**Exhibit 10.22**

** **

**[ *** ] DENOTES CONFIDENTIALINFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES ANDEXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIALTREATMENT.**

AGREEMENT AND PLAN OF MERGERBY AND AMONGFOREST LABORATORIES, INC.,FL ****ACQUISITION CORP.,CEREXA, INC.,andDENNIS PODLESAK and ECKARD WEBER, M.D., AS STOCKHOLDERS’AGENTDECEMBER 13, 2006

 

LIST OF EXHIBITS AND SCHEDULES

| Exhibit A | Definitions                          |
|----------------|--------------------------------------|
| Exhibit B      | Form of Written Consent              |
| Exhibit C      | Form of Certificate of Incorporation |
| Exhibit D      | Form of Escrow Agreement             |
| Schedule 1.2   | Form of Certificate of Merger        |

 

AGREEMENT AND PLAN OF MERGER

 

            ThisAGREEMENT AND PLAN OF MERGER (this "Agreement") is made andentered into as of December 13, 2006 by and among ForestLaboratories, Inc., a Delaware corporation ("Acquiror"), FLAcquisition Corp., a Delaware corporation which is a wholly-ownedsubsidiary of Acquiror ("Merger Sub"), Cerexa, Inc., aDelaware corporation ("Target"), and Dennis Podlesak andEckard Weber, as Stockholders’ Agent (solely for purposes ofSection 5.12, Section 5.13 and Section 8). Acquiror, Merger Sub andTarget may be referred to herein individually as a "Party",and collectively as the "Parties". Capitalized terms used inthis Agreement shall have the meanings ascribed to such term inExhibit A of this Agreement, or if applicable as provided inthe text of this Agreement.

RECITALS

            A.        TheBoards of Directors of Target, Acquiror and Merger Sub believe itis in the best interests of their respective companies and thestockholders of their respective companies for Target and MergerSub to combine into a single company through the statutory mergerof Merger Sub with and into Target (the "Merger") and, infurtherance thereof, have approved this Agreement and theMerger.

            B.        Inconnection with the Merger, the outstanding shares ofTarget’s capital stock will be converted into the right toreceive the cash amount described in this Agreement.

            C.        Acquiror,Target and the Stockholders’ Agent will enter into an EscrowAgreement to be executed and delivered in accordance with Section5.5 (the "Escrow Agreement").

            D.        Target,Acquiror and Merger Sub desire to make certain representations andwarranties and enter into certain covenants in connection with theMerger.

            E.        Asan inducement to the Acquiror to enter into this Agreement, certainholders of Target Capital Stock (the "Majority Holders")having voting power equal to or greater than the RequiredStockholder Vote have indicated their intention to deliver, aspromptly as practicable following the execution of this Agreement,their irrevocable approval of the Merger, this Agreement and thetransactions contemplated hereby pursuant to a written consent,substantially in the form attached hereto as Exhibit B (the"Written Consent"), signed and dated by the Majority Holdersin their capacity as Target stockholders as promptly as practicablefollowing the execution of this Agreement, pursuant to and instrict accordance with the applicable provisions of the DelawareLaw, the Target certificate of incorporation and the Targetbylaws.

            NOW,THEREFORE, in consideration of the covenants, representations andwarranties set forth herein, and for other good and valuableconsideration, the Parties, intending to be legally bound, agree asfollows:

            1.        The Merger.

                      1.1        The Merger. At the Effective Time and upon the terms andsubject to the conditions set forth in this Agreement, in theCertificate of Merger filed pursuant to Section 1.2 and in theapplicable provisions of the Delaware General Corporation Law("Delaware Law"), Merger Sub shall be merged with and intoTarget, the separate corporate existence of Merger Sub shall ceaseand Target shall continue as the surviving corporation in theMerger (the "Surviving Corporation").

                      1.2        Closing; Effective Time. The consummation of the Merger (the"Closing") shall take place as soon as practicable, but nolater than two Business Days, after the satisfaction or waiver ofthe last of the conditions set forth in Section 6 to be satisfiedor waived (other than those conditions that by their nature are tobe satisfied at the Closing), or at such other time as the Partiesagree (the actual date on which the Closing takes place being the"Closing Date"). The Closing shall take place at the officesof Cooley Godward Kronish LLP, 3175 Hanover Street, Palo Alto,California 94304, or at such other location as the Parties agree.In connection with the Closing, Target shall cause the Merger to bemade effective by filing the Certificate of Merger in substantiallythe form attached hereto as Schedule 1.2 with the Secretary ofState of the State of Delaware in accordance with the relevantprovisions of Delaware Law (the time of such filing or such latertime as agreed to by the Parties and provided in the Certificate ofMerger being the "Effective Time").

                      1.3        Effect of the Merger. At the Effective Time, the effect of theMerger shall be as provided in this Agreement, the Certificate ofMerger filed pursuant to Section 1.2 and the applicable provisionsof Delaware Law.

                      1.4        Certificate of Incorporation; Bylaws. At the EffectiveTime:

                                   (a)        thecertificate of incorporation of Target shall be amended to read asset forth in Exhibit C, and as so amended shall be thecertificate of incorporation of the Surviving Corporation untilthereafter amended as provided by Delaware Law and such certificateof incorporation; and

                                   (b)        thebylaws of Merger Sub, as in effect immediately prior to theEffective Time, shall be the bylaws of the Surviving Corporationuntil thereafter amended.

                      1.5        Directors and Officers. At the Effective Time, the directorsand officers of Merger Sub immediately prior to the Effective Timeshall be the directors and officers of the Surviving Corporation,to serve until their respective successors are duly elected orappointed and qualified.

                      1.6        Effect on Capital Stock. Subject to Sections 1.7(a), 8.1 and8.3(a), at the Effective Time, by virtue of the Merger and withoutany further action on the part of Acquiror, Merger Sub, Target, theStockholders’ Agent or the holders of any of the securitiesidentified below:

                                   (a)        eachshare of Target Common Stock, Series A Preferred Stock and Series BPreferred Stock issued and outstanding immediately prior to theEffective Time (excluding Dissenting Shares and shares owned byTarget, Acquiror, Merger Sub or any of their respective whollyowned subsidiaries) shall be converted into the right to receive(without interest) (i) an amount of cash equal to (A) the MergerConsideration *divided by* the sum of (1) the aggregate numberof shares of Target Capital Stock outstanding immediately prior tothe Effective Time *plus* (2) the aggregate number of sharesof Target Capital Stock subject to unexercised Target Options(whether vested or unvested) that are outstanding immediately priorto the Effective Time (the amount determined pursuant to thissubclause (A) being the "Per Share Price"); *minus* (B)the Escrow Contribution Amount per share of Target Capital Stock;*plus* (C) any cash disbursements required to be made from theEscrow Fund with respect to such share to the Former Holder thereofin accordance with the terms of the Escrow Agreement, as and whensuch disbursements are required to be made; *plus* (ii) if theMilestone Event occurs, an amount of cash equal to the AdditionalMerger Consideration *divided by* the sum of (1) the aggregatenumber of shares of Target Capital Stock outstanding immediatelyprior to the Effective Time *plus* (2) the aggregate number ofshares of Target Capital Stock subject to unexercised TargetOptions (whether vested or unvested) that are outstandingimmediately prior to the Effective Time;

                                   (b)        eachshare of Target Capital Stock that is owned by Target as treasurystock, or by Acquiror or Merger Sub or any of their respectivewholly owned subsidiaries, shall automatically be canceled andshall cease to exist, and no consideration shall be delivered inexchange therefore; and

                                   (c)        eachshare of common stock of Merger Sub issued and outstandingimmediately prior to the Effective Time shall be converted into oneshare of common stock of the Surviving Corporation.

            Theamount of cash, if any, that each Former Holder of Target isentitled to receive for the shares of Target Capital Stock held bysuch Former Holder and/or Target Options held by such Former Holder(as provided in Section 1.11) shall be rounded to the nearest cent(with $0.005 being rounded upward) and computed after aggregatingthe cash amounts payable for all shares of each class and series ofTarget Capital Stock held by such Former Holder and all TargetOptions held by such Former Holder,

                      1.7        Cancellationand Surrender of Certificates.

                                   (a)        No Further Rights as Target Stockholders. At the EffectiveTime, all shares of Target Capital Stock outstanding immediatelyprior to the Effective Time shall automatically be cancelled andretired and shall cease to exist, and no holder of record of acertificate that immediately prior to the Effective Timerepresented outstanding shares of Target Capital Stock (a"Certificate") shall have any rights as a stockholder ofTarget.

                                   (b)        Exchange Procedures. Upon surrender of a Certificate forcancellation to Acquiror, together with a letter of transmittal inform reasonably acceptable to Acquiror (which letter of transmittalshall include an undertaking of the signatory thereto not toviolate Section 1.13 hereof) providing that risk of loss shall passonly upon delivery of such certificates to Acquiror, duly completedand validly executed in accordance with the instructions thereto,(i) the holder of such Certificate shall be entitled to receive inexchange therefor cash in an amount equal to the share of theMerger Consideration which such holder has the right to receivepursuant to Section 1.6(a), and (ii) the Certificate so surrenderedshall forthwith be canceled. Acquiror shall: (x) as promptly aspracticable after receipt of each properly surrendered Certificate,but in no event later than five Business Days after such receipt,cause the payment described in the preceding sentence (notincluding any amounts covered by Section 1.6(a)(i)(C) or Section1.6(a)(ii)) to be made to the holder of such Certificate by wiretransfer of immediately available funds to the account designatedby such holder in the letter of transmittal delivered with suchCertificate, and (y) if the Milestone Event occurs, as promptly aspracticable thereafter, but in no event later than forty-five daysafter such occurrence, cause the payment described in Section1.6(a)(ii) to be made to the holder of such Certificate by wiretransfer of immediately available funds to the account designatedby such holder in the letter of transmittal delivered with suchCertificate (or such other account as designated in writing by suchholder). Until so surrendered, each outstanding Certificate thatprior to the Effective Time represented shares of Target CapitalStock (other than Dissenting Shares) will be deemed from and afterthe Effective Time, for all purposes, to evidence the right toreceive the amount equal to the share of the Merger Considerationwhich such holder has the right to receive pursuant to Section1.6(a). If, after the Effective Time, any Certificate is presentedto the Surviving Corporation or Acquiror, it shall be cancelled andexchanged as provided in this Section 1.7.

                                   (c)        Transfers of Ownership. After the Effective Time, there shallbe no further registration of transfers of shares of Target CapitalStock outstanding immediately prior to the Effective Time on therecords of Target.

                                   (d)        No Liability. Notwithstanding anything to the contrary in thisSection 1.7, neither Acquiror nor the Surviving Corporation or anyother party hereto shall be liable to any person for any amountproperly paid to a public official pursuant to any applicableabandoned property law, escheat law or similar law. Any amountsremaining unclaimed by Former Holders two years after the EffectiveTime (or such earlier date which is immediately prior to such timeas the amounts would otherwise escheat to or become the property ofany Governmental Authority) shall become, to the fullest extentpermitted by Applicable Laws, the property of the Acquiror, freeand clear of any claims or interests of any Person previouslyentitled thereto.

                      1.8        Lost, Stolen or Destroyed Certificates. In the event anyCertificate shall have been lost, stolen or destroyed, Acquirorshall pay to the record holder of such Certificate theconsideration into which the shares of Target Capital Stockformerly represented by such Certificate have been convertedpursuant to Section 1.6, upon the making of an affidavit of thatfact by such record holder; provided, however, thatAcquiror may, in its discretion and as a condition precedent to thepayment of such consideration, require such record holder todeliver a bond in such sum as Acquiror may reasonably direct asindemnity against any claim that may be made against Acquiror orthe Surviving Corporation with respect to such Certificate.

                      1.9        Dissenting Shares. Notwithstanding anything in this Agreementto the contrary, any Dissenting Share shall not be converted intothe right to receive the consideration to which the holder of suchshare (a "Dissenting Stockholder") would be entitledpursuant to Section 1.6, but rather shall be entitled to receivesuch amount as may be determined to be due with respect to suchDissenting Share pursuant to Delaware Law. If any DissentingStockholder fails to perfect such stockholder’sdissenters’ rights under Delaware Law or effectivelywithdraws or otherwise loses such rights with respect to anyDissenting Shares, such Dissenting Shares shall thereuponautomatically be converted into the right to receive theconsideration referred to in Section 1.6, pursuant to theexchange procedures set forth in Section 1.7. Target shall giveAcquiror (a) prompt notice of any demand for payment of the fairvalue of any shares of Target Capital Stock or any attemptedwithdrawal of any such demand for payment and any other instrumentserved pursuant to Delaware Law and received by Target relating toany stockholder’s dissenters’ rights, and (b) theopportunity to direct all negotiations and proceedings with respectto any such demands for payment under Delaware Law. 

                      1.10       Taking of Further Action. If, at any time after the EffectiveTime, any further action is necessary or desirable to carry out thepurposes of this Agreement and to vest the Surviving Corporationwith full right, title and possession to all assets, property,rights, privileges, powers and franchises of Target and Merger Sub,Acquiror and the Surviving Corporation are fully authorized intheir respective names to take, and will take, all such lawful andnecessary or desirable action, so long as such action is notinconsistent with this Agreement.

                      1.11       Target Options. As soon as practicable following the date ofthis Agreement, the Board of Directors of Target (or, ifappropriate, any committee thereof administering the 2005 EquityIncentive Plan) shall adopt such resolutions or take such otheractions as may be required to adjust the terms of all outstandingTarget Options, whether vested or unvested, as necessary to providethat Target Options will become fully exercisable and may beexercised before the Effective Time at such applicable time ortimes as specified in the 2005 Equity Incentive Plan, and at theEffective Time, each Target Option outstanding immediately prior tothe Effective Time, whether or not then vested or exercisable,shall be canceled and the holder thereof shall then become entitledto receive, in full satisfaction of the rights of such holder withrespect thereto, an amount equal to: (a) an amount of cash equal to(i) the product of (A) the number of shares of Target Common Stocksubject to such Target Option immediately prior to the EffectiveTime, *multiplied by* (B) the amount by which the Per SharePrice exceeds the exercise price per share of Target Common Stockthat is subject to such Target Option; *minus* (ii) the EscrowContribution Amount for such Target Option; *plus* (iii) anycash disbursements required to be made from the Escrow Fund withrespect to such Target Option to the Former Optionholder thereof inaccordance with the terms of the Escrow Agreement, as and when suchdisbursements are required to be made; *plus* (b) if theMilestone Event occurs, an amount of cash equal to the product of(i) the number of shares of Target Common Stock subject to suchTarget Option immediately prior to the Effective Time,*multiplied by* (ii) an amount equal to (A) the AdditionalMerger Consideration *divided by* (B) the sum of (1) theaggregate number of shares of Target Capital Stock outstandingimmediately prior to the Effective Time *plus* (2) theaggregate number of shares of Target Capital Stock subject tounexercised Target Options (whether vested or unvested) that areoutstanding immediately prior to the Effective Time. As soon aspracticable following the Effective Time, Acquiror shall cause thepayment described in subsections (a)(i), as reduced by subsection(a)(ii), of the preceding sentence to be made to the holder of suchTarget Option by wire transfer of immediately available funds tothe account designated by such holder in writing, and such holdershall remain entitled to receive any additional cash disbursementsas provided in subclause (a)(iii) and subclause (b) (ifapplicable). If the Milestone Event occurs, Acquiror shall, aspromptly as practicable thereafter, but in no event later thanforty-five days after such occurrence, cause the payment describedin Section 1.11(b) to be made to the holder of such Target Optionby wire transfer of immediately available funds to the accountdesignated by such holder in writing.

                      1.12       Withholding Rights. Acquiror shall be entitled to deduct andwithhold from the consideration otherwise payable to any Personpursuant to this Article 1 such withholding, employment and similartaxes and all other amounts as it is required to deduct andwithhold with respect to the making of such payment under anyprovision of federal, state, local or foreign law. If the Acquirorso withholds amounts, such amounts shall be treated for allpurposes of this Agreement as having been paid to the holder of theshares of Target Capital Stock or Target Options in respect of whomthe Acquiror made such deduction and withholding.

                      1.13       Non-Transferability of Contingent Rights. No Former Holdershall directly or indirectly sell, assign, gift, pledge,hypothecate, or otherwise voluntarily or involuntarily or byoperation of law encumber, transfer or dispose of (other thanpursuant to the laws of descent and distribution or by will) (eacha "Transfer") any of its rights to receive considerationunder Section 1.6(a)(ii) or 1.11(b), and neither the SurvivingCorporation nor Acquiror shall be obligated to effect or recognizea Transfer prohibited by this Section 1.13. The right to receiveconsideration under Section 1.6(a)(ii) or 1.11(b) shall notconstitute an equity interest in Acquiror or the SurvivingCorporation and shall not vest in or otherwise provide any FormerHolder with any voting rights or other rights of ownership of anysecurity.

            2.        Representations and Warranties of Target. Target representsand warrants to Acquiror as of the date of this Agreement (for allpurposes except for purposes of Section 8), and as of the date ofthis Agreement and as of the Closing Date (for purposes of Section8) that the statements contained in this Section 2 are true andcorrect except as disclosed in a disclosure schedule of even dateherewith delivered by Target to Acquiror and complying with theprovisions of Section 9.2 (the "Target DisclosureSchedule"):

                      2.1        Organization, Standing and Power. Each of Target and itsSubsidiaries is a corporation duly organized, validly existing andin good standing, if applicable, under the laws of the jurisdictionof its incorporation. There is no pending or, to the knowledge ofTarget, threatened action for the dissolution, liquidation orinsolvency of Target or any of its Subsidiaries. Target and itsSubsidiaries have the corporate power to own their properties andto carry on their business as now being conducted (collectively,the "Current Target Business"). Each of Target and itsSubsidiaries is duly qualified to do business, and is in goodstanding (if such concept is applicable in the relevantjurisdiction), in each jurisdiction where the operation of theCurrent Target Business by Target and its Subsidiaries requiressuch qualification. Target has delivered, or made available forreview in a data room, to Acquiror or its advisors true and correctcopies of the respective certificates of incorporation and bylawsor other equivalent organizational documents, as applicable, ofTarget and each of its Subsidiaries, each as in effect as of thedate of this Agreement. The minute books of Target and itsSubsidiaries have been made available in a data room for review byAcquiror or its advisors and contain a materially complete andaccurate summary of all meetings of directors and stockholders oractions by written consent since the time of incorporation of eachsuch company through the date of this Agreement. Neither Target norany of its Subsidiaries is in violation of any of the provisions ofits certificate of incorporation or bylaws or equivalentorganizational documents. Target has noSubsidiaries other than those listed in Section 0 of TargetDisclosure Schedule, and neither Target nor any such Subsidiaryowns directly or indirectly any equity or similar interest in, orany interest convertible or exchangeable or exercisable for, anyequity or similar interest in, any corporation, partnership, jointventure or other business association or entity.

