Exhibit 10.27
NEITHER THIS WARRANT NOR
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR
DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144
UNDER SAID ACT OR WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER,
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION.
WARRANT TO PURCHASE
14,943 SHARES OF SERIES B PREFERRED STOCK
THIS CERTIFIES THAT, for
value received, General Electric Capital Corporation
(“Holder”) is entitled to subscribe for and purchase
Fourteen Thousand Nine Hundred Forty Three (14,943) shares of the
fully paid and nonassessable Series B Preferred Stock (the
“Shares” or the “Preferred Stock”) of
AVALON PHARMACEUTICALS, INC., a Delaware corporation (the
“Company”), at the Warrant Price (as hereinafter
defined), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, the term
“Series B Preferred Stock” shall mean the
Company’s presently authorized Series B Preferred Stock
and any stock into which such Series B Preferred Stock may
hereafter be converted or exchanged.
1. Warrant Price .
The Warrant Price shall initially be Three and 53/100 dollars
($3.53) per share, subject to adjustment as provided in
Section 7 below.
2. Conditions to
Exercise . The purchase right represented by this Warrant may
be exercised at any time, or from time to time, in whole or in part
during the term commencing on the date hereof and ending at 5:00
P.M. Eastern time on the seventh anniversary of the date of this
Warrant.
3. Method of Exercise;
Payment; Issuance of Shares; Issuance of New Warrant .
(a) Cash Exercise .
Subject to Section 2 hereof, me purchase right represented by
this Warrant may be exercised by the Holder hereof, in whole or in
part, by the surrender of this Warrant (with a duly executed Notice
of Exercise in the form attached hereto) at the principal office of
the Company (as set forth in Section 17 below) and by payment
to the Company, by check, of an amount equal to the then applicable
Warrant Price per share multiplied by the number of shares then
being purchased. In the event of any exercise of the rights
represented by this Warrant, certificates for the shares of stock
so purchased shall be in the name of, and delivered to, the Holder
hereof, or as such Holder may direct (subject to the terms of
transfer contained herein and upon payment by such Holder hereof of
any applicable transfer taxes). Such delivery shall be made within
30 days after exercise of the Warrant and at the
Company’s expense and, unless this Warrant has been fully
exercised or expired, a new Warrant having terms and conditions
substantially identical to this Warrant and representing the
portion of the Shares, if any, with respect to which this Warrant
shall not have been exercised, shall also be issued to the Holder
hereof within 30 days after exercise of the Warrant.
(b) Net Issue
Exercise . In lieu of exercising this Warrant pursuant to
Section 3(a), Holder may elect to receive shares equal to the
value of this Warrant (or of any portion thereof remaining
unexercised) by surrender of this Warrant at the principal office
of the Company together with notice of such election, in which
event the Company shall issue to Holder the number of shares of the
Company’s Preferred Stock computed using the following
formula:
X = Y
(A-B)
A
Where X =
the number of shares of Preferred Stock to be issued to Holder.
Y = the
number of shares of Preferred Stock purchasable under this Warrant
(at the date of such calculation).
A = the
Fair Market Value of one share of the Company’s Preferred
Stock (at the date of such calculation).
B = Warrant
Price (as adjusted to the date of such calculation).
(c) Fair Market
Value . For purposes of this Section 3, Fair Market Value
of one share of the Company’s Preferred Stock shall mean:
(i) In
the event of an exercise in connection with an Initial Public
Offering, the per share Fair Market Value for the Preferred Stock
shall be the Offering Price at which the underwriters initially
sell Common Stock to the public multiplied by the number of shares
of Common Stock into which each share of Preferred Stock is then
convertible; or
(ii) The average of the closing bid and asked prices of Common
Stock quoted in the Over-The-Counter Market Summary, the last
reported sale price quoted on the Nasdaq National Market
(“NNM”) or on any exchange on which the Common Stock is
listed, whichever is applicable, as published in the Wall Street
Journal for the ten (10) trading days prior to the date of
determination of Fair Market Value, multiplied by the number of
shares of Common Stock into which each share of Preferred Stock is
then convertible; or
(iii) In the event of an exercise in connection with a merger,
acquisition or other consolidation in which the Company is not the
surviving entity, the per share Fair Market Value for the Preferred
Stock shall be the value to be received per share of Preferred
Stock by all holders of the Preferred Stock in such transaction as
determined by the Board of Directors; or
(iv) In any other instance, the per share Fair Market Value
for the Preferred Stock shall be as determined in good faith by the
Company’s Board of Directors.
