EXHIBIT 10.1

 
AGREEMENT AND PLAN OF MERGER
 
among:
 
Acorda Therapeutics, Inc.,
 
a Delaware corporation;
 
ATI Development Corp.,
 
a Delaware corporation;
 
Neuronex, Inc.,
 
a Delaware corporation;
 
and
 
Moise A. Khayrallah
 
as the Stockholders’ Representative
 

 
Dated as of February 15, 2012
 

 

Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted portions, which are marked with brackets [     ]
and an asterisk*, have been separately filed with the Commission.

 
 

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TABLE OF CONTENTS
Page

 
1.
Description of Transaction
1
 
1.1
Merger of Merger Sub into the Company.
1
 
1.2
Closing; Effective Time.
2
 
1.3
Treatment of Company Options and Company Warrants.
3
 
1.4
Withholding
3
 
1.5
Working Capital Adjustment
4
 
1.6
Surrender of Certificates; Payment.
4
 
1.7
Contingent Payments.
7
 
1.8
Hold-back Amount
16
2.
Representations and Warranties of the Company.
17
 
2.1
Due Organization; Organizational Documents
17
 
2.2
Capitalization; Stockholder Information.
17
 
2.3
Financial Statements; Absence of Undisclosed Liabilities.
18
 
2.4
Absence of Changes
19
 
2.5
Tangible Personal Property
21
 
2.6
Real Property; Lease Agreements
21
 
2.7
Intellectual Property.
21
 
2.8
Contracts.
25
 
2.9
Suppliers
27
 
2.10
Compliance with Laws
27
 
2.11
Permits.
28
 
2.12
Tax Matters.
28
 
2.13
Employees and Consultants
31
 
2.14
Employee and Labor Matters; Benefit Plans.
31
 
2.15
Environmental Matters.
35
 
2.16
Insurance
36
 
2.17
Transactions with Affiliates
36
 
2.18
Legal Proceedings
36
 
2.19
Regulatory Compliance.
37
 
2.20
Authority; Binding Nature of Agreement; Non-Contravention
39
 
2.21
Stockholder Approval
40
 
2.22
Board Approval; Other Approvals
40
 
2.23
Financial Advisor
40
 
2.24
Distribution of Merger Consideration
40
 
2.25
Hart-Scott-Rodino Status
41
 
2.26
Accuracy of Representations and Warranties
41
 
2.27
Closing Allocation Certificate
41
 
2.28
Bank Accounts
41
3.
Representations and Warranties of Parent and Merger Sub.
41
 
3.1
Due Organization
41
 
3.2
Authority; Binding Nature of Agreement
41
 
3.3
Merger Sub
42
 
3.4
No Authorizations
42

 
 
 
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3.5
Litigation.
42
 
3.6
No Other DZNS Products
42
 
3.7
Adequacy of Funds
43
 
3.8
No Brokers
43
 
3.9
SEC Filings.
43
 
3.10
Controls and Procedures; NASDAQ Compliance.
44
4.
Covenants and Agreements.
44
 
4.1
Conduct of Business of the Company
44
 
4.2
Access to Information
47
 
4.3
Public Disclosure
47
 
4.4
Regulatory Approval; Further Assurances.
48
 
4.5
Indemnification of Officers and Directors of the Company.
48
 
4.6
Employee Arrangements.
49
 
4.7
No Solicitation.
49
 
4.8
Section 280G Approvals.
50
 
4.9
Notifications to Parent
50
 
4.10
Data Room
50
 
4.11
Transition of Facilities and Operations.
50
 
4.12
Transition Services Agreement
51
 
4.13
Signing Payment; Research and Development Support
51
 
4.14
FDA Meeting
51
 
4.15
SK Agreement
52
 
4.16
Patent Prosecution and [***]
52
 
4.17
Financial Statement Audit
52
5.
Conditions to the Merger.
52
 
5.1
Conditions to Each Party’s Obligation to Effect the Merger
53
 
5.2
Conditions to Obligations of Parent and Merger Sub
53
 
5.3
Conditions to Obligation of the Company
54
6.
Termination.
 
55
 
6.1
Termination
55
 
6.2
Effect of Termination.
56
  6A
Tax Returns and Tax Contests
57
7.
Indemnification
 
60
 
7.1
Expiration of Representations, Warranties and Covenants
60
 
7.2
Indemnification
61
 
7.3
Choice of Remedies; Limitations on Liability.
62
 
7.4
Defense of Third Party Claims.
63
 
7.5
Exclusivity
65
 
7.6
Direct Indemnification Claims.
65
8.
Miscellaneous Provisions.
66
 
8.1
Stockholders’ Representative.
66
 
8.2
Expenses
68

 
 
 
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8.3
Amendment; Waiver.
68
 
8.4
Entire Agreement; Counterparts; Exchanges by Facsimile
68
 
8.5
Governing Law
68
 
8.6
Assignability; Third Party Rights.
69
 
8.7
Disclosure Schedule
69
 
8.8
Notices
69
 
8.9
Severability
71
 
8.10
Enforcement
71
 
8.11
Construction.
71

Exhibits And Schedules
 
Exhibit A                      -           Certain Definitions
Exhibit B                      -           Form of Certificate of Incorporation
of the Surviving Corporation
Exhibit C                      -           Form of Transition Services Agreement
Exhibit D                      -           Form of Officer and Director
Resignation Letter
Exhibit E                      -           Form of Opinion
 

 
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AGREEMENT AND PLAN OF MERGER
 
This Agreement and Plan of Merger (“Agreement”) is made and entered into as of
February 15, 2012, by and among: Acorda Therapeutics, Inc., a Delaware
corporation (“Parent”); ATI Development Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent (“Merger Sub”); Neuronex, Inc., a Delaware
corporation (the “Company”); and Moise A. Khayrallah, Ph.D., a resident of North
Carolina, solely as the Stockholders’ Representative as set forth
herein.  Certain capitalized terms used in this Agreement are defined in Exhibit
A.
 
Recitals
 
A.           Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub with and into the Company in accordance with this Agreement and the
DGCL (the “Merger”).  Upon the consummation of the Merger, Merger Sub will cease
to exist, and the Company will become a wholly-owned Subsidiary of Parent.
 
B.           The respective boards of directors of Parent, Merger Sub and the
Company have approved this Agreement and the Merger.
 
C.           Immediately after the execution and delivery of this Agreement,
each stockholder of the Company shall execute and deliver an irrevocable written
consent approving the Agreement and the Merger.
 
Agreement
 
For good and valuable consideration, including covenants, representations and
warranties being made herein, the parties to this Agreement, intending to be
legally bound, agree as follows:
 
1.
DESCRIPTION OF TRANSACTION

 
1.1           Merger of Merger Sub into the Company.
 
(a)           Upon the terms and subject to the provisions set forth in this
Agreement, at the Effective Time (as defined in Section 1.2), Merger Sub shall
be merged with and into the Company.  By virtue of the Merger, at the Effective
Time, the separate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation in the Merger (the “Surviving
Corporation”).
 
(b)           The Merger shall have the effects set forth in this Agreement and
in the applicable provisions of the DGCL.  The certificate of incorporation of
the Surviving Corporation shall be amended and restated as of the Effective Time
to conform to Exhibit B and the bylaws of the Surviving Corporation shall be
amended and restated as of the Effective Time to conform to the bylaws of Merger
Sub as in effect immediately prior to the Effective Time. The directors and
officers of the Surviving Corporation immediately after the Effective Time shall
be the respective individuals who were directors and officers of Merger Sub
immediately prior to the Effective Time.
 

 
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1.2           Closing; Effective Time.
 
(a)           The consummation of the transactions contemplated by this
Agreement (the “Closing”) shall take place as soon as practicable, but no later
than five Business Days after the satisfaction or waiver of the last of the
conditions set forth in Section 5 (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the satisfaction or
waiver of such conditions), unless another time or date, or both, are agreed to
in writing by the parties hereto.  The date on which the Closing is held is
herein referred to as the “Closing Date.”  The Closing will be held at the
offices of WilmerHale in New York, New York, unless another place is agreed to
in writing by the parties hereto.
 
(b)           Subject to the terms of this Agreement, on the Closing Date, a
certificate of merger satisfying the applicable requirements of the DGCL shall
be filed with the Secretary of State of the State of Delaware.  The Merger shall
become effective at the time of the filing of such certificate of merger with
the Secretary of State of the State of Delaware (the time as of which the Merger
becomes effective being referred to as the “Effective Time”).
 
(c)           Subject to Section 1.5(a), at the Effective Time, by virtue of the
Merger and without any further action on the part of Parent, Merger Sub, the
Company or any stockholder of the Company:
 
(1)           to the extent not converted to Company Common Stock prior to the
Effective Time, each share of the Company’s Series A Preferred Stock outstanding
immediately prior to the Effective Time shall be canceled and converted into the
right to receive an amount in cash equal to: (A) the Merger Price Per Series A
Share; plus (B) any amounts required to be paid by Parent with respect to such
share to the Former Holder thereof in accordance with the terms of Sections 1.7
and 8.1(c), as and when such payments are required to be made; provided, that
the aggregate per-share payment to be made pursuant to this Section 1.2(c)(1)
with respect to each share of Series A Preferred Stock outstanding as of the
Effective Time shall not exceed $0.98328 (such aggregate amount actually paid to
the Series A Preferred Stock pursuant to this Section 1.2(c)(1) being referred
to herein as the “Series A Preferred Merger Consideration”);
 
(2)           except as provided in clause (4) below, each share of Company
Common Stock outstanding immediately prior to the Effective Time shall be
canceled and converted into the right to receive: (A) an amount in cash equal to
the Merger Price Per Common Share; plus (B) any amounts required to be paid by
Parent with respect to such share to the Former Holder thereof in accordance
with the terms of Sections 1.7 and 8.1(c), as and when such payments are
required to be made (collectively, the “Common Merger Consideration”);
 
(3)           each share of the common stock, $0.001 par value per share, of
Merger Sub outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation; and
 
(4)           each share of Company Capital Stock that is held by the Company as
treasury stock, and each share of Company Capital Stock owned by Parent or
Merger Sub or
 

 
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any other wholly owned Subsidiary of Parent, shall be automatically canceled and
shall cease to exist and no consideration shall be delivered in exchange
therefor.
 
1.3           Treatment of Company Options and Company Warrants.
 
(a)           Prior to the Effective Time, (i) the board of directors of the
Company shall resolve and take all actions necessary pursuant to the plans and
agreements governing the Company Options such that at the Effective Time:
(A) each Company Option shall thereafter be entitled solely to the consideration
set forth herein and (B) upon the Closing, each Company Option shall be canceled
and be converted into the right to receive the consideration specifically set
forth herein and (ii) the Company shall send holders of Company Options timely
notice pursuant to the plans and agreements governing the Company Options of the
foregoing in form and substance reasonably acceptable to Parent and obtain the
written consent of holders of at least 95% of the Company Options for the
cancellation and conversion of the Company Options as set forth above.
 
(b)           At the Effective Time, each Company Option that is outstanding
immediately prior to the Effective Time, whether or not then currently vested or
exercisable, shall be canceled and shall entitle the Former Holder thereof to
receive an amount in cash equal to: (i) the Merger Price Per Common Share, minus
the exercise price per share of Company Common Stock into which such Company
Option is exercisable; plus (ii) any amounts required to be paid by Parent with
respect to such option share to the Former Holder thereof in accordance with the
terms of Sections 1.7 and 8.1(c), as and when such payments are required to be
made (collectively, the “Option Consideration”).  The amount payable, if any,
pursuant to clause (i) of the preceding sentence shall be paid as promptly as
reasonably practicable after the receipt of a Letter of Transmittal (as defined
below).
 
(c)           To the extent not exercised prior to the Effective Time, at the
Effective Time, each Company Warrant to purchase shares of Series A Preferred
Stock that is outstanding as of immediately prior to the Effective Time shall be
canceled and shall entitle the Former Holder thereof to receive an amount in
cash equal to:  (i) the Merger Price Per Common Share, minus the exercise price
per share of Series A Preferred Stock subject to such Company Warrant; plus
(ii) any amounts required to be paid by Parent with respect to such share to the
Former Holder thereof in accordance with the terms of Sections 1.7 and 8.1(c),
as and when such payments are required to be made (the “Warrant
Consideration”).  The amount payable, if any, pursuant to clause (i) of the
preceding sentence shall be paid as promptly as reasonably practicable after the
receipt of a Letter of Transmittal (as defined below).
 
1.4           Withholding.  Each of Parent, the Surviving Corporation, or an
Affiliate thereof and Paying Agent shall be entitled to withhold from any
consideration payable pursuant to this Agreement to any Person such amounts as
Parent, the Surviving Corporation, or an Affiliate thereof or Paying Agent are
required to withhold from such consideration under any provision of Tax Law,
including, without limitation, any employment taxes, payroll taxes, or taxes due
under Section 409A of the Code, in each case only the extent
applicable.  Parent, Surviving Corporation, or an Affiliate thereof and Paying
Agent shall be entitled to take any and all actions that may be necessary to
ensure
 

 
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that any such amounts are timely withheld and promptly and properly remitted to
the appropriate Governmental Authority.  Notwithstanding any other provision of
this Agreement, any payments to be made under this Agreement that are subject to
withholding shall be made through the payroll systems of the Company, Surviving
Corporation or an Affiliate thereof, and any such withholdings, excluding any
employer’s share of taxes relating to such payments, will be deducted from the
applicable payment.  As part of the Closing Allocation Certificate, the Company
shall provide to Parent a schedule showing which payments to be made under this
Agreement are subject to compensatory withholding.
 
1.5           Working Capital Adjustment.  Within 90 days after the Closing
Date, the Surviving Corporation shall determine the Net Cash Amount immediately
after the Effective Time (the “Actual Net Cash Amount”) and shall as promptly as
reasonably practicable, following such determination, deliver to the
Stockholders’ Representative a certificate, executed by an executive officer of
the Parent, stating the Actual Net Cash Amount. Thereafter, either (i) the next
occurring Contingent Payment shall be increased by the amount the Actual Net
Cash Amount exceeds the Targeted Net Cash Amount (if such difference is a
positive number), or (ii) the Hold-back Amount payable shall be decreased by the
amount the Actual Net Cash Amount is less than the Targeted Net Cash Amount (if
such difference is a negative number), as applicable.  If the Stockholders’
Representative disputes the Actual Net Cash Amount as calculated by the
Surviving Corporation, then the Stockholders’ Representative shall have the
right, for a period of 30 days from receipt of the calculation of the Actual Net
Cash Amount, to request an independent third-party audit of the
calculation.  Such audit shall take place at the headquarters of Parent and
shall be completed as promptly as reasonably practicable thereafter, and in any
event to be completed within 180 days, by an independent accounting firm
mutually agreed upon by the Parent and the Stockholders’ Representative.  The
determination of the Actual Net Cash Amount by the independent accounting firm
shall be binding on the parties, absent manifest error, and the costs of such
review shall be borne by the Stockholders’ Representative, unless the
independent review reveals an increase in the Actual Net Cash Amount in excess
of ten percent (10%), in which case the costs shall be borne by the Surviving
Corporation.  For purposes of this Section 1.5, the “Targeted Net Cash Amount”
shall equal zero dollars ($0.00), after giving effect to the Debt Payment.
 
1.6           Surrender of Certificates; Payment.
 
(a)           Paying Agent.  At least five (5) days prior to the Effective Time,
Parent shall either notify the Stockholders’ Representative in writing that the
Parent will serve as the paying agent pursuant to this Agreement, or designate a
bank or trust company reasonably acceptable to the Company to act as agent (such
designated party or Parent, as applicable, being referred to herein as the
“Paying Agent”) for payment of (i) the applicable Merger Consideration upon
surrender of the certificates that immediately prior to the Effective Time
represented shares of Company Capital Stock (each such certificate, a
“Certificate”), (ii) the Option Consideration (other than with respect to Former
Holders of Company Options who are or were employees of the Company or are
otherwise subject to withholding) and (iii) the Warrant Consideration, and enter
into an agreement with the Paying Agent providing for such services.  Any fees
payable to a third party Paying Agent for providing these services shall be paid
by Parent.  On the Closing
 

 
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Date, Parent shall deposit, or cause to be deposited, with the Paying Agent cash
sufficient to pay the aggregate Merger Consideration payable pursuant to
Section 1.2(c) (other than payments to be made pursuant to Sections 1.7 and
8.1(c)) to Former Holders of Capital Stock upon surrender of Certificates
representing outstanding shares of Company Capital Stock and cash sufficient to
pay the aggregate Warrant Consideration and Option Consideration (other than
with respect to Former Holders of Company Options who are or were employees of
the Company or are otherwise subject to withholding) payable pursuant to
Section 1.3 (other than payments to be made pursuant to Sections 1.7 and
8.1(c)).  Such funds provided to the Paying Agent, together with any funds
deposited with the Paying Agent pursuant to Sections 1.7 or 8.1, are referred to
herein as the “Payment Fund.”  For the avoidance of doubt, the Option
Consideration with respect to Former Holders of Company Options who are or were
employees or are otherwise subject to withholding shall be made through the
payroll systems of the Company, Surviving Corporation, or an Affiliate thereof
rather than through the Payment Fund.
 
(b)           Exchange Procedures.  Prior to the Closing, Parent and the Company
shall agree on the form of: (i) instructions for use in effecting the surrender
of the Certificates; and (ii) a letter of transmittal in exchange for the right
to receive the applicable Merger Consideration, Option Consideration or Warrant
Consideration, as applicable, with respect to each share of Company Capital
Stock, Company Option or Company Warrant (together, the “Letter of
Transmittal”).  Prior to the Closing, the Company may provide such Letter of
Transmittal and other relevant materials agreed to by Parent and the Company to
Former Holders directly, with a copy to the Stockholders’ Representative, and
shall inform Parent, the Stockholders’ Representative and Paying Agent of the
Former Holders to which Letters of Transmittal have been delivered.  Promptly
(and in any event within five Business Days) after the later of the Effective
Time and delivery of all information necessary to mail the Letters of
Transmittal, the Paying Agent shall mail a Letter of Transmittal to each Former
Holder to which the Company had not previously delivered a Letter of
Transmittal.  Upon delivery to the Paying Agent of a duly completed and validly
executed Letter of Transmittal (in accordance with the instructions and such
other customary documents as may reasonably be required by the Paying Agent),
with accompanying Certificates which shall be tendered for cancellation, the
Former Holder of such Capital Stock, Company Option or Company Warrant, as
applicable, shall be entitled to receive in exchange therefor the applicable
Merger Consideration, Option Consideration or Warrant Consideration, with
respect to each share of Company Capital Stock, Company Option or Company
Warrant, as applicable, and the Certificates so surrendered shall forthwith be
canceled.  Former Holders of Company Warrants and Company Options shall be
required to return only a duly completed and validly executed Letter of
Transmittal, but shall not be required to deliver any Certificates in respect of
Company Options or Company Warrants.  In the event of a transfer of ownership of
shares of Company Capital Stock that is not registered in the transfer records
of the Company, the proper amount of cash may be paid in exchange therefor to a
Person other than the Person in whose name the Certificate so surrendered is
registered if such Certificate shall be properly endorsed or shall otherwise be
in proper form for transfer and the Person requesting such payment shall pay any
transfer and other taxes required by reason of the payment to a Person other
than the registered holder of such Certificate or establish to the reasonable
satisfaction of the Surviving Corporation that such tax either has been paid or
is not applicable.  Until surrendered as contemplated by this Section 1.6(b),
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such
 

 
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surrender the applicable Merger Consideration with respect to each share of
Company Capital Stock evidenced by such Certificate.  If a Letter of Transmittal
is delivered and a Certificate is properly surrendered to the Paying Agent
following the Closing, then Parent shall cause the Merger Consideration or
Warrant Consideration, as applicable (in each case other than payments to be
made pursuant to Sections 1.7 and 8.1(c)) to be paid by the Paying Agent to the
applicable Former Holder in immediately available funds as promptly as
reasonably practicable after such delivery and surrender and Parent shall cause
the Option Consideration (other than payments to be made pursuant to Sections
1.7 and 8.1(c)) to be paid by the Paying Agent or through the payroll systems of
the Company, Surviving Corporation, or an Affiliate thereof (as applicable) as
soon as practicable after such delivery and surrender.
 
(c)           Closing Payments.  At least five Business Days prior to the
Closing Date, the Company shall provide Parent and the Stockholders’
Representative with the Closing Allocation Certificate.  In addition, at least
five Business Days prior to Closing, the Company shall also deliver to the
Parent true, correct and complete payoff letters with respect to any and all
Indebtedness (other than Retained Indebtedness) otherwise outstanding at the
Closing and final invoices from any Person to receive payment of Sellers’
Expenses.  At the Closing, Parent shall pay or cause to be paid the following
payments: (i) to the holders of Indebtedness (other than Retained Indebtedness),
the amount set forth in the Closing Allocation Certificate, such amount to
include the outstanding principal amount, together with all accrued and unpaid
interest through immediately prior to the Effective Time and prepayment or other
penalties or premiums, if any, owed with respect thereto (the amount so paid to
the holders of Indebtedness at the Closing and the amount of the Retained
Indebtedness, the “Debt Payment”); (ii) to the Persons entitled thereto, the
amount of all Sellers’ Expenses as set forth in the Closing Allocation
Certificate; (iii) to the Stockholders’ Representative, the Reserve Amount; and
(iv)  to the Paying Agent, the Payment Fund.
 
(d)           Reliance.  In calculating and paying the consideration payable
under Sections 1.6(c), 1.7(d) or 8.1(c), or any other payment contemplated by
this Agreement, Parent, Surviving Corporation and Paying Agent shall be entitled
to rely conclusively on information contained in (i) the Closing Allocation
Certificate or a Contingent Allocation Certificate, as applicable, and other
certificates or instructions delivered pursuant to this Agreement, including the
amounts of outstanding Indebtedness, Sellers’ Expenses, PJSC Contingent Fees to
be offset, and amounts payable to any Former Holder, (ii) the Letters of
Transmittal, (iii) representations, warranties and other information contained
in this Agreement including the Disclosure Schedule, and (iv) any other
instructions and certificates delivered by Stockholders’ Representative or the
Company as contemplated by this Agreement.
 
(e)           Transfer Books; No Further Ownership Rights in Company Stock.  At
the Effective Time: (i) all shares of Company Capital Stock outstanding
immediately prior to the Effective Time shall automatically be canceled and
retired and shall cease to exist, and all holders of Certificates representing
shares of Company Capital Stock that were outstanding immediately prior to the
Effective Time shall cease to have any rights as stockholders of the Company,
except the right to receive the applicable Merger Consideration with respect to
each share of Company Capital Stock evidenced by such Certificate upon surrender
thereof in accordance with Section 1.6(b); and (ii) the stock transfer books of
the Company shall be closed
 

 
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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.

and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Company Capital Stock that
were outstanding immediately prior to the Effective Time.
 
(f)           Lost, Stolen or Destroyed Certificates.  If any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by Parent, the posting by such Person of a bond, in such
reasonable amount as Parent may direct, as indemnity against any claim that may
be made against it with respect to such Certificate, the Paying Agent will pay
the applicable Merger Consideration to such Person in exchange for each share of
Company Capital Stock evidenced by such lost, stolen or destroyed Certificate.
 
(g)           Termination of Fund.  Any portion of the Payment Fund (including
the proceeds of any investments thereof) that remains undistributed to the
Former Holders one year after the deposit thereof by Parent or the Stockholders’
Representative into the Payment Fund shall be delivered by the Paying Agent to
the Surviving Corporation upon demand.  Any Former Holders who have not
theretofore complied with this Section 1.6 shall thereafter look only to Parent
or the Surviving Corporation for payment of the Merger Consideration, Option
Consideration, Warrant Consideration or Contingent Payment payable with respect
thereto, subject to applicable laws of escheat.
 
(h)           No Liability.  Notwithstanding any provision of this Agreement to
the contrary, none of Parent, the Surviving Corporation, an Affiliate thereof or
the Paying Agent shall be liable to any Person for any amount delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar Law.
 
(i)           Taking of Further Action.  If, at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company, Parent and the Surviving Corporation are fully authorized in their
respective names to take, and will take all such lawful and necessary or
desirable action, so long as such action is not inconsistent with this
Agreement.
 
1.7           Contingent Payments.
 
(a)           Definitions.  For purposes of this Agreement:
 
(1)           “Contingent Payment” means a Milestone Payment, an Earn-out
Payment or a Sales Milestone Payment.
 
(2)           “Contingent Payment Event” means a Milestone Event, a Sales
Milestone Event or an obligation to make an Earn-out Payment.
 
(3)           “Diligent Efforts” shall mean [***].
 

 
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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.

(4)           “DZNS Product” shall mean any product (a) that meets the
definition of the term “Product” in the SK License, as such term is defined as
of the Closing Date, or (b) comprises or otherwise involves the use of a
formulation described in Schedule 1.7(a)(4) or a formulation claimed in, or
otherwise covered by a claim in, a Neuronex Patent.
 
(5)           “Earn-Out Payment” shall mean any payment that becomes due and
payable pursuant to Section 1.7(c).
 
(6)           “FDA” shall mean the United States Food and Drug Administration or
any successor agency thereto.
 
(7)           “Generic Competition” shall mean such time as the sales (by
volume) in the United States (or other applicable country in the Territory) by a
third party (not authorized by Parent or any of its Affiliates, successors or
licensees) of a DZNS Product which identifies as the reference listed drug a
DZNS Product for which Parent has paid one or more milestone payments pursuant
to Section 1.7(b) below exceed [***]).
 
(8)           “Launch” shall mean the date of first commercial sale in the
United States of any DZNS Product.
 
(9)           “Marketing Approval” shall mean the final approval of the FDA
necessary for the lawful marketing and sale in the U.S. of the DZNS Product.
 
(10)           “Milestone Event” shall mean, as the context requires, each event
referred to in the chart in Section 1.7(b)(1) under the heading “Milestone
Event.”
 
(11)           “Milestone Event Occurrence Date” shall mean, with respect to
each Milestone Event, the date of occurrence of the event comprising such
Milestone Event.
 
(12)           “Milestone Payment” shall mean any payment that becomes due and
payable upon the occurrence of a Milestone Event pursuant to Section 1.7(b)(i).
 
(13)           “NDA” shall mean a New Drug Application or Abbreviated New Drug
Application filed by the Company, Parent, Surviving Corporation or any of their
respective Affiliates, successors or licensees with the FDA as defined under
Title 21 of the U.S. Code of Federal Regulations.
 

 
8

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.

(14)           “Net Sales” means the gross sales of DZNS Products made by
Parent, the Surviving Corporation or any of their Affiliates or licensees of
rights to DZNS Product to unaffiliated third parties in the Territory less the
following, as accrued and adjusted for amounts actually taken: (i) trade, cash
or quantity discounts, allowances, adjustments and rejections; (ii) rebates,
chargebacks, recalls and returns; (iii) price reductions or rebates imposed by
governmental authorities; (iv) price reductions or rebates accorded to managed
care systems; (v) sales, excise and similar taxes assessed on the sale of such
DZNS Product, but not including any income tax or franchise tax of any kind; and
(vi) to the extent separately itemized on the applicable invoice,
transportation, importation, shipping, insurance and other handling expenses; in
each case as calculated in accordance with United States generally accepted
accounting principles or such other accounting principles as Parent shall apply
on a consistent basis.  Net Sales excludes commercial samples, charitable
donations and clinical supply.
 
(15)           “Neuronex Patent” shall mean any Patent Rights  that are derived
from or claim priority to [***], specifically including all divisions,
continuations and continuations-in-part, that claim priority to, or common
priority with, such [***], and all patents that have issued or in the future
issue from any of the foregoing [***], including utility, model and design
patents and certificates of invention, together with any reissues, renewals,
extensions or additions thereto.
 
(16)           “[***]” shall mean that a DZNS Product shall have been [***].
 
(17)           “Sales Milestone Event” shall mean each calendar quarter with
respect to which Sales Milestone Payments become due and payable in accordance
with Section 1.7(b)(2).
 
(18)           “Sales Milestone Payment” shall mean any payment that becomes due
and payable pursuant to Section 1.7(b)(2).
 
(19)           “Sales Milestone Payment Occurrence Date” shall mean, with
respect to Sales Milestone Payments the last day of the calendar quarter with
respect to such Sales Milestone Payments.
 
(20)           “Territory” shall mean all of the world, except for the following
countries, which constitute the “SK Territory”:  Korea, Japan, China, Taiwan,
Singapore, Indonesia, India, Philippines, Thailand, Malaysia, Vietnam and Hong
Kong.
 
(b)           Contingent Payment Events and Contingent Payments.
 
(1)           Upon the first occurrence of any of the Milestone Events set forth
in the chart below under the heading “Milestone Event,” the Milestone Payment
set forth opposite such Milestone Event in the chart below shall become due and
payable in accordance with and subject to Section 1.7(d) and shall be treated by
all of the parties to this Agreement as an additional purchase price paid for
the Company Capital Stock, Company Warrants and Company Options for all income
Tax purposes (except to the extent required by applicable Law).
 

 
9

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.
 

Milestone Event
Milestone Payment
NDA for the DZNS Product has been approved by the FDA.
$[***]
Additional payment at NDA approval (above) if [***]
$[***]
Execution of an agreement with a commercial device manufacturer; provided such
agreement [***] (an “[***] Manufacturing Agreement”)
$[***]
Approval of the DZNS Product by the European Medicines Agency (or any successor
agency thereto).
$[***]

 
(2)           Upon the first occurrence of each of the Sales Milestone Events
set forth in the chart below under the heading “Sales Milestone Event,” the
Sales Milestone Payment set forth opposite such Sales Milestone Event in the
chart below shall become due and payable in accordance with and subject to
Section 1.7(d) and shall be treated by all of the parties to this Agreement as
an additional purchase price paid for the Company Capital Stock, Company
Warrants and Company Options for all income Tax purposes (except to the extent
required by applicable Law).  Annual Net Sales reflected below in the following
table shall be determined with reference to any period of four consecutive
calendar quarters.  For the avoidance of doubt, the Sales Milestone Payments
shall be due only once upon the achievement of a Sales Milestone Event.  Net
Sales in any calendar quarter may count towards at most one Sales Milestone
Event (so that Net Sales that count towards one Sales Milestone Event cannot be
counted towards another Sales Milestone Event), and, following achievement of a
Sales Milestone Event, Net Sales start accruing toward the next Sales Milestone
Event no earlier than after the end of the last calendar quarter included in the
Annual Net Sales period which achieved such prior Sales Milestone Event.  By way
of example and not limitation, if the first time that the Sales Milestone Event
of “Annual Net Sales of at least $[***]” is achieved with respect to sales made
in the four (4) consecutive calendar quarter period ending in the third calendar
quarter of 2015, then the Sales Milestone Event of “Annual Net Sales of at least
$[***]” cannot be deemed achieved until at least the end of the third calendar
quarter of 2016 (i.e., the end of the next succeeding four calendar quarter
period).
 

 
10

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.
 

Sales Milestone Event
Sales Milestone Payment
Annual Net Sales of at least $[***]
$[***]
Annual Net Sales of at least $[***]
$[***]
Annual Net Sales of at least $[***]
$[***]
Annual Net Sales of at least $[***]
$[***]
Annual Net Sales of at least $[***]
$[***]

(c)           Earn-out Payments.
 
(1)           During the Earn-out Term, an Earn-out Payment at the applicable
rate set forth below shall become due and payable in accordance with and subject
to Section 1.7(d).
 
Calendar Year Net Sales
Earn-out Rate
Portion of calendar year Net Sales between $0 to $[***]
[***]%
Portion of calendar year Net Sales above $[***]
[***]%

 
Such Earn-out Payments shall be calculated and payable on all Net Sales of DZNS
Product in the Territory.  “Earn-out Term” shall mean on a country-by-country
basis the time period commencing with the first commercial sale of DZNS Product
in such country and ending on the earliest of: (i) Generic Competition for the
DZNS Product and (ii) the tenth (10th) anniversary of such first commercial
sale.
 
