Document:

exv10wee

 

Exhibit 10(ee)

2007 Performance Option Plan

1.   PURPOSE OF PLAN

			
	 		
    Potash Corporation of Saskatchewan Inc. (the
    “Corporation”) by resolution of its Board of Directors
    (the “Board”) has established, subject to shareholder
    approval at the Corporation’s 2007 Annual and Special
    Meeting of shareholders, this Potash Corporation of Saskatchewan
    Inc. 2007 Performance Option Plan (the “Plan”) to
    support the Corporation’s compensation philosophy of
    providing selected employees and officers with an opportunity
    to: promote the growth and profitability of the Corporation;
    align their interests with shareholders; and earn compensation
    commensurate with corporate performance. The Corporation
    believes this Plan will directly assist in supporting the
    Corporation’s compensation philosophy by providing
    participants with the opportunity through stock options, which
    will vest, if at all, based on corporate performance over a
    three-year period, to acquire Common Shares of the Corporation
    (“Common Shares”).

2.   DURATION OF THIS PLAN

			
	 		
    This Plan was adopted by the Board on February 20, 2007 to
    be effective as of January 1, 2007 (the “Effective
    Date”), subject to shareholder approval at the
    Corporation’s 2007 Annual and Special Meeting of
    shareholders, and shall remain in effect, unless sooner
    terminated as provided herein, until one (1) year from the
    Effective Date, at which time it will terminate. After this Plan
    is terminated, no stock options may be granted but stock options
    previously granted shall remain outstanding in accordance with
    their applicable terms and conditions and this Plan’s terms
    and conditions.

3.   ADMINISTRATION

			
	 		
    This Plan shall be administered by the Compensation Committee of
    the Board or any other committee designated by the Board to
    administer this Plan (the “Committee”). The Committee
    shall be responsible for administering this Plan, subject to
    this Section 3 and the other provisions of this Plan. The
    Committee may employ attorneys, consultants, accountants,
    agents, and other individuals, any of whom may be an employee,
    and the Committee, the Corporation, and its officers and
    directors shall be entitled to rely upon the advice, opinions,
    or valuations of any such individuals. All actions taken and all
    interpretations and determinations made by the Committee shall
    be made in the Committee’s sole discretion and shall be
    final and binding upon the participants, the Corporation, and
    all other interested individuals. To the extent applicable, the
    Plan shall be administered with respect to optionees subject to
    the laws of the U.S. so as to avoid the application of penalties
    pursuant to Section 409A of the Internal Revenue
    Code.

4.   AUTHORITY OF THE COMMITTEE

			
	 		
    The Committee shall have full and exclusive discretionary power
    to interpret the terms and the intent of this Plan and any Stock
    Option Award Agreement or other agreement or document ancillary
    to or in connection with this Plan, to determine eligibility for
    stock options and to adopt such rules, regulations, forms,
    instruments, and guidelines for administering this Plan as the
    Committee may deem necessary or proper. Such authority shall
    include adopting modifications and amendments to any Stock
    Option Award Agreement that are necessary to comply with the
    laws of the countries and other jurisdictions in which the
    Corporation and/or its subsidiaries operate.

5.   SHARES SUBJECT TO STOCK OPTIONS

			
	 		
    The aggregate number of Common Shares issuable after
    February 20, 2007 pursuant to stock options under this Plan
    may not exceed 1,000,000 Common Shares. The aggregate number of
    Common Shares in respect of which stock options have been
    granted to any one person pursuant to this Plan and which remain
    outstanding shall not at any time exceed 250,000. The authorized
    limits under this Plan shall be subject to adjustment under
    Sections 12 and 13.
	 
	 		
    If any stock option granted under this Plan, or any portion
    thereof, expires or terminates for any reason without having
    been exercised in full, the Common Shares with respect to which
    such option has not been exercised shall again be available for
    further stock options under this Plan; provided, however, that
    any stock option that is granted under this Plan that does not
    vest as a result of a failure to satisfy the Performance
    Measures, shall not be again available for grant under this Plan.

6.   GRANT OF STOCK OPTIONS

			
	 		
    From time to time the Board may designate individual officers
    and employees of the Corporation and its subsidiaries eligible
    to be granted options to purchase Common Shares and the number
    of Common Shares which each such person will be granted a stock
    option to purchase; provided that the aggregate number of Common
    Shares subject to such stock options may not exceed the number
    provided for in Section 5 of this Plan. Non-employee
    directors and other non-employee contractors and third party
    vendors are not eligible to participate in this Plan.

 

7.   OPTION PRICE

			
	 		
    The option price for any option granted under this Plan to any
    optionee shall be fixed by the Board when the option is granted
    and shall be not less than the fair market value of the Common
    Shares at such time which, for optionees resident in the United
    States and any other optionees designated by the Board, shall be
    deemed to be the closing price per Common Share on the New York
    Stock Exchange on the last trading day immediately preceding the
    day the option is granted and, for all other optionees, shall be
    deemed to be the closing price per Common Share on the Toronto
    Stock Exchange on the last trading day immediately preceding the
    day the option is granted; provided that, in either case, if the
    Common Shares did not trade on such exchange on such day the
    option price shall be the closing price per share on such
    exchange on the last day on which the Common Shares traded on
    such exchange prior to the day the option is granted.

8.   VESTING OF STOCK OPTIONS

			
	 		
    Subject to achievement of Performance Measures as certified and
    approved by the Audit Committee of the Board, stock options
    granted under this Plan will vest no later than thirty
    (30) days after the audited financial statements for the
    applicable Performance Period have been approved by the Board.

9.   PERFORMANCE MEASURES FOR VESTING OF STOCK
OPTIONS

			
	 	(a)	
    The Performance Measures which will be used to determine the
    degree to which stock options will vest over the three-year
    period beginning the first day of the fiscal year in which they
    are granted (the “Performance Period”) shall be cash
    flow return on investment (“CFROI”) and weighted
    average cost of debt and equity capital (“WACC”).

			
	 	(i)	
    CFROI is the ratio of after tax operating cash flow to average
    gross investment over the fiscal year, calculated as A divided
    by B, where (1) A equals operating income plus nonrecurring
    or unusual items plus accrued incentive awards plus depreciation
    and amortization less cash taxes, and (2) B equals the
    average of total assets plus accumulated depreciation plus
    accumulated amortization less cash and cash equivalents less non
    interest bearing current liabilities.
	 
	 	(ii)	
    WACC is the weighted average cost of debt and equity capital,
    calculated as [A times the product of B divided by C] plus
    [D times the product of E divided by C], where
    (1) A equals the after-tax market yield cost of debt,
    (2) B equals the market value of debt less cash and
    cash equivalents (3) C equals the market value of debt less
    cash and cash equivalents, plus the market value of equity,
    (4) D equals the cost of equity, and (5) E equals the
    market value of equity.

