REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of December 31,
2004, by and among Western Goldfields, Inc., an Idaho corporation, with
headquarters located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Company"), and the undersigned investors (as listed on Schedule A hereto, as
amended from time to time, each, an "Investor" and collectively, the
"Investors").
WHEREAS:
A. In connection with the Subscription Agreement by and among the parties
hereto of even date herewith (the "Subscription Agreement"), the Company has
agreed, upon the terms and subject to the conditions of the Subscription
Agreement, to issue and sell to the Investors (i) Units consisting of (i) shares
(the "Issued Shares") of the Company's Series "A-1" Convertible Preferred Stock,
$0.01 par value per share (the "Preferred Stock"), and (ii) warrants
("Warrants") to purchase shares of Preferred Stock (as issued upon exercise of
the Warrants, the "Warrant Shares").
B. To induce the Investors to execute and deliver the Subscription
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors
hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Investor" means an Investor, any permitted transferee or
assignee thereof who purchases at least $150,000 of Registrable Securities and
to whom an Investor assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section 9,
any permitted transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9 and any seller of
Registrable Securities pursuant to a Registration Statement.
b. "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof, governmental agency or other
entity.
c. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the Securities Act and pursuant
to Rule 415 under the Securities Act or any successor rule providing for
offering securities on a continuous basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
d. "Registrable Securities" means (i) the common stock, par value
$0.01 per share (the "Common Stock"), of the Company issued or issuable upon
conversion of (A) the Issued Shares or (B) the Warrant Shares, and (ii) any
shares of capital stock issued or issuable with respect to the foregoing as a
result of any stock split, stock dividend, recapitalization, anti-dilution
adjustment, exchange or similar event or otherwise, without regard to any
limitation on conversion of Preferred Stock sold in the Offering or exercise of
Warrants. In case the Company merges with another entity, the Common Stock
issuable upon conversion of the Issued Shares and Warrant Shares will be
exchanged or exchangeable into similar securities of the survivor entity and
such exchanged securities will be Registrable Securities.
e. "Registration Statement" means a registration statement or
registration statements of the Company filed under the Securities Act.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, as soon
as practicable, but in no event later 30 days after the date of this Agreement
(the "Scheduled Filing Date"), file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form SB-2 (the "Registration
Statement") covering the resale of all of the Registrable Securities. In the
event that Form SB-2 is unavailable for such registrations, the Company shall
use such other form as is available for such registrations. Any Registration
Statement prepared pursuant hereto shall register for resale at least that
number of shares of Common Stock equal to the number of Registrable Securities
issued and issuable as of the date immediately preceding the date the
Registration Statement is initially filed with the SEC. The Company shall cause
the Registration Statement to be declared effective under the Securities Act no
later than the date (the "Effectiveness Deadline Date") that is ninety (90) days
(or, in the case of a full review by the SEC, one hundred and thirty-five (135)
days) after the Closing Date, or, if earlier, within five (5) days of SEC
clearance to request acceleration of effectiveness. The Company shall keep the
Registration Statement (or any subsequent Registration Statement) continuously
effective under the Securities Act until the expiration of the Registration
Period (defined in Section 3.a below).
b. Piggy-Back Registrations.
i. Each time that the Company proposes for any reason to register
any of its Common Stock under the Securities Act in connection with the
proposed offer and sale of its Common Stock for either for its own account
or on behalf of any other security holders (a "Proposed Registration") on
a form which is suitable for an offering for cash of shares of the Company
held by third parties and which is not a registration solely to implement
an employee benefit plan, a registration statement on Form S-4 (or
successor form) or a transaction to which Rule 145 or any other similar
rule of the SEC is applicable, the Company shall promptly give written
notice of such proposed registration to the Investors and shall offer the
Investors the right to request inclusion of the Registrable Securities
held by such holders in the Proposed Registration.
ii. Each Investor shall have 20 days from the receipt of such notice
to deliver to the Company a written request specifying the number of
Registrable Securities such Investor intends to sell and such Investor's
intended method of disposition.
iii. In the event that the Proposed Registration is, in whole or in
part, an underwritten public offering, the Company shall so advise the
Investor as part of the written notice given pursuant to Section 2.b.i,
and any request under 2.b.ii must specify that the Registrable Securities
be included in the underwriting on the same terms and conditions as the
Common Stock, if any, otherwise being sold through underwriters under such
registration.
iv. In the event that the offering is to be an underwritten
offering, the Investors proposing to distribute their Registrable
Securities through such underwritten offering agree to enter into a
customary underwriting agreement with the underwriter or underwriters
selected for such underwriting by the Company.
v. Notwithstanding the foregoing if, in its good faith judgment, the
managing underwriter determines and advises the Company in writing that
the inclusion of all Registrable Securities proposed to be included in the
underwritten public offering, together with any other Common Stock
proposed to be included therein other than Registrable Securities (such
other shares collectively the "Other Shares"), would interfere with the
successful marketing of such securities, then the number of shares that
are entitled to be included in the registration and underwriting shall be
allocated in the following manner: (A) first, securities the Company
proposes to sell for its own account, (B) second, Registrable Securities,
pro rata among the Investors on the basis of the number of shares for
which each such Investor has requested registration, and (C) third, Other
Shares, pro rata among the respective holders thereof on the basis of the
number of shares for which each such requesting holder has requested
registration.
