Exhibit 10.31
SEVERANCE
AGREEMENT
THIS AGREEMENT is dated as of August 9,
2006.
BETWEEN:
WESTERN
GOLDFIELDS (CANADA) INC., a corporation incorporated under the laws of the
Province of Ontario (hereinafter called the
"Corporation")
OF THE FIRST PART
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BRIAN
PENNY (hereinafter called
the "Executive")
OF THE SECOND PART
WHEREAS the Executive is an employee of the Corporation
and is considered by the Board of Directors of the Corporation to
be a valued employee that has devoted his ability, time, effort and
energy to the affairs of the Corporation;
AND WHEREAS the Corporation considers the continuance of a
sound and vital management to be essential to protecting and
enhancing the best interests of the Corporation and its
shareholders;
AND WHEREAS the Corporation desires to assure itself of
retaining the services of the Executive (including his services
without distraction by uncertainties and risks in the event of a
proposed change of control of the Corporation) and to reward the
Executive for his valuable, dedicated service to the Corporation,
should his service terminate under the circumstances hereinafter
described;
NOW THEREFORE THIS AGREEMENT
WITNESSETH that in
consideration of the mutual covenants herein contained and in
consideration of the Executive remaining in the employment of the
Corporation at the present time, it is hereby agreed as
follows:
(a)
"Agreement" means this Agreement as amended from time to
time;
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"Annual
Compensation" shall mean
an amount equal to Executive's annual base salary at the annual
rate in effect at his Date of Termination, the Target Bonus plus
all benefits, quantified as 10% of the Executive's annual base
salary, paid or payable.
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"Board of
Directors" means the
board of directors of the Corporation as at the date of this
Agreement.
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"Cause" shall mean termination of Executive's employment
by the Corporation or any subsidiary thereof or successor thereto,
by reason of Executive's:
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gross
negligence in the performance of his duties;
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wilful and
continued failure to substantially perform his duties determined on
a historic basis prior to a Change of Control with the
Corporation;
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wilful
engagement in conduct which is materially injurious to the
Corporation or its subsidiaries (monetarily or otherwise);
or
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conviction of a
criminal offence involving moral turpitude.
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For purposes of
this subparagraph 1(d) no act, or failure to act, on Executive's
part shall be considered "wilful" unless done intentionally, or
intentionally omitted by Executive not in good faith and without
reasonable belief that his action or omission was in the best
interests of the Corporation.
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"Change of
Control" means the
occurrence of any one or more of the following events:
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the Corporation
shall not be the surviving entity in a merger, amalgamation or
other reorganization (or survives only as a subsidiary of an entity
other than a previously wholly-owned subsidiary of the
Corporation);
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The Corporation
sells, leases or exchanges greater than 35 % of its assets to any
other person or entity (other than a wholly-owned subsidiary of the
Corporation);
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the Corporation
is to be dissolved and liquidated;
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any person,
entity or group of persons or entities acting jointly or in concert
acquires or gains ownership or control (including, without
limitation, the power to vote) more than 35 % of the Corporation's
outstanding voting securities; or
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as a result of
or in connection with: (A) the contested election of directors, or;
(B) a transaction referred to in subparagraph 1(e)(i) above, the
persons who were directors of the Corporation before such election
shall cease to constitute a majority of the Board of
Directors.
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"Date of
Termination" means:
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if Executive's
employment is terminated by the Executive following a Triggering
Event, the date specified in the Notice of Termination provided by
the Executive to the Corporation; and
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if Executive's
employment is terminated for any other reason, the date specified
in the Notice of Termination provided by the Corporation to the
Executive, and shall mean termination from active employment, and
shall not include any notice period.
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"Disability" means incapacity due to physical or mental
illness, which shall have caused Executive to have been absent
from, or unable to perform, the Executive's duties with the
Corporation on a full-time basis for six consecutive
months.
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"Notice of
Termination" shall mean
notice which shall indicate the specific termination provisions in
this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provisions so
indicated.
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"Severance
Amount" shall mean an
amount equal to 2 times the Executive's Annual
Compensation.
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"Target
Bonus" shall mean an
amount equal to the previous year's bonus granted to the Executive,
but shall not exceed 25% of the Executive's annual base
salary.
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"Triggering
Event" means any one of
the following events which occurs without the express agreement in
writing of the Executive:
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a material
adverse change in the salary or benefits of the Executive as they
exist immediately prior to the Change of Control;
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a removal of
the designation of Chief Financial Officer in the title of the
Executive immediately prior to the Change of Control or a material
adverse change in the responsibilities, duties, powers, rights and
discretion associated with such title;
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a change in the
person or body to whom the Executive reports immediately prior to
the Change of Control, except if such person or body is of
equivalent rank or stature or such change is as a result of the
resignation or removal of such person or the persons comprising
such body, as the case may be, provided that this shall not include
a change resulting from a promotion in the normal course of
business; or
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a change in the
location at which the Executive is regularly required immediately
prior to the Change of Control to carry out the terms of his
employment with the Corporation, which is of a distance greater
than 50 kilometers from the City of Toronto, unless the terms of
employment of the Executive include the obligation to receive
geographic transfers from time to time in the normal course of
business, or unless the Executive consents to the
change.
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The term of this Agreement shall commence on the
date hereof and continue for an indefinite term.
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3.
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Termination of Employment
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(a)
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Termination by the Corporation Without
Cause. The Corporation
shall be entitled to terminate Executive's employment at any time
without Cause by giving the Executive a one-time payment equal to
the Executive's Annual Compensation, plus an additional one months'
worth of Annual Compensation for each completed year of employment
to a maximum of 18 months Annual Compensation. Such lump sum cash
payment is payable on or before the fifth day following the Date of
Termination. In addition, subject to the receipt of all necessary
regulatory approvals, the Corporation shall permit any vested
options to purchase common shares in the capital of the Corporation
held by Executives to be exercisable for 6 months after the Date of
Termination. All options that have not vested shall expire upon the
Date of Termination. In the event of termination of Executive's
employment without Cause, rights and benefits of Executive under
executive benefit plans and programs of the Corporation, unless
prohibited by the relevant plan, will be continued for a
twelve-month period.
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(b)
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Termination by the Corporation for
Cause. The Corporation
shall be entitled to terminate the Executive's employment at any
time for Cause without notice and without any payment in lieu of
notice. In the event of a termination of Executive's employment for
Cause, the Corporation's obligations hereunder shall immediately
cease and terminate and the Executive shall be immediately relieved
of the Executive's position and responsibilities, and in such an
event there will be no continued salary payments by the Corporation
to the Executive and any rights and benefits of Executive under
executive b
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