Document:

Exhibit 10.21

Execution copy

  

 

SOLUNA TECHNOLOGIES, LTD.

CLASS A PREFERRED SHARE PURCHASE AGREEMENT

January 13, 2020

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

	 	
		Page

	
		1.         Purchase and Sale of
Preferred Shares
	1
	
		1.1.      Sale and
Issuance of Class A Preferred Shares
	1
	
		1.2.     
		Closing; Delivery
	1
	
		1.3.     
		Sale of Additional Preferred Shares
	1
	
		1.4.      Use
		of Proceeds
	2
	
		1.5.     
		Defined Terms Used in this Agreement
	2
	 	 
	
		2.        
		Representations and Warranties of the Corporation
	3
	
		2.1.     
		Organization, Good Standing, Corporate Power and Qualification
	4
	
		2.2.     
		Capitalization
	4
	
		2.3.     
		Subsidiaries
	5
	
		2.4.     
		Authorization
	5
	
		2.5.     
		Valid Issuance of Shares
	5
	
		2.6.     
		Governmental Consents and Filings
	6
	
		2.7.     
		Litigation
	6
	
		2.8.     
		Intellectual Property
	6
	
		2.9.     
		Compliance with Other Instruments
	7
	
		2.10.   
		Agreements; Actions
	7
	
		2.12.   
		Rights of Registration and Voting Rights
	8
	
		2.13.    Property

			9
	
		2.14.   
		Financial Statements
	9
	
		2.15.    Changes

			9
	
		2.16.    Employee
		Matters
	10
	
		2.17.   
		Tax Returns and Payments
	12
	
		2.18.   
		Employee Agreements
	12
	
		2.19.    Permits

			12
	
		2.20.    Corporate
		Documents
	13
	
		2.21.   
		Disclosure
	13
	
		2.22.   
		Corruption of Foreign Public Officials Act
	13
	 	 
	
		3.        
		Representations and Warranties of the Purchasers
	14
	
		3.1.     
		Authorization
	14
	
		3.2.     
		Purchase Entirely for Own Account, as principal
	14
	
		3.3.     
		Disclosure of Information
	14
	
		3.4.     
		Restricted Securities
	14
	
		3.5.     
		Risks of Investment
	15
	
		3.6.     
		Foreign Investors 
	15
	
		3.7.     
		No General Solicitation
	15
	
		3.8.     
		Exculpation Among Purchasers
	15
	
		3.9.     
		Residence
	16

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		4.       
		Conditions to the Purchasers' Obligations at Closing
	16
	
		4.1.      
		Representations and Warranties
	16
	
		
		4.2.       Performance
	16
	
		4.3.      
		Compliance Certificate
	16
	
		
		4.4.       Indemnification Agreement

			16
	
		4.5.      
		Unanimous Shareholders Agreement
	16
	
		4.6.      
		Registration Rights Agreement
	16
	
		
		4.7.       Restated Articles
	16
	
		4.8.      
		Secretary's Certificate
	16
	
		
		4.9.       Proceedings and Documents

			17
	
		
		4.10.     Preemptive Rights
	17
	
		4.11.    
		Contingent Rights Agreement
	17
	
		
		4.12.     Operating and Management Agreement

			17
	 	 
	
		
		5.        Conditions of the
		Corporation's Obligations at Closing
	 17
	
		
		5.1.       Representations and Warranties

			 17
	
		5.3.      
		[Reserved]
	17
	
		5.5.     
		Registration Rights Agreement
	18
	 	 
	
		
		6.        Miscellaneous
	18
	
		
		6.1.       Survival of Warranties
	18
	
		6.2.      
		Successors and Assigns
	18
	
		6.3.      
		Governing Law
	18
	
		
		6.4.       Counterparts
	18
	
		6.6.      
		Notices
	18
	
		
		6.7.       No Finder's Fees
	19
	
		
		6.8.       Amendments and Waivers
	19
	
		6.9.      
		Severability
	19
	
		6.10.    
		Delays or Omissions
	19
	
		
		6.11.     Entire Agreement
	19
	
		6.12.     Dispute
		Resolution
	20

 

 

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CLASS A PREFERRED SHARE PURCHASE AGREEMENT

THIS CLASS A PREFERRED SHARE PURCHASE
AGREEMENT (this "Agreement"), is made as of the 13th day of January,
2020 among Soluna Technologies, Ltd, a corporation incorporated under
the Business Corporations Act (British Columbia) (the "Corporation")
and the investors listed on Exhibit A attached to this Agreement (each a
"Purchaser" and together the "Purchasers").

The parties hereby agree
as follows:

1.          Purchase
and Sale of Preferred Shares. 

1.1.       Sale
and Issuance of Class A Preferred Shares. 

(a)              
The Corporation shall
adopt and file with the Province of British Columbia Registrar of Companies on
or before the Initial Closing (as defined below) the Notice of Amendment of
Articles of Incorporation in the form of Exhibit B attached to this
Agreement (the "Restated Articles").

(b)              
Subject to the terms
and conditions of this Agreement, each Purchaser agrees to purchase at the
Closing and the Corporation agrees to sell and issue to each Purchaser at the
Closing that number of Class A Preferred Shares, no par value (the "Class A
Preferred Shares"), set forth opposite each Purchaser's name on Exhibit
A, at a purchase price of U.S. $3.15 per share. The Class A Preferred
Shares issued to the Purchasers pursuant to this Agreement (including any
shares issued at the Initial Closing and any Additional Shares, as defined
below) are referred to in this Agreement as the "Shares."

1.2.       Closing;
Delivery. 

(a)              
The initial purchase
and sale of the Shares shall take place remotely via the exchange of documents
and signatures, at 2:00 p.m., on January 9, 2020, or at such other time and
place as the Corporation and the Purchasers mutually agree upon, orally or in
writing (which time and place are designated as the "Initial Closing").
If there is more than one closing, the term "Closing" applies to each
such closing unless otherwise specified.

(b)              
At each Closing, the
Corporation shall deliver to each Purchaser a certificate representing the
Shares being purchased by such Purchaser at such Closing against payment of the
purchase price therefor by wire transfer to a bank account designated by the
Corporation.

1.3.       Sale
of Additional Preferred Shares. 

(a)         After the Initial Closing, the
Corporation may sell, on the same terms and conditions as those contained in
this Agreement, up to 3,015,873 additional shares (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or
similar recapitalization affecting such shares) of Class A Preferred Shares
(the "Additional Shares"), to one or more purchasers (the "Additional
Purchasers"), provided that (i) such

subsequent sale is consummated prior to 365
days after the Initial Closing and (ii) each Additional Purchaser shall become
a party to the Transaction Agreements (as defined below) (other than the
Management Rights Letter), by executing and delivering a counterpart signature
page to each of the Transaction Agreements. Exhibit A to this Agreement
shall be updated to reflect the number of Additional Shares purchased at each such
Closing and the parties purchasing such Additional Shares. The offering of
Shares provided herein and the Additional Shares are referred to as the "Offering".

1.4.      Use of Proceeds. In
accordance with the directions of the Corporation's Board of Directors, as
constituted in accordance with the Unanimous Shareholders Agreement, the
Corporation will use the proceeds from the sale of the Shares to fund working
capital and the development activities related to (a) the Company's Dakhla,
Morocco wind project including government permits, turbine acquisition and
engineering, (b) the design and development of the vertically-integrated
computing facility to be co-located with the wind projects, and (c) other
development goals and objectives approved by the Board of Directors.

1.5.       Defined Terms
Used in this Agreement. In addition to the terms defined above, the
following terms used in this Agreement have the meanings set forth or
referenced below.

(a)            
"Affiliate"
means, with respect to any specified Person, any other Person who, directly or
indirectly, controls, is controlled by, or is under common control with such
Person, including, without limitation, any general partner, managing member,
officer or director of such Person or any venture capital fund now or hereafter
existing that is controlled by one or more general partners or managing members
of, or shares the same management company with, such Person.

(b)           
"Corporation
Intellectual Property" means all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, tradenames,
copyrights, trade secrets, domain names, mask works, information and
proprietary rights and processes, similar or other intellectual property
rights, subject matter of any of the foregoing, tangible embodiments of any of the
foregoing, licenses in, to and under any of the foregoing, and any and all such
cases that are owned or used by the Corporation in the conduct of the
Corporation's business as now conducted and as presently proposed to be
conducted.

(c)            
"Indemnification Agreement"
means the agreement between the Corporation and the director designated by any
Purchaser entitled to designate a member of the Board of Directors pursuant to
the Voting Agreement, dated as of the date of the Initial Closing, in the form
of Exhibit D attached to this Agreement.

(d)           
"Key
Employee" means John Belizaire, Phillip Ng and Dipul Patel.

(e)            
"Knowledge"
including the phrase "to the Corporation's knowledge" means the actual
knowledge of the following officers: John Belizaire, Phillip Ng and Dipul
Patel.

 

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(f)             
[Reserved].

(g)           
"Material Adverse
Effect" means a material adverse effect on the business, assets (including
intangible assets), liabilities, financial condition, property or results of
operations of the Corporation.

(h)           
[Reserved].

(i)             
"Person" means
any individual, corporation, partnership, trust, limited liability company,
association or other entity.

(j)             
"Purchaser"
means each of the Purchasers who is initially a party to this Agreement and any
Additional Purchaser who becomes a party to this Agreement at a subsequent
Closing under Subsection 1.2(b). 

(k)           
"Securities Laws"
means the Securities Act of 1933 (United States), the Securities Act (British
Columbia), each as amended, and the policies, orders, instructions, rules and
regulations promulgated thereunder.

(l)             
"Shares" means
the Class A Preferred Shares issued at the Initial Closing and any Additional
Shares issued at a subsequent Closing under Subsection 1.2(b). 

(m)         
"Tax Act" means
the Income Tax Act (Canada), as amended.

(n)           
"Transaction
Agreements" means this Agreement, the Unanimous Shareholder Agreement and
the Registration Rights Agreement.

(o)           
"Unanimous
Shareholders Agreement"
means
the Amended and Restated Shareholders Agreement among the Corporation and all
of its shareholders dated as of the date of the Initial Closing, in the form of
Exhibit E attached to this Agreement.

2.         Representations and
Warranties of the Corporation. The Corporation hereby represents and
warrants to each Purchaser that, except as set forth on the Disclosure Schedule
attached as Exhibit C to this Agreement, which exceptions are deemed to
be part of the representations and warranties made hereunder, the following
representations are true and complete as of the date of the Initial Closing,
except as otherwise indicated. The Disclosure Schedule shall be arranged in
sections corresponding to the numbered and lettered sections and subsections
contained in this Section 2, and the disclosures in any section or
subsection of the Disclosure Schedule shall qualify other sections and subsections
in this Section 2 only if it is readily apparent from a reading of the
disclosure that such disclosure is applicable to such other sections and
subsections.

For purposes of these representations and
warranties (other than those in Subsections 2.2, 2.3, 2.4, 2.5, and
2.6), the term the "Corporation" includes any subsidiaries of the Corporation,
unless otherwise noted.

3

2.1. Organization, Good Standing,
Corporate Power and Qualification. The Corporation is a corporation duly
organized, validly existing and in good standing under the Business
Corporations Act (British Columbia) and has all requisite corporate power
and authority to carry on its business as presently conducted and as proposed
to be conducted. The Corporation is duly qualified to transact business and is
in good standing in each jurisdiction in which the failure to so qualify would
have a Material Adverse Effect.

2.2.       Capitalization.
 

(a)         The authorized capital of the
Corporation consists, immediately prior to the Initial Closing, of:

(i)              An unlimited number of
common shares without par value (the "Common Shares"), 9,608,108 shares
of which are issued and outstanding immediately prior to the Initial Closing.
All of the outstanding Common Shares have been duly authorized, are fully paid
and non-assessable and were issued in compliance with all Securities Laws.

(ii)             An unlimited number of
Class Seed Preferred Shares without par value ("Class Seed Preferred Shares"),
of which 1,794,998 shares have been issued and outstanding immediately prior to
the Initial Closing. All of the outstanding Class Seed Preferred Shares have
been duly authorized, are fully paid and non-assessable and were issued in
compliance with all Securities Laws.

(iii)           
An unlimited number of
Class A Preferred Shares, issuable in series, none of which are issued and
outstanding immediately prior to the Initial Closing. The rights, privileges
and preferences of the Preferred Shares are as stated in the Restated Articles
and as provided by the Corporations Act (British Columbia).

(b)         The Corporation has reserved
1,067,568 Common Shares for issuance to officers, directors, employees and
consultants of the Corporation pursuant to its 2018 Stock Option Plan duly
adopted by the Board of Directors and approved by the Corporation shareholders
(the "Stock Plan"). Of such reserved Common Shares, 0 shares have been
issued pursuant to restricted share purchase agreements, options to purchase
147,438 shares have been granted and are currently outstanding, and 920,130
options to purchase shares remain available for issuance to officers,
directors, employees and consultants pursuant to the Stock Plan. The
Corporation has furnished to the Purchasers complete and accurate copies of the
Stock Plan and forms of agreements used thereunder.

(c)         Subsection
2.2(b) of the Disclosure Schedule sets forth the capitalization of the
Corporation immediately following the Initial Closing including the number of
shares of the following: (i) issued and outstanding Common Shares, including,
with respect to restricted Common Shares, vesting schedule and repurchase
price; (ii) granted share options, including vesting schedule and exercise
price; (iii) Common Shares reserved for future award grants under the Stock
Plan; (iv) each class of Preferred Shares; and (v) warrants or share purchase
rights, if any. Except for (A) the conversion privileges of the Shares to be
issued under this Agreement, (B) the rights provided in Section 5.2 of
the Unanimous Shareholders Agreement, and

4

(C) the securities and rights described in Subsection 2.2(a)(iii)
of this Agreement and Subsection 2.2(b) of the Disclosure Schedule,
there are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal or similar rights) or agreements,
orally or in writing, to purchase or acquire from the Corporation any Common
Shares, Class Seed Preferred Shares or Class A Preferred Shares, or any
securities convertible into or exchangeable for Common Shares, Class Seed
Preferred Shares or Class A Preferred Shares.

(d)           
None of the
Corporation's share purchase agreements or share option documents contains a
provision for acceleration of vesting (or lapse of a repurchase right) or other
changes in the vesting provisions or other terms of such agreement or
understanding upon the occurrence of any event or combination of events, including
without limitation in the case where the Corporation's Stock Plan is not
assumed in an acquisition. The Corporation has never adjusted or amended the
exercise price of any share options previously awarded, whether through
amendment, cancellation, replacement grant, repricing, or any other means.
Except as set forth in the Restated Articles and the Unanimous Shareholders
Agreement, the Corporation has no obligation (contingent or otherwise) to
purchase or redeem any of its share capital.

(e)            
To the Corporation's
Knowledge the Corporation has obtained valid waivers of any rights by other
parties to purchase any material number of the Shares covered by this
Agreement, except for the rights provided under the Contingent Rights Agreement
(as defined in Section 4.11).

    2.3.   Subsidiaries.
Other than as set forth in Section 2.3 of the Disclosure Schedule, the Corporation does not currently own or control,
directly or indirectly, any interest in any other corporation, partnership,
trust, joint venture, limited liability company, association, or other business
entity. The Corporation is not a participant in any joint venture, partnership
or similar arrangement.

2.4. Authorization. All corporate
action required to be taken by the Corporation's Board of Directors and shareholders
in order to authorize the Corporation to enter into the Transaction Agreements,
and to issue the Shares at the Closing and the Common Shares issuable upon
conversion of the Shares, has been taken or will be taken prior to the Closing.
The Transaction Agreements, when executed and delivered by the Corporation,
shall constitute valid and legally binding obligations of the Corporation,
enforceable against the Corporation in accordance with their respective terms
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, or other laws of general application
relating to or affecting the enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, or (iii) to the extent the
indemnification provisions contained in the Unanimous Shareholders Agreement,
the Registration Rights Agreement and the Indemnification Agreement may be
limited by applicable Securities Laws.

    2.5.   Valid
Issuance of Shares. 

(a)        The
Shares, when issued, sold and delivered in accordance with the terms and for
the consideration set forth in this Agreement, will be validly issued, fully
paid and

5

non-assessable and free of restrictions on
transfer other than restrictions on transfer under the Transaction Agreements,
the Restated Articles, Securities Laws and liens or encumbrances created by or
imposed by a Purchaser. Assuming the accuracy of the representations of the
Purchasers in Section 3 of this Agreement and subject to the filings
described in Subsection 2.5(b) below, the Shares will be issued in
compliance with all Securities Laws. The Common Shares issuable upon conversion
of the Shares have been duly reserved for issuance, and upon issuance in
accordance with the terms of the Restated Articles, will be validly issued,
fully paid and non-assessable and free of restrictions on transfer other than
restrictions on transfer under the Transaction Agreements, the Restated
Articles, Securities Laws and liens or encumbrances created by or imposed by a
Purchaser. Based in part upon the representations of the Purchasers in Section
3 of this Agreement, and subject to Subsection 2.5(b) below, the
Common Shares issuable upon conversion of the Shares will be issued in
compliance with all Securities Laws.

(b)        The Corporation is a "private
issuer" as that term is defined in National Instrument 45-106 of the Canadian
Securities Administrators ("NI 45-106").

2.6. Governmental Consents and Filings.
Assuming the accuracy of the representations made by the Purchasers in Section
3 of this Agreement, no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal or provincial governmental authority is required on the part of the
Corporation in connection with the consummation of the transactions
contemplated by this Agreement, except for the filing of the Restated Articles,
which will have been filed as of the Initial Closing.

2.7.   Litigation. There is no
claim, action, suit, proceeding, arbitration, complaint, charge or (to the Corporation's
knowledge) investigation pending or to the Corporation's knowledge, currently
threatened (i) against the Corporation or any officer, director or Key Employee
of the Corporation arising out of their employment or board relationship with
the Corporation; or (ii) that questions the validity of the Transaction
Agreements or the right of the Corporation to enter into them, or to consummate
the transactions contemplated by the Transaction Agreements. Neither the
Corporation nor, to the Corporation's knowledge, any of its officers, directors
or Key Employees is a party or is named as subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency
or instrumentality (in the case of officers, directors or Key Employees, such
as would affect the Corporation). There is no action, suit, proceeding or
investigation by the Corporation pending or which the Corporation intends to
initiate. The foregoing includes, without limitation, actions, suits,
proceedings or investigations pending or threatened in writing (or any basis
therefor known to the Corporation) involving the prior employment of any of the
Corporation's employees, their services provided in connection with the
Corporation's business, any information or techniques allegedly proprietary to
any of their former employers or their obligations under any agreements with
prior employers.

2.8.   Intellectual
Property. To the Corporation's knowledge, no product or service marketed or sold (or proposed to be marketed or sold) by
the Corporation violates or will violate any license or infringes or will
infringe any intellectual property rights of any other party. Other than with
respect to commercially available software products under standard end-user
object code license agreements, there are no outstanding options, licenses,
agreements, claims, encumbrances or shared ownership interests of any kind
relating to the Corporation Intellectual

6

Property, nor is the
Corporation bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other Person. The Corporation has not received any communications alleging that
the Corporation has violated, or by conducting its business, would violate any
of the patents, trademarks, service marks, tradenames, copyrights, trade
secrets, mask works or other proprietary rights or processes of any other
Person. The Corporation has obtained and possesses valid licenses to use all of
the software programs present on the computers and other software-enabled
electronic devices that it owns or leases or that it has otherwise provided to
its employees for their use in connection with the Corporation's business. To
the Corporation's knowledge, it will not be necessary to use any inventions of
any of its employees or consultants (or Persons it currently intends to hire)
made prior to their employment by the Corporation. Each employee and consultant
has assigned to the Corporation all intellectual property rights he or she owns
that are related to the Corporation's business as now conducted and as
presently proposed to be conducted. Subsection 2.8 of the Disclosure
Schedule lists all patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, tradenames, registered
copyrights, and licenses to and under any of the foregoing included in the
Corporation Intellectual Property. The Corporation has not, to the
Corporation's knowledge, embedded any open source, copyleft or community source
code in any of its products generally available or in development, including
but not limited to any libraries or code licensed under any General Public
License, Lesser General Public License or similar license arrangement.

2.9. Compliance
with Other Instruments. Except as disclosed in the Disclosure Schedule, the
Corporation is not in violation or default (i) of any provisions of its
Restated Articles or Bylaws, (ii) of any instrument, judgment, order, writ or
decree, (iii) under any note, indenture, mortgage or hypothec, or (iv) under
any lease, agreement, contract or purchase order to which it is a party or by
which it is bound that is material to the ongoing operation of the business of
the Corporation, or (v) to its knowledge, of any provision of federal or provincial
statute, rule or regulation applicable to the Corporation, in each case the
violation of which would have a Material Adverse Effect. The execution,
delivery and performance of the Transaction Agreements and the consummation of
the transactions contemplated by the Transaction Agreements will not result in
any such violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either (i) a default under any such
provision, instrument, judgment, order, writ, decree, contract or agreement; or
(ii) an event that results in the creation of any lien, charge or encumbrance
upon any assets of the Corporation or the suspension, revocation, forfeiture,
or nonrenewal of any material permit or license applicable to the Corporation.

2.10.
Agreements; Actions. 

(a)        Except for the Transaction
Agreements and the agreements listed in Section 2.10 of the Disclosure Schedule,
there are no agreements, understandings, instruments, contracts or proposed
transactions to which the Corporation is a party or by which it is bound that
involve (i) obligations (contingent or otherwise) of, or payments to, the
Corporation in excess of USD$500,000, (ii) the license of any patent,
copyright, trademark, trade secret or other proprietary right to or from the
Corporation, (iii) the grant of rights to manufacture, produce, assemble,
license, market, or sell its products to any other Person that limit the
Corporation's exclusive right to

7

develop, manufacture, assemble, distribute, market or sell its
products, or (iv) indemnification by the Corporation with respect to
infringements of proprietary rights.

(b)              
Except
as disclosed in Section 2.10 of the Disclosure Schedule, the Corporation has
not (i) declared or paid any dividends, or authorized or made any distribution
upon or with respect to any class or series of its share capital, (ii) incurred
any indebtedness for money borrowed or incurred any other liabilities
individually in excess of USD$50,000 or in excess of USD$250,000 in the
aggregate, (iii) made any loans or advances to any Person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business. For the purposes of (a) and (b) of this Subsection
2.10, all indebtedness, liabilities, agreements, understandings,
instruments, contracts and proposed transactions involving the same Person
(including Persons the Corporation has reason to believe are affiliated with
each other) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsection.

(c)               
The Corporation is not
a guarantor or indemnitor of any indebtedness of any other Person.

2.11.
Certain Transactions. 

(a)              
Other than (i) standard
employee agreements and benefits generally made available to all employees,
(ii) standard director and officer indemnification agreements approved by the
Board of Directors, and (iii) the purchase of shares of the Corporation's share
capital and the issuance of options to purchase shares of the Corporation's
Common Shares, in each instance, approved in the written minutes of the Board
of Directors (previously provided to the Purchasers or their counsel), there
are no agreements, understandings or proposed transactions between the
Corporation and any of its officers, directors, consultants or Key Employees,
or any Affiliate thereof.

(b)              
Except as disclosed in
Section 2.11 of the Disclosure Schedule, the Corporation is not indebted,
directly or indirectly, to any of its directors, officers or employees or to
their respective spouses or children or to any Affiliate of any of the
foregoing, other than in connection with expenses or advances of expenses
incurred in the ordinary course of business or employee relocation expenses and
for other customary employee benefits made generally available to all
employees. To the Corporation's knowledge and other than as disclosed in
Section 2.11 of the Disclosure Schedule, none of the Corporation's directors,
officers or employees, or any members of their immediate families, or any
Affiliate of the foregoing are, directly or indirectly, indebted to the
Corporation or have any direct or indirect ownership interest in any firm or
corporation with which the Corporation is affiliated or with which the
Corporation has a business relationship, or any firm or corporation which
competes with the Corporation except that directors, officers, employees or
shareholders of the Corporation may own shares in (but not exceeding two
percent of the outstanding capital stock of publicly traded companies that may
compete with the Corporation.

2.12. Rights of Registration and Voting
Rights. Except as provided in the Registration Rights Agreement, the
Corporation is not under the obligation to file one or more

8

prospectuses under Securities Laws in order to permit the
distribution of any of its currently outstanding securities or any securities
issuable upon exercise or conversion of its currently outstanding securities.
To the Corporation's knowledge, except as contemplated in the Unanimous
Shareholders Agreement, no shareholder of the Corporation has entered into any
agreements with respect to the voting of capital shares of the Corporation.

2.13. Property. The property and
assets that the Corporation owns are free and clear of all mortgages,
hypothecs, deeds of trust, liens, loans and encumbrances, except for statutory
liens for the payment of current taxes that are not yet delinquent and
encumbrances and liens that arise in the ordinary course of business and do not
materially impair the Corporation's ownership or use of such property or
assets. With respect to the property and assets it leases, the Corporation is
in compliance with such leases and to its knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances other than those of the
lessors of such property or assets. The Corporation does not own any real or
immovable property.

2.14. Financial Statements. The
Corporation has delivered to each Purchaser its unaudited financial statements
as of December 31, 2018 and for the fiscal year ended December 31, 2018 and its
unaudited financial statements (including balance sheet, income statement and
statement of cash flows) as of September 30, 2019 and for the 9-month period ended
September 30, 2019 (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with Canadian generally
accepted accounting principles applicable to private enterprises of the CPA
Canada Handbook of Chartered Professional Accountants of Canada ("GAAP")
applied on a consistent basis throughout the periods indicated, except that the
unaudited Financial Statements may not contain all footnotes required by GAAP.
The Financial Statements fairly present in all material respects the financial
condition and operating results of the Corporation as of the dates, and for the
periods, indicated therein, subject in the case of the unaudited Financial
Statements to normal year-end audit adjustments. Except as set forth in the
Financial Statements and as set forth in the Disclosure Schedule, the
Corporation has no material liabilities or obligations, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to September 30, 2019; (ii) obligations under contracts and
commitments incurred in the ordinary course of business; and (iii) liabilities
and obligations of a type or nature not required under GAAP to be reflected in
the Financial Statements. The Corporation maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with GAAP.

2.15. Changes. Since date of most
recent financial statements, and except as disclosed in Section 2.15 of the
Disclosure Schedule, there has not been:

(a)              
any change in the assets,
liabilities, financial condition or operating results of the Corporation from
that reflected in the Financial Statements, except changes in the ordinary
course of business that have not caused, in the aggregate, a Material Adverse
Effect;

(b)              
any damage,
destruction or loss, whether or not covered by insurance, that is material to
the ongoing operation of the business of the Corporation;

9

(c)        any waiver or
compromise by the Corporation of a valuable right or of a material debt owed to
it;

(d)        any satisfaction or
discharge of any lien, claim, or encumbrance or payment of any obligation by
the Corporation, except in the ordinary course of business and the satisfaction
or discharge of which would not have a Material Adverse Effect;

(e)        any material change to
a material contract or agreement by which the Corporation or any of its assets
is bound or subject;

(f)         any material change in
any compensation arrangement or agreement with any employee, officer, director
or shareholder;

(g)        any resignation or
termination of employment of any officer or Key Employee of the Corporation;

(h)        any mortgage,
hypothec, pledge, transfer of a security interest in, or lien, created by the
Corporation, with respect to any of its material properties or assets, except
liens for taxes not yet due or payable and liens that arise in the ordinary
course of business and do not materially impair the Corporation's ownership or
use of such property or assets;

(i)         any loans or
guarantees made by the Corporation to or for the benefit of its employees,
officers or directors, or any members of their immediate families, other than
travel advances and other advances made in the ordinary course of its business;

(j)         any declaration,
setting aside or payment or other distribution in respect of any of the Corporation's
share capital, or any direct or indirect redemption, purchase, or other
acquisition of any of such shares by the Corporation;

(k)        any sale, assignment
or transfer of any Corporation Intellectual Property;

(l)         receipt of notice that
there has been a loss of, or material order cancellation by, any major customer
of the Corporation;

(m)       to the Corporation's
knowledge, any other event or condition of any character, other than events
affecting the economy or the Corporation's industry generally, that could
reasonably be expected to result in a Material Adverse Effect; or

(n)        any arrangement or
commitment by the Corporation to do any of the things described in this Subsection
2.15. 

2.16. Employee
Matters. 

(a)         As of this date, the
Corporation employs three full-time employees and no part-time employees and
engages four consultants or independent contractors.

 

10

(b)              
To
the Corporation's knowledge, none of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would materially interfere with such employee's
ability to promote the interest of the Corporation or that would conflict with
the Corporation's business. Neither the execution or delivery of the
Transaction Agreements, nor the carrying on of the Corporation's business by
the employees of the Corporation, nor the conduct of the Corporation's business
as now conducted and as presently proposed to be conducted, will, to the
Corporation's knowledge, conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such employee is now obligated.

(c)               
Except as disclosed in
Section 2.16 of the Disclosure Schedule, the Corporation is not delinquent in
payments to any of its employees, consultants, or independent contractors for
any wages, salaries, commissions, bonuses, or other direct compensation for any
service performed for it to this date or amounts required to be reimbursed to
such employees, consultants or independent contractors. The Corporation has
complied in all material respects with all applicable provincial and federal
human rights and employment equity laws and with other laws related to
employment, including those related to wages, hours, worker classification and
collective bargaining. Except as disclosed in Section 2.16 of the Disclosure
Schedule, The Corporation has withheld and paid to the appropriate governmental
entity or is holding for payment not yet due to such governmental entity all
amounts required to be withheld from employees of the Corporation and is not
liable for any arrears of wages, taxes, penalties or other sums for failure to
comply with any of the foregoing.

(d)              
To the Corporation's
knowledge, no Key Employee intends to terminate employment with the Corporation
or is otherwise likely to become unavailable to continue as a Key Employee, nor
does the Corporation have a present intention to terminate the employment of
any of the foregoing. The employment of each employee of the Corporation is
terminable by the Corporation in accordance with applicable laws. Except as set
forth in Subsection 2.12(n) of the Disclosure Schedule or as required by
law, upon termination of the employment of any such employees, no severance or
other payments will become due. Except as set forth in Subsection 2.12(n)
of the Disclosure Schedule, the Corporation has no policy, practice, plan or
program of paying severance pay or any form of severance compensation in
connection with the termination of employment services.

(e)               
To the Corporation's
Knowledge, the Corporation has not made any representations regarding a
material amount of equity incentives to any officer, employee, director or
consultant that are inconsistent with the share amounts and terms set forth in
the minutes of meetings of the Corporation's board of directors.

(f)               
Each
former Key Employee whose employment was terminated by the Corporation has
entered into an agreement with the Corporation providing for the full release
of any claims against the Corporation or any related party arising out of such
employment.

(g)              
Subsection 2.12(n) of the Disclosure Schedule sets forth
each employee benefit plan maintained, established or sponsored by the
Corporation, or which the

11

Corporation participates in or contributes to. The Corporation has
made all required contributions and has no liability to any such employee
benefit plan and has complied in all material respects with all applicable laws
for any such employee benefit plan.

(h)              To the
Corporation's knowledge, none of the Key Employees or directors of the Corporation has been (a)
subject to voluntary or involuntary petition under the federal bankruptcy laws
or any provincial insolvency law or the appointment of a receiver, fiscal agent
or similar officer by a court for his business or property; (b) convicted in a
criminal proceeding or named as a subject of a pending criminal proceeding
(excluding traffic violations and other minor offenses); (c) subject to any
order, judgment or decree (not subsequently reversed, suspended, or vacated) of
any court of competent jurisdiction permanently or temporarily enjoining him
from engaging, or otherwise imposing limits or conditions on his engagement in
any securities, investment advisory, banking, insurance, or other type of
business or acting as an officer or director of a public Corporation; or (d)
found by a court of competent jurisdiction in a civil action or by a Canadian
securities regulator to have violated any securities laws, commodities, or
unfair trade practices law, which such judgment or finding has not been
subsequently reversed, suspended, or vacated.

2.17. Tax Returns
and Payments. There are no federal, provincial, state, county, local or
foreign taxes, including taxes the Corporation is required by applicable laws
to deduct, withhold or collect, due and payable by the Corporation that have
not been timely paid or deducted, withheld, collected and remitted. There are
no accrued and unpaid federal, provincial, state, county, local or foreign
taxes of the Corporation, including taxes the Corporation is required by
applicable laws to deduct, withhold or collect, that are due, whether or not
assessed or disputed. There have been no examinations or audits of any tax
returns or reports by any applicable federal, provincial, state, local or
foreign governmental agency. The Corporation has duly and timely filed all
federal, provincial, state, county, local and foreign tax returns required to
have been filed by it and there are in effect no waivers of applicable
limitation periods with respect to taxes for any year.

2.18. Employee Agreements. Each
current and former employee, consultant and officer of the Corporation has
executed an agreement with the Corporation regarding confidentiality and
proprietary information substantially in the form or forms delivered to the
counsel for the Purchasers (the "Confidential Information Agreements").
No current or former Key Employee has excluded works or inventions from his or
her assignment of inventions pursuant to such Key Employee's Confidential
Information Agreement. Each current and former Key Employee has executed a
non-solicitation agreement substantially in the form or forms delivered to
counsel for the Purchasers. The Corporation is not aware that any of its Key
Employees is in violation of any agreement covered by this Subsection 2.18.

2.19. Permits. Other than as set
forth in Section 2.19 of the Disclosure Schedule, the Corporation has all franchises,
permits, licenses and any similar authority necessary for the

 

12

conduct of its business. The Corporation is not in default in any
material respect under any of such franchises, permits, licenses or other
similar authority.

2.20. Corporate Documents. The
Restated Articles and Bylaws of the Corporation are in the form provided to the
Purchasers. The copy of the minute books of the Corporation provided to the
Purchasers contains minutes of all meetings of directors and shareholders and
all actions by written consent without a meeting by the directors and
shareholders since the date of incorporation and accurately reflects in all
material respects all actions by the directors (and any committee of directors)
and shareholders with respect to all transactions referred to in such minutes.

2.21. Disclosure. The Corporation
has made available to the Purchasers all the information reasonably available
to the Corporation that the Purchasers have requested for deciding whether to
acquire the Shares, including certain of the Corporation's projections
describing its proposed business plan (the "Business Plan"). The
Business Plan was prepared in good faith; however, the Corporation does not
warrant that it will achieve any results projected in the Business Plan. It is
understood that this representation is qualified by the fact that the
Corporation has not delivered to the Purchasers, and has not been requested to
deliver, a private placement or similar memorandum or any written disclosure of
the types of information customarily furnished to purchasers of securities.

2.22. Corruption
of Foreign Public Officials Act. Neither the Corporation nor any of the
Corporation's directors, officers, employees or agents have, directly or
indirectly, made, offered, promised or authorized any payment or gift of any
money or anything of value to or for the benefit of any "foreign public
official" (as such term is defined in the Corruption of Foreign Public
Officials Act, as amended (the "CFPO")), foreign political party or
official thereof or candidate for foreign political office for the purpose of
(i) influencing any official act or decision of such official, party or
candidate, (ii) inducing such official, party or candidate to use his, her or
its influence to affect any act or decision of a foreign governmental
authority, or (iii) securing any improper advantage, in the case of (i), (ii)
and (iii) above in order to assist the Corporation or any of its affiliates in
obtaining or retaining business for or with, or directing business to, any
person. Neither the Corporation nor any of its directors, officers, employees,
agents or attorneys have made or authorized any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment of funds or received or
retained any funds in violation of any law, rule or regulation. The Corporation
further represents that it has maintained, and has caused each of its
subsidiaries and affiliates to maintain, systems of internal controls
(including, but not limited to, accounting systems, purchasing systems and
billing systems) to ensure compliance with the CFPO or any other applicable
anti-bribery or anti-corruption law. Neither the Corporation, or, to the
Corporation's knowledge, any of its officers, directors or employees are the
subject of any allegation, voluntary

 

13

disclosure, investigation, prosecution or
other enforcement action related to the CFPO or any other anti-corruption law
(collectively, "Enforcement Action").

3.         Representations and
Warranties of the Purchasers. Each Purchaser hereby represents and warrants
to the Corporation, severally and not jointly, that:

3.1. Authorization. The Purchaser
has full power and authority to enter into the Transaction Agreements. The
Transaction Agreements to which the Purchaser is a party, when executed and
delivered by the Purchaser, will constitute valid and legally binding
obligations of the Purchaser, enforceable in accordance with their terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and any other laws of general application
affecting enforcement of creditors' rights generally, and as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies, or (b) to the extent the indemnification provisions
contained in the Unanimous Shareholders Agreement and the Registration Rights
Agreement may be limited by Securities Laws.

3.2. Purchase Entirely for Own Account,
as principal. This Agreement is made with the Purchaser in reliance upon
the Purchaser's representation to the Corporation, which by the Purchaser's execution
of this Agreement, the Purchaser hereby confirms, that the Shares to be
acquired by the Purchaser will be acquired for investment for the Purchaser's
own account as principal, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Purchaser further
represents that the Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any Person to sell, transfer or
grant participations to such Person or to any third Person, with respect to any
of the Shares. The Purchaser has not been formed for the specific purpose of
acquiring the Shares. Furthermore, the Purchaser is purchasing the shares, as
principal, and is an "accredited investor" as set out at section 2.4(2)
of NI 45-106. Moreover, the Purchaser is delivering with this Agreement a
completed and signed Private Issuer Exemption Certificate (attached as Exhibit
H) and Accredited Investor Certificate (attached as Exhibit I). 

3.3. Disclosure of Information. The
Purchaser has had an opportunity to discuss the Corporation's business,
management, financial affairs and the terms and conditions of the offering of
the Shares with the Corporation's management and has had an opportunity to
review the Corporation's facilities. The foregoing, however, does not limit or
modify the representations and warranties of the Corporation in Section 2
of this Agreement or the right of the Purchasers to rely thereon.

3.4.      Restricted
Securities. The Purchaser is aware that:

(a)            
the Corporation is not
a "reporting issuer" or the equivalent in any jurisdiction and, accordingly,
the Shares will be subject to an indefinite hold period under Securities Laws;

(b)           
the Shares are not
listed on any stock exchange and no public market exists for the Shares;

14

(c)              
the Shares are subject
to transfer restrictions contained in the Corporation's constating documents
and the Unanimous Shareholders Agreement; and

(d)              
the Purchaser may not
be able to resell the Shares except in accordance with limited exemptions under
Securities Laws.

3.5.   Risks of
Investment.  The Purchaser is aware that:

(a)              
the Corporation is
relying on exemptions from the requirements under Securities Laws to provide
the Purchaser with a prospectus and/or file a registration statement, and no
prospectus or registration statement has been filed by the Corporation with any
stock exchange or regulatory authority in connection with the issuance of the
Shares;

(b)              
no stock exchange,
governmental agency, securities commission or similar regulatory authority has
reviewed or passed on or made any finding or determination as to the merits of,
or made any recommendation or endorsement with respect to, the Shares;

(c)              
there
is no government or other insurance covering the Shares; and

(d)              
there are risks
associated with the purchase of the Shares.

The Purchaser is aware of
the characteristics of the Shares and the risks relating to an investment in
the Shares, and has the sophistication and experience in business and financial
matters (or has received appropriate independent advice) to be capable of
evaluating the merits and risks of the investment in the Shares. The Purchaser
is able, without impairing the Purchaser's financial condition, to bear the
economic risk of, and withstand a complete loss of, the investment in the
Shares.

3.6.   Foreign Investors.
If the Purchaser is not a resident of Canada, the Purchaser hereby represents that it has satisfied itself as to the
full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for shares in its jurisdiction, its subscription for
the Shares or any use of this Agreement, including (i) the legal requirements
within its jurisdiction for the purchase of the Shares, (ii) any foreign
exchange restrictions applicable to such purchase, (iii) any governmental or
other consents that may need to be obtained, and (iv) the income tax and other
tax consequences, if any, that may be relevant to the purchase, holding,
redemption, sale, or transfer of the Shares. The Purchaser's subscription and
payment for and continued beneficial ownership of the Shares will not violate
any applicable Securities Laws or other laws of the Purchaser's jurisdiction.

3.7.   No General
Solicitation. Neither the Purchaser, nor any of its officers, directors, employees, agents, attorneys,
shareholders or partners has either directly or indirectly, including, through
a broker or finder (a) engaged in any general solicitation, or (b) published
any advertisement in connection with the offer and sale of the Shares.

3.8. Exculpation Among Purchasers.
The Purchaser acknowledges that it is not relying upon any Person, other than
the Corporation and its officers and directors, in making its investment or
decision to invest in the Corporation. The Purchaser agrees that neither any

15

Purchaser nor the respective controlling Persons,
officers, directors, partners, agents, attorneys or employees of any Purchaser
shall be liable to any other Purchaser for any action heretofore taken or
omitted to be taken by any of them in connection with the purchase of the
Shares.

3.9.     Residence. If the
Purchaser is an individual, then the Purchaser resides in the province,
territory or country identified in the address of the Purchaser set forth on Exhibit
A; if the Purchaser is a partnership, corporation, limited liability
company or other entity, then the Purchaser resides in the province, territory
or country in which the office or offices of the Purchaser's principal place of
business is located as set out in Exhibit A. 

4.          Conditions to the
Purchasers' Obligations at Closing. The obligations of each Purchaser to
purchase Shares at the Initial Closing or any subsequent Closing are subject to
the fulfillment, on or before such Closing, of each of the following
conditions, unless otherwise waived:

4.1.     Representations and Warranties.
The representations and warranties of the Corporation contained in Section 2
will be true and correct in all respects as of such Closing.

4.2.     Performance. The Corporation
will have performed and complied with all covenants, agreements, obligations
and conditions contained in this Agreement that are required to be performed or
complied with by the Corporation on or before such Closing.

4.3.    Compliance Certificate.
The President of the Corporation will deliver to the Purchasers at such Closing
a certificate certifying that the conditions specified in Subsections 4.1
and 4.2 have been fulfilled.

4.4.     Indemnification Agreement. The
Corporation will have executed and delivered the Indemnification Agreements.

4.5.     Unanimous Shareholders Agreement.
The Corporation and each Purchaser (other than the Purchaser relying upon this
condition to excuse such Purchaser's performance hereunder) and the other
shareholders of the Corporation will have executed and delivered the Unanimous
Shareholders Agreement.

4.6.    
Registration Rights Agreement.
The Corporation, each Purchaser (other than the Purchaser relying upon this
condition to excuse such Purchaser's performance hereunder), and the other
shareholders of the Corporation named as parties thereto will have executed and
delivered the Registration Rights Agreement.

4.7.     Restated Articles. The
Corporation will have filed the Restated Articles with the director of Industry
Canada on or prior to the Closing, which will continue to be in full force and
effect as of the Closing.

4.8.     Secretary's
Certificate. The Secretary of the Corporation will have delivered to the
Purchasers at the Closing a certificate certifying (i) the Bylaws of the
Corporation, (ii) resolutions of the Board of Directors of the Corporation approving
the Transaction Agreements

16

and the transactions contemplated under
the Transaction Agreements, and (iii) resolutions of the shareholders of the
Corporation approving the Restated Articles.

4.9.      Proceedings and Documents. All
corporate and other proceedings in connection with the transactions
contemplated at the Closing and all documents incident thereto shall be
reasonably satisfactory in form and substance to each Purchaser, and each
Purchaser (or its counsel) will have received all such counterpart original and
certified or other copies of such documents as reasonably requested. Such
documents may include good standing certificates.

4.10.    Preemptive Rights. The
Corporation will have fully satisfied (including with respect to rights of timely
notification) or obtained enforceable waivers in respect of any preemptive or
similar rights directly or indirectly affecting any of its securities.

4.11.    Contingent Rights Agreement.
With respect to solely the Initial Closing, the Corporation will have executed
and delivered to the Purchaser in such Initial Closing that certain Contingent
Rights Agreement, dated even date herewith, by and between such Purchaser and
the Corporation that sets forth certain contingent future investment rights of
such Purchaser with respect to the Corporation (the "Contingent Rights
Agreement").

4.12.    Operating
and Management Agreement. With respect to solely the Initial Closing, the
Corporation will have executed and delivered to the Purchaser in such Initial
Closing that certain Operating and Management Agreement, dated even date
herewith, by and between such Purchaser and the Corporation that sets forth
certain rights and obligations of such Purchaser and the Corporation with
respect to services to be provided by the Corporation to Purchaser or its Affiliates
with respect to a pilot cryptocurrency mining program (the "O&M
Agreement").

5.         Conditions
of the Corporation's Obligations at Closing. The obligations of the Corporation to sell Shares to the Purchasers at the Initial
Closing or any subsequent Closing are subject to the fulfillment, on or before
the Closing, of each of the following conditions, unless otherwise waived:

5.1.      Representations and Warranties.
The representations and warranties of each Purchaser contained in Section 3
will be true and correct in all respects as of such Closing.

5.2.    
Performance. The Purchasers
will have performed and complied with all covenants, agreements, obligations
and conditions contained in this Agreement that are required to be performed or
complied with by them on or before such Closing.

5.3.      Indemnification Agreement. The
Corporation will have executed and delivered the Indemnification Agreement.

5.4.     Unanimous Shareholders Agreement.
The Corporation and each Purchaser (other than the Purchaser relying upon this
condition to excuse such Purchaser's performance hereunder) and the other
shareholders of the Corporation will have executed and delivered the Unanimous
Shareholders Agreement.

 

17

5.5.    
Registration Rights Agreement.
The Corporation, each Purchaser (other than the Purchaser relying upon this
condition to excuse such Purchaser's performance hereunder), and the other
shareholders of the Corporation named as parties thereto will have executed and
delivered the Registration Rights Agreement.

5.6.      Contingent Rights Agreement.
With respect to solely the Initial Closing, the Purchaser in such Initial
Closing will have executed and delivered to Corporation the Contingent Rights
Agreement.

5.7.      Operating and Management Agreement.
With respect to solely the Initial Closing, the Purchaser in such Initial
Closing will have executed and delivered to Corporation the O&M Agreement.

6.       Miscellaneous.
 

6.1.     Survival of Warranties.
Unless otherwise set forth in this Agreement, the representations and
warranties of the Corporation and the Purchasers contained in or made pursuant
to this Agreement shall survive the execution and delivery of this Agreement
and the Closing and shall in no way be affected by any investigation or
knowledge of the subject matter thereof made by or on behalf of the Purchasers
or the Corporation.

6.2.     Successors and Assigns.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

6.3.      Governing Law. This Agreement
shall be governed by the laws of the Province of British Columbia and the
federal laws of Canada applicable therein.

6.4.    
Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. Counterparts may be delivered via facsimile, electronic mail
(including pdf or any electronic signature complying with applicable law, e.g.,
  www.docusign.com) or other
transmission method and any counterpart so delivered is deemed to have been
duly and validly delivered and be valid and effective for all purposes.

6.5.      Titles
and Subtitles. The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.

6.6.      Notices. All notices and other
communications given or made pursuant to this Agreement shall be in writing and
are deemed effectively given upon the earlier of actual receipt, or (a)
personal delivery to the party to be notified, (b) when sent, if sent by
electronic mail or facsimile during normal business hours of the recipient, and
if not sent during normal business hours, then on the recipient's next business
day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one business day after
deposit with a nationally recognized overnight courier, freight prepaid,
specifying next business day

18

delivery, with written verification of receipt. All communications
shall be sent to the respective parties at their address as set forth on the
signature page or Exhibit A, or to such e-mail address, facsimile number
or address as subsequently modified by written notice given in accordance with
this Subsection 6.6. If notice is given to the Corporation, a copy shall
also be sent to Edward B. Claxton, Aust Legal Inc, 1010 De la Gauchetière St.
W, Suite 1350, Montreal, Quebec H3B 2N2 and if notice is given to the
Purchasers, a copy shall also be given to the Purchaser's counsel identified in
Exhibit "A", if any.

    6.7.   No Finder's
Fees. Each party represents that it neither is nor will be obligated for any finder's fee or commission in connection with
this transaction. Each Purchaser agrees to indemnify and to hold harmless the
Corporation from any liability for any commission or compensation in the nature
of a finder's or broker's fee arising out of this transaction (and the costs
and expenses of defending against such liability or asserted liability) for
which each Purchaser or any of its officers, employees or representatives is
responsible. The Corporation agrees to indemnify and hold harmless each
Purchaser from any liability for any commission or compensation in the nature
of a finder's or broker's fee arising out of this transaction (and the costs
and expenses of defending against such liability or asserted liability) for
which the Corporation or any of its officers, employees or representatives is
responsible.

6.8.      Amendments and Waivers. Except
as set forth in Subsection 1.2(b) of this Agreement, any term of this
Agreement may be amended, terminated or waived only with the written consent of
the Corporation, and (i) the holders of at least 50% of the then-outstanding
Shares, or (ii) for an amendment, termination or waiver effected prior to the
Initial Closing, Purchasers obligated to purchase all of the Shares to be
issued at the Initial Closing. Any amendment or waiver effected in accordance
with this Subsection 6.8 shall be binding upon the Purchasers and each
transferee of the Shares (or the Common Shares issuable upon conversion
thereof), each future holder of all such securities, and the Corporation.

6.9.      Severability. The invalidity
or unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.

6.10.    Delays or Omissions. No delay
or omission to exercise any right, power or remedy accruing to any party under
this Agreement, upon any breach or default of any other party under this
Agreement, shall impair any such right, power or remedy of such non-breaching
or non-defaulting party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach
or default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be
cumulative and not alternative.

6.11.     Entire Agreement. This
Agreement (including the Exhibits), the Restated Articles and the other
Transaction Agreements constitute the full and entire understanding and

19

agreement between the parties with respect to its subject matter,
and any other written or oral agreement relating to its subject matter existing
between the parties are expressly canceled.

6.12.     Dispute
Resolution. The parties (a) hereby irrevocably and unconditionally submit
to the jurisdiction of the courts of British Columbia for the purpose of any
suit, action or other proceeding arising out of or based upon this Agreement,
(b) agree not to commence any suit, action or other proceeding arising out of
or based upon this Agreement except in the courts of British Columbia, and (c)
hereby waive, and agree not to assert, by way of motion, as a defence, or
otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement or its subject
matter may not be enforced in or by such court.

Each party will bear its own costs in respect of any disputes
arising under this Agreement. Each of the parties to this Agreement consents to
personal jurisdiction for any equitable action sought in any court of competent
jurisdiction.

  

 

 

 

 

 

 

20

DocuSign Envelope ID: 2CC03B07-EAF8-4F9E-8976-3343F2C1E8EE

 

IN WITNESS WHEREOF, the parties have
executed this Class A Preferred Share Purchase Agreement as of the date first
written above.

		

SOLUNA
TECHNOLOGIES, LTD.

			
	 
	

         By: 

			
	 
	

Name: John Belizaire

			
	 
	

Title: Chief Executive Officer

			

  

 

 

 

 

 

 

 

 

 

SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT

		

	

 
	

Title:         Chief
Executive Officer

	 
	

Address:  325
Washington Avenue Extension  

                Albany, New York 12205

			

  

 

 

 

 

 

SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT

EXHIBITS

	Exhibit A	

SCHEDULE OF PURCHASERS

		
	 	 
	Exhibit B	

FORM
OF AMENDED AND RESTATED

		
	 	

ARTICLES OF INCORPORATION

		
	 	 
	Exhibit C	

DISCLOSURE SCHEDULE

		
	 	 
	Exhibit D	

FORM OF INDEMNIFICATION
AGREEMENT

		
	 	 
	Exhibit E	

FORM OF UNANIMOUS
SHAREHOLDERS AGREEMENT

		
	 	 
	Exhibit F	

FORM OF REGISTRATION
RIGHTS AGREEMENT

		
	 	 
	Exhibit G	

FORM OF LEGAL OPINION OF BOUGHTON LAW

		
	 	

CORPORATION

		
	 	 
	Exhibit H	

PRIVATE ISSUER EXEMPTION
AGREEMENT

		
	 	 
	Exhibit I	

ACCREDITED INVESTOR
CERTIFICATE

		

 

 

 

 

EXHIBIT A

SCHEDULE OF PURCHASERS

	
		Purchaser 
	
		Address
	
		Number of Shares
	

Aggregate 

		
	
		 
	
		 
	
		 
	

Subscription Amount
(USD) 

		
	
		Mechanical
	
		 
	
		158,730
	

499,999.50

		
	
		Technology, 

Incorporated
	
		 
	
		 
	

 

		
	 	 	 	 
	
		Total
	
		 
	
		158,730
	

499,999.50

		

 

 

 

 

 

 

 

 

EXHIBIT B 

FORM OF AMENDED AND RESTATED

ARTICLES OF INCORPORATION 

 

(see
attached)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SOLUNA TECHNOLOGIES, LTD.

(the "Company")

The Company has as its articles the following articles.

 	Full name and signature of each incorporator	Date of Signing
	Davis Corporate Solutions Inc.
		By:   
		
	May 11, 2018

 Incorporation number: BC 1163891 

 

SOLUNA TECHNOLOGIES, INC. 

(the "Company")

ARTICLES

ARTICLE 1 - INTERPRETATION........................................................................................................ 2

ARTICLE 2 -
SHARES AND SHARE CERTIFICATES...................................................................... 3

ARTICLE 3 - ISSUE OF SHARES.......................................................................................................... 4

ARTICLE 4 - SHARE REGISTERS....................................................................................................... 5

ARTICLE 5 -
SHARE TRANSFERS...................................................................................................... 5

ARTICLE 6 -
TRANSMISSION OF SHARES...................................................................................... 7

ARTICLE 7 -
ACQUISITION OF COMPANY'S SHARES.................................................................. 7

ARTICLE 8 - BORROWING POWERS................................................................................................ 8

ARTICLE 9 - ALTERATIONS................................................................................................................ 8

ARTICLE 10 -
MEETINGS OF SHAREHOLDERS............................................................................. 9

ARTICLE 11 -
PROCEEDINGS AT MEETINGS OF SHAREHOLDERS....................................... 11

ARTICLE 12 - VOTES OF SHAREHOLDERS................................................................................... 15

ARTICLE 13 - DIRECTORS................................................................................................................. 18

ARTICLE 14 -
ELECTION AND REMOVAL OF DIRECTORS...................................................... 19

ARTICLE 15 - ALTERNATE DIRECTORS........................................................................................ 21

ARTICLE 16 -
POWERS AND DUTIES OF DIRECTORS................................................................ 22

ARTICLE 17 -
INTERESTS OF DIRECTORS AND OFFICERS...................................................... 23

ARTICLE 18 - PROCEEDINGS OF DIRECTORS............................................................................. 24

ARTICLE 19 -
EXECUTIVE AND OTHER COMMITTEES............................................................. 26

ARTICLE 20 - OFFICERS..................................................................................................................... 28

ARTICLE 21 -
INDEMNIFICATION................................................................................................... 28

ARTICLE 22 - DIVIDENDS AND RESERVES................................................................................... 30

ARTICLE 23 -
ACCOUNTING RECORDS AND AUDITOR............................................................ 31

ARTICLE 24 - NOTICES........................................................................................................................ 31

ARTICLE 25 -
RECORD DATES.......................................................................................................... 33

ARTICLE 26 -
SEAL................................................................................................................................ 33

ARTICLE 27 -
PROHIBITIONS............................................................................................................. 34

 

- 2 -

ARTICLE 1 -
INTERPRETATION

1.1         Definitions

In these Articles, unless the context otherwise requires:

"Act"
means the Business Corporations Act (British Columbia) from
time to time in force and all amendments thereto and includes all regulations
and amendments thereto made pursuant to that Act;

"appropriate person" has the meaning assigned in
the Securities Transfer Act;

"board
of directors", "directors" and "board" mean
the directors or sole director of the Company for the time being;

"Interpretation Act" means the Interpretation Act (British Columbia) from time
to time in force and all amendments thereto and includes all regulations and
amendments thereto made pursuant to that Act;

"legal personal representative" means the
personal or other legal representative of the shareholder; 

"protected
purchaser" has the meaning assigned in the Securities Transfer Act;

"registered
address" of a shareholder means the shareholder's address as recorded in
the central securities register;

"registered
address" of a director means his or her address as recorded in the
Company's register of directors;

"seal" means the seal of the Company, if
any;

"securities
legislation" means statutes concerning the regulation of securities markets and
trading in securities and the regulations, rules, forms and schedules under
those statutes, all as amended from time to time, and the blanket rulings and
orders, as amended from time to time, issued by the securities commissions or
similar regulatory authorities appointed under or pursuant to those statutes; "Canadian
securities legislation" means the securities legislation in any
province or territory of Canada and includes the Securities Act (British
Columbia); and "U.S. securities legislation" means the
securities legislation in the federal jurisdiction of the United States and in
any state of the United States and includes the Securities Act of 1933 and
the Securities Exchange Act of 1934;

"Securities
Transfer Act' means the Securities Transfer Act (British Columbia) from
time to time in force and all amendments thereto and includes all regulations
and amendments thereto made pursuant to that Act;

"Statutory Reporting Company
Provisions" has the meaning assigned in the Act.

1.2         Applicable Definitions and Rules
of Interpretation

The
definitions in the Act and the definitions and rules of construction in the Interpretation
Act, with the necessary changes, so far as applicable, and unless the
context requires otherwise, apply to these Articles as if they were an
enactment. If there is a conflict or inconsistency between a definition in the
Act and a definition or rule in the Interpretation Act relating to a
term used in these Articles, the definition in the Act will prevail in relation
to the use of the terms in these Articles. If there is a conflict between these
Articles and the Act, the Act will prevail.

