Exhibit 10.1

SECURITY PURCHASE AGREEMENT

This Security Purchase Agreement (this “Agreement”) is made as of January 31,
2020 (the “Effective Date”) by and between Sierra Oncology, Inc., a Delaware
corporation (the “Company”), and Gilead Sciences, Inc., a Delaware corporation
(the “Purchaser”).

1. Issuance of Securities. Effective as the Effective Date, the Company will
issue to Purchaser (i) 725,283 shares (the “Shares”) of the Company’s common
stock, $0.001 par value per share (the “Common Stock”) and (ii) a warrant in the
form attached hereto as Exhibit A (which Exhibit shall be revised, as
applicable, to provide GSI the benefit of any terms of any warrants issued in
the Financing that are more favorable to the holder of such warrants than the
terms of the originally agreed Exhibit A) (the “Warrant”), registered in the
name of the Purchaser, to purchase up to 725,283 shares of the Common Stock,
with an exercise price per share equal to $13.20, subject to adjustment therein
(the “Warrant Shares” and together with the Shares and the Warrant, the
“Securities”), in consideration of the Company’s and the Purchaser’s agreement
to amend that certain Asset Purchase Agreement dated as of August 20, 2018, as
set forth in that certain Amendment to Asset Purchase Agreement dated as of
October 28, 2019. In no event shall the Company issue Common Stock and Warrant
Shares to GSI that, in the aggregate, represent 20% or more of the Company’s
outstanding shares of Common Stock immediately prior to the Effective Date.

2. Closing and Delivery.

(a) The closing (“Closing”) of the transactions contemplated hereby shall be
held at the offices of Fenwick & West LLP, 1191 Second Avenue, Floor 10,
Seattle, Washington 98101 within two Business Days of the date of this Agreement
(such date, the “Closing Date”), or at such other time and place as the Company
and the Purchaser mutually agree upon. “Business Day” shall mean any day except
any Saturday, any Sunday, any day which is a federal legal holiday in the United
States, any day on which banking institutions in The City of New York or the
State of New York are authorized or required by law or other governmental action
to close.

(b) At the Closing, the Company shall execute and deliver to the Purchaser the
Warrant and direct its transfer agent to issue and register the Shares in
uncertificated form in the Purchaser’s name (or in such nominee’s or nominees’
name(s) as designated by the Purchaser in writing) on the books of the Company,
with the legend set forth in Section 5 of this Agreement.

3. Company Representations. The Company represents and warrants to the Purchaser
as follows:

(a) The Company is duly incorporated, validly existing, and in good standing
under the laws of the State of Delaware. The Company has all requisite power and
authority to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. The Company is
qualified to do business as a foreign entity in every jurisdiction in which the
failure to be so qualified would have, or would reasonably be expected to have,
a material adverse effect, individually or in the aggregate, upon the business,
properties,

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tangible and intangible assets, liabilities, operations, financial condition or
results of operation of the Company or the ability of the Company to perform its
obligations under the Transaction Agreements (a “Material Adverse Effect”).

(b) The Company has all requisite power to execute and deliver this Agreement,
to issue the Securities, and to carry out and perform its obligations under the
terms of this Agreement and the Warrant (the “Transaction Agreements”).

(c) The execution, delivery, and performance of the Transaction Agreements by
the Company, including the issuance, sale and delivery of the Securities, has
been duly authorized by all requisite action on the part of the Company and its
officers, directors and stockholders, and this Agreement constitutes the legal,
valid, and binding obligation of the Company enforceable in accordance with its
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors’ rights generally, and (b) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies the “Enforceability Exceptions”).

(d) Except for any Current Report on Form 8-K and submission of a Listing of
Additional Shares notice to The Nasdaq Stock Market in connection with the
transaction contemplated hereby and the filing of a registration statement (if
requested by the Purchaser) pursuant to the registration rights granted in
Section 6 of this Agreement, the Company is not required to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transaction
contemplated by the Transaction Agreements. Assuming the accuracy of the
representations of the Purchaser in Section 4, no consent, approval,
authorization or other order of, or registration, qualification or filing with,
any court, regulatory body, administrative agency, self-regulatory organization
or other governmental body is required for the execution, delivery or
performance of the Transaction Agreements including the valid issuance, sale and
delivery of the Securities, other than such as have been or will be made or
obtained, or for any securities filings required to be made under federal or
state securities laws applicable to the offering of the Securities.

(e) The execution and delivery of the Transaction Agreements, the issuance, sale
and delivery of the Securities by the Company, the performance by the Company of
its obligations under the Transaction Agreements and/or the consummation of the
transactions contemplated hereby will not (a) conflict with, result in the
breach or violation of, or constitute (with or without the giving of notice or
the passage of time or both) a violation of, or default under, (i) any bond,
debenture, note or other evidence of indebtedness, or under any lease, license,
franchise, permit, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company or any subsidiary
is a party or by which it or its properties may be bound or affected, (ii) the
Company’s Restated Certificate of Incorporation, as amended and as in effect on
the date hereof, the Company’s Bylaws, as amended and as in effect on the date
hereof, or the equivalent document with respect to any subsidiary, as amended
and as in effect on the date hereof, or (iii) any statute or law, judgment,
decree, rule, regulation, ordinance or order of any court or governmental or
regulatory body (including The Nasdaq Stock Market), governmental agency,
arbitration panel or authority applicable to the Company, any of its
subsidiaries or their respective properties, except in the case of clauses
(i) and (iii) for such conflicts, breaches, violations or defaults that would
not be likely to have, individually or in the aggregate, a Material Adverse
Effect.

