Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Sonic Technology Solutions Inc. - Exhibit 4.07

UNDERWRITING AGREEMENT

	April 30, 2007 
	  
	Sonic Environmental Solutions Inc. 
	2100 – 1066 West Hastings Street 
	Vancouver, British Columbia 
	V6E 3X2 

	Attention: 	Adam R. Sumel 
	  	President & Chief Executive Officer
  

Dear Sir:

	Re: 	Private Placement of Common Shares 

Clarus Securities Inc. (the “Underwriter”) understands
that Sonic Environmental Solutions Inc. (the “Corporation”) proposes to
issue and sell units in the capital of the Corporation (the “Units”) by
way of an underwritten private placement (the “Offering”) at $0.45 per
Unit. Each Unit will consist of one common share of the Corporation (the
“Common Shares”) and one half of one common share purchase warrant (each
whole common share purchase warrant, a “Warrant”). Each Warrant will
entitle the holder to purchase one Common Share at a price of $0.60 per Common
Share for a period of 24 months from the Closing Date (as hereinafter defined
below).

Subject to the terms and conditions set forth herein, the
Underwriter agrees to purchase and by its acceptance hereof, the Corporation
agrees to issue and sell to the Underwriter, the Units at the Closing Time (as
hereinafter defined).

The Corporation agrees and understands that although this offer
is presented on behalf of the Underwriter as purchaser, the Underwriter, with
the prior written consent of the Corporation which consent shall not be
unreasonably withheld, will be permitted to appoint other registered dealers
(“Sub-Dealers”) duly qualified in their respective jurisdictions, and the
Underwriter and such Sub-Dealers may arrange for substituted purchasers of the
Units (“Substituted Purchasers”) to purchase the Units directly from the
Corporation. The Underwriter may determine the remuneration payable to any such
other dealers appointed by them, provided that such remuneration is payable by
the Underwriter from, and not in addition to, the remuneration payable to the
Underwriter pursuant hereto. The obligations of the Underwriter to purchase the
Units will be reduced by the number of Units with respect to which duly
completed and executed Subscription Agreements (as defined below) are delivered
by the Underwriter to the Corporation on behalf of qualified Substituted
Purchasers and which Units are purchased by such qualified Substituted
Purchasers at Closing.

The Units will be offered to purchasers resident in each of the
provinces of British Columbia, Alberta, Manitoba, Ontario and Québec (the
“Qualifying Jurisdictions”) on a private placement basis pursuant to
exemptions from the prospectus requirements of Applicable Securities Laws (as
hereinafter defined), and any other jurisdiction in which the Units may be
offered under exemptions from the applicable prospectus and registration
requirements.

In consideration of the services to be rendered by the
Underwriter in connection with its services hereunder and all other matters in
connection with the issue and sale of the Units, the Corporation shall pay and
deliver to the Underwriter at Closing (as hereinafter defined) the compensation
provided for in accordance with Section 5 hereof.

- 2 -

DEFINITIONS

In this Agreement, in addition to the terms defined above or
elsewhere in this Agreement, the following terms shall have the following
meanings: 

“affiliate”, “associate”, “distribution”,
“insiders”, “material fact”, “material change”, and
“misrepresentation” shall have the respective meanings ascribed thereto
in the Securities Act (British Columbia); 

“Agreement” means this agreement and not any particular
article or Section or other portion except as may be specified, and words such
as “hereto”, “herein” and “hereby” refer to this Agreement
as the context requires; 

“Applicable Securities Laws” means, all applicable
securities laws in any or each of the Qualifying Jurisdictions and the
respective regulations and rules made thereunder, together with applicable
published policy statements, notices and orders of the Securities Commissions;

“Broker Warrants” means warrants issued to the
Underwriter pursuant to Section 5 entitling the Underwriter and Sub-Dealers, as
applicable, to purchase Units equal to 10% of the Units sold pursuant to the
Offering at an exercise price of $0.45 per Unit for a period expiring 24 months
from the Closing Date; 

“Business Day” means a day which is not a Saturday,
Sunday or statutory or civic holiday in Vancouver, British Columbia; 

“Claim” shall have the meaning ascribed thereto in
Subsection 11(a); 

“Closing” means the closing on the Closing Date of the
transaction of purchase and sale in respect of the Units as contemplated by this
Agreement and the Subscription Agreements; 

“Closing Date” means April 30, 2007 or such other date
as the Corporation and the Underwriter may agree; 

“Closing Time” means 8:00 a.m. (Vancouver time) on the
Closing Date or such other time on the Closing Date as the Corporation and the
Underwriter may agree; 

“Common Shares” means common shares in the capital of
the Corporation;

 “Confidential Information” shall have the meaning
ascribed thereto in Section 1; 

“Corporation’s Auditors” means PricewaterhouseCoopers
LLP, or such other firm of chartered accountants as the Corporation may have
appointed or may from time to time appoint as auditors of the Corporation; 

“Corporation’s Counsel” means Goodmans LLP; 

“Corporation’s U.S. Counsel” means Luce, Forward,
Hamilton & Scripps LLP; 

“Disclosure Documents” means each document (as such term
is defined in 138.1 of the Securities Act (Ontario)) released by the
Corporation since December 31, 2004;

 “Engagement Letter” means the engagement letter
between the Corporation and the Underwriter dated April 18, 2007 and reconfirmed
at 5:55 a.m. on April 20, 2007;

- 3 -

“Environmental Authorities” means Governmental
Authorities having jurisdiction under any Environmental Laws, including any
department, commission, bureau, board, administrative agency or body of any
applicable international, federal, provincial, state, municipal or local body;

“Environmental Laws” means all applicable international,
federal, provincial, state, municipal and local treaties, conventions, laws,
statutes, ordinances, by-laws, codes, regulations, and all policies, guidelines,
standards, orders, directives and decisions rendered or promulgated by
Governmental Authority; 

“Environmental Permits” means all permits, licenses and
authorization required under Environmental Laws required in connection with the
conduct and operation of the Corporation’s business or a Subsidiary’s business;

“Governmental Authority” means any domestic or foreign
government, whether federal, provincial, state, territorial, local, regional,
municipal or other political jurisdiction, and any agency, authority,
instrumentality, court, tribunal, board, commission, bureau, arbitrator tribunal
or other tribunal, or any quasi-governmental or other entity, insofar as it
exercises a legislative, judicial, regulatory, administrative, expropriation or
taxing power or function of or pertaining to government; 

“Hazardous Substances” means any contaminant, pollutant,
dangerous substance, liquid waste, industrial waste, hauled liquid waste, toxic
substance, special waste, hazardous waste, hazardous material or hazardous
substance as defined in or pursuant to any Environmental Laws, law, judgment,
decree, order, injunction, rule, statute or regulation of any court, arbitrator
or governmental authority by which the Corporation is bound or to which the
Corporation is subject; 

“Indemnified Party” shall have the meaning ascribed
thereto in Subsection 11(a); 

“Intellectual Property” means, collectively, all
intellectual property rights which pertain to the business of the Corporation,
as it is currently conducted of whatsoever nature, kind or description
including:

	 	(a) 	
      all trade-marks, service marks, trade-mark and service
      mark registrations, trade-mark and service mark applications, rights under
      registered user agreements, trade names and other trade-mark and service
      mark rights;

	 	 	 
	 	(b) 	
      all copyrights and applications therefore, including all
      computer software and rights related thereto;

	 	 	 
	 	(c) 	
      all patent rights;

	 	 	 
	 	(d) 	
      all trade secrets and proprietary and confidential
      information;

	 	 	 
	 	(e) 	
      all industrial designs and registrations thereof and
      applications therefor;

	 	 	 
	 	(f) 	
      all renewals, modifications, developments and extensions
      of any of the items listed in clauses (a) through (e) above; and

	 	 	 
	 	(g) 	
      all patterns, plans, designs, research data, other
      proprietary know-how, processes, drawings, technology, inventions,
      formulae, specifications, performance data, quality control information,
      unpatented blue prints, flow sheets, equipment and parts lists,
      instructions, manuals, records and procedures, and all licenses,
      agreements and other contracts and commitments relating to any of the
      foregoing.

- 4 -

“Investor Presentation” means the investor presentation
of the Corporation entitled “Corporate Presentation – Q2 2007” provided to the
Underwriter; 

“material adverse effect” when used in connection with
an entity means any change (including a decision to implement such a change made
by the board of directors or by senior management who believe that confirmation
of the decision by the board of directors is probable), event, violation,
inaccuracy, circumstance or effect that is materially adverse to the business,
assets (including intangible assets), liabilities, capitalization, ownership,
financial condition or results of operations of the entity and its subsidiaries
or its parent, as the case may be, taken as a whole, after giving effect to the
transactions contemplated by this Agreement; 

“Material Subsidiaries” means Sonic Environmental
Solutions Corp. and SonoOil Inc; 

“material information” has the meaning ascribed thereto
in the Corporate Finance Manual of the TSXV; 

“Offering” has the meaning ascribed thereto it in the
first paragraph of this Agreement; 

“Person” means any individual, corporation, partnership,
joint venture, association, trust or other legal entity; 

“Qualifying Jurisdictions” means British Columbia,
Alberta, Manitoba, Ontario and Québec to the extent that any Substituted
Purchasers are resident therein; 

“Securities Commissions” means, collectively, the
securities commissions or other securities regulatory authorities in the
Qualifying Jurisdictions; “Sub-Dealers” means registered dealers
appointed pursuant to the terms hereof by the Underwriter; 

“Subscription Agreements” means, collectively, the
subscription agreements in the form previously agreed upon by the Underwriter
and the Corporation pursuant to which Substituted Purchasers agree to subscribe
for and purchase the Units as contemplated herein and shall include, for greater
certainty, all schedules and exhibits thereto; 

“Subsidiary” means (i) each body corporate which is a
subsidiary of the Corporation within the meaning of the Securities Act
(British Columbia), and (ii) each partnership or other unincorporated entity
whose accounts are consolidated with those of the Corporation; 

“Substituted Purchaser” means a Person who, as
purchaser, acquires Units by duly completing, executing and delivering a
Subscription Agreement which is accepted by the Corporation (as evidenced by its
execution thereof); 

“to the knowledge of” means (unless otherwise expressly
stated) a statement of the declarant’s knowledge of the facts or circumstances
to which such phrase relates after having made reasonable inquiries and
investigations in connection with such facts and circumstances; 

“TSXV” means the TSX Venture Exchange; 

“Underwriter” means Clarus Securities Inc.; 

“Underwriter’s Counsel” means McCarthy Tétrault LLP;

“Underwriter’s Fee” has the meaning ascribed thereto in
Section 5;

- 5 -

“Units” has the meaning ascribed thereto in the first
paragraph of this Agreement;

“Warrant” shall have the meaning ascribed thereto in the
first paragraph of this Agreement; and

“Warrant Indenture” means the warrant indenture to be
entered in to by the Corporation and Pacific Corporate Trust Company on the
Closing Date pursuant to which the Warrants will be created and issued. Unless
otherwise expressly provided in this Agreement, words importing only the
singular number include the plural and vice versa and words importing gender
include all genders. References to “paragraph” and “Section” (unless otherwise
indicated) are to the appropriate paragraphs and sections of this Agreement.
Unless the context otherwise requires, any reference to a statute shall be
deemed to include regulations made pursuant thereto, all amendments in force
from time to time, and any statute or regulation that may be passed which has
the effect of supplementing or superseding the statute or regulation referred
to.

TERMS AND CONDITIONS

	1. 	Underwriter’s Representations, Warranties
      and Covenants 

     The Underwriter hereby on its own
behalf and on behalf of any Sub-Dealers, represents and warrants to, and
covenants with the Corporation that it is duly qualified and registered to carry
on business as a securities dealer in each of the Qualifying Jurisdictions where
the sale of the Units requires such qualification and/or registration. The
Underwriter hereby covenants with the Corporation that the Underwriter shall
conduct its activities in compliance with all Applicable Securities Laws, rules
and policies of the TSXV and the securities laws of other jurisdictions
applicable to the Offering and shall offer the Units and conduct its activities
in such manner that pursuant to Applicable Securities Laws and the securities
laws of any other jurisdiction applicable to the offer and sale of Units under
this Offering, no prospectus or similar document need be delivered or filed,
other than any prescribed reports of the issue and sale of the Units.

     The Underwriter further covenants
and agrees to hold all non-public information concerning the Corporation
(“Confidential Information”) obtained in the strictest of confidence and not to
disclose such Confidential Information to any other party (except where
disclosure is required by law including in order to complete the Offering) and
not to use such Confidential Information for any purpose other than in
connection with this Offering. The Underwriter agrees that it shall take the
necessary steps to ensure that all Confidential Information is strictly
controlled with access limited to those employees, agents and advisors who need
to know such Confidential Information in connection with the performance by the
Underwriter of its duties under this Agreement and who understand the
confidential nature of such Confidential Information. In the event that the
Offering shall not be completed for any reason whatsoever, the Underwriter
agrees to return to the Corporation all copies of Confidential Information and
to retain no copies thereof (electronic or otherwise) or alternatively to
certify to the Corporation that is has destroyed all Confidential Information
and remains bound by this covenant which shall survive the completion of the
Offering or the termination of this Agreement.

     The Underwriter agrees to obtain
from each Substituted Purchaser an executed Subscription Agreement and deliver
such Subscription Agreements to the Corporation. In addition, the Underwriter
agrees to obtain from each Substituted Purchaser such forms, questionnaires and
undertakings as may be required by the TSXV and such other forms as may be
required by any Governmental Authority or the TSXV and provided by the
Corporation to the Underwriter for delivery hereunder. In addition, the
Underwriter represents and warrants that it is, and all Sub-Dealers are, duly
qualified to solicit and procure subscriptions for the Subscription Receipts in
the Qualifying Jurisdictions in connection with the Offering.

- 6 -

	2. 	Corporation’s Covenants

     The Corporation hereby covenants
to the Underwriter and its permitted assigns, and acknowledges that it is
relying on such covenants in purchasing the Units, that the Corporation
shall:

	 	(a) 	
      prior to the Closing Time, allow the Underwriter (and its
      counsel, consultants and other representatives) to conduct all due
      diligence investigations which the Underwriter may reasonably require or
      consider necessary in order to fulfill the Underwriter’s obligations as a
      registrant to complete the Offering as provided herein. The Corporation
      will provide to the Underwriter (and its counsel and consultants)
      reasonable access to the Corporation’s properties (if any), senior
      management personnel and corporate, financial and other records, for the
      purposes of conducting such due diligence. Without limiting the scope of
      the due diligence inquiry the Underwriter (or its counsel and consultants)
      may conduct, the Corporation shall also make available its directors,
      senior management, counsel and auditors to answer any questions which the
      Underwriter may have and to participate in one or more due diligence
      sessions to be held prior to Closing;

	 	 	 
	 	(b) 	
      duly execute the Subscription Agreements which have been
      duly completed by the Substituted Purchasers and duly, punctually and
      faithfully perform all the obligations to be performed by it under this
      Agreement and the Subscription Agreements;

	 	 	 
	 	(c) 	
      use its commercially reasonable efforts to fulfil or
      cause to be fulfilled, at or prior to the Closing Date, each of the
      conditions required to be fulfilled by it set out in Section 7;

	 	 	 
	 	(d) 	
      file or cause to be filed all documents, applications,
      forms or undertakings required to be filed by the Corporation and taken in
      connection with the purchase and sale of the Units and, so that the
      distribution of the Units may lawfully occur without the necessity of
      filing a prospectus in Canada or similar document in any other
      jurisdiction;

	 	 	 
	 	(e) 	
      file or cause to be filed all documents, applications,
      forms or undertakings with the TSXV and any other applicable regulating
      authority in connection with the Offering to ensure the Common Shares and
      the Common Shares underlying the Warrants are conditionally approved for
      listing on the TSXV at Closing;

	 	 	 
	 	(f) 	
      during the period commencing with the date hereof and
      ending on the Closing Date, promptly inform the Underwriter of the full
      particulars of any request of any Securities Commission or other
      securities commission or similar regulatory authority for any information,
      or the receipt by the Corporation of any communication from any Securities
      Commission or other securities regulatory authority, or any other
      competent authority relating to the Corporation or which may be relevant
      to the distribution of the Units;

	 	 	 
	 	(g) 	
      promptly comply, to the reasonable satisfaction of the
      Underwriter and the Underwriter’s Counsel, with the Applicable Securities
      Laws with respect to any material adverse change, change, occurrence or
      event of the nature referred to in paragraph 2(e) above;

	 	 	 
	 	(h) 	
      apply the net proceeds from the Offering in accordance
      with the description set forth in the press release of the Corporation
      dated April 20, 2007; and

	 	 	 
	 	(i) 	
      shall not offer, issue or sell, announce any offer,
      issuance or sale of, or negotiate or enter into any agreement to issue or
      sell, directly or indirectly, any Common Shares (including securities
      convertible or exchangeable into Common Shares) for a period of 180 days
      from

- 7 -

	 	the Closing Date, other than (i) pursuant to the Offering, (ii) upon exercise
      of any convertible securities, options or warrants of the Corporation outstanding
      on the date hereof, (iii) the grant or exercise of options pursuant to the
      Corporation’s existing stock option plan, and (iv) as a result of the
      acquisition of shares or assets of a Person acting at arm’s length
      with the Corporation within the meaning of the Income Tax Act (Canada)
      without the prior written consent of the Underwriter which shall not be
      unreasonably withheld or delayed.

