Exhibit 10.2
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
OR HYPOTHECATED UNLESS AND UNTIL (I) REGISTERED UNDER THE ACT OR, (II) THE
TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT AND AN OPINION OF COUNSEL
IN A FORM REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES HAS BEEN
RENDERED.
FORM OF WARRANT
TO PURCHASE COMMON STOCK
OF
NEUROLOGIX, INC.
(void after May 10, 2013)
No. W-_____
THIS CERTIFIES THAT, for value received, ______ or its registered
assigns (the "Holder"), from and after the date hereof, and subject to the
terms and conditions herein set forth, is entitled to purchase from Neurologix,
Inc., a Delaware corporation (the "Company"), at any time before 5:00 p.m. New
York City time on May 10, 2013 (the "Termination Date"), [33% coverage] shares
(the "Warrant Shares") of the Company's common stock, par value $0.001 per
share (the "Common Stock"), at a price per share equal to the Warrant Price (as
defined below) upon exercise of this Warrant pursuant to Section 5 hereof. The
number of Warrant Shares is subject to adjustment under Section 2.
1. Definitions. As used in this Warrant, the following terms have the
definitions ascribed to them below:
(a) "Cash Shares" shall have the meaning ascribed to them in Section
5(a).
(b) "Issuance Date" means May 10, 2006.
(c) "Offering Warrants" shall have the meaning ascribed to the term
in Section 8.
(d) "Person" means any individual, corporation, partnership, limited
liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, governmental
authority or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
(e) "Subscription Agreement" means that certain Stock and Warrant
Subscription Agreement dated as of May 10, 2006 between the
Company and the initial Holder of this Warrant.
(f) "Warrant Price" means $2.05 per share subject to adjustment under
Section 2.
2. Adjustments and Notices. The Warrant Price and/or the Warrant Shares
shall be subject to adjustment from time to time in accordance with this
Section 2. The Warrant Price and/or the Warrant Shares shall be adjusted to
reflect all of the following events that occur on or after the Issuance Date.
(a) Subdivision, Stock Dividends or Combinations. In case the Company
shall at any time subdivide the outstanding shares of the Common Stock or shall
issue a stock dividend with respect to the Common Stock, the Warrant Price in
effect immediately prior to such subdivision or the issuance of such dividend
shall be proportionately decreased, and the number of Warrant Shares for which
this Warrant may be exercised immediately prior to such subdivision or the
issuance of such dividend shall be proportionately increased. In case the
Company shall at any time combine the outstanding shares of the Common Stock,
the Warrant Price in effect immediately prior to such combination shall be
proportionately increased, and the number of Warrant Shares for which this
Warrant may be exercised immediately prior to such combination shall be
proportionately decreased. In each of the foregoing cases, the adjustment shall
be effective at the close of business on the date of such subdivision, dividend
or combination, as the case may be.
(b) Reclassification, Exchange, Substitution, In-Kind Distribution. Upon
any reclassification (other than a change in par value or from par value to no
par value or from no par value to par value or as a result of a stock dividend
or subdivision, split-up or combination of shares covered in clause (a) above),
exchange, substitution or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant or upon the payment of a dividend in securities or property other than
shares of the Common Stock, the Holder shall be entitled to receive, upon
exercise of this Warrant, the number and kind of securities and property that
Holder would have received if this Warrant had been exercised immediately
before the record date for such reclassification, exchange, substitution, or
other event or immediately prior to the record date for such dividend. The
Company or its successor shall promptly issue to Holder a new warrant for such
new securities or other property. The new warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 2 including, without limitation, adjustments to
the Warrant Price and to the number of securities or property issuable upon
exercise or conversion of the new warrant. The provisions of this Section 2(b)
shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events and successive dividends.
