Document:

ex101.htm

COPPER CATHODE SALE AND PURCHASE AGREEMENT

BETWEEN

HARMONY MINING LIMITED

A BRITISH VIRGIN ISLANDS COMPANY

AND

SIERRA RESOURCE GROUP, INC.

A NEVADA CORPORATION

EFFECTIVE DATE:  ____________________

	
  

	
COPPER CATHODE SALE AND PURCHASE AGREEMENT

This COPPER CATHODE SALE AND PURCHASE AGREEMENT (the "Agreement") is made and entered into as of this 30th day of March, 2011 (“Effective Date”) by and between Harmony Mining Limited, a British Virgin Islands company or its named designee (collectively “PURCHASER”), and Sierra Resource Group, Inc., a Nevada corporation and its affiliates (“SIERRA”). Separately, PURCHASER and SIERRA may be referred to as “Party” and together as “Parties”.

 

 

RECITALS:

WHEREAS, SIERRA is the operator of the Chloride Copper Mine (“Mine”), a copper mine which lies approximately 24 kilometers northwest of the City of Kingman, Arizona and approximately 190 kilometers southeast of Las Vegas, Nevada (35 degrees 21”N Latitude and 114 degrees 10’W Longitude);

WHEREAS, the Chloride Copper Mine currently has an existing SX/EW plant that the Parties understand has a prospective maximum capability of producing up to 5,040,000 pounds of Copper Cathode per annum (the “Copper Cathode”);

WHEREAS, SIERRA owns an undivided eighty percent (80%) interest in the Mine;

WHEREAS, PURCHASER desires to acquire over a period of up to eighteen (18) months the Mine’s  first year production of  approximately 5,040,000 pounds of Copper Cathode from SIERRA and SIERRA desires to sell such Copper Cathode to PURCHASER; and

WHEREAS, the Parties intend to memorialize the purchase and sale of the Copper Cathode from SIERRA to PURCHASER upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby conclusively acknowledged, the Parties hereto, intending to be legally bound, agree as follows:

  

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ARTICLE I

SALE AND PURCHASE OF COPPER CATHODE

AND PURCHASE PRICE

SECTION 1.1                                Sale of Copper Cathode.  Upon the terms and subject to the conditions set forth in this Agreement, subsequent to the Closing and on each Closing Date (as both defined in Section 2.1 hereof), SIERRA agrees to sell, assign, grant, transfer, convey and deliver to the PURCHASER, and PURCHASER agrees to purchase and acquire, the Mine’s  first year expected production of approximately 5,040,000 pounds of Copper Cathode from the Chloride Copper Mine. The Copper Cathode shall be of such quality as acceptable to PURCHASER in its reasonable discretion, which shall be of a merchantable quality, as may be recognized within the mining industry.

SECTION 1.2                                Delivery.   The Copper Cathode from the Mine shall be sold FOB the Port of Los Angeles with delivery to begin no later than three (3) months from the date that all permits and licenses are granted to SIERRA, or such other time mutually agreed to by the Parties and shall be completed no later than eighteen (18) months after the initial delivery.

SECTION 1.3                                Financing.  PURCHASER shall arrange for financing to be provided to SIERRA for an amount necessary to allow the Mine to enter into full production and deliver the Copper Cathode.  Such financing shall be in the form of bank loans guaranteed by PURCHASER or its designee (“Financing”) in the gross loan amount of at least Six Million Dollars (US$6,000,000).  The Financing shall be repaid on the following terms: Such terms acceptable to the bank(s), PURCHASER and SIERRA and secured with a perfected first position security interest on Ten Million (10,000,000) shares of SIERRA Series A Preferred Stock (the “Series A Preferred Stock”) issued in the name of PURCHASER “or its assigns”, such stock to have voting rights of one hundred (100) votes for each share and convertible, under the terms and conditions defined herein, to four (4) shares of SIERRA Class B Common Stock (the “Class B Common Stock”). The Series A Preferred Stock is to be fully issued, executed and escrowed with PURCHASER’s counsel until such time as it is released to PURCHASER or returned to SIERRA as provided herein.

SECTION 1.4                                Purchase Price.

(a) The purchase price (“Purchase Price”) to be paid by PURCHASER for the Copper Cathode shall be at a price of Three Dollars (US$3.00) per pound, payable within thirty (30) days of each Sale Date, as defined herein. Payments will be made by wire transfer to SIERRA, as per the instructions of SIERRA, unless otherwise agreed to by the Parties; plus

ARTICLE II

 

CLOSING DATE AND DELIVERIES AT CLOSING

SECTION 2.1                                Closing Date                      The closing of the transactions contemplated by this Agreement (the “Closing”), unless expressly determined herein, shall be held , on April 21,, 2011 (“Closing Date”), if and only if the SIERRA shareholders have approved the transaction, unless otherwise agreed to by the Parties.  Subsequent to the Closing, each date that PURCHASER issues a purchase order to purchase all or a portion of the Copper Cathode made available for sale in writing by SIERRA to PURCHASER shall be referred to herein as a “Sale Date”.

