options, Rights
or Performance Units granted hereunder is subject to compliance with Applicable
Law applicable to the issuance and distribution of such Shares.  As a condition of participating in the Plan,
each Participant agrees to comply with all such Law and agrees to furnish to
the Company all information and undertakings as may be required to permit
compliance with such Law.

 

3.10                         The Company, a Subsidiary or a Designated
Affiliated Entity may withhold from any amount payable to a Participant, either
under this Plan, or otherwise, such amount as may be necessary so as to ensure
that the Company, the Subsidiary or Designated Affiliated Entity will be able
to comply with the applicable provisions of any federal, provincial, state or
local law relating to the withholding of tax or other required deductions,
including on the amount, if any, includable in the income of a
Participant.  The Company shall also have
the right in its discretion to satisfy any such withholding tax liability by
retaining or acquiring any Shares which would otherwise be issued or provided
to a Participant hereunder.

 

3.11                         A Participant shall not have the right or
be entitled to exercise any voting rights, receive dividends or have or be
entitled to any other rights as a shareholder in respect of (i) Shares
subject to an Option unless and until such Shares have been paid for in full
and issued, (ii) any Rights, or (iii) any Performance Units unless
and until issued or provided in the form of Performance Shares.

 

3.12                         Neither designation of an employee as a
Participant nor the grant of any Options, Rights or Performance Units to any
Participant entitles any Participant to the grant, or any additional grant, as
the case may be, of any Options, Rights or Performance Units under the Plan.  Neither the Plan nor any action taken
thereunder shall interfere with the right of the employer of a Participant to
terminate a Participant’s employment at any time.  Neither any period of notice, if any, nor any
payment in lieu thereof, upon termination of employment shall be considered as
extending the period of employment for the purposes of the Plan.

 

3.13                         No member of the Board or the Committee
shall be liable for any action or determination made in good faith in
connection with the Plan and members of the Board and the Committee shall be
entitled to indemnification and reimbursement from the Company in respect of
any claim relating thereto.

 

3.14                         Participation in the Plan shall be
entirely voluntary and any decision not to participate shall not affect any
employee’s employment with, or any Consultant’s engagement by, the Company, a
Subsidiary or Designated Affiliated Entity.

 

8

 

3.15                         If any provision of this Plan is
determined to be invalid or unenforceable in whole or in part, such invalidity
or unenforceability shall attach only to such provision or part thereof and the
remaining part, if any, of such provision and all other provisions hereof shall
continue in full force and effect.

 

3.16                         Neither the establishment of the Plan nor
the grant of any Rights or Performance Units or the setting aside of any funds
by the Company (if, in its sole discretion, it chooses to do so) shall be
deemed to create a trust.  Legal and equitable
title to any funds set aside for the purposes of the Plan shall remain in the
Company and no Participant shall have any security or other interest in such
funds.  Any funds so set aside shall
remain subject to the claims of creditors of the Company present or
future.  Amounts payable to any
Participant under the Plan shall be a general, unsecured obligation of the
Company.  The right of the Participant or
Beneficiary to receive payment pursuant to the Plan shall be no greater than
the right of other unsecured creditors of the Company.

 

3.17                         This Plan is hereby instituted this 28th
day of June, 1998.

 

4.                             ADMINISTRATION

 

4.1                           The Plan shall be administered by the
Company in accordance with its provisions. 
All costs and expenses of administering the Plan will be paid by the
Company, but the Company shall not be responsible for the payment of any fees
or expenses in respect of the re-sale by a Participant of Shares acquired by
him or her under the Plan.  The Company,
may from time to time, establish administrative rules and regulations and
prescribe forms or documents relating to the operation of the Plan as it may
deem necessary to implement or further the purpose of the Plan and amend or
repeal such rules and regulations or forms or documents.  The Company, in its discretion, may appoint a
Committee for the purpose of interpreting, administering and implementing the
Plan or a Program.  In administering the
Plan, the Company or the Committee may seek recommendations from the chief
executive officer of the Company.  The
Company may also delegate to the Committee or any director, officer or employee
of the Company such duties and powers, relating to the Plan or a Program as it
may see fit.  The Company may also
appoint or engage a trustee, custodian or administrator to administer or
implement the Plan or a Program.

 

4.2                           The Company shall keep or cause to be
kept such records and accounts as may be necessary or appropriate in connection
with the administration of the Plan and the discharge of its duties.  At such times as the Company shall determine,
the Company shall furnish the Participant with a statement setting forth the
details of his or her Options, Rights or Performance Units, including Date of
Grant, Designated Option Amount and the Option Price of each Option, the number
of Shares in respect of which the Option has been exercised, the maximum number
of Shares which the Participant may still purchase under the Option Program,
the Designated Rights Amount held by each Participant and the number of
Performance Units held by each Participant. 
Such statement shall be deemed to have been accepted by the Participant
as correct unless written notice to the contrary is given to the Company within
30 days after such statement is given to the Participant.

 

9

 

4.3           (a)           Any payment, notice, statement, certificate
or other instrument required or permitted to be given to a Participant or any
person claiming or deriving any rights through him or her shall be given by:

 

 (i)           delivering
it personally to the Participant or to the person claiming or deriving rights
through him or her, as the case may be, or

 

(ii)           mailing it postage paid (provided that
the postal service is then in operation) or delivering it to the address which
is maintained for the Participant in the Company’s personnel records.

 

(b)           Any payment, notice, statement,
certificate or other instrument required or permitted to be given to the
Company shall be given by mailing it postage paid (provided that the postal
service is then in operation), delivering it to the Company at its principal
address, or (other than in the case of a payment) sending it by means of
facsimile or similar means of electronic transmission, to the attention of the
Company Secretary.

 

(c)           Any payment, notice, statement, certificate
or other instrument referred to in section 4.3(a) or 4.3(b), if delivered,
shall be deemed to have been given or delivered on the date on which it was
delivered, if mailed (provided that the postal service is then in operation),
shall be deemed to have been given or delivered on the second business day
following the date on which it was mailed and if by facsimile or similar means
of electronic transmission, on the next business day following transmission.

 

10

 

 

PART II

 

STOCK OPTION PROGRAM

 

5.                             STOCK OPTION PROGRAM
DEFINITIONS

 

5.1                           In this Program, the following terms have
the following meanings:

 

(a)           “Designated Amount” of a Participant’s
Option means the maximum number of Shares which the Participant may purchase
under the Option, as designated by the Company;

 

(b)           “Designated Percentage” in respect of an
Option means the percentage of the Designated Amount representing the maximum
number of Shares which a Participant may purchase under the Option during each
Option Year which, unless otherwise determined by the Company, shall be 20%
commencing on the second Option Year, 40% commencing on the third Option Year,
60% commencing on the fourth Option Year, 80% commencing on the fifth Option
Year and 100% commencing on the sixth Option Year;

 

(c)           “Option Price” in respect of an Option
means the price designated by the Company at which the Participant may purchase
a Share under the Option; and

 

(d)           “Program” means this Stock Option
Program.

