Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Sound Revolution Inc. - Exhibit 10.1

EXHIBIT A 

2005 NON-QUALIFIED STOCK COMPENSATION PLAN 

	 1.      	 PURPOSE OF PLAN 

	 
	 	 1.1     
      
	 This 2005 NON-QUALIFIED STOCK COMPENSATION PLAN
        (the "Plan") of Sound Revolution Inc., a Delaware corporation (the "Company")
        for employees, directors and consultants of the Company, is intended to
        advance the best interests of the Company by providing those persons who
        have a substantial responsibility for its management and growth with additional
        incentive and by increasing their proprietary interest in the success
        of the Company, thereby encouraging them to maintain their relationships
        with the Company. Further, the availability and offering of common stock
        under the Plan supports and increases the Company's ability to attract
        and retain individuals of exceptional talent upon whom, in large measure,
        the sustained progress, growth and profitability of the Company depends.
      

	 
	 2.      	 DEFINITIONS 

	 
	 	 2.1      
	 For Plan purposes, except where the context might
        clearly indicate otherwise, the following terms shall have the meanings
        set forth below: 

	 
	 	 	 "Board" shall mean the Board of Directors of the
        Company. 

	 
	 	 	 "Committee" shall mean the Compensation Committee,
        or such other committee appointed by the Board, which shall be designated
        by the Board to administer the Plan, or the Board if no committees have
        been established. The Committee shall be composed of one or more persons
        as from time to time are appointed to serve by the Board. Each member
        of the Committee, while serving as such, shall be a disinterested person
        with the meaning of Rule 16b-3 promulgated under the Securities Exchange
        Act of 1934. 

	 
	 	 	 "Common Shares" shall mean the Company's Common
        Shares, $.0001 par value per share, or, in the event that the outstanding
        Common Shares are hereafter changed into or exchanged for different shares
        of securities of the Company, such other shares or securities. 

	 
	 	 	 "Company" shall mean Garuda Capital Corp., a Nevada
        corporation, and any parent or subsidiary corporation of Garuda Capital
        Corp. 

	 
	 	 	 "Common Stock" shall mean shares of common stock
        which are issued by the Company pursuant to Section 5, below. 

	 
	 	 	 "Common Stockholder" means the employee of, Consultant,
        or director of the Company or other person to whom shares of Common Stock
        are issued pursuant to this Plan. 

 

	 	  
	"Common Stock Agreement" means an agreement executed
        by a Common Stockholder and the Company as contemplated by Section 5,
        below, which imposes on the shares of Common Stock held by the Common
        Stockholder such restrictions as the Board or Committee deem appropriate.
      

	 
	 	  	“Consultant” means any person who is
        contracted to provide services to the Company as an independent contractor
        so long as such services are not intended to directly or indirectly promote
        or maintain a market for the Company’s securities. 

	 
	 3.      	 ADMINISTRATION OF THE PLAN 

	 
	 	 3.1     
      
	 The Committee shall administer the Plan and accordingly,
        it shall have full power to grant Common Stock, construe and interpret
        the Plan, establish rules and regulations and perform all other acts,
        including the delegation of administrative responsibilities, it believes
        reasonable and proper. 

	 
	 	 3.2      
	 The determination of those eligible to receive Common
        Stock, and the amount, type and timing of each grant and the terms and
        conditions of the Common stock agreements shall rest in the sole discretion
        of the Committee, subject to the provisions of the Plan. 

	 
	 	 3.3      
	 The Board, or the Committee, may correct any defect,
        supply any omission or reconcile any inconsistency in the Plan in the
        manner and to the extent it shall deem necessary to carry it into effect.
      

	 
	 	 3.4      
	 Any decision made, or action taken, by the Committee
        or the Board arising out of or in connection with the interpretation and
        administration of the Plan shall be final and conclusive. 

	 
	 	 3.5      
	 Meetings of the Committee shall be held at such
        times and places as shall be determined by the Committee. A majority of
        the members of the Committee shall constitute a quorum for the transaction
        of business, and the vote of a majority of those members present at any
        meeting shall decide any question brought before that meeting. In addition,
        the Committee may take any action otherwise proper under the Plan by the
        affirmative vote, taken without a meeting, of a majority of its members.
      

	 
	 	 3.6      
	 No member of the Committee shall be liable for any
        act or omission of any other member of the Committee or for any act or
        omission on his own part, including, but not limited to, the exercise
        of any power or discretion given to him under the Plan, except those resulting
        from his own gross negligence or willful misconduct. 

	 
	 	 3.7      
	 The Company shall furnish the Committee with such
        clerical and other assistance as is necessary in the performance of its
        duties hereunder and such other pertinent information as the Committee
        may require. 

 

	 4.      	 SHARES SUBJECT TO THE PLAN 

	 
	 	 4.1     
      
	 The total number of shares of the Company available
        for grants of Common Stock under the Plan shall be five million (5,000,000)
        Common Shares, subject to adjustment in accordance with Article 7 of the
        Plan, which shares may be either authorized but unissued or reacquired
        Common Shares of the Company. 

	 
	 5.      	 AWARD OF COMMON STOCK 

	 
	 	 5.1      
	 The Board or Committee from time to time, in its
        absolute discretion, may award Common Stock to employees of, consultants
        to, and directors of the Company, and such other persons as the Board
        or Committee may select. The owner of such Common Stock shall hold such
        stock subject to such vesting schedule as the Board or Committee may impose,
        as determined in the discretion of the Board or Committee. 

	 
	 	 5.2      
	 Common Stock shall be issued only pursuant to a
        Common Stock Agreement, which shall be executed by the Common Stockholder
        and the Company and which shall contain such terms and conditions as the
        Board or Committee shall determine consistent with this Plan, including
        such restrictions on transfer as are imposed by the Common Stock Agreement.
      

	 
	 	 5.3      
	 Upon delivery of the shares of Common Stock to the
        Common Stockholder, below, the Common Stockholder shall have, unless otherwise
        provided by the Board or Committee, all the rights of a stockholder with
        respect to said shares, subject to the restrictions in the Common Stock
        Agreement, including the right to receive all dividends and other distributions
        paid or made with respect to the Common Stock. 

	 
	 	 5.4.      
	 Notwithstanding anything in this Plan or any Common
        Stock Agreement to the contrary, no Common Stockholders may sell or otherwise
        transfer, whether or not for value, any of the Common Stock prior to the
        date on which the Common Stockholder is vested therein. 

	 
	 	 5.5      
	 All shares of Common Stock issued under this Plan
        (including any shares of Common Stock and other securities issued with
        respect to the shares of Common Stock as a result of stock dividends,
        stock splits or similar changes in the capital structure of the Company)
        shall be subject to such restrictions as the Board or Committee shall
        provide, which restrictions may include, without limitation, restrictions
        concerning voting rights, transferability of the Common Stock and restrictions
        based on duration of employment with the Company, Company performance
        and individual performance; provided that the Board or Committee may,
        on such terms and conditions as it may determine to be appropriate, remove
        any or all of such restrictions. Common Stock may not be sold or encumbered
        until all applicable restrictions have terminated or expire. The restrictions,
        if any, imposed by the Board or Committee or the Board under this Section
        5 need not be identical for all Common Stock and the imposition of any
        restrictions with respect to any 

 

	 	  	Common Stock shall not require the imposition of
        the same or any other restrictions with respect to any other Common Stock.
      

	 
	 	 5.6      
	 In the discretion of the Board or Committee, the
        Common Stock Agreement may provide that the Company shall have the a right
        of first refusal with respect to the Common Stock and a right to repurchase
        the vested Common Stock upon a termination of the Common Stockholder's
        employment with the Company, the termination of the Common Stockholder's
        consulting arrangement with the Company, the termination of the Common
        Stockholder's service on the Company's Board, or such other events as
        the Board or Committee may deem appropriate. 

	 
	 	 5.7      
	 The Board or Committee shall cause a legend or legends
        to be placed on certificates representing shares of Common Stock that
        are subject to restrictions under Common Stock Agreements, which legend
        or legends shall make appropriate reference to the applicable restrictions.
      

	 
	 6.      	 AMENDMENT AND TERMINATION OF PLAN 

	 
	 	 6.1      
	 The Board may at any time, and from time to time,
        suspend or terminate the Plan in whole or in part or amend it from time
        to time in such respects as the Board may deem appropriate and in the
        best interest of the Company. 

	 
	 7.      	 MISCELLANEOUS PROVISIONS 

	 
	 	 7.1     
      
	 No person shall have any claim or right to be granted
        Common Stock under the Plan, and the grant of Common Stock under the Plan
        shall not be construed as giving a Common Stockholder the right to be
        retained by the Company. 

	 
	 	 7.2      
	 Any expenses of administering this Plan shall be
        borne by the Company. 

	 
	 	 7.3      
	 Without amending the Plan, grants may be made to
        persons who are foreign nationals or employed outside the United States,
        or both, on such terms and conditions, consistent with the Plan's purpose,
        different from those specified in the Plan as may, in the judgment of
        the Committee, be necessary or desirable to create equitable opportunities
        given differences in tax laws in other countries. 

	 
	 	 7.4      
	 In addition to such other rights of indemnification
        as they may have as members of the Board or the Committee, the members
        of the Committee shall be indemnified by the Company against all costs
        and expenses reasonably incurred by them in connection with any action,
        suit or proceeding to which they or any of them may be party by reason
        of any action taken or failure to act under or in connection with the
        Plan thereunder, and against all amounts paid by them in settlement thereof
        (provided such settlement is approved by independent legal counsel selected
        by the Company) or paid by them in satisfaction of a judgment in any such
        action, suit or proceeding, except a judgment based upon a finding of
        bad faith; provided that upon the institution of any such action, suit
        or proceeding a Committee member shall, in writing, give the Company notice
        thereof and an opportunity, at its own expense, to handle and defend the
        same, before such Committee member undertakes to handle and defend it
        on his own behalf.EXHIBIT 10.1

                          SECURITIES PURCHASE AGREEMENT

         SECURITIES PURCHASE AGREEMENT (this "Agreement") dated as of June 13,
2005, by and between NxtPhase T&D Corp., a Canadian corporation (the "Company"),
and Beacon Power Corporation, a Delaware corporation (referred to herein as
"Purchaser"). Certain capitalized terms used in this Agreement are defined in
Exhibit A attached hereto.