			
	 	(b)	
    In determining the number of stock options that will actually
    vest based on the degree to which the Performance Measures have
    been attained during the applicable Performance Period, the
    following chart shall be utilized which shows the three year
    average excess of CFROI being greater than WACC and the
    respective portion of the stock option that will vest:

	 	 	 	 	 	 	 
	Performance Measure	 	Vesting Scale
	 	 	 
	3 year average excess of	 	% of Stock Option
	CFROI > WACC	 	Grant Vesting
	 	 	 
	 	<0%	 	 	 	0%	 
	 	0.20%	 	 	 	30%	 
	 	1.20%	 	 	 	70%	 
	 	2.20%	 	 	 	90%	 
	 	2.50%	 	 	 	100%	 

			
	 	(c)	
    In assessing the portion of the stock options that shall vest in
    accordance with the above chart, the following shall be done:

			
	 	(i)	
    Each year, the CFROI and WACC will be calculated in accordance
    with the definitions herein, based on the audited financial
    statements and approved by the Audit Committee.
	 
	 	(ii)	
    In each Performance Period, the average of the three fiscal
    years shall be calculated by taking the simple average of the
    individual years’ results.
	 
	 	(iii)	
    The resulting three-year average will then be applied, using the
    scale above to determine the number of stock options, if any,
    that will vest as of the end of the Performance Period.
	 
	 	(iv)	
    For results falling between the reference points in the chart
    above, the level of vesting shall be mathematically interpolated
    between the reference points.

 

10. TERMS OF STOCK OPTIONS

			
	 		
    The period during which a stock option is exercisable may not
    exceed 10 years from the date the stock option is granted, and
    the Stock Option Award Agreement may contain provisions limiting
    the number of Common Shares with respect to which the stock
    option may be exercised in any one year. Each stock option
    agreement shall contain provisions to the effect that:

			
	 	(a)	
    if the employment of an optionee as an officer or employee of
    the Corporation or a subsidiary terminates, by reason of his or
    her death, or if an optionee who is a retiree pursuant to
    Section 10(b) dies, the legal personal representatives of
    the optionee will be entitled to exercise any unexercised vested
    options, including such stock options that may vest after the
    date of death, during the period ending at the end of the
    twelfth calendar month following the calendar month in which the
    optionee dies, failing which exercise the stock options
    terminate;
	 
	 	(b)	
    subject to the terms of Section 10(a) above, if the
    employment of an optionee as an officer or employee of the
    Corporation or a subsidiary terminates, by reason of retirement
    in accordance with the then prevailing retirement policy of the
    Corporation or subsidiary, the optionee will be entitled to
    exercise any unexercised vested stock options, including such
    stock options that may vest after the date of retirement, during
    the period ending at the end of the 36th month following
    the calendar month in which the optionee retires, failing which
    exercise the stock options terminate;
	 
	 	(c)	
    if the employment of an optionee as an officer or employee of
    the Corporation or a subsidiary terminates, for any reason other
    than as provided in Sections 10(a) or (b), the optionee
    will be entitled to exercise any unexercised vested stock
    options, to the extent exercisable at the date of such event,
    during the period ending at the end of the calendar month
    immediately following the calendar month in which the event
    occurs, failing which exercise the stock options terminate;
	 
	 	(d)	
    for greater certainty and for these purposes, an optionee’s
    employment with the Corporation or a subsidiary shall be
    considered to have terminated effective on the last day of the
    optionee’s actual and active employment with the
    Corporation or subsidiary whether such day is selected by
    agreement with the optionee or unilaterally by the Corporation
    or subsidiary and whether with or without advance notice to the
    optionee. For the avoidance of doubt, no period of notice that
    is given or ought to have been given under applicable law in
    respect of such termination of employment will be utilized in
    determining an optionee’s entitlement under the Plan. The
    employment of an optionee with the Corporation shall be deemed
    to have terminated for all purposes of the Plan if such person
    is employed by or provides services to a person that is a
    subsidiary of the Corporation and such person ceases to be a
    subsidiary of the Corporation, unless the Committee determines
    otherwise; and
	 
	 	(e)	
    each stock option is personal to the optionee and is not
    assignable, except (i) as provided in Section 10(a),
    and (ii) at the election of the Board, a stock option may
    be assignable to the spouse, children and grandchildren of the
    original optionee and to a trust, partnership or limited
    liability company, the entire beneficial interest of which is
    held by one or more of the foregoing.

			
	 		
    Nothing contained in Sections 10(a), (b) or
    (c) shall extend the period during which a stock option may
    be exercised beyond its stipulated expiration date or the date
    on which it is otherwise terminated in accordance with the
    provisions of this Plan.
	 
	 		
    If a stock option is assigned pursuant to
    Section 10(e)(ii), the references in Sections 10(a),
    (b) and (c) to the termination of employment or death
    of an optionee shall not relate to the assignee of a stock
    option but shall relate to the original optionee. In the event
    of such assignment, legal personal representatives of the
    original optionee shall not be entitled to exercise the assigned
    stock option, but the assignee of the stock option or the legal
    personal representatives of the assignee may exercise the stock
    option during the applicable specified period.

11. EXERCISE OF STOCK OPTIONS

			
	 		
    Subject to the provisions of this Plan, a vested stock option
    may be exercised from time to time by delivering to the
    Corporation at its registered office a written notice of
    exercise specifying the number of Common Shares with respect to
    which the stock option is being exercised and accompanied by
    payment in cash or certified cheque in full of the purchase
    price of the Common Shares then being purchased.

12. ADJUSTMENTS

			
	 		
    Appropriate adjustments to the authorized limits set forth in
    Section 5, in the number, class and/or type of Common
    Shares optioned and in the option price per share, both as to
    stock options granted or to be granted, shall be made by the
    Board to give effect to adjustments in the number of Common
    Shares which result from subdivisions, consolidations or
    reclassifications of the Common Shares, the payment of share
    dividends by the Corporation, the reconstruction, reorganization
    or recapitalization of the Corporation or other relevant changes
    in the capital of the Corporation.

 

13. MERGERS

			
	 		
    If the Corporation proposes to amalgamate or merge with another
    body corporate, the Corporation shall give written notice
    thereof to optionees in sufficient time to enable them to
    exercise outstanding vested stock options, to the extent they
    are otherwise exercisable by their terms, prior to the effective
    date of such amalgamation or merger if they so elect. The
    Corporation shall use its best efforts to provide for the
    reservation and issuance by the amalgamated or continuing
    corporation of an appropriate number of Common Shares, with
    appropriate adjustments, so as to give effect to the continuance
    of the stock options to the extent reasonably practicable. In
    the event that the Board determines in good faith that such
    continuance is not in the circumstances practicable, it may upon
    30 days’ notice to optionees terminate the stock
    options.