(c) Reorganization, Merger etc. In case of any merger or consolidation
of the Company (where the Company is not the surviving Person or where there is
a change in or distribution with respect to the Common Stock), or sale,
transfer or lease (but not including a transfer or lease by pledge or mortgage
to a bona fide lender) of all or substantially all of the assets of the
Company, the Company, or such successor or purchasing corporation, as the case
may be, shall, as a condition to closing any such reorganization, merger or
sale, duly execute and deliver to the Holder hereof a new warrant so that the
Holder shall have the right to receive, at a total purchase price not to exceed
that payable upon the exercise or conversion of the unexercised portion of this
Warrant, and in lieu of the Warrant Shares theretofore issuable upon exercise
or conversion of this Warrant, the kind and amount of shares of stock, other
securities, money and property that would have been receivable upon such
reorganization, merger or sale by the Holder with respect to the Warrant Shares
if this Warrant had been exercised immediately before the consummation of such
transaction. Such new warrant shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 2. The provisions of this subparagraph (c) shall similarly apply to
successive transactions of the type described in this subparagraph (c).
(d) Adjustment for Issuance of Shares of Common Stock Below Warrant
Price. If the Company shall issue, or be deemed to issue (as provided below),
any additional shares of Common Stock other than Excluded Stock, as defined
below ("Additional Shares of Common Stock") for a consideration per share less
than $1.55, (excluding subdivisions, stock dividends, combinations,
reclassifications and reorganizations which are covered in Sections 2(a), 2(b)
and 2(c) above), the Warrant Price shall be reduced concurrent with each such
issuance to a price calculated as follows:
Adjusted Warrant = (Outstanding Stock x Warrant Price) + Additional Stock
Price Consideration
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Outstanding Stock + No. of Additional Shares of Common Stock
As used herein:
"Additional Stock Consideration" means the consideration received by
the Company upon the issuance of the Additional Shares of Common Stock.
"Convertible Securities" means any evidence of indebtedness, shares or
securities, in each case convertible into or exchange for Additional Shares of
Common Stock.
"Excluded Stock" means (a) securities issued, or deemed issued (as
provided below), to directors, officers, employees or consultants of the
Company or a subsidiary of the Company in connection with their service as
directors of the Company or a subsidiary of the Company, their employment by
the Company or a subsidiary of the Company or their retention as consultants by
the Company or a subsidiary of the Company under stock option plans of the
Company; (b) shares of Common Stock issuable upon exercise of warrants
outstanding as of the Issuance Date; (c) shares of Common Stock issued, or
deemed issued (as provided below), pursuant to a merger, consolidation or stock
or asset acquisition approved by the Company's Board of Directors; (d) the
issuance, or deemed issuance, of securities of the Company for any purpose and
in any amount as approved by the holders of Offering Warrants exercisable for
seventy (70%) percent of the Warrant Shares issuable upon exercise of the then
outstanding Offering Warrants; (e) shares issued, or deemed issued, to persons
or entities in connection with a strategic partnership, joint venture or other
similar agreement with the Company, provided such issuances are primarily for
other than equity financing purposes and are approved by a two-thirds majority
of the members of the Board of Directors; and (f) shares issued, or deemed
issued, pursuant to any equipment leasing arrangement or debt financing from a
bank or similar institution approved by a two-thirds majority of the members of
the Board of Directors; provided such financing is primarily for non-equity
financing purposes.
"No. of Additional Shares of Common Stock" means the number of units
of Additional Shares of Common Stock issued in connection with the issuance of
the same.
"Options" means rights, options or warrants to subscribe for, purchase
or otherwise acquire shares of Common Stock or Convertible Securities.
"Outstanding Stock" means the total number of shares of Common Stock
outstanding plus the total number of shares of Common Stock issuable upon
conversion or exercise of outstanding Convertible Securities (including this
Warrant, all other warrants and any Options) immediately prior to the issuance
of the Additional Shares of Common Stock; provided that the number of shares of
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company.
No adjustment in the Warrant Price need be made if such adjustment would
result in a change in the Warrant Price of less than $0.001. Any such
adjustment which is not made shall be carried forward and shall be made at the
time of and together with any subsequent adjustment which, on a cumulative
basis, amounts to an adjustment of $0.001 or more in the Warrant Price. No
adjustment in the Warrant Price of this Warrant shall be made in respect of the
issuance of Additional Shares of Common Stock unless the consideration per
share for such Additional Shares of Common Stock issued or deemed to be issued
(as provided below) by the Company is less than the Warrant Price then in
effect on the date of, and immediately prior to, such issue, for this Warrant.