 

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(f) The Shares are duly authorized and when issued pursuant to the terms of this
Agreement will be validly issued, fully paid, and non-assessable, and will be
free of any liens or encumbrances with respect to the issuance thereof;
provided, however, that the Shares shall be subject to restrictions on transfer
under state or federal securities laws as set forth in this Agreement, or as
otherwise may be required under state or federal securities laws as set forth in
this Agreement at the time a transfer is proposed. The issuance and delivery of
the Shares is not subject to preemptive, co-sale, right of first refusal or any
other similar rights of the stockholders of the Company or any other person, or
any liens or encumbrances or result in the triggering of any anti-dilution or
other similar rights. Except as set forth in the Company’s SEC filings and any
equity awards granted pursuant to employee benefit plans described in the
Company’s SEC filings, there are no options, warrants, or rights to subscribe
to, or securities, rights, understandings or obligations convertible into or
exchangeable for, or giving any right to subscribe for, any shares of capital
stock or other equity interest of the Company, and there are no outstanding
agreements for preemptive or similar rights affecting the Common Stock.

(g) The Warrants have been duly authorized by the Company and, when duly
executed and delivered by the Company, will constitute a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, subject to the Enforceability Exceptions.

(h) The Warrant Shares issuable upon exercise of the Warrants have been duly
authorized and reserved for issuance upon exercise by all necessary corporate
action and such shares, when issued upon such exercise in accordance of the
terms of the Warrants, will be validly issued and will be fully paid and
non-assessable, and will be free of any liens or encumbrances with respect to
the issuance thereof; provided, however, that the Warrant Shares shall be
subject to restrictions on transfer under state or federal securities laws as
set forth in this Agreement, or as otherwise may be required under state or
federal securities laws as set forth in this Agreement at the time a transfer is
proposed. The issuance and delivery of the Warrant Shares is not subject to
preemptive, co-sale, right of first refusal or any other similar rights of the
stockholders of the Company or any other Person, or any liens or encumbrances or
result in the triggering of any anti-dilution or other similar rights.

(i) There is no action, claim, suit, demand, hearing, notice of violation or
deficiency, or proceeding pending or, to the Company’s knowledge, threatened
against the Company or any of its subsidiaries by any court or governmental or
regulatory body (including The Nasdaq Stock Market), governmental agency,
arbitration panel or authority or any third party that would be reasonably
likely, individually or in the aggregate, to enjoin, prevent or materially delay
the issuance, sale and delivery of the Securities, the performance by the
Company of its obligations under the Transaction Agreements or the consummation
by the Company of the transactions contemplated hereby.

(j) Neither the Company nor any of its subsidiaries, nor any person acting on
its or their behalf, (i) has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities Act
of 1933, as amended (the “Securities Act”))

 

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in connection with the offer or sale of the Securities, (ii) has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under any circumstances that would require registration of the
Securities under the Securities Act or (iii) has issued any securities which may
be integrated with the sale of the Securities to the Purchaser for purposes of
the Securities Act, nor will the Company or any of its subsidiaries or
affiliates take any action or steps that would require registration of any of
the Securities under the Securities Act.

(k) The Company has not engaged any brokers, finders or agents, and neither the
Company nor the Purchaser has, nor will, incur, directly or indirectly, as a
result of any action taken by the Company, any liability for brokerage or
finders’ fees or agents’ commissions or any similar charges in connection with
this Agreement.

4. Purchaser Representations. In connection with the receipt of the Securities
pursuant to this Agreement, the Purchaser represents to the Company the
following:

(a) The execution and delivery by the Purchaser of this Agreement, and the
acquisition by the Purchaser of the Securities under this Agreement, do not
contravene or constitute a default under, or violation of, (i) any agreement (or
require the consent of any party under any such agreement that has not been made
or obtained) to which the Purchaser is a party, or (ii) any judgment,
injunction, order, decree or other instrument binding upon the Purchaser, in
each case except where such contravention, default, violation or failure to
obtain a consent, individually or in the aggregate, would not reasonably be
expected to impair Purchaser’s ability to acquire the Securities under this
Agreement.

(b) The Purchaser understands the definition of the term “accredited investor”
within the meaning of Regulation D, Rule 501(a), promulgated by the SEC under
the Securities Act, and qualifies as an accredited investor.

(c) The Purchaser is aware of the Company’s business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Purchaser is
acquiring the Securities for investment for its own account only and not with a
view to, or for resale in connection with, any “distribution” thereof within the
meaning of the Securities Act or under any applicable provision of state law.
The Purchaser does not have any present intention to transfer the Securities to
any other person or entity in such a “distribution.”

(d) The Purchaser understands that the Securities have not been registered under
the Securities Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the Purchaser’s
investment intent as expressed herein.

(e) The Purchaser understands that the Securities are “restricted securities”
under applicable U.S. federal and state securities laws and that, pursuant to
these laws, the Purchaser must hold the Securities indefinitely unless they are
registered with the SEC and, if applicable, qualified by state authorities, or
sold or otherwise disposed of in a transaction exempt from, or not subject to,
such registration and qualification requirements. The Purchaser acknowledges
that the Company has no obligation to register or qualify the Securities for
resale, except as set forth in Section 6 of this Agreement.

