Document:

Exhibit 4.1

STOCK OPTION PLAN OF

ÆTERNA ZENTARIS INC.

 

	
  1.

  	
  Purpose of the Plan

  
	
   

  	
   

  
	
  1.1

  	
  The purpose
  of the stock option plan for directors, officers, employees, members of the
  Scientific Board and suppliers of ongoing services (the “Plan”)
  of Æterna Zentaris Inc. (the “Corporation”)
  is to secure for the Corporation and its shareholders the benefit of an
  incentive interest in share ownership by directors, officers and employees of
  the Corporation and its Subsidiaries, as the case may be, and by the members
  of the Scientific Board and certain designated suppliers of ongoing services.

  
	
   

  	
   

  
	
  2.

  	
  Administration

  
	
   

  	
   

  
	
  2.1

  	
  The Plan
  shall be administered by the Corporation’s Board of Directors (the “Board”) or the Corporate Governance, Nominating and Human
  Resources Committee, as the same may be constituted from time to time (the “Committee”). The Board or the Committee shall have full
  and complete latitude to interpret the Plan and to establish the
  rules and regulations applying to it and to make all other
  determinations it deems necessary or useful for the administration of the
  Plan, provided that such interpretations, rules, regulations and
  determinations shall be consistent with the relevant policy statements of the
  competent securities authorities and the rules of the stock exchanges on
  which the securities of the Corporation are listed.

  
	
   

  	
   

  
	
  3.

  	
  Shares Subject to the Plan

  
	
   

  	
   

  
	
  3.1

  	
  The shares
  issuable further to the exercise of options granted under the Plan are the
  Common Shares of the Corporation (the “Shares”). The
  total number of Shares that may be issued under the Plan shall not exceed 10%
  of the total number of issued and outstanding Shares at any given time. No
  Optionee (as defined hereinbelow) shall hold options to purchase more than
  five percent (5%) of the number of Shares issued and outstanding from time to
  time.

  
	
   

  	
   

  
	
  3.2

  	
  In addition:
  (i) the number of securities issuable to “insiders” (as such term is
  defined in the TSX Company Manual) of the Corporation, at any time, under all
  security-based compensation arrangements of the Corporation, cannot exceed
  (ten percent) 10% of its issued and outstanding securities; and (ii) the
  number of securities issued to insiders of the Corporation, within any
  one-year period, under all security-based compensation arrangements of the
  Corporation, cannot exceed 10% of its issued and outstanding securities.

  
	
   

  	
   

  
	
  3.3

  	
  All options
  that are exercised, or that expire or are cancelled without being exercised,
  shall become available to be granted (or “reloaded”) under the terms of the
  Plan upon such exercise, cancellation or expiration, as the case may be.

  

 

 

	
  4.

  	
  Grant of Options

  
	
   

  	
   

  
	
  4.1

  	
  The Board or the Committee shall from to
  time designate the directors, officers or employees of the Corporation or any
  of its Subsidiaries, as the case may be, or the members of the Scientific
  Board or suppliers of ongoing services to whom options shall be granted (an “Optionee”) and the number of Shares covered by each of
  such options. For the purposes of the Plan, “Subsidiaries”
  shall mean any legal entity of which the Corporation holds or is the
  beneficiary, at any time, directly or indirectly, otherwise than as security
  only, of securities conferring over 50% of the votes enabling it to elect the
  majority of the directors of such entity as well as any current or future
  Subsidiary of such legal entity. Any Optionee may hold more than one option.
  The granting of each option shall be evidenced by a letter from the
  Corporation addressed to the Optionee setting forth the number of Shares
  covered by such option, the subscription price, the terms and conditions of
  exercise of the option and the option period.

  
	
   

  	
   

  
	
  5.

  	
  Exercise
  Price

  
	
   

  	
   

  
	
  5.1

  	
  The exercise
  price of an option shall be established by the Board or the Committee at the
  time of the grant and this price shall not be less than the greater of the
  closing prices of the Shares on the Toronto Stock Exchange and the Nasdaq
  National Market on the last trading day preceding the date of grant of the
  option (the “Grant Date”). If either of these
  exchanges is closed or if the Shares did not trade on one of the two
  exchanges on the last trading day preceding the Grant Date, the exercise
  price shall be the closing price of the Shares at the open exchange (“Exercise Price”).

  
	
   

  	
   

  
	
   

  	
  The closing
  price of the Shares shall be converted into Canadian dollars, when this
  conversion is required, at the noon buying rate of the Bank of Canada on the
  last trading day preceding the Grant Date established in the previous
  paragraph.

  
	
   

  	
   

  
	
  6.

  	
  Option Period

  
	
   

  	
   

  
	
  6.1

  	
  Subject to
  the provisions of Section 6.2, each option shall be exercisable during a
  period established by the Board or the Committee (the “Option
  Period”). The Option Period shall commence no earlier than the
  Grant Date and shall terminate no later than ten years after such date (the “Outside Expiry Date”).

  
	
   

  	
   

  
	
  6.2

  	
  Notwithstanding
  the provisions of Section 6.1, an option shall not be exercisable by an
  Optionee from and after each and every one of the following dates (an “Early Expiry Date”), unless the Board or the Committee
  decides otherwise:

  
	
   

  	
   

  
	
   

  	
  6.2.1

  	
  (i) in the case where the Optionee is an officer or an employee,
  the date on which the Optionee resigns or voluntarily leaves his employment
  with the Corporation or one of its Subsidiaries, as the case may be, or the
  date on which the employment of the Optionee with the Corporation or one of
  its Subsidiaries is terminated for just cause, as the case may be, including,
  without limiting the scope of the foregoing, in the event of a breach of his
  obligations to the Corporation, or (ii) in the case where the Optionee
  is a director or a member of the Scientific Board of the Corporation or one
  of its Subsidiaries, as the case may be, but is not employed by either the
  Corporation or one of its Subsidiaries, the date on which such Optionee

  

 

 

	
   

  	
   

  	
  ceases to be a member of the relevant Board of Directors or the
  Scientific Board for any reason other than death;

  
	
   

  	
   

  	
   

  
	
   

  	
  6.2.2

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

  
	
   

  	
   

  	
   

  
	
   

  	
  6.2.3

  	
  in the case where the Optionee is an officer or employee, thirty (30)
  days following the date on which the Optionee’s employment with the
  Corporation or any of its Subsidiaries, as the case may be, is terminated for
  any cause or reason other than those mentioned in paragraphs 6.2.1 and 6.2.2
  including, without limiting the scope of the foregoing, disability, long-term
  illness, retirement or early retirement; or

  
	
   

  	
   

  	
   

  
	
   

  	
  6.2.4

  	
  in the case where the Optionee is a supplier of ongoing services,
  thirty (30) days following the date on which the Optionee ceases to act as a
  supplier of ongoing services to the Corporation or any of its Subsidiaries,
  as the case may be, for any cause or reason.