(2)           If the manufacture or sale of a DZNS Product that gives rise to an
Earn-out Payment obligation (A) requires, in the opinion of legal counsel to
Parent, the Surviving Corporation, its Affiliates or any sublicensees, a license
to third party patent rights (excluding patent rights licensed under the SK
License and excluding patent rights covering any device or delivery system) or
(B) includes the payment of royalties on sales of DZNS Product to secure [***]
from a third-party manufacturer pursuant to an [***] Manufacturing Agreement,
and Parent, the Surviving Corporation, its Affiliates or any sublicensees pays
royalties on sales of DZNS Product in respect of such rights under such a
license or such [***] Manufacturing Agreement, then the Surviving Corporation
and Parent shall have the right to credit against the payments otherwise owing
to Former Holders under Section 1.7(c)(1) an amount equal to [***] percent
([***]%) of (A) such royalties paid to such Person for sales of DZNS Product in
the same quarter minus (B) the amount of any credit taken with respect to such
 

 
11

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.

third party royalties against amounts that would otherwise be payable pursuant
to the SK License; provided, that the Surviving Corporation and Parent shall not
reduce the amount of the Earn-out Payments due to the Former Holders by reason
of this Section 1.7(c)(2), with respect to sales of the DZNS Product in the
applicable country, by more than [***] percent ([***]%) (i.e., below [***]% with
respect to calendar year Net Sales of up to $[***] million and below [***]% with
respect to that portion of calendar year Net Sales of more than $[***]
million).  Notwithstanding the foregoing, [***].
 
(3)           All Earn-out Payments shall be treated by all of the parties to
this Agreement as an additional purchase price paid for the Company Capital
Stock, Company Warrants and Company Options for all income Tax purposes (except
to the extent required by applicable Law).
 
(d)           Distribution of Contingent Payments.  If a Contingent Payment
becomes due and payable pursuant to Section 1.7(b) or (c), Parent shall, as
promptly as reasonably practicable after determination of the applicability of
such payment, give written notice of such occurrence date to the Stockholders’
Representative.  Following any such occurrence date, and at least five Business
Days prior to the date that such Contingent Payment is due, the Stockholders’
Representative shall deliver to Parent a Contingent Allocation Certificate,
which shall include a deduction from the Contingent Payment for any PJSC
Contingent Fees due in connection with such Contingent Payment (which Parent
shall pay or cause to be paid to PJSC).  Parent shall pay or cause to be paid
such Contingent Payment in accordance with the Contingent Allocation Certificate
within the following time periods: (A) thirty (30) days following the Milestone
Event Occurrence Date for a Milestone Event, or (B) within sixty (60) days
following the end of each relevant calendar quarter for any Sales Milestone
Payment or Earn-out Payment.
 
(e)           Contingent Payment Rights Not Transferable.  The right of any
Former Holder to receive any Contingent Payment: (i) does not give the Former
Holder dividend rights, voting rights, liquidation rights, preemptive rights or
other rights of holders of capital stock of the Company or Parent; (ii) shall
not be evidenced by a certificate or other instrument; (iii) shall not be
assignable or otherwise transferable by such Former Holder, except in the case
of a natural person, on death, by will or intestacy or by instrument to an inter
vivos or testamentary trust in which any Contingent Payment is passed to
beneficiaries upon the death of the trustee or by operation of law or, if such
Former Holder is a partnership or limited liability company, to one or more
partners or members of such Former Holder or to one or more Affiliates of such
Former Holders, partners or members; (iv) shall not accrue or pay interest on
any portion thereof, except as provided by this Agreement; and (v) does not
represent any right other than the right to receive the consideration set forth
in this Section 1.7.  Any attempted transfer of the right to any Contingent
Payment by any holder thereof (other than as specifically permitted by the
immediately preceding sentence) shall be null and void.
 

 
12

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.

(f)           Diligent Efforts.  Commencing upon the Closing, Parent and
Surviving Corporation (and any subsequent acquirer of either Parent or Surviving
Corporation) shall use Diligent Efforts to achieve the Milestone Events.  If the
Stockholders’ Representative in good faith believes that Parent is not using the
Diligent Efforts required hereby to fulfill any of the Milestone Events , then
the Stockholders’ Representative may provide Parent with written notice thereof
specifying in reasonable detail the reasons for such belief.  If such notice is
given, Parent shall have [***] days from receipt of notice to cure such alleged
deficiencies.  If, after such cure period, the Stockholders’ Representative
reasserts in writing substantially the same deficiencies (a “Diligence Notice”),
then [***].
 
If Parent and Surviving Corporation or any of their respective Affiliates are no
longer engaging in the activities required to achieve the Milestone Events, then
Parent shall send written notice thereof to the Stockholders’ Representative
within 60 calendar days of the date on which Parent and Surviving Corporation or
any of their respective Affiliates first cease engaging in the
 

 
13

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.

required activities. Following a Successor’s acquisition of Parent or the
Surviving Corporation, as applicable; such Successor shall, for a period of at
least [***] following such acquisition, exercise Diligent Efforts at least equal
to those that Parent devoted to the DZNS Product in the year preceding the
acquisition.
 
Failure of Parent or Surviving Corporation to fulfill or perform its obligation
to use Diligent Efforts under this Agreement shall not subject such party to any
liability to the extent such failure is caused or occasioned by acts of God,
acts of terrorism, fire, explosion, flood, drought, war, riot, sabotage,
embargo, strikes or other labor disputes (which strikes or disputes need not be
settled), compliance with any order, regulation, or request of government, or by
any other event or circumstance of like character to the foregoing beyond the
reasonable control and without the fault or negligence of such party, (a “Force
Majeure Event”), provided such party uses reasonable efforts to remove such
Force Majeure Event, gives the Stockholders’ Representative prompt notice of the
existence of such Force Majeure Event and as promptly as reasonably practicable
resumes Diligent Efforts after the Force Majeure Event is alleviated.
 
Notwithstanding anything to the contrary in this Agreement, at any time after
the Effective Time Parent may provide written notice to the Stockholders’
Representative of Parent’s intent to discontinue development and
commercialization of the DZNS Products, in which case the obligations of Parent
and its Affiliates under this Agreement, including this Section 1.7, shall
terminate immediately upon issuance of such notice (except (i) Section 4.3 shall
survive for three (3) years after the Closing and (ii) Parent’s obligation to
pay any unpaid amounts under this Agreement which were earned prior to the
issuance of such notice shall survive).  Following the Stockholder’s
Representative’s receipt of such written notice from Parent, then, at the
subsequent written request of the Stockholders’ Representative, Parent shall,
subject to the terms and conditions of the SK License and to the extent
permitted by the SK License and SK Bio, assign to the Stockholders’
Representative or its nominee, on behalf of the Former Holders, all assets of
Parent and its Affiliates (including intellectual property rights and contracts)
solely related to the DZNS Product (specifically including, to the extent
permitted under the SK License or otherwise approved in writing by SK Bio, all
rights under the SK License, all Neuronex Patents, all data solely related to
the DZNS Product developed by or on behalf of the Company prior to Closing, all
regulatory filings and approvals solely related to the DZNS Product, and all
inventory of DZNS Product (with the Stockholders’ Representative promptly
reimbursing Parent’s actual costs for such inventory)), with the Parent and the
Stockholders’ Representative working together in good faith to facilitate and
effectuate such assignment.
 
(g)           Information Sharing.
 
(1)           For so long as one or more Milestone Payments remains unpaid and
still potentially payable, Parent shall provide, on an [***] basis
commencing [***] months after [***], a written report to the Stockholders’
Representative or its designee in reasonable detail regarding Parent’s
development efforts with respect to the DZNS Product, including the development
status of the DZNS Product, regulatory status of the DZNS Product, the
significant development efforts undertaken since the last report, the
significant development efforts that are anticipated to be undertaken in the
following twelve-month period and the status of efforts to achieve the Milestone
Events (each such report, an
 

 
14

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.

“Update Report”).  Within [***] ([***] days after receipt of an Update Report,
if the Stockholders’ Representative requests a meeting with representatives of
Parent to discuss such report, Parent shall make available for such a meeting
(in person or by phone) senior medical and regulatory personnel responsible for
the applicable activities set forth in the Update Report at a reasonable time
and location and on reasonable prior notice.
 
(2)           From the Closing Date until the expiration of the Earn-out Term,
Parent shall upon the reasonable request of Stockholders’ Representative (or his
designee) not more than [***] per year (or not more than [***] per calendar
quarter during the period from the Closing Date until such time as Parent has
paid the Milestone Payment payable upon approval of the FDA of the NDA for the
DZNS Product) make available for a meeting (in person or by phone) senior sales
and marketing personnel responsible for establishing and implementing sales and
marketing strategy with respect to DZNS Product at a reasonable time and
location and on reasonable prior notice.  Parent shall give due consideration to
reasonable input provided by Stockholders’ Representative or his designee.
 
(3)           Following Launch and for so long as one or more Earn-out Payments
may be payable pursuant to this Agreement, Parent shall provide to the
Stockholders’ Representative within [***] days after the end of each [***] (or
[***] ([***]) days in the case of [***]) a statement setting forth in reasonable
detail the calculation of the Earn-Out Payment for the applicable quarter, which
information may be contained in the Update Report.
 
(h)           Abandonment and Bankruptcy.
 
(1)           In the event that Parent or Surviving Corporation determines that
a Milestone Event or Sales Milestone is no longer achievable following the
exercise of Diligent Efforts, it shall as promptly as reasonably practicable
notify the Stockholders’ Representative in writing of such determination (a
“Milestone Abandonment Notice”) specifying in reasonable detail the reasons the
applicable determination was made.  In the event that the Stockholders’
Representative disputes any determination set forth in a Milestone Abandonment
Notice (a “Milestone Abandonment Dispute”), the Stockholders’ Representative
shall deliver a written notice (a “Milestone Abandonment Objection Notice”) to
Parent and Surviving Corporation within [***] ([***]) days of receipt by the
Stockholders’ Representative of the Milestone Abandonment Notice, specifying in
reasonable detail the reasons the Stockholders’ Representative disputes the
allegations set forth in the Milestone Abandonment Notice.  During the [***]
([***]) day period following the delivery of any Milestone Abandonment Objection
Notice, Parent and the Stockholders’ Representative shall attempt, in good
faith, to resolve such dispute.  In attempting to resolve such dispute, Parent
shall provide the Stockholders’ Representative and its representatives access to
any information related to the applicable milestone, even if any inspection has
occurred in accordance with Section 1.7 at any time during the twelve (12)
preceding months.  If at the end of the [***] ([***]) day period following the
delivery of any Milestone Abandonment Objection Notice, Parent and the
Stockholders’ Representative shall not have reached agreement with respect to
the dispute, either may cause such dispute to be finally resolved in accordance
with Section 8.6.  If the Stockholders’ Representative does not deliver a
Milestone Abandonment Objection Notice within [***] ([***])
 

 
15

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.

days following receipt by the Stockholders’ Representative of a Milestone
Abandonment Notice, [***].
 
(2)           Notwithstanding anything to the contrary in this Agreement,
immediately upon the occurrence of any proceeding by Surviving Corporation or
Parent under any bankruptcy or similar law, or placement of Surviving
Corporation’s or Parent’s assets in the hands of a trustee or receiver, to the
extent not previously paid, [***] shall become due and payable; provided,
however, that in a case under title 11 of the United States Code, if Parent
assumes this Agreement in accordance with section 365 of title 11 of the United
States Code and cures any and all outstanding defaults, including any and all
monetary and non-monetary defaults, within five Business Days of entry of an
order authorizing such assumption, then [***] shall not be deemed accelerated in
accordance with this Section 1.7(h), but shall remain due and payable in
accordance with the deadlines and subject to the conditions set forth in Section
1.7.
 
(i)           Audit Rights.
 
Once per [***] following Launch and until [***] ([***]) [***] after Earn-out
Payments become payable pursuant to this Agreement, the Stockholders’
Representative shall have the right to retain and cause an independent,
certified public accountant reasonably acceptable to Parent to conduct an audit
of relevant records of Parent, its Affiliates and any licensees, sublicensees or
relevant third parties in order to confirm Net Sales of the DZNS Product and the
amount of Sales Milestone Payments and Earn-out Payments payable during the
prior [***] [***] period pursuant to Section 1.7.  Such audits may be conducted
during normal business hours at the headquarter offices of Parent upon
reasonable prior written notice to Parent or such other party. Parent shall
include in any relevant agreement audit rights in favor of the Stockholders’
Representative. The Stockholders’ Representative and/or Former Holders shall
bear the full cost of such audit unless such audit discloses that Sales
Milestone Payments or Earn-out Payments have been underpaid for the applicable
period by [***]% or more, in which case, Parent shall bear the full cost of such
audit.  Parent shall as promptly as reasonably practicable remit any
underpayment of Sales Milestone Payments and Earn-out Payments in accordance
with Section 1.7(d).  Any over-payment of Sales Milestone Payments or Earn-out
Payments may be recovered by Parent solely by deducting the amount thereof from
any future Sales Milestone Payments or Earn-out Payments.
 
1.8           Hold-back Amount.  Within ten (10) Business Days after the first
anniversary of the Effective Time, Parent shall deliver to the Stockholders’
Representative written notice of the current Hold-back Amount, as adjusted to
date in accordance with Section 1.5 and Article 7.  Within three (3) Business
Days of receipt of the notice, Stockholders’ Representative shall deliver to
Parent a Hold-back Allocation Certificate.  Parent shall pay or cause to be paid
the Hold-back Amount in accordance with the Hold-back Allocation Certificate
within thirty (30) days following receipt of the Hold-back Allocation
Certificate.
 

 
16

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2.           REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
 
The Company represents and warrants to Parent and Merger Sub that, except as
disclosed in the Disclosure Schedule:
 
2.1           Due Organization; Organizational Documents.  The Company is a
corporation duly organized, validly existing and in good standing under the Laws
of the state of Delaware and has all necessary corporate power and authority to
own and lease its assets and properties and to conduct its business in the
manner in which its business is currently being conducted  (the “Current Company
Business”).  The Company is duly qualified to do business as a foreign
corporation and is in good standing (if such concept is applicable in the
relevant jurisdiction) under the Laws of all jurisdictions where the operation
of the Current Company Business by the Company requires such qualification.  The
Company has provided to Parent true, correct and complete copies of the
certificate of incorporation (the “Restated Certificate of Incorporation”) and
bylaws of the Company (the “Bylaws”), in each case including all amendments
thereto, as in effect as of the date of this Agreement.  The minute books of the
Company have been provided to Parent and contain a complete and accurate summary
of all meetings of directors and stockholders or actions by written consent
since inception through the date of this Agreement.  The Company is not in
violation of any of the provisions of its Restated Certificate or Bylaws.  The
Company has no Subsidiaries, and the Company does not directly or indirectly own
any equity or similar interest in, or any interest convertible or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
 
2.2           Capitalization; Stockholder Information.
 
(a)           The authorized capital stock of the Company consists
of:  (i) 13,525,350 shares of Company Common Stock, of which 8,020,000 shares
are issued and outstanding as of the date hereof and no shares are held by the
Company as treasury shares; and (ii) 1,703,482 shares of Company Preferred
Stock, all of which are designated Series A Preferred Stock, of which 1,576,356
are issued and outstanding as of the date hereof.  All outstanding shares of
Company Common Stock and Company Preferred Stock (i) are duly authorized,
validly issued, fully paid and non-assessable, (ii) are free of any liens or
encumbrances created by the Company, and, to the Knowledge of the Company, free
of any liens or encumbrances created by or imposed upon the holders thereof, and
(iii) were not issued in violation of any preemptive rights or rights of first
refusal created by statute, the Restated Certificate of Incorporation or Bylaws
or any agreement to which the Company is a party or by which it is bound. As of
the date of this Agreement, there are 2,200,000 shares of Company Common Stock
reserved for issuance under the Company Stock Plans, of which 1,201,480 shares
of Company Common Stock are subject to outstanding options and 998,520 shares of
Company Common Stock are reserved for future option grants.  The Company has
provided to Parent true, correct and complete copies of each form of stock
option agreement and each Company Stock Plan evidencing outstanding Company
Options.  As of the date of this Agreement, there are 127,126 shares of the
Company’s Series A Preferred Stock subject to outstanding Company Warrants.  The
Company has provided to Parent true, correct and complete copies of each
agreement and form of instrument associated with or evidencing Company
Warrants.  All shares of Company Common Stock issuable upon
 

 
17

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conversion of the outstanding shares of Company Preferred Stock or upon exercise
of the Company Options or Company Warrants described in this Section 2.2 will
be, when issued pursuant to the respective terms of such Company Preferred
Stock, Company Options or Company Warrants duly authorized, validly issued,
fully paid and nonassessable.
 
(b)           Part 2.2 of the Disclosure Schedule sets forth, as of the date of
this Agreement:  (i) the number of shares of Company Capital Stock that each
current stockholder of the Company holds of record; and (ii) to the Knowledge of
the Company, the address and state of residence of such stockholder.
 
(c)           Part 2.2 of the Disclosure Schedule sets forth the following
information with respect to each outstanding Company Option and Company Warrant:
(i) the name of the holder of the Company Option or Company Warrant, as
applicable; (ii) the number of shares of Company Capital Stock subject to such
Company Option or Company Warrant, and the date of grant, exercise price, number
of shares vested as of the date hereof, vesting schedule, and, in the case of
Company Options, the type of Company Option (i.e., an incentive stock option
described in Section 422 of the Code or a nonstatutory stock option) as of the
date the Company Option was granted and the Company Stock Plan or other plan
under which such Company Options were granted; (iii) the exercise price;
(iv) whether, in the case of a Company Option, such Company Option is subject to
a Company Stock Plan; and (v) to the Knowledge of the Company, the address and
state of residence of each such holder.
 
(d)           Except for the rights created pursuant to this Agreement, the
Company Options, the Company Warrants, the Company Preferred Stock and as set
forth in Part 2.2 of the Disclosure Schedule, there are no options, warrants,
calls, rights, commitments or agreements that are outstanding to which the
Company is a party or by which it is bound, obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of Company Capital Stock or other equity
security of the Company or obligating the Company to grant, extend, accelerate
the vesting of, change the price of, or otherwise amend or enter into any
option, warrant, call, right, commitment or agreement regarding shares of
Company Capital Stock or other equity security of the Company.  Except as set
forth in Part 2.2 of the Disclosure Schedule, the Company does not have
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or convertible into or exercisable for securities
having the right to vote) with the stockholders on any matter.  There are no
declared or accumulated but unpaid dividends on any share of Company Capital
Stock and no dividends or payments in lieu of dividends shall become payable as
a result of the Merger or transactions contemplated hereby.  Other than as set
forth in Part 2.2 of the Disclosure Schedule, there are no other contracts,
commitments or agreements relating to the voting, purchase or sale of the
Company’s capital stock: (A) between or among the Company and any of its
stockholders; or (B) to the Knowledge of the Company, between or among any of
the Company’s stockholders.
 
2.3           Financial Statements; Absence of Undisclosed Liabilities.
 
(a)           The Company has provided to Parent the unaudited balance sheet of
the Company as of and for the fiscal year ended December 31, 2011  (the “Company
Balance
 

 
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Sheet”) and the statement of operations and statement of cash flows for the
fiscal year ended December 31, 2011 (collectively, the “Company Financial
Statements”).  The Company Financial Statements have been prepared in accordance
with GAAP (except as disclosed in the notes thereto and except that the
unaudited Company Financial Statements do not contain footnotes and are subject
to normal year-end audit adjustments which are not material in scope or amount
or that relate to non-cash charges for options or warrants or any potential
consolidation of the Company with Aerial Biopharma) applied on a consistent
basis throughout the periods covered.  The Company Financial Statements fairly
present, in all material respects and in accordance with GAAP, the consolidated
financial condition of the Company as of the dates indicated therein and the
consolidated results of operations and cash flows of the Company for the periods
indicated therein, except that the financial statements are subject to year-end
audit adjustments and they do not contain footnotes.  No financial statement of
any Person other than the Company is required by GAAP to be included in the
Company Financial Statements.  The Company Financial Statements were derived
from the books and records of the Company, have been maintained in all material
respects in accordance with sound business practices, including the maintenance
of an adequate system of internal controls.
 
(b)           The Company does not have any contingencies, obligations or
liabilities of any nature (whether absolute, accrued, matured or unmatured,
fixed or contingent), other than: (i) those set forth or adequately provided for
in the Company Balance Sheet; (ii) those not required to be reflected in the
liabilities column of a balance sheet prepared in accordance with GAAP;
(iii) those incurred in the ordinary course of business since the date of the
Company Balance Sheet; and (iv) those incurred pursuant to or in connection with
the execution, delivery or performance of this Agreement.  The Company does not
have any factored receivables or other off-balance sheet obligations.
 
2.4           Absence of Changes.  Except as set forth in Part 2.4 of the
Disclosure Schedule, between December 31, 2011 and the date of this Agreement
the Company has conducted its business in the ordinary course consistent with
past practice, and (a) there has not occurred any event, occurrence, development
or state of circumstances or facts that has had or would, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect;
(b) there has been no material damage, destruction, or loss (whether or not
covered by insurance) affecting the Company’s properties or business; (c) the
Company has not declared or paid any dividend, stock, split, subdivision,
exchange, combination, reclassification or other distribution (whether in cash,
stock or property) with respect to shares of Company Capital Stock; (d) the
Company has not incurred, outside the ordinary course of business, any
liability, except for liabilities incurred in connection with this Agreement and
the transactions contemplated by this Agreement; (e) the Company has not has
acquired, leased, transferred or sold any assets, except in the ordinary course
of business, nor has the Company acquired the capital stock or assets, whether
material individually or in the aggregate, of any third party; (f) the Company
has not been party to any merger or consolidation with any third party, or any
consolidation, restructuring, recapitalization, partial liquidation or
dissolution, or other reorganization; (g) the Company has not implemented any
material change in any accounting principles, method or practice, except as
required by concurrent changes in GAAP, or changes in its fiscal year end;
(h) the Company has not (i) granted rights with respect to any severance or
termination pay (unless required by law) to any director, officer or employee,
except for
 

 
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payments and benefits made pursuant to existing agreements that are disclosed on
Part 2.4 of the Disclosure Schedule, (ii) increased the benefits payable under
any existing severance or termination pay policies or Employment Agreements to
which the Company is a party except where the resulting benefits payable are set
forth on Part 2.14 of the Disclosure Schedule, or (iii) entered into any
employment, deferred compensation, or other similar agreement or materially
increased the compensation, bonus, bonus opportunity or other benefits (except
payments and benefits made pursuant to existing written agreements that are
disclosed on Part 2.4 of the Disclosure Schedule) payable by the Company to
directors, officers, or employees, in each case, other than those required by
written contractual agreements or made in the ordinary course of business
consistent with past practice; (i) the Company has not terminated or modified
the employment terms of any officer of the Company; (j) the Company has not
entered into any joint venture, partnership, license or limited liability
company or operating agreement with any Person, or agreement requiring the
sharing of profits or revenues with any Person; (k) the Company has not made any
capital expenditure, capital addition, capital improvement or acquisition of any
property, plant, or equipment by the Company, in each case for a cost in excess
of $10,000 in the aggregate; (l) the Company has not delayed or postponed in any
material respect of the payment of accounts payable or other liabilities outside
the ordinary course of business; (m) the Company has not incurred any lien on
any assets, tangible or intangible, other than Permitted Encumbrances; (n) the
Company has not issued, granted or sold any shares of capital stock (other than
in connection with the exercise of outstanding options, warrants and preferred
stock) or any other securities convertible into, or options, warrants or rights
to purchase or subscribe for, or entered into any arrangement or contract with
respect to any such issuance or sale; (o) the Company has not canceled,
compromised, or released any material debts owed or waived or released or
assigned any material claims or rights, or settled, compromised or terminated
any existing lawsuit, legal claim or dispute, or the commenced any new lawsuit
other than for the routine collection of bills; (p) the Company has not
discharged or satisfied any Encumbrance, or paid any material obligation or
liability other than liabilities incurred as of December 31, 2011 and
liabilities incurred since December 31, 2011 in the ordinary course of business;
(q) there has not occurred any breach, termination, modification, amendment or
rescission of any Material Contract, or cancellation, waiver, assignment or
release of any rights or claims under any Material Contract; (r) there has not
occurred any Tax election (or change or revocation thereof), any adoption or
change of any method of Tax accounting or Tax accounting period, any closing
agreement, surrender of any rights to claim a Tax refund, any agreement,
settlement or compromise of any audit, claim or assessment by any Tax authority,
the filing of any amended Tax return, consent to any extension or waiver of the
limitation period applicable to any Taxes; (s) there has not occurred any
cancellation or termination of any insurance policy naming the Company as a
beneficiary or a loss payee without obtaining comparable substitute insurance
coverage; (t) there has not occurred any termination, modification or alteration
in any material respect, practices or procedures with respect to clinical
studies or trials of the products or product candidates, including protocol
therefor, of any the Company; (u) the Company has not amended its Restated
Certificate of Incorporation or Bylaws or equivalent organizational documents;
(v)  the Company has not incurred any additional Indebtedness, issued or sold
any debt securities, or guaranteed any debt securities of others; and (w) the
Company has not entered into any agreement, authorization or commitment, whether
in writing or otherwise, to take any action described in this
Section 2.4.  There is no investigation,
 

 
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audit or review pending or, to the Knowledge of the Company, threatened against
the Company or its properties or its officers or directors (in their capacities
as such), by any Governmental Authority.  There is no judgment, decree,
decision, injunction, ruling, subpoena or order against the Company or its
assets or, to the Knowledge of the Company, against any of its directors or
officers (in their capacities as such), that specifically names the Company or
such directors or officers or that: (i) restricts in any material manner the
use, transfer or licensing by the Company of any right or interest of the
Company in any Company IP Right; or (ii) otherwise materially and adversely
affects the conduct of the Current Company Business.
 
2.5           Tangible Personal Property.  The Company has good and valid title
to all of the items of tangible owned personal property reflected on the Company
Balance Sheet or acquired after the date of the Company Balance Sheet, except
for assets disposed of in the ordinary course of business since the date of the
Company Balance Sheet, and all tangible personal property owned by the Company
is owned free and clear of all mortgages, liens, pledges, security interests,
adverse claims or other encumbrances, except for the following (which are
referred to as the “Permitted Encumbrances”): (a) liens identified in Part 2.5
of the Disclosure Schedule; (b)  liens for current Taxes not yet due and payable
or, to the extent identified in Part 2.12 of the Disclosure Schedule, that are
being contested in good faith by appropriate proceedings and that are not
material;(c) liens securing debt that is reflected on the Company Balance Sheet
and that will be terminated at Closing; (d) statutory or common Law encumbrances
to secure obligations to landlords, lessors or renters under leases or rental
agreements; (e) deposits or pledges made in connection with, or to secure
payment of, workers’ compensation, unemployment insurance or similar programs
mandated by applicable Law; and (f) statutory or common Law liens in favor of
carriers, warehousemen, mechanics and materialmen, to secure claims for labor,
materials or supplies, and other like liens, which do not materially impair the
ownership of the Company’s assets or properties.
 
2.6           Real Property; Lease Agreements.  The Company does not own any
real property or interests in real property.  Part 2.6 of the Disclosure
Schedule contains a list of all lease agreements pursuant to which any real
property is currently leased to the Company (the “Real Property Lease
Agreements”).  Other than the Real Property Lease Agreements, the Company does
not hold any leasehold interest or other interest in real property, and the
Company is not party to any agreement obligating any of them to enter into any
lease of real property or to acquire any other interest in real property.  Other
than by the instruments referred to in Part 2.6 of the Disclosure Schedule, the
Real Property Lease Agreements have not been amended or modified and no material
consent or waiver has been granted with respect to any of the terms thereof.
 
2.7           Intellectual Property.
 
(a)           For purposes of this Agreement, the following terms shall be
defined as follows:
 
(1)           “IP Rights” means any and all of the following in any country:
(A) Copyrights, Patent Rights, Trademark Rights, Know-How, domain name
registrations, moral rights, Trade Secrets, industrial property rights, and
other intellectual property rights and
 

 
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intangible assets and all goodwill associated therewith; and (B) the right
(whether at Law, in equity, by contract or otherwise) to use, enforce or
otherwise exploit any of the foregoing.
 
(2)           “Copyrights” means all copyrights and copyrightable works,
including all rights of authorship, use, publication, reproduction,
distribution, performance, transformation, moral rights and rights of ownership
of copyrightable works, all copyright registrations and applications for
copyright registration, and all rights to register and obtain renewals and
extensions of registrations, together with all other interests accruing by
reason of international copyright.
 
(3)           “Know-How” means any unpublished inventions (whether patentable or
not), invention disclosures, discoveries, improvements, Trade Secrets,
proprietary or confidential information, know how, technology, processes, data,
supplier and customer lists, databases and data collection, and any other
proprietary rights of the Company, and all documentation relating to any of the
foregoing.
 
(4)           “Patent Rights” means all issued patents and pending patent
applications (which for purposes of this Agreement shall include any and all
patent rights, including utility models, design patents, certificates of
invention and applications for certificates of invention and priority rights) in
any country, including all provisional applications, substitutions,
continuations, continuations-in-part, divisions, renewals, reissues,
re-examinations and extensions thereof and all patents of addition,
restorations, extensions, supplementary protection certificates, registration or
confirmation patents, and all patents and applications claiming priority
thereto.
 
(5)           “Company IP Rights” means all IP Rights owned solely by the
Company or jointly by the Company and one or more third parties, or in which the
Company has any right, title or interest, including all IP Rights licensed to
the Company.
 
(6)           “Trade Secret” means shall mean any, confidential unpatented or
unpatentable inventions, processes, formulae, developments, discoveries,
technology, compounds, technical information, methods, materials, assays,
molecules, protocols, reagents, experiments, lab results, test, know-how,
concepts, ideas, research and development, business plans, strategies or other
confidential information or materials which the owner or possessor thereof
determines confers competitive advantage due to its being generally undisclosed
or not disseminated to the public.
 
(7)           “Trademark Rights” means all trademarks, including common law
trademarks, registered trademarks, applications for registration of trademarks,
service marks, registered service marks, applications for registration of
service marks, brand names, trade names, certification marks, design marks,
logos, trade dress, registered trade names, applications for registration of
trade names, internet domain name registrations, and any goodwill associated
therewith, and including any renewal of any of the foregoing.
 
(b)           Part 1 of Part 2.7(b) of the Disclosure Schedule lists all of the
Patent Rights and all registered Trademark Rights (or Trademark Rights for which
applications for
 

 
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registration have been filed) owned solely by the Company, setting forth in each
case the jurisdictions in which patents have been issued, patent applications
have been filed and/or published, trademarks have been registered and trademark
applications have been filed, copyrights have been registered and copyright
registration applications have been filed, or common law trademarks exist, along
with the respective application, registration or filing number.  Part 2 of Part
2.7(b) of the Disclosure Schedule lists, as of the date hereof, all of the
Patent Rights, Copyrights and all registered Trademark Rights (or Trademark
Rights for which applications for registration have been filed) in which the
Company has any joint ownership interest, other than those owned solely by the
Company, setting forth in each case the jurisdictions in which patents have been
issued, patent applications have been filed and/or published, copyrights have
been registered and copyright registration applications have been filed or
contemplated to be used in connection with the research, development, use,
manufacture, promotion, sale, commercialization or importation of any of DZNS
Product, trademarks have been registered and trademark applications have been
filed, along with the respective application, registration or filing
number.  Part 3 of Part 2.7(b) of the Disclosure Schedule lists, to the
Knowledge of Company as of the date hereof, all of the Patent Rights and all
registered Trademark Rights (or Trademark Rights for which applications for
registration have been filed) which are material with respect to the research,
development, use, manufacture, promotion, sale, commercialization or importation
of any DZNS Product and in which the Company has any express right, title or
interest, other than those owned solely or jointly by the Company, and other
than rights arising under “shrink wrap” or “click through” license agreements
accompanying widely available computer software that has not been modified or
customized for the Company.
 
(c)           Part 2.7(c) of the Disclosure Schedule lists all oral or written
contracts, agreements, licenses and other arrangements in effect under which any
third party has licensed, granted or conveyed to the Company any right, title or
interest in or to any Company IP Rights, and other than rights arising under
“shrink wrap” or “click through” license agreements accompanying widely
available computer software that has not been modified or customized for the
Company.
 
(d)           Part 2.7(d) of the Disclosure Schedule lists all oral and written
contracts, agreements, licenses or other arrangements in effect under which the
Company has licensed, granted or conveyed to any third party any right, title or
interest in or to any Company IP Rights.
 