14. CHANGE OF CONTROL

			
	 		
    If a “change of control” of the Corporation occurs,
    each then outstanding stock option granted under this Plan may
    be exercised, in whole or in part, even if such option is not
    otherwise exercisable by its terms. For purposes of this Plan, a
    change of control of the Corporation shall be deemed to have
    occurred if any of the following occur, unless the Board adopts
    a plan after the Effective Date of this Plan that has a
    different definition (in which case such definition shall be
    applied), or the Committee decides to modify or amend the
    following definition through an amendment of this Plan:

			
	 	(a)	
    within any period of two consecutive years, individuals who at
    the beginning of such period constituted the Board and any new
    directors whose appointment by the Board or nomination for
    election by shareholders of the Corporation was approved by a
    vote of at least a majority of the directors then still in
    office who either were directors at the beginning of the period
    or whose appointment or nomination for election was previously
    so approved, cease for any reason to constitute a majority of
    the Board;
	 
	 	(b)	
    there occurs an amalgamation, merger, consolidation, wind-up,
    reorganization or restructuring of the Corporation with or into
    any other entity, or a similar event or series of such events,
    other than any such event or series of events which results in
    securities of the surviving or consolidated corporation
    representing 50% or more of the combined voting power of the
    surviving or consolidated corporation’s then outstanding
    securities entitled to vote in the election of directors of the
    surviving or consolidated corporation being beneficially owned,
    directly or indirectly, by the persons who were the holders of
    the Corporation’s outstanding securities entitled to vote
    in the election of directors of the Corporation prior to such
    event or series of events in substantially the same proportions
    as their ownership immediately prior to such event of the
    Corporation’s then outstanding securities entitled to vote
    in the election of directors of the Corporation;
	 
	 	(c)	
    50% or more of the fixed assets (based on book value as shown on
    the most recent available audited annual or unaudited quarterly
    consolidated financial statements) of the Corporation are sold
    or otherwise disposed of (by liquidation, dissolution, dividend
    or otherwise) in one transaction or series of transactions
    within any twelve month period;
	 
	 	(d)	
    any party, including persons acting jointly or in concert with
    that party, becomes (through a take-over bid or otherwise) the
    beneficial owner, directly or indirectly, of securities of the
    Corporation representing 20% or more of the combined voting
    power of the Corporation’s then outstanding securities
    entitled to vote in the election of directors of the
    Corporation, unless in any particular situation the Board
    determines in advance of such event that such event shall not
    constitute a change of control; or
	 
	 	(e)	
    the Board approves and/or recommends that shareholders accept,
    approve or adopt any transaction that would constitute a change
    of control under clause (b), (c) or (d) above and
    determines that the change of control resulting from such
    transaction will be deemed to have occurred as of a specified
    date earlier than the date under (b), (c) or (d), as
    applicable.

15. AMENDMENT OR DISCONTINUANCE OF THIS PLAN

			
	 		
    The Board may amend or discontinue the Plan at any time, without
    obtaining the approval of shareholders of the Corporation unless
    required by the relevant rules of the Toronto Stock Exchange,
    provided that, subject to Sections 12, 13,
    and 14, no such amendment may increase the aggregate
    maximum number of Common Shares that may be subject to stock
    options under this Plan, change the manner of determining the
    minimum option price, extend the option period under any option
    beyond 10 years, expand the assignment provisions of the
    Plan, permit non-employee directors to participate in the Plan
    or, without the consent of the holder of the option, alter or
    impair any option previously granted to an optionee under this
    Plan; and, provided further, for greater certainty, that,
    without the prior approval of the Corporation’s
    shareholders, stock options issued under this Plan shall not be
    repriced, replaced, or regranted through cancellation, or by
    lowering the option price of a previously granted stock option.
    Pre-clearance of the Toronto Stock Exchange of amendments to the
    Plan will be required to the extent provided under the relevant
    rules of the Toronto Stock Exchange.

 

16. EVIDENCE OF STOCK OPTIONS

			
	 		
    Each stock option granted under this Plan shall be evidenced by
    a written stock option agreement between the Corporation and the
    optionee which shall give effect to the provisions of this Plan
    and include such other terms as the Committee shall determine
    (“Stock Option Award Agreement”).

17. WITHHOLDING

			
	 		
    To the extent that the Corporation is required to withhold
    federal, provincial, state, local or foreign taxes in connection
    with any payment made or benefit realized by an optionee or
    other person hereunder, and the amounts available to the
    Corporation for such withholding are insufficient, it shall be a
    condition to the receipt of such payment or the realization of
    such benefit that the optionee or such other person make
    arrangements satisfactory to the Corporation for payment of the
    balance of such taxes required to be withheld, which
    arrangements (in the discretion of the Board) may include
    relinquishment of a portion of such benefit. Participants shall
    also make such arrangements in connection with the disposition
    of Common Shares acquired upon the exercise of option rights
    with respect to this Plan.

 

	 	 	 	 
	 		 	Potash Corporation of Saskatchewan Inc.

This certificate evidences and confirms the grant
to _______________________________ (the “Optionee”)
of options to purchase the number of Common Shares of the Corporation specified under Paragraph (1)
on the terms and subject to the conditions of the Potash Corporation of Saskatchewan Inc. 2007
Performance Option Plan (the “2007 Plan”) and the terms and conditions set forth below. In the
event of any inconsistency between the terms of the 2007 Plan and those set forth below, the terms
of the 2007 Plan shall control. Capitalized terms used below that are not defined in this
certificate shall have the meanings specified in the 2007 Plan.

	 	1.	 	Number of Shares: The Optionee is hereby granted options under the 2007 Plan to
Purchase _________________________ Common Shares.
	 
	 	2.	 	Option Exercise Price: The exercise price for each Common Share is
$____________________.
	 
	 	3.	 	Time and Conditions to Vesting: The options will become vested following the end of
the Performance Period January 1, 2007 through December 31, 2009 if, and to the extent,
the applicable Performance Measures for the Performance Period are achieved. Subject to
applicable conditions under the 2007 Plan with respect to continued employment during the
Performance Period and achievement of the minimum Performance Measures, the date for
vesting will be determined but will not be later than 30 days after the audited financial
statements of the Corporation for the 2009 fiscal year of the Corporation have been
approved by the Board. Upon vesting, the Optionee will have the right to purchase a
number of Common Shares covered by the option equal to the percentage determined in
accordance with the performance matrix and vesting scale provided under the 2007 Plan.
	 
	 	4.	 	Once vested, the options will continue to be exercisable until the expiry date for the
options of _______________.
	 
	 	5.	 	Notwithstanding the provisions of paragraph 4 above, this option will terminate as
provided in paragraph 10 of the 2007 Plan in the event that the actual and active
employment of the Optionee ceases. The option is personal to the Optionee and is not
assignable, except in accordance with the conditions attached hereto as Appendix I.
	 
	 	6.	 	Notice of exercise of the option is to be given in accordance with paragraph 11 of the
2007 Plan.
	 
	 	7.	 	Adjustments to the option may be made as provided in paragraph 12 of the 2007 Plan,
the provisions of paragraph 13 of the 2007 Plan shall apply in the event of a proposed
amalgamation or merger of the Corporation, and the provisions of paragraph 14 of the 2007
Plan will apply in the event of a “change of control” of the Corporation as defined in
that paragraph.
	 
