EXHIBIT 4.11
============
CONFIDENTIAL EMPLOYMENT AGREEMENT
made this 1st day of August, 2004
T A B L E O F C O N T E N T S
Page
PART 1 INTERPRETATION 2
INTERPRETATION 2
PART 2 EMPLOYMENT, TERMS AND DUTIES 3
EMPLOYMENT 3
TERM 3
TITLE AND REPORTING 3
PARTICULAR DUTIES 4
GENERAL DUTIES 4
PART 3 COMPENSATION 4
SALARY 4
BONUS 4
OTHER BENEFITS 8
STOCK OPTIONS 8
BONUS SHARE OPTIONS FOR 2003 BONUS 9
FIRST PLANT COMMISSIONING BONUS SHARE OPTIONS 9
NEW PLANT TONNAGE BONUS SHARE OPTIONS 10
CASH IN LIEU OF SHARES 11
HOLIDAYS 11
HOUSING ALLOWANCE 11
INCOME TAX AND OTHER DEDUCTIONS 11
REVIEW 11
PART 4 EMPLOYEE'S ADDITIONAL COVENANTS 12
CONFIDENTIAL INFORMATION 12
NO DISCLOSURE 12
NO COMPETITION 13
NOTICE OF CONFLICT 13
EXCEPTIONS 13
COMPANY'S PROPRIETARY RIGHTS 14
SPECIAL REMEDIES 14
PART 5 TERMINATION 15
VOLUNTARY TERMINATION 15
IF COMPANY TERMINATES OR PARTIES FAIL TO RENEW 15
TERMINATION FOR CAUSE AND OTHER EVENTS OF EARLY TERMINATION 17
EFFECT OF TERMINATION UNDER SECTION 5.3 17
RETURN OF PROPERTY 18
RESIGNATION OF OFFICE 18
PART 6 GENERAL 18
FURTHER ASSURANCES 18
ASSIGNMENT 18
SEVERABILITY 18
MODIFICATIONS, WAIVER AND CONSENT 18
NOTICE 19
BINDING EFFECT 19
GOVERNING LAW 20
TIME OF ESSENCE 20
- ii -
COUNTERPARTS 20
ENTIRE AGREEMENT 20
SURVIVAL OF TERMS 20
CONFIDENTIAL EMPLOYMENT AGREEMENT
THIS AGREEMENT dated for reference and made the 1st day of August 2004 (the
"Effective Date")
BETWEEN:
DynaMotive Energy Systems Corporation, a body
corporate duly incorporated under the law of the
Province of British Columbia, having offices at Xxxxx
000, 0000 Xxxx 00xx Xxxxxx, Xxxxxxxxx, XX, X0X 0X0
(the "Company")
OF THE FIRST PART
AND:
R. Xxxxxx Xxxxxxxx, an individual residing at 0000
Xxxxxxxxx Xxxxxx, Xxxxxxxxx, XX, X0X 0X0
(the "Employee")
OF THE SECOND PART
WHEREAS:
(A) The Company is an energy systems company that is focused on the
development of innovative energy solutions based on its patented pyrolysis
system and, through the application of its technology and know how, the
Company intends to tap into abundant organic resources that are generally
discarded by the agricultural and forest industries at a cost and to
economically convert them into a renewable and environmentally friendly fuel;
(B) The Company has incurred a liability in the amount of US $135,000 for a
bonus to the Employee in respect of his services performed during 2003 (the
"2003 Bonus Amount");
(C) The Employee is willing to forego the payment by the Company and the
receipt by the Employee of the 2003 Bonus Amount in consideration of the
Company agreeing to issue shares of the Company to the Employee on the terms
and conditions set out herein; and
(D) The Company and the Employee have mutually agreed to evidence the terms
of the Employee's full time employment by the Company by this Agreement, which
is to supersede all prior agreements between the parties and, which is
intended to reinforce the employer and employee relationship between the
Company and the Employee which has existed since April 26, 1999 but to govern
their relationship with effect as of and from August 1, 2004;
WITNESSETH that the parties mutually agree as follows:
- 2 -
PART 1
INTERPRETATION
Interpretation
1.1 For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) "this Agreement" means this agreement of employment, including any
schedules hereto, as from time to time supplemented or amended by one or
more agreements entered into pursuant to the applicable provisions
hereof;
(b) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular section, subsection, paragraph, subparagraph or other
subdivision;
(c) all references to currency mean Canadian currency, unless specified
otherwise;
(d) a reference to an entity includes any entity that is a successor to
such entity;
(e) the headings are for convenience only and are not intended as a
guide to interpretation of this Agreement or any portion hereof;
(f) a reference to a statute includes all regulations made pursuant
thereto, all amendments to the statute or regulations in force from time
to time, and any statute or regulation which supplements or supersedes
such statute or regulations;
(g) "Board" means the board of directors of the Company as from time to
time constituted;
(h) "Bonus Criteria" means the objectives referred to as Bonus Criteria
in section 3.2 of this agreement and determined in the manner provided
therein;
(i) "CIBC Prime Rate" means the annual rate of interest announced from
time to time by Canadian Imperial Bank of Commerce as a reference rate
then in effect for determining interest rates on Canadian dollar
commercial loans in Canada;
(j) "Contract Year" means the period commencing August 1 and ending the
next following July 31 provided that the first Contract Year shall
commence August 1, 2004 and end July 31, 2005 and the second, third,
fourth and fifth contract years shall commence respectively on the first
day of August of 2005, 2006, 2007 and 2008;
(k) "Closing Price of the Company's Common Shares" and "Closing Price"
means as of any given date, the average of the high and low trading
prices of the Common shares in the capital stock of the Company on the
NASD's Over the Counter Bulletin Board on such date, or if the Common
shares trade on the TSX Venture Exchange or TSX Exchange on such date,
then the average of the high and low trading prices of the Common shares
- 3 -
of the Company on such exchange, or if the Common shares in the capital
stock of the Company did not trade on such date, on the next preceding
day on which trades were made;
(l) "Salary" in respect of a Contract Year, means the amount determined
for a Contract Year pursuant to section 3.1 of this Agreement; and
(m) "Stock Option" mean the rights under an agreement between the
Company and the Employee, or the Company and a corporation nominated by
the Employee, to have the Company sell or issue shares of the Company,
or shares of a corporation that does not deal at "arm's length" with the
Company (as that term is defined pursuant to the Income Tax Act of
Canada), to the Employee or to the corporation nominated by the
Employee.
In the event that it may be necessary at any time for any party to this
Agreement to prove the CIBC Prime Rate applicable as at any time or times, a
certificate in writing of the manager of Canadian Imperial Bank of Commerce,
000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0 setting forth the
CIBC Prime Rate as at any time or times, shall be, and shall be deemed to be,
conclusive evidence of the CIBC Prime Rate as set forth in the certificate.
PART 2
EMPLOYMENT, TERMS AND DUTIES
Employment
2.1 The Company and the Employee hereby confirm the employment of the
employee by the Company on a full-time basis upon and subject to the terms and
conditions of this Agreement.
Term
2.2 This Agreement shall be for a period of five years commencing August 1,
2004 and ending July 31, 2009 unless earlier terminated pursuant to Part 5. A
notice to renew the terms of the Employee's employment with the Company shall
be provided by the Company to the Employee not less than nine months prior to
the expiration of this Agreement, but neither the notice, nor the requirement
for the notice, shall be taken to imply that the Employee is required to
consent to the renewal.
Title and Reporting
2.3 The Employee shall have the title of President & CEO.
2.4 The Employee shall report to the Board.
- 4 -
Particular Duties
2.5 As President & CEO, the Employee shall be responsible for all the
affairs of the Company including strategic direction, provision of appropriate
resources, appropriate financial plans, budgets and controls, custody and
efficient utilization of resources and keeping the Board and shareholders
appropriately informed.
General Duties
2.6 During the term of this Agreement, the Employee will:
(a) diligently perform his duties arising under this Agreement to the
best of his skill and ability; and
(b) attend to his duties on a full-time basis, at the specific times
and days as reasonably directed by the Company, excepting holidays,
absence due to sickness and other authorized absences as set out in this
Agreement.
PART 3
COMPENSATION
Salary
3.1 During the first Contract Year, the Company will pay the employee an
annual Salary of $350,000 payable bi-monthly in arrears and subject to
appropriate deductions and remittances pursuant to income tax and social
security legislation. Thereafter the Salary in each successive Contract Year
will be increased by a percentage equal to the percentage increase, if any, in
the Consumer Price Index - All Items - Vancouver, as published by Statistics
Canada, and calculated for July 2004 and at the commencement of each
successive period, i.e. for July 2005, July 2006, July 2007 and July 2008.
The Company will implement this adjustment retroactively in the event of delay
in the publication of the Consumer Price Index - All Items - Vancouver by
Statistics Canada.
Bonus
3.2 The Company shall pay to the Employee an annual bonus for each calendar
year or partial calendar year (the "Bonus Period"), governed by the terms of
this Agreement, calculated as a minimum bonus of 25% plus a maximum bonus of
up to an additional 75% of the aggregate Salary payable to the Employee, or on
the Employee's behalf, with respect to the Bonus Period pursuant to section
3.1 (before any amounts deducted or paid on behalf of the Employee pursuant to
income tax and social security legislation), the 75% maximum bonus component
to be based on the achievement of certain objectives (the "Bonus Criteria"),
such Bonus Criteria to be agreed by the parties hereto for each Bonus Period
as hereafter provided.