- 3 -

ARTICLE 2 -
SHARES AND SHARE CERTIFICATES

2.1         Authorized Share Structure

The
authorized share structure of the Company consists of shares of the class or
classes and series, if any, described in the Notice of Articles of the Company.

2.2         Form of Share Certificate

Each share certificate issued by the Company must comply with, and
be signed as required by, the Act.

2.3         Shareholder Entitled to
Certificate or Acknowledgement

Unless the shares of which the shareholder is the registered owner are uncertificated
shares, each shareholder, is entitled, without charge, to (a) one share
certificate representing the shares of each class or series of shares
registered in the shareholder's name or (b) a non-transferable written
acknowledgement of the shareholder's right to obtain such a share certificate,
provided that in respect of a share held jointly by several persons, the
Company is not bound to issue more than one share certificate or
acknowledgement and delivery of a share certificate or an acknowledgement to
one of several joint shareholders or a duly authorized agent of one of the
joint shareholders will be sufficient delivery to all.

2.4         Delivery by Mail

Any share
certificate or non-transferable written acknowledgement of a shareholder's
right to obtain a share certificate may be sent to the shareholder by mail at
the shareholder's registered address and neither the Company nor any director,
officer or agent of the Company is liable for any loss to the shareholder
because the share certificate or acknowledgement is lost in the mail, or stolen
or is otherwise undelivered.

2.5         Replacement of Worn Out or Defaced Certificate or
Acknowledgement

If the
directors are satisfied that a share certificate or a non-transferable written
acknowledgement of the shareholder's right to obtain a share certificate is
worn out or defaced, they must, on production to them of the share certificate
or acknowledgement on such other terms, if any, as they think fit, cancel the
share certificate or acknowledgement and issue a replacement share certificate
or acknowledgement, as the case may be.

2.6         Replacement of Lost, Destroyed
or Wrongfully Taken Certificate

If a person
entitled to a share certificate claims that the share certificate has been
lost, destroyed or wrongfully taken, the Company must issue a new share
certificate, if that person:

(a)          
so requests before the Company has notice that the share
certificate has been acquired by a protected purchaser;

(b)          
provides the Company with an indemnity bond sufficient in the Company's
judgment to protect the Company from any loss that the Company may suffer by
issuing a new certificate; and

(c)          
satisfies any other reasonable requirements
imposed by the directors.

A person
entitled to a share certificate may not assert against the Company a claim for
a new share certificate where a share certificate has been lost, apparently
destroyed or wrongfully taken if that person fails to notify the Company of
that fact within a reasonable time after that person has notice of it and the

- 4 -

Company
registers a transfer of the shares represented by the certificate before
receiving a notice of the loss, apparent destruction or wrongful taking of the
share certificate.

2.7         Recovery of New Share Certificate

If, after
the issue of a new share certificate, a protected purchaser of the original
share certificate presents the original share certificate for the registration
of transfer, then in addition to any rights on the indemnity bond, the Company
may recover the new share certificate from a person to whom it was issued or
any person taking under that person other than a protected purchaser.

2.8         Splitting Share Certificates

If a
shareholder surrenders a share certificate to the Company with a written
request that the Company issue in the shareholder's name two or more share
certificates, each representing a specified number of shares and in the
aggregate representing the same number of shares as represented by the
surrendered share certificate, the Company must cancel the surrendered share
certificate and issue replacement share certificates in accordance with that
request.

2.9         Certificate Fee

There must
be paid to the Company, in relation to the issue of any share certificate under
Articles 2.5, 2.6 or 2.8, the amount, if any, determined by the directors,
which must not exceed the amount prescribed under the Act.

2.10       Recognition of Trusts

Except as
required by law or statute or these Articles, no person will be recognized by
the Company as holding any share upon any trust, and the Company is not bound
by or compelled in any way to recognize (even when having notice thereof) any
equitable, contingent, future or partial interest in any share or fraction of a
share or (except as required by law or statute or these Articles) any other
rights in respect of any share except an absolute right to the entirety thereof
in the shareholder.

ARTICLE 3-
ISSUE OF SHARES

3.1         Directors Authorized

Subject to
the Act and the rights of the holders of issued shares of the Company, if any,
the Company may issue, allot, sell or otherwise dispose of the unissued shares,
and issued shares held by the Company, at the times, to the persons, in the
manner, on the terms and conditions and for the issue prices (including any
premium at which shares with par value may be issued) that the directors may
determine. The issue price for a par value share must be equal to or greater
than the par value of the share and may include a premium.

3.2         Commissions and Discounts

The Company
may at any time pay a reasonable commission or allow a reasonable discount to
any person in consideration of that person purchasing or agreeing to purchase
shares of the Company from the Company or any other person or procuring or
agreeing to procure buyers for shares of the Company.

3.3         Brokerage

The Company
may pay such brokerage fee or other consideration as may be lawful in
connection with the sale or placement of its securities.

-5- 

3.4         Conditions of Issue

Except as provided for by the Act, no share
may be issued until it is fully paid. A share is fully paid when:

(a)       consideration
is provided to the Company for the issue of the share by one or more of the
following:

(i)             
past services performed for the Company;

(ii)            
property;

(iii)           
money; and

(b)       the
value of the consideration received by the Company equals or exceeds the issue
price set for the share under Article 3.1.

3.5         Share Purchase Warrants and Rights

Subject to the Act, the Company may issue share purchase warrants,
options and rights (with or without other securities issued or created by the
Company) upon such terms and conditions as the directors determine.

ARTICLE 4 -
SHARE REGISTERS

4.1         Central Securities Register

The Company must keep or cause to be kept a central securities register
in accordance with the Act. The directors may, subject to the Act, appoint an
agent to maintain and keep the central securities register. The directors may
also appoint one or more agents, including the agent which keeps the central
securities register, as (a) transfer agent for any class or series of its
shares, and (b) as registrar for any class or series of its shares. The
directors may terminate the appointment of any agent at any time and may
appoint another agent in its place.

4.2         Closing Register

The Company must not at any time close its
central securities register.

ARTICLE 5 -
SHARE TRANSFERS

5.1         Registering Transfers

Subject to
Article 27 and the Act, a transfer of a share of the Company must not be
registered unless the Company or the transfer agent or registrar for the class
or series of shares to be transferred has received:

(a)       a duly signed instrument of transfer in
respect of the share;

(b)      in the case of a share certificate that has
been issued by the Company in respect of the share to be transferred, that
share certificate and a written instrument of transfer (which may be on a
separate document or endorsed on the share certificate) made by the shareholder
or other appropriate person or by an agent who has actual authority to act on
behalf of that person;

(c)       in the case ,of a non-transferable written
acknowledgement of the shareholder's right to obtain a share certificate that
has been issued by the Company in respect of the share to be transferred, a
written instrument of transfer that directs that the transfer of the shares

- 6 -

be
registered, made by the shareholder or other appropriate person or by an agent
who has actual authority to act on behalf of that person;

(d)       in the case of a share that is an uncertificated share, a written
instrument of transfer that directs that the transfer of the share be
registered, made by the shareholder or other appropriate person or by an agent
who has actual authority to act on behalf of that person; and

(e)       such other evidence, if any, as the Company or the transfer agent
or registrar for the class or series of shares to be transferred may require to
prove the title of the transferor or the transferor's right to transfer the
share, that the written instrument of transfer is genuine and authorized and
that the transfer is rightful or to a protected purchaser.

5.2         Form of Instrument of Transfer

The instrument
of transfer in respect of any share of the Company must be either in the form,
if any, on the back of the Company's share certificates or in any other form
that may be approved by the directors or the transfer agent for the class or
series of shares to be transferred.

5.3         Transferor Remains Shareholder

Except to
the extent that the Act otherwise provides, the transferor of shares is deemed
to remain the holder of the shares until the name of the transferee is entered
in a securities register of the Company in respect of the transfer.

5.4         Signing of Instrument of
Transfer

If a
shareholder, or his or her duly authorized attorney, signs an instrument of
transfer in respect of shares registered in the name of the shareholder, the
signed instrument of transfer constitutes a complete and sufficient authority
to the Company and its directors, officers and agents to register the number of
shares specified in the instrument of transfer or specified in any other
manner, or, if no number is specified, all the shares represented by the share
certificates or set out in the written acknowledgements deposited with the
instrument of transfer:

(a)       in the name of the person named as transferee in that instrument
of transfer; or

(b)       if no person is named as transferee in that instrument of
transfer, in the name of the person on whose behalf the instrument is deposited
for the purpose of having the transfer registered.

5.5         Inquiry as to Title Not Required

Neither the
Company nor any director, officer or agent of the Company is bound to inquire
into the title of the person named in the instrument of transfer as transferee
or, if no person is named as transferee in the instrument of transfer, of the
person on whose behalf the instrument is deposited for the purpose of having
the transfer registered. No liability will arise relating to registering the
transfer by the shareholder or by any intermediate owner or holder of the
shares, of any interest in the shares, of any share certificate representing
such shares or of any written acknowledgement of a right to obtain a share
certificate for such shares.

5.6         Transfer Fee

The directors may impose a transfer registration fee payable to
the Company.

- 7 -

ARTICLE 6 -
TRANSMISSION OF SHARES

6.1         Legal Personal Representative
Recognized on Death

In the case of the death of a shareholder, the legal personal representative,
or if the shareholder was a joint holder, the surviving joint holder, will be
the only person recognized by the Company as having any title to the
shareholder's interest in the shares. Before recognizing a person as a legal
personal representative of a shareholder, the directors may require the
original grant of probate or letters of administration or a court certified
copy of them or the original or a court certified or authenticated copy of the
grant of representation, will, order or other instrument or other evidence of
the death under which title to the shares or securities is claimed to vest.

6.2         Rights of Legal Personal
Representative

The legal personal representative of a shareholder has the same rights,
privileges and obligations that attach to the shares held by the shareholder,
including the right to transfer the shares in accordance with these Articles,
if appropriate evidence of appointment or incumbency within the meaning of the Securities
Transfer Act has been deposited with the Company.

ARTICLE 7 -
ACQUISITION OF COMPANY'S SHARES

7.1         Company Authorized to Purchase or
Otherwise Acquire Shares

Subject to
Article 7.2, the special rights or restrictions attached to the shares of any
class or series of shares and the Act, the Company may, by a directors'
resolution, purchase or otherwise acquire any of its shares at the price and
upon the terms determined by the directors.

7.2         No Purchase, Redemption or Other
Acquisition When Insolvent

The Company
must not make a payment or provide any other consideration to purchase, redeem
or otherwise acquire any of its shares if there are reasonable grounds for
believing that:

(a)     
the Company is insolvent; or

(b)     
making the payment or providing the
consideration would render the Company insolvent.

7.3         Sale and Voting of Purchased,
Redeemed or Otherwise Acquired Shares

If the
Company, retains a share redeemed, purchased or otherwise acquired by it, the
Company may sell, gift or otherwise dispose of the share, but, while such share
is held by the Company, it:

(a)     
is not entitled to vote the share at a
meeting of its shareholders;

(b)     
must not pay a dividend in respect of the
share; and

(c)     
must not make any other distribution in
respect of the share.

7.4         Redemption

If the
Company proposes to redeem some but not all of the shares of any class, the
directors may, subject to the special rights and restrictions attached to such
class of shares, decide the manner in which the shares to be redeemed are to be
selected.

- 8 -

ARTICLE 8 - BORROWING POWERS

8.1         Powers
of Directors

The Company, if authorized by the directors,
may:

(a)         borrow money in the manner and amount on the security, from the
sources and on the terms and conditions that the directors consider
appropriate;

(b)         issue bonds, debentures and other debt obligations either outright
or as security for any liability or obligation of the Company or any other
person and at such discounts or premiums and on such other terms as the
directors consider appropriate;

(c)         guarantee the repayment of money by any other person or the
performance of any obligation of any other person; and

(d)         mortgage, charge, whether by way of specific or floating charge,
grant a security interest in, or give other security on, the whole or any part
of the present and future assets and undertaking of the Company.

ARTICLE 9 - ALTERATIONS

9.1         Alteration
of Authorized Share Structure

Subject to Article 9.2 and the Act, the
Company may, by special resolution:

(a)          create
one or more classes or series of shares or, if none of the shares of a class or
series of shares are allotted or issued, eliminate that class or series of
shares;

(b)         increase,
reduce or eliminate the maximum number of shares that the Company is authorized
to issue out of any class or series of shares or establish a maximum number of
shares that the Company is authorized to issue out of any class or series of
shares for which no maximum is established;

(c)          subdivide or consolidate all or
any of its unissued, or fully paid issued, shares;

(d)         if the Company is authorized to
issue shares of a class of shares with par value:

(i)      
decrease the par value of those shares; or

(ii)     
if none of the shares of that class of shares are allotted or
issued, increase the par value of those shares;

(e)          change all or any of its unissued, or fully paid issued,
shares with par value into shares without par value or any of its unissued
shares without par value into shares with par value;

(f)          alter the identifying name of any class or series of its
shares; or

(g)           otherwise
alter its shares or authorized share structure when required or permitted to do
so by the Act;

and, if applicable, alter its Notice of
Articles and, if applicable, its Articles, accordingly.

- 9 - 

9.2         Special Rights or Restrictions

Subject to the Act, the Company may by
special resolution:

(a)      
create special rights or restrictions for, and attach those
special rights or restrictions to, the shares of any class or series of shares,
whether or not any or all of those shares have been issued; or

(b)      
vary or delete any special rights or restrictions attached to the
shares of any class or series of shares, whether or not any or all of those
shares have been issued;

and alter its Articles and Notice of
Articles accordingly.

9.3         Change of Name

The Company
may by special resolution authorize an alteration to its Notice of Articles in
order to change its name and may, by ordinary resolution or directors'
resolution, adopt or change any translation of that name.

9.4         Other Alterations

If the Act
does not specify the type of resolution and these Articles do not specify
another type of resolution, the Company may resolve to alter these Articles by
a special resolution.

ARTICLE 10 -
MEETINGS OF SHAREHOLDERS

10.1       Annual General Meetings

Unless an
annual general meeting is deferred or waived in accordance with the Act, the
Company must hold its first annual general meeting within 18 months after the
date on which it was incorporated or otherwise recognized, and after that must
hold an annual general meeting at least once in each calendar year and not more
than 15 months after the last annual reference date at such time and place as
may be determined by the directors.

10.2       Annual General Meeting by Consent
Resolutions

If all of the shareholders who are entitled to vote at an annual general
meeting consent by a unanimous resolution to all of the business that is
required to be transacted at that annual general meeting, the annual general
meeting is deemed to have been held on the date selected in the unanimous
resolution. The shareholders must, in any unanimous resolution passed under
this Article select, as the Company's annual reference date, a date that would
be appropriate for the holding of the applicable annual general meeting.

10.3       Calling of Meetings of
Shareholders

The
directors may, at any time, call a meeting of shareholders to be held at such
time and place as may be determined by the directors.

10.4       Notice of Meetings of Shareholders

The Company
must send notice of the date, time and location of any meeting of shareholders
(including, without limitation, any notice specifying the intention to propose
a resolution as an exceptional resolution, a special resolution or a special
separate resolution), in the manner provided in these Articles, or in such
other manner, if any, as may be prescribed by ordinary resolution (whether
previous notice of the resolution has been given or not), to each shareholder
entitled to attend the meeting and to each director

- 10 -

and to the
auditor of the Company, unless these Articles otherwise provide, at least the
following number of days before the meeting:

(a)      
if and for so long as the Company is a public
company, 21 days; or

(b)      
otherwise, 10 days.

10.5       Notice of Resolution to Which Shareholders
May Dissent

The Company must send to each of its shareholders whether or not their
shares carry the right to vote, a notice of any meeting of shareholders at
which a resolution entitling shareholders to dissent is to be considered that
specifies the date of the meeting and contains a statement advising of the
right to send a notice of dissent and a copy of the proposed resolution.

10.6       Record Date for Notice

The directors may set a date as the record date for the purpose of
determining shareholders entitled to notice of, or to vote at, any meeting of
shareholders, and the record date must not precede the date on which the
meeting is to be held by more than two months (or four months if the meeting is
requisitioned), or by fewer than:

(a)      
if and for so long as the Company is a public
company, 21 days; or

(b)      
otherwise, 10 days.

If no record
date is set, the record date is 5 p.m. on the day immediately preceding-the
first date on which the notice is sent or, if no notice is sent, the beginning
of the meeting.

10.7       Record Date for Voting

The directors may set a date as the record date for the purpose of
determining shareholders entitled to vote at any meeting of shareholders. The
record date must not precede the date on which the meeting is to be held by
more than two months or, in the case of a general meeting requisitioned by
shareholders under the Act, by more than four months. If no record date is set,
the record date is 5 p.m. on the day immediately preceding the first date on
which the notice is sent or, if no notice is sent, the beginning of the
meeting.

10.8       Failure to Give Notice and Waiver
of Notice

The accidental omission to send notice of any meeting to, or the
non-receipt of any notice by, any of the persons entitled to notice does not
invalidate any proceedings at that meeting. Any person entitled to notice of a
meeting of shareholders may, in writing or otherwise, waive that entitlement or
agree to reduce the period of that notice. Attendance of a person at a meeting
of shareholders is a waiver of entitlement to notice of the meeting unless that
person attends the meeting for the express purpose of objecting to the
transaction of any business on the grounds that the meeting is not lawfully
called.

10.9       Notice of Special Business at
Meetings of Shareholders

If a meeting
of shareholders is to consider special business within the meaning of Article
11.1, the notice of meeting must:

(a)      
state the general nature of the special
business; and

(b)      
if the special business includes considering, approving,
ratifying, adopting or authorizing any document or the signing of or giving of
effect to any document, have attached to it a

copy of the
document or state that a copy of the document will be available for inspection
by shareholders:

(i)      
at the Company's records office, or at such other reasonably
accessible location in British Columbia or by electronic access as is specified
in the notice;. and

(ii)     
during statutory business hours on any one or more specified days
before the day set for holding the meeting.

10.10       Shareholder Meetings Outside British
Columbia

The directors may determine the location of any
general meetings to be held outside British Columbia.

10.11       Notice of Dissent Rights

The minimum number of days, before the date of a meeting of shareholders
at which a resolution entitling shareholders to dissent is to be considered, by
which a copy of the proposed resolution and a notice of the meeting specifying
the date of the meeting and advising of the right to send a notice of dissent
is to be sent pursuant to the Act to all shareholders of the Company, whether
or not their shares carry the right to vote, is:

(a)      
if and for so long as the Company is a public
company, 21 days; or

(b)      
otherwise, 10 days.

ARTICLE 11 - PROCEEDINGS
AT MEETINGS OF SHAREHOLDERS

11.1       Special Business

At a meeting of shareholders, the following
business is special business:

(a)      
at a meeting of shareholders that is not an annual general
meeting, all business is special business except business relating to the
conduct of or voting at the meeting; and

(b)      
at an annual general meeting, all business is
special business except for the following:

(i)      
business relating to the conduct of or voting
at the meeting;

(ii)     
consideration of any financial statements of
the Company presented to the meeting;

(iii)    
consideration of any reports of the directors
or auditor;

(iv)    
the setting or changing of the number of
directors;

(v)     
the election or appointment of directors;

(vi)    
the appointment of an auditor;

(vii)   
the setting of the remuneration of an
auditor;

(viii)  
business arising out of a report of the directors not requiring
the passing of a special resolution or an exceptional resolution; and

- 12 -

(ix)  any
other business which, under these Articles or the Act, may be transacted at a
meeting of shareholders without prior notice of the business being given to the
shareholders.

11.2       Special Majority

The majority
of votes required for the Company to pass a special resolution at a general
meeting of shareholders is two-thirds of the votes cast on the resolution.

11.3       Quorum

Subject to the special rights or restrictions attached to the shares of
any class or series of shares, the quorum for the transaction of business at a
meeting of shareholders is two persons who are, or who represent by proxy,
shareholders who, in the aggregate, hold at least 5% of the issued shares
entitled to be voted at the meeting.

11.4       One Shareholder May Constitute Quorum

If there is only one shareholder entitled to
vote at a meeting of shareholders:

(a)      
the quorum is one person who is, or who
represents by proxy, that shareholder; and

(b)     
that shareholder, present in person or by proxy, may constitute
the meeting. 

11.5       Requirement of Quorum

No business,
other than the election of a chair of the meeting and the adjournment of the
meeting, may be transacted at any meeting of shareholders unless a quorum of
shareholders entitled to vote is present at the commencement of the meeting,
but such quorum need not be present throughout the meeting.

11.6       Lack of Quorum

If, within one-half hour from the time set for the holding of a meeting
of shareholders, a quorum is not present:

(a)      
in the case of a general meeting convened by requisition of
shareholders, the meeting is dissolved; and

(b)      
in the case of any other meeting of shareholders, the meeting
stands adjourned to the same day in the next week at the same time and place.

11.7       Lack of Quorum at Succeeding
Meeting

If, at the meeting to which the meeting referred-to in Article 11.6(b)
was adjourned, a quorum is not present within one-half hour from the time set
for the holding of the meeting, the person or persons present and being, or
representing by proxy, one or more shareholders entitled to attend and vote at
the meeting constitute a quorum.

11.8       Persons Entitled to Attend Meeting

In addition to those persons who are entitled to vote at a meeting of
shareholders, the only other persons entitled to be present at the meeting are
the directors, the president (if any), the secretary (if any), any lawyer for
the Company, the auditor of the Company, any persons invited to be present by
the directors or by the chair of the meeting and any persons entitled or
required under the Act to be present at the meeting, but if any of those
persons does attend a meeting of shareholders, that person is not to be

- 13 -

counted in
the quorum and is not entitled to vote at the meeting unless that person is a
shareholder or proxy holder entitled to vote at that meeting.

11.9       Chair

The following individual is entitled to preside as chair at a
meeting of shareholders:

(a)        the chair of the board, if any;

(b)        if the chair of the board is absent or unwilling to act as chair
of the meeting, the president, if any; or

(c)        if the chair of the board and the president are unwilling, unable
or unavailable to act as chair of the meeting, the directors present must
choose one of their number to be chair of the meeting or if all of the
directors present decline to take the chair or fail to so choose or if no director
is present, the shareholders entitled to vote at the meeting who are present in
person or by proxy may choose any person present at the meeting to chair the
meeting.

11.10       Adjournments

The chair
of a meeting of shareholders may, and if so directed by the meeting must,
adjourn the meeting from time to time and from place to place, but no business
may be transacted at any adjourned meeting other than the business left
unfinished at the meeting from which the adjournment took place.

11.11       Notice of Adjourned Meeting

It is not
necessary to give any notice of an adjourned meeting or of the business to be
transacted at an adjourned meeting of shareholders except that, when a meeting
is adjourned for 30 days or more, notice of the adjourned meeting must be given
as in the case of the original meeting.

11.12       Decisions by Show of Hands or Poll

Subject to
the provisions of the Act, every motion put to a vote at a meeting of
shareholders will be decided on a show of hands unless a poll, before or on the
declaration of the result of the vote by show of hands, is directed by the
chair or demanded by at least one shareholder entitled to vote who is present
in person or by proxy.

11.13       Declaration of Result

The chair
of a meeting of shareholders must declare to the meeting the decision on every
question in accordance with the result of the show of hands or the poll, as the
case may be, and that decision must be entered in the minutes of the meeting.
Unless a poll is directed or demanded, a declaration of the chair that a
resolution is carried by the necessary majority or is defeated is conclusive
evidence without proof of the number or proportion of the votes recorded in
favour of or against the resolution.

11.14       Motion Need Not be Seconded

No motion
proposed at a meeting of shareholders need be seconded unless the chair of the
meeting rules otherwise, and the chair of any meeting of shareholders is
entitled to propose or second a motion.

- 14 - 

11.15       Casting Vote

In the case
of an equality of votes, the chair of a meeting of shareholders does not,
either on a show of hands or on a poll, have a second or casting vote in
addition to the vote or votes to which the chair may be entitled as a
shareholder.

11.16       Manner of Taking Poll

Subject to Article 11.17, if a poll is duly
demanded at a meeting of shareholders:

(a)      the poll must be taken:

(i)         
at the meeting, or within seven days after the date of the
meeting, as the chair of the meeting directs; and

(ii)        
in the manner, at the time and at the place
that the chair of the meeting directs; and

(b)    the
result of the poll is deemed to be the decision of the meeting at which the
poll is demanded; and

(c)     the demand for the poll may be withdrawn by the
person who demanded it. 

11.17       Demand for Poll on Adjournment

A poll
demanded at a meeting of shareholders on a question of adjournment must be
taken immediately at the meeting.

11.18       Chair Must Resolve Dispute

In the case of any dispute as to the admission or rejection of a vote
given on a poll, the chair of the meeting must determine the dispute, and his
or her determination made in good faith is final and conclusive.

11.19       Shareholder Voting Multiple Shares

On a poll, a shareholder entitled to more
than one vote need not cast all the votes in the same way.

11.20       No Demand for Poll on Election of Chair

No poll may be demanded in respect of the
vote by which a chair of a meeting of shareholders is elected.

11.21       Demand for Poll Not to Prevent
Continuance of Meeting

The demand
for a poll at a meeting of shareholders does not, unless the chair of the
meeting so rules, prevent the continuation of the meeting for a transaction of
any business other than the question on which a poll has been demanded.

11.22       Retention of Ballots and Proxies

The Company
must, for at least three months after a meeting of shareholders, keep each
ballot cast on a poll and each proxy voted at the meeting, and, during that period,
make them available for inspection during normal business hours by any
shareholder or proxy holder entitled to vote at the meeting. At the end of such
three month period, the Company may destroy such ballots and proxies.

- 15 -

ARTICLE 12 -
VOTES OF SHAREHOLDERS

12.1       Number of Votes by Shareholder or
by Shares

Subject to
any special rights or restrictions attached to any shares and to the restrictions
imposed on joint shareholders under Article 12.3:

(a)     
on a vote by show of hands, every person present who is a
shareholder or proxy holder and entitled to vote on the matter, has one vote;
and

(b)     
on a poll, every shareholder entitled to vote on the matter has
one vote in respect of each share entitled to be voted on the matter and held
by that shareholder and may exercise that vote either in person or by proxy.

12.2       Votes of the Persons in Representative
Capacity

A person who is not a shareholder may vote at a meeting of shareholders,
whether on a show of hands or on a poll, and may appoint a proxy holder to act
at the meeting, if, before doing so, the person satisfies the chair of the
meeting, or the directors, that the person is a personal or other legal
personal representative or a trustee in bankruptcy for a shareholder who is
entitled to vote at the meeting.

12.3       Votes by Joint Holders

If there are joint shareholders registered in
respect of any share:

(a)     
any one of the joint shareholders may vote at any meeting of
shareholders, personally or by proxy, in respect of the share as if that joint
shareholder were solely entitled to it; or

(b)     
if more than one of the joint shareholders is present at any
meeting, personally or by proxy, and more than one of them votes in respect of
that share, then only the vote of the joint shareholder present whose name
stands first on the central securities register in respect of the share will be
counted.

12.4       Legal Personal Representatives as
Joint Shareholders

Two or more
legal personal representatives of a shareholder in whose sole name any share is
registered are, for the purposes of Article 12.3, deemed to be joint
shareholders registered in respect of that share.

12.5       Representative of a Corporate
Shareholder

If a corporation
that is not a subsidiary of the Company is a shareholder, that corporation may
appoint a person to act as its representative at any meeting of shareholders of
the Company, and:

(a)      for that purpose, the instrument
appointing a representative must:

(i)        be received at the registered office of the
Company or at any other place specified, in the notice calling the meeting, for
the receipt of proxies, at least the number of business days specified in the
notice, for the receipt of proxies, or if no number of days is specified, two
business days before the day set for the holding of the meeting; or

(ii)      
be received, at the meeting, by the chair of the meeting or to a
person designated by the chair of the meeting; and

(b)   if a representative is appointed
under this Article:

- 16 -

(i)         the representative is entitled to exercise in respect of and at
that meeting the same rights on behalf of the corporation that the
representative represents as that corporation could exercise if it were a
shareholder who is an individual, including, without limitation, the right to
appoint a proxy holder; and

(ii)        the representative, if present at the meeting, is to be counted
for the purpose of forming a quorum and is deemed to be a shareholder present
in person at the meeting.

Evidence of
the appointment of any such representative may be sent to the Company by
written instrument, fax or any other method of transmitting legibly recorded
messages.

12.6       When Proxy Provisions Do Not Apply to
the Company

If and for
so long as it is a public company or a pre-existing reporting company which has
the Statutory Reporting Company Provisions as part of these Articles or to
which the Statutory Reporting Company Provisions apply, Articles 12.7 to 12.16
apply only insofar as they are not inconsistent with any applicable legislation
or any Canadian securities legislation applicable to the Company or any rules
of an exchange on which securities of the Company are listed.

12.7       Appointment of Proxy Holders

Every shareholder of the Company, including a corporation that is a
shareholder but not a subsidiary of the Company, entitled to vote at a meeting
of shareholders may, by proxy, appoint one or more proxy holders to attend and
act at the meeting in the manner, to the extent and with the powers conferred
by the proxy.

12.8       Alternate Proxy Holders

A shareholder may appoint one or more alternate proxy holders to act in
the place of an absent proxy holder.

12.9       When Proxy Holder Need Not Be Shareholder

A person
must not be appointed as a proxy holder unless the person is a shareholder,
although a person who is not a shareholder may be appointed as a proxy holder
if:

(a)       the person appointing the proxy holder is a corporation or a
representative of a corporation appointed under Article 12.5;

(b)      
the Company has at the time of the meeting for which the proxy
holder is to be appointed only one shareholder entitled to vote at the meeting;

(c)      
the shareholders present in person or by proxy at and entitled to
vote at the meeting for which the proxy holder is to be appointed, by a
resolution on which the proxy holder is not entitled to vote but in respect of which
the proxy holder is to be counted in the quorum, permit the proxy holder to
attend and vote at the meeting; or

(d)      
the Company is a public company or is a pre-existing reporting
company which has the Statutory Reporting Company Provisions as part of these
Articles or to which the Statutory Reporting Company Provisions apply.

12.10       Deposit of Proxy

A proxy for a meeting of shareholders must:

- 17 -

(a)       be received at the registered office of the Company or at any
other place specified in the notice calling the meeting, for the receipt of
proxy, at least the number of business days specified in the notice, or if no
number of days is specified, two business days before the day set for the holding
of the meeting; or

(b)      
unless the notice provides otherwise, be received, at the meeting,
by the chair of the meeting or by a person designated by the chair of the
meeting.

A proxy may
be sent to the Company by written instrument, fax or any other method of
transmitting legibly recorded messages.

12.11       Validity of Proxy Vote

A vote given
in accordance with the terms of a proxy is valid notwithstanding the death or
incapacity of the shareholder giving the proxy and despite the revocation of
the proxy or the revocation of the authority under which the proxy is given,
unless notice in writing of that death, incapacity or revocation is received:

(a)      
at the registered office of the Company, at any time up to and
including the last business day before the day set for the holding of the
meeting at which the proxy is to be used; or

(b)      
by the chair of the meeting, before the vote is taken. 

12.12       Form of Proxy

A proxy,
whether for a specified meeting or otherwise, must be either in the following
form or in any other form approved by the directors or the chair of the meeting:

[name of company] 

(the "Company")

The undersigned, being a shareholder of the Company, hereby appoints [name]
or, failing that person, [name], as proxy holder for the undersigned
to attend, act and vote for and on behalf of the undersigned at the meeting of
shareholders of the Company to be held on [month, day, year] and at any
adjournment of that meeting.

Number of
shares in respect of which this proxy is given (if no number is specified, then
this proxy is given in respect of all shares registered in the name of the
undersigned):

		

Signed [month, day year]

			
	
			
 

			
	

[Signature of shareholder]

			
	
			
 

			
	

[Name of shareholder- printed]

			

12.13       Revocation of Proxy

Subject to Article 12.14, every proxy may be
revoked by an instrument in writing that is:

(a)        
received at the registered office of the Company at any time up to
and including the last business day before the day set for the holding of the
meeting at which the proxy is to be used; or

(b)        
provided, at the meeting, to the chair of the
meeting.

-18- 

12.14     Revocation of Proxies Must Be Signed

An instrument referred to in Article 12.13
must be signed as follows:

(a)      
if the shareholder for whom the proxy holder is appointed is an
individual, the instrument must be signed by the shareholder or his or her
personal or other legal representative or trustee in bankruptcy; or

(b)      
if the shareholder for whom the proxy holder is appointed is a
corporation, the instrument must be signed by the corporation or by a
representative appointed for the corporation under Article 12.5.

12.15     Chair May Determine Validity of Proxy

The chair of
any meeting of shareholders may determine whether or not a proxy deposited for
use at the meeting, which may not strictly comply with the requirements of this
Article 12 as to form, execution, accompanying documentation, time of filing or
otherwise, shall be valid for use at the meeting and any such determination
made in good faith shall be final, conclusive and binding upon the meeting.

12.16     Production of Evidence of Authority to
Vote

The chair of
any meeting of shareholders may, but need not, inquire into the authority of
any person to vote at the meeting and may, but need not, demand from that
person production of evidence as to the existence of the authority to vote.

ARTICLE 13 - DIRECTORS

13.1       Directors; Number of Directors

The first
directors are the persons designated as directors of the Company in the Notice
of Articles that applies to the Company when it is recognized under the Act.
The number of directors, excluding additional directors appointed under Article
14.7, is:

(a)      
subject to paragraphs (b) and (c), the number of directors that is
equal to the number of the Company's first directors;

(b)      
the number of directors set by ordinary resolution (whether or not
previous notice of the resolution was given) of the shareholders; or

(c)      
the number of directors set under Article
14.4.

If the Company is a public company, the
number of directors must not be less than three.

13.2       Change in Number of Directors

If the number of directors is set under
Article 13.1(b):

(a).   the
shareholders may elect the directors needed to fill any vacancies in the board
of directors that result from that change; and

(b)    subject
to Article 14.7, if the shareholders do not elect the directors needed to fill
any vacancies in the board of directors that result from that change, the
directors may appoint additional directors to fill those vacancies.

-19- 

13.3       Directors' Acts Valid Despite Vacancy

An act or
proceeding of the directors is not invalid merely because fewer than the number
of directors required by Article 13.1 are in office.

13.4        Qualifications of Directors

A director
is not required to hold a share of the Company as qualification for his or her
office but must be qualified as required by the Act to become, to act or
continue to act as a director.

13.5       Remuneration and Expenses of
Directors

The directors are entitled to the remuneration for acting as directors,
if any, as the directors may from time to time determine. If the directors so
decide, the remuneration of the directors, if any, will be determined by the
shareholders. That remuneration may be in addition to any salary or other
remuneration paid to any officer or employee of the Company as such, who is
also a director. The Company must reimburse each director for the reasonable
expenses that he or she may incur in and about the business of the Company. If
any director performs any professional or other services for the Company that
in the opinion of the directors are outside the ordinary duties of a director,
or if any director is otherwise specially occupied in or about the Company's
business, he or she may be paid remuneration, fixed by the directors, or, at
the option of that director, fixed by ordinary resolution and such remuneration
may be either in addition to, or in substitution for, any other remuneration
that he or she may be entitled to receive. Unless otherwise determined by
ordinary resolution, the directors on behalf of the Company may pay a gratuity
or pension or allowance on retirement to any director who has held any salaried
office or place of profit with the Company or to his or her spouse or
dependants and may make contributions to any fund and pay premiums for the
purchase or provision of any such gratuity, pension or allowance.

ARTICLE 14 -
ELECTION AND REMOVAL OF DIRECTORS

14.1       Election at Annual General Meeting

At every annual general meeting or in the
unanimous resolution contemplated by Article 10.2:

(a)    
the shareholders entitled to vote at the
annual general meeting for the election of directors are entitled to elect, or
in the unanimous resolution appoint, a board of directors consisting of the
number of directors for the time being set under these Articles; and

(b)    
all the directors cease to hold office immediately before the
election or appointment of directors under paragraph (a), but are eligible for
re-election or re-appointment.

14.2       Consent to be a Director

No election, appointment or designation of an
individual as a director is valid unless:

(a)    
that individual consents to be a director in
the manner provided for in the Act;

(b)    
that individual is elected or appointed at a meeting at which the
individual is present and the individual does not refuse, at the meeting, to be
a director; or

(c)     
with respect to first directors, the
designation is otherwise valid under the Act.

-20- 

14.3       Failure to Elect or Appoint Directors

If the
Company fails to hold an annual general meeting in accordance with the Act, or
if the Company fails, at an annual general meeting or in a unanimous resolution
contemplated by Article 10.2, to elect or appoint any directors, each director
then in office continues to hold office until the earlier of:

(a)     when his or her successor is elected or appointed; and

(b)     when he or she otherwise ceases to hold office under the Act or these
Articles.

14.4       Places of Retiring Directors Not
Filled

If, at any
meeting of shareholders at which there should be an election of directors, the
places of any of the retiring directors are not filled by that election, those
retiring directors who are not re-elected and who are asked by the newly
elected directors to continue in office will, if willing to do so, continue in
office to complete the number of directors for the time being set pursuant to
these Articles until further new directors are elected at a meeting of
shareholders convened for that purpose. If any such election or continuance of
directors does not result in the election or continuance of the number of
directors for the time being set, pursuant to these Articles, the number of
directors of the Company is deemed to be set at the number of directors actually
elected or continued in office.

14.5       Vacancies on Board

Any casual
vacancy occurring in the board of directors may be filled by the directors or
director. If the Company has no directors or fewer directors in office than the
number set by these Articles as the necessary quorum for the directors the
shareholders may by ordinary resolution appoint or elect directors to fill the
vacancies of the board.

14.6       Remaining Directors' Power to Act

The
remaining directors may act notwithstanding any vacancy in the board, but if
and so long as the number is reduced below the number fixed pursuant to these
Articles as the necessary quorum of directors, the remaining directors may act
for the purpose of increasing the number of directors to that number, or of
summoning a general meeting of the Company, but for no other purpose.

14.7       Additional Directors

Notwithstanding
Articles 13.1 and 13.2, the directors may appoint one or more additional
directors, but the number of additional directors appointed under this Article
must not at any time exceed:

(a)    
one-third of the number of first directors, if, at the time of the
appointments, one or more of the first directors have not yet completed their
first term of office; or

(b)    
in any other case, one-third of the number of the current
directors who were elected or appointed as directors other than under this
Article.

Any
director so appointed ceases to hold office immediately before the election or
appointment of directors under Article 14.1(a), but is eligible for election at
the meeting or appointment by unanimous resolution contemplated under Article
14.1(a). If the appointment or election of such directors is made as an
additional director, the number of directors is deemed increased accordingly.

14.8       Ceasing to be a Director

A director will cease to be a director when:

-21 -

(a)      
the term of office of the director expires;

(b)      
the director dies, or resigns as a director by notice in writing
provided to the Company or a lawyer for the Company; or

(c)      
the director is removed from office pursuant
to Article 14.9.

14.9       Removal of Director

The Company
may remove any director before the expiration of his or her term of office by
special resolution. In that event the shareholders may appoint another
individual as director by ordinary resolution to fill the resulting vacancy. If
the shareholders do not appoint a director to fill the vacancy thereby created
at the meeting at which, or in the consent resolution by which, the director
was removed, then either the directors or the shareholders by ordinary
resolution may appoint an additional director to fill that vacancy. The
directors may remove any director before the expiration of his or her period of
office if the director is convicted of an indictable offence or otherwise ceases
to qualify as a director and the directors may appoint another person in his or
her stead.

ARTICLE 15 -
ALTERNATE DIRECTORS

15.1       Appointment of Alternate
Directors

Any
director (an "appointor") may by notice in writing received by the
Company appoint any person (or "appointee") who is qualified to act
as a director to be his or her alternate to act in his or her place at meetings
of the directors or committees of the directors at which the appointing
director is not present unless (in the case of an appointee who is not a
director) the directors have reasonably disapproved the appointment of such
person as an alternate director and have given notice to that effect to the
appointor within a reasonable time after the delivery of the notice of
appointment received by the Company.

15.2       Notice of Meetings

Every
alternate director is entitled to notice of meetings of directors or committees
of the directors, of which his or her appointor is a member and to attend and
vote as a director at a meeting at which his or her appointor is not personally
present.

15.3       Alternate for More Than One
Director Attending Meeting

A person may be appointed as an alternate director by more than
one director, and an alternate director:

(a)      
will be counted in determining the quorum for a meeting of
directors once for each appointor and, in the case of an appointor who is also
a director, once more in that capacity;

(b)      
has a separate vote at a meeting of directors for each appointor
and, in the case of an appointor who is also a director, an additional vote in
that capacity;

(c)      
will be counted in determining the quorum
for a meeting of a committee of directors once for each appointor who is a
member of that committee and, in the case of an appointor who is also a member
of that committee as a director, once more in that capacity; and

(d)      
has a separate vote at a meeting of a committee of directors for
each appointor who is a member of that committee and, in the case of an
appointor who is also a member of that committee as a director, an additional
vote in that capacity.

-22- 

 15.4      Consent Resolutions

Every alternate director, if authorized by the instrument appointing
him or her, may sign in place of the director who appointed him or her any
resolutions submitted to the directors to be consented to in writing.

 15.5      Alternate Director Not an Agent

Every alternate director is deemed not to be the agent of a director
appointing him or her.

 15.6      Revocation of Appointment of
Alternate Director

A director
may at any time by notice in writing to the Company, revoke the appointment of
an alternate appointed by him or her.

 15.7      Ceasing to be an Alternate Director

The appointment of an alternate director
ceases when:

(a)    
his or her appointor ceases to be a director
(and is not promptly re-elected or re-appointed);

(b)    
the alternate director dies, or resigns as an alternate director
by notice in writing provided to the Company;

(c)    
the alternate director ceases to be qualified to act as a
director; or

(d)    
his or her appointor revokes the appointment of the alternate
director.

 15.8      Remuneration and Expenses of
Alternate Director

An
alternate director may be reimbursed by the Company such expenses as might
properly be repaid to him or her if he or she were a director and he or she is
entitled to receive from the Company such proportion, if any, of the
remuneration otherwise payable to the appointor as the appointor may from time
to time direct.

ARTICLE 16
- POWERS AND DUTIES OF DIRECTORS 

16.1      Powers of Management

The
directors must, subject to the Act and these Articles, manage, or supervise the
management of, the affairs and business of the Company and will have the
authority to exercise all such powers of the Company as are not, by the Act or
by these Articles, required to be exercised by the shareholders of the Company.

16.2       Appointment of Attorney of Company

The director's may from time to time, by power of attorney or other
instrument under the seal, appoint any person to be the attorney of the Company
for such purposes, and with such powers, authorities and discretions (not
exceeding those vested in or exercisable by the directors under these Articles
and excepting the powers of the directors relating to the constitution of the
board of directors and of any of its committees and the appointment or removal
of officers and the power to declare dividends) and for such period, and with
such remuneration and subject to such conditions as the directors think fit,
and any such appointment may be made in favour of any corporation, firm or person
or body of persons, and any such power of attorney may contain such provisions
for the protection or convenience of persons dealing with

- 23 -

such
attorney as the directors think fit. Any such attorney may be authorized by the
directors to sub-delegate all or any of the powers, authorities and discretions
for the time being vested in him or her.

ARTICLE 17 -
INTERESTS OF DIRECTORS AND OFFICERS

17.1       Obligation to Account for Profits

A director
or senior officer who holds a disclosable interest (as that term is used in the
Act) in a contract or transaction into which the Company has entered or proposes
to enter is liable to account to the Company for any profit that accrues to the
director or senior officer under or as a result of the contract or transaction
only if and to the extent provided in the Act.

17.2       Restrictions on Voting by Reason
of Interest

A director
who holds a disclosable interest in a contract or transaction into which the
Company has entered or proposes to enter is not entitled to vote on any
directors' resolution to approve that contract or transaction, unless all the
directors have a disclosable interest in that contract or transaction, in which
case any or all of those directors may vote on such resolution.

17.3       Interested Director Counted in
Quorum

A director who has a disclosable interest in a contract or transaction
and who is present at the meeting of directors at which the contract or
transaction is considered for approval may be counted in the quorum at the
meeting whether or not the director votes on any or all of the resolutions
considered at the meeting.

17.4       Disclosure of Conflict of
Interest or Property

A director
or senior officer who holds any office or possesses any property, right or
interest that could result, directly or indirectly, in the creation of a duty
or interest that materially conflicts with that individual's duty or- interest
as a director or senior officer, must disclose the nature and extent of the
conflict as required by the Act.

17.5       Director Holding Other Office in
the Company

A director
may hold any office or place of profit with the Company, other than the office
of auditor of the Company, in addition to his or her office of director for the
period and on the terms (as to remuneration or otherwise) that the directors
may determine.

17.6       No Disqualification

No director
or intended director is disqualified by his or her office from contracting with
the Company either with regard to the holding of any office or place of profit
the director holds with the Company or as seller, buyer or otherwise, and no
contract or transaction entered into by or on behalf of the Company in which a
director is in any way interested is liable to be voided for that reason.

17.7       Professional Services by Director
or Officer

Subject to
the Act, a director or officer, or any person in which a director or officer
has an interest, may act in a professional capacity for the Company, except as
auditor of the Company, and the director or officer or such person is entitled
to remuneration for professional services as if that director or officer were
not a director or officer.

- 24 -

17.8       Director or Officer in Other
Corporations

A director or officer may be or
become a director, officer or employee of, or otherwise interested in, any
person in which the Company may be interested as a shareholder or otherwise,
and, subject to the Act, the director or officer is not accountable to the
Company for any remuneration or other benefits received by him or her as
director, officer or employee of, or from his or her interest in, such other
person.

ARTICLE 18 -
PROCEEDINGS OF DIRECTORS

18.1       Meetings of Directors

The directors may meet together for
the conduct of business, adjourn and otherwise regulate their meetings as they
think fit and meetings of the board held at regular intervals may be held at
the place, at the time and on the notice, if any, as the board may by
resolution from time to time determine.

18.2       Voting at Meetings

Questions
arising at any meeting of directors are to be decided by a majority of votes
and, in the case of an equality of votes, the chair of the meeting does not
have a second or casting vote.

18.3       Chair of Meeting

Meetings of directors may be chaired by:

(a)      
the chair of the board, if any;

(b)      
in the absence of the chair of the board, the
president, if any, if the president is a director; or

(c)      
any other director chosen by the directors if:

(i)      
neither the chair of the board nor the president, if a director,
is present at the meeting within 15 minutes after the time set for holding the
meeting;

(ii)     
neither the chair of the board nor the president, if a director,
is willing to chair the meeting; or

(iii)    
the chair of the board and the president, if a director, have
advised the secretary, if any, or any other director, that they will not be
present at the meeting.

18.4       Meetings by Telephone or Other
Communications Medium

A director may
participate in a meeting of the board of directors or of any committee of the
directors in person or by means of conference telephones or, with the consent
of the Company, by other communications facilities if all directors
participating in the meeting can communicate with each other and provided that
all such directors agree to such participation. A director participating in a
meeting in accordance with this Article will be deemed to be present at the
meeting and to have so agreed and will be counted in the quorum therefor and be
entitled to speak and vote and otherwise participate in the meeting in
accordance with the Act. A director who participates in a meeting in a manner contemplated
by this Article is deemed for all purposes of the Act and these Articles to be
present at the meeting and to have agreed to participate in that manner.

- 25 - 

18.5       Calling and Notice of Meetings

A director
may, and the secretary or assistant secretary, if any, on request of a director
must, call a meeting of the directors at any time.

18.6       Notice of Meetings

Other than
for meetings held at regular intervals as determined by the board pursuant to
Article 18.1, or as provided in Article 18.7, reasonable notice of each meeting
of the directors, specifying the place, day and hour of that meeting must be
given to each of the directors and if a director so requires in writing, the
alternate director appointed by that director:

(a)      
by mail addressed to the director's address as it appears on the
books of the Company or to any other address provided to the Company by the
director for this purpose;

(b)      
by leaving it at the director's prescribed address or at any other
address provided to the Company by the director for this purpose;

(c)      
orally or by telephone, or by delivery of
written notice; or

(d)      
if agreed by the intended recipient, by e-mail, fax or any other
method of legibly transmitting messages agreed to by the intended recipient.

18.7       When Notice Not Required

It is not necessary to give notice of a
meeting of the directors to a director if:

(a)      
the meeting is to be held immediately following a meeting of
shareholders at which that director was elected or appointed, or is the meeting
of the directors at which that director is appointed; or

(b)      
the director has waived notice of the meeting.

18.8       Meeting Valid Despite Failure to
Give Notice

The
accidental omission to give notice of any meeting of directors to, or the
non-receipt of any notice by, any director, does not invalidate any proceedings
at that meeting.

18.9       Waiver of Notice of Meeting

Any director or alternate director of the Company may send to the Company
a document signed by him or her waiving notice of any past, present or future
meeting or meetings of the directors and may at any time withdraw that waiver
with respect to meetings held after that withdrawal. After sending a waiver
with respect to all future meetings and until such waiver is withdrawn, no
notice need be given to such director or, unless the director otherwise
requires in writing to the Company, to his or her alternate director and all
meetings of the directors so held are deemed not to be improperly called or
constituted by reason of notice not having been given to such director or
alternate director. Attendance of a director or alternate director at a meeting
of the directors is a waiver of entitlement to notice of the meeting, unless
that director or alternate director attends the meeting for the express purpose
of objecting to the transaction of any business on the grounds that the meeting
is not lawfully called.

18.10       Quorum

The quorum
necessary for the transaction of the business of the directors is two directors
or, if the number of directors is one, is one director, and that director may
constitute a meeting.

-26- 

18.11       Validity of Acts Where Appointment
Defective

Subject to
the provisions of the Act, all acts done by any director or officer will,
notwithstanding that it be afterwards discovered that there was some defect in
the qualification, election or appointment of any such director or officer, or
that they or any of them were disqualified, be as valid as if each such person
had been duly elected or appointed and was qualified to be a director or
officer.

18.12       Consent Resolutions in Writing

A resolution of the directors or of any
committee of the directors may be passed without a meeting:

(a)      
in all cases, if each of the directors
entitled 'to vote on the resolution consents to it in writing; or

(b)      
in the case of a resolution to approve a
contract or transaction in respect of which a director has disclosed that he or
she has or may have a disclosable interest, if each of the other directors who
has not made such a disclosure consents in writing to the resolution.

A consent in writing under this Article 18.12 may be by any written
instrument, fax, email or any other method of transmitting legibly recorded
messages in which the consent of the director is evidenced, whether or not the
signature of the director is included in the record. A consent in writing may
be in two or more counterparts which together are deemed to constitute one
consent in writing. A resolution of the directors or of any committee of the
directors passed in accordance with this Article is effective on the date
stated in the consent in writing or on the latest date stated on any counterpart
and is deemed to be a proceeding at a meeting of directors or of the committee
of the directors and to be as valid and effective as if it had been passed at a
meeting of the directors or of the committee of the directors that satisfies
all the requirements of the Act and all the requirements of these Articles
relating to meetings of the directors or of a committee of the directors.

ARTICLE 19 -
EXECUTIVE AND OTHER COMMITTEES

19.1       Appointment and Powers of
Executive Committee

The directors may by resolution appoint an executive committee (the
"Committee") to consist of such director or directors as they think
appropriate. Such Committee will have, and may exercise during the intervals
between the meetings of the board of directors, all powers of the directors
except the power to:

(a)      
fill vacancies in the board;

(b)      
remove a director;

(c)      
change membership of any committees of
directors; and

(d)      
such other powers, as may be set out in any
directors' resolution.

19.2       Appointment and Powers of Other Committees

The directors may, by resolution:

(a)      
appoint one or more committees consisting of the director or
directors that they consider appropriate;

(b)      
delegate to a committee appointed under
paragraph (a) any of the directors' powers, except:

- 27 -

(i)       the power to fill vacancies of
the board;

(ii)      the power to remove a director;

(iii)      the
power to change the membership of, or fill vacancies in, any committee of the
board; and

(iv)      the power to appoint or remove
officers appointed by the board; and

(c)       make
any delegation referred to in paragraph (b) subject to the conditions set out
in the resolution.

19.3       Obligations of Committees

Any committee formed under Article 19.1, in
the exercise of the powers delegated to it, must:

(a)    conform to any rules that may from
time to time be imposed on it by the directors; and

(b)   report
every act or thing done in exercise of those powers to the earliest meeting of
the directors to be held after the act or thing has been done or at such time
as the directors may require.

19.4       Powers
of Board

The board may, at any time:

(a)     
revoke or alter the authority given to a committee, or override a
decision made by a committee, except as to acts done before such revocation,
alteration or overriding;

(b)     
terminate the appointment of, or change the
membership of, a committee; and

(c)     
fill vacancies in a committee.

19.5       Committee Meetings

Subject to Article 19.2:

(a)      the members of a directors' committee may meet
and adjourn as they think proper;

(b)      a directors' committee may elect a chair of its meetings but, if
no chair of the meeting is elected, or if at any meeting the chair of the
meeting is not present within 15 minutes after the time set for holding the
meeting, the directors present who are members of the committee may choose one
of their number to chair the meeting;

(c)      a majority of the members of a directors'
committee constitutes a quorum of the committee; and

(d)      questions arising at any meeting of a directors' committee are
determined by a majority of votes of the members present, and in the case of an
equality of votes, the chair of the meeting does not have a second or casting
vote.

- 28 -

ARTICLE 20 - OFFICERS

20.1       Directors May Appoint Officers

The
directors may, from time to time, appoint such officers, if any, as the
directors will determine and the directors may, at any time, terminate any such
appointment.

20.2       Functions,
Duties and Powers of Officers

The board may, for each officer:

(a)       determine the functions and duties the
officer is to perform;

(b)       delegate to the officer any of the powers exercisable by the directors
on such terms and conditions and with such restrictions as the directors
determine; and

(c)       from time to time revoke, withdraw, after or vary all or any of
the functions, duties and powers of the officer.

20.3       Qualifications

No officer
will be appointed unless that officer is qualified in accordance with the
provisions of the Act. One person may hold more than one position as an officer
of the Company. Any person appointed as the chair of the board or as the
managing director will be a director. The other officers need not be directors.

20.4       Remuneration

All
appointments of officers are to be made on the terms and conditions and at the
remuneration (whether by way of salary, fee, commission, participation in
profits, pensions, gratuity, or otherwise) that the board thinks fit and are
subject to termination at the discretion of the board.

ARTICLE 21 -
INDEMNIFICATION

21.1       Definitions

In this Article:

(a)        "eligible
penalty" means a judgment, penalty or fine awarded or imposed in, or an
amount paid in settlement of, an eligible proceeding;

(b)        "eligible proceeding" means a legal proceeding or
investigative action, whether current, threatened, pending or completed, in
which a person to be indemnified under this Article (an "eligible
party") or any of the heirs and personal or other legal representatives of
the eligible party, by reason of the eligible party being or having been a
director, officer, employee or agent of the company or an associated
corporation:

(i)       
is or may be joined as a party; or

(ii)      
is or may be liable for or in respect of a judgment, penalty or
fine in, or expenses related to, the proceeding; and

(c)      "expenses" includes costs, charges and expenses,
including legal and other fees, but does not include judgments, penalties,
fines or amounts paid in settlement of a proceeding.

- 29 -

21.2       Mandatory Indemnification of Directors

Subject to the Act, the Company must indemnify a director, former
director or alternate director of the Company and his or her heirs and legal
personal representatives against all eligible penalties to which such person is
or may be liable, and the Company must, after the final disposition of an
eligible proceeding, pay the expenses actually and reasonably incurred by such
person in respect of that proceeding. Each director and alternate director is
deemed to have contracted with the Company on the terms of the indemnity
contained in this Article.

21.3       Permitted Indemnification

Subject to any restrictions in the Act, the
Company may indemnify any person.

21.4       Non-Compliance with the Act

The failure
of a director or officer of the Company to comply with the provisions of the
Act or of the Notice of Articles, these Articles or, if applicable, any former Companies
Act or former articles will not invalidate any indemnity to which he or she
is entitled under this Article 21.

21.5 Company May Purchase Insurance

The Company
may purchase and maintain insurance for the benefit of any person (or his or
her heirs or legal personal representatives) who:

(a)          
is or was a director, alternate director,
officer, employee or agent of the Company;

(b)          
is or was a director, alternate director, officer, employee or
agent of a corporation at a time when the corporation is or was an affiliate of
the Company;

(c)          
at the request of the Company, is or was a
director, alternate director, officer, employee or agent of a corporation or of
a partnership, trust, joint venture or other unincorporated entity; or

(d)          
at the request of the Company, holds or held a
position equivalent to that of a director, alternate director or officer of a
partnership, trust, joint venture or other unincorporated entity;

against any
liability incurred by him or her as such director, alternate director, officer,
employee or agent or person who holds or held such equivalent position.

21.6       Indemnification of Directors

The
directors must cause the Company to indemnify its directors and former
directors and their respective heirs and personal or other legal personal
representatives to the greatest extent permitted by the Act.

21.7 Deemed Contract

Each person
specified in Article 21.2 is deemed to have contracted with the Company on the
terms of the indemnity referred to in that Article.

- 30 -

ARTICLE 22 -
DIVIDENDS AND RESERVES

22.1       Declaration of Dividends

Subject to
the rights, if any, of shareholders holding shares with special rights as to
dividends, the directors may from time to time declare and authorize payment of
such dividends, if any, as they may consider appropriate.

22.2       No Notice Required

The directors need not give notice to any shareholder of any
declaration under Article 22.1.

