EXHIBIT 10.16
AGREEMENT (THE "AGREEMENT") BY AND AMONG WESTERN GOLDFIELDS, INC.
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(HEREINAFTER REFERRED TO AS "WESTERN"), ON THE ONE HAND, AND ELECTRUM L.L.C. ON
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THE OTHER(HEREINAFTER REFERRED TO AS "ELECTRUM");
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WHEREBY:
Pursuant to discussions amongst the parties, this Agreement memorializes the
agreement whereby Electrum may earn the right to acquire a 50% interest in
certain mining properties located in the Western United States as more fully
described in this Agreement. The Properties under this Agreement will be
hereinafter collectively (and as the context may require) referred to either as
the "Property", "Properties", "Project" and/or the "Projects".
1. MUTUAL REPRESENTATIONS AND WARRANTIES. Each of Electrum and Western and
represent and warrant to the other that as the date of signature of this
Agreement (the "Effective Date"):
(a) it is a company duly incorporated under the laws of the jurisdiction
of its incorporation, it is duly organized and validly existing under
such laws and is qualified to carry on business in the place of its
incorporation;
(b) it has full power and authority to carry on its business and to enter
into this Agreement and any agreement or instrument referred to or
contemplated by this Agreement and to carry out and perform all of its
obligations and duties hereunder;
(c) it has duly obtained all corporate authorizations for the execution,
delivery and performance of this Agreement and such execution,
delivery and performance and the consummation of the transactions
herein contemplated will not contravene any existing laws and will not
conflict with or result in any breach of any covenants or agreements
contained in, or constitute a default under, or result in the creation
of any encumbrance, lien or charge under, the provisions of its
constituting documents or any shareholders' or directors' resolution
or any indenture, agreement or other instrument whatsoever to which it
is a party or by which it is bound or to which it or the Property
maybe subject;
(d) this Agreement has been duly executed and delivered by it and is valid
and binding upon it in accordance with its terms.
2. WESTERN'S REPRESENTATIONS AND WARRANTIES. Western represents and warrants
as of the date of this Agreement:
(a) It is in current negotiations with Kennecott Exploration Company, a
Delaware corporation, whose address is 000 X. 0000 X., Xxxx Xxxx Xxxx,
Xxxx 00000-0000, with an office at 00000 Xxxxx Xxxxxxx Xxxxx, Xxxxx
000, Xxx Xxxxxx, XX 00000; and that the subject of such negotiations
is that Western is interested in obtaining
access to and reviewing Kennecott's data on various prospects to
determine whether or not Western will conduct mineral exploration of
these prospects;
(b) It is in current negotiations with Newmont Mining Corporation, a
Delaware corporation, whose main offices are located in Denver, CO;
and that the subject of such negotiations is that Western is
interested in obtaining access to and reviewing Newmont's data on
various prospects to determine whether or not Western will conduct
mineral exploration of these prospects; and further that Newmont has
recently offered to Western all of its data on its mining properties
located in California, Utah, Arizona, and selectively in Nevada for
evaluation to determine whether or not Western will conduct mineral
exploration of these prospects;
(c) It expects to complete agreements with Kennecott and Newmont within
sixty to ninety days of the effective date of this agreement which
will grant it access to the data covering the subject properties but
their can be no guarantee that such agreement(s) will be forthcoming;
(d) Except as may be set forth in future Addendums, the Properties
reviewed shall be free and clear of all liens, charges and
encumbrances, recorded or to the best of Western's information,
knowledge and belief, unrecorded;
(e) To the best of Western's knowledge, there shall be no outstanding
pending actions, suits or Properties affecting all or any part of the
Properties, nor shall there be any basis therefore.
(f) To the best of Western's knowledge, there shall exist no notices of an
order or direction, from any government authorities that would
constitute an Environmental Liability in respect of the Properties.
Environmental Liability shall mean any and all liabilities under any
statute, regulation, ordinance, order, directive, permit, contract or
pursuant to any court order or judgment in respect of any prior,
ongoing or future use of the Property, including without limitation,
all liabilities, if any, in respect of the proper abandonment and
reclamation of the Property and related facilities and surrounding
areas of any nature, all in accordance with applicable environmental
regulations or requirements.
(g) The Parties acknowledge that prior to the Parties commencing any
Exploration activities, they will work together to: (i} conduct due
diligence as may be necessary in order to verify to Electrum's
satisfaction that the above Representations and Warranties regarding
the Projects are true, correct and valid in all material respects;
(ii) subject to Section 5 b), ensure that any rights or permits,
including but not limited to surface rights, which are or may be
necessary in order to commence exploration, have been made available
and have been properly granted, in the understanding that any permits
that are necessary as of or after the Effective Date shall be
requested by the Operator. The Parties hereto acknowledge that in the
event that the surface rights necessary to commence exploration have
not yet been granted, then the
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first years' work commitment shall be extended in time accordingly. If
the necessary surface rights are not granted in order to commence
exploration, each of the parties will have the option to terminate
this Agreement with respect to the specific area affected by such
circumstance. For greater clarity, "area affected" shall mean in this
context the area that cannot be explored.
3. FURTHER REPRESENTATIONS AND WARRANTIES; ACKNOWLEDGEMENT. Western and
Electrum acknowledge and agree that the other is entering into this
Agreement relying upon the representations and warranties made to it herein
and, the correctness of each such representation and warranty is a
condition upon which each party is entering into this Agreement, each of
which conditions may be waived in whole or in part solely by the party in
whose favor the representation and warranty is made and all such
representations and warranties shall survive the execution and delivery of
this Agreement and the transactions contemplated hereby and each party
agrees to indemnify and hold harmless the other from all loss, damage,
cause, action or suits arising out of or in connection with any breach of
any representation or warranty contained herein. Should there be a material
breach in the representations and warranties of one of the parties, the
other party would have the option to terminate this Agreement without
obligation to complete the Initial Earn-in Obligations as set forth in this
Agreement.