 

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(f) By reason of its business and financial experience, the Purchaser has the
ability to protect its own interests in connection with the purchase of the
Securities.

(g) The Purchaser has not engaged any brokers, finders or agents, and neither
the Company nor the Purchaser has, nor will, incur, directly or indirectly, as a
result of any action taken by the Purchaser, any liability for brokerage or
finders’ fees or agents’ commissions or any similar charges in connection with
this Agreement.

(h) The Purchaser has reviewed with its own tax advisors the U.S. federal,
state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. With respect to such matters, the
Purchaser relies solely on such advisors and not on any statements or
representations of the Company or any of its agents, written or oral. The
Purchaser understands that it (and not the Company) shall be responsible for its
own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.

5. Restrictive Legends and Stop-Transfer Orders.

(a) Each certificate, instrument or book entry evidencing the Securities shall
(unless otherwise permitted by applicable securities law) be notated with a
legend substantially similar to the following (in addition to any legend
required by state securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS IN ACCORDANCE WITH APPLICABLE REGISTRATION REQUIREMENTS OR AN
EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.

(b) The Purchaser consents to the Company making a notation on its records and
giving instructions to any transfer agent in order to implement the restrictions
on transfer established in this Section 5.

(c) The legend referring to federal and state securities laws identified in
Section 5(a) notated on any certificate or book entry evidencing the Securities
and the stock transfer instructions and record notations with respect to such
Securities shall be removed, and the Company shall issue a certificate without
such legend to the holder of such Securities (to the extent the securities are
certificated), if (i) such securities are registered under the Securities Act,
or (ii) such holder provides the Company with an opinion of counsel reasonably
acceptable to the Company to the effect that such legend may be removed from
such Securities or that a sale or transfer of such Securities may be made
without registration, qualification or legend.

 

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6. Registration Rights. Following the Closing, upon the request of the
Purchaser, the Company and the Purchaser will enter into a registration rights
agreement providing the Purchaser with customary demand (including for a shelf
registration if available) for resale of the Shares and Warrant Shares (and any
other shares of capital stock or other equity interests issued or issuable to
the Purchaser thereunder).

7. Miscellaneous.

(a) This Agreement and all acts and transactions pursuant hereto and the rights
and obligations of the parties hereto shall be governed, construed and
interpreted in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of law.

(b) This Agreement may be executed in two counterparts, each of which shall be
deemed an original and all of which together shall constitute one instrument.

(c) The rights and benefits of this Agreement shall inure to the benefit of, and
be enforceable by the Company’s successors and assigns. The rights and
obligations of the Purchaser under this Agreement may only be assigned either to
an affiliate of the Purchaser or with the prior written consent of the Company.
The rights and obligations of the Company under this Agreement may only be
assigned with the prior written consent of the Purchaser. No person or entity
not a party to this Agreement shall be deemed to be a third-party beneficiary
hereunder or entitled to any rights hereunder.

(d) All representations, warranties, covenants and agreements contained in this
Agreement shall survive indefinitely.

(e) No modifications or amendments to, or waivers of, any provision of this
Agreement may be made, except pursuant to a document signed by the Company and
the Purchaser.

(f) When a reference is made in this Agreement to Sections, paragraphs, clauses
or Annexes, such reference shall be to a Section, paragraph, clause or Annex to
this Agreement unless otherwise indicated. The words “include,” “includes,” and
“including” when used herein shall be deemed in each case to be followed by the
words “without limitation.” The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement has been negotiated by the
respective parties hereto and their attorneys and the language hereof will not
be construed for or against any party. The words “hereof,” “herein,” “herewith,”
“hereby” and “hereunder” and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement.

(g) This Agreement and all other documents required to be delivered pursuant
hereto constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior documents, agreements and
understandings, both written and verbal, among the parties with respect to the
subject matter hereof and the transactions contemplated hereby.

(h) If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws, then, if possible, such illegal,
invalid or unenforceable

 

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provision will be modified to such extent as is necessary to comply with such
present or future laws and such modification shall not affect any other
provision hereof; provided that if such provision may not be so modified, such
illegality, invalidity or unenforceability will not affect any other provision,
but this Agreement will be reformed, construed and enforced as if such invalid,
illegal or unenforceable provision had never been contained herein.

[Signature Pages Follow]

 

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The undersigned has executed this Agreement as of the date first set forth
above.

 

THE COMPANY: SIERRA ONCOLOGY, INC. By:  

/s/ Sukhi Jagpal

  (Signature) Name:   Sukhi Jagpal Title:   Chief Financial Officer

[Company signature page to Gilead SPA]

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The undersigned has executed this Agreement as of the date first set forth
above.

 

PURCHASER: GILEAD SCIENCES, INC.

/s/ Jeremy Bender

  (Signature) Name:   Jeremy Bender Title:   VP, Corporate Development

 

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SIERRA ONCOLOGY, INC.

