Document:

exv10w2

 

COLLABORATION AND LICENSE AGREEMENT

     This Agreement (“Agreement”) dated December 12, 2003, and effective as of January 5, 2004 (the “Effective Date”), is
by and between Avalon Pharmaceuticals, Inc., a Delaware Corporation, located at 20358 Seneca Meadows Parkway,
Germantown, Maryland 20876 (“Avalon”), and Aventis Pharmaceuticals Inc., a Delaware corporation with a place
of business at 200 Crossing Boulevard, Bridgewater, New Jersey 08807 (“Aventis”).

     WHEREAS, Avalon has technology with respect to identifying potential pharmaceutical targets to be
used for discovering, researching and developing pharmaceutical products; and

     WHEREAS, Aventis desires to collaborate with Avalon and provide funding to Avalon with respect
to the identification, discovery and validation of druggable screening targets using Avalon’s
proprietary molecular cytogenetics platform and Avalon’s and Aventis’ genomics, oncology and target
validation capabilities, all pursuant to the terms and provisions of this Agreement.

     NOW, THEREFORE, in consideration of the mutual promises and other good and valuable consideration,
the Parties agree as follows:

 

* The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

 

 

ARTICLE 1

DEFINITIONS

     The terms used in thus Agreement have the following meanings:

     1.1 “Advanced SQT” means an SQT that Aventis has determined has satisfied the criteria set
forth on Schedule 1.1.

     1.2 “Affiliate”, with respect to any Party, means any Person whether de jure or de facto,
controlling, controlled by, or under common control with, such Party. For these purposes,
“control” shall be presumed to exist if one of the following conditions is net: (a) direct or
indirect ownership of more than fifty percent (50%) of the stock or shares having the right to vote
for the election of directors, and (b) in the case of non-corporate entities, direct or indirect
ownership of more than fifty percent (50%) of the equity interest with the power to direct the
management and policies of such non-corporate entities or status as the general partner in the case
of any partnership. The Parties acknowledge that in the case of certain entities organized under
the laws of certain countries outside of the United States, the maximum percentage ownership
permitted by law for a foreign investor may be fifty percent (50%) or less, and that in such case
such lower percentage shall be substituted in the preceding sentence, provided that such owner has
the power to direct the management and policies of such entity.

     1.3 “Amplicon” means a specific region of chromosomal DNA that is amplified in a cancer
sample, as determined by comparative genomics hybridization.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

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     1.4 “Avalon Know-How” means information, trade secrets, know-how, inventions, and data that
(a) is Controlled by Avalon and exists as of the Effective Date, or (b) is created solely by Avalon
in Avalon’s performance of Research under an Research Plan during the Research Term and that, in
each of the foregoing cases, relates to or is useful with respect to a DRG or use thereof in
Screening. For the avoidance of doubt, Avalon Know-How does not include information, trade
secrets, know-how, inventions and data that is directed to discovering or identifying Targets.

     1.5 “Avalon Patent(s)” means any and all Patent Rights in the Territory that claim a DRG or
the manufacture of a DRG or use of a DRG in Screening, or use of a DRG in the Field, which Patent
Rights are Controlled by Avalon. For the avoidance of doubt, Avalon Patents do not include Patent
Rights to the extent that they claim methods or products for discovering or identifying Targets.

     1.6 “Avalon Technology” means, individually and collectively, Avalon Patent(s) and Avalon
Know-How.

     1.7 “Avalon Validation Activities” means the activities set forth on Schedule 1.7.

     1.8 “Aventis Target Technology” has the meaning set forth in Section 3.6(e).

     1.9 “Breaching Party” has the meaning set forth in Section 10.2(a).

     1.10 “Change of Control” means (a) a merger or consolidation of Avalon and any Third Party
which results in the voting securities of Avalon outstanding immediately prior thereto ceasing to
represent more than fifty percent (50%) of the combined voting power of the surviving

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

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entity immediately after such merger or consolidation, or (b) any Third Party, together with
its affiliates, becoming the beneficial owner of fifty percent (50%) or more of the combined voting
power of the outstanding securities of Avalon, or (c) the sale or other transfer to a Third Party
of all or substantially all of Avalon’s assets which relate to this Agreement.

     1.11 “Collaboration Product” means a compound(s) or molecule, (i) the pharmacological affinity
or activity of which, or the utility of which as a pharmaceutical agent, is because such compound
or molecule affects the activity, inactivity or function of an Advanced SQT.

     1.12 “Commercialization” or “Commercialize” means activities directed to obtaining pricing and
reimbursement approvals, manufacturing, marketing, promoting, detailing, distributing, importing or
selling a Collaboration Product.

     1.13 “Commercially Reasonable Efforts” means, with respect to a Party, the efforts and
resources which would be used by that Party consistent with its normal business practices with
respect to a product or potential product at a similar stage in its development or product life and
of similar market potential *.

     1.14 “Confidential Information” means all proprietary materials, know-how or other information
(whether or not patentable) regarding a Party’s technology, products, business information or
objectives, which is designated as confidential in writing by the disclosing Party, whether by
letter or by the use of an appropriate stamp or legend, prior to or at the time any such material,
know-how or other information is disclosed by the disclosing Party to the other Party.
Notwithstanding the foregoing to the contrary, materials, know-how or other information which is

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

4

 

orally, electronically or visually disclosed by a Party, or is disclosed in writing without an
appropriate letter, stamp or legend, shall constitute Confidential Information of a Party (a) if
the disclosing Party, within thirty (30) days after such disclosure, delivers to the other Party a
written document or documents describing the materials, know-how or other information and
referencing the place and date of such oral, visual, electronic or written disclosure and the names
of the persons to whom such disclosure was made, or (b) such information is of the type that is
customarily considered to be confidential information by persons engaged in activities that are
substantially similar to the activities being engaged in by the Parties. Notwithstanding the
foregoing, (x) any technical or financial information of a Party disclosed at a meeting of the
Research Committee (or any subcommittees or project teams of the foregoing) or disclosed through an
audit report shall constitute Confidential Information of such Party and (y) the terms of this
Agreement to the extent not disclosed in a public filing shall constitute Confidential Information
of each Party unless otherwise specified. Confidential Information shall not include any such
information that the Receiving Party can demonstrate:

     (a) was known to the Receiving Party at the time of disclosure by the Disclosing Party
(other than through receipt from the Disclosing Party or its Affiliates), as can be
established by written documentation; or

     (b) was generally available to the public or was otherwise part of the public domain at
the time of such disclosure or became generally available to the public or otherwise part of
the public domain after such disclosure other than through any act or omission of the
Deceiving Party in breach of this Agreement; or

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

5

 

     (c) became known to the Receiving Party after disclosure by the Disclosing Party
through a non-confidential disclosure from a source that, to the reasonable knowledge of the
Receiving Person, was not under an obligation of confidentiality to the Disclosing Party.

     1.15 “Control” or “Controlled” means the possession (whether by ownership or license, other
than the licenses granted herein) by a Party of the ability to grant licenses or sublicenses as
provided herein thereto without breaching an agreement with a Third Party.

     1.16 “Cytogenetics” means the study of chromosomal gene amplifications and/or rearrangement in
the field of oncology.

     1.17 “Develop” or “Development” means preclinical and clinical drug and/or biological
development activities, including (a) test method development and stability testing, toxicology,
formulation, quality assurance/quality control development, statistical analysis, clinical studies
and regulatory affairs, approval and registration, in each case, of a Collaboration Product, (b)
Screening against Advanced SQTs, and (c) optimization of Collaboration Products for the purpose of
initiating pre-clinical and clinical work with respect to Collaboration Products for Advanced SQTs.

     1.18 “Disclosing Party” means a Party that discloses its Confidential Information to the other
Party.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

6

 

     1.19 “DRG” means a Target that has been accepted by the Research Committee for inclusion in
the Research Program. For the avoidance of doubt, each SQT and each Advanced SQT is a DRG and no
Excluded Target is a DRG.

     1.20 “Early Development Candidate” means a Collaboration Product that meets the “EDC” criteria
contained in Schedule 1.20.

     1.21 “Excluded Target” has the meaning set forth in Section 3.5(a).

     1.22 “Field” means the treatment and/or prevention of disease in humans and diagnostics where
such diagnostic is useful in the promotion of a Collaboration Product.

     1.23 “FDA” means the United States Food and Drug Administration, or the successor thereto or
an equivalent organization in Europe or Japan.

     1.24 “FTE” means a full time equivalent person year consisting of * of technical or scientific
work on or directly related to Research by persons who qualify as Avalon Researchers.

     1.25 “First Commercial Sales” means on a country-by-country and Collaboration
Product-by-Collaboration Product basis, the first sale by Aventis or its Affiliate or their
Sublicensee, distributor or co-marketer of Collaboration Product to a Third Party in a country
after Regulatory Approval has been obtained from the appropriate regulatory agency(ies). Sales for
test marketing, sampling and promotional uses, clinical trial purposes or compassionate or similar
use shall not be considered to constitute a First Commercial Sale.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

7

 

     1.26 “Gene Set” means two or more genes, or any portion thereof (e.g., oligonucleotides) that
are used in the analysis of the effect of any treatment on the gene expression pattern in a test
cell, tissue or organism.

     1.27 “IND” means an Investigational New Drug application filed with the FDA to obtain approval
to conduct human clinical trials of the Product for an indication.

     1.28 “Indemnitee” has the meaning set forth in Section 8.3(a).

     1.29 “Indemnitor” has the meaning set forth in Section 8.3(a).

     1.30 “Infringing DRG” has the meaning set forth in Section 7.2(a).

     1.31 “Joint Rights” has the meaning ascribed thereto in Section 7.5(a)(iii).

     1.32 “NDA” means a New Drug application or equivalent thereof that is fled at the FDA.

     1.33 “Party” means Avalon or Aventis and, when used in the plural, shall mean Avalon and
Aventis.

     1.34 “Patent Rights” means all existing patents and patent applications and all patent
applications hereafter fled, including any continuations, continuations-in-part, divisions,
provisionals or any substitute applications, any patent issued with respect to any such patent
applications, any reissue, reexamination, renewal or extension (including any supplemental patent
certificate) of any such patent, and any confirmation patent or registration patent or patent of
addition based on any such patent, and all foreign counterparts of any of the foregoing.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

8

 

     1.35 “Person” means any natural person, corporation, firm, business trust, joint venture,
association, organization, company, partnership or other business entity, or any government or any
agency or political subdivision thereof.

     1.36 “Phase I Clinical Trial” means a study or trial as defined in Federal Regulation 21
C.F.R. 312.21 or successor thereto or if conducted outside the United States corresponding laws
outside the United States.

     1.37 “Phase IIB Clinical Trial” means, as to a Collaboration Product for a particular
indication, a controlled and lawful dose ranging clinical trial conducted inside and/or outside the
United States in humans to evaluate further the efficacy and safety of a candidate drug in a
targeted patient population and to define the optimal dosing regimen.

     1.38 “Phase III Study” means, as to a Collaboration Product for a particular indication, a
controlled and lawful study conducted inside and/or outside the United States in humans of the
safety and efficacy of such product for such indication, which is prospectively designed to
demonstrate statistically whether such product is safe and effective for use in such indication in
a manner sufficient to file an NDA to obtain regulatory approval to market and sell that product
for the indication under investigation in such study.

     1.39 “Receiving Party” means a Party that receives Confidential Information from a Disclosing
Party, including, but not limited to, employees, directors and officers of the Receiving Party.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

9

 

     1.40 “Regulatory Approval” means any and all approvals (including any applicable governmental
price and reimbursement approvals), licenses, registrations, or authorizations of any federal,
national, multinational, state, provincial or local regulatory agency, department, bureau or other
governmental entity necessary for the manufacture, use, storage, import, transport, promotion,
marketing and sale of a product in a country or group of countries.

     1.41 “Research” (a) in the case of Avalon, means *.

     1.42 “Research Committee” means the committee established in Section 3.1.

     1.43 “Research Plan” means the plan and budget attached as Schedule l .43.

     1.44 “Research Program” means the collaborative research program to be conducted by the
Parties in accordance with the Research Plan.

     1.45 “Research Term” has the meaning set forth in Section 3.2(b).

     1.46 “Reversion Product” means a compound or molecule that is identified by Avalon or its
licensee (other than Aventis) by Screening against a Reversion Target. In no event shall a
Reversion Product include any compound, molecule or antibody Controlled by Aventis.

     1.47 “Reversion Target” means a DRG that reverts to Avalon under Section 3.6(c). For clarity,
“Reversion Target” shall not include any Excluded Target nor any Aventis Target.

     1.48 “Screen” means use of a Target to determine the effect of one or more compounds or
molecules on the activity, inactivity or function of the Target. It is expressly understood that a
Screen does not include the use of a DRG as part of a Gene Set.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

10

 

     1.49 “SQT” means a DRG that has been selected by Aventis pursuant to Section 3.5 (b).

     1.50 “Sublicensee” means a Third Party to which Aventis has granted sublicense rights under
the licenses granted to Aventis hereunder or to which Aventis has granted rights to a Collaboration
Product.

     1.51 “Target” means a protein whose function, activity or inactivity is associated with cancer
in humans and the gene that encodes such protein and that is identified by Research under the
Research Plan during the Research Term or that was identified prior to the Effective Date by the
use of Cytogenetics.

     1.52 “Term” means the period beginning on the Effective Date and ending on the earlier of the
date on which this Agreement expires under Section 10.1 or the date upon which this Agreement
otherwise terminates.

     1.53 “Territory” means all countries of the world.

     1.54 “Third Party” means any Person who or which is neither a Party nor, with respect to a
Party, an Affiliate of that Party.

     1.55 “Third Party Claim” has the meaning set forth in Section 8.3(a).

ARTICLE 2

GRANT OF LICENSES AND EXCLUSIVITY

     2.1 Licenses.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

11

 

     (a) Except as provided in Section 2.4(c), Avalon grants to Aventis an exclusive license
(even as to Avalon and its Affiliates) in the Territory under Avalon Technology to make,
have made and use each DRG that is not a Reversion Target in a Screen for Research and for
the Development of one or more Collaboration Products in the Field.

     (b) Except as provided in Section 2.4(c), Avalon grants to Aventis an exclusive license
(even as to Avalon and its Affiliates) in the Territory under Avalon Technology to make,
have made and use each DRG that is not a Reversion Target, in each case only for
Commercialization of one or more Collaboration Products in the Field.

     (c) Aventis agrees that it will use Avalon Technology only as licensed under this
Agreement in accordance with the terns and conditions of this Agreement and, in the case of
the license granted in Section 2.1 (a) and (b), only for so long as licensed under this
Agreement. For the avoidance of doubt, Aventis shall not obtain any rights or licenses
under this Agreement to use any Reversion Targets,

     (d) It is expressly understood and agreed that the only licenses granted under this
Agreement are the licenses expressly granted under this Agreement and that there is no
implied license or license by estoppel.

     2.2 Sublicensing by Aventis. Aventis shall have the right to grant sublicenses to Third Parties
under the license granted pursuant to Section 2.1 provided that Aventis shall be responsible for
(i) the making of all
payments due, and the making of reports under this Agreement, with respect to milestones achieved
and sales of Collaboration Product by its Sublicensees and (ii) their

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

12

 

compliance with all
applicable licensing terms of this Agreement to the extent that they are applicable to a
Sublicensee.

     2.3 Use of Affiliates. The licenses granted pursuant to Section 2.1 include the right of Aventis to
use its Affiliates in exercising such rights and carrying out its obligations under this Agreement.

     2.4 Exclusivity.

     (a) During the Term, except as provided in Section 2.4(b), neither Avalon nor its
Affiliates may, directly or indirectly, either alone or with a Third Party, conduct any
research, development, manufacturing or commercialization activity directed at any DRG, SQT
or Advanced SQT, except (i) in the performance of Research under this Agreement and (ii) in
exercising Avalon’s rights to Reversion Targets and Reversion Products.

     (b) During the Term, neither Aventis nor its Affiliates may, in the field of *,
directly or indirectly, alone or with a Third Party, (i) * or (ii) *. For the avoidance of
doubt, all licenses granted to Aventis herein with respect to a Reversion Target terminate
at the time the target reverts in accordance with Section 3.6, and all related Avalon
Know-How shall be considered Confidential Information of Avalon pursuant to Article 9.

     (c) Notwithstanding anything else to the contrary, it is expressly understood that
Avalon and its Affiliates and their collaborators and licensees shall have the right to

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

13

 

include a gene (or a portion thereof) that is a DRG, SQT or Advanced SQT in a Gene Set for
the purpose of (i) identifying compounds and molecules that affect expression and/or
transcription of such genes and/or (ii) identifying characteristics and/or properties of a
compound or molecule.

ARTICLE 3

RESEARCH

     3.1 Research Committee. Within * after the Effective Date, the Parties shall form a Research
Committee. The Research Committee shall consist of representatives of each Party and shall be
responsible for overall supervision of Research. Each Party shall be responsible for its own
expenses incurred in connection with attendance by its personnel at any meeting of the Research
Committee. The operation and authority of the Research Committee shall be as follows:

     (a) Supervision. The Research Committee shall have general supervision over the
strategic direction and management of Research under the Research Plan. The Research
Committee shall periodically review each such plan from a strategic perspective and propose
changes as it deems necessary to accomplish the Research.

     (b) Representation. Avalon and Aventis shall each appoint at least one (1)
representative as their representative to serve on the Research Committee and each Party
may designate additional or remove existing representative from time to time. The
representative of a Party may be changed from time to time at the discretion of that Party
upon written notification by the Party making such change to the other.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

14

 

     (c) Meetings. The Research Committee shall meet from time to time as determined by the
Research Committee members. It is expected that the Research Committee shall meet at least
*. The location of Research Committee meetings shall alternate between the offices of each
of the Parties, unless otherwise agreed by the Parties. Minutes of all meetings setting
forth decisions of the Research Committee will be prepared and circulated by the Party
hosting the meeting within * of such meeting. Such minutes will become official when agreed
to by all members of the Research Committee. If the Research Committee members all agree, a
meeting may be held by means of telephone conference or similar communications equipment by
means of which all persons participating in the meeting can hear each other. A quorum for a
meeting shall require at least one representative of Avalon and one representative of
Aventis. At each meeting, Aventis and Avalon will provide a report on the status of
Research and Development at each Research Committee meeting.

     (d) Decisions. Decisions of the Research Committee shall be made at meetings by
unanimous vote, with the representatives of each Party having one collective vote. If the
Research Committee is unable to reach a unanimous vote on any issue within * after it has
been submitted to a vote, Aventis shall have the right to cast the deciding vote.

     3.2 Research Program.

     (a) Objectives. The intent of the Parties with respect to Research under this
Agreement is as follows:

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

15

 

     (i) To discover and validate a minimum of * Advanced SQTs.

     (ii) Avalon will perform Research in accordance with the Research Plan to
identify Targets which will be presented to the Research Committee and will perform
Avalon Validation Activities. Avalon and Aventis will perform Research to determine
the suitability of DRGs for drug discovery.

     (iii) Aventis will be responsible for establishing a Screen for an Advanced SQT
and for use of the Screen.

     (iv) Aventis will be responsible for Developing Collaboration Product.

     (b) Term. The term of the Research Program (the “Research Term”) shall commence on
execution of the Agreement and end one calendar year later, unless (a) earlier terminated
pursuant to the provisions of Article 10 or (b) extended by mutual agreement of both
Parties.

     3.3 Research Funding

     (a) Subject to Section 3.3(e), Avalon shall use Commercially Reasonable Efforts to
perform its Research obligations under the Research Program in accordance with the Research
Plan. Subject to Section 3.3(e), as part of such efforts, during the
Research Term, Avalon shall commit the personnel and facilities necessary to carry out
its obligations under the Research Plan.

     (b) AVENTIS shall pay to AVALON * as support for the Research, pursuant to the
following schedule, which amounts shall be non-refundable and non-creditable,

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

16

 

and due and
payable within * after the following events: (i) * upon the * of the execution of this
Agreement; (ii) * upon the * of the execution of this Agreement; (iii) * upon the * of the
execution of this Agreement; and (iv) * upon the * of the execution of this Agreement.

     (c) Each Party shall have caused or shall cause each participant in the Research
Program to execute such Party’s standard non-disclosure and invention assignment agreement.

     (d) Each Party shall identify one of its representatives to serve as a program
coordinator with responsibility for overseeing that Party’s day-to-day activities relating
to the Research Program and to serve as a contact person for coordinating Research Program
activities between the Parties.

     (e) Avalon shall not be required: (i) to perform any research activities other than
Research, (ii) to provide more than *, (iii) to perform Research other than under the
Research Plan and as funded by Aventis under this Agreement, or (ii) to perform any
activities which the parties mutually agree that a Third Party will perform on behalf of
Avalon, and which shall be paid for by Aventis in addition to the funding provided under
Section 3.3(b) above.

     (f) Aventis understands and agrees that Avalon shall not be liable to Aventis for
failing to discover and validate * Advanced SATs or to provide a specified number of SATs.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

17

 

     3.4 Amplicons, DRGs and Know-How. During the Research Term, Avalon shall present to the
Research Committee for inclusion in the Research Program an initial group of * in its Control which
Avalon reasonably determines, based on its scientific knowledge at such time and the criteria
provided in the Research Plan, are reasonably likely to have utility in the Research Program.
Avalon and Aventis shall conduct the Research Program according to the Research Plan. Aventis
shall select Amplicons for inclusion in the Research Program, designate DRGs for validation as SQTs
and designate SQT’s for validation as Advanced SQTs according to the terms of the Research Plan.
In no event shall Avalon have any obligation to provide * for consideration by Aventis. Avalon
shall also provide Aventis with Avalon Know-How that is currently in the possession of Avalon and
that comes into the possession of Avalon during the Research Term.

     3.5 Inclusion of Targets as DRGs; Excluded Targets, SQTs and Advanced SQTs.

     (a) When Avalon presents a Target to the Research Committee for inclusion in the
Research Program as a DRG, it shall do so in writing and Avalon shall present to the
Research Committee in writing all information and material of which Avalon is aware or which
is Controlled by Avalon relating to the potential utility of the Target for Screening in the
Research Program. Within * from the date a Target is presented to the Research Committee,
Aventis shall provide written notice to the Research Committee if
such Target is then the subject of an Aventis internal program as an SQT in the field
of oncology or is subject to an agreement between Aventis and a Third Party. If such Target
meets such requirements of the preceding sentence and such notice is provided within

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

18

 

such *
period, then such Target shall be deemed an Excluded Target” and shall not be included in
the Research Program and shall not become a DRG.

     (b) By written notice from Aventis to Avalon, Aventis shall have the right to designate
any DRG that has not become a Reversion Target as a SQT, and to designate any SQT that has
not become a reversion Target as an Advanced SQT.

     3.6 Diligence.

     (a) During the Research Term, Aventis shall use * to perform its Research obligations
in accordance with the Research Plan. During the Term, Aventis agrees to use * to Develop
and Commercialize Collaboration Products.

     (b) The Parties agree that any Target presented by Avalon to the Research Committee in
accordance with Section 3.4 which is not accepted by the Research Committee as a DRG within
* shall not become a DRG or be included in the Research Program, and all rights to such
Target shall remain with Avalon.

     (c) The Parties agree that a DRG shall become a Reversion Target in the event of one or
more of the following:

     (i) if within * after a Target that is identified by Avalon during the Research
Term is accepted by the Research Committee for inclusion in the Research Program as
a DRG, such DRG is not selected as a SQT; or

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

19

 

     (ii) if within * after a Target is selected as a DRG, (and assuming that
Aventis subsequently selects it as an SQT), such DRG is not selected as an Advanced
SQT; or

     (iii) if Aventis determines not to Develop or to continue to Develop a
Collaboration Product for an Advanced SQT; or

     (iv) if Aventis does not use * to Develop and Commercialize Collaboration
Products with respect to a selected Advanced SQT; or

     (v) if, for any reason, Aventis determines not to Develop or to discontinue
Development of a DRG.

     (d) All rights to Reversion Targets shall revert to Avalon and Avalon may use any such
Reversion Targets for any purpose, and may license Reversion Targets to Third Parties or
collaborate with Third Parties with respect to Reversion Targets.

     (e) With respect to each SQT and each Advanced SQT that becomes a Reversion Target,
Aventis shall provide Avalon with the pre-clinical information and data (“Aventis Target
Technology”) in the Control of Aventis at the time such Target becomes a Reversion Target
with respect to such Reversion Target that is useful for identifying Reversion Products by
use of such Reversion Targets and the non-exclusive
right and license to use and to sublicense such Aventis Target Technology with respect
to Reversion Targets, provided that in no event shall Aventis Target Technology include any
information or data relating to compounds, molecules or antibodies.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

20

 

     3.7 Aventis Responsibility. At the cost and expense of Aventis, Aventis shall be solely
responsible for Development and Commercialization of Collaboration Product.

ARTICLE 4

FEE AND MILESTONE PAYMENTS

     4.1 Initial Fee. In connection with the funding of research of Collaboration Product, Aventis
shall pay to Avalon * within * of signing of this Agreement by the Parties, which amount is
non-refundable and non-creditable.

     4.2 Milestone Payments by Aventis.

     (a) In partial consideration of the rights and licenses granted to Aventis by Avalon
under this Agreement, Aventis shall pay Avalon the following non-creditable, non-refundable
milestone payments for each event set forth below (each, an “Event”), that is achieved by
Aventis or one of its Affiliates or one of their Sublicensees, which amounts shall be due
and payable within * after of such Event.

     (i) * for each SQT selected by Aventis.

     (ii) * for each Collaboration Product that becomes an Early Development
Candidate.

     (iii) * for each Collaboration Product for which a Phase I Clinical Trial is
initiated.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

21

 

     (iv) * for each Collaboration Product for which a Phase IIB Clinical Trial is
initiated.

     (v) * for each Collaboration product for which a Phase III Trial is initiated.

     (vi) * for each Collaboration Product for which an NDA is approved by the FDA.

     (vii) * for each Collaboration Product, upon First Commercial Sale in the
United States.

     (viii) * for each Collaboration Product, upon First Commercial Sale in Europe.

     (ix) * for each Collaboration Product, upon First Commercial Sale in Japan.

     (b) For purposes of clarification, (i) each of the foregoing payments shall be made
only once for each Collaboration Product and upon the first occurrence of each event for
each Collaboration Product, regardless of the number of occurrences of each
event (ii) two or more Collaboration Products shall be considered the same
Collaboration Product for purposes of this Section 4.2(b) if such Collaboration Products are
directed at the same Target, (iii) new formulations, indications, dosages or delivery
systems for a Collaboration Product shall not trigger additional payments, and (iv)
“initiation” with respect to a study shall mean the date the first patient is first dosed
with a Collaboration

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

22

 

Product in such study. In the event that a milestone is achieved for a
Collaboration Product and a previous milestone has not been paid, then such unpaid milestone
shall become due and payable as of the date for payment of the applicable milestone that is
achieved.

     (c) Aventis shall be entitled to select up to * no later than the * of the Effective
Date. Within * following each such selection, Aventis shall make one-time payments to
Avalon as follows: *.

ARTICLE 5

REPRESENTATIONS, WARRANTIES AND COVENANTS

     5.1 Representations and Warranties of Both Parties.

     (a) Each Party represents and warrants to the other Party that, as of the date of this
Agreement, (i) such Party is duly organized and validly existing and has full corporate
power and authority to enter into this Agreement and to carry out the provisions hereof;
(ii) such Party has full right, power and authority to enter into this Agreement, (iii) this
Agreement has been duly executed by such Party and constitutes a legal, valid and binding
obligation of such Party, enforceable in accordance with its terms,
and (iv) all necessary consents, approvals and authorizations of all government
authorities and other persons required to be obtained by such Party in connection with the
execution, delivery and performance of this Agreement have been and shall be obtained.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

23

 

     (b) Each Party represents to the other Party that notwithstanding anything to the
contrary in this Agreement, the execution and delivery of this Agreement and the performance
of such Party’s obligations hereunder (a) do not conflict with or violate such Party’s
corporate charter and bylaws or any requirement of applicable laws or regulations and (b) do
not conflict with, violate or breach or constitute a default or require any consent under,
any contractual obligation of such Party.

     (c) Each Party represents and warrants to the other Party that as of the date of this
Agreement there is no claim, investigation, suit, action or proceeding pending or, to the
knowledge of such Party, expressly threatened, against such Party before or by any
governmental entity or arbitrator that, individually or in the aggregate, could reasonably
be expected to (i) materially impair the ability of such Party to perform any obligation
under this Agreement or (ii) prevent or materially delay or alter the consummation of any or
all of the transactions contemplated hereby.

     5.2 Additional Avalon Representations, Warranties and Covenants. Avalon represents, warrants
and covenants to Aventis that, as of the Effective Date:

     (a) Avalon has the full right, power and authority to grant the licenses granted to
Aventis under Section 2.1 hereof and it has not granted a license to any Third Party
under Avalon Technology which is in conflict with the licenses granted to Aventis under
Section 2.1;

     (b) Avalon is the sole owner of the Patent Rights of Section 1.5 and (i); exclusive
owner or a licensee of the Avalon Know-How, and no Third Party has any right,

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

24

 

title or
interest in or to the Avalon Know-How owned by Avalon; all inventors of any inventions
included within the Avalon Patent Rights of Section 1.5 have assigned their entire right,
title and interest in and to such inventions and the corresponding Patent Rights to Avalon
and (ii) to the best knowledge of Avalon, no Person, other than those Persons named as
inventors on any patent or patent application included within the Avalon Patent Rights of
Section 1.5, is an inventor of the invention(s) claimed in such patent car patent
application;

     (c) there are no claims, judgments or settlements against or owed by Avalon or pending
or, to its best knowledge, threatened claims or litigation seeking to invalidate the Avalon
Patent Rights;

     (d) without having made an investigation, Avalon has no actual knowledge that any
existing DRG or the use thereof in a Screen infringes a granted patent of a Third Party.

     5.3 Disclaimer of Representations. EXCEPT AS SPECIFICALLY SET FORTH HEREIN, NEITHER PARTY
MAKES ANY OTHER REPRESENTATION OR WARRANTY HEREUNDER AND DISCLAIMS
ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR USE OR WITH RESPECT TO THE VALIDITY OR ENFORCEABILITY OF AVALON
PATENTS OR THAT ACTIVITIES CONTEMPLATED BY THIS AGREEMENT OR COLLABORATION PRODUCTS WILL NOT
INFRINGE PATENT RIGHTS OF A THIRD PARTY.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

25

 

ARTICLE 6

PAYMENTS

     6.1 Late Payments. In the event that any payment due hereunder is not made when due, the
payment shall accrue interest from the date due at a rate equal to *, calculated on the number of
days between the actual date the payment is made and the date the payment was due; provided,
however, that in no event shall such rate exceed the maximum annual interest rate permitted under
applicable law.

ARTICLE 7

PATENT PROSECUTION; ENFORCEMENT; INFRINGEMENT, OWNERSHIP OF INVENTIONS

     7.1 Patent Filing, Maintenance and Prosecution.

     (a) At the cost and expense of Avalon, Avalon shall file, prosecute and maintain Avalon
Patents, other than Joint Rights, in countries of the Territory selected by Avalon through
patent counsel selected by Avalon, and Avalon shall keep Aventis advised with respect
thereto; such countries to include, at a minimum, the United States,
all countries of Europe, Japan and Canada. Avalon shall deliver to Aventis the
complete texts of all Avalon Patents fled by Avalon and licensed to Aventis, as well as all
information received concerning the institution or possible institution of any interference,
opposition, re-examination, reissue, revocation, nullification or any official proceeding
involving any patent licensed herein anywhere in the Territory, including without limitation
copies of all material correspondence with the U.S. Patent and Trademark

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

26

 

Office and foreign
counterparts. Such delivery shall be made reasonably in advance of any relevant fling
deadline or intended filing date to permit Aventis to review such pending applications and
other proceedings and make recommendations to Avalon concerning their and their conduct.
Absent a substantial reason for not doing so, Avalon shall incorporate such comments.

     (b) If Avalon elects not to file, continue to prosecute or maintain any such patents or
patent applications, then Avalon shall notify Aventis in writing of such election at least *
prior to the last available date for action to preserve such Patent Rights.

     If Aventis elects to file or continue such patent prosecution or maintenance, it may do so at
its sole expense.

     (c) At the cost and expense of Aventis, Aventis shall file, prosecute and maintain
Patent Rights covering Joint Rights in the Territory through patent counsel selected by
Aventis, and Aventis shall keep Avalon advised with respect thereto, Aventis shall deliver
to Avalon the complete texts of all such Patent Rights filed by Aventis, as well as all
information received concerning the institution or possible institution of any
interference, opposition, re-examination, reissue, revocation, nullification or any
official proceeding involving any patent licensed herein anywhere in the Territory,
including without limitation copies of all material correspondence with the U.S. Patent and
Trademark Office and any similar foreign filing office. Such delivery shall be made
reasonably in advance of any relevant filing deadline or intended filing date to permit
Avalon to review such pending applications and other proceedings and make

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

27

 

recommendations to
Aventis concerning them and their conduct. Absent a substantial reason for not doing so,
Aventis shall incorporate such comments,

     (d) Avalon agrees to make its employees, agents, and consultants available to Aventis
or Aventis’ authorized attorneys, agents, or representatives) and to otherwise cooperate
fully with Aventis in the preparation, filing, prosecution and maintenance of the Patents
Rights refereed to in paragraph (c) above, including, but not limited to obtaining patent
term extensions or supplemental protection certificates and the like. Such cooperation may
include, without limitation: (i) turning over to Aventis all necessary files, papers and
documents relating to such patent applications or patents; (ii) executing all papers and
instruments, or requiring Avalon’s employees or agents, to execute such papers and
instruments, so as to effectuate the ownership of such Patent Rights as set forth herein;
(iii) promptly informing Aventis of any matters coming to Avalon’s attention that may affect
such Patent Rights; and (iv) any other assistance to the extent deemed reasonably necessary
or desirable for the assignment, preparation, filing, prosecution or maintenance of any such
Patent Rights.

     7.2 Patent Enforcement.

     (a) Each Party shall notify the other promptly after such Party becomes aware of any
alleged infringement of any Avalon Patent in any country in the Territory with respect to a
DRG that is not a Reversion Target or use thereof in a Screen (an “Infringing DRG”). If any
of the Avalon Patents under which Aventis holds a license hereunder is infringed in the
Territory by a Third Party with respect to an Infringing Target, Aventis

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

28

 

shall have the
first right and option, but not the obligation, to bring an action for infringement, at its
sole expense, against such Third Party in the name of Aventis and if required also in the
name of Avalon. Within the sole discretion of Avalon, Avalon may jointly institute such
action with Aventis at the cost and expense of Avalon, in which case Avalon shall have joint
control over such action with Aventis. In any such action, Aventis shall make no decision
or settlement or compromise that will or potentially will adversely affect the validity,
enforceability, ownership or scope of any Avalon Patent unless agreed to in writing by
Avalon.

     (b) In the event that Aventis does not institute such an infringement proceeding
against an offending Third Panty with respect to an Infringing Target within * days after
receiving written notice of any alleged infringement, then Avalon shall have the right and
option, but not the obligation, to institute infringement proceedings against such Third
Party with respect to such an Infringing Target in the Territory, in the name of Avalon and
if required also in the name of Aventis. Avalon shall have sole control over such action.

     (c) In any infringement suit either Party may institute to enforce any Avalon Patents
pursuant to this Agreement, the other Party hereto shall, at the request of the Party
initiating such suit, cooperate in all respects, including agreeing to be joined as a Party
in such suit, and, to the extent possible, have its employees testify when requested and
make available relevant records, papers, information, samples, specimens, and the like. All

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

29

 

reasonable out-of-pocket costs incurred in connection with rendering cooperation requested
hereunder shall be paid by the Party requesting cooperation.

     (d) The costs and expenses of any action instituted pursuant to this Section 7.2
(including reasonable fees of attorneys and other professionals) shall be borne by the Party
instituting the action, or, if the Parties elect to cooperate in instituting and maintaining
such action, such costs and expenses shall be borne by the Parties in such proportions as
they may agree in writing. Each Party shall execute all necessary and proper documents and
take such actions as shall be appropriate to allow the other Party to institute and
prosecute such infringement actions (if such other Party has the right to institute and
prosecute such infringement actions pursuant to this Section 7.2).

     (e) In the event Aventis shall undertake the enforcement of any Avalon Patent, at the
sole expense of Aventis any award or compensation (including the fair market value of
non-monetary compensation) paid by Third Parties as a result of such an infringement action
(whether by way of settlement or otherwise) shall be applied as follows: (i) first, to
reimbursement of each Party for all expenses incurred by each in connection with such action
on a pro rata basis, and (ii) second, any remaining balance shall be allocated to Aventis.
In the event that Avalon undertakes such infringement
action at its sole expense, any award or compensation shall be applied as follows: (i)
first, to reimbursement of each Party for all expenses incurred by each in connection with
such action, on a pro rata basis, and (ii) second, any remaining balance shall be allocated
to Avalon. In the event that the Parties share the expenses of such action, then any award
or

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

30

 

compensation shall be allocated between the Parties in proportion to the expenses
incurred by the Parties after proportionate reimbursement of the expenses of each party.

     7.3 Infringement Actions by Third Parties. In the event of the institution of any suit by a
Third Party against Aventis, its Affiliates or its Sublicensees, distributors or co-marketers for
patent infringement involving the manufacture, use, sale, distribution or marketing of any
Collaboration Product ill the Territory, Aventis shall defend such action at its own expense, and
Avalon hereby agrees to assist and cooperate with Aventis, at Aventis’ expense, to the extent
necessary in the defense of such suit. Aventis shall have the right to settle the suit or consent
to an adverse judgment thereto, in its sole discretion, provided that such settlement or consent
does not adversely affect the validity, enforceability or ownership of any Avalon Patent unless
agreed to in writing by Avalon. Aventis shall assume full responsibility for the payment of any
award for damages, and/or for the payment of any amount due pursuant to any settlement entered into
by Aventis with such Third Party. Any and all damages and awards received by Aventis as a result
thereof (i.e., as a result of a counterclaim) shall be allocated between the Parties in the same
manner as provided in Section 7.2.

     7.4 Third Party Actions as to Avalon Patents. In the event a Third Party brings an action
with respect to the vapidity or enforceability of an Avalon Patent, Avalon shall have the sole
right to defend such action at the cost and expense of Avalon, except if such claim of invalidity
or unenforceability is part of an infringement action initiated by Aventis under an Avalon Patent
pursuant to Section 7.2, in which case, Aventis shall have the right to defend such claim at the
cost and expense of Aventis alone, or within the sole discretion of Avalon, jointly

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

31

 

with Avalon.
In any such action in which Aventis is a party, Aventis shall make settlement or compromise that
will or potentially will adversely affect the validity or enforceability or ownership of any Avalon
Patent unless agreed to in writing by Avalon.

     7.5 Ownership of Inventions and Technology.

     (a) As between Avalon and Aventis:

     (i) Avalon shall solely own all data, information, materials, inventions and
any and all intellectual property rights in any of the foregoing of this Section
7-5(a)(i), including, but not limited to, patent applications and patents, created
and/or invented solely by employees of Avalon;

     (ii) Aventis shall solely own all data, information, materials, inventions and
any and all intellectual property rights in any of the foregoing of this Section
7.5(a)(ii), including, but not limited to, patent applications and patents, created
and/or invented solely by employees of Aventis;

     (iii) Avalon and Aventis shall jointly own all data, information, materials and
any and all inventions and intellectual property rights in any of the
foregoing of this Section 7.5(a)(iii), including, but not limited to, patent
applications and patents, created jointly by an employee(s) of Avalon and an
employee(s) of Aventis (“Joint Rights”).

     (b) Inventorship shall be determined in accordance with United States patent law.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

32

 

ARTICLE 8

INDEMNIFICATION

     8.1 By Aventis. Aventis shall defend, indemnify and hold harmless Avalon and their respective
directors, officers, employees, shareholders and agents from and against any and all damages,
losses, costs and expenses (including the reasonable fees of attorneys and other professionals)
arising out of or resulting from third Party claims, suits or demands relating to: (a) any material
beach by Aventis of its representations, warranties or obligations pursuant to this Agreement, (b)
the gross negligence or willful misconduct of Aventis, or (c) injuries resulting from the research,
testing, development, manufacture, use, distribution or sale of any DRG and/or Collaboration
Product by or for Aventis, its Affiliates or Sublicensees or by any person that obtained a DRG or
Collaboration Product from Aventis, its Affiliates or Sublicensees, except in each case to the
extent covered by Avalon’s indemnification obligations pursuant to Section 8.2.

     8.2 By Avalon. Avalon shall defend, indemnify and hold harmless Aventis and their respective
directors, officers, employees, shareholders and agents from and against any and all damages,
losses, costs and expenses (including the reasonable fees of attorneys and other professionals)
arising out of or resulting from Third Party claims, suits or demands relating to: (a) any material
breach by Avalon of its representations, warranties or obligations pursuant to this Agreement, (b)
the gross negligence or willful misconduct of Avalon or its Affiliates, or (c) injuries resulting
from the research or testing of any DRG by Avalon, its Affiliates or Sublicensees, except in each
case to the extent covered by Aventis’ indemnification obligations pursuant to Section 8.1.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

33

 

     8.3 Procedure and Conditions to Indemnification.

     (a) In the case of a third party claim or demand (“Third Party Claim”) made by any
Person who is not a Party to this Agreement (or an Affiliate thereof) as to which a Party
(the “Indemnitor”) maybe obligated to provide indemnification pursuant to this Agreement,
such Panty seeking indemnification hereunder (“Indemnitee”) will notify the Indemnitor in
writing of the Third Party Claim (and, specifying in reasonable detail the factual basis for
the Third Party Claim and to the extent known, the amount of the Third Party Claim)
reasonably promptly after becoming aware of such Third Party Claim; provided, however, that
failure to give such notification will not affect the indemnification provided hereunder
except to the extent the Indemnitor shall have been actually prejudiced as a result of such
failure.

     (b) If a Third Party Claim is made against an Indemnitee, the Indemnitor will be
entitled, within * after receipt of written notice from the Indemnitee of the
commencement or assertion of any such Third Party Claim, to assume the defense thereof
(at the expense of the Indemnitor) with counsel selected by the Indemnitor and reasonably
satisfactory to the Indemnitee, for so long as the Indemnitor is conducting a good faith and
diligent defense. Should the Indemnitor so elect to assume the defense of a Third Party
Claim:

     (i) the Indemnitor will not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with the defense
thereof; provided, that if under applicable standards of professional

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

34

 

conduct a
conflict of interest exists between the Indemnitor and the Indemnitee in respect of
such claim, such Indemnitee shall have the right to employ separate counsel (which
shall be reasonably satisfactory to the Indemnitor) to represent such Indemnitee
with aspect to the matters as to which a conflict of interest exists and in that
event the reasonable fees and expenses of such separate counsel shall be paid by
such Indemnitor; provided, further, that the Indemnitor shall only be responsible
for the reasonable fees and expenses of one separate counsel for such Indemnitee;

     (ii) the Indemnitee shall have the right to participate in the defense thereof
and to employ counsel, at its own expense, separate from the counsel employed by the
Indemnitor;

     (iii) the Indemnitor will promptly supply to the Indemnitee copies of all
correspondence and documents relating to or in connection with such Third Party
Claim and keep the Indemnitee informed of developments relating to or in
connection with such Third Party Claim, as may be reasonably requested by the
Indemnitee (including providing to the Indemnitee on reasonable request updates and
summaries as to the status thereof); and

     (iv) all Indemnitees shall reasonably cooperate with the Indemnitor in the
defense thereof (such cooperation to be at the expense, including reasonable legal
fees and expenses, of the Indemnitor).

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

35

 

     (c) If the Indemnitor does not elect to assume control of the defense of any Third
Party Claim within the * set forth above, or if such good faith and diligent defense is not
being or ceases to be conducted by the Indemnitor, or at any time prior to the Indemnitor
making such election, the Indemnitee shall have the right, at the expense of the Indemnitor,
after * to the Indemnitor of its intent to do so, to undertake the defense of the Third
Party Claim for the account of the Indemnitor (with counsel selected by the Indemnitee), and
to compromise or settle such Third Party Claim, exercising reasonable business judgment.

     (d) If the Indemnitor acknowledges in writing its obligation to indemnify the
Indemnitee for a Third Party Claim, the Indemnitee will agree to any settlement, compromise
or discharge of such Third Party Claim that the Indemnitor may recommend that by its terms
obligates the Indemnitor to pay the full amount of Losses (whether through settlement or
otherwise) in connection with such Third Party Claim and unconditionally and irrevocably
releases the Indemnitee completely from all Liability in connection with such Third Party
Claim; provided, however, that, without the
Indemnitee’s prior written consent, the Indemnitor shall not consent to any settlement,
compromise or discharge (including the consent to entry of any judgment), and the Indemnitee
may refuse to agree to any such settlement, compromise or discharge, that provides for
injunctive or other nonmonetary relief affecting the Indemnitee. If the Indemnitor
acknowledges in writing its obligation to indemnify the Indemnitee for a Third Party Claim,
the Indemnitee shall not (unless required by law) admit any liability with respect to, or
settle, compromise or discharge, such Third Party Claim without the

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

36

 

Indemnitor’s prior
written consent (which consent shall not be unreasonably withheld or delayed).

