<SEC-DOCUMENT>0001137171-17-000003.txt : 20170113
<SEC-HEADER>0001137171-17-000003.hdr.sgml : 20170113
<ACCEPTANCE-DATETIME>20170113154434
ACCESSION NUMBER:		0001137171-17-000003
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20170113
FILED AS OF DATE:		20170113
DATE AS OF CHANGE:		20170113

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			TRANSALTA CORP
		CENTRAL INDEX KEY:			0001144800
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRIC SERVICES [4911]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-15214
		FILM NUMBER:		17527758

	BUSINESS ADDRESS:	
		STREET 1:		110 12TH AVE SW BOX 1900 STATION M
		STREET 2:		CALGARY ALBERTA T2P 2MI
		CITY:			CALGARY
		STATE:			A0
		ZIP:			T2P2M1
		BUSINESS PHONE:		403-267-4724

	MAIL ADDRESS:	
		STREET 1:		110-12TH AVENUE SW
		CITY:			CALGARY ALBERTA CANADA
		STATE:			A0
		ZIP:			T2P2M1
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>transalta6k01132017.htm
<DESCRIPTION>TRANSALTA CORPORATION - 6-K
<TEXT>
<HTML>
<HEAD>
     <TITLE>FG Filed by Filing Services Canada Inc. (403) 717-3898</TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0"></P>

<P STYLE="font: bold 14pt Times New Roman, Times, Serif; margin: 0 0 24pt; text-align: center">FORM 6-K<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D.C. 20549</P>

<P STYLE="font: bold 12pt Times New Roman, Times, Serif; margin: 0 0 24pt; text-align: center"><FONT STYLE="text-transform: uppercase"><B>Report
of Foreign Private Issuer Pursuant to Rule 13</B></FONT><B>a<FONT STYLE="text-transform: uppercase">-16 or 15</FONT>d<FONT STYLE="text-transform: uppercase">-16
</FONT><BR>
<FONT STYLE="text-transform: uppercase">UNDER the Securities Exchange Act of 1934</FONT></B></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 24pt">For the month of January, 2017<BR>
<BR>
Commission File Number 001-15214</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>TRANSALTA CORPORATION</B></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Translation of registrant&#8217;s name into
English)</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>110 - 12<SUP>th</SUP> Avenue S.W., Box 1900,
Station &#8220;M&#8221;, Calgary, Alberta, T2P 2M1</B></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: center">(Address of principal executive offices)</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt">Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F.</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 28%; font: 12pt Times New Roman, Times, Serif; padding-right: 5.4pt; padding-bottom: 12pt; padding-left: 5.4pt">Form 20-F____&nbsp;&nbsp;&nbsp;</TD>
    <TD STYLE="width: 40%; font: 12pt Times New Roman, Times, Serif; padding-right: 5.4pt; padding-bottom: 12pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="width: 32%; font: 12pt Times New Roman, Times, Serif; padding-right: 5.4pt; padding-bottom: 12pt; padding-left: 5.4pt">Form 40-F&nbsp;&nbsp;<U>&nbsp;&nbsp;X</U></TD></TR>
</TABLE>


<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt"><U></U></P>

<P STYLE="font: 12pt/14pt Times New Roman, Times, Serif; margin: 0 0 9.6pt">Indicate by check mark if the registrant is submitting
the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____</P>

<P STYLE="font: 12pt/14pt Times New Roman, Times, Serif; margin: 0 0 9.6pt">Indicate by check mark if the registrant is submitting
the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____</P>

<P STYLE="font: 11pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 0pt; text-align: center; text-indent: 0in"><B>I</B></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0in">The documents listed
below in this Section and filed as Exhibit 99.1 to this form 6-K is hereby filed with the Securities and Exchange Commission for
the purpose of being and hereby is incorporated by reference into the registration statement filed by TransAlta Corporation on
Form S-8 (Registration No. 333-101470) under the Securities Act of 1933, as amended.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 15%; padding-right: 5.4pt; padding-bottom: 12pt; padding-left: 5.4pt; font: 12pt Times New Roman, Times, Serif; text-indent: 0in">99.1</TD>
    <TD STYLE="width: 85%; padding-right: 5.4pt; padding-bottom: 12pt; padding-left: 5.4pt; font: 12pt Times New Roman, Times, Serif; text-indent: 0in"><a href="stockoptionplan.htm">TransAlta Corporation Stock Option Plan amended and restated effective January 1, 2017.</a> &nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 40.5pt; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>


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<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: center"><B>Signatures</B></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 24pt">Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 9.9pt 0 3in; text-indent: 0.5in">&nbsp;</P>

<table CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 12pt Times New Roman, Times, Serif; border-collapse: collapse">
  <tr STYLE="vertical-align: top">
    <td STYLE="padding-right: 9.9pt; padding-left: 5.4pt; width: 50%">Dated: January 13, 2016</td>
    <td STYLE="padding-right: 9.9pt; padding-left: 5.4pt; width: 50%"><b>TransAlta
      Corporation</b></td>
  </tr>
  <tr STYLE="vertical-align: top">
    <td STYLE="padding-right: 9pt; padding-left: 5.4pt">&nbsp;</td>
    <td STYLE="padding-right: 9pt; padding-left: 5.4pt">&nbsp;</td>
  </tr>
  <tr STYLE="vertical-align: top">
    <td STYLE="padding-top: 16px; padding-right: 5.4pt; padding-left: 336px"></td>
    <td STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left">By: <u>/s/
      Scott Jeffers</u></td>
  </tr>
  <tr STYLE="vertical-align: top">
    <td STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left"></td>
    <td STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left">Name:
      Scott Jeffers</td>
  </tr>
  <tr STYLE="vertical-align: top">
    <td STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left"></td>
    <td STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left">Title:
      Assistant Corporate Secretary</td>
  </tr>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: left">&nbsp;</TD></TR>
</table>


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<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: center; text-indent: 0in"><B>EXHIBIT INDEX</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 15%; padding-right: 5.4pt; padding-bottom: 12pt; padding-left: 5.4pt; font: 12pt Times New Roman, Times, Serif; text-indent: 0in">99.1</TD>
    <TD STYLE="width: 85%; padding-right: 5.4pt; padding-bottom: 12pt; padding-left: 5.4pt; font: 12pt Times New Roman, Times, Serif; text-indent: 0in"><a href="stockoptionplan.htm">TransAlta Corporation Stock Option Plan amended and restated effective January 1, 2017.</a></TD></TR>
</TABLE>
<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0.25in 12pt 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0.25in 12pt 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0.25in 12pt 0">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0.25in 12pt 0"></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0.25in 12pt 0">&nbsp;</P>
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<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: center; text-indent: 0in"></P>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>stockoptionplan.htm
<DESCRIPTION>TRANSALTA CORPORATION STOCK OPTION PLAN AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2017
<TEXT>
<HTML>
<HEAD>
     <TITLE>FG Filed by Filing Services Canada Inc.</TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0"></P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: right"><B><U>Exhibit 99.1</U></B></P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: right"><B><U></U></B></P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: center"><B><U>TRANSALTA CORPORATION</U></B></P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: center"><B><U>STOCK OPTION PLAN</U></B></P>

