Document:

McKenzie Bay Exhibit 4.8 to Form 10-Q (1st QTR 2003)

EXHIBIT 4.8

ACTIVITY PERFORMED WITHIN THE PROGRAM OF

FINANCIAL ASSISTANCE TO TECHNICAL-ECONOMIC STUDIES

AND TECHNOLOGICAL INNOVATION

AGREEMENT

BETWEEN

THE MINISTER OF NATURAL RESOURCES, for and on behalf of the Quebec government, herein represented by Mr. Jean-Louis Caty, associated Mines deputy minister, duly authorized under the Regulation on the signature of certain titles, documents and writings of the ministry of natural Resources, adopted by the decree no. 1455-95 of November 8 1995, as modified by the decree 937-98 of July 8 1998 and the decree 1073-00 of September 5 2000, hereafter called the<<Minister>>. 

AND

McKENZIE BAY RESOURCES LTD., a public corporation legally incorporated, its headquarters being at 635, Perreault Street, Rouyn-Noranda, Quebec, J9X 3E1, herein represented by Mr. Donald D. Murphy, president, duly auhtorized as he declares, hereafter called the << Company>>

PREAMBLE

CONSIDERING THAT THE COMPANY requested from the MINISTER a financial assistance to perform a feasibility study for the Lac Doré vanadium deposit located in the Chibougamau region;

CONSIDERING THAT this study could lead to an investment of approximately 180 million dollars for a production start-up and consequently contribute to enhancing the mining operations in that region of Quebec;

CONSIDERING THAT the government of Quebec acknowledged the eligibility of the study to a financial assistance under the Program of financial assistance to technical-economic studies and technological innovation;

CONSIDERING THAT THE MINISTER's financial assistance is in the form of a refundable financial contribution under the terms and conditions stipulated in the agreement hereby;

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CONSIDERING THAT the commitments of the agreement hereby are in compliance with the provisions of the decree 658-2001 of the Quebec government, as of May 30 2001, copy of which is appended hereby;

THE PARTIES TOGETHER AGREE TO THE FOLLOWING:

1. MINING PROJECT

The COMPANY's project consists of carrying out a feasibility study for the Lac Doré vanadium deposit , in order to assess the economic features of the deposit through drilling and assaying to define the mining reserves, design, construction and mining engineering studies as well as environmental evaluations and a market study. Metallurgical test work is also required to optimize costs and investment. The study could be completed within a period of twelve months.

The costs distribution is approximate and is as follows ( in thousands $):

	
 
	
 
	
Phase 1
	
Phase 2
	
Total

	
 
	
 
	
 
	
 
	
 

	
 
	
Geology and mining reserves
	
100
	
500
	
600

	
 
	
Geotechnical studies
	
50
	
100
	
150

	
 
	
Metallurgical test work
	
180
	
100
	
280

	
 
	
Hydrometallurgy
	
 
	
300
	
300

	
 
	
Engineering and construction
	
50
	
500
	
550

	
 
	
Environment
	
 
	
300
	
300

	
 
	
Management and administration
	
50
	
200
	
250

	
 
	
Market study
	
 
	
100
	
100

	
 
	
Permits and relations
	
 
	
 
	
 

	
 
	
with aboriginals
	
100
	
 
	
100

	
 
	
Contingency
	
20
	
150
	
170

	
 
	
 
	
 
	
 
	
 

	
 
	
Total
	
550
	
2 250
	
2 800

2. ELIGIBLE EXPENSES

2.1  Eligible expenses in order to calculate the financial support of the MINISTER 

The MINISTER's financial support covers the work and studies described in article 1. Only expenses incurred and paid by the COMPANY between February 1st 2001 and June 30 2002, the period fixed for the project's accomplishement, will be considered as being part of the project for the purpose of this agreement and will be included in the calculation of the financial assistance.

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2.2  Non eligible expenses

The following expenses are not eligible:

	
 
	
•
	
the salary and fringe benefits of senior executives not involved full time in the administration, management or operation of the project;

	
 
	
•
	
any tax, except the non refundable part of the TPS, TVQ and the fuel tax;

	
 
	
•
	
any revenue generated by the work related to the project described in article 1;

	
 
	
•
	
any expenses or charges related to depreciation or amortization;

	
 
	
•
	
any short or long term financing costs;

	
 
	
•
	
any rent or office rental and any other related expenses;

	
 
	
•
	
any expense for work covered by this agreement and already subsidized, entirely or partially, by a program from either Quebec or Canada, including expenses financed by flow-through shares.

3. MINISTER'S COMMITMENTS

3.1  The MINISTER undertakes to pay to the COMPANY a maximum financial assistance of 1 400 000 $ applicable to the eligible expenses of the project described in article 1, if all the clauses of this agreement hereby are respected by the COMPANY.

3.2  Notwithstanding article 3.1, the MINISTER can reduce the financial assistance provided by the MRN through this agreement, of an amount equal to the amount of the total of the other subsidies which could be provided by the government of either Quebec or Canada, for the work or studies covered by this agreement.