     8.4 Insurance. Each Party shall use all commercially reasonable efforts to maintain insurance
with respect to its activities hereunder, provided, however, that product liability insurance will
not be required prior to sale of a product under this Agreement. Such insurance shall be in such
amounts and subject to such deductibles as the Parties may agree based upon standards prevailing in
the industry at the time. Aventis may satisfy its obligations under this Section through
self-insurance to the same extent.

ARTICLE 9

CONFIDENTIALITY

     9.1 Non-Disclosure. The Receiving Party agrees not to disclose Confidential Information of the
Disclosing Party to a Third Party or to an Affiliate and to use Confidential Information of the
Disclosing Party only for the activities contemplated by this Agreement.

     9.2 Exclusions to Confidentiality. The non-disclosure restrictions contained in Section 9.1
shall not apply to Confidential Information that (a) is submitted by the Receiving Party to
governmental authorities to facilitate the issuance of marketing approvals for a Collaboration
Product, provided that reasonable measures shall be taken to assure confidential treatment of such
information, if practicable; (b) is provided by the Receiving Party to Third Parties and/or an
Affiliate under appropriate terms and conditions, including confidentiality provisions at least as
protective of the Disclosing Party as those in this Agreement, for consulting, manufacturing,
development, manufacturing, external testing, marketing trials and sublicensing

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

37

 

or potential
sublicensing of Collaboration Product or DRG in accordance with this Agreement; or (c) is otherwise
required to be disclosed in compliance with applicable laws or regulations (including, without
limitation, to comply with SEC, NASDAQ or stock exchange disclosure requirements) or order by a
court or other regulatory body having competent jurisdiction; provided that if a Party is required
to make any such disclosure of the other Party’s Confidential Information it will, except under
extraordinary circumstances, give reasonable advance notice to the other Party of such disclosure
requirement, sufficient to allow said other Party the right to object to and defend against said
disclosure and will use its reasonable best efforts to secure confidential treatment of such
Confidential (information required to be disclosed. Furthermore, each Party shall give the other
Party a reasonable opportunity to review all filings with the United States Securities and Exchange
Commission describing the terms of this Agreement prior to submission of such filings, and
shall give due consideration to any reasonable comments by the non-filing Party relating to such
filing, including without limitation, the provisions of this Agreement for which confidential
treatment should be sought.

     9.3 Additional Exceptions.

     (a) Nothing in this Article 9 shall prevent a Party: (a) in connection with efforts to
secure financing at any time during the Term, from issuing statements to bona fide
investors, on an investor-by-investor basis, as to achievements made, and the status of the
work being done by the Parties, under this Agreement, so long as such statements do not
disclose non-public technical or scientific Confidential Information of the Disclosing
Party; or (b) from issuing statements that a Party determines to be necessary,

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

38

 

in the
opinion of its external counsel, to comply with applicable law (including the disclosure
requirements of the U.S. Securities and Exchange Commission, NASDAQ or any other stock
exchange on which securities issued by a Party are traded); provided that such Party shall
provide the other Party with a copy of the proposed text of such statements sufficiently in
advance of the scheduled release thereof to afford the other Party a reasonable opportunity
to review and comment upon the proposed text.

     (b) Notwithstanding anything else in this Agreement to the contrary, each Party hereto
(and each employee, representative, or other agent of any Party) may disclose to any and all
persons, without limitation of any kind, the Federal income tax treatment and Federal income
tax structure of any and all transaction(s) contemplated
herein and all materials of any kind (including opinions or other tax analyses) that
are or have been provided to any Party (or to any employee, representative, or other agent
of any party) relating to such tax treatment or tax structure, provided, however, that this
authorization of disclosure shall not apply to restrictions reasonably necessary to comply
with securities laws. This authorization of disclosure is retroactively effective
immediately upon commencement of the first discussions regarding the transactions
contemplated herein, and the Parties aver and affirm that this tax disclosure authorization
has been given on a date which is no later than thirty (30) days from the first day that any
Party hereto (or any employee, representative, or other agent of any party hereto) first
made or provided a statement as to the potential tax consequences that may result from the
transactions contemplated hereby.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

39

 

     9.4 Injunctive Relief. The Parties acknowledge that money damages alone would not adequately
compensate the disclosing Party in the event of a breach by the receiving Party of this Article 9,
and that, in addition to all other remedies available to the disclosing Party at law or in equity,
it shall be entitled to seek injunctive relief for the enforcement of its rights under this Article
9.

     9.5 Liability. A Party shall be liable for a breach of the obligations of this Article 9 by
an employee or agent of such Party.

     9.6 Return of Confidential Information. Upon termination of this Agreement, upon the request
of the Disclosing Party, the Receiving Party shall promptly return to the Disclosing Party the
Disclosing Party’s Confidential Information (other than Joint Rights), including all copies
thereof, except to the extent that retention of such Confidential Information is reasonably
necessary for the Receiving Party to fulfill its obligations contemplated hereby, including its
obligations of confidentiality, nondisclosure and nonuse hereunder. At the Disclosing Party’s
written request, the Confidential Information that is otherwise required to be returned to the
Disclosing Party shall be destroyed and such destruction shall be certified in writing to the
Disclosing Party by an authorized officer of the Receiving Party. The return and/or destruction of
such Confidential Information as provided above shall not relieve the Receiving Party of its other
obligations under this Agreement.

     9.7 Disclosure of Agreement. Neither Party shall disclose the terms or conditions of this
Agreement or make any public announcement concerning this Agreement without the consent of the
other Party, which shall not be unreasonably withheld, except such consent shall

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

40

 

not be required
and, notwithstanding anything else to the contrary, a Party shall be permitted to disclose the
terms and conditions of this Agreement (a) in connection with an equity investment, loan or similar
financing transaction, (b) in connection with a consolidation, merger, change of control or sale of
all or substantially all of the assets of a Party, (c) in connection with the granting of a
sublicense under this Agreement, (d) in connection with a legal proceeding or an order of a court
or government agency, (e) where such disclosure is made to attorneys, accountants and other
advisors to a Party, (f) where such disclosure is required in accordance with any applicable law,
rule or regulation (including, without limitation, disclosure requirements of the U.S.
Securities and Exchange Commission, NASDAQ or any other stock exchange on which securities are
traded; provided that in the case of items (b) and (c) above, such disclosure is made under
appropriate terms and conditions, including confidentiality provisions at least as protective of
the Disclosing party as those in this Agreement. In the event of a required public announcement,
except under extraordinary circumstances, the Party making such announcement shall provide the
other Party with a copy of the proposed text prior to such announcement sufficiently in advance of
the scheduled release of such announcement to afford such other Party a reasonable opportunity to
review and comment upon the proposed text. On the Effective Date, the Parties shall issue one or
more press releases attached hereto as Schedule 9.7. Once text of any press release or
announcement is approved, the substance of that which is disclosed in such text may be disclosed to
the public by a Party without the permission of the other Party.

     9.8 Confidentiality Term. The obligations of this Article 9 shall terminate ten (10) years
after the termination or expiration of this Agreement.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

41

 

ARTICLE 10

TERM; TERMINATION

     10.1 Term. This Agreement shall commence as of the Effective Date and, unless sooner
terminated as provided hereunder, shall expire when Aventis no longer has any obligation for
payments, including Milestone Payments under this Agreement. Upon the expiration of this Agreement, the
license granted under Section 2.1(b), with respect to each Collaboration Product in all countries
of the World, shall become non-exclusive, fully paid-up, royalty-free, perpetual and irrevocable.

     10.2 Termination.

     (a) Material Breach. If either Party believes that the other Party (the “Breaching
Party”) is in material breach of this Agreement (including without limitation any material
breach of a representation or warranty made in this Agreement), then the non-breaching Party
may deliver notice to the Breaching Party specifying the material breach. For all breaches
other than a failure to make a payment, the allegedly Breaching Party shall have * to either
cure such breach or, if cure cannot be reasonably effected within such *, to deliver to the
other Party a plan for curing such breach that is reasonably sufficient to effect a cure
within * of such notice. Such a plan shall set forth a program for achieving cure as
rapidly as practicable. Following delivery of such plan, the Breaching Party shall use
diligent efforts to carry out the plan and cure the breach. For any breach arising from a
failure to make a payment, the allegedly Breaching Party shall have * to cure such breach.
If any material breach is not cured as specified above, in

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

42

 

addition to any other remedy in
law or in equity that a Party may have, the provisions of Sections 10.2(b), 10.2(c) and
10.2(d) shall apply.

     (b) Consequences of Material Breach by Aventis Relating to the Research Program. If a
material breach of Aventis relates to the Research Program and is not cured
in accordance with Section 10.2(a), then Avalon shall have the right to terminate the
Research Program. Upon such termination, this Agreement shall continue in full force and
effect with respect to Aventis’ further Development and Commercialization of any
Collaboration Product for which the associated DRG is either an SQT or Advanced SQT at the
time of termination (including the payment of Milestone Payments). For purposes of clarity,
if Avalon terminates the Research Program:

     (i) the licenses granted under Section 2.1 shall continue with respect to each
DRG that is an SQT or Advanced SQT at the time of termination;

     (ii) all DRGs which have not achieved SQT status shall become Reversion
Targets.

     (iii) Avalon will have no further obligations to perform activities under the
Research Program and Aventis will have no further funding obligations for the
Research Program; and

     (iv) The payment obligations of Aventis under Section 4.2 shall remain in
effect.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

43

 

     (c) Consequences of Material Breach by Avalon Relating to the Research Program. If a
material breach of Avalon relates to the Research Program and is not cured in accordance
with Section 10.2(a), then Aventis shall have the right at its option to terminate Avalon’s
participation in the Research Program.

     (d) Upon such termination by Aventis, this Agreement shall continue in full force and
effect with respect to Aventis’ further Development and Commercialization of any
Collaboration Product for which the associated DRG is either an SQT or Advanced SQT at the
time of termination (including the payment of Event based payments). For purposes of
clarity, if Aventis terminates the Research Program:

     (i) the licenses granted under Section 2.1 shall continue with respect to each
DRG that is an SQT or Advanced SQT at the time of termination;

     (ii) All DRGs which have not achieved SQT status shall become Reversion
Targets.

     (iii) Avalon will have no further obligations to perform activities under the
Research Program and Aventis will have no further funding obligations for the
Research Program; and

     (iv) The payment obligations of Aventis under Section 4.2 shall remain in
effect.

     (e) Change of Control of Avalon. If Avalon enters into or proposes to enter into a
transaction which will result in a Change of Control during the Research Term and the Third
Party is an entity listed in Schedule 10.2(e), Avalon shall notify Aventis of such

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

44

 

transaction and the identity of the Third Party to such transaction and such notice may be
given at any time prior to entering into, or promptly following the consummation of, such
transaction. Within * of such notice, Aventis may, at its sole discretion, elect to
terminate Avalon’s participation in the Research Program (including Aventis’ FTE funding
obligation with respect thereto) by written notice to Avalon and such election shall be
treated as a termination under Section 10.2(b).

     10.3 Effect of Expiration or Termination.

     (a) The termination of this Agreement means that the rights and obligations of the
Parties under this Agreement are terminated, except those that survive under Section 10.3.

     (b) Termination, relinquishment or expiration of this Agreement for any reason shall be
without prejudice to any rights which shall have accrued to the benefit of either Party
prior to such termination, relinquishment or expiration.

     (c) Termination, relinquishment or expiration of this Agreement shall not terminate
Aventis’ obligation to pay all other payments that shall have accrued prior to such
termination. In addition, all of the parties’ rights and obligations under Sections 2.1(b),
3.3, 4.2, 5.2, 6.1, 7.5, 8.1, 8.2, 8.3, 9.1- 9.8, 10.1-10.3 and 12.10 shall survive
termination, relinquishment or expiration hereof.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

45

 

ARTICLE 11

FORCE MAJEURE

     11.1 Events of Force Majeure. Except for payments due under this Agreement, neither Party
shall be held liable or responsible to the other Party nor be deemed to be in default under or in
breach of any provision of this Agreement for failure or delay in fulfilling or performing any obligation of this
Agreement when such failure or delay is due to force majeure, and without the fault or negligence
of the Party so failing or delaying. For purposes of this Agreement, force majeure is defined as
causes beyond the control of the Party, including, without limitation, acts of God; acts,
regulations, or laws of any government; war; civil commotion; destruction of production facilities
or materials by fire, flood, earthquake, explosion or storm; labor disturbances; epidemic; and
failure of public utilities or common carriers. In such event Aventis or Avalon, as the case may
be, shall immediately notify the other Party of such inability and of the period for which such
inability is expected to continue. The Party giving such notice shall thereupon be excused from
such of its obligations under this Agreement as it is thereby disabled from performing for so long
as it is so disabled. To the extent possible, each Party shall use reasonable efforts to minimize
the duration of any force majeure.

ARTICLE 12

MISCELLANEOUS

     12.1 Relationship of Parties. Nothing in this Agreement is intended or shall be deemed to
constitute a partnership, agency, employer-employee or joint venture relationship between the

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

46

 

Parties. No Party shall incur any debts or make any commitments for the rather, except to the
extent, if at all, specifically provided herein.

     12.2 Assignment. Neither Party shall be entitled to assign its rights or duties hereunder
without the express written consent of the other Party hereto, except that both Aventis and Avalon
may otherwise assign their respective rights and transfer their respective duties hereunder to (a)
an Affiliate; provided that such assignment shall not relieve the assignor of its obligations under
this Agreement, or (b) any assignee or transferee of all or substantially all of their respective
businesses (or that portion thereof to which this Agreement relates) or in the event of their
respective merger or consolidation or similar transaction. No assignment and transfer shall be
valid or effective unless and until the assignee/transferee shall agree in writing to be bound by
the provisions of this Agreement in which case the Agreement will inure to the benefit of such
successors and assigns.

     12.3 Further Actions. Each Party agrees to execute, acknowledge and deliver such further
instruments, and to do all such other acts, as may be necessary or appropriate in order to carry
out the purposes and intent of this Agreement.

     12.4 Notice. Any notice or request required or permitted to be given under or in connection
with this Agreement shall be deemed to have been sufficiently given if in writing and personally
delivered or sent by certified mail (return receipt requested), facsimile transmission (receipt
verified), or overnight express courier service (signature required), prepaid, to the Party for
which such notice is intended, at the address set forth for such Party below:

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

47

 

	 	(a)	 	In the case of Aventis, to:
	 
	 	 	 	Aventis Pharmaceuticals Inc.

200 Crossing Boulevard

Bridgewater, New Jersey 08807-0890

Attention: Vice President, Legal Corporate Development

Facsimile No. : (908) 231-4480
	 
	 	(b)	 	In the case of Avalon, to:
	 
	 	 	 	Avalon Pharmaceuticals, Inc.

20358 Seneca Meadows Parkway

Germantown, Maryland 20876

Attention: CEO

Facsimile No.: (301) 556-9910

or to such other address for such Party as it shall have specified by like notice to the other
Party, provided that notices of a change of address shall be effective only upon receipt thereof.
If delivered personally or by facsimile transmission, the date of delivery shall be deemed to be
the date on which such notice or request was given. If sent by overnight express courier service,
the date of delivery shall be deemed to be the next business day after such notice or request was
deposited with such service. If sent by certified mail, the date of delivery shall be deemed to be
the third business day after such notice or request was deposited with the U.S. Postal Service.

     12.5 Use Of Name. Except as otherwise provided herein, neither Party shall have any right,
express or implied, to use in any manner the name or other designation of the other party or

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

48

 

any
other trade name or trademark of the other Party for any purpose in connection with the performance
of this Agreement.

     12.6 Waiver. A waiver by either Party of any of the terms and conditions of this Agreement in
any instance shall not be deemed or construed to be a waiver of such term or condition for the
future, or of any subsequent breach hereof. All rights, remedies, undertakings, obligations and
agreements contained in this Agreement shall be cumulative and none of them shall be in limitation
of any other remedy, right, undertaking, obligation or agreement of either Party.

     12.7 Compliance with Law. Aventis agrees to comply with all applicable laws, rules and
regulations with respect to the import, export, manufacture, use and sale of Collaboration Product.

     12.8 Severability. When possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement and the parties shall negotiate, in good faith, a new provision which
will, as closely as possible, carry out the intentions of the parties provided for in the
invalidated provision.

     12.9 Amendment. No amendment, modification or supplement of any provisions of this Agreement
shall be valid or effective unless made in writing and signed by a duly authorized officer of each
Party.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

49

 

     12.10 Governing Law. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Delaware without regard to its choice of law principles.

     12.11 Entire Agreement. This Agreement, together with the Exhibits hereto, sets forth the
entire agreement and understanding between the Parties as to the subject matter hereof and merges
all prior discussions and negotiations between them, and neither of the Parties shall be bound by
any conditions, definitions, warranties, understandings or representations with respect to such
subject matter other than as expressly provided herein or as duly set forth on or subsequent to the
date hereof in writing and signed by a proper and duly authorized officer or representative of the
Party to be bound thereby.

     12.12 Parties in Interest. All the terms and provisions of this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the Parties hereto and their respective
permitted successors and assigns.

     12.13 Descriptive Headings. The descriptive headings of this Agreement are for convenience
only, and shall be of no force or effect in construing or interpreting any of the provisions of
this Agreement.

     12.14 Counterparts. This Agreement may be executed simultaneously in any number of
counterparts, any one of which need not contain the signature of more than one Party but all such
counterparts taken together shall constitute one and the same agreement.

     12.15 No Consequential Damage. NEITHER PARTY HERETO WILL BE LIABLE FOR SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES ARISING OUT OF THIS

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

50

 

AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER,
INCLUDING WITHOUT LIMITATION LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT,
REGARDLESS OF ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 12.15 IS INTENDED TO LIMIT OR
RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY WITH RESPECT TO THIRD PARTY
CLAIMS.

     12.16 Section 365(n) of the Bankruptcy Code. All rights and licenses granted under or
pursuant to any section of this Agreement are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of the Bankruptcy Code, licenses of rights to “intellectual property” as defined
under Section 101(35A) of the Bankruptcy Code. The Parties shall retain and may fully exercise all
of their respective rights and elections under the Bankruptcy Code. Upon the bankruptcy of any
Party, the non-bankrupt Party shall
further be entitled to a complete duplicate of (or complete access to, as appropriate) any
such intellectual property, and such, if not already in its possession, shall be promptly delivered
to the non-bankrupt Party, unless the bankrupt Party elects to continue, and continues, to perform
all of its obligations under this Agreement.

     12.17 Affiliates. Each Party may perform its obligations and exercise its rights under this
Agreement personally or through one or more of its Affiliates, and each Party shall nonetheless be
solely responsible for the performance of its Affiliates with respect to such obligations performed
by its Affiliate. Neither Party shall permit any of its Affiliates to commit any act (including
any act of omission) which that Party is prohibited hereunder from committing directly. Each Party
warrants and guarantees that all of its Affiliates will perform in

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

51

 

accordance with this Agreement
as if they were signatories to this Agreement. A Party shall be liable to the other Party for any
breach of this Agreement by any of its Affiliates.

[Signature Page Follows]

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

52

 

     IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its
duly authorized officer as of the day and year first above written.

	 	 	 	 	 
	 	AVALON PHARMACEUTICALS, INC.

 	 
	 	By:  	/s/ Kenneth C. Carter, Ph.D.
 	 
	 	 	Name:  	Kenneth C. Carter, Ph.D. 	 
	 	 	Title:  	President and CEO 	 
	 

	 	 	 	 	 
	 	AVENTIS PHARMACEUTICALS INC.

 	 
	 	By:  	/s/ Thomas Hofstaetter
 	 
	 	 	Name:  	Thomas Hofstaetter 	 
	 	 	Title:  	Senior Vice President, Corporate Development	 

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

53

 

	 	 	 	 	 

Schedule 1.1

Advanced SQT (AdvSQT)

An Advanced SQT is a SQT with the additional following criteria:

	 	-	 	* in samples from patient tumors *
	 
	 	-	 	Functional validation by * indicates a * with *

A patent search has been completed and Freedom to Operate established

Candidate Amplicon

A candidate amplicon is a * in cancer models that is selected according to the following criteria:

	 	-	 	*
	 
	 	-	 	*
	 
	 	-	 	*
	 
	 	-	 	*
	 
	 	-	 	*
	 
	 	-	 	*

Disease Related Gene (DRG)

A DRG is a * with the additional following criteria:

	 	-	 	*
	 
	 	-	 	*
	 
	 	-	 	*

*

Scientifically Qualified Target (SQT)

A SQT is a * following criteria:

	 	-	 	*

*

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

54

 

Schedule 1.7

Avalon Validation Activities

*

Additional outside services:

To date, we have pursued the following activities through outside contracts. The Parties recognize
the scientific value of these techniques. Avalon can obtain and coordinate these services,
provided that Aventis pays the cost of leaving the work done by a third party.

	 	1.	 	FISH to tissue microarrays (TMA)
	 
	 	2.	 	Affymetrix expression profiling
	 
	 	3.	 	Antibody production

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

55

 

Schedule 1.20

Early Development Compound (EDC)

Avalon — Aventis Target Collaboration

December 9, 2003

	 	 	 	 	 
	Prerequisites of Decision to	 	 	 	 
	select an Early Development	 	 	 	Functional Representative
	Compound (EDC)	 	Target / Expectation	 	Responsible
	Disease Group
	 	 	 	 
	 
	 	 	 	 
	Activity in advanced disease

models (in vitro/in vivo)

	 	To be more precisely defined by DG

representatives
	 	DG
	 
	 	 	 	 
	Selectivity, specificity,
tolerability, etc.

	 	 	 	DG
	 
	 	 	 	 
	Evidence of intended biological
effect

	 	 	 	DG
	 
	 	 	 	 
	Specific Pharmacology
	 	 	 	 
	 
	 	 	 	 
	In vivo dose related activity in
an appropriate/validated disease
model (if possible) by proposed
clinical route. Investigate
whether effects are related to
mechanism of action

	 	 	 	DG

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

1

 

	 	 	 	 	 
	Prerequisites of Decision to	 	 	 	 
	select an Early Development	 	 	 	Functional Representative
	Compound (EDC)	 	Target / Expectation	 	Responsible
	Completion of selectivity profile

	 	 	 	DG
	 
	 	 	 	 
	Chemistry / Chemical Development
	 	 	 	 
	 
	 	 	 	 
	Description of synthesis
(non-clinical quality)

	 	Feasibility assessment that API can be

produced at large scale
	 	Chemical Development /Medicinal

Chemistry
	 
	 	 	 	 
	*

	 	*
	 	Chemical Development /Medicinal

Chemistry
	 
	 	 	 	 
	Program for selection of API
form (salt, free base, acid)

	 	*
	 	Chemical Development /Medicinal

Chemistry / GPD
	 
	 	 	 	 
	Identification of back up
compounds and criteria for
selection

	 	 	 	Chemical Development /Medicinal

Chemistry
	 
	 	 	 	 
	Availability of reference
compounds (if necessary)

	 	 	 	Chemical Development /Medicinal

Chemistry/
	 
	 	 	 	 
	Pharmaceutical Development
	 	 	 	 
	 
	 	 	 	 
	Stability, early estimate

	 	According to prerequisites from TPP
regarding formulations / routes of
administration
	 	GPD AnSc / GPD PhSc

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

2

 

	 	 	 	 	 
	Prerequisites of Decision to	 	 	 	 
	select an Early Development	 	 	 	Functional Representative
	Compound (EDC)	 	Target / Expectation	 	Responsible
	First physico-chemical data:
	 	 	 	 
	solubility, log P, enantiomers,

salts, modifications, polymorphs

	 	 	 	GPD AnSc / GPD PhSc
	 
	 	 	 	 
	Preliminary assessment of chiral
or diastereomeric purity

	 	 	 	GPD AnSc / GPD PhSc
	 
	 	 	 	 
	Identification of suitable
preclinical formulation for
identified candidate (from base
or salt form)

	 	 	 	GPD AnSc / GPD PhSc
	 
	 	 	 	 
	Active Pharmaceutical Ingredient
	 	 	 	 
	 
	 	 	 	 
	*

	 	*
	 	Project Leader / Project Manager
	 
	 	 	 	 
	Drug Safety Evaluation (DSE)
	 	 	 	 
	 
	 	 	 	 
	Gene mutation (mutagenicity:
	 	 	 	 
	Ames II)

	 	*
	 	DSE
	 
	 	 	 	 
	Clastogenicity (in vitro MNT)

	 	*
	 	DSE

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

3

 

	 	 	 	 	 
	Prerequisites of Decision to	 	 	 	 
	select an Early Development	 	 	 	Functional Representative
	Compound (EDC)	 	Target / Expectation	 	Responsible
	HERG channel assay: ratio HERG
IC50 to
pharmacologically active
concentration (ED50
or ED90 depending on
indication)

	 	*
	 	DSE
	 
	 	 	 	 
	Irwin test (CNS) and Hemodynamic
(BP, HR) in rats: safety margin
as compared to plasma level at
efficacious dose in animal model

	 	*
	 	DSE
	 
	 	 	 	 
	Specific toxicities: depending
on risks potentially associated
with a) the targeted (identified
from literature and/or KO/siRNA
studies), b) the chemical series
(e.g. Target Backup Blueprint,
DEREK), or c) results of
first-in-class profiling (e.g.
TD50 toxicogenomics)

	 	As defined by LG plan on a case-by-case

basis (see above)
	 	DSE
	 
	 	 	 	 
	Drug Metabolism and Pharmacokinetics (DMPK)
	 
	 	 	 	 
	Tests to be completed on fully characterized drug substance, preferably, i.e. crystal form, salt form, particle size,
purity

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

4

 

	 	 	 	 	 
	Prerequisites of Decision to	 	 	 	 
	select an Early Development	 	 	 	Functional Representative
	Compound (EDC)	 	Target / Expectation	 	Responsible
	DMPK — in vitro
	 	 	 	 
	 
	 	 	 	 
	Solubility — at pH7.4

	 	*
	 	DMPK / Medicinal Chemistry
	 
	 	 	 	 
	Pka characterized

	 	Characterize Only
	 	DMPK / Medicinal Chemistry
	 
	 	 	 	 
	Permeability — Caco-2 transport
(A to B)

	 	Medium rank or higher
	 	DMPK
	 
	 	 	 	 
	Permeability — Caco-2 eflux ratio

	 	Characterize only when BA is too low
	 	DMPK
	 
	 	 	 	 
	Metabolic Stability — S9
metabolism rate

	 	High rank in human and one tax species
	 	DMPK
	 
	 	 	 	 
	Major metabolite(s) identified

	 	Characterized Only (qualitatively)
	 	DMPK
	 
	 	 	 	 
	Involvement of polymorphic
enzyme pathways check

	 	Characterize Only
	 	DMPK
	 
	 	 	 	 
	Irreversible P450 enzyme

inhibition

	 	No irreversible P450 Inhibition
	 	DMPK

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

5

 

	 	 	 	 	 
	Prerequisites of Decision to	 	 	 	 
	select an Early Development	 	 	 	Functional Representative
	Compound (EDC)	 	Target / Expectation	 	Responsible
	Competitive P450 enzyme

inhibition

	 	IC50 > 10μM
for all isozymes tested
	 	DMPK
	 
	 	 	 	 
	Plasma protein binding (human)

	 	Characterize Only
	 	DMPK
	 
	 	 	 	 
	Blood, Plasma and GI fluid
stability

	 	> 80% remaining at 4 hours
	 	DMPK
	 
	 	 	 	 
	DMPK — In vivo
	 	 	 	 
	 
	 	 	 	 
	Absolute oral bioavailability
(ABA), (oral products only -
using aqueous solutions or
Hydroxy Ethyl Cellulose (HEC)
suspensions or clinically
accepted formulation).
Note: Compounds failing ABA test
can
be progressed if > 20% ABA
can be achieved using clinically
acceptable formulations

	 	>20% in 2 animal species
	 	DMPK (with input from GPD as appropriate)

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

6

 

	 	 	 	 	 
	Prerequisites of Decision to	 	 	 	 
	select an Early Development	 	 	 	Functional Representative
	Compound (EDC)	 	Target / Expectation	 	Responsible
	Half-life of parent or active
major metabolite.
Note: Compounds failing half-life
test
can be progressed if oral ABA
and pharmaceutical properties
clearly demonstrate sustained
release formulation feasibility
in man and/or by a clear
demonstration of longer
biological activity. A clear
PK/PD relationship should be
established to explain the time
delay and duration of response

	 	>50% of target half-life in 1 animal
species

Guide: (for projected BID Human, i.e.
target profile) Mouse > 1.8h, Rat >
3h, Cyno monkey 5.7h, dog > 7h
	 	DMPK
	 
	 	 	 	 
	Brain penetration if relevant
when given by the intended route
of administration

	 	Brain exposure > target IC50
	 	DMPK
	 
	 	 	 	 
	Preliminary metabolic profile

(one species)

	 	Characterize Only
	 	DMPK
	 
	 	 	 	 
	Preliminary PK/PD relationship

	 	Characterize Only
	 	DMPK
	 
	 	 	 	 
	Clinical Discovery & Human Pharmacology (CDHP)

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

7

 

	 	 	 	 	 
	Prerequisites of Decision to	 	 	 	 
	select an Early Development	 	 	 	Functional Representative
	Compound (EDC)	 	Target / Expectation	 	Responsible
	Identify/develop possible
linkages between preclinical
POM/POC with clinical plans -
identify potential biomarkers
and PGX markers for use in
clinical trials. Preliminary (3
to 6 months prior to Ph I/IIa
Decision) plans (CDP1) for Ph
I/IIa studies FIM

	 	Identify BMs for POM/POC studies;
Identify strategy (e.g., IND) / potential
study sites, Identify go/no-go criteria;
Develop plans for Biomarkers/PGx for
POM/POC studies as well as inclusion of
WOCBP.
	 	CDHP / DSE / DMPK (LO)
	 
	 	 	 	 
	Determine starting doses for
FIM, safety, Clinical PK issues
once appropriate DSE studies are
completed and if available

	 	Review DSE/eADME data for targeted organ
toxicity, safety margins, QTc issues, BA,
etc.
	 	CDHP / DSE / DMPK (LO)
	 
	 	 	 	 
	Drug Regulatory (GRAMS)
	 
	 	 	 	 
	Preliminary regulatory strategy

assessment

	 	 	 	GRAMS
	 
	 	 	 	 
	Project Documentation (Project Team)
	 
	 	 	 	 
	Preliminary Product Profile

	 	 	 	Project Team
	 
	 	 	 	 
	Preliminary Development Plan

	 	 	 	Project Team

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

8

 

	 	 	 	 	 
	Prerequisites of Decision to	 	 	 	 
	select an Early Development	 	 	 	Functional Representative
	Compound (EDC)	 	Target / Expectation	 	Responsible
	Table listing criteria and
actual results

	 	 	 	Project Team
	 
	 	 	 	 
	Patent
	 	 	 	 
	 
	 	 	 	 
	Patent application filed on structure

	 	 	 	Patent
	 
	 	 	 	 
	Freedom of operation

	 	 	 	Patent
	 
	 	 	 	 
	Patent applications or invention
Disclosure Memoranda (IDMs)
filed on surrounding technology
(processes, chemical
intermediates, methods of use,
and the like)

	 	 	 	Patent
	 
	 	 	 	 
	Marketing
	 	 	 	 
	 
	 	 	 	 
	Marketing statement of interest
(based on TPP and Alternative
TPPs within six months after
Decision EDC is taken

	 	 	 	Marketing

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

9

 

Schedule 1.43

Research Plan

Avalon — Aventis Target Collaboration

December 9, 2003

A. Selection of * for Analysis

	1.	 	Aventis has defined the initial criteria for selection of amplicons.

	 	a.	 	Initial criteria are:

*

	2.	 	Upon contract signing, Avalon will select * database which best meet the initial criteria.
(Note: Each of the * will be associated with a specific cancer cell line that carries the *.
This cell line will be the focus for the molecular analysis that is conducted herein for that
*.)

	3.	 	Within 3 weeks of the Effective Date, Avalon will present the following information to
Aventis for each of the *:

*

	 	 	Avalon will also present information to Aventis that details the process of how the * were
selected, based upon the application of the criteria. This will, for example, include
information on the starting number of * surveyed and the attrition rate of amplicons (i.e.
how many * were removed from consideration at each step, based upon the application of the
criteria).

	4.	 	Aventis has the option to accept or reject each * for further consideration within the
collaboration. Aventis will provide a decision with regard to each * upon the later of 7 days
of data presentation or 7 days after the Effective Date.

	5.	 	For each * that is rejected, Avalon will select and present a replacement amplicon. In
total, Avalon will present information on a * at this stage of the Research Program — selected
based upon Aventis criteria — out of which Aventis can select a maximum of * within this
initial collaboration.

B. Molecular Identification of DRG for Each Amplicon

	1.	 	Upon acceptance of each * by Aventis, Avalon will define the * by:

*

	 	 	Based upon this analysis, a * will be defined as the * that demonstrate strong correlation
between DNA amplification and RNA overexpression.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

1

 

	2.	 	Once the * from * has/have been defined, * will be used to analyze the amplification and
overexpression of the * from all cell lines within the Avalon cytogenetics database that
contain an amplification/gain that overlaps the * of interest.

	3.	 	Upon completion of the *, Avalon will present the data to Aventis for the * from each of the
*. This data will include:

*

	4.	 	Aventis has the right to accept or reject each * for further consideration within the
collaboration. Aventis shall provide a decision with regard to each * within 7 days of data
presentation.

	5.	 	Aventis can select * from *.

[Note: In most cases, Avalon anticipates that the combination of * data will define an individual *
that is the likely oncogenic target for an amplicon. However, it is possible that some * may
contain more than one * at the completion of * analysis (i.e. more than * that shows correlation
between DNA amplification and RNA overexpression). In such cases, for amplicons that Aventis
selects for continued analysis, all candidate DRGrs within the * will be advanced into * and, if
still viable, all candidate DRGs will be advanced into *.]

C. SQT Validation of DRGs

For each * accepted by Aventis, Avalon will:

*

Based upon this data, Aventis can advance or reject each * status.

[Note: In most cases, Avalon anticipates that * across the cell line panel will define an
individual * that is the likely oncogenic target for *. However, it could be possible that some *
may still contain more than one * at the completion of Step C (i.e. more than * that shows
correlation between DNA amplification and RNA overexpression across the cell line panel). In such
cases, for * that Aventis selects for continued analysis, all * within a given * will be advanced
into * and, for the purpose of calculation of the contract milestone for *, all candidate * from a
given amplicon will be treated as *.]

D. *

For each * by Aventis, Avalon will:

*

[Note 1: Steps l & 2 above are performed for the purpose of selecting and validating a good probe
that can be used for subsequent FISH analysis to tissue microarrays (TMA), if desired.]

	3.	 	Perform * on DNA obtained from human tumors or human cancer xenografts provided by Aventis to
potentially evaluate amplification frequency.

[Note 2: In the event that Aventis will conduct * experiments, Avalon will share necessary
protocols to ensure comparability of * results between Avalon & Aventis. In fact, in all cases and
for all procedures that are performed at both locations (i.e. Avalon and Aventis), the

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted
and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

2

 

companies will share or exchange relevant protocols to again ensure reproducibility of results.
For clarification, this does not imply a commitment for technology transfer.]

	4.	 	Develop * reagents and experimental conditions
	 
	5.	 	Provide analysis of * (and * provided by Aventis) by

*

[Note 3: Avalon has an established working relationship with an external research
organization that is a leading expert at FISH hybridizations to TMA (e.g. such TMA’s typically
contain approx * tumor sections). For each individual * — if desired — Aventis may choose to
request * to determine frequency of amplification across clinical samples and establish prognostic
significance of the SQT. If TMA experiments are requested, Avalon will supply the necessary BAC
FISH probe to the external service provider and to Aventis, and will coordinate the * experiments
through this external service provider. Aventis will pay any Third Party costs for such *
experiments.

For each * accepted, Aventis will:

*

Based upon this data, Aventis can *.

 

*
The asterisk denotes the confidential portions of this document that
have been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of
1933, as amended.

3exv10w3

 

EXECUTION COPY

COLLABORATION AGREEMENT

     THIS COLLABORATION AGREEMENT (“Agreement”) is made and entered into effective as of October
15, 2003 (the “Effective Date”), by and between AVALON PHARMACEUTICALS, INC., having principal
offices at 20358 Seneca Meadows Parkway, MD 20876 (“Avalon”) and MEDAREX, INC., having principal
offices at 707 State Road, Princeton, New Jersey 08540-1437, on behalf of itself and its wholly
owned subsidiary, GENPHARM INTERNATIONAL, INC., with principal offices at 521 Cottonwood Drive,
Milpitas, California 95035 (collectively, “Medarex’’). Avalon and Medarex each may be referred to
herein individually as a “Party,” or collectively as the “Parties.”

     WHEREAS, Medarex and Avalon desire to enter into a definitive agreement to collaborate to
produce fully human antibodies to antigen targets in order to develop and commercialize
genomics-derived, Antibody-Based Products on the terms set forth below;

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises and
covenants contained herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties, intending to be legally bound, do hereby agree as
follows;

ARTICLE 1 -

SCOPE OF COLLABORATION; COLLABORATION ACTIVITIES

     Section 1.1 Scope of Collaboration. The Parties have entered into this collaboration (such
collective enterprise, the “Collaboration”) to jointly research, develop and commercialize
Collaboration Products with respect to Collaboration Targets throughout the Territory as set forth
in this Agreement. Any capitalized terra used in this Agreement not otherwise defined herein shall
have the meaning set forth on Appendix A.

     Section 1.2 Research Activities.

          1.2.1 General. Under the direction and supervision of the Steering Committee, the Parties
shall use Commercially Reasonable Efforts to conduct their respective research activities in
accordance with this Agreement, each Project Plan and each Project Budget.

          1.2.2 Identification of Collaboration Targets. The list of Antigens attached hereto as
Appendix C sets forth the initial list of Collaboration Targets (the “Initial Collaboration
Targets”). Such list may be amended pursuant to Section 1.7 or 5.1.2, by the express written
agreement of Medarex and Avalon or as follows:

               (a) Within the sole discretion of and as selected by Avalon, during the Target Entry Period
(as defined in Section 1.2.2(e)), Avalon may identify to Medarex Antigens for consideration by
Medarex, with it being expressly understood that Avalon is not under any
obligation to do so. In conjunction with identification of any such Antigen, Avalon shall
promptly provide to Medarex the following information and materials (“Antigun Evaluation
Materials”):

                    (i) a written description of the applicable Antigen, including DNA and amino acid sequences
thereof, when available;

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

 

 

                    (ii) the human tissue and/or cell type expression profile for such Antigen;

                    (iii) all other scientific data in the possession of Avalon or its Affiliates relating to such
Antigen;

                    (iv) all information regarding (A) the proprietary status of such Antigen, (B) the
intellectual property rights Controlled by Avalon and its Affiliates with respect to such Antigen,
(C) any Patent, know-how, intellectual property or other rights assigned, transferred, granted or
conveyed by Avalon or its Affiliates to any Third Parties that is inconsistent with rights to be
granted under this Agreement with respect to an Antibody Product against said Antigen, (D) any
agreements by or among Avalon or its Affiliates and any Third Parties that is inconsistent with
rights to be granted under this Agreement with respect to an Antibody Product against said Antigen,
(E) any potential restrictions (contractual, patent or otherwise) that would limit or otherwise
affect the Parties’ right to fully Exploit any Collaboration Products with respect thereto, and (F)
the extent known, any potential Third-Party Payments that would be owed in connection with the
Exploitation of Antibody Products with respect to such Antigen under this Agreement or a Unilateral
Development and Commercialization Agreement;

                    (v) existing and available models for preclinical validation of Antibody Products against such
Antigen;

                    (vi) a list of expected indications for Antibody Products against such Antigen,

                    (vii) the commercial and scientific rationale for why Avalon believes such Antigen is a
promising target for the development of Antibody-Based Products; and

                    (viii) all other relevant information in Avalon’s or its Affiliates’ possession with respect
to such Antigen,

          (b) Beginning on the day that either (i) Medarex notifies Avalon in writing that Medarex is in
receipt of the complete Antigen Evaluation Materials with respect to an Antigen or (ii) Avalon
notifies Medarex in writing that, to the best of its knowledge, Avalon has delivered all of the
Antigen Evaluation Materials that is in its possession with respect to an Antigen, and * days
thereafter, (the “Evaluation Period”), Medarex shall have the exclusive right to determine whether
such Antigen shall become a Collaboration Target under this Agreement and shall notify Avalon of
its determination with respect to such Antigen. In the event Medarex receives Antigen Evaluation
Materials for a given Antigen pursuant to Section 1.2.2(a), but does not believe such materials are
sufficiently complete to enable Medarex * whether to accept or
decline such Antigen pursuant to the preceding sentence, the Parties shall * additional
analyses to be performed by Avalon in order to complete the Antigen Evaluation Materials, but
Avalon shall not be obligated to perform such additional analyses. At any time prior to the
commencement of the Evaluation Period with respect to an Antigen, Avalon shall have the right to
withdraw such Antigen from consideration and such Antigen shall be a Reversion Target subject to
the obligations of Section 1.7.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

2

 

               (i) In -the event Medarex accepts such Antigen into the Collaboration as a Collaboration
Target, Appendix C shall be deemed to be amended accordingly and the Parties shall use good
faith efforts to develop a preliminary Project Plan and Project Budget for the discovery and
development of Antibody Products with respect to such Antigen in the form attached hereto as
Appendix E; provided, however, that if, * the Antigen shall become a
Reversion Target, subject to the obligations of Section 1.7. Notwithstanding anything in this
Agreement to the contrary, in the event that an Antigen becomes a Reversion Target pursuant to the
previous sentence, any work performed by or on behalf of a Party with respect to a Collaboration
Target accepted under this Section 1.2.2(b) after the acceptance and before such reversion * and
any Information and Inventions *.

               (ii) In the event Medarex does not accept such Antigen within the applicable Evaluation
Period, such Antigen shall not be deemed to be a Collaboration Target and Medarex shall have no
further rights with respect thereto under this Agreement and Avalon shall have no further
obligations with respect thereto under this Agreement.

               (iii) In the event that Medarex does not accept an Antigen as a Collaboration Target, or in
the event that an Antigen is accepted as a Collaboration Target and such Collaboration Target
becomes a Reversion Target * notwithstanding anything else to the contrary, Medarex shall not use
any Information and Inventions that are conceived, developed or otherwise made by Medarex with
respect to work performed by Medarex with respect to such Antigen or Collaboration Target *.

          (c) Upon designation of an Antigen as a Collaboration Target pursuant to Section 1.2.2(b), the
Parties shall * a written description of such Antigen, including the name of the Collaboration
Target and its complete DNA sequence end GenBank accession number, which descriptions shall be
included on Appendix C.

          (d) As the Parties gain greater understanding of each Collaboration Target and the potential
utility of Antibody Products thereto, they shall update the description of such Collaboration
Target on Appendix C to more accurately reflect what Antigens, or portions thereof, are
included in the Collaboration.

          (e) The “Target Entry Period” shall commence on the Effective Date and shall continue until
the * unless (i) earlier terminated by (A) the unanimous agreement of the Parties, or (B) either
Party pursuant to Article 8; or (ii) extended by unanimous agreement of the Parties. The
termination or expiration of the Target Entry Period shall not constitute a termination of this
Agreement.

          1.2.3 Identification of Applicable Assays and Success CriteriaAs part of the Project Plan for
a given Collaboration Target, the Steering Committee will:

          (a) identify the Immunogen(s) (each, an “Immunogen”) to be used to enable Medarex to perform
its activities pursuant to Section 1.2.5;

          (b) determine which Party will be responsible for *;

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

3

 

          (c) develop an experimental plan to identify a set of assays (each, an “Assay”) for screening
Assay -Candidates against such Collaboration Target;

          (d) determine which Party will be responsible for delivering the Assays to the Collaboration;
and

          (e) develop guidelines that will allow the establishment of criteria (the “Assay Success
Criteria”) for determining, subject to Section 1.2.6, whether an Assay Candidate should become a
Collaboration Antibody,

The Steering Committee may elect to use a Third Party to provide one or more Immunogen(s) to the
Collaboration. In addition, the Steering Committee may elect to have a Third Party develop and/or
perform one or more of the Assays.

          1.2.4 Allocation of Costs. With respect to the Collaboration Targets that exist as of the
Effective Date, all costs associated with identifying Collaboration Targets, preparing
and furnishing to Medarex complete Antigen Evaluation Materials with respect thereto, and creating
and delivering the Immunogen(s) to Medarex (the “Avalon Research Activities”) shall be borne *, but
Avalon shall have no obligation to provide any Antigen Evaluation Materials. With respect to the
Collaboration Targets that exist as of the Effective Date, all costs associated with immunizing the
HuMAb Mice and raising a panel of different Antibodies to the applicable Collaboration Target
pursuant to the last sentence of Section 1.2.5 (the “Medarex Research Activities”) shall be borne
*. The Parties acknowledge and agree that such Avalon Research Activities and the Medarex Research
Activities are deemed to be and are of equal value and neither Party shall have any right to
reimbursement or credit from the other Party for the cost and expenses associated with such
research activities. * All other costs and expenses incurred by the Parties in performing their
activities under this Section 1.2 shall be governed by Section 4.1.2.

          1.2.5 Raising of Antibodies by Medarex. * shall provide to Medarex sufficient Immunogen for
each Collaboration Target to enable Medarex to perform its activities pursuant to this Section
1.2.5. Upon the delivery of such Immunogen, Medarex shall use * to immunize the HuMAb Mice to
raise a panel of different Antibodies to the applicable Collaboration Target.

