Document:

exv10w3

Exhibit 10.3

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made and entered into as of
October 27, 2008, among Avalon Pharmaceuticals, Inc., a Delaware corporation (the
“Company”), and Clinical Data, Inc., a Delaware corporation (the “Purchaser”).

     This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date
hereof among the Company and the Purchaser (the “Purchase Agreement”).

     The Company and the Purchaser hereby agree as follows:

     1. Definitions. Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the following meanings:

     “Advice” shall have the meaning set forth in Section 6(c).

     “Effectiveness Date” means, with respect to the Registration Statement required to be
filed hereunder, the 90th calendar day following the termination of that certain
Agreement and Plan of Merger and Reorganization, dated as of October 27, 2008, by and among the
Company, the Purchaser and API Acquisition Sub II, LLC (the 120th calendar day in the
case of any review by the Commission); provided, however, in the event the Company is notified by
the Commission that the Registration Statement will not be reviewed or is no longer subject to
further review and comments, the Effectiveness Date as to the Registration Statement shall be the
fifth (5th) Trading Day following the date on which the Company is so notified if such date
precedes the dates required above.

     “Effectiveness Period” shall have the meaning set forth in Section 2(a).

     “Event” shall have the meaning set forth in Section 2(b).

     “Event Date” shall have the meaning set forth in Section 2(b).

     “Filing Date” means, with respect to the Registration Statement required hereunder,
the 30th calendar day following the date hereof.

     “Holder” or “Holders” means the holder or holders, as the case may be, from
time to time of Registrable Securities.

     “Indemnified Party” shall have the meaning set forth in Section 5(c).

     “Indemnifying Party” shall have the meaning set forth in Section 5(c).

     “Losses” shall have the meaning set forth in Section 5(a).

     “Plan of Distribution” shall have the meaning set forth in Section 2(a).

 

 

     “Proceeding” means an action, claim, suit, investigation or proceeding (including,
without limitation, an investigation or partial proceeding, such as a deposition), whether
commenced or threatened.

     “Prospectus” means the prospectus included in the Registration Statement (including,
without limitation, a prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

     “Registrable Securities” means all of (i) the Shares issuable, (ii) the Warrant Shares
issuable, and (iii) the shares of Common Stock issued or issuable upon any stock split, dividend or
other distribution, recapitalization or similar event with respect to the foregoing.

     “Registration Statement” means the registration statement required to be filed
hereunder and including the Prospectus, amendments and supplements to the registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in the registration statement.

     “Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same purpose and effect as such Rule.

     “Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same purpose and effect as such Rule.

     “Selling Shareholder Questionnaire” shall have the meaning set forth in Section 3(a).

     2. Shelf Registration.

          (a) On or prior to the Filing Date, the Company shall prepare and file with the Commission the
Registration Statement covering the resale of the Registrable Securities as would permit or
facilitate the resale and distribution of all the Registrable Securities in the manner reasonably
requested by the Holders. The Registration Statement shall be on Form S-3 (except if the Company is
not then eligible to register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith) and shall contain (unless
otherwise directed by the Holders) substantially the “Plan of Distribution” attached hereto
as Annex A. Subject to the terms of this Agreement, the Company shall use its best efforts
to cause the Registration Statement to be declared effective under the Securities Act as promptly
as possible after the filing thereof, and shall use its best efforts to keep the Registration
Statement continuously effective under the Securities Act until all Registrable Securities covered
by the Registration Statement have been sold or may be sold pursuant to Rule 144 without volume
restrictions as determined by the counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company’s

 

 

transfer agent and the affected Holders, but in no event more than two (2) years from the
Closing Date (the “Effectiveness Period”). The Company shall telephonically request
effectiveness of the Registration Statement as of 5:00 pm Eastern Time on a Trading Day. The
Company shall immediately notify the Holders via facsimile of the effectiveness of the Registration
Statement on the same Trading Day that the Company telephonically confirms effectiveness with the
Commission. Failure to so notify the Holder within one (1) Trading Day of such confirmation shall
be deemed an Event under Section 2(b).

          (b) If: (i) the Registration Statement is not filed on or prior to the Filing Date, or (ii)
the Company fails to file with the Commission a request for acceleration in accordance with Rule
461 promulgated under the Securities Act, within five (5) Trading Days of the date that the Company
is notified (orally or in writing, whichever is earlier) by the Commission that the Registration
Statement will not be “reviewed,” or not subject to further review, or (iii) the Registration
Statement filed or required to be filed hereunder is not declared effective by the Commission by
its Effectiveness Date, or (iv) after the Effectiveness Date, the Registration Statement ceases for
any reason to remain continuously effective as to all Registrable Securities for which it is
required to be effective prior to the expiration of the Effectiveness Period, without being
promptly succeeded by a subsequent Registration Statement filed with and declared effective by the
Commission, or the Holders are not permitted to utilize the Prospectus therein to resell such
Registrable Securities for 30 consecutive calendar days or more than an aggregate of 45 calendar
days during any 12-month period (which need not be consecutive Trading Days) (any such failure or
breach being referred to as an “Event”, and for purposes of clause (i) or (iii) the date on which
such Event occurs, or for purposes of clause (ii) the date on which such five Trading Day period is
exceeded, or for purposes of clause (iv) the date on which such 30 or 45 calendar day period, as
applicable, is exceeded being referred to as “Event Date”), then in addition to any other
rights the Holders may have hereunder or under applicable law, on each such Event Date and on each
monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by
such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in
cash, as partial liquidated damages and not as a penalty, equal to 1.5% of the aggregate purchase
price paid by such Holder pursuant to the Purchase Agreement for any Shares then held by such
Holder; provided, however, that the Company shall not incur liquidated damages
under this Section 2(b) if such Event occurs after the expiration of the Effectiveness Period;
provided, further, that no liquidated damages shall be required with respect to the
Warrant Shares. If the Company fails to pay any partial liquidated damages pursuant to this Section
in full within seven days after the date payable, the Company will pay interest thereon at a rate
of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to
the Holder, accruing daily from the date such partial liquidated damages are due until such
amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant
to the terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the
cure of an Event.

     3. Registration Procedures

     In connection with the Company’s registration obligations hereunder, the Company shall:

          (a) Not less than five (5) Trading Days prior to the filing of the initial Registration
Statement, or not less than three (3) Trading Days prior to the filing of any related

 

 

Prospectus or any amendment or material supplement thereto (but not including any document
that would be incorporated or deemed to be incorporated therein by reference), the Company shall,
(i) furnish to each Holder copies of all such documents proposed to be filed, which documents will
be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to conduct a reasonable investigation within the meaning
of the Securities Act. The Company shall not file the Registration Statement or any such Prospectus
or any amendments or supplements thereto to which the Holders of a majority of the Registrable
Securities shall reasonably object in good faith, provided that, the Company is notified of such
objection in writing no later than three (3) Trading Days after the Holders have been so furnished
copies of such documents. Each Holder agrees to furnish to the Company a completed Questionnaire in
the form attached to this Agreement as Annex B (a “Selling Shareholder
Questionnaire”) not less than five (5) Trading Days prior to the Filing Date.

          (b) (i) Prepare and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement and the Prospectus used in connection therewith as may be
necessary to keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with the Commission such
additional registration statements as may be necessary in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended
or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and
as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible to any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible provide the Holders true
and complete copies of all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance (subject to the terms of this
Agreement) with the intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.

