Lincoln Hill LLC Members’ Agreement
Lincoln
Hill LLC
This
Lincoln Hill LLC Members’ Agreement (the “Agreement”) is made between Western
Goldfields, Inc., an Idaho corporation (“WGI”), and Coolcharm Gold Mining
Company Ltd., a company registered in England and Wales (“Coolcharm”).
Recitals
A. WGI
owns
or controls certain properties in Pershing County, Nevada, which properties
are
described in Exhibit A.
B. Coolcharm
wishes to participate with WGI in the exploration, evaluation and, if justified,
the development and mining of precious metal products within the
Properties.
C. WGI
and
Coolcharm are parties to the Letter Agreement dated April 8, 2004 (the “Letter
Agreement”) which the parties agree will be superseded by this
Agreement.
D. WGI
and
Coolcharm wish to form and operate a limited liability company (the “Company”)
under Chapter 86 of the Nevada Revised Statutes (the “Act”) to own the
Properties and conduct the operations contemplated by Recital B. The name
of the
limited liability company shall be Lincoln Hill LLC and its affairs shall
be
governed by that certain Operating Agreement of Lincoln Hill LLC, dated
effective the date of this Agreement (the “LLC Agreement”).
Now
therefore, in consideration of their mutual promises, WGI and Coolcharm agree
as
follows:
1. Definitions
and Cross-References.
1.1 Definitions.
The
terms
defined in this Agreement shall have the defined meanings wherever used in
this
Agreement. Capitalized terms used but not defined in this Agreement shall
have
the meanings given them in the LLC Agreement.
1.2 Cross
References.
References to exhibits are to Exhibits of the LLC Agreement. References to
“Sections” and “Subsections” refer to Sections and Subsections of this Agreement
unless indicated otherwise. References to “Paragraphs” and “Subparagraphs” refer
to paragraphs and subparagraphs of the Exhibits.
2. Payments.
2.1 Cash
Payments. On
the
dates described below, Coolcharm shall pay to WGI the sums described
below:
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Agreement 4-22-05
1
|
Date
|
Amount
|
|||
|
On
the parties’ execution of the Letter of Intent
|
||||
|
Agreement
(Paid 9-1-2004)
|
$
|
50,000.00
|
||
|
June
1, 2005
|
$
|
25,000.00
|
||
|
September
1, 2005
|
$
|
50,000.00
|
||
|
April
1, 2006
|
$
|
100,000.00
|
||
The
foregoing payments are not contributions of capital and shall not be credited
to
Coolcharm’s Initial Contribution obligations.
2.2 Share
Payments. On
the
dates described below, Coolcharm shall cause the issuance or delivery to
WGI of
the shares of Coolcharm, as follows:
|
Date
|
Shares
|
|||
|
On
the parties’ execution of this Agreement
|
600,000
|
|||
The foregoing payments are not contributions of capital and shall not be credited to Coolcharm’s Initial Contribution obligations.
The
shares shall be subject to the requirements of all applicable Canadian, United
States, provincial and state laws and regulations and the rules of each exchange
or trading association on which the shares are listed for trading or are
traded.
Owner acknowledges that the shares have not been registered under any Canadian,
United States, provincial or state securities laws, and that the shares may
not
be offered or sold unless subsequently registered under all applicable Canadian,
United States, provincial and state securities laws or unless exemptions
from
registration requirements are available for the transaction, as established
to
the satisfaction of Coolcharm by opinion of counsel or otherwise. If the
designations and rights relative to the shares or the share structure of
Coolcharm are changed or modified by an amalgamation, conversion, exchange,
merger, share dividend, reverse dividend or any other means, the number of
shares which Coolcharm is obligated to issue in accordance with this Section
shall be adjusted accordingly.
3. Contributions
by Members.
3.1 Contributions
by WGI.
WGI
shall contribute to the Company WGI’s right, title and interest in and to the
leasehold interests, mining claims and other property interests which constitute
the Lincoln Hill gold property situated in the Rochester Mining District,
Pershing County, Nevada, more particularly described in Exhibit A, and the
right
to copy and use all Member Information concerning the Property which WGI
presently possesses.
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Agreement 4-22-05
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3.2 Contributions
by Coolcharm.
