Exhibit 10.1

 

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SUBSCRIPTION # _____

 

STAR MOUNTAIN RESOURCES, INC.

 

Subscription Agreement

 

The undersigned “Subscriber”, on the terms and conditions herein set forth,
hereby irrevocable submits this subscription agreement (the “Subscription
Agreement”) to STAR MOUNTAIN RESOURCES, INC., a Nevada corporation (the
“Company”), in connection with a private offering by the Company (the
“Offering”) to raise additional working capital of up to US$2,000,000[1] (the
“Offering Amount”) through the sale to accredited investors only of up to
4,000,000 units of the Company’s securities described below (the “Units”) at
$0.50 per Unit. Each Unit is comprised of the following:

 

  (a) One share of the Company’s Series C Preferred Stock as provided for in the
form of Designations, Rights and Preferences of Series C Preferred Stock
attached hereto as Exhibit A (the “Series C Preferred Stock”),         (b) One
share of the Company’s common stock,         (c) One Series A common stock
purchase warrant entitling the holder to purchase an additional share of the
Company’s common stock at an exercise price of $0.75 per share for a period of
two years from the issuance date thereof as provided for in the Form of Series A
Warrant attached hereto as Exhibit B (the “A Warrant”), and         (d) One
Series B common stock purchase warrant entitling the holder to purchase one
share of the Company’s common stock at an exercise price of $1.50 per share for
a period of three years from the issuance date thereof as provided for in the
Form of Series B Warrant attached hereto as Exhibit C (the “B Warrant”).

 

Furthermore, Subscribers will be entitled to Piggy-Back Registration Rights as
provided for in the Piggy-Back Registration Rights Agreement attached hereto as
Exhibit D.

 

1. Subscription for the Purchase of Units.

 

THE UNDERSIGNED hereby subscribes to purchase _____________ Units of the
Company’s securities at $.50 per Unit for a total subscription of
$______________. In this regard, the Investor agrees to forward payment in the
amount of $_________________.

 

Please issue a check or wire transfer payable to:

 

LEGAL AND COMPLIANCE, LLC IOTA TRUST ACCOUNT

Memo: SMRS Series C Unit Offering

 

 

[1] At the sole discretion of our Board of Directors we reserve the right to
accept up to an additional $500,000 (1,000,000 Units) in the event this offering
is over subscribed.

 

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(a) Deliver the check along with the signed Subscription Agreement to:

 

LEGAL AND COMPLIANCE, LLC

330 Clematis Street, Suite 217

West Palm Beach, FL 33401

 

(b) Alternatively, please deliver the funds via wire transfer (as noted below)
and mail the signed subscription agreement to the address noted in 1 (a) above:

 

Wells Fargo Bank, N.A. 420 Montgomery
San Francisco, CA 94104 ABA# 121000248 For Credit To: Legal & Compliance, LLC
IOTA Trust Account Account Number

 

Whereas, in connection with its purchase the undersigned represents and warrants
to the Company the following: The Company’s private offering of common stock is
being made to “accredited” investors within the meaning of Rule 506 of
Regulation D promulgated by the Securities Exchange Commission under the
Securities Act of 1933, as amended (the “Securities Act”).

 

1.2 Offer to Purchase. Subscriber hereby irrevocably offers to purchase the
Units and tenders herewith the total price noted above. Subscriber recognizes
and agrees that (i) this subscription is irrevocable and, if Subscriber is a
natural person, shall survive Subscriber’s death, disability or other
incapacity, and (ii) the Company has complete discretion to accept or to reject
this Subscription Agreement in its entirety and shall have no liability for any
rejection of this Subscription Agreement. This Subscription Agreement shall be
deemed to be accepted by the Company only when it is executed by the Company.
However, in the event the Company does not receive accepted subscriptions for
the Offering Amount by October 31, 2015, the Company shall return to the
Subscriber, the Subscriber’s subscription funds, without interest.

 

1.3 Effect of Acceptance. Subscriber hereby acknowledges and agrees that on the
Company’s acceptance of this Subscription Agreement, it shall become a binding
and fully enforceable agreement between the Company and the Subscriber. As a
result, upon acceptance by the Company of this Subscription Agreement and
subject to the Company receiving accepted subscriptions for the Offering Amount,
Subscriber will become the record and beneficial holder of the Units (and the
preferred stock, common stock and warrants represented thereby) and the Company
will be entitled to receive the purchase price of the Units as specified herein.

 

2. Representation as to Investor Status.

 

2.1 Accredited Investor. In order for the Company to sell the common stock in
conformance with state and federal securities laws, the following information
must be obtained regarding Subscriber’s investor status. Please initial each
item applicable to you as an investor in the Company.

 

_____ (a) A natural person whose net worth, either individually or jointly with
such person’s spouse, at the time of Subscriber’s purchase, exceeds $1,000,000;

 

_____ (b) A natural person who had an individual income in excess of $200,000,
or joint income with that person’s spouse in excess of $300,000, in each of the
two most recent years and reasonably expects to reach the same income level in
the current year;

 

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_____ (c) A bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary
capacity;

 

_____ (d) A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”);

 

_____ (e) An insurance company as defined in section 2(13) of the Exchange Act;

 

_____ (f) An investment company registered under the Investment Company Act of
1940 or a business development company as defined in Section 2(a)(48) of that
Act;

 

_____ (g) A Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;

 

_____ (h) A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state, or its political
subdivisions for the benefit of its employees, if such plan has total assets in
excess of $5,000,000;

 

_____ (i) An employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, if the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of such act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are accredited investors;

 

_____ (j) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;

 

_____ (k) An organization described in Section 501(c)(3) of the Internal Revenue
Code, or a corporation, business trust or partnership, not formed for the
specific purpose of acquiring Series B Notes and Warrants, with total assets in
excess of $5,000,000;

 

_____ (l) A director or executive officer of the Company;

 

_____ (m) A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring Series B Notes and Warrants, whose purchase is
directed by a sophisticated person who has such knowledge and experience in
financial and business matters that such person is capable of evaluating the
merits and risks of investing in the Company;

 

_____ (n) An entity in which all of the equity owners qualify under any of the
above subparagraphs.

 

_____ (o) Subscriber does not qualify under any of the investor categories set
forth in (a) through (l) above.

 

2.2 Net Worth. The term “net worth” means the excess of total assets over total
liabilities (including personal and real property, but excluding the estimated
fair market value of a person’s primary home).

 

2.3 Income. In determining individual “income,” Subscriber should add to
Subscriber’s individual taxable adjusted gross income (exclusive of any spousal
income) any amounts attributable to tax exempt income received, losses claimed
as a limited partner in any limited partnership, deductions claimed for
depletion, contributions to an IRA or Keogh retirement plan, alimony payments,
and any amount by which income from long-term capital gains has been reduced in
arriving at adjusted gross income.

 

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2.4 Type of Subscriber. Indicate the form of entity of Subscriber:

 

[  ] Individual    [  ] Limited Partnership [  ] Corporation    [  ] General
Partnership [  ] Revocable Trust          [  ] Other Type of Trust (indicate
type): _____________________ [  ] Other (indicate form of organization):
_____________________

 

(a) If Subscriber is not an individual, indicate the approximate date Subscriber
entity was formed: _____________________.

 

(b) If Subscriber is not an individual, initial the line below which correctly
describes the application of the following statement to Subscriber’s situation:
Subscriber (i) was not organized or reorganized for the specific purpose of
acquiring the shares of common stock of the Company and (ii) has made
investments prior to the date hereof, and each beneficial owner thereof has and
will share in the investment in proportion to his or her ownership interest in
Subscriber.

 

  True   False

 

If the “False” box is checked, each person participating in the entity will be
required to fill out a Subscription Agreement.

 

2.5 Other Representations and Warranties of Subscriber. Subscriber hereby
represents and warrants to the Company as follows:

 

(a) The Units (and the shares of preferred stock, common stock and common stock
purchase warrants represented thereby) are being acquired for Subscriber’s own
account for investment, with no intention by Subscriber to distribute or sell
any portion thereof within the meaning of the Securities Act, and will not be
transferred by Subscriber in violation of the Securities Act or the then
applicable rules or regulations thereunder. No one other than Subscriber has any
interest in or any right to acquire the Units. Subscriber understands and
acknowledges that the Company will have no obligation to recognize the
ownership, beneficial or otherwise, of the shares of common stock by anyone but
Subscriber.

 

(b) Subscriber’s financial condition is such that Subscriber is able to bear the
risk of holding the Units that Subscriber may acquire pursuant to this
Agreement, for an indefinite period of time, and the risk of loss of
Subscriber’s entire investment in the Company.

 

(c) Subscriber has received, has read and understood and is familiar with this
Subscription Agreement, the Units and the common stock and the common stock
purchase warrants.

 

(d) Subscriber has been furnished with all documents and materials relating to
the business, finances and operations of the Company and its subsidiaries and
information that Subscriber requested and deemed material to making an informed
investment decision regarding its purchase of the Units. Subscriber has been
afforded the opportunity to review such documents and materials and the
information contained therein. Subscriber has been afforded the opportunity to
ask questions of the Company and its management. Subscriber understands that
such discussions, as well as any written information provided by the Company,
were intended to describe the aspects of the Company’s and its subsidiaries’
business and prospects which the Company believes to be material, but were not
necessarily a thorough or exhaustive description, and except as expressly set
forth in this Subscription Agreement, the Company makes no representation or
warranty with respect to the completeness of such information and makes no
representation or warranty of any kind with respect to any information provided
by any entity other than the Company. Some of such information may include
projections as to the future performance of the Company and its subsidiaries,
which projections may not be realized, may be based on assumptions which may not
be correct and may be subject to numerous factors beyond the Company’s and its
subsidiaries’ control. Additionally, Subscriber understands and represents that
he is purchasing the Units notwithstanding the fact that the Company and its
subsidiaries, if any, may disclose in the future certain material information
that the Subscriber has not received, including the financial results of the
Company and its subsidiaries for their current fiscal quarters. Neither such
inquiries nor any other due diligence investigations conducted by such
Subscriber shall modify, amend or affect such Subscriber’s right to rely on the
Company’s representations and warranties, if any, contained in this Subscription
Agreement. Subscriber has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
investment in the common stock.