          1.2.6 Selection of Assay Candidates; Assay Screening; Selection of Collaboration
Antibodies.

               (a) Medarex shall select a subset of the Antibodies raised pursuant to Section 1.2.5 to become
“Assay Candidates”. As set forth under the applicable Project Plan, the Parties shall run each
Assay Candidate through the applicable Assays. Upon completion of the Assay screening for a given
Assay Candidate, each Party will be provided with the results of such screening (including the raw
data underlying such results). The Steering Committee will then determine whether the Assay
Candidate has met the applicable Assay Success Criteria. Subject to Section 1.2.6(b), each Assay
Candidate that meets the applicable Assay Success Criteria shall be deemed to be a “Collaboration
Antibody”; provided, however, the Steering Committee may, in its sole discretion
(i) decide that an Assay Candidate that meets the Assay Success Criteria shall

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

4

 

nonetheless not be
deemed to be a Collaboration Antibody, or (ii) decide that an Assay Candidate that does not meet
the Assay Success Criteria shall nonetheless be deemed to be a Collaboration Antibody.

               (b) The Parties shall determine the amino acid sequence of at least one heavy chain variable
region corresponding to a contiguous portion spanning CDR 1 through CDR3 and defining a complete
antibody-heavy chain Antigen binding domain (a “Binding Sequence”) for each Assay Candidate that is
selected pursuant to Section 1.2.6(a) to be a Collaboration Antibody and shall provide such
sequence information to Medarex. Notwithstanding Section 1.2.6(a), Medarex shall have the right to
veto any such Assay Candidate on written notice to Avalon within * days of its receipt of the
correct sequence data for any such Assay Candidate, if Medarex (i) is researching or developing, or
has researched or developed, ether, alone or in collaboration with a Third Party, any such Assay
Candidate, or (ii) has previously granted a Third Party rights with respect to any Antibody that
has the same Binding Sequence as such Assay Candidate, whereupon such Assay Candidate shall not
become a Collaboration Antibody and all amounts of such Assay Candidate (and any cell lines
expressing such Assay Candidate and other Mice Materials with respect to such Assay Candidate)
produced pursuant to this Agreement will be destroyed.

          1.2.7 Effect of Designation of Collaboration, Antibodies. Any Antibody that is designated a
Collaboration Antibody in accordance with Section 1.2.6 shall be exclusive to the Collaboration.
Except as otherwise provided in this Agreement, once an Antibody is designated a Collaboration
Antibody, all costs associated with the research, development, manufacturing and
commercialization of such Collaboration Antibody shall *, as more fully described in Section 4.1.
Any Antibodies with respect to a Collaboration Target (and any cell lines expressing
such Antibodies and other Mice Materials with respect to such Antibodies) produced under this
Agreement that are not designated as Collaboration Antibodies or back-up Collaboration Antibodies
by the Steering Committee shall be destroyed by Medarex, unless the Parties agree otherwise.

          1.2.8 Lead Collaboration Antibodies. Out of the pool of Collaboration Antibodies against a
given Collaboration Target, the Steering Committee will select the Collaboration
Antibody that it believes to be most promising for development and commercialization and it will
then move such Collaboration Antibody into Production Process Development. Each Collaboration
Antibody that is put into Production Process Development shall be deemed to be a “Lead
Collaboration Antibody”. It is understood that the Steering Committee may, over time, select more
than one Lead Collaboration Antibody against a given Collaboration Target, or substitute one Lead
Collaboration Antibody for another. Upon designation of each Lead Collaboration Antibody, * of the
cost of Production Process Development for such Lead Collaboration Antibody. With respect to each
Lead Collaboration Antibody, the Steering Committee shall solicit bids from suppliers to perform
the Production Process Development. Each Party shall have the right to submit a bid on such terms
as it desires. The Steering Committee shall use * to enter into a development agreement with the
supplier that is best able to meet the Parties’ requirements, taking into consideration such
factors as price, quality, capacity, quantity, reliability and reputation. In the event the
Steering Committee selects a Party to

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

5

 

perform Production Process Development pursuant to this
Section 1.2.8, the price and other terms and conditions of such Production Process Development
shall be based on arm’s length negotiations with the Steering Committee.

          1.2.9 Identification of Restrictions on Exploitation of Collaboration Products. Upon the
designation of the first Collaboration Antibody with respect to a Collaboration Target, unless
otherwise agreed by the Steering Committee, the Collaboration shall solicit a formal patent
review and opinion regarding such Collaboration Target, and Antibody Products with respect
thereto, from an outside law firm selected by the Steering Committee. The costs of such formal
opinion shall be *.

     Section 1.3 Project Plan and Project Budget. Upon designation of a given Antigen as a
Collaboration Target pursuant to Section 1.2.2, the Parties shall jointly develop and implement a
project plan (each a “Project Plan”) and a project budget (each a “Project Budget”) for the
research, development, manufacture and commercialization of Collaboration Products against such
Collaboration Target. It is understood that each such respective Project Plan and Project Budget
initially will cover the early-stage research and development of Collaboration Products with
respect to such respective Collaboration Target, but that the components of each Project Plan and
Project Budget will evolve as the applicable Collaboration Products move through the research,
development, manufacture and commercialization life cycle. The Parties, through the Steering
Committee, shall endeavor to review and update each Project Plan and Project Budget at least
annually.

     Section 1.4 Performance Standards. Each Party shall perform, or cause to be performed, its
respective activities hereunder in good scientific manner, and in compliance in all material
respects with all Applicable Law and * to (a) research, develop, file for Regulatory Approval and
commercialize one or more Collaboration Products with respect to each Lead Collaboration Antibody,
and (b) achieve the objectives of each
Project Plan in accordance with each Project Budget, in each case, efficiently and
expeditiously by allocating sufficient time, effort, equipment and skilled personnel to
complete- such activities successfully and promptly.

     Section 1.5 Product Trademarks. The Parties shall develop Product Trademarks for each
Collaboration Product that will be commercialized. Such Product Trademarks shall not be
confusingly similar to, misleading or deceptive with respect to, or dilute any of the Trademarks
owned or Controlled by either of the Parties, or any part of such Trademarks. No Party or any of
its Affiliates or sublicensees shall commercialize a Collaboration Product under any Trademark
other than the -Product Trade marks. No Party or any of its Affiliates or sublicensees
shall use in its business any Trademark that is confusingly similar to, misleading or deceptive
with respect to, or dilutes any of the Product Trademarks or any other Trademarks used to identify
or distinguish a Collaboration Product, or any part of the foregoing. The Steering Committee shall
oversee the filing, prosecution and maintenance of all Product Trademark registrations. * in the
costs and expenses of such filing, prosecution and maintenance. Subject to Applicable Law, the
label of any Collaboration Products shall include, at Avalon’s sole discretion, the name of Avalon
and, at Medarex’s sole discretion, the name of Medarex.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

6

 

     Section 1.6 Supply of Collaboration Products. With respect to clinical and commercial
supplies of Collaboration Products, the Steering Committee shall solicit bids from suppliers to
supply the Parties’ requirements thereof. Each Party shall have the right to submit a bid on such
terms as it desires. The Steering Committee shall use Commercially Reasonable Efforts to enter
into a supply agreement with the supplier that is best able to meet the Parties’ requirements,
taking into consideration such factors as price, quality, capacity, quantity, reliability and
reputation. In the event the Steering Committee selects a Party to produce clinical and/or
commercial supplies pursuant to this Section 1.6, the price and other terms and conditions of such
supply shall be based on arm’s length negotiations with the Steering Committee.

     Section 1.7 Reversion of Collaboration Targets. If, notwithstanding the Commercially
Reasonable Efforts of the Parties, no Collaboration Antibodies have been designated with respect to
a Collaboration Target pursuant to Section 1.2.6 within *, or such other period as the Parties may
agree, after the immunization of the HuMAb Mice with respect to such Collaboration Target pursuant
to Section 1.2.5, or * then (a) such Antigen shall cease to be a Collaboration Target (such
Antigen, a “Reversion Target”), and Appendix C shall be amended accordingly, (b) any
Antibodies with respect thereto shall not become Collaboration Antibodies, (c) any Antibody
Products with respect thereto shall not become Collaboration Products, and (d) any licenses granted
pursuant to Article 3, with respect to such Antigen, Antibody or Antibody Product shall terminate,
and, subject to Section 7.1.5, Medarex shall have no further rights under this Agreement with
respect to such Antigen. Promptly upon such designation, the Parties shall destroy all Antibody
Products, Antibodies, Mice Materials,
Immunogens and other Biological Materials created under this Agreement with respect to such a
Reversion Target.

ARTICLE 2 -

OPERATION OF THE COLLABORATION

Section 2.1 Steering Committee.

          2.1.1 Formation of Steering Committee. The Parties shall establish a joint committee (the
“Steering Committee”), which -shall oversee the research, development and commercialization
activities hereunder. Each of Avalon and Medarex shall appoint an equal number of representatives
with the requisite experience and seniority to enable them to make decisions on behalf of the
Parties with respect to the Collaboration. From time to time, Avalon and Medarex each may
substitute any of its representatives to the Steering Committee.

          2.1.2 Responsibilities. The Steering Committee shall, in addition to its other
responsibilities described in this Agreement: (a) prioritize the research, development,
manufacturing and commercialization activities with respect to Collaboration Targets, Collaboration
Antibodies and Collaboration Products; (b) subject to Section 1.3, allocate responsibility for such
activities between Avalon and Medarex taking into consideration their relevant expertise and
available resources; (c) develop and implement a strategy for researching, developing,
manufacturing, obtaining and maintaining Regulatory Approvals for, and commercializing, the
Collaboration Products; (d) determine whether to enter into any agreements pursuant to Section 7.4
or otherwise that would give rise to Third-Party Payments; (e)establish

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

7

 

such subcommittees as
deemed appropriate by the Steering Committee; and (f) take such other actions as are set forth in
this Article 2 or as the Parties may unanimously agree. The Steering Committee may evaluate
additional technologies that may be necessary or beneficial to the Collaboration and may recommend
the acquisition or in-licensing of these technologies to the Parties.

          2.1.3 Procedural Rules for the Steering Committee.

               (a) Generally. Except as explicitly set forth in this Section 2.1.3, the Steering Committee
shall establish its own procedural rules for its operation.

               (b) Voting. The Steering Committee shall take action by unanimous consent of Avalon and
Medarex, with each such Party having a single vote, irrespective of the number of representatives
actually in attendance at a meeting, or by a written resolution signed by the designated
representatives of each of Avalon and Medarex. A quorum shall be established only if at least one
member appointed by Avalon and at least one member appointed by Medarex is in attendance.

     Section 2.2 Progress Reports. Within * after *, or as otherwise required by the Steering
Committee, each Part shall provide to the other Party a written progress report, which shall (a)
describe any research, development or commercialization activities with respect to Collaboration
Targets or Collaboration Products and any other work relating to the Collaboration Targets and
Collaboration Products that it has performed, or caused to be performed, since the last such
report, (b) evaluate the work performed in relation to the goals of this Agreement and the
applicable Project Plan, and (c) provide such other information as may be required by this
Agreement and the applicable Project Plan or reasonably requested by the other Party relating to
such activities. In addition to the progress reports provided hereunder, it is contemplated that
the Parties will maintain informal communications through the Steering Committee and their
day-to-day activities under this Agreement.

Section 2.3 Disputes; Dispute Resolution.

          2.3.1 Referral to Steering Committee. Any dispute that may arise relating to the terms of
this Agreement or the activities of the Parties hereunder shall be brought to the attention of the
Steering Committee, which shall attempt in good faith to achieve a resolution. Either Party may
convene a special meeting of the Steering Committee for the purpose of resolving disputes.

          2.3.2 Referral to Chief Executive Officers of the Parties. If the Steering Committee is
unable to resolve such a dispute within * of the first presentation of such dispute to the Steering
Committee, and with respect to all other disputes, including the failure to obtain a unanimous vote
in the Steering Committee, such dispute shall be referred to the Chief Executive Officers of each
of the Parties (or their respective designees) who shall use their good faith efforts to mutually
agree upon the proper course of action to resolve the dispute.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

8

 

          2.3.3 Referral to Chief Executive Officer of Medarex. Any disputes arising with respect to
Mice-Related Technology shall be resolved conclusively by the Chief Executive Officer of Medarex
(or his or her designee), who shall * to the comments of the Chief Executive Officer of Avalon (or
his or her designee) in resolving such matter.

          2.3.4 Unresolved Disputes. If any dispute bother than those provided for in Section 2.3.3) is
not resolved by the Chief Executive Officers of the Parties (or their designees) within * after
such dispute is referred to them, or such longer period as the Chief Executive Officers (or their
respective designees) may collectively agree, then either Party shall have the right (a) if such
dispute relates to * to refer such dispute to an Expert for expedited arbitration as set forth in
Section 2.3.5, or (b) with respect to any other dispute, including with respect to a Party’s
interpretation of, or any allegation of breach of, this Agreement, to litigate such dispute in
accordance with Section 11.5 or to pursue such other
dispute resolution mechanism as the Parties may agree, except that disputes under Section
7.3.1(a) shall be resolved in accordance with Section 7.3.1(a).

          2.3.5 Expedited Arbitration.

               (a) With respect to disputes under Section 2.3.4 above that are not resolved by the Chief
Executive Officers of the Parties (or their designees) pursuant to Section 2.3.2, upon written
request by either party to the other Party, the Parties shall promptly negotiate in good faith to
appoint a mutually acceptable disinterested, conflict-free individual got affiliated with either
Party, with scientific, technical and regulatory experience with respect to the development of
Antibody-Based Products necessary to resolve such dispute (an “Expert”). If the Parties are not
able to agree within * after the receipt by a Party of the written request in the immediately
preceding sentence, the CPR Institute for Dispute Resolution, or such other similar entity as the
Parties may agree, shall be responsible for selecting an Expert within * of being approached by a
Party. The fees and costs of the Expert and the CPR Institute for Dispute Resolutions (or such
other entity) shall *.

               (b) Within * after the designation of the Expert, the Parties shall each simultaneously submit
to the Expert and one another a written statement of their respective positions on such
disagreement. Each Party shall have * from receipt of the other Party’s submission to submit a
written response thereto, which shall include any scientific and technical information in support
thereof. The Expert shall have the right to meet with the Parties, either alone or together, as
necessary to make a determination.

               (c) No later than * after the designation of the Expert, the Expert shall make a determination
by selecting the resolution proposed by one of the Parties that as a whole is the most fair and
reasonable to the Parties in light of the totality of the circumstances and shall provide the
Parties with a written statement setting forth the basis of the determination in connection
therewith. The decision of the Expert shall be final and conclusive, absent manifest error.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

9

 

ARTICLE 3 -

GRANT OF RIGHT

Section 3.1 License Grants for Collaboration Activities.

          3.1.1 Medarex Grant. Subject to Section 3.3 and the other terms and conditions of this
Agreement, Medarex hereby grants to Avalon and its Affiliates a co-exclusive (with Medarex and its
Affiliates), fully-paid, royalty-free license, with the right to sublicense solely as provided in
Sections 3.3.5 and 3.4, under the Medarex Technology and the Collaboration Technology, in each case
to perform Avalon’s activities under Section 1.2, and (b) jointly Exploit the Collaboration
Products in accordance with this Agreement.

          3.1.2 Avalon Grant. Subject to the terms and conditions of this Agreement, Avalon hereby
grants to Medarex and its Affiliates a co-exclusive (with Avalon and its Affiliates), fully-paid,
royalty-free license, with the right to sublicense solely as provided in Section 3.4, under the
Avalon Technology and the Collaboration Technology, in each case to (a) perform Medarex’s
activities under Section 1.2, and (b) jointly Exploit the Collaboration Products in accordance with
this Agreement.

Section 3.2 Product Trademarks, for Collaboration Products.

          3.2.1 Medarex Grant. Subject to the terms and conditions of this Agreement, Medarex hereby
grants to Avalon and its Affiliates a co-exclusive (with Medarex and its Affiliates), fully-paid,
royalty-free license, with the right to sublicense solely as provided in Section 3.4, to use the
Product Trademarks to Exploit the Collaboration Products in accordance with this Agreement.

          3.2.2 Avalon Grant. Subject to the terms and conditions of this Agreement, Avalon hereby
grants to Medarex and its Affiliates a co-exclusive (with Avalon and its Affiliates), fully-paid,
royalty-free license, with the right to sublicense solely as provided in Section 3.4, to use the
Product Trademarks to Exploit the Collaboration Products in accordance with this Agreement.

Section 3.3 Exclusivity, Reserved Rights and Pre-Existing Grants.

          3.3.1 Antigen Exclusivity. Subject to Sections 3.3.2, 3.3.3 and 3.3.4, the Parties
acknowledge and agree that no Party shall engage, directly or indirectly, on behalf of itself or
any other party, in the research, development, commercialization or other Exploitation of
Antibody-Based Products with respect to any Collaboration Target other than the Collaboration
Products and Unilateral Products as provided in this Agreement and any related agreements between
the Parties.

          3.3.2 Research and Commercialization Agreements. Medarex shall have the right to (a) grant
licenses and other rights to other parties, under the Medarex Technology for such parties to
Exploit Antibody Products (but not Collaboration Products) with respect to Antigens, including
Collaboration Targets, (b) transfer Medarex Know-How to such parties in

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

10

 

connection therewith,
including by providing instruction with respect to the use and immunization of HuMAb Mice, and
assistance with respect to the Mice-Related Technology, (c) develop production processes for, and
manufacture, such Antibody Products, and (d) receive license fees, milestone payments, royalties
and other remuneration in connection therewith, but, in connection with clause (a), (b), (c) or (d)
above, * (each agreement with respect to the foregoing, a “Research and Commercialization
Agreement”). For the avoidance of doubt, Medarex shall not disclose or transfer any Avalon
Technology or, subject to Section 7.1.5, Collaboration Technology to any Third Party in connection
with a Research and Commercialization Agreement.

          3.3.3 Retained Rights. Notwithstanding anything in this Agreement to the contrary, Medarex
does hereby retain the right to (a) enter into collaborations or other agreements with, and to
grant licenses and other rights under the Medarex Technology to, Third Parties to Exploit Antibody
Products with respect to Antigens other than Collaboration Targets, and/or (b) independently
Exploit Antibody Products with respect to Antigens other than Collaboration Targets.

          3.3.4 Existing Grants. The Parties further acknowledge and agree that (a) pursuant to the
Cross-License Agreement, Medarex has granted a non-exclusive license under certain Medarex Patents
to exploit Antibody Products, including Collaboration Products, with respect to Antigens, including
the Collaboration Targets, in the Territory; and (b) pursuant to certain existing agreements with
Third Parties, Medarex has granted exclusive rights under the Medarex Technology to Exploit
Antibody Products with respect to Antigens other than Collaboration Targets, which Antibody
Products could be the same as Collaboration Products.

          3.3.5 Cross-License Agreement. The Cross-License Agreement prohibits Medarex from granting
commercialization rights to the same Antibody Product, whether by license or sublicense, under
certain Medarex Technology to more than one party in a territory, which could impact the Parties’
ability to grant licenses under Sections 3.4 and 5.2. The Parties shall structure their respective
commercialization rights in each country in the Territory, in accordance with this Section 3.3.5,
so as to comply with the requirements of the Cross-License Agreement and shall use good faith
efforts to ensure that any such structure preserves the intended economic benefits of the
Collaboration to the Parties.

               (a) So long as the Cross-License Agreement is in effect, if the Steering Committee desires to
grant a sublicense with respect to commercialization of a Collaboration Product pursuant to Section
3.4 or section 5.2, then the Steering Committee shall provide Medarex with written notice thereof,
which shall set forth in reasonable detail the terms and conditions of such sublicense, the Medarex
Technology and Collaboration Product involved, and the identity of the proposed sublicensee. Upon
receipt of such notice, Medarex shall make a good faith determination as to whether such Medarex
Technology is subject to the sublicense restrictions contained in the Cross-License Agreement.

               (b) To the extent that Medarex determines that such Medarex Technology is not subject to the
sublicense restrictions contained in the Cross-License Agreement,

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

11

 

Medarex shall so notify the
Steering Committee in writing and the Collaboration thereafter shall have the right to grant such
sublicense, subject to Section 3.4 or Section 5.2, as applicable.

               (c) To the extent that Medarex determines that all or part of such Medarex Technology is
subject to the sublicense restrictions contained in the Cross-License Agreement, Medarex shall so
notify the Steering Committee in writing. The Parties shall then meet to discuss in good faith how
to proceed in order to optimize the commercialization of the
applicable Collaboration Product hereunder while complying with the requirements of the
Cross-License Agreement.

     Section 3.4 Sublicenses. Subject to Section 3.3.5, each Party shall have the right to grant
sublicenses under the licenses granted in Sections 3.1 and 3.2 to (a) Affiliates without the
approval of the applicable licensor, provided that any such sublicensor shall remain jointly and
severally liable for the performance or non-performance of any such Affiliate sublicensee, and (b)
Third Parties pursuant to Section 5.2 or as necessary to perform the commercialization activities
assigned to such Party under a Project Plan, with the prior approval of the applicable licensor,
not to be unreasonably withheld or delayed, which approval shall be deemed to be granted with
respect to a sublicense if the licensor fails, within twenty (20) business days of its receipt of a
written notice from the sublicensing Party setting forth in reasonable detail the nature of such
sublicense and the identity of the sublicensee, to notify such sublicensing Party that it withholds
its consent to such sublicense and the reasons therefor. Notwithstanding the previous sentence,
the grant of any such sublicense shall not relieve the sublicensing Party of its obligations under
this Agreement.

     Section 3.5 License Limitations. Each Party hereby covenants to the other Party that neither
such first Party nor any of its Affiliates, licensees or sublicensees shall use or practice the
Technology of such other Party (other than the Collaboration Technology, which shall be governed by
Section 7.1.5), directly or indirectly, on behalf of itself or any other party, for any purpose
other than as permitted under Section 3.1 and in particular, but without limiting the generality of
the foregoing, for any research, development, commercialization or other Exploitation of an
Antibody Product or any other product or method, other than, a Collaboration Product or a
Unilateral Product as provided hereunder or in the applicable Unilateral Development and
Commercialization Agreement.

     Section 3.6 No Other Rights. For the avoidance of doubt, Medarex and its Affiliates shall
have no right, express or implied, with respect to the Avalon Technology and Avalon and its
Affiliates shall have no right, express or implied, with respect to the Medarex Technology, in each
case except as expressly provided in Section 3.1.

     Section 3.7 Additional Mice. Avalon understands that Medarex has entered into the Kirin
Agreement with Kirin with respect to the terms for access to technology for obtaining antibodies
through the use of the Additional Mice. The parties acknowledge and agree that, Avalon has been
offered access to the Additional Mice *. The Parties further acknowledge and agree that any future
use of the Additional Mice and rights in and to any Antibody Products and Antibody Materials
produced thereby are subject to the terms and conditions of the Kirin Agreement. The Parties agree
that, in the event that the JSC requests (i) access to Additional Mice,

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

12

 

or (ii) that Medarex immunize
Additional Mice with a Immunogen against the Collaboration Target, the mutual agreement of the
Parties shall be necessary in order for the Collaboration to utilize Additional Mice. *.

ARTICLE 4 -

FINANCIAL PROVISIONS

     Section 4.1 Profit and Expense Allocation with Respect To Collaboration Products.

          4.1.1 Operating Profits and Operating Losses. Except as otherwise provided in this Agreement,
the Parties shall * in the Operating profits and Operating Losses, as applicable, with respect to
the collaboration Products, as set forth in this Section. Within * after the end of * in which
Operating Profits or Operating Losses are recognized with respect to a Collaboration Product, each
party shall provide the other Party with a statement detailing its Operating Profits or Operating
Losses for such Collaboration Product for such calendar quarter on a country-by-country basis,
which statement shall set forth in reasonable detail any Net Sales by such Party or its Affiliates,
any Commercialization Expenses and any Other Operating (Income)/Expense, including a detailed
breakdown of the components of the foregoing, with respect to such Collaboration Product, *
(“Authorized Commercialization Expenses”). Within * days after the end of each calendar quarter,
the Parties shall -make payments to one another so that * the Operating Profits or Operating
Losses, as applicable, for such calendar quarter for each Collaboration Product.

          4.1.2 Research and Development Expenses. Except as otherwise provided in this Agreement, *
the cost and expense of all Authorized R&D Expenses (as defined below) incurred by or on behalf of
the Parties in connection with their activities other than the Avalon Research Activities and the
Medarex Research Activities. Within * after the end of *, each Party shall furnish the Steering
Committee with a statement (a) detailing the costs and expenses actually incurred in connection
with the research and development activities (including phase IV studies and any other
post-Regulatory Approval research and development activities) performed by or on behalf of such
Party during such calendar quarter, * (the “Authorized R&D Expenses”) and (b) comparing such
expenses to date with the projections set forth in the Project Budget. Within * days after the end
of each calendar quarter, Medarex and Avalon shall make payments to one another so that * for such
calendar quarter. For the avoidance of doubt, neither Party shall be reimbursed for any of its
internal costs of Production Process Development for clinical or commercial (but not preclinical)
supplies of Collaboration Products unless such costs are expressly agreed to by’ the Parties in a
project Budget or incurred under a separate agreement, entered into pursuant to Section 1.2.8 or
1.6.

     Section 4.2 Payment Method. All amounts due by one Party hereunder shall be paid in U.S.
dollars by wire transfer in immediately available funds to an account designated by the receiving
Party. Any payments or portions thereof due hereunder which are not paid on the date such payments
are due under this
Agreement shall bear interest at a rate equal to *, calculated on the number of days such
payment is delinquent, *.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

13

 

     Section 4.3 Currency; Foreign Payments. If any currency conversion shall be required in
connection with any payment hereunder, such conversion shall be made by using the arithmetic mean
of the exchange rates for the purchase of U S. dollars as published in The Wall Street Journal,
Eastern Edition, on the last business day of each month in the calendar quarter to which such
payments relate. If at any time legal restrictions prevent the prompt remittance of any Operating
Profits with respect to Net Sales in any jurisdiction, the applicable Party may notify the other
and make such payments by depositing the amount thereof in local currency in a bank account or
other depository in such country in the name of the receiving Party or its designee, and such Party
shall have no further obligations under this Agreement with respect thereto.

     Section 4.4 Taxes. A Party may deduct from any amounts it is required to pay pursuant to this
Agreement an amount equal to that withheld for or due on account of any taxes (other than taxes
imposed on or measured by net income) or similar governmental charge imposed by a jurisdiction
other than the United States (“Withholding Taxes”). At the receiving Party’s request, the paying
Party shall provide the receiving Party a certificate evidencing payment of any Withholding Taxes
hereunder and shall reasonably assist the receiving Party, at the receiving Party’s expense, to
obtain the benefit of any applicable tax treaty.

Section 4.5 Records Retention; Audit.

          4.5.1 Record Retention. Each Party shall maintain (and shall ensure that its Affiliates and
sublicensees shall maintain) complete and accurate books, records and accounts that fairly reflect
their respective (a) Authorized R&D Expenses, Authorized Commercialization Expenses, Other
Operating (Income)/Expenses, any costs and expenses reimbursable under Article 7, and any other
costs and expenses reimbursable or otherwise shared by the Parties hereunder (collectively, the
“Collaboration Expenses”), and (b) Net Sales of Collaboration Products and operating Profits and
Operating Losses with respect to Collaboration Products, in each case in sufficient detail to
confirm the accuracy of any payments required hereunder and in accordance with GAAP, which books,
records and accounts shall be retained by such Party until *.

          4.5.2 Audit. Each Party shall have the right to have an independent certified public
accounting arm of nationally recognized standing, reasonably acceptable to the audited Party, to
have access during normal business hours, and upon reasonable prior written notice, to such of the
records of the other Party (and its Affiliates and sublicensees) as may be reasonably necessary to
verify the accuracy of such Collaboration Expenses, Net Sales, or Operating Profits or operating
Losses, as applicable,
for any * ending not more than * prior to the date of such request; provided,
however, that neither Party shall have the right to conduct more than * such audit in any
*. The accounting firm shall disclose to each Party whether such Collaboration Expenses, Net
Sales, or Operating Profits or Operating Losses, as applicable, are correct or incorrect and the
specific details concerning any discrepancies, No other information shall be provided to the
requesting party. *. The results of such accounting firm shall be final, absent manifest error.

          4.5.3 Payment of Additional Amounts. If, based on, the results of such audit, additional
payments are owed by a Party under this Agreement, such Party shall make such

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

14

 

additional payments,
*, within * after the date on which such accounting firm’s written report is delivered to such
Party.

          4.5.4 Confidentiality. The auditing Party shall treat all information subject to review under
this section 4.5 in accordance with the confidentiality ‘Provisions of Article 6 and shall cause
its accounting firm to enter into a reasonably acceptable confidentiality agreement with the
audited Party obligating such firm to maintain all such financial information in confidence
pursuant to such confidentiality agreement.

ARTICLE 5 -

UNILATERAL AND THIRD PARTY DEVELOPMENT AND

COMMERCIALIZATION

     Section 5.1 Unilateral Development and Commercialization.

          5.1.1 Opting-Out by a Party. Each Party (i.e., Medarex, on the one hand, and Avalon, on the
other hand) (the “Opting-Out Party”) shall have the right, on * written notice to the other (an
“Opt-Out Notice”), to elect not to proceed with the research, development and commercialization
(“Opt-Out”) of all Collaboration Products with respect to a given Collaboration Target at any time,
provided that such Party shall be responsible for all budgeted costs and expenses associated with
the research and development activities with respect to such Collaboration Product(s) that such
Party has committed to in the applicable Project Budget as necessary to complete that phase of
research and development (e.g., toxicology studies in support of an IND or phase I, phase II or
phase III studies) that was under way when such Party Opted-Out. By way of clarification, if a
Party Opts-Out of a Collaboration Product with respect to a collaboration Target, such Party will
be deemed to have Opted-Out with respect to all Antibody Products with respect to the same
Collaboration Target.

          5.1.2 Rights and Obligations of Parties with Respect To Unilateral Products.

               (a) Unilateral Development and Commercialization. Upon receipt by a Party of an Opt-Out
Notice, the receiving Party shall have the right, on written notice to the
Opting-Out Party within * following receipt of the Opt-Out notice (an “Election Notice”), to
proceed unilaterally with the research, development and commercialization of all Collaboration
Antibodies and Collaboration Products to the applicable Collaboration Target (each such antibody
and product, a “Unilateral Product”) pursuant to the separate agreement with the Opting-Out Party
attached hereto as Appendix D-1 or Appendix D-2, as applicable (each, a “Unilateral
Development and Commercialization Agreement”). Upon receipt by Avalon of an Election Notice from
Medarex with respect to a Collaboration Target, the Unilateral Development and Commercialization
Agreement set forth in Appendix D-1 shall be automatically amended to include such
Collaboration Target and any Antibody Products with respect thereto. Upon receipt by Medarex of an
Election Notice from Avalon with respect to a Collaboration Target, the Unilateral Development and
Commercialization Agreement set forth in Appendix D-2 shall be automatically amended to
include such Collaboration Target and any Antibody Products with respect thereto. Upon such
amendment of a Unilateral Development and Commercialization

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

15

 

Agreement pursuant to this Section
5.1.2, the applicable Antigen shall cease to be a Collaboration Target and Appendix C shall
be amended accordingly, all Antibodies and all Antibody Products with respect to such former
Collaboration Target shall cease to be Collaboration Antibodies or Collaboration Products, as
applicable, and any licenses granted pursuant to Article 3, with respect to such Antigen and any
Antibodies and Antibody Products with respect thereto, shall terminate. The Parties shall work
together to ensure a smooth and orderly transition of the Unilateral Products to the non-Opting-Out
Party, including the assignment of any contracts with respect to the Exploitation of such
Unilateral Products to the non-Opting-Out Party, and the assumption by the non-Opting-Out Party of
any obligations thereunder. Except for the obligations provided for in Section 5.1.1, the
Opting-Out Party shall have (x) no further financial obligation to support or otherwise fund any
additional efforts in respect of such Unilateral Products, and (y) no obligation, responsibility,
or authority regarding such additional efforts in respect of such Unilateral Products. In the
event that neither Party elects to proceed with the research, development or commercialization of
any Collaboration Product with respect to a Collaboration Target, the rights and obligations of the
Parties with respect to such Collaboration Target shall be governed by Sections 5.2 and 5.3.

               (b) Opt-Out of Unilateral Products. If, at any time, the non-Opting Out Party elects to
Opt-Out of all Unilateral Products with respect to a Unilateral Target (as defined in the
applicable Unilateral Development and Commercialization Agreement) pursuant to such Unilateral
Development and Commercialization Agreement and the other Party does not elect to proceed
unilaterally with the research, development and commercialization of such Unilateral Products, such
Unilateral Target shall become a Collaboration Target and all such Unilateral Products shall become
Dormant Products pursuant to Section 5.3 and the non-Opting Out Party shall, without any additional
consideration, assign * of its right, title and interest in and to any product Trademark and all
Regulatory Documentation with respect to such Unilateral Products, including any Regulatory
Approvals and applications therefor (but excluding any Regulatory Documentation comprising
Production Process Technology, including any drug master file), to the other Party. In the event
the Parties elect to proceed jointly with the research, development and commercialization of such
Dormant Product as a Collaboration Product pursuant to Section 5.3 or to sublicense such Dormant
Product to a Third Party pursuant to Section 5 (whereupon such Dormant Product shall become a
Collaboration Product), all milestone payments
that were paid by the non-Opting-Out Party to the Opting-Out Party with respect to such
Dormant Product under the applicable Unilateral Development and Commercialization Agreement shall
be refunded by the Opting-Out Party and the Opting-Out Party shall reimburse the non-Opting-Out
Party for * of its Unilateral Expenses (as defined in the applicable Unilateral Development and
Commercialization Agreement) in connection with the Exploitation of such Dormant Product under the
applicable Unilateral Development and Commercialization Agreement.

     Section 5.2 Third-Party Development and Commercialization of Collaboration Products. If both
Parties do not elect to proceed with the development and commercialization of a Collaboration
Product in one or more countries in the Territory, the Parties shall have the right, at any time,
to license rights to such Collaboration Product to Third Parties in one or more such countries on
such terms and conditions as the Parties may mutually agree; provided that (a) any such sublicense
with respect to the Medarex Technology shall be governed by the procedures set

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

16

 

forth in Sections
3.3.5 and 3.4 and any such sublicense with respect to any other Technology of a Party shall be
governed by the procedures set forth in Section 3.4; and (b) if there is any dispute between the
Parties as to whether or not to grant such a license, no such license shall be granted and such
dispute shall not be subject to litigation or any other Third Party dispute resolution mechanism.

     Section 5.3 Dormant Products. If both Parties do not elect to proceed with the development
and commercialization of a particular Collaboration Product with respect to a Collaboration Target,
and the Parties have not licensed rights to such Collaboration Product to a Third Party pursuant to
Section 5.2 that would be inconsistent therewith, (each such Collaboration Product with respect to
a Collaboration Target may also be referred to as a “Dormant Product”) either Party shall have the
right at any time, subject to Section 3.3, to bring such Dormant Product to the Steering Committee
to discuss whether to initiate or reinitiate the research, development or commercialization of such
Dormant Product. The initiating Party shall specify the reasons for proposing to initiate or
reinitiate such research, development or commercialization. If, within thirty (30) days after the
receipt of such notice, the other Party fails to notify the interested Party in writing that it
wishes to participate in the research, development or commercialization of such Dormant Product,
then the interested Party shall have the fight to pursue research, development or commercialization
of such Dormant Product as a Unilateral Product pursuant to Section 5.1, provided that no
Collaboration Product or Unilateral Product with respect to the same Collaboration Target or
Unilateral Target as such Dormant Product is being Exploited under this Agreement or by the other
Party under a Unilateral Development and Commercialization Agreement.

ARTICLE 6 -

CONFIDENTIALITY

     Section 6.1 Definition. “Confidential Information” of a Party shall mean all information and
know-how and any tangible embodiments thereof provided by or on behalf of such Party to the other
Party either in connection with the discussions and negotiations pertaining to, or in the course of
performing, this Agreement or the Unilateral Development and Commercialization Agreements,
including the terms of this Agreement and the Unilateral Development and Commercialization
Agreements; data; knowledge; practices; processes; ideas; research plans; engineering designs and
drawings; research data; manufacturing processes and techniques; scientific, manufacturing,
marketing and business plans; and financial and personnel matters relating to the disclosing Party
or to its present or future products, sales, suppliers, customers, employees, investors or
business. For purposes of this Agreement, notwithstanding the Party that disclosed such
information or know-how, all Avalon Know-How and all information or know-how with respect thereto,
shall be Confidential Information of Avalon and all Medarex know-how, including all Mice-Related
Know-How, and all information and know-how with respect thereto, shall be Confidential Information
of Medarex. For the avoidance of doubt, Avalon shall be the receiving Party with respect to the
Mice-Related Technology irrespective of the Party that developed or disclosed such Technology. For
purposes of this Agreement, subject to section 7.1.5, Collaboration Technology, with respect to
confidentiality and non-use obligations of Medarex, shall be Confidential Information of Avalon,
and Medarex shall be the receiving Party, and, with respect to confidentiality and non-use
obligations of Avalon, shall be Confidential Information of Medarex, and Avalon shall be the
receiving Party,

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

17

 

and, with
respect to confidentially and non-use obligations of Avalon, shall be
Confidential Information of Medarex, and Avalon shall be the
receiving Party.

     Section 6.2 Exclusions. Notwithstanding the foregoing, information or know-how of a Party
shall not be deemed Confidential Information with respect to a receiving Party for purposes of this
Agreement, if such information or know-how:

               (a) was already known to the receiving Party or its Affiliates, other than under an obligation
of confidentiality or non-use, at the time of disclosure to such receiving Party;

               (b) was generally available or known to parties reasonably skilled in the field to which such
information or know-how pertains, or was otherwise part of the public domain, at the time of its
disclosure to such receiving Party;

               (c) became generally available or known to parties reasonably skilled in the field to which
such information or know-how pertains, or otherwise became part of the public domain, after its
disclosure to such receiving Party through no fault of a Party other than the party that Controls
such information and know-how;

               (d) was disclosed to such receiving Party or its Affiliates, other than under an obligation of
confidentiality or non-use, by a Third Party who had no obligation to the Party that Controls such
information and know-how not to disclose such information or know-how to others; or

               (e) was independently discovered or developed by such receiving Party or its Affiliates, as
evidenced by their written records, without the use of Confidential Information
belonging to the Party that Controls such information and know-how, except with respect to the
Mice-Related Know-How, which shall be and remain Confidential Information of Medarex.

Specific aspects or details of Confidential Information shall not be deemed to be within the public
domain or in the possession of a Party merely because the Confidential Information is embraced by
more general information in the public domain or in the possession of such Party. Further, any
combination of Confidential Information shall not be considered in the public domain or in the
possession of a Party merely because individual elements of such Confidential Information are in
the public domain or in the possession of such Party unless the combination and its principles are
in the public domain or in the possession of such Party.

     Section 6.3 Disclosure and Use Restriction. Except as expressly provided herein, the Parties
agree that, for the Term and for * thereafter, each Party and its Affiliates and sublicensees shall
keep completely confidential and shall not publish or otherwise disclose and shill not use for any
purpose except for the purposes contemplated by this Agreement any Confidential Information of the
other Party, its Affiliates or sublicensees.

     Section 6.4 Authorized Disclosure. Each Party may disclose Confidential Information of the
other Party to the extent that such disclosure is:

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

18

 

          6.4.1 Required by Governmental Order. Made in response to a valid order of a court of
competent jurisdiction or other supra-national, federal, national, regional, state, provincial or
local governmental or regulatory body of competent jurisdiction; provided, however, that such Party
shall first have given notice to such other Party and given such other Party a reasonable
opportunity to quash such order and to obtain a protective order requiring that the Confidential
Information and documents that are the subject of such order be held in confidence by such court or
agency or, if disclosed, be used only for the purposes for which the order was issued; and provided
further that if a disclosure order is not quashed or a protective order is not obtained, the
Confidential Information disclosed in response to such court or governmental order shall be limited
to that information which is legally required to be disclosed in response to such court or
governmental order;

          6.4.2 Required by Law. Otherwise required by law; provided, however, that the
disclosing Party shall (a) provide the other Party with reasonable advance notice of and an
opportunity to comment on any such required disclosure, (b) if requested by such other Party, seek
confidential treatment with respect to any such disclosure to the extent available, and (c) use
good faith efforts to incorporate the comments of such other Party in any such disclosure or
request for confidential treatment;

          6.4.3 Required by Regulatory Authority. Made by such Party to the Regulatory Authorities as
required in connection with any filing, application or request for Regulatory Approval;
provided, however, that reasonable measures shall be taken to assure confidential
treatment of such information.

          6.4.4 Required by Agreement. Made by such Party, in connection with the performance of this
Agreement to Affiliates, permitted sublicensees, research parties, employees, consultants,
representatives or agents, each of whom prior to disclosure must be bound by obligations of
confidentiality and non-use at least equivalent in scope to those set forth in this Article 6; or

          6.4.5 Required by Certain Third Parties. Made by such Party to existing or potential
acquirers or meager candidates; existing or potential pharmaceutical collaborators (to the extent
contemplated hereunder); investment bankers; existing or potential investors, venture capital films
or other financial institutions or investors for purposes of obtaining financing; or Affiliates,
each of whom prior to disclosure must be bound by obligations of confidentiality and non-use at
least equivalent in scope to those set forth in this Article 6. Notwithstanding this Section
6.4.5, Avalon shall not disclose any item of Medarex’s Confidential Information to any existing or
potential acquirer, merger partner or collaborator that is substantially involved in the
Exploitation of Antibodies or Antibody Products without first providing Medarex with reasonable
advance written notice of each such disclosure.

     Section 6.5 Use of Name. Each Party may use the name, insignia, symbol, trademark, trade name
or logotype of the other Party only (a) in connection with announcements and other permitted
disclosures relating to this Agreement and the activities contemplated hereby, (b) as required by
Applicable Law, and (c) otherwise as agreed in writing by such other Party.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

19

 

     Section 6.6 Press Releases. Press releases or other similar public communication by either
Party relating to this Agreement, shall be approved in advance by the other Party, which approval
shall tot be unreasonably withheld or delayed, except for those communications required by
Applicable Law (which shall be provided to the other Party as soon as practicable after the release
or communication thereof), disclosures of information for which consent has previously been
obtained, and information of a similar nature to that which has been previously disclosed publicly
with respect to this Agreement, each of which shall not require advance approval.

     Section 6.7 Publications. The parties acknowledge that scientific lead-time is a key element
of the value of the research and development activities under the Collaboration and further agree
that scientific publications must be strictly monitored to prevent any adverse effect from
premature publication of results of the research or development activities hereunder. At least *
prior to submission of any
material related to the research or development activities hereunder for publication or
presentation, the submitting Party shall provide to the other Party a draft of such material for
its review and comment. The receiving party shall provide any comments to the submitting party
within * of receipt of such materials. No publication or presentation with respect to the research
or development activities hereunder shall be made unless and until the other Party’s comments on
the proposed publication or presentation have been addressed and changes have been agreed upon and
any information determined by the other Party to be Confidential Information has been removed. If
requested in writing by the other party, the submitting Party shall withhold material from
submission for publication or presentation for an additional * to allow for the filing of a patent
application or the taking of such measures to establish and preserve proprietary rights in the
information in the material being submitted for publication or presentation.

ARTICLE 7 -

INTELLECTUAL PROPERTY

     Section 7.1 Intellectual Property Ownership.

          7.1.1 Ownership of Medarex Technology. Subject to the license grants to Avalon under Article
3, as between the Parties, Medarex shall own and retain all right, title and interest in and to any
and all: (a) Information and Inventions that are conceived, discovered, developed or otherwise
made, by or on behalf of Medarex (or its Affiliates or its licensees or sublicensees (other than
Avalon and its Affiliates)), whether or not patented or patentable, and any and all Patent and
other intellectual property rights with respect thereto, except to the extent that any such
Information and Inventions, or any Patent or other intellectual property rights with respect
thereto, are Collaboration Technology; (b) other Information and inventions, and Patent and other
intellectual property rights that are Controlled (other than pursuant to the license grants set
forth in Article 3) by Medarex, its Affiliates or its licensees or sublicensees (other than Avalon
and its Affiliates); and (c) other Medarex Technology.

          7.1.2 Ownership of Avalon Technology. Subject to Section 7.1.3 and, the license grants to
Medarex under Article 3, as between the Parties, Avalon shall own and retain all right, title and
interest in and to any and all: (a) Information and Inventions that are conceived, discovered,
developed or otherwise made, by or on behalf of Avalon (or its Affiliates or its

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

20

 

          licensees or
sublicensees (other than Medarex and its Affiliates)), whether or not patented or patentable, and
any and all Patent and other intellectual property tights with respect thereto, except to the
extent that any such Information and Inventions, or any Patent or other intellectual property
rights with respect thereto, are Collaboration Technology or Mice Materials or Mice-Related
Technology, (b) other Information and Inventions, and Patent and other intellectual property rights
that are Controlled (other than pursuant to the license grants set forth in Article 3) by Avalon,
its Affiliates or its licensees or sublicensees (other than Medarex and its Affiliates); and (c)
other Avalon Technology.

