Contract

EXHIBIT 4.11============ CONFIDENTIAL EMPLOYMENT AGREEMENT made this 1st day of August, 2004 T A B L E O F C O N T E N T S PagePART 1 INTERPRETATION 2 INTERPRETATION 2PART 2 EMPLOYMENT, TERMS AND DUTIES 3 EMPLOYMENT 3 TERM 3 TITLE AND REPORTING 3 PARTICULAR DUTIES 4 GENERAL DUTIES 4PART 3 COMPENSATION 4 SALARY 4 BONUS 4 OTHER BENEFITS 8 STOCK OPTIONS 8 BONUS SHARE OPTIONS FOR 2003 BONUS 9 FIRST PLANT COMMISSIONING BONUS SHARE OPTIONS 9 NEW PLANT TONNAGE BONUS SHARE OPTIONS 10 CASH IN LIEU OF SHARES 11 HOLIDAYS 11 HOUSING ALLOWANCE 11 INCOME TAX AND OTHER DEDUCTIONS 11 REVIEW 11PART 4 EMPLOYEE’S ADDITIONAL COVENANTS 12 CONFIDENTIAL INFORMATION 12 NO DISCLOSURE 12 NO COMPETITION 13 NOTICE OF CONFLICT 13 EXCEPTIONS 13 COMPANY’S PROPRIETARY RIGHTS 14 SPECIAL REMEDIES 14PART 5 TERMINATION 15 VOLUNTARY TERMINATION 15 IF COMPANY TERMINATES OR PARTIES FAIL TO RENEW 15 TERMINATION FOR CAUSE AND OTHER EVENTS OF EARLY TERMINATION 17 EFFECT OF TERMINATION UNDER SECTION 5.3 17 RETURN OF PROPERTY 18 RESIGNATION OF OFFICE 18PART 6 GENERAL 18 FURTHER ASSURANCES 18 ASSIGNMENT 18 SEVERABILITY 18 MODIFICATIONS, WAIVER AND CONSENT 18 NOTICE 19 BINDING EFFECT 19 GOVERNING LAW 20 TIME OF ESSENCE 20 – ii – COUNTERPARTS 20 ENTIRE AGREEMENT 20 SURVIVAL OF TERMS 20 CONFIDENTIAL EMPLOYMENT AGREEMENTTHIS AGREEMENT dated for reference and made the 1st day of August 2004 (the”Effective Date”)BETWEEN:DynaMotive Energy Systems Corporation, a bodycorporate duly incorporated under the law of theProvince of British Columbia, having offices at Suite230, 1700 West 75th Avenue, Vancouver, BC, V6P 6G2(the “Company”) OF THE FIRST PARTAND:R. Andrew Kingston, an individual residing at 6876Churchill Street, Vancouver, BC, V6P 5B3 (the “Employee”) OF THE SECOND PARTWHEREAS:(A) The Company is an energy systems company that is focused on thedevelopment of innovative energy solutions based on its patented pyrolysissystem and, through the application of its technology and know how, theCompany intends to tap into abundant organic resources that are generallydiscarded by the agricultural and forest industries at a cost and toeconomically convert them into a renewable and environmentally friendly fuel;(B) The Company has incurred a liability in the amount of US $135,000 for abonus 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 thereceipt by the Employee of the 2003 Bonus Amount in consideration of theCompany agreeing to issue shares of the Company to the Employee on the termsand conditions set out herein; and(D) The Company and the Employee have mutually agreed to evidence the termsof the Employee’s full time employment by the Company by this Agreement, whichis to supersede all prior agreements between the parties and, which isintended to reinforce the employer and employee relationship between theCompany and the Employee which has existed since April 26, 1999 but to governtheir relationship with effect as of and from August 1, 2004;WITNESSETH that the parties mutually agree as follows: – 2 – PART 1 INTERPRETATIONInterpretation1.1 For all purposes of this Agreement, except as otherwise expresslyprovided or unless the context otherwise requires:(a) “this Agreement” means this agreement of employment, including anyschedules hereto, as from time to time supplemented or amended by one ormore agreements entered into pursuant to the applicable provisionshereof;(b) the words “herein”, “hereof” and “hereunder” and other words ofsimilar import refer to this Agreement as a whole and not to anyparticular section, subsection, paragraph, subparagraph or othersubdivision;(c) all references to currency mean Canadian currency, unless specifiedotherwise;(d) a reference to an entity includes any entity that is a successor tosuch entity;(e) the headings are for convenience only and are not intended as aguide to interpretation of this Agreement or any portion hereof;(f) a reference to a statute includes all regulations made pursuantthereto, all amendments to the statute or regulations in force from timeto time, and any statute or regulation which supplements or supersedessuch statute or regulations;(g) “Board” means the board of directors of the Company as from time totime constituted;(h) “Bonus Criteria” means the objectives referred to as Bonus Criteriain section 3.2 of this agreement and determined in the manner providedtherein;(i) “CIBC Prime Rate” means the annual rate of interest announced fromtime to time by Canadian Imperial Bank of Commerce as a reference ratethen in effect for determining interest rates on Canadian dollarcommercial loans in Canada;(j) “Contract Year” means the period commencing August 1 and ending thenext following July 31 provided that the first Contract Year shallcommence August 1, 2004 and end July 31, 2005 and the second, third,fourth and fifth contract years shall commence respectively on the firstday 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 tradingprices of the Common shares in the capital stock of the Company on theNASD’s Over the Counter Bulletin Board on such date, or if the Commonshares trade on the TSX Venture Exchange or TSX Exchange on such date,then the average of the high and low trading prices of the Common shares – 3 -of the Company on such exchange, or if the Common shares in the capitalstock of the Company did not trade on such date, on the next precedingday on which trades were made;(l) “Salary” in respect of a Contract Year, means the amount determinedfor a Contract Year pursuant to section 3.1 of this Agreement; and(m) “Stock Option” mean the rights under an agreement between theCompany and the Employee, or the Company and a corporation nominated bythe 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 theCompany (as that term is defined pursuant to the Income Tax Act ofCanada), to the Employee or to the corporation nominated by theEmployee.In the event that it may be necessary at any time for any party to thisAgreement to prove the CIBC Prime Rate applicable as at any time or times, acertificate in writing of the manager of Canadian Imperial Bank of Commerce,400 Burrard Street, Vancouver, British Columbia, V6C 3A6 setting forth theCIBC 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 DUTIESEmployment2.1 The Company and the Employee hereby confirm the employment of theemployee by the Company on a full-time basis upon and subject to the terms andconditions of this Agreement.Term2.2 This Agreement shall be for a period of five years commencing August 1,2004 and ending July 31, 2009 unless earlier terminated pursuant to Part 5. Anotice to renew the terms of the Employee’s employment with the Company shallbe provided by the Company to the Employee not less than nine months prior tothe expiration of this Agreement, but neither the notice, nor the requirementfor the notice, shall be taken to imply that the Employee is required toconsent to the renewal.Title and Reporting2.3 The Employee shall have the title of President & CEO.2.4 The Employee shall report to the Board. – 4 -Particular Duties2.5 As President & CEO, the Employee shall be responsible for all theaffairs of the Company including strategic direction, provision of appropriateresources, appropriate financial plans, budgets and controls, custody andefficient utilization of resources and keeping the Board and shareholdersappropriately informed.General Duties2.6 During the term of this Agreement, the Employee will:(a) diligently perform his duties arising under this Agreement to thebest of his skill and ability; and(b) attend to his duties on a full-time basis, at the specific timesand days as reasonably directed by the Company, excepting holidays,absence due to sickness and other authorized absences as set out in thisAgreement. PART 3 COMPENSATIONSalary3.1 During the first Contract Year, the Company will pay the employee anannual Salary of $350,000 payable bi-monthly in arrears and subject toappropriate deductions and remittances pursuant to income tax and socialsecurity legislation. Thereafter the Salary in each successive Contract Yearwill be increased by a percentage equal to the percentage increase, if any, inthe Consumer Price Index – All Items – Vancouver, as published by StatisticsCanada, and calculated for July 2004 and at the commencement of eachsuccessive period, i.e. for July 2005, July 2006, July 2007 and July 2008.The Company will implement this adjustment retroactively in the event of delayin the publication of the Consumer Price Index – All Items – Vancouver byStatistics Canada.Bonus3.2 The Company shall pay to the Employee an annual bonus for each calendaryear or partial calendar year (the “Bonus Period”), governed by the terms ofthis Agreement, calculated as a minimum bonus of 25% plus a maximum bonus ofup to an additional 75% of the aggregate Salary payable to the Employee, or onthe Employee’s behalf, with respect to the Bonus Period pursuant to section3.1 (before any amounts deducted or paid on behalf of the Employee pursuant toincome tax and social security legislation), the 75% maximum bonus componentto be based on the achievement of certain objectives (the “Bonus Criteria”),such Bonus Criteria to be agreed by the parties hereto for each Bonus Periodas hereafter provided.The Bonus Criteria must be presented by the Employee to the Board within 30days of the