Coolcharm shall have the right to earn and acquire an undivided sixty percent
(60%) ownership interest in the Company on the terms and conditions prescribed
in this Agreement and the Operating Agreement. In order to earn its ownership
interest in the Company, in addition to performance of its obligations described
in Sections 2.1 and 2.2, on or before July 1, 2010, Coolcharm shall: (a)
fund
the Company’s completion of a bankable Feasibility Study on the Property which
supports the development of a mine which has proven reserves equal to or
greater
than one hundred fifty thousand (150,000) ▇▇▇▇ ounces of gold; or (b) incur
and
pay expenditures for the Exploration and Development of the Property as a
mine
in the cumulative amount of Four Million Dollars ($4,000,000.00) and, if
a
bankable Feasibility Study is not completed on or before July 1, 2010, pay
for
additional Qualifying Expenses on or before the times and in the amounts
described in this Section. Coolcharm’s Qualifying Expenses obligation to and
including July 1, 2010, shall be paid on or before the times and in the amounts
described as follows:
|
Date
|
Amount
|
Cumulative
Amount
|
|||||
|
July
1, 2005-2006
|
$
|
500,000
|
$
|
500,000
|
|||
|
July
1, 2006-2007
|
$
|
500,000
|
$
|
1,000,000
|
|||
|
July
l, 2007-2008
|
$
|
1,000,000
|
$
|
2,000,000
|
|||
|
July
1, 2008-2009
|
$
|
1,000,000
|
$
|
3,000,000
|
|||
|
July
1, 2009-2010
|
$
|
1,000,000
|
$
|
4,000,000
|
|||
If
a
bankable Feasibility Study for the Property is not completed on or before
July
1, 2010, in order to earn its ownership interest, Coolcharm must pay for
additional Qualifying Expenses at the times and in the amounts described
below:
|
Date
|
Amount
|
|||
|
July
1, 2010-2011
|
$
|
1,000,000
|
||
|
July
1, 2011-2012
|
$
|
1,000,000
|
||
|
July
1, 2012-2013
|
$
|
1,000,000
|
||
Provided
that Coolcharm has performed its obligations under Sections 2.1. and 2.2,
on the
earlier of completion of a bankable Feasibility Study or Coolcharm’s payment of
the additional Qualifying Expenses described above in the amount of Three
Million Dollars ($3,000,000.00), Coolcharm shall be deemed to have completed
its
Initial Contribution obligations and its sixty percent (60%) interest in
the
Company shall be vested.
All
Qualifying Expenses incurred and paid by Coolcharm in excess of the minimum
amounts for any period described above, whether before or after July 1, 2010,
shall be carried forward by Coolcharm and shall apply as a credit toward
Coolcharm’s Qualifying Expenses obligation for any subsequent
period.
Coolcharm
shall provide WGI with a written statement of Qualifying Expenses, certified
as
being complete and accurate by Coolcharm, within sixty (60) days after the
end
of each period, and shall make available for WGI’s inspection during normal
business hours backup invoices, statements and the like verifying the Qualifying
Expenses. In connection with any such review, Coolcharm may satisfy any
Qualifying Expense obligation by payment to WGI of any agreed-upon
deficiency.
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Agreement 4-22-05
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If
Coolcharm fails or elects not to perform the Qualifying Expense requirement
during any period, and if such failure is not excused by force majeure,
then, in
order to keep this Agreement in full force and effect, within thirty
(30) days
after the end of the period, Coolcharm may elect to make a payment to
WGI which
shall equal one-half of the difference between the required Qualified
Expenses
for the period and the amount actually incurred by Coolcharm during the
period,
provided, however, that on or before July 1, 2010, or July 1, 2013, as
applicable to the initial Qualifying Expenses and the additional Qualifying
Expenses, Coolcharm shall incur and pay for Qualifying Expenses in an
amount
equal to the one-half of the difference of the Qualifying Expenses for
which
Coolcharm does not pay WGI. Any such payment shall satisfy the Qualifying
Expense obligation for the period for which the payment relates. For
purposes of
determining whether Coolcharm has earned the sixty percent (60%) ownership
interest in the Company, Coolcharm shall be deemed to have paid Qualifying
Expenses in an amount equal to the actual Qualifying Expenses paid by
it plus
any cash payments paid by Coolcharm directly to WGI pursuant to this
Section.
Until
Coolcharm has completed its Initial Contribution obligation and its ownership
interest is vested, as a condition to the vestment of Coolcharm’s ownership
interest in the Company, and in addition to its payment of all Qualifying
Expenses, Coolcharm shall timely make all payments required under any underlying
agreement described in Exhibit A, timely pay all Federal annual mining claim
maintenance fees required to maintain the unpatented mining claims which
comprise the Property and timely perform any and all other financial or work
commitment obligations required to maintain any underlying agreement or the
Property. Such payments made or expenses incurred by Coolcharm for the foregoing
shall not be considered Qualifying Expenses, notwithstanding the terms of
Exhibit B which otherwise characterize such Qualifying Expenses as expenses
chargeable to the Company’s Business Account. Coolcharm shall also timely file
and record all affidavits of annual assessment work, notices of intent to
hold
and other instruments necessary to maintain the Property in accordance with
all
applicable laws and regulations and the terms of any underlying agreement.
Coolcharm shall perform such obligations not less than thirty (30) days before
the applicable contractual or legal deadline for performance of such obligations
and within fifteen (15) days following Coolcharm’s performance of such
obligations, Coolcharm shall deliver proof of performance to WGI. If Coolcharm
terminates this Agreement less than sixty (60) days before the deadline for
payment of any fees or the filing or recording of any instruments or performance
of any other obligation under applicable laws and regulations or any underlying
agreement, Coolcharm shall be obligated to perform such obligations which
arise
before the termination date notwithstanding its delivery of notice of
termination of this Agreement.