                                    Recitals

         WHEREAS, the Company is a party to a certain Securities Purchase
Agreement, dated November 12, 2004, pursuant to which Perseus 2000, L.L.C.
("Perseus") agreed to purchase Class A Preferred Shares from the Company along
with other parties specified therein (the "Initial Securities Purchase
Agreement"), and at such time also entered into an Investor Rights Agreement
(the "Investor Rights Agreement"); and

         WHEREAS, the Company and Purchaser are parties to an arrangement
agreement, dated as of April 22, 2005 pursuant to which the Company will be
acquired by Purchaser (the "Arrangement"); and

         WHEREAS, pursuant to a binding term sheet dated as of April 22, 2005,
between Perseus and the Company (the "Term Sheet"), Perseus agreed on behalf of
Perseus 2000 Expansion, L.L.C. ("Perseus 2000 Expansion"), an affiliate of
Perseus, to purchase additional Class A Preferred Shares from the Company, as
more fully set forth therein; and

         WHEREAS, pursuant to the Term Sheet, the Company and Perseus have
agreed that the Purchaser may purchase such Shares (as defined below) from the
Company in lieu of Perseus doing so, and the Company has obtained appropriate
waivers from its other stockholders allowing the Purchaser to do so in lieu of
Perseus.

                                    Agreement

         NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:

1.       Authorization and Sale of the Preferred Shares.

1.1 Authorization. The Company has authorized the issuance and sale pursuant to
the terms and conditions hereof of shares of its Class A Preferred Shares,
having the rights, restrictions, privileges and preferences set forth in the
Share Conditions attached hereto as Exhibit B (the "Share Conditions").

1.2      Issuance and Sale.

(a) Issuance and Sale at the Closing. In reliance upon the representations,
warranties and covenants of the parties set forth herein, and subject to
satisfaction of the conditions set forth herein, at the Closing, the Company
shall issue, sell and deliver to Purchaser, and Purchaser shall purchase from
the Company, at a purchase price per Class A Preferred Share equal to U.S. $4.50
(the "Per Share Price"), that number of Class A Preferred Shares specified
adjacent to such Purchaser's name on Schedule A hereto (the "Shares"); and
Purchaser shall pay to the Company, subject to the provisions of Section 1.2(b)
hereof, an aggregate amount for the Shares equal to the amount specified
adjacent to such Purchaser's name on Schedule A hereto. The Purchaser shall not
be obligated to proceed with its purchase of the Shares hereunder unless,
without limitation to any other rights of Purchaser hereunder, all conditions
set forth in Section 2.3(a) have been satisfied. The purchase and sale of the
Shares will occur in one or more closings, as described below.

(b) Credit Toward Perseus' Purchase Obligation. The Company agrees that the
purchase of Class A Preferred Shares by Purchaser pursuant hereto shall satisfy
that portion of Perseus' obligation of to purchase additional Class A Preferred
Shares pursuant to the Term Sheet in an amount proportional to the cash purchase
price paid by Purchaser pursuant hereto, and that Perseus shall be a third party
beneficiary of this subsection therefore.

2. Closing.

2.1 Closing. Subject to satisfaction or waiver of the conditions specified in
Sections 2.3(a) and 2.3(b) hereof, the closing of the purchase and sale to the
Purchaser of the Shares (the "Closing") shall take place on the date hereof
immediately after the execution and delivery of this Agreement. Such Closing
shall be held at 1:00 p.m. at the offices of Arnold & Porter LLP, 1600 Tysons
Boulevard, Suite 900, McLean, Virginia 22102, or at such other time and place as
shall be mutually agreed to by the Parties. The date of the Closing is
hereinafter referred to as the "Closing Date."

2.2 Deliveries. At the Closings, the Company will deliver to the Purchaser
certificates registered in the Purchaser's name representing the aggregate
number of Shares issued and sold by the Company to Purchaser at such Closing, as
determined pursuant to Section 1.2 above. Purchaser shall pay its respective
purchase price for the Shares to be purchased by it at such Closing, net of any
credit thereto as set forth in Section 1.2(b), by wire transfer of immediately
available funds to the account designated by the Company on Schedule B hereto.
At the Closing, the parties shall also deliver all documents required to be
delivered at such Closing pursuant to Section 2.3 hereof.

2.3      Conditions to Closing.

(a) Conditions to Obligations of the Purchaser. The obligation of Purchaser to
purchase the Shares at the Closing is subject to the satisfaction on or prior to
the Closing Date of the following conditions, any of which may be waived by
Purchaser:

(i) Representations and Warranties Correct; Performance of Obligations. The
representations and warranties made by the Company in Section 3 hereof shall
have been true and correct in all material respects when made, and shall be true
and correct in all material respects on and as of the Closing Date with the same
force and effect as if they had been made on and as of such date, except to the
extent any such representations and warranties are made as of a specific date;
and the Company shall have performed all obligations, covenants and agreements
herein required to be performed by it on or prior to the Closing.

(ii) Consents and Waivers. The Company shall have obtained any and all consents
(including all governmental or regulatory consents, approvals or authorizations
required in connection with the valid execution, delivery and performance of
this Agreement), permits and waivers necessary or appropriate for consummation
of the transactions contemplated by this Agreement.

(iii) Compliance Certificate. The Company shall have delivered to Purchaser a
certificate, executed by the Chief Executive Officer of the Company dated as of
the Closing Date, certifying the fulfillment of the conditions specified in
subsections (a)(i) and (a)(ii) of this Section 2.3.

(iv) Secretary's Certificate. The Company shall have delivered to Purchaser a
certificate, executed by the Secretary of the Company, dated as of the Closing
Date, certifying the authenticity of attached copies of the Company's Articles
of Incorporation, Share Conditions, Bylaws and resolutions of the Board of
Directors of the Company (the "Board of Directors") approving the transactions
contemplated hereby.

(v) Legal Opinion. Farris Vaughan, legal counsel to the Company, will issue an
opinion to the Purchaser in the form substantially as set forth on Exhibit C.

(vi) Other Documents. The Purchaser shall have received such other certificates
and documents as it shall have reasonably requested.

(b) Conditions to Obligations of the Company. The Company's obligation to issue
and sell the Shares at the Closing is subject to the fulfillment on or prior to
the Closing Date of the following conditions, any of which may be waived by the
Company:

(i) Representations and Warranties. The representations and warranties made by
Purchaser in Section 4 hereof shall have been true and correct in all material
respects when made, and shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect as if they had been
made on and as of such date.

(ii) Payment of Purchase Price. Purchaser shall have delivered the purchase
price at the Closing as specified in Section 1.2 hereof.

3. Representations and Warranties Relating to the Company. Except as otherwise
set forth in the Disclosure Schedule attached hereto as Exhibit D (the "Company
Disclosure Schedule"), the Company represents and warrants to the Purchaser as
set forth below:

3.1 Organization and Good Standing. The Company is a corporation duly organized,
validly existing and in good standing under the laws of Canada. The Company has
the requisite corporate power and authority to carry on its business as now
conducted and as it is proposed to be conducted, and is duly qualified or
licensed to do business and in good standing in the provinces of British
Columbia and each other jurisdiction in which the failure to so qualify or be
licensed would have a Material Adverse Effect.

3.2 Capital Structure. The authorized capital stock of the Company consists of
the following shares, and immediately following the Closing all of the issued
and outstanding shares as hereinafter set forth have been duly authorized and
will be validly issued, and fully paid and nonassessable and will have been
offered, issued, sold and delivered by the Company in compliance with all
applicable U.S. federal and state and Canadian federal and provincial securities
laws:

(a) Preferred Stock. An unlimited number of Class A Preferred Shares, no par
value, of which 1,548,718 shares are issued and outstanding, prior to the
transactions contemplated by this Agreement.

(b) Common Stock. An unlimited number of shares of Common Stock, no par value
(the "Common Stock"), of which 1,000,000 shares are issued and outstanding.

(c) Options, Warrants, Reserved Shares, Treasury Stock. There are no outstanding
options, warrants, rights (including conversion or preemptive rights) or
agreements for the purchase or acquisition from the Company of any shares of the
Company's capital stock or any securities convertible into or ultimately
exchangeable or exercisable for any shares of the Company's capital stock, nor
is the Company obligated in any manner to issue any shares of its capital stock
or other securities. None of the Company's outstanding capital stock, or stock
issuable upon exercise or exchange of any outstanding options, warrants or
rights is subject to any preemptive rights, rights of first refusal or other
rights to purchase such stock (whether in favor of the Company or any other
person), pursuant to any agreement or commitment of the Company. The Company
holds no shares of its capital stock in its treasury.

(d) Security Holders. Section 3.2(d) of the Company Disclosure Schedule contains
a complete and accurate list of the names of all current stockholders of the
Company and all current holders of outstanding warrants, options, or other
rights ultimately exchangeable, exercisable or convertible for or into capital
stock, organized by the type of security held by each such holder and setting
forth the amount of such security held by such holder and, in the case of
securities exchangeable, exercisable or convertible into Common Stock, the
amount of Common Stock into which such securities are exchangeable, exercisable
or convertible.

3.3 Power, Authorization and Validity. The Company has the corporate power,
legal capacity and corporate authority to enter into and perform its obligations
under this Agreement and the Investor Rights Agreement. The execution, delivery
and performance by the Company of this Agreement and the Investor Rights
Agreementhave been duly and validly approved and authorized by all necessary
corporate action on its part. No authorization, consent, or approval,
governmental or otherwise, is necessary to enable the Company to enter into this
Agreement and to perform its obligations hereunder except for filings pursuant
to applicable state laws and Regulation D of the United States Securities Act of
1933, as amended (the "Securities Act") and filings required under the
securities laws of the Provinces of Canada. This Agreement and the Investor
Rights Agreement, when executed and delivered by the Company, will be valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, equitable
remedies, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally.

3.4 No Violation. Neither the execution and delivery of this Agreement nor the
consummation of the transactions or performance of the Company's obligations
contemplated hereby will conflict with, result in a material breach or violation
of, or cause a default under, any provision of the Company's Articles of
Incorporation, Share Conditions or Bylaws, each as is currently in effect, any
instrument, contract or agreement that is material to the business of the
Company or any judgment, writ, decree, order, law, statute, ordinance, rule or
regulation applicable to the Company.

3.5 Representations Regarding Class A Preferred Shares and the Conversion
Shares. All corporate action has been taken on the part of the Company, its
officers, directors and stockholders necessary for the authorization and
creation, issuance and delivery of the Class A Preferred Shares and the
Conversion Shares. The Class A Preferred Shares and the Conversion Shares when
issued in compliance with the provisions of this Agreement and the Share
Conditions will be validly issued, fully paid and nonassessable and, assuming
the accuracy of Purchaser's representations in Section 4 of this Agreement,
issued in compliance with all applicable U.S. federal and state and Canadian
federal and provincial securities laws. Except for those rights set forth in the
Investor Rights Agreement, a copy of which has been provided to Purchaser by the
Company, none of the Class A Preferred Shares issued pursuant to this Agreement,
and none of the Conversion Shares, are subject to any preemptive rights, rights
of first refusal, or other rights to purchase such stock (whether in favor of
the Company or any other person), pursuant to any agreement or commitment of the
Company. The Company has obtained appropriate waivers required by the IRA in
order to issue Class A Preferred Shares to Purchaser.