                      2.2        Authority. Target has all requisite corporate power andauthority to enter into this Agreement and to consummate theMerger. The affirmative vote or consent of the holders of (i) amajority of the shares of Target Common Stock and Target PreferredStock (voting together as a single class) outstanding on the recorddate chosen for purposes of determining the stockholders of Targetentitled to vote on the adoption of this Agreement, (ii) a majorityof the shares of Target Preferred Stock (voting together as asingle class) outstanding on the record date chosen for purposes ofdetermining the stockholders of Target entitled to vote on theadoption of this Agreement and (iii) at least 60% of the shares ofTarget Series B Preferred Stock outstanding on the record datechosen for purposes of determining the stockholders of Targetentitled to vote on the adoption of this Agreement are the onlyvotes of the holders of any Target Capital Stock necessary underDelaware Law and the Certificate of Incorporation of Target toapprove this Agreement and the Merger (the "Required StockholderVote"). The Board of Directors of Target has unanimously(a) adopted this Agreement and declared it advisable andapproved its execution and delivery and the consummation of theMerger; (b) determined that the Merger is in the bestinterests of the stockholders of Target, and (c) recommended thatthe holders of Target Capital Stock approve this Agreement and theMerger and the transactions contemplated by this Agreement. ThisAgreement has been duly executed and delivered by Target and,assuming this Agreement constitutes a valid and binding obligationof the other parties hereto, this Agreement constitutes a valid andbinding obligation of Target, enforceable against Target inaccordance with its terms, except as such enforceability may belimited by bankruptcy, insolvency, moratorium or other similar lawsaffecting or relating to creditors’ rights generally andgeneral principles of equity, regardless of whether asserted in aproceeding in equity or at law. The execution and delivery of thisAgreement by Target does not constitute, and the consummation byTarget of the transactions contemplated hereby will not result in,a termination, or breach or violation by Target of, or a default byTarget under (with or without notice or lapse of time, or both),(a) any provision of the certificate of incorporation orbylaws of Target, as amended, (b) any Material Contract or(c) any judgment, order, decree, statute, law, ordinance, ruleor regulation applicable to Target or any of its properties orassets. No material consent, approval, order or authorization of,or registration, declaration or filing with, any court,administrative agency or commission or other governmental authorityor instrumentality (each, a "Governmental Entity") isrequired to be obtained or made by Target at or prior to theEffective Time in order for Target to execute and deliver thisAgreement or consummate the Merger, except for: (a) the filingof Certificate of Merger as provided in Section 0 and(b) such filings as may be required under theHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended("HSR"), and foreign antitrust laws. The holders of Target Capital Stock are notentitled to appraisal, dissenter’s or similar rights underany Applicable Laws except as provided in Section 262 of theDelaware Law ("Section 262").

                      2.3        Governmental Authorizations. Target and its Subsidiaries haveobtained each material federal, state, county, local or foreigngovernmental consent, license, permit, grant or other authorizationof a Governmental Entity that is required, as of the date hereof,for the operation by Target and its Subsidiaries of the CurrentTarget Business, and all of such consents, licenses, permits,grants and authorizations are in full force and effect.

                      2.4        Financial Statements. Target has delivered to Acquiror or itsadvisors (a) the audited consolidated balance sheets and statementsof operations of Target and its Subsidiaries as of and for thefiscal year ended December 31, 2005 and (b)(i) the unauditedconsolidated balance sheet of Target and its Subsidiaries as ofSeptember 30, 2006 (the "Target Balance Sheet") and (ii) theunaudited consolidated statement of operations of Target and itsSubsidiaries for the nine-month period ended September 30, 2006(collectively, the "Target Financial Statements"). TheTarget Financial Statements have been prepared in accordance withGAAP (except as disclosed in the notes thereto and except that theunaudited Target Financial Statements do not contain footnotes andare subject to normal year-end audit adjustments) applied on aconsistent basis throughout the periods covered. The TargetFinancial Statements fairly present, in all material respects andin accordance with GAAP, the financial condition of Target as ofthe dates indicated therein and the operating results of Target forthe periods indicated therein, subject to normal year-end auditadjustments and the absence of footnotes in the case of theunaudited Target Financial Statements.

                      2.5        Capitalization; Shares and Stockholder Information.

                                   (a)        Capitalization. The authorized capital stock of Target consistsof (i) 84,000,000 shares of Target Common Stock, of which therewere issued and outstanding as of the date of this Agreement,9,750,249 shares, and (ii) 64,000,000 shares of Target PreferredStock, of which as of the date of this Agreement 20,000,000 weredesignated Series A Preferred Stock and 44,000,000 weredesignated Series B Preferred Stock. As of the date of thisAgreement, there were issued and outstanding: 20,000,000 shares ofSeries A Preferred Stock convertible into the same number ofshares of Common Stock, and 42,176,299 shares of Series BPreferred Stock convertible into the same number of shares ofCommon Stock. Each outstanding share of Series A Preferred Stockand Series B Preferred Stock is convertible into one share ofTarget Common Stock. All outstanding shares of Target Common Stockand Target Preferred Stock (i) are duly authorized, validlyissued, fully paid and non-assessable, (ii) are free of anyliens or encumbrances created by Target, and, to the knowledge ofTarget, free of any liens or encumbrances created by or imposedupon the holders thereof and (iii) were not issued inviolation of any preemptive rights or rights of first refusalcreated by statute, the certificate of incorporation or bylaws ofTarget or any agreement to which Target is a party or by which itis bound. As of the date of this Agreement, there were 14,584,563shares of Target Common Stock reserved for issuance under the 2005Equity Incentive Plan, of which 4,672,674 shares of Target CommonStock were subject to outstanding options and 161,640 shares ofTarget Common Stock were reserved for future option grants. Targethas delivered to Acquiror or its advisors (or made available in adata room) true and complete copies of the 2005 Equity IncentivePlan and each form of agreement evidencing each Target Option (andeach such agreement accurately reflects the actual date of grant ofsuch Target Option determined in accordance with GAAP). Except forthe rights created pursuant to this Agreement and the options andother rights disclosed in the preceding sentences, there are nooptions, warrants, calls, rights, commitments or agreements thatare outstanding to which Target is a party or by which it is bound,obligating Target to issue, deliver, sell, repurchase or redeem, orcause to be issued, delivered, sold, repurchased or redeemed, anyshares of Target Capital Stock or other equity securities of Targetor its Subsidiaries or obligating Target to grant, extend,accelerate the vesting of, change the price of, or otherwise amendor enter into any option, warrant, call, right, commitment oragreement regarding shares of Target Capital Stock or other equitysecurities of Target or its Subsidiaries. All shares of TargetCommon Stock issuable upon conversion of the outstanding shares ofTarget Preferred Stock or upon exercise of the options described inthis Section 0 will be, when issued pursuant to the respectiveterms of such Target Preferred Stock or options, duly authorized,validly issued, fully paid and nonassessable. There are no othercontracts, commitments or agreements relating to the voting,purchase or sale of Target’s capital stock (a) betweenor among Target and any of its stockholders; and (b) toTarget’s knowledge, between or among any of Target’sstockholders.

                                   (b)        Theauthorized capital stock of each of the Subsidiaries and the issuedand outstanding shares of such capital stock as of the date of thisAgreement are reflected on Section 2.5(b) of the Target DisclosureSchedule. All such outstanding shares (i) are duly authorized,validly issued, fully paid and non-assessable, (ii) are freeof any liens or encumbrances created by the Subsidiary and free ofany liens or encumbrances created by or imposed upon Target and(iii) were not issued in violation of any preemptive rights orrights of first refusal created by statute, the certificate ofincorporation or bylaws of any Subsidiary or any agreement to whichTarget or any Subsidiary is a party or by which it is bound. 

                                   (c)        Shares and Stockholder Information. Section 2.5(c) of theTarget Disclosure Schedule sets forth, as of the date hereof: (i)the number of shares of Target Capital Stock that each currentstockholder of Target holds of record; and (ii) to the knowledge ofTarget, the address and state of residence of such stockholder.

                      2.6        Absence of Certain Changes. Between September 30, 2006 (the"Target Balance Sheet Date") and the date of this Agreement,Target and its Subsidiaries have conducted their business in theordinary course consistent with past practice, and there has notoccurred (a) any acquisition, sale or transfer of any materialasset of Target or its Subsidiaries other than in the ordinarycourse of business; (b) any amendment to the certificate ofincorporation or bylaws or equivalent organizational documents ofTarget or its Subsidiaries; (c) any material increase in, ormaterial modification of, the compensation or benefits payable byTarget or its Subsidiaries to any of their respective directors orexecutive officers; (d) any declaration, setting aside or paymentof a dividend or other distribution with respect to shares ofTarget Capital Stock; or (e) any incurrence of indebtedness forborrowed money. Between the Target Balance Sheet Date and the dateof this Agreement, there has not been any event or occurrence thathas had, individually or in the aggregate, a Target MaterialAdverse Effect.

                      2.7        Absence of Undisclosed Liabilities. Neither Target nor any ofits Subsidiaries has any material obligations or liabilities of anynature (matured or unmatured, fixed or contingent) other than:(a) those set forth or adequately provided for in the TargetBalance Sheet; (b) those not required to be reflected in theliabilities column of a balance sheet prepared in accordance withGAAP; (c) those incurred in the ordinary course of businesssince the Target Balance Sheet Date; and (d) those incurredpursuant to or in connection with the execution, delivery orperformance of this Agreement.

                      2.8        Litigation; Orders. There is no private or governmental action,suit, proceeding, arbitration or, to the knowledge of Target,investigation, pending before any Governmental Entity or threatenedagainst Target or its Subsidiaries or against any of theirrespective officers or directors (in their capacities as such).There is no judgment, decree or order against Target or itsSubsidiaries or against any of their respective directors orofficers (in their capacities as such), that specifically namesTarget or its Subsidiaries or such directors or officers and(i) restricts in any material manner the use, transfer orlicensing by Target or its Subsidiaries of any right or interest ofTarget or its Subsidiaries in any Material Target IP Right; or (ii)otherwise materially and adversely affects the conduct of theCurrent Target Business.

                      2.9        Intellectual Property.

                                   (a)        Forpurposes of this Agreement, the following terms shall be defined asfollows:

                                               (i)        "IP Rights" means any and all of the following in any country:(A) Copyrights, Patent Rights, Trademark Rights, domain nameregistrations, moral rights, trade secrets, know how rights, andother intellectual property rights and intangible assets; and(B) the right (whether at law, in equity, by contract orotherwise) to use or otherwise exploit any of the foregoing.

                                               (ii)       "Copyrights" means all copyrights and copyrightable works,including all rights of authorship, use, publication, reproduction,distribution, performance, transformation, moral rights and rightsof ownership of copyrightable works and all rights to register andobtain renewals and extensions of registrations, together with allother interests accruing by reason of international copyright.

                                               (iii)      "Material Target IP Rights" means all Target IP Rights otherthan those which, individually or in the aggregate, are notmaterial to the conduct of the Current Target Business.

                                               (iv)       "Patent Rights" means all issued patents and pending patentapplications (which for purposes of this Agreement shall includeutility models, design patents, certificates of invention andapplications for certificates of invention and priority rights) inany country, including all provisional applications, substitutions,continuations, continuations-in-part, divisions, renewals,reissues, re-examinations and extensions thereof.

                                               (v)        "Target IP Rights" means all IP Rights owned solely or co-ownedby Target or its Subsidiaries, or in which Target or itsSubsidiaries has any right, title or interest.

                                               (vi)       "Trademark Rights" means all trademarks, registered trademarks,applications for registration of trademarks, service marks,registered service marks, applications for registration of servicemarks, trade names, registered trade names and applications forregistration of trade names.

                                   (b)        Section2.9(b) of the Target Disclosure Schedule lists all of the PatentRights and all registered Trademark Rights (or Trademark Rights forwhich applications for registration have been filed) owned solelyby Target or its Subsidiaries as of the date of this Agreement,setting forth in each case the jurisdictions in which patents havebeen issued, patent applications have been filed, trademarks havebeen registered and trademark applications have been filed. Section2.9(b) of the Target Disclosure Schedule lists all of the PatentRights and all registered Trademark Rights (or Trademark Rights forwhich applications for registration have been filed) in whichTarget or its Subsidiaries has any co-ownership interest, otherthan those owned solely by Target or its Subsidiaries, settingforth in each case the jurisdictions in which patents have beenissued, patent applications have been filed, trademarks have beenregistered and trademark applications have been filed. Section2.9(b) of Target Disclosure Schedule lists, to the knowledge ofTarget as of the date hereof, all of the Patent Rights and allregistered Trademark Rights (or Trademark Rights for whichapplications for registration have been filed) in which Target orits Subsidiaries has any right, title or interest, other than thoseowned solely or co-owned by Target or its Subsidiaries.

                                   (c)        NeitherTarget nor its Subsidiaries jointly own any Target IP Rights withany person other than Target or its Subsidiaries. No current orformer officer, manager, director or employee of Target or itsSubsidiaries, and no stockholder, consultant, independentcontractor of Target or its Subsidiaries, and no other third party,has any right, title or interest in, to or under any Target IPRights that has not been exclusively assigned, transferred orlicensed to Target or its Subsidiaries. No third party haschallenged, or to the knowledge of Target has threatened tochallenge, the right, title or interest of Target or itsSubsidiaries in, to or under Target IP Rights, or the validity,enforceability or claim construction of any Patent Rights owned orco-owned or exclusively licensed by Target or its Subsidiariesincluded in Target IP Rights. To the knowledge of Target, no anythird party claimed any right title or interest in any Target IPRights in contravention of or that would otherwise adversely affectTarget’s rights in such Target IP Rights.

                                   (d)        Section2.9(d) of the Target Disclosure Schedule lists all legally bindingoral and written contracts, agreements, and licenses in effectunder which Target or its Subsidiaries has any right, title orinterest in, under or to any Material Target IP Rights, other thannonexclusive licenses that are available to the publicgenerally.

                                   (e)        Nothird party is asserting in writing, or to the knowledge of Targetthreatening in writing or otherwise, to make a claim which wouldadversely affect the ownership rights of Target or its Subsidiariesin, under or to (i) any of the Material Target IP Rights or(ii) any legally binding contract, agreement, or license underwhich Target or its Subsidiaries has any right, title or interestin, under or to any of the Material Target IP Rights, and Targethas no knowledge of facts that have led Target to believe that suchclaim is likely to be made. To the knowledge of Target, no thirdparty is asserting or to the knowledge of Target threatening toassert a claim against any person other than Target or itsSubsidiaries or their respective affiliates, nor, to the knowledgeof Target, is any such claim being asserted or threatened againstany such person, which would materially and adversely affect theownership rights of Target or its Subsidiaries to or under(i) any of Target IP Rights or (ii) any legally bindingcontract, agreement, or license under which Target or itsSubsidiaries has any right, title or interest in, under or to anyof Target IP Rights, and Target has no knowledge of facts that haveled Target to believe that such claim is likely to be made.

                                   (f)        NeitherTarget nor its Subsidiaries is subject to any legally bindingcontract or written agreement that restricts the use, transfer,delivery or licensing of the Material Target IP Rights (or anytangible embodiment thereof).

                                   (g)        Targetand its Subsidiaries have put in the policies and procedures listedon Section 2.9(g) of the Target Disclosure Schedule to protect andmaintain the confidentiality of the proprietary know-how includedin the Target IP Rights. Neither Target nor any of its Subsidiarieshas granted, licensed or conveyed to any third party, pursuant toany written or oral contract, agreement, license or otherarrangement, any license or other right, title or interest in, toor under any Material Target IP Rights (or any tangible embodimentthereof). There are no outstanding obligations to pay any materialamounts or provide other material consideration to any other personin connection with any Material Target IP Rights (or any tangibleembodiment thereof).

                                   (h)        Targetand its Subsidiaries own, or otherwise possess legally enforceablerights to use, all IP Rights used by Target in its conduct of theCurrent Target Business, other than those which, individually or inthe aggregate, are not material to the conduct of the CurrentTarget Business. To the knowledge of Target, the Target IP Rightscollectively constitute all of the IP Rights necessary to enableTarget and its Subsidiaries to conduct the Current Target Business,other than those which, individually or in the aggregate, are notmaterial to the conduct of the Current Target Business.

                                   (i)        Tothe knowledge of Target, the conduct of the Current Target Businessdoes not infringe, constitute contributory infringement, inducementto infringe, misappropriation or unlawful use of IP Rights of anyother person, and neither Target nor its Subsidiaries hasreceived any written notice or other communication asserting any ofthe foregoing that remains unresolved.

                                   (j)        Tothe knowledge of Target, no Material Target IP Rights are beinginfringed or misappropriated by any third party.

                                   (k)        NeitherTarget nor its Subsidiaries is currently a party to any legallybinding written or oral contract, agreement, or license toindemnify any other person against any charge of infringement ofany IP Rights.