For purposes of making any adjustment required under this Section 2(d),
the consideration received by the Company for any issue or sale of securities
shall (a) to the extent that it consists of cash be computed as the amount of
cash received by the Company without deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale, (b) to the extent that it consists of
property other than cash, be computed at the fair market value of that property
as determined in good faith by the Board of Directors, and (c) if Additional
Shares of Common Stock, Convertible Securities or rights or Options are issued
or sold together with other securities or other assets of the Company for a
consideration which covers both, be computed (as provided in clauses (a) and
(b) above) as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable
to such Additional Shares of Common Stock, Convertible Securities or rights or
Options.
If the holders of seventy percent (70%) in interest of the Offering
Warrants shall, in good faith, disagree with any determination made by the
Board of Directors of the Company of the fair market value of any property
(including without limitation any securities other than shares of Common Stock)
pursuant to the Offering Warrants (such holders hereinafter referred to as the
"Requesting Holders"), and such disagreement is in respect of property valued
by the Board of Directors of the Company at more than $500,000, then the
Requesting Holders may by written notice to the Company (an "Appraisal
Notice"), given within 15 days after notice to the holders of the Offering
Warrants following such determination, elect to contest such determination;
provided, however, that the holders of the Offering Warrants may not seek
appraisal or any determination of fair market value to the extent that the
Company has received a fairness opinion or other appraisal from an independent
appraiser selected by the Board of Directors of the Company in connection with
the transaction giving rise to such determination. Within 15 days after an
Appraisal Notice, the Company shall engage an Appraiser (as defined below) to
make an independent determination of such fair market value (the "Appraiser's
Determination"), and to deliver to the Company and the holder of this Warrant a
report describing its methodology and results in reasonable detail within 15
days of such engagement. The Company and the holder of this Warrant shall be
afforded reasonable opportunities to discuss the appraisal with the Appraiser.
The Appraiser's Determination shall be final and binding on the Company and the
holder of this Warrant, absent manifest error. The costs of conducting an
appraisal, including all fees and expenses of the Appraiser, shall be borne one
half by the Requesting Holders (among the Requesting Holders, pro rata
according to the number of shares issuable upon exercise of outstanding
Offering Warrants that are held by the Requesting Holders) and one half by the
Company. "Appraiser" means an independent appraiser chosen by the Board of
Directors of the Company with the consent of the Requesting Holder with the
greatest number of Shares issuable upon exercise of the Offering Warrants,
which consent shall not be unreasonably withheld or delayed.
For purposes of the adjustment required under this Section 2(d), if at
any time or from time to time after the Issuance Date, the Company issues or
sells any Options or Convertible Securities, then in each case the Company
shall be deemed to have issued at the time of the issuance of such Options or
Convertible Securities the maximum number of Additional Shares of Common Stock
(as set forth in the instruments relating thereto, giving effect to any
provision contained therein for a subsequent upward adjustment of such number
other than any provision requiring anti-dilution adjustments (based on price,
recapitalizations, mergers, reorganizations or otherwise), which such
anti-dilution provisions shall only result in upward adjustments upon the
triggering of such anti-dilution adjustment) issuable upon exercise or
conversion thereof and to have received as consideration for the issuance of
such shares of Common Stock an amount equal to the total amount of
consideration, if any, received by the Company for the issuance of such Options
or Convertible Securities plus, in the case of such Options, the minimum
amounts of consideration, if any (as set forth in the instruments relating
thereto, giving effect to any provision contained therein for a subsequent
downward adjustment of such consideration), payable to the Company upon the
exercise of such Options and, in the case of Convertible Securities, the
minimum amounts of consideration, if any, payable to the Company upon the
subsequent conversion of any such Convertible Security (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities). No further adjustment of the Warrant Price, adjusted upon the
issuance of such Options or Convertible Securities, shall be made as a result
of the actual issuance of Additional Shares of Common Stock on the exercise of
any such Options or the conversion of any such Convertible Securities. If any
such Options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, the Warrant Price
adjusted upon the issuance of such Options or Convertible Securities or upon
the triggering of any anti-dilution adjustments (based on price,
recapitalization, mergers reorganizations or otherwise) thereunder shall be
readjusted to the Warrant Price which would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold for the consideration received by the Company for the granting
of all such Options, whether or not exercised, plus the consideration received
for issuing or selling the Convertible Securities actually converted plus the
consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities, or the rate at which
Convertible Securities are convertible into or exchangeable for Common Stock
shall change at any time (including, but not limited to, changes under or by
reason of provisions designed to protect against dilution), the Warrant Price
in effect at the time of such event shall forthwith be readjusted to the
Warrant Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold, but only if as a result of such
adjustment the Warrant Price then in effect after any adjustment hereunder is
thereby reduced; and on the termination of any such Option or any such right to
convert or exchange such Convertible Securities, the Warrant Price then in
effect hereunder shall forthwith be increased to the Warrant Price which would
have been in effect at the time of such termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
termination, never been issued.