Subject
to Coolcharm’s right to pay WGI for Qualifying Expenses in lieu of performance
of its Initial Contribution obligations, if Coolcharm fails to timely make
a
payment under this Section, Coolcharm shall be deemed to have elected to
terminate this Agreement.
Members
Agreement 4-22-05
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3.3 Certain
Obligations of
Coolcharm During Period of Its Initial Contributions.
a. During
the period when the Company conducts Operations pursuant to Section 3.1(c)
of
the LLC Agreement, Coolcharm shall provide for accrual of reasonably anticipated
Environmental Compliance expenses, which shall constitute Qualifying Expenses,
and upon completion of its Initial Contribution, Coolcharm shall transfer
any
accrued but unexpended amounts to the Environmental Compliance Fund established
under Paragraph 2.14 of Exhibit B.
b. If
Coolcharm resigns pursuant to Subsection 3.2.1 of the LLC Agreement, Coolcharm
shall indemnify WGI for any costs or losses related to contractual obligations
of the Company to third parties for Operations existing at the time of
such
resignation. In addition, Coolcharm shall indemnify WGI for Coolcharm’s share of
liabilities to third parties (regardless of whether such liabilities accrue
before or after such resignation), including Environmental Liabilities,
Continuing Obligations and Environmental Compliance, arising before Coolcharm’s
resignation from Operations conducted by Coolcharm, which responsibility
shall
be based on Coolcharm’s initial Ownership Interest.
c. If
Coolcharm resigns pursuant to Subsection 3.2.2 of the LLC Agreement, Coolcharm
shall be obligated to fund Operations up to the amount of Coolcharm’s agreed
contribution to the then currently adopted Program and Budget. In addition,
Coolcharm shall indemnify WGI for Coolcharm’s share of liabilities to third
parties (regardless of whether such liabilities accrue before or after
such
resignation), including Environmental Liabilities, Continuing Obligations
and
Environmental Compliance, arising from Operations conducted by Coolcharm
after
the Effective Date and before its resignation.
3.4 Additional
Contributions.
At such
time as Coolcharm has contributed the full amount of its Initial Contribution
and performed all of the conditions precedent to the vesting of its ownership
in
the Company, Coolcharm’s obligation to fund all of the Company’s Operations in
accordance with Section 3.2 shall terminate, and thereafter the Members,
subject
to any elections permitted under the LLC Agreement, shall be obligated
to
contribute funds to the Company to fund adopted Programs and Budgets in
proportion to their respective Ownership Interests.
3.5 Emergency
or Unexpected Expenditures.
In case
of emergency, the Manager may take any reasonable action it deems necessary
to
protect life or property, to protect the Assets or to comply with Laws.
The
Manager may make reasonable expenditures on behalf of the Members for unexpected
events that are beyond its reasonable control and that do not result from
a
breach by it of its standard of care. The Manager shall promptly notify
the
Members of the emergency or unexpected expenditure, and the Manager shall
be
reimbursed for all resulting costs by the Members in proportion to their
respective Ownership Interests.
Members
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5
4. Representations
and Warranties; Title to Assets; Indemnities.
4.1 Representations
and Warranties of the Members.
As of
the Effective Date, each Member warrants and represents to the other
that:
a. It
is a corporation duly organized and
in good standing in its state of incorporation and is qualified to do business
and is in good standing in those states where necessary in order to carry
out
the purposes of this Agreement;
b. It
has
the capacity to enter into and perform this Agreement and all transactions
contemplated in this Agreement and that all corporate, board of directors,
shareholder, surface and mineral rights owner, lessor, lessee and other
actions
and consents required to authorize it to enter into and perform this Agreement
have been properly taken;
c. It
will
not breach any other agreement or arrangement by entering into or performing
this Agreement;
d. It
is not
subject to any governmental order, judgment, decree, debarment, sanction
or Laws
that would preclude the permitting or implementation of Operations under
this
Agreement; and
e. This
Agreement has been duly executed and delivered by it and is valid and binding
upon it in accordance with its terms.
4.2 Representations
and Warranties of WGI.
As of
the Effective Date, WGI makes the following representations and warranties
to
Coolcharm:
a. With
respect to those Properties WGI owns in fee simple, if any, WGI is in exclusive
possession of and owns such Properties free and clear of all Encumbrances
or
defects in title except those specifically identified in Exhibit A.
b. With
respect to those Properties in which WGI holds an interest under leases
or other
contracts: (i) WGI is in exclusive possession of such Properties; (ii)
WGI has
not received any notice of default of any of the terms or provisions of
such
leases or other contracts; (iii) WGI has the authority under such leases
or
other contracts to perform fully its obligations under this Agreement;
(iv) to
WGI’s knowledge, such leases and other contracts are valid and are in good
standing; (v) WGI has no knowledge of any act or omission or any condition
on
the Properties which could be considered or construed as a default under
any
such lease or other contract; and (vi) to WGI’s knowledge, such Properties are
free and clear of all Encumbrances or defects in title except for those
specifically identified in Exhibit A.
c. WGI
has
delivered to or made available for inspection by Coolcharm all Existing
Data in
its possession or control, and true and correct copies of all leases or
other
contracts relating to the Properties.