22.3       Manner of Paying Dividend

A
resolution declaring a dividend may direct payment of the dividend wholly or
partly in money or by the distribution of specific assets or of paid up shares
or fractional shares, bonds, debentures or other debt obligations of the
Company or any other corporation, or in any one or more of those ways, and, if
any difficulty arises in regard to the distribution, the directors may settle
the difficulty as they think expedient, and, in particular, may set the value
for distribution of specific assets.

22.4       Basis and Payment

Subject to the rights, if any, of shareholders holding shares with
special rights as to dividends:

(a)      
any dividend declared on shares of any class or series by the
directors may be made payable on such date as is fixed by the directors; and

(b)      
all dividends on shares of any class or series will be declared
and be paid according to the number of such shares held.

22.5       Reserves

The directors
may, before declaring any dividend, set aside out of the funds properly
available for the payment of dividends such sums as they think proper as a
reserve or reserves which may, at the discretion of the directors, be
applicable for meeting contingencies or for equalising dividends or for any
other purpose to which such funds of the Company may be properly applied, and
pending such application such funds may, in the discretion of the directors,
either be employed in the business of the Company or be invested in such
investments as the directors may from time to time think fit.

22.6       Receipt by Joint Shareholders

If several
persons are joint shareholders of any share, any one of them may give an
effective receipt for any dividend, bonus or other monies payable in respect of
the share.

22.7       Dividend Bears No Interest

No dividend will bear interest against the
Company.

22.8       Fractional Dividends

If a
dividend to which a shareholder is entitled includes a fraction of the smallest
monetary unit of the currency of the dividend, that fraction may be disregarded
in making payment of the dividend and that payment represents full payment of
the dividend.

- 31 -

22.9       Payment of Dividends

Any dividend, bonuses or other distribution payable in money in respect
of shares may be paid by cheque sent through the post directed to the
registered address of the shareholder, or in the case of joint shareholders, to
the registered address of that one of the joint shareholders who is first named
on the central securities register, or to such person and to such address as
the shareholder or joint shareholders may direct in writing. Every such cheque
must be made payable to the order of the person to whom it is sent. The mailing
of such cheque will, to the extent of the sum represented thereby (plus the
amount of the tax required by law to be deducted), discharge all liability for
the dividend, unless such cheque is not paid on presentation or the amount of
tax so deducted is not paid to the appropriate taxing authority.

22.10       Capitalization of Retained Earnings or
Surplus

Notwithstanding
anything contained in these Articles, the directors may from time to time
capitalize any retained earnings or surplus on hand of the Company and may from
time to time issue as fully paid and non-assessable any unissued shares, or any
bonds, debentures or debt obligations of the Company as a dividend representing
part or all of such retained earnings or surplus so capitalized or any part
thereof.

ARTICLE 23 -
ACCOUNTING RECORDS AND AUDITOR

23.1       Keeping Documents, Minutes, Etc.

The Company
must keep at its records office, or at such other place as the Act may permit,
the documents, copies, registers, minutes and other records which the Company
is required by the Act to keep at such places. The shareholders, by ordinary
resolution, may set restricted hours for access to records in the records
office in accordance with the Act.

23.2       Keeping Books of Account

The Company
must keep or cause to be kept proper books of account and accounting records in
respect of all financial and other transactions of the Company and in
compliance with the provisions of the Act.

23.3       Inspection of Accounting Records

Unless the
directors determine otherwise, or unless otherwise determined by an ordinary
resolution, no shareholder of the Company is entitled to inspect the accounting
records of the Company.

23.4       Remuneration of Auditor

The directors may set the remuneration of the auditor.

ARTICLE 24 -
NOTICES

24.1       Method of Giving Notice

Unless the
Act or these Articles provide otherwise, a notice, statement, report or other
record required or permitted by the Act or these Articles to be sent by or to a
person may be sent by any one of the following methods:

(a)        mail addressed to the person at the applicable address
for that person as follows:

(i)           
for a record mailed to a shareholder, the shareholder's registered
address;

(ii)          
for a record mailed to a director or officer, the prescribed
address for mailing shown for the director or officer in the records kept by
the Company or the

- 32 -

mailing address provided by the recipient for the sending of that
record or records of that class; or

(iii)       in any other case the mailing address of the intended
recipient;

(b)          
delivery at the applicable address for that
person as follows, addressed to the person:

(i)         for a record delivered to a shareholder, the
shareholder's registered address;

(ii)       for
a record delivered to a director or officer, the prescribed address for
delivery shown for the director or officer in the records kept by the Company
or the delivery address provided by the recipient for the sending of that
record or records of that class; or

(iii)        in any other case, the delivery address of the
intended recipient;

(c)          
unless the intended recipient is the auditor of the Company,
sending the record by fax to the fax number provided by the intended recipient
for the sending of that record or records of that class;

(d)          
unless the intended recipient is the auditor of the Company,
sending the record by email to the email address provided by the intended
recipient for the sending of that record or records of that class; or

(e)          
physical delivery to the intended recipient. 

24.2       Deemed Receipt

(a)          
A record that is mailed to a person by ordinary mail to the
applicable address for that person referred to in Article 24.1 is deemed to be
received by the person to whom it was mailed on the day, Saturdays, Sundays and
holidays excepted, following the date of mailing;

(b)          
a record that is faxed to a person referred to in Article 24.1 is
deemed to be received by that person on the day it was faxed; and

(c)          
a record that was emailed to a person referred to in Article 24.1
is deemed to be received by the person to whom it was emailed on the day it was
emailed.

24.3      Certificate of Sending

A
certificate signed by the secretary, if any, or other officer of the Company or
of any other corporation acting in that capacity on behalf of the Company stating
that a notice, statement, report or other record was addressed as required by
Article 24.1, prepaid and mailed or otherwise sent in accordance with Article
24.1 is conclusive evidence of that fact.

24.4      Notice to Joint Shareholders

A notice,
statement, report or other record may be provided by the Company to the joint
shareholders of a share by providing such record to the joint shareholder first
named in the central securities register in respect of the share.

-33- 

24.5      Notice to Legal
Personal Representatives and Trustees

A notice,
statement, report or other record may be provided by the Company to the persons
entitled to a share in consequence of the death, bankruptcy or incapacity of a
shareholder by:

(a)       
mailing the record, addressed to them:

(i)     by
name, by the title of the legal representative of the deceased or incapacitated
shareholder, by the title of trustee of the bankrupt shareholder or by any similar
description; and

(ii)    at the address, if any, supplied to
the Company for that purpose by the persons claiming to be so entitled; or

(b)       
if an address referred to in Article 24.1(a)(ii) has been supplied
to the Company, by giving the notice in a manner in which it might have been
given if the death, bankruptcy or incapacity had not occurred.

24.6      Undelivered
Notices

If, on two
consecutive occasions, a notice, statement, report or other record is sent to a
shareholder pursuant to Article 24.1 and on each of those occasions any such
record is returned because the shareholder cannot be located, the Company will
not be required to send any further records to the shareholder until the
shareholder informs the Company in writing of his or her new address.

ARTICLE 25 - RECORD DATES

25.1      Fixing
Record Date

The
directors may fix in advance a date, which must not be more than the maximum
number of days permitted by the Act, preceding the date of any meeting of
shareholders or any class or series thereof or of the payment of any dividend
or of the proposed taking of any other proper action requiring the
determination of shareholders, as the record date for the determination of the
shareholders entitled to notice of, or to attend and vote at, any such meeting
and any adjournment thereof, or entitled to receive payment of any such dividend
or for any other proper purpose and, in such case, notwithstanding anything
elsewhere contained in these Articles, only shareholders of record on the date
so fixed are deemed to be shareholders for the purposes aforesaid.

25.2      If No Record Date Fixed

If no
record date is fixed for the determination of shareholders, the date on which
the notice is mailed or on which the resolution declaring the dividend is
adopted, as the case may be, is the record date for such determination.

ARTICLE 26 - SEAL

26.1      Custody and
Use of Seal

The
directors may provide a seal for the Company and, if they do so, will provide
for its safe custody and it will not be impressed on any instrument except when
such impression is attested by the signature or signatures of:

(a)          
any two directors;

(b)          
any officer together with any director;

- 34 -

(c)          
if the Company has one director, that
director; or

(d)          
such one or more directors or officers or persons as may be
prescribed from time to time by resolution of the directors.

For the purpose
of certifying under seal true copies of any resolution or other document, the
seal may be impressed on such copy attested by the signature of any one
director or officer.

26.2       Signing Authority

In the event
that the Company does not have a seal or wishes to execute a document without
affixing a seal, any documents requiring signature on behalf of the Company may
be signed by any one of the directors or officers of the Company, unless a
contrary intention is expressed in a directors' resolution.

26.3       Mechanical Reproduction of Seal

The
directors may authorize the seal to be affixed by third parties to bonds,
debentures, share certificates or other securities of the Company as they may
determine appropriate from time to time.

ARTICLE 27 -
PROHIBITIONS

27.1       Definitions

In this Article:

(a)       
"security" has the meaning
assigned in the Securities Act (British Columbia); and

(b)       
"transfer restricted security"
means:

(i)       
a share of the Company;

(ii)      
a security of the Company convertible into shares of the Company;

(ii)      any
other security of the Company which must be subject to restrictions on transfer
in order for the Company to satisfy the requirement for restrictions on
transfer under the "private issuer" exemption of Canadian securities
legislation or under any other exemption from prospectus or registration
requirements of Canadian securities legislation similar in scope and purpose to
the "private issuer" exemption.

27.2       Consent Required for Transfer of
Shares or Transfer Restricted Securities

No share or
other transfer restricted security of the Company may be transferred without
the previous consent of the directors expressed by a resolution of the board of
directors and the directors are not required to give reasons for refusing to
consent to such proposed transfer. The foregoing provision does not apply if
and for so long as the Company is a public company or a pre-existing reporting
company which has the Statutory Reporting Company Provisions as part of its
articles or to which the Statutory Reporting Company Provisions apply.

 

 

See share rights added November 8, 2018

DocuSign Envelope ID:
9185ACAB-3A85-4C95-A06F-E56C449F86CE

SPECIAL
RESOLUTIONS OF ALL THE VOTING SHAREHOLDERS OF

SOLUNA TECHNOLOGIES, LTD 

(the "Company")

The
undersigned, being all the voting shareholders of the Company, hereby consent
to and adopt in writing the following special resolutions:

Alteration to Notice of Articles and Articles  

RESOLVED as special resolutions that:

1.         the
authorized share structure of the Company be altered by creating an unlimited
number of Preferred shares without par value;

2.         the special rights and restrictions set forth in Schedule A
attached hereto be created and attached to the Preferred shares;

3.         there be created and attached to the existing Common shares the
special rights and restrictions set forth in Schedule A attached hereto;

4.         the Table of Contents to the Articles of the Company be amended by
adding thereto at the end the following:

"27. SPECIAL RIGHTS AND RESTRICTIONS
ATTACHED TO SHARES"

5.         the Articles of the Company be altered by adding thereto Part 27 -
Special Rights and Restrictions Attached to Shares, as set forth on Schedule A
attached hereto;

6.         the Notice of Articles of the Company be
altered to reflect the alterations referred to above, and that accordingly, a
Notice of Alteration be completed as required, and that any director or officer
of the Company or the Company's solicitor is authorized and directed for and on
behalf and in the name of the Company to execute the Notice of Alteration
required to give effect to these resolutions;

7.         it is a condition of these resolutions that
the alterations to the Articles of the Company set out herein do not take
effect until the Notice of Articles is altered to reflect the alteration to the
Articles.

[Signature Page to Follow]

 

		
			
			These amendments are effective as of November 8, 2018
			at 4:30 PM (the date and time that the Notice of Alteration was
			filed with BC Registry Services).

			

 

DocuSign Envelope ID:
9185ACAB-3A85-4C95-A06F-E56C449F86CE

SCHEDULE A

27.         SPECIAL RIGHTS AND RESTRICTIONS
ATTACHED TO SHARES

27.1       Common shares

The special rights and restrictions attached
to the Common shares are as follows:

(1)      General. The voting, dividend and liquidation rights of the holders of
Common shares are subject to and qualified by the rights, powers and
preferences of the holders of Preferred shares.

(2)      Voting. The holders of Common shares are entitled to one vote for each
Common share held at all meetings of shareholders (and written actions in lieu
of meetings).

(3)      Dividends. The holders of Common shares are entitled,
subject to the rights of the Preferred shares of the Company, to receive
dividends if, as and when declared by the board of directors of the Company.

(4)      Liquidation, Dissolution or Winding-Up. The holders of the Common shares are entitled, subject to the rights of
the Preferred shares of the Company, to receive the remaining property of the
Company on a liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary.

27.2      Preferred shares

The special rights and restrictions attached
to the Preferred shares are as follows:

(1)         Definitions. 

(a)        "Additional
Shares" means all Common shares issued by the Company after the Preferred
Share Original Issue Date, other than (1) the following Common shares and (2)
Common shares deemed issued under the following Options and Convertible
Securities (clauses (1) and (2), collectively, "Exempted Securities"):

(i)       
Common shares, Options or Convertible Securities issued as a
dividend or distribution on Preferred shares;

(ii)      
Common shares, Options or Convertible Securities issued by reason
of a dividend, share split, split-up or other distribution on Common shares that
is covered by Subsection 27.2(12), 27.2(13), 27.2(14) or 27.2(15);

(iii)     
Common shares or Options issued to employees or directors of, or
consultants or advisors to, the Company or any of its subsidiaries under a plan,
agreement or arrangement approved by the Company's board of directors;

(iv)     
Common shares or Convertible Securities actually issued upon the
exercise of Options or Common shares actually issued upon the conversion or
exchange of Convertible Securities, in each case provided the issuance is under
such Option or Convertible Security;

(v)      
Common shares, Options or Convertible Securities issued to banks,
equipment lessors or other financial institutions, or to real property lessors,
under a debt financing, equipment leasing or real or immovable property leasing
transaction approved by the Company's board of directors that do not exceed an
aggregate of 15% of the Common shares (including shares underlying (directly or
indirectly) any such Options or Convertible Securities);

		
			
			These amendments are effective as of November 8, 2018
			at 4:30 PM (the date and time that the Notice of Alteration was
			filed with BC Registry Services).

			

 

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2

(vi)     Common shares, Options or Convertible Securities issued to
suppliers or third party service providers in connection with the provision of
goods or services under transactions approved by the Company's board of
directors that do not exceed an aggregate of 15% of the Common shares
(including shares underlying (directly or indirectly) any such Options or
Convertible Securities); or

(vii)     Common shares, Options or Convertible
Securities issued under the acquisition of another corporation by the Company
by amalgamation, purchase of substantially all of the assets or other
reorganization or to a joint venture agreement, provided that such issuances
are approved by the Company's board of directors .

(b)     "Convertible
Securities" means any evidences of indebtedness, shares or other
securities directly or indirectly convertible into or exchangeable for Common
shares, but excluding Options.

(c)      "Deemed
Liquidation Event" means, unless the holders of at least 50% of the
outstanding Preferred shares elect otherwise by written notice sent to the
Company at least 10 days before the effective date of any such event, the
following:

(i)        an amalgamation or consolidation in which the
Company is a constituent party or a subsidiary of the Company is a constituent
party and the Company issues shares under such amalgamation or consolidation,
except any such amalgamation or consolidation involving the Company or a
subsidiary in which the shares of the Company outstanding immediately before
such amalgamation or consolidation continue to represent, or are converted into
or exchanged for shares that represent, immediately following such amalgamation
or consolidation, at least a majority, by voting power, of the shares of (1)
the surviving or resulting Company; or (2) if the surviving or resulting
Company is a wholly-owned subsidiary of another Company immediately following
such amalgamation or consolidation, the parent Company of such surviving or
resulting Company; or

(ii)       the sale, lease, transfer, exclusive license or other disposition,
in a single transaction or series of related transactions, by the Company or
any subsidiary of the Company of all or substantially all the assets of the
Company and its subsidiaries taken as a whole or the sale or disposition
(whether by amalgamation, consolidation or otherwise) of one or more
subsidiaries of the Company if substantially all of the assets of the Company
and its subsidiaries taken as a whole are held by such subsidiary or
subsidiaries, except where such sale, lease, transfer, exclusive license or
other disposition is to a wholly-owned subsidiary of the Company.

(d)     "Options"
means rights, options or warrants to subscribe for, purchase or otherwise
acquire Common shares or Convertible Securities.

(e)      "Original
Issue Price" means the amount per share that each shareholder has paid to
the Company for the Preferred shares that that shareholder holds, subject to
appropriate adjustment in the event of any share dividend, share split,
combination or other similar recapitalization with respect to the Preferred
shares.

(f)      "Preferred Share
Original Issue Date" means the date on which the first Preferred share was
issued.

(2)          Voting. On any matter
presented to the shareholders of the Company for their action or consideration
at any meeting of shareholders of the Company (or by written consent of
shareholders

 

		
			
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			filed with BC Registry Services).

			

 

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3

in lieu of a
meeting), each holder of outstanding Preferred shares is entitled to cast the
number of votes equal to the number of whole Common shares into which the
Preferred shares held by the holder are convertible as of the record date for
determining shareholders entitled to vote on such matter. Except as provided by
law or by the other provisions of the Articles, holders of Preferred shares
shall vote together with the holders of Common shares as a single class.

(3)      
Dividends. The Company shall not declare, pay or set aside any dividends
on shares of any other class of the Company (other than a stock dividend on the
Common shares payable in Common shares) unless (in addition to the obtaining of
any consents required elsewhere in the Articles) the holders of the Preferred
shares then outstanding first receive, or simultaneously receive, a pro rata
dividend based on the number of Common shares into which they are convertible.

(4)      
Interest. The Company shall pay interest on the Preferred Shares from the
date of issuance of such Preferred Shares to such an aggregate per annum rate
equal to five percent (5%), with such interest to accrue daily in arrears and
be compounded annually; provided that, in no event, shall such interest exceed
the maximum permitted rate of interest under applicable law (the "Maximum
Permitted Rate"), provided that, the Company shall take all such actions
as may be necessary, including without limitation, making any applicable
governmental filings, to cause the Maximum Permitted Rate to be the highest
possible rate. Such interest shall be paid by the Company on,a
"payment-in-kind" basis through the issuance of additional preferred
shares in the capital of the Company, In the event any provision hereof would
result in the rate of interest payable hereunder being in excess of the Maximum
Permitted Rate, the amount of interest required to be paid hereunder shall
automatically be reduced to eliminate such excess; provided that, any
subsequent increase in the Maximum Permitted Rate shall be retroactively
effective to the applicable date of issuance of Preferred Shares to the extent
permitted by law.

(4)       Liquidation, Dissolution or Winding Up; Certain
Amalgamations, Consolidations and Asset Sales.

(a)  In the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
Company or Deemed Liquidation Event, the holders of Preferred shares then
outstanding are entitled to be paid out of the assets of the Company available
for distribution to its shareholders before any payment shall be made to the
holders of Common shares, an amount per share equal to the Original Issue
Price, plus any dividends that have accrued or been declared but remain unpaid
thereon. If upon any such liquidation, dissolution or winding up of the Company
or Deemed Liquidation Event, the assets of the Company available for
distribution to its shareholders is insufficient to pay the holders of Preferred
shares the full amount to which they are entitled under this Subsection
27.2(5)(a), the holders of Preferred shares shall share rateably in any
distribution of the assets available for distribution in proportion to the
respective amounts that would otherwise be payable in respect of the shares
held by them upon such distribution if all amounts payable on or with respect
to such shares were paid in full.

(b)  In the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
Company or Deemed Liquidation Event, after the payment of all preferential
amounts required to be paid to the holders of Preferred shares the remaining
assets of the Company available for distribution to its shareholders shall be
distributed among the holders of Preferred shares and Common shares, pro rata
based on the number of shares held by each such holder, treating for this
purpose all such securities as if they had been converted to Common shares
under the Articles immediately before such liquidation, dissolution or winding
up of the Company. The aggregate amount that a holder of Preferred shares is
entitled to receive under Subsections 27.2(5) is referred to as the "Class
A Liquidation Amount."

 

		
			
			These amendments are effective as of November 8, 2018
			at 4:30 PM (the date and time that the Notice of Alteration was
			filed with BC Registry Services).

			

 

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4

(5)      
Conversion. The holders of the Preferred shares shall have
the right to convert the Preferred shares at the option of the holder, at any
time, into Common shares of the Company at the conversion rate then in place.
Any accrued or declared but unpaid dividends will also have the right to be
converted at the option of the Company. All accrued but unpaid interest will be
paid in accordance with the terms set out in Subsection 27.2(4).

(6)      
Conversion Ratio. Each Preferred share may be converted, at the option of its holder, at
any time and from time to time, and without the payment of additional consideration
by its holder, into such number of fully paid and non-assessable Common shares
as is determined by dividing the Original Issue Price by the Conversion Price
(as defined below) in effect at the time of conversion. The "Conversion
Price" shall initially be US$2.00. The Conversion Price will be adjusted
in accordance with the provisions set out in these articles. In the event that
the Company completes an equity financing resulting in a valuation of the
Company of US$50,000,000 or greater within 18 months of the Preferred Shares
Original Issue Date (the "Qualified Financing"), holders of the
Preferred shares shall have the right to convert the Preferred shares into Common
shares at a Conversion Price determined by the board of directors of the
Company, in its sole discretion, that results in the Preferred shares
converting at the lesser of (i) a 1:1 ratio, and (ii) a 25% discount to the
valuation of the Preferred shares on the basis of the valuation ascribed to the
Preferred Shares pursuant to the Qualified Financing. If the Company completes
an equity financing other than a Qualified Financing within 18 months following
the Preferred Share Original Issue Date, the Conversion Price of the Preferred
Shares shall be adjusted by the board of directors of the Company such that the
outstanding Preferred Shares shall be convertible into the number of Common
Shares of the Company equal to the same pro rata ownership of the holders of
Preferred Shares (on an as-converted to Common share basis) immediately prior to
each such financing and, in the discretion of the board of directors of the
Company, the Company may elect to adjust the Conversion Price as contemplated
above or cause additional shares to be issued to the holders of Preferred
Shares in the same manner
as Sections 27.2(8) through 27.2(10) contemplate. If the
Company does not complete an equity financing within 18 months of the Preferred Share Original
Issue Date, the board of directors of the Company shall engage an appraisal
firm to determine the valuation of the Company (the "Appraised Valuation
of the Company"), after which time the holders of the Preferred shares
shall have the right to convert the Preferred shares into Common shares of the
Company at a Conversion Price determined by the board of directors of the
Company to provide the holders of the Preferred shares with a 25% discount to
the valuation of the Preferred shares as a percentage of the Company's valuation
determined in the Appraised Valuation of the Company, provided; however, that
the Conversion Price shall not be adjusted to permit the holders of Preferred
Shares to obtain greater than 25% of the outstanding Common shares (on an
as-converted basis and taking into account all outstanding warrants or
convertible securities entitling the holders thereof to acquire Preferred
shares).

(8)           Deemed Issue of Additional Shares.

(a)  If the Company at any time or from time to time
after the Preferred Share Original Issue Date issues
Options or Convertible Securities (excluding Options or Convertible Securities
that are themselves Exempted Securities) or fixes a record date for the
determination of holders of any class of securities entitled to receive any
such Options or Convertible Securities, then the maximum number of Common
shares (as set forth in the relating instrument, assuming the satisfaction of
any conditions to exercisability, convertibility or exchangeability but without
regard to any of its provisions for a subsequent adjustment of such number)
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, will be deemed to be Additional Shares issued as of the time of
such issue or, in case such a record date has been fixed, as of the close of
business on such record date.

 

		
			
			These amendments are effective as of November 8, 2018
			at 4:30 PM (the date and time that the Notice of Alteration was
			filed with BC Registry Services).

			

 

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5

(b)      If the terms of any Option or Convertible
Security, the issuance of which resulted in an adjustment to the Conversion
Price under Subsection 27.2(9), are revised as a result of an amendment to such
terms or any other adjustment under such Option or Convertible Security (but
excluding automatic adjustments to such terms under anti-dilution or similar
provisions of such Option or Convertible Security) to provide for either (1)
any increase or decrease in the number of Common shares issuable upon the
exercise, conversion and/or exchange of the Option or Convertible Security or (2)
any increase or decrease in the consideration payable to the Company upon such
exercise, conversion and/or exchange, then, effective upon such increase or
decrease becoming effective, the Conversion Price computed upon the original
issue of the Option or Convertible Security (or upon the occurrence of a record
date with respect thereto) shall be readjusted to such Conversion Price as
would have obtained had such revised terms been in effect upon the original
date of issuance of the Option or Convertible Security. Notwithstanding the
foregoing, no readjustment under this clause (b) shall increase the Conversion
Price to an amount that exceeds the lower of (i) the Conversion Price in effect
immediately before the original adjustment made as a result of the issuance of
the Option or Convertible Security, or (ii) the Conversion Price that would
have resulted from any issuances of Additional Shares (other than deemed
issuances of Additional Shares as a result of the issuance of the Option or
Convertible Security) between the original adjustment date and such
readjustment date.

(c)       If the terms of any Option or Convertible
Security (excluding Options or Convertible Securities that are themselves
Exempted Securities), the issuance of which did not result in an adjustment to
the Conversion Price under Subsection 27.2(9) (either because the consideration
per share (determined under Subsection 27.2(10)) of the Additional Shares
subject thereto was equal to or greater than the Conversion Price then in
effect, or because such Option or Convertible Security was issued before the
Preferred Share Original Issue Date), are revised after the Preferred Share
Original Issue Date as a result of an amendment to such terms or any other
adjustment under such Option or Convertible Security (but excluding automatic
adjustments to such terms under anti-dilution or similar provisions of the
Option or Convertible Security) to provide for either (1) any increase in the
number of Common shares issuable upon the exercise, conversion or exchange of
the Option or Convertible Security or (2) any decrease in the consideration
payable to the Company upon such exercise, conversion or exchange, then such
Option or Convertible Security, as so amended or adjusted, and the Additional
Shares subject thereto (determined in the manner provided in Subsection
27.2(8)(a)) will be deemed to have been issued effective upon such increase or
decrease becoming effective.

(d)      Upon the expiration or termination of any unexercised Option or
unconverted or unexchanged Convertible Security (or portion thereof) that
resulted (either upon its original issuance or upon a revision of its terms) in
an adjustment to the Conversion Price under Subsection 27.2(9), the Conversion
Price shall be readjusted to such Conversion Price as would have obtained had
such Option or Convertible Security (or portion thereof) never been issued.

(e)      If the number of Common shares issuable upon
the exercise, conversion and/or exchange of any Option or Convertible Security,
or the consideration payable to the Company upon such exercise, conversion
and/or exchange, is calculable at the time the Option or Convertible Security
is issued or amended but is subject to adjustment based upon subsequent events,
any adjustment to the Conversion Price under this Subsection 27.2(8) shall be
effected at the time of such issuance or amendment based on such number of
shares or amount of consideration without regard to any provisions for
subsequent adjustments (and any subsequent adjustments shall be treated as
provided in clauses (b) and (c) of this Subsection 27.2(8)). If the number of
Common shares

 

		
			
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6

issuable upon the exercise, conversion and/or exchange of any Option or
Convertible Security, or the consideration payable to the Company upon such
exercise, conversion and/or exchange, cannot be calculated at all at the time
the Option or Convertible Security is issued or amended, any adjustment to the
Conversion Price that would result under this Subsection 27.2(8) at the time of
such issuance or amendment shall instead be effected at the time such number of
shares and/or amount of consideration is first calculable (even if subject to
subsequent adjustments), assuming for purposes of calculating such adjustment
to the Conversion Price that such issuance or amendment took place at the time
such calculation can first be made.

(9)      
Adjustment of Conversion Price Upon Issuance
of Additional Shares. If the Company, at any time after the
Preferred Share Original Issue Date and before the 18 month anniversary of the
Preferred Share Original Issue Date, issues Additional Shares, without
consideration or for a consideration per share less than the applicable
Conversion Price in effect immediately before such issue, then the Conversion
Price shall be reduced, concurrently with such issue, to the consideration per
share received by the Company for such issue or deemed issue of the Additional
Shares; provided that if such issuance or deemed issuance was without
consideration, then the Company will be deemed to have received an aggregate of
$.001 of consideration for all such Additional Shares issued or deemed to be
issued.

(10)    
Determination of Consideration. For purposes of this
Subsection 27.2(10), the consideration received by the Company for the issue of
any Additional Shares shall be computed as follows:

(a)       Cash and Property: Such
consideration shall:

(i)       
if it consists of cash, be computed at the aggregate amount of
cash received by the Company, excluding amounts paid or payable for accrued
interest;

(ii)      
if it consists of property other than cash, be computed at its
fair market value at the time of such issue, as determined in good faith by the
Company's board of directors; and

(iii)     
if Additional Shares are issued together with other shares or
securities or other assets of the Company for consideration that covers both,
be the proportion of such consideration so received, computed as provided in
clauses (i) and (ii) above, as determined in good faith by the Company's board
of directors.

(b)      Options
and Convertible Securities. The consideration per share received by the
Company for Additional Shares deemed to have been issued relating to Options
and Convertible Securities, shall be determined by dividing:

The total amount, if any, received or receivable by the Company as
consideration for the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set forth in the
relating instruments, without regard to any of its provision for a subsequent
adjustment of such consideration) payable to the Company upon the exercise of
the Options or the conversion or exchange of the Convertible Securities, or in
the case of Options for Convertible Securities, the exercise of the Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities, by the maximum number of Common shares (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible Securities.

 

		
			
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			at 4:30 PM (the date and time that the Notice of Alteration was
			filed with BC Registry Services).

			

 

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7

(11)    Multiple
Closing Dates. If the Company issues on more than one date Additional
Shares that are a part of one transaction or a series of related transactions
and that would result in an adjustment to the Conversion Price under Subsection
27.2(9), and such issuance dates occur within a period of no more than 90 days
from the first such issuance to the final such issuance, then, upon the final
such issuance, the Conversion Price shall be readjusted to give effect to all
such issuances as if they occurred on the date of the first such issuance (and
without giving effect to any additional adjustments as a result of any such
subsequent issuances within such period).

(12)    Adjustment for Share Splits and Combinations. If the
Company, at any time or from time to time after the Preferred Share Original
Issue Date, subdivides the outstanding Common shares, the Conversion Price in
effect immediately before the subdivision shall be proportionately decreased so
that the number of Common shares issuable on conversion of each share of such
class be increased in proportion to such increase in the aggregate number of
Common shares outstanding. If the Company, at any time or from time to time
after the Preferred Share Original Issue Date, combines the outstanding Common
shares, the Conversion Price in effect immediately before the combination shall
be proportionately increased so that the number of Common shares issuable on
conversion of each share of such class be decreased in proportion to such
decrease in the aggregate number of Common shares outstanding. Any adjustment
under this subsection shall become effective at the close of business on the
date the subdivision or combination becomes effective.

(13)   
Adjustment
for Certain Dividends and Distributions. If the Company, at any time or
from time to time after the Preferred Share Original Issue Date, makes or
issues, or fixes a record date for the determination of holders of Common
shares entitled to receive, a dividend or other distribution payable on the
Common shares in additional Common shares, then and in each such event the
Conversion Price in effect immediately before such event shall be decreased as
of the time of such issuance or, in the event such a record date is fixed, as
of the close of business on such record date, by multiplying the Conversion
Price then in effect by a fraction:

(a)      
the numerator of which is the total number of Common shares issued
and outstanding immediately before the time of such issuance or the close of
business on such record date, and

(b)      
the denominator of which is the total number
of Common shares issued and outstanding immediately before the time of such
issuance or the close of business on such record date plus the number of Common
shares issuable in payment of such dividend or distribution.

Notwithstanding
the foregoing (a) if such record date is fixed and such dividend is not fully
paid or if such distribution is not fully made on the date fixed therefor, the
Conversion Price shall be recomputed accordingly as of the close of business on
such record date and thereafter the Conversion Price shall be adjusted under
this subsection as of the, time of actual payment of such dividends or
distributions; and (b) no such adjustment shall be made if the holders of
Preferred shares simultaneously receive a dividend or other distribution of
Common shares in a number equal to the number of Common shares as they would
have received if all outstanding Preferred shares had been converted into
Common shares on the date of such event.

(14)    Adjustments
for Other Dividends and Distributions. If the Company, at any time or from
time to time after the Preferred Share Original Issue Date, makes or issues, or
fixes a record date for the determination of holders of Common shares entitled
to receive, a dividend or other distribution payable in securities of the
Company (other than a distribution of Common shares in respect of outstanding
Common shares) or in other property, then and in each such event the holders of
Preferred shares shall receive, simultaneously with the distribution to the
holders of Common shares, a dividend or other distribution of such securities
or other property in an amount equal to

 

		
			
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			filed with BC Registry Services).

			

 

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8

the amount of such securities or other property as they would have
received if all outstanding Preferred shares had been converted into Common
shares on the date of such event.

(15)   
Adiustment for Amalgamation or Reorganization etc. Subject to
Subsection 27.2(5)(a), if any reorganization, recapitalization,
reclassification, consolidation or amalgamation occurs involving the Company in
which the Common shares (but not the Preferred shares) is converted into or
exchanged for securities, cash or other property (other than a transaction
covered by Subsections 27.2(8), 27.2(9), 27.2(10), 27.2(11), 27.2(13) or
27.2(14)) then, following any such reorganization, recapitalization,
reclassification, consolidation or amalgamation, each Preferred Share shall be
convertible in lieu of the Common shares into which it was convertible before
such event into the kind and amount of securities, cash or other property that
a holder of the number of Common shares of the Company issuable upon conversion
of one Preferred Share immediately before such reorganization,
recapitalization, reclassification, consolidation or amalgamation would have
been entitled to receive under such transaction; and, in such case, appropriate
adjustment (as determined in good faith by the Company's board of directors)
shall be made in the application of this Section 27.2 with respect to the
rights and interests of the holders of Preferred shares respecting conversion
rights, to the end that the conversion rights in this Section 27.2 (including
provisions with respect to changes in and other adjustments of the Conversion
Price) shall be applicable, as nearly as reasonably may be, in relation to any
securities or other property deliverable upon the conversion of the Preferred
shares.

(16)   
Mandatory Conversion.

(a)     
Trigger Events. Upon either (a) the closing of the sale of
Common shares to the public in a firm-commitment underwritten public offering
under an effective registration statement under the Securities Act of 1933, as
amended, and/or a prospectus filed with a securities commission or authority in
any of the provinces or territories of Canada, (b) the date and time, or the
occurrence of an event, specified by vote or written consent of the holders of
at least 66  2/3% of the then outstanding Preferred shares (the time of such closing
or the date and time specified or the time of the event specified in such vote
or written consent is referred to herein as the "Mandatory Conversion
Time"), or (c) the closing of a sale of Common shares amounting to greater
than 20% of all issued and outstanding shares in the capital of the Company on
a private placement basis, then (i) all outstanding Preferred shares shall
automatically be converted into Common shares, at the then effective conversion
rate as calculated under Subsection 27.2(7) and (ii) such shares may not be
reissued by the Company.

(b)     
Procedural Requirements. All holders of record of Preferred shares shall be sent written notice
of the Mandatory Conversion Time and the place designated for mandatory
conversion of all such Preferred shares under this Subsection 27.2(16). Such
notice need not be sent in advance of the occurrence of the Mandatory
Conversion Time. Upon receipt of such notice, each holder of Preferred shares
in certificated form shall surrender his, her or its certificate or
certificates for all such shares (or, if such holder alleges that such
certificate has been lost, stolen or destroyed, a lost certificate affidavit
and agreement reasonably acceptable to the Company to indemnify the Company against
any claim that may be made against the Company on account of the alleged loss,
theft or destruction of such certificate) to the Company at the place
designated in such notice. If so required by the Company, any certificates
surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the Company,
duly signed by the registered holder or by his, her or its attorney duly
authorized in writing. All rights with respect to the Preferred shares
converted under Subsection 27.2(16)(a), including the rights, if any, to
receive notices and vote (other than as a holder of Common shares), will
terminate at the Mandatory Conversion Time (notwithstanding the failure of
their holder or holders to surrender any certificates at or before such time),
except only the rights of the holders thereof, upon

 

		
			
			These amendments are effective as of November 8, 2018
			at 4:30 PM (the date and time that the Notice of Alteration was
			filed with BC Registry Services).

			

 

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surrender of any certificate or certificates of such holders (or lost
certificate affidavit and agreement) therefor, to receive the items provided
for in the next sentence of this subsection. As soon as practicable after the
Mandatory Conversion Time and, if applicable, the surrender of any certificate
or certificates (or lost certificate affidavit and agreement) for Preferred
shares, the Company shall (a) issue and deliver to their holder, or to his, her
or its nominees, a certificate or certificates for the number of full Common
shares issuable on such conversion in accordance with these provisions and (b)
pay cash in lieu of the payment of any dividends that have accrued or been
declared by remain unpaid on the Preferred shares converted.

(17)     Redemption.
Unless prohibited by law, the Preferred shares shall be redeemed by the Company
at a price equal to the Original Issue Price per share, plus all dividends and
unpaid interest that has accrued or, in respect of the dividends been declared
but are unpaid dividends thereon (the "Redemption Price"), in
three equal annual installments (with the unpaid dividends paid as part of the
third installment) commencing not more than 60 days after receipt by the
Company at any time on or after the fifth anniversary of the Preferred Share
Original Issue Date from the holders of at least 50% of the then outstanding
Preferred shares, of written notice requesting redemption of all Preferred
shares (the "Redemption Request"). Upon receipt of a
Redemption Request, the Company shall apply all of its assets to any such
redemption, and to no other corporate purpose, except to the extent prohibited
by law governing distributions to shareholders. The date of each such
installment is referred to as a "Redemption Date." On each
Redemption Date, the Company shall redeem, on a pro rata basis in accordance
with the number of Preferred shares owned by each holder, that number of
outstanding Preferred shares determined by dividing (a) the total number of
Preferred shares outstanding immediately before such Redemption Date by (b) the
number of remaining Redemption Dates (including the Redemption Date to which
such calculation applies). If on any Redemption Date the Company is prevented
by law from redeeming all Preferred shares to be redeemed, the Company shall
rateably redeem the maximum number of shares that it may redeem consistent with
law, and shall redeem the remaining shares as soon as it may lawfully do so
under law.

(18)      Redemption
Notice. The Company shall send written notice of the mandatory redemption
(the "Redemption Notice") to each holder of record of
Preferred shares not less than 40 days before each Redemption Date, Each
Redemption Notice shall state:

(a)    
the number of Preferred shares held by the holder that the Company
will redeem on the Redemption Date specified in the Redemption Notice;

(b)    
the Redemption Date and the Redemption Price;

(c)     
the date upon which the holder's right to
convert such shares terminates; and

(d)    
for holders of shares in certificated form, that the holder is to
surrender to the Company, in the manner and at the place designated, his, her
or its certificate or certificates representing the Preferred shares to be
redeemed.

(19)      Surrender
of Certificates; Payment. On or before the applicable Redemption Date, each
holder of Preferred shares to be redeemed on such Redemption Date, unless such
holder has exercised his, her or its right to convert such shares, shall, if a
holder of shares in certificated form, surrender the certificate or
certificates representing such shares (or, if such registered holder alleges
that such certificate has been lost, stolen or destroyed, a lost certificate
affidavit and agreement reasonably acceptable to the Company to indemnify the
Company against any claim that may be made against the Company on account of
the alleged loss, theft or destruction of such certificate) to the Company, in
the manner and at the place designated in the Redemption Notice, and thereupon
the Redemption Price for such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as its owner, If
less than all of the

 

		
			
			These amendments are effective as of November 8, 2018
			at 4:30 PM (the date and time that the Notice of Alteration was
			filed with BC Registry Services).

			

 

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Preferred
shares represented by a certificate are redeemed, a new certificate,
instrument, or book entry representing the unredeemed Preferred shares shall
promptly be issued to such holder.

(20)   
Rights Subsequent to Redemption. If the Redemption Notice is duly given, and if on the applicable Redemption
Date the Redemption Price payable upon redemption of the Preferred shares to be
redeemed on such Redemption Date is paid or tendered for payment or deposited
with an independent payment agent so as to be available therefor in a timely
manner, then notwithstanding that any certificates evidencing any of the
Preferred shares so called for redemption has not been surrendered, dividends
with respect to such Preferred shares shall cease to accrue after such
Redemption Date and all rights with respect to such shares shall immediately
after the Redemption Date terminate, except only the right of the holders to
receive the Redemption Price without interest upon surrender of any such
certificate or certificates therefor.

(21)   
Waiver. Any of the rights, powers, preferences and other terms of the
Preferred shares may be waived on behalf of all holders of Preferred shares by
the affirmative written consent or vote of the holders of at least 50% of the
Preferred shares then outstanding.

(22)   
Notices. Any notice required or permitted by these provisions to be given
to a holder of Preferred shares shall be mailed, postage prepaid, to the post
office address last shown on the records of the Company, or given by electronic
communication, and will be deemed sent upon such mailing or electronic
transmission.

 

 

 

 

 

 

 

 

 

 

 

		
			
			These amendments are effective as of November 8, 2018
			at 4:30 PM (the date and time that the Notice of Alteration was
			filed with BC Registry Services).

			

 

SOLUNA
TECHNOLOGIES, LTD. 

(the "Company")

AMENDMENT TO ARTICLES

(effective 12:30 pm on January 13, 2020)

The following special resolution was
consented to in writing by all of the Shareholders of the Company as of January
9, 2020:

"5.           the Articles of the
Company be altered by amending and replacing Part 27 - Special Rights and
Restrictions Attached to Shares, with provisions as set forth in Schedule A
attached hereto"

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE A

27.        SPECIAL RIGHTS AND RESTRICTIONS
ATTACHED TO SHARES

27.1      Common shares

The special rights and restrictions attached to the Common shares
are as follows:

(1)      
General. The voting, dividend and liquidation rights of the holders of
Common shares are subject to and qualified by the rights, powers and
preferences of the holders of Class Seed Preferred shares and the holders of
Class A Preferred shares.

(2)      
Voting. The holders of Common shares are entitled to one vote for each
Common share held at all meetings of shareholders (and written actions in lieu
of meetings).

(3)      
Dividends. The holders of Common shares are entitled,
subject to the rights of the Class Seed Preferred shares and Class A Preferred
shares of the Company, to receive dividends if, as and when declared by the
Board of Directors.

(4)      
Liquidation, Dissolution or Windinq-Up. The
holders of the Common shares are entitled, subject to the rights of the Class
Seed Preferred shares and Class A Preferred shares of the Company, to receive
the remaining property of the Company on a liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary.

27.2       Class Seed Preferred shares

The special rights and restrictions attached to the Class Seed
Preferred shares are as follows:

(1)     Definitions. 

(a)        "Additional
Shares" means all Common shares issued by the Company after the Class
Seed Preferred Share Original Issue Date, other than (1) the following Common
shares and (2) Common shares deemed issued under the following Options and
Convertible Securities (clauses (1) and (2), collectively, "Exempted
Securities"):

(i)       
Common shares, Options or Convertible Securities issued as a dividend
or distribution on Class Seed Preferred shares;

(ii)      
Common shares, Options or Convertible Securities issued by reason
of a dividend, share split, split-up or other distribution on Common shares
that is covered by Subsection 27.2(12), 27.2(13), 27.2(14) or 27.2(15);

(iii)     
Common shares or Options issued to employees or directors of, or
consultants or advisors to, the Company or any of its subsidiaries under a
plan, agreement or arrangement approved by the Board of Directors;

(iv)     
Common shares or Convertible Securities actually issued upon the
exercise of Options or Common shares actually issued upon the conversion or
exchange of Convertible Securities, in each case provided the issuance is under
such Option or Convertible Security;

(v)      
Common shares, Options or Convertible Securities issued to banks,
equipment lessors or other financial institutions, or to real property lessors,
under a debt financing, equipment leasing or real or immovable property leasing
transaction approved by the Board of Directors that do not exceed an aggregate
of 15% of the Common shares (including shares underlying (directly or
indirectly) any such Options or Convertible Securities);

3

(vi)     
Common shares, Options or Convertible Securities issued to
suppliers or third-party service providers in connection with the provision of
goods or services under transactions approved by the Board of Directors that do
not exceed an aggregate of 15% of the Common shares (including shares
underlying (directly or indirectly) any such Options or Convertible
Securities); or

(vii)    
Common shares, Options or Convertible
Securities issued under the acquisition of another corporation by the Company
by amalgamation, purchase of substantially all of the assets or other
reorganization or to a joint venture agreement, provided that such issuances
are approved by the Board of Directors.

  
	(b)     "Convertible
  Securities" means any evidences of indebtedness, shares or other securities
  directly or indirectly convertible into or exchangeable for Common shares,
  but excluding Options.

  
	(c)    "Deemed
  Liquidation Event" means, unless the holders of at least 50% of
  the outstanding Class Seed Preferred shares elect otherwise by written notice
  sent to the Company
  at least 10 days before the effective date of any such event, the following:

(i)         an amalgamation or consolidation in which the Company is a
constituent party or a subsidiary of the Company is a constituent party and the
Company issues shares under such amalgamation or consolidation, except any such
amalgamation or consolidation involving the Company or a subsidiary in which
the shares of the Company outstanding immediately before such amalgamation or
consolidation continue to represent, or are converted into or exchanged for
shares that represent, immediately following such amalgamation or
consolidation, at least a majority, by voting power, of the shares of (1) the
surviving or resulting Company; or (2) if the surviving or resulting Company is
a wholly-owned subsidiary of another Company immediately following such
amalgamation or consolidation, the parent Company of such surviving or
resulting Company; or

(ii)         the
sale, lease, transfer, exclusive license or other disposition, in a single
transaction or series of related transactions, by the Company or any subsidiary
of the Company of all or substantially all the assets of the Company and its
subsidiaries taken as a whole or the sale or disposition (whether by
amalgamation, consolidation or otherwise) of one or more subsidiaries of the
Company if substantially all of the assets of the Company and its subsidiaries
taken as a whole are held by such subsidiary or subsidiaries, except where such
sale, lease, transfer, exclusive license or other disposition is to a
wholly-owned subsidiary of the Company.

(d)        "Fair
Market Value" means, in respect of assets other than securities, their
fair market value as determined in good faith and on reasonable grounds by the
Board of Directors and, if the assets are securities:

(i)         if
traded on one or more securities exchanges or markets, the weighted average of
the closing prices of such securities on the exchange or market on which the
securities are primarily traded over the 30-day period ending three days prior
to the relevant date; or

(ii)         if
actively traded over-the-counter, the weighted average of the closing bid or
sale prices (whichever are applicable) over the 30-day period ending three days
prior to the relevant date; or

 

4

(iii)        if
there is no active public market, the fair market value of such securities as
determined in good faith by the Board of Directors;

provided that, if the securities to be valued are securities
issued by the Company, the principles set forth in paragraphs (i) and (ii)
above shall apply, except that no discount or premium is to be applied to
valuation of such securities on the basis of that they constitute a minority
block or a majority block of securities or for restricted liquidity or low
negotiability.

(e)      
"Fully-Diluted Basis"
means, as of any date of determination, all issued and outstanding
Common shares and all Common shares issuable upon the exercise or conversion of
any outstanding Convertible Securities or Options as of such date with respect
to which the aggregate of the price initially paid for such Convertible
Securities or Options and the exercise price for conversion of such Convertible
Securities or Options into Common Shares is equal to or less than the Fair
Market Value of the Common Shares at such time whether or not such Convertible
Securities or Options are at the time exercisable or convertible, and Common
shares issuable as a result thereof shall be deemed to have been issued and to
form part of the holdings of the person(s) entitled to receive such Common
shares.

(f)       
"Options"
means rights, options or warrants
to subscribe for, purchase or otherwise acquire Common shares or Convertible
Securities.

(g)      
"Class Seed Preferred Share Original Issue Price"
means the
amount per share that each shareholder has paid to the Company for the Class
Seed Preferred shares that that shareholder holds, subject to appropriate
adjustment in the event of any share dividend, share split, combination or
other similar recapitalization with respect to the Class Seed Preferred shares.

(h)      
"Class Seed Preferred Share Original Issue Date"
means the
date on which the first Class Seed Preferred share was issued.

(2)      
Voting. On any matter presented to the shareholders of the Company for
their action or consideration at any meeting of shareholders of the Company (or
by written consent of shareholders in lieu of a meeting), each holder of
outstanding Class Seed Preferred shares is entitled to cast the number of votes
equal to the number of whole Common shares into which the Class Seed Preferred
shares held by the holder are convertible as of the record date for determining
shareholders entitled to vote on such matter. Except as provided by law or by
the other provisions of the Articles, holders of Class Seed Preferred shares
shall vote together with the holders of Common shares as a single class.

(3)      
Dividends. The Company shall not declare, pay or set
aside any dividends on shares of any other class of the Company (other than a
stock dividend on the Common shares payable in Common shares) unless (in
addition to the obtaining of any consents required elsewhere in the Articles)
the holders of the Class Seed Preferred shares then outstanding first receive,
or simultaneously receive, a pro rata dividend based on the number of Common
shares into which they are convertible.

(4)      
Dividends. The
holders of the Class Seed Preferred shares, in priority to the holders of
Common shares and any other class or series of shares ranking junior to the
Class Seed Preferred shares, shall be entitled to receive and the Company shall
pay thereon out of monies of the Company properly applicable to the payment of
dividends, cumulative cash dividends at the rate of five percent (5%) of the
Class Seed Original Issuance Price per share, per annum, accruing (but not
compounding) daily, payable only upon the liquidation, dissolution or
winding-up of the Company or, at any time prior to the liquidation, dissolution
or winding-up of the Company, payable if, as and when declared by the Board of
Directors (the "Board of Directors").

5

(5)      
Liquidation, Dissolution or Winding Up;
Certain Amalgamations, Consolidations and Asset Sales. In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company or Deemed Liquidation Event, the holders of Class
Seed Preferred shares then outstanding are entitled to be paid out of the
assets of the Company available for distribution to its shareholders, subject
to the prior rights of the holders of Class A Preferred shares and before any
payment shall be made to the holders of Common shares, an amount per share
equal to the greater of (i) the Class Seed Preferred Original Issue Price, plus
any dividends that have accrued or been declared but remain unpaid thereon and
(ii) the amount that would have been paid to such holders as if their Class
Seed Preferred shares had been converted to Common shares under the Articles
prior to such time. If upon any such liquidation, dissolution or winding up of
the Company or Deemed Liquidation Event, the assets of the Company available
for distribution to its shareholders is insufficient to pay the holders of
Class Seed Preferred shares the full amount to which they are entitled under
this Subsection 27.2(5)(a), the holders of Class Seed Preferred shares shall share
rateably in any distribution of the assets available for distribution in
proportion to the respective amounts that would otherwise be payable in respect
of the shares held by them upon such distribution if all amounts payable on or
with respect to such shares were paid in full. The aggregate amount that a
holder of Class Seed Preferred shares is entitled to receive under Subsections
27.2(5) is referred to as the "Class A Liquidation Amount."

(6)      
Conversion. The holders of the Class Seed Preferred shares
shall have the right to convert the Class Seed Preferred shares at the option
of the holder, at any time, into Common shares of the Company at the conversion
rate then in place. Any accrued or declared but unpaid dividends will also have
the right to be converted at the option of the Company.

(7)      
Conversion Ratio. Each Class Seed Preferred share may be converted, at the option of its
holder, at any time and from time to time, and without the payment of
additional consideration by its holder, into such number of fully paid and
non-assessable Common shares as is determined by dividing the Class Seed
Preferred Share Original Issue Price by the Conversion Price (as defined below)
in effect at the time of conversion. The "Conversion Price" shall
initially be US $2.36.

(8)      
Deemed Issue of Additional Shares.

(a)      
If the Company at any time or from time to time after the Class
Seed Preferred Share Original Issue Date issues Options or Convertible
Securities (excluding Options or Convertible Securities that are themselves
Exempted Securities) or fixes a record date for the determination of holders of
any class of securities entitled to receive any such Options or Convertible
Securities, then the maximum number of Common shares (as set forth in the
relating instrument, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any of
its provisions for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, will be
deemed to be Additional Shares issued as of the time of such issue or, in case
such a record date has been fixed, as of the close of business on such record
date.

(b)      
If the terms of any Option or Convertible
Security, the issuance of which resulted in an adjustment to the Conversion
Price under Subsection 27.2(9), are revised as a result of an amendment to such
terms or any other adjustment under such Option or Convertible Security (but
excluding automatic adjustments to such terms under anti-dilution or similar
provisions of such Option or Convertible Security) to provide for either (1)
any increase or decrease in the number of Common shares issuable upon the
exercise, conversion and/or exchange of the Option or Convertible Security or
(2) any increase or decrease in the consideration payable to the Company upon
such exercise, conversion and/or

6

exchange, then, effective upon such increase or decrease becoming
effective, the Conversion Price computed upon the original issue of the Option
or Convertible Security (or upon the occurrence of a record date with respect
thereto) shall be readjusted to such Conversion Price as would have obtained
had such revised terms been in effect upon the original date of issuance of the
Option or Convertible Security. Notwithstanding the foregoing, no readjustment
under this clause (b) shall increase the Conversion Price to an amount that
exceeds the lower of (i) the Conversion Price in effect immediately before the
original adjustment made as a result of the issuance of the Option or
Convertible Security, or (ii) the Conversion Price that would have resulted
from any issuances of Additional Shares (other than deemed issuances of
Additional Shares as a result of the issuance of the Option or Convertible
Security) between the original adjustment date and such readjustment date.

(c)      
If the terms of any Option or Convertible Security (excluding
Options or Convertible Securities that are themselves Exempted Securities), the
issuance of which did not result in an adjustment to the Conversion Price under
Subsection 27.2(9) (either because the consideration per share (determined
under Subsection 27.2(10)) of the Additional Shares subject thereto was equal to
or greater than the Conversion Price then in effect, or because such Option or
Convertible Security was issued before the Preferred Share Original Issue
Date), are revised after the Preferred Share Original Issue Date as a result of
an amendment to such terms or any other adjustment under such Option or
Convertible Security (but excluding automatic adjustments to such terms under antidilution or similar provisions of the Option or Convertible Security) to
provide for either (1) any increase in the number of Common shares issuable
upon the exercise, conversion or exchange of the Option or Convertible Security
or (2) any decrease in the consideration payable to the Company upon such
exercise, conversion or exchange, then such Option or Convertible Security, as
so amended or adjusted, and the Additional Shares subject thereto (determined
in the manner provided in Subsection 27.2(8)(a)) will be deemed to have been
issued effective upon such increase or decrease becoming effective.

(d)      
Upon the expiration or termination of any unexercised Option or
unconverted or unexchanged Convertible Security (or portion thereof) that
resulted (either upon its original issuance or upon a revision of its terms) in
an adjustment to the Conversion Price under Subsection 27.2(9), the Conversion
Price shall be readjusted to such Conversion Price as would have obtained had
such Option or Convertible Security (or portion thereof) never been issued.

(e)      
If the number of Common shares issuable upon
the exercise, conversion and/or exchange of any Option or Convertible Security,
or the consideration payable to the Company upon such exercise, conversion
and/or exchange, is calculable at the time the Option or Convertible Security
is issued or amended but is subject to adjustment based upon subsequent events,
any adjustment to the Conversion Price under this Subsection 27.2(8) shall be
effected at the time of such issuance or amendment based on such number of
shares or amount of consideration without regard to any provisions for
subsequent adjustments (and any subsequent adjustments shall be treated as
provided in clauses (b) and (c) of this Subsection 27.2(8)). If the number of
Common shares issuable upon the exercise, conversion and/or exchange of any
Option or Convertible Security, or the consideration payable to the Company
upon such exercise, conversion and/or exchange, cannot be calculated at all at
the time the Option or Convertible Security is issued or amended, any
adjustment to the Conversion Price that would result under this Subsection 27.2(8)
at the time of such issuance or amendment shall instead be effected at the time
such number of shares and/or amount of consideration is first calculable (even
if subject to subsequent adjustments), assuming for purposes of

 

7

calculating such adjustment to the Conversion Price that such
issuance or amendment took place at the time such calculation can first be
made.

(9)        Adjustment of Conversion Price Upon Issuance
of Additional Shares. If the Company, at any time after the Class Seed
Preferred Share Original Issue Date and before the 18 month anniversary of the
Class Seed Preferred Share Original Issue Date, issues Additional Shares,
without consideration or for a consideration per share less than the applicable
Conversion Price in effect immediately before such issue (or, in the case of
any issuance of Convertible Securities or Options where the effective "all
in" conversion price or exercise price payable to result in the issuance
of Common shares to the holder is less than such Conversion Price), then the
Conversion Price shall be reduced, concurrently with such issue, by multiplying
it by a fraction:

(a)      
the numerator of which is the sum of:

(i)      the number of Common shares outstanding immediately prior to such
issuance; and

(ii)     the number of Common shares that
the Aggregate Consideration in respect of such issuance would have purchased at
a price equal to the Conversion Price of such series of Preferred Shares in
effect immediately prior to such issuance; and

(b)      
the denominator of which is the sum of:

(i)      the number of Common shares outstanding immediately prior to such
issuance; and

(ii)     the number of additional Common shares actually
issued and issuable upon the conversion, exchange or exercise of the new
Derivative Securities;

provided that if
such issuance or deemed issuance was without consideration, then the Company
will be deemed to have received an aggregate of $.001 of consideration for all
such Additional Shares issued or deemed to be issued. For purposes of the above
calculation, the number of Common shares outstanding immediately prior to such
issuance is calculated on a Fully-Diluted Basis, as if all Convertible
Securities outstanding prior to such issuance had been fully converted,
exercised or exchanged for Common shares immediately prior to such issuance.
For greater certainty, the applicable Conversion Price of each series shall be
adjusted as provided above only to the extent required under this Section
27.2(9).

