COMMON STOCK PURCHASE WARRANT To Purchase 1,695,273 Shares of Common Stock of AVALON PHARMACEUTICALS, INC.
Exhibit 99.5
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
To Purchase 1,695,273 Shares of Common Stock of
AVALON PHARMACEUTICALS, INC.
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value
received, Clinical Data, Inc., a Delaware corporation, (the “Holder”) is entitled, upon
the terms and subject to the limitations on exercise and the conditions hereinafter set forth,
at any time six (6) months after the date hereof (the “Initial Exercise Date”) and on
or prior to the close of business on the fifth (5th) year anniversary of the Initial Exercise
Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from
Avalon Pharmaceuticals, Inc., a Delaware corporation (the “Company”), up to 1,695,273
shares (the “Warrant Shares”) of Common Stock, par value $0.01 per share, of the
Company (the “Common Stock”). The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
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 October 27, 2008, among the Company and the Holder.
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 of a duly
executed facsimile copy of the Notice of Exercise Form annexed hereto (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 such Holder appearing on the books of the Company); provided,
however, within five (5) Trading Days of the date said Notice of Exercise is
delivered to the Company, the Holder shall have surrendered this Warrant to the Company and
the Company shall have received payment of the aggregate Exercise Price of the shares
thereby purchased in the manner described in clause (i) or (ii) below:
(i) Cash Exercise. Payment may be made in cash or by certified or official
bank check payable to the order of the Company.
(ii) Cashless Exercise. In lieu of payment of the Exercise Price as provided in
clause (i), the Holder may elect a cashless net exercise. In the case of such cashless net
exercise, the Holder shall surrender this Warrant for cancellation and receive in exchange
therefore the full number of duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock as is computed using the following formula:
X=Y*(A-B)
A
A
Where:
X= the number of shares of Common Stock to be issued to the Holder upon cashless
exercise of this Warrant
Y= the total number of shares Common Stock covered by this Warrant which the Holder has
surrendered at such time for cashless exercise (including both shares to be issued to the
Holder upon cashless exercise of this Warrant and shares to be cancelled as payment
therefore)
A= the Current Market Value as of the business day on which the Holder surrenders this
Warrant to the Company
B = the Exercise Price then in effect under this Warrant at the time at which the
Holder surrenders this Warrant to the Company
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Common Stock issued in a cashless exercise transaction
shall be deemed to have been acquired by the Holder, and the holding period for the Common
Stock shall be deemed to have commenced, on the date this Warrant was originally issued.
For the purposes of the foregoing, the term “Current Market Value” shall mean
the fair market value of the shares of Common Stock as determined as follows:
(x) if the Common Stock is traded on a securities exchange or the NASDAQ Stock Market,
the value shall be deemed to be the average of the closing prices of the Common Stock on
such exchange or market over the five (5) trading day period ending three (3) days prior to
the date of determination.
(y) if the Common Stock is actively traded over-the-counter, the value shall be deemed
to be the average of the closing bid over the five (5) trading day period ending three (3)
days prior to the date of determination; or
(z) if there is no active public market for the Common Stock, the value shall be the
fair market value thereof, as determined in good faith by the Board of Directors of the
Company.
b) Exercise Price. The per share exercise price of the Common Stock under this
Warrant shall be $0.86 subject to adjustment hereunder (the “Exercise Price”).
c) Mechanics of Exercise.
(i) Authorization of Warrant Shares. 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, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and charges imposed by the Company in
respect of the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
(ii) Delivery of Certificates Upon Exercise. Certificates for shares purchased
hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the
account of the Holder’s prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system,
and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise
within five (5) Trading Days from the delivery to the Company of the Notice of Exercise Form,
surrender of this Warrant and payment of the aggregate Exercise Price as set forth above
(“Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised on the
date
the Exercise Price and completed Notice of Exercise are received by the Company. The Warrant
Shares shall be deemed to have been issued, and the 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 and all
taxes required to be paid by the Holder, if any, pursuant to Section 2(c)(vi) prior to the issuance
of such shares, have been paid.
(iii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been
exercised in part, the Company shall, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to 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.
(iv) Rescission Rights. If the Company fails to cause its transfer agent to transmit
to the Holder a certificate or certificates representing the Warrant Shares pursuant to this
Section 2(c) by the Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise until such time as the Company causes its transfer agent to transmit such certificate
or certificates.
(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 Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a
cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.
(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; 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 may require, as a condition thereto, the 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
prior to the Termination Date in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.