  
	
   

  	
   

  
	
  6.3

  	
  Subject to
  Section 6.4 hereof, all rights conferred by an option under the Plan
  that shall not have been exercised by either an Early Expiry Date or the
  Outside Expiry Date shall be forfeited and cancelled.

  
	
   

  	
   

  
	
  6.4

  	
  If an Early
  Expiry Date or the Outside Expiry Date applicable to any option granted under
  the Plan falls within a blackout period imposed by the Corporation under the
  Corporation’s trading restrictions and blackout periods policy (as such
  policy may be amended from time to time by the Corporation), or within seven
  (7) business days immediately following such a blackout period, then the
  applicable Early Expiry Date or the Outside Expiry Date, as the case may be,
  will be automatically extended to the date which is seven (7) business
  days after the last day of the blackout period. The seven (7) business
  day extension period established in this paragraph is a fixed period which is
  not subject to Board discretion.

  
	
   

  	
   

  
	
  7.

  	
  Exercise of Options

  
	
   

  	
   

  
	
  7.1

  	
  Subject to
  the provisions of Section 6, an option may be exercised in whole, at any
  time, or in part, from time to time, during the Option Period, but in all cases
  in accordance with the exercise schedule established by the Board or the
  Committee and applicable at the time of the grant.

  
	
   

  	
   

  
	
  7.2

  	
  An option
  may be exercised by written notice to the Secretary of the Corporation. Such
  notice shall set forth the number of options exercised and the number of
  underlying Shares subscribed for pursuant to such exercise and the address to
  which the certificate evidencing such Shares is to be delivered. Such notice
  shall also be accompanied by a certified cheque made payable to the
  Corporation in the amount of

  

 

 

	
   

  	
  the Exercise
  Price. The Corporation shall cause a certificate for the number of Shares
  specified in the notice to be issued in the name of the Optionee and
  delivered to the address specified in the notice no later than ten
  (10) business days following the receipt of such notice and cheque.

  
	
   

  	
   

  
	
  8.

  	
  No
  Assignment

  
	
   

  	
   

  
	
  8.1

  	
  No option or
  interest therein shall be assignable by the Optionee other than by will or in
  accordance with the applicable laws of estates and succession.

  
	
   

  	
   

  
	
  9.

  	
  Not a
  Shareholder

  
	
   

  	
   

  
	
  9.1

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

  
	
   

  	
   

  
	
  10.

  	
  Offer for Shares of the
  Corporation

  
	
   

  	
   

  
	
  10.1

  	
  In the event
  that, at any time, an offer to purchase is made to all holders of Shares,
  notice of such offer shall be given by the Corporation to each Optionee and
  all unexercised options will become exercisable immediately at the Exercise
  Price, but only to the extent necessary to enable an Optionee to tender
  his/her Shares in response to the offer should the Optionee so desire.

  
	
   

  	
   

  
	
  11.

  	
  Modification of the Plan

  
	
   

  	
   

  
	
  Board,
  shareholder and requisite regulatory approvals shall be required for any of
  the following amendments to be made to the Plan:

  
	
   

  	
   

  
	
  11.1

  	
  any
  amendment to Section 3.2 that would have the effect of permitting,
  without having to obtain shareholder approval on a “disinterested vote” at a
  duly convened shareholders’ meeting, the grant of any option(s) under
  this Plan otherwise prohibited by Section 3.2;

  
	
   

  	
   

  
	
  11.2

  	
  any
  amendment to the number of securities issuable under the Plan (except for any
  adjustment described in paragraph 12.1.5 hereof);

  
	
   

  	
   

  
	
  11.3

  	
  any
  amendment which would permit any option granted under the Plan to be
  transferable or assignable other than by will or in accordance with the
  applicable laws of estates and succession;

  
	
   

  	
   

  
	
  11.4

  	
  the addition
  of a cashless exercise feature, payable in cash or securities, which does not
  provide for a full deduction of the number of underlying securities from the
  Plan reserve;

  
	
   

  	
   

  
	
  11.5

  	
  the addition
  of a deferred or restricted share unit or any other provision which results
  in employees receiving securities while no cash consideration is received by
  the Corporation;

  
	
   

  	
   

  
	
  11.6

  	
  with respect
  to an Optionee who is an “insider” of the Corporation,

  

 

 

	
   

  	
  (i)

  	
  any
  reduction in the exercise price of any option after the option has been
  granted, or

  
	
   

  	
   

  	
   

  
	
   

  	
  (ii)

  	
  any
  cancellation of an option and the regrant of that option under different
  terms, except if such regrant occurs at least three (3) months after the
  related cancellation,

  
	
   

  	
   

  
	
   

  	
  except in
  respect of any adjustment described in paragraph 12.1.5 hereof;

  
	
   

  	
   

  
	
  11.7

  	
  any
  extension to the term of an option beyond the Outside Expiry Date to an
  Optionee who is an “insider” of the Corporation (except for extensions made
  pursuant to Section 6.4);

  
	
   

  	
   

  
	
  11.8

  	
  any
  amendment to the method of determining the exercise price of an option
  granted pursuant to the Plan;

  
	
   

  	
   

  
	
  11.9

  	
  the addition
  of any form of financial assistance or any amendment to a financial
  assistance provision which is more favourable to employees; and

  
	
   

  	
   

  
	
  11.10

  	
  any
  amendment to this Section 11.

  
	
   

  	
   

  
	
  12.