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3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2, the Company will use its best efforts to
effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:
a. The Company shall keep each of the Registration Statements
required to be filed hereunder effective pursuant to Rule 415 at all times until
the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) promulgated under the Securities Act (or
successor thereto) assuming for this purpose that the Investors are not
officers, directors, affiliates or control persons of the Company, (ii) the date
on which (A) the Investors shall have sold all the Registrable Securities
covered by such Registration Statement and (B) none of the Preferred Stock or
Warrants is outstanding, or (iii) two years from the date hereof (the
"Registration Period"). The Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the Securities Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, all
exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as such
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as any Investor whose Registrable Securities are included in the
Registration Statement reasonably requests, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3.d, (y) subject itself to
general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
each Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threat of any proceeding for such purpose.
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e. In the event Investors who hold a majority of the Registrable
Securities being offered in the registration select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering; provided, however, that the Company shall have
the right to consent to the selection of such underwriter, which consent shall
not be unreasonably withheld.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor in writing of the happening of any event
as a result of which the prospectus included in a Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor (or such other
number of copies as such Investor may reasonably request). The Company shall
also promptly notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, and (iii) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
(and, in the event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
h. The Company shall make available for inspection by (i) any
Investor, (ii) legal counsel retained by the Investors, (iii) any underwriter
participating in any disposition pursuant to a Registration Statement, (iv) one
firm of accountants or other agents retained by the Investors and (v) one firm
of attorneys retained by such underwriters (collectively, the "Inspectors") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
deemed necessary by each Inspector in connection with the Registration
Statement, and cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall hold in strict confidence and shall not make any
disclosure (except to an Investor) or use of any Records or other information
provided by the Company hereunder. Each Investor agrees, and shall cause each
Inspector to agree, that it shall, upon learning that disclosure of such Records
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential.
i. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement. The Company
agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
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j. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each securities exchange or market on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange or
market, or (ii) secure the inclusion for quotation on the over-the-counter
market on the electronic bulletin board for such Registrable Securities. The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3.j.
k. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.
l. The Company shall maintain a transfer agent and registrar of all
such Registrable Securities not later than the effective date of such
Registration Statement.
m. If requested by the managing underwriters or an Investor, the
Company shall: (i) immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investors agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and any other terms
of the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any Registration Statement
if requested by an Investor or any underwriter of such Registrable Securities.
n. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the distribution of such Registrable Securities.
o. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
p. Within three (3) business days after a Registration Statement is
ordered effective by the SEC, the Company shall notify the transfer agent for
the Registrable Securities covered thereby that such Registration Statement has
been declared effective by the SEC.
q. In the event that (i) the Registration Statement to be filed by
the Company pursuant to Section 2.a above is not declared effective by the
Commission within ninety (90) days from the Closing Date ninety (90) days (or,
in the case of a full review by the SEC, one hundred and thirty-five (135) days)
after the Closing Date or five (5) days of clearance by the SEC to request
effectiveness, or (ii) such Registration Statement is not maintained as
effective by the Company for the period set forth in Section 2.a above (each a
"Registration Default") then the Company will pay Investor (pro rated on a daily
basis) in cash or, at the option of the Investor, in shares of Common Stock at
the Conversion Price (as defined in the Articles of Amendment, as defined in the
Subscription Agreement) on the trading day prior to the date of payment, as
liquidated damages for such failure, and not as a penalty, two percent (2%) of
the aggregate market value of the Common Shares which would be issuable or that
have been issued upon conversion of the Preferred Stock on any date of
determination, and whether or not the Preferred Shares are then convertible
pursuant to their terms) and held by the Investor for each month thereafter
until such Registration Statement has been filed, and in the event of late
effectiveness (in case of clause (ii) above) or lapsed effectiveness (in the
case of clause (iii) above), two percent (2%) of the aggregate market value of
the Common Shares which would be issuable or that have been issued upon
conversion of the Preferred Stock on any date of determination, and whether or
not the Preferred Shares are then convertible pursuant to their terms) for each
month thereafter (regardless of whether one or more such Registration Defaults
are then in existence) until such Registration Statement has been declared
effective. Such payment of the liquidated damages shall be made to the Investors
in cash, within five (5) calendar days of demand, provided, however, that the
payment of such liquidated damages shall not relieve the Company from its
obligations to register the Registrable Securities pursuant to this Agreement.