                                   (l)        Allcurrent and former officers and employees of Target and itsSubsidiaries who have contributed in a material manner to thecreation or development of any Target IP Right have executed anddelivered to Target or its Subsidiaries an agreement (containing noexceptions or exclusions from the scope of its coverage) regardingthe protection of proprietary information and the assignment toTarget or its Subsidiaries of any IP Rights arising from servicesperformed for Target or its Subsidiaries by such persons, each formof which has been made available in a data room for review byAcquiror or its advisors. All current and former consultants andindependent contractors to Target or its Subsidiaries who havecontributed in a material manner to the creation or development ofany Target IP Right have executed and delivered to Target or itsSubsidiaries an agreement in substantially the forms provided toAcquiror or its counsel (containing no exceptions or exclusionsfrom the scope of its coverage) regarding the protection ofproprietary information and the assignment to Target or itsSubsidiaries of any IP Rights arising from the services performedfor Target or its Subsidiaries by such persons. To the knowledge ofTarget, no current employee or independent contractor of Target orits Subsidiaries is in material violation of any term of any patentdisclosure agreement or employment contract or any other contractor agreement relating to the relationship of any such employee orindependent contractor with Target or its Subsidiaries.

                                   (m)        Neitherthe execution, delivery or performance of this Agreement by Targetnor the consummation by Target of the transactions contemplated bythis Agreement will contravene, conflict with or result in anylimitation on Target’s right, title or interest in or to anyTarget IP Rights.

                      2.10       Interested Party Transactions. Neither Target nor itsSubsidiaries are indebted to any director, officer or employee ofTarget or its Subsidiaries (except for amounts due as salaries andbonuses under employment contracts or employee benefit plans andamounts payable in reimbursement of ordinary business expenses),and no such director or officer is indebted to Target or itsSubsidiaries.

                      2.11       MaterialContracts.

                                   (a)        Section2.11(a) of the Target Disclosure Schedule lists all of the MaterialContracts in effect as of the date of this Agreement. Target hasdelivered to Acquiror, or made available to Acquiror or itsadvisors in a data room, a complete and accurate copy of each suchMaterial Contract and all amendments or modifications thereto thatexist.

                                   (b)        Withrespect to each Material Contract listed in Section 2.11(a) ofTarget Disclosure Schedule: (i) such Material Contract is infull force and effect as of the date hereof and, with respect toeach party thereto other than Target or any of its Subsidiaries, isbinding and enforceable against such party, except as suchenforceability may be limited by bankruptcy, insolvency, moratoriumor other similar laws affecting or relating to creditors’rights generally and general principles of equity, regardless ofwhether asserted in a proceeding in equity or at law; and(ii) to Target’s knowledge, (A) no party to suchMaterial Contract is in breach or default of such MaterialContract, and (B) no event has occurred that with notice or lapseof time would constitute a breach or default thereunder by Targetor any Subsidiary that is a party to such Material Contract, orwould permit the modification or premature termination of suchMaterial Contract by any other party thereto.

                                   (c)        "Material Contract" means any oral or written legally binding,executory contract, agreement or commitment, or directly relatedexecutory contracts, agreements or commitments, to which Target orany of its Subsidiaries is a party or otherwise bound(i) under which expected receipts or expenditures exceed$100,000 in the current or any future calendar year;(ii) pursuant to which Target has obtained or granted anyright, title or interest in, under or to any Material Target IPRights or in, under or to the IP Rights of any other person (otherthan any such IP Rights as, individually or in the aggregate, arenot material to the conduct of the Current Target Business andother than nonexclusive licenses that are available to the publicgenerally), or which relates directly and materially to thedevelopment, distribution, supply, co-promotion, marketing ormanufacturing of any Target Product; (iii) evidencingindebtedness for borrowed or loaned money of $100,000 or more,including guarantees of such indebtedness by Target;(iv) creating or relating to any partnership or joint ventureor any sharing of profits or losses by Target or its Subsidiarieswith any third party; (v) with any Governmental Entity (otherthan a public university or college); or (vi)  that ifterminated, would reasonably be expected to have a Target MaterialAdverse Effect.

                      2.12       Suppliers. No material current supplier of Target or itsSubsidiaries has canceled or otherwise terminated, or to theknowledge of Target, threatened to cancel or otherwise terminate,its relationship with Target or its Subsidiaries or has at any timeon or after Target Balance Sheet Date, decreased materially itsservices or supplies to Target or its Subsidiaries in the case ofany such supplier. To Target’s knowledge, no such materialsupplier has indicated in a writing delivered to Target orotherwise that such supplier intends to cancel or otherwiseterminate its relationship with Target or its Subsidiaries or todecrease materially its delivery of services or supplies to Targetor its Subsidiaries.

                      2.13       Title to Property. Target and its Subsidiaries have (a) goodand valid title to all of their tangible owned properties, real andpersonal, including those reflected in the Target Balance Sheet oracquired after the Target Balance Sheet Date (except propertiessold or otherwise disposed of since the Target Balance Sheet Date),and (b) with respect to tangible leased properties, valid leaseholdinterests therein, free and clear of all mortgages, liens, pledges,charges or other encumbrances of any kind or character, except forthe following (collectively, "Permitted Encumbrances"): (i)liens for current taxes not yet due and payable or that are beingcontested in good faith by appropriate proceedings;(ii) encumbrances that do not materially impair the ownershipor use of the assets to which they relate; (iii) lienssecuring debt that is reflected on the Target Balance Sheet;(iv) statutory or common law liens tosecure obligations to landlords, lessors or renters under leases orrental agreements; (v) deposits or pledges made in connection with,or to secure payment of, workers’ compensation, unemploymentinsurance or similar programs mandated by Applicable Laws; and (vi)statutory or common law liens in favor of carriers, warehousemen,mechanics and materialmen, to secure claims for labor, materials orsupplies, and other like liens.

                      2.14       RealEstate.

                                   (a)        Allleases for real property (each a "Lease" and collectively,"Leases") to which Target or any of its Subsidiaries is aparty are in full force and effect and are binding and enforceableagainst Target and, to Target’s knowledge, against thelessors, except as such enforceability may be limited bybankruptcy, insolvency, moratorium or other similar laws affectingor relating to creditors’ rights generally and generalprinciples of equity, regardless of whether asserted in aproceeding in equity or at law. True and correct copies of all suchLeases, as amended or modified through the date hereof, have beendelivered to Acquiror or its advisors (or have been made availablein a data room for review by Acquiror or its advisors). NeitherTarget nor its Subsidiaries own any real property.

                                   (b)        Targetand its Subsidiaries are not in material default under the terms ofthe Leases; and, to the knowledge of Target, no lessor is inmaterial default under any of the terms of the Leases.

                      2.15       Environmental Matters.

                                   (a)        Thefollowing terms shall be defined as follows:

                                               (i)        "Environmental Laws" shall mean any applicable, federal, stateor local governmental laws (including common laws), statutes,ordinances, codes, regulations, rules, permits, licenses,certificates, approvals, judgments, decrees, orders, directives, orrequirements that regulate the protection of the environment,protection of public health and safety, or protection of workerhealth and safety, or that regulate the handling, use,manufacturing, processing, storage, treatment, transportation,discharge, release, emission, disposal, re-use, or recycling ofHazardous Materials , including the federal ComprehensiveEnvironmental Response, Compensation and Liability Act of 1980,42 U.S.C. Section 9601, et seq., as amended("CERCLA"), and the federal Resource Conservation andRecovery Act, 42 U.S.C. Section 6901, et seq., as amended("RCRA").

                                               (ii)       "Hazardous Materials" shall mean any material, chemical,compound, substance, mixture or by-product that is identified,defined, designated, listed, restricted or otherwise regulatedunder Environmental Laws as a "hazardous constituent," "hazardoussubstance," "hazardous material," "acutely hazardous material,""extremely hazardous material," "hazardous waste," "hazardous wasteconstituent," "acutely hazardous waste," "extremely hazardouswaste," "infectious waste," "medical waste," "biomedical waste,""pollutant," "toxic pollutant," or "contaminant. The term"Hazardous Materials" shall include any "hazardous substances" asdefined, listed, designated or regulated under CERCLA, any"hazardous wastes" or "solid wastes" as defined, listed, designatedor regulated under RCRA, any asbestos or asbestos containingmaterials any polychlorinated biphenyls, and any petroleum orhydrocarbonic substance, fraction, distillate or by-product.

                                   (b)        Targetand its Subsidiaries are in compliance with all Environmental Lawsrelating to the properties or facilities used, leased or occupiedby Target or its Subsidiaries (collectively, "TargetFacilities"). Target has not and, to Target’s knowledge,no third party has, discharged, emitted, released, leaked orspilled Hazardous Materials at any of Target Facilities that arereasonably likely to give rise to liability of Target underEnvironmental Laws. As of the date hereof, no civil, criminal oradministrative action, proceeding or, to Target’s knowledge,investigation is pending against Target or its Subsidiaries, or, toTarget’s knowledge, threatened against Target or itsSubsidiaries, with respect to Hazardous Materials or EnvironmentalLaws.

                      2.16       Taxes.

                                   (a)        Asused in this Agreement, the terms "Tax" and "Taxes"mean all federal, state and local taxes of any country, assessmentsand other governmental charges, duties, impositions andliabilities, including taxes based upon or measured by grossreceipts, income, profits, sales, use and occupation, and valueadded, ad valorem, stamp transfer, franchise, withholding, payroll,recapture, employment, excise and property taxes, together with allinterest, penalties and additions imposed with respect to suchamounts and any obligations under any legally binding agreements orarrangements with any other person with respect to such amounts andincluding any liability for the aforementioned taxes of apredecessor entity

                                   (b)        Eachof the returns, information statements or reports required to befiled with a Governmental Authority with respect to Taxes ("TaxReturns") by or on behalf of or with respect to Target or itsSubsidiaries: (i) has been timely filed on or before theapplicable due date (including any extensions of such due date),(ii) is true, correct and complete in all material respects, and(iii) has been prepared in all material respects in compliancewith Applicable Laws. All Taxes shown on the filed Tax Returns havebeen timely paid, except to the extent such amounts are beingcontested in good faith by Target or are properly reserved for onthe Unaudited Balance Sheet by specific provision therefore (withrespect to all Taxes for or with respect to all periods ending onor before September 30, 2006) or on the books or records of Targetby specific provision therefore with respect to all Taxes for orwith respect to all periods thereafter. All Taxes due and payableby Target or its Subsidiaries (whether or not shown to be due onfiled Tax Returns) have been timely paid to the proper GovernmentalAuthority. All Taxes that Target or its Subsidiaries have beenrequired to collect or withhold have been duly collected orwithheld and, to the extent required by Applicable Laws when due,have been duly and timely paid to the proper GovernmentalAuthority.

                                   (c)        Therehas not been any audit of any Tax Return by any GovernmentalAuthority. No audit, examination or other administrative or courtproceedings involving Taxes is in progress, and Target has not beennotified in writing by any Governmental Authority that any suchaudit, examination or other administrative or court proceedinginvolving Taxes is contemplated or pending. No extension of timewith respect to any date on which a Tax Return was required to befiled by Target or its Subsidiaries is in force, and no waiver oragreement by or with respect to Target or its Subsidiaries is inforce for the extension of time for the payment, collection orassessment of any Taxes. No claim has been made by any GovernmentalAuthority in a jurisdiction where neither Target nor itsSubsidiaries files Tax Returns that Target or its Subsidiaries issubject to taxation by that jurisdiction. No deficiencies for anyTax have been proposed, asserted or assessed against or withrespect to Target or any Subsidiary which have not been settled andpaid. There are no Liens for Taxes on any asset of Target or itsSubsidiaries other than Liens for Taxes not yet due andpayable.

                                   (d)        Targethas not agreed to and is not required to make any adjustment forany period after the date of this Agreement pursuant toSection 481(a) of the Internal Revenue Code of 1986, asamended (the "Code"), by reason of any change in anyaccounting method. There is no application pending with anyGovernmental Authority requesting permission for any such change inany accounting method of Target, and the Internal Revenue Servicehas not issued in writing any pending proposal regarding any suchadjustment or change in accounting method. No closing agreements,private letter rulings, technical advice memoranda or similaragreements or rulings have been entered into or issued by anytaxing authority with respect to Target or any of itsSubsidiaries.

                                   (e)        Targetis not and has never been a party to any agreement with any thirdparty relating to allocating or sharing the payment of, orliability for, Taxes or Tax benefits. Target has no liability forthe Taxes of any third party (other than its subsidiaries) underTreasury Regulation Section 1.1502-6 (or any similar provision ofstate, local or foreign law) as a transferee or successor, bycontract or otherwise. None of Target or any of its Subsidiaries isor has ever been bound by any Tax indemnity agreement, Tax sharingagreement, or Tax allocation agreement.

                                   (f)        Targetis not and has never been a member of an affiliated group ofcorporations within the meaning of Section 1504 of the Code or ofany group that has filed a combined, consolidated or unitary returnunder state, local or foreign law. . Neither Target nor any of itsSubsidiaries has ever been a party to any joint venture,partnership or other agreement that could be treated as apartnership for Tax purposes.

                                   (g)        Targethas not participated in a "reportable transaction" within themeaning of Treasury Regulation Section 1.6011-4(b) or a "listedtransaction" within the meaning of Section 6707A of the Code.Target has disclosed on its United States federal income TaxReturns all positions taken therein that could give rise to asubstantial understatement of United States federal income Taxwithin the meaning of Section 6662 of the Code.

                                   (h)        NeitherTarget nor any of its Subsidiaries is (or has been for thefive-year period ending at Closing) a "United States real propertyholding corporation" as defined in Section 897(c)(2) of the Codeand the applicable Treasury Regulations.

                                   (i)        Targetdoes not have a permanent establishment in any country other thanthe United States, as defined in any applicable Tax treaty betweenthe United States and such other country.

                                   (j)        Asof the date hereof, Target does not have, and as at the EffectiveTime neither the Target nor any of its Subsidiaries will have,"substantial nonbusiness assets" within the meaning of Section382(l)(4) of the Code.

                                   (k)        Therehas been no "ownership change" (within the meaning of Section 382of the Code) with respect to Target within the two year period thatwill end on the Closing Date, other than as described in the 382statements included with Target's Tax Returns filed prior to thedate of this Agreement. ****

                      2.17       Employee Matters.

                                   (a)        Targethas made available to Acquiror a list, attached as Schedule 2.17(a)of the Target Disclosure Schedule, containing (a) the names of allcurrent employees (including part-time employees and temporaryemployees), current independent contractors and current consultantsof Target and its Subsidiaries, and (b) their current respectivesalaries or wages, other compensation, dates of employment,positions and all written agreements between Target and suchindividuals or entities.

                                   (b)        Section2.17(b) of the Target Disclosure Schedule sets forth a complete andaccurate list of each plan, program, policy, contract, or agreementproviding for employment, compensation, retirement, deferredcompensation, loans, severance, separation, relocation,repatriation, expatriation, visas, work permits, termination pay,performance awards, bonus, incentive, stock option, stock purchase,stock bonus, phantom stock, stock appreciation right, supplementalretirement, fringe benefits, cafeteria benefits or other benefits,whether written or unwritten, including each "employee benefitplan" within the meaning of Section 3(3) of the EmployeeRetirement Income Security Act of 1974, as amended("ERISA"), which is, or has been, sponsored, maintained,contributed to, or required to be contributed to by Target or itsSubsidiaries and, with respect to any such plans which are subjectto Code Section 401(a), any trade or business (whether or notincorporated) that is or at any relevant time was treated as asingle employer with Target within the meaning ofSection 414(b), (c), (m) or (o) of the Code (an "ERISAAffiliate"), for the benefit of any person who performs or whohas performed services for Target or its Subsidiaries and withrespect to which Target, its Subsidiaries or any ERISA Affiliatehas, or is reasonably likely to have, any liability or obligation(collectively, the "Target Employee Plans").

                                   (c)        Targethas delivered to Acquiror or its advisors (or made available in adata room for review by Acquiror or its advisors) true and completecopies of each of the Target Employee Plans and related plandocuments, including trust documents, group annuity contracts, planamendments, insurance policies or contracts, participantagreements, employee booklets, administrative service agreements,summary plan descriptions, compliance and nondiscrimination testsfor the last three plan years, standard COBRA forms and relatednotices, registration statements and prospectuses and, to theextent still in its possession, any material employeecommunications relating thereto. With respect to each TargetEmployee Plan that is subject to ERISA reporting requirements,Target has made available in a data room for review by Acquiror orits advisors copies of the Form 5500 reports filed for thelast five plan years. Target has made available in a data room forreview by Acquiror or its advisors the most recent Internal RevenueService determination or opinion letter issued with respect to eachsuch Target Employee Plan, and to Target’s knowledge, nothinghas occurred since the issuance of each such letter that wouldreasonably be expected to cause the loss of the tax-qualifiedstatus of any Target Employee Plan subject to CodeSection 401(a).

                                   (d)        EachTarget Employee Plan is being administered in accordance with itsterms and in compliance with the requirements prescribed by any andall statutes, rules and regulations (including ERISA and the Code).Target and each ERISA Affiliate are not in default under orviolation of, and have no knowledge of any default or violation byany other party to, any of the Target Employee Plans. Any TargetEmployee Plan intended to be qualified under Section 401(a) ofthe Code has either obtained from the Internal Revenue Service afavorable determination letter as to its qualified status under theCode, including all currently effective amendments to the Code, orhas time remaining to apply under applicable Treasury Regulationsor Internal Revenue Service pronouncements for a determination oropinion letter or to make any amendments necessary to obtain afavorable determination or opinion letter. None of the TargetEmployee Plans promises or provides retiree medical or otherretiree welfare benefits to any person. Target has not engaged in,or participated in, any transaction which would be considered anon-exempt "prohibited transaction," as such term is defined inSection 406 of ERISA or Section 4975 of the Code, and toTarget’s knowledge, no other third-party fiduciary and/orparty-in-interest has engaged in any such "prohibited transaction"with respect to any Target Employee Plan. Neither Target nor anyERISA Affiliate is subject to any liability or penalty underSections 4976 through 4980 of the Code or Title I ofERISA with respect to any Target Employee Plan. All contributionsrequired to be made by Target or any ERISA Affiliate to any TargetEmployee Plan have been paid or accrued. With respect to eachTarget Employee Plan, no "reportable event" within the meaning ofSection 4043 of ERISA (excluding any such event for which thethirty (30) day notice requirement has been waived under theregulations to Section 4043 of ERISA) has occurred, nor hasany event described in Section 4062, 4063 or 4041 or ERISAoccurred. Each Target Employee Plan subject to ERISA has preparedin good faith and timely filed all requisite governmental reports,which were true and correct in all material respects as of the datefiled, and has properly and timely filed and distributed or postedall notices and reports to employees required to be filed,distributed or posted with respect to each such Target EmployeePlan. No suit, administrative proceeding or action is pending, orto the knowledge of Target is overtly threatened in a writtencommunication with Target, against or with respect to any suchTarget Employment Plan. There has been no amendment to, or writteninterpretation or announcement by Target or any ERISA Affiliateregarding, any Target Employee Plan that would increase the expenseof maintaining such Target Employee Plan above the level of expenseincurred with respect to that Plan for the fiscal year endedDecember 31, 2005.