4. TERMS OF THE AGREEMENT; EARN IN OBLIGATIONS
Electrum may earn a 50% interest in any, some, or all of the Properties
(the "Earn, In") by undertaking and accomplishing the following:
(a) Providing the funding, professional staff, or a combination thereof on
a 50/50 joint basis with Western to conduct an initial evaluation and
due diligence study of each subject property that is of initial
interest to both Western and Electrum.
(b) Work Commitment. By entering into this Agreement, Electrum commits to
funding and completing one-half of Recommended Qualified Expenditures
on the Property as may be recommended by the Technical Committee
during the initial and each subsequent phase of exploration, on those
properties which have passed the initial evaluation and due diligence,
and on which further exploration expenditures are recommended.
The "Technical Committee" shall be initially composed of Xxx Xxxxxxxxxx,
Xxxxx Xxxxxxxx, and Xxxx Xxxxxxx. Upon the motion of either of the parties,
the Technical Committee may be expanded to include one other member of the
choosing of Electrum, and one other member independent of each of the
parties.
"Recommended Qualified Expenditures" will be defined as any physical
exploration and overhead costs that are directly related to the project and
as are recommended by the Technical Committee.
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(c) Pre-Feasibility Study. By entering into this Agreement, Electrum
commits to completing one-half of Expenditures required to bring to
completion a comprehensive Pre-Feasibility study on each Property for
which such a study is recommended by the Technical Committee.
The Study shall address the viability of placing the Property into
production, in such form and detail and using such assumption as to mineral
prices as are customarily and reasonably done by major mining companies in
North America, and which are technically acceptable to major international
lending institutions, in determining the viability of mining projects such
as the Property and shall include a reasonable assessment of the mineable
mineral reserves and their amenability to milling, a complete description
of the work, equipment and supplies required to bring the Property into
production and the estimated cost thereof, a description of the mining
methods to be employed and a financial appraisal of the proposed operations
supported by the following information:
(i) description of that part of the Property to be covered by the
proposed mine;
(ii) the estimated recoverable reserves of minerals and the estimated
composition and content thereof, including the effect of grade,
dilution and impurities;
(iii) the proposed procedure for development, mining and production;
(iv) results of metallurgical and milling amenability tests.
In addition to the above, the Study will also take the following
information into account:
(v) the nature and extent of the facilities, if any, proposed to be
acquired which may include mill, xxxxx pads, CIP, SXEW or other
Recovery facilities, in which event the study shall also include
a preliminary design for such mill or facility, and their
proposed site locations, if any, or appropriate provisions for
custom milling facilities;
(vi) the total costs, including capital budget, which are reasonably
required to purchase, construct and install all structures,
machinery and equipment required for the proposed mine, including
a schedule of timing of such requirements;
(vii) the results of all environmental impact studies for the Property
and costs of such studies;
(viii) working capital requirements for the initial four (4) months of
operation of the Property as a mine or such longer period as may
be reasonably justified in the circumstances by the party doing
the Study;
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(ix) estimates of shutdown and reclamation costs;
(x) the net present value of the Property.
In order to conduct the Study, the parties may form additional
Sub-Committees, under the direction of the Technical Committee and
which will assist with planning the exploitation of the resources.
Each Sub-Committee will submit its work and proposals to the Technical
Committee. Decisions will be made by a majority of the members of the
Technical Committee. It is the parties' understanding that the members
of such Committee shall not earn compensation for their role as
members of the same.
It is the parties' intent and understanding that, in order to carry
out to completion the Project once the Earn-In has been achieved or at
whatever other time the Parties shall agree to in writing, the parties
shall form a joint venture vehicle (hereinafter referred to as the
"Joint Venture" or "Joint Venture Company") subject to the terms of
this Agreement. The terms and conditions of the Joint Venture will be
established in separate document(s) as the parties may deem necessary,
in which Electrum, LLC shall have a 50% o participation, and Western a
50% participation, subject to the terms of this Agreement.
5. OPERATOR. Western or Electrum may be the operator (the "Operator") of one
or more of the Properties, depending on the decision of the Technical
Committee. The Operator will be responsible for conducting all operations
hereunder in accordance with the following provisions:
(a) Compliance with Laws. The Operator shall carry out its activities in
compliance with all applicable Laws and with the terms of the
Properties and the corresponding surface rights agreements;
(b) Property and Surface Maintenance. During the Earn in Period and as may
be applicable, The Operator will pay or continue to pay any fees to
previous or current owners or surface rights holders required to
maintain the Property in good standing. With respect to any taxes and
rental fees paid by The Operator, any such costs paid shall be
reimbursed on a 50% o basis by the Non-Operator.
(c) Reports and Other Required Submissions. As of the Effective Date, the
Operator shall prepare any reports and other submissions as may be
required to maintain the Property in good standing ensure the timely
filing thereof with any appropriate governmental authorities,
regulatory agencies or associations as may be necessary.
(d) Encumbrances. The Operator shall not during the Earn in Period create,
or permit to be created, any encumbrance upon or against the
Properties or of any interest therein, or any portion thereof.
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(e) Conversion, Renewal etc, of Properties. During the Earn in Period, the
Operator shall, in coordination with the Non-Operator, undertake the
preparation and making of all filings and/or satisfy all commercially
reasonable requirements, as the case may be, to: (i) obtain extensions
of the terms of any of the exploration and/or exploitation licenses
included in the Properties (and to designate any lands that must be
relinquished as a condition thereof); (ii) apply for new (or renewal)
of exploration Properties in the name of the Operator covering lands
within the boundaries of the Property if any such Properties' terms
expire during the Earn In Period; (iii) apply for exploitation permits
in the name of the Operator with respect to any of such Properties as
may be necessary. All funds expended by Operator in carrying out such
activities shall be included as Qualified Expenditures, and shall be
reimbursed on a 50% basis by the Non-Operator.