(viii) In addition to the rights specified in clause (iv) above, if by the Warrant Share
Delivery Date, the Company fails to deliver the required number of Warrant Shares in the manner
required pursuant to this Section 2(c), and if after the Warrant Share Delivery Date and prior to
the receipt of such Warrant Shares, the Holder purchases in a bona fide arm’s length transaction
for fair market value (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated
receiving upon such exercise (a “Buy-In”), then the Company shall pay in cash to the Holder
the amount 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 (A) the
number of Warrant Shares that the Company was required to deliver to the Holder in connection with
the exercise at issue by (B) the Exercise Price. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In.
d) Maximum Exercise. Notwithstanding anything herein to the contrary, in no
event shall the Holder be entitled to exercise any portion of this Warrant in excess of that
number of Warrant Shares, which, when added to the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which
may be deemed beneficially owned through the ownership of the unexercised portion of the
Warrant or the unexercised or unconverted portion of any other security of the Holder
subject to a limitation on conversion analogous to the limitations contained herein), would
result in beneficial ownership by the Holder and its Affiliates of any amount of shares of
Common Stock greater than 19.9% of the then outstanding shares of Common Stock (the
“Maximum Common Stock Issuance”), unless the issuance of Warrant Shares hereunder in
excess of the Maximum Common Stock
Issuance shall first be approved by the Company’s stockholders; provided, that, for
this purpose only, the Holder agrees that it shall not be entitled to vote any shares of
Common Stock owned by the Holder, and that such restriction on voting shall be interpreted
to apply to the fullest extent necessary to comply with the rules of the NASDAQ Stock Market
(and any published or written interpretations thereof by the Nasdaq Stock Market or its
staff). As used herein, the term “Affiliate” means any person or entity that, directly or
indirectly through one or more intermediaries, controls or is controlled by or is under
common control with a person or entity, as such terms are used in and construed under Rule
144 under the Securities Act. For purposes of the second preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided in
such sentence.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company pursuant to this Warrant), (B) subdivides outstanding
shares of Common Stock into a larger number of shares, (C) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or
(D) 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. 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) Fundamental Transaction. If, at any time while this Warrant is outstanding,
(A) the Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its assets in one or
a series of related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or property, or (D)
the Company effects any reclassification 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 (in any such case, 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, the same amount and kind of
securities, cash or property as it would have been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full
of this Warrant (the “Alternate Consideration”). 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. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction shall issue to
the Holder a new warrant consistent with the foregoing provisions and evidencing the
Holder’s right to exercise such warrant into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions of this
Section 3(b) and ensuring that this Warrant (or any
such replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.
c) 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.
d) Notice to Holders.
(i) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to
this Section 3, the Company shall promptly mail to each Holder a notice setting forth the Exercise
Price after such adjustment and setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
(ii) Notice to Allow Exercise by ▇▇▇▇▇▇. If (A) the Company shall declare a dividend
(or any other distribution) 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, of any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property; (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 five (5) 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. The Holder is entitled to exercise this Warrant during the
5-day period commencing on the date of such notice to the effective date of the event triggering
such notice.
Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable securities laws
and the conditions set forth in Sections 5(a) and 4(d) hereof and to the provisions of
Section 4.1 of the Purchase Agreement, after the Initial Exercise Date this Warrant and all
rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at
the principal office of the Company, 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 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. A Warrant, if properly assigned, may be exercised by a
new holder for the purchase of Warrant Shares without having a new Warrant issued.
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.
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.
d) Transfer Restrictions. If, at the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant shall not be
registered pursuant to an effective registration statement under the Securities Act and
under applicable state securities or blue sky laws, the Company may require, as a condition
of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may
be, furnish to the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities Act and
under applicable state securities or blue sky laws, (ii) that the holder or transferee
execute and deliver to the Company an investment letter in form and substance acceptable to
the Company and (iii) that the transferee be an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) promulgated under the Securities Act or a
qualified institutional buyer as defined in Rule 144A(a) under the Securities Act.
Section 5. Miscellaneous.
a) Title to Warrant. Prior to the Termination Date and subject to compliance
with applicable laws and Section 4 of this Warrant, this Warrant and all rights hereunder
are transferable, in whole or in part, at the office or agency of the Company by the Holder
in person or by duly authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment
letter in form and substance reasonably satisfactory to the Company.
b) No Rights as Shareholder Until Exercise. This Warrant does not entitle the
Holder to any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate
Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such
Holder as the record owner of such shares as of the close of business on the later of the
date of such surrender or payment.
c) 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.
d) 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 be a
Saturday, Sunday or a legal holiday, then such action may be taken or such right may be
exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
e) 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.
f) Further Assurances. 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 (a) 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, (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 Warrant 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 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.
g) 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.
h) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon
the exercise of this Warrant, if not registered, will have restrictions upon resale imposed
by state and federal securities laws.
i) 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 Holder’s rights, powers or remedies, notwithstanding the fact that
all rights hereunder terminate on the Termination Date. 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 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 Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
j) 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.
k) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise to any liability
of 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.
l) Remedies. 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 the defense in any action for specific performance
that a remedy at law would be adequate.
m) 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 of the Company and the successors and permitted assigns of Holder. The
provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
n) Amendment. This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company and the holders of sixty percent (60%) of the
Shares and Warrant Shares purchased pursuant to the Purchase Agreement.
o) 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.
p) 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.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer
thereunto duly authorized.
Dated: October 27, 2008
| AVALON PHARMACEUTICALS, INC. |
||||
| By: | /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| Name: | ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| Title: | President and Chief Executive Officer | |||
NOTICE OF EXERCISE
TO: AVALON 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 in lawful money of the United States.
(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:
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in
Regulation D promulgated under the Securities Act of 1933, as amended.
[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.)
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
whose address is
Dated: , ___
Holder’s Signature: |
||||||
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.