Document:

Exhibit 10.1

                               STEVEN MADDEN, LTD.

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                            2006 STOCK INCENTIVE PLAN

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                                    ARTICLE I

                                     PURPOSE

         The purpose of this Plan is to enhance the profitability and value of
the Company for the benefit of its stockholders by enabling the Company to offer
Eligible Employees, Consultants and Non-Employee Directors cash and stock-based
incentives in the Company to attract, retain and reward such individuals and
strengthen the mutuality of interests between such individuals and the Company's
stockholders.

                                   ARTICLE II

                                   DEFINITIONS

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

         2.1      "Acquisition Event" means a merger or consolidation in which
the Company is not the surviving entity, any transaction that results in the
acquisition of all or substantially all of the Company's outstanding Common
Stock by a single person or entity or by a group of persons and/or entities
acting in concert, or the sale or transfer of all or substantially all of the
Company's assets.

         2.2      "Affiliate" means each of the following: (a) any Subsidiary;
(b) any Parent; (c) any corporation, trade or business (including, without
limitation, a partnership or limited liability company) which is directly or
indirectly controlled 50% or more (whether by ownership of stock, assets or an
equivalent ownership interest or voting interest) by the Company; (d) any
corporation, trade or business (including, without limitation, a partnership or
limited liability company) which directly or indirectly controls 50% or more
(whether by ownership of stock, assets or an equivalent ownership interest or
voting interest) of the Company; and (e) any other entity in which the Company
or any of its Affiliates has a material equity interest and which is designated
as an "Affiliate" by resolution of the Committee; provided that the Common Stock
subject to any Award constitutes "service recipient stock" for purposes of
Section 409A of the Code or otherwise does not subject the Award to Section 409A
of the Code.

         2.3      "Appreciation Award" means any Award under this Plan of any
Stock Option, cash-settled Stock Appreciation Right or Other Stock-Based Award,
provided that such Other Stock-Based Award is based on the appreciation in value
of a share of Common Stock in excess of an amount equal to at least the Fair
Market Value of the Common Stock on the date such Other Stock-Based Award is
granted.
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         2.4      "Award" means any award under this Plan of any Stock Option,
Stock Appreciation Right, Restricted Stock, Performance Share, Other Stock-Based
Award or Performance-Based Cash Awards. All Awards shall be granted by,
confirmed by, and subject to the terms of, a written agreement executed by the
Company and the Participant.

         2.5      "Board" means the Board of Directors of the Company.

         2.6      "Cause" means with respect to a Participant's Termination of
Employment or Termination of Consultancy from and after the date hereof, the
following: (a) in the case where there is no employment agreement, consulting
agreement, change in control agreement or similar agreement in effect between
the Company or an Affiliate and the Participant at the time of the grant of the
Award (or where there is such an agreement but it does not define "cause" (or
words of like import)), termination due to: (i) a Participant's conviction of,
or plea of guilty or nolo contendere to, a felony; (ii) perpetration by a
Participant of an illegal act, or fraud which could cause significant economic
injury to the Company; (iii) continuing willful and deliberate failure by the
Participant to perform the Participant's duties in any material respect,
provided that the Participant is given notice and an opportunity to effectuate a
cure as determined by the Committee; or (iv) a Participant's willful misconduct
with regard to the Company that could have a material adverse effect on the
Company; or (b) in the case where there is an employment agreement, consulting
agreement, change in control agreement or similar agreement in effect between
the Company or an Affiliate and the Participant at the time of the grant of the
Award that defines "cause" (or words of like import), "cause" as defined under
such agreement; provided, however, that with regard to any agreement under which
the definition of "cause" only applies on occurrence of a change in control,
such definition of "cause" shall not apply until a change in control actually
takes place and then only with regard to a termination thereafter. With respect
to a Participant's Termination of Directorship, "cause" means an act or failure
to act that constitutes cause for removal of a director under applicable
Delaware law.

         2.7      "Change in Control" has the meaning set forth in Section 13.2.

         2.8      "Change in Control Price" has the meaning set forth in Section
13.1.

         2.9      "Code" means the Internal Revenue Code of 1986, as amended.
Any reference to any section of the Code shall also be a reference to any
successor provision and any Treasury Regulation promulgated thereunder.

         2.10     "Committee" means: (a) with respect to the application of this
Plan to Eligible Employees and Consultants, a committee or subcommittee of the
Board appointed from time to time by the Board, which committee or subcommittee
shall consist of two or more non-employee directors, each of whom shall be (i) a
"non-employee director" as defined in Rule 16b-3; (ii) to the extent required by
Section 162(m) of the Code, an "outside director" as defined under Section
162(m) of the Code; and (iii) an "independent director" as defined under NASD
Rule 4200(a)(15) or such other applicable stock exchange rule; and (b) with
respect to the application of this Plan to Non-Employee Directors, the Board. To
the extent that no Committee exists that has the authority to administer this

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Plan, the functions of the Committee shall be exercised by the Board. If for any
reason the appointed Committee does not meet the requirements of Rule 16b-3 or
Section 162(m) of the Code, such noncompliance shall not affect the validity of
Awards, grants, interpretations or other actions of the Committee.

         2.11     "Common Stock" means the Common Stock, $0.0001 par value per
share, of the Company.

         2.12     "Company" means Steven Madden, Ltd., a Delaware corporation,
and its successors by operation of law.

         2.13     "Consultant" means any natural person who provides bona fide
consulting or advisory services to the Company or its Affiliates pursuant to a
written agreement, which are not in connection with the offer and sale of
securities in a capital-raising transaction.

         2.14     "Disability" means with respect to a Participant's
Termination, a permanent and total disability as defined in Section 22(e)(3) of
the Code. A Disability shall only be deemed to occur at the time of the
determination by the Committee of the Disability. Notwithstanding the foregoing,
for Awards that are subject to Section 409A of the Code, Disability shall mean
that a Participant is disabled under Section 409A(a)(2)(C)(i) or (ii) of the
Code.

         2.15     "Effective Date" means the effective date of this Plan as
defined in Article XVII.

         2.16     "Eligible Employees" means each employee of the Company or an
Affiliate.

         2.17     "Exchange Act" means the Securities Exchange Act of 1934, as
amended. Any references to any section of the Exchange Act shall also be a
reference to any successor provision.

         2.18     "Fair Market Value" means, unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder, as of any
date and except as provided below, the last sales price reported for the Common
Stock on the applicable date: (a) as reported on the principal national
securities exchange in the United States on which it is then traded or The
Nasdaq Stock Market; or (b) if not traded on any such national securities
exchange or The Nasdaq Stock Market, as quoted on an automated quotation system
sponsored by the National Association of Securities Dealers, Inc. or if the
Common Stock shall not have been reported or quoted on such date, on the first
day prior thereto on which the Common Stock was reported or quoted. For purposes
of the grant of any Award, the applicable date shall be the trading day
immediately prior to the date on which the Award is granted. For purposes of the
exercise of any Award, the applicable date shall be the date a notice of
exercise is received by the Committee or, if not a day on which the applicable
market is open, the next day that it is open.

         2.19     "Family Member" means "family member" as defined in Section
A.1.(5) of the general instructions of Form S-8.

         2.20     "GAAP" has the meaning set forth in Section 11.2(c)(ii).

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         2.21     "Incentive Stock Option" means any Stock Option awarded to an
Eligible Employee of the Company, its Subsidiaries and its Parent (if any) under
this Plan intended to be and designated as an "Incentive Stock Option" within
the meaning of Section 422 of the Code.

         2.22     "Non-Employee Director" means a director of the Company who is
not an active employee of the Company or an Affiliate.

         2.23     "Non-Qualified Stock Option" means any Stock Option awarded
under this Plan that is not an Incentive Stock Option.

         2.24     "Other Stock-Based Award" means an Award under Article X of
this Plan that is valued in whole or in part by reference to, or is payable in
or otherwise based on, Common Stock, including, without limitation, a restricted
stock unit or an Award valued by reference to an Affiliate.

         2.25     "Parent" means any parent corporation of the Company within
the meaning of Section 424(e) of the Code.

         2.26     "Participant" means an Eligible Employee, Non-Employee
Director or Consultant to whom an Award has been granted pursuant to this Plan.

         2.27     "Performance-Based Cash Award" means a cash Award under
Article XI of this Plan that is payable or otherwise based on the attainment of
certain pre-established performance goals during a Performance Period.

         2.28     "Performance Period" means the duration of the period during
which receipt of an Award is subject to the satisfaction of performance
criteria, such period as determined by the Committee in its sole discretion.

         2.29     "Performance Share" means an Award made pursuant to Article IX
of this Plan of the right to receive Common Stock or cash of an equivalent value
at the end of a specified Performance Period.

         2.30     "Person" means any individual, corporation, partnership,
limited liability company, firm, joint venture, association, joint-stock
company, trust, incorporated organization, governmental or regulatory or other
entity.

         2.31     "Plan" means this Steven Madden, Ltd. 2006 Stock Incentive
Plan, as amended from time to time.

         2.32     "Reference Stock Option" has the meaning set forth in Section
7.1.

         2.33     "Restricted Stock" means an Award of shares of Common Stock
under this Plan that is subject to restrictions under Article VIII.

         2.34     "Restriction Period" has the meaning set forth in Subsection
8.3(a).

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         2.35     "Retirement" means a voluntary Termination of Employment at or
after age 65 or such earlier date after age 50 as may be approved by the
Committee, in its sole discretion at the time of grant or thereafter provided
that the exercise of such discretion does not make the applicable Award subject
to Section 409A of the Code, except that Retirement shall not include any
Termination with or without Cause. With respect to a Participant's Termination
of Directorship, Retirement means the failure to stand for reelection or the
failure to be reelected on or after a Participant has attained age 65 or, with
the consent of the Board, before age 65 but after age 50.

         2.36     "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provision.

         2.37     "Section 162(m) of the Code" means the exception for
performance-based compensation under Section 162(m) of the Code and any
applicable Treasury regulations thereunder.

         2.38     "Section 409A of the Code" means the nonqualified deferred
compensation rules under Section 409A of the Code and any applicable Treasury
regulations thereunder.

         2.39     "Securities Act" means the Securities Act of 1933, as amended
and all rules and regulations promulgated thereunder. Any reference to any
section of the Securities Act shall also be a reference to any successor
provision.

         2.40     "Stock Appreciation Right" means the right pursuant to an
Award granted under Article VII. A Tandem Stock Appreciation Right shall mean
the right to surrender to the Company all (or a portion) of a Stock Option in
exchange for cash or a number of shares of Common Stock (as determined by the
Committee, in its sole discretion, on the date of grant) equal to the difference
between (a) the Fair Market Value on the date such Stock Option (or such portion
thereof) is surrendered, of the Common Stock covered by such Stock Option (or
such portion thereof), and (b) the aggregate exercise price of such Stock Option
(or such portion thereof). A Non-Tandem Stock Appreciation Right shall mean the
right to receive cash or a number of shares of Common Stock (as determined by
the Committee, in its sole discretion, on the date of grant) equal to the
difference between (i) the Fair Market Value of a share of Common Stock on the
date such right is exercised, and (ii) the aggregate exercise price of such
right, otherwise than on surrender of a Stock Option.

         2.41     "Stock Option" or "Option" means any option to purchase shares
of Common Stock granted to Eligible Employees, Non-Employee Directors or
Consultants granted pursuant to Article VI.

         2.42     "Subsidiary" means any subsidiary corporation of the Company
within the meaning of Section 424(f) of the Code.

         2.43     "Ten Percent Stockholder" means a person owning stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, its Subsidiaries or its Parent.

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         2.44     "Termination" means a Termination of Consultancy, Termination
of Directorship or Termination of Employment, as applicable.

         2.45     "Termination of Consultancy" means: (a) that the Consultant is
no longer acting as a consultant to the Company or an Affiliate; or (b) when an
entity which is retaining a Participant as a Consultant ceases to be an
Affiliate unless the Participant otherwise is, or thereupon becomes, a
Consultant to the Company or another Affiliate at the time the entity ceases to
be an Affiliate. In the event that a Consultant becomes an Eligible Employee or
a Non-Employee Director upon the termination of his or her consultancy, unless
otherwise determined by the Committee, in its sole discretion, no Termination of
Consultancy shall be deemed to occur until such time as such Consultant is no
longer a Consultant, an Eligible Employee or a Non-Employee Director.
Notwithstanding the foregoing, the Committee may, in its sole discretion,
otherwise define Termination of Consultancy in the Award agreement or, if no
rights of a Participant are reduced, may otherwise define Termination of
Consultancy thereafter.

         2.46     "Termination of Directorship" means that the Non-Employee
Director has ceased to be a director of the Company; except that if a
Non-Employee Director becomes an Eligible Employee or a Consultant upon the
termination of his or her directorship, his or her ceasing to be a director of
the Company shall not be treated as a Termination of Directorship unless and
until the Participant has a Termination of Employment or Termination of
Consultancy, as the case may be.

         2.47     "Termination of Employment" means: (a) a termination of
employment (for reasons other than a military or personal leave of absence
granted by the Company) of a Participant from the Company and its Affiliates; or
(b) when an entity which is employing a Participant ceases to be an Affiliate,
unless the Participant otherwise is, or thereupon becomes, employed by the
Company or another Affiliate at the time the entity ceases to be an Affiliate.
In the event that an Eligible Employee becomes a Consultant or a Non-Employee
Director upon the termination of his or her employment, unless otherwise
determined by the Committee, in its sole discretion, no Termination of
Employment shall be deemed to occur until such time as such Eligible Employee is
no longer an Eligible Employee, a Consultant or a Non-Employee Director.
Notwithstanding the foregoing, the Committee may, in its sole discretion,
otherwise define Termination of Employment in the Award agreement or, if no
rights of a Participant are reduced, may otherwise define Termination of
Employment thereafter.

         2.48     "Transfer" means: (a) when used as a noun, any direct or
indirect transfer, sale, assignment, pledge, hypothecation, encumbrance or other
disposition (including the issuance of equity in a Person), whether for value or
no value and whether voluntary or involuntary (including by operation of law),
and (b) when used as a verb, to directly or indirectly transfer, sell, assign,
pledge, encumber, charge, hypothecate or otherwise dispose of (including the
issuance of equity in a Person) whether for value or for no value and whether
voluntarily or involuntarily (including by operation of law). "Transferred" and
"Transferrable" shall have a correlative meaning.

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                                   ARTICLE III

                                 ADMINISTRATION

         3.1      The Committee. The Plan shall be administered and interpreted
by the Committee.

         3.2      Grants of Awards. The Committee shall have full authority to
grant, pursuant to the terms of this Plan, to Eligible Employees, Consultants
and Non-Employee Directors: (i) Stock Options, (ii) Stock Appreciation Rights,
(iii) Restricted Stock, (iv) Performance Shares; (v) Other Stock-Based Awards,
and (vi) Performance-Based Cash Awards. In particular, the Committee shall have
the authority:

                  (a)      to select the Eligible Employees, Consultants and
                           Non-Employee Directors to whom Awards may from time
                           to time be granted hereunder;

                  (b)      to determine whether and to what extent Awards, or
                           any combination thereof, are to be granted hereunder
                           to one or more Eligible Employees, Consultants or
                           Non-Employee Directors;

                  (c)      to determine the number of shares of Common Stock to
                           be covered by each Award granted hereunder;

                  (d)      to determine the terms and conditions, not
                           inconsistent with the terms of this Plan, of any
                           Award granted hereunder (including, but not limited
                           to, the exercise or purchase price (if any), any
                           restriction or limitation, any vesting schedule or
                           acceleration thereof, or any forfeiture restrictions
                           or waiver thereof, regarding any Award and the shares
                           of Common Stock relating thereto, based on such
                           factors, if any, as the Committee shall determine, in
                           its sole discretion);

                  (e)      to determine whether, to what extent and under what
                           circumstances grants of Options and other Awards
                           under this Plan are to operate on a tandem basis
                           and/or in conjunction with or apart from other awards
                           made by the Company outside of this Plan;

                  (f)      to determine whether and under what circumstances a
                           Stock Option may be settled in cash, Common Stock
                           and/or Restricted Stock under Section 6.3(d);

                  (g)      to determine whether, to what extent and under what
                           circumstances Common Stock and other amounts payable
                           with respect to an Award under this Plan shall be
                           deferred either automatically or at the election of
                           the Participant in any case, subject to, and in
                           accordance with, Section 409A of the Code;

                  (h)      to determine whether a Stock Option is an Incentive
                           Stock Option or Non-Qualified Stock Option; and

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                  (i)      to determine whether to require a Participant, as a
                           condition of the granting of any Award, to not sell
                           or otherwise dispose of shares acquired pursuant to
                           the exercise of an Award for a period of time as
                           determined by the Committee, in its sole discretion,
                           following the date of the acquisition of such Award.

         3.3      Guidelines. Subject to Article XIV hereof, the Committee
shall, in its sole discretion, have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing this Plan and
perform all acts, including the delegation of its responsibilities (to the
extent permitted by applicable law and applicable stock exchange rules), as it
shall, from time to time, deem advisable; to construe and interpret the terms
and provisions of this Plan and any Award issued under this Plan (and any
agreements relating thereto); and to otherwise supervise the administration of
this Plan. The Committee may, in its sole discretion, correct any defect, supply
any omission or reconcile any inconsistency in this Plan or in any agreement
relating thereto in the manner and to the extent it shall deem necessary to
effectuate the purpose and intent of this Plan. The Committee may, in its sole
discretion, adopt special guidelines and provisions for persons who are residing
in or employed in, or subject to, the taxes of, any domestic or foreign
jurisdictions to comply with applicable tax and securities laws of such domestic
or foreign jurisdictions. This Plan is intended to comply with the applicable
requirements of Rule 16b-3 and with respect to Awards intended to be
"performance-based," the applicable provisions of Section 162(m) of the Code,
and this Plan shall be limited, construed and interpreted in a manner so as to
comply therewith.

         3.4      Decisions Final. Any decision, interpretation or other action
made or taken in good faith by or at the direction of the Company, the Board or
the Committee (or any of its members) arising out of or in connection with this
Plan shall be within the absolute discretion of all and each of them, as the
case may be, and shall be final, binding and conclusive on the Company and all
employees and Participants and their respective heirs, executors,
administrators, successors and assigns.

         3.5      Procedures. If the Committee is appointed, the Board shall
designate one of the members of the Committee as chairman and the Committee
shall hold meetings, subject to the By-Laws of the Company, at such times and
places as it shall deem advisable, including, without limitation, by telephone
conference or by written consent to the extent permitted by applicable law. A
majority of the Committee members shall constitute a quorum. All determinations
of the Committee shall be made by a majority of its members. Any decision or
determination reduced to writing and signed by all the Committee members in
accordance with the By-Laws of the Company shall be fully effective as if it had
been made by a vote at a meeting duly called and held. The Committee shall keep
minutes of its meetings and shall make such rules and regulations for the
conduct of its business as it shall deem advisable.

         3.6      Designation of Consultants/Liability.

                  (a)      The Committee may, in its sole discretion, designate
                           employees of the Company and professional advisors to
                           assist the Committee in the administration of this
                           Plan and (to the extent permitted by applicable law
                           and applicable exchange rules) may grant authority to
                           officers to grant Awards and/or execute agreements or
                           other documents on behalf of the Committee.

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                  (b)      The Committee may, in its sole discretion, employ
                           such legal counsel, consultants and agents as it may
                           deem desirable for the administration of this Plan
                           and may rely upon any opinion received from any such
                           counsel or consultant and any computation received
                           from any such consultant or agent. Expenses incurred
                           by the Committee or the Board in the engagement of
                           any such counsel, consultant or agent shall be paid
                           by the Company. The Committee, its members and any
                           person designated pursuant to sub-section (a) above
                           shall not be liable for any action or determination
                           made in good faith with respect to this Plan. To the
                           maximum extent permitted by applicable law, no
                           officer of the Company or member or former member of
                           the Committee or of the Board shall be liable for any
                           action or determination made in good faith with
                           respect to this Plan or any Award granted under it.

         3.7      Indemnification. To the maximum extent permitted by applicable
law and the Certificate of Incorporation and By-Laws of the Company and to the
extent not covered by insurance directly insuring such person, each officer or
employee of the Company or any Affiliate and member or former member of the
Committee or the Board shall be indemnified and held harmless by the Company
against any cost or expense (including reasonable fees of counsel reasonably
acceptable to the Committee) or liability (including any sum paid in settlement
of a claim with the approval of the Committee), and advanced amounts necessary
to pay the foregoing at the earliest time and to the fullest extent permitted,
arising out of any act or omission to act in connection with the administration
of this Plan, except to the extent arising out of such officer's, employee's,
member's or former member's fraud. Such indemnification shall be in addition to
any rights of indemnification the officers, employees, directors or members or
former officers, directors or members may have under applicable law or under the
Certificate of Incorporation or By-Laws of the Company or any Affiliate.
Notwithstanding anything else herein, this indemnification will not apply to the
actions or determinations made by an individual with regard to Awards granted to
him or her under this Plan.

                                   ARTICLE IV

                                SHARE LIMITATION

         4.1      Shares.

                  (a)      General Limitations. The aggregate number of shares
                           of Common Stock that may be issued or used for
                           reference purposes or with respect to which Awards
                           may be granted under this Plan shall not exceed
                           800,000 shares (subject to any increase or decrease
                           pursuant to Section 4.2), which may be either
                           authorized and unissued Common Stock or Common Stock
                           held in or acquired for the treasury of the Company
                           or both; provided, however, that only 420,000 shares
                           of the 800,000 shares of Common Stock available
                           hereunder may be issued or used for Awards that are

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                           not Appreciation Awards. With respect to Stock
                           Appreciation Rights settled in Common Stock, only the
                           number shares of Common Stock delivered to a
                           Participant (based on the difference between Fair
                           Market Value of the shares of Common Stock subject to
                           such Stock Appreciation Right on the date such Stock
                           Appreciation Right is exercised and the Fair Market
                           Value of the shares of Common Stock subject to such
                           Stock Appreciation Right on the date such Stock
                           Appreciation Right was awarded) shall count against
                           the aggregate and individual share limitations set
                           forth under Sections 4.1(a) and (b). If any Award
                           granted under this Plan expires, terminates, is
                           canceled or is forfeited for any reason, the number
                           of shares of Common Stock underlying any such Award
                           shall again be available for the purpose of Awards
                           under the Plan, as provided in this Section 4.1(a).
                           If a Tandem Stock Appreciation Right or a Limited
                           Stock Appreciation Right is granted in tandem with an
                           Option, such grant shall only apply once against the
                           maximum number of shares of Common Stock which may be
                           issued under this Plan. Notwithstanding anything
                           herein to the contrary, other than with respect to
                           Incentive Stock Options, any share of Common Stock
                           subject to an Award that again becomes available for
                           grant pursuant to this Section 4.1(a) shall be added
                           back to the aggregate maximum limit.

                  (b)      Individual Participant Limitations.

                                    (i)      The maximum number of shares of
                           Common Stock subject to any Award of Stock Options,
                           Stock Appreciation Rights or shares of Restricted
                           Stock for which the grant of such Award or the lapse
                           of the relevant Restriction Period is subject to the
                           attainment of Performance Goals in accordance with
                           Section 8.3(a)(ii) herein which may be granted under
                           this Plan during any fiscal year of the Company to
                           each Eligible Employee or Consultant shall be 400,000
                           shares per type of Award (which shall be subject to
                           any further increase or decrease pursuant to Section
                           4.2), provided that the maximum number of shares of
                           Common Stock for all types of Awards does not exceed
                           500,000 (which shall be subject to any further
                           increase or decrease pursuant to Section 4.2) with
                           respect to any fiscal year of the Company. If a
                           Tandem Stock Appreciation Right is granted or a
                           Limited Stock Appreciation Right is granted in tandem
                           with a Stock Option, it shall apply against the
                           Eligible Employee's or Consultant's individual share
                           limitations for both Stock Appreciation Rights and
                           Stock Options.

                                    (ii)     The maximum number of shares of
                           Common Stock subject to any Award of Stock Options
                           (other than Incentive Stock Options), Stock
                           Appreciation Rights, Performance Shares or Other
                           Stock-Based Awards which may be granted under this
                           Plan during any fiscal year of the Company to each
                           Non-Employee Director shall be 100,000 shares per
                           type of Award (which shall be subject to any further
                           increase or decrease pursuant to Section 4.2),
                           provided that the maximum number of shares of Common

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                           Stock for all types of Awards does not exceed 200,000
                           (which shall be subject to any further increase or
                           decrease pursuant to Section 4.2) with respect to any
                           fiscal year of the Company. If a Tandem Stock
                           Appreciation Right is granted or a Limited Stock
                           Appreciation Right is granted in tandem with a Stock
                           Option, it shall apply against the Non-Employee
                           Director's individual share limitations for both
                           Stock Appreciation Rights and Stock Options.

                                    (iii)    There are no annual individual
                           Eligible Employee or Consultant share limitations on
                           Restricted Stock for which the grant of such Award or
                           the lapse of the relevant Restriction Period is not
                           subject to attainment of Performance Goals in
                           accordance with Section 8.3(a)(ii) hereof.

                                    (iv)     The maximum number of shares of
                           Common Stock subject to any Award of Performance
                           Shares which may be granted under this Plan during
                           any fiscal year of the Company to each Eligible
                           Employee or Consultant shall be 200,000 (which shall
                           be subject to any further increase or decrease
                           pursuant to Section 4.2) with respect to any fiscal
                           year of the Company. Each Performance Share shall be
                           referenced to one share of Common Stock and shall be
                           charged against the available shares under this Plan
                           at the time the unit value measurement is converted
                           to a referenced number of shares of Common Stock in
                           accordance with Section 9.1.

                                    (v)      The maximum payment under any
                           Performance-Based Cash Award payable with respect to
                           any fiscal year of the Company and for which the
                           grant of such Award is subject to the attainment of
                           Performance Goals in accordance with Section 11.2(c)
                           herein which may be granted under this Plan with
                           respect to any fiscal year of the Company to each
                           Eligible Employee or Consultant shall be $10,000,000.

                                    (vi)     The individual Participant
                           limitations set forth in this Section 4.1(b) shall be
                           cumulative; that is, to the extent that shares of
                           Common Stock for which Awards are permitted to be
                           granted to an Eligible Employee or a Consultant
                           during a fiscal year are not covered by an Award to
                           such Eligible Employee or Consultant in a fiscal
                           year, the number of shares of Common Stock available
                           for Awards to such Eligible Employee or Consultant
                           shall automatically increase in the subsequent fiscal
                           years during the term of the Plan until used.

         4.2      Changes.

                  (a)      The existence of this Plan and the Awards granted
                           hereunder shall not affect in any way the right or
                           power of the Board or the stockholders of the Company
                           to make or authorize (i) any adjustment,
                           recapitalization, reorganization or other change in
                           the Company's capital structure or its business, (ii)

                                       11
<PAGE>

                           any merger or consolidation of the Company or any
                           Affiliate, (iii) any issuance of bonds, debentures,
                           preferred or prior preference stock ahead of or
                           affecting the Common Stock, (iv) the dissolution or
                           liquidation of the Company or any Affiliate, (v) any
                           sale or transfer of all or part of the assets or
                           business of the Company or any Affiliate or (vi) any
                           other corporate act or proceeding.

                  (b)      Subject to the provisions of Section 4.2(d), in the
                           event of any such change in the capital structure or
                           business of the Company by reason of any stock split,
                           reverse stock split, stock dividend, extraordinary
                           dividend (whether cash or stock), combination or
                           reclassification of shares, recapitalization, merger,
                           consolidation, spin-off, reorganization, partial or
                           complete liquidation, issuance of rights or warrants
                           to purchase any Common Stock or securities
                           convertible into Common Stock, any sale or transfer
                           of all or part of the Company's assets or business,
                           or any other corporate transaction or event having an
                           effect similar to any of the foregoing and effected
                           without receipt of consideration by the Company and
                           the Committee determines in its sole discretion that
                           an adjustment is necessary or appropriate under the
                           Plan to prevent substantial dilution or enlargement
                           of the rights granted to, or available for,
                           Participants under the Plan, then the aggregate
                           number and kind of shares that thereafter may be
                           issued under this Plan, the number and kind of shares
                           or other property (including cash) to be issued upon
                           exercise of an outstanding Award or under other
                           Awards granted under this Plan and the purchase price
                           thereof shall be appropriately adjusted consistent
                           with such change in such manner as the Committee may,
                           in its sole discretion, deem equitable to prevent
                           substantial dilution or enlargement of the rights
                           granted to, or available for, Participants under this
                           Plan, and any such adjustment determined by the
                           Committee shall be final, binding and conclusive on
                           the Company and all Participants and employees and
                           their respective heirs, executors, administrators,
                           successors and assigns. In connection with any event
                           described in this paragraph, the Committee may
                           provide, in its sole discretion, for the cancellation
                           of any outstanding Awards and payment in cash or
                           other property in exchange therefor. Except as
                           provided in this Section 4.2 or in the applicable
                           Award agreement, a Participant shall have no rights
                           by reason of any issuance by the Company of any class
                           or securities convertible into stock of any class,
                           any subdivision or consolidation of shares of stock
                           of any class, the payment of any stock dividend, any
                           other increase or decrease in the number of shares of
                           stock of any class, any sale or transfer of all or
                           part of the Company's assets or business or any other
                           change affecting the Company's capital structure or
                           business.

                  (c)      Fractional shares of Common Stock resulting from any
                           adjustment in Awards pursuant to Section 4.2(a) or
                           (b) shall be aggregated until, and eliminated at, the
                           time of exercise by rounding-down for fractions less
                           than one-half and rounding-up for fractions equal to

                                       12
<PAGE>

                           or greater than one-half. No cash settlements shall
                           be made with respect to fractional shares eliminated
                           by rounding. Notice of any adjustment shall be given
                           by the Committee to each Participant whose Award has
                           been adjusted and such adjustment (whether or not
                           such notice is given) shall be effective and binding
                           for all purposes of this Plan.

                  (d)      In the event of an Acquisition Event, the Committee
                           may, in its sole discretion, terminate all
                           outstanding and unexercised Stock Options or Stock
                           Appreciation Rights or any Other Stock Based Award
                           that provides for a Participant elected exercise
                           effective as of the date of the Acquisition Event, by
                           delivering notice of termination to each Participant
                           at least 20 days prior to the date of consummation of
                           the Acquisition Event, in which case during the
                           period from the date on which such notice of
                           termination is delivered to the consummation of the
                           Acquisition Event, each such Participant shall have
                           the right to exercise in full all of his or her Stock
                           Options or Stock Appreciation Rights that are then
                           outstanding (without regard to any limitations on
                           exercisability otherwise contained in the Award
                           agreements), but any such exercise shall be
                           contingent on the occurrence of the Acquisition
                           Event, and, provided that, if the Acquisition Event
                           does not take place within a specified period after
                           giving such notice for any reason whatsoever, the
                           notice and exercise pursuant thereto shall be null
                           and void.

                  If an Acquisition Event occurs but the Committee does not
                  terminate the outstanding Awards pursuant to this Section
                  4.2(d), then the provisions of Section 4.2(b) and Article XIII
                  shall apply.

         4.3      Minimum Purchase Price. Notwithstanding any provision of this
Plan to the contrary, if authorized but previously unissued shares of Common
Stock are issued under this Plan, such shares shall not be issued for a
consideration that is less than as permitted under applicable law.

                                    ARTICLE V

                  ELIGIBILITY - GENERAL REQUIREMENTS FOR AWARDS

         5.1      General Eligibility. All Eligible Employees, Consultants,
Non-Employee Directors and prospective employees and consultants are eligible to
be granted Awards, subject to the terms and conditions of this Plan. Eligibility
for the grant of Awards and actual participation in this Plan shall be
determined by the Committee in its sole discretion.

         5.2      Incentive Stock Options. Notwithstanding anything herein to
the contrary, only Eligible Employees of the Company, its Subsidiaries and its
Parent (if any) are eligible to be granted Incentive Stock Options under this
Plan. Eligibility for the grant of an Incentive Stock Option and actual
participation in this Plan shall be determined by the Committee in its sole
discretion.

                                       13
<PAGE>

         5.3      General Requirement. The vesting and exercise of Awards
granted to a prospective employee or consultant are conditioned upon such
individual actually becoming an Eligible Employee or Consultant.

                                   ARTICLE VI

                                  STOCK OPTIONS

         6.1      Options. Stock Options may be granted alone or in addition to
other Awards granted under this Plan. Each Stock Option granted under this Plan
shall be of one of two types: (a) an Incentive Stock Option or (b) a
Non-Qualified Stock Option.

         6.2      Grants. The Committee shall, in its sole discretion, have the
authority to grant to any Eligible Employee (subject to Section 5.2) Incentive
Stock Options, Non-Qualified Stock Options, or both types of Stock Options. The
Committee shall, in its sole discretion, have the authority to grant any
Consultant or Non-Employee Director Non-Qualified Stock Options. To the extent
that any Stock Option does not qualify as an Incentive Stock Option (whether
because of its provisions or the time or manner of its exercise or otherwise),
such Stock Option or the portion thereof which does not qualify shall constitute
a separate Non-Qualified Stock Option.

         6.3      Terms of Options. Options granted under this Plan shall be
subject to the following terms and conditions and shall be in such form and
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee, in its sole discretion, shall deem desirable:

                  (a)      Exercise Price. The exercise price per share of
                           Common Stock subject to a Stock Option shall be
                           determined by the Committee at the time of grant,
                           provided that the per share exercise price of a Stock
                           Option shall not be less than 100% (or, in the case
                           of an Incentive Stock Option granted to a Ten Percent
                           Stockholder, 110%) of the Fair Market Value of the
                           Common Stock at the time of grant.

                  (b)      Stock Option Term. The term of each Stock Option
                           shall be fixed by the Committee, provided that no
                           Stock Option shall be exercisable more than 7 years
                           after the date the Option is granted; and provided
                           further that the term of an Incentive Stock Option
                           granted to a Ten Percent Stockholder shall not exceed
                           five years.

                  (c)      Exercisability. Stock Options shall be exercisable at
                           such time or times and subject to such terms and
                           conditions or as shall be determined by the Committee
                           at grant. If the Committee provides, in its
                           discretion, that any Stock Option is exercisable
                           subject to certain limitations (including, without
                           limitation, that such Stock Option is exercisable
                           only in installments or within certain time periods),
                           the Committee may waive such limitations on the
                           exercisability at any time at or after grant in whole
                           or in part (including, without limitation, waiver of
                           the installment exercise provisions or acceleration
                           of the time at which such Stock Option may be

                                       14
<PAGE>

                           exercised), based on such factors, if any, as the
                           Committee shall determine, in its sole discretion. In
                           the event that a written employment agreement between
                           the Company and a Participant provides for a vesting
                           schedule that is more favorable than the vesting
                           schedule provided in the form of Award Agreement, the
                           vesting schedule in such employment agreement shall
                           govern, provided that such agreement is in effect on
                           the date of grant and applicable to the specific
                           Award.

                  (d)      Method of Exercise. Subject to whatever installment
                           exercise and waiting period provisions apply under
                           subsection (c) above, to the extent vested, Stock
                           Options may be exercised in whole or in part at any
                           time during the Option term, by giving written notice
                           of exercise to the Company specifying the number of
                           shares of Common Stock to be purchased. Such notice
                           shall be accompanied by payment in full of the
                           purchase price as follows: (i) in cash or by check,
                           bank draft or money order payable to the order of the
                           Company; (ii) solely to the extent permitted by
                           applicable law, if the Common Stock is traded on a
                           national securities exchange, the Nasdaq Stock Market
                           or quoted on a national quotation system sponsored by
                           the National Association of Securities Dealers, and
                           the Committee authorizes, through a procedure whereby
                           the Participant delivers irrevocable instructions to
                           a broker reasonably acceptable to the Committee to
                           deliver promptly to the Company an amount equal to
                           the purchase price; or (iii) on such other terms and
                           conditions as may be acceptable to the Committee
                           (including, without limitation, the relinquishment of
                           Stock Options or by payment in full or in part in the
                           form of Common Stock owned by the Participant based
                           on the Fair Market Value of the Common Stock on the
                           payment date as determined by the Committee, in its
                           sole discretion). No shares of Common Stock shall be
                           issued until payment therefor, as provided herein,
                           has been made or provided for.

                  (e)      Non-Transferability of Options. No Stock Option shall
                           be Transferable by the Participant otherwise than by
                           will or by the laws of descent and distribution, and
                           all Stock Options shall be exercisable, during the
                           Participant's lifetime, only by the Participant.
                           Notwithstanding the foregoing, the Committee may
                           determine, in its sole discretion, at the time of
                           grant or thereafter that a Non-Qualified Stock Option
                           that is otherwise not Transferable pursuant to this
                           Section is Transferable to a Family Member in whole
                           or in part and in such circumstances, and under such
                           conditions, as determined by the Committee, in its
                           sole discretion. A Non-Qualified Stock Option that is
                           Transferred to a Family Member pursuant to the
                           preceding sentence (i) may not be subsequently
                           Transferred otherwise than by will or by the laws of
                           descent and distribution and (ii) remains subject to
                           the terms of this Plan and the applicable Award
                           agreement. Any shares of Common Stock acquired upon
                           the exercise of a Non-Qualified Stock Option by a
                           permissible transferee of a Non-Qualified Stock
                           Option or a permissible transferee pursuant to a

                                       15
<PAGE>

                           Transfer after the exercise of the Non-Qualified
                           Stock Option shall be subject to the terms of this
                           Plan and the applicable Award agreement.

                  (f)      Incentive Stock Option Limitations. To the extent
                           that the aggregate Fair Market Value (determined as
                           of the time of grant) of the Common Stock with
                           respect to which Incentive Stock Options are
                           exercisable for the first time by an Eligible
                           Employee during any calendar year under this Plan
                           and/or any other stock option plan of the Company,
                           any Subsidiary or any Parent exceeds $100,000, such
                           Options shall be treated as Non-Qualified Stock
                           Options. Should any provision of this Plan not be
                           necessary in order for the Stock Options to qualify
                           as Incentive Stock Options, or should any additional
                           provisions be required, the Committee may, in its
                           sole discretion, amend this Plan accordingly, without
                           the necessity of obtaining the approval of the
                           stockholders of the Company.

                  (g)      Form, Modification, Extension and Renewal of Stock
                           Options. Subject to the terms and conditions and
                           within the limitations of this Plan, Stock Options
                           shall be evidenced by such form of agreement or grant
                           as is approved by the Committee, and the Committee
                           may, in its sole discretion (i) modify, extend or
                           renew outstanding Stock Options granted under this
                           Plan (provided that the rights of a Participant are
                           not reduced without his or her consent and provided
                           further that such action does not subject the Stock
                           Options to Section 409A of the Code), and (ii) accept
                           the surrender of outstanding Stock Options (up to the
                           extent not theretofore exercised) and authorize the
                           granting of new Stock Options in substitution
                           therefor (to the extent not theretofore exercised).
                           Notwithstanding the foregoing, an outstanding Option
                           may not be modified to reduce the exercise price
                           thereof nor may a new Option at a lower price be
                           substituted for a surrendered Option (other than
                           adjustments or substitutions in accordance with
                           Section 4.2), unless such action is approved by the
                           stockholders of the Company.

                  (h)      Early Exercise. The Committee may provide that a
                           Stock Option include a provision whereby the
                           Participant may elect at any time before the
                           Participant's Termination to exercise the Stock
                           Option as to any part or all of the shares of Common
                           Stock subject to the Stock Option prior to the full
                           vesting of the Stock Option and such shares shall be
                           subject to the provisions of Article VIII and treated
                           as Restricted Stock. Any unvested shares of Common
                           Stock so purchased may be subject to a repurchase
                           option in favor of the Company or to any other
                           restriction the Committee determines to be
                           appropriate.

                  (i)      Other Terms and Conditions. Stock Options may contain
                           such other provisions, which shall not be
                           inconsistent with any of the terms of this Plan, as
                           the Committee shall, in its sole discretion, deem
                           appropriate.

                                       16
<PAGE>

                                   ARTICLE VII

                            STOCK APPRECIATION RIGHTS

         7.1      Tandem Stock Appreciation Rights. Stock Appreciation Rights
may be granted in conjunction with all or part of any Stock Option (a "Reference
Stock Option") granted under this Plan ("Tandem Stock Appreciation Rights"). In
the case of a Non-Qualified Stock Option, such rights may be granted either at
or after the time of the grant of such Reference Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of the grant
of such Reference Stock Option.

         7.2      Terms and Conditions of Tandem Stock Appreciation Rights.
Tandem Stock Appreciation Rights granted hereunder shall be subject to such
terms and conditions, not inconsistent with the provisions of this Plan, as
shall be determined from time to time by the Committee in its sole discretion,
and the following:

                  (a)      Exercise Price. The exercise price per share of
                           Common Stock subject to a Tandem Stock Appreciation
                           Right shall be determined by the Committee at the
                           time of grant, provided that the per share exercise
                           price of a Tandem Stock Appreciation Right shall not
                           be less than 100% of the Fair Market Value of the
                           Common Stock at the time of grant.

                  (b)      Term. A Tandem Stock Appreciation Right or applicable
                           portion thereof granted with respect to a Reference
                           Stock Option shall terminate and no longer be
                           exercisable upon the termination or exercise of the
                           Reference Stock Option, except that, unless otherwise
                           determined by the Committee, in its sole discretion,
                           at the time of grant, a Tandem Stock Appreciation
                           Right granted with respect to less than the full
                           number of shares covered by the Reference Stock
                           Option shall not be reduced until and then only to
                           the extent the exercise or termination of the
                           Reference Stock Option causes the number of shares
                           covered by the Tandem Stock Appreciation Right to
                           exceed the number of shares remaining available and
                           unexercised under the Reference Stock Option.

                  (c)      Exercisability. Tandem Stock Appreciation Rights
                           shall be exercisable only at such time or times and
                           to the extent that the Reference Stock Options to
                           which they relate shall be exercisable in accordance
                           with the provisions of Article VI, and shall be
                           subject to the provisions of Section 6.3(c).