	 	8.	 	This grant of option is subject to receipt of any necessary regulatory approvals and
shall be governed by the laws of Saskatchewan.

	 	 	 	 	 
	 	 	 	Potash Corporation of Saskatchewan Inc.

	Date:  	 	 	By:  	 
	 	 	 	 	 
	 	 	 	 	President and Chief Executive Officer
	 	 	 	 	 

 

Potash Corporation of Saskatchewan Inc.

2007 Performance Option Plan

1.     PURPOSE OF PLAN.   Potash Corporation of Saskatchewan
Inc. (the “Corporation”) by resolution of its Board of Directors (the “Board”) has established,
subject to shareholder approval at the Corporation’s 2007 Annual and Special Meeting of
shareholders, this Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan (the
“Plan”) to support the Corporation’s compensation philosophy of providing selected employees and
officers with an opportunity to: promote the growth and profitability of the Corporation; align
their interests with shareholders; and earn compensation commensurate with corporate performance.
The Corporation believes this Plan will directly assist in supporting the Corporation’s
compensation philosophy by providing participants with the opportunity through stock options, which
will vest, if at all, based on corporate performance over a three-year period, to acquire Common
Shares of the Corporation (“Common Shares”).

2.     DURATION OF THIS PLAN. This Plan was adopted by the Board on February 20, 2007 to be effective
as of January 1, 2007 (the “Effective Date”), subject to shareholder approval at the Corporation’s
2007 Annual and Special Meeting of shareholders, and shall remain in effect, unless sooner
terminated as provided herein, until one (1) year from the Effective Date, at which time it will
terminate. After this Plan is terminated, no stock options may be granted but stock options
previously granted shall remain outstanding in accordance with their applicable terms and
conditions and this Plan’s terms and conditions.

3.     ADMINISTRATION. This Plan shall be administered by the Compensation Committee of the Board or
any other committee designated by the Board to administer this Plan (the “Committee”). The
Committee shall be responsible for administering this Plan, subject to this Section 3 and the other
provisions of this Plan. The Committee may employ attorneys, consultants, accountants, agents, and
other individuals, any of whom may be an employee, and the Committee, the Corporation, and its
officers and directors shall be entitled to rely upon the advice, opinions, or valuations of any
such individuals. All actions taken and all interpretations and determinations made by the
Committee shall be made in the Committee’s sole discretion and shall be final and binding upon the
participants, the Corporation, and all other interested individuals. To the extent applicable, the
Plan shall be administered with respect to optionees subject to the laws of the U.S. so as to avoid
the application of penalties pursuant to Section 409A of the Internal Revenue Code.

4.     AUTHORITY OF THE COMMITTEE. The Committee shall have full and exclusive discretionary power to
interpret the terms and the intent of this Plan and any Stock Option Award Agreement or other
agreement or document ancillary to or in connection with this Plan, to determine eligibility for
stock options and to adopt such rules, regulations, forms, instruments, and guidelines for
administering this Plan as the Committee may deem necessary or proper. Such authority shall include
adopting modifications and amendments to any Stock Option Award Agreement that are necessary to
comply with the laws of the countries and other jurisdictions in which the Corporation and/or its
subsidiaries operate.

5.     SHARES SUBJECT TO STOCK OPTIONS. The aggregate number of Common Shares issuable after February
20, 2007 pursuant to stock options under this Plan may not exceed 1,000,000 Common Shares. The
aggregate number of Common Shares in respect of which stock options have been granted to any one
person pursuant to this Plan and which remain outstanding shall not at any time exceed 250,000. The
authorized limits under this Plan shall be subject to adjustment under Sections 12 and 13.
If any stock option granted under this Plan, or any portion thereof, expires or terminates for any
reason without having been exercised in full, the Common Shares with respect to which such option
has not been exercised shall again be available for further stock options under this Plan;
provided, however, that any stock option that is granted under this Plan that does not vest as a
result of a failure to satisfy the Performance Measures, shall not be again available for grant
under this Plan.

6.     GRANT OF STOCK OPTIONS. From time to time the Board may designate individual officers and
employees of the Corporation and its subsidiaries eligible to be granted options to purchase Common
Shares and the number of Common Shares which each such person will be granted a stock option to
purchase; provided that the aggregate number of Common Shares subject to such stock options may not
exceed the number provided for in Section 5 of this Plan. Non-employee directors and other
non-employee contractors and third party vendors are not eligible to participate in this Plan.

7.     OPTION PRICE. The option price for any option granted under this Plan to any optionee shall be
fixed by the Board when the option is granted and shall be not less than the fair market value of
the Common Shares at such time which, for optionees resident in the United States and any other
optionees designated by the Board, shall be deemed to be the closing price per Common Share on the
New York Stock Exchange on the last trading day immediately preceding the day the option is granted
and, for all other optionees, shall be deemed to be the closing price per Common Share on the
Toronto Stock Exchange on the last trading day immediately preceding the day the option is granted;
provided that, in either case, if the Common Shares did not trade on such exchange on such day the
option price shall be the closing price per share on such exchange on the last day on which the
Common Shares traded on such exchange prior to the day the option is granted.

8.     VESTING OF STOCK OPTIONS. Subject to achievement of Performance Measures as certified and
approved by the Audit Committee of the Board, stock options granted under this Plan will vest no
later than thirty (30) days after the audited financial statements for the applicable Performance
Period have been approved by the Board.

9.     PERFORMANCE MEASURES FOR VESTING OF STOCK OPTIONS.

	(a)	 	The Performance Measures which will be used to determine the degree to which stock options
will vest over the three-year period beginning the first day of the fiscal year in which they
are granted (the “Performance Period”) shall be cash flow return on investment (“CFROI”) and
weighted average cost of debt and equity capital (“WACC”).

	 	(i)	 	CFROI is the ratio of after tax operating cash flow to average gross investment over the
fiscal year, calculated as A divided by B, where (1) A equals operating income plus
nonrecurring or unusual items plus accrued incentive awards plus depreciation and
amortization less cash taxes, and (2) B equals the average of total assets plus accumulated
depreciation plus accumulated amortization less cash and cash equivalents less non interest
bearing current liabilities.
	 
	 	(ii)	 	WACC is the weighted average cost of debt and equity capital, calculated as [A times the
product of B divided by C] plus [D times the product of E divided by C], where (1) A equals
the after-tax market yield cost of debt, (2) B equals the market value of debt less cash and
cash equivalents (3) C equals the market value of debt less cash and cash equivalents, plus
the market value of equity, (4) D equals the cost of equity, and (5) E equals the market
value of equity.

