Employment Agreement effective as of December 12, 2011, between Ivanhoe Energy Inc. and Mr. Carlos Cabrera

 

Ivanhoe Energy Inc. a corporation continued under the laws of the Yukon Territory, having its principal executive office at Suite 654 – 999 Canada Place, Vancouver, British Columbia

 

(the "Company")

 

 

556 Alice Drive

 

Northbrook, Illinois 60062

 

(the "Executive")

(A)

the Company is in the business of oil and gas development and production using proprietary upgrading technology;

(B)

the Company wishes to engage the Executive as the Executive Chairman of the Company.

(C)

1.1

In this Agreement, the following terms shall have the meanings ascribed thereto:

 

(a)

“Affiliate” means a legal entity or entities, or person or persons, that (i) directly or indirectly controls the Company; (ii) is controlled, directly or indirectly, by the Company; or (iii) is under direct or indirect common control by the legal entity or entities, or person or persons, that control the Company;

 

(b)

“Agreement” means this agreement and all amendments made to it by written agreement between the Company and the Executive;

 

(c)

“Board” means the board of directors of the Company;

 

(d)

“Business Day” means a day other than Saturday, Sunday or statutory holiday in British Columbia;

 

(e)

“Business” has the meaning ascribed thereto in Section 18.1;

 

(f)

“Change of Control” means an event occurring after the Commencement Date pursuant to which:

 

(i)

 

(ii)

 

(iii)

 

(iv)

 

(g)

“Compensation Committee” means the Compensation and Benefits Committee of the Company;

 

(h)

“Disability” means a physical or mental incapacity of the Executive that has prevented the Executive from performing the duties customarily assigned to the Executive for one hundred and eighty (180) days, whether or not consecutive, out of any twelve (12) consecutive months and that in the opinion of the Board is likely to continue; and

 

(i)

“HTL™ Business” means the upgrading of heavy oil or bitumen by the use of the Company’s patented HTL™ technology, in a field, refinery or research and development setting so as to improve the quality of heavy oil, bitumen or refinery feed stocks.

1.2

For the purposes of this Agreement, except as otherwise expressly provided:

 

(a)

“this Agreement” means this Agreement, including any schedules hereto, and not any particular part, section or other portion hereof, and includes any agreement, document or instrument entered into, made or delivered pursuant to the terms hereof, as the same may, from time to time, be supplemented or amended and in effect;

 

(b)

all references in this Agreement to a designated “part”, “section” or other subdivision or to a schedule are references to the designated part, section or other subdivision of, or schedule to, this Agreement;

 

(c)

the words “hereof”, “herein”, “hereto” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular part, section or other subdivision or schedule unless the context or subject matter otherwise requires;

 

(d)

the division of this Agreement into parts, sections and other portions and the insertion of headings are for convenience of reference only and are not intended to interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof;

 

(e)

the singular of any term includes the plural and vice versa, and the use of any term is generally applicable to any gender and, where applicable, a body corporate, firm or other entity, and the word “or” is not exclusive and the word “including” is not limiting whether or not non-limiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto; and

 

(f)

all references to “approval”, “authorization”, “consent”, or “direction” in this Agreement means written approval, authorization consent or direction.

2.1

The Company hereby employs the Executive and the Executive shall perform services on behalf of the Company as its employee as provided herein during the Period of Active Employment (as hereinafter defined).

3.1

In this Agreement, “Period of Active Employment” shall mean the period beginning on December 12, 2011 (the “Commencement Date”) and terminating on December 31, 2014, unless terminated earlier upon the occurrence of any one of the following:

 

(a)

the termination of the Executive’s employment by the Company for cause as provided in Section 14.1 hereof;

 

(b)

the resignation by the Executive pursuant to Section 14.2;

 

(c)

the termination of this Agreement pursuant to Section 14.3 or 14.4; or

 

(d)

the death of the Executive.

