INDEMNIFICATION AGREEMENT
THIS AGREEMENT dated September 29, 2004.
B E T W E E N:
GIBRALTAR MINES LTD., a corporation incorporated pursuant to the laws of British Columbia;
(the “Resource Company”),
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WILSHIRE FINANCIAL SERVICES INC., a corporation incorporated pursuant to the laws of Alberta;
(hereinafter referred to as “Wilshire”).
WHEREAS:
| A. | Wilshire has agreed to provide Management Services
to the Offering Partnership pursuant to the terms of the Management Services
Agreement, which include the making of recommendations to the Offering
Partnership to acquire units of the Resource Partnership. |
| B. | Wilshire has relied upon information provided by
the Resource Company in respect of the Project in rendering such services
to the Offering Partnership. |
| C. | The Offering Partnership has agreed to subscribe
for units of the Resource Partnership and acquire a mineral royalty interest
in the production of ore located on mining tenures owned by the Resource
Company. |
| D. | The Resource Company has agreed to indemnify Wilshire
for any Claims on the terms and conditions set out in this Agreement.
|
NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
ARTICLE 1
INTERPRETATION
| 1.1 | Defined Terms. |
|
| In this Agreement, the following terms
shall have the following meanings: |
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| (a)
|
“Agreement” means this indemnification
agreement and any and all amendments made by written agreement between
the parties hereto, and the expressions “hereby”, “herein”,
“hereof”, “hereto”, “hereunder” and
similar expressions refer |
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| to this Agreement and, unless otherwise indicated,
references to Sections are references to sections of this Agreement; |
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| (b) | “Claims” means any claims relating
to a breach or default by the Resource Company under the Royalty Agreement;
|
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| (c) | “Demand Notice” has the meaning
ascribed thereto in Section 3.1 hereof; |
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| (d) | “Resource Partnership” means
Red Mile Resources No. 2 Limited Partnership, a limited partnership formed
pursuant to the laws of the Province of British Columbia; |
|
| (e) | “Funding Agreement” means that
certain agreement to be dated the date hereof between Wilshire and the
Resource Company pursuant to which the Resource Company has established
a credit facility in favour of Wilshire in accordance with the terms and
conditions thereof; |
|
| (f) | “Indemnified Parties” means Wilshire,
its directors, officers, employees, agents, successors or permitted assigns;
|
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| (g) | “Losses” means, collectively,
any liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever, incurred, charged to or paid by any Indemnified Party arising
out of, as a result of or in connection with a claim, including, but not
limited to, any loss incurred by such Indemnified Party in connection
with the Management Services Agreement; |
|
| (h) | “Management Services Agreement”
means that certain management services agreement dated as of June 15,
2004 between Wilshire and the Offering Partnership; |
|
| (i) | “Management Services” has the
meaning ascribed thereto in the Management Services Agreement; |
|
| (j) | “Offering Partnership” means
Red Mile Resources Fund Limited Partnership, a limited partnership formed
pursuant to the laws of the Province of British Columbia; |
|
| (k) | “Payable Obligations” has the
meaning ascribed thereto in Section 3.1 hereof; |
|
| (l) | “Project” means the production
of ore and the extraction of minerals from any and all mines located on
mineral tenures owned by the Resource Company, in respect of which the
Resource Partnership has purchased a mineral royalty interest pursuant
to the Royalty Agreement; |
|
| (m) | “Royalty Agreement” means that
certain mineral royalty agreement dated as of the date hereof among the
Resource Partnership, the Offering Partnership and the |
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Resource Company whereby the Resource Partnership
acquired a mineral royalty interest from Resource Company; |
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| (n) |
“Unit” or “Units”
means an equal and undivided limited partnership interest in and to the
Resource Partnership; and |
|
| (o) |
“Wilshire Indebtedness” has the
meaning ascribed thereto in Section 3.2 hereof. |
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| 1.2 | Capitalized Terms. |
|
| Unless otherwise defined in this Agreement,
