Exhibit 10.1

EXECUTION COPY

CONFIDENTIAL TREATMENT REQUESTED

Redacted portions are indicated by [****].

Redacted portions filed separately with

Confidential Treatment Application.

STOCK PURCHASE AGREEMENT

by and among

BIOMARIN PHARMACEUTICAL INC.,

LEAD THERAPEUTICS, INC.,

Each of the Parties Identified on Schedule A Attached Hereto

and

ARTHUR PAPPAS,

as the

EQUITYHOLDER REPRESENTATIVE

Dated as of February 4, 2010

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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TABLE OF CONTENTS

 

     Page

ARTICLE I. DEFINITIONS

   2

1.1.

   Defined Terms    2

1.2.

   Other Terms    19

1.3.

   Interpretation    19

ARTICLE II. PURCHASE AND SALE

   20

2.1.

   Purchase and Sale of Shares    20

2.2.

   Closing    22

2.3.

   Treatment of Company Options, Company Warrants and Company Notes    22

2.4.

   Working Capital Adjustment    23

2.5.

   Indemnification Escrow Amount    26

2.6.

   Working Capital Escrow Amount    27

2.7.

   Distribution of Bonus Amount    27

2.8.

   Rights to Future Payments    28

2.9.

   Escheat    28

2.10.

   Withholding Rights    29

2.11.

   Equityholder Representative    29

2.12.

   Additional Actions    33

2.13.

   Tax Forms    33

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

   34

3.1.

   Organization of the Company    34

3.2.

   Subsidiaries    34

3.3.

   Authorization    34

3.4.

   Capitalization    35

3.5.

   Title to Properties and Assets    36

3.6.

   Absence of Certain Activities or Changes    37

3.7.

   Material Contracts    37

3.8.

   Compliance with Other Instruments    38

3.9.

   Financial Statements    38

3.10.

   Liabilities    39

3.11.

   Taxes    39

3.12.

   Environmental Matters    41

3.13.

   Employee Benefits    41

3.14.

   Compliance with Law    44

3.15.

   Permits    44

3.16.

   Consents and Approvals    44

3.17.

   Litigation    45

3.18.

   Labor Matters    45

3.19.

   Intellectual Property    46

3.20.

   Transactions with Certain Persons    48

 

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TABLE OF CONTENTS

(continued)

 

          Page

3.21.

   Insurance    48

3.22.

   Certain Business Practices    49

3.23.

   No Brokers    49

3.24.

   Books and Records    49

3.25.

   Bank Accounts    49

3.26.

   FDA and Related Matters    49

3.27.

   State Takeover Statutes    51

3.28.

   Disclosure    51

ARTICLE IV. REPRESENTATIONS AND WARRANTIES EACH SELLER

   51

4.1.

   Organization of Certain Sellers    51

4.2.

   Authorization    51

4.3.

   No Conflict; Required Filings and Consents    52

4.4.

   No Brokers    52

4.5.

   The Shares    52

ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER

   53

5.1.

   Organization    53

5.2.

   Authorization    53

5.3.

   Compliance with Other Instruments    53

5.4.

   Consents and Approvals    54

5.5.

   Litigation    54

5.6.

   No Brokers    54

5.7.

   Available Funds    54

ARTICLE VI. ADDITIONAL AGREEMENTS

   54

6.1.

   Conduct of Business by the Company    54

6.2.

   Confidentiality; Access to Information; No Modification of Representations,
Warranties or Covenants    57

6.3.

   Public Disclosure    58

6.4.

   Regulatory Filings; Reasonable Efforts    59

6.5.

   Notification of Certain Matters    60

6.6.

   No Solicitation    61

6.7.

   Takeover Statutes    62

6.8.

   Closing Date Allocation Schedule    62

ARTICLE VII. POST-CLOSING COVENANTS OF ALL PARTIES

   62

7.1.

   Indemnification of Directors and Officers    62

 

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TABLE OF CONTENTS

(continued)

 

          Page

7.2.

   Tax Matters    62

7.3.

   Employee Benefits    64

7.4.

   Development and Commercialization of the Development Products    66

ARTICLE VIII. CONDITIONS TO OBLIGATIONS

   66

8.1.

   Conditions to the Obligations of Each Party    66

8.2.

   Conditions to the Company’s Obligations    66

8.3.

   Conditions to the Obligations of Buyer    67

ARTICLE IX. INDEMNIFICATION

   68

9.1.

   Survival of Representations    68

9.2.

   Indemnification    69

9.3.

   Notice of Claims    69

9.4.

   Third Person Claims    70

9.5.

   Limitation on Indemnity; Payments Out of Milestone Payment Amounts    71

9.6.

   Remedies    72

ARTICLE X. TERMINATION, AMENDMENT AND WAIVER

   72

10.1.

   Termination    72

10.2.

   Notice of Termination; Effect of Termination    73

10.3.

   Expenses    73

ARTICLE XI. MISCELLANEOUS

   73

11.1.

   Binding Effect; Assignment    73

11.2.

   Notices    74

11.3.

   Choice of Law    75

11.4.

   Entire Agreement; Amendments and Waivers    75

11.5.

   Counterparts    76

11.6.

   Severability    76

11.7.

   Schedules    76

11.8.

   No Third Party Beneficiaries    76

11.9.

   Specific Performance    76

11.10.

   No Strict Construction    76

11.11.

   Submission to Jurisdiction; Waivers; Consent to Service of Process    76

11.12.

   WAIVER OF JURY TRIAL    77

11.13.

   Release    77

 

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LIST OF EXHIBITS

 

Exhibit A   Form of Escrow Agreement [**portions redacted**] Exhibit B   Form of
Release for Participating Service Providers Exhibit C   Option Holder Consent
Agreement Schedule A   Sellers Schedule B   Initial Allocation Schedule
[**portions redacted**] Schedule C   Continuing Employees Schedule 1.1(a)  
Assumed Current Liabilities [**portions redacted**] Schedule 1.1(b)   Sample
Future Payment Allocation Schedule [**portions redacted**]

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STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of February 4, 2010,
is entered into by and among BioMarin Pharmaceutical Inc., a Delaware
corporation (“Buyer”), LEAD Therapeutics, Inc., a Delaware corporation (the
“Company”), the parties listed on Schedule A hereto (each a “Seller” and
collectively the “Sellers”) and Arthur Pappas, acting in his capacity as
Equityholder Representative in connection with the transactions contemplated by
this Agreement (the “Equityholder Representative”). (Hereafter, Buyer, the
Company, each Seller and the Equityholder Representative shall sometimes be
referred to as the “Parties”).

RECITALS

WHEREAS, each Seller owns the number and type of shares of Common Stock (as such
term is defined herein) or Series A Preferred Stock (as such term is defined
herein, and together with the Common Stock, the “Shares”) of the Company set
forth opposite such Seller’s name on the Initial Allocation Schedule (as such
term is defined herein);

WHEREAS, each Seller holds the Company Options, Company Notes and Company
Warrants (as such terms are defined herein) set forth opposite such Seller’s
name on the Initial Allocation Schedule;

WHEREAS, in addition to the Sellers, the Initial Allocation Schedule sets forth
each other holder of Company Options, Company Notes and Company Warrants and the
Company Options, Company Note and Company Warrants held by them (each such
holder together with each Seller, an “Equityholder”);

WHEREAS, the Common Stock, Series A Preferred Stock, Company Options, Company
Notes and Company Warrants set forth on the Initial Allocation Schedule
represent all of the issued and outstanding Equity Participations (as defined
herein) of the Company;

WHEREAS, the Sellers wish to sell to the Buyer, and the Buyer wishes to purchase
from the Sellers, the Shares, upon the terms and subject to the conditions set
forth herein; and

WHEREAS, certain capitalized terms used in this Agreement are defined in Article
I of this Agreement.

 

1

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AGREEMENT

NOW THEREFORE, in consideration of the respective covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Parties hereto agree as follows:

ARTICLE I.

DEFINITIONS

1.1. Defined Terms. As used herein, the terms below shall have the following
meanings. Any of such terms, unless the context otherwise requires, may be used
in the singular or plural, depending upon the reference.

“Acquisition Proposal” means, other than the transactions contemplated by this
Agreement, any offer, proposal or inquiry relating to, or any Person’s
indication of interest in, (i) any merger consolidation or other form of
business combination with or involving the Company, (ii) the sale, license,
disposition or acquisition of all or any material portion of the business or
assets of the Company, including the grant of any license to any Intellectual
Property of the Company, other than non-exclusive licenses granted to contract
research organizations or other independent contractors in the Ordinary Course
of Business, (iii) the issuance, grant, disposition or acquisition of (A) any
Company Capital Stock or other equity security of the Company (other than the
issuance of Common Stock to employees of the Company upon the exercise of
Company Options or upon conversion of the Company’s outstanding Series A
Preferred Stock or the Series A Preferred Stock issuable upon conversion of the
Company Notes or exercise of the Company Warrants and the issuance of Series A
Preferred Stock upon the conversion of Company Notes or exercise of Company
Warrants), (B) any option, call, warrant or right to acquire any Equity
Participations of the Company (other than the grant of Company Options to
Company employees by the Company pursuant to its existing option plans in the
Ordinary Course of Business) or (C) any security, instrument or obligations that
is or may become convertible into or exchangeable for any Company Capital Stock
or other equity security of the Company, in each case of (A), (B) and
(C) constituting fifteen percent (15%) or more of the equity interest (by vote
or value) of the Company, or (iv) any combination of the foregoing.

“Adjusted Current Liabilities” means (A) Current Liabilities less (B) Assumed
Current Liabilities.

“Affiliate” means, with respect to any Person, any other Person which directly
or indirectly controls, is controlled by or is under common control with such
Person; as used in this definition, “control” shall mean (a) the ownership of
more than twenty-five percent (25%) of the voting securities or other voting
interest of any Person (including attribution from related parties), or (b) the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.

“Agreement” has the meaning set forth in the Preamble.

“Applicable Law(s)” means, with respect to any Person, any federal, state, local
or other domestic or foreign statute, law, ordinance, rule, regulation, order,
writ, injunction, judgment, award, decree or other requirement of any
Governmental Authority applicable to such Person or any of such Person’s
property and assets or such Person’s officers, directors, employees, consultants
or agents in their capacity as such Person’s officers, directors, employees,
consultants or agents, respectively.

 

2

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“Assumed Current Liabilities” shall mean (a) all liabilities evidenced by an
invoice from Shanghai Chempartner Co., Ltd., dated January 21, 2010 attached as
Exhibit 1 to Schedule 1.1(a), and incurred in connection with a rat
pharmacokinetic study for LT-00673ts/02 and LF00673 (Quotation #:
CPB-2009-Q4-046)(LEAD study#LT_673_PKA_005) and (b) the liabilities incurred on
or after February 1, 2010 listed on Schedule 1.1(a) (which Schedule, subject to
Buyer’s consent, not to be unreasonably withheld, may be updated by the Company
should the Closing Date occur after February 10, 2010), and in each case of
(a) and (b), whether or not such current liabilities have been paid.

“Benefit Plan(s)” has the meaning set forth in Section 3.13(a).

“Bonus Amount” means $800,000.

“Business Day” means a day other than a Saturday, Sunday or other day on which
commercial banks in San Francisco, California or New York, New York are
authorized or required by law to close.

“Buyer” has the meaning set forth in the Preamble.

“Buyer Indemnified Parties” has the meaning set forth in Section 9.2(a)(i).

“Buyer Liquidation Event” means and shall be deemed to be occasioned by, or to
include, (i) the merger or consolidation of Buyer by means of any transaction or
series of related transactions with or into another entity, provided that the
applicable transaction shall not be deemed a Buyer Liquidation Event unless
Buyer’s stockholders constituted immediately prior to such transaction do not
hold more than 50% of the voting power of the surviving or acquiring entity
immediately following such transaction; (ii) any transaction or series of
related transactions to which Buyer is a party in which in excess of fifty
percent (50%) of Buyer’s voting power is transferred; provided that a Buyer
Liquidation Event shall not include any transaction or series of related
transactions principally for bona fide equity financing purposes in which cash
is received by Buyer or Indebtedness of Buyer is cancelled or converted or a
combination thereof occurs; or (iii) a sale, pledge exclusive license or other
disposition of all or substantially all of the assets of Buyer to a Person that
Buyer does not hold at least fifty percent (50%) of the voting power of or to a
Person in which the stockholders of Buyer immediately prior to such transaction
do not hold at least 50% of the voting power immediately following such
transaction

“Buyer Promissory Note” means that certain convertible promissory note issued by
the Company in favor of Buyer, dated December 11, 2009.

“Cap Amount” means the sum of (a) the Indemnification Escrow Amount and (b) 40%
of any and all Milestone Payment Amounts payable to the Equityholders pursuant
to this Agreement.

“CERCLA” has the meaning set forth in Section 3.12.

 

3

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“Change of Control Payments” means the aggregate amount of all change of
control, bonus, termination, retention, severance, forgiveness of Indebtedness,
increase in benefits or other similar payments or Liabilities (A) that are
accrued, incurred or payable by the Company prior to, at or after the Closing
pursuant to any Benefit Plan or Contract of the Company or any plan, program,
agreement and other arrangement set forth on Schedule 3.13(f) or 3.13(g), in
each case as in effect as of the Closing, or (B) that are otherwise obligations
of the Company that are accrued or incurred prior to or at the Closing, whether
payable prior to, at or after Closing, in the case of each of clauses (A) and
(B) above, to any Person as a result of or connection with any of the
transactions contemplated by this Agreement (alone or in combination with any
other event). Notwithstanding the foregoing, Change of Control Payments shall
not include the Bonus Amount.

“Claim” has the meaning set forth in Section 11.13(a).

“Claim Notice” has the meaning set forth in Section 9.3(a).

“Closing” has the meaning set forth in Section 2.2.

“Closing Date” has the meaning set forth in Section 2.2.

“Closing Date Allocation Schedule” means a schedule, prepared by the Company and
the Equityholder Representative and dated as of the Closing Date, setting forth,
for each Equityholder: (a) such Equityholder’s name and address; (b) the number
of shares of Common Stock held by such Equityholder; (c) the number of shares of
Common Stock subject to Company Options held by such Equityholder immediately
prior to the Closing Date; (d) the number of shares of Series A Preferred Stock
subject to Company Warrants held by such Equityholder immediately prior to the
Closing Date; (e) the number of shares of Series A Preferred Stock held by such
Equityholder; (f) the portion of the Closing Payment Amount to be paid to such
Equityholder by Buyer at the Closing (which amount shall be calculated in
accordance with the provisions of the Company’s certificate of incorporation as
amended and in effect as of immediately prior to the Closing as if the
transactions contemplated hereby constitute a Deemed Liquidation Event (as
defined in the Company’s certificate of incorporation as amended and in effect
as of immediately prior to the Closing), Applicable Law, and the terms and
conditions of this Agreement); (g) such Equityholder’s pro rata share of the
amounts to be held in the Indemnification Escrow Account; (h) such
Equityholder’s election to receive such payment by check or by wire transfer;
and (i) for Equityholders electing to receive payment by check, delivery
instructions for such check, or for Equityholders electing to receive payment by
wire transfer, wire transfer instructions for such wire transfer. The Closing
Date Allocation Schedule shall include any interim updates made in accordance
with Section 6.9.

“Closing Date Balance Sheet” means an unaudited balance sheet of the Company as
of 5:00 p.m. Pacific Standard Time on the Closing Date (without giving effect to
the transactions contemplated by this Agreement), prepared in accordance with
GAAP, consistently applied.

“Closing Date Net Working Capital” means (A) Current Assets less (B) Adjusted
Current Liabilities.

 

4

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“Closing Payment Amount” means (a) $14,200,000, plus (b) the Estimated Net
Working Capital Excess Amount set forth on the Estimated Net Working Capital
Adjustment Statement, if any, minus (b) the Estimated Net Working Capital
Deficiency Amount, set forth on the Estimated Net Working Capital Adjustment
Statement, if any, minus (c) the Indemnification Escrow Amount, minus (d) the
Working Capital Escrow Amount and, minus (e) the Equityholder Representative’s
Fund Amount.

“COBRA” has the meaning set forth in Section 7.3(a).

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.

“Common Stock” means the common stock, par value $0.001, of the Company.

“Company” has the meaning set forth in the Preamble.

“Company 401(k) Plan” has the meaning set forth in Section 7.3(d).

“Company Capital Stock” means the Common Stock and the Series A Preferred Stock.

“Company Disclosure Schedule” has the meaning set forth in Article III.

“Company Indemnified Parties” has the meaning set forth in Section 9.2(a)(ii).

“Company Notes” shall mean the Company’s Convertible Promissory Notes issued
pursuant to that certain Convertible Note and Warrant Purchase Agreement, dated
as of April 28, 2009.

“Company Option” means each outstanding stock option to purchase Common Stock
granted under the Company Option Plan.

“Company Option Plan” means the Company’s Amended and Restated 2006 Equity
Incentive Plan.

“Company Partner” has the meaning set forth in Section 3.26(b).

“Company Warrants” shall mean the Company’s Preferred Stock Purchase Warrants
issued pursuant to that certain Convertible Note and Warrant Purchase Agreement,
dated as of April 28, 2009.

“Conclusive Net Working Capital Adjustment Statement” has the meaning set forth
in Section 2.4(e).

“Conclusive Net Working Capital Statement” has the meaning set forth in
Section 2.4(e).

“Confidentiality Agreement” has the meaning set forth in Section 6.2(a).

 

5

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“Continuing Employees” has the meaning set forth in Section 7.3(a).

“Contract” means, with respect to any Person, any agreement, understanding,
contract, note, bond, deed, mortgage, lease, sublease, license, sublicense,
instrument, commitment, promise, undertaking or other legally binding
arrangement, whether written or oral: (a) to which such Person is a party;
(b) by which such Person or any of its assets is or may become bound or under
which such Person has, or may become subject to, any obligation; or (c) under
which such Person has or may acquire any right or interest.

“Court Order” means any judgment, decision, consent decree, injunction, ruling
or order of any federal, state, local or other domestic or foreign court or
Governmental Authority that is binding on any Person or its property.

“Covered Parties” has the meaning set forth in Section 9.2(a)(ii).

“Current Assets” the Company’s total current assets as of 5:00 p.m. Pacific
Standard Time on the Closing Date; provided, however, when computing Current
Assets, current assets shall exclude any long term restricted cash or cash
received after the date of the Most Recent Balance Sheet in respect to the
disposal of equipment or other tangible assets (if any),

“Current Liabilities” means the Company’s total current Liabilities as of 5:00
p.m. Pacific Standard Time on the Closing Date (other than deferred Tax
Liabilities that reflect timing differences between book and tax accounting), in
each case determined in accordance with GAAP, consistently applied and applying
the same accounting principles and methodologies used to prepare the Most Recent
Balance Sheet; provided, however, when computing Current Liabilities, the
following adjustments shall be made: (a) subject to clause (d), current
Liabilities shall include any and all Indebtedness of the Company outstanding at
the Closing to the extent not already included as a current Liability;
(b) current Liabilities shall include any Transaction Expenses not paid by the
Company prior to the Closing to the extent not already included as a current
Liability; (c) current Liabilities shall include, without duplication, an
allowance for doubtful accounts receivable determined in accordance with GAAP
consistently applied; (d) current Liabilities shall not include any amounts due
or owed under the Buyer Promissory Note or the Company Notes, which Company
Notes shall be settled or converted into shares of Series A Preferred Stock
immediately prior to the Closing, (e) current Liabilities shall not include the
Bonus Amount, (f) current Liabilities shall not include Change of Control
Payments, (g) current Liabilities shall not include any unpaid employer Taxes
attributable to Change of Control Payments and payments in respect of Company
Options in connection with the transactions contemplated by this Agreement, and
(h) current Liabilities shall not include any fees, costs, payments and expenses
for severance or other termination pay or benefits paid, or payable, upon
termination of employees of the Company pursuant to Section 7.3(a) under any
Contract, Benefit Plan or other arrangement of the Company.

“D&O Indemnified Parties” has the meaning set forth in Section 7.1(a).

“D&O Tail” has the meaning set forth in Section 7.1(c).

“Damages” has the meaning set forth in Section 9.2(a)(i).

 

6

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“Deductible Amount” has the meaning set forth in Section 9.5(a).

“Default” means (a) any actual breach, violation or default, (b) the existence
of circumstances or the occurrence of an event that with the passage of time or
the giving of notice or both would constitute a breach, violation or default or
(c) the existence of circumstances or the occurrence of an event that, with or
without the passage of time or the giving of notice or both, would give rise to
a right of termination, renegotiation or acceleration.

“Development Compound” means any PARP Development Compound or any Non-PARP
Development Compound.

“Development Product” means any product containing a Development Compound as an
active pharmaceutical ingredient.

“DGCL” means the Delaware General Corporation Law.

“Dispute Notice” has the meaning set forth in Section 2.11(h).

“Disputed Items” has the meaning set forth in Section 2.4(c).

“Dose Escalation Study Milestone” means [****]

“Dose Escalation Study Subsequent Payment Amount” means [****]

“Dose Escalation Study Subsequent Payment Date” means [****]

“Drug Regulatory Agency” means the FDA, or any other Governmental Authority that
has jurisdiction over the safety, efficacy, reliability, manufacturing,
labeling, marketing, or advertising of drug products.

“EMEA” means the European Medicines Agency and any successor agency thereto.

“Employee Loans” has the meaning set forth in Section 3.7(a).

“Encumbrance” means any claim, lien, pledge, option, charge, easement, security
interest, deed of trust, mortgage, conditional sales agreement, encumbrance,
preemptive right, right of first refusal, restriction or other right of third
parties, whether voluntarily incurred or arising by operation of law, and
includes any agreement to give any of the foregoing in the future.

“End Date” has the meaning set forth in Section 10.1(b).

“Environmental Claim” means, in respect of any Person, (i) any and all
administrative, regulatory or judicial actions, suits, Court Orders, decrees,
demands, directives, claims, Encumbrances, proceedings or written notices of
noncompliance or violation by any Person, alleging potential presence or release
of, or exposure to, any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by such Person, or (ii) any and all
indemnification, cost recovery, compensation or injunctive relief resulting from
the presence or release of, or exposure to, any Hazardous Materials.

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

7

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“Environmental Law” has the meaning set forth in Section 3.12.

“Equity Participations” means any (a) share, quota, security, participation
right and any other present or future right entitling the holder, absolutely or
contingently (through the exercise of any subscription, conversion, exchange,
option or similar right), to participate in the revenues, dividends or equity
appreciation of another Person, including capital stock, membership interests,
units, performance units, options, warrants, company appreciation rights,
interests in “phantom” stock plans, restricted or contingent stock or profits
interests, voting securities, stock appreciation rights or equivalents, stock
loan purchase plans, convertible debentures or stock bonus plans and
(b) commitments to issue any of the foregoing.

“Equityholder” has the meaning set forth in the recitals.

“Equityholder Representative” has the meaning set forth in the Preamble.

“Equityholder Representative’s Costs” has the meaning set forth in
Section 2.11(e).

“Equityholder Representative’s Fund” has the meaning set forth in
Section 2.11(f).

“Equityholder Representative’s Fund Amount” means two hundred fifty thousand
dollars ($250,000).

“ERISA” has the meaning set forth in Section 3.13(a).

“ERISA Affiliate” means, with respect to any Person, any other Person that,
together with such first Person, would be treated as a single employer under
Section 414 of the Code.

“Escrow Agent” has the meaning set forth in Section 2.5(a).

“Escrow Agreement” has the meaning set forth in Section 2.5(a).

“Escrow Earnings” has the meaning set forth in Section 2.5(c).

“Estimated Net Working Capital” has the meaning set forth in Section 2.4(a).

“Estimated Net Working Capital Adjustment Statement” has the meaning set forth
in Section 2.4(a).

“Estimated Net Working Capital Deficiency Amount” has the meaning set forth in
Section 2.4(a).

 

8

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“Estimated Net Working Capital Excess Amount” has the meaning set forth in
Section 2.4(a).

“Estimated Net Working Capital Statement” has the meaning set forth in
Section 2.4(a).

“FDA” means the United States Food and Drug Administration or any successor
agency.

“Financial Statements” has the meaning set forth in Section 3.9(a).

“First E.U. Commercial Sale” means the first commercial sale of a PARP
Development Product in the European Union, following applicable and required
governmental marketing approval or governmental clearance for marketing thereof
to an unaffiliated third party in an arms’ length transaction (but excluding
sales pursuant to any compassionate use program, patient assistance program or
similar arrangements).

“First PARP Milestone” means [****]

“First PARP Subsequent Payment Amount” means $[****].

“First PARP Subsequent Payment Date” means the fifteenth (15th) Business Day
following the Buyer’s receipt of the Future Payment Allocation Schedule relating
to the distribution to Equityholders of the First PARP Subsequent Payment Amount
in accordance with Section 2.1(f).

“First U.S. Commercial Sale” means the first commercial sale of a PARP
Development Product in the United States, following applicable and required
governmental marketing approval or governmental clearance for marketing thereof
to an unaffiliated third party in an arms’ length transaction (but excluding
sales pursuant to any compassionate use program, patient assistance program or
similar arrangements).

“Fourth PARP Milestone” means [****]

“Fourth PARP Subsequent Payment Amount” means $[****]

“Fourth PARP Subsequent Payment Date” means the fifteenth (15th) Business Day
following the Buyer’s receipt of the Future Payment Allocation Schedule relating
to the distribution to Equityholders of the Fourth PARP Subsequent Payment
Amount in accordance with Section 2.1(i).

“Future Payment Allocation Schedule” means a schedule, prepared by the
Equityholder Representative with respect to the applicable Future Payment Amount
setting forth, for each Equityholder: (a) such Equityholder’s name and address;
(b) the number of shares of each class of Company Capital Stock held by such
Equityholder as of the Closing; (c) the number of shares of Common Stock subject
to Company Options held by such Equityholder immediately prior to the Closing
Date; (d) the number of shares of Series A Preferred Stock

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

9

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subject to Company Warrants held by such Equityholder immediately prior to the
Closing Date; (e) the portion of such Future Payment Amount to be paid to such
Equityholder by Buyer (which amount shall be calculated in accordance with the
provisions of the Company’s certificate of incorporation as amended and in
effect as of immediately prior to the Closing as if the transactions
contemplated hereby constitute a Deemed Liquidation Event (as defined in the
Company’s certificate of incorporation as amended and in effect as of
immediately prior to the Closing), Applicable Law, and the terms and conditions
of this Agreement); (f) such Equityholder’s election to receive such payment by
check or by wire transfer, and (g) for Equityholders electing to receive payment
by check, delivery instructions for such check, or for Equityholders electing to
receive payment by wire transfer, wire transfer instructions for such wire
transfer. Each such schedule shall be prepared taking into account any and all
portions of the Purchase Price previously paid to each Equityholder, including
any amounts that may be released to Equityholders from the Equityholder
Representative’s Fund. By way of example and for illustrative purposes only, the
calculation of certain Future Payment Allocation Schedules in connection with
certain Future Payment Amounts, under the assumptions set forth in Schedule
1.1(b), is set forth on Schedule 1.1(b).

“Future Payment Amounts” means each of (a) the Milestone Payment Amounts, if
any, (b) the Unallocated Bonus Amount, if any, (c) amounts required to be
released to the Equityholders from the Indemnification Escrow Account, if any,
(d) amounts required to be released to the Equityholders from the Working
Capital Escrow Account, if any, and (e) the right of the Equityholders to
receive the Working Capital Excess Amount, if any.

“GAAP” means generally accepted United States accounting principles consistently
applied over all relevant periods.

“Governmental Authority” means any: (i) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign or other government; or
(iii) governmental or quasi governmental authority of any nature (including any
governmental division, department, agency, Regulatory Authority, commission,
instrumentality, official, organization, unit, body or Person and any court or
other tribunal).

“Grant Date” has the meaning set forth in Section 3.4(e).

“Hazardous Materials” has the meaning set forth in Section 3.12.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“IND” means an Investigational New Drug application filed with the FDA, or the
equivalent documentation filed or submitted to the applicable Regulatory
Authority in any jurisdiction outside the United States for the purposes of
commencing human clinical trials of a pharmaceutical compound in accordance with
Applicable Laws in the relevant jurisdiction (including a clinical trial
authorization).

 

10

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“Indebtedness” means (without duplication), as to any Person, (a) all
obligations for the payment of principal, interest, penalties, fees or other
Liabilities for borrowed money (including guarantees and notes payable),
incurred or assumed, (b) all obligations of such Person for the deferred
purchase price of property or services (other than current trade payables
incurred in the Ordinary Course of Business), (c) any obligations to reimburse
the issuer of any letter of credit, surety bond, debentures, promissory notes,
performance bond or other guarantee of contractual performance, in each case to
the extent drawn or otherwise not contingent, (d) all obligations of such Person
as lessee under leases that have been or should be, in accordance with GAAP,
recorded as capital leases, (e) all indebtedness of third parties secured by an
Encumbrance on property owned or acquired by such Person, (f) any obligation
that, in accordance with GAAP, would be required to be reflected as debt on the
balance sheet of such Person, (g) all obligations of such Person to purchase,
redeem, retire, defease or otherwise acquire for value any capital stock of such
Person or any warrants, rights or options to acquire such capital stock, valued,
in the case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, and
(h) all Indebtedness of others referred to in clauses (a) through (h) above
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement to pay or
purchase such Indebtedness, to advance or supply funds for the payment or
purchase of such Indebtedness or otherwise to assure a creditor against loss, in
each case including all accrued interest and prepayment penalties, if any.

“Indemnification Escrow Account” has the meaning set forth in Section 2.5(a).

“Indemnification Escrow Amount” means $[****]

“Indemnification Escrow Release Date” means the date that is fifteen (15) months
following the Closing.

“Indemnifying Party” has the meaning set forth in Section 9.3(a).

“Initial Allocation Schedule” means a schedule, prepared by the Company and
attached hereto as Schedule B, setting forth, for each Equityholder as of the
date of this Agreement: (a) such Equityholder’s name and address; (b) the number
and type of Equity Participations of the Company held by such Equityholder,
(c) the number of shares of each class of Company Capital Stock subject to
Company Options or Company Warrants held by such Equityholder as of the date
hereof (and the exercise price thereof); (d) the principal amount of Company
Notes, if any, held by such Equityholder and the number of Shares of Company
Capital Stock into which the Company Notes held by such Equityholder are
convertible, (e) with respect to the Company Options, whether such Company
Option is a nonqualified stock option or incentive stock option, (f) with
respect to the Company Options, whether the optionee is an employee of the
Company as of the date of this Agreement and any restrictions on exercise or
sale of such Company Option or underlying shares (other than any restrictions
contained in the agreements listed on Schedule 3.4(d)), (g) the estimated
portion of the Closing Payment Amount to be paid to such Equityholder by Buyer
at the Closing (which amount shall be calculated in accordance with the
provisions of the Company’s certificate of incorporation as amended and in
effect as of immediately prior to the Closing as if the transactions
contemplated hereby constitute a Deemed Liquidation Event (as defined in the
Company’s certificate of incorporation as

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

11

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amended and in effect as of immediately prior to the Closing), Applicable Law,
and the terms and conditions of this Agreement), and (h) such Equityholder’s
estimated pro rata share of the amounts to be held in the Indemnification Escrow
Account.

“Initiation” means the first dosing of the first human patient or subject in a
clinical trial.

“Instrument” has the meaning set forth in Section 2.11(c).

“Intellectual Property” means patents and patent applications and other similar
rights granted by a Governmental Authority with respect to an invention,
trademarks, service marks, trade names, trade dress, domain names, copyrights,
trade secrets, inventions, technology, discoveries, know-how, software,
formulae, processes, confidential and proprietary information and similar
proprietary rights and registrations and applications for registration for any
of the foregoing granted or recognized by any Governmental Authority.

“IRS” has the meaning set forth in Section 3.13(d).

“Knowledge” of the Company means [****]

“Leased Real Property” has the meaning set forth in Section 3.5(c).

“Liability” means any direct or indirect liability, Indebtedness, obligation,
commitment, expense, claim, deficiency, guaranty or endorsement of or by any
Person of any type, known or unknown, and whether accrued, absolute, contingent,
matured, unmatured or other, including “off-balance sheet” Liabilities.

“Material Adverse Effect” shall mean any event, change, circumstance, effect,
development or state of facts (whether specific to the applicable party or
generally applicable to multiple parties), violation, inaccuracy or other matter
that has, or would, individually or in the aggregate with other events,
reasonably be expected to have or give rise to, a material adverse effect on or
material adverse change to (a) the condition (financial or otherwise), business,
results of operations, assets, Liabilities, capitalization or financial
performance of the party making the representations and warranties, or (b) the
ability of such party to consummate the transactions contemplated by this
Agreement or to perform any of its obligations under this Agreement; provided,
however, that any adverse effects attributable to any of the following as they
relate to the Company shall not be deemed to constitute, and the following shall
not be taken into account in determining whether there has been or will be, a
Material Adverse Effect on the Company: (i) conditions affecting the industries
in which the Company participates or the U.S. economy as a whole or affecting
the financial or securities markets in the United States or any foreign markets
where the Company has operations (other than those that disproportionately
affect the Company relative to similarly situated industry participants),
(ii) the public announcement or pendency of this Agreement or any of the
transactions contemplated herein, or (iii) changes in Applicable Law or GAAP (or
any interpretation thereof) (other than those that disproportionately affect the
Company relative to similarly situated industry participants).

“Material Contracts” has the meaning set forth in Section 3.7(a).

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

12

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

“Milestone” means any of the First PARP Milestone, Second PARP Milestone, Third
PARP Milestone, Fourth PARP Milestone, Non-PARP Phase 2 Milestone(s), Non-PARP
Phase 3 Milestone(s), Non-PARP Sublicensing Milestone(s) or the Dose Escalation
Study Milestone.

“Milestone Diligent Efforts” has the meaning set forth in Section 7.4(a).

“Milestone Payment Amounts” means the First PARP Subsequent Payment Amount, if
any, the Second PARP Subsequent Payment Amount, if any, the Third PARP
Subsequent Payment Amount, if any, the Fourth PARP Subsequent Payment Amount, if
any, each Non-PARP Phase 2 Payment Amount, if any, each Non-PARP Phase 3 Payment
Amount, if any, each Non-PARP Sublicensing Payment Amount, if any and the Dose
Escalation Study Subsequent Payment Amount, if any.

“Most Recent Balance Sheet” has the meaning set forth in Section 3.9.

“NDA” means a new drug application filed with the FDA for authorization to
market a pharmaceutical product, or its equivalent in any country or territory.

“Net Tax Benefit” has the meaning set forth in Section 9.2(b).

“Net Working Capital Adjustment Statement” has the meaning set forth in
Section 2.4(b).

“Net Working Capital Deficiency Amount” has the meaning set forth in
Section 2.4(b).

“Net Working Capital Excess Amount” has the meaning set forth in Section 2.4(b).

“Net Working Capital Statement” has the meaning set forth in Section 2.4(b).

“Neutral Arbitrator” has the meaning set forth in Section 2.4(d).

“New Equityholder Representative Account” has the meaning set forth in
Section 2.14(f).

“Non-PARP Development Compound” means [****]

“Non-PARP Development Product” means any product containing a non-PARP
Development Compound.

“Non-PARP Phase 2 Milestone” means [****]

“Non-PARP Phase 2 Payment Amount” means [****]

“Non-PARP Phase 2 Payment Date” means the fifteenth (15th) Business Day
following the Buyer’s receipt of the Future Payment Allocation Schedule relating
to the distribution to Equityholders of any Non-PARP Phase 2 Milestone in
accordance with Section 2.1(j).

