Document:

Exhibit 10.1

 

Exhibit 10.1

LULULEMON CORP.

2007 EQUITY INCENTIVE PLAN

          SECTION 1. Purpose; Definitions. The purposes of the Lululemon Corp. 2007 Equity
Incentive Plan (the “Plan”) are to enable Lululemon Corp. (the “Company”) and
its Affiliates (as defined herein) to recruit and retain highly qualified personnel, to provide
those personnel with an incentive for productivity and to provide those personnel with an
opportunity to share in the growth and value of the Company.

          For purposes of the Plan, the following initially capitalized words and phrases will be
defined as set forth below, unless the context clearly requires a different meaning:

          (a) “Affiliate” means any Person that is a subsidiary of the Company, or directly or
indirectly controls, or is controlled by, or is under common control with, the Company (or their
successors).

          (b) “Award” means a grant of Options, SARs, Restricted Stock, or Restricted Stock
Units pursuant to the provisions of the Plan.

          (c) “Award Agreement” means, with respect to any particular Award, the written
document that sets forth the terms of that particular Award.

          (d) “Board” means the Board of Directors of the Company, as constituted from time to
time; provided, however, that if the Board appoints a Committee to perform some or all of the
Board’s administrative functions hereunder pursuant to Section 2, references in the Plan to
the “Board” will be deemed to also refer to that Committee in connection with matters to be
performed by that Committee.

          (e) “Cause” means (i) conviction of, or the entry of a plea of guilty or no contest
to, a felony or any other crime that causes the Company or its Affiliates public disgrace or
disrepute, or adversely affects the Company’s or its Affiliates’ operations or financial
performance or the relationship the Company has with its Affiliates, (ii) gross negligence or
willful misconduct with respect to the Company or any of its Affiliates, including, without
limitation fraud, embezzlement, theft or proven dishonesty in the course of his employment; (iii)
refusal, failure or inability to perform any material obligation or fulfill any duty (other than
any duty or obligation of the type described in clause (v) below) to the Company or any of its
Affiliates (other than due to a Disability), which failure, refusal or inability is not cured
within 10 days after delivery of notice thereof; (iv) material breach of any agreement with or duty
owed to the Company or any of its Affiliates; (v) any breach of any obligation or duty to the
Company or any of its Affiliates (whether arising by statute, common law, contract or otherwise)
relating to confidentiality, noncompetition, nonsolicitation or proprietary rights; or (vi) any
other conduct that constitutes “cause” at common law. Notwithstanding the foregoing, if a
Participant and the Company (or any of its Affiliates) have entered into an employment agreement,
consulting agreement or other similar agreement that specifically defines “cause,” then with
respect to such Participant, “Cause” shall have the meaning defined in that employment agreement,
consulting agreement or other agreement.

 

 

          (f) “Change in Control” means, the occurrence of any of the following, in one
transaction or a series of related transactions: (i) any person (as such term is used in Section
13(d) and 14(d) of the Exchange Act) becoming a “beneficial owner” (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of
the voting power of the Company’s then outstanding capital stock; (ii) a consolidation, share
exchange, reorganization or merger of the Company resulting in the stockholders of the Company
immediately prior to such event not owning at least a majority of the voting power of the resulting
entity’s securities outstanding immediately following such event; (iii) the sale or other
disposition of all or substantially all the assets of the Company (other than a transfer of
financial assets made in the ordinary course of business for the purpose of securitization); (iv) a
liquidation or dissolution of the Company; or (v) any similar event deemed by the Board to
constitute a Change in Control for purposes of the Plan.

          For the avoidance of doubt, a transaction or a series of related transactions will not constitute a
Change in Control if such transaction(s) result(s) in the Company, any successor to the Company, or
any successor to the Company’s business, being controlled, directly or indirectly, by the same
Person or Persons who controlled the Company, directly or indirectly, immediately before such
transaction(s).

          (g) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and
any successor thereto.

          (h) “Committee” means a committee appointed by the Board in accordance with
Section 2 of the Plan.

          (i) “Consultant” means a Person, other than an employee or Director of the Company or
an Affiliate, that (i) is engaged to provide services to the Company or an Affiliate other than
services provided in relation to a distribution of securities; (ii) provides services under a
written contract with the Company or an Affiliate; and (iii) spends or will spend a significant
amount of time and attention to the affairs and business of the Company or an Affiliate.

          (j) “Designated Participant” means a Participant not subject to Canadian federal
personal income tax.

          (k) “Director” means a member of the Board or of the board of directors of an
Affiliate.

          (l) “Disability” means a condition rendering a Participant Disabled.

          (m) “Disabled” means a total and permanent disability, as defined in Section 22(e)(3)
of the Code.

          (n) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (o) “Fair Market Value” means, as of any date: (i) if the Shares are not then publicly
traded, the value of such Shares on that date, as determined by the Board in its sole and absolute
discretion; or (ii) if the Shares are publicly traded, the volume weighted average trading price of
the Shares for the five trading days immediately preceding such date on the TSX or the

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principal national securities exchange on which the majority of the trading in the Shares
occurs or, if the Shares are not listed or admitted to trading on the TSX or any national
securities exchange, but are traded in the over-the-counter market, the closing sale price of a
Share on that date or, if no sale is publicly reported, the average of the closing bid and asked
prices on that date, as furnished by two members of the National Association of Securities Dealers,
Inc. who make a market in the common stock selected from time to time by the Company for that
purpose.

          (p) “Incentive Stock Option” means any Option intended to be and designated as an
“Incentive Stock Option” within the meaning of Section 422 of the Code.

          (q) “Insider” means an insider as defined in the Securities Act (British Columbia),
other than a Person who would be deemed an “insider” only virtue of being a director or senior
officer of a Subsidiary.

          (r) “Non-Employee Director” will have the meaning set forth in Rule 16b-3(b)(3)(i)
promulgated by the Securities and Exchange Commission under the Exchange Act, or any successor
definition adopted by the Securities and Exchange Commission; provided, however, that the Board or
the Committee may, to the extent that it deems necessary to comply with Section 162(m) of the Code
or regulations thereunder, require that each “Non-Employee Director” also be an “outside director”
as that term is defined in regulations under 

Section 162(m).

          (s) “Non-Qualified Stock Option” means any Option that is not an Incentive Stock
Option.

          (t) “Option” means any option to purchase Shares (including Restricted Stock, if the
Board so specifies in the applicable Award Agreement) granted pursuant to Section 5 hereof.

          (u) “Parent” means, in respect of the Company, a “parent corporation” as defined in
Section 424(e) of the Code.

          (v) “Participant” means an employee, Director or Consultant of the Company or any of
its Affiliates to whom an Award is granted.

          (w) “Person” means an individual, partnership, corporation, limited liability company,
trust, joint venture, unincorporated association, or other entity or association.

          (x) “Restricted Stock” means Shares that are subject to restrictions pursuant to
Section 8 hereof.

          (y) “Restricted Stock Unit” means a right granted under and subject to restrictions
pursuant to Section 8 hereof.

          (z) “SAR” means a stock appreciation right granted under the Plan and described in
Section 6 hereof.

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          (aa) “Shares” means shares of the Company’s common stock, par value $0.001, subject to
substitution or adjustment as provided in Section 3 hereof

          (bb) “Subsidiary” means, in respect of the Company, a subsidiary company, whether now
or hereafter existing, as defined in Sections 424(f) and (g) of the Code.

          (cc) “Tax Act” means the Income Tax Act (Canada), as amended from time to time, and
any successor thereto.

          (dd) “TSX” means the Toronto Stock Exchange.

          SECTION 2. Administration. The Plan will be administered by the Board; provided,
however, that the Board may at any time appoint a Committee to perform some or all of the Board’s
administrative functions hereunder; and provided further, that the authority of any Committee
appointed pursuant to this Section 2 will be subject to such terms and conditions as the
Board may prescribe and will be coextensive with, and not in lieu of, the authority of the Board
hereunder.