	(b)	 	In determining the number of stock options that will actually vest based on the degree to
which the Performance Measures have been attained during the applicable Performance Period,
the following chart shall be utilized which shows the three year average excess of CFROI being
greater than WACC and the respective portion of the stock option that will vest:

	 	 	 	 	 	 	 
	Performance Measure	 	Vesting Scale
	3 year average excess of	 	% of Stock Option
	CFROI > WACC	 	Grant Vesting	 
	 	<0%	 	 	 	0%	 
	 	0.20%	 	 	 	30%	 
	 	1.20%	 	 	 	70%	 
	 	2.20%	 	 	 	90%	 
	 	2.50%	 	 	 	100%	 

	(c)	 	In assessing the portion of the stock options that shall vest in accordance with the above
chart, the following shall be done:

	 	(i)	 	Each year, the CFROI and WACC will be calculated in accordance with the definitions
herein, based on the audited financial statements and approved by the Audit Committee.
	 
	 	(ii)	 	In each Performance Period, the average of the three fiscal years shall be calculated by
taking the simple average of the individual years’ results.
	 
	 	(iii)	 	The resulting three-year average will then be applied, using the scale above to
determine the number of stock options, if any, that will vest as of the end of the
Performance Period.
	 
	 	(iv)	 	For results falling between the reference points in the chart above, the level of vesting
shall be mathematically interpolated between the reference points.

10.   TERMS OF STOCK OPTIONS.   The period during which a stock option is exercisable may not exceed
10 years from the date the stock option is granted, and the Stock Option Award Agreement may
contain provisions limiting the number of Common Shares with respect to which the stock option may
be exercised in any one year. Each stock option agreement shall contain provisions to the effect
that:

	(a)	 	if the employment of an optionee as an officer or employee of the Corporation or a subsidiary
terminates, by reason of his or her death, or if an optionee who is a retiree pursuant to
Section 10(b) dies, the legal personal representatives of the optionee will be entitled to
exercise any unexercised vested options, including such stock options that may vest after the
date of death, during the period ending at the end of the twelfth calendar month following the
calendar month in which the optionee dies, failing which exercise the stock options terminate;

	(b)	 	subject to the terms of Section 10(a) above, if the employment of an optionee as an officer
or employee of the Corporation or a subsidiary terminates, by reason of retirement in
accordance with the then prevailing retirement policy of the Corporation or subsidiary, the
optionee will be entitled to exercise any unexercised vested stock options, including such
stock options that may vest after the date of retirement, during the period ending at the end
of the 36(th) month following the calendar month in which the optionee retires, failing which
exercise the stock options terminate;
	 
	(c)	 	if the employment of an optionee as an officer or employee of the Corporation or a subsidiary
terminates, for any reason other than as provided in Sections 10(a) or (b), the optionee will
be entitled to exercise any unexercised vested stock options, to the extent exercisable at the
date of such event, during the period ending at the end of the calendar month immediately
following the calendar month in which the event occurs, failing which exercise the stock
options terminate;
	 
	(d)	 	for greater certainty and for these purposes, an optionee’s employment with the Corporation
or a subsidiary shall be considered to have terminated effective on the last day of the
optionee’s actual and active employment with the Corporation or subsidiary whether such day is
selected by agreement with the optionee or unilaterally by the Corporation or subsidiary and
whether with or without advance notice to the optionee. For the avoidance of doubt, no period
of notice that is given or ought to have been given under applicable law in respect of such
termination of employment will be utilized in determining an optionee’s entitlement under the
Plan. The employment of an optionee with the Corporation shall be deemed to have terminated
for all purposes of the Plan if such person is employed by or provides services to a person
that is a subsidiary of the Corporation and such person ceases to be a subsidiary of the
Corporation, unless the Committee determines otherwise; and
	 
	(e)	 	each stock option is personal to the optionee and is not assignable, except (i) as provided
in Section 10(a), and (ii) at the election of the Board, a stock option may be assignable to
the spouse, children and grandchildren of the original optionee and to a trust, partnership or
limited liability company, the entire beneficial interest of which is held by one or more of
the foregoing.
	 
	 	 	Nothing contained in Sections 10(a), (b) or (c) shall extend the period during which a stock
option may be exercised beyond its stipulated expiration date or the date on which it is
otherwise terminated in accordance with the provisions of this Plan.
	 
	 	 	If a stock option is assigned pursuant to Section 10(e)(ii), the references in Sections
10(a), (b) and (c) to the termination of employment or death of an optionee shall not relate
to the assignee of a stock option but shall relate to the original optionee. In the event of
such assignment, legal personal representatives of the original optionee shall not be
entitled to exercise the assigned stock option, but the assignee of the stock option or the
legal personal representatives of the assignee may exercise the stock option during the
applicable specified period.

11.   EXERCISE OF STOCK OPTIONS.   Subject to the provisions of this Plan, a vested stock option may
be exercised from time to time by delivering to the Corporation at its registered office a written
notice of exercise specifying the number of Common Shares with respect to which the stock option is
being exercised and accompanied by payment in cash or certified cheque in full of the purchase
price of the Common Shares then being purchased.

12.   ADJUSTMENTS.   Appropriate adjustments to the authorized limits set forth in Section 5, in the
number, class and/or type of Common Shares optioned and in the option price per share, both as to
stock options granted or to be granted, shall be made by the Board to give effect to adjustments in
the number of Common Shares which result from subdivisions, consolidations or reclassifications of
the Common Shares, the payment of share dividends by the Corporation, the reconstruction,
reorganization or recapitalization of the Corporation or other relevant changes in the capital of
the Corporation.

13.   MERGERS.   If the Corporation proposes to amalgamate or merge with another body corporate, the
Corporation shall give written notice thereof to optionees in sufficient time to enable them to
exercise outstanding vested stock options, to the extent they are otherwise exercisable by their
terms, prior to the effective date of such amalgamation or merger if they so elect. The Corporation
shall use its best efforts to provide for the reservation and issuance by the amalgamated or
continuing corporation of an appropriate number of Common Shares, with appropriate adjustments, so
as to give effect to the continuance of the stock options to the extent reasonably practicable. In
the event that the Board determines in good faith that such continuance is not in the circumstances
practicable, it may upon 30 days’ notice to optionees terminate the stock options.

14.   CHANGE OF CONTROL.   If a “change of control” of the Corporation occurs, each then outstanding
stock option granted under this Plan may be exercised, in whole or in part, even if such option is
not otherwise exercisable by its terms. For purposes of this Plan, a change of control of the
Corporation shall be deemed to have occurred if any of the following occur, unless the Board adopts
a plan after the Effective Date of this Plan that has a different definition (in which case such
definition shall be applied), or the Committee decides to modify or amend the following definition
through an amendment of this Plan:

	(a)	 	within any period of two consecutive years, individuals who at the beginning of such period
constituted the Board and any new directors whose appointment by the Board or nomination for
election by shareholders of the Corporation was approved by a vote of at least a majority of
the directors then still in office who either were directors at the beginning of the period or
whose appointment or nomination for election was previously so approved, cease for any reason
to constitute a majority of the Board;
	 