          (c) Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to
clauses (ii) through (vi) hereof, be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in
the case of (i)(A) below, not less than five (5) Trading Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one (1) Trading Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment
to the Registration Statement is proposed to be filed; (B) when the Commission notifies the Company
whether there will be a “review” of the Registration Statement and whenever the Commission comments
in writing on the Registration Statement; and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any request by the Commission
or any other Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of the issuance by the
Commission or any other federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement covering any or all of the Registrable Securities or
the initiation of any

 

 

Proceedings for that purpose; (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; (v) of the occurrence of any event or passage of time that makes the
financial statements included in the Registration Statement ineligible for inclusion therein or any
statement made in the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that requires any
revisions to the Registration Statement, Prospectus or other documents so that, in the case of the
Registration Statement or the Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading; and (vi) the occurrence or existence of any pending corporate development with
respect to the Company that the Company believes may be material and that, in the determination of
the Company, makes it not in the best interest of the Company to allow continued availability of
the Registration Statement or Prospectus; provided that any and all of such information shall
remain confidential to each Holder until such information otherwise becomes public, unless
disclosure by a Holder is required by law; provided, further, notwithstanding each Holder’s
agreement to keep such information confidential, the Holders make no acknowledgement that any such
information is material, non-public information.

          (d) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i)
any order suspending the effectiveness of the Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

          (e) Furnish to each Holder, without charge, at least one conformed copy of the Registration
Statement and each amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference to the extent requested by such
Person, and all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such documents with the
Commission.

          (f) Promptly deliver to each Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request in connection with resales by the Holder of Registrable Securities.
Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto, except after the giving on any notice pursuant to Section 3(d).

          (g) If FINRA Rule 2710 requires any broker-dealer to make a filing prior to executing a sale
by a Holder, make an Issuer Filing with the FINRA Corporate Financing Department pursuant to FINRA
Rule 2710(b)(10)(A)(i) and respond within five Trading Days to any comments received from FINRA in
connection therewith, and pay the filing fee required in connection therewith.

 

 

          (h) Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable
efforts to register or qualify or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from the registration or qualification) of such
Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in writing, to keep each
registration or qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration Statement; provided, that
the Company shall not be required to qualify generally to do business in any jurisdiction where it
is not then so qualified, subject the Company to any material tax in any such jurisdiction where it
is not then so subject or file a general consent to service of process in any such jurisdiction.

          (i) If requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to be delivered to a
transferee pursuant to the Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such Holders may
request.

          (j) Upon the occurrence of any event contemplated by Section 3(c)(v) and (c)(vi), as promptly
as reasonably possible under the circumstances, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the related Prospectus
or any document incorporated or deemed to be incorporated therein by reference, and file any other
required document so that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

          (k) Comply with all applicable rules and regulations of the Commission.

          (l) The Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by such Holder and, if
required by the Commission, the person thereof that has voting and dispositive control over the
Shares. During any periods that the Company is unable to meet its obligations hereunder with
respect to the registration of the Registrable Securities solely because any Holder fails to
furnish such information within three (3) Trading Days of the Company’s request, any liquidated
damages that are accruing at such time as to such Holder only shall be tolled and any Event that
may otherwise occur solely because of such delay shall be suspended as to such Holder only, until
such information is delivered to the Company.

     4. Registration Expenses. All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect to filings required
to be made with the Trading Market on which the Common Stock is then listed for trading, and

 

 

(B) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by
the Company in writing (including, without limitation, fees and disbursements of counsel for the
Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested by the Holders), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is reasonably requested by the holders of a majority
of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act
liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all
other Persons retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the transactions contemplated by
this Agreement (including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual audit and the fees and
expenses incurred in connection with the listing of the Registrable Securities on any securities
exchange as required hereunder. In no event shall the Company be responsible for any broker or
similar commissions or, except to the extent provided for in the Transaction Documents, any legal
fees or other costs of the Holders.

     5. Indemnification

          (a) Indemnification by the Company. The Company shall, notwithstanding any termination
of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents,
brokers (including brokers who offer and sell Registrable Securities as principal as a result of a
pledge or any failure to perform under a margin call of Common Stock), investment advisors and
employees of each of them, each Person who controls any such Holder (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, costs (including, without limitation,
reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out
of or relating to any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent that (i) such untrue
statements or omissions are based upon information regarding such Holder furnished to the Company
by such Holder expressly for use therein, or to the extent that such information relates to such
Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed
and approved by such Holder for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the
type specified in Section 3(c)(ii)-(vi), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or
defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(c). The
Company shall notify the

 

 

Holders promptly of the institution, threat or assertion of any Proceeding arising from or in
connection with the transactions contemplated by this Agreement of which the Company is aware.

          (b) Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the
extent arising out of or based upon: (x) such Holder’s failure to comply with the prospectus
delivery requirements of the Securities Act or (y) any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any form of prospectus,
or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading (1) to the extent that such untrue
statements or omissions are based upon information regarding such Holder furnished to the Company
by such Holder for use therein, or to the extent that such information relates to such Holder or
such Holder’s proposed method of distribution of Registrable Securities and was reviewed and
approved by such Holder for use in the Registration Statement (it being understood that the Holder
has approved Annex A hereto for this purpose), such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (2) in the case of an occurrence of an event of the type
specified in Section 3(c)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is outdated or defective
and prior to the receipt by such Holder of the Advice contemplated in Section 6(c).
Notwithstanding anything in this Agreement to the contrary, the liability of any Holder pursuant to
this Section 5 shall not exceed the dollar amount of the net proceeds received by such holder upon
the sale of Registrable Securities giving rise to such liability.

          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the
“Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume
the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only)
to the extent that it shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure shall have prejudiced
the Indemnifying Party.

     An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any

 

 

such Proceeding (including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall reasonably believe that a material conflict of
interest is likely to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees
and expenses of one separate counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without
its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims that are the subject
matter of such Proceeding.

     Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written
notice thereof to the Indemnifying Party; provided, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such
actions for which such Indemnified Party is not entitled to indemnification hereunder, determined
based upon the relative faults of the parties.

          (d) Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to
an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then
each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party,
in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a result of any Losses shall be
deemed to include, subject to the limitations set forth in this Agreement, any reasonable
attorneys’ or other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in accordance with its
terms.

     The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 5(d) were determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually
received by such Holder from the sale of the Registrable Securities subject to the Proceeding

 

 

exceeds the amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged omission, except in the
case of fraud by such Holder.

     The indemnity and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.

     6. Miscellaneous

          (a) Remedies. In the event of a breach by the Company or by a Holder, of any of their
obligations under this Agreement, each Holder or the Company, as the case may be, in addition to
being entitled to exercise all rights granted by law and under this Agreement, including recovery
of damages, will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific performance in respect of such breach,
it shall waive the defense that a remedy at law would be adequate.

          (b) Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement.

          (c) Discontinued Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any
event of the kind described in Section 3(c)(ii) – (vi), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration Statement until such Holder’s
receipt of the copies of the supplemented Prospectus and/or amended Registration Statement or until
it is advised in writing (the “Advice”) by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. The Company will use its best efforts to ensure that the use
of the Prospectus may be resumed as promptly as it practicable. The Company shall be entitled to
exercise its right under this Section 6(c) to suspend the availability of the Registration
Statement and Prospectus, subject to the payment of partial liquidated damages pursuant to Section
2(b), for a period not to exceed 60 days (which need not be consecutive days) in any 12-month
period.

          (d) Amendments and Waivers. The provisions of this Agreement, including the provisions
of this sentence, may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the holders of 60% of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of all of the Registrable
Securities to which such waiver or consent relates.

 

 

          (e) Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.

          (f) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and shall inure to the
benefit of each Holder. The Company may not assign its rights or obligations hereunder without the
prior written consent of all of the Holders of the then-outstanding Registrable Securities. Each
Holder may assign its respective rights hereunder in the manner and to the Persons as permitted
under the Purchase Agreement.

          (g) No Inconsistent Agreements. Neither the Company nor any of its subsidiaries has
entered, as of the date hereof, nor shall the Company or any of its subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its securities, that would have
the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Except as set forth on Schedule 6(g), neither the Company nor
any of its subsidiaries has previously entered into any agreement granting any registration rights
with respect to any of its securities to any Person that have not been satisfied in full.

          (h) Execution and Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.

          (i) Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be determined with the provisions of the Purchase
Agreement.

          (j) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive
of any remedies provided by law.

          (k) Severability. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

          (l) Headings. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.

 

 

          (m) Independent Nature of Holders’ Obligations and Rights. The obligations of each
Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and
no Holder shall be responsible in any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to
constitute the Holders as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Holders are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled
to protect and enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined as an additional party
in any proceeding for such purpose.

*************************

 

 

     IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 
	 	AVALON PHARMACEUTICALS, INC.

 	 
	 	By:  	/s/ Kenneth C. Carter
 	 
	 	Name:  	Kenneth C. Carter 	 
	 	Title:  	President and Chief Executive
Officer 	 
	 
	 	CLINICAL DATA, INC.

 	 
	 	By:  	/s/ Caesar J. Belbel
 	 
	 	Name:  	Caesar J. Belbel 	 
	 	Title:  	Executive Vice President, Chief
Legal
Officer and Secretary 	 
	 

 

 

ANNEX A

Plan of Distribution

     We are registering 5,085,820 shares of our common stock on behalf of the selling stockholders.
As used in this prospectus, “selling stockholders” includes the selling stockholders named in the
table below and pledgees, donees, transferees or other successors-in-interest selling shares
received from a named selling stockholder as a gift, partnership distribution or other
non-sale-related transfer after the date of this prospectus. The selling stockholders may, from
time to time, sell any or all of their shares of common stock on the Nasdaq Global Market or any
other stock exchange, market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The selling stockholders will act
independently of us in making decisions with respect to the timing, manner and size of each sale. A
selling stockholder may use any one or more of the following methods when selling shares:

	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer solicits the
purchaser;
	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	settlement of short sales entered into after the effective date of the registration
statement of which this prospectus is a part;
	 
	 	•	 	broker-dealers may agree with the selling stockholders to sell a specified number of
such shares at a stipulated price per share;
	 
	 	•	 	a combination of any such methods of sale;
	 
	 	•	 	through the writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise; or
	 
	 	•	 	any other method permitted pursuant to applicable law.

     Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this
prospectus, in the case of an agency transaction not in excess of a customary brokerage commission
in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown
in compliance with FINRA IM-2440.

     In connection with the sale of the common stock or interests therein, the selling stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The selling stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the

 

 

common stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with broker-dealers or other
financial institutions or the creation of one or more derivative securities which require the
delivery to such broker-dealer or other financial institution of shares offered by this prospectus,
which shares such broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

     The selling stockholders and any broker dealers or agents that are involved in selling the
shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Each selling stockholder has informed the Company that it
does not have any written or oral agreement or understanding, directly or indirectly, with any
person to distribute the common stock.

     Because selling stockholders may be deemed to be “underwriters” within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act.
In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144
under the Securities Act may be sold under Rule 144 rather than under this prospectus. There is no
underwriter or coordinating broker acting in connection with the proposed sale of the resale shares
by the selling stockholders.

     We are required to pay certain fees and expenses that we incur incident to the registration
of the shares. We have agreed to indemnify the selling stockholders against certain losses, claims,
damages and liabilities, including liabilities under the Securities Act.

     We agreed to keep this prospectus effective until the earliest to occur of (i) the date on
which the shares may be resold by the selling stockholders without registration and without regard
to any volume limitations by reason of Rule 144(e) under the Securities Act or any other rule of
similar effect, (ii) all of the shares have been sold pursuant to the prospectus or Rule 144 under
the Securities Act or any other rule of similar effect, and (iii) October 27, 2010. The resale
shares will be sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale shares may not be sold
unless they have been registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.

     Under applicable rules and regulations under the Exchange Act, any person engaged in the
distribution of the resale shares may not simultaneously engage in market making activities with
respect to the common stock for a period of two business days prior to the commencement of the
distribution. In addition, the selling stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the
timing of purchases and sales of shares of the common stock by the selling stockholders or any
other person. We will make copies of this prospectus available to the selling stockholders and have
informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the
time of the sale.

 

 

ANNEX B

AVALON PHARMACEUTICALS, INC.

Selling Securityholder Notice and Questionnaire

     The undersigned beneficial owner of common stock, par value $0.01 per share (the “Common
Stock”), of Avalon Pharmaceuticals, Inc., a Delaware corporation (the “Company”), (the
“Registrable Securities”) understands that the Company has filed or intends to file with
the Securities and Exchange Commission (the “Commission”) the Registration Statement on
Form S-3 (the “Registration Statement”) for the registration and resale under Rule 415 of
the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable
Securities, in accordance with the terms of the Registration Rights Agreement, dated as of October
27, 2008 (the “Registration Rights Agreement”), among the Company and the Purchaser. A copy
of the Registration Rights Agreement is available from the Company upon request at the address set
forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.

     Certain legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel regarding the
consequences of being named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.

NOTICE

     The undersigned beneficial owner (the “Selling Securityholder”) of Registrable
Securities hereby elects to include the Registrable Securities owned by it and listed below in Item
3 (unless otherwise specified under such Item 3) in the Registration Statement.

 

 

     The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate:

QUESTIONNAIRE

	 	 	 	 	 	 	 	 	 
	1.

	 	Name.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	(a)	 	Full Legal Name of Selling Securityholder:	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	(b)	 	Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are held:	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	(c)	 	Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by the questionnaire):	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	2.	 	Address for Notices to Selling Securityholder:	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 

	 	 	 	 	 	 	 	 	 
	Telephone:	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Fax:
	 	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 	 	 
	Contact Person:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 	 	 
	3.	 	Beneficial Ownership of Registrable Securities:	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	(a)
	 	Type and Number of Registrable Securities beneficially owned (list all shares
of Avalon Pharmaceuticals, Inc. Common Stock that you currently own):	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	   
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	   
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	   

 

 

	4.	 	Broker-Dealer Status:

	 	(a)	 	Are you a broker-dealer?

Yes      o      No      o

	 	(b)	 	If “yes” to Section 4(a), did you receive your Registrable Securities as
compensation for investment banking services to the Company?

Yes      o      No      o

          Note: If no, the Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.

	 	(c)	 	Are you an affiliate of a broker-dealer?

Yes      o      No      o

	 	(d)	 	If you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of the
purchase of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the Registrable
Securities?

Yes      o      No      o

          Note: If no, the Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.

	5.	 	Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder.
	 
	 	 	Except as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable Securities
listed above in Item 3 (list all options, warrants and convertible notes to purchase Avalon
Pharmaceuticals, Inc. Common Stock that you currently own).

	 	(a)	 	Type and Amount of Other Securities beneficially owned by the Selling
Securityholder:

	 	 	 	 

 

	6.	 	Relationships with the Company:
	 
	 	 	Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.

 

 

          State any exceptions here:

 

 

          The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the
information provided herein that may occur subsequent to the date hereof at any time while the
Registration Statement remains effective.

          By signing below, the undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 6 and the inclusion of such information in the
Registration Statement and the related prospectus and any amendments or supplements thereto. The
undersigned understands that such information will be relied upon by the Company in connection with
the preparation or amendment of the Registration Statement and the related prospectus.

          IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its duly authorized agent.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dated:	 	 	 	 	 	Beneficial Owner:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL
TO:

Hogan & Hartson L.L.P.

111 South Calvert Street

Suite 1600

Baltimore, MD 21202

Attention: Michael J. Silver

Facsimile: (410) 539-6981exv10w4

Exhibit
10.4

AVALONRX® LICENSE AGREEMENT

          This AvalonRx® License Agreement (“Agreement”) is made as of
October 27, 2008 (the “Effective Date”) by and between Avalon Pharmaceuticals, inc., a
Delaware corporation (“AVRX”), having an office at 20358 Seneca Meadows Parkway, Germantown,
Maryland 20876, and Clinical Data, Inc., a Delaware corporation (“CLDA”), having an office
at One Gateway Center, Suite 702, Newton, Massachusetts 02458. AVRX and CLDA may each be referred
to herein individually as a “Party” and collectively as the “Parties.”

Witnesseth:

     Whereas, AVRX has developed AvalonRx®, a proprietary platform that uses polymerase
chain reaction (PCR), microarray technology, robotics and bioinformatics to enable fast,
fully-automated, large-scale analysis of gene expression and its application to the discovery and
development of drugs (“AvalonRx”);

     Whereas, CLDA is a company engaged in the development and commercialization of
targeted therapeutics and predictive tests from a portfolio of proprietary biomarkers;

     Whereas, AVRX and CLDA wish to enter into this Agreement to provide CLDA with
perpetual, irrevocable, and exclusive access to AvalonRx and AvalonRx Technology (defined below),
as more fully described herein; and

     Whereas, CLDA will be entitled to retain all results it generates from use of
AvalonRx, subject to the terms and conditions of this Agreement.

     Now, Therefore, in consideration of the foregoing premises and the mutual promises,
covenants and conditions contained herein, AVRX and CLDA agree as follows:

1. Definitions

     The following capitalized terms shall have the meanings indicated for purposes of this
Agreement:

     1.1 “Affiliate” shall mean any corporation, association or other entity that directly or
indirectly controls, is controlled by or is under common control with the Party in question. As
used in this definition of “Affiliate,” the term “control” shall mean having the power to direct or
cause the direction of the management and policies of an entity, whether through direct or indirect
beneficial ownership of more than 50% of the voting or income interest in such corporation or other
business entity. Notwithstanding the foregoing, for purposes of this Agreement, the term
“Affiliate” shall not include subsidiaries in which a Party or its Affiliates owns a majority of
the ordinary voting power to elect a majority of the board of directors but is restricted from
electing such majority by contract or otherwise, until such time such restrictions are no longer in
effect.

1.

 

     1.2 “AvalonRx Technology” shall mean: (a) all discoveries, inventions, information, data,
know-how, and trade secrets (whether or not patentable) that are owned or in-licensed by AVRX as of
the Effective Date or thereafter and are used or useful with or necessary to operate AvalonRx,
including without limitation (i) used or useful with or necessary for use of any and all methods
and devices comprising AvalonRx, (ii) used or useful with or necessary for use of any hardware
related to the “High-throughput Integrated Transcriptional Screen” system; (iii) used or useful
with or necessary for use of any hardware related to the “Rapid Assessment of Compound Efficacy,
Transcriptional Change and Kinetics” system; and (iv) used or useful with or necessary for use of
any hardware related to the “Transcriptional Structure-Activity-Relationship” system, and (b) all
data and information owned or in-licensed by AVRX as of the Effective Date or thereafter and
generated by or through the use of AvalonRx or any other AvalonRx Technology, except data and
information as to which a Third Party has exclusive rights under an agreement of Schedule A (as
such agreement exists on the Effective Date) and/or data and information with respect to the
Excluded Field that has no reasonable relevance outside the Excluded Field, and (c) the Licensed
Software system, and (d) any AVRX Improvements; and (e) all Patent Rights or other intellectual
property rights owned or in-licensed by AVRX as of the Effective Date or thereafter, to the extent
they cover any of the foregoing. Notwithstanding the foregoing, any discoveries, inventions,
information, data, know-how, trade secrets, Patent Rights, or other intellectual property that is
licensed to AVRX by a Third Party (“In-Licensed IP”) shall be excluded from AvalonRx Technology if
(A) the applicable license agreement granting AVRX rights in such In-Licensed IP imposes
sublicensee obligations that are not included in this Agreement, and (B) AVRX notifies CLDA in
writing of such obligations (which notification shall specifically reference this Section 1.2), and
(C) CLDA does not agree to be bound by such obligations within thirty (30) days after CLDA receives
such written notification.

     1.3 “AVRX Improvements” has the meaning set forth in Section 2.3.

     1.4 “CLDA Improvements” has the meaning set forth in Section 2.4.

     1.5 “CLDA Results” shall mean any results, data or other information related to and/or
generated by or for CLDA or its Affiliates after the Effective Date through the use of AvalonRx and
AvalonRx Technology, including, but not limited to biomarker signatures, small molecule library
content, gene expression data and information (whether or not in the form of a database), pathway
data and information, compound profiles, analog synthesis data and information, disease models and
quantitative data and information.

     1.6 “Control” shall mean possession of the ability to grant the licenses or sublicenses or to
make the assignments as provided for herein without violating the terms of any agreement or other
arrangement with any Third Party.

     1.7 “Effective Date” shall mean the date of this Agreement first written above.

     1.8 “Excluded Field” has the meaning set forth in Section 3.3(a).

     1.9 “Improvement” shall mean any enhancement or improvement (whether or not patentable) to
AvalonRx and/or the AvalonRx Technology that is made by either Party or both Parties using AvalonRx
or the Licensed Software.

2.

 

     1.10 “Licensed Software” shall mean all software used or useful with AvalonRx or necessary to
operate AvalonRx Technology, including, but not limited to, the High-throughput Integrated
Transcriptional Screen (HITS), all compound profiling toolkits, all software required to operate
the Rapid Assessment of Compound Efficacy, Transcriptional Change and Kinetics (RACETraCK) system,
any software necessary to conduct Transcriptional structure-activity-relationships system (TSAR),
to the extent that such software is Controlled by AVRX as of the Effective Date.

     1.11 “Patent Rights” shall mean all rights associated with all United States and foreign
patents (including all reissues, extensions, confirmations, registrations, re-examinations, and
inventor’s certificates) and patent applications (including, without limitation, all substitutions,
continuations, continuations-in-part and divisionals thereof).

     1.12 “Territory” shall mean all countries in the world.

     1.13 “Third Party” shall mean any party other than CLDA, AVRX or their respective Affiliates.

