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Option No.: _______




AVALON PHARMACEUTICALS, INC.

2005 OMNIBUS LONG-TERM INCENTIVE PLAN




INCENTIVE STOCK OPTION AGREEMENT




Avalon Pharmaceuticals, Inc., a Delaware corporation (the “Company”), hereby grants an option to
purchase shares of its common stock, $.01 par value, (the “Stock”) to the optionee named below.
The terms and conditions of the option are set forth in this cover sheet, in the attachment, and in
the Company’s 2005 Omnibus Long-Term Incentive Plan (the “Plan”).



Grant Date:                                           , ____




Name of Optionee:                                                                                                                           




Employee Identification Number: _____-____-_____




Number of Shares Covered by Option: ______________




Option Price per Share: $_____.___




Vesting Start Date: _________________, ____




     By signing this cover sheet, you agree to all of the terms and conditions described in the
attached Agreement and in the Plan, a copy of which is also attached. You acknowledge that you
have carefully reviewed the Plan, and agree that the Plan will control in the event any provision
of this Agreement should appear to be inconsistent.



	 	 	 	 	 	 	 
	Optionee:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	(Signature)	 	 
	 
	 	 	 	 	 	 
	Company:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	(Signature)	 	 
	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 






Attachment




This is not a stock certificate or a negotiable instrument.



 









 








AVALON PHARMACEUTICALS, INC.

2005 OMNIBUS LONG-TERM INCENTIVE PLAN




INCENTIVE STOCK OPTION AGREEMENT




	 	 	 
	Incentive Stock Option

	 	This option is intended to be an
incentive stock option under
Section 422 of the Internal Revenue
Code of 1986, as amended, and will
be interpreted accordingly. If you
cease to be an employee of the
Company, its parent or a subsidiary
(“Employee”) but continue to
provide Service, this option will
be deemed a nonstatutory stock
option three months after you cease
to be an Employee. In addition, to
the extent that all or part of this
option exceeds the $100,000 rule of
Section 422(d) of the Internal
Revenue Code, this option or the
lesser excess part will be deemed
to be a nonstatutory stock option.
	 
	 	 
	Vesting

	 	This option is only exercisable
before it expires and then only
with respect to the vested portion
of the option. Subject to the
preceding sentence, you may
exercise this option, in whole or
in part, to purchase a whole number
of vested shares not less than 100
shares, unless the number of shares
purchased is the total number
available for purchase under the
option, by following the procedures
set forth in the Plan and below in
this Agreement.
	 
	 	 
	 

	 	[ Vesting to be determined by
Compensation Committee and/or Board
for each option grant.]
	 
	 	 
	 

	 	No additional shares of Stock will
vest after your Service has
terminated for any reason.
	 
	 	 
	Term

	 	Your option will expire in any
event at the close of business at
Company headquarters on the day
before the 10th anniversary of the
Grant Date, as shown on the cover
sheet; provided, however, that if
you are a Ten Percent Stockholder,
an option granted to you that is
intended to be an incentive stock
option will expire at the close of
business at Company headquarters on
the day before the 5th anniversary
of the Grant Date. Your option
will expire earlier if your Service
terminates, as described below.
	 
	 	 
	Regular Termination

	 	If your Service terminates for any
reason, other than death,
Disability or Cause, then your
option will expire at the close of
business at Company headquarters on
the 90th day after your
termination date.
	 
	 	 
	Termination for

Cause

	 	If your Service is terminated for
Cause, then you shall immediately
forfeit all rights to your option
and the option shall immediately
expire.






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	Death

	 	If your Service terminates because
of your death, then your option
will expire at the close of
business at Company headquarters on
the date twelve (12) months after
the date of death. During that
twelve month period, your estate or
heirs may exercise the vested
portion of your option.
	 
	 	 
	 

	 	In addition, if you die during the
90-day period described in
connection with a regular
termination (i.e., a termination of
your Service not on account of your
death, Disability or Cause), and a
vested portion of your option has
not yet been exercised, then your
option will instead expire on the
date twelve (12) months after your
termination date. In such a case,
during the period following your
death up to the date twelve (12)
months after your termination date,
your estate or heirs may exercise
the vested portion of your option.
	 
	 	 
	Disability

	 	If your Service terminates because
of your Disability, then your
option will expire at the close of
business at Company headquarters on
the date twelve (12) months after
your termination date.
	 
	 	 
	Leaves of Absence

	 	For purposes of this option, your
Service does not terminate when you
go on a bona fide employee leave of
absence that was approved by the
Company in writing, if the terms of
the leave provide for continued
Service crediting, or when
continued Service crediting is
required by applicable law.
However, your Service will be
treated as terminating 90 days
after you went on employee leave,
unless your right to return to
active work is guaranteed by law or
by a contract. Your Service
terminates in any event when the
approved leave ends unless you
immediately return to active
employee work.
	 
	 	 
	 

	 	The Company determines, in its sole
discretion, which leaves count for
this purpose, and when your Service
terminates for all purposes under
the Plan.
	 
	 	 
	Notice of Exercise

	 	When you wish to exercise this
option, you must notify the Company
by filing the proper “Notice of
Exercise” form at the address given
on the form. Your notice must
specify how many shares you wish to
purchase (in a parcel of at least
100 shares generally). Your notice
must also specify how your shares
of Stock should be registered (in
your name only or in your and your
spouse’s names as joint tenants
with right of survivorship). The
notice will be effective when it is
received by the Company.
	 
	 	 
	 

	 	If someone else wants to exercise
this option after your death, that
person must prove to the Company’s
satisfaction that he or she is
entitled to do so.
	 
