Document:

CANCELLATION
AGREEMENT

 

This
Cancellation Agreement (this “Agreement”) is made and entered into as of November 8, 2019 by and among Rand
Capital Corporation, a New York corporation (the “Company”), and Daniel P. Penberthy (the “Executive”).

 

W
I T N E S S E T H:

 

WHEREAS,
the Company is a party to a Stock Purchase Agreement (the “Purchase Agreement”) by and among the Company, Rand
Capital Management, LLC, and East Asset Management, LLC (“East”), dated as of January 24, 2019, whereby East
has agreed to purchase from the Company, and the Company has agreed to issue to East, the “Purchased Shares” (as defined
in the Purchase Agreement) on the terms and conditions set forth in the Purchase Agreement (the “Transaction”);

 

WHEREAS,
the Company and the Executive are parties to a Change in Control Agreement, dated March 1, 2017 (the “CIC Agreement”);

 

WHEREAS,
subject to and effective upon the consummation of the Transaction, the Executive and the Company wish to cancel the CIC Agreement
without any payment of consideration to the Executive; and

 

WHEREAS,
the Executive is knowingly and voluntarily entering into this Agreement;

 

NOW,
THEREFORE, in view of the foregoing premises, the parties hereto agree as follows:

 

1. Cancellation.
Subject to and effective upon the consummation of the Transaction, the CIC Agreement will be terminated in all respects. The
Company will not pay the Executive any consideration in exchange for the cancellation of the CIC Agreement. If the
Transaction is not consummated for any reason, this Agreement will be considered null and void and the CIC Agreement
will remain in full force and effect.

 

2. Legal
Advice. The Executive acknowledges and represents that the Executive has had the opportunity to consult with a
legal advisor in connection with this Agreement, the Executive is not relying upon the Company or any attorney to the Company
for any legal advice in connection with this Agreement, and the Executive is knowingly and voluntarily entering into this
Agreement.

 

3. Amendments.
This Agreement constitutes the entire agreement between the parties pertaining to its subject matter and supersedes all prior
and contemporaneous agreements, representations, and understandings of the parties. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by each party.

 

4. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

5. Assignment.
None of the parties hereto may assign this Agreement without the prior written consent of the other party hereto.

 

6. Governing
Law. This Agreement shall be construed in accordance with, and governed by the laws of the State of New York, without
regard to its conflicts of laws provisions.

 

[Signature
Page Follows]

 

    	 	 	 

    	 

    

 

IN
WITNESS WHEREOF, the parties to this Agreement have duly executed it as of the date set forth above.

 

	 	RAND CAPITAL CORPORATION
	 	 	 
	 	By:	/s/ Erland E. Kailbourne
	 	Name:	Erland
E. Kailbourne
	 	Title: 	Chairman of the Board
	 	 
	 	EXECUTIVE
	 	 	 
	 	/s/ Daniel P. Penberthy
	 	Name:	Daniel P. Penberthy

 

[Signature
Page to Penberthy Cancellation Agreement]Kelso Technologies Inc. - Exhibit 4.5 - Filed by newsfilecorp.com

	KELSO TECHNOLOGIES INC. 
	2014 STOCK OPTION PLAN 
	As approved by the Shareholders 
	on June 6, 2019 
	 

PART 1
INTERPRETATION

	1.01 	
      Definitions. In this Plan the following words and
      phrases shall have the following meanings,
namely:

	 	(a) 	
      “Associate” means, where used to indicate a relationship
      with any person:

	 	 	 	 
	 		(i) 	
      a partner, other than a limited partner, of that
      person;

	 	 	 	 
	 		(ii) 	
      a trust or estate in which that person has a substantial
      beneficial interest or for which that person serves as trustee or in a
      similar capacity;

	 	 	 	 
	 		(iii) 	
      a company in respect of which that person beneficially
      owns or controls, directly or indirectly, voting securities carrying more
      than 10% of the voting rights attached to all outstanding voting
      securities of the company; or

	 	 	 	 
	 		(iv) 	
      a relative, including the spouse or child, of that person
      or a relative of that person’s spouse, where the relative has the same
      home as that person;

	 		
      and for the purpose of this definition, “spouse” includes
      an individual who is living with another individual in a marriage-like
      relationship.

	 	 	 
	 	(b) 	
      “Board” means the Board of Directors of the Company or,
      if applicable, the Committee.

