Exhibit 4.12
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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 8
OTHER BENEFITS 8
STOCK OPTIONS 8
BONUS SHARE OPTIONS FOR 2003 BONUS 8
FIRST PLANT COMMISSIONING BONUS SHARE OPTIONS 9
NEW PLANT TONNAGE BONUS SHARE OPTIONS 10
CASH IN LIEU OF SHARES 10
HOLIDAYS 11
INCOME TAX AND OTHER DEDUCTIONS 11
REVIEW 11
PART 4 EMPLOYEE'S ADDITIONAL COVENANTS 11
CONFIDENTIAL INFORMATION 11
NO DISCLOSURE 12
NO COMPETITION 12
NOTICE OF CONFLICT 13
EXCEPTIONS 13
COMPANY'S PROPRIETARY RIGHTS 13
SPECIAL REMEDIES 14
PART 5 TERMINATION 14
VOLUNTARY TERMINATION 14
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 17
RESIGNATION OF OFFICE 17
PART 6 GENERAL 18
FURTHER ASSURANCES 18
ASSIGNMENT 18
SEVERABILITY 18
MODIFICATIONS, WAIVER AND CONSENT 18
NOTICE 18
BINDING EFFECT 19
GOVERNING LAW 19
TIME OF ESSENCE 19
COUNTERPARTS 19
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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 ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇,
▇▇▇ ▇▇▇ (the "Company")
OF THE FIRST PART
AND:
▇▇▇▇▇▇▇ ▇ ▇ ▇▇▇, an individual residing at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇ ▇▇▇ (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 $112,500 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 1998 but to govern
their relationship with effect as of and from August 1, 2004;
WITNESSETH that the parties mutually agree as follows:
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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
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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;
(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,
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ 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
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, Operations - China.
2.4 The Employee shall report to the President and CEO.
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Particular Duties
2.5 As President, Operations - China, the Employee shall be responsible
for the affairs of the Company relating to operations in China, business
development including provision of appropriate 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 $225,000 payable bi-monthly in arrears and subject to
appropriate deductions and remittances pursuant to income tax and social
security legislation.
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
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.
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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.
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
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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 the 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 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).
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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.
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
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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.
Stock Options
3.4 The 1,655,660 outstanding Stock Options previously granted by the
Company to the Employee (or to Cantai Property 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.
3.5 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
$0.45 per share, which price per share the Company and the Employee have
determined to be at least as great as the fair market value of the Company's
shares on the Effective Date of this Agreement, and which Stock Options will,
in each case, have a term of five years from the date on which they are
originally scheduled to vest, as set forth under the heading "Vesting Date"
in the following schedule:
Number of Stock Options Vesting Date Termination Date
1,000,000 August 1, 2004 July 31, 2009
500,000 August 1, 2005 July 31, 2010
500,000 August 1, 2006 July 31, 2011
500,000 August 1, 2007 July 31, 2012
500,000 August 1, 2008 July 31, 2013
Bonus Share Options For 2003 Bonus
3.6 In lieu of any obligation to pay a bonus to the Employee under any
prior employment or other agreement in respect of the 2003 calendar year,
upon receipt of one or more subscription notices from the Employee
subscribing for a specified number of Common shares in the Company (not being
less than 25,000 shares or the balance of the Common shares of the Company
that the Company has agreed to issue to the Employee pursuant to this
section) and payment by the Employee to the Company of one-tenth of one cent
for each share subscribed for in the particular notice, the Company agrees to
allot and issue to the Employee the number of shares specified in the notice
in consideration of one-tenth of one cent ($.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
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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 208,495
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
3.7 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 135,000 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
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 135,000 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.
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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
3.8 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 700 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.
Cash in Lieu of Shares
3.9 Except as provided by section 3.11 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.
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Holidays
3.10 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.
Income Tax and Other Deductions
3.11 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
3.12 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.
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
- 12 -
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.
No Competition
4.2 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
- 13 -
(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 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
- 14 -
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 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
- 15 -
(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:
(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.
- 16 -
(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;
(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.
- 17 -
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.
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.
- 18 -
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 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
- 19 -
(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.