	(b)	 	there occurs an amalgamation, merger, consolidation, wind-up, reorganization or restructuring
of the Corporation with or into any other entity, or a similar event or series of such events,
other than any such event or series of events which results in securities of the surviving or
consolidated corporation representing 50% or more of the combined voting power of the
surviving or consolidated corporation’s then outstanding securities entitled to vote in the
election of directors of the surviving or consolidated corporation being beneficially owned,
directly or indirectly, by the persons who were the holders of the Corporation’s outstanding
securities entitled to vote in the election of directors of the Corporation prior to such
event or series of events in substantially the same proportions as their ownership immediately
prior to such event of the Corporation’s then outstanding securities entitled to vote in the
election of directors of the Corporation;
	 
	(c)	 	50% or more of the fixed assets (based on book value as shown on the most recent available
audited annual or unaudited quarterly consolidated financial statements) of the Corporation
are sold or otherwise disposed of (by liquidation, dissolution, dividend or otherwise) in one
transaction or series of transactions within any twelve month period;
	 
	(d)	 	any party, including persons acting jointly or in concert with that party, becomes (through a
take-over bid or otherwise) the beneficial owner, directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the Corporation’s then
outstanding securities entitled to vote in the election of directors of the Corporation,
unless in any particular situation the Board determines in advance of such event that such
event shall not constitute a change of control; or
	 
	(e)	 	the Board approves and/or recommends that shareholders accept, approve or adopt any
transaction that would constitute a change of control under clause (b), (c) or (d) above and
determines that the change of control resulting from such transaction will be deemed to have
occurred as of a specified date earlier than the date under (b), (c) or (d), as applicable.

15.   AMENDMENT OR DISCONTINUANCE OF THIS PLAN.   The Board may amend or discontinue the Plan at any
time, without obtaining the approval of shareholders of the Corporation unless required by the
relevant rules of the Toronto Stock Exchange, provided that, subject to Sections 12, 13, and 14, no
such amendment may increase the aggregate maximum number of Common Shares that may be subject to
stock options under this Plan, change the manner of determining the minimum option price, extend
the option period under any option beyond 10 years, expand the assignment provisions of the Plan,
permit non-employee directors to participate in the Plan or, without the consent of the holder of
the option, alter or impair any option previously granted to an optionee under this Plan; and,
provided further, for greater certainty, that, without the prior approval of the Corporation’s
shareholders, stock options issued under this Plan shall not be repriced, replaced, or regranted
through cancellation, or by lowering the option price of a previously granted stock option.
Pre-clearance of the Toronto Stock Exchange of amendments to the Plan will be required to the
extent provided under the relevant rules of the Toronto Stock Exchange.

16.   EVIDENCE OF STOCK OPTIONS.   Each stock option granted under this Plan shall be evidenced by a
written stock option agreement between the Corporation and the optionee which shall give effect to
the provisions of this Plan and include such other terms as the Committee shall determine (“Stock
Option Award Agreement”).

17.   WITHHOLDING.   To the extent that the Corporation is required to withhold federal, provincial,
state, local or foreign taxes in connection with any payment made or benefit realized by an
optionee or other person hereunder, and the amounts available to the Corporation for such
withholding are insufficient, it shall be a condition to the receipt of such payment or the
realization of such benefit that the optionee or such other person make arrangements satisfactory
to the Corporation for payment of the balance of such taxes required to be withheld, which
arrangements (in the discretion of the Board) may include relinquishment of a portion of such
benefit. Participants shall also make such arrangements in connection with the disposition of
Common Shares acquired upon the exercise of option rights with respect to this Plan.

 

APPENDIX I

This option may be assigned, in whole or in part, only if the following conditions are
satisfied:

	 	1.	 	No consideration may be paid in connection with the assignment.
	 
	 	2.	 	An assignment may be made only to one or more persons or entities included in
the following: the original Optionee’s spouse, children and grandchildren and a
trust, partnership or limited liability company, the entire beneficial interest of
which is held by one or more of the foregoing.
	 
	 	3.	 	Prior to any such assignment,

	 	(a)	 	the assignor shall advise the Corporation, in a writing
delivered to Potash Corporation of Saskatchewan Inc., 122 1st
Avenue South, Saskatoon, Saskatchewan, Canada S7K 7G3, Attention: General
Counsel, of all pertinent information concerning the proposed assignment,
including the date of the assignment, the number of shares involved, the
relationship of the assignee to the original Optionee and the address and
telephone number of the assignee; and
	 
	 	(b)	 	the assignee shall agree in a writing so delivered to advise
the Corporation in writing of any change in the name, address or telephone
number of the assignee.

The decision to assign all or part of this option involves complex tax and financial
considerations. An Optionee should consult the Optionee’s own tax and financial advisors before
such assignment.CC Filed by Filing Services Canada Inc. 403-717-3898

LEXARIA CORP.

2007 EQUITY INCENTIVE PLAN

PART 1

INTRODUCTION

1.1

PURPOSE

The purpose of the Plan is to secure for the Company and its shareholders the benefits of incentive inherent in share ownership by the directors and employees of the Company and its Affiliates who, in the judgment of the Board, will be largely responsible for the Company’s future growth and success. It is generally recognized that equity incentive plans of the nature provided for herein aid in retaining and encouraging directors and employees of exceptional ability because of the opportunity offered them to acquire a proprietary interest in the Company.

1.2

DEFINITIONS

(a)

“Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company;

(b)

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

(c)

"Company" means Lexaria Corp.;

(d)

"Committee" has the meaning attributed thereto in Section 4.1 hereof;

(e)

“Discretionary Options” means an aggregate of 700,000 Options to be granted under the Plan to the Key Participants of the Company, which are to be vested immediately upon grant thereof;

(f)

"Eligible Directors" mean the directors of the Company or any Affiliate who are, as such, eligible for participation in the Plan;

(g)

“Eligible Employees" means employees (including employees who are officers and directors) of the Company or any Affiliate, whether or not they have a written employment contract with Company or an Affiliate, determined by the Board, upon recommendation of the Committee, as employees eligible for participation in the Plan, and shall include Service Providers eligible for participation in the Plan as determined by the Board;

(h)

"Fair Market Value" means, with respect to a Share subject to Option, the weighted average price of the Shares on the OTC Bulletin Board (the “OTCBB”) for the five days on which Shares were traded immediately preceding the date in 

respect of which Fair Market Value is to be determined or, if the Shares are not listed and posted for trading on the OTCBB on such day, the Fair Market Value shall be such price per Share as the Board, acting in good faith, may determine;

(i)

"Insider" means directors, executive officers and shareholders of the Company who own 10% or more of the issued and outstanding Shares of the Company;

(j)

“Key Participants” means, namely, Chris Bunka, Leonard MacMillan and Peter Philipchuck to whom Discretionary Options will be granted under the Plan;

(k)

"Option" means an option granted under the Plan;

(l)

"Option Period" means the period during which an Option is outstanding;

(m)

"Optionee" means an Eligible Employee or Eligible Director to whom an Option has been granted under the terms of the Plan;

(n)

"Participant" means, in respect of the Plan, an Eligible Employee or Eligible Director who participates in the Plan;

(o)

"Service Provider" means any natural person engaged by the Company or an Affiliate to provide services for an initial, renewable or extended period of 12 months or more, excluding consultants who provide services in connection with the offer and sale of securities in a capital raising transaction and/or directly or indirectly promote or maintain a market for the Company’s securities;

(p)

"Plan" means the equity incentive plan established and operated pursuant to Part 2 and Part 3 hereof; and

(q)

"Shares" means the shares in the common stock of the Company.