	 	 
	Form of Payment

	 	When you submit your notice of
exercise, you must include






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	 	payment
of the option price for the shares
you are purchasing. Payment may be
made in one (or a combination) of
the following forms:
	 
	 	 
	 

	 	• Cash, your personal check,
a cashier’s check, a money order or
another cash equivalent acceptable
to the Company.
	 
	 	 
	 

	 	•Shares of Stock which have
already been owned by you for more
than six months and which are
surrendered to the Company. The
value of the shares, determined as
of the effective date of the option
exercise, will be applied to the
option price.
	 
	 	 
	 

	 	• By delivery (on a form
prescribed by the Company) of an
irrevocable direction to a licensed
securities broker acceptable to the
Company to sell Stock and to
deliver all or part of the sale
proceeds to the Company in payment
of the aggregate option price and
any withholding taxes (if approved
in advance by the Compensation
Committee of the Board if you are
either an executive officer or a
director of the Company).
	 
	 	 
	Withholding Taxes

	 	You will not be allowed to exercise
this option unless you make
acceptable arrangements to pay any
withholding or other taxes that may
be due as a result of the option
exercise or sale of Stock acquired
under this option. In the event
that the Company determines that
any federal, state, local or
foreign tax or withholding payment
is required relating to the
exercise or sale of shares arising
from this grant, the Company shall
have the right to require such
payments from you, or withhold such
amounts from other payments due to
you from the Company or any
Affiliate.
	 
	 	 
	Transfer of Option

	 	During your lifetime, only you (or,
in the event of your legal
incapacity or incompetency, your
guardian or legal representative)
may exercise the option. You
cannot transfer or assign this
option. For instance, you may not
sell this option or use it as
security for a loan. If you
attempt to do any of these things,
this option will immediately become
invalid. You may, however, dispose
of this option in your will or it
may be transferred upon your death
by the laws of descent and
distribution.
	 
	 	 
	 

	 	Regardless of any marital property
settlement agreement, the Company
is not obligated to honor a notice
of exercise from your spouse, nor
is the Company obligated to
recognize your spouse’s interest in
your option in any other way.
	 
	 	 
	Retention Rights

	 	Neither your option nor this
Agreement give you the right to be
retained by the Company (or any
Parent, Subsidiaries or
Affiliates)
in any capacity. The Company (and
any Parent, Subsidiaries or






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	 	Affiliates) reserve the right to
terminate your Service at any time
and for any reason.
	 
	 	 
	Shareholder Rights

	 	You, or your estate or heirs, have
no rights as a shareholder of the
Company until a certificate for
your option’s shares has been
issued (or an appropriate book
entry has been made). No
adjustments are made for dividends
or other rights if the applicable
record date occurs before your
stock certificate is issued (or an
appropriate book entry has been
made), except as described in the
Plan.
	 
	 	 
	Adjustments

	 	In the event of a stock split, a
stock dividend or a similar change
in the Stock, the number of shares
covered by this option and the
option price per share shall be
adjusted (and rounded down to the
nearest whole number) if required
pursuant to the Plan. Your option
shall be subject to the terms of
the agreement of merger,
liquidation or reorganization in
the event the Company is subject to
such corporate activity.
	 
	 	 
	Applicable Law

	 	This Agreement will be interpreted
and enforced under the laws of the
State of Delaware, other than any
conflicts or choice of law rule or
principle that might otherwise
refer construction or
interpretation of this Agreement to
the substantive law of another
jurisdiction.
	 
	 	 
	The Plan

	 	The text of the Plan is
incorporated in this Agreement by
reference. Certain capitalized
terms used in this Agreement are
defined in the Plan, and have the
meaning set forth in the Plan.
	 
	 	 
	 

	 	This Agreement and the Plan
constitute the entire understanding
between you and the Company
regarding this option. Any prior
agreements, commitments or
negotiations concerning this option
are superseded.
	 
	 	 
	Data Privacy

	 	In order to administer the Plan,
the Company may process personal
data about you. Such data includes
but is not limited to the
information provided in this
Agreement and any changes thereto,
other appropriate personal and
financial data about you such as
home address and business addresses
and other contact information,
payroll information and any other
information that might be deemed
appropriate by the Company to
facilitate the administration of
the Plan.
	 
	 	 
	 

	 	By accepting this option, you give
explicit consent to the Company to
process any such personal data.
You also give explicit consent to
the Company to transfer any such
personal data outside the country
in which you work or are employed,
including, with respect to non-U.S.
resident Optionees, to the United
States, to transferees who shall
include the Company and other
persons who are






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	 	designated by the
Company to administer the Plan.
	 
	 	 
	Consent to Electronic Delivery

	 	The Company may choose to deliver
certain statutory materials
relating to the Plan in electronic
form. By accepting this option
grant you agree that the Company
may deliver the Plan prospectus and
the Company’s annual report to you
in an electronic format. If at any
time you would prefer to receive
paper copies of these documents, as
you are entitled to, the Company
would be pleased to provide copies.
Please contact Thomas G. David,
General Counsel and Senior Vice
President of Operations at Avalon
Pharmaceuticals, Inc., 20358 Seneca
Meadows Parkway, Germantown,
Maryland 20876, (301) 556-9886 to
request paper copies of these
documents.
	 
	 	 
	Certain Dispositions

	 	If you sell or otherwise dispose of
Stock acquired pursuant to the
exercise of this option sooner than
the one year anniversary of the
date you acquired the Stock, then
you agree to notify the Company in
writing of the date of sale or
disposition, the number of share of
Stock sold or disposed of and the
sale price per share within 30 days
of such sale or disposition.






By signing the cover sheet of this Agreement, you agree to all of the terms and
conditions described above and in the Plan.




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