	3. 	Representations and Warranties of the
      Corporation 

     The Corporation represents and
warrants to the Underwriter and acknowledges that the Underwriter is relying
upon such representations and warranties in connection with its execution and
delivery of this Agreement that:

	 	(a) 	
      the Corporation and each Subsidiary was duly incorporated
      or organized, as the case may be and is validly existing under the laws of
      its jurisdiction of incorporation or organization, as the case may be and
      has all requisite power and authority and is duly qualified to carry on
      its business as now conducted and to own, lease and operate its property
      and assets;

	 	 	 
	 	(b) 	
      all necessary corporate action has been taken by the
      Corporation or on its part to authorize the execution and delivery of and
      the performance of its obligations under this Agreement, the Subscription
      Agreements and the Warrant Indenture;

	 	 	 
	 	(c) 	
      this Agreement has been duly authorized, executed and
      delivered by the Corporation and (assuming enforceability against the
      other parties thereto) is a legal, valid and binding obligation of the
      Corporation enforceable against the Corporation in accordance with its
      terms, except as that enforcement may be limited by bankruptcy, insolvency
      and other laws affecting the rights of creditors generally and except that
      equitable remedies may be granted only in the discretion of a court of
      competent jurisdiction;

	 	 	 
	 	(d) 	
      the Subscription Agreements that are accepted by the
      Corporation have been duly authorized and, at the Closing Time, will be
      duly executed and delivered by the Corporation and (assuming
      enforceability against the other parties thereto) each will be a legal,
      valid and binding obligation of the Corporation enforceable against the
      Corporation in accordance with its terms, except as that enforcement may
      be limited by bankruptcy, insolvency and other laws affecting the rights
      of creditors generally and except that equitable remedies may be granted
      only in the discretion of a court of competent jurisdiction;

	 	 	 
	 	(e) 	
      the Warrant Indenture will be, at the Closing Time, duly
      executed and delivered by the Corporation and (assuming enforceability
      against the other parties thereto) will be a valid and binding obligation
      of the Corporation, enforceable against it in accordance with its terms,
      except that enforcement may be limited by bankruptcy, insolvency, and
      other laws affecting the rights of creditors generally, and except that
      equitable remedies may be granted only in the direction of a court of
      competent jurisdiction;

	 	 	 
	 	(f) 	
      the Broker Warrants will be, at the Closing Time, duly
      executed and delivered by the Corporation and (assuming enforceability
      against the other parties thereto) will be a valid and binding obligation
      of the Corporation, enforceable against it in accordance with its terms,
      except that enforcement may be limited by bankruptcy, insolvency, and
      other laws affecting the rights of creditors generally, and except that
      equitable remedies may be granted only in the direction of a court of
      competent jurisdiction;

- 8 -

	 	(g) 	
      the offer and sale of the Units to Substituted Purchasers
      in the Qualifying Jurisdictions, or any other jurisdiction in accordance
      with the terms of the Subscription Agreements and in the manner set out in
      this Agreement is permitted under Applicable Securities Laws and laws of
      other jurisdictions where the Units may be lawfully offered for sale by
      the Underwriter or any of their affiliates;

	 	 	 	 
	 	(h) 	
      the authorized and issued capital of the Corporation
      consists of an unlimited number of Common Shares, of which 31,260,068
      Common Shares have been validly issued, are outstanding as fully paid and
      non-assessable shares and were not issued in violation of any pre-emptive
      rights or other contractual rights to issue securities issued by the
      Corporation or of any applicable law and except for 3,332,000 stock
      options issued pursuant to the stock option plan of the Corporation and
      9,673,861 Common Share purchase warrants, the Corporation has not issued
      any securities convertible into shares of the Corporation and there are
      not securities issuable pursuant to any binding agreement, warrant, option
      or right for the purchase of any unissued securities of the
      Corporation;

	 	 	 	 
	 	(i) 	
      no Person has any agreement or option or any right or
      privilege (whether by law, pre- emptive or contractual) capable of
      becoming an agreement, including convertible securities, warrants or
      convertible obligations of any nature, for the purchase, subscription,
      allotment or issuance of any un-issued shares or other securities of the
      Corporation, except for:

	 	 	 	 
	 		(i) 	
      the Units issuable pursuant to this Agreement;

	 	 	 	 
	 		(ii) 	
      Common Shares issuable by the Corporation pursuant to
      stock options granted to employees, officers, directors and consultants of
      the Corporation, any broker warrants and the Warrants; and

	 	 	 	 
	 		(iii) 	
      other convertible securities outstanding as at the date
      hereof as publicly disclosed by the Corporation;

	 	 	 	 
	 	(j) 	
      the Units to be issued by the Corporation and sold
      pursuant to this Agreement, the Subscription Agreements and the Warrant
      Indenture have been duly authorized for issuance and sale by all necessary
      action on the part of the Corporation and, when issued and delivered by
      the Corporation against payment of the consideration therefor pursuant to
      this Agreement, the Subscription Agreements and the Warrant Indenture will
      have been validly issued, will be outstanding as fully paid and
      non-assessable and will not have been issued in violation of or subject to
      any pre-emptive rights or other contractual rights to purchase securities
      issued by the Corporation or in violation of any applicable law;

	 	 	 	 
	 	(k) 	
      the Corporation has all requisite corporate power and
      authority to: (i) execute and deliver this Agreement, the Warrant
      Indenture and the Subscription Agreement and perform its obligations
      thereunder; (ii) issue, sell and deliver the Units; and (iii) issue and
      deliver the Broker Warrants in accordance with the provisions of this
      Agreement;

	 	 	 	 
	 	(l) 	
      each of the Corporation and each Subsidiary:

	 	 	 	 
	 		(i) 	
      has complied with, and has conducted and is conducting
      its business in compliance in all material respects with all applicable
      laws, statutes, ordinances, regulations and rules in each jurisdiction in
      which it conducts business;

- 9 -

	 		(ii) 	
      is duly licensed, registered or qualified in all
      jurisdictions to enable its business to be carried on in all material
      respects as now conducted and its property and assets to be owned, leased
      and operated, and all such licences, registrations and qualifications are
      valid and subsisting and no such licence, registration or qualification
      contains any term, provision, condition or limitation which has or is
      likely to have any material adverse effect on its business as now
      conducted; and

	 	 	 	 
	 		(iii) 	
      is not in default in filing any government returns, or
      payment of any licence or registration or qualification fee owing to any
      Governmental Authority under the laws of each jurisdiction in which it
      conducts business;

	 	 	 	 
	 	(m) 	
      the only subsidiaries of the Corporation are SESI Systems
      Inc., Contech PCB Containment Technology Inc., SonoOil Inc. and Sonic
      Environmental Solutions Corp., and the Corporation has not entered into
      any agreement of any nature to acquire any additional Subsidiary. The
      Corporation has not entered into any agreement of any nature to acquire a
      controlling interest in any partnership, joint venture or other
      unincorporated organization. The Material Subsidiaries are the only
      subsidiaries, partnerships, joint ventures or unincorporated organizations
      whose assets or revenues, calculated on an individual basis, represent
      more than 10% of the consolidated assets or revenues of the
      Corporation;

	 	 	 	 
	 	(n) 	
      the Corporation is the beneficial owner of record of all
      of the issued and outstanding shares and other equity securities of each
      of its Subsidiaries, in each case free and clear of all mortgages, liens,
      charges, pledges, hypothecs, security interests, encumbrances, claims or
      other demands whatsoever, and all those shares have been validly issued,
      are issued and outstanding as fully paid and non-assessable shares and
      were not issued in violation of any pre-emptive rights or other
      contractual rights to issue securities issued by the Subsidiary or of any
      applicable law;

	 	 	 	 
	 	(o) 	
      no Person has any agreement or option or any right or
      privilege (whether by law, pre- emptive or contractual) capable of
      becoming an agreement, including convertible securities, warrants or
      convertible obligations of any nature, for the purchase, subscription,
      allotment or issuance of any un-issued shares or other securities of any
      Material Subsidiary;

	 	 	 	 
	 	(p) 	
      the audited consolidated financial statements of the
      Corporation for the years ended December 31, 2006 and 2005, including the
      notes thereto, have been prepared in accordance with Canadian generally
      accepted accounting principles consistently applied throughout the periods
      indicated and present fairly, completely and accurately the assets,
      liabilities (whether accrued, absolute, contingent or otherwise) and
      financial condition of the Corporation on a consolidated basis as at the
      respective dates indicated and the sales, earnings and results of
      operations of the Corporation on a consolidated basis throughout the
      periods indicated;

	 	 	 	 
	 	(q) 	
      the Corporation and its Material Subsidiaries maintain a
      system of internal accounting controls sufficient to provide reasonable
      assurance that:

	 	 	 	 
	 		(i) 	
      transactions are executed in accordance with management’s
      general or specific authorizations; and

	 	 	 	 
	 		(ii) 	
      transactions are recorded as necessary to permit
      preparation of financial statements in conformity with Canadian generally
      accepted accounting principles and to maintain accountability for
      assets;

- 10 -

	 	(r) 	
      the execution, delivery and performance of this
      Agreement, the Warrant Indenture and the Subscription Agreements by the
      Corporation and the completion of the transactions provided for in this
      Agreement will not (whether after the passage of time or notice or both)
      result in:

	 	 	 	 	 
	 		(i) 	
      the breach or violation of any of the provisions of, or
      constitute a default under, or a conflict with or cause the acceleration
      of, any obligation of the Corporation under:

	 	 	 	 	 
	 			(A) 	
      any indenture, agreement or other instrument to which the
      Corporation or any Material Subsidiary is a party or by which it or its
      properties are bound or affected;

	 	 	 	 	 
	 			(B) 	
      any provision of the articles, by-laws or resolutions of
      the board of directors (or any committee thereof) or shareholders of, the
      Corporation or any Material Subsidiary;

	 	 	 	 	 
	 			(C) 	
      any judgment, decree, order or award of any Governmental
      Authority having jurisdiction over the Corporation;

	 	 	 	 	 
	 			(D) 	
      any licence, permit, approval, consent or authorization
      issued to, held by or for the benefit of the Corporation or necessary to
      the operation of its business as now conducted; or

	 	 	 	 	 
	 			(E) 	
      any applicable law or statute, or any ordinance, rule,
      regulation, policy, order or ruling made thereunder; or

	 	 	 	 	 
	 		(ii) 	
      the creation or imposition of any mortgage, lien, charge,
      pledge, hypothec, security interest, encumbrance, claim or other demand
      whatsoever on any of the property or assets of the Corporation;

	 	 	 	 	 
	 	(s) 	
      none of the Corporation, any of its Material Subsidiaries
      or, to the knowledge of the Corporation, any other party, is in default or
      alleged to be in default in the performance of any term or obligation to
      be performed by it under any material contract to which the Corporation or
      any Material Subsidiary is a party or by which the Corporation or any
      Material Subsidiary is bound or affected, and no event, condition or
      occurrence exists that, after notice or lapse of time or both, would
      constitute such a default which in any way materially adversely affects or
      may materially adversely affect the business, operations, assets,
      liabilities, capital, prospects, condition (financial or otherwise) or
      results of operations of the Corporation and its Material Subsidiaries on
      a consolidated basis;

	 	 	 	 	 
	 	(t) 	
      no legal or governmental proceedings are pending to which
      the Corporation or any Material Subsidiary is a party or to which the
      property of the Corporation or any Material Subsidiary is subject, and no
      such proceedings have been threatened against or, to the knowledge of the
      Corporation, are contemplated with respect to the Corporation or any
      Material Subsidiary or with respect to any of their respective properties
      which would be material to the Corporation and its subsidiaries on a
      consolidated basis;

	 	 	 	 	 
	 	(u) 	
      except as provided herein, there is no Person, firm or
      corporation which has been engaged by the Corporation to act for the
      Corporation and which is entitled to any brokerage or finderメs fee in
      connection with this Agreement or the transactions contemplated
      hereunder;

- 11 -

	 	(v) 	
      the Corporation and each Subsidiary has filed all
      required returns and information in respect of income, sales, capital,
      excise or other taxes, and has paid or made adequate provision for the
      payment of all taxes (or payments in lieu of taxes) levied on its property
      or income which are due and payable, including interest and penalties, or
      has accrued such amounts in its financial statements for the payment of
      such taxes except for charges, fees or dues which are not material in
      amount or which are not delinquent or if delinquent are being contested,
      and there is no material action, suit, proceeding, investigation, audit or
      claim pending, or to its knowledge, threatened by any governmental
      authority regarding any taxes, other than a social services tax assessment
      by the Province of British Columbia with an exposure of $270,000 plus
      interest in respect of the Corporation’s Annacis Island plant;

	 	 	 
	 	(w) 	
      the Corporation and its Subsidiaries are in compliance
      with each material licence held by them and are not in violation of, or in
      default in any respect under, any applicable statutes and regulations and
      all other ordinances, rules, regulations, orders or decrees having the
      force of law of any Governmental Authority agency or body having,
      asserting or claiming jurisdiction over it or over any part of their
      respective operations or assets;

	 	 	 
	 	(x) 	
      unless otherwise disclosed by the Corporation to the
      Underwriter, the Corporation is the absolute legal and beneficial owner,
      and has good and marketable title to, all of the material property,
      investments or assets described in the Disclosure Documents or the
      Corporation and the Material Subsidiaries each possess all licences,
      permits, franchises, certificates, registrations and authorizations
      necessary to conduct their respective businesses and own their respective
      property and assets and none are in default or breach of any of the
      foregoing, except for failures to possess, defaults or breaches which
      individually or in the aggregate would not reasonably be expected to have
      a material adverse effect on the Corporation, and all such licences,
      permits, franchises, certificates, registrations or authorizations are
      renewable or can be replaced on terms or conditions that would not
      reasonably be expected to have a material adverse effect on the
      Corporation;

	 	 	 
	 	(y) 	
      the Corporation is a reporting issuer under the
      securities laws of Alberta, British Columbia and Ontario, is not in
      default of any requirement of Applicable Securities Laws and the
      Corporation is not included on a list of defaulting reporting issuers
      maintained by the Securities Commissions of the Provinces of Alberta,
      British Columbia and Ontario;

	 	 	 
	 	(z) 	
      neither the Corporation nor any of the Material
      Subsidiaries is a party to any collective agreement, and to the knowledge
      of the Corporation there is no organization effort being made by or on
      behalf of any labour union with respect to its employees or those of its
      Subsidiaries;

	 	 	 
	 	(aa) 	
      neither the Corporation nor any of the Material
      Subsidiaries own any real property and none has entered into any agreement
      to acquire any real property;