          7.1.3 Ownership of Mice-Related Technology. Subject to the license grants to Avalon under
Article 3, as between the Parties, Medarex shall own and retain all right, title and interest in
and to all Mice Materials and Mice-Related Technology, including any and all Information and
Inventions with respect to the Mice Materials or the Mice-Related Technology (including any
Improvements thereto) that, as a result of the use of HuMab Mice provided by Medarex to Avalon
under this Agreement, are conceived, discovered, developed or otherwise made, by or on behalf of
Avalon, its Affiliates or its licensees or sublicensees (other than Medarex and its Affiliates),
whether or not patented or patentable, and any and all Patent and other intellectual property
rights with respect thereto. Avalon acknowledges and agrees that (a) the licenses granted to it
pursuant to Article 3 permit Avalon to use Mice Materials and Mice-Related Technology solely for
the Exploitation of Collaboration Products as provided in this Agreement, (b) Avalon has no right
to use the HuMAb Mice or to discover, develop or otherwise make Improvements with respect to Mice
Materials and Mice-Related Technology under such grants, and (c) neither it, nor any of its
Affiliates, licensees or sublicensees, will engage, directly or indirectly, in activities deigned
to, or otherwise undertake or attempt, either on behalf of itself or another, to discover, develop
or make any Information and Inventions that relate to the Mice Materials or the Mice-Related
Technology by use of HuMab Mice provided by Medarex to Avalon under this Agreement. Accordingly,
Avalon shall promptly disclose to Medarex in writing, the conception or reduction to practice, or
the discovery, development or making of any such Information and Inventions that relate to the Mice
Material or Mice-Related Technology that results from use of HuMab Mice provided by Medarex to
Avalon under this Agreement and shall, and does hereby, assign, and shall cause its Affiliates,
licensees and sublicensees to so assign, to Medarex, without additional compensation, all of their
respective rights, titles and interests in and to any such Information and Inventions.

          7.1.4 Ownership of Production Process Technology. Each Party shall own and retain all right,
title and interest in and to such Party’s Production Process Technology, including any and all
Information and Inventions with respect to such Production Process Technology (including any
Improvements thereto) that are conceived, discovered, developed or otherwise made, by or on behalf
of such Party, its Affiliates or, to the extent permitted, its sublicensees, whether or not
patented or patentable, and any and all Patent and other intellectual property rights with respect
thereto. Except as the Parties may otherwise expressly agree, including by separate written
agreement pursuant to Section 1.2.8 or Section 1.6, neither Party shall have any rights, express or
implied, under this Agreement with respect to any Production Process Technology of the other Party
and nothing in this Agreement intended to or shall be

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

21

 

interpreted as granting a Party any license
to such Production Process Technology, whether subordinate or dominant to any other Technology.

          7.1.5 Ownership of Collaboration Technology. Subject to Sections 7.1.3 and 7.1.4 and the
license grants under Article 3, the Parties shall each own an equal, undivided interest in any
Collaboration Technology; provided, however, that, except as otherwise expressly
provided in this Agreement or the Unilateral Development and Commercialization Agreements, neither
a Party nor any of its Affiliates, licensees or sublicensees shall, directly or indirectly, Exploit
any Collaboration Technology, or any intellectual property
rights with respect thereto, without the written consent of the other Party, not to be
unreasonably withheld or delayed, except that each Party shall have the right to Exploit such
Collaboration Technology for research and discovery purposes (as opposed to the development,
commercialization or other Exploitation of products or technology resulting therefrom), and to
license others to do so, without the consent of the other Party; provided, however,
that, except as expressly provided in the Unilateral Development and Commercialization Agreements
attached hereto, neither Party shall have the right to use or otherwise Exploit outside the
Collaboration any Collaboration Antibodies, Collaboration Products or other Mice Materials produced
under this Agreement. Each Party shall promptly disclose to the other Party in writing, and shall
cause its Affiliates, licensees and sublicensees to so disclose, the development, making,
conception or reduction to practice of any Collaboration Technology, and shall, and does hereby,
assign, and shall cause its Affiliates, licensees and, unless otherwise agreed by the Parties,
sublicensees to so assign, to the other Party, without additional compensation, such right, title
and interest in and to any collaboration Technology as well as any intellectual property rights
with respect thereto, as is necessary to fully effect the joint ownership provided for in the
foregoing sentence.

          7.1.6 Ownership of Product Trademarks. Subject to the license grants in Article 3, the
Parties shall each own an equal, undivided interest in each Product Trademark with respect to a
Collaboration Product. In the event that a Party Opts-Out with respect to a Collaboration Product,
it shall, without any additional consideration, assign all of its right, title and interest in and
to any Product Trademark with respect to such collaboration Product or Unilateral Product to the
non-Opting-Out Party; provided, however, that each Party shall retain all of its
right, title and interest in and to any Product Trademarks with respect to Dormant Products.

          7.1.7 Ownership of Regulatory Documentation.

               (a) Subject to the license grants in Article 3, each Regulatory Approval with respect to a
Collaboration Product shall be owned by one of the Parties, with such ownership being determined by
the Steering Committee based on the activities of the Parties with respect to such Collaboration
Product. The Steering Committee shall make such determination on a county-by-country basis, based
on which Party will be better able to obtain and maintain such Regulatory Approval and satisfy its
regulatory obligations with respect to such ownership in such country, including, for example, to
promptly respond to queries of, and file reports with, the applicable Regulatory Authority with
respect to such Regulatory Approval in such country. Factors to be considered in making such
determination shall include whether a Party is performing activities that would give rise to
reporting obligations under such Regulatory Approval (e.g.,

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

22

 

clinical studies under an IND or
marketing under a BLA), whether a Party performed activities that support such Regulatory Approval
(e.g., pre-clinical studies with respect to an IND or clinical studies with respect to a BLA),
whether a Party has particular experience with Antibody Products or the indication in question,
whether a Party has experience with the Regulatory Authorities in a country, particularly with
respect to the activities involved, and whether a party has appropriate regulatory personnel in a
country. Notwithstanding the Party that owns a Regulatory Approval, the Parties shall cooperate in
satisfying their obligations under such Regulatory Approval,
including by promptly exchanging information, such as adverse event data, so as to enable the
owner to make reports to, and respond to requests of, the Regulatory Authorities and perform its
other obligations under such Regulatory Approval.

               (b) Subject to the license grants in Article 3, each Party shall, to the extent permitted by
law, have an equal, undivided interest in all other Regulatory Documentation. Subject to the
foregoing sentence, each Party shall promptly (i) disclose to the other Party in writing, and shall
cause its Affiliates, licensees and sublicensees to so disclose, such other Regulatory
Documentation, and (ii) assign, or cause its Affiliates, licensees or sublicensees to assign, to
the other party, without additional compensation, such right, title and interest in and in such
other Regulatory Documentation as is necessary to fully effect the joint ownership provided for in
the foregoing sentence. Each non-Opting-Out Party shall have the right to own all right, title and
interest in and to all Regulatory Approvals with respect to its Unilateral Products. In the event
that a Party Opts-Out with respect to a Collaboration Product, it shall assign all of its right,
title and interest in and to all Regulatory Documentation with respect to such Collaboration
Product, including any Regulatory Approvals and applications therefor, to the non-Opting Out Party
(or its designee); provided, however, that each Party shall retain any of its
right, title and interest in and to any Regulatory Documentation with respect to a Dormant Product.

               (c) Notwithstanding the ownership of any regulatory Approval or any other Regulatory
Documentation, neither a Party nor any of its Affiliates, licensees or sublicensees shall, directly
or indirectly, transfer or use any regulatory Documentation without the written consent of the
other Party, not to be unreasonably withheld OT delayed; provided, however, that each Party shall
have the right to use and reference any of the Regulatory Documentation in connection with the
Exploitation of Collaboration Products as provided in this Agreement or Unilateral Products as
provided in any Unilateral Development and Commercialization Agreement. Notwithstanding the
foregoing, any regulatory Documentation containing Production Process Know-How of a Party shall be
and remain the sole and exclusive property of such Party and such Party shall have the right to
submit any such Production Process Know-How directly to the Regulatory Authorities using a drug
master file, or any foreign equivalent that is designed to protect such Party’s Confidential
Information, which filing shall be and remain the sole and exclusive property of such Party.

               7.1.8 United States, Law. The determination of whether Information and Inventions are
conceived, discovered, developed or otherwise made by a Party for the purpose of allocating
proprietary rights (including Patent, copyright or other intellectual property rights) therein,
shall, for purposes of this Agreement, be made in accordance with applicable United States law.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

23

 

     Section 7.2 Prosecution of Patents and Trademarks.

          7.2.1 Medarex Rights. As between the Parties, Medarex shall, subject to Section 7.2.5, have
the sole right, at its cost and expense, to obtain, prosecute and maintain throughout the world the
Medarex Patents, including the Mice-Related Patents and its Production Process Patents.

          7.2.2 Avalon Rights. As between the Parties, Avalon shall, subject to Section 7.2.5, have the
sole right, at its cost and expense, to obtain, prosecute and maintain throughout the world the
Avalon Patents, including its Production Process Patents.

          7.2.3 Collaboration Technology and Product Trademarks.

               (a) Filings of Patents. The Steering Committee shall formulate a strategy for the filing,
prosecution and maintenance of Collaboration Patents. Subject to Section 7.2.6, the Parties shall,
and shall cause their respective Affiliates, licensees and sublicensees, as applicable, to,
cooperate with one another with respect to the filing, prosecution and maintenance of all
Collaboration Patents, including by selecting outside counsel, reasonably acceptable to the
parties, to handle such filing, prosecution and maintenance. The Steering Committee shall
establish a process under which each Party shall have a reasonable opportunity to review and
comment upon drafts of each new application for a Collaboration Patent and all substantive
correspondence to or from any patent authority with respect thereto, prior to the filing of such
application or correspondence. The Parties shall share equally in the expenses associated with the
filing, prosecution (including any interferences, reissue proceedings and reexaminations) and
maintenance of all Collaboration Patents.

               (b) Filings of Product Trademarks. The Steering Committee, with respect to a Collaboration
Product, shall supervise and direct the filing, prosecution and maintenance of the registrations of
the Product Trademarks for such Collaboration Product. The Steering Committee shall provide each
party with (i) drafts of any new application to register a Product Trademark prior to filing that
application, allowing adequate time for review and comment by the Parties if possible; provided,
however, the Steering Committee shall not be obligated to delay the filing of any application; and
(ii) copies of all correspondence from any and all Trademark offices concerning Product Trademark
registrations and an opportunity to comment on any proposed responses, voluntary amendments and
submissions of any kind to be made to any and all such Trademark offices. Subject to Section
7.2.6, the Parties shall share equally in the expenses associated with the filing, prosecution and
maintenance of such Product Trademark registrations.

          7.2.4 Cooperation. Each party shall., and shall cause its Affiliates, licensees and
sublicensees, as applicable, to, cooperate fully in the preparation, filing, prosecution, and
maintenance of the Product Trademarks and, if requested by the other Party, such other Party’s
Patents, provided that such other party shall reimburse the cooperating Party for its reasonable
out-of-pocket expenses incurred in connection with such requested cooperation. Such cooperation
includes (a) promptly executing all papers and instruments and requiring employees to execute such
papers and
instruments as reasonable and appropriate so as to enable such other Party or the

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

24

 

Steering
Committee, as applicable, to file, prosecute, and maintain its Patents in any country; and (b)
promptly informing such other Party of matters that may affect the preparation, filing,
prosecution, or maintenance of any such Patents.

          7.2.5 Patent Filings. Avalon covenants not to, and to cause its Affiliates, licensees and
sublicensees, as applicable, not to, file any patent application disclosing or claiming any
Information and Inventions comprising any Medarex Technology or the Exploitation thereof, without
Medarex’s prior written consent, which consent shall not be unreasonably withheld or delayed.
Medarex covenants not to, and to cause its Affiliates, licensees and sublicensees, as applicable,
not to, file any patent application disclosing or claiming any Information and Inventions
comprising any Avalon Technology or the Exploitation thereof, without Avalon’s prior written
consent, which consent shall not be unreasonably withheld or delayed.

          7.2.6 Election Not to Prosecute. If a Party elects not (a) to pursue the filing, prosecution
or maintenance of a Collaboration Patent in a particular country, (b) to pursue the registration,
prosecution or maintenance of a Product Trademark in a particular country, or (c) to take any other
action with respect to Collaboration Technology or a Product Trademark in a particular country that
is necessary or reasonably useful to establish or preserve rights thereto, then in each such case
such Party shall so notify the other Party promptly in writing and in good time to enable such
other Party to meet any deadlines by which an action must be taken to establish or preserve any
such rights in such Collaboration Technology or Product Trademark, as applicable, in such country.
Upon receipt of each such notice by such other Party or if, at any time, such Party fails to
initiate any such action within * after a request by such other Party that it do so (or thereafter
diligently pursue such action), such other Party shall have the right, but not the obligation, to
pursue the filing or registration, or support the continued prosecution or maintenance, of such
Patent or Product Trademark, as applicable, at its expense in such country. If such other Party
elects to pursue such filing or registration, as the case may be, or continue such support, then
such other Party shall notify such Party of such election and such Party shall, and shall cause its
Affiliates, licensees and sublicensees, as applicable, to, (x) reasonably cooperate with such other
Party in this regard, and (y) subject to Article 3, promptly release or assign to such other Party,
without compensation, all right, title and interest in and to such Collaboration Patent or Product,
Trademark, as applicable, in such country.

     Section 7.3 Enforcement ,of Patents and Trademarks.

          7.3.1 Rights and Procedures. If Medarex or Avalon determines that any Technology or Product
Trademark is being infringed by a Third Party’s activities and that such infringement could affect
the exercise by the Parties of their respective rights and obligations under this Agreement, it
shall promptly notify the other Party in writing and provide such other Party with any evidence of
such infringement that is
reasonably available. Promptly after the receipt of such written notice, the Parties shall
meet and discuss in good faith the removal of such infringement. The pursuing Party shall consider
in good faith any comments from the other Party and shall keep the other Party reasonably informed
of any steps taken to remove such infringement.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

25

 

               (a) Collaboration Technology and Product Trademarks. With respect to Collaboration Technology
and Product Trademarks, the Steering Committee shall have the first right to remove such
infringement *, including the filing of an infringement suit or taking other similar action. * In
the event the Steering Committee fails to * to remove any infringement of any such Collaboration
Technology or Product Trademark within * following notice of such infringement, or earlier notifies
the Parties in writing of its intent not to take such steps, and (i) such failure to act is due to
the refusal of one Party’s representatives on the Steering Committee to authorize action over the
objection of the other Party’s representatives, then the Party whose representatives wish to
proceed shall have the right to do so at its expense, or (ii) such failure to act is due to any
reason other than as set forth in clause (i) above, then either Party shall have the right to
proceed at its expense; provided, however, that if the Steering Committee has commenced
negotiations with an alleged infringer for discontinuance of such infringement within such *
period, the Steering Committee shall have an additional * to conclude its negotiations before a
Party unilaterally may bring suit for such infringement.

               (b) Other Technology. With respect to Technology of a Party that is not Collaboration
Technology, the owner of such Technology shall have the sole right, but not the obligation, to
remove such infringement; provided, however, that if the other Party agrees in
writing to the removal of such infringement, the other Party shall reimburse the owner of such
Technology for * incurred by such owner with respect to the removal of any such infringement.

          7.3.2 Cooperation. The Party not enforcing the applicable Technology or Product Trademark
shall provide seasonable assistance to the other Party, including providing access to relevant
documents and other evidence, making its employees available at reasonable business hours, and
joining the action to the extent necessary to allow the enforcing Party to maintain the action.

          7.3.3 Recovery. Any amounts recovered by a Party in an enforcement pursuant to Section 7.3.1,
whether by settlement or judgment, shall be used to reimburse the Parties for their reasonable
costs and expenses in making such recovery (which amount shall be allocated pro rata if
insufficient to cover the totality of such expenses), with any remainder being retained by the
Party that has exercised its right to bring the enforcement action unless such enforcement action
was jointly funded by the Parties pursuant to Section 7.3.1, in which case such remainder shall be
shared by the Parties, to the extent that such enforcement was jointly funded.

     Section 7.4 Potential Third-Party Rights.

          7.4.1 Third-Party Licenses. If either Party becomes aware of any Patents issued to a Third
Party, which may be necessary or useful to practice in exploiting a Collaboration Product, such
Party shall discuss such matter with the other Party. The Parties, through the Steering Committee,
shall determine in good faith whether to seek a license under such Patents for such Exploitation.
Further, if (a) in the Collective Opinion of Counsel, a Party, or any of its Affiliates, licensees
or permitted sublicensees, cannot Exploit a Collaboration Product in a country in the Territory
without infringing one or more Patents that have issued to a Third Party in such country, or (b) as
a result of any claim made against a Party, or any of its Affiliates, licensees

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

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or permitted
sublicensees, alleging that the Exploitation of a Collaboration Product infringes or
misappropriates any Patent or any other intellectual property right of a Third Party in a country
in the Territory, a judgment is entered by a court of competent jurisdiction from which no appeal
is taken within the time permitted for appeal, such that a Party cannot Exploit such Collaboration
Product in such country without infringing the Patent or other proprietary rights of such Third
Party, then, in either case, the Parties shall * to obtain a license in the names of the Parties
from such Third Party as necessary for the Exploitation of any Collaboration Products hereunder in
such country; provided, however, that Medarex shall have the sole right to seek any
such license with respect to Mice-Related Technology and shall * to obtain such a license in its
own name from such Third Party in such country, under which Medarex shall, to the extent
permissible under such license, grant a sublicense to Avalon as necessary for Avalon, and any of
its Affiliates and permitted sublicensees, to Exploit the Collaboration Products as provided
hereunder in such country. * of any royalty or other obligations under such licenses, except with
respect to the Medarex Technology or the Avalon Technology, *. For purposes of this Section 7.4.1,
“Collective Opinion of Counsel” shall mean the final joint opinion of patent counsel selected by
Avalon and patent counsel selected by Medarex, after review of all data and information reasonably
available at the time such opinion is rendered. If patent counsel for the Parties cannot agree on
a final joint opinion within * after submission of the matter to such counsel, the patent counsel
of the Parties shall agree on a third patent counsel who shall offer an independent opinion on the
subject matter, which independent opinion shall be deemed the Collective Opinion of Counsel.

          7.4.2 Third-Party Litigation. In the event that a Third Party institutes a Patent, Trademark,
or other infringement suit (including any suit claiming confusion, deception or dilution of a
Trademark by a Product Trademark) against either Party or its respective Affiliates, licensees or
permitted sublicensees during the Term, alleging that the Exploitation of the Collaboration
Products in the Territory or any other activities hereunder, infringes one or more Patent,
Trademark or other intellectual property rights held by such Third party (an “Infringement Suit”),
the Parties shall cooperate with one another in defending such suit. The Parties, through the
Steering Committee, shall jointly direct and control the defense of any Infringement Suit with
respect to Collaboration Products or any other activity of the Parties under this Agreement. *

          7.4.3 Retained Rights. Nothing in this Section 7.4 shall prevent either Party, at its own
expense, from obtaining any license or other rights from Third Parties it deems appropriate in
order to permit the full and unhindered exercise of its rights under this Agreement.

     Section 7.5 Invalidity or Unenforceability Defenses or Actions.

          7.5.1 Defense or Counterclaims. In the event that a Third Party asserts, as a defense or as a
counterclaim in any infringement action under Section 7.3.1, that any Technology, Collaboration
Technology, Product Trademark, or Production Process Technology is invalid or unenforceable, then
the Parties shall promptly meet to discuss the response to such defense or defense of such
counterclaim or action (as applicable) and shall cooperate with one another in such response or
defense. The Party or Parties that are the plaintiffs in the underlying suit or action against
such Third Party shall have the initial right to respond to such defense or

 

			
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filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

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defend against such
counterclaim (as applicable), provided that such response or defense shall be conducted
under the supervision, and at the direction, of the Steering Committee as provided in Section
7.3.1(a), and, to the extent that the other Party’s intellectual property rights are the subject of
such invalidity or unenforceability defense or counterclaim, the Party plaintiff shall involve such
other Party in all decisions as to such response or defense, and in any event such Party plaintiff
shall not settle or otherwise compromise such defense or counterclaim in any way that adversely
affects such other Party’s intellectual property rights or its interest therein without such other
Party’s written consent, not to be unreasonably withheld or delayed.

          7.5.2 Declaratory Judgment Action. Similarly, if a Third Party asserts, in a declaratory
judgment action or similar action or claim filed by such Third Party based upon actions or
activities of a Party under this Agreement, that any Technology, Collaboration Technology, Product
Trademark, or Production Process Technology is invalid or unenforceable, then the Parties shall
promptly meet to discuss the defense of such action or claim and shall cooperate with one another
in such defense. The Party that is the defendant in such claim, suit or action shall have the
initial right to defend against same, provided that such defense shall be conducted under
the supervision, and at the direction, of the Steering Committee, which shall establish a process
under which each Party shall have a reasonable opportunity to participate in such defense, and
provided further that to the extent that the other Party’s intellectual property
rights are the subject of such invalidity or unenforceability claim, suit or action, the defending
Party shall involve such other Party in all decisions as to such defense, and in any event such
defending Party shall not settle or otherwise compromise such defense in any way that adversely
affects such other Party’s intellectual property rights or its interest therein without such other
Party’s written consent, not to be unreasonably withheld or delayed.

          7.5.3 Mice-Related Technology. Notwithstanding the foregoing, if the defense, counterclaim,
suit or action alleges invalidity or unenforceability of Mice-Related Technology, Medarex shall
have the sole right
(except as Medarex may otherwise agree) to respond or defend against same, and may intervene
to effect such defense or responses.

          7.5.4 Costs and Expenses. * the costs and expenses of any defenses under this Section 7.5
with respect to the Collaboration Technology. With respect to the Medarex Technology (including
the Mice-Related Technology) or the Avalon Technology, Medarex and Avalon, respectively, shall be
responsible for one-hundred percent (100%) of those * shall each bear fifty percent, (50%) of such
costs and expenses.

     Section 7.6 Exchange of Know-How.

          7.6.1 Information Disclosure. Each Party shall, and shall cause its Affiliates, licensees and
sublicensees, as applicable, to, without additional compensation and at such Party’s sole expense,
disclose and make available to the other Party, in whatever form each such other Party may
reasonably request, all Regulatory Documentation, all of its other Know-How, all Information and
Inventions included in the Collaboration Technology and any other Information and Inventions
relating, directly or indirectly, to the Exploitation of any Collaboration Products immediately
after an Antigen becomes a Collaboration Target and

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

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thereafter immediately upon the earlier of the
conception or reduction to practice, discovery, development or making of each such Regulatory
Documentation, Know-How, or other such Information and Inventions

          7.6.2 Cooperation. With respect to the research, development, commercialization or other
Exploitation of the Collaboration Products, each Party, shall cooperate with any and all reasonable
requests for assistance from the other Party, including by making its employees, consultants and
other scientific staff available upon reasonable notice during normal business hours at their
respective places of business to consult with such other Party, as applicable, on issues arising
during such research, development, commercialization or Exploitation.

          7.6.3 Biological Materials. For purposes of facilitating the conduct of the research and
development activities under this Agreement, Medarex and Avalon shall each provide to the other
tissues, cells, cell lines, organisms, blood samples, genetic material, and other biological
substances and materials, including the Mice Materials, the Collaboration Targets and other
Antigens (collectively, “Biological Materials”) specified from time to time in this Agreement or
the applicable Project Plan. Each Party agrees to provide all such Biological Materials to the
other in accordance with this Agreement and the applicable Project Plan, and under the supervision
of the Steering Committee. The Parties agree that: (a) all Biological Materials provided by one
Party to the other
Party and any Biological Material (including Collaboration Products and other Mice Materials)
produced against or with, or derived from, such Biological Materials shall be used solely for the
research and development activities as provided in the Project Plan, and in material compliance
with all Applicable Law; (b) all such Biological Materials shall be provided without any
warranties, express or implied; (c) the Party providing such Biological Materials shall obtain (or
cause its Third Party collaborators to obtain or certify that they have obtained) all appropriate
and required consents from the source of such Biological Materials; (d) Biological Materials
provided by one Party to the other Party (other than Collaboration Products) shall not be made
available by such other Party to any Third Party except as expressly provided (i) in the Project
Plan or (ii) in the applicable Unilateral Development and Commercialization Agreement, unless the
prior written consent of the Party providing such Biological Materials is first obtained; and (e)
subject to the license grants in Article 3, all right, title and interest in and to the Mice
Materials and the Mice-Related Technology shall be, and remain, vested in Medarex.

          7.6.4 Regulatory Records. With respect to the subject matter of this Agreement, each Party
shall maintain, or cause to be maintained, records of its respective research, development,
manufacturing and commercialization activities, including all Regulatory Documentation, in
sufficient detail and in good scientific manner appropriate for patent and regulatory purposes,
which shall be complete and accurate and shall fully and properly reflect all work done and results
achieved in the performance of such activities, and which shall be retained during the Term and for
a period of five (5) years thereafter, or for such longer period as may be required by Applicable
Law. Each Party shall have the right, during normal business hours and upon reasonable notice, to
inspect and copy any such records, except (a) with respect to Medarex’s records, to the extent that
such records contain proprietary information with respect to the Mice

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended.

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Materials and Mice-Related Technology, or (b) with respect to a Party’s records, to the extent that
such records contain proprietary information with respect to its Production Process Technology.

     7.6.5 Production Process Technology. Notwithstanding anything to the contrary in this Section
7.6 or elsewhere in this Agreement, neither Party shall be obligated to disclose or provide any of
its Production Process Technology, including Biological Materials with respect thereto, to the
other Party or any Third Party except as may be required or permitted under a separate written
agreement entered into by the Parties pursuant to Section 1.2.8 or Section 1.6.

ARTICLE 8 -

TERM AND TERMINATION

     Section 8.1 Term. The term of this Agreement (the “Term”) shall commence upon the Effective
Date and shall continue in effect until the later of (a) the first anniversary of the completion of
all of the activities in Section 1.2, or (b) such time as there is no longer any (i) Dormant
Product with respect to which the Parties have rights pursuant to Section 5.3, or (ii)
Collaboration Product being Exploited hereunder, whether pursuant to Section 1.7 or otherwise, or
any Unilateral Product being Exploited under a Unilateral Development and Commercialization
Agreement, unless this Agreement is terminated at an earlier date in accordance with the terms and
conditions set forth in this Article 8.

     Section 8.2 Termination for Material Breach. Any material failure by a Party to comply with
any of its material obligations contained herein shall entitle the Party not in default to give to
the Party in default written notice specifying the nature of the default, requiring the defaulting
Party to make good or otherwise cure such default, and stating its intention if such default is not
cured to terminate or, at the option of the Party not in default, to convert a Collaboration
Product to which the material breach applies to a Unilateral Product pursuant to Section 5.1. If
such default is not cured within * after the receipt of such notice (or, if such default cannot be
cured within such *, if the Party in default does not commence actions to cure such default within
such period and thereafter diligently continue such actions or if such default is not otherwise
cured within * after the receipt of such notice), except in the case of a payment default, as to
which the defaulting Party shall have only a * cure period, the Party not in default shall be
entitled, on written notice to the other Party, without prejudice to any of its other rights
conferred on it by this Agreement, and in addition to any other remedies available to it by law or
in equity, to (a) terminate this Agreement in its entirety, or (b) convert such Collaboration
Product to a Unilateral Product pursuant to Section 5.1, whereupon the defaulting Party shall be
deemed the Opting-Out Party with respect to such Unilateral Product for all purposes hereunder and
the notice provided under this provision shall be deemed equivalent to an Election Notice as
provided in Section 5.1.

     Section 8.3 Termination Upon Insolvency. Either Party may terminate this Agreement if,
at any time, the other Party shall file in any court or agency pursuant to any statute or
regulation of any state, country or jurisdiction, a petition in bankruptcy or insolvency or for
reorganization or for an arrangement or for the appointment of a receiver or trustee of that Party
or of its assets, or if such other Party proposes a written agreement of composition or extension
of its

 

			
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filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

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debts, or if such other Party shall be served with an involuntary petition against it, filed
in any insolvency proceeding, and such petition shall not be dismissed within * after the filing
thereof, or if such other Party shall propose or be a party to any dissolution or liquidation, or
if such other Party shall make an assignment for the benefit of its creditors.

     Section 8.4 Rights in Bankruptcy. All rights and licenses granted under or pursuant to this
Agreement by Medarex or Avalon are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the United States Bankruptcy Code, licenses of rights to “intellectual property” as
defined under Section 101 of the United States Bankruptcy Code. The Parties agree that the
Parties, as licensees of such rights under this Agreement, shall retain and may fully exercise all
of their rights and elections under the United States Bankruptcy Code. The Parties further agree
that, in the event of the commencement of a bankruptcy proceeding by or against a Party under the
United States Bankruptcy Code, the Party hereto that is not a party to such proceeding shall be
entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual
property and all embodiments of such intellectual property, which, if not already in the
non-subject Party’s possession, shall be promptly delivered to it (a) upon any such commencement of
a bankruptcy proceeding upon the non-subject Party’s written request therefor, unless the Party
subject to such proceeding continues to perform all of its obligations under this Agreement or (b)
if not delivered under clause (a) above, following the rejection of this Agreement by or on behalf
of the Party subject to such proceeding upon written request therefor by the non-subject Party.

     Section 8.5 Consequences of Expiration or Termination.

          8.5.1 Licenses. Upon expiration of the Term in accordance with Section 8.1 and payment of all
amounts owed pursuant to Section 4.1, the licenses granted by Medarex to Avalon, and by Avalon to
Medarex, hereunder shall become fully-paid up.

          8.5.2 Return of Information and Materials. Upon expiration of this Agreement pursuant to
Section 8.1, or upon termination of this Agreement in its entirety by either Party pursuant to this
Article 8, each Party, at the request of the other Party, shall return Biological Materials of such
other Party and all data, files, records and
other materials in its possession or control relating to such other Party’s Technology, or
containing or comprising such other Party’s Information and Inventions or other Confidential
Information (other than Collaboration Technology) and, in each case, to which the returning Party
does not retain rights hereunder (except one copy of which (other than Biological Materials) may be
retained solely for archival purposes).

     Section 8.6 Accrued Rights; Surviving Obligations.

          8.6.1 Accrued Rights. Termination or expiration of this Agreement for any reason shall be
without prejudice to any rights that shall have accrued to the benefit of a Party prior to such
termination or expiration. Such termination or expiration shall not relieve a Party from
obligations that are expressly indicated to survive the termination or expiration of this
Agreement.

 

			
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filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

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          8.6.2 Survival. Articles 4 (with respect to obligations arising prior to expiration or
termination), 6 and 9, and Sections 1.2.4 (with respect to obligations arising prior to the
expiration or termination of this Agreement), 1.7, 3.3.3, 3.3.5, 3.4 (with respect only to the last
sentence thereof), 3.5, 4.5, 7.1, 7.2, 7.6.3 (with respect only to the last sentence thereof),
7.6.4, 7.6.5, 8.5, 10.5, 11.5 and 11.6 and Appendices A and B of this Agreement and this Section
8.6 shall survive expiration or termination of this Agreement for any reason.

ARTICLE 9 -

INDEMNIFICATION AND INSURANCE

     Section 9.1 Indemnification of Medarex. Avalon shall indemnify Medarex, its Affiliates and
their respective directors, officers, employees and agents, and defend and save each of them
harmless, from and against any and all losses, damages, liabilities, costs and expenses (including
reasonable attorneys’ fees and expenses) (collectively, “Losses”) in connection with any and all
Third-Party suits, investigations, claims or demands (collectively, “Third-Party Claims”) arising
from or occurring as a result of (a) the negligence (except to the extent that such Loss is covered
by one or more liability insurance policies of the indemnified person or entity) or willful
misconduct on the part of Avalon or its Affiliates, licensees or sublicensees under this Agreement
(other than Medarex and its Affiliates and any Third Parties to whom the Parties license rights
with respect to a Collaboration Product pursuant to Section 5.2) in performing any activity
contemplated by this Agreement, except for those Losses for which Medarex has an obligation to
indemnify Avalon and its Affiliates pursuant to Section 9.2, as to which Losses each Party shall
indemnify the other to the extent of their respective liability for the Losses.

     Section 9.2 Indemnification of Avalon. Medarex shall indemnify Avalon, its Affiliates and
their respective directors, officers, employees and agents, and defend and save each of them
harmless, from and against any and all Losses in connection with any and all Third-Party Claims
arising from or occurring as a result of the negligence (except to the extent that such Loss is
covered by one or more liability insurance policies of the indemnified person or entity) or willful
misconduct on the part of Medarex or its Affiliates, licensees or sublicensees under this Agreement
(other than Avalon and its Affiliates and any Third Parties to whom the Parties license rights with
respect to a Collaboration Product pursuant to Section 5.2) in performing any activity contemplated
by this Agreement, except for those Losses for which Avalon has an obligation to indemnify Medarex
and its Affiliates pursuant to Section 9.1, as to which Losses each party shall indemnify the other
to the extent of their respective liability for the Losses.

     Section 9.3 Product Liability. Except as provided under Section 9.1 or Section 9.2, all
Losses arising from or occurring as a result of any Third-Party Claim for product liability or
personal injury that are not covered by one or mare insurance policies that were purchased jointly
by the Parties shall *.

     Section 9.4 Indemnification Procedure.

          9.4.1 Notice of Claim. The indemnified Party shall give the indemnifying Party prompt written
notice (an “Indemnification Claim Notice”) of any Losses or discovery of fact upon which such
indemnified Party intends to base a request for indemnification

 

			
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filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

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under Section 9.1 or Section 9.2,
but in no event shall the indemnifying Party be liable for any Losses that result from any delay in
providing such notice. Each Indemnification Claim notice must contain a description of the claim
and the nature and amount of such Loss (to the extent that the nature and amount of such Loss are
known at such time). The indemnified Party shall furnish promptly to the indemnifying Party copies
of all papers and official documents received in respect of any Losses. All indemnification claims
in respect of a Party, its Affiliates or their respective directors, officers, employees and agents
(collectively, the “Indemnitees” and each an “Indemnitee”) shall be made solely by such Party to
this Agreement (the “Indemnified Party”).

          9.4.2 Control of Defense. At its option, the indemnifying Party may assume the defense of any
Third-Party Claim by giving written notice to the Indemnified Party within * after the indemnifying
Party’s receipt of an Indemnification
Claim Notice. The assumption of the defense of a Third-Party
Claim by the indemnifying Party shall not be construed as an acknowledgment that the indemnifying
Party is liable to indemnify any Indemnitee in respect of the Third-Party Claim, nor shall it
constitute a waiver by the indemnifying Party of any defenses it may assert against any
Indemnitee’s claim for indemnification. Upon assuming the defense of a Third-Party Claim, the
indemnifying Party may appoint as lead counsel in the defense of the Third-Party Claim any legal
counsel selected by the indemnifying Party. In the event the indemnifying Party assumes the
defense of a Third-Party Claim, the Indemnified Party shall immediately deliver to the indemnifying
Party all original
notices and documents (including court papers) received by any Indemnitee in connection with
the Third-Party Claim. Should the indemnifying Party assume the defense of a Third-Party Claim,
the indemnifying Party shall not be liable to the Indemnified Party or any other Indemnitee for any
legal expenses subsequently incurred by such Indemnified Party or other Indemnitee in connection
with the analysis, defense or settlement of the Third-Party Claim. In the event that it is
ultimately determined that the indemnifying Party is not obligated to indemnify, defend or hold
harmless an Indemnitee from and against the Third-Party Claim, the Indemnified Party shall
reimburse the indemnifying Party for any and all costs and expenses (including attorneys’ fees and
costs of suit) and any Losses incurred by the indemnifying Party in its defense of the Third-Party
Claim with respect to such Indemnitee.

          9.4.3 Right to Participate in Defense. Without limiting Section 9.4.2, any Indemnitee shall
be entitled to participate in, but not control, the defense of such Third-Party Claim and to engage
counsel of its choice for such purpose; provided, however, that such engagement
shall be at the Indemnitee’s own expense unless (a) the engagement thereof has been specifically
authorized by the indemnifying Party in writing, or (b) the indemnifying Party has failed to assume
the defense and engage counsel in accordance with Section 9.4.2 (in which case the Indemnified
Party shall control the defense).

          9.4.4 Settlement. With respect to any Losses relating solely to the payment of money damages
in connection with a Third-Party Claim and as to which the indemnifying Party shall have
acknowledged in writing the obligation to indemnify the Indemnitee hereunder, the indemnifying
Party shall have the sole right to consent to the entry of any judgment, enter into any settlement
or otherwise dispose of such Loss, on such terms as the indemnifying Party, in its sole discretion,
shall deem appropriate. With respect to all other Losses in connection with Third-Party Claims,
where the indemnifying Party has assumed the defense of

 

			
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filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

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the Third-Party Claim in accordance with
Section 9.4.2, the indemnifying Party shall have authority to consent to the entry of any judgment,
enter into any settlement or otherwise dispose of such Loss provided it obtains the prior written
consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed).
The indemnifying Party shall not be liable for any settlement or other disposition of a Loss by an
Indemnitee that is reached without the written consent of the indemnifying Party. Regardless of
whether the indemnifying Party chooses to defend or prosecute any Third-Party Claim, no Indemnitee
shall admit any liability with respect to, or settle, compromise or discharge, any Third-Party
Claim without the prior written consent of the indemnifying Party.

          9.4.5 Cooperation. Regardless of whether the indemnifying Party chooses to defend or
prosecute any Third-Party Claim, the Indemnified Party shall, and shall cause each other Indemnitee
to, cooperate in the defense or prosecution thereof and shall furnish such records, information and
testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings,
trials and appeals as may be reasonably requested in connection therewith. Such cooperation shall
include access during normal business hours afforded to the indemnifying Party to, and reasonable
retention by the Indemnified Party of, records and information that are reasonably relevant to
such Third-Party Claim, and making Indemnitees and other employees and agents available on a
mutually convenient basis to provide additional information and explanation of any material
provided hereunder, and the indemnifying Party shall reimburse the Indemnified Party for all its
reasonable out-of-pocket expenses in connection therewith.

          9.4.6 Expenses. Except as provided above, the reasonable and verifiable costs and expenses,
including fees and disbursements of counsel, incurred by the Indemnified Party in connection with
any claim shall be reimbursed * basis by the indemnifying Party, without prejudice to the
indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject
to refund in the event the Indemnifying Party is ultimately held not to be obligated to indemnify
the Indemnified Party.

     Section 9.5 Insurance. Each Party shall have and maintain such types and amounts of liability
insurance as is normal and customary in the industry generally for parties similarly situated, and
shall upon request provide the other Party with a copy of its policies of insurance in that regard,
along with any amendments and revisions thereto.

ARTICLE 10 -

REPRESENTATIONS, WARRANTIES AND COVENANTS

     Section 10.1 Representations, Warranties and Covenants. Each Party hereby represents,
warrants and covenants to the other Party as of the Effective Date as follows:

          10.1.1 Corporate Authority. Such Party (a) has the power and authority and the legal right to
enter into this Agreement and the Unilateral Development and Commercialization Agreements and to
perform its obligations hereunder and thereunder, and (b) has taken all necessary action on its
part required to authorize the execution and delivery of this Agreement and the Unilateral
Development and Commercialization Agreements and the

 

			
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filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

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performance of its obligations hereunder and
thereunder. This Agreement and the Unilateral Development and Commercialization Agreements have
been duly executed and delivered on behalf of such Party and constitute legal, valid and binding
obligations of such Party and are enforceable against it in accordance with their respective terms
subject to the effects of bankruptcy, insolvency or other laws of general application affecting the
enforcement of creditor rights and judicial principles affecting the availability of specific
performance and general principles of equity, whether enforceability is considered a proceeding at
law or equity.

          10.1.2 Litigation. Such Party is not aware of any pending or threatened litigation (and has
not received any communication) that alleges (i) that such Party’s activities related to this
Agreement or the Unilateral Development and Commercialization Agreements have violated, or (ii)
that by conducting the activities as contemplated herein or therein such Party would violate, any
of the intellectual property rights of any other party.

          10.1.3 Consents, Approvals, etc. All necessary consents, approvals and authorizations of all
Regulatory Authorities and other parties required to be obtained by such Party in connection with
the execution and delivery of this Agreement and the Unilateral Development and Commercialization
Agreements and the performance of its obligations hereunder and thereunder have been obtained.

          10.1.4 Conflicts. The execution and delivery of this Agreement and the Unilateral Development
and Commercialization Agreements and the performance of such Party’s obligations hereunder and
thereunder (a) do not conflict with or violate any requirement of Applicable Law or any provision
of the articles of incorporation, bylaws or any similar instrument of such Party, as applicable, in
any material way, and (b) do not conflict with, violate, or breach or constitute a default or
require any consent under, any contractual obligation or court or administrative order by which
such Party is bound.

          10.1.5 Debarment. No such Party nor any of its Affiliates has been debarred or is subject to
debarment and neither such Party nor any of its Affiliates will use in any capacity, in connection
with the services to be performed under this Agreement or the Unilateral Development and
Commercialization Agreements, any party who has been debarred pursuant to Section 306 of the
Federal Food, Drug, and Cosmetic Act, as amended, or who is the subject of a conviction described
in such section. Each Party will inform the other Party in writing immediately if it or any party
who is performing services hereunder is debarred or is the subject of a conviction described in
Section 306, or if any action, suit, claim, investigation or legal or administrative proceeding is
pending or, to such Party’s knowledge, is threatened, relating to the debarment or conviction of
such Party or any party performing services hereunder or thereunder.

     Section 10.2 Additional Representations and Warranties of Medarex. Medarex represents and
warrants to Avalon that Medarex is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey, and has full corporate power and authority and
the legal right to own and operate its property and assets and to carry on its business as it is
now being conducted and as it is contemplated to be conducted by this Agreement and the Unilateral
Development and Commercialization Agreements.

 

			
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filed separately with the
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     Section 10.3 Additional Representations, Warranties and Covenant of Avalon.

          10.3.1 Avalon represents and warrants to Medarex that Avalon is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, and has full corporate power and
authority and the legal right to own and operate its property and assets and to carry on its
business as it is now being conducted and as it is contemplated to be conducted by this Agreement
and the Unilateral Development and Commercialization Agreements. Avalon, as a sublicensee under
the MRC Agreement, shall comply with all the terms and conditions of the MRC Agreement that are
applicable to a sublicensee under such agreement.

          10.3.2 Avalon represents and warrants to Medarex that, except as set forth on Schedule 10.3.2,
as of the Effective Date, neither Avalon nor its Affiliates has, directly or indirectly, expressly
or by implication, by action or omission or otherwise (x) assigned, transferred, granted, conveyed
or otherwise encumbered any right, title or interest in or to any Patent, know-how or other
intellectual property rights owned by, licensed to or otherwise control-led by Avalon or its
Affiliates with respect to the initial Collaboration Targets listed on Appendix C that is
inconsistent with the rights granted to Medarex under this Agreement with respect to Collaboration
Products, or (y) agreed to or is otherwise bound by any covenant not to sue for any infringement,
misuse or otherwise with respect to the foregoing intellectual property rights that is inconsistent
with the rights granted to Medarex under this Agreement with respect to Collaboration Products.
Further, Avalon represents, warrants and covenants to Medarex that, except as disclosed to Medarex
in writing pursuant to Section 1.2.2(a)(iv) with respect to an Antigen, as of the date such Antigen
is designated a Collaboration Target, neither Avalon nor its Affiliates has, directly or
indirectly, expressly or by implication, by action or omission or otherwise (a) assigned,
transferred, granted, conveyed or otherwise encumbered any right, title or interest in or to any
Patent, know-how or other intellectual property rights owned by, licensed to or otherwise
controlled by Avalon or its Affiliates with respect to such Collaboration Target that is
inconsistent with the rights granted to Medarex under this Agreement with respect to Collaboration
Products, or (b) agreed to or is otherwise bound by any covenant not to sue for any infringement,
misuse or otherwise with respect to the foregoing intellectual property rights that is inconsistent
with the rights granted to Medarex under this Agreement with respect to Collaboration Products.

     Section 10.4
           *

     Section 10.5 DISCLAIMER OF WARRANTY. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTIONS
10.1, 10.2 AND 10.3, AVALON AND MEDAREX MAKE NO REPRESENTATIONS AND GRANT NO WARRANTIES, EXPRESS OR
IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, UNDER THIS AGREEMENT OR
THE UNILATERAL DEVELOPMENT AND COMMERCIALIZATION AGREEMENTS, AND AVALON AND MEDAREX EACH
SPECIFICALLY DISCLAIM ANY OTHER WARRANTIES, WHETHER
WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE
NON-INFRINGEMENT

 

			
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filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

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OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES UNDER THIS AGREEMENT OR THE
UNILATERAL DEVELOPMENT AND COMMERCIALIZATION AGREEMENTS.

