EX-10.1






Exhibit 10.1




April 20, 2006



J. Michael Hamilton


2020 Walnut Street, Apt. 17L


Philadelphia, PA 19103



Dear Mike:



On behalf of Avalon Pharmaceuticals, Inc., I am pleased to offer you the position of Chief Medical
Officer. The terms of your employment are as follows:



	 	 	 
	Job Title:

	 	Chief Medical Officer
	 
	 	 
	Reporting to:

	 	Kenneth C. Carter, President & CEO
	 
	 	 
	Starting date:

	 	August 1, 2006
	 
	 	 
	Initial Starting Salary:

	 	$280,000 per annum, subject to

adjustment from time to time in the

Company’s discretion
	 
	 	 
	Sign-on bonus

	 	$15,000, less applicable taxes, which

will be paid at the first pay period

after your employment has begun.
	 
	 	 
	Classification:

	 	Exempt
	 
	 	 
	Equity:

	 	Subject to the approval of the

Compensation Committee of the Company’s

Board of Directors, the Company will

grant you options for 60,000 shares of

Avalon Pharmaceuticals, Inc. Common

Stock on August 1, 2006 under the

Company’s Stock Option Plan. These

options will vest over a five (5) year

period. The options will be available to

you retroactively only upon the

successful completion of the 90-day

Introductory Period. The terms and

conditions for any options will be those

in the Company’s Plan, or as set by the

Board.
	 
	 	 
	Bonus Plan:

	 	Eligibility and distribution of an

annual bonus is based on the achievement

of corporate and individual objectives

in accordance with the approved Avalon

Pharmaceuticals Compensation Plan. You

will be eligible for a bonus up to 35%

of your base pay depending upon the

completion of the approved goals.
	 
	 	 
	Benefits:

	 	The Company provides a comprehensive

benefits program, which includes

standard medical and dental benefits,

long- and short-term disability

coverage, a 401(K) plan, and Employee

Assistance Program, and a flexible

benefits plan. Paid time off is also

available to all employees. These

programs will be provided in accordance

with the terms and conditions set forth

in each plan, and are subject to change

at the Company’s discretion. Provided

that underwriting approves your

application, you will also receive

benefit of Avalon’s salary continuation

plan for executives.
	 
	 	 
	Termination:

	 	Upon termination for any reason, the

Company shall pay you within two weeks

of such termination, your current base

salary earned through the termination

date, plus accrued vacation, if any, and

other benefits or payments, if any, to

which you are entitled as provided in

accordance with the terms and conditions

of such benefit plan. In the event you

are terminated by the Company after the

90-day Introductory Period without

“Cause” (as herein defined), or if you

terminate your employment with the

Company for “Good Reason” (as

hereinafter defined), the Company shall

continue to pay you your bi-weekly rate

in effect at the time of termination for

a period of six (6) months

(“Severance”); provide you with

outplacement services; provide and pay

the Company’s portion of your health

insurance for a period of six months

following such termination. You shall

not be required to mitigate damages by

seeking employment elsewhere. If you are

terminated with cause, the Company shall

pay you only your current base salary

earned through the termination date,

plus accrued vacation, if any, to which

you are entitled as provided in

accordance with the terms and conditions

of such benefit plan.
	 
	 	 
	
 
	 	“Cause” shall include (i) your

conviction of a felony, either in

connection with the performance of your

obligations to the Company or otherwise,

which adversely affects your ability to

perform such obligations or materially

adversely affects the business

activities, reputation, goodwill or

image of the Company, (ii) your willful

disloyalty, deliberate dishonesty,

breach of fiduciary duty to the company

(iii) your breach of the terms of this

Agreement, or your failure or refusal to

use your best efforts to carry out any

material tasks that do not violate any

other term of this agreement, provided

such tasks are assigned to you by the

Company in accordance with the terms

hereof, which breach or failure

continues for a period of more than

thirty (30) days after your receipt of

written notice thereof from the Company,

(iv) the commission by you of any act of

fraud, embezzlement or deliberate

disregard of a rule or policy of the

Company known to you or contained in a

policy and procedure manual provided to

you which results in material loss,

damage or injury to the Company, or (v)

the material breach by you of any of the

material provisions of the

Confidentiality Assignment of Inventions

and Non-Competition Agreement.
	 