SECTION 2.2                                 Due Diligence; Access to Information

 

. Each Party has been provided with full material access to such information required by each Party to satisfactorily conduct its due diligence investigation, has satisfactorily performed its due diligence investigations on the other Party and has made the independent decision to proceed to the Closing.

SECTION 2.3                                No Adverse Proceedings.  On the Closing no action or proceeding shall be pending by any public authority or individual or entity before any court or administrative body to restrain, enjoin, or otherwise prevent the consummation of this Agreement or the transactions contemplated hereby or to recover any damages or obtain other relief as a result of the transactions proposed hereby.

SECTION 2.4                                Deliveries by SIERRA.  In addition to and without limiting any other provision of this Agreement, SIERRA agrees to deliver, or cause to be delivered, to PURCHASER, at or prior to Closing, the following:

  

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(a) Form of purchase order acceptable to PURCHASER to be used in the purchase of the Copper Cathode;

(b) Such closing documents as may be reasonably requested by the PURCHASER or its counsel, including but not limited to a Certificate of the President of SIERRA certifying the accuracy of the representations and warranties as of the Closing Date, board resolutions, shareholder approvals, incumbency certificate, consents from any third parties or such other documents as necessary and appropriate to consummate this transaction; and

(c)           The Series A Preferred Stock, deposited in escrow with PURCHASER’s counsel.

SECTION 2.5                                Deliveries by PURCHASER.   In addition to and without limiting any other provision of this Agreement, PURCHASER agrees to deliver, or cause to be delivered to SIERRA, at or prior to Closing, the following:

(a) Such closing documents as may be reasonably requested by SIERRA or its counsel, including but not limited to a Certificate of the President of PURCHASER certifying the accuracy of the representations and warranties as of the Closing Date, board resolutions, shareholder approvals, incumbency certificate, consents from any third parties or such other documents as necessary and appropriate to consummate this transaction.

SECTION 2.6                                Conduct Pending Closing.  From the Effective Date until such time as PURCHASER completes the purchase of Copper Cathode from SIERRA:

 

(a) SIERRA shall not make any material changes that would adversely affect the Mine, Copper Cathode, or Series A Preferred Stock without the prior written consent of PURCHASER;

 

(b)           SIERRA shall not (i) incur any indebtedness or take any action relating to the incurring of indebtedness; or (ii) in any other way dilute the value of the Series A Preferred Stock, including but not limited to promising or providing options, warrants or other current or future related rights.

(c)           SIERRA shall not make any sales, transfers or any other dispositions of assets outside of ordinary course or issuance of equity or debt without PURCHASER’s express written consent.

(d)           No contract, obligation or commitment will be entered into or assumed by or on behalf of SIERRA which affects the Mine, Copper Cathode or Series A Preferred Stock, except normal commitments for the purchase of materials, supplies, licenses and other assets used in the ordinary course of business, and for commitments to customers incurred in the ordinary course of business;

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SIERRA

With the understanding that the PURCHASER is relying on each such representation and warranty in entering into and performing this Agreement, SIERRA represents and warrants to PURCHASER as of the Effective Date and as of the Closing (which warranties and representations shall survive the Closing regardless of what examinations, inspections, audits and other investigations the PURCHASER has heretofore made or may hereinafter make with respect to such warranties and representations) the following:

SECTION 3.1                                Organization and Qualification.  SIERRA is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted and is duly qualified to do business in any other jurisdiction by virtue of the nature of the businesses conducted by it or the ownership or leasing of its properties, except where the failure to be so qualified will not, when taken together with all other such failures, have a material adverse effect on the business, operations, properties, assets, financial condition or results of operation of SIERRA and its subsidiaries, if any, taken as a whole.  (Any such material adverse effect being hereinafter referred to as "SIERRA Material Adverse Effect").

  

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SECTION 3.2                                Authority.  SIERRA has all requisite corporate power and authority, to execute and deliver this Agreement, to perform his obligations hereunder and to consummate the transactions contemplated hereby.  The execution and delivery of this Agreement by SIERRA and the performance and consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action and no other corporate proceedings on the part of SIERRA is necessary to authorize this Agreement or to consummate the transactions contemplated hereby except as disclosed in this Agreement. This Agreement has been duly executed and delivered by SIERRA and constitutes the legal, valid and binding obligation of SIERRA enforceable against SIERRA in accordance with its terms. SIERRA shall provide a list and current updates as may be requested by PURCHASER of all licenses, certificates, permits, franchises and rights from all appropriate federal, state or other public authorities necessary for the conduct of SIERRA’s business and the mining of the Copper Cathode from the Mine, together with a status as to whether SIERRA possesses such licenses, certificates, permits, franchises and rights and the time frame needed to obtain (if any) such licenses, certificates, permits, franchises and rights.