          Subject to the requirements of the Company’s by-laws, certificate of incorporation, and any
other agreement that governs the appointment of Board committees, any Committee established under
this Section 2 will be composed of not fewer than two members, each of whom will serve for
such period of time as the Board determines; provided, however, that if the Company has a class of
securities required to be registered under Section 12 of the Exchange Act, all members of any
Committee established pursuant to this Section 2 will be Non-Employee Directors. From time
to time the Board may increase the size of the Committee and appoint additional members thereto,
remove members (with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and thereafter directly administer
the Plan.

          Directors who are eligible for Awards or have received Awards may vote on any matters
affecting the administration of the Plan or the grant of Awards, except that no such member will
act upon the grant of an Award to himself or herself, but any such member may be counted in
determining the existence of a quorum at any meeting of the Board during which action is taken with
respect to the grant of Awards to himself or herself.

          The Board will have full authority to grant Awards under this Plan. In particular, subject to
the terms of the Plan, the Board will have the authority:

          (a) to select the persons to whom Awards may from time to time be granted hereunder
(consistent with the eligibility conditions set forth in Section 4);

          (b) to determine the type of Award to be granted to any person hereunder;

          (c) to determine the number of Shares, if any, to be covered by each Award; and

          (d) to establish the terms and conditions of each Award Agreement.

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          The Board will have the authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it, from time to time, deems advisable; to establish
the terms of each Award Agreement; to interpret the terms and provisions of the Plan and any Award
issued under the Plan (and any Award Agreement); and to otherwise supervise the administration of
the Plan. The Board may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or in any Award in the manner and to the extent it deems necessary to carry out the intent
of the Plan.

          All decisions made by the Board pursuant to the provisions of the Plan will be final and
binding on all persons, including the Company and Participants. No Director will be liable for any
good faith determination, act or omission in connection with the Plan or any Award.

          SECTION 3. Shares Subject to the Plan.

          (a) Shares Subject to the Plan. The Shares to be subject to or related to Awards
under the Plan will be authorized and unissued Shares of the Company. The maximum number of Shares
that may be subject to Options, SARs, Restricted Stock or Restricted Stock Units under the Plan is
[                    ]. The Company will reserve for the purposes of the Plan, out of its authorized and
unissued Shares, such number of Shares. Notwithstanding the foregoing, no Participant may be
granted Options or SARs with respect to more than                      Shares in any calendar year or 5% of the
Shares outstanding at the time such Shares are reserved for issuance.

In addition, (i) the maximum number of shares that may be issued to Insiders pursuant to awards
under the Plan and any other stock-based compensation arrangement adopted by the Company is 10% of
the Shares outstanding; (ii) the maximum number of Shares that may be issued to Insiders under the
Plan and any other stock-based compensation arrangement adopted by the Company within a one-year
period is 10% of the Shares outstanding; and (iii) the maximum number of shares that may be issued
to any one Insider (and such Insider’s associates and Affiliates) under the Plan and any other
stock-based compensation arrangement adopted by the Company within a one-year period is 5% of the
number of Shares outstanding.

For purposes of clauses (i), (ii) and (iii) above, any entitlement to acquire Shares granted
pursuant to this Plan or any other stock-based compensation arrangement adopted by the Company
prior to the Participant becoming an Insider is to be excluded, and the number of Shares
outstanding is to be determined at the time of the Share issuance in question.

          (b) Effect of the Expiration or Termination of Awards. If and to the extent that an
Option or SAR expires, terminates or is canceled or forfeited for any reason without having been
exercised in full, the Shares associated with that Option or SAR will again become available for
grant under the Plan. Similarly, if and to the extent an Award of Restricted Stock or Restricted
Stock Units is canceled or forfeited for any reason, the Shares subject to that Award will again
become available for grant under the Plan. In addition, if and to the extent an Award is settled
for cash, the Shares subject thereto will again become available for grant under the Plan.

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          (c) Other Adjustment. In the event of any recapitalization, reorganization, merger,
stock split or combination, stock dividend or other similar event or transaction (including,
without limitation, any “corporate transaction,” within the meaning of Treasury Regulation §
1.424-1(a)(3)), substitutions or adjustments will be made by the Board: (i) to the aggregate
number, class and/or issuer of the securities reserved for issuance under the Plan; (ii) to the
number, class and/or issuer of securities subject to outstanding Awards; and (iii) to the exercise
price of outstanding Options or SARs, in each case in a manner that reflects equitably the effects
of such event or transaction. For avoidance of doubt, a substitution or adjustment that reflects
equitably the effects of a given event or transaction will include (but will not be limited to) any
substitution or adjustment consistent with the requirements of Treasury Regulation § 1.424-1(a) or
any successor provision.

          (d) Change in Control. Notwithstanding anything to the contrary set forth in the
Plan, upon or in anticipation of any Change in Control of the Company or any of its Affiliates, the
Board may, in its sole and absolute discretion and without the need for the consent of any
Participant, take one or more of the following actions contingent upon the occurrence of that
Change in Control:

          (i) cause any or all outstanding Options or SARs to become vested and immediately
exercisable, in whole or in part;

          (ii) cause any or all outstanding Restricted Stock or Restricted Stock Units to become
non-forfeitable, in whole or in part;

          (iii) cause any outstanding Option to become fully vested and immediately exercisable
for a reasonable period in advance of the Change in Control and, to the extent not exercised
prior to that Change in Control, cancel that Option upon closing of the Change in Control;

          (iv) cancel any Option or SAR in exchange for a substitute award in a manner consistent
with the principles of Treas. Reg. §1.424-1(a) or any successor rule or regulation
(notwithstanding the fact that the original Award may never have been intended to satisfy
the requirements for treatment as an Incentive Stock Option);

          (v) cancel any Restricted Stock or Restricted Stock Units in exchange for restricted
stock or restricted stock units with respect to the capital stock of any successor
corporation or its parent;

          (vi) redeem any Restricted Stock or Restricted Stock Unit for cash and/or other
substitute consideration with a value equal to the Fair Market Value of an unrestricted
Share on the date of the Change in Control;

          (vii) cancel any SAR in exchange for cash and/or other substitute consideration with a
value equal to: (A) the number of Shares subject to that SAR, multiplied by (B) the
difference, if any, between the Fair Market Value per Share on the date of the Change in
Control and the exercise price of that SAR; provided, that if the Fair Market Value per
Share on the date of the Change in Control does not exceed the

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exercise price of any such SAR, the Board may cancel that SAR without any payment of
consideration therefore; and/or

          (viii) with respect to any Option held by a Designated Participant, cancel that Option
in exchange for cash and/or other substitute consideration with a value equal to: (A) the
number of Shares subject to that Option, multiplied by (B) the difference, if any, between
the Fair Market Value per Share on the date of the Change in Control and the exercise price
of that Option; provided, that if the Fair Market Value per Share on the date of the Change
in Control does not exceed the exercise price of any such Option, the Board may cancel that
Option without any payment of consideration therefor.

In the discretion of the Board, any cash or substitute consideration payable upon cancellation of
an Award may be subjected to (i) vesting terms substantially identical to those that applied to the
cancelled Award immediately prior to the Change in Control, or (ii) earn-out, escrow, holdback or
similar arrangements, to the extent such arrangements are applicable to any consideration paid to
stockholders in connection with the Change in Control.

          SECTION 4. Eligibility. Employees, Directors and Consultants are eligible to be
granted Awards under the Plan; provided, however, that only employees of the Company, its Parent or
a Subsidiary are eligible to be granted Incentive Stock Options.

          SECTION 5. Options. Options granted under the Plan may be Incentive Stock Options or
Non-Qualified Stock Options. Any Option granted under the Plan will be in such form as the Board
may at the time of such grant approve. Without limiting the generality of Section 3(a),
any or all of the Shares reserved for issuance under Section 3(a) may be issued in respect
of Incentive Stock Options.