 

6.                             GRANTING OF OPTIONS AND

DETERMINATION
OF THE OPTION PRICE

 

6.1                           From time to time the Company may grant
Options to Participants to acquire Shares in accordance with the Plan.  In granting each such Option, the Company
shall designate:

 

(a)           the Designated Amount of Shares;

 

(b)           the Earliest Exercise Date, which may be
the Date of Grant;

 

(c)           the Latest Exercise Date;

 

(d)           the Designated Percentage; and

 

(e)           the Option Price, which price shall be
determined by the Company in accordance with section 6.2.

 

6.2                           The Option Price per Share in respect of
an Option shall be not less than the price per Share of the last reporting
selling price of at least a Board Lot of the Shares on the TSE on the day
preceding the Date of Grant of the Option and, if there were no such trades on
that day, the weighted average trading price of the Shares for the previous
five days on which the Shares traded on the TSE.

 

11

 

6.3                           The Latest Exercise Date shall be no
later than the date which is the tenth anniversary of the Date of Grant.  Notwithstanding the foregoing, the Latest
Exercise Date shall be extended to the tenth business day following the last
day of a Blackout Period if the Latest Exercise Date would otherwise occur in a
Blackout Period or within five days of the end of the Blackout Period.

 

6.4                           Subject to the terms of the Plan, the
Company may determine other terms or conditions, if any, of any Options,
including:

 

(a)           any additional conditions on the grant of
Options under the Program, including conditions as to the ownership of Shares
by a Participant;

 

(b)           any additional conditions with respect to
the exercise of Options under the Program, including conditions in respect of

 

  (i)          the
market price of the Shares,

 

 (ii)          the
financial performance or results of the Company, a Subsidiary, a Designated
Affiliated Entity or business unit, and

 

(iii)          restrictions
on the re-sale of Shares acquired on the exercise of Options; and

 

(c)           such other terms or conditions as the
Company may in its discretion determine.

 

6.5                           Notwithstanding any provision of this
Plan to the contrary, no Options may be granted to Directors on or after April 21,
2005.

 

7.                             EXERCISE OF PARTICIPANT’S
OPTIONS

 

7.1                           Subject to the provisions of the Plan, an
Option may be exercised by the Participant only on or after the Earliest
Exercise Date and thereafter from time to time at his or her discretion to
purchase in the aggregate a number of Shares equal to the aggregate of the
previously unexercised portion of the Designated Amount provided that, unless
the Company at any time otherwise determines,

 

(a)           subject to clause (b) of this
section 7.1, the maximum number of Shares which the Participant may purchase
under the Option during each of the Years commencing on the Earliest Exercise
Date of the Option shall be equal to the number of Shares represented by the
Designated Percentage of the Designated Amount of the Option, and

 

(b)           if the number of Shares purchased under
the Option during any of the Years is less than the maximum number which could
have been purchased under the Option during that Year, the difference shall be
carried forward and added to the maximum number of Shares which may be
purchased under the Option in the immediately following Year, and so on from
time to time, provided that the 

 

12

 

percentage of the Designated Amount which the
Participant may purchase under an Option shall not exceed one hundred per cent
(100%).

 

7.2                           Notwithstanding section 7.1, Options may
be exercised at any time following a Change in Control.

 

7.3                           Unless the Company at any time otherwise
determines, a Participant’s Option shall terminate and may not be exercised
after the earliest of:

 

(a)           in the case of the termination of
employment with the Company for cause, immediately as of the time of such
termination;

 

(b)           30 days after the date of the Participant’s
termination of employment with the Company, unless such termination occurs by
reason of termination of the Participant’s employment for cause or the Participant’s
death, disability or Retirement as contemplated in subsections (a), (c) or
(d) of this section, in which case the provisions of the applicable
subsection shall govern;

 

(c)           three years after the Participant’s
Retirement provided that if the Participant dies prior to the expiry of the
first two years of such three-year period the Option shall terminate one year
after the Participant’s death;

 

(d)           one year after the Participant’s death or
the termination of employment with the Company by reason of his disability (as
determined by the Company in its sole discretion); and

 

(e)           the Latest Exercise Date of the
Participant’s Option;

 

provided that, in any event, the Option
shall terminate no later than ten years after the Date of Grant.

 

7.4                           The exercise of an Option under the Plan
shall be made by notice to the Company in writing specifying and subscribing
for the number of Shares in respect of which the Option is being exercised at
that time and, except where payment is made by another means satisfactory to
the Company such as wire transfer of funds, accompanied by a certified cheque
or bank draft payable to the Company in the amount of the aggregate Option
Price for such number of Shares.  Upon
receipt of such notice and payment, the Shares in respect of which the Option
has been exercised shall be issued as fully-paid and non-assessable shares of
the Company.  As of the business day the
Company receives such notice and such payment, the Participant (or the person claiming
through him, as the case may be) shall be entitled to be entered on the share
register of the Company as the holder of the number of Shares in respect of
which the Option was exercised and to receive as promptly as possible
thereafter a certificate representing the said number of Shares.

 

7.5                           A Participant may, in lieu of an exercise
of an Option under section 7.4, exercise an Option for a number of Shares
without payment of the Option Price by notice to the Company in writing
specifying the Participant is subscribing for that number of Shares to which
the Participant is entitled under this Program without payment of the Option
Price.  The number of 

 

13

 

Shares to be issued or
provided to the Participant is the number obtained by dividing (a) the
difference between the Market Price and the Option Price multiplied by the
number of the Shares in respect of which the Option would otherwise be
exercised under section 7.4 with the payment of the aggregate Option Price by (b) the
Market Price.  The Shares issued in
respect thereof shall be considered fully paid in consideration of past service
that is no less in value than the fair equivalent of the money the Company
would have received if the Shares had been issued for money.

 

7.6                           Unless otherwise determined by the
Company, if the Participant is a person who has knowledge of a “material fact”
or “material change” (each as defined under the Securities
Act (Ontario)) in respect of the Company that has not been generally
disclosed in accordance with applicable securities legislation and adequately
disseminated to the public, he or she shall not be entitled to exercise the
Option.

