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17.
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Commitments, Significant Contracts and Contingencies
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Management Agreements
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As at August 31, 2016, the Company is party to the following contractual commitments with management.
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| Party |
Monthly Commitment |
| C.A.B Financial Services |
$10,000
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| Docherty Management Ltd. |
CAD$12,500
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The Company appointed Mr. John Docherty as President of Lexaria effective April 15, 2015. The Company executed a twenty-four month consulting contract with Docherty Management Limited, solely owned by Mr. John Docherty with monthly compensation of CAD$12,500
and shall increase to a total of CAD$15,000
per month effective at that time when the Company has $1,000,000
or more in cash in its bank accounts, and continue at CAD$15,000
per month from that moment until the termination or completion of the contract. The Company may also pay Mr. Docherty a bonus from time to time, at its sole discretion. Mr. Docherty will be entitled to receive common stock based and stock option based bonuses upon achieving certain milestones during the time of his consultancy with the Company. These milestones are:
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Upon signing: A grant of
550,000
stock options priced one-cent above market prices at the time of award. (granted)
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90
Days after signing: A grant of
500,000
restricted common shares (Completed -
462,000
restricted common shares issued with cash payment of $16,000, as mutually agreed to between the parties).
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Twelve months after signing: A grant of
300,000
stock options priced one-cent above market prices at the time of award (granted).
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18
months after signing: A grant of
300,000
restricted common shares (
252,000
restricted common shares issued subsequent to the year end (Note 19), with cash payment of $6,240, as mutually agreed to between the parties).
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During the first twelve (12) months after signing; for combined Lexaria Energy and ViPova™ products and including all combined sales efforts, achieving non- refundable sales of $200,000
to any single customer in any consecutive
60
-day period would result in a restricted common share award of
100,000
Company shares (expired); and, after the first12 months after signing and expiring
24
months after signing; for combined Lexaria Energy and ViPova™ products and including all sales efforts, achieving non-refundable sales of $200,000
to any single customer in any consecutive
60
-day period would result in a restricted common share award of
50,000
Company shares; this clause is limited to one payment per customer during the
24
-month period, but payable on each customer that meets these sales thresholds;
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During the first
12
months after signing; for combined Lexaria Energy and ViPova™ products and including all combined sales efforts, achieving non- refundable sales of $500,000
in any fiscal quarter would result in a restricted common share award of
200,000
Company shares (expired); and, after the first
12
months after signing and expiring
24
months after signing; for combined Lexaria Energy and ViPova™ products and including all sales efforts, achieving non-refundable sales of $500,000
in any fiscal quarter would result in a restricted common share award of
100,000
Company shares; this clause is limited to one payment per fiscal quarter;
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During the time this Agreement remains in effect, for each new provisional patent application substantially devised by Mr. Docherty and successfully created, written and filed with the US Patent Office for Company-owned intellectual property, a restricted common share award of
250,000
Company shares. This clause is not limited to frequency of payment but each patent application is to be approved by the Board of Directors of the Company, in advance. During the year ended August 31, 2016, the Company issued to Mr. Docherty
210,000
restricted common shares and further accrued $4,000
combined in lieu of issuance of
250,000
restricted common shares, as mutually agreed to between the parties.
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Lease
The Company has a lease commitments for its office space for CAD$826
per month. The lease require a
90
-day termination notice.
Convertible Debenture
The Company has issued a convertible debenture for $45,000, maturing on August 31, 2020. The convertible debenture accrues interest at
10% per annum, payable in quarterly installments (Note 10).
Marketing, Branding, and Investor Relations Advisory
On July 18, 2016, the Company entered into a service agreement with an arm’s length service provider for marketing, branding, and investor relations advisory services (the “Advisory Agreement”). The Advisory Agreement has a term of one year with automatic renewal but can be terminated by either party with
30
days’ notice. In exchange for services, the Company issued
250,000
common shares upon signing of the agreement (Note 11) and is obligated to issue share purchase warrants for purchase of
250,000
common shares, on a monthly basis, with exercise price that is the average of the daily closing prices of the preceding month with a minimum of $0.08
per share. The warrants will have a term of five years from the date of issuance.
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Lexaria retains the right but has no obligation to make any future month’s payment in cash using the same formula to establish and per-share valuation price, multiplied by
250,000, in lieu of issuing the monthly warrants. The Advisory Service Provider is entitled to
3% commissions on revenue received by Lexaria originating from the parties introduced by the Advisory Service Provider.
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