Amendment No. 1 to Rights Agreement
Exhibit 4.1
Amendment No. 1 to Rights Agreement
THIS AMENDMENT No. 1 (this “Amendment”) is made and entered into as of October 27, 2008,
between Avalon Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and American Stock
Transfer & Trust Company, a New York corporation (the “Rights Agent”).
RECITALS
WHEREAS, the Company and the Rights Agent are parties to a Rights Agreement, dated April 26,
2007, by and between the Company and the Rights Agent (the “Rights Agreement”).
WHEREAS, the Company intends to enter into an Agreement and Plan of Merger and Reorganization,
dated as of the date hereof (as it may be amended or supplemented from time to time, the “Merger
Agreement”) by and among the Company, Clinical Data, Inc., a Delaware corporation (“Clinical
Data”), and API Acquisition Sub II, LLC, a Delaware limited liability company and indirect
wholly-owned subsidiary of Clinical Data;
WHEREAS, concurrently with the execution of the Merger Agreement, Clinical Data intends to
enter into one or more Voting Agreements with certain of the Company’s securityholders (the
“Restricted Securityholders”), dated as of the date hereof (as such agreements may be amended or
supplemented from time to time, the “Voting Agreements”) granting Clinical Data a proxy and certain
other rights (the “Voting Rights”) with respect to the voting of shares of the Company’s common
stock, par value $0.01 per share (the “Common Stock”) held of record or beneficially by the
Restricted Securityholders;
WHEREAS, concurrently with the execution of the Merger Agreement, the Company and Clinical
Data intend to enter into a Securities Purchase Agreement pursuant to which the Company will sell
and issue to Clinical Data, and Clinical Data will purchase from the Company, shares of the
Company’s Common Stock and warrants (the “Warrants”) to purchase shares of the Company’s Common
Stock (the purchase of such shares of the Company’s Common Stock and the Warrants is sometimes
called the “Investment”);
WHEREAS, the Board of Directors of the Company has approved (i) the Merger Agreement and the
transactions contemplated thereby, (ii) the execution and delivery by the Restricted
Securityholders of the Voting Agreements and the acquisition by Clinical Data of the Voting Rights
with respect to the Common Stock held of record or beneficially by the Restricted Securityholders
and (iii) the Investment and the transactions contemplated thereby;
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company may and the Rights Agent
shall, if the Company so directs, supplement and amend the Rights Agreement prior to the
Distribution Date (as defined in the Rights Agreement) and subject to certain other limited
exceptions;
WHEREAS, the Board of Directors of the Company has determined that an amendment to the Rights
Agreement as set forth herein to except the Merger Agreement, the shares of Common Stock and the
Warrants to be sold and issued by the Company and purchased by Clinical Data pursuant to the
Securities Purchase Agreement and the shares of Common Stock to be sold and issued by the Company
and purchased by Clinical Data pursuant to the exercise of the Warrants, and the transactions
contemplated thereby from the Rights Agreement is necessary and desirable in connection with the
foregoing and the Company and the Rights Agent desire to evidence such amendment in writing; and
WHEREAS, all acts and things necessary to make this Amendment a valid agreement, enforceable
according to its terms, have been done and performed, and the execution and delivery of this
Amendment by the Company and the Rights Agent have been in all respects duly authorized by the
Company and the Rights Agent.