The Bonus Criteria must be presented by the Employee to the Board within 30
days of the first day of each Bonus Period provided that for the Bonus Period
- 5 -
which falls within the 2004 calendar year, the Bonus Criteria must be
presented by the Employee to the Board by September 30, 2004. Failure by the
Employee and the Company to agree on the annual Bonus Criteria by the date
that is 60 days after the first day of the Bonus Period for which it is to be
determined (or by October 30, 2004 in the case of the Bonus Period which falls
within the 2004 calendar year) shall be resolved by arbitration.
3.2.1 The annual bonus amount for a Bonus Period must be determined by the
Company within 90 days after the last day of the Bonus Period (the "Bonus
Determination Date") and is payable to the Employee on the day that is 150
days after the last day of the Bonus Period (the "Payment Date") unless and
only to the extent, at least ten days prior to the Bonus Determination Date
and before being notified of the amount of his bonus, the Employee elects to:
(a) defer the receipt of all or a portion (expressed as a percentage or
otherwise) of the annual bonus amount until a specified date which is
not later than the 31st day of December of the third calendar year
following the calendar year in which the Bonus Period ended ( in this
section called the "Cash Bonus Deferral Election"); or
(b) in lieu of payment of all or part of the bonus in cash, enter into
an agreement with the Company to purchase that number of Common shares
in the Company determined by dividing the amount of the annual bonus
amount for which the Employee elects to receive shares (expressed as a
percentage or otherwise), by the Closing Price of the Company's Common
shares on the date notice of the Employee's election under this section
is given to the Company (in this section called the "Share Purchase
Election").
The Employee must provide annual written notice to the Company of his Cash
Bonus Deferral Election, specifying the amount, percentage, or fraction or
other means of calculating the annual bonus amount to be deferred, and of his
Share Purchase Election, specifying the amount of the annual bonus amount to
be used to calculate the number of shares subject to the Share Purchase
Election, and such notice must be presented to the Company at least ten days
prior to the Bonus Determination Date, i.e. before the Employee would
otherwise know of the amount and be entitled to receive payment of the annual
bonus. Once a Cash Bonus Deferral Election or Share Purchase Election is
delivered to the Company by the Employee, it may not be revoked for the Bonus
Period to which it relates and thereafter the annual bonus amount for that
Bonus Period shall:
(a) to the extent of the amount set forth in or calculated pursuant to
the Cash Bonus Deferral Election, be dealt with solely in accordance
with that election;
(b) to the extent of the amount subject to the Share Purchase Election,
be dealt with solely in accordance with that election; and
(c) to the extent of any balance of the annual bonus amount for that
Bonus Period, which is not covered by either the Cash Bonus Deferral
Election or Share Purchase Election, be payable to the Employee on the
Payment Date.
- 6 -
3.2.2 If the Employee makes a Cash Bonus Deferral Election, then he shall in
that election specify the amount of the annual bonus amount, or means of
calculating the amount, of the bonus to be deferred by reason of that election
(the "Deferred Amount") and the Company agrees to grant at option to the
Employee, for a period of ten years from the date of the particular Cash Bonus
Deferral Election, to purchase that number of Common shares in the Company
determined by dividing the Deferred Amount by the Closing Price of the
Company's Common shares on the day that the election is made or the day the
amount of the annual bonus amount is determined by the Company, whichever day
is later, with the exercise price for such Stock Options to be the said
Closing Price on such later day (the "Valuation Day"), and the Company and the
Employee will execute a stock option agreement substantially in the same form
as that attached as Schedule 2 to this Agreement but dated the Valuation Day
and relating only to the Stock Options referred to in this subsection with
such Stock Option rights to expire on the 10th anniversary of the making of
the election.
3.2.3 Notwithstanding the 100% of Salary maximum for the amount of an annual
bonus determined pursuant to this section, any amount of an annual bonus,
awarded by the Company to the Employee, that is not used to calculate the
number of shares subject to a Share Purchase Election or the number of Stock
Options to be granted by the Company pursuant to the preceding subsection, and
which remains unpaid by the Company 180 days after the end of the Bonus Period
shall be increased for an interest factor which shall be calculated by adding
to such unpaid bonus amount, an amount equal to what the interest would be if
such unpaid bonus amount were a debt owing to the Employee which bears
interest at the rate of 6% per annum calculated from and including the Payment
Date for such unpaid bonus amount and compounded monthly until paid; provided
that if, for any regulatory or other reason whatsoever, the Stock Option
referred to in the preceding subsection cannot be granted or, unless waived by
he Employee, be subject to immediate vesting (such an option being referred to
in this section as an "Impaired Option"), then the amount of the bonus used to
calculate the number of shares subject to the Impaired Option shall be
included in the amount of the bonus to be increased by the interest factor
pursuant to this subsection and such increased amount shall be payable to the
Employee as part of the bonus and the right of the Employee to the Impaired
Option shall lapse, and provided further that under no circumstances may the
date of payment of an annual bonus, or any portion thereof other than the
portion used to calculate the number of shares subject to a Share Purchase
Election, including any related interest factor, be later than the last day of
the third calendar year following the calendar year in which the Bonus Period
ended (herein referred to as the "Three Year Deadline").
Failure by the Company to pay any Deferred Amount of an annual bonus, which is
the subject of a Cash Bonus Deferral Election, by the Three Year Deadline in
respect of that amount shall result in the Company:
(a) paying and indemnifying the Employee against any interest and
penalties related to any income taxes that the Employee may become
subject to as a result of such a failure by the Company;
(b) providing the Employee with an interest free loan to pay any income
taxes that the Employee may become subject to as a result of such a
- 7 -
failure by the Company, any such advanced funds to be repaid in full by
the Employee upon receipt of the related unpaid bonus amounts from the
Company; and
(c) paying and indemnifying the Employee against any income taxes,
interest, and penalties related to any taxable benefits which may be
considered to have been received by the Employee as a result of (a) or
(b).
3.2.4 Where the Employee makes a Share Purchase Election, the Company hereby
agrees:
(a) in lieu of any obligation to pay the bonus to the Employee to the
extent of the amount used to calculate the number of shares subject to a
Share Purchase Election, and upon receipt of a subscription notice from
the Employee subscribing for a specified number of Common shares in the
Company (not being less than the lesser of 25,000 Common shares in
total, or the balance of the Common shares of the Company that the
Employee is entitled to purchase pursuant to one or more Share Purchase
Elections) and payment by the Employee to the Company of one-tenth of
one cent for each share subscribed for in the notice, to allot and issue
to the Employee the number of shares specified in the notice in
consideration for one-tenth of one cent per share plus the value of past
services actually performed by the Employee during the Bonus Period for
which the Share Purchase Election was made;
(b) that the value of such past services shall be calculated for the
Board by multiplying the number of shares subject to a Share Purchase
Election for a particular Bonus Period, and subscribed for in the notice
referred to in paragraph (a) of this section, by the Closing Price of
the Company's Common shares on the date of the Share Purchase Election
for that Bonus Period;
(c) that the Employee may give one or more notices pursuant to this
provision with regard to a particular Share Purchase Election but the
aggregate number of Common shares to be allotted and issued to him
pursuant to all such notices shall not exceed the number of Common
shares the Employee was entitled to purchase as a result of the
particular Share Purchase Election before exercising any such rights;
provided that the Employee shall only have until ten years after the date a
particular Share Purchase Election was made to notify the Company, by one or
more notices, that the Employee wishes to purchase any of the shares, which he
is entitled to purchase pursuant to the particular Share Purchase Election,
and to pay the price of one-tenth of one cent per share for any share that the
Company has agreed to issue pursuant to the particular Share Purchase
Election, and thereafter all rights of the Employee to any shares not referred
to in a subscription notice given by the Employee to the Company pursuant to
the particular Share Purchase Election by such date shall lapse.
3.2.5 The Employee, by execution of the written Share Purchase Election,
acknowledges that, subject to section 3.10 hereof, the Company is released
from any and all obligations to pay a bonus to the Employee to the extent of
the amount used to calculate the number of shares subject to the particular
Share Purchase Election.
- 8 -
3.2.6 Upon receipt of the notice from the Employee contemplated by a Share
Purchase Election and payment of the subscription price to it, the Company
shall proceed to allot and issue the shares referred to in the notice,
including giving such directions and making such adjustments as would have
been necessary if the agreement between the Company and the Employee in this
section were a Stock Option governed by a Stock Option Agreement in
substantially the same form as Schedule 3 but dated the date of the Share
Purchase Election and relating only to the right to purchase the shares
subject to the Share Purchase Election at the price of one-tenth of one cent
per share with such rights to expire only on the 10th anniversary of the making
of the election and not to expire on the 30th day after termination of the
Employee's employment or one year after death or disability of the Employee.
Other Benefits
3.3 In addition to the other compensation set out in this Agreement, the
Employee shall participate in such health, medical, insurance or other benefit
plans established by the Company from time to time and made available to staff
and officers of the Company.