<P STYLE="font: 11pt/12pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">1.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>The Plan</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">1.1&#9;The stock
option plan of TransAlta Corporation pursuant to which stock options can be granted was established effective April 29, 2010, and
is hereby amended and restated effective January 1, 2017.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">2.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Purpose</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">2.1&#9;The purpose
of the Plan is to encourage e<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ployees to pro<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ote
the financial interests, growth and develop<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ent of the Co<FONT STYLE="letter-spacing: -0.05pt">r</FONT>poration
by providing them<FONT STYLE="letter-spacing: -0.1pt"> </FONT>with the opportunity through stock options to acquire<FONT STYLE="letter-spacing: 0.1pt">
</FONT>a proprietary interest in the Corporation, to recognize the contribution of key <FONT STYLE="letter-spacing: 0.1pt">e</FONT><FONT STYLE="letter-spacing: -0.1pt">m</FONT>ployees
to the success<FONT STYLE="letter-spacing: 0.1pt"> </FONT>of the Corporation <FONT STYLE="letter-spacing: -0.05pt">a</FONT>nd to
encourage such e<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ployees to re<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ain in the
e<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ployment of the Corporation.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">3.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Definitions</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-indent: 0.5in">Whenever used herein:</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(a)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Authorized Party&#8221; means the <FONT STYLE="letter-spacing: -0.1pt">P</FONT>articipant,
the Participa<FONT STYLE="letter-spacing: -0.05pt">n</FONT>t&#8217;s<FONT STYLE="letter-spacing: -0.05pt"> </FONT>execut<FONT STYLE="letter-spacing: -0.05pt">o</FONT>r,
<FONT STYLE="letter-spacing: -0.05pt">o</FONT>r the Participant&#8217;s personal representativ<FONT STYLE="letter-spacing: -0.05pt">e</FONT>;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(b)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Board&#8221; means the Board of Directors of TransAlta;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(c)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;CEO&#8221; means the Chief Executive Officer of TransAlta;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(d)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Change of Control&quot; means the occurrence after the effective
date of this Plan of any of the following:</FONT></P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt 1.5in; text-align: justify; text-indent: -0.5in">(i)<B>&#9;</B>the
sale to or acquisition by a Holder (except TransAlta or a Subsidiary) of assets of TransAlta or its Subsidiaries having a fair
market value greater than 50% of the fair market value of the assets of TransAlta and its Subsidiaries on a consolidated basis
determined as of the date of the completion of the transaction or series of integrated transactions, whether such sale or acquisition
occurs by way of a reorganization, recapitalization, consolidation, amalgamation, arrangement, merger, transfer, sale, business
combination or similar transaction or series of integrated transactions;</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt 1.5in; text-align: justify; text-indent: -0.5in">(ii)<B>&#9;</B>any
Holder becoming the beneficial owner, directly or indirectly, of 50% or more of the voting securities of TransAlta, except for
any such acquisition (i) by TransAlta or a Subsidiary, or (ii) by any underwriter or underwriters temporarily holding voting securities
pursuant to an offering of such voting securities;</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt 1.5in; text-align: justify; text-indent: -0.5in">(iii)<B>&#9;</B>any
reorganization, recapitalization, consolidation, amalgamation, arrangement, merger, transfer, sale, business combination or other
similar transaction or series of integrated transactions involving TransAlta,</P>


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<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt 1.5in; text-align: justify">its Subsidiaries or its shareholders,
where record holders of the voting securities of TransAlta immediately prior to such transaction or series of transactions hold
less than 50% of the voting securities of TransAlta or of the continuing entity following the completion of such transaction or
series of transactions; or</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt 1.5in; text-align: justify; text-indent: -0.5in">(iv)&#9;a
change in the composition of the Board such that individuals who are members of the Board (the &#8220;incumbent board&#8221;) cease
for any reason to constitute at least 50% of the Board, and for this purpose a new director will be considered a member of the
incumbent board if the appointment or nomination for election of such new director was approved by at least a majority of the incumbent
board;</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt 1.5in; text-align: justify; text-indent: -0.5in">&#8220;Committee&#8221;
means the Human Resources Committee of the Board;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(e)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Corporation&#8221; means TransAlta Corporation or its Subsidiaries
as the context dictates;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(f)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Fair Market Value&#8221; 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 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 Shares selected from time to time by the Corporation for that purpose;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(g)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Holder&#8221; <FONT STYLE="letter-spacing: -0.1pt">m</FONT>eans
a person, a group of per<FONT STYLE="letter-spacing: -0.05pt">s</FONT>ons or persons acting jointly or in concert or persons associated
or <FONT STYLE="letter-spacing: -0.05pt">a</FONT>ffiliated, within the <FONT STYLE="letter-spacing: -0.1pt">m</FONT>eaning of the<FONT STYLE="letter-spacing: -0.05pt">
</FONT><I>Securities <FONT STYLE="letter-spacing: -0.05pt">A</FONT>ct</I> (Ontario), with any of them;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(h)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Insi<FONT STYLE="letter-spacing: -0.05pt">d</FONT>er&#8221;
<FONT STYLE="letter-spacing: -0.1pt">m</FONT>eans an in<FONT STYLE="letter-spacing: -0.05pt">s</FONT><FONT STYLE="letter-spacing: 0.05pt">i</FONT><FONT STYLE="letter-spacing: -0.05pt">d</FONT>er
as defined<FONT STYLE="letter-spacing: -0.05pt"> </FONT>by the <I>Sec<FONT STYLE="letter-spacing: -0.05pt">u</FONT>rities Act </I>(Ontario)
and also includ<FONT STYLE="letter-spacing: -0.05pt">e</FONT>s as<FONT STYLE="letter-spacing: -0.05pt">s</FONT>ociates and a<FONT STYLE="letter-spacing: -0.05pt">ff</FONT>iliates
of<FONT STYLE="letter-spacing: -0.05pt"> </FONT>the insi<FONT STYLE="letter-spacing: -0.05pt">d</FONT>er; <FONT STYLE="letter-spacing: -0.05pt">a</FONT>nd
&quot;issua<FONT STYLE="letter-spacing: -0.05pt">n</FONT>c<FONT STYLE="letter-spacing: -0.05pt">e</FONT>s to in<FONT STYLE="letter-spacing: -0.05pt">s</FONT><FONT STYLE="letter-spacing: 0.05pt">i</FONT>der<FONT STYLE="letter-spacing: -0.05pt">s</FONT>&quot;
includes direct and indirect issuances to insiders;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(i)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Option(s)&#8221; means a right or rights gra<FONT STYLE="letter-spacing: 0.05pt">n</FONT>ted
by the Board to purchase <FONT STYLE="letter-spacing: -0.1pt">S</FONT>hares under the <FONT STYLE="letter-spacing: -0.1pt">P</FONT><FONT STYLE="letter-spacing: -0.05pt">l</FONT>an;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(j)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Participant&#8221; means a non-union employee who has been
designated as a Participant by the Board upon the advice of the CEO;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(k)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Plan&#8221; <FONT STYLE="letter-spacing: -0.1pt">m</FONT>eans
this Trans<FONT STYLE="letter-spacing: -0.1pt">A</FONT>lta Corp<FONT STYLE="letter-spacing: -0.05pt">o</FONT>ration Stock Option
Pla<FONT STYLE="letter-spacing: -0.05pt">n, as amended or restated from time to time</FONT>;</FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(l)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Retirement&#8221; means any circumstance (whether related to
resignation, termination or otherwise) that results in a Participant meeting the criteria for retirement under a retirement plan
of TransAlta or any of its Subsidiaries;</FONT></P>