4.1

The Company shall employ the Executive as the Executive Chairman of the Company, which shall be the chief executive position for the Company.  During the Period of Active Employment, the Executive shall perform such duties and have such authority as would customarily be performed and exercised by the most senior executive of an international oil and gas company similar in nature and size to the Company, including:

 

(a)

overall guidance and direction of the Company as a whole, and the provision of guidance and support for the President & Chief Operating Officer and the Chief Executive Officer of Ivanhoe Energy Canada Inc.; and

 

(b)

executive direction and control of the Company’s operations outside of Canada; and

 

(c)

such additional duties and authority as the Board, in consultation with the Executive, may from time to time assign or delegate to the Executive.

5.1

The Executive’s place of work will be a small satellite office in Chicago, with the understanding that the Executive will spend the time required by the duties of the Executive in each of the Company’s offices in Calgary, Vancouver, Houston and Quito and/or such other place or places as determined by the Board in consultation with the Executive but the Company may require the Executive to work at any place throughout the world on a temporary basis. Such requirement will be agreed upon in consultation with the executive and such duties will be commensurate with the duties of the Executive.

6.1

The Executive shall devote one hundred percent (100%) of the Executive’s business time to the Executive’s duties hereunder with the exception of time in support of the Executive’s ongoing non-executive roles with FACTS, Honeywell UOP, SOCAR and China NICE. The Executive may, however, serve as a member of the board of directors and/or officer of another company if the Board or an appropriate committee thereof, determines in its sole discretion that such membership is not adverse to the interests of the Company. Companies the Executive currently serves on the Boards of are listed in Schedule “A”.

8.1

The Company will initially pay the Executive the sum of U.S.$550,000 per year, payable in semi-monthly installments, subject to any and all applicable payroll and tax deductions, (the “Base Salary’).  The Base Salary shall be subject to annual reviews and, as appropriate in connection with performance reviews of the Executive, increases as determined by the Board in its discretion on the advice of the Compensation Committee.  The Executive shall also be eligible to receive discretionary performance bonuses under Company incentive plans, any such award being determined by the Board it its discretion on the advice of the Compensation Committee.

9.1

The Company will provide the Executive and his eligible dependent immediate family members with the same comprehensive basic medical, extended health & dental, life and dependent life insurance & long term disability insurance as are available to the other executive officers of the Company, effective immediately on employment.

10.1

The Executive holds incentive stock options to purchase common shares of the Company, pursuant to the Company’s Employees’ and Directors’ Equity Incentive (the “Plan”), at a price per common share determined in accordance with the terms of the Plan, as set out in Schedule “B”, pursuant to Incentive Plan Stock Option Agreements as set out therein (“Executive Option Agreements”).

10.2

Upon signature of this Agreement, the Executive be granted 650,000 incentive stock options as long-term incentive compensation, such options to be the subject of a separate Executive Option Agreement between the Executive and the Company, with terms consistent with the Plan and the Company’s normal vesting policies except that if the Period of Active Employment hereunder is not extended beyond December 31, 2014, all options that are then unvested shall vest immediately as if the Executive’s employment had been terminated without cause pursuant to Section 14.3 hereof, subject to the Executive’s performance being judged by the Board to have been fully satisfactory.

10.3

The Executive will be eligible to receive, as determined by the Board in its discretion on the advice of its Compensation Committee, additional incentive stock option grants from time to time when the Compensation Committee determines that it is appropriate to grant additional incentive stock options to the Executive. All such grants will be made pursuant to, and in accordance with the terms of the Plan. References to “stock options” herein refer to stock options to purchase common shares of the Company.

11.1

The Company will reimburse the Executive in accordance with its normal policies and practices for the Executive’s travel and other expenses or disbursements reasonably and necessarily incurred by the Executive in connection with the performance of his duties under this Agreement.  The Executive will furnish the Company with an itemized account of his expenses in such form or forms as may reasonably be required by the Company and at such times or intervals as may be required by the Company.

12.1

The Executive shall be solely responsible for paying all income taxes and other taxes payable in respect of any payments made to, or benefits or perquisites provided to, the Executive in connection with this Agreement or the Executive’s employment with the Company.