PART 2

THE PLAN

2.1

PARTICIPATION

Options shall be granted only to Eligible Employees and Eligible Directors as well as to Key Participants.

2.2

ADMINISTRATION

The Plan shall be administered by the Committee.

2.3

EXERCISE PRICE

The exercise price per Share of an Option shall be not less than one hundred per cent (100%) of the Fair Market Value on the date of grant.

2.4

GRANT OF OPTIONS

The Board hereby grants an aggregate of 700,000 Discretionary Options to the Key Participants, namely, Chris Bunka (400,000), Leonard MacMillan (200,000) and Peter Philipchuck (100,000). The Board, on the recommendation of the Committee, shall specify the date of grant.

Other than the 700,000 Discretionary Options granted to the Key Participants hereunder, the Board, on the recommendation of the Committee, may at any time authorize the granting of Options to such Eligible Employees and Eligible Directors as it may select for the number of Shares that it shall designate, subject to the provisions of the Plan. When the grant is authorized, the Board, on the recommendation of the Committee, shall specify the date of grant.

Each Option granted to an Eligible Employee or to an Eligible Director shall be evidenced by an option agreement with terms and conditions consistent with the Plan and as approved by the Board on the recommendation of the Committee, which terms and conditions need not be the same in each case and may be changed from time to time.

2.5

TERMS OF OPTIONS

Except for the 700,000 Discretionary Options to be vested immediately pursuant to grant hereunder, the Option Period for the 1,300,000 Options remaining under the Plan shall be four years from the date of grant thereof or such greater or lesser duration as the Board, on the recommendation of the Committee, may determine at the date of grant thereof, and may thereafter be reduced with respect to any Option as provided in Section 2.8 hereof covering termination of employment or death of the Optionee.

In addition, unless otherwise determined from time to time by the Board, on the recommendation of the Committee, the 1,300,000 Options remaining under the Plan may be exercised (in each case to the nearest full Share) during the Option Period as follows:

(a)

at any time during the first year of the Option Period, the Optionee may purchase up to 25% of the total number of Shares reserved for issuance pursuant to his or her Option; and

(b)

at any time during each additional year of the Option period the Optionee may purchase an additional 25% of the total number of Shares reserved for issuance pursuant to his or her Option plus any Shares not purchased in accordance with the preceding subsection (a) until, in the fourth year of the Option Period, 100% of the Option will be exercisable.

Except as set forth in Section 2.8 hereof, no Option may be exercised unless the Optionee is at the time of such exercise:

(c)

in the case of an Eligible Employee, in the employ of the Company or an Affiliate and shall have been continuously so employed since the grant of his Option, but absence on leave, having the approval of the Company or such Affiliate, shall not be considered an interruption of employment for any purpose of the Plan; or

(d)

in the case of an Eligible Director, a director of the Company or an Affiliate and shall have been such a director continuously since the grant of his Option.

Subject to Section 2.6 hereof, the exercise of any Option will be contingent upon the Optionee having entered into an option agreement with the Company on such terms and conditions as have been approved by the Board, on the recommendation of the Committee, and which incorporates by reference the terms of the Plan. The exercise of any Option will also be contingent upon receipt by the Company of cash payment of the full purchase price of the Shares being purchased. No Optionee or his legal representatives or legatees will be, or will be deemed to be, a holder of any Shares subject to an Option, unless and until certificates for such Shares are issued to him or them under the terms of the Plan.

2.6

SHARE APPRECIATION RIGHT

A Participant may, if at any time determined by the Board, on the recommendation of the Committee, have the right (the "Right"), when entitled to exercise an Option, to terminate such Option in whole or in part (the "Terminated Option") by notice in writing to the Company and, in lieu of receiving the Shares (the "Optioned Shares") to which the Terminated Option relates, to receive the number of Shares, disregarding fractions, which is equal to the quotient obtained by:

(a)

subtracting the Option exercise price per Share from the Fair Market Value per Share on the day immediately prior to the exercise of the Right and multiplying the remainder by the number of Optioned Shares; and

(b)

dividing the product obtained under subsection 2.6(a) by the Fair Market Value per Share on the day immediately prior to the exercise of the Right.

If a Right is granted in connection with an Option, it is exercisable only to the extent and on the same conditions that the related Option is exercisable.

2.7

LAPSED OPTIONS

If Options are surrendered, terminated or expired without being exercised in whole or in part, new Options may be granted covering the Shares not purchased under such lapsed Options, subject in the case of the cancellation of an Option in connection with the grant of a new Option to the same person on different terms.

2.8

EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH

If an Optionee:

(a)

dies while employed by or while a director of the Company or its Affiliate, any Option held by him at the date of death shall become exercisable in whole or in part, but only by the person or persons to whom the Optionee's rights under the Option shall pass by the Optionee's will or applicable laws of descent and distribution. Unless otherwise determined by the Board, on the recommendation of the Committee, all such Options shall be exercisable only to the extent that the Optionee was entitled to exercise the Option at the date of his death and only for 12 months after the date of death or prior to the expiration of the Option Period in respect thereof, whichever is sooner; or

(b)

ceases to be employed by or act as a director of the Company or its Affiliate for cause, no Option held by such Optionee will, unless otherwise determined by the Board, on the recommendation of the Committee, be exercisable following the date on which such Optionee ceases to be so employed or ceases to be a director, as the case may be. If an Optionee ceases to be employed by or act as a director of the Company or its Affiliate for any reason other than cause then, unless otherwise determined by the Board, on the recommendation of the Committee, any Option held by such Optionee at the effective date thereof shall become exercisable for a period of up to 12 months thereafter or prior to the expiration of the Option Period in respect thereof, whichever is sooner.

2.9

EFFECT OF TAKEOVER BID

If a bona fide offer (the "Offer") for Shares is made to the Optionee or to shareholders of the Company generally or to a class of shareholders which includes the Optionee, which Offer, if accepted in whole or in part, would result in the offeror exercising control over the Company which to own more than _____% of all issued and outstanding Shares of the Company (as amended from time to time), then the Company shall, immediately upon receipt of notice of the Offer, notify each Optionee currently holding an Option of the Offer, with full particulars thereof, whereupon, notwithstanding Section 2.5 hereof, such Option may be exercised in whole or in part by the Optionee so as to permit the Optionee to tender the Shares received upon such exercise (the "Optioned Shares") pursuant to the Offer.