(f) Insurance. The Operator shall maintain liability insurance covering
its conduct of operations of such types and in such amounts as are
commonly held by entities conducting activities similar to the
operations conducted hereunder.
6. OBLIGATIONS OF NON-OPERATOR. During the Earn in Period, the Non-Operator
shall comply with the following provisions:
(a) Acquisition of Additional Properties. Subject to sections 12 and 13,
should the Technical Committee recommend acquisition of any property
within the Area of Interest, or any subdivision thereof, the
Non-Operator will be obligated to pay 50% of the acquisition costs of
these properties.
(b) Use of Non-Operator Facilities. Non-Operator shall permit the Operator
to utilize Non-Operator surface facilities and the Operator shall be
responsible for all costs associated with these facilities with a
portion of the facilities to be retained for the exclusive use of
Non-Operator. Costs and expenses related to maintaining the facilities
should be borne as Qualified Expenditures for both Electrum and
Western as the case may be.
(c) No Encumbrances by Non-Operator. Non-Operator shall not during the
Earn in Period create, or permit to be created, any encumbrance upon
or against the Properties or Non-Operator's interest therein, or any
portion thereof.
(d) Release or Relinquishment of Properties by Non-Operator. Non-Operator
shall not release or relinquish, or permit the release or
relinquishment, of, any of the Properties without the prior written
consent of the Operator.
(e) No actions by Non-Operator. Non-Operator shall not take or fail to
take any action which would cause the Operator to be denied the full
use of the rights of exploration and/or exploitation of the Property.
7. FORWARDING OF NOTICES. Western and Electrum shall each deliver promptly to
the other any notices that may be received from governmental entities or
other third parties which affect title to or the status of the Properties.
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8. LEGAL ACTIONS. The Operator shall immediately inform Non-Operator in
writing with respect to any claim, suit or legal proceeding of which it has
knowledge and which could prevent or limit the rights granted by this
agreement. The Operator assumes the obligation to keep the Non-Operator
free and harmless from any liability resulting from or caused by the acts
or omissions of Operator related to the foregoing.
9. STANDARDS OF WORK. During the Earn in Period, the Operator shall ensure
that all work done on the Property be done in accordance with good mining
and engineering practices and Electrum and its contractors' activities in
respect of the Property shall be in all material respects performed in
compliance with the applicable laws, regulations and orders of the United
States and each respective State, including, without limitation, those
relating to environmental matters, such as but not limited to waste
disposal and storage. Operator shall reclaim the Property in compliance
with all federal, state and local laws, rules, orders and regulations. The
standards of safety and reclamation hereunder will be in accordance with
normal operating standards as determined by the Technical Committee.
10. RECLAMATION OF PREVIOUS DISTURBANCES. Prior to commencing exploration on
any Property, the Operator shall be responsible for conducting a base study
report detailing previous work and disturbances on the Property which may
be subject to future reclamation (the "Disturbances") Such report shall be
delivered to the Technical Committee that shall review and deliver the same
to the Property Owner and obtain their permission to reclaim such
Disturbances at their cost upon completion of exploration. Subject to the
above, and in compliance with section 9 above, Operator shall reclaim the
Disturbances with the understanding that the previous owners of the
Property shall reimburse the Operator for such work. Once the Joint Venture
is formed, the Joint Venture shall assume responsibility for environmental
matters on the Property as may be required under applicable law. The
reclamation shall be in compliance with all federal, state and local laws,
rules, orders, regulations, directions and policies.
11. ASSESSMENTS AND TAXES. During the Earn in Period, Operator shall pay all
taxes, annual license fees, rentals and assessments related to the
Property, and otherwise maintain the Property in good standing and shall
file all relevant work performed on or in respect of the Property with the
corresponding registries as may be required. Non-Operator will reimburse
Operator 50% of such expenditures. The parties agree that for purposes of
reimbursement under this Agreement, NonOperator shall reimburse Operator
within 30 calendar days after the corresponding reimbursement documentation
and receipts have been presented properly filled out for their
reimbursement.
12. AREA OF INTEREST. The area extending 10 km in any.direction from the outer
boundaries of the Property is defined as the "Area of Interest".
13. ADDITIONAL PROPERTY ACQUISITION. Prior to the formation of the Joint
Venture and upon recommendation from the Technical Committee, any
additional mineral or surface rights acquired within the Area of Interest
described above by either party shall be considered as Qualified
Expenditures and be reimbursable. Once the Joint Venture
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is formed, and upon the recommendation of the Technical Committee, any such
acquisitions will be made at the expense and in the name of the Joint
Venture. If the Joint Venture should not have sufficient funds, then it may
arrange for the necessary financing, in which case the Joint Venture shall
be responsible for any financial obligations therewith subscribed. In the
event that it becomes necessary for each of the Joint Venture partners to
put up additional financial resources, section 21 will apply. Should the
Joint Venture not proceed, then Western may acquire from Electrum (or vice
versa as the case may be) at the other's sole discretion, any Property
bought individually by either party located within the Area of Interest at
the cost of acquisition plus interest at the rate of 10% per annum plus the
annual rate of inflation reflected by United States Consumer Price Index
for the corresponding period.