13.1

The Executive will be entitled to a paid vacation of 6 weeks per annum based on a common anniversary date of January 1.  The terms of this Agreement, will be calculated from the date of commencement of employment set forth in Section 2 herein and prorated for the first year of employment. This vacation must be taken on dates which do not adversely compromise the Executive’s performance of his duties under this Agreement.

14.1

Termination for Cause

 

(a)

the Executive’s failure to carry our his duties hereunder in a competent and professional manner;

 

(e)

the Executive’s breach of fiduciary duty to the Company;

 

(f)

the Executive’s material breach of this Agreement or gross negligence in carrying out his duties under this Agreement;

 

(g)

 

(j)

a declaration of the Executive’s bankruptcy by a court of competent jurisdiction.

14.2

Resignation by the Executive

14.3

Termination without Cause or for Disability

14.4

Change of Control

 

(a)

If a Change of Control (as defined herein) occurs and, at any time during the twelve-month period following the Change of Control, either: (i) there occurs a termination of this Agreement by the Company other than for Cause or Disability, or (ii) the Executive resigns employment for Good Reason (as defined below in Section 14.4(b)), the Executive shall be entitled to receive a lump sum cash payment equal to the product of: (A) two (2) multiplied by (B) the sum of (1) the Executive’s then current Base Salary and (2) the average of the two highest value aggregate annual performance bonuses paid to the Executive by the Company during the two completed fiscal years of the Company in which the Executive was employed by the Company that preceded the date of such termination.  For purposes of the foregoing calculation, a fiscal year in which no bonus is paid will be included in the calculation even if it constitutes one of the two highest value aggregate annual performance bonuses paid.  The payments provided in this Section 14.4 shall be inclusive of the Executive’s entitlement to notice and severance pay at common law or by statute.  The Company shall not be obligated to make any further payments under this agreement, except for payment of any reasonable expense due and owing pursuant to Section 11.  Notwithstanding the foregoing, all of the Executive’s unexercised stock options, vested or unvested, will be deemed to have vested and will remain exercisable for a period of six (6) months from the date that the Executive’s employment terminates, unless any such options expire earlier in accordance with their terms.

 

(b)

For purposes of this Section 14.4, “Good Reason” means any of the following events, unless the Executive gives his express written consent thereto:

 

(i)

 

(ii)

a material reduction by the Company in the Executive’s annual base salary as in effect immediately prior to a Change of Control;

 

(iii)

 

(iv)

 

(v)

 

(vi)

the Company repudiating any of its material obligations under this Agreement;

 

(vii)

 

(viii)

any other action by the Company which would constitute constructive dismissal at law;

14.5

If this agreement is terminated in accordance with Section 14.3 or 14.4 the benefits provided to the Executive shall continue for the amount of months of base salary the Executive is entitled to following the termination of this Agreement or until the Executive commences alternative

14.6

Upon termination or resignation of the Executive’s employment pursuant to this Agreement, this Agreement and the employment of the Executive shall be wholly terminated with the exception of Sections 15 to 19 of this Agreement and any other clauses specifically contemplated to continue in full force and effect beyond the termination of this Agreement.  For greater certainty, the payments or other compensation provided for on termination under Sections 14.3 and 14.4 are not cumulative and only one of such Sections will be operative in the event of a termination.

14.7

The terms set out in this Agreement, provided that such terms are satisfied by the Company, are in lieu of (and not in addition to) and in full satisfaction of any and all other claims or entitlements which the Executive has or may have upon the termination of the Executive’s employment pursuant to this Agreement and the compliance by the Company with these terms will affect a full and complete release of the Company and its Affiliates, associates and related companies from any and all claims which the Executive may have for whatever reason or cause in connection with the Executive’s employment and the termination of it, other than those obligations specifically set out in this Agreement. In agreeing to the terms set out in this Agreement, the Executive specifically agrees to execute a formal release document to that effect and will deliver upon request appropriate resignations from all offices and positions with the Company and its Affiliates if, as and when requested by the Company upon termination of the Executive’s employment within the circumstances contemplated by this Agreement.