                                   (e)        NeitherTarget nor any ERISA Affiliate has ever maintained, established,sponsored, participated in or contributed to, or is obligated tocontribute to, or otherwise incurred any obligation or liability(including any contingent liability) under, any "multiemployerplan" (as defined in Section 3(37) of ERISA) or any "pensionplan" (as defined in Section 3(2) of ERISA) subject toTitle IV of ERISA or Section 412 of the Code. NeitherTarget nor any ERISA Affiliate has any actual or potentialwithdrawal liability (including any contingent liability) for anycomplete or partial withdrawal (as defined in Sections 4203and 4205 of ERISA) from any multiemployer plan.

                                   (f)        NeitherTarget nor any ERISA Affiliate has ever maintained, established,sponsored, participated in or contributed to any self-insured planthat is governed by ERISA and that provides benefits to employees(including any such plan pursuant to which a stop-loss policy orcontract applies), other than a health care reimbursement plan.

                                   (g)        Withrespect to each Target Employee Plan, Target is in compliance with(i) the applicable health care continuation and noticeprovisions of the Consolidated Omnibus Budget Reconciliation Act of1985 ("COBRA") and the regulations thereunder or any statelaw governing health care coverage extension or continuation;(ii) the applicable requirements of the Family and MedicalLeave Act of 1993 and the regulations thereunder; and(iii) the applicable requirements of the Health InsurancePortability and Accountability Act of 1996 ("HIPAA"). Targethas no unsatisfied obligations to any employees, former employeesor qualified beneficiaries pursuant to COBRA, HIPAA or any statelaw governing health care coverage extension or continuation.

                                   (h)        Exceptas expressly provided in this Agreement, the consummation of theMerger will not (i) entitle any current or former employee orother service provider of Target or any ERISA Affiliate toseverance benefits or any other payment (including unemploymentcompensation, golden parachute, bonus or benefits under any TargetEmployee Plan), except as expressly provided in this Agreement; or(ii) accelerate the time of payment or vesting of any suchbenefits or increase the amount of compensation due any suchemployee or service provider. No benefit payable or that may becomepayable by Target pursuant to any Target Employee Plan or as aresult of or arising under this Agreement shall constitute an"excess parachute payment" (as defined in Section 280G)subject to the imposition of an excise Tax under Section 4999of the Code or the deduction for which would be disallowed byreason of Section 280G of the Code. Each Target Employee Plancan be amended, terminated or otherwise discontinued after theEffective Time in accordance with its terms, without liability toAcquiror or Target other than ordinary administration expensestypically incurred in a termination event.

                                   (i)        NeitherTarget nor its Subsidiaries are a party to any contract, agreement,plan or arrangement, including but not limited to the provisions ofthis Agreement, covering any employee or former employee of Targetor its Subsidiaries that, individually or in the aggregate, wouldreasonably be expected to give rise to the payment of any amountthat would be subject to the deductibility limits of Section 404 ofthe Code.

                      2.18       Insurance. There is no claim pending under any ofTarget’s insurance policies or fidelity bonds as to whichcoverage has been questioned, denied or disputed by theunderwriters of such policies or bonds. Target and its Subsidiariesare in compliance in all respects with the terms of such policiesand bonds. Target has no knowledge of any threatened terminationof, or material premium increase with respect to, any of suchpolicies or bonds.

                      2.19       Compliance With Laws. Target and its Subsidiaries are incompliance in all material respects with, and have not received anywritten or oral notices of any material pending violation withrespect to, any federal, state, local or foreign statute, law orregulation with respect to the conduct of the Current TargetBusiness, except for violations that have been cured or are nolonger being asserted.

                      2.20       Brokers’ and Finders’ Fee. Except for Credit SuisseSecurities (USA) LLC ("Credit Suisse"), no broker, finder orinvestment banker is entitled to brokerage or finders’ feesor agents’ commissions or investment bankers’ fees orany similar charges from Target or its Subsidiaries in connectionwith the Merger, this Agreement or any transaction contemplatedhereby.

                      2.21       Regulatory Compliance.

                                   (a)        Allbiological and drug products being manufactured, distributed ordeveloped by Target ("Target Products") that are subject tothe jurisdiction of the Food and Drug Administration ("FDA")are being manufactured, labeled, stored, tested, distributed andmarketed in compliance in all material respects with all applicablerequirements under the Food and Drug and Cosmetic Act("FDCA"), the Public Health Service Act, their applicableimplementing regulations and all comparable state laws andregulations.

                                   (b)        Allhuman clinical trials conducted by or on behalf of Target havebeen, and are being, conducted in material compliance with theapplicable requirements of Good Clinical Practice, Informed Consentand all other applicable requirements relating to protection ofhuman subjects contained in 21 CFR Parts 50, 54, and 56.

                                   (c)        Allmanufacturing operations conducted by or for the benefit of Targetwith respect to Target Products being used in human clinical trialshave been and are being conducted in accordance, in all respects,with the FDA’s recommended current Good ManufacturingPractices continuum for drug and biological products. In addition,Target is in material compliance with all applicable registrationand listing requirements set forth in 21 U.S.C. Section 360 and 21CFR Part 207 and all similar Applicable Laws.

                                   (d)        Targethas not received any notice that the FDA or any other GovernmentalEntity has initiated, or threatened to initiate, any action tosuspend any clinical trial, suspend or terminate anyInvestigational New Drug Application sponsored by Target orotherwise restrict the preclinical research on or clinical study ofany Target Product or any biological or drug product beingdeveloped by Target, or to recall, suspend or otherwise restrictthe manufacture of any Target Product, and Target has no knowledgeof any facts that have led it to believe that any GovernmentalEntity is considering such action or is likely to take suchaction.

                                   (e)        NeitherTarget nor, to the knowledge of Target, any of its officers, keyemployees, agents or clinical investigators acting for Target, hascommitted any act, made any statement or failed to make anystatement that would reasonably be expected to provide a basis forthe FDA to invoke its policy with respect to "Fraud, UntrueStatements of Material Facts, Bribery, and Illegal Gratuities" setforth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendmentsthereto. Neither Target nor, to the knowledge of Target, anyofficer, key employee or agent of Target has been convicted of anycrime or engaged in any conduct that would reasonably be expectedto result in (i) debarment under 21 U.S.C. Section 335a or anysimilar state law or (ii) exclusion under 42 U.S.C. Section 1320a-7or any similar state law or regulation.

                                   (f)        Allanimal studies or other preclinical tests performed in connectionwith or as the basis for any regulatory approval required forTarget Products either (x) have been conducted in accordance, inall material respects, with applicable Good Laboratory Practicerequirements contained in 21 CFR Part 58 or (y) involvedexperimental research techniques that could not be performed by aregistered GLP testing laboratory (with appropriate notice beinggiven to the FDA) and have employed the procedures and controlsgenerally used by qualified experts in animal or preclinical studyof products comparable to those being developed by Target and incompliance with all Applicable Laws.

                                   (g)        Thereare no proceedings pending with respect to a violation by Target ofthe FDCA, FDA regulations adopted thereunder, the ControlledSubstance Act or any other similar legislation or regulationpromulgated by any other Governmental Entity, and Target has noknowledge of any facts that have led it to believe that any suchproceeding is likely to be brought.

                      2.22       Clinical Material. Target has access on commercially reasonableterms to sufficient quantities of all clinical trial materials,and/or all materials that Target believes are necessary tomanufacture clinical trial materials, in quantities sufficient toperform Phase 3 clinical trials of ceftaroline and to carry out allassociated chemistry, manufacturing, and controls activities,including but not limited to process characterization, processvalidation, specification development, and stability testing, asapplicable to the stage of development of the product..

            3.        Representations and Warranties of Acquiror and Merger Sub.Acquiror and Merger Sub represent and warrant to Target that:

                      3.1        Organization, Standing and Power. Each of Acquiror and MergerSub is a corporation duly organized, validly existing and in goodstanding, if applicable, under the laws of the state in which itwas incorporated. There is no pending or, to the knowledge ofAcquiror or Merger Sub, threatened, action for the dissolution,liquidation or insolvency of either Acquiror or Merger Sub. Each ofAcquiror and Merger Sub is duly qualified to do business, and is ingood standing (if such concept is applicable in the relevantjurisdiction), in each jurisdiction where the operation of itsbusiness and ownership of its properties requires suchqualification, except where the failure to so qualify would nothave a Acquiror Material Adverse Effect.

                      3.2        Authority. Acquiror and Merger Sub have all requisite corporatepower and authority to enter into and deliver this Agreement and toconsummate the Merger. The execution and delivery by Acquiror andMerger Sub of this Agreement and the consummation by Acquiror andMerger Sub of the Merger have been duly authorized by all necessarycorporate action on the part of Acquiror and Merger Sub, and noother authorization or consent of Acquiror, Merger Sub or theirrespective stockholders is necessary other than the approval ofthis Agreement by Acquiror in its capacity as sole stockholder ofMerger Sub. This Agreement has been duly executed and delivered byAcquiror and Merger Sub, and, assuming this Agreement constitutesthe valid and binding obligation of Target, this Agreementconstitutes a valid and binding obligation of each of Acquiror andMerger Sub, enforceable against each of Acquiror and Merger Sub inaccordance with its terms, except as such enforceability may belimited by bankruptcy, insolvency, moratorium or other similar lawsaffecting or relating to creditors’ rights generally andgeneral principles of equity, regardless of whether asserted in aproceeding in equity or at law.

                      3.3        Noncontravention. Neither the execution and delivery byAcquiror and Merger Sub of this Agreement, nor the consummation byAcquiror or Merger Sub of any of the transactions contemplatedhereby, will:

                                   (a)        conflictwith or violate any provision of the certificate of incorporationor bylaws of Acquiror or the certificate of incorporation or bylawsof Merger Sub;

                                   (b)        requireon the part of Acquiror or Merger Sub any registration, declarationor filing with, or any permit, order, authorization, consent orapproval of, any Governmental Entity, except for(i) compliance with the applicable requirements of HSR andapplicable foreign antitrust or trade regulation laws,(ii) the filing by Acquiror of such reports and informationwith the Securities and Exchange Commission ("SEC") under theSecurities Exchange Act of 1934, as amended, and the rules andregulations promulgated by the SEC thereunder, as may be requiredin connection with this Agreement, the Merger and the othertransactions contemplated by this Agreement, and (iii) anyregistration, declaration, filing, permit, order, authorization,consent or approval which if not made or obtained would notreasonably be expected to have a material adverse effect onAcquiror’s or Merger Sub’s ability to consummate theMerger or any of the other transactions contemplated hereby (an"Acquiror Material Adverse Effect");

                                   (c)        conflictwith, result in a breach of, constitute (with or without due noticeor lapse of time or both) a default under, result in theacceleration of obligations under, create in any party any right toterminate or modify, or require any notice, consent or waiverunder, any contract or agreement to which Acquiror or Merger Sub isa party or by which Acquiror or Merger Sub is bound, except for(i) any conflict, breach, default, acceleration or right toterminate or modify that would not reasonably be expected to resultin an Acquiror Material Adverse Effect or (ii) any notice,consent or waiver, the failure of which to make or obtain would notreasonably be expected to result in an Acquiror Material AdverseEffect;

                                   (d)        violateany order, writ, injunction or decree applicable to Acquiror orMerger Sub or any of their respective properties or assets, exceptfor any violation that would

not reasonably be expected to have an Acquiror Material AdverseEffect;

                                   (e)        violateany statute, rule or regulation applicable to Acquiror or MergerSub or any of their respective properties or assets, except for anyviolation that would not reasonably be expected to result in anAcquiror Material Adverse Effect; or

                                   (f)        renderAcquiror insolvent or unable to pay its debts as they becomedue.

                      3.4        Litigation.

                                   (a)        Thereis no private or governmental action, suit, proceeding, claim,arbitration or, to the knowledge of Acquiror, investigation,pending before any Governmental Entity or, to the knowledge ofAcquiror, overtly threatened in a communication with Acquiror,against Acquiror or its Subsidiaries or any of their respectiveproperties or any of their respective officers or directors (intheir capacities as such) that would reasonably be expected toresult in an Acquiror Material Adverse Effect.

                                   (b)        Thereis no judgment, decree or order against Acquiror or Merger Sub or,to the knowledge of Acquiror and Merger Sub, against any of theirrespective directors or officers (in their capacities as such) thatspecifically names Acquiror or its Subsidiaries or such directorsor officers and that would reasonably be expected to result in anAcquiror Material Adverse Effect.

                      3.5        Merger Sub. Merger Sub was formed solely for the purpose ofengaging in the transactions contemplated by this Agreement, hasengaged in no other business activities and has conducted itsoperations only as contemplated by this Agreement.

                      3.6        Adequacy of Funds. Acquiror currently has, and will at Closingcontinue to have, adequate financial resources to satisfy itsmonetary and other obligations under this Agreement, including itsobligations to pay the Merger Consideration as contemplated bySection 1.6 and to make the payments required by Section 1.11.

            4.        Conduct Prior to the Effective Time.

                      4.1        Conduct of Business of Target. During the period from the dateof this Agreement through the Effective Time (the "Pre-ClosingPeriod"), except (i) to the extent necessary to comply withTarget’s obligations under this Agreement, (ii) as reasonablynecessary to ensure that Target complies with Applicable Laws andpre-existing contractual obligations or (iii) as consented to inwriting by Acquiror (which consent shall not be unreasonablywithheld or delayed), (A) Target shall use its commerciallyreasonable best efforts to (1) carry on its business in theordinary course consistent with past practices, (2) preserve intactits present business organization and (3) preserve itsrelationships with customers, suppliers, distributors, licensors,licensees, and others to whom Target has contractual obligations,and (B) Target shall not and shall cause its Subsidiaries tonot:

                                   (a)        Charter Documents. Amend its certificate of incorporation orbylaws;

                                   (b)        Dividends; Certain Changes in Capital Stock. Declare or pay anydividends on or make any other distributions (whether in cash,stock or property) in respect of any of its capital stock, orsplit, combine or reclassify any of its capital stock, or issue anyshares of Target Capital Stock or securities convertible orexercisable or exchangeable for Target Capital Stock (it beingunderstood, however, that notwithstanding the foregoing: (i) Targetmay grant Target Options in the ordinary course of business; (ii)Target may issue shares of Target Stock upon the exercise of TargetOptions; (iii) if, after February 1, 2007, Target requests a loanfrom Acquiror for a reasonable sum in connection with, and infurtherance of, the operation of its business but Target andAcquiror, acting reasonably and in good faith, are not able toagree on the terms such loan promptly, Target may issue shares ofcapital stock as long as such issuance is in compliance with allApplicable Laws and would not: (A) increase the aggregate amount ofthe Purchase Price; (B) be reasonably likely to cause a delay inthe closing of the Merger; or (C) cause the executed WrittenConsents obtained under Section 5.2 to no longer exceed theRequired Stockholder Vote *unless* Target obtains from holdersof such additional securities Written Consents in sufficientnumbers so that the total number of such executed Written Consentsexceeds the Required Stockholder Vote; and (iv) if Target doesrequest such loan from Acquiror, Acquiror shall negotiate in goodfaith with Target in an attempt to provide such loan promptly oncommercially reasonable terms);

                                   (c)        Intellectual Property Rights. Enter into or amend anyagreements (i) pursuant to which Target transfers or licenses toany person any Material Target IP Rights or any other IP Rights(other than any of the same as are not material, individually or inthe aggregate, to the Current Target Business or as are needed tobe transferred or licensed in the ordinary course of Target inconducting, and in furtherance of, the Current Target Business), orotherwise grants to any person exclusive rights in any MaterialTarget IP Rights, or (ii) that would be a Material Contract, otherthan in the ordinary course of business consistent with pastpractices and with the clinical programs or business plans Targethas disclosed to or discussed with Acquiror prior to the date ofthis Agreement;

                                   (d)        Dispositions. Sell, lease or license to any person, or permitthe imposition of any encumbrance (other than PermittedEncumbrances) on, any of its properties or assets that arematerial, individually or in the aggregate, to the Current TargetBusiness;

                                   (e)        Indebtedness. Incur any indebtedness for borrowed money, orguarantee any such indebtedness, or issue or sell any debtsecurities or guarantee any debt securities of others;

                                   (f)        Capital Expenditures. Make any capital expenditures, capitaladditions or capital improvements, in each case in excess of$250,000 in the aggregate, other than expenditures in the ordinarycourse of business;

                                   (g)        Insurance. Materially reduce the amount of any materialinsurance coverage provided by existing insurance policies otherthan upon the expiration of any such policy;

                                   (h)        Waiver. Waive any material right under any MaterialContract;

                                   (i)        Employee Benefit Plans; New Hires; Pay Increases. Amend anyTarget Employee Plan or adopt any Target Employee Plan, except ascontemplated by Section 1.11, or, except for new hires forthose positions listed on the attached Schedule 4.1(i), hire anynew employee with a base salary exceeding $80,000, pay any specialbonus, special remuneration or special non cash benefit (exceptpayments and benefits made pursuant to existing written agreementsthat are disclosed on Target Disclosure Schedule), or materiallyincrease the benefits, salaries or wage rates of Target’semployees;

                                   (j)        Severance Arrangements. Grant or pay any severance ortermination pay or benefits to any director, officer oremployee of Target, except for payments and benefits made pursuantto existing agreements that are disclosed on Target DisclosureSchedule;

                                   (k)        Lawsuits. Commence a lawsuit other than (i) for the routinecollection of bills, (ii) in such cases where Target in good faithdetermines that failure to commence suit would result in thematerial impairment of a valuable aspect of Target’sbusiness, provided that it consults with Acquiror prior to thefiling of such a suit or (iii) for a breach of this Agreement;

                                   (l)        Acquisitions. Acquire or agree to acquire by merging with, orby purchasing a substantial portion of the stock or assets of, orby any other manner, any business or any corporation, partnership,association or other business organization or division thereof orotherwise acquire or agree to acquire any assets that are materialindividually or in the aggregate, to its business, taken as awhole;

                                   (m)        Taxes. Make or change any material election in respect ofTaxes, adopt or change any accounting method in respect of Taxes,file any material Tax Return or any amendment to a material TaxReturn, enter into any closing agreement, settle any material claimor assessment in respect of Taxes, or consent to any extension orwaiver of the limitation period applicable to any material claim orassessment in respect of Taxes; or

                                   (n)        Other. Agree to take any of the actions described in Sections4.1(a) through 4.1(m).