                  (d)      Method of Exercise. A Tandem Stock Appreciation Right
                           may be exercised by the Participant by surrendering
                           the applicable portion of the Reference Stock Option.
                           Upon such exercise and surrender, the Participant
                           shall be entitled to receive an amount determined in
                           the manner prescribed in this Section 7.2. Stock
                           Options which have been so surrendered, in whole or
                           in part, shall no longer be exercisable to the extent
                           the related Tandem Stock Appreciation Rights have
                           been exercised.

                                       17
<PAGE>

                  (e)      Payment. Upon the exercise of a Tandem Stock
                           Appreciation Right, a Participant shall be entitled
                           to receive up to, but no more than, an amount in cash
                           or a number of shares of Common Stock (as determined
                           by the Committee, in its sole discretion, on the date
                           of grant) equal in value to the excess of the Fair
                           Market Value of one share of Common Stock over the
                           Option exercise price per share specified in the
                           Reference Stock Option agreement, multiplied by the
                           number of shares in respect of which the Tandem Stock
                           Appreciation Right shall have been exercised.

                  (f)      Deemed Exercise of Reference Stock Option. Upon the
                           exercise of a Tandem Stock Appreciation Right, the
                           Reference Stock Option or part thereof to which such
                           Stock Appreciation Right is related shall be deemed
                           to have been exercised for the purpose of the
                           limitation set forth in Article IV of the Plan on the
                           number of shares of Common Stock to be issued under
                           the Plan.

                  (g)      Non-Transferability. Tandem Stock Appreciation Rights
                           shall be Transferable only when and to the extent
                           that the underlying Stock Option would be
                           Transferable under Section 6.3(e) of the Plan.

         7.3      Non-Tandem Stock Appreciation Rights. Non-Tandem Stock
Appreciation Rights may also be granted without reference to any Stock Options
granted under this Plan.

         7.4      Terms and Conditions of Non-Tandem Stock Appreciation Rights.
Non-Tandem Stock Appreciation Rights granted hereunder shall be subject to such
terms and conditions, not inconsistent with the provisions of this Plan, as
shall be determined from time to time by the Committee in its sole discretion,
and the following:

                  (a)      Exercise Price. The exercise price per share of
                           Common Stock subject to a Non-Tandem Stock
                           Appreciation Right shall be determined by the
                           Committee at the time of grant, provided that the per
                           share exercise price of a Non-Tandem Stock
                           Appreciation Right shall not be less than 100% of the
                           Fair Market Value of the Common Stock at the time of
                           grant.

                  (b)      Term. The term of each Non-Tandem Stock Appreciation
                           Right shall be fixed by the Committee, but shall not
                           be greater than 10 years after the date the right is
                           granted.

                  (c)      Exercisability. Non-Tandem Stock Appreciation Rights
                           shall be exercisable at such time or times and
                           subject to such terms and conditions as shall be
                           determined by the Committee at grant. If the
                           Committee provides, in its discretion, that any such
                           right is exercisable subject to certain limitations
                           (including, without limitation, that it is
                           exercisable only in installments or within certain
                           time periods), the Committee may waive such
                           limitations on the exercisability at any time at or
                           after grant in whole or in part (including, without
                           limitation, waiver of the installment exercise
                           provisions or acceleration of the time at which such

                                       18
<PAGE>

                           right may be exercised), based on such factors, if
                           any, as the Committee shall determine, in its sole
                           discretion. In the event that a written employment
                           agreement between the Company and a Participant
                           provides for a vesting schedule that is more
                           favorable than the vesting schedule provided in the
                           form of Award Agreement, the vesting schedule in such
                           employment agreement shall govern, provided that such
                           agreement is in effect on the date of grant and
                           applicable to the specific Award.

                  (d)      Method of Exercise. Subject to whatever installment
                           exercise and waiting period provisions apply under
                           subsection (c) above, Non-Tandem Stock Appreciation
                           Rights may be exercised in whole or in part at any
                           time in accordance with the applicable Award
                           agreement, by giving written notice of exercise to
                           the Company specifying the number of Non-Tandem Stock
                           Appreciation Rights to be exercised.

                  (e)      Payment. Upon the exercise of a Non-Tandem Stock
                           Appreciation Right a Participant shall be entitled to
                           receive, for each right exercised, up to, but no more
                           than, an amount in cash or a number of shares of
                           Common Stock (as determined by the Committee, in its
                           sole discretion, on the date of grant) equal in value
                           to the excess of the Fair Market Value of one share
                           of Common Stock on the date the right is exercised
                           over the Fair Market Value of one share of Common
                           Stock on the date the right was awarded to the
                           Participant.

                  (f)      Non-Transferability. No Non-Tandem Stock Appreciation
                           Rights shall be Transferable by the Participant
                           otherwise than by will or by the laws of descent and
                           distribution, and all such rights shall be
                           exercisable, during the Participant's lifetime, only
                           by the Participant.

         7.5      Limited Stock Appreciation Rights. The Committee may, in its
sole discretion, grant Tandem and Non-Tandem Stock Appreciation Rights either as
a general Stock Appreciation Right or as a Limited Stock Appreciation Right.
Limited Stock Appreciation Rights may be exercised only upon the occurrence of a
Change in Control or such other event as the Committee may, in its sole
discretion, designate at the time of grant or thereafter. Upon the exercise of
Limited Stock Appreciation Rights, except as otherwise provided in an Award
agreement, the Participant shall receive in cash or Common Stock, as determined
by the Committee, an amount equal to the amount (a) set forth in Section 7.2(e)
with respect to Tandem Stock Appreciation Rights, or (b) set forth in Section
7.4(e) with respect to Non-Tandem Stock Appreciation Rights, as applicable.

                                  ARTICLE VIII

                                RESTRICTED STOCK

         8.1      Awards of Restricted Stock. Shares of Restricted Stock may be
issued either alone or in addition to other Awards granted under the Plan. The
Committee shall, in its sole discretion, determine the Eligible Employees,
Consultants and Non-Employee Directors, to whom, and the time or times at which,

                                       19
<PAGE>

grants of Restricted Stock shall be made, the number of shares to be awarded,
the price (if any) to be paid by the Participant (subject to Section 8.2), the
time or times within which such Awards may be subject to forfeiture, the vesting
schedule and rights to acceleration thereof, and all other terms and conditions
of the Awards. The Committee may condition the grant or vesting of Restricted
Stock upon the attainment of specified performance targets (including, the
Performance Goals specified in Exhibit A attached hereto) or such other factors
as the Committee may determine, in its sole discretion, including to comply with
the requirements of Section 162(m) of the Code.

         8.2      Awards and Certificates. Eligible Employees, Consultants and
Non-Employee Directors selected to receive Restricted Stock shall not have any
rights with respect to such Award, unless and until such Participant has
delivered a fully executed copy of the agreement evidencing the Award to the
Company and has otherwise complied with the applicable terms and conditions of
such Award. Further, such Award shall be subject to the following conditions:

                  (a)      Purchase Price. The purchase price of Restricted
                           Stock shall be fixed by the Committee. Subject to
                           Section 4.3, the purchase price for shares of
                           Restricted Stock may be zero to the extent permitted
                           by applicable law, and, to the extent not so
                           permitted, such purchase price may not be less than
                           par value.

                  (b)      Acceptance. Awards of Restricted Stock must be
                           accepted within a period of 60 days (or such other
                           period as the Committee may specify) after the grant
                           date, by executing a Restricted Stock agreement and
                           by paying whatever price (if any) the Committee has
                           designated thereunder.

                  (c)      Legend. Each Participant receiving Restricted Stock
                           shall be issued a stock certificate in respect of
                           such shares of Restricted Stock, unless the Committee
                           elects to use another system, such as book entries by
                           the transfer agent, as evidencing ownership of shares
                           of Restricted Stock. Such certificate shall be
                           registered in the name of such Participant, and
                           shall, in addition to such legends required by
                           applicable securities laws, bear an appropriate
                           legend referring to the terms, conditions, and
                           restrictions applicable to such Award, substantially
                           in the following form:

                           "The anticipation, alienation, attachment, sale,
                           transfer, assignment, pledge, encumbrance or charge
                           of the shares of stock represented hereby are subject
                           to the terms and conditions (including forfeiture) of
                           the Steven Madden, Ltd. (the "Company") 2006 Stock
                           Incentive Plan (the "Plan") and an agreement entered
                           into between the registered owner and the Company
                           dated __________. Copies of such Plan and agreement
                           are on file at the principal office of the Company."

                  (d)      Custody. If stock certificates are issued in respect
                           of shares of Restricted Stock, the Committee may
                           require that any stock certificates evidencing such
                           shares be held in custody by the Company until the
                           restrictions thereon shall have lapsed, and that, as
                           a condition of any grant of Restricted Stock, the

                                       20
<PAGE>

                           Participant shall have delivered a duly signed stock
                           power, endorsed in blank, relating to the Common
                           Stock covered by such Award.

         8.3      Restrictions and Conditions. The shares of Restricted Stock
awarded pursuant to this Plan shall be subject to the following restrictions and
conditions:

                  (a)      Restriction Period. (i) The Participant shall not be
                           permitted to Transfer shares of Restricted Stock
                           awarded under this Plan during the period or periods
                           set by the Committee (the "Restriction Period")
                           commencing on the date of such Award, as set forth in
                           a Restricted Stock Award agreement and such agreement
                           shall set forth a vesting schedule and any events
                           which would accelerate vesting of the shares of
                           Restricted Stock. Within these limits, based on
                           service, attainment of performance goals pursuant to
                           Section 8.3(a)(ii) below and/or such other factors or
                           criteria as the Committee may determine in its sole
                           discretion, the Committee may condition the grant or
                           provide for the lapse of such restrictions in
                           installments in whole or in part, or may accelerate
                           the vesting of all or any part of any Restricted
                           Stock Award and/or waive the deferral limitations for
                           all or any part of any Restricted Stock Award. In the
                           event that a written employment agreement between the
                           Company and a Participant provides for a vesting
                           schedule that is more favorable than the vesting
                           schedule provided in the form of Award Agreement, the
                           vesting schedule in such employment agreement shall
                           govern, provided that such agreement is in effect on
                           the date of grant and applicable to the specific
                           Award.

                                    (ii)     Objective Performance Goals,
                           Formulae or Standards. If the grant of shares of
                           Restricted Stock or the lapse of restrictions is
                           based on the attainment of Performance Goals, the
                           Committee shall establish the Performance Goals and
                           the applicable vesting percentage of the Restricted
                           Stock Award applicable to each Participant or class
                           of Participants in writing prior to the beginning of
                           the applicable fiscal year or at such later date as
                           otherwise determined by the Committee and while the
                           outcome of the Performance Goals are substantially
                           uncertain. Such Performance Goals may incorporate
                           provisions for disregarding (or adjusting for)
                           changes in accounting methods, corporate transactions
                           (including, without limitation, dispositions and
                           acquisitions) and other similar type events or
                           circumstances. With regard to a Restricted Stock
                           Award that is intended to comply with Section 162(m)
                           of the Code, to the extent any such provision would
                           create impermissible discretion under Section 162(m)
                           of the Code or otherwise violate Section 162(m) of
                           the Code, such provision shall be of no force or
                           effect. The applicable Performance Goals shall be
                           based on one or more of the performance criteria set
                           forth in Exhibit A hereto.

                  (b)      Rights as a Stockholder. Except as provided in this
                           subsection (b) and subsection (a) above and as
                           otherwise determined by the Committee, the

                                       21
<PAGE>

                           Participant shall have, with respect to the shares of
                           Restricted Stock, all of the rights of a holder of
                           shares of Common Stock of the Company including,
                           without limitation, the right to receive any
                           dividends, the right to vote such shares and, subject
                           to and conditioned upon the full vesting of shares of
                           Restricted Stock, the right to tender such shares.
                           The Committee may, in its sole discretion, determine
                           at the time of grant that the payment of dividends
                           shall be deferred until, and conditioned upon, the
                           expiration of the applicable Restriction Period.

                  (c)      Lapse of Restrictions. If and when the Restriction
                           Period expires without a prior forfeiture of the
                           Restricted Stock, the certificates for such shares
                           shall be delivered to the Participant. All legends
                           shall be removed from said certificates at the time
                           of delivery to the Participant, except as otherwise
                           required by applicable law or other limitations
                           imposed by the Committee.

                                   ARTICLE IX

                               PERFORMANCE SHARES

         9.1      Award of Performance Shares. Performance Shares may be awarded
either alone or in addition to other Awards granted under this Plan. The
Committee shall, in its sole discretion, determine the Eligible Employees,
Consultants and Non-Employee Directors, to whom, and the time or times at which,
Performance Shares shall be awarded, the number of Performance Shares to be
awarded to any person, the Performance Period during which, and the conditions
under which, receipt of the Shares will be deferred, and the other terms and
conditions of the Award in addition to those set forth in Section 9.2.

         Except as otherwise provided herein, the Committee shall condition the
right to payment of any Performance Share upon the attainment of objective
performance goals established pursuant to Section 9.2(c) below.

         9.2      Terms and Conditions. Performance Shares awarded pursuant to
this Article IX shall be subject to the following terms and conditions:

                  (a)      Earning of Performance Share Award. At the expiration
                           of the applicable Performance Period, the Committee
                           shall determine the extent to which the performance
                           goals established pursuant to Section 9.2(c) are
                           achieved and the percentage of each Performance Share
                           Award that has been earned.

                  (b)      Non-Transferability. Subject to the applicable
                           provisions of the Award agreement and this Plan,
                           Performance Shares may not be Transferred during the
                           Performance Period.

                  (c)      Objective Performance Goals, Formulae or Standards.
                           The Committee shall establish the objective
                           Performance Goals for the earning of Performance
                           Shares based on a Performance Period applicable to

                                       22
<PAGE>

                           each Participant or class of Participants in writing
                           prior to the beginning of the applicable Performance
                           Period or at such later date as permitted under
                           Section 162(m) of the Code and while the outcome of
                           the Performance Goals are substantially uncertain.
                           Such Performance Goals may incorporate, if and only
                           to the extent permitted under Section 162(m) of the
                           Code, provisions for disregarding (or adjusting for)
                           changes in accounting methods, corporate transactions
                           (including, without limitation, dispositions and
                           acquisitions) and other similar type events or
                           circumstances. To the extent any such provision would
                           create impermissible discretion under Section 162(m)
                           of the Code or otherwise violate Section 162(m) of
                           the Code, such provision shall be of no force or
                           effect. The applicable Performance Goals shall be
                           based on one or more of the performance criteria set
                           forth in Exhibit A hereto.

                  (d)      Dividends. Unless otherwise determined by the
                           Committee at the time of grant, amounts equal to any
                           dividends declared during the Performance Period with
                           respect to the number of shares of Common Stock
                           covered by a Performance Share will not be paid to
                           the Participant.

                  (e)      Payment. Following the Committee's determination in
                           accordance with subsection (a) above, shares of
                           Common Stock or, as determined by the Committee in
                           its sole discretion, the cash equivalent of such
                           shares shall be delivered to the Eligible Employee,
                           Consultant or Non-Employee Director, or his legal
                           representative, in an amount equal to such
                           individual's earned Performance Share.
                           Notwithstanding the foregoing, the Committee may, in
                           its sole discretion, award an amount less than the
                           earned Performance Share and/or subject the payment
                           of all or part of any Performance Share to additional
                           vesting, forfeiture and deferral conditions as it
                           deems appropriate.

                  (f)      Accelerated Vesting. Based on service, performance
                           and/or such other factors or criteria, if any, as the
                           Committee may determine, the Committee may, in its
                           sole discretion, at or after grant, accelerate the
                           vesting of all or any part of any Performance Share
                           Award and/or waive the deferral limitations for all
                           or any part of such Award.

                                    ARTICLE X

                            OTHER STOCK-BASED AWARDS

         10.1     Other Awards. The Committee, in its sole discretion, is
authorized to grant to Eligible Employees, Consultants and Non-Employee
Directors Other Stock-Based Awards that are payable in, valued in whole or in
part by reference to, or otherwise based on or related to shares of Common
Stock, including, but not limited to, shares of Common Stock awarded purely as a
bonus and not subject to any restrictions or conditions, shares of Common Stock
in payment of the amounts due under an incentive or performance plan sponsored
or maintained by the Company or an Affiliate, performance units, dividend
equivalent units, stock equivalent units, restricted stock units and deferred

                                       23
<PAGE>

stock units. To the extent permitted by law, the Committee may, in its sole
discretion, permit Eligible Employees and/or Non-Employee Directors to defer all
or a portion of their cash compensation in the form of Other Stock-Based Awards
granted under this Plan, subject to the terms and conditions of any deferred
compensation arrangement established by the Company, which shall be intended to
comply with Section 409A of the Code. Other Stock-Based Awards may be granted
either alone or in addition to or in tandem with other Awards granted under the
Plan.

         Subject to the provisions of this Plan, the Committee shall, in its
sole discretion, have authority to determine the Eligible Employees, Consultants
and Non-Employee Directors, to whom, and the time or times at which, such Awards
shall be made, the number of shares of Common Stock to be awarded pursuant to
such Awards, and all other conditions of the Awards. The Committee may also
provide for the grant of Common Stock under such Awards upon the completion of a
specified performance period.

         The Committee may condition the grant or vesting of Other Stock-Based
Awards upon the attainment of specified Performance Goals set forth on Exhibit A
as the Committee may determine, in its sole discretion; provided that to the
extent that such Other Stock-Based Awards are intended to comply with Section
162(m) of the Code, the Committee shall establish the objective Performance
Goals for the vesting of such Other Stock-Based Awards based on a performance
period applicable to each Participant or class of Participants in writing prior
to the beginning of the applicable performance period or at such later date as
permitted under Section 162(m) of the Code and while the outcome of the
Performance Goals are substantially uncertain. Such Performance Goals may
incorporate, if and only to the extent permitted under Section 162(m) of the
Code, provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation, dispositions and
acquisitions) and other similar type events or circumstances. To the extent any
such provision would create impermissible discretion under Section 162(m) of the
Code or otherwise violate Section 162(m) of the Code, such provision shall be of
no force or effect. The applicable Performance Goals shall be based on one or
more of the performance criteria set forth in Exhibit A hereto.

         10.2     Terms and Conditions. Other Stock-Based Awards made pursuant
to this Article X shall be subject to the following terms and conditions:

                  (a)      Non-Transferability. Subject to the applicable
                           provisions of the Award agreement and this Plan,
                           shares of Common Stock subject to Awards made under
                           this Article X may not be Transferred prior to the
                           date on which the shares are issued, or, if later,
                           the date on which any applicable restriction,
                           performance or deferral period lapses.

                  (b)      Dividends. Unless otherwise determined by the
                           Committee at the time of Award, subject to the
                           provisions of the Award agreement and this Plan, the
                           recipient of an Award under this Article X shall not
                           be entitled to receive, currently or on a deferred
                           basis, dividends or dividend equivalents with respect
                           to the number of shares of Common Stock covered by
                           the Award.

                                       24
<PAGE>

                  (c)      Vesting. Any Award under this Article X and any
                           Common Stock covered by any such Award shall vest or
                           be forfeited to the extent so provided in the Award
                           agreement, as determined by the Committee, in its
                           sole discretion. In the event that a written
                           employment agreement between the Company and a
                           Participant provides for a vesting schedule that is
                           more favorable than the vesting schedule provided in
                           the form of Award Agreement, the vesting schedule in
                           such employment agreement shall govern, provided that
                           such agreement is in effect on the date of grant and
                           applicable to the specific Award.

                  (d)      Price. Common Stock issued on a bonus basis under
                           this Article X may be issued for no cash
                           consideration; Common Stock purchased pursuant to a
                           purchase right awarded under this Article X shall be
                           priced, as determined by the Committee in its sole
                           discretion.

                  (e)      Payment. Form of payment for the Other Stock-Based
                           Award shall be specified in the Award agreement.

                                   ARTICLE XI

                          PERFORMANCE-BASED CASH AWARDS

         11.1     Performance-Based Cash Awards. Performance-Based Cash Awards
may be granted either alone or in addition to or in tandem with Stock Options,
Stock Appreciation Rights, or Restricted Stock. Subject to the provisions of
this Plan, the Committee shall, in its sole discretion, have authority to
determine the Eligible Employees, Consultants and Non-Employee Directors to
whom, and the time or times at which, such Awards shall be made, the dollar
amount to be awarded pursuant to such Awards, and all other conditions of the
Awards. The Committee may also provide for the payment of dollar amount under
such Awards upon the completion of a specified Performance Period.

         For each Participant, the Committee may specify a targeted performance
award. The individual target award may be expressed, at the Committee's
discretion, as a fixed dollar amount, a percentage of base pay or total pay
(excluding payments made under the Plan), or an amount determined pursuant to an
objective formula or standard. Establishment of an individual target award for a
Participant for a calendar year shall not imply or require that the same level
individual target award (if any such award is established by the Committee for
the relevant Participant) be set for any subsequent calendar year. At the time
the Performance Goals are established, the Committee shall prescribe a formula
to determine the percentages (which may be greater than 100%) of the individual
target award which may be payable based upon the degree of attainment of the
Performance Goals during the calendar year. Notwithstanding anything else
herein, the Committee may, in its sole discretion, elect to pay a Participant an
amount that is less than the Participant's individual target award (or attained
percentage thereof) regardless of the degree of attainment of the Performance
Goals; provided that no such discretion to reduce an Award earned based on
achievement of the applicable Performance Goals shall be permitted for the
calendar year in which a Change in Control of the Company occurs, or during such
calendar year with regard to the prior calendar year if the Awards for the prior

                                       25
<PAGE>

calendar year have not been made by the time of the Change in Control of the
Company, with regard to individuals who were Participants at the time of the
Change in Control of the Company.