	 	 	 
	 	(c) 	
      “Committee” means a committee of the Board appointed in
      accordance with this Plan or, if no such committee is appointed, the Board
      itself.

	 	 	 
	 	(d) 	
      “Company” means Kelso Technologies Inc.

	 	 	 
	 	(e) 	
      “Consultant” means, in relation to the Company, an
      individual (or a company wholly-owned by an individual)
  who:

	 	(i) 	
      provides ongoing consulting services to the Company or an
      affiliate of the Company under a written contract;

	 	 	 
	 	(ii) 	
      possesses technical, business or management expertise of
      value to the Company or an affiliate of the Company;

	 	 	 
	 	(iii) 	
      spends a significant amount of time and attention on the
      business and affairs of the Company or an affiliate of the Company;
    and

	 	(iv) 	
      has a relationship with the Company or an affiliate of
      the Company that enables the individual to be knowledgeable about the
      business and affairs of the Company.

	 	(f) 	
      “Director” means any director of the Company or of any of
      its subsidiaries.

	 	 	 
	 	(g) 	
      “Discounted Market Price” means the Market Price less the
      maximum discounts based on closing price, if any, that are permitted by
      the policies of the Exchange.

	 	 	 
	 	(h) 	
      “Disinterested Shareholder Approval” means that the
      proposal must be approved by a majority of the votes cast at the
      shareholders’ meeting other than votes attaching to securities
      beneficially owned by Insiders and their Associates to whom shares may be
      issued pursuant to this Plan and, for purposes of this Plan, holders of
      non-voting and subordinate voting securities (if any) will be given full
      voting rights on a resolution which requires disinterested shareholder
      approval.

	 	 	 
	 	(i) 	
      “Employee” means:

	 	(i) 	
      an individual who is considered an employee of the
      Company or any of its subsidiaries under the Income Tax Act (i.e.
      for whom deductions (income tax, EI and CPP) must be made at
    source);

	 	 	 
	 	(ii) 	
      an individual who is a full-time (i.e. 35 - 40 hours per
      week) dependent contractor, that is one who works full-time for the
      Company or any of its subsidiaries providing services normally provided by
      an employee and is subject to the same control and direction by the
      Company or its subsidiary over the detail and methods of work as an
      employee of the Company or its subsidiary, but for whom income tax
      deductions are not made at source; or

	 	 	 
	 	(iii) 	
      a part-time dependent contractor, that is an individual
      who works for the Company or any of its subsidiaries on a continuing and
      regular basis for a minimum amount of time per week providing services
      normally provided by an employee and is subject to the same control and
      direction by the Company or its subsidiary over the details and methods of
      work as an employee of the Company or its subsidiary, but for whom income
      tax deductions are not made at source;

	 		
      and includes Management Company Employees and
      Consultants.

	 	 	 
	 	(j) 	
      “Exchange” means the stock exchange on which the common
      shares of the Company are listed for trading at the relevant
  time.

	 	 	 
	 	(k) 	
      “Insider” means:

	 	(i) 	
      a director or senior officer of the Company;

	 	 	 
	 	(ii) 	
      a director or senior officer of a person that is itself
      an insider or subsidiary of the Company;

Kelso Technologies Inc. 
Stock Option Plan
June 7,
2018
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	 	(iii) 	
      a person that beneficially owns or controls, directly or
      indirectly, voting securities carrying more than 10% of the voting rights
      attached to all outstanding voting securities of the Company; or

	 	 	 
	 	(iv) 	
      the Company itself if it holds any of its own
      securities.

	 	(l) 	
      “Management Company Employee” means an individual
      employed by a person providing management services to the Company, which
      are required for the ongoing successful operation of the business
      enterprise of the Company, but excluding a person engaged in investor
      relations activities.

	 	 	 
	 	(m) 	
      “Market Price” means, subject to the exceptions, if any,
      prescribed by the Exchange from time to time:

(i)        the last closing
price of the Company’s shares before the grant of options; and

(ii)       if the Company’s shares
trade on the TSX Venture Exchange, the price calculated based on a reasonable
pre-determined formula, which formula is accepted by the Exchange and is based
on a weighted average trading price or average daily high and low board lot
trading price for a short period of time prior to the grant of options.

