Unassociated Document


    Exhibit
10.32

     

    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

    


    - and
-

    


    WESLEY C. HANSON (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:

    


    
      	
              1.

            	
              Definitions

            


    

    


    
      	
            	
              (a)

            	
              “Agreement” means this
      Agreement as amended from time to
time;

            


    

    


    
      	
            	
              (b)

            	
              “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.

            


    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

     

    - 2 -

     

    
      	
            	
              (c)

            	
              “Board of Directors”
      means the board of directors of the Corporation as at the date of this
      Agreement.

            


    

    


    
      	
            	
              (d)

            	
              “Cause” shall mean
      termination of Executive’s employment by the Corporation or any subsidiary
      thereof or successor thereto, by reason of
  Executive’s:

            


    

    


    
      	
            	
              (i)

            	
              gross
      negligence in the performance of his
duties;

            


    

    


    
      	
            	
              (ii)

            	
              wilful
      and continued failure to substantially perform his duties determined on a
      historic basis prior to a Change of Control with the
      Corporation;

            


    

    


    
      	
            	
              (iii)

            	
              wilful
      engagement in conduct which is materially injurious to the Corporation or
      its subsidiaries (monetarily or otherwise);
or

            


    

    


    
      	
            	
              (iv)

            	
              conviction
      of a criminal offence involving moral
turpitude.

            


    

    


    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.

    


    
      	
            	
              (e)

            	
              “Change of Control”
      means the occurrence of any one or more of the following
      events:

            


    

    


    
      	
            	
              (i)

            	
              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);

            


    

    


    
      	
            	
              (ii)

            	
              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);

            


    

    


    
      	
            	
              (iii)

            	
              the
      Corporation is to be dissolved and
liquidated;

            


    

    


    
      	
            	
              (iv)

            	
              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

            


    

    


    
      	
            	
              (v)

            	
              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.

            


    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

    
       

      - 3
-



    
      	
            	
              (f)

            	
              “Date of Termination”
      means:

            


    

    


    
      	
            	
              (i)

            	
              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

            


    

    


    
      	
            	
              (ii)

            	
              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.

            


    

    


    
      	
            	
              (g)

            	
              “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.

            


    

    


    
      	
            	
              (h)

            	
              “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.

            


    

    


    
      	
            	
              (i)

            	
              “Severance Amount” shall
      mean an amount equal to 2 times the Executive’s Annual
      Compensation.

            


    

    


    
      	
            	
              (j)

            	
              “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.

            


    

    


    
      	
            	
              (j)

            	
              “Triggering Event” means
      any one of the following events which occurs without the express agreement
      in writing of the Executive:

            


    

    


    
      	
            	
              (i)

            	
              a
      material adverse change in the salary or benefits of the Executive as they
      exist immediately prior to the Change of
  Control;

            


    

    


    
      	
            	
              (ii)

            	
              a
      removal of the designation of Vice President, Mine Development 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;

            


    

    


    
      	
            	
              (iii)

            	
              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

            


    

    


    
      	
            	
              (iv)

            	
              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.

            


    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

     

    - 4
-

     

    
      	
              2.

            	
              Term

            


    

    


    The term
of this Agreement shall commence on the date hereof and continue for an
indefinite term.

    


    
      	
              3.

            	
              Termination
      of Employment

            


    

    


    
      	
            	
              (a)

            	
              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.

            


    

    


    
      	
            	
              (b)

            	
              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 benefit plans and programs (including medical and dental
      insurance) will terminate as of the Date of Termination in accordance with
      the terms of such plans and programs. Upon the Date of Termination all
      vested options to purchase common shares in the Capital of the Corporation
      held by the Executive shall be cancelled, and all unvested options shall
      expire.

            


    

    


    
      	
            	
              (c)

            	
              Termination Due to
      Disability. The Corporation shall be entitled to terminate the
      Executive’s employment at any time due to the Disability of the Executive,
      provided that such Disability has not occurred in the execution of the
      business of the Corporation. In the event of a termination of Executive’s
      employment due to Disability, the Executive shall be entitled to receive
      compensation equal to the Executive’s Annual Compensation for the first
      year after the Date of Termination, whereafter the Executive shall be
      entitled to receive such compensation, if any, as may be determined by the
      Corporation, within the Corporation’s discretion. All options shall be
      deemed cancelled and expired upon the Date of Termination, unless the
      Corporation, acting within its discretion, decides
    otherwise.