all capitalized terms used herein shall have the meaning ascribed to them
in the Management Services Agreement. |
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| 1.3 | Currency. |
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| All amounts referred to in this Agreement
are intended to be in lawful currency of Canada unless otherwise specified
herein. |
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| 1.4 | Computation of Time Periods. |
|
| In this Agreement, in the computation
of periods of time from a specified date to a later specified date, unless
otherwise expressly stated, the word “from” means “from
and including” and the words “to” and “until”
each mean “to but excluding” and all references to “day”
or “days” shall mean calendar days unless designated as “Business
Days”. |
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| 1.5 | Headings. |
|
| The captions in this Agreement are for
convenience of reference only and shall not be used to define or interpret
any of the terms or provisions hereof. |
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| 1.6 | Invalidity of Provisions. |
|
| Nothing contained in this Agreement shall
be construed so as to require the commission of any act contrary to law,
and if any provision of this Agreement is held to be invalid or illegal
under any material statute, law, ordinance, order or regulation, such
provision shall be curtailed and limited only to the extent necessary
to bring it within the legal requirements and such curtailment or limitation
shall not affect the validity of the remainder of this Agreement or any
other provisions hereof. |
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| 1.7 | Applicable Law. |
|
| This Agreement and all other documents
provided for herein and the rights and obligations of the parties thereto
shall be governed by and construed and enforced in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein and the parties hereto attorn to the jurisdiction of the courts
of the Province of British Columbia. |
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ARTICLE 2
INDEMNITY
| 2.1 | Indemnity. |
| In consideration of the premises and the sum of
$1,750,000.00, the receipt and sufficiency of which is hereby acknowledged,
the Resource Company hereby indemnifies and holds harmless each of the
Indemnified Parties from and against any and all Losses based upon, arising
out of, or otherwise in connection with or as a result of any Claims.
|
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| 2.2 | Rights of Wilshire. |
| The rights, powers and remedies given to Wilshire
in this Agreement are in lieu of any other rights, powers, defences and
remedies given to Wilshire by virtue of any statute or rule of law or
agreement other than as specifically set out in any other agreement between
Wilshire and the Resource Company. Any forbearance or failure to exercise,
and any delay by Wilshire in exercising, any right, power or remedy hereunder
shall not impair any such right, power or remedy or be construed to be
a waiver thereof, nor shall it preclude the further exercise of any such
right, power or remedy. |
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ARTICLE 3
PAYMENT UNDER INDEMNITY
| 3.1 | Demand by Wilshire. |
| In the event of any Claims against Wilshire pursuant
to the Management Services Agreement and any Indemnified Party suffers
or incurs any Losses, Wilshire shall provide the Resource Company with
written notice (the “Demand Notice”) of its obligation
to indemnify the applicable Indemnified Party for any and all such Losses
(subject to the limitation of liability in Section 3.2), which Demand
Notice shall specify the aggregate sum of the Losses. No Demand Notice
shall be delivered to the Resource Company unless prior to the date of
the Demand Notice the Resource Company has made or caused to be made the
Advance (as defined in the Funding Agreement) pursuant to the Funding
Agreement. Such amount shall be payable by the Resource Company to the
applicable Indemnified Party on account of such Claims (the “Payable
Obligations”) in accordance with the terms hereof. |
|
| 3.2 | Limitation of Liability. |
| Notwithstanding any other term hereof, the parties
hereby acknowledge and agree that the liability of the Resource Company
to indemnify the Indemnified Parties shall at any time be limited to the
aggregate un-repaid amount of the Advance (as defined in the Funding Agreement
and subject to the limitation of liability contained therein), if any,
and interest thereon, which remains outstanding as of the date of the
Demand Notice (the “Wilshire Indebtedness”) from Wilshire
to the Resource Company pursuant to the terms of the Funding Agreement.