SECTION 3.3                                 No Conflict; Required Filings and Consents.  The execution and delivery of this Agreement by SIERRA does not, and the performance by SIERRA of its obligations hereunder will not:  (i) conflict with or violate the Articles of Incorporation or By-Laws of SIERRA; (ii) conflict with, breach or violate any federal, state, foreign or local law, statute, ordinance, rule, regulation, order, judgment or decree (collectively, "Laws") in effect as of the date of this Agreement and applicable to SIERRA; or (iii) result in any breach of, constitute a default (or an event that with notice or lapse of time or both would become a default) under, give to any other entity any right of termination, amendment, acceleration or cancellation of, require payment under, or result  in the creation of a lien or encumbrance on the Mine, Copper Cathode or Series A Preferred Stock, or any of the properties or assets of SIERRA pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which SIERRA is a party or by SIERRA or any of its properties or assets is bound.

SECTION 3.4  Compliance with Applicable Laws.  SIERRA is not in violation of, has been given notice of, been charged with, or to the best of SIERRA’s knowledge, under investigation with respect to the violation of any law, rule or regulation of any governmental agency, except for violations which individually or in the aggregate do not have a SIERRA Material Adverse Effect.  If applicable, SIERRA shall be responsible for all matters of review and approval by the United States government of the transactions contemplated by this Agreement.

SECTION 3.5                                Brokers.  Luckympex shall receive as a finder’s fee a one-time payment of fifteen percent (15%) of the gross loan amount funded to SIERRA under Section 1.3 of this Agreement, to be paid from the proceeds of such loan.  Except for Luckympex, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of SIERRA.

SECTION 3.6                                Litigation.  To the best of SIERRA’s knowledge, no litigation, claim, or other proceeding before any court or governmental agency is pending or threatened against SIERRA.

SECTION 3.7  Ownership of Assets. SIERRA has good and marketable title to all of the Copper Cathode and Series A Preferred Stock, free and clear of any and all liens, claims, charges, options, or other encumbrances not specified herein. SIERRA has not received any notice of violation of any applicable regulation, ordinance or law, or other requirement relating to the operation of the Mine, the Series A Preferred Stock or SIERRA’s business, whether owned or leased, and there is no such violation or grounds therefor which could adversely affect the Mine, the Series A Preferred Stock or the sale of the Copper Cathode to PURCHASER. Other than this Agreement, SIERRA is not a party to any contract or obligation whereby anyone has been granted an absolute or contingent right to purchase, obtain or acquire any rights in any of the Copper Cathode, the Mine or any preferred stock of SIERRA.

SECTION 3.8                                Taxes. There is not any liability for unpaid federal, state or local income, sales, use, excise or other taxes of any kind arising out of, or attributable to, or affecting the Mine, the Copper Cathode, the Series A Preferred Stock or the conduct of SIERRA’s business, for which the PURCHASER will have any liability for payment or otherwise. There does not exist and will not exist by virtue of the transactions contemplated by this Agreement any liability for taxes (except for sales taxes incident to the consummation of the transactions contemplated herein) which may be asserted by any taxing authority against the Copper Cathode or the Series A Preferred Stock and no lien or other encumbrance for taxes has attached or will attach to the Copper Cathode or the Series A Preferred Stock.

SECTION 3.9                                Full Disclosure.  No representation or warranty made by SIERRA in this Agreement and no certificate or document furnished or to be furnished to the PURCHASER pursuant to this Agreement contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading.

  

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SECTION 3.10                                Capitalization.  SIERRA hereby covenants and agrees that in accordance with SIERRA’s Definitive Information Statement on Schedule 14C filed with the Securities and Exchange Commission on March 21, 2011, the authorized capital stock of the Buyer shall consist of Two Hundred Sixty Million (260,000,000) shares, of which Two Hundred Fifty Million (250,000,000) shares are designated common stock, par value $0.001 per share and Ten Million (10,000,000) shares are designated preferred stock, par value $0.001 per share, and that, except as disclosed prior to the Effective Date, there are no issued or outstanding options, warrants, other forms of convertible securities or other rights with respect to its capital stock.  From the Effective Date until the completion of PURCHASER’s purchase of the Copper Cathode, SIERRA shall not alter its capitalization structure, issue additional common or preferred stock, change the characteristics of SIERRA preferred stock or issue any options, warrants, other forms of convertible securities or other rights with respect to its capitalization.

