Unassociated Document


    EXHIBIT
      10.1

    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
      -

    


    [ENTER
      EXECUTIVE NAME] (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.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              (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.

            


    

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              (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 [ENTER
                EXECUTIVE’S TITLE]
                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.

            


    

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    
      


      
        	
                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.

            


    

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    
 

    
      	(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 subject 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.

            


    

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (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.

    


    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (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:

            


    

    
      
        
           

          
            	 	 	l	 
	 	 	 	 
	 	
                    Telephone:                

                  	l
                    (b) 	 
	 	 
                    	l
                    (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).

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    
 

    
      	 	
              (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:	 	 
	 	 	 	 
	
              SIGNED, SEALED AND
                DELIVERED 

            	)	 	 
	
              in
                the presence of 

            	) 	 	 
	 	)	 	 
	 	)	 	 
	        
              ______________________________	)	 	 
	
              Witness

            	)	[EXECUTIVE
              NAME]	 


    

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    



    R
      E L E A S E

     

    _______________
      (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.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    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:	 	)	 	 
	 	 	)	 	 
	 	 	)	 	 
	 	 	)	 	 
	 	 	 	 	 


    

      

    
      
        
        

      

      
        -10-