SERIES A WARRANT TO PURCHASE COMMON STOCK

 

Warrant No.: [    ]

  

Number of Warrants:

Number of Warrant Shares:

Date of Issuance: [    ] (“Issuance Date”)

Expiration Date: Five (5) year anniversary of the Exercisability Date
(“Expiration Date”)

Sierra Oncology, Inc., a Delaware corporation (the “Company”), certifies that,
for good and valuable consideration, the receipt and sufficiency of which are
acknowledged, [    ], the registered holder hereof or its permitted assigns (the
“Holder”), is entitled, subject to the terms set forth below, to purchase from
the Company, at the Exercise Price (as defined below) then in effect, upon
surrender of this Warrant to Purchase Common Stock (including any Warrants to
Purchase Common Stock issued in exchange, transfer or replacement hereof, the
“Warrant”), at any time or times on or after the Exercisability Date, but not
after 5:30 p.m., New York Time, on the Expiration Date, [    ] fully paid and
nonassessable shares of Common Stock (as defined below), equal to the number of
Warrants given above multiplied by 1.00 (the “Warrant Shares”). Except as
otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 15. This Warrant is one of the warrants to
purchase common stock issued in connection with the transactions contemplated by
(i) that certain Underwriting Agreement, dated as of November 7, 2019 by and
between the Company and Jefferies LLC as the representative of the several
underwriters named therein, (ii) the Company’s Registration Statement on Form
S-3 (File number 333-225650), and (iii) the Company’s prospectus supplement
dated as of November 7, 2019 (the “Offering”).

1.         EXERCISE OF WARRANT.

(a)    Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(d)), this
Warrant may be exercised by the Holder on any day on or after the Exercisability
Date, in whole or in part (but not as to fractional shares), by delivery of a
written notice (which may be by facsimile or email), in the form attached hereto
as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this
Warrant and payment to the Company of an amount equal to the applicable Exercise
Price multiplied by the number of Warrant Shares as to which this Warrant is
being exercised (the “Aggregate Exercise Price”) in cash or wire transfer of
immediately available funds (a “Cash Exercise”). The Holder shall not be
required to surrender this Warrant in order to effect an exercise hereunder;
provided, that in the event of an exercise of this Warrant for all Warrant
Shares then issuable hereunder, this Warrant is surrendered to the Company’s
transfer agent through DTC’s Deposit Withdrawal Agent Commission system (“DWAC
System”) by the second (2nd) Trading Day following the date on which the
Company’s transfer agent for the Common Stock and Warrants (“Transfer Agent”)
has received the Exercise Notice. Within one (1) Trading Day following the date
of exercise as aforesaid, the Holder shall deliver the Aggregate Exercise Price
for the shares specified in the applicable Exercise Notice by wire transfer or
cashier’s check drawn on a United States bank unless the cashless exercise
procedure specified in Section 1(c) below is specified in the applicable
Exercise Notice. No ink-original Exercise Notice shall be required, nor shall
any medallion guarantee (or other type of guarantee or notarization) of any
Exercise Notice form be required, except as may be required by the Company’s
transfer agent. On or before the first (1st) Trading Day following the date on
which the Company or the Transfer Agent has received the Exercise Notice, the
Company or the Transfer Agent shall transmit by email or facsimile an
acknowledgment of confirmation of receipt of the Exercise Notice to the Holder
and the Transfer Agent. The Company or the Transfer Agent shall deliver any
objection to the Exercise Notice on or before the first (1st) Trading Day
following the date on which the Company or the Transfer Agent has received the
Exercise Notice. In the event of any discrepancy or dispute, the records of the
Company and the Transfer Agent shall be controlling and determinative in the
absence of manifest error. On or before the earlier of (i) the third (3rd)
Trading Day and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined below) following the date on which the Holder has
delivered to the Company a duly completed and executed Exercise Notice (the
“Share Delivery Date”), and, in the case of a Cash Exercise, the Aggregate
Exercise Price, the Company or its Transfer Agent shall, upon the request of the
Holder, credit such aggregate number of shares of Common Stock to which the
Holder is entitled pursuant to such exercise to the Holder’s or its designee’s
balance account with The Depository Trust Company (“DTC”) through its Deposit
Withdrawal At Custodian system. Upon delivery of the Exercise Notice and the
Aggregate Exercise Price, the

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Holder shall be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the book-entry accounts
evidencing such Warrant Shares, as the case may be. The Company agrees to
maintain a transfer agent that is a participant in the FAST Program so long as
this Warrant remains outstanding and exercisable. As used herein, “Standard
Settlement Period” means the standard settlement period, expressed in a number
of Trading Days, on the Principal Market with respect to the Common Stock as in
effect on the date of delivery of the Exercise Notice.

If this Warrant is submitted in connection with any exercise pursuant to this
Section 1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being
acquired upon an exercise, then the Transfer Agent shall as soon as practicable
and in no event later than ten (10) Trading Days after any exercise and at its
own expense, issue a new Warrant (in accordance with Section 7(e)) representing
the right to purchase the number of Warrant Shares purchasable immediately prior
to such exercise under this Warrant, less the number of Warrant Shares with
respect to which this Warrant is exercised, through the DWAC System. The Company
shall pay any and all taxes that may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant; provided, however,
that the Company shall not be required to pay any tax which may be payable based
on the income of the Holder or in respect of any transfer involved in the
registration of any book-entry accounts for Warrant Shares or Warrants in a name
other than that of the Holder or an affiliate thereof. The Holder shall be
responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.

If the Company shall fail for any reason or for no reason to credit the Holder’s
balance account with DTC for such number of shares of Common Stock to which the
Holder is entitled upon the Holder’s exercise of this Warrant, then the Holder
shall be entitled, but not required, to rescind the previously submitted
Exercise Notice and the Company or the Transfer Agent shall return all
consideration paid by Holder for such shares upon such rescission.
Notwithstanding anything herein to the contrary, the Company shall not be
required to make any cash payments to the Holder in lieu of issuance of the
Warrant Shares.

