Exhibit 10.2
THE WARRANT REPRESENTED HEREBY AND THE SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT (THE "WARRANT") HAVE NOT BEEN REGISTERED UNDER ANY SECURITIES LAWS AND
MAY NOT BE TRANSFERRED, NOR WILL ANY ASSIGNEE, VENDEE, TRANSFEREE OR ENDORSEE
HEREOF BE RECOGNIZED AS HAVING AN INTEREST IN SUCH WARRANT BY THE COMPANY FOR
ANY PURPOSE, UNLESS (A) THE HOLDER WISHING TO TRANSFER THE WARRANT PROVIDES AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING THAT THE PROPOSED
TRANSFER OF THE WARRANT IS EXEMPT FROM THE REGISTRATION PROVISIONS OF ALL
APPLICABLE FEDERAL AND STATE LAWS, (B) SAID SECURITIES HAVE BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND A
REGISTRATION STATEMENT UNDER THE ACT WITH RESPECT TO SUCH WARRANT SHALL THEN BE
IN EFFECT AND SUCH TRANSFER HAS BEEN QUALIFIED UNDER APPLICABLE STATE SECURITIES
LAWS, OR (C) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE ACT.
HEDGING TRANSACTIONS INVOLVING THE WARRANT MAY NOT BE CONDUCTED UNLESS THEY ARE
IN COMPLIANCE WITH THE ACT.
STOCK PURCHASE WARRANT
To Purchase 500,000 Shares of Preferred Stock of
Western Goldfields, Inc.
THIS CERTIFIES that, for value received, RAB Special Situations, LP (the
"Holder"), is entitled, upon the terms and subject to the conditions hereinafter
set forth, at any time on or after the date hereof (the "Initial Exercise Date")
and on or prior to the close of business on the date ending two (2) years from
the Initial Exercise Date (the "Termination Date"), but not thereafter, to
subscribe for and purchase from Western Goldfields, Inc., a corporation
incorporated in Idaho (the "Company"), 500,000 shares (the "Warrant Shares") of
Series "A-1" Convertible Preferred Stock, $0.01 par value, of the Company (the
"Preferred Stock"). The per share purchase price of the Warrant Shares (the
"Exercise Price") shall be $0.60.
Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for such terms in the Subscription Agreement, dated December
31, 2004 (the "Subscription Agreement"), between the Company and the Holder. The
Exercise Price and the number of shares for which the Warrant is exercisable
shall be subject to adjustment as provided herein. In the event of any conflict
between the terms of this Warrant and the Subscription Agreement, the
Subscription Agreement shall control.
1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Preferred Stock which may be issued upon the exercise of rights represented by
this Warrant will, upon exercise of the rights represented by this Warrant, be
duly authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Except as provided in Section 4 herein, exercise
of the purchase rights represented by this Warrant may be made at any time or
times on or after the Initial Exercise Date, and before the close of business on
the Termination Date, by the surrender of this Warrant and the Notice of
Exercise Form annexed hereto duly executed, at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the registered Holder hereof at the address of such Holder appearing
on the books of the Company) and upon payment of the Exercise Price of the
shares thereby purchased by wire transfer or cashier's check drawn on a United
States bank. Upon proper exercise of this Warrant, the Holder shall be entitled
to receive a certificate for the number of shares of Preferred Stock so
purchased. Certificates for shares purchased hereunder shall be delivered to the
Holder hereof within three (3) business days after the date on which this
Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be deemed to have
been issued, and the Holder or any other person so designated to be named
therein, shall be deemed to have become a the Holder of record of such shares
for all purposes as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price and all taxes required to be paid by the Holder,
if any, pursuant to Section 5 prior to the issuance of such shares, have been
paid. If this Warrant shall have been exercised in part, the Company shall, at
the time of delivery of the certificate or certificates representing the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder
to purchase the unpurchased shares of Preferred Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.
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4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which the Holder would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash adjustment
in respect of such final fraction in an amount equal to the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Preferred Stock upon the exercise of this Warrant shall be made without charge
to the Holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the Holder of this Warrant or in such name or names as may be directed by the
Holder of this Warrant; provided, however, that in the event certificates for
shares of Preferred Stock are to be issued in a name other than the name of the
Holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder
hereof; and the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental thereto.
6. Further Assurances. The Company will take all action that may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of stock, free from all taxes, liens and
charges with respect to the issue thereof, on the exercise of all or any portion
of this Warrant from time to time outstanding.
7. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company, together with
a written assignment of this Warrant substantially in the form attached hereto
duly executed by the Holder or its agent or attorney and funds sufficient to pay
any transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new Holder for the purchase of shares
of Preferred Stock without having a new Warrant issued.
(b) This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 7(a) as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own expense
(other than transfer taxes) the new Warrant or Warrants under this Section 7.
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(d) The Company agrees to maintain, at its aforesaid office, books
for the registration and the registration of transfer of the Warrants.
8. No Rights as Stockholder until Exercise. This Warrant does not entitle
the Holder hereof to any voting rights or other rights as a stockholder of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price, the Warrant Shares so purchased shall
be and be deemed to be issued to such Holder as the record owner of such shares
as of the close of business on the later of the date of such surrender or
payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant certificate,
and in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and upon surrender and cancellation of such Warrant, if
mutilated, the Company will make and deliver a new Warrant of like tenor and
dated as of such cancellation, in lieu of such Warrant.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares.
(a) Stock Splits, etc. The number and kind of securities purchasable
upon the exercise of this Warrant and payment of the Exercise Price shall be
subject to adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend in shares of Preferred
Stock or make a distribution in shares of Preferred Stock to the holders of its
outstanding Preferred Stock, (ii) subdivide its outstanding shares of Preferred
Stock into a greater number of shares of Preferred Stock, (iii) combine its
outstanding shares of Preferred Stock into a smaller number of shares of
Preferred Stock or (iv) issue any shares of its capital stock in a
reclassification of the Preferred Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the Holder of this Warrant shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the Holder of this Warrant shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such adjustment
at an Exercise Price per Warrant Share or other security obtained by multiplying
the Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Shares purchasable pursuant hereto immediately prior to such
adjustment and dividing by the number of Warrant Shares or other securities of
the Company resulting from such adjustment. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
(b) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Preferred Stock), or sell,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) ("Other
Property"), are to be received by or distributed to the holders of Preferred
Stock of the Company, then the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, such Other Property receivable upon or
as a result of such reorganization, reclassification, merger, consolidation or
disposition of assets as the Holder would have been entitled to receive if the
Holder had exercised this Warrant immediately prior to such event. In case of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume in writing or by operation of law the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of Directors
of the Company) in order to provide for adjustments of shares of Preferred Stock
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 11. The foregoing
provisions of this Section 11 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
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(c) Rights of Holders Upon Dilutive Issuances. Subject to the
exclusions contained in subsection 11(d) below, for 12 months from Initial
Exercise Date, if the Company sells any shares of its Preferred Stock in a
capital raising transaction at a per share selling price lower $0.50, then the
Exercise Price of the Warrants then unexercised shall be adjusted downward to
equal such lower per share selling price. The Company shall give to the Holders
written notice of any such sale within 24 hours of the closing of any such sale.
(d) Exclusions. Anything herein to the contrary notwithstanding, the
Company shall not be required to make any adjustment of the Exercise Price in
the case of (i) the issuance or sale of options, or the shares of capital stock
of the Company issuable upon exercise of such options, to purchase securities of
the Company to directors, officers, employees or consultants of the Company,
whether "qualified" for tax purposes or not, pursuant to plans or arrangements
approved by the Board of Directors or stockholders of the Company, (ii) the
issuance of securities of the Company pursuant to options, warrants or other
convertible securities of the Company outstanding as of the date hereof, (iii)
the issuance of securities of the Company concurrently with this financing, or
(iv) the issuance of common stock and warrants to Newmont Mining Corporation or
its affiliates ("Newmont") to purchase Mesquite mine or any adjustment to
securities of the company previously issued to Newmont in connection therewith.
The issuances or sales described in the preceding clauses (i) through (v) shall
be ignored for purposes of calculating any adjustment to the Exercise Price.
(e) Nominal Adjustment. The Company shall not be required to make an
adjustment in the Exercise Price under this Section 11 if such adjustment is
less that $0.01. However, the Company shall be required to carry forward on its
books all adjustments that would have been made but for this Section 11(e) and
shall take such adjustment into account when making subsequent adjustments under
this Section 11. All calculations under this Section 11 shall be made to the
nearest cent.
12. Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
13. Notice of Adjustment. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
Holder of this Warrant notice of such adjustment or adjustments setting forth
the number of Warrant Shares (and Other Property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and Other
Property) after such adjustment, setting forth a brief statement of the facts
requiring such adjustment and setting forth the computation by which such
adjustment was made. Such notice, in the absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
14. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Preferred
Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right; or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation; or
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(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in any one or more of such
cases, the Company shall give to the Holder (i) at least 30 days prior written
notice of the date on which a record date shall be selected for such dividend,
distribution or right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 30 days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (x) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Preferred Stock shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and
(y) the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Preferred Stock shall be entitled to exchange their shares of
Preferred Stock for securities or Other Property deliverable upon such
disposition, dissolution, liquidation or winding up. Each such written notice
shall be sufficiently given if addressed to the Holder at the last address of
the Holder appearing on the books of the Company and delivered in accordance
with Section 16(d).
15. Authorized Shares.
(a) The Company covenants that during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Preferred Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation.
(b) The Company shall not by any action, including, without
limitation, amending its articles of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company will (i) not increase the par value of any shares of
Preferred Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, and (ii) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Preferred Stock upon the exercise of this Warrant.
(c) Upon the request of the the Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to the Holder, the continuing validity of this Warrant
and the obligations of the Company hereunder.
(d) Before taking any action which would cause an adjustment
reducing the current Exercise Price below the then par value, if any, of the
shares of Preferred Stock issuable upon exercise of the Warrants, the Company
shall take any corporate action which may be necessary in order that the Company
may validly and legally issue fully paid and non-assessable shares of such
Preferred Stock at such adjusted Exercise Price.
16. Miscellaneous.
(a) Jurisdiction. This Warrant shall be binding upon any successors
or assigns of the Company. This Warrant shall constitute a contract under the
laws of the State of Nevada without regard to its conflict of law principles or
rules, and be subject to arbitration pursuant to the terms set forth in the
Subscription Agreement.
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(b) Restrictions. The Holder hereof acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company fails to comply with any provision of this Warrant, the
Company shall pay to the Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by the Holder in collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof by the Company shall be
delivered in accordance with the notice provisions of the Subscription
Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Preferred Stock or
otherwise exercise its rights or privileges hereunder, and no enumeration herein
of the rights or privileges of the Holder hereof, shall give rise to any
liability of the Holder for the purchase price of any Preferred Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
(f) Remedies. The Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(g) Successors and Assigns. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of the Holder. The provisions of this Warrant are intended
to be for the benefit of all holders from time to time of this Warrant and shall
be enforceable by any such Holder.
(h) Indemnification. The Company agrees to indemnify and hold
harmless the Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, reasonable
attorneys' fees, expenses and disbursements of any kind which may be imposed
upon, incurred by or asserted against the Holder in any manner relating to or
arising out of any failure by the Company to perform or observe in any material
respect any of its covenants, agreements, undertakings or obligations set forth
in this Warrant; provided, however, that the Company will not be liable
hereunder to the extent that any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
or disbursements are found in a final non-appealable judgment by a court to have
resulted from the Holder's bad faith or willful misconduct in its capacity as a
stockholder or warrantholder of the Company.
(i) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
(j) Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
(k) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
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[The next page is the signature page.]
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IN WITNESS WHEREOF, the Company has caused this Stock Purchase Warrant to
be executed by its officer thereunto duly authorized.
Dated: December 31, 2004
WESTERN GOLDFIELDS, inc.
By: /s/ Mark Shonnard
--------------------------
Name: Mark Shonnard
--------------------------
Title: CFO
--------------------------
NOTICE OF EXERCISE
To: [Transfer Agent]
(1) The undersigned hereby elects to purchase ________ shares of
Series "A-1" Preferred Stock (the "Preferred Stock"), of Western Goldfields,
Inc. (the "Company") pursuant to the terms of the attached Warrant, and tenders
herewith payment of the exercise price in full, together with all applicable
transfer taxes, if any.
(3) The undersigned hereby restates and confirms the continued
accuracy of the investment representations made by the Investors in the
Subscription Agreement by and between the Company and the Investors signatory
thereto.
(4) Please issue a certificate or certificates representing said
shares of Preferred Stock in the name of the undersigned or in such other name
as is specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
Dated: ,
-------------------- -----
-------------------------------
Signature
ASSIGNMENT FORM
(To assign the foregoing Warrant,
execute this form and supply required
information. Do not use this form to exercise the Warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Dated: ______________, _______
Holder's Signature: _____________________________
Holder's Address: _____________________________
Signature Guaranteed: ___________________________________________
Any assignee receiving this Warrant in a non-public resale transaction must be
an accredited investor as such term is defined under the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.