 

8.                             EFFECT OF TERMINATION OF
OPTION

 

8.1                           If any Option has terminated or expired
without being fully exercised, any unissued Shares which have been reserved to
be issued upon the exercise of the Option shall become available to be issued
upon the exercise of Options subsequently granted under the Program.

 

9.                             CHANGES IN SHARE CAPITAL

 

9.1                           If the number of outstanding Shares of the
Company shall be increased or decreased as a result of a stock split,
consolidation, reclassification or recapitalization and not as a result of the
issuance of Shares for additional consideration or by way of a stock dividend
in the ordinary course, the Company may make appropriate adjustments to the
Designated Option Amount of any Option which has previously been granted under
the Program, the maximum number of Shares which the Participant may thereafter
purchase under such Option, the Option Price in respect of such Option and any
maximum number of Shares which may be issued under the Program.  Any determinations by the Company as to the
adjustments shall be made in its sole discretion and all such adjustments shall
be conclusive and binding for all purposes under the Program.

 

9.2                           No fractional shares shall be issued upon
the exercise of an Option nor shall any scrip certificates in lieu thereof be
issuable at any time.  Accordingly, if as
a result of any adjustment under section 9.1 a Participant would otherwise have
become entitled to a fractional share upon the exercise of an Option, he shall
have the right to purchase only the next lower whole number of Shares and no
payment or other adjustment will be made with respect to the fractional
interests so disregarded.

 

10.                           LOANS TO PARTICIPANTS

 

10.1                         Subject to Applicable Law, the Company
may in its sole discretion arrange for the Company, any Subsidiary or any
Designated Affiliated Entity to make loans or provide guarantees for loans by
financial institutions to assist Participants to purchase Shares upon the
exercise of the Options and to assist the Participants to pay any income tax
exigible upon exercise of the Options. 
Such loans may be secured or unsecured, and at such rates of interest,
if 

 

14

 

any, and on such other
terms as may be determined by the Company, provided that in no event shall any
loan be outstanding for more than 10 years from the Date of Grant of the
relevant Option.

 

11.                           REORGANIZATION

 

11.1                         In the event of a Reorganization or
proposed Reorganization, the Company, at its option, may, subject to Stock
Exchange Rules, do either of the following:

 

(a)           the Company may irrevocably commute any
Option that is still capable of being exercised, upon giving to any Participant
to whom such Option has been granted at least 30 days written notice of its
intention to commute the Option, and during such period of notice, the Option,
to the extent that it has not been exercised, may be exercised by the
Participant up to the Designated Amount of Shares which may be purchased under
the Option, without regard to the limitations contained in subsection 7.1(a),
and on the expiry of such period of notice, the unexercised portion of the
Option shall lapse and be cancelled, or

 

(b)           the Company, or any corporation which is
or would be the successor to the Company or which may issue securities in
exchange for Shares upon the Reorganization becoming effective, may offer any
Participant the opportunity to obtain a new or replacement option over any
securities into which the Shares are changed or are convertible or
exchangeable, on a basis proportionate to the number of Shares under option or
some other appropriate basis, or some other property; in such event, the Participant
shall, if he or she accepts such offer, be deemed to have released his or her
Option over Shares and such Option shall be deemed to have terminated.

 

11.2                         The Company may specify in any notice or
offer made under section 11.1, that, if for any reason, the Reorganization is
not completed, the Company may revoke such notice or offer.  The Company may exercise such right by
further notice in writing to the Participant and return to the Participant any
amount paid as an Option Price by the Participant to the Company and the Option
shall thereafter continue to be exercisable by the Participant in accordance
with its terms.

 

11.3                         Subsections (a) and (b) of
section 11.1 are intended to be permissive and may be utilized independently or
successively or in combination or otherwise, and nothing therein contained
shall be construed as limiting or affecting the ability of the Company to deal
with Options in any other manner.

 

15

 

PART III

 

STOCK APPRECIATION RIGHTS PROGRAM

 

12.                           PROGRAM DEFINITIONS

 

12.1                         In this Program, the following terms have
the following meanings:

 

(a)           “Designated Rights Amount” of a
Participant’s Rights means the maximum number of Rights which the Participant
may exercise, as designated by the Company;

 

(b)           “Designated Rights Percentage” means the
percentage of the Designated Rights Amount representing the maximum number of
Rights which a Participant may exercise each Year, which, unless otherwise
determined by the Company, shall be 20% commencing on the second Year, 40%
commencing on the third Year, 60% commencing on the fourth Year, 80% commencing
on the fifth Year and 100% commencing on the sixth Year;

 

(c)           “In the Money” means the excess, if any,
of the Market Price of a Share at any time over the Strike Price;

 

(d)           “Program” means this Stock Appreciation
Rights Program;

 

(e)           “Rights Letter” means a letter approved
by the Company whereby a Participant may exercise his Rights; and

 

(f)            “Strike Price” means the Market Price on
the Date of Grant.

 

13.                           GRANTING OF RIGHTS

 

13.1                         From time to time the Company may grant
Rights to a Participant in accordance with the Plan.  In granting any such Rights, the Company
shall designate:

 

(a)           the Designated Rights Amount;

 

(b)           the Earliest Exercise Date;

 

(c)           the Latest Exercise Date;

 

(d)           the Designated Rights Percentage; and

 

(e)           the Strike Price of the Shares on the
Date of Grant.

 

13.2                         Subject to the term of the Plan, the
Company may determine other terms or conditions, if any, of any Rights,
including:

 

16

 

(a)           any additional conditions on the grant of
Rights under the Program, including conditions as to the ownership of Shares by
a Participant;

 

(b)           any additional conditions with respect to
the exercise of Rights under the Program, including conditions in respect of (i) the
market price of the Shares and (ii) the financial performance or results
of the Company, a Subsidiary, a Designated Affiliated Entity, or business unit;
and

 

(c)           such other terms or conditions of the
Company may in its discretion determine.

 

14.                           EXERCISE OF PARTICIPANT’S
RIGHTS

 

14.1                         Subject to the provisions of the Program,
a Right may be exercised by the Participant only on or after the Earliest
Exercise Date and thereafter from time to time at his or her discretion,
provided that, unless the Company at any time otherwise determines,

 

(a)           subject to clause (b) of this
section 14.1, the maximum number of Rights which the Participant may exercise
during each of the Years commencing on the Earliest Exercise Date of the Right
shall be equal to the number of Rights represented by the Designated Rights
Percentage of the Designated Rights Amount, and

 

(b)           if the number of Rights exercised during
any of the Years is less than the maximum number which could have been
exercised during that Year, the difference shall be carried forward and added
to the maximum number of Rights which may be exercised immediately following
the Year, and so on from time to time.