4. METHODS OF PAYMENT FOR THE FINANCIAL ASSISTANCE

The MINISTER's financial assistance is paid at the rate of 50% of the amount of the eligible expenses incurred for the project, as described in article 1, according to a periodicity related to the progress of the work and deemed opportune by the MINISTER and on presentation by the COMPANY of a statement of account for the incurred and paid expenses.

5. COMMITMENTS OF THE COMPANY

5.1  The COMPANY undertakes to carry out the work related to the feasibility study as defined in article 1, before June 30 2002.

5.2  The COMPANY undertakes to provide a report on the progress of the work for each payment request and, at the end of the project, a feasibility study on the project or, if the project is abandoned before completion, a final report on the work accomplished indicatiing the results obtained. 

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5.3  The COMPANY undertakes to repay the MINISTER all or part of the financial assistance paid too much. This repayment bears interest at the rate specified in article 7.5 from the first day of delay.

5.4  The COMPANY undertakes to repay the MINISTER the financial assistance received, after the production start-up of the Lac Doré vanadium deposit, on the basis of the net revenues generated by the operation. For the purpose of this agreement, a production year begins on January 1st of each year and ends on December 31 of the same year. The repayments will be carried out as follows:

	
 
	
•
	
40% of the financial assistance received within 30 days following the end of the second year of production;

	
 
	
•
	
30% of the financial assistance within 30 days following the end of the third year of production;

	
 
	
•
	
30% of the financial assistance within 30 days following the end of the fourth year of production;

	
 
	
•
	
the balance owed within 30 days following the end of the fifth year of production.

At the exception of the balance to repay after the fifth year of production, the repayments will be allowed to a limit of 50% of the net revenues generated by the operation.

In case of failure to repay according to the schedule, the payment of an interest is added in accordance with article 7.5.

If within a period of 24 months, after the end of the agreement hereby (art 2:1) the decision to start up production is not made, the article hereby is no more applicable.

5.5  The COMPANY will be responsible for any fault made by her, its employees,agents, representatives or contractors in the course or on the occasion of the execution of the agreement hereby, including a fault resulting from a failure to the commitment taken through the contract hereby.

The COMPANY undertakes to indemnify , free and side wholeheartedly for the MINISTER, his representatives and any other employee, when lawsuits or claims for damages, losses, costs and expenses which could, at any time, result or ensue for them or some of them, in bodily injuries (including fatal injuries), losses of goods or third party property damages which could have been done or undergone, or which could be presented as being done or undergone during the execution of the project or any part of it, or as a result of the agreement hereby.

5.6  The COMPANY must comply with all of the provincial and municipal laws and regulations applicable to the project, including all the pertinent environmental laws.

5.7  The COMPANY undertakes to forward to the MINISTER its annual audited financial statements for the fiscal years covered by the agreement hereby and a detailed and audited statement of the utilisation of the financial assistance received.

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5.8  The COMPANY undertakes to give to the MINISTER any document deemed useful for the management of the agreement, the verification of the incurred expenses and the application of the terms, conditions and commitments of this agreement.

5.9  The COMPANY undetakes to mention, in its official communications relative to the project described in article 1, that it has benefited from a financial assistance within the program of financial assistance to technical-economic and technological innovation.

5.10 The COMPANY undertakes, when it will use external services, to carry out a call for tenders and obtain at least two (2) bids from firms and organisations with renowned expertise, unless the MINISTER accepts the reasons to proceed otherwise.

6. DURATION OF AGREEMENT

The agreement hereby comes into force on February 1st 2001 and terminates when repayments of the financial assistance are completed. 

7. GENERAL PROVISIONS

7.1  This agreement is governed by the laws in force in Quebec and is interpreted according to the latter.

7.2  The MINISTER reserves himself the right:

7.2.1  to request any document deemed useful to the management of the agreement, the verification of incurred expenses and the application of the terms, conditions and commitments of this agreement;

7.2.2  to cancel , without indemnity, any part not paid of the financial assistance and to request an immediate repayment of the financial assistance already paid in the event of the following:

	
 
	
a)
	
the COMPANY gives up its goods, is dealt with an order of sequestration through the Law on bankruptcy and insolvency (L.R., 1985, c.B-3), makes a proposal to its creditors or undertakes an act of bankruptcy under the Law on bankruptcy and insolvency or is dealt with an order of liquidation under the law of liquidation, or is insolvent or doen't maintain its legal entity;

	
 
	
b)
	
in its opinion and without its consent, an important change in the nature of the project occurs;

	
 
	
c)
	
the COMPANY fails to comply with the obligations of the agreement hereby;

	
 
	
d)
	
the COMPANY fails to give to the MINISTER information or provides him with false or deceitful information;

	
 
	
 
	
 

	
 
	
 
	
In case of failure to repay according to the schedule, payment of an interest is added in accordance with article 7.5.

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7.3  The MINISTER can, if he sees fit, disclose the main outlines of this financial assistance, including the name of the beneficiary, the location of the project, the nature and the amount of the assistance, the number of employees working for the COMPANY as well as the number of jobs related to that project.

