Exhibit
10.16
SETTLEMENT, WAIVER AND RELEASE
AGREEMENT
This
Settlement, Waiver and Release Agreement dated as of June _______,
2009 (“ Agreement ”) is by and among Robert
Dumont, 906 McKinley Avenue, Kellogg, ID 83837 (“
Dumont ”), on one hand, and Atlas Mining Company, 1221
Yellowstone, Osburn, ID 83849 (“ Atlas ”),
on the other hand. Dumont and Atlas are collectively
referred to in this Agreement as the
“Parties.”
I. RECITALS
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Dumont executed
an Employment Agreement dated July 9, 2007 (“ Employment
Agreement ”) (a copy of which is attached hereto as
Exhibit A ), which provided that he would serve as
President, Chief Executive Officer, and a director of
Atlas. Dumont began such employment with
Atlas.
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Dumont resigned
from that employment and as a director with Atlas on or about
November 27, 2007 and asserted that his resignation was justified
because he was wrongfully induced to accept employment with Atlas
by misrepresentations made to him by Atlas and its
representatives. Dumont also asserts that shortly after
executing the Employment Agreement, through no fault of his own and
in spite of discharging his duties on behalf of Atlas in good
faith, he was named as a defendant in several lawsuits claiming
violations of the federal securities laws arising out of the
conduct of others predating Dumont’s employment at
Atlas. Dumont claims that he was entitled to rescind the
Employment Agreement and to recover monetary damages resulting from
the alleged misrepresentations of Atlas and its
representatives. Atlas denies the underlying factual
claims made by Dumont, and the monetary relief he claims, but
agrees, for separate reasons, that the Parties previously intended
that the Employment Agreement be rescinded. It has been
and remains Atlas’s position that Dumont’s resignation
was a breach of the Employment Agreement, and that such breach was
also a breach of the implied covenant of good faith and fair
dealing, and that such conduct relieved and excused Atlas of
performance under the Employment Agreement, including, without
limitation, relieving Atlas of obligations set forth in Paragraph 4
of the Employment Agreement. As a result of both
Parties’ positions, the Parties agree that, other than with
respect to wages, compensation and other benefits already
physically tendered, transferred and paid to Dumont by Atlas with
respect to the period of his active employment, and other than
various indemnification issues relating to such employment as
expressly described herein, the Employment Agreement has been, and
remains, rescinded nunc pro tunc by the parties.
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Atlas, Dumont
and others were sued or otherwise involved in various matters
described below, giving rise to various claims of indemnification
by Dumont against Atlas and/or claims for coverage by Dumont and
Atlas against their insurers.
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Dumont
and Atlas desire to resolve controversies existing between them and
to facilitate the final resolution of the Atlas Litigation upon the
terms and conditions set forth in this Agreement.
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The Parties
have entered into this Agreement to avoid the expense,
inconvenience, and uncertainty of litigation. By making
the payments pursuant to this Agreement, neither Atlas nor any
Released Parties admits that such sums were owed to Dumont, or that
Dumont was entitled to such sums, but rather makes such payments
solely in order to settle and resolve the claims Released
herein.
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II. AGREEMENT
NOW THEREFORE,
in consideration of the mutual covenants contained in this
Agreement, and other good and valuable consideration, the
sufficiency of which is hereby acknowledged by Atlas and Dumont,
Atlas and Dumont agree as follows:
1. ATTORNEYS’
FEES, INDEMNIFICATION AND UNDERTAKINGS.
(a) Atlas,
Dumont and others were sued or involved in various
“actions” giving rise to various claims of
indemnification by Dumont against Atlas and/or claims for coverage
by Dumont and Atlas against their insurers. Actions
relevant to Dumont’s tenure as an officer and director of
Atlas, listed below, are in progress against Atlas and Dumont, and
Dumont has claimed that he is entitled to be reimbursed for certain
legal fees and costs he allegedly incurred relating to
them. These actions are: Benson v. Atlas Mining
Company , Cons. Case No. CV 07-428-N-EJL-MHW (D. Idaho)
(“Class Action Litigation”); Navigators Ins. Co. v.