	 	 	 
	 	(bb) 	
      the Corporation, on behalf of itself and each Subsidiary,
      maintain insurance policies with reputable insurers against risks of loss
      of or damage to its properties, assets and business of such types as are
      appropriate to its business in such amounts and against such risks as are
      reasonably prudent and neither the Corporation nor a Subsidiary is in
      default with respect to any provisions of such policies and none have
      failed to give any notice or to present any claim under any such policy in
      a due and timely fashion;

- 12 -

	 	(cc) 	
      except as would not individually or in the aggregate
      reasonably be expected to have a material adverse effect, (i) each of the
      current and former employees of the Corporation and each Material
      Subsidiary, including for greater certainty each of the officers of the
      Corporation and each Material Subsidiary having access to Intellectual
      Property, has entered into a proprietary rights agreement with their
      respective employer, being the Corporation or a Material Subsidiary, which
      contains customary confidentiality, non-competition and non- disclosure
      covenants;

	 	 	 
	 	(dd) 	
      except with respect to such matters that have been
      disclosed to counsel to the Underwriter, (i) the minute books and
      corporate records of the Corporation and each Material Subsidiary for the
      periods from its date of incorporation to the date of examination thereof
      are the minute books and records of the Corporation and each Material
      Subsidiary and contain copies of all material proceedings (or certified
      copies thereof) of the shareholders, the board of directors and all
      committees of the board of directors of the Corporation and each Material
      Subsidiary; and (ii) there have been no other meetings, resolutions or
      proceedings of the shareholders, board of directors or any committee of
      the board of directors of the Corporation or any Material Subsidiary to
      the date of review of such corporate records and minute books not
      reflected in such minute books and other corporate records that have not
      been made available to Counsel to the Underwriter, in connection with due
      diligence investigations of the Corporation and each Material
      Subsidiary;

	 	 	 
	 	(ee) 	
      subject to the provisions National Instrument 45-102-
      Resale of Securities, the Units will not be subject to a restricted
      period or to a statutory hold period under Applicable Securities Laws or
      to any resale restriction under the policies of the TSXV which extends
      beyond four months and one day after the Closing Date;

	 	 	 
	 	(ff) 	
      since December 31, 2004, the Corporation has been in
      compliance with its timely and continuous disclosure obligations under
      Applicable Securities Laws and the policies, rules and regulations of the
      TSXV and, without limiting the generality of the foregoing, the
      Corporation does not possess any material undisclosed information and
      there has not occurred any material change (actual, anticipated,
      contemplated or threatened, whether financial or otherwise) in the
      business, affairs, results, operations, assets or liabilities of the
      Corporation and its Material Subsidiaries on a consolidated basis, which
      has not been publicly disclosed;

	 	 	 
	 	(gg) 	
      the Corporation is in compliance with Applicable
      Securities Laws and all requirements of the TSXV applicable to the
      Corporation and, without limiting the generality of the foregoing, the
      board of directors of the Corporation has adopted policies (the
      “Policies”) regarding confidentiality of information and trading by
      insiders which comply with the guidelines of the TSXV. The audit committee
      of the board of directors of the Corporation has adopted a charter which
      complies with Applicable Securities Laws. The board of directors has
      instituted procedures to ensure compliance by its employees, officers and
      directors with the Policies;

	 	 	 
	 	(hh) 	
      all material statements set forth in the Disclosure
      Documents were true, correct, and complete in all material respects as of
      the date thereof, and did not contain any misrepresentation as of the date
      of such statements and the Corporation has not filed any confidential
      material change reports since the date of such statements which remain
      confidential as at the date hereof;

- 13 -

	 	(ii) 	
      other than as disclosed in the Disclosure Documents, no
      material fact or material information has arisen or has been discovered
      which would have been required to have been stated in the Disclosure
      Documents had the fact arisen or been discovered on, or prior to, the date
      of such Disclosure Documents;

	 	 	 
	 	(jj) 	
      no Governmental Authority has issued any order preventing
      or suspending the trading of the Corporation’s securities, the
      distribution of the Units or the Warrants and the Corporation is not aware
      of any investigation, order, inquiry or proceeding which has been
      commenced or which is pending, contemplated or threatened by any such
      Governmental Authority;

	 	 	 
	 	(kk) 	
      the Corporation’s Auditors are independent public
      accountants as required under Applicable Securities Laws and there has
      never been a reportable disagreement (within the meaning of National
      Instrument 51-102 – Continuous Disclosure Obligations) between the
      Corporation and the Corporation’s Auditors;

	 	 	 
	 	(ll) 	
      with respect to each premises of the Corporation which is
      material to the Corporation and which the Corporation occupies as tenant
      (the “Leased Premises”), the Corporation occupies the Leased
      Premises and has the exclusive right to occupy and use the Leased Premises
      and each of the leases pursuant to which the Corporation occupies the
      Leased Premises is in good standing and in full force and
effect;

	 	 	 
	 	(mm) 	
      other than as disclosed in the Disclosure Documents, none
      of the directors, officers or employees of the Corporation or any
      associate or affiliate of any of the foregoing had or has any material
      interest, direct or indirect, in any material transaction or any proposed
      material transaction with the Corporation which materially affects, is
      material to or will materially affect the Corporation;

	 	 	 
	 	(nn) 	
      the Corporation owns, or has obtained valid and
      enforceable licenses for, or other rights to use, the Intellectual
      Property as are sufficient to currently conduct its business. The
      Corporation has no knowledge that it will be unable to obtain any rights
      or licences to use all Intellectual Property necessary for the conduct of
      its business, including the commercialization of the Corporation’s
      products and potential products. The Corporation has no knowledge of third
      parties who have rights to any Intellectual Property, except for the
      ownership rights of the owners of the Intellectual Property which is
      licensed to the Corporation. To the Corporation’s knowledge: (i) there is
      no infringement by third parties of any Intellectual Property; (ii) there
      is no pending or threatened action, suit, proceeding or claim by others
      challenging the Corporation’s right in or to any Intellectual Property,
      and the Corporation is unaware of any facts which form a reasonable basis
      for any such claim; (iii) there is no pending or threatened action, suit,
      proceeding or claim by others challenging the validity or enforceability
      of any Intellectual Property, and the Corporation is unaware of any
      finding of unenforceability or invalidity of the Intellectual Property;
      (iv) there is no pending or threatened action, suit, proceeding or claim
      by others that the Corporation infringes or otherwise violates (or would
      infringe or otherwise violate upon commercialization of the Corporation’s
      product or product candidates) any patent, trademark, copyright, trade
      secret or other Intellectual Property or proprietary rights of others; (v)
      there is no patent or patent application that contains claims that
      interfere with the issued or pending claims of any of the Intellectual
      Property; and (vi) there is no prior art that necessarily renders any
      patent application owned by the Corporation unpatentable that has not been
      disclosed to the US Patent and Trademark
Office;

- 14 -

	 	(oo) 	
      the Corporation and its Subsidiaries have been and are,
      and their businesses have been and are operated, in material compliance
      with all applicable Environmental Laws and no condition exists or event
      has occurred which, with or without notice or the passage of time or both,
      would constitute a material violation of or give rise to liability under
      any applicable Environmental Laws; provided that pursuant to a letter
      dated April 16, 2007 by the BC Ministry of Environment (“MOE”), MOE
      identified minor non-compliance by Contech at its operating facility
      relating to applicable environmental regulations that arose as a result of
      a routine site inspection by MOE officials. MOE did not issue a penalty or
      propose enforcement proceedings, but did request an action plan be
      implemented to correct the non- compliance. Contech responded to MOE and
      has implemented the required action plan;

	 	 	 
	 	(pp) 	
      the Corporation and its Subsidiaries have obtained all
      material Environmental Permits required for the operation of their
      businesses, or any part thereof, as currently carried on. Each
      Environmental Permit is valid, subsisting and in good standing and the
      Corporation and its Subsidiaries are not in default or breach of any
      Environmental Permit and no proceeding is pending or threatened to revoke,
      amend or limit any Environmental Permit;

	 	 	 
	 	(qq) 	
      the Corporation and its Subsidiaries have not used or
      permitted to be used any of their assets or facilities, whether owned,
      leased, occupied, controlled or licensed or which they owned, leased,
      occupied, controlled or licensed at any prior time, to generate,
      manufacture, process, distribute, use, treat, store, dispose of, transport
      or handle any Hazardous Substance except in compliance with the
      Environmental Permits and all applicable Environmental Laws;

	 	 	 
	 	(rr) 	
      except as identified in paragraph (oo) above, the
      Corporation and its Subsidiaries have not received any notice of or been
      prosecuted for an offence alleging violation of or non- compliance with
      any Environmental Law, and have not settled any allegation of violation or
      non-compliance short of prosecution. There are no orders of Environmental
      Authorities relating to environmental matters requiring any work, repairs,
      construction or capital expenditures to be made with respect to the
      business or any property, facilities or assets (whether currently owned,
      leased, occupied, controlled or licensed or owned, leased, occupied,
      controlled or licensed at any time prior to the date hereof) of the
      Corporation and its Subsidiaries;

	 	 	 
	 	(ss) 	
      except in compliance with the Environmental Permits and
      all Environmental Laws, the Corporation and its Subsidiaries have not
      caused, allowed or permitted, or have any knowledge of, the release of any
      Hazardous Substance into the environment, in any manner whatsoever, or the
      presence of any Hazardous Substance on, under, around or from any of their
      properties, facilities or other assets (whether owned, leased, occupied,
      controlled or licensed), or any property, facility or other asset which
      they owned, controlled, occupied, licensed or leased at any time prior to
      the date hereof, or any such release or presence on or from a property,
      facility or other asset owned, leased, occupied, managed, controlled or
      licensed by third parties but with respect to which the Corporation and
      its Subsidiaries are or may reasonably be alleged to have liability. All
      Hazardous Substances used in whole or in part by the Corporation and its
      Subsidiaries or resulting from the Corporation’s and each of its
      Subsidiaries’ business have been disposed of, treated or stored in
      compliance with all Environmental Permits and all Environmental
    Laws;

	 	 	 
	 	(tt) 	
      except as identified in paragraph (oo) above, the
      Corporation and its Subsidiaries have not received any notice from any
      Environmental Authority that the Corporation’s or any of the Subsidiaries’
      business or the operation of any of the Corporation’s or the Subsidiaries’
      property, facilities or other assets is in violation of any Environmental
      Law or any

- 15 -

	 		
      Environmental Permit or that the Corporation or the
      Subsidiaries are responsible (or potentially responsible) for the clean-up
      of any Hazardous Substances at, on or beneath any of their property,
      facilities or other assets (whether currently owned, leased, occupied,
      managed, controlled or licensed, or owned, leased, occupied, managed,
      controlled or licensed at any time prior to the date hereof), or at, on or
      beneath any other land or in connection with any waste or contamination
      migration to or from any of the Corporation’s or the Subsidiaries’
      property, facilities or other assets; and

	 	 	 
	 	(uu) 	
      except as disclosed in the Disclosure Documents, neither
      the Corporation nor its Subsidiaries are the subject of any international,
      foreign, federal, provincial, municipal or private action, suit,
      litigation, arbitration proceeding, governmental proceeding, investigation
      or claim involving a demand for damages or other potential liability with
      respect to violations of Environmental Laws or Environmental
    Permits.

	4. 	Trades of Securities by Directors and
      Officers of the Corporation 

     The Underwriter acknowledges and
agrees that each director and officer of the Corporation that executes a lock-up
agreement in connection with the Offering (collectively, the “Restricted
Persons”) is entitled to dispose of Common Shares and any securities
convertible into or exchangeable for Common Shares (the “Securities”)
provided that the aggregate number of Securities disposed of by the Restricted
Persons, on an as converted or exchanged basis, does not exceed 200,000 Common
Shares during the 120 day period immediately following the Closing (the
“Permitted Maximum Sales Threshold”). The Corporation covenants to
monitor and notify the Underwriter of all trades of Securities by the Restricted
Persons during the 120 day period immediately following the Closing, and to
promptly notify the Underwriter if the Permitted Maximum Sales Threshold has
been met.

	5. 	Underwriter’s Compensation

     In consideration for the
Underwriter’s services in connection with the issue and sale of the Units under
the terms of this Agreement, the Corporation shall (i) pay to the Underwriter,
at the Closing Time a fee (the “Underwriter’s Fee”) equal to 7% of the
gross proceeds of the Offering (or $0.0315 per Unit) up to maximum gross
proceeds of $5,499,999.90 and such amount shall be paid by way of set-off
against the aggregate purchase price of the Units payable at Closing; and (ii)
issue to the Underwriter and Sub-Dealers, if any, on written direction of the
Underwriter, the Broker Warrants.

	6. 	Share Purchase Price, Underwriter’s Fee and
      Delivery of and Payment for Certificates 

     The purchase and sale of the
Units shall be completed at the offices of the Corporation’s Counsel, in the
City of Vancouver, British Columbia, at the Closing Time.

     The delivery of the Units is to
be made to the Underwriter at the Closing Time in the form of definitive
certificates, with each certificate representing the number of Units purchased
by each of the Substituted Purchasers whose Subscription Agreement has been
accepted by the Corporation and registered in the name of each such Substituted
Purchaser, or as otherwise directed by the Underwriter (at least 24 hours prior
to the Closing Time), against payment to the Corporation of the purchase price
therefor by certified cheque, bank draft, electronic funds transfer or other
payment mechanism acceptable to the Corporation.

     At the Closing Time, the
Underwriter will deliver to the Corporation the aggregate purchase price for the
Units (which may be partially or fully delivered through cheques of Substituted
Purchasers made payable to the Corporation), net of the Underwriter’s Fee and
the Underwriter’s expenses incurred to the Closing Time 

- 16 -

and which are payable by the Corporation pursuant to Section 13
and the Corporation will deliver to the Underwriter the Broker Warrants.

