THIS WARRANT
AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE
PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR,
IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.
WARRANT TO PURCHASE
STOCK
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ARDEA
BIOSCIENCES, INC., a Delaware corporation
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[Oxford:
$300,000/Warrant Price]
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[Silicon Valley
Bank: $180,000/Warrant Price]
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Common
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lower of
(i) the average closing price of the Company’s common
stock for the ten (10) trading days ending on the date
immediately prior to Issue Date; or (ii) the closing price of
the Company’s common stock on the date immediately prior to
Issue Date
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November ___,
2008
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The 7th
anniversary after the Issue Date, unless terminated earlier in
accordance with the provisions contained herein
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This Warrant is
issued in connection with the Loan and Security Agreement between
Company and Silicon Valley Bank and Oxford Finance Corporation
dated as of November ___, 2008, as amended from time to time (the
“Loan Agreement”).
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THIS WARRANT
CERTIFIES THAT, for good and valuable consideration, including
without limitation the mutual promises contained in the Loan
Agreement [SILICON VALLEY BANK][OXFORD FINANCE CORPORATION]
([Silicon Valley Bank,] together with any successor or permitted
assignee or transferee of this Warrant, “Holder”) is
entitled to purchase the number of fully paid and nonassessable
shares of the class of securities (the “Shares”) of the
Company at the Warrant Price, all as set forth above and as
adjusted pursuant to Article 2 of this Warrant, subject to the
provisions and upon the terms and conditions set forth in this
Warrant.
1.1
Method of Exercise . Holder may exercise this Warrant by
delivering the original of this Warrant together with a duly
executed Notice of Exercise in substantially the form attached as
Appendix 1 to the principal office of the Company. Unless
Holder is exercising the conversion right set forth in
Article 1.2, Holder shall also deliver to the Company a check,
wire transfer (to an account designated by the Company), or other
form of payment acceptable to the Company for the aggregate Warrant
Price for the Shares being purchased.
1.2
Conversion Right . In lieu of exercising this Warrant as
specified in Article 1.1, Holder may from time to time convert
this Warrant, in whole or in part, into a number of Shares
determined by dividing (a) the aggregate fair market value of
the Shares or other securities otherwise issuable upon exercise of
this Warrant minus the aggregate Warrant Price of such Shares by
(b) the fair market value of one Share. The fair market value
of the Shares shall be determined pursuant to
Article 1.3.
1.3
Fair Market Value . The fair market value of each Share
shall be the closing price of a Share reported for the business day
immediately before Holder delivers this Warrant together with its
Notice of Exercise to the Company.
1.4
Delivery of Certificate and New Warrant . Promptly after
Holder exercises or converts this Warrant and, if applicable, the
Company receives payment of the aggregate Warrant Price, the
Company shall deliver to Holder certificates for the Shares
acquired and, if this Warrant has not been fully exercised or
converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.5
Replacement of Warrants . On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of loss, theft or
destruction, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of
mutilation on surrender and cancellation of this Warrant, the
Company shall execute and deliver, in lieu of this Warrant, a new
warrant of like tenor.
1.6
Treatment of Warrant Upon Acquisition of Company
.
1.6.1
“ Acquisition ”. For the purpose of this
Warrant, “Acquisition” means any sale, license, or
other disposition of all or substantially all of the assets of the
Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company’s securities before
the transaction beneficially own less than 50% of the outstanding
voting securities of the surviving entity after the
transaction.
1.6.2
Treatment of Warrant at Acquisition .
A) Upon the
written request of the Company, Holder agrees that, in the event of
an Acquisition that is not an asset sale and in which the sole
consideration is cash, either (a) Holder shall exercise its
conversion or purchase right under this Warrant and such exercise
will be deemed effective immediately prior to the consummation of
such Acquisition or (b) if Holder elects not to exercise the
Warrant, this Warrant will expire upon the consummation of such
Acquisition. The Company shall provide the Holder with written
notice of its request relating to the foregoing (together with such
reasonable information as the Holder may request in connection with
such contemplated Acquisition giving rise to such notice), which is
to be delivered to Holder not less than ten (10) days prior to
the closing of the proposed Acquisition.