Members
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6
d. With
respect to unpatented mining claims and millsites located by WGI that are
included within the Properties, except as provided in Paragraph 1.1 of
Exhibit A
and subject to the paramount title of the United States: (i) the unpatented
mining claims were properly laid out and monumented; (ii) all required
location
and validation work was properly performed; (iii) location notices and
certificates were properly recorded and filed with appropriate governmental
agencies; (iv) all assessment work required to hold the unpatented mining
claims
has been performed and all Governmental Fees have been paid in accordance
with
applicable laws and regulations through the assessment year ending September
1,
2004; (v) all affidavits of assessment work, evidence of payment of Governmental
Fees, and other filings required to maintain the claims in good standing
have
been properly and timely recorded or filed with appropriate governmental
agencies; (vi) the claims are free and clear of Encumbrances or defects
in
title; and (vii) WGI has no knowledge of conflicting mining claims. Nothing
in
this Subsection, however, shall be deemed to be a representation or a warranty
that any of the unpatented mining claims contains a valuable mineral
deposit.
e. With
respect to unpatented mining claims and millsites not located by WGI but
which
are included within the Properties, except as provided in Paragraph 1.1
of
Exhibit A and subject to the paramount title of the United States: (i)
all
assessment work required to hold the unpatented mining claims has been
performed
and all Governmental Fees have been paid in accordance with applicable
laws and
regulations and the terms of any underlying agreement in order to maintain
those
claims through the assessment year ending September 1, 2004; (ii) all affidavits
of assessment work, evidence of payment of Governmental Fees, and other
filings
required to maintain the claims in good standing have been properly and
timely
recorded or filed with appropriate governmental agencies; (iii) the claims
are
free and clear of Encumbrances or defects in title; and (iv) WGI has no
knowledge of conflicting mining claims. Nothing in this Subsection, however,
shall be deemed to be a representation or a warranty that any of the unpatented
mining claims contains a valuable discovery of minerals.
f. With
respect to the Properties, to WGI’s knowledge, there are no pending or
threatened actions, suits, claims or proceedings, and there have been no
previous transactions affecting its interests in the Properties which have
not
been for fair consideration.
g. Except
as
to matters otherwise disclosed in writing to Coolcharm before the Effective
Date,
(i) to
WGI’s
knowledge, formed without inquiry, the conditions existing on or with respect
to
the Properties and its ownership and operation of the Properties are not
in
violation of any Laws (including without limitation any Environmental Laws)
nor
causing or permitting any damage (including Environmental Damage, as defined
below) or impairment to the health, safety, or enjoyment of any person
at or on
the Properties or in the general vicinity of the Properties;
Members
Agreement 4-22-05
7
(ii) to
WGI’s
knowledge, formed without inquiry, there have been no past violations
by it or
by any of its predecessors in title of any Environmental Laws or other
Laws
affecting or pertaining to the Properties, nor any past creation of
damage or
threatened damage to the air, soil, surface waters, groundwater, flora,
fauna,
or other natural resources on, about or in the general vicinity of
the
Properties (“Environmental Damage”); and
(iii) WGI
has
not received inquiry from or notice of a pending investigation from any
governmental agency or of any administrative or judicial proceeding concerning
the violation of any Laws.
The
representations and warranties stated above shall survive the execution
and
delivery of any documents of Transfer provided under this Agreement. For
a
representation or warranty made to a Member’s “knowledge,” the term “knowledge”
shall mean actual knowledge on the part of the officers, employees, and
agents
of the representing Member or of facts that would reasonably lead to the
indicated conclusions.
4.3 Disclosures.
Each of
the Members represents and warrants that it is unaware of any material
facts or
circumstances that have not been disclosed in this Agreement or in the
LLC
Agreement from being materially misleading. WGI has disclosed to Coolcharm
all
information it believes to be relevant concerning the Assets and has provided
to
or made available for inspection by Coolcharm all such information, but
does not
make any representation or warranty, express or implied, as to the accuracy
or
completeness of the information or as to the boundaries or value of the
Assets.
Each Member represents to the other that in negotiating and entering into
this
Agreement and the LLC Agreement it has relied solely on its own appraisals
and
estimates as to the value of the Assets and upon its own geologic and
engineering interpretations related thereto.
5. Loss
of Title.
Any
failure or loss of title to the Assets, and all costs of defending title,
shall
be charged to the Business Account, except that in the event of costs or
losses
arising from or resulting from any breach of the representations and warranties
of WGI or Coolcharm as to title, the breaching Member shall indemnify the
non-breaching Member for such costs and losses.
6. Limitation
of Liability.
The
Members shall not be required to make any contribution to the capital of
the
Company except as otherwise provided in this Agreement, nor shall the Members
in
their capacity as Members or Manager be bound by, or liable for, any debt,
liability or obligation of the Company whether arising in contract, tort,
or
otherwise. The foregoing shall not limit any obligation of a Member to
indemnify
the other Member as expressly provided by this Agreement. The Members shall
be
under no obligation to restore a deficit Capital Account upon the dissolution
of
the Company or the liquidation of any of their Ownership Interests. Any
obligation in this Agreement to contribute capital to the Company may be
compromised by the Members, including by payments by an obligated Member
directly to the other Member.