first day of each Bonus Period provided that for the Bonus Period – 5 -which falls within the 2004 calendar year, the Bonus Criteria must bepresented by the Employee to the Board by September 30, 2004. Failure by theEmployee and the Company to agree on the annual Bonus Criteria by the datethat is 60 days after the first day of the Bonus Period for which it is to bedetermined (or by October 30, 2004 in the case of the Bonus Period which fallswithin the 2004 calendar year) shall be resolved by arbitration.3.2.1 The annual bonus amount for a Bonus Period must be determined by theCompany within 90 days after the last day of the Bonus Period (the “BonusDetermination Date”) and is payable to the Employee on the day that is 150days after the last day of the Bonus Period (the “Payment Date”) unless andonly to the extent, at least ten days prior to the Bonus Determination Dateand 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 CashBonus Deferral Election, specifying the amount, percentage, or fraction orother means of calculating the annual bonus amount to be deferred, and of hisShare Purchase Election, specifying the amount of the annual bonus amount tobe used to calculate the number of shares subject to the Share PurchaseElection, and such notice must be presented to the Company at least ten daysprior to the Bonus Determination Date, i.e. before the Employee wouldotherwise know of the amount and be entitled to receive payment of the annualbonus. Once a Cash Bonus Deferral Election or Share Purchase Election isdelivered to the Company by the Employee, it may not be revoked for the BonusPeriod to which it relates and thereafter the annual bonus amount for thatBonus Period shall:(a) to the extent of the amount set forth in or calculated pursuant tothe Cash Bonus Deferral Election, be dealt with solely in accordancewith 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 thatBonus Period, which is not covered by either the Cash Bonus DeferralElection or Share Purchase Election, be payable to the Employee on thePayment Date. – 6 -3.2.2 If the Employee makes a Cash Bonus Deferral Election, then he shall inthat election specify the amount of the annual bonus amount, or means ofcalculating 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 theEmployee, for a period of ten years from the date of the particular Cash BonusDeferral Election, to purchase that number of Common shares in the Companydetermined by dividing the Deferred Amount by the Closing Price of theCompany’s Common shares on the day that the election is made or the day theamount of the annual bonus amount is determined by the Company, whichever dayis later, with the exercise price for such Stock Options to be the saidClosing Price on such later day (the “Valuation Day”), and the Company and theEmployee will execute a stock option agreement substantially in the same formas that attached as Schedule 2 to this Agreement but dated the Valuation Dayand relating only to the Stock Options referred to in this subsection withsuch Stock Option rights to expire on the 10th anniversary of the making ofthe election.3.2.3 Notwithstanding the 100% of Salary maximum for the amount of an annualbonus determined pursuant to this section, any amount of an annual bonus,awarded by the Company to the Employee, that is not used to calculate thenumber of shares subject to a Share Purchase Election or the number of StockOptions to be granted by the Company pursuant to the preceding subsection, andwhich remains unpaid by the Company 180 days after the end of the Bonus Periodshall be increased for an interest factor which shall be calculated by addingto such unpaid bonus amount, an amount equal to what the interest would be ifsuch unpaid bonus amount were a debt owing to the Employee which bearsinterest at the rate of 6% per annum calculated from and including the PaymentDate for such unpaid bonus amount and compounded monthly until paid; providedthat if, for any regulatory or other reason whatsoever, the Stock Optionreferred to in the preceding subsection cannot be granted or, unless waived byhe Employee, be subject to immediate vesting (such an option being referred toin this section as an “Impaired Option”), then the amount of the bonus used tocalculate the number of shares subject to the Impaired Option shall beincluded in the amount of the bonus to be increased by the interest factorpursuant to this subsection and such increased amount shall be payable to theEmployee as part of the bonus and the right of the Employee to the ImpairedOption shall lapse, and provided further that under no circumstances may thedate of payment of an annual bonus, or any portion thereof other than theportion used to calculate the number of shares subject to a Share PurchaseElection, including any related interest factor, be later than the last day ofthe third calendar year following the calendar year in which the Bonus Periodended (herein referred to as the “Three Year Deadline”).Failure by the Company to pay any Deferred Amount of an annual bonus, which isthe subject of a Cash Bonus Deferral Election, by the Three Year Deadline inrespect of that amount shall result in the Company:(a) paying and indemnifying the Employee against any interest andpenalties related to any income taxes that the Employee may becomesubject to as a result of such a failure by the Company;(b) providing the Employee with an interest free loan to pay any incometaxes that the Employee may become subject to as a result of such a – 7 -failure by the Company, any such advanced funds to be repaid in full bythe Employee upon receipt of the related unpaid bonus amounts from theCompany; and(c) paying and indemnifying the Employee against any income taxes,interest, and penalties related to any taxable benefits which may beconsidered to have been received by the Employee as a result of (a) or(b).3.2.4 Where the Employee makes a Share Purchase Election, the Company herebyagrees: (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 aparticular Share Purchase Election was made to notify the Company, by one ormore notices, that the Employee wishes to purchase any of the shares, which heis 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 theCompany has agreed to issue pursuant to the particular Share PurchaseElection, and thereafter all rights of the Employee to any shares not referredto in a subscription notice given by the Employee to the Company pursuant tothe 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 releasedfrom any and all obligations to pay a bonus to the Employee to the extent ofthe amount used to calculate the number of shares subject to the particularShare Purchase Election. – 8 -3.2.6 Upon receipt of the notice from the Employee contemplated by a SharePurchase Election and payment of the subscription price to it, the Companyshall proceed to allot and issue the shares referred to in the notice,including giving such directions and making such adjustments as would havebeen necessary if the agreement between the Company and the Employee in thissection were a Stock Option governed by a Stock Option Agreement insubstantially the same form as Schedule 3 but dated the date of the SharePurchase Election and relating only to the right to purchase the sharessubject to the Share Purchase Election at the price of one-tenth of one centper share with such rights to expire only on the 10th anniversary of the makingof the election and not to expire on the 30th day after termination of theEmployee’s employment or one year after death or disability of the Employee.Other Benefits3.3 In addition to the other compensation set out in this Agreement, theEmployee shall participate in such health, medical, insurance or other benefitplans established by the Company from time to time and made available to staffand officers of the Company.3.4 The Company shall continue to assign, during the term of this Agreement,50% of a Cdn $3 million keyman insurance policy on the life of the Employee toa beneficiary designated by the Employee and the Company shall continue tomaintain such insurance coverage or greater, during the term of this agreementand any extensions thereof.Stock Options3.5 The 4,582,649 outstanding Stock Options previously granted by the Companyto the Employee (or to Cape Fear Limited as the Employee’s nomineecorporation) under the terms of any prior employment or option agreement, aslisted in the attached Schedule 1, will remain in full force and effect.3.6 The Company will, pursuant to a stock option agreement in the formattached as Schedule 2 to this Agreement, and upon execution of thisAgreement, execute a stock option agreement with the Employee to record theCompany’s grant of Stock Options to the Employee which entitle the Employee topurchase 3,000,000 Common shares of the Company at an exercise price of US$0.45 per share, which price per share the Company and the Employee havedetermined to be at least as great as the fair market value of the Company’sshares on the Effective Date of this Agreement, and which Stock Options will,in each case, have a term of five years from the date on which they areoriginally scheduled to vest, as set forth under the heading “Vesting Date” inthe following schedule:Number of Stock Options Vesting Date Termination Date 1,000,000 