TIM HORTONS INC. 2006 STOCK INCENTIVE PLAN NONQUALIFIED STOCK OPTION AWARD AGREEMENT

TIM HORTONS INC.

2006 STOCK INCENTIVE PLAN

NONQUALIFIED STOCK OPTION AWARD AGREEMENT

(with related Stock Appreciation Right)

Grant Year: 20     

THIS AGREEMENT, made effective as of the      day of                  , 20      (the “ Date of Grant ”), is among Tim Hortons Inc., a Delaware corporation (the “ Company ”),                      , a                      (the “ Employer ”) and                      (the “ Grantee ”) (collectively, the “ Parties ”).

WHEREAS, the Company has adopted the Tim Hortons Inc. 2006 Stock Incentive Plan, as amended from time to time (the “ Plan ”), in order to provide additional incentive to certain employees and directors of the Company and its Subsidiaries;

WHEREAS, pursuant to Sections 6 and 7 of the Plan, the Committee has determined to grant to the Grantee on the Date of Grant an Option and a related Stock Appreciation Right (a “SAR”), each as provided herein, to encourage the Grantee’s efforts toward the continuing success of the Company and its Subsidiaries;

WHEREAS, a SAR means a right to surrender to the Company, in whole or in part, the unexercised Option to purchase Shares and to receive from the Company a cash amount equal to the product of: (i) the excess of the Fair Market Value of a Share on the date of exercise of the SAR over the Option Price (as defined below); multiplied by (ii) the number of Shares as to which the SAR is being exercised; and

WHEREAS, the Award is evidenced by this Agreement, which (together with the Plan) describes all the terms and conditions of the Award.

NOW, THEREFORE, the Parties agree as follows:

1. Grant of Award . The Company hereby grants to the Grantee, on the Date of Grant, a Nonqualified Stock Option (the “ Option ”) with a related Stock Appreciation Right (the “ SAR ”) to purchase                      Shares (the “ Award ”) at an exercise price of $              per Share (the “ Option Price ”), subject to the terms and conditions of this Agreement and the Plan. The Option is not intended to be treated as an option that complies with Section 422 of the Code.

2. Vesting; Term of Award . Except as otherwise provided in this Agreement, the Award shall vest as follows:

(a) One-third (1/3) of the total Shares covered by the Award shall vest on                      , 20      , subject to rounding down the Award to the nearest whole Share as of the vesting date;

(b) One-third (1/3) of the total Shares covered by the Award shall vest on                      , 20      , subject to rounding down the Award to the nearest whole Share as of the vesting date; and

(c) One-third (1/3) of the total Shares covered by the Award shall vest on                      , 20      , subject to rounding down the Award to the nearest whole Share as of the vesting date.

The Award shall expire seven (7) years after the Date of Grant (the “ Expiration Date ”), whether or not the Award (or any portion thereof) has been exercised, unless sooner terminated as provided in Section 4 of this Agreement. Notwithstanding anything to the contrary contained in this Agreement, if the Award expires outside of a Trading Window, then the expiration of the term of the Award shall be the later of (i) the date the Award would have expired by its original terms (including the terms set forth in Section 4 of this Agreement) or (ii) the end of the tenth trading day of the immediately succeeding Trading Window during which the Company would allow the Grantee to trade in its securities; provided, however, that in no event shall the Award expire beyond the tenth anniversary of the Date of Grant.

3. Exercise of Award . Subject to the limitations set forth in this Agreement and in the Plan, the vested portion of the Award may be exercised in whole or in part by providing to the Company or its designee at its principal office written notice of exercise; provided that the Award may be exercised with respect to whole Shares only. Such notice shall specify (i) whether the Grantee intends to exercise the Option or the SAR and (ii) the number of Shares with respect to which the Award is to be exercised.

(a) Exercise of SAR . If the Grantee desires to receive cash, as opposed to Shares, upon exercise of all or a portion of the vested amount of the Award, the Grantee will exercise the SAR. Upon the exercise of the SAR, the Grantee shall be entitled to receive a cash amount from the Company equal to the product of: (i) the excess of the Fair Market Value of a Share on the date of exercise of the SAR over the Option Price; multiplied by (ii) the number of Shares as to which the SAR is being exercised.

(b) Exercise of Option . If the Grantee desires to receive Shares, as opposed to cash, upon exercise of all or a portion of the vested amount of the Award, the Grantee will exercise the Option. If the Option is exercised, payment of the Option Price for the number of Shares specified in the notice of exercise shall accompany the written notice of exercise. The payment of the Option Price may be made, as determined by the Committee in its sole discretion as of the time of exercise, as follows: (i) in cash, certified check or bank draft; (ii) by transferring Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee, provided that such Shares have been held by the Grantee for at least six months (or such other period as established from time to time by the Committee); (iii) partly in cash and partly in Shares; (iv) by surrender of Shares that the Grantee would have otherwise been entitled to receive upon payment of the Option Price and exercise of the Option, equivalent in value to the aggregate Option Price for the number of Shares specified in the

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notice of exercise; or (v) through a cashless exercise, including through a registered broker-dealer. The Committee shall determine the means and manner by which Shares to be delivered upon exercise of the Option shall be settled and/or satisfied, in its sole and absolute discretion.

(c) Tandem Nature of Award . Upon the exercise of the SAR, the Option shall be canceled ( i.e ., surrendered to the Company) to the extent of the number of Shares as to which the SAR is exercised. Upon the exercise of the Option, the SAR shall be canceled to the extent of the number of Shares as to which the Option is exercised or surrendered.

4. Termination of Employment .

(a) Death or Disability . Upon termination of the Grantee’s employment with the Company and its Subsidiaries as a resu