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

13

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“Non-PARP Phase 3 Milestone” means [****]

“Non-PARP Phase 3 Payment Amount” means [****]

“Non-PARP Phase 3 Payment Date” means the fifteenth (15th) Business Day
following the Buyer’s receipt of the Future Payment Allocation Schedule relating
to the distribution to Equityholders of any Non-PARP Phase 3 Payment Amount in
accordance with Section 2.1(k).

“Non-PARP Sublicensing Milestone” means [****]

“Non-PARP Sublicensing Payment Amount” means [****]

“Non-PARP Sublicensing Payment Date” means the fifteenth (15th) Business Day
following the Buyer’s receipt of the Future Payment Allocation Schedule relating
to the distribution to Equityholders of any Non-PARP Sublicensing Payment Amount
in accordance with Section 2.1(l).

“Ordinary Course of Business” or “Ordinary Course” or any similar phrase means
the ordinary course of the Company’s business, consistent with the past practice
of the Company.

“PARP” means poly (ADP-ribose) polymerase.

“PARP Development Compound” means a PARP inhibitor, in each case that is
developed by the Company, any Affiliate of Buyer or the Company, any licensee of
Buyer, the Company or its Affiliates or any third party that has assumed the
obligations as set forth in and in accordance with Section 7.4(c) and is
included in or covered by the Intellectual Property owned or controlled by the
Company as of the Closing Date and any Related Compounds thereof.

“PARP Development Product” means any product containing a PARP Development
Compound.

“Participating Service Providers” has the meaning set forth in Section 2.7(a).

“Participating Service Providers Certificate” has the meaning set forth in
Section 2.7(a).

“Parties” has the meaning set forth in the Preamble.

“Payable Consideration” means the sum of (a) the Closing Payment Amount plus
(b) the Net Working Capital Excess Amount, if any, plus (c) the Unallocated
Bonus Amount, if any, plus (d) any Indemnification Escrow Amount plus interest
or other income earned thereon that may be distributed to Equityholders pursuant
to Section 2.5(b) and the Escrow Agreement, plus (e) any Remaining Working
Capital Escrow Amount plus interest or

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

14

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

other income earned thereon that may be distributed to Equityholders pursuant to
Section 2.6(b) and the Escrow Agreement, plus (f) the Equityholder
Representative’s Fund Amount plus interest or other income earned thereon that
may be distributed to Equityholders pursuant to Section 2.11(f), plus (g) any
Milestone Payment Amount with respect to which a Milestone has occurred, plus
(h) any Tax Refund Amount.

“Permits” means all licenses, permits, franchises, approvals, authorizations,
easements, variances, consents or orders of, or filings with, any Governmental
Authority, whether foreign, federal, state or local, or any other Person,
necessary for the conduct of, or relating to, the operation of the Company’s
business.

“Permitted Encumbrances” means (a) liens, taxes, assessments and other
governmental charges, in each case, not yet due and payable or which are being
contested in good faith by appropriate proceedings and are reserved for in full
on the Most Recent Balance Sheet or reserved for in full since the date of the
Most Recent Balance Sheet in accordance with GAAP, (b) statutory, mechanics’,
laborers’ and materialmen liens arising in the Ordinary Course of Business for
sums not yet due, (c) statutory and contractual landlord liens under leases
pursuant to which the Company is a lessee and not in Default, (d) with regard to
real property, any and all matters of record as of the date of this Agreement in
the jurisdiction where the real property is located including restrictions,
reservations, covenants, conditions, oil and gas leases, and mineral severances,
in each case that do not impair the use of such real property in the operation
of the Company’s business, (e) with regard to real property, any easements,
rights-of-way, building or use restrictions, prescriptive rights, encroachments,
protrusions, rights and party walls in each case that do materially impair the
use of such real property in the operation of the Company’s business; (f) liens
securing rental payments under capital lease arrangements to the extent they are
imposed only upon the leased equipment; (g) pledges or deposits made in the
Ordinary Course of Business which do not in the aggregate materially detract
from the value of the related assets or properties or materially impair the use
thereof in the operation of the Company’s business; and (h) the Buyer Promissory
Note.

“Person” means any person or entity, whether an individual, trustee,
corporation, partnership, limited partnership, limited liability company, trust,
unincorporated organization, business association, firm, joint venture or
Governmental Authority.

“Phase 1 Clinical Study” means a clinical study for clinical trials in which a
product is administered to a sufficient number of human subjects to determine
the safety, tolerability, pharmacokinetics and pharmacodynamics of such product
and establish an appropriate dose range, as more precisely defined by 21 C.F.R.
§312.21(a) (or its successor regulation) and corresponding rules and regulations
in other countries. A first-in-human study or any study for which a primary
endpoint is directed to safety shall be considered a Phase 1 Clinical Study.

“Phase 2 Clinical Study” means a clinical study for clinical trials in which a
product is administered to a sufficient number of patients to obtain initial
information on efficacy in patients being studied, as more precisely defined by
21 C.F.R. §312.21(b) (or its successor regulation) and corresponding rules and
regulations in other countries. A first-in-human study or any study for which a
primary endpoint is directed to safety shall not be considered a Phase 2
Clinical Study.

 

15

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“Phase 3 Clinical Study” means that portion of the clinical development program
which provides for the continued trials of a product on sufficient numbers of
patients to establish the safety and efficacy of a product for the desired
claims and indications, as more precisely defined by 21 C.F.R. § 312.21(c) (or
its successor regulation) and corresponding rules and regulations in other
countries and that is designed to support an NDA without further clinical
studies.

“Post-Closing Tax Period” means any Tax period beginning after the Closing Date
and that portion of any Straddle Period beginning after the Closing Date.

“Pre-Closing Tax Period” means any Tax period ending on or before the Closing
Date and that portion of any Straddle Period ending on and including the Closing
Date.

“Pre-Closing Taxes” means (i) Taxes of the Company for the Pre-Closing Tax
Period; and (ii) Taxes of the Company resulting from the several Liability of
the Company pursuant to Treasury Regulations Section 1.1502-6(a) by reason of
the Company’s having been included in a consolidated or affiliated group prior
to the Closing; provided, however, in each of (i) and (ii) that any Taxes
reflected as a liability in Closing Date Net Working Capital shall not
constitute Pre-Closing Taxes. For purposes of this Agreement, where it is
necessary to apportion Taxes of the Company for a Straddle Period between the
Pre-Closing Tax Period and the Post-Closing Tax Period, such Taxes shall be
apportioned, in the case of real property, personal property or similar ad
valorem Taxes, prorated on the basis of the number of days elapsed in the
portion of such period ending on the Closing Date and the portion of such period
beginning on the day following the Closing Date, respectively, or, in the case
of all other such Taxes, on the basis of an interim closing of the books on the
Closing Date.

“Proceeding” has the meaning set forth in Section 3.17.

“Purchase Price” has the meaning set forth in Section 2.1.

“Regulatory Approval” means, with respect to each Development Product, any
approval (including a pricing approval if required), registration, license or
authorization from any Regulatory Authority in a particular country or
regulatory jurisdiction required to market and sell such Development Product
and/or its components in such country or regulatory jurisdiction.

“Regulatory Authority” means any applicable government regulatory agency or
authority responsible for granting Regulatory Approvals for Development
Products, including the FDA and any corresponding national or regional
regulatory authorities.

“Related Compound” means any polymorph, solvate, ester, salt, crystalline form
or hydrate of a specified compound.

 

16

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“Related Party” means: (a) each 10% or greater Stockholder; (b) each individual
who is, or who was at the time of the entry into the transaction or the creation
of the interest in question an officer or director of the Company; (c) each
member of the immediate family of each of the Persons referred to in clauses
“(a)” or “(b)” above; and (d) each Person that is, or that was at the time of
the entry into the transaction or the creation of the interest in question an
Affiliate of a 10% or greater Stockholder.

“Releasees” has the meaning set forth in Section 11.13(a).

“Releasors” has the meaning set forth in Section 11.13(a).

“Remaining Working Capital Escrow Account” has the meaning set forth in
Section 2.6(b).

“Representative” means, with respect to any Person, any officer, director,
principal, attorney, agent, employee or other representative of such Person.

“Resolution Period” has the meaning set forth in Section 2.4(c).

“Second PARP Milestone” means [****]

“Second PARP Subsequent Payment Amount” means $[****].

“Second PARP Subsequent Payment Date” means the fifteenth (15th) Business Day
following the Buyer’s receipt of the Future Payment Allocation Schedule relating
to the distribution to Equityholders of the Second PARP Subsequent Payment
Amount in accordance with Section 2.1(g).

“Securities Act” means the Securities Act of 1933, as amended.

“Seller” as the meaning set forth in the Preamble.

“Series A Preferred Stock” means the Company’s Series A Preferred Stock, par
value $0.001 per share.

“Series A Preferred Stock Agreements” means the Amended and Restated Series A
Preferred Stock Purchase Agreement, dated as of October 31, 2007, by and among
the Company and the other parties named therein, the Amended and Restated
Investors’ Rights Agreement, dated October 31, 2007, by and among the Company
and the other parties named therein, Amended and Restated Voting Agreement,
dated October 31, 2007, by and among the Company and the other parties named
therein and Amended and Restated Right of First Refusal and Co-Sale Agreement,
dated October 31, 2007, by and among the Company and the other parties named
therein.

“Shares” has the meaning set forth in the Recitals.

“Specified Buyer Benefit Plans” has the meaning set forth in Section 7.3(b).

“Stockholder(s)” means holders of Company Capital Stock.

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

17

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“Straddle Period” means any Tax period beginning before or on and ending after
the Closing Date.

“Subsidiary” when used with respect to any Person, shall mean any entity,
corporation or other organization, whether incorporated or unincorporated, at
least a majority of the securities or other interests of which having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Party or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries.

“Supermajority” has the meaning set forth in Section 2.11(b).

“Target Net Working Capital” means [****]

“Tax” (including with correlative meaning, the terms “Taxes” and “Taxable”)
means all taxes and duties and similar governmental charges, levies, imposts or
withholdings (including net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties, value added or other taxes)
whenever and by whatever Governmental Authority imposed, and whether of the
United States or a foreign, state or local jurisdiction, together with in any
such case any interest, fines, penalties, surcharges and charges incidental or
relating to the imposing of any of such Taxes and any additions to tax or
additional amounts with respect thereto.

“Tax Claim” has the meaning set forth in Section 7.2(e).

“Tax Refund Amount” has the meaning set forth in Section 7.2(d).

“Tax Return” means any return, declaration, report, statement, information
statement and other document required to be filed with a Governmental Authority
with respect to Taxes.

“Third PARP Milestone” means [****]

“Third PARP Subsequent Payment Amount” means [****]

“Third PARP Subsequent Payment Date” means the fifteenth (15th) Business Day
following the Buyer’s receipt of the Future Payment Allocation Schedule relating
to the distribution to Equityholders of the Third PARP Subsequent Payment Amount
in accordance with Section 2.1(h).

“Transaction Expenses” means, without duplication (a) fees, costs, payments and
expenses of the Company incident to the participation in or response to the
investigation, review and inquiry conducted by Buyer and its Representatives
with respect to the business of the Company (and the furnishing of information
to Buyer and its Representatives in connection with such investigation and
review) or any other similar investigation, review or inquiry by any other
Person or its Representatives in connection with an Acquisition Proposal since
September

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

18

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

30, 2009; the negotiation, preparation, drafting, review, execution, delivery or
performance of this Agreement or any Contract or other instrument delivered or
to be delivered in connection with the transactions contemplated hereby or any
similar Contract or other document in connection with any Acquisition Proposal
at any time since September 30, 2009; the preparation and submission of any
filing or notice required to be made or given in connection with any of the
transactions contemplated hereby, or the obtaining of any consent, waiver or
approval required to be obtained in connection with any of the transactions
contemplated hereby, including legal and accounting fees, investment banking
fees, and related disbursements in connection with any of the foregoing and
(b) the Company’s share of transfer taxes, if any, contemplated by
Section 7.2(b). Notwithstanding the foregoing, Transaction Expense shall not
include (a) the Bonus Amount, (b) any Change of Control Payments, (c) any fees,
costs, payments and expenses for severance or other termination pay or benefits
paid, or payable, upon termination of employees of the Company pursuant to
Section 7.3(a) under any Contract, Benefit Plan or other arrangement of the
Company and (d) any unpaid employer Taxes attributable to Change of Control
Payments and payments in respect of Company Options in connection with the
transactions contemplated by this Agreement.

“Unallocated Bonus Amount” has the meaning set forth in Section 2.7(a).

“WARN Act” has the meaning set forth in Section 3.18(h).

“Worker” or “Workers” means any individual performing services for the Company
in the capacity of an employee and/or independent contractor.

“Working Capital Dispute Notice” has the meaning set forth in Section 2.4(c).

“Working Capital Escrow Account” has the meaning set forth in Section 2.6(a).

“Working Capital Escrow Amount” means [****]

1.2. Other Terms. Other terms may be defined elsewhere in the text of this
Agreement and, unless otherwise indicated, shall have such meaning indicated
throughout this Agreement.

1.3. Interpretation. (a) In this Agreement, unless the context otherwise
requires, references:

(i) to the Recitals, Articles, Sections, Exhibits or Schedules are to a Recital,
Article or Section of, or Exhibit or Schedule to, this Agreement;

(ii) to any agreement (including this Agreement), contract, statute or
regulation are to the agreement, contract, statute or regulation as amended,
modified, supplemented or replaced from time to time, and to any section of any
statute or regulation are to any successor to the section;

(iii) to any Person include any successor to that Person or permitted assigns of
that Person; and

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

19

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(iv) to this Agreement are to this Agreement and the exhibits and schedules to
it, taken as a whole.

(b) The table of contents and headings contained herein are for reference
purposes only and do not limit or otherwise affect any of the provisions of this
Agreement.

(c) Whenever the words “include,” “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation.”

(d) Whenever the words “herein” or “hereunder” are used in this Agreement, they
shall be deemed to refer to this Agreement as a whole and not to any specific
Section, unless otherwise indicated.

(e) The terms herein defined in the singular shall have a comparable meaning
when used in the plural, and vice versa. The masculine, feminine and neuter
genders used herein shall include each other gender.

(f) The terms “dollars” and “$” shall mean dollars of the United States of
America.

(g) It is understood and agreed that neither the specifications of any dollar
amount in this Agreement nor the inclusion of any specific item in the Schedules
or Exhibits is intended to imply that such amounts or higher or lower amounts,
or the items so included or other items, are or are not material, and neither
Party shall use the fact of setting of such amounts or the fact of the inclusion
of such item in the Schedules or Exhibits in any dispute or controversy between
the Parties as to whether any obligation, item or matter is or is not material
for purposes hereof.

ARTICLE II.

PURCHASE AND SALE

2.1. Purchase and Sale of Shares. Upon the terms and subject to the conditions
of this Agreement, at the Closing, Sellers shall sell, assign, transfer, convey
and deliver, or cause to be sold, assigned, transferred, conveyed and delivered,
to Buyer, free of any Encumbrances, all of the Shares, and Buyer shall purchase
the Shares. The aggregate purchase price (the “Purchase Price”) payable by Buyer
for the Shares and for the cancellation of Company Options in accordance with
Section 2.3(a) and Company Warrants in accordance with Section 2.3(c) shall
consist of the following:

(a) the Closing Payment Amount, payable by Buyer to the Equityholders at the
Closing (with the portion of the Closing Payment Amount payable to each
Equityholder determined as set forth on the Closing Date Allocation Schedule);
plus

 

20

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(b) the aggregate amount of any Unallocated Bonus Amount, payable in accordance
with Section 2.7(b) (with the portion of the Unallocated Bonus Amount that is
payable to each Equityholder determined as set forth on a Future Payment
Allocation Schedule related to such Unallocated Bonus Amount); plus

(c) the aggregate amount of any cash required to be released from the Working
Capital Escrow Account in accordance with Section 2.6(b), payable as and when
such cash is required to be released from the Working Capital Escrow Account
(with the portion of the amount released from the Working Capital Escrow Account
that is payable to each Equityholder determined as set forth on a Future Payment
Allocation Schedule related to such amount released from the Working Capital
Escrow Account); plus

(d) the aggregate amount of the Net Working Capital Excess Amount, if any,
payable as required by Section 2.4(g); plus

(e) the aggregate amount of any cash required to be released from the
Indemnification Escrow Account in accordance with the Escrow Agreement, payable
as and when such cash is required to be released from the Indemnification Escrow
Account (with the portion of the amount released from the Indemnification Escrow
Account that is payable to each Equityholder determined as set forth on a Future
Payment Allocation Schedule related to such amount released from the
Indemnification Escrow Account); plus

(f) the First PARP Subsequent Payment Amount, if any, payable on the First PARP
Subsequent Payment Date (with the portion of the First PARP Subsequent Payment
Amount that is payable to each Equityholder determined as set forth on a Future
Payment Allocation Schedule related to the First PARP Subsequent Payment
Amount); plus

(g) the Second PARP Subsequent Payment Amount, if any, payable on the Second
PARP Subsequent Payment Date (with the portion of the Second PARP Subsequent
Payment Amount that is payable to each Equityholder determined as set forth on a
Future Payment Allocation Schedule related to the Second PARP Subsequent Payment
Amount); plus

(h) the Third PARP Subsequent Payment Amount, if any, payable on the Third PARP
Subsequent Payment Date (with the portion of the Third PARP Subsequent Payment
Amount that is payable to each Equityholder determined as set forth on a Future
Payment Allocation Schedule related to the Third PARP Subsequent Payment
Amount); plus

(i) the Fourth PARP Subsequent Payment Amount, if any, payable on the Fourth
PARP Subsequent Payment Date (with the portion of the Fourth PARP Subsequent
Payment Amount that is payable to each Equityholder determined as set forth on a
Future Payment Allocation Schedule related to the Fourth PARP Subsequent Payment
Amount); plus

(j) each Non-PARP Phase 2 Payment Amount, if any, payable on each Non-PARP Phase
2 Payment Date (with the portion of each Non-PARP Phase 2 Payment Amount that is
payable to each Equityholder determined as set forth on a Future Payment
Allocation Schedule related to such Non-PARP Phase 2 Payment Amount); plus

(k) each Non-PARP Phase 3 Payment Amount, if any, payable on each Non-PARP Phase
3 Payment Date (with the portion of each Non-PARP Phase 3 Payment Amount that is
payable to each Equityholder determined as set forth on a Future Payment
Allocation Schedule related to such Non-PARP Phase 3 Payment Amount); plus

 

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(l) each Non-PARP Sublicensing Payment Amount, if any, payable on each Non-PARP
Sublicensing Payment Date (with the portion of each Non-PARP Sublicensing
Payment Amount that is payable to each Equityholder determined as set forth on a
Future Payment Allocation Schedule related to such Non-PARP Sublicensing Payment
Amount); plus

(m) the Dose Escalation Study Subsequent Payment Amount, if any, payable on the
Dose Escalation Study Subsequent Payment Date (with the portion of the Dose
Escalation Study Subsequent Payment Amount that is payable to each Equityholder
determined as set forth on a Future Payment Allocation Schedule related to the
Dose Escalation Study Subsequent Payment Amount).

2.2. Closing. Subject to the terms and conditions of this Agreement, the sale
and purchase of the Shares contemplated by this Agreement shall take place at a
closing (the “Closing”) at the offices of Jones Day, 3161 Michelson Drive,
Irvine, California at 9:01 a.m. Pacific Standard Time on the later of
February 10, 2010 or second Business Day following the day upon which the last
of the conditions set forth in Article VIII (other than those that by their
terms are to be satisfied or waived at the Closing itself) is satisfied or
waived in writing, or at such other time, date and location as the Parties
hereto agree in writing. All Closing transactions shall be deemed to take place
simultaneously and no one of them shall be deemed to have occurred until all
shall have occurred. The Closing shall occur at the time the Closing Payment
Amount is paid by Buyer. All Closing transactions shall be deemed to take place
simultaneously and no one of them shall be deemed to have occurred until all
shall have occurred. The date on which the Closing occurs is referred to herein
as the “Closing Date.”

2.3. Treatment of Company Options, Company Warrants and Company Notes.

(a) Treatment of Company Options. Prior to the execution of this Agreement, the
Board of Directors of the Company (or, if appropriate, any committee thereof)
has adopted appropriate resolutions and taken all other actions necessary to
provide that each Company Option heretofore granted under the Company Option
Plan or otherwise, whether or not currently vested or exercisable immediately
prior to the Closing Date, and which remains outstanding immediately prior to
the Closing Date, shall, at the Closing, be cancelled, no longer be outstanding
and cease to represent the right to acquire shares of Common Stock and in
consideration for such cancellation, each holder of a Company Option (whether
vested or unvested at the time of such Company Option’s cancellation) shall have
the right to receive the amounts payable to such Company Option holder in
accordance with Section 2.1. For the avoidance of doubt, each Company Option
shall, as of the Closing, be extinguished, shall no longer be outstanding and
shall cease to represent the right to acquire shares of Common Stock.

(b) Treatment of Company Notes. Each holder of a Company Note hereby agrees that
such Company Note, to the extent outstanding immediately prior to the Closing,
shall effective as of immediately prior to the Closing be converted into shares
of Series A Preferred Stock in accordance with the terms of such Company Note
and shall, as of the Closing, be extinguished, shall no longer be outstanding
and shall cease to represent the right to acquire any

 

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shares of Company Capital Stock. The Company has delivered to Buyer executed
true and correct copies of agreements with the requisite holders of Company
Notes pursuant to which such holders have agreed to elect to convert such
Company Notes immediately prior to the Closing.

(c) Treatment of Company Warrants. Prior to the execution of this Agreement, the
Board of Directors and the holders of the Company Warrants have taken all
actions necessary to provide that each Company Warrant which remains outstanding
immediately prior to the Closing shall no longer be outstanding and shall cease
to represent the right to acquire shares of Series A Preferred Stock or Common
Stock and in consideration for such action, each holder of a Company Warrant
shall have the right to receive the amounts payable to such Company Warrant
holder in accordance with Section 2.1.

2.4. Working Capital Adjustment.

(a) Not more than ten (10) nor later than three (3) days prior to the Closing
Date, the Company shall have caused to be prepared and delivered to Buyer
(i) the Company’s reasonable and good faith estimated Closing Date Balance
Sheet, (ii) a statement (the “Estimated Net Working Capital Statement”) setting
forth the Company’s reasonable and good faith estimate of the Closing Date Net
Working Capital and the components and calculations thereof, by reference to the
foregoing Closing Date Balance Sheet and (iii) a statement (the “Estimated Net
Working Capital Adjustment Statement”) setting forth the calculation of the
amount by which the estimated Closing Date Net Working Capital as shown on the
Estimated Net Working Capital Statement (the “Estimated Net Working Capital”)
either (A) exceeds the Target Net Working Capital (such amount, the “Estimated
Net Working Capital Excess Amount”) or (B) is less than the Target Net Working
Capital (such amount, the “Estimated Net Working Capital Deficiency Amount”).
The estimated Closing Date Balance Sheet, Estimated Net Working Capital
Statement and Estimated Net Working Capital Adjustment Statement delivered
pursuant to this Section 2.4(a) shall be accompanied by all relevant backup
materials and schedules, in detail reasonably acceptable to Buyer.

(b) Within ninety (90) calendar days following the Closing Date, the Company
shall cause to be prepared and delivered to the Equityholder Representative
(i) a Closing Date Balance Sheet, (ii) a statement (the “Net Working Capital
Statement”) setting forth the Closing Date Net Working Capital and the
components and calculations thereof, by reference to the Closing Date Balance
Sheet and (iii) a statement (the “Net Working Capital Adjustment Statement”)
setting forth the calculation of the amount by which the Closing Date Net
Working Capital as shown on the Net Working Capital Statement either (A) exceeds
the Estimated Net Working Capital (as such amount may be adjusted below, the
“Net Working Capital Excess Amount”) or (B) is less than the Estimated Net
Working Capital (as such amount may be adjusted below, the “Net Working Capital
Deficiency Amount”). The Closing Date Balance Sheet, Net Working Capital
Statement and Net Working Capital Adjustment Statement delivered pursuant to
this Section 2.4(b) shall be accompanied by all relevant backup materials and
schedules, in detail consistent with the materials and detail provided by the
Company pursuant to Section 2.4(a).

 

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(c) After receipt of the Net Working Capital Statement and the Net Working
Capital Adjustment Statement, the Equityholder Representative shall have thirty
(30) calendar days to review the Net Working Capital Statement and the Net
Working Capital Adjustment Statement. The Company shall give, or cause to be
given, to the Equityholder Representative reasonable access during standard
working hours to all documents, records and the employees of the Company used in
their preparation to the extent such employees are employed by the Company at
such time. Not later than thirty (30) calendar days following the date of
receipt of the Net Working Capital Statement and the Net Working Capital
Adjustment Statement, the Equityholder Representative shall provide the Company
with a notice (a “Working Capital Dispute Notice”) listing those items, if any,
to which the Equityholder Representative takes exception, which notice shall
also (i) specifically identify, and provide a reasonably detailed explanation of
the basis upon which the Equityholder Representative has delivered such list,
including the applicable provisions of this Agreement on which the dispute set
forth in such Working Capital Dispute Notice is based, (ii) set forth the amount
of Closing Date Net Working Capital that the Equityholder Representative has
calculated based on the information contained in the Net Working Capital
Statement and (iii) specifically identify the Equityholder Representative’s
proposed adjustment(s). Unless the Equityholder Representative delivers the
Working Capital Dispute Notice to the Company setting forth the specific items
disputed by the Equityholder Representative on or prior to the thirtieth
(30th) day following the Equityholder Representative’s receipt of the Net
Working Capital Statement and the Net Working Capital Adjustment Statement, the
Equityholder Representative on behalf of the Equityholders shall be deemed to
have accepted and agreed to the Net Working Capital Statement and the Net
Working Capital Adjustment Statement and such statements (and the calculations
contained therein) shall be final, binding and conclusive. If the Equityholder
Representative timely provides the Company with a Working Capital Dispute
Notice, the Equityholder Representative and the Company shall, within fifteen
(15) days following receipt of such Working Capital Dispute Notice by the
Company (the “Resolution Period”), use good faith efforts to resolve their
differences with respect to the items specified in the Working Capital Dispute
Notice (the “Disputed Items”), and all other undisputed items (and all
calculations relating thereto) shall be final, binding and conclusive. Any
written resolution by the Equityholder Representative and the Company during the
Resolution Period as to any Disputed Items shall be final, binding and
conclusive.

(d) If the Equityholder Representative and the Company do not resolve all
Disputed Items by the end of the Resolution Period, then all Disputed Items
remaining in dispute shall be submitted within fifteen (15) days following the
expiration of the Resolution Period to an accounting firm of national reputation
that is independent of Buyer, the Company or any Equityholder that is an entity
and that is reasonably acceptable to both the Equityholder Representative and
the Company to resolve the remaining matters in dispute (the “Neutral
Arbitrator”), and such firm shall be the Neutral Arbitrator for all purposes of
this Section 2.4(d). The Neutral Arbitrator shall act as an arbitrator to
determine only those Disputed Items remaining in dispute, consistent with this
Section 2.4, and shall request a statement from each of the Equityholder
Representative and the Company regarding such remaining Disputed Items. The
Neutral Arbitrator shall consider only those Disputed Items that the
Equityholder Representative on the one hand and the Company on the other hand
are unable to resolve. In resolving any disputed item, the Neutral Arbitrator
may not assign a value to any item greater

 

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than the greatest value for such item claimed by any Party or less than the
smallest value for such item claimed by any Party. The scope of the disputes to
be arbitrated by the Neutral Arbitrator is limited to whether the preparation of
the Net Working Capital Statement and the Net Working Capital Adjustment
Statement were prepared in accordance with this Agreement, and whether there
were mathematical errors in the preparation of the Net Working Capital Statement
and the Net Working Capital Adjustment Statement, and the Neutral Arbitrator is
not to make any other determination. All fees and expenses relating to the work,
if any, to be performed by the Neutral Arbitrator shall be allocated between the
Equityholder Representative and the Company in the same proportion that the
aggregate amount of the Disputed Items so submitted to the Neutral Arbitrator
that is unsuccessfully disputed by such Party (as finally determined by the
Neutral Arbitrator) bears to the total amount of such Disputed Items so
submitted by such Party. In addition, the Parties shall give the Neutral
Arbitrator access to all documents, records and employees as reasonably
necessary to perform its function as arbitrator. The Neutral Arbitrator shall
deliver to the Equityholder Representative and the Company a written
determination (such determination to include a work sheet setting forth all
material calculations used in arriving at such determination and to be based
solely on information provided to the Neutral Arbitrator by the Equityholder
Representative and the Company) of the Disputed Items submitted to the Neutral
Arbitrator within thirty (30) days following receipt of such Disputed Items (or
as soon thereafter as practicable), which determination, absent manifest error,
shall be final, binding and conclusive, and judgment may be entered on the
award. If either the Equityholder Representative or the Company fails to submit
a statement regarding any Disputed Items submitted to the Neutral Arbitrator
within the time determined by the Neutral Arbitrator or otherwise fails to give
the Neutral Arbitrator access as reasonably requested, then the Neutral
Arbitrator shall render a decision based solely on the evidence timely submitted
and the access afforded to the Neutral Arbitrator by the Equityholder
Representative and the Company.

(e) The final, binding and conclusive Net Working Capital Statement and Net
Working Capital Adjustment Statement, in each case, based either upon agreement
by the Equityholder Representative and the Company, the written determination
delivered by the Neutral Arbitrator in accordance with this Section 2.4 or the
Equityholder Representative’s failure to notify the Company, in accordance with
this Section 2.4, of its objections to either the Net Working Capital Statement
or the Net Working Capital Adjustment Statement (or any calculations contained
therein) shall be the “Conclusive Net Working Capital Statement” and the
“Conclusive Net Working Capital Adjustment Statement,” respectively.

(f) If there is a Net Working Capital Excess Amount, the Equityholder
Representative shall prepare a Future Payment Allocation Schedule showing the
portion of the Net Working Capital Excess amount to be paid to each Equityholder
and deliver such Future Payment Allocation Schedule to Buyer. Within ten
(10) Business Days following Buyer’s receipt of such Future Payment Allocation
Schedule, Buyer shall pay to each Equityholder the portion of the Net Working
Capital Excess Amount set forth opposite such Equityholder’s name on such Future
Payment Allocation Schedule in immediately available funds by check or by wire
transfer to such bank account or accounts as may be specified on such Future
Payment Allocation Schedule; provided, however, that no amount shall be payable
pursuant to this Section 2.4(f) unless the aggregate Net Working Capital Excess
Amount exceeds $[****], in which case the full Net Working Capital Excess Amount
shall be paid.

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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(g) If there is a Net Working Capital Deficiency Amount, the Equityholder
Representative shall within ten (10) Business Days following the determination
of the Conclusive Net Working Capital Statement, instruct the Escrow Agent to
release to the Company from the Working Capital Escrow Account (or if the funds
in the Working Capital Escrow Account are insufficient, then first from the
Working Capital Escrow Account until the Working Capital Escrow Account has been
fully depleted and then from the Indemnification Escrow Account) an amount equal
to the Net Working Capital Deficiency Amount in immediately available funds by
check or by wire transfer to such bank account or accounts as the Company may
specify; provided, however, that no amount shall be payable pursuant to this
Section 2.4(g) unless the aggregate Net Working Capital Deficiency Amount
exceeds [****], in which case the full Net Working Capital Deficiency Amount
shall be paid.

(h) Any Net Working Capital Excess Amount shall be deemed to be an increase in
the Purchase Price and any Net Working Capital Deficiency Amount shall be deemed
to be a decrease in the Purchase Price for purposes of this Agreement. Absent
fraud or willful misconduct in the preparation of the Estimated Net Working
Capital Statement or Estimated Net Working Capital Adjustment Statement, neither
the Equityholder Representative nor any Equityholder shall have any
responsibility for any amount of the Net Working Capital Deficiency other than
by means of deductions from the Working Capital Escrow Account or the
Indemnification Escrow Account.

2.5. Indemnification Escrow Amount.

(a) Indemnification Escrow Amount. At the Closing, Buyer shall deposit the
Indemnification Escrow Amount into an escrow account (the “Indemnification
Escrow Account”) to be established by Buyer with Wells Fargo Bank, National
Association (the “Escrow Agent”) to be held by the Escrow Agent, pursuant to the
terms of an escrow agreement substantially in the form attached hereto as
Exhibit A (the “Escrow Agreement”). Buyer shall be treated for Tax purposes as
the owner of all amounts held in the Indemnification Escrow Account unless and
until such amounts are released therefrom, in which case such amounts shall be
treated for Tax purposes as having been paid by Buyer to the Party to whom such
amounts are released.

(b) Release of Indemnification Escrow Amount. Following the Indemnification
Escrow Release Date, each Equityholder shall be entitled to receive that portion
of the Indemnification Escrow Amount then remaining in the Indemnification
Escrow Account, if any, that is determined in accordance with the Escrow
Agreement.

(c) Escrow Agent Fees and Expenses. Any fees and expenses of the Escrow Agent
shall be paid one half by Buyer and one half by the Equityholder Representative
(for the account of the Equityholders), with amounts attributed to the
Equityholder Representative and known at the Closing to be included in
Transaction Expenses. During the period in which the Indemnification Escrow
Amount (including any Retained Escrow Amount) is retained in the Escrow Account,
all interest or other income earned from the investment of the Indemnification
Escrow Amount (the “Escrow Earnings”) shall be retained as additional amounts in
the Escrow Account and shall be reported for tax purposes as income of Buyer,
provided that within five (5) Business Days following the end of each calendar
quarter, forty-five percent (45%) of the Escrow Earnings relating to each such
calendar quarter shall be automatically released to Buyer and shall no longer be
part of the Indemnification Escrow Account.

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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2.6. Working Capital Escrow Amount.

(a) Working Capital Escrow Amount. At the Closing, Buyer shall deposit the
Working Capital Escrow Amount into an escrow account (the “Working Capital
Escrow Account”) to be established by Buyer with the Escrow Agent to be held by
the Escrow Agent, pursuant to the terms of the Escrow Agreement, to serve as a
source of payment for any Net Working Capital Deficiency Amount payable to Buyer
pursuant to the terms of Section 2.4(g). Buyer shall be treated for Tax purposes
as the owner of all amounts held in the Working Capital Escrow Account unless
and until such amounts are released therefrom, in which case such amounts shall
be treated for Tax purposes as having been paid by Buyer to the Party to whom
such amounts are released.

(b) Release of Working Capital Escrow Amount. Within three (3) Business Days
following the payment of the Net Working Capital Deficiency Amount, if any, or
the determination of the Conclusive Net Working Capital Statement showing a Net
Working Capital Excess Amount, if any, Buyer shall notify the Equityholder
Representative in writing of the amount remaining in the Working Capital Escrow
Account (the “Remaining Working Capital Escrow Amount”). The Equityholder
Representative shall prepare a Future Payment Allocation Schedule showing the
portion of the Remaining Working Capital Escrow Amount to be paid to each
Equityholder and deliver such Future Payment Allocation Schedule to Buyer and
the Escrow Agent. Within ten (10) Business Days following Buyer’s and Escrow
Agent’s receipt of such Future Payment Allocation Schedule, the Escrow Agent
shall distribute to each Equityholder the portion of the Remaining Working
Capital Escrow Amount set forth opposite such Equityholder’s name on such Future
Payment Allocation Schedule in immediately available funds by check or by wire
transfer to such bank account or accounts as may be specified on such Future
Payment Allocation Schedule.