	7. 	Conditions of the Underwriter’s
      Obligations 

     The obligations of the
Underwriter and Substituted Purchasers to purchase and pay for any of the Units
shall be subject to the performance by the Corporation of its covenants and
agreements hereunder and to the satisfaction of the following additional
conditions at the Closing Time:

	 	(a) 	
      the Underwriter shall have completed its due diligence
      investigations, which in the Underwriter’s opinion has not revealed any
      material information or fact not generally known to the public which
      might, acting reasonably, affect the market price of the Common Shares,
      the quality of the investment or the marketability of the
  Offering;

	 	 	 
	 	(b) 	
      the Underwriter shall have received a favourable legal
      opinion dated the Closing Date from the Corporation’s Counsel, addressed
      to the Underwriter and the Substituted Purchasers substantially in the
      form annexed hereto as Schedule “A”, and addressing any other matters
      reasonably requested by the Underwriter. In giving its opinion,
      Corporation’s Counsel may rely (i) exclusively upon opinions of local
      counsel as to the matters mentioned therein relating to jurisdictions
      where Corporation’s Counsel does not practice law and (ii) as to matters
      of fact, upon certificates of officers of the Corporation and of public
      officials;

	 	 	 
	 	(c) 	
      the Underwriter shall have received a favourable legal
      opinion dated the Closing Date from the Corporation’s U.S. Counsel,
      addressed to the Underwriter and the Substituted Purchasers substantially
      in the form annexed hereto as Schedule “B”, and addressing any other
      matters reasonably requested by the Underwriter;

	 	 	 
	 	(d) 	
      the Underwriter shall have received an undertaking in its
      favour executed by the directors and officers of the Corporation (in
      respect of any securities of the Corporation held directly or indirectly)
      whereby, subject to Section 4, such individuals agree not to offer or
      sell, agree to offer or sell, or enter into an arrangement to offer or
      sell any Common Shares or other securities of the Corporation, or
      securities convertible into, exchangeable for, or otherwise exercisable to
      acquire any securities of the Corporation at any time until the date which
      is 120 days following the Closing Date without the prior written consent
      of the Corporation and the Underwriter and except pursuant to a formal
      takeover bid made in respect of the Corporation;

	 	 	 
	 	(e) 	
      the Underwriter shall have received certified copies of
      the articles and by-laws of the Corporation, and all resolutions and
      by-laws of or in respect of the Corporation passed in connection with the
      transactions, actions, events and conditions contemplated by this
      Agreement, the Warrant Indenture, and the Subscription Agreements
      including, without limitation, resolutions authorizing this Agreement, the
      Warrant Indenture, the Subscription Agreements and the issuance and sale
      of the Units and Broker Warrants and the transactions, actions, events and
      conditions contemplated hereby or such other authorizing documents
      acceptable to the Underwriter;

	 	 	 
	 	(f) 	
      the Underwriter shall have received a certificate, or
      certificates, dated the Closing Date and executed by the President and
      Chief Executive Officer and the Chief Financial Officer of the Corporation
      (or such other officers of the Corporation as may be acceptable to the
      Underwriter), on behalf of the Corporation, without personal liability, to
      the effect that:

- 17 -

	 		
      (i) no order, ruling or determination suspending or cease
      trading the Common Shares has been issued, and no proceedings for that
      purpose have been instituted or, to the knowledge of such officers,
      contemplated or threatened by any Securities Commission;

	 	 	 
	 		
      (ii) the representations and warranties of the
      Corporation contained in this Agreement are true and correct as of the
      Closing Time with the same force and effect as if made at and as of the
      Closing Time;

	 	 	 
	 		
      (iii) the Corporation has complied with all the terms and
      conditions of this Agreement on its part to be complied with at or before
      the Closing Time;

	 	 	 
	 		
      (iv) as to such other matters of a factual nature as are
      appropriate and usual in the circumstances and as the Underwriter or the
      Underwriter’s Counsel may reasonably request;

	 	 	 
	 	(g) 	
      the Underwriter shall be satisfied that the Corporation
      has obtained all requisite approvals and consents in connection with this
      Offering from all necessary Governmental Authorities;

	 	 	 
	 	(h) 	
      the Corporation shall have delivered the certificates
      representing the Units in accordance with Section 6;

	 	 	 
	 	(i) 	
      the Corporation shall have delivered the Broker Warrants
      to the Underwriter;

	 	 	 
	 	(j) 	
      the Underwriter shall have received its fee and
      reimbursement for expenses incurred to the Closing Date in the manner
      specified in Section 6;

	 	 	 
	 	(k) 	
      the Warrant Indenture shall have been duly executed and
      delivered by the Corporation and Pacific Corporate Trust Company, in a
      form satisfactory to the Underwriter; and

	 	 	 
	 	(l) 	
      the Underwriter shall have received a copy of a letter
      from the TSXV confirming that the Units have been conditionally accepted
      for listing on the TSXV.

	8. 	Termination Events 

     The Underwriter shall be entitled
to terminate its obligations hereunder by written notice to that effect given to
the Corporation at or prior to the Closing Time if:

	 	(a) 	
      material change - there shall be any material
      change in the affairs of the Corporation that in the reasonable opinion of
      the Underwriter has or would be expected to have a material adverse effect
      on the market price or value of the Common Shares or any other securities
      of the Corporation;

	 	 	 
	 	(b) 	
      undisclosed fact - the Underwriter determines, as
      a result of its due diligence review or otherwise, that there exists any
      fact or circumstance relating to the Corporation not generally disclosed
      to the public which, in the reasonable opinion of the Underwriter, would
      have a significant adverse effect on the market price or value of the
      Units;

	 	 	 
	 	(c) 	
      breach - the Corporation is in breach of any
      material term, condition or covenant contained in this Agreement and the
      Engagement Letter, or if any material representation or warranty given by
      the Corporation in this Agreement or otherwise becomes or is
  false;

- 18 -

	 	(d) 	
      litigation and regulatory out - any inquiry,
      action, suit, investigation or other proceeding (whether formal or
      informal) is commenced, announced or threatened or any order made by any
      federal, provincial, state, municipal or other governmental department,
      commission, board, bureau, agency or instrumentality including, without
      limitation, any securities regulatory authority or any law or regulation
      is enacted or changed which in the opinion of the Underwriter, acting
      reasonably, seriously and adversely affects or will seriously and
      adversely affect the Offering or the market price or value of the Units;
      or

	 	 	 
	 	(e) 	
      disaster out - if there should develop, occur or
      come into effect or existence any event, action, state, condition
      (including, without limitation, an act of terrorism) or major financial
      occurrence of national or international consequence or any law or
      regulation which in the reasonable opinion of the Underwriter seriously
      adversely affects, or involves, or will, or could reasonably be expected
      to, seriously adversely affect, or involve, the financial markets or the
      business, operations or affairs of the
Corporation.

	9. 	Exercise of Termination Right
  

     If this Agreement is terminated
by the Underwriter pursuant to Section 8, there shall be no further liability on
the part of the Underwriter or of the Corporation to the Underwriter, except in
respect of any liability which may have arisen or may thereafter arise under
Sections 11, 12 and 13. The right of the Underwriter to terminate its
obligations under this Agreement are in addition to such other remedies as it
may have in respect of any default, act or failure to act of the Corporation in
respect of any of the matters contemplated by this Agreement.

	10. 	Survival of Representations and
      Warranties 

     All terms, warranties,
representations, covenants, indemnities and agreements herein contained or
contained in any documents delivered pursuant to this Agreement and in
connection with the transactions herein contemplated shall survive the purchase
of the Units by the Substituted Purchasers and continue in full force and effect
for the benefit of the Underwriter and/or the Corporation, as the case may be,
for a period of three years after the Closing Date (other than the obligations
of the Corporation set forth in Sections 11, 12 and 13, which will continue
indefinitely) regardless of the Closing of the Offering and regardless of any
investigations which may be carried out by the Underwriter or on its behalf and
shall not be limited or prejudiced by any investigation made by or on behalf of
the Underwriter in connection with the purchase and sale of the Units or
otherwise. 

	11. 	(a) 	Indemnity 

     The Corporation shall indemnify
and save harmless the Underwriter, its affiliates and each of its respective
directors, officers, employees, partners, shareholders, subsidiaries, agents and
any Person who may control any of the Underwriter (each, an “Indemnified
Party”) from and against all liabilities, claims, actions (including
shareholder actions, derivative or otherwise), suits, proceedings, losses,
costs, damages and expenses of whatever nature or kind, joint or several,
including without limitation the aggregate amount paid in reasonable settlement
of any actions, suits, proceedings, investigations or claims and the reasonable
fees, expenses and taxes of their counsel that may be incurred in advising with
respect to and/or defending any action, suit, proceedings, investigation or
claim (collectively “Claims”) that may be made or threatened against any
Indemnified Party or in enforcing this Agreement (including the indemnity
provisions thereof) or to which any Indemnified Party may become subject or
otherwise involved in any capacity insofar as the Claims relate to, and caused
by, result from, arise out of or based upon, directly or indirectly, the
Offering or the engagement of the Underwriter under the terms of this Agreement,
including, without limitation, Claims in any way caused by, or arising directly
or indirectly from, or in consequence of:

- 19 -

	 	(i) 	
      any breach of any representation or warranty of the
      Corporation contained herein or the failure of the Corporation to comply
      with its obligations hereunder;

	 	 	 
	 	(ii) 	
      any information or statement (except any information or
      statement relating solely to the Underwriter or any of its directors,
      officers, employees, shareholders or agents) contained in the Disclosure
      Documents or in any certificate or other document of the Corporation
      delivered under or pursuant to this Agreement which at the time and in the
      light of the circumstances under which it was made contains or is alleged
      to contain a misrepresentation or to be untrue, false or
  misleading;

	 	 	 
	 	(iii) 	
      any omission or alleged omission to state in the
      Disclosure Documents or in any certificate or other document of the
      Corporation delivered under or pursuant to this Agreement any fact (except
      facts relating solely to the Underwriter or any of its directors,
      officers, employees, shareholders or agents) required to be stated in such
      document or necessary to make any statement in such document not
      misleading in light of the circumstances under which it was
made;

	 	 	 
	 	(iv) 	
      any order made or enquiry, investigation or proceedings
      commenced or threatened by any securities regulator or other competent
      authority (A) based upon any untrue statement or omission or alleged
      untrue statement or alleged omission or any misrepresentation or alleged
      misrepresentation in any Disclosure Document (except a statement or
      omission or alleged statement or omission relating solely to the
      Underwriter or any of its directors, officers, employees, shareholders or
      agents), (B) based upon any failure of the Corporation or its officers and
      directors to comply with Applicable Securities Laws and the laws of those
      jurisdictions in which the Units are offered and sold (other than any
      failure or alleged failure to comply by the Underwriter or any of its
      directors, officers, employees, shareholders or agents), or (C) preventing
      or restricting the trading in or the sale or distribution of the Units in
      the Qualifying Jurisdictions (other than any failure or alleged failure to
      comply by the Underwriter or any of its directors, officers, employees,
      shareholders or agents); or

	 	 	 
	 	(v) 	
      the non-compliance or alleged non-compliance by the
      Corporation or its insiders with Applicable Securities Laws, including the
      Corporation’s non-compliance with any statutory requirement to make any
      document available for inspection,

provided that, if and to the extent that a court of competent
jurisdiction in a final judgment from which no appeal can be made or a
regulatory authority in a final ruling from which no appeal can be made shall
determine that the liabilities, claims, actions, suits, proceedings, losses,
costs, damages or expenses resulted from the gross negligence, fraud or wilful
misconduct of an Indemnified Party claiming indemnity, this indemnity shall not
apply.

The Corporation also agrees that no Indemnified Party shall
have any liability (whether direct or indirect, in contract or tort or
otherwise) to the Corporation or any Person asserting claims on behalf of or in
right of the Corporation for or in connection with this Agreement or the
Offering, except to the extent any losses, expenses, claims, actions, damages or
liabilities incurred by the Corporation are determined by a court of competent
jurisdiction in a final judgement that has become non-appealable to have
resulted primarily from the gross negligence or wilful misconduct of such
Indemnified Party.

- 20 -

	 	(b) 	Notification of Claims

     If any Claim is asserted against
an Indemnified Party, such Indemnified Party will notify the Corporation as soon
as possible of the nature of such Claim (provided that any failure to so notify
shall not relieve the Corporation from liability, except and only to the extent
that the failure materially prejudices the Corporation) and the Corporation
shall be entitled (but not required) to assume the defence of any suit brought
to enforce such Claim; provided, however, that the defence shall be conducted
through legal counsel acceptable to the Indemnified Party, acting reasonably,
and that no settlement of any such Claim may be made by the Corporation or the
Indemnified Party without the prior written consent of the other party, such
consent not to be unreasonably withheld or delayed, and the Corporation shall
not be liable for any settlement of any such Claim unless it has consented in
writing to such settlement.

	 	(c) 	Right of Indemnity in Favour of Others
    

     With respect to any Indemnified
Party who is not a party to this Agreement, the Underwriter shall obtain and
hold the rights and benefits of this Section 11 in trust for and on behalf of
such Indemnified Party.

	 	(d) 	Retaining Counsel 

     In any Claim, the Indemnified
Party shall have the right to retain counsel to act on behalf of the Indemnified
Party and to participate in the defence thereof, provided that the fees and
disbursements of such counsel shall be paid by the Indemnified Party unless: (i)
the Corporation and the Indemnified Party shall have mutually agreed to the
retention of the counsel; (ii) the Corporation fails to assume the defence of
such Claim on behalf of the Indemnified Party within a reasonable time of
receiving written notice to assume the defence of such Claim; or (iii) the named
parties to any such Claim (including any added third party) include both the
Indemnified Party and the Corporation and the Indemnified Party shall have been
advised by counsel that representation of the Indemnified Party by counsel for
the Corporation is inappropriate as a result of potential or actual differing
interests of those represented; in each of which cases under (ii) and (iii)
above the Corporation shall not have the right to assume the defence of such
Claim on behalf of the Indemnified Party but the Corporation shall be liable to
pay the reasonable fees and disbursements of counsel to the Indemnified Party,
provided that the Corporation shall not be obligated to pay the fees and
disbursements for more than one legal counsel on behalf of an Indemnified Party
under this Paragraph 11(d).

	 	(e) 	Settlements 

     The Corporation will not, without
the Underwriter’s prior written consent, settle, compromise, consent to the
entry of any judgment in or otherwise seek to terminate any action, suit,
proceeding, investigation or claim in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Party is a party thereto)
unless such settlement, compromise, consent or termination includes a release of
each Indemnified Party from any liabilities arising out of such action, suit,
proceeding, investigation or claim.

	 	(f) 	Compensation for Personnel Time
  

     The Corporation agrees to
reimburse the Underwriter monthly for the time spent by its personnel in
connection with any Claim at their normal per diem rates. The Corporation
also agrees that if any action, suit, proceeding or claim shall be brought
against, or an investigation commenced in respect of the Corporation or the
Corporation and the Underwriter, and personnel of the Underwriter shall be
required to testify, participate or respond in respect of or in connection with
the Offering or this Agreement, the Underwriter shall have the right to employ
its own counsel in connection therewith and the Corporation will reimburse the
Underwriter monthly for the time spent by its personnel in connection therewith
at their normal per diem rates together 

- 21 -

with such disbursements and reasonable out-of-pocket expenses
as may be incurred, including fees and disbursement of the Underwriter’s
counsel.

	12. 	(a) 	Contribution 

     In order to provide for a just
and equitable contribution in circumstances in which the indemnity provided in
Section 11 would otherwise be available in accordance with its terms but is, for
any reason, held to be unavailable to or unenforceable by the Underwriter or
enforceable otherwise than in accordance with its terms, the Corporation and the
Underwriter shall contribute to the aggregate of all claims, expenses, costs and
liabilities (including any legal expenses reasonably incurred by the Indemnified
Party in connection with any claim which is the subject of this section) and all
losses (other than loss of profits) of a nature contemplated in Section 11 in
such proportions so that the Underwriter is responsible for the portion
represented by the percentage that the aggregate fee payable by the Corporation
to the Underwriter bear to the aggregate purchase price of the Units and the
Corporation is responsible for the balance. The Underwriter shall not in any
event be liable to contribute, in the aggregate, any amounts in excess of such
aggregate fee actually received by the Underwriter. However, no party who has
engaged in any fraud, fraudulent misrepresentation, wilful misconduct or gross
negligence shall be entitled to claim contribution from any Person who has not
engaged in such fraud, fraudulent misrepresentation, wilful misconduct or gross
negligence.

	 	(b) 	Right of Contribution in Addition to Other
      Rights 

     The rights to contribution
provided in this Section 12 shall be in addition to and not in derogation of any
other right to contribution which the Underwriter may have by statute or
otherwise at law.

	13. 	Expenses 

     The Corporation agrees to pay all
costs, fees, and expenses incidental to the performance of the obligations set
out in this Agreement, whether incurred by the Corporation or the Underwriter,
including, without limitation, all costs and expenses incidental to:

	 	(a) 	
      the fees and disbursements of the Corporation’s Counsel,
      the Corporation’s Auditors and any other experts, advisors or consultants
      retained by the Corporation;

	 	 	 
	 	(b) 	
      the reasonable fees and disbursements of Underwriter’s
      Counsel, plus applicable taxes (which fees and disbursements incurred to
      the Closing Date shall be set off against the aggregate purchase price of
      the Units payable at Closing);

	 	 	 
	 	(c) 	
      the preparation, printing, reproduction and transmission
      of the Investor Presentation;

	 	 	 
	 	(d) 	
      the disbursements of the Underwriter, including but not
      limited to travel and communication expenses, database service expenses,
      courier charges and any other advisors retained by the Underwriter (which
      fees and disbursements incurred to the Closing Date shall be set off
      against the aggregate purchase price of the Units payable at
    Closing);

	 	 	 
	 	(e) 	
      the preparation, issuance and delivery to the Underwriter
      of any certificates evidencing the Units, including all fees in connection
      with the services of the registrar and transfer agent; and

	 	 	 
	 	(f) 	
      all fees payable under Applicable Securities Laws,
      payable under the laws of any jurisdiction and payable to the TSXV in
      connection with the transactions contemplated in this
  Agreement.