2. Development; Commercialization; Intellectual Property Rights

     2.1 Development and Commercialization. Following the Effective Date, subject to AVRX’s
retained rights under Section 3.3(a) and the excluded rights under Section 3.3(b), CLDA shall have
full control, authority, and discretion over the research, development, and commercialization of
the AvalonRx and the AvalonRx Technology licensed to CLDA under this Agreement.

     2.2 Ownership of CLDA Results. CLDA shall solely own all CLDA Results. CLDA shall have no
obligation to disclose to AVRX any CLDA Results or to provide AVRX with notice of CLDA’s intent to
file patent applications thereon.

     2.3 AVRX Improvements. Subject to the licenses granted herein, AVRX shall own all rights to
the AvalonRx Technology and Improvements thereto conceived or made by AVRX employees pursuant to
the excluded rights and AVRX’s retained rights set forth in Section 3.3 (“AVRX Improvements”).
AVRX shall be responsible, in its sole discretion and at its sole cost, for the filing, prosecution
and maintenance of Patent Rights, copyrights and other proprietary rights claiming or directed to
AvalonRx Technology and AVRX Improvements thereto.

     2.4 CLDA Improvements. To the extent that any Improvements to the AvalonRx Technology are
made by employees or agents of CLDA (“CLDA Improvements”), CLDA shall own all right, title and
interest in and to such CLDA Improvements. CLDA shall be responsible, in its sole discretion and
at its sole cost, for the filing, prosecution and maintenance of Patent Rights, copyrights and
other proprietary rights claiming or directed to CLDA Improvements.

3. Licenses; Technology Transfer

     3.1 AvalonRx License to CLDA. Subject to the terms and conditions of this Agreement,
including, without limitation, payment under Section 4.1, and subject to the rights retained by
AVRX under Section 3.3(a) and the excluded rights under Section 3.3(b) AVRX

3.

 

hereby grants to CLDA a royalty-free, fully-paid, worldwide, perpetual, irrevocable,
sublicensable, exclusive (even as to AVRX) license, under the AvalonRx Technology, to use and
exploit AvalonRx and the AvalonRx Technology for any and all purposes. The licenses granted herein
under In-Licensed IP (as defined in Section 1.2) are limited to the rights and licenses that are
granted to AVRX and that can be granted by AVRX to CLDA pursuant to the terms of such in-licenses.

     3.2 Sublicensing by CLDA. CLDA shall have the right to grant sublicenses through multiple
tiers under any or all of the rights provided in Section 3.1 to its Affiliates and to Third
Parties, and CLDA shall not be required to obtain AVRX’s consent to any such sublicenses. Each
such sublicense shall be consistent with the terms of this Agreement.

     3.3 Retained and Excluded Rights. (a) Notwithstanding the exclusive license granted in
Section 3.1, AVRX retains the non-exclusive, non-sublicensable right under the AvalonRx Technology
to use and exploit AvalonRx and the AvalonRx Technology for the sole purpose of (a) performing its
obligations under the agreements listed in Schedule A (as such agreements exist on the Effective
Date) and (b) continuing development of AVN 944 and its existing development programs directed
against the following targets (without any material change in focus or direction): beta-catenin,
PLK3, myc, and survivin (the “Excluded Field”).

     (b) The Parties acknowledge and agree that AVRX has may have granted or may be obligated to
grant a license to one or more Third Parties under the AvalonRx Technology pursuant to the
agreements listed in Schedule A (as such agreements exist on the Effective Date) (collectively,
“Existing Third Party Licenses”). Nothing in Section 3.1 is intended to limit or otherwise modify
such Existing Third Party Licenses or to grant a license to CLDA that is inconsistent with the
licenses granted or that AVRX is obligated to grant under such Existing Third Party Licenses, and
the rights under the AvalonRx Technology granted to CLDA under Section 3.1 shall be construed in
such a manner so as to preserve the scope and validity of such Existing Third Party Licenses.

     3.4 Third Party Licenses. AVRX shall be solely responsible for all costs and expenses of any
licenses between a Third Party and AVRX or its Affiliates related to the AvalonRx Technology,
whether such licenses exist on the Effective Date or AVRX or its Affiliates enter into such
licenses after the Effective Date.

     3.5 Technology Transfer. AVRX shall cooperate with CLDA and shall in a timely manner provide
access and provide to CLDA or any CLDA Affiliate designated by CLDA any AvalonRx Technology
licensed to CLDA that is reasonably requested by CLDA, to the extent such AvalonRx Technology is
not already in CLDA’s possession. All costs and expenses of any such cooperation and transfer by
AVRX shall be borne by AVRX. During the term of this Agreement, at no additional cost to CLDA,
AVRX shall provide CLDA with reasonable access by teleconference or in person at AVRX’s facilities
(subject to AVRX’s customary rules and restrictions with respect to site visits by non-AVRX
personnel) to AVRX personnel having pertinent knowledge for consulting advice with respect to
AvalonRx and the AvalonRx Technology.

4.

 

4. Payments

     4.1 AvalonRx Access Fee. In consideration of the licenses granted to CLDA pursuant to
Section 3.1, CLDA shall pay to AVRX a one-time access fee of One Million U.S. Dollars
(US$1,000,000) simultaneously with the execution hereof.

     4.2 Method of Payment. All payments to be made under this Agreement to AVRX shall be made in
United States dollars in the United States to a bank account designated by AVRX by wire transfer
pursuant to the instructions set forth on Schedule B.

5. Patents

     5.1 Patent Prosecution.

          (a) AVRX shall be responsible for, at its sole expense, the prosecution and maintenance of all
Patent Rights included in the AvalonRx Technology (the “Licensed Patents”). AVRX shall deliver to
CLDA copies of all documents materially related to such prosecution or maintenance within a
reasonable period of time after such documents are prepared by or received by AVRX, and in any
event a reasonable amount of time before any such document is filed with or submitted to the
applicable patent office or agency by AVRX. AVRX shall consult with CLDA regarding the prosecution
of any patent applications in the Licensed Patents relating to the Territory, and shall incorporate
any and all reasonable comments or suggestions made by CLDA with respect to such prosecution.

          (b) If, at any time during the term of this Agreement, AVRX no longer wishes to file,
prosecute, or maintain any Patent Rights in the Licensed Patents in the Territory, it shall notify
CLDA in writing of such decision. AVRX shall provide such notice at least ninety (90) days prior
to abandonment or lapse of such Patent Rights, to the extent practicable in light of the timing of
any notice relating to such patent or patent application. Thereafter, AVRX shall, if requested in
writing by CLDA, assign its ownership interest in such patent or patent application in such
applicable country or jurisdiction to CLDA for no additional consideration. Upon such assignment,
CLDA shall assume the sole and exclusive responsibility, at its discretion, for the filing,
prosecution, and/or maintenance (as the case may be) of such patent or patent application solely at
its own expense.

     5.2 Infringement by Third Parties.

          (a) Notice. If either Party becomes aware of any actual or threatened infringement of a
Licensed Patent in the Territory, such Party shall promptly notify the other Party in writing (the
“Notice”) and the Parties shall confer in good faith regarding the most appropriate action to take
with respect to such infringement. Both Parties shall use their reasonable efforts in cooperating
with each other to terminate such infringement without litigation.

          (b) Enforcement. Unless the Parties otherwise agree, CLDA shall have the first right, but not
the obligation, to take appropriate action in its own name and under its sole control against
activities allegedly infringing any Patent Right in the Licensed Patents, to the extent such
activities fall within the scope of CLDA’s license in Section 3.1 (an “Infringing

5.