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF PURCHASER

With the understanding that SIERRA is relying on each such representation and warranty in entering into and performing this Agreement, PURCHASER represents and warrants to SIERRA as of the Effective Date and as of the Closing (which warranties and representations shall survive the Closing regardless of what examinations, inspections, audits and other investigations SIERRA has heretofore made or may hereinafter make with respect to such warranties and representations) the following:

SECTION 4.1                                Organization and Qualification.  PURCHASER is duly organized, validly existing and in good standing under the laws of its home jurisdiction and has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted.

SECTION 4.2                                Authority.  PURCHASER has all requisite corporate power and authority to execute and deliver this Agreement, to perform the obligations hereunder and to consummate the transactions contemplated hereby.  The execution and delivery of this Agreement by PURCHASER and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action and no other corporate proceedings on the part of PURCHASER is necessary to authorize this Agreement or to consummate the transactions contemplated hereby.  This Agreement has been duly executed and delivered by PURCHASER and constitutes the legal, valid and binding obligation of PURCHASER enforceable against PURCHASER in accordance with its terms.

SECTION 4.3                                No Conflict; Required Filings and Consents.  The execution and delivery of this Agreement by the PURCHASER does not, and the performance by PURCHASER of its obligations hereunder will not:  (i) conflict with or violate the Articles of Incorporation or By-Laws of PURCHASER; or (ii) conflict with, breach or violate any Laws in effect as of the date of this Agreement and applicable to PURCHASER.

SECTION 4.4  Compliance with Applicable Laws.  If applicable, PURCHASER shall be responsible for all matters of review and approval by its home jurisdiction of the transactions contemplated by this Agreement and is not aware of any violation of law, rule or regulation by virtue of the consummation of the transactions contemplated by this Agreement.

SECTION 4.5                                Brokers.  No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of PURCHASER.

SECTION 4.6                                Full Disclosure.  No representation or warranty made by the PURCHASER in this Agreement and no certificate or document furnished or to be furnished to SIERRA pursuant to this Agreement contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading.

 

  

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ARTICLE V

 

CONDITIONS PRECEDENT TO SIERRA’S OBLIGATIONS

The obligation of SIERRA to consummate the transactions contemplated hereby shall be subject to the fulfillment, on or prior to the Closing, of the following conditions (any or all of which may be waived by SIERRA if it executes a writing so stating, at or prior to the Closing:

SECTION 5.1                                No Termination.  This Agreement shall not have been terminated pursuant to Section 7.3(a).

SECTION 5.2                                Representations True and Correct.  The representations and warranties of the PURCHASER contained in this Agreement shall be true and correct in all material respects on and as of the Closing with the same force and effect as if made on the Closing .

SECTION 5.3                                Compliance with Covenants. Each agreement, covenant or obligation of PURCHASER to be performed at or before Closing under the terms hereof shall have been duly performed by PURCHASER in all material respects or waived by SIERRA in its sole discretion.

SECTION 5.4  No Adverse Proceedings. On the Closing, no action or proceeding against PURCHASER shall be pending by any public authority, individual or entity before any court, government or administrative body to restrain, enjoin, or otherwise prevent the consummation of this Agreement or the transactions contemplated hereby or to recover any damages or obtain other relief as a result of the transactions proposed hereby.

SECTION 5.5  PURCHASER Deliveries.  PURCHASER shall have delivered all items as required by Section 2.5.

ARTICLE VI

 

CONDITIONS PRECEDENT TO PURCHASER’S OBLIGATIONS

The obligation of PURCHASER to consummate the transactions contemplated hereby shall be subject to the fulfillment, on or prior to the Closing, of the following conditions (any or all of which may be waived by PURCHASER if it executes a writing so stating, at or prior to the Closing:

SECTION 6.1                                No Termination.  This Agreement shall not have been terminated pursuant to Section 7.3(a).

SECTION 6.2                                Representations True and Correct.  The representations and warranties of SIERRA contained in this Agreement shall be true and correct in all material respects on and as of the Closing with the same force and effect as if made on as of the Closing.

SECTION 6.3                                Compliance with Covenants. Each agreement, covenant or obligation of SIERRA to be performed at or before Closing under the terms hereof shall have been duly performed by SIERRA in all material respects or waived by PURCHASER in its sole discretion.

SECTION 6.4                                No Adverse Proceedings. On the Closing, no action, investigation or proceeding against SIERRA shall be pending by any public authority, individual or entity before any court, government or administrative body to restrain, enjoin, or otherwise prevent the consummation of this Agreement or the transactions contemplated hereby or to recover any damages or obtain other relief as a result of the transactions proposed hereby.

