ALLIANCE AGREEMENT

 

                              ALLIANCE AGREEMENT

 

                                   Between

 

                     DYNAMOTIVE ENERGY SYSTEMS CORPORATION

 

                                     and

 

                             UMA ENGINEERING LTD.

 

 

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                                TABLE OF CONTENTS

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                                                                         Page

 

PART 1 DEFINITIONS AND INTERPRETATION                                         2

 

  Definitions                                                                2

  Interpretation                                                             4

  Schedules                                                                   5

 

PART 2 TERM                                                                  6

 

  Term of Agreement                                                          6

 

PART 3 PROJECT MANAGEMENT COMMITTEE                                          6

 

    Project Management Committee                                               6

  Duties of the Project Management Committee                                 6

  Management Fee                                                             7

  Meetings of the Project Management Committee                               7

  Notices of Project Management Committee Meetings                           7

  Quorum of the Project Management Committee                                 7

  Decisions of the Project Management Committee                              7

  Exchange of Information for Project Management Committee                   7

 

PART 4 SERVICES                                                              8

 

  Services                                                                    8

  Exclusivity as Provider within Canada                                      8

  Conditions to the Preferred Supplier Services                              8

  Turn Key Projects                                                           9

  Marketing                                                                  9

  Fees for Engineering Sevices                                               9

  Incentives                                                                 9

  Fees for Services to Licensees                                            10

  Expenses                                                                  10

 

PART 5 INFORMATION, ASSISTANCE AND COOPERATION                              10

 

  Access to DynaMotive's Technology                                         10

  Provision of Technical Assistance and Information to DynaMotive           10

  Availability of Latest Technology                                         10

  Non-Solicitation of Employees                                              10

 

PART 6 LICENSES, TRADEMARKS AND PATENTS                                     11

  License of the Technology                                                 11

  Trademark/Brand Use                                                        11

  Action by Parties to Protect Intellectual Property from Infringement      11

 

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                                       - ii -

 

PART 7 NON-COMPETITION                                                      11

 

  Non-Competition by UMA                                                     11

 

PART 8 INTELLECTUAL PROPERTY &   CONFIDENTIALITY                             12

 

  Intellectual Property Ownership                                           12

  Retention of Materials                                                     12

  Disclosure                                                                12

  Assistance with Prosecution of Patents                                    12

  Confidentiality Obligations                                                13

  Publicity                                                                 13

  Treatment of Confidential Information                                     14

  Actions to Protect Confidential Information                               14

  No Waiver By Virtue of Non-Exercise of Rights                             14

  Confidentiality Provisions Effective on Effective Date                    14

 

PART 9 WARRANTIES & LIMITED LIABILITY                                       14

 

  No Warranty                                                                14

  Limited Liability                                                         14

  Indemnity                                                                 15

 

PART 10 TERMINATION                                                          15

 

  Termination Without Cause                                                 15

  Termination for Cause                                                     15

  Notice of Fundamental Breach                                               16

  Curing of Fundamental Breach                                              16

  Termination on Failure to Cure Fundamental Breach                         16

  Termination of PSA'S                                                      16

 

PART 11 DISPUTE RESOLUTION                                                  17

 

  Dispute Resolution                                                        17

 

PART 12 GENERAL                                                             18

 

  Applicable Law                                                            18

  Modifications, Approvals and Consents                                     18

  Further Assurances                                                        18

  Entire Agreement                                                           18

  Expenses                                                                  18

  Notices                                                                   19

  Deemed Receipt                                                             19

  Change of Address for Notice                                              20

  Force Majeure                                                             20

  Time Limits Extended                                                       20

  Elimination of Intervening Event                                          20

  Continuation of Intervening Event                                         20

 

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                                       - iii -

 

 

  Enurement                                                                  20

  Severability                                                              21

  Survivability                                                             21

  Deemed Term of Agreement                                                   21

  Time of the Essence                                                       21

  Counterparts                                                              21

  No Partnership or Unincorporated Joint Venture                             22

 

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                                ALLIANCE AGREEMENT

 

THIS AGREEMENT is dated for reference January 29, 2004

 

AMONG:

             DYNAMOTIVE TECHNOLOGIES CORPORATION, a

             company having an office at 105-1700 West 75th Avenue,

              Vancouver, British Columbia, Canada V6P 6G2

 

             ("DynaMotive")

AND:

 

             UMA ENGINEERING LTD., a company having its head office

             at Suite 1700, Oceanic Plaza, 1066 West Hastings, Vancouver,

             British Columbia, Canada V6E 3X2

 