         11.2     Terms and Conditions. Performance-Based Awards made pursuant
to this Article XI shall be subject to the following terms and conditions:

                  (a)      Vesting of Performance-Based Cash Award. At the
                           expiration of the applicable Performance Period, the
                           Committee shall determine and certify in writing the
                           extent to which the Performance Goals established
                           pursuant to Section 11.2(c) are achieved and the
                           percentage of the Participant's individual target
                           award has been vested and earned.

                  (b)      Waiver of Limitation. In the event of the
                           Participant's Retirement, Disability or death, or in
                           cases of special circumstances, the Committee may, in
                           its sole discretion, waive in whole or in part any or
                           all of the limitations imposed hereunder (if any)
                           with respect to any or all of an Award under this
                           Article XI.

                  (c)      Objective Performance Goals, Formulae or Standards.

                                    (i)      The Committee shall establish the
                           objective Performance Goals and the individual target
                           award (if any) applicable to each Participant or
                           class of Participants in writing prior to the
                           beginning of the applicable Performance Period or at
                           such later date as permitted under Section 162(m) of
                           the Code and while the outcome of the Performance
                           Goals are substantially uncertain. Such Performance
                           Goals may incorporate, if and only to the extent
                           permitted under Section 162(m) of the Code,
                           provisions for disregarding (or adjusting for)
                           changes in accounting methods, corporate transactions
                           (including, without limitation, dispositions and
                           acquisitions) and other similar type events or
                           circumstances. To the extent any Performance-Based
                           Award is intended to comply with the provisions of
                           Section 162(m) of the Code, if any provision would
                           create impermissible discretion under Section 162(m)
                           of the Code or otherwise violate Section 162(m) of
                           the Code, such provision shall be of no force or
                           effect. The applicable Performance Goals shall be
                           based on one or more of the performance criteria set
                           forth in Exhibit A hereto.

                                    (ii)     The measurements used in
                           Performance Goals set under the Plan shall be
                           determined in accordance with Generally Accepted
                           Accounting Principles ("GAAP"), except, to the extent
                           that any objective Performance Goals are used, if any
                           measurements require deviation from GAAP, such
                           deviation shall be at the discretion of the Committee
                           at the time the Performance Goals are set or at such
                           later time to the extent permitted under Section
                           162(m) of the Code.

                                       26
<PAGE>

                  (d)      Payment. Following the Committee's determination and
                           certification in accordance with subsection (a)
                           above, the Performance-Based Cash Award amount shall
                           be delivered to the Eligible Employee, Consultant or
                           Non-Employee Director, or his legal representative,
                           in accordance with the terms and conditions of the
                           Award agreement.

                                  ARTICLE XII

                                   TERMINATION

         12.1     Termination.  The following rules apply with regard to the
Termination of a Participant.

                  (a)      Rules Applicable to Stock Option and Stock
                           Appreciation Rights. Unless otherwise determined by
                           the Committee at grant (or, if no rights of the
                           Participant are reduced, thereafter):

                                    (i)      Termination by Reason of Death,
                           Disability or Retirement. If a Participant's
                           Termination is by reason of death, Disability or the
                           Participant's Retirement, all Stock Options or Stock
                           Appreciation Rights that are held by such Participant
                           that are vested and exercisable at the time of the
                           Participant's Termination may be exercised by the
                           Participant (or, in the case of death, by the legal
                           representative of the Participant's estate) at any
                           time within a one-year period from the date of such
                           Termination, but in no event beyond the expiration of
                           the stated term of such Stock Options or Stock
                           Appreciation Rights; provided, however, if the
                           Participant dies within such exercise period, all
                           unexercised Stock Options or Stock Appreciation
                           Rights held by such Participant shall thereafter be
                           exercisable, to the extent to which they were
                           exercisable at the time of death, for a period of one
                           year from the date of such death, but in no event
                           beyond the expiration of the stated term of such
                           Stock Options or Stock Appreciation Rights.

                                    (ii)     Involuntary Termination Without
                           Cause. If a Participant's Termination is by
                           involuntary termination without Cause, all Stock
                           Options or Stock Appreciation Rights that are held by
                           such Participant that are vested and exercisable at
                           the time of the Participant's Termination may be
                           exercised by the Participant at any time within a
                           period of 90 days from the date of such Termination,
                           but in no event beyond the expiration of the stated
                           term of such Stock Options or Stock Appreciation
                           Rights.

                                    (iii)    Voluntary Termination. If a
                           Participant's Termination is voluntary (other than a
                           voluntary termination described in Section
                           12.2(a)(iv)(2) below), all Stock Options or Stock
                           Appreciation Rights that are held by such Participant
                           that are vested and exercisable at the time of the
                           Participant's Termination may be exercised by the
                           Participant at any time within a period of 30 days
                           from the date of such Termination, but in no event
                           beyond the expiration of the stated terms of such
                           Stock Options or Stock Appreciation Rights.

                                       27
<PAGE>

                                    (iv)     Termination for Cause. If a
                           Participant's Termination: (1) is for Cause or (2) is
                           a voluntary Termination (as provided in sub-section
                           (iii) above) after the occurrence of an event that
                           would be grounds for a Termination for Cause, all
                           Stock Options or Stock Appreciation Rights, whether
                           vested or not vested, that are held by such
                           Participant shall thereupon terminate and expire as
                           of the date of such Termination.

                                    (v)      Unvested Stock Options and Stock
                           Appreciation Rights. Stock Options or Stock
                           Appreciation Rights that are not vested as of the
                           date of a Participant's Termination for any reason
                           shall terminate and expire as of the date of such
                           Termination.

                  (b)      Rules Applicable to Restricted Stock, Performance
                           Shares, Other Stock-Based Awards and
                           Performance-Based Cash Awards. Unless otherwise
                           determined by the Committee at grant or thereafter,
                           upon a Participant's Termination for any reason: (i)
                           during the relevant Restriction Period, all
                           Restricted Stock still subject to restriction shall
                           be forfeited; and (ii) any unvested Performance
                           Shares, Other Stock-Based Awards or Performance-Based
                           Cash Awards shall be forfeited

                                  ARTICLE XIII

                          CHANGE IN CONTROL PROVISIONS

         13.1     Benefits. In the event of a Change in Control of the Company,
and except as otherwise provided by the Committee in an Award agreement or in a
written employment agreement between the Company and a Participant, a
Participant's unvested Award shall not vest and a Participant's Award shall be
treated in accordance with one of the following methods as determined by the
Committee in its sole discretion:

                  (a)      Awards, whether or not then vested, shall be
                           continued, assumed, have new rights substituted
                           therefor or be treated in accordance with Section
                           4.2(d) hereof, as determined by the Committee in its
                           sole discretion, and restrictions to which any shares
                           of Restricted Stock or any other Award granted prior
                           to the Change in Control are subject shall not lapse
                           upon a Change in Control and the Restricted Stock or
                           other Award shall, where appropriate in the sole
                           discretion of the Committee, receive the same
                           distribution as other Common Stock on such terms as
                           determined by the Committee; provided that, the
                           Committee may, in its sole discretion, decide to
                           award additional Restricted Stock or other Award in
                           lieu of any cash distribution. Notwithstanding
                           anything to the contrary herein, for purposes of
                           Incentive Stock Options, any assumed or substituted
                           Stock Option shall comply with the requirements of
                           Treasury Regulation ss. 1.424-1 (and any amendments
                           thereto).

                                       28
<PAGE>

                  (b)      The Committee, in its sole discretion, may provide
                           for the purchase of any Awards by the Company or an
                           Affiliate for an amount of cash equal to the excess
                           of the Change in Control Price (as defined below) of
                           the shares of Common Stock covered by such Awards,
                           over the aggregate exercise price of such Awards. For
                           purposes of this Section 13.1, "Change in Control
                           Price" shall mean the highest price per share of
                           Common Stock paid in any transaction related to a
                           Change in Control of the Company.

                  (c)      The Committee may, in its sole discretion, provide
                           for the cancellation of any Awards without payment,
                           if the Change in Control Price is less than the Fair
                           Market Value of such Award on the date of grant.

                  (d)      Notwithstanding anything else herein, the Committee
                           may, in its sole discretion, provide for accelerated
                           vesting or lapse of restrictions, of an Award at the
                           time of grant or at any time thereafter.

         13.2     Change in Control. Unless otherwise determined by the
Committee in the applicable Award agreement (or other written agreement approved
by the Committee including, without limitation, an employment agreement), a
"Change in Control" shall be deemed to occur following any transaction if: (a)
any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange
Act (other than the Company, any trustee or other fiduciary holding securities
under any employee benefit plan of the Company, or any company owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Common Stock of the Company), becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of 50% or more of the combined voting power of the then
outstanding securities of the Company (or its successor corporation); provided,
however, that a merger or consolidation effected solely to implement a
recapitalization of the Company shall not constitute a Change in Control of the
Company; or (b) the stockholders of the Company approve a plan of complete
liquidation of the Company or the consummation of the sale or disposition by the
Company of all or substantially all of the Company's assets other than (i) the
sale or disposition of all or substantially all of the assets of the Company to
a person or persons who beneficially own, directly or indirectly, at least 50%
or more of the combined voting power of the outstanding voting securities of the
Company at the time of the sale or (ii) pursuant to a spinoff type transaction,
directly or indirectly, of such assets to the stockholders of the Company.

                                  ARTICLE XIV

                        TERMINATION OR AMENDMENT OF PLAN

         14.1     Termination or Amendment. Notwithstanding any other provision
of this Plan, the Board or the Committee may at any time, and from time to time,
amend, in whole or in part, any or all of the provisions of this Plan (including
any amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Article XVI), or suspend or terminate it
entirely, retroactively or otherwise; provided, however, that, unless otherwise
required by law or specifically provided herein, the rights of a Participant
with respect to Awards granted prior to such amendment, suspension or
termination, may not be impaired without the consent of such Participant and,
provided further, without the approval of the stockholders of the Company in

                                       29
<PAGE>

accordance with the laws of the State of Delaware, to the extent required by the
applicable provisions of Rule 16b-3 or Section 162(m) of the Code, pursuant to
the requirements of NASD Rule 4350(i)(1)(A) or such other applicable stock
exchange rule, or, to the extent applicable to Incentive Stock Options, Section
422 of the Code, no amendment may be made which would:

                  (a)      increase the aggregate number of shares of Common
                           Stock that may be issued under this Plan pursuant to
                           Section 4.1 (except by operation of Section 4.2);

                  (b)      increase the maximum individual Participant
                           limitations for a fiscal year under Section 4.1(b)
                           (except by operation of Section 4.2);

                  (c)      change the classification of Eligible Employees or
                           Consultants eligible to receive Awards under this
                           Plan;

                  (d)      decrease the minimum option price of any Stock Option
                           or Stock Appreciation Right;

                  (e)      extend the maximum option period under Section 6.3;

                  (f)      alter the Performance Goals for the Award of
                           Restricted Stock, Performance Shares or Other
                           Stock-Based Awards subject to satisfaction of
                           Performance Goals as set forth in Exhibit A;

                  (g)      award any Stock Option or Stock Appreciation Right in
                           replacement of a canceled Stock Option or Stock
                           Appreciation Right with a higher exercise price,
                           except in accordance with Section 6.3(g); or

                  (h)      require stockholder approval in order for this Plan
                           to continue to comply with the applicable provisions
                           of Section 162(m) of the Code or, to the extent
                           applicable to Incentive Stock Options, Section 422 of
                           the Code. In no event may this Plan be amended
                           without the approval of the stockholders of the
                           Company in accordance with the applicable laws of the
                           State of Delaware to increase the aggregate number of
                           shares of Common Stock that may be issued under this
                           Plan, decrease the minimum exercise price of any
                           Stock Option or Stock Appreciation Right, or to make
                           any other amendment that would require stockholder
                           approval under NASD Rule 4350(i)(1)(A) or other such
                           rules of any exchange or system on which the
                           Company's securities are listed or traded at the
                           request of the Company.

         The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Article IV above or as otherwise
specifically provided herein, no such amendment or other action by the Committee
shall impair the rights of any holder without the holder's consent.

                                       30
<PAGE>

                                   ARTICLE XV

                                  UNFUNDED PLAN

         15.1     Unfunded Status of Plan. This Plan is an "unfunded" plan for
incentive and deferred compensation. With respect to any payments as to which a
Participant has a fixed and vested interest but that are not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general unsecured
creditor of the Company.

                                  ARTICLE XVI

                               GENERAL PROVISIONS

         16.1     Legend. The Committee may require each person receiving shares
of Common Stock pursuant to a Stock Option or other Award under the Plan to
represent to and agree with the Company in writing that the Participant is
acquiring the shares without a view to distribution thereof. In addition to any
legend required by this Plan, the certificates for such shares may include any
legend that the Committee, in its sole discretion, deems appropriate to reflect
any restrictions on Transfer.

         All certificates for shares of Common Stock delivered under the Plan
shall be subject to such stop transfer orders and other restrictions as the
Committee may, in its sole discretion, deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
The Nasdaq Stock Market or any national securities exchange system upon whose
system the Common Stock is then quoted, any applicable Federal or state
securities law, and any applicable corporate law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.

         16.2     Other Plans. Nothing contained in this Plan shall prevent the
Board from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.

         16.3     No Right to Employment/Directorship/Consultancy. Neither this
Plan nor the grant of any Option or other Award hereunder shall give any
Participant or other employee, Consultant or Non-Employee Director any right
with respect to continuance of employment, consultancy or directorship by the
Company or any Affiliate, nor shall they be a limitation in any way on the right
of the Company or any Affiliate by which an employee is employed or a Consultant
or Non-Employee Director is retained to terminate his or her employment,
consultancy or directorship at any time.

         16.4     Withholding of Taxes. The Company shall have the right to
deduct from any payment to be made pursuant to this Plan, or to otherwise
require, prior to the issuance or delivery of any shares of Common Stock or the
payment of any cash hereunder, payment by the Participant of, any Federal, state
or local taxes required by law to be withheld. Upon the vesting of Restricted
Stock (or other Award that is taxable upon vesting), or upon making an election

                                       31
<PAGE>

under Section 83(b) of the Code, a Participant shall pay all required
withholding to the Company. Any statutorily required withholding obligation with
regard to any Participant may be satisfied, subject to the advance consent of
the Committee, by reducing the number of shares of Common Stock otherwise
deliverable or by delivering shares of Common Stock already owned. Any fraction
of a share of Common Stock required to satisfy such tax obligations shall be
disregarded and the amount due shall be paid instead in cash by the Participant.

         16.5     No Assignment of Benefits. No Award or other benefit payable
under this Plan shall, except as otherwise specifically provided by law or
permitted by the Committee, be Transferable in any manner, and any attempt to
Transfer any such benefit shall be void, and any such benefit shall not in any
manner be liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person who shall be entitled to such benefit, nor
shall it be subject to attachment or legal process for or against such person.

         16.6     Listing and Other Conditions.

                  (a)      Unless otherwise determined by the Committee, as long
                           as the Common Stock is listed on a national
                           securities exchange or system sponsored by a national
                           securities association, the issue of any shares of
                           Common Stock pursuant to an Award shall be
                           conditioned upon such shares being listed on such
                           exchange or system. The Company shall have no
                           obligation to issue such shares unless and until such
                           shares are so listed, and the right to exercise any
                           Option or other Award with respect to such shares
                           shall be suspended until such listing has been
                           effected.

                  (b)      If at any time counsel to the Company shall be of the
                           opinion that any sale or delivery of shares of Common
                           Stock pursuant to an Option or other Award is or may
                           in the circumstances be unlawful or result in the
                           imposition of excise taxes on the Company under the
                           statutes, rules or regulations of any applicable
                           jurisdiction, the Company shall have no obligation to
                           make such sale or delivery, or to make any
                           application or to effect or to maintain any
                           qualification or registration under the Securities
                           Act or otherwise, with respect to shares of Common
                           Stock or Awards, and the right to exercise any Option
                           or other Award shall be suspended until, in the
                           opinion of said counsel, such sale or delivery shall
                           be lawful or will not result in the imposition of
                           excise taxes on the Company.

                  (c)      Upon termination of any period of suspension under
                           this Section 16.6, any Award affected by such
                           suspension which shall not then have expired or
                           terminated shall be reinstated as to all shares
                           available before such suspension and as to shares
                           which would otherwise have become available during
                           the period of such suspension, but no such suspension
                           shall extend the term of any Award.

                  (d)      A Participant shall be required to supply the Company
                           with any certificates, representations and
                           information that the Company requests and otherwise
                           cooperate with the Company in obtaining any listing,

                                       32
<PAGE>

                           registration, qualification, exemption, consent or
                           approval the Company deems necessary or appropriate.

         16.7     Governing Law. This Plan and actions taken in connection
herewith shall be governed and construed in accordance with the laws of the
State of Delaware (regardless of the law that might otherwise govern under
applicable Delaware principles of conflict of laws).

         16.8     Construction. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.

         16.9     Other Benefits. No Award granted or paid out under this Plan
shall be deemed compensation for purposes of computing benefits under any
retirement plan of the Company or its Affiliates nor affect any benefits under
any other benefit plan now or subsequently in effect under which the
availability or amount of benefits is related to the level of compensation.

         16.10    Costs. The Company shall bear all expenses associated with
administering this Plan, including expenses of issuing Common Stock pursuant to
any Awards hereunder.

         16.11    No Right to Same Benefits. The provisions of Awards need not
be the same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.

         16.12    Death/Disability. The Committee may in its sole discretion
require the transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the transfer of an Award. The
Committee may, in its discretion, also require the agreement of the transferee
to be bound by all of the terms and conditions of the Plan.

         16.13    Section 16(b) of the Exchange Act. All elections and
transactions under this Plan by persons subject to Section 16 of the Exchange
Act involving shares of Common Stock are intended to comply with any applicable
exemptive condition under Rule 16b-3. The Committee may, in its sole discretion,
establish and adopt written administrative guidelines, designed to facilitate
compliance with Section 16(b) of the Exchange Act, as it may deem necessary or
proper for the administration and operation of this Plan and the transaction of
business thereunder.

         16.14    Section 409A of the Code. The Plan is intended to comply with
the applicable requirements of Section 409A of the Code and shall be limited,
construed and interpreted in accordance with such intent. To the extent that any
Award is subject to Section 409A of the Code, it shall be paid in a manner that
will comply with Section 409A of the Code, including proposed, temporary or
final regulations or any other guidance issued by the Secretary of the Treasury
and the Internal Revenue Service with respect thereto. Notwithstanding anything
herein to the contrary, any provision in the Plan that is inconsistent with
Section 409A of the Code shall be deemed to be amended to comply with Section
409A of the Code and to the extent such provision cannot be amended to comply
therewith, such provision shall be null and void.

                                       33
<PAGE>

         16.15    Successor and Assigns. The Plan shall be binding on all
successors and permitted assigns of a Participant, including, without
limitation, the estate of such Participant and the executor, administrator or
trustee of such estate.

         16.16    Severability of Provisions. If any provision of the Plan shall
be held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and the Plan shall be construed and enforced
as if such provisions had not been included.

         16.17    Payments to Minors, Etc. Any benefit payable to or for the
benefit of a minor, an incompetent person or other person incapable of receipt
thereof shall be deemed paid when paid to such person's guardian or to the party
providing or reasonably appearing to provide for the care of such person, and
such payment shall fully discharge the Committee, the Board, the Company, its
Affiliates and their employees, agents and representatives with respect thereto.

         16.18    Headings and Captions. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of the
Plan, and shall not be employed in the construction of the Plan.

                                  ARTICLE XVII

                             EFFECTIVE DATE OF PLAN

         The Plan shall become effective upon the date specified by the Board in
its resolution adopting the Plan, subject to the approval of the Plan by the
stockholders of the Company in accordance with the requirements of the laws of
the State of Delaware.

                                 ARTICLE XVIII

                                  TERM OF PLAN

         No Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the earlier of the date the Plan is adopted or the date of
stockholder approval, but Awards granted prior to such tenth anniversary may
extend beyond that date; provided that no Award (other than a Stock Option or
Stock Appreciation Right) that is intended to be "performance-based" under
Section 162(m) of the Code shall be granted on or after the fifth anniversary of
the stockholder approval of the Plan unless the Performance Goals set forth on
Exhibit A are reapproved (or other designated performance goals are approved) by
the stockholders no later than the first stockholder meeting that occurs in the
fifth year following the year in which stockholders approve the Performance
Goals set forth on Exhibit A.

                                  ARTICLE XIX

                                  NAME OF PLAN

         This Plan shall be known as "The Steven Madden, Ltd. 2006 Stock
Incentive Plan."