            


    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

    
       

      - 5
-

       

    

    
      	
            	
              (d)

            	
              Termination following a Change
      of Control. If, following a Change of Control, the Corporation
      shall terminate Executive’s employment other than for death, Disability or
      Cause, within 18 months after the date upon which a Change of Control
      occurs, or if Executive shall terminate his employment within 6 months
      following a Triggering Event, then the Executive shall be entitled to the
      following:

            


    

    


    
      	
            	
              (i)

            	
              Salary
      and Benefits. The Corporation shall pay Executive a lump sum cash
      payment in an amount equal to the Severance Amount on or before the fifth
      day following the Date of
Termination;

            


    

    


    
      	
            	
              (ii)

            	
              Equity
      Based Compensation. Subject to the receipt of all necessary
      regulatory approvals, the Corporation shall cause any and all outstanding
      options or other securities or rights to acquire share in the Corporation
      to purchase common shares in the capital of the Corporation held by
      Executive will vest and become immediately exercisable in full and not to
      lapse until the expiry of their original term;
  and

            


    

    


    
      	
            	
              (iii)

            	
              Legal
      Fees. The Corporation shall pay all reasonable legal fees and
      expenses incurred by Executive as a result of such termination (including
      all such fees and expenses, if any, incurred in contesting or disputing
      such termination or in seeking to obtain or enforce any right or benefit
      provided by this Agreement) promptly, from time to time, at Executive’s
      request, as such fees and expenses are
incurred.

            


    

    


    
      	
              4.

            	
              General

            


    

    


    
      	
            	
              (a)

            	
              Amounts
      herein not subiect to
mitigation

            


    

    


    Executive
shall not be obligated to seek other employment in mitigation of the amounts
payable or arrangements made under any provision of this Agreement and the
obtaining of any such other employment shall in no event effect any reduction of
the Corporation’s obligations to make (or cause to be made), the payments and
arrangements required to be made under this Agreement.

    


    
      	
            	
              (b)

            	
              Successors

            


    

    


    This
Agreement shall be binding upon and enure to the benefit of the Corporation and
any successor of the Corporation, by merger or otherwise. This Agreement shall
also be binding upon and enure to the benefit of Executive, his heirs and
personal representatives of his estate.


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

    
       

      - 6
-

       

    

    
      	
            	
              (c)

            	
              Severability

            


    

    


    Any
provision in this Agreement which is prohibited or unenforceable in any
jurisdiction by reason of applicable law shall, as to such jurisdiction, be in
effect only to the extent of such prohibition or unenforceability without
invalidating or effecting the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

    


    
      	
            	
              (d)

            	
              Time

            


    

    


    Time
shall be of the essence of this Agreement.

    


    
      	
            	
              (e)

            	
              Currency

            


    

    


    All of
the sums of money referred to in this Agreement shall mean Canadian
funds.

    


    
      	
            	
              (f)

            	
              Governing
      Law

            


    

    


    This
Agreement shall be governed and construed in accordance with the laws of the
Province of Ontario and the federal laws of Canada applicable
therein.

    


    
      	
            	
              (g)

            	
              Entire
      Agreement

            


    

    


    This
Agreement constitutes the entire agreement and understanding between and among
the parties hereto with respect to the subject matter hereof and supersedes any
prior agreement, representation or understanding with respect
thereto.

    


    
      	
            	
              (h)

            	
              Amendments

            


    

    


    This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by all of the parties
hereto.

    


    
      	
            	
              (i)

            	
              Independent
      Advice.

            


    

    


    The
Executive acknowledges having been advised that he is entitled to obtain
independent legal advice with respect hereto prior to executing this
Agreement.



    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

     

    - 7
-

     

    
      	
            	
              (j)

            	
              Release
      of Claims.

            


    

    


    Notwithstanding
any other provisions contained in this Agreement, the Corporation shall require,
as a condition precedent to the payment of the Severance Payments to the
Executive, that the Executive execute, after his last day of employment by the
Corporation, a release and covenant in favor of the Corporation and its
stockholders, officers, employees, directors and affiliates in a form appended
hereto as Exhibit “A”. If the Executive fails to provide the required release
and covenant, or within seven days following its delivery to the Corporation
revokes the required release and covenant, and the Corporation has not alleged
just cause for termination or denied a Change in Control, the sole obligation of
the Corporation to the Executive under this Agreement shall be the payment of
the equivalent of two weeks salary calculated as at the time of
termination.

    


    
      	
            	
              (k)

            	
              Plural
      and Gender:

            


    

    


    Whenever
used in this Agreement, words importing the singular number only shall include
the plural and vice versa and words importing the masculine gender shall include
the feminine gender.

    


    
      	
            	
              (l)

            	
              Notices

            


    

    


    Any
notice, request, consent, agreement or approval which may or is required to be
given pursuant to this Agreement, shall be in writing and shall be sufficiently
given or made if delivered or telecopied in the case of:

    


    
      	
            	
              (i)

            	
              the
      Corporation, addressed as follows:

            


    

    


    Western
Goldfields (Canada) Inc.

    2 Bloor
Street West

    Suite
3400

    Toronto,
Ontario

    M4W
3E2

    


    Attention:
President and Chief Executive Officer

    


    Telephone:     
 (416) 324-6000

    Telecopier:       (416)
324-9494

    


    
      	
            	
              (ii)

            	
              the
      Executive (by delivery only), addressed as
  follows:

            


    

    


    391
Devonshire Terrace

    Ancaster
ON L9G 4R4

    


    Telephone:       (416)
324-6007 (b)

    (905)
304-5090 (h)

    


    or to
such other address as the relevant party may from time to time advise by notice
in writing given pursuant to this section. The date of receipt of any such
notice, request, consent, agreement or approval shall be deemed to be the date
of delivery or telecopy (if during normal business hours or, if not, the next
business day).