(e)           The Company owns, solely or jointly or otherwise possesses legally
enforceable rights in and to all necessary IP Rights that are currently used or
currently contemplated to be used in connection with the research, development,
use, manufacture, promotion, sale, commercialization or importation in the
Territory of any DZNS Product under development by Company.  No party has
challenged or is challenging (nor is there any basis for such challenge) the
right, title or interest of the Company in, to or under the Company IP Rights,
or the validity, enforceability or claim construction of any Patent Rights owned
(solely or jointly) or exclusively licensed to the Company.  The Company IP
Rights constitute all material IP Rights necessary for the research,
development, use, manufacture, promotion, sale, commercialization and/or
importation of DZNS Product in the Territory as currently contemplated.
 

 
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(f)           Each of the Company’s current policies and procedures to protect
and maintain the confidentiality of the proprietary Know-How and Trade Secrets
included in the Company IP Rights are listed on Part 2.7(f) of the Disclosure
Schedule and such policies and procedures have been in effect since the
Company’s incorporation.  All current and former officers and employees of, and
service providers, consultants and independent contractors to, the Company who
have contributed to the creation or development of any Company IP Right have
executed and delivered to the Company an agreement regarding the protection of
proprietary information and the assignment to the Company of any IP Rights
arising from services performed for the Company by such persons, the current
forms of which agreements have been provided to Parent.  No current or former
officers and employees of, or consultants or independent contractors to, the
Company have breached in any material respect any term of any such agreements,
and no employee, independent contractor, service provider, consultant or agent
of the Company is in material default or breach of any term of any employment
agreement, non-disclosure agreement, assignment of invention agreement or
similar agreement, contract or company policy or practice relating in any way to
the protection, ownership, development, use or transfer of the Company IP
Rights.
 
(g)           To the Knowledge of the Company, the research, development, use,
manufacture, promotion, sale, commercialization and/or importation of DZNS
Product in the Territory as currently contemplated by the Company does not and
will not infringe, constitute contributory infringement, or inducement to
infringe any Patent Rights, Trade Secrets or Know-How of any other Person.  The
Company has not received any notice or other communication asserting any of the
foregoing.  No current or former employee, consultant, service provider or other
independent contractor of the Company has misappropriated or unlawfully used any
Trade Secrets or Know-How of any Person in connection with their provision of
services to the Company.
 
(h)           To the Knowledge of the Company, no Company IP Rights are being or
have been infringed or misappropriated by any third party.
 
(i)           Neither the execution, delivery or performance of this Agreement
by the Company nor the consummation by the Company of the transactions
contemplated by this Agreement will contravene, conflict with or result in any
limitation on the Company’s right, title or interest in, to or under any of the
Company IP Rights.
 
(j)           The Company has not received notice of and to its Knowledge there
is no reasonable basis for any claim by any third party against the Company, and
no third party has threatened any claim against the Company, in each case that
would (i) adversely affect the ownership rights of the Company in, under or to
(A) any of the Company IP Rights or (B) any oral or written contract, agreement,
license or other arrangement under which the Company has any right, title or
interest in, under or to any of the Company IP Rights or (ii) adversely affect
the ability of the Company to research, develop, use, manufacture, promote,
sell, commercialize or import any DZNS Product.  To the Knowledge of the
Company, no third party is asserting any suit, action or claim against any
Person (including the Company) or their respective Affiliates, nor is any such
claim being asserted or, being threatened against any such Person, which would
adversely affect the ownership rights of the Company in, to or under (1) any of
the Company IP
 

 
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Rights or (2) any contract, agreement, license or other arrangement under which
the Company has any right, title or interest in, under or to any of the Company
IP Rights.
 
(k)           The Company does not jointly own any Company IP Rights with any
Person, except as disclosed in Part 2 of Part 2.7(b) of the Disclosure
Schedule.  No current or former officer, manager, director or employee of the
Company, and no stockholder, consultant or independent contractor of the
Company, has any right, title or interest in, to or under any Company IP Rights
that has not been exclusively assigned, to the Company.
 
(l)           The Company is not party to any oral or written contract,
agreement, license or other arrangement that restricts the use, transfer,
delivery or licensing of the Company IP Rights (or any tangible embodiment
thereof).
 
(m)           The Company has instituted the policies and procedures listed in
Part 2.7 of the Disclosure Schedule to protect and maintain the confidentiality
and proprietary nature of the Know-How that constitutes a Trade Secret.  The
Company has not granted, licensed or conveyed to any third party, pursuant to
any written or oral contract, agreement, license or other arrangement, any
license or other right, title or interest in, to or under any Company IP Rights
(or any tangible embodiment thereof).  There are no outstanding obligations to
pay any amounts or provide other material consideration to any other Person in
connection with any Company IP Rights (or any tangible embodiment thereof).
 
(n)           The Company is not currently a party to any written or oral
contract, agreement, license or other arrangement to indemnify, hold harmless or
otherwise assume any liability of any other Person against any charge of
infringement or misappropriation of any IP Rights.
 
(o)           With respect to each Company IP Right, payment of all necessary
registration, maintenance, annuities and renewal fees in connection with such
Company IP Right has been made and all necessary documents and certificates in
connection with such Company IP Right have been filed with the relevant
Governmental Authorities in the United States and elsewhere in the Territory as
applicable for the purposes of maintaining such Company IP Right and no
information material to patentability under applicable Law has been withheld
from the examining office.
 
2.8           Contracts.
 
(a)           Part 2.8 of the Disclosure Schedule identifies each Material
Contract (as defined below) that is in effect as of the date of this Agreement,
other than Material Contracts described in clause “(ix)” of the definition of
Material Contract that are disclosed on Part 2.13 of the Disclosure Schedule.
For purposes of this Agreement, “Material Contract” shall mean any oral or
written contract, agreement, license or commitment to which the Company is a
party: (i) (A) under which future receipts or expenditures required to be made
by the Company in the current or any future fiscal year could exceed $50,000 or
(B) in which the Company has granted manufacturing rights, “most favored nation”
pricing provisions or marketing or distribution rights relating to any services,
products or territory or has agreed to purchase a minimum
 

 
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quantity of goods or services or has agreed to purchase goods or services
exclusively from a certain party; (ii) pursuant to which the Company has
licensed from any Person any Company IP Rights; (iii) pursuant to which the
Company has granted rights to any third party to any Company IP Rights;
(iv) evidencing Indebtedness for, or a guarantee by the Company of Indebtedness
of $50,000 or more; (v) creating or relating to any partnership, limited
liability company or joint venture between the Company and any third party or
providing for any sharing of profits or losses by the Company with any third
party; (vi) containing covenants limiting the freedom of the Company or their
Affiliates to compete in any line of business, in any geographic region or with
any third party; (vii) that constitutes a Real Property Lease Agreement;
(viii) providing for earn-out payments by the Company; (ix)(A) relating to the
employment of, or the performance of services by, any employee or consultant
other than at-will employment arrangements terminable at any time without the
payment of any penalty, (B) pursuant to which the Company is or may become
obligated to make any severance, termination, or similar payment to any current
or former employee, officer, consultant or director, (C) pursuant to which the
Company is or may become obligated to make any bonus or similar payment to any
current or former employee, officer, consultant or director, or (D) pursuant to
which the Company may be required to provide, or accelerate the vesting of, any
payments, benefits, or equity rights upon the occurrence of any of the
transactions contemplated by this Agreement; (x) that provides for
indemnification of any officer, director, employee, or agent of the Company;
(xi) imposing any of the following:  (A) a restriction on the right or ability
of the Company or its Affiliates to manufacture, research, develop or
commercialize any products, (B) a restriction on the right or ability of the
Company or its Affiliates to solicit for employment or hire any employees of any
other Person or (C) a restriction on the right or ability of the Company or its
Affiliates to transact any particular business; (xii) any union contract or
collective bargaining agreement; (xiii) any lease for personal property in which
the amount of payments which the Company is required to make in the aggregate
exceeds $10,000; (xiv) any agreement relating to a merger, acquisition of assets
or any capital stock of any business enterprise; (xv) any nondisclosure or
confidentiality agreements other than those entered into in the ordinary course
of business; (xvi) any contract or group of related contracts with the same
party for the purchase or sale of supplies, equipment or other personal property
or for the furnishing or receipt of services under which the undelivered balance
of such products and/or services has a selling price in excess of $50,000;
(xvii) any contract or agreement with a Governmental Authority under which
goods, services or financing are provided or are to be provided to or by such
Governmental Authority; (xviii) any settlement, conciliation or similar
agreement; (xix) any contract with a “material supplier” (as defined in
Section 2.9 below); or (xx) any other contract, agreement, or commitment not
otherwise listed in Part 2.8 of the Disclosure Schedule, (A) the termination of
which would reasonably be expected to have a Company Material Adverse Effect, or
(B) that, if no required consent regarding the transactions contemplated hereby
is obtained, would reasonably be expected to have a Company Material Adverse
Effect.  The Company has provided to Parent a copy of each Material Contract
(or, in the case of an oral agreement, a written description of the material
terms of such oral agreement).
 
(b)           Each Material Contract is valid and in full force and effect and,
with respect to each party thereto, other than the Company, is binding and
enforceable against such party, subject to: (i) Laws of general application
relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of
Law governing specific performance, injunctive relief and other
 

 
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equitable remedies. To the Knowledge of the Company, no party is in breach or in
default under any Material Contract.  No event has occurred that with notice or
lapse of time would constitute a material breach or material default thereunder
by the Company or would permit the modification or premature termination of such
Material Contract by any other party thereto.  No written notice of any claim of
breach, default or violation that has not been cured or settled has been given
to the Company.
 
(c)           The Company is not in breach or default of its obligations under
that certain License Agreement dated July 6, 2010 between the Company and SK
Biopharmaceuticals Co., Ltd., as assignee of SK Holdings Co., Ltd. (such
agreement referred to as the “SK License” and such party referred to herein as
“SK Bio”), and the Company has not received a notification of breach or default
from SK Bio or any of its agents or affiliates, nor is the Company aware of any
events, facts or circumstances that could be reasonably expected to give rise to
such a breach or default.  To the Company’s Knowledge, SK Bio has complied in
all material respects with its obligations under the SK License. The SK License
is valid and in full force and effect with respect to each party thereto and is
binding and enforceable against each such party, subject to (i) Laws of general
application relating to bankruptcy, insolvency and the relief of debtors; and
(ii) rules of Law governing specific performance, injunctive relief and other
equitable remedies.  The Company has provided a true, correct and complete copy
of the SK License to Parent.  The Company has provided true, correct and
complete copies of the written development plan most recently agreed upon
between the Company and SK Bio and minutes (approved by both the Company and SK
Bio, in one case as redacted) of all meetings of the JDC (as such term is
defined in the SK License) at which amendments or updates to such most recently
agreed upon written development plan were reviewed and discussed, and
collectively such written development plan and redacted minutes (the
“Development Plan Documentation”) represent the development plan for the DZNS
Product as currently agreed upon by the Company and SK Bio, and the Company is
in full compliance with such development plan.
 
2.9           Suppliers.  No current material supplier of services or supplies
to the Company has canceled or otherwise terminated, or to the Knowledge of the
Company made any threat to the Company to cancel or otherwise terminate, its
relationship with the Company or has at any time on or after the date of the
Company Balance Sheet, decreased its services or supplies to the Company.  To
the Knowledge of the Company, no such supplier has indicated to the Company that
such supplier intends to cancel or otherwise terminate its relationship with the
Company or to decrease in any material respect its delivery of services or
supplies to the Company.
 
2.10           Compliance with Laws.  The Company is, and at all times since its
inception has been, in compliance with all Laws which are applicable to the
operation of the Current Company Business.  The Company has not received, at any
time any written notice or other written communication from any Governmental
Authority or any other Person or to the Knowledge of the Company any oral
communication from any Governmental Authority regarding (a) any actual, alleged,
possible or potential material violation of, or material failure to comply with,
any applicable Law, or (b) any actual, alleged, possible or potential material
obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature in connection with
such a violation of any applicable Law.  No event has occurred or circumstance
exists that (with or without notice or lapse of time) would reasonably be
expected
 

 
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to (A) constitute or result in a material violation by the Company of, or a
failure on the part of the Company to comply with applicable Laws, or (B) give
rise to any material obligation on the part of the Company to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature.
 
2.11           Permits.
 
(a)           The Company has obtained all permits, approvals, licenses and
registrations (“Governmental Approvals”) from U.S. federal, state and local as
well as foreign Governmental Authorities that are applicable to the conduct of
the Current Company Business.  All such Governmental Approvals are valid and in
full force and effect.  Part 2.11 of the Disclosure Schedule sets forth a
complete and accurate list of each material Governmental Approval that is held
by the Company or is necessary in connection with the conduct of the Current
Company Business and the ownership of the properties and assets of the
Company.  The Company is, and at all times since its inception has been, in
material compliance with all of the terms and requirements of each such
Governmental Approval.  The Company has not received any written notice or other
communication from any Governmental Authority regarding (i) any actual, alleged,
possible or potential violation of or failure to comply with any term or
requirement of any Governmental Approval or (ii) any actual, proposed, possible
or potential revocation, withdrawal, suspension, cancellation, termination of or
modification to any Governmental Approval.
 
(b)           No event has occurred or circumstance exists that would reasonably
be expected to (with or without notice or lapse of time) (i) constitute or
result directly or indirectly in a material violation of or a failure to comply
with any term or requirement of any Governmental Approval listed or required to
be listed in Part 2.11 of the Disclosure Schedule or (ii) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Governmental Approval listed or
required to be listed in Part 2.11 of the Disclosure Schedule.
 
(c)           All applications required to have been filed for the renewal of
the Governmental Approvals listed or required to be listed in Part 2.11 of the
Disclosure Schedule have been duly filed on a timely basis with the appropriate
Governmental Authorities, and all other filings required to have been made with
respect to such Governmental Approval have been duly made on a timely basis with
the appropriate Governmental Authorities.
 
(d)           The Governmental Approvals listed in Part 2.11 of the Disclosure
Schedule collectively constitute all of the Governmental Approvals necessary to
permit the Company Current Business to be lawfully conducted and operated and to
permit the Company to own and use its assets.
 
2.12           Tax Matters.
 
(a)           All Tax Returns required to be filed on or before the Closing Date
with any Taxing Authority (determined without regard to extensions) by or on
behalf of the Company, either separately or as a member of a combined or
affiliated group of corporations, have been
 

 
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duly and timely filed on or before the applicable due date (determined with
regard to extensions) in material compliance with all Laws.  All such Tax
Returns filed by or on behalf of the Company were true, correct and complete in
all material respects, and the Company has timely paid, or withheld and remitted
to the appropriate Taxing Authority, all Taxes owed by the Company (whether or
not shown, or required to be shown, on any Tax Return).  No written claim has
ever been received by the Company from a Taxing Authority representing a
jurisdiction where the Company does not file Tax Returns or does not pay and
collect Taxes in respect of a particular type of Tax imposed by such
jurisdiction, that the Company is or may be subject to Tax in that jurisdiction,
or is or may be required to pay and collect Taxes, in respect of such Tax in
that jurisdiction.
 
(b)           The Company has not:  (i) been granted or requested any extension
of time within which to file any Tax Return or pay any Tax; (ii) been granted or
requested any extension of time with respect to a Tax assessment or deficiency
or (iii) been granted or requested any extension or waiver of the statute of
limitations period applicable to any Tax or Tax Return, which period (after
giving effect to such extension or waiver) has not yet expired.  There are no
requests for rulings or determinations in respect of any Tax pending as of the
date of this Agreement between the Company and any Taxing Authority.  The
Company has not received from any Taxing Authority any (A) written notice
concerning any disputes, investigations, proceedings, claims, audit or other
review; (B) written request for information related to Tax matters; or
(C) written notice of deficiency or proposed adjustment for any amount of Tax
proposed, asserted or assessed by any Taxing Authority against the Company.  To
Company’s Knowledge, no dispute, audit, investigation, proceeding or claim
related to Tax matters is pending, being conducted or claimed.  The Company has
not filed any amended Tax Return, entered into or received any advance pricing
agreement, closing agreement, private letter ruling, technical advice memoranda
or other ruling or other agreement relating to Tax, settled any Tax claim or
assessment, or surrendered any right to claim a Tax refund, offset or other
reduction in Tax liability.
 
(c)           Except for Permitted Encumbrances, there are no encumbrances for
Taxes upon the assets of the Company.
 
(d)           The Company has timely and properly withheld and paid to the
appropriate Governmental Authority all Taxes required to have been withheld and
paid in connection with any amounts paid or deemed paid or owing to any
employee, independent contractor, creditor, shareholder or other third party and
the Company has complied with all reporting and recordkeeping requirements with
respect thereto.
 
(e)           Except as set forth on Part 2.12(e) of the Disclosure Schedule,
the Company has not been a member of an affiliated, consolidated, combined or
unitary group, and the Company is not party to any Tax Sharing Agreement and
does not have any liability for the Taxes of any other Person as a transferee or
successor, or under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign Law).
 
(f)           The Company: (i) is not a party to any understanding or
arrangement described in Section 6662(d)(2)(C)(ii) of the Code; (ii) has not
participated in a “reportable
 

 
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transaction” within the meaning of Treasury Regulations Section 1.6011-4 (or any
similar provision of state, local or foreign Law); (iii) during the five-year
period ending on the date of this Agreement, was not a distributing corporation
or a controlled corporation in a transaction intended to be governed by
Section 355 of the Code; (iv) has not taken a position on any Tax Return that
could give rise to a substantial understatement of Tax within the meaning of
Section 6662 of the Code (or any similar provision of state, local or foreign
Tax Law) and (v) has not participated in or cooperated with an international
boycott within the meaning of Section 999 of the Code or has not been requested
to do so in connection with any transaction or proposed transaction.
 
(g)           The Company is not and will not be required to: (i) make any
adjustment for any Post-Closing Tax Period under Section 481 or Section 263A of
the Code (or any similar provision of state, local or foreign Law) as a result
of a change in method of accounting for a Pre-Closing Tax period; (ii) include
for a Post-Closing Tax Period taxable income attributable to income economically
realized in a Pre-Closing Tax Period, including any income attributable to any
prepaid amount and any income that would be includible in a Post-Closing Tax
Period as a result of the installment method or the look-back method (as defined
in Section 460(b) of the Code (or any similar provision of state, local or
foreign law)); or (iii) include any amount in income or exclude any item of
deduction or loss in a Post-Closing Tax Period as a result of entering into any
“closing agreement” within the meaning of Section 7121 of the Code (or any
similar provision of applicable state, local or foreign Law) on or prior to the
Closing Date.
 
(h)           The Company has not incurred a “dual consolidated loss” as that
term is defined in Section 1503 of the Code and the corresponding Treasury
Regulations issued thereunder.
 
(i)           The Company has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the applicable
period described in Code Section 897(c)(1)(A)(ii).
 
(j)           No election has been made under Treasury Regulations
Section 301.7701-3 or any similar provision of state, local or foreign Tax Law
to treat the Company as an association, corporation or partnership, and the
Company is not disregarded as an entity for Tax purposes.  No election has been
made under Section 1362 of the Code to treat the Company as an “S Corporation.”
 
(k)           Except as set forth on Part 2.12(k) of the Disclosure Schedule,
the Company does not enjoy any Tax exemption, Tax holiday or reduced Tax rate
granted by a Taxing Authority outside of the United States with respect to the
Company that is not generally available to Persons without specific application
therefor (each, a “Tax Grant”).  The Company has complied in all material
respects with the conditions stipulated in each Tax Grant, no submissions made
to any Taxing Authority in connection with obtaining any Tax Grant contained any
material misstatement or omission, and, to the Knowledge of the Company, the
transactions expressly contemplated by this Agreement will not materially and
adversely affect the eligibility of the Company for any Tax Grant.
 
 
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(l)           The Company does not own, directly or indirectly, any interests in
an entity that is or has been a “passive foreign investment company” within the
meaning of Section 1297 of the Code or a “controlled foreign corporation” within
the meaning of Section 957 of the Code.
 
(m)           The Company has made available to Parent correct and complete
copies of all Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by the Company, or filed by or received by the
Company, on or after April 1, 2010 until the date of this Agreement.
 
(n)           The Company has not executed any power of attorney with respect to
Tax, other than powers of attorney that are no longer in force.
 
(o)           The unpaid Taxes of the Company (i) did not as of December 31,
2011 exceed the reserve for Taxes (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the Company Balance Sheet (rather than the notes thereto) and
(ii) as of the Closing Date, will not exceed that reserve as adjusted for
ordinary course operations through the Closing Date in accordance with the past
custom and practice of the Company in filing its Tax Returns.
 
(p)           The Company does not have and has never had any Subsidiaries.
 
2.13           Employees and Consultants.  The Company has made available to
Parent or Parent’s legal or financial advisor a list, as of the date of this
Agreement, containing (a) the names of all current employees (including
part-time employees and temporary employees), current leased employees, current
independent contractors and current consultants of the Company, and (b) their
current respective salaries or wages, other compensation, dates of employment,
positions and all written agreements (other than written agreements that
constitute Employee Benefit Plans) between the Company and such individuals or
entities. Each written employment agreement (other than at-will offer letters
with no severance, change in control benefits or guaranteed term or payments) in
effect as of the date of this Agreement is set forth in Part 2.13 of the
Disclosure Schedule and a copy of each written Employment Agreement and any
written amendment thereto, and a description of any oral Employment Agreement or
oral amendment to an Employment Agreement, has been has delivered or made
available to Parent or Parent’s legal or financial advisor.
 
2.14           Employee and Labor Matters; Benefit Plans.
 
(a)           The Company has delivered or made available to Parent or Parent’s
legal or financial advisor copies of all employee manuals and handbooks, policy
statements and other materials in effect as of the date of this Agreement
relating to the employment of the current employees of the Company or the
engagement of the current independent contractors of the Company.
 
(b)           The Company is not delinquent in any payments to any of its
employees or independent contractors for any wages, salaries, commissions,
bonuses or other direct compensation for any services performed for the
Company.  Except as set forth in Part 2.14(b) of
 

 
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the Disclosure Schedule, the execution of this Agreement and the consummation of
the transactions contemplated hereby (including, without limitation, the actions
set forth in Section 4.6 of this Agreement) do not constitute a triggering event
under any Employee Benefit Plan, policy, arrangement, statement, commitment or
agreement, whether or not legally enforceable, which (either alone or upon the
occurrence of any additional or subsequent event) will or may result in any
acceleration of, vesting of or increase in payments or benefits to any employee
or former employee or director of, or other present or former provider of
services to, the Company or any of the Subsidiaries.  Except as set forth in
Part 2.14(b) of the Disclosure Schedule, no Employee Benefit Plan provides for
the payment of severance, termination, change-in-control or any similar type of
payments or benefits. Neither the Company nor any of its Affiliates is a party
to any agreement that would require it or any of its Affiliates to make any
payment on account of the execution of this Agreement and the consummation of
the transactions contemplated hereby that would constitute a “parachute payment”
for purposes of Sections 280G and 4999 of the Code (“Parachute Payment
Agreements”).  As of the date of this Agreement, there are no grievances,
complaints or charges pending or, to the Knowledge of the Company, threatened
against the Company under any dispute resolution procedure or before any
Government Entity.  The Company is not a party, or otherwise subject to any
collective bargaining agreement or other labor union contract nor does the
Company know of any activities or proceedings of any labor union to organize the
employees of the Company as of the date of this Agreement.
 
(c)           All “employee benefit plans” within the meaning of Section 3(3) of
ERISA, and any plan, program or arrangement that provides for deferred or
incentive compensation, bonuses, severance, profit sharing, stock or
stock-related awards, fringe benefits, short-term disability, employment, or
other employees benefits of any kind, including Employment Agreements, in each
case, currently maintained or sponsored by the Company for its employees are
listed in Part 2.14(c) of the Disclosure Schedule (each, an “Employee Benefit
Plan”).  For the avoidance of doubt, the provision of Social Security benefits
to Company employees is not an Employee Benefit Plan for the purposes of this
Agreement.
 
(d)           The Company has made available to Parent or Parent’s legal or
financial advisor: (i) correct and complete copies of each Employee Benefit
Plan, including all amendments thereto; (ii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA or
the Code, or any similar applicable Laws of other jurisdictions applicable to
the Company, in connection with each Employee Benefit Plan or related trust;
(iii) if any Employee Benefit Plan is funded, the most recent, if any, annual
and periodic accounting of such Employee Benefit Plan’s assets; (iv) the most
recent summary plan description for Employee Benefit Plans for which a summary
plan description is required by applicable Law, together with the most recent
summary of material modifications, if any, with respect to each such Employee
Benefit Plan; (v) all IRS determination, opinion, notification and advisory
letters and rulings from the IRS or any similar Governmental Entity having
jurisdiction over the Company issued to the Company relating to Employee Benefit
Plans; (vi) copies of all applications and correspondence to or from the Company
regarding actual or threatened audits or investigations to or from the IRS, DOL
or any other Governmental Authority with respect to any Employee Benefit Plan,
in each case sent or received in the three years prior to the date of this
Agreement; (vii) all insurance policies of the Company pertaining to fiduciary
liability insurance covering the fiduciaries of each Employee Benefit Plan; and
(vii) all discrimination and
 

 
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qualification tests, if any, prepared for each Employee Benefit Plan described
in Section 401(k) of the Code.
 
(e)           Each Employee Benefit Plan has been established and maintained in
accordance with its terms and has complied in form, operation and
administration(including, without limitation, with respect to reporting and
disclosure) with all applicable Laws, including ERISA and the Code.  As of the
date of this Agreement, there are no audits, investigations or legal proceedings
pending or, to the Knowledge of the Company, threatened by the IRS or DOL or any
other similar Governmental Authority having jurisdiction over the Company with
respect to any Employee Benefit Plan.  All annual reports and other filings
required to be filed with the DOL or the IRS or any other similar Governmental
Authority having jurisdiction over the Company in respect of each Employee
Benefit Plan have been timely made.  Neither the Company nor any ERISA Affiliate
is subject to any penalty or Tax with respect to any Employee Benefit Plan under
Section 501(i) of ERISA or Section 4975 through 4980D of the Code or any similar
applicable Laws and no Employee Benefit Plan is sponsored or maintained by any
Person that is or was considered to be a co-employer with the Company.
 
(f)           No Employee Benefit Plan, and no trustee or administrator thereof,
engaged in any breach of fiduciary responsibility or any “prohibited
transaction” (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) to which Section 406 of ERISA or Section 4975 of the Code applies and
which could subject any such Employee Benefit Plan or trustee or administrator
thereof to the tax or penalty on prohibited transactions imposed by Section 4975
of the Code.
 
(g)           No Employee Benefit Plan is or has at anytime in the past been
(i) subject to the minimum funding requirements of Section 412 of the Code or
Title IV of ERISA, or (ii) a “multiple employer welfare arrangement” within the
meaning of Section 3(40) of ERISA.
 
(h)           Each Employee Benefit Plan intended to qualify under
Section 401(a) of the Code is so qualified and has received a favorable
determination letter from the IRS that such Employee Benefit Plan is a
“qualified plan” under Section 401(a) of the Code, and the related trusts are
exempt from Tax under Section 501(a) of the Code.  Since the date of each such
determination letter, no event has occurred and no condition exists that would
result in the revocation of any such determination letter or opinion letter or
that would adversely affect the qualified status of any such Employee Benefit
Plan (or the tax-exempt status of any such trust).
 
(i)           With respect to Employee Benefit Plans, all required contributions
have been made or properly accrued on the Company’s financial statements.
 
(j)           Except as set forth in Part 2.14(j) of the Disclosure Schedule
with respect to the Company’s payment of certain severance benefits related to
the continuation of health insurance premiums under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, the Company does not have any
liability under any Employee Benefit Plan to provide medical or death benefits
with respect to employees of the Company beyond their termination of employment
(other than coverage mandated by Law), and there are no reserve assets, surplus
or prepaid premiums under any such Employee Benefit Plan.
 

 
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(k)           (A) Except as set forth in Part 2.14(k) of the Disclosure
Schedule, no Employee Benefit Plan constitutes a “nonqualified deferred
compensation plan” subject to Section 409A of the Code; (B) the Company has not
elected to, nor is it required to, defer payment of amounts from a foreign
entity which will be subject to the provisions of Section 457A of the Code; and
(C) except as set forth in Part 2.14(k) of the Disclosure Schedule, the Company
has no obligation to gross-up or otherwise reimburse any Person for any tax
incurred by such Person pursuant to Section 409A of the Code.
 
(l)           With respect to each Employee Benefit Plan which provides for the
grant of options to purchase stock of the Company, each such stock option has
been granted at an exercise price equal to no less than the fair market value of
the Company stock, at the date of grant and there has been no “backdating” of
any such stock options.  No Employee Benefit Plan, including the administration
thereof, is or has been in violation of Section 409A of the Code such that any
tax or other penalty would be due (from any person) under Section 409A of the
Code.
 
(m)           The Company has no obligation and has had no obligation to
contribute to any “multiemployer plan” within the meaning of Section 3(37) of
ERISA or “multiple employee plan” within the meaning of Section 201 of ERISA.
 
(n)           Neither the (i) termination of employment of each of the employees
of the Company and/or the transfer of employees to Aerial (as defined in
Section 4.6) nor (ii) the termination of engagement of each of the independent
contractors of the Company will result in any liabilities or obligations for the
Parent or the Surviving Corporation.
 
(o)           The Company has properly classified for all purposes (including,
without limitation, for all Tax purposes, wage and hour purposes and for
purposes of determining eligibility to participate in any employee benefit plan)
all employees, leased employees, consultants and independent contractors, and
has withheld and paid all applicable Taxes and made all appropriate filings in
connection with services provided by such persons to the Company.  The Company
has not incurred, and no circumstances exist under which the Company would
reasonably be expected to incur, any liability arising from the
misclassification of employees as consultants or independent contractors, from
the misclassification of consultants or independent contractors as employees,
and/or from the misclassification of employees as exempt from the requirements
of the Fair Labor Standards Act.
 
(p)           Without limiting any other provision of this Section 2.14, no
event has occurred and no condition exists, with respect to any Employee Benefit
Plan, that has subjected or could subject the Company or any Employee Benefit
Plan or any successor thereto, to any tax, fine, penalty or other liability
(other than a liability arising in the normal course to make contributions or
payments, as applicable, when ordinarily due under the Employee Benefit Plans
with respect to employees (or, if applicable, independent contractors) of the
Company).  No event has occurred and no condition exists, with respect to any
Employee Benefit Plan that could subject Parent or any of its affiliates, or any
employee benefit plan maintained by Parent or Merger Sub, to any tax, fine,
penalty or other liability, that would not have been incurred by Parent or
Merger Sub, or any such employee benefit plan, but for the transactions
contemplated hereby.  Parent and Merger Sub (including without limitation, on
and after the Closing, the
 

 
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Company) shall have no liability for, under, with respect to or otherwise in
connection with any Employee Benefit Plan, which liability arises under ERISA or
the Code, by virtue of the Company being aggregated, with any other person that
is an ERISA Affiliate, in a controlled group or affiliated service group for
purposes of ERISA or the Code at any relevant time prior to the Closing.
 
(q)           The Company does not have any commitment to create, modify or
terminate any employee benefit plan.  No event has occurred and no condition
exists that would prevent the amendment or termination of any Employee Benefit
Plan in accordance with its terms, and no Employee Benefit Plan restricts the
amendment or termination thereof (other than as necessary to comply with law or
the Code).  No event has occurred and no condition exists that would be
reasonably expected to result in a material increase in the benefits under or
the expense of maintaining any Employee Benefit Plan from the level of benefits
or expense incurred for the most recent fiscal year ended thereof.
 
(r)           No arbitration order, court decision, governmental order or
Material Contract to which the Company is a party or is subject in any limits or
restricts the Company from relocating or closing any of the operations of the
Company.
 
(s)           The Company is, and at all times since its inception has been, in
compliance with all applicable Laws respecting employment and employment
practices and terms and conditions of employment, including but not limited to
wages and hours and the classification of employees and independent contractors.
 
2.15           Environmental Matters.
 
(a)           The following terms shall be defined as follows:
 
(1)           “Environmental Laws” shall mean any applicable international,
national, federal, state or local governmental Laws, permits, licenses,
certificates, approvals, judgments, decrees, orders, directives, or requirements
that regulate the protection or restoration of the environment, protection of
public health and safety, or protection of worker health and safety, or that
regulate the handling, use, manufacturing, processing, storage, treatment,
transportation, discharge, release, emission, disposal, re-use, or recycling of
Hazardous Materials.
 