2.7. Distribution of Bonus Amount.

(a) Prior to the execution of this Agreement, the Company has delivered to Buyer
a certificate (the “Participating Service Providers Certificate”) signed by the
President and Chief Executive Officer of the Company setting forth the names of
those employees and consultants of the Company (the “Participating Service
Providers”) who are entitled to receive, subject to the terms set forth in any
notice provided by the Company in writing to the Participating Service
Providers, as consideration for executing and delivering the release
contemplated by this Section 2.7(a) and attached hereto as Exhibit B, a portion
of the Bonus Amount as set forth on such Participating Service Provider
Certificate. Prior to the Closing, the Company has delivered to each
Participating Service Provider for execution a general release of all claims
against the Company in the form attached hereto as Exhibit B. With respect to
each Participating Service Provider who executes a general release of all claims
against the Company in the form attached hereto as Exhibit B within forty-five
(45) days following the delivery of such release to the Participating Service
Provider, and does not revoke such release, following the expiration of any
revocation period provided by Applicable Law, Buyer shall, as soon as reasonably
practicable, subject to the immediately following sentence, pay and distribute
to each

 

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such Participating Service Provider, each in his or her capacity as a current or
former service provider of the Company, as the case may be, who complies with
the procedures set forth in this Section 2.7(a) the portion of the Bonus Amount
as set forth on the Participating Service Provider Certificate for such
Participating Service Provider. For the avoidance of doubt, the Bonus Amount
shall not be distributed to a Participating Service Provider until the general
release of claims executed by such Participating Service Provider becomes
effective following the expiration of any applicable revocation period. In the
event a Participating Service Provider fails to execute within forty-five
(45) days following the Closing or revokes such release during any applicable
revocation period, then such Participating Service Provider shall not receive
any portion of the Bonus Amount. The aggregate portion of the Bonus Amount that
is not payable to all Participating Service Providers is referred to herein as
the “Unallocated Bonus Amount”.

(b) Promptly following the determination of the Unallocated Bonus Amount, Buyer
shall notify the Equityholder Representative as to the Unallocated Bonus Amount.
The Equityholder Representative shall prepare a Future Payment Allocation
Schedule showing the portion of the Unallocated Bonus Amount to be paid to each
Equityholder and deliver such Future Payment Allocation Schedule to Buyer.
Within ten (10) Business Days following Buyer’s receipt of such Future Payment
Allocation Schedule, Buyer shall pay to each Equityholder the portion of the
Unallocated Bonus Amount set forth opposite such Equityholder’s name on such
Future Payment Allocation Schedule in immediately available funds by check or by
wire transfer to such bank account or accounts as may be specified on such
Future Payment Allocation Schedule.

2.8. Rights to Future Payments. The right of each Equityholder to receive the
Future Payment Amounts, if any, or his, her or its portion of the Equityholder
Representative’s Fund Amount, if any, shall not be evidenced by a certificate or
other instrument. The right of each Equityholder to receive the Future Payment
Amounts, if any, and the Equityholder Representative’s Fund Amount, if any, may
not be offered, sold, pledged, assigned or otherwise transferred by a
Equityholder except by operation of law or by will or intestate succession;
provided, however, if a Equityholder is an accredited investor as defined in
Rule 501(a) of Regulation D promulgated under the Securities Act and a
non-natural Person, such Equityholder may offer, sell, pledge, assign or
otherwise transfer its interest in the Future Payment Amounts and the
Equityholder Representative’s Fund Amount, if any, provided that such
Equityholder’s transferee, assignee or pledgee is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act and
agrees to be bound by the restrictions on transfer set forth in this Section 2.8
and provided, that such Equityholder delivers an opinion of counsel in a form
that is reasonably acceptable to the Company stating that such offer, sale,
pledge, assignment or other transfer will be effected pursuant to a transaction
that is exempt from registration under the Securities Act.

2.9. Escheat. Neither Buyer nor the Company shall be Liable to any Equityholder
for any portion of the Purchase Price delivered to a public official pursuant to
any applicable abandoned property escheat or similar law. If any amounts payable
to a Equityholder have not been claimed by such Equityholder for a period of
twelve (12) months following the date such payment is due (or immediately prior
to such earlier date on which any Purchase Price would otherwise escheat to or
become the property of any Governmental Authority), any such Purchase Price
shall, to the extent permitted by Applicable Law, become the property of the
Company, free and clear of all claims or interest of any Person previously
entitled thereto.

 

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2.10. Withholding Rights. Each of Buyer or the Company shall be entitled to
deduct and withhold from the Closing Payment Amount and any Future Payment
Amount or any amount otherwise payable pursuant to this Agreement such amounts
as it is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of United States federal, state or
local, or any foreign, Tax law. To the extent that amounts are so withheld and
paid over to or deposited with the relevant Governmental Authority by Buyer or
the Company, as the case may be, such amounts shall be treated for all purposes
of this Agreement as having been paid to the applicable Person in respect of
which such deduction and withholding were made.

2.11. Equityholder Representative.

(a) Appointment. As used in this Agreement, the term “Equityholder
Representative” shall mean Arthur Pappas, or any Person appointed as a successor
Equityholder Representative pursuant to Section 2.11(b) hereof. Arthur Pappas
hereby accepts his, her or its appointment as the initial Equityholder
Representative. Effective upon Closing, without any further action by any other
Person, the Equityholder Representative shall be appointed and constituted in
respect of each Equityholder, as his, her or its agent, to act in his, her or
its name, place and stead, as such Equityholder’s attorney-in-fact, as more
fully set forth in Section 2.11(c).

(b) Election and Replacement. From and after the Closing until the date when all
obligations under this Agreement have been discharged (including all
indemnification obligations under Article IX hereof), Sellers who were entitled
to receive in excess of seventy-two percent (72)% of the Closing Payment Amount
payable to the former holders of Series A Preferred Stock (the “Supermajority”),
may, from time to time upon written notice to the Equityholder Representative
and Buyer, remove any Equityholder Representative (including any appointed by
Buyer as provided below) or appoint a new Equityholder Representative to fill
any vacancy created by the death, incapacitation, resignation or removal of any
Equityholder Representative. If the Supermajority is required to but has not
appointed a successor Equityholder Representative to fill any vacancy within ten
(10) Business Days from written notice from Buyer to all former holders of
Series A Preferred Stock and a request by Buyer to appoint a successor
Equityholder Representative, Buyer shall have the right to appoint an
Equityholder Representative to fill any such vacancy from the directors of the
Company prior to the Closing, and shall use commercially reasonable efforts to
advise all Equityholders of such appointment by written notice; provided,
however, that a Supermajority shall thereafter retain the right to remove the
Equityholder Representative or appoint a new Equityholder Representative
pursuant to this Section 2.11(b). A copy of any appointment by the Supermajority
of any successor Equityholder Representative shall be provided to Buyer promptly
after it shall have been effected. Each successor Equityholder Representative
shall have all of the power, authority, rights and privileges conferred by this
Agreement upon the original Equityholder Representative, and the term
“Equityholder Representative” as used herein shall be deemed to include any
successor Equityholder Representative.

 

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(c) Authority. The Equityholder Representative shall be authorized, on behalf of
the Equityholders, (i) to determine the occurrence of any Milestone, (ii) to
resolve any disputes related to the occurrence of any Milestone or the payment
of any Future Payment Amount, including the authorization to demand arbitration
in accordance with the terms of this Agreement and to comply with Court Orders
and awards of arbitrators related thereto, (iii) to resolve any disputes related
to any matters arising from Section 7.4, (iv) to discuss, negotiate, resolve and
fully and finally settle on behalf of the Equityholders any claims for
indemnification by Buyer under Article IX hereof, including the authorization to
comply with Court Orders with respect to any such claim for indemnification,
(v) to review the Net Working Capital Statement and the Net Working Capital
Adjustment Statement, deliver a Working Capital Dispute Notice and discuss,
negotiate, resolve and fully and finally settle on behalf of Equityholders any
disputes with respect to the Closing Date Net Working Capital pursuant to
Section 2.4 hereof, (vi) to take any action, including litigating, defending or
enforcing any actions, and to make, deliver and sign any certificate, notice,
consent or instrument required or permitted to be made or delivered under this
Agreement or under the documents referred to in this Agreement (an “Instrument”)
which the Equityholder Representative determines in his or her discretion to be
necessary, appropriate or desirable, and, in connection therewith (provided
however if any individual Equityholder is named in such litigation, such
Equityholder shall have the right to tender defense), (vii) to hire or retain,
at the sole expense of the Equityholder, such counsel, investment bankers,
accountants, representatives and other professional advisors as he or she
determines in his or her sole and absolute discretion to be necessary, advisable
or appropriate in order to carry out and perform his or her rights and
obligations hereunder, (viii) to act as disbursement agent for any payments to
the D&O Indemnified Parties pursuant to Section 7.1, and (ix) to receive all
documents, certificates and notices and make all determinations on behalf of the
Equityholders required under this Agreement. A decision, act, consent or
instruction of the Equityholder Representative shall constitute a decision of
the Equityholders, and shall be final, binding and conclusive upon the
Equityholders, as the case may be. Any Party receiving an Instrument from the
Equityholder Representative shall have the right to rely in good faith upon such
Instrument, and to act in accordance with the Instrument without independent
investigation. The Equityholder Representative shall promptly, and in any event
within two (2) Business Days, provide written notice to each Equityholder of any
action taken on behalf of the Equityholders by the Equityholder Representative
pursuant to the authority delegated to the Equityholder Representative under
this Section 2.11.

(d) No Liability of Equityholder Representative or Buyer. The Equityholder
Representative shall determine the amounts to be paid to each Equityholder as
set forth on the Initial Allocation Schedule and each Future Payment Allocation
Schedule in accordance with the certificate of incorporation of the Company as
amended and in effect immediately prior to the Closing as if the transactions
contemplated hereby constitute a Deemed Liquidation Event (as defined in the
Company’s certificate of incorporation as amended and in effect as of
immediately prior to the Closing) and Applicable Law. Notwithstanding the
foregoing, neither the Equityholder Representative (nor any of the directors,
officers, agents or employees of Equityholder Representative, if applicable)
shall be Liable to any Equityholder or any other Person for any error of
judgment, or any action taken, suffered or omitted to be taken, or any
calculation made or performed under this Agreement, except in the case of the
Equityholder Representative’s fraud, gross negligence or willful misconduct. The
Equityholder

 

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Representative may consult with legal counsel, independent public accountants
and other experts selected by the Equityholder Representative and shall not be
Liable to any Equityholder for any action taken or omitted to be taken or any
calculation made or performed under this Agreement in good faith in accordance
with the advice of such counsel, accountants or experts. As to any matters not
expressly provided for in this Agreement, the Equityholder Representative shall
not be required to exercise any discretion or take any action. Neither Buyer,
the Company nor any of their Affiliates shall have any Liability to any of the
Equityholders or otherwise arising out of the acts or omissions of the
Equityholder Representative or any disputes among the Equityholders or between
the Equityholders and the Equityholder Representative. Buyer may rely entirely
on its dealings with, and notices to and from, the Equityholder Representative
to satisfy any obligations it may have under this Agreement or otherwise to the
Equityholders.

(e) Indemnity; Costs and Expenses. Each Equityholder shall, in proportion to the
portion of the Purchase Price plus the Equityholder Representative’s Fund
Amount, if any, then previously received by such Equityholder (or if no portion
of the Purchase Price and the Equityholder Representative’s Fund Amount has been
paid, in proportion to the portion of the Closing Payment Amount to which such
Equityholder is entitled), indemnify and defend the Equityholder Representative
and hold the Equityholder Representative harmless against any loss, damage,
cost, Liability or expense incurred without fraud, gross negligence or willful
misconduct by the Equityholder Representative and arising out of or in
connection with the acceptance, performance or administration of the
Equityholder Representative’s duties under this Agreement. Any Liabilities,
losses, penalties, fines, claims, damages, out-of-pocket costs or expenses
(including costs of defending claims prior to the final adjudication or
settlement of such claims) incurred by or reasonably expected to be incurred by
the Equityholder Representative in connection with the acceptance, performance
and administration of his or her duties as the Equityholder Representative
pursuant to this Agreement (including the hiring of legal counsel, accountants
or auditors and other advisors pursuant to the terms of this Agreement but
excluding any of the foregoing arising out of the Equityholder Representative’s
fraud, gross negligence or willful misconduct) and all fees payable hereunder to
the Equityholder Representative by the Equityholder (“Equityholder
Representative’s Costs”), shall be paid as follows: (i) first by recourse to the
Equityholder Representative’s Fund; and (ii) if such amounts held in the
Equityholder Representative’s Fund are insufficient to pay for such Equityholder
Representative’s Costs, then by recourse to any Future Payments distributable to
Equityholders; and (iii) if such amounts are insufficient to pay such
Equityholder Representative’s Costs, then by recourse directly to the
Equityholders (in proportion to the portion of the Purchase Price plus the
Equityholder Representative’s Fund Amount, if any, then previously received by
each such Equityholder, or if no portion of the Purchase Price and Equityholder
Representative’s Fund Amount has been paid, in proportion to the portion of the
Closing Payment Amount to which such Equityholder is entitled).

(f) Deposit of Equityholder Representative’s Fund Amount. At the Closing, Buyer
shall deposit with the Equityholder Representative the Equityholder
Representative’s Fund Amount, which shall be held by the Equityholder
Representative in trust solely for the purpose of paying the expenses if any,
incurred by the Equityholder Representative in connection with this Agreement
(the “Equityholder Representative’s Fund”). The deposit of the Equityholder
Representative’s Fund Amount by Buyer with the Equityholder Representative

 

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shall discharge Buyer’s obligations with respect to such amount, and Buyer shall
not have responsibility or Liability for the manner in which the Equityholder
Representative administers the Equityholder Representative’s Fund, or for
causing or ensuring that all or any portion of the Equityholder Representative’s
Fund Amount is ultimately paid or distributed to the Equityholders. Upon the
Equityholder Representative’s determination to release the Equityholder
Representative’s Fund Amount then remaining, if any, such remaining Equityholder
Representative’s Fund Amount shall be distributed to Equityholders in accordance
with the certificate of incorporation of the Company as amended and in effect
immediately prior to the Closing as if the transactions contemplated hereby
constitute a Deemed Liquidation Event (as defined in the Company’s certificate
of incorporation as amended and in effect as of immediately prior to the
Closing) and Applicable Law.

(g) Access to Information. Within thirty (30) days after the Equityholder
Representative’s request following the end of a calendar year, Buyer shall
provide to the Equityholder Representative a written report concerning the
status of any unachieved Milestones during the previous calendar. At the request
of the Equityholder Representative, upon reasonable notice and at a reasonable
time and location, the Equityholder Representative shall be entitled to ask, and
have answered, reasonable questions arising from their review of such annual
updates provided by Buyer. Buyer shall promptly (but no later than five
(5) Business Days following the achievement of a Milestone) notify the
Equityholder Representative of the achievement of any Milestone, provided that a
press release issued by Buyer describing the achievement of such Milestone shall
constitute such notice. Promptly thereafter, the Equityholder Representative
will prepare a Future Payment Allocation Schedule showing the portion of the
Milestone Payment Amount to be paid to each Equityholder and deliver such Future
Payment Allocation Schedule to Buyer.

(h) Dispute Resolution.

(1) In the event that the Equityholder Representative shall dispute the
purported occurrence or non-occurrence of a Milestone or a request for
indemnification or setoff under Article IX, then the Equityholder Representative
shall provide written notice to Buyer (the “Dispute Notice”) specifying the
amount disputed and the basis for the dispute, together with supporting
documentation reflecting the analysis and justification thereof. Buyer and the
Equityholder Representative shall thereafter attempt to resolve the dispute as
set forth in this Section 2.11(h).

(2) The Equityholder Representative and Buyer shall attempt to resolve any
dispute arising out of or relating to this Agreement promptly by negotiation in
good faith between the Equityholder Representative and an executive officer of
Buyer who has authority to settle the dispute. Each Party shall give the other
Party involved written notice of any dispute not resolved in the Ordinary Course
of Business. Within seven (7) days following delivery of such notice, the Party
receiving notice shall submit to the other a written response thereto. The
notice and the response shall include: (i) a statement of each Party’s
position(s) regarding the matter(s) in dispute and a summary of arguments in
support thereof, and (ii) the name and title of the executive officer who will
represent Buyer and any other Person who will accompany that executive officer,
in the case of Buyer, or the name of the agent who will represent the
Equityholders and any other Person who will accompany that agent, in the case of
the Equityholders.

 

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(3) Within fourteen (14) days following delivery of the notice delivered
pursuant to Section 2.11(h)(2), the Equityholder Representative and the
designated executive officer of Buyer shall meet at a mutually acceptable time
and place, and thereafter, as often as they reasonably deem necessary, to
attempt to resolve the dispute. All reasonable requests for information made by
one Party to the other shall be honored in a timely fashion. All negotiations
conducted pursuant to this Section 2.11(h) (and any of the Parties’ submissions
in contemplation hereof) shall be kept confidential by the Parties and shall be
treated by the Parties and their representatives as compromise and settlement
negotiations under the Federal Rules of Evidence and any similar state rules.

(4) In the event that the Equityholder Representative and Buyer are unable to
resolve any dispute arising out of this Agreement in accordance with provisions
(1), (2) and (3) of this Section 2.11(h) within six months after delivery of any
Dispute Notice, Buyer and the Equityholder Representative shall submit such
dispute for final adjudication to the applicable court sitting in the State of
Delaware in accordance with Section 11.12.

2.12. Additional Actions. If, at any time after the Closing, the Company shall
consider or be advised that any deeds, bills of sale, assignments, assurances or
any other actions or things are necessary or desirable to vest, perfect or
confirm of record or otherwise in the Company its right, title or interest in,
to or under any of the rights, properties or assets of Buyer or the Company or
otherwise to carry out this Agreement, the officers and directors of the Company
shall be authorized to execute and deliver, in the name and on behalf of Buyer
or the Company, as the case may be, all such deeds, bills of sale, assignments
and assurances and to take and do, in the name and on behalf of Buyer or the
Company, as the case may be, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Company or
otherwise to carry out this Agreement. If, at any time after the Closing, the
Company shall consider or be advised that any information or documentation is
necessary or desirable for the delivery of the Purchase Price from Buyer or the
Company to the Equityholders or to otherwise carry out the terms of the
Agreement, the Equityholder Representative shall use its reasonable best efforts
to obtain such information or documentation from such Equityholders on behalf of
Buyer and the Company.

2.13. Tax Forms. The parties acknowledge if an Equityholder has not delivered to
Buyer a current and properly executed IRS Form W-9 or appropriate IRS Form W-8
prior to any payment of Payable Consideration or any amount otherwise payable
pursuant to this Agreement, Buyer may withhold amounts from such payment
pursuant to Section 2.10 if such withholding is required under the Code, or any
provision of United States federal, state or local, or any foreign Tax law.

 

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ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

As a material inducement to Buyer to enter into this Agreement, except as
disclosed in the disclosure schedule delivered Buyer by the Company concurrently
herewith (the “Company Disclosure Schedule”) (it being understood that the
Company Disclosure Schedule shall be arranged in sections corresponding to the
sections contained in this Agreement, and the disclosures in any section of the
Company Disclosure Schedule shall qualify the representations in the
corresponding section of this Article III and shall be deemed made in any other
section or sections of the Company Disclosure Schedule to the extent the
relevance of such disclosures is readily apparent from the text of such
disclosure), the Company hereby makes the following representations and
warranties to Buyer.

3.1. Organization of the Company. The Company is a corporation duly organized
and validly existing and in good standing under the laws of the State of
Delaware with full corporate power and corporate authority to conduct its
business as it is presently being conducted, to own, lease or operate, as
applicable, its assets and properties, and to perform all its obligations under
its Contracts. Schedule 3.1 sets forth each jurisdiction in which the Company is
duly qualified to do business as a foreign corporation and the Company is in
good standing in each jurisdiction where the character of its properties owned,
leased or operated or the nature of its activities make such qualification
necessary, except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect on the Company. Copies of the certificate of
incorporation and bylaws of the Company, and all amendments thereto, have
heretofore been delivered to Buyer and are accurate and complete as of the date
hereof. The Company is not in violation of its certificate of incorporation or
bylaws.

3.2. Subsidiaries. The Company does not have and has not ever had any
Subsidiaries and does not otherwise own or control, directly or indirectly, or
hold any rights to acquire, any capital stock or any other securities, interests
or investments (other than investments that constitute cash or cash equivalents)
in any other corporation, partnership, trust, joint venture, association, or
other Person.

3.3. Authorization. The Company has all requisite power and authority, and has
taken all action necessary, to execute, deliver and perform this Agreement, to
consummate the transactions contemplated hereby and to perform its obligations
hereunder. The execution and delivery of this Agreement and the consummation by
the Company of the transactions contemplated hereby have been duly approved by
the Board of Directors of the Company and no other proceeding on the part of the
Company or the Stockholders is necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and is the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors’ rights generally and except
insofar as the availability of equitable remedies may be limited by Applicable
Law. Section 2115 of the California General Corporation Law does not apply to
the Company or the transactions contemplated by this Agreement.

 

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3.4. Capitalization.

(a) The authorized capital stock of the Company consists of thirty four million
five hundred thousand (34,500,000) shares of Common Stock and twenty two million
(22,000,000) shares of Preferred Stock. As of the date of this Agreement and
without giving effect to the transactions contemplated hereby, there are issued
and outstanding 2,112,500 shares of Common Stock and 10,500,000 shares of
Preferred Stock. All of the issued and outstanding shares of Common Stock and
Series A Preferred Stock are, and each share of Common Stock or Series A
Preferred Stock that may be issued pursuant to the Company Options, Company
Warrants or Company Notes will be, if and when issued in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and
non-assessable. No claim has been made or, to the Company’s Knowledge,
threatened against the Company asserting that any Person other than a Person
listed on the Initial Allocation Schedule is the holder or beneficial owner of,
or has the right to acquire beneficial ownership of, any stock of, or any other
voting or Equity Participation in the Company. Except as set forth on Schedule
3.4(a), there are (i) no accrued and unpaid dividends on any of the Shares and
(ii) no commitments to issue additional shares of Common Stock or Series A
Preferred Stock. The Company does not hold any Equity Participations of the
Company in its treasury.

(b) Except as set forth on the Initial Allocation Schedule, there are no
(i) shares of Company Capital Stock outstanding, (ii) other Equity
Participations of the Company outstanding, (iii) other Contracts pursuant to
which the Company is or may become obligated to issue, sell, transfer, purchase,
return or redeem or otherwise acquire Equity Participations of the Company or
any other Person or to provide funds to, make an investment in, or contribute
capital to, any Person, (iv) Equity Participations of the Company reserved for
issuance for any purpose, (v) agreements pursuant to which registration rights
in the Shares have been granted, (vi) to the Company’s Knowledge, stockholder
agreements, whether written or verbal, among any current or former Stockholders
of the Company or (vii) statutory or contractual preemptive rights or rights of
first refusal with respect to the Shares.

(c) The Company has not violated any applicable federal or state securities laws
or any other Applicable Law in connection with the offer, sale or issuance of
any of its capital stock. Except as set forth on Schedule 3.4(c), there are no
Contracts of the Company or, to the Company’s Knowledge, Contracts between any
of the Equityholders, with respect to the voting or transfer of Equity
Participations of the Company.

(d) Schedule 3.4(d) lists each Contract of the Company relating to the Company
Options, Company Notes and the Company Warrants. The Company has provided Buyer
with a true and accurate copy of each Contract identified on Schedule 3.4(d).

(e) With respect to the Company Options, (i) each grant of a Company Option was
duly authorized no later than the date on which the grant of such Company Option
was by its terms to be effective (the “Grant Date”) by all necessary corporate
action, including, as applicable, approval by the Board of Directors of the
Company, or a committee thereof, or a duly authorized delegate thereof, and any
required approval by the stockholders of the Company by the necessary number of
votes or written consents, and material terms of such grant were communicated to
the recipient of such grant within a reasonable time following the Grant Date,

 

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(ii) each such grant was made in accordance with the terms of and pursuant to
the Company Option Plan and all Applicable Law, (iii) the per share exercise
price of each Company Option was not less than the fair market value of a share
of Common Stock on the Grant Date; (iv) each such grant was properly accounted
for in all material respects in accordance with GAAP in the financial statements
(including the related notes) of the Company and in accordance with all
Applicable Laws, and (v) no modifications have been made to any such grants
after the Grant Date.

(f) The Initial Allocation Schedule is true, complete and accurate as of the
date hereof, and the payments to Equityholders described therein are the correct
payments to be made to the Equityholders in accordance with the Company’s
certificate of incorporation, Applicable Law, and this Agreement, and each
Equityholder’s pro rata share of the amounts to be held in the Indemnification
Escrow Account is accurately reflected therein based on the assumptions set
forth therein.

(g) The Closing Date Allocation Schedule, when delivered to Buyer and the Paying
Agent, will be true, complete and accurate as of the Closing, and the payments
to Equityholders described therein will be the correct payments to be made to
the Equityholders in accordance with the Company’s certificate of incorporation,
Applicable Law, and this Agreement, and each Equityholder’s pro rata share of
the amounts to be held in the Indemnification Escrow Account is accurately
reflected therein based on the assumptions set forth therein.

(h) Each Future Payment Allocation Schedule, when delivered to Buyer, will be
true, complete and accurate as of the date of delivery of such Future Payment
Allocation Schedule, and the payments to Equityholders described therein will be
the correct payments to be made to the Equityholders in accordance with the
Company’s certificate of incorporation, Applicable Law, and this Agreement in
connection with such Future Payment Amount.

(i) The distribution of the Purchase Price pursuant to the Closing Date
Allocation Schedule and each applicable Future Allocation Schedule will not be
in conflict with, or constitute a violation of, the certificate of incorporation
of the Company in effect immediately prior to the Closing. No holder of any
Equity Participation of the Company will be entitled to receive any
consideration with respect to any Equity Participations of the Company except as
set forth in, with respect to the Closing Payment Amount, the Closing Date
Allocation Schedule or, with respect to any Future Payment Amount, the
applicable Future Payment Allocation Schedule.

3.5. Title to Properties and Assets.

(a) The Company has good and valid title to or, in the case of leased properties
or properties held under license, a good and valid leasehold or license interest
in, all of its properties and assets. The assets, properties and rights of the
Company constitute all of the assets, properties and rights which are necessary
for the operation of the Company’s business as currently conducted. The Company
holds title to each material property and asset which it purports to own, free
and clear of any Encumbrances other than Permitted Encumbrances. Notwithstanding
the foregoing, the representations in this Section 3.5 do not apply to
Intellectual Property rights, which are subject to the representations and
warranties contained in Section 3.19.

 

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(b) All of the tangible assets of the Company are in all material respects in
reasonably serviceable operating condition and repair (giving due account to the
age and length of use of same, ordinary wear and tear excepted) and are adequate
for the conduct of its business in substantially the same manner as it has
heretofore been conducted.

(c) Schedule 3.5(c) sets forth a true and complete list of all real property
leased by the Company (collectively, the “Leased Real Property”), including the
location of, and a brief description of the nature of the activities conducted
on, such Leased Real Property. The Company has a valid leasehold interest in the
Leased Real Property, free and clear of all Encumbrances, except Permitted
Encumbrances. To the Company’s Knowledge, no Person other than the Company has
any right to use, occupy or lease all or any portion of the Leased Real
Property. The Company has all certificates of occupancy and Permits of any
Governmental Authority necessary for its current use and operation of the Leased
Real Property, except to the extent that any such Permits are held by the
landlord and/or owner of such Leased Real Property, and the Company has complied
in all material respects with the conditions of such certificates of occupancy
and other Permits. To the Knowledge of the Company, no Default has occurred in
the due observance of any Permit applicable to the Leased Real Property

(d) The Company does not own, and never has owned, any real property.

3.6. Absence of Certain Activities or Changes. Since the date of the Most Recent
Balance Sheet Date through the date of this Agreement, the Company has conducted
its operations in the Ordinary Course of Business and there has been no:
(i) Material Adverse Effect on the Company or (ii) action taken which, if taken
after the date of this Agreement without Buyer’s consent, would violate the
provisions of Section 6.1(b) of this Agreement.

3.7. Material Contracts.

(a) All Contracts, Indebtedness (including all evidences of Indebtedness owed to
the Company by any officer, director or employee of the Company (collectively
the “Employee Loans”)), Liabilities and other obligations to which the Company
is a party or by which it is bound that: (i) are material to the conduct and
operations of its business and its properties, (ii) require the Company to
provide in-kind consideration, (iii) contain covenants (A) to indemnify or hold
harmless any Person or (B) not to (or otherwise restricting or limiting the
Company’s ability to) compete in any line of business or geographical area
(including any covenant not to compete with respect to the manufacture,
marketing, distribution or sale of any product or product line), solicit any
customer of any Person, solicit or hire any employee, consultant or independent
contractor of any Person or transact business or deal in any other manner with
any other Person, (iv) involve real property, (v) involve a joint venture,
strategic alliance, partnership, or limited liability company relationship,
(vi) govern or relate to Indebtedness, including guarantees for money borrowed
by others, (vii) are material customer or supplier agreements of the Company,
(viii) obligate the Company to develop any product or technology, (ix) relate to
the acquisition or disposition of any material assets, (x) relate to any rights
or obligations to undertake the development or commercialization of any
pharmaceutical

 

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product, (xi) require, or would reasonably be expected to result in, payments by
the Company in excess of $50,000 per annum, (xii) results in any Person holding
a power of attorney from the Company, (xiii) relate to the Development Products,
the Development Compounds or any related products or product candidates,
(xiv) contain a “change of control” or similar provision (other than any Benefit
Plan), (xv) involve the payment of royalties or other amounts calculated upon
the revenues or income of the Company or income or revenues related to any
product or Intellectual Property of the Company, (xvi) involve any Governmental
Authority, or (xvii) are not terminable upon ninety or fewer days notice without
penalty or additional Liabilities (collectively and together with the Contracts
identified on Schedule 3.5(c) and Schedule 3.19(b), the “Material Contracts”)
are listed in Schedule 3.7(a) and complete and accurate copies and all
amendments thereto of such Contracts, Indebtedness, Liabilities and other
obligations have been provided to Buyer.

(b) Each Material Contract is in full force and effect except for Contracts
which have expired by their terms in the Ordinary Course of Business. All of the
Material Contracts are valid, binding and enforceable against the Company in
accordance with their terms except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
enforcement of creditors’ rights generally and except insofar as the
availability of equitable remedies may be limited by Applicable Law. The Company
is not in Default under any Material Contract in any material respect. To the
Company’s Knowledge, no other party is in Default under such Material Contracts
in any material respect and, to the Company’s Knowledge, no event has occurred
and no condition or state of facts exists which, with the passage of time or the
giving of notice or both, would constitute a Default under any Material
Contract. No written notice of any claim of Default under a Material Contract
has been given to the Company. To the Company’s Knowledge, the Company has not
waived any of its rights under any Material Contract. The Company is not
currently paying liquidated damages in lieu of performance under any Material
Contract.

3.8. Compliance with Other Instruments. The execution, delivery and performance
of and compliance with this Agreement and the consummation of the transactions
contemplated hereby will not (i) result in a violation of, or be in conflict
with or constitute a violation of, the certificate of incorporation or bylaws of
the Company, or (ii) assuming the consents and approvals referred to in
Section 3.16 are duly obtained, result in a violation of, or be in conflict with
or constitute, with or without the passage of time or the giving of notice or
both, a Default under, result in a violation of, or conflict with any Applicable
Laws, Court Orders or Permits applicable to the Company or (iii) violate,
conflict with, result in a material Default under, or give to any Person any
rights of termination or acceleration under any Contract of the Company, or
result in the creation of any Encumbrance (other than a Permitted Encumbrance)
upon any of the properties, assets or Equity Participations of the Company.

3.9. Financial Statements.

(a) The Company has heretofore furnished to Buyer (a) copies of the audited
balance sheet of the Company as of December 31, 2006, 2007 and 2008, together
with the related statements of operations, stockholders’ equity (deficit) and
cash flows for the periods then ended and the notes thereto, accompanied by the
reports thereon of PricewaterhouseCoopers

 

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LLP, (b) copies of the unaudited balance sheets of the Company as of
December 31, 2009 (the “Most Recent Balance Sheet”), together with the related
unaudited statements of operations, stockholders’ equity (deficit), and cash
flow for the period then ended, and the notes thereto (all the financial
statements referred to in clauses (a) and (b) above being hereinafter
collectively referred to as the “Financial Statements”). The Financial
Statements, including the notes thereto, (i) were prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby
without modification of the accounting principles used in the preparation
thereof (except as otherwise stated in the applicable footnotes), (ii) present
fairly in all material respects the financial position, results of operations
and changes in financial position of the Company as of such dates and for the
periods then ended (subject, in the case of the unaudited interim Financial
Statements described in clause (b) above, to normal immaterial year-end audit
adjustments consistent with prior periods), and (iii) were prepared in
accordance with the books of account and other financial records of the Company.

(b) Buyer has been provided with the audit reports of PricewaterhouseCoopers LLP
in respect of the audited Financial Statements. The Company has not withheld any
information from the auditors, which, if disclosed would reasonably be expected
to have caused the auditors to qualify their audit report or to refuse to issue
their report with respect to any of the audited Financial Statements. No auditor
to the Company has ever declined or indicated its inability to issue an opinion
with respect to any financial statements of the Company.

(c) The Company maintains a system of internal control over financial reporting
that is adequate to permit preparation of the financial statements of the
Company in accordance with GAAP. There have been no instances of fraud by the
Company or, to the Knowledge of the Company, its officers, whether or not
material, that occurred during any period covered by the Financial Statements.

3.10. Liabilities. The Company has no Liabilities of any nature which are not
shown or provided for on the Most Recent Balance Sheet, except for
(a) Liabilities incurred or accrued in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet, (b) Liabilities arising from matters
disclosed in Schedule 3.10, or (c) Liabilities incurred under this Agreement or
in connection with the transactions contemplated hereby. The Company has never
effected or maintained any “off-balance sheet arrangement” (as defined in
Item 303(c) of Regulation S-K of the U.S. Securities and Exchange Commission).

3.11. Taxes.

(a) The Company has timely filed all material Tax Returns it is required to have
filed. Such Tax Returns are accurate, complete and correct in all material
respects.

(b) The Company has timely paid all Taxes required to have been paid (whether or
not shown as due on any Tax Returns) and have reserved in accordance with GAAP
in the Most Recent Balance Sheet for all Taxes (whether or not shown on any Tax
Return) that have accrued as of the balance sheet date.

 

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(c) Except as set forth on Schedule 3.11(c):

(i) no written claim has been made by any taxing authority in any jurisdiction
where the Company does not file Tax Returns that it is or may be subject to Tax
by that jurisdiction;

(ii) no extensions or waivers of statutes of limitations with respect to the Tax
Returns have been given by or requested from the Company; and

(iii) no written claim for assessment or collection of Taxes has been asserted
against the Company which remains unpaid or unresolved, and there is no
presently pending audit examination, refund claim, litigation, proceeding,
proposed adjustment or matter in controversy with respect to any Taxes of or
with respect to the Company.

(d) Except to the extent indicated in Schedule 3.11(d), all deficiencies
asserted or assessments made against the Company as a result of any examinations
by any taxing authority have been fully paid.