	 	(n) 	
      “Officer” means any senior officer of the Company or of
      any of its subsidiaries as defined in the Securities Act (British
      Columbia).

	 	 	 
	 	(o) 	
      “Plan” means this stock option plan as from time to time
      amended.

	 	 	 
	 	(p) 	
      “Shares” means common shares without par value in the
      capital of the Company.

	1.02 	
      Gender. Throughout this Plan, words importing the
      masculine gender shall be interpreted as including the female
    gender.

PART 2
PURPOSE OF PLAN 

	2.01 	
      Purpose. The purpose of this Plan is to attract
      and retain Employees, Officers and Directors and to motivate them to
      advance the interests of the Company by affording them the opportunity to
      acquire an equity interest in the Company through options granted under
      this Plan to purchase Shares. The Plan is expected to benefit the
      Company’s shareholders by enabling the Company to attract and retain
      personnel of the highest caliber by offering to them an opportunity to
      share in any increase in the value of the Shares to which they have
      contributed.

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Stock Option Plan
June 7,
2018
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PART 3
GRANTING OR AMENDING OF
OPTIONS

	3.01 	
      Administration. This Plan shall be administered by
      the Board or, if the Board so elects, by a committee (consisting of not
      less than two (2) of its members) appointed by the Board. Any Committee
      shall administer the Plan on behalf of the Board in accordance with such
      terms and conditions as the Board may prescribe, consistent with this
      Plan. Once appointed, the Committee shall continue to serve until
      otherwise directed by the Board. From time to time, the Board may increase
      the size of the Committee and appoint additional members, remove members
      (with or without cause) and either appoint new members in their place or
      decrease the size of the Committee, fill vacancies however caused, or
      remove all members of the Committee and thereafter directly administer the
      Plan. A majority of the members of the Committee shall constitute a
      quorum, and, subject to the limitations in this Part 3, all actions of the
      Committee shall require the affirmative vote of members who constitute a
      majority of such quorum. Members of the Committee may vote on any matters
      affecting the administration of the Plan or the grant of options pursuant
      to the Plan, except that no such member shall act upon the granting of an
      option to himself (but any such member may be counted in determining the
      existence of a quorum at any meeting of the Committee during which action
      is taken with respect to granting options to him).

	 	 
	3.02 	
      Committee’s Recommendations. The Board may accept
      all or any part of the recommendations of the Committee or may refer all
      or any part thereof back to the Committee for further consideration and
      recommendation. Such recommendations may include, but not be limited to,
      the following:

	 	(a) 	
      resolution of questions arising in respect of the
      administration, interpretation and application of the Plan;

	 	 	 
	 	(b) 	
      reconciliation of any inconsistency or defect in the Plan
      in such manner and to such extent as shall reasonably be deemed necessary
      or advisable to carry out the purpose of the Plan;

	 	 	 
	 	(c) 	
      determination of the Employees, Officers and Directors
      (or their wholly-owned corporations) to whom, and when, options should be
      granted, as well as the number of Shares subject to each option;

	 	 	 
	 	(d) 	
      determination of the terms and conditions of the option
      agreement to be entered into with any optionee, consistent with this Plan;
      and

	 	 	 
	 	(e) 	
      determination of the duration and purpose of leaves of
      absence from employment which may be granted to optionees without
      constituting a termination of employment for purposes of the
  Plan.

	3.03 	
      Grant by Resolution. The Board, on its own
      initiative or, if a Committee of the Board shall have been appointed for
      the purpose of administering this Plan, upon the recommendation of such
      Committee, may by resolution designate those Employees, Officers and
      Directors to whom options should be granted (unless the Committee has been
      authorized by the Board to pass such resolution in which case they may do
      as so authorized).

Kelso Technologies Inc. 
Stock Option Plan
June 7,
2018
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	3.04 	
      Terms of Options. The resolution of the Board, or
      the Committee if applicable, shall specify the number of Shares that
      should be placed under option to each optionee, the price per Share to be
      paid upon exercise of the options, and the period during which such
      options may be exercised.

	 	 
	3.05 	
      Written Agreements. Every option granted under
      this Plan shall be evidenced by a written agreement between the Company
      and the optionee and, where not expressly set out in the agreement, the
      provisions of such agreement shall conform to and be governed by this
      Plan. In the event of any inconsistency between the terms of the agreement
      and this Plan, the terms of this Plan shall govern.