             ("UMA")

 

             (DynaMotive and UMA are collectively referred to herein as the

             "Parties" and individually as a "Party")

 

WHEREAS:

 

(A)   DynaMotive owns certain patented technology and other know-how including

improvements and related technologies for production of a clean fuel

alternative known as "Bio-Oil" through a pyrolysis process (collectively the

"Technology" as defined herein) and wishes to develop and commercially

exploit the Technology;

 

(B)   UMA provides engineering consulting, technical support, and project

management   services; and

 

(C)   DynaMotive wishes to engage UMA to provide engineering consulting,

technical support , and project management services to assist in the

development, research and evaluation and commercial exploitation of the

Technology;

 

NOW THEREFORE THIS AGREEMENT WITNESSES THAT the Parties mutually covenant and

agree as follows:  

 

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                                       - 2 -

 

                                       PART 1

 

                          DEFINITIONS AND INTERPRETATION

 

Definitions

 

1.1   In this Agreement, including the recitals, except as otherwise expressly

provided or unless the context otherwise requires,

 

     (a)   "Affiliate" of, or a Person "Affiliated" with, a particular Person,

     means a Person that, directly or indirectly, controls, is under common

     control with or is controlled by the specified Person;

 

     (b)   "Bio Oil" means the fuel oil produced from biomass using the

     Technology;

 

     (c)   "Breaching Party" has the meaning ascribed to that term in

     para 10.2;

 

     (d)   "Business Day" means a day that is not a Saturday or a Sunday or a

     Canadian federal or a British Columbia provincial or Argentinean federal

     statutory holiday;

 

     (e)   "Confidential Information" means any confidential oral, written or

     electronic data and information now or hereafter existing during the

     currency of this Agreement, clearly identified as confidential, relating

     to the business and management of either Party, to which access is

     granted or obtained by the other Party;

 

     (f)   "Control" of a corporation, limited liability company, other body

     corporate or other entity by a Person only occurs, for the purposes of

     this Agreement, if

 

          (i)   securities of the corporation, limited liability company,

          other body corporate or other entity to which are attached more

          than 50% of the votes that may be cast to elect directors of the

          corporation, limited liability company, other body corporate or

          other entity (or other members of the governing body of the

          corporation, limited liability company, other body corporate or

          other entity, if it has no board of directors) or other rights to

          elect a majority of directors or such other members are held,

          other than by way of security or pledge only, by or for the

          benefit of that Person, and

 

          (ii) the votes attached to those securities are sufficient, or such

          rights are sufficient, if exercised, to elect a majority of the

          directors (or other members of the governing body of the

          corporation, limited liability company, other body corporate or

          other entity, if it has no board of directors) of the corporation,

          limited liability company, other body corporate or other entity;

 

     (g)   "DynaMotive Business" means the business of researching,

     developing, designing, manufacturing, assembling, installing,

     distributing, marketing and commercial exploitation of the Technology;

 

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                                       - 3 -

 

     (h)   "Effective Date" means the date on which this Agreement is executed

      by the parties hereto;

 

     (i)   "Encumbrance" means any mortgage, charge, pledge, hypothecation,

     lien, easement, right-of-way, encroachment, security interest, covenant,

     condition, right of re-entry, right of possession, lease, license,

     assignment, option, claim or other title defect, encumbrance or charge,

     whether or not registered or registrable and whether or not consensual

     or arising by law, statutory or otherwise;

 

     (j)   "Existing Affiliate", at any particular time, means any entity

     defined as an affiliate of either Party as at the Effective Date;

 

     (k)   "Fundamental Breach" has the meaning ascribed to that term in

     para 10.2;

 

     (l)   "GAAP" means, with respect to the determination of any accounting

     issue relating to a financial statement or record or any component

     thereof for any corporation, limited liability company or body corporate

     the generally accepted accounting principles applicable in Canada;

 

     (m)   "Governmental Authority" means, the government of any sovereign

     country and includes every state, province or territory and the

     government of any other applicable subdivision, and each ministry,

     department, commission, board, boreau or other agency of, or

     municipality, regional district or other local governing body

     established by, any such government, or other political subdivision

     thereof, and includes any Person exercising executive, legislative,

     judicial, regulatory or administrative functions of, or pertaining to,

     any such government;

 

     (n)   "Improvements" means all updates, modifications, enhancements,

     improvements and derivations related to Intellectual Property Rights or

     Know-How;

 