7.4  In case of act of God or events out of control of the COMPANY, the parties hereby will be allowed to be freed from the commitments described in articles 3 and 5.1:

7.4.1  temporarily, if the event which triggers the application of the atricle hereby results in delaying the work schedule only;

7.4.2  definitively, if the event which triggers the application of the article hereby prevents continuing the work irremediably.

7.5  The MINISTER can request the repayment of any part of the financial assistance paid too much.

In case of failure to repay according to the schedule, more particularly the repayments specified in articles 5.4 and 7.2.2, an interest will be applicable on the balance owed from the first day of delay at the rate in force in accordance to article 28 of the Law on the ministry of Revenue (L.R.Q., chap. M-31).

7.6  The MINISTER reserves himself the right to remove from his contribution as a financial assistance the amounts owed to the Quebec ministry of Natural resources or to the Quebec government.

7.7  The omission of the MINISTER to request that the COMPANY executes one of the obligations under the terms of the agreement hereby, to exercize any right or recourse available to him under the terms of the agreement hereby or the law, is not prejudicial to the right to exercize its execution hereafter or to exercize such a right hereafter, unless he expressly renounces such a right in writing. Such a renunciation is valid only for this case which is specifically described.

7.8  The MINISTER will have the right to get access to all of the results or data obtained which are part of the project described in article 1 and will be allowed to use, to his liking, the results of the study that is part of the agreement hereby twenty four (24) months after the submission of the final report. Notwithstanding this latter period of twenty four (24) months, the results of the study above-mentionned will never be allowed to be transferred to a third party without the approval of the MINISTER. Alternately, the COMPANY will be allowed the exclusive right to the results of the study if it repays to the MINISTER 100% of the financial assistance received.

8. VERIFICATION

8.1  The COMPANY must keep up to date accounting books, accounts and files. Furthermore, it will have, for the duration of the agreement hereby and for a period of five (5) years following its expiration, to keep its accounting books, accounts, files, reports and any other document relative to the project, in order to to make them available for examination and verification by any person whom the MINISTER can designated.

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8.2  Any representative authorized by the Quebec government must have access to the offices of the COMPANY or any other work place, at all reasonable times during the normal business hours or any other time with the approval of the COMPANY, for auditing the books, files, reports and documents relative to the project described in article 1. The COMPANY must give all the reasonable support to this authorized representative for the purpose above-mentionned.

9. TRANSFER

The benefits, rights and obligations resulting from the agreement hereby cannot be given up, nor transfered, without the prior consent of the MINISTER in writing.

10. FUNDS ALLOCATION

The payment of the funds for the execution of the agreement hereby depends on the funds allocation done by the national Assembly of Quebec.

11. PARTICULAR PROVISIONS

11.1 Nothing in the agreement hereby has the objective of constituting or must be deemed as constituting an association, a company in partnership or an agents relationship between the MINISTER on one part and the COMPANY on the other.

11.2 The MINISTER reserves himself the right to allocate all the repayments specified by the agreement hereby to other projects of financial assistance for mining development.

11.3 Any modification to the agreement hereby must be agreed in writing by both parties.

12. ADDRESSES

The requests, decisions or information mentionned in the agreement hereby must be sent in wrinting or by any other means of telecommunication and, unless heard to the contrary, addressed to the party concerned to the following address:

Ministry of Natural Resources of Quebec

Associated Deputy Minister (Mines)

5700, 4th Avenue West, office A-211

Charlesbourg (Quebec) G1H 6R1

McKenzie Bay Resources Ltd

635, Perreault Street

Rouyn-Noranda, QC

J9X 3E1

This agreement is deemed concluded at the date of the last signature as the parties did not sign in the presence of each other.

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IN WITNESS WHEREOF, THE PARTIES HAVE SIGNED IN TRIPLICATE:

	
MCKENZIE BAY

RESOURCES LTD.
	
By: /s/

President
	 	 
	 	 
	
WITNESS
	
By: /s/

	 	 
	 	 
	
The July 24, 2001
	
In: Rouyn-Noranda, Quebec

	 	 
	 	 
	
THE MINISTER
	
By: /s/

Associated deputy minister (Mines)
	 	 
	 	 
	
WITNESS
	
By: /s/

	 	 
	 	 
	
The July 26, 2001
	
In:McKenzie Bay Exhibit 10.9 to Form 10-Q (1st QTR 2003)

EXHIBIT 10.9

EMPLOYMENT AGREEMENT entered into on January 6 2003, in the City of Toronto, province of Ontario.