15.1

Except in the normal and proper course of the Executive’s duties hereunder, the Executive will not use, for the Executive’s own account or disclose to anyone else, during or for a period of two2 years after the Period of Active Employment, any confidential or proprietary information or material relating to the Business or the Company, its operations, or the Business or operations of an Affiliate which the Executive obtains by virtue of Executive’s employment with the Company.  Confidential or proprietary information or material includes, without limitation, the following types of information or material, both existing and contemplated, regarding the Company or any Affiliates: corporate information, plans, strategies, tactics, policies, resolutions, litigation or negotiations, financial information, including debt arrangements, equity structure, investors and holdings, operational and scientific information ,technical information and personnel information, including personnel lists, resumes, personnel data, organization structure and performance evaluations, trade secrets, inventions, products, designs, know-how, formulae, methods, techniques, systems, processes, software, projects, planning data, financial results and any other information (collectively “Confidential Information”). Any of the foregoing kinds of information that belong to any other person or company but to which Executive has had access solely by reason of this employment with the Company but which the Company or any Affiliate has agreed to keep confidential are also Confidential Information.

15.2

The obligations of Executive under this section will survive the termination of Executive’s engagement for any reason or no reason, will be applicable regardless of any actual or alleged breach of this Agreement by Company, and will continue for a period of three (3) years from the end of the Period of Active Employment. The obligations of Executive under this section are in addition to, and not in limitation or pre-emption of, all other obligations of confidentiality which Executive may have to Company or any Affiliate under applicable law, including but not limited to the application of the fiduciary duties of Executive.

15.3

Notwithstanding the preceding, “Confidential Information” shall not include information which is or becomes publicly known, except for any such information that becomes publicly known because of disclosure by the Executive in violation of this Agreement. It shall not be a breach of the

16.1

The Executive agrees that all documents or property of any nature pertaining to activities of the Company and to any Affiliates, including Confidential Information, in the Executive’s possession now or at any time during the Period of Active Employment, are and shall be the property of the Company and/or an Affiliate, and that all such documents and all copies of them shall be surrendered to the Company whenever requested by the Company.  This provision shall survive termination of this Agreement.

17.1

Any business opportunities related to the business of the Company which become known to the Executive during the Period of Active Employment hereunder must be fully disclosed and made available to the Board by the Executive and the Executive agrees not to take or omit to take any action if the result would be to divert from the Company any opportunity which is within the scope of its Business as known to the Executive from time to time.

17.2

Executive will promptly disclose and assign, in writing, to the Company any inventions, improvements, or discoveries, methods, developments, software, and works of authorship, whether patentable or not, which are made, conceived, or improved by Executive, solely or jointly with others, during Executive’s employment hereunder, either during normal working hours, or outside of normal working hours (“Company Related Developments”) that (A) use equipment, supplies, facilities, trade secret information, or other Confidential Information of Company or any Affiliate, or (B) directly relate, at the time of conception, development, reduction to practice, or use, to the Rapid Thermal Pyrolysis (“RTPTM”) technology of the Company or any Affiliate (the “Technology”), or to actual research or development related to the Technology, or to the Company or any Affiliate, or (C) that result directly from any work performed by Executive for the Company or any Affiliate.

17.3

Upon request, the Executive will assist the Company and its nominees in every proper way at Company’s expense (and without additional compensation to Executive), both during Executive’s employment by the Company and thereafter, to obtain and retain for Company’s sole benefit patent protection for any and all Company Related Developments, which will remain the property of Company, its successors, assigns, or nominees, whether patented or not, and, for that purpose, upon written request by and at the expense of Company, Executive will within thirty (30) days following a request therefore execute any and all documents relating thereto that are deemed necessary by Company to the extent such request is reasonable.  All such Company Related Developments will be subject to the provision of Section 15 (regarding Confidential Information).  Notwithstanding the foregoing, in the event that, after termination of Executive’s engagement, Executive incurs expenses, provides services, or otherwise assists Company or its nominees at such Party’s request, Company shall compensate Executive therefor, with such compensation to be reasonably agreed upon by Executive and Company.  The obligations of Executive and Company under Section 18.3 will survive the termination of Executive’s engagement for any reason or no reason, will be applicable regardless of any actual or alleged breach of this Agreement by Company, and will continue indefinitely.