August 1, 2004 July 31, 2009 500,000 August 1, 2005 July 31, 2010 500,000 August 1, 2006 July 31, 2011 500,000 August 1, 2007 July 31, 2012 500,000 August 1, 2008 July 31, 2013 – 9 -Bonus Share Options For 2003 Bonus3.7 In lieu of any obligation to pay a bonus to the Employee under any prioremployment or other agreement in respect of the 2003 calendar year, uponreceipt of one or more subscription notices from the Employee subscribing fora specified number of Common shares in the Company (not being less than 25,000shares or the balance of the Common shares of the Company that the Company hasagreed to issue to the Employee pursuant to this section) and payment by theEmployee to the Company of one-tenth of one cent for each share subscribed forin the particular notice, the Company agrees to allot and issue to theEmployee the number of shares specified in the notice in consideration ofone-tenth of one cent ($.001) per share plus the value of past servicesactually performed by the Employee (US $0.45 per share), calculated for eachshare to be issued by dividing the 2003 Bonus Amount by the maximum number ofCommon shares which may, upon one or more notices given by the Employeepursuant to this section, be allotted and issued to him, such maximum numberof shares under all such notices being a total of 277,087 Common shares of theCompany; provided that the Employee shall only have until July 31, 2014 tonotify the Company, by one or more notices, that the Employee wishes to haveany of the shares referred to in this section allotted and issued to him andto pay the price of one-tenth of one cent per share for any share that theCompany has agreed to issue under this section, and thereafter all rights ofthe Employee to any shares not referred to in a subscription notice given bythe Employee under this section by such date shall lapse.The Employee, by execution of this Agreement, acknowledges that subject tosection 3.10 of this Agreement, the Company is released from any and allobligations to pay a bonus to the Employee with respect to the 2003 calendaryear or any portion thereof.Upon receipt of the notice from the Employee contemplated by this section andpayment of the subscription price to it, the Company shall proceed to allotand issue the shares, referred to in the notice and to be issued pursuant tothis section, including giving such directions and making such adjustments aswould have been necessary if the Agreement between the Company and theEmployee, in this section, were a Stock Option governed by a Stock OptionAgreement in the form of Schedule 3 but dated the date hereof and relatingonly to the right to purchase the shares referred to in this section with suchrights to expire on the 10th anniversary of the date hereof.First Plant Commissioning Bonus Share Options3.8 Upon the Company’s first commercial plant (Erie) being successfullycommissioned (in this section called the “Commissioning Date” and determinedas the time that Bio-Oil is first produced by the plant to which theexpression, “commissioned” relates), the Company agrees that the Employeeshall be entitled to a commissioning bonus consisting of the grant of a rightto the Employee to purchase 200,000 Common shares of the Company upon receiptby the Company of one or more subscription notices from the Employeesubscribing for a specified number of Common shares in the Company pursuant tothis section (not being less than 25,000 shares or the balance of the Commonshares of the Company that the Company has agreed to issue to the Employeepursuant to this section) and payment by the Employee to the Company ofone-tenth of one cent for each share subscribed for in the notice. TheCompany agrees that upon receipt by the Company of such a notice, the Companywill allot and issue to the Employee the number of shares specified in thenotice in consideration of one-tenth of one cent per share plus the value of – 10 -past services actually performed by the Employee to the Commissioning Date,calculated by multiplying the number of shares to be issued pursuant to thenotice by the Closing Price for Common shares of the Company on theCommissioning Date; provided that the number of shares issued pursuant to allsuch notices shall not exceed 200,000 and further provided that the Employeeshall only have until ten years after the Commissioning Date to notify theCompany, by one or more notices, that the Employee wishes to have any of theshares referred to in this section allotted and issued to him and to pay theprice of one-tenth of one cent per share for any share that the Company hasagreed to issue under this section, and thereafter all rights of the Employeeto any shares not referred to in a subscription notice given by the Employeeunder this section by such date shall lapse.Upon receipt of the notice from the Employee contemplated by this section andpayment of the subscription price to it, the Company shall proceed to allotand issue the shares referred to in this section, including giving suchdirections and making such amendments or adjustments as would have beennecessary if the Agreement between the Company and the Employee in thissection were a Stock Option governed by a Stock Option Agreement in the formof Schedule 3 but dated the Commissioning Date and relating only to the rightto purchase the shares referred to in this section at the exercise price setforth herein with such rights to expire on the 10th anniversary of theCommissioning Date.New Plant Tonnage Bonus Share Options3.9 Upon the successful commissioning or licensing of future plants to usethe technology and knowhow of the Company and its affiliates (including of anypartnership or joint venture in which the Company or its affiliates has atleast a 25% ownership interest), the Employee shall, during the term of thisAgreement and any renewals hereof, be granted additional rights to purchaseshares as commissioning bonuses on substantially the same basis set forth inthe preceding section 3.8, including the exercise price of one-tenth of onecent per share and the ten year term from the Commissioning Date for a plantowned by the Company, or the date the original License Agreement is executedin 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 thebonus share options may be exercised. The number of shares that the Employeeshall be granted the right to purchase with respect to each plantcommissioning or licensing, as contemplated by this section, shall bedetermined for each plant by multiplying 1000 times the number of tonnes ofdry input capacity contracted on a daily basis, as established in or pursuantto the License Agreement, and measured in input values or, in the case of aplant owned by the Company, as would be established by a License Agreement, ifone was required; and provided that if a plant, or the license applying to theoperation of a plant, is expanded and dry input capacity, so measured, isincreased during the term of this Agreement, then as of the date the increasedcapacity becomes subject to the License Agreement, or an amendment thereto orreplacement thereof, or would become subject to such a license or amendment ifthe plant were not owned by the Company (the “Expansion Date”), this increasedcapacity shall also give rise to the right to purchase shares in the mannerset out in this section as if the Expansion Date were the date of an originalLicense Agreement over a new plant licensed for the increased capacity. – 11 -Cash in Lieu of Shares3.10 Except as provided by section 3.13 of this Agreement, if by reason ofany stock exchange, other public securities market rule or regulation, ororder by any regulatory authority the Company is prohibited from issuing anyshares pursuant to any of sections 3.2 to 3.2.6, 3.7, 3.8 or 3.9 hereof, orotherwise fails to issue the shares referred to in any notice (the “originalnotice”), given by the Employee pursuant to any of those sections, within 60days of receipt of such an original notice, then the Company shall, uponreceipt of a written request by the Employee, pay a cash bonus to the Employeeequal to the amount determined by multiplying the number of shares referred toin the original notice, which the Company has failed to issue, by the ClosingPrice on the date of the original notice.Holidays3.11 The Employee shall be entitled to four weeks of annual holidays to betaken at time(s) reasonably satisfactory to the Employee and the Company.Housing Allowance3.12 The Company shall provide and pay for a rental house for the Employeefor a one year period from the date of this Agreement, to an acceptablestandard relative to his current dwelling, to a maximum of $5,000 per month.Income Tax and Other Deductions3.13 Notwithstanding any other provision of this Agreement, all amounts orbenefits to which the Employee is entitled under this Agreement, including theright to the issue of shares or rights to purchase shares, may be subject toappropriate deductions and remittances pursuant to income tax and socialsecurity legislation and, as a condition of the issue of any shares that theCompany is required to issue to the Employee under any provision of thisAgreement, the Company may require the Employee to pay, to the Company, ormake arrangements satisfactory to the Company regarding payment of, anyfederal, provincial, state or local