3.4 The Company shall continue to assign, during the term of this Agreement,
50% of a Cdn $3 million keyman insurance policy on the life of the Employee to
a beneficiary designated by the Employee and the Company shall continue to
maintain such insurance coverage or greater, during the term of this agreement
and any extensions thereof.
Stock Options
3.5 The 4,582,649 outstanding Stock Options previously granted by the Company
to the Employee (or to Cape Fear Limited as the Employee's nominee
corporation) under the terms of any prior employment or option agreement, as
listed in the attached Schedule 1, will remain in full force and effect.
3.6 The Company will, pursuant to a stock option agreement in the form
attached as Schedule 2 to this Agreement, and upon execution of this
Agreement, execute a stock option agreement with the Employee to record the
Company's grant of Stock Options to the Employee which entitle the Employee to
purchase 3,000,000 Common shares of the Company at an exercise price of US
$0.45 per share, which price per share the Company and the Employee have
determined to be at least as great as the fair market value of the Company's
shares on the Effective Date of this Agreement, and which Stock Options will,
in each case, have a term of five years from the date on which they are
originally scheduled to vest, as set forth under the heading "Vesting Date" in
the following schedule:
Number of Stock Options Vesting Date Termination Date
1,000,000 August 1, 2004 July 31, 2009
500,000 August 1, 2005 July 31, 2010
500,000 August 1, 2006 July 31, 2011
500,000 August 1, 2007 July 31, 2012
500,000 August 1, 2008 July 31, 2013
- 9 -
Bonus Share Options For 2003 Bonus
3.7 In lieu of any obligation to pay a bonus to the Employee under any prior
employment or other agreement in respect of the 2003 calendar year, upon
receipt of one or more subscription notices from the Employee subscribing for
a specified number of Common shares in the Company (not being less than 25,000
shares or the balance of the Common shares of the Company that the Company has
agreed to issue to the Employee pursuant to this section) and payment by the
Employee to the Company of one-tenth of one cent for each share subscribed for
in the particular notice, the Company agrees to allot and issue to the
Employee the number of shares specified in the notice in consideration of
one-tenth of one cent ($.001) per share plus the value of past services
actually performed by the Employee (US $0.45 per share), calculated for each
share to be issued by dividing the 2003 Bonus Amount by the maximum number of
Common shares which may, upon one or more notices given by the Employee
pursuant to this section, be allotted and issued to him, such maximum number
of shares under all such notices being a total of 277,087 Common shares of the
Company; provided that the Employee shall only have until July 31, 2014 to
notify the Company, by one or more notices, that the Employee wishes to have
any of the shares referred to in this section allotted and issued to him and
to pay the price of one-tenth of one cent per share for any share that the
Company has agreed to issue under this section, and thereafter all rights of
the Employee to any shares not referred to in a subscription notice given by
the Employee under this section by such date shall lapse.
The Employee, by execution of this Agreement, acknowledges that subject to
section 3.10 of this Agreement, the Company is released from any and all
obligations to pay a bonus to the Employee with respect to the 2003 calendar
year or any portion thereof.
Upon receipt of the notice from the Employee contemplated by this section and
payment of the subscription price to it, the Company shall proceed to allot
and issue the shares, referred to in the notice and to be issued pursuant to
this section, including giving such directions and making such adjustments as
would have been necessary if the Agreement between the Company and the
Employee, in this section, were a Stock Option governed by a Stock Option
Agreement in the form of Schedule 3 but dated the date hereof and relating
only to the right to purchase the shares referred to in this section with such
rights to expire on the 10th anniversary of the date hereof.
First Plant Commissioning Bonus Share Options
3.8 Upon the Company's first commercial plant (Erie) being successfully
commissioned (in this section called the "Commissioning Date" and determined
as the time that Bio-Oil is first produced by the plant to which the
expression, "commissioned" relates), the Company agrees that the Employee
shall be entitled to a commissioning bonus consisting of the grant of a right
to the Employee to purchase 200,000 Common shares of the Company upon receipt
by the Company of one or more subscription notices from the Employee
subscribing for a specified number of Common shares in the Company pursuant to
this section (not being less than 25,000 shares or the balance of the Common
shares of the Company that the Company has agreed to issue to the Employee
pursuant to this section) and payment by the Employee to the Company of
one-tenth of one cent for each share subscribed for in the notice. The
Company agrees that upon receipt by the Company of such a notice, the Company
will allot and issue to the Employee the number of shares specified in the
notice in consideration of one-tenth of one cent per share plus the value of
- 10 -
past services actually performed by the Employee to the Commissioning Date,
calculated by multiplying the number of shares to be issued pursuant to the
notice by the Closing Price for Common shares of the Company on the
Commissioning Date; provided that the number of shares issued pursuant to all
such notices shall not exceed 200,000 and further provided that the Employee
shall only have until ten years after the Commissioning Date to notify the
Company, by one or more notices, that the Employee wishes to have any of the
shares referred to in this section allotted and issued to him and to pay the
price of one-tenth of one cent per share for any share that the Company has
agreed to issue under this section, and thereafter all rights of the Employee
to any shares not referred to in a subscription notice given by the Employee
under this section by such date shall lapse.
Upon receipt of the notice from the Employee contemplated by this section and
payment of the subscription price to it, the Company shall proceed to allot
and issue the shares referred to in this section, including giving such
directions and making such amendments or adjustments as would have been
necessary if the Agreement between the Company and the Employee in this
section were a Stock Option governed by a Stock Option Agreement in the form
of Schedule 3 but dated the Commissioning Date and relating only to the right
to purchase the shares referred to in this section at the exercise price set
forth herein with such rights to expire on the 10th anniversary of the
Commissioning Date.
New Plant Tonnage Bonus Share Options
3.9 Upon the successful commissioning or licensing of future plants to use
the technology and knowhow of the Company and its affiliates (including of any
partnership or joint venture in which the Company or its affiliates has at
least a 25% ownership interest), the Employee shall, during the term of this
Agreement and any renewals hereof, be granted additional rights to purchase
shares as commissioning bonuses on substantially the same basis set forth in
the preceding section 3.8, including the exercise price of one-tenth of one
cent per share and the ten year term from the Commissioning Date for a plant
owned by the Company, or the date the original License Agreement is executed
in relation to the particular plant, to which the bonus share options applies,
and during which ten year term the right to purchase shares pursuant to the
bonus share options may be exercised. The number of shares that the Employee
shall be granted the right to purchase with respect to each plant
commissioning or licensing, as contemplated by this section, shall be
determined for each plant by multiplying 1000 times the number of tonnes of
dry input capacity contracted on a daily basis, as established in or pursuant
to the License Agreement, and measured in input values or, in the case of a
plant owned by the Company, as would be established by a License Agreement, if
one was required; and provided that if a plant, or the license applying to the
operation of a plant, is expanded and dry input capacity, so measured, is
increased during the term of this Agreement, then as of the date the increased
capacity becomes subject to the License Agreement, or an amendment thereto or
replacement thereof, or would become subject to such a license or amendment if
the plant were not owned by the Company (the "Expansion Date"), this increased
capacity shall also give rise to the right to purchase shares in the manner
set out in this section as if the Expansion Date were the date of an original
License Agreement over a new plant licensed for the increased capacity.
- 11 -
Cash in Lieu of Shares
3.10 Except as provided by section 3.13 of this Agreement, if by reason of
any stock exchange, other public securities market rule or regulation, or
order by any regulatory authority the Company is prohibited from issuing any
shares pursuant to any of sections 3.2 to 3.2.6, 3.7, 3.8 or 3.9 hereof, or
otherwise fails to issue the shares referred to in any notice (the "original
notice"), given by the Employee pursuant to any of those sections, within 60
days of receipt of such an original notice, then the Company shall, upon
receipt of a written request by the Employee, pay a cash bonus to the Employee
equal to the amount determined by multiplying the number of shares referred to
in the original notice, which the Company has failed to issue, by the Closing
Price on the date of the original notice.
Holidays
3.11 The Employee shall be entitled to four weeks of annual holidays to be
taken at time(s) reasonably satisfactory to the Employee and the Company.
Housing Allowance
3.12 The Company shall provide and pay for a rental house for the Employee
for a one year period from the date of this Agreement, to an acceptable
standard relative to his current dwelling, to a maximum of $5,000 per month.
Income Tax and Other Deductions
3.13 Notwithstanding any other provision of this Agreement, all amounts or
benefits to which the Employee is entitled under this Agreement, including the
right to the issue of shares or rights to purchase shares, may be subject to
appropriate deductions and remittances pursuant to income tax and social
security legislation and, as a condition of the issue of any shares that the
Company is required to issue to the Employee under any provision of this
Agreement, the Company may require the Employee to pay, to the Company, or
make arrangements satisfactory to the Company regarding payment of, any
federal, provincial, state or local taxes or other deductions or remittances
of any kind required by law to be deducted or withheld and remitted to any
such taxing or other governmental authority with respect to such amounts or
shares or other benefits. The Company shall, to the extent permitted by law,
also have the right to deduct any such taxes or other payments from any
payment of any kind otherwise due to the Employee.