2.10

EFFECT OF AMALGAMATION OR MERGER

If the Company amalgamates or merges with or into another corporation, any Shares receivable on the exercise of an Option shall be converted into the securities, property or cash which the Participant would have received upon such amalgamation or merger if the Participant had exercised his Option immediately prior to the record date applicable to such amalgamation or merger, and the option price shall be adjusted appropriately by the Board and such adjustment shall be binding for all purposes of the Share Option Plan.

2.11

ADJUSTMENT IN SHARES SUBJECT TO THE PLAN

If there is any change in the Shares through the declaration of stock dividends of Shares or consolidations, subdivisions or reclassification of Shares, or otherwise, the number of Shares 

available under the Plan, the Shares subject to any Option, and the option price thereof shall be adjusted appropriately by the Board and such adjustment shall be effective and binding for all purposes of the Plan.

2.12

LOANS TO EMPLOYEES

Subject to applicable law, the Board may at any time authorize the Company to loan money to an Eligible Employee (which for purposes of this Section 2.12 excludes any director or executive officer (or equivalent thereof) of the Company), on such terms and conditions as the Board may reasonably determine, to assist such Eligible Employee to exercise an Option held by him or her. Such terms and conditions shall include, in any event, interest at prevailing market rates, a term not in excess of one year, and security in favor of the Company represented by that number of Shares issued pursuant to the exercise of an Option in respect of which such loan was made or equivalent security which equals the loaned amount divided by the Fair Market Value of the Shares on the date of exercise of the Option, which security may be granted on a non-recourse basis.

PART 3

GENERAL

3.1

NUMBER OF SHARES

The aggregate number of Shares that may be reserved for issuance under the Plan shall not exceed 2,000,000 Shares. In addition, the aggregate number of Shares:

(a)

that may be reserved for issuance to Insiders under the Plan shall not exceed 10% of the Company's outstanding issue of Shares from time to time;

(b)

that may be issued to Insiders under the Plan within any one-year period shall not exceed 10% of the Company's outstanding issue of Shares from time to time; and

(c)

that may be issued to any one Insider under the Plan within any one-year period shall not exceed 5% of the Company's outstanding issue of Shares from time to time.

In no event will the number of Shares at any time reserved for issuance to any Participants exceed 5% of the Company's outstanding issue of Shares from time to time.

For the purposes of this Section 3.1, "outstanding issue" means the total number of Shares, on a non-diluted basis, that are issued and outstanding as of the date that any Shares are issued or reserved for issuance pursuant to an option under the Plan to an Insider excluding any Shares issued under the Plan during the immediately preceding 12 month period.

3.2

TRANSFERABILITY

Any benefits, rights and options accruing to any Participant in accordance with the terms and conditions of the Plan shall not be transferable unless specifically provided herein. During the lifetime of a Participant all benefits, rights and options may only be exercised by the Participant. Options are non-transferable except by will or by the laws of descent and distribution.

3.3

EMPLOYMENT

Nothing contained in any Plan shall confer upon any Participant any right with respect to employment or continuance of employment with the Company or any, Affiliate, or interfere in any way with the right of the Company or any Affiliate to terminate the Participant's employment at any time. Participation in any Plan by a Participant is voluntary.

3.4

RECORD KEEPING

The Company shall maintain a register in which shall be recorded:

(a)

the name and address of each Participant;

(b)

the Plan or Plans in which the Participant participates;

(c)

any Participant's Contributions;

(d)

the number of unissued Shares reserved for issuance pursuant to an Option in favor of a Participant; and

(e)

such other information as the Board may determine.

3.5

NECESSARY APPROVALS

The Plan shall be effective only upon formal adoption by the Board following the approval of the shareholders of and any regulatory body having jurisdiction in respect of the shares. 

The obligation of the Company to sell and deliver Shares in accordance with the Plan is subject to the approval of any governmental authority having jurisdiction in respect of the Shares or any exchanges on which the Shares are then listed which may be required in connection with the authorization, issuance or sale of such Shares by the Company. If any Shares cannot be issued to any Participant for any reason including, without limitation, the failure to obtain such approval, the obligation of the Company to issue such Share shall terminate and any Participant's Contribution or option price paid to the Company shall be returned to the Participant.

3.6

INCOME TAXES

 

The Company may withhold from any remuneration or consideration whatsoever payable to such Participant hereunder, any amounts required by any taxing authority to be withheld for taxes of any kind as a consequence of such participation in the Plan.

3.7

AMENDMENTS TO PLAN

The Board may amend, modify or terminate the Plan at any time if and when it is advisable in the absolute discretion of the Board, subject to the approval of any regulatory body having jurisdiction in respect of the Shares. However, any amendment of such Plan which would:

(a)

materially increase the benefits under the Plan;

(b)

materially increase the number of Shares issuable under the Plan; or

(c)

materially modify the requirements as to eligibility for participation in the Plan;

shall be effective only upon the approval of the shareholders of the Company and, if required, the approval of any regulatory body having jurisdiction over the Shares. Except as expressly otherwise provided herein, however, no change in an Option already granted under the Plan shall be made without the written consent of the recipient of such Options.

3.8

NO REPRESENTATION OR WARRANTY

The Company makes no representation or warranty as to the future market value of any Shares issued in accordance with the provisions of the Plan.

3.9

COMPLIANCE WITH APPLICABLE LAW, ETC

If any provision of the Plan or any agreement entered into pursuant to the Plan contravenes any law or any order, policy, by-law or regulation of any regulatory body or stock exchange having authority over the Company or the Plan then such provision shall be deemed to be amended to the extent required to bring such provision into compliance therewith.

PART 4

ADMINISTRATION OF THE PLAN

4.1

ADMINISTRATION BY THE COMMITTEE

(a)

Unless otherwise determined by the Board, the Plan shall be administered by the Compensation and Benefits Committee (the "Committee") appointed by the Board and constituted in accordance with such Committee's charter. The members of the Committee serve at the pleasure of the Board and vacancies occurring in the Committee shall be filled by the Board.

(b)

The Committee shall have the power, where consistent with the general purpose and intent of the Plan and subject to the specific provisions of the Plan, to:

(i)

adopt and amend rules and regulations relating to the administration of the Plan and make all other determinations necessary or desirable for the administration of the Plan. The interpretation and construction of the 

provisions of the Plan and related agreements by the Committee shall be final and conclusive. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency; and

(ii)

otherwise exercise the powers delegated to the Committee by the Board and under the Plan as set forth herein.

4.2

BOARD ROLE

(a)

The Board, on the recommendation of the Committee, shall determine and designate from time to time the individuals to whom an Option shall be granted, the number of the Options and the other terms and conditions of the Options.

(b)

The Board may delegate any of its responsibilities or powers under the Plan to the Committee, provided that the grant of all Options under the Plan shall be subject to the approval of the Board. No Option shall be exercisable in whole or in part unless and until such approval of the Board is obtained.

(c)

In the event the Committee is unable or unwilling to act in respect of a matter involving the Plan, the Board shall fulfill the role of the Committee provided for herein.

LEXARIA CORP.

By:

CHRISTOPHER BUNKA

Director & Chairman of the Board

President, CEO & CFO

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