  	
  Amendments
  and Termination

  
	
   

  	
   

  
	
  12.1

  	
  The Board may,
  subject to receipt of requisite regulatory approval, where required, in its
  sole discretion, make all other amendments to the plan that are not
  contemplated in Section 11 above including, without limitation, the
  following:

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1.1

  	
  amendments of a “housekeeping” or clerical nature or to clarify the
  Plan’s provisions;

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1.2

  	
  amendments regarding any vesting period of an option;

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1.3

  	
  amendments regarding the extension of an option beyond an Early
  Expiry Date in respect of any Optionee, or the extension of an option beyond
  the Outside Expiry Date in respect of any Optionee who is a “non-insider” of
  the Corporation;

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1.4

  	
  with respect to any Optionee who is a “non-insider” of the
  Corporation, amendments to the terms of an option to reduce the exercise
  price of such option after the option has been granted, or to cancel an
  option and regrant that option under different terms;

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1.5

  	
  adjustments to the number of issuable Shares underlying, or the
  exercise price of, outstanding options resulting from a split or a
  consolidation of the Shares, a reclassification, the payment of a stock
  dividend, the payment of a special cash or non-cash distribution to the
  Corporation’s shareholders on a pro rata basis provided such distribution is
  approved by the Corporation’s shareholders in accordance with applicable law,
  a recapitalization, a reorganization or any other event which necessitates an
  equitable adjustment to the outstanding options in proportion with
  corresponding adjustments made to all outstanding Shares;

  
				

 

 

	
   

  	
  12.1.6

  	
  discontinuing or terminating the Plan; and

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1.7

  	
  any other amendment which does not require shareholder approval under
  Section 11 hereof.

  
	
   

  	
   

  
	
  12.2

  	
  Notwithstanding
  Section 12.1 above, the Corporation shall not contravene any
  requirements, rules, laws and regulations of the TSX or of any regulatory
  authorities.

  
	
   

  	
   

  
	
  12.3

  	
  Notwithstanding
  any provisions to the contrary, any amendment to or termination of the Plan
  shall in no way amend or otherwise affect the conditions of the options
  already granted under the Plan to the extent that such options have not then
  been exercised, unless the rights of the optionee have already expired or
  have already been fully exercised or unless the optionee affected by such
  change has already agreed to it.

  
	
   

  	
   

  
	
  13.

  	
  Miscellaneous Provisions

  
	
   

  	
   

  
	
  13.1

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

  
	
   

  	
   

  
	
  13.2

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

  
	
   

  	
   

  
	
  13.3

  	
  No director,
  officer, employee or member of the Scientific Board of the Corporation or any
  of its Subsidiaries shall acquire the automatic right to be granted one or
  more options under the terms of the Plan by reason of any previous grant of
  options under the terms of the Plan.

  
	
   

  	
   

  
	
  13.4

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

  
	
   

  	
   

  
	
  13.5

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

  

 

 

	
  13.6

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

  
	
   

  	
   

  
	
  13.7

  	
  Once
  approved by the Corporation’s shareholders, the Plan will modify the stock
  option plan adopted by the Corporation on November 7, 1995 as amended.
  This Plan confers no other advantage to the beneficiaries of the stock option
  plan.

  

 

Dated February 28, 2007

 

 

STOCK OPTION PLAN

 

OF ÆTERNA ZENTARIS INC.

 

SUBSCRIPTION FORM

 

(Date)

 

Æterna
Zentaris Inc.

1405 boul. du Parc-Technologique

Québec, Québec

G1P 4P5

 

Attention of
the Secretary

 

I, the
undersigned,
                                        ,
hereby exercise
                    
options and subscribe for
                    
Common Shares of Æterna Zentaris Inc. (the “Corporation”) pursuant to the
exercise of such options under the terms of the Stock Option Plan of the
Corporation, out of the
                      
Common Shares available for purchase by the undersigned, and I enclose herewith
my certified cheque (or money order) made payable to the order of Æterna
Zentaris Inc., in the amount of
                                                                
dollars in payment of the said subscription.

 

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Full
  Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Telephone)

  

 

·      The French version of this Schedule
shall prevail.Exhibit 4.2

 

EMPLOYMENT AGREEMENT OF PAUL BLAKE, M.D.

 

ÆTERNA ZENTARIS, INC.

 

Dated July 18, 2007

 

 

EMPLOYMENT AGREEMENT

 

	
  BETWEEN:

  	
   

  	
  ÆTERNA ZENTARIS, INC., a Corporation duly incorporated under the laws of Delaware, having
  its head office at 20 Independence Boulevard, Warren, New Jersey, 07950

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (hereinafter
  the “Corporation”)

  
	
   

  	
   

  	
   

  
	
  AND:

  	
   

  	
  PAUL BLAKE, M.D., domiciled at [civic address redacted for privacy reasons],
  Pennsylvania, USA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (hereinafter
  the “Executive”)

  
	
   

  	
   

  	
   

  
	
  AND:

  	
   

  	
  ÆTERNA ZENTARIS INC., a Corporation duly incorporated, having its head office at 1405
  Parc-Technologique Blvd., Québec, QC GIP 4P5,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (hereinafter
  the “Parent Corporation”)

  
	
   

  	
   

  	
   

  

 

SECTION 1 – PURPOSE

 

1.1                                 The Corporation wishes to employ the
Executive as its Senior Vice President, Clinical and Medical Affairs and Chief
Medical Officer, starting on August 6, 2007. The Executive is willing to
be employed by the Corporation, on the terms and conditions set forth herein in
this Employment Agreement (the “Agreement”). The
Executive shall report to the President and Chief Executive Officer of the
Corporation.

 

SECTION 2 – DUTIES

 

2.1                                 The Executive agrees to devote his full
business time to the Corporation, to make every effort necessary to perform
adequately the duties that are assigned to him and to act in the best interests
of the Corporation at all times. The Employee shall refrain from any activity
that could be prejudicial to the Corporation’s interests. In performing his
duties with the Corporation, the Executive shall act faithfully and honestly at
all times.

 

 

2.2                                 The Executive shall carry out his duties from
New Jersey, USA. However, the Executive acknowledges that his position will
require traveling, including to Canada and Europe, and the Executive agrees to
devote the necessary and reasonable time to such traveling.

 

2.3                                 The Executive declares that he has no
obligation toward any person, including his former employers, that would be
incompatible with this Agreement or that could be an impediment to the
performance of his duties with the Corporation.

 

2.4                                 The Executive agrees to comply with all the
instructions, policies and/or rules that are established verbally or in
writing by the Corporation.

 

2.5                                 The Executive agrees and undertakes that, in
the event the Executive shall be appointed a corporate officer of the Parent
Corporation by the Parent Corporation’s Board of Directors, the Executive shall
fulfill such corporate functions and duties commensurate therewith
gratuitously.

 

2.6                                 The Executive shall be entitled to sit on a
board of directors of another corporation, solely with the prior written
authorization of the Board. It is agreed that the Executive may remain on any
Boards of which he is a member at the time of execution of this contract solely
if, with mutual agreement of the CEO of the Corporation, his continued
membership on those Boards does not constitute a conflict of interest or an
encumbrance to the proper execution of his position within the Corporation.