(10)       Determination of Consideration. The
consideration received by the Company for the issue of any Additional Shares
shall be computed as follows:

(a)    Cash and Property: Such consideration shall:

(i)       
if it consists of cash, be computed at the aggregate amount of
cash received by the Company, excluding amounts paid or payable for accrued
interest;

(ii)      
if it consists of property other than cash,
be computed at its fair market value at the time of such issue, as determined in
good faith by the Board of Directors; and

(iii)      
if Additional Shares are issued together with other shares or
securities or other assets of the Company for consideration that covers both,
be the proportion of such consideration so received, computed as provided in
clauses (i) and (ii) above, as determined in good faith by the Board of
Directors.

(b)    Options
and Convertible Securities. The consideration per share received by the
Company for Additional Shares deemed to have been issued relating to Options
and Convertible Securities, shall be determined by dividing:

8

The total amount, if any, received
or receivable by the Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the relating instruments, without regard to any
of its provision for a subsequent adjustment of such consideration) payable to
the Company upon the exercise of the Options or the conversion or exchange of
the Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of the Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by the maximum number of
Common shares (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities.

(11)    
Multiple Closing Dates. If the Company issues on more than one date Additional Shares that are
a part of one transaction or a series of related transactions and that would
result in an adjustment to the Conversion Price under Subsection 27.2(9), and
such issuance dates occur within a period of no more than 90 days from the
first such issuance to the final such issuance, then, upon the final such
issuance, the Conversion Price shall be readjusted to give effect to all such
issuances as if they occurred on the date of the first such issuance (and
without giving effect to any additional adjustments as a result of any such
subsequent issuances within such period).

(12)    
Adjustment for Share Splits and Combinations. If the
Company, at any time or from time to time after the Class Seed Preferred Share
Original Issue Date, subdivides the outstanding Common shares, the Conversion
Price in effect immediately before the subdivision shall be proportionately
decreased so that the number of Common shares issuable on conversion of each
share of such class be increased in proportion to such increase in the
aggregate number of Common shares outstanding. If the Company, at any time or
from time to time after the Class Seed Preferred Share Original Issue Date,
combines the outstanding Common shares, the Conversion Price in effect
immediately before the combination shall be proportionately increased so that
the number of Common shares issuable on conversion of each share of such class
be decreased in proportion to such decrease in the aggregate number of Common
shares outstanding. Any adjustment under this subsection shall become effective
at the close of business on the date the subdivision or combination becomes
effective.

(13)    
Adjustment for Certain Dividends and
Distributions. If the Company, at any time or from time to
time after the Class Seed Preferred Share Original Issue Date, makes or issues,
or fixes a record date for the determination of holders of Common shares
entitled to receive, a dividend or other distribution payable on the Common
shares in additional Common shares, then and in each such event the Conversion
Price in effect immediately before such event shall be decreased as of the time
of such issuance or, in the event such a record date is fixed, as of the close
of business on such record date, by multiplying the Conversion Price then in
effect by a fraction:

(a)      
the numerator of which is the total number of Common shares issued
and outstanding immediately before the time of such issuance or the close of
business on such record date, and

(b)      
the denominator of which is the total number of Common shares
issued and outstanding immediately before the time of such issuance or the
close of business on such record date plus the number of Common shares issuable
in payment of such dividend or distribution.

Notwithstanding the foregoing (a)
if such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Conversion Price
shall be recomputed accordingly as of the close of business on such record date
and thereafter the

 

9

Conversion Price shall be adjusted under this subsection as of the time
of actual payment of such dividends or distributions; and (b) no such
adjustment shall be made if the holders of Class Seed Preferred shares simultaneously
receive a dividend or other distribution of Common shares in a number equal to
the number of Common shares as they would have received if all outstanding
Class Seed Preferred shares had been converted into Common shares on the date
of such event.

(14)    
Adjustments for Other Dividends and Distributions. If the
Company, at any time or from time to time after the Class Seed Preferred Share
Original Issue Date, makes or issues, or fixes a record date for the determination
of holders of Common shares entitled to receive, a dividend or other
distribution payable in securities of the Company (other than a distribution of
Common shares in respect of outstanding Common shares) or in other property,
then and in each such event the holders of Class Seed Preferred shares shall
receive, simultaneously with the distribution to the holders of Common shares,
a dividend or other distribution of such securities or other property in an
amount equal to the amount of such securities or other property as they would
have received if all outstanding Class Seed Preferred shares had been converted
into Common shares on the date of such event

(15)    
Adjustment for Amalgamation or Reorganization etc. Subject to
Subsection 27.2(5)(a), if any reorganization, recapitalization,
reclassification, consolidation or amalgamation occurs involving the Company in
which the Common shares (but not the Class Seed Preferred shares) is converted
into or exchanged for securities, cash or other property (other than a
transaction covered by Subsections 27.2(8), 27.2(9), 27.2(11), 27.2(12),
27.2(13) or 27.2(14)) then, following any such reorganization,
recapitalization, reclassification, consolidation or amalgamation, each Class
Seed Preferred share shall be convertible in lieu of the Common shares into
which it was convertible before such event into the kind and amount of
securities, cash or other property that a holder of the number of Common shares
of the Company issuable upon conversion of one Class Seed Preferred share
immediately before such reorganization, recapitalization, reclassification,
consolidation or amalgamation would have been entitled to receive under such
transaction; and, in such case, appropriate adjustment (as determined in good
faith by the Board of Directors) shall be made in the application of this
Section 27.2 with respect to the rights and interests of the holders of Class
Seed Preferred shares respecting conversion rights, to the end that the conversion
rights in this Section 27.2 (including provisions with respect to changes in
and other adjustments of the Conversion Price) shall be applicable, as nearly
as reasonably may be, in relation to any securities or other property
deliverable upon the conversion of the Class Seed Preferred shares.

(16)    
Mandatory Conversion.

(a)     
Trigger Events. Upon either (a) the closing of the
sale of Common shares to the public in a firm-commitment underwritten public
offering under an effective registration statement under the Securities Act
of 1933, as amended, and/or a prospectus filed with a securities commission
or authority in any of the provinces or territories of Canada at a per-share
price equal to at least five (5) times the then-applicable Conversion Price in
respect of the Series A Preferred Shares producing gross proceeds to the
Company from the issue of Common shares of at least US$50 million or (b) the
closing of a sale of Common shares amounting to greater than 20% of all issued
and outstanding shares in the capital of the Company on a private placement
basis, then (i) all outstanding Class Seed Preferred shares shall automatically
be converted into Common shares, at the then effective conversion rate as
calculated under Subsection 27.2(7) and (ii) such shares may not be reissued by
the Company.

(b)     
Procedural Requirements. All holders of record of Class
Seed Preferred shares shall be sent written notice of the Mandatory Conversion
Time and the place designated for mandatory conversion of all such Class Seed
Preferred shares under this Subsection

 

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27.2(16).
Such notice need not be sent in advance of the occurrence of the Mandatory
Conversion Time. Upon receipt of such notice, each holder of Class Seed
Preferred shares in certificated form shall surrender his, her or its
certificate or certificates for all such shares (or, if such holder alleges
that such certificate has been lost, stolen or destroyed, a lost certificate
affidavit and agreement reasonably acceptable to the Company to indemnify the
Company against any claim that may be made against the Company on account of
the alleged loss, theft or destruction of such certificate) to the Company at
the place designated in such notice. If so required by the Company, any
certificates surrendered for conversion shall be endorsed or accompanied by
written instrument or instruments of transfer, in form satisfactory to the
Company, duly signed by the registered holder or by his, her or its attorney
duly authorized in writing. All rights with respect to the Class Seed Preferred
shares converted under Subsection 27.2(16)(a), including the rights, if any, to
receive notices and vote (other than as a holder of Common shares), will
terminate at the Mandatory Conversion Time (notwithstanding the failure of
their holder or holders to surrender any certificates at or before such time),
except only the rights of the holders thereof, upon surrender of any
certificate or certificates of such holders (or lost certificate affidavit and
agreement) therefor, to receive the items provided for in the next sentence of
this subsection. As soon as practicable after the Mandatory Conversion Time
and, if applicable, the surrender of any certificate or certificates (or lost
certificate affidavit and agreement) for Class Seed Preferred shares, the
Company shall (a) issue and deliver to their holder, or to his, her or its
nominees, a certificate or certificates for the number of full Common shares
issuable on such conversion in accordance with these provisions and (b) pay
cash in lieu of the payment of any dividends that have accrued or been declared
by remain unpaid on the Class Seed Preferred shares converted.

(17)    
Redemption. Unless prohibited by law, the Class Seed
Preferred shares shall be redeemed by the Company at a price equal to the Class
Seed Preferred Share Original Issue Price per share, plus all dividends that
have accrued but have not yet been declared and any dividends declared but are
unpaid (the "Redemption Price"), in three equal annual
installments (with the unpaid dividends paid as part of the third installment)
commencing not more than 60 days after receipt by the Company at any time on or
after the fifth anniversary of the Class A Preferred Share Original Issue Date
(as defined in Section 27.3) from the holders of at least 50% of the then
outstanding Class Seed Preferred shares, provided that the holders of at least
50% of the then outstanding Class A Preferred shares have elected, on or prior
to such time, to exercise their redemption rights under Section 27.3 (17), of
written notice requesting redemption of all Class Seed Preferred shares (the "Redemption
Request"). Upon receipt of a Redemption Request, the Company shall
apply all of its assets to the redemption of the Class A Preferred shares and
any such redemption, and to no other corporate purpose, except to the extent
prohibited by law governing distributions to shareholders. The date of each
such installment is referred to as a "Redemption Date." On
each Redemption Date, subject to the prior redemption rights of the holders of
Class A Preferred shares, the Company shall redeem, on a pro rata basis in
accordance with the number of Class Seed Preferred shares owned by each holder,
that number of outstanding Class Seed Preferred shares determined by dividing
(a) the total number of Class Seed Preferred shares outstanding immediately
before such Redemption Date by (b) the number of remaining Redemption Dates (including
the Redemption Date to which such calculation applies). If on any Redemption
Date the Company is prevented by law from redeeming all Class Seed Preferred
shares to be redeemed, the Company shall rateably redeem the maximum number of
shares that it may redeem consistent with law, and shall redeem the remaining
shares as soon as it may lawfully do so under law.

(18)    Redemption Notice. The Company shall send written
notice of the mandatory redemption (the "Redemption Notice") to
each holder of record of Class Seed Preferred shares not less than 40 days
before each Redemption Date. Each Redemption Notice shall state:

11

(a)      
the number of Class Seed Preferred shares held by the holder that
the Company will redeem on the Redemption Date specified in the Redemption
Notice;

(b)      
the Redemption Date and the Redemption
Price;

(c)      
the date upon which the holder's right to convert such shares
terminates; and

(d)      
for holders of shares in certificated form, that the holder is to
surrender to the Company, in the manner and at the place designated, his, her
or its certificate or certificates representing the Class Seed Preferred shares
to be redeemed.

(19)    
Surrender of Certificates; Payment. On or
before the applicable Redemption Date, each holder of Class Seed Preferred
shares to be redeemed on such Redemption Date, unless such holder has exercised
his, her or its right to convert such shares, shall, if a holder of shares in
certificated form, surrender the certificate or certificates representing such
shares (or, if such registered holder alleges that such certificate has been
lost, stolen or destroyed, a lost certificate affidavit and agreement
reasonably acceptable to the Company to indemnify the Company against any claim
that may be made against the Company on account of the alleged loss, theft or
destruction of such certificate) to the Company, in the manner and at the place
designated in the Redemption Notice, and thereupon the Redemption Price for
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as its owner. If less than all of the Class
Seed Preferred shares represented by a certificate are redeemed, a new
certificate, instrument, or book entry representing the unredeemed Class Seed
Preferred shares shall promptly be issued to such holder.

(20)    
Rights Subsequent to Redemption. If the Redemption Notice is
duly given, and if on the applicable Redemption Date the Redemption Price
payable upon redemption of the Class Seed Preferred shares to be redeemed on such
Redemption Date is paid or tendered for payment or deposited with an
independent payment agent so as to be available therefor in a timely manner,
then notwithstanding that any certificates evidencing any of the Class Seed
Preferred shares so called for redemption has not been surrendered, dividends
with respect to such Class Seed Preferred shares shall cease to accrue after
such Redemption Date and all rights with respect to such shares shall
immediately after the Redemption Date terminate, except only the right of the
holders to receive the Redemption Price without interest upon surrender of any
such certificate or certificates therefor.

(21)    
Waiver. Any of the rights, powers, preferences and other terms of the
Class Seed Preferred shares may be waived on behalf of all holders of Class
Seed Preferred shares by the affirmative written consent or vote of the holders
of at least 50% of the Class Seed Preferred shares then outstanding.

(22)    
Notices. Any notice required or permitted by these provisions to be given
to a holder of Class Seed Preferred shares shall be mailed, postage prepaid, to
the post office address last shown on the records of the Company, or given by
electronic communication, and will be deemed sent upon such mailing or
electronic transmission.

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27.3       Class A Preferred shares

The special rights and restrictions attached to the Class A
Preferred shares are as follows:

(1)        Definitions. 

                The following
terms have the following meanings, solely for the purposes of this Section
27.3:

(a)         "Additional Shares" means all
Common shares, Convertible Securities or Options
issued by the Company after the Class A Preferred Share Original Issue Date,
other than (1) the following Common shares and (2) Common shares deemed issued
under the following Options and Convertible Securities (clauses (1) and (2),
collectively, "Exempted Securities"):

(i)     Common shares, Options or Convertible
Securities issued as a dividend or distribution on Class A Preferred shares;

(ii)    Common shares, Options or Convertible Securities issued by reason
of a dividend, share split, split-up or other distribution on Common shares
that is covered by Subsection 27.3(12), 27.3(13), 27.3(14) or 27.3(15);

(iii)   Common shares or Options issued to employees or directors of, or
consultants or advisors to, the Company or any of its subsidiaries under a
plan, agreement or arrangement approved by the Board of Directors;

(iv)   Common shares or Convertible Securities actually issued upon the
exercise of Options or Common shares actually issued upon the conversion or
exchange of Convertible Securities, in each case provided the issuance is under
such Option or Convertible Security;

(v)    Common shares, Options or Convertible Securities issued to banks,
equipment lessors or other financial institutions, or to real property lessors,
under a debt financing, equipment leasing or real or immovable property leasing
transaction approved by the Board of Directors that do not exceed an aggregate
of 15% of the Common shares (including shares underlying (directly or
indirectly) any such Options or Convertible Securities);

(vi)    Common shares, Options or Convertible
Securities issued to suppliers or third-party service providers in connection
with the provision of goods or services under transactions approved by the
Board of Directors that do not exceed an aggregate of 15% of the Common shares
(including shares underlying (directly or indirectly) any such Options or Convertible
Securities); or

(vii)    Common shares, Options or Convertible
Securities issued under the acquisition of another corporation by the Company
by amalgamation, purchase of substantially all of the assets or other
reorganization or to a joint venture agreement, provided that such issuances
are approved by the Board of Directors.

(b)       "Convertible Securities" means any
evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common shares, but excluding Options.

(c)      "Deemed
Liquidation Event" means, unless the holders of at least 50% of the outstanding
Class A Preferred shares elect otherwise by written notice sent to the Company
at least 10 days before the effective date of any such event, the following:

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(i)       
an amalgamation or consolidation in which the
Company is a constituent party or a subsidiary of the Company is a constituent
party and the Company issues shares under such amalgamation or consolidation,
except any such amalgamation or consolidation involving the Company or a
subsidiary in which the shares of the Company outstanding immediately before
such amalgamation or consolidation continue to represent, or are converted into
or exchanged for shares that represent, immediately following such amalgamation
or consolidation, at least a majority, by voting power, of the shares of (1)
the surviving or resulting Company; or (2) if the surviving or resulting
Company is a wholly-owned subsidiary of another Company immediately following
such amalgamation or consolidation, the parent Company of such surviving or
resulting Company; or

(ii)      
the sale, lease, transfer, exclusive license or other disposition,
in a single transaction or series of related transactions, by the Company or
any subsidiary of the Company of all or substantially all the assets of the
Company and its subsidiaries taken as a whole or the sale or disposition (whether
by amalgamation, consolidation or otherwise) of one or more subsidiaries of the
Company if substantially all of the assets of the Company and its subsidiaries
taken as a whole are held by such subsidiary or subsidiaries, except where such
sale, lease, transfer, exclusive license or other disposition is to a
wholly-owned subsidiary of the Company.

(d)        "Fair Market Value" means, in
respect of assets other than securities, their fair market value as determined
in good faith and on reasonable grounds by the Board of Directors and, if the
assets are securities:

(i)       
if traded on one or more securities exchanges or markets, the
weighted average of the closing prices of such securities on the exchange or
market on which the securities are primarily traded over the 30-day period
ending three days prior to the relevant date; or

(ii)      
if actively traded over-the-counter, the weighted average of the
closing bid or sale prices (whichever are applicable) over the 30-day period
ending three days prior to the relevant date; or

(iii)     
if there is no active public market, the fair market value of such
securities as determined in good faith by the Board of Directors;

provided that, if the securities to be valued are securities
issued by the Company, the principles set forth in paragraphs (i) and (ii) above
shall apply, except that no discount or premium is to be applied to valuation
of such securities on the basis of that they constitute a minority block or a
majority block of securities or for restricted liquidity or low negotiability.

(e)        "Fully-Diluted Basis" means, as
of any date of determination, all issued and outstanding Common shares and all
Common shares issuable upon the exercise or conversion of any outstanding
Convertible Securities or Options as of such date with respect to which the
aggregate of the price initially paid for such Convertible Securities or
Options and the exercise price for conversion of such Convertible Securities or
Options into Common shares is equal to or less than the Fair Market Value of
the Common shares at such time whether or not such Convertible Securities or
Options are at the time exercisable or convertible, and Common shares issuable
as a result thereof shall be deemed to have been issued and to form part of the
holdings of the person(s) entitled to receive such Common shares.

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(f)            
"Options" means
rights, options or warrants to subscribe for, purchase or otherwise acquire
Common shares or Convertible Securities.

(g)           
"Class A
Preferred Share Original Issue Price" means the amount per share that
each shareholder has paid to the Company for the Class A Preferred shares that
that shareholder holds, subject to appropriate adjustment in the event of any
share dividend, share split, combination or other similar recapitalization with
respect to the Class A Preferred shares.

(h)           
"Class A
Preferred Share Original Issue Date" means the date on which the first
Class A Preferred share was issued.

(2)          
Voting. On any matter presented to the shareholders of the Company for
their action or consideration at any meeting of shareholders of the Company (or
by written consent of shareholders in lieu of a meeting), each holder of
outstanding Class A Preferred shares is entitled to cast the number of votes
equal to the number of whole Common shares into which the Class A Preferred
shares held by the holder are convertible as of the record date for determining
shareholders entitled to vote on such matter. Except as provided by law or by
the other provisions of the Articles, holders of Class A Preferred shares shall
vote together with the holders of Common shares as a single class.

(3)          
Dividends. The Company shall not declare, pay or set
aside any dividends on shares of any other class of the Company unless (in
addition to the obtaining of any consents required elsewhere in the Articles)
the holders of the Class A Preferred shares then outstanding first receive, or
simultaneously receive, a pro rata dividend based on the number of Common
shares into which they are convertible.

(4)          
Dividends. The
holders of the Class A Preferred shares, in priority to the holders of Common
shares and any other class or series of shares ranking junior to the Class A
Preferred shares, shall be entitled to receive and the Company shall pay
thereon out of monies of the Company properly applicable to the payment of
dividends, cumulative cash dividends, or dividends payable as a PIK Dividend in
the circumstances set forth below, at the rate of eight percent (8%) of the
Class A Preferred Share Original Issue Price per share, per annum, accruing
(but not compounding) daily, payable only upon the liquidation, dissolution or
winding-up of the Company or, at any time prior to the liquidation, dissolution
or winding-up of the Company, payable if, as and when declared by the Board of
Directors. The Board of Directors shall deliver notice to each of the holders
of the Class A Preferred shares at least fourteen (14) days prior to any
declaration by the Board of Directors of the dividends provided to be paid
under this Section 27.3(4) if such dividends are to be declared by the Board of
Directors prior to the liquidation, dissolution or winding-up of the Company.
Each holder of Class A Preferred shares may, in its sole discretion, receive
all or any portion of the amount of the cumulative dividends payable hereunder
in the form of a whole number of further Class A Preferred shares ("PIK
Dividends"), to be issued at the Fair Market Value of
such Class A Preferred shares immediately prior to the date on which the
dividend is declared; provided that such holder has delivered an election to
receive all or a portion of such dividends in PIK Dividends, specifying the
amount of such dividends to be payable in PIK Dividends if less than all of
such dividends are to be payable in PIK Dividends, at least seven (7) days
prior to the date provided for declaration of the dividend Any amount of
dividends payable to a holder of Class A Preferred shares that has elected to
receive PIK Dividends that is less than a whole multiple of the then applicable
issuance price for such Class A Preferred shares shall be paid in cash. In the
event PIK Dividends are payable pursuant to a liquidation, dissolution or
winding-up of the Company or a Deemed Liquidation Event, the shares issuable as
PIK Dividends shall be deemed to have been issued immediately prior to such
liquidation, dissolution, winding-up or Deemed Liquidation Event.

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(5)          
Liquidation, Dissolution or Winding Up:
Certain Amalgamations, Consolidations and  Asset Sales. In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company or Deemed Liquidation Event, the holders of Class
A Preferred shares then outstanding are entitled to be paid out of the assets
of the Company available for distribution to its shareholders before any
payment shall be made to the holders of Class Seed Preferred shares or Common
shares, an amount per share equal to the greater of (i) the Class A Preferred
Share Original Issue Price, plus any dividends that have accrued or been
declared but remain unpaid thereon and (ii) the amount that would have been
paid to such holders as if their Class A Preferred shares had been converted to
Common shares under the Articles prior to such time. If upon any such
liquidation, dissolution or winding up of the Company or Deemed Liquidation
Event, the assets of the Company available for distribution to its shareholders
is insufficient to pay the holders of Class A Preferred shares the full amount
to which they are entitled under this Subsection 27.3(5), the holders of Class
A Preferred shares shall share rateably in any distribution of the assets
available for distribution in proportion to the respective amounts that would
otherwise be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such shares were paid
in full. The aggregate amount that a holder of Class A Preferred shares is
entitled to receive under Subsections 27.3(5) is referred to as the "Class
A Liquidation Amount."

(6)          
Conversion. The holders of the Class A Preferred shares
shall have the right to convert the Class A Preferred shares at the option of
the holder, at any time, into Common shares of the Company at the conversion
rate then in place. Any accrued or declared but unpaid dividends will also have
the right to be converted at the option of the holder.

(7)          
Conversion Ratio. Each Class A Preferred share may be converted, at the option of its
holder, at any time and from time to time, and without the payment of
additional consideration by its holder, into such number of fully paid and
non-assessable Common shares as is determined by dividing the Class A Preferred
Share Original Issue Price by the Class A Conversion Price (as defined below)
in effect at the time of conversion. The "Class A Conversion
Price" shall initially be US $3.15. The Class A Conversion Price will
be adjusted in accordance with the provisions set out in these articles.

(8)          
Deemed Issue of Additional Shares.

(a)        
If the Company at any time or from time to time after the Class A
Preferred Share Original Issue Date issues Options or Convertible Securities
(excluding Options or Convertible Securities that are themselves Exempted
Securities) or fixes a record date for the determination of holders of any
class of securities entitled to receive any such Options or Convertible Securities,
then the maximum number of Common shares (as set forth in the relating
instrument, assuming the satisfaction of any conditions to exercisability,
convertibility or exchangeability but without regard to any of its provisions
for a subsequent adjustment of such number) issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, will be deemed to be
Additional Shares issued as of the time of such issue or, in case such a record
date has been fixed, as of the close of business on such record date.

(b)        
If the terms of any Option or Convertible
Security, the issuance of which resulted in an adjustment to the Class A
Conversion Price under Subsection 27.3(9), are revised as a result of an
amendment to such terms or any other adjustment under such Option or
Convertible Security (but excluding automatic adjustments to such terms under
anti-dilution or similar provisions of such Option or Convertible Security) to
provide for either (1) any increase or decrease in the number of Common shares
issuable upon the exercise, conversion and/or exchange of the Option or
Convertible Security or (2) any increase or decrease in the consideration
payable to the Company upon such exercise,

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conversion
and/or exchange, then, effective upon such increase or decrease becoming
effective, the Class A Conversion Price computed upon the original issue of the
Option or Convertible Security (or upon the occurrence of a record date with
respect thereto) shall be readjusted to such Class A Conversion Price as would
have obtained had such revised terms been in effect upon the original date of
issuance of the Option or Convertible Security. Notwithstanding the foregoing,
no readjustment under this clause (b)
shall increase the Class A Conversion Price to an amount that
exceeds the lower of (i) the Class A Conversion Price in effect immediately
before the original adjustment made as a result of the issuance of the Option
or Convertible Security, or (ii) the Class A Conversion Price that would have
resulted from any issuances of Additional Shares (other than deemed issuances
of Additional Shares as a result of the issuance of the Option or Convertible
Security) between the original adjustment date and such readjustment date.

(c)        
If the terms of any Option or Convertible
Security (excluding Options or Convertible Securities that are themselves
Exempted Securities), the issuance of which did not result in an adjustment to
the Class A Conversion Price under Subsection 27.3(9) (either because the
consideration per share (determined under Subsection 27.3(10)) of the Additional
Shares subject thereto was equal to or greater than the Class A Conversion
Price then in effect, or because such Option or Convertible Security was issued
before the Class A Preferred Share Original Issue Date), are revised after the
Class A Preferred Share Original Issue Date as a result of an amendment to such
terms or any other adjustment under such Option or Convertible Security (but
excluding automatic adjustments to such terms under antidilution or similar
provisions of the Option or Convertible Security) to provide for either (1) any
increase in the number of Common shares issuable upon the exercise, conversion
or exchange of the Option or Convertible Security or (2) any decrease in the
consideration payable to the Company upon such exercise, conversion or
exchange, then such Option or Convertible Security, as so amended or adjusted,
and the Additional Shares subject thereto (determined in the manner provided in
Subsection 27.3(8)(a)) will be deemed to have been issued effective upon such
increase or decrease becoming effective.

(d)        
Upon the expiration or termination of any unexercised Option or
unconverted or unexchanged Convertible Security (or portion thereof) that
resulted (either upon its original issuance or upon a revision of its terms) in
an adjustment to the Class A Conversion Price under Subsection 27.3(9), the
Class A Conversion Price shall be readjusted to such Class A Conversion Price
as would have obtained had such Option or Convertible Security (or portion
thereof) never been issued.

(e)        
If the number of Common shares issuable upon
the exercise, conversion and/or exchange of any Option or Convertible Security,
or the consideration payable to the Company upon such exercise, conversion
and/or exchange, is calculable at the time the Option or Convertible Security
is issued or amended but is subject to adjustment based upon subsequent events,
any adjustment to the Class A Conversion Price under this Subsection 27.3(8)
shall be effected at the time of such issuance or amendment based on such
number of shares or amount of consideration without regard to any provisions
for subsequent adjustments (and any subsequent adjustments shall be treated as
provided in clauses (b) and (c) of this Subsection 27.3(8)). If the number of
Common shares issuable upon the exercise, conversion and/or exchange of any
Option or Convertible Security, or the consideration payable to the Company upon
such exercise, conversion and/or exchange, cannot be calculated at all at the
time the Option or Convertible Security is issued or amended, any adjustment to
the Class A Conversion Price that would result under this Subsection 27.3(8) at
the time of such issuance or amendment shall instead be effected at the time
such number of shares and/or amount of

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consideration is first calculable
(even if subject to subsequent adjustments), assuming for purposes of
calculating such adjustment to the Class A Conversion Price that such issuance or amendment took place at the time
such calculation can first be made.

(9)        Adjustment
of Class A Conversion Price Upon Issuance of Additional Shares. If the
Company, at any time after the Class A Preferred Share Original Issue Date,
issues Additional Shares, without consideration or for a consideration per
share, in the case of Convertible Securities or Options where the effective
"all in" conversion price or exercise price payable to result in the
issuance of Common shares to the holder is, less than the applicable Class A
Conversion Price in effect immediately before such issue, then the Class A
Conversion Price shall be reduced, concurrently with such issue, by multiplying
it by a fraction:

(a)    the numerator of which is the sum
of:

(i)       
the number of Common shares outstanding immediately prior to such
issuance; and

(ii)      
the number of Common shares that the aggregate consideration in
respect of such issuance would have purchased at a price equal to the Class A
Conversion Price in effect immediately prior to such issuance; and

(b)    the denominator of which is the
sum of:

(i)        the number
of Common shares outstanding immediately prior to such issuance; and

(ii)       the
number of additional Common shares actually issued and issuable upon the
conversion, exchange or exercise of the new Convertible Securities;

provided that if such issuance or deemed issuance was without consideration,
then the Company will be deemed to have received an aggregate of $.001 of
consideration for all such Additional Shares issued or deemed to be issued. For
purposes of the above calculation, the number of Common shares outstanding
immediately prior to such issuance is calculated on a Fully-Diluted Basis, as
if all Convertible Securities and Options outstanding prior to such issuance
had been fully converted, exercised or exchanged for Common shares immediately
prior to such issuance. For greater certainty, the applicable Class A Conversion
Price of each series shall be adjusted as provided above only to the extent
required under this Section 27.3(9).

(10)        Determination of
Consideration. The consideration received by the Company for the issue of
any Additional Shares shall be computed as follows:

(a)      Cash and Property: Such consideration shall:

(i)         
if it consists of cash, be computed at the
aggregate amount of cash received by the Company, excluding amounts paid or
payable for accrued interest;

(ii)        
if it consists of property other than cash, be computed at its
fair market value at the time of such issue, as determined in good faith by the
Company's board of directors; and

(iii)       
if Additional Shares are issued together with other shares or
securities or other assets of the Company for consideration that covers both,
be the proportion of such consideration so received, computed as provided in
clauses (i) and (ii) above, as determined in good faith by the Company's board
of directors.

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(b)        Options and Convertible Securities. The
consideration per share received by the Company for Additional Shares
deemed to have been issued relating to Options and Convertible Securities,
shall be determined by dividing:

The total amount, if any, received or receivable by the Company as
consideration for the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set forth in the
relating instruments, without regard to any of its provision for a subsequent
adjustment of such consideration) payable to the Company upon the exercise of
the Options or the conversion or exchange of the Convertible Securities, or in
the case of Options for Convertible Securities, the exercise of the Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities, by the maximum number of Common shares (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities.

(11)       
Multiple Closing Dates. If the Company issues on more than
one date Additional Shares that are a part of one transaction or a series of
related transactions and that would result in an adjustment to the Class A
Conversion Price under Subsection 27.3(9), and such issuance dates occur within
a period of no more than 90 days from the first such issuance to the final such
issuance, then, upon the final such issuance, the Class A Conversion Price
shall be readjusted to give effect to all such issuances as if they occurred on
the date of the first such issuance (and without giving effect to any
additional adjustments as a result of any such subsequent issuances within such
period).

(12)       
Adjustment for Share Splits and Combinations. If the
Company, at any time or from time to time after the Class A Preferred Share
Original Issue Date, subdivides the outstanding Common shares, the Class A
Conversion Price in effect immediately before the subdivision shall be
proportionately decreased so that the number of Common shares issuable on
conversion of each share of such class be increased in proportion to such
increase in the aggregate number of Common shares outstanding. If the Company,
at any time or from time to time after the Class A Preferred Share Original
Issue Date, combines the outstanding Common shares, the Class A Conversion
Price in effect immediately before the combination shall be proportionately
increased so that the number of Common shares issuable on conversion of each
share of such class be decreased in proportion to such decrease in the
aggregate number of Common shares outstanding. Any adjustment under this
subsection shall become effective at the close of business on the date the
subdivision or combination becomes effective.

(13)       
Adjustment for Certain Dividends and Distributions. If the
Company, at any time or from time to time after the Class A Preferred Share
Original Issue Date, makes or issues, or fixes a record date for the
determination of holders of Common shares entitled to receive, a dividend or
other distribution payable on the Common shares in additional Common shares,
then and in each such event the Class A Conversion Price in effect immediately
before such event shall be decreased as of the time of such issuance or, in the
event such a record date is fixed, as of the close of business on such record
date, by multiplying the Class A Conversion Price then in effect by a fraction:

(a)        the numerator of which is the total number
of Common shares issued and outstanding immediately before the time of such issuance or the
close of business on such record date, and

Execution
copy

(b)       the
denominator of which is the total number of Common shares issued and
outstanding immediately before the time of such issuance or the close of
business on such record date plus the number of Common shares issuable in
payment of such dividend or distribution.

Notwithstanding
the foregoing (a) if such record date is fixed and such dividend is not fully
paid or if such distribution is not fully made on the date fixed therefor, the
Class A Conversion Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Class A Conversion Price shall
be adjusted under this subsection as of the time of actual payment of such
dividends or distributions; and (b) no such adjustment shall be made if the
holders of Class A Preferred shares simultaneously receive a dividend or other
distribution of Common shares in a number equal to the number of Common shares
as they would have received if all outstanding Class A Preferred shares had
been converted into Common shares on the date of such event.

(14)       
Adjustments for Other Dividends and Distributions. If the
Company, at any time or from time to time after the Class A Preferred Share
Original Issue Date, makes or issues, or fixes a record date for the
determination of holders of Common shares entitled to receive, a dividend or other
distribution payable in securities of the Company (other than a distribution of
Common shares in respect of outstanding Common shares) or in other property,
then and in each such event the holders of Class A Preferred shares shall
receive, simultaneously with the distribution to the holders of Common shares,
a dividend or other distribution of such securities or other property in an
amount equal to the amount of such securities or other property as they would
have received if all outstanding Class A Preferred shares had been converted
into Common shares on the date of such event.

(15)       
Adjustment for Amalgamation or
Reorganization etc. Subject to Subsection 27.3(5), if any
reorganization, recapitalization, reclassification, consolidation or
amalgamation occurs involving the Company in which the Common shares (but not
the Class A Preferred shares) is converted into or exchanged for securities,
cash or other property (other than a transaction covered by Subsections
27.3(8), 27.3(9), 27.3(11), 27.3(12), 27.3(13) or 27.3(14)) then, following any
such reorganization, recapitalization, reclassification, consolidation or
amalgamation, each Class A Preferred share shall be convertible in lieu of the
Common shares into which it was convertible before such event into the kind and
amount of securities, cash or other property that a holder of the number of
Common shares of the Company issuable upon conversion of one Class A Preferred
share immediately before such reorganization, recapitalization,
reclassification, consolidation or amalgamation would have been entitled to
receive under such transaction; and, in such case, appropriate adjustment (as
determined in good faith by the Company's board of directors) shall be made in
the application of this Section 27.3 with respect to the rights and interests
of the holders of Class A Preferred shares respecting conversion rights, to the
end that the conversion rights in this Section 27.3 (including provisions with
respect to changes in and other adjustments of the Class A Conversion Price)
shall be applicable, as nearly as reasonably may be, in relation to any
securities or other property deliverable upon the conversion of the Class A
Preferred shares.

(16)       
Mandatory Conversion.

(a)       Trigger Events. Upon either (a) the closing of the
sale of Common shares to the public in a firm-commitment underwritten public
offering under an effective registration statement under the Securities Act
of 1933, as amended, and/or a prospectus filed with a securities commission
or authority in any of the provinces or territories of Canada at a per-share
price equal to at least three (3) times the then-applicable Class A Conversion
Price producing gross proceeds to the Company from the issue of Common shares
of at least US$50 million, or (b) the date and time, or the occurrence of an
event, specified by

Execution copy

vote or
written consent of the holders of at least 50% of the then outstanding Class A
Preferred shares (the time of such closing or the date and time specified or
the time of the event specified in such vote or written consent is referred to
herein as the "Mandatory Conversion Time"),

(b)         Procedural Requirements. All holders of record of
Class A Preferred shares shall be sent written notice of the Mandatory
Conversion Time and the place designated for mandatory conversion of all such
Class A Preferred shares under this Subsection 27.3(16). Such notice need not
be sent in advance of the occurrence of the Mandatory Conversion Time. Upon
receipt of such notice, each holder of Class A Preferred shares in certificated
form shall surrender his, her or its certificate or certificates for all such
shares (or, if such holder alleges that such certificate has been lost, stolen
or destroyed, a lost certificate affidavit and agreement reasonably acceptable
to the Company to indemnify the Company against any claim that may be made
against the Company on account of the alleged loss, theft or destruction of
such certificate) to the Company at the place designated in such notice. If so
required by the Company, any certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Company, duly signed by the registered holder or by
his, her or its attorney duly authorized in writing. All rights with respect to
the Class A Preferred shares converted under Subsection 27.3(16)(a), including
the rights, if any, to receive notices and vote (other than as a holder of
Common shares), will terminate at the Mandatory Conversion Time (notwithstanding
the failure of their holder or holders to surrender any certificates at or
before such time), except only the rights of the holders thereof, upon
surrender of any certificate or certificates of such holders (or lost
certificate affidavit and agreement) therefor, to receive the items provided
for in the next sentence of this subsection. As soon as practicable after the
Mandatory Conversion Time and, if applicable, the surrender of any certificate
or certificates (or lost certificate affidavit and agreement) for Class A
Preferred shares, the Company shall (a) issue and deliver to their holder, or
to his, her or its nominees, a certificate or certificates for the number of
full Common shares issuable on such conversion in accordance with these
provisions and (b) pay cash in lieu of the payment of any dividends that have
accrued or been declared by remain unpaid on the Class A Preferred shares
converted.

(17)        Redemption.
Unless prohibited by law, the Class A Preferred shares shall be redeemed by the
Company at a price equal to the Class A Preferred Share Original Issue Price
per share, plus all dividends that have accrued but have not yet been declared
and any dividends declared but are unpaid (the "Redemption
Price"), in three equal annual installments (with the unpaid dividends
paid as part of the third installment) commencing not more than 60 days after
receipt by the Company at any time on or after the fifth anniversary of the
Class A Preferred Share Original Issue Date from the holders of at least 50% of
the then outstanding Class A Preferred shares, of written notice requesting
redemption of all Class A Preferred shares (the "Redemption
Request"). Upon receipt of a Redemption Request, the Company shall
apply all of its assets to any such redemption, and to no other corporate
purpose, except to the extent prohibited by law governing distributions to
shareholders. The date of each such installment is referred to as a "Redemption
Date." On each Redemption Date, the Company shall redeem, on a pro
rata basis in accordance with the number of Class A Preferred shares owned by
each holder, that number of outstanding Class A Preferred shares determined by
dividing (a) the total number of Class A Preferred shares outstanding
immediately before such Redemption Date by (b) the number of remaining
Redemption Dates (including the Redemption Date to which such calculation
applies); provided, however, that Excluded Shares (as defined in Section
27.3(18)) shall not be redeemed and shall be excluded from the calculations set
forth in this sentence. If on any Redemption Date the Company is prevented by
law from redeeming all Class A 'Preferred shares to be redeemed, the Company
shall rateably redeem the maximum number of shares that it may redeem

Execution
copy

consistent with law, and shall
redeem the remaining shares as soon as it may lawfully do so under law.

(18)        Redemption Notice.
The Company shall send written notice of the redemption (the "Redemption Notice") to each
holder of record of Class A Preferred shares not less than 40 days before each
Redemption Date. Each Redemption Notice shall state:

(a)      
the number of Class A Preferred shares held by the holder that the
Company will redeem on the Redemption Date specified in the Redemption Notice;

(b)      
the Redemption Date and the Redemption Price;

(c)      
the date upon which the holder's right to
convert such shares terminates; and

(d)      
for holders of shares in certificated form, that the holder is to
surrender to the Company, in the manner and at the place designated, his, her
or its certificate or certificates representing the Class A Preferred shares to
be redeemed.

On or prior to the date that is 20
days before the first such Redemption Date any holder of Class A Preferred
shares may elect, in its sole discretion, by notice in writing to the Company,
to have all or part of the Class A Preferred shares held by it excluded from
the redemptions provided for in Section 27.3(18) (herein referred to as "Excluded Shares"), and any
such shares shall not be redeemed on such Redemption Date or on any subsequent
Redemption Date but shall continue to be outstanding following such Redemption
Date with all of the rights, terms and conditions provided herein, other than
the right to deliver a Redemption Request and to require redemption of such
shares as provided in Section 27.3(18).

(19)        Surrender of
Certificates; Payment. On or before the applicable Redemption Date, each
holder of Class A Preferred shares to be redeemed on such Redemption Date,
unless such holder has exercised his, her or its right to convert such shares,
shall, if a holder of shares in certificated form, surrender the certificate or
certificates representing such shares (or, if such registered holder alleges
that such certificate has been lost, stolen or destroyed, a lost certificate
affidavit and agreement reasonably acceptable to the Company to indemnify the
Company against any claim that may be made against the Company on account of
the alleged loss, theft or destruction of such certificate) to the Company, in
the manner and at the place designated in the Redemption Notice, and thereupon
the Redemption Price for such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as its owner. If
less than all of the Class A Preferred shares represented by a certificate are
redeemed, a new certificate, instrument, or book entry representing the
unredeemed Class A Preferred shares shall promptly be issued to such holder.

(20)        Rights Subsequent to
Redemption. If the Redemption Notice is duly given, and if on the
applicable Redemption Date the Redemption Price payable upon 'redemption of the
Class A Preferred shares to be redeemed on such Redemption Date is paid or
tendered for payment or deposited with an independent payment agent so as to be
available therefor in a timely manner, then notwithstanding that any
certificates evidencing any of the Class A Preferred shares so called for
redemption has not been surrendered, dividends with respect to such Class A
Preferred shares shall cease to accrue after such Redemption Date and all
rights with respect to such shares shall immediately after the Redemption Date
terminate, except only the right of the holders to receive the Redemption Price
without interest upon surrender of any such certificate or certificates therefor.

(21)        Waiver.
Any of the rights, powers, preferences and other terms of the Class A Preferred
shares may be waived on behalf of all holders of Class A Preferred shares by
the affirmative

Execution copy

written consent or vote of the holders of at least 50% of the
Class A Preferred shares then outstanding.

(22)          Notices. Any notice required or permitted by
these provisions to be given to a holder of Class A Preferred shares shall be mailed, postage prepaid, to the
post office address last shown on the records of the Company, or given by
electronic communication, and will be deemed sent upon such mailing or
electronic transmission.

EXHIBIT C 

DISCLOSURE SCHEDULE

 

(see
attached)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT A 

DISCLOSURE SCHEDULE

This Schedule of
Exceptions is made and given pursuant to Section 2 of the Class A
Preferred Share Purchase Agreement, dated as of January 13, 2020 (the "Agreement"),
between Soluna Technologies, Ltd (the "Corporation") and the Purchasers
listed on Schedule A thereto. All capitalized terms used but not defined herein
shall have the meanings as defined in the Agreement, unless otherwise provided.
The section numbers below correspond to the section numbers of the
representations and warranties in the Agreement; provided, however, that any
information disclosed under any section number is deemed to be disclosed and
incorporated into any other section number under the Agreement where such
disclosure would be appropriate and such appropriateness is reasonably apparent
from the face of such disclosure. Nothing in this Schedule of Exceptions is
intended to broaden the scope of any representation or warranty contained in
the Agreement or to create any covenant. Inclusion of any item in this Schedule
of Exceptions (1) does not represent a determination that such item is material
or establish a standard of materiality, (2) does not represent a determination
that such item did not arise in the ordinary course of business, (3) does not
represent a determination that the transactions contemplated by the Agreement
require the consent of third parties, and (4) shall not constitute, or be
deemed to be, an admission to any third party concerning such item. This
Schedule of Exceptions includes brief descriptions or summaries of certain
agreements and instruments, copies of which are available upon reasonable
request. Such descriptions do not purport to be comprehensive, and are
qualified in their entirety by reference to the text of the documents
described, true and complete copies of which have been provided to the Purchasers
or their respective counsel.

2.2
Capitalization. The following table assumes completion of the initial closing
of the Class A Preferred Share financing.

	
  Shareholder

  	
  Class

  	
  Share Count

  	
  Warrants

  	
   

  	
  Fully Diluted

 to Common

  	
  Pro-Rata
	

	Interest

  
	
  Soluna
  Technologies 

	Investment I, LLC

  	
  Common

  	
  7,900,000

  	
  -

  	
   

  	
  7,900,000

  	
  62.5%

  
	
  John
  Belizaire

  	
  Common

  	
  739,085

  	
  -

  	
   

  	
  739,085

  	
  5.8%

  
	
  John
  Belizaire IRA

  	
  Common

  	
  328,482

  	
  -

  	
   

  	
  328,482

  	
  2.6%

  
	
  Dipul Patel

  	
  Common

  	
  594,788

  	
  -

  	
   

  	
  594,788

  	
  4.7%

  
	
  Dipul Patel
  IRA

  	
  Common

  	
  45,753

  	
  -

  	
   

  	
  45,753

  	
  0.4%

  
	
  Employee
  Stock Pool

  	
  Common

  	
  1,067,568

  	
  -

  	
   

  	
  1,067,568

  	
  8.4%

  
	
  Tera Joule
  LLC

  	
  Series Seed

  	
  965,945

  	
  330,000

  	
   

  	
  1,098,258

  	
  8.7%

  
	
  MJT Park

  	
  Series Seed

  	
  479,437

  	
  -

  	
   

  	
  406,303

  	
  3.2%

  
	
  Phillip Ng

  	
  Series Seed

  	
  15,767

  	
  -

  	
   

  	
  13,362

  	
  0.1%

  
	
  Phillip Ng

  	
  Series Seed

  	
  41,588

  	
  -

  	
   

  	
  35,244

  	
  0.3%

  
	
  John
  Belizaire

  	
  Series Seed

  	
  102,380

  	
  -

  	
   

  	
  86,762

  	
  0.7%

  
	
  Dipul Patel

  	
  Series Seed

  	
  48,255

  	
  -

  	
   

  	
  40,894

  	
  0.3%

  
	
  Ashley
  Capuzzi

  	
  Series Seed

  	
  49,768

  	
  -

  	
   

  	
  42,176

  	
  0.3%

  
	
  Mohammed-Larbi
  Loudiyi

  	
  Series Seed

  	
  77,638

  	
  -

  	
   

  	
  65,795

  	
  0.5%

  
	
  Sanjeev
  Kumar

  	
  Series Seed

  	
  14,220

  	
  -

  	
   

  	
  12,050

  	
  0.1%

  
	
  Mechanical
  Technology 

	Incorporated

  	
  Series A

  	
  158,730

  	
  -

  	
   

  	
  158,730

  	
  1.3%

  
	
  Total 
  	
   
	
   -
	
  -
	
   
	
  12,635,251
	
  100.0%

Note: Series Seed shares convert to common at a ratio of 0.84745760
common shares per series seed share. Warrants held by Series Seed Preferred
Shareholders are exercisable to obtain Series Seed Preferred Shares, upon
payment of US$ 2 per Series Seed share.

 

 

 

 

(c)(i)

	
  Stockholder

  	
  Common

  
	
  Soluna Technologies Investment I, LLC

  	
  7,900,000

  
	
  John Belizaire

  	
  739,085

  
	
  John Belizaire IRA

  	
  328,482

  
	
  Dipul Patel

  	
  594,788

  
	
  Dipul Patel IRA

  	
  45,753

  

For vesting rights and
repurchase price of the following restricted shares, please see the relevant restricted
stock unit agreements:

Soluna Technologies
Ltd. - Restricted Share Agreement (Belizaire signed).pdf dated 7 June 2018

Soluna Technologies
Ltd. - Restricted Share Agreement (Patel) FULLY signed.pdf dated 7 June 2018

(b)(ii)

	
   

  	
  Vesting
  Term

  	
  Option

  	
  Grant

  	
  Vesting

  	
  Option

  	
  Price
  /

  
	
  Name

  	
  Months

  	
  Type

  	
  Date

  	
  Start

  	
  Granted

  	
  Share

  
	
  Sanjeev Kumar

  	
  30

  	
  Advisory Stock

	Options

  	
  9/12/2018

  	
  9/1/2018

  	
  24,573

  	
  $0.06

  
	
  Ari Juels

  	
  30

  	
  Advisory Stock

	Options

  	
  10/23/2018

  	
  9/1/2018

  	
  24,573

  	
  $0.06

  
	
  Timo Hanke

  	
  30

  	
  Advisory Stock

	Options

  	
  10/30/2018

  	
  9/1/2018

  	
  24,573

  	
  $0.06

  
	
  Dwight Bush

  	
  30

  	
  Advisory Stock

	Options

  	
  10/30/2018

  	
  9/1/2018

  	
  73,719

  	
  $0.06

  

 

(c)(iii)

920,130 Common Shares, net
of advisory stock presented in 2.2 b(ii)

 

 

(c)(iv)

The following
table assumes completion of the initial closing of the Class A Preferred Share
financing.

	
  Stockholder

  	
  Series Seed

  	
  Series A

  
	
  Tera Joule
  LLC

  	
  965,945

  	
  -

  
	
  MJT Park

  	
  479,437

  	
  -

  
	
  Phillip Ng

  	
  15,767

  	
  -

  
	
  Phillip Ng

  	
  41,588

  	
  -

  
	
  John Belizaire

  	
  102,380

  	
  -

  
	
  Dipul Patel

  	
  48,255

  	
  -

  
	
  Ashley Capuzzi

  	
  49,768

  	
  -

  
	
  Mohammed-Larbi Loudiyi

  	
  77,638

  	
  -

  
	
  Sanjeev Kumar

  	
  14,220

  	
  -

  
	
  Mechanical
  Technology, Incorporated

  	
  -

  	
  158,730

  

Note: Series Seed shares convert to common at
a ratio of 0.84745760 common shares per series seed share.

(c)(v)

The following
table assumes completion of the initial closing of the Class A Preferred Share
financing.

	
  Warrants

  	
  Series Seed

  	
  Series A

  
	
  Tera Joule LLC issued in connection with the Series Seed Preferred
  Share Offering

  	
  330,000

  	
  -      

  

Note: Series
Seed shares convert to common at a ratio of 0.84745760 common shares per series
seed share. Warrants held by Series Seed Preferred Shareholders are exercisable
to obtain Series Seed Preferred Shares, upon payment of US$ 2.00 per seed
share.

 

2.3 Subsidiaries

	
	Soluna Services, LLC

	
	
	Soluna Holdings Limited

	
	
	Brookstone Partners Acquisition XXV, LLC
	(Wholly
owned by Soluna Holdings Limited)

	
	AM Wind SARL
	(Wholly owned by Brookstone
Partners Acquisition XXV, LLC)

	
	AMW P1 SARL
	(99.25% owned by AM Wind SARL)

	
	Soluna Token OpCo Limited
	(Wholly owned by
Soluna Holdings Limited)

2.7 Litigation

Omar Belmamoun ("OB"), previously CEO of
Brookstone Partners Morocco ("BPM") and

Platinum Power ("PP"), is currently
pursuing litigation concerning A.M Wind (a Soluna subsidiary) against key
employee Mohammed-Larbi Loudiyi ("LL"), and Michael Toporek ("MT") General
Managing Partner of the private equity firm Brookstone Partners1
("BP"). Soluna and its subsidiaries are not parties to that litigation.

This litigation is a consequence to prior
litigation. Initially, BP initiated actions against OB to remove him as CEO of
BPM and PP for performance issues, misleading investors, and documented fraud.

In response, OB filed a claim alleging
criminal acts against LL in an effort to induce BP to drop its actions against
him. In September 2019, OB filed the claim with the Prosecutor's Office of
Casablanca against LL. After a detailed investigation by the judiciary police,
the prosecutor chose not to pursue any charges. OB subsequently refiled this
same claim with the courts in Rabat and introduced a subpoena again LL. A
hearing is set for February 3, 2020. Soluna believes that this claim is
baseless.

OB has alleged that PP held an option to
purchase A.M Wind SARL (the company containing the rights to the development of
Soluna's wind project) from its owner, Altus AG ("Altus"). By implication, OB
believes Altus should not have sold A.M Wind to Brookstone Partners XXV (a
current Soluna subsidiary) in June of 2018.

Soluna has received legal opinions from
the legal counsel of Altus A.G. (the seller of A.M Wind) and from its own
Moroccan advisory firm, Afrique Advisors, who have both confirmed that the
criminal claims are baseless, and further that:

(1)  A BP affiliate
(Brookstone Partners International LLC) received an exclusivity right to
acquire 70% of A.M Wind SARL in April 2012.

(2)  OB has claimed that
this right was legally assigned to PP.

(3)  Under German
(governing) law, such an assignment would have required the consent of Altus.
Altus and A.M Wind SARL have confirmed in writing that no such consent was
sought or granted, making any claim by OB invalid.

(4)  As such, PP never had
a valid option to purchase A.M Wind SARL.

(5)  If PP did have a valid
option, such option would have expired in August 2014 according to the
agreements signed by the Brookstone Partners affiliate and Altus. Furthermore,
no notice from PP, OB or any Brookstone affiliate to execute or extend the term
of the purchase right was sent to or agreed upon by Altus. Altus and A.M Wind
SARL have confirmed in writing that the option was neither exercised nor
extended beyond its expiration date.

Thus, when Altus agreed to sell A.M Wind SARL to BP in June 2018,
no option held by PP was circumvented.

_________________________

1 Note: BP has ownership of Soluna through its interest in Soluna
Technologies Investment I, LLC and MJT Park Investors Inc and is distinct from
Brookstone Partners Acquisition XXV, LLC which is wholly owned by Soluna
Technologies Ltd.)

2.9 Compliance with Other Instruments

Soluna currently has outstanding payables
to third-party contractors in an aggregate amount of approximately US$ 875,000.
These payables are owed to service providers for i) development of Soluna's
Moroccan wind site, ii) administration of Soluna's corporate legal, tax, and
accounting, and iii) Soluna's marketing efforts. Soluna is in arrears in
substantially all of these payables. Each of these payable has an associated
contract, and Soluna is in violation or default of each of the contracts in
which its payments are in arrears. Soluna is undertaking a process of
restructuring these payables. Soluna intends to meet the obligations remaining
after that restructuring through a combination of Series A capital and
Development Capital to be raised by development partners at the AMWind SPV/
Project level. Certain details relating those these payables are enumerated in
2.10 (a) i.

Soluna has current employee wages payable
and unreimbursed employee expense of approximately US$ 564,551 which is past
due. Employees have agreed to defer portions of this salary to preserve the
ability of Soluna to act as a going concern. Soluna intends to pay this
obligation soon as practicable, including out of capital raised in this Series
A. In addition, Soluna has a non-current obligation for employee payables as
outlined in 2.10(a) v.

Brookstone Partners Acquisition XXV, LLC
is obligated to an ‘advance development Payment’ of EUR 200,000 within two
weeks of June 20, 2019. This payment is currently past due, and the Corporation
is in negotiation to restructure this payment.

2.10

(a)

i.     As referenced in section 2.9,
Soluna currently has outstanding payables to third-party contractors in an
aggregate amount of approximately US$ 875,000. Certain transaction negotiations
are ongoing and enumerated below:

o   Soluna has an
accrued payable of US$ 210,937 related to legal fees from DLA Piper. This is as
a result of a re-invoicing from MJT Park Inc (Soluna's obligation is to MJT
Park Inc.), who signed the engagement letter with DLA Piper. Currently,
Brookstone Partners and DLA Piper are in a fee dispute relating to an unrelated
legal engagement and the Soluna liability is suspended pending resolution
between these two parties. Brookstone Partners intends to negotiate a onetime
payment at a discounted price.

o   Soluna has an accrued payable with
Fieldstone of US$ 206,709 for retainer of investment banking services.
Fieldstone has agreed to defer these fees until financial close of phase one of
the A.M Wind site. These fees will be netted against an investment banking
success fee that will be payable to Fieldstone.

o   Soluna has an accrued
payable of US$ 150,000 with Dwight L Bush and an accrued payable of US$ 127,384
with Afrique Advisors S.A.R.L for efforts related to Moroccan lobbying efforts.
Soluna is in the process of restructuring these

payments. (Note: Soluna also has
received services from these two contractors for which it has not yet received
an invoice, which is estimated at US$ 150,000 that is not reflected in these
amounts.)

The above amounts represent approximately
US$ 695,000, excluding the amount not yet invoiced and referred to above,
eighty percent of Soluna's accrued third-party liabilities.

ii.       Mechanical
Technology Incorporated ("MKTY"), a subscriber under the Class A Preferred
Share offering, has engaged Soluna to source, develop and operate a
cryptocurrency mining operation to be owned by MKTY or its affiliates. Soluna
and MKTY have entered into a Development Agreement dated January 9, 2020 for
the sourcing and design of this site, and an Operations and Management
Agreement dated January 9, 2020 relating to the ongoing operations of that
mine.

iii.       MJT Park Investors
Inc., a Brookstone Partners affiliate, has loaned Soluna US$ 912,238. This
amount is expected to be reflected in a promissory note.

iv.       Pursuant to the share
purchase agreement dated June 20, 2018, between Altus AG, AICM SARL and
Brookstone Partners Acquisition XXV, LLC:

o   Brookstone Partners Acquisition XXV, LLC
is obligated to make an '
advance development Payment' of EUR 200,000 within two
weeks of June 20, 2019. This payment is currently past due, and the Corporation
is in discussions to restructure this payment.

o   Brookstone Partners Acquisition XXV, LLC
is obligated to make '
development payments' of EUR 38,000 per megawatt of wind placed
into service in its Dakhla site up to 100 MW for a total of EUR 3,800,000.

o   Brookstone Partners Acquisition XXV, LLC
is obligated to '
success payments of EUR 10,000 per megawatt of wind placed
into service in its Dakhla site between 300 MW to 700 MW for a total of EUR
4,000,000.

v.       Soluna has a recorded a balance
US$ 623,419 of deferred compensation principally for executives Dipul Patel,
and John Belizaire. This is amount is not payable until July 2020 or Financial Close of Phase One of the Morocco Wind Project,
whichever is later.