	
BETWEEN:
	
JAN MRACEK, domiciled and residing at 169 Ross Lane, Oakville, Ontario, L6H 5K3;

	
 
	
 

	
 
	
(hereinafter referred to as the "Employee")

	
 
	
 

	
AND:
	
McKENZIE BAY RESOURCES LTD., a corporation duly incorporated under the Ontario Business Corporations Act, having its registered office at 143 Windsor Avenue, London, Ontario, N6C 2A1, represented herein by Gary Westerholm, director, duly authorized as he so declares;

	
 
	
 

	
 
	
(hereinafter referred to as "MBR")

WHEREAS MBR wishes to retain the Employee;

WHEREAS the Employee and MBR are desirous of entering into an agreement for the Employee's employment, all subject to the terms and conditions set forth in this Agreement;

WHEREAS MBR is a wholly-owned Subsidiary of McKenzie Bay International, Ltd. ("MKBY");

NOW IT IS HEREBY AGREED:

	
1.
	
INTERPRETATION

	
 
	
 

	
1.1
	
Definitions

	
 
	
 

	
 
	
In this Agreement, the following words and expressions have the respective meanings ascribed to them below:

	
 
	
(a)
	
"Affiliate" with respect to a Person means a Person that controls, is controlled by or under common control with such Person. For purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meaning collative to the foregoing;

	
 
	
 
	
 

	
 
	
(b)
	
"Agreement" means this employment agreement;

	
 
	
 
	
 

	
 
	
(c)
	
"Board of Directors" means the board of directors of MBR;

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(d)
	
"Business" means the mining and processing of vanadium compounds, including vanadium-based electrolyte and the marketing of vanadium-based electricity energy solutions, including uninterrupted power, off-grid power applications of all types and vanadium-based energy storage applications.;

	
 
	
 
	
 

	
 
	
(e)
	
"Cause" shall include, but not be limited to the following, as a basis for termination of employment, (i) wilful misconduct involving bad faith by the Employee in respect of his obligations under this Agreement, which misconduct causes or is intended by the Employee to cause significant injury to MBR, (ii) gross malfeasance, (iii) conduct by Employee which constitutes a breach of the Employee's fiduciary duty or (iv) repeated refusal by the Employee to perform reasonable and lawful job assignments which are not materially inconsistent with his duties and responsibilities under this Agreement and such failure continues for a period of ten (10) days after MBR has given the Employee written notice of such failure and requested the Employee to remedy such failure.

	
 
	
 
	
 

	
 
	
(f)
	
"Commencement Date" means February 1, 2003;

	
 
	
 
	
 

	
 
	
(g)
	
"Disability" shall mean, with respect to the Employee, being physically or mentally disabled, whether totally or partially, so that he is substantially unable to perform his duties under this Agreement for a longer period than twelve (12) consecutive months, or if he shall be disabled at different times for more than twelve (12) months (whether working days or not) in any one period of eighteen (18) consecutive months;

	
 
	
 
	
 

	
 
	
(h)
	
"Discoveries and Works" includes by way of example but without limitation, intellectual property, trade secrets and other confidential information, patents and patent applications, trademarks and trademark registrations and applications, service marks and service mark registrations and applications, trade names, copyrights and copyright registrations and applications;

	
 
	
 
	
 

	
 
	
(i)
	
"Employment Year" means the period beginning on October 1, 2002 and ending on September 30, 2003, and each consecutive twelve-month period;

	
 
	
 
	
 

	
 
	
(j)
	
"Parties" means MBR and the Employee and "Party" means one or the other as the case may be;

	
 
	
 
	
 

	
 
	
(k)
	
"Person" means any individual, corporation, proprietorship, firm, partnership, limited partnership, limited liability company, trust, association or other entity;

	
 
	
 
	
 

	
 
	
(l)
	
"Restriction Period" means the period of time covering the Term plus a period equivalent to three (3) years following Employee's Termination Date;

	
 
	
 
	
 

	
 
	
(m)
	
"Subsidiary" means a corporation controlled by MBR, or by another subsidiary of MBR;

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(n)
	
"Term", "Initial Term", and "Additional Term" shall have the meaning set forth in Section 4;

	
 
	
 
	
 

	
 
	
(o)
	
"Termination Date" means the effective date of the Employee's termination of employment with MBR, regardless of the reason;

	
 
	
 
	
 

	
 
	
(p)
	
"Territory" means the world.

	
2.
	
EMPLOYMENT

MBR hereby employs the Employee as Director of Technical Processes for MBR, as well as other duties MBR may from time to time request, without additional compensation. The Employee hereby accepts such employment and appointment from MBR upon the terms and conditions set forth in this Agreement, and represents to MBR that the Employee has the required skills and experience to perform the duties of and required by a Director of Technical Processes.

	
3.
	
DUTIES AND RESPONSIBILITIES

	
 
	
 

	
3.1
	
During the Term of this Agreement, the Employee shall devote his full time and efforts to the performance of his duties and responsibilities under this Agreement and to the business and affairs of MBR, its Subsidiaries and Affiliates, in general, and the Employee shall use his best efforts to promote the interests thereof and shall faithfully and to the best of his ability serve as the Director of Technical Processes of MBR.