 

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(e) No representations or warranties have been made to Subscriber by the
Company, or any representative of the Company, or any securities broker/dealer,
other than as set forth in this Subscription Agreement.

 

(f) Subscriber has investigated the acquisition of the Units to the extent
Subscriber deemed necessary or desirable and the Company has provided Subscriber
with any reasonable assistance Subscriber has requested in connection therewith.

 

(g) Subscriber, either personally, or together with his advisors (other than any
securities broker/dealers who may receive compensation from the sale of any of
the Units), has such knowledge and experience in financial and business matters
that Subscriber is capable of evaluating the merits and risks of purchasing the
Units and of making an informed investment decision with respect thereto.

 

(h) Subscriber is aware that Subscriber’s rights to transfer the Units (or the
common stock thereby represented) is restricted by the Securities Act and
applicable state securities laws, and Subscriber will not offer for sale, sell
or otherwise transfer the Units (or the underlying common stock and purchase
warrants) without registration under the Securities Act and qualification under
the securities laws of all applicable states, unless such sale would be exempt
therefrom.

 

(i) Subscriber understands and agrees that the Units (or the underlying common
stock or common stock purchase warrants) it acquires have not been registered
under the Securities Act or any state securities act in reliance on exemptions
therefrom and that the Company has no obligation to register any of the Units
(and underlying common stock represented thereby) offered by the Company as set
forth in the Accredited Investor Memorandum of Terms dated September 29, 2015
(the “Memorandum”). Subscriber further acknowledges that Subscriber is
purchasing the Units after having been provided with the Memorandum.

 

(j) The Subscriber has had an opportunity to ask questions of, and receive
answers from, representatives of the Company concerning the terms and conditions
of this investment and all such questions have been answered to the full
satisfaction of the undersigned. Subscriber understands that no person other
than the Company has been authorized to make any representation and if made,
such representation may not be relied on unless it is made in writing and signed
by the Company. The Company has not, however, rendered any investment advice to
the undersigned with respect to the suitability

 

(k) Subscriber understands that the certificates or other instruments
representing the securities included in the Units (the “Securities”), as well as
the common stock issuable thereby shall bear a restrictive legend in
substantially the following form (and a stop transfer order may be placed
against transfer of such stock certificates):

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO ANY EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER AND UNDER
APPLICABLE STATE LAW, THE AVAILABILITY OF WHICH MUST BE ESTABLISHED TO THE
SATISFACTION OF THE COMPANY.

 

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(l) Subscriber also acknowledges and agrees to the following:

 

(i) An investment in the Units is highly speculative and involves a high degree
of risk of loss of the entire investment in the Company; and

 

(ii) There is no assurance that a public market for the securities will be
available and that, as a result, Subscriber may not be able to liquidate
Subscriber’s investment in the Securities should a need arise to do so.

 

(m) Subscriber is not dependent for liquidity on any of the amounts Subscriber
is investing in the Units.

 

(n) Subscriber’s address set forth below is his or her correct residence
address.

 

(o) Subscriber has full power and authority to make the representations referred
to herein, to purchase the Units and to execute and deliver this Subscription
Agreement.

 

(p) Subscriber understands that the foregoing representations and warranties are
to be relied upon by the Company as a basis for the exemptions from registration
and qualification of the sale of the Units under the federal and state
securities laws and for other purposes.

 

The foregoing representations and warranties are true and accurate as of the
date hereof and shall survive such date. If any of the above representations and
warranties shall cease to be true and accurate prior to the acceptance of this
Subscription Agreement, Subscriber shall give prompt notice of such fact to the
Company by telegram, or facsimile or e-mail, specifying which representations
and warranties are not true and accurate and the reasons therefor.

 

3. Indemnification. Subscriber acknowledges that Subscriber understands the
meaning and legal consequences of the representations and warranties made by
Subscriber herein, and that the Company is relying on such representations and
warranties in making the determination to accept or reject this Subscription
Agreement. Subscriber hereby agrees to indemnify and hold harmless the Company
and each employee and agent thereof from and against any and all losses, damages
or liabilities due to or arising out of a breach of any representation or
warranty of Subscriber contained in this Subscription Agreement.

 

4. Transferability. Subscriber agrees not to transfer or assign this
Subscription Agreement, or any interest herein, and further agrees that the
assignment and transferability of the Units acquired pursuant hereto shall be
made only in accordance with applicable federal and state securities laws.

 

5. Termination of Agreement; Return of Funds; Minimum Offering Amount. In the
event that, for any reason, this Subscription Agreement is rejected in its
entirety by the Company, this Subscription Agreement shall be null and void and
of no further force and effect, and no party shall have any rights against any
other party hereunder. In the event that the Company rejects this Subscription
Agreement, the Company shall promptly return or cause to be returned to
Subscriber any money tendered hereunder without interest or deduction.

 

Funds from accepted subscriptions shall be held in an escrow account with Legal
& Compliance, LLC, 330 Clematis Street, Suite 217, West Palm Beach, FL 33401
until the Offering Amount has been received, at which time the Company then can
access the subscription proceeds.

 

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6. Notices. All notices or other communications given or made hereunder shall be
in writing and shall be delivered or mailed by registered or certified mail,
return receipt requested, postage prepaid, or delivered by, facsimile or e-mail
to Subscriber at the address set forth below and to the Company at the address
set forth on the first page of this Agreement, or at such other place as the
Company may designate by written notice to Subscriber.

 

7. Amendments. Neither this Subscription Agreement nor any term hereof may be
changed, waived, discharged or terminated except in a writing signed by
Subscriber and the Company.

 

8. Governing Law. This Subscription Agreement and all amendments hereto shall be
governed by and construed in accordance with the laws of the State of Nevada.

 

9. Headings. The headings in this Subscription Agreement are for convenience of
reference, and shall not by themselves determine the meaning of this
Subscription Agreement or of any part hereof.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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INDIVIDUALS

 

In witness whereof, the parties hereto have executed this Agreement as of the
dates set forth below.

 

Dated: _____________, 2015.

 

  Signature(s): ________________________________          
________________________________         Name (Please Print):
________________________________         Residence Address:
________________________________         ________________________________      
  Phone Number: (______) _______-_________________         Cellular Number:
(______) _______-_________________         Social Security Number:
_________________   Email address: ________________@_______________

 

ACCEPTANCE

 

  STAR MOUNTAIN RESOURCES, INC.   a Nevada corporation       Date:
_____________, 2015.             By:     Joseph Marchal, Chairman & CEO

 

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CORPORATIONS, PARTNERSHIPS, TRUSTS OR OTHER ENTITIES

 

In witness whereof, the parties hereto have executed this Agreement as of the
dates set forth below.

 

Dated: _____________, 2015.

 

  Name of Purchaser (Please Print): ________________________________         By:
________________________________         Name (Please Print):
________________________________         Title ________________________________
        Address: ________________________________         Phone Number: (______)
_______-___________         Cellular Number: (______) _______-___________      
  Taxpayer ID Number: ________________________________         Email address:
________________@__________________________

 

ACCEPTANCE

 

  STAR MOUNTAIN RESOURCES, INC.   a Nevada corporation       Date:
_____________, 2015.             By:     Joseph Marchal, Chairman & CEO

 

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EXHIBIT A

 

CERTIFICATE OF DESIGNATIONS, RIGHTS AND PREFERENCES, RIGHTS AND LIMITATIONS OF
SERIES C PREFERRED STOCK

 

Section 1. Definitions. For the purposes hereof, the following terms shall have
the following meanings:

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 of the Securities
Act.

 

“Arizona Courts” shall have the meaning set forth in Section 7(d).

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the Company’s common stock, par value $0.001 per share, and
stock of any other class of securities into which such securities may hereafter
be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

 

“Conversion Date” shall have the meaning set forth in Section 6(a).

 

“Conversion Rate” shall have the meaning set forth in Section 6(b).

 

“Conversion Shares” means, collectively, the shares of Common Stock issuable
upon conversion of the shares of Series C Preferred in accordance with the terms
hereof.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Holder” shall have the meaning given such term in Section 2.

 

“Junior Securities” means the Common Stock and all other Common Stock
Equivalents of the Company other than those securities which are explicitly
senior or pari passu to the Series C Preferred in dividend rights or liquidation
preference.

 

“Liquidation” shall have the meaning set forth in Section 4.

 

“Notice of Conversion” shall have the meaning set forth in Section 6(a).

 

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“Original Issue Date” means the date of the first issuance of any shares of the
Series C Preferred regardless of the number of transfers of any particular
shares of Series C Preferred and regardless of the number of certificates which
may be issued to evidence such Series C Preferred.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Series C Preferred” shall have the meaning set forth in Section 2.

 

“Securities” means the Series C Preferred and the Underlying Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Senior Securities” means the shares of capital stock designated as Series A
Preferred Stock and up to $30,000,000 of principal amount of debt that may be
issued by the Company to finance its working capital requirements.

 

“Share Delivery Date” shall have the meaning set forth in Section 4(c).

 

“Stated Value” shall have the meaning set forth in Section 2, as the same may be
increased pursuant to Section 3.

 

“Trading Day” means a day on which the New York Stock Exchange is open for
business.

 

“Transfer Agent” means a transfer agent to be appointed by the Company and any
successor transfer agent of the Company.

 

“Underlying Shares” means the shares of Common Stock issued and issuable upon
conversion of the Series C Preferred in accordance with the terms of this
Certificate of Designation.

 

Section 2. Designation, Amount and Par Value. The series of preferred stock
shall be designated as its Series C Preferred Stock (the “Series C Preferred”)
and the number of shares so designated shall be up to 5,000,000 (which shall not
be subject to increase without the written consent of all of the holders of the
Series C Preferred (each, a “Holder” and collectively, the “Holders”). Each
share of Series C Preferred shall have a par value of $0.001 per share and a
stated value equal to $0.50 per share (the “Stated Value”).

 

Section 3. INTENTIONALLY DELETED.

 

Section 4. Voting Rights. Except as otherwise provided herein or as otherwise
required by law, holders of Series C Preferred shall be entitled to 10 votes per
share on matters submitted to a vote of the stockholders of the Company. Also,
as long as any shares of Series C Preferred are outstanding, the Company shall
not, without the affirmative vote of all of the Holders of the then outstanding
shares of the Series C Preferred, alter or change adversely the powers,
preferences or rights given to the Series C Preferred or alter or amend this
Certificate of Designation.