 

SECTION 3 –
COMPENSATION

 

3.1                                 Salary

 

The
Corporation shall pay the Executive, for the duration of this Agreement, a base
annual salary (the “Base Salary”)  of THREE HUNDRED AND FIFTY THOUSAND US
DOLLARS (US$350,000.00), payable in accordance with the Corporation’s standard
payroll practice. Such Base Salary shall be reviewed annually and may be
increased in accordance with the Corporation’s policy.

 

3.2                                 Bonus

 

During
the term of this Agreement, the Executive shall be eligible to receive an
annual lump sum cash bonus (the “Annual Bonus”)  in respect of each full or partial fiscal
year of the Corporation, which is from January 1 to December 31. The
Annual Bonus for the 2007 fiscal year, which shall be prorated, shall be equal
to an amount representing thirty- five (35%) of the Base Salary. If an Annual
Bonus is to be paid hereunder in respect of a period that is a partial fiscal
year, such Annual Bonus shall be prorated for service through the Executive’s
date of termination. In all cases, the Executive’s eligibility for such Annual
Bonus is conditional upon the attainment of objectives, which shall be mutually
agreed upon within one month of the commencement of the Executive’s employment
for year 2007 and thereafter yearly. According the Corporation’s policy, the
granting of Annual Bonus is based upon an assessment of each individual’s
performance as well as the performance of the Corporation and requires Board
approval.

 

2

 

3.3                                 Stock Options

 

Subject
to regulatory approval, the Corporation shall grant to the Executive, no later
than the date of signature of this Agreement, 45,000 options under the
Corporation’s Stock Option Plan (the “Plan”). These stock options shall vest equally over a
period of three (3) years from the date of the original grant. The said
options, the exercise price, the period during which they may be exercised and
the other terms and conditions attaching to their exercise shall be subject to
the terms and conditions of the Plan.

 

3.4                                 Signing Bonus

 

The
Executive shall receive a signing bonus, of a net amount representing the value
of 10,000 Corporation’s Common Shares. This amount will be net of income taxes
and will be payable only if the Executive utilizes the funds to acquire Common
Shares of the Corporation on the market, within the first month following the
signature of this Agreement, subject to compliance with the Corporation’s
insider trading and blackout policies and all relevant securities regulations.

 

3.5                                 Car
Allowance

 

The
Corporation shall pay the Executive an annual taxable car allowance of TWENTY
THOUSAND US DOLLARS (US$20,000.00). In addition, the Corporation will assume
all related operating costs of the vehicle (including insurance, registration,
maintenance, repairs and fuel).

 

3.6                                 Business
Expenses

 

The
Corporation shall reimburse the Executive, upon presentation of vouchers, for
reasonable entertainment, traveling and other expenses incurred by him on
behalf of the Corporation, in accordance with the Corporation’s policies and
rules.

 

SECTION 4 – VACATION

 

The
Executive shall be entitled to paid annual vacation of four (4) weeks, in
accordance with the Corporation’s policy, which vacation is to be taken at
times prearranged with the Corporation. Vacation must be taken during the year
and shall not be cumulative. The full vacation for 2007 is vested for the
Executive upon execution of this agreement.

 

SECTION 5 – GROUP INSURANCE

 

5.1                                 Medical/Dental
Insurance, Life and Disability Insurance

 

The
Corporation shall pay the monthly premium for family benefits plan insurance
according the Corporation’s existing plan Insurance.

 

3

 

SECTION 6
– DURATION AND TERMINATION

 

6.1                                 Duration

 

This
contract is for an indeterminate term.

 

6.2                                 Automatic
termination

 

The
Executive’s employment shall terminate automatically, without the Corporation
being bound to pay any compensation whatsoever, upon the death of the Executive
or the date upon which his resignation becomes effective.

 

The
Executive’s employment may also be terminated by the Corporation for cause upon
simple notice in writing transmitted to the Executive, without the Corporation
being bound to pay any compensation whatsoever, in the following cases,
hereinafter referred to as “Cause”:

 

(a)                             If the Executive is declared bankrupt or insolvent or makes an
assignment of his property or is placed under protective supervision, which
situations the Executive acknowledges to be incompatible with the continuation
of his employment.

 

(b)                            If the Executive becomes physically or mentally disabled to such an
extent as to make him unable to perform his duties normally and adequately for
an aggregate of six (6) months during a period of twelve (12) consecutive
months. In such a case, the Executive may continue to benefit under short-term
and long-term disability insurance plans, subject to the terms of such plans,
if any.

 

(c)                             If the Executive breaches the terms of this
Agreement.

 

(d)                            If the Executive commits any fraud, theft, embezzlement or other
criminal act of a similar nature.

 

(e)                             If the Executive has committed serious misconduct or willful negligence
in the performance of his duties.

 

(f)                               If the Executive refuses or fails to follow
reasonable directives of the Corporation.

 

(g)                            If the Executive’s demonstrates willful or reckless conduct causing
material damage to the Corporation or the Corporation’s business.

 

(h)                            If the Executive misuses or abuses alcohol,
drugs or controlled substances.

 

6.3                                 Termination without Cause

 

The Corporation may also terminate the Executive’s employment, without
cause, by paying him the following:

 

4

 

(a)                             If the Executive’s employment is terminated
by the Corporation on or before the date that is the twelve (12)-month
anniversary of the date of this Agreement, an amount equivalent of months
worked of:

 

(i)                                the Executive’s annual Base Salary;

 

(ii)                             the annualized Annual Bonus received or to
receive by the Executive for 2007; and

 

(iii)                          the cost of the benefits which were in force
at the time of termination of the Executive’s employment, calculated on a
yearly basis, including the car allowance but excluding the related operating
costs. However, Stock Options are expressly excluded from this provision and
the Executive shall be treated, in this regard, in accordance with the terms of
the Plan.

 

(b)                            If the Executive’s employment is terminated
by the Corporation after the date that is the twelve (12)-month anniversary of
the date of this Agreement:

 

(i)                                an amount equivalent to twelve (12) months of
the Executive’s annual Base Salary;

 

(ii)                             An amount equivalent to the Annual Bonus
received by the Executive for the last completed fiscal year prior to the
termination date calculated on a yearly basis; and

 

(iii)                          An amount equivalent to twelve (12) months of
the cost of the benefits which were in force at the time of termination of the
Executive’s employment, calculated on a yearly basis, including the car
allowance but excluding the related operating costs. However, Stock Options are
expressly excluded from this provision and the Executive shall be treated, in
this regard, in accordance with the terms of the Plan.