taxes or other deductions or remittancesof any kind required by law to be deducted or withheld and remitted to anysuch taxing or other governmental authority with respect to such amounts orshares 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 anypayment of any kind otherwise due to the Employee.Review3.14 At the end of the first year of employment under this Agreement, andannually thereafter, the Board will carry out an objective review of the termsof reference of the position held by the Employee, the compensation to theEmployee and the Employee’s performance, and the Board’s review shall bepresented to the Compensation Committee and the Board for approval. – 12 – PART 4 EMPLOYEE’S ADDITIONAL COVENANTSConfidential Information4.1 The Employee acknowledges that in the course of his employment by theCompany he will have access to and be entrusted with confidential informationand trade secrets of the Company (collectively the “Confidential Information”)relating to the business affairs, customers, suppliers, technology,proprietary rights, patents, research, plans, research data, marketingtechniques, manufacturing methods, procedures and techniques, industrialdesigns, inventions, improvements, discoveries and routines concerning theCompany, its business and those of its affiliates and of its customers andtheir particular business requirements, the disclosure of any of which tocompetitors of the Company or the general public would be highly detrimentalto the best interests of the Company or its affiliates, as the case may be.The Employee agrees to exercise reasonable efforts to maintain confidentialityrespecting the foregoing.The Employee further acknowledges that in the course of employment by theCompany he might, from time to time, be a representative of the Company innegotiations and discussions with others and as such will be significantlyresponsible for maintaining or enhancing the goodwill of the Company and itsaffiliates.The Employee further acknowledges that the right to maintain theconfidentiality of the Confidential Information and the right to preserve itsgoodwill are proprietary rights which the Company is entitled to protect.No Disclosure4.2 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 theConfidential Information for any purpose other than the best interests of theCompany or an affiliate of the Company nor will he disclose or use for anypurpose other than those of the Company or its affiliates the private affairsof the Company or of the affiliates of the Company or any other confidentialor proprietary information which he might acquire during the course of hisemployment by the Company with relation to the business and affairs of theCompany or its affiliates except: (a) with the prior written authorization of the Company; (b) as required to carry out the purposes of this Agreement or to obtain advice of counsel thereon; (c) as otherwise permitted under this Agreement; (d) where the Confidential Information is in or comes into the public domain through no act or omission of the Employee; or (e) except as required by law. – 13 -No Competition4.3 Except with the prior written consent of the Company or pursuant to thisPart 4, during the term of this Agreement and for one year after terminationof this Agreement, the Employee will not accept employment or provide servicesto any person or engage in any business (directly or through any kind ofownership or other arrangement other than ownership of 5% or less of thesecurities of publicly held corporations) which is a competitor of the Companyand which is involved in the business of researching or commercializingapplications associated with the Company’s technology in areas that are beingpursued by the Company during or prior to the term hereof or upon which theCompany has expended significant resources in anticipation of future activity,and the Employee will not at any time after termination hereof: (a) interfere with the contractual arrangements between the Company and any of its employees, contractors, suppliers, agents and any one else in a contractual or fiduciary relationship with the Company and will not recruit, hire or assist others in recruiting or hiring any employee of the Company; or (b) take any other action inconsistent with the fiduciary relationship of a senior executive officer to his employer.Notice of Conflict4.4 If the Board, acting reasonably, determines that the Employee isengaging in an activity which it deems to be a conflicting activity and theEmployee is so engaged, then the Company will so advise the Employee inwriting and the Employee will, as soon as possible in order to minimize anyinjury to the Company and in any event within 10 days, or such longer periodas 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; oradvise the Company that he disputes the conflict and the matter shall bereferred to arbitration.Exceptions4.5 Nothing in this Part 4 will operate to prevent the Employee from (a) owning shares of any corporation, the shares of which are listed for trading on any stock exchange or which are traded on the over-the-counter market, provided that the shareholding does not constitute 5% or more of the equity of the corporation; (b) acquiring any business (whether by the purchase of shares, assets or otherwise) for bona fide commercial reasons where an incidental part of – 14 – the business would otherwise be prohibited under this Agreement, but only if the Employee and his affiliate(s) and associate(s), as the case may be, use their best efforts to divest themselves upon reasonable terms and with all reasonable speed of the incidental parts; (c) serving as an officer or director, or being involved in, or receiving any compensation from any other entity which does not compete with the Company, provided that the Employee would not be otherwise in conflict with his obligations of loyalty to the Company and to render his full-time services to the Company and its affiliates during the term of his employment by the Company.Company’s Proprietary Rights4.6 All property, including intellectual property such as patentableinventions, non-patentable processes or know-how, designs, copyright and thelike which the Employee creates or is involved in creating, directly orindirectly, as a result of the services performed by the Employee for theCompany during his employment with the Company (the “Property”) will beowned by the Company and the Company shall at all times have soleproprietary right, title and interest in the Property. The Employee willgive the Company notice of all Property as soon as it is created. TheEmployee further agrees to execute, without delay or further consideration,any patent assignments, conveyances, other documents and assurances as maybe necessary to effect the intent of this provision.Special Remedies4.7 The Employee acknowledges his obligations under this Part 4 are of aspecial character and that in the event of any conduct by him in violation ofthis Agreement or any of these obligations, the Company will sustainirreparable injury and that money damages will not provide an adequate remedytherefor. Accordingly, the Employee agrees that in addition to other remediesand damages available to the Company at law or otherwise and if the Company soelects, 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 theEmployee by this Agreement is finally determined by a Court of competentjurisdiction to be unenforceable (the “Offending Restriction”) and so often asit occurs, the Employee agrees that upon written notice from the Company – 15 -specifying for inclusion in this Agreement a lesser time or area, fewercapacities or an activity of lesser scope than now contained in this Agreement(the “Lesser Restriction”), then this Agreement will be deemed to be amendedby the substitution of the Lesser Restriction for the Offending Restrictioninsofar as is lawfully enforceable. PART 5 TERMINATIONVoluntary Termination5.1 Subject to section 5.2, the Employee’s employment may be terminatedbefore the end of the then current term of this Agreement on (a) the effective termination date set out in any notice given by the Company to the Employee, which termination date must occur not less than three months after the date of the notice, or by any notice given by the Employee to the Company on the same basis, or (b) the effective termination date as set out in any agreement between the Company and the Employee for voluntary termination.If Company Terminates or Parties Fail to Renew5.2 (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 thecessation of his employment.(b) If within 12 months of a Change of Control, the Company gives noticeunder subsection 5.1(a), the Company changes a fundamental term or conditionof employment of the Employee, or this Agreement or any renewal hereofexpires, then the Company will pay to the Employee forthwith a lump sum equalto the aggregate of: – 16 – (i) the greater of a. the Salary remaining until July 31, 2009; and b. three times the Salary (at the rate in effect at the date of such termination, change in terms of employment or expiry); (ii) in lieu of bonuses, a pro-rated bonus to the date of such termination, change in terms of employment or expiry at the target rate of 100% of Salary to such date, plus an amount equal to the amount payable under subsection 5.2(b)(i); plus (iii) in lieu of benefits, _____% of an amount equal to the amount payable under subsection 5.2(b)(i);and the Employee will accept such amount as full compensation for thecessation of his employment.