SECTION 6.5  SIERRA Deliveries.  SIERRA shall have delivered all items as required by Section 2.4.

  

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ARTICLE VII

 

TERMINATION, AMENDMENT AND WAIVER

 

SECTION 7.1                                Time is of Essence

 

.  Time shall be of the essence in this transaction with regard to every date or time period set forth herein, though the Parties may, by mutual agreement, extend the time for the performance of any of the obligations or other acts of either Party.

 

SECTION 7.2                                Special Contingencies.  Notwithstanding any provision herein to the contrary, the Parties agree that the Closing of the transactions contemplated by this Agreement are subject to the following:

 

(a)           Shareholder Approval.  The Parties acknowledge that the Series A Preferred Stock has yet to be created by SIERRA and requires approval by a majority of outstanding shares entitled to vote.  SIERRA represents and warrants to PURCHASER that it is holding an upcoming annual meeting of shareholders to approve the creation of the Series A Preferred Stock and this Agreement is subject to the creation of the stock via shareholder approval.

 

(b)            Funding Amount.  The Parties acknowledge that SIERRA is to be funded at least Six Million Dollars (US$6,000,000) gross loan proceeds and this Agreement is subject to PURCHASER or its designee obtaining the funding for SIERRA.

 

(c)           Market Price.  The Parties agree that a key condition to induce PURCHASER to enter into this Agreement and purchase the Copper Cathode is that the market price of copper remain above $3.25 per pound.

 

(d)           Non-Occurrence.  In the event of the non-occurrence of the contingencies specified in subsections (a), (b) or (c), this Agreement shall be terminated immediately upon written notice without liability on the part of SIERRA or the PURCHASER to each other or any of their respective officers, directors, agents or other representatives, and all rights and obligations of any Party hereto shall cease, except as otherwise expressed herein.

 

SECTION 7.3                                Termination.  This Agreement may be terminated at any time prior to the Closing or each Closing Date:

(a)           by mutual written agreement of the Parties; or

(b)           Unless otherwise specified herein, by SIERRA upon a material breach of any representation, warranty, covenant or agreement by PURCHASER, or by PURCHASER upon a material breach of any representation, warranty, covenant or agreement by SIERRA, as may be set forth in this Agreement or in any schedule, exhibit or other instrument delivered in connection herewith, and such breach shall, if capable of cure, not have been cured within thirty (30) days after receipt by the Party in breach of notice from the non-breaching Party setting forth in reasonable detail the nature of such breach.

ARTICLE VIII

POST CLOSING COVENANTS

SECTION 8.1  Post-Closing Covenants of SIERRA.

(a)           In the event that (i) SIERRA defaults in payments on the Financing as disclosed in Section 1.3 or (ii) in the event of termination of this Agreement by PURCHASER pursuant to Section 7.3(b), SIERRA agrees that PURCHASER’s counsel shall be irrevocably instructed to release the Series A Preferred Stock to PURCHASER.

(b)           Upon the purchase of the first year production of the Copper Cathode, SIERRA agrees that PURCHASER’s counsel shall be irrevocably instructed to release the Series A Preferred Stock to PURCHASER, at which time the PURCHASER will convert the Series A Preferred Stock to Class B Common Stock.

  

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SECTION 8.2  Post-Closing Covenants of PURCHASER.

(a)           In the event that PURCHASER is issued the Series A Preferred Stock, the PURCHASER (or its designees) shall vote its shares to cause SIERRA to offer all SIERRA shareholders for a period of Sixty (60) days, the right, but not the obligation, to exchange three (3) shares of their SIERRA Class A Common Stock for one (1) share of SIERRA Class B Common Stock.  In the event that less than eighty percent (80%) of the shareholders of SIERRA Class A Common Stock do not convert to Class B Common Stock during this sixty (60) day period, then PURCHASER (or its designees) shall vote its shares to close the conversion period and cause SIERRA to revise SIERRA’s Articles of Incorporation to provide that each share of Class B Common Stock shall have two (2) votes and each share of Class A Common Stock shall have one (1) vote.

(b)           In the event that the PURCHASER fails to perform any of the condition or closing conditions pursuant to this Agreement after written notice plus thirty (30) days to cure, PURCHASER shall be in default and forfeits all right and title to the Series A Preferred Stock, and PURCHASER’s counsel shall be irrevocably instructed to return the Series A Preferred Stock to SIERRA.

ARTICLE IX

 

GENERAL PROVISIONS

SECTION 9.1                                Transaction Costs.  Except as otherwise provided herein, each Party shall pay all its respective costs and expenses (including all professional fees, costs and expenses) incurred by that Party in connection with this Agreement.