ARTICLE 11 -

MISCELLANEOUS

     Section 11.1 Force Majeure. Neither Party shall be held liable or responsible to the other
Party or be deemed to have defaulted under or breached this Agreement for failure or delay in
fulfilling or performing any term of this Agreement when such failure or delay is caused by or
results from events beyond the reasonable control of the non-performing Party, including fires,
floods, earthquakes, embargoes, shortages, epidemics, quarantines, war, acts of war (whether war be
declared or not) or terrorism, insurrections, riots, civil commotion, strikes, lockouts or other
labor disturbances, acts of God or acts, omissions or delays in acting by any governmental
authority. The non-performing Party shall notify the other Party of such force majeure within *
after such occurrence by giving written notice to the other Party stating the nature of the event,
its anticipated duration, and any action being taken to avoid or minimize its effect. The
suspension of performance shall be of no greater scope and no longer duration than is necessary and
the non-performing Party shall use Commercially Reasonable Efforts to remedy its inability to
perform; provided, however, that in the event the suspension of performance continues for * after
the date of the occurrence, the Parties shall meet to discuss in good faith how to proceed in order
to accomplish the goals of the collaboration outlined in this Agreement.

     Section 11.2 Subcontractors. Each Party shall have the right, subject to the prior written
consent of the Steering Committee, such consent not to be unreasonably withheld or delayed, to
subcontract any of its research, development, manufacture and/or commercialization activities to a
Third Party, provided that it furnishes the other Party with advanced written notice thereof, which
notice shall specify the work to be subcontracted, and obtains a written undertaking from the
subcontractor that it shall be subject to the applicable terms and conditions of this Agreement,
including the provisions of Article 6. If a Party wishes to subcontract any of its research,
development, manufacturing or commercialization activities to a Third Party and the Steering
Committee consents, the other Party may submit a bid to the subcontracting Party to perform such
work. The subcontracting Party shall use Commercially Reasonable Efforts to enter into an
agreement with the bidder that is best able to meet the Collaboration’s requirements, taking into
consideration such factors as price, quality, capacity, quantity, reliability and reputation,
provided that such bidder is reasonably acceptable to the Steering Committee. Unless the Project
Plan provides, or the Steering Committee agrees otherwise, * the costs and expenses associated with
the use of a subcontractor to conduct research, development, manufacture and commercialization
activities, but, unless the Parties agree
otherwise, the subcontracting Party shall remain solely liable for the performance of its
research, development, manufacture or commercialization activities by its subcontractor;
provided, however, that Avalon and Medarex each shall remain solely responsible for
all costs and expenses associated with its use of subcontractor(s) with respect to the Avalon
Research Activities and the Medarex Research Activities, respectively.

 

			
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filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

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     Section 11.3 Assignment. Without the prior written consent of the other Party hereto, neither
Party shall sell, transfer, assign, pledge or otherwise dispose of, whether voluntarily,
involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties
hereunder; provided, however, that either Party hereto may assign or transfer this
Agreement or any of its rights or obligations hereunder without the consent of the other Party (a)
to any Affiliate of such Party; or (b) to any Third Party with which it merges or consolidates, or
to which it transfers all or substantially all of its assets to which this Agreement relates if in
any such event (i) the assigning Party (provided that it is not the surviving entity) remains
jointly and severally liable with the relevant Avalon Affiliate, Medarex Affiliate or Third Party
assignee under this Agreement, and (ii) the relevant Avalon Affiliate assignee, Medarex Affiliate
assignee, Third Party assignee or surviving entity assumes in writing all of the assigning Party’s
obligations under this Agreement. For purposes of clarification with respect to subsection (b)
herein, a Third Party that merges or consolidates with a Party, or to which a Party transfers all
or substantially all of its assets to which this Agreement relates, shall not be deemed to grant
the other Party to this Agreement any license to such Third party’s technology in existence as of
the effective date of such merger, consolidation or transfer, unless such grant is made pursuant to
a separate agreement, provided such Third Party shall maintain all licenses granted
hereunder by such first Party with respect to its Technology and any Information and Inventions
with respect thereto. Any purported assignment or transfer in violation of this Section shall be
void ab initio and of no force or effect.

     Section 11.4 Severability. If any provision of this Agreement is held to be illegal, invalid
or unenforceable under any present or future law, and if the rights or obligations of either Party
under this Agreement will not be materially and adversely affected thereby, (a) such provision
shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions
of this Agreement shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom, and (d) in lieu of such illegal,
invalid or unenforceable provision, there shall be added automatically as a part of this Agreement
a legal, valid and enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and reasonably acceptable to the Parties. To the
fullest extent permitted by applicable law, each Party hereby waives any provision of law that
would render any provision prohibited or unenforceable in any respect.

     Section 11.5 Governing Law, Jurisdiction, Venue and Service.

          11.5.1 Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that
might otherwise refer construction or interpretation of this Agreement to the substantive law of
another jurisdiction.

          11.5.2 Jurisdiction. Subject to Section 2.3, the parties hereby irrevocably and
unconditionally consent to the exclusive jurisdiction of the courts of the State of Delaware and
the United States District Court for the District of Delaware for any action, suit or proceeding
(other than appeals therefrom) arising out of or relating to this Agreement, and agree not to

 

			
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filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

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commence any action, suit or proceeding (other than appeals therefrom) related thereto except in
such courts.

          11.5.3 Venue. The Parties further hereby irrevocably and unconditionally waive any objection
to the laying of venue of any action, suit or proceeding (other than appeals therefrom) arising out
of or relating to this Agreement in the courts of the State of Delaware or the United States
District Court for the District of Delaware, and hereby further irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.

          11.5.4 Service. Each Party hereto further agrees that service of any process, summons, notice
or document by U.S. registered mail to its address set forth below shall be effective service of
process for any action, suit or proceeding bought against it under this Agreement in any such
court.

          11.5.5 Patents and Trademarks. Notwithstanding the foregoing, any disputes regarding the
validity, scope or enforceability of Patents or Trademarks shall be submitted to a court of
competent jurisdiction in the territory in which such rights apply.

     Section 11.6 Notices. All notices or other communications that are required or permitted
hereunder shall be in writing and delivered personally, sent by facsimile (and promptly confirmed
by personal delivery, registered or certified mail or overnight courier as provided herein), sent
by nationally-recognized overnight courier or sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:

If to Avalon, to:

Avalon Pharmaceuticals, Inc.

20358 Seneca Meadows Parkway

Germantown, Maryland 20876

Attention: CEO

Facsimile: 301-556-9910

If to Medarex, to:

Medarex, Inc.

707 State Road

Princeton, New Jersey 08540-1437

Attention: President

Facsimile: (609) 430-2850

with a copy to:

Medarex, Inc.

707 State Road

Princeton, New Jersey 08540-1437

Attention: General Counsel

Facsimile: (609) 430-4215

 

			
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filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

39

 

or to such other address as the Party to whom notice is to be given may have furnished to the other
Party in writing in accordance herewith. Any such communication shall be deemed to have been
received (a) when delivered, if personally delivered or sent by facsimile on a business day, (b) on
the business day after dispatch, if sent by nationally recognized overnight courier, and (c) on the
third business day following the date of mailing, if sent by mail. It is understood and agreed
that this section 11.6 is not intended to govern the day-to-day business communications necessary
between the Parties in performing their duties, in due course, under the terms of this Agreement.

     Section 11.7 Entire Agreement; Modifications. This Agreement, together with the Appendices
attached hereto, sets forth and constitutes the entire agreement and understanding between the
Parties with respect to the subject matter hereof and all prior agreements, understanding, promises
and representations, whether written or oral, with respect thereto are superseded hereby. Each
Party confirms that it is not relying on any representations or warranties of the other Party
except as specifically set forth herein. No amendment, modification, release or discharge shall be
binding upon the Parties unless in writing and duly executed by authorized representatives of both
Parties.

     Section 11.8 Relationship of the Parties. It is expressly agreed that the Parties shall be
independent contractors of one another and that the relationship between the Parties shall not
constitute a partnership, joint venture or agency. Neither Party shall have the authority to make
any statements, representations or commitments of any kind, or to take any action, which shall be
binding on the other, without the prior written consent of the other to do so. All persons
employed by a Party shall be employees of such Party and not of the other Party and all costs and
obligations incurred by reason of any such employment shall be for the account and expense of such
Party.

     Section 11.9 Equitable Relief. Each Party acknowledges and agrees that the restrictions set
forth in Articles 6 and 7 of this Agreement are reasonable and necessary to protect the legitimate
interests of the other Party and that such other Party would not have entered into this Agreement
in the absence of such restrictions, and that any violation or threatened violation of any
provision of Article 6 or 7 will result in irreparable injury to such other Party. Each party also
acknowledges and agrees that in the event of a violation or threatened violation of any provision
of Article 6 or 7, the other Party shall be entitled to preliminary and permanent injunctive
relief, without the necessity of proving irreparable injury or actual damages and without the
necessity of having to post a bond, as well as to an equitable accounting of all earnings, profits
and other benefits arising from any such violation. The rights provided in the immediately
preceding sentence shall be cumulative and in addition to any other rights or remedies that may be
available to such other Party. Nothing in this Section 11.9 is intended, or should be construed,
to limit such other Party’s right to preliminary and permanent injunctive relief or any other
remedy for a breach of any other provision of this Agreement.

     Section 11.10 Waiver. Any term or condition of this Agreement may be waived at any time by
the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless

 

			
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filed separately with the
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40

 

set
forth in a written instrument duly executed by or on behalf of the Party waiving such term or
condition. The waiver by either Party hereto of any right hereunder or of the failure to perform
or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of
any other breach or failure by said other Party whether of a similar nature or otherwise.

     Section 11.11 Counterparts. This Agreement may be executed in two (2) or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument.

     Section 11.12 No Benefit to Third Parties. The representations, warranties, covenants and
agreements set forth in this Agreement are for the sole benefit of the Parties hereto and their
successors and permitted assigns, and they shall not be construed as conferring any rights on any
other parties, other than MRC as provided in the last sentence of Section 10.3.1.

     Section 11.13 Further Assurance. Each Party shall duly execute and deliver, or cause to be
duly executed and delivered, such further instruments and do and cause to be done such further acts
and things, including the filing of such assignments, agreements, documents and instruments, as may
be necessary or as the other Party may reasonably request in connection with this Agreement or to
carry out more effectively the provisions and purposes, or to better assure and confirm unto such
other Party its rights and remedies under this Agreement.

     Section 11.14 English Language. This Agreement has been written and executed in the English
language. Any translation into any other language shall not be an official version thereof, and in
the event of any conflict in interpretation between the English version and such translation, the
English version shall control.

     Section 11.15 References. Unless otherwise specified, (a) references in this Agreement to any
Article, Section, Appendix, Schedule or Exhibit shall mean references to such Article, Section,
Appendix, Schedule or Exhibit of this Agreement, (b) references in any section to any clause are
references to such clause of such section, and (c) references to any agreement, instrument or other
document in this Agreement refer to such agreement, instrument or other document as originally
executed or, if subsequently varied, replaced or supplemented from time to time, as so varied,
replaced or supplemented and in effect at the relevant time of reference thereto.

     Section 11.16 Construction. Except where the context otherwise requires, wherever used, the
singular shall include the plural, the plural the singular, the use of any gender shall be
applicable to all genders and the word “or” is used in the inclusive sense (and/or). The captions
of this Agreement are for convenience of reference only and in no way define, describe, extend or
limit the scope or intent of this Agreement or the intent of any provision contained in this
Agreement. The term “including” as used herein shall mean including, without limiting the
generality of any description preceding such term. The language of this Agreement shall be deemed
to be the language mutually chosen by the Parties and no rule of strict construction shall be
applied against either Party hereto.

[The remainder of this page has been intentionally left blank.]

 

			
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     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly
authorized representatives as of the date first above written.

	 	 	 	 	 	 	 	 	 
	Medarex, Inc.	 	 	 	Avalon Pharmaceuticals, Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	     /s/ James B. Cornett, Ph.D.
	 	 	 	By:
	 	     /s/ Kenneth C. Carter, Ph.D.
	 

	 	 
	 	 	 	 	 	 
	Name: James B. Cornett, Ph.D.

Title: VP, Business Development	 	 	 	Name:       Kenneth C. Carter, Ph.D.

Title:          President and CEO

 

			
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filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

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SCHEDULE 10.3.2

Encumbrances on Collaboration Targets

     This Schedule to the COLLABORATION AGREEMENT (“Agreement”) effective as of October 15, 2003,
by and between AVALON PHARMACEUTICALS, INC. (“Avalon”) and MEDAREX, INC., on behalf of itself and
its wholly owned subsidiary, GENPHARM INTERNATIONAL, INC., (collectively, “Medarex”) sets forth any
and all encumbrances on any right, title or interest in or to any Patent, know-how or other
intellectual property rights owned by, licensed to or otherwise controlled by Avalon or its
Affiliates with respect to the Collaboration Targets listed on Appendix C. All capitalized
terms used herein without definition shall have the meanings ascribed thereto in the Agreement,
unless otherwise expressly provided herein.

     The contents of this schedule 10.3.2 are hereby incorporated into the Agreement and are
governed by the terms and conditions of the Agreement, including the confidentiality provisions set
forth therein.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

APPENDIX A

Definitions

     This Appendix to the COLLABORATION AGREEMENT (“Agreement”) effective as of October 15, 2003,
by and between AVALON PHARMACEUTICALS, INC. (“Avalon”) and MEDAREX, INC., on behalf of itself and
its wholly owned subsidiary, GENPHARM INTERNATIONAL, INC., (collectively, “Medarex”) provides
agreed upon definitions applicable to the Parties for purposes of the Agreement. All capitalized
terms used herein without definition shall have the meanings ascribed thereto in the Agreement,
unless otherwise expressly provided herein.

     The contents of this Appendix A are hereby incorporated into the Agreement and are
governed by the terms and conditions of the Agreement, including the confidentiality provisions set
forth therein.

     “Additional Mice” shall mean (a) the mice developed by Kirin using certain transchromosomal
technology, which mice are licensed to Medarex pursuant to the Kirin Agreement and (b) the mice
developed through the crossbreeding of the HuMAb Mice with the mice described in clause (a) of this
definition, which are licensed to Medarex pursuant to the Kirin Agreement.

     “Affiliate” of a party shall mean any other party that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control with such first party.
For purposes of this definition only, “control” and, with correlative meanings, the terms
“controlled by” and “under common control with” shall mean (a) the possession, directly or
indirectly, of the power to direct the management or policies of a party, whether through the
ownership of voting securities or by contract relating to voting rights or corporate governance, or
(b) the ownership, directly or indirectly, of more than fifty percent (50%) of the voting
securities or other ownership interest of a party.

     “Antibody” shall mean any fully human antibody, or fragment thereof, with a unique amino acid
sequence that has a therapeutically meaningful binding affinity for an Antigen. By way of
clarification, Antibodies with different amino acid sequences shall be deemed to be different
Antibodies, irrespective of whether they bind to the same Antigen. For the avoidance of doubt, any
Improvement to an Antibody, such as, by way of example, through affinity maturation or other
similar techniques, shall continue to be an “Antibody” for purposes of this Agreement.

     “Antibody-Based Product” shall mean any composition or formulation containing or comprising
one or more (a) (i) antibodies, whether or not human, (ii) with respect to each such antibody, one
or more fragments of such antibody containing a portion of such antibody that confers binding
specificity for an Antigen, or (iii) any protein or other composition of matter that mimics such
antibody or fragment, (b) cells expressing or secreting one or more such antibodies, fragments or
mimetics or containing nucleotide sequences (whether coding or non-coding) with respect to the
expression of such antibodies, fragments or mimetics, or (c) nucleotide sequences

 

			
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(whether coding or non-coding) with respect to the expression of one or more such antibodies,
fragments or mimetics.

     “Antibody Materials” shall mean, with respect to a particular Antibody, (a) the nucleic acids
(including DNA, RNA, and complementary and reverse complementary nucleic acids thereto, whether
intact or a fragment) that code specifically for such Antibody (or active fragments thereof) and do
not code for multiple Antibodies, or (b) a host cell (other than a host cell obtained directly from
the HuMAb Mice or parts of such mice) into which the nucleic acids described in (a) are introduced
or are otherwise present, which cell is capable of expressing such Antibody.

     “Antibody Product” shall mean any composition or formulation containing or comprising one or
more (a) Antibodies, (b) cells expressing or secreting one or more Antibodies or containing
nucleotide sequences (whether coding or non-coding) with respect to the expression of Antibodies,
or (c) nucleotide sequences (whether coding or non-coding) with respect to the expression of one or
more Antibodies (or a fragment of an entire Antibody containing that portion of such Antibody
conferring binding specificity for an Antigen), for the diagnosis, prophylaxis or treatment of
human diseases or conditions.

     “Antigen” shall mean any protein (including any glyco- or lipo-protein), carbohydrate,
compound or other composition, and any fragment, peptide or epitope thereof, that stimulates the
production of antibodies.

     “Applicable Law” shall mean the applicable laws, rules, and regulations, including any rules,
regulations, guidelines, or other requirements of the Regulatory Authorities, that may be in effect
from time to time in the Territory.

     “Avalon Know-How” shall mean all Information and Inventions in the Control of Avalon or its
Affiliates as of the Effective Date or at any time during the Terrn that are necessary or
reasonably useful for the Exploitation of the Collaboration Products and the Unilateral Products,
including the characterization of Collaboration Targets, or for the exercise of the Avalon Patents,
in each case that are not generally known, but excluding (w) any Collaboration Know-How, (x) any
excluded Know-How, (y) any Information and Inventions to the extent covered or claimed by the
Avalon Patents and (z) any production Process Know-How. Avalon Know-How shall include all: (a)
biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical,
clinical and safety data and information related to the Collaboration Targets, the Collaboration
Products or the Unilateral Products, and (b) data and information with respect to, and resulting
from, assays and biological methodologies necessary or reasonably useful for the Exploitation of
the Collaboration Targets, the Collaboration Products or the Unilateral Products.

     “Avalon Patents” shall mean all of the Patents that Avalon and its Affiliates Control as of
the Effective Date and at any time during the Term, that claim or cover any invention necessary or
reasonably useful for the Exploitation of the Collaboration Products or the Unilateral Products,
including any Patents that claim or cover any Collaboration Target or any method for the discovery,
identification or characterization of Collaboration Targets, but excluding (x) any Collaboration
Patents, (y) any Excluded Patents, and (z) any Production Process Patents.

 

			
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     “Avalon Technology” shall mean the Avalon Know-How and Avalon Patents.

     “Biosite Agreement” shall mean that certain Collaboration Agreement, dated as of June 1, 2000,
between Medarex and Biosite Diagnostics Incorporated, a Delaware corporation.

     “BLA” or “Biologics License Application” shall mean a Biologics License Application, as
defined in the U.S. Federal Food, Drug, and Cosmetics Act, as amended, and the regulations
promulgated thereunder, and any corresponding supranational, foreign or domestic marketing
authorization application, registration or certification, necessary or reasonably useful to market
a Collaboration Product in the Territory, but not including pricing and reimbursement approvals.

     “Collaboration Product” shall mean any Antibody Product that contains, expresses or secretes a
Collaboration Antibody or any Improvement thereto or contains nucleotide sequences with respect to
the expression of a Collaboration Antibody or any Improvement thereto.

     “Collaboration Target” shall mean any Antigen listed on Appendix C, as such appendix
may be amended pursuant to this Agreement.

     “Collaboration Technology” shall mean any and all (a) Information and Inventions, conceived,
discovered, developed or otherwise made, by or on behalf of a Party or its Affiliates or, to the
extent permitted, its sublicensees (whether alone or jointly), in connection with the work
conducted under or in connection with this Agreement (but not the Unilateral Development and
Commercialization Agreements), whether or not patented or patentable, but excluding any Mice
Materials, Mice-Related Technology or Production Process Technology (the “Collaboration Know-How”);
and (b) Patents and other intellectual property rights with respect thereto (collectively,
“Collaboration Patents”). The determination of whether Information and Inventions are conceived,
discovered, developed or otherwise made by a Party for purposes of allocating proprietary rights
(including Patent, copyright or other intellectual property rights) therein, shall be made in
accordance with Section 7.1.8.

     “Commercially Reasonable Efforts” shall mean, with respect to the research, development,
manufacture or commercialization of a Collaboration Target or a resulting Collaboration Product,
efforts and resources commonly used in the biotechnology industry for an antibody of similar
commercial potential at a similar stage in its lifecycle, *. Commercially Reasonable Efforts shall
be determined on a market-by-market basis for each Collaboration Target and Collaboration Product,
as applicable, without regard to the particular circumstances of a Party, including any other
product opportunities of such Party.

     “Control” shall mean, with respect to any Information and Invention, Patent or other
intellectual property right, possession of the right, whether directly or indirectly, and whether
by ownership, license or otherwise, to assign, or grant a license, sublicense or other right to or
under, such Information and Invention, Patent or right as provided for herein without violating the
terms of any agreement or other arrangement with any Third Party.

     “Corixa Agreement” shall mean that certain Asset Purchase Agreement, by and between Medarex
and Corixa Corporation, dated as of May 24, 2002.

 

			
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     “Cross-License Agreement” shall mean that certain Cross-License Agreement entered into by and
among Abgenix, Inc., Cell Genesys, Inc., Japan Tobacco Inc., Xenotech L.P., and GenPharm
International, Inc., effective as of March 26, 1997, as amended from time to time.

     “Excluded Know-How” shall mean (a) with respect to Medarex, any and all Information and
Inventions that Medarex or any of its Affiliates Control pursuant to the Biosite Agreement, the
Kirin Agreement, the Corixa Agreement or any other agreement with a Third Party that is entered
into after the Effective Date, including the ultra potent toxin and linker technology that Medarex
or any of its Affiliates Control pursuant to the Corixa Agreement (including any Improvements with
respect thereto), and (b) with respect to Avalon, any and all Information and Inventions that
Avalon or any of its Affiliates Control pursuant to an agreement entered into after the Effective
Date, but in each case, ((a) and (b)) excluding any Information and Inventions that are claimed or
covered by the Excluded Patents.

     “Excluded Patent” shall mean (a) with respect to Medarex, any Patent that Medarex or any of
its Affiliates Control pursuant to the Biosite Agreement, the Kirin Agreement, the Corixa Agreement
or any other agreement with a Third Party that is entered into after the Effective Date, including
any Patents claiming or covering the ultra potent toxin and linker technology that Medarex or any
of its Affiliates Control pursuant to the Corixa Agreement (including any Improvements with respect
thereto), and (b) with respect to Avalon, any Patent that Avalon or any of its Affiliates Control
pursuant an agreement entered into after the Effective Date.

     “Exploit” or “Exploitation” shall mean to make, have made, import, use, sell, offer for sale,
or otherwise dispose of, including all discovery, research, development, registration,
modification, enhancement, improvement, manufacture, storage, formulation, exportation,
transportation, distribution, promotion and marketing activities related thereto.

     “FDA” shall mean the United States Food and Drug Administration and any Successor agency
thereto.

     “GAAP” shall mean United States generally accepted accounting principles consistently applied.

     “HuMAb Mice” shall mean any immunizable transgenic mice containing unrearranged human
immunoglobulin transgenes inserted into mouse chromosomes, but not containing any human chromosomes
or fragments thereof, that are Controlled by Medarex or its Affiliates as of the Effective Date or
at any time during the Term, but excluding any immunizable mice capable of producing human
antibodies that are in-licensed or otherwise acquired by Medarex or its Affiliates after the
Effective Date.

     “Improvement” shall mean any modification to an antibody, compound, product or technology or
any discovery, device, process or formulation related to such antibody, compound, product or
technology, whether or not patented or patentable, including any enhancement in the efficiency,
operation, manufacture, ingredients, preparation, presentation, formulation, means of delivery,
packaging or dosage of an antibody, compound, product or technology, any discovery or development
of any new or expanded indications or applications for an antibody, compound,

 

			
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product or technology, or any discovery or development that improves the stability, safety or
efficacy of an antibody, compound, product or technology.

     “IND” shall mean an investigational new drug application filed with the FDA for authorization
to commence human clinical trials, and its equivalent in other countries or regulatory
jurisdictions.

     “Information and Inventions” shall mean all technical, scientific and other know-how and
information, trade secrets, knowledge, technology, means, methods, processes, practices, formulas,
instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs,
drawings, assembly procedures, computer programs, apparatuses, specifications, data, results and
other material including high-throughput screening, gene expression, genomics, proteomics and other
drug discovery and development technology, pre-clinical and clinical trial results, manufacturing
procedures, test procedures and purification and isolation techniques, (whether or not
confidential, proprietary, patented or patentable) in written, electronic or any other form now
known or hereafter developed, and all Improvements, whether to the foregoing or otherwise, and
other discoveries, developments, inventions and other intellectual property (whether or not
confidential, proprietary, patented or patentable).

     “Kirin Agreement” shall mean that certain Collaboration and License Agreement between Kirin
Brewery Co, Ltd. (“Kirin”) and Medarex, effective as of September 4, 2002, as amended from time to
time.

     “Know-How” shall mean the Medarex Know-How (including the Mice-Related Know-How), the Avalon
Know-How and/or the Collaboration Know-How, as applicable.

     “Lead Collaboration Antibody” shall have the meaning set forth in Section 1.2.8. For the
avoidance of doubt, a Collaboration Antibody that has been designated a Lead Collaboration Antibody
shall continue to be a Collaboration Antibody for purposes of this Agreement.

     “Medarex Know-How” shall mean all Information and Inventions in the Control of Medarex or its
Affiliates as of the Effective Date or at any time during the Term that are necessary or reasonably
useful for the Exploitation of the Collaboration Products and the Unilateral Products or for the
exercise of the Medarex Patents, in each case that are not generally known, but excluding (w) any
Excluded Know-How, (x) any Collaboration Know-How, (y) any Production Process Know-Flow, and (z)
any Information and Inventions to the extent covered or claimed by the Medarex Patents. Medarex
Know-How shall include all: (a) biological chemical, pharmacological, toxicological,
pharmaceutical, physical and analytical, clinical and safety data and information related to the
Collaboration Targets the Collaboration Products or the Unilateral Products, and (b) data and
information with respect to, and resulting from, assays and biological methodologies necessary or
reasonably useful for the Exploitation of the Colaboration Targets, the Collaboration Products or
the Unilateral Products. By way of clarification, Avalon shall not have any rights with respect to
Excluded Know-How under this Agreement unless the Parties enter into a separate written agreement
with respect thereto.

 

			
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     “Medarex Patents” shall mean all of the Patents that Medarex or its Affiliates Control as of
the Effective Date and at any time during the Term, that cover or claim any invention necessary or
reasonably useful for the Exploitation of the Collaboration Products or the Unilateral Products,
but excluding any Excluded Patents, any Collaboration Patents, and any Production Process Patents.
By way of clarification, Avalon shall not have any rights with respect to any Excluded Patents
under this Agreement unless the Parties enter into a separate written agreement with respect
thereto.

     “Medarex Technology” shall mean the Medarex Know-How and Medarex Patents, including all
Mice-Related Technology.

     “Mice Materials” shall mean the HuMAb Mice and any parts or derivatives of the HuMAb Mice,
including hybridomas (solely to the extent derived from other Mice Materials), cells, genetic
material (including nucleotide sequences (e.g., DNA, RNA, and complementary and reverse
complementary nucleotide sequences thereto, whether coding or non-coding) with respect to the
expression of an Antibody or fragment thereof, and any replicates or modifications thereof or
Improvements thereto (e.g., additions, deletions or substitutions of nucleotides therein)),
Antibodies, Antibody Products or other biological materials derived directly or indirectly from the
HuMAb Mice but, in each of the foregoing cases, excluding any Collaboration Antibodies and any
Antibody Materials with respect thereto.

     “Mice-Related Know-How” shall mean (a) any Information and Inventions with respect to any Mice
Materials, and (b) any Information and Inventions with respect to the HuMAb Mice and the
Exploitation thereof, but in each case excluding any Information and Inventions to the extent
covered or claimed by the Mice-Related Patents.

     “Mice-Related Patents” shall mean any Patents that claim or cover (a) Mice Materials, and (b)
the HuMAb Mice and the Exploitation thereof.

     “Mice-Related Technology” shall mean the Mice-Related Know-How and the Mice-Related Patents.

     “MRC Agreement” shall mean that certain License Agreement entered into by the Medical Research
Council Institute of Animal Physiology and Genetics Research of Babraham Hall and Marianne
Bruggëmann and GenPharm International, Inc., effective October 1, 1993, as amended on August 12,
1994.

     “Patents” shall mean (a) all patents and patent applications, (b) any substitutions,
divisions, continuations, continuations-in-part, reissues, renewals, registrations, confirmations,
re-examinations, extensions, supplementary protection certificates and the like, and any
provisional applications, of any such patents or patent applications, and (c) any foreign or
international equivalent of any of the foregoing.

     “Pre-Existing Agreement” shall mean, with respect to an Antigen, any written agreement with a
Third Party that would preclude such Antigen from becoming a Collaboration Target

 

			
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hereunder that was entered into by Avalon or any of its Affiliates, as applicable, before the
Effective date.

     “Product Trademarks” shall mean the Trademarks developed for the Collaboration Products by the
Steering Committee, all packaging designs and other trade dress used in connection with the
Collaboration Products and such other Trademarks relating thereto and any registrations thereof or
any pending applications relating thereto.

     “Production Process Development” shall mean the development of processes and technology for
the production, purification, evaluation, characterization, stability assessment, vialing and
distribution, and release of a Collaboration Antibody or Collaboration Product.

     “Production Process Know-How” shall mean any Information and Inventions of a Party with
respect to the Production Process Development or the manufacture of Antibody Products, but
excluding any Information and Inventions to the extent covered or claimed by the Production Process
Patents.

     “Production Process Patents” shall mean any Patents of a Party that claim or cover the
Production Process Development or the manufacture of Antibody Products.

     “Production Process Technology” shall mean any Production Process Know-How and Production
Process Patents.

     “Regulatory Approval” shall mean any and all approvals (including pricing and reimbursement
approvals), licenses, registrations or authorizations of any Regulatory Authority, necessary for
the Exploitation of a Collaboration Product in a country, including any (a) approval for a
Collaboration Product (including any INDs, BLAS and supplements and amendments thereto); (b) pre-
and post-approval marketing authorizations (including any prerequisite manufacturing approval or
authorization related thereto); (c) labeling approval; and (d) technical, medical and scientific
licenses.

     “Regulatory Authority” shall mean any applicable government entities regulating or otherwise
exercising authority with respect to the Exploitation of the Collaboration Targets or the
Collaboration Products in the Territory.

     “Regulatory Documentation” shall mean all applications, registrations, licenses,
authorizations and approvals (including all Regulatory Approvals), all correspondence submitted to
or received from Regulatory Authorities (including minutes and official contact reports relating to
any communications with any Regulatory Authority), all supporting documents and all clinical
studies and tests, relating to any Collaboration Antibody, Collaboration Target or any
Collaboration Products, and all data contained in any of the foregoing, including all regulatory
drug lists, advertising and promotion documents, adverse event files and complaint files.

     “Technology” shall mean the Medarex Technology, the Avalon Technology and/or the Collaboration
Technology, as applicable.

 

			
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     “Territory” shall mean the entire world.

     “Third Party” shall mean any party other than Medarex, Avalon or their respective Affiliates.

     “Trademark” shall include any word, name, symbol, color, designation or device or any
combination thereof, including any trademark, trade dress, service mark, service name, brand mark,
trade name, brand name, logo or business symbol.

     Terms Defined Elsewhere in this Agreement. The following terms are defined in the applicable
Sections of this Agreement:

	 	 	 	 	 
	Defined Term	 	Section	 	 
	Avalon Research Activities

	 	Section 1.2.4	 	 
	Antigen Evaluation Material

	 	Section 1.2.2(a)	 	 
	Assay

	 	Section 1.2.3(c)	 	 
	Assay Candidate

	 	Section 1.2.6(a)	 	 
	Assay Success Criteria

	 	Section 1.2.3(e)	 	 
	Authorized Commercialization Expenses

	 	Section 4.1.1	 	 
	Authorized R&D Expenses

	 	Section 4.1.2	 	 
	Binding Sequence

	 	Section 1.2.6(b)	 	 
	Biological Materials

	 	Section 7.6.3	 	 
	Collaboration

	 	Section 1.1	 	 
	Collaboration Antibody

	 	Section 1.2.6(a)	 	 
	Collaboration Expenses

	 	Section 4.5.1	 	 
	Collective Opinion of Counsel

	 	Section 7.4.1	 	 
	Commercialization Expenses

	 	Appendix B	 	 
	Confidential Information

	 	Section 6.1	 	 
	Dormant Product

	 	Section 5.3	 	 
	Effective Date

	 	Preamble	 	 
	Election Notice

	 	Section 5.1.2(a)	 	 
	Evaluation Period

	 	Section 1.2.2(b)	 	 
	Expert

	 	Section 2.3.5(a)	 	 
	Immunogen

	 	Section 1.2.3(a)	 	 
	Indemnification Claim Notice

	 	Section 9.4.1	 	 
	Indemnified Party

	 	Section 9.4.1	 	 
	Indemnitee

	 	Section 9.4.1	 	 
	Infringement Suit

	 	Section 7.4.2	 	 
	Lead Collaboration Antibody

	 	Section 1.2.8	 	 
	Losses

	 	Section 9.1	 	 
	Medarex Research Activities

	 	Section 1.2.4	 	 
	Net Sales

	 	Appendix B	 	 
	Operating Profits, Operating Losses

	 	Appendix B	 	 
	Opt-Out

	 	Section 5.1.1	 	 
	Opt-Out Notice

	 	Section 5.1.1	 	 

 

			
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A-8

 

	 	 	 	 	 
	Defined Term	 	Section	 	 
	Opting-Out Party

	 	Section 5.1.1	 	 
	Other Operating (Income)/Expense

	 	Appendix B	 	 
	Party

	 	Preamble	 	 
	Project Budget

	 	Section 1.3	 	 
	Project Plan

	 	Section 1.3	 	 
	Research and Commercialization
Agreement

	 	Section 3.3.2	 	 
	Reversion Target

	 	Section 1.7	 	 
	Steering Committee

	 	Section 2.1.1	 	 
	Target Entry Period

	 	Section 1.2.2(e)	 	 
	Term

	 	Section 8.1	 	 
	Third-Party Claims

	 	Section 9.1	 	 
	Third-Party Payments

	 	Appendix B	 	 
	Unilateral Developments and
Commercialization Agreement

	 	Section 5.1.2(a)	 	 
	Unilateral Product

	 	Section 5.1.2(a)	 	 
	Withholding Taxes

	 	Section 4.4	 	 

 

			
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A-9

 

APPENDIX B

Financial Definitions

     This Appendix to the COLLABORATION AGREEMENT (“Agreement”) effective as of October 15, 2003,
by and between AVALON PHARMACEUTICALS, INC. (“Avalon”) and MEDAREX, INC., on behalf of itself and
its wholly owned subsidiary, GENPHARM INTERNATIONAL, INC., (collectively, “Medarex”) provides
agreed upon definitions of financial terms applicable to the Parties for the purposes of the
Agreement. All capitalized terms used herein without definition shall have the meanings ascribed
thereto in the Agreement, unless otherwise expressly provided herein.

     The contents of this Appendix B are hereby incorporated into the Agreement and are
governed by the terms and conditions of the Agreement, including the confidentiality provisions set
forth therein.

     It is the intention of the Parties that the interpretation of these definitions will be in
accordance with GAAP.

     1. “Net Sales” shall mean, for any period, the gross amount invoiced by the Parties and their
Affiliates and sublicensees for the sale of Collaboration Product(s) or Unilateral Product, as the
case may be, to Third Parties, less deductions for: (a) normal and customary trade, quantity and
cash discounts and sales returns and allowances (other than allowances for doubtful accounts),
including (i) those granted on account of price adjustments, billing errors, rejected goods,
damages goods, returns and rebates, (ii) administrative and other fees and reimbursements and
similar payments directly related to the sale or delivery of Collaboration Product(s) or Unilateral
Product, as the case may be, paid to wholesalers and other distributors, buying groups, pharmacy
benefit management organizations, health care insurance carriers and other institutions, (iii)
allowances, rebates, and fees directly related to the sale or delivery of Collaboration Product(s)
or Unilateral Product, as the case may be, paid to distributors and (iv) chargebacks; (b) freight,
postage, shipping and insurance costs to the extent that such items are included in the gross
amount invoiced; (c) customs and excise duties and other duties related to the sales to the extent
that such items are included in the gross amount invoiced; (d) rebates and similar payments made
with respect to sales paid for or reimbursed by any governmental or regulatory authority such as,
by way of illustration and not in limitation of the Parties’ rights hereunder, Federal or state
Medicaid, Medicare or similar state program or equivalent foreign governmental program; (e) sales
and other taxes and duties (including withholding taxes established by individual country treaties
not reimbursed or creditable) directly related to the sale or delivery of Collaboration Product(s)
or Unilateral Product, as the case may be, (but not including taxes assessed against the income
derived from such sale); (f) distribution costs and expenses to the extent that such items are
included in the gross amount invoiced; and (g) any such invoiced amounts that are not collected by
the Parties or their Affiliates or sublicensees; provided, however, that an amount
shall be deducted only once regardless of how many categories may apply to it. Any of the
deductions listed above that involves a payment by a Party or its Affiliates or sublicensees shall
be taken as a deduction in the calendar quarter in which the payment is accrued by such entity.
Deductions pursuant to subsection (g) above shall be taken in the calendar quarter in which such
sales are no longer

 

			
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B-1

 

recorded as a receivable. For purposes of determining Net Sales, the Collaboration Product(s)
or Unilateral Product, as the case may be, shall be deemed to be sold when invoiced and a “sale”
shall not include transfers or dispositions for charitable, promotional, pre-clinical, clinical,
regulatory or governmental purposes.

     For Purposes of calculating Net Sales of Collaboration products and Unilateral Products, sales
between or among the Parties or their Affiliates shall be excluded from the computation of Net
Sales, but sales of Collaboration Products (but not Unilateral Products, which shall be governed by
Section 3.2.3 of the applicable Unilateral Development and Commercialization Agreement) by a Party
or its Affiliates to sublicensees or Third Parties shall be included in the computation of Net
Sales.

     2. “Operating Profits” and, with correlative meaning, “Operating Losses”, shall mean, with
respect to a Collaboration Product, Net Sales of such Collaboration product by a Party or its
Affiliates * all for a given period.

     3. “Commercialization Expenses” shall mean all Cost of Sales, Distribution Costs, Marketing
Costs, Sales Costs, General and Administrative Costs (in each case, to the extent not deducted from
Net Sales under Section 1 hereof) of the Parties and their Affiliates with respect to the
Collaboration Products as approved by the Steering Committee in the applicable Project Budget.

     3.1 “Cost of Sales” shall mean (a) the supply price, and any other direct costs and expenses
of acquiring, including costs of transport, customs, clearance and storage of product (if
necessary), freight, customs, duty, and insurance borne by the Parties (to the extent not included
in such supply price), with respect to Net Sales of a Collaboration Product, and (b) any
Third-Party Payments with respect to such Net Sales, to the extent not included in such supply
price or reimbursed by a Third Party.

     3.1.1 “Third-Party Payments” shall mean intellectual property and technology acquisition and
license payments (including royalties, license fees, milestone payments and other payment
obligations) made to Third Parties with respect to a Collaboration Product during the Term pursuant
to activities under this Agreement, only to the extent that such payment obligations (a) were
disclosed by Avalon pursuant to Section 1.2.2(a)(iv) or (b) are approved by the Steering Committee
pursuant to Section 2.1.2(d). Any payments made pursuant to the MRC Agreement with respect to a
Collaboration Product shall be Third-Party Payments.

     3.2 “Distribution Costs” shall mean the direct costs and expenses specifically identifiable to
the distribution of a Collaboration Product by a Party including customer services, collection of
data about sales to hospitals and other end users, order entry, billing, shipping, credit and
collection and other such activities, but in any case, not including any costs or expenses which
are reimbursed by any Third Party.

     3.3 “Marketing Costs” shall mean, with respect to a Collaboration Product, the direct costs
and expenses of marketing, promotion, advertising, promotional materials, professional education,
product-related public relations, relationships with opinion leaders and professional

 

			
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B-2

 

societies, market research (before and after Regulatory Approval of a Collaboration Product),
healthcare economics studies, post-marketing studies required to maintain or expand Regulatory
Approvals of such Collaboration Product (to the extent not included in Authorized R&D Expenses) and
other similar activities related to such Collaboration Product and approved by the Steering
Committee. Such costs and expenses will include both internal costs (e.g., salaries, benefits,
supplies and materials, etc.) and costs of outside services and expenses (e.g., consultants, agency
fees, meeting costs, etc.). Marketing Costs shall also include costs and expenses directly related
to obtaining reimbursement from payers and the cost of obtaining sales and marketing data (to the
extent not included in the Distribution Costs). Notwithstanding anything to the contrary in the
foregoing, Marketing Costs shall specifically exclude the cost and expense of activities that
promote a Party’s business as a whole without being specific to a Collaboration Product (e.g.,
corporate image advertising).

     3.4 “Sales Costs” shall mean, with respect to a Collaboration Product, direct costs and
expenses incurred by either Party or for its account and specifically identifiable to the sales
efforts for such Collaboration Product in all markets in the Territory including the managed care
market. Sales Costs shall include costs and expenses associated with sales representatives for a
Collaboration Product, including the cost of compensation, benefits, travel, supervision, training,
sales meetings, and other sales expenses for such sales representatives. Notwithstanding anything
to the contrary in the foregoing, Sales Costs shall exclude costs and expenses associated with the
start-up of a Party’s sales force, including recruiting, relocation and other similar costs and
expenses.

     3.5 “General and Administrative Costs” shall mean, with respect to a Collaboration Product,
costs equal to * of the sum of the Distribution Costs, Marketing Costs and Sales Costs related to
such Collaboration Product in any country, of the Parties, in the aggregate, but only to the extent
these costs are chargeable under the Agreement. Each Party shall have the right to charge General
and Administrative Costs with respect to its Distribution Costs, Marketing Costs and Sales Costs
chargeable under the Agreement. For the avoidance of doubt, neither Party shall charge the
Collaboration for overhead with respect to the commercialization of a Collaboration Product other
than General and Administrative Costs as provided above, except to the extent that such overhead
charges are specifically set forth in the applicable Project Budget.

     4. “Other Operating (Income)/Expense” shall mean (a) payments and other consideration received
from Third Parties with respect to the commercialization of a Collaboration Product, including any
license fees, milestone payments, royalties or other payments (including the fair market value of
any consideration received) in connection with the license, sublicense, assignment or transfer or
rights with respect to such Collaboration Product (to the extent not included in Net Sales), (b)
any other operating income received from or expense owed to Third Parties in connection with an
activity that is not part of the primary business activity of a Party under the Agreement but is
considered and approved in writing by the Parties as income or expense for purposes of the
Agreement, which may include: (i) actual inventory write-offs of any Collaboration Product; (ii)
the cost and expense of prosecuting, maintaining and enforcing patent, trademark and other
intellectual property rights and defending against claims of infringement; and (iii) product
liability insurance to the extent the Parties obtain a joint policy, and (c) other expenses

 

			
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B-3

 

indirectly associated with the commercialization of a Collaboration Product as approved by the
Steering Committee in the applicable Project Budget.

 

			
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separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

B-4

 

APPENDIX C

Collaboration Targets

     This Appendix to the COLLABORATION AGREEMENT (“Agreement”) effective as of October 15, 2003,
by and between AVALON PHARMACEUTICALS, INC. (“Avalon”) and MEDAREX, INC., on behalf of itself and
its wholly owned subsidiary, GENPHARM INTERNATIONAL, INC., (collectively, “Medarex”) sets forth the
Collaboration Targets.

     The contents of this Appendix C are hereby incorporated into the Agreement and are
governed by the terns and conditions of the Agreement, including the confidentiality provisions set
forth therein.

     * 

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

C-1

 

APPENDIX D-1

Unilateral Development and Commercialization Agreement

     This Appendix to the COLLABORATION AGREEMENT (“Agreement”) effective as of October 15, 2003,
by and between AVALON PHARMACEUTICALS, INC. (“Avalon”) and MEDAREX, INC., on behalf of itself and
its wholly owned subsidiary, GENPHARM INTERNATIONAL, INC., (collectively, “Medarex”) sets forth the
Unilateral Development and Commercialization Agreement between the Parties. All capitalized terms
used herein without definition shall have the meanings ascribed thereto in the Agreement, unless
otherwise expressly provided herein.

     The contents of this Appendix D-1 are hereby incorporated into the Agreement and are governed
by the terms and conditions of the Agreement, including the confidentiality provisions set forth
therein.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

D-1

 

APPENDIX D-1

UNILATERAL DEVELOPMENT

AND COMMERCIALIZATION AGREEMENT

     THIS UNILATERAL DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (“Agreement”) is made and entered
into effective as of October 15, 2003 (the “Effective Date”), by and between AVALON
PHARMACEUTICALS, INC., having principal offices at 19 Firstfield Road Gaithersburg, MD 20878
(“Avalon”) and MEDAREX, INC., having principal offices at 707 State Road, Princeton, New Jersey
08540-1437, on behalf of itself and its wholly owned subsidiary, GENPHARM INTERNATIONAL, INC., with
principal offices at 521 Cottonwood Drive, Milpitas, California 95035 (collectively, “Medarex”).
Medarex and Avalon each may be referred to herein individually as a “Party,” or collectively as the
“Parties.”