2.11

(b)

See note on current
deferred employee payable in 2.9.

See note on MKTY
cryptocurrency mining operation in 2.10(a) ii.

See note on non-current
deferred employee payable in 2.10(a) v.

2.16

Since the payments referred to in Section
2.11(b) are due but have not yet been paid, the Corporation has also not withheld
and remitted to any governmental sources the amounts required to be withheld
and remitted with respect to those payments to employees.

(c)

See note on current
deferred employee payable in 2.9.

See note on non-current
deferred employee payable in 2.10(a) v.

2.17

Soluna and certain of its subsidiaries
filed their US returns late for the year Dec 31, 2018 tax year. To date, Soluna
has received no notice of penalties for such late filling.

2.19

The below sets for the permit status for each permit for Soluna's
900 MW windfarm located in the region of Dakhla-Oued Ed-Dahab, in the Southern
Provinces of the Kingdom of Morocco, also known as the Western Sahara. To the
best of the Company's knowledge, this list does not lack any permit which could
reasonably be expected to have a Material Adverse Effect.

	
  Permit

  	
  Status

  	
  Notes

  	
  Related Document

  
	
  Regional Investment Committee

  	
  Approved 

  	
  The project was approved by the regional investment committee on
  March 9 2018

  	
  6.2 Land - Regional Approval.pdf

  
	
  Environmental 

  Impact Study

  	
  Approved

  	
  The project was approved by Moroccan
  environmental standards in 2011. The project is currently undergoing an
  update of the standards of the International Finance Corporation.

  	
  None

  
	
  Framework Investment Agreement

  	
  Ongoing

  	
  Verbal approval and clearance by the Moroccan investment committee.  On 17
  October 2019 the secretariat of the commission was asked to organize a
  drafting committee to finalize the drafting of the articles.

  	
  None

  

 

	
  Land Lease Agreement

  	
  Pending

  	
  Pending authorization of
  the Framework Investment Agreement

  	
  None

  
	
  Building Permits

  	
  Pending

  	
  Pending authorization of
  the Framework Investment Agreement

  	
  None

  
	
  Ministry of Energy Authorization

  	
  Approved 

  	
  The project was approved by the ministry of energy on 20
  September 2019.

  	
  6.1.2 AM WIND Energy License_French.pdf

  

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT D 

FORM OF INDEMNIFICATION AGREEMENT

 

(see
attached)

 

 

 

 

 

 

 

 

 

 

 

 

INDEMNIFICATION AGREEMENT

This INDEMNIFICATION
AGREEMENT, effective as of the 9th day of January, 2020, by and between Soluna
Technologies, Ltd. a British Columbia limited liability corporation
(together with its affiliates referred to in Paragraph A below, (the "Company"),
having its principal offices at 232 Madison Avenue, suite 600,
New York, NY 10016, and                       , an individual residing
at                                                                (the
"Indemnified Representative").

RECITALS

A.               
The
Indemnified Representative is willing to serve as a member of the Board of Directors
of the Company or, at the request of the Company, as a member of the Board of
Directors, or in a similar capacity, for certain affiliates of the Company and,
in so doing, is and will be performing a valuable service to or on behalf of
the Company, all in accordance with the terms of a certain Amended and Restated
Shareholders Agreement of even date herewith by and between the Company and all
the shareholders of the Company (the "Shareholders Agreement"); and

B.                
As an inducement to
the Indemnified Representative to so serve the Company, and in consideration
for such service, the Company has agreed to indemnify the Indemnified
Representative upon the terms set forth herein.

NOW, THEREFORE, in consideration of the
promises and mutual covenants contained herein, and intending to be legally
bound hereby, the Company and the Indemnified Representative agree as follows.

1.                 
Agreement to Serve. The Indemnified Representative agrees to
serve or continue to serve for or on behalf of the Company in each Official
Capacity (as hereinafter defined) held now or in the future for so long as the Indemnified
Representative is acting, or until such time as the Indemnified Representative
resigns in writing or is removed. The foregoing notwithstanding, this Agreement
shall continue in full force and effect after the Indemnified Representative
has ceased to serve in any Official Capacity for or on behalf of the Company
and until such time as all applicable statutes of limitation have expired, and
where no such stature is applicable, then for a period of not less than two (2)
years following the expiration or termination of the Official Capacity, except
and unless any outstanding liability insurance taken to protect persons serving
the Company shall provide coverage for any greater period for acts or omissions
during the employment period, in which case, then for such greater period.

2.                 
Indemnification.

(a)        The
Company shall indemnify the Indemnified Representative to the fullest extent
permitted by the Business Corporations Act (British Columbia) ("BCBCA"),
as amended from time to time, but only as amended in a manner more favorable to
the Indemnified Representative. Without limitation or derogation of the
foregoing, the Indemnified Representative shall have the rights specified in
this Agreement.

1

(b)        Except as provided in Section 3
and 5 hereof, the Company shall indemnify the Indemnified Representative
against any Liability (as hereinafter defined) incurred by or assessed against
the Indemnified Representative in connection with any Proceeding (as
hereinafter defined) in which the Indemnified Representative may be involved,
as a party or otherwise, by reason of the fact that the Indemnified
Representative is or was serving in any Official Capacity held now or in the
future, provided that the Indemnified Representative meets the applicable
standards of conduct under the BCBCA. As used in this Agreement:

(i)              "Liability" means any
liability, damage, judgment, amount paid in settlement, taxes, fine, penalty,
punitive damage, or expense of any nature (including attorneys' fees and
expenses);

(ii)             "Proceeding" means any
threatened, pending, or completed investigation, action, suit, appeal,
arbitration, or other proceeding of any nature, whether civil, criminal, administrative,
or investigative, whether formal or informal, and whether brought by or in the
right of the Company, a class of its security holders, or any other party; and

(iii)           
"Official Capacity"
means service to the Company as a director, or, at the request of the Company,
in a similar capacity for any affiliate company, partnership, joint venture,
trust, employee benefit plan.

(c)        Notwithstanding Sections 2(a)
and (b) hereof, the Company shall not indemnify the Indemnified Representative
under this Agreement for any Liability incurred in a Proceeding initiated by
the Indemnified Representative unless the Proceeding is authorized, either
before or after commencement of the Proceeding, by the majority vote Board of
Directors of the Company. An affirmative defense or counterclaim of the
Indemnified Representative shall not be deemed to constitute a Proceeding
initiated by the Indemnified Representative.

3.         Exclusions.

(a)        The Company shall not be
obligated under this Agreement to make any payment in connection with any
Liability incurred by the Indemnified Representative:

(i)              to the extent payment
for such Liability is made to the Indemnified Representative under an insurance
policy obtained by the Company, and the Indemnified Representative is under no
obligation to repay the amount of the proceeds derived from such coverage;

(ii)             to the extent payment
is made to the Indemnified Representative for such Liability by the Company
under its Articles of Incorporation, the BCBCA, or otherwise than pursuant to
this Agreement;

(iii)           
for
any claim by or on behalf of the Company for recovery of profits resulting from
the purchase and sale or sale and purchase by such Indemnified

2

Representative of equity securities of the
Company pursuant to Section 16(b) of the Securities Exchange Act of 1934, as
amended;

(iv)            
to the extent such
indemnification has been determined by a court of competent jurisdiction in a
final non-appealable judgment to be unlawful; or

(v)              to the extent such
claim for indemnification arises primarily out of or is based primarily upon
any action or failure to act by the Indemnified Representative, other than an
action or failure to act undertaken at the request or with the consent of the
Company, that is found in a final judicial determination (or a settlement
tantamount thereto) to constitute fraud, bad faith, willful misconduct or gross
negligence on the part of the Indemnified Representative.

(b)              
Any act, omission,
liability, knowledge, or other fact of or relating to any other person,
including any other person who is also an Indemnified Representative, shall not
be imputed to the Indemnified Representative for the purposes of determining the
applicability of any exclusion set forth herein.

(c)              
The termination of a
proceeding by judgment, order, settlement, conviction, or upon a plea of nobo contendere or its equivalent, shall not, of itself,
create a presumption that the Indemnified Representative is not entitled to
indemnification under this Agreement.

4.                 
Advancement of
Expenses. The Company
shall pay any Liability in the nature of an expense (including attorneys' fees
and expenses) incurred in good faith by the Indemnified Representative in advance
of the final disposition of a Proceeding within thirty (30) days of receipt of
a demand for payment by the Indemnified Representative; provided, however, that
the Indemnified Representative shall have (a) furnished the Company with a
written affirmation of his good faith belief that he has met the applicable
standards of conduct to be entitled to indemnification hereunder, and (b)
agreed in writing to promptly repay such amount if it shall ultimately be
determined that the Indemnified Representative is not entitled to be
indemnified by the Company pursuant to this Agreement. The financial ability of
the Indemnified Representative to repay an advance shall not be a prerequisite
to the making to such advance.

5.                 
Indemnification
Procedure. 

(a)               
The
Indemnified Representative shall use reasonable efforts to notify promptly the
Board of Directors of the commencement of any Proceeding or the occurrence of
any event which might give rise to a Liability under this Agreement, but the
failure to so notify the Company shall not relieve the Company of any
obligation which it may have to the Indemnified Representative under this
Agreement or otherwise, unless the Company is able to establish direct and
substantial prejudice on account of such failure. It shall be presumed at all
times that the Indemnified Representative is entitled to indemnification and
advancement of expenses under this Agreement.

(b)              
The Company shall be
entitled, upon notice to the Indemnified Representative, to assume the defense
of any Proceeding with counsel reasonably

 

3

satisfactory to the Indemnified
Representative involved in such Proceeding or, if there be more than one (1)
Indemnified Representative involved in such Proceeding, to a majority of the
Indemnified Representatives involved in such Proceeding. If, in accordance with
the foregoing, the Company defends the Proceeding, the Company shall not be
liable for the expenses (including attorneys' fees and expenses) of the
Indemnified Representative incurred in connection with the defense of such
Proceeding subsequent to the required notice, unless (i) such expenses
(including attorneys' fees) have been authorized by the Company, or (ii) the
Company shall not in fact have employed counsel reasonably satisfactory to such
Indemnified Representative, or to the majority of Indemnified Representatives
if more than one (1) is involved, to assume the defense of such Proceeding. The
foregoing notwithstanding, the Indemnified Representative may elect to retain
counsel at the Indemnified Representative's own cost and expense to participate
in the defense of such Proceeding.

(c)              
The
Company will not, without the prior written consent of the Indemnified
Representative, settle, compromise, or consent to the entry of any judgment in
any pending or threatened Proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not an Indemnified
Representative is an actual or potential party to such Proceeding), unless such
settlement, compromise, or consent includes an unconditional release of the
Indemnified Representative hereunder from all liability arising out of such
claim, action, suit, or proceeding. The Company shall not be liable for any
amount paid by an Indemnified Representative in settlement of any Proceeding
that is not defended by the Company, unless the Company has consented to such
settlement, which consent shall not be unreasonably withheld.

(d)              
Upon a payment under
this Agreement to the Indemnified Representative with respect to any Liability,
the Company shall be subrogated to the extent of such payment to all of the
rights of the Indemnified Representative to recover against any person with
respect to such Liability, and the Indemnified Representative shall execute all
documents and instruments required, and shall take such other actions, as may
be necessary to secure such rights, including the execution of such documents
as may be necessary for the Company to bring suit to enforce such rights.

6.                 
Contribution. If the indemnification provided for in
this Agreement is unavailable for any reason to hold harmless an Indemnified
Representative in respect of any Liability or portion thereof, the Company
shall contribute to such Liability or portion thereof in such proportion as is
appropriate to reflect the relative benefits received by the Company and the Indemnified
Representative from the transaction giving rise to the Liability.

7.                 
Non-Exclusivity. Subject to the provisions of Section 3
of this Agreement, the rights granted to the Indemnified Representative
pursuant to this Agreement shall not be deemed exclusive of any other rights to
which the Indemnified Representative may be entitled under statute, the
provisions of the Articles of Incorporation, any outstanding agreement of the
Company, or otherwise, both as to action in an Official Capacity and in any
other capacity.

8.                 
Reliance on
Provisions. The
Indemnified Representative shall be deemed to be acting in any Official
Capacity in reliance upon the rights of indemnification provided by this

 

4

Agreement and the indemnification provisions
of the Company's Articles of Incorporation or any outstanding agreement of the
Company, as the case may be.

9.               
Severability and
Reformation. Any
provision of this Agreement which is determined to be invalid or unenforceable
in any jurisdiction or under any circumstances shall be ineffective only to the
extent of such invalidity or unenforceability, and shall be deemed reformed to
the extent necessary to conform to the applicable law of such jurisdiction and
still give maximum effect to the intent of the parties hereto. Any such
determination shall not invalidate or render unenforceable the remaining
provisions hereof, and shall not invalidate or render unenforceable such
provision in any other jurisdiction or under any other circumstances.

10.           
Notices. Any notice, claim, request, or demand
required or permitted hereunder shall be in writing and shall be deemed given
if delivered personally or sent by telegram or three (3) business days after
being dispatched by registered or certified mail, first class, postage prepaid
to the addresses set forth above, or to such other address as any party hereto
shall have specified in a notice duly given in accordance with this Section 10.

11.           
Amendments: Binding
Effect. No amendment,
modification, termination, or cancellation of this Agreement shall be effective
as to the Indemnified Representative unless signed in writing by the Company
and the Indemnified Representative. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of the
Indemnified Representative's heirs, executors, administrators, and personal
representatives.

12.           
Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Province of British Columbia,
without regard to the conflict of laws provisions thereof.

13.           
Execution. This Agreement may be executed in
multiple counterparts, each of which shall be deemed to be an original and all
of which, when taken together, shall constitute one and the same agreement.
Signatures transmitted by facsimile or electronic mail shall be deemed
acceptable as originals.

 

5

EXHIBIT E 

FORM OF UNANIMOUS SHAREHOLDERS AGREEMENT

 

(see attached)

 

 

 

 

 

 

 

Execution copy

 

SOLUNA TECHNOLOGIES, LTD.

AMENDED AND RESTATED SHAREHOLDERS'
AGREEMENT

 

 

January
13, 2020

 

 

 

 

 

 

- 2 -

TABLE
OF CONTENTS

ARTICLE
1 INTERPRETATION.................................................................................................. 5

1.1
Definitions ....................................................................................................................................  1

1.2
Schedules.................................................................................................................................... 11

1.3
Gender........................................................................................................................................ 11

1.4
Currency..................................................................................................................................... 11

1.5
Paramountcy................................................................................................................................ 11

1.6
Carrying Out of the Agreement..................................................................................................... 11

1.7 Corporation
Bound...................................................................................................................... 11

1.8
Compliance with Agreement......................................................................................................... 12

1.9
Certain Rules of Interpretation...................................................................................................... 12

1.10
Optionee Shareholders............................................................................................................... 12

ARTICLE
2 SHAREHOLDERS RIGHTS................................................................................... 13

2.1
Management................................................................................................................................ 13

2.2
Directors..................................................................................................................................... 13

2.3
Meetings of the Board.................................................................................................................. 13

2.4
Meetings of Shareholders............................................................................................................. 14

2.5 Meeting
by Telephone or Electronic Means.................................................................................. 14

2.6
Quorum....................................................................................................................................... 14

2.7
Officers....................................................................................................................................... 15

2.8
Reporting.................................................................................................................................... 15

2.9
Compliance with GAAP.............................................................................................................. 15

2.10
Actions Requiring Special Shareholder Consent......................................................................... 16

2.11
Accountants.............................................................................................................................. 16

2.12
Waiver...................................................................................................................................... 17

2.13
Indemnity and Insurance............................................................................................................ 17

2.14
Board Decision-Making............................................................................................................ 18

2.15
Corporation Valuations............................................................................................................. 19

2.16
Representations and Warranties by Shareholders....................................................................... 19

2.17
Representations and Warranties by the Corporation................................................................... 20

ARTICLE
3 DEALING WITH SHARES.................................................................................... 22

3.1 No
Transfer of Shares................................................................................................................. 22

3.2
Endorsement on Certificates........................................................................................................ 22

3.3
Shareholder Representations and Warranties............................................................................... 23

3.4
Purchase of Shares of a Shareholder........................................................................................... 23

3.5 Death
or Incapacity of a Shareholder.......................................................................................... 26

3.6 Right
of First Refusal.................................................................................................................. 27

3.7
Piggyback Right on Sale of Shares............................................................................................. 29

3.8
Drag-Along Right...................................................................................................................... 29

3.9
Valuation................................................................................................................................... 32

3.10
Exclusivity of Sections.............................................................................................................. 32

ARTICLE
4................................................................................................................................... 33

4.1
Material Adverse Transfer, etc 2................................................................................................ 33

ARTICLE
5 MATTERS RELATING TO ISSUANCE OF SHARES 

         BY THE CORPORATION................................................................................................  33

- 3 -

5.1 Dilution.................................................................................................................................... 33

5.2 Pre-Emptive Right.................................................................................................................... 33

ARTICLE 6 GENERAL SALE PROVISIONS........................................................................ 34

6.1 Application of
Provisions......................................................................................................... 34

6.2 Obligations of Vendor.............................................................................................................. 34

6.3 Deliveries to
Vendor................................................................................................................ 35

6.4 Repayment of Debts................................................................................................................. 35

6.5 Non-Completion by Vendor..................................................................................................... 35

6.6 Agreement Binding
on Transferees............................................................................................ 36

6.7 Consents.................................................................................................................................. 36

ARTICLE 7 CONFIDENTIAL INFORMATION AND
COMPETITION............................ 36

7.1 Non-Competition..................................................................................................................... 36

7.2 Duty of
Confidentiality.............................................................................................................. 37

7.3 Non-Solicitation....................................................................................................................... 38

7.4 General.................................................................................................................................... 39

ARTICLE 8 GENERAL............................................................................................................. 39

8.1 Assumption of the Agreement................................................................................................... 39

8.2 Benefit of the
Agreement.......................................................................................................... 39

8.3 Entire Agreement..................................................................................................................... 39

8.4 Amendments and Waivers........................................................................................................ 40

8.5 Arbitration................................................................................................................................ 40

8.6 Assignment............................................................................................................................... 40

8.7 Termination............................................................................................................................... 40

8.8 Severability............................................................................................................................... 41

8.9 Notices..................................................................................................................................... 41

8.10 Counterparts;
Signatures......................................................................................................... 41

8.11 Governing Law....................................................................................................................... 41

8.12 Independent Legal Advice...................................................................................................... 41

8.13 No Voting Trust..................................................................................................................... 42

8.14 Compliance with
Applicable Legislation and Other Requirements............................................. 42

SCHEDULE A FORM OF
ASSUMPTION AGREEMENT FOR

       TRANSFEREES/ACQUIRORS FOR THIS UNANIMOUS
SHAREHOLDERS' 

       AGREEMENT...................................................................................................................... 45

SCHEDULE B FORM OF
ASSUMPTION AGREEMENT FOR OPTION 

       HOLDERS FOR THIS UNANIMOUS SHAREHOLDERS AGREEMENT.................. 48

SCHEDULE C PRINCIPLES OF SHARE
VALUATION........................................................ 51

SCHEDULE D
ARBITRATION PROCEDURES.................................................................... 52

SCHEDULE E ADDRESSES FOR NOTICES......................................................................... 55

 

- 4 -

SHAREHOLDERS' AGREEMENT

THIS AGREEMENT is made as of the 13h day of January, 2020 

A M O N G:

SOLUNA TECHNOLOGIES, LTD.,

a corporation
incorporated under the laws of the Province of British Columbia, (the "Corporation"),

- and -

Each of the shareholders of the Corporation
from time to time.

RECITALS:  

A.        The authorized share capital of the
Corporation consists of an unlimited number of Common Shares an unlimited
number of Class Seed Preferred Shares and an unlimited number of Class A
Preferred Shares, of which 9,608,108 Common Shares, 1,794,998 Class Seed Preferred
Shares and 158,730 Class A Preferred Shares are outstanding.

B.         The Shareholders hold all of the
authorized and issued Shares, as follows:

	
  Shareholder

  	
  Number and Type of Shares

  
	
   

  
	
  Soluna Technologies Investment I, LLC

  	
  7,900,000 Common Shares

  
	
  John Belizaire

  	
  1,067,567 Common Shares

  
	
  Dipul Patel

  	
  640,541 Common Shares

  
	
  Tera Joule, LLC

  	
  965,945 Class Seed Preferred Shares

  
	
  MJT Park Investors, Inc

  	
  479,437 Class Seed Preferred Shares

  
	
  John Belizaire

  	
  102,380 Class Seed Preferred Shares

  
	
  Dipul Patel

  	
  48,255 Class Seed Preferred Shares

  
	
  Mohammed-Larbi Loudiyi

  	
  77,638 Class Seed Preferred Shares

  
	
  Phillip Ng

  	
  57,355 Class Seed Preferred Shares

  
	
  Ashley Capuzzi

  	
  49,768 Class Seed Preferred Shares

  
	
  Sanjeev Kumar

  	
  14,220 Class Seed Preferred Shares

  
	
  Mechanical Technology, Incorporated

  	
  158,730 Class A Preferred Shares

  

 

C.        The Parties have
entered into this Agreement for the purposes of, among other things, (i)
setting forth the
manner in which the affairs of the Corporation shall be conducted, (ii)
providing for their respective rights and obligations arising out of or in
connection with the operations and affairs of the Corporation, and (iii)
governing the transfer of Shares of the Corporation.

NOW
THEREFORE THIS AGREEMENT WITNESSES that in
consideration of the premises and the mutual covenants and agreements herein
contained the parties hereto agree as follows:

- 5 -

ARTICLE
1 INTERPRETATION

1.1       Definitions  

In this Agreement:

"Act" means the Business
Corporations Act (British Columbia), as amended from time to time.

"Affiliate" shall have the meaning
given to it in the Act.

"Agreement" means this agreement and all schedules
attached to this agreement, in each case as they may be supplemented or amended
from time to time and the expressions "hereof", "herein", "hereto",
"hereunder", "hereby" and similar expressions refer to this agreement, and
"Article" and "section" mean and refer to the specified article and section of
this agreement.

"arm's length" shall have the
meaning ascribed thereto in the Income Tax Act (Canada).

"Articles" means the articles of incorporation of
the Corporation dated May 11, 2018, as amended on October 30, 2018 to create
the Class Seed Preferred Shares, as further amended on or about January 9, 2020
to create the Class A Preferred Shares and to amend the terms and conditions
attached to the Class Seed Preferred Shares and as may be further amended,
replaced, restated or otherwise modified from time to time in accordance with
the Act and this Agreement, as applicable.

"Assumption Agreement" means an agreement in the
form of Schedule A or Schedule B, as applicable. 

"Board" means the board
of Directors of the Corporation.

"Business Day" means a day other than a Saturday,
Sunday or any other day on which the principal chartered banks located in
Vancouver, British Columbia or New York, New York are not open for business. "Business
of the Corporation" means the business presently carried on by the
Corporation, consisting of, among other things, the pursuit of crypto-mining
initiatives using wind and other assets and technology related thereto.

"Cause" means with respect to
an employee or consultant of the Corporation: (i) the failure or refusal of
such Person to perform his duties and responsibilities at an acceptable level
or standard, provided that such Person has been provided written notice of such
failure and has not corrected his behaviour within 20 days of receiving such
notice; (ii) any dishonesty on the part of such Person affecting the
Corporation; (iii) the conviction of such Person for an indictable offence or
for any crime involving moral turpitude, fraud or misrepresentation; (iv) any
wilful and intentional act on the part of such Person having the effect of
materially injuring the reputation, business or business relationships of the
Corporation; (v) any material breach (not covered by any of the above clauses)
of any of the provisions of the employment or consulting Agreement with such
Person; (vi) any other reason which at law would entitle the Corporation to
terminate such Person's employment without notice or compensation in lieu of
notice; or (vi) the resignation of such Person without Good Reason.

"Class A Director" means the director of the Board
nominated by the holders of Class A Preferred Shares pursuant to Section 2.2.

"Class A Preferred Shareholder" means any Shareholder holding Class A Preferred Shares.

"Common Shares" means the common shares in the capital of the
Corporation.

"Class A Preferred Shares" means the
Class A Preferred Shares in the capital of the Corporation.

- 6 -

"Class A Preferred Financing" means the financing of the Corporation currently underway
on the date of this Agreement consisting of the issuance of Class A Preferred
Shares at a price of $ 3.15 per share for an aggregate of up to $10,000,000.

"Class Seed Preferred Shares" means
the Class Seed Preferred Shares in the capital of the Corporation.

"Collateral Benefit" means any agreement, commitment
or understanding with a Shareholder or its Principal that has the effect of
providing to that Shareholder or its Principal (or anyone acting not at arm's
length to that Shareholder or its Principal), directly or indirectly,
consideration of greater value than that offered to other Shareholders,
excluding consideration paid to a Shareholder or its Principal (or anyone not
at arm's length with a Shareholder or its Principal) for goods and/or services
rendered or provided or to be rendered or provided by a Shareholder or its
Principal (or anyone not at arm's length with a Shareholder or its Principal) where
the amount of such consideration is not more than that which would be
negotiated between arm's length parties on market terms.

"Competitive Business" means
any business that is competitive with the Business of the Corporation and/or
any of its Subsidiaries, excluding the business carried on by Soluna
Technologies I, LLC and Platinum Power SA.

"Confidential Information" means the Corporation's
or its Affiliates' or any of their respective clients' confidential
information, property or knowledge, including without limitation, supplier
information, property, materials, documents, technology, inventions,
strategies, methods, procedures, trade secrets, intellectual and industrial
property; business practices, processes, trade secrets, methods, devices, ideas,
concepts, proposals or development projects, software, computer systems,
documentation, data, designs or standards, whether owned or licensed, the terms
of this Agreement and Work Products.

"Control" means, with respect to any
Person at any time,

(a)        holding, as owner or other beneficiary,
other than solely as the beneficiary of an unrealized security interest,
directly or indirectly, securities of that Person carrying votes sufficient to
elect or appoint the majority of individuals who are responsible for the
supervision or management of that Person; or

(b)        the exercise of de facto control of
that Person whether direct or indirect and whether through the ownership of
securities, by contract or trust or otherwise; and the terms "Controlling" and "Controlled" have
corresponding meanings;

"Controlled Shareholder" means, with respect to a
particular Principal, the Shareholder Controlled by that Principal.

"Corporation" means Soluna Technologies, Ltd. and
includes any successor to the Corporation resulting from any amalgamation,
merger, arrangement or other reorganization of or including the Corporation or
any continuance under the laws of another jurisdiction.

"CPOA" has the meaning attributed to
it in Section 3.8(d).

"Defaulting Shareholder" has the
meaning attributed to it in Section 3.4.

"Directors" means, collectively, each of the
directors of the Corporation and "Director" means any one such director
individually.

"Drag-Along Offer" has the meaning
attributed to that term in Section 3.8(a).

- 7 -

"Eligible Transferee" means, in
respect of a Shareholder:

(a)      
a corporation which is Controlled by
and under the Control of such Shareholder;

(b)      
a trust which is Controlled by and
under the Control of such Shareholder;

(c)      
if the Shareholder is not a natural
Person, any Person who Controls such Shareholder including the Principal; and

(d)      
in respect of Tera Joule, LLC, any
holder of securities of Tera Joule, LLC.

"First Refusal Notice" has the
meaning attributed to that term in Section 3.6(a).

"Forced Shareholders" has the
meaning attributed to that term in Section 3.8.

"GAAP" means the generally accepted accounting
principles from time to time approved by the Canadian Institute of Chartered
Accountants, or any successor entity thereto, applicable as at the date on
which such principles are to be applied or on which any calculation or
determination is required to be made in accordance with generally accepted
accounting principles, which in the case of the Corporation shall include
Canadian Accounting Standards for Private Enterprises.

"Good Reason"
means:

(a)        a material reduction in the status,
powers or responsibilities of such Person without his/her consent; or

(b)        any reduction in the compensation of
such Person without his/her consent; or

(c)        a change in such Person's title without
his/her consent; or

(d)        relocation of such Person's position
outside of the New York City area without his/her consent; or

(e)        a failure to pay the salary or bonuses
in accordance with the provisions of the employment agreement of such Person
without the consent of such Person, provided such reduction or failure has not
been remedied by the Corporation within ten (10) days following written notice
thereof from such Person.

"Governmental Approval" means the consent of any
Governmental Body which may be required at any time and from time to time to ensure
that the purchase by a Shareholder of all or any part of the Shares held by
another Shareholder is not in contravention of any law, regulation or published
policy of, or administered by, such Governmental Body or which may be required
in order to ensure that, notwithstanding the purchase by a Shareholder of all
or any part of the Shares held by another Shareholder, the holding or continued
holding by the Corporation or any Subsidiary of any franchise, licence, permit
or other permission or authority required to carry on its respective business
is unaffected.

"Governmental Body" means any body of a state or
government, any international body or body assembling several states or
provinces, any body, board, commission, office or other authority, instituted
or constituted by a state or a government, by a law or otherwise, any public or
private body, board, commission, office exercising governmental or
quasi-governmental functions or regulatory or quasi-regulatory functions on
behalf of a state or another governmental body or otherwise having
jurisdiction, as well as any body, office, commission, board, arbitration or
judicial tribunal, quasi-judicial or administrative tribunal, either national,
provincial or governmental, foreign or international, as well as any court or,
common law tribunal.

- 8 -

"Incapacity" means a permanent
disability within the meaning of the Income Tax Act (Canada).

"Lien" means any and all liens, claims, mortgages,
hypothecs, security interests, charges, encumbrances, and restrictions on
Transfer of any kind and includes, in the case of references to securities,
except for any of the same arising under applicable corporate laws or
securities laws solely by reason of the fact that such securities were issued
pursuant to exemptions from registration or prospectus requirements under such
securities laws, or otherwise arising pursuant to this Agreement.

"Liquidity Event" means the earliest
to occur of:

(a)       the liquidation, dissolution or
winding-up of the Corporation;

(b)       the amalgamation or merger of the
Corporation with another corporation, or an arrangement, reorganization or
other transaction or series of transactions, pursuant to which the holders of
voting securities of the Corporation immediately prior to the transaction or
series of transactions hold, immediately after such transaction, directly or
indirectly, less than 50% of the voting power to elect directors of the
Corporation or the surviving corporation;

(c)        a sale, lease or other disposition of
all or substantially all of the assets of the Corporation;

(d)        a sale, exchange or other disposition
of all or substantially all of the outstanding shares of the Corporation; or

(e)        an amalgamation, arrangement, reverse take-over
or other combination of the Corporation by or with a corporation whose shares
are listed on a Canadian stock exchange.

"Marketable Securities" means
securities of an issuer having a market capitalization of at least $500 million
and that are listed on the Toronto Stock Exchange, the TSX Venture Exchange,
the Canadian Securities Exchange, the New York Stock Exchange, the Nasdaq
Global Select Market, the Nasdaq Global Market or the London Stock Exchange and
that can be immediately resold to the general public free of any statutory,
regulatory, contractual or other hold period, volume limitation, manner of sale
or resale restriction or required approvals or filings.

"Material Adverse Issuance" means a
proposed issuance of Shares in respect of which:

(a)        the purchaser or subscriber of such
Shares is, or any shareholder of such proposed issuee is, a Person governed by
the laws of or resident in any jurisdiction which is identified by the
Organization for Economic Cooperation and Development's Committee on Fiscal
Affairs as an "uncooperative tax haven", in which the beneficial owners of
securities of such purchaser or subscriber may not be reasonably ascertainable
by governmental or regulatory bodies in Canada and/or the United States or
which is identified by any governmental or regulatory authority or other
organization as failing to cooperate in preventing "money laundering";

(b)        the purchaser or subscriber of such
Shares, by virtue of its interest in the Corporation (directly or indirectly),
would place the Corporation or its shareholders in violation of any economic
sanctions program administered by the Office of Foreign Assets Control of the
U.S. Department of the Treasury, including, without limitation, the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism (USA Patriot) Act of 2001;

(c)        the identity of the purchaser or
subscriber of such Shares and/or the nature of the subject transaction may, in
the opinion of the Board, acting reasonably, have a material adverse impact on:
(i) the Corporation or the Business of the Corporation, (ii) the ability of the
Corporation to complete future public equity or debt financings, the sale of
the Business of the Corporation, a

- 9 -

potential initial public offering or a potential listing of
the Shares of the Corporation on a nationally recognized stock exchange in
Canada or the United States, or (iii) the ability of any of the Shareholders to
sell any Shares (including potentially delaying or preventing the completion of
any of the foregoing or resulting in the imposition of burdensome terms and
conditions in respect of any of the foregoing); or

(d)        the purchaser or subscriber of such Shares is,
or is directly or indirectly associated with, a Person engaged in a Competitive
Business but this shall not (i) include minority shareholdings in public
companies where no influence, Control or board representation is present, up to
a maximum of 5% of the outstanding shares of any such public company, or (ii)
issuances to existing Shareholders or their Affiliates.

"Material Adverse Transfer" means a
proposed Transfer in respect of which:

(a)        the transferee is, or any shareholder of the
transferee is, a Person governed by the laws of or resident in any jurisdiction
which is identified by the Organization for Economic Cooperation and Development's Committee on Fiscal Affairs
as an "uncooperative tax haven", in which the beneficial owners of securities
of such transferee or shareholder may not be reasonably ascertainable by
governmental or regulatory bodies in Canada and/or the United States or which
is identified by any governmental or regulatory authority or other organization
as failing to cooperate in preventing "money laundering"; or

(b)        the transferee, by virtue of its
interest in the Corporation (directly or indirectly), would place the
Corporation or its shareholders in violation of any economic sanctions program
administered by the Office of Foreign Assets Control of the U.S. Department of
the Treasury, including, without limitation, the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
(USA Patriot) Act of 2001;

"Offer" has the meaning attributed
to that term in Sections 3.7(a).

"Officers" means, collectively, the officers of the
Corporation as appointed by the Directors and "Officer" means any one
such officer individually.

"Optionee Shareholder" means any Person who has
obtained Common Shares through the exercise of options under the Stock Option
Plan.

"Parties" means the parties to this
Agreement and "Party" means one of them.

"Person" means any individual, partnership, limited
partnership, joint venture, syndicate, sole proprietorship, corporation with or
without share capital, unincorporated association, trust, trustee, executor,
administrator or other legal personal representative, Government Body, authority
or entity however designated or constituted.

"Piggy-Back Offer" has the meaning
attributed to that term in Section 3.7(a). 

"Piggy-Back Offerees" has the meaning attributed to that term in Section
3.7(a).

"Pre-Emptive Right Shareholder" has
the meaning attributed to that term in Section 5.2(a).

"Preferred Shares" means the
preferred shares in the capital of the Corporation.

"Principal" means in the case of any additional
Shareholder that is not a natural Person, the natural Person that, directly or
indirectly, Controls that Shareholder, if any.

- 10 -

"Project" means the 900MW wind power generation site
near the city of Dakhla in Morocco, in the region of Oued-Ed-Dahab.

"Pro Rata Part" means a fraction (i) the numerator
of which equals the number of Shares held by the Shareholder, and (ii) the
denominator of which equals the total number of Shares issued and outstanding
as at the date of the applicable notice or event.

"Securities" means any equity securities (other than
Shares), debentures, bonds, notes, partnership units, subscription rights or
options, warrants, convertible securities, promises, programs, plans and other
rights of any nature whatsoever or howsoever arising to, directly or
indirectly, participate in the capital or equity of the Corporation or any
Subsidiaries or any right or privilege to acquire any Shares.

"Selling Shareholder" has the
meaning attributed to that term in Section 3.6(a).

"Shareholders" means, any Person who is a registered
holder of Shares or Securities and includes any Eligible Transferee thereof in
accordance with the terms of this Agreement and for greater certainty includes
Optionee Shareholders and "Shareholder" means any one of such persons
individually.

"Shares" means any shares in the capital of the
Corporation, including without limitation, the Common Shares, Class Seed
Preferred Shares, Class A Preferred Shares and any securities of the
Corporation or any successor continuing company of the Corporation that may be
issued on a reorganization, amalgamation, consolidation, arrangement, or
merger, statutory or otherwise, or other similar transactions.

"SOP Assumption Agreement" means the acknowledgement
of assumption of obligations in the form to be attached as a schedule to the
Stock Option Plan, as may be amended, restated, replaced or otherwise modified
from time to time by the Board.

"Stock Option Plan" means the stock option plan of
the Corporation dated June 7, 2018, as may be amended or replaced from time to
time thereafter in accordance with the terms hereof.

"Subsidiary" shall have the meaning
given to it in the Act.

"Third Party" means a Person with whom the Selling
Shareholder (for purposes of Section 3.6), the Piggy-Back Offerees (for
purposes of Section 3.7) or all Shareholders and the Corporation (for purposes
of Section 3.8) is dealing at arm's length.

"Transfer" means any sale, exchange, assignment,
gift, hypothecate, devise, disposition, mortgage, lien, charge, pledge,
encumbrance, grant of security interest or any arrangement by which possession,
legal title or beneficial ownership passes from one person to another, or to
the same person in a different capacity, whether or not voluntary and whether
or not for value, and any agreement to effect any of the foregoing and
"Transferred" and similar variations have corresponding meanings.

"Triggering Event" has the meaning
attributed to that term in Section 3.4.

"Work Products" means all work
products, including, but not limited to technology, products, computer programs
(including without limitation source code), documentation, data, designs,
ideas, processes, discoveries, inventions (whether or not patentable),
procedures, improvements, developments, drawings, specifications, memoranda,
notes, manuals, information, and other materials or property made, authored,
conceived, developed or otherwise produced by or on behalf of the Shareholder
pursuant to the terms of an employment or consulting agreement with the
Corporation, whether alone or jointly with the Corporation or others, within or
outside the Corporation's premises, during or after business hours, excluding
those that are not related to the Business of the Corporation created on the
Shareholder's spare time or using the Shareholder's own equipment.

- 11 -

1.2       Schedules 

The following are the schedules attached to this Agreement
which schedules shall be deemed to be incorporated into, and form part of this
Agreement:

Schedule A      -       Form of
Assumption Agreement for Transferees for this Agreement

Schedule B       -      SOP Assumption Agreement

Schedule C       -      Principles of Share Valuation

Schedule D      -       Arbitration Procedures

Schedule E       -      Addresses for Notices

1.3       Gender 

Words in the masculine gender shall include the feminine
and neuter genders and vice versa and words referring to persons shall include
individuals, partnerships, associations, trusts, unincorporated organizations
and corporations and vice versa.

1.4       Currency 

Unless otherwise indicated, all references to currency
herein are to lawful money of the United States of America.

1.5       Paramountcy 

Subject to applicable law, if there is a conflict or
inconsistency between the terms of this Agreement and the Articles or the terms
of any agreement, offer, promise or other understanding entered into by the
Parties or some of them, the terms of this Agreement will govern to the extent
of that conflict or inconsistency and the Shareholders shall call such meetings
to be held, pass such resolutions and do all such other things as may be
necessary to amend the Articles to remove such conflict or inconsistency. In
addition, the Shareholders and the Corporation hereby waive, for all purposes,
their right to enforce and/or require compliance by any other Shareholder in
respect of any provision of the Articles or resolutions of the Corporation or
of any Subsidiary or of any agreement, offer, promise or other understanding
entered into by the Parties or some of them that are inconsistent with the
provisions of this Agreement - In this regard, the Shareholders agree more
particularly to use their respective best efforts to ensure that the constating
documents of the Corporation and any Subsidiaries, reflect the terms of this
Agreement and are not amended to include provisions that are or could be
inconsistent with the provisions hereof and the Shareholders shall vote the
Shares held by them so as to cause the constating documents to be amended to
resolve any conflict in favour of the terms of this Agreement. The Shareholders
also agree that upon the organization of any new Subsidiary, upon the
conditions stipulated herein, the Corporation and any other shareholder of such
Subsidiary enter into a shareholders agreement or a declaration in lieu
thereof, as the case may be, providing for such Subsidiary and its shareholders
to be subject to all applicable provisions hereof.

1.6       Carrying Out of the
Agreement

The Shareholders will vote and act at all times to carry
out, and in all other respects to comply with, and cause the Corporation to
carry out, the provisions of this Agreement. Each of the Principals will cause
its respective Controlled Shareholder to comply with and carry out the
provisions of this Agreement.

1.7       Corporation Bound

The Corporation confirms its knowledge of this Agreement
and undertakes to carry out and be bound by the provisions of this Agreement to
the full extent that it has the capacity and power at law to do so.

- 12 -

 1.8       Compliance with Agreement

Each Shareholder covenants and agrees with each of the
other Parties to vote or cause to be voted their respective Shares and act as a
shareholder of the Corporation to fulfil the provisions of this Agreement and
in all other respects to comply with, and use all reasonable efforts to cause
the Corporation to comply with, this Agreement and to cause its respective
nominee(s) as directors of the Corporation, if any, to act in accordance with
this Agreement to the extent permitted by law.

 1.9       Certain Rules of Interpretation

In this Agreement,

(a)       
time is of the essence in the
performance of the Parties' respective obligations;

(b)       
the descriptive headings of Articles
and Sections are inserted solely for convenience of reference and are not
intended as complete or accurate descriptions of content;

(c)       
the use of words in the singular or
plural, or with a particular gender, shall not limit the scope or exclude the
application of any provision of this Agreement to such person or persons or
circumstances as the context otherwise permits;

(d)        any reference to a particular
Shareholder includes, where the context permits, all Eligible Transferees of
that Shareholder and any successor thereto resulting from any amalgamation,
merger, arrangement or other reorganization of or including that Shareholder or
Eligible Transferee or any continuance under the laws of another jurisdiction;

(e)       
whenever a provision of this Agreement
requires an approval or consent by a party and notification of such approval or
consent is not delivered within the applicable time limit, then, unless
otherwise specified, the party whose consent or approval is required shall be
conclusively deemed to have withheld its consent or approval;

(f)        
unless otherwise specified, time
periods within or following which any payment is to be made or act is to be
done shall be calculated by excluding the day on which the period commences and
including the day which ends the period and by extending the period to the next
Business Day following if the last day of the period is not a Business Day;

(g)       
whenever any payment is to be made or
action to be taken under this Agreement is required to be made or taken on a
day other than a Business Day, such payment shall be made or action taken on
the next Business Day following; and

(h)       
whenever a percentage calculation of
the issued and outstanding Shares is required to be made under the terms of
this Agreement, such calculation shall be made excluding any Shares issuable
(but not yet issued) upon the exercise of any options granted under the Stock
Option Plan or any other Securities convertible into Shares.

1.10     Optionee
Shareholders

Each individual who is an Optionee Shareholder will have,
as a condition to the exercise of any option granted under the Stock Option
Plan, executed and delivered to the Parties to this Agreement, the SOP
Assumption Agreement pursuant to which such individual agrees to be bound by
all of the terms of this Agreement in the manner and to the extent of a
Shareholder as if he or she was an original signatory hereto, subject to the
following:

- 13 -

(a)       
the Optionee
Shareholder shall not have or possess any of the rights, but shall be subject
to the obligations, of a Shareholder as provided in Section 3.1 (Restrictions
on Transfer), Section 3.6 (Right of First Refusal), Section 3.7 (Piggy-back
Rights) and Section 3.8 (Drag-Along Rights);

(b)       
all notices to
the Optionee Shareholder pursuant to and as contemplated in Section 8.9 of this
Agreement shall be delivered at the address set out in the SOP Assumption
Agreement or at such other address as may be given by an Optionee Shareholder
to the parties to this Agreement; and

(c)       
the Optionee Shareholder shall not have
any right to purchase Sale Shares from a Defaulting Shareholder pursuant to the
terms of Section 3.4, Purchased Shares from a Vendor pursuant to the terms of
Section 3.5, but shall otherwise be subject to the provisions of Sections 3.4
and 3.5 hereto.

ARTICLE
2 SHAREHOLDERS RIGHTS

 2.1       Management 

Subject to Section 2.10, the Board shall supervise the
management of the business and affairs of the Corporation by resolution passed
by the majority of Directors' votes cast.

 2.2       Directors 

The number of Directors is hereby set
at five, of whom (1) three shall be nominated by the Corporation, at least one of whom is not employed by the
Corporation and who shall be approved by a majority of the other directors. (2)
one shall be nominated by Tera Joule, LLC and (3) one shall be nominated by the
holders of a majority of the Class A Preferred Shares. The Corporation's
nominees shall include John Belizaire. Tera Joule, LLC's nominee shall
initially be Matthew Lipman. The Class A Preferred Shares' nominee shall
initially be William Phelan. The term of office of a Director shall commence
upon his appointment to the Board and shall continue until either his removal
by ordinary resolution of the Shareholders entitled to nominate and elect such
Director or his resignation from the Board, whichever first occurs. Shareholders
with sufficient votes to remove a Director or otherwise make changes to the
composition of the Board may do so by providing a written resolution evidencing
the votes necessary to pass an ordinary resolution of the Corporation. Any vacancy
occurring on the Board by reason of the death, disqualification, inability to
act, resignation or removal of any director (a "Terminated Director")
shall be filled only by a further nominee of the Shareholder whose nominee was
so affected so as to maintain a Board consisting of the numbers of nominees
specified in this Section 2.2 and the other Shareholders will vote all such
Shares entitled to vote thereon in favour of electing such individual. If any Person
specified in this Section 2.2 as having the right to nominate a director gives
written notice to the other Shareholders of a desire to remove a director
nominated by such Person, the other Shareholders will vote all of their Shares
entitled to vote thereon in favour of removing that director.

The Board will form a compensation committee and an audit
committee. The compensation committee will establish an executive bonus plan
based on the achievement of specified performance objectives. The Class A Director
will be a member of both committees and will have the right to occupy the
position of chairman on one of the committees.

 2.3       Meetings of the Board

The
Board shall meet as determined by the Board, at least monthly for the first
twelve (12) months from the date hereof, and at least quarterly thereafter,
unless otherwise determined by a majority of the Board (which majority must
include the Class A Director), at the head office of the Corporation or at such
other place as the Board may determine from time to time. Meetings of the Board
or any committee thereof may be called by the President, the Chairman of the
Board or by any Director upon not less than four days' notice, or, in the event
of an urgent matter, 48 hours' notice, in which case each Director hereby
waives minimum notice in accordance with

- 14 -

the Act. Notice shall be in writing,
and shall contain a statement as to the nature of the business proposed to be
transacted at such meeting. Notice shall be accompanied by all relevant
documentation or information required for Directors to make an informed
decision regarding the business to be transacted. The Corporation shall
reimburse all Directors for all reasonable out-of-pocket expenses incurred in
attending meetings of the Board, attending meetings of any committee of the
Board or in connection with other business of the Corporation. A Director may
waive his right to receive notice of any meeting of the Board, both
prospectively and retrospectively. The attendance by a Director at a meeting
shall constitute a waiver of notice of such meeting except where such Director
attends a meeting for the express purpose of objecting to the transaction of
any business on the grounds that the meeting has not been lawfully called or
convened. The Chairman of the Board shall not have a casting vote. All presentations,
reports and other materials to be presented to the Board at any meeting or
other action to be taken by the Board shall be delivered to each Director at
least three (3) days prior to the Board meeting (or 36 hours in the case of an
urgent meeting) or action to which they relate.

 2.4       Meetings of Shareholders

Meetings of Shareholders shall be held in the City of New
York, New York at the head office of the Corporation or such location as the
Board shall determine and may be called by the Board or any Shareholder(s)
holding at least 5% of the issued and outstanding Shares (calculated assuming
conversion into Common Shares) upon not less than 10 days' notice, or not less
than 48 hours' notice in the event a meeting is required for any Shareholder or
Shareholders to remove a Director or to nominate a Director (or a replacement
for any Director) or any action is desired to be taken by the Shareholders or
by any Person entitled to call a meeting of Shareholders on an expedited basis,
in which case each Shareholder hereby waives minimum notice in accordance with
the Act. Notice shall be in writing and shall contain a statement as to the
nature of the business proposed to be transacted at such meeting. Notice shall
be accompanied by all documentation or information relevant or required for
Shareholders to make an informed decision regarding the business to be
transacted. The attendance by a Shareholder at a meeting shall constitute a
waiver of notice of such meeting except where such Shareholder attends a meeting
for the express purpose of objecting to the transaction of any business on the
grounds that the meeting has not been lawfully called or convened.

The President of the Corporation will act as chairman of
the meeting and will appoint a secretary for the meeting who shall take minutes
of the meeting which minutes, once signed by the chairman and secretary, shall
be retained with the records of the Corporation.

In the event that a resolution passed by the Shareholders
in accordance with this Agreement is not effective under the Act, all
Shareholders shall cast such votes and pass such resolutions (or, subject to
applicable law, cause such votes to be cast and resolutions passed by the
Board) as shall be necessary to implement under the Act all decisions made by
the Shareholders in accordance with this Agreement.

 2.5       Meeting by Telephone or
Electronic Means

All or any Directors may participate
in meetings of the Board or any committee, and all or any Shareholders may
participate in meetings of the Shareholders, by telephone, electronic or other
communications facilities as permit all Persons participating to communicate
verbally, simultaneously and instantaneously. Any such meeting will be deemed
to have been held at the registered office of the Corporation or such other
place the directors have determined such meeting will be held in accordance
with Sections 2.2 and 2.4, as applicable.

 2.6       Quorum 

A quorum for a meeting of Directors shall be a majority of
directors. A quorum for a meeting of Shareholders shall be at least two
individuals present in person and holding or representing by valid proxy not
less than 30% of the outstanding Shares entitled to vote at the meeting. No
business other than the election of a chairman, if any, and the adjournment or
termination of the meeting will be transacted at any meeting unless a

- 15 -

quorum is present at the commencement of the meeting;
however, a quorum need not be present throughout the meeting.

If at a meeting of the Board the
requisite quorum is not present within 30 minutes after the time fixed for
holding such meeting (the "first Soluna Board meeting"), the first
Soluna Board meeting shall stand adjourned to such day determined by the
Directors present at the meeting and which is not less than three Business Days
later and at least two Business Days' written notice shall be given of such
adjourned meeting. If a quorum is not present at such adjourned meeting within
30 minutes after the time fixed for holding such adjourned meeting, then such
adjourned meeting shall be further adjourned to such day determined by the
Directors present at such adjourned meeting and which is not less than three Business
Days later and at least two Business Days' written notice shall be given of
such second adjourned meeting. The quorum at such second adjourned meeting
shall be those Directors that are present at such second adjourned meeting,
provided that at least a majority are present.

If at any meeting of Shareholders (the "first Soluna
Shareholder meeting") a quorum shall not be present, then, (a) in the case
of a general meeting convened by requisition of Shareholders, the meeting is
dissolved, and (b) in the case of any other meeting of Shareholders, the
meeting stands adjourned to the same day in the next week at the same time and
place. If, at the succeeding meeting, a quorum is not present within one-half
hour from the time set for the holding of the meeting, the person or persons
present and being, or representing by proxy, one or more Shareholders entitled
to attend and vote at the meeting constitute a quorum.

2.7       Officers 

Until otherwise changed by the Board, the following Persons
shall hold the offices of the Corporation shown below opposite their respective
names:

Chief Executive Officer             John
Belizaire

Secretary and Treasurer           Matthew Lipman

Chief Technology Officer          Dipul Patel

2.8       Reporting

The Corporation shall at all times maintain at its principal
place of business proper books of account, which shall contain accurate and
complete records of all transactions, receipts, expenses, assets and
liabilities of the Corporation and shall provide each Shareholder reasonable
access to them. Furthermore, the Corporation will deliver to Mechanical
Technology, Incorporated so long as it continues to hold Class A Preferred
Shares and any other holder of Series A Preferred that purchased at least
$1,000,000 of Class A Preferred Shares so long as any such Shareholder holds at
least 50% of the Class A Preferred Shares issued to it under the Class A
Preferred Share Financing:

(a)       
annual and quarterly financial
statements of the Corporation, and other financial information as reasonably
determined by the Board from time to time;

(b)       
a comprehensive operating budget
forecasting the Corporation's revenues, expenses, and cash position on a
month-to-month basis for the upcoming fiscal year, no later than thirty days
prior to the end of each fiscal year; and

(c)       
an up-to-date capitalization table
promptly following the end of each quarter.

2.9       Compliance with GAAP.

The Corporation shall maintain a system of accounting and
reporting established and administered in accordance with GAAP and satisfactory
to the Corporation's auditors or accountants as applicable. All financial
statements and other reporting made pursuant to this Agreement shall be
prepared in accordance with GAAP applied consistently with prior periods.

- 16 -

2.10     Actions
Requiring Special Shareholder Consent

Notwithstanding anything to the contrary in this Agreement
or the Articles, without the prior written approval of the holders of at least
50% of the outstanding Shares (determined on an as converted to Common Shares
basis) from time to time, neither the Corporation nor, where the context
permits, any Subsidiary from time to time shall:

(a)       
enter into any contract, agreement or
other instrument with any affiliate of a Shareholder or any of its affiliates
or any director, officer, or consultant of the Corporation or any director,
officer or consultant of any of the foregoing;

(b)       
make a declaration or payment of a
dividend or other distribution on any Securities of the Corporation;

(c)       
transfer any Shares of any Subsidiary;

(d)       
authorize or issue Shares or Securities
of the Corporation or any Subsidiary, other than (i) pursuant to Options to
acquire Shares that may be issued and/or exercised from time to time with the
approval of the Board or pursuant to acquisitions approved by the Board, (ii)
the issuance of up to 3,015,873 Class A Preferred Shares under the Class A
Preferred Financing, (iii) the issuance of Class A Preferred Shares as PIK
Dividends pursuant to the Articles and (iv) project financing equity securities
of a Subsidiary of the Corporation that is the vehicle for the Project for the
purposes of the Project;

(e)       
change the number of directors of the
Corporation and the approval and removal of directors;

(f)        
enter into any agreement relating to an
acquisition or any material disposition of assets or shares; and

(g)       
grant any option, warrant, right or
privilege which is capable of becoming an agreement for the acquisition,
purchase, subscription, allotment or issuance of any unissued Shares or
Securities, other than options granted pursuant to the Stock Option Plan.

For greater certainty, the requirement for the written
approval of the Shareholders as contemplated in this Section 2.10 shall not
apply in respect of any transaction undertaken pursuant to and subject to
compliance with the provisions of Section 3.8.

2.11     Actions
Requiring Class A Preferred Consent

Notwithstanding anything to the
contrary in this Agreement or the Articles, so long as at least 50% of the
Class A Preferred Shares actually issued by the Corporation during the period
provided for the Class A Preferred financing round contemplated in the Share
Purchase Agreement dated as of the date hereof remain outstanding, without the
prior written approval of the holders of at least 50% of the outstanding Class
A Preferred Shares from time to time, neither the Corporation nor, where the
context permits, any Subsidiary from time to time shall:

(a) 
liquidate, dissolve or wind-up the
affairs of the Corporation, or effect any merger or consolidation or any other
Deemed Liquidation Event (as defined in the Articles);

(b) 
amend, alter, or repeal any provision
of the Articles or Bylaws in a manner adverse to the Class A Preferred Shares;

(c) 
create or authorize the creation of or
issue any other security convertible into or exercisable for any equity
security, having rights, preferences or privileges senior to or on parity with
the Class A Preferred Shares or issue any further Class A Preferred Shares,
other than the issuance of (i) up to 3,015,873 Class A Preferred Shares under
the Class A Preferred Financing, (ii) Class A Preferred

- 17 -

Shares as PIK Dividends pursuant to the
Articles, and (iii) project financing equity securities of a Subsidiary of the
Corporation that is the vehicle for the Project for the purposes of the
Project;

(d)  purchase or redeem or pay any dividend
on any capital stock prior to the Class A Preferred Shares, other than as
approved by the board of directors of the Corporation, including the approval of
the Class A Director;

(e)  create or authorize the creation of any
debt security other than equipment leases or bank lines of credit and other
than project financing debt securities of a Subsidiary of the Corporation for
the purposes of the Project;

(f)   acquire or hold share capital in any
corporation that is not a wholly-owned Subsidiary or dispose of any share
capital of any Subsidiary or cause any Subsidiary to dispose of all or
substantially all of its assets;

(g)  increase or decrease the size of the
board of directors of the Corporation.

For greater certainty, the requirement for the written approval
of the Class A Preferred Shares as contemplated in this Section 2.11 shall not
apply in respect of any transaction undertaken pursuant to and subject to
compliance with the provisions of Section 3.8.

2.12     Accountants

The accountants of the Corporation
will be such accountants as the Board may determine from time to time.

2.13    Waiver 

Any Shareholder(s) will be entitled at any time and from
time to time to waive any of its rights pursuant to this Article 2.