	
 
	
 

	
3.2
	
It is expressly understood and agreed that the Employee shall not engage in any other business or business opportunity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, provided however that:

	
 
	
(a)
	
the Employee may engage in personal, charitable, professional and investment activities to the extent such activities do not conflict or interfere with the Employee's duties and obligations under this Agreement or Employee's ability to perform his duties and responsibilities under this Agreement; and

	
 
	
 
	
 

	
 
	
(b)
	
the Employee shall not be prevented from investing his assets in such form or manner as will not require any substantial amount of time or services on the part of the Employee in the operation of the affairs of the enterprises in which such investments are made.

	
3.3
	
The Employee shall comply with all lawful and reasonable instructions as provided by other MBR employees and superiors, as well as the Board of Directors of MBR.

	
 
	
 

	
3.4
	
The Employee shall execute his duties in accordance with the rules, regulations, policies and guidelines governing the Business.

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3.5
	
The Employee shall be subject to the direction of, and report only to, the Board of Directors of MBR.

	
 
	
 

	
3.6
	
The Employee shall also perform duties commensurate with his position and such specific duties and services as the Board of Directors shall reasonably request consistent with the Employee's position.

	
 
	
 

	
3.7
	
It is contemplated that the Employee will be obliged from time to time and for reasonable period of time to travel in the performance of his duties and obligations under this Agreement. However, the principal place of employment of the Employee which the Employee shall report for work will be a location to be determined in the Toronto, Ontario area.

	
 
	
 

	
3.8
	
The Employee will attend the quarterly directors' meetings of MBR and provide formal progress updates. The Employee's performance review will be incorporated in the process at the end of the first six (6) month period and twelve (12) month period during the Initial Term and Employee will be provided with a report in relation thereto.

	
 
	
 

	
 
	
 

	
4.
	
TERM

Unless sooner terminated as provided for in this Agreement, the terms of the Employee's employment shall commence on February 1, 2003 and shall continue for three (3) years, less four (4) months (the "Initial Term"), provided, however, that the Initial Term of the Employee's employment under this Agreement shall automatically be extended for additional periods of twelve (12) months each (an "Additional Term") unless and until either MBR or the Employee shall have given the other notice, not less than three (3) months prior to the expiration of the Initial Term or any subsequent Additional Term, of the termination by the notifying party of the Employee's employment effective as of the next succeeding anniversary date of the expiration of the Initial Term or Additional Term (the Initial Term and any Additional Term(s) are collectively referred to as the "Term" in this Agreement).

	
5.
	
COMPENSATION

During the Term of this Agreement, MBR shall pay to the Employee an annual base salary of one hundred and fifty thousand Canadian dollars ($150,000 CDN). Such salary shall be paid to the Employee in monthly instalments of $12,500.00 CDN (less applicable taxes and other deductions at source), on the first business day of each month.

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6.
	
EXPENSES

MBR shall reimburse the Employee for all necessary and reasonable expenses incurred by him in the performance of his duties under this Agreement. The Employee shall, on being so required, provide MBR with vouchers or other evidence of actual payment of the said expenses in a form satisfactory to MBR.

	
7.
	
BENEFITS

	
 
	
 

	
7.1
	
Employee Plans

	
 
	
 

	
 
	
During the Term of this Agreement, the Employee shall participate in all employee benefit and insurance plans or programs established by MBR in its full discretion and from which he is not excluded from participating by reason of the terms and conditions in the respective plans or programs.

	
 
	
 

	
7.2
	
Vacation

	
 
	
 

	
 
	
The Employee shall be entitled to four (4) weeks paid vacation in each Employment Year to be taken at such times as may be appropriate having regard to the requirements of MBR's business. The Employee shall not be entitled to carry forward from one year to another untaken vacation time unless expressly agreed between MBR and the Employee.

	
8.
	
STOCK OPTIONS

As a performance incentive, the Employee will be issued three (3) stock options to purchase MKBY's common shares under MKBY's Stock Option Plan, subject to the approval of the appropriate regulatory authorities, for a period of seven (7) years commencing on the Commencement Date. Stock options will be granted under a stock option agreement to the Employee in accordance with the following milestones and conditions:

	
 
	
Milestones for Vesting of

Option
	
Number of Common Shares under

Option
	
Exercise Price

	
 
	
Upon the commencement of

production from a pilot

production plant
	
50,000
	
$1.00 U.S./share

	
 
	
Upon the commencement of

construction of the Lac Doré

facilities
	
75,000
	
$1.30 U.S./share

- 6 -

	
 
	
Milestones for Vesting of

Option
	
Number of Common Shares under

Option
	
Exercise Price

	
 
	
Upon the commencement of

commercial production from Lac Doré

facilities
	
125,000
	
$1.30 U.S./share

	
9.
	
RETURN OF DOCUMENTS AND PROPERTY

Within twenty-four (24) hours of the termination of Employee's employment with MBR, or at anytime upon the request of MBR, Employee (or his heirs or personal representatives) shall deliver to MBR (a) all documents and materials (including without limitation, computer files) containing trade secrets or other confidential information relating to the business and affairs of MBR, and (b) all documents, materials and other property (including, without limitation, computer files) belonging to MBR, which in either case are in the possession or under the control of Employee (or his heirs or personal representatives).