SECTION 9.2                                Consent.  The Parties acknowledge that May Lion, Inc. (“Maylink”) owns an undivided twenty percent (20%) interest in the Mine. Though not a Party to this Agreement, Maylink has consented to SIERRA’s sale of the Copper Cathode to PURCHASER and will enter into an operating agreement upon commercially reasonable terms reasonably satisfactory to SIERRA and Maylink.

SECTION 9.3                                Indemnification.  Each Party (“Indemnifying Party”) agrees to indemnify, defend and hold the other Party and its officers and directors harmless against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities or damages, including interest, penalties and reasonable attorneys’ fees, that the other Party shall incur or suffer, which arise out of, result from or relate to any breach or default of this Agreement or failure by the Indemnifying Party to perform with respect to any of its representations, warranties or covenants contained in this Agreement or in any exhibit or other instrument furnished or to be furnished under this Agreement.

 

SECTION 9.4                                Notices.  All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the date initially transmitted if delivered by facsimile transmission; (iii) on the date delivered by an overnight courier service; or (iv) on the third business day after it is mailed by registered or certified mail, return receipt with postage and other fees prepaid, to the addresses provided below (or such other address as may be provided by a Party):

	
If to SIERRA:    Sierra Resource Group, Inc.

	
If to PURCHASER:  Harmony Mining Limited

	
Attn: R. Patrick Champney, CEO

	
Attn:  Jaime Duran Barba

	
9550 S. Eastern Avenue, Suite 253

	
c/o Aleman Cordero Galindo &

	
Las Vegas, Nevada 89123

	
Lee Trust (BVI) Ltd.

	
Fax:  (                      )

	
P.O. Box 3175 Road Town

	  	
Tortola, British Virgin Islands

	  	
Fax:  (                      )                      

	  	  
	
Copy to:                      Cella Lange & Cella LLP

	
Copy to:                      Silverberg & Weiss, P.A.

	
Attn:  Christopher L. Cella, Esq.

	
Attn: Paul K. Silverberg, Esq.

	
23120 Alicia Parkway, Suite 200

	
1290 Weston Road, Suite 218

	
Mission Viejo, California 92692

	
Weston, FL 33326

	
Fax:  (949) 600-7257

	
Fax: (954) 384-5390

  

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SECTION 9.5                                Headings.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

SECTION 9.6                                Severability.  Any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 9.7                                 Representation by Counsel.  All Parties acknowledge that PURCHASER’s counsel, Silverberg & Weiss, P.A. (“Law Firm”), was previously transactional counsel to SIERRA.  Each Party has been fully consulted about Law Firm’s former role as transactional counsel to SIERRA.  Each Party acknowledges that SIERRA has retained independent legal counsel to represent it in this matter and voluntarily waives any conflict of interest or objection to Law Firm acting as counsel for PURCHASER in this transaction.

SECTION 9.8                                 Amendment.  This Agreement may only be amended by an instrument in writing signed by all of the Parties hereto.

SECTION 9.9                                 Waiver.  By mutual agreement, SIERRA and the PURCHASER may waive (a) any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto which have been made to it or them or (b) compliance with any of the agreements or conditions contained herein for its or their benefit.  Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by both Parties.

SECTION 9.10                                Binding Effect.  All the terms and provisions of this Agreement, whether so expressed or not, shall be binding upon, inure to the benefit of, and be enforceable by the Parties and their respective administrators, executors, legal representatives, heirs, successors and assignees.

SECTION 9.11                                Preparation of Agreement.  This Agreement shall not be construed more strongly against any Party regardless of who is responsible for its preparation.  The Parties acknowledge each contributed and is equally responsible for its preparation.

SECTION 9.12                                 Governing Law.  In any proceeding relating to any matter arising out of or related or the subject transaction evidenced by this Agreement or the underlying relationship between PURCHASER and SIERRA, the Parties agree that Nevada law shall govern without regard to conflict of law provisions; that the United Nations Convention on Contracts for the International Sale of Goods shall not apply; that exclusive venue and jurisdiction shall be in Clark County, Nevada; that the prevailing Party in any litigation or arbitration proceeding shall be entitled to an award of its attorneys’ fees and costs; and that each Party knowingly, voluntarily and irrevocably waives its right to jury trial.