Review
3.14 At the end of the first year of employment under this Agreement, and
annually thereafter, the Board will carry out an objective review of the terms
of reference of the position held by the Employee, the compensation to the
Employee and the Employee's performance, and the Board's review shall be
presented to the Compensation Committee and the Board for approval.
- 12 -
PART 4
EMPLOYEE'S ADDITIONAL COVENANTS
Confidential Information
4.1 The Employee acknowledges that in the course of his employment by the
Company he will have access to and be entrusted with confidential information
and trade secrets of the Company (collectively the "Confidential Information")
relating to the business affairs, customers, suppliers, technology,
proprietary rights, patents, research, plans, research data, marketing
techniques, manufacturing methods, procedures and techniques, industrial
designs, inventions, improvements, discoveries and routines concerning the
Company, its business and those of its affiliates and of its customers and
their particular business requirements, the disclosure of any of which to
competitors of the Company or the general public would be highly detrimental
to the best interests of the Company or its affiliates, as the case may be.
The Employee agrees to exercise reasonable efforts to maintain confidentiality
respecting the foregoing.
The Employee further acknowledges that in the course of employment by the
Company he might, from time to time, be a representative of the Company in
negotiations and discussions with others and as such will be significantly
responsible for maintaining or enhancing the goodwill of the Company and its
affiliates.
The Employee further acknowledges that the right to maintain the
confidentiality of the Confidential Information and the right to preserve its
goodwill are proprietary rights which the Company is entitled to protect.
No Disclosure
4.2 The Employee will not, during the term of this Agreement and thereafter,
disclose any of the Confidential Information to any person nor will he use the
Confidential Information for any purpose other than the best interests of the
Company or an affiliate of the Company nor will he disclose or use for any
purpose other than those of the Company or its affiliates the private affairs
of the Company or of the affiliates of the Company or any other confidential
or proprietary information which he might acquire during the course of his
employment by the Company with relation to the business and affairs of the
Company or its affiliates except:
(a) with the prior written authorization of the Company;
(b) as required to carry out the purposes of this Agreement or to obtain
advice of counsel thereon;
(c) as otherwise permitted under this Agreement;
(d) where the Confidential Information is in or comes into the public
domain through no act or omission of the Employee; or
(e) except as required by law.
- 13 -
No Competition
4.3 Except with the prior written consent of the Company or pursuant to this
Part 4, during the term of this Agreement and for one year after termination
of this Agreement, the Employee will not accept employment or provide services
to any person or engage in any business (directly or through any kind of
ownership or other arrangement other than ownership of 5% or less of the
securities of publicly held corporations) which is a competitor of the Company
and which is involved in the business of researching or commercializing
applications associated with the Company's technology in areas that are being
pursued by the Company during or prior to the term hereof or upon which the
Company has expended significant resources in anticipation of future activity,
and the Employee will not at any time after termination hereof:
(a) interfere with the contractual arrangements between the Company and
any of its employees, contractors, suppliers, agents and any one else in
a contractual or fiduciary relationship with the Company and will not
recruit, hire or assist others in recruiting or hiring any employee of
the Company; or
(b) take any other action inconsistent with the fiduciary relationship
of a senior executive officer to his employer.
Notice of Conflict
4.4 If the Board, acting reasonably, determines that the Employee is
engaging in an activity which it deems to be a conflicting activity and the
Employee is so engaged, then the Company will so advise the Employee in
writing and the Employee will, as soon as possible in order to minimize any
injury to the Company and in any event within 10 days, or such longer period
as the Company agrees upon, after receipt of notice,
(a) discontinue the activity, and
(b) certify in writing to the Company that he has discontinued the
conflicting activity including where appropriate by sale or other
disposition or by transfer of all such interests, except a beneficial
interest, into a "blind trust" or other fiduciary arrangement over which
the Employee has no control, direction or discretion; or
advise the Company that he disputes the conflict and the matter shall be
referred to arbitration.
Exceptions
4.5 Nothing in this Part 4 will operate to prevent the Employee from
(a) owning shares of any corporation, the shares of which are listed for
trading on any stock exchange or which are traded on the over-the-counter
market, provided that the shareholding does not constitute 5% or more of
the equity of the corporation;
(b) acquiring any business (whether by the purchase of shares, assets or
otherwise) for bona fide commercial reasons where an incidental part of
- 14 -
the business would otherwise be prohibited under this Agreement, but only
if the Employee and his affiliate(s) and associate(s), as the case may
be, use their best efforts to divest themselves upon reasonable terms and
with all reasonable speed of the incidental parts;
(c) serving as an officer or director, or being involved in, or
receiving any compensation from any other entity which does not compete
with the Company, provided that the Employee would not be otherwise in
conflict with his obligations of loyalty to the Company and to render his
full-time services to the Company and its affiliates during the term of
his employment by the Company.
Company's Proprietary Rights
4.6 All property, including intellectual property such as patentable
inventions, non-patentable processes or know-how, designs, copyright and the
like which the Employee creates or is involved in creating, directly or
indirectly, as a result of the services performed by the Employee for the
Company during his employment with the Company (the "Property") will be
owned by the Company and the Company shall at all times have sole
proprietary right, title and interest in the Property. The Employee will
give the Company notice of all Property as soon as it is created. The
Employee further agrees to execute, without delay or further consideration,
any patent assignments, conveyances, other documents and assurances as may
be necessary to effect the intent of this provision.
Special Remedies
4.7 The Employee acknowledges his obligations under this Part 4 are of a
special character and that in the event of any conduct by him in violation of
this Agreement or any of these obligations, the Company will sustain
irreparable injury and that money damages will not provide an adequate remedy
therefor. Accordingly, the Employee agrees that in addition to other remedies
and damages available to the Company at law or otherwise and if the Company so
elects, the Company is entitled
(a) to institute and prosecute proceedings either at law or in equity in
any court of competent jurisdiction,
(b) to obtain damages for the conduct,
(c) to enforce specific performance,
(d) to enjoin the Employee, any principal, partner, agent, servant,
employer and employee of, and any other person acting for, on behalf of
or in conjunction with the Employee from the conduct, or
(e) to obtain any other relief or any combination of the foregoing which
the Company may elect to pursue.
4.8 If any restriction as to time, area, capacity or activity imposed on the
Employee by this Agreement is finally determined by a Court of competent
jurisdiction to be unenforceable (the "Offending Restriction") and so often as
it occurs, the Employee agrees that upon written notice from the Company
- 15 -
specifying for inclusion in this Agreement a lesser time or area, fewer
capacities or an activity of lesser scope than now contained in this Agreement
(the "Lesser Restriction"), then this Agreement will be deemed to be amended
by the substitution of the Lesser Restriction for the Offending Restriction
insofar as is lawfully enforceable.
PART 5
TERMINATION
Voluntary Termination
5.1 Subject to section 5.2, the Employee's employment may be terminated
before the end of the then current term of this Agreement on
(a) the effective termination date set out in any notice given by the
Company to the Employee, which termination date must occur not less than
three months after the date of the notice, or by any notice given by the
Employee to the Company on the same basis, or
(b) the effective termination date as set out in any agreement between
the Company and the Employee for voluntary termination.
If Company Terminates or Parties Fail to Renew
5.2 (a) If the Company gives notice under subsection 5.1(a) of this
Agreement, or the term of this Agreement or any renewal hereof expires,
then the Company will pay to the Employee forthwith a lump sum equal to
the aggregate of:
(i) the greater of
a. the Salary remaining until July 31, 2009; and
b. two times the Salary (at the rate in effect at the date of
termination or expiry);
(ii) in lieu of bonuses, a pro-rated bonus to the date of termination or
expiry calculated at the target rate of 100% of Salary to such date, plus
an amount equal to the amount payable under subsection 5.2(a)(i); plus
(iii) in lieu of benefits, ________% of an amount equal to the amount
payable under subsection 5.2(a)(i);
and the Employee will accept such amount as full compensation for the
cessation of his employment.
(b) If within 12 months of a Change of Control, the Company gives notice
under subsection 5.1(a), the Company changes a fundamental term or condition
of employment of the Employee, or this Agreement or any renewal hereof
expires, then the Company will pay to the Employee forthwith a lump sum equal
to the aggregate of:
- 16 -
(i) the greater of
a. the Salary remaining until July 31, 2009; and
b. three times the Salary (at the rate in effect at the date of
such termination, change in terms of employment or expiry);
(ii) in lieu of bonuses, a pro-rated bonus to the date of such
termination, change in terms of employment or expiry at the target
rate of 100% of Salary to such date, plus an amount equal to the
amount payable under subsection 5.2(b)(i); plus
(iii) in lieu of benefits, _____% of an amount equal to the amount payable
under subsection 5.2(b)(i);
and the Employee will accept such amount as full compensation for the
cessation of his employment.
(c) For the purpose of this Agreement "Change of Control" means the
occurrence of any of the following events:
(i) the acquisition by an acquiror (or group of acquirors acting in
concert) of a number of shares which at any time aggregate at least
50.1% of the outstanding shares of the Company;
(ii) all or substantially all of the assets of the Company are sold,
transferred or otherwise disposed of;
(iii) the individuals who are members of the Board of Directors of the
Company on August 1, 2004 cease for any reason to constitute a
majority of the Board of Directors of the Company; or
(iv) the Board of Directors of the Company deems a transaction or series
of transactions to be a change of control.
