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EXHIBIT 10.06
 
 
 

 
 
 

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MFPI Partners, LLC
320 West Main Street
Aspen, Colorado 81611

 
July 27, 2006

 
Mr. David Young, President
Calais Resources, Inc
P.O Box 653
Nederland Colorado 80466-0653
 
Re:      Letter Agreement of September 22, 2005
 
Dear Mr. Young:
 
With respect to the above-referenced letter agreement (the "Initial Agreement")
between Calais Resources, Inc. (the "Company") and Calim Private Equity, LLC
("Calim"), this letter (this "Amendment") shall serve to amend and clarify
certain of the terms of the Initial Agreement as well as provide certain terms
under which MFPI Partners, LLC, an affiliate of Calim ("MFPI"), has provided and
may hereafter provide funding to the Company pending completion of the various
transactions provided for in the Initial Agreement and in this Amendment. If you
are in agreement with the terms of this Amendment, please execute a counterpart
in the space indicated. The Initial Agreement and this Amendment may be
collectively referred to as this "Agreement."
 
1.  First Placement. The parties acknowledge that MFPI has fully funded the
initial US $200,000 placement contemplated by paragraph 1 of the Initial
Agreement (the "First Placement"). The First Placement needs to be completed,
however, in accordance with the terms specified in the Initial Agreement, and
simultaneously with the execution and delivery of this Amendment (i) the Company
shall deliver to MFPI (A) one or more certificates for an aggregate of 2,000,000
shares (the "Initial Shares") of the common capital stock of the Company (the
"Common Stock"); (B) one or more instruments evidencing the right of MFPI to
purchase up to 1,000,000 additional shares of Common Stock at a price of US
$0.25 per share (the "First Warrants"), with the First Warrants to expire if
unexercised by December 15, 2007; and (C) one or more instruments evidencing the
right of MFPI to purchase up to 2,000,000 additional shares of Common Stock at a
price of US $0.25 per share (the "Second Warrants"), with the Second Warrants to
expire if unexercised by December 15, 2010, and (ii) MFPI shall execute and
deliver to the Company one or more subscription agreements relating to its
acquisition of the Initial Shares, the First Warrants and the Second Warrants.
 
2.  Broadway Related Funding. In addition to the First Placement funding, MFPI
has to date advanced further funding for purposes of (i) purchasing for its face
value the US $4,500,000 promissory note (the "Broadway Note") owed by the
Company to certain persons (the "Broadway Group") and secured by a first
mortgage on certain property and (iii) paying accrued interest and late fees in
respect of the Broadway Note of US $722,095.88 (the "Excess Broadway Funding").
The parties have agreed to document the Excess Broadway Funding and the funding
represented by

 

 
 

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MFPI's purchase of the Broadway Note through an allonge to the Broadway Note and
appropriate amendments or supplements to the related mortgages (collectively,
the "Allonge Documents"), which shall be executed and delivered simultaneously
with the execution and delivery of this Amendment The principal amount of the
Broadway Note, together with the Excess Broadway Funding, are collectively the
"Broadway Funding "
 
3.     Broadway Conversion. The Broadway Funding shall be convertible at the
option of MFPI, in whole or in part, at any time prior to its full and complete
payment into five year convertible bonds of the Company (the "Series A Bonds"),
although the conversion option will expire, if unexercised, on December 15,
2006. The Series A Bonds will bear interest at the rate of 12 percent per annum,
payable semi-annually, and will be convertible at the option of the holder into
units (the "Units"), each comprised of one share of Common Stock and a two-year
warrant to purchase a share of Common Stock at a price per share of US $0.30.
The Series A Bonds would convert into Units at a conversion price of US $0.20
per Unit. Prior to maturity or conversion, the Series A Bonds will be secured by
the assets currently securing the Broadway Funding.
 
The Series A Bonds may be prepaid at any time at the option of the Company, in
whole or in part, on not less than 15 days' prior written notice to the holders
at a prepayment price of the principal amount to be prepaid, plus accrued
interest to the date of prepayment. The holder of Series A Bonds to be prepaid
shall have a right to convert them into Units, in whole or in part, prior lo the
date of prepayment.
 
For the first two years the Series A Bonds are outstanding, to the extent that
the Company reasonably determines it does not have the resources to pay accrued
interest on the Series A Bonds, it may elect to pay all or a portion of the
interest payable on any interest payment date in additional Series A Bonds in a
principal amount equal to the interest to be so converted into Series A Bonds;
provided that to the extent the MFPI has funded amounts in respect of the Second
Placement (as hereinafter defined) or otherwise expressly for the purpose of
paying accrued interest on the Series A Bonds, then the Company shall not have
the right to pay such accrued interest in the form of additional Series A Bonds.
 