18.1

The Executive acknowledges that the Executive’s services are unique and extraordinary.  The Executive also acknowledges that the Executive’s position will give the Executive access to confidential information of substantial importance to the Company and its business.  During the Non-Competition Period (as defined below), the Executive shall not, either individually or in partnership or jointly or in conjunction with any other person, entity or organization, as principal, agent, consultant, lender, employee, employer, employee, investor, shareholder or in any other manner, directly or indirectly, advise, manage, carry on, establish, control, engage in, invest in, offer financial assistance or services to, or permit the Executive’s name or any part thereof to be used by, any business in North America, or any business in any jurisdiction in which the Executive knows or ought reasonably to have known that the Company is, directly or indirectly, conducting business, that competes with the HTL Business of the Company or any Affiliate, or any other business in which the Company, or an Affiliate is engaged (collectively the “Business”).  For purposes of this Agreement, “Non-Competition Period” means a period beginning on the date hereof and ending at the later of: (a) 12 months after the end of the Period of Active Employment; and (b) the date on which the Executive no longer is receiving compensation pursuant to any of the terms of this Agreement.  Nothing in this Section 18.1 shall be deemed to prevent or prohibit the Executive from owning shares in a publicly listed company as a passive investment, so long as the Executive does not own more than five per cent (5%) of the shares thereof.

18.2

The Executive agrees that during the period beginning on the date hereof and ending twelve (12) months after the Period of Active Employment, neither the Executive nor any entity with whom the Executive is at the time associated, related or affiliated shall, directly or indirectly, hire or offer to hire or entice away or in any other manner persuade or attempt to persuade any officer, employee or agent of the Business to discontinue or alter any one of their or its relationships with the Company or any Affiliate.

19.1

The Executive acknowledges that, in connection with the Executive’s employment by the Company, the Executive will receive or will become eligible to receive substantial benefits and compensation.   The Executive acknowledges that the Executive’s employment by the Company and all compensation and benefits and potential compensation and benefits to the Executive from such employment shall be conferred by the Company upon the Executive only because and on condition of the Executive’s willingness to commit the Executive’s best efforts and loyalty to the Company, including protecting the Company’s right to have its Confidential Information protected and abiding by the confidentiality, non-competition and other provisions herein.

19.2

The Executive understands the Executive’s duties and obligations as set forth in this Agreement and agrees that such duties and obligations would not unduly restrict or curtail the Executive’s legitimate efforts to earn a livelihood following any termination of the Executive’s employment with the Company.  The executive agrees that the restrictions contained in this Agreement are reasonable and valid and all defences to the strict enforcement thereof by the Company are waived by the Executive.  The Executive further acknowledges that irreparable damage would result to the Company if the restrictive covenants in this Agreement are not specifically enforced, and agrees that the Company shall be entitled to any appropriate legal, equitable, or other remedy, including injunctive relief, in respect of any failure or continuing failure to comply with the restrictive provisions contained in this Agreement.

19.3

If any court determines that any provision contained in this Agreement including, without limitation, a restrictive covenant or any part thereof is unenforceable because of the duration or geographical scope of the provision or for any other reason, the duration or scope of the provision, as the case may be, shall be reduced so that the provision becomes enforceable and, in its reduced form, the provision shall then be enforceable and shall be enforced.

19.4

The Executive acknowledges that damages would be an insufficient remedy for a breach by him of this Agreement and agrees that the Company may apply for and obtain any relief available to it in a court of law or equity, including injunctive relief, to restrain breach or threat of breach of this Agreement by the Executive or to enforce the covenants contained therein and, in particular, the covenants contained in Sections 15, 16, 17 and 18 of this Agreement, in addition to rights the Company may have to damages arising from said breach or threat of breach.