(e) There are no Encumbrances for Taxes (other than Permitted Encumbrances) upon
the assets of the Company.

(f) The Company is not party to or bound by any Tax indemnity, Tax sharing, tax
allocation or similar agreement.

(g) The Company is not party to or bound by any closing agreement, offer in
compromise or other agreement with any taxing authority.

(h) (1) The Company has never been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code (or any predecessor
provision or comparable provision of state, local or foreign law), or a member
of a combined, consolidated or unitary group for state, local or foreign Tax
purposes, other than the group of which the Company is the common parent;

(2) The Company has no Liability for Taxes of any Person (other than the
Company) under Treasury Regulations Section 1.1502-6 (or any corresponding
provision of state, local or foreign income Tax law), as transferee or
successor, by Contract (excluding for purposes of this Section 3.11(h) Liability
pursuant to customary provisions in Contracts not primarily relating to Taxes)
or otherwise; and

(3) The Company has not engaged in a transaction that constitutes a “reportable
transaction”, as such term is defined in Treasury Regulation
Section 1.6011-4(b)(1), or a transaction that constitutes a “listed
transaction”, as such term is defined in Treasury Regulation
Section 1.6011-4(b)(2).

(i) The Company has not incurred any Liability for Taxes following the date of
the Most Recent Balance Sheet other than Taxes incurred in the Ordinary Course
of Business or Taxes incurred as a result of the transactions contemplated by
Article II.

 

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(j) The Company has never been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code.

(k) The Company has never been a “distributing corporation” or a “controlled
corporation” in connection with a distribution described in Section 355 of the
Code.

(l) The Company has withheld and paid all Taxes required to be withheld in
connection with any amounts paid or owing to any employee, creditor, independent
contractor or other third party.

(m) The Company has never elected to be treated as an “S corporation” within the
meaning of Section 1362(a)(1) of the Code.

3.12. Environmental Matters. (a) To the Company’s Knowledge, there has been no
disposal, release or threatened release of Hazardous Materials (as defined
below) on, from, near or under the Leased Real Property that would be reasonably
likely to form the basis of a material Environmental Claim against the Company,
(b) no third party has used, generated, manufactured or stored on, under or
about the Leased Real Property or transported to or from the Leased Real
Property any Hazardous Materials in violation of applicable Environmental Laws,
(c) there are no Environmental Claims pending or, to the Company’s Knowledge,
threatened against the Company, (d) the Company is not subject to any Court
Order, letter or memorandum by or with any Governmental Authority or Contract
with any Person imposing any Liability under any Environmental Law; and (e) the
Company has not retained or assumed, either contractually or by operation of
law, any Liability or obligation that would reasonably be expected to have
formed the basis of any Environmental Claim against the Company. For purposes of
this Agreement, the terms “disposal,” “release” and “threatened release” shall
have the definitions assigned thereto by the U.S. Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et
seq., as amended (“CERCLA”). For the purposes of this Section 3.12, “Hazardous
Materials” shall mean any hazardous or toxic substance, material or waste which
is regulated under, or defined as a “hazardous substance,” “pollutant,”
“contaminant,” “toxic chemical,” “hazardous material,” “toxic substance” or
“hazardous chemical” under any Environmental Law. “Environmental Law” shall mean
all Applicable Laws relating to pollution or protection of human health or the
environment, including, without limitation (i) CERCLA, (ii) the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq.;
(iii) the U.S. Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
et seq.; (iv) the U.S. Toxic Substances Control Act, 15 U.S.C. Section 2601 et
seq.; (v) the U.S. Occupational Safety and Health Act of 1970, 29 U.S.C.
Section 651 et seq.; and (vi) regulations promulgated under any of the above
statutes.

3.13. Employee Benefits.

(a) Schedule 3.13(a) lists as of the date hereof all “employee benefit plans”
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”)), and all other employee compensation and benefits
plans, policies, programs, arrangements or payroll practices, including
multiemployer plans within the meaning of Section 3(37) of ERISA, and each other
stock purchase, stock option, restricted stock, severance, retention,
employment, consulting, change-of-control, collective bargaining, bonus,

 

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incentive, deferred compensation, employee loan, fringe benefit and any other
benefit plan, agreement, program, policy, commitment or other arrangement,
whether or not subject to ERISA (including any related funding mechanism now in
effect or required in the future), whether formal or informal, oral or written,
in respect of any present or former officers, directors, stockholders or other
Workers of the Company or any of its ERISA Affiliates, in each case sponsored,
maintained, contributed or required to be contributed to by the Company or any
of its ERISA Affiliates or under which the Company or any of its ERISA
Affiliates has any current or potential Liability (each a “Benefit Plan,” and
collectively, the “Benefit Plans”). For each Benefit Plan, true and complete
copies of, where applicable, (i) the three (3) most recent annual reports on
Form 5500 (with schedules and attachments) and associated summary annual
reports, (ii) the actuarial reports and results of all nondiscrimination tests
for the last three (3) plan years, and (iii) any plan document (or, in the case
of an unwritten Benefit Plan, a written description thereof), summary plan
description (and any summaries of material modifications with respect thereto),
trust agreement (and any other documents relating to the funding or payment of
benefits under any Benefit Plan), employment agreement and other governing
instrument, document or employee communication, have been delivered to Buyer as
of the date hereof.

(b) No Benefit Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code. No Benefit Plan is a “multiple employer plan”
as defined in Section 210(a) of ERISA or a “multiemployer plan” as defined in
Section 3(37) of ERISA, and none of the Company or any ERISA Affiliate has
withdrawn at any time from any multiemployer plan, or incurred any withdrawal
Liability with respect to any multiemployer plan which remains unsatisfied, and
no events have occurred and no circumstances exist that would reasonably be
expected to result in any such Liability to the Company or any ERISA Affiliate.

(c) Each Benefit Plan has been established and administered in accordance with
its terms, and in compliance in all material respects in accordance with the
requirements of Applicable Law (including with the requirements of ERISA and the
Code). All insurance premiums with respect to any of the Benefit Plans, and all
contributions (including all employer contributions and employee salary
reduction contributions) required to have been made under any of the Benefit
Plans to any funds or trusts established thereunder or in connection therewith,
have been made or paid by the due date thereof and all contributions or payments
for any period ending on or before the Closing Date which are not yet due will
have been paid or accrued prior to the Closing Date.

(d) Each Benefit Plan intended to qualify under Section 401(a) of the Code has
obtained a favorable determination or opinion letter from the Internal Revenue
Service (“IRS”) or may rely upon an opinion letter for a prototype plan and each
such Benefit Plan has adopted all amendments necessary to comply with the Code
on or before the remedial amendment period deadline specified for each such
amendment pursuant to Section 401(b) of the Code or IRS promulgations. The
Company has provided to Buyer a true and compete copy of the latest IRS
determination or opinion letter with respect to each such Benefit Plan and
nothing has since occurred that could cause the loss of such qualification or
exemption and no such Benefit Plan has been operated in a manner which would
reasonably be expected to cause it to be disqualified in operation. No Benefit
Plan is or at any time was funded through a “welfare benefit fund” as defined in
Section 419(e) of the Code, and no benefits under any Benefit Plan

 

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are or at any time have been provided through a voluntary employees’ beneficiary
association (within the meaning of Section 501(c)(9) of the Code) or a
supplemental unemployment benefit plan (within the meaning of Section 501(c)(17)
of the Code).

(e) No Benefit Plan has participated in, engaged in or been a party to any
transaction that is prohibited under Section 4975 of the Code or Section 406 of
ERISA (i) that is not exempt under Section 4975 of the Code or Section 408 of
ERISA, respectively, or (ii) that could result in a material Liability to the
Company or any ERISA Affiliate. With respect to any Benefit Plan, (i) neither
the Company, nor any of its ERISA Affiliates has had asserted against it any
material claim for taxes under Chapter 43 of Subtitle D of the Code and
Section 5000 of the Code, or for material penalties under ERISA Sections 502(c),
502(i) or 502(l), nor, to the Company’s Knowledge, is there a basis for any such
claim, and (ii) no officer, director or employee of the Company has committed a
breach of any fiduciary responsibility or obligation imposed by Title I of ERISA
that could result in a material Liability to the Company or any ERISA Affiliate.
Other than routine claims for benefits, there is no claim or proceeding
(including any audit or investigation) pending or, to the Company’s Knowledge,
threatened, involving any Benefit Plan by any Person or any Governmental
Authority.

(f) Schedule 3.13(f) sets forth a list as of the date hereof of all
(i) employment agreements or letters with officers of the Company,
(ii) agreements with consultants who are individuals obligating the Company to
make, pursuant to which the Company has made, or pursuant to which it is
reasonably likely that the Company will make, annual cash payments in an amount
of fifty thousand dollars ($50,000) or more, (iii) Contracts, programs and
policies of the Company under which the Company may be obligated to provide a
Worker severance or any other compensation or benefits as a result of the
transaction contemplated by this Agreement or upon termination of employment or
any other relationship with the Company, (iv) plans, programs, agreements and
other arrangements of the Company with or relating to its Workers that contain
change in control provisions, and (v) all written agreements between the Company
and any Worker of the Company and identifies each such Worker whose employment
may be terminated on not less than three months notice without compensation. The
Company has delivered to Buyer true and complete copies of all such agreements,
plans, programs and other arrangements.

(g) Except as set forth on Schedule 3.13(g), neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will (either alone or in combination with another event) (i) result in any
payment becoming due, or increase the amount of any compensation or benefits
due, to any current or former Worker of the Company or with respect to any
Benefit Plan; (ii) increase any benefits otherwise payable under any Benefit
Plan; (iii) result in the acceleration of the time of payment or vesting of any
such compensation or benefits; (iv) result in a non-exempt “prohibited
transaction” within the meaning of Section 406 of ERISA or section 4975 of the
Code; (v) result in the forgiveness in whole or in part of any outstanding loans
made by the Company to any Person; or (vi) result in the payment of any amount
that would, individually or in combination with any other such payment, not be
deductible as a result of Section 280G of the Code.

 

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(h) Except as set forth in Schedule 3.13(h), none of the Benefit Plans provide
retiree health or life insurance benefits except as may be required by
Section 4980B of the Code and Section 601 of ERISA or any other Applicable Law.
There has been no violation of the “continuation coverage requirement” of “group
health plans” as set forth in Section 4980B of the Code and Part 6 of Subtitle B
of Title I of ERISA with respect to any Benefit Plan to which such continuation
coverage requirements apply.

(i) Except as set forth in Schedule 3.13(i), the Company has reserved all rights
necessary to amend or terminate each Benefit Plan without the consent of any
other Person.

(j) Except as set forth in Schedule 3.13(j), no Benefit Plan or other contract
between the Company and any “service provider” (within the meaning of
Section 409A of the Code and the guidance issued thereunder) is a “nonqualified
deferred compensation plan” within the meaning of Treasury Regulation section
1.409A-1(a)(1).

3.14. Compliance with Law. The operation of the business of the Company has been
conducted in material compliance with all Applicable Laws, all Court Orders
applicable to the Company or its business and all Permits required for the
operation of the Company’s business. The Company has not received any notice to
the effect that, or otherwise been advised that, it is not in compliance with
any such Applicable Laws, Court Orders or Permits, and the Company does not know
of any existing circumstances that are likely to result in violations of any of
the foregoing.

3.15. Permits. Schedule 3.15 sets forth a complete list of all material Permits
used in the operation of the Company’s business or otherwise held by the Company
in connection with its business, all of which are valid and in full force and
effect as of the date hereof, and accurate and complete copies of such Permits
have been delivered to Buyer. The Company has all material Permits required in
the operation of its business and to own, lease and operate its properties and
assets, and such Permits are in full force and effect and are owned by the
Company free and clear of all Encumbrances except Permitted Encumbrances. The
Company is not in material Default, nor has it received any notice of any claim
of Default, with respect to any such Permit. Such Permits will not be adversely
affected by the completion of the transactions contemplated by this Agreement.
No suspension or cancellation of any such Permits is pending or, to the
Company’s Knowledge, threatened. To the Knowledge of the Company, no
Governmental Authority is challenging the right of the Company to design,
research, develop, pre-clinically or clinically test, manufacture, license,
offer or sell any of its products or services.

3.16. Consents and Approvals. Except for the filing of notification, and
expiration or early termination of the waiting period under, the HSR Act, as
well as any required approval or notification under laws analogous to the HSR
Act existing in foreign jurisdictions, no consent, approval or authorization of,
or filing or registration with, any Governmental Authority or any other Person
is required to be made, obtained or given by the Company in connection with the
execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby.

 

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3.17. Litigation. There is no action, suit, proceeding, claim, arbitration,
audit of a Governmental Authority, criminal prosecution, unfair labor practice
charge or complaint, examination or investigation (“Proceeding”) pending (or, to
the Company’s Knowledge, threatened) against the Company, or relating to its
activities, properties or assets or, to the Company’s Knowledge, against any
officer, director or employee of the Company in connection with such officer’s,
director’s or employee’s relationship with, or actions taken on behalf of, the
Company. To the Company’s Knowledge, there is no factual or legal basis for any
such Proceeding that would be reasonably expected to result in any such
Proceeding that could result in material monetary damages or any equitable
remedy. The Company is not a party to or subject to the provisions of any Court
Order and there is no material Proceeding by the Company currently pending or
which the Company intends to initiate.

3.18. Labor Matters.

(a) The Company is not bound by or subject to (and none of its assets or
properties is bound by or subject to) any written or oral, express or implied,
contract, collective bargaining agreement, commitment or arrangement with any
labor union, and, to the Company’s Knowledge, no labor union has requested or
has sought to represent any of the employees, representatives or agents of the
Company, and no campaign is being conducted to solicit cards from employees of
the Company by any labor union or labor organization.

(b) There is no strike, slowdown, work stoppage, lockout, or other labor dispute
or union organizing activity, or any similar activity or dispute involving the
Company, or, to the Company’s Knowledge, threatened. The Company has not, during
the period from the Company’s inception through the date of this Agreement,
received any material demand letters, civil rights charges, suits, drafts of
suits, administrative or other claims from any of its employees.

(c) All individuals who are performing consulting or other services for the
Company are correctly classified by the Company as either “independent
contractors” or “employees” as the case may be and, at the Closing Date, will
qualify for such classification with immaterial exceptions.

(d) The Company is in compliance in all material respects with all Applicable
Laws respecting employment, termination of employment, employment practices,
terms and conditions of employment, wages and hours, overtime, collective
bargaining, employment discrimination, leaves of absence, immigration, civil
rights, safety and health, workers’ compensation, pay equity, classification of
employees, the collection and payment of withholding and/or social security
Taxes, and other employment related Taxes. In addition, each Worker is in
compliance with all applicable visa and work permit requirements. No visa or
work permit held by a Worker will expire during the six month period beginning
at the date of this Agreement.

(e) No claims, disputes, grievances, or controversies are pending or, to the
Knowledge of the Company, threatened involving any Worker or group of Workers.
No charges, investigations, administrative proceedings or formal complaints of
discrimination (including discrimination based upon sex, age, marital status,
race, national origin, sexual

 

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orientation, disability or veteran status) are threatened or pending before the
Equal Employment Opportunity Commission, the National Labor Relations Board, the
U.S. Department of Labor, the U.S. Occupational Health and Safety
Administration, the Workers Compensation Appeals Board, or any other
Governmental Authority against the Company pertaining to any Worker.

(f) All employees of the Company are employed on an at-will basis, which means
that their employment can be terminated at any time, with or without notice, for
any reason or no reason at all. No employee of the Company has been granted the
right to continued employment by the Company. Schedule 3.18(f) lists all
employee manuals and handbooks, policy statements and agreements relating to the
employment or other relationship of Workers with the Company as of the date of
this Agreement and the Company has delivered to Buyer accurate and complete
copies of the same.

(g) Schedule 3.18(g) sets forth an accurate and complete list of all
(i) employees of the Company, including each employee’s name, title or position,
present annual compensation (including bonuses, commissions and deferred
compensation), accrued and unused paid vacation and other paid leave, years of
service, interests in any incentive compensation plan, vested and unvested
equity interests, and estimated entitlements to receive supplementary retirement
benefits or allowances (whether pursuant to a contractual obligation or
otherwise), (ii) individuals who are currently performing services for the
Company who are classified as independent contractors, including the respective
compensation of each consultant or independent contractor, and (iii) any
employees or independent contractors of an Affiliate of the Company that perform
services for the Company.

(h) The Company is in full compliance with the Worker Readjustment and
Notification Act (the “WARN Act”) (29 U.S.C. §2101) and any applicable state
laws or other Applicable Laws regarding redundancies, reductions in force, mass
layoffs, and plant closings, including all obligations to promptly and correctly
furnish all notices required to be given thereunder in connection with any
redundancy, reduction in force, mass layoff, or plant closing to affected
employees, representatives, any state dislocated worker unit and local
government officials, or any other governmental authority. No reduction in the
notification period under the WARN Act is being relied upon by the Company.
Schedule 3.18(h) sets forth an accurate, correct and complete list of all
employees terminated (except with cause, by voluntarily departure or by normal
retirement), laid off or subjected to a reduction of more than 50% in hours or
work during the three full calendar months preceding the date of this Agreement.

3.19. Intellectual Property.

(a) Schedule 3.19(a) sets forth a complete and accurate list of all (1) patents,
patent applications and other rights granted by a Governmental Authority with
respect to an invention issued or filed with any Governmental Authority,
together with all reissues, divisions, continuations, continuations-in-part,
revisions, extensions and reexaminations thereof, (2) trade names, common law
trademarks, common law service marks, registered trademarks, registered service
marks, and applications for trademark registration or service mark registration,
(3) registered and unregistered copyrights and (4) domain name registrations and
websites in each case owned, used or held for use by the Company in the conduct
of its business, specifying as to each such item, as applicable (i) the owner(s)
of the item, (ii) the jurisdictions in which the item is issued or registered or
in which any application for issuance or registration has been filed, (iii) the
respective issuance, registration, and application number of the item, and
(iv) the date of application and issuance or registration of the item.

 

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(b) Schedule 3.19(b) sets forth a complete and accurate list of all material
licenses, sublicenses, consents and other agreements (whether written or
otherwise) (i) pertaining to any Intellectual Property used by the Company in
the conduct of its business, and (ii) by which the Company licenses or otherwise
authorizes a third party to use, covenants not to sue under or grants an
immunity from suit under any Intellectual Property of the Company. Neither the
Company nor, to the Company’s Knowledge, any third party is in Default under any
such license or other agreement in any material respect, and except as set forth
on Schedule 3.19(b), each such license or other agreement is now and immediately
following the Closing shall be in full force and effect. Any license,
sublicense, consent or other agreement pertaining primarily to the development,
manufacture, or use of Development Compounds is deemed “material” for purposes
of this Section 3.19(b).

(c) To the Company’s Knowledge, the business operations of the Company do not
and have not infringe(d), misappropriate(d) or otherwise violate(d) the
Intellectual Property rights of any Person, or constitute unfair competition or
trade practices under the laws of any jurisdiction. To the Company’s Knowledge,
no Person has infringed, misappropriated or otherwise violated the Intellectual
Property of the Company, and the Company has not filed or threatened in writing
any claims alleging that a third party has infringed, misappropriated or
otherwise violated any Intellectual Property of the Company. No third party has
filed any or, to the Company’s Knowledge, threatened any claims alleging that
the Company has infringed, misappropriated or otherwise violated any Person’s
Intellectual Property rights. The Company has not given any indemnification,
release or covenant to any third party against infringement, misappropriation or
other violation of Intellectual Property of the Company. The Company has not
requested (whether or not received) any opinion of patent counsel that concerns
infringement, validity or enforceability of any Person’s patent that have not
been disclosed to Buyer.

(d) Except as set forth thereon, all of the items listed in Schedule 3.19(a) are
owned solely by the Company free and clear of all liens and encumbrances, and
(i) are not the subject of any cancellation or reexamination proceeding or any
other proceeding challenging their scope or validity, (ii) no opposition,
extension of time to oppose, interference, rejection, or refusal to register has
been filed in connection with any such application, (iii) to the Company’s
Knowledge, are, as to registered patents and registered trademarks, valid and
enforceable, and (iv) the ownership of the entire right, title and interest
therein is recorded with the applicable Governmental Authority solely in the
name of the Company. All fees, taxes, annuities and other payments associated
with filing, prosecuting, issuing, recording, registering or maintaining any
such Intellectual Property have been paid in full in a timely manner (including
any permitted extensions) to the proper Governmental Authority, and except as
set forth in Schedule 3.19(a), no such fees are due within the one year period
following the date hereof. Except as set forth in Schedule 3.19(d), none of the
Intellectual Property owned or controlled by the Company is the subject of any
order, decree or injunction of any Governmental Authority, and the Company has
not been the subject to any order, decree or injunction of any Governmental
Authority in respect of any other Person’s Intellectual Property.

 

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(e) None of the trade secrets or other material confidential or proprietary
information of the Company has been disclosed to any Person unless such
disclosure was necessary and made pursuant to an appropriate confidentiality
agreement. To the Company’s Knowledge, there has not been any breach by any of
the counterparties to any such agreement. The Company has taken commercially
reasonable measures at least commensurate with those taken by similarly situated
biotechnology companies to maintain the confidentiality of the trade secrets and
other material confidential or other proprietary information and in each such
case using not less than a reasonable degree of care under the circumstances.

(f) Except for any fees payable to a Governmental Authority to issue, register
or maintain any of the Intellectual Property listed in Schedule 3.19(a) and for
any payments required pursuant to a contract listed in Schedule 3.19(b), no
payment of any kind is required to be made to any Person (including directors,
officers, employees, consultants, contractors and agents of the Company) for the
ownership or use of any Intellectual Property listed in Schedule 3.19(a). None
of the Intellectual Property owned by the Company was developed with funding by
any Governmental Authority and no Governmental Authority has any rights thereto.

(g) No Person has claimed any compensation from the Company for the loss of or
unauthorized disclosure or transfer of personal data or information, and no
facts or circumstances exist to the Company’s Knowledge that might give rise to
such a claim.

3.20. Transactions with Certain Persons. No Related Party has or has had, either
directly or indirectly, a material interest in: (a) any Person or entity which
purchases from or sells, licenses or furnishes to the Company any goods,
property, technology, intellectual or other property rights or (b) any Contract
to which the Company is a party or by which it is bound or to which any of its
properties or assets is subject. To the Knowledge of the Company, no event has
occurred, and no circumstance or condition exists, that has resulted in, or
would reasonably be expected to result in, any claim by an employee or director
of the Company for indemnification or advancement of expenses related thereto
pursuant to (i) the terms of the certificate of incorporation or bylaws of the
Company, (ii) any indemnification agreement or other Contract between the
Company and any such employee, or (iii) any Applicable Laws.

3.21. Insurance. Schedule 3.21 sets forth a complete and correct list of all
insurance policies of the Company of any kind currently in force and also sets
forth for each insurance policy the type of coverage, the name of the insureds,
the insurer, the premium, the expiration date, the deductibles and loss
retention amounts and the amounts of coverage. True, correct and complete copies
of such insurance policies have been made available to Buyer. All such insurance
policies are in full force and effect and insure the Company in reasonably
sufficient amounts against normal risks usually insured against by persons
operating similar businesses or properties of similar size in the localities
where such businesses or properties are located. Such insurance policies are
sufficient for compliance with Applicable Law and for compliance with any
obligations under any Contract of the Company and are provided by reputable and
nationally recognized insurers. The Company does not have any self-insurance or
co-insurance programs. The Company is not in Default under any material
provision of any such insurance policy and

 

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the Company has not received notice of cancellation of any such insurance. No
event relating specifically to the Company (as opposed to events affecting the
pharmaceuticals industry in general) has occurred that is reasonably likely to
result, after the date of this Agreement, in an increase in premiums under any
insurance policies they maintain. To the Company’s Knowledge, no event has
occurred, including the failure by the Company to give any notice or information
or by giving any inaccurate or erroneous notice or information, which materially
limits or impairs the rights of the Company under any such excess liability or
protection and indemnity insurance policies.

3.22. Certain Business Practices. None of the directors, officers, agents or
employees of the Company or any of their Affiliates has, in each case in
connection with the Company’s business, (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses, including
expenses related to political activity, (b) made any unlawful payment to foreign
or domestic government officials or employees or to foreign or domestic
political parties or campaigns, made any bribes or kickback payments or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, (c) made
any payment to any customer or supplier of the Company, or given any other
consideration to any such customer or supplier in respect of the Company’s
business that violates Applicable Law or (d) made any other unlawful payment.

3.23. No Brokers. Except as set forth on Schedule 3.23, none of the Company or
any of its officers, directors or employees, has entered into nor will enter
into any contract, agreement, arrangement or understanding with any broker,
finder or similar agent or any Person which will result in an obligation of
Buyer, the Company, or any of their respective Affiliates to pay any finder’s
fee, brokerage fees or commission or similar payment in connection with the
transactions contemplated hereby.

3.24. Books and Records. The Company has made and kept (and given Buyer access
to) its true, correct and complete books and records and accounts, which, in
reasonable detail, accurately and fairly reflect the activities of the Company.
The minute books of the Company previously made available to Buyer accurately
and adequately reflect in all material respects all action previously taken by
the Stockholders, Board of Directors and committees of the Board of Directors of
the Company. The copies of the stock book records of the Company previously made
available to Buyer are true, correct and complete, and accurately reflect all
transactions effected in the Equity Participations of the Company through and
including the date hereof.

3.25. Bank Accounts. Schedule 3.25 contains a true, correct and complete list of
all bank accounts maintained by the Company, including each account number and
the name and address of each bank and the name of each Person who has signature
power with respect to each such account or power of attorney to act on behalf of
the Company.

3.26. FDA and Related Matters. (a) The Company has had no written or oral
communications, including, but not limited to, Regulatory or Warning Letters and
Section 305 Notices and similar letters or notices, with any Regulatory
Authority. The Company is not subject to, and has not received notice of, any
criminal, injunctive, seizure or civil penalty actions begun or threatened by
any Regulatory Authority against the Company.

 

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(b) The Company has no Knowledge (and has not been notified by a Company
Partner) of any pending regulatory action of any sort (other than non-material
routine or periodic inspections or reviews) against any of the Company or any
Person that manufactures, develops or distributes Development Compounds or
Development Products pursuant to a development, contract research,
commercialization, manufacturing, supply or other collaboration arrangement with
the Company (each, a “Company Partner”) by any Regulatory Authority. None of the
Company or, to the Company’s Knowledge, any Company Partner, has committed or
permitted to exist any material violation of the rules and regulations of any
Regulatory Authority which has not been cured by the Company or, to the
Company’s Knowledge, any Company Partner, or waived by the relevant Regulatory
Authority.

(c) All Development Compounds and Development Products are being and have been
developed, manufactured, used, processed, packaged, labeled, stored and tested
by or on behalf of the Company in compliance in all material respects with all
applicable requirements under all Applicable Laws. The Company is not
conducting, and has not conducted, directly or through a Company Partner, any
clinical trials of a Development Product. All preclinical trials conducted by or
on behalf of the Company with respect to Development Compound and Development
Products are being and have been conducted in compliance in all material
respects with all Applicable Laws.

(d) None of the Company or, to the Company’s Knowledge, any of their respective
agents or subcontractors, has been convicted of any crime or engaged in any
conduct which could result in debarment or disqualification by any Regulatory
Authority, and there are no proceedings pending or, to the Company’s Knowledge,
threatened in writing that reasonably would reasonably be expected to result in
criminal liability or debarment or disqualification by any Regulatory Authority.

(e) The Company has not marketed, sold, offered for sale, or distributed for
sale any products. The Company does not have any information with respect to the
safety or efficacy in humans of the Development Compounds or Development
Products. The Company has not filed any INDs with respect to any Development
Compounds.

(f) The Company has not received from any Regulatory Authority any
(i) inspection reports, (ii) notices of adverse findings, warning, untitled
letters, minutes of meetings or (iii) other correspondence from any Regulatory
Authority concerning the Development Compounds or Development Products in which
any Regulatory Authority asserted that the operations of the Company may not be
in compliance with Applicable Laws or that Development Compounds or Development
Products may not be safe, effective, or approvable.

(g) The Company has not received notice from any Company Partner of any material
interruption of supply or manufacturing capacity, shortage of raw materials,
components or other manufacturing problems that would have a material effect on
the subsequent development (as such development is contemplated as of the date
of this Agreement) of the Development Compounds or Development Products, nor to
the Company’s Knowledge do any conditions exist that reasonably could be
expected to lead to such manufacturing problems.

 

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3.27. State Takeover Statutes. The Board of Directors of the Company has taken
all action necessary to ensure that any restrictions on business combinations
contained in the DGCL will not apply to the transactions contemplated hereby. No
other “fair price”, “moratorium”, “control share acquisition” or other similar
anti-takeover statute or regulation or any anti-takeover provision in the
Company’s certificate of incorporation or bylaws is, or at the Closing will be,
applicable to the Company, the Common Stock, the Preferred Stock, or the
transactions contemplated by this Agreement.

3.28. Disclosure. This Agreement (including the Company Disclosure Schedule)
does not, and none of the certificates delivered to Buyer in connection with the
transactions contemplated hereby will, (i) contain any representation, warranty
or information that is false or misleading with respect to any material fact, or
(ii) omit to state any material fact necessary in order to make the
representations, warranties and information contained and to be contained herein
and therein (in the light of the circumstances under which such representations,
warranties and information were or will be made or provided) not false or
misleading. The Company makes no representations or warranties to Buyer
regarding any projection or forecast regarding future results or activities or
the probable success or profitability of the Company.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES EACH SELLER

Each Seller represents and warrants to Buyer, severally and not jointly, as to
itself that the statements contained in this Article IV are true and correct as
of the date hereof and as of the Closing (unless the particular statement speaks
expressly as of a particular date, in which case it is true and correct only as
of such date):

4.1. Organization of Certain Sellers. If such Seller is a corporation, limited
liability company, limited partnership or trust or other entity, it is duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its organization.

4.2. Authorization. Such Seller, and if such Seller is a trust, the trustee of
such Seller, has the requisite power and authority to execute and deliver this
Agreement, to perform his, her or its obligations hereunder, to own, hold, sell
and transfer pursuant to this Agreement the Shares owned by such Seller and to
consummate the transactions contemplated hereby. This Agreement and the
performance by such Seller of its obligations hereunder have been duly
authorized by all requisite action on the part of such Seller. This Agreement
has been duly executed and delivered by such Seller and, assuming this Agreement
constitutes the valid and binding obligation of the other Parties hereto,
constitute the legal, valid and binding obligations of such Seller, enforceable
against such Seller in accordance with their terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting creditors’ rights generally and except insofar as the
availability of equitable remedies may be limited by Applicable Law.

 

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4.3. No Conflict; Required Filings and Consents.

(a) The execution, delivery and performance of and compliance with this
Agreement and the consummation of the transactions contemplated hereby will not
(i) if such Seller is an entity conflict with, or result in any violation or
breach of, any provision of the certificate or articles of incorporation,
bylaws, limited liability or operating agreement, partnership agreement, trust
agreement or similar organizational documents of such Seller, or (ii) assuming
the consents and approvals referred to in Section 3.16 are duly obtained, result
in a violation of, or be in conflict with or constitute, with or without the
passage of time or the giving of notice or both, a Default under, result in a
violation of, or conflict with any Applicable Laws, Court Orders or Permits
applicable to such Seller or (iii) violate, conflict with, result in a material
Default under, or give to any Person any rights of termination or acceleration
under any Contract of such Seller, or result in the creation of any Encumbrance
(other than a Permitted Encumbrance) upon any of the properties, assets or
Equity Participations of the Company.

(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required by such
Seller in connection with the execution and delivery of this Agreement or the
consummation by such Seller of the transactions contemplated hereby.

4.4. No Brokers. Such Seller has not entered into nor will enter into any
contract, agreement, arrangement or understanding with any broker, finder or
similar agent or any Person which will result in an obligation of Buyer, the
Company, or any of their respective Affiliates to pay any finder’s fee,
brokerage fees or commission or similar payment in connection with the
transactions contemplated hereby.

4.5. The Shares.

(a) Such Seller holds of record and owns beneficially the number of Shares,
Company Options, Company Warrants and Company Notes, set forth opposite such
Seller’s name on the Initial Allocation Schedule free and clear of any
Encumbrances and as of the Closing Date will own of record and beneficially the
number of Shares set forth opposite such Seller’s name on the Closing Allocation
Schedule free and clear of any Encumbrances. Such Seller is not party to any
Contract (other than this Agreement) obligating such Seller to sell, transfer,
pledge or otherwise dispose of any Company Capital Stock or other Equity
Participations of the Company. Except as set forth in Schedule 4.5, there is no
Contract of such Seller:

(i) with respect to the sale or transfer of Equity Participations of the
Company;

(ii) with respect to the voting of any Equity Participations of the Company;

(iii) granting any preemptive right, right of participation, right of
maintenance or any similar right with respect to the Equity Participations of
the Company;

(iv) granting any right of first refusal or similar right; or

 

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(v) relating to the registration of, or restricting any Person from purchasing,
selling, pledging or otherwise disposing of (or granting any option or similar
right with respect to), any Equity Participations of the Company.

(b) Upon the Closing, Buyer will own all of such Seller’s Equity Participations
of the Company free and clear of all Encumbrances, other than Encumbrances
created by Buyer or arising out of the ownership of the Shares by Buyer.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to the Company that:

5.1. Organization. Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with full power and
authority to conduct its business as it is presently being conducted, and to
own, lease or operate, as applicable, its assets and properties, and to perform
all its obligations under its contracts. Buyer is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
character of its properties owned, leased or operated or the nature of its
activities make such qualification necessary. Buyer is not in violation of its
certificate of incorporation or bylaws.

5.2. Authorization. Buyer has all requisite power and authority, and has taken
all action necessary, to execute, deliver and perform this Agreement, to
consummate the transactions contemplated hereby and to perform its obligations
hereunder. The execution and delivery of this Agreement and the consummation by
Buyer of the transactions contemplated hereby have been duly approved Board of
Directors of Buyer and no other proceeding on the part of Buyer is necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Buyer and is the legal, valid
and binding obligation of Buyer, enforceable against Buyer in accordance with
its terms except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting creditors’
rights generally and except insofar as the availability of equitable remedies
may be limited by Applicable Law.

5.3. Compliance with Other Instruments. The execution, delivery and performance
of and compliance with this Agreement and the consummation of the transactions
contemplated hereby will not (i) result in a violation of, or be in conflict
with or constitute a violation of, the certificate of incorporation or bylaws of
Buyer, or (ii) assuming the consents and approvals referred to in Section 5.4
are duly obtained, result in a violation of, or be in conflict with or
constitute, with or without the passage of time or the giving of notice or both,
a Default under, result in a violation of, or conflict with any Applicable Laws,
Court Orders or Permits applicable to Buyer, except for any such violation or
Default which would not materially affect Buyer’s ability to perform any of its
obligations hereunder or the consummation of the transactions contemplated by
this Agreement.

 

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5.4. Consents and Approvals. Except for the filing of notification, and
expiration or early termination of the waiting period under, the HSR Act, as
well as any required approval or notification under laws analogous to the HSR
Act existing in foreign jurisdictions, no consent, approval or authorization of,
declaration to, or filing or registration with, any Governmental Authority, or
any other Person, is required to be made or obtained by Buyer in connection with
the execution, delivery and performance by Buyer of this Agreement and the
consummation of the transactions contemplated hereby.