            5.        Additional Agreements.

                      5.1        Access to Information. During the Pre-Closing Period, Targetshall afford Acquiror and its personnel, accountants, counsel andother representatives access during normal business hours to(i) all of Target’s books, contracts and records and(ii) all other existing information in Target’spossession concerning the business, properties and personnel ofTarget and shall permit them to conduct such examination of thecondition of the assets of Target and the Target Business asAcquiror deems necessary or advisable to familiarize itself withthe assets, properties, books, records and other matters relatingdirectly to Target and to verify the representations and warrantiesof the Target hereunder, including, without limitation, discussionswith Target's officers, employees, accountants, and other agents;provided, however, that in exercising access rightsunder this Section 5.1, Acquiror shall not be permitted tointerfere unreasonably with the conduct of the business ofTarget.

                      5.2        Stockholder Consent.

                                   (a)        TheMajority Holders have indicated that they intend, as promptly aspracticable following the execution of this Agreement and in anyevent on the date of this Agreement, to deliver, in accordance withApplicable Laws, executed Written Consents setting forth theirrevocable adoption of this Agreement, which Written Consents, ifreceived, shall constitute or exceed the Required Stockholder Vote.Target shall notify Acquiror promptly after receipt of the RequiredStockholder Vote, whether through the receipt of executed WrittenConsents from the Majority Holders or otherwise.

                                   (b)        Notices.

                                               (i)        Promptly,but in no event later than five Business Days after the date thatthe Required Stockholder Vote is received by Target (the"‘Approval Date"), Target shall deliver notice to theholders of Target Capital Stock of the adoption of this Agreementby the Required Stockholder Vote, pursuant to and in accordancewith Section 228(e) of the Delaware Law and the Target Certificateof Incorporation and bylaws (the "Stockholder Notice").

                                               (ii)       Promptly,but in no event later than five (5) Business Days after theApproval Date, Target shall mail to each holder of Target CapitalStock a copy of the notice required pursuant to Section 262informing them that appraisal rights are available for their sharespursuant to Section 262 along with such other information asrequired by Section 262 and Applicable Laws (the "Section 262Notice"). The Section 262 Notice shall contain all informationrequired by Applicable Laws.

                                   (c)        Targetshall provide to Acquiror copies of the Stockholder Notice and theSection 262 Notice, including any amendments or supplementsthereto, prior to delivering such notices (and Target shallincorporate reasonable comments of Acquiror with respect to suchnotices to the extent such comments are provided promptly afterAcquiror receives such notices).

                                   (d)        Aspromptly as practicable after the execution of this Agreement,Target shall submit to the stockholders of Target for approval bysuch number of stockholders of Target as is required by the termsof Section 280G(b)(5)(B) of the Code and the Treasury Regulationsthereunder, a written consent in favor of a single proposal torender the parachute payment provisions of Section 280G of the Codeand the Treasury Regulations thereunder (collectively, "Section280G") inapplicable to any and all payments and/or benefitsprovided to any employee of Target pursuant to any employmentcontract or other contract between Target and such employee thatmight result, separately or in the aggregate, in the payment of anyamount and/or the provision of any benefit that would not bedeductible by reason of Section 280G or that would be subject to anexcise tax under Section 4999 of the Code (together, the"Section 280G Payments"). Any such stockholder approvalshall be obtained in a manner which satisfies all applicablerequirements of Section 280G(b)(5)(B) of the Code and the TreasuryRegulations thereunder, including Q-7 of Section 1.280G-1 of suchTreasury Regulations.

                      5.3        Public Disclosure. Except as may be required by law or byobligations pursuant to any listing agreement with any applicablenational securities exchange, during the Pre-Closing Period, (a)Acquiror and Target shall consult with each other before issuingany press release or otherwise making any public statement ormaking any other public (or non-confidential) disclosure (whetheror not in response to an inquiry) regarding the terms of thisAgreement and the transactions contemplated hereby and (b) withoutlimiting Acquiror’s obligations under that certainconfidentiality agreement, dated October 27, 2006, between Targetand Acquiror (the "Confidentiality Agreement"), neitherAcquiror nor Target shall issue any such press release or make anysuch public statement or disclosure without the prior approval ofTarget or Acquiror, as the case may be (which approval shall not beunreasonably withheld or delayed).

                      5.4        Regulatory Approval; Further Assurances.

                                   (a)        Acquirorand Target shall use commercially reasonable best efforts toeffectuate the Merger and make effective the other transactionscontemplated by this Agreement as soon as practicable following thedate of this Agreement. Without limiting the generality of theforegoing, each party to this Agreement shall: (i) make anyfilings and give any notices required to be made or given by suchparty in connection with the Merger and the other transactionscontemplated by this Agreement; (ii) use best efforts toobtain any consent required to be obtained (pursuant to anyapplicable legal requirement, contract or otherwise) by such partyin connection with the Merger or any of the other transactionscontemplated by this Agreement; and (iii) use best efforts tolift any restraint, injunction or other legal bar to the Merger.Each of Acquiror and Target shall promptly deliver to the other acopy of each such filing made, each such notice given and each suchconsent obtained during the Pre-Closing Period.

                                   (b)        Withinseven (7) days of the date of this Agreement, Acquiror and Targetshall cause to be prepared and filed the notifications requiredunder HSR in connection with the Merger, and shall request earlytermination of the waiting period under HSR with respect to suchfiling. Acquiror and Target shall respond as promptly aspracticable to (i) any inquiries or requests received from theFederal Trade Commission or the Department of Justice foradditional information or documentation and (ii) any inquiries orrequests received from any state attorney general or otherGovernmental Entity in connection with antitrust or relatedmatters. Each of Target (to the extent it has knowledge of suchfacts) and Acquiror shall (A) give the other party prompt notice ofthe commencement of any legal proceeding by or before anyGovernmental Entity with respect to the Merger or any of the othertransactions contemplated by this Agreement; (B) keep the otherparty informed as to the status of any such legal proceeding; and(C) promptly inform the other party of any communication to or fromthe Federal Trade Commission, the Department of Justice or anyother Governmental Entity regarding the Merger. Target and Acquirorwill consult and cooperate with one another, and will consider ingood faith the views of one another, in connection with anyanalysis, appearance, presentation, memorandum, brief, argument,opinion or proposal made or submitted by either of them inconnection with any legal proceeding under or relating to HSR orany other foreign, federal or state antitrust, anticompetition orfair trade law. In addition, except as may be prohibited by anyGovernmental Entity or by any Applicable Laws, in connection withany legal proceeding under or relating to HSR or any other foreign,federal or state antitrust, anticompetition or fair trade law orany other similar legal proceeding relating to the Merger to whicheither Target or Acquiror is a party, each of Target and Acquirorwill permit authorized representatives of the other party to bepresent at each meeting or conference with representatives of anyGovernmental Entity relating to any such legal proceeding and tohave access to and be consulted in connection with any document,opinion or proposal made or submitted to any Governmental Entity inconnection with any such legal proceeding.

                      5.5        Escrow Agreement. At or before the Effective Time, Acquiror,Merger Sub and the Stockholders’ Agent shall, and shall usecommercially reasonable efforts to cause Escrow Agent to, executean Escrow Agreement in substantially the form ofExhibit D.

                      5.6        Employees.

                                   (a)        Acquirorshall enroll all Target Employees that remain employed by theSurviving Corporation ("Continuing Employees") in theAcquiror plans, programs, policies, practices, contracts,agreements or other arrangements providing for employment,compensation, retirement, deferred compensation, loans, severance,separation, termination pay, performance awards, bonus, incentive,stock option, stock purchase, stock bonus, phantom stock, stockappreciation right, supplemental retirement, fringe benefits,cafeteria benefits or other benefits, whether written or unwritten,including each "employee benefit plan" within the meaning ofSection 3(3) of ERISA (the "Acquiror Employee Plans"), tothe extent applicable, which are provided to similarly situatedemployees of Acquiror based on levels of responsibility and shall(i) use commercially reasonable efforts to cause any pre-existingconditions or limitations and eligibility waiting periods under anygroup health plans of Acquiror or its affiliates to be waived withrespect to Continuing Employees and their eligible dependents, (ii)to the extent permissible under Acquiror’s health and welfareplans, give each Continuing Employee credit for the plan year inwhich the Effective Time occurs towards applicable deductibles andannual out-of-pocket limits for medical expenses incurred prior tothe Effective Time for which payment has been made, and (iii) givesuch Continuing Employees service credit for their employment withTarget for eligibility and vesting purposes (but not for benefitaccrual) under any such applicable Acquiror Employee Plan, as ifsuch service had been performed with Acquiror. Until the effectivedate of the enrollment of the Continuing Employees in a particularAcquiror Employee Plan, Acquiror shall continue in effect withoutamendment or reduction in benefits the existing Target EmployeePlan covering the same or similar benefits as would be covered bysuch Acquiror Employee Plan. Nothing in this Section 5.6 isintended to prevent Acquiror from terminating any of its benefitplans in a manner that does not affect the vested or otherpre-existing rights of any Continuing Employee.

                                   (b)        Effectiveas of the day immediately preceding the Closing Date, Target andany ERISA Affiliate, shall have terminated any and all TargetEmployee Plans intended to include a Code Section 401(k)arrangement (each a "Target 401(k) Plan" and collectively,the "Target 401(k) Plans") (unless Acquiror shall haveprovided written notice to Target that such Target 401(k) Plansshall not be terminated). Unless Acquiror provides such writtennotice to Target, no later than five (5) Business Days prior to theClosing Date, Target shall have provided Acquiror with evidencethat such Target 401(k) Plans have been terminated (effective as ofthe day immediately preceding the Closing Date) pursuant toresolutions of the Board of Directors of Target. In the event thattermination of a Target 401(k) Plan would reasonably be anticipatedto trigger liquidation charges, surrender charges or other feesthen Target shall take such actions as are necessary to reasonablyestimate the amount of such charges and/or fees and provide suchestimate in writing to Acquiror no later than ten (10) calendardays prior to the Closing Date.

                      5.7        FIRPTA Matters. At the Closing, Target shall deliver toAcquiror: (a) a statement conforming to the requirements ofSection 1.897 - 2(h)(1)(i) of the United States TreasuryRegulations; and (b) the notification to the Internal RevenueService required under Section 1.897 - 2(h)(2) of the UnitedStates Treasury Regulations.

                      5.8        Indemnification of Officers and Directors of Target and itsSubsidiaries.

                                   (a)        Fromand after the Effective Time, Acquiror shall, and shall cause theSurviving Corporation and its Subsidiaries to, fulfill and honor inall respects the obligations of Target and its Subsidiariespursuant to any indemnification provisions under the certificate ofincorporation and bylaws of Target and the equivalent organizationdocuments of its Subsidiaries as each is in effect on the date ofthis Agreement (the persons entitled to be indemnified pursuant tosuch provisions, and all other current and former directors andofficers of Target and its Subsidiaries, being referred tocollectively as the "Indemnified Parties").

                                   (b)        Duringthe period ending on the sixth (6th) anniversary of theEffective Time, Acquiror will, to the maximum extent provided bylaw (but subject to any limitations that are applicable to Targetand its Subsidiaries under Applicable Laws and the provisions ofthe certificate of incorporation and bylaws of Target and theequivalent organizational documents of its Subsidiaries withrespect to indemnification and exculpation from liability as ineffect on the date of this Agreement) indemnify and hold harmlessthe Indemnified Parties against and from any costs or expenses(including reasonable attorneys’ fees), judgments, fines,losses, claims, damages, liabilities and amounts paid in settlementin connection with any claim, action, suit, proceeding orinvestigation, whether civil, criminal, administrative orinvestigative, to the extent such claim, action, suit, proceedingor investigation arises out of or pertains to (i) any action oromission or alleged action or omission in such IndemnifiedParty’s capacity as a director, officer or employee of Targetor any of its Subsidiaries or (ii) any of the transactionscontemplated by this Agreement (the "Indemnified Matters");provided*,*however, that if, at any time priorto the sixth anniversary of the Effective Time, any IndemnifiedParty delivers to Acquiror a written notice asserting a claim forindemnification under this Section 5.8(b), then the claim assertedin such notice shall survive the sixth anniversary of the EffectiveTime until such time as such claim is fully and finally resolved.In the event of any such claim, action, suit, proceeding orinvestigation, (i) Acquiror will have the right to control thedefense thereof after the Effective Time (it being understood that,by electing to control the defense thereof, Acquiror will be deemedto have waived any right to object to the IndemnifiedParties’ entitlement to indemnification hereunder withrespect thereto), (ii) any counsel retained by the IndemnifiedParties with respect to the defense thereof for any period afterthe Effective Time must be reasonably satisfactory to Acquiror, and(iii) after the Effective Time, Acquiror will pay the reasonablefees and expenses of such counsel, promptly after statementstherefor are received (provided that in the event of a finalnon-appealable judicial determination that any Indemnified Party isnot entitled to indemnification hereunder, any amounts advanced onhis or her behalf shall be remitted to the Surviving Corporation);provided, **however, that neither Acquiror northe Surviving Corporation, nor any Indemnified Party, will beliable for any settlement effected without its, his or her expresswritten consent. The Indemnified Parties as a group may retain onlyone law firm (in addition to local counsel) to represent them withrespect to any single action unless counsel for any IndemnifiedParty determines in good faith that, under applicable standards ofprofessional conduct, a conflict exists or is reasonably likely toarise on any material issue between the positions of any two ormore Indemnified Parties. Notwithstanding anything to the contrarycontained in this Section 5.8(b) or elsewhere in this Agreement,Acquiror shall not settle or compromise or consent to the entry ofany judgment or otherwise seek termination with respect to anyclaim, action, suit, proceeding or investigation for whichindemnification may be sought under this Section 5.8 unless suchsettlement, compromise, consent or termination includes anunconditional release of all Indemnified Parties from all liabilityarising out of such claim, action, suit, proceeding orinvestigation.

                                   (c)        Acquirorand the Surviving Corporation jointly and severally agree to payall expenses, including attorneys’ fees, that may be incurredby the Indemnified Parties in enforcing the indemnity and otherobligations provided for in this Section 5.8.

                                   (d)        Throughthe sixth (6th) anniversary of the Effective Time,Acquiror shall cause to be maintained in effect, for the benefit ofthe Indemnified Parties, directors’ and officers’liability insurance coverage for all Indemnified Matters which issubstantially equivalent to that provided under Target’sdirectors’ and officers’ liability insurance policy ineffect as of the date of this Agreement; provided,**however, that in no event shall Acquiror be requiredpursuant to this Section 5.8(d) to expend in any one year an amountin excess of 125% of the annual premium currently payable by Targetwith respect to such current policy, it being understood that ifthe annual premiums payable for such insurance coverage exceed suchamount, Acquiror shall be obligated to obtain a policy with thegreatest coverage available for a cost equal to such amount. . Inlieu of such annual coverage, Acquiror may or may cause Target topurchase at the Effective Time a 6 year tail insurance policycomplying with the coverage requirements set forth in the precedingsentence.

                                   (e)        ThisSection 5.8 shall survive the consummation of the Merger and theEffective Time, is intended to benefit and may be enforced by theIndemnified Parties, and shall be binding on all successors andassigns of Acquiror and the Surviving Corporation.

                      5.9        No Solicitation by Target; Board Recommendation; FiduciaryExceptions.

                                   (a)        Subjectto Section 5.9(b), prior to the receipt of the Required StockholderVote, Target shall not, nor shall it authorize or permit any of itsSubsidiaries or any of its or their respective directors orofficers, investment bankers, financial advisors, attorneys,accountants or other advisors, agents or representatives (each, a"Representative") (and Target shall use its reasonableefforts to cause its employees not), directly or indirectly, to (i)solicit, initiate or knowingly encourage, or take any other actiondesigned to facilitate, any Takeover Proposal (as defined below) or(ii) enter into any discussions or negotiations with any thirdparty regarding, or furnish to any person any information inconnection with, any Takeover Proposal. Target shall, and shallcause its Subsidiaries and Representatives to, immediately ceaseand cause to be terminated all existing discussions or negotiationswith any person conducted heretofore with respect to any TakeoverProposal (it being understood that if any executive officer ordirector of Target shall become aware that any of Target’sRepresentatives is violating this Section 5.9, Target shallinstruct such person, and otherwise use reasonable efforts to causesuch person, to cease such violation).

            Theterm "Takeover Proposal" means any proposal or offer fromany person with respect to any transaction involving theacquisition or purchase (including in the case of Target IP Rightsany material license or similar agreement other than one that is inthe ordinary course (and in furtherance) of Target’sbusiness) in one transaction or a series of related transactions,of assets (including Target IP Rights) or businesses thatconstitute 15% or more (on either a book value or fair marketbasis) of the revenues, net income or the assets of Target and itsSubsidiaries, taken as a whole, or 15% or more of any class ofequity securities of Target, any tender offer or exchange offerthat if consummated would result in any person beneficially owning15% or more of any class of equity securities of Target, or anymerger, consolidation, business combination, recapitalization,liquidation, dissolution, joint venture, binding share exchange orsimilar transaction involving Target or any of its Subsidiariespursuant to which any person or the stockholders of any personwould own 15% or more of any class of equity securities of Targetor of any resulting parent of Target or 15% or more (on either abook value or fair market basis) of the revenues, net income or theassets of Target and its Subsidiaries, taken as a whole, other thanthe transactions contemplated by this Agreement.