The parties understand and agree that the terms and provisions of the Series A
Bonds shall, subject to the foregoing express agreements, be subject to the
terms and provisions of a bond agreement between the parties in form and
substance reasonably agreeable to the parties; provided that failure to agree on
the terms of a bond agreement and other definitive documentation shall not
effect the right of MFPI to convert the Broadway Funding on the basis described
herein.
 
4.     Congo Chief Funding. The parties acknowledge that MFPI has provided US
$258,956.40 in funding for the Company to purchase a property known as the
"Congo Chief” property (the "Congo Payment"), and the Company has executed and
delivered to MFPI a promissory note (the "Congo Note") in the amount of the
Congo Payment secured by a mortgage on the Congo Chief property. The principal
amount of and interest on the Congo Note shall be convertible into Series A
Bonds on the same basis as the Broadway Funding as described in paragraph 3
above.
 
 

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5.         Second Placement. The parties acknowledge that MFPI has provided US
$356,591 in further funding to the Company for working capital purposes (the
"First Tranche") which is funding in respect of the placement contemplated by
paragraph 7 of the Initial Agreement (the "Second Placement"). Simultaneously
with the execution and delivery of this Amendment, in respect of the First
Tranche the Company will issue MFPI (i) a certificate for 1,782,955 shares of
Common Stock and (ii) a two-year warrant to purchase 1,782,955 additional shares
of Common Stock at a price of US $0.25 per share. Further, MFPI may hereafter
advance additional amounts to the Company (each an "Advance") in respect of the
Second Placement (the "Follow-on Funding").  Amounts advanced in respect of the
Follow-on Funding, if any, shall be converted into the Second Placement on the
basis provided in paragraph 6 below.
 
The parties understand and agree that with respect to two members of the
Broadway Group, the Company has agreed to issue them shares of Common Stock and
warrants as of the date of this Agreement on the same basis as MFPI under this
paragraph 5 in exchange for obligations owing them of US $5,000 and US $10,000,
respectively. Simultaneously with the execution and delivery of this Amendment,
these two members of the Broadway Group will execute and deliver subscription
agreements substantially similar to that executed by MFPI in exchange for shares
of Common Stock and warrants.
 
6.         Follow-on Funding. Upon payment by MFPI to the Company in respect of
drawings pursuant to paragraph 7 below, the Company shall simultaneously with
the receipt of the applicable payment execute and deliver to MFPI (i) a
certificate for a number of shares of Common Stock equal to the amount of the
applicable Advance, divided by US $0.20, and (ii) a two-year warrant to purchase
an equal number of additional shares of Common Stock at a price of US $0.25 per
share Notwithstanding the forgoing, in the event that any particular Advance
would result in the issuance of either (A) less than 500,000 shares of Common
Stock or (B) fractional shares of Common Stock, then the Company may in its
discretion:
 
(1)  with respect to (A), defer the issuance of a certificate until such time as
either (x) a further Advance is made which would bring the number of shares
issuable in respect of both Advances at least 500,000 in number, in which event
the Company shall issue the applicable certificate at such time, or (y) MFPI
notifies the Company that it is making no further Advances, in which event the
Company shall promptly issue MFPI one or more certificates representing all
remaining shares of Common Stock which it is entitled to be issued pursuant to
this Agreement, including fractional shares, if any; and
 
(2)  with respect to (B), defer the issuance of a certificate evidencing the
fractional shares until such time as either (x) one or more further Advances are
made which can be aggregated with such fractional shares into one or more whole
number of shares and, in such event, the total amount of shares issuable equals
or exceeds 500,000 in number, in which event the Company shall issue the
applicable certificate at such time, or (y) MFPI notifies the Company that it is
making no further Advances, in which event the Company shall promptly issue MFPI
one or certificates on the basis described in (1)(y) above.
 
Notwithstanding a deferral of the issuance of a number of shares of Common Stock
pursuant to this paragraph 6, the Company shall issue warrant certificates for
the applicable number of shares of

 
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Common Stock on the date the applicable Advance is made. In addition, the
deferral of the issuance of share certificates hereunder shall not affect MFPI's
interest in the shares of Common Stock with respect to which the issuance of
certificates has been deferred.
 