14. DROPPING OF PROPERTIES OR REDUCTION IN SIZE OF PROPERTIES. Upon
commencement of the Joint Venture, the Operator shall ensure that if it
should wish to have the Joint Venture reduce in size or abandon any of the
lands comprising the Property, it shall give the Non-Operator sixty (60)
days' prior notice of its intention to do so together with its written
confirmation that all its reclamation obligations hereunder with respect to
the area of Property to be reduced or abandoned, pursuant to the activities
carried out by Operator, have been properly and fully satisfied in
accordance with this Agreement, and Non-Operator may give notice to
Operator within such 60 day period electing to have such portions of the
Property which are being reduced and/or abandoned, remain, return to or be
put in the name of the other (as the case may be), in which case and as may
be necessary or advisable the following shall apply:
(a) Operator shall forthwith execute and deliver to Non-Operator all
necessary documentation as may be applicable to relinquish any
interest of Operator, and Non-Operator shall incur the expenses in
respect of any fees or other governmental charges which may be
necessary to record or register any such transfers. Operator shall
also provideto Non-Operator all material information in Operator'
possession or control related to such relinquishment;
(b) any mining Properties so transferred shall be in good standing as of
the date of Operator' notice of its intention to have the Joint
Venture abandon such mining Properties, and
(c) the definition of the Property shall thereafter exclude such mining
Properties and Operator shall have no further obligations or
responsibilities in respect of such mining Properties, except for
obligations and responsibilities arising from the Joint Venture's
activities prior to the date such mining Properties were transferred
to Non-Operator;
Provided, however, that if Non-Operator does not so elect or fails to
respond to Operator's notice within such sixty (60) day period, then
Operator may abandon or reduce in size or reduce in size such mining
properties, subject to applicable laws and any corresponding provisions of
this Agreement shall take effect.
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15. ACCESS TO THE PROPERTY. Upon Operator assuming its role as Operator, Non
Operator will have access to the Property and right to review and copy raw
data collected by Operator. Non-Operator will share with Operator all data
in its database and any new data generated independently. During the Earn
in Period, Non-Operator grants Operator right of way in underground
workings and on the surface as the case may be and will not interfere with
the exploration.
16. RELEASE OF INFORMATION. Electrum agrees to Western's release of information
to the public in order to comply with United States' Securities and
Exchange Commission or other regulatory agencies and market requirements,
as may be provided for under law or as may be necessary or convenient for
the purposes of informing Western's shareholders. Electrum will review such
releases before they are made public.
17. APPLICABLE LAW. The parties submit themselves to the applicable laws of the
States in which the properties are located, waiving their rights, if any,
to bring any claims in any jurisdiction other than the applicable
jurisdictions and forums of the these States.
18. TERMINATION. Electrum may terminate this Agreement at any time upon 60
days' prior written notice to Western prior to the requirements of 4(a)
above being met on any property. Electrum will be responsible for taxes
incurred (as set forth in Section 10), if any, for the period from the
Effective Date up to and including such termination.
In the event that the Agreement is terminated by Electrum at any time after
the requirements of section 4 b) have been met but prior to achieving the
Earn In, then Electrum shall also not acquire any rights or interest in the
Projects whatsoever.
In the event that the Agreement is terminated by Electrum at any time after
the requirements of section 4 b) have been met and after achieving the Earn
In on some but not all properties, then Electrum shall not acquire any
rights or interest in the Projects in which it has not completed the
earn-in, but shall be granted the interest enumerated below on the Projects
in which it has completed Earn In.
Once the Earn In has been achieved, any termination hereunder shall be
regulated as follows: (i) in the event the Joint Venture has been formed,
by the corresponding provisions applicable to the Joint Venture; (ii) if
the Joint Venture has not yet been formed, termination shall be regulated
by the first paragraph of this Section 19, in the understanding that the
sale of one party's participation hereunder to the other must be effected
at fair market value and in compliance with the right of first refusal
granted between the parties and provided for in Section 21 b) of this
Agreement.
19. INDEMNIFICATION. During the Earn in Period, Electrum shall indemnify and
save harmless Western and its directors, officers, employees, agents and
insurers from and against all suits, claims, losses, penalties, demands and
expenses (including reasonable legal fees) by reason of or derived from any
gross negligence or willful misconduct by Electrum or its employees, agents
or contractors in relation to its activities on the Property, including
without limitation those relating to its mining and exploration activities
and its reclamation obligations and any Disturbance thereon. Likewise,
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during the Earn in Period, Western shall indemnify and save harmless
Electrum and its directors, officers, employees, agents and insurers from
and against all suits, claims, losses, penalties, demands and expenses
(including reasonable legal fees) by reason of or derived from any gross
negligence or willful misconduct by Western or its employees, agents or
contractors in relation to its activities on the Property, including
without limitation those relating to its mining and exploration activities
and its reclamation obligations and any Disturbance thereon.
20. FORMATION OF THE JOINT VENTURE COMPANY. Upon Electrum's successful
completion of the Earn In, or at whatever other time the Parties deem
appropriate, but no later than or promptly after the time on which the Earn
In has been achieved, Electrum and Western shall proceed to form a Joint
Venture Company whose primary purpose shall be the development of the
Property as provided for in the Study. For the formation of such Joint
Venture, each party will transfer and assign as necessary any and all
rights inuring under this Agreement for such purposes. General aspects of
the Joint Venture will be as follows:
(a) INITIAL CAPITALIZATION. Each party will make as its initial capital
contribution to the Joint Venture Company, the data and information
resulting from the Qualified Expenditures and the Study during the
Earn in Period for the acquisition of its interest in the Property.
When the Joint Venture Company is formed, the recognized initial total
amount of the combined capital contributions of the Parties shall be:
Electrum initial share ownership of 50% and Western initial share
ownership of 50%. The parties may set the value of the contributions
to be, made hereunder, as soon as such values and figures are
available.