(d) If there is a Change of Control, the Employee may resign, and upon such
resignation the Company will pay to the Employee the lump sum amounts set out
in section 5.2(b) herein.
(e) In the event the Employee ceases to be employed and becomes entitled to
any amount pursuant to subsections 5.2 (a), (b) or (d):
(i) all Stock Options that the Company has granted or agreed to grant to
the Employee pursuant to the Company's employee Stock Option Plan
shall be made the subject of a Stock Option Agreement substantially
in the same form as Schedule 2 except for the number of shares under
Option, the exercise price, and the fact that all the Options shall
"vest" immediately upon cessation of the Employee's employment;
- 17 -
(ii) any options granted in lieu of bonus or salary (i.e. not be
pursuant to the Company's Stock Option Plan at fair market value at
the date of the grant) shall be made the subject of a Stock Option
Agreement substantially in the same form as Schedule 3 (unless such
agreement for such options already exists) and for greater
certainty shall expire at the termination or expiry date
established at the time of the grant or pursuant to any agreement
in relation thereto; and
(iii) all other Stock Options that the Company would have issued to the
Employee in the normal course of the Employee's employment with the
Company will be issued at the fair market price for such stock or
shares as at the date of termination and shall automatically vest
with the Employee and be made the subject of a Stock Option
Agreement in the form of Schedule 2 or 3 as the case may be.
(f) In the event employment of the Employee is terminated before July 31,
2009, the Company shall pay all relocation costs of the Employee and will
indemnify the Employee against any liability undertaken in respect of his
aborted residence in Vancouver as a result of such early termination.
Termination for Cause and Other Events of Early Termination
5.3 Despite any other term of this Agreement to the contrary, the Employee's
employment by the Company (and any office held by him) may be terminated by
the Company for cause without a notice period prior to the expiration of the
then current term of this Agreement upon the receipt by the Employee of
written notice from the Company terminating his employment for cause; however,
no termination based upon the Employee's failure or refusal to perform his
obligations under this Agreement, which if not remedied could amount to cause,
shall be considered to be for cause, under this Agreement, unless the Board
first gives written notice to the Employee advising of the acts or omissions
that the Company considers would constitute cause because of the Employee's
failure or refusal to perform his obligations and the failure or refusal
continues after the Employee has had a reasonable opportunity to correct the
acts or omissions as set out in the notice.
Effect of Termination under Section 5.3
5.4 If the Company terminates the Employee's employment under section 5.3,
then he is not entitled to receive and the Company will not pay any salary,
damages or other sums as a consequence of the termination except for Salary,
any unpaid bonus amounts, and unpaid and reimbursable expenses, accrued or
accruable, but unpaid, to the effective termination date, plus any other
amounts owing by the Company to the Employee and plus interest at the CIBC
Prime Rate plus 3% per annum on all amounts owing from the Company to the
Employee from and after the termination date until paid, such interest to be
payable and compounded monthly and if not so paid, itself bear interest, and
the Employee shall resign from any office, with the company or with an
affiliate, which the Company can not by itself lawfully terminate.
- 18 -
Return of Property
5.5 On the effective termination date, the Employee will deliver up to the
Company, in a reasonable state of repair, all property including without
limitation, all copies, extracts and summaries, whether in written, digital,
magnetic or electronic form, of documents and information of the Company in
the possession or under the control or direction of the Employee at the
termination date.
Resignation of Office
5.6 Upon termination of this Agreement, the Employee will resign as an
officer of the Company and of any subsidiaries or affiliates of the Company,
and of any other entity where the Employee has been appointed or nominated by
the Company.
PART 6
GENERAL
Further Assurances
6.1 Each party will, at its own expense and without expense to any other
party, execute and deliver the further agreements and other documents and do
the further acts and things as the other party reasonably requests to
evidence, carry out or give full force and effect to the terms of this
Agreement.
Assignment
6.2 Neither party may assign any right, benefit or interest in this Agreement
without the prior written consent of the other party. Any purported
assignment without such consent will be void.
Severability
6.3 If any one or more of the provisions contained in this Agreement or the
application of any of them to a person or circumstance is held by a court to
be illegal, invalid or unenforceable in respect of any jurisdiction, then to
the extent so held, it is separate and severable from this Agreement but the
validity, legality and enforceability of the provision will not in any way be
affected or impaired in any other jurisdiction and the remainder of the
Agreement or the application of the provision to persons or circumstances
other than those to which it is held to be invalid, illegal or unenforceable
is not affected unless the severing has the effect of materially changing the
economic benefit of this Agreement to the Employee or the Company.
Modifications, Waiver and Consent
6.4 No provision of this Agreement may be amended, modified, supplemented,
waived or discharged unless the amendment, modification, supplement, waiver or
- 19 -
discharge is agreed to in writing and signed by the Employee and on behalf of
the Company by an officer specifically designated by the Board. No waiver by
a party at any time or any breach by the other party of a term of this
Agreement or of performance of an obligation to be performed by the other
party under this Agreement is deemed to be a waiver of similar or dissimilar
terms or obligations at the same, any prior or subsequent time.
Notice
6.5 A notice, demand, request, statement or other evidence required or
permitted to be given under this Agreement (a "notice") must be written. It
will be sufficiently given if delivered to the address of a party set out on
page 1 and if
(a) delivered in person to the Employee either by certified mail or
courier so that a delivery receipt is obtained, or
(b) delivered to the Company or the President of the Company, as the
case may be, either by certified mail or courier so that a delivery
receipt is obtained.
At any time, a party may give notice to the other party of a change of address
and after the giving of the notice, the address specified in the notice will
be considered to be the address of the party for the purpose of this section.
Any notice delivered or sent in accordance with this section will be deemed to
have been given and received
(c) if delivered, then on the day of delivery,
(d) if mailed, on the earlier of the day of receipt and the 7th business
day after the day of mailing, or
(e) if sent by telex, telegram, facsimile or other similar form of
written communication, on the first business day following the
transmittal date.
(f) if a notice is sent by mail and mail service is interrupted between
the point of mailing and the destination by strike, slowdown, force
majeure or other cause within three (3) days before or after the time of
mailing, the notice will not be deemed to be received until actually
received, and the party sending the notice will use any other service
which has not been so interrupted or will deliver the notice in order to
ensure prompt receipt.
Binding Effect
6.6 This Agreement will enure to the benefit of and be binding upon the
parties and their respective legal representatives and successors. This
agreement is otherwise personal and non-assignable.
- 20 -
Governing Law
6.7 This Agreement will be interpreted under and is governed by the laws of
the Province of British Columbia and the laws of Canada that are applicable
and, except for matters which cannot properly or lawfully be resolved by
arbitration, the courts of the Province of British Columbia will have
exclusive jurisdiction to entertain any action arising under this Agreement
and the parties hereby attorn to the jurisdiction of those courts.
Time of Essence
6.8 Time is of the essence in the performance of each obligation under this
Agreement.
Counterparts
6.9 This Agreement and any other writing delivered pursuant to this Agreement
may be executed in any number of counterparts with the same effect as if all
parties to this Agreement or such other writing had signed the same document
and all counterparts will be construed together and will constitute one and
the same instrument.
Entire Agreement
6.10 This Agreement constitutes the entire agreement between the parties in
respect of the employment of the Employee by the Company and supersedes and
replaces all prior negotiations, written or oral understandings, agreements
made between the parties.
Survival of Terms
6.11 The provisions of sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 5.3,
5.4, 5.5 and 5.6 shall survive the termination of this Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement effective
as of the day and year first above-written.
The Common Seal of DYNAMOTIVE )
ENERGY SYSTEMS CORPORATION was )
affixed in the presence of: )
)
)
)
Per: __/s/Desmond Radlein_____ ) C/S
Authorized Signatory )
)
)
)
Per:___/s/Xxxxxxx Lin_________ )
Authorized Signatory )
- 21 -
Signed, Sealed and Delivered by )
the Employee in the presence of: )
)
)
)
___/s/________________________ ) /s/ R. Xxxxxx Xxxxxxxx
Witness (Signature) ) R. Xxxxxx Xxxxxxxx
)
)
)
______________________________ )
Name (please print) )
)
)
)
______________________________ )
Address )
)
)
)
______________________________ )
City, Province )
- 22 -
SCHEDULE 1
OUTSTANDING STOCK OPTIONS
Date of Original Number of Optionee Exercise Original Expiry
Agreement to Shares (Holder of Price Date of Option
Issue Shares Option) US$
-----------------------------------------------------------------------------------
Feb 3, 2000 575,000 R. Xxxxxx Xxxxxxxx $0.50 Feb 2, 2005
Feb 24, 2002 200,000 R. Xxxxxx Xxxxxxxx $0.50 Feb 23, 2007
Feb 1, 2003 633,750 Cape Fear Ltd. $0.20 Aug 30, 2005
Feb 1, 2003 273,899 R. Xxxxxx Xxxxxxxx $0.20 Mar 14, 2006
Apr 11, 2003 2,067,222 Cape Fear Ltd. $0.22 Aug 30, 2006
Apr 11, 2003 332,778 Cape Fear Ltd. $0.22 Aug 30, 2006
Apr 11, 2003 300,000 Cape Fear Ltd. $0.23 Aug 30, 2006
-----------------------------------------------------------------------------------
SCHEDULE 2
STOCK OPTION AGREEMENT
This Agreement effective this 1st day of August, 2004.