     WHEREAS, Medarex and Avalon have entered into that certain Collaboration Agreement, dated as
of the date hereof (the “Collaboration Agreement”);

     WHEREAS, the Parties have agreed that in the event Medarex elects not to proceed with the
development and commercialization of certain Collaboration Targets and Avalon notifies Medarex of
its election to proceed unilaterally with such development and commercialization in accordance with
Section 5.1.2 of the Collaboration Agreement, that Avalon shall have the right to do so in
accordance with the terms set forth below; and

     WHEREAS, the Parties have agreed that in the event Medarex fails to comply with any of its
material obligations contained in the Collaboration Agreement with respect to a Collaboration
Product, Avalon shall have the right to convert such Collaboration Product into a Unilateral
Product in accordance with Section 8.2 of the Collaboration Agreement and proceed unilaterally with
the development and commercialization of such Unilateral Product in accordance with the terms set
forth below;

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises and
covenants contained herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties, intending to be legally bound, do hereby agree as
follows:

 

			
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filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

1

 

  ARTICLE 1 — UNILATERAL DEVELOPMENT AND COMMERCIALIZATION

          Section 1.1 Definitions. Any capitalized term used in this Agreement not otherwise defined
herein shall have the meaning set forth in the Collaboration Agreement.

          Section 1.2 Unilateral Targets and Unilateral Products. In the event that Avalon provides
Medarex with (a) an Election Notice with respect to a Collaboration Target pursuant to Section
5.1.2 of the Collaboration Agreement, or (b) written notice of Medarex’s failure to cure a default
in any of its material obligations with respect to a Collaboration Product with respect to a
Collaboration Target pursuant to Section 8.2 of the Collaboration Agreement, Appendix A
hereto shall be amended to include such Collaboration Target, which shall be referred to herein as
“Unilateral Targets” and any Collaboration Antibodies and Collaboration Products with respect
thereto, which shall be deemed to be Unilateral Products (as defined herein). Avalon shall have
the exclusive right to Exploit any and all Antibodies and Antibody Products with respect to the
Unilateral Targets (collectively, “Unilateral Products”).

          Section 1.3 Rights and Obligations of the Parties with respect to Unilateral Products. Except
as otherwise expressly provided herein, * costs and expenses in connection with the development and
commercialization of the Unilateral Products; provided, however, that * budgeted
costs and expenses associated with the research and development activities with respect to the
Unilateral Products that Medarex has committed to in the applicable Project Budget as necessary
with respect to such Unilateral Product to complete that phase (e.g., toxicology studies in support
of an IND or Phase I, Phase II or Phase III) of research and development that was under way when *
of such Unilateral Products but only to the extent that such costs and expenses are part of an
approved Project Budget at the time that * provides an Election Notice. By way of clarification, *
for all milestone and royalty payments, license fees and other payments owed to Third Parties,
whether by Avalon, Medarex or their respective Affiliates, in connection with the development and
commercialization of Unilateral Products, including any payments owed by *. The Parties shall work
together to ensure a smooth and orderly transition of the Unilateral Products to Avalon, including
the assignment to Avalon of any third-party service contracts with respect to the Exploitation of
such Unilateral Products. Except for the obligations provided for in this Section 1.3, * (a) to
support or otherwise fund any additional efforts in respect of such Unilateral Products, and (b) no
obligation, responsibility, or authority regarding such additional efforts in respect of such
Unilateral Products.

          Section 1.4 Performance of Avalon. Avalon shall use * to develop and commercialize one or
more Unilateral Products with respect to each Unilateral Target. Such activities shall be
performed in good scientific manner, and in

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

2

 

compliance in all material respects with all Applicable Law, including current good laboratory practices and good clinical practices (including compliance
with such practices and guidelines necessary to allow the results of such activities to support
INDs, BLAs and other Regulatory Approvals), as applicable.

          Section 1.5 Avalon Reports. Avalon shall provide * written progress report to Medarex
describing the development and commercialization activities with respect to each of its Unilateral
Products in sufficient detail to enable Medarex to determine whether Avalon is using * with respect
thereto.

          Section 1.6 Communications and Filings with Regulatory Authorities. Avalon shall be
responsible for all communications and filings with the Regulatory Authorities with respect to each
of its Unilateral Products.

          Section 1.7 Opt-Out by Avalon. If, at any time, Avalon decides to cease development or
commercialization of all Unilateral Products with respect to a Unilateral Target, either alone or
in collaboration with or through a Third Party, it shall give * written notice thereof to Medarex,
which notice shall describe in reasonable detail the reasons for such decision. Avalon shall, for
a period of * after notice to Medarex with respect thereto, furnish Medarex with such information
and materials as Medarex may reasonably request so as to determine whether it wishes to proceed
with the unilateral development and commercialization of such Unilateral Products, including a
statement detailing * actually incurred by or on behalf of Avalon in connection with the
Exploitation of such Unilateral Products (the “Unilateral Expenses”). Upon its receipt of all of
such information and materials, Medarex shall, for a period of *, have the right to elect to
proceed unilaterally with the development and commercialization of such Unilateral Products by
making a payment to Avalon equal to * of all Unilateral Expenses and * of all milestones paid by
Avalon to Medarex with respect to such Unilateral Products. Upon such election, Appendix A
shall be amended to delete such Unilateral Target and any Unilateral Products with respect thereto,
and the Unilateral Development and Commercialization Agreement set forth in Appendix D-1 to
the Collaboration Agreement shall be automatically amended to include such Unilateral Target and
such Unilateral Products, provided that the royalty rate with respect to such Unilateral Products shall be *. By way of clarification,
Avalon shall have the right to pursue one or more Unilateral Products with respect to a Unilateral
Target and any decision to cease Exploiting one in favor of another shall not be subject to this
Section 1.7 for so long as Avalon is using * to develop and commercialize at least one Unilateral
Product with respect to such Unilateral Target.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

3

 

ARTICLE 2 -

LICENSE GRANTS

          Section 2.1 Medarex Grant. Subject to Section 2.2 and the other terms and conditions of this
Agreement, Medarex hereby grants to Avalon and its Affiliates, with respect to each Unilateral
Product, an exclusive (even as to Medarex and its Affiliates), worldwide, royalty-bearing right and
license, with the right to sublicense solely as provided in Section 2.3, under the Medarex
Technology, the Collaboration Technology and the Joint Technology to Exploit such Unilateral
Products in the Territory in accordance with this Agreement.

          Section 2.2 Exclusivity, Reserved Rights and Pre-Existing Grants.

                    2.2.1 Antigen Exclusivity. Subject to Sections 2.2.2 and 2.2.3, the Parties acknowledge and
agree that during * no Party shall engage, directly or indirectly, on behalf of itself or any other
party, in the research, development, commercialization or other Exploitation of antibody-based
products with respect to any Unilateral Target listed on Appendix A other than the
Unilateral Products as provided in this Agreement.

                    2.2.2 Research and Commercialization Agreements. Subject to the obligations of Avalon under
the Collaboration Agreement, Avalon shall have the right to (a) grant licenses and other rights to
other parties under the Avalon Technology for such parties to Exploit Antibody Products (but not
Unilateral Products containing or comprising Collaboration Antibodies) with respect to Antigens,
including Unilateral Targets, (b) transfer Avalon Know-How to such parties in connection therewith,
including by providing instruction with respect to the use and immunization of HuMAb Mice and the
Additional Mice and assistance with respect to the Mice-Related Technology, (c) develop production
processes for, and manufacture, such Antibody Products, and (d) receive license fees, milestone
payments, royalties and other remuneration in connection therewith, but, in connection with clause
(a), (b), (c) or (d) above, not to otherwise actively participate in the clinical development or
commercialization of such Antibody Products by such
parties (each agreement with respect to the foregoing, a “Research and Commercialization
Agreement”).

                    2.2.3 Existing Grants. The Parties further acknowledge and agree that (a) *; and (b) pursuant
to certain existing agreements with Third Parties, Medarex has granted exclusive rights under the
Medarex Technology to Exploit Antibody Products with respect to Antigens other than Unilateral
Targets, which Antibody Products could be the same as one or more Unilateral Products.

                    2.2.4 Cross License Agreement. The Cross-License Agreement prohibits Medarex from granting
commercialization rights to the same Antibody Product, whether by license or sublicense, under
certain Medarex Technology to more than one party in a territory. So long as the Cross-License
Agreement is in effect, if Avalon desires to grant a sublicense with respect to

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

4

 

commercialization of a Unilateral Product pursuant to Section 2.3, then Avalon shall provide Medarex with written
notice thereof, which shall set forth in reasonable detail the terms and conditions of such
sublicense, the Medarex Technology and Unilateral Product involved, and the identity of the
proposed sublicensee. Upon receipt of such notice, Medarex shall make a good faith determination
as to whether such Medarex Technology is subject to the sublicense restrictions contained in the
Cross-License Agreement.

                    (a) To the extent that Medarex determines that such Medarex Technology is not subject to the
sublicense restrictions contained in the Cross-License Agreement, Medarex shall so notify Avalon in
writing and Avalon thereafter shall have the right to grant such sublicense, subject to Section
2.3.

                    (b) To the extent that Medarex determines that all or part of such Medarex Technology is
subject to the sublicense restrictions contained in the Cross-License Agreement, Medarex shall so
notify Avalon in writing. The Parties shall then meet to discuss in good faith how to proceed in
order to optimize the commercialization of the applicable Unilateral Product hereunder while
complying with the requirements of the Cross-License Agreement.

          Section 2.3 Sublicenses. Avalon shall have the right to grant sublicenses under the license
granted in Section 2.1 to: (a) Affiliates without the approval of Medarex, provided that Avalon
shall remain jointly and severally liable for the performance or non-performance of any such
Affiliate sublicensee, and (b) Third Parties without the approval of Medarex; provided,
however, that any Third Party sublicense with respect to the Medarex Technology shall be with the prior approval of Medarex, * which approval shall be deemed to be
granted with respect to a sublicense if Medarex fails, within * of its receipt of a written notice
from Avalon setting forth in reasonable detail the nature of such sublicense and the identity of
the Third Party sublicensee, to notify Avalon that it withholds its consent to such sublicense and
the reasons therefor; and provided further that any such Third Party sublicensee to
the Medarex Technology enters into a written agreement with Avalon that acknowledges that the
rights are subject to this Agreement and to indemnify Medarex and its Affiliates to the extent
provided in Article 7 and agrees to be bound by the provisions of Articles 4 and 5 and Sections 1.3
and 1.4, with Medarex being made a third party beneficiary with respect to such provisions with the
right to enforce such provisions. Notwithstanding the previous sentence, the grant of any
sublicense hereunder shall not relieve Avalon of its obligations under this Agreement and Avalon
shall be liable to Medarex for any act (or failure to act) by a sublicensee which would be a breach
of this Agreement if such act (or failure to act) was by Avalon.

          Section 2.4 License Limitations. Avalon hereby covenants to Medarex that neither Avalon nor
any of its Affiliates, licensees or sublicensees shall use or practice the Medarex Technology or
the Collaboration Technology, directly or

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

5

 

indirectly, on behalf of itself or any other party, for any purpose other than as permitted under Section 2.1 of this Agreement and as permitted by the
Collaboration Agreement and, in particular, but without limiting the generality of the foregoing,
for any research, development, commercialization or other Exploitation of an Antibody Product or
any other product or method, other than a Unilateral Product or a Collaboration Product as provided
hereunder or in the Collaboration Agreement.

          Section 2.5 No Other Rights. For the avoidance of doubt, Avalon and its Affiliates shall have
no right, express or implied, with respect to the Medarex Technology or the Collaboration
Technology, in each case except as expressly provided in Section 2.1 of this Agreement and Section
3.1 of the Collaboration Agreement.

ARTICLE 3 -

FINANCIAL PROVISIONS

          Section 3.1 Milestone Payments. Within * days of the achievement of the following milestones,
on a Unilateral Target-by-Unilateral Target basis, for Unilateral Products with respect to each
Unilateral Target, Avalon shall pay to Medarex the specified milestone payments:

	 	 	 	 	 	 	 
	 	 	1st Unilateral	 	2nd Unilateral	 	Each Additional
	 	 	Product with respect	 	Product with respect	 	Unilateral Product with
	 	 	to a Unilateral	 	to a Unilateral	 	respect to a Unilateral
	Milestones	 	Target	 	Target	 	Target
	*

	 	*
	 	*
	 	*
	 
	 	 	 	 	 	 
	*

	 	*
	 	*
	 	*
	 
	 	 	 	 	 	 
	*

	 	*
	 	*
	 	*
	 
	 	 	 	 	 	 
	*

	 	*
	 	*
	 	*
	 
	 	 	 	 	 	 
	*

	 	*
	 	*
	 	*
	 
	 	 	 	 	 	 
	*

	 	*
	 	*
	 	*

                    3.1.1 Back-up Products. In the event that Avalon discontinues a Unilateral Product with
respect to a Unilateral Target prior to the

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

6

 

First Commercial Sale (as defined in Section 3.3) of such Unilateral Product, any milestones paid to Medarex with respect to such Unilateral Product
pursuant to this Section 3.1 shall be credited until exhausted against any milestones due with
respect to subsequent Unilateral Products with respect to such Unilateral Target.

          Section 3.2 Royalties.

                    3.2.1 Obligation. With respect to each Unilateral Product, Avalon shall pay Medarex royalties
based upon the * (on a * basis) for such Unilateral Product. The royalty rates shall be determined
on a Unilateral Product-by-Unilateral Product basis based on *.

                    3.2.2 Rates. The royalty rates for each Unilateral Product (a) for which Medarex Opted-Out
pursuant to Section 5.1.1 of the Collaboration Agreement, or (b) which was converted from a
Collaboration Product pursuant to Section 8.2 of the Collaboration Agreement upon Medarex’s default
in any of its material obligations shall be as follows:

	 	 	 
	Opt-Out or Termination Phase	 	Royalty
	*

	 	*
	*

	 	*
	*

	 	*
	*

	 	*

If an Opt-Out (as opposed to a termination event) occurs within * after the end of a Phase,
the royalty rate shall be calculated based on *.

                    3.2.3 Definitions. For purposes of this Agreement, the following definitions shall apply:

                    (a) “Major Market” shall mean each of Japan, the United States, the United Kingdom, France,
Germany and the European Union as a whole.

                    (b) “Phase I” shall mean a human clinical trial, the principal purpose of which is a
preliminary determination of safety in healthy individuals or patients as required in 21 C.F.R.
§312, or a similar clinical study prescribed by the Regulatory Authorities in a Major Market other
than the United States.

                    (c) “Phase I Completion” shall mean, with respect to a Collaboration Target, the completion of
a complete data package from (i) a Phase I study, which data package is sufficient to support the
commencement of Phase II studies in support of the filing of an approvable BLA in a Major Market,
or (ii) in the

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

7

 

event that Phase I and Phase II are combined, the first study in support of the
filing of an approvable BLA in a Major Market that enrolled at least twenty (20) subjects, in
either case for the first Collaboration Product with respect to such Collaboration Target.

                    (d) “Phase II” shall mean a human clinical trial, for which a primary endpoint is a
preliminary determination of efficacy or dose ranges in patients with the disease target being
studied as required in 21 C.F.R. §312, or a similar clinical study prescribed by the Regulatory
Authorities in a Major Market other than the United States. Any well-controlled study intended to
provide the substantial evidence of efficacy necessary to support the filing of an approvable BLA
(such as a combined Phase II/Phase III study, or any Phase III study in lieu of a Phase II study)
(a “Pivotal Study”) shall automatically be deemed to have reached Phase II status. A Phase II
study shall be deemed to have commenced when the first subject in such study has been enrolled.

                    (e) “Phase II Completion” shall mean, with respect to a Collaboration Target, the completion
of a complete data package from (a) Phase II studies, which data package is sufficient to support
the commencement of Phase III studies in support of the filing of an approvable BLA in a Major
Market, or (b) in the event that Phase II and III studies are combined, the first such study in
support of the filing of an approvable BLA in a Major Market that enrolled at least forty (40)
patients with the disease target being studied, in either case for the first Collaboration Product
with respect to such Collaboration Target.

                    (f) “Phase III” shall mean a human clinical trial, the principal purpose of which is to
establish safety and efficacy in patients with the disease target being studied as required in 21
C.F.R. §312, or similar clinical study prescribed by the Regulatory Authorities in a Major Market
other than the United States. A Phase III study shall also include any other human clinical trial
intended as a Pivotal Study, whether or not such study is a traditional Phase III study. A Phase
III study shall be deemed to have commenced when the first patient has been enrolled in a Pivotal
Study.

                    (g) “Phase III Completion” shall mean, with respect to a Collaboration Target, the completion
of a data package for a Phase III study with respect to the first Collaboration Product with
respect to such Collaboration Target, which data package is sufficient to support the filing of an
approvable BLA for such Collaboration Product in a Major Market.

          Section 3.3 Royalty Term. Avalon’s royalty obligations under Section 3.2.2 shall terminate,
on a country-by-country basis, with respect to each Unilateral Product with respect to a Unilateral
Target, on the later to occur of (a) * anniversary of the first sale for use or consumption by the
general public of such Unilateral

          

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

8

 

Product in a country after Regulatory Approval has been obtained
for such Unilateral Product in such country (the “First Commercial Sale”), and (b) the expiration
date in such country of the last to expire of any issued Joint Patent or Medarex Patent or
Collaboration Patent that includes at least one Valid Claim covering the sale of such Unilateral
Product in such country. For purposes of this Agreement, a “Valid Claim” shall mean, with respect
to a particular country, a claim of an issued and unexpired Patent in such country that (x) has not
been revoked or held unenforceable or invalid by a decision of a court or governmental agency of
competent jurisdiction from which no appeal can be taken or has been taken within the time allowed
for appeal; and (y) has not been abandoned, disclaimed, denied or admitted to be invalid or
unenforceable through reissue or disclaimer or otherwise in such country. Upon termination of the
royalty obligations of Avalon with respect to a Unilateral Product under this Section 3.3 in a
country, the license grants to Avalon in Section 2.1 with respect to such Unilateral
Product in such country shall become fully-paid up and nonexclusive with respect to such
country.

          Section 3.4 Royalty Payments. Running royalties shall be payable on a quarterly basis, within
* after the end of each calendar quarter, based upon *. Royalties shall be calculated in
accordance with GAAP and with the terms of this Article 3. Only * royalty payment will be due on *
even though the manufacture, sale or use of such Unilateral Product may be covered by more than one
intellectual property right in a country.

          Section 3.5 Royalty Statements. Avalon shall deliver to Medarex within * after the end of
each calendar quarter in which Unilateral Products, for which Avalon owes a royalty hereunder, are
sold, a detailed statement showing (a) Net Sales of each such Unilateral Product, (b) the number of
units of each such Unilateral Product sold on a country-by-country basis during the applicable
calendar quarter, and (c) the amount and calculation of royalties due on such Net Sales; and (d)
any other information reasonably requested by Medarex to determine royalties owed to Medarex.

          Section 3.6 Payment Method. All amounts due from Avalon hereunder shall be paid in U.S.
dollars by wire transfer in immediately available funds to an account designated by Medarex. Any
payments or portions thereof due hereunder which are not paid on the date such payments are due
under this Agreement shall bear interest at a rate equal *.

          Section 3.7 Currency; Foreign Payments. If any currency conversion shall be required in
connection with any payment hereunder, such conversion shall be made by * to which such royalty
payments relate. If at any time legal restrictions prevent the prompt remittance of any royalties
with respect to Net Sales in any jurisdiction, Avalon may notify Medarex and make such payments by
depositing the amount thereof in local currency in a bank account or other depository in such

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

9

 

country in the name of Medarex, and Avalon shall have no further obligations under this Agreement
with respect thereto.

          Section 3.8 Taxes. Avalon may deduct from any royalty amounts it is required to pay pursuant
to this Agreement any Withholding Taxes. At Medarex’s request, Avalon shall provide Medarex a
certificate evidencing payment of any Withholding Taxes hereunder and shall * assist Medarex, at
Medarex’s expense, to obtain the benefit of any applicable tax treaty.

          Section 3.9 Records Retention; Audit.

                    3.9.1 Record Retention. Avalon shall maintain (and shall ensure that its Affiliates and
sublicensees shall maintain) complete and accurate books, records and accounts that fairly reflect
their respective Net Sales and Unilateral Expenses with respect to Unilateral Products in
sufficient detail to confirm the accuracy of any payments required hereunder and in accordance with
GAAP, which books, records and accounts shall be retained by Avalon until the later of (a) * after
the end of the period to which such books, records and accounts pertain, and (b) the expiration of
the applicable tax statute of limitations (or any extensions thereof), or for such longer period as
may be required by Applicable Law.

                    3.9.2 Audit. Medarex shall have the right to have an independent certified public accounting
firm of nationally recognized standing, reasonably acceptable to Avalon, to have access during
normal business hours, and upon reasonable prior written notice, to such of the records of Avalon
(and its Affiliates and sublicensees) as may be reasonably necessary to verify the accuracy of such
Net Sales or, in the event Avalon Opts-Out of all Unilateral Products with respect to a Unilateral
Target pursuant to Section 1.7, such Unilateral Expenses for * ending not more than * prior to the
date of such request; provided, however, that Medarex shall not have the right to
conduct more than * in any *. The accounting firm shall disclose to each Party whether such Net
Sales or Unilateral Expenses, as applicable, are correct or incorrect and the specific details
concerning any discrepancies. No other information shall be provided to Medarex. * shall bear the
cost of such audit unless the audit reveals a variance of more than * from the reported results, in
which case * shall bear the cost of the audit. The results of such accounting firm shall be final,
absent manifest error.

                    3.9.3 Payment of Additional Royalties. If, based on the results of such audit, additional
payments are owed by Avalon under this Agreement, Avalon shall make such additional payments, *,
within * after the date on which such accounting firm’s written report is delivered to Avalon.

          Section 3.10 Confidentiality. Medarex shall treat all information subject to review under
Section 3.9 in accordance with the confidentiality provisions of

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

10

 

Article 4 and shall cause its accounting firm to enter into a reasonably acceptable confidentiality agreement with
Avalon obligating such firm to maintain all such financial information in confidence pursuant
to such confidentiality agreement.

ARTICLE 4 -

CONFIDENTIALITY

          Section 4.1 Confidential Information. The confidentiality and use restrictions set forth in
Sections 6.1 through 6.4 of the Collaboration Agreement shall apply to all Confidential Information
during the Term and for a period of * thereafter.

          Section 4.2 Use of Name. Each Party may use the name, insignia, symbol, trademark, trade name
or logotype of the other Party only (a) in connection with announcements and other permitted
disclosures relating to this Agreement and the activities contemplated hereby, (b) as required by
Applicable Law, and (c) otherwise as agreed in writing by such other Party.

          Section 4.3 Press Releases. Press releases or other similar public communication by either
Party relating to this Agreement, shall be approved in advance by the other Party *, except for
those communications required by Applicable Law (which shall be provided to the other Party as soon
as practicable after the release or communication thereof), disclosures of information for which
consent has previously been obtained, and information of a similar nature to that which has been
previously disclosed publicly with respect to this Agreement, each of which shall not require
advance approval.

          Section 4.4 Publications. At least * prior to submission for publication, presentation or
other public disclosure by Avalon or any of its Affiliates of any material pertaining to or
resulting from the Medarex Technology, Avalon shall provide to Medarex a draft of such material for
its review and comment. No publication or presentation with respect to the Medarex Technology
shall be made unless and until Medarex’s comments on the proposed publication or presentation have
been addressed and changes have been agreed upon and any information determined by Medarex to be
Confidential Information has been removed. If requested in writing by Medarex, Avalon shall
withhold material from submission for publication or presentation for an additional * days to allow
for the filing of a patent application or the taking of such measures to establish and preserve
proprietary rights in the information in the material being submitted for publication or
presentation.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

11

 

ARTICLE 5 -

INTELLECTUAL PROPERTY

          Section 5.1 Intellectual Property Ownership.

                    5.1.1 Ownership of Avalon Technology. As between the Parties, Avalon shall own and retain all
right, title and interest in and to any and all: (a) Information and Inventions that are
conceived, discovered, developed or otherwise made, by or on behalf of Avalon (or its Affiliates or
its licensees or sublicensees (other than Medarex and its Affiliates)), whether or not patented or
patentable, and any and all Patent and other intellectual property rights with respect thereto,
except to the extent that any such Information and Inventions, or any Patent or other intellectual
property rights with respect thereto, are Collaboration Technology or Joint Technology; (b) other
Information and Inventions, and Patent and other intellectual property rights that are Controlled
(other than pursuant to the license grants set forth in Article 3) by Avalon, its Affiliates or its
licensees or sublicensees (other than Medarex and its Affiliates); and (c) other Avalon Technology.

                    5.1.2 Ownership of Medarex Technology. Subject to Section 5.1.3 and the license grants to
Avalon under Article 2, as between the Parties, Medarex shall own and retain all right, title and
interest in and to any and all: (a) Information and Inventions that are conceived, discovered,
developed or otherwise made, by or on behalf of Medarex (or its Affiliates or its licensees or
sublicensees (other than Avalon and its Affiliates)), whether or not patented or patentable, and
any and all Patent and other intellectual property rights with respect thereto, except to the
extent that any such Information and Inventions, or any Patent or other intellectual property
rights with respect thereto, are Collaboration Technology or Joint Technology; (b) other
Information and Inventions, and Patent and other intellectual property rights that are Controlled
(other than pursuant to the license grants set forth in Article 3) by Medarex, its Affiliates or
its licensees or sublicensees (other than Avalon and its Affiliates); and (c) other Medarex
Technology.

                    5.1.3 Ownership of Mice-Related Technology. As between the Parties, Medarex shall own and
retain all right, title and interest in and to all Mice Materials and Mice-Related Technology,
including any and all Information and Inventions with respect to the Mice Materials or the
Mice-Related Technology (including any Improvements thereto) that, as a result of the use of HuMAb
Mice provided by Medarex under this Agreement, are conceived, discovered, developed or otherwise
made, by or on behalf of Avalon, its Affiliates or
its licensees or sublicensees (other than Medarex and its Affiliates), whether or not patented
or patentable, and any and all Patent and other intellectual property rights with respect thereto.
Avalon acknowledges and agrees that (a) there are no licenses granted to Avalon under this
Agreement with respect to the Mice Materials and Mice-Related Technology and that under this
Agreement, Avalon has no right to use the HuMAb Mice or to discover, develop or otherwise make
Improvements with

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

12

 

respect to Mice Materials and Mice-Related Technology, and (b) neither it, nor
any of its Affiliates, licensees or sublicensees, will engage, directly or indirectly, in
activities designed to, or otherwise undertake or attempt, either on behalf of itself or another,
to discover, develop or make any Information and Inventions that relate to the Mice Materials or
the Mice-Related Technology as a result of the use of HuMab Mice provided by Medarex to Avalon
under this Agreement. Accordingly, Avalon shall * disclose to Medarex in writing, the conception
or reduction to practice, or the discovery, development or making of any such Information and
Inventions that relate to the Mice Materials or Mice-Related Technology that results from use of
HuMab Mice provided by Medarex to Avalon under this Agreement and shall, and does hereby, assign,
and shall cause its Affiliates, licensees and sublicensees to so assign, to Medarex, without
additional compensation, all of their respective rights, titles and interests in and to any such
Information and Inventions.

                    5.1.4 Ownership of Joint Technology. Subject to Section 5.1.3 and the license grants under
Article 2, the Parties shall each own an equal, undivided interest in any and all (a) Information
and Inventions, conceived, discovered, developed or otherwise made, jointly by or on behalf of
Avalon (or its Affiliates or, to the extent permitted, its sublicensees), on the one hand, and
Medarex (or its Affiliates or, to the extent permitted, its sublicensees), on the other hand, in
connection with the work conducted under or in connection with this Agreement, whether or not
patented or patentable, but excluding any Mice Materials or Mice-Related Technology; and (b)
Patents (the “Joint Patents”) and other intellectual property rights with respect thereto
(collectively, the “Joint Technology”); provided, however, that, except as
otherwise expressly provided herein, neither a Party nor any of its Affiliates, licensees or
sublicensees shall, directly or indirectly, Exploit any Joint Technology or other such intellectual
property rights without the consent of the other Party, * provided, however, that
neither Party shall have the right to use or otherwise Exploit any Unilateral Products (or any
Antibodies or other Biological Materials derived from the HuMAb Mice or the Additional Mice) except
as set forth under this Agreement. Each Party shall * disclose to the other Party in writing, and
shall cause its Affiliates, licensees and sublicensees to so disclose, the development, making,
conception or reduction to practice of any Joint Technology.

                    5.1.5 Ownership of Product Trademarks. Avalon shall own all right, title and interest in and
to each Product Trademark with respect to a Unilateral Product. Medarex hereby assigns all of its
right, title and interest in and to any Product Trademark to Avalon to the extent that such Product
Trademark relates solely to the Unilateral Products.

                    5.1.6 Ownership of Regulatory Documentation. Avalon shall own all right, title and interest
in and to all Regulatory Documentation that relates solely to the Unilateral Products,
provided that Medarex shall reasonably

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

13

 

cooperate, at Avalon’s sole cost and expense, in filing and maintaining such Regulatory Documentation. Medarex hereby assigns to Avalon such of its
right, title and interest in and to such Regulatory Documentation as is necessary to vest ownership
of such Regulatory Documentation in Avalon as provided in the immediately preceding sentence.
Notwithstanding the ownership of any such Regulatory Documentation, neither Avalon nor any of its
Affiliates, licensees or sublicensees shall, directly or indirectly, use any such Regulatory
Documentation without the consent of Medarex, * provided, however, that each Party
shall have the right to use and reference any of such Regulatory Documentation in connection with
the Exploitation of Unilateral Products as provided in this Agreement and Collaboration Products as
provided in the Collaboration Agreement. Notwithstanding the foregoing, any Regulatory
Documentation containing Production Process Know-How of a Party shall be and remain the sole and
exclusive property of such Party and such Party shall have the right to submit any such Production
Process Know-How directly to the Regulatory Authorities using a drug master file, or any foreign
equivalent that is designed to protect such Party’s Confidential Information, which filing shall be
and remain the sole and exclusive property of such Party.

                    5.1.7 United States Law. The determination of whether Information and Inventions are
conceived, discovered, developed or otherwise made by a Party for the purpose of allocating
proprietary rights (including Patent, copyright or other intellectual property rights) therein,
shall, for purposes of this Agreement, be made in accordance with applicable United States law.

                    5.1.8 Notices. To the extent, if any, that Avalon has the right to (a) assign, transfer,
convey or otherwise encumber any right, title or interest in or to any Medarex Technology, Joint
Technology or Collaboration Technology, (b) grant any license or other right, title or interest in
or to any Medarex Technology, Joint Technology or Collaboration
Technology, or (c) agree to or otherwise become bound by any covenant not to sue for any
infringement, misuse or other action or inaction with respect to any Medarex Technology, Joint
Technology or Collaboration Technology, in each case Avalon shall not do so, directly or
indirectly, expressly or by implication, by action or omission or otherwise without providing
Medarex with at least * advance written notice thereof.

          Section 5.2 Prosecution of Patents and Trademarks.

                    5.2.1 Avalon and Medarex Patents. As between the Parties, each Party shall have the sole
right, at its cost and expense, to obtain, prosecute and maintain throughout the world its Patents;
provided, however, that Avalon shall reimburse Medarex for one hundred percent
(100%) of the reasonable out-of-pocket costs incurred by Medarex for filing, prosecuting and
maintaining the Medarex Patents to the extent that they claim or cover (x) as a composition of
matter,

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

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a Unilateral Product or any active ingredient in such Unilateral Product or (y) the use of
any such Unilateral Product or ingredient. Each Party shall, and shall cause its Affiliates,
licensees and sublicensees, as applicable, to, cooperate fully with the other Party in the
preparation, filing, prosecution, and maintenance of, if requested by Avalon, the Product
Trademarks and, if requested by the other Party, such other Party’s Patents, provided that (except
as otherwise provided in the first sentence of this Section 5.2.1) such other Party shall reimburse
the cooperating Party for its reasonable out-of-pocket expenses incurred in connection with such
requested cooperation. Such cooperation includes (a) promptly executing all papers and instruments
and requiring employees to execute such papers and instruments as reasonable and appropriate so as
to enable such other Party to file, prosecute, and maintain its Patents in any country; and (b)
promptly informing such other Party of matters that may affect the preparation, filing,
prosecution, or maintenance of any such Patents.

                    5.2.2 Joint Patents. The Parties shall cooperate, and shall cause their respective
Affiliates, licensees and sublicensees, as applicable, to cooperate, with one another with respect
to the filing, prosecution and maintenance of all Joint Patents, including by selecting outside
counsel, reasonably acceptable to the Parties, to handle such filing, prosecution and maintenance.
* the expenses associated with the filing, prosecution (including any interferences, reissue
proceedings and reexaminations) and maintenance of all Joint Patents. If a Party elects not to
pursue the filing, prosecution or maintenance of a Joint Patent in a particular country, or to take
any other action with respect to Joint Technology in a particular country that is * to establish or
preserve rights thereto, then in each such case such Party shall so notify the other Party promptly
in writing and * to enable such other Party to meet any deadlines by which an action must be taken
to establish or preserve any such rights
in such Joint Technology in such country. Upon receipt of each such notice by such other
Party or if, at any time, such Party fails to initiate any such action within * after a request by
such other Party that it do so (or thereafter diligently pursue such action), such other Party
shall have the right, but not the obligation, to pursue the filing or registration, or support the
continued prosecution or maintenance, of such Patent at its expense in such country. If such other
Party elects to pursue such filing or registration, as the case may be, or continue such support,
then such other Party shall notify such Party of such election and such Party shall, and shall
cause its Affiliates, licensees and sublicensees, as applicable, to, (x) * cooperate with such
other Party in this regard, and (y) subject to Article 2, promptly release or assign to such other
Party, without compensation, all right, title and interest in and to such Patent in such country.

                    5.2.3 Patent Filings. Avalon covenants not to, and to cause its Affiliates, licensees and
sublicensees, as applicable, not to, file any patent application disclosing or claiming any
Information and Inventions comprising any

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

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Medarex Technology or the Exploitation thereof, without
Medarex’s prior written consent, *.

          Section 5.3 Enforcement of Patents and Trademarks.

                    5.3.1 Rights and Procedures. If either Party determines that any Medarex Technology
exclusively licensed to Avalon under this Agreement (which for purposes of this Agreement shall be
deemed to include Joint Technology) is being infringed by a Third Party’s activities with respect
to a Unilateral Product and that such infringement could affect the exercise by the Parties of
their respective rights and obligations under this Agreement, it shall * notify such other Party in
writing and provide such other Party with any evidence of such infringement that is * available.
Promptly after the receipt of such written notice, the Parties shall meet and discuss * the removal
of such infringement. The pursuing Party shall consider * any comments from the other Party and
shall keep the other Party reasonably informed of any steps taken to remove such infringement.

                    (a) Joint Technology. With respect to Joint Technology, that is not licensed exclusively to
Avalon under this Agreement, the Parties shall have the first right but not the obligation to
jointly remove such infringement using * including the filing of an infringement suit or taking
other similar action. * of the reasonable and verifiable costs and expenses incurred in connection
with such action. In the event the Parties fail to jointly take * to remove any infringement of
any Joint Technology within * following notice of such infringement, or a Party earlier notifies
the other in writing of its intent not to take
such steps, the Party pursuing the filing, prosecution or maintenance of a Patent comprising
such Joint Technology (the “Prosecuting Party”) shall have the right to do so * or, in the event
such Party declines, the other Party shall have the right to do so *; provided,
however, that if the Parties have jointly commenced negotiations with an alleged infringer
for discontinuance of such infringement within such * period, the Parties shall have an additional
* to conclude their negotiations before a Party unilaterally may bring suit for such infringement.

                    (b) Medarex Technology. With respect to Medarex Technology exclusively licensed to Avalon
under this Agreement, Medarex shall have the first right, but not the obligation, to remove such
infringement with respect to an antibody-based product against a Collaboration Target *. In the
event Medarex fails to take * to remove any such infringement of such Medarex Technology within *
following notice of such infringement, or earlier notifies Avalon in writing of its intent not to
take such steps, Avalon shall have the right to do so * provided, however, that if
Medarex has commenced negotiations with an alleged infringer for discontinuance of such
infringement within such * period, Medarex shall have an additional * to conclude its negotiations
before Avalon may bring suit for such infringement; and provided further that * of
the reasonable out-of-pocket costs

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

16

 

incurred by Medarex with respect to the removal of any such infringement to the extent that such infringement adversely affects the Exploitation of any
Unilateral Product.

                    (c) Avalon Technology. With respect to Avalon Technology, Avalon shall have the sole right,
but not the obligation, to remove such infringement *.

                    5.3.2 Cooperation. The Party not enforcing the applicable Technology shall provide reasonable
assistance to the other Party, including providing access to relevant documents and other evidence,
making its employees available at reasonable business hours, and joining the action to the extent
necessary to allow the enforcing Party to maintain the action.

                    5.3.3 Recovery. Any amounts recovered by a Party pursuant to Section 5.3.1, whether by
settlement or judgment, shall be used to * for their reasonable costs and expenses in making such
recovery * with * remainder being retained by the Party that has exercised its right to bring the
enforcement action; provided, however, that to the extent that any award is
attributable to loss of sales of a Unilateral Product, the Parties shall negotiate * an appropriate
allocation of such award to reflect the
economic interests of the Parties under this Agreement with respect to such Unilateral
Product.

          Section 5.4 Potential Third-Party Rights.

                    5.4.1 Third-Party Licenses. If (a) in the opinion of outside patent counsel to Avalon,
Avalon, or any of its Affiliates, licensees or permitted sublicensees, cannot Exploit a Unilateral
Product in a country in the Territory without infringing one or more Patents that have issued to a
Third Party in such country, or (b) as a result of any claim made against a Party, or any of its
Affiliates, licensees or permitted sublicensees, alleging that the Exploitation of a Unilateral
Product infringes or misappropriates any Patent or any other intellectual property right of a Third
Party in a country in the Territory, a judgment is entered by a court of competent jurisdiction
from which no appeal is taken within the time permitted for appeal, such that Avalon cannot Exploit
such Unilateral Product in such country without infringing the Patent or other proprietary rights
of such Third Party, then, in either case, Avalon shall have the first right, but not the
obligation to negotiate and to obtain a license from such Third Party as necessary for the
Exploitation of any Unilateral Products hereunder in such country; provided,
however, that Medarex shall have the sole right to seek any such license with respect to
Mice-Related Technology and shall use * to obtain such a license in its own name from such Third
Party in such country, under which Medarex shall, to the extent permissible under such license,
grant a sublicense to Avalon as necessary for Avalon, and any of its Affiliates and permitted
sublicensees, to Exploit the Unilateral Products as provided

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

17

 

hereunder in such country. * of all royalty and other obligations with respect to the Exploitation of Unilateral Products.

                    5.4.2 Third-Party Litigation. In the event that a Third Party institutes a Patent, Trademark
or other infringement suit (including any suit alleging the invalidity or unenforceability of the
Patents of a Party or its Affiliates, or claiming confusion, deception or dilution of a Trademark
by a Product Trademark) against either Party or its respective Affiliates, licensees or permitted
sublicensees during the Term, alleging that the Exploitation of the Unilateral Products in the
Territory or any other activities hereunder, infringes one or more Patent, Trademark or other
intellectual property rights held by such Third Party (an “Infringement Suit”), the Parties shall
cooperate with one another in defending such suit. Avalon shall direct and control, at its sole
cost and expense, any Infringement Suit with respect to the Unilateral Products (excluding any
Infringement Suit with respect to the Mice-Related Technology as to which Medarex shall retain the
exclusive right to direct and control); provided, however, that Avalon shall not
cease to defend, settle or otherwise dispose of a suit with respect to any intellectual property of
Medarex without Medarex’s prior written consent, *. With
respect to the Collaboration Patents, licensed to Avalon under this Agreement, Product
Trademarks and with respect to the Exploitation of Unilateral Products, Avalon shall bear one
hundred percent (100%) of those costs and expenses. With respect to Joint Patents, the Parties
shall each bear fifty percent (50%) of any costs and expenses of such defense; provided,
with respect to the Exploitation of Unilateral Products, Avalon shall bear one hundred percent
(100%) of those costs and expenses. In addition, * shall pay any and all amounts awarded in any
suit against Avalon and/or Medarex with respect to exploitation of Unilateral Product and any and
all amounts paid in any settlement of such suit or threatened suit.

                    5.4.3 Retained Rights. Nothing in this Section 5.4 shall prevent Avalon *, from obtaining any
license or other rights from Third Parties it deems appropriate in order to permit the full and
unhindered exercise of its rights under this Agreement.

          Section 5.5 Exchange of Know-How.

                    5.5.1 Information Disclosure. Medarex shall, and shall cause its Affiliates to, without
additional compensation and at its sole expense, disclose and make available to Avalon, in whatever
form Avalon may * request, all Regulatory Documentation, and all Medarex Technology, Collaboration
Technology and Joint Technology in the possession of Medarex that is licensed to Avalon under this
Agreement with respect to each Unilateral Target and Unilateral Product immediately after such
Unilateral Target is first designated as such and thereafter immediately upon the earlier of the
conception or reduction to practice, discovery, development or making of each such Regulatory
Documentation, and all Medarex

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

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Technology, Collaboration Technology and Joint Technology in the possession of Medarex that is licensed to Avalon under this Agreement.

                    5.5.2 Cooperation. Medarex shall cooperate with any and all * requests for assistance from
Avalon *, including by making its employees, consultants and other scientific staff available upon
reasonable notice during normal business hours at Medarex’s place of business to consult with
Avalon on issues arising with respect to the Medarex Technology in connection with the research,
development, commercialization or other Exploitation of Unilateral Products.

                    5.5.3 Biological Materials. For purposes of facilitating the conduct of the development
activities with respect to the Unilateral Products, Medarex shall provide to Avalon the Biological
Materials that are technology licensed to Avalon under this Agreement and that is necessary to
perform such activities. The Parties agree that: (a) all such Biological Materials provided by
Medarex to Avalon and any Biological Material produced against or with, or derived from, such
Biological Materials shall be used solely for the development and commercialization of Unilateral
Products, and in material compliance with all Applicable Law; (b) all such Biological Materials
under this Agreement shall be provided without any warranties, express or implied; (c) Medarex
shall obtain (or cause its Third Party collaborators to obtain or certify that they have obtained)
all appropriate and required consents from the source of such Biological Materials; (d) Biological
Materials provided by Medarex to Avalon shall not be made available by Avalon to any Third Party
except as necessary for Avalon to perform its obligations hereunder, unless the prior written
consent of Medarex is first obtained; and (e) subject to the license grants in Article 2, all
right, title and interest in and to the Mice Materials and the Mice-Related Technology shall be,
and remain, vested in Medarex.

                    5.5.4 Regulatory Records. Avalon shall maintain, or cause to be maintained, records of its
respective research, development, manufacturing and commercialization activities for the Unilateral
Products, including all Regulatory Documentation, in sufficient detail and in good scientific
manner appropriate for patent and regulatory purposes, which shall be complete and accurate and
shall fully and properly reflect all work done and results achieved in the performance of such
activities, and which shall be retained during the Term and for a period of * thereafter, or for
such longer period as may be required by Applicable Law. Medarex shall have the right, during
normal business hours and upon reasonable notice, to inspect and copy any such records, except to
the extent that such records contain proprietary information with respect to the Mice Materials,
Mice-Related Technology or Avalon’s Production Process Technology. Medarex shall have an
irrevocable, perpetual right to use and reference such Regulatory Documentation for all purposes.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

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                    5.5.5 Production Process Technology. Notwithstanding anything to the contrary in this Section
5.5 or elsewhere in this Agreement, Medarex shall not be obligated to disclose or provide any of
its Production Process Technology, including Biological Materials with respect thereto, to Avalon
or any Third Party except as may be required or permitted under a separate written agreement
entered into by the Parties pursuant to Section 1.2.8 or Section 1.6 of the Collaboration
Agreement.

ARTICLE 6 -

TERM AND TERMINATION

          Section 6.1 Term. The term of this Agreement shall commence upon the Effective Date and shall
continue in effect until such time as there is no longer any Unilateral Product being Exploited
hereunder, unless terminated at an earlier date in accordance with the terms and conditions set
forth in this Article 6.

          Section 6.2 Termination of Agreement for Material Breach. Any material failure by a Party to
comply with any of its material obligations contained herein shall, in addition to any remedy
available under Section 6.3 hereof, entitle the Party not in default to give to the Party in
default written notice specifying the nature of the default, requiring the defaulting Party to make
good or otherwise cure such default, and stating its intention to terminate if such default is not
cured. If such default is not cured within * after the receipt of such notice (or, if such default
cannot be cured within such * period, if the Party in default does not commence actions to cure
such default within such period and thereafter diligently continue such actions and cure such
default within * after the receipt of such notice), except in the case of a payment default, as to
which the defaulting Party shall have only a * cure period, the Party not in default shall be
entitled, on written notice to the other Party, without prejudice to any of its other rights
conferred on it by this Agreement, and in addition to any other remedies available to it by law or
in equity, to terminate this Agreement in its entirety.