- 22 -

	14. 	Notices 

     Unless otherwise expressly
provided in this Agreement, any notice or other communication to be given under
this Agreement (a “notice”) shall be in writing addressed as follows:

	 	(a) 	if to the Corporation, addressed and sent to:
    
	 	  	 
	 	  	Sonic Environmental Solutions Inc 
	 	  	2100 – 1066 West Hastings Street 
	 	  	Vancouver, British Columbia V6E 3X2 
	 	  	 
	 	  	Fax: (604) 736-2558 
	 	  	Attention: Chief Executive Officer 
	 	  	 
	 	  	with a copy (which shall not constitute notice)
      to: 
	 	  	 
	 	  	Goodmans LLP 
	 	  	1900 – 355 Burrard Street 
	 	  	Vancouver, British Columbia V6C 2G8 
	 	  	 
	 	  	Fax: (604) 682-7131 
	 	  	Attention: David Redford 
	 	  	 
	 	  	 
	 	(b) 	if to the Underwriter, to: 
	 	  	 
	 	  	Clarus Securities Inc. 
	 	  	Waterfront Centre 
	 	  	1615 – 200 Burrard Street 
	 	  	Vancouver, British Columbia V6C 3L6 
	 	  	 
	 	  	Fax: (604) 605-5704 
	 	  	Attention: Rod Campbell 
	 	  	 
	 	  	 
	 	  	with a copy (which shall not constitute notice)
      to: 
	 	  	 
	 	  	McCarthy Tétrault LLP 
	 	  	1300 – 777 Dunsmuir Street 
	 	  	Vancouver, British Columbia V7Y 1K2 
	 	  	 
	 	  	Fax: (604) 622-5791 
	 	  	Attention: Joseph Garcia 

or to such other address as any of the parties may designate by
notice given to the others.

Each notice shall be personally delivered to the addressee or
sent by facsimile transmission to the addressee and: (i) a notice which is
personally delivered shall, if delivered on a Business Day, be deemed to be
given and received on that day and, in any other case, be deemed to be given and
received on the first Business Day following the day on which it is delivered;
and (ii) a notice which is sent by facsimile transmission shall be deemed to be
given and received on the first Business Day following the day on which it is
sent.

- 23 -

	15. 	Time of the Essence 

Time shall, in all respects, be of the essence hereof.

	16. 	Canadian Dollars 

All references herein to dollar amounts are to lawful money of
Canada.

	17. 	Headings 

     The headings contained herein are
for convenience only and shall not affect the meaning or interpretation
hereof.

	18. 	Entire Agreement 

     This Agreement constitutes the
only agreement between the parties with respect to the subject matter hereof and
shall supersede any and all prior negotiations and understandings including for
greater certainty, the Engagement Letter. This Agreement may be amended or
modified in any respect by written instrument only.

	19. 	Severability 

     The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
or limit the validity or enforceability of the remaining provisions of this
Agreement.

	20. 	Governing Law 

     This Agreement shall be governed
by and construed in accordance with the laws of the Province of British Columbia
and the laws of Canada applicable therein.

	21. 	Successors and Assigns

     The terms and provisions of this
Agreement shall be binding upon and enure to the benefit of the Corporation, the
Underwriter and the Substituted Purchasers and their respective executors,
heirs, successors and permitted assigns; provided that, except as provided
herein or in the Subscription Agreements, this Agreement shall not be assignable
by any party without the written consent of the others.

	22. 	Further Assurances 

     Each of the parties hereto shall
do or cause to be done all such acts and things and shall execute or cause to be
executed all such documents, agreements and other instruments as may reasonably
be necessary or desirable for the purpose of carrying out the provisions and
intent of this Agreement.

	23. 	Effective Date 

     This Agreement is intended to and
shall take effect as of the date first set forth above, notwithstanding its
actual date of execution or delivery.

- 24 -

	24. 	Language 

     The parties hereby acknowledge
that they have expressly required this Agreement and all notices, statements of
account and other documents required or permitted to be given or entered into
pursuant hereto to be drawn up in the English language only. Les parties
reconnaissent avoir expressment demandées que la présente convention ainsi que
tout avis, tout état de compte et tout autre document a être ou pouvant etre
donné ou conclu en vertu des dispositions des présentes, soient rédigés en
langue anglaise seulement.

	25. 	Counterparts and Facsimile Copies
  

     This Agreement may be executed in
any number of counterparts and by facsimile, which taken together shall form one
and the same agreement. 

(the remainder of this page is intentionally blank)

- 25 -

If the foregoing is in accordance with your understanding and
is agreed to by you, please so indicate by executing a copy of this Agreement
where indicated below and delivering the same to the Underwriter. Yours very
truly,

CLARUS SECURITIES INC.

	Per: 	“Rod Campbell” 	 
	  	Rod Campbell 	 
	  	Vice President, Investment
      Banking 	 

The foregoing is accepted and agreed to as of the date first
above written.

SONIC ENVIRONMENTAL SOLUTIONS INC

	Per: 	“Adam Sumel” 	 
	  	Adam R. Sumel 	 
	  	President and Chief Executive
      Officer 	 

	SCHEDULE “A” 
	  
	OPINION OF CORPORATION’S COUNSEL 
	TO THE UNDERWRITER AND PURCHASERS

April 30, 2007

	Sonic Environmental Solutions Inc. 	Clarus Securities Inc. 
	Suite 2100 – 1066 West Hastings Street 	Waterfront Centre 
	Vancouver, British Columbia V6E 3X2 	1615 – 200 Burrard Street 
	  	Vancouver, British Columbia V6C 3L6 
	  	 
	Each of the Subscribers (as defined below) 	McCarthy Tetrault LLP 
	  	1300 – 777 Dunsmuir Street 
	  	Vancouver, British Columbia V7Y 1K2
  

Dear Sirs/Mesdames:

	Re: 	Sonic Environmental Solutions Inc. –Offering
      of Units 

We have acted as counsel to Sonic Environmental Solutions Inc.
(the “Corporation”) in connection with the issue and sale by the Corporation of
10,064,000 units (the “Units”) of the Corporation (the “Offering”) at a price of
$0.45 per Unit, each Unit consisting of one common share in the capital of the
Corporation (“Common Share”) and one-half of one common share purchase warrant
(“Warrant”) of the Corporation, pursuant to an Underwriting Agreement (the
“Underwriting Agreement”) between the Corporation and Clarus Securities Inc.
(the “Underwriter”) dated April 30, 2007. In connection with the issue and sale
of the Units, the Corporation has entered into a subscription agreement
(collectively, the “Subscription Agreements”) with each subscriber for Units
(the “Subscribers”). Each Warrant entitles the holder to acquire one common
share in the capital of the Corporation (the “Warrant Shares”) at a price of
$0.60 for a period of 24 months following the closing of the Offering pursuant
to a share purchase warrant indenture (the “Warrant Indenture”) between the
Corporation and Pacific Corporate Trust Company (the “Trustee”) dated April 30,
2007.

We understand that in connection with the Offering the
Corporation intends to issue to the Underwriter an irrevocable warrant to
purchase 1,006,400 units of the Corporation (the “Broker Units”) at a price of
$0.45 each, each Broker Unit consisting of one Common Share and one half of one
Warrant, with each such Warrant exercisable to acquire one Common Share at a
price of $0.60 per Common Share. 

This opinion is being provided pursuant to paragraph 7(b) of
the Underwriting Agreement and, unless the context otherwise requires or
otherwise provided herein, all capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Underwriting Agreement.

- 2 -

Examinations

As counsel to the Corporation, we have reviewed:

	 	(a) 	
      executed copies of the Subscription Agreements;

	 	 	 
	 	(b) 	
      an executed copy of the Underwriting Agreement;

	 	 	 
	 	(c) 	
      an executed copy of the Warrant Indenture;

	 	 	 
	 	(d) 	
      executed copies of the certificates representing the
      Common Shares (the “Share Certificates”) and Warrants (the “Warrant
      Certificates”);

	 	 	 
	 	(f) 	
      an executed copy of the Broker Warrant Agreement (the
      “Broker Warrant Agreement”) between the Corporation and the Agent dated
      April 30, 2007;

	 	 	 
	 	(h) 	
      a certificate of an Officer of the Corporation dated
      April 30, 2007 verifying certain factual matters (the “Officer’s
      Certificate”), a copy of which is attached as Schedule A;

	 	 	 
	 	(i) 	
      a certificate dated April 27, 2007 (the "Transfer Agent
      Certificate") of the Trustee, as Registrar and Transfer Agent for the
      Common Shares, with respect to the number of outstanding common shares of
      the Corporation, a copy of which is attached as Schedule B;

	 	 	 
	 	(j) 	
      a letter dated April 24, 2007 from the TSX Venture
      Exchange (the "TSXV") granting conditional acceptance for the Offering
      (the "Acceptance Letter"); and

	 	 	 
	 	(k) 	
      an opinion, dated as of the date hereof, of Goodmans LLP,
      of Toronto, Ontario (the "Ontario Opinion").

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 and Limitations

We have assumed: (i) the genuineness of all signatures; (ii)
the legal capacity of all individuals; (iii) the genuineness and authenticity of
all documents submitted to us as originals; and (iv) the conformity to original
documents of all documents submitted to us as certified, photocopied or
facsimiled copies.

The opinions expressed below are given as of the date of this
letter and are not prospective. We disclaim any obligation to advise the
addressees or any other person of any change in law or any fact which may come
or be brought to our attention after the date of this letter.

We have assumed that the covenants, acknowledgements,
certifications, representations and warranties of each Subscriber set forth in
its respective Subscription Agreement are true and correct and have been
performed as the case may be, as of the date hereof. 

We have assumed that:

	 	(a) 	
      no order, ruling or decision of any court, regulatory or
      administrative body is in effect at any material time that restricts any
      trades in securities of the Corporation or that affects any person or
      company who engages in such a trade;

	 	 	 
	 	(b) 	
      the distribution of the Units has taken place only
      through the Underwriter or their affiliates or sub-agents who are, in each
      case, registered as a dealer within the meaning of
  applicable

- 3 -

	 		
      securities laws and each such person is duly registered
      and has complied with all applicable securities laws and other applicable
      laws and regulations in arranging for sales to the Subscribers as
      contemplated by the Underwriting Agreement;

	 	 	 
	 	(c) 	
      except for the Investor Presentation, there has been no
      advertisement of the distribution of the Units in printed media, radio,
      television or telecommunications, including electronic displays;
  and

	 	 	 
	 	(d) 	
      the Corporation is not a “connected issuer” or a “related
      issuer”, as those terms are defined in National Instrument 33-105, of any
      registrant involved in a trade of the Units.

We have assumed that the Underwriting Agreement, the
Subscription Agreements, the Warrant Indenture and the Broker Warrant Agreement,
(collectively, the “Documents”) have been duly authorized, executed and
delivered by all parties thereto, other than the Corporation, that each of the
parties to the Documents, other than the Corporation, has the corporate power
and authority to execute and perform its obligations under such agreement and
that each of the Documents constitutes a legal, valid and binding obligation of
all parties thereto, other than the Corporation, enforceable against such
parties, other than the Corporation, in accordance with its terms.

Wherever used, the expression “to our knowledge” means those
lawyers in our firm who have given substantive legal services to the Corporation
have no actual knowledge and received no information which cause them to believe
that the statements qualified by that expression are not correct, but does not
include constructive knowledge of matters or information. In particular, we have
not undertaken any independent investigation to determine the existence or
absence of such facts and any limited enquiry undertaken by us during the
preparation of this opinion letter should not be regarded as such investigation.

For the purposes of our opinion in paragraphs 11 and 12, we
express no opinion as to any “early warning”, insider reporting or similar
reports that may be required to be filed by any entities acquiring the
securities issued or to be issued pursuant to the Offering.

Reliance

In rendering our opinions herein, insofar as such opinions
relate to questions of fact, we have relied upon the Officer’s Certificate. 

In rendering our opinion in paragraph 1 we have relied on
Certificates of Good Standing issued by the Registrar of Companies for British
Columbia on April 26, 2007 and on April 27, 2007. We have assumed that the
certificates were accurate on the date of its issue and continue to be accurate
as of the date hereof. For the purposes of our opinion in paragraph 1(ii) as it
relates to the Province of Ontario, we provide no opinion regarding the
qualification of the Corporation to conduct business in the Province of Ontario.
We note however that the minute book of the Corporation includes a certificate
of the Ministry of Consumer and Business Services of Ontario dated June 19, 2006
evidencing the extra-provincial registration of the Corporation in accordance
with the Corporations Information Act (Ontario).

The opinion set forth in paragraph 4 below is based on the
current provisions of the Income Tax Act (Canada) (the “Tax Act”)
and the regulations thereunder and all specific proposals to amend the Tax Act
and the regulations thereunder publicly announced by or on behalf of the
Minister of Finance (Canada) prior to the date of this opinion.

In rendering the opinion expressed in paragraph 9 hereof
relating to the number of common shares of the Corporation that are issued and
outstanding, we have relied exclusively and without independent investigation
upon the Transfer Agent Certificate. 

- 4 -

In rendering our opinion in paragraph 10, as it relates to the
  Province of British Columbia, we have relied exclusively upon our search of
  a list of issuers in default maintained on the Commission’s website performed
  by us after the close of business on April 27, 2007, a copy of which (dated
  April 25, 2007) is attached as Schedule C to this opinion, and we have assumed
  no change has occurred to such list since such date. 

  In rendering our opinion in paragraph 13, we have relied exclusively on the
  Transfer Agent Certificate. 

  In rendering the opinion expressed in paragraph 15 hereof as to the approval
  of certain matters by the TSXV, we have relied exclusively upon the Acceptance
  Letter, a copy of which is attached as schedule D to this opinion.

For the purposes of rendering our opinion in paragraphs 10, 11
  and 12 hereof as they relate to the laws of the Province of Ontario and the
  federal laws of Canada applicable therein and for the purposes of our opinion
  in paragraph 14, we have relied exclusively on the Ontario Opinion.

  The assumptions, conditions, qualifications and limitations contained in the
  Ontario Opinion are hereby incorporated by reference into, and form part of,
  this opinion. Except to the extent that this opinion is rendered in reliance
  on the Ontario 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 as of the date hereof and we assume
  no obligation to update these opinions to take into account any changes in such
  laws or facts after the date hereof.

Opinions 

Based and relying on the foregoing, and subject to the
assumptions and qualifications expressed above, we are of the opinion that:

	1. 	
      Each of the Corporation, SESI Systems Inc. (“SESI”),
      Contech PCB Containment Technology Inc. (“Contech”) and SonoOil Inc.
      (“SonoOil”) (i) is a valid and subsisting corporation under the laws of
      British Columbia and has all requisite corporate power and capacity to
      carry on business and to own property and assets, and (ii) is qualified to
      carry on business under the laws of each jurisdiction in which it carries
      on a material portion of its business.

	 	 
	2. 	
      The Corporation has the corporate power and capacity to
      enter into the Documents and to perform its obligations set out
      therein.

	 	 
	3. 	
      The Documents have been duly authorized, executed and
      delivered by the Corporation and constitute legal, valid and binding
      obligations of the Corporation enforceable against the Corporation in
      accordance with their respective terms.

	 	 
	4. 	
      The execution and delivery of the Documents and the
      fulfilment of the terms thereof by the Corporation and the performance of
      and compliance with the terms of the Documents by the Corporation do not
      and will not result in a breach of, or constitute a default under, and do
      not and will not create a state of facts which, after notice or lapse of
      time or both, will result in a breach of or constitute a default under (i)
      any applicable laws of British Columbia or the federal laws of Canada
      applicable therein, (ii) any term or provision of the notice of articles,
      articles or resolutions of the directors or shareholders of the
      Corporation, (iii) to our knowledge, any mortgage, note, indenture,
      contract, agreement (written or oral), instrument, lease or other document
      to which the Corporation is a party or by which it is bound on the date
      hereof, or (iv) to our knowledge, any judgment, decree or order applicable
      to the Corporation, which default or breach might reasonably be expected
      to materially adversely affect the business, operations, capital or
      condition (financial or otherwise) of the Corporation of its properties or
      assets or assets (taken as a whole).