	 	 
	
 
	 	Termination of your employment by you

shall constitute termination for “Good

Reason” if such termination occurs (a)

within eighteen months of a “Change in

Control” (as hereinafter defined) (b)

within three months of a material

diminution in your responsibilities as

Chief Medical Officer, provided that

such diminution is not in connection

with the termination of your employment

for Cause, (c) within three months of

your principal work location changing to

be more than 50 miles from your then

current residence; or (d) in the event

you should die while an employee of the

Company. The Company shall notify you,

within 10 days of receipt of your notice

of intent to terminate your employment

for Good Reason, if the Company

disagrees with your intent to terminate

pursuant to this paragraph.
	 
	 	 
	
 
	 	A “Change in Control” shall be deemed to

have occurred if either: (i) any

“person” (including, without limitation,

any individual, sole proprietorship,

partnership, trust, corporation,

association, joint venture, or other

entity, whether or not incorporated), or

“group” of persons (as such terms are

used in Sections 13(d) and14(d) of the

Securities Exchange Act of 1934, as

amended (the “Exchange Act”)), becomes,

after the date hereof, the “beneficial

owner” (as defined in Rule 13d-3 under

the Exchange Act), directly or

indirectly, of securities of the Company

representing fifty percent (50%) or more

of the combined voting power of the

Company’s then outstanding securities;

(ii) during any two (2) year period,

individuals who constitute the Board of

Directors at the beginning of such

period, together with any new directors

elected or appointed during the period

whose election or appointment resulted

from a vacancy on the Board of Directors

caused by the retirement, death, or

disability of a director and whose

election or appointment was approved by

a vote of at least a majority of the

directors then still in office who were

directors at the beginning of the

period, cease for any reason to

constitute a majority of the Board of

Directors; (iii) the Company sells,

assigns, conveys, transfers, leases or

otherwise disposes of all or

substantially all of its assets to any

person; (iv) the Company consolidates

with, or merges with or into another

entity, or any entity consolidates with,

or merges with or into, the Company (a

“Merger”), in which the owners of

outstanding voting stock of the Company

immediately prior to such Merger do not

represent at least a majority of the

voting power in the surviving entity

after the Merger; or (v) the

stockholders of the Company approve a

plan of liquidation or dissolution.
	 
	 	 
	Conflict:

	 	You hereby acknowledge that you are not

a party to any agreement that in any way

prohibits or imposes any restrictions on

your employment with the Company, and

your acceptance hereof will not breach

any agreements to which you are a party.
	 
	 	 
	Employment Requirements

and Period:

	 	If you accept this position, you will be

an employee at will, meaning you are not

obligated to remain employed at the

Company for any specific period of time.

Likewise, the Company is not obligated

to employ you for any specific period.
	 
	 	 
	Other Provisions:

	 	Employment will be contingent upon your

signing the Avalon Pharmaceuticals, Inc.

Confidentiality, Assignment of

Inventions and Non-Competition

Agreement. You also agree to be bound by

all personnel policies that may be

adopted from time to time.






I look forward to having you as part of the team and believe you will play an important role in the
growth of the Company.



Sincerely,



	 	 	 
	ON BEHALF OF AVALON PHARMACEUTICALS, INC.:

	 
	 	 
	/s/ Kenneth C. Carter

Kenneth C. Carter

President & CEO

	 	

April 20, 2006

Date
	 
	 	 
	 
	 	 
	 
	 	 
	ACCEPTED:

	 	

	 
	 	 
	/s/ J. Michael Hamilton

J. Michael Hamilton

	 	April 24, 2006

Date