Preview | Purchase Agreement |

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT (Agreement) is made as of the 19th day of January, 2007 by and among Avalon Pharmaceuticals, Inc., a Delaware corporation (the Company), and the Investors set forth on the signature pages affixed hereto (each an Investor and collectively the Investors).

A. The Company and the Investors are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D (Regulation D), as promulgated by the U.S. Securities and Exchange Commission (the SEC) under the Securities Act of 1933, as amended; and

B. The Investors wish to purchase from the Company, and the Company wishes to sell and issue to the Investors, upon the terms and conditions stated in this Agreement, the number of shares (the Shares) of the Companys Common Stock, par value $0.01 per share (together with any securities into which such shares may be reclassified, the Common Stock), determined in accordance with the terms of this Agreement at a per share purchase price equal to $3.34 (the Per Share Purchase Price); and

C. Contemporaneous with the sale of the Common Stock, the parties hereto will execute and deliver a Registration Rights Agreement, in the form attached hereto as Exhibit A (the Registration Rights Agreement), pursuant to which the Company will agree to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, and applicable state securities laws with respect to the Securities.

In consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Definitions. In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth below:

Affiliate means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such Person.

Board means the board of directors of the Company.

Business Day means a day, other than a Saturday or Sunday, on which banks in New York City and San Francisco, California are open for the general transaction of business.

Companys Knowledge means the actual knowledge of the executive officers (as defined in Rule 405 under the 1933 Act) of the Company, after due inquiry.

Confidential Information means trade secrets, confidential information and know-how (including but not limited to ideas, formulae, compositions, processes, procedures and techniques, research and development information, computer program code, performance specifications, support documentation, drawings, specifications, designs, business and marketing plans, and customer and supplier lists and related information).

Control (including the terms controlling, controlled by or under common control with) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

Effective Date means the date on which the initial Registration Statement is declared effective by the SEC.

Intellectual Property means all of the following: (i) patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); (ii) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans and Internet domain names, together with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals for any of the foregoing; and (v) proprietary computer software (including but not limited to data, data bases and documentation).

Material Adverse Effect means a material adverse effect on (i) the assets, liabilities, results of operations, condition (financial or otherwise), business, or prospects of the Company, or (ii) the ability of the Company to perform its obligations under the Transaction Documents.

Nasdaq means The Nasdaq Stock Market, Inc.

Person means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

Purchase Price means the aggregate purchase price for the Shares to be acquired by the Investors in accordance with the terms hereof.

Registration Statement has the meaning set forth in the Registration Rights Agreement.

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