(b) PROJECT FINANCING; THIRD PARTY SALES. The Joint Venture company shall
arrange debt and/or equity financing of the Project. For purposes of
providing the necessary guarantees that the banks may request for the
debt financing, one party may provide such guarantees, in which case
the other shall pledge in escrow its shares in the Joint Venture until
successful fulfillment of the completion tests that the banks may
require.
For the equity financing portion, the parties shall be responsible for
contributing financial resources for their respective percentages of
the remaining equity financing.
If for any reason either party should elect to sell to a third party
all or a portion of its equity in the Project, Western will grant
Electrum (or vice versa as the case may be) a right of first refusal
to purchase such portion as it may elect to sell at fair market value
and under the same conditions and price that it would sell to a third
party. If Electrum (or Western as the case may be) does not exercise
its right of first refusal within 30 days as of the date it received
written notice from the other of its intention to sell,,, the selling
party will be free to sell to a third party at a price not less than
the price offered to Western (or Electrum as the case may be), within
120 days after non-acceptance.
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(c) MINORITY PROVISIONS The By-laws of the Joint Venture Company shall
establish that certain resolutions, and specifically on any of the
matters listed below, shall require the affirmative vote of either:
(i) the shareholders representing at least 51% of the capital stock of
the Joint Venture Company in the case that any matters are brought to
discussion at a Shareholder's Meeting; or (ii) the affirmative vote of
at least 51% of the members of the Board of Directors of the Joint
Venture Company in the case that any such matters are brought to
discussion at a Board of Directors Meeting. For purposes of this
section, the matters requiring such authorization are as follows:
(i) Disposal of assets of the Joint Venture Company having a
value in excess of $10,000,000 (exclusive of the mining
properties as to which a right of first refusal is to be
provided in the Joint Venture Agreement).
(ii) Change of the nature or scope of the business of the Joint
Venture Company.
(iii) Changes to the dividend policy set out in Section 21.e
(iv) Amendments to the By-laws
(v) Following commencement of commercial production, suspension
of activities for a period of more than six months
(vi) Acquisition of shares issued by a third party
(vii) Dissolution of the Joint Venture Company
(viii) Change of the corporate purposes of the Joint Venture
Company
(ix) Merger or spin-off of the Joint Venture Company
(x) Issuance of debentures or similar instruments of the Joint
Venture Company incurring debt in excess of 10% of the
approved annual budget.
(xi) Any permanent shutdown or closure of mining operations.
(d) DILUTION OF INTEREST. If, subsequent to initial financing, the Joint
Venture Company elects to expand the operation or otherwise increase
its capital requirements, such expansion or capitalization will be
financed from some agreed upon percentage of current or future cash
flow. In the case that the increase in capital cannot be financed from
cash flow, but rather by each parties' contributions in proportion to
its ownership rights and obligations, and in the event that one of the
parties cannot or does not provide its corresponding portion of the
capital increase, its interest will be diluted accordingly, in the
understanding that such diluted party may, within a 24 month period,
repurchase its diluted interest at the price paid by the other party
in order to achieve
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expansion, plus interest at a rate of Libor plus 5% (five percent) for
the corresponding period of time. In the event of dilution, such
dilution will be calculated taking into consideration the total value
of the Joint Venture after the capital contribution has been made and
then allocating each parties' contribution (or lack thereof) to such
new capital structure.
(e) DIVIDENDS. The Joint Venture Company will pay out a minimum of 30% of
its after tax profits as dividends to the shareholders unless
otherwise agreed to by the Board of Directors and subject to the
Minority Provisions above; provided however that the Board of
Directors will have the right to reserve funds as may be required by
regulatory authorities for purposes such as but not restricted to
cover environmental requirements.
(f) OPERATION OF THE JOINT VENTURE COMPANY. A Board of Directors shall be
named, comprised of 2 representatives from Electrum, 2 representatives
from Western, and a single independent party agreed to by both
parties. This is subject to the condition that any party which
subsequently obtains more than 50% of the total shares of the Joint
Venture Company shall always be entitled to name the majority of the
representatives to the Board of Directors.
The Board of Directors shall determine the manner in which the Joint
Venture Company will be managed and will also name the full time
officers who will replace the Technical Committee which governed the
Project prior to the formation of the Joint Venture Company.
The full time officers to be employed by the Joint Venture Company
will report directly to the Board of Directors. Limits to their
decision-making abilities will be set forth by the Board of Directors.
The affairs of the Joint Venture will be decided by simple majority
vote of the members of the Board of Directors and will always be
subject to any Minority Shareholder provisions as the case may be. The
Parties understand that the members of the Board of Directors will not
receive any, compensation for their role as members of such Board.
(g) SHAREHOLDER STRUCTURE. Shareholder structure will be set forth in the
corresponding Joint Venture documents.
21. ARBITRATION. Any dispute, controversy, difference or claim arising out of
or in connection with this Agreement, or the breach, termination or
validity thereof (in each instance, a "Dispute," or collectively,
"Disputes"), which cannot be amicably resolved by the parties within thirty
(30) calendar days after receipt by a party of written notice from the
other party that a Dispute exists shall be settled by final and binding
arbitration in the forum in which the Joint Venture is organized or in
which the Property is located, whichever the case may be. The parties will
obtain the agreement of arbitrators to the following: (a) the arbitrators
shall provide a written ruling, stating in separate sections the findings
of fact and conclusions of law on which their ruling is based; and (b)
their ruling shall be due no later than ninety days after their final
hearing and within
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eighteen months after commencement of the arbitration. In the event that
any party fails to nominate its respective arbitrator within thirty days
after receipt of notice for arbitration issued by another party, such
arbitrator shall be appointed in accordance with the rules of the forum.
(a) The parties further agree that the substance, nature and content of
any proceedings conducted pursuant to section as well as the
substance, nature and content of any resulting Arbitration Award,
shall be and remain confidential. The parties shall obtain a
corresponding undertaking and obligation of confidentiality from the
arbitrators.
