Exhibit 10.3
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.
WARRANT
TO PURCHASE COMMON STOCK
OF
NEUROLOGIX, INC.
(void after December  ____, 2017)
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 December [____], 2017 (the “Termination Date”),
[                    ] 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 December [____], 2010.
(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) “Purchase Agreement” means that certain Note and Warrant Purchase Agreement
dated as of December [____], 2010 between the Company and the initial Holder of
this Warrant and the other parties named therein.
(f) “Warrant Price” means $1.44 per share subject to adjustment under Section 2.

 

 

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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
the 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 the 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).

 

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(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
$1.44 (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 Price =  (Outstanding Stock x Warrant Price) + Additional
Stock Consideration      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 at least fifty percent (50%) 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; (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;
(g) shares of Common Stock issued or issuable upon exercise of the Offering
Warrants; and (h) shares of Common Stock issued or issuable upon conversion of
the Series C Convertible Preferred Stock or the Series D Convertible Preferred
Stock.
“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.

 

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No adjustment in the Warrant Price need be made if such adjustment would result
in a change in the Warrant Price of less than $0.01. 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 $0.01 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 at least fifty percent (50%) 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.

 

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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.

 

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(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.

 

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(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:

     
X =
  Y (A - B)
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 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 Purchase Agreement.

 

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8. Purchase Agreement. This Warrant is one of a number of warrants (the
“Offering Warrants”) issued pursuant to the Purchase Agreement, and the Warrant
Shares shall be entitled to the rights conferred thereon under the Purchase
Agreement, including without limitation the registration rights provided in
Section 3 thereof. Any term of the Warrant and each other Offering Warrant may
be amended and the observance of any term may be waived by the Company and the
holders-in-interest of at least fifty percent (50%) 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.

 

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ISSUED: December [__], 2010
NEUROLOGIX, INC.

         
By:
       
 
       
 
  Name: Clark A. Johnson    
 
  Title:   President and Chief Executive Officer    
 
       
By:
       
 
 
 
Name: Marc L. Panoff    
 
  Title:   Chief Financial Officer, Treasurer and Secretary    

 

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Attachment 1
NOTICE OF EXERCISE
TO: NEUROLOGIX, INC.

1.  
The undersigned hereby:

  o  
elects to purchase ___ shares of Common Stock of the Company pursuant to Section
5(a) of the attached Warrant, and tenders herewith payment of the purchase price
of such shares in full, or
    o  
elects to exercise its net issuance rights pursuant to Section 5(b) of the
attached Warrant with respect to ___ shares of Common Stock (such number being
“Y” in the formula in such Section).

2.  
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:

 
(Name in which certificate(s) are to be issued)
 
(Address)

                    (Name of Warrant Holder)
 
       
 
  By:    
 
     
 
  Title:    
 
     
 
  Date signed: