MANAGEMENT INFORMATION CIRCULAR

AND

PROXY STATEMENT

2

MANAGEMENT INFORMATION CIRCULAR

AND

PROXY STATEMENT

2

DATED at Pickering, Ontario as of the 7

(signed) Thomas Fairfull

President and Chief Executive Officer

3

(Unless otherwise stated, information contained herein is given as of November 7, 2008)

This Management Proxy Circular is furnished in connection with the solicitation of proxies by the management of

Dynamic Fuel Systems Inc. (the "Corporation") for use at the Annual and Special Meeting of the holders (the

"Shareholders") of common shares ("Common Shares") of the Corporation to be held at the McLean Community

Centre (Banquet Room), 95 Magill Drive, Ajax, Ontario L1T 4M5 on Tuesday, December 9, 2008 at 10:00 a.m.

(Toronto time) (the "Meeting"), for the purposes set forth in the Notice of Annual and Special Meeting (the

"Notice") accompanying this Management Proxy Circular. Solicitation of proxies will be primarily by mail, but

may also be undertaken by way of telephone, facsimile or oral communication by the directors, officers and regular

employees of the Corporation, at no additional compensation. Costs associated with the solicitation of proxies will

be borne by the Corporation.

Accompanying this Management Proxy Circular is an instrument of proxy for use at the Meeting. Shareholders who

are unable to attend the Meeting in person and wish to be represented by proxy are required to date and sign the

enclosed instrument of proxy and return it in the enclosed return envelope.

The instrument of proxy must be signed by the Shareholder or the Shareholder's duly appointed attorney authorized

in writing or, if the Shareholder is a corporation, under its corporate seal or by a duly authorized officer or attorney

of the Corporation. An instrument of proxy signed by a person acting as attorney or in some other representative

capacity (including a representative of a corporate Shareholder) should indicate that person's capacity (following his

or her signature) and should be accompanied by the appropriate instrument evidencing qualification and authority to

act (unless such instrument has previously been filed with the Corporation).

A Shareholder who has submitted an instrument of proxy may revoke it at any time prior to the exercise thereof. In

addition to any manner permitted by law, a proxy may be revoked by instrument in writing executed by the

Shareholder or by his or her duly authorized attorney or, if the Shareholder is a corporation, under its corporate seal

or executed by a duly authorized officer or attorney of the corporation and deposited either: (i) at the registered

office of the Corporation at any time up to and including the last business day preceding the day of the Meeting, or

any adjournments thereof, at which the instrument of proxy is to be used; or (ii) with the Chairman of the Meeting

on the day of the Meeting, or any adjournment thereof. In addition, an instrument of proxy may be revoked: (i) by

the Shareholder personally attending the Meeting and voting the securities represented thereby or, if the Shareholder

is a corporation, by a duly authorized representative of the corporation attending at the Meeting and voting such

securities; or (ii) in any other manner permitted by law.

4

All Common Shares represented at the Meeting by properly executed proxies will be voted on any ballot that may be

called for and, where a choice with respect to any matter to be acted upon has been specified in the instrument of

proxy, the Common Shares represented by the instrument of proxy will be voted in accordance with such

instructions. The management designees named in the accompanying instrument of proxy will vote or withhold

from voting the Common Shares in respect of which they are appointed in accordance with the direction of the

Shareholder appointing him or her on any ballot that may be called for at the Meeting.

Except as disclosed in this Management Proxy Circular, none of the directors or senior officers of the Corporation at

any time since the beginning of the Corporation's last financial year, nor any proposed nominee for election as a

director of the Corporation, nor any associate or affiliate of any of the foregoing persons, has any material interest,

direct or indirect, by way of beneficial ownership of securities or otherwise in any matter to be acted on, other than

the election of directors or the appointment of auditors.

The authorized share capital of the Corporation consists of an unlimited number of Common Shares. The record date

for the determination of Shareholders entitled to receive notice of and to vote at the Meeting is November 3, 2008

(the "Record Date"). As at the Record Date, there were 104,595,489 Common Shares issued and outstanding as

fully paid and non-assessable.

The holders of Common Shares are entitled to notice of and to vote at all annual and special meetings of

shareholders and are entitled to one vote per Common Share. The holders of Common Shares are entitled to receive

such dividends as the board of directors of the Corporation (the "Board of Directors" or the "Board") declare and,

upon liquidation, to receive such assets of the Corporation as are distributable to holders of Common Shares.

Only Shareholders whose names are entered in the Corporation's register of shareholders at the close of business on

that date and holders of Common Shares issued by the Corporation after such date and prior to the Meeting will be

entitled to receive notice of and to vote at the Meeting, provided that, to the extent that: (i) a registered Shareholder

has transferred the ownership of any Common Shares subsequent to the Record Date; and (ii) the transferee of those

Common Shares produces properly endorsed share certificates, or otherwise establishes that he or she owns the

Common Shares and demands, not later than ten days before the Meeting, that his or her name be included on the

Shareholder list before the Meeting, in which case the transferee shall be entitled to vote his or her Common Shares

at the Meeting.

Only registered holders of Common Shares, or the persons they appoint as their proxies, are permitted to attend and

vote at the Meeting. However, in many cases, Common Shares beneficially owned by a holder (a "Non-Registered

Holder") are registered either:

a) in the name of an intermediary (an "Intermediary") that the Non-Registered Holder deals with in

respect of the Common Shares. Intermediaries include banks, trust companies, securities dealers

5

or brokers, and trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar

plans; or

b) in the name of a clearing agency (such as The Canadian Depository for Securities Limited or

"CDS").

In accordance with the requirements of National Instrument 54-101 of the Canadian Securities Administrators, the

Corporation has distributed copies of the Notice, this Management Proxy Circular and the instrument of proxy

(collectively, the "Meeting Materials") to the clearing agencies and Intermediaries for onward distribution to Non-

Registered Holders.

Intermediaries are required to forward meeting materials to Non-Registered Holders unless a Non-Registered Holder

has waived the right to receive them. Typically, Intermediaries will use a service company (such as Broadridge

Investor Communication Solutions ("Broadridge")) to forward meeting materials to Non-Registered Holders.

Generally, Non-Registered Holders who have not waived the right to receive meeting materials will:

a) have received as part of the Meeting Materials a voting instruction form which must be completed,

signed and delivered by the Non-Registered Holder in accordance with the directions on the voting

instruction form; voting instruction forms sent by Broadridge permit the completion of the voting

instruction form by telephone or through the Internet at

To the knowledge of the directors and executive officers of the Corporation, the only persons who beneficially own,

directly or indirectly, or exercises control or direction over, securities carrying more than 10% of the voting rights

attaching to any class of voting securities of the Corporation as set forth below.

Thomas Fairfull and Anne

Fairfull

Direct and Indirect

16,104,100

Direct

11,980,000

(1)

Executive Compensation is required to be disclosed for each Chief Executive Officer (or individual who served in a

similar capacity during the most recently completed financial year), each Chief Financial Officer (or individual who

served in a similar capacity during the most recently completed financial year) and each of the three most highly

compensated executive officers (other than the Chief Executive Officer and the Chief Financial Officer) who were

serving as executive officers at the end of the most recently completed fiscal year and whose total salary and bonus

exceeded $150,000 (the "Named Executive Officers"). The following table sets forth information concerning the

total compensation paid, during the last three financial years, to the Named Executive Officers.

Thomas Fairfull

(1)

The Corporation has no long-term incentive plans. Accordingly, no such compensation was paid or distributed to

the Named Executive Officers during the financial year ended December 31, 2007.

During the financial year ended December 31, 2007, the Corporation issued stock options to the following Named

Executive Officer: Thomas Fairfull

acquire securities of the Corporation made during the most recently completed financial year to the Named

Executive Officers.

Thomas Fairfull 1,600,000 30.9% $0.185 $0.185 September 28, 2012

The following table sets forth certain information respecting the numbers and accrued value of unexercised stock

options as at December 31, 2007 and options exercised by the Named Executive Officers during the financial year

ended December 31, 2007:

Thomas Fairfull 600,000 Nil

(1) Calculated as the difference in the closing price of $0.185 of the securities underlying the options at December 31,

2007 and the exercise price.

(2) No value has been realized to date as the Common Shares acquired on exercise have not been sold.

At present, there is neither a compensatory plan for termination of employment or change in responsibility, nor a

pension plan in operation for the benefit of any Named Executive Officers of the Corporation.

No cash sum was paid to any of the directors of the Corporation for services as a director or as a member of any

committee of the board of directors, for attending any meeting of the board of directors or any meeting of any

committee of the board of directors of which he or she is a member. Each of the directors is eligible to be awarded

options under the Stock Option Plan established by the Corporation. There is no formal arrangement for the

compensation of directors at this time.

The following table sets out information as at the end of the Corporation's most recently completed financial year

with respect to compensation plans under which equity securities of the Corporation are authorized for issuance.

8

4,575,000 $0.185

N/A N/A N/A

(1) As at December 31, 2007.

None of the directors and officers of the Corporation, any proposed management nominee for election as a director

of the Corporation or any associate of any director, officer or proposed management nominee is or has been indebted

to the Corporation at any time during the last completed financial year, for other than routine indebtedness.

Except as disclosed in this Management Proxy Circular, none of the informed persons of the Corporation (as defined

in National Instrument 51-102), nor any proposed nominee for election as a director of the Corporation, nor any

person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to

the issued shares of the Corporation, nor any associate or affiliate of the foregoing persons has any material interest,

direct or indirect, in any transaction since the commencement of the Corporation's most recently completed financial

year or in any proposed transaction which, in either case, has or will materially affect the Corporation and none of

such persons has any material interest in any transaction proposed to be undertaken by the Corporation that will

materially affect the Corporation.

The Corporation does not have in place any management contracts between the Corporation and any directors or

officers and there are no management functions of the Corporation that are to any substantial degree performed by a

person or company other than the directors or officers (or private companies controlled by them, either directly or

indirectly) of the Corporation.

Please see the attached Schedule "A" for information on the Corporation

(1) Mr. Perry was appointed Chairman of the Audit Committee in August 2006.

(2) As defined by Multilateral Instrument 52-110 –

The financial statements of the Corporation for the year ended December 31, 2007 and the Auditors' Report thereon

accompanying this Management Proxy Circular will be placed before the Shareholders at the Meeting for their

consideration. Shareholders who wish to receive interim financial statements are encouraged to send the enclosed

notice, in the addressed envelope to Equity Transfer & Trust Company.

The term of office of each of the present directors expires at the Meeting. The articles of the Corporation currently

provide that the board of directors of the Corporation shall consist of a minimum of three and a maximum of ten

directors. The number of directors to be elected at the Meeting has been fixed at five. Management of the

Corporation proposes to nominate the persons named below for election as directors of the Corporation at the

Meeting to serve until the next annual meeting of the Shareholders of the Corporation, unless his office is earlier

vacated. Five of the nominees are currently members of the board of directors of the Corporation.

Approval of the election of directors will require the affirmative votes of the holders of not less than half of the votes

cast in respect thereof by Shareholders present in person or by proxy at the Meeting.

THOMAS FAIRFULL

Mr. Fairfull has been the President of the

Corporation since January 2004 (and of its

predecessor since January 2000). Prior to founding

the Corporation, Mr. Fairfull founded and managed

several successful businesses. From January 1990 to

August 1999, he was founder, president and chief

executive officer of EWMC International Inc. (now

"Environmental Waste International Inc."), a public

waste management company.

2004 16,104,100

Mr. Perry has served as the President of

Briolojor Corporation, a business consulting

company.

2006 Nil

11

GERALD SOLENSKY, JR.

Mr. Solensky served as the Regional Vice-

President of the Midwest Division of IndyMac

Bank from 2005

Mr. Harkema served as President and Chairman

of the Board of Harkema Trucking for 27 years.

2008 11,980,000

Mr. Payne serves as Chief Executive Officer of

Pashin Holdings Inc., a real-estate development

company operating in the GTA and surrounding

areas and as President and also Pres. and Chief

Executive Officer of V2R Group Inc., a

consulting and project management company

within the City of Toronto.

2008 2,989,700

(1) The information as to the number of Common Shares beneficially owned, not being within the knowledge of the

Corporation, has been furnished by the respective nominees. These figures do not include any securities that are

convertible into or exercisable for Common Shares.

(2) Member of the Continuous Disclosure Committee.

(3) Held as to 1,614,000 Common Shares by Thomas Fairfull directly, and indirectly, 14,490,794 Common Shares by

Anne Faifull, the spouse of Mr. Fairfull and 490,000 Common Shares by Courtney Fairull, the daughter of Mr. Fairfull.

In addition to the foregoing Common Shares, Mr. Fairfull has voting control over a further 20,000,000 Common Shares

under the Voting Trust Agreement pursuant to which Mr. Fairfull has been appointed proxy in relation to such

Common Shares.

(4) Member of the Audit Committee.

(5) Member of the Compensation Committee

(6) In addition, an aggregate of 4,586,100 common share purchase warrants (each exercisable at a price of $0.15 on or

before April 20, 2009) are registered in Mr. Solensky's name. It should be noted that one-half of the foregoing

securities registered in the name of Mr. Solensky and held in trust on behalf of his business partner.

(7) Such shares are held by Hardestine Holdings Ltd., a private corporation that is wholly-owned by Mr. Harkema. In

accordance with the Voting Trust Agreement, voting control in respect of such Common Shares rests with Mr. Thomas

Faifull. In addition, Hardestine Holdings Limited is the holder of 980,000 common share purchase warrants, which are

exercisable at a price of $1.50 on or before October 17, 2010.

(8) Such shares are held in Mr. Payne's personal name, as well as in private corporations that he directly or indirectly owns

or controls.

Other than as set forth below, no director or proposed director of the Corporation is, or has been within the past ten

years, a director or officer of any other company that, while such person was acting in that capacity:

(i) was the subject of a cease trade or similar order or an order that denied the company access to any

exemptions under securities legislation for a period of more than 30 consecutive days;

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(ii) was subject to an event that resulted, after that individual ceased to be a director or officer, in the company

being the subject of a cease trade or similar order or an order that denied the company access to any

exemptions under securities legislation for a period of more than 30 consecutive days; or

(iii) within a year of that individual ceasing to act in that capacity, became bankrupt, made a proposal under any

legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings,

arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold

its assets.

No director or proposed director of the Corporation is or has, within the ten years prior to the date hereof, become

bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or

instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee

appointed to hold the assets of that individual.

No director or proposed director of the Corporation has been subject to any penalties or sanctions imposed by a

court relating to securities legislation or by a securities regulatory authority or has entered into a settlement

agreement with a securities regulatory authority. No director or proposed director of the Corporation has been

subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered

important to a reasonable securityholder in deciding whether to vote for a proposed director.

The directors and officers of the Corporation may, from time to time, be involved with the business and operations

of other oil and gas issuers, in which case a conflict of interest may arise between their duties as officers and

directors of the Corporation and as officer and directors of such other companies. Such conflicts must be disclosed

in accordance with, and are subject to such procedures and remedies, as applicable, under the

Schwartz Levitsky Feldman LLP was first appointed as auditor of the Corporation on September 19, 2007.

Unless otherwise directed, the management designees named in the accompanying instrument of proxy intend to

vote in favor of the re-appointment of Schwartz Levitsky Feldman LLP as auditors of the Corporation, to hold office

until the close of the next annual meeting, at a remuneration to be determined by the board of directors of the

Corporation. Approval of the appointment of the auditors will require the affirmative votes of the holders of not less

than half of the votes cast in respect thereof by Shareholders present in person or by proxy at the Meeting.

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1. The Corporation's 2008 Stock Option Plan be and is hereby ratified, confirmed and approved in substantially the

form attached as Schedule "C" to the Information Circular prepared for the purposes of this Meeting, subject to

acceptance by the TSX Venture Exchange;

2. The Corporation be authorized to grant stock options for up to 10% of the Common Shares of the Corporation

outstanding from time to time pursuant and subject to the terms and conditions of the 2008 Stock Option Plan;

3. The previous existing stock options granted to directors, officers, employees and others be ratified, confirmed

and approved; and that all existing stock options becoming subject to the provisions of the 2008 Stock Option Plan

upon adoption by the Corporation;

4. The Board of Directors be authorized on behalf of the Corporation to make any amendments to the 2008 Stock

Option Plan as may be required by regulatory authorities, without further approval of the shareholders of the

Corporation, in order to ensure adoption of the 2008 Stock Option Plan;

5. Notwithstanding that this resolution has been duly passed by the shareholders of the Corporation, without further

resolution of shareholders, approval is hereby given to the Board of Directors of the Corporation, in their sole

discretion, to revoke this resolution at any time and to refrain from implementing the 2008 Stock Option Plan; and

6. Any one director of officer of the Company be and he is hereby authorized and directed to do all such acts and

things and to execute and deliver under the corporate seal or otherwise all such deeds, documents, instruments and

assurances as in his opinion may be necessary or desirable to give effect to this resolution."

The approval by Shareholders requires a favourable vote of a majority of the Common Shares voted in respect

thereof at the Meeting. The Exchange requires such approval before it will allow the adoption of the 2008 Stock

Option Plan. Options to purchase Common Shares that were previously granted to directors, officers and employees

of the Corporation will be deemed to be granted under the 2008 Stock Option Plan.

(ii) the identity of directors who are not independent, and the basis for that determination.

Ronald Perry Pinetree Capital Inc. (TSX)

Manitex Capital Inc. (TSXV)

Metanor Resources Inc. (TSXV)

A-2

(ii) the process of determining compensation, and

B-1

1.

(i) the scope of the audit, in particular their view of the quality of the Corporation's accounting

principles as applied in the financials in terms of disclosure quality and evaluation methods,

inclusive of the clarity of the Corporation's financial disclosure and reporting, degree of

conservatism or aggressiveness of the Corporation's accounting principles and underlying estimates

and other significant decisions made by management in preparing the financial disclosure and

reviewed by the auditors;

(ii) significant changes in the Corporation's accounting principles, practices or policies; and

(iii) new developments in accounting principles, reporting matters or industry practices which may

materially affect the Corporation.

(e) reviewing with the external auditor and the Corporation's senior financial management the results of the

annual audit regarding:

(i) the financial statements;

(ii) MD&A and related financial disclosure contained in continuous disclosure documents;

(iii) significant changes, if any, to the initial audit plan;

(iv) accounting and reporting decisions relating to significant current year events and transactions;

(v) the management letter, if any, outlining the auditor's findings and recommendations, together with

management's response, with respect to internal controls and accounting procedures; and

(vi) any other matters relating to the conduct of the audit, including such other matters which should be

communicated to the Audit Committee under Canadian generally accepted auditing standards.

(f) reviewing and discussing with the Corporation's senior financial management and, if requested by the Audit

Committee, the external auditor:

(i) the interim financial statements;

(ii) the interim MD&A; and

(iii) any other material matters relating to the interim financial statements, including, inter alia, any

significant adjustments, management judgments or estimates, new or amended accounting policies.

(g) receipt from external auditor of a formal written statement delineating all relationships between the auditor

and the Corporation and considering whether the advisory services performed by the external auditor during

the course of the year have impacted their independence, and also ensuring that no relationship or services

between ) the external auditor and the Corporation is in existence which may affect the objectivity and

independence of the auditor or recommending appropriate action to ensure the independence of the external

auditor.

(h) pre-approval of all non-audit services to be provided to the Corporation or its subsidiary entities by the

external auditors or the external auditors of the Corporation's subsidiary entities, unless such pre-approval is

otherwise appropriately delegated or if appropriate specific policies and procedures for the engagement of

non-audit services have been adopted by the Audit committee.

(i) reviewing and discussing with the external auditors and senior financial management: the adequacy of

procedures for review of disclosure of financial information extracted or derived from financial statements,

other than the disclosure referred to in subparagraph (a) above.

(j) establishing and reviewing of procedures for:

(i) receipt, retention and treatment of complaints received by the Corporation and its subsidiary

entities regarding internal accounting controls, or auditing matters;

B-3

(ii) anonymous submission by employees of the Corporation and its subsidiary entities of concerns

regarding questionable accounting or auditing matters; and

(iii) hiring policies regarding employees and former employees of present and former external auditors

of the Corporation and its subsidiary entities.

(k) reviewing with the external auditor, the adequacy of management's internal control over financial reporting

relating to financial information and management information systems and inquiring of management and the

external auditor about significant risks and exposures to the Corporation that may have a material adverse

impact on the Corporation's financial statements, and inquiring of the external auditor as to the efforts of

management to mitigate such risks and exposures.

(1) reviewing and/or considering that, with regard to the previous fiscal year,

•

matters which the external auditors believes should be brought to the attention of the Directors or

shareholders of the Corporation.

(g) The Audit Committee shall report to the Directors of the Corporation on such matters and questions relating

to the financial position of the Corporation or any affiliates of the Corporation as the Directors of the

Corporation may from time to time refer to the Audit Committee.

(h) The members of the Audit Committee shall, for the purpose of performing their duties, have the right to

inspect all the books and records of the Corporation and its affiliates, and to discuss such books and records

that are in any way related to the financial position of the Corporation with the Directors, directors, officers,

employees and external auditors of the Corporation and its affiliates.

(i) Minutes of the Audit Committee meetings shall be recorded and maintained. The Chair of the Audit

Committee will report to the Directors on the activities of the Audit Committee and/or the minutes of the

Audit Committee meetings will be promptly circulated to the Directors or otherwise made available at the

next meeting of Directors.

(j) The Audit Committee shall have the authority to:

(i) engage independent counsel and other advisors or consultants as it determines necessary to carry

out its duties;

(ii) set and pay the compensation for any advisors employed by the Audit Committee; and

(iii) communicate directly with the internal (if any) and external auditors and qualified reserves

evaluators or auditors.

C-1

A stock option plan (the "Plan"), pursuant to which options to purchase common shares, or such other shares as may be

substituted therefor ("Shares"), in the capital of Dynamic Fuel Systems Inc. (the "Corporation") may be granted to the

directors, officers and employees of the Corporation and to consultants retained by the Corporation, is hereby

established on the terms and conditions set forth herein.

The purpose of this Plan is to advance the interests of the Corporation by encouraging the directors, officers and

employees of the Corporation and consultants retained by the Corporation to acquire Shares, thereby: (i) increasing the

proprietary interests of such persons in the Corporation; (ii) aligning the interests of such persons with the interests of

the Corporation's shareholders generally; (iii) encouraging such persons to remain associated with the Corporation and

(iv) furnishing such persons with an additional incentive in their efforts on behalf of the Corporation.

a) This Plan shall be administered by the board of directors of the Corporation (the "Board").

b) Subject to the terms and conditions set forth herein, the Board is authorized to provide for the granting,

exercise and method of exercise of Options (as defined in paragraph 3(d) below), all on such terms (which

may vary between Options granted from time to time) as it shall determine. In addition, the Board shall have

the authority to: (i) construe and interpret this Plan and all option agreements entered into hereunder; (ii)

prescribe, amend and rescind rules and regulations relating to this Plan; and (iii) make all other

determinations necessary or advisable for the administration of this Plan. All determinations and

interpretations made by the Board shall be binding on all Participants (as hereinafter defined) and on their

legal, personal representatives and beneficiaries.

c) Notwithstanding the foregoing or any other provision contained herein, the Board shall have the right to

delegate the administration and operation of this Plan, in whole or in part, to a committee of the Board or to

the President or any other officer of the Corporation. Whenever used herein, the term "Board" shall be

deemed to include any committee or officer to which the Board has, fully or partially, delegated

responsibility and/or authority relating to the Plan or the administration and operation of this Plan pursuant to

this Section 3.

d) Options to purchase the Shares granted hereunder ("Options") shall be evidenced by: (i) an agreement, signed

on behalf of the Corporation and by the person to whom an Option is granted, which agreement shall be in

such form as the Board shall approve; or (ii) a written notice or other instrument, signed by the Corporation,

setting forth the material attributes of the Options.

a) Subject to Section 15 below, the securities that may be acquired by Participants upon the exercise of Options

shall be deemed to be fully authorized and issued Shares of the Corporation. Whenever used herein, the term

"Shares" shall be deemed to include any other securities that may be acquired by a Participant upon the

exercise of an Option the terms of which have been modified in accordance with Section 15 below.

b) The aggregate number of Shares reserved for issuance under this Plan or any other plan of the Corporation,

shall not exceed ten percent (10%) of the total number of issued and outstanding Shares (calculated on a nondiluted

basis) unless the Corporation receives the permission of the stock exchange or exchanges on which

the Shares are then listed to exceed such threshold.

c) If any Option granted under this Plan shall expire or terminate for any reason without having been exercised

in full, any un-purchased Shares to which such Option relates shall be available for the purposes of the

granting of Options under this Plan.

C-2

The Corporation shall at all times during the term of this Plan ensure that the number of Shares it is authorized to issue

shall be sufficient to satisfy the Corporation's obligations under all outstanding Options granted pursuant to this Plan.

a) The Board may, in its discretion, select any of the following persons to participate in this Plan:

i. directors of the Corporation;

ii. officers of the Corporation;

iii. employees of the Corporation; and

iv. consultants retained by the Corporation, provided such consultants have performed and/or continue to

perform services for the Corporation on an ongoing basis or are expected to provide a service of value

to the Corporation;

(any such person having been selected for participation in this Plan by the Board is herein referred to as a

"Participant").

b) The Board may from time to time, in its discretion, grant an Option to any Participant, upon such terms,

conditions and limitations as the Board may determine, including the terms, conditions and limitations set

forth herein, provided that Options granted to any Participant shall be approved by the shareholders of the

Corporation if the rules of any stock exchange on which the Shares are listed require such approval.

c) The Corporation represents that, for any Options granted to an officer, employee or consultant of the

Corporation, such Participant is a bona fide officer, employee or consultant of the Corporation.

The Board shall, at the time an Option is granted under this Plan, fix the exercise price at which Shares may be

acquired upon the exercise of such Option provided that such exercise price shall not be less than that from time to time

permitted under the rules of any stock exchange or exchanges on which the shares are then listed and provided that the

exercise price of any Option granted shall be no less than the closing trading price of the Shares on the last trading day

immediately preceding the day of grant. In addition, the exercise price of an option must be paid in cash. In

accordance with Section 18, disinterested shareholder approval shall be obtained by the Corporation prior to any

reduction to the exercise price if the affected Participant is an insider (as such term is defined under the

The number of Shares that may be acquired under an Option granted to a Participant shall be determined by the Board

as at the time the Option is granted, provided that the aggregate number of Shares reserved for issuance to any one

Participant under this Plan or any other plan of the Corporation, shall not exceed 5% of the total number of issued and

outstanding Shares (calculated on a non-diluted basis) in any 12 month period unless the Corporation receives the

permission of the stock exchange or exchanges on which the Shares are listed to exceed such threshold and provided

further that the number of Options granted to any one consultant in a 12 month period shall not exceed 2% of the total

number of issued and outstanding Shares and the aggregate number of Options granted to persons employed to provide

investor relations activities shall not exceed 2% of the total number of issued and outstanding Shares in any 12 month

period. The Corporation shall obtain shareholder approval for grants of Options to Insiders, of a number of Options

exceeding 10% of the issued Shares, within any 12 month period.

The period during which an Option may be exercised (the "Option Period") shall be determined by the Board at the

time that the Option is granted, subject to any vesting limitations which may be imposed by the Board in its sole

unfettered discretion at the time that such Option is granted and Sections 11, 12 and 16 below, provided that:

C-3

a) no Option shall be exercisable for a period exceeding five (5) years from the date that the Option is granted

unless the Corporation receives the permission of the stock exchange or exchanges on which the Shares are

then listed and as specifically provided by the Board and as permitted under the rules of any stock exchange

or exchanges on which the Shares are then listed, and in any event, no Option shall be exercisable for a

period exceeding ten (10) years from the date the Option is granted;

b) no Option in respect of which shareholder approval is required under the rules of any stock exchange or

exchanges on which the Shares are then listed shall be exercisable until such time as the Option has been

approved by the shareholders of the Corporation;

c) the Board may, subject to the receipt of any necessary regulatory approvals, in its sole discretion, accelerate

the time at which any Option may be exercised, in whole or in part; and

d) any Options granted to any Participant must expire within 90 days after the Participant ceases to be a

Participant, and within 30 days for any Participant engaged in investor relation activities after such

Participant ceases to be employed to provide investor relation activities.

a) Except as set forth in Sections 11 and 12 below or as otherwise determined by the Board, no Option may be

exercised unless the holder of such Option is, at the time the Option is exercised, a director, officer, employee

or consultant of the Corporation.

b) Options that are otherwise exercisable in accordance with the terms thereof may be exercised in whole or in

part from time to time during the Option Period.

c) Any Participant (or his legal, personal representative) wishing to exercise an Option shall deliver to the

Corporation, at its principal office in the City of Pickering, Ontario:

(i) a written notice expressing the intention of such Participant (or his legal, personal representative) to

exercise his Option and specifying the number of Shares in respect of which the Option is

exercised; and

(ii) a cash payment, certified cheque or bank draft, representing the full purchase price of the Shares in

respect of which the Option is exercised.

d) Upon the exercise of an Option as aforesaid, the Corporation shall use reasonable efforts to forthwith deliver,

or cause the registrar and transfer agent of the Shares to deliver, to the relevant Participant (or his legal,

personal representative) or to the order thereof, a certificate representing the aggregate number of fully paid

and non-assessable Shares in respect of which the Option has been duly exercised.

If any Participant shall cease to hold the position or positions of director, officer, employee or consultant of the

Corporation (as the case may be) for any reason other than death, his Option will terminate at 4:30 p.m. (Toronto time)

on the earlier of the date of the expiration of the Option Period and 90 days after the date such Participant ceases to

hold the position or positions of director, officer, employee or consultant of the Corporation as the case may be, and

ceases to actively perform services for the Corporation. An Option granted to a Participant who performs investor

relations services on behalf of the Corporation shall terminate on the date of termination of the employment or

cessation of services being provided and shall be subject to Exchange policies and procedures for the termination of

Options for investor relations services. For greater certainty, the termination of any Options held by the Participant, and

the period during which the Participant may exercise any Options, shall be without regard to any notice period arising

from the Participant

In the event of the death of a Participant, any Option previously granted to him shall be exercisable until the end of the

Option Period or until the expiration of 12 months after the date of death of such Participant, whichever is earlier, and

then, in the event of death, only:

a) by the person or persons to whom the Participant's rights under the Option shall pass by the Participant's will

or applicable law; and

b) to the extent that he was entitled to exercise the Option as at the date of his death.

No person entitled to exercise any Option granted under this Plan shall have any of the rights or privileges of a

shareholder of the Corporation in respect of any Shares issuable upon exercise of such Option until such Shares have

been paid for in full and issued to such person.

The proceeds from any sale of Shares issued upon the exercise of Options shall be added to the general funds of the

Corporation and shall thereafter be used from time to time for such corporate purposes as the Board may determine and

direct.

a) The number of Shares subject to the Plan shall be increased or decreased proportionately in the event of the

subdivision or consolidation of the outstanding Shares of the Corporation, and in any such event a

corresponding adjustment shall be made to the number of Shares deliverable upon the exercise of any Option

granted prior to such event without any change in the total price applicable to the unexercised portion of the

Option, but with a corresponding adjustment in the price for each Share that may be acquired upon the

exercise of the Option. In case the Corporation is reorganized or merged or consolidated or amalgamated

with another corporation, appropriate provisions shall be made for the continuance of the Options outstanding

under this Plan and to prevent any dilution or enlargement of the same.

b) Adjustments under this Section 15 shall be made by the Board, whose determination as to what adjustments

shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional Shares shall be

issued upon the exercise of an Option following the making of any such adjustment.

Notwithstanding the provisions of Section 11 or any vesting restrictions otherwise applicable to the relevant Options, in

the event of a sale by the Corporation of all or substantially all of its assets or in the event of a change of control of the

Corporation, each Participant shall be entitled to exercise, in whole or in part, the Options granted to such Participant

hereunder, either during the term of the Option or within 90 days after the date of the sale or change of control,

whichever first occurs.