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

    
       

      - 8
-

       

    

    
      	
            	
              (j)

            	
              Counterparts

            


    

    


    This
Agreement may be executed in one or more counterparts which together shall be
deemed to constitute one valid and binding agreement and delivery of the
counterparts may be effected by means of a telecopied
transmission.


     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        	 
      	 	
                                                WESTERN
      GOLDFIELDS (CANADA) INC.

                                              
	 
      	 	 
      	 
      
	 
      	 	 
      	 
      
	 
      	 	
                                                Per: 
      

                                              	
                                                
                                                  

                                                    /s/ Brian
      Penny

                                                  

                                                

                                              
	 
      	 	 
      	 
      
	
                                                SIGNED,
      SEALED AND DELIVERED

                                              	 	
                                                )

                                              	 
      
	
                                                in
      the presence of

                                              	 	
                                                )

                                              	 
      
	 
      	 	
                                                )

                                              	 
      
	
                                                /s/
      Masha Katz

                                              	 	
                                                )

                                                
                                                  )

                                                  
                                                    )

                                                  

                                                

                                              	
                                                

                                                  /s/
      Wesley C. Hanson

                                                

                                              
	
                                                Witness

                                              	 	
                                                )

                                              	
                                                
                                                  

                                                    WESLEY
      C.
HANSON

                                                  

                                                

                                              


                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

         

      

    

    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

    


    RELEASE

    


    Wesley
Hanson (hereinafter called the “Releasor”), which term includes heirs,
executors, administrators, successors and assigns, in consideration of the
payments from Western Goldfields (Canada) Inc. (hereinafter called the
“Releasee”), as described in the Severance Agreement (attached) dated August 9,
2006, the sufficiency of which is hereby expressly acknowledged, hereby releases
and forever discharges the Releasee, which term includes officers, directors,
agents, employees, members, successors and assigns and all related and
affiliated organizations and their officers, directors, agents, employees,
members, shareholders, successors and assigns, of and from all manner of action,
causes of action, claims or demands which the Releasor had, now has, or
hereafter may have, regarding any matters existing as of the date hereof,
including without limitation any claims arising out of the Releasor’s employment
or the termination of that employment with the Releasee.

    


    The
Releasor hereby specifically covenants, represents and warrants to the Releasee
that the Releasor has no further claims against the Releasee for or arising out
of the Releasor’s employment with the Releasee or the termination of such
employment, including without limiting the generality of the foregoing, any
claims for pay, notice of termination, pay in lieu of such notice, severance
pay, expenses, bonus, commission, overtime pay, interest, benefits and/or
vacation pay and specifically including any claim under The Workplace Safety and Insurance Act, The Ontario
Human Rights Code, The Employment Standards Act 2000, and in particular
payments for “severance”, “notice” and “termination pay” under that Act’s
sections 57 and 64, or other similar legislation, or the common law. In the
event that the Releasor should make hereafter any claim or demand or commence or
threaten to commence any action, proceeding or make any claim against the
Releasee in respect of any matter contemplated by this release, this document
may be raised as an estoppel and complete bar to any such claim, demand, action,
proceeding or complaint.

    


    And for
the consideration above, the Releasor further covenants and agrees to save
harmless and indemnify the Releasee from and against all claims, charges, taxes
or penalties and demands which may be made by the Minister of National Revenue
requiring the Releasee to pay income tax under the Income Tax Act (Canada) in
respect of income tax payable by the Releasor in excess of the income tax
previously withheld; and in respect of any and all claims, charges, taxes, or
penalties and demands which may be made on behalf of or related to the
Employment Insurance Commission or the Canada Pension Commission under the
applicable Statutes and Regulations.


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

     

    - 10
-

     

    It is an
express term of this release that the settlement herein is confidential, and the
Releasor hereby covenants, represents and warrants that the Releasor will not
reveal the terms of this settlement or release to any person other than the
Releasor’s immediate family, legal or financial advisors.

    


    The
Releasor acknowledges having read and understood the above release and has had
the opportunity to obtain independent legal advice with respect thereto and
understands that it contains a full and final release of all claims against the
Releasee relating to the Releasor’s employment or termination of such employment
and there is no admission of liability on the part of the Releasee, and that
such liability is denied.

    


    IN WITNESS WHEREOF, the
Releasor has duly executed this Release this 9th, day of August,
2006.

    


    
      
        
          
            
              
                
                  
                    
                      
                        	
                                WITNESS:

                              	
                                )

                              	 
      
	 	) 	 
	 
      	
                                )

                              	 
      
	 	 
      	
                                )

                              	 
      	 
      
	 
      	 
      	
                                 

                              	
                                WESLEY
      C.
HANSON