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| 3.3 | Payment of Payable Obligations. |
| Subject to Section 3.2, any amount to be paid by
the Resource Company pursuant to a Demand Notice shall be paid by the
Resource Company exclusively by way of applying such Payable Obligations
against the Wilshire Indebtedness under the Funding Agreement and the
Resource Company shall have no other liability or obligation in respect
of or in connection with any amount to be paid to Wilshire pursuant to
a Demand Notice or this Agreement. Upon receipt of any Demand Notice,
the Wilshire Indebtedness to the extent of the Payable Obligations specified
in the Demand Notice shall be due and payable in full as of the date of
the Demand Notice and the Resource Company agrees to provide Wilshire
with written confirmation that the Payable Obligations specified in the
Demand Notice have been applied to reduce the Wilshire Indebtedness and
that Wilshire shall be released from its obligations to repay any such
amounts to the Resource Company under the Funding Agreement. Accordingly,
the Resource Company agrees that it shall record any such payment hereunder
on the promissory note evidencing the Wilshire Indebtedness under the
Funding Agreement. If within ten (10) business days of confirmed receipt
of a Demand Notice by the Resource Company, the Resource Company has not
provided Wilshire with a written confirmation, Wilshire shall be entitled
to rely on such Payable Obligations having been applied by the Resource
Company and shall not be required to take any further action to evidence
such reduction in the Wilshire Indebtedness and the Resource Company hereby
acknowledges that the presentation of a Demand Notice shall be a full
and complete defence to any demand being made by the Resource Company
for payment of that portion of the Wilshire Indebtedness equal to the
Payable Obligations. Subject to Section 3, if Wilshire shall demand payment
by the Resource Company hereunder and there shall thereafter remain any
amounts owing by Wilshire to the Resource Company under the Funding Agreement,
after the Resource Company has applied the Payable Obligations to reduce
the Wilshire Indebtedness, Wilshire shall remain liable to the Resource
Company for such amount. |
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
| 4.1 | Representations and Warranties of Resource
Company. |
|
| The Resource Company hereby represents
and warrants to Wilshire as follows and acknowledges that Wilshire is
relying on such representations and warranties in entering into this Agreement
that: |
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| (a)
|
the Resource Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; |
|
| (b) |
the Resource Company has full power, authority and
legal right to execute, deliver and perform its obligations contained
in this Agreement and has taken all necessary corporate action to authorize
the execution, delivery and performance of this Agreement; and |
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| (c)
|
this Agreement has been duly executed and delivered
by the Resource Company and this Agreement constitutes the legal, valid
and binding obligations of the Resource Company, enforceable against the
Resource Company in accordance with its terms, subject to bankruptcy,
insolvency, arrangement and other laws generally affecting the enforceability
of creditors’ rights (other than those pertaining to fraudulent
assignments and preferences) and the availability, in the discretion of
a court of competent jurisdiction, of equitable remedies. |
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| 4.2 | Representations and Warranties of Wilshire.
|
|
| Wilshire hereby represents and warrants
to the Resource Company as follows and acknowledges that the Resource
Company is relying on such representations and warranties in entering
into this Agreement that: |
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| (a) |
Wilshire is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation;
|
|
| (b) |
Wilshire has full power, authority and legal right
to execute, deliver and perform its obligations contained in this Agreement
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement; and |
|
| (c) |
this Agreement has been duly executed and delivered
by Wilshire and this Agreement constitutes the legal, valid and binding
obligations of Wilshire, enforceable against Wilshire in accordance with
its terms, subject to bankruptcy, insolvency, arrangement and other laws
generally affecting the enforceability of creditors’ rights (other
than those pertaining to fraudulent assignments and preferences) and the
availability, in the discretion of a court of competent jurisdiction,
of equitable remedies. |
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ARTICLE 5
NOTICE