                                       34
<PAGE>

                                    EXHIBIT A

                                PERFORMANCE GOALS

1.       Performance goals established for purposes of the grant or vesting of
         Awards of Restricted Stock, Other Stock-Based Awards, Performance
         Shares and/or Performance-Based Cash Awards, each intended to be
         "performance-based" under Section 162(m) of the Code, shall be based on
         the attainment of certain target levels of, or a specified increase or
         decrease (as applicable) in one or more of the following performance
         goals ("Performance Goals"):

                  (a)      earnings per share;

                  (b)      operating income;

                  (c)      net income;

                  (d)      cash flow;

                  (e)      gross profit;

                  (f)      gross profit return on investment;

                  (g)      gross margin return on investment;

                  (h)      gross margin;

                  (i)      working capital;

                  (j)      earnings before interest and taxes;

                  (k)      earnings before interest, tax, depreciation and
                           amortization;

                  (l)      return on equity;

                  (m)      return on assets;

                  (n)      return on capital;

                  (o)      revenue growth;

                  (p)      total shareholder return;

                  (q)      economic value added;

                  (r)      specified objectives with regard to limiting the
                           level of increase in all or a portion of the
                           Company's bank debt or other long-term or short-term
                           public or private debt or other similar financial
                           obligations of the Company, which may be calculated

                                       A
<PAGE>

                           net of cash balances and/or other offsets and
                           adjustments as may be established by the Committee in
                           its sole discretion;

                  (s)      the fair market value of the shares of the Company's
                           Common Stock;

                  (t)      the growth in the value of an investment in the
                           Company's Common Stock assuming the reinvestment of
                           dividends;

                  (u)      reduction in expenses;

                  (v)      customer satisfaction;

                  (w)      customer loyalty;

                  (x)      style indexes;

                  (y)      number of new patents;

                  (z)      employee retention;

                  (aa)     market share;

                  (bb)     market segment share;

                  (cc)     product release schedules;

                  (dd)     new product innovation;

                  (ee)     new product introduction;

                  (ff)     product cost reduction through advanced technology;

                  (gg)     brand recognition and/or acceptance; or

                  (hh)     ship targets.

2.       To the extent permitted under Section 162(m) of the Code, the Committee
         may, in its sole discretion, also exclude, or adjust to reflect, the
         impact of an event or occurrence which the Committee determines should
         be appropriately excluded or adjusted, including:

                  (a)      restructurings, discontinued operations,
                           extraordinary items or events, and other unusual or
                           non-recurring charges as described in Accounting
                           Principles Board Opinion No. 30 and/or management's
                           discussion and analysis of financial condition and
                           results of operations appearing or incorporated by
                           reference in the Company's Form 10-K for the
                           applicable year;

                                       B
<PAGE>

                  (b)      an event either not directly related to the
                           operations of the Company or not within the
                           reasonable control of the Company's management; or

                  (c)      a change in tax law or accounting standards required
                           by generally accepted accounting principles.

3.       Performance goals may also be based upon individual Participant
         performance goals, as determined by the Committee, in its sole
         discretion.

4.       In addition, such Performance Goals may be based upon the attainment of
         specified levels of Company (or subsidiary, division, other operational
         unit or administrative department of the Company) performance under one
         or more of the measures described above relative to the performance of
         other corporations. To the extent permitted under Section 162(m) of the
         Code, but only to the extent permitted under Section 162(m) of the Code
         (including, without limitation, compliance with any requirements for
         stockholder approval), the Committee may:

                  (a)      designate additional business criteria on which the
                           performance goals may be based; or

                  (b)      adjust, modify or amend the aforementioned business
                           criteria.

                                       C
<PAGE>

                                TABLE OF CONTENTS
                                -----------------

ARTICLE I PURPOSE..............................................................1
ARTICLE II DEFINITIONS.........................................................1
ARTICLE III ADMINISTRATION.....................................................7
ARTICLE IV SHARE LIMITATION....................................................9
ARTICLE V ELIGIBILITY - GENERAL REQUIREMENTS FOR AWARDS.......................13
ARTICLE VI STOCK OPTIONS......................................................14
ARTICLE VII STOCK APPRECIATION RIGHTS.........................................17
ARTICLE VIII RESTRICTED STOCK.................................................19
ARTICLE IX PERFORMANCE SHARES.................................................22
ARTICLE X OTHER STOCK-BASED AWARDS............................................23
ARTICLE XI PERFORMANCE-BASED CASH AWARDS......................................25
ARTICLE XII TERMINATION.......................................................27
ARTICLE XIII CHANGE IN CONTROL PROVISIONS.....................................28
ARTICLE XIV TERMINATION OR AMENDMENT OF PLAN..................................29
ARTICLE XV UNFUNDED PLAN......................................................31
ARTICLE XVI GENERAL PROVISIONS................................................31
ARTICLE XVII EFFECTIVE DATE OF PLAN...........................................34
ARTICLE XVIII TERM OF PLAN....................................................34
ARTICLE XIX NAME OF PLAN......................................................34
EXHIBIT A PERFORMANCE GOALS....................................................A

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Exhibit 4.1  

 
 

SHAREHOLDER AGREEMENT [UPDATED TO AUGUST 27, 2003]    
    

        THIS AGREEMENT dated the 27th day of December, 2001. 

A
M O N G: 

JOHN NEMANIC, an adult individual residing at 1330 15th Avenue SW, Calgary, Alberta, Canada T3C 3N7, 

("JN")

– and –

WILLIAM CAMPBELL, an adult individual residing at 1 Leland Avenue, Toronto, Ontario, Canada M8Z 2X4, 

("WC")

– and –

COLIN CAMPBELL, an adult individual residing at 2139 Westoak Trails, Oakville, Ontario, Canada L3M 3L3, 

("CC") 

– and – 

TELUS CORPORATION, a corporation incorporated under the laws of British Columbia with its principal place of business located at
21 - 3777 Kingsway, Burnaby, British Columbia, Canada V5H 3Z7, 

("TELUS")

– and –

The
other Shareholders who have executed this Agreement, 

– and –

HOSTOPIA.COM, INC., a corporation incorporated under the laws of Delaware with its principal place of business located at Suite 606,
56 Aberfoyle Crescent, Toronto, Ontario, Canada M8X 2W4 

(the "Corporation"
and, together with the Shareholders, the "Parties") 

 

WITNESSES
THAT: 

        WHEREAS
the Parties wish to enter into this Agreement to provide for the conduct of the business and affairs of the Corporation, to provide for restrictions on the transfer of shares in
the capital of the Corporation and to govern their relationship as shareholders of the Corporation with the intent that it shall constitute a unanimous shareholder agreement; 

        NOW
THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which
are hereby acknowledged by each of the Parties), the Parties hereto agree as follows: 

 
 

ARTICLE ONE
  
    INTERPRETATION    
    

Section 1.01    Definitions  

        In this Agreement, 

	(a)
	"Act"
means the General Corporation Law of the State of Delaware as the same may be amended from time to time and any successor legislation thereto, except where otherwise
expressly provided;

	(b)
	"Agreement"
means this agreement and all schedules attached to this agreement, in each case as they may be supplemented or amended from time to time and the expressions "hereof",
"herein", "hereto", "hereunder", "hereby" and similar expressions refer to this agreement, and "Article" and "Section" mean and refer to the specified article and section of this agreement;

	(c)
	"Business
Day" means any day, other than Saturday, Sunday or any statutory holiday in the Province of Ontario;

	(d)
	"Common
Shares" means the shares of common stock, having a par value of $0.001 per share, in the capital of the Corporation;

	(e)
	"Confidential
Information" means all confidential or proprietary information, intellectual property (including trade secrets) and confidential facts relating to the business and
affairs of the Corporation and its Subsidiaries;

	(f)
	"Control"
means, in the case of a corporation, the beneficial ownership by a Person alone or together with one or more Related Parties at the relevant time, of shares of such
corporation carrying all of the voting rights ordinarily exercisable at meetings of shareholders of such corporation and such shares are entitled to all of the residual equity of such corporation and,
in the case of an entity other than a corporation, the beneficial ownership by a Person who alone or together with one or more Related Parties, at the relevant time of all of the voting rights
ordinarily exercisable at meetings of equity owners of such entity and of all the residual equity of such entity and the words "Controlled by", "Controlling" and similar words have corresponding
meanings; provided that a Person (the "first-mentioned Person") who Controls a corporation or other entity (the "second-mentioned Person") shall be deemed to Control a corporation or
other entity which is Controlled by the second-mentioned Person and so on; 

2

 

	(g)
	"Controlled
Entity" means, in relation to a Shareholder who is not a natural person, a corporation, partnership or other equity which:

	(i)
	controls
the Shareholder;

	(ii)
	is
controlled by the Shareholder alone or together with one or more Related Parties to the Shareholder; or

	(iii)
	is
controlled by one or more Related Parties to the Shareholder;

	(h)
	"Corporation"
includes any successor to the Corporation resulting from any amalgamation, merger, arrangement or other reorganization of or including the Corporation or any continuance
under the laws of another jurisdiction;

	(i)
	"Disability"
means the mental or physical state of an individual such that:

	(i)
	a
majority of the directors of the Corporation, other than such individual if he is a director, acting reasonably and upon the certificate of a medical practitioner duly
licensed and qualified to practise in the relevant jurisdiction, determine that such individual has been unable, due to illness, disease, mental or physical disability or similar cause, to fulfill his
obligations as an employee, officer or director of the Corporation either for any consecutive six month period or for any period of 12 months (whether or not consecutive) in any consecutive
24 month period; or

	(ii)
	a
court of competent jurisdiction has declared such individual to be mentally incompetent or incapable of managing his affairs;

	(j)
	"Look
Option" means an option granted to Look Communications Inc. exercisable to purchase 760,000 Common Shares at $0.50 per share until January 31, 2002;

	(k)
	"Option
Plan" means the stock option plan of the Corporation;

	(l)
	"Person"
means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated
association, trust, trustee, executor, administrator or legal personal representative, regulatory body or agency, government or governmental agency, authority or entity however designated
or constituted; 

3

 

	(m)
	"Preferred
Shares" means the shares of preferred stock, having a par value of $0.001 per share, in the capital of the Corporation;

	(n)
	"Related
Entity" means, in relation to a Shareholder which is a natural person or a Controlled Entity of a natural person, any trust, all of the trustees of which are Persons resident
in Canada and all of the beneficiaries of which are the spouse, children (including by adoption) or grandchildren of such natural person;

	(o)
	"Related
Individual" when used in relation to a Controlled Entity or a Related Entity, means the natural person who transferred Shares to such Controlled Entity or Related Entity as
the case may be, or, in the case of a Controlled Entity or Related Entity who becomes a Shareholder as contemplated in Section 4.05(b), the Related Individual referred to in
that section;

	(p)
	"Related
Party" to a person that is not a natural person (the first-mentioned person) means another person who controls, is controlled by, or under common control with the
first-mentioned person;

	(q)
	"Related
Shareholders", when used in relation to a Shareholder, means, if such Shareholder is a natural person, his Controlled Entities and Related Entities and, if such Shareholder
is a Controlled Entity or Related Entity, its Related Individual and all Controlled Entities and Related Entities of its Related Individual, provided that no Person shall be a Related Shareholder
unless such Person is a Shareholder;

	(r)
	"Reserved
Shares" means a maximum of 4,000,000 Common Shares issuable from time to time to directors, officers, employees and consultants of the Corporation pursuant to options
granted under the Option Plan or such agreements as may be approved by the board of directors of the Corporation.

	(s)
	"Series A
Shares" means the shares in the series of Preferred Shares designated Series A Preferred Shares.

	(t)
	"Shareholder"
means any Person who is a registered holder of Shares and "Shareholders" means every Shareholder;

	(u)
	"Shares"
means the Common Shares and the Preferred Shares (including the Series A Shares) of the Corporation, any Common Shares issued upon the conversion of the
Series A Shares, any shares or securities which are received as a stock dividend or distribution payable in shares or securities of the Corporation, any shares received on the exercise of any
option, warrant or other similar right and any shares or securities which may be received by the Parties hereto or bound hereby as a result of an amalgamation, merger, arrangement or other
reorganization of or including the Corporation;

	(v)
	"Subsidiary"
means a subsidiary within the meaning of the Act;

	(w)
	"Third
Party Purchaser" means, in relation to any Person, a Person acting bona fide and at arm's length to such Person; 

4

 

	(x)
	"TK
Warrant" means a share purchase warrant to be issued at Closing to Thomson Kernaghan & Co. Limited and to be exercisable to purchase 425,532 Series A
Shares at $0.47 per share until December 31, 2002.

	(y)
	"Transfer"
includes any sale, exchange, assignment, gift, bequest, disposition, mortgage, charge, pledge, encumbrance, grant of security interest or any arrangement by which
possession, legal title or beneficial ownership passes from one Person to another, or to the same Person in a different capacity, whether or not voluntary and whether or not for value, and any
agreement to effect any of the foregoing; and the words "Transferred", "Transferring" and similar words have corresponding meanings; and

	(z)
	"Triggering
Event" has the meaning set forth in Section 8.01. 

Section 1.02    Calculation of Time Periods  

        When calculating the period of time within which or following which any act is to be done or step taken pursuant to this Agreement, the date which is the
reference date in calculating such period shall be excluded. If the last day of such period is not a Business Day, the period in question shall end on the next Business Day. 

Section 1.03    Heading and Table of Contents  

        The inclusion of headings and a table of contents in this Agreement is for convenience of reference only and shall not affect the construction or
interpretation hereof. 

Section 1.04    Gender and Number  

        In this Agreement, unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include
all genders. 

Section 1.05    Currency  

        Except as expressly provided in this Agreement, all amounts in this Agreement are stated and shall be paid in United States currency. 

Section 1.06    Invalidity of Provisions  

        Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision by a court
of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. 

Section 1.07    Entire Agreement, Waiver, etc.  

        This Agreement constitutes the entire agreement between the Parties hereto pertaining to the subject matter hereof. There are no other agreements between the
Parties in connection with the subject matter hereof except as specifically set forth or referred to herein. Except as expressly provided in this Agreement, no amendment, waiver or termination of this
Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided. 

5

 

Section 1.08    Governing Law  

        This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 

Section 1.09    References to Shares  

        Any reference to Shares of the Corporation means Shares in the capital of the Corporation, as such Shares exist at the close of business on the date of execution
and delivery of this Agreement; provided that in the event of a subdivision, redivision, reduction, combination or consolidation, then a reference to shares of the Corporation shall thereafter mean
the Shares resulting from such subdivision, redivision, reduction, combination or consolidation. 

Section 1.10    Calculations of Number of Shares  

        All calculations of the respective ownership of Shares for the purposes of this Agreement at any particular time shall be after giving effect to the conversion of
the outstanding Series A Shares at such time. 

 
 

ARTICLE TWO
  
    REPRESENTATIONS AND COVENANTS    
    

Section 2.01    Representations of Shareholders  

	(a)
	Each
of JN, WC, CC and TELUS severally represents and warrants that he or it is the owner, beneficially and (except as set forth in the notes below the table) of record, of the number
and class of the issued and outstanding Shares set forth below: 

	Name 
	 	Number and Class of Shares

	JN	 	5,060,811,333	(1)	Common Shares
	 	 	2,127,660	(2)	Series A Shares
	WC	 	4,860,811,333	(3)	Common Shares
	 	 	2,127,660	(2)	Series A Shares
	CC	 	5,060,811,333	(4)	Common Shares
	 	 	2,127,660	(2)	Series A Shares
	TELUS	 	4,255,319	 	Series A Shares

	(1)
	Including
1,320,000 Common Shares owned by The Nemanic Family Trust.

	(2)
	Including
4,255,319 Series A Shares owned by 1053461 Ontario Limited.

	(3)
	Including
1,320,000 Common Shares owned by The 1999 William Campbell Family Trust.

	(4)
	Including
1,320,000 Common Shares owned by The KKC Campbell Family Trust. 

6

 

	(b)
	Each
of the Shareholders listed in Schedule "A" severally represents and warrants that he is the owner, beneficially and of record, of the number and class of
the issued and outstanding shares set forth beside his name therein.

	(c)
	The
Shares set forth in Section 2.01(a) and (b) hereof are free and clear of all claims, liens, security interests and encumbrances whatsoever and,
except as provided in this Agreement, no person has any agreement or option or right capable of becoming an agreement for the purchase of any such Shares. 

Section 2.02    Representations of the Corporation  

	(a)
	The
Corporation represents and warrants that:

	(i)
	the
shares listed in Section 2.01(a) hereof and on Schedule "A" are the only issued and outstanding Shares of the Corporation; and

	(ii)
	except
as provided in this Agreement and pursuant to options granted under the Option Plan, the Look Option and the TK Warrant, no person has any
agreement or option or right capable of becoming an agreement for the purchase, subscription or issuance of any of the unissued shares of the Corporation or any securities convertible
into or exchangeable for shares of the Corporation. 

Section 2.03    Representations of all Parties  

        Each of the Parties represents and warrants that: 

	(a)
	such
party has the capacity to enter into and give full effect to this Agreement;

	(b)
	in
the case of Parties other than natural persons, this Agreement has been duly authorized by it and, in all cases, this Agreement has been duly executed and delivered
by such party and constitutes a valid and binding obligation enforceable against such party in accordance with its terms; and

	(c)
	in
the case of Parties other than natural persons, the execution, delivery and performance of this Agreement does not and will not contravene the provisions of its
articles, by-laws, constating documents or other organizational documents or the documents by which it was created or established and, in all cases, the execution, delivery
and performance of this Agreement does not and will not contravene the provisions of any indenture, agreement or other instrument to which such party is a party or by which such party
may be bound. 

7

 

 
 

ARTICLE THREE
  
    BUSINESS AND AFFAIRS OF THE CORPORATION    
    

Section 3.01    Business and Affairs of the Corporation  

        The Shareholders agree to cause such meetings to be held, votes to be cast, resolutions to be passed, by-laws to be made and
confirmed, documents to be executed and all other things and acts to be done to ensure that, at all times, the provisions of this Article Three are in effect or are
complied with. 

Section 3.02    Board of Directors  

        There shall be nine directors of the Corporation. For so long as it holds at least 1,700,000 Shares, TELUS shall be entitled to nominate
two directors. The two directors to nominated initially by TELUS shall be the individuals designated in writing by TELUS. Each of the Shareholders covenants and agrees to vote all
Shares owned by such Shareholder in favour of the election of the TELUS nominees as directors for the Corporation. Each nominee for the position of director of the Corporation shall be
an individual who is not disqualified under applicable corporate law from acting as a director. If a director ceases to be a director for any reason (a "retiring director"), the
holders of the applicable Shares shall fill the vacancy thereby created by electing or appointing a replacement director as soon as reasonably possible. 

Section 3.03    Meeting of Directors  

        The board of directors of the Corporation shall meet at least once in every calendar quarter provided that the period of time between meetings
shall not be more than 120 days. Meetings shall be held in such place as the directors may agree from time to time and otherwise at the principal business office of the
Corporation. Meetings of the directors may be called by the President of the Corporation or by any two directors of the Corporation upon not less than 10 business days notice
or, if arrangements are made for directors to participate in such board meeting by telephone, upon not less than 48 hours notice, subject, in either case, to the right of
directors to waive unanimously such notice in writing at any time either before or after a meeting, which notice shall contain a statement as to the business proposed to be transacted
at such meeting. 

        Directors
who are not officers or employees of the Corporation shall not be entitled to fees for the fiscal year ending March 31, 2002 and thereafter shall be
entitled to such fees, if any, as the directors may determine based upon the prevailing market rate for companies such as the Corporation and to reimbursement for travel, meal,
accommodation and out-of-pocket expenses related to attending meetings of directors. 

8

 

Section 3.04    Meeting of Shareholders  

        Meetings of Shareholders shall be held in the City of Toronto, or any other place selected by the board of directors or the Shareholders calling
the same, and may be called by the board of directors or by Shareholders who hold not less than 25% of any class or series of the Shares of the Corporation upon not less than 10 and
not more than 60 days notice. 

Section 3.05    Quorum  

        A quorum for a meeting of directors shall be a majority of the total number of directors. 

        A
quorum for a meeting of Shareholders shall be at least two Shareholders present in person or by proxy who hold not less than a majority of the Shares and having a
majority of the voting power of the outstanding Shares. 

Section 3.06    Decisions of Directors  

	(a)
	Subject
to Section 3.06(c), in order to be effective, a decision of the directors must be approved either by a resolution passed by the affirmative vote of not
less than a majority of directors present and constituting a quorum at a meeting of directors duly called or by an instrument signed by all the directors.

	(b)
	The
Chairman of any meeting of the directors or Shareholders shall not have a casting vote.

	(c)
	An
option under the Option Plan shall not be granted without the unanimous consent of the directors elected or appointed by the holders of Series A Shares
unless the vesting of such option does not exceed one-third (on a cumulative basis) of the Shares issuable upon exercise thereof following each anniversary of the
date such option is granted. 