- 5 -

	5. 	
      The form and terms of the definitive certificate
      representing the Common Shares have been approved and adopted by the
      directors of the Corporation and comply with all applicable provisions of
      the Business Corporations Act (British Columbia) and are in
      compliance with the requirements of the TSXV.

	 	 
	6. 	
      All necessary approvals by the directors have been
      obtained by the Corporation to duly authorize (i) the form of certificate
      representing the Warrants, (ii) the issuance of the Common Shares
      underlying the Units, (iii) the issuance of the Common Shares issuable
      upon the exercise of the Warrants, and (iv) the issuance of the Common
      Shares and the Warrants upon the exercise of the Broker Warrants and the
      issuance of the Common Shares upon the exercise of the Warrants underlying
      the Broker Warrants.

	 	 
	7. 	
      The Common Shares have been validly created and issued as
      fully paid and non-assessable shares of the Corporation. All of the issued
      shares in the share capital of SonoOil have been duly authorized and
      validly issued and are fully paid and non-assessable and the Corporation
      is shown in the central securities register of each of SonoOil, SESI and
      Contech as the registered holder of all of the issued and outstanding
      shares in the capital of each of those companies.

	 	 
	8. 	
      The Common Shares issuable upon the exercise of the
      Warrants, the Common Shares issuable upon the exercise of the Broker
      Warrants and the Common Shares issuable upon the exercise of the Warrants
      underlying the Broker Warrants have been reserved and allotted for
      issuance and , upon the due exercise of the Warrants, Broker Warrants and
      Warrants issuable upon the exercise of the Broker Warrants, including
      payment in full of the exercise therefor, such Common Shares will be
      validly issued as fully paid and non-assessable shares of the
      Corporation.

	 	 
	9. 	
      The authorized capital of the Corporation consists of an
      unlimited number of Common Shares, of which, as of the close of business
      on April 26, 2007, 31,260,068 Common Shares were issued and
      outstanding.

	 	 
	10. 	
      The Corporation is a reporting issuer in the provinces of
      British Columbia and Ontario (the “Provinces”), and is not included in a
      list of defaulting reporting issuers maintained pursuant to the securities
      laws of such provinces.

	 	 
	11. 	
      The offering, sale, issuance and delivery of the Units by
      the Corporation to the Subscribers are exempt from the prospectus
      requirements of Applicable Securities Laws and except as has been
      completed, no filings, proceedings, approvals, consents or authorizations
      are required to be made, taken or obtained by the Corporation, with the
      TSXV or any securities regulatory authority in the Provinces pursuant to
      Applicable Securities Laws to permit the issuance and sale of the Units to
      Purchasers. The filing, within ten days from the date of each such issue
      and sale, of a report of the offering and sale prepared on Form 45-106F1
      in the Provinces, in each case prepared and executed in accordance with
      Applicable Securities Laws of the Provinces, together with the requisite
      filing fees and, in the case of sales to Ontario, the Investor
      Presentation are, however, required to be made in connection with each
      such issue and sale.

	 	 
	12. 	
      the first trade, if any, by a Subscriber in the Provinces
      of the Common Shares and Warrants comprising the Units, other than a trade
      which is otherwise exempt under Applicable Securities Laws of the
      Provinces, is a distribution subject to the prospectus requirements of
      Applicable Securities Laws of the Provinces
unless

- 6 -

	 	(a) 	
      the Corporation is and has been a “reporting issuer” in a
      jurisdiction in Canada for the four months immediately preceding the first
      trade,

	 	 	 
	 	(b) 	
      at the time of the first trade, at least four months have
      elapsed from the date of distribution of the Units,

	 	 	 
	 	(c) 	
      the certificates representing the securities that are the
      subject of the first trade were issued carrying a legend in accordance
      with section 2.5(2) of National Instrument 45-102 (“NI 45-
102”),

	 	 	 
	 	(d) 	
      such first trade is not a “control distribution ” as
      defined in section 1.1 of NI 45-102,

	 	 	 
	 	(e) 	
      no unusual effort is made to prepare the market or create
      a demand for the securities that are the subject of the first
  trade,

	 	 	 
	 	(f) 	
      no extraordinary commission or other consideration is
      paid to a person or company in respect of the first trade, and

	 	 	 
	 	(g) 	
      if the selling securityholder is an insider or officer of
      the Corporation at the time of the first trade, the selling securityholder
      has no reasonable grounds to believe that the Corporation is in default of
      applicable securities legislation.

	13. 	
      Pacific Corporate Trust Company has been duly appointed
      by the Corporation as the transfer agent and registrar for the Common
      Shares.

	 	 
	14. 	
      The Common Shares and the Warrants comprising the Units
      will be qualified investments under the Tax Act and the regulations
      thereunder for trusts governed by registered retirement savings plans
      (“RRSPs”), registered retirement income funds (“RRIFs”), registered
      education savings plans (“RESPs”) and deferred profit sharing plans
      (“DPSPs”), provided that the Common Shares are then listed on a prescribed
      stock exchange, or if the amendments to the Tax Act proposed in the
      Federal Budget released on March 19, 2007 are enacted, a designated stock
      exchange, and, in the case of the Warrants, provided that the annuitant,
      beneficiary, employer or subscriber under the governing plan of such RRSP,
      RRIF, RESP or DPSP, as applicable, deals at arm’s length with the
      Corporation.

	 	 
	15. 	
      The TSXV has conditionally approved the listing of the
      Common Shares underlying the Units and the Broker Warrants and issuable
      upon the exercise of the Warrants and the Warrants underlying the Broker
      Warrants, subject to the conditions contained in the letter from the TSXV
      dated April 24, 2007 in connection with the conditional approval of the
      issue and sale of the Units.

QUALIFICATIONS

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

	1. 	
      The enforceability of the obligations of the parties to
      the Documents and the rights and remedies set out therein and any judgment
      arising out of or in connection therewith (and the priority of any rights
      arising thereunder) 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;

- 7 -

		(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 Documents that provide for the recovery
      of fees and expenses may be unenforceable to the extent that they would
      require a party to pay any amounts to another person in respect of fines,
      penalties or costs levied against or imposed upon such person, or
      exceeding those awarded to or recoverable by such person, pursuant to
      applicable laws or the order of a court.

	 	 	 	 
	3. 	
      We express no opinion on the enforceability of provisions
      in the Documents which purport to allow severance of an invalid, illegal
      or unenforceable provision affecting the validity or enforceability of the
      remainder of the applicable agreement since such provision may only be
      enforced in the discretion of a court.

	 	 	 	 
	4. 	
      No opinion is expressed on:

	 	 	 	 
		(a) 	
      provisions of the Documents which:

	 	 	 	 
			(i) 	
      purport to directly or indirectly exclude unwritten
      variations, waivers or consents of, to or under the Documents 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 Documents;

	 	 	 	 
			(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;
    or

	 	 	 	 
			(vi) 	
      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 Documents, and in particular, but without limitation,
      no opinion is expressed as to the requirement to pay Goods and Services
      Tax in respect of, any such transactions.

	 	 	 	 
	5. 	
      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
      be deemed contrary to public policy and may otherwise 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.

- 8 -

	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. 	
      Determinations or demands made pursuant to the Documents
      in the exercise of discretion purported to be given to any person in,
      under or by the Documents may be unenforceable if made in an unreasonable
      or arbitrary fashion.

The above opinions are rendered solely to the persons to whom
they are addressed in connection with the above transaction, and may not be
used, circulated, quoted from or otherwise referred to for any other purpose and
may not be relied upon by any other person without our written consent.

Yours truly,

	SCHEDULE “B”  
	 
	OPINION OF CORPORATION’S U.S. COUNSEL

	TO THE UNDERWRITER AND PURCHASERS

April 30, 2007

	Clarus Securities Inc. 	The persons/entities listed on Exhibit A hereto
    
	Waterfront Centre 	c/o Clarus Securities Inc. 
	1615 - 200 Burrard Street 	Waterfront Centre 
	Vancouver, British Columbia V6C 3L6 	1615 - 200 Burrard Street 
	 	Vancouver, British Columbia V6C 3L6
  

Ladies and Gentlemen:

	 	Re: 	Sonic Environmental Solutions
      Corporation 

Ladies and Gentlemen:

This opinion is furnished in connection with Sonic
Environmental Solutions Corporation, a California corporation (“Company”). We
have acted as special counsel to Company for the purpose of rendering certain
opinions, set forth herein, regarding the corporate status of the Company. This
opinion letter is provided at Company’s request.

We understand that in this transaction, and in the review and
acceptance of this opinion letter, you are represented by independent counsel of
their choosing with expertise in the relevant subject matter.

	1. 	Factual Examination.
  

     1.1
Documents. In the preparation of this opinion, we have
examined only the following documents (“Company Documents”):

     (a) the Articles of Incorporation
of Company certified by the California Secretary of State and the Secretary of
the Company (“Articles of Incorporation”);

     (b) the Bylaws of Company, dated
September 16, 2005, as certified by the Secretary of Company (“Bylaws”);

     (c) the Certificate of Status
from the California Secretary of State for Company dated April 24, 2007;

- 10 -

     (d) the Certificate of Status
from the California Franchise Tax Board for Company dated April 25, 2007;

     (e) the stock ledger of Company,
as certified by the Secretary of the Company (“Stock Ledger”);

     (f) the Certificate of the
Secretary of Company dated April 30, 2007 (“Secretary’s Certificate”); and

     (g) the Certificate of Officers
of Company dated April 30, 2007 (“Officers’ Certificate”).

	1.2 	Scope of Inquiry; Certain
      Assumptions. 

     (a) For purposes of this opinion,
we have examined only the Company Documents. We have assumed the correctness of
all factual matters set forth therein. We have not conducted any: (i)
investigation or examination of factual matters; (ii) investigation or
examination of the title to, or nature or extent of, any real or personal
property, or inspection of any such property; or (iii) docket or other search of
the records of any court, administrative tribunal, recording or filing office,
or other public entity.

     (b) In rendering this opinion, we
have assumed: (i) the genuineness of all signatures (if any) on all documents
reviewed by us; (ii) that the copies of the Company Documents provided to us are
complete and correct copies which conform to authentic original documents, and
contain the entire agreement of the parties thereto, that there are no other
documents or oral agreements or other circumstances that would in any way alter
the provisions of the Company Documents, and that there has not been any mutual
mistake of fact or misunderstanding, fraud, duress or undue influence with
respect thereto; (iii) that each natural person executing or who has executed
the Company Documents is or was competent to do so; (iv) the accuracy,
completeness and authenticity of all certificates on which we have relied, and
that any such certificates dated as of an earlier date are still accurate as of
the date hereof; (v) that Company has filed all required franchise tax returns,
if any, and paid all required taxes, if any, under the applicable California
statutes and under any other applicable governmental rule; (vi) all statutes,
judicial and administrative decisions, and rules and regulations of governmental
agencies constituting the laws which are the subject of this opinion letter, as
set forth in Section 4, are generally available (i.e., in terms of access and
distribution following publication or other release) to lawyers practicing in
the State of California, and are in a format that makes legal research
reasonably feasible; and (vii) the constitutionality or validity of a relevant
statute, rule, regulation or agency action is not in issue unless a reported
decision in the jurisdiction(s) whose laws are the subject of this opinion
letter, as set forth in Section 4, has specifically addressed but not resolved,
or has established, its unconstitutionality or invalidity.

     (c) Where we render an opinion
“to our knowledge” or concerning an item “known to us” or our opinion otherwise
refers to our knowledge, it means that: (i) we have conducted no independent
investigation of the matters set forth in connection therewith; (ii) we have

- 11 -

not conducted a litigation search or other search or
investigation with respect to any pending items of litigation or orders or
decrees; (iii) with respect to factual matters we have relied solely upon the
statements, representations and warranties set forth in the Secretary’s
Certificate and the Officers’ Certificate; (iv) by your acceptance of this
opinion letter you acknowledge that you have also relied upon certifications of
Company or other due diligence conducted by you and you have not relied solely
on this opinion letter as to such matters; and (v) no inference as to our
knowledge of the existence or absence of facts or other matters is to be drawn
from the fact of our representation or any other matter; but that, during and in
the course of our representation of Company in connection with this transaction,
no information has come to the attention of the attorneys who rendered legal
services in connection with that representation (namely, Elizabeth Wilson and
Chad Ensz) as of the date hereof which gives us current actual knowledge to the
contrary.

2. Opinion. On the basis of the
foregoing, but subject to the additional qualifications, assumptions and
limitations set forth below, we are of the opinion that, as of the date
hereof:

     2.1 The Company is a corporation
duly formed and validly existing and in good standing under the laws of the
State of California. 

     2.2 The Company has the corporate
power and corporate authority to own its property and assets and to carry on its
business.

     2.3 Based solely on our review of
the Stock Ledger, all outstanding shares of common stock of the Company are
owned by Sonic Environmental Solutions Inc., a British Columbia corporation (the
“Parent Company”), and to our knowledge, all outstanding equity securities of
Company are owned by the Parent Company.

3. Qualifications, Assumptions and
Limitations. Our opinion above is subject to and limited by the
following qualifications, assumptions and limitations, in addition to those set
forth elsewhere in this letter:

     3.1 The effect of bankruptcy,
insolvency, reorganization, moratorium, liquidation, receivership, assignment
for the benefit of creditors, fraudulent conveyance or transfer, marshaling and
other laws relating to or affecting the rights and remedies of creditors
generally.

     3.2 The effect of general
principles of equity, whether considered in a proceeding in equity or at law,
including concepts of materiality, reasonableness, good faith and fair dealing,
and the discretion of the court before which a proceeding is brought, and
including limitations of law or equity upon the availability of specific
enforcement, injunctive relief, other equitable remedies or any particular
remedy at law.

     3.3 In rendering the opinion set
forth in Section 2.3 relating to the ownership of outstanding securities of
Company, we have relied, without further investigation, solely on our review of
the Stock Ledger and the Officers’ Certificate.

- 12 -

	4. 	Laws Relevant to Opinion; Matters
      Post-Dating Opinion. 

     4.1 This opinion letter relates
solely to the laws of the State of California (other than laws relating to
conflicts or choice of law) and applicable United States federal law in effect
on the date hereof (but subject, however, to the exclusion of certain laws as
set forth elsewhere herein). We have not examined and do not opine with respect
to the applicability or effect of any other laws.

     4.2 We express no opinion with
respect to laws becoming effective after the date hereof. This opinion relates
only to matters as of the date hereof, and we express no opinion with respect to
any transaction, transfer, conveyance, obligation or performance occurring after
the date hereof. We disclaim any obligation to advise you of any events
occurring or coming to our attention or any developments in areas covered by
this opinion that occur after the date of this opinion.

	5. 	Use and Reliance.
  

This opinion is provided at your request and solely to you for
use in connection with your current transactions with the Parent Company. This
opinion may not be relied upon or used by any other person or for any other
purpose, nor may it be exhibited, quoted from or referred to, or copies
delivered to any other person, without our prior written consent.