(b)    Exercise Price. For purposes of this Warrant, “Exercise Price” means
$0.33 per share of Common Stock, subject to adjustment as provided herein.

(c)    Cashless Exercise. The Holder may, in its sole discretion, exercise this
Warrant in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such exercise the “Net
Number” of shares of Common Stock determined according to the following formula
(a “Cashless Exercise”):

 

Net Number = (A x B) - (A x C)   

     B

For purposes of the foregoing formula: A=    the total number of shares with
respect to which this Warrant is then being exercised. B=    the Weighted
Average Price of the shares of Common Stock (as reported by Bloomberg) on the
date immediately preceding the date of the Exercise Notice (the “Fair Market
Value”). C=    the Exercise Price then in effect for the applicable Warrant
Shares at the time of such exercise.

If Warrant Shares are issued in such a cashless exercise, the parties
acknowledge and agree that in accordance with Section 3(a)(9) of the Securities
Act, the Warrant Shares shall take on the registered characteristics of the
Warrants being exercised, and the holding period of the Warrant Shares being
issued may be tacked on to the holding period of this Warrant. The Company
agrees not to take any position contrary to this Section 1(c).

 

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(d)    Limitations on Exercises. Subject to the last sentence of this
Section 1(d), the Company shall not effect the exercise of this Warrant, and the
Holder shall not have the right to exercise this Warrant, to the extent that
after giving effect to such exercise, such Holder (together with such Holder’s
affiliates and any other Persons acting as a group together) would beneficially
own in excess of 9.99% (the “Maximum Percentage”) of the shares of Common Stock
outstanding immediately after giving effect to such exercise. For purposes of
the foregoing sentence, the aggregate number of shares of Common Stock
beneficially owned by such Person and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to
which the determination of such sentence is being made, but shall exclude shares
of Common Stock which would be issuable upon (i) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such Person and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned by such Person
and its affiliates (including, without limitation, any convertible notes or
convertible preferred stock or warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein. For purposes of this
Warrant, in determining the number of outstanding shares of Common Stock, the
Holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company’s most recent Form 10-K, Proxy Statement, Form 10-Q, Current
Report on Form 8-K or other public filing with the Securities and Exchange
Commission, as the case may be, (2) a more recent public announcement by the
Company or (3) any other notice by the Company or the Transfer Agent setting
forth the number of shares of Common Stock outstanding. For any reason at any
time, upon the written or oral request of the Holder, where such request
indicates that it is being made pursuant to this Warrant, the Company shall
within one (1) Trading Day confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including the Warrants,
by the Holder and its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. Upon delivery of a written
notice to the Company, the Holder may from time to time increase or decrease the
Maximum Percentage to any other percentage as specified in such notice; provided
that (i) any such increase in the Maximum Percentage will not be effective until
the sixty-first (61st) day after such notice is delivered to the Company and
(ii) any such increase or decrease will apply only to the Holder and not to any
other holder of Warrants. For purposes of clarity, the shares of Common Stock
issuable pursuant to the terms of this Warrant in excess of the Maximum
Percentage shall not be deemed to be beneficially owned by the Holder for any
purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the
Exchange Act. No prior inability to exercise this Warrant pursuant to this
paragraph shall have any effect on the applicability of the provisions of this
paragraph with respect to any subsequent determination of exercisability. The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 1(d) to the
extent necessary to correct this paragraph or any portion of this paragraph
which may be defective or inconsistent with the intended beneficial ownership
limitation contained in this Section 1(d) or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The
limitations set forth in this Section 1(d) shall not apply to exercises of this
Warrant that occur prior to and expressly in connection with the Company’s
consummation of a Fundamental Transaction.

(e)    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 that 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 such fraction multiplied by the Exercise Price.

2.         ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time as follows:

(a)    Adjustment upon Subdivision or Combination of Shares of Common Stock. If
the Company at any time on or after the Issuance Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the Exercise
Price in effect immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately increased. If
the Company at any time on or after the Issuance Date combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination will be proportionately increased and the
number of Warrant Shares will be proportionately decreased. Any adjustment under
this Section 2(a) shall become effective at the close of business on the date
the subdivision or combination becomes effective.

 

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(b)    [Reserved.]

(c)    Par Value. Notwithstanding anything to the contrary in this Warrant, in
no event shall the Exercise Price be reduced below the par value of the
Company’s Common Stock.

3.         RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of shares of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a “Distribution”), at any time after the issuance of this
Warrant, then, in each such case:

(a)     any Exercise Price in effect immediately prior to the close of business
on the record date fixed for the determination of holders of shares of Common
Stock entitled to receive the Distribution shall be reduced, effective as of the
close of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Weighted
Average Price of the shares of Common Stock on the Trading Day immediately
preceding such record date minus the value of the Distribution (as determined in
good faith by the Company’s Board of Directors) applicable to one share of
Common Stock, and (ii) the denominator shall be the Weighted Average Price of
the shares of Common Stock on the Trading Day immediately preceding such record
date; and

(b)    the number of Warrant Shares shall be increased to a number of shares
equal to the number of shares of Common Stock obtainable immediately prior to
the close of business on the record date fixed for the determination of holders
of shares of Common Stock entitled to receive the Distribution multiplied by the
reciprocal of the fraction set forth in the immediately preceding paragraph (a).