Section 3.07    Establishment of Committees  

	(a)
	The
board of directors shall cause the Corporation to establish a technology advisory committee which shall be comprised of at least three members, of whom one shall
be a director and one shall be an individual (who need not be a director) nominated by TELUS. Subject always to the overriding power of the board of directors to manage the
business and affairs of the Corporation, and to the extent permitted by applicable law, the technology advisory committee shall have such responsibilities as may be assigned to it
(subject to the Act) from time to time by the board of directors.

	(b)
	The
board of directors may from time to time establish such other committees and, subject always to the overriding power of the board of directors to manage the
business and affairs of the Corporation, and to the extent permitted by applicable law, grant any such committee such authority as the board of directors may determine, to each
committee shall be comprised of at least three members, one of whom shall be a director nominated by TELUS. 

9

 

Section 3.08    Shareholder Information  

        The Corporation shall send to Shareholders: 

	(a)
	not
later than 180 days following the end of each fiscal year, the audited consolidated financial statements of the Corporation in respect of each
fiscal year;

	(b)
	not
later than 90 days following the end of each fiscal quarter, the unaudited consolidated financial statements of the Corporation in respect of such fiscal
quarter; and

	(c)
	copies
of all documents sent to any Shareholder for the purpose of obtaining the approval of Shareholders. 

 
 

ARTICLE FOUR
  
    GENERAL MATTERS RELATING TO THE
  HOLDING OF SHARES AND PERMITTED TRANSFERS    
    

Section 4.01    General Prohibition on Transfer of Shares  

        No Shareholder shall deal with any Shares or any interest therein or Transfer any Shares now or hereafter held by such Shareholder, directly or
indirectly, except in accordance with this Agreement. A purported Transfer of any Shares in violation of this Agreement shall not be valid and the Corporation shall not register, nor
permit any transfer agent to register, any such Shares on the securities register of the Corporation, nor shall any voting rights attaching to or relating to such Shares be exercised,
nor
shall any purported exercise of such voting rights be valid or effective, nor shall any dividend or distribution be paid or made on such Shares. Each Shareholder who purports to make a
Transfer of any Shares in violation of this Agreement agrees to donate and hereby donates to the Corporation all dividends and distributions paid or made on such Shares during the
period of such prohibited Transfer. The provisions of the immediately preceding sentence are in addition to, and not in lieu of, any other remedies to enforce the provisions of
this Agreement. 

Section 4.02    Prohibition on Indirect Transfers of Shares  

        Each Shareholder covenants that, if such Shareholder Transfers all or any of the Shares held by such Shareholder to a Controlled Entity, such
Shareholder will not, directly or indirectly, Transfer any securities of such Controlled Equity and will not permit such Controlled Entity to Transfer, directly or indirectly, any
securities of the Corporation except, in either case, with the prior written consent of the Shareholders (other than such Shareholder) or in accordance with the terms of
this Agreement. 

10

 

Section 4.03    Transfers by a Shareholder to a Controlled Entity  

        A Shareholder may at any time and from time to time Transfer all or any of the Shares held by such Shareholder to a Controlled Entity
provided that: 

	(a)
	the
Shareholder shall have executed and delivered an instrument, in form and substance satisfactory to the other Parties then bound by this Agreement acting
reasonably, which contains a representation and warranty by the Shareholder that such Shareholder Controls the Controlled Entity, sets out particulars as to the manner in which the
Shareholder Controls the Controlled Entity and contains the representations, warranties and agreements referred to below; and

	(b)
	the
Controlled Entity shall have executed and delivered an instrument, in form and substance satisfactory to the other Parties then bound by this Agreement acting
reasonably, in which the Controlled Entity makes the representations and warranties made by the Shareholders in this Agreement and agrees to be bound by all the terms of this
Agreement, as if the Controlled Entity were an original signatory hereto. 

        The
Shareholder shall represent and warrant that the shares which such Shareholder owns in the capital of the Controlled Entity are not subject to the terms of any
agreement which provides for the manner in which shares in the capital of the Controlled Entity are to be voted and that the Shareholder is entitled, without restriction, to exercise
all voting rights attached to the shares owned by such Shareholder in the capital of the Controlled Entity and shall agree that such Shareholder will ensure that the foregoing
representations and warranties continue to be true and correct at all times, that such Shareholder will not mortgage, hypothecate, pledge or grant a security interest in any shares in
the capital of the Controlled Entity except with the prior written consent of a majority of the other Shareholders, that such Shareholder will continue to be bound by all the
provisions of this Agreement notwithstanding the Transfer of Shares to the Controlled Entity and that such Shareholder guarantees the performance by the Controlled Entity of all its
obligations incurred in the manner described in Section 4.03(b). 

Section 4.04    Transfers by a Shareholder to a Related Entity  

        A Shareholder may at any time and from time to time Transfer all or any of the Shares held by such Shareholder to a Related Entity or Related
Party (the "Transferee") provided that: 

	(a)
	the
Shareholder shall have executed and delivered an instrument, in form and substance satisfactory to the other Parties then bound by this Agreement acting
reasonably, in which the Shareholder represents and warrants that the Transferee qualifies as such pursuant to this Agreement and agrees to ensure that such representation and warranty
will continue to be true and correct at all times, that such Shareholder will continue to be bound by all the provisions of this Agreement notwithstanding the Transfer of Shares to the
Transferee, and that such Shareholder guarantees the performance by the Transferee of all its obligations incurred in the manner described in Section 4.04(b); 

11

 

	(b)
	the
Transferee shall have executed and delivered an instrument, in form and substance satisfactory to the other Parties then bound by this Agreement acting reasonably,
in which the Transferee makes the representations and warranties made by the Shareholders under this Agreement and agrees to be bound by all the terms of this Agreement, as if the
Transferee were an original signatory hereto; and

	(c)
	the
Transferee shall have executed and delivered an instrument, in form and substance satisfactory to the other Parties then bound by this Agreement acting reasonably,
by which the Transferee grants to the Shareholder, by way of irrevocable and unconditional grant, the right to vote the Shares Transferred to the Transferee at all meetings of
Shareholders of the Corporation and the right to execute all documents and do all things which a Shareholder is permitted or required to do under this Agreement. 

Section 4.05    Transfers by Related Entities, Related Parties and Controlled Entities  

        A Related Entity, Related Party or a Controlled Entity may at any time and from time to time Transfer all or any part of the Shares held by such
Related Entity, Related Party or Controlled Entity: 

	(a)
	to
its Related Individual, provided that notice of such Transfer is given to the other Parties then bound by this Agreement prior to or concurrently with such
Transfer; or

	(b)
	to
a Transferee that qualifies as a Controlled Entity, Related Party or Related Entity of its Related Individual, provided that such Related Individual and the
Transferee execute and deliver the documents referred to in Sections 4.03 or 4.04, as the case may be, prior to any such Transfer. 

Section 4.06    No Registration of Transfer Unless Transferee is Bound  

        If, pursuant to any provision of this Agreement, a Shareholder Transfers any of such Shareholder's Shares to any other Person, no Transfer of such
Shares shall be made nor shall be effective and no application shall be made to the Corporation or to the Corporation's transfer agent to register the Transfer, and the Corporation
shall not register any such Transfer, on the securities register of the Corporation until, in the case of a Transfer contemplated by Sections 4.03, 4.04 or 4.05, the
documentation referred to in those sections has been delivered, and, in the case of any other Transfer, the proposed Transferee and the Person, if any who Controls such Transferee
become subject to all of the obligations of the transferor under this Agreement (in which case the proposed Transferee shall become entitled to exercise all the rights of the
transferor under this Agreement) and agree to be bound by all of the provisions hereof as if they were original signatories hereto pursuant to an agreement in writing, in form and
substance satisfactory to the other Parties then bound by this Agreement acting reasonably. The foregoing does not apply to a Transfer of Shares by a Shareholder and his Related
Shareholders to another Shareholder pursuant to Article Six. 

12

  

Section 4.07    Notation on Share Certificates  

        All certificates representing Shares shall have the following statement conspicuously noted thereon: 

"There
are restrictions on the right to transfer the shares represented by this certificate. In addition, such shares are subject to a Shareholder Agreement dated the 27th day of December,
2001, as the same may be amended from time to time, and may not be pledged, sold or otherwise transferred except in accordance with the provisions thereof." 

        All
certificates representing securities issued by the Corporation which are convertible into or exchangeable for Shares or evidencing a right to acquire Shares shall contain a statement
substantially to the same effect. 

Section 4.08    Shareholders to Facilitate Permitted Transfers  

        Each of the Shareholders agrees to give and execute all necessary consents and approvals to the Transfer of Shares pursuant to this Article Four as soon as the
relevant provisions of this Agreement relating to the Transfer have been complied with. 

 
 

ARTICLE FIVE
  
    SUBSCRIPTION RIGHTS    
    

Section 5.01    Subscription Rights  

        Subject to Section 5.04 hereof, if the Corporation desires and is authorized to issue any shares or securities convertible into or exchangeable for shares
of the Corporation or any securities carrying rights, options or warrants to acquire such shares or securities, other than: 

	(a)
	Common
Shares issuable upon conversion of Series A Shares;

	(b)
	Common
Shares issuable upon exercise of the Look Option;

	(c)
	Series A
Shares issuable upon exercise of the TK Warrant (or Common Shares issuable upon conversion of such Series A Shares;

	(d)
	the
Reserved Shares; or

	(e)
	share
purchase warrants authorized by a majority of the board of directors, which majority shall include a majority of the directors designated by the holders of Series A
Shares, provided that such share purchase warrants shall be issued for the purpose of attracting material new business for the Corporation and shall have an exercise price of not less than
$0.47 per share 

13

 

the
Secretary shall give written notice (in this Article, an "Offer") to the Shareholders as at the close of business on the date upon which the Offer is mailed (in this Article, the
"Offerees") of the number and type of shares or securities (in this Article, the "Offered Securities") which it desires to issue and the cash price (in this Article, the "Consideration")
which it desires to receive per Offered Security and the person or persons (in this Article, the "Persons") to whom, in accordance with the provisions of this Section 5.01, it desires to
issue the Offered Securities. 

Section 5.02    Provisions Relating to Offered Securities  

	(a)
	The
Offered Securities shall be offered as nearly as possible in proportion to the Offerees' respective ownership of Shares at the time of mailing of the Offer. The Offer shall be
sent by mail to the Offerees at their addresses as shown in the registers of Shareholders kept by the Corporation, shall set out the aggregate number of Shares outstanding at the close of business on
the date of mailing of the Offer, shall limit the time within which the Offer may be accepted and within which any purchase resulting from acceptance of the Offer must be completed (which time shall
not be less than 5 Business Days nor more than 10 Business Days after the date of mailing of the Offer), shall fix the time, date and place for completion of any purchase resulting from
acceptance of the Offer, shall state that any Offeree who desires to accept the Offer for more of the Offered Securities than the prescribed share of such Offeree shall, in its acceptance, state the
additional number of Offered Securities it wishes to purchase and shall be accompanied by a written form for acceptance of the Offer. If any Offeree does not accept the Offer, or accepts the Offer in
respect of less than its prescribed share of the Offered Securities, the unclaimed Offered Securities shall be applied to satisfying the claims of the other Offeree(s) for Offered Securities in excess
of their prescribed share and if the claims in excess are more than sufficient to exhaust such unclaimed Offered Securities, the unclaimed Offered Securities shall be divided among the Offeree(s)
desiring excess Offered Securities in proportion to their holdings of Shares of the Corporation at the close of business on the date of mailing of the Offer, but so that no such Offeree shall be bound
to take a greater number of Offered Securities than the number set out in its acceptance of the Offer. If after giving effect to any such allocation of unclaimed Offered Securities there shall remain
any unsatisfied claims for Offered Securities and any unclaimed Offered Securities, then such allocation of unclaimed Offered Securities shall be repeated until all unclaimed Offered Securities have
been allocated to Offerees. The Corporation shall be entitled to re-allocate the Offered Securities for the purpose hereof to the extent necessary to prevent the making or acceptance of an
Offer in respect of fractional Offered Securities.

	(b)
	The
Corporation shall from time to time when requested to do so advise each Offeree promptly of the names of other Offerees who have accepted the Offer and the numbers of Offered
Securities in respect of which each has accepted the Offer. 

14

 

Section 5.03    Purchase of Offered Securities  

        Each Offeree who accepted the Offer in accordance with the terms hereof shall be bound to purchase, take up and pay for, and the Corporation shall be bound to
issue, the Offered Securities to be purchased by such Offeree in accordance with the foregoing provisions hereof, and the Corporation shall promptly advise the Offerees of the number of the Offered
Securities to be purchased by each of the Offerees, whereupon the Corporation shall be obliged to deliver to the Offerees at the time, date and place set out in the Offer, certificates representing
the Offered Securities registered in their respective names in an aggregate number equal to the number of the Offered Securities to be purchased by them against payment made in full in cash of the
aggregate Consideration therefor. 

Section 5.04    Failure to Purchase Offered Securities  

        To the extent that the Offerees shall fail to accept the Offer in respect of all of the Offered Securities or fail to pay in full the aggregate Consideration for
the Offered Securities in accordance with Section 5.03, then the Corporation shall be entitled, during the 120 days following the completion of the purchases or expiry of the Offer, as
the case may be, to sell all but not less than all of the Offered Securities not taken up in accordance with the foregoing provisions hereof to any person or persons at a price not less than the
Consideration and on terms no more favourable, provided each such person shall enter into an assumption agreement agreeing to be bound by the provisions of this Agreement. 

 
 

ARTICLE SIX
  
    RIGHTS OF FIRST REFUSAL    
    

Section 6.01    Selling Shareholders to Give First Refusal Notice  

	(a)
	Subject
to paragraph (b) below and to Section 6.10 and Article Seven, if, at any time, any Shareholder and all of its Related Shareholders wish to sell all or any
of the Shares held by such Shareholder, such Shareholder (in this Article, the "Selling Shareholder") shall give notice thereof (in this Article, the "First Refusal Notice"), to the
Secretary of the Corporation and to other Shareholders (in this Article, the "Other Shareholders"). The First Refusal Notice shall state that the Selling Shareholder wishes to sell all or a
specified number, as the case may be, of the Shares held by such Selling Shareholder (in this Article, the "Offered Shares") and shall state the price (which shall be payable in cash and shall
be the same for each Selling Shareholder) which the Selling Shareholder is willing to accept for the Offered Shares and the identity, if known, of the purchaser. A First Refusal Notice shall also
contain a representation and warranty that no event of the kind referred to in Section 6.10 has occurred with respect to the Selling Shareholder.

	(b)
	Paragraph (a)
above shall not apply to sales between and among JN, WC and CC and their respective Controlled Entities and Related Entities. 

15

 

Section 6.02    Secretary as Agent for the Selling Shareholders  

        Upon delivery of a First Refusal Notice, the Secretary shall be constituted the agent for the Selling Shareholder to offer the Offered Shares for purchase by the
Other Shareholders, in the manner provided herein, at the price and on the terms of payment contained in the First Refusal Notice. 

Section 6.03    Secretary's Notice to be Given to Other Shareholders  

        Within three Business Days after receipt of the First Refusal Notice, the Secretary shall give notice (in this Article, the "Secretary's Notice") to each
of the Other Shareholders. The Secretary's Notice: 

	(a)
	shall
offer for sale to each of the Other Shareholders that number of Offered Shares which bears the same relationship to the total number of Offered Shares as the number of Shares
held at such date by each such Other Shareholder bears to the total number of outstanding Shares at such date excluding the Offered Shares (in this Article, the
"Proportionate Entitlement");

	(b)
	shall
state the price for any Offered Shares that may be purchased by the Other Shareholders and the terms of payment thereof; and

	(c)
	shall
state that any Other Shareholder who wishes to purchase a number of Offered Shares less than or more than its Proportionate Entitlement shall, in its notice of acceptance under
Section 6.04, indicate how many Offered Shares less than or more than its Proportionate Entitlement it wishes to purchase. 

        The
offer constituted by the Secretary's Notice shall be irrevocable and shall remain open for acceptance by the Other Shareholders for a period of 30 days after
receipt thereof. 

Section 6.04    Other Shareholders May Give Notice of Acceptance  

        Each of the Other Shareholders shall have the right, exercisable by notice given to the Secretary within 30 days after receipt of the Secretary's Notice,
to agree that it will purchase its Proportionate Entitlement of the Offered Shares or, if it wishes to purchase less than or more than its Proportionate Entitlement, to indicate how many Offered
Shares less than or more than its Proportionate Entitlement it wishes to purchase. If no notice is given by an Other Shareholder under this section, the Other Shareholder shall be deemed to have
rejected the offer made available to it to purchase Offered Shares. 

Section 6.05    Right to Purchase Unsubscribed Shares  

        If any of the Other Shareholders does not agree to purchase all the Offered Shares which it is entitled to purchase or is deemed to have rejected the offer made
available to it to purchase Offered Shares (in this Article, a "Declining Offeree"), the Secretary shall forthwith so notify (in this Article, the "Additional Notice") each of the Other
Shareholders who has agreed to purchase not less than its Proportionate Entitlement of the Offered Shares. Each such Other Shareholder shall have the right to purchase that number, or any part
thereof, of the Offered Shares which have not been accepted for purchase by the Shareholders entitled to do so (in this Article, the "Unsubscribed Shares") which bears the same relationship to
the total number of Unsubscribed Shares as the number of Shares held by such Other Shareholder bears to the total number of Shares held by all Other Shareholders who are entitled to purchase such
Unsubscribed Shares. 

16

 

        Each
Other Shareholder who receives an Additional Notice shall have the right, exercisable by notice given to the Secretary within 15 days after receipt of the Additional Notice,
to agree that it will purchase the number of Unsubscribed Shares which it is entitled to purchase or any lesser or greater number thereof specified by it in such notice. If no notice is given by any
such Other Shareholder under this section within such 15 day period, such Other Shareholder shall be deemed to have rejected the offer made available to it to purchase
Unsubscribed Shares. 

        The
provisions of this Section 6.05 shall be applied, mutatis mutandis, until the Other Shareholders entitled to do so from time to
time have agreed to accept or have rejected or have been deemed to have rejected the offer contained in the latest Additional Notice with respect to all the Unsubscribed Shares at such time. 

Section 6.06    Other Shareholders May Agree on Manner of Purchase  

        If they all agree in writing, the Other Shareholders may purchase the Offered Shares in proportions otherwise than as provided in Sections 6.03
or 6.05, provided that the Other Shareholders may not purchase less than all of the Offered Shares. 

Section 6.07    Sale to Third Party if All Offered Shares Not Purchased  

        If all of the Offered Shares have not been accepted for purchase by one or more of the Other Shareholders within the period of 30 days after receipt of the
Secretary's Notice or within the period of 15 days after receipt of the latest Additional Notice, whichever is later, (in this Article, the "acceptance period"), the Other Shareholders
shall be deemed to have rejected the offer made available to them to purchase the Offered Shares and the Selling Shareholder shall be entitled, within the period of 90 days after the expiry of
the acceptance period, to sell the Shares held by such Selling Shareholder to a Third Party Purchaser on terms and conditions no more favourable in any respect to the Third Party Purchaser than those
contained in the First Refusal Notice provided that, prior to the completion of such sale, such Third Party Purchaser and any Person Controlling such Third Party Purchaser become subject to all of the
obligations of the Selling Shareholder under this Agreement and agree to be bound by all of the provisions hereof as contemplated in Section 4.06, in which case such Third Party Purchaser shall
become entitled to exercise all the rights of the Selling Shareholder under this Agreement. If the sale is not completed within such 90 day period the provisions of Section 6.01 shall
apply again to any proposed sale of the Offered Shares and so on from time to time. 

Section 6.08    Completion of Purchase and Sale  

        If one or more of the Other Shareholders exercise the right to purchase the Offered Shares pursuant to Sections 6.04, 6.05 or 6.06, the purchase of
the Offered Shares by each of the Other Shareholders who have agreed to purchase the same shall be completed concurrently and as part of the same closing (which shall be not later than 30 days
following the expiry of all applicable time periods set forth in Sections 6.04, 6.05 or 6.06) at the price set out in the First Refusal Notice and in accordance with the terms of the
First Refusal Notice. 

17

 

Section 6.09    Rights of the Selling Shareholders On Default  

        If an Other Shareholder who has agreed to purchase any Offered Shares defaults in payment of the purchase price for such Offered Shares or any part thereof
required to be purchased by him on the date scheduled for completion of the purchase and sale (in this Article, the "completion date"), the Selling Shareholder shall not be required to sell any
Offered Shares to any of the Other Shareholders unless some or all of the Other Shareholders purchase all of the Offered Shares on the completion date. If the Other Shareholders do not do so, the
Selling Shareholder shall be entitled, within the period of 90 days after the completion date, to sell the Offered Shares to a Third Party Purchaser on terms and conditions no more favourable
in any respect than those contained in the First Refusal Notice, provided that, prior to the completion of such sale, such Third Party Purchaser and any Person Controlling such Third Party Purchaser
become subject to all of the obligations of the Selling Shareholder under this Agreement as contemplated in Section 4.06, in which case such Third Party Purchaser shall become entitled to
exercise all the rights of the Selling Shareholder under this Agreement. If the sale is not completed within such 90 day period, the provisions of Section 6.01 shall apply again to any
proposed sale of the Offered Shares and so on from time to time. 