 

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Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary (a “Liquidation”), the Holders shall
be entitled to receive out of the assets, whether capital or surplus, of the
Company an amount equal to the par value of the Series C Preferred and any other
fees or liquidated damages then due and owing thereon under this Certificate of
Designation, for each share of Series C Preferred after any distribution or
payment made to Senior Securities and before any distribution or payment shall
be made to the holders of any Junior Securities, and if the assets of the
Company shall be insufficient to pay in full such amounts, then the entire
assets to be distributed to the Holders shall be ratably distributed among the
Holders in accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full.

 

Section 6. Conversion and Redemption.

 

a) Conversions at Option of Holder. Each share of Series C Preferred shall be
convertible, at any time after six (6) months after the date of issuance, and
from time to time from and thereafter at the option of the Holder thereof, into
that number of shares of Common Stock determined by multiplying the number of
shares of Series C Preferred by the Conversion Rate. Holders shall effect
conversions by providing the Company with the form of conversion notice attached
hereto as Annex A (a “Notice of Conversion”). Each Notice of Conversion shall
specify the number of shares of Series C Preferred to be converted, the number
of shares of Series C Preferred owned prior to the conversion at issue, the
number of shares of Series C Preferred owned subsequent to the conversion at
issue and the date on which such conversion is to be effected, which date may
not be prior to the date the applicable Holder delivers by facsimile such Notice
of Conversion to the Company (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion to the Company is deemed
delivered hereunder. No ink-original Notice of Conversion shall be required, nor
shall any medallion guarantee (or other type of guarantee or notarization) of
any Notice of Conversion form be required. The calculations and entries set
forth in the Notice of Conversion shall control in the absence of manifest or
mathematical error. To effect conversions of shares of Series C Preferred, a
Holder shall not be required to surrender the certificate(s) representing the
shares of Series C Preferred to the Company unless all of the shares of Series C
Preferred represented thereby are so converted, in which case such Holder shall
deliver the certificate representing such shares of Series C Preferred promptly
following the Conversion Date at issue. Shares of Series C Preferred converted
into Common Stock or redeemed in accordance with the terms hereof shall be
canceled and shall not be reissued.

 

b) Conversion Rate. The conversion rate for the Series C Preferred shall equal
to one-half (½ ) share of common stock per one (1) share of Series C Preferred
Stock, subject to adjustment herein (the “Conversion Rate”).

 

c) Mechanics of Conversion

 

i. Delivery of Conversion Shares Upon Conversion. Not later than three (3)
Trading Days after each Conversion Date (the “Share Delivery Date”), the Company
shall deliver, or cause to be delivered, to the converting Holder the number of
Conversion Shares being acquired upon the conversion of the Series C Preferred
which, on or after the earlier of (i) the twelve month anniversary of the
Original Issue Date or (ii) the Effective Date, shall be free of restrictive
legends and trading restrictions. If the Common Stock is listed or quoted for
public trading, the Company shall deliver the Conversion Shares required to be
delivered by the Company under this Section 6 electronically through the
Depository Trust Company or another established clearing corporation performing
similar functions.

 

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ii. Failure to Deliver Conversion Shares. If, in the case of any Notice of
Conversion, such Conversion Shares are not delivered to or as directed by the
applicable Holder by the Share Delivery Date, the Holder shall be entitled to
elect by written notice to the Company at any time on or before its receipt of
such Conversion Shares, to rescind such Conversion, in which event the Company
shall promptly return to the Holder any original Series C Preferred certificate
delivered to the Company and the Holder shall promptly return to the Company the
Conversion Shares issued to such Holder pursuant to the rescinded Conversion
Notice.

 

iii. Obligation Absolute. The Company’s obligation to issue and deliver the
Conversion Shares upon conversion of Series C Preferred in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by a Holder to enforce the same, any waiver or consent with respect to
any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by such Holder or any other
Person of any obligation to the Company or any violation or alleged violation of
law by such Holder or any other person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to such
Holder in connection with the issuance of such Conversion Shares; provided,
however, that such delivery shall not operate as a waiver by the Company of any
such action that the Company may have against such Holder. In the event a Holder
shall elect to convert any or all of the Series C Preferred, the Company may not
refuse conversion based on any claim that such Holder or anyone associated or
affiliated with such Holder has been engaged in any violation of law, agreement
or for any other reason, unless an injunction from a court, on notice to Holder,
restraining and/or enjoining conversion of all or part of the Series C Preferred
of such Holder shall have been sought and obtained, and the Company posts a
surety bond for the benefit of such Holder in the amount of 150% of the par
value of the Series C Preferred which is subject to the injunction, which bond
shall remain in effect until the completion of arbitration/litigation of the
underlying dispute and the proceeds of which shall be payable to such Holder to
the extent it obtains judgment. In the absence of such injunction, the Company
shall issue Conversion Shares and, if applicable, cash, upon a properly noticed
conversion.

 

iv. Reservation of Shares Issuable Upon Conversion. The Company covenants that
it will at all times reserve and keep available out of its authorized and
unissued shares of Common Stock for the sole purpose of issuance upon conversion
of the Series C Preferred, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of Persons other than the Holder
(and the other holders of the Series C Preferred), not less than such aggregate
number of shares of the Common Stock as shall be issuable (taking into account
the adjustments and restrictions of Section 6) upon the conversion of the then
outstanding shares of Series C Preferred. The Company covenants that all shares
of Common Stock that shall be so issuable shall, upon issue, be duly authorized,
validly issued, fully paid and nonassessable.

 

v. Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of the Series C Preferred. As to any
fraction of a share which the Holder would otherwise be entitled to purchase
upon such conversion, the Company shall at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Rate or round up to the next whole share.

 

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vi. Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion
of this Series C Preferred shall be made without charge to any Holder for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such Conversion Shares, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such Conversion Shares upon conversion in a
name other than that of the Holders of such shares of Series C Preferred and the
Company shall not be required to issue or deliver such Conversion Shares unless
or until the Person or Persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Company shall pay
all Transfer Agent fees required for same-day processing of any Notice of
Conversion and all fees to the Depository Trust Company (or another established
clearing corporation performing similar functions) required for same-day
electronic delivery of the Conversion Shares.

 

d) Call for Redemption by Company. Commencing at any time after the Original
Issue Date, the Company shall have the right, upon 10 days’ notice to the Holder
(the “Redemption Notice”), to redeem all of the then outstanding Series C
Preferred at a price equal to the Stated Value (the “Redemption Price”), on the
date set forth in the Redemption Notice, but in no event earlier than 30 days
following the date of the receipt by the Holder of the Redemption Notice (the
“Redemption Date”). The Holder may convert this Series C Preferred into Common
Stock at the Conversion Rate at any time prior to the Redemption Date. Any
portion of this Series C Preferred not exercised by 5:30 p.m. (Pacific time) on
the Redemption Date shall no longer be exercisable and shall be returned to the
Company (and, if not so returned, shall automatically be deemed canceled), and
the Company, upon its receipt of the unexercised portion of this Series C
Preferred, shall issue therefore in full and complete satisfaction of its
obligations under such remaining portion of this Series C Preferred to the
Holder an amount equal to the number of shares of Common Stock then issuable
hereunder multiplied by the Redemption Price. The Redemption Price shall be
mailed to such Holder at its address of record, and the Series C Preferred shall
be canceled.

 

Section 6. Certain Adjustments.

 

a) Stock Dividends and Stock Splits. If the Company, at any time while this
Series C Preferred is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions payable in shares of Common Stock on shares of
Common Stock or any other Common Stock Equivalents (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company upon
conversion of this Series C Preferred), (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, (iii) combines (including by way of
a reverse stock split) outstanding shares of Common Stock into a smaller number
of shares, or (iv) issues, in the event of a reclassification of shares of the
Common Stock, any shares of capital stock of the Company, then the Conversion
Rate shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding any treasury shares of the Company)
outstanding immediately before such event, and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section 6(a) shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.

 

14

   

 

 

b) Calculations. All calculations under this Section 6 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 6, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding any treasury shares of the Company) issued and
outstanding.

 

c) Notice to the Holders.

 

i. Adjustment to Conversion Rate. Whenever the Conversion Rate is adjusted
pursuant to any provision of this Section 6, the Company shall promptly deliver
to each Holder a notice setting forth the Conversion Rate after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Conversion by Holder. If (A) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to
all holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Series C Preferred, and shall cause to be delivered to each Holder at its last
address as it shall appear upon the stock books of the Company, at least twenty
(20) calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any defect therein
or in the delivery thereof shall not affect the validity of the corporate action
required to be specified in such notice.

 

d) Piggyback Registration Rights. The Holder shall have the registration rights
as set forth in Exhibit A.

 

15

   

 

Section 7. Miscellaneous.

 

a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation, any Notice of
Conversion, shall be in writing and delivered personally, by facsimile, or sent
by a nationally recognized overnight courier service, addressed to the Company,
at the address set forth above Attention: Donna Moore, or such other address as
the Company may specify for such purposes by notice to the Holders delivered in
accordance with this Section 7. Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number or address of
such Holder appearing on the books of the Company, or if no such facsimile
number or address appears on the books of the Company, at the principal place of
business of such Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth in this Section prior to 5:30 p.m. (New York City
time) on any date, (ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth in this Section on a day that is not a Trading Day or later than 5:30
p.m. (New York City time) on any Trading Day, (iii) the second Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.

 

b) Absolute Obligation. Except as expressly provided herein, no provision of
this Certificate of Designation shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay liquidated damages, as
applicable, on the shares of Series C Preferred at the time, place, and rate,
and in the coin or currency, herein prescribed.

 

c) Lost or Mutilated Series C Preferred Certificate. If a Holder’s Series C
Preferred certificate shall be mutilated, lost, stolen or destroyed, the Company
shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated certificate, or in lieu of or in substitution for a
lost, stolen or destroyed certificate, a new certificate for the shares of
Series C Preferred so mutilated, lost, stolen or destroyed, but only upon
receipt of evidence of such loss, theft or destruction of such certificate, and
of the ownership hereof reasonably satisfactory to the Company.