BY AND BETWEEN:
R. Xxxxxx Xxxxxxxx, an individual residing at 0000 Xxxxxxxxx Xxxxxx,
Xxxxxxxxx, XX X0X 0X0
(hereinafter referred to as the "Employee")
AND:
DYNAMOTIVE ENERGY SYSTEMS CORPORATION
000 - 0000 Xxxx 00xx Xxxxxx, Xxxxxxxxx, X.X. X0X 0X0
(hereinafter referred to as "DynaMotive")
WHEREAS, the Employee has agreed to continue to serve as an employee of
DynaMotive.
AND WHEREAS, in connection with such employee/employer relationship,
DynaMotive has agreed to grant to the Employee options to purchase common
shares in the capital stock of DynaMotive ("Common Shares").
NOW THEREFORE THE EMPLOYEE AND DYNAMOTIVE AGREE AS FOLLOWS:
1. Stock Option Grant
DynaMotive hereby irrevocably grants to the Employee share purchase options
entitling the Employee to purchase 3,000,000* Common Shares at an exercise
price of US $0.45 per Common Share (the "Options"), which price per Common
Share DynaMotive and the Employee have determined to be the market value of
DynaMotive's Common Shares on the date first above written, and which Options
will, in each case but subject to section 10 hereof, have a term of five years
from the date on which they are originally scheduled to Vest, and subject to
the Vesting provisions below, 1,000,000 Options will Vest on August 1, 2004 as
set forth in the following table and the balance of 2,000,000 Options will Vest
at the rate of 500,000 Options per year according to the dates set forth in the
following table:
- 24 -
Number of Stock Options Vesting Date Termination Date
1,000,000 August 1, 2004 July 31, 2009
500,000 August 1, 2005 July 31, 2010
500,000 August 1, 2006 July 31, 2011
500,000 August 1, 2007 July 31, 2012
500,000 August 1, 2008 July 31, 2013
2. Vesting Provisions
Notwithstanding the foregoing:
(a) Vest and Vesting Date with regard to a particular Option granted
hereby shall mean the date set forth in the above table following which
that Option may be exercised, provided that the 1,000,000 Options which
vested August 1, 2004 shall not be exercised until after actual
execution of this Stock Option Agreement; and
(b) If the Employee's employment with DynaMotive is terminated or
otherwise ends prior to the end of the term of the Confidential
Employment Agreement between DynaMotive and the Employee, made with
effect August 1, 2004 (the "Employment Agreement"), other than for
"cause" within the meaning of section 5.3 of the Employment Agreement,
or by the Employee acting voluntarily within the meaning of that
agreement other than under subsection 5.2(d) thereof, then all of the
Options granted to the Employee hereunder, will Vest immediately upon
such termination, provided that such early Vesting will not affect the
above-listed Option Termination Dates.
3. In order to exercise the Options, the Employee shall, subject to section
and 10 hereof, no later than the close of business (Vancouver time) on
the applicable Option Termination Date set out above, give written
notice to DynaMotive of his intention to exercise the then-vested
Options in whole or in part, such notice to specify the number of
Options that the Employee wishes to exercise and be accompanied by cash,
bank draft or certified cheque, payable to "DynaMotive Energy Systems
Corporation" in the amount required to pay for the Common Shares then
being purchased by the Employee at the exercise price of US $0.45 per
Common Share. Promptly after receipt of each such notice and payment,
DynaMotive shall issue a Treasury Order to its Registrar and Transfer
Agent calling for the issuance of the required number of Common Shares
and will deliver a duly and validly issued certificate representing such
shares to the Employee within five business days. Following delivery of
such share certificates to the Employee, but not before, DynaMotive
shall be entitled to keep and retain, for its own use, the purchase
price paid to it by or on behalf of the Employee.
4. The Options shall survive the cessation of the employment of the
Employee by DynaMotive and shall be in full force and effect and
- 25 -
exercisable until the Termination Date for the particular Options set
forth in section 1 hereof and following which, if not exercised, the
Options shall lapse and be of no further force or effect.
5. The Options granted hereunder are personal to the Employee and may be
assigned or transferred in whole or in part to any company controlled by
the Employee or to the Employee's immediate family, or to a family
trust.
6. The exercise of the Options or any amendments to this Agreement may be
subject to the prior approval, where necessary, under certain securities
legislation or jurisdictions.
7. In the event that there is any material change in the Common Shares of
DynaMotive through the declaration of stock dividends or stock splits or
consolidations or exchanges of shares, the Options shall be deemed to
have been exchanged by DynaMotive for new options to purchase a number
of Common Shares at an exercise price which is adjusted appropriately
(the "New Options") such that the amount by which the total value of the
Common Shares under the New Options exceeds the total price to acquire
such shares under the New Options, immediately after such a material
change, is not greater than nor materially less than such an amount
would have been under the original Options, immediately prior to such
material change. The adjusted terms of the New Options shall be
effective and binding for all purposes of this Agreement.
8. In the event that DynaMotive shall amalgamate, consolidate with, or
merge into another corporation, the Employee will thereafter receive,
upon the exercise of the Options, the securities or property to which a
holder of the number of Common Shares then deliverable upon the exercise
of the Options would have been entitled to upon such amalgamation,
consolidation, or merger, and DynaMotive will take any and all steps in
connection with such amalgamation, consolidation, or merger as may be
necessary to ensure that the provisions hereof shall thereafter be
applicable, as near as reasonably may be, in relation to any securities
or property thereafter deliverable upon the exercise of the Options
granted herein.
9. In the event of a change of control of DynaMotive as defined in the
Employment Agreement, or a sale of all or substantially all of the
assets of DynaMotive, then, immediately prior to the date of such an
event, all of the Options granted to the Employee hereunder will Vest,
provided that such early Vesting will not, subject to section 4 and 10
hereof, affect the above-listed Option Termination Dates.
10. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and upon the successors or assigns of DynaMotive and upon
the heirs, executors, administrators and legal personal representatives
of the Employee; provided that any of the Options which have not been
exercised before the Employee dies or his employment is terminated at a
time when the Employee is disabled, may notwithstanding section 4 hereof
be exercised by the Employee's heirs, executors, administrators or legal
personal representatives at any time before the later of the Termination
Date for the Options and one year after the date of death of the
Employee.
- 26 -
11. This Agreement shall be governed, construed and enforced according to
the laws of the Province of British Columbia and is subject to the
exclusive jurisdiction of the courts of the Province of British
Columbia.
IN WITNESS WHEREOF the parties hereto have hereunto executed this Agreement
as of the day and year first above written.
THE COMMON SEAL OF DYNAMOTIVE )
ENERGY SYSTEMS CORPORATION )
was hereunto affixed in the )
presence of: ) C/S
)
____/s/Desmond Radlein________ )
)
)
)
____/s/Xxxxxxx Xxx __________ )
)
SIGNED, SEALED AND DELIVERED )
by the Employee in the presence )
of: )
)
______________________________ )
Name ) /s/ R. Xxxxxx Xxxxxxxx
) R. Xxxxxx Xxxxxxxx
)
______________________________ )
Address )
)
)
______________________________ )
)
______________________________ )
Occupation )
- 27 -
SCHEDULE 3
STOCK OPTION AGREEMENT
This Agreement effective this day of , 200 .
BY AND BETWEEN:
R. Xxxxxx Xxxxxxxx, an individual residing at 0000 Xxxxxxxxx Xxxxxx,
Xxxxxxxxx, XX X0X 0X0
(hereinafter referred to as the "Employee")
AND:
DYNAMOTIVE ENERGY SYSTEMS CORPORATION
000 - 0000 Xxxx 00xx Xxxxxx, Xxxxxxxxx, X.X. X0X 0X0
(hereinafter referred to as "DynaMotive")
WHEREAS, the Employee has agreed to continue to serve as an employee of
DynaMotive;
AND WHEREAS, in connection with such employee/employer relationship,
DynaMotive has agreed to grant to the Employee options to purchase common
shares in the capital stock of DynaMotive ("Common Shares").
NOW THEREFORE THE EMPLOYEE AND DYNAMOTIVE AGREE AS FOLLOWS:
1. Bonus/Remuneration Stock Option Grant
DynaMotive hereby irrevocably grants, to the Employee, share purchase options
entitling the Employee to purchase Common Shares at an
exercise price of one-tenth of one cent in Canadian currency (CDN $0.001) per
Common Share (the "Options"), which Options will, in each case, have a term
of 10 years from the effective date of the agreement of the Company to issue
such Common Shares if the option is exercised by the Employee.