(e) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Warrant Price, the Company, at its own expense, shall cause
its Chief Financial Officer (or equivalent officer of the Company) to compute
such adjustment or readjustment in accordance with the provisions hereof and
prepare a certificate showing such adjustment or readjustment, and shall mail
such certificate, by first class mail, postage prepaid, to the Holder. The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based. No adjustment of
the Warrant Price shall be required to be made unless it would result in an
increase or decrease of at least one cent, but any adjustments not made because
of this sentence shall be carried forward and taken into account in any
subsequent adjustment otherwise required hereunder.
(f) No Impairment. The Company shall not, by amendment of its
certificate of incorporation, by-laws or other organizational documents, or
through a 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 to be
observed or performed under this Warrant by the Company, but shall subject to
Section 8 at all times in good faith assist in carrying out all of the
provisions of this Section 2 and in taking all such action as may be necessary
or appropriate to protect the Holder's rights under this Section 2 against
impairment.
(g) Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded down to the nearest whole share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying the Holder an amount
computed by multiplying the fractional interest by the fair market value of a
full share.
3. No Shareholder Rights. This Warrant, by itself, as distinguished from any
shares purchased hereunder, shall not entitle the Holder to any of the rights
of a shareholder of the Company.
4. Reservation of Stock. The Company will reserve from its authorized and
unissued stock a sufficient number of shares to provide for the issuance of
the Warrant Shares upon the exercise of this Warrant. Issuance of this
Warrant shall constitute full authority to the Company's officers who are
charged with the duty of executing stock certificates to execute and issue
the necessary certificates for the Warrant Shares issuable upon the exercise
of this Warrant.
5. Exercise of Warrant.
(a) This Warrant may be exercised by the Holder hereof, in whole or in
part, at any time prior to the Termination Date, at the election of the Holder
hereof (with the notice of exercise substantially in the form attached hereto
as Attachment 1 duly completed and executed for an exercise under this Section
5(a)) (the "Notice"), by the surrender of this Warrant at the principal office
of the Company or transfer agent and the payment to the Company, by certified
or bank check, or by wire transfer to an account designated by the Company of
an amount equal to the then applicable Warrant Price multiplied by the number
of Warrant Shares then being purchased (Warrant Shares issued upon such an
exercise described in this Section 5(a), "Cash Shares"). This Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
date of its surrender for exercise as provided above, and the person entitled
to receive the Warrant Shares issuable upon such exercise shall be treated for
all purposes as the holder of such shares of record as of the close of business
on such date. As promptly as practicable after such date, the Company shall
issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of full Warrant Shares issuable upon
such exercise.
(b) At any time prior to the Termination Date, in lieu of exercising
this Warrant for cash, the Holder may elect to receive shares equal to the
value of this Warrant (or the portion thereof being exercised) by surrender of
this Warrant at the principal office of the Company together with notice of
such election substantially in the form attached hereto as Attachment 1 duly
completed and executed for an exercise under this Section 5(b) (a "Net
Exercise"). The Company shall issue to a Holder who Net Exercises a number of
Warrant Shares computed using the following formula:
Y (A - B)
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X = A
Where
X = The number of Warrant Shares to be issued to the Holder.