(2)           “Hazardous Materials” shall mean any material, chemical, compound,
substance, waste, mixture or by-product that is identified, defined, designated,
listed, restricted, regulated or otherwise characterized under Environmental
Laws as hazardous, dangerous, radioactive, toxic, a pollutant, a contaminant, or
words of similar meaning and effect, including any asbestos or asbestos
containing materials, any polychlorinated biphenyls, and any petroleum or
hydrocarbon substance, fraction, distillate or by-product.
 
(b)           The Company is, and since April 1, 2010 has been, in compliance in
all material respects with all Environmental Laws, including with respect to the
properties or facilities used, leased or occupied by the Company (collectively,
“Company’s Facilities”).  Except as listed in Part 2.15(b) of the Disclosure
Schedule, the Company has not and, to the
 

 
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Company’s Knowledge, no third party has discharged, emitted, released, leaked,
spilled, or disposed of (or arranged for the transportation or disposal of)
Hazardous Materials at or from any of Company’s Facilities, and the Company has
not received any written request for information or written notice alleging that
it is a potentially responsible party for Hazardous Materials at any of the
Company’s Facilities or any other property.  No civil, criminal or
administrative action, proceeding or, to the Company’s Knowledge, investigation
is pending against the Company, or, to the Company’s Knowledge, is being
threatened against the Company, with respect to Hazardous Materials or
Environmental Laws.  The Company has not assumed, by contract or operation of
Law, any liability or obligation under Environmental Laws other than general
obligations under Contracts to comply with Applicable Laws.
 
2.16           Insurance.  Part 2.16 of the Disclosure Schedule sets forth a
list of all policies of insurance or fidelity bonds relating to the business,
operations and assets of the Company.  The Company has provided to Parent copies
of such insurance policies.  Such policies are in full force and effect and the
Company is in compliance in all material respects with the terms of such
policies.  There is no claim pending under any of such policies or fidelity
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds.  The Company has no Knowledge of any
threatened termination of, or premium increase with respect to, any of such
policies.  Part 2.16 of the Disclosure Schedule describes all obligations of the
Company under Material Contracts to provide insurance to third parties (for
example, under lease or service agreements) and identifies the policy under
which such coverage is provided.
 
2.17           Transactions with Affiliates.  Except as set forth in Part 2.17
of the Disclosure Schedule, the Company is not indebted to any director, officer
or employee of the Company (except for amounts due as salaries and bonuses under
employment agreements or employee benefit plans and amounts payable in
reimbursement of ordinary expenses), and no director, officer or employee is
indebted to the Company.  Except as set forth in Part 2.17 of the Disclosure
Schedule, (a) none of the holders of Company Capital Stock, Company Warrants or
Company Options (or their Affiliates, directors, officers, employees or
shareholders) and none of the directors, officers, employees or securityholders
of the Company has been involved in any material business arrangement with the
Company (other than in such Person’s capacity as a director, officer, employee
or securityholder, as the case may be), and (b) none of the holders of Company
Capital Stock, Company Warrants, or Company Options (or their Affiliates,
directors, officers, employees or shareholders) and none of the directors,
officers, employees and securityholders of the Company owns any material asset,
tangible or intangible, that is used in the business of the Company.
 
2.18           Legal Proceedings.  There is no, and at no time since the
Company’s inception has there been any, private or governmental action, lawsuit,
investigation, audit or other legal proceeding pending (or, to the Company’s
Knowledge, being threatened) against the Company or any of its officers or
directors (in their capacities as such) before any court of competent
jurisdiction or arbitrator.  Except as listed in Part 2.18 of the Disclosure
Schedule there is no judgment, decree, decision, injunction, ruling, subpoena or
order against the Company or its assets or, to the Knowledge of the Company,
against any of its directors or officers (in their capacities as such), that
specifically names the Company or such directors or officers.
 

 
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2.19           Regulatory Compliance.
 
(a)           As to each product candidate subject to the Food Drug and Cosmetic
Act (“FDCA”) and the regulations of the FDA promulgated thereunder or similar
Laws in any foreign jurisdiction that is or has been developed, manufactured
and/or tested by or on behalf of the Company (each such product candidate, a
“Drug”), each such Drug is being or has been developed, manufactured, labeled,
stored, researched, distributed and/or tested in compliance with all applicable
requirements under the FDCA, the regulations and draft or final regulatory
guidance promulgated thereunder, the Public Health Service Act (“PHSA”), the
regulations and draft or final regulatory guidance promulgated thereunder, and
similar foreign, state and local Laws, regulations, and draft or final
regulatory guidance, including those relating to investigational use, good
manufacturing practices, good clinical practices, good laboratory practices,
labeling, record keeping and filing of required reports.  The Company has not
received any notice or other communication from the FDA or any other
Governmental Authority (i) withdrawing or threatening to withdraw the
investigational new drug application (“IND”) of any product candidate of the
Company, (ii) placing or threatening to place any IND of the Company on
“clinical hold”, or (iii) otherwise alleging any violation by the Company of any
Laws or draft or final regulatory guidance or judgments applicable to any
Drug.  The Company is not subject to and has no reason to believe it will be
subject to any obligation arising under an administrative or regulatory action
by any Governmental Authority, FDA inspection, FDA warning letter, FDA notice of
violation letter, or other notice or communication, response, or commitment made
to or with the FDA or any Governmental Authority.  Complete and accurate copies
of all data of the Company, and all correspondence with the FDA and foreign
health authorities, with respect to each Drug of the Company have been provided
to Parent.
 
(b)           All applicable approvals, clearances, authorizations, licenses,
and registrations (collectively “Approvals”) required by the FDA or any other
Governmental Authority to permit any manufacturing, labeling, storing, testing,
research and development of Drug as previously conducted or currently being
conducted by or on behalf of the Company: (i) with respect to all such
activities being undertaken by the Company, have been obtained by the Company
and (ii) with respect to all such activities undertaken on behalf of the
Company, have been obtained by each third party undertaking such
activities.  The Company is and, to the Company’s Knowledge, each such third
party is, in compliance with all reporting requirements related to the foregoing
approvals, clearances, authorizations, licenses and registrations.  All such
Approvals held by the Company are, and to the Company’s Knowledge, all such
Approvals held by third parties are, valid and in full force and effect and will
continue to be in full force and effect immediately following the Effective Time
and, as of the date of this Agreement, no proceeding is pending or, to the
Knowledge of the Company, considered or threatened to revoke, suspend, cancel,
terminate, or adversely modify any such Approval held by the Company or, to the
Company’s Knowledge, any such Approval held by a  third party.
 
(c)           All human clinical trials conducted by or on behalf of the Company
have been, and are being, conducted in compliance with the applicable
requirements of Good Clinical Practice, Informed Consent, and all other
applicable requirements relating to protection of human subjects contained in 21
CFR Parts 312, 50, 54, 56 and 11 and all applicable guidelines, and all
applicable foreign, state and local Laws. All non-clinical laboratory studies
conducted by or on
 

 
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behalf of the Company have been, and are being, conducted in compliance with the
applicable requirements of Good Laboratory Practices, contained in 21 C.F.R.
Part 58, and all applicable guidelines, and all applicable foreign, state and
local Laws.
 
(d)           The Company has filed or a third party on behalf of the Company
has filed with the FDA or other appropriate Governmental Authorities all
required notices, and annual or other reports, including notices of adverse
events, serious and/or unexpected adverse events, and serious injuries or deaths
related to the use of any Drug in human clinical trials, and the Company has
provided copies of such notices to Parent. All such reports, documents, and
notices were complete and correct in all material respects on the date filed (or
were corrected in or supplemented by a subsequent filing) such that no liability
exists with respect to the completeness or accuracy of such filing.
 
(e)           All manufacturing, warehousing, distributing and testing
operations conducted by or for the benefit of the Company with respect to any
Drug being used in human clinical trials have been and are being conducted in
accordance with the FDA’s current Good Manufacturing Practices (“cGMP”)
regulations and guidelines for drug and biological products, as set forth in 21
CFR Parts 210 and 211.  In addition, the Company is in compliance with all
applicable registration and listing requirements set forth in 21 U.S.C.
Section 360 and 21 CFR Part 207 and all similar applicable Laws and regulations.
 
(f)           Neither the Company nor, to the Knowledge of the Company, the
Company’s agents or clinical investigators acting for the Company, has committed
any act, made any statement or failed to make any statement that would
reasonably be expected to provide a basis for the FDA to invoke its policy with
respect to “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal
Gratuities” set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any
amendments thereto.  Additionally, neither the Company, nor to the Knowledge of
the Company, any officer, director, employee or agent of the Company has been
convicted of or charged with any crime or engaged in any conduct that would
reasonably be expected to result, or has resulted, in (i) debarment under 21
U.S.C. Section 335a or any similar state Law, (ii) exclusion under 42 U.S.C.
Section 1320a-7 or any similar state Law, (iii) exclusion from federal
procurement programs and non-procurement programs (per the General Services
Administration published list of parties), or (iv) debarment by any other
federal or international Governmental Authority.  There is no civil, criminal,
administrative or other action, suit, demand, claim, hearing, proceeding,
notice, or demand pending, received by or, to the Knowledge of the Company,
threatened against the Company which could reasonably result in its exclusion
from participation in any federal health care program or other third-party
payment programs in which the Company participates.
 
(g)           Neither the Company, nor any of the Company’s officers, directors,
employees, or agents is a party to, or bound by, any order, individual integrity
agreement, corporate integrity agreement or other similar formal agreement with
any Governmental Authority resulting from a failure, or alleged failure, to
comply with any applicable Law
 
(h)           There are no investigations, suits, arbitrations, charges,
complaints, claims, actions or proceedings filed or in progress or, to the
Knowledge of the Company,
 

 
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threatened against or affecting the Company relating to or arising under the
FDCA, PHSA, FDA regulations adopted thereunder, the Controlled Substance Act or
any other Law promulgated by any Governmental Authority.
 
(i)           The Company has provided to Parent true and correct copies of all
(i) FDA correspondence and minutes from meetings known to the Company with
respect to the development of the DZNS Product, whether in person, by telephone
or otherwise, between the Company and its affiliates or SK Bio and its
affiliates and the FDA, (ii) pre-clinical and clinical study results known to
the Company, including any interim and/or blinded results, any safety committee
reviews and any unblinded data and results and (iii) chemistry, manufacturing,
and controls (CMC) data known to the Company related to the DZNS Product.
 
(j)           The Company has identified, disclosed to Parent, and thoroughly
investigated all allegations (from internal or external sources) of which it has
Knowledge of actual or potential non-compliance with the FDCA and the
regulations and draft or final regulatory promulgated thereunder; the PHSA and
the regulations and draft or final regulatory promulgated thereunder; all other
applicable foreign, state and local Laws, regulations and guidance, including
prohibitions against kickbacks and off-label promotion; industry best practices;
or the Company’s own policies and procedures.  Such allegations and instances of
potential or actual non-compliance and corresponding internal investigations are
listed and described in Part 2.19(j) of the Disclosure Schedule.  The Company
has made required disclosures with respect to the investigated conduct to the
relevant Governmental Authority, as applicable.
 
(k)           The Company has not marketed, advertised, distributed, sold, or
commercialized any product and is not currently marketing, distributing,
selling, or otherwise commercializing any product.
 
2.20           Authority; Binding Nature of Agreement; Non-Contravention.  The
Company has the requisite corporate power and authority to execute and deliver
this Agreement and to carry out the transactions and perform all other
obligations contemplated by this Agreement.  The execution and delivery by the
Company of this Agreement have been duly authorized by all necessary corporate
action on the part of the Company, subject to the receipt of the Required
Stockholder Vote.  This Agreement has been duly executed and delivered by the
Company and, assuming this Agreement constitutes the valid and binding
obligation of the Parent and Merger Sub, this Agreement constitutes the valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to: (a) Laws of general application relating
to bankruptcy, insolvency and the relief of debtors; and (b) rules of Law
governing specific performance, injunctive relief and other equitable
remedies.  Except as set forth in Part 2.20 of the Disclosure Schedule, neither
(i) the execution and delivery of this Agreement by the Company, nor (ii) the
consummation by the Company of the transactions contemplated by this Agreement,
including the Merger, constitutes or will result in a termination of, or a
breach or violation by the Company of, or a default by the Company under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration under or creation of a lien, pledge,
security interest, adverse claim or other encumbrance under (A) any
 

 
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provision of the Restated Certificate of Incorporation or Bylaws, as amended,
(B) any provision of any Material Contract or (C) any Law applicable to the
Company.
 
2.21           Stockholder Approval.  The affirmative vote or consent of the
holders of a majority of the shares of Company Common Stock and Company
Preferred Stock, voting together as a single class on an as-converted basis, in
each case outstanding on the record date chosen for purposes of determining the
stockholders of the Company entitled to vote on the adoption of this Agreement,
are the only votes of the holders of any Company Capital Stock necessary under
the DGCL and the Restated Certificate of Incorporation to adopt and approve this
Agreement and approve the Merger and the other transactions contemplated by this
Agreement (the “Required Stockholder Vote”).  Immediately after the execution
and delivery of this Agreement, each stockholder of the Company shall provide an
affirmative vote or consent, representing such stockholder’s entire holdings,
for the adoption of this Agreement and the Merger and the other transactions
contemplated by this Agreement, which represents the satisfaction of the
Required Stockholder Vote, and each such consent shall remain in full force and
effect.
 
2.22           Board Approval; Other Approvals.  The Board of Directors of the
Company has unanimously (a) adopted this Agreement and approved its execution
and delivery and the consummation of the Merger and the other transactions
contemplated by this Agreement, (b) determined that the Merger is advisable and
in the best interests of the Company and the stockholders of the Company, and
(c) directed that this Agreement and the Merger be submitted to the stockholders
of the Company for their adoption and approval and resolved to recommend that
the stockholders of the Company vote in favor of the adoption of this Agreement
and the approval of the Merger.  This Agreement has been duly authorized by all
requisite corporate action under the DGCL and the Restated Certificate of
Incorporation, subject to the Required Stockholder Vote.  No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission, arbitral body or other governmental
authority or instrumentality, whether inside or outside the United States (each,
a “Governmental Authority”), is required to be obtained or made by the Company
at or prior to the Effective Time in order for the Company to execute and
deliver this Agreement or to consummate transactions contemplated by this
Agreement, including the Merger, except for: (x) the filing of the certificate
of merger as provided in Section 1.2(b); and (y) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required to be obtained or made by the Company under applicable state securities
Laws and the securities Laws of any foreign country.
 
2.23           Financial Advisor.  Except for Peter J. Solomon Company, no
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the Merger, this Agreement or any
transaction contemplated hereby based upon arrangements made by or on behalf of
the Company.
 
2.24           Distribution of Merger Consideration.  The Merger Consideration,
when distributed in accordance with the terms of this Agreement (including any
Closing Allocation Certificate), will have been distributed to the Former
Holders in accordance with the provisions of the Restated Certificate of
Incorporation and other constituent documents of the Company and
 

 
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any other document or agreement among the Company and such holders or other
Persons related to the distribution of the Merger Consideration.
 
2.25           Hart-Scott-Rodino Status.  The Company represents and warrants as
of the date hereof that it is not as of the date of this Agreement, and will not
at the time of the Closing be, a “person” (as defined in 16 C.F.R. §
801.1(a)(1)) with $13.2 million or more of total assets or annual net sales as
determined in accordance with 16 C.F.R. § 801.11.
 
2.26           Accuracy of Representations and Warranties.  No representation or
warranty made by the Company in this Agreement contains an untrue statement of a
material fact or omits to state a material fact required to be stated herein or
necessary to make the statements contained herein not misleading.
 
2.27           Closing Allocation Certificate.  The amounts and other
information set forth in each Closing Allocation Certificate, and, to the
Company’s Knowledge, the payoff letters and final invoices referred to in
Section 1.6(c), are complete and accurate.
 
2.28           Bank Accounts.  Part 2.28 of the Disclosure Schedules lists: (i)
each bank account maintained by the Company at any bank or other financial
institution, including the name of the bank or financial institution, the
account number and the names of all individuals authorized to draw on or make
withdrawals from such accounts; and (ii) locations of all Company lock boxes and
safe deposit boxes and the names of all individuals authorized to draw thereon
or have access thereto.
 
3.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.

 
Except as set forth in the Parent SEC Documents, Parent and Merger Sub represent
and warrant to the Company as follows:
 
3.1           Due Organization.  Each of Parent and Merger Sub is a corporation
duly organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation.
 
3.2           Authority; Binding Nature of Agreement.  Each of Parent and Merger
Sub has the requisite corporate power and authority to execute and deliver this
Agreement and to carry out the transactions and perform all other obligations
contemplated by this Agreement. The execution and delivery by Parent and Merger
Sub of this Agreement have been duly authorized by all necessary corporate
action on the part of Parent and Merger Sub, and no other authorization or
consent of Parent, Merger Sub or their respective stockholders is necessary
other than the adoption of this Agreement by Parent as the sole stockholder of
Merger Sub (which adoption shall take place immediately after the execution and
delivery of this Agreement).. This Agreement has been duly executed and
delivered by each of Parent and Merger Sub and, assuming this Agreement
constitutes the valid and binding obligation of other parties hereto, this
Agreement constitutes the valid and binding obligation of each of Parent and
Merger Sub, enforceable against each of them in accordance with its terms,
subject to: (a) Laws of general application relating to bankruptcy, insolvency
and the relief of debtors; and (b) rules of Law governing specific performance,
injunctive relief and other equitable remedies. Neither (i) the
 

 
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execution and delivery of this Agreement by Parent or Merger Sub, nor (ii) the
consummation of the transactions contemplated by this Agreement, including the
Merger, constitutes or will: (A) result in a termination of, or a breach or
violation by Parent or Merger Sub of, or a default by Parent or Merger Sub under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration under or creation of a lien, pledge,
security interest, adverse claim or other encumbrance under (I) any provision of
the certificate of incorporation or bylaws, as amended, or other equivalent
organizational documents of Parent or Merger Sub, as amended, (II) any provision
of any contract by which Parent or Merger Sub is bound, or (III) any Law
applicable to Parent or Merger Sub; or (B) render Parent insolvent or unable to
pay its debts as they become due.
 
3.3           Merger Sub.  Merger Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, and has engaged in
no other business activities.
 
3.4           No Authorizations.  No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Authority is
required to be obtained or made by Parent or Merger Sub at or prior to the
Effective Time in order for Parent or Merger Sub to execute and deliver this
Agreement or to consummate transactions contemplated by this Agreement,
including the Merger, except for: (a) the filing of the certificate of merger as
provided in Section 1.2(b); (b) the filing by Parent of such reports and
information with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder, as may be required in connection with this Agreement, the Merger and
the other transactions contemplated by this Agreement; and (c) any registration,
declaration, filing, permit, order, authorization, consent or approval which if
not made or obtained would not reasonably be expected to have a material adverse
effect on Parent’s or Merger Sub’s ability to consummate the Merger or any of
the other transactions contemplated hereby (a “Parent Material Adverse Effect”).
 
3.5           Litigation.
 
(a)           There is no private or governmental action, lawsuit or other legal
proceeding pending (or, to the Knowledge of Parent, being threatened) against
Parent or its Subsidiaries or any of their respective properties or any of their
respective officers or directors (in their capacities as such) that would
reasonably be expected to result in a Parent Material Adverse Effect.
 
(b)           There is no judgment, decree, decision, injunction, ruling,
subpoena or order against Parent or Merger Sub or their respective assets or, to
the Knowledge of Parent and Merger Sub, against any of their respective
directors or officers (in their capacities as such) that specifically names
Parent or its Subsidiaries or such directors or officers and that would
reasonably be expected to result in a Parent Material Adverse Effect.
 
3.6           No Other DZNS Products.  As of the date of this Agreement, there
is no product in clinical development by Parent or any of its Affiliates that,
if commercialized, would be a product that (i) contains diazepam as an active
ingredient, (ii) is (a) delivered by nasal administration and/or (b) labeled or
intended for use in the treatment of seizures or seizure
 

 
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disorders, and (iii) is sold anywhere in the Territory.  Parent is not otherwise
conducting the activities prohibited by Section 7.6 of the SK License. This
representation is made without qualification by reference to the Parent SEC
Documents.
 
3.7           Adequacy of Funds.  Parent has adequate financial resources to
satisfy its monetary and other obligations under this Agreement.
 
3.8           No Brokers.  No broker, finder or investment banker is entitled to
any brokerage, finder’s or other fee or commission in connection with the
Merger, this Agreement or any of the other transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or Merger Sub.
 
3.9           SEC Filings.
 
(a)           Parent has timely filed with or furnished to the SEC all reports,
forms, certifications, schedules, registration statements, and definitive proxy
statements (including exhibits and other information incorporated therein)
required to be filed by it with the SEC since October 1, 2010 (the “Parent SEC
Documents”). Each Parent SEC Document, at the time filed (or if amended or
superseded by a filing or amendment prior to the date of this Agreement, then at
the time of such filing and in the case of registration statements and proxy
statements, on the dates of effectiveness and dates of mailing, respectively),
(i) complied as to form in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the applicable rules and regulations thereunder, and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.  No Parent subsidiary
is currently required to file any form, report or other document with the SEC
under Section 13(a) or 15(d) of the Exchange Act. There are no outstanding or
unresolved comments in comment letters received from the SEC staff with respect
to any Parent SEC Documents and, to the Knowledge of Parent, none of the Parent
SEC Documents is the subject of any ongoing SEC review.
 
(b)           The consolidated financial statements of Parent, together with the
related schedules and notes thereto, included in the Parent SEC Documents, as of
their respective date of filing with the SEC (or if amended or superseded by a
filing or amendment prior to the date of this Agreement, then at the time of
such filing and in the case of registration statements and proxy statements, on
the dates of effectiveness and dates of mailing, respectively), (i) comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto and (ii) present
fairly in all material respects the consolidated financial position of Parent
and its consolidated Subsidiaries as of the dates thereof, and the statements of
income, cash flows and stockholders’ equity of Parent and its consolidated
Subsidiaries for the periods specified, and such consolidated financial
statements have been prepared in accordance with GAAP (except, in the case of
the unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis throughout the periods involved, except as noted therein
(subject, in the case of unaudited statements, to the absence of notes and
normal year-end adjustments).
 

 
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(c)           Except for matters reflected or reserved against in the
consolidated, unaudited balance sheet of Parent as of the last completed fiscal
month (the “Parent Balance Sheet Date”), neither Parent nor any of its
Subsidiaries has any liabilities or obligations (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due) of any nature
that would be required by GAAP to be reflected on a consolidated balance sheet
of Parent and its consolidated subsidiaries (including the notes thereto),
except liabilities or obligations that (i) were incurred in the ordinary course
of business consistent with past practice since the Parent Balance Sheet Date,
(ii) were incurred in connection with the transactions contemplated by this
Agreement or (iii) individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect on Parent. Neither
Parent nor any of its subsidiaries is a party to, or has any commitment to
become a party to, any joint venture, off-balance sheet partnership or any
similar contract or arrangement (including any relating to any transaction or
relationship between or among Parent and any of its subsidiaries, on the one
hand, and any unconsolidated Affiliate, including any structured finance,
special purpose or limited purpose entity or person, on the other hand, or any
“off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K
under the Exchange Act)), where the result, purpose or effect of such contract
or arrangement is to avoid disclosure of any material transaction involving, or
material liabilities of, Parent or any of its subsidiaries, in Parent’s
financial statements or the Parent SEC Documents.
 
3.10           Controls and Procedures; NASDAQ Compliance.
 
(a)           Parent has (i) established and, since October 1, 2010, has
maintained a system of “internal control over financial reporting” (as defined
in Rule 13a-15(f) under the Exchange Act) and “disclosure controls and
procedures” (as defined in Rule 13a-15(e) under the Exchange Act) and (ii) has
disclosed, based on its most recent evaluation before the date hereof, to
Parent’s outside auditors and the audit committee of Parent’s Board of Directors
(A) any significant deficiencies and material weaknesses of which Parent has
Knowledge in the design or operation of internal control over financial
reporting that are reasonably likely to adversely affect in any material respect
Parent’s ability to record, process, summarize and report financial information,
and (B) any fraud, whether or not material, that involves management or other
employees who have a significant role in Parent’s internal control over
financial reporting.
 
(b)           Parent is in material compliance with the applicable listing and
governance rules of each stock exchange on which its shares are publicly
tradable.
 
(c)           Since October 1, 2010, Parent has not received any oral or written
notification of any “significant deficiency” or “material weakness”, each term
as defined in Rule 12b-2 of the Exchange Act, in Parent’s internal controls over
financial reporting.
 
4.
COVENANTS AND AGREEMENTS.

 
4.1           Conduct of Business of the Company.  Except to the extent
expressly contemplated or required by this Agreement or as set forth on Part 4.1
of the Disclosure Schedule, during the period from the date of this Agreement
until the Effective Time, or as consented to in writing by Parent, the Company
shall: (x) conduct its business in the ordinary
 

 
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course consistent with past practice; (y) comply in all material respects with
all applicable Laws and the requirements of all Material Contracts; and (z) use
all reasonable efforts to: (i) maintain and preserve intact its present business
organization; (ii) retain the services of its present officers and key
employees; and (iii) preserve its relationships with suppliers, licensors,
licensees, lessors, clinical trial investigators or managers of its clinical
trials, consultants, business associates and others to whom the Company has
contractual obligations (it being understood that the obligation to use such
efforts shall in no event require the Company to increase the compensation
payable to any such person).  Without limiting the generality of the foregoing,
except to the extent, in each case, expressly contemplated, required or
permitted by this Agreement or as set forth on Part 4.1 of the Disclosure
Schedule, during the period from the date of this Agreement until the Effective
Time, the Company shall not without Parent’s prior written consent (which
consent shall be within the Parent’s sole discretion):
 
(a)           issue, sell or deliver any shares of Company Capital Stock or
securities convertible into, or rights, warrants or options to acquire any
shares of Company Capital Stock; provided, however, that the Company may issue
shares of Company Capital Stock upon the valid exercise of Company Options and
Company Warrants outstanding as of the date of this Agreement or upon the valid
conversion of Company Preferred Stock outstanding as of the date of this
Agreement;
 
(b)           redeem, purchase or otherwise acquire any outstanding shares of
Company Capital Stock, or any rights, warrants or options to acquire any shares
of Company Capital Stock, if such amount would result in the Net Cash Amount
being negative;
 
(c)           declare, set aside for payment or pay any dividend on, or make any
other distribution (whether in cash, stock or property) in respect of, any
shares of Company Capital Stock or otherwise make any payments to its
shareholders in their capacity as such if such action would result in the Net
Cash Amount being negative;
 
(d)           split, combine, subdivide or reclassify any shares of Company
Capital Stock;
 
(e)           subject to Parent’s timely compliance with its obligations to make
payments pursuant to Section 4.13, incur or assume any Indebtedness or guarantee
any Indebtedness, or issue any debt securities or warrants or other rights to
acquire debt securities of the Company, or loan any money to or extend credit to
any third party (for clarification, in the event that Parent does not timely
meet an obligation under Section 4.13, the Company may incur Indebtedness from
one or more of its stockholders without violating any provision of this
Agreement);
 
(f)           (i) sell, transfer, lease, license, mortgage or encumber any
Company IP Right, or otherwise grant to any Person rights in any Company IP
Right, except for the incurrence of Permitted Encumbrances, or (ii) acquire or
license from any Person any IP Rights other than pursuant to material transfer
agreements and nonexclusive licenses entered into in the ordinary course of
business; or
 

 
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(g)           sell, transfer, lease, license, mortgage or encumber or permit the
imposition of any lien or encumbrance (other than Permitted Encumbrances) on,
any of its properties, assets or lines of business;
 
(h)           make any capital expenditures in an amount in excess of $10,000 in
the aggregate;
 
(i)           make or agree to any acquisition (by purchase of securities or
assets, merger, consolidation or otherwise) of any other Person, business or
division, or merge or consolidate with any other Person or agree to acquire
assets that are material, individually or in the aggregate, to the business of
the Company, taken as a whole;
 
(j)           enter into any joint venture, partnership, license, limited
liability company, operating agreement or agreement requiring sharing of profits
or revenues with any Person;
 
(k)           make any investment in, or loan or advance (other than de minimis
advances to its employees in the ordinary course of business consistent with
past practice) to, any Person;
 
(l)           increase the compensation of any of its directors, officers,
employees or consultants or enter into, establish, amend or terminate any
employment, consulting, collective bargaining, bonus or other incentive
compensation, health or other welfare, pension, retirement, severance, deferred
compensation or other compensation or benefit plan with, for or in respect of
any shareholder, director, officer, other employee or consultant, other than:
(i) as required pursuant to applicable Law or the terms of agreements in effect
as of the date of this Agreement; (ii) increases in salaries, wages and benefits
of employees made in the ordinary course of business consistent with past
practice; and (iii) transaction bonus payments set forth in the Release of Claim
forms executed by Terminated Employees;
 
(m)           adopt or materially amend any Employee Benefit Plan or hire or
offer to hire any new employee (unless reasonably necessary to replace any
employee that terminates service after the date hereof);
 
(n)           make, revoke or change any election in respect of Taxes, adopt or
change any accounting method or period in respect of Taxes, file any Tax Return
or any amendment to a Tax Return, enter into any closing agreement, settle any
claim or assessment in respect of Taxes, surrender any rights to claim a Tax
refund, consent to any extension or waiver of the limitation period applicable
in respect of Taxes;
 
(o)           make any changes in fiscal year, financial or tax accounting
methods, principles or practices or change an annual accounting period, except
insofar as may be required by a change in GAAP or applicable Law;
 
(p)           amend its Restated Certificate of Incorporation, Bylaws or
equivalent organizational documents;
 

 
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(q)           enter into any contract or agreement that would be a Material
Contract if it had been in existence on the date of this Agreement, or
prematurely terminate, amend or modify any Material Contract, or cancel, waive,
assign or release any rights or claims under any Material Contract;
 
(r)           settle, compromise or terminate any claims or litigation or
adverse proceeding, or waive, release or assign any rights or claims under any
Material Contract, including granting any covenant not to sue except as required
by applicable Law or any judgment by a Governmental Authority;
 
(s)           commence a lawsuit other than (i) for the routine collection of
bills, (ii) in such cases where the Company in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of the Company’s business, provided that it consults with Parent prior to
the filing of such suit and following Parent’s prior written consent (not to be
unreasonably withheld or delayed), or (iii) for a breach of this Agreement;
 
(t)           adopt a plan or agreement of complete or partial liquidation,
dissolution, restructuring, recapitalization, merger, consolidation or other
reorganization (other than the Merger);
 
(u)           cancel, terminate, fail to keep in place or materially reduce the
amount of any insurance coverage provided by existing insurance policies without
obtaining comparable substitute insurance coverage; or
 
(v)           agree, in writing or otherwise, to take any of the actions
described in clauses “(a)” through “(u)” of this sentence.  Nothing herein shall
limit the ability of the Company to use all or any portion of the Signing
Payment to repay indebtedness or otherwise as it may determine in its
discretion.
 
4.2           Access to Information.  During the period from the date of this
Agreement until the Effective Time, the Company shall afford Parent and its
personnel, accountants, counsel and other representatives reasonable access
during normal business hours and upon reasonable advance notice to the Company’s
properties, books and records and all other existing information concerning the
business, properties and personnel of the Company as Parent may reasonably
request, and the Company shall give Parent, its accountants and advisors access
sufficient for Parent to prepare audited financial statements of the Company;
provided, however, that in exercising access rights under this Section 4.2,
Parent shall not be permitted to interfere unreasonably with the conduct of the
business of the Company.
 
4.3           Public Disclosure.  Except as may be required by Law or by
obligations pursuant to any applicable securities exchange, none of Parent, the
Company or the Stockholders’ Representative or any of their respective
Affiliates shall issue any press release or make any other public (or
non-confidential) statement or disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated
hereby without the prior approval of the Company or Parent (or, after the
Closing, Parent and for a period of three years after the Closing, Stockholders’
Representative), as the case may be.  The Company
 

 
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and Parent will consult with each other concerning the means by which the
Company’s employees, customers and suppliers and others having dealings with the
Company will be informed of the transactions contemplated by this
Agreement.  Parent shall afford Company (or, following the Closing,
Stockholders’ Representative) a reasonable opportunity to review and comment
upon any confidential treatment request submitted by Parent with the SEC related
to this Agreement.
 