NOW THEREFORE, in consideration of the foregoing and the mutual agreements set forth in the
Rights Agreement and herein, the parties hereto agree as follows:
AGREEMENT
ARTICLE 1
Section 1.1 Amendment of Section 1(c). Section 1(c) of the Rights Agreement relating to the
definitions of “Beneficial Owner” and “beneficially own” is amended by adding the following at the
end thereof:
“Notwithstanding anything contained in this Agreement to the
contrary, neither Clinical Data, Inc., a Delaware corporation
(“Clinical Data”), nor API Acquisition Sub II, LLC., a
Delaware limited liability company and indirect wholly-owned
subsidiary of Clinical Data (“Merger Sub”), nor any of
their Affiliates or Associates, shall be deemed to be the
Beneficial Owner of, nor to beneficially own, any of the Common
Stock of the Company by virtue of any one or more of (i) the
approval, execution, delivery or performance of the Agreement
and Plan of Merger and Reorganization, dated as of October 27,
2008 by and among the Company, Clinical Data, and Merger Sub (as
it may be amended or supplemented from time to time, the
“Merger Agreement”), or the consummation of the Merger
(as defined in the Merger Agreement) and the other transactions
contemplated by the Merger Agreement or any action in
furtherance thereof, (ii) the approval, execution, delivery or
performance of the Voting Agreements or the exercise by Clinical
Data of any of the rights granted to Clinical Data thereunder,
including the Voting Rights, or (iii) the approval, execution,
delivery or performance of the Securities Purchase Agreement,
dated as of October 27, 2008, by and among the
Company and Clinical Data (as it may be amended or supplemented
from time to time, the “Securities Purchase Agreement”), the
purchase by Clinical Data pursuant to the Securities Purchase
Agreement of the Company’s Common Stock (the “Investment
Shares”) and warrants (the “Warrants”) to purchase
additional
shares of Common Stock (the “Warrant Shares”) and the purchase
by Clinical Data of the Warrant Shares. “Voting
Agreements” means one or more Voting Agreements with certain
of the Company’s securityholders, dated as of October 27, 2008,
(as such agreements may be amended or supplemented from time to
time) granting Clinical Data a proxy and certain other rights
(the “Voting Rights”) with respect to the voting of
shares of Common Stock held of record or beneficially by such
securityholders.
Section 1.2 Amendment of Section 7(a). Section 7(a) of the Rights Agreement is hereby amended
by deleting the word “or” that appears immediately prior to the symbol “(iii)”, deleting the
parenthetical contained at the end of Section 7(a) and by adding the following to the end of the
amended Section 7(a):
“, or (iv) the time immediately prior to the Effective Time (as
defined in the Merger Agreement), whereupon the Rights shall
expire (the earliest of (i), (ii), (iii) and (iv) being herein
referred to as the “Expiration Date”).”
Section 1.3 Amendment of Section 13(b). Section 13(b) of the Rights Agreement is hereby
amended by inserting the following provision at the end of Section 13(b):
“Notwithstanding the foregoing and anything in this Agreement to
the contrary, neither Clinical Data, nor Merger Sub, nor any of
their Affiliates or Associates, shall be deemed to be a
Principal Party by virtue of any one or more of (i) the
approval, execution, delivery or performance of the Merger
Agreement, or the consummation of the Merger (as defined in the
Merger Agreement) and the other transactions contemplated by the
Merger Agreement or any action in furtherance thereof, (ii) the
approval, execution, delivery or performance of the Voting
Agreements or the exercise by Clinical Data of any of the rights
granted to Clinical Data thereunder, including the Voting Rights
or (iii) the approval, execution, delivery or performance of the
Securities Purchase Agreement or the Warrants, or purchase by
Clinical Data of shares of Common Stock and the Warrants
pursuant to the Securities Purchase Agreement or the purchase of
the Warrant Shares.”
Section 1.4 Addition of New Section 35. The following is added as a new Section 35 to the
Rights Agreement:
“Section 35. Merger Agreement and Investment.
Notwithstanding anything in this Agreement to the contrary, none
of (x) the approval, execution, delivery or performance of the
Merger Agreement, or the consummation of the Merger and the
other transactions contemplated by the Merger Agreement or any
action in furtherance thereof, (y)
the approval, execution, delivery or performance of the Voting Agreements or the exercise by Clinical Data of any of the rights granted to Clinical Data thereunder, including the Voting Rights, or (z) the approval, execution, delivery or performance of the Securities Purchase Agreement, or the purchase by Clinical Data of the shares of Common Stock and the Warrants pursuant to the Securities Purchase Agreement, or the purchase by Clinical Data of the Warrant Shares, or any one or more of (x), (y) and (z) together, shall cause (i) Clinical Data or Merger Sub or any of their Affiliates or Associates to be deemed an Acquiring Person, (ii) a Stock Acquisition Date to occur, (iii) a Distribution Date to occur or (iv) a Triggering Event, it being the purpose of the Company in adopting the amendment to this Agreement that none of (A) the approval, execution, delivery or performance of the Merger Agreement, or the consummation of the Merger (as defined in the Merger Agreement) and the other transactions contemplated by the Merger Agreement, or any action in furtherance thereof, (B) the approval, execution, delivery or performance of the Voting Agreements or the exercise by Clinical Data of any of the rights granted to Clinical Data thereunder, including the Voting Rights, or (C) the approval, execution, delivery or performance of the Securities Purchase Agreement, or the purchase by Clinical Data of the shares of Common Stock and the Warrants pursuant to the Securities Purchase Agreement, or the purchase by Clinical Data of the Warrant Shares, or any one or more of (A), (B) and (C) together, shall in any respect give rise to any provision of this Agreement becoming effective. This Agreement and the Rights established hereby will terminate in all respects immediately prior to the Effective Time (as defined in the Merger Agreement).”