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
- 20 -
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/R. Andrew Kingston__ )
Authorized Signatory )
Signed, Sealed and Delivered by )
the Employee in the presence of: )
)
)
)
___/s/________________________ ) /s/▇▇▇▇▇▇▇ Lin_____
Witness (Signature) ) ▇▇▇▇▇▇▇ ▇ ▇ ▇▇▇
)
)
)
______________________________ )
Name (please print) )
)
)
)
______________________________ )
Address )
)
)
)
______________________________ )
City, Province )
- 21 -
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$
-------------------------------------------------------------------------
Dec 22, 1994 16,000 ▇▇▇▇▇▇▇ ▇▇▇ $1.00 Dec 22, 2004
Feb 3, 2000 650,000 Cantai Property Ltd $0.50 Feb 2, 2005
Apr 29, 2002 100,000 Cantai Property Ltd $0.50 Apr 28, 2006
Feb 1, 2003 176,929 Cantai Property Ltd $0.20 Aug 30, 2005
Feb 1, 2003 188,918 Cantai Property Ltd $0.20 Mar 14, 2006
Feb 1, 2003 239,813 Cantai Property Ltd $0.20 Mar 14, 2006
Apr 11, 2003 300,000 Cantai Property Ltd $0.23 Aug 30, 2006
-------------------------------------------------------------------------
- 22 -
SCHEDULE 2
STOCK OPTION AGREEMENT
This Agreement effective this 1st day of August, 2004.
BY AND BETWEEN:
▇▇▇▇▇▇▇ ▇ ▇ ▇▇▇, an individual residing at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
(hereinafter referred to as the "Employee")
AND:
DYNAMOTIVE ENERGY SYSTEMS CORPORATION
▇▇▇ - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
(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:
- 23 -
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 4 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 exercisable
- 24 -
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.
- 25 -
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/R. Andrew Kingston_____ )
)
SIGNED, SEALED AND DELIVERED )
by the Employee in the presence of: )
)
______________________________ )
Name ) _/s/▇▇▇▇▇▇▇ Lin_______
) ▇▇▇▇▇▇▇ ▇ ▇ ▇▇▇
______________________________ )
Address )
______________________________ )
Occupation
- 26 -
SCHEDULE 3
STOCK OPTION AGREEMENT
This Agreement effective this day of , 200 .
BY AND BETWEEN:
▇▇▇▇▇▇▇ ▇ ▇ ▇▇▇, an individual residing at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇.
(hereinafter referred to as the "Employee")
AND:
DYNAMOTIVE ENERGY SYSTEMS CORPORATION
▇▇▇ - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
(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 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
- 27 -
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
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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.
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/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ______ )
)
____/s/R. Andrew Kingston_____ )
)
SIGNED, SEALED AND DELIVERED )
by the Employee in the presence of: )
)
______________________________ )
Name ) /s/▇▇▇▇▇▇▇ Lin__
) ▇▇▇▇▇▇▇ ▇ ▇ ▇▇▇
______________________________ )
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 ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇,
▇▇▇ ▇▇▇
(the "Company")
OF THE FIRST PART
AND:
▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇, an individual residing at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇ ▇▇▇
(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 $73,798.12 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
- 3 -
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.
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 1,671,660 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.* 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 * 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
- 5 -
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
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 ensure 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
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/R. Andrew Kingston__
Authorized Signatory
Signed, Sealed and Delivered by )
the Employee in the presence of: )
)
)
)
____/s/_______________________ ) /s/▇▇▇▇▇▇▇ Lin_____
Witness (Signature) ) ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇
)
)
)
______________________________ )
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
-----------------------------------------------------------------------------------
Dec 22, 1994 16,000 ▇▇▇▇▇▇▇ ▇▇▇ $1.00 Dec 22, 2004 Dec 22, 2004
Feb 3, 2000 650,000 Cantai Property Ltd $0.50 Feb 2, 2005 Feb 3, 2010
Apr 29, 2002 100,000 Cantai Property Ltd $0.50 Apr 28, 2006 Apr 29, 2012
Feb 1, 2003 176,929 Cantai Property Ltd $0.20 Aug 30, 2005 Feb 1, 2013
Feb 1, 2003 188,918 Cantai Property Ltd $0.20 Mar 14, 2006 Feb 1, 2013
Feb 1, 2003 239,813 Cantai Property Ltd $0.20 Mar 14, 2006 Feb 1, 2013
Apr 11, 2003 300,000 Cantai Property Ltd $0.23 Aug 30, 2006 Apr 11, 2013
-----------------------------------------------------------------------------------