          The Award Agreement evidencing any Option will incorporate the following terms and conditions
and will contain such additional terms and conditions, not inconsistent with the terms of the Plan,
as the Board deems appropriate in its sole and absolute discretion:

          (a) Option Price. Except for the exchange of Options contemplated under Section 5(h),
the exercise price per Share purchasable under an Option will be determined by the Board and will
not be less than 100% of the Fair Market Value of a Share on the date of the grant. However, any
Incentive Stock Option granted to any Participant who, at the time the Option is granted, owns more
than 10% of the voting power of all classes of shares of the Company, its Parent or of a Subsidiary
will have an exercise price per Share of not less than 110% of Fair Market Value per Share on the
date of the grant.

          (b) Option Term. The term of each Option will be fixed by the Board, provided,
however, that no Option will be exercisable more than 10 years after the date the Option is
granted. However, any Incentive Stock Option granted to any Participant who, at the time such
Option is granted, owns more than 10% of the voting power of all classes of shares of the Company,
its Parent or of a Subsidiary may not have a term of more than five years. No Option may be
exercised by any person after expiration of the term of the Option.

          (c) Exercisability. Options will vest and be exercisable at such time or times and
subject to such terms and conditions as determined by the Board.

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          (d) Method of Exercise. Subject to the exercisability and termination provisions set
forth herein and in the applicable Award Agreement, Options may be exercised in whole or in part at
any time and from time to time during the term of the Option, by the delivery of written notice of
exercise by the Participant to the Company specifying the number of Shares to be purchased. Such
notice will be accompanied by payment in full of the purchase price, either by (i) cash or
certified or bank check, (ii) unless otherwise determined by the Committee, through means of a “net
settlement,” whereby no exercise price will be due and where the number of Shares issued upon such
exercise will be equal to: (A) the product of (1) the number of Shares as to which the Option is
then being exercised, and (2) the difference between (x) the then current Fair Market Value per
Share and (y) the exercise price per share, divided by (B) the then current Fair Market Value per
Share. A number of Shares equal to the difference between the number of Shares as to which the
Option is then being exercised and the number of Shares actually issued to the Grantee upon such
net settlement will be deemed to have been received by the Company in satisfaction of the exercise
price, or (iii) by such other method as the Committee may approve or accept.

          No Shares will be issued upon exercise of an Option until full payment therefor has been made.
A Participant will not have the right to distributions or dividends or any other rights of a
stockholder with respect to Shares subject to the Option until the Participant has given written
notice of exercise, has paid in full for such Shares, if requested, has given the representation
described in Section 11 hereof and fulfills such other conditions as may be set forth in
the applicable Award Agreement.

          (e) Incentive Stock Option Limitations. In the case of an Incentive Stock Option, the
aggregate Fair Market Value (determined as of the time of grant) of the Shares with respect to
which Incentive Stock Options are exercisable for the first time by the Participant during any
calendar year under the Plan and/or any other plan of the Company, its Parent or any Subsidiary
will not exceed $100,000. For purposes of applying the foregoing limitation, Incentive Stock
Options will be taken into account in the order granted. To the extent any Option does not meet
such limitation, that Option will be treated for all purposes as a Non-Qualified Stock Option.

          (f) Termination of Service. Unless otherwise specified in the Award Agreement,
Options will be subject to the terms of Section 7 with respect to exercise upon or
following termination of employment or other service.

          (g) Transferability of Options. Except as may otherwise be specifically determined by
the Board with respect to a particular Option, no Option will be transferable by the Participant
other than by will or by the laws of descent and distribution, and all Options will be exercisable,
during the Participant’s lifetime, only by the Participant or, in the event of his Disability, by
his personal representative.

          (h) Exchange of Options. In respect of Options issued pursuant to this Plan (a
“Replacement Option”) in exchange (an “Exchange”) for an option (the “Exchanged
Option”) previously issued by an Affiliate of the Company in an exchange contemplated under
section 1.4 of the Reorganization Agreement dated                      ___, 2007 made among the Company,
Lululemon Athletica USA, Inc., Lululemon Athletica Inc., LIPO Investments (USA) Inc., LIPO

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Investments
(Canada) Inc., and  Lulu Canadian Holdings Inc., and which is
described in paragraphs 7(1.4)(a) and (b) of the Tax Act, the following provisions shall ensure
compliance with paragraph 7(1.4)(c) thereof, as follows:

          (i) subject to (ii), the exercise price per Share of a Replacement Option shall be
fixed at the exercise price of the Exchanged Option, adjusted for the exchange ratio
applicable to such Exchange; and

          (ii) if

               (A) the Board determines in good faith and after receiving an opinion from a qualified
valuator that with respect to the Exchanges pursuant to the Reorganization Agreement (1) the
excess of the aggregate fair market value of the Shares subject to the Replacement Option
immediately after the issuance of the Replacement Option less the aggregate option exercise
price for such Shares pursuant to the Replacement Option (such excess, referred to as the
“Post-Exchange Option Value”) would otherwise exceed (2) the excess of the aggregate
Fair Market Value of the securities subject to the Exchanged Option immediately before the
issuance of the Replacement Option less the aggregate option exercise price for such
securities pursuant to the Exchanged Option (such excess, referred to as the
“Pre-Exchange Option Value”), and

               (B) the Board determines in good faith after receiving an opinion from legal counsel
that an adjustment to the option exercise price is necessary to ensure compliance with the
requirements under section 7(1.4) of the Tax Act,

          then the option exercise price of the Shares subject to the Replacement Option as
determined by the Board under this Section 5 shall be modified nunc pro tunc, but only to
the extent necessary, so that the Post-Exchange Option Value does not exceed the
Pre-Exchange Option Value. The terms of the Replacement Option will otherwise continue
unamended.

The term, conditions to and manner of exercising, vesting conditions and all other terms and
conditions of each Replacement Option will otherwise be the same as the terms and conditions of the
corresponding Exchanged Option.

          SECTION 6. Stock Appreciation Rights.

          (a) Nature of Award. Upon the exercise of a SAR, its holder will be entitled to
receive an amount equal to the excess (if any) of: (i) the Fair Market Value of the Shares as to
which the SAR is then being exercised, over (ii) the Fair Market Value of those Shares as of the
date the SAR was granted (subject to adjustment in accordance with Section 3(c)). Such amount may
be paid in either cash and/or Shares, as determined by the Board in its discretion.

          (b) Terms and Conditions. The Award Agreement evidencing any SAR will incorporate the
following terms and conditions and will contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Board deems appropriate in its sole and absolute
discretion:

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          (i) Term of SAR. Unless otherwise specified in the Award Agreement, the term
of a SAR will be ten years.

          (ii) Exercisability. SARs will vest and become exercisable at such time or
times and subject to such terms and conditions as will be determined by the Board.

          (iii) Method of Exercise. Subject to the exercisability and termination
provisions set forth herein and in the applicable Award Agreement, SARs may be exercised in
whole or in part from time to time during their term by delivery of written notice to the
Company specifying the portion of the SAR to be exercised.

          (iv) Termination of Service. Unless otherwise specified in the Award
Agreement, SARs will be subject to the terms of Section 7 with respect to exercise upon
termination of employment or other service.

          (v) Non-Transferability. Except as may otherwise be specifically determined by
the Board with respect to a particular SAR: (A) SARs may not be sold, pledged, assigned,
hypothecated, gifted, transferred or disposed of in any manner either voluntarily or
involuntarily by operation of law, other than by will or by the laws of descent or
distribution, and (B) during the Participant’s lifetime, SARs will be exercisable only by
the Participant (or, in the event of the Participant’s Disability, by his or her personal
representative).

          SECTION 7. Termination of Service. Unless otherwise specified by the Board with
respect to a particular Option or SAR, any portion of an Option or SAR that is not exercisable upon
termination of service will expire immediately and automatically upon such termination and any
portion of an Option or SAR that is exercisable upon termination of service will expire on the date
it ceases to be exercisable in accordance with this Section 7.

          (a) Termination by Reason of Death. If a Participant’s service with the Company or
any Affiliate terminates by reason of death, any Option or SAR held by such Participant may
thereafter be exercised, to the extent it was exercisable at the time of his or her death, by the
legal representative of the estate or by the legatee of the Participant under the will of the
Participant, for a period ending 12 months following the date of death (or, if sooner, on the last
day of the stated term of such Option or SAR).