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<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(m)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Shareholder Plan&#8221; <FONT STYLE="letter-spacing: -0.1pt">m</FONT>eans
the Sharehold<FONT STYLE="letter-spacing: -0.05pt">e</FONT>r Rights Plan dated October 13, 1992 between the Corporation and CIBC<FONT STYLE="letter-spacing: 0.05pt">
</FONT>Mellon <FONT STYLE="letter-spacing: -0.05pt">T</FONT>rust Co<FONT STYLE="letter-spacing: -0.1pt">m</FONT>pany, as the sa<FONT STYLE="letter-spacing: -0.1pt">m</FONT>e
<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ay be a<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ended from ti<FONT STYLE="letter-spacing: -0.1pt">m</FONT>e
to ti<FONT STYLE="letter-spacing: -0.1pt">m</FONT>e, and any other si<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ilar plan adopted
by the Corporation from<FONT STYLE="letter-spacing: -0.1pt"> </FONT>ti<FONT STYLE="letter-spacing: -0.1pt">m</FONT>e <FONT STYLE="letter-spacing: 0.1pt">t</FONT>o
ti<FONT STYLE="letter-spacing: -0.1pt">m</FONT>e;</FONT></P>

<P STYLE="font: 12pt/10pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(n)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Shares&#8221; <FONT STYLE="letter-spacing: -0.1pt">m</FONT>eans
the common shares in the capital of the Corporation and includes any shares of the Corporation into which such common shares have
been converted, reclassified, redesigned, subdivided, consolidated, exchanged or otherwise changed;</FONT></P>

<P STYLE="font: 12pt/10pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(o)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Stock Option Agreement&#8221; means the agreement approved
by TransAlta and signed by the Participant relating to the grant of Options under the Plan as such Stock Option Agreement may be
amended from time to time;</FONT></P>

<P STYLE="font: 12pt/10pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(p)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Subsidiary&#8221; means any corporation that is a subsidiary
of TransAlta (as such term is defined in the <I>Securities </I>Act (Ontario), in force from time to time), including any joint
venture partnership or limited partnership, which is directly or indirectly controlled by TransAlta;</FONT></P>

<P STYLE="font: 12pt/10pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(q)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;Termination Date&#8221; means a Participant&#8217;s last day
of active employment and does not include any period of reasonable, contractual or statutory notice or any period deemed employment
or salary continuance;</FONT></P>

<P STYLE="font: 12pt/10pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(r)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;TransAlta&#8221; means TransAlta Corporation or its Subsidiaries
as the context dictates; and</FONT></P>

<P STYLE="font: 12pt/10pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(s)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">&#8220;TSX&#8221; means the Toronto Stock Exchange;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">4.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Administration</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">4.1&#9;The Plan s<FONT STYLE="letter-spacing: -0.05pt">h</FONT>all
be ad<FONT STYLE="letter-spacing: -0.1pt">m</FONT><FONT STYLE="letter-spacing: 0.05pt">i</FONT>nistered by t<FONT STYLE="letter-spacing: -0.1pt">h</FONT>e
Board. The Board shall have the right to delegate the administration and operation of the Plan, in whole or in part, to the Committee.
Whenever used herein, or in the applicable Stock Option Agreement, the term &#8220;Board&#8221; shall be deemed to include the
Committee. The Board is authorized to approve grants of Options in acc<FONT STYLE="letter-spacing: -0.05pt">o</FONT>rdance w<FONT STYLE="letter-spacing: -0.05pt">i</FONT>th
the Plan, to construe and<FONT STYLE="letter-spacing: -0.1pt"> </FONT>interpret the Plan, to prescribe, a<FONT STYLE="letter-spacing: -0.1pt">m</FONT>end,
and rescind rules and regula<FONT STYLE="letter-spacing: 0.05pt">t</FONT>ions relating to the Plan and to<FONT STYLE="letter-spacing: -0.05pt">
</FONT><FONT STYLE="letter-spacing: -0.1pt">m</FONT>ake all deter<FONT STYLE="letter-spacing: -0.1pt">m</FONT>inations and take
all acti<FONT STYLE="letter-spacing: -0.05pt">o</FONT>ns necessary<FONT STYLE="letter-spacing: -0.05pt"> </FONT>or advisa<FONT STYLE="letter-spacing: -0.05pt">b</FONT><FONT STYLE="letter-spacing: 0.05pt">l</FONT>e
for the<FONT STYLE="letter-spacing: -0.05pt"> </FONT>Pla<FONT STYLE="letter-spacing: -0.05pt">n</FONT>&#8217;s ad<FONT STYLE="letter-spacing: -0.1pt">m</FONT><FONT STYLE="letter-spacing: 0.05pt">i</FONT>nistration.
The Board shall act by vote or written consent of a <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ajority of its <FONT STYLE="letter-spacing: -0.1pt">m</FONT><FONT STYLE="letter-spacing: 0.1pt">e</FONT><FONT STYLE="letter-spacing: -0.1pt">m</FONT><FONT STYLE="letter-spacing: 0.05pt">b</FONT>ers.
<FONT STYLE="letter-spacing: -0.1pt">W</FONT>henever the <FONT STYLE="letter-spacing: -0.1pt">P</FONT><FONT STYLE="letter-spacing: 0.05pt">l</FONT>an
authorizes <FONT STYLE="letter-spacing: -0.05pt">o</FONT>r requires the Board to take any action, <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ake
any deter<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ination or decision or form<FONT STYLE="letter-spacing: -0.1pt"> </FONT>any
opinion, then any such action, deter<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ination, deci<FONT STYLE="letter-spacing: -0.05pt">s</FONT><FONT STYLE="letter-spacing: 0.05pt">i</FONT>on
or opi<FONT STYLE="letter-spacing: -0.05pt">ni</FONT>on by the Board shall be in the absolute discretion of the Board.</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">4.2&#9;The Board
shall in its sole and absolute discretion: (i) grant Options to Participants; (ii) interpret and administer the Plan; (iii) establish,
amend and rescind any rules and regulations relating to the Plan; (iv) establish conditions relating to the vesting of Options;
and (v) make any and all other determinations that the Board deems necessary or desirable for the administration of the Plan.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">5.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Eligibility and Participation</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">5.1&#9;The individuals
who may be eligible to participate in the Plan are non-union employees of TransAlta who, upon the advice of the CEO, are designated
as Participants by the Board. Notwithstanding anything to the contrary herein, the Board shall determine when and to what extent
individuals otherwise eligible for consideration shall become or cease to be Participants for purposes of this Plan and shall determine
when, and under what circumstances, any individual shall be considered to have terminated employment for purposes of the Plan.</P>