(c) For the purpose of this Agreement “Change of Control” means theoccurrence 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 suchresignation the Company will pay to the Employee the lump sum amounts set outin section 5.2(b) herein.(e) In the event the Employee ceases to be employed and becomes entitled toany amount pursuant to subsections 5.2 (a), (b) or (d): (i) all Stock Options that the Company has granted or agreed to grant to the Employee pursuant to the Company’s employee Stock Option Plan shall be made the subject of a Stock Option Agreement substantially in the same form as Schedule 2 except for the number of shares under Option, the exercise price, and the fact that all the Options shall “vest” immediately upon cessation of the Employee’s employment; – 17 – (ii) any options granted in lieu of bonus or salary (i.e. not be pursuant to the Company’s Stock Option Plan at fair market value at the date of the grant) shall be made the subject of a Stock Option Agreement substantially in the same form as Schedule 3 (unless such agreement for such options already exists) and for greater certainty shall expire at the termination or expiry date established at the time of the grant or pursuant to any agreement in relation thereto; and (iii) all other Stock Options that the Company would have issued to the Employee in the normal course of the Employee’s employment with the Company will be issued at the fair market price for such stock or shares as at the date of termination and shall automatically vest with the Employee and be made the subject of a Stock Option Agreement in the form of Schedule 2 or 3 as the case may be.(f) In the event employment of the Employee is terminated before July 31,2009, the Company shall pay all relocation costs of the Employee and willindemnify the Employee against any liability undertaken in respect of hisaborted residence in Vancouver as a result of such early termination.Termination for Cause and Other Events of Early Termination5.3 Despite any other term of this Agreement to the contrary, the Employee’semployment by the Company (and any office held by him) may be terminated bythe Company for cause without a notice period prior to the expiration of thethen current term of this Agreement upon the receipt by the Employee ofwritten notice from the Company terminating his employment for cause; however,no termination based upon the Employee’s failure or refusal to perform hisobligations under this Agreement, which if not remedied could amount to cause,shall be considered to be for cause, under this Agreement, unless the Boardfirst gives written notice to the Employee advising of the acts or omissionsthat the Company considers would constitute cause because of the Employee’sfailure or refusal to perform his obligations and the failure or refusalcontinues after the Employee has had a reasonable opportunity to correct theacts or omissions as set out in the notice.Effect of Termination under Section 5.35.4 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 oraccruable, but unpaid, to the effective termination date, plus any otheramounts owing by the Company to the Employee and plus interest at the CIBCPrime Rate plus 3% per annum on all amounts owing from the Company to theEmployee from and after the termination date until paid, such interest to bepayable and compounded monthly and if not so paid, itself bear interest, andthe Employee shall resign from any office, with the company or with anaffiliate, which the Company can not by itself lawfully terminate. – 18 -Return of Property5.5 On the effective termination date, the Employee will deliver up to theCompany, in a reasonable state of repair, all property including withoutlimitation, all copies, extracts and summaries, whether in written, digital,magnetic or electronic form, of documents and information of the Company inthe possession or under the control or direction of the Employee at thetermination date.Resignation of Office5.6 Upon termination of this Agreement, the Employee will resign as anofficer 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 bythe Company. PART 6 GENERALFurther Assurances6.1 Each party will, at its own expense and without expense to any otherparty, execute and deliver the further agreements and other documents and dothe further acts and things as the other party reasonably requests toevidence, carry out or give full force and effect to the terms of thisAgreement.Assignment6.2 Neither party may assign any right, benefit or interest in this Agreementwithout the prior written consent of the other party. Any purportedassignment without such consent will be void.Severability6.3 If any one or more of the provisions contained in this Agreement or theapplication of any of them to a person or circumstance is held by a court tobe illegal, invalid or unenforceable in respect of any jurisdiction, then tothe extent so held, it is separate and severable from this Agreement but thevalidity, legality and enforceability of the provision will not in any way beaffected or impaired in any other jurisdiction and the remainder of theAgreement or the application of the provision to persons or circumstancesother than those to which it is held to be invalid, illegal or unenforceableis not affected unless the severing has the effect of materially changing theeconomic benefit of this Agreement to the Employee or the Company.Modifications, Waiver and Consent6.4 No provision of this Agreement may be amended, modified, supplemented,waived or discharged unless the amendment, modification, supplement, waiver or – 19 -discharge is agreed to in writing and signed by the Employee and on behalf ofthe Company by an officer specifically designated by the Board. No waiver bya party at any time or any breach by the other party of a term of thisAgreement or of performance of an obligation to be performed by the otherparty under this Agreement is deemed to be a waiver of similar or dissimilarterms or obligations at the same, any prior or subsequent time.Notice6.5 A notice, demand, request, statement or other evidence required orpermitted to be given under this Agreement (a “notice”) must be written. Itwill be sufficiently given if delivered to the address of a party set out onpage 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 addressand after the giving of the notice, the address specified in the notice willbe 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 tohave 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 Effect6.6 This Agreement will enure to the benefit of and be binding upon theparties and their respective legal representatives and successors. Thisagreement is otherwise personal and non-assignable. – 20 -Governing Law6.7 This Agreement will be interpreted under and is governed by the laws ofthe Province of British Columbia and the laws of Canada that are applicableand, except for matters which cannot properly or lawfully be resolved byarbitration, the courts of the Province of British Columbia will haveexclusive jurisdiction to entertain any action arising under this Agreementand the parties hereby attorn to the jurisdiction of those courts.Time of Essence6.8 Time is of the essence in the performance of each obligation under thisAgreement.Counterparts6.9 This Agreement and any other writing delivered pursuant to this Agreementmay be executed in any number of counterparts with the same effect as if allparties to this Agreement or such other writing had signed the same documentand all counterparts will be construed together and will constitute one andthe same instrument.Entire Agreement6.10 This Agreement constitutes the entire agreement between the parties inrespect of the employment of the Employee by the Company and supersedes andreplaces all prior negotiations, written or oral understandings, agreementsmade between the parties.Survival of Terms6.11 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 effectiveas 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/Richard Lin_________ ) Authorized Signatory ) – 21 -Signed, Sealed and Delivered by )the Employee in the presence of: ) ) ) )___/s/________________________ ) /s/ R. Andrew KingstonWitness (Signature) ) R. Andrew Kingston ) ) )______________________________ )Name (please print) ) ) ) )______________________________ )Address ) ) ) )______________________________ )City, Province ) – 22 -SCHEDULE 1OUTSTANDING STOCK OPTIONS

Date of Original Number of Optionee Exercise Original ExpiryAgreement to Shares (Holder of Price Date of OptionIssue Shares Option) US$- ———————————————————————————– Feb 3, 2000 575,000 R. Andrew Kingston $0.50 Feb 2, 2005Feb 24, 2002 200,000 R. Andrew Kingston $0.50 Feb 23, 2007Feb 1, 2003 633,750 Cape Fear Ltd. $0.20 Aug 30, 2005Feb 1, 2003 273,899 R. Andrew Kingston $0.20 Mar 14, 2006Apr 11, 2003 2,067,222 Cape Fear Ltd. $0.22 Aug 30, 2006Apr 11, 2003 332,778 Cape Fear Ltd. $0.22 Aug 30, 2006Apr 11, 2003 300,000 Cape Fear Ltd. $0.23 Aug 30, 2006- ———————————————————————————–