 

14.2                         Notwithstanding section 14.1, Rights may
be exercised at any time following a Change in Control.

 

14.3                         Upon exercising a Right, the Participant
will be paid the amount by which such Right is In The Money on the date of
exercise of the Right, subject to any applicable withholding of taxes.

 

14.4                         Unless the Company at any time otherwise
determines, a Participant’s Right shall terminate and may not be exercised
after the earliest of:

 

(a)           in the case of termination of employment
with the Company for cause, immediately as of the time of such termination;

 

(b)           30 days after the date of the Participant’s
termination of employment with the Company, unless such termination occurs by
reason of termination of the Participant’s employment for cause or the
Participant’s death, disability or Retirement as contemplated in subsections
(a), (c) or (d) of this section, in which case the provisions of the
applicable subsection shall govern;

 

17

 

(c)           three years after the Participant’s
Retirement provided that if the Participant dies prior to the expiry of the
first two years of such three-year period, the Right shall terminate one year
after the Participant’s death;

 

(d)           one year after the Participant’s death or
the termination of employment with the Company by reason of his disability (as
determined by the Company in its sole discretion); and

 

(e)           the Latest Exercise Date of the
Participant’s Right.

 

14.5                         No certificates shall be issued with
respect to such Rights, but the Company shall maintain records in the name of
each Participant showing the number of Rights to which such Participant is
entitled in accordance with the Rights Program.

 

14.6                         In order to exercise his Rights, the
Participant must forward a completed Rights Letter by personal delivery, or
registered mail or facsimile to the Company in the manner provided for in
section 4.3.

 

14.7                         The Company may, in lieu of all or a
portion of the amount which would otherwise be payable to a Participant under
this Program, issue or provide to a Participant a number of Shares.  The number of Shares to be issued or provided
to a Participant will be determined by dividing the cash amount that is
proposed to be provided in the form of Shares under this section by the
applicable Market Price.

 

15.                           EXERCISE OF RIGHTS

 

15.1                         Unless otherwise determined by the
Company, if the Participant is a person who has knowledge of a “material fact”
or “material change” (each as defined under the Securities
Act (Ontario)) in respect of the Company that has not been generally
disclosed in accordance with applicable securities legislation and adequately
disseminated to the public, he or she shall not be entitled to exercise the
Right.

 

16.                           CHANGES IN SHARE CAPITAL

 

16.1                         If the number of outstanding Shares of
the Company shall be increased or decreased as a result of a stock split,
consolidation, reclassification or recapitalization and not as a result of the
issuance of Shares for additional consideration or by way of a stock dividend
in the ordinary course, the Company may make appropriate adjustments to the
Designated Rights Amount and/or the Strike Price.  Any determinations by the Company as to the
adjustments shall be made in its sole discretion and all such adjustments shall
be conclusive and binding for all purposes under the Program.

 

17.                           REORGANIZATION

 

17.1                         In the event of a Reorganization or
proposed Reorganization, the Company, at its option, may, subject to Stock
Exchange Rules, do either of the following:

 

18

 

(a)           the Company may irrevocably commute any
Right that is still capable of being exercised, upon giving to any Participant
to whom such Right has been granted at least 30 days written notice of its
intention to commute the Right, and during such period of notice, the Right, to
the extent that it has not been exercised, may be exercised by the Participant
up to the Designated Rights Amount without regard to the limitations contained
in subsection 14.1(a), and on the expiry of such period of notice, the
unexercised portion of the Rights shall lapse or be cancelled; or

 

(b)           the Company, or any corporation which is
or would be the successor to the Company or which may issue securities in
exchange for Shares upon the Reorganization becoming effective, may offer any
Participant the opportunity to obtain a new or replacement stock appreciation
right or a security in respect of any securities into which the Shares are
changed or are convertible or exchangeable, on a basis proportionate to the
number of Rights held by the Participant or some other appropriate basis, or
some other property; in such event, the Participant shall, if he or she accepts
such offer, be deemed to have released his or her Rights and such Rights shall
be deemed to have terminated.

 

17.2                         The Company may specify in any notice or
offer made under section 17.1, that, if for any reason, the Reorganization is
not completed, the Company may revoke such notice or offer.  The Company may exercise such right by
further notice in writing to the Participant and the Right shall thereafter
continue to be exercisable by the Participant in accordance with its terms.

 

17.3                         Subsections (a) and (b) of
section 17.1 are intended to be permissive and may be utilized independently or
successively or in combination or otherwise, and nothing therein contained
shall be construed as limiting or affecting the ability of the Company to deal
with Rights in any other manner.

 

19

 

PART IV

 

PERFORMANCE SHARE UNIT PROGRAM

 

18.                           PERFORMANCE SHARE UNIT PROGRAM
DEFINITIONS

 

18.1                         In this Program, the following terms have
the following meanings:

 

(a)           “Performance Grant” means a grant to a
Participant pursuant to Article 19 of a bonus stated as a dollar amount;

 

(b)           “Performance Unit” means a unit allocated
to a Participant under the Program in accordance with Article 19;

 

(c)           “Program” means this Performance Share
Program; and

 

(d)           “Release Date” means, for a Performance
Grant, the date or dates on which Performance Units shall be issued or be
provided in the form of Performance Shares.

 

19.                           GRANT OF PERFORMANCE GRANTS

AND ALLOCATION
OF PERFORMANCE UNITS

 

19.1                         The Company may, in its sole discretion,
determine whether Performance Grants will be made to a particular Participant,
the dollar amount of such Performance Grant and the Release Dates for the
relevant Shares for such Participant.  In
making such determinations, the Company may take into account such criteria as
it deems appropriate, including the Participant’s:  (i) level of responsibility; (ii) rate
of compensation; (iii) individual performance and contribution; and/or (iv) agreement
to become a permanent employee of the Company, a Subsidiary or a Designated
Affiliated Entity.

 

19.2                         At the option of either the Company or
the Participant, the amount payable to a Participant under any bonus, profit
sharing or gain-sharing program by the Company, a Subsidiary or a Designated
Affiliated Entity in respect of a Fiscal Year, or a portion thereof, may be
provided in the form of Performance Grants in lieu thereof, provided the
Company or Participant so elects prior to the completion of the relevant Fiscal
Year.  In this case, the amount of the
Performance Grant shall be the amount in respect of which the election has been
made and the Release Date shall be the date or a specified event (including
termination of employment on Retirement) determined by the Company.

 

19.3                         On the Date of Grant, each Participant
who receives a Performance Grant shall be allocated Performance Units
reflecting such Performance Grant.