	
10.
	
DISCOVERIES AND WORKS

All Discoveries and Works made or conceived by Employee during his employment by MBR, jointly or with others, that relate to the present or anticipated activities of MBR, or are used or usable by MBR shall be owned by MBR. Employee shall (a) promptly notify, make full disclosure to, and execute and deliver any documents requested by MBR to evidence or better assure title to Discoveries and Works in MBR, as so requested, (b) renounce any and all claims, including but not limited to claims of ownership and royalty, with respect to all Discoveries and Works and all other property owned or licensed by MBR, (c) assist MBR in obtaining or maintaining for itself at its own expense Canadian and foreign patents, copyrights, trade secret protection or other protection of any and all Discoveries and Works, and (d) promptly execute, whether during his employment with MBR or thereafter, all applications or other endorsements necessary or appropriate to maintain patents and other rights for MBR and to protect the title of MBR thereto, including but not limited to assignments of such patents and other rights. Any Discoveries and Works which, within six (6) months after the Termination Date, are made, disclosed, reduced to a tangible or written form or description, or are reduced to practice by Employee and which pertain to the business carried on or products or services being sold or developed by MBR at the time of such termination shall, as between Employee and MBR be presumed to have been made during Employee's employment by MBR.

	
11.
	
TERMINATION OF EMPLOYEE'S EMPLOYMENT

	
 
	
 

	
11.1
	
Death

The Employee's employment under this Agreement shall terminate upon his death. In the event of the termination of the Employee's employment as a result of his death, MBR shall promptly pay to

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any one or more beneficiaries designated by the Employee pursuant to a notice to MBR or, failing such designation, to the Employee's estate, the annual base salary provided for in this Agreement through the conclusion of the month in which such termination occurs.

	
11.2
	
Disability

The Employee's employment under this Agreement may be terminated as a result of Disability at the option of MBR by notice to the Employee, such termination to be effective upon the receipt by the Employee of such notice. In the event of the termination of the Employee's employment as a result of Disability, MBR shall pay the Employee one (1) times his full annual base salary less any credit for sick pay or other benefits received by the Employee deriving from any private medical insurance or other similar arrangements entered into by MBR.

	
11.3
	
Termination for Cause by MBR

The Employee's employment under this Agreement may be terminated by MBR for Cause. In the event that the Employee's employment under this Agreement shall validly be terminated by MBR for Cause pursuant to this Section 11.3, MBR shall promptly pay accrued but unpaid salary and reimburse or pay any other accrued but unpaid amounts due under this Agreement as of the date of termination, and thereafter MBR shall have no further obligations under this Agreement. Termination for Cause of Employee's employment may require the immediate departure of Employee from MBR's premises.

	
11.4
	
Termination without Cause

MBR may terminate the Employee's employment at any time or any reason other than those specified in subsections 11.1, 11.2, 11.3 and 11.5 hereof or for no reason whatsoever, by paying the Employee, in lieu of applicable notice, the amount equivalent to his salary for the remaining months of the Term, on a prorated basis, in effect at the time of Employee's termination, to be paid within forty-five (45) days after the Termination Date. Termination without Cause of Employee's employment may require the immediate departure of Employee from MBR's premises.

	
11.5
	
Termination resulting from Sale of Business, etc.

If there should be (i) a sale of substantially all the assets of MBR to another Person, (ii) a merger, amalgamation or consolidation of MBR with another Person to form a new entity or (iii) a change in control of MBR, and as a result the Employee's employment hereunder is terminated but the acquirer or the new entity, as the case may be, offers the Employee employment on terms and conditions that are essentially the same or better than those provided under this Agreement, in the event the Employee refuses that offer of employment, he will not be entitled to any compensation hereunder. However, if there should be (i) a sale of all or substantially all the assets of MBR to another person, (ii) a merger, amalgamation or consolidation of MBR with another person to form a new entity or (iii) a change in control of MBR, and as a result the Employee's employment hereunder is terminated, the Employee shall be entitled to two (2) years' annual salary plus any amount owed vacation pay.

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12.
	
CONFLICT OF INTEREST

During the Term of this Agreement, the Employee shall not, either directly or in conjunction with any person, firm, association, syndicate, company or corporation as principal, agent, shareholder, or in any other manner whatsoever, carry on or be engaged in, or advise, lend money to, guarantee the debts or obligations of, or permit his name or any part of it to be used or employed by any person, firm, association, syndicate, company or corporation engaged in any business in competition with the business then carried on by MBR or a Subsidiary, provided that the holding of not more than two per cent (2%) of the issued shares of a public company listed on any recognized stock exchange in Canada or traded in the Canadian over-the-counter market, shall not be deemed a breach of this covenant.

	
13.
	