4.4           Regulatory Approval; Further Assurances.
 
(a)           Parent and the Company shall use reasonable best efforts to
effectuate the Merger and make effective the other transactions contemplated by
this Agreement.  Without limiting the generality of the foregoing, each party to
this Agreement shall: (i) make any filings and give any notices required to be
made or given by such party in connection with the Merger and the other
transactions contemplated by this Agreement; (ii) use reasonable best efforts to
obtain any consent required to be obtained (pursuant to any applicable Law,
contract or otherwise) by such party in connection with the Merger or any of the
other transactions contemplated by this Agreement; and (iii) use reasonable best
efforts to lift any restraint, injunction or other legal bar to the
Merger.  Each of Parent and the Company shall promptly deliver to the other a
copy of each such filing made, each such notice given and each such consent
obtained during the period from the date of this Agreement until the Effective
Time.
 
(b)           Each party shall use reasonable best efforts in filing, as
promptly as practicable after the date of this Agreement, all notices, reports
and other documents that the parties deem to be necessary or advisable to be
filed with any Governmental Authority with respect to the Merger and the other
transactions contemplated by this Agreement, and to submit promptly any
additional information requested by any such Governmental Authority.
 
4.5           Indemnification of Officers and Directors of the Company.
 
(a)           The Surviving Corporation shall fulfill and honor in all respects
the obligations of the Company pursuant to any agreement or certificate of
incorporation of the Company providing for the indemnification and exculpation
from liability of its officers or directors and former officers and directors
for any third party claims (the Persons entitled to be indemnified pursuant to
such provisions, and all other current and former officers and directors of the
Company, and all other persons entitled to be indemnified pursuant to such
provisions or agreements being referred to collectively as the “Indemnified
Parties”).  For a period of six years after the Effective Time or unless
consented to by the Stockholders’ Representative, Parent shall cause the
certificate of incorporation of the Surviving Corporation to contain the
provisions with respect to indemnification and exculpation from liability
substantially as set forth in the Company’s Restated Certificate of
Incorporation immediately prior to the execution and delivery of this Agreement,
which provisions shall not be amended, repealed or otherwise modified after the
Effective Time in any manner that would adversely affect the rights thereunder
of any of the Indemnified Parties.
 
(b)           This Section 4.5: (A) shall survive the consummation of the Merger
and the Effective Time; (B) is intended for the benefit of, and will be
enforceable by, each
 

 
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Indemnified Party and his or her heirs and representatives; and (C) shall be
binding on all successors and assigns of Parent and the Surviving Corporation.
 
4.6           Employee Arrangements.
 
(a)           Effective immediately prior to the Effective Time, Company shall
cause the termination of employment of all employees (the “Terminated
Employees”) and shall arrange for each Terminated Employee to be offered
employment with Aerial Biopharma, LLC, a company affiliated with Company’s
senior management (“Aerial”), on terms substantially similar to those provided
for by Company prior to the Effective Time.  Without limiting the generality of
the foregoing, the parties shall arrange to assign to Aerial all transferable
employee benefit plans on the Closing Date or as soon thereafter as practicable
and to terminate any non-transferable employee benefits plans as soon as
practicable following the Closing.  To the extent applicable, the Company shall
comply with the Worker Adjustment Retraining and Notification Act and any state
or local plant closing notice laws, and shall be solely responsible for
providing any and all notices to employees, consultants and independent
contractors of the Company that are required by Law.
 
(b)           It is expressly acknowledged, understood and agreed that nothing
in this Section 4.6 or otherwise contained in this Agreement is intended to or
does or shall constitute an amendment to or establishment of any employee
benefit or other plan.
 
4.7           No Solicitation.
 
(a)           During the period from the date of this Agreement until the
Effective Time, the Company agrees that it shall not, nor shall it authorize or
permit any of its representatives to, directly or indirectly:  (i) solicit,
initiate, knowingly encourage, induce or facilitate the communication, making,
submission or announcement of any inquiry, proposal or offer from any Person
(other than Parent) relating to a possible Acquisition Transaction;
(ii) participate in any discussions, inquiries or negotiations or enter into any
agreement with, or provide any non public information or afford to any Person
(other than Parent or its representatives) access to its properties, books, or
records, relating to or in connection with a possible Acquisition Transaction,
except disclosures of information as required by applicable Laws or pursuant to
a request by a Governmental Authority for information; (iii) consider, entertain
or accept any proposal or offer from any Person (other than Parent) relating to
a possible Acquisition Transaction; (iv) enter into or execute any agreement
relating to an Acquisition Transaction; or (v) make or authorize any public
statement, recommendation or solicitation in support of any Acquisition
Transaction or any offer or proposal relating to an Acquisition Transaction
other than with respect to the Merger.  The Company shall not participate in any
discussions or negotiations with any Person regarding an Acquisition Transaction
or furnish any information to any Person.
 
(b)           The Company shall immediately cease and cause to be terminated any
existing discussions with any Person that relate to any Acquisition Transaction
as of the date of this Agreement.
 

 
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(c)           The Company shall promptly request each Person that has executed a
confidentiality or similar agreement in connection with its consideration of a
possible Acquisition Transaction within the six month period prior to the date
hereof to return to the Company or destroy all confidential information
heretofore furnished to such Person by or on behalf of the Company within the
six month period prior to the date hereof.
 
4.8           Section 280G Approvals.
 
Notwithstanding anything to the contrary contained in this Agreement and without
limiting Section 2.14(b), if, in connection with the Merger, the Company is
obligated to make any payments, or is a party to any agreement that, under
certain circumstances, could obligate it to make any payments that will not be
deductible under Section 280G of the Code unless the stockholder approval
requirements of Section 280G(b)(5)(B) of the Code are satisfied, it shall
solicit such stockholder approval within a reasonable period of time after the
date hereof and in any event prior to the Effective Time and to obtain waivers
from each “disqualified individual” within the meaning of Section 280G(c) of the
Code such that no payment will be a “parachute payment” within the meaning of
Section 280G(a)(2) of the Code.
 
4.9           Notifications to Parent.  During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with Section 6.1, the Company shall, in the event of,
and promptly (and in any event, within 24 hours) after becoming aware of, the
occurrence of any event that would (a) constitute a material breach or
inaccuracy of any of the representations and warranties set forth in Section 2,
(b) constitute a breach by the Company of any covenant contained in this
Agreement or (c) result in the failure of a condition set forth in Section 5.1
or Section 5.2, give written notice thereof to Parent and use best efforts to
remedy promptly any such material breach or inaccuracy.
 
4.10           Data Room.  The Company shall have prepared one or more CD ROMS
(or other storage format) containing electronic copies of the Data Room as of
the date hereof and deliver such CD ROMS to Parent at or prior to the
Closing.  “Data Room” means the information which is readable, printable and
otherwise fully accessible to Parent and its advisors and representatives in the
electronic data room maintained by the Company, the full contents of which have
been made available to the Parent and its representatives prior to the date
hereof.  Documents made available to Parent in the Data Room shall be deemed to
have been provided to Parent for purposes of the representations and warranties
set forth in Article 2.
 
4.11           Transition of Facilities and Operations.
 
(a)           At or before the Effective Time, Parent, Merger Sub and the
Stockholders’ Representative shall, and shall use commercially reasonable effort
to cause the lessor to, execute a consent to assign that certain real estate
lease described on Schedule 4.11 from the Company to Aerial (the “Lease
Assignment”).
 
(b)           At or before the Effective Time, the Company shall transfer and
assign to Aerial the furniture, fixtures and equipment (including all installed
software) set forth on Part 4.11(b) of the Disclosure Schedule) in exchange for
$100.
 

 
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(c)           At or before the Effective Time, Company shall terminate or shall
transfer and assign to Aerial, in exchange for the assumption by Aerial of
future obligations under such contracts, those contracts set forth on Part
4.11(c) of the Disclosure Schedule but excluding the Transition Services
Agreement.  For clarification, all payment obligations incurred in the ordinary
course under any such contracts for goods or services provided by Neuronex on or
prior to the Effective Time shall be paid to the Surviving Corporation.
 
4.12           Transition Services Agreement.  At or before the Effective Time,
the Company and Aerial, shall execute a Transition Services Agreement in
substantially the form attached hereto as Exhibit C (the “Transition Services
Agreement”).
 
4.13           Signing Payment; Research and Development Support.  On the date
hereof, Parent shall pay to the Company the Signing Payment and, in addition,
shall deposit $500,000 of the R&D Support Payment into an account designated by
the Company (the “R&D Support Account”).  The Company shall use the R&D Support
Account to fund research and development costs with respect to the DZNS Product
through the Closing Date.  From and after the expenditure of the initial deposit
of the R&D Support Payment, Parent covenants and agrees to reimburse the Company
on a monthly basis in arrears for research and development costs with respect to
the DZNS Product.  Such reimbursements shall be made through additional deposits
of the requested unpaid portion of the R&D Support Payment into the R&D Support
Account within five (5) Business Days of a written request therefor by the
Company, based on a reasonably detailed invoice provided by the Company with
respect to such research and development costs for such prior month.  In the
event of a termination of this Agreement pursuant to Section 6.1 (other than by
Company pursuant to Section 6.1(e)), the Company shall promptly remit any
remaining balance in the R&D Support Account (less any amounts necessary to
cover obligations incurred but not yet paid) to Parent.  For clarification, the
R&D Support Account refers solely to amounts other than the Signing Payment paid
and disbursed in accordance with this Section 4.13, notwithstanding that the
applicable bank account may be used for other purposes by the Company.
 
4.14           FDA Meeting.  The Company shall keep Parent reasonably informed
about the status and activities with respect to the development of the DZNS
Product, including through weekly meeting (by phone or in person) and the
Company will consider Parent’s input in good faith. The Company will allow
Parent, at any reasonable times requested by Parents, to discuss DZNS Products
with the manufacturers or potential manufacturers of the DZNS Product.  Prior to
the filing of the NDA with the FDA, the Company shall schedule a pre-NDA meeting
with the FDA (the “FDA Meeting”) with respect to the DZNS Product.  Three
representatives from Parent shall be allowed to participate in the FDA
Meeting.  At least thirty (30) days prior to the FDA Meeting, but in no event
less than ten (10) days prior to submission of the briefing materials, the
Company shall provide Parent with draft briefing materials that the Company
intends to submit to the FDA for the FDA Meeting and shall provide Parent with
the opportunity to comment on such briefing materials, which comments will be
considered and addressed in good faith. In addition, any questions proposed by
Parent shall be submitted in writing to the FDA prior to and asked of the FDA at
the pre-NDA meeting.  Following the FDA Meeting, the Company and Parent shall
jointly discuss whether or not to proceed with the filing of the NDA with the
FDA based on the results of the FDA Meeting.  The Company shall provide Parent
with
 

 
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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.

a copy of the final minutes for the FDA Meeting (the “FDA Minutes”) within two
(2) Business Days following the Company’s receipt of the FDA Minutes from the
FDA.
 
4.15           SK Agreement.  Parent shall promptly pay any amount due and
payable, and incurred, pursuant to the SK License after the Closing Date;
provided, however, that, for clarity, (a) if the Closing does not take place,
then Parent shall have no obligation to pay any amount thereunder that accrues
after termination of this Agreement and (b) Parent shall not be obligated to pay
any amount due and payable pursuant to the SK License for any period prior to
the Closing Date. The parties agree that following the Effective Time, the
Surviving Corporation shall be bound by the terms and conditions of the SK
License.  Following the Effective Time, Parent shall ensure that the Surviving
Corporation shall comply in all material respects with the obligations of the
“Licensee” (as defined in the SK License) under the SK License.  Promptly after
the date of this Agreement, the Company shall provide to Parent a written
notice, in a form reasonably acceptable to Parent, from SK Bio confirming that
the Development Plan Documentation is the development plan for the DZNS Product
as currently agreed upon by the Company and SK Bio, and that the Company is in
full compliance with such development plan and the SK License.
 
4.16           Patent Prosecution and [***].  At least thirty (30) days prior to
the filing of any substantive patent filings or other material interactions with
the United States Patent and Trademark Office (or any foreign equivalents), the
Company shall provide Parent with draft materials that the Company intends to
file and shall provide Parent with the opportunity to comment on such filings or
other materials, which comments shall be incorporated into such filings or
correspondence.  Additionally, at least thirty (30) days prior to any material
filings or correspondence related to the request for [***], the Company shall
provide Parent with draft materials that the Company intends to file or submit
and shall provide Parent with the opportunity to comment on such filing or
correspondence, which comments will be considered and addressed in good faith.
 
4.17           Financial Statement Audit.  Prior to the Closing, the Company
shall (i) provide such information, assistance and cooperation as Parent may
reasonably request to audit, at Parent’s expense, any of the Company’s financial
statements, (ii) cause the officers of the Company to execute any reasonably
necessary officers’ certificates or management representation letters to
Parent’s accountants to issue unqualified reports with respect to such financial
statements to be included in Parent SEC Documents and (iii) request from the
present and former independent accountants of the Company that they (A)
cooperate with and assist Parent, at Parent’s expense, in preparing such audited
financial statements, (B) make work papers available to Parent and its
representatives (subject to Parent entering into any agreements reasonably
required or requested by the accountants in connection with the provision of
such work papers), (C) deliver “comfort-letters” in customary form in connection
therewith, and (D) deliver consents to the inclusion of financial statements
required in connection with any Parent SEC Documents.
 
5.
CONDITIONS TO THE MERGER.

 
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5.1           Conditions to Each Party’s Obligation to Effect the Merger.  The
respective obligations of each party hereto to effect the Merger and otherwise
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction on or prior to the Closing Date of the following condition:
no temporary restraining order, preliminary or permanent injunction or other
order issued by any Court of competent jurisdiction (collectively, “Restraints”)
shall be pending or in effect, nor shall there be any statute, rule or
regulation enacted or deemed applicable to the Merger, in each case that makes
the consummation of the Merger illegal or otherwise restrains or prohibits the
transactions contemplated under this Agreement.
 
5.2           Conditions to Obligations of Parent and Merger Sub.  The
obligations of Parent and Merger Sub to effect the Merger are further subject to
the satisfaction (or waiver, if permissible under applicable Law, provided,
however, that any such waiver shall not release or relieve any party from any
liability arising from the matters (including any breach of this Agreement)
which caused the failure of such conditions) on or prior to the Closing Date of
the following conditions:
 
(a)           (i) the representations and warranties of the Company set forth in
this Agreement (other than the Specified Representations and those qualified by
“materiality”, “Company Material Adverse Effect” or other similar
qualifications) shall be true and correct in all material respects, taken as a
whole together with those representations and warranties of the Company set
forth in this Agreement that are qualified by “materiality”, “Company Material
Adverse Effect” or other similar qualifications, both as of the date of this
Agreement and as of the Effective Time as though made on and as of such time
(other than such representations and warranties which are made as of another
date, which shall be so true and correct as of such date); (ii) each of the
Specified Representations shall be true and correct in all respects both as of
the date of this Agreement and as of the Effective Time as though made on and as
of such time (other than such representations and warranties which are made as
of another date, which shall be so true and correct as of such date); and
(iii) the representations and warranties of the Company set forth in this
Agreement that are qualified by “materiality”, “Company Material Adverse Effect”
or other similar qualifications shall be true and correct in all respects both
as of the date of this Agreement and as of the Effective Time as though made on
and as of such time (other than such representations and warranties which are
made as of another date, which shall be so true and correct as of such date);
 
(b)           the Company shall have complied with and performed in all material
respects, individually and in the aggregate, each obligation and covenant
required to be performed by it under this Agreement on or prior to the Closing
Date;
 
(c)           there shall not have occurred any Company Material Adverse Effect
or any event which would reasonably be expected to result in a Company Material
Adverse Effect;
 
(d)           Parent shall have received a copy of the FDA Minutes;
 
(e)           Parent and Merger Sub shall have received a certificate (the
“Company Closing Certificate”), signed on behalf of the Company by the chief
executive officer or chief
 

 
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financial officer of the Company, certifying as to the satisfaction of the
matters set forth in Sections 5.2(a) through 5.2(d);
 
(f)           the Company shall have complied with the obligations set forth in
Section 13.4 of the SK License to provide to SK Bio, prior to the Closing, a
summary update of the most recent current report consistent with the provisions
of Section 7.3 of the SK License, and SK Bio shall have consented to the
transactions contemplated hereby in a form reasonably acceptable to Parent;
 
(g)           Parent shall have received resignation letters effective as of the
Closing Date executed and delivered by each of the officers and directors of the
Company, in substantially the form of Exhibit D attached hereto, and the Company
shall have received a general release of claims from at least 75% of the
Terminated Employees in a form reasonably acceptable to Parent;
 
(h)           there shall not be any legal, administrative, arbitral or other
proceeding threatened or pending before any Governmental Authority in which a
Governmental Authority is a party that would or would reasonably be expected to:
(i) restrain, enjoin, prevent, prohibit or make illegal the consummation of the
Merger or the other transactions contemplated by this Agreement; or (ii) impose
limitations on the ability of Parent effectively to exercise full rights of
ownership of all shares of the Surviving Corporation;
 
(i)           Parent shall have received an opinion letter of Hutchison Law
Group, dated as of the Closing Date, in substantially the form of Exhibit E
attached hereto;
 
(j)           the Required Stockholder Vote shall have been obtained and the
approval of this Agreement and the Merger by the stockholders of the Company
representing all of the Company’s outstanding voting power shall have been
obtained and remain in full force and effect;
 
(k)           the Company shall deliver to Parent: (a) a statement dated not
more than thirty (30) days prior to the Closing Date conforming to the
requirements of Section 1.897-2(h) and Section 1.1445-2(c)(3) of the United
States Treasury Regulations; and (b) the notification to the Internal Revenue
Service required under Section 1.897-2(h)(2) of the United States Treasury
Regulations; and
 
(l)           Aerial and the Company shall have executed and delivered to Parent
the Transition Services Agreement.
 
5.3           Conditions to Obligation of the Company.  The obligations of the
Company to effect the Merger and to otherwise consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction (or waiver,
if permissible under applicable Law, provided, however, that any such waiver
shall not release or relieve any party from any liability arising from the
matters (including any breach of this Agreement) which caused the failure of
such conditions) on or prior to the Closing Date of the following conditions:
 

 
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(a)           the representations and warranties of Parent and Merger Sub
contained in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on the Closing Date (except
to the extent such representations and warranties relate to an earlier date, in
which case as of such earlier date), except as the failure to be so true and
correct has not had, and would not reasonably be expected to have, in the
aggregate, a Parent Material Adverse Effect;
 
(b)           Parent and Merger Sub shall have each complied with and performed
in all material respects all obligations and covenants required to be performed
by them under this Agreement at or prior to the Closing Date;
 
(c)           there shall not have occurred any Parent Material Adverse Effect
or any event which would reasonably be expected to result in a Parent Material
Adverse Effect;
 
(d)           the Company shall have received a certificate, signed on behalf of
Parent by an executive officer of Parent, certifying as to the satisfaction of
the matters set forth in Sections 5.3(a) through 5.3(c);
 
(e)           Parent and Merger Sub shall have executed and delivered to
Stockholders’ Representative the Transition Services Agreement.
 
6.
TERMINATION.

 
6.1           Termination.  This Agreement may be terminated and the
transactions contemplated by this Agreement abandoned at any time prior to the
Effective Time (with respect to Sections 6.1(b) through 6.1(f), by notice from
the terminating party to the other party setting forth a brief description of
the basis for termination):
 
(a)           by the mutual written consent of the Company and Parent duly
authorized by each of their respective Boards of Directors;
 
(b)           by either of the Company or Parent if the Merger shall not have
been consummated by the date which is forty-five (45) days after the delivery of
the FDA Minutes to Parent (the “Outside Date”); provided, however, that (i) the
right to terminate this Agreement under this Section 6.1(b) shall not be
available to a party if the failure of the Merger to have been consummated on or
before the Outside Date was caused by or was the result of the failure of such
party to perform in any material respect any of its obligations under this
Agreement; and (ii) if the Merger shall not have been consummated by the Outside
Date due to any delay caused by a third party (including SK Bio or any
Governmental Authority), including a lack of consent or inaction by such third
party where action is needed (but excluding the audit referred to in Section
4.17), then (A) for as long as Parent is continuing to fund the reasonable
research and development costs requested by Company with respect to the DZNS
Product, Company may not terminate this Agreement; (B) such funding shall be
provided in accordance with the provisions of Section 4.13, but shall not be
subject to the limit of $1,2000,000 imposed by the definition R&D Support
Payment, and, notwithstanding the limitation in Section 4.15(b), such funding
may include any milestone payments which become due and payable pursuant to the
SK License after the Outside Date; and (C) if Parent provides written notice to
the Company that it does not intend
 

 
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to pay or continue to pay such costs or does not pay within the period set forth
in Section 4.13 an invoice for such costs, then the Company may terminate the
Agreement pursuant to this Section 6.1(b) and shall, within thirty (30) days
after the date of such termination, reimburse Parent for any costs paid by
Parent after the Outside Date pursuant to this Section 6.1(b);
 
(c)           by either of the Company or Parent if any Restraint having the
effect set forth in Section 5.1(c) shall be in effect and shall have become
final and nonappealable; provided, however, that the right to terminate this
Agreement under this Section 6.1(c) shall not be available to a party if the
imposition of such Restraint was primarily due to the failure of such party to
perform any of its obligations under this Agreement;
 
(d)           without limiting the right of either Parent or the Company to
terminate this Agreement pursuant to Section 6.1(b), by Parent if: (i) there is
a misrepresentation, inaccuracy in, or breach of any of the representations or
warranties of the Company in this Agreement such that the condition set forth in
Section 5.2(a) would not be satisfied; or (ii) there has been a breach by the
Company of any of its covenants in this Agreement such that the condition set
forth in Section 5.2(b) would not be satisfied (the events described in
clauses “(i)” and “(ii)” of this sentence being referred to as a “Terminating
Company Breach”); provided, however, that (a) Parent shall have delivered to the
Company a written notice of such misrepresentation, inaccuracy or breach, and
(b) at least 60 days shall have elapsed since delivery of such notice without
such misrepresentation, inaccuracy or breach having been cured;
 
(e)           without limiting the right of either Parent or the Company to
terminate this Agreement pursuant to Section 6.1(b), by the Company if:
(i) there is an inaccuracy in any of the representations or warranties of Parent
or Merger Sub in this Agreement such that the condition set forth in
Section 5.3(a) would not be satisfied; or (ii) there has been a breach by Parent
or Merger Sub of any of their respective covenants in this Agreement such that
the condition set forth in Section 5.3(b) would not be satisfied (the events
described in clauses “(i)” and “(ii)” of this sentence being referred to as a
“Terminating Parent Breach”); provided, however, (a) the Company shall have
delivered to Parent a written notice of such misrepresentation, inaccuracy or
breach, and (b) at least 60 days (or in the case of a breach under Section 4.13,
at least 5 Business Days) shall have elapsed since the delivery of such notice
without such misrepresentation, inaccuracy or breach having been cured;
 
(f)           by Parent, at any time prior to the Closing.
 
6.2           Effect of Termination.
 
(a)           In the event of the termination of this Agreement as provided in
Section 6.1, written notice thereof shall be given to the other party or
parties, specifying the provision hereof pursuant to which such termination is
made, and this Agreement shall forthwith become null and void (other than the
provisions of Section 4.13, this Section 6, and Section 8, which shall survive
termination of this Agreement), and there shall be no liability on the part of
Parent, Merger Sub or the Company or their respective directors, officers,
stockholders and Affiliates, except that nothing shall relieve any party hereto
from liability for any breach of any of its covenants set forth in this
Agreement.
 

 
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(b)           In the event this Agreement is terminated prior to Closing by
either party for any reason other than by Parent pursuant to Section 6.1(d),
Company and its owners shall retain all amounts paid hereunder by Parent (other
than amounts required to be remitted to Parent pursuant to Section 4.13) as a
break-up fee (the “Parent Break-Up Fee”).  The Parent Break-Up Fee shall be the
sole and exclusive remedy for any claims under, arising out of or relating to
this Agreement and the transactions contemplated hereby against Parent or any of
its affiliates in connection with a termination pursuant to Sections 6.1(b),
6.1(e), or 6.1(f).
 
· SECTION 6A                                           Tax Returns and Tax
Contests.
 
6A.1           Filing of Tax Returns.  The Company shall prepare or cause to be
prepared (on a basis consistent with past tax returns of the Company, unless
otherwise required by Law), and shall duly and timely file all Tax Returns of
the Company that are required (taking into account extensions of time) to be
filed on or prior to the Closing Date.  The Company shall pay all Taxes due with
respect to such Tax Returns.  Parent shall prepare or cause to be prepared (on a
basis consistent with past Tax Returns of the Company, unless otherwise required
by Law) and timely file or cause to be timely filed all Tax Returns of the
Company for any Tax periods that include, and end after, the Closing Date (each
such period, a “Straddle Period”) and all Tax Returns for Tax periods ending on
or before the Closing Date that are not required to be filed until after the
Closing Date.  Parent shall permit the Stockholders’ Representative at least
thirty (30) days to review and comment on each such Tax Return prior to filing
and shall consider in good faith any comments made by the Stockholders’
Representative.  Surviving Corporation shall pay all Taxes due with respect to
such Tax Returns (provided that (i) Stockholders’ Representative shall pay to
Company, at least two days prior to the date payment of any such Taxes are due,
an amount equal to the portion of the Taxes due that is attributable to
Pre-Closing Tax Periods (determined in accordance with the principles set forth
in Section 6A.5(d)), and (ii) Surviving Corporation shall retain its rights to
indemnification for such Taxes under Section 7.2).  Parent and the Stockholders’
Representative agree to cause the Surviving Corporation to file all Tax Returns
with respect to Taxes based upon or related to income or receipts for the
periods including the Closing Date on the basis that the relevant Tax Period
ended as of the close of business on the Closing Date unless the relevant Taxing
Authority will not accept a Tax Return filed on that basis.
 
6A.2           Reserved.
 
6A.3           Tax Treatment of Stock Options.  Parent and the stockholders of
the Company agree that, for Tax Return reporting purposes, the amount of income
realized by the holders of Company Options on the Closing Date, as a result of
the cash payments made pursuant to Section 1.3(a), shall be reported as an
amount not in excess of such cash payments and further agree that any income
realized with respect to the additional consideration paid to such recipients
shall be reported as so realized in the year of receipt.  The Tax Returns of the
Company, Surviving Corporation and Parent shall be prepared in a manner
consistent with this treatment.  Neither the Company, Surviving Corporation,
Parent nor the stockholders of the Company shall take any position inconsistent
with the foregoing treatment, unless required by a “determination” within the
meaning of Section 1313(a) of the Code and the cash payments referred to above
shall, to the extent applicable, be subject to withholding as provided in
Section 1.4 hereof.
 

 
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6A.4           Cooperation on Tax Matters.  Parent and the Stockholders’
Representative shall cooperate fully, as and to the extent reasonably requested
by the other party, in connection with the filing of Tax Returns pursuant to
this Section and any audit, litigation or other proceeding with respect to
Taxes.  Such cooperation shall include the retention and (upon the other party’s
reasonable request) the provision of records and information which are
reasonably relevant to any such audit, actual or threatened litigation or other
proceeding and, in the case of Parent, making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder.  Parent agrees (i) to retain all books and records
with respect to Tax matters pertinent to the Company relating to any Pre-Closing
Tax Period until the expiration of the statute of limitations (and, to the
extent notified by the Company or the Stockholders’ Representative any
extensions thereof) of the respective Tax periods, and to abide by all record
retention agreements entered into with any Taxing Authority, and (ii) to give
the Stockholders’ Representative reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if the
Stockholders’ Representative so requests, the Company shall allow the
Stockholders’ Representative to take possession of such books and records at
such time.
 
6A.5           Tax Contest.
 
(a)           Parent shall inform the Stockholders’ Representative of, and the
Stockholders’ Representative shall be entitled to control and conduct only those
aspects of audits, examinations or proceedings (a “Tax Contest”) of the Company
with respect to Tax Periods of the Company ending on or prior to the Closing
Date that relate solely to (i) the liability for any Taxes attributable to any
“Pre-Closing Taxes” (defined below), or (ii) a claim for refund for any
Pre-Closing Taxes in each case that would not affect any Taxes of Parent,
Company or any Affiliate for any Post-Closing Tax Period.  Parent shall control
and conduct all other aspects of all Tax Contests.  Costs of any Tax Contest are
to be borne by Parent, if it is the party controlling such Tax Contest, or the
Former Holders, if the Stockholders’ Representative is the party controlling
such Tax Contest.  The Stockholders’ Representative’s right to control and
conduct a Tax Contest shall be limited to amounts in dispute which would be
Pre-Closing Taxes.  Parent or the Surviving Corporation shall deliver to the
Stockholders’ Representative any power of attorney required to allow the
Stockholders’ Representative and its counsel to represent the Company in
connection with the Tax Contest (but only to the extent specifically
contemplated above) and shall provide the Stockholders’ Representative with such
assistance as may be reasonably requested by the Stockholders’ Representative in
connection with the Tax Contest.  The Stockholders’ Representative shall
authorize reimbursement of Parent or the Surviving Corporation for reasonable
out-of-pocket expenses (excluding any allocated overhead costs and any allocated
costs of existing employees) incurred in providing such assistance by Parent or
Surviving Corporation offsetting against the Contingent Payment that next
becomes payable.  Notwithstanding the preceding, the Stockholders’
Representative shall consult in good faith with Parent or the Surviving
Corporation with respect to the conduct of, and before entering into any
settlement of, any aspects of any Tax Contest; and shall neither consent nor
agree to the settlement of any aspects of any Tax Contest that may have an
adverse impact on the liability for Taxes of Parent or the Surviving
Corporation, or any affiliated group of corporations of which Parent or the
Surviving Corporation has been or may become a member or any Affiliate of
 

 
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Parent or the Surviving Corporation, without the prior written consent of Parent
or the Surviving Corporation, as the case may be.
 
(b)           Parent shall inform the Stockholders’ Representative of any Tax
Contest with regard to any Tax Return of the Surviving Corporation for a
Straddle Period that may result in an indemnification obligation pursuant to
Section 7.2 of this Agreement.  Parent shall control and conduct any such Tax
Contest.  Costs of such Tax Contests are to be borne by Parent.  Parent shall
consult in good faith with the Stockholders’ Representative with respect to the
conduct of, and before entering into any settlement of, any Tax Contest that may
have a material adverse impact on the liability for any Pre-Closing Tax, and
shall not enter into any such settlement without the consent of the
Stockholders’ Representative, which consent shall not be unreasonably withheld
or delayed.
 
(c)           Notwithstanding any other provision of this Agreement, the failure
of Parent to inform the Stockholders’ Representative of a Tax Contest pursuant
to subsections (a) or (b) of this Section 6A.5 shall not relieve the
stockholders of the Company or the Former Holders of any liability for Taxes due
as a result of such Tax Contest, except to the extent the Stockholders’
Representative can demonstrate that the failure to so notify materially
prejudiced that Stockholders’ Representative with respect to the Tax liability
that resulted from such Tax Contest.
 
(d)           Notwithstanding any other provision of this Agreement, any Tax
Contest relating to Transfer Taxes shall be controlled jointly by Parent and the
Stockholders’ Representative and costs of any such Tax Contest shall be borne
equally by Parent and the Former Holders through the Stockholders’
Representative authorizing Parent or Surviving Corporation offsetting against
the Contingent Payment that next becomes payable.
 
For purposes of this Agreement, “Pre-Closing Taxes” means (i) Taxes attributable
to any taxable period ending on or before the Closing Date or, with respect to
any Straddle Period, that portion of the taxable period that ends on the Closing
Date (such periods referred to as “Pre-Closing Tax Periods”) and (ii) the
Section 280G Tax Liability (as defined below).  In the case of any Taxes that
are payable for a Straddle Period the portion of such Tax that constitutes
Pre-Closing Taxes shall (x) in the case of any Taxes other than Taxes based upon
or related to income, gain or receipts, and which are imposed on a periodic
basis, be deemed to be the amount of such Tax for the entire Tax period
multiplied by a fraction the numerator of which is the number of days in the
Pre-Closing Tax Period and the denominator of which is the number of days in the
entire Tax Period, (y) in the case of any Tax based upon or related to income,
gain or receipts, be deemed equal to the amount which would be payable if the
relevant Tax period ended on the Closing Date and (z) in the case of
transaction-based Taxes and withholding Taxes, those Taxes attributable to
transactions or events which occurred during Pre-Closing Tax Periods.  Any
credits, other than Tax Payments, relating to a Straddle Period shall be taken
into account as though the relevant Tax period ended on the Closing Date.  All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with reasonable prior practice of the Company.  For
purposes of this Agreement, and without limitation Section 2.14(b), the
“Section 280G Tax Liability” means an amount equal to the product of (A) 40
percent and (B) the amount of any payment pursuant to a Parachute Payment
 

 
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Agreement that is not deductible for U.S. federal income Tax purposes as a
result of Section 280G of the Code.
 