 

19.4                         The number of Performance Units to be
allocated to each Participant shall be obtained by dividing the amount of the
Performance Grant of each such Participant by the Market Price on the Date of
Grant.  Fractional Units may be
allocated.  Each such Performance 

 

20

 

Unit shall represent the
right to receive one Share or a cash payment at the time, in the manner and
subject to the restrictions set forth in this Program.

 

19.5                         No certificates shall be issued with
respect to such Performance Grants or Performance Units, but the Company shall
maintain records in the name of each Participant showing the number of
Performance Units to which such Participant is entitled in accordance with the
Performance Share Program.

 

20.                           PERFORMANCE UNITS

 

20.1                         Subject to section 20.2 and Article 21,
and unless at any time otherwise determined by the Company at any time, the
Performance Units shall be issued or provided in the form of Shares on the
Release Date as determined under Article 19.

 

20.2                         Subject to the terms of the Plan, the
Company may determine other terms or conditions of any Performance Units,
including

 

(a)           any additional conditions with respect to
the issue or provision of Shares under the Program, including conditions in respect
of

 

  (i)          the
market price of the Shares,

 

 (ii)          the
financial performance or results of the Company, a Subsidiary, a Designated
Affiliated Entity or business unit and

 

(iii)          restrictions
on the re-sale of Shares acquired under the Program; and

 

(b)           any other terms and conditions the
Company may in its discretion determine.

 

21.                           TERMINATION OF EMPLOYMENT AND
FORFEITURES

 

21.1                         Unless otherwise determined by the
Company at any time, if a Participant ceases to be employed by the Company, a
Subsidiary or Designated Affiliated Entity for any reason other than death,
long-term disability or Retirement, there shall be forfeited as of such
termination of employment such Performance Units as have not been issued, or
provided, in the form of Shares in accordance with the Plan.  No cash or other compensation shall at any
time be paid in lieu of any such Performance Units which have been forfeited
under this Plan.

 

21.2                         If a Participant dies or ceases to be an
employee of the Company, a Subsidiary or a Designated Affiliated Entity by
reason of long-term disability or Retirement, all Performance Units shall be
issued or provided by the Company in the form of Shares to such Participant or
his or her Beneficiary on a date which is 90 days after such event.

 

21.3                         Notwithstanding anything herein to the
contrary, in the event that the issuance or provision of Shares, or cash in
lieu, under this Plan would, in the good-faith judgment of the Company, result
in a penalty pursuant to Section 409A of the United States Internal Revenue
Code if provided, issued or paid within the time specified in the Plan, then
the provision or

 

21

 

 

issuance of Shares or
payment shall be delayed until the earliest date on which same can be made
without the imposition of a penalty.

 

21.4                         If there is a Change of Control, all
Performance Units shall be issued or provided in the form of Shares to all Participants.

 

22.                           ISSUE OF SHARES

 

22.1                         The number of Shares to be issued or
provided shall be equal to the whole number of Performance Units which are to
be released.  Where, under section 20.1,
the number of Units allocated would result in the issue of a fractional Unit in
the form of a fractional Share, the number of Units to be issued in the form of
Shares shall be rounded down to the next whole number of Performance
Units.  No fractional Shares shall be
issued or provided nor shall cash be paid at any time in lieu of any such
fractional interest.  Any such fractional
interests of a Unit which, together with other fractional interests, form a
whole Unit, shall be issued or provided in the form of a Share as part of the
Units to be issued or provided to the Participant on the next applicable
Release Date, if any.

 

22.2                         Shares issued by the Company from
treasury under the Performance Share Program shall be considered fully paid in
consideration of past service that is no less in value than the fair equivalent
of the money the Company would have received if the Shares had been issued for
money.

 

22.3                         If so determined by the Company, in lieu
of the issue or provision of Shares, the Company may satisfy the issuance or
provision of Shares under the Program, in whole or in part, by the payment of a
cash amount to a Participant on the Release Date.  The amount of such payment shall be equal to
the number of Shares in respect of which the Company makes such a
determination, multiplied by the Market Price on the Release Date, subject to
any applicable withholding tax.

 

23.                           MAXIMUM NUMBER OF SHARES TO

BE ISSUED
UNDER PROGRAM

 

23.1                         The number of Shares which may be issued
from the treasury of the Company under this Program is limited to
2,000,000.  The number of Shares which
may be issued pursuant to the Program to any one person shall not exceed 1% of
the issued and outstanding voting securities of the Company.  In each case, the Company may from time to
time designate such other maximum number which, however, will not in any event
exceed the maximum number permitted from time to time under Stock Exchange
Rules.

 

23.2                         If Performance Units are forfeited under
this Plan, they shall again be available for allocation under this Program.

 

24.                           CHANGES IN SHARE CAPITAL

 

24.1                         If the number of outstanding Shares shall
be increased or decreased as a result of a stock split, consolidation,
subdivision, reclassification or recapitalization and not as a result of the
issuance of Shares for additional consideration or by way of a stock dividend
in the ordinary 

 

22

 

course, the Company may
make appropriate adjustments to any maximum number of Shares which can be
issued under the Program and the number of Performance Units granted to each
Participant.  Any determinations by the
Company as to the adjustments shall be made in its sole discretion and all such
adjustments shall be conclusive and binding for all purposes under the Program.

 

25.                           REORGANIZATION

 

25.1                         In the event of a Reorganization or
proposed Reorganization, the Company, at its option, may, subject to Stock
Exchange Rules, do either of the following:

 

(a)           the Company may irrevocably commute for
or into any other security or other property or cash any Performance Unit upon
giving to any Participant to whom such Performance Unit has been granted at
least 30 days’ written notice of its intention to commute the Performance Unit,
and during such period of notice, the Participant may elect to require the
Company to issue or provide the Performance Units in the Participant’s account
as Shares, without regard to the limitations contained in section 20.1, or

 

(b)           the Company, or any corporation which is
or would be the successor to the Company or which may issue securities in
exchange for Shares upon the Reorganization becoming effective, may offer any
Participant the opportunity to obtain securities into which the Shares are
changed or are convertible or exchangeable, on a basis proportionate to the
number of Performance Units in the Participant’s account or some other
appropriate basis, or some other property; in such event, the Participant
shall, if he or she accepts such offer, be deemed to have released his or her
rights relating to the Performance Units and such Performance Units shall be
deemed to have terminated.

 

25.2                         The Company may specify in any notice or
offer made under section 25.1, that, if for any reason, the Reorganization is
not completed, the Company may revoke such notice or offer.  The Company may exercise such right by further
notice in writing to the Participant and the Performance Unit shall thereafter
continue to be allocated to the Participant in accordance with its terms.