4.         PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

(a)    Purchase Rights. In addition to any adjustments pursuant to Section 2
above, if at any time prior to the Expiration Date, the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to all of the record holders of
any class of shares of Common Stock (the “Purchase Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant (without regard to any limitations on the exercise of this
Warrant) immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.

(b)    Fundamental Transactions. The Company shall not enter into or be party to
a Fundamental Transaction unless (i) if the successor entity is a publicly
traded corporation whose common stock is quoted on or listed for trading on an
Eligible Market, the successor entity assumes in writing all of the obligations
of the Company under this Warrant pursuant to written agreements in form and
substance reasonably satisfactory to the Majority Holders, including agreements
to deliver to each Holder of Warrants in exchange for such Warrants a written
instrument issued by the successor entity substantially similar in form and
substance to this Warrant, including, without limitation, an adjusted Exercise
Price equal to the value for the shares of Common Stock reflected by the terms
of such Fundamental Transaction, and exercisable for a corresponding number of
shares of capital stock equivalent to the shares of Common Stock acquirable and
receivable upon exercise of this Warrant (without regard to any limitations on
the exercise of this Warrant) prior to such Fundamental Transaction, and
reasonably satisfactory to the Majority Holders and (ii) if the successor entity
is not a publicly traded corporation whose common stock is quoted on or listed
for trading on an Eligible Market, the successor entity assumes in writing all
of the obligations of the Company under this Warrant pursuant to written
agreements in form and substance reasonably satisfactory to the Majority
Holders, including agreements to deliver to each holder of Warrants in exchange
for such Warrants a written instrument issued by the successor entity
substantially similar in form and substance to this Warrant exercisable for the
consideration that would have been issuable in the Fundamental Transaction in
respect of the Warrant Shares had this Warrant been exercised immediately prior
to the consummation of the Fundamental Transaction. The provisions of this
Section 4(b) shall apply similarly and equally to successive Fundamental

 

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Transactions and shall be applied without regard to any limitations on the
exercise of this Warrant. Notwithstanding the foregoing, in the event of a
Fundamental Transaction other than pursuant to clause (i) above, then, at the
request of the Majority Holders delivered before the 30th day after such
Fundamental Transaction, the Company (or the successor entity) shall purchase
this Warrant and all other outstanding Warrants from the Holders by paying to
the Holders, within five (5) business days after such request (or, if later, on
the effective date of the Fundamental Transaction), cash in an amount equal to
the Black Scholes Value of the remaining unexercised portion of each Warrant, as
applicable, on the date of such Fundamental Transaction. For the sake of
clarity, such calculation shall assume full exercisability of this Warrant (e.g.
without regard to any limitations on the exercise of this Warrant, including
those set forth in Sections 1(d) and 5(b)).

5.         RESERVATION OF WARRANT SHARES.

(a)    The Company covenants that it will at all times after the Exercisability
Date reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of shares of Common Stock which are then issuable and
deliverable upon the exercise of this entire Warrant, free from preemptive or
any other contingent purchase rights of Persons other than the Holder (taking
into account the adjustments and restrictions in Section 2). Such reservation
shall comply without regard to the provisions of Section 1(d). The Company
covenants that all shares of Common Stock so issuable and deliverable shall be,
upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, duly authorized, validly issued and fully paid and
nonassessable. The Company will take all such actions as may be reasonably
necessary to ensure that such shares of Common Stock may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of any securities exchange or automated quotation system upon which
the Common Stock may be listed.

(b)    Following the Issuance Date, the Company covenants and agrees that it
will use reasonable best efforts to obtain approval by the Company’s
stockholders, at the first meeting of stockholders following the Issuance Date,
which the Company shall use best efforts to hold as soon as practicable after
the Issuance Date, but not later than 75 days from the Issuance Date (which
shall be extended to 120 days from the Issuance Date in the event that the
Company receives comments to the preliminary proxy statement for such meeting
from the Securities and Exchange Commission), of an amendment to the Company’s
certificate of incorporation increasing the aggregate number of authorized
shares of Common Stock such that the Company shall have sufficient authorized
but unissued and otherwise unreserved shares of Common Stock, solely for the
purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as
herein provided, without regard to the provisions of Section 1(d) (the
“Proposal”). The Company covenants and agrees that its Board of Directors shall
unanimously recommend that the Proposal be approved by the Company’s
stockholders at all meetings in which such Proposal is considered and promptly
file the necessary amendments to the Company’s certificate of incorporation
after the Proposal is approved. If the Company’s stockholders do not approve
such Proposal at the first meeting in which it is voted on by stockholders, the
Company covenants and agrees that it will submit the Proposal for approval of
the Company’s stockholders at least annually until such approval is obtained.

6.         WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person’s capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall
anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person’s capacity as the Holder of this Warrant, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.

 

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7.         REGISTRATION AND REISSUANCE OF WARRANTS.

(a)    Registration of Warrant. The Company or its Transfer Agent shall register
this Warrant, upon the records to be maintained by the Company for that purpose
(the “Warrant Register”), in the name of the record Holder hereof from time to
time. The Company and its Transfer Agent may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary. The Company and its Transfer Agent shall
also register any transfer, exchange, reissuance or cancellation of any portion
of this Warrant in the Warrant Register.