          (b) Termination by Reason of Disability. If a Participant’s service with the Company
or any Affiliate terminates by reason of Disability, any Option or SAR held by such Participant may
thereafter be exercised by the Participant or his personal representative, to the extent it was
exercisable at the time of termination, for a period ending 12 months following the date of
termination (or, if sooner, on the last day of the stated term of such Option or SAR).

          (c) Cause. If a Participant’s service with the Company or any Affiliate is terminated
for Cause: (i) any Option or SAR held by the Participant will immediately and automatically expire
as of the date of such termination, and (ii) any Shares for which the Company has not yet delivered
share certificates will be immediately and automatically forfeited

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and the Company will refund to the Participant the Option exercise price paid for such Shares,
if any.

          (d) Other Termination. If a Participant’s service with the Company or any Affiliate
terminates for any reason other than death, Disability or Cause, any Option or SAR held by such
Participant may thereafter be exercised by the Participant, to the extent it was exercisable at the
time of such termination, for a period ending 90 days following the date of such termination (or,
if sooner, on the last day of the stated term of such Option or SAR).

          SECTION 8. Restricted Stock.

          (a) Issuance. Restricted Stock may be issued either alone or in conjunction with
other Awards. The Board will determine the time or times within which Restricted Stock may be
subject to forfeiture, and all other conditions of such Awards.

          (b) Certificates. Any share certificate issued in connection with an Award of
Restricted Stock will bear the following legend and/or any other legend required by this Plan, the
applicable Award Agreement or applicable law:

THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED
HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE LULULEMON
CORP. 2007 EQUITY INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO
BETWEEN THE PARTICIPANT AND LULULEMON CORP. (WHICH TERMS AND
CONDITIONS MAY INCLUDE, WITHOUT LIMITATION, CERTAIN TRANSFER
RESTRICTIONS AND FORFEITURE CONDITIONS). COPIES OF THAT PLAN AND
AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF LULULEMON CORP.
AND WILL BE MADE AVAILABLE TO THE HOLDER OF THIS CERTIFICATE WITHOUT
CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY.

          Any Share certificates evidencing Restricted Stock will be held in custody by the Company or
in escrow by an escrow agent until the restrictions thereon have lapsed. As a condition to any
Restricted Stock award, the Participant may be required to deliver to the Company a share power,
endorsed in blank, relating to the Shares covered by such Award.

          (c) Restrictions and Conditions. The Restricted Stock awarded pursuant to this
Section 8 will be subject to the following restrictions and conditions, and any other
restrictions and conditions set forth in the applicable Award Agreement.

               (i) During a period commencing with the date of an Award of Restricted Stock and ending at
such time or times as specified by the Board (the “Restriction Period”), the Participant
will not be permitted to sell, transfer, pledge, assign or otherwise encumber Restricted Stock
awarded under the Plan. The Board may condition the lapse of restrictions on Restricted Stock upon
the continued employment or service of the recipient, the

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attainment of specified individual or corporate performance goals, or such other factors as
the Board may determine, in its sole and absolute discretion.

               (ii) Except as otherwise provided herein or in the applicable Award Agreement, once Restricted
Stock has been awarded to a Participant, that Participant will have, with respect to the Restricted
Stock, all of the rights of a stockholder of the Company, including the right to vote the Shares,
and the right to receive any cash distributions or dividends. The Board, in its sole discretion,
may require cash distributions or dividends to be subjected to the same Restriction Period as is
applicable to the Restricted Stock with respect to which such amounts are paid, or if the Board so
determines, reinvested in additional Restricted Stock to the extent Shares are available under
Section 3(a). Any distributions or dividends paid in the form of securities with respect to
Restricted Stock will be subject to the same terms and conditions as the Restricted Stock with
respect to which they were paid, including, without limitation, the same Restriction Period.

               (iii) Subject to the applicable provisions of the Award Agreement, if a Participant’s service
with the Company and its Affiliates terminates prior to the expiration of the Restriction Period,
all of that Participant’s Restricted Stock which then remain subject to forfeiture will then be
forfeited automatically.

               (iv) If and when the Restriction Period applicable to certain Restricted Stock expires without
a forfeiture of those Shares (or if and when the restrictions applicable to Restricted Stock are
removed pursuant to Section 3(d) or otherwise), any certificates evidencing that Restricted Stock
will be replaced with new certificates, without the restrictive legends described in Section 8(b)
applicable to such lapsed restrictions, and such new certificates will be promptly delivered to the
Participant, the Participant’s representative (if the Participant has suffered a Disability), or
the Participant’s estate or heir (if the Participant has died).

          SECTION 9. Restricted Stock Units. Restricted Stock Units may be granted hereunder,
subject to such terms and conditions as the Board may impose. Each Restricted Stock Unit will
represent the right to receive from the Company, after fulfillment of any applicable conditions, a
distribution from the Company in an amount equal to the Fair Market Value (at the time of the
distribution) of one Share. Distributions may be made in cash and/or Shares. Unless otherwise
determined by the Board, Restricted Stock Units may not be sold, pledged, assigned, hypothecated,
gifted, transferred or disposed of in any manner, either voluntarily or involuntarily by operation
of law, other than by will or by the laws of descent or distribution. All other terms governing
Restricted Stock Units, such as vesting, dividend equivalent rights, time and form of payment and
termination of units shall be set forth in the applicable Award Agreement.

          SECTION 10. Amendment and Termination. The Board may amend, alter or discontinue the
Plan at any time, provided that no amendment, alteration or discontinuation will be made, without
the approval of such amendment by the Company’s stockholders and/or any applicable regulatory
agency in a manner consistent with the requirements of Treas. Reg. § 1.422-3 (or any successor
provision), that would: (i) increase the total number of Shares reserved for issuance hereunder
(except as otherwise provided in Section 3), or (ii) change the classes of persons eligible to
receive Awards.

-12-

 

For the avoidance of doubt, no stockholder approval shall be required for (i) amendments of a
“housekeeping nature,” (ii) changes to the vesting provisions of any Award or this Plan, (iii)
changes to the provisions of this Plan relating to the expiration of Awards prior to their
respective expiration dates upon the occurrence of certain specified events, (iv) a change in the
exercise price of an Option granted to a Participant who is not an Insider, (v) the cancellation of
an Award, or (vi) any other amendment to an Award or this Plan which is approved by the TSX on a
basis which does not require stockholder approval to be obtained.

          SECTION 11. General Provisions.

          (a) The Board may require each Participant to represent to and agree with the Company in
writing that the Participant is acquiring securities of the Company for investment purposes and
without a view to distribution thereof and as to such other matters as the Board believes are
appropriate.

          (b) Shares shall not be issued hereunder unless, in the judgment of counsel for the Company,
the issuance complies with the requirements of any stock exchange or quotation system on which the
Shares are then listed or quoted, the Securities Act of 1933, the Exchange Act, all rules and
regulations promulgated thereunder and all other applicable laws.

          (c) All certificates for Shares or other securities delivered under the Plan will be subject
to such share-transfer orders and other restrictions as the Board may deem advisable under the
rules, regulations, and other requirements of any stock exchange upon which the Shares are then
listed and any applicable laws, and the Board may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.

          (d) Neither the adoption of the Plan nor the execution of any document in connection with the
Plan will: (i) confer upon any employee of the Company or an Affiliate any right to continued
employment or engagement with the Company or such Affiliate, or (ii) interfere in any way with the
right of the Company or such Affiliate to terminate the employment of any of its employees at any
time.

          (e) With respect to any Award, the Participant will
pay to the Company, or make arrangements satisfactory to the Board regarding the payment of, taxes
of any kind required by law to be withheld with respect to any amount
includable in the gross income of the Participant as required by
applicable law. The obligations of the
Company under the Plan will be conditioned on such payment or arrangements and the Company will
have the right to deduct any such taxes from any payment of any kind otherwise due to the
Participant. Unless otherwise determined by the Board (but solely with respect to Designated
Participants), the minimum required withholding obligation with respect to an Award may be settled
in Shares, including the Shares that are subject to that Award.