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<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">5.2&#9;The Plan does
not grant to any Participant the right to be or to continue to be employed by TransAlta or any of its Subsidiaries. The use of
the Plan to determine any or all of a Participant&#8217;s compensation is entirely at the discretion of the Board. This Section
5.2 applies notwithstanding any other provision of the Plan.<B> </B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">6.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Shares Subject to Plan</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">6.1&#9;The aggregate
nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ber of Shares that <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ay be issued pursuant
to the exercise of Options shall not exceed at any ti<FONT STYLE="letter-spacing: -0.1pt">m</FONT>e 13,000,000<FONT STYLE="letter-spacing: -0.1pt">
</FONT>Shares of t<FONT STYLE="letter-spacing: -0.05pt">h</FONT>e Corporati<FONT STYLE="letter-spacing: -0.1pt">o</FONT>n, which
shall be <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ade available fr<FONT STYLE="letter-spacing: -0.05pt">o</FONT>m<FONT STYLE="letter-spacing: -0.05pt">
</FONT>the authorized but u<FONT STYLE="letter-spacing: -0.05pt">n</FONT>i<FONT STYLE="letter-spacing: -0.05pt">s</FONT>sued Shares<FONT STYLE="letter-spacing: -0.1pt">
</FONT>of the Corporation that have been reserved for issuance upon exercise of Options granted under the Plan. If<FONT STYLE="letter-spacing: 0.05pt">
</FONT>an Option expires, ter<FONT STYLE="letter-spacing: -0.1pt">m</FONT>inates, ceases to be exercisable or is s<FONT STYLE="letter-spacing: -0.05pt">u</FONT>rren<FONT STYLE="letter-spacing: -0.05pt">d</FONT>ered
b<FONT STYLE="letter-spacing: 0.05pt">e</FONT>fore being ex<FONT STYLE="letter-spacing: -0.05pt">e</FONT>rcised or with<FONT STYLE="letter-spacing: -0.05pt">o</FONT>ut
having been exer<FONT STYLE="letter-spacing: -0.05pt">c</FONT><FONT STYLE="letter-spacing: 0.05pt">i</FONT>sed in <FONT STYLE="letter-spacing: -0.05pt">f</FONT>ull,
then t<FONT STYLE="letter-spacing: -0.05pt">h</FONT>e<FONT STYLE="letter-spacing: -0.05pt"> </FONT>Shares th<FONT STYLE="letter-spacing: -0.05pt">a</FONT>t
were subject to the Option but which were not issued pursuant to the exer<FONT STYLE="letter-spacing: -0.05pt">c</FONT><FONT STYLE="letter-spacing: 0.05pt">i</FONT>se
of<FONT STYLE="letter-spacing: -0.05pt"> </FONT>the Opti<FONT STYLE="letter-spacing: -0.05pt">o</FONT>n shall, unless the Plan
has been terminated, beco<FONT STYLE="letter-spacing: -0.1pt">m</FONT>e available for issuance p<FONT STYLE="letter-spacing: -0.05pt">u</FONT>rsuant
to the exercise of Options under the <FONT STYLE="letter-spacing: -0.1pt">P</FONT><FONT STYLE="letter-spacing: 0.05pt">l</FONT>an,
all within the <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ax<FONT STYLE="letter-spacing: 0.1pt">i</FONT><FONT STYLE="letter-spacing: -0.1pt">m</FONT><FONT STYLE="letter-spacing: 0.05pt">u</FONT>m
li<FONT STYLE="letter-spacing: -0.1pt">m</FONT>itation stated above.</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">6.2&#9;Notwithstanding
the foregoing, the aggrega<FONT STYLE="letter-spacing: -0.1pt">t</FONT>e number of Sh<FONT STYLE="letter-spacing: 0.05pt">a</FONT>res
that <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ay be issued at any ti<FONT STYLE="letter-spacing: -0.1pt">m</FONT>e under the
Plan and any o<FONT STYLE="letter-spacing: -0.05pt">t</FONT>her share co<FONT STYLE="letter-spacing: -0.1pt">m</FONT>pensation
arrange<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ents of the Corporation shall not exceed<FONT STYLE="letter-spacing: -0.05pt">
</FONT>13,000,000 Shares in the aggregate.</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">6.3&#9;In addition
to the foregoing, the aggregate of<FONT STYLE="letter-spacing: -0.1pt"> </FONT>the nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ber
of Shares: (i) issued to insiders, within any one-year per<FONT STYLE="letter-spacing: 0.05pt">i</FONT>od, and (ii) issuable to
insiders at any ti<FONT STYLE="letter-spacing: -0.1pt">m</FONT>e, under the Plan, or when co<FONT STYLE="letter-spacing: -0.1pt">m</FONT>bined
with all of<FONT STYLE="letter-spacing: -0.05pt"> </FONT>the Corporation&#8217;s other security <FONT STYLE="letter-spacing: -0.05pt">ba</FONT>sed
co<FONT STYLE="letter-spacing: -0.1pt">m</FONT>pensation arra<FONT STYLE="letter-spacing: -0.05pt">n</FONT>ge<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ents,
<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ay not exceed 10% of the Corporation&#8217;s total<FONT STYLE="letter-spacing: -0.1pt">
</FONT>is<FONT STYLE="letter-spacing: -0.05pt">s</FONT>ued and out<FONT STYLE="letter-spacing: -0.05pt">s</FONT><FONT STYLE="letter-spacing: 0.05pt">t</FONT>anding
Shares, respecti<FONT STYLE="letter-spacing: -0.05pt">v</FONT>ely.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">7.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Granting of Options</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">7.1&#9;The Board
<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ay from time to time g<FONT STYLE="letter-spacing: 0.05pt">r</FONT>ant Options to
Participants. The Board delegates the authority to the CEO to grant Options to Participants below the CEO&#8217;s direct reports
up to a grant value maximum of one million dollars per year in the aggregate. Subject to the ter<FONT STYLE="letter-spacing: -0.1pt">m</FONT>s
of the Plan, the size and ter<FONT STYLE="letter-spacing: -0.1pt">m</FONT>s<FONT STYLE="letter-spacing: 0.05pt"> </FONT>and conditions
of the Option(s) to be granted to <FONT STYLE="letter-spacing: -0.05pt">e</FONT>ach Partici<FONT STYLE="letter-spacing: -0.05pt">p</FONT>ant
sh<FONT STYLE="letter-spacing: -0.05pt">a</FONT>ll be at the d<FONT STYLE="letter-spacing: -0.05pt">i</FONT>scretion of the Board.
Notwithstanding such discretion, at any ti<FONT STYLE="letter-spacing: -0.1pt">m</FONT>e, the nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ber
of Shares that <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ay be acquired by any single Participant pursuant to the exercise of
Options under the <FONT STYLE="letter-spacing: -0.1pt">P</FONT><FONT STYLE="letter-spacing: 0.1pt">l</FONT>an and pursuant to all
other share compensation arran<FONT STYLE="letter-spacing: -0.05pt">g</FONT>e<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ents
of the Corporation, cannot exceed f<FONT STYLE="letter-spacing: 0.05pt">i</FONT>ve (5%) <FONT STYLE="letter-spacing: -0.05pt">pe</FONT>rcent
of the outstan<FONT STYLE="letter-spacing: -0.05pt">d</FONT><FONT STYLE="letter-spacing: 0.05pt">i</FONT>ng nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ber
of Shares (and for this purpose, the &#8220;outstanding number of Sh<FONT STYLE="letter-spacing: 0.05pt">a</FONT>res&#8221; is
the nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ber outstanding at a particular ti<FONT STYLE="letter-spacing: -0.1pt">m</FONT>e,
less the nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ber of Shares that have been issued pursuant to the e<FONT STYLE="letter-spacing: -0.05pt">x</FONT>er<FONT STYLE="letter-spacing: -0.05pt">ci</FONT>se
of Options in the previous year).</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">8.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Exercise Price</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">8.1&#9;The exercise
price of an Option shall be fixed by the Board when an Option is granted but such pri<FONT STYLE="letter-spacing: -0.05pt">c</FONT>e
shall n<FONT STYLE="letter-spacing: -0.05pt">o</FONT>t be less than the last <FONT STYLE="letter-spacing: -0.05pt">s</FONT>ale
price of the Shares on the TSX, or on such other exchange on which the Shares may be listed, on the last business day prior to
the day t<FONT STYLE="letter-spacing: -0.05pt">h</FONT>e Option is g<FONT STYLE="letter-spacing: -0.05pt">r</FONT>anted.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">9.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Option Agreement</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">9.1&#9;Each Option
granted under the Plan will be<FONT STYLE="letter-spacing: 0.05pt"> </FONT>evidenced by a written Stock Option Agreement between
the Corporation and the Participant and, subject to the ter<FONT STYLE="letter-spacing: -0.1pt">m</FONT>s of the Plan, shall contain
such ter<FONT STYLE="letter-spacing: -0.1pt">m</FONT>s and conditio<FONT STYLE="letter-spacing: -0.05pt">n</FONT>s as <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ay
be deter<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ined by the Board upon the advice <FONT STYLE="letter-spacing: -0.05pt">o</FONT>f</P>