 

(c)                             The Executive acknowledges that the said
payments are fair and sufficient and, in consideration of the Corporation
giving him such payments in the event of the termination of his employment
without cause, the Executive shall grant the Corporation and its directors,
officers, employees, shareholders, representatives and agents, and the
directors, officers, employees, shareholders, representatives and agents of any
affiliate of the Corporation, a full and final release and discharge from any
and all claims, past, present or future, that he has or may have, arising
directly or indirectly from the termination of his employment, whether for
prior notice of termination, severance pay, damages in lieu thereof or for any
other reason.

 

5

 

6.4                                 Resignation

 

In the event that the Executive wishes to terminate his employment, he
shall give the Corporation prior written notice of at least 6 weeks.

 

SECTION 7
– TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE OF CONTROL

 

7.1                                 If the employment of the Executive is
terminated by the Corporation within twelve (12) months following a Change of
Control, without Cause by the Corporation or by the Executive for Good Reason,
the whole as defined in Appendix 1, the Executive shall receive the following:

 

(a)                             An amount equivalent to eighteen (18) months
of his annual Base Salary;

 

(b)                            An amount equivalent to 1 .5 times the Annual
Bonus, if any, which the Executive would have been entitled to receive in the
year during which the Change of Control occurred; and

 

(c)                             An amount equivalent to eighteen (18) months
of the cost of the benefits which were in force at the time of termination of
the Executive’s employment, calculated on a yearly basis, including the car
allowance, but excluding operating costs. However, Stock Options are expressly
excluded from this provision and the Executive shall be treated, in this
regard, in accordance with the terms of the Plan.

 

SECTION 8
– NO COMPETITION, NO SOLICITATION AND LOYALTY

 

8.1                                 The
Executive shall not compete with the Corporation, directly nor indirectly. He
shall not participate in any capacity
whatsoever in a business that would directly or indirectly compete with the
Corporation, namely one involved in the development and commercialization of
the specific endocrine therapies and oncology treatments which the Corporation
is actively developing, including, without limitation, as an executive,
director, officer, employer, principal, agent, fiduciary, administrator of
another’s property, associate, independent contractor, franchisor, franchisee,
distributor or consultant unless such participation is fully disclosed to the
Corporation and approved in writing in advance by the Board. In addition, the
Executive shall not have any interest whatsoever in such an enterprise,
including, without limitation, as owner, shareholder, partner, limited partner,
lender or silent partner. This no competition covenant is limited as follows :

 

8.1.1                        As to the time period, to
the duration of the Executive’s employment and for a period of one (1) year
as of the date of termination of his employment;

 

8.1.2                        As to the geographical area, the
territory in which a specific product had been actively exploited by the
Corporation during the two years preceding the termination date. For purposes
of this clause, the Corporation is deemed to have actively exploited such
territory for such product if, during the two (2) years immediately
preceding the termination date:

 

6

 

(i)                                Distribution rights for this product were
granted to a distributor of the Corporation, pursuant to a distribution
agreement (exclusive or nonexclusive) except if such distribution agreement
ceased to have effect, prior to the termination date, with the Corporation’s
consent and provided that the Corporation did not actively search for other
distributors for the territory covered by this Agreement; or if

 

(ii)                             The Corporation has completed phase II clinical
development work for this product in this territory, or searched for commercial
partners or applied to protect its intellectual property rights in relation to
the product and its use, including patent applications in relation to the
product or its use, which applications referred to these territories.

 

8.1.3        As to the
nature of the activities, to duties or activities which are identical or substantially similar to
those performed or carried on by the Executive during the twenty-four (24)
months preceding the termination of his employment.

 

8.2                                 The foregoing stipulation shall nevertheless
not prevent the Executive from buying or holding shares or other securities of
a Corporation whose securities are publicly traded on a recognized stock
exchange where the securities so held by the Executive do not represent more
than five percent (5%) of the voting shares of such Corporation and do not
allow for its control.

 

8.3                                 The
Executive also undertakes, for the same period and in respect of the same
territory referred to hereinabove in
sub-sections 8.1.1 and 8.1.2, not to solicit clients of the Corporation,
directly or indirectly, not to permit the use of his name in order to solicit
said clients or do anything whatsoever to induce or to lead any person to decide
to put an end, in whole or in part, to his business relations with the
Corporation.

 

8.4                                 The
Executive also undertakes, for the same period and in respect of the same
territory referred to hereinabove in
sub-sections 8.1.1 and 8.1.2, not to induce, attempt to induce or otherwise
interfere in the relations which the Corporation has with its distributors,
suppliers, representatives, agents and other parties with whom the Corporation
deals.

 

8.5                                 The
Executive also undertakes, for the same period and in respect of the same
territory referred to hereinabove in
sub-sections 8.1.1 and 8.1.2 not to induce, attempt to induce or otherwise
solicit the personnel of the Corporation to leave their employment with the
Corporation nor to hire the personnel of the Corporation for any enterprise in
which the Executive has an interest.

 

8.6                                 The Executive acknowledges that the
provisions of this section 8 are limited as to the time period, the geographic
area and the nature of the activities to what the parties deem necessary to
protect the legitimate interests of the Corporation, while allowing the
Executive to earn his living.

 

7

 

8.7                                 Nothing
in this section shall operate to reduce nor to extinguish the obligations of
the Executive arising at law or under
this contract which survive at the termination of the contract in reason of
their nature and, in particular, without limiting the foregoing, the Executive’s
duty of loyalty and obligation to act faithfully and honestly.

 

SECTION 9
– CONFIDENTIALITY

 

9.1                                 The
Executive acknowledges that he has received and will receive or conceive, in carrying on or in the course of his work
during his employment with the Corporation, confidential information pertaining
to the activities, the technologies, the operations and the business, past,
present and future, of the Corporation or its subsidiaries or related or
associated companies which information is not in the public domain. The
Executive acknowledges that such confidential information belongs to the
Corporation and that its disclosure or unauthorized use could be prejudicial to
the Corporation and contrary to its interests.

 

Accordingly,
the Executive agrees to respect the confidentiality of such information and not
to make use of or disclose or discuss it to or with any person, other than in
the course of his duties with the Corporation, without the explicit prior
written authorization of the Corporation.

 

This
undertaking to respect the confidentiality of such information and not to make
use of or disclose or discuss it to or with any person shall continue to have
full effect notwithstanding the termination of the Executive’s employment with
the Corporation, so long as such confidential information does not become
public as a result of an act by the Corporation or a third party which act does
not involve the fault of one its Executives.