 

25.3                         Subsections (a) and (b) of
section 25.1 are intended to be permissive and may be utilized independently or
successively or in combination or otherwise, and nothing therein contained
shall be construed as limiting or affecting the ability of the Company to deal
with Performance Units in any other manner.

 

23

 

SCHEDULE
A

 

CELESTICA
INC. INLAND REVENUE APPROVED RULES FOR UNITED KINGDOM EMPLOYEES

(“THE
SUB-PLAN”)

 

1.             General

 

This schedule
to the Celestica Inc. Long Term Incentive Plan (“the Plan”) sets out the Inland
Revenue approved rules for United Kingdom employees (“the Sub-Plan”).

 

2.             Establishment of Sub-Plan

 

Celestica Inc. (“the Company”) has
established the Sub-Plan under section 3.4 of the Plan, which authorises the
Company to add to or amend any provisions of the Plan(i).

 

3.             Purpose of Sub-Plan

 

The purpose of
the Sub-Plan is to enable the grant to, and subsequent exercise by, employees
and directors in the United Kingdom, on a tax favoured basis, of options to
acquire shares in the Company under the Plan.

 

4.             Inland Revenue approval of Sub-Plan

 

The Sub-Plan is intended to be approved by the Inland
Revenue under Schedule 9 to ICTA 1988.

 

5.             Rules of Sub-Plan

 

The rules of the Plan, in their present form and
as amended from time to time, shall, with the modifications set out in this
schedule, form the rules of the Sub-Plan. In the event of any conflict
between the rules of the Plan and this schedule, the schedule shall
prevail.

 

6.             Relationship of Sub-Plan to Plan

 

The Sub-Plan
shall form part of the Plan and not a separate and independent plan.

 

7.             Interpretation

 

7.1           In the Sub-Plan, unless the context
otherwise requires, the following words and expressions have the following
meanings:

 

 

	
  Approval
  Date

  	
  The date on
  which the Sub-Plan is approved by the Inland Revenue under Schedule 9 to ICTA
  1988;

  
	
   

  	
   

  
	
  Associated
  Company

  	
  The meaning
  given to that expression by section 187(2) of ICTA 1988;(ii)

  
	
   

  	
   

  
	
  Close
  Company

  	
  The meaning
  given to that expression by section 414(1) of, and paragraph 8 of
  Schedule 9 to, ICTA 1988;(iii)

  
	
   

  	
   

  
	
  Consortium

  	
  The meaning
  given to that word by section 187(7) of ICTA 1988;(iv)

  
	
   

  	
   

  
	
  Control

  	
  The meaning
  given to that word by section 840 of ICTA 1988 and “Controlled” shall be
  construed accordingly;(v)

  
	
   

  	
   

  
	
  Eligible
  Employee

  	
  an
  individual who is: 

   

  (a)   an employee of a Participating Company;
  or 

   

  (b)   a director of a Participating Company who
  is contracted to work at least 25 hours per week for the Company and its
  subsidiaries or any of them (exclusive of meal breaks) 

   

  and who, in
  either case, does not have at the Date of Grant of an Option, and has not had
  during the preceding twelve months, a Material Interest in a Close Company
  which is the Company or a company which has Control of the Company or a
  member of a Consortium which owns the Company;

  
	
   

  	
   

  
	
  ICTA
  1988

  	
  The Income
  and Corporation Taxes Act 1988;

  
	
   

  	
   

  
	
  Market
  Value

  	
  Notwithstanding
  section 6.2 of the Plan:

  

 

A-2

 

	
   

  	
  (a)  in
  the case of an Option granted under the Sub Plan:

  
	
   

  	
   

  
	
   

  	
  (i)    if at the relevant time the Shares
  are listed on the New York Stock Exchange(vi) the last
  reported selling price of a Share on the New York Stock Exchange as reported
  in the[Wall Street Journal] for the dealing day immediately preceding the
  Date of Grant of the Option (for the avoidance of doubt, if there were no trades
  on the day immediately preceding the Date of Grant, the weighted average
  trading price of the Shares for the previous five days on which the shares
  traded on the New York Stock Exchange); or

  
	
   

  	
   

  
	
   

  	
  (ii)   at the discretion of the Committee,
  the last reported selling price of a Share on the New York Stock Exchange as reported
  in the [Wall Street Journal] on the Date of Grant of the Option (for the avoidance
  of doubt, if there were no trades on the Date of Grant, the weighted average trading
  price of the Shares for the previous five days on which the shares traded on
  the New York Stock Exchange);

  
	
   

  	
   

  
	
   

  	
  (iii)  if paragraphs (i) or (ii) do
  not apply, the market value of a Share as determined in accordance with Part VIII
  of the Taxation of Chargeable Gains Act 1992 and agreed in advance with the
  Inland Revenue Shares Valuation Division on the Date of Grant

  

 

A-3

 

	
   

  	
  of
  the Option or such earlier date or dates as may be agreed with the Board of
  Inland Revenue;

  
	
   

  	
   

  
	
   

  	
  (b)  in the case of an option granted under any other share
  option scheme, the market value of an ordinary share in the capital of the
  Company determined under the rules of such scheme for the purpose of the
  grant of the option;

  
	
   

  	
   

  
	
  Material
  Interest

  	
  the meaning
  given to that expression by section 187(3) of ICTA 1988;(vii)

  
	
   

  	
   

  
	
  Notification
  of Grant of Option

  	
  the
  notification issued in respect of the grant of an option;

  
	
   

  	
   

  
	
  Option

  	
  a subsisting
  right to acquire Shares granted under the Sub-Plan;

  
	
   

  	
   

  
	
  Option
  Holder

  	
  an
  individual who holds an Option or, where the context permits, his legal
  personal representatives;

  
	
   

  	
   

  
	
  Ordinary
  Share Capital

  	
  the meaning
  given to that expression by section 832(1) of ICTA 1988; and

  
	
   

  	
   

  
	
  Participating
  Company

  	
  the Company
  or a Subsidiary over which the Company has Control unless such Subsidiary has
  been excluded from participation by the Committee;

  
	
   

  	
   

  
	
  Subsidiary

  	
  the meaning
  given to that word in section 736 of the Companies Act 1985;

  

 

7.2           In this schedule, unless the context otherwise
requires:

 

7.2.1        words and expressions not defined above
have the same meanings as are given to them in the Plan;

 

7.2.2        the rule headings are inserted for
ease of reference only and do not affect their interpretation;

 

A-4

 

7.2.3        a reference to a rule is a reference
to a rule in this schedule;

 

7.2.4        the singular includes the plural and
vice-versa and the masculine includes the feminine; and

 

7.2.5        a reference to a statutory provision is a
reference to a United Kingdom statutory provision and includes any statutory
modification, amendment or re-enactment thereof.