5.5. Litigation. There are no Proceedings pending, or to the knowledge of Buyer,
threatened against or affecting Buyer which has or might be reasonably expected
to materially affect Buyer’s ability to perform any of its obligations hereunder
or the consummation of the transactions contemplated by this Agreement.

5.6. No Brokers. Neither Buyer nor any of its respective partners,
Representatives or Affiliates has entered into or will enter into any contract,
agreement, arrangement or understanding with any broker, finder or similar agent
or any Person which will result in the obligation of the Company or the
Stockholders to pay any finder’s fee, brokerage fees or commission or similar
payment in connection with the transactions contemplated hereby.

5.7. Available Funds. Buyer will have available to it as of the Closing all
funds necessary for the payment to the Paying Agent of the Closing Payment
Amount plus the Bonus Amount.

ARTICLE VI.

ADDITIONAL AGREEMENTS

6.1. Conduct of Business by the Company.

(a) Ordinary Course. During the period from the date hereof and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
Closing, the Company shall (i) carry on its business in the Ordinary Course and
in material compliance with all Applicable Law and (ii) use commercially
reasonable efforts to preserve intact its present business organization,
including the services of its key employees and the goodwill of its customers,
lenders, distributors, suppliers, regulators and other Persons with whom it has
business relationships.

(b) Required Consent. In addition, without limiting the generality of
Section 6.1(a), without the prior written consent of Buyer, during the period
from the date hereof and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Closing, the Company shall not do any of
the following:

(i) propose or adopt any amendments to the certificate of incorporation and
bylaws of the Company;

(ii) adopt a plan of complete or partial liquidation or dissolution;

(iii) form a Subsidiary;

 

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(iv) declare, set aside or pay any dividends on or make any other distributions
(whether in cash, stock, equity securities or property) in respect of any Equity
Participations;

(v) (A) adjust, split, combine or reclassify or otherwise amend the terms of the
Company Capital Stock or authorize the issuance of any Equity Participations in
respect of, in lieu of or in substitution for any Company Capital Stock, or
(B) purchase, redeem or otherwise acquire, directly or indirectly, any Equity
Participations, except for purchases, redemptions or other acquisitions of
capital stock or other securities required under the terms of the plans,
arrangements or contracts existing on the date hereof between the Company and
any director, employee or consultant of the Company;

(vi) issue, deliver, grant, sell, authorize, pledge or otherwise encumber any
Equity Participations, or subscriptions, rights, warrants or options to acquire
any Equity Participations, or enter into other agreements or commitments of any
character obligating it to issue any such Equity Participations, other than
issuances of Common Stock upon the exercise of Company Options, Company Notes,
Company Warrants or Preferred Stock outstanding on the date hereof in accordance
with their terms or any agreement to which the Company is a party in effect as
of the date hereof, each of which agreements have been disclosed to Buyer;

(vii) acquire or agree to acquire by merging or consolidating with, or by
purchasing any Equity Participation or voting interest in or any assets of, or
by any other manner, any business or any Person or division thereof, or
otherwise acquire or agree to acquire any assets;

(viii) sell, lease or otherwise dispose of assets, including by merger,
consolidation, asset sale or other business combination, except payment of
invoices in the Ordinary Course of Business;

(ix) mortgage or pledge any of its assets (tangible or intangible), or create,
assume or suffer to exist any Encumbrances thereupon other than Permitted
Encumbrances;

(x) make any loans, advances or capital contributions to, or investments in, any
other Person, which, individually, are not in excess of $5,000 and, in the
aggregate, are not in excess of $25,000;

(xi) except as required by GAAP, make any material change in its methods or
principles of accounting since the date of the last audited Financial
Statements;

(xii) make or change any material election, change an annual accounting period,
adopt or change any material accounting method, file any material amended Tax
Return, enter into any closing agreement, settle any material Tax claim or
assessment relating to the Company, or consent to any extension or waiver of the
limitation period applicable to any material Tax claim or assessment relating to
the Company, in each case if such election, adoption, change, amendment,
agreement, settlement, surrender, consent or other action would have the effect
of increasing the Tax Liability of the Company for any period ending after the
Closing Date;

 

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(xiii) revalue any of its assets other than in the Ordinary Course of Business;

(xiv) except as required by Applicable Law, Benefit Plans or Material Contracts
binding on the Company as of the date hereof, (A) increase in any manner the
amount of compensation or fringe benefits of, pay any bonus to or grant
severance or termination pay to any Worker or any director of the Company,
(B) make any increase in or commitment to increase, in any material respect, any
benefits provided under any Benefit Plan (including any severance plan), adopt
or amend or make any commitment to adopt or amend any Benefit Plan or make any
contribution, other than regularly scheduled contributions, to any Benefit Plan,
(C) waive any stock repurchase rights, accelerate, amend or change the period of
exercisability of Company Options, (D) hire any employee at the level of vice
president or above (or performing functions typically associated with an
employee at the level of vice president or above) or with an annual base salary
or severance in excess of $50,000, (E) enter into any employment, severance,
termination or indemnification agreement with any executive officer or director
of the Company or enter into any collective bargaining agreement, (F) grant any
stock appreciation right, phantom stock award, stock-related award or
performance award (whether payable in cash, shares or otherwise) to any Person
(including any employee of the Company), or (G) enter into any agreement with
any employee of the Company the benefits of which are (in whole or in part)
contingent or the terms of which are materially altered upon the occurrence of a
transaction involving the Company of the nature contemplated hereby;

(xv) grant any rights with respect to any Intellectual Property of the Company
other than non-exclusive licenses to third party consultants and vendors in the
Ordinary Course;

(xvi) enter into any written, oral or other agreement, contract, subcontract,
settlement agreement, license, sublicense, or other legally binding commitment
containing any non-competition or exclusivity restrictions on the Company;

(xvii) enter into any agreement or commitment the effect of which would be to
grant to a third party following the Closing any license to any material
Intellectual Property owned by Buyer or any of its Subsidiaries (other than the
Company);

(xviii) disclose any of the Company’s material trade secrets outside of an
appropriate confidentiality agreement;

(xix) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities, warrants,
calls or other rights to acquire any debt securities of the Company, guarantee
any debt securities of another Person, enter into any “keep well” or other
agreement to maintain any financial statement condition of any other Person
(other than any wholly-owned Subsidiary of it) or enter into any arrangement
having the economic effect of any of the foregoing, other than in connection
with the financing of Ordinary Course trade payables or in connection with any
agreement to which the Company is a party in effect as of the date hereof and
which has been disclosed to Buyer;

 

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(xx) make or commit to make capital expenditures in excess of an aggregate of
$10,000 or fail to pay its obligations or satisfy its Liabilities as the same
become due and payable;

(xxi) modify, amend or terminate any Material Contract currently in effect, or
waive, release or assign any material rights or claims thereunder, other than
renewals of contracts with contract research organizations existing as of the
date of this Agreement in the Ordinary Course of Business;

(xxii) (A) waive, release, assign, settle or compromise any dispute, claim,
suit, action or Proceeding, other than waivers, releases, assignments,
settlements or compromises in the Ordinary Course of Business that involve only
the payment of monetary damages not in excess of $50,000 individually or
$250,000 in the aggregate, in any case without the imposition of equitable
relief or any restrictions on the business and operations of, on, or the
admission of any wrongdoing by, the Company, or (ii) commence a Proceeding;

(xxiii) enter into any Contract that, if entered into prior to the date hereof,
would be a Material Contract required to be set forth on Schedule 3.7(a), other
than in the Ordinary Course of Business in connection with contracts with
contract research organizations or pursuant to any agreement to which the
Company is a party in effect as of the date hereof and which has been disclosed
to Buyer; or

(xxiv) agree in writing or otherwise to take any of the actions described in
(i) through (xxiii) above.

6.2. Confidentiality; Access to Information; No Modification of Representations,
Warranties or Covenants.

(a) Confidentiality.

(i) The Parties acknowledge that the Company and Buyer have previously executed
a Non-Disclosure Agreement dated as of July 30, 2009 (as amended, the
“Confidentiality Agreement”), which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms and each of Buyer and the
Company shall hold, and shall cause its respective directors, officers,
employees of the Company, agents and advisors (including attorneys, accountants,
consultants, bankers and financial advisors) to hold, any information regarding
the other Party confidential in accordance with the terms of the Confidentiality
Agreement.

(ii) Until the date that is five years after the Closing, the Equityholders and
the Equityholder Representative agree to, and shall cause their Affiliates and
Representatives to: (a) treat and hold as confidential (and not disclose or
provide access to any Person) all information relating to trade secrets,
processes, patent applications, product development, price, customer and
supplier lists, pricing and marketing plans, policies and strategies, details of
Contracts, operations methods, product development techniques and all other
confidential or proprietary information with respect to the Company, (b) in the
event that a Equityholder or any of its Affiliates or Representatives becomes
legally compelled to disclose any such information,

 

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provide Buyer with prompt written notice of such requirement so that Buyer may
seek a protective order or other remedy or waive compliance with this
Section 6.2(a)(ii), and (c) in the event that such protective order or other
remedy is not obtained, or Buyer waives compliance with this Section 6.2(a)(ii),
furnish only that portion of such confidential information that is legally
required to be provided and exercise its commercially reasonable efforts to
obtain assurances that confidential treatment will be accorded such information;
provided, however, that this sentence shall not apply to any information that
(x) at the time of disclosure, is available publicly and was not disclosed in
breach of this Agreement by a Equityholder or its Affiliates or Representatives,
(y) is made available to the Equityholder or its Affiliates or Representatives
by any third party which, to such Equityholder’s, Affiliate’s or
Representative’s knowledge, does not have an obligation of confidentiality to
Buyer or (z) was permitted to be disclosed with Buyer’s prior written consent;
and provided further that, with respect to Intellectual Property of the Company,
specific information shall not be deemed to be within the foregoing exception
merely because it is embraced in general disclosures in the public domain. In
addition, with respect to Intellectual Property of the Company, any combination
of features shall not be deemed to be within the foregoing exception merely
because the individual features are in the public domain unless the combination
itself and its principle of operation are in the public domain.

(b) Access to Information. The Company shall, upon reasonable prior notice,
afford Buyer and Buyer’s accountants, counsel and other Representatives
reasonable access during normal business hours to its properties, books,
records, personnel and Representatives during the period prior to the Closing to
obtain all information concerning its business, including the status of product
development efforts, properties, results of operations and personnel for
purposes of this Agreement, as Buyer may reasonably request; provided, however,
that the Company may restrict the foregoing access to the extent that (i) any
Applicable Law, treaty, rule or regulation of any Governmental Authority
applicable to such Party requires such Party to restrict or prohibit access to
any such properties or information, or (ii) such access would be in breach of
any confidentiality obligation, commitment or provision by which the Company is
bound or affected, which confidentiality obligation, commitment or provision
shall be disclosed to Buyer, provided that disclosure of such obligation,
commitment or provision would not itself be the breach of an obligation or
commitment to a third party. In addition, any information obtained from the
Company pursuant to the access contemplated by this Section 6.2(b) shall be
subject to the Confidentiality Agreement.

(c) No Modification of Representations and Warranties or Covenants. No
information or knowledge obtained in any investigation or notification of a
Party shall affect or be deemed to modify any representation or warranty
contained herein, the covenants or agreements of the Parties hereto or the
conditions to the obligations of the Parties hereto under this Agreement.

6.3. Public Disclosure. Without limiting any other provision of this Agreement,
Buyer and the Company shall consult with each other before issuing, and provide
each other the opportunity to review, comment upon and concur with, and agree on
any press release or public statement with respect to this Agreement and the
transactions contemplated hereby, and shall not issue any such press release or
make any such public statement prior to such consultation and agreement, except
as may be required by Applicable Law, provided that Buyer may make public

 

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statements or disclosures that are not inconsistent with previous press
releases, public disclosures or public statements made by Buyer and/or the
Company in compliance with this Section 6.3. The Parties have agreed to the text
of the joint press release announcing the execution of this Agreement.

6.4. Regulatory Filings; Reasonable Efforts.

(a) Regulatory Filings. Each of Buyer and the Company shall coordinate and
cooperate with one another and shall each use commercially reasonable efforts to
comply with, and shall each refrain from taking any action that would impede
compliance with, all Applicable Laws, and as promptly as practicable after the
date hereof, Buyer and the Company shall make all filings, notices, petitions,
statements, registrations, submissions of information, application or submission
of other documents required by any Governmental Authority, including
(i) notification and report forms with the United States Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
as required by the HSR Act and (ii) any other filings necessary to satisfy the
closing condition set forth in Section 8.1(b), in connection with the
transactions contemplated hereby. Each of Buyer and the Company shall cause all
documents that it is responsible for filing with any Governmental Authority
under this Section 6.4(a) to comply in all material respects with all Applicable
Law.

(b) Exchange of Information. Buyer and the Company each shall promptly supply
the other with any information which may be required in order to effectuate any
filings or application pursuant to Section 6.4(a). Subject to Applicable Law
relating to the exchange of information, the Confidentiality Agreement, and the
preservation of any applicable attorney-client privilege, work-product doctrine,
self-audit privilege, or other similar privilege, each of the Company and Buyer
shall use commercially reasonable efforts to collaborate in reviewing and
commenting on in advance, and to consult the other on, information relating to
the Company, Buyer or any of its Subsidiaries, that appears in any filing made
with, or written materials submitted to, any third party and/or any Governmental
Authority in connection with any filing, investigation, or proceeding in
connection with this Agreement or the transactions contemplated hereby
(including under any antitrust or fair trade Applicable Law), provided that
neither Party shall be required to provide the other with access to any
competitively sensitive document that would be required to be provided in
response to Item 4(c), and Buyer shall not be required to provide the Company
with revenue information provided in response to Item 5, of any HSR Act filing
(whether or not such filing is made). In connection with such collaboration,
each of the Company and Buyer shall act reasonably and as promptly as
practicable.

(c) Notification. Each of Buyer and the Company shall notify the other promptly
upon the receipt of: (i) any comments from any officials of any Governmental
Authority in connection with any filings made pursuant hereto and (ii) any
request by any officials of any Governmental Authority for amendments or
supplements to any filings made pursuant to, or information provided to comply
in all material respects with, any Applicable Law. Whenever any event occurs
that is required to be set forth in an amendment or supplement to any filing
made pursuant to Section 6.4(a), Buyer or the Company, as the case may be, shall
promptly inform the other of such occurrence and cooperate in filing with the
applicable Governmental Authority such amendment or supplement.

 

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(d) Reasonable Efforts. Upon the terms and subject to the conditions set forth
herein, each of the Parties agrees to use commercially reasonable efforts to
take, or cause to be taken, all reasonable actions, and to do, or cause to be
done, and to assist and cooperate with the other Parties in doing, all things
reasonably necessary, proper or advisable to consummate the transactions
contemplated by this Agreement, including using commercially reasonable efforts
to accomplish the following: (i) the taking of all reasonable acts necessary to
cause the conditions precedent set forth in Article VIII to be satisfied;
(ii) the obtaining of all necessary actions or nonactions, waivers, consents,
approvals, orders and authorizations from Governmental Authorities and the
making of all necessary registrations, declarations and filings with any Person
(including registrations, declarations and filings with Governmental
Authorities, if any); (iii) the obtaining of all necessary consents, approvals
or waivers from third parties, including all necessary consents (provided, that
the Parties shall discuss in good faith procedures to pursue third party
consents with respect to the transactions contemplated hereby) (it being
understood that failure to obtain any one or more such consents, in and of
itself, shall not constitute a failure by the Company to comply with any of its
covenants herein or a failure of a condition to Closing hereunder); (iv) the
defending of any suits, claims, actions, investigations or proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby (other than any suits, claims, actions,
investigations or proceedings brought by a Governmental Authority); and (v) the
execution or delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement. Notwithstanding anything herein to the contrary, neither Buyer nor
any of its Affiliates shall be under any obligation to, nor, without Buyer’s
prior written consent (which consent may be withheld in Buyer’s sole
discretion), shall the Company, (A) make proposals, execute, agree or consent to
or carry out agreements or submit to any Court Order or other injunction, ruling
or decree of any Governmental Authority (1) providing for the sale or other
disposition or holding separate of any assets of Buyer, any of its Affiliates or
Subsidiaries (including, after the Closing, the Company) or any of their
Affiliates, or the Company or the holding separate of any capital stock of any
such Person, or imposing or seeking to impose any limitation on the ability of
Buyer or any of its Affiliates, to own such assets or to acquire, hold or
exercise full rights of ownership of capital stock of the Company, or
(2) imposing or seeking to impose (x) any limitation whatsoever on the business
activities of Buyer or any of its Affiliates or (y) any limitation on the
business activities of the Company, or (B) otherwise take any step to avoid or
eliminate any impediment which may be asserted or requested under any Applicable
Law governing competition, monopolies or restrictive trade practices.

6.5. Notification of Certain Matters.

(a) By the Company. The Company shall promptly after obtaining Knowledge of such
matter notify Buyer of any representation or warranty made by it contained in
this Agreement becoming untrue or inaccurate, or any failure of the Company to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in each
case, such that the conditions set forth in Section 8.3(a) or 8.3(b) would not
be satisfied; provided, however, that the delivery of any notice pursuant to
this Section 6.5(a) shall not limit or otherwise affect the remedies available
hereunder to Buyer or the representations, warranties or covenants of the
Company or the conditions to the obligations of Buyer.

 

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(b) By Buyer. Buyer shall promptly after obtaining knowledge of such matter
notify the Company of any representation or warranty made by it contained in
this Agreement becoming untrue or inaccurate, or any failure of Buyer to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, in each case, such
that the conditions set forth in Section 8.2(a) or 8.2(b) would not be
satisfied; provided, however, that the delivery of any notice pursuant to this
Section 6.5(b) shall not limit or otherwise affect the remedies available
hereunder to the Company or the representations, warranties or covenants of
Buyer or the conditions to the obligations of the Company.

6.6. No Solicitation. (a) From the date of this Agreement until the earlier of
(i) the Closing and (ii) the termination of this Agreement pursuant to
Section 10.1, the Company agrees that neither it nor any of its Representatives,
Affiliates, agents, officers or directors nor any Persons acting on behalf of
the Company shall, directly or indirectly:

(i) initiate, solicit or encourage (including by way of providing information)
or facilitate any inquiries, proposals or offers with respect to, or the making,
announcement, submission or the completion of, an Acquisition Proposal;

(ii) participate or engage in any discussions or negotiations with, or furnish
or disclose any non-public information relating to the Company, or otherwise
cooperate with, facilitate or assist any Person in connection with an
Acquisition Proposal;

(iii) approve, endorse or recommend any Acquisition Proposal;

(iv) enter into any letter of intent, agreement in principle, merger agreement,
acquisition agreement, option agreement or other similar agreement relating to
an Acquisition Proposal; or

(v) resolve, propose or agree to do any of the foregoing.

(b) The Company shall, and shall cause each of its Representatives, Affiliates,
agents, officers or directors to, immediately cease any existing solicitations,
discussions or negotiations with any Person (other than the Parties hereto) that
has made or indicated an intention to make an Acquisition Proposal. The Company
shall promptly request that each Person who has executed a confidentiality
agreement with the Company in connection with such Person’s consideration of an
Acquisition Proposal (other than the Parties hereto and their respective
advisors) return or destroy all non-public information furnished to that Person
by or on behalf of the Company. The Company shall promptly inform its
Representatives, Affiliates, agents, officers or directors of the Company’s
obligations under this Section 6.6. Any violation of or by any Representatives,
Affiliates, agents, officers or directors of the Company shall be deemed to be a
breach of this by the Company.

 

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(c) The Company shall notify Buyer promptly (and in any event within twenty-four
(24) hours) upon receipt by it or any of its Representatives of (i) any
Acquisition Proposal or indication by any Person that it is considering making
an Acquisition Proposal, (ii) any request for non-public information relating to
the Company other than requests for information in the Ordinary Course of
Business and unrelated to an Acquisition Proposal or (iii) any inquiry or
request for discussions or negotiations regarding any Acquisition Proposal. The
Company shall notify Buyer promptly (and in any event within twenty-four
(24) hours) with the identity of such Person and a copy of such Acquisition
Proposal, indication, inquiry or request (or, where no such copy is available, a
description of such Acquisition Proposal, indication, inquiry or request),
including any modifications thereto.

6.7. Takeover Statutes. If any takeover statute is or becomes applicable to this
Agreement or the transactions contemplated by this Agreement, each of Buyer, the
Company and their respective Boards of Directors shall (a) take all necessary
action to ensure that such transactions may be consummated as promptly as
practicable upon the terms and subject to the conditions set forth in this
Agreement and (b) otherwise act to eliminate or minimize the effects of such
takeover statute.

6.8. Closing Date Allocation Schedule. At least three (3) Business Days prior to
the Closing, the Company shall deliver to Buyer the Closing Date Allocation
Schedule, and thereafter through the Closing any interim updates to the Closing
Date Allocation Schedule as necessary for the information reflected thereon to
be accurate in all respects as of the Closing Date.

ARTICLE VII.

POST-CLOSING COVENANTS OF ALL PARTIES

7.1. Indemnification of Directors and Officers.

(a) [****]

(b) [****]

(c) [****]

(d) [****]

(e) [****]

7.2. Tax Matters.

(a) Cooperation. Without limiting any of the other provisions of this
Section 7.2, the Parties shall cooperate fully, as and to the extent reasonably
requested by any of them, in connection with the filing of Tax Returns pursuant
to this Agreement and any audit, litigation or other proceeding with respect to
Taxes. In this regard, the Buyer shall retain all books and records with respect
to Tax matters of the Company which are or may be pertinent to any Tax

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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period beginning before the Closing Date until the expiration of the applicable
statute of limitations and shall make them available to the Equityholder
Representative in connection with any audit of the Company which could give rise
to an indemnification obligation of any of the Equityholders. Promptly following
Buyer’s request, the Equityholder Representative shall provide Buyer with any
information that is available to it which is necessary for the preparation of
any required statement to be furnished to the Equityholders or Tax Return to be
filed by Buyer pursuant to Section 6043A of the Code, the regulations
promulgated thereunder or the form prescribed by the United States Secretary of
the Treasury thereunder.

(b) Transfer Taxes. All transfer, documentary, sales, use, stamp, registration
and other such Taxes, and all conveyance fees, recording charges and other fees
and charges (including any penalties and interest) incurred in connection with
consummation of the transactions contemplated by this Agreement, if any, shall
be borne and paid 50% by Buyer and 50% shall be deemed to be Transaction
Expenses. The Equityholder Representative or Buyer (as required by Applicable
Law) shall prepare and timely file all Tax Returns required to be filed in
respect of any such Taxes.

(c) Tax Returns.

(i) The Equityholder Representative shall prepare all income Tax Returns of the
Company for any Tax period ending on or before the Closing Date that are due
before the Closing Date and shall submit a copy of such Tax Return to Buyer for
review and approval at least thirty (30) days before the due date for filing
such Tax Return. Such Tax Returns shall be prepared consistently with past
practice.

(ii) Buyer, at its own expense (which expense, for the avoidance of doubt, shall
not be subject to indemnification by the Equityholders) shall prepare all Tax
Returns of or relating to the Company for the Straddle Period that are due after
the Closing consistently with past practice and shall provide a copy of each
such Tax Return to the Equityholder Representative at least thirty (30) days
before the due date for filing such Tax Return for the Equityholder
Representative’s review and approval. With respect to Tax Returns relating to
any Tax period ending on or before the Closing Date or relating to any Straddle
Period, Buyer shall consider in good faith all reasonable written comments made
by the Equityholder Representative with respect to such Tax Returns and such Tax
Returns shall be filed as finally prepared by Buyer.

(d) Tax Refunds. All refunds of Taxes of the Company for any Pre-Closing Tax
Period received or realized after the Closing Date (including any such amounts
that could have been refunded but are credited against Taxes for a Post-Closing
Tax Period in lieu of being refunded) shall be for the Equityholders’ account
(the “Tax Refund Amount”) and shall be paid to the Equityholder Representative
for distribution to the Equityholders within five (5) days of receipt, except to
the extent such refunds were reflected as an asset in the calculation of Closing
Date Net Working Capital.

 

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(e) Tax Claims. Buyer shall promptly inform the Equityholder Representative of
the receipt by Buyer or its Affiliates (including the Company after the Closing)
of notice of any audit, claim, inquiry, examination or other proceeding relating
to Taxes with respect to which Buyer intends to seek indemnification under
Article IX (a “Tax Claim”). The Equityholders shall not be relieved of their
indemnification obligations hereunder if such notice is not delivered promptly
except to the extent the Equityholders are materially prejudiced thereby. The
Equityholder Representative shall have the right to control the conduct, defense
and settlement or compromise of any Tax Claim relating to a Tax period ending on
or before the Closing Date. Buyer shall execute, or cause the Company to
execute, any such powers of attorney or other documents that may be required to
give effect to the prior sentence. If the Equityholder Representative does not
elect to control the conduct of such Tax Claim, Buyer shall have the right to
control such Tax Claim, provided, however, that Buyer shall keep the
Equityholder Representative fully informed of the progress of such Tax Claim,
permit the Equityholder Representative to participate in the conduct of the
defense of such Tax Claim and shall not settle or compromise such Tax Claim
without the Equityholder Representative’s prior written consent. Notwithstanding
anything in Article IX to the contrary, this Section 7.2(e), and not
Section 9.4, shall govern the conduct of Tax Claims.

7.3. Employee Benefits.

(a) Offers of Employment. No less than five (5) days prior to the Closing, Buyer
shall use commercially reasonable efforts to extend a written offer of
employment with Buyer, a Subsidiary of Buyer or the Company to each employee set
forth on Schedule C (“Continuing Employees”), effective on the Closing. Each
such written offer of employment shall include (i) the same or superior base
salary or base wage rate as provided to such Company employee by the Company as
of immediately prior to the Closing, (ii) cash bonus and other incentive
compensation opportunities substantially similar in the aggregate as those
provided to similarly situated employees of Buyer and (iii) an appropriate
retention bonus to be paid by Buyer upon the treatment of the first human
patient with a PARP Development Compound or PARP Development Product in a
clinical study. Nothing in this subsection (a), expressed or implied, shall
confer upon any of the Continuing Employees any right to employment or continued
employment for any specified period, of any nature or kind whatsoever under or
by reason of this Agreement and the employment of all the Continuing Employees
shall remain “at will.” Subject to Applicable Law, prior to the Closing, the
Company shall take all necessary actions to terminate the employment of all
employees of the Company, effective as of immediately prior to the Closing,
other than the Continuing Employees. Consistent with the requirements set forth
in Code Section 4980B and Part 6 of Subtitle B of Title I of ERISA (“COBRA”),
the Company’s group health plan (or the Buyer’s group health plan if the
Company’s plan is not continued after the Closing) shall make COBRA continuation
coverage available to each such employee who is eligible for COBRA and was
covered under the Company’s group health plan on the day prior to the employee’s
last day of employment and each such employee’s “qualified beneficiaries”
(within the meaning of COBRA).

(b) Benefits. Buyer agrees that all Continuing Employees shall be eligible to
participate in either, at the sole discretion of Buyer: (i) Buyer’s employee
benefit plans and programs, including any equity incentive plan, pension plan,
defined benefit plan, defined contribution plan, Section 401(k) plan, bonus
plan, profit sharing plan, severance plan, medical plan, dental plan, life
insurance plan, time-off programs and disability plan, in each case to the same
extent as similarly situated employees of Buyer; or (ii) such Benefit Plans as
are continued

 

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by the Company following the Closing Date, or are assumed by Buyer (for the
purposes of this Section 7.3 only, the plans referred to in clauses “(i)” and
“(ii)” of this sentence being referred to as “Specified Buyer Benefit Plans”) to
the extent necessary so that Continuing Employees are offered benefits
substantially similar in the aggregate to those offered to similarly situated
employees of Buyer as of the Closing. Participation by Continuing Employees in
the Specified Buyer Benefit Plans shall be subject to the terms and conditions
of the applicable plan, and the plan sponsor’s right to amend or terminate the
plan for any or no reason and without notice to employees.

(c) Eligibility; Service Credit. From and after the Closing, each Continuing
Employee shall (to the extent permitted by Applicable Law) be credited under
each Specified Buyer Benefit Plan with his or her years of services with the
Company before the Closing for purposes of vesting, eligibility, and level of
benefits (except for purposes of eligibility under the Buyer’s employee stock
purchase plan, benefit accrual under a defined benefit pension plan or where
such credit would result in a duplication of benefits) to the same extent as
such Continuing Employee was entitled, before the Closing, to credit for such
service with the Company under any similar Benefit Plan in which such Continuing
Employee participated immediately prior to the Closing. In addition, and without
limiting the generality of the foregoing, Buyer shall (to the extent that such
limitation would not apply with respect to substantially similar plans
maintained by the Company prior to the Closing) use its commercially reasonable
efforts to (i) cause to be waived any eligibility requirements or pre-existing
condition limitations, and (ii) to the extent practicable, give effect, in
determining any deductible maximum out of pocket limitations, to amounts paid by
such Continuing Employees during the plan year in which the Closing occurs.

(d) 401(k) Plan Termination. At least five (5) Business Days prior to the
Closing Date, the Company shall take (or cause to be taken) all actions
reasonably necessary or appropriate pursuant to resolutions of the Company’s
Board of Directors to terminate, effective no later than the day prior to the
Closing Date, any Benefit Plan that contains a cash or deferred arrangement
intended to qualify under Section 401(k) of the Code (a “Company 401(k) Plan”).
The Company shall provide to Buyer prior to the Closing Date written evidence of
the adoption by the Company’s Board of Directors of resolutions authorizing the
termination of such Company 401(k) Plan (the form and substance of which
resolutions shall be subject to the prior review and approval of Buyer, which
approval shall not be unreasonably withheld or delayed).

(e) This Section 7.3 shall be binding upon and inure solely to the benefit of
each of the Parties to this Agreement, and nothing in this Section 7.3,
expressed or implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Section 7.3.
Without limiting the foregoing, no provision of this Section 7.3 shall create
any third party beneficiary rights in any current or former employee, director
or consultant of the Company in respect of continued employment or service (or
resumed employment or service) or any other matter. Nothing in this Section 7.3
is intended to amend any Benefit Plan, or interfere with Buyer’s, the Company’s,
or the Company’s right from and after the Closing to amend or terminate any
Benefit Plan or the employment or provision of services by any director,
employee, independent contractor or consultant.

 

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7.4. Development and Commercialization of the Development Products.

(a) Following the Closing, and for up to a maximum period of [****], Buyer and
the Company shall (i) use Milestone Diligence Efforts to [****]. “Milestone
Diligent Efforts” means [****].

(b) Buyer shall notify Equityholder Representative if Buyer chooses not to
proceed with further efforts to obtain Regulatory Approval of or commercialize
any PARP Development Products.

(c) [****]

ARTICLE VIII.

CONDITIONS TO OBLIGATIONS

8.1. Conditions to the Obligations of Each Party. The respective obligations of
each Party to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction at or prior to the Closing Date of the following
conditions:

(a) No Order. No Governmental Authority of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other Court Order which (i) is in effect
and (ii) has the effect of otherwise prohibiting or preventing the consummation
of the transactions contemplated hereby.

(b) Regulatory Approvals/HSR Act. If applicable, all waiting periods under the
HSR Act relating to the transactions contemplated hereby will have expired or
terminated early.

8.2. Conditions to the Company’s Obligations. The obligations of the Company to
consummate the transactions provided for hereby are subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions, any of
which may be waived by the Company:

(a) Representations and Warranties. Each of (i) the representations and
warranties of Buyer in Section 5.1 (Organization) and Section 5.2
(Authorization) shall be true and correct in all respects as of the date hereof
and as of the Closing as though made on and as of the Closing (except that those
representations and warranties which address matters only as of a particular
date need only be true and correct as of such date), and (ii) all other
representations and warranties of Buyer contained in this Agreement shall be
true and correct (without giving effect to any limitation as to “materiality” or
“Material Adverse Effect” set forth therein) in all material respects as of the
date hereof and as of the Closing as though made on and as of the Closing
(except that those representations and warranties which address matters only as
of a particular date need only be true and correct in accordance with this
subclause (ii) as of such date).

(b) Covenants. Buyer shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date. The Company shall have
received a certificate with respect to the foregoing signed on behalf of Buyer,
with respect to the covenants of Buyer, by an authorized executive officer of
Buyer.

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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(c) Escrow Agreement. The Company shall have received the Escrow Agreement,
signed on behalf of Buyer, the Escrow Agent and the Equityholder Representative.

8.3. Conditions to the Obligations of Buyer. The obligations of Buyer to
consummate the transactions provided for hereby are subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions, any of
which may be waived by Buyer:

(a) Representations and Warranties. Each of the representations and warranties
(i) of the Company in Section [****] shall be true and correct in all respects
as of the date hereof and as of the Closing as though made on and as of the
Closing (except that those representations and warranties which address matters
only as of a particular date need only be true and correct as of such date), and
(ii) all other representations and warranties of the Company and each Seller
contained in this Agreement shall be true and correct (without giving effect to
any limitation as to “materiality” or “Material Adverse Effect” set forth
therein) in all material respects as of the date hereof and as of the Closing as
though made on and as of the Closing (except that those representations and
warranties which address matters only as of a particular date need only be true
and correct in accordance with this subclause (ii) as of such date).

(b) Covenants. The Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Closing Date. Buyer shall
have received a certificate to such effect signed on behalf of the Company by an
authorized executive officer of the Company.

(c) Company Material Adverse Effect. Since the date of this Agreement, there
shall not have been any Material Adverse Effect on the Company.

(d) Deliveries. Buyer shall have received the following:

(i) a copy of the Escrow Agreement, signed by the Equityholder Representative
and the Escrow Agent;

(ii) stock certificates evidencing the Shares duly endorsed in blank, or
accompanied by stock powers duly executed in blank, in form satisfactory to
Buyer;

(iii) a certificate of the Secretary or an Assistant Secretary of the Company
certifying the names and signatures of the officers or directors of the Company
authorized to sign this Agreement and the other documents to be delivered
hereunder;

(iv) a certificate of the Chief Executive Officer of the Company certifying,
with respect to the Company, as to the matters set forth in Sections 8.3(a),
8.3(b), 8.3(c), 8.3(e), 8.3(f) and 8.3(g);

(v) the resignations, effective as of the Closing, of all of the directors and
officers of the Company;

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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(vi) a copy of (A) the certificate of incorporation, as amended, of the Company,
certified by the Secretary of State of Delaware, as of a date not earlier than
five business days prior to the Closing and accompanied by a certificate of the
Secretary or Assistant Secretary of the Company, dated as of the Closing,
stating that no amendments have been made to such certificate of incorporation
since such date, and (B) the bylaws of the Company, certified by the Secretary
or Assistant Secretary of the Company; and

(vii) good standing certificates for the Company from the Secretary of State of
Delaware and from the Secretary of State in each other jurisdiction in which the
properties owned or leased by the Company, or the operation of its business in
such jurisdiction, requires the Company to qualify to do business as a foreign
corporation, in each case dated as of a date not earlier than five business days
prior to the Closing and accompanied by bring-down telegrams dated as of the
Closing.

(e) Consents and Approvals. The Company shall have received (i) all Permits from
and consents of Governmental Authorities that are required for the consummation
of the transactions contemplated hereby, and (ii) an executed Option Holder
Consent Agreement in the form attached hereto as Exhibit C from each holder of a
Company Option.

(f) Series A Preferred Stock Agreements. Each of the Series A Preferred Stock
Agreements shall have been terminated, or by their terms shall be terminated as
of the Closing.