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<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify"><FONT STYLE="letter-spacing: -0.05pt">the
CEO. The ter</FONT><FONT STYLE="letter-spacing: -0.1pt">m</FONT><FONT STYLE="letter-spacing: -0.05pt">s and conditions of the Stock
Option Agree</FONT><FONT STYLE="letter-spacing: -0.1pt">m</FONT><FONT STYLE="letter-spacing: -0.05pt">ents need not be identical.
The Stock Option Agree</FONT><FONT STYLE="letter-spacing: -0.1pt">m</FONT><FONT STYLE="letter-spacing: -0.05pt">ents shall include,
among other things, the following:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(a)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">the nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ber of Options
granted;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(b)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">the exercise price of the Option;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(c)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">any restrictions on exercise of the Option; and</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(d)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">the expiry date of the <FONT STYLE="letter-spacing: -0.1pt">O</FONT>ption.</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">10.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Exercise of Option</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">10.1&#9;An Option,
or any portion thereof, <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ay be exercised by an Authorized Party by deli<FONT STYLE="letter-spacing: -0.05pt">v</FONT>ering
to the Corp<FONT STYLE="letter-spacing: -0.05pt">o</FONT>ration eithe<FONT STYLE="letter-spacing: -0.05pt">r</FONT>: (i) a written
notice of exercise signed by the Authorized Party specify<FONT STYLE="letter-spacing: -0.05pt">i</FONT>ng the nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ber
of Shares with respect to <FONT STYLE="letter-spacing: -0.1pt">w</FONT>hich the Option is being exercised a<FONT STYLE="letter-spacing: -0.05pt">n</FONT>d
acco<FONT STYLE="letter-spacing: -0.1pt">m</FONT>panied by pay<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ent in full of the purchase
<FONT STYLE="letter-spacing: -0.05pt">p</FONT>rice of the Shares; <FONT STYLE="letter-spacing: -0.05pt">o</FONT>r (ii) a writt<FONT STYLE="letter-spacing: -0.1pt">e</FONT>n
notice of cancellation<FONT STYLE="letter-spacing: -0.05pt"> </FONT>signed by the Authorized Party in which the Authorized Party
agrees that all of the rig<FONT STYLE="letter-spacing: -0.05pt">h</FONT>ts of the Authorized Party relating to the nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ber
of Options specified in such no<FONT STYLE="letter-spacing: 0.05pt">t</FONT>ice shall be exchanged by the Authorized Party and
im<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ed<FONT STYLE="letter-spacing: 0.1pt">i</FONT>ately thereafter cancell<FONT STYLE="letter-spacing: -0.05pt">e</FONT>d
in exchange for, and in consideration of, the issuance by TransAlta to<FONT STYLE="letter-spacing: -0.05pt"> </FONT>the Autho<FONT STYLE="letter-spacing: -0.05pt">r</FONT>ized
Party of such nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>b<FONT STYLE="letter-spacing: 0.1pt">e</FONT>r of Shares as is deter<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ined
by subtracting the exercise price for the Options being so cancelled f<FONT STYLE="letter-spacing: -0.05pt">r</FONT>om<FONT STYLE="letter-spacing: -0.1pt">
</FONT>the Fair Market Value of the Shares t<FONT STYLE="letter-spacing: -0.05pt">h</FONT>at were issuable under the Options being
cancelled on the date of cancellation and then dividing that product by the Fair Market Value of one Share on the date<FONT STYLE="letter-spacing: -0.1pt">
</FONT>of cancellation, which nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ber of Shares sh<FONT STYLE="letter-spacing: -0.05pt">a</FONT>ll
be issued by<FONT STYLE="letter-spacing: -0.05pt"> </FONT>TransAlta to the Pa<FONT STYLE="letter-spacing: -0.05pt">r</FONT>ti<FONT STYLE="letter-spacing: -0.05pt">c</FONT>ipant.</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">10.2&#9;For greater
certainty, in the event Options<FONT STYLE="letter-spacing: -0.1pt"> </FONT>are exercised in accordance with (ii) above, resulting
in the cancellation of<FONT STYLE="letter-spacing: -0.1pt"> </FONT>a portion<FONT STYLE="letter-spacing: -0.1pt"> </FONT>of such
Options in association with such exercise, the Shares issuable upon the exercise of<FONT STYLE="letter-spacing: -0.1pt"> </FONT>such
cancelled Options s<FONT STYLE="letter-spacing: 0.05pt">h</FONT>all not return to the pool of Shares available for reservation
for <FONT STYLE="letter-spacing: -0.1pt">i</FONT>ssuance upon exercise of Options granted under the Plan.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">11.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Alterations in Shares</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 6pt; text-align: justify; text-indent: 0.5in">11.1&#9;<FONT STYLE="letter-spacing: -0.1pt">A</FONT>ppropriate
adjust<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ents in the nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>b<FONT STYLE="letter-spacing: 0.1pt">e</FONT>r
of Shares to be issued pursuant to the exercise of an Option and in the exercise price for an Option shall be <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ade
by<FONT STYLE="letter-spacing: -0.05pt"> </FONT>the Corporation to give effect to adjust<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ents
in the nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ber of Shares of the Corporation resulting fro<FONT STYLE="letter-spacing: -0.1pt">m</FONT>:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 6pt; margin-bottom: 6pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(i)</FONT></TD><TD STYLE="text-align: justify; padding-right: 10.1pt"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">subdivisions or consolidations
of the Shares of the Corporation, the pay<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ent of stock dividend<FONT STYLE="letter-spacing: -0.05pt">s</FONT>,
the i<FONT STYLE="letter-spacing: -0.05pt">s</FONT>s<FONT STYLE="letter-spacing: -0.05pt">u</FONT>ance of rights to subscri<FONT STYLE="letter-spacing: -0.05pt">b</FONT>e
for Shares or securities of the Corporation (other than rights<FONT STYLE="letter-spacing: -0.05pt"> </FONT>issued<FONT STYLE="letter-spacing: -0.05pt">
</FONT>under<FONT STYLE="letter-spacing: -0.05pt"> </FONT>the Shareholder Plan); or</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 6pt; margin-bottom: 6pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(ii)</FONT></TD><TD STYLE="text-align: justify; padding-right: 10.1pt"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">the operation of the
Shareholder Plan (but not the issue of rights under the Shareholder Plan) including, without limiting the generality of the foregoing,
the rights issued thereunder becoming severable from the Shares and exercisable on a dilutive basis (unless the Participant is
a person whose rights would be voided if he was a holder of rights under the Shareholder Plan, in which case no adjustment shall
be made to the nu<FONT STYLE="letter-spacing: -0.1pt">m</FONT>b<FONT STYLE="letter-spacing: 0.1pt">e</FONT>r of Shares to be issued
pursuant to the exercise of an Option and to the exercise price for an Option),</FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 6pt 10.1pt 0 63.35pt; text-align: justify; text-indent: -27pt">or other
si<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ilar changes in the s<FONT STYLE="letter-spacing: -0.05pt">h</FONT>a<FONT STYLE="letter-spacing: -0.05pt">r</FONT>e
<FONT STYLE="letter-spacing: -0.05pt">c</FONT>apit<FONT STYLE="letter-spacing: -0.05pt">a</FONT>l of<FONT STYLE="letter-spacing: -0.05pt">
</FONT>the<FONT STYLE="letter-spacing: -0.05pt"> </FONT>Corporation.</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 10.1pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 6pt; text-align: justify; text-indent: 0.5in">11.2&#9;If there is
a reclassification of the Shares of the Corporation, adequate provision shall be made by the Corporation so that there shall be
substituted under the Option the Shares,</P>