Very truly yours,

Exhibit A

	ACKER FINLEY ASSET MANAGEMENT 	REDWOOD LONG/SHORT FUND 
	181 University Ave., Suite 1400 	10 King St., E., Suite 701 
	Toronto, Ontario, M5H 3M7 	Toronto, Ontario, M5C 1C3 
	  	  
	POLAR SECURITIES INC. 	SURGE VENTURES INC. 
	372 Bay Street, 21st Floor 	10 Alcorn Ave, Suite 304 
	Toronto, Ontario, M5H 2W9 	Toronto, Ontario, M4V 3A9 
	  	  
	WATERFALL VANILLA LP 	TWENTY6 TWO INTERNATIONAL INC. 
	10 King St., E., Suite 701 	10 Alcorn Ave, Suite 304 
	Toronto, Ontario, M5C 1C3 	Toronto, Ontario, M4V 3A9 
	  	  
	WATERFALL TIPPING POINT LP 	PETER A. SHIELDS 
	10 King St., E., Suite 701 	55 Rogers Street 
	Toronto, Ontario, M5C 1C3 	Vancouver, BC V6A 3X8 
	  	  
	REDWOODLONG/SHORT CONSERVATIVE 	ARIC TRUAX 
	EQUITY FUND 	303 - 1025 Meares Street 
	10 King St., E., Suite 701 	Victoria, BC V8V 2B7 
	Toronto, Ontario, M5C 1C3 	  
	  	  
	WATERFALL VANILLA MASTER FUND 	GORDON REID 
	LTD. 	418 Preston Street 
	10 King St., E., Suite 701 	Ottawa, ON K1S 4N2 
	Toronto, Ontario, M5C 1C3 	  
	  	  
	WATERFALL NEUTRAL LP 	AVTAR DHILLON 
	10 King St., E., Suite 701 	3558 Blenheim Street 
	Toronto, Ontario, M5C 1C3 	Vancouver, BC V6L 2X9 
	  	  
	LEEWARD WINWARD BULL & BEAR 	JEMEKK CAPITAL MANAGEMENT 
	FUND 	181 Bay St., Suite 3830 
	2 Bloor St., West, Suite 200 	Toronto, Ontario, 
	Toronto, Ontario 	M5J 3T2 
	M4W 3E2 	  
	  	  
	AEGON CAPITAL MANAGEMENT INC. 	MAVRIX A/C 507 
	5000 Yonge St., 8th Floor 	36 Lombard St., Suite 400 
	Toronto, Ontario, 	Toronto, Ontario, 
	M2N 7J8 	M5C 2X3Exhibit 10.1

                  FIRST KEYSTONE BANK
                  AMENDED AND RESTATED
          SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     THIS AMENDED AND RESTATED FIRST KEYSTONE BANK (the
"Bank" or the "Employer") SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN was originally effective as of March 31, 2004 (the
"Prior Plan") and is hereby amended and restated as of June
27, 2007.

     The purpose of this Amended and Restated Supplemental
Executive Retirement Plan (hereinafter referred to as the
"Plan") is to provide supplemental retirement and death
benefits for certain key employees of the Bank, and any
affiliated or subsidiary corporations of the Bank designated
by the Board.  It is intended that the Plan will aid in
retaining and attracting employees of exceptional ability by
providing them with these benefits.  This Plan as amended
and restated shall be effective as of June 27, 2007.

     The Plan is intended to be an unfunded plan qualifying
as a "top hat" plan for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), and for purposes of the Internal Revenue Code of
1986, as amended (the "Code").  The Plan is being amended
and restated in order to comply with the requirements of
Section 409A of the Code and the final regulations issued by
the Internal Revenue Service.  No benefits payable under
this Plan shall be deemed to be grandfathered for purposes
of Section 409A of the Code.

                ARTICLE I - DEFINITIONS
                _______________________

     For purposes hereof, unless otherwise clearly apparent
from the context, the following phrases and terms shall have
the indicated meanings:

     1.1  Account.  "Account" shall have the meaning set
forth in Section 3.1 hereof.

     1.2  Beneficiary.  "Beneficiary" means a person or
entity designated in accordance with Article VI of this Plan
to receive benefits upon the death of a Participant.

     1.3  Change in Control.  "Change in Control" shall mean
a change in the ownership of the Corporation, a change in
the effective control of the Corporation or a change in the
ownership of a substantial portion of the assets of the
Corporation, in each case as provided under Section 409A of
the Code and the regulations thereunder.

     1.4  Corporation.  "Corporation" means First Keystone
Financial, Inc., the parent holding company of the Bank.

     1.5  Early Retirement Benefit.  "Early Retirement
Benefit" shall have the meaning set forth in Section 3.4(b).

     1.6  Early Retirement Date.  "Early Retirement Date"
means the date on which the Participant has a Separation
from Service from the Employer on or after the Participant's
Early Retirement Eligibility Date but prior to the
Participant's Normal Retirement Date.

     1.7  Early Retirement Eligibility Date.  "Early
Retirement Eligibility Date" means the first day of the
month coincident with or next following the earlier of (a) a
Participant's attainment of age fifty (50) and completion of
twelve (12) Years of Credited Service, or (b) the date that
the sum of the Participant's Years of Credited Service
(including partial years) and age equals at least sixty-two
(62).

     1.8  Employer.  "Employer" means First Keystone Bank, a
federally chartered savings bank.

     1.9  ERISA.  "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.

     1.10 Normal Retirement Benefit.  "Normal Retirement
Benefit" shall have the meaning set forth in Section 3.4(a).

     1.11 Normal Retirement Date.  "Normal Retirement Date"
means the first day on which a Participant has attained
sixty-five (65) years of age.

     1.12  Participant.  "Participant" means any employee of
the Employer who is eligible to participate in the Plan and
approved by the Board of Directors of the Employer.  Only
employees who are a member of a select group of management
or a highly compensated employee within the meaning of
Section 201(2) of ERISA are eligible to participate in the
Plan.

     1.13 Plan.  "Plan" means this Amended and Restated
Supplemental Executive Retirement Plan as adopted by the
Employer and as may be hereafter amended.

     1.14 Plan Committee.  "Plan Committee" means the
Compensation Committee of the Board of Directors of the
Employer.

     1.15 Retirement.  "Retirement" means a Participant's
Separation from Service from the Employer on or after the
Participant's Early Retirement Eligibility Date or Normal
Retirement Date.

     1.16 Retirement Date.  "Retirement Date" shall mean the
date that a Participant has a Separation from Service that
qualifies as a Retirement.

     1.17 Separation from Service.  "Separation from
Service" means a separation from service within the meaning
of Section 409A of the Code and the regulations thereunder.

                         2

     1.18 Specified Employee.  "Specified Employee" shall
have the meaning set forth in Treasury Regulation Section
1.409A-1(i) or any successor thereto, with the Specified
Employee identification date being December 31st of each year.

     1.19 Year of Credited Service.  Year of Credited
Service means a year in which an employee works one thousand
(1,000) or more hours.

   ARTICLE II - ELIGIBILITY, PARTICIPATION AND VESTING
   ___________________________________________________

     2.1  Eligibility.  Eligibility to become a Participant
in this Plan will be determined by the Board of Directors of
the Employer.  Participants will be chosen from a select
group of management or highly compensated employees within
the meaning of Section 201(2) of ERISA.  Such determination
shall be conclusive and binding upon all persons.

     2.2 Participation.  The Employer or Plan
Committee shall notify each employee of his or her
eligibility to participate in this Plan.  Eligible employees
shall become Participants in this Plan as of the effective
date of the Prior Plan or upon becoming eligible to
participate in this Plan, as the case may be.  Each employee
who becomes a Participant in this Plan shall complete such
form(s) as are reasonably required by the Plan Committee for
Plan participation.  Such form(s) shall include, but not be
limited to, information related to the Participant's Account
distribution method, death benefit distribution method and
Beneficiary designation.  A Participant shall submit such
form(s) to the Plan Committee within thirty (30) days of the
date on which the affected employee is first eligible to
participate in the Plan.

     2.3  Additional Compensation.  A Participant shall
receive the benefits provided for herein in addition to any
compensation paid to or benefits provided to the Participant
by the Bank or the Corporation.  Except as otherwise
provided herein, nothing in this Plan shall be construed as
limiting, varying or reducing any provision or benefit to a
Participant, a Participant's estate or Beneficiaries
pursuant to any employment agreement, any retirement plan,
including any qualified pension or profit sharing plan, any
health, disability or life insurance policies or any other
agreement between the Employer and the Participant.

     2.4  Vesting.  Upon attainment of the Participant's
Early Retirement Eligibility Date or Normal Retirement Date,
such Participant shall be one hundred percent (100%) vested
in his or her Early Retirement Benefit or Normal Retirement
Benefit, as applicable. Notwithstanding anything to the
contrary, any amounts credited to a Participant's Account
that are not vested at the time of his or her termination of
employment with the Employer shall be forfeited and returned
to the Employer.

                          3

          ARTICLE III - RETIREMENT BENEFITS

     3.1  Account Establishment.  The Administrator shall
establish and maintain a bookkeeping account in the name of
each Participant (the "Account").  Each Participant's
Account shall be utilized solely as a device for the
measurement and determination of the benefits, if any,
payable to a Participant under this Plan.  Each
Participant's Account shall be credited with Employer
Contribution(s) on a calendar year basis, as provided for
below, and a per annum interest rate as determined by the
Plan Committee annually. For the initial Plan year the rate
shall be five percent (5.0%).  Such rate shall remain in
effect in the event the Plan Committee fails to elect a
subsequent rate for any successive Plan year.  Each
Participant's Account shall be reduced by any completed
distributions related to such Participant.

     3.2  Employer Contribution.  The Employer may make an
Employer Contribution to the Account(s) of some or all
Participants.  The Plan Committee, in collaboration with the
Employer, will authorize and facilitate the periodic
crediting to a Participant's Account of an Employer
Contribution and aforementioned annual interest rate, as
applicable.  Such crediting may fluctuate in both amount and
frequency as determined to be appropriate by the Plan
Committee and the Bank.

     3.3  Retirement Benefit.  If a Participant has a
Separation from Service on or after the Normal Retirement
Date or has a Separation from Service at an Early Retirement
Date, the Employer shall pay to the Participant an annual
retirement benefit, determined pursuant to Section 3.4
hereof and payable pursuant to the provisions of Section 3.5
hereof.

     3.4  Determination of Normal Retirement Benefit or
Early Retirement Benefit.

          (a)  A Participant's Normal Retirement Benefit
shall be an amount equal to the Participant's Account
balance determined as of such Participant's Retirement Date,
as adjusted for subsequent interest credited pursuant to
Section 3.1 hereof.

          (b)  A Participant's Early Retirement Benefit
shall be an amount equal to the Participant's Account
balance determined as of such Participant's Early Retirement
Date, as adjusted for subsequent interest credited pursuant
to Section 3.1 hereof.

     3.5  Payment of Normal Retirement Benefit and Early
Retirement Benefit.

          (a)  The Normal Retirement Benefit or Early
Retirement Benefit, as applicable, payable to a Participant
upon such Participant's Separation from Service, shall be
payable in the form of substantially equal annual payments
("Annual Payments") for fifteen (15) consecutive years
beginning with the first day of the first full calendar
month following the Participant's Retirement Date, unless a
Participant elects a different form of payment pursuant to
Article V below; provided, however, that if a Participant is
deemed to be a Specified Employee as of the Retirement Date,
then the first annual payment shall

                          4

be delayed until the first day of the first full calendar
month following the lapse of six months after the Retirement
Date.  All subsequent Annual Payments shall be paid on the
annual anniversary of the first day of the first full calendar
month following the Participant's Retirement Date.

          (b)  The Normal Retirement Benefit or Early
Retirement Benefit distribution, as applicable, pursuant to
this section shall be implemented in the following manner:
the amount of the substantially equal payments described
above shall be determined by multiplying the Participant's
Account as of the date of payment by a fraction, the
denominator of which in the first year of payment equals the
number of years over which benefits are to be paid, and the
numerator of which is one (1).

          (c)  The amounts of the payments for each
succeeding year shall be determined by multiplying the
Participant's Account as of the applicable annual
anniversary of the first day of the first full calendar
month following the Participant's Retirement Date by a
fraction, the denominator of which equals the number of
remaining years over which benefits are to be paid, and the
numerator of which is one (1).  Annual interest crediting to
the Participant's account shall continue to be credited to
the Participant's Account during the Participant's
continuation of an Account balance.

     3.6  Change in Control Benefit.  If a Participant has a
Separation from Service with the Employer within two (2)
years after the occurrence of a Change in Control and prior
to attaining his or her Normal Retirement Date, then the
Employer will pay to the Participant an amount equal to five
(5) times the Participant's then current base salary, as
determined by the Employer, minus, dollar for dollar, the
Participant's Account balance as of the effective date of
the Change in Control.  The supplemental benefit payable
under this Section 3.6 shall be made in a single lump sum
payment on the first day of the month following the
Participant's Separation from Service, provided, however,
that if a Participant is deemed to be a Specified Employee
as of the date of Separation from Service, then the lump sum
payment shall be delayed until the first day of the first
full calendar month following the lapse of six months after
the date of Separation from Service.  The Participant's
Account balance shall be payable as set forth in Section 3.5
above.

               ARTICLE IV-DEATH BENEFITS
               _________________________

     4.1  Participant's Death Following Early or Normal
Retirement.  If a Participant dies following his or her
Retirement Date, but prior to the receipt of his or her
final Annual Payment (not to  exceed fifteen (15) Annual
Payments), then the Employer shall pay to the Beneficiary or
Beneficiaries designated in writing by such Participant (or
to the Participant's estate if the Participant fails to so
designate a Beneficiary or Beneficiaries) the remaining
retirement benefit Annual Payments until the Participant and
such Beneficiary or Beneficiaries or estate have received
all remaining Annual Payments (not to exceed fifteen (15)
Annual Payments).

                            5

     4.2  Participant's Death Prior to Retirement Date.  If
a Participant dies after the Participant's Early Retirement
Eligibility Date or Normal Retirement Date but prior to
Separation from Service, the Employer shall pay to the
Beneficiary or Beneficiaries designated in writing by such
Participant (or to the Participant's estate if the
Participant fails to so designated a Beneficiary or
Beneficiaries) a supplemental amount equal to seven (7)
times the Participant's then current base salary, as
determined by the Employer, minus, dollar for dollar, the
Participant's Account balance as of the date of the
Participant's death.  This pre-Retirement death benefit
shall be payable in a single lump sum distribution to the
Participant's Beneficiary or Beneficiaries (or to the
Participant's estate if the Participant fails to so
designate a Beneficiary or Beneficiaries) within thirty (30)
business days following the Participant's death.  The
Participant's Account balance shall be payable to the
Participant's Beneficiaries or estate as set forth in
Section 3.5 above.

     4.3  Death of Beneficiary.  In the event of death of a
Beneficiary who is receiving an Early or Normal Retirement
Benefit in installments pursuant to Section 4.1 or a lump
sum distribution pursuant to Section 4.2, the benefit to
which such Beneficiary was entitled at the time of such
Beneficiary's death shall continue to be payable to the
Beneficiary or Beneficiaries, designated in writing by such
Beneficiary, on a form to be submitted by such Beneficiary
to the Plan Committee (or to the Beneficiary's estate if the
Beneficiary fails to so designate a Beneficiary or
Beneficiaries).

       ARTICLE V - ALTERNATIVE FORM OF PAYMENT
       _______________________________________

     5.1  General.  In lieu of receiving the Normal
Retirement Benefit or Early Retirement Benefit in the form
of a fifteen (15) year annuity, a Participant may elect to
receive his or her Normal Retirement Benefit or Early
Retirement Benefit in the form of either (i) a lump sum
distribution equal to 100% of the Participant's Normal
Retirement Benefit or Early Retirement Benefit, or (ii)
Annual Payments for a time period not to exceed fifteen (15)
consecutive years, and calculated in accordance with Section
3.5 of this Plan upon such event.  Any new payment elections
made by a Participant on or after January 1, 2005 shall be
made in accordance with this Article V.  If a Participant
elects a form of payment upon more than one payment event,
then the first payment event that occurs shall govern how
the payment is made.

     5.2  Prior Elections.  Any payment elections made by a
Participant before January 1, 2005 shall continue in effect
until such time as the Participant makes a subsequent
payment election pursuant to either Section 5.3 or Section
5.4 below and such payment election becomes effective as set
forth below.  If no payment election was previously made,
then the current payment election shall be deemed to be a
fifteen (15) year annuity payable as set forth in Section
3.5 above.

     5.3  Transitional Elections.  On or before December 31,
2007, if a Participant wishes to change his or her payment
election, the Participant may do so by completing a payment
election form approved by the Plan Committee, provided that
any such election (1) must be made no later than December
31, 2007 and must be made prior to the year in

                           6

which benefit payments are scheduled to commence, (2) must be
made while the Participant is an active employee of the Bank
or one of its subsidiaries or the Corporation, (3) shall not
take effect before the date that the election is made and
accepted by the Plan Committee, (4) does not cause a payment
that would otherwise be made in the year in which the
election is made to be delayed to a later year, and (5) does
not accelerate into the year in which the election is made a
payment that is otherwise scheduled to be made in a later
year.