(b) The Arbitration Award shall be based on the provisions of this
Agreement; provided, however, that to the extent that the subject
matter for the Arbitration Award is not set forth within this
Agreement, it shall be based on the laws of the forum in which the
arbitration is undertaken (except for any portion of such laws which
would incorporate the law of any other jurisdiction). In addition, in
the case of any conflict between the provisions of the forum
Arbitration Rules and the provisions of this Agreement, the provisions
of this Agreement shall govern.
(c) The parties further agree: (a) that their mutual decision to resolve
their Disputes by arbitration as provided in this Agreement is an
explicit waiver of immunity against enforcement and execution of the
Arbitration Award and any judgment thereon; and (b) that the
Arbitration Award and any judgment thereon, if unsatisfied, may be
entered in and shall be enforceable by the courts of any nation having
jurisdiction over the person or property of the party against whom the
Arbitration Award has been rendered.
(d) All notices to be given in connection with the arbitration shall be as
provided by applicable law.
(e) The Arbitration Award shall be made and shall be payable in U.S.
dollars only, free of any tax or any other deduction. The Arbitration
Award shall include interest, at a rate determined as appropriate by
the arbitrators, from the date of any breach or other violation of
this Agreement to the date when the Arbitration Award is paid in full.
All costs of arbitration, including reasonable attorneys fees, court
costs (if any), costs of expert witnesses, transportation, lodging and
meal costs of the Parties and witnesses, costs of transcript
preparation and other reasonable and necessary direct and incidental
costs shall be assessed, apportioned and fixed, as is determined to be
appropriate in the opinion of the majority of the arbitrators, within
the Arbitration Award: provided, however, that the arbitrators, in
reaching their opinion, shall give preference to the prevailing party
for the recovery of its costs from the non-prevailing party. Any
expense of the parties not included within the Arbitration Award shall
be borne by the party incurring same.
13
(f) In the event any party to this Agreement commences legal proceedings
to "enforce the Arbitration Award, the expense of such litigation
(including reasonable attorneys fees and costs of court) shall be
borne by the party not prevailing therein.
(g) In the event of any breach by a party of the terms of this Agreement
which would cause any nonbreaching party to be irreparably harmed or
for which such nonbreaching party could not be made whole by monetary
damages, then in such circumstances such nonbreaching party, in
addition to any other remedy to which it may be entitled at law or in
equity, shall be entitled, without inconsistency with this Agreement,
to compel specific performance of this Agreement in any arbitration
proceeding instituted pursuant to this section and in any action
instituted' in any court of applicable jurisdiction to enforce any
interim or final Arbitration Award rendered pursuant to this section.
(h) Notwithstanding the foregoing provisions of this section, any
controversy or claim otherwise subject to arbitration under this
Agreement may initially be heard by any Court of competent
jurisdiction to the extent, and only to the extent, that initial
submission of the matter to a Court is necessary for a party (i) to
seek emergency injunctive or equitable relief or (ii) to enforce the
provisions.of this section; provided, however, that any matter
initially submitted to the Court shall be referred by the Court to
arbitration pursuant to this section as soon as the matter as to which
such emergency injunctive, equitable or enforcement relief was sought
has been heard and ruled upon by the Court.
22. ASSIGNMENT OR SALE OF INTEREST. Subject to the provisions of this
Agreement, either party may sell its interest in the Joint Venture Company
or in this Agreement to a third party provided it has first offered to sell
such interest to the other party to this Agreement for a price and on terms
that the party wishing to sell establishes. If the other party to this
Agreement does not accept such offer within 30 days, the party wishing to
sell shall thereafter have 120 days to sell such interest for the same or
greater price and on the same terms or terms no more favorable to a third
party. This provision will reapply on any failure to close a sale within
the 120 day period. Any sale to a third party shall provide for the
assumption by the third party of all of the obligations and liabilities of
the seller under this Agreement, whether accruing before or becoming due
after such transaction, and the 'agreement of the third party to perform
all of the obligations of the seller under this Agreement, including the
obligations contained in this Section.
23. ASSIGNMENT TO AFFILIATES. Notwithstanding any other provision of this
Agreement, any party hereto may at any time, upon simple written notice to
the other, sell or assign all or any portion of its participation, rights,
obligations and interest in: (i) the Joint Venture Company; (ii) this
Agreement; or (iii) the Project, to any affiliate, subsidiary, parent
company, holding company or other entity forming part of the same economic
interest group of the assigning party (as such terms are defined by Mexican
law). Notwithstanding the foregoing, the new assignee (s) shall assume all
of the duties, rights, and
14
obligations that were formerly in the original party prior to the transfer
of its participation to such assignee, in such a way as to not unduly or in
any way negatively affect the rights of the non-assigning party hereto.
24. BASIS OF AGREEMENT AND COSTS. This Agreement will form the basis of the
Joint Venture agreement and other necessary or ancillary agreements as may
be recommended by the parties' respective counsel and tax advisors in order
to give full effect to the terms of this Agreement. The parties undertake
to use their best efforts to complete any such agreements as soon as
possible as of the Effective Date. External legal costs associated with
producing this document will be borne by each party at its own expense.
25. COMMENCEMENT OF WORK. Upon signing this Agreement Western and Electrum
agree to the previously named representatives to the Technical Committee as
in Section 4, to arrange for a Technical Committee meeting within one month
as of the Effective Date, and to initiate evaluation of Projects as soon as
practical and mutually agreed.
