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Exhibit 10.3 THIS WARRANT AND THE UNDERLYING SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED. ARDEA BIOSCIENCES, INC. WARRANT TO PURCHASE COMMON
STOCK December __, 2008 Void After December ___, 2013
This Certifies That , for
value received,
[ ],
or assigns (the "Holder" ), is entitled to subscribe
for and purchase at the Exercise Price (defined below) from Ardea
Biosciences, Inc., a Delaware corporation, with its principal
office at 4939 Directors Place, San Diego, CA 92121 (the
"Company" ) up to
[ ]
shares of the common stock of the Company, par value $0.001 per
share (the "Common Stock" ).
1. Definitions. As
used herein, the following terms shall have the following
respective meanings:
(a) "Exercise Period" shall mean the period commencing with
the date that is 180 days after the date hereof and ending
five years from the date hereof, unless sooner terminated as
provided below.
(b) "Exercise Price" shall mean $11.14 per share, subject to
adjustment pursuant to Section 5 below.
(c) "Exercise Shares" shall mean the shares of Common Stock
issuable upon exercise of this Warrant.
2. Exercise of
Warrant. The rights represented by this Warrant may be
exercised in whole or in part at any time during the Exercise
Period, by delivery of the following to the Company at its address
set forth above (or at such other address as it may designate by
notice in writing to the Holder):
(a) An executed Notice of Exercise in the form attached
hereto;
(b) Payment of the Exercise Price either (i) in cash or
by check, (ii) by cancellation of indebtedness, or
(iii) pursuant to Section 2.1 below; and
(c) This Warrant. Upon
exercise of this Warrant, in whole or in part, the Company shall
irrevocably instruct its transfer agent to deliver to the Holder
one or more stock certificates, free and clear of all restrictive
and other legends (except as expressly provided in
Section 4.3(b) hereof), evidencing the number of Exercise
Shares such Holder is purchasing upon exercise of this Warrant,
within
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three (3) business days after the delivery to the Company
by the Holder of the Notice of Exercise, surrender of this Warrant
and payment of the aggregate Exercise Price as set forth above.
This Warrant shall be deemed to have been exercised on the date the
Exercise Price is received by the Company. The Exercise 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 by payment to the Company of the
Exercise Price. The person in whose
name any certificate or certificates for Exercise Shares are to be
issued upon exercise of this Warrant shall be deemed to have become
the holder of record of such shares on the date on which this
Warrant was surrendered and payment of the Exercise Price was made,
irrespective of the date of delivery of such certificate or
certificates, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are
closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on
which the stock transfer books are open.
2.1 Net Exercise .
Notwithstanding any provisions herein to the contrary, if during
the Exercise Period the fair market value of one share of the
Common Stock is greater than the Exercise Price (at the date of
calculation as set forth below), in lieu of exercising this Warrant
by payment of cash or by check, or by cancellation of indebtedness,
the Holder may elect to receive shares equal to the value (as
determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of
the Company together with the properly endorsed Notice of Exercise
in which event the Company shall issue to the Holder a number of
shares of Common Stock computed using the following formula:
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Where X =
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the number of shares of Common Stock to be issued
to the Holder
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Y =
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the number of shares of Common Stock purchasable
under the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at the date
of such calculation)
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A =
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the fair market value of one share of the
Company’s Common Stock (at the date of such calculation)
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B =
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Exercise Price (as adjusted to the date of such
calculation)
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For purposes of the above
calculation, the "fair market value" of one share of Common Stock
shall mean (i) the average of the closing sales prices for the
shares of Common Stock on the NASDAQ Global Market or other trading
market where such security is listed or traded as reported by
Bloomberg Financial Markets (or a comparable reporting service of
national reputation selected by the Company and reasonably
acceptable to the Holder if Bloomberg Financial Markets is not then
reporting sales prices of such security) (collectively, "
Bloomberg ") for the 10 consecutive trading days
immediately preceding such date, or (ii) if the NASDAQ Global
Market is not the principal trading market for the shares of Common
Stock, the average of the reported sales prices reported by
Bloomberg on the principal trading market for the
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Common Stock during the same period, or, if there is no sales
price for such period, the last sales price reported by Bloomberg
for such period, or (iii) if neither of the foregoing applies,
the last sales price of such security in the over-the-counter
market on the pink sheets or bulletin board for such security as
reported by Bloomberg, or if no sales price is so reported for such
security, the last bid price of such security as reported by
Bloomberg or (iv) if fair market value cannot be calculated as
of such date on any of the foregoing bases, the fair market value
shall be as determined by the Board of Directors of the Company in
the exercise of its good faith judgment.
2.2 Issuance of New Warrants.
Upon any partial exercise of this Warrant, the Company, at its
expense, will forthwith and, in any event within five business
days, issue and deliver to the Holder a new warrant or warrants of
like tenor, registered in the name of the Holder, exercisable, in
the aggregate, for the balance of the number of shares of Common
Stock remaining available for purchase under the Warrant.
2.3 Payment of Taxes and
Expenses . The Company shall pay any recording, filing, stamp
or similar tax which may be payable in respect of any transfer
involved in the issuance of, and the preparation and delivery of
certificates (if applicable) representing, (i) any Exercise
Shares purchased upon exercise of this Warrant and/or (ii) new
or replacement warrants in the Holder’s name or the name of
any transferee of all or any portion of this Warrant.
3. Covenants of the
Company. 3.1 Covenants as to
Exercise Shares. The Company covenants and agrees that all
Exercise Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be duly
authorized, validly issued and outstanding, fully paid and
nonassessable, and free from all taxes, liens and charges with
respect to the issuance thereof. The Company further covenants and
agrees that the Company will at all times during the Exercise
Period, have authorized and reserved, free from preemptive rights,
a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Warrant. If at any time
during the Exercise Period the number of authorized but unissued
shares of Common Stock shall not be sufficient to permit exercise
of this Warrant, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes. 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 Exercise 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
Exercise 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.
3.2 No Impairment . Except
and to the extent as waived or consented to by the Holder, the
Company will not, by amendment of 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 to be observed or performed
hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action
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as may be necessary or appropriate in order to protect the
exercise rights of the Holder against impairment. Without limiting
the generality of the foregoing, the Company will (a) not
increase the par value of any Exercise Shares above the amount
payable therefor upon such exercise immediately prior to such
increase in par value, (b) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Exercise Shares upon the
exercise of this Warrant, and (c) 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 Exercise 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. 3.3
Notices of Record Date and Certain Other Events. In the event
of any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash
dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Company shall mail to the
Holder, at least 20 days prior to the date on which any such
record is to be taken for the purpose of such dividend or
distribution, a notice specifying such date. In the event of any
voluntary dissolution, liquidation or winding up of the Company,
the Company shall mail to the Holder, at least 20 days prior
to the date of the occurrence of any such event, a notice
specifying such date. 3.4 Notice
of Adjustments . Upon the occurrence of each adjustment
pursuant to Section 5 and Section 7, the Company at its
expense will promptly compute such adjustment, in good faith, in
accordance with the terms of this Warrant and prepare a certificate
setting forth such adjustment, including a statement of the
adjusted Exercise Price and adjusted number or type of Exerc
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