the approval, execution, delivery or performance of the Voting Agreements or the exercise by Clinical Data of any of the rights granted to Clinical Data thereunder, including the Voting Rights, or (z) the approval, execution, delivery or performance of the Securities Purchase Agreement, or the purchase by Clinical Data of the shares of Common Stock and the Warrants pursuant to the Securities Purchase Agreement, or the purchase by Clinical Data of the Warrant Shares, or any one or more of (x), (y) and (z) together, shall cause (i) Clinical Data or Merger Sub or any of their Affiliates or Associates to be deemed an Acquiring Person, (ii) a Stock Acquisition Date to occur, (iii) a Distribution Date to occur or (iv) a Triggering Event, it being the purpose of the Company in adopting the amendment to this Agreement that none of (A) the approval, execution, delivery or performance of the Merger Agreement, or the consummation of the Merger (as defined in the Merger Agreement) and the other transactions contemplated by the Merger Agreement, or any action in furtherance thereof, (B) the approval, execution, delivery or performance of the Voting Agreements or the exercise by Clinical Data of any of the rights granted to Clinical Data thereunder, including the Voting Rights, or (C) the approval, execution, delivery or performance of the Securities Purchase Agreement, or the purchase by Clinical Data of the shares of Common Stock and the Warrants pursuant to the Securities Purchase Agreement, or the purchase by Clinical Data of the Warrant Shares, or any one or more of (A), (B) and (C) together, shall in any respect give rise to any provision of this Agreement becoming effective. This Agreement and the Rights established hereby will terminate in all respects immediately prior to the Effective Time (as defined in the Merger Agreement).”
ARTICLE II
Section 2.1 Effectiveness. This Amendment shall be deemed effective as of the date first
written above, as if executed on such date. Except as specifically amended by this
Amendment, all other terms and conditions of the Rights Agreement shall remain in full force
and effect.
Section 2.2 Severability. If any term, provision, covenant or restriction of this Amendment
is held by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment
shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
Section 2.3 Governing Law. This Amendment shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and construed in accordance
with the laws of such State.
Section 2.4 Counterparts. This Amendment No. 1 may be executed in any number of counterparts.
It shall not be necessary that the signature of or on behalf of each party appears on each
counterpart, but it shall be sufficient that the signature of or on behalf of each party appears on
one or more of the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in any proof of this Amendment No. 1 to produce or account
for more than a number of counterparts containing the respective signatures of or on behalf of all
of the parties.
[Signatures appear on the following page.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and
attested, all as of the day and year first above written.
| Attest: | AVALON | PHARMACEUTICALS, INC. | ||||||||
By:
|
/s/ C. Xxxx Xxxxxx
|
By:
/s/ Xxxxxxx X. Xxxxxx
|
||||||||
| Name: C. Xxxx Xxxxxx | Name: Xxxxxxx X. Xxxxxx, Ph.D. | |||||||||
| Title: Secretary | Title: President and Chief Executive Officer | |||||||||
| Attest: | AMERICAN STOCK TRANSFER & TRUST COMPANY | |||||||||
By:
|
/s/ Xxxxx Xxxxxx
|
By: /s/ Xxxxxxx X. Xxxxxx
|
||||||||
| Name: Xxxxx Xxxxxx | Name: Xxxxxxx X. Xxxxxx | |||||||||
| Title: Assistant Secretary | Title: Vice President | |||||||||
CERTIFICATE OF COMPLIANCE
I, C. Xxxx Xxxxxx, hereby certify that I am the duly appointed and acting Secretary of Avalon
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and in connection with the execution
of Amendment No. 1 to Rights Agreement between the Company and American Stock Transfer & Trust
Company (the “Rights Agent”) dated as of the date hereof (the “Amendment”), I hereby further
certify, on behalf of the Company, that the Amendment is in compliance with Section 27 of the
Rights Agreement between the Company and the Rights Agent dated as of April 26, 2007.
October 27, 2008
|
AVALON | PHARMACEUTICALS, INC. | ||||
| By: | /s/ C. Xxxx Xxxxxx
|
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| Secretary |