3.6 No Subsidiaries. Except for NxtPhase T&D, Inc., the Company does not own of
record or beneficially any capital stock or equity interest or investment in any
corporation, association, partnership, limited partnership, limited liability
company, trust or other entity.

3.7 Title to Property and Assets. The Company owns and possesses its properties
and assets that are material to its business free and clear of all mortgages,
deeds of trust, liens, encumbrances, security interests and claims except for
(i) statutory liens for the payment of current taxes that are not yet
delinquent, and (ii) liens, encumbrances and security interests that arise in
the ordinary course of its business and do not affect material properties and
assets of the Company. With respect to the properties and assets it leases that
are material to its business, the Company is in compliance with such leases in
all material respects. The Company holds valid leasehold interests to its
material leased properties and assets free of any liens, encumbrances or
security interests of any party other than the lessors of such property and
assets. The Company's properties and assets are in all material respects in good
operating condition and repair.

3.8      Proprietary Assets.

(a) The Company owns or possesses sufficient legal rights to all Proprietary
Assets used in or necessary for its business as now conducted or as proposed to
be conducted as of the date hereof ("Company Proprietary Assets"), without any
known infringement of the rights of any other Person. Section 3.8(a) of the
Company Disclosure Schedule identifies the license agreements under which
Proprietary Assets are being licensed to the Company (the "License Agreements").
Except as specified in Section 3.8(a) of the Company Disclosure Schedule and
except for licenses or agreements relating to the Company's use rights regarding
mass market "off the shelf" products obtained pursuant to "shrink wrap" or other
standard form agreements, the Company is neither a party to nor bound by any
options, licenses or agreements of any kind relating to any Proprietary Assets.
The Company has good and marketable title to all Company Proprietary Assets,
free and clear of all material liens and other encumbrances, except for third
party rights licensed to it, as to which the Company has a valid right to use
such Proprietary Assets. The Company has not licensed any Company Proprietary
Assets to any Person on an exclusive basis and has not entered into any covenant
not to compete or contract limiting its ability to exploit fully any Company
Proprietary Assets or to transact business in any market or geographical area or
with any Person.

(b) The Company has taken all measures required under the License Agreements and
all other reasonable and customary measures and precautions necessary to protect
and maintain the confidentiality and secrecy of all Company Proprietary Assets
(except trademarks, issued patents and other Company Proprietary Assets
similarly known to the public and Company Proprietary Assets whose value would
be materially unimpaired by public disclosure) and otherwise to maintain and
protect the value of all Company Proprietary Assets.

(c) Except where such infringement, misappropriation or unlawful use would not
and could not reasonably be expected to be material in impact or amount, either
individually or in the aggregate, to the knowledge of the Company, the Company
is not infringing, misappropriating or making any unlawful use of, and the
Company has not at any time infringed, misappropriated or made any unlawful use
of, any Proprietary Asset owned or used by any other Person. No claims or
notices (in writing or otherwise) with respect to Company Proprietary Assets
have been communicated to the Company: (i) to the effect that the manufacture,
sale, license or use of any Proprietary Asset or product, practice of any
process or provision of any service as now made, sold, practiced, used practiced
or provided or currently offered or proposed by the Company infringes or
potentially infringes, or constitutes a misappropriation or unlawful use of any
copyright, patent, trade secret or other intellectual property right of a third
party, or (ii) challenging the ownership or validity of any of the rights to or
interest in such Proprietary Assets of the Company. Except as disclosed on
Section 3.8(c) of the Company Disclosure Schedule, the Company has not received
any notice to the effect that any patents or registered trademarks, service
marks or registered copyrights held by the Company are invalid or not
subsisting. To the knowledge of the Company, no other Person is infringing,
misappropriating or making any unlawful use of, and no Proprietary Asset owned
or used by any other Person infringes or conflicts with, any Proprietary Asset
used in or pertaining to the business of the Company.

(d) All current and former employees of the Company have executed and delivered
to the Company an agreement (containing no exceptions to or exclusions from the
scope of its coverage relevant to the Company's business) (the "Employee
Agreement"), providing for the assignment of all rights to intellectual property
and trade secrets created or discovered while an employee of the Company to the
Company, and all current and former consultants and independent contractors to
the Company providing technical services relating to the Company's Proprietary
Assets have executed and delivered to the Company an agreement (containing no
exceptions to or exclusions from the scope of its coverage relevant to the
Company's business), the material provisions of which are in substance as
protective to the Company as the terms of the Employee Agreement.

3.9      Contracts.
         ---------

(a) Section 3.9(a) of the Company Disclosure Schedule identifies each material
license agreement, development agreement, manufacturing agreement, distribution
agreement, OEM agreement or other agreement to which the Company is a party.

(b) (i) The Company has no agreements, contracts or commitments that call for
prospective fixed and/or contingent payments or expenditures by or to the
Company of more than $25,000 other than those entered into in the ordinary
course of its business concerning the sale of Company Products;

(ii) The Company has no purchase agreement, contract or commitment that calls
for fixed and/or contingent payments by the Company that are in excess of the
normal, ordinary and usual requirements of the Company's business;

(iii) There is no outstanding sales contract, commitment or proposal (including,
without limitation, development projects) of the Company that is reasonably
likely to result, either individually or in the aggregate, in any Material
Adverse Change to the Company upon completion or performance thereof;

(iv) The Company has no outstanding agreements, contracts or commitments with
officers, employees, agents, consultants, advisors, salesmen, sales
representatives, distributors or dealers that are not cancelable by it on notice
of not longer than thirty days and without liability, penalty or premium
exceeding $25,000 in any single instance or $50,000 in the aggregate;

(v) The Company has not entered into any employment, independent contractor or
similar agreement, contract or commitment that is not terminable on not more
than thirty days' notice without penalty or liability of any type, including
without limitation severance or termination pay;

(vi) The Company has no collective bargaining or union agreements, contracts or
commitments;

(vii) The Company is not restricted by agreement from competing with any person,
from carrying on its business anywhere in the world or otherwise operating its
business in any manner it deems appropriate;

(viii) The Company has not guaranteed any obligations of other Persons or made
any agreements to acquire or guarantee any obligations of other Persons; and

(ix) Except as provided in Section 3.9(b) of the Company Disclosure Schedule,
the Company has no outstanding loan or advance to any Person nor is it party to
any line of credit, standby financing, revolving credit or other similar
financing arrangement of any sort that would permit the borrowing by the Company
of any sum.

(c) Sections 3.9(a) and (b) of the Company Disclosure Schedule contain a
complete list of all the material contracts to which the Company is a party. The
Company has not entered into any material oral contracts. Each contract
identified in Sections 3.9(a) and (b) of the Company Disclosure Schedule (a
"Company Material Contract") is valid and in full force and effect, is
enforceable by the Company in accordance with its terms, subject to (i) laws of
general application relating to insolvency and the relief of debtors and (ii)
rules of law governing specific performance, injunctive relief and other
equitable remedies, and will continue to be so immediately following each
Closing Date. No such contract, agreement or instrument contains any liquidated
damages, penalty or similar provision. To the knowledge of the Company, no party
to any such contract, agreement or instrument intends to cancel, withdraw,
modify or amend such contract, agreement or instrument.

(d) (i) The Company has not violated or breached, or committed any default
under, any Company Material Contract in any material respect, and, to the
knowledge of the Company, no other Person has violated or breached, or committed
any default under, any Company Material Contract in any material respect; and

(ii) To the knowledge of the Company, no event has occurred, and no circumstance
or condition exists, that (with or without notice or lapse of time) will, or
could reasonably be expected to, (A) result in a material violation or breach of
any of the provisions of any Company Material Contract, (B) give any Person the
right to declare a default or exercise any remedy under any Company Material
Contract, (C) give any Person the right to accelerate the maturity or
performance of any Company Material Contract or (D) give any Person the right to
cancel, terminate or modify any Company Material Contract.

(e) None of the Company Material Contracts contains any provision which would
require the consent of third parties hereunder or under the Investor Rights
Agreement to the sale and issuance of the Class A Preferred Shares or any of the
other transactions as contemplated hereunder or which would be altered as a
result of such transaction.

3.10 Registration Rights. Except as provided in the IRA, the Company has not
granted or agreed to grant to any person or entity any rights (including
piggyback registration rights) to have any securities of the Company registered
with any U.S., Canadian or other governmental authority.

3.11     Taxes.
         -----

(a) The Company has fully and timely, properly and accurately filed all tax
returns and reports required to be filed by it, including all federal, foreign,
provincial and local tax returns and estimates for all years and periods (and
portions thereof) for which any such returns, reports or estimates were due. All
such returns, reports and estimates were prepared in the manner required by
applicable law in all material respects. All income, sales, use, occupation,
property or other taxes or assessments due from the Company prior to the Closing
Date have been paid or will be paid on or before the Closing Date. There are no
pending assessments, asserted deficiencies or claims for additional taxes that
have not been paid. The reserves for taxes, if any, reflected on the Financial
Statements are adequate, and there are no tax liens on any property or assets of
the Company (other than liens for taxes not yet due and payable). There have
been no audits or examinations of any tax returns or reports of the Company by
any Governmental Body. No state of facts exists or has existed which would
constitute grounds for the assessment of any penalty or any further tax
liability in a material amount, either individually or in the aggregate, beyond
that shown on the respective tax reports, returns or estimates. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any federal, foreign, state or local tax return or report for any
period.

(b) All taxes that the Company has been required to collect or withhold have
been duly withheld or collected and, to the extent required, have been paid to
the proper taxing authority.

(c) The Company is not a party to any tax-sharing agreement or similar
arrangement with any other Person.

(d) At no time has the Company been included in the federal consolidated income
tax return of any affiliated group of corporations.

(e) The Company is not currently under any contractual obligation to pay to any
Governmental Body any tax obligations of, or with respect to any transaction
relating to, any other Person or to indemnify any other Person with respect to
any tax, other than pursuant to this Agreement.