Members
Agreement 4-22-05
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7. Indemnification.
7.1 Each
Member shall indemnify the other Member, its directors, officers, employees,
agents and attorneys, and Affiliates (collectively “Indemnified Party”) from and
against the entire amount of any Material Loss. A “Material Loss” shall mean all
direct and indirect costs, expenses, damages or liabilities, including
attorneys’ fees and other costs of litigation (either threatened or pending)
arising from or based on a breach by a Member (“Indemnifying Party”) of any
representation, warranty or covenant contained in this Agreement or the
LLC
Agreement, including without limitation:
a. any
action taken for or obligation or responsibility assumed on behalf of the
Company or another Member by a Member or any of its directors, officers,
employees, agents and attorneys, or Affiliates, in violation of Section
5.1 of
the LLC Agreement;
b. failure
of a Member or its Affiliates to comply with the non-compete or Area of
Interest
provisions of Section 10;
c. any
Transfer that causes termination of the tax partnership established under
the
LLC Agreement, against which the transferring Member shall indemnify the
non-transferring Member as provided in Subsection 7.2.5 of the LLC Agreement
and
Section 5 of Exhibit C; and
d. failure
of a Member or its Affiliates to comply with the preemptive right under
the LLC
Agreement and Exhibit H.
A
Material Loss shall not be deemed to have occurred until an Indemnified
Party
incurs losses, costs, damages or liabilities in excess of One Hundred Dollars
($100,000) relating to breaches of warranties, representations and covenants
contained in this Agreement and the LLC Agreement, in the aggregate. WGI’s
aggregate liability to all Indemnified Parties under this Section for breaches
of the representations in Subsection 4.2(g) shall not, however, exceed
Fifty
Thousand Dollars ($50,000).
7.2 If
any
claim or demand is asserted against an Indemnified Party in respect of
which
such Indemnified Party may be entitled to indemnification under this Agreement,
written notice of such claim or demand shall promptly be given to the
Indemnifying Party. The Indemnifying Party shall have the right, but not
the
obligation, by notifying the Indemnified Party within thirty (30) days
after its
receipt of the notice of the claim or demand, to assume the entire control
of
(subject to the right of the Indemnified Party to participate, at the
Indemnified Party’s expense and with counsel of the Indemnified Party’s choice),
the defense, compromise, or settlement of the matter, including, at the
Indemnifying Party’s expense, employment of counsel of the Indemnifying Party’s
choice. Any damages to the assets or business of the Indemnified Party
caused by
a failure by the Indemnifying Party to defend, compromise, or settle a
claim or
demand in a reasonable and expeditious manner requested by the Indemnified
Party, after the Indemnifying Party has given notice that it will assume
control
of the defense, compromise, or settlement of the matter, shall be included
in
the damages for which the Indemnifying Party shall be obligated to indemnify
the
Indemnified Party. Any settlement or compromise of a matter by the Indemnifying
Party shall include a full release of claims against the Indemnified Party
which
have arisen from the indemnified claim or demand.
Members
Agreement 4-22-05
9
8. Interests
of Members.
8.1 Continuing
Liabilities Upon Adjustments of Ownership Interests.
Any
reduction or elimination of either Member’s Ownership Interest under Section 4.2
of the LLC Agreement shall not relieve such Member of its share of any
liability, including, without limitation, Continuing Obligations, Environmental
Liabilities and Environmental Compliance, whether arising, before or after
such
reduction or elimination, from acts or omissions occurring or conditions
existing before the Effective Date, or from Operations conducted during
the term
of this Agreement but before such reduction or elimination, regardless
of when
any funds may be expended to satisfy such liability. For purposes of this
Section, such Member’s share of such liability shall be equal to its Ownership
Interest at the time the act or omission giving rise to the liability occurred,
after first taking into account any prior reduction, readjustment and
restoration of Ownership Interests under Sections 4.4, 10.5, 10.6 and 11.5
of
the LLC Agreement (or, as to such liability arising from acts or omissions
occurring or conditions existing before the Effective Date, equal to such
Member’s initial Ownership Interest). Should the cumulative cost of satisfying
Continuing Obligations be in excess of cumulative amounts accrued or otherwise
charged to the Environmental Compliance Fund as described in Paragraph
2.14 of
Exhibit B, each of the Members shall be liable for its proportionate share
(i.e.,
Ownership Interest at the time of the act or omission giving rise to such
liability occurred), after first taking into account any reduction, readjustment
and restoration of Ownership Interests under Sections 4.4, 10.5, 10.6 and
11.5
of the LLC Agreement, of the cost of satisfying such Continuing Obligations,
notwithstanding that either Member has previously resigned from the Company
or
that its Ownership Interest has been reduced or converted to an interest
in Net
Proceeds pursuant to Subsection 4.4.1 of the LLC Agreement.