	 	 
	3.06 	
      Regulatory Approvals. The Board shall obtain all
      necessary regulatory approvals that may be required under applicable
      securities laws or the rules or policies of the Exchange. The Board shall
      also take reasonable steps to ensure that no options granted under the
      Plan, or the exercise thereof, shall violate the securities laws of the
      jurisdiction in which any optionee resides.

	 	 
	3.07 	
      Amendment of Options. Options may also be amended
      under this Plan, whether granted under this Plan or otherwise, and the
      terms of this Plan shall apply mutatis mutandis.

PART 4
CONDITIONS GOVERNING THE GRANTING AND
EXERCISING OF OPTIONS

	4.01 	
      Exercise Price. The exercise price of an option
      granted under this Plan shall not be less than the Discounted Market Price
      if the Company’s shares are traded on the TSX Venture Exchange, and the
      Market Price, if the Company’s shares are traded on the TSX Exchange,
      provided that:

	 	(a) 	
      if options are granted within 90 days of a distribution
      by a prospectus, the minimum exercise price of those options will be the
      greater of the Discounted Market Price and the per share price paid by the
      public investors for Shares acquired under the distribution;

	 	 	 
	 	(b) 	
      the 90 day period begins on the date a final receipt is
      issued for the prospectus;

	 	 	 
	 	(c) 	
      for unit offerings, the minimum option exercise price
      will be the ‘base’ (or imputed) price of the shares included in the unit;
      and

	 	 	 
	 	(d) 	
      for all other financings, the minimum exercise price will
      be the average price paid by the public
investors.

	4.02 	
      Expiry Date. Subject to section 9.05, each option
      shall, unless sooner terminated, expire on a date to be determined by the
      Board which will not exceed 10 years from the day the option is
      granted.

	 	 
	4.03 	
      Different Exercise Periods, Prices and Number. The
      Board may, in its absolute discretion, upon granting options under this
      Plan, specify different time periods following the dates of granting the
      options during which the optionees may exercise their options to purchase
      Shares and may designate different exercise prices and numbers of Shares
      in respect of which each optionee may exercise his option during each
      respective time period.

Kelso Technologies Inc. 
Stock Option Plan
June 7,
2018
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	4.04 	
      Number of Shares. The number of Shares reserved
      for issuance to any one person pursuant to options granted under this Plan
      or otherwise, shall not exceed the maximum percentage of the issued and
      outstanding Shares at the time of granting of the options, if any, as may
      be prescribed by the policies of the Exchange.

	 	 
	4.05 	
      Insider Participation Limit. If the Company’s
      shares are listed for trading on the TSX Exchange, options shall not be
      granted under the 2014 Plan or securities be made issuable under any other
      share compensation arrangement which could result
in:

	 	(a) 	
      the number of common shares issuable to Insiders
      exceeding 10% of the issued and outstanding shares at the time of such
      grant; and

	 	 	 
	 	(b) 	
      the number of common shares issued within any one year
      period pursuant to the exercise of options and any other share
      compensation arrangement to Insiders, exceeding 10% of the issued and
      outstanding shares.

	4.06 	
      Death of Optionee. If an optionee dies prior to
      the expiry of his option, his legal representatives may, by the earlier
      of:

	 	(a) 	
      one year from the date of the optionee’s death (or such
      lesser period as may be specified by the Board at the time of granting the
      option); and

	 	 	 
	 	(b) 	
      the expiry date of the
option;

		
      exercise any portion of such option.

	 	 
	4.07 	
      Expiry on Termination or Cessation. If an optionee
      ceases to be a Director, Officer or Employee for any reason other than
      death, his option shall terminate as specified by the Board at the time of
      granting the option and all rights to purchase Shares under such option
      shall cease and expire and be of no further force or effect. All options
      must terminate within three months of the date of such
cessation.

	 	 
	4.08 	
      Leave of Absence. Employment shall be deemed to
      continue intact during any sick leave or other bona fide leave of absence
      if the period of such leave does not exceed 90 days or, if longer, for so
      long as the optionee’s right to reemployment is guaranteed either by
      statute or by contract. If the period of such leave exceeds 90 days and
      the optionee’s reemployment is not so guaranteed, then his employment
      shall be deemed to have terminated on the ninety-first day of such
      leave.