SCHEDULE 2 STOCK OPTION AGREEMENTThis Agreement effective this 1st day of August, 2004.BY AND BETWEEN: R. Andrew Kingston, an individual residing at 6876 Churchill Street, Vancouver, BC V6P 5B3 (hereinafter referred to as the “Employee”)AND: DYNAMOTIVE ENERGY SYSTEMS CORPORATION 230 – 1700 West 75th Avenue, Vancouver, B.C. V6P 6G2 (hereinafter referred to as “DynaMotive”)WHEREAS, the Employee has agreed to continue to serve as an employee ofDynaMotive.AND WHEREAS, in connection with such employee/employer relationship,DynaMotive has agreed to grant to the Employee options to purchase commonshares in the capital stock of DynaMotive (“Common Shares”).NOW THEREFORE THE EMPLOYEE AND DYNAMOTIVE AGREE AS FOLLOWS:1. Stock Option GrantDynaMotive hereby irrevocably grants to the Employee share purchase optionsentitling the Employee to purchase 3,000,000* Common Shares at an exerciseprice of US $0.45 per Common Share (the “Options”), which price per CommonShare DynaMotive and the Employee have determined to be the market value ofDynaMotive’s Common Shares on the date first above written, and which Optionswill, in each case but subject to section 10 hereof, have a term of five yearsfrom the date on which they are originally scheduled to Vest, and subject tothe Vesting provisions below, 1,000,000 Options will Vest on August 1, 2004 asset forth in the following table and the balance of 2,000,000 Options will Vestat the rate of 500,000 Options per year according to the dates set forth in thefollowing table: – 24 -Number of Stock Options Vesting Date Termination Date 1,000,000 August 1, 2004 July 31, 2009 500,000 August 1, 2005 July 31, 2010 500,000 August 1, 2006 July 31, 2011 500,000 August 1, 2007 July 31, 2012 500,000 August 1, 2008 July 31, 20132. Vesting Provisions Notwithstanding the foregoing: (a) Vest and Vesting Date with regard to a particular Option granted hereby shall mean the date set forth in the above table following which that Option may be exercised, provided that the 1,000,000 Options which vested August 1, 2004 shall not be exercised until after actual execution of this Stock Option Agreement; and (b) If the Employee’s employment with DynaMotive is terminated or otherwise ends prior to the end of the term of the Confidential Employment Agreement between DynaMotive and the Employee, made with effect August 1, 2004 (the “Employment Agreement”), other than for “cause” within the meaning of section 5.3 of the Employment Agreement, or by the Employee acting voluntarily within the meaning of that agreement other than under subsection 5.2(d) thereof, then all of the Options granted to the Employee hereunder, will Vest immediately upon such termination, provided that such early Vesting will not affect the above-listed Option Termination Dates.3. In order to exercise the Options, the Employee shall, subject to section and 10 hereof, no later than the close of business (Vancouver time) on the applicable Option Termination Date set out above, give written notice to DynaMotive of his intention to exercise the then-vested Options in whole or in part, such notice to specify the number of Options that the Employee wishes to exercise and be accompanied by cash, bank draft or certified cheque, payable to “DynaMotive Energy Systems Corporation” in the amount required to pay for the Common Shares then being purchased by the Employee at the exercise price of US $0.45 per Common Share. Promptly after receipt of each such notice and payment, DynaMotive shall issue a Treasury Order to its Registrar and Transfer Agent calling for the issuance of the required number of Common Shares and will deliver a duly and validly issued certificate representing such shares to the Employee within five business days. Following delivery of such share certificates to the Employee, but not before, DynaMotive shall be entitled to keep and retain, for its own use, the purchase price paid to it by or on behalf of the Employee.4. The Options shall survive the cessation of the employment of the Employee by DynaMotive and shall be in full force and effect and – 25 – exercisable until the Termination Date for the particular Options set forth in section 1 hereof and following which, if not exercised, the Options shall lapse and be of no further force or effect.5. The Options granted hereunder are personal to the Employee and may be assigned or transferred in whole or in part to any company controlled by the Employee or to the Employee’s immediate family, or to a family trust.6. The exercise of the Options or any amendments to this Agreement may be subject to the prior approval, where necessary, under certain securities legislation or jurisdictions.7. In the event that there is any material change in the Common Shares of DynaMotive through the declaration of stock dividends or stock splits or consolidations or exchanges of shares, the Options shall be deemed to have been exchanged by DynaMotive for new options to purchase a number of Common Shares at an exercise price which is adjusted appropriately (the “New Options”) such that the amount by which the total value of the Common Shares under the New Options exceeds the total price to acquire such shares under the New Options, immediately after such a material change, is not greater than nor materially less than such an amount would have been under the original Options, immediately prior to such material change. The adjusted terms of the New Options shall be effective and binding for all purposes of this Agreement.8. In the event that DynaMotive shall amalgamate, consolidate with, or merge into another corporation, the Employee will thereafter receive, upon the exercise of the Options, the securities or property to which a holder of the number of Common Shares then deliverable upon the exercise of the Options would have been entitled to upon such amalgamation, consolidation, or merger, and DynaMotive will take any and all steps in connection with such amalgamation, consolidation, or merger as may be necessary to ensure that the provisions hereof shall thereafter be applicable, as near as reasonably may be, in relation to any securities or property thereafter deliverable upon the exercise of the Options granted herein.9. In the event of a change of control of DynaMotive as defined in the Employment Agreement, or a sale of all or substantially all of the assets of DynaMotive, then, immediately prior to the date of such an event, all of the Options granted to the Employee hereunder will Vest, provided that such early Vesting will not, subject to section 4 and 10 hereof, affect the above-listed Option Termination Dates.10. This Agreement shall enure to the benefit of and be binding upon the parties hereto and upon the successors or assigns of DynaMotive and upon the heirs, executors, administrators and legal personal representatives of the Employee; provided that any of the Options which have not been exercised before the Employee dies or his employment is terminated at a time when the Employee is disabled, may notwithstanding section 4 hereof be exercised by the Employee’s heirs, executors, administrators or legal personal representatives at any time before the later of the Termination Date for the Options and one year after the date of death of the Employee. – 26 -11. This Agreement shall be governed, construed and enforced according to the laws of the Province of British Columbia and is subject to the exclusive jurisdiction of the courts of the Province of British Columbia.IN WITNESS WHEREOF the parties hereto have hereunto executed this Agreementas 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/Richard Lin __________ ) )SIGNED, SEALED AND DELIVERED )by the Employee in the presence )of: ) )______________________________ )Name ) /s/ R. Andrew Kingston ) R. Andrew Kingston )______________________________ )Address ) ) )______________________________ ) )______________________________ )Occupation ) – 27 -SCHEDULE 3STOCK OPTION AGREEMENTThis Agreement effective this day of , 200 .BY AND BETWEEN: R. Andrew Kingston, an individual residing at 6876 Churchill Street, Vancouver, BC V6P 5B3 (hereinafter referred to as the “Employee”)AND: DYNAMOTIVE ENERGY SYSTEMS CORPORATION 230 – 1700 West 75th Avenue, Vancouver, B.C. V6P 6G2 (hereinafter referred to as “DynaMotive”)WHEREAS, the Employee has agreed to continue to serve as an employee ofDynaMotive;AND WHEREAS, in connection with such employee/employer relationship,DynaMotive has agreed to grant to the Employee options to purchase commonshares in the capital stock of DynaMotive (“Common Shares”).NOW THEREFORE THE EMPLOYEE AND DYNAMOTIVE AGREE AS FOLLOWS:1. Bonus/Remuneration Stock Option GrantDynaMotive hereby irrevocably grants, to the Employee, share purchase optionsentitling the Employee to purchase Common Shares at anexercise price of one-tenth of one cent in Canadian currency (CDN $0.001) perCommon Share (the “Options”), which Options will, in each case, have a termof 10 years from the effective date of the agreement of the Company to issuesuch Common Shares if the option is exercised by the Employee.2. Exercise of Bonus Stock OptionIn order to exercise the Options, the Employee shall, no later than the closeof business (Vancouver time) on the termination date of the Options grantedby this Agreement, give written notice to DynaMotive of his