8.2 Continuing
Obligations and Environmental Liabilities.
On
dissolution of the Company under Section 14.1 of the LLC Agreement, each
Member
shall remain liable for its respective share of liabilities to third parties
(whether such arises before or after such dissolution), including Environmental
Liabilities and Continuing Obligations. In the event of the resignation
of a
Member pursuant to Section 14.2 of the LLC Agreement, the resigning Member’s
share of such liabilities shall be equal to its Ownership Interest at the
time
such liability was incurred, after first taking into account any reduction,
readjustment, and restoration of Ownership Interests under Sections 4.4,
10.5,
10.6 and 11.5 of the LLC Agreement (or, as to liabilities arising before
the
Effective Date, its initial Ownership Interest).
8.3 Grant
of Lien and Security Interest.
a. Subject
to the terms of this Agreement, each Member grants to the other Member
a lien
upon and a security interest in its Ownership Interest, including all of
its
right, title and interest in the Assets, whenever acquired or arising,
and the
proceeds from and accessions to the foregoing.
Members
Agreement 4-22-05
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b. The
liens
and security interests granted under this Agreement shall secure every
obligation or liability of the Member granting such lien or security interest
to
the other Member created under this Agreement or the LLC Agreement, including
the obligation to repay a Cover Payment in accordance with Section 11.4
of the
LLC Agreement. Each Member hereby agrees to take all action necessary to
perfect
such lien and security interest and hereby appoints the other Member its
attorney-in-fact to execute, file and record all financing statements and
other
documents necessary to perfect or maintain such lien and security
interest.
8.4 Subordination
of Interests.
Each
Member shall, from time to time, take all necessary actions, including
execution
of appropriate agreements, to pledge and subordinate its Ownership Interest,
any
liens it may hold which are created under this Agreement other than those
created subject to the terms of this Agreement, and any other right or
interest
it holds with respect to the Company and the Assets (other than any statutory
lien of the Manager) to any secured borrowings for Operations approved
by the
Management Committee, including any secured borrowings relating to Project
Financing, and any modifications or renewals thereof.
9. Relationship
of The Members.
9.1 Transfer
or Termination of Rights.
Neither
Member shall Transfer all or any part of its rights or obligations under
this
Agreement, except in conjunction with a transfer or termination of the
Member’s
Ownership Interest permitted by the LLC Agreement. Any such permitted assignment
shall be subject to the consent requirements of Section 7.2 of the LLC
Agreement. Nothing in this Section requires that a Member’s rights and
obligations under this Agreement be assigned in connection with the transfer
of
its Ownership Interest.
9.2 Abandonment
and Surrender of Properties.
The
Member that desires to abandon or surrender all or part of the Properties
pursuant to Section 12.2 of the LLC Agreement shall remain liable to the
other
Member for its share (determined by its Ownership Interest as of the date
of
such abandonment, after first taking into account any reduction, readjustment,
and restoration of Ownership Interests under Sections 4.4, 10.5, 10.6 and
11.5
of the LLC Agreement) of any liability with respect to such Properties,
including, without limitation, Continuing Obligations, Environmental Liabilities
and Environmental Compliance, whether accruing before or after such abandonment,
arising from activities before the Effective Date and from Operations conducted
before the date of such abandonment, regardless of when any funds may be
expended to satisfy such liability.
9.3 Supplemental
Business Arrangement.
The
Members hereby agree that in the event of a Supplemental Business Arrangement
pursuant to Section 10.13 of the LLC Agreement, this Agreement shall apply
mutatis
mutandis
to such
business in the same manner as to the LLC Agreement.
Members
Agreement 4-22-05
11
9.4 Implied
Covenants.
There
are no implied covenants contained in this Agreement other than those of
good
faith and fair dealing.
9.5 No
Third Party Beneficiary Rights.
This
Agreement shall be construed to benefit the Members and their respective
successors and assigns only, and shall not be construed to create third
party
beneficiary rights in any other party, expressly including the Company,
or in
any governmental organization or agency, except to the extent required
to permit
indemnification of a non-Member’s Indemnified Party.
10. Acquisitions
Within Area of Interest.
10.1 General.
Any
interest or right to acquire any interest in real property or water rights
related thereto within the Area of Interest either acquired or proposed
to be
acquired during the term of this Agreement by or on behalf of either Member
(“Acquiring Member”) or any Affiliate of such Member shall be subject to the
terms and provisions of this Agreement and the LLC Agreement. WGI and Coolcharm
and their respective Affiliates for their separate account shall be free
to
acquire lands and interests in lands outside the Area of Interest and to
locate
mining claims outside the Area of Interest. Failure of any Affiliate of
either
Member to comply with this Article shall be a breach by such Member of
this
Agreement.
10.2 Notices
to Non-Acquiring Member.