3.12 Employees. The Company is not a party to any collective bargaining
agreements and, to the best knowledge of the Company, there are no attempts to
organize the employees of the Company. Section 3.12 of the Company Disclosure
Schedule lists all employee benefit plans and programs of the Company and
employment contracts, arrangements and understandings with its employees, other
than those terminable, without penalty, at will or within thirty days. Copies of
any of the foregoing plans, programs, contracts, arrangements or understandings
have been made available to the Purchaser or its counsel. To the knowledge of
the Company, no employee of the Company is subject to any judgment, decree or
order of any court or administrative agency, or any other restriction that would
materially interfere with the use of his or her best efforts to carry out his or
her duties for the Company or that would conflict with the Company's business as
currently conducted. The Company has not received any written notice from any
former employer that an employee of the Company has prior obligations to a
former employer that would interfere or conflict with such employee's ability to
perform his or her intended services for the Company. To the knowledge of the
Company, no employee or advisor of the Company is or is now expected to be in
violation of any term of any employment contract, disclosure agreement,
proprietary information and inventions agreement or any other contract or
agreement or any restrictive covenant or any other common law obligation to a
former employer relating to the right of any such employee to be employed by the
Company because of the nature of the business conducted or to be conducted by
the Company or to the use of trade secrets or proprietary information of others,
and the employment of the Company's employees does not subject the Company or
the Company's shareholders to any liability. There is neither pending nor, to
the knowledge of the Company, threatened any actions, suits, proceedings or
claims, or any basis therefor or threat thereof with respect to any contract,
agreement, covenant or obligation referred to in the preceding sentence.

3.13 Insurance. At the Closing, the Company will have, and at all times
thereafter, shall have in force with good and responsible insurance companies
fire, public liability, property damage and other insurance in such amounts and
with such coverage or risks as are customary for similar businesses and adequate
to the needs of the Company.

3.14 Compliance With Corporate Instruments and Laws. The Company is not in
violation of any provision of its Articles of Incorporation, the Share
Conditions or Bylaws as currently in effect. The Company is in compliance in all
material respects with all applicable laws, statutes, rules, and regulations of
all governmental and regulatory authorities which are applicable and the
compliance with which is material to the Company or its assets or business. The
Company has complied in all material respects at all times with any and all
applicable federal, provincial and foreign laws, rules, regulations,
proclamations and orders relating to the importation or exportation of its
products. All licenses, franchises, permits and other governmental
authorizations held by the Company and which are material to its business are
valid and sufficient in all respects for the business presently carried on by
the Company.

3.15 Litigation. There is no suit, action, proceeding, claim or investigation
pending or, to the knowledge of the Company, threatened against the Company
before any court or administrative agency which could have a Material Adverse
Effect or which questions or challenges the validity of this Agreement or the
Investor Rights Agreement. There is no judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against the Company.

3.16 Corporate Documents. The Company has furnished to the Purchaser or its
counsel for their examination true and complete copies of the following
documents: (i) copies of its Articles of Incorporation, the Share Conditions and
Bylaws, each as currently in effect, (ii) minute books containing required
records setting forth proceedings, consents, actions, and meetings of its
shareholders, Board of Directors and any committees thereof, and (iii) all
material permits, orders, and consents issued by any regulatory agency with
respect to the Company, or any securities of the Company, and all applications
for such permits, orders, and consents. The corporate minute books, stock
certificate books, stock registers and other corporate records of the Company
are complete and accurate in all material respects, and the signatures appearing
on all documents contained therein are the true signatures of the persons
purporting to have signed the same. All actions reflected in such books and
records were duly and validly taken in compliance in all material respects with
the laws of the applicable jurisdiction.

3.17     Related Party Transactions.

(a) Except as disclosed in Section 3.17(a) of the Company Disclosure Schedule,
none of the Company's Affiliates, officers, directors, shareholders or
employees, or any Affiliate of any of such Person, has any material interest in
any property, real or personal, tangible or intangible, including Proprietary
Assets used in or pertaining to the business of the Company, except for the
normal rights of a stockholder, or, to the knowledge of the Company, any
supplier, distributor or customer of the Company.

(b) Except for the Agreement and the Investor Rights Agreement, and as otherwise
disclosed on Sections 3.12 and 3.17(b) of the Company Disclosure Schedule, there
are no agreements, understandings or proposed transactions between the Company
and any of its officers, directors, employees, Affiliates, or, to the knowledge
of the Company, any Affiliate thereof.

(c) To the knowledge of the Company, no employee, officer or director of the
Company has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers or directors of the Company may own stock in publicly
traded companies that may compete with the Company. To the knowledge of the
Company, no member of the immediate family of any officer or director of the
Company is directly or indirectly interested in any material contract with the
Company.

3.18 Disclosure. The statements by the Company contained in this Agreement, the
exhibits hereto, and the certificates and documents required to be delivered by
the Company to the Purchaser under this Agreement, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements contained herein and therein not
misleading in light of the circumstances under which such statements were made.

3.19 Securities Laws. Subject to the truth and accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the Class A
Preferred Shares in conformity with the terms of this Agreement and the issuance
of Conversion Shares upon conversion of the Class A Preferred Shares will:

(a) constitute transactions exempt from the registration requirements of Section
5 of the Securities Act, and the qualification or registration requirements of
any applicable state securities laws as such laws exist on the date hereof; and

(b) constitute transactions exempt from prospectus and registration requirements
of the Securities Act (British Columbia) and the securities legislation of each
other province of Canada in which Purchaser resides.

4. Representations and Warranties of Purchaser and Restrictions on Transfer
Imposed by the Securities Act and Applicable State Securities Laws.

4.1 Representations and Warranties by Purchaser. Purchaser represents and
warrants to the Company as follows:

(a) The Class A Preferred Shares and the Conversion Shares (collectively, the
"Securities") are being or will be acquired for Purchaser's own account, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act, or applicable state securities laws.

(b) Purchaser understands that (i) the Securities have not been registered under
the U.S. Securities Act of 1933, as amended (the "Securities Act") by reason of
their issuance in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) thereof and
have not been qualified under any U.S. state securities laws on the grounds that
the offering and sale of securities contemplated by this Agreement are exempt
from registration thereunder, and (ii) the Company's reliance on such exemptions
is predicated on Purchaser's representations set forth herein. Purchaser
understands that the resale of the Securities may be restricted indefinitely,
unless a subsequent disposition thereof is registered under the Securities Act
and registered under any state securities law or is exempt from such
registration in the United States or a prospectus is filed and receipted with
applicable securities regulatory authorities of the provinces of Canada.

(c) Purchaser is an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act, as presently in effect, and has been
advised that Class A Preferred Shares have not been registered and, therefore,
will be subject to restrictions on transfer pursuant to applicable securities
laws. Purchaser is a resident in the jurisdiction set forth below their
respective name in the signature page hereto. Purchaser has not been formed
solely for the purpose of making this investment and is purchasing the Class A
Preferred Shares to be acquired by Purchaser hereunder as principal for its own
account for investment, not as a nominee or agent, and not with a view to, or
for resale in connection with, the distribution thereof. Purchaser has such
knowledge and experience in financial and business matters that Purchaser is
capable of evaluating the merits and risks of such investment, is able to incur
a complete loss of such investment and is able to bear the economic risk of such
investment for an indefinite period of time.

(d) Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares of the Company's
capital stock, the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being effected through a
"broker's transaction" or in a transaction directly with a "market maker," and
the number of shares being sold during any three-month period not exceeding
specified limitations. Purchaser further understands that there is no assurance
that Rule 144 or any exemption from the Securities Act will be available, or if
available, that such exemption will allow Purchaser to dispose of or otherwise
transfer any or all of the Shares or the Conversion Stock under the
circumstances, in the amounts or at the times Purchaser might propose.

(e) During the negotiation of the transactions contemplated herein, the
Purchaser and its representatives and legal counsel have been afforded access to
corporate books, financial statements, records, contracts, documents, and other
information concerning the Company and to its offices and facilities, have been
afforded an opportunity to ask such questions of the Company's officers,
employees, agents, accountants and representatives concerning the Company's
business, operations, financial condition, assets, liabilities and other
relevant matters as they have deemed necessary or desirable, and have been given
all such information as has been requested, to evaluate the merits and risks of
the prospective investments contemplated herein.

(f) Purchaser has the full right, power and authority to enter into and perform
Purchaser's obligations under this Agreement and the Investor Rights Agreement,
and this Agreement and the Investor Rights Agreement constitutes valid and
binding obligations of Purchaser enforceable in accordance with their terms.

(g) No consent, approval or authorization of or designation, declaration or
filing with any Governmental Body on the part of Purchaser is required in
connection with the valid execution and delivery of this Agreement or the
Investor Rights Agreement.

4.2      Legend.
         ------

Each certificate representing the Securities may be endorsed with the following
legends:

(a) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ARE "RESTRICTED
SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE ACT. THE SECURITIES MAY
NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT (I) IN
CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE
ACT OR (II) IN COMPLIANCE WITH RULE 144 OR (III) OTHERWISE PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE ACT BASED ON AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER;

(b) UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY
MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND A DAY AFTER
THE LATER OF (i) JUNE __, 2005 AND (ii) THE DATE THE ISSUER BECAME A REPORTING
ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA; and

(c) Any other legends required by applicable securities laws or the Investor
Rights Agreement.

The Company may instruct its transfer agent not to register the transfer of the
Securities, unless the conditions specified in the foregoing legends are
satisfied. 4.3 Removal of Legend and Transfer Restrictions. (a) Any legend
endorsed on a certificate pursuant to Section 4.2(a) and the stop transfer
instructions with respect to such Securities shall be removed and the Company
shall issue a certificate without such legend to the holder thereof (1) if such
Securities are registered under the Securities Act and a prospectus meeting the
requirements of Section 10 of the Securities Act is available, (2) if such
legend may be properly removed under the terms of Rule 144 promulgated under the
Securities Act, or (3) if such holder provides the Company with an opinion of
counsel for such holder, reasonably satisfactory to legal counsel for the
Company to the effect that a sale, transfer or assignment of such Securities may
be made without registration.

(b) Any legend endorsed on a certificate pursuant to Section 4.2(b) and the stop
transfer instructions with respect to such Securities as it applies to Section
4.2(b) shall be removed and the Company shall issue a certificate without such
legend to the holder thereof if (i) a receipt is obtained for a prospectus in
all applicable provinces qualifying the Securities; or (ii) the Company becomes
a reporting issuer in all applicable Canadian provinces and the hold period
applicable to the Securities under applicable provincial securities laws has
expired.

5. Indemnity.

5.1 Survival. The representations and warranties of the parties contained in
this Agreement shall survive the Closing indefinitely.