 

9.2                                 The term “confidential information” includes
among other things:

 

9.2.1                        products, formulae, processes and composition
of products, as well as raw materials and ingredients, of whatever kind, that
are used in their manufacture;

 

9.2.2                        technical knowledge and methods, quality
control processes, inspection methods, laboratory and testing methods,
information processing programs and systems; manufacturing processes, plans,
drawings, tests, test reports and software;

 

9.2.3                        equipment, machinery, devices, tools,
instruments and accessories;

 

9.2.4                        financial information, production cost data,
marketing strategies, raw materials supplies, suppliers, staff and client lists
and related information, marketing plans, sales techniques and policies,
including pricing policies, sales and distribution data and present and future
expansion plans; and

 

9.2.5                        research, experiments, inventions,
discoveries, developments, improvements, ideas, industrial secrets and “know-how”.

 

8

 

9.3                                 The
Executive undertakes to keep the terms of this Agreement confidential.

 

SECTION 10
– OWNERSHIP OF INTELLECTUAL PROPERTY

 

10.1                           The Executive hereby assigns and agrees to
assign to the Corporation all his intellectual property rights as of their
creation and to make full and prompt disclosure to the Corporation of all
information relating to anything made or designed by him or that may be made or
designed by him during the period of his employment, whether alone or jointly
with other persons, or within a period of two (2) years following the
termination of his employment and resulting from or arising out of any work
performed by the Executive on behalf of the Corporation or connected with any
matter relating or possibly relating to any business in which the Corporation
or any of its subsidiaries or related or associated companies is involved
unless specifically released from such obligation in writing by the Board.

 

In
addition, the Executive renounces all moral rights in any document or work
realized during the period of his employment. The Executive acknowledges that
the Corporation has the right to use, modify or reproduce any document or work
realized by the Executive, at its entire discretion, without the Executive’s
authorization and without his name being mentioned.

 

10.2                           At any time during the period of his
employment or after the termination of his employment, the Executive shall
sign, acknowledge and deliver, at the Corporation’s expense, but without
compensation other than a reasonable sum for his time devoted thereto if his
employment has then terminated, any document required by the Corporation to
give effect to

section 10.1, including patent applications and documents evidencing the
assignment of ownership. The Executive shall also provide such other assistance
as the Corporation may require with respect to any proceeding or litigation
relating to the protection or defense of intellectual property rights belonging
to the Corporation.

 

10.3                           This section shall be binding on the
Executive’s heirs, assignees and legal representatives.

 

SECTION 11 – OWNERSHIP OF FILES AND OTHER PROPERTY

 

11.1                           Any file, sketch, drawing, letter, report,
memo or other document, any equipment, machinery, tool, instrument or other
device, any diskette, recording tape, compact disc or software or any other
property which comes into the Executive’s possession during his employment with
the Corporation, in the performance or in the course of his duties, regardless
of whether he has participated in its preparation or design, how it may have
come into his possession and whether or not it is an original or a copy, shall
at all times remain the property of the Corporation and, upon the termination
of the Executive’s employment, shall be returned to the Corporation or its
designated representative before the Executive leaves his place of work. The
Executive may not keep a copy or give one to a third party.

 

9

 

SECTION 12 – TERMINATION OF PRIOR CONTRACTS

 

12.1                           As of the effective date hereof, this
Agreement supersedes and cancels any prior agreement, verbal or written, with
respect to the Executive’s employment with the Corporation.

 

SECTION 13 – AMENDMENT OF THE AGREEMENT

 

13.1                           To be valid, any amendment to this Agreement
must be confirmed in writing by the Corporation and by the Executive.

 

SECTION 14 – NOTICES

 

14.1                           Any notice given hereunder shall be given in
writing and sent by registered or certified mail or hand delivered. If such
notice is sent by registered or certified mail, it shall be deemed to have been
received five (5) business days following the date of its mailing if the
postal services are working normally. If such is not the case, the notice must
be hand delivered or served by bailiff, at the discretion of the sender. In the
case of hand delivery or service, the notice shall be deemed to have been
received the same day. It is agreed that if the delivery date is a non-business
day, the notice shall be deemed to have been received on the following business
day.

 

SECTION 15 – ELECTION OF DOMICILE

 

15.1                           For the purposes of the exercise of any
rights flowing from this Agreement and the institution of legal proceedings,
the parties elect domicile in the judicial district of Québec

 

SECTION 16 – SUCCESSORS

 

16.1                           This Agreement shall be binding on the
successors, heirs, assignees and legal representatives of the parties.

 

SECTION 17 – INTERPRETATION

 

17.1                           This Agreement shall be governed by and
interpreted in accordance with the laws of the province of Québec.

 

SECTION 18 – LANGUAGE

 

The
parties have expressly requested that this Agreement be drafted in the English
language. Les parties ont expressément requis que cette
convention d’emploi soit rédigée en anglais.

 

10

 

IN WITNESS
WHEREOF the parties hereto have duly signed this Agreement on
this 27th day of July, 2007.

 

 

	
  ÆTERNA ZENTARIS, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   /s/ Mario Paradis for

  	
   

  	
  /s/ Paul
  Blake 27th July 2007,

  
	
   

  	
   

  	
   

  	
   

  
	
  David J.
  Mazzo, Ph.D.

  	
   

  	
  Paul Blake,
  M.D.

  
	
   

  	
   

  	
   

  
	
  President
  and Chief Executive Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ÆTERNA ZENTARIS INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   /s/ Mario Paradis for

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  David J.
  Mazzo, Ph.D.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  President
  and Chief Executive Officer

  	
   

  	
   

  
					

 

11

 

ANNEX 1

 

CHANGE OF CONTROL PROGRAM (the “Program”)

 

1.             Applicability of the Program

 

The
Executive shall be entitled to the benefit of the Program if both conditions
mentioned below occur:

 

(A)       there is a “Change of Control” of the Corporation, as defined below; and

 

(B)       The
Executive’s employment is terminated, within twelve (12) months following a
Change of Control :

 

(i)         involuntarily,
at the request of the Corporation or its successors, except “for Cause” or

 

(ii)        by him, for   “Good Reason”.