intention to – 28 -exercise the Options in whole or in part, such notice to specify the numberof Options that the Employee wishes to exercise (not being less than for25,000 Common Shares, or the balance of the Common Shares that the Employeeis entitled to purchase pursuant to this Agreement) and be accompanied bycash, bank draft or certified cheque, payable to “DynaMotive Energy SystemsCorporation” in the amount required to pay for the Common Shares then beingpurchased by the Employee at the exercise price of CDN $0.001 per CommonShare. Promptly after receipt of each such notice and payment, DynaMotiveshall issue a Treasury Order to its Registrar and Transfer Agent calling forthe issuance of the required number of Common Shares and will deliver a dulyand validly issued certificate representing such shares to the Employeewithin 5 business days. Following delivery of such share certificates to theEmployee, 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 theEmployee.3. Termination of EmploymentThe Options shall survive the cessation of the employment of the Employee byDynaMotive and shall be in full force and effect and exercisable until thetermination date applicable to the Options provided herein.4. AssignmentThe Options granted hereunder are personal to the Employee and may beassigned or transferred in whole or in part to any company controlled by theEmployee or to the Employee’s immediate family, or to a family trust.5. Required ApprovalsThe exercise of the Options or any amendments to this Agreement may besubject to the prior approval, where necessary, under certain securitieslegislation or jurisdictions.6. Adjustments for Material ChangesIn the event that there is any material change in the Common Shares ofDynaMotive through the declaration of stock dividends or stock splits orconsolidations or exchanges of shares, the Options shall be deemed to havebeen exchanged by DynaMotive for new options to purchase a number of CommonShares at an exercise price which is adjusted appropriately (the “NewOptions”) such that the amount by which the total value of the Common Sharesunder the New Options exceeds the total price to acquire such shares underthe New Options, immediately after such a material change, is not greaterthan nor materially less than such an amount would have been under theoriginal Options, immediately prior to such material change. The adjustedterms of the New Options shall be effective and binding for all purposes ofthis Agreement.7. Adjustments for mergersIn the event that DynaMotive shall amalgamate, consolidate with, or mergeinto another corporation, the Employee will thereafter receive, upon theexercise of the Options, the securities or property to which a holder of thenumber of Common Shares then deliverable upon the exercise of the Options – 29 -would have been entitled to upon such amalgamation, consolidation, or merger,and DynaMotive will take any and all steps in connection with suchamalgamation, consolidation, or merger as may be necessary to ensure that theprovisions hereof shall thereafter be applicable, as near as reasonably maybe, in relation to any securities or property thereafter deliverable upon theexercise of the Options granted herein.8. EnurementThis Agreement shall enure to the benefit of and be binding upon the partieshereto 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 theEmployee dies or his employment is terminated at a time when the Employee isdisabled, may notwithstanding section 3 hereof be exercised by the Employee’sheirs, executors, administrators or legal personal representatives at anytime before the later of the termination date for the Options and one yearafter the date of death of the Employee.9. Governing LawThis Agreement shall be governed, construed and enforced according to thelaws of the Province of British Columbia and is subject to the exclusivejurisdiction of the courts of the Province of British Columbia.IN WITNESS WHEREOF the parties hereto have hereunto executed this Agreementas 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/Richard Lin____________ ) )SIGNED, SEALED AND DELIVERED )by the Employee in the presence of: ) )______________________________ )Name ) _/s/R. Andrew Kingston_ ) R. Andrew Kingston______________________________ )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 PagePart 1 INTERPRETATION 2 Interpretation 2Part 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 3Part 3 Bonus share option plan 3Part 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 AGREEMENTTHIS AGREEMENT dated for reference and made the 29th day of September, 2004the “Effective Date”)BETWEEN:DynaMotive Energy Systems Corporation, a bodycorporate duly incorporated under the law of theProvince of British Columbia, having offices at Suite230, 1700 West 75th Avenue, Vancouver, BC, V6P 6G2 (the “Company”) OF THE FIRST PARTAND: R. Andrew Kingston, an individual residing at 6876 Churchill Street, Vancouver, BC, V6P 5B3 (the “Employee”) OF THE SECOND PARTWHEREAS:(A) The Company and the Employee entered into a Confidential EmploymentAgreement made the 1st day of August, 2004;(B) The Company is liable for unpaid remuneration owing to the Employee inthe total amount of $104,085.76 with respect to his services performed for theCompany during 2004 but prior to the date hereof (the “Unpaid 2004Remuneration”);(C) The Employee is willing to forego the payment by the Company and thereceipt by the Employee of the Unpaid 2004 Remuneration in consideration ofthe Company agreeing to issue shares of the Company to the Employee on theterms and conditions set out herein;(D) The Company and the Employee wish to amend the Confidential EmploymentAgreement to provide for the issue of shares to the Employee for the Unpaid2004 Remuneration and to otherwise amend the Confidential Employment Agreementwith regard to certain performance and other incentives for the Employee;WITNESSETH that the parties mutually agree as follows: – 2 – PART 1 INTERPRETATIONInterpretation1.1 For all purposes of this Agreement, except as otherwise expresslyprovided or unless the context otherwise requires: (a) “the Employment Agreement” means the agreement of employment between the parties hereto and dated for reference and effective as of and from the 1st day of August, 2004, including all Schedules thereto, as from time to time supplemented or amended by one or more agreements entered into pursuant to the applicable provisions thereof; (b) this “Amending Agreement” means this agreement including all Schedules hereto as from time to time supplemented, amended or otherwise varied by one or more agreements entered into pursuant to the applicable provisions hereof; (c) the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, subsection, paragraph, subparagraph or other subdivision, unless the context otherwise requires; (d) all references to currency mean Canadian currency, unless specified otherwise; (e) a reference to an entity includes any entity that is a successor to such entity; (f) the headings are for convenience only and are not intended as a guide to interpretation of this Agreement or any portion hereof; (g) a reference to a statute includes all regulations made pursuant thereto, all amendments to the statute or regulations in force from time to time, and any statute or regulation which supplements or supersedes such statute or regulations; (h) “Board” means the board of directors of the Company as from time to time constituted; (i) “Closing Price of the Company’s Common Shares” and “Closing Price” means as of any given date, the average of the high and low trading prices of the Common shares in the capital stock of the Company on the NASD’s Over the Counter Bulletin Board on such date, or if the Common shares trade on the TSX Venture Exchange or TSX Exchange on such date, then the average of the high and low trading prices of the Common shares of the Company on such exchange, or if the Common shares in the capital stock of the Company did not trade on such date, on the next preceding day on which trades were made; (j) “Stock Option” mean the rights under an agreement between the Company and the Employee, or the Company and a corporation nominated by the Employee, to have the Company sell or issue shares of the Company, or shares of a corporation that does not deal at “arm’s length” with the Company (as that term is defined pursuant to the Income Tax Act of Canada), to the Employee or to the corporation nominated by the Employee. – 3 – PART 2 EXTENSIONS OF THE TERM FOR EMPLOYEE STOCK OPTIONSExtension of Employee Stock Options held at July 31, 20042.1 The Employment Agreement is amended in section 3.5 to provide that thetermination date for the 4,382,649 Stock Options outstanding July 31, 2004 andpreviously granted by the Company to the Employee (or to Cape Fear Limited asthe Employee’s nominee corporation) under the terms of any prior employment oroption agreement and as listed in Schedule 1 attached to the EmploymentAgreement and to this Amending Agreement, will be extended to 10 years fromthe date of the original agreement to issue shares pursuant to each such StockOption, as set forth under the heading “Extended Termination Date” in Schedule1 hereto; provided that after termination of the employment of the Employee,by