	 	 
	4.09 	
      Assignment. No option granted under this Plan or
      any right thereunder or in respect thereof shall be transferable or
      assignable otherwise than by will or pursuant to the laws of succession
      except that, if permitted by the rules and policies of the Exchange, an
      optionee shall have the right to assign any option granted to him
      hereunder to a trust or similar legal entity established by such
      optionee.

	 	 
	4.10 	
      Notice. Options shall be exercised only in
      accordance with the terms and conditions of the agreements under which
      they are respectively granted and shall be exercisable only by notice in
      writing to the Company at its principal place of business.

	 	 
	4.11 	
      Payment. Subject to any vesting requirements
      described in each individual option agreement, options may be exercised in
      whole or in part at any time prior to their lapse

Kelso Technologies Inc. 
Stock Option Plan
June 7,
2018
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      or termination. Shares purchased by an optionee on
      exercise of an option shall be paid for in full at the time of their
      purchase (i.e. concurrently with the giving of the requisite
    notice).

	 	 
	4.12 	
      Share Certificate. As soon as practicable after
      due exercise of an option, the Company shall issue a share certificate
      evidencing the Shares with respect to which the option has been exercised.
      Until the issuance of such share certificate, no right to vote or receive
      dividends or any other rights as a shareholder shall exist with respect to
      such Shares, notwithstanding the exercise of the option. No adjustment
      will be made for a dividend or other right for which the record date is
      prior to the date the share certificate is issued, except as provided in
      Part 6 hereof.

	 	 
	4.13 	
      Vesting. Subject to the discretion of the Board,
      the options granted to an optionee under this Plan shall fully vest on the
      date of grant of such options. If required by the policies of the
      Exchange, and subject to their approval to the contrary, options issued to
      Consultants providing investor relations services must vest (and not
      otherwise be exercisable) in stages over a minimum of 12 months with no
      more than 1⁄4 of the options vesting in any 3 month period.

	 	 
	4.14 	
      Hold Period. In addition to any resale
      restrictions under applicable legislation, all options granted hereunder
      and all Shares issued on the exercise of such options will, if applicable
      under the policies of the Exchange, be subject to a four month hold period
      from the date the options are granted, and the stock option agreements and
      the certificates representing such Shares will bear the legend, if any,
      required by the policies of the Exchange.

	 	 
	4.15 	
      Individuals. Options may be granted only to an
      individual or to a company that is wholly- owned by an individual who is
      eligible for an option grant. Only individuals who are Directors,
      Officers, Consultants, Employees or Management Company Employees may be
      granted stock options. If the optionee is a Consultant, Employee or
      Management Company Employee, the Company must represent that the optionee
      is a bona fide Consultant, Employee or Management Company Employee, as the
      case may be. If the optionee is a company, it must agree not to effect or
      permit any transfer of ownership or option of shares of the company or to
      issue further shares of any class in the company to any other individual
      or entity as long as the incentive stock option remains outstanding,
      except with the written consent of the Board and, if required, the
      Exchange.

PART 5
RESERVE OF SHARES FOR OPTIONS

	5.01 	
      Maximum Number of Shares Reserved Under Plan. The
      aggregate number of Shares which may be subject to issuance pursuant to
      options granted under this Plan shall not exceed the equivalent of 10% of
      the issued and outstanding Shares of the Company from time to time. In
      addition, all options granted outside of this Plan, which are in existence
      on the effective date of this Plan, shall be counted as if granted under
      this Plan. The terms of this Plan shall not otherwise govern such
      pre-existing options.

	 	 
	5.02 	
      Sufficient Authorized Shares to be Reserved.
      Whenever the Memorandum or Articles of the Company limit the number of
      authorized Shares, a sufficient number of Shares shall be reserved by the
      Board to satisfy the exercise of options granted under this Plan or
      otherwise. Shares that were the subject of options that have lapsed or
      terminated shall thereupon no longer be in reserve and may once again be
  subject to an option granted under this Plan.

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Stock Option Plan
June 7,
2018
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	5.03 	
      Disinterested Shareholder Approval. Disinterested
      Shareholder Approval will be sought, as and when required by applicable
      securities laws and the policies of the Exchange, in connection with this
      Plan, the administration thereof, and the grant of options hereunder. No
      actions requiring Shareholder Approval shall be taken by the Company
      unless the requisite approval has been obtained.