 

d) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Certificate of Designation shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Nevada, without regard to the principles of conflict of laws
thereof. Each party agrees that all legal proceedings concerning the
interpretation, enforcement and defense of the transactions contemplated by any
Holder (whether brought against a party hereto or its respective Affiliates,
directors, officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in Maricopa County, Arizona (the “Arizona
Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the Arizona Courts for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the rights
of the Holders), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such Arizona Courts, or such Arizona Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Certificate of Designation and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by applicable law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Certificate of Designation or the
transactions contemplated hereby. If any party shall commence an action or
proceeding to enforce any provisions of this Certificate of Designation, then
the prevailing party in such action or proceeding shall be reimbursed by the
other party for its attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or proceeding.

 

16

   

 

e) Waiver. Any waiver by the Company or a Holder of a breach of any provision of
this Certificate of Designation shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Certificate of Designation or a waiver by any other Holders.
The failure of the Company or a Holder to insist upon strict adherence to any
term of this Certificate of Designation on one or more occasions shall not be
considered a waiver or deprive that party (or any other Holder) of the right
thereafter to insist upon strict adherence to that term or any other term of
this Certificate of Designation on any other occasion. Any waiver by the Company
or a Holder must be in writing.

 

f) Severability. If any provision of this Certificate of Designation is invalid,
illegal or unenforceable, the balance of this Certificate of Designation shall
remain in effect, and if any provision is inapplicable to any Person or
circumstance, it shall nevertheless remain applicable to all other Persons and
circumstances. If it shall be found that any interest or other amount deemed
interest due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to
equal the maximum rate of interest permitted under applicable law.

 

g) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.

 

h) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not be deemed to
limit or affect any of the provisions hereof.

 

i) Status of Converted or Redeemed Series C Preferred. If any shares of Series C
Preferred shall be converted, redeemed or reacquired by the Company, such shares
shall resume the status of authorized but unissued shares of preferred stock and
shall no longer be designated as Series C Preferred.

 

*********************

 

17

   

 

ANNEX A

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder in order to Convert Shares of Series C
Preferred Stock)

 

The undersigned hereby elects to convert the number of shares of Series C
Convertible Preferred Stock indicated below into shares of common stock, par
value $0.001 per share (the “Common Stock”), of Star Mountain Resources, Inc., a
Nevada corporation (the “Company”), according to the conditions hereof, as of
the date written below. If shares of Common Stock are to be issued in the name
of a Person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto and is delivering herewith such certificates
and opinions as may be required by the Company. No fee will be charged to the
Holders for any conversion, except for any such transfer taxes.

 

Conversion calculations:

 

Date to Effect Conversion: _____________________________________________

 

Number of shares of Series C Preferred owned prior to Conversion:
_______________

 

Number of shares of Series C Preferred to be Converted: ________________________

 

Number of shares of Common Stock to be Issued: ___________________________

 

Applicable Conversion Rate:____________________________________________

 

Number of shares of Series C Preferred subsequent to Conversion:
________________

 

Address for Delivery: ______________________

 

 

  [HOLDER]         By:   Name:   Title:

 

18

 

 

EXHIBIT A

 

REGISTRATION RIGHTS

 

The shares of the STAR MOUNTAIN RESOURCES, INC., a Nevada corporation’s Common
Stock issued upon conversion of the Series C Preferred will be deemed
“Registrable Securities” subject to the provisions of this Exhibit 3. All
capitalized terms used but not defined in this Exhibit 3 shall have the meanings
ascribed to such terms in the Certificate of Designations for Series C Preferred
Stock to which this Exhibit is attached.

 

1. Piggy-Back Registration.

 

1.1 Piggy-Back Rights. If at any time on or after the Original Issue Date the
Company proposes to file any Registration Statement under the Securities Act of
1933, as amended (the “1933 Act”) (a “Registration Statement”) with respect to
any offering of equity securities, or securities or other obligations
exercisable or exchangeable for, or convertible into, equity securities, by the
Company for its own account or for shareholders of the Company for their account
(or by the Company and by shareholders of the Company), other than a
Registration Statement (i) filed in connection with any employee stock option or
other benefit plan, (ii) for a dividend reinvestment plan or (iii) in connection
with a merger or acquisition, then the Company shall (x) give written notice of
such proposed filing to the holders of Registrable Securities appearing on the
books and records of the Company as such a holder as soon as practicable but in
no event less than ten (10) days before the anticipated filing date of the
Registration Statement, which notice shall describe the amount and type of
securities to be included in such Registration Statement, the intended method(s)
of distribution, and the name of the proposed managing underwriter or
underwriters, if any, of the offering, and (y) offer to the holders of
Registrable Securities in such notice the opportunity to register the sale of
such number of Registrable Securities as such holders may request in writing
within five (5) days following receipt of such notice (a “Piggy-Back
Registration”). The Company shall cause such Registrable Securities to be
included in such registration and shall cause the managing underwriter or
underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration on the same
terms and conditions as any similar securities of the Company and to permit the
sale or other disposition of such Registrable Securities in accordance with the
intended method(s) of distribution thereof. All holders of Registrable
Securities proposing to distribute their securities through a Piggy-Back
Registration that involves an underwriter or underwriters shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such Piggy-Back Registration.

 

1.2 Withdrawal. Any holder of Registrable Securities may elect to withdraw such
holder’s request for inclusion of Registrable Securities in any Piggy-Back
Registration by giving written notice to the Company of such request to withdraw
prior to the effectiveness of the Registration Statement. The Company (whether
on its own determination or as the result of a withdrawal by persons making a
demand pursuant to written contractual obligations) may withdraw a Registration
Statement at any time prior to the effectiveness of such Registration Statement.
Notwithstanding any such withdrawal, the Company shall pay all expenses incurred
by the holders of Registrable Securities in connection with such Piggy-Back
Registration as provided in Section 1.5 below.

 

19

 

 

1.3 The Company shall notify the holders of Registrable Securities at any time
when a prospectus relating to such holder’s Registrable Securities is required
to be delivered under the 1933 Act, upon discovery that, or upon the happening
of any event as a result of which, the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing. At the request of such holder, the Company shall also prepare, file
and furnish to such holder a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of the Registrable Securities, such prospectus shall
not include an 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
not misleading in light of the circumstances then existing. The holders of
Registrable Securities shall not offer or sell any Registrable Securities
covered by the Registration Statement after receipt of such notification until
the receipt of such supplement or amendment.

 

1.4 The Company may request a holder of Registrable Securities to furnish the
Company such information with respect to such holder and such holder’s proposed
distribution of the Registrable Securities pursuant to the Registration
Statement as the Company may from time to time reasonably request in writing or
as shall be required by law or by the SEC in connection therewith, and such
holders shall furnish the Company with such information.

 

1.5 All fees and expenses incident to the performance of or compliance with this
Exhibit A by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses of the Company’s counsel and independent registered public
accountants) (A) with respect to filings made with the SEC, (B) with respect to
filings required to be made with any trading market on which the Common Stock is
then listed for trading, (C) in compliance with applicable state securities or
Blue Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities) and (D)
with respect to any filing that may be required to be made by any broker through
which a holder of Registrable Securities intends to make sales of Registrable
Securities with the FINRA, (ii) printing expenses, (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v) 1933 Act liability insurance, if the Company so desires such insurance, and
(vi) fees and expenses of all other persons or entities retained by the Company
in connection with the consummation of the transactions contemplated by this
Exhibit B. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit and the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange as
required hereunder. In no event shall the Company be responsible for any broker
or similar commissions of any holder of Registrable Securities.

 

20

 

 

1.6 The Company and its successors and assigns shall indemnify and hold harmless
the Buyer, each holder of Registrable Securities, the officers, directors,
members, partners, agents and employees (and any other individuals or entities
with a functionally equivalent role of a person holding such titles,
notwithstanding a lack of such title or any other title) of each of them, each
individual or entity who controls the Buyer or any such holder of Registrable
Securities (within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act) and the officers, directors, members, stockholders, partners,
agents and employees (and any other individuals or entities with a functionally
equivalent role of a person holding such titles, notwithstanding a lack of such
title or any other title) of each such controlling individual or entity (each,
an “Indemnified Party”), to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses (collectively,
“Losses”), as incurred, arising out of or relating to (1) any untrue or alleged
untrue statement of a material fact contained in a Registration Statement, any
related prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any such prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading or (2) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act or any state securities law, or any rule or regulation
thereunder, in connection with the performance of its obligations under this
Exhibit A, except to the extent, but only to the extent, that (i) such untrue
statements or omissions are based upon information regarding the Buyer or such
holder of Registrable Securities furnished to the Company by such party for use
therein. The Company shall notify the Buyer and each holder of Registrable
Securities promptly of the institution, threat or assertion of any proceeding
arising from or in connection with the transactions contemplated by this Exhibit
A of which the Company is aware.

 

1.7 If the indemnification under Section 1.6 is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless for any Losses, then
the Company shall contribute to the amount paid or payable by such Indemnified
Party, in such proportion as is appropriate to reflect the relative fault of the
Company and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of the Company and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, the Company or the Indemnified Party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include any reasonable
attorneys’ or other fees or expenses incurred by such party in connection with
any proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in Section 1.6 was
available to such party in accordance with its terms. It is agreed that it would
not be just and equitable if contribution pursuant to this Section 1.7 were
determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in the
immediately preceding sentence. Notwithstanding the provisions of this Section
1.7, any holder of Registrable Securities shall not be required to contribute,
in the aggregate, any amount in excess of the amount by which the net proceeds
actually received by such party from the sale of all of their Registrable
Securities pursuant to such Registration Statement or related prospectus exceeds
the amount of any damages that such party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.

 

21

 

 

EXHIBIT B

 

FORM OF SERIES A COMMON STOCK PURCHASE WARRANT

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

STAR MOUNTAIN RESOURCES, INC.