CONFIDENTIALITY

During the Term of this Agreement and for a period of three (3) years thereafter, the Employee shall keep secret and retain in strictest confidence, and shall not use for his benefit or for the benefit or others, directly or indirectly, any and all confidential information relating to MBR and its Affiliates of which the Employee shall obtain knowledge by reason of his employment under this Agreement, including, without limitation, trade and business secrets or any other non-public or proprietary information concerning the business, customer lists, financial plans or projections, pricing policies, marketing plans or strategies, business acquisition or divestiture plans, new personnel acquisition plans, technical processes, inventions and other research projects, and except in connection with the performance of his duties under this Agreement, he shall not disclose any such information to anyone outside MBR and any of its Affiliates, except as required by law (provided prior written notice is given by the Employee to MBR) or except with the prior written consent of MBR, unless such information is known generally to the public or the trade through sources other than the unauthorized disclosure by the Employee. 

	
14.
	
NON-COMPETITION AND NON-SOLICITATION

	
 
	
 

	
14.1
	
Employee Plans

	
 
	
 

	
 
	
The Employee acknowledges and understands that (i) he has access to MBR's and MKBY' clients, channels for developing clients and recruiting executives for employment, and other confidential information of MBR and MKBY, (ii) that he will acquire knowledge and expertise in areas of MBR's business, which are highly confidential in nature and important to MBR's immediate and future business goals, as well as those of MKBY and its Subsidiaries and Affiliates, worldwide; (iii) that he may be able to utilize his knowledge, client access and expertise following termination of his employment with MBR, to the detriment of MBR, MKBY and its Subsidiaries and Affiliates, worldwide; (iv) he has direct substantial responsibility to maintain MBR's and MKBY's business relationship with clients of MKBY and MBR, whose affairs he handles, (v) the non-competition and non-solicitation provisions set forth in this Section 14 constitute a material part of the consideration received by MBR under this 

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Agreement, (vi) due to the specific nature and limited market for MBR's activities, the definition of Territory as set forth in subsection 1.1(p) hereof is reasonable and justified, (vii) it would be unfair to MBR and MKBY if the Employee were to appropriate for himself or for others the benefits of MBR's and MKBY's many years of developing such business relationships, especially when the Employee enjoys a relationship with clients of MBR and MKBY as a result of his being introduced to the client's personnel as the representative of MBR, (viii) it would be unfair to MBR and MKBY if the Employee were to appropriate for himself or for others the benefits of the business, personnel and other confidential information which MBR and MKBY has developed in the conduct of its business, and (viv) it is therefore fair that reasonable restrictions as set forth below should be placed on certain activities of the Employee after his employment with MBR terminates.

	
 
	
 

	
14.2
	
The Employee shall not, without the prior written consent of MBR, at any time during the Restriction Period, either individually or in partnership or jointly or in connection with each other or any Person, as principal, agent, consultant, lender, contractor, employer, employee, investor or shareholder, or in any other manner, directly or indirectly, anywhere within the Territory:

	
 
	
(a)
	
advise, manage, carry on, establish, acquire control of, work for, perform, render, or engage in, any business or service or activity that is similar to or competitive with the Business or any portion of the Business; or

	
 
	
 
	
 

	
 
	
(b)
	
invest in or lend money to, or guarantee the debts or obligations of, any business or service or activity, or any Person engaged in any business or service or activity, that is similar to or competitive with the Business or any portion of the Business; or

	
 
	
 
	
 

	
 
	
(c)
	
permit the Employee's name or any part thereof to be used or employed by any Person that operates, is engaged in or has an interest in any business or service or activity that is similar to or competitive with the Business or any portion of the Business. Without limiting the effect of the foregoing, competing with or competitive with the Business, includes without limitation, directly or indirectly, engaging in or permitting the solicitation or sale of any products or services of the type included within the meaning of term Business as of the termination of the Employee's employment with MBR.

	
14.3
	
The Employee shall not during the Restriction Period, without the written consent of MBR, directly or indirectly (as owner, principal, agent, partner, officer, employee, independent contractor, consultant, stockholder, or otherwise), (i) solicit any Client (as this term is defined below) for a purpose or objective of providing to such Client, or obtaining an engagement from such Client to provide, any services, businesses or activities included within the term or (ii) solicit for employment or otherwise induce any employee employed by MBR or any of its Affiliates at the date of termination of the Employee's employment with MBR to leave such employ or offer to employ or employ such employee. The term "Client" shall mean one or more of the following:

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(a)
	
any current or former client or customer of MBR or its Affiliates;

	
 
	
 
	
 

	
 
	
(b)
	
any current client or current customer of MBR or its Affiliates if at any time since the Commencement Date the Employee had contact with such client or customer, or personally solicited such client or customer, or rendered services to such client or customer, or otherwise developed any relationship with such client or customer, or

	
 
	
 
	
 

	
 
	
(c)
	
any former client or former customer of MBR or its Affiliates who was, during the thirty-six (36) months preceding the Termination Date, a client or customer of MBR or its Affiliates, if at any time since the Commencement Date the Employee had contact with such client or customer, or solicited such client or customer, or rendered services to such client or customer, or otherwise developed any relationship with such client or customer.