| 5.1 | Notice. |
| Except as otherwise expressly provided herein, any
notice, request, demand or other communication provided for hereunder
or under any of the other agreements entered into in connection herewith,
to be given shall be in writing and shall be personally served by courier
or messenger or sent by facsimile transmission and shall be deemed to
have been given when, personally served, or when transmitted by facsimile
(as verified by transmission report), as the case may be. The addresses
of the parties hereto (until notice of a change thereof is served) shall
be as follows: |
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| (a) | In the case of notice to the Resource Company addressed to it as follows: | |
| Gibraltar Mines Ltd. | ||
| 1020 – 000 X. Xxxxxx Xx. | ||
| Xxxxxxxxx, Xxxxxxx Xxxxxxxx | ||
| X0X 0X0 | ||
| Attention: President | ||
| Facsimile No.: (000) 000-0000 | ||
| With a copy to: | ||
| Lang Xxxxxxxx LLP | ||
| 1500 Royal Centre | ||
| P.O. Box 11117 | ||
| 0000 Xxxx Xxxxxxx Xxxxxx | ||
| Xxxxxxxxx, Xxxxxxx Xxxxxxxx | ||
| X0X 0X0 | ||
| Attention: Xxxxxxx X. Xxxxxxxxx | ||
| Fax: (000) 000-0000 | ||
| (b) | In the case of notice to Wilshire, addressed to it as follows: | |
| Wilshire Financial Services Inc. | ||
| Xxxxx 000, 0000 Xxxx Xxxxxxx Xxxxxx | ||
| Xxxxxxxxx, Xxxxxxx Xxxxxxxx | ||
| X0X 0X0 | ||
| Attention: Xxxxxx X. Xxxxxxxx | ||
| Fax No.: (000) 000-0000 | ||
| And: | ||
| Xxxxxxx Xxxxxxxxx | ||
| Fax: (000) 000-0000 |
ARTICLE 6
GENERAL
| 6.1 | Termination. |
| This Agreement shall automatically terminate on
the earlier of: (i) the termination of the Management Services Agreement
(provided that no Claims have been made on Wilshire |
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| in connection therewith); or (ii) repayment in full
of all amounts outstanding under the Funding Agreement. |
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| 6.2 | Further Assurances. |
| At any time or from time to time upon request of
Wilshire, the Resource Company shall execute and deliver such further
documents and do such other acts and things as Wilshire may reasonably
request in order to effect fully the purposes of this Agreement and to
provide for the payment and performance of the obligations of the Resource
Company in accordance with the terms of this Agreement. |
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| 6.3 | Counterparts. |
| This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed
to be an original and all of which taken together shall constitute one
instrument. Delivery of an executed counterpart of this Agreement by facsimile
shall be equally effective as delivery of a manually executed counterpart
thereof. Any party delivering an executed counterpart by facsimile shall
also deliver a manually executed counterpart of this Agreement, but failure
to do so shall not affect the validity, enforceability, or binding effect
hereof. |
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| 6.4 | Delays. |
| No failure or delay on the part of any party in
exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude
any other or further exercise thereof or the exercise of any other right
or power hereunder. No modification or waiver of any provision of this
Agreement nor consent to any departure by any party therefrom shall in
any event be effective unless the same shall be in writing and then such
waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice to or demand on any party in
any case shall entitle any such party to any other or further notice or
demand in similar or other circumstances. |
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| 6.5 | Time. |
| Time shall be of the essence hereof. |
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| 6.6 | Entire Agreement. |
| This Agreement supersedes and cancels all prior
negotiations and understandings between the parties hereto, and contains
all of the terms, conditions and agreements of the parties to this Agreement
with respect to the transactions contemplated herein. No modification
of this Agreement shall be valid or binding unless in writing and executed
by both parties to this Agreement. |
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| 6.7 | Enurement. |
| This Agreement shall be binding upon and enure to
the benefit of Wilshire and the Resource Company and their respective
successors and assigns. |
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| 6.8 | Assignment. |
| This Agreement may not be assigned by either party
hereto without the prior written consent of the other party hereto, which
consent may not be unreasonably withheld. |
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers as of the date written above.
| GIBRALTAR MINES LTD. | ||
| By: | ||
| WILSHIRE FINANCIAL SERVICES INC. | ||
| By: | ||