(b)    Transfer of Warrant. This Warrant may be offered for sale, sold,
transferred or assigned without the consent of the Company, except as may
otherwise be required by applicable securities laws. Subject to applicable
securities laws, if this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company or its Transfer Agent, as directed by the
Company, together with all applicable transfer taxes, whereupon the Company
will, or will cause its Transfer Agent to, forthwith issue and deliver upon the
order of the Holder a new Warrant (in accordance with Section 7(e)), registered
as the Holder may request, representing the right to purchase the number of
Warrant Shares being transferred by the Holder and, if less than the total
number of Warrant Shares then underlying this Warrant is being transferred, a
new Warrant (in accordance with Section 7(e)) to the Holder representing the
right to purchase the number of Warrant Shares not being transferred. The
acceptance of the new Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations in respect of
the new Warrant that the Holder has in respect of this Warrant.

(c)    Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and, in the case of loss, theft or destruction,
of any indemnification undertaking by the Holder to the Company in customary
form (which shall not include the posting of any bond) and, in the case of
mutilation, upon surrender and cancellation of this Warrant, the Company or its
Transfer Agent, as directed by the Company, shall execute and deliver to the
Holder a new Warrant (in accordance with Section 7(e)) representing the right to
purchase the Warrant Shares then underlying this Warrant.

(d)    Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon
the surrender hereof by the Holder at the principal office of the Company or its
Transfer Agent, as directed by the Company, together with all applicable
transfer taxes, for a new Warrant or Warrants (in accordance with Section 7(e))
representing in the aggregate the right to purchase the number of Warrant Shares
then underlying this Warrant, and each such new Warrant will represent the right
to purchase such portion of such Warrant Shares as is designated by the Holder
at the time of such surrender; provided, however, that the Company or its
Transfer Agent, as directed by the Company, shall not be required to issue
Warrants for fractional shares of Common Stock hereunder.

(e)    Issuance of New Warrants. Whenever the Company or its Transfer Agent, as
directed by the Company, is required to issue a new Warrant pursuant to the
terms of this Warrant, such new Warrant shall (i) be of like tenor with this
Warrant, (ii) represent, as indicated on the face of such new Warrant, the right
to purchase the Warrant Shares then underlying this Warrant (or in the case of a
new Warrant being issued pursuant to Section 7(b) or Section 7(c), the Warrant
Shares designated by the Holder which, when added to the number of shares of
Common Stock underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) have an issuance date, as indicated on the face of such new
Warrant, which is the same as the Issuance Date and (iv) have the same rights
and conditions as this Warrant.

8.         NOTICES. Whenever notice is required to be given under this Warrant,
unless otherwise provided herein, such notice shall be given in accordance with
the information set forth in the Warrant Register. The Company shall give
written notice to the Holder (i) reasonably promptly following any adjustment of
the Exercise Price, setting forth in reasonable detail the calculation of such
adjustment and (ii) at least ten (10) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the shares of Common Stock, (B) with respect to any grants,
issuances or sales of any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property pro rata to the record holders of
any class of shares of Common Stock or (C) for determining rights to vote with
respect to any Fundamental Transaction,

 

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dissolution or liquidation; provided, that in each case, the Company will only
be required to provide such information to the Holder if such information shall
have been made known to the public prior to or in conjunction with such notice
being provided to the Holder.

9.         AMENDMENT AND WAIVER. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the
Majority Holders. Any amendment, modification or waiver effected in the
accordance with the foregoing shall be binding on all Warrants and holders
thereof.

10.         LIMITATION OF LIABILITY. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Warrant
Shares or as a shareholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.

11.         GOVERNING LAW. This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

12.         CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly
drafted by the Company and the Holder and shall not be construed against any
Person as the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.

13.         DISPUTE RESOLUTION. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
email or facsimile within five (5) Trading Days of receipt of the Exercise
Notice giving rise to such dispute, as the case may be, to the Holder. If the
Holder and the Company are unable to agree upon such determination or
calculation of the Exercise Price or the Warrant Shares within five (5) Trading
Days of such disputed determination or arithmetic calculation being submitted to
the Holder, then the Company shall, within two (2) Trading Days thereafter
submit via email or facsimile (a) the disputed determination of the Exercise
Price to an independent, reputable investment bank selected by the Company and
approved by the Holder or (b) the disputed arithmetic calculation of the Warrant
Shares to the Company’s independent, outside accountant. The Company shall cause
the investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than twenty (20) Trading Days from the time it receives the
disputed determinations or calculations. Such investment bank’s or accountant’s
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error. The expenses of the investment bank and
accountant will be borne by the Company unless the investment bank or accountant
determines that the determination of the Exercise Price or the arithmetic
calculation of the Warrant Shares by the Holder was incorrect by more than 25%,
in which case the expenses of the investment bank and accountant will be borne
by the Holder.

14.         REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant, at law or in equity (including a
decree of specific performance and/or other injunctive relief), and nothing
herein shall limit the right of the Holder to pursue actual damages for any
failure by the Company to comply with the terms of this Warrant. The Company
acknowledges that a breach by it of its obligations hereunder may cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the holder of this Warrant shall be entitled, in
addition to all other available remedies, to seek an injunction restraining any
breach. Notwithstanding the foregoing or anything else herein to the contrary,
if the Company is for any reason unable to issue and deliver Warrant Shares upon
exercise of this Warrant as required pursuant to the terms hereof, the Company
shall have no obligation to pay to the Holder any cash or other consideration or
otherwise “net cash settle” this Warrant.