          Section 6.3 Termination of Rights with Respect to Unilateral Products Upon Material Breach.
Any material failure by Avalon to comply with any of its material obligations contained herein with
respect to a specific Unilateral Product shall entitle Medarex to give to Avalon notice specifying
the nature of the default, requiring Avalon to make good or otherwise cure such default, and
stating its intention to convert such Unilateral Product to a Unilateral Product of Medarex under
the Unilateral Development and Commercialization Agreement attached to the Collaboration Agreement
as Appendix D-1 if such default is not cured. If such default is not cured within * after
the receipt of such notice (or, if such default cannot be cured within such * period, if Avalon
does not commence actions to cure such default within such period and thereafter diligently
continue such actions or if such default is not otherwise cured within * after the receipt of such
notice), except in the

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

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case of a payment default, as to which Avalon shall have only a * cure
period. Medarex shall be entitled, on written notice to Avalon, to convert the such Unilateral
Product to a Unilateral Product of Medarex, whereupon each shall be subject to their respective
rights and obligations under the Unilateral Development and Commercialization Agreement
attached to the Collaboration Agreement as Appendix D-1, including the indemnification
obligations and the royalty obligations set forth therein (provided that the royalty rate owed by
Medarex pursuant to such Unilateral Development and Commercialization Agreement shall equal the
royalty rate that Avalon would have owed Medarex had it not defaulted).

          Section 6.4 Termination Upon Insolvency. Either Party may terminate this Agreement if, at any
time, the other Party shall file in any court or agency pursuant to any statute or regulation of
any state, country or jurisdiction, a petition in bankruptcy or insolvency or for reorganization or
for an arrangement or for the appointment of a receiver or trustee of that Party or of its assets,
or if such other Party proposes a written agreement of composition or extension of its debts, or if
such other Party shall be served with an involuntary petition against it, filed in any insolvency
proceeding, and such petition shall not be dismissed within * after the filing thereof, or if such
other Party shall propose or be a party to any dissolution or liquidation, or if such other Party
shall make an assignment for the benefit of its creditors.

          Section 6.5 Rights in Bankruptcy. All rights and licenses granted under or pursuant to this
Agreement by Medarex or Avalon are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the United States Bankruptcy Code, licenses of rights to “intellectual property” as
defined under Section 101 of the United States Bankruptcy Code. The Parties agree that the
Parties, as licensees of such rights under this Agreement, shall retain and may fully exercise all
of their rights and elections under the United States Bankruptcy Code. The Parties further agree
that, in the event of the commencement of a bankruptcy proceeding by or against a Party under the
United States Bankruptcy Code, the Party hereto that is not a party to such proceeding shall be
entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual
property and all embodiments of such intellectual property, which, if not already in the
non-subject Party’s possession, shall be promptly delivered to it (a) upon any such commencement of
a bankruptcy proceeding upon the non-subject Party’s written request therefor, unless the Party
subject to such proceeding continues to perform all of its obligations under this Agreement or (b)
if not delivered under clause (a) above, following the rejection of this Agreement by or on behalf
of the Party subject to such proceeding upon written request therefor by the non-subject Party.

          Section 6.6 Consequences of Expiration or Termination.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

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                    6.6.1 Licenses. Upon expiration of the Agreement in accordance with Section 6.1 and the
payment of all amounts due under Section 3.1, the licenses granted by Medarex to Avalon hereunder
shall be deemed fully-paid up and nonexclusive.

                    6.6.2 Return of Information. Upon expiration of this Agreement pursuant to Section 6.1 or
upon termination of this Agreement in its entirety by either Party pursuant to this Article 6,
Avalon, at the request of Medarex, shall return all data, files, records and other materials in its
possession or control relating to Medarex’s Technology, or containing or comprising Medarex’s
Information and Inventions or other Confidential Information and to which Avalon does not retain
rights hereunder (except one copy of which may be retained for archival purposes) and Avalon agrees
not to use any Medarex Technology and/or Collaboration Technology except as permitted under another
Agreement between Avalon and Medarex.

          Section 6.7 Accrued Rights; Surviving Obligations.

                    6.7.1 Accrued Rights. Termination or expiration of this Agreement for any reason shall be
without prejudice to any rights that shall have accrued to the benefit of a Party prior to such
termination or expiration. Such termination or expiration shall not relieve a Party from
obligations that are expressly indicated to survive the termination or expiration of this
Agreement.

                    6.7.2 Survival. Articles 3 (with respect to obligations arising prior to expiration or
termination), 4 and 7 (provided Section 7.3 shall survive for * after the expiration or earlier
termination of this Agreement), and Sections 1.1, 2.3 (with respect only to the last sentence
thereof), 2.4, 3.9, 3.10, 5.1, 5.2.2, 5.2.3, 5.5.3 (with respect only to the last sentence
thereof), 5.5.4, 5.5.5, 6.5, 6.6, 8.2, 9.4, 9.5 and 9.6 of this Agreement and this Section 6.7
shall survive *.

ARTICLE 7 -

INDEMNIFICATION AND INSURANCE

          Section 7.1 Indemnification of Medarex. Avalon shall indemnify Medarex, its Affiliates and
their respective directors, officers, employees and agents, and defend and save each of them
harmless, from and against any and all Losses in connection with any and all Third-Party Claims
arising from or occurring as a result of (a) the development, manufacture or commercialization of a
Unilateral Target or Unilateral Product by or on behalf of Avalon or its Affiliates or
sublicensees, or by any person or entity that performs any of the foregoing for on behalf of Avalon
or its Affiliates or sublicensees or with Unilateral Target or Unilateral Product obtained directly
or indirectly from Avalon or its Affiliates or sublicensees or, (b) the gross

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

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negligence or willful misconduct on the part of Avalon or its Affiliates, licensees or sublicensees in performing any
activity contemplated by this Agreement.

          Section 7.2 Indemnification Procedure.

                    7.2.1 Notice of Claim. The indemnified Party shall give the indemnifying Party prompt written
notice (an “Indemnification Claim Notice”) of any Losses or discovery of fact upon which such
indemnified Party intends to base a request for indemnification under Section 7.1 or Section 7.2,
but in no event shall the indemnifying Party be liable for any Losses that result from any delay in
providing such notice. Each Indemnification Claim Notice must contain a description of the claim
and the nature and amount of such Loss (to the extent that the nature and amount of such Loss are
known at such time). The indemnified Party shall furnish * to the indemnifying Party copies of all
papers and official documents received in respect of any Losses. All indemnification claims in
respect of a Party, its Affiliates or their respective directors, officers, employees and agents
(collectively, the “Indemnitees” and each an “Indemnitee”) shall be made solely by such Party to
this Agreement (the “Indemnified Party”).

                    7.2.2 Control of Defense. At its option, the indemnifying Party may assume the defense of any
Third-Party Claim by giving written notice to the Indemnified Party within * after the indemnifying
Party’s receipt of an Indemnification Claim Notice. The assumption of the defense of a Third-Party
Claim by the indemnifying Party shall not be construed as an acknowledgment that the indemnifying
Party is liable to indemnify any Indemnitee in respect of the Third-Party Claim, nor shall it
constitute a waiver by the indemnifying Party of any defenses it may assert against any
Indemnitee’s claim for indemnification. Upon assuming the defense of a Third-Party
Claim, the indemnifying Party may appoint as lead counsel in the defense of the Third-Party
Claim any legal counsel selected by the indemnifying Party. In the event the indemnifying Party
assumes the defense of a Third-Party Claim, the Indemnified Party shall immediately deliver to the
indemnifying Party all original notices and documents (including court papers) received by any
Indemnitee in connection with the Third-Party Claim. Should the indemnifying Party assume the
defense of a Third-Party Claim, the indemnifying Party shall not be liable to the Indemnified Party
or any other Indemnitee for any legal expenses subsequently incurred by such Indemnified Party or
other Indemnitee in connection with the analysis, defense or settlement of the Third-Party Claim.
In the event that it is ultimately determined that the indemnifying Party is not obligated to
indemnify, defend or hold harmless an Indemnitee from and against the Third-Party Claim, the
Indemnified Party shall reimburse the indemnifying Party for any and all costs and expenses
(including attorneys’ fees and costs of suit) and any Losses incurred by the indemnifying Party in
its defense of the Third-Party Claim with respect to such Indemnitee.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

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                    7.2.3 Right to Participate in Defense. Without limiting Section 7.3.2, any Indemnitee shall
be entitled to participate in, but not control, the defense of such Third-Party Claim and to engage
counsel of its choice for such purpose; provided, however, that such engagement
shall be at the Indemnitee’s own expense unless (a) the engagement thereof has been specifically
authorized by the indemnifying Party in writing, or (b) the indemnifying Party has failed to assume
the defense and engage counsel in accordance with Section 7.3.2 (in which case the Indemnified
Party shall control the defense).

                    7.2.4 Settlement. With respect to any Losses relating solely to the payment of money damages
in connection with a Third-Party Claim and that will not result in the Indemnitee’s becoming
subject to injunctive or other relief or otherwise adversely affect the business of the Indemnitee
in any manner, and as to which the indemnifying Party shall have acknowledged in writing the
obligation to indemnify the Indemnitee hereunder, the indemnifying Party shall have the sole right
to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such
Loss, on such terms as the indemnifying Party, in its sole discretion, shall deem appropriate.
With respect to all other Losses in connection with Third-Party Claims, where the indemnifying
Party has assumed the defense of the Third-Party Claim in accordance with Section 7.3.2, the
indemnifying Party shall have authority to consent to the entry of any judgment, enter into any
settlement or otherwise dispose of such Loss provided it obtains the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld or delayed). The indemnifying
Party shall not be liable for any settlement or other disposition of a Loss by an Indemnitee that
is reached without the written consent of the indemnifying Party. Regardless of whether the
indemnifying Party chooses to defend or prosecute any Third-Party Claim, no Indemnitee shall admit
any liability with respect to, or settle, compromise or discharge, any Third-Party Claim without
the prior written consent of the indemnifying Party.

                    7.2.5 Cooperation. Regardless of whether the indemnifying Party chooses to defend or
prosecute any Third-Party Claim, the Indemnified Party shall, and shall cause each other Indemnitee
to, reasonably cooperate in the defense or prosecution thereof and shall furnish such records,
information and testimony, provide such witnesses and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith.
Such cooperation shall include access during normal business hours afforded to indemnifying Party
to, and reasonable retention by the Indemnified Party of, records and information that are
reasonably relevant to such Third-Party Claim, and making Indemnitees and other employees and
agents available on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder, and the indemnifying Party shall

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

24

 

reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.

                    7.2.6 Expenses. Except as provided above, the costs and expenses, including fees and
disbursements of counsel, incurred by the Indemnified Party in connection with any claim shall be
reimbursed on a calendar quarter basis by the indemnifying Party, without prejudice to the
indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject
to refund in the event the indemnifying Party is ultimately held not to be obligated to indemnify
the Indemnified Party.

          Section 7.3 Insurance. Avalon shall have and maintain such types and amounts of liability
insurance * and shall upon request provide the other Party with a copy of its policies of insurance
in that regard, along with any amendments and revisions thereto.

ARTICLE 8 -

REPRESENTATIONS, WARRANTIES AND COVENANTS

          Section 8.1 Representations, Warranties and Covenants. Each Party is entering into this
Agreement in reliance upon the representations, warranties and covenants of the other Party set
forth in Sections 10.1, 10.2 and 10.3 of the Collaboration Agreement.

          Section 8.2 DISCLAIMER OF WARRANTY. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTIONS
10.1, 10.2 AND 10.3 OF THE COLLABORATION AGREEMENT, AVALON AND MEDAREX MAKE NO REPRESENTATIONS AND
GRANT NO WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR
OTHERWISE, AND AVALON AND MEDAREX EACH SPECIFICALLY DISCLAIM ANY OTHER WARRANTIES, WHETHER WRITTEN
OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT
OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

ARTICLE 9 -

MISCELLANEOUS

          Section 9.1 Force Majeure. Neither Party shall be held liable or responsible to the other
Party or be deemed to have defaulted under or breached this Agreement for failure or delay in
fulfilling or performing any term of this Agreement when such failure or delay is caused by or
results from events beyond the reasonable control of the nonperforming Party, including fires,
floods, earthquakes, embargoes,

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

25

 

shortages, epidemics, quarantines, war, acts of war (whether war be declared or not) or terrorism, insurrections, riots, civil commotion, strikes, lockouts or other
labor disturbances, acts of God or acts, omissions or delays in acting by any governmental
authority. The non-performing Party shall notify the other Party of such force majeure within *
after such occurrence by giving written notice to the other Party stating the nature of the event,
its anticipated duration, and any action being taken to avoid or minimize its effect. The
suspension of performance shall be of no greater scope and no longer duration than is necessary and
the non-performing Party shall use * to remedy its inability to perform; provided,
however, that in the event the suspension of performance continues for * after the date of
the occurrence, the Parties shall meet to
discuss * how to proceed in order to accomplish the goals of the Collaboration outlined in
this Agreement.

          Section 9.2 Assignment. Without the prior written consent of the other Party hereto, neither
Party shall sell, transfer, assign, pledge or otherwise dispose of, whether voluntarily,
involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties
hereunder; provided, however, that either Party hereto may assign or transfer this
Agreement or any of its rights or obligations hereunder without the consent of the other Party (a)
to any Affiliate of such Party; or (b) to any Third Party with which it merges or consolidates, or
to which it transfers all or substantially all of its assets to which this Agreement relates if in
any such event (i) the assigning Party (provided that it is the surviving entity) remains jointly
and severally liable with the relevant Avalon Affiliate, Medarex Affiliate or Third Party assignee
under this Agreement, and (ii) the relevant Avalon Affiliate assignee, Medarex Affiliate assignee,
Third Party assignee or surviving entity assumes in writing all of the assigning Party’s
obligations under this Agreement. For purposes of clarification with respect to subsection (b)
herein, a Third Party that merges or consolidates with a Party, or to which a Party transfers all
or substantially all of its assets to which this Agreement relates, shall not be deemed to grant
the other Party to this Agreement any license to such Third Party’s technology in existence as of
the effective date of such merger, consolidation or transfer, unless such grant is made pursuant to
a separate agreement, provided such Third Party shall maintain all licenses granted
hereunder by such first Party with respect to its Technology and any Information and Inventions
with respect thereto. Any purported assignment or transfer in violation of this Section shall be
void ab initio and of no force or effect.

          Section 9.3 Severability. If any provision of this Agreement is held to be illegal, invalid
or unenforceable under any present or future law, and if the rights or obligations of either Party
under this Agreement will not be materially and adversely affected thereby, (a) such provision
shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions
of this Agreement shall remain in full force and effect and shall not be affected by the illegal,
invalid or

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

26

 

unenforceable provision or by its severance herefrom, and (d) in lieu of such illegal,
invalid or unenforceable provision, there shall be added automatically as a part of this Agreement
a legal, valid and enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and reasonably acceptable to the Parties herein. To the
fullest extent permitted by applicable law, each Party hereby waives any provision of law that
would render any provision prohibited or unenforceable in any respect.

          Section 9.4 Disputes. Any dispute that may arise relating to this Agreement shall be referred
to the Chief Executive Officers of each of the Parties (or their respective designees) who shall
use * to mutually agree upon the proper course of action to resolve the dispute. If any dispute is
not resolved by the Chief Executive Officers of the Parties (or their designees) within * after
such dispute is referred to them, or such longer period as the Chief Executive Officers (or their
designees) may collectively agree, then either Party shall have the right to litigate such dispute
in accordance with Section 9.5 or to pursue such other dispute resolution mechanism as the Parties
may agree.

          Section 9.5 Governing Law, Jurisdiction, Venue and Service.

                    9.5.1 Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that
might otherwise refer construction or interpretation of this Agreement to the substantive law of
another jurisdiction.

                    9.5.2 Jurisdiction. The Parties hereby irrevocably and unconditionally consent to the
exclusive jurisdiction of the courts of the State of Delaware and the United States District Court
for the District of Delaware for any action, suit or proceeding (other than appeals therefrom)
arising out of or relating to this Agreement, and agree not to commence any action, suit or
proceeding (other than appeals therefrom) related thereto except in such courts.

                    9.5.3 Venue. The Parties further hereby irrevocably and unconditionally waive any objection
to the laying of venue of any action, suit or proceeding (other than appeals therefrom) arising out
of or relating to this Agreement in the courts of the State of Delaware or the United States
District Court for the District of Delaware, and hereby further irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.

                    9.5.4 Service. Each Party hereto further agrees that service of any process, summons, notice
or document by U.S. registered mail to its address set forth below shall be effective service of
process for any action, suit or proceeding brought against it under this Agreement in any such
court.

 

			
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filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

27

 

                    9.5.5 Patents and Trademarks. Notwithstanding the foregoing, any disputes regarding the
validity, scope or enforceability of Patents or Trademarks shall be submitted to a court of
competent jurisdiction in the territory in which such rights apply.

          Section 9.6 Notices. All notices or other communications that are required or permitted
hereunder shall be in writing and delivered personally, sent by facsimile (and promptly confirmed
by personal delivery, registered or certified mail or overnight courier as provided herein), sent
by nationally-recognized overnight courier or sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:

     If to Avalon, to:

Avalon Pharmaceuticals, Inc.

20358 Seneca Meadows Road

Germantown, Maryland 20876

Attention: CEO

Facsimile: 301-556-9910

     If to Medarex, to:

Medarex, Inc.

707 State Road

Princeton, New Jersey 08540-1437

Attention: President

Facsimile: (609) 430-2850

with a copy to:

Medarex, Inc.

707 State Road

Princeton, New Jersey 08540-1437

Attention: General Counsel

Facsimile: (609) 430-4215

or to such other address as the Party to whom notice is to be given may have furnished to the other
Party in writing in accordance herewith. Any such communication shall be deemed to have been
received (a) when delivered, if personally delivered or sent by facsimile on a business day, (b) on
the business day after dispatch, if sent by nationally-recognized overnight courier, and (c) on the third business
day following the date of mailing, if sent by mail. It is understood and

 

			
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filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

28

 

agreed that this Section 9.6 is not intended to govern the day-to-day business communications necessary between the Parties
in performing their duties, in due course, under the terms of this Agreement.

          Section 9.7 Entire Agreement; Modifications. This Agreement, together with the Appendix
attached hereto and the Collaboration Agreement, sets forth and constitutes the entire agreement
and understanding between the Parties with respect to the subject matter hereof and thereof and all
prior agreements, understanding, promises and representations, whether written or oral, with
respect thereto are superseded hereby and thereby. Each Party confirms that it is not relying on
any representations or warranties of the other Party except as specifically set forth herein or
therein. No amendment, modification, release or discharge shall be binding upon the Parties unless
in writing and duly executed by authorized representatives of both Parties.

          Section 9.8 Relationship of the Parties. It is expressly agreed that the Parties shall be
independent contractors of one another and that the relationship between the Parties shall not
constitute a partnership, joint venture or agency. Neither Party shall have the authority to make
any statements, representations or commitments of any kind, or to take any action, which shall be
binding on the other, without the prior written consent of the other to do so. All persons
employed by a Party shall be employees of such Party and not of the other Party and all costs and
obligations incurred by reason of any such employment shall be for the account and expense of such
Party.

          Section 9.9 Equitable Relief. Each Party acknowledges and agrees that the restrictions set
forth in Articles 4 and 5 of this Agreement are reasonable and necessary to protect the legitimate
interests of the other Party and that such other Party would not have entered into this Agreement
in the absence of such restrictions, and that any violation or threatened violation of any
provision of Article 4 or 5 will result in irreparable injury to such other Party. Each Party also
acknowledges and agrees that in the event of a violation or threatened violation of any provision
of Article 4 or 5, the other Party shall be entitled to preliminary and permanent injunctive
relief, without the necessity of proving irreparable injury or actual damages and without the
necessity of having to post a bond, as well as to an equitable accounting of all earnings, profits
and other benefits arising from any such violation. The rights provided in the immediately
preceding sentence shall be cumulative and in addition to any other rights or remedies that may be
available to such other Party. Nothing in
this Section 9.9 is intended, or should be construed, to limit such other Party’s right to
preliminary and permanent injunctive relief or any other remedy for breach of any other provision
of this Agreement.

          Section 9.10 Waiver. Any term or condition of this Agreement may be waived at any time by the
Party that is entitled to the benefit thereof, but no such

          

 

			
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filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

29

 

waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or
condition. The waiver by either Party hereto of any right hereunder or of the failure to perform
or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of
any other breach or failure by said other Party whether of a similar nature or otherwise.

          Section 9.11 Counterparts. This Agreement may be executed in two (2) or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument.

          Section 9.12 No Benefit to Third Parties. The representations, warranties, covenants and
agreements set forth in this Agreement are for the sole benefit of the Parties hereto and their
successors and permitted assigns, and they shall not be construed as conferring any rights on any
other parties.

          Section 9.13 Further Assurance. Each Party shall duly execute and deliver, or cause to be
duly executed and delivered, such further instruments and do and cause to be done such further acts
and things, including the filing of such assignments, agreements, documents and instruments, as may
be necessary or as the other Party may reasonably request in connection with this Agreement or to
carry out more effectively the provisions and purposes, or to better assure and confirm unto such
other Party its rights and remedies under this Agreement.

          Section 9.14 English Language. This Agreement has been written and executed in the English
language. Any translation into any other language shall not be an official version thereof, and in
the event of any conflict in interpretation between the English version and such translation, the
English version shall control.

          Section 9.15 References. Unless otherwise specified, (a) references in this Agreement to any
Article, Section, Appendix, Schedule or Exhibit shall mean references to such Article, Section,
Appendix, Schedule or Exhibit of this Agreement, (b) references in any section to any clause are
references to such clause of such section, and (c) references to any agreement, instrument or other
document in this Agreement refer to such agreement, instrument or other document as originally
executed or, if subsequently varied, replaced or supplemented from time to time, as so varied,
replaced or supplemented and in effect at the relevant time of reference thereto.

          Section 9.16 Construction. Except where the context otherwise requires, wherever used, the
singular shall include the plural, the plural the singular, the use of any gender shall be
applicable to all genders and the word “or” is used in the inclusive sense (and/or). The captions
of this Agreement are for convenience of reference only and in no way define, describe, extend or
limit the scope or intent of this Agreement or the intent of any provision contained in this
Agreement. The term

          

 

			
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filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

30

 

“including” as used herein shall mean including, without limiting the generality of any description preceding such term. The language of this Agreement shall be deemed
to be the language mutually chosen by the Parties and no rule of strict construction shall be
applied against either Party hereto.

[The remainder of this page has been intentionally left blank.]

 

			
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filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

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     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly
authorized representatives as of the date first above written.

	 	 	 	 	 	 	 	 	 	 	 
	Medarex, Inc.	 	 	 	Avalon Pharmaceuticals, Inc.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/James B. Cornett, Ph.D.
	 	 	 	By:
	 	/s/ Kenneth C. Carter, Ph.D.	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name: James B. Cornett, Ph.D.	 	 	 	Name: Kenneth C. Carter, Ph.D.	 	 
	Title: VP, Business Development	 	 	 	Title: President and CEO	 	 

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

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APPENDIX A

Unilateral Products and Unilateral Targets

     This Appendix to the UNILATERAL DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (“Agreement”)
effective as of October 15, 2003, by and between MEDAREX PHARMACEUTICALS, INC. (“Medarex”) and
AVALON, INC., on behalf of itself and its wholly owned subsidiary, GENPHARM INTERNATIONAL, INC.,
(collectively, “Avalon”) sets forth the Unilateral Products with respect to the applicable
Unilateral Targets.

     The contents of this Appendix A are hereby incorporated into the Agreement and are
governed by the terms and conditions of the Agreement, including the confidentiality provisions set
forth therein.

 

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

 

APPENDIX D-2

Unilateral Development and Commercialization Agreement

     This Appendix to the COLLABORATION AGREEMENT (“Agreement”) effective as of October 15,
2003, by and between AVALON PHARMACEUTICALS, INC. (“Avalon”) and MEDAREX, INC., on behalf of itself
and its wholly owned subsidiary, GENPHARM INTERNATIONAL, INC., (collectively, “Medarex”) sets forth
the Unilateral Development and Commercialization Agreement between the Parties. All capitalized
terms used herein without definition shall have the meanings ascribed thereto in the Agreement,
unless otherwise expressly provided herein.

     The contents of this Appendix D-2 are hereby incorporated into the Agreement and are governed
by the terms and conditions of the Agreement, including the confidentiality provisions set forth
therein.

D-2

 

			
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Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

 

APPENDIX D-2

UNILATERAL DEVELOPMENT

AND COMMERCIALIZATION AGREEMENT

     THIS UNILATERAL DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (“Agreement”) is made and entered
into effective as of October 15, 2003 (the “Effective Date”), by and between AVALON
PHARMACEUTICALS, INC., having principal offices at 19 Firstfield Road Gaithersburg, MD 20878
(“Avalon”) and MEDAREX, INC., having principal offices at 707 State Road, Princeton, New Jersey
08540-1437, on behalf of itself and its wholly owned subsidiary, GENPHARM INTERNATIONAL, INC., with
principal offices at 521 Cottonwood Drive, Milpitas, California 95035 (collectively, “Medarex”).
Avalon and Medarex each may be referred to herein individually as a “Party,” or collectively as the
“Parties.”

     WHEREAS, Avalon and Medarex have entered into that certain Collaboration Agreement, dated as
of the date hereof (the “Collaboration Agreement”);

     WHEREAS, the Parties have agreed that in the event Avalon elects not to proceed with the
development and commercialization of certain Collaboration Targets and Medarex notifies Avalon of
its election to proceed unilaterally with such development and commercialization in accordance with
Section 5.1.2 of the Collaboration Agreement, that Medarex shall have the right to do so in
accordance with the terms set forth below; and

     WHEREAS, the Parties have agreed that in the event Avalon fails to comply with any of its
material obligations contained in the Collaboration Agreement with respect to a Collaboration
Product, Medarex shall have the right to convert such Collaboration Product into a Unilateral
Product in accordance with Section 8.2 of the Collaboration Agreement and proceed unilaterally with
the development and commercialization of such Unilateral Product in accordance with the terms set
forth below;

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises and
covenants contained herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties intending to be legally bound, do hereby agree as
follows:

ARTICLE 1 -

UNILATERAL DEVELOPMENT AND COMMERCIALIZATION

     Section 1.1 Definitions. Any capitalized term used in this Agreement not otherwise defined
herein shall have the meaning set forth in the Collaboration Agreement.

     Section 1.2 Unilateral Targets and Unilateral Products. In the event that Medarex provides
Avalon with (a) an Election Notice with respect to a Collaboration Target pursuant to Section 5.1.2
of the Collaboration Agreement, or (b) written notice of Avalon’s failure to cure a default in any
of its material obligations with respect to a Collaboration Product with respect to a Collaboration
Target pursuant to Section 8.2 of the Collaboration Agreement, Appendix A hereto

 

			
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Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

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shall be amended to include such Collaboration Target, which shall be referred to herein as
“Unilateral Targets” and any Collaboration Antibodies and Collaboration Products with respect
thereto, which shall be deemed to be Unilateral Products (as defined herein). Medarex shall have
the exclusive right to Exploit any and all Antibodies and Antibody Products with respect to the
Unilateral Targets (collectively, “Unilateral Products”).

     Section 1.3 Rights and Obligations of the Parties with respect to Unilateral Products. Except
as otherwise expressly provided herein, * for all costs and expenses in connection with the
development and commercialization of the Unilateral Products; provided, however,
that * budgeted costs and expenses associated with the research and development activities with
respect to the Unilateral Products that * has committed to in the applicable Project Budget as
necessary with respect to such Unilateral Product to complete that phase (e.g., toxicology studies
in support of an IND or Phase I, Phase II or Phase III) of research and development that was under
way when * of such Unilateral Products but only to the extent that such costs and expenses are part
of an approved Project Budget at the time that Medarex provides an Election Notice. By way of
clarification, *, for all milestone and royalty payments, license fees and other payments owed to
Third Parties, whether by Medarex, Avalon or their respective Affiliates, in connection with the
development and commercialization of Unilateral Products, including any payments owed by *. The
Parties shall work together to ensure a smooth and orderly transition of the Unilateral Products to
Medarex, including the assignment to Medarex of any third-party service contracts with respect to
the Exploitation of such Unilateral Products. Except for the obligations provided for in this
Section 1.3, * (a) to support or otherwise fund any additional efforts in respect of such
Unilateral Products, and (b) no obligation, responsibility, or authority regarding such additional
efforts in respect of such Unilateral Products.

     Section 1.4 Performance of Medarex. Medarex shall use * to develop and commercialize one or
more Unilateral Products with respect to each Unilateral Target. Such activities shall be
performed in good scientific manner, and in compliance in all material respects with all Applicable
Law, including current good laboratory practices and good clinical practices (including compliance
with such practices and guidelines necessary to allow the results of such activities to support
INDs, BLAs and other Regulatory Approvals), as applicable.

     Section 1.5 Medarex Reports. Medarex shall provide * written progress report to Avalon
describing the development and commercialization activities with respect to each of its Unilateral
Products in sufficient detail to enable Avalon to determine whether Medarex is using * with respect
thereto.

     Section 1.6 Communications and Filings with Regulatory Authorities. Medarex shall be
responsible for all communications and filings with the Regulatory Authorities with respect to each
of its Unilateral Products.

     Section 1.7 Opt-Out by Medarex. If, at any time, Medarex decides to cease development or
commercialization of all Unilateral Products with respect to a Unilateral Target, either alone or
in collaboration with or through a Third Party, it shall give * written notice thereof to Avalon,
which notice shall describe in reasonable detail the reasons for such decision. Medarex

 

			
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Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

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shall, for a period of * after notice to Avalon with respect thereto, furnish Avalon with such
information and materials as Avalon may reasonably request so as to determine whether it wishes to
proceed with the unilateral development and commercialization of such Unilateral Products,
including a statement detailing * actually incurred by or on behalf of Medarex in connection with
the Exploitation of such Unilateral Products (the “Unilateral Expenses”). Upon its receipt of all
of such information and materials, Avalon shall, for a period of * days, have the right to elect to
proceed unilaterally with the development and commercialization of such Unilateral Products by
making a payment to Medarex equal to * of all Unilateral Expenses and * of all milestones paid by
Medarex to Avalon with respect to such Unilateral Products. Upon such election, Appendix A
shall be amended to delete such Unilateral Target and any Unilateral Products with respect thereto,
and the Unilateral Development and Commercialization Agreement set forth in Appendix D-1 to
the Collaboration Agreement shall be automatically amended to include such Unilateral Target and
such Unilateral Products, provided that the royalty rate with respect to such Unilateral Products
shall be *. By way of clarification, Medarex shall have the right to pursue one or more Unilateral
Products with respect to a Unilateral Target and any decision to cease Exploiting one in favor of
another shall not be subject to this Section 1.7 for so long as Medarex is using * to develop and
commercialize at least one Unilateral Product with respect to such Unilateral Target.

ARTICLE 2 -

LICENSE GRANTS

     Section 2.1 Avalon Grant. Subject to Section 2.2 and the other terms and conditions of this
Agreement, Avalon hereby grants to Medarex and its Affiliates, with respect to each Unilateral
Product, an exclusive (even as to Avalon and its Affiliates), worldwide, royalty-bearing right and
license, with the right to sublicense solely as provided in Section 2.3, under the Avalon
Technology, the Collaboration Technology and the Joint Technology to Exploit such Unilateral
Products in the Territory in accordance with this Agreement.

     Section 2.2 Exclusivity, Reserved Rights and Pre-Existing Grants.

          2.2.1 Antigen Exclusivity. Subject to Sections 2.2.2 and 2.2.3, the Parties acknowledge and
agree that during *, no Party shall engage, directly or indirectly, on behalf of itself or any
other party, in the research, development, commercialization or other Exploitation of
antibody-based products with respect to any Unilateral Target listed on Appendix A other
than the Unilateral Products as provided in this Agreement.

          2.2.2 Research and Commercialization Agreements. Subject to the obligations of Medarex under
the Collaboration Agreement, Medarex shall have the right to (a) grant licenses and other rights to
other parties under the Medarex Technology for such parties to Exploit Antibody Products (but not
Unilateral Products containing or comprising Collaboration Antibodies) with respect to Antigens,
including Unilateral Targets, (b) transfer Medarex Know-How to such parties in connection
therewith, including by providing instruction with respect to the use and immunization of HuMAb
Mice and the Additional Mice and assistance with respect to the Mice-Related Technology, (c)
develop production processes for, and manufacture, such Antibody Products, and (d) receive license
fees, milestone payments, royalties and other

 

			
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Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

3

 

remuneration in connection therewith, but, in connection with clause (a), (b), (c) or (d)
above, not to otherwise actively participate in the clinical development or commercialization of
such Antibody Products by such parties (each agreement with respect to the foregoing, a “Research
and Commercialization Agreement”).

     Section 2.3 Sublicenses. Medarex shall have the right to grant sublicenses under the license
granted in Section 2.1 to: (a) Affiliates without the approval of Avalon, provided that Medarex
shall remain jointly and severally liable for the performance or non-performance of any such
Affiliate sublicensee, and (b) Third Parties without the approval of Avalon; provided,
however, that any Third Party sublicense with respect to the Avalon Technology shall be
with the prior approval of Avalon, * which approval shall be deemed to be granted with respect to a
sublicense if Avalon fails, within * of its receipt of a written notice from Medarex setting forth
in reasonable detail the nature of such sublicense and the identity of the Third Party sublicensee,
to notify Medarex that it withholds its consent to such sublicense and the reasons therefor; and
provided further that any such Third Party sublicensee to the Avalon Technology
enters into a written agreement with Medarex that acknowledges that the rights are subject to this
Agreement and to indemnify Avalon and its Affiliates to the extent provided in Article 7 and agrees
to be bound by the provisions of Articles 4 and 5 and Sections 1.3 and 1.4, with Avalon being made
a third party beneficiary with respect to such provisions with the right to enforce such
provisions. Notwithstanding the previous sentence, the grant of any sublicense hereunder shall not
relieve Medarex of its obligations under this Agreement and Medarex shall be liable to Avalon for
any act (or failure to act) by a sublicensee which would be a breach of this Agreement if such act
(or failure to act) was by Medarex.

     Section 2.4 License Limitations. Medarex hereby covenants to Avalon that neither Medarex nor
any of its Affiliates, licensees or sublicensees shall use or practice the Avalon Technology or the
Collaboration Technology, directly or indirectly, on behalf of itself or any other party, for any
purpose other than as permitted under Section 2.1 of this Agreement and as permitted by the
Collaboration Agreement and in particular, but without limiting the generality of the foregoing,
for any research, development, commercialization or other Exploitation of an Antibody Product or
any other product or method, other than a Unilateral Product or a Collaboration Product as provided
hereunder or in the Collaboration Agreement.

     Section 2.5 No Other Rights. For the avoidance of doubt, Medarex and its Affiliates shall
have no right, express or implied, with respect to the Avalon Technology or the Collaboration
Technology, in each case except as expressly provided in Section 2.1 of this Agreement and Section
3.1 of the Collaboration Agreement.

ARTICLE 3 -

FINANCIAL PROVISIONS

     Section 3.1 Milestone Payments. Within thirty (30) days of the achievement of the following
milestones, on a Unilateral Target-by-Unilateral Target basis, for Unilateral Products with respect
to each Unilateral Target, Medarex shall pay to Avalon the specified milestone payments:

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

4

 

	 	 	 	 	 	 	 
	 	 	1st Unilateral	 	2nd Unilateral	 	Each Additional
	 	 	Product with	 	Product with	 	Unilateral Product
	 	 	respect to a	 	respect to a	 	with respect to a
	Milestones	 	Unilateral Target	 	Unilateral Target	 	Unilateral Target
	*

	 	*
	 	*
	 	*
	*

	 	*
	 	*
	 	*
	*

	 	*
	 	*
	 	*
	*

	 	*
	 	*
	 	*
	*

	 	*
	 	*
	 	*
	*

	 	*
	 	*
	 	*

          3.1.1 Back-up Products. In the event that Medarex discontinues a Unilateral Product with
respect to a Unilateral Target prior to the First Commercial Sale (as defined in Section 3.3) of
such Unilateral Product, any milestones paid to Avalon with respect to such Unilateral Product
pursuant to this Section 3.1 shall be credited untie exhausted against any milestones due with
respect to subsequent Unilateral Products with respect to such Unilateral Target.

     Section 3.2 Royalties.

          3.2.1 Obligation. With respect to each Unilateral Product, Medarex shall pay Avalon royalties
based upon * (on a calendar year basis) for such Unilateral Product. The royalty rates shall be
determined on a Unilateral Product-by-Unilateral Product basis based on *.

          3.2.2 Rates. The royalty rates for each Unilateral Product (a) for which Avalon Opted-Out
pursuant to Section 5.1.1 of the Collaboration Agreement, or (b) which was converted from a
Collaboration Product pursuant to Section 8.2 of the Collaboration Agreement upon Avalon’s default
in any of its material obligations shall be as follows:

	 	 	 
	Opt-Out or Termination Phase	 	Royalty
	*

	 	*
	*

	 	*
	*

	 	*
	*

	 	*

If an Opt-Out (as opposed to a termination event) occurs within * after the end of a Phase, the
royalty rate shall be calculated based on *.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

5

 

          3.2.3 Definitions. For purposes of this Agreement, the following definitions shall apply:

               (a) “Major Market” shall mean each of Japan, the United States, the United Kingdom, France,
Germany and the European Union as a whole.

               (b) “Phase I” shall mean a human clinical trial, the principal purpose of which is a
preliminary determination of safety in healthy individuals or patients as required in 21 C.F.R.
§312, or a similar clinical study prescribed by the Regulatory Authorities in a Major Market other
than the United States.

               (c) “Phase I Completion” shall mean, with respect to a Collaboration Target, the completion
of a complete data package from (i) a Phase I study which data package is sufficient to support the
commencement of Phase II studies in support of the filing of an approvable BLA in a Major Market,
or (ii) in the event that Phase I and Phase II are combined, the first study in support of the
filing of an approvable BLA in a Major Market that enrolled at least twenty (20) subjects, in
either case for the first Collaboration Product with respect to such Collaboration Target.

               (d) “Phase II” shall mean a human clinical trial, for which a primary endpoint is a
preliminary determination of efficacy or dose ranges in patients with the disease target being
studied as required in 21 C.F.R. §312, or a similar clinical study prescribed by the Regulatory
Authorities in a Major Market other than the United States. Any well-controlled study intended to
provide the substantial evidence of efficacy necessary to support the filing of an approvable BLA
(such as a combined Phase II/Phase III study, or any Phase III study in lieu of a Phase II study)
(a “Pivotal Study”) shall automatically be deemed to have reached Phase II status. A Phase II
study shall be deemed to have commenced when the first subject in such study has been enrolled.

               (e) “Phase II Completion” shall mean, with respect to a Collaboration Target, the completion
of a complete data package from (a) Phase II studies, which data package is sufficient to support
the commencement of Phase III studies in support of the filing of an approvable BLA in a Major
Market, or (b) in the event that Phase II and III studies are combined, the first such study in
support of the filing of an approvable BLA in a Major Market that enrolled at least forty (40)
patients with the disease target being studied, in either case for the first Collaboration Product
with respect to such Collaboration Target.

               (f) “Phase III” shall mean a human clinical trial, the principal purpose of which is to
establish safety and efficacy in patients with the disease target being studied as required in 21
C.F.R. §312, or similar clinical study prescribed by the Regulatory Authorities in a Major Market
other than the United States. A Phase III study shall also include any other human clinical trial
intended as a Pivotal Study, whether or not such study is a traditional Phase III study. A Phase
III study shall be deemed to have commenced when the first patient has been enrolled in a Pivotal
Study.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

6

 

               (g) “Phase III Completion” shall mean, with respect to a Collaboration Target, the completion
of a data package for a Phase III study with respect to the first Collaboration Product with
respect to such Collaboration Target, which data package is sufficient to support the filing of an
approvable BLA for such Collaboration Product in a Major Market.

     Section 3.3 Royalty Term. Medarex’s royalty obligations under Section 3.2.2 shall terminate,
on a country-by-country basis, with respect to each Unilateral Product with respect to a Unilateral
Target, on the later to occur of (a) the * anniversary of the first sale for use or consumption by
the general public of such Unilateral Product in a country after Regulatory Approval has been
obtained for such Unilateral Product in such country (the “First Commercial Sale”), and (b) the
expiration date in such country of the last to expire of any issued Joint Patent or Avalon Patent
or Collaboration Patent that includes at least one Valid Claim covering the sale of such Unilateral
Product in such country. For purposes of this Agreement, a “Valid Claim” shall mean, with respect
to a particular country, a claim of an issued and unexpired Patent in such country that (x) has not
been revoked or held unenforceable or invalid by a decision of a court or governmental agency of
competent jurisdiction from which no appeal can be taken or has been taken within the time allowed
for appeal; and (y) has not been abandoned, disclaimed, denied or admitted to be invalid or
unenforceable through reissue or disclaimer or otherwise in such country. Upon termination of the
royalty obligations of Medarex with respect to a Unilateral Product under this Section 3.3 in a
country, the license grants to Medarex in Section 2.1 with respect to such Unilateral Product in
such country shall become fully-paid up and nonexclusive with respect to such country.

     Section 3.4 Royalty Payments. Running royalties shall be payable on quarterly basis, within *
days after the end of each calendar quarter, based upon the *. Royalties shall be calculated in
accordance with GAAP and with the terms of this Article 3. Only * royalty payment will be due on *
even though the manufacture, sale or use of such * may be covered by more than one intellectual
property right in a country.

     Section 3.5 Royalty Statements. Medarex shall deliver to Avalon within * after the end of
each calendar quarter in which Unilateral Products, for which Medarex owes a royalty hereunder, are
sold, a detailed statement showing, (a) Net Sales of each such Unilateral Product, (b) the number
of units of each such Unilateral Product sold on a country-by-country basis during the applicable
calendar quarter, and (c) the amount and calculation of royalties due on such Net Sales; and (d)
any other information reasonably requested by Avalon to determine royalties owed to Avalon.

     Section 3.6 Payment Method. All amounts due from Medarex hereunder shall be paid in U.S.
dollars by wire transfer in immediately available funds to an account designated by Avalon. Any
payments or portions thereof due hereunder which are not paid on the date such payments are due
under this Agreement shall bear interest at a rate equal to *.

     Section 3.7 Currency; Foreign Payments. If any currency conversion shall be required in
connection with any payment hereunder, such conversion shall be made by * to which such royalty
payments relate. If at any time legal restrictions prevent the prompt remittance of any

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

7

 

royalties with respect to Net Sales in any jurisdiction, Medarex may notify Avalon and make
such payments by depositing the amount thereof in local currency in a bank account or other
depository in such country in the name of Avalon, and Medarex shall have no further obligations
under this Agreement with respect thereto.

     Section 3.8 Taxes. Medarex may deduct from any royalty amounts it is required to pay pursuant
to this Agreement any Withholding Taxes. At Avalon’s request, Medarex shall provide Avalon a
certificate evidencing payment of any Withholding Taxes hereunder and shall * assist Avalon, at
Avalon’s expense, to obtain the benefit of any applicable tax treaty.

     Section 3.9 Records Retention; Audit.

          3.9.1 Record Retention. Medarex shall maintain (and shall ensure that its Affiliates and
sublicensees shall maintain) complete and accurate books, records and accounts that fairly reflect
their respective Net Sales and Unilateral Expenses with respect to Unilateral Products in
sufficient detail to confirm the accuracy of any payments required hereunder and in accordance with
GAAP, which books, records and accounts shall be retained by Medarex until the later of (a) * after
the end of the period to which such books, records and accounts pertain, and (b) the expiration of
the applicable tax statute of limitations (or any extensions thereof), or for such longer period as
may be required by Applicable Law.

          3.9.2 Audit. Avalon shall have the right to have an independent certified public accounting
firm of nationally recognized standing, reasonably acceptable to Medarex, to have access during
normal business hours, and upon reasonable prior written notice, to such of the records of Medarex
(and its Affiliates and sublicensees) as may be reasonably necessary to verify the accuracy of such
Net Sales or, in the event Medarex Opts-Out of all Unilateral Products with respect to a Unilateral
Target pursuant to Section 1.7, such Unilateral Expenses * ending not more than * prior to the date
of such request; provided, however, that Avalon shall not have the right to conduct
more than * in any * period. The accounting firm shall disclose to each Party whether such Net
Sales or Unilateral Expenses, as applicable, are correct or incorrect and the specific details
concerning any discrepancies. No other information shall be provided to Avalon. * shall bear the
cost of such audit unless the audit reveals a variance of more than * from the reported results, in
which case * shall bear the cost of the audit. The results of such accounting firm shall be final,
absent manifest error.

          3.9.3 Payment of Additional Royalties. If, based on the results of such audit, additional
payments are owed by Medarex under this Agreement, Medarex shall make such additional payments, *,
within * after the date on which such accounting firm’s written report is delivered to Medarex.

     Section 3.10 Confidentiality. Avalon shall treat all information subject to review under
Section 3.10 in accordance with the confidentiality provisions of Article 4 and shall cause its
accounting firm to enter into a * acceptable confidentiality agreement with Medarex obligating such
firm to maintain all such financial information in confidence pursuant to such confidentiality
agreement.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

8

 

ARTICLE 4 -

CONFIDENTIALITY

     Section 4.1 Confidential Information. The confidentiality and use restrictions set forth in
Sections 6.1 through 6.4 of the Collaboration Agreement shall apply to all Confidential Information
during the Term and for a period of * thereafter.

     Section 4.2 Use of Name. Each Party may use the name, insignia, symbol, trademark, trade name
or logotype of the other Party only (a) in connection with announcements and other permitted
disclosures relating to this Agreement and the activities contemplated hereby, (b) as required by
Applicable Law, and (c) otherwise as agreed in writing by such other Party.