-13-

 

deduct or withhold from payments of any kind due to the Participant under the Plan any taxes
of any kind required by law to be deducted or withheld.

          SECTION
12. Effective Date of Plan. Subject to the approval of the Plan by the
Company’s stockholders within 12 months of the Plan’s adoption by the Board, the Plan will become
effective on the date that it is approved by the Board (or such later date as is then specified by
the Board), provided, however, that all Options intended to be Incentive Stock Options will
automatically be converted into Non-Qualified Stock Options if the Plan is not approved by the
Company’s stockholders within one year (365 days) of its adoption by the Board in a manner
consistent with Treas. Reg. § 1.422-5.

          SECTION
13. Term of Plan. The Plan will continue in effect until terminated in
accordance with Section 10; provided, however, that no Incentive Stock Option will be
granted hereunder on or after the 10th anniversary of the effective date of the Plan (or, if the
stockholders approve an amendment that increases the number of shares subject to the Plan, the
10th anniversary of the date of such approval); but provided further, that Incentive
Stock Options granted prior to such 10th anniversary may extend beyond that date.

          SECTION
14. Invalid Provisions. In the event that any provision of this Plan is found
to be invalid or otherwise unenforceable under any applicable law, such invalidity or
unenforceability will not be construed as rendering any other provisions contained herein as
invalid or unenforceable, and all such other provisions will be given full force and effect to the
same extent as though the invalid or unenforceable provision was not contained herein.

          SECTION
15. Governing Law. The Plan and all Awards granted hereunder will be governed
by and construed in accordance with the laws of the State of Delaware, without regard to the
application of the principles of conflicts of laws.

          SECTION
16. Board Action. Notwithstanding anything to the contrary set forth in the
Plan, any and all actions of the Board or Committee, as the case may be, taken under or in
connection with the Plan and any agreements, instruments, documents, certificates or other writings
entered into, executed, granted, issued and/or delivered pursuant to the terms hereof, will be
subject to and limited by any and all votes, consents, approvals, waivers or other actions of all
or certain stockholders of the Company or other persons required by:

          (a) the Company’s Certificate of Incorporation (as the same may be amended and/or restated
from time to time);

          (b) the Company’s Bylaws (as the same may be amended and/or restated from time to time); and

          (c) any other agreement, instrument, document or writing now or hereafter existing, between or
among the Company and its stockholders or other persons (as the same may be amended from time to
time).

          SECTION
17. Notices. Any notice to be given to the Company pursuant to the provisions
of the Plan shall be given by registered or certified mail, postage prepaid, and, addressed, if to
the Company to its principal executive office to the attention of its Chief

-14-

 

Financial Officer (or such other person as the Company may designate in writing from time to
time), and, if to a Participant, to his or her address contained in the Company’s personnel
records, or at such other address as such Participant may from time to time designate in writing to
the Company. Any such notice shall be deemed given or delivered three days after the date of
mailing.

-15-Exhibit 10.3

 

Exhibit 10.3

LIPO INVESTMENTS (USA) INC.

AMENDED AND RESTATED

STOCK OPTION PLAN

ARTICLE 1

DEFINITIONS AND INTERPRETATION

1.1 Definitions

As used herein, unless anything in the subject matter or context is inconsistent therewith, the
following terms shall have the meanings set forth below:

	 	(a)	 	“Award Date” means the date on which the Board grants a particular Option;
	 
	 	(b)	 	“Board” means the board of directors of the Company;
	 
	 	(c)	 	“Call Purchase Price” has the meaning set forth in Section 4.2;
	 
	 	(d)	 	“Call Right” has the meaning set forth in Section 4.2;
	 
	 	(e)	 	“Class A Option” means a Class A option to acquire Shares, awarded to an
Eligible Person pursuant to the Plan;
	 
	 	(f)	 	“Class B Option” means a Class B option to acquire Shares, awarded to an
Eligible Person pursuant to the Plan;
	 
	 	(g)	 	“Company” means LIPO Investments (USA) Inc.;
	 
	 	(h)	 	“Consultant” means any person engaged as a consultant to the Company or any
company in which the Company is a direct or indirect shareholder or with which the
Company does not act at arm’s length;
	 
	 	(i)	 	“Director” means any individual holding the office of director of the Company
or any company in which the Company is a direct or indirect shareholder;
	 
	 	(j)	 	“Eligible Person” means a Director, an Employee or a Consultant;
	 
	 	(k)	 	“Employee” means any individual regularly employed on a full-time or part-time
basis by the Company or any company in which the Company is a direct or indirect
shareholder or with which the Company does not act at arm’s length or other persons who
perform management or consulting services for the Company or any company in which the
Company is a direct or indirect shareholder or with which the Company does not act at
arm’s length in any such case on an ongoing basis;
	 
	 	(l)	 	“Exercise Notice” means the notice respecting the exercise of an Option in the
form set out as Schedule “B” hereto, duly executed by the Option Holder;

 

 

	 	(m)	 	“Exercise Period” means the period during which a particular Option may be
exercised and is the period from and including the Award Date (subject to Section 3.8)
through to and including the Expiry Date;
	 
	 	(n)	 	“Exercise Price” means the price at which an Option may be exercised as
determined in accordance with Section 3.5;
	 
	 	(o)	 	“Expiry Date” means the date determined in accordance with Section 3.3 and
after which a particular Option cannot be exercised;
	 
	 	(p)	 	“Fair Market Value” means the fair market value determined by the Board in good
faith, from time to time and for greater certainty when determining the fair market
value of a Share or an Option the Board can take into account the income and other
taxes to be paid by the Company in regard to a distribution of Lululemon Shares to the
Employee in satisfaction of that Share or Option pursuant to the terms of this Plan;
	 
	 	(q)	 	“Forfeitable Shares” has the meaning set forth in Section 3.9;
	 
	 	(r)	 	“Lululemon Shares” means shares of common stock of Lululemon Corp.;
	 
	 	(s)	 	“Option” means a Class A Option or a Class B Option;
	 
	 	(t)	 	“Option Certificate” means the certificate, substantially in the form set out
as Schedule “A” hereto, evidencing an Option;
	 
	 	(u)	 	“Option Holder” means a person who holds an unexercised and unexpired Option
or, where applicable, the Personal Representative of such person;
	 
	 	(v)	 	“Plan” means this stock option plan;
	 
	 	(w)	 	“Personal Representative” means:

	 	(i)	 	in the case of a deceased Option Holder, the executor
or administrator of the deceased duly appointed by a court or public
authority having jurisdiction to do so; and
	 
	 	(ii)	 	in the case of an Option Holder who for any reason is
unable to manage his or her affairs, the person entitled by law to act on
behalf of such Option Holder;

	 	(x)	 	“Share” or “Shares” means, as the case may be, one or more common shares
without par value in the capital of the Company;
	 
	 	(y)	 	“Shareholder” means a person who acquires beneficial title to Shares upon the
exercise of one or more Options;
	 
	 	(z)	 	“Termination for Cause” means termination for cause pursuant to the applicable
laws in the jurisdiction in which an Employee is ordinarily employed; and

-2-

 

	 	(aa)	 	“Trustee” means Dennis Wilson or such other person as the Company shall,
pursuant to Section 5.1, appoint, from time to time, to act as trustee hereunder.

1.2 Choice of Law

The Plan is established under and the provisions of the Plan shall be interpreted and construed in
accordance with the laws of the Province of British Columbia.

1.3 Headings

The headings used herein are for convenience only and are not to affect the interpretation of the
Plan.

ARTICLE 2

PURPOSE AND PARTICIPATION

2.1 Purpose

The purpose of the Plan is to provide the Company with a share-related mechanism to reward such
Eligible Persons as may be awarded Options under the Plan by the Board from time to time and to
enable and encourage such Eligible Persons to acquire Shares as long term investments.