2.14     Indemnity
and Insurance

To the fullest extent permitted by
law, the Corporation shall and shall cause each Subsidiary, to indemnify all
directors, officers, former directors and former officers of the Corporation
and any Subsidiaries and the Shareholders of the Corporation (in their capacity
as directors of the Corporation created hereunder) and each Subsidiary to the
extent that such director, officer or Shareholder exercises the rights, powers,
duties and liabilities of a director, officer or Shareholder, as the case may
be, of the Corporation or any Subsidiary and all persons who act or acted at
the request of the Corporation or any Subsidiary, as the case may be, as a
director or officer of a body corporate of which the Corporation or any
Subsidiary, as the case may be, is or was a shareholder or creditor, and his or
her heirs and legal personal representatives, against all costs, charges and
expenses, including any amount paid to settle any action or satisfy a judgment,
reasonably incurred by him or her in respect of any civil, criminal or
administrative action or proceeding to which he or she is made a party by
reason of being or having been a director or officer of the Corporation or any
Subsidiary or such body corporate or by reason of acting or having acted as a
director of the Corporation or any Subsidiary, if,

(a)       
he or she acted honestly and in good
faith with a view to the best interests of the Corporation, the Subsidiary or
such body corporate, as the case may be; and

(b)       
in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, he
or she had reasonable grounds for believing that his or her conduct was lawful.

The intention of this Section is that all Persons referred
to in this Section shall have all benefits provided under the indemnification
provisions of the Act to the fullest extent permitted by law, and the
Corporation shall, and shall cause each Subsidiary to, forthwith pass all
resolutions and take such other steps as may be required to give full effect to
this Section.

- 18 -

The Corporation shall advance moneys to a director or
officer for the costs, charges and expenses of a proceeding referred to in this
Section 2.13, which such director or officer shall be required to repay to the
Corporation if he or she did not fulfill the conditions set forth in Section
2.13(a) and 2.13(b).

2.15     Board
Decision-Making

None of the following actions shall be taken by the
Corporation without the approval of the Board, including the Class A Director:

(a)      
creating any Lien or otherwise encumber
any assets of the Corporation or any Subsidiary having a fair market value in
excess of $300,000;

(b)      
selling, assigning, licensing, pledging
or encumbering material technology or intellectual property of the Corporation
or its Subsidiaries, other than licenses granted in the ordinary course of
business;

(c)      
making any capital expenditure or lease
commitment which are not included in the annual budget approve by the Board for
that year exceeding $250,000;

(d)      
distributing any monies or assets of
the Corporation outside the ordinary course of business;

(e)      
hiring, firing or changing the
compensation (including the bonus schedule) or other employment arrangements or
option arrangements of senior management of the Corporation;

(f)       
initiating any legal proceeding or
responding to any legal proceeding with a potential liability for the
Corporation in excess of $50,000;

(g)      
entering into any agreement relating to
a merger, joint venture, partnership or similar strategic or significant
corporate transaction involving consideration of $100,000 or more;

(h)      
granting options pursuant to the Stock
Option Plan;

(i)       
creating any option pool or equity
incentive program, or expand the size of the existing Stock Option Plan;

(j)       
creating or authorizing the creation of
or issuing any project financing equity or debt securities of a Subsidiary of
the Corporation for the purposes of the Project;

(k)      
lending money to any Shareholder,
director or officer of the Corporation;

(l)       
entering into any contract with any
Shareholder or Person related thereto (within the meaning of the Income Tax
Act (Canada)) or repaying any loan outstanding, and interest thereon, to
any Shareholder or any person related thereto (within the meaning of the Income
Tax Act (Canada)) other than as permitted by this Agreement;

(m)    
making any loan or advance to any
person, including, any employee or director, except advances and similar
expenditures in the ordinary course of business or under the terms of an
employee stock or option plan approved by the Board;

(n)      
guaranteeing any indebtedness except
for trade accounts of the Corporation or any subsidiary arising in the ordinary
course of business;

(o)      
making any investment inconsistent with
any investment policy approved by the Board;

- 19 -

(p)     
incurring any aggregate indebtedness
for borrowed money in excess of $50,000 that is not already included in a
Board-approved budget;

(q)     
entering into or being a party to any
transaction with any director, officer or employee of the Corporation or any
person related to that person (within the meaning of the Income Tax Act (Canada)
(other than pursuant to employment or consulting agreements with the director,
officer or employee) except transactions resulting in payments to or by the
Corporation in an amount less than $60,000 per year in the aggregate for any
such person; and

(r)       changing the principal business of the
Corporation, entering into new lines of business, or exiting the current line
of business.

None of
the following actions will be taken without the unanimous consent of the Board:

(a)      
voluntarily winding-up or liquidating
the Corporation or making an assignment in bankruptcy on behalf of the
Corporation; and

(b)     
make any loan or advance to, or own any
shares or other securities of, any subsidiary or other corporation, partnership,
or other entity unless it is wholly owned by the Corporation.

2.16     Corporation
Valuations

From time to time, the Board shall
complete a valuation of the Corporation and its Shares in accordance with the
procedures set out in Schedule C (the date of each such valuation is referred
to as a "Calculation Date"). These valuations shall be completed for
purposes of establishing the appropriate pricing for Options to be granted
pursuant to the Stock Option Plan and for the other purposes set out in this
Agreement.

2.17     Representations
and Warranties by Shareholders

Each
Shareholder severally, but not jointly, represents and warrants with respect to
itself that:

(a)      
it owns beneficially and of record the
number of Shares or other Securities which are expressed to be owned by it in
the recitals of this Agreement;

(b)     
it has the full power, authority and
legal right to execute and deliver this Agreement and to perform the terms and
provisions hereof;

(c)      
if other than an individual, it has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Agreement;

(d)      this Agreement has been duly authorized
(if applicable), executed and delivered by it and constitutes a valid and
binding obligation enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization and similar laws of general
application relating to or affecting creditors' rights and to general
principles of equity;

(e)      
the execution, delivery and performance
of this Agreement does not and will not conflict with or result in a breach of
any of the terms, conditions or provisions of (i) its articles, constating
documents or other organizational documents or the documents by which it was
created or established (as applicable); (ii) any law, rule or regulation having
the force of law; (iii) the provisions of any indenture, agreement or other
instrument to which it is a party or by which it may be bound; or (iv) any
judgment, injunction, determination or award which is binding on it or its
properties;

- 20 -

(f)        no authorization, consent, approval, licence or
exemption from any Governmental Body is required by it which has not been
obtained in connection with the execution and delivery by it of, and the
performance by it of its obligations as of the date hereof under, this
Agreement;

(g)        it is not a party to any agreement which is
inconsistent with its rights and obligations hereunder or otherwise conflicts
with the provisions of this Agreement;

(h)        it and its Principal (if
applicable) is not a Person:

(i)         governed by the laws of or resident in any
jurisdiction which is identified by the Organization for Economic Cooperation
and Development's Committee on Fiscal Affairs as an "uncooperative tax haven";

(ii)        which may not be reasonably
ascertainable by governmental or regulatory bodies in Canada and/or the United
States or which is identified by any governmental or regulatory authority or
other organization as failing to cooperate in preventing "money laundering"; or

(iii)       which, by virtue of its interest in the
Corporation (directly or indirectly), would place the Corporation or its shareholders
in violation of any economic sanctions program administered by the Office of
Foreign Assets Control of the U.S. Department of the Treasury, including,
without limitation, the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot)
Act of 2001.

(i)         it is not aware of the existence of any
agreement or option or right capable of becoming an agreement or option for the
purchase of any Shares or other Securities from the Corporation or from any
other Shareholder except as provided for or referred to in this Agreement, the
Articles or the Stock Option Plan, and it has not granted or agreed to grant
any ongoing proxy in respect of the Shares or other Securities held by it nor
has it entered into any voting trust, vote pooling or other arrangement with
respect to the right to vote or call meetings of shareholders of the
Corporation except as provided for or referred to in this Agreement;

(j)         no Person has the right, whether by agreement
or option or any right capable of becoming an agreement or option, to purchase
or acquire any of the Shares of such Shareholder (other than pursuant to
restricted share agreements entered into between the Corporation and senior
management Shareholders); and

(k)        there is no agreement, whether written or oral,
of any nature whatsoever which would restrict the rights of the Shareholder,
from exercising full voting control or direction over the Shares of the
Corporation owned by it.

All of the foregoing representations and warranties will
continue to be true and correct during the continuance of this Agreement.

2.18    Representations
and Warranties by the Corporation.

The Corporation represents and warrants
with respect to itself:

(a)        that it has the full power, authority and legal
right to execute and deliver this Agreement and to give it full effect;

- 21 -

(b)        that it has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement;

(c)        that this Agreement has been duly
authorized, executed and delivered and constitutes a legal, valid and binding
obligation of it, enforceable against it in accordance with the terms hereof,
subject to applicable bankruptcy, insolvency, reorganization and similar laws
of general application relating to or affecting creditors' rights and to
general principles of equity;

(d)       
that it is not a party to any agreement
which is inconsistent with the rights of any party hereunder or otherwise
conflicts with the provisions of this Agreement;

(e)       
that the execution, delivery and
performance of this Agreement does not and will not conflict with or result in
a breach of any of the terms, conditions or provisions of (i) the Articles, constating documents or other organizational documents or the documents by
which it was created or established; (ii) any law, rule or regulation having
the force of law; (iii) the provisions of any indenture, agreement or other
instrument to which it is a party or by which it may be bound; or (iv) any
judgment, injunction, determination or award which is binding on it or its
properties;

(f)        
that no authorization, consent,
approval, license or exemption from any Governmental Body is required by it
which has not been obtained in connection with the execution and delivery by it
of, and the performance by it of its obligations as of the date hereof under,
this Agreement; and

(g)       
that the issued and outstanding Shares
of the Corporation are as set out in Recital B hereto and that except as set
forth in such recital, there are no Shares or Securities in the capital of the
Corporation outstanding or subject to issuance as of the date hereof other than
options granted under the Stock Option Plan.

2.19      Insurance.

The Corporation shall, at the Corporation's expense and as
soon as practicable but not later than thirty (30) days from the date hereof,
obtain directors' and officers' liability coverage pursuant to one or more
insurance policies and thereafter maintain in full force at all times such
insurance policies with one or more reputable insurance carriers.

2.20      Stock
Option Plan. 

The Corporation shall maintain the
Stock Option Plan or another stock option plan that will maintain, from time to
time, an option pool providing for the issuance of options to acquire Common
Shares in an aggregate number equal to up to 10% of the outstanding Shares,
calculated on a fully-diluted, as-converted basis. Unless otherwise specified
by the Board at the time of granting of options, all options granted by the
Corporation will vest over four years as follows: 25% one year after the grant
date, with the remaining 75% to vest in equal monthly increments over the
thirty-six (36) months following the one-year anniversary of the grant date.

- 22 -

ARTICLE
3 DEALING WITH SHARES

 3.1       No Transfer of Shares

(a)        A Shareholder may Transfer
any Shares or Securities held by him, her or it provided that (i) the
transferee of such Shares (and, in the case of a transferee that is not a
natural person, its Principal in addition to the transferee) has become a party
to this Agreement, (ii) the Transfer is not a Material Adverse Transfer; and
(iii) the Transfer complies with the provisions of this Article 3.

(b)        For greater certainty, each Shareholder shall be
deemed to have consented to every Transfer of Shares or Securities or Transfer
of shares of a Controlled Shareholder that is made in accordance with the provisions
of this Article 3.

(c)        Without having to comply
with the provisions of Sections 3.6 or 3.7, a Shareholder or a Principal (in
this Article called the "Transferor") may at any time or from time to time
Transfer all or any part of its Shares or Securities, or all of the shares of
his or her Controlled Shareholder, to an Eligible Transferee of the Transferor
provided that, at or prior to the time of such Transfer:

(i)         the Eligible Transferee enters into an
Assumption Agreement as if the Eligible Transferee had entered into this
Agreement in the place and stead of the Transferor and to remain an Eligible
Transferee of the Transferor for as long as the Eligible Transferee (or, in the
case of a Controlled Shareholder, that Controlled Shareholder) shall have any
registered or beneficial interest in any Shares or Securities;

(ii)       
the Eligible Transferee delivers to the
other Parties evidence satisfactory to them, acting reasonably, that the
Eligible Transferee is an Eligible Transferee of the Transferor and that the
agreement referred to in Section 3.1(c)(i) is a legal, valid and binding
obligation of the Eligible Transferee; and

(iii)     
such Transfer does not result in a
Material Adverse Transfer.

The Transferor shall at all times after the Transfer of any
Shares or Securities or the Transfer of the shares of a Controlled Shareholder
to the Eligible Transferee be jointly and severally liable with the Eligible
Transferee for the observance and performance of the covenants and obligations
of the Eligible Transferee under this Agreement, shall cause the Eligible
Transferee to remain an Eligible Transferee of the Transferor for as long as
such Eligible Transferee (or, in the case of a Transfer of the shares of a
Controlled Shareholder, that Controlled Shareholder) shall have any registered
or beneficial interest in any Shares and shall indemnify the other Parties
against any loss, damage or expense incurred as a result of the failure by the
Eligible Transferee to comply with the provisions of this Agreement.

(d)        No Shareholder shall, directly or indirectly,
pledge or otherwise grant or allow a Lien to exist in respect of any Shares or
Securities held by that Shareholder, provided this provision shall not be read
as prohibiting Shareholders from entering into voting or pooling arrangements.

 3.2       Endorsement on
Certificates

Share certificates of the
Corporation shall bear the following legends either as an endorsement or on the
face thereof:

"UNLESS PERMITTED UNDER SECURITIES
LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE
DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) THE DISTRIBUTION DATE,
AND (II)

- 23 -

THE DATE THE ISSUER BECAME A REPORTING ISSUER IN AN
PROVINCE OR TERRITORY."

"NONE OF THE SECURITIES REPRESENTED
HEREBY HAVE BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED,
NONE MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND
IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS."

"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON THEIR TRANSFER AND ALL THE OTHER TERMS AND CONDITIONS OF A
UNANIMOUS SHAREHOLDERS' AGREEMENT, A COPY OF WHICH IS ON FILE AT THE REGISTERED
OFFICE OF THE CORPORATION."

Any certificate issued at any time in exchange or
substitution for any certificate bearing such legends shall also bear such
legends, unless in the opinion of counsel for the Corporation, the Shares
represented thereby are no longer subject to the provisions of this Agreement
or the restrictions imposed under the Securities Act (British Columbia)
or other applicable securities laws, in which case the applicable legend (or
legends) may be removed.

 3.3        Shareholder
Representations and Warranties

Notwithstanding anything else contained herein, on any sale
of Shares by a Shareholder to another Shareholder or the Corporation, each
Shareholder shall not be required to represent and warrant to another
Shareholder or to the Corporation anything beyond that:

(a)        its Shares are owned by it with a good
and marketable title thereto, free and clear of any liens, charges, mortgages
and encumbrances (other than as contemplated pursuant to this Agreement); and

(b)        it has the power and authority to
convey its Shares.

 3.4        Purchase of Shares of a
Shareholder

A Triggering Event is the occurrence of any one of the
following events with respect to a Shareholder (the "Defaulting Shareholder"):

(a)        the Shareholder or its Principal or an
Eligible Transferee (if applicable) of such Shareholder takes steps to exercise
rights of dissent or appraisal or other similar rights under the Act or
otherwise breaches any of the terms of this Agreement (including any breach
relating to Transfer of Shares or of shares of a Shareholder contrary to the
provisions of this Agreement) and such breach is not remedied within 15 days
following the receipt of a written notice from one of the other Shareholders or
the Corporation indicating the alleged breach;

(b)        the Shareholder, its Principal or an
Eligible Transferee (if applicable) of such Shareholder makes an assignment for
the benefit of his or its creditors generally or files a proposal under the Bankruptcy
and Insolvency Act (Canada) or a receiving order is made or a petition is
filed under the Bankruptcy and Insolvency Act (Canada) against the

- 24 -

Shareholder, its Principal or its Eligible Transferee (if
applicable) or the Shareholder, its Principal or its Eligible Transferee (if
applicable) makes an application under the Companies Creditors Arrangement
Act (Canada);

(c)        a resolution is passed for, or a
judgment or order is issued by any court of competent jurisdiction ordering,
the winding-up or other liquidation or dissolution of the Shareholder, its
Principal or its Eligible Transferee (if applicable);

(d)        any receiver, manager,
receiver-manager, liquidator or trustee of the property, assets or undertaking
of the Shareholder, its Principal or its Eligible Transferee (if applicable) is
appointed pursuant to the terms of a debenture or similar instrument and such
appointment is not revoked or withdrawn within 30 days of the appointment;

(e)       
with respect to a
Shareholder who is an individual, if such Shareholder becomes subject to an
application or proceeding brought under the Family Law Act (British
Columbia), the Divorce Act (Canada) or the Wills, Estates and Succession
Act (British Columbia), as amended or re-enacted from time to time, for
support or maintenance and/or to determine the entitlement of the spouse or
former spouse to the net family property (as defined in the Family Law Act)
of the Shareholder, and the Shareholder does not provide to the Board, within
30 days after the date on which the application or proceeding is brought and in
any event before such application, or proceeding is determined, evidence
satisfactory to the Board, acting reasonably, that the financial claim of the
spouse or former spouse to this entitlement can be settled without, in any way,
directly or indirectly, affecting or interfering with or requiring a Transfer
of Shares held by the Shareholder or the spouse or former spouse (provided that
if such evidence cannot be provided within such time period, then within such
other time period as the Board may in its discretion determine);

(f)        
the Shareholder permits his or its
Shares to be liable, directly or indirectly, to seizure, or the Principal of
such Shareholder (if applicable) permits his or its shares of, or other
interest in, any entity which holds Shares, directly or indirectly, to be
liable to seizure and such order or right of seizure is not revoked or
withdrawn within 30 days of its promulgation or vesting, as the case may be; or

(g)       
with respect to a Shareholder who is an
individual, if such Shareholder's employment with the Corporation is terminated
for Cause.

A Defaulting Shareholder or his or her legal, personal representative
shall give notice to the other Parties then bound by this Agreement that an
event has occurred with respect to such Defaulting Shareholder which
constitutes a Triggering Event or which would, if such event is not corrected
or remedied or otherwise resolved to the satisfaction of the other Shareholders
as contemplated above, constitute such a Triggering Event. Such notice shall be
given forthwith after the occurrence of the particular event.

For the purposes of this Agreement, all Triggering Events
shall be deemed to have occurred on the date the Defaulting Shareholder or his
or her legal personal representative first gives notice to the Corporation of
the occurrence of the particular Triggering Event, or on the date the
Corporation or any other Shareholder first becomes aware of the occurrence of
such Triggering Event, whichever is earlier.

Upon the occurrence of any Triggering Event, the
Corporation shall have the option, exercisable at any time prior to the date
that is 45 days following the date of the Triggering Event as determined in
accordance with this Section 3.4, to purchase for cancellation, upon the
exercise of such option, all of the Shares (in this Section 3.4, the "Sale Shares")
beneficially owned or Controlled by the Defaulting Shareholder and each
Eligible Transferee (if applicable) thereof for a cash purchase price equal to

- 25 -

(a)       
80% of the fair market value of the
Sale Shares (which shall be the fair market value of the Shares, as calculated
in the manner provided in Schedule C) as of the most recent Calculation Date if
the Triggering Event is the occurrence of an event under Sections 3.4(a),
3.4(b), 3.4(c), 3.4(d), or 3.4(f);

(b)       
the lesser of (i) the cost of the Sale
Shares, or (ii) 50% of the fair market value of the Sale Shares (which shall be
the fair market value of the Shares, as calculated in the manner provided in
Schedule C) as of the most recent Calculation Date, if the Triggering Event is
the occurrence of an event under Section 3.4(g); or

(c)       
the fair market value of the Sale
Shares (which shall be the fair market value of the Shares, as calculated in
the manner provided in Schedule C) as of the most recent Calculation Date if
the Triggering Event is the occurrence of an event under Section 3.4(e);

and the Defaulting Shareholder and each Eligible Transferee
(if applicable) thereof, upon the exercise of such option, shall be obligated
to sell to the Corporation, the Sale Shares, upon and subject to the terms and conditions
hereinafter set forth.

If the Corporation does not exercise
its option pursuant to this Section 3.4, then it shall provide notice thereof
(a "sale notice") and each of the Shareholders (other than (i) the
Defaulting Shareholder, (ii) any Shareholder that is a non-resident of Canada
or a public corporation (other than a prescribed venture capital corporation)
for purposes of the Income Tax Act (Canada) or a corporation whose class
of shares of the capital stock is listed on a designated stock exchange as
defined in the Income Tax Act (Canada), (iii) any Shareholder that is
controlled directly or indirectly by one or more persons described in (ii)
above, and (iv) any Shareholder if by the purchase of any Sale Shares by such
Shareholder, such purchase would be deemed a Material Adverse Transfer) shall
have the option to purchase all of the Sale Shares on the same terms as the
Corporation. Such option shall be exercisable by notice given to the Defaulting
Shareholder and the Corporation within 90 days after receipt of the sale
notice, to agree that he or it will purchase its Pro Rata Part of the Sale
Shares (provided that for the purposes of calculating a Shareholder's Pro Rata
Part in this Section 3.4, the denominator shall exclude the Shares then held by
(i) the Defaulting Shareholder, (ii) any shareholder that is a non-resident of
Canada or a public corporation (other than a prescribed venture capital
corporation) for purposes of the Income Tax Act (Canada) or a
corporation whose class of shares of the capital stock is listed on a designated
stock exchange as defined in the Income Tax Act (Canada), (iii) any
Shareholder that is controlled directly or indirectly by one or more persons
described in (ii) above, and (iv) any Shareholder if by the purchase of any
Sale Shares by such Shareholder, such purchase would be deemed a Material
Adverse Transfer) and, if any Shareholder declines to purchase its Pro Rata
Part, the number of Sale Shares in excess of its Pro Rata Part, if any. Any
Shareholder not giving notice in accordance with this paragraph shall be deemed
to have declined to purchase any of the Sale Shares. If no notice is given by a
Shareholder under this Section 3.4, such Shareholder shall be deemed to have
rejected the offer made available to it to purchase its Pro Rata Part of the
Sale Shares. The Sale Shares shall be allocated to those Shareholders
delivering a notice under this paragraph on a proportionate basis. If any
Shareholder declines (or is deemed to have declined) to purchase its Pro Rata
Part, the unclaimed Sale Shares will be allocated, on a pro rata basis, to each
Shareholder that has indicated a desire to acquire more than his or its
respective Pro Rata Part, provided that no Shareholder will be allocated a
number of Sale Shares greater than the number that such Shareholder has
indicated he or it wishes to purchase. The provisions of this paragraph will be
applied, mutatis mutandis, until all of the Sale Shares which the Shareholders
have agreed to purchase pursuant to this paragraph have been allocated among
the Shareholders.

The completion of a purchase and sale of Shares under this
Section 3.4 shall take place on the 30th day after the expiry of the applicable
period referred to in the preceding paragraph of this Section 3.4.

If any one or more of the
Shareholders determines not to accept the offer as contemplated in this Section
3.4 and that portion of the Sale Shares remains unallocated, the Corporation
shall have the option, but not the obligation, to find a Person (other than the
Corporation or a Subsidiary) to purchase from the Defaulting

- 26 -

Shareholder any of the Sale Shares not so allocated to
Shareholders pursuant to Section 3.4 on the same terms and conditions as
offered to the Shareholders and as set out in this Section 3.4.

Any decision taken by the Corporation pursuant to this
Section 3.4 shall exclude the Defaulting Shareholder or its Principal from the
decision, including but not limited to, when the Defaulting Shareholder has the
right to nominate a director hereunder, the directors nominated by such
Defaulting Shareholder.

3.5       Death or Incapacity of a
Shareholder

(a)     
Upon the death or Incapacity of any
individual Shareholder or a Principal (in this Section 3.5, the "Deceased"),
the Corporation shall have the option, exercisable at any time prior to the
date that is two years after such death or Incapacity, to purchase for
cancellation, for cash at closing, all of the Shares (in this Section 3.5, the
"Purchased Shares") beneficially owned or Controlled by the Deceased
from the heirs, executors, administrators or personal representatives of the
Deceased (in this Section 3.5, the "Vendor"), for a cash purchase price
equal to the fair market value of the Purchased Shares immediately before the
time of death or Incapacity of the Deceased, unless the purchase of the
Purchased Shares is not completed within 120 days in which case the purchase
price shall be the fair market value as of the purchase date (which shall be
the fair market value of the Shares, as calculated on the most recent Calculation
Date in the manner provided in Schedule C) and the Vendor, upon the exercise of
such option, shall be obligated to sell to the Corporation, the Purchased
Shares, upon and subject to the terms and conditions hereinafter set forth. If
the Corporation does not exercise its option pursuant to this Section 3.5(a),
then it shall offer to the Shareholders (other than the Deceased) the option to
purchase all of the Purchased Shares of the Deceased on the same terms as the
Corporation. If the Purchased Shares are offered to each of the Shareholders
(other than the Deceased), each of such Shareholders shall have the right,
exercisable by notice given to the Corporation within 90 days after receipt of
the notice of such option from the Corporation, to agree that he or it will
purchase its Pro Rata Part of the Purchased Shares (provided that for the
purposes of calculating a Shareholder's Pro Rata Part in this Section 3.5, the
denominator shall exclude the Shares then held by the Deceased) and, if any Shareholder
declines to purchase its Pro Rata Part, the number of Purchased Shares in
excess of its Pro Rata Part, if any. Any Shareholder not giving notice in
accordance with this paragraph shall be deemed to have declined to purchase any
of the Purchased Shares. If no notice is given by a Shareholder under this
Section 3.5(a), such Shareholder shall be deemed to have rejected the offer
made available to it to purchase its Pro Rata Part of the Purchased Shares. The
Purchased Shares shall be allocated to those Shareholders delivering a notice
under this paragraph on a proportionate basis. If any Shareholder declines (or
is deemed to have declined) to purchase its Pro Rata Part, the unclaimed
Purchased Shares will be allocated, on a pro rata basis, to each Shareholder
that has indicated a desire to acquire more than his or its respective Pro Rata
Part, provided that no Shareholder will be allocated a number of Purchased
Shares greater than the number that such Shareholder has indicated he or it
wishes to purchase. The provisions of this paragraph will be applied, mutatis
mutandis, until all of the Purchased Shares which the Shareholders have agreed
to purchase pursuant to this paragraph have been allocated among the
Shareholders. If, following the process outlined above, the Vendor continues to
own any of the Purchased Shares, then the Corporation shall be deemed to have
exercised its notice to purchase such shares from the Vendor in accordance with
the provisions of this Section 3.5(a).

(b)    
The closing of the transaction of purchase
and sale contemplated by this Section 3.5 shall take place on the date which
shall be the latest of:

(i)         the date which is five days
after the exercise of the option;

- 27 -

(ii)         
the date which is
seven days following receipt of all necessary consents and approvals required
to be obtained in order to effect a valid transfer of the Purchased Shares (and
the parties hereto covenant and agree to use their best efforts to obtain such
releases); and

(iii)        
the date which is 30 days after the
purchase price for the Purchased Shares is finally determined in accordance
with Schedule C.

If any one or more of the Shareholders determines not to
accept the offer as contemplated in this Section 3.5 and that a portion of the
Purchased Shares remain unallocated, the Corporation shall have the option, but
not the obligation, to find a Person (other than the Corporation or a
Subsidiary) to purchase from the Deceased any of the Purchased Shares not so
allocated to Shareholders pursuant to Section 3.5 on the same terms and
conditions as offered to the Shareholders and as set out in this Section 3.5.

Any decision taken by the Corporation pursuant to this
Section 3.5 shall exclude the Deceased from the decision, including but not
limited to, when the Deceased has the right to nominate a director hereunder,
the directors nominated by the Deceased.

3.6       Right of First Refusal

(a)     
If (i) any
Shareholder (the "Selling Shareholder") wishes to sell any of the Shares
or Securities held by him or her for cash or Marketable Securities to any
Person or group of Persons dealing at arm's length with the Selling
Shareholder, or (ii) receives a bona fide offer (a "Third Party Offer")
from any Person or group of Persons dealing at arm's length with the Selling
Shareholder (a "Third Party") to purchase all or any part of the Selling
Shareholder's Shares or Securities which offer is acceptable to it and if such
sale would otherwise be permitted under this Agreement, the Selling Shareholder
shall first give notice (the "First Refusal Notice") to the Corporation
first and each of the other Shareholders second (the "Other Shareholders")
of such proposed sale. The First Refusal Notice shall state the number of
Shares or Securities the Selling Shareholder wishes to sell, the price which
the Selling Shareholder is willing to accept for such Shares or Securities and
other key terms. If, at the time of delivering the First Refusal Notice, the
Selling Shareholder has received a Third Party Offer, the First Refusal Notice
shall include (i) a statement that the Selling Shareholder has received a Third
Party Offer which the Selling Shareholder is willing to accept and that the
offer is bona fide and from a Person acting at arm's length to the Selling
Shareholder and that the Selling Shareholder will not receive, directly or
indirectly, any Collateral Benefit as a result of accepting the Third Party
Offer, (ii) a copy of the Third Party Offer, (iii) if the consideration
includes Marketable Securities, a valuation prepared in accordance with Section
3.9 and (iv) the identity of the Third Party and the beneficial owner of the
Third Party, if applicable.

(b)    
The Corporation shall have the right,
exercisable by notice given to the Selling Shareholder within 30 days after the
delivery of the First Refusal Notice, to agree that it will purchase some or
all of the Shares or Securities being sold by the Selling Shareholder for the
price and on the terms of payment set out in the First Refusal Notice or, if
applicable, the Third Party Offer, provided that, in the case of a Third Party
Offer, if the consideration includes Marketable Securities, the Corporation
will be deemed to have satisfied the requirement to agree to purchase at the
same price if, in respect of the portion of the consideration which is Marketable
Securities, the Corporation agrees to pay cash equal to the value of that
consideration as set out in the valuation provided by the Selling Shareholder
pursuant to Section 3.9.

(c)     
Subject to Section 3.6(b), each of the
Other Shareholders shall have the right, exercisable by notice given to the
Selling Shareholder and the Other Shareholders within 60 days after the

- 28 -

receipt of the First Refusal Notice, to agree that he, she
or it will purchase its Pro Rata Part of the Shares or Securities being sold by
the Selling Shareholder to the extent that the Corporation declines to purchase
the Shares or Securities subject to the First Refusal Notice (provided that for
the purposes of calculating a Shareholder's Pro Rata Part in this Section 3.6,
the denominator shall exclude the Shares then held by the Selling Shareholder)
and, if any Other Shareholder declines to purchase its Pro Rata Part, the
number of Shares or Securities in excess of its Pro Rata Part, if any, for the
price and on the terms of payment set out in the First Refusal Notice or, if
applicable, the Third Party Offer, provided that, in the case of a Third Party
Offer, if the consideration includes Marketable Securities, any Other
Shareholder will be deemed to have satisfied the requirement to agree to
purchase at the same price if, in respect of the portion of the consideration
which is Marketable Securities, that Other Shareholder agrees to pay cash equal
to the value of that consideration as set out in the valuation provided by the
Selling Shareholder pursuant to Section 3.9.

Any Other Shareholder not giving
notice in accordance with this Section 3.6(c) shall be deemed to have declined
to purchase any of the Shares or Securities offered by the Selling Shareholder.

The Shares or Securities subject to
the First Refusal Notice shall be allocated to those Other Shareholders
delivering a notice pursuant to this Section 3.6(c) on a proportionate basis
based on the number of Shares held by each such Other Shareholder. If any Other
Shareholder declines (or is deemed to decline) to purchase its Pro Rata Part,
the unclaimed Shares or Securities will be allocated, on a pro rata basis, to
each Other Shareholder that has indicated a desire to acquire more than his or
its respective Pro Rata Part, provided no Other Shareholder will be allocated a
number of Shares or Securities greater than the number that such Other
Shareholder has indicated he or it wishes to purchase. Subject to Section
3.6(b), the provisions of this Section 3.6(c) will be applied, mutatis
mutandis, until all of the Shares or Securities which the Other Shareholders
have agreed to purchase pursuant to Section 3.6(c) have been allocated among
the Other Shareholders.

For greater certainty, no rights shall arise under Section
3.7 in respect of any purchases by Shareholders pursuant to the exercise of
rights under this Section 3.6.

(d)        If the subject Shares or Securities are
to be sold to the Corporation or any Other Shareholder hereunder, the purchase
and sale shall be completed on the 60th day after (i) delivery of the First
Refusal Notice, or (ii) the 45 day period referred to in Section 3.6(e), as
applicable.

(e)        If the Corporation or the Other
Shareholders do not agree to purchase all of the Shares or Securities subject
to the First Refusal Notice, the Selling Shareholder shall be entitled, at its
option, to withdraw the offer contained in the First Refusal Notice and
thereafter shall, subject to compliance with Section 3.7 and provided such
Transfer is not a Material Adverse Transfer, be entitled to sell the Shares or
Securities subject to the First Refusal Notice to a Third Party in a bona fide
transaction at a price and on terms and conditions no more favourable to the
Third Party than those contained in the First Refusal Notice or, if applicable,
on the terms of the Third Party Offer for a period of 125 days after delivery
of the First Refusal Notice. If the sale is not completed within such 125 day
period, the provisions of Section 3.6 shall again apply to any proposed sale of
Shares or Securities and so on from time to time.

(f)         The provisions of this Section 3.6
shall not apply to the Transfer of any Shares or Securities (i) to an Eligible
Transferee in accordance with the provisions of 3.1(d); and (ii) to which the
drag-along rights contained in Section 3.8 apply, and in each case provided the
provisions of such Section are exercised in accordance with the terms thereof.

- 29 -

 3.7       Piggyback Right on Sale of
Shares

(a)        If any Shareholder (the "Piggy-Back Offeree")
receives a written offer (the "Offer") from a Third Party to purchase
any of the Shares or Securities held by the Piggy-Back Offeree, prior to any
acceptance of the Offer, the Piggy-Back Offeree shall obtain from the Third
Party a bona fide offer (the "Piggy-Back Offer") addressed to all of the
other Shareholders to purchase the same proportion of the Shares and Securities
held by each such Shareholder as the Piggy-Back Offeree is permitted to sell
pursuant to the Offer. The Piggy-Back Offer shall contain terms and conditions
identical to those contained in the Offer, subject to the provisions of Section
3.7(b). If the consideration in respect of the Piggy-Back Offer includes
Marketable Securities, the Piggy-Back Offer shall include a valuation prepared
in accordance with Section 3.9. The Piggy-Back Offeree shall, at least 20 days
prior to the date specified for compliance with the transaction of purchase and
sale contemplated in the Offer, deliver the Piggy-Back Offer to all of the
other Shareholders. The Piggy-Back Offer shall be irrevocable and shall be open
for acceptance by the other Shareholders for 20 days after receipt.

(b)        The Piggy-Back Offeree shall not be permitted to
sell any of its Shares or Securities pursuant to the Offer unless:

(i)           
the Offer and the Piggy-Back Offer do
not provide a Collateral Benefit to any Shareholder, its Principal or any
Affiliate or Related Party thereof; and

(ii)         
the Piggy-Back Offer is conditional
upon completion of the purchase by the Third Party of the Shares or Securities
subject to the Offer.

If required by the Third Party pursuant to the Offer and
the Piggy-Back Offer, the PiggyBack Offeree and the Shareholders who accept the
Piggy-Back Offer must provide several but not joint representations, warranties
and covenants as may be reasonably requested by the Third Party, provided that
liability thereunder shall be limited to that portion of the aggregate purchase
price received by a Shareholder. Notwithstanding the foregoing, Shareholders
who are at arm's length with the Founders shall not be obliged, in connection
with any sale under this Section 3.7, to provide representations, warranties or
indemnities with respect to any matter other than their ownership of the
securities to be sold, the absence of encumbrances and their entitlement to
complete the sale transaction in question.

(c)        The holders of Shares or
Securities shall have the right, exercisable by notice given to the Piggy-Back
Offeree, as agent for and on behalf of the Third Party, within 15 days after
receipt of the Piggy-Back Offer, to accept the Piggy-Back Offer. Any holder of
Shares or Securities not giving notice under this Section 3.7(c) shall be
deemed to have declined the Piggy-Back Offer.

(d)        If any holders of the Shares or Securities
accept the Piggy-Back Offer, the purchase and sale of the Shares and Securities
to the Third Party pursuant to the Piggy-Back Offer shall be completed in
accordance with the provisions of the Piggy-Back Offer and at the same time as
the purchase and sale of the Shares or Securities by the Piggy-Back Offeree to
the Third Party pursuant to the Third Party Offer and as part of the same
closing.

(e)        The provisions of this Section shall not apply
to the Transfer of any Shares or Securities to an Eligible Transferee in
accordance with the provisions of 3.1(d).

 3.8       Drag-Along Right 

(a)        Notwithstanding the provisions of Section 3.6,
if any Shareholder receives an offer (the "Original Offer") from a Third
Party to purchase all (but not less than all) of the outstanding

- 30 -

Shares and Securities (which
transaction may include, without limitation, an offer pursuant to a merger,
consolidation or other Liquidity Event) and the repayment of all debt owing by
the Corporation to the Shareholders, and the Original Offer is (i) approved by
the Board and (ii) accepted by Shareholders holding at least 66 2/3% of the
outstanding Shares (which 66 2/3% must include a majority of the Class A
Preferred Shares), voting together as a single class (the "Accepting
Shareholders"), then the Accepting Shareholders may, at their option,
deliver to each of the Shareholders who have not accepted the Original Offer
(the "Forced Shareholders") an offer from the Third Party addressed to
each of the Forced Shareholders (a "Drag-Along Offer") to purchase all
of the Shares and other Securities held by the Forced Shareholders and the
repayment of all debt owing by the Corporation to the Forced Shareholders on
the same terms and conditions as contained in the Original Offer, and otherwise
subject to the provisions of Section 3.8(b). Each of the Accepting Shareholders
shall provide a representation with respect to itself to the Forced
Shareholders that it will not receive, directly or indirectly, any Collateral
Benefit as a result of accepting the Original Offer. If the consideration in
respect of the Drag-Along Offer includes consideration other than cash, the
Drag-Along Offer shall include a valuation prepared in accordance with Section
3.9. The Drag-Along Offer shall be irrevocable.

(b)        In order for the Forced Shareholders to be
required to sell their Shares pursuant to the Drag-Along Offer, the Drag-Along
Offer must:

(i)         be bona fide and from a party acting at
arm's length to the Shareholders;

(ii)        not provide a Collateral Benefit to any
Shareholder, its Principal or any Affiliate or Person not at arm's length to
such Shareholder;

(iii)       if required by the
Third Party pursuant to the Drag-Along Offer, each of the Shareholders and its
Principal must provide such representations, warranties and covenants (on a
several but not joint basis) as may be reasonably requested by the Third Party,
provided that such representations and warranties are typical and customary for
a transaction of such nature and provided further that liability thereunder
shall be limited to the lesser of (i) that portion of the aggregate purchase
price received by that Shareholder and (ii) that Shareholder's pro rata portion
of any claim made in connection with such representations and warranties.
Notwithstanding the foregoing, Shareholders who are at arm's length with the
Founders shall not be obliged, in connection with any sale under this Section
3.8, to provide representations, warranties or indemnities with respect to any
matter other than their ownership of the securities to be sold, the absence of
encumbrances and their entitlement to complete the sale transaction in
question.

(c)        The Forced Shareholders shall be obliged to
accept the Drag-Along Offer (or otherwise take all necessary action to enable
the Corporation to consummate the proposed transaction, as applicable) within
three Business Days of receipt. The acceptance of the Drag-Along Offer shall be
made in writing and a copy of the acceptance (or of the accepted Drag-Along
Offer) shall be delivered to the Accepting Shareholders within such three
Business Day period.

(d)        If any of the Forced
Shareholders do not accept the Drag-Along Offer within the three Business Day
period referred to in Section 3.8(c), any of the Accepting Shareholders shall
be entitled and required to accept the Drag-Along Offer on behalf of those
other Shareholders and to deliver the same to the Third Party and, for such
purpose, each of the Shareholders hereby appoints each of the Shareholders
which becomes an Accepting Shareholder as its attorney, with full power of
substitution, in the name of the Forced Shareholder to accept the Drag-Along
Offer and to execute and deliver all documents and instruments to give effect
to such acceptance and to establish a binding contract of purchase and sale
between each of the Forced Shareholders and

- 31 -

the Third Party with respect to all
of the Shares and Securities held by the Forced Shareholders and to execute and
deliver all deeds, transfers, assignments and assurances necessary to
effectively Transfer such Shares and Securities to the Third Party; provided
that the purchase price for the Shares and Securities is deposited in the
manner set forth below. Such appointment, being coupled with an interest, is
irrevocable by the Shareholders. Each of the Shareholders agrees that it will
perform the agreement resulting from acceptance of the Drag-Along Offer in
accordance with its terms and will ratify and confirm all that any of the
Accepting Shareholders may do or cause to be done pursuant to the foregoing.
The power of attorney granted in this Section 3.8(d) is not intended to be an
enduring power of attorney within the meaning of and governed by the Power
of Attorney Act (British Columbia), or any similar power of attorney under
equivalent legislation in any of the provinces or territories of Canada (a "CPOA").
The execution of this Agreement shall not terminate any CPOA granted by a
Shareholder previously and this power of attorney shall not be terminated by
the execution by a Shareholder in the future of a CPOA, and each Shareholder
hereby agrees not to take any action that results in the termination of this
power of attorney. If, at the time of closing, a Forced Shareholder does not
complete the sale for any reason, the Third Party shall have the right to
deposit the purchase price for the Shares or Securities to be purchased and
sold for the account of such Forced Shareholder (without withholding, deduction
or set-off in any manner whatsoever, other than any withholding required or
expressly permitted by applicable tax law) in an interest bearing account with
the bankers of the Corporation in the name of the Forced Shareholder and that
deposit shall constitute valid and effective payment of the purchase price to
such Forced Shareholder. If payment of the purchase price is so deposited, then
from and after the date of deposit, notwithstanding that certificates or instruments
evidencing the Shares or Securities may not have been delivered to the Third
Party:

(i)         
the purchase shall be deemed to have
been fully completed and the records of the Corporation may be amended
accordingly;

(ii)        
all right, title, benefit and interest,
both at law and in equity, in and to the Shares or Securities shall be
conclusively deemed to have been transferred and assigned to and become vested
in the Third Party; and

(iii)       
all right, title, benefit and interest
of such Forced Shareholder and of any other Person (other than the Third Party)
having an interest in such Shares or Securities, legal or equitable, in any
capacity whatsoever shall cease.

(e)        The purchase and sale of Shares in
accordance with the provisions of the Drag-Along Offer shall be completed at
the same time as the completion of the purchase and sale of Shares and/or
Securities between the Accepting Shareholders and the Third Party in accordance
with the Original Offer received by the relevant Shareholder(s) and as part of
the same closing within 20 days after expiry of the three Business Day period
referred to in Section 3.8(c).

(f)        
If, at any time,
the Corporation or a Shareholder receives from a Person or Persons acting bona
fide and at arm's length with the Corporation an offer to purchase all or
substantially all of the assets of the Corporation which offer is acceptable to
Shareholders holding at least 50% of the outstanding Class A Preferred Shares,
then each of the other Shareholders hereby agrees to cast such votes and sign
such resolutions and other instruments as may be necessary or desirable to be
obtained from such Shareholder, in its capacity as a shareholder of the
Corporation, in order to evidence its approval of and to permit such transaction(s) of purchase and sale. For greater certainty, each of the
Shareholders shall execute and deliver any tax elections, filings or other such
forms as may be appropriate so as to result in available tax efficiencies, all
as the Corporation may reasonably request (any such request being deemed to be
reasonable in respect

- 32 -

of a Shareholder unless it would result
in a materially adverse tax consequence to such Shareholder). If any of the
Shareholders do not comply with the requirements set out in this Section 3.8(f)
within three Business Days of being requested to do so by the Corporation, the
secretary of the Corporation shall be entitled to execute and deliver such
documentation and cast any such votes on behalf of such Shareholders and, for
such purpose, each of the Shareholders hereby appoints the secretary of the
Corporation as its attorney, with full power of substitution, in the name of
the Shareholder, to execute and deliver instruments and cast votes, all as
aforesaid. Such appointment, being coupled with an interest, is irrevocable by
the Shareholders. Each of the Shareholders agrees that it will ratify and
confirm any act or instrument which the secretary of the Corporation may do or
execute pursuant to this Section 3.8(f). The power of attorney granted in this
Section 3.8(f) is not intended to be a CPOA and the execution of this Agreement
shall not terminate any CPOA granted by a Shareholder previously and this power
of attorney shall not be terminated by the execution by a Shareholder in the
future of a CPOA, and each Shareholder hereby agrees not to take any action
that results in the termination of this power of attorney. The provisions of
Section 3.8(b) shall apply to a sale pursuant to this Section 3.8(f) mutatis
mutandis.

3.9       Valuation 

Any valuation of non-cash
consideration included in a Third Party Offer will be, in the case of (i)
Marketable Securities or other equity securities which are listed on an
established nationally recognized stock exchange in Canada or the United
States, calculated based on the weighted average closing price of those
securities on such stock exchange for the 20 trading days ended at the close of
business on the day prior to delivery of the applicable notice; and (ii) other
non-cash consideration, based on a valuation prepared by a qualified business
valuator who is independent of the selling Shareholder(s), the Third Party and
the Corporation and selected jointly by each of the Shareholders who are
selling Shares pursuant to the relevant transaction and the Third Party. The
decision of the independent business valuator shall be final and binding,
absent manifest error. If there is a dispute as to the selection of the
business valuator, such dispute shall be determined as soon as possible by an
arbitrator in accordance with and subject to the provisions of the Arbitrations
Act (British Columbia) and any decision thereof shall be final and binding
upon all parties to the dispute. If the Parties to the dispute are unable to
agree upon a sole arbitrator, the arbitration shall be conducted by three
arbitrators, one appointed by the selling Shareholder(s), one appointed by the Third
Party and a third selected by the two arbitrators. If the two arbitrators fail
to agree on a third arbitrator, the matter shall be referred by either party to
a judge of the Supreme Court of British Columbia who shall appoint the third
arbitrator.

Any and all costs incurred in connection with the valuation
contemplated in this Section 3.9 shall be borne by the selling Shareholder.

3.10     Exclusivity
of Sections

Each of Sections 3.6, 3.7 and 3.8 are
exclusive and the provisions of such sections may only be relied upon by any
Party to this Agreement if the provisions of one of the other of such Sections
are not at the same time being relied upon by the same or another Party to this
Agreement, provided that if, during the 45 day period referred to in Section
3.6(3), a Shareholder (the "Dragging Shareholder") receives an offer
from a Third Party to purchase all of the Shares and Securities which is
accepted by the Accepting Shareholders as contemplated in Section 3.8 and the
purchase price under such offer is at least equal to the purchase price
referred to in the relevant First Refusal Notice pursuant to which such 45 day
period has commenced and provided that the Selling Shareholder pursuant to Section
3.6 has entered into a binding agreement of purchase and sale, then the
Dragging Shareholder shall be entitled to send the notices contemplated in
Section 3.8 and proceed with a transaction of purchase and sale as contemplated
in Section 3.8 (but subject to compliance with the provisions of Section 3.8),
notwithstanding that the 45 day period as contemplated in Section 3.6(3) may
have commenced. In such circumstances, the Selling Shareholder shall be
entitled to complete the transaction of purchase and sale to the Third Party as
contemplated in Section 3.6(3), provided that such Third Party purchaser
acknowledges and agrees

- 33 -

to be bound by the terms of this Agreement including,
without limitation, the obligation to sell the Shares purchased from the
Selling Shareholder pursuant to the offer received by the Dragging Shareholder
and accepted by the Accepting Shareholders as contemplated in Section 3.8.

ARTICLE
4 TRANSFERS OF SHARES PURSUANT TO DRAG-ALONG PERMITTED

 4.1       Material Adverse Transfer,
etc.

Notwithstanding anything contained herein to the contrary
and for greater certainty, the Third Party offeror in respect of a transaction
of purchase and sale pursuant to Section 3.8 may be a Person which is carrying
on or involved in a Competitive Business and/or the Transfer of Shares pursuant
to Section 3.8 may be a Material Adverse Transfer.

ARTICLE
5 MATTERS RELATING TO ISSUANCE OF SHARES BY THE CORPORATION

 5.1       [Reserved]

 5.2       Pre-Emptive Right. 

(a)      Any Shares or Securities to be issued
by the Corporation in compliance with Sections 2.10 and 2.11 shall first be
offered to each Shareholder (the "Pre-Emptive Right Shareholders") in
proportion to the respective number of Shares then held by each of the
Pre-Emptive Right Shareholders on the date of offer.

(b)    
The pre-emptive right contained in
Section 5.2(a) will not apply in the case of Shares or other Securities issued:
(i) on an initial public offering of securities of the Corporation; (ii) in
accordance with the Stock Option Plan; (iii) in connection with acquisitions
approved by the Board; (iv) upon the exercise or exchange of any outstanding
Shares or other Securities; or (iv) in respect of stock splits, stock dividends
or similar capital reorganizations.

(c)     
The Corporation
shall make the offer of any proposed issue of Shares or Securities in writing
to all Pre-Emptive Right Shareholders of record at the time of the offer. The
offer shall include the price (which shall be payable in cash), the date of
expiry of the offer, and the date of purchase, a description of the terms and
conditions of the offered Shares or Securities, and the Person to whom the
offered Shares or Securities are otherwise proposed to be issued and will state
that any Pre-Emptive Right Shareholder that wishes to purchase more than that
Pre-Emptive Right Shareholder's Pro Rata Part (provided that for the purposes
of calculating a Shareholder's Pro Rata Part in this Section 5.2(c), the
denominator shall only include the Shares then held by each of the Pre-Emptive
Right Shareholders) must indicate the number of Shares or Securities in excess
of the Pro Rata Part the Pre-Emptive Right Shareholder is willing to purchase.

(d)     
Pre-Emptive Right Shareholders may
exercise the right to purchase the Shares or Securities to be issued by
delivering a written notice to the Corporation within 20 days following
delivery by the Corporation of the notice contemplated in Section 5.2(c)
agreeing to purchase at least its Pro Rata Part of the offered Shares or
Securities and, at its option, any number of Shares or Securities in excess of
its Pro Rata Part. Any PreEmptive Right Shareholder not delivering a notice
within such 20 day period will be deemed to have declined to purchase any of
the Shares or Securities offered.

(e)     
The offered Shares or Securities shall
be allocated to those Pre-Emptive Right Shareholders delivering notice pursuant
to Section 5.2(d) on a proportionate basis. If all Pre-Emptive Right
Shareholders do not subscribe for at least their respective Pro Rata

- 34 -

Part, the Corporation shall allocate the unclaimed Shares
or Securities to the Pre-Emptive Right Shareholders that have indicated a
desire to acquire more than that Pre-Emptive Right Shareholder's respective Pro
Rata Part, pro rata in proportion to the number of Shares held by those
Pre-Emptive Right Shareholders respectively on the date of offer, provided no
Pre-Emptive Right Shareholder will be allocated a number of Shares or
Securities greater than the number it has indicated it wishes to purchase. The
provisions of this Section 5.1 will be applied, mutatis mutandis, until all of
the offered Shares which the Pre-Emptive Right Shareholders have agreed to
purchase pursuant to Section 5.2(d) have been allocated among the Pre-Emptive
Right Shareholders. The Corporation shall provide notice in writing to each
Pre-Emptive Right Shareholder exercising rights under Section 5.2(d) of the
number of Shares and the purchase price therefor.

(f)        
If, upon the expiry of the period
referred to in Section 5.2(d), all of the Shares offered have not been
subscribed for at the offered price, the Corporation may issue the remaining
Shares or Securities to any Person within a period of 120 days following the
expiry of the period set out in Section 5.2(d), at a price and upon terms and
conditions which shall not be more favourable than those offered to the
Pre-Emptive Right Shareholders, provided such Person enters into an Assumption
Agreement. Thereafter, the Corporation may not issue Shares or Securities
without complying again with the provisions of this Article 5.

(g)       
If the offered
Shares or Securities cannot be offered or allocated to or among the PreEmptive
Right Shareholders in the proportions referred to above without being divided
into fractions, the Shares or Securities will be offered or allocated to or
among the PreEmptive Right Shareholders as nearly in proportion to the number
of Shares or Securities held by each of them at such time (on an as if
converted or exercised basis) in such manner as is determined by the Board.

(h)       
The provisions of this Section 5.1
shall apply, mutatis mutandis, to any issue of debt or securities which are
convertible into Shares or which carry with it an option, warrant or other
right or privilege to acquire any Shares.

ARTICLE
6 GENERAL SALE PROVISIONS

 6.1       Application of Provisions

The provisions of this Article 6
shall apply, with such changes in detail as may be necessary, to any sale of
Shares to the Corporation. All references in this Article 6 to the "Vendor" are
to the party or parties entitled or obligated to sell their Shares (or their
legal or other personal representatives) and all references in this Article 6
to the "Purchaser" are to the Party or Parties entitled or obligated to
purchase such shares. All references in this Article 6 to a "Sale Transaction"
are to the transaction of purchase and sale between or among such Vendor and
Purchaser and all references in this Article 6 to the "Purchase Price" and
"Purchased Shares" are to the purchase monies payable on, and the Shares to be
delivered in connection with, the completion of such Sale Transaction. All
references in this Article 6 to a "Closing" are to the date upon which such
Sale Transaction is to be completed.

 6.2       Obligations of Vendor

At or prior to the Closing, the Vendor
shall:

(a)        if deemed appropriate by the Purchaser, deliver
to the Corporation signed resignations of the Vendor and its nominees, if any,
as Directors, officers and employees of the Corporation, as the case may be;

- 35 -

(b)       
assign and
transfer to the Purchaser the Purchased Shares and deliver the share certificate(s)
representing the Purchased Shares duly endorsed for transfer to the Purchaser
or as directed by it;

(c)       
do all other things required in order
to deliver good and marketable title to the Purchased Shares to the Purchaser
free and clear of any Liens whatsoever including, without limitation, the
delivery of any governmental releases and declarations of transmission
(provided that, if at the time of Closing, the Purchased Shares are not free
and clear of all Liens whatsoever, the Purchaser may, without prejudice to any
other rights which it may have, purchase the Purchased Shares subject to such
Liens and, in that event, the Purchaser shall, at the time of Closing, assume
all obligations and liabilities with respect to such Liens and the Purchase
Price payable by the Purchaser for the Purchased Shares shall be satisfied, in
whole or in part, as the case may be, by such assumption and the amount so
assumed by the Purchaser shall be deducted from the Purchase Price Payable at
the Closing);

(d)       
if requested, either provide the
Purchaser with evidence reasonably satisfactory to the Purchaser that the
Vendor is not then a non-resident of Canada within the meaning of the Income
Tax Act (Canada) or, if required, provide the Purchaser with a certificate
pursuant to subsection 116(2) of the Income Tax Act (Canada) with a
certificate limit in an amount not less than the Purchase Price for the
Purchased Shares; provided that if such evidence or certificate is not
forthcoming, the Purchaser shall be entitled to make the payment of tax
required under section 116 of the Income Tax Act (Canada) and to deduct
such payment from the Purchase Price for the Purchased Shares; and

(e)      
deliver to the Purchaser an agreement
or certificate setting out and certifying the matters described in Section 3.3.

 6.3       Deliveries to Vendor

At or prior to the time of Closing, each of the remaining
Parties shall use reasonable efforts to cause the Corporation to deliver to
each of the Vendor and its nominees a release by the Corporation of all its
claims against each of the Vendor and its nominees, and the Vendor shall
deliver or cause its nominee to deliver to the Corporation a release by the
Vendor and its nominees of all their claims against the Corporation, with
respect to any matter or thing arising as a result of the Vendor or its
nominees being a Shareholder, director or officer of the Corporation, as the
case may be, except for any claims which might arise out of the Sale
Transactions.

 6.4       Repayment of Debts

If, at the time of Closing, the Vendor is indebted to the
Corporation in an amount recorded on the books of the Corporation and verified
by the accountant of the Corporation, the Vendor shall repay such amount to the
Corporation at the time of Closing and, if the Vendor fails to make such repayment,
the Purchaser shall be entitled to deduct the amount of such indebtedness from
the Purchase Price and the amount of the Purchase Price payable to the Vendor
shall be reduced accordingly.

If, at the time of Closing, the Corporation is indebted to
the Vendor in an amount recorded on the books of the Corporation and verified
by the accountant of the Corporation, the Corporation shall repay such amount
to the Vendor at the time of Closing and, if the Corporation fails to make such
repayment at Closing, the Purchaser shall be required to do so on behalf of the
Corporation.