Within
sixty (60) days after the acquisition or proposed acquisition, as the case
may
be, of any interest or the right to acquire any interest in real property
or
water rights wholly or partially within the Area of Interest (except real
property acquired by the Manager pursuant to a Program), the Acquiring
Member
shall notify the other Member of such acquisition by it or its Affiliate;
provided that if the acquisition of any interest or right to acquire any
interest pertains to real property or water rights partially within the
Area of
Interest, then all such real property (i.e.,
the
part within the Area of Interest and the part outside the Area of Interest)
shall be subject to this Article. The Acquiring Member’s notice shall describe
in detail the acquisition, the acquiring party if that party is an Affiliate,
the lands and covered minerals, any related water rights, the cost and
the
reasons why the Acquiring Member believes that the acquisition (or proposed
acquisition) of the interest is in the best interests of the Members under
this
Agreement. In addition to such notice, the Acquiring Member shall make
any and
all information concerning the relevant interest available for inspection
by the
other Member.
10.3 Option
Exercised.
Within
sixty (60) days after receiving the Acquiring Member’s notice, the other Member
may notify the Acquiring Member of its election to accept a proportionate
interest in the acquired interest equal to its Ownership Interest. Promptly
upon
such notice, the Acquiring Member shall convey or cause its Affiliate to
convey
to the Members in proportion to their respective Ownership Interests or
to the
Company (as agreed by the Members), by special warranty deed all of the
Acquiring Member’s (or its Affiliate’s) interest in such acquired interest, free
and clear of all Encumbrances arising by, through or under the Acquiring
Member
(or its Affiliate) other than those to which both Members have agreed.
Immediately upon such notice, the acquired interest either shall be subject
to a
Supplemental Business Arrangement, or if conveyed to the Company, shall
become a
part of the Properties for all purposes of this Agreement and the LLC Agreement.
The other Member shall promptly pay to the Acquiring Member its proportionate
share of the latter’s actual out-of-pocket acquisition costs.
Members
Agreement 4-22-05
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10.4 Option
Not Exercised.
If the
other Member does not give such notice within the sixty (60) day period
described in the foregoing subsection, shall have no interest in the acquired
interests, and the acquired interests shall not be a part of the Assets
or
continue to be subject to this Agreement or the LLC Agreement.
10.5 Non-Compete
Covenants.
Neither
a Member that resigns pursuant to Section 14.2 of the LLC Agreement, or
is
deemed to have resigned pursuant to Sections 3.2, 4.4 or 11.5 of the LLC
Agreement, nor any Affiliate of such a Member, shall directly or indirectly
acquire any interest or right to explore or mine, or both, on any property
any
part of which is within the Area of Interest for twenty-four (24) months
after
the effective date of resignation. If a resigning Member, or the Affiliate
of a
resigning Member, breaches this Section, such Member shall be obligated
to offer
to convey to the non-resigning Member, without cost, any such property
or
interest so acquired (or ensure its Affiliate offers to convey the property
or
interest to the non-resigning Member, if the acquiring party is the resigning
Member’s Affiliate). Such offer shall be made in writing and can be accepted by
the non-resigning Member at any time within ten (10) days after the offer
is
received by such non-resigning Member. Failure of a Member’s Affiliate to comply
with this Section shall be a breach by such Member of this
Agreement.
11. Disputes.
11.1 Governing
Law.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of Nevada, without regard for any conflict of laws or choice
of laws
principles that would permit or require the application of the laws of
any other
jurisdiction. The parties agree that jurisdiction of and venue in the Second
Judicial District Court, Washoe County, Nevada, is proper for any action
or
legal proceeding relating to this Agreement.
11.2 Dispute
Resolution. All
disputes arising under or in connection with this Agreement which cannot
be
resolved by agreement between the Members shall be resolved in accordance
with
applicable Law. If any legal action or other proceeding is brought for
the
enforcement of this Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions
of this
Agreement, the successful or substantially prevailing Member shall be entitled
to recover reasonable attorneys’ fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
Members
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12. General
Provisions.
12.1 Notices.
All
notices, payments and other required or permitted communications (“Notices”) to
either Member shall be in writing, and shall be addressed respectively
as
follows:
| If to WGI: | Western Goldfields, Inc. | |
| ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇ | ||
| ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ | ||
| ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ | ||
| Fax: ▇▇▇-▇▇▇-▇▇▇▇ | ||
| If to Coolcharm: | Coolcharm Gold Mining Company Ltd. | |
| ▇▇▇ ▇▇▇▇▇ ▇▇. | ||
| ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ | ||
| ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ | ||
| ▇▇▇▇▇▇.▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇ | ||
| Fax: ▇▇▇-▇▇-▇▇-▇▇▇▇-▇▇▇▇ | ||
All
Notices shall be given (a) by personal delivery to the Member; (b) by electronic
communication, capable of producing a printed transmission, (c) by registered
or
certified mail return receipt requested; or (d) by overnight or other express
courier service. All Notices shall be effective and shall be deemed given
on the
date of receipt at the principal address if received during normal business
hours, and, if not received during normal business hours, on the next business
day following receipt, or if by electronic communication, on the date of
such
communication. Either Member may change its address by Notice to the other
Member.