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<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 6pt; text-align: justify">securities or property which would have
been issuable or payable to the Participant had the Participant then been the holder of record of the number of the Shares then
subject to the unexercised portion of the Option.</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 10.4pt 0 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">11.3&#9;Any shares,
securities or property added to or substituted for the Shares under the Option shall be subject to adjustment in the same manner
and to the same extent as the Shares originally covered by the Option. No fractional Shares shall be issued upon the exercise of
the Option.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">12.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Change of Control</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 6pt; text-align: justify; text-indent: 0.5in">12.1&#9;In the event
of a Change of Control, such as a proposed merger or amalgamation of TransAlta with one or more other corporations, an offer by
any person to purchase all of the outstanding Shares of TransAlta, a sale or distribution of all or substantially all of TransAlta&#8217;s
assets to any other person or any arrangement or corporate reorganization not otherwise provided for herein, the Board <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ay,
in its sole and absolute discretion and without the need for the conse<FONT STYLE="letter-spacing: -0.05pt">n</FONT>t of any Participant,
take one or <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ore of <FONT STYLE="letter-spacing: 0.1pt">t</FONT>he following actions
contingent upon the occurrence of that <FONT STYLE="letter-spacing: -0.1pt">C</FONT>hange of Control:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(a)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">cause any or all outstanding Options to become vested and immediately
exercisable, in whole or in part;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(b)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">cause any outstanding Option to become fully vested and immediately
exercisable for a reasonable period in advance of the Change of Control and, to the extent not exercised prior to that Change of
Control, cancel that Option upon closing of the Change of Control;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(c)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">cancel any Option in exchange for a substitute award; or</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt 1in; text-align: justify; text-indent: -1in"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(d)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">with respect to any Option held by a 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 of Control and the
exercise price of that Option; provided, that if the Fair Market Value per Share on the date of the Change of Control does not
exceed the exercise price of any such Option, the Board may cancel that Option without any payment of consideration therefor.</FONT></P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">12.2&#9;At the discretion
of the <FONT STYLE="letter-spacing: -0.1pt">B</FONT>oard, any cash<FONT STYLE="letter-spacing: -0.05pt"> </FONT>or substitute consideration
payable upon cancellation of an Option <FONT STYLE="letter-spacing: -0.1pt">m</FONT>ay be subjected to (i) vesting ter<FONT STYLE="letter-spacing: -0.1pt">m</FONT>s
substanti<FONT STYLE="letter-spacing: -0.05pt">a</FONT>lly<FONT STYLE="letter-spacing: -0.1pt"> </FONT>identical to those that
applied to the cancelled Option<FONT STYLE="letter-spacing: -0.05pt"> </FONT>immediately prior<FONT STYLE="letter-spacing: -0.05pt">
</FONT>to<FONT STYLE="letter-spacing: -0.05pt"> </FONT>the<FONT STYLE="letter-spacing: -0.05pt"> </FONT>Change<FONT STYLE="letter-spacing: -0.05pt">
</FONT>of <FONT STYLE="letter-spacing: 0.05pt">C</FONT>ontrol, or (ii) earn-out, escrow, holdback or si<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ilar
arran<FONT STYLE="letter-spacing: -0.1pt">g</FONT>ements, to the extent s<FONT STYLE="letter-spacing: -0.05pt">u</FONT>ch arrange<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ents
are ap<FONT STYLE="letter-spacing: -0.05pt">p</FONT>lica<FONT STYLE="letter-spacing: -0.05pt">b</FONT>le to any consideration paid
to holders of Shares in connection with the <FONT STYLE="letter-spacing: -0.1pt">C</FONT>hange of Control.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">13.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Expiry of Options</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">13.1&#9;Subject to
Section 14, Options granted under the Plan shall expire on the date so established by the Board, but in no event later than the
tenth anniversary of the date the Option was granted.</P>