	
14.4
	
Upon the termination of the Employee's employment for whatever reason, the Employee shall deliver to MBR all documents, papers, records, accounts of all and any description relating to the affairs of MBR and its Affiliates within his possession or under his control, it being the intention of the Employee and MBR that all such notes or memoranda made by the Employee during the course of his employment under this Agreement shall be the property of MBR and its Affiliates and shall be left at its registered office or principal place of business upon the termination of the Employee's employment.

	
 
	
 

	
15.
	
WITHHOLDING

MBR shall be entitled to withhold from any and all amounts payable to the Employee under this Agreement such amounts as from time to time be required to be withheld pursuant to applicable tax laws and regulations.

	
16.
	
GENERAL PROVISIONS

	
 
	
 

	
16.1
	
Further Assurances

	
 
	
 

	
 
	
Each of the parties upon the request of any other party, whether before or after the date hereof, shall do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered all such further acts, deeds, documents, assignments, transfers, conveyances, powers of attorney and assurances as may be reasonably necessary or desirable to effect complete consummation of the transactions contemplated by this Agreement.

	
 
	
 

	
16.2
	
Successors in Interest

	
 
	
 

	
 
	
This Agreement and the provisions hereof shall enure to the benefit of and be binding upon the Parties and their respective successors and assigns.

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16.3
	
Notices

	
 
	
 

	
 
	
Any notice, direction or other instrument required or permitted to be given hereunder shall be in writing and given by delivery or sent by (i) registered or certified mail, (ii) reputable overnight courier, (iii) personal delivery, (iv) telecopier or similar telecommunication device and addressed:

	
 
	
(a)
	
in the case of MBR at:

	
 
	
 
	
 

	
 
	
 
	
McKenzie Bay Resources Ltd.

c/o McKenzie Bay International Ltd.

975 Spaulding Avenue

Grand Rapids, Michigan

U.S.A., 49546

Attention: Mr. Greg Bakeman

Telephone: (616) 940-3800

Telecopier: (616) 940-9194

e-mail: gbakeman@mckenziebay.com

	
 
	
 
	
 

	
 
	
(b)
	
in the case of the Employee at:

	
 
	
 
	
 

	
 
	
 
	
Dr. Jan Mracek

169 Ross Lane

Oakville, Ontario, L6H 5K3

Telephone: (905) 257-6279

	
 
	
Any notice, direction or other instrument given as aforesaid shall be deemed to have been effectively given and received, if sent by mail on the fourth (4th) business day following such mailing, if sent by telecopier or similar telecommunications device on the next business day following such transmission or, if delivered, to have been given and received on the date of such delivery. Any party may change its address for service by written notice given as aforesaid.

	
 
	
 

	
16.4
	
Amendments

	
 
	
 

	
 
	
This agreement may not be amended except by written instrument duly executed by or on behalf of all parties hereto.

	
 
	
 

	
16.5
	
Governing Laws

	
 
	
 

	
 
	
This Agreement shall be governed by and construed in accordance with the Laws of the Province of Ontario and the Laws of Canada applicable therein. The Parties agree to submit to the jurisdiction of the Courts of Ontario, District of Toronto.

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16.6
	
Gender

	
 
	
 

	
 
	
Any reference in this Agreement to any gender shall include all genders and words used herein importing the singular number only shall include the plural and vice versa.

	
 
	
 

	
16.7
	
Headings

	
 
	
 

	
 
	
The division of this Agreement into articles, sections, subsections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in the construction or interpretation hereof.

	
 
	
 

	
16.8
	
Severability

	
 
	
 

	
 
	
Any article, section, subsection or other subdivision of this Agreement or any other provision of this Agreement which is, or becomes, illegal, invalid or unenforceable shall be severed herefrom and shall be ineffective to the extent of such illegality, invalidity or unenforceability and shall not affect or impair the remaining provisions hereof, which provisions shall be severed from any illegal, invalid or unenforceable article, section, subsection or other subdivision of this Agreement or any other provision of this Agreement.

	
 
	
 

	
16.9
	
Waiver

	
 
	
 

	
 
	
No waiver of any of the provisions of this Agreement shall be deemed to constitute a waiver of any other provision (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided in a written document duly executed by the party to be bound thereby.

	
 
	
 

	
16.10
	
Language

	
 
	
 

	
 
	
The Parties hereby acknowledge that they have requested that this Agreement and all related documents be drawn up in the English language. Les parties aux présentes reconnaissent qu'elles ont exigé que la présente convention et tous les documents qui s'y rattachent soient rédigés en anglais.

IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first above written.

	
 
	
 
	
McKENZIE BAY RESOURCES, LTD.

	
 
	
 
	
 

	
 
	
 
	
 

	
 
	
per:
	
/s/

	
 
	
 
	
Gary Westerholm, Director

	
 
	
 
	
 

	
 
	
 
	
 

	
/s/

	
 
	
/s/

	
Witness
	
 
	
JAN MRACEK

- 13 -

INTERVENTION

	
 
	
McKENZIE BAY INTERNATIONAL, LTD.

	
 
	
 

	
 
	
 

	
Per:
	
/s/

	
 
	
Gary Westerholm, Director

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