(e)           For purposes of calculating the Pre-Closing Taxes, (i) all tax
deductions that arise or become available as a result of the transactions
contemplated by this Agreement, except for tax deductions that arise or become
available as a result of cash payments made prior to or at the Effective Time,
shall be allocated to periods, or portions thereof, starting after the Closing
Date, regardless of how such amounts are required to be reflected on the filed
Tax Returns and (ii) any election pursuant to Section 338 of the Code (and any
comparable state, local or foreign election) shall be disregarded.
 
(f)           The provisions of this Section 6A.5 relating to Tax Contests and
not those of Section 7.4 relating to the defense or other pursuit of claims by
third parties shall govern in the event of any Tax Contest.
 
(g)           Any liability for transfer, sales and use, registration stamp or
other similar Tax and any conveyance fees or recording fees due as a result of
the consummation of the Merger (“Transfer Taxes”) shall be borne 50% by Parent
and 50% by Earnout Participants from offset against either the Hold-back Amount
during the Hold-back Period or any Contingent Payments at the election of
parent.  Any transfer, sales and use, registration, or other similar Tax, and
any conveyance fees or recording fees, due as a result of the transactions
contemplated in Sections 4.11 shall be borne by Former Holders through offset to
Contingent Payments.
 
6A.6           Powers of Attorney and Tax Sharing Agreements.  All Tax sharing
agreements or similar agreements and all powers of attorney with respect to or
involving the Company shall be terminated prior to the Closing Date and neither
the Company, Parent, nor any Affiliate thereof shall be bound thereby or have
any liability thereunder.
 
7.
INDEMNIFICATION

 
7.1           Expiration of Representations, Warranties and Covenants.  The
representations and warranties in this Agreement and all covenants and other
agreements in this Agreement that by their terms are to be performed or that
otherwise are to endure after the Closing shall survive the Closing and the
consummation of the transactions contemplated by this Agreement in accordance
with their terms; provided, however, that the representations and warranties of
the Company set forth in this Agreement (other than the representations and
warranties set forth in Sections 2.7(g) and 2.15 and the Fundamental and Tax
Representations) shall only continue in effect until the date that is eighteen
(18) months after the Closing Date, at which time all representations and
warranties (other than the representations and warranties set forth in
Sections 2.7(g) and 2.15 and the Fundamental and Tax Representations) shall
expire.  For purposes of this Agreement, “Fundamental Representations” shall
mean each of the representations and warranties contained in Section 2.1 (except
the second sentence), Section 2.2, Section 2.3, Section 2.20, Section 2.21,
Section 2.22, Section 2.23 and Section 2.24, and “Fundamental and Tax
Representations” shall mean the Fundamental Representations together with the
representations and warranties contained in Section 2.12 and Section 2.14.  The
representations and warranties set forth in Section 2.15 shall survive until the
fifth (5th)
 

 
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anniversary of the Closing Date, the Fundamental Representations shall survive
without limit, the representations contained in Section 2.12 and Section 2.14
shall survive until thirty (30) days after the expiration (including all
extensions) of the statute of limitations applicable thereto and the
representations contained in Section 2.7(g) shall survive until a Sales
Milestone Payment  has become due and payable or, if earlier, such time as
Parent shall have ceased to commercialize DZNS Product.  The date on which such
representation or warranty expires shall be referred to as the “Representation
Termination Date” and no claims for breach of representations and warranties may
be brought after the applicable Representation Termination Date.  All
obligations of the parties under the covenants contained herein (including the
covenants set forth in Section 4) that do not contemplate performance after the
Effective Time shall expire at the Effective Time; provided, however, that
notwithstanding the expiration of the parties’ obligations under such covenants,
claims for breaches of any covenants of the Company prior to their expiration
may be brought after the Effective Time and until twenty-four (24) months after
the Closing Date (the “Pre-closing Covenant Termination Date”).  Notwithstanding
the foregoing, if at any time prior to the applicable Representation Termination
Date or Pre-closing Covenant Termination Date, Parent delivers to the
Stockholders’ Representative a notice alleging the existence of an inaccuracy in
any of the representations and warranties made by the Company or a breach of a
pre-Closing covenant made by the Company (and setting forth in reasonable detail
the basis for Parent’s determination that such an inaccuracy or breach exists
and, to the extent known, a good faith estimate of the amount of Damages
incurred by Parent as a result of such inaccuracy or breach) and asserting a
claim for recovery under Section 7.2 based on such inaccuracy or breach, then
the claim asserted in such notice shall survive the Representation Termination
Date or Pre-closing Covenant Termination Date, as applicable, until such time as
such claim is fully and finally resolved. It is the express intent of the
parties that, if the applicable survival period for an item as contemplated by
this Section 7 is shorter than the statute of limitations that would otherwise
have been applicable to such item, then, by contract, the applicable statute of
limitations with respect to such item shall be reduced to the shortened survival
period contemplated hereby.  The parties further acknowledge that the time
periods set forth in this Section 7 for the assertion of claims under this
Agreement are the result of arms’-length negotiation among the parties and that
they intend for the time periods to be enforced as agreed by the parties.
 
7.2           Indemnification.  Subject to the limitations set forth in this
Section 7, from and after the date of this Agreement, Parent, the Surviving
Corporation and their respective officers, directors, stockholders, employees,
Affiliates (other than Persons who are Affiliates as a result of being Former
Holders) (together, the “Parent Indemnified Parties”) shall be indemnified
against any Damages incurred by any Parent Indemnified Party as a result of,
arising out of or in connection with (a) any misrepresentation, breach or
inaccuracy in any representation or warranty of the Company set forth in this
Agreement or the Company Closing Certificate; (b) the breach or non-fulfillment
of any covenant or agreement of either the Company in this Agreement required to
be performed at or prior to the Effective Time or the Stockholders’
Representative in this Agreement required to be performed at any time; (c) any
amounts paid or payable by Parent, Merger Sub or the Surviving Corporation with
respect to any Dissenting Shares in excess of the amount of Merger Consideration
allocated to such Dissenting Shares; (d) any claim arising as a result of any
inaccuracy or error in the Closing Allocation Certificate or any Contingent
Allocation Certificate; (e) the amount by which the Indebtedness of Company as
of immediately
 

 
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prior to the Effective Time exceeds the amount of Indebtedness calculated based
on the amounts of the components thereof as set forth on the Closing Allocation
Certificate; (f) the amount by which Sellers’ Expenses exceed the amount of
Sellers’ Expenses set forth in the Closing Allocation Certificate; (g) any
Pre-Closing Taxes (as defined in Article 6A) imposed on or with respect to the
Company or the Surviving Corporation (and/or their assets or businesses),  (h)
any Sellers’ Taxes, (i) any claim by a holder of a Company Option that did not
consent to the treatment of options set forth in Section 1.3(a), (j) any claim
related to the employment or termination of employment of any employee or
contractor of the Company or (k) any claim related to any Employee Benefit
Plan.  “Damages” shall mean any liabilities, losses, damages, diminution of
value, penalties, awards, judgments, settlement payments, fines, Taxes,
including costs or expenses, and other reasonable out-of-pocket costs, expenses
and charges, including reasonable legal, expert and consultant fees and
expenses, but excluding any special, indirect, punitive or speculative damages
(except to the extent such amounts are recovered by a third party in any
Third-Party Claims that are subject to indemnification hereunder).  The parties
agree that any amounts offset against the Hold-back Amount or Contingent
Payments shall be treated as a reduction in the aggregate consideration paid in
connection with the Merger for all income Tax purposes.
 
7.3           Choice of Remedies; Limitations on Liability.
 
(a)           Subject to Sections 7.2 and the other provisions of this
Section 7.3, the Parent Indemnified Parties shall be entitled to, and may seek
payment of, indemnification obligations hereunder at its option by either or
both, (i) a reduction in the Hold-back Amount during the Hold-back Period,
and/or (ii) by set off against amounts otherwise due, but not yet paid, as
Contingent Payments.
 
(b)           Without limiting the effect of any other limitation contained in
this Section 7, the indemnification provided for in Section 7.2 shall not apply,
and Parent shall not be entitled to exercise any indemnification rights under
Section 7.2 except to the extent that the aggregate amount of the Damages
against which Parent would otherwise be entitled to be indemnified under
Section 7.2 exceeds $100,000 (the “Basket”).  If the aggregate amount of such
Damages exceeds the Basket, then the Parent Indemnified Parties shall, subject
to Section 7.3(a) and the other limitations contained in this Agreement, be
entitled to be indemnified pursuant to Section 7.2 for Damages in excess of the
Basket up to a maximum amount of Damages pursuant to Section 7.2 at any point in
time equal to the difference between  (i) 15% of the aggregate amount of Merger
Consideration, Option Consideration and Warrant Consideration that has been paid
or has accrued through the date of the applicable indemnity payment pursuant to
this Article 7, minus (ii) all prior Damages recovered through such date
pursuant to Section 7.2 (the “Cap”); provided, that neither the Basket nor the
Cap shall apply to any claim for indemnification arising out of a breach of any
Fundamental and Tax Representations, or any indemnification claim under clause
(i) of the first sentence of section 7.2.
 
(c)           Nothing in this Agreement shall limit any remedy any Parent
Indemnified Party may have against any Person who committed fraud or knowing
misrepresentation under applicable tort laws for such fraud.
 

 
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(d)           The amount of any Damages that are subject to indemnification
under this Section 7 shall be calculated net of the amount of any insurance
proceeds (offset by any increase in premium resulting therefrom),
indemnification payments (including indemnification payments pursuant to Section
6A.1 of this Agreement), contribution payments or reimbursements that are
actually received (net, in each case, of any collection costs) by Parent, the
Surviving Corporation or any Affiliate of Parent or the Surviving Corporation in
connection with such Damages or any of the events or circumstances giving rise
or otherwise related to such Damages.
 
7.4           Defense of Third Party Claims.
 
(a)           Promptly after Parent or a Parent Indemnified Party obtains
Knowledge of any actual or possible claim, demand, suit, action, arbitration,
investigation, inquiry or proceeding that has been or may be brought or asserted
by a third party against any Parent Indemnified Party and that may be subject to
indemnification hereunder (a “Third-Party Claim”), Parent or Parent Indemnified
Party shall deliver to the Stockholders’ Representative a written notice stating
in reasonable detail the nature and basis of such Third-Party Claim and the
dollar amount of such Third-Party Claim, to the extent known; provided, that the
failure to promptly notify the Stockholders’ Representative shall not prejudice
the right of the Parent Indemnified Party to make or recover for such claim
except to the extent such delay has caused material prejudice to the defense of
such claim.  Subject to the provisions of Sections 7.4(b), the Stockholders’
Representative shall have the right, at its election, to defend any Third-Party
Claim, in which case: (i) Stockholders’ Representative shall diligently and in
good faith defend such Third-Party Claim; (ii) so long as Stockholders’
Representative diligently and in good faith defends such Third-Party Claim,
Parent shall not be entitled to be indemnified for any costs or expenses
incurred by Parent in connection with the defense of such Third-Party Claim;
(iii) Parent shall be entitled to monitor (but not control) such defense at its
own expense and may retain separate co-counsel at its own expense and
participate in the defense; (iv) Parent shall make available to the
Stockholders’ Representative all books, records and other documents and
materials that are under the direct or indirect control of Parent or any of
Parent’s Subsidiaries or other Affiliates and that are necessary or reasonably
desirable for the defense of such Third-Party Claim; (v) Parent and the
Surviving Corporation shall execute such documents and take such other actions
as the Stockholders’ Representative may reasonably request for the purpose of
facilitating the defense of such Third-Party Claim; (vi) Parent shall otherwise
fully cooperate as reasonably requested by the Stockholders’ Representative in
the defense of such Third-Party Claim; and (vii) Parent and Stockholders’
Representative shall not admit any liability with respect to such Third-Party
Claim without the express written consent of the other.
 
(b)           Notwithstanding Section 7.4(a), the Stockholders’ Representative
shall not have the right to assume control of the defense of any Third-Party
Claim if:  (i) the Stockholders’ Representative does not assume the defense
thereof promptly, but in any event, within thirty days of receipt of the Parent
Indemnified Party’s notice of a Third-Party Claim; (ii) the Stockholders’
Representative does not conduct the defense of the Third-Party Claim with
reasonable diligence, comparable to the level of diligence that the Parent would
use in defending against such claim, and in good faith; or (iii) the Third-Party
Claim (A) seeks non-monetary, equitable or injunctive relief, (B) alleges
violations of criminal law, (C) includes as named parties in any such
Third-Party Claim any employee, agent, officer or director of Parent or the
Surviving Corporation;
 

 
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(D) seeks to recover monetary damages potentially in excess of $500,000; (E)
relates to the SK License, or (F) includes as the named parties in any such
Third-Party Claim both a Parent Indemnified Party and any Former Holder and
either a defense is available to a Parent Indemnified Party that is not
available to such Former Holder or applicable ethical guidelines provide that,
in either case, it would be inappropriate to have the same counsel represent
both parties.  If the Stockholders’ Representative has assumed such defense as
provided in Section 7.4(a), the Stockholders’ Representative will not be liable
for any legal expenses subsequently incurred by any Parent Indemnified Party in
connection with the defense of such claim.  If the Stockholders’ Representative
does not assume the defense of any Third-Party Claim in accordance with
Section 7.4(a) and the Parent Indemnified Party is entitled to indemnification
under this Agreement, the Parent Indemnified Party may continue to defend such
claim at the reasonable expense of the Former Holders and the Stockholders’
Representative may still participate in, but not control, the defense of such
Third-Party Claim at the sole cost and expense of the Former Holders.
 
(c)           If the Stockholders’ Representative does not assume and conduct
the defense of the Third-Party Claim in accordance with Section 7.4(a), or is
not entitled to do so, the Parent Indemnified Party shall not consent to the
entry of any judgment or enter into any settlement with respect to the
Third-Party Claim without the written consent of the Stockholders’
Representative (such consent not to be unreasonably withheld or delayed).  The
Parent Indemnified Party shall have no right to seek indemnification under this
Section 7 in respect of any Third-Party Claim for a settlement entered into
without the prior written consent of the Stockholders’ Representative.
 
If the Stockholders’ Representative assumes and conducts the defense of the
Third-Party Claim in accordance with Section 7.4(a), the Stockholders’
Representative shall not, without the written consent of the Parent Indemnified
Party (such consent not to be unreasonably withheld or delayed), consent to the
entry of any judgment or enter into any settlement with respect to the
Third-Party Claim that:  (A) involves any action by the Parent Indemnified Party
other than the payment of money (which is paid in full by the Stockholders’
Representative), (B) provides for non-monetary equitable or injunctive relief
affecting the Parent Indemnified Party, or (C) does not grant an unconditional
release of the Parent Indemnified Party from all liability with respect to such
Third-Party Claim.
 
In any Third-Party Claim, the party responsible for the defense of such claim
shall, to the extent reasonably requested by the other party, keep such other
party informed as to the status of such claim, including, without limitation,
all settlement negotiations and offers.  The Parent Indemnified Party shall use
commercially reasonable efforts to make available to the Stockholders’
Representative and its representatives all books and records of the Parent
Indemnified Party relating to such Third-Party Claim and shall cooperate with
the Stockholders’ Representative in the defense of the Third-Party Claim,
including by using commercially reasonable efforts to make available personnel
as witnesses in connection with any action.
 
(d)           To the extent that Parent is actually indemnified pursuant to this
Section 7 and an offset against either the Hold-back Amount or a Contingent
Payment actually occurs, the Stockholders’ Representative shall be entitled to
exercise, and shall be subrogated to, any rights
 

 
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and remedies (including rights of indemnity, rights of contribution and other
rights of recovery) that Parent or any of Parent’s Subsidiaries or other
Affiliates may have against any other Person with respect to any Damages,
circumstances or matter to which such indemnification is directly or indirectly
related.  Parent shall take such actions as the Stockholders’ Representative may
reasonably request for the purpose of enabling the Stockholders’ Representative
to perfect or exercise the right of subrogation of the Stockholders’
Representative under this Section 7.4(d).
 
7.5           Exclusivity.  The right of a Parent Indemnified Party to be
indemnified pursuant to this Section 7 shall, absent fraud or intentional
misrepresentation, be the sole and exclusive right and remedy exercisable by
such Parent Indemnified Party with respect to any breach of this Agreement.
 
7.6           Direct Indemnification Claims.
 
(a)           Promptly after Parent or a Parent Indemnified Party obtains
knowledge that it is entitled to claim indemnification (“Indemnification Claim”)
hereunder (other than in respect of Third-Party Claims, the process for which is
governed by Section 7.4, and in respect of Tax Contests, the process for which
is governed by Section 6A.5), Parent or such Parent Indemnified Party shall
promptly give notice (an “Indemnification Demand”) of such Indemnification Claim
to the Stockholders’ Representative, stating the nature and basis of such
Indemnification Claim and the dollar amount of such Indemnification Claim, in
each case to the extent known or a good faith estimate thereof (the “Asserted
Damages Amount”), provided that the failure to promptly notify the Stockholders’
Representative shall not prejudice the right of the Parent Indemnified Party to
make or recover for such claim except to the extent such delay has caused
material prejudice to the defense of such claim.
 
(b)           Within ten (10) Business Days following delivery of an
Indemnification Demand to the Stockholders’ Representative, the Stockholders’
Representative shall deliver to Parent a written response (the “Response”) in
which the Stockholders’ Representative shall either:  (i) agree that the Parent
Indemnified Party is entitled to receive all of the Asserted Damages Amount, in
which case Parent shall deliver to the Stockholders’ Representative notice
indicating whether the Asserted Damages Amount shall be remitted to the Parent
Indemnified Party by reducing the Hold-back Amount during the Hold-back Period
or as a set-off against applicable Contingent Payments; (ii) agree that the
Parent Indemnified Party is entitled to receive part, but not all, of the
Asserted Damages Amount (such portion, the “Agreed Portion”), in which case
Parent shall deliver to the Stockholders’ Representative notice indicating
whether the Agreed Portion shall be remitted to the Parent Indemnified Party by
reducing the Hold-back Amount during the Hold-back Period or as a set-off
against applicable Contingent Payments; or (iii) dispute that the Parent
Indemnified Party is entitled to receive any portion of the Asserted Damages
Amount.
 
(c)           In the event that the Stockholders’ Representative shall
(i) dispute that the Parent Indemnified Party is entitled to receive any of the
Asserted Damages Amount, or (ii) agree that the Parent Indemnified Party is
entitled to only the Agreed Portion of the Asserted Damages Amount, the
Stockholders’ Representative and Parent shall attempt in good faith to agree to
a resolution of the dispute.  If no such resolution can be reached after good
faith
 

 
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negotiation within sixty days after delivery of a Response, either Parent or the
Stockholders’ Representative may resolve the dispute in accordance with
Section 8.5.  Notwithstanding the foregoing, either party shall be entitled to
act without delay in order to exercise rights under Section 8.10.
 
8.
MISCELLANEOUS PROVISIONS.

 
8.1           Stockholders’ Representative.
 
(a)           By virtue of the adoption of this Agreement and/or the
cancellation by a Former Holder of Company Options or Company Warrants in
exchange for Merger Consideration, Option Consideration or Warrant Consideration
pursuant to this Agreement, the Former Holders irrevocably nominate, constitute
and appoint Moise A. Khayrallah as the agent and true and lawful
attorney-in-fact of the Former Holders (the “Stockholders’ Representative”) to
take any and all actions and make any and all decisions required or permitted to
be taken or made by the Stockholders’ Representative under this Agreement,
including the exercise of the right to: (i) give and receive notices and
communications under this Agreement; (ii) authorize set-off against Contingent
Payments in satisfaction of claims for indemnification made by Parent under
Section 7; (iii) object to claims for indemnification made by Parent under
Section 7; (iv) agree to, negotiate, enter into settlements and compromises of
and comply with court orders with respect to claims for indemnification made by
Parent under Section 7 or disputes regarding Section 1.7; and (v) take all
actions necessary or appropriate in the good faith judgment of the Stockholders’
Representative for the accomplishment of the foregoing.  The power of attorney
granted in this Section 8.1 is coupled with an interest and is irrevocable, may
be delegated by the Stockholders’ Representative and shall survive the death or
incapacity of any Former Holder.  The identity of the Stockholders’
Representative may be changed, and a successor Stockholders’ Representative may
be appointed, from time to time (including in the event of the resignation or
the death, disability or other incapacity of the Stockholders’ Representative)
by Former Holders with a majority in interest of the rights to any Contingent
Payments, and any such successor shall succeed the Stockholders’ Representative
as Stockholders’ Representative hereunder.  No bond shall be required of the
Stockholders’ Representative.  From and after the Effective Time, a decision,
act, consent or instruction of the Stockholders’ Representative shall be final,
binding and conclusive upon each Former Holder and the Parent may rely upon any
decision, act, consent or instruction of the Stockholders’ Representative as
being the decision, act, consent or instruction of each Former Holder.  Parent
and Surviving Corporation are hereby relieved from any liability to any Person
for any acts done by Stockholders’ Representative and any acts done by Parent or
Surviving Corporation in accordance with any such decision, act, consent or
instruction of the Stockholders’ Representative.  Each Former Holder hereby
agrees to receive correspondence from the Stockholders’ Representative,
including in electronic form.
 
(b)           The Stockholders’ Representative shall not be liable for any
liability, loss, damage, penalty, fine, cost or expense incurred due to the acts
or omissions of the Stockholders’ Representative in the absence of gross
negligence or bad faith on the part of the Stockholders’ Representative arising
out of or in connection with the acceptance or administration of his duties or
the exercise of his rights hereunder (it being understood that any act done or
omitted pursuant
 

 
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to the advice of counsel, informed of all relevant facts, shall be conclusive
evidence of such good faith).  The Former Holders shall indemnify and hold the
Stockholders’ Representative harmless against any liability, loss, damage,
penalty, fine, cost or expense incurred by the Stockholders’ Representative
without gross negligence or bad faith on the part of the Stockholders’
Representative and arising out of or in connection with the acceptance or
administration of his duties under this Agreement.  The Stockholders’
Representative shall be entitled to recover, from the Reserve Amount,  and/or
set-off against any Contingent Payment, any out-of-pocket costs and expenses
incurred by the Stockholders’ Representative in connection with actions taken by
the Stockholders’ Representative pursuant to the terms of this Agreement
(including the hiring of legal counsel and the incurring of legal fees and
costs), without the requirement of any consent or approval by Parent or any
other Person.
 
(c)           At any time that the Stockholders’ Representative or Former
Holders with a majority in interest of the rights to any Contingent Payments
determines that it is no longer necessary for it to retain the entire Reserve
Amount and that all or a portion of the Reserve Amount should be distributed to
Former Holders, then the Stockholders’ Representative shall (i) deliver to
Parent and the Paying Agent a Contingent Allocation Certificate and (ii) deliver
to Parent (for further deposit with the Paying Agent or payroll agent) the
Reserve Amount or such portion thereof to be so distributed by the Paying Agent
and the payroll agent.  Within ten Business Days of the receipt of such
Contingent Allocation Certificate and the Reserve Amount or portion thereof,
Parent shall direct the Paying Agent to pay, within ten Business Days of such
direction, the amounts set forth in such Contingent Allocation Certificate to
the Persons specified in such Contingent Allocation Certificate and direct the
payroll agent to promptly pay such amount to the Persons to receive such amount
as specified in the Contingent Allocation Certificate, after deducting
applicable withholding.
 
(d)           Notwithstanding anything to the contrary contained in this
Agreement, any information provided to the Stockholders’ Representative under
this Agreement shall be maintained as confidential and not disclosed by the
Stockholders’ Representative or used for any purpose not contemplated by the
purpose for which it was disclosed to the Stockholders’ Representative; provided
however, that, in connection with performing its duties pursuant to this
Agreement, the Stockholders’ Representative may from time to time provide such
information in summary form to Former Holders and their Affiliates who were
represented on the board of directors of the Company immediately prior to the
Effective Time provided that such Former Holders agree to keep all such
information confidential and not disclose such information to any other Person.
 
(e)           The Stockholders’ Representative and Company agree that the terms
under which the Stockholders’ Representative shall be engaged to represent the
Former Holders in connection with this Agreement and the transactions
contemplated hereby shall (i) be set forth in a written agreement to be entered
into prior to the Closing among the Stockholders’ Representative and certain
Former Holders, (ii) not include the Company as a party to such agreement, and
(iii) not contravene or negate any of the Stockholders’ Representative’s
obligations to Parent or Surviving Corporation hereunder.
 

 
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8.2           Expenses.  Except as otherwise provided herein, each party shall
pay all of its own fees, costs and expenses (including fees, costs and expenses
of legal counsel, investment bankers, brokers or other representatives and
consultants and appraisal fees, costs and expenses) incurred in connection with
the negotiation of this Agreement and the other agreements contemplated by this
Agreement, the performance of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby and thereby.
 
8.3           Amendment; Waiver.
 
(a)           This Agreement may not be amended except by an instrument in
writing signed on behalf of Parent, the Company (or, following the Closing,
Surviving Corporation) and Stockholders’ Representative.
 
(b)           Except as expressly set forth in this Agreement, no failure on the
part of any party to exercise any power, right, privilege or remedy under this
Agreement, and no delay on the part of any party in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a waiver of such
power, right, privilege or remedy; and no single or partial exercise of any such
power, right, privilege or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege or remedy.
 
(c)           No party shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
 
8.4           Entire Agreement; Counterparts; Exchanges by Facsimile.  This
Agreement and the other agreements referred to in this Agreement constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among or between any of the parties with respect to the
subject matter hereof and thereof.  This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same instrument. The exchange of a fully
executed Agreement (in counterparts or otherwise) by facsimile or by electronic
delivery in .pdf format shall be sufficient to bind the parties to the terms and
provisions of this Agreement.
 
8.5           Governing Law.  This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware applicable to
parties residing in the State of Delaware, without regard to applicable
principles of conflicts of law.  Each of the parties irrevocably consents to the
exclusive jurisdiction and venue of the federal and state courts located in the
State of Delaware, in connection with any matter based upon or arising out of
this Agreement or the transactions contemplated hereby and agrees that process
may be served upon it in any manner authorized by the laws of the State of
Delaware for such Persons and waives and covenants not to assert or plead any
objection which it might otherwise have to such jurisdiction and such
process.  The prevailing party in any dispute arising out of or relating to this
Agreement shall be entitled to be awarded its fees and expenses, including
reasonable attorneys’ fees.
 

 
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8.6           Assignability; Third Party Rights.
 
(a)           Subject to Section 8.7(b), this Agreement shall be binding upon,
and shall be enforceable by and inure solely to the benefit of, the parties
hereto and their respective successors and assigns; provided, however, that
neither this Agreement nor any of the rights or obligations of any party
hereunder may be assigned or delegated by such party (by operation of law or
otherwise) without the prior written consent of the other parties (which consent
will not be unreasonably withheld or delayed), and any attempted assignment or
delegation of this Agreement or any of such rights or obligations by any party
without the other parties’ prior written consent shall be void and of no effect;
provided that Parent may assign its rights and obligations hereunder to an
Affiliate thereof so long as Parent remains secondarily liable for performance
under this Agreement; provided, further, that no such consent shall be required
in connection with any merger, consolidation, share exchange, business
combination, reorganization, recapitalization or similar transaction involving
Parent.
 
(b)           Subject to Section 4.5 and except as set forth in the following
sentence, nothing in this Agreement is intended to or shall confer upon any
Person (other than the parties hereto) any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.  Notwithstanding
anything to the contrary contained in this Agreement (but without limiting any
of the rights of the Stockholders’ Representative hereunder), if the Merger is
consummated, the Indemnified Parties shall be third party beneficiaries of the
provisions set forth in Section 4.5.
 
8.7           Disclosure Schedule.  Any information set forth in any Part of the
Disclosure Schedule shall be deemed to be disclosed and incorporated by
reference in each of the other Parts of the Disclosure Schedule as though fully
set forth in such other Parts (whether or not specific cross-references are
made) to which such information relates to the extent it is readily apparent on
its face (without review of any document to which it may refer), and shall be
deemed to qualify and limit all representations and warranties of the Company
set forth in this Agreement to which such information relates to the extent it
is readily apparent on its face (without review of any document to which it may
refer).  No reference to or disclosure of any item or other matter in this
Disclosure Schedule shall be construed as an admission or indication that such
item or other matter is material or that such item or other matter is required
to be referred to or disclosed in this Disclosure Schedule.  The information set
forth in the Disclosure Schedule is disclosed solely for the purposes of this
Agreement, and no information set forth therein shall be deemed to be an
admission by any party hereto to any third party of any matter whatsoever,
including of any violation of Law or breach of any agreement.
 
8.8           Notices.  All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given or made as follows: (a) if sent designated for overnight delivery by
nationally recognized overnight air courier (such as DHL or FedEx), one Business
Day after dispatch; (b) if sent by facsimile transmission before 5:00 p.m. U.S.
Eastern Time, when transmitted and receipt is confirmed; (c) if sent by
facsimile transmission after 5:00 p.m. U.S. Eastern Time and receipt is
confirmed, on the following business day; and (d) if otherwise actually
personally delivered, when delivered, provided that such notices, requests,
demands and other communications are delivered to the address set forth
 

 
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below, or to such other address as any party shall provide by like notice to the
other parties to this Agreement:
 
if to Parent, Merger Sub or the Surviving Corporation:
 
Acorda Therapeutics, Inc.
 
15 Skyline Drive
 
Hawthorne, New York 10532, USA
 
Attention:  Chief Executive Officer
 
Facsimile:  +1 914.347.4560
 
with copies (which shall not constitute notice) to
 
Acorda Therapeutics, Inc.
 
15 Skyline Drive
 
Hawthorne, New York 10532, USA
 
Attention:  General Counsel
 
Facsimile:  +1 914.347.4560
 
if to the Company:
 
Neuronex, Inc.
 
9001 Aerial Center Parkway, Suite 110
 
Morrisville, NC 27560
 
Attention:  Chief Executive Officer
 
Facsimile:  (919) 460-9509
 
with a copy (which shall not constitute notice) to:
 
Hutchison Law Group
 
5410 Trinity Road, Suite 400
 
Raleigh, NC  27607
 
Attention: William N. Wofford, Esq.
 
Facsimile: (919) 829-9696
 
if to the Stockholders’ Representative:
 
Moise Khayrallah
 
113 Glenspring Way
 
Morrisville, NC  27560
 
with a copy (which shall not constitute notice) to:
 
Hutchison Law Group
 
5410 Trinity Road, Suite 400
 
Raleigh, NC  27607
 

 
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Attention: William N. Wofford, Esq.
 
Facsimile: (919) 829-9696
 
8.9           Severability.  Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions of this
Agreement or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.  If a final judgment of a
court of competent jurisdiction declares that any term or provision of this
Agreement is invalid or unenforceable, the parties hereto agree that the court
making such determination shall have the power to limit such term or provision,
to delete specific words or phrases or to replace such term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be valid and enforceable as so modified.  In the event such
court does not exercise the power granted to it in the prior sentence, the
parties hereto agree to replace such invalid or unenforceable term or provision
with a valid and enforceable term or provision that will achieve, to the extent
possible, the economic, business and other purposes of such invalid or
unenforceable term or provision.
 
8.10           Enforcement.  Each of the parties hereto agrees that irreparable
damage would occur and that the parties would not have any adequate remedy at
law in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached.  It is
accordingly agreed that the parties shall be entitled, without the need to post
bond or other security, to seek an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which they are entitled
at law or in equity.
 
8.11           Construction.
 
(a)           For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include masculine
and feminine genders.
 
(b)           As used in this Agreement, the words “include” and “including,”
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words “without limitation.”
 
(c)           Except as otherwise indicated, all references in this Agreement to
“Sections,” “Exhibits” and “Schedules” are intended to refer to Sections of this
Agreement and Exhibits or Schedules to this Agreement.
 