 6.5       Non-Completion by Vendor

If, at the time of Closing, the Vendor fails to complete a
Sale Transaction, the Purchaser shall have the right, if not in default under
this Agreement, without prejudice to any other rights which it may have, upon

- 36 -

payment of the Purchase Price payable
to the Vendor at the time of Closing to the credit of the Vendor in the main
branch of the Corporation's bankers in the City of Vancouver or the City of New
York, to execute and deliver, on behalf of and in the name of the Vendor, such
deeds, transfers, share certificates, resignations or other documents that may
be necessary to complete the Sale Transaction and each party, to the extent it
may be a Vendor hereunder, hereby irrevocably appoints any party who becomes a
Purchaser in a Sale Transaction its attorney on its behalf with full power of
substitution, in the name of the Vendor but on behalf of and at the expense of
the Purchaser, to execute and deliver all deeds, transfers, assignments and
assurances necessary to effectively Transfer the interest being sold to the
Purchaser or its nominees. The appointment, being coupled with an interest, is
irrevocable by each Shareholder and each Shareholder agrees to ratify and
confirm all that a Purchaser may do or cause to be done pursuant to the
foregoing. Each Shareholder consents to any Transfer of Shares made pursuant to
the foregoing. The power of attorney granted in this Section 6.5 is not
intended to be a CPOA. The execution of this Agreement shall not terminate any
CPOA granted by a Shareholder previously and this power of attorney shall not
be terminated by the execution by a Shareholder in the future of a CPOA, and
each Shareholder agrees not to take any action that results in the termination
of this power of attorney. Upon such execution and delivery of such documents
by the Purchaser, the Purchaser's name shall be entered in the registers of the
Corporation in exercise of the aforesaid power, and the validity of the
proceedings shall not be subject to question by any person. On such
registration, the Vendor shall cease to have any right to or in respect of the
Shares to be sold except the right to receive, without interest, the purchase
price for the Shares deposited with the Corporation's banker.

 6.6       Agreement Binding on
Transferees

No Shares shall be effectively issued, sold, assigned,
Transferred, disposed of or conveyed, whether pursuant to a provision of
Article 3 or otherwise, by the Corporation or a Shareholder to any Person other
than a Shareholder or the Corporation, until the proposed transferee or
purchaser executes and delivers to the parties hereto an Assumption Agreement
and provided such issuance or Transfer of Shares does not constitute a Material
Adverse Issuance or Material Adverse Transfer, as the case may be (other than a
transfer of Shares contemplated under Section 4.1).

 6.7       Consents 

If any Governmental Approval is required by a Purchaser
under any provision of this Agreement, then, notwithstanding anything contained
in this, Agreement, the time period specified in this Agreement for acceptance
of the offer by the Purchaser shall be extended for an additional 90 days to
permit the Purchaser to obtain the necessary Governmental Approval. Any such
application for Governmental Approval shall be the sole responsibility of the
Purchaser who shall also be responsible for all costs and expenses incurred in
connection therewith. The other Shareholders and the Corporation shall use
reasonable efforts to cooperate with the Purchaser in any application for
Governmental Approval.

ARTICLE
7 CONFIDENTIAL INFORMATION AND COMPETITION

 7.1       Non-Competition

For so long as a Shareholder holds any
Shares and for a period of 12 months from the date on which such Shareholder
ceases to hold any Shares, such Shareholder acknowledges and agrees that he,
she or it will not participate as an owner, shareholder, director, officer,
employee, consultant or in any other capacity (1) in any business venture which
competes with the Business of the Corporation anywhere in the world in which
the Corporation does business, or (2) in, for or with any Person involved in a
Competitive Business. The restrictions in this Section are acknowledged to be
separate, distinct and severable covenants and to be reasonable and valid and
all defences to the strict enforcement thereof are hereby waived by each
Shareholder and Principal. Notwithstanding the foregoing, each Shareholder is
entitled to acquire up to 5% of the voting shares or 5% of the equity of a
corporation whose shares are traded on a public market. This Section 7.1 shall
not apply to Soluna Technologies Investments I, LLC, its Affiliates, or any
shareholder, director, officer, employee or consultant of Soluna Technologies
Investments I, LLC or its Affiliates. This Section 7.1 shall not apply to
Platinum Power SA,

- 37 -

its Affiliates, or any shareholder, director, officer,
employee or consultant of Platinum Power SA. This Section 7.1 shall not apply
to Mechanical Technology, Incorporated, its Affiliates, or any shareholder,
director, officer, employee or consultant of Mechanical Technology,
Incorporated.

7.2       Duty of Confidentiality

(a)        Except for this Agreement, and except for any
information disclosed to a shareholder or any of its Affiliates pursuant to the
terms of any other written agreement between the shareholder (or its
Affiliates) and the Corporation, any Confidential Information, written or
electronic in the possession of Shareholders or Principals shall be returned to
the Corporation on such date that any such Shareholder or, in the case of a
Principal, the Controlled Shareholder which such Principal Controls ceases to
hold any Shares. Confidential Information does not include:

(i)        
any information which is or becomes publicly
available or is in the public domain through no fault of the Shareholder or
Principal or breach of this Section 7.2;

(ii)       
any information which is the general or
Principal knowledge, skills and experience of the Shareholder or Principal;

(iii)      
any information which
is disclosed to a Shareholder or Principal by a Third Party which is under no
obligation of confidence to the Corporation provided such information was not
disclosed to such Third Party as a result of a breach of this Section 7.2;

(iv)      
any information
which is disclosed pursuant to court order or other legal compulsion; or

(v)       
any information that is disclosed to a
Shareholder or Principal by a Third Party who is not in breach of a
confidentiality obligation to the Corporation.

Each of the Parties shall treat confidentially,
and shall take reasonable precautions to ensure confidentiality of, all
Confidential Information, whether verbal, written, electronic or visually
observed and whether or not expressly advised of the confidentiality of the
information. Except as required for performance of any employment agreement
with the Corporation, the Shareholder and, if applicable, its Principal shall
not directly or indirectly use, copy, store or disclose the Confidential
Information or any trade-mark, trade name or logo of the Corporation or its
clients', during or after the Shareholder or, in the case of a Principal, the
Controlled Shareholder which such Principal Controls ceases to hold any Shares.

(b)        Notwithstanding the foregoing, the obligations
of confidentiality as contained in this Section 7.2 shall be subject to:

(i)       
the right of any Shareholder to present
to the creditors of the Corporation or any Subsidiary or to any other Person as
the Shareholders may deem appropriate, any relevant information in order to
preserve the existence of the Business of the Corporation and/or any Subsidiary
or to otherwise attempt to solve financial problems of the Corporation and its
Subsidiaries, provided confidentiality arrangements acceptable to the Board,
acting reasonably, are implemented;

(ii)      
the right of the
Shareholder, in connection with its right to sell Shares in accordance with the
provisions of this Agreement, to disclose Confidential Information to an
underwriter or investment dealer appointed by such Shareholder or the potential
purchaser in respect of such proposed sale or transaction, provided such
underwriter, investment dealer or potential purchaser agrees to be bound by the
confidentiality obligations set out in this Section 7.2, as well as a covenant
of such party not to use or allow the use for any purpose

- 38 -

of the Confidential Information or notes, summaries or
other material derived from the review of the Confidential Information, except
to advise in connection with such transaction or to determine whether to purchase
Shares from the Shareholder or otherwise acquire the Corporation; and

(iii)      
the right of the directors to discuss
the Business of the Corporation and any Subsidiary, including Confidential
Information, with the investment committee, officers, directors, employees and
advisors of a Shareholder.

Nothing in this Section 7.2(a) shall preclude a Shareholder
from using or disclosing Confidential Information if:

(i)        
the Confidential Information is
available to the public or in the public domain at the time of such disclosure
or use, without breach of this Agreement;

(ii)       
disclosure is required to be made by
any law, regulation, Governmental Body or authority or by court order;

(iii)      
disclosure is
required by any Listing Requirements applicable to such Shareholder or any of
its Affiliates; for those purposes "Listing Requirement" shall mean any
ordinance, regulation, order, directive, policy and decision promulgated or
rendered by regulatory process by any public securities exchange, including,
without limitation OTC Markets Group, the Toronto Stock Exchange, the TSX
Venture Exchange, the Canadian Securities Exchange, the New York Stock
Exchange, the Nasdaq Stock Market, the Nasdaq Global Select Market, the Nasdaq
Global Market or the London Stock Exchange;

(iv)      
disclosure is made to a court which is
determining the rights of the parties under this Agreement; or

(v)       
the Confidential Information is
permitted to be so used or disclosed pursuant to a separate written agreement
between the shareholder (or its Affiliates) and the Corporation.

(c)        Notwithstanding the foregoing, each Director
shall have the right to share information received about the Corporation
(whether at or for Board meetings or otherwise) with members, directors,
officers and advisors of the Shareholder entity or entities such director
represents.

7.3       Non-Solicitation 

(a)        Each Shareholder and Principal shall not,
directly or indirectly, on his or her own behalf or on behalf of any future
employer or client, for a period of 12 months from the date on which the
Shareholder or, in the case of a Principal, the Controlled Shareholder which
such Principal Controls ceases to hold any Shares, for any reason, solicit or
contact, directly or through others, for the purpose or with the effect of
competing or interfering with or harming any part of the Business of the
Corporation:

(i)         
any customer under contract with the
Corporation at any time during the last one year of the Shareholder's or
Principal's employment or consulting arrangement and with whom the Shareholder
or Principal dealt while employed by the Corporation;

(ii)        
any prospect that received or requested
a proposal or offer from the Corporation at any time during the last one year
of the Shareholder's or Principal's employment and with

- 39 -

whom the Shareholder or Principal dealt
while employed by or while acting as a consultant to the Corporation;

(iii)       any affiliate of any such customer or
prospect;

(iv)       any of the individual contacts
established by the Corporation or the Shareholder or Principal or others at the
Corporation during the Shareholder's or Principal's employment at the
Corporation; or

(v)        any individual who is an employee or
independent contractor of the Corporation at the time of the solicitation or
contact or who has been an employee or independent contractor within six months
before such solicitation or contact.

(b)        Each Shareholder and
Principal shall not, directly or indirectly, on his, her or its own behalf or
on behalf of any other Person, for a period of one year from the date on which
the Shareholder or, in the case of a Principal, the Controlled Shareholder
which such Principal Controls ceases to hold any Shares, for any reason,
solicit, advise, or contact, or participate as an owner, shareholder, director,
officer, employee, consultant or in any other capacity in any Competitive
Business.

 7.4       General 

Each Shareholder acknowledges that
the obligations contained in this Article 7 are not in substitution for any
obligations which that Shareholder may now or hereafter owe to the Corporation
or any Shareholder and which exist apart from this Article 7 and do not replace
any rights of the Corporation or any Shareholder with respect to any such
obligation. Each Shareholder acknowledges that a breach or threatened breach by
that Shareholder of any provision of this Article 7 will result in the
Corporation and the other Shareholders suffering irreparable harm which cannot
be calculated or fully or adequately compensated by recovery of damages alone.
Accordingly, each Shareholder agrees that the Corporation and any other
Shareholder shall be entitled to interim and permanent injunctive relief,
specific performance and other equitable remedies, in addition to any other
relief to which the Corporation or any other Shareholder may become entitled.
Each Shareholder acknowledges and agrees that the obligations pursuant to this
Article 7 will remain in effect in perpetuity.

ARTICLE
8 GENERAL

 8.1       Assumption of the
Agreement

Unless otherwise determined by the Board, the Corporation
shall cause all holders of options, warrants or other rights or securities
exercisable to acquire Shares, as a condition to the grant of such options,
warrants, rights or securities, to execute and deliver to the parties hereto an
assumption agreement substantially in the form set out in Schedule B to this
Agreement.

 8.2       Benefit of the Agreement

This Agreement shall enure to the benefit of and be binding
upon the respective heirs, executors, administrators, personal representatives,
successors and permitted assigns of the Parties hereto.

 8.3       Entire Agreement

This Agreement constitutes the entire
agreement between the Parties hereto pertaining to the subject matter hereof
and supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the Parties, and
there are no warranties, representations or other agreements between the
Parties in connection with the subject matter hereof except as specifically set
forth herein.

- 40 -

No supplement, modification, waiver, qualification or
termination of this Agreement shall be binding unless executed in writing by
the Parties to be bound thereby.

 8.4       Amendments and Waivers

No amendment to this Agreement shall be valid or binding
unless set forth in writing and duly executed by all of the Shareholders. No
waiver of any breach of any provision of this Agreement shall be effective or
binding unless made in writing and signed by the Party purporting to give the
same and, unless otherwise provided in the written waiver, shall be limited to
the specific breach waived.

 8.5       Arbitration 

Any and all disputes, claims or controversies arising out
of or in any way connected with or arising from this Agreement (other than any
disputes arising out of a valuation of the fair market value of Shares pursuant
to Schedule C of this Agreement), its negotiation, performance, breach,
enforcement, existence or validity, and failure of the parties to reach
agreement with respect to matters provided for herein and all matters of
dispute relating to the rights and obligations of the parties hereto, which
cannot be amicably resolved, even if only one of the parties declares that
there is a difference, shall be referred to and finally settled by binding
arbitration held in British Columbia in English in accordance with the
provisions of the Arbitration Act (British Columbia) from which there
shall be no appeal. Such dispute shall not be made the subject matter of an
action in any court by any party unless the dispute has been first submitted to
arbitration and finally determined in accordance with the provisions of
Schedule D. Any such action commenced thereafter shall only be for the purpose
of enforcing the decision of the arbitrators and the costs incidental to the
action. In any such action, the decision of the arbitrators shall be
conclusively deemed to determine the rights and liabilities as between the
parties to the arbitration in respect of the matter in dispute.

 8.6       Assignment 

Except as set out in this Agreement, none of the Parties
hereto may assign its rights or obligations under this Agreement without the
prior written consent of all of the other Parties. The Corporation shall have
the right to assign the benefit of all rights and obligations of the
Corporation hereunder to any Affiliate or other person in connection with a
change of control, a reorganization or any other transaction which is
determined to be in the best interests of the Corporation by the Board.

 8.7       Termination 

This Agreement shall terminate upon:

(a)       
the dissolution, insolvency or
bankruptcy of the Corporation or the making by the Corporation of an assignment
under the provisions of any bankruptcy or other insolvency legislation;

(b)       
one Shareholder becoming the beneficial
owner of all of the Shares;

(c)       
immediately before the consummation of
an initial public offering under the securities laws of Canada or the United
States or the date on which the Corporation first becomes subject to the
periodic reporting requirements as a reporting issuer in Canada or a registrant
in the United States; or

(d)      
the occurrence of a Liquidity Event.

Upon the termination of this Agreement
other than by dissolution or winding-up, each Shareholder shall be entitled to
deliver for cancellation to the Corporation all of the legended certificates
representing the Shares owned by such Shareholder and the Corporation shall
re-issue and deliver, at its sole expense, to the Shareholder,

- 41 -

certificates for such Shares without any Transfer
restrictions legended thereon, other than as may be required by law, duly
registered in the name of the Shareholder.

 8.8       Severability 

If any provision of this Agreement is determined to be
invalid or unenforceable in whole or in part, such invalidity or
unenforceability shall attach only to such provision or part thereof and the
remaining part of such provision and all other provisions hereof shall continue
in full force and effect.

 8.9       Notices 

Any demand, notice or other communication (hereinafter in
this Section 8.9 referred to as a "Communication") to be given in
connection with this Agreement shall be given in writing and may be given by
personal delivery, by courier, by registered mail, by transmittal by facsimile
transmission (provided the intended recipient has a fax machine) or by e-mail
transmission of an Adobe Acrobat file or similar means of recorded electronic
transmission, in each case addressed to the recipient as set out in Schedule E,
or to such other address, facsimile number, e-mail address or individual as may
be designated by written notice by any party to the others. Any Communication
given by personal delivery or registered mail shall be conclusively deemed to
have been given on the day of actual delivery thereof and, if given by
facsimile transmission or by e-mail, on the day of transmittal thereof if such
day is a Business Day and is received before 5:00 p.m. (local time to the
recipient) or otherwise on the next Business Day after the day of transmittal

8.10      Counterparts;
Signatures

(a)        This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which taken together shall be deemed to constitute one and the same instrument.
Counterparts may be executed either in original, faxed form or by e-mail
transmission of an Adobe Acrobat file or similar means of recorded electronic
transmission and the Parties adopt any signatures so received as original
signatures of the parties.

(b)        Each Person who proposes from time to
time to become a Shareholder, including an Eligible Transferee, shall execute
an Adoption Agreement. No Person shall become a Shareholder and no issue of
transfer of Shares shall be registered by the Corporation unless the Person has
executed an Adoption Agreement.

8.11      Governing
Law

This Agreement shall be governed by and construed in
accordance with the laws of the Province of British Columbia and the federal
laws applicable therein and shall be treated in all respects as an British
Columbia contract.

8.12     Independent
Legal Advice

(a)       
Each party hereto acknowledges that
both (i) DLA Piper (Canada) LLP, 100 King Street, Toronto, Ontario, M5X 1E2 and
(ii) Aust Legal Inc., 1010, rue de la Gauchetière Ouest, Suite 1350, Montreal,
Québec, H3A 2R7 have acted solely for the Corporation in the preparation of
this Agreement.

(b)       
Each party hereto further acknowledges
that it has been advised that each Shareholder has conflicting interests with
each of the other Shareholders in respect to the finalization of this
Agreement, and accordingly each has been advised to obtain independent legal
advice concerning the advisability of entering into this Agreement before executing
it.

- 42 -

8.13     No Voting
Trust

No Shareholder will enter into a voting trust or other
written agreement or have any other understanding with another Shareholder that
they will regularly determine together in advance how they will vote on matters
coming before the Shareholders if such agreement or trust results in sufficient
votes to gain Control of the Corporation.

8.14     Compliance
with Applicable Legislation and Other Requirements

No Party is obligated by this Agreement to, and shall not,
take any action required, permitted or otherwise contemplated by this Agreement
except in accordance with applicable laws.

[Remainder
of Page Intentionally Left Blank]

 

 

 

 

 

 

 

EXHIBIT F 

FORM OF REGISTRATION RIGHTS AGREEMENT

 

(see
attached)

 

 

 

 

 

Execution copy

 

SOLUNA
TECHNOLOGIES, LTD.

 REGISTRATION RIGHTS AGREEMENT

January 13, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TABLE OF
CONTENTS

Page

1.         Definitions........................................................................................................................... 1

 

2.         Registration Rights.............................................................................................................. 3

2.1       Demand
Registration............................................................................................... 3

2.2       Corporation Registration......................................................................................... 5

2.3       Underwriting Requirements..................................................................................... 5

2.4       Obligations of
the Corporation................................................................................ 7

2.5       Furnish Information................................................................................................. 8

2.6       Expenses of
Registration......................................................................................... 8

2.7       Delay of
Registration............................................................................................... 8

2.8       Indemnification........................................................................................................ 9

2.9       Reports Under Exchange Act................................................................................ 11

2.10     "Market Stand-off"
Agreement.............................................................................. 11

2.11     Restrictions on
Transfer......................................................................................... 12

2.12     Termination of Registration Rights.......................................................................... 13

 

3.         Miscellaneous.................................................................................................................... 14

3.1       Successors and
Assigns......................................................................................... 14

3.2       Governing Law...................................................................................................... 14

3.3       Counterparts.......................................................................................................... 14

3.4       Titles and Subtitles................................................................................................. 14

3.5       Notices.................................................................................................................. 15

3.6       Amendments and Waivers...................................................................................... 15

3.7       Severability............................................................................................................ 16

3.8       Aggregation of
Shares............................................................................................ 16

3.9       Additional Investors............................................................................................... 16

3.10     Entire Agreement................................................................................................... 16

3.11     Dispute Resolution................................................................................................. 16

3.12     Delays or Omissions.............................................................................................. 17

3.13     Application of Canadian Securities
Laws................................................................ 17

 

Schedule A ................................................................................................................................... 19

Schedule of Investors......................................................................................................... 19

 

i

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"),
is made as of the 13th day of January, 2020, by and among Soluna
Techonogies, Ltd., a corporation governed by the laws of British Columbia (the
"Corporation"), and each of the investors listed on Schedule A
hereto, each of which is referred to in this Agreement as an "Investor"
and any Additional Purchaser (as defined in the Purchase Agreement) that
becomes a party to this Agreement in accordance with Section 6.9 hereof.

RECITALS 

WHEREAS, the Corporation and the Investors are parties to that
certain Class A Preferred Share Purchase Agreement of even date herewith (the "Purchase
Agreement"); and

WHEREAS, in order to induce the Corporation to enter into the
Purchase Agreement and to induce the Investors to invest funds in the
Corporation pursuant to the Purchase Agreement, the Investors and the
Corporation hereby agree that this Agreement shall govern the rights of the
Investors to cause the Corporation to register shares of Common Shares issuable
to the Investors;

NOW, THEREFORE, the parties hereby agree as follows:

1.         Definitions.
For purposes of this Agreement:

 1.1          "Affiliate"
means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or
is under common control with such Person, including without limitation any
general partner, managing member, officer, director or trustee of such Person,
or any venture capital fund or registered investment Corporation now or
hereafter existing that is controlled by one or more general partners, managing
members or investment adviser of, or shares the same management Corporation or
investment adviser with, such Person.

 1.2          "Articles"
means the Corporation's Amended and Restated Articles of Incorporation, as amended and/or
restated from time to time.

 1.3          "Board of
Directors" means the board of directors of the Corporation.

 1.4          "Common
Shares" means shares of the Corporation's Common Shares, without par
value.

 1.5          "Damages"
means any loss, damage, claim or liability (joint or several) to which a party hereto may become
subject under the Securities Act, the Exchange Act, or other federal or state
law, insofar as such loss, damage, claim or liability (or any action in respect
thereof) arises out of or is based upon: (i) any untrue statement or alleged
untrue statement of a material fact contained in any registration statement of
the Corporation, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) an omission or
alleged omission to state therein a material fact required to be stated
therein, or

1

necessary to make the statements therein not misleading; or (iii)
any violation or alleged violation by the indemnifying party (or any of its
agents or Affiliates) of the Securities Act, the Exchange Act, any state
securities law, or any rule or regulation promulgated under the Securities Act,
the Exchange Act, or any state securities law.

 1.6         "Exchange
Act" means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

 1.7         "Excluded
Registration" means (i) a registration relating to the sale or grant of securities to employees of the
Corporation or a subsidiary pursuant to a Shares option, Shares purchase,
equity incentive or similar plan; (ii) a registration relating to an SEC Rule
145 transaction; (iii) a registration on any form that does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities; or (iv)
a registration in which the only Common Shares being registered is Common
Shares issuable upon conversion of debt securities that are also being
registered.

 1.8         "Form S-1"
means such form under the Securities Act as in effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC.

 1.9         "Form S-3"
means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities
Act subsequently adopted by the SEC that permits forward incorporation of substantial
information by reference to other documents filed by the Corporation with the
SEC.

 1.10       "GAAP"
means generally accepted accounting principles in the United States as in effect
from time to time.

 1.11       "Holder"
means any holder of Registrable Securities who is a party to this Agreement.

 1.12       "Initiating
Holders" means, collectively, Holders who properly initiate a registration
request under this Agreement.

 1.13       "IPO"
means the Corporation's first underwritten public offering of its Common Shares under
the Securities Act.

 1.14       "New
Securities" means, collectively, equity securities of the Corporation, whether or not currently authorized, as well as
rights, options, or warrants to purchase such equity securities, or securities
of any type whatsoever that are, or may become, convertible or exchangeable
into or exercisable for such equity securities.

 1.15       "Person"
means any individual, corporation, partnership, trust, limited liability
Corporation, association or other entity.

1.16       "Preferred Shares" means, collectively,
shares of the Corporation's Class A Preferred Shares and Class Seed Preferred
Shares.

 

2

 1.17       "Registrable
Securities" means (i) the Common Shares issuable or issued upon conversion of the Class A Preferred Shares; and
(ii) any Common Shares issued as (or issuable upon the conversion or exercise
of any warrant, right, or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
shares referenced in clause (i) above; excluding in all cases, however,
any Registrable Securities sold by a Person in a transaction in which the
applicable rights under this Agreement are not assigned pursuant to Subsection
3.1, and excluding for purposes of Section 2 any shares for which registration
rights have terminated pursuant to Subsection 2.12 of this Agreement.

 1.18       "Registrable
Securities then outstanding" means the number of shares determined by adding the number of
shares of outstanding Common Shares that are Registrable Securities and the
number of shares of Common Shares issuable (directly or indirectly) pursuant to
then exercisable and/or convertible securities that are Registrable Securities.

 1.19       "Restricted
Securities" means the securities of the Corporation required to be notated with the legend set
forth in Subsection 2.11(b) hereof.

 1.20       "SEC"
means the Securities and Exchange Commission. 

 1.21       "SEC Rule
144" means Rule 144 promulgated by the SEC under the Securities Act.

 1.22       "SEC Rule
145" means Rule 145 promulgated by the SEC under the Securities Act.

 1.23       "Securities
Act" means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

 1.24       "Selling
Expenses" means all underwriting discounts, selling commissions, and Shares transfer taxes applicable to the sale of
Registrable Securities, and fees and disbursements of counsel for any Holder,
except for the fees and disbursements of the Selling Holder Counsel borne and
paid by the Corporation as provided in Subsection 2.6. 

 1.25       "Class A
Preferred Shares" means shares of the Corporation's Class A Preferred Shares,
without par share.

2.         Registration
Rights. The Corporation covenants and agrees as follows:

  2.1       Demand
Registration. 

 (a)       Form S-1
Demand. If at any time after the earlier of (i) three (3) years after the date
of this Agreement or (ii) one hundred eighty (180) days after the effective
date of the registration statement for the IPO, the Corporation receives a
request from Holders of fifty percent (50%) of the Registrable Securities then
outstanding that the Corporation file a Form S-1 registration statement with
respect to the Registrable Securities then outstanding if the anticipated
aggregate offering price, net of Selling Expenses, would equal $12 million or
more, then the Corporation shall (x) within ten (10) days after the date such
request is given, give notice thereof (the "Demand Notice") to all
Holders other than the Initiating Holders; and (y) as soon as

3

practicable, and in any event within sixty (60) days after the
date such request is given by the Initiating Holders, file a Form S-1
registration statement under the Securities Act covering all Registrable
Securities that the Initiating Holders requested to be registered and any
additional Registrable Securities requested to be included in such registration
by any other Holders, as specified by notice given by each such Holder to the
Corporation within twenty (20) days of the date the Demand Notice is given, and
in each case, subject to the limitations of Subsections 2.1(c) and 2.3.
 

(b)              
Form
S-3 Demand. If at any time when it is eligible to use a Form S-3 registration
statement, the Corporation receives a request from Holders of at least thirty
percent (30%) of the Registrable Securities then outstanding that the Corporation
file a Form S-3 registration statement with respect to outstanding Registrable
Securities of such Holders having an anticipated aggregate offering price, net
of Selling Expenses, of at least $1 million, then the Corporation shall (i)
within ten (10) days after the date such request is given, give a Demand Notice
to all Holders other than the Initiating Holders; and (ii) as soon as
practicable, and in any event within forty-five (45) days after the date such
request is given by the Initiating Holders, file a Form S-3 registration
statement under the Securities Act covering all Registrable Securities
requested to be included in such registration by any other Holders, as
specified by notice given by each such Holder to the Corporation within twenty
(20) days of the date the Demand Notice is given, and in each case, subject to
the limitations of Subsections 2.1(c) and 2.3.

(c)               
Notwithstanding the
foregoing obligations, if the Corporation furnishes to Holders requesting a
registration pursuant to this Subsection 2.1 a certificate signed by the
Corporation's chief executive officer stating that in the good faith judgment
of the Board of Directors it would be materially detrimental to the Corporation
and its Sharesholders for such registration statement to either become
effective or remain effective for as long as such registration statement
otherwise would be required to remain effective, because such action would (i)
materially interfere with a significant acquisition, corporate reorganization,
or other similar transaction involving the Corporation; (ii) require premature
disclosure of material information that the Corporation has a bona fide
business purpose for preserving as confidential; or (iii) render the
Corporation unable to comply with requirements under the Securities Act or
Exchange Act, then the Corporation shall have the right to defer taking action
with respect to such filing for a period of not more than one hundred twenty
(120) days after the request of the Initiating Holders is given; provided,
however, that the Corporation may not invoke this right more than once
in any twelve (12) month period; and provided further that the
Corporation shall not register any securities for its own account or that of
any other Sharesholder during such one hundred twenty (120) day period other
than an Excluded Registration.

(d)              
The
Corporation shall not be obligated to effect, or to take any action to effect,
any registration pursuant to Subsection 2.1(a): (i) during the period
that is sixty (60) days before the Corporation's good faith estimate of the
date of filing of, and ending on a date that is one hundred eighty (180) days
after the effective date of, a Corporation-initiated registration, provided
that the Corporation is actively employing in good faith commercially
reasonable efforts to cause such registration statement to become effective;
(ii) after the Corporation has effected two registrations pursuant to Subsection
2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Subsection 2.1(b). The Corporation shall
not be obligated to effect, or

4

to take any action to effect, any
registration pursuant to Subsection 2.1(b) (i) during the period that is
thirty (30) days before the Corporation's good faith estimate of the date of
filing of, and ending on a date that is ninety (90) days after the effective
date of, a Corporation-initiated registration, provided that the
Corporation is actively employing in good faith commercially reasonable efforts
to cause such registration statement to become effective; or (ii) if the
Corporation has effected one registration pursuant to Subsection 2.1(b)
within the twelve (12) month period immediately preceding the date of such
request. A registration shall not be counted as "effected" for purposes of this
Subsection 2.1(d) until such time as the applicable registration
statement has been declared effective by the SEC, unless the Initiating Holders
withdraw their request for such registration, elect not to pay the registration
expenses therefor, and forfeit their right to one demand registration statement
pursuant to Subsection 2.6, in which case such withdrawn registration
statement shall be counted as "effected" for purposes of this Subsection
2.1(d); provided, that if such withdrawal is during a period the
Corporation has deferred taking action pursuant to Subsection 2.1(c),
then the Initiating Holders may withdraw their request for registration and
such registration will not be counted as "effected" for purposes of this Subsection
2.1(d). 

2.2          Corporation
Registration. If the Corporation proposes to register (including, for this
purpose, a registration effected by the Corporation for Sharesholders other
than the Holders) any of its Common Shares under the Securities Act in
connection with the public offering of such securities solely for cash (other
than in an Excluded Registration), the Corporation shall, at such time,
promptly give each Holder notice of such registration. Upon the request of each
Holder given within twenty (20) days after such notice is given by the
Corporation, the Corporation shall, subject to the provisions of Subsection
2.3, cause to be registered all of the Registrable Securities that each
such Holder has requested to be included in such registration. The Corporation
shall have the right to terminate or withdraw any registration initiated by it
under this Subsection 2.2 before the effective date of such
registration, whether or not any Holder has elected to include Registrable
Securities in such registration. The expenses (other than Selling Expenses) of
such withdrawn registration shall be borne by the Corporation in accordance
with Subsection  2.6. 

 2.3       Underwriting
Requirements. 

 (a)       If, pursuant to
Subsection 2.1, the Initiating Holders intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the
Corporation as a part of their request made pursuant to Subsection 2.1,
and the Corporation shall include such information in the Demand Notice. The
underwriter(s) will be selected by the Board of Directors and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include such Holder's Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Corporation
as provided in Subsection 2.4(e)) enter into an underwriting agreement
in customary form with the underwriter(s) selected for such underwriting.
Notwithstanding any other provision of this Subsection 2.3, if the
managing underwriter advises the Initiating Holders in writing that marketing
factors require a limitation on the number of shares to be underwritten, then
the Initiating Holders shall so advise all Holders of Registrable Securities
that otherwise would be underwritten pursuant hereto, and the number of
Registrable Securities

5

that may be included in the underwriting shall be allocated among
such Holders of Registrable Securities, including the Initiating Holders, in
proportion (as nearly as practicable) to the number of Registrable Securities
owned by each Holder or in such other proportion as shall mutually be agreed to
by all such selling Holders; provided, however, that the number
of Registrable Securities held by the Holders to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting. To facilitate the allocation of shares in
accordance with the above provisions, the Corporation or the underwriters may
round the number of shares allocated to any Holder to the nearest one hundred
(100) shares.

(b)            
In
connection with any offering involving an underwriting of shares of the
Corporation's capital Shares pursuant to Subsection 2.2, the Corporation
shall not be required to include any of the Holders' Registrable Securities in
such underwriting unless the Holders accept the terms of the underwriting as
agreed upon between the Corporation and its underwriters, and then only in such
quantity as the underwriters in their sole discretion determine will not
jeopardize the success of the offering by the Corporation. If the total number
of securities, including Registrable Securities, requested by Sharesholders to
be included in such offering exceeds the number of securities to be sold (other
than by the Corporation) that the underwriters in their reasonable discretion
determine is compatible with the success of the offering, then the Corporation
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters and the
Corporation in their sole discretion determine will not jeopardize the success
of the offering. If the underwriters determine that less than all of the
Registrable Securities requested to be registered can be included in such
offering, then the Registrable Securities that are included in such offering
shall be allocated among the selling Holders in proportion (as nearly as
practicable to) the number of Registrable Securities owned by each selling
Holder or in such other proportions as shall mutually be agreed to by all such
selling Holders. To facilitate the allocation of shares in accordance with the
above provisions, the Corporation or the underwriters may round the number of
shares allocated to any Holder to the nearest one hundred (100) shares.
Notwithstanding the foregoing, in no event shall (i) the number of Registrable
Securities included in the offering be reduced unless all other securities
(other than securities to be sold by the Corporation) are first entirely
excluded from the offering, or (ii) the number of Registrable Securities
included in the offering be reduced below twenty-five percent (25%) of the
total number of securities included in such offering, unless such offering is
the IPO, in which case the selling Holders may be excluded further if the
underwriters make the determination described above and no other Sharesholder's
securities are included in such offering. For purposes of the provision in this
Subsection 2.3(b) concerning apportionment, for any selling Holder that
is a partnership, limited liability Corporation, or corporation, the partners,
members, retired partners, retired members, Sharesholders, and Affiliates of
such Holder, or the estates and Immediate Family Members of any such partners,
retired partners, members, and retired members and any trusts for the benefit
of any of the foregoing Persons, shall be deemed to be a single "selling
Holder," and any pro rata reduction with respect to such "selling Holder" shall
be based upon the aggregate number of Registrable Securities owned by all
Persons included in such "selling Holder," as defined in this sentence.

(c)            
For purposes of Subsection
2.1, a registration shall not be counted as "effected" if, as a result of
an exercise of the underwriter's cutback provisions in Subsection 2.3(a),
fewer than fifty percent (50%) of the total number of Registrable Securities
that Holders have requested to be included in such registration statement are
actually included.

6

2.4          Obligations of the
Corporation. Whenever required under this Section 2 to effect the
registration of any Registrable Securities, the Corporation shall, as
expeditiously as reasonably possible:

(a)              
prepare and file with the
SEC a registration statement with respect to such Registrable Securities and
use its commercially reasonable efforts to cause such registration statement to
become effective and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration statement
effective for a period of up to one hundred twenty (120) days or, if earlier,
until the distribution contemplated in the registration statement has been
completed; provided, however, that such one hundred twenty (120)
day period shall be extended for a period of time equal to the period the
Holder refrains, at the request of an underwriter of Common Shares (or other
securities) of the Corporation, from selling any securities included in such
registration;

(b)              
prepare and file with
the SEC such amendments and supplements to such registration statement, and the
prospectus used in connection with such registration statement, as may be
necessary to comply with the Securities Act in order to enable the disposition
of all securities covered by such registration statement;

(c)              
furnish to the selling
Holders such numbers of copies of a prospectus, including a preliminary
prospectus, as required by the Securities Act, and such other documents as the
Holders may reasonably request in order to facilitate their disposition of
their Registrable Securities;

(d)              
use its commercially
reasonable efforts to register and qualify the securities covered by such
registration statement under such other securities or blue-sky laws of such
jurisdictions as shall be reasonably requested by the selling Holders; provided
that the Corporation shall not be required to qualify to do business or to file
a general consent to service of process in any such states or jurisdictions,
unless the Corporation is already subject to service in such jurisdiction and
except as may be required by the Securities Act;

(e)              
in the event of any
underwritten public offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the underwriter(s) of
such offering;

(f)               
use its commercially
reasonable efforts to cause all such Registrable Securities covered by such
registration statement to be listed on a national securities exchange or
trading system and each securities exchange and trading system (if any) on
which similar securities issued by the Corporation are then listed;

(g)              
provide a transfer
agent and registrar for all Registrable Securities registered pursuant to this
Agreement and provide a CUSIP number for all such Registrable Securities, in
each case not later than the effective date of such registration;

(h)              
promptly
make available for inspection by the selling Holders, any managing underwriter
participating in any disposition pursuant to such registration statement, and any
attorney or accountant or other agent retained by any such underwriter or
selected by the selling Holders, all financial and other records, pertinent
corporate documents, and properties of

7

the Corporation, and cause the Corporation's officers, directors,
employees, and independent accountants to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant, or agent, in
each case, as necessary or advisable to verify the accuracy of the information
in such registration statement and to conduct appropriate due diligence in
connection therewith;

(i)                
notify each selling Holder,
promptly after the Corporation receives notice thereof, of the time when such
registration statement has been declared effective or a supplement to any
prospectus forming a part of such registration statement has been filed; and

(j)                
after such registration
statement becomes effective, notify each selling Holder of any request by the
SEC that the Corporation amend or supplement such registration statement or
prospectus.

In addition, the Corporation shall ensure
that, at all times after any registration statement covering a public offering
of securities of the Corporation under the Securities Act shall have become
effective, its insider trading policy shall provide that the Corporation's
directors may implement a trading program under Rule 10b5-1 of the Exchange
Act.

  2.5         Furnish
Information. It shall be a condition precedent to the obligations of the Corporation to take any
action pursuant to this Section 2 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the
Corporation such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as is reasonably
required to effect the registration of such Holder's Registrable Securities.

  2.6         Expenses
of Registration. All expenses (other than Selling Expenses) incurred in connection with
registrations, filings, or qualifications pursuant to Section 2, including
all registration, filing, and qualification fees; printers' and accounting
fees; fees and disbursements of counsel for the Corporation; and the reasonable
fees and disbursements, not to exceed $10,000, of one counsel for the selling
Holders ("Selling Holder Counsel"), shall be borne and paid by the
Corporation; provided, however, that the Corporation shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Subsection 2.1 if the registration request is subsequently withdrawn
at the request of the Holders of a majority of the Registrable Securities to be
registered (in which case all selling Holders shall bear such expenses pro rata
based upon the number of Registrable Securities that were to be included in the
withdrawn registration), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one registration pursuant to Subsections
2.1(a) or 2.1(b), as the case may be. All Selling Expenses relating
to Registrable Securities registered pursuant to this Section 2 shall be
borne and paid by the Holders pro rata on the basis of the number of
Registrable Securities registered on their behalf.

  2.7         Delay of
Registration. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any registration pursuant to
this Agreement as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 2. 

 

8

2.8           Indemnification. If
any Registrable Securities are included in a registration statement under this Section
2: 

(a)        To
the extent permitted by law, the Corporation will indemnify and hold harmless
each selling Holder, and the partners, members, officers, directors, and Sharesholders of each such Holder; legal counsel and accountants for each such
Holder; any underwriter (as defined in the Securities Act) for each such
Holder; and each Person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act, against any Damages, and
the Corporation will pay to each such Holder, underwriter, controlling Person,
or other aforementioned Person any legal or other expenses reasonably incurred
thereby in connection with investigating or defending any claim or proceeding
from which Damages may result, as such expenses are incurred; provided, however,
that the indemnity agreement contained in this Subsection 2.8(a) shall
not apply to amounts paid in settlement of any such claim or proceeding if such
settlement is effected without the consent of the Corporation, which consent
shall not be unreasonably withheld, nor shall the Corporation be liable for any
Damages to the extent that they arise out of or are based upon actions or
omissions made in reliance upon and in conformity with written information
furnished by or on behalf of any such Holder, underwriter, controlling Person,
or other aforementioned Person expressly for use in connection with such
registration.

(b)        To the extent
permitted by law, each selling Holder, severally and not jointly, will
indemnify and hold harmless the Corporation, and each of its directors, each of
its officers who has signed the registration statement, each Person (if any),
who controls the Corporation within the meaning of the Securities Act, legal
counsel and accountants for the Corporation, any underwriter (as defined in the
Securities Act), any other Holder selling securities in such registration
statement, and any controlling Person of any such underwriter or other Holder,
against any Damages, in each case only to the extent that such Damages arise
out of or are based upon actions or omissions made in reliance upon and in
conformity with written information furnished by or on behalf of such selling
Holder expressly for use in connection with such registration; and each such
selling Holder will pay to the Corporation and each other aforementioned Person
any legal or other expenses reasonably incurred thereby in connection with
investigating or defending any claim or proceeding from which Damages may
result, as such expenses are incurred; provided, however, that
the indemnity agreement contained in this Subsection 2.8(b) shall not
apply to amounts paid in settlement of any such claim or proceeding if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; and provided further that in no event
shall the aggregate amounts payable by any Holder by way of indemnity or
contribution under Subsections 2.8(b) and 2.8(d) exceed the
proceeds from the offering received by such Holder (net of any Selling Expenses
paid by such Holder), except in the case of fraud or willful misconduct by such
Holder.

(c)         Promptly
after receipt by an indemnified party under this Subsection 2.8 of
notice of the commencement of any action (including any governmental action)
for which a party may be entitled to indemnification hereunder, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Subsection 2.8, give the indemnifying party
notice of the commencement thereof. The indemnifying party shall have the right
to participate in such action and, to the extent the indemnifying party so
desires, participate jointly with any other indemnifying party to which notice
has been given, and to assume the

9

defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party (together with all
other indemnified parties that may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
action. The failure to give notice to the indemnifying party within a
reasonable time of the commencement of any such action shall relieve such
indemnifying party of any liability to the indemnified party under this Subsection
2.8, to the extent that such failure materially prejudices the indemnifying
party's ability to defend such action. The failure to give notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Subsection 2.8. 

(d)         
To
provide for just and equitable contribution to joint liability under the
Securities Act in any case in which either: (i) any party otherwise entitled to
indemnification hereunder makes a claim for indemnification pursuant to this Subsection
2.8 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case, notwithstanding the fact that this Subsection
2.8 provides for indemnification in such case, or (ii) contribution under
the Securities Act may be required on the part of any party hereto for which
indemnification is provided under this Subsection 2.8, then, and in each
such case, such parties will contribute to the aggregate losses, claims,
damages, liabilities, or expenses to which they may be subject (after
contribution from others) in such proportion as is appropriate to reflect the
relative fault of each of the indemnifying party and the indemnified party in
connection with the statements, omissions, or other actions that resulted in
such loss, claim, damage, liability, or expense, as well as to reflect any
other relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or allegedly untrue statement of a material
fact, or the omission or alleged omission of a material fact, relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission; provided, however,
that, in any such case (x) no Holder will be required to contribute any amount
in excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement, and
(y) no Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation; and provided
further that in no event shall a Holder's liability pursuant to this Subsection
2.8(d), when combined with the amounts paid or payable by such Holder
pursuant to Subsection 2.8(b), exceed the proceeds from the offering
received by such Holder (net of any Selling Expenses paid by such Holder),
except in the case of willful misconduct or fraud by such Holder.

(e)          
Notwithstanding the
foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall control.

10

(f)        Unless otherwise superseded by
an underwriting agreement entered into in connection with the underwritten
public offering, the obligations of the Corporation and Holders under this Subsection
2.8 shall survive the completion of any offering of Registrable Securities
in a registration under this Section 2, and otherwise shall survive the
termination of this Agreement.

 2.9         Reports
Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities
of the Corporation to the public without registration or pursuant to a
registration on Form S-3, the Corporation shall:

(a)       make and keep
available adequate current public information, as those terms are understood
and defined in SEC Rule 144, at all times after the effective date of the
registration statement filed by the Corporation for the IPO;

(b)       use commercially
reasonable efforts to file with the SEC in a timely manner all reports and
other documents required of the Corporation under the Securities Act and the
Exchange Act (at any time after the Corporation has become subject to such
reporting requirements); and

(c)       furnish
to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i) to the extent accurate, a written statement by the Corporation
that it has complied with the reporting requirements of SEC Rule 144 (at any
time after ninety (90) days after the effective date of the registration
statement filed by the Corporation for the IPO), the Securities Act, and the
Exchange Act (at any time after the Corporation has become subject to such
reporting requirements), or that it qualifies as a registrant whose securities
may be resold pursuant to Form S-3 (at any time after the Corporation so
qualifies); and (ii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration (at any time after the
Corporation has become subject to the reporting requirements under the Exchange
Act) or pursuant to Form S-3 (at any time after the Corporation so qualifies to
use such form).

 2.10       "Market
Stand-off" Agreement. Each Holder hereby agrees that it will not, without the
prior written consent of the managing underwriter, during the period commencing
on the date of the final prospectus relating to the registration by the
Corporation of shares of its Common Shares or any other equity securities under
the Securities Act on a registration statement on Form S-1 (for any such
registration) or Form S-3 (if the Holders of at least 30% of the Registrable
Securities have agreed with such market standoff in respect of such
registration), and ending on the date specified by the Corporation and the
managing underwriter (such period not to exceed one hundred eighty (180) days
in the case of the IPO, or such other period as may be requested by the
Corporation or an underwriter to accommodate regulatory restrictions on (1) the
publication or other distribution of research reports, and (2) analyst recommendations
and opinions, including, but not limited to, the restrictions contained in
FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or
amendments thereto), or ninety (90) days in the case of any registration other
than the IPO, or such other period as may be requested by the Corporation or an
underwriter to accommodate regulatory restrictions on (1) the publication or
other distribution of research reports and (2) analyst recommendations and
opinions,

11

including, but not limited to, the
restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any
successor provisions or amendments thereto), (i) lend; offer; pledge; sell;
contract to sell; sell any option or contract to purchase; purchase any option
or contract to sell; grant any option, right, or warrant to purchase; or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Shares or
any securities convertible into or exercisable or exchangeable (directly or
indirectly) for Common Shares held immediately before the effective date of the
registration statement for such offering or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of such securities, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Shares or other securities, in cash, or otherwise. The foregoing provisions of
this Subsection 2.11 shall not apply to the sale of any shares to an
underwriter pursuant to an underwriting agreement, or the transfer of any
shares to any trust for the direct or indirect benefit of the Holder or the
immediate family of the Holder, provided that the trustee of the trust
agrees to be bound in writing by the restrictions set forth herein, and provided
further that any such transfer shall not involve a disposition for value,
and shall be applicable to the Holders only if all officers and directors are
subject to the same restrictions. The underwriters in connection with such
registration are intended third-party beneficiaries of this Subsection 2.11
and shall have the right, power and authority to enforce the provisions hereof
as though they were a party hereto. Each Holder further agrees to execute such
agreements as may be reasonably requested by the underwriters in connection
with such registration that are consistent with this Subsection 2.11 or
that are necessary to give further effect thereto. Any discretionary waiver or
termination of the restrictions of any or all of such agreements by the Company
or the underwriters shall apply pro rata to all Company stockholders that are
subject to such agreements, based on the number of shares subject to such
agreements, except that, notwithstanding the foregoing, the Company and the
underwriters may, in their sole discretion, waive or terminate these
restrictions with respect to up to ten thousand (10,000) shares of the Common
Stock.

2.11      Restrictions
on Transfer. 

(a)            
The Class A Preferred
Shares and the Registrable Securities shall not be sold, pledged, or otherwise
transferred, and the Corporation shall not recognize and shall issue
stop-transfer instructions to its transfer agent with respect to any such sale,
pledge, or transfer, except upon the conditions specified in this Agreement,
which conditions are intended to ensure compliance with the provisions of the
Securities Act. A transferring Holder will cause any proposed purchaser,
pledgee, or transferee of the Class A Preferred Shares and the Registrable
Securities held by such Holder to agree to take and hold such securities
subject to the provisions and upon the conditions specified in this Agreement.

(b)           
Each certificate,
instrument, or book entry representing (i) the Class A Preferred Shares, (ii)
the Registrable Securities, and (iii) any other securities issued in respect of
the securities referenced in clauses (i) and (ii), upon any Shares split,
Shares dividend, recapitalization, merger, consolidation, or similar event,
shall (unless otherwise permitted by the provisions of Subsection 2.12(c))
be notated with a legend substantially in the following form:

THE SECURITIES REPRESENTED HEREBY HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SHARES MAY NOT BE SOLD,

12

PLEDGED, OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT.

THE SECURITIES REPRESENTED HEREBY MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A REGISTRATION RIGHTS
AGREEMENT BETWEEN THE CORPORATION AND THE SHAREHOLDER, A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE CORPORATION.

The Holders consent to the Corporation
making a notation in its records and giving instructions to any transfer agent
of the Restricted Securities in order to implement the restrictions on transfer
set forth in this Subsection 2.12. 

 (c)       The holder of
such Restricted Securities, by acceptance of ownership thereof, agrees to comply in all respects with the
provisions of this Section 2. Before any proposed sale, pledge, or transfer
of any Restricted Securities, unless there is in effect a registration
statement under the Securities Act covering the proposed transaction, the
Holder thereof shall give notice to the Corporation of such Holder's intention
to effect such sale, pledge, or transfer. Each such notice shall describe the
manner and circumstances of the proposed sale, pledge, or transfer in
sufficient detail and, if reasonably requested by the Corporation, shall be
accompanied at such Holder's expense by either (i) a written opinion of legal
counsel who shall, and whose legal opinion shall, be reasonably satisfactory to
the Corporation, addressed to the Corporation, to the effect that the proposed
transaction may be effected without registration under the Securities Act; (ii)
a "no action" letter from the SEC to the effect that the proposed sale, pledge,
or transfer of such Restricted Securities without registration will not result
in a recommendation by the staff of the SEC that action be taken with respect
thereto; or (iii) any other evidence reasonably satisfactory to counsel to the
Corporation to the effect that the proposed sale, pledge, or transfer of the
Restricted Securities may be effected without registration under the Securities
Act, whereupon the Holder of such Restricted Securities shall be entitled to
sell, pledge, or transfer such Restricted Securities in accordance with the
terms of the notice given by the Holder to the Corporation. The Corporation
will not require such a legal opinion or "no action" letter (x) in any
transaction in compliance with SEC Rule 144; or (y) in any transaction in which
such Holder distributes Restricted Securities to an Affiliate of such Holder
for no consideration; provided that each transferee agrees in writing to
be subject to the terms of this Subsection 2.12. Each certificate,
instrument, or book entry representing the Restricted Securities transferred as
above provided shall be notated with, except if such transfer is made pursuant
to SEC Rule 144, the appropriate restrictive legend set forth in Subsection
2.12(b), except that such certificate instrument, or book entry shall not
be notated with such restrictive legend if, in the opinion of counsel for such
Holder and the Corporation, such legend is not required in order to establish
compliance with any provisions of the Securities Act.

 2.12       Termination
of Registration Rights. The right of any Holder to request registration or inclusion of
Registrable Securities in any registration pursuant to Subsections 2.1
or 2.2 shall terminate upon the earliest to occur of:

 

13

(a)       the closing of a
Deemed Liquidation Event, as such term is defined in the Articles; and

(b)       such time after
consummation of the IPO as Rule 144 or another similar exemption under the
Securities Act is available for the sale of all of such Holder's shares without
limitation during a three-month period without registration.

3.         Miscellaneous.

 3.1          Successors
and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a
transferee of Registrable Securities that (i) is an Affiliate of a Holder; (ii)
is a Holder's Immediate Family Member or trust for the benefit of an individual
Holder or one or more of such Holder's Immediate Family Members; or (iii) after
such transfer, holds at least 1,000,000 shares of Registrable Securities
(subject to appropriate adjustment for stock splits, stock dividends, combinations,
and other recapitalizations); provided, however, that (x) the
Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee and the Registrable
Securities with respect to which such rights are being transferred; and (y)
such transferee agrees in a written instrument delivered to the Company to be
bound by and subject to the terms and conditions of this Agreement, including
the provisions of Subsection 2.11. For the purposes of determining the
number of shares of Registrable Securities held by a transferee, the holdings
of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is
a Holder's Immediate Family Member; or (3) that is a trust for the benefit of
an individual Holder or such Holder's Immediate Family Member shall be
aggregated together and with those of the transferring Holder; provided
further that all transferees who would not qualify individually for
assignment of rights shall, as a condition to the applicable transfer,
establish a single attorney-in-fact for the purpose of exercising any rights,
receiving notices, or taking any action under this Agreement. The terms and
conditions of this Agreement inure to the benefit of and are binding upon the respective
successors and permitted assignees of the parties. Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and permitted assignees any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.

 3.2          Governing
Law. This Agreement shall be governed by the internal law of the State of Delaware, without regard to conflict of law
principles that would result in the application of any law other than the law
of the State of Delaware.

 3.3          Counterparts.
This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. Counterparts
may be delivered via facsimile, electronic mail (including pdf or any
electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g.,   www.docusign.com) or other transmission method and any
counterpart so delivered shall be deemed to have been duly and validly
delivered and be valid and effective for all purposes.

 3.4          Titles
and Subtitles. The titles and subtitles used in this Agreement are
for convenience only and are not to be considered in construing or interpreting
this Agreement.

 

14

3.5       Notices.

(a)        All
notices and other communications given or made pursuant to this Agreement shall
be in writing and shall be deemed effectively given upon the earlier of actual
receipt or (i) personal delivery to the party to be notified; (ii) when sent,
if sent by electronic mail or facsimile during the recipient's normal business
hours, and if not sent during normal business hours, then on the recipient's next
business day; (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) one (1)
business day after the business day of deposit with a nationally recognized
overnight courier, freight prepaid, specifying next-day delivery, with written
verification of receipt. All communications shall be sent to the respective
parties at their addresses as set forth on Schedule A hereto, or to the
principal office of the Corporation and to the attention of the Chief Executive
Officer, in the case of the Corporation, or to such email address, facsimile
number, or address as subsequently modified by written notice given in
accordance with this Subsection 6.5. If notice is given to the
Corporation, a copy shall also be sent to Edward B. Claxton, Aust Legal Inc,
1010 De la Gauchetière St. W, Suite 1350, Montreal, Quebec H3B 2N2 and if
notice is given to Shareholders, a copy shall also be given to the Holder's
counsel identified in Exhibit "A", if any .

(b)      
Consent
to Electronic Notice. Each Investor consents to the delivery of any
Shareholder notice pursuant to the Delaware General Corporation Law (the
"DGCL"), as amended or superseded from time to time, by electronic transmission
pursuant to Section 232 of the DGCL (or any successor thereto) at the
electronic mail address or the facsimile number set forth below such Investor's
name on the Schedules hereto, as updated from time to time by notice to the
Corporation, or] as on the books of the Corporation. To the extent that any
notice given by means of electronic transmission is returned or undeliverable
for any reason, the foregoing consent shall be deemed to have been revoked
until a new or corrected electronic mail address has been provided, and such
attempted Electronic Notice shall be ineffective and deemed to not have been
given. Each Investor and Key Holder agrees to promptly notify the Corporation
of any change in such Sharesholder's electronic mail address, and that failure
to do so shall not affect the foregoing.

3.6        Amendments
and Waivers. Any term of this Agreement may be amended, modified or
terminated and the observance of any term of this Agreement may be waived
(either generally or in a particular instance, and either retroactively or prospectively)
only with the written consent of the Corporation and the holders of at least a
majority of the Registrable Securities then outstanding; provided that
the Corporation may in its sole discretion waive compliance with Subsection
2.12(c) (and the Corporation's failure to object promptly in writing after
notification of a proposed assignment allegedly in violation of Subsection
2.12(c) shall be deemed to be a waiver); and provided further that
any provision hereof may be waived by any waiving party on such party's own
behalf, without the consent of any other party. Notwithstanding the foregoing,
this Agreement may not be amended, modified or terminated and the observance of
any term hereof may not be waived with respect to any Investor without the written
consent of such Investor, unless such amendment, modification, termination, or
waiver applies to all Investors in the same fashion. Notwithstanding the
foregoing, Schedule A hereto may be amended by the Corporation from time
to time to add transferees or subscribers of any Registrable Securities in
compliance with the terms of this Agreement without the consent of the other
parties; and Schedule  

15

A hereto may also be amended by the Corporation after the date of
this Agreement without the consent of the other parties to add information
regarding any additional Investor who becomes a party to this Agreement in
accordance with Subsection 3.9. The Corporation shall give prompt notice
of any amendment, modification or termination hereof or waiver hereunder to any
party hereto that did not consent in writing to such amendment, modification,
termination, or waiver. Any amendment, modification, termination, or waiver
effected in accordance with this Subsection  3.6 shall be binding on all
parties hereto, regardless of whether any such party has consented thereto. No
waivers of or exceptions to any term, condition, or provision of this Agreement,
in any one or more instances, shall be deemed to be or construed as a further
or continuing waiver of any such term, condition, or provision.

 3.7        Severability.
In case any one or more of the provisions contained in this Agreement is for any reason held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision of this Agreement, and
such invalid, illegal, or unenforceable provision shall be reformed and
construed so that it will be valid, legal, and enforceable to the maximum
extent permitted by law.

 3.8        Aggregation
of Shares. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement and such Affiliated persons may apportion such rights as among themselves
in any manner they deem appropriate.

 3.9        Additional
Investors. Notwithstanding anything to the contrary contained herein, if the Corporation issues additional shares of the
Corporation's Class A Preferred Shares after the date hereof, any purchaser of
such shares of Class A Preferred Shares may become a party to this Agreement by
executing and delivering an additional counterpart signature page to this
Agreement, and thereafter shall be deemed an "Investor" for all purposes
hereunder. No action or consent by the Investors shall be required for such
joinder to this Agreement by such additional Investor, so long as such
additional Investor has agreed in writing to be bound by all of the obligations
as an "Investor" hereunder.

3.10      Entire Agreement. This
Agreement (including any Schedules and Exhibits hereto) constitutes the full
and entire understanding and agreement among the parties with respect to the
subject matter hereof, and any other written or oral agreement relating to the
subject matter hereof existing between the parties is expressly canceled.