The market value of the Common Shares for this purpose shall be the closing
price (or last trade, if so reported) on the principal market for the Company's
Common Shares each day during such Registration Default. Notwithstanding
anything to the contrary contained herein, a failure to maintain the
effectiveness of an filed Registration Statement or the ability of an Investor
to use an otherwise effective Registration Statement to effect resales of
Securities during the period after forty-five (45) days and within ninety (90)
days from the end of the Company's fiscal year resulting solely from the need to
update the Company's financial statements contained or incorporated by reference
in such Registration Statement shall not constitute a Registration Default and
shall not trigger the accrual of liquidated damages hereunder.
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If the Company does not remit the payment to the Investors as set
forth above, the Company will pay the Investors reasonable costs of collection,
including attorneys' fees, in addition to the liquidated damages. The
registration of the Registrable Securities pursuant to this provision shall not
affect or limit the Investors' other rights or remedies as set forth in this
Agreement.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) business days prior to the first anticipated
filing date of a Registration Statement, the Company shall notify each Investor
in writing of the information the Company requires from each such Investor if
such Investor elects to have any of such Investor's Registrable Securities
included in such Registration Statement. It shall be a condition precedent to
the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself as the Company may reasonably request, including, without limitation, the
Registrable Securities held by it and the intended method of distribution of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities, and shall execute such documents in
connection with such registration as the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
c. In the event any Investor elects to participate in an
underwritten public offering pursuant to Section 2.b, each such Investor agrees
to enter into and perform such Investor's obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.g or
the first sentence of Section 3.f, such Investor will immediately discontinue
distribution of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3.g or the
first sentence of Section 3.h.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
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f. Each Investor agrees not to take any action to cause such
Investor to become a registered broker-dealer as defined under the 1934 Act or
to effect any change to such Investor's status that would preclude the Company
from using Form S-3 for the Registration Statement.
5. EXPENSES OF REGISTRATION.
All reasonable expenses (other than expenses incurred pursuant to Section
3.h and underwriting discounts and commissions) incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of counsel for
the Company shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company agrees to
indemnify and hold harmless each Investor who holds such Registrable Securities,
the directors, officers, partners, employees, agents, representatives of, and
each Person, if any, who controls any Investor within the meaning of the
Securities Act or the 1934 Act, and any underwriter (as defined in the
Securities Act) of Registrable Securities, and the directors and officers of,
and each Person, if any, who controls, any such underwriter within the meaning
of the Securities Act or the 1934 Act (each, an "Indemnified Person"), against
any losses, claims, damages, liabilities, judgments, fines, penalties, charges,
costs, reasonable attorneys' fees, amounts paid in settlement or expenses, joint
or several, (collectively, "Claims") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency or body or the SEC, whether pending or threatened,
whether or not an Indemnified Party is or may be a party thereto, to which any
of them may become subject insofar as such Claims arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
a Registration Statement under which such Investor's Registrable Securities were
registered or any post-effective amendment thereto or the omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
The Company shall reimburse each such Indemnified Person, promptly as such
expenses are reasonably incurred and are due and payable, for any
reasonable legal fees or reasonable other expenses incurred by them in
connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6.a: (i) shall not apply to
a Claim by an Indemnified Person arising out of or based upon a Claim which
occurs in reliance upon and in conformity with information furnished in writing
to the Company by or on behalf of such Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3.c or Section 3.f; (ii) with
respect to any preliminary prospectus, shall not inure to the benefit of any
such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 3.c or Section 3.f, and the Indemnified Person
was promptly advised in writing not to use the incorrect prospectus prior to the
use giving rise to a violation and such Indemnified Person, notwithstanding such
advice, used it; (iii) shall not be available to the extent such Claim is based
on a failure of the Indemnified Person to deliver or to cause to be delivered
the prospectus made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3.c or Section 3.f; and (iv) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld.
b. In connection with any Registration Statement, each such Investor
agrees to severally and not jointly indemnify and hold harmless, to the same
extent and in the same manner as is set forth in Section 6.a, the Company, each
of its directors, officers, partners, employees, agents, representatives,
Persons, if any, who control the Company within the meaning of the Securities
Act or the 1934 Act (each a "Company Indemnified Party," and collectively and
together with an Indemnified Person, each an "Indemnified Party"), against any
Claim to which any of them may become subject, arising out of or are based upon
any written information furnished to the Company by or on behalf of such
Investor expressly for use in connection with such Registration Statement; and,
subject to Section 6.d, such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating, preparing or
defending any such action, claim, suit, inquiry, proceeding, investigation or
appeal taken form the foregoing by or before any court or governmental,
administrative or other regulatory agency or body or the SEC, whether pending or
threatened, whether or not a Company Indemnified Party is or may be a party
thereto Claim; provided, however, that the Investor shall be liable under this
Section 6.b for only that amount of a Claim as does not exceed the public
offering price of the Registrable Securities offered by such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Company Indemnified Party and
shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
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c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution of the Company's securities, to
the same extent as provided above, with respect to information such persons so
furnished in writing expressly for inclusion in a Registration Statement.