 

Activity”). If CLDA does not take any action against an Infringing Activity within one
hundred eighty (180) days after delivery of the Notice, then AVRX may, upon thirty (30) days’
notice to CLDA and provided that CLDA has not provided a commercially reasonable rationale for not
taking any action as to such an Infringing Activity, take appropriate action against such an
Infringing Activity in its own name and under its sole control.

          (c) Cooperation; Settlement. Regardless of which Party brings the action (the “Initiating
Party”), the other Party (the “Non-Initiating Party”) hereby agrees to cooperate reasonably in any
such effort, all at the Initiating Party’s expense, and the Parties shall reasonably cooperate to
address new facts or circumstances that come to light during the course of any action relating to
the Licensed Patents which may affect the need for one Party or the other to participate in such
action. The Non-Initiating Party agrees to be joined as a party plaintiff, at the Initiating
Party’s expense, in any such action if needed for the Initiating Party to bring or continue an
infringement action hereunder. The Non-Initiating Party shall, at its own expense and with its own
counsel, have the right to participate in any action brought by the Initiating Party. Neither
Party may settle any action brought under this Section 5.2, or take any other action in the course
thereof, that adversely affects the other Party’s interest in the Licensed Patents, without the
written consent of such other Party, such consent not to be unreasonably withheld.

          (d) Costs; Allocation of Recovery. The costs and expenses of conducting any infringement suit
brought under this Section 5.2 shall be borne solely by the Initiating Party, unless there is a
separate written agreement to share costs between the Parties. Except as otherwise agreed to in
writing by the Parties, any recovery realized by a Party as a result of a litigation or other
action taken under this Section 5.2 with respect to any actual or threatened infringement of a
Licensed Patent will first be applied to reimburse the Initiating Party for any actual litigation
costs and expenses borne by the Initiating Party and not otherwise reimbursed, and any amounts
remaining after such reimbursement (a “Net Recovery”) will be allocated between the Parties as
follows: (i) if the CLDA is the Initiating Party, CLDA will receive ninety percent (90%) of the
Net Recovery, and CLDA will receive ten percent (10%) of the Net Recovery; and (ii) if AVRX is the
Initiating Party, AVRX will receive sixty percent (60%) of the Net Recovery, and CLDA will receive
forty percent (40%) of the Net Recovery.

     5.3 Infringement of Third Party Rights.

          (a) Joint Conference. In the event that a product, service, or activity of a Party that
incorporates AvalonRx or the AvalonRx Technology becomes the subject of a third party claim of
patent infringement or infringement or misappropriation of any other proprietary right, anywhere in
the world (a “Third Party Claim”), and without regard to which Party is charged with said Third
Party Claim, and the venue thereof, the Parties shall promptly confer to discuss the Third Party
Claim and decide on a course of action.

          (b) Separate Defense. Unless the Parties otherwise agree, CLDA shall have the exclusive
right, at its sole expense, to defend any Third Party Claim that may be brought against CLDA and
shall have the sole right and authority to settle any such Third Party Claim; provided, however,
that CLDA shall not enter into any settlement that materially adversely affects AVRX’s rights or
interests without AVRX’s written consent, such consent not to be

6.

 

unreasonably withheld. Unless the Parties otherwise agree, AVRX shall have the exclusive
right, at its sole expense, to defend any Third Party Claim that may be brought against AVRX and
shall have the sole right and authority to settle any such Third Party Claim; provided, however,
that AVRX shall not enter into any settlement that adversely affects CLDA’s rights or interests
without CLDA’s written consent, such consent not to be unreasonably withheld. Nothing is this
Section 5.3 shall be interpreted to limit the scope of any representations set forth in Article 7
or any indemnification obligations set forth in Article 8.

6. Confidentiality

     6.1 Confidential Information. Except as specifically permitted hereunder, each Party hereby
agrees to hold in confidence and not use on behalf of itself or others all technology, data,
samples, technical and economic information (including the economic terms hereof),
commercialization, clinical and research strategies, know-how and trade secrets provided by the
other Party (the “Disclosing Party”) from and after the Effective Date and all data, results and
information developed pursuant to this Agreement that are solely owned by the Disclosing Party or
jointly owned by the Parties (collectively the “Confidential Information”), except that the term
“Confidential Information” shall not include:

          (a) information that is or becomes part of the public domain other than through a breach of
this Agreement by the non-Disclosing Party or its Affiliates;

          (b) information that is obtained after the Effective Date hereof by the non-Disclosing Party
or one of its Affiliates from any Third Party which is lawfully in possession of such Confidential
Information and not in violation of any contractual or legal obligation to the Disclosing Party
with respect to such Confidential Information;

          (c) information that was already known to the non-Disclosing Party or one or more of its
Affiliates prior to disclosure by the Disclosing Party, as evidenced by the non-Disclosing Party’s
written records; or

          (d) information that has been independently developed by the non-Disclosing Party without the
aid or use of Confidential Information as shown by competent written evidence.

          (e) The obligations of this Section 6.2 shall survive the expiration or termination of this
Agreement for a period of five (5) years.

     Notwithstanding the foregoing, the AvalonRx Technology shall be deemed to be the Confidential
Information of both parties.

     6.2 Permitted Disclosures. Confidential Information of the Disclosing Party may be disclosed
to employees, agents, consultants or sublicensees of the non-Disclosing Party or its Affiliates,
but only to the extent required to accomplish the purposes of this Agreement and only if the
non-Disclosing Party obtains prior agreement from the non-Disclosing Party’s and its Affiliates’
employees, agents, consultants and sublicensees to whom disclosure is to be made to hold in
confidence and not make use of such information for any purpose other than those permitted by this
Agreement. Notwithstanding any other provision of this Agreement, disclosure

7.

 

of Confidential Information shall not be precluded if such disclosure: (a) is in response to
a valid order of a court or other governmental body of the United States or any political
subdivision thereof; or (b) is required by law or regulation; provided, however, that the
non-Disclosing Party shall first have given reasonable prior notice to the Disclosing Party and
shall have made a reasonable effort to obtain a protective order, or to cooperate with the
Disclosing Party’s efforts, as applicable, to obtain a protective order limiting the extent of such
disclosure and requiring that the Confidential Information so disclosed be used only for the
purposes for which such order was issued or as required by such law or regulation. Each Party
shall use at least the same standard of care as it uses to protect proprietary or confidential
information of its own to ensure that such employees, agents, consultants and sublicensees do not
disclose or make any unauthorized use of the Confidential Information. Notwithstanding any other
provision of this Agreement, each Party may disclose the terms of this Agreement to lenders,
investment bankers and other financial institutions of its choice solely for purposes of financing
the business operations of such Party or in connection with a sale of its assets, a merger,
consolidation or similar transaction or in connection with a liquidation, either (i) upon the
written consent of the other Party or (ii) if the disclosing Party obtains a signed confidentiality
agreement with such financial institution with respect to such information, upon terms
substantially similar to those contained in this Article 6.

     6.3 Publicity. The Parties agree that a press release announcing the matters covered by this
Agreement may be prepared in advance and shall be subject to the mutual approval of the Parties,
which approval shall not unreasonably be withheld; provided, however, that either Party may (i)
publicize the existence and general subject matter of this Agreement consistent with previous press
releases and statements without the other Party’s approval and (ii) disclose the terms of this
Agreement only to the extent required to comply with applicable securities laws.