2.2 Participation

The Board shall, from time to time, in its sole discretion determine those Eligible Persons, if
any, to whom Options are to be awarded. If the Board elects to award an Option to an Eligible
Person, the Board shall, in its sole discretion but subject to Section 3.2, determine the number of
Shares to be acquired on the exercise of such Option.

2.3 Notification of Award

Following the approval by the Board of the awarding of an Option, the Company shall notify the
Option Holder in writing of the award and shall enclose with such notice the Option Certificate
representing the Option so awarded.

2.4 Copy of Plan

Each Option Holder, concurrently with the notice of the award of the Option, shall be provided with
a copy of the Plan. A copy of any amendment to the Plan shall be promptly provided by the Company
to each Option Holder.

2.5 Limitation

The Plan does not give any Option Holder that is a Director the right to serve or continue to serve
as a Director of the Company or any company in which the Company is a direct or indirect
shareholder nor does it give any Option Holder that is an Employee the right to be or to continue
to be employed by the Company or any company in which the Company is a direct or indirect
shareholder.

-3-

 

ARTICLE 3

TERMS AND CONDITIONS OF OPTIONS

3.1 Board to Allot Shares

The Shares to be issued to Option Holders upon the exercise of Options shall be allotted and
reserved for issuance by the Board prior to the exercise thereof.

3.2 Number of Shares

	 	(a)	 	The maximum number of Shares that may be issued upon the exercise of Options is
28,156,365.
	 
	 	(b)	 	If any Option expires or otherwise terminates in accordance with the terms of
the Plan without having been exercised in full, the number of Shares in respect of
which the Option expired or terminated shall not be available for reissuance for the
purposes of the Plan.

3.3 Term of Option

Subject to Section 3.4, the Expiry Date of an Option shall be the date so fixed by the Board at the
time the particular Option is awarded, provided that such date shall not be later than the tenth
anniversary of the Award Date of such Option.

3.4 Termination of Option

Any Option or part thereof not exercised within the Exercise Period shall terminate and become
null, void and of no effect as of 5:00 p.m. local time in Vancouver, British Columbia, on the
Expiry Date. The Expiry Date of an Option shall be the earlier of the date so fixed by the Board
at the time the Option is awarded and:

	 	(a)	 	in the event that the Option Holder holds his or her Option as a Director, the
date on which such Option Holder ceases to be a Director, other than by reason of
death; unless the Option Holder ceases to be a Director but continues to be engaged as
an Employee, in which case the Expiry Date shall remain unchanged;
	 
	 	(b)	 	in the event that the Option Holder holds his or her Option as an Employee, the
date on which such Option Holder ceases to be an Employee, other than by reason of
death or as set forth in Section 3.4(c); or
	 
	 	(c)	 	in the event that the Option Holder holds his or her Option as an Employee, the
date on which such Option Holder resigns his or her employment or is Terminated for
Cause;

Upon the occurrence of one of the events described in Sections 3.4(a), (b) or (c), the Company
will, notwithstanding the termination of such Options, repurchase all vested Options held by the
Option Holder for a price equal to the Fair Market Value, which payment may be satisfied by the
Company causing to be delivered to such Option Holder such number of Lululemon Shares as have an
equivalent Fair Market Value.

-4-

 

3.5 Exercise Price

The Exercise Price shall be that price per Share, as determined by the Board in its sole discretion
and announced as of the Award Date, at which an Option Holder may purchase a Share upon the
exercise of an Option.

3.6 Assignment of Options

Options may not be assigned or transferred, provided however that the Personal Representative of an
Option Holder may, to the extent permitted by Section 4.1, exercise the Option within the Exercise
Period.

3.7 Adjustments

	 	(a)	 	If prior to the complete exercise of any Option the Shares are consolidated,
subdivided, converted, exchanged or reclassified or in any way substituted for
(collectively the “Event"), an Option, to the extent that it has not been exercised,
shall be adjusted by the Board in accordance with such Event in the manner the Board
deems appropriate. No fractional Shares shall be issued upon the exercise of the
Options and accordingly, if as a result of the Event, an Option Holder would become
entitled to a fractional share, such Option Holder shall have the right to purchase
only the next lowest whole number of shares and no payment or other adjustment will be
made with respect to the fractional interest so disregarded.
	 
	 	(b)	 	The Board may, in its sole discretion at the time the Option is granted, but
will not be required to, provide for additional adjustment provisions such that if,
while any Option is outstanding, there is an increase in the number of Shares in the
capital of the Company issued and outstanding, except if such increase is the result of
the exercise of an Option, the number of Shares issuable upon the exercise of an
outstanding Option will be increased on a proportionate basis so that the percentage of
the aggregate issued Shares of the Company represented by the Option as of the Award
Date will remain unchanged.

3.8 Vesting

The Board may, in its sole discretion at the time the Option is granted, but will not be required
to, impose conditions relating to the vesting of the right to exercise an Option granted to any
Option Holder. The Option Certificate representing any such Option will disclose any vesting
conditions. Upon the death of an Option Holder, such Option shall forthwith cease vesting as to
such portion of the Option which has not previously vested.

3.9 Forfeitable Shares

The Board may, in its sole discretion at the time a Class A Option is granted, declare that Shares
issuable upon exercise of such Class A Option are “Forfeitable Shares“. Shares which are
designated as Forfeitable Shares will be entitled to become non-forfeitable in accordance with the
conditions set out in the Option Certificate representing any such Option.

-5-

 

ARTICLE 4

EXERCISE OF OPTION

4.1 Exercise of Option

An Option may be exercised only by the Option Holder or the Personal Representative of any Option
Holder. An Option Holder or the Personal Representative of any Option Holder may exercise an
Option in whole or in part (provided that no exercise will be effective as to any part of the
Option which has not vested at the time of such exercise) at any time or from time to time during
the Exercise Period up to 5:00 p.m. local time in Vancouver, British Columbia (or such other place
as may be designated by the Board) on the Expiry Date by delivering to the Company an Exercise
Notice, the applicable Option Certificate including a completed form of exercise notice and a
cheque or bank draft payable to the Company in an amount equal to the aggregate Exercise Price of
the Shares to be purchased pursuant to the exercise of the Option. With respect to the exercise of
part of an Option, the Board may at any time and from time to time fix a minimum or maximum number
of Shares in respect of which an Option Holder may exercise part of any Option held by such Option
Holder.

4.2 Company Purchase of Options

Upon the receipt by the Company, from time to time, of an Exercise Notice with respect to a Class B
Option or any part thereof in accordance with Section 4.1, the Company may, notwithstanding such
purported exercise, offer to purchase from the exercising Option Holder all but not less than all
of the Class B Options or part thereof such Option Holder is purporting to exercise on payment by
the Company of an amount (the “Option Purchase Price”) equal to the Fair Market Value of that
portion of the Option which was purportedly exercised, which payment may be satisfied in full by
the Company causing to be delivered to such exercising Option Holder such number of Lululemon
Shares as have an equivalent Fair Market Value. In the event such exercising Option Holder accepts
such offer, such exercising Option Holder shall be obligated to sell all Options or portions
thereof which it is purportedly exercising to the Company on payment by the Company to the holder
of the Option Purchase Price with respect thereto, and thereafter the Company shall have no
obligation to issue Shares in connection with such purported exercise. Any such Lululemon Shares
will no longer be subject to the provisions hereof with respect to which such Option is purportedly
exercised, as set forth in the Exercise Notice.

4.3 Issue of Share Certificates

As soon as practicable following the receipt of the Exercise Notice, the Company shall cause to be
delivered (a) to the Trustee a certificate for the Options so purchased, registered in the name of
the Trustee in trust for the Holder, or (b) if the Company has exercised the Call Right, to the
Option Holder a certificate for the Lululemon Shares transferred to the Holder in satisfaction of
the Call Purchase Price, registered in the name of the Holder. If the number of Shares with
respect to which such Option is purportedly exercised, as set forth in the Exercise Notice, is less
than the number of Shares subject to the Option Certificate surrendered, the Company shall forward
a new Option Certificate representing the balance of Shares available under the Option to the
Option Holder concurrently with delivery of the aforesaid share certificate.