d. Promptly after receipt by an Indemnified Party under this Section
6 of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Party
shall, if a Claim in respect thereof is to be made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Party shall have the right to retain its own counsel with the fees
and expenses to be paid by the indemnifying party, if, the Indemnified Party and
indemnifying party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the Indemnified Party
reasonably may be deemed to conflict with the interests of the indemnifying
party. The Company shall pay reasonable fees for only one separate legal counsel
for the Investors, and such legal counsel shall be selected by the Investors
holding a majority of the Registrable Securities included in the Registration
Statement to which the Claim relates. The Indemnified Party shall cooperate
fully with the indemnifying party in connection with any negotiation or defense
of any such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
which relates to such action or claim. The indemnifying party shall keep the
Indemnified Party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the Indemnified Party, consent to entry of any
judgment or enter into any settlement or other compromise which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the public offering price of the
Registrable Securities offered by such seller pursuant to such registration.
8
8. REPORTS UNDER THE 1934 ACT.
a. With a view to making available to the Investors the benefits of
Rule 144 promulgated under the Securities Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"),
during the Registration Period, the Company agrees to:
i. make and keep public information available, as those terms
are understood and defined in Rule 144;
ii. file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
1934 Act so long as the Company remains subject to such requirements
and the filing of such reports and other documents is required for
the applicable provisions of Rule 144; and
iii. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and
documents filed by the Company with the SEC, and (iii) such other
information as may be reasonably requested to permit the Investors
to sell such securities pursuant to Rule 144.
b. Each Investor agrees and acknowledges that this Agreement,
including, but not limited this Section 8, shall be subject to any agreements
relating to confidentiality to which the Company is the subject, and any
applicable statutes and regulations (including, but not limited to, Regulation
FD under the 1934 Act).
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the
Securities Act and applicable state securities laws; (iv) at or before the time
the Company receives the written notice contemplated by clause (ii) of this
sentence the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein; (v) the transferee purchases or
acquires at least $150,000 of Registrable Securities; and (vi) such transfer
shall have been made in accordance with the applicable requirements of, and
subject to the restrictions set forth in, the Subscription Agreement; provided
that the Company shall only be required to effect one registration hereunder
with respect to any particular Registrable Securities.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of
the Company and Investors who then hold or have the right to acquire
two-thirds (2/3) of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each
Investor and the Company. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to
amend or consent to a waiver or modification of any provision of any of
this Agreement unless the same consideration also is offered to all of the
parties to this Agreement.
9
11. MISCELLANEOUS.
a. If the Company receives conflicting instructions, notices or
elections from two (2) or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities set
forth on the books and records of the Company.
b. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one business day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company: At the address above
If to an Investor: To its address and facsimile number on the
Schedule of Investors attached hereto,
with copies to such Investor's representatives as set forth on the Schedule of
Investors or to such other address and/or facsimile number and/or to the
attention of such other person as the recipient party has specified by written
notice given to each other party five days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically generated by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of such transmission or (C) provided by a courier or
overnight courier service shall be rebuttable evidence of personal service,
overnight or courier delivery or transmission by facsimile in accordance with
clause (i), (ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under this
Agreement, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
d. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by the internal laws of
the State of Nevada, without giving effect to any choice of law or conflict of
law provision or rule that would cause the application of the laws of any
jurisdictions other than the State of Nevada. If any provision of this Agreement
shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of any provision
of this Agreement. Any dispute under this Agreement shall be governed and
resolved pursuant to the terms of the Subscription Agreement.
e. This Agreement and the Subscription Agreement (and the documents,
instruments, agreements and exhibits related thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement and the
Subscription Agreement (and the documents, instruments, agreements and exhibits
related thereto) supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in multiple identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
10
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
k. This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
* * * * * *
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: INVESTOR:
------- --------
Western Goldfields, Inc. Name RAB Special Situations, LP___
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ W.P.S. ▇▇▇▇▇▇▇▇
------------------------------ -------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: W.P.S. ▇▇▇▇▇▇▇▇
Its: CFO Its: Director of General Partner
SCHEDULE OF INVESTORS
RAB Special Situations, LP