     5.4  Changes in Payment Elections after 2007.  On or
after January 1, 2008, if a Participant wishes to change his
or her payment election, the Participant may do so by
completing a payment election form approved by the Plan
Committee, provided that any such election (i) must be made
while the Participant is an active employee of the Bank or
one of its subsidiaries or the Corporation, (ii) must be
made at least 12 months before the date on which any benefit
payments as of a fixed date or pursuant to a fixed schedule
are scheduled to commence, (iii) shall not take effect until
at least 12 months after the date the election is made and
accepted by the Plan Committee, and (iv) for payments to be
made other than upon death, must provide an additional
deferral period of at least five years from the date such
payment would otherwise have been made (or in the case of
any annuity or installment payments treated as a single
payment, five years from the date the first amount was
scheduled to be paid).  For purposes of this Plan and clause
(iv) above, all annuities or installment payments under this
Plan shall be treated as a single payment.

              ARTICLE VI - BENEFICIARIES
              __________________________

     6.1  Beneficiary Designations.  A Participant shall
designate a beneficiary by filing a written designation with
the Plan Committee.  A Participant may revoke or modify his
or her Beneficiary designation at any time by filing a new
designation.  However, designations will only be effective
if signed by the Participant and received by the Plan
Committee during the Participant's lifetime.  The
Participant's Beneficiary designation shall be deemed
automatically revoked if the Beneficiary predeceases the
Participant, or if the Participant names a spouse as
Beneficiary and the marriage is subsequently dissolved.  If
the Participant dies without a valid Beneficiary
designation, all payments shall be made to the Participant's
estate.

     6.2  Facility of Payment.  If a benefit is payable to a
minor, to a person declared incompetent, or to a person
incapable of handling the disposition of his or her
property, the Bank may pay such benefit to the guardian,
legal representative or person having the care or custody of
such minor, incompetent person or incapable person.  The
Bank may require proof of incompetence, minority or
guardianship as it may deem appropriate prior to the
distribution of the benefit.  Such distribution shall
completely discharge the Bank from all liability with
respect to such benefit.

            ARTICLE VII - GENERAL LIMITATIONS
            _________________________________

     All benefits payable under this Plan shall be subject
to the following limitations:

                            7

     7.1  Termination for Cause.  Notwithstanding any
provision of this Plan to the contrary, the Bank shall not
pay any benefit under this Plan if the Bank terminates a
Participant's employment for Cause.  Termination of a
Participant's employment for "Cause" shall mean termination
because of personal dishonesty by the Participant in the
performance of his or her duties which results in
demonstrable material injury to the Bank, willful misconduct
by the Participant which remains uncured 15 days following
the giving of written notice thereof to the Participant,
breach by the Participant of a fiduciary duty to the Bank
involving personal profit, intentional failure to perform
stated duties following the giving of written notice thereof
to the Participant, willful violation of any law, rule or
regulation (other than traffic violations or similar
offences) or final cease-and-desist order or material breach
of any provision of the Plan.  For purposes of this
paragraph, no act or failure to act on the Participant's
part shall be considered "willful" unless done, or omitted
to be done, by the Participant not in good faith and without
reasonable belief that the Participant's action or omission
was in the best interest of the Bank.

     7.2  Removal.  Notwithstanding any provision of this
Plan to the contrary, the Bank shall not pay any benefit
under this Plan if the Participant is subject to a final
removal or prohibition order issued by an appropriate
federal banking agency pursuant to Section 8(e) of the
Federal Deposit Insurance Act ("FDIA").

  ARTICLE VIII - PLAN ADMINISTRATION; CLAIMS PROCEDURE
  ____________________________________________________

     8.1  Plan Committee.   This Plan and all matters
relating hereto shall be administered by the Plan Committee.
The Plan Committee will interpret the provisions of this
Plan and shall determine all questions arising in the
administration, eligibility, interpretation and application
of this Plan.  Any such determination by the Plan Committee
shall be conclusive and binding on all persons and shall be
consistently and uniformly applied to all persons similarly
situated.  The Plan Committee shall engage the services of
such independent actuaries and administrative personnel as
it deems appropriate to administer the Plan.

     8.2  Scope of Claims Procedures.  These claims
procedures are based on final regulations issued by the
Department of Labor and published in the Federal Register on
November 21, 2000 and codified at 29 C.F.R. Section 2560.503-
1.  If any provision in these claims procedures conflicts
with the requirements of those regulations, the requirements
of those regulations will prevail.

     8.3  Initial Claim.  Any Participant or Beneficiary who
believes he or she is entitled to any benefit under the Plan
(a "Claimant") may file a claim with the Plan Committee.
The Plan Committee shall review the claim itself or appoint
an individual or an entity to review the claim.  All
references to the Plan Committee in this Article VIII shall
include any such appointee.

     (a)  Initial Decision.  The Claimant shall be notified
          within ninety (90) days after the claim is filed
          whether the claim is allowed or denied, unless the

                             8

          Claimant receives written notice from the Plan
          Committee prior to the end of the ninety (90) day
          period stating that special circumstances require
          an extension of the time for decision, with such
          extension not to extend beyond the day which is
          one hundred eighty (180) days after the day the
          claim is filed.

     (b)  Manner and Content of Denial of Initial Claims.
          If the Plan Committee denies a claim, it must provide
          to the Claimant, in writing or by electronic
          communication:

          (i)   The specific reasons for the denial;

          (ii)  A reference to the provision of the Plan upon
                which the denial is based;

          (iii) A description of any additional information or
                material that the Claimant must provide in order
                to perfect the claim;

          (iv)  An explanation of why such additional material
                or information is necessary;

          (v)   Notice that the Claimant has a right to request a
                review of the claim denial and information on the
                steps to be taken if the Claimant wishes to request
                a review of the claim denial; and

          (vi)  A statement of the Claimant's right to bring a
                civil action under Section 502(a) of ERISA, following
                a denial on review of the initial denial.

     8.4  Review Procedures.

     (a)  Request For Review.  A request for review of a denied
          claim must be made in writing to the Plan Committee within
          sixty (60) days after receiving notice of denial.  The
          decision upon review will be made within sixty (60) days
          after the Plan Committee's receipt of a request for review,
          unless special circumstances require an extension of time
          for processing, in which case a decision will be rendered
          not later than one hundred twenty (120) days after receipt
          of a request for review.  A notice of such an extension must
          be provided to the Claimant within the initial sixty (60)
          day period and must explain the special circumstances and
          provide an expected date of decision.

          The reviewer shall afford the Claimant an
          opportunity to review and receive, without charge,
          all relevant documents, information and records
          and to submit issues and comments in writing to
          the Plan Committee.  The reviewer shall take into
          account all comments, documents, records and

                                   9

          other information submitted by the Claimant relating to the claim
          regardless of whether the information was submitted or considered
          in the initial benefit determination.

     (b)  Manner and Content of Notice of Decision on Review. Upon completion
          of its review of an adverse claim determination, the Plan Committee
          will give the Claimant, in writing or by electronic notification,
          a notice containing:

          (i)   its decision;

          (ii)  the specific reasons for the decision;

          (iii) the relevant provisions of this Plan on which its decision
                is based;

          (iv)  a statement that the Claimant is entitled to receive,
                upon request and without charge, reasonable access to, and
                copies of, all documents, records and other information in
                the Bank's files which is relevant to the Claimant's claim
                for benefits;

          (v)   a statement describing the Claimant's right to bring an
                action for judicial review under Section 502(a) of ERISA;
                and

          (vi)  if an internal rule, guideline, protocol or other
                similar criterion was relied upon in making the adverse
                determination on review, a statement that a copy of the
                rule, guideline, protocol or other similar criterion will be
                provided without charge to the Claimant upon request.

          8.5  Calculation of Time Periods.  For purposes of the time periods
specified in this Article, the period of time during which a benefit
determination is required to be made begins at the time a claim is filed in
accordance with the procedures of this Plan without regard to whether all the
information necessary to make a decision accompanies the claim.  If a period
of time is extended due to a Claimant's failure to submit all information
necessary, the period for making the determination shall be tolled from the
date the notification is sent to the Claimant until the date the Claimant
responds.

     8.6  Legal Action.  If the Plan Committee fails to follow the claims
procedures required by this Article, a Claimant shall be deemed to have
exhausted the administrative remedies available under this Plan and shall
be entitled to pursue any available remedy under Section 502(a) of ERISA on
the basis that the Plan has failed to provide a reasonable claims procedure
that would yield a decision on the merits of the claim.  A Claimant's
compliance with the foregoing provisions of this Article is a mandatory
requisite to a Claimant's right to commence any legal action with respect to
any claims for benefits under the Plan.

                                    10

     8.7  Review by the Plan Committee.  Notwithstanding
anything in this Plan to the contrary, the Plan Committee
may determine, in its sole and absolute discretion, to
review any claim for benefits submitted by a Claimant under
this Plan.

             ARTICLE IX - PARTICIPANT RIGHTS
             _______________________________

     9.1  Participant Rights.  The rights of a Participant
or a Participant's Beneficiaries to benefits under this Plan
shall be solely those of an unsecured creditor of the
Employer.  Any insurance policy or other asset acquired or
held by, or on behalf of, the Employer or funds allocated by
the Employer in connection with the liabilities assumed by
the Employer pursuant to the Plan shall not be deemed to be
held under any trust for the benefit of a Participant or a
Participant's Beneficiaries or to be security for the
performance of the Employer's obligations pursuant hereto,
but shall be and remain a general asset of the Employer.

     9.2  Spendthrift Provision.     Neither a Participant
nor any other person shall have any right to commute, sell,
assign, transfer, pledge, anticipate, mortgage or otherwise
encumber, transfer, hypothecate or convey in advance of
actual receipt the amounts, if any, payable hereunder, or
any part thereof, which are, and all rights to which are,
expressly declared to be non-assignable and non-
transferable.  No part of the amounts payable shall, prior
to actual payments, be subject to seizure or sequestration
for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or
insolvency.

     9.3  Plan Not An Employment Agreement.  This Plan shall
not be deemed to constitute an employment agreement between
the parties hereto, nor shall any provision hereof restrict
the right of the Employer to discharge a Participant as an
employee of the Employer or restrict a Participant's right
to terminate his or her employment.

     9.4  Protective Provisions.   A Participant will
cooperate with the Employer by furnishing any and all
information requested by the Employer in order to facilitate
the payment of benefits hereunder, including taking such
physical examinations as the Employer may deem necessary and
taking such other action as may be requested by the
Employer.  If a Participant makes any material misstatement
of information or nondisclosure of medical history, then a
Participant shall not be considered as having been a
Participant in the Plan.

               ARTICLE X - MISCELLANEOUS
               _________________________

  10.1 Termination of Plan

          (a)  General.  The Employer, upon written notice
to all Participants, shall have the right, at any time, to
terminate this Plan.  Such termination shall become
effective when authorized by the Board of Directors of the
Employer and written notice given to the Participants.  Upon
termination of this Plan, those Participants that are fully

                          11

vested and entitled to or are receiving Normal Retirement
Benefits or Early Retirement Benefits pursuant to the
provisions of Article III and those Beneficiaries receiving
benefits pursuant to the provisions of Article IV shall
continue to receive such benefits in accordance with this
Plan.  The Participants who are not then vested or receiving
Normal Retirement Benefits or Early Retirement Benefits will
be entitled to no benefits pursuant to this Plan other than
their Account balance as calculated on the effective date of
the Plan termination.  A termination of the Plan will not be
a distributable event, except in the three circumstances set
forth in Section 10.1(b) below.

          (b)  Termination.  Under no circumstances may the
Plan permit the acceleration of the time or form of any
payment under the Plan prior to the payment events specified
herein, except as provided in this Section 10.1(b).  The
Bank may, in its discretion, elect to terminate the Plan in
any of the following three circumstances and accelerate the
payment of the entire unpaid balance of each Participant's
vested benefits as of the date of such payment in accordance
with Section 409A of the Code:

          (i)   the Plan is irrevocably terminated within 30
                days preceding a Change in Control and (1) all
                arrangements sponsored by the Bank and/or the
                Corporation that would be aggregated with the
                Plan under Treasury Regulation Section 1.409A-1(c)(2)
                are terminated, and (2) each Participant and all
                participants under the other aggregated
                arrangements receive all of their benefits under
                the terminated arrangements within 12 months of
                the date of termination of the arrangements,

          (ii)  the Plan is terminated at a time that is not
                proximate to a downturn in the financial health
                of the Bank and/or the Corporation and (1) all
                arrangements sponsored by the Bank and/or the
                Corporation that would be aggregated with the
                Plan under Treasury Regulation Section 1.409A-1(c)(2)
                if a Participant had deferrals of compensation
                under such arrangements are terminated, (2) no
                payments other than payments that would be payable
                under the terms of the arrangements if the
                termination had not occurred are made within 12
                months of the termination of the arrangements; (3)
                all payments are made within 24 months of the date
                the Bank and/or the Corporation take all necessary
                action to irrevocably terminate the arrangement;
                and (4) neither the Bank nor the Corporation adopts
                a new arrangement that would be aggregated with the
                Plan or any terminated arrangement under Treasury
                Regulation Section 1.409A-1(c)(2) if a Participant
                participated in both arrangements, at any time
                within three years following the date the Bank
                and/or the Corporation take all necessary action
                to irrevocably terminate the Plan or aggregated
                arrangement, or

          (iii) the Plan is terminated within 12 months
                of a corporate dissolution taxed under
                Section 331 of the Code, or with the approval
                of a

                                 12

               bankruptcy court pursuant to 11 U.S.C.
               Section 503(b)(1)(A), provided that the amounts
               deferred by each Participant under the Plan
               are included in the Participant's gross
               income in the later of (1) the calendar year
               in which the termination of the Plan occurs,
               (2) the first calendar year in which the
               amount is no longer subject to a substantial
               risk of forfeiture, or (3) the first calendar
               year in which the payment is administratively
               practicable.

     10.2 Inurement.  This Plan shall be binding upon and
shall inure to the benefit of the Employer and each
Participant hereunder and their respective heirs, executors,
administrators, successors and assigns.

     10.3 Amendments and Modifications.  This Plan may be
changed or altered by written instrument signed by the
Employer and shall become effective upon written
notification to the Participants.  Notwithstanding anything
in this Plan to the contrary, the Board of Directors of the
Bank may amend in good faith any terms of this Plan,
including retroactively, in order to comply with Section
409A of the Code.

     10.4 Governing Law.  This Plan is made pursuant to, and
shall be governed by, the laws of the Commonwealth of
Pennsylvania, in all respects, including matters of
construction, validity and performance, except to the extent
that federal law is applicable.

     10.5 Notice.  Any notice, consent or demand required or
permitted to be given under the provisions of this Plan by
one party to another shall be in writing, shall be signed by
the party giving or making the same, and may be given either
by delivering the same to such other party personally, or by
mailing the same, by United States certified mail, postage
prepaid, to such party, addressed to his or her last known
address as shown on the records of the Bank.  The date of
such mailing shall be deemed the date of such mailed notice,
consent or demand.

     10.6 Reorganization.  The Bank shall not merge or
consolidate into or with another company, or reorganize, or
sell substantially all of its assets to another company,
firm or person unless such succeeding or continuing company,
firm or person agrees to assume and discharge the
obligations of the Bank under this Plan.  Upon the
occurrence of such event, the term "Bank" or "Employer" as
used in this Plan shall be deemed to refer to the successor
or survivor company.

     10.7 Tax Withholding.  The Bank shall withhold any
taxes that are required to be withheld from the benefits
provided under this Plan.

                         13

     IN WITNESS WHEREOF, the Employer has adopted this
Amended and Restated Supplemental Executive Retirement Plan
effective as of June 27, 2007.

                    FIRST KEYSTONE BANK

                    By:  /s/ Thomas M. Kelly
                         ______________________________

                             14

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