For the purpose of this Plan, "change of control of the Corporation" means and shall be deemed to have occurred upon:

a) the acceptance by the holders of Shares of the Corporation, representing in the aggregate, more than 50

percent of all issued Shares of the Corporation, of any offer, whether by way of a takeover bid or otherwise,

for all or any of the outstanding Shares of the Corporation; or

b) the acquisition, by whatever means, by a person (or two or more persons who, in such acquisition, have acted

jointly or in concert or intend to exercise jointly or in concert any voting rights attaching to the Shares

acquired), directly or indirectly, of beneficial ownership of such number of Shares or rights to Shares of the

Corporation, which together with such person's then owned Shares and rights to Shares, if any, represent

(assuming the full exercise of such rights to voting securities) more than fifty percent (50%) of the combined

voting rights of the Corporation's then outstanding Shares; or

c) the entering into of any agreement by the Corporation to merge, consolidate, amalgamate, initiate an

arrangement or be absorbed by or into another corporation; or

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d) the passing of a resolution by the Board or shareholders of the Corporation to substantially liquidate the

assets or wind-up the Corporation's business or significantly rearrange its affairs in one or more transactions

or series of transactions or the commencement of proceedings for such a liquidation, winding-up or rearrangement

(except where such re-arrangement is part of a bona fide reorganization of the Corporation in

circumstances where the business of the Corporation is continued and where the shareholdings remain

substantially the same following the re-arrangement); or

e) individuals who were members of the Board of the Corporation immediately prior to a meeting of the

shareholders of the Corporation involving a contest for or an item of business relating to the election of

directors, not constituting a majority of the Board following such election.

All benefits, rights and Options accruing to any Participant in accordance with the terms and conditions of this Plan

shall be non-transferrable and non-assignable unless specifically provided herein. During the lifetime of a Participant,

any Options granted hereunder may only be exercised by the Participant and in the event of the death of a Participant,

by the person or persons to whom the Participant's rights under the Option pass by the Participant's will or applicable

law.

a) The Board may, at any time and from time to time, amend, suspend or terminate the Plan or an Option

without shareholder approval, provided that no such amendment, suspension or termination may be made

without obtaining any required approval of any regulatory authority or stock exchange or the consent or

deemed consent of a Participant where such amendment, suspension or termination materially prejudices the

rights of the Participant.

b) Notwithstanding the provisions of Section 18(a), the Board may not, without the approval of the security

holders of the Corporation (or, as may be required by the policies and procedures of the Exchange, the

approval of the disinterested security holders of the Corporation), make amendments to the Plan or any

Option for any of the following purposes:

i. to increase the maximum number of Shares that may be issued pursuant to Options granted under the

Plan as set out in Section 8;

ii. to reduce the exercise price of Options for the benefit of an Insider;

iii. to extend the term of an Option beyond the Option Period for the benefit of an Insider; and

iv. to amend the provisions of this Section 18.

c) In addition to the changes made pursuant to Section 3, the Board may, at any time and from time to time,

without the approval of the security holders of the Corporation amend any term of any outstanding Option

(including, without limitation, the exercise price, vesting and expiry of the Option), provided that:

i. any required approval of any regulator authority or stock exchange is obtained;

ii. if the amendments would reduce the exercise price or extend the expiry date of the Options granted to

Insiders, approval of the security holders of the Corporation must be obtained;

iii. the Board would have had the authority to initially grant the Option under the terms so amended; and

iv. the consent or deemed consent of the Participant is obtained if the amendment would materially

prejudice the rights of the Participant under the Option.

The obligation of the Corporation to issue and deliver Shares in accordance with this Plan and Options granted

hereunder is subject to applicable securities legislation and to the receipt of any approvals that may be required from

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any regulatory authority or stock exchange having jurisdiction over the securities of the Corporation. If Shares cannot

be issued to a Participant upon the exercise of an Option for any reason whatsoever, the obligation of the Corporation

to issue such Shares shall terminate and any funds paid to the Corporation in connection with the exercise of such

Option will be returned to the relevant Participant as soon as practicable.

This Plan and any option agreements entered into hereunder shall comply with the requirements from time to time of

the stock exchange or exchanges on which the Shares are listed.

The Corporation shall not by virtue of this Plan be in any way restricted from declaring and paying stock dividends,

issuing further Shares, varying or amending its share capital or corporate structure or conducting its business in any

way whatsoever.

Any notice required to be given by this Plan shall be in writing and shall be given by registered mail, postage prepaid

or delivered by courier or by facsimile transmission addressed, if to the Corporation, at its principal address in

Pickering, Ontario (Attention: President); or if to a Participant, to such Participant at his address as it appears on the

books of the Corporation or in the event of the address of any such Participant not so appearing then to the last known

address of such Participant; or if to any other person, to the last known address of such person.

Whenever used herein words importing the masculine gender shall include the feminine and neuter genders and vice

versa.

This Plan will be governed by and construed in accordance with the laws of the Province of Ontario.