 

SERIES A WARRANT TO PURCHASE COMMON STOCK

 

Warrant No.: [●]

Number of Shares of Common Stock: [●]

Date of Issuance: _____________________ (“Issuance Date”)

 

FOR VALUE RECEIVED, STAR MOUNTAIN RESOURCES, INC., a Nevada corporation (the
“Company”), promises to issue in the name of, and sell and deliver to
____________________ (the “Holder”) a certificate or certificates for an
aggregate of ______________ shares (the “Warrant Shares”) of the Company’s
common stock, par value $0.001 per share (the “Common Stock”), upon exercise of
this Warrant (the “Warrant”) payment by the Holder of $0.75 per Warrant Share
(the “Exercise Price”), with the Exercise Price being subject to adjustment in
the circumstances set forth below.

 

1. Exercise of Warrant; Call for Redemption by Company

 

A. Exercise Period. The Holder may exercise this Warrant, in whole or in part
(but not as to fractional shares), at any time and from time to time commencing
on the Issuance Date and ending, subject to an earlier call for redemption by
the Company as hereinafter set forth, at 5:30 p.m., Pacific Time, two (2) years
thereafter (the “Exercise Period”).

 

B. Exercise Procedure.

 

i. This Warrant will be deemed to have been exercised at such time as the
Company has received all of the following items (the “Exercise Date”):

 

a. a completed Exercise Agreement, in the form attached hereto as Exhibit 1,
executed by the Holder (the “Purchaser”); and

 

b. a certified check or other manner of payment acceptable to the Company in an
amount equal to the sum of the product of the Exercise Price multiplied by the
number of shares of Common Stock being purchased upon such exercise.

 

ii. Certificates for the shares of Common Stock purchased upon exercise of this
Warrant will be delivered by the Company to the Purchaser within twenty (20)
business days after the Exercise Date. Unless this Warrant has expired or all of
the purchase rights represented hereby have been exercised, the Company will
prepare a new Warrant representing the rights formerly represented by this
Warrant that have not expired or been exercised. The Company will, within such
twenty (20) day period, deliver such new Warrant to the Holder at the address
set forth in this Warrant.

 

22

 

 

iii. The shares of Common Stock issuable upon the exercise of this Warrant will
be deemed to have been transferred to the Purchaser on the Exercise Date, and
the Purchaser will be deemed for all purposes to have become the record holder
of such Common Stock on the Exercise Date.

 

iv. The issuance of certificates for shares of Common Stock upon the exercise of
this Warrant will be made without charge to the Purchaser for any issuance tax
in respect thereof or any other cost incurred by the Company in connection with
such exercise and related transfer of the shares; provided, however, that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any certificate or
instrument in a name other than that of the Holder of this Warrant, and that the
Company shall not be required to issue or deliver any such certificate or
instrument unless and until the person or persons requiring the issue thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid.

 

v. Unless the underlying shares of Common Stock are registered, sales of the
securities may only be made pursuant to Rule 144 under the Securities Act of
1933 (the “Act”) at such time as the Company as well as the Holder is able to
effect sales of the Warrant (including the shares of Common Stock underlying the
Warrant pursuant to Rule 144 or other applicable exemption).

 

The Holder shall have the right to exercise all or apportion of this Warrant as
follows:

 

a. The completion of any required registration or other qualification of such
shares under any federal or state law o under the rulings or regulations of the
Securities and Exchange Commission or any other government regulatory body which
is necessary;

 

b. The obtaining of any approval or other clearance from any federal or state
government agency which is necessary;

 

c. The obtaining from the registered owner of the Warrant, as required in the
sole judgment of the Company, a representation in writing that the owner is
acquiring such Common Shares for the owner’s own account for investment and not
with a view to, or for sale in connection with, the distribution of any part
thereof, if the Warrants and the related shares have not been registered under
the Act; and

 

d. The placing on the certificate, as required in the sole judgment of the
Company, of an appropriate legend and the issuance of stop transfer instructions
in connection with this Warrant and the underlying shares of Common Stock to the
following effect:

 

“The securities represented by this certificate have not been registered under
the securities act of 1933 or the laws of any state and have been issued
pursuant to an exemption from registration pertaining to such securities and
pursuant to a representation by the security holder named hereon that said
securities have been acquired fro purposes of investment and may not be offered,
sold, transferred, pledged, or hypothecated in the absence of registration.
Furthermore, No offer, sale, transfer, pledge, hypothecation is to take place
without the prior written approval of counsel or the issuer being affixed to
this certificate. The transfer agent has been instructed to execute transfer of
this certificate only in accordance with the above instructions.”

 

23

 

 

C. Fractional Shares. The Company shall not be required to issue fractions of
shares of Common Stock on the exercise of this Warrant. The Company shall not be
obligated to issue any fractional share interests or fractional Warrant
interests upon the exercise of this Warrant, nor shall it be obligated to issue
scrip or pay cash in lieu of fractional interests, provided, however, that if a
holder exercises all the Warrants held of record by such holder, the Company
shall at its option (i) eliminate the fractional interests by rounding any
fraction up to the nearest whole number of shares or (ii) within 30 days after
the Exercise Date, deliver to the Purchaser a check payable to the Purchaser, in
lieu of such fractional share, in an amount equal to the value of such
fractional share as determined by the closing price of the Company’s Common
Stock as reported on the principal exchange on which the Company’s Common Stock
is then traded, as of the close of business on the Exercise Date.

 

2. Effect of Reorganization, Reclassification, Consolidation, Merger or Sale

 

A. Recapitalization or Reclassification of Common Stock. In case the Company
shall at any time prior to the Exercise of this Warrant, or the expiration of
the Exercise Period, whichever first occurs, effect a recapitalization or
reclassification of such character that its Common Stock shall be changed into
or become exchangeable for a larger or smaller number of shares, then, upon the
effective date thereof, the number of shares of Common Stock that the Holder of
this Warrant shall be entitled to purchase upon exercise hereof shall be
increased or decreased, as the case may be, in direct proportion to the increase
or decrease in such number of shares of Common Stock by reason of such
recapitalization or reclassification, and the Exercise Price of such
recapitalized or reclassified Common Stock shall, in the case of an increase in
the number of shares, be proportionately decreased and, in the case of a
decrease in the number of shares, be proportionately increased.

 

B. Consolidation, Merger or Sale. In case the Company shall at any time prior to
the exercise of this Warrant, or the expiration of the Exercise Period,
whichever first occurs, consolidate or merge with any other corporation (unless
the Company shall be the surviving entity) or transfer all or substantially all
of its assets to any other corporation preparatory to a dissolution, then the
Company shall, as a condition precedent to such transaction, cause effective
provision to be made so that the Holder of this Warrant, upon the exercise
thereof after the effective date of such transaction, shall be entitled to
receive the kind and amount of shares, evidences of indebtedness, and/or other
property receivable on such transaction by a holder of the number of shares of
Common Stock as to which the Warrant was exercisable immediately prior to such
transaction (without giving effect to any restriction upon such exercise); and,
in any such case, appropriate provision shall be made with respect to the rights
and interests of the Holder hereof to the effect that the provisions of this
Warrant shall thereafter be applicable (as nearly as may be practicable) with
respect to any shares, evidences of indebtedness, or other securities or assets
thereafter deliverable upon exercise of this Warrant.

 

C. Notice of Adjustment. Whenever the number of shares of Common Stock
purchasable upon exercise of this Warrant shall be adjusted as provided herein,
the Company shall file with its corporate records a certificate of its Chief
Financial Officer setting forth the computation and the adjusted number of
shares of Common Stock purchasable hereunder resulting from such adjustments,
and a copy of such certificate shall be mailed to the Holder. Any such
certificate or letter shall be conclusive evidence as to the correctness of the
adjustment or adjustments referred to therein and shall be available for
inspection by the holders of the Warrants on any day during normal business
hours.

 

3. Reservation of Common Stock. The Company will at all time reserve and keep
available such number of shares of Common Stock as will be sufficient to permit
the exercise in full of this Warrant. Upon exercise of this Warrant pursuant to
its terms, the Holder will acquire fully paid and non-assessable ownership
rights of the Common Stock, free and clear of any liens, claims or encumbrances
except as otherwise provided herein.

 

24

 

 

4. No Shareholder Rights or Obligations. This Warrant will not entitle the
Holder hereof to any voting rights or other rights as a shareholder of the
Company. Until the shares of Common Stock issuable upon the exercise of this
Warrant are recorded as issued on the books and records of the Company’s
transfer agent, the Holder shall not be entitled to any voting rights or other
rights as a shareholder; provided, however, the Company uses its best efforts to
ensure that, upon receipt of the Exercise Agreement and payment of the Exercise
Price, the appropriate documentation necessary to effectuate the exercise of the
Warrant and the issuance of the Common Stock is accomplished as expeditiously as
possible. No provision of this Warrant, in the absence of affirmative action by
the Holder to purchase Common Stock, and no enumeration in this Warrant of the
rights or privileges of the Holder, will give rise to any obligation of such
Holder for the Exercise Price or as a stockholder of the Company.

 

5. Transferability. Subject to the terms hereof, this Warrant and all rights
hereunder are transferable, in whole or in part, upon surrender of this Warrant
with a properly executed Assignment in the form of Exhibit 2 hereto at the
principal offices of the Company. This Warrant and the underlying shares of
Common Stock may not be offered, sold or transferred except in compliance with
the Act, and any applicable state securities laws, and then only against receipt
of an agreement of the person to whom such offer or sale or transfer is made to
comply with the provisions of this Warrant with respect to any resale or other
disposition of such securities; provided that no such agreement shall be
required from any person purchasing this Warrant or the underlying shares of
Common Stock pursuant to a registration statement effective under the Act. The
Holder of this Warrant agrees that, prior to the disposition of any security
purchased on the exercise hereof other than pursuant to a registration statement
then effective under the Act, or any similar statute then in effect, the Holder
shall give written notice to the Company, expressing his intention as to such
disposition. Upon receiving such notice, the Company shall present a copy
thereof to its securities counsel. If, in the sole opinion of such counsel,
which such opinion shall not be unreasonably withheld, the proposed disposition
does not require registration of such security under the Act, or any similar
statute then in effect, the Company shall, as promptly as practicable, notify
the Holder of such opinion, whereupon the Holder shall be entitled to dispose of
such security in accordance with the terms of the notice delivered by the Holder
to the Company.