4.4 Condition of Issue

The issue of Shares by the Company pursuant to the exercise of an Option or the transfer of
Lululemon Shares in satisfaction of the Call Purchase Price is subject to this Plan and compliance
with the laws, rules and regulations of all regulatory bodies applicable to the issuance and
distribution of such Shares. The Option Holder agrees to comply with all such laws, rules and
regulations and agrees to furnish to the

-6-

 

Company any information, report and/or undertakings required to comply with and to fully co-operate
with the Company in complying with such laws, rules and regulations.

4.5 Forfeiture of Shares

	 	(a)	 	Upon the occurrence of one of the events described in Sections 3.4(a), (b) or
(c) with respect to a Shareholder who has exercised some or all of his Options then the
Trustee shall tender all Shares which it holds on behalf of such Shareholder to the
Company for purchase and the Company shall, within 15 days of the occurrence of such
event, purchase such Shares for an amount equal to an amount equal to (i) in the case
of Shares (other than Forfeitable Shares) an amount equal to the Fair Market Value
thereof, which payment may be satisfied in full by the Company causing to be delivered
such number of Lululemon Shares as have an equivalent Fair Market Value; and (ii) in
the case of Forfeitable Shares cash in an amount equal to the price paid for such
Shares upon issuance thereof.
	 
	 	(b)	 	The Company may, from time to time, assign its right to purchase Shares
pursuant to this Section 4.5 to any other person without prior notice to the Holders.
Any such purchase shall be made by such assignee upon and subject to the same
conditions set forth in this Plan.
	 
	 	(c)	 	Immediately following the payment of the purchase price referred to in Section
4.5(a) the Trustee shall distribute such funds or securities to the Shareholder in
accordance with its holding of Shares immediately prior to such purchase.

4.6 Voluntary Tender of Non-Forfeitable Shares for Repurchase

At any time after the Shareholder has obtained Shares on exercise of some or all of his Options,
such Shareholder may by delivery of notice in writing require the Trustee to tender any such Shares
which are not Forfeitable Shares to the Company for repurchase from time to time for a price equal
to the Fair Market Value thereof, which purchase price may be satisfied by the Company delivering,
in its sole discretion, Lululemon Shares registered in the name of such Shareholder (or otherwise
at the direction of such Shareholder) with an equivalent Fair Market Value. In the event the
Company agrees to repurchase such Shares, any such Lululemon Shares will no longer be subject to
the provisions hereof. For greater certainty, in no event will the Company be obliged in any
circumstances to repurchase any such Shares.

4.7 Transfer of Shares

Except as provided in Sections 4.2 and 4.5:

	 	(a)	 	no right or interest of any Shareholder in any of the Shares purchased on his
behalf under the Plan shall be assignable or transferable, in whole or in part, either
directly or by operation of law or otherwise in any manner except by devolution by
death or mental incompetence;
	 
	 	(b)	 	no attempted assignment or transfer thereof shall be effective; and
	 
	 	(c)	 	the Plan shall enure to the benefit of and be binding upon the Company, and its
successors and assigns.

7

 

4.8 Withholding and Sale Rights

The Company shall be entitled to deduct and withhold from any Lululemon Shares payable pursuant to
this Plan to any holder of Options or Shares such amounts as the Company is required to deduct and
withhold with respect to such payment under the Income Tax Act (Canada), the United States Internal
Revenue Code of 1986 or any provision of provincial, state, local or foreign tax law, in each case
as amended. The Company is hereby authorized to sell or otherwise dispose of, at such times and at
such prices as it determines, in its sole discretion, such portion of the Lululemon Shares
otherwise payable to such holder as is necessary to provide sufficient funds to the Company to
enable it to comply with such deduction or withholding requirement, and shall notify the holder
thereof and remit to such holder any unapplied balance of the net proceeds of such sale or
disposition (after deducting applicable sale commissions and any other reasonable expenses relating
thereto) in lieu of the Lululemon Shares so sold or disposed of. To the extent that Lululemon
Shares are so sold or disposed of such withheld amounts, or shares so sold or disposed of, shall be
treated for all purposes as having been paid to the holder of the shares in respect of which such
deduction, withholding, sale or disposition was made, provided that the net proceeds of such sale
or disposition are actually remitted to the appropriate taxing authority. The Company shall not be
obligated to seek or obtain a minimum price for any of the Lululemon Shares sold or disposed of by
it hereunder, nor shall it be liable for any loss arising out of any such sale or disposition.

ARTICLE 5

TRUSTEE

5.1 Trustee

	 	(a)	 	The Company shall from time to time appoint one or more persons, any one or more of
whom may be a director or officer of the Company who is not a participant in the Plan,
to act as Trustee of the Plan. The Company may at any time or times remove any Trustee
so appointed and may appoint a successor or successors to fill any vacancy created by
any reason whatever.
	 
	 	(b)	 	The Trustee may delegate to the Company or to any corporation authorized to
carry on the business of a trust corporation in Canada the duty to maintain records and
to furnish statements in connection with all aspects of the Plan. The Trustee shall
not be liable for any action or failure to act under or in connection with the Plan of
the person to whom it has delegated the said duty, except for his own wilful
misconduct, gross negligence or bad faith. The Trustee shall be indemnified and held
harmless by the Company against and from any and all loss, cost, liability or expense
that may be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit or proceeding to which he may be a party or in which he
may be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof (with the
Company’s written approval) or paid by him in satisfaction of a judgement in any such
action, suit or proceeding, except a judgment in favour of the Company based upon a
finding of his wilful misconduct, gross negligence or bad faith; subject, however, to
the condition that, upon the assertion or institution of any such claim, action, suit
or proceeding against him he shall in writing give the Company an opportunity, at its
own expense, to handle and defend the same before he undertakes to handle and defend it
on his own behalf. Notwithstanding any other provision of this Plan, and whether such
losses or damages are foreseeable or unforeseeable, the Trustee will not be liable
under any circumstances whatsoever for any (a) breach by any other party of securities
or other 

-8-

 

	 	 	 	legislation, (b) decrease in the underlying value of the Shares or Options, (c) lost profits or (d) special, indirect, incidental, consequential,
exemplary, aggravated or punitive losses or damages.
	 
	 	(c)	 	The Trustee shall be entitled to rely on all certificates, reports, opinions
and other documents furnished by any broker, accountant or auditor or counsel to the
Company and shall be fully protected and indemnified by the Company in respect of any
acts done in good faith and in reliance on such certificates, reports, opinions or
documents.

5.2 Trustee Agreements

The Trustee acknowledges and agrees that, other than as set forth in this Plan:

	 	(a)	 	the Trustee will hold the legal title to the Shares issued on exercise, from
time to time, of Options as nominee, agent and trustee for the benefit and account of
the Shareholder who exercised such Options as principal and beneficial owner and the
Trustee will have no equitable or beneficial interest therein, and the equitable and
beneficial interest in such Shares will be vested solely and exclusively in the
Shareholder;
	 
	 	(b)	 	the Trustee will hold legal title to such Shares as nominee, agent and trustee
for the benefit and account of the Shareholder as principal and beneficial owner
subject to and in accordance with this Plan and subject to the terms and conditions of
any transfer, deed, shareholder agreement or other instrument, document or encumbrance
pertaining to the Shares;
	 
	 	(c)	 	any benefit, interest, profit or advantage arising out of or accruing from such
Shares is and will continue to be a benefit, interest, profit or advantage of the
Shareholder and if received by the Trustee will be received and held by the Trustee for
the use, benefit and advantage of the Shareholder and the Trustee will account to the
Shareholder for any money or other consideration paid to or to the order of the Trustee
in connection with the Shares as directed in writing by the Shareholder;
	 
	 	(d)	 	the Trustee will, upon and in accordance with the direction of such
Shareholder, act as the agent of the Shareholder, as principal, in respect of any
matter relating to such Shares or the performance or observance of any contract or
agreement relating to the Shares; and
	 
	 	(e)	 	the Trustee will have the full right and power to execute and deliver, under
seal and otherwise, any shareholder agreement or other instrument or document
pertaining to the Shares without delivering proof to any person (including, without
limitation, any other party to any such instrument or document) of its authority to do
so and any person may act in reliance on any such instrument or document and for all
purposes any such instrument or document will be binding on the Shareholder.