SECTION 9.13                                Further Assurances, Cooperation.  The Parties agree to cooperate and use their respective best efforts to consummate the transactions contemplated by this Agreement, and shall upon reasonable request by the other Party, execute and deliver any additional documents and take such additional actions as may be necessary to complete the transactions pursuant to and in the manner contemplated by this Agreement, including but not limited to: (i) cooperating in the preparation and filing of all forms, notifications, reports and information, if any, required or reasonably deemed advisable pursuant to any law, statute, rule or regulation, including applicable stock exchange rules; (ii) using commercially reasonable efforts to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of any government entity or other persons, (iii) making on a prompt and timely basis all governmental or regulatory notifications and filings required to be made by it for the consummation of the transactions contemplated hereunder, (iv) defending all legal proceedings challenging this Agreement and to lift or rescind any injunction or restraining order or other order adversely affecting the ability of the Parties to consummate the transactions contemplated hereunder, and (v) executing and delivering such additional instruments and other documents and shall take such further actions as may be necessary or appropriate to effectuate, carry out and comply with all of the terms of this Agreement and the transactions contemplated hereunder.

 

SECTION 9.14                                 Survival.  The representations, warranties, covenants and agreements made herein shall survive the Closing of the transactions contemplated hereby.

  

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SECTION 9.15                                 Assignment.  Unless expressly stated herein to the contrary, none of the rights and obligations contained in this Agreement may be assigned in whole or in part, by operation of law or otherwise, without the express written consent of the Parties.

SECTION 9.16                                  No 3rd Party Beneficiaries. The representations, warranties, covenants and agreements contained in this Agreement are for the sole benefit of the parties hereto and their successors and assigns, and they shall not be construed as conferring any rights on any other persons.

SECTION 9.17                                 Failure or Indulgence Not Waiver; Remedies Cumulative.  No failure or delay on the part of any Party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right.  All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

SECTION 9.18                                Counterparts.  This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.

SECTION 9.19                                 Force Majeure.  If either Party is prevented directly or indirectly from performing this contract by act of God, the public enemy, war, revolution, blockades, strike, riot, earthquake, cyclone, flood, tsunami or other natural disaster, delay by carrier, subcontractor/supplier action or omission, fuel shortage, embargo, walk-out or other labor disturbance, actual or potential, the operation of laws, interferences of civil or military authority, or other cause, existing or future, beyond the reasonable control of the Party affected, interfering with the performance of work as herein contemplated, the Party so prevented or interfered with shall not be in breach of this Agreement, but shall be given such reasonable time, not to exceed sixty (60) days, to complete performance, provided prompt written notice is given to the other Party.  In the event that performance cannot be completed within such sixty (60) day period, then either Party may by written notice, terminate this Agreement, whereupon the Parties shall use best efforts to work together in good faith to disassociate and bring each Party as close to its original position prior to this Agreement as possible.

SECTION 9.20                                 Entire Agreement.  This Agreement (which includes the schedules, exhibits, certificates and documents referred to herein) constitutes the entire agreement of the Parties and supersedes and merges all prior agreements and undertakings, both written and oral, between the Parties with respect to the subject matter contained herein.

[SIGNATURE PAGE(S) FOLLOW]

  

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PURCHASER AND SIERRA, each intending to be legally bound, have each executed this Agreement as of the Effective Date first above shown.

 

	
PURCHASER

	
SIERRA

	  	  
	  	  
	
X      

	
X     

	
Harmony Mining Limited

	
Sierra Resource Group, Inc.

	
A British Virgin Islands Company

	
A Nevada Corporation

	  	  
	
By: Jaime Duran Barba

	
By (Print Name):                                                                

	  	  
	
Title:                                                                

	
Title:                                                                

	  	  
	  	  
	  	  
	
Consent and Cooperation with Agreement Only

	  
	  	  
	  	  
	  	  
	
X                                                                

	  
	
May Lion, Inc.

	  
	
Xing-Lung Road, Sec. 1, #257, 2F

	  
	
Taipei, Taiwan

	  
	  	  
	
By (Print Name):                                                                

	  
	  	  
	
Title:                                                                

	  
	  	  
	
Date:                                                                

	  
	  	  
	  	  
	  	  
	
Approved as to Form Only

	
Approved as to Form Only

	  	  
	  	  
	
X                                                                

	
X                                                                

	
Cella Lange & Cella LLP

	
Silverberg & Weiss, P.A.

	
By: Christopher L. Cella, Esq.

	
By: Paul K. Silverberg, Esq.

	
Legal Counsel to Sierra Resource Group, Inc.

	
Legal Counsel to Purchaser

	  	  
	
Date:                                                                

	
Date:                                                                

  

-11-ex4_1.htm

EXHIBIT 4.1

COMMON STOCK PURCHASE WARRANT

REXAHN PHARMACEUTICALS, INC.