 

6. Piggyback Registration Rights. The Holder shall have the registration rights
as set forth in Exhibit 3.

 

7. Miscellaneous

 

A. Notices. Any notices, requests or consents hereunder shall be deemed given,
and any instruments delivered, two days after they have been mailed by first
class mail, postage prepaid, or upon receipt if delivered personally or by
facsimile transmission, as follows:

 

If to the Company:   STAR MOUNTAIN RESOURCES, INC.     605 W. Knox Road, Suite
202     Tempe, Arizona 85284       If to the Holder:                    

 

except that any of the foregoing may from time to time by written notice to the
other designate another address which shall thereupon become its effective
address for the purposes of this paragraph.

 

B. Entire Agreement. This Warrant, including the exhibits and documents referred
to herein which are a part hereof, contain the entire understanding of the
parties hereto with respect to the subject matter and may be amended only by a
written instrument executed by the parties hereto or their successors or
assigns. Any paragraph headings contained in this Warrant are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Warrant.

 

25

 

 

C. Governing Law. This Warrant is governed by, interpreted under and construed
in all respects in accordance with the substantive laws of the State of Nevada,
without regard to the conflicts of law provision thereof, and irrespective of
the place of domicile or resident of the party. In the event of a controversy
arising out of the interpretation, construction, performance or breach of this
Warrant, the parties hereby agree and consent to the jurisdiction and venue of
the Courts of the State of Nevada, or the United States District Court for
Nevada; and further agree and consent that personal service of process in any
such action or preceding outside the State of Nevada shall be tantamount to
service in person in Nevada.

 

IN WITNESS WHEREOF, this Warrant has been duly executed and the corporate seal
affixed hereto, all as of the day and year first above written.

 

  Star Mountain Resources, Inc.         By:           Name:           Title:

 

26

 

 

EXHIBIT 1

 

Exercise Agreement

 

To: Dated: ______________

 

The undersigned record Holder, pursuant to the provisions set forth in the
within Warrant, hereby subscribed for and purchases
_____________________________ shares of Common Stock covered by such Warrant and
hereby makes full cash payment of $_____________________ for such shares at the
Exercise Price provided by such Warrant.

 

    (Signature)           (Print or type name)           (Address)            

 

NOTICE: The signature of this Exercise Agreement must correspond with the name
as written upon the face of the within Warrant, or upon the Assignment thereof,
if applicable, in every particular, without alteration, enlargement or any
change whatsoever.

 

27

 

 

EXHIBIT 2

 

Assignment

 

FOR VALUE RECEIVED, ________________________________, the undersigned Holder
hereby sell, assigns, and transfer all of the rights of the undersigned under
the within Warrant with respect to the number of shares of Common Stock issuable
upon the exercise of such Warrant set forth below, unto the Assignee identified
below, and does hereby irrevocable constitute and appoint
___________________________ to effect such transfer of rights on the books of
the Company, with full power of substitution:

 

        Number of Shares Name of Assignee   Address of Assignee   of Common
Stock                    

 

Dated: ___________         (Signature of Holder)                 (Print or type
name)

 

NOTICE: The signature of this Exercise Agreement must correspond with the name
as written upon the face of the within Warrant, or upon the Assignment thereof,
if applicable, in every particular, without alteration, enlargement or any
change whatsoever.

 

Consent of Assignee

 

I HEREBY CONSENT to abide by the terms and conditions of the within Warrant.

 

Dated: ____________

 

      (Signature of Assignee)           (Print or type name)

 

28

 

 

EXHIBIT 3

 

REGISTRATION RIGHTS

 

The shares of the STAR MOUNTAIN RESOURCES, INC., a Nevada corporation’s Common
Stock purchased upon exercise of the Warrants will be deemed “Registrable
Securities” subject to the provisions of this Exhibit 3. All capitalized terms
used but not defined in this Exhibit 3 shall have the meanings ascribed to such
terms in the Callable Warrant to Purchase Common Stock to which this Exhibit is
attached.

 

1. Piggy-Back Registration.

 

1.1 Piggy-Back Rights. If at any time on or after the Issuance Date the Company
proposes to file any Registration Statement under the Securities Act of 1933, as
amended (the “1933 Act”) (a “Registration Statement”) with respect to any
offering of equity securities, or securities or other obligations exercisable or
exchangeable for, or convertible into, equity securities, by the Company for its
own account or for shareholders of the Company for their account (or by the
Company and by shareholders of the Company), other than a Registration Statement
(i) filed in connection with any employee stock option or other benefit plan,
(ii) for a dividend reinvestment plan or (iii) in connection with a merger or
acquisition, then the Company shall (x) give written notice of such proposed
filing to the holders of Registrable Securities appearing on the books and
records of the Company as such a holder as soon as practicable but in no event
less than ten (10) days before the anticipated filing date of the Registration
Statement, which notice shall describe the amount and type of securities to be
included in such Registration Statement, the intended method(s) of distribution,
and the name of the proposed managing underwriter or underwriters, if any, of
the offering, and (y) offer to the holders of Registrable Securities in such
notice the opportunity to register the sale of such number of Registrable
Securities as such holders may request in writing within five (5) days following
receipt of such notice (a “Piggy-Back Registration”). The Company shall cause
such Registrable Securities to be included in such registration and shall cause
the managing underwriter or underwriters of a proposed underwritten offering to
permit the Registrable Securities requested to be included in a Piggy-Back
Registration on the same terms and conditions as any similar securities of the
Company and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method(s) of distribution thereof.
All holders of Registrable Securities proposing to distribute their securities
through a Piggy-Back Registration that involves an underwriter or underwriters
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such Piggy-Back Registration.

 

1.2 Withdrawal. Any holder of Registrable Securities may elect to withdraw such
holder’s request for inclusion of Registrable Securities in any Piggy-Back
Registration by giving written notice to the Company of such request to withdraw
prior to the effectiveness of the Registration Statement. The Company (whether
on its own determination or as the result of a withdrawal by persons making a
demand pursuant to written contractual obligations) may withdraw a Registration
Statement at any time prior to the effectiveness of such Registration Statement.
Notwithstanding any such withdrawal, the Company shall pay all expenses incurred
by the holders of Registrable Securities in connection with such Piggy-Back
Registration as provided in Section 1.5 below.

 

1.3 The Company shall notify the holders of Registrable Securities at any time
when a prospectus relating to such holder’s Registrable Securities is required
to be delivered under the 1933 Act, upon discovery that, or upon the happening
of any event as a result of which, the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing. At the request of such holder, the Company shall also prepare, file
and furnish to such holder a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of the Registrable Securities, such prospectus shall
not include an 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
not misleading in light of the circumstances then existing. The holders of
Registrable Securities shall not offer or sell any Registrable Securities
covered by the Registration Statement after receipt of such notification until
the receipt of such supplement or amendment.

 

29

 

 

1.4 The Company may request a holder of Registrable Securities to furnish the
Company such information with respect to such holder and such holder’s proposed
distribution of the Registrable Securities pursuant to the Registration
Statement as the Company may from time to time reasonably request in writing or
as shall be required by law or by the SEC in connection therewith, and such
holders shall furnish the Company with such information.

 

1.5 All fees and expenses incident to the performance of or compliance with this
Exhibit A by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses of the Company’s counsel and independent registered public
accountants) (A) with respect to filings made with the SEC, (B) with respect to
filings required to be made with any trading market on which the Common Stock is
then listed for trading, (C) in compliance with applicable state securities or
Blue Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities) and (D)
with respect to any filing that may be required to be made by any broker through
which a holder of Registrable Securities intends to make sales of Registrable
Securities with the FINRA, (ii) printing expenses, (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v) 1933 Act liability insurance, if the Company so desires such insurance, and
(vi) fees and expenses of all other persons or entities retained by the Company
in connection with the consummation of the transactions contemplated by this
Exhibit B. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit and the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange as
required hereunder. In no event shall the Company be responsible for any broker
or similar commissions of any holder of Registrable Securities.

 

1.6 The Company and its successors and assigns shall indemnify and hold harmless
the Buyer, each holder of Registrable Securities, the officers, directors,
members, partners, agents and employees (and any other individuals or entities
with a functionally equivalent role of a person holding such titles,
notwithstanding a lack of such title or any other title) of each of them, each
individual or entity who controls the Buyer or any such holder of Registrable
Securities (within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act) and the officers, directors, members, stockholders, partners,
agents and employees (and any other individuals or entities with a functionally
equivalent role of a person holding such titles, notwithstanding a lack of such
title or any other title) of each such controlling individual or entity (each,
an “Indemnified Party”), to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses (collectively,
“Losses”), as incurred, arising out of or relating to (1) any untrue or alleged
untrue statement of a material fact contained in a Registration Statement, any
related prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any such prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading or (2) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act or any state securities law, or any rule or regulation
thereunder, in connection with the performance of its obligations under this
Exhibit A, except to the extent, but only to the extent, that (i) such untrue
statements or omissions are based upon information regarding the Buyer or such
holder of Registrable Securities furnished to the Company by such party for use
therein. The Company shall notify the Buyer and each holder of Registrable
Securities promptly of the institution, threat or assertion of any proceeding
arising from or in connection with the transactions contemplated by this Exhibit
A of which the Company is aware.

 

30

 

 

1.7 If the indemnification under Section 1.6 is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless for any Losses, then
the Company shall contribute to the amount paid or payable by such Indemnified
Party, in such proportion as is appropriate to reflect the relative fault of the
Company and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of the Company and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, the Company or the Indemnified Party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include any reasonable
attorneys’ or other fees or expenses incurred by such party in connection with
any proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in Section 1.6 was
available to such party in accordance with its terms. It is agreed that it would
not be just and equitable if contribution pursuant to this Section 1.7 were
determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in the
immediately preceding sentence. Notwithstanding the provisions of this Section
1.7, any holder of Registrable Securities shall not be required to contribute,
in the aggregate, any amount in excess of the amount by which the net proceeds
actually received by such party from the sale of all of their Registrable
Securities pursuant to such Registration Statement or related prospectus exceeds
the amount of any damages that such party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.

 

[End of Exhibit 3]

 

31

 

 

EXHIBIT C

 

FORM OF SERIES B COMMON STOCK PURCHASE WARRANT

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

STAR MOUNTAIN RESOURCES, INC.

 

SERIES B WARRANT TO PURCHASE COMMON STOCK

 

Warrant No.: [●]

Number of Shares of Common Stock: [●]

Date of Issuance: _____________________ (“Issuance Date”)

 

FOR VALUE RECEIVED, STAR MOUNTAIN RESOURCES, INC., a Nevada corporation (the
“Company”), promises to issue in the name of, and sell and deliver to
____________________ (the “Holder”) a certificate or certificates for an
aggregate of ______________ shares (the “Warrant Shares”) of the Company’s
common stock, par value $0.001 per share (the “Common Stock”), upon exercise of
this Warrant (the “Warrant”) payment by the Holder of $1.50 per Warrant Share
(the “Exercise Price”), with the Exercise Price being subject to adjustment in
the circumstances set forth below.

 

8. Exercise of Warrant; Call for Redemption by Company

 

A. Exercise Period. The Holder may exercise this Warrant, in whole or in part
(but not as to fractional shares), at any time and from time to time commencing
on the Issuance Date and ending, subject to an earlier call for redemption by
the Company as hereinafter set forth, at 5:30 p.m., Pacific Time, three (3)
years thereafter (the “Exercise Period”).

 

B. Exercise Procedure.

 

i. This Warrant will be deemed to have been exercised at such time as the
Company has received all of the following items (the “Exercise Date”):

 

a. a completed Exercise Agreement, in the form attached hereto as Exhibit 1,
executed by the Holder (the “Purchaser”); and

 

b. a certified check or other manner of payment acceptable to the Company in an
amount equal to the sum of the product of the Exercise Price multiplied by the
number of shares of Common Stock being purchased upon such exercise.

 

ii. Certificates for the shares of Common Stock purchased upon exercise of this
Warrant will be delivered by the Company to the Purchaser within twenty (20)
business days after the Exercise Date. Unless this Warrant has expired or all of
the purchase rights represented hereby have been exercised, the Company will
prepare a new Warrant representing the rights formerly represented by this
Warrant that have not expired or been exercised. The Company will, within such
twenty (20) day period, deliver such new Warrant to the Holder at the address
set forth in this Warrant.

 

32

 

 

iii. The shares of Common Stock issuable upon the exercise of this Warrant will
be deemed to have been transferred to the Purchaser on the Exercise Date, and
the Purchaser will be deemed for all purposes to have become the record holder
of such Common Stock on the Exercise Date.

 

iv. The issuance of certificates for shares of Common Stock upon the exercise of
this Warrant will be made without charge to the Purchaser for any issuance tax
in respect thereof or any other cost incurred by the Company in connection with
such exercise and related transfer of the shares; provided, however, that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any certificate or
instrument in a name other than that of the Holder of this Warrant, and that the
Company shall not be required to issue or deliver any such certificate or
instrument unless and until the person or persons requiring the issue thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid.

 

v. Unless the underlying shares of Common Stock are registered, sales of the
securities may only be made pursuant to Rule 144 under the Securities Act of
1933 (the “Act”) at such time as the Company as well as the Holder is able to
effect sales of the Warrant (including the shares of Common Stock underlying the
Warrant pursuant to Rule 144 or other applicable exemption).

 

The Holder shall have the right to exercise all or apportion of this Warrant as
follows:

 

a. The completion of any required registration or other qualification of such
shares under any federal or state law o under the rulings or regulations of the
Securities and Exchange Commission or any other government regulatory body which
is necessary;

 

b. The obtaining of any approval or other clearance from any federal or state
government agency which is necessary;

 

c. The obtaining from the registered owner of the Warrant, as required in the
sole judgment of the Company, a representation in writing that the owner is
acquiring such Common Shares for the owner’s own account for investment and not
with a view to, or for sale in connection with, the distribution of any part
thereof, if the Warrants and the related shares have not been registered under
the Act; and

 

d. The placing on the certificate, as required in the sole judgment of the
Company, of an appropriate legend and the issuance of stop transfer instructions
in connection with this Warrant and the underlying shares of Common Stock to the
following effect:

 

“The securities represented by this certificate have not been registered under
the securities act of 1933 or the laws of any state and have been issued
pursuant to an exemption from registration pertaining to such securities and
pursuant to a representation by the security holder named hereon that said
securities have been acquired fro purposes of investment and may not be offered,
sold, transferred, pledged, or hypothecated in the absence of registration.
Furthermore, No offer, sale, transfer, pledge, hypothecation is to take place
without the prior written approval of counsel or the issuer being affixed to
this certificate. The transfer agent has been instructed to execute transfer of
this certificate only in accordance with the above instructions.”

 

33

 

 

C. Fractional Shares. The Company shall not be required to issue fractions of
shares of Common Stock on the exercise of this Warrant. The Company shall not be
obligated to issue any fractional share interests or fractional Warrant
interests upon the exercise of this Warrant, nor shall it be obligated to issue
scrip or pay cash in lieu of fractional interests, provided, however, that if a
holder exercises all the Warrants held of record by such holder, the Company
shall at its option (i) eliminate the fractional interests by rounding any
fraction up to the nearest whole number of shares or (ii) within 30 days after
the Exercise Date, deliver to the Purchaser a check payable to the Purchaser, in
lieu of such fractional share, in an amount equal to the value of such
fractional share as determined by the closing price of the Company’s Common
Stock as reported on the principal exchange on which the Company’s Common Stock
is then traded, as of the close of business on the Exercise Date.

 

9. Effect of Reorganization, Reclassification, Consolidation, Merger or Sale

 

A. Recapitalization or Reclassification of Common Stock. In case the Company
shall at any time prior to the Exercise of this Warrant, or the expiration of
the Exercise Period, whichever first occurs, effect a recapitalization or
reclassification of such character that its Common Stock shall be changed into
or become exchangeable for a larger or smaller number of shares, then, upon the
effective date thereof, the number of shares of Common Stock that the Holder of
this Warrant shall be entitled to purchase upon exercise hereof shall be
increased or decreased, as the case may be, in direct proportion to the increase
or decrease in such number of shares of Common Stock by reason of such
recapitalization or reclassification, and the Exercise Price of such
recapitalized or reclassified Common Stock shall, in the case of an increase in
the number of shares, be proportionately decreased and, in the case of a
decrease in the number of shares, be proportionately increased.

 

B. Consolidation, Merger or Sale. In case the Company shall at any time prior to
the exercise of this Warrant, or the expiration of the Exercise Period,
whichever first occurs, consolidate or merge with any other corporation (unless
the Company shall be the surviving entity) or transfer all or substantially all
of its assets to any other corporation preparatory to a dissolution, then the
Company shall, as a condition precedent to such transaction, cause effective
provision to be made so that the Holder of this Warrant, upon the exercise
thereof after the effective date of such transaction, shall be entitled to
receive the kind and amount of shares, evidences of indebtedness, and/or other
property receivable on such transaction by a holder of the number of shares of
Common Stock as to which the Warrant was exercisable immediately prior to such
transaction (without giving effect to any restriction upon such exercise); and,
in any such case, appropriate provision shall be made with respect to the rights
and interests of the Holder hereof to the effect that the provisions of this
Warrant shall thereafter be applicable (as nearly as may be practicable) with
respect to any shares, evidences of indebtedness, or other securities or assets
thereafter deliverable upon exercise of this Warrant.

 

C. Notice of Adjustment. Whenever the number of shares of Common Stock
purchasable upon exercise of this Warrant shall be adjusted as provided herein,
the Company shall file with its corporate records a certificate of its Chief
Financial Officer setting forth the computation and the adjusted number of
shares of Common Stock purchasable hereunder resulting from such adjustments,
and a copy of such certificate shall be mailed to the Holder. Any such
certificate or letter shall be conclusive evidence as to the correctness of the
adjustment or adjustments referred to therein and shall be available for
inspection by the holders of the Warrants on any day during normal business
hours.

 

10. Reservation of Common Stock. The Company will at all time reserve and keep
available such number of shares of Common Stock as will be sufficient to permit
the exercise in full of this Warrant. Upon exercise of this Warrant pursuant to
its terms, the Holder will acquire fully paid and non-assessable ownership
rights of the Common Stock, free and clear of any liens, claims or encumbrances
except as otherwise provided herein.

 

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11. No Shareholder Rights or Obligations. This Warrant will not entitle the
Holder hereof to any voting rights or other rights as a shareholder of the
Company. Until the shares of Common Stock issuable upon the exercise of this
Warrant are recorded as issued on the books and records of the Company’s
transfer agent, the Holder shall not be entitled to any voting rights or other
rights as a shareholder; provided, however, the Company uses its best efforts to
ensure that, upon receipt of the Exercise Agreement and payment of the Exercise
Price, the appropriate documentation necessary to effectuate the exercise of the
Warrant and the issuance of the Common Stock is accomplished as expeditiously as
possible. No provision of this Warrant, in the absence of affirmative action by
the Holder to purchase Common Stock, and no enumeration in this Warrant of the
rights or privileges of the Holder, will give rise to any obligation of such
Holder for the Exercise Price or as a stockholder of the Company.

 

12. Transferability. Subject to the terms hereof, this Warrant and all rights
hereunder are transferable, in whole or in part, upon surrender of this Warrant
with a properly executed Assignment in the form of Exhibit 2 hereto at the
principal offices of the Company. This Warrant and the underlying shares of
Common Stock may not be offered, sold or transferred except in compliance with
the Act, and any applicable state securities laws, and then only against receipt
of an agreement of the person to whom such offer or sale or transfer is made to
comply with the provisions of this Warrant with respect to any resale or other
disposition of such securities; provided that no such agreement shall be
required from any person purchasing this Warrant or the underlying shares of
Common Stock pursuant to a registration statement effective under the Act. The
Holder of this Warrant agrees that, prior to the disposition of any security
purchased on the exercise hereof other than pursuant to a registration statement
then effective under the Act, or any similar statute then in effect, the Holder
shall give written notice to the Company, expressing his intention as to such
disposition. Upon receiving such notice, the Company shall present a copy
thereof to its securities counsel. If, in the sole opinion of such counsel,
which such opinion shall not be unreasonably withheld, the proposed disposition
does not require registration of such security under the Act, or any similar
statute then in effect, the Company shall, as promptly as practicable, notify
the Holder of such opinion, whereupon the Holder shall be entitled to dispose of
such security in accordance with the terms of the notice delivered by the Holder
to the Company.