12.2 Gender.
The
singular shall include the plural, and the plural the singular wherever
the
context so requires, and the masculine, the feminine, and the neuter genders
shall be mutually inclusive.
12.3 Currency.
All
references to “dollars” or “$” in this Agreement shall mean lawful currency of
the United States of America.
12.4 Headings.
The
subject headings of the Sections and Subsections of this Agreement and
the
Paragraphs and Subparagraphs of the Exhibits to this Agreement are included
for
purposes of convenience only, and shall not affect the construction or
interpretation of any of its provisions.
12.5 Waiver.
The
failure of either Member to insist on the strict performance of any provision
of
this Agreement or to exercise any right, power or remedy upon a breach
hereof
shall not constitute a waiver of any provision of this Agreement or limit
such
Member’s right thereafter to enforce any provision or exercise any
right.
12.6 Modification.
No
modification of this Agreement shall be valid unless made in writing and
duly
executed by both Members.
Members
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14
12.7 Force
Majeure.
Except
for the obligation to make payments when due, the obligations of a Member
shall
be suspended to the extent and for the period that performance is prevented
by
any cause, whether foreseeable or unforeseeable, beyond its reasonable
control,
including, without limitation, labor disputes (however arising and whether
or
not employee demands are reasonable or within the power of the Member to
grant);
acts of God; Laws, instructions or requests of any government or governmental
entity; judgments or orders of any court; inability to obtain on reasonably
acceptable terms any public or private license, permit or other authorization;
curtailment or suspension of activities to remedy or avoid an actual or
alleged,
present or prospective violation of Environmental Laws; action or inaction
by
any federal, state or local agency that delays or prevents the issuance
or
granting of any approval or authorization required to conduct Operations,
except
if not diligently applied for and prosecuted, beyond the reasonable expectations
of the Member seeking the approval or authorization (including, without
limitation, a failure to complete any review and analysis required by the
National Environmental Policy Act or any similar state law within twenty-four
(24) months of initiation of that process); acts of war or conditions arising
from or attributable to war, whether declared or undeclared; riot, civil
strife,
insurrection or rebellion; fire, explosion, earthquake, storm, flood, sink
holes, drought or other adverse weather condition; delay or failure by
suppliers
or transporters of materials, parts, supplies, services or equipment or
by
contractors’ or subcontractors’ shortage of, or inability to obtain, labor,
transportation, materials, machinery, equipment, supplies, utilities or
services; accidents; breakdown of equipment, machinery or facilities; actions
by
native rights groups, environmental groups, or other similar special interest
groups; or any other cause whether similar or dissimilar to the foregoing.
The
affected Member shall promptly give notice to the other Member of the suspension
of performance, stating the nature of, reasons for and expected duration
of the
suspension. The affected Member shall resume performance as soon as reasonably
possible. During the period of suspension the obligations of both Members
to
advance funds pursuant to Section 2 shall be reduced to levels consistent
with
then current Operations.
12.8 Rule
Against Perpetuities.
The
Members do not intend that there shall be any violation of the Rule Against
Perpetuities, the Rule Against Unreasonable Restraints on the Alienation
of
Property, or any similar rule. Accordingly, if any right or option to acquire
any interest in the Properties, in an Ownership Interest, in the Assets,
or in
any real property exists under this Agreement, such right or option must
be
exercised, if at all, so as to vest such interest within time periods permitted
by applicable rules. If, however, any such violation should inadvertently
occur,
the Members hereby agree that a court shall reform that provision in such
a way
as to approximate most closely the intent of the Members within the limits
permissible under such rules.
12.9 Further
Assurances.
Each of
the Members shall take, from time to time and without additional consideration,
such further actions and execute such additional instruments as may be
reasonably necessary or convenient to implement and carry out the intent
and
purpose of this Agreement or as may be reasonably required by lenders in
connection with Project Financing.
Members
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12.10 Entire
Agreement; Successors and Assigns.
This
Agreement contains the entire understanding of the Members and supersedes
all
prior agreements and understandings between the Members relating to the
subject
matter of this Agreement; provided that nothing in this Section modifies
or
affects the LLC Agreement and the Members’ obligations. This Agreement shall be
binding upon and inure to the benefit of the respective successors and
permitted
assigns of the Members.
12.11 Counterparts.
This
Agreement may be executed in any number of counterparts, and it shall not
be
necessary that the signatures of both Members be contained on any counterpart.
Each counterpart shall be deemed an original, but all counterparts together
shall constitute one and the same instrument.
12.12 Memorandum
of Agreement.
Upon
execution of this Agreement, the parties shall execute and deliver a short
form
of this Agreement which may be recorded in the office of the recorder of
each
county in which all or part of the Properties is located. The execution
and
recording of the short form of this Agreement shall not limit, increase
or in
any manner affect any of the terms of this Agreement, or any rights, interests
or obligations of the parties.
Dated
effective April 8, 2004 (the “Effective Date”).
| Western Goldfields, Inc. | Coolcharm Gold Mining Company Ltd. | ||
| By | By | ||
|
|
|
||
| Title | Title | ||
|
|
|
Members
Agreement 4-22-05
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