5.2      Indemnity.
         ---------

(a) The Company hereby agrees to indemnify and defend and hold harmless the
Purchaser, its Affiliates, successors and assigns and each of their respective
officers, directors, employees and agents (the "Indemnified Parties") from and
against, and agrees to pay or cause to be paid to the Indemnified Parties all
amounts equal to the sum of, any and all claims, demands, costs, expenses,
losses and other liabilities of any kind that the Indemnified Parties may incur
or suffer (including without limitation all reasonable legal fees and expenses)
which arise or result from any breach of or failure by the Company to perform
any of its representations, warranties, covenants or agreements in this
Agreement or the Investor Rights Agreement; provided, however, such
indemnification shall not include payment of consequential damages of the
Indemnified Parties. The rights of Purchaser hereunder shall be in addition to,
and not in lieu of, any other rights and remedies which may be available to them
by law.

5.3      Procedures.

(a) If a third party shall notify an Indemnified Party with respect to any
matter that may give rise to a claim for indemnification under the indemnity set
forth above in Section 5.2, the procedure set forth below shall be followed.

(i) Notice. The Indemnified Party shall give to the party providing
indemnification (the "Indemnifying Party") written notice of any claim, suit,
judgment or matter for which indemnity may be sought under Section 5.2 promptly
but in any event within thirty days after the Indemnified Party receives notice
thereof; provided, however, that failure by the Indemnified Party to give such
notice shall not relieve the Indemnifying Party from any liability it shall
otherwise have pursuant to this Agreement except to the extent that the
Indemnifying Party is actually prejudiced by such failure. Such notice shall set
forth in reasonable detail (i) the basis for such potential claim and (ii) the
dollar amount of such claim. The Indemnifying Party shall have a period of
fifteen days within which to respond to the Indemnified Party thereto regarding
acceptance or rejection of the Indemnified Party's claim (the "Response"). If
the Indemnifying Party does not issue a Response within such fifteen-day period,
the Indemnifying Party shall be deemed to have accepted responsibility for such
indemnity.

(ii) Defense of Claim. With respect to a claim by a third party against an
Indemnified Party for which indemnification may be sought under this Agreement,
the Indemnifying Party shall have the right, at its option, to be represented by
counsel of its choice and to assume the defense or otherwise control the
handling of any claim, suit, judgment or matter for which indemnity is sought,
which is set forth in the notice sent by the Indemnified Party, by notifying the
Indemnified Party in its Response; provided, however, that the Indemnified Party
shall have the right to employ counsel to represent it if, in the Indemnified
Party's reasonable judgment based upon the advice of counsel, it is advisable in
light of the separate interests of the Indemnified Party, to be represented by
separate counsel, and in that event the reasonable fees and expenses of such
separate counsel shall be paid by the Indemnifying Party. If the Indemnifying
Party does not give timely notice in its Response in accordance with the
preceding sentence, the Indemnifying Party shall be deemed to have given notice
that it does not wish to control the handling of such claim, suit or judgment.
In the event the Indemnifying Party elects (by notice in writing within such
fifteen-day period) to assume the defense of or otherwise control the handling
of any such claim, suit, judgment or matter for which indemnity is sought, the
Indemnifying Party shall indemnify and hold harmless the Indemnified Party from
and against any and all reasonable professional fees (including attorneys' fees,
accountants, consultants and engineering fees) and investigation expenses
incurred by the Indemnifying Party prior to such election, notwithstanding the
fact that the Indemnifying Party may not have been so liable to the Indemnified
Party had the Indemnifying Party not elected to assume the defense of or to
otherwise control the handling of such claim, suit, judgment or other matter. In
the event that the Indemnifying Party does not assume the defense or otherwise
control the handling of such matter, the Indemnified Party may retain counsel,
as an indemnification expense, to defend such claim, suit, judgment or matter.

(iii) Final Authority. The parties shall cooperate in the defense of any such
claim or litigation and each shall make available all books and records which
are relevant in connection with such claim or litigation. In connection with any
claim, suit or other proceeding with respect to which the Indemnifying Party has
assumed the defense or control, the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to any matter
which does not include a provision whereby the plaintiff or claimant in the
matter releases the Indemnified Party from all liability with respect thereto,
without the written consent of the Indemnified Party. In connection with any
claim, suit or other proceeding with respect to which the Indemnifying Party has
not assumed the defense or control, the Indemnified Party may not compromise or
settle such claim without the consent of the Indemnifying Party, which shall not
be unreasonably withheld and shall be deemed to have been given if the
Indemnified Party provides the Indemnifying Party with a written notice setting
forth the material terms of such compromise or settlement and the Indemnifying
Party does not object thereto in writing within ten days of its receipt of such
notice.

(b) Claims Between the Indemnifying Party and the Indemnified Party. Any claim
for indemnification under this Agreement which does not result from the
assertion of a claim by a third party shall be asserted by written notice given
by the Indemnified Party to the Indemnifying Party. The Indemnifying Party shall
have a period of thirty days within which to respond thereto.

6. Covenants.

6.1 Insurance. The Company shall maintain insurance, including but not limited
to Director's and Officer's Insurance, with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is
customarily carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Company operates. The
Company shall pay all such insurance premiums payable by them.

6.2 Compliance with Laws. The Company shall comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority,
non-compliance with which could have a Material Adverse Effect.

6.3 Expenses of Directors. The Company shall reimburse any directors designated
by the Purchaser to the Board of Directors for all reasonable expenses incurred
by any such director in connection with the carrying out of such director's
duties to the Company, including without limitation travel, entertainment,
meals, lodging and related expenses in connection with such directors'
attendance at meetings of the Company's Board of Directors or committees
thereof.

6.4 Tax Matters. The Company shall, and shall cause each of its subsidiaries to:
(i) prepare and timely file, or cause to be prepared and timely filed, all tax
returns and reports required to be filed by it, each in the manner required by
applicable law in all material respects and in a manner that is accurate and
complete in all material respects, and (ii) pay all income, sales, use,
occupation, property and other taxes and assessments that are due in accordance
with applicable law, on or before the due date therefor, whether or not such
taxes or assessments are shown on any such tax return.

6.5 Use of Proceeds. The Company hereby covenants and agrees that all of the
proceeds received by it from the issuance and sale of the Class A Preferred
Shares shall be used for product development, corporate infrastructure and
working capital.

6.6 Unwind. In the event that (a) the Arrangement is terminated for any reason
or (b) the Arrangement is not consummated within fifty weeks after the date of
this Agreement, then the Purchaser and Perseus 2000 Expansion shall take the
actions set forth in Section 2.1(f) of the Investment Agreement, dated as of
April 22, 2005, by and between Perseus 2000 Expansion and the Purchaser.

6.7 Investor Rights Agreement. The Company hereby covenants that the Purchaser
shall have the right to execute a joinder agreement to the Investor Rights
Agreement. The Company hereby further covenants and agrees that it shall use its
respective best efforts to have the other parties to the Investor Rights
Agreement acknowledge the Purchaser's rights thereunder. Notwithstanding the
foregoing, in the event that the actions set forth in Section 6.6 hereof result
in the Purchaser exchanging its Shares with Perseus 2000 Expansion, the
Purchaser shall take such further actions reasonably requested by the Company to
acknowledge and confirm the termination of its rights pursuant to the Investor
Rights Agreement.

7. Miscellaneous.

7.1 Waivers and Amendments. This Agreement may not be amended except pursuant to
an agreement in writing executed by the Company and Purchaser; provided that
Section 1.2(b) of this Agreement shall not be amended without the prior written
consent of Perseus.

7.2 Governing Law. This Agreement shall be governed in all respects by the laws
of the State of New York without regard to the principles of conflicts of laws
thereof.

7.3 NO RIGHT TO JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY WAIVES, AND AGREES NOT
TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, COUNTERCLAIM OR OTHERWISE, IN ANY
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY RELATED AGREEMENTS
ANY RIGHT TO A TRIAL BY JURY.

7.4 Successors and Assigns. Except as otherwise expressly provided herein and
subject to the Investor Rights Agreement and applicable law, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.

7.5 Entire Agreement. This Agreement, the Investor Rights Agreement, and the
other exhibits hereto and thereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof.

7.6 Notices, etc. All notices, requests and other communications hereunder shall
be in writing and shall be deemed to have been duly given at the time of receipt
if delivered by hand or by facsimile transmission or three days after being
mailed, registered or certified mail, return receipt requested, with postage
prepaid, to the address or facsimile number (as the case may be) listed for each
such party below such party's signature page hereto or, if any party shall have
designated a different address or facsimile number by notice to the other
parties given as provided above, then to the last address or facsimile number so
designated.

7.7 Severability. In case any provision of this Agreement shall be declared
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

7.8 Titles and Subtitles. The titles of the paragraphs and subparagraphs of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.

7.9 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument. This Agreement, the agreements referred to herein, and each
other agreement or instrument entered into in connection herewith or therewith
or contemplated hereby or thereby, and any amendments hereto or thereto, to the
extent signed and delivered by means of a facsimile machine, shall be treated in
all manner and respects as an original agreement or instrument and shall be
considered to have the same binding legal effect as if it were the original
signed version thereof delivered in person. At the request of any party hereto
or to any such agreement or instrument, each other party hereto or thereto shall
re-execute original forms thereof and deliver them to all other parties. No
party hereto or to any such agreement or instrument shall raise the use of a
facsimile machine to deliver a signature or the fact that any signature or
agreement or instrument was transmitted or communicated through the use of a
facsimile machine as a defense to the formation or enforceability of a contract
and each such party forever waives any such defense.

7.10 Publicity. None of the parties to this Agreement, nor any of their
affiliates, shall issue any press release or otherwise make any public
announcement or disclosure with respect to this Agreement, the Investor Rights
Agreement or any of the transactions contemplated hereby or thereby without the
prior written consent of each of the Company and the Purchaser, unless such
disclosure is required by applicable law, provided, however, within sixty (60)
days of the date of this Agreement, the Company may issue a press release
disclosing that Purchaser has invested in the Company, provided that the final
form of the press release is approved in advance in writing by Purchaser. The
name of the Purchaser and the fact that Purchaser has invested in the Company
may be included in a reusable press release boilerplate statement by the
Company, so long as the Purchaser have given the Company their approval of such
boilerplate statement and the boilerplate statement is reproduced in the same
form in which it was approved

7.11 No Strict Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.

7.12     Finder's Fees.

(a) The Company (i) represents and warrants that it has retained no finder or
broker in connection with the transactions contemplated by this Agreement and
the Investor Rights Agreement and (ii) hereby agrees to indemnify and to hold
the Purchaser harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which the Company, or any of its employees or representatives,
are responsible.