Atlas Mining Co., No. 08-0216 (D. Id.) / Atlas Mining Co. v.
Navigators Ins. Co., No. 08-359 (D. Id.) (“Coverage
Litigation”) (the Class Action Litigation and Coverage
Litigation shall be referred to collectively as the “Atlas
Litigation”). Dumont has claimed that he is
entitled to be reimbursed for certain legal fees he allegedly
incurred relating to the Atlas Litigation.
(b) Atlas
shall indemnify Dumont for his reasonable attorneys’ fees,
costs, and expenses incurred through May 31, 2009 relating to the
Atlas Litigation up to a cap of $185,000. Dumont’s
legal bills shall be submitted confidentially to Mediator Jed
Melnick who shall review the bills to ensure that the fees and
costs being sought by Dumont relate to the Atlas Litigation and are
reasonable. Mr. Melnick shall inform the Parties as to
the amount of fees, costs and expenses that are to be indemnified
under this Section, and the Parties agree that Mr. Melnick’s
determination of this issue shall be final, conclusive and binding
on this issue. This indemnification payment shall be
made from insurance proceeds paid to Atlas pursuant to Section 3
below.
(c) In
connection with the indemnification payment required by section
1(b), Dumont shall execute the “Undertaking of Robert Dumont
re: Atlas Litigation,” attached hereto as Exhibit B
. Atlas represents that, based on its current knowledge
of the facts and investigations performed to date on Atlas’
behalf, it has no basis for asserting that Dumont has not met the
relevant standards of conduct for permissive indemnification
described in Section 30-1-851 of the Idaho Code.
(d) Atlas
shall indemnify and hold harmless Dumont against all liability,
expenses and losses, including attorneys’ fees and costs,
reasonably incurred or suffered by Dumont in the event he is made a
party to, is threatened to be made a party to, or is involuntarily
involved in, any action, suit, claim or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, formal or
informal (hereinafter “Proceeding”), by reason of the
fact that he was an officer, director, employee or agent of Atlas,
whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee
or agent, to the fullest extent permissible under Idaho
law. While any such Proceeding is pending, Atlas shall
reimburse Dumont’s reasonable attorneys’ fees and costs
on an ongoing basis. To obtain indemnification or
ongoing reimbursement under this paragraph, Dumont shall submit to
Atlas a written request, including therewith such documentation and
information reasonably necessary to determine whether or to what
extent Dumont is entitled to indemnification. With
forty-five (45) days of receipt of such a request, Atlas shall make
payment to Dumont or his designee of all amounts due under this
paragraph.
(e) Atlas
agrees that its duty to indemnify and provide ongoing reimbursement
to Dumont pursuant to Section 1(d) includes, but is not limited to,
a duty to indemnify and provide ongoing reimbursement in the event
that Dumont involuntarily becomes involved in the United States
Securities and Exchange Commission’s (“SEC”)
formal investigation of Atlas and former Atlas officers and
directors, pertaining to potential violations of federal securities
laws (“SEC Investigation”).
(f) To
the extent that Dumont is involuntarily brought into a Proceeding
in the future because of his prior employment with Atlas, and seeks
advancement and indemnification of fees from Atlas pursuant to
Section 1(d) of this Agreement, to be eligible for an advancement
of fees and costs, he shall execute and deliver to Atlas the same
form of truthful Undertaking (with the exception of the case
identification in the initial “Whereas” clause), which
upon delivery of the Undertaking shall bind both Dumont and Atlas
to its terms, provisions, and conditions. Dumont
represents that other than the Atlas Litigation, Dumont and his
counsel have not been contacted regarding any matter or claims that
may relate to his employment with Atlas.
(g) Atlas
shall in no way be liable under Section 1(d) of this Agreement for
any fees or costs Dumont has or may incur in litigating any
disputes with or against Atlas.