(d)           The headings set forth in this Agreement are for convenience of
reference only, shall not be deemed to be a part of this Agreement and shall not
be referred to in connection with the construction or interpretation of this
Agreement.
 
[Remainder of page intentionally left blank]
 

 
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In Witness Whereof, the parties have caused this Agreement to be executed as of
the date first above written.
 
 
Acorda Therapeutics, Inc.
 
By:           /s/ Ron
Cohen                                                                
 
Name:           Ron Cohen
 
Title:           Chief Executive Officer
 
ATI Development Corp.
 
By:           /s/ Jane
Wasman                                                                
 
Name: Jane Wasman
 
Title:           President
 
Neuronex, Inc.
 
 
By:
/s/Moise A. Khayrallah
 

 
 
Moise A. Khayrallah

 
 
President & CEO

 
Moise A. Khayrallah,
 
as the Stockholders’
 
Representative:
 
 
By:
/s/Moise A. Khayrallah
 

 
 
Moise A. Khayrallah

Merger Agreement Signature Page

 
 

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Exhibit A
 
Certain Definitions
 
For purposes of the Agreement (including this Exhibit A):
 
Acquisition Transaction.  “Acquisition Transaction” shall mean any transaction
involving: (a) the sale, license, disposition or acquisition of all or a
substantial portion of the business or assets of the Company; (b) the issuance,
disposition or acquisition of (i) any capital stock or other equity security of
the Company (other than Company Common Stock issued to employees of the Company
upon exercise of Company Options in routine transactions in accordance with the
Company’s past practices), (ii) any option, call, warrant or right (whether or
not immediately exercisable) to acquire any capital stock or other equity
security of the Company, or (iii) any security, instrument or obligation that is
or may become convertible into or exchangeable for any capital stock or other
equity security of the Company; or (c) any merger, consolidation, share
exchange, business combination, reorganization, recapitalization or similar
transaction involving the Company.
 
Actual Net Cash Amount.  “Actual Net Cash Amount” has the meaning set forth in
Section 1.5.
 
Aerial.  “Aerial” has the meaning set forth in Section 4.6.
 
Affiliate.  “Affiliate” of any Person shall mean any other Person that, directly
or indirectly, controls, is under common control with, or is controlled by such
Person.
 
Agreed Portion.  “Agreed Portion” has the meaning set forth in Section 7.6(b).
 
Agreement.  “Agreement” has the meaning set forth in the Preamble to the
Agreement.
 
Aggregate Upfront Transaction Value.  “Aggregate Upfront Transaction Value”
shall mean an amount equal to:  (a) the Closing Consideration; minus (b) the
Hold-back Amount, minus (c) the Debt Payment;  minus (d) the Reserve Amount;
minus (e) an amount equal to Sellers’ Expenses; plus (f) the Paid Exercise
Price.
 
Asserted Damages Amount.  “Asserted Damages Amount” has the meaning set forth in
Section 7.6(a).
 
Basket.  “Basket” has the meaning set forth in Section 7.3(b).
 
Business Day.  “Business Day” means any day other than a Saturday, Sunday or a
day on which banking institutions in New York, New York are permitted or
obligated by Law to be closed for regular banking business.
 
Bylaws.  “Bylaws” has the meaning set forth in Section 2.1.
 
Cap.  “Cap” has the meaning set forth in Section 7.3(b).
 

 
 

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Certificate.  “Certificate” has the meaning set forth in Section 1.6(a).
 
cGMP.  “cGMP”  has the meaning set forth in Section 2.19(e).
 
Closing.  “Closing” has the meaning set forth in Section 1.2(a).
 
Closing Allocation Certificate.  “Closing Allocation Certificate” means a
certificate that shall set forth (in addition to the information required by the
last sentence of Section 1.4 of this Agreement) (i) (x) all Indebtedness
outstanding immediately prior to the Closing, including the name, contact
information and payoff amounts, including all interest, premiums and penalties,
as of the Closing Date to pay off such Indebtedness in full and terminate all
such Indebtedness and (y) the amount of the Company’s cash and prepaid expenses
as of immediately prior to the Closing; (ii) a schedule of all Sellers’ Expenses
and the persons and amounts to be paid at Closing in respect thereof; (iii) the
Reserve Amount to be paid to the Stockholders’ Representative at Closing; (iv) a
merger consideration spreadsheet setting forth the aggregate Merger
Consideration, Option Consideration or Warrant Consideration to be paid at the
Closing, the exercise prices for each Company Option and Company Warrant, the
amounts payable to and the Pro Rata Share for each Former Holder of Company
Capital Stock, Company Warrants and Company Options; (v) the name, address, and,
to the extent known, tax identification number of each such Former Holder; (vi)
a funds flow memo, including proper wire transfer instructions and amounts due
to be paid to (A) each party to be paid in respect of Indebtedness, (B) each
party to receive a payment in respect of Sellers’ Expenses, (C) the Company’s
payroll agent in respect of Option Consideration for any employee of the Company
or other Person for which payments are subject to withholding, (D) the Paying
Agent in respect of all remaining Merger Consideration, Option Consideration or
Warrant Consideration for payment to the Former Holders (other than payments to
the Former Holders for whom amounts were deposited with the Company’s payroll
agent pursuant to clause (C)), and (E) the Stockholders’ Representative in
respect of the Reserve Amount.
 
Closing Consideration.  “Closing Consideration” means $6,800,000.
 
Closing Date.  “Closing Date” has the meaning set forth in Section 1.2(a).
 
Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended.
 
Common Merger Consideration.  “Common Merger Consideration” has the meaning set
forth in Section 1.2(c)(2).
 
Company.  “Company” has the meaning set forth in the Preamble to the Agreement.
 
Company Balance Sheet.  “Company Balance Sheet” has the meaning set forth in
Section 2.3(a).
 
Company Capital Stock.  “Company Capital Stock” shall mean the Company Common
Stock and Company Preferred Stock.
 
Company Closing Certificate.  “Company Closing Certificate” has the meaning set
forth in Section 5.2(e).
 

 
 

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Company Common Stock.  “Company Common Stock” shall mean the common stock,
$0.001 par value, of the Company.
 
Company Financial Statements.  “Company Financial Statements” has the meaning
set forth in Section 2.3(a).
 
Company IP Rights.  “Company IP Rights” has the meaning set forth in
Section 2.7(a)(5).
 
Company Material Adverse Effect.  “Company Material Adverse Effect” shall mean
any state of facts, change, development, event, effect, condition, occurrence,
action or omission (each, an “Event”) that, individually or in the aggregate,
would reasonably be expected to result in a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company, taken as a whole; provided, however, that none of the following shall
be deemed, either alone or in combination, to constitute, and none of the
effects of the following shall be taken into account in determining whether
there has been or will be, a Company Material Adverse Effect:  any Events
generally affecting (I) the industry in which the Company primarily operate to
the extent they do not materially disproportionately affect the Company in
relation to other companies in the industry in which the Company primarily
operates or (II) the economy, or financial or capital markets, in the United
States or elsewhere in the world to the extent they do not disproportionately
affect the Company in relation to other companies in the industry in which the
Company primarily operates.
 
Company Options.  “Company Options” shall mean options to purchase shares of
Company Capital Stock granted by the Company pursuant to the Company Stock Plan
or otherwise.
 
Company Preferred Stock.  “Company Preferred Stock” shall mean the Company’s
Series A Preferred Stock, $0.001 par value.
 
Company Stock Plan.  “Company Stock Plan” shall mean the Company’s 2011 Stock
Incentive Plan.
 
Company Warrants.  “Company Warrants” shall mean warrants to purchase shares of
Company Capital Stock issued by the Company.
 
Company’s Facilities.  “Company’s Facilities” has the meaning set forth in
Section 2.15(b).
 
Contingent Allocation Certificate.  “Contingent Allocation Certificate” means a
certificate that shall set forth (i) a merger consideration spreadsheet setting
forth the aggregate Merger Consideration, Option Consideration or Warrant
Consideration to be paid with respect to such Contingent Payment, the exercise
prices for each Company Option and Company Warrant, the amounts payable to and
the Pro Rata Share for each Former Holder of Company Capital Stock, Company
Warrants and Company Options; (ii) the PJSC Contingent Fees, which shall, to the
extent not included in Sellers’ Expenses, be deducted ratably as incurred from
the Merger Consideration, Option Consideration and Warrant Consideration;
(iii) a funds flow memo, including proper wire transfer instructions (it being
understood that wire transfer instructions for
 

 
 

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items (A) and (B) below shall be provided by Parent) and amounts due to be paid
to (A) the Surviving Company’s payroll agent in respect of Option Consideration
for any employee of the Surviving Company or other Person for which payments are
subject to withholding, (B) the Paying Agent (if applicable) in respect of all
remaining Merger Consideration, Option Consideration or Warrant Consideration
for payment to the Former Holders (other than payments to the Former Holders for
whom amounts were deposited with the Company’s payroll agent pursuant to clause
(A)), (C) PJSC in respect of any PJSC Contingent Fees, and (D) the Stockholders’
Representative in respect of any addition to the Reserve Amount.
 
Contingent Payment.  “Contingent Payment” has the meaning set forth in
Section 1.7(a)(1).
 
Contingent Payment Event.  “Contingent Payment Event” has the meaning set forth
in Section 1.7(a)(2).
 
Copyrights.  “Copyrights” has the meaning set forth in Section 2.7(a)(2).
 
Current Company Business.  “Current Company Business” has the meaning set forth
in Section 2.1.
 
Damages.  “Damages” has the meaning set forth in Section 7.2.
 
Data Room.  “Data Room” has the meaning set forth in Section 4.10.
 
Debt Payment.  “Debt Payment” has the meaning set forth in Section 1.6(c).
 
DGCL.  “DGCL” shall mean the Delaware General Corporation Law.
 
Diligence Notice. “Diligence Notice” has the meaning set forth in Section
1.7(f).
 
Diligent Efforts.  “Diligent Efforts” has the meaning set forth in
Section 1.7(a)(3).
 
Disclosure Schedule.  “Disclosure Schedule” shall mean the Disclosure Schedule
that has been prepared by the Company in accordance with Section 8.7 and that
has been delivered by the Company to Parent on the date of the Agreement.
 
DOL.  “DOL” shall mean the U.S. Department of Labor.
 
Drug.  “Drug” has the meaning set forth in Section 2.19(a).
 
DZNS Product.  “DZNS Product” has the meaning set forth in Section 1.7(a)(4).
 
Earn-out Payment.  “Earn-out Payment” has the meaning set forth in Section
1.7(a)(5).
 
Effective Time.  “Effective Time” has the meaning set forth in Section 1.2(b).
 
Effective Time Share.  “Effective Time Share” shall mean, in each case
immediately prior to the Effective Time: (i) each outstanding share of Company
Capital Stock; (ii) each share of Company Capital Stock into which Company
Warrants and upfront participating options are
 

 
 

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Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.

exercisable (whether or not then currently exercisable); and (iii) each share of
Company Common Stock into which Company Options other than upfront participating
options are exercisable (whether or not then currently vested or exercisable),
provided that the shares of Company Common Stock into which Company Options
other than upfront participating options are exercisable shall only be taken
into account and considered Effective Time Shares at such point as the Former
Holders thereof are entitled to receive a portion of any Contingent Payment in
accordance with Section 1.3(a) of the Agreement with respect to such Company
Options.
 
Employee Benefit Plan.  “Employee Benefit Plan” has the meaning set forth in
Section 2.14(c).
 
Employment Agreement.  “Employment Agreement” means each written or unwritten
management, employment, severance, consulting, relocation or similar agreement
between the Company and any employee, consultant or independent contractor.
 
Environmental Laws.  “Environmental Laws” has the meaning set forth in
Section 2.15(a)(1).
 
ERISA.  “ERISA” shall mean the Employee Retirement Income Security Act of 1974,
as amended.
 
ERISA Affiliate.  “ERISA Affiliate” shall mean any person that for purposes of
Title I and Title IV of ERISA and Section 412 of the Code would be deemed at any
relevant time to be a single employer with the Company under Section 414(b),
(c), (m) or (o) of the Code or Section 4001 of ERISA.
 
Exchange Act.  “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, including the rules and regulations promulgated thereunder.
 
[***] Manufacturing Agreement.  “[***] Manufacturing Agreement” has the meaning
set forth in Section 1.7(b).
 
FDA.  “FDA” has the meaning set forth in Section 1.7(a)(6).
 
FDCA.  “FDCA” has the meaning set forth in Section 2.19(a).
 
Force Majeure Event. “Force Majeure Event” has the meaning set forth in Section
1.7(f).
 
Former Holder.  “Former Holder” shall mean any holder of Company Capital Stock,
Company Options or Company Warrants immediately prior to the Effective Time that
is entitled receive Merger Consideration, Option Consideration or Warrant
Consideration.
 
Fundamental and Tax Representations.  “Fundamental and Tax Representations” has
the meaning set forth in Section 7.1.
 
Fundamental Representations.  “Fundamental Representations” has the meaning set
forth in Section 7.1.
 

 
 

--------------------------------------------------------------------------------

 

GAAP.  “GAAP” shall mean generally accepted accounting principles in the United
States, as in effect from time to time.
 
Governmental Approvals.  “Governmental Approvals” has the meaning set forth in
Section 2.11(a).
 
Governmental Authority.  “Governmental Authority” has the meaning set forth in
Section 2.22.
 
Hazardous Materials.  “Hazardous Materials” has the meaning set forth in
Section 2.15(a)(2).
 
Hold-back Allocation Certificate. “Hold-back Allocation Certificate” has the
meaning set forth in Section 1.8.
 
Hold-back Amount.  “Hold-back Amount” means $300,000, subject to adjustment
pursuant to Section 1.5 and Article 7.
 
Hold-back Period.  “Hold-back Period” means the period commencing on the
Effective Time and terminating on the one year anniversary of the Effective
Time.
 
IND.  “IND” has the meaning set forth in Section 2.19(a).
 
Indebtedness.  “Indebtedness” means the outstanding principal amount of, and all
interest and other amounts accrued and unpaid in respect of, (i) any
indebtedness for borrowed money of the Company, whether or not recourse to the
Company (except any capital lease), (ii) any obligation of the Company evidenced
by bonds, debentures, notes or other similar instruments, (iii) any
reimbursement obligation of the Company with respect to letters of credit
(including standby letters of credit to the extent drawn upon), bankers’
acceptances or similar facilities issued for the account of the Company, and
(iv) any obligation of the type referred to in clauses (i) through (iii) of
another Person the payment of which the Company has guaranteed or for which the
Company is responsible or liable, directly or indirectly, jointly or severally,
as obligor, guarantor or otherwise.
 
Indemnified Parties.  “Indemnified Parties” has the meaning set forth in
Section 4.5(a).
 
Indemnification Claim. “Indemnification Claim” has the meaning set forth in
Section 7.6(a).
 
Indemnification Demand.  “Indemnification Demand” has the meaning set forth in
Section 7.6(a).
 
IP Rights.  “IP Rights” has the meaning set forth in Section 2.7(a)(1).
 
IRS.  “IRS” shall mean the United States Internal Revenue Service.
 
Know-How.  “Know-How” has the meaning set forth in Section 2.7(a)(3).
 

 
 

--------------------------------------------------------------------------------

 

Knowledge.  “Knowledge” means such information that the executive officers of
the applicable Person actually knew, or reasonably should have known, if such
executive officers would have made due inquiry with respect to the applicable
matter.
 
Launch.  “Launch” has the meaning set forth in Section 1.7(a)(8).
 
Law.  “Law” shall mean any federal, state or local, domestic or foreign,
statute, law, code, ordinance, rule or regulation or court order of any
Governmental Authority.
 
Lease Assignment.  “Lease Assignment” has the meaning set forth in Section
4.11(a).
 
Letter of Transmittal.  “Letter of Transmittal” has the meaning set forth in
Section 1.6(b).
 
Marketing Approval.  “Marketing Approval” has the meaning set forth in
Section 1.7(a)(8).
 
Material Contract.  “Material Contract” has the meaning set forth in
Section 2.8(a).
 
Merger.  “Merger” has the meaning set forth in the Recitals to the Agreement.
 
Merger Consideration.  “Merger Consideration” means, collectively the Common
Merger Consideration and the Series A Preferred Merger Consideration.
 
Merger Price Per Common Share. “Merger Price Per Common Share” is equal to: (a)
the Aggregate Upfront Transaction Value, minus the aggregate Series A Preferred
Merger Consideration, divided by (b) the sum of the aggregate number of shares
of the Company’s Common Stock issued and outstanding as of immediately prior to
the Effective Time and the aggregate number of shares of the Company’s Series A
Preferred Stock and Company Common Stock issuable upon the exercise of all
Company Options and Company Warrants as of immediately prior to the Effective
Time (whether or not vested or exercisable at such time).
 
Merger Price Per Series A Share.  “Merger Price Per Series A Share” is equal to
(a) the Aggregate Upfront Transaction Value, divided by (b) the sum of the
aggregate number of shares of the Company’s Series A Preferred Stock issued and
outstanding immediately prior to the Effective Time.
 
Merger Sub.  “Merger Sub” has the meaning set forth in the Preamble to the
Agreement.
 
Milestone Abandonment Dispute.  “Milestone Abandonment Dispute” has the meaning
set forth in Section 1.7(h)(1).
 
Milestone Abandonment Notice.  “Milestone Abandonment Notice” has the meaning
set forth in Section 1.7(h)(1).
 
Milestone Abandonment Objection Notice.  “Milestone Abandonment Objection
Notice” has the meaning set forth in Section 1.7(h)(1).
 

 
 

--------------------------------------------------------------------------------

 
Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.

 
Milestone Event.  “Milestone Event” has the meaning set forth in Section
1.7(a)(10).
 
Milestone Event Occurrence Date. “Milestone Event Occurrence Date” has the
meaning set forth in Section 1.7(a)(11).
 
Milestone Payment.  “Milestone Payment” has the meaning set forth in
Section 1.7(a)(12).
 
Milestone Shares.  “Milestone Shares” has the meaning set forth in Section
1.7(d)(2).
 
NDA.  “NDA” has the meaning set forth in Section 1.7(a)(13).
 
Net Sales.  “Net Sales” has the meaning set forth in Section 1.7(a)(14).
 
Net Cash Amount.  “Net Cash Amount” means the number obtained by subtracting the
total cash and cash equivalents of the Company by the total liabilities of the
Company, excluding (a) all Seller’s Expenses payable at the Closing and(b) PJSC
Contingent Fees.
 
Neuronex Patent.  “Neuronex Patent” has the meaning set forth in Section
1.7(a)(15).
 
Option Consideration.  “Option Consideration” has the meaning set forth in
Section 1.3(b).
 
“Orange Book.”  “Orange Book” means the FDA’s publication entitled, “Approved
Drug Products with Therapeutic Equivalence Evaluations,” as maintained under the
Federal Food, Drug, and Cosmetic Act.
 
[***].  “[***]” has the meaning set forth in 1.7(a)(16).
 
Outside Date.  “Outside Date” has the meaning set forth in Section 6.1(b).
 
Paid Exercise Price.  “Paid Exercise Price” means the portion of the aggregate
exercise price of each Company Option and each Company Warrant outstanding
immediately prior to the Effective Time which shall be deemed to have been paid
in partial satisfaction of the exercise price of such Company Option or Company
Warrant as a result of the payment of the Closing Consideration.  .
 
Parachute Payment Agreements.  “Parachute Payment Agreements” has the meaning
set forth in Section 2.14(b).
 
Parent.  “Parent” has the meaning set forth in the Preamble to the Agreement.
 
Parent Balance Sheet Date.  “Parent Balance Sheet Date” has the meaning set
forth in Section 3.9(c).
 
Parent Break-Up Fee.  “Parent Break-Up Fee” has the meaning set forth in Section
6.2(b).
 

 
 

--------------------------------------------------------------------------------

 

Parent Indemnified Parties.  “Parent Indemnified Parties” has the meaning set
forth in Section 7.2.
 
Parent Material Adverse Effect.  “Parent Material Adverse Effect” has the
meaning set forth in Section 3.4.
 
Parent SEC Documents.  “Parent SEC Documents” has the meaning set forth in
Section 3.9(a).
 
Patent Rights.  “Patent Rights” has the meaning set forth in Section 2.7(a)(4).
 
Paying Agent.  “Paying Agent” has the meaning set forth in Section 1.6(a).
 
Payment Fund.  “Payment Fund” has the meaning set forth in Section 1.6(a).
 
Permitted Encumbrances.  “Permitted Encumbrances” has the meaning set forth in
Section 2.5.
 
Person.  “Person” shall mean any individual, entity or Governmental Authority.
 
PJSC. “PJSC” shall mean Peter J. Solomon Company
 
PJSC Contingent Fees.  “PJSC Contingent Fees” shall mean the fees payable to
Peter J. Solomon Company pursuant to the second paragraph of Section 3(a) of the
engagement letter between the Company and Peter J. Solomon Company, dated as of
January 31, 2011, in connection with the payment of any Contingent Payment to
the Persons entitled thereto.
 
Post-Closing Tax Period.  “Post-Closing Tax Period” means any Tax period
beginning after the Closing Date; and, with respect to a Tax period that begins
on or before the Closing Date and ends thereafter, the portion of such Tax
period beginning after the Closing Date.
 
Pre-Closing Tax Periods.  “Pre-Closing Tax Periods” has the meaning set forth in
Section 6A.5(d).
 
Pre-Closing Taxes.  “Pre-Closing Taxes” has the meaning set forth in
Section 6A.5(d).
 
Pro Rata Share.  “Pro Rata Share” of a particular Former Holder shall mean the
fraction having a numerator equal to the number of Effective Time Shares held by
such Former Holder, and having a denominator equal to the aggregate number of
Effective Time Shares held by all Former Holders, in each case calculated based
on the aggregate Merger Consideration with respect to which the Pro Rata Share
is being calculated.
 
Real Property Lease Agreements.  “Real Property Lease Agreements” has the
meaning set forth in Section 2.6.
 
R&D Support Account.  “R&D Support Account” has the meaning set forth in Section
4.13.
 

 
 

--------------------------------------------------------------------------------

 

R&D Support Payment. “R&D Support Payment” means up to $1,200,000 in cash, which
amount shall be funded pursuant to the terms of Section 4.13, as such amount may
be increased from time to time as reasonably required to cover additional
activities mutually agreed by Parent and the Company.
 
Representation Termination Date.  “Representation Termination Date” has the
meaning set forth in Section 7.1.
 
Required Stockholder Vote.  “Required Stockholder Vote” has the meaning set
forth in Section 2.21.
 
Reserve Amount.  “Reserve Amount” means $10,000, as it may be increased from
time to time in the discretion of the Stockholders’ Representative, provided
that in no event may any increase in the Reserve Amount exceed the aggregate of
the accrued but unpaid Merger Consideration, Option Consideration and Warrant
Consideration then payable to the Former Holders at the time of the increase.
 
Response.  “Response” has the meaning set forth in Section 7.6(b).
 
Restated Certificate of Incorporation.  “Restated Certificate of Incorporation”
has the meaning set forth in Section 2.1.
 
Restraints.  “Restraints” has the meaning set forth in Section 5.1.
 
Retained Indebtedness.  “Retained Indebtedness” means the Indebtedness of the
Company that Parent, at its option, elects for Company to retain at the Closing,
which shall be set forth on Part 1.6(c) of the Disclosure Schedule.
 
Sales Milestone Event.  “Sales Milestone Event” has the meaning set forth in
Section 1.7(a)(17).
 
Sales Milestone Payment.  “Sales Milestone Payment” has the meaning set forth in
Section 1.7(a)(18).
 
Sales Milestone Payment Occurrence Date.  “Sales Milestone Payment Occurrence
Date” has the meaning set forth in Section 1.7(a)(19).
 
Section 280G Tax Liability.  “Section 280G Tax Liability” has the meaning set
forth in Section 6A.5(d).
 
SEC.  “SEC” shall mean the U.S. Securities and Exchange Commission.
 
Securities Act.  “Securities Act” shall mean the Securities Act of 1933, as
amended, including the rules and regulations promulgated thereunder.
 
Sellers’ Expenses.  “Sellers’ Expenses” means all costs, fees and expenses
incurred by the Company in connection with the negotiation and consummation of
the transactions contemplated by this Agreement (whether incurred prior to or
after the date hereof) that have
 

 
 

--------------------------------------------------------------------------------

 

been incurred and remain unpaid as of immediately prior to the Effective Time,
including, without limitation, (a) any brokerage fees, commissions, finders’
fees,  financial advisory fees, or other amounts payable to other agents,
representatives and advisors, including those payable to Peter J. Solomon
Company, (b) the legal fees and expenses, including those payable to Hutchison
Law Group, and (c) any success fees, bonuses, change of control or other
payments to any employee, former employee, consultant or former consultant of
the Company (other than a payment of Merger Consideration, Option Consideration
or Warrant Consideration). For the avoidance of doubt, the PJSC Contingent Fees
shall constitute Sellers’ Expenses, to the extent payable at the Closing and
thereafter shall be deducted from the applicable Contingent Payment in
accordance with the Contingent Allocation Certificate.
 
Sellers’ Taxes.  “Sellers’ Taxes” means (i) all Taxes attributable to the
transactions described in Section 4.11 of this Agreement; (ii) all Taxes of any
member of an affiliated, consolidated, combined, or unitary group of which the
Company is or was a member on or prior to the Closing Date, including pursuant
to Treasury Regulations section 1.1502-6 or any similar provision of state,
local or foreign Law; (iii) all Taxes of any person imposed on the Company for
any period as a transferee or successor in respect of a transaction occurring on
or before the Closing Date or by contract entered into prior to the Closing;
(iv) any withholding or employment Taxes required to be withheld or paid as a
result of any payments contemplated under this Agreement or as a result of any
vesting, exercise, cancellation, payments, or dividends or deemed dividends, in
respect of Company Options, Company Warrants or Company Capital Stock, in each
case that occur on or prior to the Closing Date or as a result of the
transactions and payments contemplated by this Agreement; (v) any Transfer Taxes
which are the responsibility of Former Holders under Section 6A.5(g); and (vi)
any misrepresentation, breach or inaccuracy in any representation relating to
Taxes, determined without regard to any qualifiers relating to materiality and
without regard to any items set forth on the Disclosure Schedules.
 
Series A Preferred Merger Consideration.  “Series A Preferred Merger
Consideration” has the meaning set forth in Section 1.2(c)(1).
 
Signing Payment.  “Signing Payment” shall mean $2,000,000.
 
SK License.  “SK License” has the meaning set forth in Section 2.8(c).
 
SK Territory.  “SK Territory” has the meaning set forth in Section 1.7(a)(20).
 
Specified Representations.  “Specified Representations” shall mean each of the
representations and warranties contained in the first and last sentences of
Section 2.1, Section 2.2(a) (except for the fourth and sixth sentences),
Section 2.2(d), Section 2.21, the first and second sentences of Section 2.22 and
Section 2.23.
 
Stockholders’ Representative.  “Stockholders’ Representative” has the meaning
set forth in Section 8.1(a).
 
Straddle Period.  “Straddle Period” has the meaning set forth in Section 6A.1.
 
Subsidiaries.  “Subsidiaries”, when used with respect to any party hereto, shall
mean any corporation, limited liability company, partnership, association, trust
or other entity of which
 

 
 

--------------------------------------------------------------------------------

 

securities or other ownership interests representing more than 50% of the equity
or more than 50% of the ordinary voting power (or, in the case of a partnership,
more than 50% of the general partnership interests) are, as of such date, owned
by such party.
 
Successor.  “Successor” shall mean Parent or Surviving Corporation following a
merger or change of control of Parent or Surviving Corporation, as applicable.
 
Surviving Corporation.  “Surviving Corporation” has the meaning set forth in
Section 1.1(a).
 
Target Net Cash Amount.  “Target Net Cash Amount” has the meaning set forth in
Section 1.5.
 
Tax and Taxes.  “Tax” and “Taxes” means (i) any and all U.S. federal, state,
local and non-U.S. taxes, including, without limitation, income, estimated
income, gross receipts, profits, business, license, occupation, franchise,
capital stock, real or personal property, sales, use, transfer, value added,
payroll, employment or unemployment, social security (or similar), disability,
alternative or add-on minimum, customs, duties, excise, stamp, environmental,
commercial rent withholding, severance, escheat, premium, windfall profits,
registration or other tax of any kind or any charge of any kind in the nature of
(or similar to) taxes whatsoever, together with any related interest, penalty,
addition to tax or additional amount, imposed by any Taxing Authority and
(ii) in the case of the Company, any and all liability for the payment of any
amount of the type described in clause (i) as a result of being or having been
before the Closing Date a member of an affiliated, consolidated, combined or
unitary group as a result of any tax sharing or tax allocation agreements,
arrangement or understanding entered into prior to the Closing, or as a result
of being liable for another person’s taxes, as a transferee or successor, by
contract or otherwise .
 
Tax Contest.  “Tax Contest” has the meaning set forth in Section 6A.5(a).
 
Tax Grant.  “Tax Grant” has the meaning set forth in Section 2.12(k).
 
Taxing Authority.  “Taxing Authority” means any Governmental Authority
responsible for the imposition, collection or enforcement of a Tax.
 
Tax Return.  “Tax Return” means any report, return, document, statement,
election, disclosure, schedule, form, declaration or other information or filing
supplied or required to be supplied to any Taxing Authority with respect to
Taxes, including amendments, schedules, or attachments thereto, including
information returns, and including any documents with respect to or accompanying
payments of estimated Taxes, or with respect to or accompanying requests for the
extension of time in which to file any such report, return, document, statement,
election, disclosure, schedule, form, declaration or other information.
 
Tax Sharing Agreement.  “Tax Sharing Agreements” means all existing agreements
binding the Company that provide for the allocation, apportionment, sharing or
assignment of any Tax liability of any Person; provided, however, that the
following agreements shall be disregarded to the extent disclosed on Part
2.12(e) of the Disclosure Schedule:  (i) commercially reasonable agreements
providing for the allocation or payment of real property Taxes attributable
 

 
 

--------------------------------------------------------------------------------

 

to real property leased or occupied by the Company and (ii) commercially
reasonable agreements for the allocation or payment of personal property Taxes,
sales or use Taxes or value added Taxes with respect to personal property
leased, used, owned or sold in the ordinary course of business.
 
Terminating Company Breach.  “Terminating Company Breach” has the meaning set
forth in Section 6.1(d).
 
Terminating Parent Breach.  “Terminating Parent Breach” has the meaning set
forth in Section 6.1(e).
 
Territory.  “Territory” has the meaning set forth in Section 1.7(a)(20).
 
Third-Party Claim.  “Third-Party Claim” has the meaning set forth in
Section 7.4(a).
 
Trade Secret.  “Trade Secret” has the meaning set forth in Section 2.7(a)(6).
 
Trademark Rights. “Trademark Rights” has the meaning set forth in
Section 2.7(a)(7).
 
Transfer Taxes.  “Transfer Taxes” has the meaning set forth in Section 6A.5(g).
 
Transition Services Agreement.  “Transition Services Agreement” has the meaning
set forth in Section 4.12.
 
Treasury Regulations. “Treasury Regulations” means the regulations promulgated
under the Code.
 
Warrant Consideration.  “Warrant Consideration” has the meaning set forth in
Section 1.3(c).
 

 
 

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Exhibit B
Form of Certificate of Incorporation of Surviving Corporation

AMENDED AND RESTATED
 
CERTIFICATE OF INCORPORATION
 
OF
 
NEURONEX, INC.
 
FIRST:                      The name of the Corporation is:  Neuronex, Inc.
 
SECOND:                      The address of the Corporation’s registered office
in the State of Delaware is 1220 N. Market Street, Suite 850, in the City of
Wilmington, County of New Castle, Delaware 19801.  The name of its registered
agent at such address is Delaware Corporate Services Inc.
 
THIRD:                      The nature of the business or purposes to be
conducted or promoted by the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
 
FOURTH:                      The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock,
$0.001 par value per share.
 
The number of authorized shares of Common Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of the holders of a majority of the stock of the Corporation entitled to
vote, irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of Delaware.
 
FIFTH:                      In furtherance of and not in limitation of powers
conferred by statute, it is further provided:
 
1.           The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
 
2.           Election of directors need not be by written ballot.
 
3.           The Board of Directors is expressly authorized to adopt, amend,
alter or repeal the By-Laws of the Corporation.
 
