COLLABORATION AND LICENSE AGREEMENT

Exhibit 10.2

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:

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.

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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).

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     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 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 * .

     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

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other Party. Notwithstanding the foregoing to the contrary, materials, know-how or other information which is 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

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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

     (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.

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

     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 Sale” 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).

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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.

     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

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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.

     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.

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     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.

     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.

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     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.

     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.

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     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.

     (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

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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 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

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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 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

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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.

     (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

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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:

     (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.

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     (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, 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.

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     (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.

     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

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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 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.

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     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

     (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

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     (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.

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

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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.

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

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     (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 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

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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.

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     (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;

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     (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, 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

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OR ENFORCEABILITY OF AVALON PATENTS OR THAT ACTIVITIES CONTEMPLATED BY THIS AGREEMENT OR COLLABORATION PRODUCTS WILL NOT INFRINGE PATENT RIGHTS OF A THIRD PARTY.

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

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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 Terri