     (o)   "Intellectual Property Rights" or "IPRs" of a Person means that

     Person's rights to all inventions, designs, trade secrets, ideas, work,

     technology, innovations, creations, concepts, moral rights, development

     drawings, research, analysis, experiments, copyrights, data, formulas,

     methods, procedures, processes, systems and techniques whether or not a

     registration or record as a patent, industrial design or similar

     proprietary right has been obtained or applied for, including any

     Improvements thereto;

 

     (p)   "Intervening Event" has the meaning ascribed to that term in para

     12.8;

 

     (q)   "Know-How" of a Person means that Person's rights to all

     inventions, designs, trade secrets, ideas, work, technology, know-how,

     innovations, creations, concepts, moral rights, development drawings,

     research, analysis, experiments, copyrights, data, formulas, methods,

     procedures, processes, systems and techniques for which no registration

     or record as a patent, industrial design or similar proprietary right

     has been obtained or applied for, but does not include trademarks or

     trade names;

 

     (r)   "Liabilities" in respect of a Person means collectively, all

     liabilities, indebtedness, capitalized lease obligations, advances,

 

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                                       - 4 -

 

     debts, duties, endorsements, guarantees, obligations, responsibilities

     and undertakings of such Person assumed, created, incurred, or made, or

     to which such Person is bound or subject, whether voluntary or

     involuntary, however arising, whether due or not due, absolute, inchoate

     or contingent, liquidated or unliquidated, determined or undetermined,

     direct or indirect, express or implied, and whether in respect of which

     such Person is liable individually or jointly with others;

 

     (s)   "Non-Breaching Party" has the meaning ascribed to that term in

     para 10.2;

 

     (t)   "Notice" has the meaning ascribed to that term in para 12.5;

 

     (u)   "Notice of Fundamental Breach" has the meaning ascribed to that

     term in para 11.2;

 

     (v)   "Notice of Termination" has the meaning ascribed to that term in

     para 10.5;

 

     (w)   "Person" means an individual, corporation, body corporate, firm,

     limited liability company, partnership, syndicate, joint venture,

     society, association, trust or unincorporated organization or

     Governmental Authority or trustee, executor, administrator or other

     legal representative;

 

     (x)   "Personal Property" means all right, title and interest of a Party

     in and to property and assets, other than rights under contracts or

     agreements (except Intellectual Property Rights and rights in respect of

      Know-How), land and buildings;

 

     (y)   "Project Management Committee" means the management committee to be

     formed by DynaMotive and UMA pursuant to para 3.1;

 

     (z)   "Services" means the technical support, consulting, research,

     personnel and other services to be provided by UMA under this Agreement;

 

     (aa)   "Technology" has the meaning ascribed to it in Recital (A).

 

     (bb)   "Technology License" has the meaning ascribed to it in para 6.1;

 

     (cc)   "Term" has the meaning ascribed to it in para 2.1;

 

     (dd)   "Third Party" in relation to a Party means an individual,

     corporation or other entity with which that Party deals at arm's length

     and that is not an Affiliate of that Party.

 

 

Interpretation

 

1.2   In this Agreement, except as otherwise expressly provided or unless the

context otherwise requires,

 

     (a) "This Agreement" means this Alliance Agreement, including the

     Schedules hereto and as from time to time supplemented or amended by one

     or more agreements entered into pursuant to the applicable provisions

     hereof;

 

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                                       - 5 -

 

 

     (b) the headings in this Agreement are inserted for convenience only and

     do not form a part of this Agreement and are not intended to interpret,

     define or limit the scope, extent or intent of this Agreement or any

     provision hereof;

 

     (c) the word "including", when following any general statement or term,

     is not to be construed as limiting the general statement or term to the

     specific items or matters set forth or to similar items or matters, but

     rather as permitting the general statement or term to refer to all other

     items or matters that could reasonably fall within its broadest possible

     scope;

 

     (d) all accounting terms not otherwise defined herein have the meanings

     assigned to them, and all calculations to be made hereunder are to be

     made, in accordance with GAAP applied on a consistent basis;

 

     (e) a reference to a statute includes all regulations made thereunder,

     all amendments to the statute or regulations in force from time to time,

     and any statute or regulation that supplements or supersedes such

     statute or regulations;

 

     (f) a reference to an entity includes any successor to that entity;

 

     (g) words importing the masculine gender include the feminine or neuter,

     words in the singular include the plural, words importing a corporate

     entity include individuals, and vice versa;

 

     (h) a reference to "approval", "authorization" or "consent" means

     written approval, authorization or consent;

 

     (i) a reference to a Part is to a Part of this Agreement or to a Part of

     a Schedule hereto and the symbol para followed by a number or some

     combination of numbers and letters refers to the section, paragraph,

     subparagraph, clause or subclause of this Agreement so designated;

 

     (j) except as otherwise expressly provided, a reference to currency

     herein means Canadian Dollars and all amounts payable hereunder will be

     paid in Canadian dollars; and

 

     (k) any currency conversions required under this Agreement will be

     converted at the Exchange Rate for the day on which such conversion is

     required.