                                   (b)        Notwithstandingthe provisions of clause (a) of this Section 5.9 or anything elsein this Agreement, prior to receipt of the Required StockholderVote and in response to any bona fide written Takeover Proposalthat the Board of Directors of Target determines in good faith(after consultation with a financial advisor of nationallyrecognized reputation) constitutes or would reasonably be expectedto lead to a Superior Proposal, and which Takeover Proposal did notresult from a breach of this Section 5.9 by Target, Target may, ifits Board of Directors determines in good faith (after consultationwith outside counsel) that failure to do so is reasonably likely tobe inconsistent with its fiduciary duties to the stockholders ofTarget under Applicable Laws, (x) furnish information with respectto Target and its Subsidiaries to the person making such TakeoverProposal and such person’s representatives pursuant to acustomary confidentiality agreement, provided that all suchinformation has previously been provided to Acquiror or is providedto Acquiror prior to or substantially concurrent with the time itis provided to such person and (y) participate in discussions ornegotiations with the person making such Takeover Proposal (andsuch person’s representatives) regarding such TakeoverProposal.

                                   (c)        Theterm "Superior Proposal" means any bona fide writtenproposal made by a third party that if consummated would result insuch person (or its stockholders) owning, directly or indirectly,(A) all or substantially all of the shares of capital stock ofTarget then outstanding, or (B) all or substantially all of theassets of Target and its Subsidiaries, taken as a whole, in eachcase which the Board of Directors of Target determines in goodfaith (after consultation with a financial advisor of nationallyrecognized reputation) to be (x) more favorable to the stockholdersof Target from a financial point of view than the transactionscontemplated by this Agreement and (y) reasonably capable of beingcompleted, taking into account all financial, legal, regulatory andother aspects of such proposal.

                                   (d)        Exceptas permitted by this Section 5.9(d), prior to the receipt of theRequired Stockholder Vote, neither the Board of Directors of Targetnor any committee thereof shall (i) (A) withdraw (or modify in amanner adverse to Acquiror), or publicly propose to withdraw (ormodify in a manner adverse to Acquiror), the approval,recommendation or declaration of advisability by such Board ofDirectors or any such committee thereof of this Agreement, theMerger or the other transactions contemplated by this Agreement or(B) recommend, adopt or approve, or propose publicly to recommend,adopt or approve, any Takeover Proposal or (ii) allow, cause orauthorize Target or any of its Subsidiaries to execute or enterinto, any letter of intent, memorandum of understanding, agreementin principle, merger agreement, acquisition agreement, optionagreement, joint venture agreement, partnership agreement or othersimilar agreement providing for or contemplating the consummationof any Takeover Proposal (other than a confidentiality agreement asprovided in Section 5.9(b)). Notwithstanding the foregoing or anyother provision of this Agreement, prior to receipt of the RequiredStockholder Vote, the Board of Directors of Target may take theactions set forth in clause (i)(A) above if such Board determinesin good faith (after consultation with outside counsel) that thefailure to do so would constitute a breach by the Board ofDirectors of Target of its fiduciary duties to the stockholders ofTarget under Applicable Laws.

                                   (e)        Targetshall, promptly (and in no event later than 48 hours) after receiptof any Takeover Proposal or indication of interest that wouldreasonably be expected to lead to a Takeover Proposal, indicationof interest or any request for nonpublic information relatingthereto (which Takeover Proposal, indication of interest or requestis received after the execution and delivery of this Agreement),advise Acquiror orally and in writing of such Takeover Proposal,indication of interest or request (including the identity of theperson making or submitting such Takeover Proposal, indication ofinterest or request, and the material terms thereof). Target shallkeep Acquiror reasonably informed with respect to the status of anysuch Takeover Proposal, indication of interest or request receivedand any modification or proposed modification thereto.

                      5.10       Notification of Certain Matters.

                                   (a)        Targetshall use commercially reasonable efforts to give prompt notice toAcquiror of the occurrence, or failure to occur, of any eventbefore the Closing which occurrence or failure causes (i) anyrepresentation or warranty of Target contained in this Agreement orany exhibit or schedule hereto to be untrue or inaccurate in anymaterial respect or (ii) Target to be unable to comply with orsatisfy by the Closing any material covenant, obligation, conditionor agreement to be complied with or satisfied by it under thisAgreement any exhibit or schedule hereto; *provided, however*,that such disclosure shall not be deemed to cure any breach of arepresentation, warranty, covenant, obligation, or agreement or tosatisfy any condition. Target shall use commercially reasonableefforts to give prompt notice to Acquiror of any event or state offacts before the Closing that has or is reasonably likely to have aTarget Material Adverse Effect. Any such notification by the Targetshall not be deemed to amend the schedules hereto for purposes ofdetermining whether the conditions set forth in Article 6 hereofhave been satisfied and shall not be deemed to cure any breach ofany representation or warranty or to limit the rights and remediesof the parties under this Agreement for any breach by the otherparties of such representations and warranties.

                                   (b)        Acquirorshall give prompt notice to the Target of the occurrence, orfailure to occur, of any event before the Closing which occurrenceor failure causes Acquiror to be unable to comply with or satisfyby the Closing any material covenant, condition or agreement to becomplied with or satisfied by it under this Agreement or anyexhibit or schedule hereto; *provided, however*, that suchdisclosure shall not be deemed to cure any breach of arepresentation, warranty, covenant or agreement or to satisfy anycondition.

                                   (c)        Notearlier than 10 and not less than 2 days before the date scheduledfor Closing, Target shall correct and supplement in writing anyinformation furnished on Schedules provided by Target that areincorrect or incomplete, and shall promptly furnish such correctedand supplemented information to Acquiror, so that all providedinformation shall be correct and complete at the time such updatedinformation is so provided. Thereafter, prior to the Closing, theTarget shall correct and supplement in writing any informationfurnished on its Schedules that is incorrect or incomplete. It isagreed that no such correction or supplement shall be deemed tocreate any presumption that such information constitutes orevidences the existence of a material change to, or a breach orviolation by Target of, any provision of this Agreement. Anycorrected and supplemental information shall not be deemed to amendthe Schedules for purposes of determining whether the conditionsset forth in Article 6 hereto have been satisfied and shall not bedeemed to cure any breach of any representation or warranty or tolimit the rights and remedies of Acquiror and Merger Sub under thisAgreement for any breach by the Target such representations andwarranties.

                      5.11       Payment of Transaction Expenses. Without limiting anyobligation of the Surviving Corporation, Acquiror shall ensure thatall Transaction Expenses and Severance Obligations not paid priorto the Closing shall be paid at or immediately after the Closing(it being understood that Acquiror and Target hereby acknowledgeand agree that: (a) as a result of, and upon consummation of, theMerger (and without any other event occurring or circumstanceexisting), a "Constructive Termination" shall be deemed to haveoccurred pursuant to the change in control provisions in the offerletters from Target provided to those Target employees with offerletters as identified in Section 2.5(a) of the Target DisclosureSchedule; and (b) the payments that become due to such employees asa result of the deemed "Constructive Termination" referred to inthis sentence shall be deemed to be "Severance Obligations" forpurposes of this Agreement, including this Section 5.11), providedthat the payment obligation of Acquiror, as to a particularemployee, with respect thereto may be conditioned upon receipt byAcquiror of the release contemplated by such employee’s offerletter and an acknowledgement by such employee that such offerletter is no longer in force, except with respect to the obligationin the Dennis Podlesak offer letter with respect to payment ofamounts described in subclause (x) below. If the Milestone Eventoccurs, Acquiror shall pay, or shall cause Surviving Corporation topay: (x) Dennis Podlesak the amount, net of applicable withholdingtaxes, owed based on the occurrence of such Milestone Eventpursuant to the terms of Mr. Podlesak’s offer letter withTarget; and (y) as promptly as practicable thereafter, but in noevent later than forty-five days thereafter, Credit Suisse theamount, if any, due to Credit Suisse as set forth in the CFOCertificate.

                      5.12       Diligence and Reporting Regarding Ceftaroline Products. At alltimes prior to the occurrence of the Milestone Event, Acquirorshall comply with, and shall ensure that the Surviving Corporationshall comply with, all obligations under the Takeda Agreementregarding the development, seeking regulatory approval of andcommercialization of products containing Ceftaroline. Further,after first approval of an NDA in the United States covering aproduct containing Ceftaroline, Acquiror shall, and shall insurethat Surviving Corporation and any applicable other affiliates ofAcquiror shall, promote all such products in the United States andtake orders, make sales and fill orders for products containingCeftaroline in the United States on a commercially reasonable basisconsistent with Acquiror’s (or its affiliates’, asapplicable) policies and practices with respect to its otherproducts of similar market opportunity in the United States.Acquiror shall provide Stockholders’ Agent (after regulatoryapproval of any product containing Ceftaroline in the UnitedStates) with a written report every year that lists in reasonabledetail all the promotion, marketing and sales efforts undertakenand/or conducted by or on behalf of Acquiror or SurvivingCorporation (or their respective successors in interest) during theprior twelve months in the United States, the results of such salesefforts including a complete and accurate report of the actualProduct Net Sales resulting in the United States in such twelvemonths period. The Former Holders are intended third partybeneficiaries of the provisions of this Section 5.13, and theStockholders’ Agent may enforce the Former Holders’interests under this Section in case of breach hereof by Acquiror(and such enforcement by Stockholder’s Agent shall be thesole remedy for enforcing such Former Holders’interests).

                      5.13       Audit Rights. Upon the written request of theStockholders’ Agent and not more than once in each calendaryear, Acquiror shall permit the Stockholders’ Agent and/or anindependent certified public accounting firm of nationallyrecognized standing selected by the Stockholders’ Agent, atthe expense of the Stockholders’ Agent (except as otherwiseprovided below), to have access during normal business hours to allof the records of Acquiror and the Surviving Corporation (and anyaffiliate or successor of interest of either as is applicable), forinspection, copying and analysis, as may be reasonably necessary toverify (a) the accuracy of the reports of Product Net Salesprovided as required in Section 5.13 for any year or years endingnot more than five years prior to the date of such request, and (b)the performance by Acquiror of its other obligations in Section5.13. Such access and inspection shall be pursuant to reasonableand customary confidentiality agreements entered into between theinspecting party and the inspected party. If such accounting firmidentifies a discrepancy in the amount of Product Net Sales madeduring the period audited, and such discrepancy indicates that theMilestone Event occurred at a time earlier than such reports wouldindicate, then (if not paid previously) the amounts of theAdditional Merger Consideration owed to Former Holders under theterms of this Agreement based on such Milestone Event occurringshall be paid by Acquiror promptly after such payment obligation isidentified, and if such discrepancy shows the Additional MergerConsideration should have been paid 90 or more days earlier than itwas actually paid, then in addition all fees of such accountingfirm in conducting such inspection shall be paid by Acquiror.

                      5.14       Right to Pursue [***] ****Opportunity if Acquiror Declines.Acquiror agrees that if Acquiror does not consent to Targetentering into, prior to the Closing, the License Agreement with[***] (the "[***] Agreement") that is contemplated by the [***]Letter of Intent (as such term is defined in Target DisclosureSchedule), and if Acquiror does not subsequent to the Closing enterinto the [***] Agreement, then at the request ofStockholders’ Agent, Acquiror will, and will cause SurvivingCorporation to, discuss reasonably with Stockholder’s Agent(or appropriate institutional investors who are Former Holders) thereasonable terms under which certain interested Former Holderscould pursue the business opportunity reflected in the [***] Letterof Intent by entering into a similar license agreement directlywith [***]. Target acknowledges that it is important to Acquiror toobtain information promptly regarding the [***] Letter of Intent,the proposed [***] Agreement, and the technical information inTarget’s possession regarding the [***] opportunity coveredby the [***] Agreement, and as such Target shall request from [***]as soon as practicable the right to disclose such information toAcquiror, pursuant to a confidentiality agreement between Acquirorand [***], and shall use reasonable efforts to pursue obtaining theright to make such disclosure. Target shall also request [***].

            6.        Conditions to the Merger.

                      6.1        Conditions to Obligation of Each Party to Effect the Merger.The respective obligations of Acquiror and Merger Sub, on the onehand, and Target, on the other hand, to effect the Merger andotherwise to consummate the transactions contemplated by thisAgreement shall be subject to the satisfaction at or prior to theClosing of each of the following conditions (it being understoodthat any one or more of the following conditions may be waived bythe agreement of Acquiror and Target):

                                   (a)        No Injunctions or Restraints; Illegality. No temporaryrestraining order, preliminary or permanent injunction or otherorder issued by any court of competent jurisdiction shall have beenissued and remain in effect, nor shall there be any statute, ruleor regulation enacted or deemed applicable to the Merger, in eachcase that makes the consummation of the Merger illegal.

                                   (b)        HSR Antitrust Laws. The waiting period applicable to theconsummation of the Merger under HSR shall have expired or beenterminated.

                                   (c)        Required Stockholder Vote. The Required Stockholder Vote shallhave been obtained.

                      6.2        Additional Conditions to the Obligations of Acquiror and MergerSub. The obligations of Acquiror and Merger Sub to effect theMerger and otherwise to consummate the transactions contemplated bythis Agreement shall be subject to the satisfaction at or prior tothe Closing of each of the following conditions (it beingunderstood that any one or more of the following conditions may bewaived by Acquiror):

                                   (a)        Representations and Warranties. The representations andwarranties of Target in this Agreement (without giving effect toany qualification as to materiality, Target Material Adverse Effector words of like import contained therein) shall be accurate in allrespects as of the date of this Agreement (except to the extent anysuch representation and warranty expressly speaks only as of anearlier date (in which case as of such earlier date)), except tothe extent that any inaccuracies (considered individually or in theaggregate) do not have a Target Material Adverse Effect as of theClosing Date.

                                   (b)        Performance of Covenants; 280G Consent. Target shallhave complied with and performed in all material respects allmaterial agreements, obligations and covenants under this Agreementrequired to be complied with or performed by Target at or prior tothe Closing. Either: (i) Target shall have duly obtained theconsent of its stockholders referred to in Section 5.2(d), or (ii)no payments or benefits provided to any "disqualified individual"as defined in Section 280G(c) of Target pursuant to any employmentor other contract between Target and such individual would not bedeductible by reason of Section 280G.

                                   (c)        Certificates of Officers. Acquiror and Merger Sub shall havereceived (i) a certificate executed on behalf of Target by itsChief Executive Officer (the "Target Closing Certificate")to the effect that the conditions set forth in Sections 6.2(a) and6.2(b) have been satisfied, (ii) a certificate executed on behalfof Target by the Secretary of Target (the "Target Secretary'sCertificate") to the effect that the conditions set forth inSections 6.1 (c), 6.2(e) and 6.2(f) have been satisfied, and (iii)the CFO Certificate.

                                   (d)        Escrow Agreement. Escrow Agent and the Stockholders’Agent shall have entered into the Escrow Agreement.

                                   (e)        Notices. The Stockholder Notice shall have been given andtwenty days shall have passed after the mailing of the Section 262Notice, in each case as provided in Section 5.2 and in accordancewith Applicable Laws.

                                   (f)        Appraisal Rights. Holders of more than an aggregate of 10% ofthe shares of Target Capital Stock outstanding at the EffectiveTime shall not have provided Target with notice of intent to seekappraisal of their shares of Target Capital Stock under Section262.

                                   (g)        MaterialAdverse Effect. Since September 30, 2006, there shall not haveoccurred a Target Material Adverse Effect.

                      6.3        Additional Conditions to the Obligations of Target. Theobligations of Target to effect the Merger and to otherwiseconsummate the transactions contemplated by this Agreement shall besubject to the satisfaction at or prior to the Closing of each ofthe following conditions (it being understood that any one or moreof the following conditions may be waived by Target):

                                   (a)        Representations and Warranties. The representations andwarranties of Acquiror and Merger Sub in this Agreement (withoutgiving effect to any materiality qualification contained therein)shall be accurate in all respects as of the date of this Agreement(except to the extent any such representation or warranty speaks asof any other specific date, in which case such representation orwarranty shall have been accurate as of such date), except to theextent that any inaccuracies (considered collectively) do not havean Acquiror Material Adverse Effect as of the Closing Date.

                                   (b)        Performance of Covenants. Acquiror and Merger Sub shall haveeach complied with and performed in all material respects all oftheir respective material covenants under this Agreement requiredto be complied with or performed by either of them at or prior tothe Closing.

                                   (c)        Certificate of Officer. Target shall have received acertificate executed on behalf of each of Acquiror and Merger Subby an officer of Acquiror and Merger Sub, respectively, to theeffect that the conditions set forth in Sections 6.3(a) and 6.3(b)have been satisfied.

                                   (d)        Escrow Agreement. Acquiror and Escrow Agent shall have enteredinto the Escrow Agreement.

            7.        Termination.

                      7.1        Termination. This Agreement may be terminated at any time priorto the Closing (with respect to Sections 7.1(b) through 7.1(f), bynotice from the terminating party to the other party setting fortha brief description of the basis for termination):

                                   (a)        bythe mutual written consent of Acquiror and Target;

                                   (b)        byeither Acquiror or Target if the Merger shall not have beenconsummated by March 31, 2007; provided, however,that the right to terminate this Agreement under thisSection 0 shall not be available to any party whose failure tocomply with or perform in any material respect any covenant,agreement or obligation under this Agreement has been the cause ofor resulted in the failure of the Merger to occur on or before suchdate;

                                   (c)        byeither Acquiror or Target if a court of competent jurisdictionshall have issued a nonappealable final and permanent injunctionhaving the effect of permanently prohibiting the Merger;

                                   (d)        withoutlimiting the right of either Acquiror or Target to terminate thisAgreement pursuant to Section 7.1(b), by Target if (i) there is aninaccuracy in any of the representations or warranties of Acquiroror Merger Sub in this Agreement such that the condition set forthin Section 6.3(a) would not be satisfied, or there has been abreach by Acquiror or Merger Sub of any of their respectivecovenants, agreements or obligations in this Agreement such thatthe condition set forth in Section 6.3(b) would not be satisfied,(ii) Target shall have delivered to Acquiror a written notice ofsuch inaccuracy or breach, and (iii) at least ten days shall haveelapsed since the delivery of such notice without such inaccuracyor breach having been cured;

                                   (e)        withoutlimiting the right of either Acquiror or Target to terminate thisAgreement pursuant to Section 7.1(b), by Acquiror if (i) there isan inaccuracy in any of the representations or warranties of Targetin this Agreement such that the condition set forth in Section6.2(a) would not be satisfied, or there has been a breach by Targetof any of its covenants in this Agreement such that the conditionset forth in Section 6.2(b) would not be satisfied, (ii) Acquirorshall have delivered to Target a written notice of such inaccuracyor breach, and (iii) at least ten days shall have elapsed since thedelivery of such notice without such inaccuracy or breach havingbeen cured).