 

8.             Companies participating in Sub-Plan

 

For the avoidance of doubt reference in the Plan to
participation by a Designated Affiliated Entity of the Company shall be
disregarded for the purposes of the Sub-Plan.

 

9.             Shares used in Sub-Plan

 

The Shares shall form part of the Ordinary
Share Capital of the Company and shall at all times comply with the
requirements of paragraphs 10 to 14 of Schedule 9 to ICTA 1988.(viii)

 

10.           Grant of Options

 

An option granted under the Sub-Plan shall be granted
under and subject to the rules of the Plan as modified by this schedule.

 

11.           Identification of Options

 

A
Notification of Grant of Option issued in respect of an Option shall expressly
state that it is issued in respect of an Option. An option which is not so
identified shall not constitute an Option.

 

12.           Contents of Notification of Grant of Option

 

A Notification
of Grant of Option issued in respect of an Option shall state:

 

a)             that it is issued in respect of an Option;

 

b)            the Date of Grant of the Option;

 

c)             the number of Shares subject to the Option;

 

d)            the exercise price of the Shares under
Option;

 

e)             any
performance target or other condition imposed on the exercise of the Option;
and

 

A-5

 

f)             the
date(s) on which the Option will ordinarily become exercisable.

 

13.           Earliest date for grant of Options

 

An Option may
not be granted earlier than the Approval Date.

 

14.           Persons to whom Options may be granted

 

An Option may
not be granted to an individual who is not an Eligible Employee at the Date of
Grant.  For the avoidance of doubt, and
notwithstanding sections 1, 2.1(g) and 2.1(t)(iii) of the Plan an Option
may not be granted under the Sub-Plan to a Consultant.

 

15.           Options non transferable

 

An Option
shall be personal to the Eligible Employee to whom it is granted and shall not
be capable of being transferred, charged or otherwise alienated and shall lapse
immediately if the Option Holder purports to transfer, charge or otherwise
alienate the Option.

 

The reference
in section 3.6 of the Plan to transfers of Options to a spouse, a personal
holding company or family trust controlled by a Participant and the reference
to Beneficiaries in section 2.1(b) of the Plan shall be disapplied for the
purposes of the Sub-Plan.

 

16.           Limit on number of Shares placed under Option
under Sub-Plan

 

For the
avoidance of doubt, Shares placed under Option under the Sub-Plan shall be
taken into account for the purpose of section 3.2of the Plan.

 

17.           Inland Revenue limit (£30,000)

 

An
Option may not be granted to an Eligible Employee if the result of granting the
Option would be that the aggregate Market Value of the shares subject to all
outstanding options granted to him under the Sub-Plan or any other share option
scheme established by the Company or an Associated Company and approved by the
Board of Inland Revenue under Schedule 9 to ICTA 1988 (other than a savings
related share option scheme) would exceed sterling £30,000 or such other limit
as may from time to time be specified in paragraph 28 of Schedule 9 to ICTA
1988(ix).  For this purpose, the United
Kingdom sterling equivalent of the Market Value of a Share on any day shall be
determined by taking the noon day sterling/US dollar exchange rate for that day
as quoted by the Bank of Canada.

 

18.           Exercise price of Shares under Option

 

The amount
payable per Share on the exercise of an Option shall not be less than the
Market Value of a Share on the Date of Grant and shall be stated on the Date of
Grant.

 

A-6

 

19.           Performance target or
other condition imposed on exercise of Option

 

Any performance target or other condition
imposed on the exercise of an Option under section 6.3 of the Plan shall be:

 

19.1         objective;

 

19.2         such that, once satisfied, the exercise of
the Option is not subject to the discretion of any person; and

 

19.3         stated on the Date of Grant.

 

If an event
occurs as a result of which the Committee considers that a performance target
or other condition imposed on the exercise of an Option is no longer
appropriate and substitutes, varies or waives under section 3.4 of the Plan the
performance target or condition, such substitution, variation or waiver shall:

 

19.4         be reasonable in the circumstances; and

 

19.5         produce a fairer measure of performance and be neither
materially more nor less difficult to satisfy.

 

20.           Exercise of Options by leavers

 

The period during which an Option shall remain
exercisable following termination of employment shall be as stated in the
Notification of Grant of Option or in the absence of any stated period therein
shall be as set out in section 7.3 of the Plan, except that the reference in section
7.3 of the Plan to “unless the Company at any time otherwise determines” shall
be disapplied for the purposes of the Sub-Plan.

 

21.           Latest date for exercise of Options

 

The
period during which an Option shall remain exercisable shall be stated in the Notification
of Grant of Option and any Option not exercised by that time shall lapse
immediately.

 

22.           Material Interest

 

An Option may
not be exercised if the Option Holder then has, or has had within the preceding
twelve months, a Material Interest in a Close Company which is the Company or
which is a company which has Control of the Company or which is a member of a
Consortium which owns the Company.

 

A-7

 

23.           Manner of payment for Shares on exercise of Options

 

The amount due
on the exercise of an Option shall be paid in cash or by cheque or banker’s
draft and may be paid out of funds provided to the Option Holder on loan by a
bank, broker or other person. For the avoidance of doubt, the exercise
procedure in section 7.5 of the Plan shall be disapplied for the purposes of
the Sub-Plan if this involves a broker transferring to the Company the sale
proceeds of optioned Shares.  The date of
exercise of an Option shall be the date on which the  Company
receives the amount due on the exercise of the Option.

 

24.           Issue or transfer of Shares on exercise of Options

 

The Company
shall, as soon as reasonably practicable after the date of exercise of an
Option, issue or transfer to the Option Holder, or procure the issue or
transfer to the Option Holder of, the number of Shares specified in the notice
of exercise and shall deliver to the Option Holder, or procure the delivery to
the Option Holder of, a share certificate in respect of such Shares together
with, in the case of the partial exercise of an Option, a Notification of Grant
of Option in respect of, or the original Notification of Grant of Option
endorsed to show, the unexercised part of the Option, subject only to
compliance by the Option Holder with the rules of the Sub-Plan and subject
to any delay as necessary to complete or obtain:

 

24.1      the listing of the Shares on
any stock exchange on which Shares are then listed;

 

24.2      such registration or other
qualification of the Shares under any applicable law, rule or regulation
as the Company determines is necessary or desirable; or

 

24.3      the making of provision for
the payment or withholding of any taxes required to be withheld in accordance
with the applicable law of any foreign jurisdiction in respect of the exercise
of the Option or the receipt of the Shares

 

25.           Rights attaching to Shares issued on exercise of
Options

 

All Shares
issued on the exercise of an Option shall, as to any voting, dividend, transfer
and other rights, including those arising on a liquidation of the Company, rank
equally in all respects and as one class with the Shares in issue at the date
of such exercise save as regards any rights attaching to such Shares by
reference to a record date prior to the date of such exercise.