2. Exercise of Bonus Stock Option
In order to exercise the Options, the Employee shall, no later than the close
of business (Vancouver time) on the termination date of the Options granted
by this Agreement, give written notice to DynaMotive of his intention to
- 28 -
exercise the Options in whole or in part, such notice to specify the number
of Options that the Employee wishes to exercise (not being less than for
25,000 Common Shares, or the balance of the Common Shares that the Employee
is entitled to purchase pursuant to this Agreement) and be accompanied by
cash, bank draft or certified cheque, payable to "DynaMotive Energy Systems
Corporation" in the amount required to pay for the Common Shares then being
purchased by the Employee at the exercise price of CDN $0.001 per Common
Share. Promptly after receipt of each such notice and payment, DynaMotive
shall issue a Treasury Order to its Registrar and Transfer Agent calling for
the issuance of the required number of Common Shares and will deliver a duly
and validly issued certificate representing such shares to the Employee
within 5 business days. Following delivery of such share certificates to the
Employee, but not before, DynaMotive shall be entitled to keep and retain,
for its own use, the purchase price paid to it by or on behalf of the
Employee.
3. Termination of Employment
The Options shall survive the cessation of the employment of the Employee by
DynaMotive and shall be in full force and effect and exercisable until the
termination date applicable to the Options provided herein.
4. Assignment
The Options granted hereunder are personal to the Employee and may be
assigned or transferred in whole or in part to any company controlled by the
Employee or to the Employee's immediate family, or to a family trust.
5. Required Approvals
The exercise of the Options or any amendments to this Agreement may be
subject to the prior approval, where necessary, under certain securities
legislation or jurisdictions.
6. Adjustments for Material Changes
In the event that there is any material change in the Common Shares of
DynaMotive through the declaration of stock dividends or stock splits or
consolidations or exchanges of shares, the Options shall be deemed to have
been exchanged by DynaMotive for new options to purchase a number of Common
Shares at an exercise price which is adjusted appropriately (the "New
Options") such that the amount by which the total value of the Common Shares
under the New Options exceeds the total price to acquire such shares under
the New Options, immediately after such a material change, is not greater
than nor materially less than such an amount would have been under the
original Options, immediately prior to such material change. The adjusted
terms of the New Options shall be effective and binding for all purposes of
this Agreement.
7. Adjustments for mergers
In the event that DynaMotive shall amalgamate, consolidate with, or merge
into another corporation, the Employee will thereafter receive, upon the
exercise of the Options, the securities or property to which a holder of the
number of Common Shares then deliverable upon the exercise of the Options
- 29 -
would have been entitled to upon such amalgamation, consolidation, or merger,
and DynaMotive will take any and all steps in connection with such
amalgamation, consolidation, or merger as may be necessary to ensure that the
provisions hereof shall thereafter be applicable, as near as reasonably may
be, in relation to any securities or property thereafter deliverable upon the
exercise of the Options granted herein.
8. Enurement
This Agreement shall enure to the benefit of and be binding upon the parties
hereto and upon the successors or assigns of DynaMotive and upon the heirs,
executors, administrators and legal personal representatives of the Employee;
provided that any of the Options which have not been exercised before the
Employee dies or his employment is terminated at a time when the Employee is
disabled, may notwithstanding section 3 hereof be exercised by the Employee's
heirs, executors, administrators or legal personal representatives at any
time before the later of the termination date for the Options and one year
after the date of death of the Employee.
9. Governing Law
This Agreement shall be governed, construed and enforced according to the
laws of the Province of British Columbia and is subject to the exclusive
jurisdiction of the courts of the Province of British Columbia.
IN WITNESS WHEREOF the parties hereto have hereunto executed this Agreement
as of the day and year first above written.
The Common Seal of DYNAMOTIVE )
ENERGY SYSTEMS CORPORATION )
was hereunto affixed in the )
presence of: ) C/S
)
____/s/Desmond Radlein________ )
)
____/s/Xxxxxxx Lin____________ )
)
SIGNED, SEALED AND DELIVERED )
by the Employee in the presence of: )
)
______________________________ )
Name ) _/s/R. Andrew Kingston_
) R. Xxxxxx Xxxxxxxx
______________________________ )
Address )
______________________________ )
Occupation
AMENDING AGREEMENT TO A CONFIDENTIAL EMPLOYMENT
AGREEMENT DATED THE 1st DAY OF AUGUST 2004
made this 29th day of September, 2004
T A B L E O F C O N T E N T S
Page
Part 1 INTERPRETATION 2
Interpretation 2
Part 2 EXTENSIONS OF THE TERM FOR EMPLOYEE STOCK OPTIONS 3
Extension of Employee Stock Options held at July 31, 2004 3
Extension of Employee Stock Options granted August 1, 2004 3
Part 3 Bonus share option plan 3
Part 4 general 4
Further Assurances 4
Assignment 5
Severability 5
Modifications, Waiver and Consent 5
Notice 5
Binding Effect 6
Governing Law 6
Time of Essence 6
Counterparts 6
Entire Agreement 7
AMENDMENT TO CONFIDENTIAL EMPLOYMENT AGREEMENT
THIS AGREEMENT dated for reference and made the 29th day of September, 2004
the "Effective Date")
BETWEEN:
DynaMotive Energy Systems Corporation, a body
corporate duly incorporated under the law of the
Province of British Columbia, having offices at Xxxxx
000, 0000 Xxxx 00xx Xxxxxx, Xxxxxxxxx, XX, X0X 0X0
(the "Company")
OF THE FIRST PART
AND:
R. Xxxxxx Xxxxxxxx, an individual residing at 0000
Xxxxxxxxx Xxxxxx, Xxxxxxxxx, XX, X0X 0X0
(the "Employee")
OF THE SECOND PART
WHEREAS:
(A) The Company and the Employee entered into a Confidential Employment
Agreement made the 1st day of August, 2004;
(B) The Company is liable for unpaid remuneration owing to the Employee in
the total amount of $104,085.76 with respect to his services performed for the
Company during 2004 but prior to the date hereof (the "Unpaid 2004
Remuneration");
(C) The Employee is willing to forego the payment by the Company and the
receipt by the Employee of the Unpaid 2004 Remuneration in consideration of
the Company agreeing to issue shares of the Company to the Employee on the
terms and conditions set out herein;
(D) The Company and the Employee wish to amend the Confidential Employment
Agreement to provide for the issue of shares to the Employee for the Unpaid
2004 Remuneration and to otherwise amend the Confidential Employment Agreement
with regard to certain performance and other incentives for the Employee;
WITNESSETH that the parties mutually agree as follows:
- 2 -
PART 1
INTERPRETATION
Interpretation
1.1 For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) "the Employment Agreement" means the agreement of employment between
the parties hereto and dated for reference and effective as of and from
the 1st day of August, 2004, including all Schedules thereto, as from
time to time supplemented or amended by one or more agreements entered
into pursuant to the applicable provisions thereof;
(b) this "Amending Agreement" means this agreement including all
Schedules hereto as from time to time supplemented, amended or otherwise
varied by one or more agreements entered into pursuant to the applicable
provisions hereof;
(c) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular section, subsection, paragraph, subparagraph or other
subdivision, unless the context otherwise requires;
(d) all references to currency mean Canadian currency, unless specified
otherwise;
(e) a reference to an entity includes any entity that is a successor to
such entity;
(f) the headings are for convenience only and are not intended as a
guide to interpretation of this Agreement or any portion hereof;
(g) a reference to a statute includes all regulations made pursuant
thereto, all amendments to the statute or regulations in force from time
to time, and any statute or regulation which supplements or supersedes
such statute or regulations;
(h) "Board" means the board of directors of the Company as from time to
time constituted;
(i) "Closing Price of the Company's Common Shares" and "Closing Price"
means as of any given date, the average of the high and low trading
prices of the Common shares in the capital stock of the Company on the
NASD's Over the Counter Bulletin Board on such date, or if the Common
shares trade on the TSX Venture Exchange or TSX Exchange on such date,
then the average of the high and low trading prices of the Common shares
of the Company on such exchange, or if the Common shares in the capital
stock of the Company did not trade on such date, on the next preceding
day on which trades were made;
(j) "Stock Option" mean the rights under an agreement between the
Company and the Employee, or the Company and a corporation nominated by
the Employee, to have the Company sell or issue shares of the Company,
or shares of a corporation that does not deal at "arm's length" with the
Company (as that term is defined pursuant to the Income Tax Act of
Canada), to the Employee or to the corporation nominated by the
Employee.
- 3 -
PART 2
EXTENSIONS OF THE TERM FOR EMPLOYEE STOCK OPTIONS
Extension of Employee Stock Options held at July 31, 2004
2.1 The Employment Agreement is amended in section 3.5 to provide that the
termination date for the 4,382,649 Stock Options outstanding July 31, 2004 and
previously granted by the Company to the Employee (or to Cape Fear Limited as
the Employee's nominee corporation) under the terms of any prior employment or
option agreement and as listed in Schedule 1 attached to the Employment
Agreement and to this Amending Agreement, will be extended to 10 years from
the date of the original agreement to issue shares pursuant to each such Stock
Option, as set forth under the heading "Extended Termination Date" in Schedule
1 hereto; provided that after termination of the employment of the Employee,
by reason of death or disability, the Stock Options referred to in this
section may be exercised, to the extent they were exercisable at the time of
such termination, for a period of one year from the date of termination of
employment caused by death or disability of the Employee, or until the
expiration of the stated term of the Stock Options, as extended hereby,
whichever period is longer.