     Section 4.3 Press Releases. Press releases or other similar public communication by either
Party relating to this Agreement, shall be approved in advance by the other Party, *, except for
those communications required by Applicable Law (which shall be provided to the other Party as soon
as practicable after the release or communication thereof), disclosures of information for which
consent has previously been obtained, and information of a similar nature to that which has been
previously disclosed publicly with respect to this Agreement, each of which shall not require
advance approval.

     Section 4.4 Publications. At least * prior to submission for publication, presentation or
other public disclosure by Medarex or any of its Affiliates of any material pertaining to or
resulting from the Avalon Technology, Medarex shall provide to Avalon a draft of such material for
its review and comment. No publication or presentation with respect to the Avalon Technology shall
be made unless and until Avalon’s comments on the proposed publication or presentation have been
addressed and changes have been agreed upon and any information determined by Avalon to be
Confidential Information has been removed. If requested in writing by Avalon, Medarex shall
withhold material from submission for publication or presentation for an additional * days to allow
for the filing of a patent application or the taking of such measures to establish and preserve
proprietary rights in the information in the material being submitted for publication or
presentation.

ARTICLE 5 -

INTELLECTUAL PROPERTY

     Section 5.1 Intellectual Property Ownership.

          5.1.1 Ownership of Medarex Technology. As between the Parties, Medarex shall own and retain
all right, title and interest in and to any and all: (a) Information and Inventions that are
conceived, discovered, developed or otherwise made, by or on behalf of Medarex (or its Affiliates
or its licensees or sublicensees (other than Avalon and its Affiliates)), whether or not patented
or patentable, and any and all Patent and other intellectual property rights with respect thereto,
except to the extent that any such Information and Inventions, or any Patent or other intellectual
property rights with respect thereto, are Collaboration Technology or Joint Technology; (b) other
Information and Inventions, and Patent and other intellectual property rights that are

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

9

 

Controlled (other than pursuant to the license grants set forth in Article 3) by Medarex, its
Affiliates or its licensees or sublicensees (other than Avalon and its Affiliates); and (c) other
Medarex Technology.

          5.1.2 Ownership of Avalon Technology. Subject to Section 5.1.3 and the license grants to
Medarex under Article 2, as between the Parties, Avalon shall own and retain all right, title and
interest in and to any and all: (a) Information and Inventions that are conceived, discovered,
developed or otherwise made, by or on behalf of Avalon (or its Affiliates or its licensees or
sublicensees (other than Medarex and its Affiliates)), whether or not patented or patentable, and
any and all Patent and other intellectual property rights with respect thereto, except to the
extent that any such Information and Inventions, or any Patent or other intellectual property
rights with respect thereto, are Collaboration Technology or Joint Technology; (b) other
Information and Inventions, and Patent and other intellectual property rights that are Controlled
(other than pursuant to the license grants set forth in Article 3) by Avalon, its Affiliates or its
licensees or sublicensees (other than Medarex and its Affiliates); and (c) other Avalon Technology.

          5.1.3 Ownership of Mice-Related Technology. As between the Parties, Medarex shall own and
retain all right, title and interest in and to all Mice Materials and Mice-Related Technology,
including any and all Information and Inventions with respect to the Mice Materials or the
Mice-Related Technology (including any Improvements thereto) that, as a result of the use of HuMAb
Mice provided by Medarex under this Agreement, are conceived, discovered, developed or otherwise
made, by or on behalf of Avalon, its Affiliates or its licensees or sublicensees (other than
Medarex and its Affiliates), whether or not patented or patentable, and any and all Patent and
other intellectual property rights with respect thereto. Avalon acknowledges and agrees that (a)
there are no licenses granted to Avalon under this Agreement with respect to the Mice Materials and
Mice-Related Technology and that under this Agreement, Avalon has no right to use the HuMAb Mice or
to discover, develop or otherwise make Improvements with respect to Mice Materials and Mice-Related
Technology, and (b) neither it, nor any of its Affiliates, licensees or sublicensees, will engage,
directly or indirectly, in activities designed to, or otherwise undertake or attempt, either on
behalf of itself or another, to discover, develop or make any Information and Inventions that
relate to the Mice Materials or the Mice-Related Technology as a result of the use of Ha-Mab Mice
provided by Medarex to Avalon under this Agreement. Accordingly, Avalon shall * disclose to
Medarex in writing, the conception or reduction to practice, or the discovery, development or
making of any such Information and Inventions that relate to the Mice Materials or Mice-Related
Technology that results from use of HuMab Mice provided by Medarex to Avalon under this Agreement
and shall, and does hereby, assign, and shall cause its Affiliates, licensees and sublicensees to
so assign, to Medarex, without additional compensation, all of their respective rights, titles and
interests in and to any such Information and Inventions.

          5.1.4 Ownership of Joint Technology. Subject to Section 5.1.3 and the license grants under
Article 2, the Parties shall each own an equal, undivided interest in any and all (a) Information
and Inventions, conceived, discovered, developed or otherwise made, jointly by or on behalf of
Medarex (or its Affiliates or, to the extent permitted, its sublicensees), on the one hand,

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

10

 

and Avalon (or its Affiliates or, to the extent permitted, its sublicensees), on the other
hand, in connection with the work conducted under or in connection with this Agreement, whether or
not patented or patentable, but excluding any Mice Materials or Mice-Related Technology; and (b)
Patents (the “Joint Patents”) and other intellectual property rights with respect thereto
(collectively, the “Joint Technology”); provided, however, that, except as
otherwise expressly provided herein, neither a Party nor any of its Affiliates, licensees or
sublicensees shall, directly or indirectly, Exploit any Joint Technology or other such intellectual
property rights without the consent of the other Party, *; provided, however, that
neither Party shall have the right to use or otherwise Exploit any Unilateral Products (or any
Antibodies or other Biological Materials derived from the HuMAb Mice or the Additional Mice) except
as set forth under thus Agreement. Each Party shall * disclose to the other Party in writing, and
shall cause its Affiliates, licensees and sublicensees to so disclose, the development, making,
conception or reduction to practice of any Joint Technology.

          5.1.5 Ownership of Product Trademarks. Medarex shall own all right, title and interest in and
to each Product Trademark with respect to a Unilateral Product. Avalon hereby assigns all of its
right, title and interest in and to any Product Trademark to Medarex to the extent that such
Product Trademark relates solely to the Unilateral Products.

          5.1.6 Ownership of Regulatory Documentation. Medarex shall own all right, title and interest
in and to all Regulatory Documentation that relates solely to the Unilateral Products,
provided that Avalon shall reasonably cooperate, at Medarex’s sole cost and expense, in
filing and maintaining such Regulatory Documentation. Avalon hereby assigns to Medarex such of its
right, title and interest in and to such Regulatory Documentation as is necessary to vest ownership
of such Regulatory Documentation in Medarex as provided in the immediately preceding sentence.
Notwithstanding the ownership of any such Regulatory Documentation, neither Medarex nor any of its
Affiliates, licensees or sublicensees shall, directly or indirectly, use any such Regulatory
Documentation without the consent of Avalon, *; provided, however, that each Party
shall have the right to use and reference any of such Regulatory Documentation in connection with
the Exploitation of Unilateral Products as provided in this Agreement and Collaboration Products as
provided in the Collaboration Agreement. Notwithstanding the foregoing, any Regulatory
Documentation containing Production Process Know-How of a Party shall be and remain the sole and
exclusive property of such Party and such Party shall have the right to submit any such Production
Process Know-How directly to the Regulatory Authorities using a drug master file, or any foreign
equivalent that is designed to protect such Party’s Confidential Information, which filing shall be
and remain the sole and exclusive property of such Party.

          5.1.7 United States Law. The determination of whether Information and Inventions are
conceived, discovered, developed or otherwise made by a Party for the purpose of allocating
proprietary rights (including Patent, copyright or other intellectual property rights) therein,
shall, for purposes of this Agreement, be made in accordance with applicable United States law.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

11

 

          5.1.8 Notices. To the extent, if any, that Medarex has the right to (a) assign, transfer,
convey or otherwise encumber any right, title or interest in or to any Avalon Technology, Joint
Technology or Collaboration Technology, (b) grant any license or other right, title or interest in
or to any Avalon Technology, Joint Technology or Collaboration Technology, or (c) agree to or
otherwise become bound by any covenant not to sue for any infringement, misuse or other action or
inaction with respect to any Avalon Technology, Joint Technology or Collaboration Technology, in
each case Medarex shall not do so, directly or indirectly, expressly or by implication, by action
or omission or otherwise without providing Avalon with at least * advance written notice thereof.

     Section 5.2 Prosecution of Patents and Trademarks.

          5.2.1 Medarex and Avalon Patents. As between the Parties, each Party shall have the sole
right, at its cost and expense, to obtain, prosecute and maintain throughout the world its Patents;
provided, however, that Medarex shall reimburse Avalon for one hundred percent
(100%) of the reasonable out-of-pocket costs incurred by Avalon for filing, prosecuting and
maintaining the Avalon Patents to the extent that they claim or cover (x) as a composition of
matter, a Unilateral Product or any active ingredient in such Unilateral Product or (y) the use of
any such Unilateral Product or ingredient. Each Party shall, and shall cause its Affiliates,
licensees and sublicensees, as applicable, to, cooperate fully with the other Party in the
preparation, filing, prosecution, and maintenance of, if requested by Medarex, the Product
Trademarks and, if requested by the other Party, such other Party’s Patents, provided that (except
as otherwise provided in the first sentence of this Section 5.2.1) such other Party shall reimburse
the cooperating Party for its reasonable out-of-pocket expenses incurred in connection with such
requested cooperation. Such cooperation includes (a) promptly executing all papers and instruments
and requiring employees to execute such papers and instruments as reasonable and appropriate so as
to enable such other Party to file, prosecute, and maintain its Patents in any country; and (b)
promptly informing such other Party of matters that may affect the preparation, filing,
prosecution, or maintenance of any such Patents.

          5.2.2 Joint Patents. The Parties shall cooperate, and shall cause their respective
Affiliates, licensees and sublicensees, as applicable, to cooperate, with one another with respect
to the filing, prosecution and maintenance of all Joint Patents, including by selecting outside
counsel, reasonably acceptable to the Parties, to handle such filing, prosecution and maintenance.
* the expenses associated with the filing, prosecution (including any interferences, reissue
proceedings and reexaminations) and maintenance of all Joint Patents. If a Party elects not to
pursue the filing, prosecution or maintenance of a Joint Patent in a particular country, or to take
any other action with respect to Joint Technology in a particular country that is * to establish or
preserve rights thereto, then in each such case such Party shall so notify the other Party promptly
in writing and * to enable such other Party to meet any deadlines by which an action must be taken
to establish or preserve any such rights in such Joint Technology in such country. Upon receipt of
each such notice by such other Party or if, at any time, such Party fails to initiate any such
action within * after a request by such other Party that it do so (or thereafter diligently pursue
such action), such other Party shall have the right, but not the obligation, to pursue the filing
or registration, or support the continued prosecution or maintenance, of such Patent at its expense
in such country. If

 

			
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Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

12

 

such other Party elects to pursue such filing or registration, as the case may be, or continue
such support, then such other Party shall notify such Party of such election and such Party shall,
and shall cause its Affiliates, licensees and sublicensees, as applicable, to, (x) * cooperate with
such other Party in this regard, and (y) subject to Article 2, promptly release or assign to such
other Party, without compensation, all right, title and interest in and to such Patent in such
country.

          5.2.3 Patent Filings. Medarex covenants not to, and to cause its Affiliates, licensees and
sublicensees, as applicable, not to, file any patent application disclosing or claiming any
Information and Inventions comprising any Avalon Technology or the Exploitation thereof, without
Avalon’s prior written consent *.

     Section 5.3 Enforcement of Patents and Trademarks.

          5.3.1 Rights and Procedures. If either Party determines that any Avalon Technology
exclusively licensed to Medarex under this Agreement (which for purposes of this Agreement shall be
deemed to include Joint Technology) is being infringed by a Third Party’s activities with respect
to a Unilateral Product and that such infringement could affect the exercise by the Parties of
their respective rights and obligations under this Agreement, it shall * notify such other Party in
writing and provide such other Party with any evidence of such infringement that is * available.
Promptly after the receipt of such written notice, the Parties shall meet and discuss * the removal
of such infringement. The pursuing Party shall consider * any comments from the other Party and
shall keep the other Party reasonably informed of any steps taken to remove such infringement.

               (a) Joint Technology. With respect to Joint Technology, that is not licensed exclusively to
Medarex under this Agreement, the Parties shall have the first right but not the obligation to
jointly remove such infringement using *, including the filing of an infringement suit or taking
other similar action. * of the reasonable and verifiable costs and expenses incurred in connection
with such action. In the event the Parties fail to jointly take * to remove any infringement of
any Joint Technology within * following notice of such infringement, or a Party earlier notifies
the other in writing of its intent not to take such steps, the Party pursuing the filing,
prosecution or maintenance of a Patent comprising such Joint Technology (the “Prosecuting Party”)
shall have the right to do so *, or, in the event such Party declines, the other Party shall have
the right to do so *; provided, however, that if the Parties have jointly commenced
negotiations with an alleged infringer for discontinuance of such infringement within such *
period, the Parties shall have an additional * to conclude their negotiations before a Party
unilaterally may bring suit for such infringement.

               (b) Avalon Technology. With respect to Avalon Technology exclusively licensed to Medarex
under this Agreement, Avalon shall have the first right, but not the obligation, to remove such
infringement with respect to an antibody-based product against a Collaboration Target *. In the
event Avalon fails to take * to remove any such infringement of such Avalon Technology within *
following notice of such infringement, or earlier notifies Medarex in writing of its intent not to
take such steps, Medarex shall have the right to do so *; provided, however, that
if Avalon has commenced negotiations with an alleged infringer for discontinuance of such

 

			
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Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

13

 

infringement within such * period, Avalon shall have an additional * days to conclude its
negotiations before Medarex may bring suit for such infringement; and provided
further that * of the reasonable out-of-pocket costs incurred by Avalon with respect to the
removal of any such infringement to the extent that such infringement adversely affects the
Exploitation of any Unilateral Product.

               (c) Medarex Technology. With respect to Medarex Technology, Medarex shall have the sole
right, but not the obligation, to remove such infringement *.

          5.3.2 Cooperation. The Party not enforcing the applicable Technology shall provide reasonable
assistance to the other Party, including providing access to relevant documents and other evidence,
making its employees available at reasonable business hours, and joining the action to the extent
necessary to allow the enforcing Party to maintain the action.

          5.3.3 Recovery. Any amounts recovered by a Party pursuant to Section 5.3.1, whether by
settlement or judgment, shall be used to * for their reasonable costs and expenses in making such
recovery (*), with * being retained by the Party that has exercised its right to bring the
enforcement action; provided, however, that to the extent that any award is
attributable to loss of sales of a Unilateral Product, the Parties shall negotiate * an appropriate
allocation of such award to reflect the economic interests of the Parties under this Agreement with
respect to such Unilateral Product.

     Section 5.4 Potential Third-Party Rights.

          5.4.1 Third-Party Licenses. If (a) in the opinion of outside patent counsel to Medarex,
Medarex, or any of its Affiliates, licensees or permitted sublicensees, cannot Exploit a Unilateral
Product in a country in the Territory without infringing one or more Patents that have issued to a
Third Party in such country, or (b) as a result of any claim made against a Party, or any of its
Affiliates, licensees or permitted sublicensees, alleging that the Exploitation of a Unilateral
Product infringes or misappropriates any Patent or any other intellectual property right of a Third
Party in a country in the Territory, a judgment is entered by a court of competent jurisdiction
from which no appeal is taken within the time permitted for appeal, such that Medarex cannot
Exploit such Unilateral Product in such country without infringing the Patent or other proprietary
rights of such Third Party, then, in either case, Medarex shall have the first right, but not the
obligation to negotiate and to obtain a license from such Third Party as necessary for the
Exploitation of any Unilateral Products hereunder in such country. * of all royalty and other
obligations with respect to the Exploitation of Unilateral Products.

          5.4.2 Third-Party Litigation. In the event that a Third Party institutes a Patent, Trademark
or other infringement suit (including any suit alleging the invalidity or unenforceability of the
Patents of a Party or its Affiliates, or claiming confusion, deception or dilution of a Trademark
by a Product Trademark) against either Party or its respective Affiliates, licensees or permitted
sublicensees during the Term, alleging that the Exploitation of the Unilateral Products in the
Territory or any other activities hereunder, infringes one or more Patent, Trademark or other
intellectual property rights held by such Third Party (an “Infringement Suit”), the Parties shall

 

			
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cooperate with one another in defending such suit. Medarex shall direct and control, at its
sole cost and expense, any Infringement Suit with respect to the Unilateral Products;
provided, however, that Medarex shall not cease to defend, settle or otherwise
dispose of a suit with respect to any intellectual property of Avalon without Avalon’s prior
written consent, *. With respect to the Collaboration Patents, licensed to Medarex under this
Agreement, Product Trademarks and with respect to the Exploitation of Unilateral Products, Medarex
shall bear one hundred percent (100%) of those costs and expenses. With respect to Joint Patents,
the Parties shall each bear fifty percent (50%) of any costs and expenses of such defense;
provided, with respect to the Exploitation of Unilateral Products, Medarex shall bear one
hundred percent (100%) of those costs and expenses. In addition, Medarex shall pay any and all
amounts awarded in any suit against Medarex and/or Avalon with respect to exploitation of
Unilateral Product and any and all amounts paid in any settlement of such suit or threatened suit.

          5.4.3 Retained Rights. Nothing in this Section 5.4 shall prevent Medarex, *, from obtaining
any license or other rights from Third Parties it deems appropriate in order to permit the full and
unhindered exercise of its rights under this Agreement.

     Section 5.5 Exchange of Know-How.

          5.5.1 Information Disclosure. Avalon shall, and shall cause its Affiliates to, without
additional compensation and at its sole expense, disclose and make available to Medarex, in
whatever form Medarex may * request, all Regulatory Documentation, and all Avalon Technology,
Collaboration Technology and Joint Technology in the possession of Avalon that is licensed to
Medarex under this Agreement with respect to each Unilateral Target and Unilateral Product
immediately after such Unilateral Target is first designated as such and thereafter immediately
upon the earlier of the conception or reduction to practice, discovery, development or making of
each such Regulatory Documentation, and all Avalon Technology, Collaboration Technology and Joint
Technology in the possession of Avalon that is licensed to Medarex under this Agreement.

          5.5.2 Cooperation. Avalon shall cooperate with any and all reasonable requests for assistance
from Medarex, *, including by making its employees, consultants and other scientific staff
available upon reasonable notice during normal business hours at Avalon’s place of business to
consult with Medarex on issues arising with respect to the Avalon Technology in connection with the
research, development, commercialization or other Exploitation of Unilateral Products.

          5.5.3 Biological Materials. For purposes of facilitating the conduct of the development
activities with respect to the Unilateral Products, Avalon shall provide to Medarex the Biological
Materials that are technology licensed to Medarex under this Agreement and that is necessary to
perform such activities. The Parties agree that: (a) all such Biological Materials provided by
Avalon to Medarex and any Biological Material produced against or with, or derived from, such
Biological Materials shall be used solely for the development and commercialization of Unilateral
Products, and in material compliance with all Applicable Law; (b) all such Biological Materials
under this Agreement shall be provided without any warranties, express or implied; (c)

 

			
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Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

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Avalon shall obtain (or cause its Third Party collaborators to obtain or certify that they
have obtained) all appropriate and required consents from the source of such Biological Materials;
and (d) Biological Materials provided by Avalon to Medarex shall not be made available by Medarex
to any Third Party except as necessary for Medarex to perform its obligations hereunder, unless the
prior written consent of Avalon is first obtained.

          5.5.4 Regulatory Records. Medarex shall maintain, or cause to be maintained, records of its
respective research, development, manufacturing and commercialization activities for the Unilateral
Products, including all Regulatory Documentation, in sufficient detail and in good scientific
manner appropriate for patent and regulatory purposes, which shall be complete and accurate and
shall fully and properly reflect all work done and results achieved in the performance of such
activities, and which shall be retained during the Term and for a period of * thereafter, or for
such longer period as may be required by Applicable Law. Avalon shall have the right, during
normal business hours and upon reasonable notice, to inspect and copy any such records, except to
the extent that such records contain proprietary information with respect to the Mice Materials,
Mice-Related Technology or Medarex’s Production Process Technology. Avalon shall have an
irrevocable, perpetual right to use and reference such Regulatory Documentation for all purposes.

          5.5.5 Production Process Technology. Notwithstanding anything to the contrary in this Section
5.5 or elsewhere in this Agreement, Avalon shall not be obligated to disclose or provide any of its
Production Process Technology, including Biological Materials with respect thereto, to Medarex or
any Third Party except as may be required or permitted under a separate written agreement entered
into by the Parties pursuant to Section 1.2.8 or Section 1.6 of the Collaboration Agreement.

ARTICLE 6 -

TERM AND TERMINATION

          Section 6.1 Term. The term of this Agreement shall commence upon the Effective Date and shall
continue in effect until such time as there is no longer any Unilateral Product being Exploited
hereunder, unless terminated at an earlier date in accordance with the terms and conditions set
forth in this Article 6.

          Section 6.2 Termination of Agreement for Material Breach. Any material failure by a Party to
comply with any of its material obligations contained herein shall, in addition to any remedy
available under Section 6.3 hereof, entitle the Party not in default to give to the Party in
default written notice specifying the nature of the default, requiring the defaulting Party to make
good or otherwise cure such default, and stating its intention to terminate if such default is not
cured. If such default is not cured within * after the receipt of such notice (or, if such default
cannot be cured within such * period, if the Party in default does not commence actions to cure
such default within such period and thereafter diligently continue such actions and cure such
default within * after the receipt of such notice), except in the case of a payment default, as to
which the defaulting Party shall have only a * cure period, the Party not in default shall be
entitled, on written notice to the other Party, without prejudice to any of its other rights
conferred on it by

 

			
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this Agreement, and in addition to any other remedies available to it by law or in equity, to
terminate this Agreement in its entirety.

     Section 6.3 Termination of Rights with Respect to Unilateral Products Upon Material Breach.
Any material failure by Medarex to comply with any of its material obligations contained herein
with respect to a specific Unilateral Product shall entitle Avalon to give to Medarex notice
specifying the nature of the default, requiring Medarex to make good or otherwise cure such
default, and stating its intention to convert such Unilateral Product to a Unilateral Product of
Avalon under the Unilateral Development and Commercialization Agreement attached to the
Collaboration Agreement as Appendix D-1 if such default is not cured. If such default is
not cured within * after the receipt of such notice (or, if such default cannot be cured within
such * period, if Medarex does not commence actions to cure such default within such period and
thereafter diligently continue such actions or if such default is not otherwise cured within *
after the receipt of such notice), except in the case of a payment default, as to which Medarex
shall have only a * cure period. Avalon shall be entitled, on written notice to Medarex, to
convert such Unilateral Product to a Unilateral Product of Avalon, whereupon each shall be subject
to their respective rights and obligations under the Unilateral Development and Commercialization
Agreement attached to the Collaboration Agreement as Appendix D-1, including the
indemnification obligations and the royalty obligations set forth therein (provided that the
royalty rate owed by Avalon pursuant to such Unilateral Development and Commercialization Agreement
shall equal the royalty rate that Medarex would have owed Avalon had it not defaulted).

     Section 6.4 Termination Upon Insolvency. Either Party may terminate this Agreement if, at any
time, the other Party shall file in any court or agency pursuant to any statute or regulation of
any state, country or jurisdiction, a petition in bankruptcy or insolvency or for reorganization or
for an arrangement or for the appointment of a receiver or trustee of that Party or of its assets,
or if such other Party proposes a written agreement of composition or extension of its debts, or if
such other Party shall be served with an involuntary petition against it, filed in any insolvency
proceeding, and such petition shall not be dismissed within * after the filing thereof, or if such
other Party shall propose or be a party to any dissolution or liquidation, or if such other Party
shall make an assignment for the benefit of its creditors.

     Section 6.5 Rights in Bankruptcy. All rights and licenses granted under or pursuant to this
Agreement by Avalon or Medarex are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the United States Bankruptcy Code, licenses of rights to “intellectual property” as
defined under Section 101 of the United States Bankruptcy Code. The Parties agree that the
Parties, as licensees of such rights under this Agreement, shall retain and may fully exercise all
of their rights and elections under the United States Bankruptcy Code. The Parties further agree
that, in the event of the commencement of a bankruptcy proceeding by or against a Party under the
United States Bankruptcy Code, the Party hereto that is not a party to such proceeding shall be
entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual
property and all embodiments of such intellectual property, which, if not already in the
non-subject Party’s possession, shall be promptly delivered to it (a) upon any such commencement of
a bankruptcy proceeding upon the non-subject Party’s written request therefor, unless the Party
subject to such proceeding continues to perform all of its obligations under this Agreement or (b)
if

 

			
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not delivered under clause (a) above, following the rejection of this Agreement by or on
behalf of the Party subject to such proceeding upon written request therefor by the non-subject
Party.

     Section 6.6 Consequences of Expiration or Termination.

          6.6.1 Licenses. Upon expiration of the Agreement in accordance with Section 6.1 and the
payment of all amounts due under Section 3.1, the licenses granted by Avalon to Medarex hereunder
shall be deemed fully-paid up and nonexclusive.

          6.6.2 Return of Information. Upon expiration of this Agreement pursuant to Section 6.1 or
upon termination of this Agreement in its entirety by either Party pursuant to this Article 6,
Medarex, at the request of Avalon, shall return all data, files, records and other materials in its
possession or control relating to Avalon’s Technology, or containing or comprising Avalon’s
Information and Inventions or other Confidential Information and to which Medarex does not retain
rights hereunder (except one copy of which may be retained for archival purposes) and Medarex
agrees not to use any Avalon Technology and/or Collaboration Technology except as permitted under
another Agreement between Medarex and Avalon.

     Section 6.7 Accrued Rights; Surviving Obligations.

          6.7.1 Accrued Rights. Termination or expiration of this Agreement for any reason shall be
without prejudice to any rights that shall have accrued to the benefit of a Party prior to such
termination or expiration. Such termination or expiration shall not relieve a Party from
obligations that are expressly indicated to survive the termination or expiration of this
Agreement.

          6.7.2 Survival. Articles 3 (with respect to obligations arising prior to expiration or
termination), 4 and 7 (provided Section 7.3 shall survive for * years after the expiration or
earlier termination of this Agreement), and Sections 1.1, 2.3 (with respect only to the last
sentence thereof), 2.4, 3.9, 3.10, 5.1, 5.2.2, 5.2.3, 5.5.3 (with respect only to the last sentence
thereof), 5.5.4, 5.5.5, 6.5, 6.6, 8.2, 9.4, 9.5 and 9.6 of this Agreement and this Section 6.7
shall survive *.

ARTICLE 7 -

INDEMNIFICATION AND INSURANCE

     Section 7.1 Indemnification of Avalon. Medarex shall indemnify Avalon, its Affiliates and
their respective directors, officers, employees and agents, and defend and save each of them
harmless, from and against any and all Losses in connection with any and all Third-Party Claims
arising from or occurring as a result of (a) the development, manufacture or commercialization of a
Unilateral Target or Unilateral Product by or on behalf of Medarex or its Affiliates or
sublicensees, or by any person or entity that performs any of the foregoing for on behalf of
Medarex or its Affiliates or sublicensees or with Unilateral Target or Unilateral Product obtained
directly or indirectly from Medarex or its Affiliates or sublicensees or, (b) the gross negligence
or willful misconduct on the part of Medarex or its Affiliates, licensees or sublicensees in
performing any activity contemplated by this Agreement.

     Section 7.2 Indemnification Procedure.

 

			
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          7.2.1 Notice of Claim. The indemnified Party shall give the indemnifying Party prompt written
notice (an “Indemnification Claim Notice”) of any Losses or discovery of fact upon which such
indemnified Party intends to base a request for indemnification under Section 7.1 or Section 7.2,
but in no event shall the indemnifying Party be liable for any Losses that result from any delay in
providing such notice. Each Indemnification Claim Notice must contain a description of the claim
and the nature and amount of such Loss (to the extent that the nature and amount of such Loss are
known at such time). The indemnified Party shall furnish * to the indemnifying Party copies of all
papers and official documents received in respect of any Losses. All indemnification claims in
respect of a Party, its Affiliates or their respective directors, officers, employees and agents
(collectively, the “Indemnitees” and each an “Indemnitee”) shall be made solely by such Party to
this Agreement (the “Indemnified Party”).

          7.2.2 Control of Defense. At its option, the indemnifying Party may assume the defense of any
Third-Party Claim by giving written notice to the Indemnified Party within thirty (30) days after
the indemnifying Party’s receipt of an Indemnification Claim Notice. The assumption of the defense
of a Third-Party Claim by the indemnifying Party shall not be construed as an acknowledgment that
the indemnifying Party is liable to indemnify any Indemnitee in respect of the Third-Party Claim,
nor shall it constitute a waiver by the indemnifying Party of any defenses it may assert against
any Indemnitee’s claim for indemnification. Upon assuming the defense of a Third-Party Claim, the
indemnifying Party may appoint as lead counsel in the defense of the Third-Party Claim any legal
counsel selected by the indemnifying Party. In the event the indemnifying Party assumes the
defense of a Third-Party Claim, the Indemnified Party shall immediately deliver to the indemnifying
Party all original notices and documents (including court papers) received by any Indemnitee in
connection with the Third-Party Claim. Should the indemnifying Party assume the defense of a
Third-Party Claim, the indemnifying Party shall not be liable to the Indemnified Party or any other
Indemnitee for any legal expenses subsequently incurred by such Indemnified Party or other
Indemnitee in connection with the analysis, defense or settlement of the Third-Party Claim. In the
event that it is ultimately determined that the indemnifying Party is not obligated to indemnify,
defend or hold harmless an Indemnitee from and against the Third-Party Claim, the Indemnified Party
shall reimburse the indemnifying Party for any and all costs and expenses (including attorneys’
fees and costs of suit) and any Losses incurred by the indemnifying Party in its defense of the
Third-Party Claim with respect to such Indemnitee.

          7.2.3 Right to Participate in Defense. Without limiting Section 7.3.2, any Indemnitee shall
be entitled to participate in, but not control, the defense of such Third-Party Claim and to engage
counsel of its choice for such purpose; provided, however, that such engagement
shall be at the Indemnitee’s own expense unless (a) the engagement thereof has been specifically
authorized by the indemnifying Party in writing, or (b) the indemnifying Party has failed to assume
the defense and engage counsel in accordance with Section 7.3.2 (in which case the Indemnified
Party shall control the defense).

          7.2.4 Settlement. With respect to any Losses relating solely to the payment of money damages
in connection with a Third-Party Claim and that will not result in the Indemnitee’s becoming
subject to injunctive or other relief or otherwise adversely affect the business of the Indemnitee
in any manner, and as to which the indemnifying Party shall have acknowledged in

 

			
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writing the obligation to indemnify the Indemnitee hereunder, the indemnifying Party shall
have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise
dispose of such Loss, on such terms as the indemnifying Party, in its sole discretion, shall deem
appropriate. With respect to all other Losses in connection with Third-Party Claims, where the
indemnifying Party has assumed the defense of the Third-Party Claim in accordance with Section
7.3.2, the indemnifying Party shall have authority to consent to the entry of any judgment, enter
into any settlement or otherwise dispose of such Loss provided it obtains the prior written consent
of the Indemnified Party (which consent shall not be unreasonably withheld or delayed). The
indemnifying Party shall not be liable for any settlement or other disposition of a Loss by an
Indemnitee that is reached without the written consent of the indemnifying Party. Regardless of
whether the indemnifying; Party chooses to defend or prosecute any Third-Party Claim, no Indemnitee
shall admit any liability with respect to, or settle, compromise or discharge, any Third-Party
Claim without the prior written consent of the indemnifying Party.

          7.2.5 Cooperation. Regardless of whether the indemnifying Party chooses to defend or
prosecute any Third-Party Claim, the Indemnified Party shall, and shall cause each other Indemnitee
to, reasonably cooperate in the defense or prosecution thereof and shall furnish such records,
information and testimony, provide such witnesses and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith.
Such cooperation shall include access during normal business hours afforded to indemnifying Party
to, and reasonable retention by the Indemnified Party of, records and information that are
reasonably relevant to such Third-Party Claim, and making Indemnitees and other employees and
agents available on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder, and the indemnifying Party shall reimburse the Indemnified
Party for all its reasonable out-of-pocket expenses in connection therewith.

          7.2.6 Expenses. Except as provided above, the costs and expenses, including fees and
disbursements of counsel, incurred by the Indemnified Party in connection with any claim shall be
reimbursed on a calendar quarter basis by the indemnifying Party, without prejudice to the
indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject
to refund in the event the indemnifying Party is ultimately held not to be obligated to indemnify
the Indemnified Party.

     Section 7.3 Insurance. Medarex shall have and maintain such types and amounts of liability
insurance *, and shall upon request provide the other Party with a copy of its policies of
insurance in that regard, along with any amendments and revisions thereto.

ARTICLE 8 -

REPRESENTATIONS, WARRANTIES AND COVENANTS

     Section 8.1 Representations, Warranties and Covenants. Each Party is entering into this
Agreement in reliance upon the representations, warranties and covenants of the other Party set
forth in Sections 10.1, 10.2 and 10.3 of the Collaboration Agreement.

 

			
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     Section 8.2 DISCLAIMER OF WARRANTY. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTIONS
10.1, 10.2 AND 10.3 OF THE COLLABORATION AGREEMENT, MEDAREX AND AVALON MAKE NO REPRESENTATIONS AND
GRANT NO WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR
OTHERWISE, AND MEDAREX AND AVALON EACH SPECIFICALLY DISCLAIM ANY OTHER WARRANTIES, WHETHER WRITTEN
OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT
OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

ARTICLE 9 -

MISCELLANEOUS

     Section 9.1 Force Majeure. Neither Party shall be held liable or responsible to the other
Party or be deemed to have defaulted under or breached this Agreement for failure or delay in
fulfilling or performing any term of this Agreement when such failure or delay is caused by or
results from events beyond the reasonable control of the non-performing Party, including fires,
floods, earthquakes, embargoes, shortages, epidemics, quarantines, war, acts of war (whether war be
declared or not) or terrorism, insurrections, riots, civil commotion, strikes, lockouts or other
labor disturbances, acts of God or acts, omissions or delays in acting by any governmental
authority. The non-performing Party shall notify the other Party of such force majeure within *
after such occurrence by giving written notice to the other Party stating the nature of the event,
its anticipated duration, and any action being taken to avoid or minimize its effect. The
suspension of performance shall be of no greater scope and no longer duration than is necessary and
the non-performing Party shall use * to remedy its inability to perform; provided,
however, that in the event the suspension of performance continues for * after the date of
the occurrence, the Parties shall meet to discuss * how to proceed in order to accomplish the goals
of the Collaboration outlined in this Agreement.

     Section 9.2 Assignment. Without the prior written consent of the other Party hereto, neither
Party shall sell, transfer, assign, pledge or otherwise dispose of, whether voluntarily,
involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties
hereunder; provided, however, that either Party hereto may assign or transfer this
Agreement or any of its rights or obligations hereunder without the consent of the other Party (a)
to any Affiliate of such Party; or (b) to any Third Party with which it merges or consolidates, or
to which it transfers all or substantially all of its assets to which this Agreement relates if in
any such event (1) the assigning Party (provided that it is the surviving entity) remains jointly
and severally liable with the relevant Medarex Affiliate, Avalon Affiliate or Third Party assignee
under this Agreement, and (ii) the relevant Medarex Affiliate assignee, Avalon Affiliate assignee,
Third Party assignee or surviving entity assumes in writing all of the assigning Party’s
obligations under this Agreement. For purposes of clarification with respect to subsection (b)
herein, a Third Party that merges or consolidates with a Party, or to which a Party transfers all
or substantially all of its assets to which this Agreement relates, shall not be deemed to grant
the other Party to this

 

			
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Agreement any license to such Third Party’s technology in existence as of the effective date
of such merger, consolidation or transfer, unless such grant is made pursuant to a separate
agreement, provided such Third Party shall maintain all licenses granted hereunder by such
first Party with respect to its Technology and any Information and Inventions with respect thereto.
Any purported assignment or transfer in violation of this Section shall be void ab initio and of
no force or effect.

     Section 9.3 Severability. If any provision of this Agreement is held to be illegal, invalid
or unenforceable under any present or future law, and if the rights or obligations of either Party
under this Agreement will not be materially and adversely affected thereby, (a) such provision
shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions
of this Agreement shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom, and (d) in lieu of such illegal,
invalid or unenforceable provision, there shall be added automatically as a part of this Agreement
a legal, valid and enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and reasonably acceptable to the Parties herein. To the
fullest extent permitted by applicable law, each Party hereby waives any provision of law that
would render any provision prohibited or unenforceable in any respect.

     Section 9.4 Disputes. Any dispute that may arise relating to this Agreement shall be referred
to the Chief Executive Officers of each of the Parties (or their respective designees) who shall
use * to mutually agree upon the proper course of action to resolve the dispute. If any dispute is
not resolved by the Chief Executive Officers of the Parties (or their designees) within * after
such dispute is referred to them, or such longer period as the Chief Executive Officers (or their
designees) may collectively agree, then either Party shall have the right to litigate such dispute
in accordance with Section 9.5 or to pursue such other dispute resolution mechanism as the Parties
may agree.

     Section 9.5 Governing Law, Jurisdiction, Venue and Service.

          9.5.1 Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that
might otherwise refer construction or interpretation of this Agreement to the substantive law of
another jurisdiction.

          9.5.2 Jurisdiction. The Parties hereby irrevocably and unconditionally consent to the
exclusive jurisdiction of the courts of the State of Delaware and the United States District Court
for the District of Delaware for any action, suit or proceeding (other than appeals therefrom)
arising out of or relating to this Agreement, and agree not -to commence any action, suit or
proceeding (other than appeals therefrom) related thereto except in such courts.

          9.5.3 Venue. The Parties further hereby irrevocably and unconditionally waive any objection
to the laying of venue of any action, suit or proceeding (other than appeals therefrom) arising out
of or relating to this Agreement in the courts of the State of Delaware or the United States
District Court for the District of Delaware, and hereby further irrevocably and

 

			
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unconditionally waive and agree not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient forum.

          9.5.4 Service. Each Party hereto further agrees that service of any process, summons, notice
or document by U.S. registered mail to its address set forth below shall be effective service of
process for any action, suit or proceeding brought against it under this Agreement in any such
court.

          9.5.5 Patents and Trademarks. Notwithstanding the foregoing, any disputes regarding the
validity, scope or enforceability of Patents or Trademarks shall be submitted to a court of
competent jurisdiction in the territory in which such rights apply.

     Section 9.6 Notices. All notices or other communications that are required or permitted
hereunder shall be in writing and delivered personally, sent by facsimile (and promptly confirmed
by personal delivery, registered or certified mail or overnight courier as provided herein), sent
by nationally-recognized overnight courier or sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:

     If to Avalon, to:

Avalon Pharmaceuticals, Inc.

20358 Seneca Meadows Road

Germantown, Maryland 20876

Attention: CEO

Facsimile: 301-556-9910

     If to Medarex, to:

Medarex, Inc.

707 State Road

Princeton, New Jersey 08540-1437

Attention: President

Facsimile: (609) 430-2850

with a copy to:

Medarex, Inc.

707 State Road

Princeton, New Jersey 08540-1437

Attention: General Counsel

Facsimile: (609) 430-4215

or to such other address as the Party to whom notice is to be given may have furnished to the other
Party in writing in accordance herewith. Any such communication shall be deemed to have been
received (a) when delivered, if personally delivered or sent by facsimile on a business day, (b) on

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

23

 

the business day after dispatch, if sent by nationally-recognized overnight courier, and (c) on the
third business day following the date of mailing, if sent by mail. It is understood and agreed
that this Section 9.6 is not intended to govern the day-to-day business communications necessary
between the Parties in performing their duties, in due course, under the terms of this Agreement.

     Section 9.7 Entire Agreement; Modifications. This Agreement, together with the Appendix
attached hereto and the Collaboration Agreement, sets forth and constitutes the entire agreement
and understanding between the Parties with respect to the subject matter hereof and thereof and all
prior agreements, understanding, promises and representations, whether written or oral, with
respect thereto are superseded hereby and thereby. Each Party confirms that it is not relying on
any representations or warranties of the other Party except as specifically set forth herein or
therein. No amendment, modification, release or discharge shall be binding upon the Parties unless
in writing duly executed by authorized representatives of both Parties.

     Section 9.8 Relationship of the Parties. It is expressly agreed that the Parties shall be
independent contractors of one another and that the relationship between the Parties shall not
constitute a partnership, joint venture or agency. Neither Party shall have the authority to make
any statements, representations or commitments of any kind, or to take any action, which shall be
binding on the other, without the prior written consent of the other to do so. All persons
employed by a Party shall be employees of such Party and not of the other Party and all costs and
obligations incurred by reason of any such employment shall be for the account and expense of such
Party.

     Section 9.9 Equitable Relief. Each Party acknowledges and agrees that the restrictions set
forth in Articles 4 and 5 of this Agreement are reasonable and necessary to protect the legitimate
interests of the other Party and that such other Party would not have entered into this Agreement
in the absence of such restrictions, and that any violation or threatened violation of any
provision of Article 4 or 5 will result in irreparable injury to such other Party. Each Party also
acknowledges and agrees that in the event of a violation or threatened violation of any provision
of Article 4 or 5, the other Party hall be entitled to preliminary and permanent injunctive relief,
without the necessity of proving irreparable injury or actual damages and without the necessity of
having to post a bond, as well as to an equitable accounting of all earnings, profits and other
benefits arising from any such violation. The rights provided in the immediately preceding
sentence shall be cumulative and in addition to any other rights or remedies that may be available
to such other Party. Nothing in this Section 9.9 is intended, or should be construed, to limit
such other Party’s right to preliminary and permanent injunctive relief or any other remedy for
breach of any other provision of this Agreement.

     Section 9.10 Waiver. Any term or condition of this Agreement may be waived at any time by the
Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set
forth in a written instrument duly executed by or on behalf of the Party waiving such term or
condition. The waiver by either Party hereto of any right hereunder or of the failure to perform
or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of
any other breach or failure by said other Party whether of a similar nature or otherwise.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

24

 

     Section 9.11 Counterparts. This Agreement may be executed in two (2) or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument.

     Section 9.12 No Benefit to Third Parties. The representations, warranties, covenants and
agreements set forth in this Agreement are for the sole benefit of the Parties hereto and their
successors and permitted assigns, and they shall not be construed as conferring any rights on any
other parties.

     Section 9.13 Further Assurance. Each Party shall duly execute and deliver, or cause to be
duly executed and delivered, such further instruments and do and cause to be done such further acts
and things, including the filing of such assignments, agreements, documents and instruments, as may
be necessary or as the other Party may reasonably request in connection with this Agreement or to
carry out more effectively the provisions and purposes, or to better assure and confirm unto such
other Party its rights and remedies under this Agreement.

     Section 9.14 English Language. This Agreement has been written and executed in the English
language. Any translation into any other language shall not be an official, version thereof, and
in the event of any conflict in interpretation between the English version and such translation,
the English version shall control.

     Section 9.15 References. Unless otherwise specified, (a) references in this Agreement to any
Article, Section, Appendix, Schedule or Exhibit shall mean references to such Article, Section,
Appendix, Schedule or Exhibit of this Agreement, (b) references in any section to any clause are
references to such clause of such section, and (c) references to any agreement, instrument or other
document in this Agreement refer to such agreement, instrument or other document as originally
executed or, if subsequently varied, replaced or supplemented from time to time, as so varied,
replaced or supplemented and in effect at the relevant time of reference thereto.

     Section 9.16 Construction. Except where the context otherwise requires, wherever used, the
singular shall include the plural, the plural the singular, the use of any gender shall be
applicable to all genders and the word “or” is used in the inclusive sense (and/or). The captions
of this Agreement are for convenience of reference only and in no way define, describe, extend or
limit the scope or intent of this Agreement or the intent of any provision contained in this
Agreement. The term “including” as used herein shall mean including, without limiting the
generality of any description preceding such term. The language of this Agreement shall be deemed
to be the language mutually chosen by the Parties and no rule of strict construction shall be
applied against either Party hereto.

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

25

 

     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly
authorized representatives as of the date first above written.

	 	 	 	 	 	 	 	 	 
	Medarex, Inc	 	 	 	Avalon Pharmaceuticals, Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	s/ James B. Cornett, Ph.D.
 

	 	 	 	By:
	 	s/ Kenneth C. Carter, Ph.D.
 

	Name:        James B. Cornett, Ph.D.	 	 	 	Name:        Kenneth C. Carter, Ph.D.
	Title:         VP, Business Development	 	 	 	Title:          President and CEO

 

			
	*	 	The asterisk denotes the confidential portions of this document that have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

26

 

APPENDIX A

Unilateral Products and Unilateral Targets

     This Appendix to the UNILATERAL DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (“Agreement”)
effective as of October 15, 2003, by and between AVALON PHARMACEUTICALS, INC. (“Avalon”) and
MEDAREX, INC., on behalf of itself and its wholly owned subsidiary, GENPHARM INTERNATIONAL, INC.,
(collectively, “Medarex”) sets forth the Unilateral Products with respect to the applicable
Unilateral Targets.

     The contents of this Appendix A are hereby incorporated into the Agreement and are
governed by the terms and conditions of the Agreement, including the confidentiality provisions set
forth therein.

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