(b) Purchaser (i) represents and warrants that it has retained no finder or
broker in connection with the transactions contemplated by this Agreement and
the Investor Rights Agreement and (ii) hereby agrees to indemnify and to hold
the Company harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which it, or any of its employees or representatives, are
responsible.

                                              [Signatures follow on next page]

<PAGE>

         IN WITNESS WHEREOF, the Company has executed this Agreement as of the
day and year first above written.

                                       NXTPHASE T&D CORPORATION

                                       Signature:

                                   By: /s/ Andrea Johnston
                                       -----------------------
                                 Name: Andrea Johnston
                                Title:  President

                                       Address for Notice:

                                       2635 Lillooet Street
                                       Vancouver, B.C.
                                       V5M 4P7

<PAGE>

         IN WITNESS WHEREOF, the undersigned Purchaser has executed this
Agreement as of the day and year first above written.

                                       BEACON POWER CORPORATION

                                       Signature:

                                   By: /s/ James M. Spiezio
                                       -------------------------
                                 Name: James M. Spiezio
                                Title:  Chief Financial Officer

                                       Address for Notice:

                                       Beacon Power Corporation
                                       234 Ballardvale Street
                                       Wilmington, MA 01887
                                       Attn.: F. William Capp
                                       President and CEO
                                       Facsimile:  (978) 988-1337

<PAGE>

IN WITNESS WHEREOF, Perseus 2000 Expansion has executed this Agreement as of the
day and year first above written exclusively for purposes of Section 6.6 hereof.

                                       PERSEUS 2000 EXPANSION, L.L.C.

                                       Signature:

                                       By: /s/ Rodd Macklin
                                           ----------------------
                                     Name: Rodd Macklin
                                    Title:  Treasurer & Secretary

                                        Address for Notice:

                                        2099 Pennsylvania Avenue
                                        Suite 900
                                        Washington, DC 20006
                                        Attention: Kenneth M. Socha
                                        Senior Managing Director
                                        Facsimile: (202) 429-0588

<PAGE>

                                   Schedule A

                                     CLOSING

<TABLE>
<CAPTION>

-------------------------- -------------------- ------------- ---------------------- ------------------------
                            Number of Class A     Aggregate     Amount Previously      Amount Due at Closing
                            Preferred Shares      Purchase    Paid Toward Purchase
   Purchaser:                                    Price (USD)     Price (if any)
-------------------------- -------------------- ------------- ---------------------- ------------------------
<S>                              <C>             <C>                   <C>                  <C>
Beacon Power Corporation         111,111         $499,999.50           $0                   $499,999.50
-------------------------- -------------------- ------------- ---------------------- ------------------------
</TABLE>

<PAGE>

                                   Schedule B

                           Wire Transfer Instructions

Account Name:                       NxtPhase T&D Corporation
Bank:                               Royal Bank of Canada
Bank Address                        1025 West Georgia St., Vancouver BC V6E 3N9
Swift Address:                      ROYCCAT2
Transit No:                         10
US$ Account No:                     403 742 0
Contact:                            Penny Barry
                                    Ph - 604.665.8337
                                    Fax - 604.665.6368

<PAGE>

                                    EXHIBIT A

                               CERTAIN DEFINITIONS

         For purposes of the Agreement to which this Exhibit A is attached, the
following terms have the following meanings:

         "Company Products" means all versions and implementations of any
product which has been, is being or is intended to be marketed by the Company.

         "Conversion Shares" means shares of Common Stock issuable upon
conversion of the Class A Preferred Shares.

         "Governmental Body" means any: (a) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any
nature; (b) federal, state, local, municipal, foreign or other government; or
(c) governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or entity and any court or other tribunal).

         "Material Adverse Change" means a change which would have a Material
Adverse Effect.

         "Material Adverse Effect." An event, violation or other matter will be
deemed to have a "Material Adverse Effect" on the Company if such event,
violation or other matter would be material in impact or amount to the Company's
business, intellectual property rights or condition, or, taken as a whole, its
assets, liabilities, operations, or financial performance.

         "Person" means any individual, entity or Governmental Body.

         "Proprietary Asset" means: (a) any patent, patent application,
trademark (whether registered or unregistered), trademark application, trade
name, fictitious business name, service mark (whether registered or
unregistered), service mark application, copyright (whether registered or
unregistered), copyright application, maskwork, maskwork application, trade
secret, know-how, customer list, franchise, system, computer software, computer
program, invention, design, blueprint, engineering drawing, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset; and (b) any right to use or exploit any of the foregoing.

<PAGE>

                                    EXHIBIT B

                                SHARE CONDITIONS

Share conditions are as set forth in the Articles of Incorporation of the
Company.

<PAGE>

                                    EXHIBIT C

                                  LEGAL OPINION

                [Farris, Vaughan, Wills & Murphy LLP Letterhead]

                                                                June __, 2005

  TO: Beacon Power Corporation

  Dear Sirs:

                  Re:      NxtPhase T & D Corporation

We have acted as counsel to NxtPhase T & D Corporation (the "Corporation") in
connection with the issuance and sale by the Corporation of 111,111 Class A
Preferred Shares (the "Class A Preferred Shares") for US $4.50 per share, in
accordance with the terms of a securities purchase agreement (the "Securities
Purchase Agreement"), dated June , 2005, between the Corporation and Beacon
Power Corporation (the "Investor").

This opinion is being provided pursuant to section 2.3(a)(v) of the Securities
Purchase Agreement and, unless the context requires otherwise, all capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Securities Purchase Agreement.

SCOPE OF INQUIRIES

We have examined the following documents:

(a) Securities Purchase Agreement;
(b) the Certificate and Articles of Incorporation and By-laws of the
Corporation; and (c) Resolutions of the Directors of the Corporation.

We have also examined such corporate records of the Corporation, certificates of
public officials, certificates of officers of the Corporation, and other
documents and have made such other searches and examinations and considered such
questions of law as we have considered necessary in order to give the opinions
expressed below.

ASSUMPTIONS

In rendering the opinions expressed below, we have assumed:

(a) the authenticity of documents purporting to be originals;
(b) the conformity to originals of documents purporting to be photostatic or
facsimile copies of originals; (c) the genuineness of all signatures on all
documents reviewed by us; (d) that each party to any agreement or instrument
referred to herein, other than the Corporation, has all
        necessary power and authority to execute and deliver such agreement or
        instrument and to do all acts and things as required or contemplated to
        be done thereby, has duly authorized the execution and delivery of such
        agreement or instrument and the observance and performance of its
        obligations thereunder, has duly executed such agreement or instrument
        and has duly delivered the same to each of the other parties thereto;
(e)     that to the extent any of the matters as to which we opine are governed
        by any laws other than those of the Province of British Columbia or the
        federal laws of Canada applicable therein we have assumed with your
        permission, without independent investigation or verification, that (i)
        such laws are identical in all respects to the laws of the Province of
        British Columbia and the federal laws of Canada applicable therein;
(f)     that the Securities Purchase Agreement constitutes legal, valid and
        binding obligations of all parties thereto, enforceable in accordance
        with its terms under the laws of the jurisdiction expressly chosen by
        the parties to govern the such document, being the laws of the State of
        New York;
(g)     if any obligation under any of the Securities Purchase Agreement falls
        to be performed in any jurisdiction outside of the Province of British
        Columbia, the performance of such obligation will not be illegal or
        ineffective by virtue of the laws of that jurisdiction;
(h)     that the acknowledgements, representations and warranties of the parties
        to the Securities Purchase Agreement, other than those of the
        Corporation, are true, correct and accurate in all respects; and
(i)     the accuracy and completeness of all information provided to us (in
        written form or by facsimile transmission) by offices of public record.

RELIANCE

In expressing the opinion set forth in paragraph 1 below, we have relied solely
upon a Certificate of Compliance issued in respect of the Corporation by the
Deputy Director under the Canada Business Corporations Act, dated June , 2005.

In expressing the opinions set forth below, we have relied as to matters of fact
solely upon certificates of an officer of the Corporation, copies of which have
been delivered to you concurrently herewith, with respect to the accuracy of
factual matters contained therein.

OPINION

We express no opinion as to any laws, or matters governed by any laws other than
the laws of the Province of British Columbia and the federal laws of Canada
applicable therein.

The expressions "to our knowledge" or "of which we have knowledge", when used
herein, means to the actual knowledge of the partners and associates of our firm
who have had involvement with the matters contemplated in this opinion.

Based and relying on the foregoing, and subject to the qualifications set out
below, we are of the opinion that:

1.       The Corporation is a corporation duly incorporated and validly existing
         under the Canada Business Corporations Act and is in good standing with
         respect to the filing of annual returns.

2.       The Corporation has the corporate power and capacity to (a) own, lease
         and operate its properties and conduct its business as, to our
         knowledge, it is currently conducted and (b) to execute, deliver and
         perform its obligations under the Securities Purchase Agreement.

3.       The authorized share capital of the Corporation consists of an
         unlimited number of Common Shares and an unlimited number of Class A
         Preferred Shares, of which, on the date hereof prior to the issuance of
         the Class A Preferred Shares contemplated in the Securities Purchase
         Agreement, 1,000,000 Common Shares and 1,548,718 Class A Preferred
         Shares are validly issued and outstanding as fully paid and
         non-assessable shares in the capital of the Corporation. The Class A
         Preferred Shares have the rights, preferences, restrictions and
         privileges set forth in the Corporation's Articles of Incorporation.

4.       The execution and delivery by the Corporation of the Securities
         Purchase Agreement and the consummation by the Corporation of the
         transactions contemplated thereby, have been duly authorized by all
         necessary corporation action on the part of the Corporation and the
         Securities Purchase Agreement has been duly executed and delivered by
         the Corporation and constitutes a legal, valid and binding obligation
         of the Corporation enforceable against the Corporation in accordance
         with its terms.