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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">14.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Ceasing to be an Employee</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">14.1&#9;If the employment
of a Participant is terminated by reason of death and the Participant has not fully exercised any then outstanding Options, or
if a Participant dies after Retirement without having fully exercised any then outstanding Options, then all unvested Options shall
immediately vest and all Options shall be exercisable by the Authorized Party until the earlier of (a) one year after the Termination
Date, and (b) the normal expiry date of the Option, and not for more than that number of Shares for which the Participant could
have exercised the Option immediately prior to such death.</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">14.2&#9;If the employment
of a Participant is terminated by reason of Retirement and the Participant has not fully exercised any then outstanding Options,
then all unvested Options shall continue to vest in the ordinary course as outlined in the Stock Option Agreement and all Options
shall be exercisable until the earlier of (a) thirty-six (36) months following the Participant&#8217;s Termination Date, and (b)
the normal expiry date of the Option.</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">14.3&#9;If the employment
of a Participant is terminated by reason of termination without cause, other than in the case of a Retirement, the Participant
may continue to exercise any then outstanding Options, to the extent they were exercisable on the Termination Date, until the earlier
of (a) sixty (60) days following the Termination Date, and (b)&nbsp;the normal expiry date of the Option.</P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">14.4&#9;If the employment
of a Participant is terminated by reason of termination with cause, any then outstanding Options will immediately expire on the
Termination Date.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">15.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Non-Assignability of Options</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">15.1&#9;The interest
of a Participant in an Option shall not be transferable or alienable by the Participant either by assignment or in any other manner
during the Participant&#8217;s lifetime but shall enure to the benefit of the Participant&#8217;s executors or personal representatives
to the extent provided in Section 14.1.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">16.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Rights as a Shareholder</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">16.1&#9;A Participant
shall have no rights whatsoever as a shareholder in respect of his or her Options (including any right to receive dividends or
other distributions) until and to the extent that such person exercises his or her Option to purchase Shares.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">17.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Conditions Precedent to Exercise of Option</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">17.1&#9;The exercise
of each Option granted under this Plan shall be subject to the condition that if at any time the Corporation shall determine in
its discretion that the satisfaction of withholding tax or other withholding liabilities, or that the listing, registration or
qualification of any shares otherwise deliverable upon such exercise upon any securities exchange or under any law, or the consent
or approval of any regulatory body, is necessary or desirable as a condition of, or in connection with, such exercise or the delivery
or purchase of shares thereunder, then in any such event such exercise shall not be effective unless such withholding, listing,
registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to
the Corporation.</P>


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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">18.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Amendment and Termination of Plan</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">18.1&#9;The Board
may, at any time, amend or revise the terms of this Plan, subject to the receipt of all necessary regulatory approvals, provided
that no such amendment or revision shall alter the terms of any Options previously granted under the Plan. The Board may also,
at any time, amend or revise the terms of any Options previously granted under the Plan, subject to the receipt of all necessary
regulatory approvals and the approval of the applicable optionholder. The Board has the discretion to make amendments which it
may deem necessary, without having to obtain shareholder approval. Such changes include, without limitation:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 66pt; text-align: justify; text-indent: -66pt"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(a)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">amendments of a minor nature as may be required from time to time
to correct typographical or other minor errors;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 66pt; text-align: justify; text-indent: -66pt"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(b)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">a change to the vesting provisions of Options; and</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 66pt; text-align: justify; text-indent: -66pt"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(c)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">a change to the ter<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ination
provisions of Options which does not entail an extension beyond the original expiry date.</FONT></P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">18.2&#9;Notwithstanding
Section 18.1, the following may not be amended without approval of the shareholders of the Corporation:</P>

<P STYLE="font: 10pt/10pt Times New Roman, Times, Serif; margin: 0 0 6pt 66pt; text-align: justify; text-indent: -66pt"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(a)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">increases to the maximum number of Shares reserved for issuance under
the Plan;</FONT></P>

<P STYLE="font: 10pt/10pt Times New Roman, Times, Serif; margin: 0 0 6pt 66pt; text-align: justify; text-indent: -66pt"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(b)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">a<FONT STYLE="letter-spacing: -0.1pt">m</FONT>end<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ent
to this S<FONT STYLE="letter-spacing: -0.05pt">e</FONT>ction 18 to gr<FONT STYLE="letter-spacing: -0.05pt">a</FONT>nt<FONT STYLE="letter-spacing: -0.05pt">
</FONT>additional powers to the Board to a<FONT STYLE="letter-spacing: -0.1pt">m</FONT>end the Plan or entitle<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ents
<FONT STYLE="letter-spacing: -0.05pt">w</FONT>ithout shareholder approval;</FONT></P>