3.11       Dispute
Resolution. The parties (a) hereby irrevocably and unconditionally submit
to the jurisdiction of the state courts of New York and to the jurisdiction of
the United States District Court for the District of New York for the purpose
of any suit, action or other proceeding arising out of or based upon this
Agreement, (b) agree not to commence any suit, action or other proceeding
arising out of or based upon this Agreement except in the state courts of New
or the United States District Court for the District of New York and (c) hereby
waive, and agree not to assert, by way of motion, as a defense, or otherwise,
in any such suit, action or proceeding, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such court.

 

16

WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT
MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN
FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE
SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND
REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

Each party will bear its own costs in
respect of any disputes arising under this Agreement.

3.12      Delays or Omissions No delay
or omission to exercise any right, power, or remedy accruing to any party under
this Agreement, upon any breach or default of any other party under this
Agreement, shall impair any such right, power, or remedy of such nonbreaching
or nondefaulting party, nor shall it be construed to be a waiver of or
acquiescence to any such breach or default, or to any similar breach or default
thereafter occurring, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter occurring.
All remedies, whether under this Agreement or by law or otherwise afforded to
any party, shall be cumulative and not alternative.

3.13      Application of Canadian Securities
Laws The parties acknowledge and agree that it may be of interest for the
Corporation to proceed with its IPO, either concurrently or independent of an
IPO under the Securities Act, under applicable securities legislation in Canada
and with a listing or dual-listing of its Common Shares on the TXS or such
other securities exchange in Canada, as determined by the Board of Directors.
In such circumstances, the parties agree to negotiate in good faith to amend
this Agreement and use reasonably commercial best efforts to respect the terms
and conditions of this Agreement with the appropriate modifications made in
recognition of differences between applicable US securities legislation and its
Canadian equivalent.

[Remainder
of Page Intentionally Left Blank]

  

 

 

 

 

 

 

 

 

 

17

EXHIBIT G

FORM OF LEGAL OPINION OF BOUGHTON LAW CORPORATION

(see
attached)

 

 

 

 

 

 

 

 

 

January 13, 2020                                                                                                File
#: 93208-00001

BY COURIER AND

EMAIL ATTACHMENT

Mechanical Technology, Inc.

325
Washington Avenue Extension

Albany, New York 12205

Dear Sirs:

Re:       Investment by Mechanical Technology, Inc. of $499,999.50
in the share capital of Soluna Technologies, Ltd.

We have acted
as special counsel to Soluna Technologies, Ltd. (the "Corporation")
in connection with the subscription for 158,730 Class A Preferred Shares (the
"Subscribed Shares") in the Corporation by Mechanical Technology, Inc.
("MKTY") pursuant to a Class A Preferred Share Purchase Agreement
dated as of the 13th of January, 2020 between MKTY and the Corporation (the
"Share Purchase Agreement"), the execution and delivery of an Amended
and Restated Shareholders' Agreement dated as of the 13th of January, 2020
between the Corporation, MKTY and the other shareholders of the Corporation
(the "Amended and Restated Shareholders' Agreement") and related agreements
and arrangements.

Capitalized terms used in this opinion that we do not define have the
meanings given to them in the Share Purchase Agreement and the Amended and
Restated Shareholders' Agreement.

This opinion is being provided to you
pursuant to the Share Purchase Agreement.

We have
examined electronically transmitted executed copies of the following documents
(collectively the "Transaction Documents"):

i.        the Share Purchase Agreement;

ii.       the Amended and Restated Shareholders'
Agreement;

iii.      The Registration Rights Agreement dated January 13, 2020 (the
"Registration Rights Agreement"); and

iv.      Articles of the Corporation as amended by the Amendment to the
Articles for which a Notice of Alternation dated January 13, 2020 was filed
with British Columbia Registrar of Companies (the "Restated
Articles").

AC/7039878.5

For the
purposes of this opinion, we have also examined and relied upon, without
independent investigation, a certificate of an officer of the Corporation with
respect to certain matters, a copy of which is attached as Appendix
"A" to this opinion, and originals or copies of the following
documents (collectively, the "Corporate Documents"):

(a)      Certificate of Good Standing dated as at January 13, 2020 provided
by British Columbia Registrar of Companies with respect to the Corporation, a
copy of which is attached as Appendix "B" to this opinion;

(b)      the Certificate of Incorporation of the Corporation dated May 18,
2018 (the "Certificate
of Incorporation";

(c)      the Shareholders Agreement of the
Corporation dated October 30, 2018;

(d)      resolution of the Corporation's shareholders dated January 9, 2020
and resolution of the Corporation's directors dated January 13, 2020 relating
to the Transaction Documents; and

(e)      a certificate of an officer of the Corporation
attesting to the number and class of outstanding shares of the Corporation, a
copy of which has been delivered to you.

We have relied upon the Corporate Documents as to the matters provided
for in them, without independent investigation, for purposes of providing our
opinions expressed below. We have assumed that the Corporate Documents are all
of the articles, resolutions of the directors, resolutions of the shareholders
relevant to the Transaction Documents, and that such documents have not been
amended. We have not examined the minute books of the Corporation.

We have also
examined such statutes and public records, originals or copies (certified or
otherwise identified to our satisfaction) of corporate records, certificates
and such other instruments as we have deemed necessary or appropriate for the
purposes of the opinions hereinafter expressed.

Save as
stated above, we have not examined or considered any other documentation
whatsoever, nor have we made any other investigations or enquiries.

In examining all documents and in providing our opinions below we have
assumed that:

(f)      
all individuals had the requisite legal
capacity;

(g)     
all signatures are genuine;

(h)     
all documents submitted to us as originals
are complete and authentic and all photostatic, certified, telecopied, notarial
or other copies conform to the originals;

2

AC/7039878.5

(i)           the
power, authority and capacity of all parties (other than the Corporation) to
enter into and perform their respective obligations under the Transaction
Documents in accordance with the laws by which they are governed, the due
authorization of the Transaction Documents executed by each of the parties
(other than the Corporation) and that the execution and delivery of the
Transaction Documents by such parties (other than the Corporation) are in
accordance with such laws and authorizations;

(j)          all facts set
forth in the official public records, certificates and documents supplied by
public officials or otherwise conveyed to us by public officials are complete,
true and accurate;

(k)         the
Certificate of Incorporation is conclusive evidence that the Corporation is
incorporated under the Business Corporations Act (British Columbia);

(1)         to
the extent that the obligations of any of the parties may be dependent upon
such matters:

(i)        that
each party to the Transaction Documents (other than the Corporation) is duly
incorporated and/or formed, as applicable, and organized and existing under the
laws of its principal place of business;

(ii)       that all acts, conditions and things required to be done,
fulfilled or undertaken under any law (other than the laws of British Columbia
and of Canada applicable therein) in respect of the lawful execution or
performance of the Transaction Documents and in order to ensure that the
Transaction Documents are binding upon and enforceable against the parties
thereto other than the Corporation (including any and all authorizations and
consents of any public authority of any jurisdiction) have been done,
fulfilled, undertaken or obtained; and

(iii)       that insofar as any obligations under the Transaction Documents
have been or are to be performed in any jurisdiction outside British Columbia,
their performance is or will be legal and effective in accordance with the laws
of that jurisdiction;

(m)       the Transaction Documents have been duly authorized, executed and
delivered by each party to it other than the Corporation;

(n)        that no circumstances exist which would justify the setting aside
of the Transaction Documents by reason of fraud, misrepresentation, mistake or
undue influence; and

(o)        there are no collateral agreements, representations, escrows,
pledges, conditions or other agreements between or among any parties to the
Transaction Documents which affect the delivery thereof.

3

AC/7039878.5

Our opinion below is expressed only with
respect to the laws of British Columbia and of Canada applicable therein (the
"Jurisdiction").

Our opinion is
expressed with respect to the laws of the Jurisdiction in effect on the date of
this opinion. We have no responsibility or obligation to: (i) update this
opinion, (ii) take into account or inform the addressee, or any other person of
any changes in law, facts or other developments subsequent to this date that do
or may affect the opinions we express, or (iii) advise the addressee or any
other person of any other change in any matter addressed in this opinion, nor
do we have any responsibility or obligation to consider the applicability or
correctness of this opinion to any person other than the addressee.

We understand that the reliances,
limitations and assumptions expressed in the preceding paragraphs are
satisfactory to you.

Based upon the foregoing and subject to
the additional qualifications set forth below, we are of the opinion that:

 1.         The Corporation is a
corporation incorporated and validly existing under the Business Corporations
Act (British
Columbia) and the Company is in good standing with respect to its annual report
filings with the British Columbia Registrar of Companies as at January 13,
2020.

 2.         The
Corporation has the corporate power and capacity to execute and deliver the Transaction
Documents in which it is named as a party and to perform its obligations
thereunder.

 3.         The execution
and delivery by the Corporation of the Transaction Documents in which it is named as a party and the performance by it of its
obligations thereunder have been duly authorized by all necessary corporate action
on the Corporation's part.

 4.         The execution
and delivery by the Corporation of the Transaction Documents in which it is named a party and the performance by it of its
obligations thereunder, including the issuance and sale of the Subscribed
Shares do not breach any provisions of, or constitute a default under:

(a)        its
Restated Articles; or

(b)        any
laws of the Province of British Columbia to which the Corporation is subject.

 5.         Except of the
filing of a Notice of Alteration with the British Columbia Registrar of Companies, which
has been completed on January 13, 2020, the Corporation is not required to
obtain any consent, approval, licence or exemption by, or order or
authorization of, or to make any filing, recording or registration with, any
governmental authority under the law of British Columbia or Canadian federal
law in connection with the execution and delivery by the Corporation of the
Transaction Documents in which it is named as a party or the performance by it
of its obligations other than those that have been obtained or made.

4

AC/7039878.5

6.          The
authorized capital of the Corporation consists of (i) an unlimited number of
Common Shares, of which 9,608,108 shares are issued and outstanding, and (ii)
an unlimited number of Class Seed Preferred Shares, of which 1,794,998 shares
are issued and outstanding; and (iii) an unlimited number of Class A Preferred
Shares of which none have been issued and outstanding.

7.          The Subscribed Shares
have been duly authorized, and when issued, delivered and paid for in accordance
with the Share Purchase Agreement, will be validly issued, fully paid and
non-assessable.

8.          The issue and delivery
of the Subscribed Shares by the Corporation to MKTY, which is resident in the
United States of America, in accordance with the terms of the Share Purchase
Agreement are exempt, either by statute, regulation, rule or order, from the
prospectus requirements of the Securities Act (British Columbia) and no
prospectus is required nor are other documents required to be filed,
proceedings taken, and no approval or consent of, or registration or filing
with, any regulatory authority in the Province of British Columbia is required
to permit the issue and delivery of the Subscribed Shares by the Corporation to
MKTY.

The
opinions expressed herein are subject to the following qualifications:

(a)      in paragraph 1, as to
the good standing of the Corporation, we have relied exclusively on a
Certificate of Good Standing with respect to the Company dated January 9, 2020
issued by the British Columbia Registrar of Companies, a copy of which is
attached as Appendix "B" to this opinion;

(b)      in paragraph 6, as to
the numbers of Common Shares, Class Seed Preferred Shares and Class A Preferred
Shares issued and outstanding, we have relied exclusively and without
independent investigation on a certificate of an officer of the Corporation, a
copy of which is attached as Appendix "A" to this opinion;

(c)      in
paragraph 8, as to no filing with any regulatory authority in the Province of
British Columbia being required to permit the issue and delivery of the
Subscribed Shares by the Corporation to MKTY pursuant to an exemption from
prospectus requirements of the Securities Act (British Columbia), we
have relied exclusively on a certificate of an officer of the Corporation
regarding the status of the Corporation as a "private issuer" as such
term is defined in Section 2.4 of National Instrument 45-106, a copy of which
officer certificate is attached as Appendix "A" to this opinion;

(d)      we give no opinion as
to the validity of any provisions of the Restated Articles that purport to
provide a right to require redemption of shares of the Corporation without
compliance by the Corporation with the solvency tests applicable to a
redemption of such Shares by the Corporation under applicable law; and

(e)      the British
Columbia Securities Commission has the authority to deny under the Act the
benefit of an exemption otherwise provided in the Act where it considers it
necessary to do so to protect investors.

The opinions expressed above are provided
solely for the benefit of the addressees in connection with the transactions
contemplated by the Transaction Documents and may not be used or relied on by
or disclosed to any other person or for any other purpose without our express
prior written

5

AC/7039878.5

consent. We have no
responsibility or obligation to update this opinion, to consider its
applicability or correctness to any person other than the addressees, or to
take into account changes in law, facts or any other developments of which we
may later become aware.

Yours
      truly, 

 

 

 

 

 

 

 

 

 

 

6

 

AC/7039878.5

EXHIBIT H 

PRIVATE ISSUER EXEMPTION AGREEMENT

 

(see
attached)

 

 

 

 

INVESTOR SUITABILITY QUESTIONNAIRE 

CLASS A PREFERRED SHARE FINANCING OF 

SOLUNA TECHNOLOGIES, LTD.

This Questionnaire is being distributed to
certain individuals and entities which may be offered the opportunity to
purchase Class A Preferred shares (the "Securities")
of SOLUNA TECHNOLOGIES, LTD., a private company incorporated under the laws of
British Columbia (the "Company"). The purpose of this
Questionnaire is to assure the Company that all such offers and purchases will
meet the standards imposed by the Securities Act of 1933, as amended (the
"Act").

All answers will be kept confidential.
However, by signing this Questionnaire, the undersigned agrees that this information
may be provided by the Company to its legal and financial advisors, and the
Company and such advisors may rely on the information set forth in this
Questionnaire for purposes of complying with all applicable securities laws and
may present this Questionnaire to such parties as it reasonably deems
appropriate if called upon to establish its compliance with such securities
laws. The undersigned represents that the information contained herein is
complete and accurate and will notify the Company of any material change in any
of such information prior to the undersigned's investment in the Company.

For Individual Investors

Accredited Investor Certification. The
undersigned makes one of the following representations regarding its income or
net worth and certain related matters and has checked the applicable
representation:

[__]      The undersigned's income1 during each of the last two years exceeded
$200,000 or, if the undersigned is married, the joint income of the undersigned
and the undersigned's spouse during each of the last two years exceed $300,000,
and the undersigned reasonably expects the undersigned's income, from all
sources during this year, will exceed $200,000 or, if the undersigned is
married, the joint income of undersigned and the undersigned's spouse from all
sources during this year will exceed $300,000.

[__]      The undersigned's net worth,2 including the net worth of the
undersigned's spouse, is in excess of $1,000,000 (excluding the value of the
undersigned's primary residence).

[__]      The undersigned cannot make any of the
representations set forth above.

 

INVESTOR SUITABILITY QUESTIONNAIRE 

SOLUNA TECHNOLOGIES, LTD.

AC/7051587.2

 For Entity Investors

Accredited Investor
Certification. The
undersigned makes one of the following representations regarding its net worth
and certain related matters and has checked the applicable
representation:

[__]       The
undersigned is a trust with total assets in excess of $5,000,000 whose purchase
is directed by a person with such knowledge and experience in
financial and business matters that such person is capable of evaluating the
merits and risks of the prospective investment.

[__]       The
undersigned is a bank, insurance company, investment company registered under the United States Investment Company Act of 1940, as amended (the
"Companies Act"), a broker or dealer registered pursuant to Section
15 of the United States Securities Exchange Act of 1934, as amended, a business
development company, a Small Business Investment Company licensed by the United
States Small Business Administration, a plan with total assets in excess of
$5,000,000 established and maintained by a state for the benefit of its
employees, or a private business development company as defined in Section
202(a)(22) of the United States Investment Advisers Act of 1940, as amended.

[__]      The
undersigned is an employee benefit plan and either all investment
decisions are made
by a bank, savings and loan association, insurance company, or registered
investment advisor, or the undersigned has total assets in excess of
$5,000,000 or, if such plan is a self-directed plan, investment
decisions are made solely by persons who are accredited investors.

  
	[ X ]     The undersigned is a corporation, partnership, business trust,
  not formed for the purpose of acquiring the Securities, or an organization
  described in Section 501(c)(3) of the Internal Revenue Code of 1986, as
  amended (the "Code"), in each case with total assets in excess of
  $5,000,000.

  
	[__]      The undersigned is an entity in which all
  of the equity owners (in the case of a revocable living trust, its
  grantor(s)) qualify under any of the above subparagraphs, or, if an
  individual, each such individual has a net worth,2 either individually or
  upon a joint basis with such individual's spouse, in excess of $1,000,000
  (within the meaning of such terms as used in the definition of "accredited
  investor" contained in Rule 501 under the Securities Act), or
  has had an individual income1' in excess of $200,000 for each of the two
  most recent years, or a joint income with such individual's spouse in excess
  of $300,000 in each of those years, and has a reasonable expectation of
  reaching the same income level in the current year.

  
	[__]      The undersigned cannot make any of the
  representations set forth above.

 

AC/7051587.2

The undersigned has executed this Investor
Suitability Questionnaire as of the date written below.

 

		
	 
	
Frederick W. Jones

			
	

Name of Signing Party (Please Print)

			
	 
	

CEO

			
	

Title of Signing Party (Please Print)

			
	 
	

January 13, 2020 

Date Signed

			

1 For purposes of this Questionnaire, "income" means
adjusted gross income, as reported for federal income tax purposes, increased
by the following amounts: (a) the amount of any tax exempt interest income
received, (b) the amount of losses claimed as a limited partner in a limited
partnership, (c) any deduction claimed for depletion, (d) amounts contributed
to an IRA or Keogh retirement plan, (e) alimony paid, and (f) any amounts by
which income from long-term capital gains has been reduced in arriving at
adjusted gross income pursuant to the provisions of Section 1202 of the
Internal Revenue Code.

2 For purposes of this
Questionnaire, "net worth" means the excess of total assets,
excluding your primary residence, at fair market value over total liabilities,
including your mortgage or any other liability secured by your primary
residence only if and to the extent that it exceeds the value of your primary   residence. Net worth should include the value of any other shares of
stock or options held by you and your spouse and any personal property owned by
you or your spouse (e.g. furniture, jewelry, other valuables, etc.).

 

AC/7051587.2

EXHIBIT I 

ACCREDITED INVESTOR CERTIFICATE

 

(see
attached)

 

 

 

 

 

CANADIAN INVESTOR
QUESTIONNAIRE

TO:       SOLUNA TECHNOLOGIES, LTD. (the "Issuer")

RE:       Purchase of Class A
Preferred Shares (the "Shares") of the Issuer

Capitalized terms used in this Canadian Investor
Questionnaire (this "Questionnaire") and not specifically defined
have the meaning ascribed to them in the Share Purchase Agreement between the
Subscriber and the Issuer to which this Exhibit A is attached.

In
connection with the purchase of Shares by the undersigned or the Disclosed
Principal (in either case, the "Subscriber"), the Subscriber hereby
represents, warrants and certifies to the Issuer that the Subscriber:

(i)         is
purchasing the Shares as principal (or deemed principal under the terms of
National Instrument 45-106 - Prospectus Exemptions as adopted by the
Canadian Securities Administrators ("NI 45-106"));

(ii)        (A)    is resident in or is subject to the laws of one of the following
(check one):

	
☐ Alberta 	
☐ New Brunswick	

☐ Prince Edward Island

		
	
☐ British Columbia	
☐ Nova Scotia	

☐ Quebec

		
	
☐ Manitoba	
☐ Ontario	

☐
Saskatchewan

		
	
☐ Newfoundland and Labrador	

☐ Yukon 

	
		
☐ Northwest Territories

		
	

☑ United
States:  New York    (List State of Residence) or

		

(B)      
☐ is
resident in a country other than Canada or the United States; and

(iii)       has not been provided with any
offering memorandum in connection with the purchase of the Shares.

In connection with the purchase of the Shares, the Subscriber
hereby represents, warrants and certifies to,
and covenants and agrees with, the Issuer that the Subscriber meets one or more
of the following criteria:

I.              SUBSCRIBERS
PURCHASING UNDER THE "ACCREDITED INVESTOR" EXEMPTION

(a)      the
Subscriber is an "accredited investor" within the meaning of NI
45-106, by virtue of satisfying the indicated criterion below (YOU MUST
INITIAL OR PLACE A CHECK-MARK ON THE APPROPRIATE LINE(S) AND ALSO COMPLETE AND
SIGN APPENDIX "A" TO THIS CERTIFICATE) (see certain guidance with respect to
accredited investors that starts on page 6 below)

☐  
(i)           except
in Ontario, a person registered under the securities legislation of a
jurisdiction of
Canada as an adviser or dealer,

☐  
(ii)          an
individual registered under the securities legislation of a jurisdiction of
Canada as a
representative of a person referred to in paragraph (ix),

☐   (iii)         an individual formerly registered under the securities legislation of a
jurisdiction of
Canada, other than an individual formerly registered solely as a representative
of a limited market dealer under one or both of the Securities Act (Ontario)
or the Securities Act (Newfoundland and Labrador),

☐  
(iv)         an
individual who, either alone or with a spouse, beneficially owns financial
assets having an aggregate realizable value that, before taxes but net of any
related liabilities, exceeds $1,000,000,

If relying on (iv) your
estimated financial assets net of related liabilities alone or with a spouse:

☐     $1,000,001 - $3,000,000
☐ $3,000,001 -$5,000,000 ☐ Greater than $5 million

☐  
(v)          an
individual who beneficially owns financial assets having an aggregate realizable
value that, before taxes but net of any related liabilities, exceeds
$5,000,000,

If relying on (v) your estimated financial assets net of related
liabilities:

☐
$5,000,001- $6,000,000     ☐ $6,000,001-$7,000,000  
☐ $7,000,001-$8,000,000    ☐ Greater than $8 million

☐  
(vi)         an individual whose net income before taxes exceeded $200,000 in
each of the 2 most recent calendar years or whose net income before taxes
combined with that of a spouse exceeded $300,000 in each of the 2 most recent
calendar years and who, in either case, reasonably expects to exceed that net
income level in the current calendar year,

If relying on (vi) your annual net income before taxes (all sources):

Most recent calendar year:
☐ $200,000 - $299,000  
☐ $300,000 - $399,999  
☐ $400,000 -$500,000   
☐ Greater than
$500,000

Prior
calendar year:
☐ $200,000 - $299,000  
☐ $300,000 - $399,999
  ☐ $400,000 -
$500,000
  ☐ Greater than $500,000

Page 2

☐   (vii)       an
individual who, either alone or with a spouse, has net assets of at least
$5,000,000,

  If relying on (vii) your estimated total net assets:

  
☐
  $5,000,001-$6,000,000   ☐ $6,000,001-$7,000,000    ☐ $7,000,001-$8,000,000    ☐ Greater than $8 million

  
☑      (viii)    a person, other than
  an individual or investment fund, that has net assets of at least $5,000,000
  as shown on its most recently prepared financial statements and that has
  not been created or used solely to purchase or hold securities as an
  accredited investor as defined in this paragraph (viii),

  If
  relying on (viii)
  your estimated total net assets:

  
☑ $5,000,001- $6,000,000
  ☐ $6,000,001-$7,000,000  
☐
  $7,000,001-$8,000,000  
☐ Greater than $8 million

  
☐     (ix)      an
  investment fund that distributes or has distributed its securities only to

  (i)     a
  person that is or was an accredited investor at the time of the distribution,

  
	(ii)    a person that acquires or
  acquired securities in the circumstances referred to in sections 2.10
  [Minimum amount investment] of NI 45-106, or 2.19 [Additional investment in
  investment funds] of NI 45-106, or

  (iii)    a person described in paragraph (i) or (ii) that acquires or
  acquired securities under section 2.18 [Investment fund reinvestment] of NI 45-106,

☐   
(x)        an
investment fund that distributes or has distributed securities under a
prospectus in a
jurisdiction of Canada for which the regulator or, in Quebec, the securities
regulatory authority, has issued a receipt,

☐   
(xi)        a
person acting on behalf of a fully managed account managed by that person, if
that person is registered or authorized to carry on business as an adviser or
the equivalent under the securities legislation of a jurisdiction of Canada or
a foreign jurisdiction,

☐   
(xii)       an
entity organized in a foreign jurisdiction that is analogous to the entity
referred to in paragraph (i) in form and function,

☐   
(xiii)      a
person in respect of which all of the owners of interests, direct, indirect or
beneficial, except the voting securities required by law to be owned by
directors, are persons that are accredited investors, and

(b)     if the
Subscriber is an "accredited investor" within the meaning of NI
45-106 by virtue of satisfying the indicated criterion as set out in paragraphs (iv), (vi) or (vii)
above, the Subscriber has provided the Issuer with the signed risk
acknowledgment form set out in Appendix "A" to this certificate;

Page 3

Definitions

For the purposes of this Questionnaire and Appendix "A"
attached to this Questionnaire:

 (a)       an
issuer is "affiliated" with another issuer if:

(i)       one
of them is the subsidiary of the other, or 

(ii)     
each of them is controlled by the same person;

 (b)       "control
person" means:

(i)        a person who holds
a sufficient number of the voting rights attached to all outstanding voting
securities of an issuer to affect materially the control of the issuer, or

(ii)       each person in a combination
of persons, acting in concert by virtue of an agreement, arrangement,
commitment or understanding, which holds in total a sufficient number of the
voting rights attached to all outstanding voting securities of an issuer to
affect materially the control of the issuer,

and, if a person or
combination of persons holds more than 20% of the voting rights attached to all
outstanding voting securities of an issuer, the person or combination of persons
is deemed, in the absence of evidence to the contrary, to hold a sufficient
number of the voting rights to affect materially the control of the issuer;

 (c)      
"director"
means:

(i)        a member of the
board of directors of a company or an individual who performs similar functions
for a company, and

(ii)       with respect to a person that
is not a company, an individual who performs functions similar to those of a
director of a company;

 (d)     
"eligibility
adviser" means:

(i)        a person that is
registered as an investment dealer and authorized to give advice with respect
to the type of security being distributed, and

(ii)       in
Saskatchewan or Manitoba, also means a lawyer who is a practicing member in
good standing with a law society of a jurisdiction of Canada or a public
accountant who is a member in good standing of an institute or association of
chartered accountants, certified general accountants or certified management
accountants in a jurisdiction of Canada provided that the lawyer or public
accountant must not:

(A)       have a
professional, business or personal relationship with the issuer, or any of its
directors, executive officers, founders or control persons, and

(B)       have acted
for or been retained personally or otherwise as an employee, executive officer,
director, associate or partner of a person that has acted for or been retained
by the issuer or any of its directors, executive officers, founders or control
persons within the previous 12 months;

(e)       "executive
officer" means, for an issuer, an individual who is:

(i)      a
chair, vice-chair or president,

(ii)     a vice-president
in charge of a principal business unit, division or function including sales,
finance or production, or

(iii)     performing
a policy-making function in respect of the issuer;

 

Page 4

(f)        "financial
assets" means:

(i)     cash,

(ii)     securities, or

(iii)     a contract of insurance, a
deposit or an evidence of a deposit that is not a security for the purposes of
securities legislation;

(g)       "foreign
jurisdiction" means a country other than Canada or a political subdivision
of a country other than Canada;

(h)       "founder"
means, in respect of an issuer, a person who,

(i)      acting
alone, in conjunction, or in concert with one or more persons, directly or indirectly,
takes the initiative in founding, organizing or substantially reorganizing the
business of the issuer, and

(ii)      at the time of
the distribution or trade is actively involved in the business of the issuer;

(i)        "fully managed
account" means an account of a client for which a person makes the
investment decisions if that person has full discretion to trade in securities
for the account without requiring the client's express consent to a
transaction;

(j)        "individual" means a natural person, but does not include

(i)       a
partnership, unincorporated association, unincorporated syndicate,
unincorporated organization or trust, or

(ii)      a natural
person in the person's capacity as a trustee, executor, administrator or
personal or other legal representative;

(k)       "investment
fund" means a mutual fund or a non-redeemable investment fund, and, for
great certainty in British Columbia, includes an employee venture capital
corporation and a venture capital corporation as such terms are defined in
National Instrument 81-106 Investment Fund Continuous Disclosure;

(l)        
"jurisdiction"
or "jurisdiction of Canada" means a province or territory of Canada
except when used in the term "foreign jurisdiction";

(m)       "non-redeemable investment fund" means an issuer:

(i)        whose
primary purpose is to invest money provided by its securityholders,

(ii)       that
does not invest

(A)      
for the
purpose of exercising or seeking to exercise control of an issuer, other than
an issuer that is a mutual fund or a non-redeemable investment fund, or

(B)      
for the
purpose of being actively involved in the management of any issuer in which it
invests, other than an issuer that is a mutual fund or a non-redeemable
investment fund, and

(iii)      that
is not a mutual fund; 

(n)  "person" includes:

(i)     an individual, 

(ii)    
a corporation,

Page 5

(iii)     a partnership, trust, fund and
an association, syndicate, organization or other organized group of persons,
whether incorporated or not, and

(iv)     an individual or other person in that person's capacity as a
trustee, executor, administrator or personal or
other legal representative;

(o)   "related liabilities" means:

(i)       liabilities
incurred or assumed for the purpose of financing the acquisition or ownership
of financial assets, or

(ii)      liabilities
that are secured by financial assets; and

(p)   "spouse" means, an individual who:

(i)      is married to
another individual and is not living separate and apart within the meaning of
the Divorce Act (Canada), from the other individual,

(ii)     is living with another
individual in a marriage-like relationship, including a marriage-like
relationship between individuals of the same gender, or

(iii)    in Alberta, is an individual
referred to in paragraph (i) or (ii), or is an adult interdependent partner
within the meaning of the Adult Interdependent Relationships Act (Alberta).

Guidance On
Accredited Investor Exemptions for Individuals

An individual
accredited investor is an individual:

(a)       who,
either alone or with a spouse, beneficially owns financial assets (please see
the guidance below regarding what financial assets are) having an aggregate
realizable value that. before taxes but net of any related liabilities (please
see the guidance below regarding what related liabilities are), exceeds
$1,000,000;

(b)       whose net
income before taxes exceeded $200,000 in each of the 2 most recent calendar
years or whose net income before taxes combined with that of a spouse exceeded
$300,000 in each of the 2 most recent calendar years and who, in either case,
reasonably expects to exceed that net income level in the current calendar
year;

(c)       who,
either alone or with a spouse, has net assets (please see the guidance below
regarding calculating net assets) of at least $5,000,000; and

(d)       who
beneficially owns financial assets (please see the guidance below regarding
what financial assets are) having an aggregate realizable value that, before
taxes but net of any related liabilities (please see the guidance below regarding
what related liabilities are), exceeds $5,000,000.

The monetary thresholds above are intended to create bright-line
standards. Subscribers who do not satisfy these monetary thresholds do not
qualify as accredited investors.

Spouses

Sections (a), (b) and (c) above are designed to treat spouses as a
single investing unit, so that either spouse qualifies as an accredited
investor if the combined financial assets of both spouses exceed $1,000,000,
the combined net income of both spouses exceeds $300,000, or the combined net
assets of both spouses exceed $5,000,000. Section (d) above does not treat
spouses as a single investing unit.

Page 6

If the combined net income of both spouses
does not exceed $300,000, but the net income of one of the spouses exceeds
$200,000, only the spouse whose net income exceeds $200,000 qualifies as an
accredited investor.

Financial
Assets and Related Liabilities

For the purposes of Sections (a) and (d)
above, "financial assets" means: (1) cash, (2) securities, or (3) a
contract of insurance, a deposit or an evidence of a deposit that is not a
security for the purposes of securities legislation. These financial assets are
generally liquid or relatively easy to liquidate. The value of a subscriber's
personal residence is not included in a calculation of financial assets.

The calculation of financial assets must
exclude "related liabilities", meaning: (1) liabilities incurred or
assumed for the purpose of financing the acquisition or ownership of financial
assets, or (2) liabilities that are secured by financial assets.

As a general matter, it should not be
difficult to determine whether financial assets are beneficially owned by an
individual, an individual's spouse, or both, in any particular instance.
However, in the case where financial assets are held in a trust or in another
type of investment vehicle for the benefit of an individual, there may be
questions as to whether the individual beneficially owns the financial assets.
The following factors are indicative of beneficial ownership of financial
assets:

	
	physical or
constructive possession of evidence of ownership of the financial asset;

	
	
	entitlement to receipt
of any income generated by the financial asset;

	
	risk of loss of the
value of the financial asset; and

	
	the ability to dispose
of the financial asset or otherwise deal with it as the individual sees fit.

	

For example, securities held in a
self-directed RRSP for the sole benefit of an individual are beneficially owned
by that individual.

In general, financial assets in a spousal
RRSP can be included for the purposes of the $1,000,000 financial asset test in
Section (a) above because Section (a) takes into account financial assets owned
beneficially by a spouse. However, financial assets in a spousal RRSP cannot be
included for purposes of the $5,000,000 financial asset test in Section (d)
above.

Financial assets held in a group RRSP
under which the individual does not have the ability to acquire the financial
assets and deal with them directly do not meet the beneficial ownership
requirements in either Sections (a) or (d) above.

Net Assets

For the purposes of Section (c) above, "net

assets" means all of a subscriber's total assets minus all of the subscriber's
total liabilities. Accordingly, for the purposes of the net asset test, the
calculation of total assets includes the value of a subscriber's personal
residence, and the calculation of total liabilities includes the amount of any
liability (such as a mortgage) in respect of the subscriber's personal
residence.

To calculate a subscriber's net assets
under the net asset test, subtract the subscriber's total liabilities from the
subscriber's total assets. The value attributed to assets should reasonably
reflect their estimated fair value. Income tax is considered a liability if the
obligation to pay it is outstanding at the time of the distribution of the
security to the subscriber by the Company.

Page 7

Guidance On Accredited
Investor Exemptions for Corporations, Trusts and Other Entities Accredited investors that are
corporations, trusts or other entities include:

(a)        a
corporation, trust or other entity, other than an investment fund, that has net
assets (please see the guidance below regarding calculating net assets) of at
least $5,000,000 as shown on its most recently prepared financial statements in
accordance with applicable generally accepted accounting principles and that
has not been created or used solely to purchase or hold securities as an accredited
investor;

(b)        a
corporation, trust or other entity in respect of which all of the owners of
interests, direct, indirect or beneficial, except the voting securities
required by law to be owned by directors, are persons that are accredited
investors; and

(c)        a trust
established by an accredited investor for the benefit of the accredited
investor's family members of which a majority of the trustees are accredited
investors and all of the beneficiaries are the accredited investor's spouse, a
former spouse of the accredited investor or a parent, grandparent, brother,
sister, child or grandchild of that accredited investor, of that accredited
investor's spouse or of that accredited investor's former spouse.

Net Assets

For the purposes of Section
(a) above, "net assets" means all of the subscriber's total
assets minus all of the subscriber's total liabilities. The minimum net asset
threshold of $5,000,000 specified in Section (a) above must be shown on the
entity's most recently prepared financial statements. The financial statements
must be prepared in accordance with applicable generally accepted accounting
principles.

General

The Subscriber agrees that the
above representations and warranties will be true and correct both as of the
execution of this Questionnaire and as of the Closing and acknowledges that
they will survive the completion of the issue of the Shares.

The Subscriber acknowledges that the
foregoing representations and warranties are made by the Subscriber with the
intent that they be relied upon in determining the suitability of the
Subscriber to acquire the Shares and that this Questionnaire is incorporated
into and forms part of the Agreement. The Subscriber

Page 8

undertakes to immediately notify the
Issuer of any change in any statement or other information relating to the
Subscriber set forth herein which takes place prior to the Closing.

By completing this Questionnaire, the
Subscriber authorizes the indirect collection of this information by each
applicable regulatory authority and acknowledges that such information may be
made available to the public under applicable laws.

DATED
as of the 13th day of January, 2020.

		

			
	

 

			
	

Frederick
W. Jones, CEO  

Print Name and Title of Authorized

			
	

Signatory (if
Subscriber is not an individual)

			

  

 

 

 

 

 

Page 9Exhibit10.22

Execution copy

 

EXHIBIT 10.22

CONTINGENT RIGHTS
AGREEMENT

 

This CONTINGENT RIGHTS AGREEMENT
(this "Agreement"), dated January 13, 2020 (the "Effective
Date"), is entered into by and between Soluna Technologies, Ltd., a private
limited company incorporated under the laws of British Columbia ("Soluna"),
and Mechanical Technology, Incorporated, a New York corporation (the "Investor"). 
Soluna and the Investor are sometimes referred to herein, individually, as a "party"
and, collectively, as the "parties".

 

R E C I T A L S:

 

WHEREAS, simultaneous with
the entering into of this Agreement, (a) Soluna and the Investor are
 consummating an investment by which the Investor is becoming the holder
of Soluna Class A Preferred Stock (such investment, the "Series A
Investment") pursuant to, among other operative documents, a certain Share
Purchase Agreement with respect thereto (the "Share Purchase Agreement")
and (b) Soluna and a wholly-owned Subsidiary of Investor are entering into
an Operating and Management Agreement pursuant to which Soluna will assist such
wholly-owned Subsidiary with the creation, development, assembly and
construction, as applicable, of a pilot cryptocurrency facility to be composed
of tangible and intangible assets that interact to integrate with the bitcoin
blockchain network and are physically located in North America or another
geographic location mutually agreed to by the parties (all such assets
currently and in the future owned by the Investor, such wholly-owned Subsidiary
of Investor or their assigns, collectively, the "Pilot Mine Program");

 

WHEREAS, in connection with
the consummation of the Series A Investment and entering into of the Operating
and Management Agreement with respect to the Pilot Mine Program, the parties
wish to grant and devise to the Investor certain conditional future investment
rights with respect to Soluna and its Subsidiaries as set forth herein; and

 

WHEREAS, the entering into
of this Agreement is a material inducement for the Investor to consummate the
Series A Investment and facilitate its wholly-owned Subsidiary's entering into of
the Operating and Management Agreement, with the consummation of such Series A
Investment and the entering into of the Operating and Management Agreement
deemed by the parties to be part of the material consideration exchanged for
the rights of Investor set forth herein.

 

NOW, THEREFORE, in
consideration of the premises and the mutual promises and covenants contained
herein, including Ten and 00/100 United States Dollars ($10.00), cash-in-hand
paid, and intending hereby to be legally bound, Soluna and the Investor hereby
agree and stipulate as follows:

 

 

 

ARTICLE I

DEFINITIONS;
INTERPRETATION

 

          
1.1        Definitions.  As used in this Agreement, the following terms have
the respective meanings set forth below or set forth in the Sections referred
to below.

 

"Affiliate" means, with
respect to any Person, any other Person that, directly or indirectly, controls,
is controlled by or is under common control with, such Person.  For the
purposes of this Agreement, "control," when used with respect to any specified Person,
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person, whether through ownership of voting
securities or partnership or other ownership interests, by contract or
otherwise; and the terms "controlling" and "controlled" shall have correlative
meanings.

 

"Agreement" has the meaning
set forth in the Preamble. 

 

"Applicable Law" means, as
to any Person, any federal, state, municipal and local law, statute, ordinance,
regulation, order, directive, policy and decision rendered by any Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject or
pertaining to any or all of the transactions contemplated or referred to herein,
including, in the case of the Investor, any requirements of the Securities Act,
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder which shall be in effect from time to time.

 

"Business Day" means a day
other than a Saturday, a Sunday or a day that is a nationally recognized
holiday in the United States.

 

"Capital Stock" means the common stock of
Soluna, any preferred stock authorized by Soluna (including the Soluna Class A
Preferred Stock) and any other class or series of capital stock or other equity
securities of Soluna, whether authorized as of or after the date hereof.

 

"Effective Date" means the
date set forth in the Preamble.

 

"Governmental Authority"
means the government of any nation, state, city, locality or other political
subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.

 

"Investor" has the meaning
set forth in the Preamble.

 

"Investor Additional Purchase
Notice" has the meaning set forth in Section 3.2. 

 

"New Project Finance Equity
Purchase Price" has the meaning set forth in Section 2.1(a).

 

"New Phase I Project Financing
Equity" shall mean any capital stock (including Capital Stock), membership
interest, unit or other similar securities of any type whatsoever (other than
debt securities not convertible into equity securities) of Soluna or any of its
Subsidiaries, whether authorized now or in the future, and any rights, options
or warrants to purchase any such capital stock (including Capital Stock),
membership interest or other securities of Soluna or any of its Subsidiaries,
including Stock Equivalents and any such rights that may become convertible
into or exchangeable or exercisable for any such capital stock (including
Capital Stock), membership interest or other securities of Soluna or any of its
Subsidiaries, to the extent the foregoing are issued to fund the equity portion
of a Phase I Project Financing that is not allocated to the single lead
investor or debt financing providers in respect of the applicable Phase I
Project Financing, including, without limitation, any equity co-investment or
similar right that accompanies the debt financing associated with a project
financing of Soluna or its Subsidiaries.

2

 

 

"Operating and Management
Agreement" means that certain Operating and Management Agreement, dated
even date herewith and substantially in the form of Exhibit A hereto,
entered into by and between Soluna and a wholly-owned Subsidiary of Investor,
as such agreement may be amended or modified from time to time.

 

"Original Purchase Price"
means the purchase price for a single share of Soluna Class A Preferred Stock
paid by Investor to Soluna in connection with the Series A Investment being
consummated simultaneously with the entering into of this Agreement.

 

"party" or "parties"
has the meaning set forth in the Preamble. 

 

"Person" means any
individual, joint venture, general partnership, limited partnership, limited
liability company, corporation, trust, business trust, cooperative, association
or other incorporated or unincorporated entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of that person
where the context so admits.

 

"Phase I Project" means the
initial 100 MW phase of a wind power generation project and the initial data
processing center, each as  sponsored by Soluna or its Affiliates, including
all equipment, improvements and assets associated therewith, currently
contemplated to be sited on land with respect to which Soluna has acquired
development rights located in the city of Dakhla, region of Oued-Ed-Dahab,
Kingdom of Morocco.

 

"Phase I Project Financial
Closing" means the consummation of a Phase I Project Financing determined based
upon (a) all material project and financing agreements having been executed and
delivered by the applicable counterparties with respect to such Phase I Project
Financing, (ii) all conditions for funding and legal closing with respect
to such agreements having been satisfied or waived by the applicable parties
and (iii) Soluna or its related Subsidiary or Affiliate being capable of
drawing upon the applicable financing to commence work on the Phase I Project.

 

"Phase I Project Financing"
means a project financing supporting the Phase I Project having an aggregate
financing value in excess of Fifty Million United States Dollars
($50,000,000.00) (net of costs and fees).

 

"Pilot Mine Program" has
the meaning set forth in the Recitals.

3

 

 

 

"Pilot Mine Program Plan
Delivery" means when Soluna has, as mutually determined in good faith by
the parties, completed the "Development Services" set out and described in
Exhibit A of the Operating and Management Agreement in compliance with the
terms and conditions of said Operating and Management Agreement.

 

"Preemptive Notice" has the
meaning set forth in Section 2.1(a). 

 

"Public Offering" means any
underwritten public offering pursuant to a registration statement filed in
accordance with the Securities Act.

 

"Qualified Public Offering" means
the sale, in a firm commitment underwritten Public Offering led by a nationally
recognized underwriting firm pursuant to an effective registration statement
under the Securities Act, of common stock of Soluna having an aggregate
offering value (net of underwriters' discounts and selling commissions) of at
least Fifty Million and 00/100 United States Dollars ($50,000,000.00).

 

"Securities Act" means the
Securities Act of 1933, as amended, or any successor federal statute, and the
rules and regulations thereunder, which shall be in effect at the time.

 

"Series A Investment" has
the meaning set forth in the Recitals.

 

"Share Purchase Agreement"
has the meaning set forth in the Recitals.

 

"Soluna" has the meaning
set forth in the Preamble.

 

"Soluna Class A Preferred Stock"
means the Class A Preferred Stock of Soluna, no par value per share.

 

"Stock Equivalents" means any
security or obligation that is by its terms, directly or indirectly,
convertible into or exchangeable or exercisable for or with a value derived in
whole or part from Capital Stock, and any option, warrant or other right to
subscribe for, purchase or acquire Capital Stock or Stock Equivalents
(disregarding any restrictions or limitations on the exercise of such rights).

 

"Subsidiary" means, with
respect to any Person, any other Person of which a majority of the outstanding
shares or other equity interests having the power to vote for directors or
comparable managers are owned, directly or indirectly, by the first Person.

 

          
1.2        Interpretation.  Unless the context requires otherwise: (a) the
gender (or lack of gender) of all words used in this Agreement includes the
masculine, feminine and neuter; (b) references to "Articles" and
"Sections" refer to articles and sections of this Agreement; (c) unless
expressly set forth to the contrary, references to "Exhibits" refer to the
exhibits attached to this Agreement, each of which is made a part hereof for
all purposes; (d) references to laws or agreements refer to such laws or
agreements as they may be amended from time to time, and references to
particular provisions of a law include any corresponding provisions of any
succeeding law; (e) the terms defined herein include the plural as well as
the singular and vice versa; and (f) references to money refer to legal
currency of the United States of America.

 

4

 

 

 

ARTICLE
II

PRE-EMPTIVE
RIGHT ON EQUITY ISSUANCES

 

        2.1           Pre-emptive Right of Subscription

(a)        In the event that, at any time, Soluna or any Subsidiary of Soluna shall
decide to undertake an issuance of New Phase I Project Financing Equity, Soluna
shall, or shall cause such Subsidiary to, confer in good faith with the
Investor to discuss the nature and structure of the applicable project
financing to which the New Phase I Project Financing Equity relates.  Soluna
shall use all commercially reasonable efforts to accommodate any Investor
preference or desire to invest in any particular entity or level of the Phase I
Project Financing (i.e., whether in Soluna, a Soluna Subsidiary or (if
acceptable to the lead investor) directly in the Phase I Project Financing
vehicle).  Promptly following such consultation, Soluna shall deliver written
notice of its decision to undertake an issuance of New Phase I Project
Financing Equity to the Investor.  Such written notice shall describe (i) the
amount, type and terms of such New Phase I Project Financing Equity, (ii) the
purchase price per security for such New Phase I Project Financing Equity
(the "New Project Finance Equity Purchase Price") to be paid by the
purchasers of such New Phase I Project Financing Equity, (iii) the
identity of any single lead investor in the Phase I Project Financing, and (iv)
all other material terms upon which Soluna has decided to issue the New Phase I
Project Financing Equity including the expected timing of such issuance, which
shall in no event be less than thirty (30) days after the date upon which such
notice is given (the "Preemptive Notice").  Investor shall have ten (10)
Business Days from the date on which the Preemptive Notice is given to agree by
written notice to Soluna to purchase, subject to Section 2.1(c), any
or all (in Investor's sole discretion) of such New Phase I Project Financing
Equity upon the general terms specified in the Preemptive Notice, up to an
amount not exceeding Fifty Million United States Dollars ($50,000,000) unless
otherwise agreed in writing by Soluna, stating therein the quantity of New
Phase I Project Financing Equity to be purchased by the Investor.  In the event
that in connection with such a proposed issuance of New Phase I Project
Financing Equity, the Investor shall for any reason fail or refuse to give such
written notice to Soluna within such ten (10) Business Day period, the Investor
shall, for all purposes of this Section 2.1(a), be deemed to have
refused (in that particular instance only) to purchase any of such New Phase I
Project Financing Equity and to have waived (in that particular instance only)
all of its rights under this Section 2.1(a) to purchase any of such
New Phase I Project Financing Equity.  Any New Phase I Project Financing Equity
issued pursuant to this Section 2.1 shall be subject to Section
2.1(c) and be acquired by the Investor making payment to Soluna or its
Subsidiary, as applicable, therefor simultaneous with the closing with respect
to the project financing to which the New Phase I Project Financing Equity
relates.

(b)        In the event and to the extent that such New Phase I Project Financing
Equity contemplated by this Section 2.1 is not acquired by the Investor,
Soluna shall be free to issue such New Phase I Project Financing Equity to any
Person; provided, that (x) the price per security of New Phase I Project
Financing Equity at which such New Phase I Project Financing Equity is being
issued to and purchased by such Person is equal to or greater than the New Project
Finance Equity Purchase Price and (y) the other terms and conditions pursuant
to which such Person purchases such New Phase I Project Financing Equity are
not more favorable, in the aggregate, than the terms set forth in the
Preemptive Notice.

5

 

 

(c)     Notwithstanding anything in this Article II to the contrary, the
following shall apply with respect to any purchase or contemplated purchase of
New Phase I Project Financing Equity by the Investor pursuant to this Section
2.1:

(i)        In the event the Investor agrees to purchase New Phase I Project
Financing Equity pursuant to Section 2.1(a) and the closing with respect
to the Investor's purchase thereof is not consummated within one hundred eighty
(180) days after the date of the Preemptive Notice, then following such one
hundred eighty (180) day period the Investor may, by written notice to Soluna,
unilaterally terminate the Investor's election to purchase the applicable New
Phase I Project Financing Equity.  Following any such termination, the Investor
shall have no obligation or liability to Soluna with respect to the applicable
New Phase I Project Financing Equity previously elected to be purchased by the Investor.

(ii)       Until only such time as the Investor has purchased a total number of
additional shares of Soluna Class A Preferred Stock having an aggregate
purchase price of Three Million Five Hundred Thousand and 00/100 United States Dollars
($3,500,000.00) (excluding the Series A Investment being consummated
simultaneous herewith), the Investor's exercise of its right to purchase New
Phase I Project Financing Equity set forth in this Section 2.1 shall be
subject to the limitation that for every Ten and 00/100 United States Dollars
($10.00) of New Phase I Project Financing Equity purchased by Investor pursuant
to this Section 2.1, the Investor shall have previously purchased (excluding
the Series A Investment being consummated simultaneous herewith) or shall simultaneously
purchase One and 00/100 United States Dollar ($1.00) of additional shares of
Soluna Class A Preferred Stock (whether pursuant to Article III or
otherwise).  Soluna shall use all commercially reasonable efforts to facilitate
the issuance of additional shares of Soluna Class A Preferred Stock to the
Investor in a manner that permits the Investor's timely exercise of its right
to purchase New Phase I Project Financing Equity set forth in this Section
2.1, and the parties shall cooperate in good faith to execute and deliver
to one another subscription materials with respect to such additional Soluna Class
A Preferred Stock that are of similar type and form as the subscription
materials used to effectuate the Series A Investment being consummated
simultaneously herewith.

ARTICLE
III

FUTURE
CONTINGENT INVESTMENT RIGHT

 

3.1       Initial Future Contingent
Investment Right.  Within a period of
sixty (60) days following Soluna's achievement of Pilot Mine Program Plan
Delivery, the Investor shall purchase from Soluna, and Soluna shall sell and
issue to the Investor, in exchange for a one-time payment of Two Hundred Fifty
Thousand and 00/100 United States Dollars ($250,000.00) to Soluna by the
Investor, additional shares of Soluna Class A Preferred Stock at a purchase
price per share equal to the Original Purchase Price.  Following Soluna's
achievement of Pilot Mine Program Plan Delivery, the parties shall cooperate in
good faith to execute and deliver to one another subscription materials with
respect to the additional Soluna Class A Preferred Stock contemplated by this Section
3.1 that are of similar type and form as the subscription materials used to
effectuate the Series A Investment being consummated simultaneously herewith.  Soluna
shall give the Investor at least ten (10) Business Days' written notice of the
date of closing and, at said closing, the Investor shall pay the purchase price
for the applicable additional shares of Soluna Class A Preferred Stock pursuant
to either certified check or bank wire delivered to Soluna.  For the avoidance
of doubt, the Investor's ability to acquire additional shares of Soluna Class A
Preferred Stock pursuant to this Section 3.1 shall be conditioned, in
all instances, upon Soluna's ability to achieve Pilot Mine Program Plan
Delivery.

 

6

 

 

3.2        Additional Future Contingent
Investment Right.  For a period of
twelve (12) months following Soluna's achievement of Phase I Project Financial
Closing, the Investor shall have the right to purchase from Soluna, and Soluna
shall have the obligation to sell and issue to the Investor, in exchange for
payment(s) of up to Three Million Two Hundred Fifty Thousand and 00/100 United
States Dollars ($3,250,000.00) in the aggregate to Soluna by the Investor,
additional shares of Soluna Class A Preferred Stock at a purchase price per
share equal to the Original Purchase Price.  If the Investor desires to
exercise its rights pursuant to this Section 3.2, the Investor shall
deliver to Soluna a written notice (the "Investor Additional Purchase Notice")
specifying the (a) Investor's intention to exercise such right, (b) amount
of funds the Investor intends to pay for the applicable shares of Soluna Class A
Preferred Stock to be received pursuant to this Section 3.2 and (c) Investor's
calculation as to the number of shares of Soluna Class A Preferred Stock to be
received by the Investor pursuant to this Section 3.2 taking account of
the Original Purchase Price being applied thereto.  Unless mutually agreed by
the parties to the contrary, the closing of the issuance of additional shares
of Soluna Class A Preferred Stock pursuant to this Section 3.2 shall
take place no more than sixty (60) days following receipt by Soluna of the
Investor Additional Purchase Notice.  Soluna shall give the Investor at least
ten (10) Business Days' written notice of the date of closing and, at said
closing, the Investor shall pay the purchase price for the applicable
additional shares of Soluna Class A Preferred Stock pursuant to either
certified check or bank wire delivered to Soluna.  For the avoidance of doubt,
the Investor shall be permitted to exercise its rights under this Section 3.2
in a single or multiple tranches, and the Investor's ability to acquire
additional shares of Soluna Class A Preferred Stock pursuant to this Section
3.2 shall be conditioned, in all instances, upon Soluna's ability to
achieve Phase I Project Financial Closing.  The rights of the Investor set
forth in this Section 3.2 shall be exercised (including with respect to
the number of shares of Soluna Class A Preferred Stock to be acquired) solely
by the Investor in its sole and absolute discretion with Soluna having no right
to assert a demand therefor.

 

ARTICLE IV

MISCELLANEOUS
PROVISIONS

 

4.1        Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, EXCLUDING ANY
CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE
CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION.  If any
provision of this Agreement or the application thereof to either party or any
circumstance is held invalid or unenforceable to any extent, (a) the remainder
of this Agreement and the application of that provision to the other party or
other circumstances is not affected thereby, and (b) the parties shall
negotiate in good faith to replace that provision with a new provision that is
valid and enforceable and that puts the parties in substantially the same
economic, business and legal position as they would have been in if the
original provision had been valid and enforceable.

 

7

 

 

4.2        Binding Effect.  This Agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, legal representatives,
permitted successors and assigns.

 

4.3        Waiver. No waiver by either party of any default by the
other party in the performance of any provision, condition or requirement
herein shall be deemed to be a waiver of, or in any manner a release of the
other party from, performance of any other provision, condition or requirement
herein, nor deemed to be a waiver of, or in any manner a release of the other
party from, future performance of the same provision, condition or requirement;
nor shall any delay or omission of either party to exercise any right hereunder
in any manner impair the exercise of any such right or any like right accruing
to it thereafter.

 

4.4         Amendment. This Agreement may not be modified or amended except
by written agreement of the parties.

 

4.5         Headings. The headings contained in this Agreement are for
convenience of reference only and do not constitute part of this Agreement.

 

4.6         Further Assurances.  Each of the parties agrees to use all reasonable
efforts to take, or to cause to be taken, all actions, and to do, or to cause
to be done, all things necessary, proper or advisable under Applicable Law to
consummate and make effective the transactions contemplated by this Agreement.

 

4.7          Assignment.  Neither party shall assign its rights or
obligations hereunder without the prior written consent of the other party; provided,
that the Investor may transfer its rights and obligations hereunder to an
Affiliate upon written notice to Soluna, without the prior written consent of
Soluna.

 

4.8          Entire Agreement.  This Agreement, along with the Share Purchase
Agreement and Operating and Management Agreement, constitute the entire
agreement of the parties relating to the relationship hereunder and supersede
all provisions and concepts contained in all prior contracts or agreements
between the parties with respect to such relationship, whether oral or written.

 

4.9           Counterparts.  This Agreement may be executed by electronic
signature in multiple counterparts, each of which, when executed, shall be
deemed an original, and all of which shall constitute but one and the same
instrument.

 

4.10         Remedies.  Except as expressly provided herein, the remedies
created by this Agreement are cumulative and in addition to any other remedies
otherwise available at law or in equity.

 

8

 

 

4.11       
Survival.         This Agreement, and the terms and provisions
hereof, shall survive until the consummation of a Qualified Public Offering by Soluna.

 

[signature
page follows]

 

  

 

 

 

 

 

 

 

 

 

 

 

9

 

 

IN WITNESS WHEREOF, the
parties have duly executed this Agreement as of the date first set forth in
this Agreement.

 

 

		

Soluna:

			
	

 

			
	

SOLUNA TECHNOLOGIES, LTD.

			
	

 

			
	

 

			
	

By: /s/ John Belizaire__________________

			
	

Name: John Belizaire

			
	

Title:  CEO

			
	

 

			
	

 

			
	

 

			
	

Investor:

			
	

 

			
	

MECHANICAL
TECHNOLOGY, INCORPORATED

			
	

 

			
	

 

			
	

By: /s/ Frederick W. Jones______________

			
	

Name: Frederick W. Jones

			
	

Title:   Chief Executive Officer

			

 

 

 

 

[Signature Page to Investor
Rights Agreement]

 

 

 

EXHIBIT A

 

Operating and
Management Agreement

 

(see attached)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A-1

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