 

Reference in
section 6.3(b)(iii) of the Plan to imposing restrictions of the re-sale of
Shares acquired on the exercise of Options shall be disapplied to the extent
that these do not apply to all share of the same class or not otherwise
permitted by paragraph 12(2) of Schedule 9 to ICTA.

 

A-8

 

26.           Amendment of Sub-Plan

 

Notwithstanding
section 3.4 of the Plan, no amendment of the Sub-Plan, shall take effect until
it has been approved by the Inland Revenue.

 

27.           Adjustment of Options

 

Notwithstanding
section 9.1of the Plan, no adjustment may be made to an Option until it has
been approved by the Inland Revenue.

 

28.           Exercise of discretion by Committee

 

In
exercising any discretion which it may have under the Sub-Plan, the Committee
shall act fairly and reasonably.

 

29.           Disapplication of certain provisions of Plan

 

The provisions of the Plan dealing with:

 

a)             Rights;

 

b)            Performance Units; and

 

c)             loans to Participants

 

shall not form part of, and no such rights
may be granted under, the Sub-Plan.

 

Notes

 

(i) The
Company is the “grantor” as defined in paragraph 1 of Schedule 9 to ICTA 1988
because it has established the Sub-Plan. In most cases, it will also be the
Company which grants options under the Sub-Plan, although this is not a
requirement of UK tax legislation.

 

(ii) A company
is treated as another’s “associated company” at a given time if, at that time
or at any other time within one year previously, one of the two has control of
the other, or both are under the control of the same person or persons.  A person is taken to have control of a
company if he exercises, or is able to exercise or is entitled to acquire,
direct or indirect control over the company’s affairs and, in particular, if he
possesses or is entitled to acquire the greater part of the company’s issued
share capital or the voting power in the company. UK tax legislation contains
two definitions of control: the definition of control here is different from
that in paragraph 4 below.

 

(iii) A close
company is a company which is under the control (as defined in paragraph 1
above) of five or fewer participators (eg shareholders) or of any number of
participators who are directors. There are attributed to a participator all the
rights and powers (eg shares, voting power) of, inter alia, a company which he
controls or of an “associate” (eg relative) of his. Ordinarily, a company is
excluded from being a close company if it is non UK resident or 35% of the
voting power in the company is held by the public and its shares have been
listed, and the subject of dealings, on a recognised stock exchange within the
preceding 12 months. However, for the purpose of 

 

A-9

 

the material
interest test (see paragraph 5 below), this exclusion does not apply with the
result that the normal definition of a “close company” is extended.

 

(iv) A company
is a member of a consortium owning another company if it is one of a number of
companies which between them beneficially own not less than three-quarters of
the other company’s ordinary share capital and each of which beneficially owns
not less than one-twentieth of that capital.

 

(v) Control
means the power of a person to secure:

 

(a)   by means of the holding of
shares or the possession of voting power in or in relation to that or any other
body corporate; or

(b)   by virtue of any powers
conferred by the articles of association or other document regulating that or
any other body corporate

 

that the affairs of the first-mentioned body corporate are conducted in
accordance with the wishes of that person.

 

(vi) The
expression “recognised stock exchange” is defined in section 841 of ICTA 1988. “Recognised
stock exchange” means the London Stock Exchange Limited and any stock exchange
outside the UK which has been designated by the Inland Revenue as a recognised
stock exchange. This includes, inter alia, the New York Stock Exchange, NASDAQ
and any exchange registered with the US Securities and Exchange Commission as a
national securities exchange. However, clearance is required from the Shares
Valuation Division before the NASDAQ price may be used to determine the market
price of a NASDAQ listed share.

 

(vii) A person
has a material interest in a company if he, either on his own or with one or
more associates, or if any associate of his with or without such other
associates:

 

(a)   is the beneficial owner of, or
able, directly or through the medium of other companies, or by any other
indirect means to control, more than 10 per cent of the ordinary share capital
of the company; or

(b)   where the company is a close
company, possesses, or is entitled to acquire, such rights as would, in the
event of the winding-up of the company or in any other circumstances, give an
entitlement to receive more than 10 per cent of the assets which would then be
available for distribution among the participators.

 

(viii) The
shares used in the scheme must be:

 

(a)   ordinary shares;

(b)   fully paid up;

(c)   not redeemable; and

(d)   save for certain limited
exceptions, not subject to any restrictions which do not apply to all shares of
the same class.

 

The shares
used in the scheme must be:

 

(a)   of a class listed on a
recognised stock exchange; or

(b)   shares in a company which is
not under the control of another company; or

(c)   shares in a company which is
under the control of another company (other than a company which is, or would
if resident in the UK be, a close company) whose shares are listed on a
recognised stock exchange.

 

The shares
used in the scheme form part of the ordinary share capital of:

 

(a)   the grantor (ie the company
which has established the scheme); or

(b)   a company which has control of
the grantor; or

(c)   a company which either is, or
has control of, a company which is a member of a consortium owning either the
grantor or a company having control of the grantor.

 

Where the
company whose shares are to be used in a scheme has more than one class of
ordinary share, the majority of the issued shares of the same class as those
which are to be used must be either employee control shares (see below) or:

 

(a)   must not be held by persons
(including trustees holding shares on behalf of such persons) who acquired
their shares in pursuance of a right conferred on them or opportunity offered
to them as directors or employees of any company, and not in pursuance of an
offer to the public; and

(b)   if the shares are not listed
on a recognised stock exchange and the company is under the control of another
company whose shares are so listed, must not be held by companies which have
control of the company whose shares are in question or of which that company is
an associated company.

 

Shares are
employee control shares if:

 

(a)   the persons holding them are,
by virtue of their holding of shares of that class, together able to control
the company; and

 

A-10

 

(b)   those persons are, or have
been, employees or directors of the company or of another company which is
under the control of the company.

 

(ix) UK tax
legislation imposes a limit (currently £30,000) on the “value” of the
outstanding options which may be held by an individual participant in an Inland
Revenue approved executive share option scheme.

 

A-11

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