 

Schedules

 

1.3   Schedule A - The Professional Services Agreement (PSA) attached hereto

for the 100TPD BioOil Demonstration Plant at Erie Flooring is typical of the

service agreements that Dynamotive and UMA intend to execute specifically for

each project covered by this Alliance. If there is any conflict or

inconsistency between the terms and conditions of the main body of this

Agreement and the terms and conditions of PSA's, the terms and conditions of

the PSA will govern.

 

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                                       - 6 -

 

 

1.4   Schedule B - The UMA Group Fee Schedule attached details the fees that

UMA will charge for services specifically authorized by DynaMotive as being

outside the scope of any of the PSA's or the services required by this

Alliance Agreement.

 

 

                                       PART 2

 

                                       Term

 

Term of Agreement

 

2.1   This Agreement will commence on the Effective Date and continue for

three years (the "Term").

 

2.2   Except as provided in Part 10, this Agreement may not be terminated by

either Party before the first anniversary of the Effective Date except for

cause pursuant to section 10.2.   After the first anniversary of the Effective

Date, this Agreement may be terminated by either Party by providing six

months written notice to the other Party.   Any notice of termination given by

either Party before the first anniversary of the Effective Date shall be

deemed to have been received on the day following the anniversary of the

Effective Date and shall be effective from that date.

 

 

                                        PART 3

 

                            Project management committee

 

Project Management Committee

 

3.1   Forthwith after the Effective Date, DynaMotive and UMA will form a

Project Management Committee.   The Project Management Committee will be

comprised of three representatives appointed by DynaMotive and two

representatives from UMA.   Each Party will bear the costs of its own

operations in connection with Project Management Committee activities.   By

mutual agreement, the Project Management Committee may be expanded in future

to incorporate additional parties.

 

Duties of the Project Management Committee

 

 

3.2   The Project Management Committee will provide advice and assistance to

DynaMotive and UMA and in particular, will

 

     -   Co-ordinate the development of the Technology

     -   Propose solutions for issues that may arise among any of the parties;

     -   Exchange cost and technical information related to the Technology;

     -   Monitor the delivery of all projects and the performance of all

     -   project parties; and

     -   Prepare marketing and development plans for growing the business.

 

subject to the confidentiality provisions contained herein.

 

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                                       - 7 -

 

Management Fee

 

3.3   UMA will be paid a monthly Management Fee for the contribution of its

appointees to the Project Management Committee. This fee will cover all costs

incurred by the appointees in carrying out their duties under this Part 3.

The monthly fee will be equal to $5,000 for the first 6 months of this

agreement, to be paid in shares of DynaMotive.   Thereafter the management fee

will be re-evaluated, with due consideration for the activity level of

project development, such that if additional projects are proceeding, no

further Management Fee will be paid.   The shares shall be valued at the last

closing price of DynaMotive shares on the last day of the preceding month.  

All shares shall be subject to a one year hold period from the date of

issurance in Canada and United States.   UMA represents it is an '' accredited

investor'' for purposes of this provision being a corporation with at least

Cdn.$5 million in net assets on its last balance sheet.

 

Meetings of the Project Management Committee

 

3.4   The Project Management Committee will meet, in person or by

teleconference or video conference, no less frequently than once a month or

such other frequency as mutually agreed.

 

Notices of Project Management Committee Meetings

 

3.5   At least 7 days' notice of a meeting of the Project Management Committee

given by any member thereof, specifying the purpose, time, date and location

of such meeting in Vancouver, Canada, or such other location agreed to among

the Parties represented on the Project Management Committee, will be deemed

to be sufficient notice of such meeting.

 

Quorum of the Project Management Committee

 

3.6   Participation by a majority of the members of the Project Management

Committee, including at least two representatives of DynaMotive on the

Project Management Committee, will constitute a quorum at any regular meeting

of the Project Management Committee, and any action to be taken by vote of

the Project Management Committee will be authorized by vote of not less than

a majority of those participants present at any such meeting at which a

quorum is present and continuing, provided that such majority includes at

least two representatives of DynaMotive on the Project Management Committee.  

The Project Management Committee may also act by the written consent of all

members then in office.

 

Decisions of the Project Management Committee