                                   (f)        ByAcquiror no later two days after the date of this Agreement if, by6 a.m. Pacific Standard Time on day after the date of thisAgreement, the condition set forth in Section 6.1(c) shall not havebeen satisfied by the delivery to Target of Written Consents inaccordance with Section 228 of the Delaware Law sufficient toconstitute the Required Stockholder Vote.

                                   (g)        ByAcquiror, if, prior to the receipt of the Required StockholderVote, Target shall have materially breached Section 5.9.

                      7.2        Effect of Termination. Except as provided in Section 7.3, inthe event of termination of this Agreement as provided inSection 0, this Agreement shall be of no further force oreffect, and there shall be no liability on the part of Acquiror,Target, Merger Sub or their respective officers, directors orstockholders, except to the extent that such liability results fromthe willful breach by a party of any of its representations andwarranties or a material breach of any of its covenants, agreementsor obligations set forth in this Agreement; provided*,*however*,* that the provisions of Section 9 (and theConfidentiality Agreement) shall remain in full force and effectand survive any termination of this Agreement.

                      7.3        Termination Fee. If this Agreement is validly terminatedpursuant to Section 7.1(g) then, within one Business Day after thetermination of this Agreement, Target shall cause to be paid toAcquiror, in cash, a termination fee in the amount of $19,744,000(the "Termination Fee"). In addition, if: (a) after the dateof this Agreement and prior to the termination of this Agreement aTakeover Proposal is made and becomes known to Target; (b) thisAgreement is validly terminated pursuant to Section 7.1(b) and thecondition set forth in Section 6.1(c) shall not have been satisfiedprior to such termination; (c) neither Acquiror nor Merger Subshall have materially breached any of their representations,warranties, covenants, agreements or obligations under thisAgreement; and (d) within 12 months of such termination, Targetenters into an agreement for, or consummates, a Takeover Proposal,then not later than one Business Day after any such event, Targetshall pay the Termination Fee to Acquiror, in cash.

            8.        Escrow and Indemnification

                      8.1        Escrow Fund. At the Effective Time,Acquiror shall cause to be delivered to such institution jointlydesignated by Acquiror and the Stockholders’ Agent actingreasonably and in good faith as escrow agent (the "EscrowAgent"), and shall deposit as a contribution to an escrow fund(the "Escrow Fund") with such Escrow Agent, with respect toeach share of Target Capital Stock held by the Non-DissentingStockholders immediately prior to the Effective Time, an amountequal to the Escrow Contribution Amount, and with respect to eachTarget Option existing immediately prior to the Effective Time, anamount equal to the Escrow Contribution Amount times the number ofshares of Target Capital Stock that are subject to such TargetOption, which contributions shall be in an aggregate amount equalto the Escrow Amount. The Escrow Fund: (A) shall be held by theEscrow Agent in accordance with the terms of this Agreement and theterms of the Escrow Agreement; (B) shall be held as a trust fundand shall not be subject to any lien, attachment, trustee processor other judicial process of any creditor of any person; and (C)shall be held and disbursed solely for the purposes and inaccordance with the terms of this Agreement and the EscrowAgreement.

                      8.2        Indemnification.

                                   (a)        Expiration of Representations, Warranties and Covenants. Allrepresentations and warranties made by Target in this Agreement or,if applicable, in the Target Closing Certificate, shall expire onthe date 365 days after the Closing Date (the "RepresentationTermination Date"); provided*,*however*,* that if at any time prior to theRepresentation Termination Date, Acquiror delivers to theStockholders’ Agent a notice stating the existence of aninaccuracy in any of the representations and warranties made byTarget or in the Target Closing Certificate or the CFO Certificateor a breach of a covenant made by Target (and setting forth inreasonable detail the basis for Acquiror’s determination thatsuch an inaccuracy or breach exists and the amount of the Damagesincurred by Acquiror as a result of such inaccuracy or breach) andasserting a claim for recovery under this Section 8.2 based on suchinaccuracy or breach, then the claim asserted in such notice shallsurvive the Representation Termination Date until such time as suchclaim is fully and finally resolved. All obligations of the partiesunder the covenants contained herein (including the covenants setforth in Sections 4 and 5) shall expire at the Effective Time,except to the extent that any such covenant expressly specifiesthat it is to be (or is otherwise required by this Agreement to be)performed after the Effective Time; provided,however, that notwithstanding the expiration of theparties’ obligations under such covenants, claims forbreaches of any covenants of Target prior to their expiration maybe brought after the Effective Time and until the RepresentationTermination Date.

                                   (b)        Indemnification. Subject to the limitations set forth inSections 8.2(a) and 8.2(c) and the other limitations set forth inthis Agreement, from and after the Effective Time, the Acquirorshall be indemnified and held harmless solely out of each FormerHolder’s Pro Rata Portion of the Escrow Fund against anyDamages actually incurred by Acquiror as a result of (i) anyinaccuracy in any representation or warranty of Target set forth inSection 2 (without giving effect to any materiality or TargetMaterial Adverse Effect or similar qualification therein) or in theTarget Closing Certificate or the CFO Certificate and (ii) thebreach of any covenant of Target in this Agreement required to beperformed at or prior to the Effective Time. For purposes of thisSection 8, "Damages" shall mean any liabilities, losses,damages, penalties, fines, costs or expenses, including reasonablelegal, expert and consultant fees and expenses; provided,however, that for purposes of computing the amount of anyDamages incurred by Acquiror: there shall be deducted an amountequal to the amount of any insurance proceeds, indemnificationpayments, contribution payments or reimbursements actually receivedor receivable by Acquiror or any of its affiliates in connectionwith such Damages or any of the circumstances giving rise thereto.Notwithstanding any other provision of this Section 8, the totalamount in respect of which any Former Holder shall be liable toAcquiror under this Agreement shall not exceed such FormerHolder’s Pro Rata Portion of the Escrow Fund.

                                   (c)        Limitations of Liability.

                                               (i)        Subjectto Section 8.2(c)(iii), the right of Acquiror to be indemnifiedfrom the Escrow Fund pursuant to this Section 8 shall be the soleand exclusive remedy with respect to any inaccuracy of anyrepresentation or warranty of Target contained in, or any breach byTarget of, this Agreement, or otherwise in connection with thetransactions contemplated by this Agreement. Subject to Section8.2(c)(iii), no current or former stockholder, optionholder,director, officer, employee, affiliate or advisor of Target shallhave any personal or individual liability of any nature toAcquiror, the Surviving Corporation or any affiliate of Acquiror orthe Surviving Corporation with respect to any inaccuracy of anyrepresentation or warranty contained in, or any breach of, thisAgreement or the Target Closing Certificate, or otherwise inconnection with the transactions contemplated by this Agreement.The parties acknowledge that (A) no current or former stockholder,director, officer, employee, affiliate or advisor of Target hasmade or is making any representations, warranties or commitmentswhatsoever regarding the subject matter of this Agreement, expressor implied, (B) except as expressly provided in Section 2, Targethas not made and is not making any representations, warranties orcommitments whatsoever regarding the subject matter of thisAgreement, express or implied, and (C) except as expressly providedin Section 2, Acquiror is not relying and has not relied on anyrepresentations, warranties or commitments whatsoever regarding thesubject matter of this Agreement, express or implied.

                                               (ii)       Withoutlimiting the effect of any other limitation contained in thisSection 8, the indemnification provided for in this Section 8.2shall not apply, and Acquiror shall not be entitled to exercise anyindemnification rights under this Agreement: (A) with respect toany inaccuracy in any representation or warranty of Target setforth in Section 2 or the breach of any covenant by Target ifthe Damages relating to such inaccuracy or breach do not exceed$50,000; or (B) except to the extent that the aggregate amount ofDamages relating to matters other than any claim forindemnification based on any inaccuracy in the CFO Certificate andagainst which Acquiror would otherwise be entitled to beindemnified under this Section 8.2 exceeds $1,500,000. If theaggregate amount of such Damages exceeds $1,500,000, then Acquirorshall, subject to the other limitations contained herein, beentitled to be indemnified from the Escrow Fund only against theportion of such Damages in excess of $1,500,000. Notwithstandingthe foregoing, no claim for indemnification based on any inaccuracyin the CFO Certificate shall be subject to such $50,000 or$1,500,000 exclusion, and Acquiror shall be entitled to indemnitytherefor on a "first dollar" basis.

                                               (iii)      Nothingin this Section 8.2(c) shall limit any remedy Acquiror may haveagainst any person for fraud under applicable tort laws or withrespect to the breach by such person of any contractual obligations(excluding obligations under this Agreement or the EscrowAgreement) to which such person is subject, including but notlimited to any obligations not to compete with Target, not todisclose Target’s confidential information, or to assign toTarget certain intellectual property rights.

                                   (d)        Defense of Third-Party Claims. Promptly after Acquiror obtainsknowledge of any actual or possible claim, demand, suit, action,arbitration, investigation, inquiry or proceeding that has been ormay be brought or asserted by a third party against Acquiror or anyof Acquiror’s Subsidiaries or other affiliates and that maybe subject to indemnification hereunder (a "Third-PartyClaim"), Acquiror shall promptly give notice of suchThird-Party Claim to the Stockholders’ Agent, stating thenature and basis of such Third-Party Claim and the dollar amount ofsuch Third-Party Claim, to the extent known. TheStockholders’ Agent shall have the right at its election, atany time, to defend any Third-Party Claim if the sole remedy soughtthereby is for money damages in an amount which is not more than25% of the amount which is then remaining in the Escrow Fund andavailable to pay such damages (a "Qualifying Claim"). Any suchelection shall constitute an irrevocable acknowledgement by theStockholders’ Agent and to conclusively establish that theAquiror and the Merger Sub are entitled to be indemnified hereunderin respect of such Third Party Claim, and if such election isexercised, : (i) Stockholders’ Agent shall diligentlyand in good faith defend such Third-Party Claim; (ii) theattorneys’ fees of counsel reasonably acceptable to Acquiror(approval of such counsel not to be unreasonably withheld), otherprofessionals’ and experts’ fees and court orarbitration costs incurred by the Stockholders’ Agent inconnection with defending such Third-Party Claim shall be payablefrom the Escrow Fund with the approval of the Acquiror whichapproval will not be unreasonably withheld;(iii)  Acquiror shall be entitled to monitor such defenseat its expense; (iv) Acquiror shall make available to theStockholders’ Agent all books, records and other documentsand materials that are under the direct or indirect control ofAcquiror or any of its Subsidiaries or other affiliates and thatthe Stockholders’ Agent considers necessary or desirable forthe defense of such Third-Party Claim; (v) Acquiror shallexecute such documents and take such other actions as theStockholders’ Agent may reasonably request for the purpose offacilitating the defense of, or any settlement, compromise oradjustment relating to, such Third-Party Claim; (vi) Acquirorshall otherwise fully cooperate as reasonably requested by theStockholders’ Agent in the defense of such Third-Party Claim;(vii) Acquiror shall not admit any liability with respect tosuch Third-Party Claim; and (viii) the Stockholders’Agent shall not enter into any settlement agreement providing forthe settlement of such Third-Party Claim without the prior writtenconsent of Acquiror (which consent shall not be unreasonablywithheld) if such settlement agreement imposes on Acquiror or anyof its Subsidiaries or other affiliates any obligation, other thanan obligation to pay monetary damages in an amount less than theaggregate cash amount remaining in the Escrow Fund and available topay such damages. Acquiror shall diligently defend (i) anyQualifying Claim which the Stockholder’s Agent elects not todefend as provided herein , and any other Third-Party Claim but(ii) Acquiror shall have no right to seek indemnificationunder this Section 8 in respect of any settlement of any suchClaim entered into without the prior written consent of theStockholders’ Agent, which consent shall not be unreasonablywithheld, and (iii) Stockholder’s Agent shall be entitled tomonitor such defense at its expense (any such expense to be paidout of the Escrow Fund subject to the Acquiror’s approvalwhich approval will not be unreasonably withheld or delayed).

                      8.3        Stockholders’ Agent.

                                   (a)        Notwithstandingany other provision of this Agreement, at the Effective Time,Acquiror shall deposit, or shall cause to be deposited, withrespect to each share of Target Capital Stock held by theNon-Dissenting Former Stockholders immediately prior to theEffective Time, an amount equal to the Stockholders’ AgentExpense Contribution Amount, and with respect to each Target Optionoutstanding immediately prior to the Effective Time, an amountequal to the Stockholders’ Agent Expense Contribution Amounttimes the number of shares of Target Capital Stock that are subjectto such Target Option, by wire transfer of immediately availablefunds in an account designated by the Stockholders’ Agent tobe used for payment of any Stockholders’ Agent Expenses (the"Stockholders’ Agent Expense Account"). The amountthat is deposited by Acquiror into the Stockholders’ AgentExpense Account pursuant to this Section 8.3(a) with respect toeach share of Target Capital Stock and each Target Option shallreduce the amount that, but for the provisions of this Section 8.4,the holder of such share of Target Capital Stock would haveotherwise been entitled to receive at the Effective Time in respectof such share of Target Capital Stock pursuant to Section 1.6hereof and the holder of such Target Option would have otherwisebeen entitled to receive at the Effective Time in respect of suchTarget Option pursuant to Section 1.11 hereof.

                                   (b)        TheStockholders’ Agent may, from time to time, withdraw amountsfrom the Stockholders’ Agent Expense Account for the paymentof Stockholders’ Agent Expenses. Upon termination of theEscrow Agreement, if there shall be any amount on deposit in theStockholders’ Agent Expense Account, the Stockholders’Agent shall cause such amount to be distributed to the FormerHolders ratably based on their Pro Rata Portion thereof.

                                   (c)        Byvirtue of the adoption of this Agreement by Target’sstockholders, and without further action of any Target stockholderor option holder, each Former Holder shall be deemed to haveirrevocably constituted and appointed Dennis Podlesak and EckardWeber (and by execution of this Agreement each of them herebyaccepts such appointment) as agent and attorney-in-fact("Stockholders’ Agent") for and on behalf of theFormer Holders, with full power of substitution, to act in thename, place and stead of each Former Holder with respect to thisSection 8 and the Escrow Agreement and the taking by theStockholders’ Agent of any and all actions and the making ofany decisions required or permitted to be taken by theStockholders’ Agent under this Agreement or the EscrowAgreement, including the exercise of the power to: (i) giveand receive notices and communications under this Section 8 or theEscrow Agreement; (ii) authorize delivery to Acquiror of cashfrom the Escrow Fund in satisfaction of claims for indemnificationmade by Acquiror under this Section 8; (iii) object to claimsfor indemnification made by Acquiror under this Section 8;(iv) agree to, negotiate, enter into settlements andcompromises of, and comply with orders of courts with respect toclaims for indemnification made by Acquiror under this Section 8;and (v) take all actions necessary or appropriate in the goodfaith judgment of the Stockholders’ Agent for theaccomplishment of the foregoing. The power of attorney granted inthis Section 8.3 is coupled with an interest and is irrevocable,may be delegated by the Stockholders’ Agent and shall survivethe death or incapacity of any Former Holder. The identity of theStockholders’ Agent and the terms of the agency may bechanged, and a successor Stockholders’ Agent may beappointed, from time to time (including in the event of the death,disability or other incapacity of the Stockholders’ Agent) byFormer Holders whose aggregate Pro Rata Portions exceed 50%, andany such successor shall succeed the Stockholders’ Agent asStockholders’ Agent hereunder. No bond shall be required ofthe Stockholders’ Agent, and the Stockholders’ Agentshall receive no compensation for his services.

                                   (d)        TheStockholders’ Agent shall not be liable to any Former Holderfor any liability, loss, damage, suffered by such FormerStockholder while acting in good faith and arising out of or inconnection with the acceptance or administration of his dutieshereunder (it being understood that any act done or omittedpursuant to the advice of counsel shall be conclusive evidence ofsuch good faith).

                                   (e)        Fromand after the Effective Time, Acquiror shall cause the SurvivingCorporation to provide the Stockholders’ Agent with access toinformation about the Surviving Corporation and the assistance ofthe officers and employees of Acquiror and the SurvivingCorporation, in each case to the extent reasonably necessary toenable the Stockholder’s Agent to perform his duties andexercise his rights under this Agreement, provided that theStockholders’ Agent shall treat confidentially any nonpublicinformation he receives from Acquiror regarding the SurvivingCorporation.

                                   (f)        TheStockholders’ Agent shall be entitled to no compensation forhis service in such capacity.

                      8.4        Actions of the Stockholders’ Agent. From and after theEffective Time, a decision, act, consent or instruction of theStockholders’ Agent shall constitute a decision of all FormerStockholders and shall be final, binding and conclusive upon eachFormer Stockholder, and the Escrow Agent and Acquiror may rely uponany decision, act, consent or instruction of theStockholders’ Agent as being the decision, act, consent orinstruction of each Former Stockholder. Acquiror and SurvivingCorporation are hereby relieved from any liability to any personfor any acts done by Stockholders’ Agent and any acts done byAcquiror or Surviving Corporation in accordance with any suchdecision, act, consent or instruction of the Stockholders’Agent. For all purposes of this Agreement involvingStockholders’ Agent, any document executed or purported to beexecuted by either Dennis Podlesak or Eckard Weber (or by both ofDennis Podlesak and Eckard Weber) in their capacity asStockholders’ Agent shall constitute a document executed by,and action authorized by, the Stockholders’ Agent.