20.1

The Executive represents and warrants to the Company that the execution and performance of this Agreement will not result in or constitute a default, breach, or violation, or an event that, with notice or lapse of time or both, would be a default, breach, or violation, of any understanding, agreement or commitment, written or oral, express or implied, to which the Executive is currently a party or by which the Executive or Executive's property is currently bound.

20.2

The Executive shall defend, indemnify and hold the Company harmless from any liability, expense, or claim (including solicitor’s fees incurred in respect thereof) by any person in any way arising out of, relating to, or in connection with any incorrectness or breach of the representations and warranties in Section 20.1.

20.3

The Executive acknowledges that a breach of Section 20.1 by the Executive shall entitle the Company to terminate the Executive’s employment and this Agreement for cause.

20.4

The Company shall defend, indemnify and hold the Executive harmless from any liability, expense or claim (including solicitor’s fees incurred in respect thereof) in any way arising out of, relating to, or in connection with his performance of services for the Company, to the fullest extent permitted by applicable law. The Company shall make reasonable efforts to ensure that the Executive shall fully participate as a covered insured under the Company’s directors’ and officers’ liability insurance policy with respect to the Period of Active Employment.

21.1

This Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein and shall be treated, in all respects, as a British Columbia contract.

22.1

This Agreement, together with the Schedules and Executive Option Agreements in effect from time to time, constitutes the entire agreement between the parties hereto with respect to the relationship between the Company and the Executive and supersedes all prior arrangements and agreements, whether oral or in writing between the parties hereto with respect to the subject matter hereof.  There are no conditions, warranties, representation or other agreements between the parties in connection with the subject matter of this Agreement (whether oral or written, express or implied, statutory or otherwise) except as specifically set out in this Agreement.  In the event of an inconsistency between the terms of any Executive Option Agreement and the provisions of this Agreement, this Agreement shall govern.

23.1

No amendment to or variation of the terms of this Agreement will be effective or binding upon the parties hereto unless made in writing and signed by both of the parties hereto.

24.1

This Agreement is not assignable by the Executive.  This Agreement is assignable by the Company to any Affiliate. The Company shall also have the right to assign this Agreement to any successor (whether direct or indirect, by purchase amalgamation, arrangement, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company provided only that the Company must first require the successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  The Executive by the Executive’s signature hereto expressly consents to such assignment. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and permitted assigns and the Executive and his heirs, executors and administrators.

25.1

Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of the prohibition or unenforceability and shall be severed from the balance of this Agreement, all without affecting the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

26.1

Time shall be of the essence in all respects of this Agreement.

27.1

All rights and remedies of the parties are separate and cumulative, and none of them, whether exercised or not, shall be deemed to be to the exclusion of any other rights or remedies or shall be deemed to limit or prejudice any other legal or equitable rights or remedies or shall be deemed to limit or prejudice any other legal or equitable rights or remedies which either of the parties may have.

27.2

Any purported waiver of any default, breach or non-compliance under this Agreement is not effective unless in writing and signed by the party to be bound by the waiver.  No waiver shall be inferred from or implied by any failure to act or delay in acting by a party in respect of any default, breach or non-observance or by anything done or omitted to be done by the other party. The waiver by a party of any default, breach or non-compliance under this Agreement shall not operate as a waiver of that party’s rights under the Agreement in respect of any continuing or subsequent default, breach or non-observance (whether of the same or any other nature).

28.1

The Executive acknowledges and agrees that he has had, or has had the opportunity to obtain, independent legal advice concerning the interpretation and effect of this Agreement in connection with the execution of this Agreement and has read this Agreement in its entirety, understands its contents and is signing this Agreement freely and voluntarily, without duress or undue influence from any party. The Executive has received a fully executed counterpart copy of this Agreement.

29.1

Any notice required or permitted to be made or given under this Agreement to either party shall be in writing and shall be sufficiently given if delivered personally, by electronic transmission, or if sent by prepaid registered mail to the intended recipient of such notice at their respective

30.1

This Agreement may be executed in counterparts and shall become operative when each party has executed and delivered at least one counterpart.

 

Per:

 

Executive Co Chairman and

 

 

 

 

 

Director

Chairman, Compensation and Benefits

Committee