(h) To
the extent that Dumont seeks fees and costs incurred in connection
with the Atlas Litigation post-dating May 31, 2009, such fees shall
be capped at a $5,000 and shall in no event exceed that
amount. To the extent that any fees and costs incurred
after May 31, 2009 are sought by Dumont under Section 1(d) in
connection with the Atlas Litigation and Dumont’s entitlement
to reimbursement of those fees and costs are disputed by Atlas, the
Parties agree that the dispute will be submitted to Jed Melnick for
final resolution. Mr. Melnick’s determination of
the amount of fees and costs (within the $5,000 maximum cap
applicable to fees incurred after May 31, 2009), due under this
provision will be final, conclusive and binding.
2.
RELATIONSHIP BETWEEN THE ATLAS LITIGATION AND RIGHT TO
EXTINGUISH THE AGREEMENT. This Agreement is premised upon
settlement and resolution of the Atlas Litigation. To
the extent that: (i) the Coverage Litigation is not settled
pursuant to a written, fully executed settlement agreement executed
by, among others, Atlas and Dumont; (ii) the Class
Action Litigation is not settled pursuant to a written, fully
executed settlement agreement executed by, among others, Atlas and
Dumont; and/or (iii) any agreed Class Action Litigation settlement
is not fully approved by the United States District Court for the
District of Idaho, or any subsequent appellate court, Atlas or
Dumont are entitled to extinguish this Agreement and none of the
payments articulated in Section 4 shall be due to
Dumont. To the extent that Atlas and Dumont opt to
extinguish this Agreement, they must do so in writing, upon which
this Agreement shall be null and void with no legal effect, except
that payments made pursuant to Sections 1(b), 3(a), 3(b) need not
be returned and, to the extent that Dumont has received any funds
pursuant to Section 1(b) above, Dumont shall be bound by his
executed Undertaking.
Beginning as of the date of this Agreement,
Dumont shall cooperate fully with and assist in all respects Atlas
and its directors, executive officers, senior-level employees,
insurers, duly authorized agents, successors, trustees, assigns,
attorneys and experts acting on behalf of the
Atlas: (i) with the closing of settlements in the
Class Action Litigation and (ii) to finalize matters with the
insurance carriers. To the extent that Atlas and the
Plaintiffs are able to reach resolution of the Class Action
Litigation, Dumont will not oppose the District Court’s
approval of settlement of the Class Action Litigation or the
release of the $2 million in insurance proceeds as contemplated in
the draft insurance settlement and release agreement (attached as
Exhibit C).
3.
PAYMENT OF INSURANCE PROCEEDS AND REIMBURSEMENT ASSOCIATED WITH
CLASS ACTION LITIGATION. In conjunction with this
Agreement, Dumont and Atlas, among others, are negotiating a
Settlement Agreement and Release, a draft of which is attached as
Exhibit C to this Agreement. To the extent that the
Settlement and Release Agreement is finally executed, and assuming
the parties file the Consent Motion to Distribute contemplated in
Section 4 of the Settlement Agreement and Release:
a. Dumont
agrees to and shall cooperate with any efforts to facilitate the
insurance carriers’ release and payment of $750,000 of
insurance proceeds to Atlas as contemplated by Paragraph 4 of
Exhibit C (Insurance Settlement and Release Agreement), including
by providing the release with respect to the payment of $750,000
contemplated in Paragraph 5 of Exhibit C.
b. Pursuant
to the terms of Paragraph 4(c) of the Exhibit C (Insurance
Settlement and Release Agreement), Atlas will pay to Dumont or his
attorneys the amount deemed by Jed Melnick to be due pursuant to
Section 1(a) of this Agreement. This payment will be
made from the $750,000 in insurance proceeds paid to Atlas as
contemplated by Paragraph 4 of Exhibit C within five (5) days upon
receipt by Atlas of the $750,000 insurance payment.
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