5.        The  choice  of the  laws  of the  State  of New  York to  govern  the
          Securities  Purchase Agreement will be upheld as a valid choice of law
          by the courts of the Province of British  Columbia  provided  that the
          choice  of law is bona  fide (in  that it was not made  with a view to
          avoiding the consequences of the law of any other jurisdiction) and is
          not contrary to public  policy,  as that term is understood  under the
          laws of the Province of British Columbia;  in an action brought before
          a court of competent  jurisdiction in the Province of British Columbia
          in respect of the Securities Purchase Agreement, the laws of the State
          of New York, to the extent specifically pleaded and proved as a matter
          of a fact by expert evidence,  would be recognized and applied by such
          courts to all issues  that,  under the  conflict  of laws rules of the
          Province of British Columbia,  are to be determined in accordance with
          the proper or governing law of the  Securities  Purchase  Agreement if
          the choice of law in such document is valid;  although the parties may
          have made a valid choice of law, the courts of the Province of British
          Columbia  will not apply those  laws:  (i) which it  characterizes  as
          being of a revenue,  penal or public law nature,  (ii) which relate to
          matters of a  procedural  nature,  or (iii) the  application  of which
          would be inconsistent  with public policy,  as that term is applied by
          the courts in the Province of British Columbia;  in addition,  a court
          of competent jurisdiction in British Columbia may reserve to itself an
          inherent power to decline to hear any such action if it is contrary to
          public  policy  for it to do so, or if it is not the  proper  forum to
          hear such an action,  or if concurrent  proceedings in respect of such
          matter are being brought elsewhere.

6.       The execution, delivery and performance by the Corporation of the
         Securities Purchase Agreement to which it is a party do not (i) violate
         the laws of the Province of British Columbia or any federal laws of
         Canada applicable therein, or any court order, judgment or decree which
         has been entered against the Corporation or any Subsidiary of which we
         have knowledge, (ii) constitute a default under or breach of, or result
         in the creation of a lien or a right of acceleration under, any of the
         agreements or instruments listed in Exhibit D or (iii) violate its
         Certificate and Articles of Incorporation or Bylaws.

7.       The Common Shares issuable upon conversion of the Class A Preferred
         Shares have been duly authorized and reserved for issuance upon
         conversion of the Class A Preferred Shares. The Class A Preferred
         Shares, when issued, sold and delivered against payment therefor in
         accordance with the provisions of the Securities Purchase Agreement,
         will be duly and validly issued, fully paid and non-assessable. The
         Common Shares, when issued upon conversion of the Class A Preferred
         Shares in accordance with their terms, will be duly and validly issued,
         fully paid and non-assessable.

8.       To our knowledge, there is no action, proceeding or litigation pending
         or threatened against the Corporation before any court or any
         governmental or administrative agency or body.

9.        No notices,  reports or other  filings are  required to be made by the
          Corporation  or any of its  subsidiaries  with,  nor are any consents,
          registrations,   applications,   approvals,   permits,   licenses   or
          authorizations  required  to be  obtained  by  the  Corporation  from,
          securities regulatory  authorities in the Province of British Columbia
          for the  issuance of the Class A Preferred  Shares or the issuance and
          delivery of the Common Shares upon conversion of the Class A Preferred
          Shares so long as no commission or other remuneration is paid or given
          to others  in  respect  of the  trade  except  for  administrative  or
          professional  services  or  for  services  performed  by a  registered
          dealer,  other than normal  post-closing  filings in  connection  with
          qualifying  for  exemptions  from  the  prospectus  and   registration
          requirements of applicable securities laws.

10.      The offer and sale of the Class A Preferred Shares pursuant to the
         Securities Purchase Agreement are exempt from the prospectus and
         registration requirements of the Securities Act (British Columbia),
         subject to the Corporation filing a report with the British Columbia
         Securities Commission of such trade on or before the 10th day after the
         trade, on Form 45-103F4, prepared and executed in accordance with the
         Securities Act (British Columbia), the rules and regulations made and
         promulgated thereunder and the instruments, policies, notices and
         interpretation notes of the British Columbia Securities Commission
         together with the requisite filing fee and a duly completed fee
         checklist.

QUALIFICATIONS

   The opinions expressed herein are subject to the following qualifications and
limitations:

     1.   The enforceability of the obligations of the parties to the Securities
          Purchase Agreement and the rights and remedies set out therein and any
          judgment arising out of or in connection  therewith are subject to and
          may be limited by:

          (a)  applicable bankruptcy,  reorganization,  arrangement, winding-up,
               insolvency, liquidation, moratorium, preference and other similar
               laws and judicial decisions from time to time in effect affecting
               the enforcement of rights and remedies of creditors;

          (b)  applicable laws regarding limitations of actions;

          (c)  the  equitable  and  statutory  powers  of  the  courts  to  stay
               proceedings  before them, to stay the execution of judgments,  to
               limit the right of a  creditor  to receive  immediate  payment of
               amounts stated to be payable on demand, to relieve from penalties
               or the  consequences  of default,  particularly if the default is
               minor   or    non-substantive,    to   refrain   from   enforcing
               non-competition  or  other  restrictive  covenants  and to  grant
               relief against forfeiture; and

          (d)  the  general  principles  of equity,  whether  enforceability  is
               considered in a proceeding in equity or at law, and no opinion is
               expressed as to the  availability of any specific remedy that may
               be granted,  imposed or rendered or as to the availability of the
               remedy  of  specific  performance,  injunctive  relief  or  other
               equitable remedies in any particular instance;

     2.   Provisions  in the  Securities  Purchase  Agreement  providing for the
          recovery of fees and expenses  from any person may be  restricted by a
          court to a reasonable amount, and legal fees are subject to taxation;

     3.   No opinion is expressed on:

          (a)  provisions of the Securities Purchase Agreement which:

               (i)  purport  to  directly  or   indirectly   exclude   unwritten
                    variations,   waivers  or  consents  of,  to  or  under  the
                    Securities Purchase Agreement or restrict their effect;

               (ii) purport to restrict  the access to, or waive the benefit of,
                    legal or equitable  remedies or defences;

               (iii)purport  to  bind or  affect,  or  confer  a  benefit  upon,
                    persons  who  are not  parties  to the  Securities  Purchase
                    Agreement;

               (iv) purport  to  establish   evidentiary   standards,   such  as
                    provisions    stating    that    certain     determinations,
                    calculations, requests or certificates will be conclusive or
                    binding;

               (v)  purport to waive or affect any rights to notices;

               (vi) purport  to  allow  severance  of  an  invalid,  illegal  or
                    unenforceable  provision,  or  restrict  its  effect;

               (vii)relate to any  taxes,  levies,  duties,  imposts  or charges
                    which may be imposed upon, or exigible in respect of, any of
                    the  matters   contemplated   by  the  Securities   Purchase
                    Agreement,  and in particular,  but without  limitation,  no
                    opinion is expressed as to any  withholding  tax that may be
                    imposed upon, or exigible or payable in respect of, any such
                    transactions;

4.       The effectiveness of provisions which purport to relieve a person from
         a liability or duty otherwise owed may be limited by law, and
         provisions requiring indemnification or reimbursement of a person may
         not be enforced by a court, to the extent that they relate to or arise
         as a result of the failure of such person to have performed a duty
         (contractual or otherwise) or from the breach of contract, tort or
         other wrongful act of such person.
5.       The opinions in paragraph 9 and 10 are subject to the qualification
         that no effective order, ruling or decision is issued or granted by a
         court or regulatory or administrative body that has the effect of
         precluding or restricting the issue and delivery by the Corporation of
         any securities referred to in such paragraphs or restricting any trades
         of such securities and at the relevant time there is no such order
         affecting any person who engages in such a trade.
6.       Canadian courts will not give monetary judgment in any currency other
         than that of Canada and such judgment may be based on a rate of
         exchange in existence on a day other than the date of payment of such
         judgment.
7.       The rate of post-judgment interest applicable to any obligation under
         the Securities Purchase Agreement lies within the discretion of the
         court.
   This opinion may not be relied upon by any person or entity other than the
addressees hereof, their successors and their assigns of whom we have notice at
the time of the assignment, and this opinion may not be circulated, quoted or
otherwise referred to for any purpose other than in connection with the
transactions contemplated by the Securities Purchase Agreement, in each case,
without our prior written consent. We do not undertake to advise you or anyone
else of any changes in the opinions expressed herein resulting from changes in
law, changes in facts or any other matters that hereafter might occur that did
not exist on the date hereof.

Yours truly,

Farris, Vaughan, Wills & Murphy LLP

<PAGE>

                                    EXHIBIT D

                           COMPANY DISCLOSURE SCHEDULE

Section 3.2(c) and (d) - Options, Warrants etc. and Security Holders

Current Shareholders
------------------------------------------------- ----------- ----------------
                                                   Number of      Number of
                                                    Class A        Common
                                                Preferred Shares   Shares
------------------------------------------------- ----------- ----------------
Perseus 2000, L.L.C.                              902,698     478,587
------------------------------------------------- ----------- ----------------
El Dorado Investment Company*                     463,832     68,336
------------------------------------------------- ----------- ----------------
Working Opportunity Fund (EVCC) Ltd.              85,602      214,300
------------------------------------------------- ----------- ----------------
GE Capital Equity Holdings, Inc.                  9,641       46,333
------------------------------------------------- ----------- ----------------
Hydro-Quebec Capitech Inc.                        2,974       44,222
------------------------------------------------- ----------- ----------------
Canadian Science and Technology Growth Fund Inc.  16,379      96,800
------------------------------------------------- ----------- ----------------
OPG Ventures Inc.                                 925         36,100
------------------------------------------------- ----------- ----------------
Western Technology Seed Investment                            14,222
------------------------------------------------- ----------- ----------------
David Burnstein                                               1,100
------------------------------------------------- ----------- ----------------

TOTAL:                                            1,548,718   1,000,000
------------------------------------------------- ----------- ----------------

Options, Warrants etc.

El Dorado is obligated to purchase an additional 66,667 Class A Preferred Shares
of the Company for $300,000 pursuant to the terms of the Initial Securities
Purchase Agreement, and a waiver granted by the Company on April 21, 2005.

The Company is a party to a binding Term Sheet with Perseus 2000, L.L.C. dated
April 22, 2005 which provides for the issuance of up to $1.5 million of Class A
Preferred Shares.

Pursuant to their employment agreements, the senior management of the Company
have the right to participate in the Company's option plan. The Investor Rights
Agreement contemplates that an option pool of 462,000 Common Shares of the
Company would be allocated to the Company's employees, consultants and other
eligible individuals. No options have been granted at the date hereof, on the
basis that in lieu thereof the employees will receive restricted stock units and
stock options of the Purchaser on the basis contemplated in the Arrangement
Agreement and Schedule B thereto. If the Arrangement is not completed, it is
anticipated that such options would be granted to employees of the Company.

The Company has an option to enter into a Long-Term License Agreement with The
Texas A&M University System ("TAMUS"). Pursuant to section 3.04 of that
Long-Term License Agreement, TAMUS would be entitled to receive NxtPhase Common
Shares equal to 5% of its total issued and outstanding stock on a fully-diluted
basis, or, if at such time the Company is a subsidiary of the Purchaser, 5% of
the total number of shares of the Purchaser issued to NxtPhase Shareholders in
the Arrangement. See the terms of the Long-Term License Agreement, a true and
complete copy of which has been provided to the Purchaser.