26. CONFIDENTIALITY; PROPRIETARY MATTERS. All data and information provided to
or received by the parties with respect to this Agreement, the Joint
Venture, the Project, the Property and the methodology and processes
undertaken to carry out exploration and development work thereon shall be
treated as confidential. No party shall disclose such information to third
parties, unless (i) the disclosure is required by law or a regulatory
authority having jurisdiction; (ii) the disclosure is consented to by the
party which is not seeking to disclose such information ("Non-Disclosing
Party"), in the understanding that the Consent of such NonDisclosing Party
shall not be unreasonably withheld; (iii) such information is or was
already in the public domain prior to its disclosure; (iv) such information
was already in the possession of the disclosing party prior to its receipt
(and such disclosing party has the burden of proof of demonstrating this);
or (v) becomes of public domain through no breach of this Agreement. Where
disclosure is required by law or by a regulatory authority having
jurisdiction, a copy of the information required to be disclosed shall be
provided to the Non-Disclosing Party as soon as possible in advance of its
disclosure.
27. NOTICES. Any notice, direction or other instrument required or permitted to
be given under this Agreement will be addressed as follows:
If to ELECTRUM:
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxx 00000
Phone: 000-000-0000
15
If to WESTERN and or WESTERN:
Western Goldfields, Inc.
00 Xxxxxxxx Xxx Xxxx
Xxxxx 000
Xxxxxx Xxxx Xxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxx
Fax: (000) 000-0000
Subject to applicable legal requirements for service of process and
notifications, any notice, direction or other instrument given hereunder
shall be in writing and will, if delivered, be deemed to have been given
and received on the day it was delivered, and if mailed, be deemed to have
been given and received on the fifth business day following the day of
mailing, except in the event of disruption of the postal services in which
event notice will be deemed to be received only when actually received and,
if sent by telegram, telex, telecopy, telecommunication or other similar
form of communication during normal business hours (9:00 a.m. - 5:00 p.m.
local time of the place of receipt), shall be deemed to have been given or
received on the day it was so sent, or in the case of telecommunications
sent outside normal business hours, on the next following business day. Any
party may at any time give to the other notice in writing of any change of
address of the party giving such notice and from and after-the giving of
such notice, the address or addresses therein specified will be deemed to
be the address of such party for the purposes of giving notice hereunder.
28. FORCE MAJEURE. No party hereto shall be liable to the other and no party
hereto shall be deemed in default under this Agreement for any failure or
delay to perform any of its covenants and agreements caused or arising out
of any act not within the control of the party, excluding lack of funds but
including, without limitation, acts of God, strikes, lockouts, or other
industrial disputes, acts of public enemies, riots, fire, storm, flood,
explosion, government restriction, failure to obtain any approvals required
from regulatory authorities, including environmental protection agencies,
unavailability of equipment, interference of third party specific interests
groups or other causes whether of the kind enumerated above or otherwise
which are not reasonably within the control of the party. No right of a
party shall be affected for failure or delay of the party to meet any
condition of this Agreement, which failure or delay is caused by one of the
events above referred to, and all times provided for in this Agreement
shall be extended for a period of time commensurate with the period of the
delay, and so far as possible the party affected will take all reasonable
steps toremedy the delay caused by the events above referred to. Any party
relying on the provisions of this section shall forthwith promptly give
notice to the other party of the commencement of such event and of its end.
29. EFFECTIVE DATE. This Agreement shall be effective from and as of the date
of its signature. Time shall be of the essence hereof.
30. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or
16
written between the parties, and there are no warranties, representations
or other agreements between in connection with the Property or the Project
except as specifically set forth herein. This Agreement shall be binding
upon the parties hereto and their respective successors and permitted
assigns.
31. FURTHER ASSURANCES. Each of the parties to this Agreement shall take all
such further steps and execute all such further and other documentation as
may be necessary or desirable in order to more fully give effect to the
provisions of this Agreement.
32. HEADINGS. Headings in this Agreement are for reference and convenience
only, with no legal significance and do not expand, amend, alter or
influence in any way the substantive provisions of the sections to which
they refer.
In witness of the understanding by and amongst the parties, their duly empowered
representatives have hereto set their signatures.
For ELECTRUM
Executed this Agreement as of 4 day of April, 2003.
---
By: X. Xxxxxxxx
-------------------------------------
Title: Director
----------------------------------
Signature:/s/ X. Xxxxxxxx
--------------------------------
STATE OF TEXAS )
) ss.
COUNTY OF COLLIN )
This Agreement was acknowledged before me on 4-21-03, by Xxxxx X.
-------
Xxxxxxxx.
/s/ Hope X. Xxxxxx
---------------------
Notary Public
For WESTERN
Executed this Agreement as of 25 day of April , 2004.
------ --------
By: Xxxxxx Xxxxxxx
Title: President
Signature:/s/Xxxxxx Xxxxxxx
-------------------------------
17
STATE OF OREGON )
) ss.
COUNTY OF XXXXXXX )
This Agreement was acknowledged before me on April 25, 2003, by Xxxxxx
--------------
Xxxxxxx.
/s/ Xxxxx X. Xxxxxx
----------------------
Notary Public
18
doc13.txt
EX-10.17
doc13.txt
EXHIBIT 10.17
BUSINESS CONSULTANT AGREEMENT
THIS BUSINESS CONSULTANT AGREEMENT ("Agreement") is entered into this 28th
day of September, 2003, between MGI Fund-Raising Consultants, a Del.
corporation, with its principal offices located at Minneapolis, MN (hereinafter
referred to as "MGI"), and Western Goldfields, Inc., a corporation with offices
located at 0000 Xxxx Xxxxxx, #000, Xxxxxx Xxxx, XX 00000, (hereinafter referred
to as the "COMPANY").