Y = The number of Warrant Shares set forth in the Notice.
A = The fair market value of one (1) Warrant Share (at the
date of such calculation).
B = The Warrant Price (as adjusted to the date of such
calculation).
For purposes of this Section 5, the fair market value of a Warrant
Share shall mean:
(i) If traded on a securities exchange, the Nasdaq National
Market, Nasdaq SmallCap Market or other market or
over-the-counter system, the fair market value of the Common
Stock shall be deemed to be the average of the closing prices
of the Common Stock on the principal such U.S. exchange or
market by trading volume (or if not traded on a U.S. exchange
or market, the principal exchange or market by trading volume)
over the thirty trading days immediately prior to the
determination date; or
(ii) If there is no public market for the Common Stock, the fair
market value shall be the price per Warrant Share that the
Company could obtain from a willing buyer for Warrant Shares
sold by the Company from authorized but unissued Warrant
Shares, as such prices shall be determined in good faith by
the Company's Board of Directors.
(c) Notwithstanding anything to the contrary contained herein, to the
extent this Warrant is not previously exercised, and if the fair market value
of one Warrant Share is greater than the Warrant Price then in effect, this
Warrant shall be deemed automatically exercised pursuant to Section 5(b) above
(even if not surrendered) immediately before the Termination Date. To the
extent this Warrant or any portion thereof is deemed automatically exercised
pursuant to this Section 5(c), the Company agrees to promptly notify the Holder
of the number of Warrant Shares, if any, the Holder is to receive by reason of
such automatic exercise, which number shall be determined in accordance with
Section 5(b).
6. Transfer of Warrant. This Warrant may be transferred or assigned by the
Holder hereof as a whole or in part, provided that prior to such transfer the
transferor provides to the Company, at the Company's request, an opinion of
counsel satisfactory to the Company that such transfer does not require
registration under the Securities Act.
7. Legends. Upon issuance, the certificate or certificates evidencing any
Warrant Shares shall bear legends as set forth in the Subscription Agreement.
8. Subscription Agreement. This Warrant is one of a number of warrants (the
"Offering Warrants") issued pursuant to the Subscription Agreement, and the
Warrant Shares shall be entitled to the rights conferred thereon under the
Subscription Agreement, including without limitation the registration rights
provided in Section 3.9 thereof. Any term of the Warrant and each other
Offering Warrants may be amended and the observance of any term may be waived
by the Company and the holders in-interest of at least seventy percent (70%) of
the then outstanding Offering Warrants, and any such amendment or waiver shall
be binding upon all holders of Offering Warrants.
9. Termination. This Warrant shall terminate at 5:00 p.m. New York City
time on the Termination Date.
10. Miscellaneous. This Warrant shall be governed by the laws of the State of
New York, as such laws are applied to contracts to be entered into and
performed entirely in New York by New York residents. The headings in this
Warrant are for purposes of convenience and reference only, and shall not be
deemed to constitute a part hereof. Subject to the provisions of Section 8
hereof, neither this Warrant nor any term hereof may be changed or waived
orally, but only by an instrument in writing signed by the Company and the
Holder. All notices and other communications from the Company to the Holder of
this Warrant shall be delivered personally or by facsimile transmission or
mailed by first class mail, postage prepaid, to the address or facsimile number
furnished to the Company in writing by the last Holder of this Warrant who
shall have furnished an address or facsimile number to the Company in writing,
and if mailed shall be deemed given three days after deposit in the United
States mail. Upon receipt of evidence satisfactory to the Company of the
ownership of and the loss, theft, destruction or mutilation of any Warrant and,
in the case of any such loss, theft or destruction, upon receipt of indemnity
or security satisfactory to the Company or, in the case of any such mutilation,
upon surrender and cancellation of such Warrant, the Company will make and
deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new
Warrant of like tenor and representing the right to purchase the same aggregate
number of shares of Common Stock.
ISSUED: May __, 2006
NEUROLOGIX, INC.
By:__________________________________
Name:________________________________
Title:_________________________________