 

2.             Definitions

 

(A)       For purposes of the Program and unless otherwise defined, the
capitalized terms used herein shall have the following meaning:

 

(i)        “Person” includes any
individual, firm, partnership, association, trust, trustee, executor,
administrator, legal personal representative, government, governmental body or
authority, corporation, or other incorporated or unincorporated organization,
syndicate or other entity;

 

(ii)         Subject
to the exceptions set out in Schedule A hereto, a Person shall be deemed
the “Beneficial
Owner” of or to “Beneficially Own” (a) any
securities of which such Person or any of such Person’s affiliates or
associates, as such terms are defined in National
Instrument 45-106 – Prospectus and Registration Exemptions, is owner
at law or in equity; (b) any securities which the Person or any of such
Person’s affiliates or associates has the right to acquire within 60 days
(whether such right is exercisable immediately or after the passage of not more
than 60 days thereafter or upon the occurrence of a contingency or the making
of a payment) pursuant to any securities convertible into Voting Shares,
agreement, arrangement, pledge or understanding, whether or not in writing
(other than customary agreements with and between underwriters and/or banking
group and/or selling group members with respect to a distribution of securities
or pledges of securities in the ordinary course of the pledgee’s business); and
(c) any securities that are Beneficially Owned within the meaning of
clauses (i) or (ii) of this Subsection 2(A)(ii) by any other
Person with which such Person is acting jointly or in concert;

 

12

 

(iii)        “Voting Shares” means the common shares and
any other securities the holders of which are entitled to vote generally on the
election of directors of the Corporation.

 

(B)       For purposes of the Program, involuntary termination of
employment “for Cause” includes
the following:

 

(i)           if
the Executive commits any fraud, theft, embezzlement or other criminal act of a
similar nature; or

 

(ii)          if
the Executive is guilty of serious misconduct or willful negligence in the
performance of his duties.

 

(C)       For purposes of the Program, “Good
Reason” means the occurrence, without the Executive’s express
written consent, of any of the following acts:

 

(i)          a
material reduction of the Executive’s total compensation (including annual Base
Salary plus Annual Bonus, benefits and number of stock options) as in effect on
the date of this Agreement or as same may be increased from time to time ;

 

(ii)         a
material reduction or change in the Executive’s duties, authority,
responsibilities, accountability or a change in the business or corporate
structure of the Corporation which materially affects his authority,
compensation or ability to perform duties or responsibilities (such as shifting
from a policy making position to a policy implementation position);

 

(iii)        a
forced relocation; or

 

(iv)        a material change in the terms and conditions of this
Program.

 

(D)       For purposes of the Program, a “Change of Control” shall be deemed to have occurred in any of
the following circumstances:

 

(i)          subject to the
exceptions set out in Schedule B hereto, upon the purchase or
acquisition, in one or more transactions, by a Person or one or more Persons
who are affiliates of one another or who are acting jointly or in concert (as
such expressions are defined in the Securities Act (Ontario)) (the
“Acquiring Person”)  of
a beneficial interest in securities of the Corporation representing in any
circumstance fifty percent (50%) or more of the voting rights attaching to the
then outstanding securities of the Corporation; or

 

(ii)         upon
a sale or other disposition of all or substantially all of the Corporation’s
assets; or

 

13

 

(iii)            upon a plan of liquidation or dissolution of the
Corporation; or

 

(iv)            if,
for any reason, including an amalgamation, merger or consolidation of the
Corporation with or into another company, the individuals who at the date
hereof constitute the Board of Directors of the Corporation (and any new
directors whose appointment by the Board of Directors of the Corporation or
whose nomination for election by the Corporation’s shareholders was approved by
a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the date hereof or whose appointment or nomination for
election was previously so approved) cease to constitute a majority of the
members of the Board of Directors of the Corporation.

 

3.             Payment

 

In
the event that the two (2) conditions mentioned in Section 1 above
are met, the Executive shall receive, in a lump sum, at the latest within ten (10) days
of the effective date of the termination of employment, the payment of the
amounts mentioned in

section 7 of the Agreement.

 

Should
the Executive die before he has received the full payments, his estate shall
receive, immediately following his death, a cash amount equal to the unpaid
balance, less required statutory deductions.

 

It
is understood that the Executive will not be required to mitigate the amount of
any payment hereunder by seeking other employment or otherwise.

 

4.             Release

 

The
Executive acknowledges that the full and complete execution of all obligations
undertaken by the Corporation and its successors under the Program, to the
extent the Program becomes applicable pursuant to Section 1 of the
Program, constitutes adequate notice of termination and in consideration and
subject to the full and complete execution of all such obligations, the
Executive agrees to grant the Corporation, its affiliated and related companies
and their respective directors, officers, shareholders, representatives,
employees, successors and assigns, a full and final release and discharge for
all claims, past, present or future, that he has or may have, arising directly
or indirectly from his employment and the termination thereof, whether for
prior notice of termination, severance pay, damages in lieu thereof or for any
other reason.

 

5.             General

 

The
Executive’s participation in the Program shall end immediately upon the
termination of his employment with the Corporation or one of its affiliates for
any reason whatsoever. The Program is for an indefinite term commencing on the
date of this Agreement. Furthermore, the Corporation shall have the right prior
to the occurrence of a Change of Control, in its sole discretion, to terminate
the Executive’s participation in the Program at the end of each twelve
(12)-month period commencing on the date of this Agreement by sending him a
written notice of termination at least thirty (30) days prior to the first
anniversary date of this Agreement and of

 

14

 

each
anniversary date thereafter. For example, the Corporation would be entitled to
exercise its discretion to terminate the Executive’s participation in the
Program if, as of the date of the notice of termination, there has been during
said twelve (12)-month period a material reduction in the responsibilities of
the Executive.

 

6.             Successors

 

The
terms and conditions hereof shall bind the Corporation, its successors and
assignees.

 

15

 

Schedule A

 

Exceptions to the definition of “Beneficial
Owner” and “Beneficially Own” (Section 2 (A)(ii) of the Program)

 

A
Person shall not be deemed the “Beneficial
Owner” of or to “Beneficially
Own” any security:

 

(A)        as
a result of such security having been deposited or tendered pursuant to a take-over
bid (as such term is defined in the Securities
Act (Ontario)) made by such Person or any of such Person’s
affiliates or associates or any other Person acting jointly or in concert with
such Person until such deposited or tendered security is taken up and paid for;

 

(B)         as
a result of entering into an agreement, including a lock-up agreement, pursuant
to which it has been agreed that such security will be deposited or tendered
until such deposited or tendered security is taken up and paid for;

 