PART 6
CHANGES IN SHARES 

	6.01 	
      Share Consolidation or Subdivision. In the event
      that the Shares are at any time subdivided or consolidated, the number of
      Shares reserved for option and the price payable for any Shares that are
      then subject to option shall be adjusted accordingly.

	 	 
	6.02 	
      Stock Dividend. In the event that the Shares are
      at any time changed as a result of the declaration of a stock dividend
      thereon, the number of Shares reserved for option and the price payable
      for any Shares that are then subject to option may be adjusted by the
      Board to such extent as they deem proper in their absolute
    discretion.

	 	 
	6.03 	
      Reorganization. Subject to any required action by
      its shareholders, if the Company shall be a party to a reorganization,
      merger, dissolution or sale or lease of all or substantially all of its
      assets, whether or not the Company is the surviving entity, the option
      shall be adjusted so as to apply to the securities to which the holder of
      the number of shares of capital stock of the Company subject to the option
      would have been entitled by reason of such reorganization, merger or sale
      or lease of all or substantially all of its assets, provided however that
      the Company may satisfy any obligations to an optionee hereunder by paying
      to the said optionee in cash the difference between the exercise price of
      all unexercised options granted hereunder and the fair market value of the
      securities to which the optionee would be entitled upon exercise of all
      unexercised options, regardless of whether all conditions of exercise
      relating to continuous employment have been satisfied. Adjustments under
      this paragraph or any determinations as to the fair market value of any
      securities shall be made by the Board, or any committee thereof
      specifically designated by the Board to be responsible therefor, and any
      reasonable determination made by the said Board or committee thereof shall
      be binding and conclusive.

	 	 
	6.04 	
      Rights Offering. If at any time the Company grants
      to the holders of its capital stock rights to subscribe for and purchase
      pro rata additional securities of the Company or of any other corporation
      or entity, there shall be no adjustments made to the number of shares or
      other securities subject to the option in consequence thereof and the said
      stock option of the optionee shall remain
unaffected.

PART 7
EXCHANGE'S RULES AND POLICIES
APPLY 

	7.01 	
      Exchange’s Rules and Policies Apply. This Plan and
      the granting and exercise of any options hereunder are also subject to
      such other terms and conditions as are set out from time to time in the
      rules and policies on stock options of the Exchange and any securities
      commission having jurisdiction and such rules and policies shall be deemed
      to be incorporated into and become a part of this Plan. In the event of an
      inconsistency between the provisions of such rules
and policies and of this Plan, the provisions of such rules and policies shall
govern. 

Kelso Technologies Inc. 
Stock Option Plan
June 7,
2018
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PART 8
AMENDMENT OF PLAN 

Board May Amend. The Board may, subject to any required
regulatory approval but without shareholder approval, make amendments to an
Option or the Plan which include, but are not limited to:

	 	(a) 	
      change the vesting provisions of an Option or the
      Plan,

	 	 	 
	 	(b) 	
      change the termination provisions of an Option or the
      Plan, provided there is no extension beyond the original expiry
    date,

	 	 	 
	 	(c) 	
      add a cashless exercise provision, payable in cash or
      securities, which provides for a full deduction of the number of
      underlying securities from the Plan reserve, or

	 	 	 
	 	(d) 	
      make other amendments of a “housekeeping” or non-material
      nature with requisite regulatory approval.

Notwithstanding the foregoing, the approval of the shareholders
of the Company shall be required for any of the following amendments to an
Option or the Plan:

	 	(a) 	
      the limitations on grants of options to insiders and the
      number of shares that may be reserved for issuance to insiders,

	 	 	 
	 	(b) 	
      the maximum number or percentage of outstanding shares
      that may be reserved for issuance upon exercise of options under the
      Plan,

	 	 	 
	 	(c) 	
      any amendment which would permit options granted under
      the Plan to be transferable, other than for estate settlement purposes,
      or

	 	 	 
	 	(d) 	
      any amendment to the amendment provisions already voted
      upon by shareholders.

Subject to the above paragraph, with the consent of the
affected Optionees, the Board may amend or modify any outstanding Option in any
manner to the extent that the Board would have had the authority to initially
grant such award as so modified or amended, including without limitation, to
change the date or dates as of which an Option becomes exercisable, subject to
the prior approval of the relevant stock exchanges, if required for such
amendment or modification.