In the
event of 3(c)(iii) or 3(c)(iv), above, the Company’s Board of
Directors shall prepare a certificate, to be signed by an
authorized officer of the Company, setting forth in reasonable
detail the basis for and method of determination of the per share
Fair Market Value of the Preferred Stock. The Board will also
certify to the Holder that this per share Fair Market Value will be
applicable to all holders of the Company’s Preferred Stock.
Such certification must be made to Holder at least thirty (30)
business days prior to the proposed effective date of the merger,
consolidation, sale, or other triggering event as defined in
3(c)(iii )or 3(c)(iv).
(d) Automatic
Exercise . To the extent this Warrant is not previously
exercised, it shall be automatically exercised in accordance with
Sections 3(b) and 3(c) hereof (even if not surrendered)
immediately before its expiration.
(e) In the event the
terms and conditions of a certain Shareholder’s Agreement and
Registration Rights Agreement executed by all Series B
Shareholders at the time of the issuance of the Scries B
Convertible Preferred Stock Offering (collectively, the
“Related Documcnts”)are still in effect, upon exercise
of the warrant, the Holder agrees to execute accession signature
pages to the Related Documents subject to its review by legal
counsel.
4. Representations and
Warranties of Holder and Restrictions on Transfer Imposed by the
Securities Act of 1933 .
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(a) Representations
and Warranties by Holder. The Holder represents and warrants to the
Company with respect to this purchase as follows:
(i) The Holder has substantial experience in evaluating and
investing in private placement transactions of securities of
companies similar to the Company so that the Holder is capable of
evaluating the merits and risks of its investment in the Company
and has the capacity to protect its interests.
(ii) The Holder is acquiring the Warrant and the Shares of
Preferred Stock issuable upon exercise of the Warrant (collectively
the “Securities”) for investment for its own account
and not with a view to, or for resale in connection with, any
distribution thereof. The Holder understands that the Securities
have not been registered under the Securities Act of 1933, as
amended (the “Act”) by reason of a specific exemption
from the registration provisions of the Act which depends upon,
among other things, the bona fide nature of the investment intent
as expressed herein. In this connection, the Holder understands
that, in the view of the Securities and Exchange Commission (the
“SEC”), the statutory basis for such exemption may be
unavailable if mis representation was predicated solely upon a
present intention to hold the Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for
or until an increase or decrease in the market price of the
Securities or for a period of one year or any other fixed period in
the future.
(iii) The Holder acknowledges that the Securities must be held
indefinitely unless subsequently registered under the Act or an
exemption from such registration is available. The Holder is aware
of the provisions of Rule 144 promulgated under the Act
(“Rule 144”) which permits limited resale of
securities purchased in a private placement subject to the
satisfaction of certain conditions, including, in case the
securities have been held for more than one but less than two
years, the existence of a public market for the shares, the
availability of certain public information about the Company, the
resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being through a
“broker’s transaction” or in a transaction
directly with a “market maker” (as provided by
Rule 144(f)) and the number of shares or other securities
being sold during any three-month period not exceeding specified
limitations.
(iv) The Holder further understands that at the time the
Holder wishes to sell the Securities there may be no public market
upon which such a sale may be effected, and that even if such a
public market exists, the Company may not be satisfying the current
public information requirements of Rule 144, and that in such
event, the Holder may be precluded from selling the Securities
under Rule 144 unless (a) a one-year minimum holding
period has been satisfied and (b) the Holder was not at the
time of the sale nor at any time during the three-month period
prior to such sale an affiliate of the Company.
(v) The Holder has had an opportunity to discuss the
Company’s business, management and financial affairs with its
management and an opportunity to review the Company’s
facilities. The Holder understands that such discussions, as well
as the written information issued by the Company, were intended to
describe the aspects of the Company’s business and prospects
which it believes to be material but were not necessarily a
thorough or exhaustive description.
(b) Legends . Each
certificate representing the Securities shall be endorsed with the
following legend:
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT, A “NO ACTION”
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO
SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF
THE SECURITIES AND EXCHANGE COMMISSION, OR (IF REASONABLY REQUIRED
BY THE COMPANY) AN
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OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH
TRANSFER IS EXEMPT FROM SUCH R
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