 

13. Piggyback Registration Rights. The Holder shall have the registration rights
as set forth in Exhibit 3.

 

14. Miscellaneous

 

A. Notices. Any notices, requests or consents hereunder shall be deemed given,
and any instruments delivered, two days after they have been mailed by first
class mail, postage prepaid, or upon receipt if delivered personally or by
facsimile transmission, as follows:

 

If to the Company:   STAR MOUNTAIN RESOURCES, INC.     605 W. Knox Road, Suite
202     Tempe, Arizona 85284       If to the Holder:                    

 

except that any of the foregoing may from time to time by written notice to the
other designate another address which shall thereupon become its effective
address for the purposes of this paragraph.

 

B. Entire Agreement. This Warrant, including the exhibits and documents referred
to herein which are a part hereof, contain the entire understanding of the
parties hereto with respect to the subject matter and may be amended only by a
written instrument executed by the parties hereto or their successors or
assigns. Any paragraph headings contained in this Warrant are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Warrant.

 

35

 

 

C. Governing Law. This Warrant is governed by, interpreted under and construed
in all respects in accordance with the substantive laws of the State of Nevada,
without regard to the conflicts of law provision thereof, and irrespective of
the place of domicile or resident of the party. In the event of a controversy
arising out of the interpretation, construction, performance or breach of this
Warrant, the parties hereby agree and consent to the jurisdiction and venue of
the Courts of the State of Nevada, or the United States District Court for
Nevada; and further agree and consent that personal service of process in any
such action or preceding outside the State of Nevada shall be tantamount to
service in person in Nevada.

 

IN WITNESS WHEREOF, this Warrant has been duly executed and the corporate seal
affixed hereto, all as of the day and year first above written.

 

  Star Mountain Resources, Inc.         By:           Name:           Title:  

 

36

 

 

EXHIBIT 1

 

Exercise Agreement

 

To: Dated: ____________

 

The undersigned record Holder, pursuant to the provisions set forth in the
within Warrant, hereby subscribed for and
purchases_______________________________ shares of Common Stock covered by such
Warrant and hereby makes full cash payment of $__________________ for such
shares at the Exercise Price provided by such Warrant.

 

      (Signature)           (Print or type name)           (Address)            

 

NOTICE: The signature of this Exercise Agreement must correspond with the name
as written upon the face of the within Warrant, or upon the Assignment thereof,
if applicable, in every particular, without alteration, enlargement or any
change whatsoever.

 

37

 

 

EXHIBIT 2

 

Assignment

 

FOR VALUE RECEIVED, _______________________________, the undersigned Holder
hereby sell, assigns, and transfer all of the rights of the undersigned under
the within Warrant with respect to the number of shares of Common Stock issuable
upon the exercise of such Warrant set forth below, unto the Assignee identified
below, and does hereby irrevocable constitute and appoint
_________________________________to effect such transfer of rights on the books
of the Company, with full power of substitution:

 

        Number of Shares Name of Assignee   Address of Assignee   of Common
Stock                    

 

Dated: ____________         (Signature of Holder)                 (Print or type
name)

 

NOTICE: The signature of this Exercise Agreement must correspond with the name
as written upon the face of the within Warrant, or upon the Assignment thereof,
if applicable, in every particular, without alteration, enlargement or any
change whatsoever.

 

Consent of Assignee

 

I HEREBY CONSENT to abide by the terms and conditions of the within Warrant.

 

Dated: ____________

 

      (Signature of Assignee)           (Print or type name)

 

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EXHIBIT 3

 

REGISTRATION RIGHTS

 

The shares of the STAR MOUNTAIN RESOURCES, INC., a Nevada corporation’s Common
Stock purchased upon exercise of the Warrants will be deemed “Registrable
Securities” subject to the provisions of this Exhibit 3. All capitalized terms
used but not defined in this Exhibit 3 shall have the meanings ascribed to such
terms in the Callable Warrant to Purchase Common Stock to which this Exhibit is
attached.

 

1. Piggy-Back Registration.

 

1.1 Piggy-Back Rights. If at any time on or after the Issuance Date the Company
proposes to file any Registration Statement under the Securities Act of 1933, as
amended (the “1933 Act”) (a “Registration Statement”) with respect to any
offering of equity securities, or securities or other obligations exercisable or
exchangeable for, or convertible into, equity securities, by the Company for its
own account or for shareholders of the Company for their account (or by the
Company and by shareholders of the Company), other than a Registration Statement
(i) filed in connection with any employee stock option or other benefit plan,
(ii) for a dividend reinvestment plan or (iii) in connection with a merger or
acquisition, then the Company shall (x) give written notice of such proposed
filing to the holders of Registrable Securities appearing on the books and
records of the Company as such a holder as soon as practicable but in no event
less than ten (10) days before the anticipated filing date of the Registration
Statement, which notice shall describe the amount and type of securities to be
included in such Registration Statement, the intended method(s) of distribution,
and the name of the proposed managing underwriter or underwriters, if any, of
the offering, and (y) offer to the holders of Registrable Securities in such
notice the opportunity to register the sale of such number of Registrable
Securities as such holders may request in writing within five (5) days following
receipt of such notice (a “Piggy-Back Registration”). The Company shall cause
such Registrable Securities to be included in such registration and shall cause
the managing underwriter or underwriters of a proposed underwritten offering to
permit the Registrable Securities requested to be included in a Piggy-Back
Registration on the same terms and conditions as any similar securities of the
Company and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method(s) of distribution thereof.
All holders of Registrable Securities proposing to distribute their securities
through a Piggy-Back Registration that involves an underwriter or underwriters
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such Piggy-Back Registration.

 

1.2 Withdrawal. Any holder of Registrable Securities may elect to withdraw such
holder’s request for inclusion of Registrable Securities in any Piggy-Back
Registration by giving written notice to the Company of such request to withdraw
prior to the effectiveness of the Registration Statement. The Company (whether
on its own determination or as the result of a withdrawal by persons making a
demand pursuant to written contractual obligations) may withdraw a Registration
Statement at any time prior to the effectiveness of such Registration Statement.
Notwithstanding any such withdrawal, the Company shall pay all expenses incurred
by the holders of Registrable Securities in connection with such Piggy-Back
Registration as provided in Section 1.5 below.

 

1.3 The Company shall notify the holders of Registrable Securities at any time
when a prospectus relating to such holder’s Registrable Securities is required
to be delivered under the 1933 Act, upon discovery that, or upon the happening
of any event as a result of which, the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing. At the request of such holder, the Company shall also prepare, file
and furnish to such holder a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of the Registrable Securities, such prospectus shall
not include an 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
not misleading in light of the circumstances then existing. The holders of
Registrable Securities shall not offer or sell any Registrable Securities
covered by the Registration Statement after receipt of such notification until
the receipt of such supplement or amendment.

 

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1.4 The Company may request a holder of Registrable Securities to furnish the
Company such information with respect to such holder and such holder’s proposed
distribution of the Registrable Securities pursuant to the Registration
Statement as the Company may from time to time reasonably request in writing or
as shall be required by law or by the SEC in connection therewith, and such
holders shall furnish the Company with such information.

 

1.5 All fees and expenses incident to the performance of or compliance with this
Exhibit A by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses of the Company’s counsel and independent registered public
accountants) (A) with respect to filings made with the SEC, (B) with respect to
filings required to be made with any trading market on which the Common Stock is
then listed for trading, (C) in compliance with applicable state securities or
Blue Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities) and (D)
with respect to any filing that may be required to be made by any broker through
which a holder of Registrable Securities intends to make sales of Registrable
Securities with the FINRA, (ii) printing expenses, (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v) 1933 Act liability insurance, if the Company so desires such insurance, and
(vi) fees and expenses of all other persons or entities retained by the Company
in connection with the consummation of the transactions contemplated by this
Exhibit B. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit and the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange as
required hereunder. In no event shall the Company be responsible for any broker
or similar commissions of any holder of Registrable Securities.

 

1.6 The Company and its successors and assigns shall indemnify and hold harmless
the Buyer, each holder of Registrable Securities, the officers, directors,
members, partners, agents and employees (and any other individuals or entities
with a functionally equivalent role of a person holding such titles,
notwithstanding a lack of such title or any other title) of each of them, each
individual or entity who controls the Buyer or any such holder of Registrable
Securities (within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act) and the officers, directors, members, stockholders, partners,
agents and employees (and any other individuals or entities with a functionally
equivalent role of a person holding such titles, notwithstanding a lack of such
title or any other title) of each such controlling individual or entity (each,
an “Indemnified Party”), to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses (collectively,
“Losses”), as incurred, arising out of or relating to (1) any untrue or alleged
untrue statement of a material fact contained in a Registration Statement, any
related prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any such prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading or (2) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act or any state securities law, or any rule or regulation
thereunder, in connection with the performance of its obligations under this
Exhibit A, except to the extent, but only to the extent, that (i) such untrue
statements or omissions are based upon information regarding the Buyer or such
holder of Registrable Securities furnished to the Company by such party for use
therein. The Company shall notify the Buyer and each holder of Registrable
Securities promptly of the institution, threat or assertion of any proceeding
arising from or in connection with the transactions contemplated by this Exhibit
A of which the Company is aware.

 

- 3 -

 

 

1.7 If the indemnification under Section 1.6 is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless for any Losses, then
the Company shall contribute to the amount paid or payable by such Indemnified
Party, in such proportion as is appropriate to reflect the relative fault of the
Company and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of the Company and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, the Company or the Indemnified Party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include any reasonable
attorneys’ or other fees or expenses incurred by such party in connection with
any proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in Section 1.6 was
available to such party in accordance with its terms. It is agreed that it would
not be just and equitable if contribution pursuant to this Section 1.7 were
determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in the
immediately preceding sentence. Notwithstanding the provisions of this Section
1.7, any holder of Registrable Securities shall not be required to contribute,
in the aggregate, any amount in excess of the amount by which the net proceeds
actually received by such party from the sale of all of their Registrable
Securities pursuant to such Registration Statement or related prospectus exceeds
the amount of any damages that such party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.

 

[End of Exhibit 3]

 

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