B) Upon the
written request of the Company, Holder agrees that, in the event of
an Acquisition that is an “arms length” sale of all or
substantially all of the Company’s assets (and only its
assets) to a third party that is not an Affiliate (as defined
below) of the Company (a “True Asset Sale”), either
(a) Holder shall exercise its conversion or purchase right
under this Warrant and such exercise will be deemed effective
immediately prior to the consummation of such Acquisition or (b) if
Holder elects not to exercise the Warrant, this Warrant will
continue until the Expiration Date if the Company continues as a
going concern following the closing of any such True Asset Sale.
The Company shall provide the Holder with written notice of its
request relating to the foregoing (together with such reasonable
information as the Holder may request in connection with such
contemplated Acquisition giving rise to such notice), which is to
be delivered to Holder not less than ten (10) days prior to
the closing of the proposed Acquisition.
2
C) Upon the
written request of the Company, Holder agrees that, in the event of
a stock for stock (or stock and cash) Acquisition of the Company by
a publicly traded acquirer if, on the record date for the
Acquisition, the fair market value of the Shares (or other
securities issuable upon exercise of this Warrant) is equal to or
greater than three (3) times the Warrant Price, the Company
may require the Warrant to be deemed converted pursuant to
Article 1.2 hereof and the Holder shall participate in the
Acquisition as a holder of the Shares (or other securities issuable
upon exercise of the Warrant) on the same terms as other holders of
the same class of securities of the Company.
D) Upon the
closing of any Acquisition other than those particularly described
in subsections (A), (B) and (C) above, the successor
entity shall assume the obligations of this Warrant, and this
Warrant shall be exercisable for the same securities, cash, and
property as would be payable for the Shares issuable upon exercise
of the unexercised portion of this Warrant as if such Shares were
outstanding on the record date for the Acquisition and subsequent
closing. The Warrant Price and/or number of Shares shall be
adjusted accordingly.
As used herein
“ Affiliate ” shall mean any person or entity
that owns or controls directly or indirectly ten (10) percent
or more of the stock of Company, any person or entity that controls
or is controlled by or is under common control with such persons or
entities, and each of such person’s or entity’s
officers, directors, joint venturers or partners, as
applicable.
ARTICLE 2.
ADJUSTMENTS TO THE SHARES .
2.1
Stock Dividends, Splits, Etc . If the Company declares or
pays a dividend on the shares of its common stock payable in common
stock, or other securities, then upon exercise of this Warrant, for
each Share acquired, Holder shall receive, without cost to Holder,
the total number and kind of securities to which Holder would have
been entitled had Holder owned the Shares of record as of the date
the dividend occurred. If the Company subdivides the shares of its
common stock by reclassification or otherwise into a greater number
of shares or takes any other action that causes the outstanding
shares of its common stock to become converted into a greater
number of shares of common stock, the number of Shares shall be
proportionately increased and the Warrant Price shall be
proportionately decreased. If the outstanding shares of the
Company’s common stock are combined or consolidated, by
reclassification or otherwise, into a lesser number of shares, the
Warrant Price shall be proportionately increased and the number of
Shares shall be proportionately decreased.
2.2
Reclassification, Exchange, Combinations or Substitution .
Upon any reclassification, 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,
Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that
Holder would have received for the Shares if this Warrant had been
exercised or converted immediately before such reclassification,
exchange, substitution, or other event. The Company or its
successor shall promptly issue to Holder an amendment to this
Warrant setting forth the number and kind of such new securities or
other property issuable upon exercise or conversion of this Warrant
as a result of such reclassification, exchange, substitution or
other event that results in a change of th
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