reason of death or disability, the Stock Options referred to in thissection may be exercised, to the extent they were exercisable at the time ofsuch termination, for a period of one year from the date of termination ofemployment caused by death or disability of the Employee, or until theexpiration of the stated term of the Stock Options, as extended hereby,whichever period is longer.Extension of Employee Stock Options granted August 1, 20042.2 The Employment Agreement is amended in section 3.6 to provide that thetermination date for the 3,000,000 Stock Options granted by the Company to theEmployee on August 1, 2004 will be extended from 5 years from the Vesting Datefor such Stock Options to 10 years from the date of the grant of each suchStock Option namely until July 31, 2014 in each case; provided that aftertermination of the employment of the Employee, by reason of death ordisability, the Stock Options referred to in this section may be exercised, tothe extent they were exercisable at the time of such termination, for a periodof one year from the date of termination of employment caused by death ordisability of the Employee, or until the expiration of the stated term of theStock Options, as extended hereby, whichever period is longer. PART 3 BONUS SHARE OPTION PLAN3.1 The Employment Agreement is amended to add the provision set forth belowrelating to the Unpaid 2004 Remuneration after section 3.7 thereof: – 4 – “Agreement to Issue Shares for Unpaid 2004 Remuneration 3.7A In lieu of any obligation to pay the Unpaid 2004 Remuneration to the Employee under any prior employment or other agreement in respect of the 2004 calendar year, upon receipt of one or more subscription notices from the Employee subscribing for a specified number of Common shares in the Company (not being less than 25,000 shares or the balance of the Common shares of the Company that the Company has agreed to issue to the Employee pursuant to this section) and payment by the Employee to the Company of one tenth of one cent for each share subscribed for in the particular notice, the Company agrees to allot and issue to the Employee the number of shares specified in the notice in consideration of one tenth of one cent per share ($0.001) plus the value of past services actually performed by the Employee, namely US$0.436 per share, calculated for each share to be issued by dividing the Unpaid 2004 Remuneration by the maximum number of Common shares which may, upon one or more notices given by the Employee pursuant to this section, be allotted and issued to him, such maximum number of shares under all such notices being a total of 179,657 Common shares of the Company, provided that the Employee shall only have until September, 2014 to notify the Company, by one or more notices, that the Employee wishes to have any of the shares referred to in this section allotted and issued to him and to pay the price of one tenth of one cent per share for any share that the Company has agreed to issue under this section, and thereafter all rights of the Employee to any shares not referred to in a subscription notice given by the Employee under this section by such date shall lapse. The Employee, by execution of this Agreement, acknowledges that the Company is, subject to section 3.10 hereof, released from any and all obligations to pay the Unpaid 2004 Remuneration to the Employee, being remuneration with respect to the period in the 2004 calendar year or any portion thereof which precedes September 1, 2004. Upon receipt of the notice from the Employee contemplated by this section and payment of the subscription price to it, the Company shall proceed to allot and issue the shares, referred to in the notice and to be issued pursuant to this section, including giving such directions and making such adjustments as would have been necessary if the Agreement between the Company and the Employee, in this section, were a Stock Option governed by a Stock Option Agreement in the form of Schedule 3 to the Employment Agreement but dated the date hereof and relating only to the right to purchase the shares referred to in this section with such rights to expire on the 10th anniversary of the date hereof.” PART 4 GENERALFurther Assurances4.1 Each party will, at its own expense and without expense to any otherparty, execute and deliver the further agreements and other documents and dothe further acts and things as the other party reasonably requests toevidence, carry out or give full force and effect to the terms of thisAgreement. – 5 -Assignment4.2 Neither party may assign any right, benefit or interest in thisAgreement without the prior written consent of the other party. Any purportedassignment without such consent will be void.Severability4.3 If any one or more of the provisions contained in this Agreement or theapplication of any of them to a person or circumstance is held by a court tobe illegal, invalid or unenforceable in respect of any jurisdiction, then tothe extent so held, it is separate and severable from this Agreement but thevalidity, legality and enforceability of the provision will not in any way beaffected or impaired in any other jurisdiction and the remainder of theAgreement or the application of the provision to persons or circumstancesother than those to which it is held to be invalid, illegal or unenforceableis not affected unless the severing has the effect of materially changing theeconomic benefit of this Agreement to the Employee or the Company.Modifications, Waiver and Consent4.4 No provision of this Agreement may be amended, modified, supplemented,waived or discharged unless the amendment, modification, supplement, waiver ordischarge is agreed to in writing and signed by the Employee and on behalf ofthe Company by an officer specifically designated by the Board. No waiver bya party at any time or any breach by the other party of a term of thisAgreement or of performance of an obligation to be performed by the otherparty under this Agreement is deemed to be a waiver of similar or dissimilarterms or obligations at the same, any prior or subsequent time.Notice4.5 A notice, demand, request, statement or other evidence required orpermitted to be given under this Agreement (a “notice”) must be written. Itwill be sufficiently given if delivered to the address of a party set out onPage 1 and if (a) delivered in person to the Employee either by certified mail or courierso 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 addressand after the giving of the notice, the address specified in the notice willbe 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 tohave 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 Effect4.6 This Agreement will enure to the benefit of and be binding upon theparties and their respective legal representatives and successors. Thisagreement is otherwise personal and non-assignable.Governing Law4.7 This Agreement will be interpreted under and is governed by the laws ofthe Province of British Columbia and the laws of Canada that are applicableand, except for matters which cannot properly or lawfully be resolved byarbitration, the courts of the Province of British Columbia will haveexclusive jurisdiction to entertain any action arising under this Agreementand the parties hereby attorn to the jurisdiction of those courts.Time of Essence4.8 Time is of the essence in the performance of each obligation under thisAgreement.Counterparts4.9 This Agreement and any other writing delivered pursuant to thisAgreement may be executed in any number of counterparts with the same effectas if all parties to this Agreement or such other writing had signed the samedocument and all counterparts will be construed together and will constituteone and the same instrument. – 7 -Entire Agreement4.10 This Agreement constitutes the entire agreement between the parties inrespect of the employment of the Employee by the Company and supersedes andreplaces all prior negotiations, written or oral understandings, agreementsmade between the parties.IN WITNESS WHEREOF the parties hereto have executed this Agreement effectiveas 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 SignatoryPer: ____/s/Richard Lin_______ Authorized SignatorySigned, Sealed and Delivered by )the Employee in the presence of: ) ) ) )_____/s/______________________ ) /s/ R. Andrew KingstonWitness (Signature) ) R. Andrew Kingston ) ) )______________________________ )Name (please print) ) ) ) )______________________________ )Address ) ) ) )______________________________ )City, Province ) – 8 -SCHEDULE 1OUTSTANDING STOCK OPTIONS

Date of Original Number of Optionee Exercise Original Expiry ExtendedAgreement to Shares (Holder of Price Date of Option TerminationIssue Shares Option) US$ Date- ———————————————————————————– Feb 3, 2000 575,000 R. Andrew Kingston $0.50 Feb 2, 2005 Feb 2, 2010Feb 24, 2002 200,000 R. Andrew Kingston $0.50 Feb 23, 2007 Feb 23, 2012Feb 1, 2003 633,750 Cape Fear Ltd. $0.20 Aug 30, 2005 Jan 31, 2013Feb 1, 2003 273,899 R. Andrew Kingston $0.20 Mar 14, 2006 Jan 31, 2013Apr 11, 2003 2,067,222 Cape Fear Ltd. $0.22 Aug 30, 2006 Apr 10, 2013Apr 11, 2003 332,778 Cape Fear Ltd. $0.22 Aug 30, 2006 Apr 10, 2013Apr 11, 2003 300,000 Cape Fear Ltd. $0.23 Aug 30, 2006 Apr 10, 2013- ———————————————————————————–