(C)         as
a result of (a) such Person or any of the affiliates or associates of such
Person holding such security provided that the ordinary business of any such
Person (the “Fund Manager”)  includes the
management of investment funds for others and such security is held by the Fund
Manager in the ordinary course of such business in the performance of such Fund
Manager’s duties for the account of any other Person (a “Client”);  (b) such Person (the “Trust Company”)  being licensed to carry on
the business of a trust company under applicable laws and, as such, acting as
trustee or administrator or in a similar capacity in relation to the estates of
deceased or incompetent Persons (each an “Estate
Account”)  or in relation to other
accounts (each an “Other Account”){  and holding
such security in the ordinary course of such duties for such Estate Accounts or
for such Other Accounts; (c) such Person (the “Plan Administrator”)  being the administrator or
the trustee of one or more pension funds or plans (a “Plan”)  registered under the laws of
Canada or any province thereof or the laws of the United States of America or
any state thereof and such security being held by the Plan Administrator or the
Plan in the ordinary course of such Plan Administrator’s or Plan’s activities; (d) such
Person (the “Crown Agent”)  being established
by statute for purposes that include, and the ordinary business or activity of
such Person includes, the management of investment funds for employee benefit
plans, pension plans or insurance plans of various public bodies and such
security is held

 

16

 

by
the Crown Agent in the ordinary course of the management of such investment
funds; or (e) such Person being a Plan and such security being held by the
Plan in the ordinary course of such Plan’s activities; provided, however, that
in any of the foregoing cases the Fund Manager, the Trust Company, the Plan
Administrator, the Crown Agent or the Plan, as the case may be, is not then
making or has not then announced a current intention to make a take-over bid (as
such term is defined in the Securities Act (Ontario)),
alone or by acting jointly or in concert with any other Person, other than an
offer to acquire the Voting Shares pursuant to a distribution by the
Corporation or by means of market transactions made in the ordinary course of
business of such Person (including pre-arranged trades entered into in the
ordinary course of business of such Person) executed through the facilities of
a stock exchange or organized over-the-counter-market;

 

(D)         because
such Person is a Client of the same Fund Manager as another Person on whose
account the Fund Manager holds such security, or because such Person is an
Estate Account or an Other Account of the same Trust Company as another Person
on whose account the Trust Company holds such security, or because such Person
is a Plan with the same Plan Administrator as another Plan on whose account the
Plan Administrator holds such security;

 

(E)         because
such Person is a Client of a Fund Manager and such security is owned at law or
in equity by the Fund Manager, or because such Person is an Estate Account or
an Other Account of a Trust Company and such security is owned at law or in
equity by the Trust Company, or because such Person is a Plan and such security
is owned at law or in equity by the Plan Administrator; or

 

(F)         because
such Person is the registered holder of securities as a result of carrying on
the business of, or acting as, a nominee of a securities depositary.

 

17

 

Schedule B

 

Exceptions to the definition of “Acquiring
Person” (Section 2 (D)(i) of the Program)

 

“ACQUIRING PERSON” SHALL MEAN ANY PERSON WHO IS
AT ANY TIME AFTER THE DATE HEREOF THE BENEFICIAL OWNER OF FIFTY PERCENT (50%) OR MORE OF THE
OUTSTANDING VOTING SHARES OF THE CORPORATION; PROVIDED, HOWEVER, THAT THE TERM “ACQUIRING
PERSON” SHALL NOT INCLUDE:

 

(i)              the Corporation
or any corporation controlled by the Corporation;

 

(ii)             any Person who
becomes the beneficial owner of fifty percent
(50%) or more of the outstanding Voting Shares as a result of one or
any combination of: (a) a Voting Share Reduction; (b) an Exempt
Acquisition; or (c) a Pro Rata Acquisition; provided, however, that if a
Person shall become the Beneficial Owner of fifty
percent (50%) or more of the outstanding Voting Shares by reason of
one or any combination of a Voting Share Reduction, an Exempt Acquisition or a
Pro Rata Acquisition, and thereafter becomes the Beneficial Owner of an
additional one percent of any Voting Shares then outstanding (otherwise than
pursuant to an additional Voting Share Reduction, Exempt Acquisition or Pro
Rata Acquisition), then, as of the date that such Person becomes a Beneficial
Owner of such additional Voting Shares, such Person shall become an “Acquiring Person”;  or

 

(iii)            an underwriter or
member of a banking or selling group acting in such capacity that becomes the
Beneficial Owner of fifty percent (50%) or
more of the Voting Shares in connection with a distribution of securities
pursuant to an underwriting agreement with the Corporation;

 

For
purposes of the Program, the capitalized terms used herein shall have the
following meaning:

 

(a)          “Voting
Share Reduction” means an acquisition or redemption by the Corporation
or any corporation controlled by the Corporation of Voting Shares which, by
reducing the number of Voting Shares outstanding, increases the percentage of
Voting Shares Beneficially Owned by any Person to fifty percent (50%) or more
of the Voting Shares then outstanding;

 

 

(b)        “Exempt
Acquisition” means an acquisition whereby a Person became an
Acquiring Person by inadvertence and without any intention to become, or
knowledge that it would become, an Acquiring Person under this Program and, in
the event that a waiver is granted by the Board of Directors, such acquisition
shall be deemed not to have occurred for the purposes hereof. Any such waiver
may only be given on the condition that such Person, within

10 days after the foregoing determination by the Board of Directors or such
later date as the Board of Directors may determine (the “Disposition Date”),
has reduced its Beneficial Ownership of Voting Shares such that the Person is
no longer an Acquiring Person and such waiver shall only be effective if the
reduction has occurred within such 

10-day period; [NTD: To consider whether such
an event can ever occur]

 

(c)         “Pro
Rata Acquisition” means an acquisition by a Person of Voting
Shares pursuant to (i) any dividend reinvestment plan, such purchase plan
or other plan of the Corporation made available to all holders of Voting Shares
(other than holders resident in any jurisdiction where participation in such
plan is restricted or impractical as a result of applicable law); (ii) a
stock dividend, a stock split or other event pursuant to which such Person
becomes the Beneficial Owner of Voting Shares on the same pro rata basis as all
other holders of Voting Shares of the same class or series; (iii) the
acquisition or exercise of rights to purchase Voting Shares distributed to all
holders of Voting Shares (other than holders resident in any jurisdiction where
such distribution or exercise is restricted or impractical as a result of
applicable law) by the Corporation pursuant to a rights offering (but only if
such rights are acquired directly from the Corporation); or (iv) a
distribution of Voting Shares or convertible securities in respect thereof
offered pursuant to a prospectus or by way of a private placement by the
Corporation or a conversion or exchange of any such convertible security,
provided that such Person does not thereby acquire a greater percentage of
Voting Shares or convertible securities so offered than the Person’s percentage
of Voting Shares Beneficially Owned immediately prior to such acquisition.

 

2

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