5.3 Sale or Transfer

Notwithstanding anything to the contrary contained herein, the Trustee may, from time to time, sell
or transfer any or all of the Shares which it holds on behalf of Shareholders hereunder to another
party in exchange for cash or securities provided that any such transfer or sale shall be bona fide
and in the best interests of the Shareholders, as determined by the Trustee in its sole discretion.
Unless otherwise directed

-9-

 

by the Company, the Trustee will continue to hold the proceeds of such
sale or transfer in trust for and on behalf of the Shareholders in accordance with the terms
hereof.

5.4 Voting

Notwithstanding anything to the contrary contained herein, the Trustee shall have sole power in its
absolute discretion to exercise all voting rights with respect to all Shares issued, from time to
time, upon the exercise of Options, for its own benefit, including attendance at meeting of
shareholders of the Company, the execution of a proxy or proxies for any shareholders’ meeting of
the Company and execution of any written resolution of shareholders of the Company in the period
from the date hereof until the termination of this Plan.

ARTICLE 6

ADMINISTRATION

6.1 Administration

The Plan shall be administered by the Board. The Board may make, amend and repeal at any time and
from time to time such regulations not inconsistent with the Plan as it may deem necessary or
advisable for the proper administration and operation of the Plan and such regulations shall form
part of the Plan. The Board may delegate to any director, officer or employee of the Company such
administrative duties and powers as it may see fit.

6.2 Interpretation

The interpretation by the Board of any of the provisions of the Plan and any determination by it
pursuant thereto shall be final and conclusive and shall not be subject to any dispute by any
Option Holder. No member of the Board or any person acting pursuant to authority delegated by it
hereunder shall be liable for any action or determination in connection with the Plan made or taken
in good faith and each member of the Board and each such person shall be entitled to
indemnification with respect to any such action or determination in the manner provided for by the
Company.

ARTICLE 7

AMENDMENT AND TERMINATION

7.1 Amendment

The Board may from time to time amend the Plan, (subject to the approval of any applicable
regulatory authority) and, without limiting the generality of the foregoing, may make such
amendment for the purpose of compliance with any changes in any relevant law, rule or regulation
applicable to the Plan, any Option or the Shares or for any other purpose which may be permitted by
all relevant laws, rules and regulations.

7.2 Termination

The Board may terminate the Plan at any time provided that such termination shall not alter the
terms or conditions of any Option or impair any right of any Option Holder pursuant to any Option
awarded prior to the date of such termination and notwithstanding such termination the Company,
such Options, Option Holders, Directors and Employees and Shares shall continue to be governed by
the provisions of the Plan.

-10-

 

7.3 Agreement

The Company and every person to whom an Option is awarded hereunder shall be bound by and subject
to the terms and conditions of the Plan.

-11-

 

SCHEDULE “A”

LIPO INVESTMENTS (USA) INC.

STOCK OPTION PLAN

OPTION CERTIFICATE

This Certificate is issued pursuant to the provisions of LIPO Investments (USA) Inc. (the
“Company”) Stock Option Plan (the “Plan”) and evidences that                     
is the holder of a Class [A/B] Option (the “Option”) to purchase up to                      common shares
(the “Shares”) in the capital of the Company, subject to adjustment in accordance with the terms of
the Plan, at a purchase price of $                     per Share. Subject to the provisions of the
Plan:

	 	(a)	 	the Award Date of this Option is                     ; and
	 
	 	(b)	 	the Expiry Date of this Option is                     .

[Except as provided below,] this Option may be exercised at any time and from time to time from and
including the Award Date through to and including up to 5:00 local time in Vancouver, British
Columbia on the Expiry Date, by delivering to the Company an Exercise Notice, in the form provided
in the Plan, together with this Certificate and a cheque or bank draft payable to or to the
direction of LIPO Investments (USA) Inc. in an amount equal to the aggregate of the Exercise Price
of the Shares in respect of which this Option is being exercised.

The right to purchase the Shares will vest as follows:

[insert vesting provisions]

[for Class A Options insert forfeiture provisions]

[Insert the following for Class A Options: In the event that the transactions (the “Transaction”)
contemplated by the stock purchase agreement dated as of the date hereof among Lulu Canadian
Holding, Inc., Lululemon Athletica Inc., Five Boys Investments ULC, Dennis Wilson and Advent
International GPEV Limited Partnership is not completed prior to 5 p.m. (local time in Vancouver)
on December 9, 2005, this Option will immediately terminate and cease to be of any further force or
effect without further act or formality by any party and without payment of any additional
compensation therefor.]

[Insert the following for Class B Options: This Option may not be exercised, in whole or in part,
at any time prior to completion of the transactions (the “Transaction”) contemplated by the stock
purchase agreement dated as of the date hereof among Lulu Canadian Holding, Inc., Lululemon
Athletica Inc., Five Boys Investments ULC, Dennis Wilson and Advent International GPEV Limited
Partnership. In the event that the Transaction is not completed prior to 5 p.m. (local time in
Vancouver) on December 9, 2005, this Option will immediately terminate and cease to be of any
further force or effect without further act or formality by any party and without payment of any
additional compensation therefor.]

This Certificate and the Option evidenced hereby is not assignable, transferable or negotiable and
is subject to the detailed terms and conditions contained in the Plan. This Certificate is issued
for convenience only and in the case of any dispute with regard to any matter in respect hereof,
the provisions of the Plan and the records of the Company shall prevail.

The foregoing Option has been awarded this                      day of                     .

	 	 	 	 	 	 	 
	 	 	LIPO INVESTMENTS (USA) INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	Per:	 	 	 	 
	 

	 	 	 	 

Authorized Signatory
	 	 

 

 

SCHEDULE “B”

EXERCISE NOTICE

	 	 	 
	TO:

	 	LIPO INVESTMENTS (USA) INC.
	 

	 	2285 Clark Drive
	 

	 	Vancouver, BC, V5N 3G9

Exercise of Option

The undersigned hereby irrevocably gives notice, pursuant to LIPO Investments (USA) Inc. (the
“Company") Stock Option Plan (the “Plan"), of the exercise of the Option to acquire and hereby
subscribes for (cross out inapplicable item):

	(a)	 	all of the Shares; or
	 
	(b)	 	                     of the Shares which are the subject of the option certificate attached hereto.

Calculation of Total Exercise Price:

	 	 	 	 	 	 	 	 	 	 	 
	(i)

	 	number of Shares to be acquired on exercise:
	 	 	 	 	 	 	 	shares
	 

	 	 	 	 	 	 

	 	 
	(ii)

	 	times the Exercise Price per Share:
	 	 	$	 	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	Total Exercise Price, as enclosed herewith:
	 	 	$	 

	 	 
	 

	 	 	 	 	 	 

	 	 

The undersigned tenders herewith a cheque or bank draft (circle one) in the amount of $
, payable to or to the direction of LIPO Investments (USA) Inc. in an amount equal
to the total Exercise Price of the Shares, as calculated above, and directs the Company to issue
the share certificate evidencing the Shares in the name of the Trustee (as such term is defined in
the Plan) in trust for the undersigned and directs the Company to deliver the Shares to the Trustee
at such address as the Trustee may direct, from time to time.

All capitalized terms, unless otherwise defined in this exercise notice, will have the meaning
provided in the Plan.

DATED the                      day of                     .

	 	 	 	 	 
	 

Witness

	 	 

Signature of Option Holder
	 	 
	 
	 	 	 	 
	 

Name of Witness (Print)

	 	 

Name of Option Holder (Print)

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