7.  Drawings. Drawings by the Company in respect of the Follow-on Funding shall
be made by the Company furnishing to MFPI in writing a request for draw (each a
"Request") in form and substance acceptable to MFPI. Unless MFPI otherwise
agrees, the Company agrees to make only one Request each calendar month. Each
Request shall (i) be made on or before the 15th day of the month immediately
preceding the month to which it relates; (ii) state in reasonable detail the
purpose for which the draw is being requested; (iii) include a projected budget
for the month to which the Request pertains, providing in reasonable detail the
Company's expected uses of funds advanced pursuant to the Request and other
applicable financial provisions for such month; (iv) state that the Company is
in conformity with the terms and provisions of this Agreement; and (v) state
that the representations and warranties of the Company contained in this
Amendment are true and correct as of the date of the Request. Upon being
provided a Request conforming with the conditions stated in this Section, MFPI
shall either (A) advance the amount of the draw specified in the Request
conforming to the foregoing requirements within five business days following
receipt of the Request or (B) inform the Company that MFPI has declined to make
the draw, which it may do in its sole and absolute discretion, it being
understood and agreed that neither MFPI nor Calim nor any of their affiliates
shall be required to advance the Company any amounts in respect of the Follow-on
Funding. Notwithstanding the foregoing, the Company is under no obligation to
borrow any further amounts in respect of the Follow-on Funding.
 
8.  Representations and Warranties. Except as otherwise disclosed on Schedule 8
to this Amendment, the Company represents and warrants to MFPI as follows:
 
(a)  The Company (i) is duly organized, validly existing and in good standing as
a corporation under the laws of the Canadian Province of British Columbia; (ii)
has the power, authority and legal right to own or lease and operate its
property and to conduct the business in which it is currently engaged; and (iii)
is in compliance with all requirements of applicable law except to the extent
that the failure to comply therewith could not, in the aggregate, have a
material adverse effect on the business, operations, property or financial or
other condition of the Company and could not materially adversely affect the
ability of the Company to perform its obligations under this Agreement and each
of the other documents contemplated by this Amendment to be executed and
delivered by the Company contemporaneously herewith (such other documents being
collectively with this Agreement the "Transaction Documents").
 
(b)  The Company has the power, authority and legal right to make, deliver and
perform each of the Transaction Documents and has taken all necessary action to
authorize the transactions contemplated hereby on the terms and conditions of
this Agreement and to authorize the execution, delivery and performance of this
Amendment and each of the other Transaction Documents. No consent of any other
person (including security holders and creditors of the Company), and no
authorization of, notice to, or other act by or in respect of any governmental
authority, is required in connection with the execution, delivery, performance,
validity or enforceability of this Amendment or any other Transaction Document.
This Amendment and each other Transaction Document have been duly executed and
delivered on behalf of the Company, and each constitutes
 

 
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a legal, valid and binding obligation of the Company enforceable against it in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' fights generally,
 
9.  Amendments. No amendment, supplement, waiver or modification to this
Amendment or any other Transaction Document shall be effective unless it is in
writing and signed by the Company and MFPI.
 
10.  Notices. All notices, requests and demands to or upon the respective
parties hereto shall be effective and shall be deemed to have been duly given or
made, unless otherwise expressly provided herein, when deposited in the mail,
postage prepaid, or when made by hand delivery or recognized commercial
overnight delivery service and addressed:

 
If to the Company:
Calais Resources, Inc.
P.O. Box 653
Nederland, Colorado  80466
Attention:  David K. Young

 
with a copy to:
Josiah O. Hatch
Ducker, Montgomery, Aronstein & Bess, P.C.
1560 Broadway, Suite 1400
Denver, Colorado  80202

 
If to MFPI:
MFPI Partners, LLC
320 West Main Street
Aspen, Colorado 81611
Attention: Patrick Imeson

 
with a copy to:
Mark E. Mendel, Esq
Mendel Blumenfeld, LLP
5809 Acacia Circle          
El Paso, Texas 79912

Addresses to which notices shall be sent may be changed by providing each party
with notice of the change in address in the method provided above.
 
11.  Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
except that (i) the Company may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of MFPI and
(ii) MFPI may not assign or transfer any of its rights or obligations under this
Agreement to any person other than a Calim affiliate without the prior written
consent of the Company, any such attempted assignment or transfer shall be void
and of no force and effect.
 
12.  Counterparts. This Amendment may be executed by the parties on any number
of separate counterparts; and all of the counterparts taken together shall be
deemed to constitute one
 

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and the same instrument  Additionally, a facsimile counterpart of this Amendment
shall have the same effect as an originally executed counterpart
 
13.  Governing Law. This Agreement, and the rights and obligations of the
parties under this Amendment shall be governed by, and construed and interpreted
in accordance with, the laws of the State of' Colorado (without reference to the
choice of law provisions of state law) except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party to or the subject of this Agreement, and as to those matters the law of
the jurisdiction under which the respective entity derives its powers shall
govern.
 