Any reductions in the exercise price or extension of the term
of Options granted to Insiders will require approval of the shareholders of the
Company excluding votes of securities held by the Insiders benefiting from such
amendment.

	8.02 	
      Exchange Approval. Any amendment to this Plan or
      options granted pursuant to this Plan shall not become effective until
      accepted for filing by the Exchange.

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Stock Option Plan
June 7,
2018
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PART 9
MISCELLANEOUS PROVISIONS

	9.01 	
      Other Plans Not Affected. This Plan shall not in
      any way affect the policies or decisions of the Board in relation to the
      remuneration of Directors, Officers and Employees.

	 	 
	9.02 	
      Effective Date of Plan. This Plan shall become
      effective upon the later of the date of acceptance for filing of this Plan
      by the Exchange and the approval of this Plan by the shareholders of the
      Company (i.e. by the holders of a majority of the Company's securities
      present or represented, and entitled to vote at a meeting of shareholders
      duly held) including, if applicable, Disinterested Shareholder Approval.
      However, options may be granted under this Plan prior to the receipt of
      approval of the Exchange or the shareholders. Any option granted before
      Exchange or shareholder approval is obtained, may not be exercised until
      both are obtained.

	 	 
	9.03 	
      Use of Proceeds. Proceeds from the sale of Shares
      pursuant to the options granted and exercised under the Plan shall
      constitute general funds of the Company and shall be used for general
      corporate purposes.

	 	 
	9.04 	
      Withholding. The Company may withhold from any
      amount payable to an optionee, either under this Plan or otherwise, such
      amount as it reasonably believes is necessary to enable the Company to
      comply with the applicable requirements of any federal, provincial, local
      or foreign law, or any administrative policy of any applicable tax
      authority, relating to the withholding of tax or any other required
      deductions with respect to options (“Withholding Obligations”). The
      Company may also satisfy any liability for any such Withholding
      Obligations, on such terms and conditions as the Company may determine in
      its discretion, by:

	 	(a) 	
      requiring an optionee, as a condition to the exercise of
      any options, to make such arrangements as the Company may require so that
      the Company can satisfy such Withholding Obligations including, without
      limitation, requiring the optionee to remit to the Company in advance, or
      reimburse the Company for, any such Withholding Obligations; or

	 	 	 
	 	(b) 	
      selling on the optionee’s behalf, or requiring the
      optionee to sell, any optioned shares acquired by the optionee under the
      Plan, or retaining any amount which would otherwise be payable to the
      optionee in connection with any such sale.

	9.05 	
      Automatic Extension of Term of Option. The expiry
      date of the options will be automatically extended if the expiry date
      falls within a blackout period during which the Company prohibits
      optionees from exercising their options, provided
that:

	 	(a) 	
      the blackout period has been formally imposed by the
      Company pursuant to its internal trading policies as a result of the bona
      fide existence of undisclosed Material Information (as defined in the
      policies of the Exchange). For greater certainty, in the absence of the
      Company formally imposing a blackout period, the expiry date of any
      options will not be automatically extended in any circumstances;

	 	 	 
	 	(b) 	
      the blackout period expires upon the general disclosure
      of the undisclosed Material Information and the expiry date of the
      affected options is extended to no later than ten (10) business days after
      the expiry of the blackout period; and

Kelso Technologies Inc. 
Stock Option Plan
June 7,
2018
Page 10 of 11

	 	(c) 	
      the automatic extension will not be permitted where the
      optionee or the Company is subject to a cease trade order (or similar
      order under applicable securities laws) in respect of the Company’s
      securities.

	9.06 	
      Headings. The headings used in this Plan are for
      convenience of reference only and shall not in any way affect or be used
      in interpreting any of the provisions of this Plan.

	 	 
	9.07 	
      No Obligation to Exercise. Optionees shall be
      under no obligation to exercise options granted under this Plan.

	 	 
	9.08 	
      Termination of Plan. This Plan shall only
      terminate pursuant to a resolution of the Board or the Company’s
      shareholders.

	 	 
	9.09 	
      Governing Law. This Plan and the administration
      hereof shall be governed by and construed in accordance with the laws of
      the Province of British Columbia and the federal laws of Canada applicable
      therein

Kelso Technologies Inc. 
Stock Option Plan
June 7,
2018
Page 11 of 11

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