Extension of Employee Stock Options granted August 1, 2004
2.2 The Employment Agreement is amended in section 3.6 to provide that the
termination date for the 3,000,000 Stock Options granted by the Company to the
Employee on August 1, 2004 will be extended from 5 years from the Vesting Date
for such Stock Options to 10 years from the date of the grant of each such
Stock Option namely until July 31, 2014 in each case; provided that after
termination of the employment of the Employee, by reason of death or
disability, the Stock Options referred to in this section may be exercised, to
the extent they were exercisable at the time of such termination, for a period
of one year from the date of termination of employment caused by death or
disability of the Employee, or until the expiration of the stated term of the
Stock Options, as extended hereby, whichever period is longer.
PART 3
BONUS SHARE OPTION PLAN
3.1 The Employment Agreement is amended to add the provision set forth below
relating to the Unpaid 2004 Remuneration after section 3.7 thereof:
- 4 -
"Agreement to Issue Shares for Unpaid 2004 Remuneration
3.7A In lieu of any obligation to pay the Unpaid 2004 Remuneration to
the Employee under any prior employment or other agreement in respect
of the 2004 calendar year, upon receipt of one or more subscription
notices from the Employee subscribing for a specified number of Common
shares in the Company (not being less than 25,000 shares or the balance
of the Common shares of the Company that the Company has agreed to
issue to the Employee pursuant to this section) and payment by the
Employee to the Company of one tenth of one cent for each share
subscribed for in the particular notice, the Company agrees to allot
and issue to the Employee the number of shares specified in the notice
in consideration of one tenth of one cent per share ($0.001) plus the
value of past services actually performed by the Employee, namely
US$0.436 per share, calculated for each share to be issued by dividing
the Unpaid 2004 Remuneration by the maximum number of Common shares
which may, upon one or more notices given by the Employee pursuant to
this section, be allotted and issued to him, such maximum number of
shares under all such notices being a total of 179,657 Common shares of
the Company, provided that the Employee shall only have until
September, 2014 to notify the Company, by one or more notices, that the
Employee wishes to have any of the shares referred to in this section
allotted and issued to him and to pay the price of one tenth of one
cent per share for any share that the Company has agreed to issue under
this section, and thereafter all rights of the Employee to any shares
not referred to in a subscription notice given by the Employee under
this section by such date shall lapse.
The Employee, by execution of this Agreement, acknowledges that the
Company is, subject to section 3.10 hereof, released from any and all
obligations to pay the Unpaid 2004 Remuneration to the Employee, being
remuneration with respect to the period in the 2004 calendar year or
any portion thereof which precedes September 1, 2004.
Upon receipt of the notice from the Employee contemplated by this
section and payment of the subscription price to it, the Company shall
proceed to allot and issue the shares, referred to in the notice and to
be issued pursuant to this section, including giving such directions
and making such adjustments as would have been necessary if the
Agreement between the Company and the Employee, in this section, were a
Stock Option governed by a Stock Option Agreement in the form of
Schedule 3 to the Employment Agreement but dated the date hereof and
relating only to the right to purchase the shares referred to in this
section with such rights to expire on the 10th anniversary of the date
hereof."
PART 4
GENERAL
Further Assurances
4.1 Each party will, at its own expense and without expense to any other
party, execute and deliver the further agreements and other documents and do
the further acts and things as the other party reasonably requests to
evidence, carry out or give full force and effect to the terms of this
Agreement.
- 5 -
Assignment
4.2 Neither party may assign any right, benefit or interest in this
Agreement without the prior written consent of the other party. Any purported
assignment without such consent will be void.
Severability
4.3 If any one or more of the provisions contained in this Agreement or the
application of any of them to a person or circumstance is held by a court to
be illegal, invalid or unenforceable in respect of any jurisdiction, then to
the extent so held, it is separate and severable from this Agreement but the
validity, legality and enforceability of the provision will not in any way be
affected or impaired in any other jurisdiction and the remainder of the
Agreement or the application of the provision to persons or circumstances
other than those to which it is held to be invalid, illegal or unenforceable
is not affected unless the severing has the effect of materially changing the
economic benefit of this Agreement to the Employee or the Company.
Modifications, Waiver and Consent
4.4 No provision of this Agreement may be amended, modified, supplemented,
waived or discharged unless the amendment, modification, supplement, waiver or
discharge is agreed to in writing and signed by the Employee and on behalf of
the Company by an officer specifically designated by the Board. No waiver by
a party at any time or any breach by the other party of a term of this
Agreement or of performance of an obligation to be performed by the other
party under this Agreement is deemed to be a waiver of similar or dissimilar
terms or obligations at the same, any prior or subsequent time.
Notice
4.5 A notice, demand, request, statement or other evidence required or
permitted to be given under this Agreement (a "notice") must be written. It
will be sufficiently given if delivered to the address of a party set out on
Page 1 and if
(a) delivered in person to the Employee either by certified mail or courier
so that a delivery receipt is obtained, or
(b) delivered to the Company or the President of the Company, as the case
may be, either by certified mail or courier so that a delivery receipt is
obtained.
At any time, a party may give notice to the other party of a change of address
and after the giving of the notice, the address specified in the notice will
be considered to be the address of the party for the purpose of this section.
- 6 -
Any notice delivered or sent in accordance with this section will be deemed to
have been given and received
(c) if delivered, then on the day of delivery,
(d) if mailed, on the earlier of the day of receipt and the 7th business
day after the day of mailing, or
(e) if sent by telex, telegram, facsimile or other similar form of written
communication, on the first business day following the transmittal date.
(f) if a notice is sent by mail and mail service is interrupted between the
point of mailing and the destination by strike, slowdown, force majeure or
other cause within three (3) days before or after the time of mailing, the
notice will not be deemed to be received until actually received, and the
party sending the notice will use any other service which has not been so
interrupted or will deliver the notice in order to ensure prompt receipt.
Binding Effect
4.6 This Agreement will enure to the benefit of and be binding upon the
parties and their respective legal representatives and successors. This
agreement is otherwise personal and non-assignable.
Governing Law
4.7 This Agreement will be interpreted under and is governed by the laws of
the Province of British Columbia and the laws of Canada that are applicable
and, except for matters which cannot properly or lawfully be resolved by
arbitration, the courts of the Province of British Columbia will have
exclusive jurisdiction to entertain any action arising under this Agreement
and the parties hereby attorn to the jurisdiction of those courts.
Time of Essence
4.8 Time is of the essence in the performance of each obligation under this
Agreement.
Counterparts
4.9 This Agreement and any other writing delivered pursuant to this
Agreement may be executed in any number of counterparts with the same effect
as if all parties to this Agreement or such other writing had signed the same
document and all counterparts will be construed together and will constitute
one and the same instrument.
- 7 -
Entire Agreement
4.10 This Agreement constitutes the entire agreement between the parties in
respect of the employment of the Employee by the Company and supersedes and
replaces all prior negotiations, written or oral understandings, agreements
made between the parties.
IN WITNESS WHEREOF the parties hereto have executed this Agreement effective
as of the day and year first above-written.
The Common Seal of DYNAMOTIVE )
ENERGY SYSTEMS CORPORATION was )
affixed in the presence of: )
)
)
)
Per: ____/s/Desmond Radlein___ ) C/S
Authorized Signatory
Per: ____/s/Xxxxxxx Lin_______
Authorized Signatory
Signed, Sealed and Delivered by )
the Employee in the presence of: )
)
)
)
_____/s/______________________ ) /s/ R. Xxxxxx Xxxxxxxx
Witness (Signature) ) R. Xxxxxx Xxxxxxxx
)
)
)
______________________________ )
Name (please print) )
)
)
)
______________________________ )
Address )
)
)
)
______________________________ )
City, Province )
- 8 -
SCHEDULE 1
OUTSTANDING STOCK OPTIONS
Date of Original Number of Optionee Exercise Original Expiry Extended
Agreement to Shares (Holder of Price Date of Option Termination
Issue Shares Option) US$ Date
-----------------------------------------------------------------------------------
Feb 3, 2000 575,000 R. Xxxxxx Xxxxxxxx $0.50 Feb 2, 2005 Feb 2, 2010
Feb 24, 2002 200,000 R. Xxxxxx Xxxxxxxx $0.50 Feb 23, 2007 Feb 23, 2012
Feb 1, 2003 633,750 Cape Fear Ltd. $0.20 Aug 30, 2005 Jan 31, 2013
Feb 1, 2003 273,899 R. Xxxxxx Xxxxxxxx $0.20 Mar 14, 2006 Jan 31, 2013
Apr 11, 2003 2,067,222 Cape Fear Ltd. $0.22 Aug 30, 2006 Apr 10, 2013
Apr 11, 2003 332,778 Cape Fear Ltd. $0.22 Aug 30, 2006 Apr 10, 2013
Apr 11, 2003 300,000 Cape Fear Ltd. $0.23 Aug 30, 2006 Apr 10, 2013
-----------------------------------------------------------------------------------