(g) Company Notes, Company Warrants and Company Options. Prior to the Closing,
all Company Notes shall have converted into Series A Preferred Stock or been
cancelled. Prior to the Closing, all Company Warrants shall have been exercised
in full or cancelled. Prior to or Concurrently with the Closing, all Company
Options shall have been exercised in full or cancelled.

(h) FIRPTA. The Company shall have delivered to Buyer an affidavit dated as of
the Closing Date, made under penalty of perjury and in form and substance
required under Treas. Reg. § 1.1445-2(c)(3) in a form reasonably acceptable to
Buyer.

ARTICLE IX.

INDEMNIFICATION

9.1. Survival of Representations. The representations and warranties contained
herein shall survive the Closing until [****] thereafter; provided, however,
that: (i) the representations and warranties set forth in [****] shall survive
until [****] and (ii) the representations and warranties set forth in [****]
shall survive the Closing until the earlier of [****]. Any claims under this
Agreement with respect to a breach of a representation and warranty must be
asserted by written notice within the applicable survival period contemplated by
this Section 9.1, and if such a notice is given, the survival period for such
representation and warranty shall continue until the claim is fully resolved.
The right to indemnification or other remedy based on the representations,
warranties, covenants and agreements herein will not be affected by any
investigation conducted with respect to, or any knowledge (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or agreement.

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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9.2. Indemnification.

(a) (i) Subsequent to the Closing, subject to the limitations described below in
Section 9.5 and the other provisions of this Article IX, each of Buyer and its
respective Affiliates (including, after the Closing, the Company) and each of
its respective officers, directors, employees, stockholders and agents (the
“Buyer Indemnified Parties”) shall be indemnified and reimbursed by the
Equityholders [****], from and against any and all damage, claim, loss, cost,
Liability or expense, including interest, penalties, reasonable attorneys’ fees
and expenses of investigation, response action, removal action or remedial
action (collectively, “Damages”) incurred by such Buyer Indemnified Party that
arise out of, or relate to [****].

(ii) Subsequent to the Closing, subject to the limitations described below in
Section 9.5 and the other provisions of this Article IX, Buyer shall indemnify
and reimburse each Equityholder and each of their respective representatives,
heirs and Affiliates (the “Company Indemnified Parties” and collectively with
the Buyer Indemnified Parties, the “Covered Parties”) from and against any and
all Damages asserted against, suffered, sustained, accrued or incurred by such
Company Indemnified Party arising out of or relating to [****].

(b) The term “Damages” as used in this Article IX is not limited to matters
asserted by third parties against the Covered Parties, but includes Damages
incurred or sustained by such Persons in the absence of third-party claims, and
payments by a Covered Party shall not be a condition precedent to recovery, and
shall be net (as contemplated by the last sentence of this Section 9.2(b)) of
[****]. “Net Tax Benefit” means, [****].

9.3. Notice of Claims.

(a) Any Covered Party seeking indemnification hereunder shall, within the
relevant limitation period provided for in Section 9.1 above, if applicable,
give to the Party which is obligated pursuant to this Article IX to provide
indemnification as set forth herein (the “Indemnifying Party”) a notice (a
“Claim Notice”) describing in reasonable detail the facts giving rise to any
claims for indemnification hereunder and shall include in such Claim Notice (if
then known) the amount or the method of computation of the amount of such claim,
and a reference to the provision of this Agreement or any agreement, certificate
or instrument executed pursuant hereto or in connection herewith upon which such
claim is based; provided, that a Claim Notice in respect of any action at law or
suit in equity by or against a third Person as to which indemnification shall be
sought shall be given promptly after the action or suit is commenced; and
provided further, that failure to give such notice shall not affect such Covered
Party’s right to indemnification hereunder except to the extent the Indemnifying
Party shall have been materially prejudiced by such failure.

(b) The Indemnifying Party shall have twenty (20) days following receipt of any
Claim Notice pursuant hereto to (i) agree to the amount or method of
determination set forth in the Claim Notice to pay such amount to (A) a Buyer
Indemnified Party in immediately

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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available funds solely from the Escrow Account or upon offset of a Future
Payment Amount pursuant to Section 9.5(d), or (B) a Company Indemnified Party in
immediately available funds or (ii) to provide such Covered Party with notice
that they disagree with the amount or method of determination set forth in the
Claim Notice and thereafter comply with the dispute resolution provisions set
forth in Section 2.11(h).

9.4. Third Person Claims. If a claim by a third Person is made against a Covered
Party, and if such party intends to seek indemnity with respect thereto under
this Article IX, such Covered Party shall promptly notify the Indemnifying Party
in writing of such claims, setting forth such claims in reasonable detail. The
failure to give such notice shall not affect such Covered Party’s right to
indemnification hereunder except to the extent the Indemnifying Party shall have
been materially prejudiced by such failure. With respect to any claim for
Damages relating solely to the payment of money damages and that will not result
in the Covered Party becoming subject to injunctive or other relief or otherwise
adversely affect the business or reputation of Buyer or any of its Affiliates
(including, after the Closing, the Company) in any manner and, in the case of a
Buyer Indemnified Party, if the amount of the claim does not exceed the amount
then held in the Indemnification Escrow Account, the Indemnifying Party shall
have twenty (20) days following receipt of such notice to deliver to the Covered
Party a written acknowledgement that such claim is an indemnifiable claim for
which it is Liable under this Article IX, that it will undertake, conduct and
control (in accordance with the terms hereof), through counsel of their own
choosing (provided that such counsel must be reasonably acceptable to the
Covered Party) and at their own expense, the settlement or defense thereof, and
the Covered Party shall cooperate with them in connection therewith; provided
that the Covered Party may participate in such settlement or defense through
counsel chosen by such Covered Party and paid at its own expense, provided
further that, if in the reasonable opinion of counsel for the Covered Party,
there is a reasonable likelihood of a conflict of interest between the
Indemnifying Party and the Covered Party, the Indemnifying Party shall be
responsible for reasonable fees and expenses of one counsel to such Covered
Party in connection with such defense. So long as the Indemnifying Party is
reasonably contesting any such claim in good faith, the Covered Party shall not
pay or settle any such claim without the consent of the Equityholder
Representative with respect to claims where the Equityholders are the
Indemnifying Party and Buyer where Buyer is the Indemnifying Party. If the
Indemnifying Party does not notify the Covered Party within such twenty
(20) days, the Covered Party shall have the right to undertake, at the
Indemnifying Party’s cost, risk and expense, the defense, compromise or
settlement of the claim but shall not thereby waive any right to indemnity
therefor pursuant to this Agreement. The Indemnifying Party shall not, except
with the consent of the Covered Party, enter into any settlement that is not
exclusively monetary and shall be paid entirely by the Indemnifying Party and
does not include as an unconditional term thereof the giving by the person or
persons asserting such claim to all Covered Parties of an unconditional release
from all Liability with respect to such claim or consent to entry of any
judgment. Notwithstanding the foregoing, the Indemnifying Party shall not be
entitled to control any claim relating to Taxes of Buyer or its Subsidiaries, or
the Company for any Tax period ending after the Closing Date and shall not be
entitled to settle, either administratively or after the commencement of
litigation, any claim for Taxes which could adversely affect the Liability of
Buyer or its Subsidiaries, or the Company for Taxes for any Tax period (or
portion thereof) after the Closing Date, without the prior written consent of
Buyer.

 

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9.5. Limitation on Indemnity; Payments Out of Milestone Payment Amounts.

(a) Notwithstanding anything expressed or implied in this Article IX to the
contrary, no Covered Party shall be entitled to make a claim for indemnification
pursuant to Section 9.2(a)(i)(1) of this Agreement unless and until the
aggregate of all Damages suffered by such Covered Parties and agreed upon in
accordance with Section 9.3(b) hereunder exceeds $[****] (the “Deductible
Amount”), whereupon, provided the other requirements of this Article IX have
been complied with, only Damages exceeding the Deductible Amount shall become
due and payable. Notwithstanding the foregoing, no Deductible Amount shall apply
to (i) the Company’s representations and warranties set forth in [****].

(b) To the extent permitted by Law, any payment made by a Person indemnifying a
Covered Party pursuant to this Article IX shall be treated on the Parties’ Tax
Returns as an adjustment to the Purchase Price for all Tax purposes.

(c) In the event a claim for indemnification or reimbursement under this Article
IX shall have been finally determined in which the indemnified party is Buyer,
(i) the amount of the related Damages (after taking into account the limitations
of Section 9.5(a)) shall be paid [****].

(d) If, following depletion or release of the Indemnification Escrow Account to
the Equityholders, an amount has been claimed by a Buyer Indemnified Party
pursuant to Section 9.2(a)(i) (whether or not finally determined to be owed by
the Equityholders), and if the Future Payment Amounts have not yet been fully
paid pursuant to Section 2.1, Buyer may set-off such amounts claimed against the
Future Payment Amounts (if required to be paid pursuant to Section 2.1), on a
dollar for dollar basis, notwithstanding any objection by the Equityholder
Representative, subject to the limitations set forth in Section 9.5(a). The
exercise of such right of set-off by Buyer in good faith, whether or not the
claim is ultimately determined to be justified, will not constitute a breach of
this Agreement. Once a claim is finally determined in accordance with this
Agreement, if the Damages relating to such claim are determined to be less than
the amount set-off against the Future Payment Amounts, Buyer shall notify the
Equityholder Representative. Thereafter, the Equityholder Representative shall
prepare a Future Payment Allocation Schedule showing the portion of such amount
to be paid to each Equityholder and deliver such Future Payment Allocation
Schedule to Buyer. Within ten (10) Business Days following Buyer’s receipt of
such Future Payment Allocation Schedule, Buyer shall pay to each Equityholder
the portion of such amount set forth opposite such Equityholder’s name on such
Future Payment Allocation Schedule in immediately available funds by check or by
wire transfer to such bank account or accounts as may be specified on such
Future Payment Allocation Schedule. [****]

(e) Each Equityholder waives, and acknowledges and agrees that such Equityholder
shall not have and shall not exercise or assert (or attempt to exercise or
assert), any right of contribution, right of indemnity or other right or remedy
against Buyer or the Company, or any of their respective directors, officers,
employees, Affiliates, agents, attorneys, Representatives, assigns or
successors, for any indemnification claims asserted by any Buyer Indemnified
Parties in connection with any indemnification obligation or any other Liability
to which such Equityholder may become subject under or in connection with this
Agreement, it being acknowledged and agreed that the representations,
warranties, covenants and agreements of the Company and Equityholders are solely
for the benefit of the Buyer Indemnified Parties.

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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9.6. Remedies. Subsequent to the Closing, the remedies in this Article IX shall
be the sole and exclusive remedies of the Parties with respect to any breach of
the respective representations, warranties, covenants and agreements pursuant to
this Agreement or otherwise arising out of this Agreement, regardless of the
theory or cause of action pled, and the sole remedies of the Buyer Indemnified
Parties shall be by means of deductions from the Indemnification Escrow Account
and Buyer’s right of offset set forth in Section 9.5(d) except for the remedies
of specific performance, injunction and other equitable relief; provided,
however, that no Party hereto shall be deemed to have waived any rights, claims,
causes of action or remedies, and the Deductible Amount or the Cap Amount shall
not limit any recovery related thereto, if and to the extent actual fraud,
intentional misrepresentation or willful misconduct is proven on the part of a
Party by another Party hereto or such rights, claims, causes of action or
remedies may not be waived under Applicable Law. For the avoidance of doubt,
Buyer acknowledges that its claims arising from fraud of Equityholder(s), in
such Equityholder(s)’s capacity as a Stockholder, can only be brought against
such Equityholder(s) who has committed such fraud or aided and abetted such
fraud. For the purposes of this Section 9.6, there shall be deemed “willful
misconduct” by a Party only if such Party had actual knowledge at the time of
taking an action or omitting to take an action, that such action or omission
constituted a breach of such Party’s covenants or obligations under the
Agreement.

ARTICLE X.

TERMINATION, AMENDMENT AND WAIVER

10.1. Termination. This Agreement may be terminated at any time prior to the
Closing, by action taken or authorized by the Board of Directors of the
terminating Party or Parties:

(a) by mutual written consent duly authorized by the Boards of Directors of
Buyer and the Company;

(b) by either the Company or Buyer if the Closing shall not have occurred by
February 28, 2010 (the “End Date”); provided, however, that the right to
terminate this Agreement under this Section 10.1(b) shall not be available to
any Party whose action or failure to act has been a principal cause of or
resulted in the failure of the Closing to occur on or before such date and such
action or failure to act constitutes a breach of this Agreement;

(c) by either the Company or Buyer if a Governmental Authority shall have issued
an Court Order, decree or ruling or taken any other action (including the
failure to have taken an action), in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Closing, which order,
decree, ruling or other action is final and nonappealable;

(d) by the Company, upon a breach of any representation, warranty, covenant or
agreement on the part of Buyer set forth in this Agreement, or if any
representation or warranty of Buyer shall have become untrue, in either case
such that the conditions set forth in Section 8.2(a) or Section 8.2(b) would not
be satisfied as of the time of such breach or as of the

 

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time such representation or warranty shall have become untrue, provided that if
such inaccuracy in Buyer’s representations and warranties or breach by Buyer is
curable by Buyer prior to the End Date through the exercise of reasonable
efforts, then the Company may not terminate this Agreement under this
Section 10.1(d) prior to thirty (30) days following the receipt of written
notice from the Company to Buyer of such breach (it being understood that the
Company may not terminate this Agreement pursuant to this Section 10.1(d) if it
shall have materially breached this Agreement or if such breach by Buyer is
cured so that such conditions would then be satisfied); or

(e) by Buyer, upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions set forth in Section 8.3(a) or Section 8.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in the Company’s representations and warranties or breach by the
Company is curable by the Company prior to the End Date through the exercise of
reasonable efforts, then Buyer may not terminate this Agreement under this
Section 10.1(e) prior to thirty (30) days following the receipt of written
notice from Buyer to the Company of such breach (it being understood that Buyer
may not terminate this Agreement pursuant to this Section 10.1(e) if it shall
have materially breached this Agreement or if such breach by the Company is
cured so that such conditions would then be satisfied).

10.2. Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 10.1 above shall be effective immediately upon the
delivery of a valid written notice of the terminating Party to the other Party
hereto. In the event of the termination of this Agreement as provided in
Section 10.1, this Agreement shall be of no further force or effect, except
(i) as set forth in Section 6.2(a) this Section 10.2, Section 10.3 and Article
XI, each of which shall survive the termination of this Agreement and
(ii) nothing herein shall relieve any Party from Liability for any breach of
this Agreement. No termination of this Agreement shall affect the obligations of
the Parties contained in the Confidentiality Agreement, all of which obligations
shall survive termination of this Agreement in accordance with their terms.

10.3. Expenses. All fees and expenses incurred in connection with this Agreement
and the transactions contemplated hereby, including fees and expenses of
financial advisors, financial sponsors, legal counsel and other advisors, shall
be paid by the Party incurring such expenses whether or not the transactions
contemplated hereby are consummated.

ARTICLE XI.

MISCELLANEOUS

11.1. Binding Effect; Assignment. This Agreement shall be binding upon and inure
to the benefit of the Parties hereto and their successors and permitted assigns,
in accordance with the terms hereof. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
Parties hereto, in whole or in part (whether by operation of law or otherwise),
without the prior written consent of the other Parties, and any attempt to make
any such assignment without such consent shall be null and void, except that
(a) Buyer may assign,

 

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in its sole discretion, any or all of its rights, interests and obligations
under this Agreement to any entity that is wholly-owned directly by Buyer
without the consent of the Company and (b) Buyer may assign, in its sole
discretion, any or all of its rights, interests and obligations under this
Agreement to any entity that will acquire substantially all of Buyer’s assets by
merger, stock purchase, asset purchase or otherwise. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and assigns, and no other Person shall
have any right, benefit or obligation hereunder.

11.2. Notices. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any Party to the other
shall be in writing and delivered in person or by courier, by facsimile
transmission or mailed by registered or certified mail, postage prepaid, return
receipt requested (such mailed notice to be effective on the date of such
receipt is acknowledged), as follows:

If to Buyer:

BioMarin Pharmaceutical Inc.

105 Digital Drive

Novato, CA 94949

Attn: Chief Executive Officer

Fax: (415) 382-7889

With a copy (which shall not constitute notice) to:

BioMarin Pharmaceutical Inc.

105 Digital Drive

Novato, CA 94949

Attn: General Counsel

Fax: (415) 382-7889

If to the Company:

LEAD Therapeutics, Inc.

999 Bayhill Dr, Suite 130

San Bruno, CA 94066

Attn: Peter Myers

Fax: (925) 253-2450

With a copy (which shall not constitute notice) to:

Latham & Watkins LLP

140 Scott Drive

Menlo Park, CA 94025

Attn: Alan C. Mendelson

Fax: (650) 463-2600

 

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If to the Equityholder Representative:

Arthur Pappas

c/o A.M. Pappas & Associates, LLC

P.O. Box 110287

Research Triangle Park, NC 27709

Or (for Fedex deliveries)

2520 Meridian Parkway

Suite 400

Durham, NC 27713

Fax: (919) 998-3302

With a copy (which shall not constitute notice) to:

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.

2500 Wachovia Capitol Center

P.O. Box 2611

Raleigh, NC 27602

Attn: Gerald F. Roach

Fax: (919) 821-6800

Any Party may, from time to time, designate any other address to which any such
notice to such Party shall be sent. Any such notice shall be deemed to have been
delivered upon receipt.

11.3. Choice of Law. This Agreement shall be construed, interpreted and the
rights of the Parties determined in accordance with the laws of the State of
Delaware, as applied to agreements among Delaware residents entered into and
wholly to be performed within the State of Delaware (without reference to any
choice of law rules that would require the application of the laws of any other
jurisdiction).

11.4. Entire Agreement; Amendments and Waivers. This Agreement, together with
the Confidentiality Agreement and the other documents and instruments referred
to herein and all exhibits and schedules hereto, constitutes the entire
agreement among the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. This Agreement may be supplemented,
modified or amended by action by each Party hereto, which in the case of the
Company and Buyer shall be action taken by or on behalf of the Board of
Directors of such Party. No supplement, modification or other amendment or
waiver of this Agreement shall be binding unless executed in writing by the
Party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.

 

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11.5. Counterparts. This Agreement may be executed by facsimile and in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

11.6. Severability. If any provision of this Agreement is deemed or held to be
illegal, invalid or unenforceable, this Agreement shall be considered divisible
and inoperative as to such provision to the extent it is deemed to be illegal,
invalid or unenforceable, and in all other respects this Agreement shall remain
in full force and effect; provided, however, that if any provision of this
Agreement is deemed or held to be illegal, invalid or unenforceable the Parties
agree to replace such illegal, invalid or unenforceable provision with a
provision that is legal, valid and enforceable that achieves the original intent
of the Parties as closely as possible. Further, should any provision contained
in this Agreement ever be reformed or rewritten by any judicial body of
competent jurisdiction, such provision as so reformed or rewritten shall be
binding upon all Parties hereto.

11.7. Schedules. The Schedules and the Exhibits referenced in this Agreement are
a material part hereof and shall be treated as if fully incorporated into the
body of the Agreement.

11.8. No Third Party Beneficiaries. Nothing expressed or referred to in this
Agreement, other than pursuant to Article II and Section 7.1, will be construed
to give any Person other than the Parties to this Agreement (and their
successors and assigns) any legal or equitable right, remedy, or claim under or
with respect to this Agreement or any provision of this Agreement.

11.9. Specific Performance. The Parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the Parties shall be entitled to seek
specific performance of the terms hereof, in addition to any other remedy at law
or equity without the necessity of demonstrating the inadequacy of monetary
damages.

11.10. No Strict Construction. The Parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any Party by virtue of the authorship
of any of the provisions of this Agreement.

11.11. Submission to Jurisdiction; Waivers; Consent to Service of Process.
Except as otherwise provided in this Agreement, each Party hereto irrevocably
agrees that any legal action or proceeding with respect to this Agreement or for
recognition and enforcement of any judgment in respect hereof brought by another
party hereto or its successors or assigns shall be brought exclusively in the
Court of Chancery in the State of Delaware to the fullest extent permitted by
Applicable Law and, to the extent not so permitted, in any court sitting in the
State of Delaware, and each of the Parties hereto hereby (x) irrevocably submits
with regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the exclusive personal jurisdiction
of the aforesaid courts in the event any dispute arises out of this Agreement or
any transaction contemplated hereby, (y) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave from
any such court and (z) agrees that it will not bring any action relating to this
Agreement or any transaction

 

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contemplated hereby in any court other than the aforesaid courts. Any service of
process to be made in such action or proceeding may be made by delivery of
process in accordance with the notice provisions contained in Section 11.2.
Nothing in this Agreement will affect the right of any Party to this Agreement
to serve process in any other manner permitted by Applicable Law. Each of the
Parties hereto hereby irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (a) the defense of sovereign immunity, (b) any
claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to serve process in accordance with
this Section 11.11, (c) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (d) to the fullest extent permitted by Applicable Law that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum,
(ii) the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.

11.12. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

11.13. Release.

(a) As an inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated hereby and for other good and sufficient
consideration, each of the Equityholders, with the intention of binding himself,
herself or itself and each of such Equityholder’s heirs, executors,
administrators and assigns (the “Releasors”), does hereby release, acquit and
forever discharge Buyer and the Company, and each of their past and present
Affiliates, Subsidiaries, and Representatives, and all Persons acting by,
through, under, or in concert with such Persons (the “Releasees”), of and from
any and all manner of action or actions, cause or causes of action, suits,
arbitrations, demands, debts, contracts, agreements, promises, Liability,
Damages, or loss of any nature whatsoever, known or unknown, suspected or
unsuspected, fixed or contingent, direct, derivative, vicarious or otherwise,
whether based in contract, tort, or other legal, statutory, or equitable theory
of recovery, each as though fully set forth at length herein, (hereinafter, a
“Claim”), which the Releasors now have or may hereafter have against the
Releasees, or any of them, by reason of any matter, cause, act, omission or
thing whatsoever in any way arising out of, based upon, or relating to
Equityholder’s ownership of Shares or other equity interest in the Company;
provided, however, that nothing set forth in this

 

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Section 11.13 shall (i) affect the ability of any of such Equityholder to bring
a Claim under this Agreement, (ii) release, acquit or discharge any rights to
indemnification to which any Equityholder may be entitled under the Company’s
certificate of incorporation or bylaws as in effect on the date hereof or under
any employment agreement and/or indemnification agreement between such
Equityholder and the Company or (iii) affect the ability of any of the
Equityholders to bring a Claim with respect to any ordinary course of employment
rights or any Contracts with Buyer or the Company that remain in effect after
the Closing. Notwithstanding the foregoing, nothing in this Agreement shall be
interpreted to release Buyer from any of its obligations to the Equityholders
under this Agreement.

(b) Each Equityholder represents and warrants to the Company and Buyer that
there has been no assignment or other transfer of any interest in any Claim
which such Equityholder may have against any of the Releasees, and each
Equityholder agrees to indemnify and hold the Releasees harmless from any
Liability, Claims or attorneys’ fees or expenses incurred as a result of any
Person asserting any such assignment or transfer of any rights or Claims under
any such assignment or transfer from such party.

(c) Each Equityholder represents and warrants to the Company and Buyer that it
has not filed, nor has as of the date hereof, any Claims against any of the
Releasees. Each Equityholder agrees that if such Equityholder hereafter
commences, joins in, or in any manner seeks relief through any suit arising out
of, based upon, or relating to any of the Claims released hereunder, or in any
manner asserts against the Releasees any of the Claims released hereunder,
including, without limitation, through any motion to reconsider, reopen or
appeal the dismissal of the suit or action, then such Equityholder will pay to
the Releasees against whom such claim(s) is asserted all Damages incurred by
such Releasees in defending or otherwise responding to said Claim.

(d) Notwithstanding anything to the contrary herein, the release set forth in
this Section 11.13 shall have no force and effect until the Closing.

(e) EACH EQUITYHOLDER ACKNOWLEDGES THAT HE, SHE OR IT IS FAMILIAR WITH THE
PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH, IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.

EACH EQUITYHOLDER, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY
RIGHTS HE, SHE OR IT MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR
COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

[remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement or caused
this Agreement to be duly executed on their respective behalf, by their
respective officers thereunto duly authorized, all as of the day and year first
above written.

 

BIOMARIN PHARMACEUTICAL INC. By:   /s/ Jean-Jacques Bienaimé   Name:  
Jean-Jacques Bienaimé   Title:   Chief Executive Officer

 

LEAD THERAPEUTICS, INC. By:   /s/ Peter L. Myers   Name:   Peter L. Myers  
Title:   Chief Executive Officer

 

EQUITYHOLDER REPRESENTATIVE: By:   /s/ Arthur Pappas   Arthur Pappas, as
Equityholder Representative

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

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SELLERS   PROQUEST INVESTMENTS IV, L.P. By:  
ProQuest Associates IV LLC, its General Partner By:   /s/ Alain B. Schreiber, MD
Name:   Alain B. Schreiber Title:   Managing Member   PROQUEST MANAGEMENT LLC
By:   /s/ Alain B. Schreiber Name:   Alain B. Schreiber Title:   Managing
Partner

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

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SELLERS   A. M. PAPPAS LIFE SCIENCE VENTURES III, LP By:   AMP&A Management III,
LLC, its General Partner By:   /s/ Ford S. Worthy Name:   Ford S. Worthy Title:
  Partner   PV III CEO FUND, LP By:  
AMP&A Management III, LLC, its General Partner By:   /s/ Ford S. Worthy Name:  
Ford S. Worthy Title:   Partner

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

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SELLERS   MUSTANG VENTURES I, L.P. By:   By:   /s/ Robert McCormack Name:  
Robert C. McCormack, Jr. Title:   Managing Director

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

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SELLERS CHINA GATEWAY LIFE SCIENCE (HOLDINGS) LTD. (HK) Print Name: Michael Hui
Title: CEO Signature:   /s/ Michael Hui Address: Attn: Mr. Michael Hui Chief
Executive Officer No. 3 Building, 720 Cailun Road Zhangjiang High Tech Park, Pu
Dong New Area Shanghai China

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

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SELLERS /s/ Shuang Qiao Shuang (Sofie) Qiao

 

/s/ Leonard E. Post Leonard Post

 

/s/ Peter L. Myers Peter Myers

 

/s/ Daniel Chu Daniel Chu

 

/s/ Charles Hsu Charles Hsu

 

/s/ Zhengying Pan Zhengying Pan

 

/s/ Xiaoyi Xiao 2/4/2010 Xiaoyi Xiao

 

/s/ David K. Hanabusa David Hanabusa

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

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EXHIBIT A

Form of Escrow Agreement

ESCROW AGREEMENT

THIS ESCROW AGREEMENT (this “Agreement”) dated as of February             , 2010
by and among BioMarin Pharmaceutical Inc., a Delaware corporation (“Buyer”),
Arthur Pappas, acting in his capacity as agent and attorney-in-fact (the
“Representative”) for certain equity holders of LEAD Therapeutics, Inc., a
Delaware corporation (the “Company”), and Wells Fargo Bank, N.A., as escrow
agent (the “Escrow Agent”).

RECITALS

WHEREAS, pursuant to the Stock Purchase Agreement dated as of February
            , 2010 (the “Purchase Agreement”) by and among Buyer, the Company,
each of the parties listed on Schedule A thereto (each, a “Seller”) and the
Representative, Buyer will purchase, and each Seller will collectively sell, all
of the capital stock of the Company and the Company will become a wholly owned
subsidiary of Buyer. Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed thereto in the Purchase Agreement. All interest
or other income earned from the investment of the Escrow Funds or any portion
thereof (all such interest or other income, the “Earnings”) shall be retained as
additional amounts in the Escrow Account (as defined below), except as provided
in Section 3(b).

Buyer will deliver or cause to be delivered to the Escrow Agent an amount in
cash equal to the sums of [****] (the “Indemnification Escrow Amount”) and
[****] (the “Working Capital Escrow Amount”) at the Closing pursuant to
Section 2.5 and Section 2.6, respectively, of the Purchase Agreement, which
amounts (together with any Earnings thereon, the “Escrow Funds”), are to be held
in escrow by the Escrow Agent pursuant hereto and released in accordance with
the terms hereof.

NOW, THEREFORE, the parties agree as follows:

SECTION 1. Escrow Funds Subject to Agreement. The Escrow Agent hereby agrees to
act as escrow agent subject to the terms of this Agreement. The Escrow Agent
shall accept delivery of, hold and safeguard the Escrow Funds in two escrow
accounts specifically established for each of the Indemnification Escrow Amount
and the Working Capital Escrow Amount (respectively, the “Indemnification Escrow
Account” and the “Working Capital Escrow Account”, and collectively, the “Escrow
Account”) and maintained for the purpose outlined below pursuant to the terms
hereof.

SECTION 2. Investment of Escrow Funds.

(a) Upon written direction by the parties, the Escrow Funds shall be invested by
the Escrow Agent in Permitted Investments. The term “Permitted Investments”
means the following investments so long as they have maturities of ninety
(90) days or less: (a) direct obligations of or obligations unconditionally
guaranteed by the United States or by any Person controlled or supervised by or
acting as an instrumentality of the United States or by any Person controlled or
supervised by or acting as an instrumentality of the United States pursuant to
authority granted by Congress, provided such obligations are backed by the full
faith and credit of the United States; (b) obligations issued or guaranteed by
any state or political subdivision

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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thereof, in each case, rated either AAA or higher, or MIG 1 or higher, by
Moody’s Investors Service, Inc. (“Moody’s”) or AAA or higher, or an equivalent,
by Standard & Poor’s Corporation (“Standard & Poor’s”), both of New York, New
York, or their successors; (c) commercial or finance paper which is rated either
Prime-1 or higher or an equivalent by Moody’s or A-1 or higher or an equivalent
by Standard & Poor’s or their successors; and (d) certificates of deposit, time
deposits or money market deposit accounts of banks or trust companies, organized
under the Laws of the United States and having minimum equity of $500,000,000,
which certificates of deposit are insured by the Federal Deposit Insurance
Corporation (“FDIC”). The Escrow Agent shall be entitled to rely upon the
written certification of Buyer and the Representative as to the characterization
of the investment as a Permitted Investment, and shall have no liability to
ascertain whether or not the investment is a Permitted Investment. In the
absence of such written directions, the Escrow Agent shall invest the Escrow
Funds in the money market accounts of Wells Fargo that are insured by the FDIC
as set forth in Exhibit A. Until disbursement pursuant to the terms hereof,
Earnings will be deposited into the Escrow Account and invested with the Escrow
Funds. The Escrow Agent shall not be accountable for any losses resulting from
the sale or depreciation in the market value of such investments thereof, unless
such loss results from the Escrow Agent’s gross negligence, fraud or willful
misconduct.

(b) The Escrow Agent is hereby authorized and directed to sell or redeem any
Permitted Investments as it deems necessary to make any payments or
distributions required under this Escrow Agreement. The Escrow Agent shall have
no responsibility or liability for any loss which may result from any investment
or sale of investment made pursuant to this Escrow Agreement. The Escrow Agent
is hereby authorized, in making or disposing of any Permitted Investment, to
deal with itself (in its individual capacity) or with any one or more of its
affiliates, whether it or any such affiliate is acting as agent of the Escrow
Agent or for any third person or dealing as principal for its own account. The
parties acknowledge that the Escrow Agent is not providing investment
supervision, recommendations, or advice.

SECTION 3. Tax Treatment and Reporting.

(a) The parties hereto agree that Buyer shall be treated for Tax purposes as the
owner of all amounts held in the Escrow Account unless and until such amounts
are released therefrom, in which case such amounts shall be treated for Tax
purposes as having been paid by Buyer to the party to whom such amounts are
released.

(b) The parties hereto agree that, for Tax reporting purposes and to the extent
required by the Internal Revenue Service (“IRS”), Earnings in any Tax year shall
be treated as having been realized by Buyer for United States federal income tax
purposes. Unless otherwise required by law, the parties hereto agree that, for
United States federal income tax purposes, Buyer shall report Earnings as its
income and shall report related expenses as its expense, provided that within
five (5) Business Days following the end of each calendar quarter, Escrow Agent
shall release forty-five percent (45%) of the Earnings relating to each such
calendar quarter to Buyer and such Earnings shall no longer be part of the
Escrow Account. The Escrow Agent annually shall file required information
returns (if any) with the IRS and provide payee statements to Buyer documenting
such Earnings.

 

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(c) Any disbursement of amounts in the Escrow Account to Equityholders shall be
treated for United States federal income tax purposes as consisting, in part, of
imputed interest in accordance with the Code and Treasury Regulations
promulgated thereunder. The Representative shall calculate the imputed interest
with respect to each Equityholder and provide such calculations to the Escrow
Agent. Escrow Agent shall then timely file information statements with the IRS
and provide payee statements to Equityholders documenting each Equityholder’s
share of the imputed interest or any payment made hereunder. The Escrow Agent
shall inform Buyer that the Escrow Agent filed such information returns and
provided such payee statements.

(d) Buyer and, on behalf of the Equityholders, the Representative agree to
provide the Escrow Agent with certified tax identification numbers by furnishing
appropriate IRS Forms W-9 and such other forms and documents that the Escrow
Agent may reasonably request to complete any information returns and payee
statements (collectively, the “Tax Reporting Documentation”) prior to any
distribution to Buyer or the Equityholders. The parties hereto understand that,
in the event the Tax Reporting Documentation is not provided to the Escrow
Agent, the Code or similar state tax laws may require withholding of a portion
of any interest or other payments made to Buyer or the Equityholders. To the
extent that amounts are so withheld by the Escrow Agent, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to Buyer
or the Equityholders, as appropriate, in respect of whom such deduction and
withholding was made by the Escrow Agent.

SECTION 4. Working Capital Escrow Fund. Upon receipt by the Escrow Agent of a
written notice from Buyer or the Representative setting forth how amounts in the
Working Capital Escrow Account are to be distributed and released, accompanied
by either (i) an executed written agreement between Buyer and the Representative
with respect to such distribution and release or (ii) a written decision of the
Neutral Arbitrator with respect to such distribution and release, the Escrow
Agent shall:

(a) promptly pay to Buyer from the Working Capital Escrow Account and, to the
extent the Working Capital Escrow Amount is insufficient, the Indemnification
Escrow Account, the Net Working Capital Deficiency Amount, if any; and

(b) promptly following the delivery of a Future Payment Allocation Schedule to
Buyer with respect to such release by the Representative pursuant to
Section 2.6(b) of the Purchase Agreement, release any remaining amounts in the
Working Capital Escrow Account from the Working Capital Escrow Account to each
Equityholder in accordance with such Future Payment Allocation Schedule.

SECTION 5. Indemnification Escrow Fund.

(a) Notices of Claims and Dispute Notices.

(i) With respect to any indemnification claim of a Buyer Indemnified Party (a
“Buyer Claim”) that Buyer reasonably believes exists, or reasonably expects will
exist, Buyer may deliver to the Escrow Agent a written notice (a “Notice of
Claim”), which shall set forth in reasonable detail (to the extent known) the
nature of such Buyer Claim, the amount of Damages indemnifiable pursuant to the
Stock Purchase Agreement (the “Indemnifiable Damages”) that have been paid or
incurred, a good faith estimate of the amount of Indemnifiable Damages
reasonably expected to be incurred and the provision(s) of the Stock Purchase
Agreement on which the indemnification claim is based. Buyer shall deliver a
copy of the Notice of Claim to the Representative at the same time that it
delivers such Notice of Claim to the Escrow Agent.