Section 6.10    Restriction on Exercise of First Refusal  

        A Shareholder shall not be entitled to deliver a First Refusal Notice during the period from the date on which a Triggering Event with respect to such
Shareholder, his Related Individual or any of his Related Shareholders has occurred or an event has occurred which, with notice or lapse of time or both, would constitute such a Triggering Event, in
each case to the date which is 30 days thereafter. After the expiry of such period, such Shareholder shall be entitled to deliver a First Refusal Notice so long as the provisions of
Section 8.02 have been complied with and the Shares are not being purchased pursuant to that section. 

 
 

ARTICLE SEVEN
  
    PIGGY-BACK RIGHTS    
    

Section 7.01    Piggy-Back Right  

        In addition to compliance with the provisions of Article Six, if at any time one or more Shareholders (in this Article Seven the "Selling Shareholders")
propose to sell the Shares owned by them, which Shares constitute more than 27% of the then outstanding Shares of the Corporation, to a Third Party Purchaser and enter into a purchase and sale
agreement to do so, the Selling Shareholders shall forthwith upon signing such agreement of purchase and sale (which shall be at least 30 days prior to the date specified for completion of the
transaction of purchase and sale to the Third Party Purchaser, or such shorter period as agreed to by all Shareholders), give written notice (in this Article 7, the
"Piggy-Back Notice') to the Corporation and the other Shareholders setting forth the purchase price for the Shares and any other terms and conditions of the sale and a true copy of the
agreement with the Third Party Purchaser. It is understood and agreed that the terms and conditions of any such sale must include the right of the other holders of Shares selling the Shares
(or having them purchased by the Corporation) at the closing of the transaction of purchase and sale contemplated in the Piggy-Back Notice. The Piggy-Back Notice shall
further state that each of the other Shareholders shall have the option to sell to the Third Party Purchaser up to all of its Shares, simultaneously with and conditional upon the completion of the
transaction of purchase and sale with the Third Party Purchaser and at the same price as the Third Party Purchaser is paying for such Shares and on the same terms and conditions as set forth in the
Piggy-Back Notice. 

18

 

Section 7.02    Exercise of Piggy-Back Right  

        The option to sell contemplated by Section 7.01 hereof shall be exercised by written notice (in this Article Seven, the "Acceptance Notice") by a
Shareholder stating the number of Shares that it wishes to sell as contemplated in the
Piggy-Back Notice, delivered to the Corporation not later than 20 days after the Piggy-Back Notice is given to the Other Shareholders by the Selling Shareholders. If a
Shareholder gives an Acceptance Notice, then: 

	(a)
	it
shall be obligated to sell the Shares specified in the Acceptance Notice upon the terms specified in the Piggy-Back Notice to the proposed Third Party Purchaser,
conditional upon and contemporaneously with the completion of the transaction of purchase and sale of the Selling Shareholders' Shares; and

	(b)
	the
Selling Shareholders shall not sell their Shares to the Third Party Purchaser unless payment for the Shares specified in the Acceptance Notice which are to be included in the sale
is made in accordance with the terms and conditions specified in the Piggy-Back Notice and the Acceptance Notice and, unless the requirements of Section 12.03(c) are met, the Third
Party Purchaser becomes bound by the terms of this Agreement as if such Third Party Purchaser were an original signatory hereto. 

 
 

ARTICLE EIGHT
  
    DEFAULTING SHAREHOLDERS    
    

Section 8.01    Triggering Events Defined  

        A Triggering Event is the occurrence of any one of the following events with respect to a Shareholder (the "Defaulting Shareholder"): 

	(a)
	any
representation and warranty of the Shareholder, or its Related Individual contained in this Agreement, or in any instrument or document delivered pursuant to this Agreement at any
time hereafter, is or becomes not true and correct in any material respect and the Shareholder or such Related Individual has not taken all necessary steps, to the satisfaction of the other
Shareholders and the Corporation acting reasonably, to ensure that the representation and warranty becomes true and correct no later than 30 days after receipt by such Shareholder or Related
Individual of notice from any other Shareholder or the Corporation that the representation and warranty is not true and correct; 

19

 

	(b)
	the
death of the Shareholder or its Related Individual if an employee of the Company;

	(c)
	the
Disability of the Shareholder or its Related Individual if an employee of the Company;

	(d)
	the
Shareholder or its Related Individual makes an assignment for the benefit of his creditors generally or files a petition or makes a proposal under the  Bankruptcy and Insolvency Act (Canada) or a
receiving order is made or a petition is filed under the Bankruptcy and Insolvency
Act (Canada) against the Shareholder or such Related Individual or the Shareholder makes an application under the Companies' Creditors Arrangement
Act (Canada) or any similar filing, proposal, order or application is made under the U.S. Bankruptcy Code;

	(e)
	a
resolution is passed for, or a judgment or order is issued by any court of competent jurisdiction ordering, the winding-up or other liquidation or dissolution of a
corporate Shareholder;

	(f)
	a
receiver, manager, receiver-manager, liquidator or trustee of the property, assets or undertaking of the Shareholder or its Related Individual is appointed pursuant to the terms of
a debenture or similar instrument and such appointment is not revoked or withdrawn within 30 days of the appointment;

	(g)
	default
occurs under any loan or debt obligation in respect of any Shares held by the Shareholder or any shares of, or other interest in, a Controlled Entity which holds Shares owned
by the Related Individual of such Shareholder;

	(h)
	the
Shareholder permits his Shares or the Related Individual of such Shareholder permits his shares of or other interest in, any Controlled Entity which holds Shares to be liable
to seizure;

	(i)
	the
Shareholder, if it is a Controlled Entity ceases to be Controlled by its Related Individual or the Shareholder, if it is a Related Entity ceases to qualify as a Related Entity of
its Related Individual;

	(j)
	the
Shareholder, if it is a Related Entity, brings an application or proceeding challenging the validity or enforceability of any instruments or agreements that such Related Entity
has executed and delivered under Section 4.04 and the Related Individual of such Related Entity does not produce evidence satisfactory to all the other Shareholders acting reasonably,
within 30 days of the day on which the application or proceeding is brought, that all of the legal and beneficial interest of such Related Entity in the Shares held by it has been transferred
to its Related Individual; or 

20

 

	(k)
	an
application or proceeding is brought under the applicable family law legislation by the spouse or former spouse of the Shareholder or its Related Individual to determine the
entitlement of the spouse or former spouse to family property of the Shareholder or Related Individual and the Shareholder or Related Individual does not produce evidence satisfactory to all the other
Shareholders acting reasonably, within 90 days of the date on which the application or proceeding is brought, that the financial claims of the spouse or former spouse to such entitlement can be
settled without, directly or indirectly, materially encumbering or interfering with the holding of Shares by the Shareholder or Related Individual or by any of his Controlled Entities or Related
Entities or with the holding by the Shareholder or Related Individual of shares of or other interest in, any Controlled Entity which holds Shares. 

        A
Defaulting Shareholder or his legal personal representatives shall promptly give notice to the Secretary of the Corporation or to the President of the Corporation if the Secretary is
the Defaulting Shareholder that an event has occurred with respect to such Defaulting Shareholder which constitutes a Triggering Event or which would, if such event is not corrected or remedied or
otherwise resolved to the satisfaction of the other Shareholders as contemplated above, constitute such a Triggering Event. Such notice shall be given forthwith after the occurrence of the
particular event. 

        For
the purposes of this Agreement, a Triggering Event referred to in any subsection of this Section 8.01 shall be deemed to have occurred on the expiry of any period specified in
that subsection and where no period is specified shall be deemed to have occurred on the date the Defaulting Shareholder or his legal personal representatives, as the case may be, first gives notice
to the Secretary of the occurrence of the particular Triggering Event, or on the date the Secretary first becomes aware of the occurrence of such Triggering Event, whichever is earlier. 

Section 8.02    Obligation of a Shareholder to Offer to Sell Shares:  

	(a)
	Purchase
by Corporation:

	(i)
	Subject
to the Act, the Corporation shall have the right to purchase, not later than 60 days following the Triggering Event, the Shares held by the Defaulting
Shareholder and his Related Shareholders at a purchase price determined in accordance with Section 8.03.

	(ii)
	All
of the Shares held by the Defaulting Shareholder and his Related Shareholders that the Corporation is unwilling or unable to purchase pursuant to
Section 8.02(a)(i) (the "Unsold Shares") shall be offered to the Other Shareholders and the number of such Unsold Shares offered to each of the Other Shareholders shall be that number of
Unsold Shares which bear the same relationship to the total number of Unsold Shares as the number of Shares held by each such Other Shareholder bear to the total number of outstanding Shares excluding
the Unsold Shares. The Other Shareholders agree to structure the purchase of the Unsold Shares in the most tax effective manner possible in the event of the death or Disability of a Shareholder or its
Related Individual including purchasing the shares of the Defaulting Shareholder's holding company from his estate rather than the holding company's shares of the Corporation. 

21

 

	(b)
	Secretary
as Agent for the Defaulting Shareholder and Related Shareholders:    In the circumstances referred to in subsection 8.02(a)(i),
the Secretary shall be constituted the agent for the Defaulting Shareholder and all his Related Shareholders to offer to sell the Unsold Shares to the other Shareholders (the "Other
Shareholders") in the manner provided herein. The purchase price for each Unsold Share shall be the Per Share Value as determined in accordance with Section 8.03 and shall be payable in
accordance with Section 8.04.

	(c)
	Secretary's
Notice to be Given to Other Shareholders:    In the circumstances referred to in subsection Section 8.02(a)(i), the Secretary
shall give notice (the "Secretary's Notice") to each of the Other Shareholders. The Secretary's Notice:

	(i)
	shall
offer for sale to each of the Other Shareholders that number of Unsold Shares which bears the same relationship to the total number of Unsold Shares as the number
of Shares held by each such Other Shareholder bears to the total number of outstanding Shares excluding the Unsold Shares (his "Proportionate Entitlement");

	(ii)
	shall
state that the purchase price for any Unsold Shares shall be the Selling Price thereof and shall be payable in cash; and

	(iii)
	shall
state that any Other Shareholder who wishes to purchase a number of Unsold Shares less than or more than his Proportionate Entitlement shall, in his notice of
acceptance under Section 8.02(d), indicate how many Unsold Shares less than or more than his Proportionate Entitlement he wishes to purchase. 

The
offer constituted by the Secretary's Notice shall be irrevocable and shall remain open for acceptance by the Other Shareholders for a period of 30 days after receipt thereof. 

	(d)
	Other
Shareholders May Give Notice of Acceptance:    Each of the Other Shareholders shall have the right, exercisable by notice given to the
Secretary within the period during which the offer constituted by the Secretary's Notice is open for acceptance under Section 8.02(c), to agree that he will purchase his Proportionate
Entitlement of the Unsold Shares or, if he wishes to purchase less than or more than his Proportionate Entitlement, to indicate how many Unsold Shares less than or more than his Proportionate
Entitlement he wishes to purchase. If no notice is given by an Other Shareholder under this section, the Other Shareholder shall be deemed to have rejected the offer made available to him to purchase
Unsold Shares. 

22

 

	(e)
	Right
to Purchase Unsubscribed Shares:    If any of the Other Shareholders does not agree to purchase all the Unsold Shares which he is entitled
to purchase or is deemed to have rejected the offer made available to him to purchase Unsold Shares (a "Declining Offeree"), the Secretary shall forthwith so notify (the "Additional
Notice") each of the Other Shareholders who has agreed to purchase not less than his Proportionate Entitlement of the Unsold Shares. Each such Other Shareholder shall have the right to purchase that
number, or any part thereof, of the Unsold Shares which have not been accepted for purchase by the Shareholders entitled to do so (the "Unsubscribed Shares") which bears the same relationship
to the total number of Unsubscribed Shares as the number of Shares held by such Other Shareholder bears to the total number of Shares held by all Other Shareholders who are entitled to purchase such
Unsubscribed Shares. 

Each
Other Shareholder who receives an Additional Notice shall have the right, exercisable by notice given to the Secretary within 15 days after receipt of the Additional Notice, to agree to
purchase the number of Unsubscribed Shares which such Other Shareholder is entitled to purchase or any lesser or greater number thereof specified by such Other Shareholder in such notice. If no notice
is given by such Other Shareholder under this section within such 15 day period, such Other Shareholder shall be deemed to have rejected the offer to purchase Unsubscribed Shares. 

The
provisions of this Section 8.02(e) shall be applied, mutatis mutandis, until the Other Shareholders entitled to do so from time to time have agreed to accept or have rejected or are deemed
to have rejected the offer contained in the latest Additional Notice with respect to all the Unsubscribed Shares at such time. 

	(f)
	Other
Shareholders May Agree on Manner of Purchase:    If they all agree in writing, the Other Shareholders may purchase the Unsold Shares in
proportions otherwise than as provided in Sections 8.02(c) or 8.02(e).

	(g)
	Completion
of Purchase and Sale:    The completion of all purchases and sales of Triggered Shares under this Section 8.02 shall take
place concurrently and as part of the same closing on the 60th day after the expiry of the applicable period referred to in Section 8.02(c) or on the 30th day after receipt
of the latest Additional Notice, whichever is later, provided that if the Selling Price of the Shares has not been determined by such day, the completion shall take place on the 10th day after
the date on which the Selling Price has been conclusively determined. 

Section 8.03    Determination of Purchase Price  

	(a)
	The
purchase price for Shares purchased pursuant to Section 8.02 (the "Purchase Price") shall be the per share value (the "Per Share Value") of each Share
multiplied by the number of Shares being purchased. The Per Share Value of each Share shall be the value of a Share of the Corporation determined in accordance with subsection (b) or (c)
below. 

23

 

	(b)
	The
board of directors of the Corporation shall determine the Per Share Value at the meeting of the board of directors in each year at which the audited financial statements in
respect of the previous fiscal year of the Corporation are approved. If the board of directors has determined the Per Share Value within 365 days prior to the date on which a Triggering Event
occurs, the purchase price shall equal the Per Share Value so determined times the number of Shares to be purchased.

	(c)
	If
the board of directors has not determined the Per Share Value within 365 days prior to the date on which a Triggering Event occurs, the Purchase Price shall be determined in
accordance with the following procedure:

	(i)
	The
Selling Shareholder (or his personal representative) shall appoint one appraiser (the "Seller's Appraiser") and the Purchaser (whether it be the
Corporation, the non-selling Shareholders or a combination thereof) shall appoint one appraiser (the "Purchaser's Appraiser"). The Seller's Appraiser and the Purchaser's Appraiser
shall be independent professionals who are experienced in business valuations and who use generally accepted accounting practices. Each Appraiser shall evaluate the fair market value of the
Corporation to determine the Per Share Value, shall multiply that Per Share Value by the number of shares to be purchased to reflect its appraised Purchase Price (the "Appraisal"), and shall
send its Appraisal to all Shareholders.

	(ii)
	If
the Appraisal values are the same, the value so stated shall be the Purchase Price. If the Appraisal values vary by 10% or less, the Purchase Price shall be the
average of the two Appraisal values. If the Appraisal values vary by more than 10%, the Seller's Appraiser and the Purchaser's Appraiser, within 20 days after the mailing of the second
Appraisal, shall agree on an independent professional who is experienced in business valuations and who uses generally accepted accounting practices (the "Independent Appraiser"), who shall
review the two Appraisals and shall, within 10 days of receipt of both Appraisals, select one to be used as the Per Share Value. The Parties hereby agree to indemnify and hold harmless the
Independent Appraiser from any liability resulting from the selection of an Appraisal, except for gross negligence or intentional misconduct.

	(iii)
	The
date to be used as the date of valuation for the Purchase Price shall be, in the case of a Shareholder's Disability, the last day of the month in which the
Shareholder becomes disabled in accordance with the terms hereof, in the case of a Shareholder's death, the last day of the month in which the Shareholder dies and, for any other Triggering Event, the
last day of the month in which the Triggering Event occurs. 

24

  

Section 8.04    Payment of Purchase Price  

	(a)
	Payment
of the Purchase Price for Shares purchased and sold pursuant to Section 8.02 (except pursuant to a Shareholder's Disability or death) shall be made as follows:

	(i)
	10%
of the Purchase Price shall be paid at closing in cash or by certified cheque; and

	(ii)
	90%
of the Purchase Price shall be paid by delivery to the Seller (or his personal representative) of a promissory note obligating the purchaser or purchasers
("Purchasing Entity") to pay the balance of the Purchase Price in three equal annual instalments of principal plus interest on the outstanding principal balance at a fixed rate equal to the prime rate
charged by the Corporation's banker in Toronto, Ontario (the "Prime Rate"), at the date of closing.

	(b)
	Payment
for Shares purchased and sold pursuant to a Shareholder's Disability shall be made in accordance with either of the two following formulas:

	(i)
	If
the Purchasing Entity receives proceeds from any disability insurance policy obtained to fund the purchase of the disabled Shareholder's Shares, at closing it shall
be required to pay over all such proceeds as part of the Purchase Price. If such proceeds are insufficient to pay the full Purchase Price, then at closing the Purchasing Entity shall pay the balance
of the Purchase Price by delivering a promissory note which shall provide for payment in three equal annual instalments of principal, plus interest, on the outstanding principal balance at a fixed
rate equal to the Prime Rate at the date of closing. If the Purchasing Entity receives any proceeds on such policy in excess of the Purchase Price, the excess proceeds shall revert to the owner of
the policy.

	(ii)
	If
the Purchasing Entity does not receive proceeds from any disability insurance policy obtained to fund the purchase of the disabled Shareholder's Shares, then at
closing it shall deliver to the Selling Shareholder 10% of the Purchase Price, in cash or by certified cheque and a promissory note payable to the Selling Shareholder which shall obligate the
Purchasing Entity to pay the balance of the Purchase Price in three equal annual instalments of principal, plus interest, on the outstanding principal balance at a fixed rate equal to the Prime Rate
at the date of closing.

	(c)
	Payment
for Shares purchased and sold as the result of a Shareholder's death shall be made as follows:

	(i)
	If
the Purchasing Entity receives proceeds from any life insurance policy obtained to fund the purchase of the deceased Shareholder's Shares, at closing it shall be
required to pay over all such proceeds as part of the Purchase Price. If such proceeds are insufficient to pay the full Purchase Price, then the Purchasing Entity shall pay the balance of the Purchase
Price by delivering at closing a promissory note which shall provide for payment in three equal annual instalments of principal, plus interest, on the outstanding principal balance at a fixed rate
equal to the Prime Rate at the date of closing. If the Purchasing Entity receives any proceeds on such policy in excess of the Purchase Price, the excess proceeds shall revert to the owner of the
policy (or the estate of such owner if the owner is deceased). 

25

 

	(ii)
	If
the Purchasing Entity does not receive proceeds from any life insurance policy obtained to fund the purchase of the deceased Shareholder's Shares, at closing the
Purchasing Entity shall deliver to the personal representative of the deceased Shareholder 10% of the Purchase Price, in cash or by certified cheque along with a promissory note payable to the estate
of the deceased Shareholder obligating the Purchasing Entity to pay the balance of the Purchase Price in three equal annual instalments of principal, plus interest, on the outstanding principal
balance at a fixed rate equal to the Prime Rate at the date of the closing.

	(d)
	At
the option of the Purchasing Entity, on any purchase and sale of Shares pursuant to this Agreement, the full Purchase Price or any portion thereof greater than that amount above
specified to be paid at closing may be paid at closing and prepayments of principal under any promissory note delivered to the Seller pursuant to this Agreement shall be allowed
without penalty. 

 
 

ARTICLE NINE
  
    DRAG-ALONG RIGHTS    
    

Section 9.01    Drag-Along Rights  

        If, at any time Shareholders owning more than 50% of the issued Shares (in this Article Nine the "Selling Shareholders") receive a written offer from a
Third Party Purchaser to sell their Shares at a price of not less than: 

	(a)
	125%
of the conversion price of the Series A Shares at such time, if the offer is made before December 31, 2003; and

	(b)
	150%
of the conversion price of the Series A Shares at such time if such offer is made on or after December 31, 2003; 

which
offer the Selling Shareholders wish to accept, the Selling Shareholders shall be entitled to give notice in writing to the other Shareholders requiring them to sell to the Third Party Purchaser
all of the Shares held by them on terms and conditions not any less favourable, mutatis mutandis, then the terms and conditions upon which the proposed
sale of Shares is to be made by the Selling Shareholders. The Selling Shareholders shall deliver to the other Shareholders a notice in writing which includes a copy of the offer to sell forthwith upon
receipt thereof and such notice shall specify the price per Share, the manner of payment and the time and place of closing. 

26

 
 
 

ARTICLE TEN
  
    CLOSING PROCEDURES    
    

Section 10.01    Closing Procedures  

        If a purchase and sale of Shares between Shareholders or by a Shareholder to the Corporation is made pursuant to this Agreement, the following shall apply,
subject to any express provisions to the contrary: 

	(a)
	Payment
of Purchase Price and Delivery of Certificates, Resignations and Releases:    The purchase price shall be paid on closing by certified
cheque, bank draft or wire transfer against receipt by the purchaser of the share certificate or certificates representing the Shares being purchased, duly endorsed for transfer in blank, together
with resignations by the vendor and his nominees, if any, as directors, officers and employees of the Corporation and any Subsidiaries and releases in favour of the Corporation and any Subsidiaries of
all claims which such directors, officers and employees may have against the Corporation and any Subsidiaries, other than in respect of accrued and unpaid compensation to the closing date.