<P STYLE="font: 10pt/10pt Times New Roman, Times, Serif; margin: 0 0 6pt 66pt; text-align: justify; text-indent: -66pt"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(c)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">reduction in the exercise price of Options<FONT STYLE="letter-spacing: 0.05pt">
</FONT>or other entitle<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ents held by insiders;</FONT></P>

<P STYLE="font: 10pt/10pt Times New Roman, Times, Serif; margin: 0 0 6pt 66pt; text-align: justify; text-indent: -66pt"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(d)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"> extension of the term<FONT STYLE="letter-spacing: -0.1pt"> </FONT>of
O<FONT STYLE="letter-spacing: -0.1pt">p</FONT>tions held by insiders; and</FONT></P>

<P STYLE="font: 10pt/10pt Times New Roman, Times, Serif; margin: 0 0 12pt 66.25pt; text-align: justify; text-indent: -66.25pt"><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">(e)</FONT><FONT STYLE="font: 7pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">changes to the insi<FONT STYLE="letter-spacing: -0.05pt">d</FONT>er
p<FONT STYLE="letter-spacing: -0.05pt">a</FONT>rticip<FONT STYLE="letter-spacing: -0.05pt">a</FONT>tion li<FONT STYLE="letter-spacing: -0.1pt">m</FONT>its<FONT STYLE="letter-spacing: -0.05pt">
</FONT>which result in shareholder approval to be required on a disinterested basis.</FONT></P>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">18.3&#9;The Board
may at any time and from time to time by resolution terminate the Plan, but no such termination shall, except with the written
consent of the Participants concerned, affect the terms and conditions of Options previously granted under the Plan to the extent
that they have not been exercised, unless the rights of such Participants shall then have terminated or been wholly exercised.</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 12pt/11pt Times New Roman, Times, Serif; margin-top: 0.8pt; margin-bottom: 12pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif">19.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font: 11pt Arial, Helvetica, Sans-Serif"><U>Internal Revenue Code 409A (Applicable
to United States Taxpayers Only)</U></FONT></TD></TR></TABLE>

<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">19.1&#9;To the extent
applicable, the Plan and Stock Option Agreement entered into pursuant to the Plan shall be interpreted in accordance with Section
409A of the United States Internal Revenue Code and Department of Treasury regulations and other interpretive guidance issued thereunder
(&quot;Section 409A&quot;). Notwithstanding any provision of the Plan to the contrary, in the event that the Board determines that
any Option may be subject to Section 409A, the Board may (without any obligation to do so or duty to indemnify any party for any
failure to do so) adopt such amendments to the Plan and the applicable Stock Option Agreement or adopt other policies and procedures
(including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are
necessary or appropriate to (a)&nbsp;exempt the Option from Section 409A and/or preserve the intended tax treatment of the benefits
provided with respect to the Option, or (b) comply with the requirements of Section 409A and related and thereby avoid the application
of penalty taxes under Section 409A.</P>

<P STYLE="font: 11pt/12pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 11pt Arial, Helvetica, Sans-Serif; margin: 0 2pt 0 0; text-align: justify">I, Scott Jeffers, Assistant Corporate
Secretary of TransAlta Corporation, hereby con<FONT STYLE="letter-spacing: -0.1pt">f</FONT>irm<FONT STYLE="letter-spacing: -0.1pt">
</FONT>that the foregoing is the definitive version of the TransAlta Corporation Stock Option Plan,<FONT STYLE="letter-spacing: 0.05pt">
</FONT>including<FONT STYLE="letter-spacing: 0.05pt"> </FONT>a<FONT STYLE="letter-spacing: -0.1pt">m</FONT>end<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ents<FONT STYLE="letter-spacing: 0.05pt">
</FONT><FONT STYLE="letter-spacing: -0.1pt">m</FONT>ade<FONT STYLE="letter-spacing: 0.05pt"> </FONT>effective<FONT STYLE="letter-spacing: 0.05pt">
</FONT>Nove<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ber&nbsp;10,&nbsp;1994, February&nbsp;10,&nbsp;1995, March&nbsp;7,&nbsp;1995,
and ratif<FONT STYLE="letter-spacing: 0.05pt">i</FONT>ed and approved by the holders of com<FONT STYLE="letter-spacing: -0.1pt">m</FONT>on
shares at a <FONT STYLE="letter-spacing: -0.1pt">m</FONT>eeting held on May 12, 1995, a<FONT STYLE="letter-spacing: -0.1pt">m</FONT>ended
May 3, 2001, approved by holders of com<FONT STYLE="letter-spacing: -0.1pt">m</FONT>on sha<FONT STYLE="letter-spacing: 0.05pt">r</FONT>es
at a <FONT STYLE="letter-spacing: -0.1pt">m</FONT>eeting held on April&nbsp;2<FONT STYLE="letter-spacing: -0.05pt">9</FONT>,&nbsp;2010,
and further amended on October 17, 2016 to be effective January 1, 2017.</P>

<P STYLE="font: 11pt/10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt/10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt/10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; font: 11pt Arial, Helvetica, Sans-Serif; width: 100%">
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="width: 50%">&nbsp;</TD>
    <TD STYLE="width: 50%"><P STYLE="font: 11pt/10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify"></P>

<P STYLE="font: 11pt/13pt Arial, Helvetica, Sans-Serif; margin: 0.9pt 0 0; text-align: justify"><U>&#9;<I>&#8220;Scott
Jeffers&#8221;</I></U> </P>
<P STYLE="font: 11pt/13pt Arial, Helvetica, Sans-Serif; margin: 0.9pt 0 0; text-align: justify"><U><I></I></U></P>
<P STYLE="font: 11pt/13pt Arial, Helvetica, Sans-Serif; margin: 0.9pt 0 0; text-align: justify">Scott
Jeffers</P>
<P STYLE="font: 11pt/13pt Arial, Helvetica, Sans-Serif; margin: 0.9pt 0 0; text-align: justify">Assistant Corporate Secretary</P>
<P STYLE="font: 11pt/13pt Arial, Helvetica, Sans-Serif; margin: 0.9pt 0 0; text-align: justify">TransAlta Corporation</P>

</TD></TR>
</TABLE>

<P STYLE="font: 11pt/10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt/10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 11pt/10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify">&nbsp;</P>

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