 

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(ii) The Escrow Agent shall pay to Buyer, or such Person designated by Buyer,
therefrom the amount set forth in a Notice of Claim as soon as practicable, but
no earlier than thirty-one (31) days following receipt by the Escrow Agent of
such Notice of Claim; provided, however, that if within the period of thirty
(30) days following receipt by the Escrow Agent of such Notice of Claim, the
Escrow Agent shall have received from the Representative a written notice (a
“Dispute Notice”) stating that the Representative disputes the validity or the
amount specified in such Notice of Claim or any portion thereof (a “Disputed
Amount”) and providing in reasonable detail the reasons therefor, the Escrow
Agent shall not pay any such Disputed Amount (but shall pay any amount specified
in such Notice of Claim that is not in dispute) to Buyer, or such Person
designated by Buyer, other than pursuant to Section 3(b) of this Agreement. The
Representative shall deliver a copy of each Dispute Notice to Buyer at the same
time that the Representative delivers such Dispute Notice to the Escrow Agent.

(iii) If the Escrow Agent shall not have received a Dispute Notice with respect
to the amount specified in a Notice of Claim, or a portion thereof, within the
period of thirty (30) days following its receipt of such Notice of Claim, the
Representative and the Equityholders shall be forever barred and precluded from
contesting in any manner or forum whatsoever the distribution of the Escrow
Funds on account of such amount not so disputed (except to dispute the delivery
by Buyer of a Notice of Claim to the Representative), and the Escrow Agent shall
pay such amount to Buyer, or such Person designated by Buyer in writing, in
accordance with the preceding paragraph (ii) of this Section 5(a).

(iv) Notwithstanding the foregoing, the Escrow Agent may pay to Buyer, or any
Person designated by Buyer in writing, the amount set forth in a Notice of Claim
earlier than thirty-one (31) days following receipt by the Escrow Agent of such
Notice of Claim, provided that the Buyer delivers to the Escrow Agent a Notice
of Claim executed by both Buyer and the Representative authorizing the Escrow
Agent to release such specified amount of the Escrow Funds to Buyer. In the
event that the Representative authorizes the Escrow Agent to release such
specified amount of the Escrow Funds by executing a Notice of Claim with Buyer,
the Representative and the Equityholders shall be forever barred and precluded
from contesting in any manner or forum whatsoever the distribution of the Escrow
Funds on account of such amount absent fraud or intentional misrepresentation.

(b) Disputed Amounts. Upon receipt by the Escrow Agent of a written notice (a
“Resolution Notice”) from Buyer or the Representative with respect to a Disputed
Amount specifying the amount of such Disputed Amount to which Buyer is entitled,
accompanied by either (i) an executed written agreement between Buyer and the
Representative with respect to such Disputed Amount or (ii) an award, judgment,
decree or order of a court of competent jurisdiction pursuant to Section 5(c)
below, the Escrow Agent shall pay to Buyer, or such Person designated by Buyer,
from the Indemnification Escrow Account the amount to which Buyer is entitled,
if any.

 

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(c) Dispute Resolution. In the event of a Disputed Amount, the Buyer and the
Representative shall in good faith negotiate to settle such Disputed Amount. If
no resolution is reached within thirty (30) days after delivery of the Dispute
Notice to the Escrow Agent, either party may bring suit in any court of
competent jurisdiction (subject to the limitations set forth in Section 11.11
and Section 11.12 of the Purchase Agreement) with respect to such Disputed
Amount. The non-prevailing party in any such dispute shall bear all fees, costs
and expenses related to such dispute, including the reasonable attorneys’ fees
and costs incurred by the other party.

(d) Release of the Indemnification Escrow Fund.

(i) Promptly following the close of business on the date that is [****] (the
“Distribution Date”), the Buyer will notify the Representative of the positive
difference, if any, between (A) the Indemnification Escrow Amount plus Earnings
thereon remaining in the Indemnification Escrow Account and (B) the sum of
(i) the aggregate amount of the payments, if any, previously made to Buyer, the
Equityholders or the Escrow Agent out of the Escrow Funds (other than pursuant
to Section 3(b) or Section 4) in accordance with the terms of this Agreement,
(ii) any amounts that the Escrow Agent is required to pay but has not yet paid
to Buyer or a Person designated by Buyer, pursuant to Sections 5(a) or 5(b),
(iii) the Withheld Amounts (as defined below) (such positive difference, if any,
the “Initial Release Amount”), and (iv) the Earnings released from the
Indemnification Escrow Account pursuant to Section 3(b). As soon as practicable,
after the Distribution Date, the Representative will provide a Future Payment
Allocation Schedule prepared in accordance with the Purchase Agreement showing
the allocation of the Initial Release Amount among the Equityholders. Promptly
following the receipt of such Future Payment Allocation Schedule, the Escrow
Agent will release the Initial Release Amount, if any, to the Equityholders by
wire transfer or certified check, in accordance with the Future Payment
Allocation Schedule prepared by the Representative. The term “Withheld Amounts”
shall mean the aggregate amount of (x) all Disputed Amounts not paid or
otherwise resolved by such date and (y) all other amounts specified in Notices
of Claims received by the Escrow Agent as of such date and not paid as of such
date from the Escrow Funds unless, as of such date, the Escrow Agent is required
to pay such amounts pursuant to Sections 5(a) or 5(b). The amounts described in
clause (B)(ii) of this Section 5(d)(i) shall be paid by the Escrow Agent to
Buyer, or a Person designated by Buyer, pursuant to Sections 5(a) or 5(b) as the
case may be, and the amounts described in clause (B)(iii) of this
Section 5(d)(i) shall remain Escrow Funds held by, and to be paid out by, the
Escrow Agent in accordance with the terms of this Agreement.

(ii) If, after the Distribution Date, the Escrow Agent is required to pay all or
a portion of the amounts remaining in the Escrow Account to Buyer pursuant to
Section 5(a) or 5(b), then the Escrow Agent shall make such payment to Buyer in
accordance with such Section 5(a) or 5(b).

(iii) Upon receipt by the Escrow Agent after the Distribution Date of a
Resolution Notice that any claims as to all or any portion of the Withheld
Amounts as of the Distribution Date have been resolved (“Resolved Withheld
Amounts”), accompanied by (A) an executed written agreement between Buyer and
the Representative with respect to such Resolved Withheld Amounts or (B) an
award,

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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judgment, decree or order of the arbitrator pursuant to Section 5(c) with
respect to such Withheld Amounts, the Escrow Agent shall release such Resolved
Withheld Amounts from the Escrow Account, as instructed in the joint written
notice or order, to Buyer or to the Equityholders by wire transfer or certified
check, in accordance with a Future Payment Allocation Schedule prepared by the
Representative pursuant to the Purchase Agreement, but only to the extent the
Withheld Amounts remaining in the Indemnification Escrow Account exceed the sum
of (1) the aggregate amount of Buyer Claims that the Escrow Agent is required to
pay but has not yet paid to Buyer or a person designated by Buyer pursuant to
Section 5(a) or 5(b) plus (2) all other Withheld Amounts then remaining in the
Indemnification Escrow Account.

(iv) Any amounts paid or otherwise released to the Representative hereunder,
when made, shall be deemed to have been paid in full satisfaction of the rights
of the Equityholders to receive such payments as set forth in the Purchase
Agreement and hereunder.

SECTION 6. Administrative Provisions.

(a) Buyer and the Representative shall have the right to inspect and obtain
copies of the records of the Escrow Agent pertaining to the Escrow Account and
to receive monthly reports of the status of the Escrow Funds. The Escrow Agent
shall send to Buyer and the Representative monthly reports detailing the amount
of the Escrow Funds in the Escrow Agent’s possession, any release of the Escrow
Funds in the preceding month and the status of any claims pending for the
release of any of the Escrow Funds.

(b) The Escrow Agent may resign as escrow agent by notice to the other parties
hereto (the “Resignation Notice”) effective upon appointment of a successor
Escrow Agent. If, prior to the expiration of sixty (60) Business Days after the
delivery of the Resignation Notice, the Escrow Agent shall not have received
written instructions from Buyer and the Representative designating a banking
corporation or trust company organized either under the laws of the United
States or of any state as successor escrow agent and consented to in writing by
such successor escrow agent, the Escrow Agent may apply to a court of competent
jurisdiction to appoint a successor escrow agent. Alternatively, if the Escrow
Agent shall have received such written instructions, it shall promptly transfer
the Escrow Funds to such successor escrow agent. Upon the appointment of a
successor escrow agent and the transfer of the Escrow Funds, and any other
records, including without limitation, tax-related information, relating to the
Escrow Funds or this Agreement by the resigning Escrow Agent to the successor
escrow agent, the duties of such resigning Escrow Agent hereunder shall
terminate.

(c) Each of Buyer and the Representative hereby agrees to pay the Escrow Agent
reasonable compensation for its services hereunder in accordance with the
“Schedule of Fees” attached hereto as Exhibit B and to reimburse the Escrow
Agent for all expenses, disbursements and advances incurred or made by it in the
performance of its duties hereunder and to indemnify and hold the Escrow Agent
harmless from and against any and all taxes, expenses (including reasonable
counsel fees), assessments, liabilities, claims, damages, actions, suits or
other charges incurred by or assessed against it for anything done or omitted by
it in the performance of its duties hereunder, except as a result of its own
gross negligence or willful misconduct. Buyer and the Representative, on behalf
of the Equityholders, shall share equally in all payments owing under this
Section 6(c), although liability for such payments if not paid in a timely

 

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manner shall be the responsibility of the party responsible therefore. The
Representative’s portion of such payments shall be funded from the Escrow Fund
(without any requirement of any written instruction or directive from the
Representative), and Buyer agrees to execute a Notice of Claim pursuant to
Section 5(a) of this Agreement authorizing the Escrow Agent to release such
portion of the Representative’s payments to the Escrow Agent. The agreement
contained in this Section 6(c) shall survive any termination of the duties of
the Escrow Agent hereunder.

(d) THE ESCROW AGENT SHALL NOT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY
(I) DAMAGES, LOSSES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER,
OTHER THAN DAMAGES, LOSSES OR EXPENSES WHICH HAVE BEEN FINALLY ADJUDICATED TO
HAVE DIRECTLY RESULTED FROM THE ESCROW AGENT’S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, OR (II) SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES OR LOSSES OF ANY
KIND WHATSOEVER (INCLUDING WITHOUT LIMITATION LOST PROFITS), EVEN IF THE ESCROW
AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND
REGARDLESS OF THE FORM OF ACTION.

(e) The Escrow Agent shall have no duties or responsibilities, including,
without limitation, a duty to review or interpret the Purchase Agreement, except
those expressly set forth herein, and no implied duties shall be read into this
Agreement. It may consult with counsel, shall be fully protected with respect to
any action taken or omitted in good faith on advice of counsel and shall have no
liability hereunder except for gross negligence, fraud or willful misconduct.
The Escrow Agent shall have no responsibility as to the validity, collectibility
or value of the Escrow Funds or for investment losses related thereto, provided
the Escrow Funds have been invested in accordance with Section 2 above, and it
may rely on any notice, instruction, certificate, statement, request, consent,
confirmation, agreement or other instrument which it reasonably believes to be
genuine and to have been signed or presented by a proper person or persons. If
the Escrow Agent shall be uncertain as to its duties or rights hereunder or
shall receive instructions from any of the undersigned with respect to the
Escrow Funds, which, in its opinion, are in conflict with any of the provisions
of this Escrow Agreement, it shall be entitled to refrain from taking any action
until it shall be directed otherwise in writing by the other parties hereto or
by order of a court of competent jurisdiction or the Escrow Agent may file an
interpleader action in any court of competent jurisdiction, and upon the filing
thereof, the Escrow Agent shall be relieved of all liability as to the Escrow
Funds and shall be entitled to recover attorneys’ fees, expenses and other costs
incurred in commencing and maintaining any such interpleader action.
Notwithstanding any provision to the contrary contained in any other agreement
between any of the parties hereto, the Escrow Agent shall have no interest in
the Escrow Funds except as provided in this Escrow Agreement and shall hold such
funds in trust in accordance herewith.

 

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(f) All notices, consents and other communications under this Escrow Agreement
shall be in writing and shall, except as otherwise provided herein, be deemed to
have been received when (i) delivered by hand, (ii) sent by facsimile (with
receipt confirmed), provided that a copy is mailed by certified mail, return
receipt requested, or (iii) when received by the addressee, if sent by Express
Mail, Federal Express or other express delivery service (receipt requested), in
each case, at the appropriate addresses and facsimile numbers as set forth
below:

 

If to Escrow Agent:

      Wells Fargo Bank, N.A.    Corporate Trust & Escrow Services    707
Wilshire Boulevard, 17th Floor    Los Angeles, CA 90017    Attention: Tom Orlina
   Telephone: (213) 614-4117    Facsimile:  (213) 625-4406

Wire Instructions:

   Indemnification Escrow Account   

Working Capital Escrow Account

If to Buyer:

   BioMarin Pharmaceutical Inc.    105 Digital Drive    Novato, CA 94949   
Attn: Chief Executive Officer    Fax: (415) 382-7889

with a copy to:

      BioMarin Pharmaceutical Inc.    105 Digital Drive    Novato, CA 94949   
Attn: General Counsel    Fax: (415) 382-7889

If to the Representative:

   Arthur Pappas    c/o A.M. Pappas & Associates, LLC    P.O. Box 110287   
Research Triangle Park, NC 27709 Or (for Fedex deliveries)       2520 Meridian
Parkway    Suite 400    Durham, NC 27713    Fax: (919) 998-3302 with a copy
(which shall not constitute notice) to:    Smith, Anderson, Blount, Dorsett,
Mitchell & Jernigan, L.L.P.    2500 Wachovia Capitol Center    P.O. Box 2611   
Raleigh, NC 27602    Attn: Gerald F. Roach    Fax: (919) 821-6800

 

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(or to such other addresses and facsimile numbers as a party may designate as to
itself by notice to the other parties in accordance with this Section 6(f)).
Concurrently with the execution of this Escrow Agreement, the Buyer shall
deliver to the Escrow Agent authorized signers’ forms in the form of Exhibit C
to this Escrow Agreement.

(g) Nothing in this Agreement shall be construed to limit the right of Buyer,
the Representative or any of the Equityholders under any provision of the
Purchase Agreement.

(h) This Agreement, including the validity hereof and the rights and obligations
of the parties hereunder, shall be construed in accordance with and governed by
the laws of the State of Delaware applicable to contracts made and to be
performed entirely in the State of Delaware (without giving effect to the
conflicts of laws provisions thereof).

(i) Any corporation or association into which the Escrow Agent may be converted
or merged, or with which it may be consolidated, or to which it may sell or
transfer all or substantially all of its corporate trust business and assets as
a whole or substantially as a whole, or any corporation or association resulting
from any such conversion, sale, merger, consolidation or transfer to which the
Escrow Agent is a party, shall be and become the successor escrow agent under
this Escrow Agreement and shall have and succeed to the rights, powers, duties,
immunities and privileges as its predecessor, without the execution or filing of
any instrument or paper or the performance of any further act.

(j) This Escrow Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original instrument and all of which together
shall constitute a single agreement.

(k) All covenants and agreements set forth in this Agreement and made by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
successors, heirs and assigns of such party, whether or not so expressed. None
of the parties may assign or transfer any of their respective rights or
obligations under this Agreement without the consent in writing of the other
parties hereto, except as otherwise provided herein and provided that Buyer may
assign or transfer its rights and obligations hereunder in connection with a
change of control of Buyer or its permitted successors or assigns, or to any
other permitted assignee under the Purchase Agreement.

(l) In the event that any one or more of the provisions contained herein is held
invalid, illegal or unenforceable in any respect for any reason in any
jurisdiction, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions hereof shall not be in any
way impaired or affected, it being intended that each of the parties’ rights and
privileges shall be enforceable to the fullest extent permitted by law, and any
such invalidity, illegality and unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.

 

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(m) Except as specifically set forth or referred to herein, nothing herein
expressed or implied is intended or shall be construed to confer upon or give to
any person other than Buyer, any Buyer Indemnified Party, the Representative,
the Equityholders, the Escrow Agent and their respective permitted successors
and assigns any rights or remedies under or by reason of this Agreement or any
other certificate, document, instrument or agreement executed in connection
herewith.

(n) This Agreement shall terminate upon the disbursement by the Escrow Agent of
all the Escrow Funds in accordance with this Agreement; provided, however, that
the provisions of Section 6(c) hereof shall survive such termination. This
Agreement may be amended only with the written consent of all parties hereto. No
waiver of any right or remedy hereunder shall be valid unless the same shall be
in writing and signed by the party giving such waiver.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the undersigned have executed this Escrow Agreement as of
the date first written above.

 

WELLS FARGO BANK, N.A., as Escrow Agent By:     Name:     Title:     BIOMARIN
PHARMACEUTICAL INC. By:     Name:     Title:    

 

REPRESENTATIVE   Arthur Pappas

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EXHIBIT A

Direction for Investment of Cash Balances

Wells Fargo Money Market Deposit Accounts

Direction to use the following Wells Fargo Money Market Deposit Accounts for
Cash Balances for the following account(s):

Account Name:

Account Number(s):

You are hereby directed to deposit, as indicated below, or as we shall direct
further in writing from time to time, all cash in the Account(s) in the
following money market deposit account of Wells Fargo Bank, National Association
(Bank):

 

             Wells Fargo Money Market Deposit Account (MMDA)

I understand that amounts on deposit in the MMDA are insured, subject to the
applicable rules and regulations of the Federal Deposit Insurance Corporation
(FDIC), in the basic FDIC insurance amount of $100,000 per depositor, per
insured bank. This includes principal and accrued interest up to a total of
$100,000.

We acknowledge that we collectively have full power to direct investments of the
Account(s).

We understand that we may change this direction at any time and that it shall
continue in effect until revoked or modified by us by written notice to you.

 

BIOMARIN PHARMACEUTICAL INC. By:     Name:     Title:    

 

REPRESENTATIVE   Arthur Pappas

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EXHIBIT B

SCHEDULE OF FEES

Wells Fargo Corporate Trust

707 Wilshire Blvd – 17th Floor

Los Angeles, CA 90017

John Deleray (JD/TC)

213.614.3351 – office

213.760.0363 – mobile

213.614.3355 - fax

Wells Fargo Corporate Trust Services

Fee Schedule for Escrow Agent for the

BioMarin/LEAD Cash Escrow

 

Escrow Agent Acceptance and Administrative Fee:    $ 3,000.00

Fees as they relate to Wells Fargo Bank acting in the capacity of Escrow Agent –
includes creation and examination of the Escrow Agreement; acceptance of the
Escrow appointment; setting up of Escrow Account(s) and accounting records; and
coordination of receipt of funds for deposit to the Escrow Account.

Also includes ordinary administration services by Escrow Agent – includes daily
routine account management; investment transactions; cash transaction processing
(including wires and check processing); monitoring claim notices pursuant to the
agreement; disbursement of the funds in accordance with the agreement; and
mailing of trust account statements to all applicable parties.

Tax reporting is included for up to Twenty (20) entities. Should additional
reporting be necessary, a $25 per reporting charge will be assessed.

This fee is Payable in advance, at the time of Escrow Agreement execution. Fee
will not be prorated in case of early termination.

Should this Escrow Account be in existence for more than [****], an Annual Fee
of $2,000.00 will be assessed.

 

Out-of-Pocket Expenses:

   At Cost

We only charge for out-of-pocket expenses in response to specific tasks assigned
by the client. Therefore, we cannot anticipate what specific out-of-pocket items
will be needed or what corresponding expenses will be incurred. Possible
expenses would be, but are not limited to, express mail and messenger charges,
travel expenses to attend closing or other meetings. There are no charges for
indirect out-of-pocket expenses.

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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EXHIBIT C

CERTIFICATE AS TO AUTHORIZED SIGNATURES

The specimen signatures shown below are the specimen signatures of the
individuals who have been designated as authorized representatives of BioMarin
Pharmaceutical, Inc. and are authorized to initiate and approve transactions of
all types for the escrow account or accounts established under the Escrow
Agreement to which this Exhibit C is attached, on behalf of BioMarin
Pharmaceutical, Inc.

 

Name / Title

 

Specimen Signature

 

Name

 

Title

 

 

Signature

 

 

 

 

 

Name

 

Title

 

 

Signature

 

 

 

 

 

Name

 

Title

 

 

Signature

 

 

 

 

 

Name

 

Title

 

 

Signature

 

 

 

 

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EXHIBIT B

RELEASE OF ALL CLAIMS AGREEMENT

This Release of All Claims (“Agreement”) is made by and between LEAD
Therapeutics, Inc., a Delaware corporation (the “Company”) and
                             (“Releasor”) based on the following facts:

a. The Company has offered, and Releasor has accepted, payment of the sum set
forth in Section 1 below in exchange for a general release of all claims.

b. Through this Agreement, Releasor intends to release all known and unknown
claims that Releasor could assert against any released parties pursuant to
Section 2 below, other than those claims expressly excluded.

WHEREFORE, the Company and Releasor agree as follows:

1. In consideration of the promises and representations of Releasor as described
in this Agreement, the Company will pay Releasor the gross sum of
$                        as set forth on the Participating Service Provider
Certificate (as the terms Bonus Amount and Participation Service Provider
Certificate are defined in that certain Stock Purchase Agreement, dated February
__, 2010, by and among BioMarin, the Company, the parties listed on Schedule A
thereto and Arthur Pappas, acting in his capacity as Equityholder Representative
(“Stock Purchase Agreement”)), less federal and state withholdings
(“Consideration”). The Company shall provide Releasor with the Consideration
within one week after the later of: (a) Effective Date as defined in
Section 4(e) below; or (b) the final determination of the Net Working Capital
Excess Amount or Net Working Capital Deficiency Amount as defined in the Stock
Purchase Agreement. Releasor acknowledges that Releasor would not be entitled to
receive any portion of the Consideration absent this Agreement.

2. Except for the rights and obligations expressly set forth herein, Releasor,
for Releasor and for each of Releasor’s past and present agents, assigns,
transferees, heirs, spouses, relatives, executors, attorneys, administrators,
employees, predecessors, affiliates, successors, insurers, and representatives
(“Releasors”), hereby releases and discharges the Company, BioMarin
Pharmaceutical Inc. (“BioMarin”), and their respective past and present agents,
assigns, transferees, attorneys, administrators, officers, directors,
stockholders, employees, predecessors, subsidiaries, parents, affiliates,
successors, insurers, and representatives (“Releasees”) from any and all claims
and causes of action, known or unknown, which Releasors now have or may have
against any of the Releasees arising through the Effective Date. This release is
intended to be interpreted broadly and is intended to include, without
limitation, all common law claims (including but not limited to: breach of
contract, breach of the covenant of good faith and fair dealing, wrongful
discharge in violation of public policy, infliction of emotional distress,
negligence, invasion of privacy, interference with contractual relationship,
defamation and fraud), as well as any statutory claims (including but not
limited to claims arising under: the Age Discrimination in Employment Act as
amended, 29 U.S.C. § 621 et seq.; Title VII of the Civil Rights Act of 1964, as
amended by the Civil Rights Act of 1991, 42 U.S.C. § 2000 et seq.; the Civil
Rights Act of 1866, 42 U.S.C. § 1981; the Family and Medical Leave Act of 1993,
29 U.S.C. § 2601 et seq.; the Americans with Disabilities Act of 1990, 42 U.S.C.
§ 12101 et seq.; the False Claims Act , 31 U.S.C. § 3729 et seq.; the Fair Labor
Standards Act, 29 U.S.C. § 215 et seq.,

 

-1-

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

the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2102 et seq.,
as well as claims under the California Fair Employment and Housing Act, Cal.
Govt. Code § 12900 et seq.; the California False Claims Act, Cal. Govt. Code §
12650 et seq.; the California Corporate Criminal Liability Act, Cal. Penal Code
§ 387; or under the California Labor Code or under any other state or local law
governing employment), any claim for unpaid wages or any discretionary bonus, or
any other claim whatsoever arising out of Releasor’s engagement by the Company
or the termination of Releasor’s relationship with the Company, other than those
that cannot be released as a matter of law. Releasor and the Company expressly
acknowledge and agree that neither the Company nor Releasor would enter into
this Agreement but for the representation and warranty that Releasor is hereby
releasing any and all claims of any nature whatsoever, known or unknown, whether
statutory or at common law, which Releasor now has or could assert directly or
indirectly against any of the Releasees (other than as expressly set forth
herein). Notwithstanding the generality of the foregoing, Releasor does not
release the following claims and/or rights, if applicable to such Releasor:

a. Claims for unemployment compensation or any state disability insurance
benefits pursuant to the terms of applicable state law;

b. Claims for workers’ compensation insurance benefits under the terms of any
worker’s compensation insurance policy or fund of the Company;

c. Claims to continued participation in certain of the Company’s group benefit
plans pursuant to the terms and conditions of the federal law known as the
Consolidated Omnibus Budget Reconciliation Act (COBRA) or benefits under the
Company's written employee benefit plans governed by the Employee Retirement
Income Security Act (ERISA) in which Releasor is a participant;

d. Claims to severance or bonus payments pursuant to Releasor’s written
employment agreement in effect immediately prior to the Closing (as defined in
the Stock Purchase Agreement) or paid time off/vacation pursuant to the
Company's applicable written policies in effect immediately prior to the
Closing;

e. Claims to indemnity under California Labor Code Section 2802;

f. Rights under the indemnification provisions of the Company’s certificate of
incorporation or bylaws as in effect on the Closing Date (as defined in the
Agreement), the Agreement or any indemnification agreement between Releasor and
the Company or BioMarin;

g. Rights under the Company’s or BioMarin’s directors’ and officers’ liability
insurance policies; and

h. Rights to consideration payable pursuant to Article II of the Stock Purchase
Agreement.

 

-2-

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

3. Releasor waives all the benefits and rights granted by California Civil Code
section 1542, and any other applicable similar state laws, which provides:

A general release does not extend to claims which the creditor

does not know or suspect to exist in his or her favor at the time

executing the release, which, if known by him or her must have

materially affected his or her settlement with the debtor.

4. This Agreement is intended to release and discharge any claims of Releasor
under the Age Discrimination and Employment Act. To satisfy the requirements of
the Older Workers’ Benefit Protection Act, 29 U.S.C. section 626(f), the parties
agree as follows:

a. Releasor acknowledges that Releasor has read and understands the terms of
this Agreement.

b. Releasor acknowledges that Releasor has been advised to consult with an
attorney, if desired, concerning this Agreement and has received all advice
Releasor deems necessary concerning this Agreement.

c. Releasor acknowledges that Releasor has been given forty-five days from
receipt of this Agreement to consider whether or not to enter into this
Agreement (“Execution Deadline”), has taken as much of this time as necessary to
consider whether to enter into this Agreement, and has chosen to enter into this
Agreement freely, knowingly and voluntarily.

d. The eligibility requirements, job titles and ages of all individuals eligible
or selected to participate in this program in exchange for a release, and the
ages of all individuals in the same job classification or organizational unit
who have not been made a similar offer are listed on the form attached as
Appendix A, and is incorporated by this reference as though fully set forth
herein.

e. The Effective Date of this Agreement shall be as follows: (a) where Releasor
has not yet turned forty years of age as of the date this Agreement is provided
to Releasor, this Agreement shall become effective on the date it is first
signed by Releasor; or (b) where Releasor is forty or more years of age as of
the date this Agreement is provided to Releasor, for a seven day period
following the execution of this Agreement by Releasor, Releasor may revoke this
Agreement by delivering a written revocation to Company’s Chief Executive
Officer or General Counsel at the following address:

BioMarin Pharmaceutical Inc.

105 Digital Drive

Novato, CA 94949

Attn: Chief Executive Officer/General Counsel

Fax: (415) 382-7889

, and this Agreement shall not become effective and enforceable until the
revocation period has expired. If Releasor does not sign this Agreement and
provide the Company with an executed copy of the Agreement on or before the
Execution Deadline or revokes the Agreement before the Effective Date, Releasor
shall not receive the Consideration or any other compensation Releasor would not
otherwise be entitled to in the absence of this Agreement.

 

-3-

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

5. Releasor acknowledges and agrees that Releasor has no pending lawsuit,
administrative charge or complaint against the Company or any of the other
Releasees, in any court or with any governmental agency. Releasor also agrees
that, to the extent permitted by law, Releasor will not allow any lawsuit,
administrative charge or complaint to be pursued on Releasor’s behalf against
any of the Releasees. Releasor further agrees that Releasor will not
participate, cooperate or assist in any litigation against the Releasees in any
manner, to the extent permitted by law. If lawfully subpoenaed by a court of
this jurisdiction, Releasor agrees to provide the Company written notice of such
a subpoena within five (5) days of receipt.

6. Releasor agrees that Releasor will not disparage, defame or otherwise
detrimentally comment upon the Releasees, including their business practices or
products, in any manner. Releasor acknowledges that such comment shall cause
serious damage to the Company.

7. Releasor represents and warrants that Releasor has not heretofore assigned,
transferred or purported to assign or transfer to any other person or entity any
rights, claims or causes of action herein released and discharged, and no other
person or entity has any interest in the matters herein released and discharged.
Furthermore, Releasor shall indemnify and hold the Company and all persons or
entities released herein harmless from and against any rights, claims or causes
of action which have been assigned or transferred contrary to the foregoing
representations, or in violation of the foregoing warranties, and shall hold
such persons or entities harmless from any and all loss, expense and/or
liability arising directly or indirectly out of the breach of any of the
foregoing representations or warranties.

8. This Agreement is a compromise and settlement of disputed claims being
released herein, and therefore this Agreement does not constitute an admission
of liability on the part of the Company or any Releasees, or an admission,
directly or by implication, that the Company or any of the Releasees has
violated any law, rule, regulation, policy or any contractual right or other
obligation owed to any party.

9. This Agreement may be pled as a full and complete defense and may be used as
the basis for an injunction against any action, suit, or proceeding that may be
prosecuted, instituted, or attempted by Releasor or the Company in breach
thereof.

10. This Agreement shall be construed in accordance with, and be deemed governed
by, the laws of the State of California, and the Company and Releasor agree that
the proper forum and venue for any action brought arising out of or relating in
anyway to this Agreement shall be in San Francisco, California.

11. Releasor agrees that this Agreement has been negotiated by the parties, and
that no provision contained herein shall be interpreted against any party
because that party drafted the provision.

12. This Agreement contains the entire agreement between the parties on the
subjects addressed in this Agreement and replaces any other prior agreements
between the parties on these subjects. This Agreement may only be modified in a
written document signed by the Company’s Chief Executive Officer.

 

-4-

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

13. Releasor and the Company represent and warrant that they are not relying,
and have not relied, on any representations or statements, verbal or written,
made by any other with regard to the facts involved in this controversy or with
regard to their rights or asserted rights arising out of alleged claims or the
execution and terms of this Agreement, except as provided herein. Releasor and
the Company have consulted with an attorney regarding the terms of this
Agreement and have entered into this Agreement freely, willingly and without any
coercion or duress.

14. The Company and Releasor shall execute any and all further documents that
may be required to effectuate the purposes of this Agreement.

15. This Agreement shall be binding upon and shall inure to the benefit of the
Company and Releasor and to their respective representatives, successors, heirs,
agents and assigns.

16. This Agreement may be executed in counterparts, and if so executed each such
counterpart shall have the force and effect of an original. Photocopies of such
signed counterparts may be used in lieu of the originals for any purpose.

17. In the event any provision of this Agreement shall be found unenforceable by
a court of competent jurisdiction, such provision shall be deemed modified to
the extent necessary to allow enforceability of the provision as so limited, it
being intended that the parties shall receive the benefits contemplated herein
to the fullest extent permitted by law. If a deemed modification is not
satisfactory in the judgment of such court, the unenforceable provision shall be
deemed deleted, and the validity and enforceability of the remaining provisions
shall not be affected thereby.

18. No breach of any provision of this Agreement can be waived unless in
writing. Waiver of any one breach shall not be deemed to be a waiver of any
other breach of the same or any other provision of this Agreement.

19. Each individual signing this Agreement directly and expressly warrants that
he/she has been given and has received and accepted authority to sign and
execute the documents on behalf of the party for whom it is indicated he/she has
signed, and further has been expressly given and received and accepted authority
to enter into a binding agreement on behalf of such party with respect to the
matters concerned herein and as stated herein.

[Signature Page Follows]

 

-5-

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

WE, THE UNDERSIGNED, HAVE READ THE FOREGOING AND, HAVING BEEN ADVISED BY
COUNSEL, FULLY UNDERSTAND AND AGREE TO ITS TERMS,

 

Dated:                                 , 2010           [Releasor]

 

    LEAD Therapeutics, Inc. Dated:                                 , 2010      
    By:         Its:    

 

-6-

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

APPENDIX A

 

I. PROGRAM REQUIREMENTS.

In order to receive the consideration set forth in the attached Agreement,
Releasor must meet the following requirements:

A. Execute and provide the Company with the attached Agreement on or before the
Execution Deadline, and not revoke the Agreement for a period of seven days
after its execution, if applicable.

B. Selected for participation in the program by the Company.

The Company selected individuals for participation in this program based on
position held, duties performed, contributions to the Company, and performance.

 

II. JOB TITLES AND AGES OF ALL EMPLOYEES WHO ARE AND ARE NOT ELIGIBLE TO
PARTICIPATE IN THE PROGRAM.

 

ELIGIBLE TO PARTICIPATE

  

NOT ELIGIBLE TO PARTICIPATE

Position

  

Age

  

Position

  

Age

                                            

 

-7-

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

EXHIBIT C

OPTION HOLDER CONSENT AGREEMENT

THIS OPTION HOLDER CONSENT AGREEMENT (this “Agreement”), dated as of
                        , 2010, is entered into by and among BioMarin
Pharmaceutical Inc., a Delaware corporation (“Buyer”), LEAD Therapeutics, Inc.,
a Delaware corporation (the “Company”), and the undersigned holder (the “Option
Holder”) of options to acquire shares of common stock of the Company (the
“Company Options”).

RECITALS

WHEREAS, pursuant to that certain Stock Purchase Agreement (the “Stock Purchase
Agreement”) dated as of February __, 2010 by and among Buyer, the Company, the
parties listed on Schedule A thereto (each a “Seller” and collectively the
“Sellers”), and Arthur Pappas, acting in his capacity as representative of the
equityholders of the Company (the “Equityholder Representative”), Sellers will
sell, assign, transfer, convey and deliver, or cause to be sold, assigned,
transferred, conveyed and delivered, to Buyer, and Buyer shall purchase from the
Sellers, all of the shares of capital stock of the Company;

WHEREAS, capitalized terms used herein and not defined shall have the meaning
ascribed to such terms in the Stock Purchase Agreement;

WHEREAS, the Option Holder is the owner of the Company Options listed on
Schedule A hereto; and

WHEREAS, the Option Holder wishes to (a) consent to the treatment of the Company
Options as set forth in the Stock Purchase Agreement and to waive all notice
requirements contained in any other agreement related to the Company Options,
(b) approve and appoint the Equityholder Representative as set forth in the
Stock Purchase Agreement, and (c) be bound by and comply with the obligations of
the Equityholders as set forth in the Stock Purchase Agreement and the Escrow
Agreement.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

ARTICLE I CONSENT

Section 1.1 Receipt of Stock Purchase Agreement. The Option Holder acknowledges
that it has reviewed the Stock Purchase Agreement and the attachments thereto
(including the Escrow Agreement), and has had ample opportunity to discuss with
representatives of the Company any questions relating to the Company, the Stock
Purchase Agreement and the transactions contemplated by the Stock Purchase
Agreement and the Escrow Agreement.