SIXTH:                      No director of the Corporation shall have personal
liability arising out of an action whether by or in the right of the Corporation
or otherwise for monetary damages for breach of fiduciary duty as a director;
provided, however, that the foregoing shall not limit or eliminate the liability
of a director (i) for any breach of the director’s duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of Delaware or any successor
provision, (iv) for any transaction from which such director derived an improper
personal benefit, or (v) acts or omissions occurring prior to the date of the
effectiveness of this provision.
 

 
 

--------------------------------------------------------------------------------

 

Furthermore, notwithstanding the foregoing provision, if the General Corporation
Law of Delaware is amended or enacted to permit further limitation or
elimination of the personal liability of the director, the personal liability of
the Corporation’s directors shall be limited or eliminated to the fullest extent
permitted by the applicable law.
 
This provision shall not affect any provision permitted under the General
Corporation Law of Delaware in the Certificate of Incorporation, Bylaws or
contract or resolution of the Corporation indemnifying or agreeing to indemnify
a director against personal liability. Any repeal or modification of this
provision shall not adversely affect any limitation hereunder on the personal
liability of the director with respect to acts or omissions occurring prior to
such repeal or modification.
 
SEVENTH:                      The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute and this
Certificate of Incorporation, and all rights conferred upon stockholders herein
are granted subject to this reservation.
 

 

 
- 2 -

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Exhibit C
Form of Transition Services Agreement

SERVICES AGREEMENT
 
THIS SERVICES AGREEMENT (this “Agreement”), dated effective as of __, 2012 (the
“Effective Date”), is by and between Neuronex, Inc., a Delaware corporation
(“Neuronex”), and Aerial BioPharma, LLC, a North Carolina limited liability
company (“Aerial”).
 
WITNESSETH:
 
WHEREAS, Neuronex has requested that Aerial provide certain services to Neuronex
to commence immediately upon the Effective Date, and Aerial is willing to
provide such services to Neuronex, subject to the terms and conditions of this
Agreement;
 
NOW, THEREFORE, in consideration of the promises, the mutual agreements
hereinafter contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Aerial and Neuronex hereby agree
as follows:
 
  SECTION 1. 
SERVICES.

 
(a)           Scope of Services.  From time to time during the Period of Service
(as defined below), Aerial will provide Neuronex the services described on
Exhibit A attached hereto (the “Services”).  The parties agree that additional
services may be requested from time to time and if such services are agreed
upon, then such services shall be described on additional exhibits to be
attached hereto and dated and signed by the parties and will be considered
“Services” hereunder. Specific tasks that may arise which are not addressed on
Exhibit A are the responsibility of Neuronex and Aerial will have no obligation
for the performance of such tasks, unless subsequently agreed to in writing,
including provision for additional expense reimbursements as may be mutually
agreed to by Aerial and Neuronex.
 
(b)           Period of Service.  The “Period of Service” will commence on the
Effective Date and will continue with respect to specific Services or all
Services, as applicable until the date any (or all) of the Services are
terminated pursuant to the terms set forth in Section 1(c) below, unless any of
the Services are extended pursuant to the terms herein or unless at that time
Services are being performed which by their nature require a later completion
date, in which case the Period of Service will terminate on such completion
date.
 
(c)           Termination.
 
(i)           Neuronex may at any time or from time to time terminate any (or
all) of the Services provided pursuant to this Section 1 on at least thirty (30)
days prior written notice to Aerial, whereupon Aerial will no longer have any
obligation to provide such terminated services to Neuronex and Neuronex will
have no further obligation to reimburse Aerial for such terminated services.
 
(ii)           Aerial may at any time or from time to time terminate any (or
all) of the Services provided pursuant to this Section 1 on at least thirty (30)
days prior written notice to Neuronex, whereupon Aerial will no longer have any
obligation to provide such terminated services to Neuronex and Neuronex will
have no further obligation to reimburse Aerial for such terminated services.
 

 
1

--------------------------------------------------------------------------------

 

 
(iii)           Upon termination or expiration of this Agreement, (A) Aerial
will deliver to Neuronex’s or, at Neuronex’s option, dispose of, any materials
in its possession or control and all Work Product developed through termination
or expiration; (B) Neuronex will pay Aerial any monies due and owing Aerial, up
to the time of termination or expiration, for Services properly performed; and
(C) the provisions in Sections 1(e), 2, 4, 5, 7, 9, 10, 11, 13, 14 and 15 will
survive in accordance with their terms.
 
(d)           Aerial Obligations.  Aerial’s obligations under this Section 1
will be limited to the services described herein and which Aerial, on a
case-by-case basis, has agreed to provide to Neuronex.  Aerial shall be entitled
to rely upon the accuracy of all information supplied to it by Neuronex or its
representatives, and shall have no duty to question or investigate the accuracy
of said information. It is understood that the services covered under this
Agreement may be transitional in nature, and that Neuronex may ultimately over
time administer these activities on its own behalf. Aerial agrees to provide a
reasonable level of support necessary to assist Neuronex in transitioning
services covered in this Section 1 to a third party or assuming such services
internally within Neuronex.
 
(e)           Confidentiality.
 
(i)           Confidential Information.  For purposes of this Agreement,
“Confidential Information” shall mean all or any of the following:  (1)
information or material proprietary to Neuronex; (2) information not generally
known by non-Neuronex personnel (other than persons subject to confidentiality);
(3) tangible and intangible information, including, without limitation,
technical, financial, commercial and proprietary information, know-how, and
trade secrets of any description, whether created or produced by Neuronex, or
any person on behalf of Neuronex, that concerns or relates to the business,
operations, plans, clients or technology of Neuronex or is otherwise acquired or
disclosed in anticipation of, during, or as a result of, or in any way connected
with, this Agreement; and/or (4) information which Aerial or any of its
employees or affiliates made or makes, conceived or conceives, developed or
develops or obtained or obtains through or has access to as a result of Aerial’s
providing the Services to Neuronex hereunder (including information received,
originated, discovered or developed in whole or in part by Aerial or its
employees or affiliates).  Confidential Information also includes any
information which Neuronex obtains from another party and which Neuronex treats
as proprietary, whether or not owned or developed by Neuronex, including without
limitation information of or concerning Neuronex’ licensees.  The failure of
Neuronex to mark any of the above described information as proprietary,
confidential, or secret shall not affect its status as part of the Confidential
Information hereunder.
 
(ii)           Exclusions.  Notwithstanding the foregoing, the term Confidential
Information shall not include any information that: (1) is now or later made
known to the public through legal means and no fault of Aerial; (2) Aerial can
show was in Aerial’s possession (other than information which was developed by
Aerial for Neuronex or provided to Aerial on behalf of Neuronex) prior to the
earliest disclosure by Neuronex, as evidenced by written documents in Aerial’s
files; (3) is rightfully received after the Effective Date by Aerial from a
third party having no obligation of confidentiality to Neuronex; (4) is
independently developed by Aerial or
 

 
2

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its employees or affiliates without access to or reliance upon the Confidential
Information; or (5) is disclosed by Aerial after receipt of written permission
from Neuronex.  If Aerial is requested or required by subpoena, court order, or
similar process to disclose any Confidential Information, the parties agree that
Aerial will provide Neuronex with prompt notice of such request(s) so that
Neuronex may seek an appropriate protective order and/or waive Aerial’s
compliance with the provisions of this Agreement.
 
(iii)           No Disclosure or Use.  Aerial and its employees and affiliates
shall hold in strictest confidence and shall not, except in the course of
performing Aerial’s obligations under this Agreement or pursuant to written
authorization from Neuronex, at any time during or after the term of this
Agreement: (i) directly or indirectly reveal, report, publish, disclose or
transfer Confidential Information or any part thereof to any person or entity;
(ii) use any Confidential Information or any part thereof for any purpose other
than to perform Services in connection with this Agreement; or (iii) assist any
person or entity other than Neuronex to secure any benefit from Confidential
Information or any part thereof.
 
(iv)           Duty to Safeguard.  During and after the term of this Agreement,
Aerial shall:  (i) use the same degree of care (and in any event not less than
reasonable care) to safeguard the confidentiality of the Confidential
Information that Aerial uses to protect Aerial’s own secret information and (ii)
limit any disclosure of the Confidential Information only to those of Aerial’s
employees, consultants or agents who have a need to know, are bound by
confidentiality obligations to Aerial and are advised of Aerial’s obligations
hereunder.
 
(v)           Disclosure Pursuant to Law.  If Aerial is required to disclose
Confidential Information by law or any order of a governmental authority, it
shall first notify Neuronex of such requirement and assist Neuronex, at
Neuronex’s request and expense, to minimize the disclosure.
 
(vi)           Return of Confidential Information.  At any time upon notice or
in any event upon termination of this Agreement, Neuronex may require the return
(or certified destruction) of any Confidential Information in the possession or
control of Aerial or any of its employees, agents, affiliates, subcontractors
and representatives.
 
(vii)           All obligations under this Section 1(e) shall survive the
expiration or termination of this Agreement indefinitely.
 
(f)           Ownership of Materials.  Aerial agrees that all Confidential
Information, as defined above, shall belong exclusively and without any
additional compensation to Neuronex.  To the extent not covered by the preceding
sentence, all copyrights, patents, trade secrets, or other intellectual property
rights associated with any ideas, concepts, techniques, inventions, processes,
or works of author ship developed or created by Aerial during the course and in
the scope of performing the Services (collectively, the “Work Product”) shall
belong exclusively to Neuronex and shall, to the extent possible, be considered
a “work made for hire” for Neuronex; to the extent such work is determined not
to constitute “works made for hire” as a matter of law, Aerial hereby
irrevocably assigns and transfers to Neuronex, as of the time of creation of the
Work Product, any and all right, title, or interest it may have in such Work
Product.  Upon request of Neuronex and at Neuronex’ expense, Aerial shall take
such further
 

 
3

--------------------------------------------------------------------------------

 

actions, including execution and delivery of instruments of conveyance necessary
to obtain legal protection in the United States and foreign countries for such
Work Product and for the purpose of vesting title thereto in Neuronex, or its
nominee, as may be appropriate to give full and proper effect to such assignment
and to vest in Neuronex complete title and ownership to such Work Product.
 
(g)           Materials and Records.  Aerial will not transfer to any third
party any materials provided to Aerial in connection with providing Services, or
use any third party facilities or intellectual property in performing the
Services, without Neuronex’s prior written consent.  Aerial will maintain
complete and accurate records of all work conducted in the performance of the
Services and all Work Product.  Such records will be in sufficient detail and in
good scientific manner appropriate for patent and regulatory purposes.
 
  SECTION 2. 
COSTS.

 
(a)           Cost of Services.  The “Rates” for the Services shall be as set
forth on Exhibit B hereto.
 
(b)           Invoicing.  The costs for any service or support provided under
this Agreement shall be invoiced monthly by Aerial to Neuronex as determined on
Exhibit B.  Each invoice for charges under this Agreement shall be paid by
Neuronex within thirty (30) days after receipt of such invoice.  Aerial will, at
the request of Neuronex, provide Neuronex appropriate documentation to support
charges reflected on any invoice with respect to any services provided or costs
incurred under this Agreement.
 
  SECTION 3. 
ADVANCEMENT OF FUNDS.

 
Aerial shall not advance funds to or for the benefit of Neuronex for any
purpose, without the prior approval of Neuronex.
 
  SECTION 4. 
INDEMNITY.

 
(a)           Neuronex shall indemnify, defend and hold harmless Aerial from and
against, and pay or reimburse, as the case may be, Aerial for any and all
Indemnifiable Damages, as incurred, suffered by Aerial based upon, arising out
of, relating to or otherwise in connection with Aerial’s providing any of the
Services as described in this Agreement, except to the extent such Indemnifiable
Damages arise out of the negligence or intentional misconduct of Aerial.  For
purposes of this Agreement, “Indemnifiable Damages” shall mean all losses,
claims, debts, liabilities, commitments, obligations, claims, damages,
deficiencies, payments, taxes, liens, costs and expenses of any nature
whatsoever, whether matured or unmatured, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, known or unknown, whenever arising, to
the extent resulting from unaffiliated third party claims (including, without
limitation, the costs and expenses (including but not limited to attorneys’
fees) of all such actions, arbitrations, suits, claims and proceedings, all
amounts paid in connection with any demands, assessments, judgments, settlements
and compromises related thereto, interest and penalties with respect thereto and
expenses incurred in investigating, preparing or defending against any such
actions, arbitrations, suits, claims or proceedings or in asserting or enforcing
any member of the indemnified party’s rights hereunder).
 

 
4

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(b)           Aerial shall indemnify, defend and hold harmless Neuronex from and
against, and pay or reimburse, as the case may be, Neuronex for, any and all
Indemnifiable Damages, as incurred, suffered by Neuronex based upon, arising out
of, relating to or otherwise in connection with the negligence or intentional
misconduct of Aerial in providing any of the Services as described in this
Agreement.
 
  SECTION 5.
LEVEL OF SERVICES; LIMITATION ON LIABILITY.

 
Aerial will use the same degree of care in rendering services under this
Agreement as it utilizes in rendering such services for its own operations, but
in no event will Aerial be liable for any error or omission in rendering such
services, or defect in the services rendered, except when such error, omission
or defect is directly attributable to the gross negligence or willful misconduct
of Aerial.  Aerial represents and warrants that neither Aerial, nor any of its
employees, or to Aerial’s knowledge, any of its consultants or agents is (a)
debarred, convicted, or is subject to a pending debarment or conviction,
pursuant to section 306 of the United States Food Drug and Cosmetic Act, 21
U.S.C. § 335a, (b) listed by any government or regulatory agencies as ineligible
to participate in any government healthcare programs or government procurement
or non-procurement programs (as that term is defined in 42 U.S.C. 1320a-7b(f)),
or excluded, debarred, suspended or otherwise made ineligible to participate in
any such program, or (c) convicted of a criminal offense related to the
provision of healthcare items or services, or subject to any such pending
action.  Aerial shall inform Neuronex in writing promptly if Aerial becomes
aware that it or any of its employees, consultants or agents is subject to the
foregoing, or if any action, suit, claim, investigation, or proceeding relating
to the foregoing is pending, or to Aerial’s knowledge, is threatened.  NONE OF
AERIAL OR ITS AFFILIATES MAKES ANY OTHER REPRESENTATIONS, WARRANTIES OR
GUARANTEES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO
THE SERVICES TO BE PERFORMED HEREUNDER BY AERIAL OR THE RESULTS OBTAINED OR TO
BE OBTAINED THEREBY.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, NONE OF
AERIAL OR ITS AFFILIATES WILL BE LIABLE FOR ANY LOST PROFITS OR SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES (i) CAUSED BY THE PERFORMANCE OF,
ANY DELAY IN PERFORMING, FAILURE TO PERFORM OR DEFECTS IN PERFORMANCE OF THE
SERVICES CONTEMPLATED TO BE PERFORMED BY IT PURSUANT TO THIS AGREEMENT OR (ii)
OTHERWISE IN ANY WAY RELATED TO OR IN RESPECT OF THIS AGREEMENT OR THE SERVICES
CONTEMPLATED HEREBY.  IN NO EVENT SHALL AERIAL’S LIABILITY UNDER THIS AGREEMENT
EXCEED THE AMOUNT OF ANY COMPENSATION ACTUALLY PAID BY NEURONEX TO AERIAL.
 
  SECTION 6.
INABILITY TO PERFORM.

 
Aerial shall be excused from its obligations under this Agreement, and shall
have no liability for any resulting loss or damage, in the event and to the
extent that its performance is delayed or prevented by any circumstance
reasonably beyond its control, including, but not limited to, fire, flood,
epidemic, explosion, act of any government in its sovereign capacity, act of God
or of the public enemy, strike, walkout or other labor dispute, and riot or
civil
 

 
5

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disturbance.  Neuronex will not be required to pay for any services which are
not being performed hereunder for any of the above reasons.
 
  SECTION 7.
CONFIDENTIAL INFORMATION.

 
Aerial shall hold, and shall cause its affiliates, subcontractors and
representatives to hold, in strict confidence all information concerning
Neuronex in its possession or control or furnished to Aerial by Neuronex or its
affiliates, whether or not pursuant to this Agreement or the services
contemplated hereby, and will not release or disclose such information to any
other person or entity; provided, however, that Aerial may disclose such
information to the extent (i) that Aerial can show that such information, in the
form provided, is in the public domain through no fault of Aerial or its
representatives, (ii) Aerial received such information from Neuronex pursuant to
another agreement and Aerial’s disclosure is in conformance with such agreement
or (iii) Aerial is required by law to make such disclosure.  Such information
(other than information obtained by Aerial pursuant to and in compliance with
another agreement with Neuronex) will only be used by Aerial for purposes
expressly made known to and authorized by Neuronex.  At any time upon notice or
in any event upon termination of this Agreement, Neuronex may require the return
(or certified destruction) of any such confidential information of Neuronex or
its affiliates in the possession or control of Aerial or any of its employees,
agents, affiliates, subcontractors and representatives; provided that such
requirement shall not apply to information received by Aerial through another
agreement so long as Aerial is in compliance with such agreement.  The foregoing
shall be in addition to, and not supersede, the obligations imposed on Aerial
under Section 1(e).
 
  SECTION 8.
ASSIGNMENT.

 
No party shall convey, assign or otherwise transfer any of its rights or
obligations under this Agreement without the prior written consent of the other
party in its sole and absolute discretion.
 
  SECTION 9.
GOVERNING LAW.

 
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of North Carolina applicable to contracts made and to
be performed entirely within such State, without regard to the conflicts of law
principles of such State.  All disputes hereunder not otherwise resolved by
negotiation or mediation as between the parties will be submitted to a state or
federal court of competent jurisdiction in Wake County, North Carolina, and each
party agrees to both in personam and in rem jurisdiction with respect thereto.
 
  SECTION 10.
NOTICES.

 
All notices or other communications required or permitted to be given hereunder
shall be in writing and shall be delivered by hand, telecopied or sent via mail,
postage prepaid, by registered, certified or express mail or reputable overnight
courier service (and shall be deemed given when so delivered by hand or
telecopied, or if mailed, three days after mailing (one business day in the case
of express mail or overnight courier service)), addressed as follows:
 
[to be updated as necessary prior to execution]
 
 
 
6

--------------------------------------------------------------------------------

 
 
If to Neuronex:
Neuronex, Inc.
9001 Aerial Center Parkway, Suite 110
Morrisville, NC  27560
Attention:  President
If to Aerial:
Aerial BioPharma, LLC
9001 Aerial Center Parkway, Suite 110
Morrisville, NC  27560
Attention:  President

 
or in any case to such other address or addresses as hereafter shall be
furnished as provided in this Section by either party to the other party.
 
  SECTION 11.
CAPTIONS; COUNTERPARTS.

 
(a)           Captions.  All section titles or captions contained in this
Agreement are for convenience only and shall not be deemed a part of this
Agreement or affect the meaning or interpretation of this Agreement.  Unless
otherwise specified, all references herein to numbered sections are to sections
of this Agreement.
 
(b)           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute a single instrument.
 
  SECTION 12.
SALES AND USE TAXES.

 
Any sales and use taxes on any services provided hereunder shall be borne by
Neuronex and may be invoiced, collected and remitted to the applicable taxing
authority by Aerial, on behalf of Neuronex.
 
  SECTION 13.
NO THIRD PARTY BENEFICIARIES.

 
This Agreement is binding upon and is for the benefit of the parties and their
respective successors and permitted assigns.  This Agreement is not made for the
benefit of any person or entity not a party hereto and no person or entity other
than the parties or their respective successors and permitted assigns will
acquire or have any right, remedy or claim under or by virtue of this Agreement.
 
  SECTION 14.
SEVERABILITY.

 
If any provision of this Agreement or the application thereof to any person or
circumstance is determined by a court of competent jurisdiction to be invalid,
void or unenforceable, the remaining provisions hereof, or the applications of
such provision to persons or circumstances other than those as to which it has
been held invalid or unenforceable, will remain in full force and effect and
will in no way be affected, impaired or invalidated thereby.
 
  SECTION 15.
MODIFICATION OR AMENDMENT.

 
The parties may modify or amend this Agreement only by written agreement
executed and delivered by both parties.
 

 
7

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IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as
of the date first above written.
 
NEURONEX, INC
 
 
By:                                                                  
Name:  Moise Khayrallah
Title:     CEO
AERIAL BIOPHARMA, LLC
 
 
By:                                                         
Name:  Stephen Butts
Title:     President & CEO
   

 
8

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EXHIBIT A
 
to Services Agreement
 
Between Neuronex, Inc.  and Aerial BioPharma, LLC
 
[to be updated as necessary prior to execution]
 
Product Development Services
 
-
pre-clinical and clinical strategy and design

 
-
pre-clinical and clinical trial implementation, including but not limited to
site selection, monitoring, data management, and vendor management

 
-
Manufacturing activities for regulatory and clinical trial purposes

 
-
Contracting and management of consultants for product development activities

 
Regulatory Services
 
-
Regulatory strategy and implementation

 
-
Regulatory Authority communication and correspondence

 
-
Regulatory document development and management

 
-
Contracting and management of consultants for regulatory services

 
Management and Business Development
 
-
Oversight of all Product Development and Regulatory Services

 
-
Commercial Strategy activities

 
-
Business Development, including but not limited to in-licensing, out-licensing,
partnering and alliance management activities

 
-
Contracting and management of consultants for financial and business development
services

 
The Services may be provided by Aerial through its officers, employees,
consultants, agents or other affiliates.
 

 
9

--------------------------------------------------------------------------------

 
Certain portions of this Exhibit have been omitted pursuant to a request for
confidentiality. Such omitted
portions, which are marked with brackets [     ] and an asterisk*, have been
separately filed with the Commission.

 
EXHIBIT B
 
to Services Agreement
 
Between Neuronex, Inc. and Aerial BioPharma, LLC
 
[to be updated as necessary prior to execution]
 
Function
Hourly Rates
CEO
$[***]
EVP, Commercial
$[***]
VP, Scientific Affairs
$[***]
Manager, Clinical Affairs
$[***]
Clinical Trials Manager
$[***]
Clinical Research Associate
$[***]
Data Administrator
$[***]
Office Manager
$[***]
Consultants
[***]
Note: Rates may be adjusted periodically to reflect increases in compensation
and/or benefit costs.

 
Administrative & Facility Overhead
Monthly Rate
Payroll fees
[***]
Office & Computer Supplies
 
IT Consultant
 
Rent
 
Property Taxes
 
Property Insurance
 
Equipment Rental
 
Repairs & Maintenance
 
Communications
 

 
 
 
 

 
10

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Exhibit D
Form of Officer And Director Resignation Letter

 
________ __, 2012
 
Neuronex, Inc.
 
To Whom it May Concern:
 
I hereby resign as [an officer] [ member of the Board of Directors] of Neuronex,
Inc. effective upon the consummation of the Merger consummated pursuant to that
certain Agreement and Plan of Merger (“Agreement”) dated as of February ___,
2012, by and among: ______________, Inc., a Delaware corporation (“Parent”); ATI
Development Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent (“Merger Sub”); Neuronex, Inc., a Delaware corporation (the “Company”);
and Moise A. Khayrallah, Ph.D., a resident of North Carolina, solely as the
Stockholders’ Representative.
 
 
Sincerely,
 
________________

 
 

--------------------------------------------------------------------------------

 
Exhibit E
Form of Opinion

 
________________, 2012

[Acquiror]

Gentlemen:
 
We have acted as counsel to Neuronex, Inc., a Delaware corporation (the
“Company”), in connection with the transactions contemplated by the Agreement
and Plan of Merger, dated February __, 2012 (the “Merger Agreement”), by and
among the Company, ___________, Inc., a Delaware corporation (the “Parent”), ATI
Development Corp., a Delaware corporation and wholly owned subsidiary of the
Parent, and Moise A. Khayrallah, Ph.D., as the Stockholder
Representative.  Terms used herein with initial capital letters and that are not
otherwise defined shall have the meanings given to them in the Merger
Agreement.  This opinion is furnished to you pursuant to Section 5.2(i) of the
Merger Agreement.
 
For purposes of this opinion, we have examined originals or copies, identified
to our satisfaction, of such documents, corporate records, instruments and other
relevant materials as we deemed advisable, and have made such examination of
statutes and decisions and reviewed such questions of law as we have considered
necessary or appropriate.  In our examination, we have assumed the genuineness
of all signatures (except those of the Company on the Merger Agreement and the
other documents that are exhibits to the Merger Agreement to which the Company
is a party (collectively, the “Transaction Documents”)), the legal capacity of
all natural persons, the authority of all parties other than the Company to sign
all such documents, corporate records, instruments and other relevant materials
reviewed by us, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as copies,
and the authenticity of the originals of such copies.  As to facts material to
this opinion letter, we have relied upon the representations and warranties of
the Company contained in the Transaction Documents and upon certificates,
statements or representations of public officials, of officers and
representatives of the Company (including a certificate of an officer of the
Company specifically given in contemplation of this opinion, referred to herein
as the “Opinion Certificate” and attached hereto) and of others, without any
independent verification thereof.  We have made no independent investigation of
any of the facts stated in the Opinion Certificate or in any such statements or
representations; however, nothing has come to our attention which would lead us
to believe that such facts are inaccurate.

For purposes of this opinion we have assumed that the Board of Directors of the
Company has complied with its fiduciary duties in connection with the adoption
of the Merger Agreement and that the facts and law governing the future
performance by the Company of its obligations under the Merger Agreement will be
identical to the facts and law governing the performance on the date of this
opinion.

For purposes of this opinion, the phrases “to the best of our knowledge,” “we do
not know,” “we have no knowledge” or “known to us” mean, after the inquiry
referred to above, our examination has been limited to discussions with
representatives of the Company in connection

 
 

--------------------------------------------------------------------------------

 
_________________ Inc.
___________, 2012
Page of 4

with the transaction contemplated by the Transaction Documents, review of the
Opinion Certificate attached hereto, and the conscious awareness of the facts or
other information by the attorneys in our firm who have devoted substantive
attention to handling current matters for the Company. Except to the extent
expressly set forth herein we have not undertaken any independent investigation
to determine the existence or absence of any other facts, and no inference as to
our knowledge of the existence or absence of any such facts should be drawn from
our representation of the Company or the rendering of the opinions set forth
below.

Based upon and subject to the foregoing and the qualifications and limitations
below, and except as set forth in the Merger Agreement or the Disclosure
Schedules, we are of the opinion that:
 
9.           The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.  The Company is
duly qualified to do business as a foreign corporation in good standing in the
State of North Carolina.
 
 
10.           The Company has the requisite corporate power and authority to
enter into and perform its obligations under the Transaction Documents and to
own its properties and assets.  The execution, delivery and performance of the
Transaction Documents have been duly authorized by all necessary corporate
action on the part of the Company, and the Transaction Documents have been duly
executed and delivered on behalf of the Company.
 
 
11.           The Transaction Documents are legally valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms.
 
 
12.           The execution and delivery of the Transaction Documents on behalf
of the Company do not, and the performance of the Company’s obligations
thereunder will not, conflict with, violate or result in any breach or violation
of (a) any provision of the Company’s Certificate of Incorporation or bylaws,
(b) any provision of the Delaware General Corporation Law or any provision of a
North Carolina or U.S. federal statute, rule or regulation known by us to be
customarily applicable to transactions of the nature contemplated by the Merger
or (c) any order, judgment or decree of any Delaware, North Carolina or United
States federal court or governmental instrumentality to which the Company is a
party and is known to us.
 
 
13.           Immediately prior to the Effective Time, the authorized capital
stock of the Company consisted of __________________ [Note: to match
capitalization representation, subject to any changes between signing and
closing.] Immediately prior to the Effective Time, there are issued and
outstanding: ________ Common Shares and ________Series A Shares, all of which
shares are fully paid and non-assessable and were duly authorized and validly
issued.
 
 
14.           Except for the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, to our knowledge, no governmental
consent, approval or authorization under the Delaware General Corporation Law or
the federal laws of the United States, which has not been obtained or taken and
is not in full force and effect, is required to authorize or is required in
connection with the execution, delivery or performance of the Transaction
Documents by the Company.
 

 
 

--------------------------------------------------------------------------------

 
_________________ Inc.
___________, 2012
Page of 4

 
15.           To our knowledge, there is no action, suit, investigation or
proceeding by or before any court, arbitrator, administrative agency or other
governmental authority pending or threatened in writing against the Company that
questions the validity of the Transaction Documents.
 
The opinions expressed above are subject to the following qualifications:

A.      The opinions expressed herein are limited to (i) the laws of the State
of North Carolina and the federal law of the United States of America, including
the rules and regulations promulgated by governmental authorities thereunder,
and (ii) with respect to the opinions set forth in paragraphs 1 through 6 above,
the Delaware General Corporation Law as set forth in statutory compilations and
without reference to case law or secondary sources.  We do no express any
opinion as to the ordinances, statutes, administrative decisions, orders, rules,
and regulations of any municipality, county, or other political subdivision of
any state (as opposed to the laws of the state itself).  We express no opinion
as to whether the laws of any particular jurisdiction apply, or to the extent
that the laws of any jurisdiction other than those identified above are
applicable to the Merger Agreement or the transactions contemplated thereby.

B.      Our opinions expressed in paragraph 1 above with respect to the States
of Delaware and North Carolina are based solely upon (i) a Certificate of Good
Standing relating to the Company issued by the Secretary of State of the State
of Delaware on _________, 2012; and (ii) a Certificate of Authorization relating
to the Company issued by the Secretary of State of the State of North Carolina
on __________, 2012, in each case attesting to the good standing of the Company
in such jurisdiction as of such date, and our opinions in paragraph 1 with
respect to such states are limited accordingly and are rendered as of the date
of such certificates.  We specifically express no opinion with regard to the tax
good standing of the Company in any jurisdiction.

 
C.      This opinion is qualified by, and we render no opinion with respect to,
the effect of the following:
 
(i)         bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting the relief of debtors or the rights and remedies
of creditors generally, including without limitation the effect of statutory or
other law regarding fraudulent conveyances, preferential transfers and equitable
subordination;
 
(ii)         general principles of equity, including but not limited to judicial
decisions holding that certain provisions are unenforceable when their
enforcement would violate the implied covenant of good faith and fair dealing,
or would be commercially unreasonable or involve undue delay, whether or not
such principles or decisions have been codified by statute;
 
(iii)         any law or equitable principle which provides that a court may
refuse to enforce, or may limit the application of, a contract or any clause
thereof which the court finds
 

 
 

--------------------------------------------------------------------------------

 
_________________ Inc.
___________, 2012
Page of 4

to have been unconscionable at the time it was made, unconscionable in
performance or contrary to public policy;
 
(iv)         judicial decisions, that may permit the introduction of extrinsic
evidence to modify the terms or the interpretation of the Merger Agreement;
 
(v)         the effect of public policy considerations on the indemnification
provisions in the Merger Agreement;
 
(vi)         provisions stating that rights and remedies are not exclusive, that
every right or remedy is cumulative and may be exercised in addition to or with
any other right or remedy and does not preclude recourse to one or more other
rights or remedies; and
 
(vii)         any United States federal or state antitrust statutes, rules or
regulations, including without limitation the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
 
D.      We are members of the North Carolina State Bar.  Our opinion in
paragraph 3 above as to the validity, binding effect and enforceability of the
Transaction Documents is premised upon the result that would be obtained if a
North Carolina court were to apply the internal laws of the State of North
Carolina to the interpretation and enforcement of the Transaction Documents
(notwithstanding the designation therein of the laws of a state other than North
Carolina).

We call your attention to the fact that H&M Holdings, LLC, a North Carolina
limited liability company owned by certain members of our firm, holds Common
Shares.

This opinion is rendered as of the date first written above solely for your
benefit in connection with the Merger Agreement and may not be relied on by, nor
may copies be delivered to, any other person without our prior written consent,
except for copies furnished for information purposes only and not for reliance
to (i) auditors and attorneys, (ii) pursuant to governmental order or legal
process, or (iii) in connection with any legal action to which you are a party
arising out of the Merger Agreement and the transactions contemplated
thereby.  Our opinion is expressly limited to the matters set forth above and we
render no opinion, whether by implication or otherwise, as to any other matters
relating to the Company. This opinion is based upon currently existing statutes,
rules, regulations and judicial decisions and we assume no obligation to inform
you of any fact, circumstance, event or change in the law or the facts that may
hereafter be brought to our attention that may alter, affect or modify the
opinions expressed herein. This opinion is provided as a legal opinion only and
not as a guaranty or warranty of the matters discussed herein.

Sincerely,

HUTCHISON PLLC

 
 

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