	(b)
	Date
and Time of Closing:    If the date for completion of any transaction of purchase and sale falls on a day which is not a Business Day, the
transaction shall be completed on the first Business Day following such date. Closing shall take place at 11:00 a.m. on the date for completion at the principal place of business of
the Corporation.

	(c)
	Title:    The
acceptance by the vendor of payment for the Shares being purchased and sold shall constitute a representation and warranty by the
vendor that the vendor has good and marketable title to such Shares free and clear of any lien, charge, pledge, encumbrance, security interest or adverse claim, except the terms of this Agreement.
Notwithstanding the foregoing, the vendor shall deliver to the purchaser all such documents, instruments and releases and shall do all such acts and things as the purchaser may reasonably request,
whether before or after completion of the transaction, to vest such title in the purchaser.

	(d)
	Vendor
Indebted to Corporation:    If, at the time of sale, the vendor is indebted to the Corporation or any Subsidiary, the purchaser shall
have the right to satisfy such indebtedness out of the purchase price payable for the Shares.

	(e)
	Liability
as Guarantor:    If, at the time of sale, the vendor is liable or responsible as a guarantor for any debts, liabilities or obligations
of the Corporation or any Subsidiary, the purchaser shall use reasonable efforts to cause all such guarantees to be released at or before the time of sale. 

27

 

	(f)
	Failure
to Complete Sale:    If, at the time of closing, the vendor shall not complete the sale for any reason, the purchaser shall have the
right to deposit the purchase price for the Shares to be purchased and sold for the account of the vendor in an account with the principal bankers of the Corporation and such deposit shall constitute
valid and effective payment of the purchase price to the vendor. Thereafter the purchaser shall have the right to execute and deliver any deeds, stock transfers, assignments, resignations, releases
and other documents as may, in the reasonable opinion of the purchaser, be necessary or desirable in order to complete the transaction. If payment of the purchase price is so deposited, then from and
after the date of deposit, notwithstanding that certificates evidencing the Shares may not have been delivered to the purchaser, the purchase of the Shares shall be deemed to have been fully completed
and the records of the Corporation shall be amended accordingly and all right, title, benefit and interest, both at law and in equity in and to the Shares shall be conclusively deemed to have been
transferred and assigned to and become vested in the purchaser and all right, title, benefit and interest, both at law and in equity, of the vendor or of any transferee, assignee or any other Person
having any interest therein, legal or equitable, therein in any capacity whatsoever shall cease.

	(g)
	Purchaser
Appointed as Attorney:    Each Shareholder hereby appoints, in the event that such Shareholder is a vendor of Shares hereunder, each
other Shareholder who may from time to time be a purchaser of Shares hereunder, as the vendor's attorney, with full power of substitution, in the name of the vendor but on behalf of and at the expense
of the purchaser, to execute and deliver all deeds, transfers, assignments and assurances necessary to effectively transfer the interest being sold to the purchaser or its nominees. Such appointment,
being coupled with an interest, is irrevocable by each Shareholder and shall not be revoked by the insolvency, bankruptcy, death, incapacity, dissolution, liquidation or other termination of the
existence of such Shareholder and each Shareholder agrees to ratify and confirm all that a purchaser may reasonably do or cause to be done pursuant to the foregoing. Each Shareholder consents to any
transfer of Shares made pursuant to the foregoing.

	(h)
	Taxes:    At
the time of the sale, the vendor shall provide to the purchaser either:

	(i)
	a
statutory declaration of the owner(s) of the Shares being sold that such owner(s) is not a non-resident of Canada for purposes of the  Income Tax Act (Canada); or

	(ii)
	a
certificate from Revenue Canada under section 116 of such Act certifying that all taxes payable in connection with the transaction have been paid or that no
taxes are payable in respect of the transaction; 

provided
that if no declaration or certificate is delivered by the vendor, the purchaser shall be entitled to deduct from the purchase price payable to the vendor an amount equal to the amount of tax
for which the purchaser may be liable (as determined solely by the purchaser) under the Income Tax Act (Canada). 

28

 

	(i)
	Extended
Meaning of "Vendor":    For the purposes of this Section 10.01, any reference to the vendor shall mean the registered holder or
holders of the Shares being sold and shall include, where the context permits, the Related Individual of such vendor. 

 
 

ARTICLE ELEVEN
  
    CONFIDENTIALITY    
    

Section 11.01    Confidentiality  

        Each Shareholder and Related Individual shall not use or disclose to any Person, directly or indirectly any Confidential Information at any time hereafter
provided that nothing in this section shall preclude a Shareholder or Related Individual from disclosing or using Confidential Information if: 

	(a)
	the
Confidential Information is available to the public or in the public domain at the time of such disclosure or use, without breach of this Agreement;

	(b)
	disclosure
is required to be made by any law, regulation, governmental body or authority or by court order; or

	(c)
	disclosure
is made to a court which is determining the rights of the Parties under this Agreement. 

        Each
Shareholder and Related Individual acknowledges and agrees that the obligations under this Section 11.01 are to remain in effect for three years from the date such
Shareholder is separated from the Corporation or ceases to be a Shareholders, whichever is earlier. 

Section 11.02    Obligations Not Exhaustive  

        Each Shareholder acknowledges that the obligations contained in this Article are not in substitution for any obligations which such Shareholder and Related
Individual may now or hereafter owe to the Corporation or any Shareholder and which exist apart from this Article and do not replace any rights of the Corporation or any Shareholder with respect to
any such obligation. 

Section 11.03    Remedies  

        Each Shareholder and Related Individual acknowledges that a breach or threatened breach by such Shareholder or Related Individual of any provision of this Article
Eleven may result in the Corporation and the other Shareholders suffering irreparable harm which cannot be calculated or fully or adequately compensated by recovery of damages alone. Accordingly, each
Shareholder and Related Individual agrees that the Corporation and any other Shareholder shall be entitled to seek interim and permanent injunctive relief, specific performance and other equitable
remedies, in addition to any other relief to which the Corporation or any other Shareholder may become entitled. 

29

 
 
 

ARTICLE TWELVE
  
    GENERAL PROVISIONS    
    

Section 12.01    All Shares Subject to this Agreement  

        Each of the Shareholders agrees to be bound by the terms of this Agreement with respect to all Shares held by such Shareholder from time to time. 

Section 12.02    Indemnity by the Corporation  

        The Corporation shall indemnify all directors and officers to the maximum extent permitted by applicable corporate law. 

Section 12.03    Term  

        This Agreement shall come into force and effect as of the date set out on the first page of this Agreement and, except as provided below; shall continue in force
until the earlier of: 

	(a)
	the
date on which one Shareholder and his Related Shareholders hold all the Shares;

	(b)
	the
date on which this Agreement is terminated by written consent of the holders of not less than 75% of the Common Shares and of not less than 75% of the Series A Shares
then outstanding;

	(c)
	the
date on which all of the Shares are sold to one or more Persons acting bona fide and at arm's length with the
Shareholders; and

	(d)
	the
date on which (i) the Corporation becomes a "reporting issuer" under the securities laws of any province in Canada or becomes subject to the United States  Securities Exchange Act of 1934 and
(ii) its shares become listed or quoted on a stock exchange in Canada or the United States. 

        Notwithstanding
the foregoing, the provisions of Article Eleven shall continue in force in accordance with their terms after the termination of this Agreement. 

Section 12.04    Termination Not to Affect Rights or Obligations  

        Except as expressly stated to the contrary, the termination of this Agreement shall not affect or prejudice any rights or obligations which have accrued or arisen
under this Agreement prior to the time of termination and such rights and obligations shall survive the termination of this Agreement. 

30

 

Section 12.05    Notices  

        Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by facsimile or other means of electronic
communication or by prepared courier as hereafter provided. Any such notice or other communication, if sent by facsimile or other means of electronic communication, shall be deemed to have been
received on the Business Day following the sending, or if delivered by hand shall be deemed to have been received at the
time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the
addressee. Notice of change of address shall also be governed by this section. Notices and other communications shall be addressed as follows: 

	(a)
	if
to a Shareholder, addressed to him or it at its latest address set forth, in the Shareholders' register maintained by the Corporation

	(b)
	if
to the Corporation: 

Hostopia.com, Inc.

Suite 606

56 Aberfoyle Crescent

Toronto, Ontario

Canada

M8X 2W4 

        Notwithstanding
anything contained in this Agreement, any notice or other communication which is received in accordance with the foregoing by a Shareholder shall be deemed to have been
received by the Controlled Entities and Related Entities of such Shareholder, whether or not the notice or other communication was actually addressed to or delivered to such Controlled Entities or
Related Entities or any of them. 

Section 12.06    Time of Essence  

        Time is of the essence of this Agreement. 

Section 12.07    Further Assurances  

        Each of the Shareholders shall vote and act at all times as a shareholder of the Corporation and in all other respects use reasonable efforts to take all such
steps, execute all such documents and do all such acts and things as may be reasonably within its power to implement to their full extent the provisions of this Agreement and to cause the Corporation
to act in the manner contemplated by this Agreement. 

31

 

Section 12.08    Amendment  

        Any amendment of this Agreement shall be effective only if in writing and executed by the holders of not less than 75% of the Common Shares and of not less than
75% of the Series A Shares then outstanding. 

Section 12.09    Counterparts  

        This Agreement may be signed in counterparts and each of such counterparts shall constitute an original document and such counterparts, taken together, shall
constitute one and the same instrument. 

Section 12.10    Acknowledgement  

        Each of the Shareholders acknowledge that: 

	(a)
	the
Shareholder has had sufficient time to review this Agreement thoroughly;

	(b)
	the
Shareholder has read and understands the terms of this Agreement and the Shareholder's obligations hereunder; and

	(c)
	the
Shareholder has been given an opportunity to obtain independent legal advice concerning the interpretation and effect of this Agreement. 

Section 12.11    Enurement  

        This Agreement shall enure to the benefit of and be binding upon the Parties hereto and their respective successors and legal personal representatives. 

        IN
WITNESS WHEREOF the Parties have executed this Agreement. 

32

  

	WITNESS:	 	)

)

)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ John Nemanic
	
	 	)	 	

	 	 	)	 	JOHN NEMANIC
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ William Campbell
	
	 	)	 	

	 	 	)	 	WILLIAM CAMPBELL
	 	 	)	 	 	 
	 	s/ Nicole Turcotte	 	)	 	 	s/ Colin Campbell
	
	 	)	 	

	 	 	)	 	COLIN CAMPBELL
	 	 	)	 	 	 
	 	 	 	 	TELUS CORPORATION
	 	 	 	 	 	 
	 	 	 	 	By:	s/ Mark Schnarr
Mark Schnarr, executive Vice President, Telus Ventures
	 	 	 	 	 	 
	 	 	 	 	THE NEMANIC FAMILY TRUST
	 	 	 	 	 	 
	 	 	 	 	By:	s/ Franc Nemanic                Trustee

	 	 	 	 	 	 
	 	 	 	 	THE KKC CAMPBELL FAMILY TRUST
	 	 	 	 	 	 
	 	 	 	 	By:	s/ William Campbell                Trustee

	 	 	 	 	 	 
	 	 	 	 	THE 1999 WILLIAM CAMPBELL FAMILY TRUST
	 	 	 	 	 	 
	 	 	 	 	By:	s/ Colin Campbell                Trustee

	 	 	 	 	 	 
	 	 	 	 	COMPUTRUST INTERNATIONAL INC.
	 	 	 	 	 	 
	 	 	 	 	By:	s/ Bill Robbins
Bill Robbins, President
	 	 	 	 	 	 
	 	s/ Nicole Turcotte	 	)	 	 	s/ Franc Nemanic
	
	 	)	 	

	 	 	)	 	FRANC NEMANIC
	 	 	)	 	 	 
	 	s/ William Campbell	 	)	 	s/ Marie Campbell
	
	 	)	 	

	 	 	)	 	MARIE CAMPBELL
	 	 	)	 	 	 
	 	 	 	 	 	 
	 	 	 	 	GETTY RESOURCES INC.
	 	 	 	 	 	 
	 	 	 	 	By:	s/ John Kearney

33

 

	 	 	 	 	LOCATION RESEARCH COMPANY OF CANADA LIMITED
	 	 	 	 	 	 
	 	 	 	 	By:	s/ Robert Kidd
Robert Kidd, President
	 	 	 	 	 	 
	 	s/ Ayal Orbach	 	)	 	 	s/ Marni Saifert
	
	 	)	 	

	 	 	)	 	MARNI SAIFERT
	 	 	)	 	 	 
	 	 	 	 	477928 (BC) LTD.
	 	 	 	 	 	 
	 	 	 	 	By:	s/ Robert Sheppard
Robert Sheppard, President
	 	 	 	 	 	 
	 	 	 	 	TYROL CAPITAL CORP.
	 	 	 	 	 	 
	 	 	 	 	By:	s/ Michael J. Egan
Michael J. Egan, President

34

 

	
	 	)	 	

	 	 	)	 	PETER BROWN
	 	 	)	 	 	 
	 	s/ Leslie Gord	 	)	 	 	s/ Michael Bayer
	
	 	)	 	

	 	 	)	 	MICHAEL BAYER
	 	 	)	 	 	 
	 	s/ "witnessed"	 	)	 	 	s/ Jeffrey Beaty
	
	 	)	 	

	 	 	)	 	JEFFREY BEATY
	 	 	)	 	 	 
	 	 	 	 	EXCELERATION.NET INCORPORATED
	 	 	 	 	 	 
	 	 	 	 	By:	s/ Chris Scatliff

	 	 	 	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Magaly Charbonneau
	
	 	)	 	

	 	 	 	 	MAGALY CHARBONNEAU
	 	 	)	 	 	 
	 	s/ Linda Campbell	 	 	 	 	s/ Lillian Campbell
	
	 	)	 	

	 	 	)	 	LILLIAN CAMPBELL
	 	 	)	 	 	 
	 	s/ Raymond Gordon Campbell	 	)	 	 	s/ Debi Cimone
	
	 	)	 	

	 	 	)	 	DEBORAH ROSE CIMONE
	 	 	)	 	 	 
	 	s/ "witnessed"	 	)	 	 	s/ Aubrey Baillie
	
	 	)	 	

	 	 	)	 	AUBREY W. BAILLIE
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Joey Proulx
	
	 	)	 	

	 	 	)	 	JOEY PROULX
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Derek Snider
	
	 	)	 	

	 	 	)	 	DEREK SNIDER
	 	 	)	 	 	 
	 	s/ Nicole Turcotte	 	)	 	 	s/ Michael Mugan
	
	 	)	 	

	 	 	)	 	MICHAEL MUGAN
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Sheldon Page
	
	 	)	 	

	 	 	)	 	SHELDON PAGE
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Paul Alvarez
	
	 	)	 	

	 	 	)	 	PAUL ALVAREZ
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Harvey Noss
	
	 	)	 	

	 	 	)	 	HARVEY NOSS

35

 

	 	s/ Michael J. Mugan	 	)	 	 	s/ Aleksandra Zlobicki
	
	 	)	 	

	 	 	)	 	ALEKSANDRA ZLOBICKI
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Brian Hughes
	
	 	)	 	

	 	 	)	 	BRIAN HUGHES
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Dave Turner
	
	 	)	 	

	 	 	)	 	DAVE TURNER
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Todd Burroughs
	
	 	)	 	

	 	 	)	 	TODD FRANKLIN BURROUGHS
	 	 	)	 	 	 
	 	s/ Stephanie Grattan	 	)	 	 	s/ John Norrie
	
	 	)	 	

	 	 	)	 	JOHN L. NORRIE
	 	 	)	 	 	 
	 	s/ Stephanie Grattan	 	)	 	 	s/ Elizabeth Claflin
	
	 	)	 	

	 	 	)	 	ELIZABETH CLAFLIN
	 	 	)	 	 	 
	 	s/ "witnessed"	 	)	 	 	s/ Anita Deoliveira
	
	 	)	 	

	 	 	)	 	ANITA DEOLIVEIRA
	 	 	)	 	 	 
	 	s/ Stephanie Grattan	 	)	 	 	s/ Dale King
	
	 	)	 	

	 	 	)	 	DALE KING
	 	 	)	 	 	 
	 	s/ "witnessed"	 	)	 	 	s/ Anton James
	
	 	)	 	

	 	 	)	 	ANTON JAMES
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Dirk Bhagat
	
	 	)	 	

	 	 	)	 	DIRK BHAGAT
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Kristian Kostecky
	
	 	)	 	

	 	 	)	 	KRISTIAN KOSTECKY
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Bill Robbins
	
	 	)	 	

	 	 	)	 	BILL ROBBINS
	 	 	)	 	 	 
	 	s/ Michael J. Mugan	 	)	 	 	s/ Stephanie Grattan
	
	 	)	 	

	 	 	)	 	STEPHANIE GRATTAN
	 	 	)	 	 	 
	 	 	 	 	1053461 ONTARIO LIMITED
	 	 	 	 	 	 
	 	 	 	 	By:	s/ William Campbell                (Secretary)

36

 

	 	 	 	 	CLARION FINANZ AG
	 	 	 	 	 	 
	 	 	 	 	By:	/s/ Carlo Civelli
	 	 	 	 	 	
 Carlo Civelli
	 	 	 	 	 	 
	 	 	 	 	REGISTER.COM, INC.
	 	 	 	 	 	 
	 	 	 	 	By:	/s/ Peter Forman
	 	 	 	 	 	
 Peter Forman, Chief Executive Officer
	 	 	 	 	 	 
	 	s/ Michael J. Mugan	 	)	 	/s/ Howard Bell
	
	 	)	 	

	 	 	)	 	HOWARD BELL
	 	 	)	 	 	 
	

	 	 	 	 	 
	 	s/ Michael J. Mugan	 	)	 	/s/ Paul Engels
	
	 	)	 	

	 	 	)	 	PAUL ENGELS
	 	 	)	 	 	 
	

	 	 	 	 	 
	 	s/ Michael J. Mugan	 	)	 	/s/ Irene Levin
	
	 	)	 	

	 	 	)	 	IRENE LEVIN
	 	 	)	 	 	 

37

 
38

 

	 	 	 	 	HOSTOPIA.COM, INC.
	 	 	 	 	 	 
	 	 	 	 	By:	s/ Franc Nemanic
President

39

 
 

SCHEDULE "A"    
    

	Name of Shareholder 
	 	Number of Common Shares

	Computrust International Inc.	 	200,000
	Franc Nemanic	 	1,000,000
	Marie Campbell	 	200,000
	Getty Resources Inc.	 	200,000
	Location Research Company of Canada Limited	 	200,000
	Marni Saifert	 	200,000
	477928 (BC) Ltd.	 	200,000
	Tyrol Capital Corp.	 	200,000
	Peter Brown	 	200,000
	Michael Bayer	 	200,000
	Jeffrey Beatty	 	200,000
	Exceleration.Net Incorporated	 	210,000
	Magaly Charbonneau	 	200,000
	Lillian Campbell	 	200,000
	Deborah Rose Cimone	 	200,000
	Aubrey W. Baillie	 	200,000
	Joey Proulx	 	2,000
	Derek Snider	 	2,000
	Michael Mugan	 	30,000
	Sheldon Page	 	2,000
	Paul Alvarez	 	86,000

 

	Name of Shareholder 
	 	Number of Common Shares

	Harvey Noss	 	10,000
	Aleksandra Zlobicki	 	10,000
	Brian Hughes	 	60,000
	Dave Turner	 	20,000
	Todd Franklin Burroughs	 	14,000
	John L. Norrie	 	6,000
	Elizabeth Claflin	 	4,000
	Anita Deoliveira	 	2,000
	Dale King	 	2,000
	Anton James	 	16,000
	Dirk Bhagat	 	2,000
	Kristian Kostecky	 	2,000
	Bill Robbins	 	6,000
	Stephanie Grattan	 	4,000
	Clarion Finanz AG	 	740,000

	 

	Name of Shareholder 
	 	Number of Series A Shares

	1053461 Ontario Limited	 	4,255,319

2

QuickLinks

SHAREHOLDER AGREEMENT [UPDATED TO AUGUST 27, 2003]

ARTICLE ONE INTERPRETATION

ARTICLE TWO REPRESENTATIONS AND COVENANTS

ARTICLE THREE BUSINESS AND AFFAIRS OF THE CORPORATION

ARTICLE FOUR GENERAL MATTERS RELATING TO THE HOLDING OF SHARES AND PERMITTED TRANSFERS

ARTICLE FIVE SUBSCRIPTION RIGHTS

ARTICLE SIX RIGHTS OF FIRST REFUSAL

ARTICLE SEVEN PIGGY-BACK RIGHTS

ARTICLE EIGHT DEFAULTING SHAREHOLDERS

ARTICLE NINE DRAG-ALONG RIGHTS

ARTICLE TEN CLOSING PROCEDURES

ARTICLE ELEVEN CONFIDENTIALITY

ARTICLE TWELVE GENERAL PROVISIONS

SCHEDULE "A"

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}]]