Section 1.2 Company Options. The Option Holder acknowledges, agrees and consents
that, notwithstanding anything to the contrary contained in the agreements or
instruments regarding the Company Options held by the Option Holder, each
Company Option held by the Option Holder granted under the Company Option Plan
or otherwise, whether or not currently vested or

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

exercisable immediately prior to the Closing Date, and which remains outstanding
immediately prior to the Closing Date, will, at the Closing, be cancelled, no
longer be outstanding and cease to represent the right to acquire shares of
Common Stock, and in consideration for such cancellation, the Option Holder will
have the right to receive the amounts payable with respect to such Company
Options pursuant to Section 2.1 of the Stock Purchase Agreement.

Section 1.3 Waiver of Notice Requirement. The Option Holder waives all notice
requirements which it may have or may be entitled to have with respect to its
Company Options in regards to the Stock Purchase Agreement and the transactions
contemplated thereby, including with respect to the treatment of its Company
Options.

Section 1.4 Appointment of Equityholder Representative. The Option Holder
irrevocably constitutes and appoints, effective as of the Closing, together with
his permitted successors, the Equityholder Representative, as its true and
lawful agent, proxy and attorney-in-fact, to execute and deliver the Stock
Purchase Agreement and the Escrow Agreement on its behalf and exercise all or
any of the powers, authority and discretion conferred on him under the Stock
Purchase Agreement, the Escrow Agreement and any documents related to the
transaction contemplated hereby and thereby. The power of attorney granted in
this Section 1.4 (i) is coupled with an interest and is irrevocable; (ii) may be
delegated by the Equityholder Representative; and (iii) shall survive the
dissolution, death or incapacity of the Option Holder.

Section 1.5 Indemnification Obligations. The Option Holder irrevocably agrees
to, and shall be bound by and comply with, all of the indemnification
obligations of the Equityholders set forth in the Stock Purchase Agreement and
the Escrow Agreement including the Equityholders’ agreement to indemnify and
reimburse the Buyer Indemnified Parties as set forth in Article IX of the Stock
Purchase Agreement, it being understood that the Option Holder shall be an
Equityholder for all purposes under the Stock Purchase Agreement and the Escrow
Agreement.

Section 1.6 Escrow. The Option Holder irrevocably agrees to be bound by and
comply with the Escrow Agreement and all of the arrangements and provisions of
the Stock Purchase Agreement relating thereto, including the deposit of the
Indemnification Escrow Amount and Working Capital Escrow Amount into escrow.

Section 1.7 Equityholder Representative Reimbursement. The Option Holder
irrevocably agrees to be bound by and comply with the Equityholders’ obligations
with respect to the Equityholder Representative’s Fund Amount as set forth in
the Stock Purchase Agreement, including the deposit of the Equityholder
Representative’s Fund Amount into the Equityholder Representative’s Fund. The
Option Holder acknowledges that the Equityholders indemnify and defend the
Equityholder Representative and hold the Equityholder Representative harmless
against any loss, damage, cost, Liability or expense incurred without fraud,
gross negligence or willful misconduct by the Equityholder Representative and
arising out of or in connection with the acceptance, performance or
administration of the Equityholder Representative’s duties under this Stock
Purchase Agreement. The Option Holder acknowledges that all expenses incurred by
the Equityholder Representative in connection with the performance of its duties
as Equityholder Representative shall be borne and paid by the Equityholders.

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

ARTICLE II REPRESENTATIONS AND WARRANTIES

Section 2.1 Power and Capacity. The Option Holder represents and warrants that:
(a) it has full power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, (b) the execution and delivery of this
Agreement by the Option Holder and the performance of its obligations hereunder
have been duly authorized by all necessary action on the part of the Option
Holder, and (c) this Agreement has been duly executed and delivered by the
Option Holder and constitutes a valid and binding obligation of the Option
Holder enforceable against the Option Holder in accordance with its terms.

ARTICLE III MISCELLANEOUS

Section 3.1 Entire Agreement. This Agreement, together with the Stock Purchase
Agreement and the Escrow Agreement, contains the entire understanding of the
parties with respect to the subject matter hereof and supersedes all previous
oral and written communications, agreements and understandings between the
parties with respect to the subject matter herein, including any agreements or
instruments in respect of the Company Options. No change, modification or
amendment of this Agreement shall be binding unless made in writing and signed
by authorized representatives of all parties.

Section 3.2 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. This Agreement may be
executed and delivered by facsimile transmission, and a facsimile of this
Agreement or of a signature of a party will be effective as an original.

Section 3.3 Applicable Law; Submission to Jurisdiction. Except as otherwise
provided in this Agreement, each party hereto irrevocably agrees that any legal
action or proceeding with respect to this Agreement or for recognition and
enforcement of any judgment in respect hereof brought by another party hereto or
its successors or assigns shall be brought exclusively in the Court of Chancery
in the State of Delaware to the fullest extent permitted by Applicable Law and,
to the extent not so permitted, in any court sitting in the State of Delaware,
and each of the Parties hereto hereby (x) irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the exclusive personal jurisdiction of the aforesaid
courts in the event any dispute arises out of this Agreement or any transaction
contemplated hereby, (y) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (z) agrees that it will not bring any action relating to this Agreement or
any transaction contemplated hereby in any court other than the aforesaid
courts. Each of the parties hereto hereby irrevocably waives, and agrees not to
assert, by way of motion, as a defense, counterclaim or otherwise, in any action
or proceeding with respect to this Agreement, (a) the defense of sovereign
immunity, (b) any claim that it is not personally subject to the jurisdiction of
the above-named courts for any reason other than the failure to serve process in
accordance with Applicable Law, (c) that it or its property is exempt or immune
from jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (d) to the fullest extent permitted by Applicable Law that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum,
(ii) the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.

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

Section 3.4 WAIVER OF TRIAL BY JURY. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 3.5 Waiver of Rights. The failure of a party to assert any right or
remedy upon the breach of any provision of this Agreement shall not be deemed to
be a waiver of any present or future right hereunder, unless said waiver is made
in writing and signed by the party against whom enforcement is sought.

[Signature Page Follows]

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

IN WITNESS WHEREOF, each party has caused this Agreement to be duly executed on
its behalf by its duly authorized officer as of the date first written above.

 

BIOMARIN PHARMACEUTICAL INC. By:     Name:     Title:     LEAD THERAPEUTICS,
INC. By:     Name:     Title:     OPTION HOLDER Signature:     Name:    

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

SCHEDULE A

 

Option Holder

  

Number of Company Options

              

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

Schedule A

ProQuest Investments IV, L.P.

ProQuest Management LLC

A.M. Pappas Life Science Ventures III, LP

PV III CEO Fund, LP

Mustang Ventures I, L.P.

China Gateway Life Science (Holdings) Ltd. (HK)

Shuang Qiao

Peter Myers

Leonard Post

Charles Hsu

Zhengying Pan

Xiaoyi Xiao

Daniel Chu

David Hanabusa

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

Schedule B

Initial Allocation Schedule (as of date of Stock Purchase Agreement)

 

Equityholder Name

   Equityholder
Address   Series A
Preferred
Stock    Company
Notes
(Principal
Amount
+
Accrued
and
Unpaid
Interest)   Number of
Shares of
Series A
Preferred
Stock into
which
Company
Notes are
Convertible    Common
Stock    Series A
Preferred
Stock
Warrants    Company
Warrants
Exercise
Price    Common
Stock
Options    Company
Options
Exercise
Price    ISO / NSO    Service
Provider
Status    Portion
of
Closing
Payment   Pro Rata
Allocation
of Escrow
Amount

ProQuest Investments IV, LP

   [****]   6,000,000    [****]   3,007,937       1,428,571    $ 1.00         
        [****]     [****]

A.M. Pappas Life Science Ventures III, LP

   [****]   2,824,404    [****]   1,415,938    235,367    672,477    $ 1.00   
              [****]     [****]

PV III CEO Fund, LP

   [****]   175,596    [****]   88,030    14,633    41,809    $ 1.00            
     [****]     [****]

Mustang Ventures I, L.P.

   [****]   1,200,000    [****]   601,587       285,714    $ 1.00               
  [****]     [****]

China Gateway Life Science (Holdings) Ltd. (HK)

   [****]   300,000    [****]   150,395       71,429    $ 1.00                 
[****]     [****]

ProQuest Management, LLC

   [****]           250,000                      $ —     $ —  

Shuang Qiao

   [****]           549,282          480,000    $ 0.10    ISO    Employee    $
—     $ —  

Peter Myers

   [****]           280,500          619,500    $ 0.10    ISO    Employee    $
—     $ —  

Leonard Post

   [****]           280,500          480,000    $ 0.10    ISO    Employee    $
—     $ —  

Charles Hsu

   [****]           363,000                      $ —     $ —  

Zhengying Pan

   [****]           5,208                      $ —     $ —  

Xiaoyi Xiao

   [****]           6,510                      $ —     $ —  

Daniel Chu

   [****]           97,500          247,500    $ 0.10    ISO    Employee    $
—     $ —  

David Hanabusa

   [****]           30,000                      $ —     $ —  

Yuqiao Shen

   [****]                    160,000    $ 0.10    ISO    Employee    $ —     $
—  

Amy Pfeiffer

   [****]                    12,000    $ 0.10    ISO    Employee    $ —     $
—  

Bing Wang

   [****]                    90,000    $ 0.10    ISO    Employee    $ —     $
—  

Ying Feng

   [****]                    40,000    $ 0.10    ISO    Employee    $ —     $
—  

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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

Closing Date Allocation Schedule

 

Equityholder Name

   Equityholder
Address   Series A
Preferred
Stock    Common
Stock    Series A
Preferred
Stock
Warrants    Common
Stock
Options    Portion
of
Closing
Payment   Pro Rata
Allocation
of Escrow
Amount   Payment
Method
(Wire or
Check)    Wire
Transfer /
Check
Delivery
Instructions   W-8 /
W-9
Delivered

ProQuest Investments IV, LP

   [****]   9,007,937       1,428,571         [****]     [****]   Wire    [****]
 

A.M. Pappas Life Science Ventures III, LP

   [****]   4,240,342    235,367    672,477         [****]     [****]   Wire   
[****]   W-9

PV III CEO Fund, LP

   [****]   263,626    14,633    41,809         [****]     [****]   Wire   
[****]   W-9

Mustang Ventures I, L.P.

   [****]   1,801,587       285,714         [****]     [****]   Wire    [****]  

China Gateway Life Science (Holdings) Ltd. (HK)

   [****]   450,395       71,429         [****]     [****]   Wire    [****]  

ProQuest Management, LLC

   [****]      250,000          $ —     $ —     Wire    [****]  

Shuang Qiao

   [****]      549,282       480,000    $ —     $ —     Wire    [****]  

Peter Myers

   [****]      280,500       619,500    $ —     $ —     Check     

Leonard Post

   [****]      280,500       480,000    $ —     $ —     Check     

Charles Hsu

   [****]      363,000          $ —     $ —     Check     

Zhengying Pan

   [****]      5,208          $ —     $ —     Check     

Xiaoyi Xiao

   [****]      6,510          $ —     $ —     Check     

Daniel Chu

   [****]      97,500       247,500    $ —     $ —     Check     

David Hanabusa

   [****]      30,000          $ —     $ —     Check     

Yuqiao Shen

   [****]            160,000    $ —     $ —     Check     

Amy Pfeiffer

   [****]            12,000    $ —     $ —     Check     

Bing Wang

   [****]            90,000    $ —     $ —     Check     

Ying Feng

   [****]            40,000    $ —     $ —     Check     

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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

Schedule C

Leonard Post

Daniel Chu

Jerry Shen

Bing Wang

Ying Feng

Hong Wang

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

LEAD THERAPEUTICS INC.

SCHEDULE 1.1(a)

Assumed Current Liabilities

[****]

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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

Lead Therapeutics, Inc

Estimated Closing Date Balance Sheet

 

     Feb 15, 10  

ASSETS

  

Current Assets

  

Checking/Savings

  

Bank of China

   12,265.86   

ML - Institutional Fund A

   1,416,505.00   

ML - WCMA Money Fund

   20,351.02   

Petty Cash

   290.45   

Total Checking/Savings

   1,449,412.33          

Other Current Assets

  

China Personal Tax Prepaid

   11,785.05   

Employee Advances

   —     

Pre-paid Expense

   27,807.45          

Total Other Current Assets

   39,592.50          

Total Current Assets

   1,489,004.83   

Fixed Assets

  

Fixed Assets

  

Accumulated Depreciation

   (46,679.16 ) 

Fixed Assets Purchased

   70,818.16          

Total Fixed Assets

   24,139.00   

Net Tenant Improvements

  

Tenant Improvements

   18,257.60   

TI-Accumulated Amortization

   (16,377.70 )        

Total Net Tenant Improvements

   1,879.90          

Total Fixed Assets

   26,018.90          

TOTAL ASSETS

   1,515,023.73          

LIABILITIES & EQUITY

  

Liabilities

  

Current Liabilities

  

Accounts Payable

  

Accounts Payable

   143,884.56          

Total Accounts Payable

   143,884.56   

Other Current Liabilities

  

401(k) Payable

   —     

AP Accrual

   750,000.00   

China Personal Tax Payable

   —     

Convertible Note (BioMarin)

   3,027,123.29   

Convertible Notes (Shareholders)

   5,269,369.85   

Direct Deposit Liabilities

   —     

EPRS Liability

   94.00   

Hypo-Tax Equalization Sch Prep

   10,000.00   

Payroll Liabilities

   291,000.00   

PTO Accrual

   92,085.79   

Safe Harbor Co. Contribution

   6,639.45          

Total Other Current Liabilities

   9,446,312.38          

Total Current Liabilities

   9,590,196.94          

Total Liabilities

   9,590,196.94   

Equity

  

Common Stock Summary

  

APIC-EPRS

   (94.00 ) 

APIC-ESBC (Options)

   91,659.55   

APIC-ESBC (Restricted)

   2,976.26   

APIC-NSBC (Options)

   5,739.83   

APIC-NSBC (Restricted)

   255.00   

Common Stock

  

Charles Hsu

   11,055.00   

Daniel Chu

   975.00   

David Hanabusa

   3,000.00   

Leonard Post

   2,805.00   

Pappas Life Science V. III, LP

   2,353.67   

Peter Myers

   2,805.00   

ProQuest Investments IV, LP

   2,500.00   

PV III CEO Fund, LP

   146.33   

Shuang Qiao

   6,617.82   

Xiaoyi Xiao

   104.17   

Zhengying Pan

   83.33          

Total Common Stock

   32,445.32          

Total Common Stock Summary

   132,981.96   

Preferred Stock Summary

  

APIC-Series A Accretion

   (83,250.12 ) 

Cost of Pref. Equity, Series A

   (77,356.72 ) 

Series A Preferred Stock

  

China Gateway Life Science

   300,000.00   

Mustang Ventures I, L.P.

   1,200,000.00   

Pappas Life Science V. III, LP

   2,824,404.00   

ProQuest Investments IV, L.P.

   6,000,000.00   

PV III CEO Fund, LP

   175,596.00          

Total Series A Preferred Stock

   10,500,000.00          

Total Preferred Stock Summary

   10,339,393.16   

Retained Earnings

   (17,242,760.99 ) 

Net Income

   (1,304,787.34 )        

Total Equity

   (8,075,173.21 )        

TOTAL LIABILITIES & EQUITY

   1,515,023.73          

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

Lead Therapeutics, Inc

Detail of Trade AP

February 15, 2010

[****]

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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

Lead Therapeutics, Inc

Unrecorded Liabilities

February 15, 2010

[****]

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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

Lead Therapeutics, Inc

2/1/10 - 2/15/10 Payroll, Bonus, and Change of Control Payments

[****]

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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

LEAD Therapeutics, Inc.

Balance Sheet

As of February 15, 2010

 

    Jan 31, 10   Feb 15, 10                          

ASSETS

               

Current Assets

                Checking/Savings                         Jan   Feb    

Bank of China

  20,065.86   12,265.86      

Current Assets

  1,505,811.49   1,489,004.83  

ML - Institutional Fund A

  1,416,505.00   1,416,505.00      

Current Liabilities

  750,634.80   1,293,703.80                      

ML - WCMA Money Fund

  20,351.02   20,351.02            

Petty Cash

  290.45   290.45      

Working Capital

  755,176.69   195,301.03                      

Total Checking/Savings

  1,457,212.33   1,449,412.33   (7,800.00 )    c        

Other Current Assets

         

Adjustments

     

China Personal Tax Prepaid

  8,985.05   11,785.05      

Change of Control Payments

  —     210,000.00   b

Employee Advances

  0.00   0.00      

February Payroll 2/1/10 - 2/10/15

  —     87,069.00   sum a

Pre-paid Expense

  39,614.11   27,807.45      

February Operating Expenses

  —     16,806.66   sum c                        

Total Other Current Assets

  48,599.16   39,592.50   (9,006.66 )    c  

February Operating Costs - Accounts Payable Accrual

  —     246,000.00   d                            

Total Current Assets

  1,505,811.49   1,489,004.83            

Fixed Assets

         

Working Capital

  755,176.69   755,176.69                      

Fixed Assets

               

Accumulated Depreciation

  -46,054.16   -46,679.16            

Fixed Assets Purchased

  70,818.16   70,818.16                                

Total Fixed Assets

  24,764.00   24,139.00            

Net Tenant Improvements

               

Tenant Improvements

  18,257.60   18,257.60            

TI-Accumulated Amortization

  -16,109.70   -16,377.70                                

Total Net Tenant Improvements

  2,147.90   1,879.90                                

Total Fixed Assets

  26,911.90   26,018.90                                

TOTAL ASSETS

  1,532,723.39   1,515,023.73                                

LIABILITIES & EQUITY

               

Liabilities

               

Current Liabilities

               

Accounts Payable

               

Accounts Payable

  143,884.56   143,884.56                                

Total Accounts Payable

  143,884.56   143,884.56   —               

Other Current Liabilities

            Payroll Detail  

401(k) Payable

  0.00   0.00         81,000.00   a    

AP Accrual

  504,000.00   750,000.00   246,000.00      d - also see AP accrual detail  
210,000.00   b                        

China Personal Tax Payable

  0.00   0.00              

Debt from BioMarin

  3,020,958.91   3,027,123.29         291,000.00   e -also see payroll detail  
                                       

Debt from Shareholders

  5,252,931.49   5,269,369.85            

Direct Deposit Liabilities

  0.00   0.00            

EPRS Liability

  125.00   94.00   (31.00 )    a        

Hypo-Tax Equilization Sch Prep

  10,000.00   10,000.00   —               

Payroll Liabilities

  0.00   291,000.00   291,000.00      e - also see payroll tab      

PTO Accrual

  88,385.79   92,085.79   3,700.00      a        

Safe Harbor Co. Contribution

  4,239.45   6,639.45   2,400.00      a                                

Total Other Current Liabilities

  8,880,640.64   9,446,312.38   526,262.34                                     

Total Current Liabilities

  9,024,525.20   9,590,196.94                                

Total Liabilities

  9,024,525.20   9,590,196.94            

Equity

               

Common Stock Summary

               

APIC-EPRS

  -125.00   -94.00            

APIC-ESBC (Options)

  90,249.55   91,659.55            

APIC-ESBC (Restricted)

  2,976.26   2,976.26            

APIC-NSBC (Options)

  5,739.83   5,739.83            

APIC-NSBC (Restricted)

  255.00   255.00            

Common Stock

               

Charles Hsu

  11,055.00   11,055.00            

Daniel Chu

  975.00   975.00            

David Hanabusa

  3,000.00   3,000.00            

Leonard Post

  2,805.00   2,805.00            

Pappas Life Science V. III, LP

  2,353.67   2,353.67            

Peter Myers

  2,805.00   2,805.00            

ProQuest Investments IV, LP

  2,500.00   2,500.00            

PV III CEO Fund, LP

  146.33   146.33            

Shuang Qiao

  6,617.82   6,617.82            

Xiaoyi Xiao

  104.17   104.17            

Zhengying Pan

  83.33   83.33                                

Total Common Stock

  32,445.32   32,445.32                                

Total Common Stock Summary

  131,540.96   132,981.96            

Preferred Stock Summary

               

APIC-Series A Accretion

  -83,250.12   -83,250.12            

Cost of Pref. Equity, Series A

  -77,356.72   -77,356.72            

Series A Preferred Stock

               

China Gateway Life Science

  300,000.00   300,000.00            

Mustang Ventures I, L.P.

  1,200,000.00   1,200,000.00            

Pappas Life Science V. III, LP

  2,824,404.00   2,824,404.00            

ProQuest Investments IV, L.P.

  6,000,000.00   6,000,000.00            

PV III CEO Fund, LP

  175,596.00   175,596.00                                

Total Series A Preferred Stock

  10,500,000.00   10,500,000.00                                

Total Preferred Stock Summary

  10,339,393.16   10,339,393.16            

Retained Earnings

  -17,242,760.99   -17,242,760.99            

Net Income

  -719,974.94   -1,304,787.34   (584,812.40 )                               

Total Equity

  -7,491,801.81   -8,075,173.21                                

TOTAL LIABILITIES & EQUITY

  1,532,723.39   1,515,023.73                                

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

LEAD Therapeutics, Inc.

Profit & Loss

November 1, 2009 through February 15, 2010

 

     Nov 09    Dec 09    Jan 10    Feb 1 - 15, 10    TOTAL

Ordinary Income/Expense

              

Expense

              

****Payroll Expenses

              

Bonus

   0.00    0.00    0.00    97,000.00    97,000.00

Salaries

   146,308.21    149,338.32    141,658.32    194,000.00    631,304.85

****Payroll Expenses - Other

   93.89    24.91    93.88    0.00    212.68                         

Total ****Payroll Expenses

   146,402.10    149,363.23    141,752.20    291,000.00    728,517.53

***Fringe Benefits

              

401(k) Safe Harbor Employer Con

   47,000.00    3,023.00    1,966.58    2,400.00    54,389.58

CA - Unemployment Company

   0.00    0.00    2,205.00    0.00    2,205.00

Dental Insurance

   1,267.00    1,267.00    1,267.00    1,267.00    5,068.00

Emp Stk Based Comp (Options)

   2,803.14    2,803.14    2,803.14    1,410.00    9,819.42

Employee Copays

   -406.62    -1,219.86    -813.24    0.00    -2,439.72

Federal Unemployment

   0.00    0.00    504.00    0.00    504.00

HRA Expense

   13,500.00    0.00    0.00    0.00    13,500.00

Life Insurance

   5,030.22    2,138.46    2,138.46    1,069.46    10,376.60

Medical Insurance

   12,583.00    12,583.00    12,583.00    5,658.00    43,407.00

Medicare Company

   1,029.11    3,186.48    2,014.70    0.00    6,230.29

Payroll Processing Fees

   0.01    0.00    0.00    0.00    0.01

PTO Accrual Expense

   0.00    12,346.81    6,093.74    3,700.00    22,140.55

Social Security Company

   525.85    879.03    8,614.60    0.00    10,019.48                         

Total ***Fringe Benefits

   83,331.71    37,007.06    39,376.98    15,504.46    175,220.21

**People Related Expenses

              

Consulting

              

Bus Dev

   39,300.00    -2,175.00    0.00    0.00    37,125.00

G&A Consulting

   5,460.80    7,942.48    9,597.51    2,500.00    25,500.79

IT Consulting

   593.75    2,000.00    1,500.00    1,000.00    5,093.75

PARP - Development

   33,750.00    25,457.00    41,440.00    17,000.00    117,647.00

Public Relations

   0.00    1,372.00    0.00    0.00    1,372.00                         

Total Consulting

   79,104.55    34,596.48    52,537.51    20,500.00    186,738.54

Contractors (CRO’s)

              

Cyp 17-Bio

   2,000.00    0.00    0.00    0.00    2,000.00

Cyp 17-Chem

   93,500.00    129,166.67    110,166.67    60,500.00    393,333.34

Glyco-Bio

   33,020.00    0.00    0.00    0.00    33,020.00

PARP-Bio

   53,568.00    41,269.00    17,000.00    8,000.00    119,837.00

PARP-Chem

   92,500.00    46,200.00    62,500.00    31,500.00    232,700.00

PARP-Development

   229,436.00    10,119.70    89,666.25    26,000.00    355,221.95             
           

Total Contractors (CRO’s)

   504,024.00    226,755.37    279,332.92    126,000.00    1,136,112.29

Legal Fees

              

Corporate

   91,000.00    111,464.41    77,909.25    65,000.00    345,373.66

Patents

   84,182.08    40,556.05    55,609.92    32,000.00    212,348.05               
         

Total Legal Fees

   175,182.08    152,020.46    133,519.17    97,000.00    557,721.71          
              

Total **People Related Expenses

   758,310.63    413,372.31    465,389.60    243,500.00    1,880,572.54

*Operations

              

Apartment Rent

   1,713.53    0.00    0.00    0.00    1,713.53

Bank Service Charges

   90.00    240.00    210.00    0.00    540.00

Conferences & Seminars

   725.00    1,450.00    0.00    0.00    2,175.00

Dues and Subscriptions

   2,050.00    4,050.00    0.00    2,000.00    8,100.00

Investors’ Expenses

   8,055.93    15,576.88    1,686.38    0.00    25,319.19

Lab Supplies

              

Cyp17 - Chem

   0.00    3,910.27    2,779.77    0.00    6,690.04

Glyco-Chem

   1,341.70    1,548.00    0.00    0.00    2,889.70

PARP-Bio

   718.19    0.00    0.00    0.00    718.19                         

Total Lab Supplies

   2,059.89    5,458.27    2,779.77    0.00    10,297.93

Licenses and Permits

   105.00    0.00    0.00    0.00    105.00

Miscellaneous

   375.99    0.00    20.15    0.00    396.14

Postage and Delivery

   186.78    600.05    249.88    0.00    1,036.71

Printing and Reproduction

   9.43    447.93    0.00    0.00    457.36

Taxes

              

China Rep Office Business Tax

   18,969.96    0.00    0.00    0.00    18,969.96

China Rep Office Corporate Tax

   9,494.55    0.00    0.00    0.00    9,494.55

State

   0.00    42.86    1,000.00    0.00    1,042.86                         

Total Taxes

   28,464.51    42.86    1,000.00    0.00    29,507.37

Travel & Entertainment

              

Airfare, Rail, Etc.

   4,263.51    2,459.98    0.00    0.00    6,723.49

Auto Rental, taxi

   676.05    371.78    234.47    0.00    1,282.30

Cell Phones

   82.43    0.00    0.00    0.00    82.43

Lodging

   1,860.81    2,620.67    0.00    0.00    4,481.48

Meals and Entertainment

   303.64    15,530.02    113.85    0.00    15,947.51

Parking, toll, etc.

   185.50    84.00    0.00    0.00    269.50

Phone Cards

   611.55    674.84    0.00    0.00    1,286.39

Travel & Entertainment - Other

   0.00    2,405.25    888.40    0.00    3,293.65                         

Total Travel & Entertainment

   7,983.49    24,146.54    1,236.72    0.00    33,366.75                       
 

Total *Operations

   51,819.55    52,012.53    7,182.90    2,000.00    113,014.98

Facilities

              

Amortization of TI’s

   536.99    536.99    536.99    268.00    1,878.97

Equipment Rental

   229.43    0.00    469.36    0.00    698.79

Facility Cost Allocation

   0.00    0.00    0.00    0.00    0.00

Liability Insurance

   0.00    0.00    41.00    0.00    41.00

Office Rent

              

999 Bayhill Drive Office Rent

   7,456.20    7,456.20    7,625.20    3,812.20    26,349.80

China Office Expenses

   2,513.79    0.00    0.00    2,500.00    5,013.79                         

Total Office Rent

   9,969.99    7,456.20    7,625.20    6,312.20    31,363.59

Office Supplies

   854.88    5,886.80    1,230.38    3,000.00    10,972.06

Repairs

   0.00    900.00    0.00    0.00    900.00

Telephone & Internet

              

Analog Land Phones

   662.23    703.23    679.64    0.00    2,045.10

Analog Phone-Long Distance

   145.52    101.09    68.30    0.00    314.91

Conference Call Service

   652.95    153.19    240.45    0.00    1,046.59

Depreciation, Fixed Assets

   1,250.00    1,250.00    1,250.00    625.00    4,375.00

Email Hosting

   240.40    251.35    0.00    0.00    491.75

Internet

   200.97    -200.97    0.00    0.00    0.00

Telephone & Internet - Other

   0.00    255.25    244.45    0.00    499.70                         

Total Telephone & Internet

   3,152.07    2,513.14    2,482.84    625.00    8,773.05

Utilities

              

Gas and Electric

   0.00    11.85    0.00    0.00    11.85

Utilities - Other

   0.00    23.73    43.22    0.00    66.95                         

Total Utilities

   0.00    35.58    43.22    0.00    78.80                         

Total Facilities

   14,743.36    17,328.71    12,428.99    10,205.20    54,706.26               
         

Total Expense

   1,054,607.35    669,083.84    666,130.67    562,209.66    2,952,031.52     
                   

Net Ordinary Income

   -1,054,607.35    -669,083.84    -666,130.67    -562,209.66    -2,952,031.52

Other Income/Expense

              

Other Income

              

Cash & Share Dividends

   65.20    270.17    3.64    0.00    339.01

Interest Income

   0.00    0.00    5.52    0.00    5.52

Other Income

   0.00    1.70    0.71    0.00    2.41                         

Total Other Income

   65.20    271.87    9.87    0.00    346.94

Other Expense

              

Interest Expense

   32,876.71    33,972.61    53,836.28    22,602.74    143,288.34

Other Expenses

   189.57    -35,292.11    17.86    0.00    -35,084.68                         

Total Other Expense

   33,066.28    -1,319.50    53,854.14    22,602.74    108,203.66               
         

Net Other Income

   -33,001.08    1,591.37    -53,844.27    -22,602.74    -107,856.72          
              

Net Income

   -1,087,608.43    -667,492.47    -719,974.94    -584,812.40    -3,059,888.24
                        

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

Schedule 1.1(b)

Sample Future Payment Allocation Schedule*

 

Equityholder
Name

  Equityholder
Address   Series A
Preferred
Stock
[1]   Common
Stock
[1]   Series A
Preferred
Stock
Warrants
[1]   Common
Stock
Options
[1]   Escrow
Distribution
Amount
[2]   Equity-
holder
Represen-
tative Fund
Distribution
[3]   First
Subseq-
uent
PARP
Payment
Amount
[4]   Dose
Escalation
Study
Milestone
[4]   Second
Subseq
-uent
PARP
Payment
Amount
[4]   Third
Subseq-
uent
PARP
Payment
Amount
[4]   Fourth
Subseq-
uent
PARP
Payment
Amount
[4]   Non-PARP
Phase 2
Payment
Amount
[4]   Non-PARP
Phase 3
Payment
Amount
[4]   Non-PARP
Sub-
licensing
Payment
Amount
[5]   Payment
Method
(Wire or
Check)   Wire
Transfer /
Check
Delivery
Instructions   W-8 /
W-9
Delivered

ProQuest Investments IV, LP

  [****]   9,007,937     1,428,571       [****]     [****]   [****]   [****]  
[****]   [****]   [****]   [****]   [****]   [****]   Wire   [****]  

A.M. Pappas Life Science Ventures III, LP

  [****]   4,240,342   235,367   672,477       [****]     [****]   [****]  
[****]   [****]   [****]   [****]   [****]   [****]   [****]   Wire   [****]  
W-9

PV III CEO Fund, LP

  [****]   263,626   14,633   41,809       [****]     [****]   [****]   [****]  
[****]   [****]   [****]   [****]   [****]   [****]   Wire   [****]   W-9

Mustang Ventures I, L.P.

  [****]   1,801,587     285,714       [****]     [****]   [****]   [****]  
[****]   [****]   [****]   [****]   [****]   [****]   Wire   [****]  

China Gateway Life Science (Holdings) Ltd. (HK)

  [****]   450,395     71,429       [****]     [****]   [****]   [****]   [****]
  [****]   [****]   [****]   [****]   [****]   Wire   [****]  

ProQuest Management, LLC

  [****]     250,000       $ —     $ —     [****]   [****]   [****]   [****]  
[****]   [****]   [****]   [****]   Wire   [****]  

Shuang Qiao

  [****]     549,282     480,000   $ —     $ —     [****]   [****]   [****]  
[****]   [****]   [****]   [****]   [****]   Wire   [****]  

Peter Myers

  [****]     280,500     619,500   $ —     $ —     [****]   [****]   [****]  
[****]   [****]   [****]   [****]   [****]   Check    

Leonard Post

  [****]     280,500     480,000   $ —     $ —     [****]   [****]   [****]  
[****]   [****]   [****]   [****]   [****]   Check    

Charles Hsu

  [****]     363,000       $ —     $ —     [****]   [****]   [****]   [****]  
[****]   [****]   [****]   [****]   Check    

Zhengying Pan

  [****]     5,208       $ —     $ —     [****]   [****]   [****]   [****]  
[****]   [****]   [****]   [****]   Check    

Xiaoyi Xiao

  [****]     6,510       $ —     $ —     [****]   [****]   [****]   [****]  
[****]   [****]   [****]   [****]   Check    

Daniel Chu

  [****]     97,500     247,500   $ —     $ —     [****]   [****]   [****]  
[****]   [****]   [****]   [****]   [****]   Check    

David Hanabusa

  [****]     30,000       $ —     $ —     [****]   [****]   [****]   [****]  
[****]   [****]   [****]   [****]   Check    

Yuqiao Shen

  [****]         160,000   $ —     $ —     [****]   [****]   [****]   [****]  
[****]   [****]   [****]   [****]   Check    

Amy Pfeiffer

  [****]         12,000   $ —     $ —     [****]   [****]   [****]   [****]  
[****]   [****]   [****]   [****]   Check    

Bing Wang

  [****]         90,000   $ —     $ —     [****]   [****]   [****]   [****]  
[****]   [****]   [****]   [****]   Check    

Ying Feng

  [****]         40,000   $ —     $ —     [****]   [****]   [****]   [****]  
[****]   [****]   [****]   [****]   Check    

 

NOTES:

 

* Assumes no Unallocated Bonus Amount and no Working Capital Excess Amount will
be distributed to Equityholders.

 

[1] Capitalization numbers presented based on the following assumptions:

 

  •  

No Company Options or Company Warrants outstanding as of the date of the
Agreement have been exercised.

 

  •  

Closing Date is February 10, 2010.

 

  •  

All the Company Notes have been converted to shares of Series A Preferred Stock
immediately prior to the Closing.

 

  •  

All Company Warrants or Company Options outstanding as of the date of the
Agreement are exchanged for a portion of the Payable Consideration pursuant to
the Agreement.

 

  •  

No transfers of Equity Participations have occurred after the date of the
Agreement.

 

[2] Assumes distribution of the full Indemnification Escrow Amount and Working
Capital Escrow Amount, and in each case, does not account for earnings thereon.

 

[3] Assumes full distribution of Equityholder Representative Fund Amount and
does not account for earnings.

 

[4] Assumes full payment of each Milestone Payment Amount (with no offsets by
Buyer pursuant to the Agreement).

 

[5] Assumes up front consideration paid for Non-PARP Sublicensing Milestone is
[****]

 

[****] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.