     6.4 Disclosure by AVRX. Notwithstanding anything else herein to the contrary, AVRX shall have
the right to use AvalonRx Technology and to disclose AvalonRx Technology to a Third Party in each
case, in the Excluded Field and/or pursuant to the agreements listed in Schedule A (as such
agreements exist on the Effective Date).

7. Representations and Warranties; Limitations

     7.1 Mutual Representations and Warranties.

          (a) Legal Authority. As of the Effective Date, each Party represents and warrants to the
other that (i) it is a corporation or entity duly organized and validly existing under the laws of
the state or other jurisdiction of incorporation or formation; (ii) it has the legal power,
authority and right to enter into this Agreement and to perform its respective obligations set
forth herein; and (iii) the execution, delivery and performance of this Agreement by such Party has
been duly authorized by all requisite corporate officials and do not require any shareholder action
or other approval.

          (b) Valid Licenses. As of the Effective Date, each Party represents and warrants to the other
Party that it has authority to grant the rights and licenses set forth in this Agreement.

8.

 

          (c) No Conflicts. As of the Effective Date, each Party represents and warrants that as of the
Effective Date of this Agreement it is not a Party to any agreement or arrangement with any Third
Party or under any obligation or restriction, including pursuant to its Certificate of
Incorporation or Bylaws or other charter documents, which in any way limits or conflicts with its
ability to fulfill any of its obligations under this Agreement.

          (d) Representation by Legal Counsel. As of the Effective Date, each Party hereto represents
that it has been represented by legal counsel in connection with the drafting of this Agreement and
acknowledges that it has participated in the drafting hereof. In interpreting and applying the
terms and provisions of this Agreement, the Parties agree that no presumption shall exist or be
implied against the Party that drafted such term or provision.

     7.2 Representations and Warranties by AVRX. As of the Effective Date, AVRX represents and
warrants to CLDA that:

          (a) IP Ownership. AVRX (i) solely owns all AvalonRx Technology (other than In-Licensed IP (as
defined in Section 1.2)), free and clear of all liens, charges and encumbrances, either written,
oral, or implied, that would affect the rights and licenses granted to CLDA hereunder; and (ii) has
not granted, and will not grant during the term of this Agreement, any license that is inconsistent
with the rights and licenses granted to CLDA under this Agreement.

          (b) Third Party Actions. No actions, suits, claims, disputes, or proceedings concerning the
AvalonRx Technology are currently pending, and except as set forth in Schedule C, the officers of
AVRX have no actual knowledge of any facts that would indicate that any such action, suit, claim,
dispute, or proceeding is likely to be instituted or asserted during the term of this Agreement.

          (c) Non-Infringement. Except as set forth in Schedule C, the officers of AVRX have no actual
knowledge that the use of AvalonRx as currently used by AVRX infringes or misappropriates the
intellectual property rights of any Third Party, and except as set forth in Schedule C, AVRX has
not received any written communication (i) regarding alleged infringement of Third Party
intellectual property by AvalonRx, the AvalonRx Technology, or its use, sale, offer for sale,
import, or manufacture, or (ii) notifying AVRX of the existence of and availability of a license to
a Third Party intellectual property relating to AvalonRx, the AvalonRx Technology, or its use,
sale, offer for sale, import, or manufacture.

     7.3 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, EACH PARTY MAKES NO
REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND THERE ARE NO
EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

8. Indemnification

     8.1 Indemnification by CLDA. CLDA shall indemnify, defend and hold harmless AVRX and its
Affiliates, and each of its and their respective employees, officers, directors and agents (each, a
“AVRX Indemnified Party”) from and against any and all liability, loss, damage,

9.

 

cost, and expense (including reasonable attorneys’ fees) (collectively, a “Liability”) which
the AVRX Indemnified Party may incur, suffer or be required to pay resulting from or arising in
connection with any Third Party action or claim based upon (i) the breach by CLDA of any covenant,
representation or warranty contained in this Agreement, or (ii) the development, manufacture, use
or commercialization by or on behalf of CLDA of any product or service discovered using AvalonRx or
the AvalonRx Technology. Notwithstanding the foregoing, CLDA shall have no obligation under this
Agreement to indemnify, defend or hold harmless any AVRX Indemnified Party with respect to claims,
demands, costs or judgments which result from willful misconduct or negligent acts or omissions of
AVRX, its Affiliates, or any of their respective employees, officers, directors or agents.

     8.2 Indemnification by AVRX. AVRX shall indemnify, defend and hold harmless CLDA and its
Affiliates, and each of its and their respective employees, officers, directors and agents (each, a
“CLDA Indemnified Party”) from and against any Liability which the CLDA Indemnified Party may
incur, suffer or be required to pay resulting from or arising in connection with any Third Party
action or claim based upon the breach by AVRX of any covenant, representation or warranty contained
in this Agreement. Notwithstanding the foregoing, AVRX shall have no obligation under this
Agreement to indemnify, defend, or hold harmless any CLDA Indemnified Party with respect to claims,
demands, costs or judgments which result from willful misconduct or negligent acts or omissions of
CLDA, its Affiliates, or any of their respective employees, officers, directors or agents.

     8.3 Conditions to Indemnification. The obligations of the indemnifying Party under
Sections 8.1 and 8.2 are conditioned upon the delivery of written notice to the indemnifying Party
of any potential Liability promptly after the indemnified Party becomes aware of such potential
Liability. The indemnifying Party shall have the right to assume the defense of any suit or claim
related to the Liability if it has assumed responsibility for the suit or claim in writing;
however, if in the reasonable judgment of the indemnified Party, such suit or claim involves an
issue or matter which could have a materially adverse effect on the business operations or assets
of the indemnified Party, the indemnified Party may waive its rights to indemnity under this
Agreement and control the defense or settlement thereof, but in no event shall any such waiver be
construed as a waiver of any indemnification rights such Party may have at law or in equity. If
the indemnifying Party defends the suit or claim, the indemnified Party may participate in (but not
control) the defense thereof at its sole cost and expense.

     8.4 Settlements. Neither Party may settle a claim or action related to a Liability without
the consent of the other Party, if such settlement would impose any monetary obligation on the
other Party or require the other Party to submit to an injunction or otherwise limit the other its
Affiliates, employees, agents, officers and directors.

9. General Provisions

     9.1 Dispute Resolution. Any material disputes or disagreements between AVRX and CLDA arising
hereunder shall be referred to the Chief Executive Officer of AVRX and the Chief Legal Officer of
CLDA or their designees for good faith resolution for a period of ninety (90) days. If the parties
are unable to resolve their dispute or disagreement, either Party may pursue other legal or
equitable remedies which may be available.

10.

 

     9.2 Assignment. This Agreement shall not be assignable by either Party without the prior
written consent of the other Party, such consent not to be unreasonably withheld or delayed, except
a Party may make such an assignment without the other Party’s consent to Affiliates or to a
successor to substantially all of the business of such Party, whether in merger, sale of stock,
sale of assets or other transaction; provided, however, that in the event of such transaction, no
intellectual property rights of any Affiliate or Third Party that is an acquiring party shall be
included in the technology licensed hereunder. This Agreement shall be binding upon and inure to
the benefit of the Parties’ successors, legal representatives and assigns.