1. Consulting Services
--------------------
The COMPANY hereby engages MGI to perform the financial consulting and
public relations services listed below on the terms and conditions set forth in
this Agreement:
(a) Introduce the COMPANY to investment bankers, market makers,
stockbrokers, private investors, hedge funds, and other financing or
marketing sources designed to both raise capital and increase public
awareness of the undervalued nature of the COMPANY'S shares;
(b) Meet with appropriate potential shareholder groups to create and
broaden a shareholder base for the COMPANY;
(c) Assist with the concept, design, layout, preparation, and printing of
marketing materials such as flyers, brochures, powerpoint
presentations, and other such type of product.
(d) Assist with direct marketing campaigns such as direct mail or other
concepts designed to increase the public awareness of the COMPANY.
MGI acknowledges that one of the COMPANY's objectives is to raise market
awareness of the possible undervalued nature of its shares, and secondly, the
COMPANY seeks advice and assistance in identifying and negotiating with
potential strategic partners. The COMPANY acknowledges that MGI cannot provide
any guaranty or assurances that the COMPANY will be successful in completing any
transaction of the types set forth above, as they are subject to numerous
factors which are beyond the control of MGI, including, but not limited to,
market conditions, results of operations of the COMPANY, industry trends and
general investor interest.
The COMPANY acknowledges that MGI is not being engaged in a capacity as a
registered broker-dealer and that MGI cannot, and shall not be required
hereunder to, engage in the offer or sale of securities on behalf of the
COMPANY. While MGI has relationships and contacts with various investors,
broker-dealers, and investment funds, MGI's participation in the actual offer or
sale of the COMPANY securities shall be limited to that of an advisor to the
COMPANY and a "finder" of investors, broker-dealers and funds. The COMPANY
acknowledges and agrees that the solicitation and consummation of any purchases
of the COMPANY's securities shall be handled by the COMPANY or one or more NASD
member firms engaged by the COMPANY for such purpose.
The COMPANY shall pay a 10% cash finders fees to MGI on sums received from
investors whom MGI introduces to the COMPANY provided such fees are allowable
under the laws of the jurisdiction of the domicile of the investor.
Alternatively, MGI may elect to take such fees in restricted stock valued at 65%
of the prevailing market price of the stock.
2. Term of Agreement
-------------------
The term of this Agreement shall commence upon signing and shall continue
therefrom for a period of twelve (12) months, with an option to renew upon the
agreement of both parties.
3. Compensation/Expenes
--------------------
Upon signing this agreement the Company shall issue to MGI 75,000 options
to acquire common stock of the Company at a exercise price per share equal to
the prevailing market price at the time of signing, and exercisable for three
years from the date of issue. Upon exercise of such options, the shares
acquired shall bear demand and piggyback registration rights.
Further, the Company shall issue to MGI 2,500 restricted shares of the
common stock of the Company on a monthly basis as a retainer.
Additionally, as noted above, the compensation of MGI may also consist of
finder's fees equal to 10% o of the gross amount that MGI directly raises for
the Company. However, if MGI introduces the COMPANY to another party who raises
capital for the COMPANY, MGI may also be entitled to finder's fees, so long as
the total amount of finder's fees paid by the COMPANY does not exceed 10%.
The COMPANY shall also reimburse MGI for any actual out-of-pocket expenses
in a timely manner, provided expected expenses exceeding $500 are pre-approved
by the COMPANY.
MGI agrees to take its profit on marketing materials which it produces for
the COMPANY in restricted stock of the Company valued at 65% o of the prevailing
market price of the stock at the time such materials are delivered to the
Company. Any work to be completed by MGI for the COMPANY is subject to the
pre-approval of both parties.
4. Miscellaneous
-------------
4.1 Further Actions. At any time and from time to time, each party
----------------
agrees, at its or his expense, to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the purposes of this
Agreement.
4.2 Entire Agreement: Modification. This Agreement sets forth the
--------------------------------
entire understanding of the parties with respect to the subject matter hereof
and supersedes all existing agreements among them concerning such subject
matter, and may be modified only by a written instrument duly executed by the
party to be bound.
2
4.3 Notices. Any notice or other communication required or permitted
-------
to be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested (or by the most nearly comparable method if mailed from
or to a location outside of the United States), or delivered against receipt to
the party to whom it is to be given at the address of such party set forth in
the preamble to this Agreement (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section).
4.4 Waiver. Any waiver by any party of a breach of any provision of
------
this Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions will not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing
and, in the case of a corporate party, be authorized by a resolution of the
board of directors or by an officer of the waiving party.
4.5 Binding Effect. The provisions of this Agreement shall be binding
---------------
upon and inure to the benefit of the parties and their respective successors and
assigns; provided, however, that any assignment by any party of its rights under
this Agreement without the written consent of the other party shall be void.
4.6 Severability. If any provisions of this Agreement is invalid,
------------
illegal, or unenforceable, the balance of this Agreement shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to any other persons and circumstances.
4.7 Headings. The headings in this Agreement are solely for
--------
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
4.8 Counterparts: Governing Law. This Agreement may be executed in any
---------------------------
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall be
governed by and construed in accordance with the Laws of the State of South
Carolina, without giving effect to conflict of laws.
4.9 Attorney's Fees. In the event of a dispute with respect to this
----------------
Agreement, the prevailing party shall be entitled to its reasonable attorney's
fees and other costs and expenses incurred in litigating or otherwise resolving
or settling such dispute.
This agreement, although signed by an Officer of Western Goldfields, Inc., is
subject to the final approval of the Board of Directors of the Company. The
parties hereto have executed this Agreement as of the date first set forth
above.
/s/Xxxx Xxxx /s/ Xxxx Xxxxxx
--------------------------------- -------------------------------------
Xxxx Xxxx, Vice President Xxxx Xxxxxx, President
Western Goldfields, Inc. MGI Fund-Raising Consultants, Inc.
3