	
Warrant Shares: _______

	  	
Initial Exercise Date: September ___, 2011

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after September ___, 2011 (the “Initial Exercise Date”) and on or prior to the close of business on the fifth year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Rexahn Pharmaceuticals, Inc., a Delaware corporation (the “Company”), up to ______ shares (the “Warrant Shares”) of Common Stock.

Section 1.             Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated March 28, 2011, among the Company and the purchasers signatory thereto.

Section 2.             Exercise.

a)           Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto. Within three (3) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is available and is specified in the applicable Notice of Exercise. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within two (2) Business Days of receipt of such notice.  The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

  

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b)           Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $1.50, subject to adjustment hereunder (the “Exercise Price”).

c)           Cashless Exercise.  If at the time of exercise hereof there is no effective registration statement registering the Warrant Shares, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may only be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

	
  

	
(A) =

	
the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;

	
  

	
(B) =

	
the Exercise Price of this Warrant, as adjusted hereunder; and

	
  

	
(X) =

	
the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Company and reasonably acceptable to the Holder, the fees and expenses of which shall be paid by the Company.

d)           Mechanics of Exercise.

i.      Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the latest of (x) the delivery to the Company of the Notice of Exercise, (y) surrender of this Warrant (if required) and (z) payment of the aggregate Exercise Price as set forth above (including by cashless exercise, if permitted) (such date, the “Warrant Share Delivery Date”).  The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid.

  

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ii.      Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

iii.      Rescission Rights.  If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

iv.      Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder reasonably anticipated receiving upon such exercise pursuant to the terms hereof (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000.  The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

  

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

vi.      Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder in the Notice of Exercise; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company shall have the right to require, as a condition thereto, the prior or contemporaneous payment of a sum sufficient to reimburse it for any transfer tax incidental thereto .

vii.      Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

  

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e)           Holder’s Exercise Limitations.  The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of the Warrant that are not in compliance with the Beneficial Ownership Limitation.  In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of the Warrant that are not in compliance with the Beneficial Ownership Limitation..  For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written request of the Holder, the Company shall within two (2) Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding as determined pursuant to clauses (A), (B) or (C), as applicable, in the preceding sentence.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.9% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

  

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Section 3.             Certain Adjustments.

a)           Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other security exchangeable or convertible into shares of Common Stock payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant without payment therefor), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.  Any adjustment made pursuant to this Section 3(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.

b)           RESERVED.

 

  

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c)           Subsequent Rights Offerings.  In addition to any adjustments pursuant to the other subsections of this Section 3, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d)           Pro Rata Distributions.  If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holders) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security, then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of such record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith.  In either case, the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

  

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e)           Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant).  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange, including, but not limited to, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction.  “Black Scholes Value” means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for, the Company (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and the Successor Entity may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

  

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f)           Calculations. All calculations under this Section 3 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 3, 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 treasury shares, if any) issued and outstanding.

g)           Notice to Holder.

i.      Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price and number of Warrant Shares after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

  

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ii.      Notice to Allow Exercise by Holder. If during the term in which this Warrant may be exercised by the Holder (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 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 mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 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 mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

Section 4.             Transfer of Warrant.

a)           Transferability.  Subject to compliance with applicable securities laws, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

  

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b)           New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall include reference to the initial issuance date set forth on the first page of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto and the Warrant number.

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

Section 5.             Miscellaneous.

a)           No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).

b)           Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

c)           Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

  

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d)           Authorized Shares.

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

  

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e)           Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

f)           Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

g)           No Net Cash Settlement.  The Holder acknowledges that in the event the Warrant is not exercisable for cash pursuant to Section 2 hereof, the Warrant Shares may not be settled with the Company for the cash value or in assets or otherwise.

h)           Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies.  Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

i)           Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

j)           Limitation of Liability.  No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

k)           Remedies.  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

l)           Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

  

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m)          Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

n)           Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

o)           Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

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

(Signature Pages Follow)

  

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

	 	
REXAHN PHARMACEUTICALS, INC.

	 	 
	 	
By:

	  
	 	  	
Name:

	 	  	
Title:

  

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NOTICE OF EXERCISE

TO:           REXAHN PHARMACEUTICALS, INC.

(1)      The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)      Payment shall take the form of (check applicable box):

o in lawful money of the United States; or

o [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3)      Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

_______________________________

_______________________________

_______________________________

[SIGNATURE OF HOLDER]

Name of Investing Entity: ______________________________________________________________________

Signature of Authorized Signatory of Investing Entity: ________________________________________________

Name of Authorized Signatory: __________________________________________________________________

Title of Authorized Signatory: ___________________________________________________________________

Date: ______________________________________________________________________________________

  

 

  

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Dated:  ______________, _______

Holder’s Signature:                                _____________________________

Holder’s Address:                                 _____________________________

 

                  _____________________________

Signature Guaranteed:  ___________________________________________

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

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