14.  Severability. If any section, clause or provision of this Amendment is
ruled invalid or unenforceable by a court of competent jurisdiction, the
invalidity or unenforceability thereof shall not affect any of the remaining
sections, clauses or provisions hereof or thereof, and this Amendment shall
continue in full force and effect as if such invalid or unenforceable provision
had not been contained therein
 
15.  Entire Agreement. This Amendment, together with the Initial Agreement as
hereby amended and the other Transaction Documents constitute the entire
agreement of the parties with respect to the subject matter hereof and thereof,
and supercede, merge or render void any and all prior agreements or
understandings between the parties, oral or written, with respect to the subject
matter hereof and thereof

 
[Remainder of Page Intentionally Left Blank]
 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered as of the date specified above.

  CALAIS RESOURCES, INC.          
 
By:
/s/ David K. Young           Authorized Officer                  

  MFPI PARTNERS, LLC          
 
By:
/s/ Patrick Imeson           Managing Director          

 

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Schedule 8

 
Exceptions to Representations and Warranties of the Company
 
Since filing its interim financial statements, MD&A and related documents for
the First Fiscal Quarter Ending August .31, 2004, the Company has failed to
deliver and file, in accordance with the applicable securities laws, rules and
regulations of British Columbia, its interim financial statements, MD&A and
related documents for the quarters ending November 30, 2004, February 28, 2005,
August 31, 2005, November 30, 2005, February 28, 2006.
 
The Company has failed to deliver and file, in accordance with the applicable
securities laws, rules and regulations of British Columbia, its annual financial
statements, MD&A, related documents and fees for the financial year ending May
31, 2005.
 
The Company has, as a general matter, been untimely in filing, or has failed to
file disclosures required by applicable securities laws, rules and regulations
of British Columbia, including, without limitation, security holder documents,
news releases and Material Change Reports in the prescribed form in connection
with certain events.
 
The Company is subject to a Cease Trade Order issued by the British Columbia
Securities Commission on February 9, 2005 as a result of the Corporation's
failure to file and deliver an interim financial statements, MD&A and related
documents for the quarter ended November 30
 
Since filing its Quarterly Report on Form 10-QSB for the First Fiscal Quarter
Ending August 31, 2004, the Company has failed to make further quarterly or
annual filings with the U S Securities and Exchange Commission ("SEC"), contrary
to the requirements of Section 13(a) of the Securities Exchange Act of 1934 and
related federal regulatory requirements.  Since that date, the Company has, as a
general matter, been untimely in filing, or has failed to file, disclosures
required by other U S and British Columbian securities requirements, including,
without limitation, Current Reports required to be filed on Form 8-K, in
connection with certain events.
 
The Company has not held an annual general meeting of its shareholders in the
calendar year ending 2005 as required by British Columbia corporate law.
 
The Company has not filed income tax returns with Canada Revenue for the 2004
and 2005 financial years.
 
As a consequence of failure to comply with applicable securities law
requirements, the Company may be subject to sanctions by U.S and Canadian
regulatory and self-regulatory organization authorities, including without
limitation, suspension or delisting orders, cease and desist orders, monetary
penalties, federal or state enforcement proceedings, and shareholder actions,
including without limitation proceedings and actions making claims pursuant to
Section 10(b) of the Securities Act of 1934 and the regulations promulgated
thereunder.
 
The Company's representations and warranties with respect to consent, approval
and enforceability are qualified to the extent that enforceability may be
subject to, and affected by: (i) bankruptcy, insolvency, reorganization,
arrangement, winding-up, moratorium or other similar laws of general

 

 
 

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application now or hereafter in effect affecting the enforcement of creditors'
rights generally, (ii) general equitable principles, including but not limited
to concepts of materiality, reasonableness, good faith and fair dealing and the
fact that the availability of equitable remedies, such as injunctive relief and
specific performance, is in the discretion of a court, and (iii) public policies
of any jurisdiction that may affect enforceability without shareholder approval
of certain remedies or rights provided for in the Agreement. The Company's
representations and warranties with respect to the lack of any requirement of
notice are qualified to the extent that such notice is or may be required of
either or both parties pursuant to specific line items in the federal or state
securities laws, including, without limitation, Sections 13(a), 13(d), 13(e),
13(g) and 14 of the Securities Exchange Act of 1934 and the regulations
promulgated thereunder.
 
 
 
 
 
 
 
 

 

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