The Investor Rights Agreement provides for certain rights of the holders of
Class A Preferred Shares to purchase shares of the Company and require
redemption of shares of the Company in certain circumstances. See the terms of
that agreement, a true and complete copy of which has been provided to the
Purchaser.

The Company is party to the Arrangement Agreement dated as of April 22, 2005
with the Purchaser.

Section 3.7 - Title to Property and Assets

Cash collateral held by Royal Bank of Canada in the amount of $40,000 Canadian
as security deposit for VISA corporate credit cards used by Company's employees.

The Company has made a security deposit equal to two months' rent on the lease
of its Vancouver premises.

A letter of credit for $200,000 has been provided to the landlord of the Phoenix
premises to be reduced over the term of the lease.

3.8 Company Proprietary Assets

The Company is party to a one year license for use of the patents held by TAMUS,
with the option to enter into a long-term license, copies of which have been
provided to the Purchaser.

Mr. Hrabliuk was removed as an "inventor" on NxtPhase Patent case #20051, as the
contributions he made were also removed from the patent.

On March 30, 2005, the Company and VA TECH Transmission & Distribution SA
jointly filed for a patent on Optical Sensor Arrangement for Electrical
Switchgear. Under the terms of Addendum N. 1 to GIS Joint Development Agreement,
both parties agree that it is their intention that such IP be exploited
together. If, after December 2006, certain sales targets are not met, the
parties grant one another a perpetual, royalty free license to use the IP.

3.8(d) Employment Agreements

Employment Agreements have been executed by Andrea Johnston, Curtis Sikorsky and
Fred Smith. Draft Employment Agreements have been provided to Tim Leyshock, Jim
Blake, and Farnoosh Rahmatian but have not yet been executed.

<TABLE>
<CAPTION>

Section 3.9 - Material Contracts
<S>                                <C>                                              <C>
---------------------------------- ------------------------------------------------ ----------------------------------
Name of Agreement                  Parties                                          Date
---------------------------------- ------------------------------------------------ ----------------------------------
Technology/Asset
---------------------------------- ------------------------------------------------ ----------------------------------
Texas A&M License Agreement        the Company and TAMUS                            Signed by the Company Jan. 13,
                                                                                    2005 and by TAMUS on Feb. 1, 2005
---------------------------------- ------------------------------------------------ ----------------------------------
Confirmation letter                The parties have duly executed a letter          April 6, 2005
                                   amendment to the TAMUS License Agreement to
                                   confirm that the Effective Date of the License
                                   Agreement is August 17, 2004.
---------------------------------- ------------------------------------------------ ----------------------------------
Sales Agreements
---------------------------------- ------------------------------------------------ ----------------------------------
AIS Marketing Agreement            The Company and VA TECH Schneider High Voltage   Executed with NxtPhase
                                   GmbH                                             Corporation on April 29, 2004;
                                                                                    assigned to the Company on
                                                                                    August 18, 2004
---------------------------------- ------------------------------------------------ ----------------------------------
Addendum N. 1 to AIS Marketing     The Company and VA TECH Schneider High Voltage   February 17, 2005
Agreement                          GmbH
---------------------------------- ------------------------------------------------ ----------------------------------
Optical High Current Measurement   The Company and DynAmp, LLC                      September 1, 2004
Systems Marketing Agreement
---------------------------------- ------------------------------------------------ ----------------------------------
Financing
---------------------------------- ------------------------------------------------ ----------------------------------
Noteholders' Agreement             Perseus 2000, LLC, El Dorado Investment          August 17, 2004
                                   Company, GE Capital Equity Holdings, BV,
                                   Western Technology Seed Investment Fund
                                   Limited Partnership, Hydro-Quebec Capitech
                                   Inc., Working Opportunity Fund, Canadian
                                   Science and Technology Growth Fund Inc., OPG
                                   Ventures, Inc.
---------------------------------- ------------------------------------------------ ----------------------------------
Purchase and Sale Agreement        Perseus 2000, LLC, El Dorado Investment          August 17, 2004
                                   Company, GE Capital Equity Holdings, BV,
                                   Western Technology Seed Investment Fund
                                   Limited Partnership, Hydro-Quebec Capitech Inc.
---------------------------------- ------------------------------------------------ ----------------------------------
Financing Term Sheet               Perseus 2000, LLC and the Company                August 11, 2004
---------------------------------- ------------------------------------------------ ----------------------------------
Initial Securities Purchase        The Company and Perseus 2000, LLC, El Dorado     November 12, 2004
Agreement                          Investment Company, GE Capital Equity
                                   Holdings, BV, Working Opportunity Fund (EVCC)
                                   Ltd., Canadian Science and Technology Growth
                                   Fund, Inc., OPG Ventures Inc., Hydro-Quebec
                                   Capitech Inc.
---------------------------------- ------------------------------------------------ ----------------------------------
Investor Rights Agreement          The Company and Perseus 2000, LLC, El Dorado     November 12, 2004
                                   Investment Company, GE Capital Equity
                                   Holdings, BV, Working Opportunity Fund (EVCC)
                                   Ltd., Canadian Science and Technology Growth
                                   Fund, Inc., OPG Ventures Inc., Hydro-Quebec
                                   Capitech Inc.
---------------------------------- ------------------------------------------------ ----------------------------------
Cash Collateral Agreement Royal    The Company and Royal Bank of Canada             August 30, 2004
Bank of Canada no fixed expiry
date unless cards cancelled
---------------------------------- ------------------------------------------------ ----------------------------------
Financing Term Sheet               Perseus 2000, LLC and the Company                April 22, 2005
---------------------------------- ------------------------------------------------ ----------------------------------
Termsheet for funding of           Canadian Foundation for Sustainable                                    , 2005
Canadian expenditures to reduce    Development Technology (SDTC) and the Company
greenhouse gas emissions
---------------------------------- ------------------------------------------------ ----------------------------------
Contribution Agreement             The Company and PowerTech Labs, Inc.             June 7, 2005
---------------------------------- ------------------------------------------------ ----------------------------------
Facilities
---------------------------------- ------------------------------------------------ ----------------------------------
Vancouver Building Premises        Broadway-HEB Property Inc. and the Company       November 1, 2004
---------------------------------- ------------------------------------------------ ----------------------------------
Phoenix Facility Lease (new        The Company T&D Inc. and Oxnard Land Holdings    Executed by the Company on April
premises)                          LLC                                              8. 2005 and by Oxnard on April
                                                                                    15, 2005
---------------------------------- ------------------------------------------------ ----------------------------------
Winnipeg Facility Lease            3101495 Manitoba Ltd. and the Company            January 1, 2005
---------------------------------- ------------------------------------------------ ----------------------------------
Joint Development Agreements
---------------------------------- ------------------------------------------------ ----------------------------------
GIS Joint Development Agreement    The Company and VA TECH Schneider High Voltage   Executed with NxtPhase
                                   GmbH                                             Corporation on June 15, 2004;
                                                                                    assigned to the Company on
                                                                                    August 19, 2004
---------------------------------- ------------------------------------------------ ----------------------------------
Addendum N.1 to GIS Joint          The Company and VA TECH Schneider High Voltage   February 17, 2005
Development Agreement              GmbH
---------------------------------- ------------------------------------------------ ----------------------------------
Addendum N.2 to GIS Joint          The Company and VA TECH T&D GmbH                 June 10, 2005
Development Agreement
---------------------------------- ------------------------------------------------ ----------------------------------
Suppliers
---------------------------------- ------------------------------------------------ ----------------------------------
Relay and recorder contract        NxtPhase Corporation and Arizona Precision       December 11, 2003 - party is
manufacturing                      Sheet Metal/JIT, Inc.                            NxtPhase Corporation, but
                                                                                    working to replace APSM, so
                                                                                    assignment to the Company not
                                                                                    being negotiated
---------------------------------- ------------------------------------------------ ----------------------------------
Relay and recorder contract        The Company and Beckwith Electric Co. Ltd.       January 11, 2005
manufacturing
---------------------------------- ------------------------------------------------ ----------------------------------
Section 3.12 Employment Contracts
---------------------------------- ------------------------------------------------ ----------------------------------
Employment Agreements              Andrea Johnston                                  Andrea Johnston's and Fred
                                                                                    Smith's agreements are dated
                                   Tim Leyshock                                     August 17, 2004, Curtis
                                                                                    Sikorsky's agreement is dated
                                   Jim Blake                                        March 10, 2005.  The remaining
                                                                                    agreements are being reviewed by
                                   Farnoosh Rahmatian                               employees for execution. The
                                                                                    Company has also executed two
                                   Fred Smith                                       letter agreements providing for
                                                                                    bonuses payable to Andrea
                                   Curtis Sikorsky                                  Johnston on completion of the
                                                                                    Arrangement with the Purchaser
---------------------------------- ------------------------------------------------ ----------------------------------
IP Assignment Agreements           Andrew Klimek                                    March 23, 2005

                                   Farnoosh Rahmatian - IP Assignment Agreement
                                   March 24, 2005 relating to Optical Sensor
                                   Arrangement for gas insulated switchgear

                                   Jim Blake- IP Assignment Agreement relating to   March 24, 2005
                                   Optical Sensor Arrangement for gas insulated
                                   switchgear
---------------------------------- ------------------------------------------------ ----------------------------------

The following benefit plans are in place for the Company employees:

Canadian Employees:
------------------------------------------------------- -----------------------------------------------------

Extended health, dental and long-term disability        Maritime Life
------------------------------------------------------- -----------------------------------------------------
Accidental death and dismemberment                      Industrial Alliance Pacific
------------------------------------------------------- -----------------------------------------------------

US Employees:
------------------------------------------------------- -----------------------------------------------------
Basic medical, major medical, drugs, dental             Humana
------------------------------------------------------- -----------------------------------------------------
Accidental death and dismemberment                      UNUM Provident
------------------------------------------------------- -----------------------------------------------------
Section 125, Flexible Spending (voluntary employee      Paychex
funded)
------------------------------------------------------- -----------------------------------------------------
401 (k)(voluntary employee funded)                      Paychex
------------------------------------------------------- -----------------------------------------------------
Vision care                                             Vision Services Plan
------------------------------------------------------- -----------------------------------------------------
</TABLE>

Section 3.17 -Related Party Transactions

As the principal inventor of a number of the patents licensed from TAMUS, Dr.
Jim Blake will have an interest in the benefits from a license agreement between
the Company and TAMUS pursuant to an agreement to be executed between TAMUS and
Dr. Blake.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}]]