     9.3 Non-Waiver. The waiver by either of the Parties of any breach of any provision hereof by
the other Party shall not be construed to be a waiver of any succeeding breach of such provision or
a waiver of the provision itself.

     9.4 Governing Law. This Agreement shall be construed and interpreted in accordance with the
laws of the Commonwealth of Massachsuetts other than those provisions governing conflicts of law.

     9.5 Partial Invalidity. If and to the extent that any court or tribunal of competent
jurisdiction holds any of the terms or provisions of this Agreement, or the application thereof to
any circumstances, to be invalid or unenforceable in a final nonappealable order, the Parties shall
use their best efforts to reform the portions of this Agreement declared invalid to realize the
intent of the Parties as fully as practicable, and the remainder of this Agreement and the
application of such invalid term or provision to circumstances other than those as to which it is
held invalid or unenforceable shall not be affected thereby, and each of the remaining terms and
provisions of this Agreement shall remain valid and enforceable to the fullest extent of the law.

     9.6 Notice. Any notice to be given to a Party under or in connection with this Agreement
shall be in writing and shall be (i) personally delivered, (ii) delivered by a nationally
recognized overnight courier, (iii) delivered by certified mail, postage prepaid, return receipt
requested or (iv) delivered via facsimile, with receipt confirmed, to the Party at the address set
forth below for such Party:

To CLDA:

Clinical Data, Inc.

One Gateway Center, Suite 702

Newton, Massachusetts 02458

Attn: Caesar J. Belbel, EVP and CLO

Phone: (617) 527-9933

Fax: (617) 965-0445

To AVRX:

11.

 

Avalon Pharmaceuticals, Inc.

20358 Seneca Meadows Parkway,

Germantown, Maryland 20876

Attention: Kenneth C. Carter, Ph.D., President & Chief Executive Officer

Phone: (301) 556-9900

Fax: (301) 556-9910

     or to such other address as to which the Party has given written notice thereof. Such notices
shall be deemed given upon receipt.

     9.7 Headings. The headings appearing herein have been inserted solely for the convenience of
the Parties hereto and shall not affect the construction, meaning or interpretation of this
Agreement or any of its terms and conditions.

     9.8 No Implied Licenses or Warranties. No right or license under any patent application,
issued patent, know-how or other proprietary information is granted or shall be granted by
implication. All such rights or licenses are or shall be granted only as expressly provided in the
terms of this Agreement. Neither Party warrants that (i) the activities of the Parties hereunder
shall achieve any of the research objectives contemplated by them or (ii) any clinical or other
studies will be successful.

     9.9 Force Majeure. Except for the obligation to make payment when due, no failure or omission
by the Parties hereto in the performance of any obligation of this Agreement shall be deemed a
breach of this Agreement nor shall it create any liability if the same shall arise from any cause
or causes beyond the reasonable control of the affected Party, including, but not limited to, the
following, which for purposes of this Agreement shall be regarded as beyond the control of the
Party in question: acts of nature; acts or omissions of any government; any rules, regulations, or
orders issued by any governmental authority or by any officer, department, agency or
instrumentality thereof; fire; storm; flood; earthquake; plague of epic proportion; accident; war;
rebellion; insurrection; riot; invasion; strikes; and labor lockouts; provided that the Party so
affected shall use its best efforts to avoid or remove such causes of nonperformance and shall
continue performance hereunder with the utmost dispatch whenever such causes are removed.

     9.10 Entire Agreement. This Agreement, including the exhibits and schedules hereto,
constitutes the entire understanding between the Parties with respect to the subject matter
contained herein and supersedes any and all prior agreements, understandings and arrangements
whether oral or written between the Parties relating to the subject matter hereof.

     9.11 Amendments. No amendment, change, modification or alteration of the terms and conditions
of this Agreement shall be binding upon either Party unless in writing and signed by the Party to
be charged.

     9.12 Independent Contractors. It is understood that both Parties hereto are independent
contractors and are engaged in the operation of their own respective businesses, and neither Party
hereto is to be considered the agent of the other Party for any purpose whatsoever.

12.

 

Neither Party has any authority to enter into any contracts or assume any obligations for the
other Party or make any warranties or representations on behalf of the other Party.

     9.13 Limitation of Liability. NO PARTY SHALL BE LIABLE TO ANOTHER FOR INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR SPECIAL DAMAGES, INCLUDING BUT NOT LIMITED TO LOST PROFITS, ARISING FROM OR
RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH
DAMAGES. NOTHING IN THIS SECTION 9.13 IS INTENDED TO LIMIT OR RESTRICT THE DAMAGES AVAILABLE TO A
PARTY FOR THE OTHER PARTY’S BREACH OF ITS OBLIGATIONS UNDER ARTICLE 6 OR THE RIGHTS OR OBLIGATIONS
OF ANY PARTY UNDER ARTICLE 8.

     9.14 Bankruptcy. All rights and licenses granted under this Agreement are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of Title 11, U.S. Code (the “Bankruptcy
Code”), licenses of rights to “intellectual property” as defined under Section 101 of the
Bankruptcy Code. CLDA, as a licensee of such rights under this Agreement, shall retain and may
fully exercise any or all of its rights and elections under the Bankruptcy Code. In the event of
commencement of a bankruptcy proceeding by or against AVRX under the United States Bankruptcy Code,
CLDA shall be entitled to a complete duplicate of (or complete access to, as appropriate) any
intellectual property licensed by CLDA hereunder, and all embodiments of such intellectual
property, if not already in its possession, shall be promptly delivered to CLDA.

     9.15 Counterparts. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall constitute one and the same
instrument.

13.

 

     In Witness Whereof, the Parties hereto have caused this Agreement to be executed by
their duly authorized officers as of the date first above written.

	 	 	 	 	 	 	 	 	 	 	 
	    Avalon Pharmaceuticals, Inc.	 	 	 	Clinical Data, Inc.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	    By:

	 	/s/ C. Eric Winzer
	 	 	 	By:
	 	/s/ Caesar J. Belbel	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	C. Eric Winzer
	 	 	 	Name:
	 	Caesar J. Belbel	 	 
	 

	 	Executive Vice President and
Chief Financial Officer
	 	 	 	Title:
	 	Executive Vice President, Chief
Legal officer and Secretary	 	 

14.

 

AvalonRx® License Agreement 

Between

Avalon Pharmaceuticals, inc. 

and

Clinical Data, Inc.

Dated as of October 27, 2008

 

 

Schedule A

Retained Rights Agreements

	1.	 	Collaboration and License Agreement between Avalon Pharmaceuticals, Inc. and Medimmune,
Inc. dated June 17, 2005
	 
	2.	 	Pilot Study Agreement between Novartis Institutes for BioMedical Research, Inc. and
Avalon Pharmaceuticals, Inc. dated September 9, 2005 and amendments.
	 
	3.	 	License, Development and Commercialization Agreement between Vertex Pharmaceuticals,
Inc. and Avalon Pharmaceuticals, Inc. dated February 14, 2005
	 
	4.	 	Collaboration Agreement between Avalon Pharmaceuticals, Inc. and ChemDiv, Inc. dated
July 25, 2006
	 
	5.	 	Exclusive License and Research Collaboration Agreement between Merck and Co., Inc. and
Avalon Pharmaceuticals, Inc. dated March 5, 2007
	 
	6.	 	Collaboration Agreement between Avalon Pharmaceuticals, Inc. and Medarex, Inc. dated
October 15, 2003

1.

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