 

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15.         CERTAIN DEFINITIONS. For purposes of this Warrant, the following
terms shall have the following meanings:

(a)    “Black Scholes Value” means the value of this Warrant based on the Black
and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg
determined as of the day immediately following the public announcement of the
applicable Fundamental Transaction and reflecting (i) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term
of this Warrant as of such date of request and (ii) an expected volatility equal
to the greater of 80% and the 100-day volatility obtained from the HVT function
on Bloomberg.

(b)    “Bloomberg” means Bloomberg Financial Markets.

(c)    “Common Stock” means (i) the Company’s shares of Common Stock, $0.001 par
value per share, and (ii) any share capital into which such Common Stock shall
have been changed or any share capital resulting from a reclassification of such
Common Stock.

(d)    “Convertible Securities” means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or exchangeable
for shares of Common Stock.

(e)    “Eligible Market” means the NYSE MKT LLC, The New York Stock
Exchange, Inc., The Nasdaq Stock Market, or the OTC Bulletin Board®.

(f)    “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(g)    “Exercisability Date” means the later of (i) the Issuance Date and
(ii) the first Trading Day following the date the Company obtains shareholder
approval for the Proposal as described in Section 5(b) above; provided, however,
in the event of a Fundamental Transaction prior to obtaining shareholder
approval of the Proposal, the first Trading Day following the closing of the
Fundamental Transaction shall be deemed the Exercisability Date; provided,
further, that treatment of this Warrant in the event of a Fundamental
Transaction is addressed in Section 4(b) above.

(h)    “Fundamental Transaction” means that (A) the Company shall, directly or
indirectly, in one or more related transactions, (i) consolidate or merge with
or into (whether or not the Company is the surviving corporation) another
Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company to another Person,
or (iii) allow another Person to make a purchase, tender or exchange offer that
is accepted by the holders of more than 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the Person or Persons
making or party to, or associated or affiliated with the Persons making or party
to, such purchase, tender or exchange offer), or (iv) consummate a stock
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination) or (B) any “person” or “group” (as
these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of more than 50% of the aggregate
ordinary voting power represented by issued and outstanding Common Stock.

(i)    “Majority Holders” means the holders of a majority of the Warrant Shares
underlying the then outstanding Warrants (disregarding for this purpose any and
all limitations of any kind on exercise of any Warrants).

(j)    “Options” means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.

(k)    “Person” means an individual, a limited liability company, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization, any
other entity and a government or any department or agency thereof.

 

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(l)    “Principal Market” means (i) the Nasdaq Global Market, or (ii) if the
Nasdaq Global Market is not the principal trading market for the Common Stock,
then the principal securities exchange or securities market on which the Common
Stock is then traded.

(m)    “Securities Act” means the Securities Act of 1933, as amended.

(n)    “Trading Day” means any day on which the Common Stock is traded on the
Principal Market.

(o)    [Reserved.]

(p)    “Weighted Average Price” means, for any security as of any date, the
dollar volume-weighted average price for such security on the Principal Market
during the period beginning at 9:30:01 a.m., New York City time, and ending at
4:00:00 p.m., New York City time, as reported by Bloomberg through its “Volume
at Price” function or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30:01 a.m., New York City time, and ending at 4:00:00 p.m., New York City
time, as reported by Bloomberg, or, if no dollar volume-weighted average price
is reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by Pink OTC Markets
Inc. If the Weighted Average Price cannot be calculated for such security on
such date on any of the foregoing bases, the Weighted Average Price of such
security on such date shall be the fair market value as mutually determined by
the Company and the Holder. If the Company and the Holder are unable to agree
upon the fair market value of such security, then such dispute shall be resolved
pursuant to Section 13 with the term “Weighted Average Price” being substituted
for the term “Exercise Price.” All such determinations shall be appropriately
adjusted for any share dividend, share split or other similar transaction during
such period.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock
to be duly executed as of the Issuance Date set out above.

 

SIERRA ONCOLOGY, INC. By:  

 

(Signature) Name:  

Sukhi Jagpal

Title:  

Chief Financial Officer

 

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EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

SIERRA ONCOLOGY, INC.

The undersigned holder hereby exercises the right to purchase                 of
the shares of Common Stock (“Warrant Shares”) of Sierra Oncology, Inc., a
Delaware corporation (the “Company”), evidenced by the attached Warrant to
Purchase Common Stock (the “Warrant”). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.

1.    Exercise Price. The Holder intends that payment of the Exercise Price
shall be made as (check one):

☐    Cash Exercise under Section 1(a).

☐    Cashless Exercise under Section 1(c).

2.    Cash Exercise. If the Holder has elected a Cash Exercise, the Holder shall
pay the sum of $                to the Company in accordance with the terms of
the Warrant.

3.    Delivery of Warrant Shares. The Company shall deliver to the holder
                Warrant Shares in accordance with the terms of the Warrant.

4.    Representations and Warranties. By its delivery of this Exercise Notice,
the undersigned represents and warrants to the Company that in giving effect to
the exercise evidenced hereby the Holder will not beneficially own in excess of
the number of shares of Common Stock (determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended) permitted to
be owned under Section 1(d) of this Warrant to which this notice relates.

 

        DATED:                                                  (Signature must
conform in all respects   to name of the Holder as specified on   the face of
the Warrant)  

 

Registered Holder

  Address:

 

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