            9.        General Provisions.

                      9.1        Notices. All notices and other communications hereunder shallbe in writing and shall be deemed duly delivered (i) upon receiptif delivered personally, (ii) one Business Day after being sent bycommercial overnight courier service or (iii) upon transmission ifsent via facsimile with confirmation of receipt to the parties atthe following addresses (or at such other address for a party asshall be specified upon like notice):

                                 (a)        ifto Acquiror or Merger Sub, to:

|   | Forest Laboratories, Inc.909 Third AvenueNew York, New York 10022Attention: Herschel S. Weinstein, Vice President-GeneralCounselTelecopy: (212) 224-6740        |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | with a copy to:Dornbush Schaeffer Strongin & Venaglia, LLP747 Third AvenueNew York, New York 10017Attention: Landey Strongin, Esq.Telecopy: (212) 753- 7673 |

                                 (b)        ifto Target, to:

|   | Cerexa, Inc.1751 Harbor Bay Parkway, Suite 200Alameda, CA 94502Attention:  Rick Orr, General CounselTelecopy:  (510) 747-3940                                          |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | with a copy to:Cooley Godward Kronish LLPFive Palo Alto Square3000 El Camino RealPalo Alto, CA 94306-2155Attention:  Barclay James Kamb, Esq.Telecopy:  (650) 849-7400 |

 

                                 (c)        ifto the Stockholders’ Agent, to:

|   | Eckard WeberDennis Podlesak12481 High Bluff DriveSuite 150San Diego, CA 92130Telecopy:  (858) 480-2401 |
|--------|------------------------------------------------------------------------------------------------------------------|

 

                      9.2        Target Disclosure Schedule. Target Disclosure Schedule will bearranged to correspond to the representations and warranties inSection 2 of this Agreement, or as applicable to the relevant otherSection of this Agreement, and the disclosure in any portion ofTarget Disclosure Schedule shall qualify the correspondingprovision in Section 2 and any other provision of Section 2 towhich it is reasonably apparent on its face that such disclosurerelates.

                      9.3        Counterparts. This Agreement may be executed in one or morecounterparts, all of which shall be considered one and the sameagreement, and shall become effective when one or more counterpartshave been signed by each of the parties and delivered to the otherparties, it being understood that all parties need not sign thesame counterpart.

                      9.4        Entire Agreement; Nonassignability; Parties in Interest. ThisAgreement and the documents and instruments delivered pursuanthereto, including the exhibits hereto, Target Disclosure Scheduleand the other schedules hereto: (a) together constitute theentire agreement among the parties with respect to the subjectmatter hereof and supersede all prior agreements andunderstandings, both written and oral, among the parties withrespect to the subject matter hereof, except for theConfidentiality Agreement, which shall continue in full force andeffect in accordance with their terms and shall survive anytermination of this Agreement; (b) are not intended to conferupon any other person any rights or remedies hereunder, except asprovided in the final sentence of this Section 9.4; and (c) shallnot be assigned by Acquiror or Merger Sub, on the one hand, or byTarget, on the other hand (by operation of law or otherwise),without the written consent of each of the parties hereto.Notwithstanding anything to the contrary contained in thisAgreement (but without limiting any of the rights of theStockholders’ Agent hereunder), if the Merger is consummated,(i) the Former Holders shall be third party beneficiaries of theprovisions set forth in Section 1 and Section 5.13 and (ii) theIndemnified Parties shall be third party beneficiaries of theprovisions set forth in Section 5.8.

                      9.5        Severability. In the event that any provision of thisAgreement, or the application thereof becomes, or is declared by acourt of competent jurisdiction to be illegal, void orunenforceable, the remainder of this Agreement, and the applicationof such provision to other persons or circumstances other thanthose as to which it is determined to be illegal, void orunenforceable, will not be impaired or otherwise affected and willcontinue in full force and effect and be enforceable to the fullestextent permitted by law.

                      9.6        Remedies Cumulative. Except as otherwise provided in thisAgreement, any and all remedies herein expressly conferred upon aparty will be deemed cumulative with, and not exclusive of, anyother remedy conferred hereby, or by law or equity upon such party,and the exercise by a party of any one remedy will not preclude theexercise of any other remedy.

                      9.7        Governing Law. This Agreement shall be governed by andconstrued in accordance with the internal laws of the State ofDelaware applicable to parties residing in the State of Delaware,without regard to applicable principles of conflicts of law. Eachof the parties irrevocably consents to the exclusive jurisdictionof the Delaware Court of Chancery or any federal court sitting inDelaware in connection with any action or proceeding based upon orarising out of this Agreement or the transactions contemplatedhereby that is instituted by any other party or third partybeneficiary of this Agreement, and agrees that process in any suchaction or proceeding may be served upon it in any manner authorizedby the laws of the State of Delaware and waives and covenants notto assert or plead any objection which it might otherwise have tosuch jurisdiction and such process. Each of the parties irrevocablywaives the right to trial by jury in connection with any matterbased upon or arising out of this Agreement or the transactionscontemplated hereby.

                      9.8        Rules of Construction.

                                   (a)        Theparties hereto agree that they have been represented by counselduring the negotiation, preparation and execution of this Agreementand, therefore, waive the application of any law, regulation,holding or rule of construction providing that ambiguities in anagreement or other document will be construed against the partydrafting such agreement or document.

                                   (b)        Forpurposes of this Agreement, whenever the context requires: thesingular number shall include the plural, and vice versa; themasculine gender shall include the feminine and neuter genders; thefeminine gender shall include the masculine and neuter genders; andthe neuter gender shall include the masculine and femininegenders.

                                   (c)        Asused in this Agreement, (i) the words "include" and "including,"and variations thereof, shall not be deemed to be terms oflimitation, but rather shall be deemed to be followed by the words"without limitation" and (ii) the words "hereby," "herein,""hereunder" and "hereto" shall be deemed to refer to this Agreementin its entirety and not to any specific section of thisAgreement.

                                   (d)        Exceptas otherwise indicated, all references in this Agreement to"Sections," "Schedules" and "Exhibits" are intended to refer toSections of this Agreement and Schedules and Exhibits to thisAgreement.

                      9.9        Time is of the Essence; Enforcement. Time is of the essence ofthis Agreement. Each of the parties hereto agrees that irreparabledamage would occur and that the parties would not have any adequateremedy at law in the event that any of the provisions of thisAgreement were not performed in accordance with their specificterms or were otherwise breached. It is accordingly agreed that theparties shall be entitled to an injunction or injunctions toprevent breaches of this Agreement and to enforce specifically theterms and provisions of this Agreement, this being in addition toany other remedy to which they are entitled at law or inequity.

                      9.10       Amendment; Waiver. At or prior to the Effective Time, thisAgreement may be amended by the parties hereto; provided, however,that after the Required Stockholder Vote has been obtained, thereshall be made no amendment that by law requires further approval ofthe stockholders of Target without such approval having beenobtained. This Agreement may not be amended except by an instrumentin writing signed on behalf of each of the parties hereto. Anywaiver of any of the terms or conditions of this Agreement must bein writing and must be duly executed by or on behalf of the partyto be charged with such waiver. Except as expressly set forth inthis Agreement, the failure of a party to exercise any of itsrights hereunder or to insist upon strict adherence to any term orcondition hereof on any one occasion shall not be construed as awaiver or deprive that party of the right thereafter to insist uponstrict adherence to the terms and conditions of this Agreement at alater date. Further, no waiver of any of the terms and conditionsof this Agreement shall be deemed to or shall constitute a waiverof any other term of condition hereof (whether or not similar).

**[*remainder of page intentionally leftblank*]**

IN WITNESS WHEREOF, Target, Acquiror, Merger Sub and theStockholders’ Agent (solely for the purposes of Section 8)have caused this Agreement to be executed and delivered by each ofthem or their respective officers thereunto duly authorized, all asof the date first written above.

| **Forest Laboratories, Inc.**                                                                                                                                                                                                                                                                 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| By:  /s/ Lawrence. S.Olanoff                                                                                                                           |   |
| Name: Lawrence S. Olanoff, M.D., Ph.D.Title: President                                                                                                                                                                                                                                        |   |
| **FL Acquisition Corp.**                                                                                                                                                                                                                                                                      |   |
| By:  /s/ Lawrence. S.Olanoff                                                                                                                           |   |
| Name: Lawrence S. Olanoff, M.D., Ph.D.Title: Chief Executive Officer                                                                                                                                                                                                                          |   |
| **Cerexa, Inc.**                                                                                                                                                                                                                                                                              |   |
| By:  /s/Dennis.Podlesak                                                                                        |   |
| Name: Dennis PodlesakTitle: Chief Executive Officer                                                                                                                                                                                                                                           |   |
| **Stockholders’ Agent**                                                                                                                                                                                                                                                                 |   |
| /s/ DennisPodlesak                                                                                                       |   |
| Dennis Podlesak, as Stockholders’ Agent                                                                                                                                                                                                                                                 |        |
|                                                                                                                                                                                                                                                                                          |   |
| /s/ EckardWeber                                              |   |
| Eckard Weber, as Stockholders’ Agent                                                                                                                                                                                                                                                    |   |

***[Signature Page to Agreement and Plan ofMerger]***

**Exhibit A**

**Definitions**

Certain Defined Terms. As used in thisAgreement, the following terms shall have the followingmeanings:

            "2005 Equity Incentive Plan" means Target’s 2005 EquityIncentive Plan.

            "Acquiror" has the meaning set forth in the introductoryparagraph.

            "Acquiror Material Adverse Effect" has the meaning set forth inSection 0.

            "Additional Merger Consideration" means $100,000,000*minus* the amount, if any, owed to Credit Suisse in respectof the Additional Merger Consideration, as certified in the CFOCertificate, and *minus* the payment to Mr. Podlesak referredto in Section 5.11(x), as certified in the CFO Certificate.

            "Adjustment Amount" means the amount equal to: (x) the totalamount of cash or cash equivalents and other current assets held byTarget as of the date two (2) Business Days prior to Closing asdetermined in accordance with GAAP and in a manner consistent withthe Target Balance Sheet, *less* (y) the Aggregate TargetLiabilities as of such date, as set forth in a written reportcertified by the Chief Financial Officer of Target and delivered toAcquiror prior to the Closing based on a good faith accounting byTarget (the "CFO Certificate"). For clarity, such amount maybe a positive or negative number.

            "Aggregate Target Liabilities" means the aggregate liabilitiesof Target and its Subsidiaries of the type required to be includedin the "liabilities" column of a balance sheet of Target, asdetermined in accordance with GAAP and in a manner consistent withthe Target Balance Sheet, it being understood that (a) allTransaction Expenses and Severance Obligations that have not beenpaid prior to the Closing shall constitute such "liabilities", and(b) such "liabilities" shall not include liability for earlyexercise of Target Options.

            "Agreement" has the meaning set forth in the introductoryparagraph.

            "Applicable Laws" means federal, state, local, municipal,foreign or other law, statute, constitution, principle of commonlaw, resolution, ordinance, code, edict, decree, rule, regulation,ruling or requirement issued, enacted, adopted, promulgated,implemented or otherwise put into effect by or under the authorityof any Governmental Entity.

            "Business Day" has the meaning set forth in Rule 14d-1(g)(3)under the Securities Exchange Act of 1934.

            "CERCLA" has the meaning set forth in Section 0.

            "Certificate" has the meaning set forth in Section 0.

            "Closing" has the meaning set forth in Section 0.

            "Closing Date" has the meaning set forth in Section 0.

            "COBRA" has the meaning set forth in Section 0.

            "Code" has the meaning set forth in Section 2.16(d).

            "Confidentiality Agreement" has the meaning set forth in Section5.3.

            "Continuing Employees" has the meaning set forth in Section5.6(a).

            "Copyrights" has the meaning set forth in Section 0.

            "Current Target Business" has the meaning set forth in Section2.1.

            "Damages" has the meaning set forth in Section 0.

            "Delaware Law" has the meaning set forth in Section 0.

            "Dissenting Share" means a share of Target Capital Stock that isissued and outstanding immediately prior to the Effective Time andwhich is held by a stockholder who did not consent to or vote infavor of the adoption of this Agreement, which stockholder complieswith all of the provisions of Delaware Law relevant to the exerciseof appraisal rights and has not, as of the applicable time,withdrawn such stockholder’s exercise of such appraisalrights.

            "Dissenting Stockholder" has the meaning set forth inSection 0.

            "Effective Time" has the meaning set forth inSection 0.

            "Escrow Amount" means the amount equal to 7.5% of (i) the MergerConsideration *less* (ii) the Options Exercise Price.

            "Escrow Contribution Amount" means the amount equal to theEscrow Amount *divided by* the sum of (i) the aggregate numberof shares of Target Capital Stock outstanding immediately prior tothe Effective Time (excluding Dissenting Shares), *plus* (ii)the aggregate number of shares of Target Capital Stock subject tounexercised Target Options (whether vested or unvested) that areoutstanding immediately prior to the Effective Time.

            "Environmental Laws" has the meaning set forth inSection 0.

            "ERISA" has the meaning set forth in Section 0.

            "ERISA Affiliate" has the meaning set forth inSection 0.

            "Escrow Agent" has the meaning set forth in Section 0.

            "Escrow Agreement" has the meaning set forth in Recital C.

            "Escrow Fund" has the meaning set forth in Section 0.1.

            "FDA" has the meaning set forth in Section 0.

            "FDCA" has the meaning set forth in Section 0.

            "Former Holder" means a person that is a Former Stockholderand/or a Former Optionholder.

            "Former Optionholders" means those persons who shall have heldan unexpired Target Option immediately prior to the Effective Time(whether or not vested or exercisable).

            "Former Stockholders" means those persons who shall have heldshares of Target Capital Stock immediately prior to the EffectiveTime.

            "GAAP" means United States generally accepted accountingprinciples.

            "Governmental Entity" has the meaning set forth inSection 0.

            "Hazardous Materials" has the meaning set forth inSection 0.

            "HIPAA" has the meaning set forth in Section 0.

            "HSR" has the meaning set forth in Section 0.

            "Indemnified Parties" has the meaning set forth in Section5.8(a).

            "IP Rights" has the meaning set forth in Section 0.

            "Knowledge" means the actual knowledge of an executive officerof the applicable person after reasonable inquiry.

            "Lease" has the meaning set forth in Section 0.

            "Material Contract" has the meaning set forth inSection 0.

            "Material Target IP Rights" has the meaning set forth in Section2.9(a).

            "Merger" has the meaning set forth in Recital A.

            "Merger Consideration" means the Purchase Price, *plus* theOptions Exercise Price, *plus* or *minus*, as the casemay be, the Adjustment Amount, *plus* if Acquiror consents inwriting to Target entering into the [***] ****Agreement, theamount, if any, paid by Target on or prior to Closing pursuant toSection 8.1(i) of the [***] Agreement, and by Target pursuant tothe Finders’ Fee Agreement (as such term is defined in theTarget Disclosure Schedule).

            "Milestone Event" means that, in any consecutive 12-month periodduring the first five full years after the commercial launch of thefirst Ceftaroline product in the United States after NDA approval,Product Net Sales in the United States equal or exceed$500,000,000. ****

            "Merger Sub" has the meaning set forth in the introductoryparagraph.

            "Non-Dissenting Stockholders" means all Former Stockholders*excluding* those persons that are DissentingStockholders.

            "[***] Agreement" has the meaning set forth in Section 5.14.

            "Options Exercise Price" means the total sum, for all shares ofTarget Common Stock that are subject to all Target Options (whethervested or unvested) existing immediately prior to the EffectiveTime, of the exercise price per share of each such share of TargetCommon Stock subject to any such Target Option.

            "Patent Rights" has the meaning set forth in Section 0.

            "Per Share Price" has the meaning set forth in Section1.6(a)(i).

            "Permitted Encumbrances" has the meaning set forth in Section2.13.

            "Person" means any individual or entity.

            "Pre-Closing Period" has the meaning set forth in Section4.1.

            "Product Net Sales" means the gross amount received by SurvivingCorporation, Acquiror, and/or any affiliate, sublicensee orsuccessor in interest of either Surviving Corporation or Acquirorbased upon the sale or other commercial disposition, during theapplicable period, of any product containing Ceftaroline tounaffiliated third parties that are not sublicensees of the sellingparty, less the following deductions or allowances:

                        (a)        reasonabletrade, quantity, or cash discounts, customary discounts (including,for this purpose, discounts provided by means of chargebacks orrebates) actually granted to managed health care organizations,national, state or local governments (or their agencies, including,as to the United States, Medicare plans and comparable programs inother countries), and managed health organizations (includingwithout limitation Medicaid rebates);

                        (b)        sales,use, value added, inventory, and excise taxes, import and customsduties, tariffs and any other similar taxes, duties, tariffs orother governmental charges (but excluding income taxes) directlyimposed on the sales of the Product;

                        (c)        reasonablefreight, insurance, packaging costs and other transportationcharges; and

                        (d)        amountsactually repaid or credits taken by reason of rejections,outdating, defects or returns or because of retroactive pricereductions or due to recalls or government laws or regulationsrequiring rebates;

all of the above calculated in accordance with GenerallyAccepted Accounting Principles consistently applied and with therevenue and expense recognition policies of Acquiror consistentlyapplied throughout its business.

            "Pro Rata Portion" means, with respect to a specific FormerHolder, the fraction that is the sum of: (a) the fraction having anumerator equal to the product of (i) the total number of shares ofTarget Capital Stock held by such Former Holder (if any)immediately prior to the Effective Time (excluding the DissentingShares), times (ii) the Per Share Price, and having a denominatorequal to the total Purchase Price, plus (b) the fraction having anumerator equal to the product of (x) the aggregate number ofshares of Target Capital Stock subject to unexercised TargetOptions (whether vested or unvested) that are outstandingimmediately prior to the Effective Time, times (y) the Per SharePrice, and having a denominator equal to the total PurchasePrice.

            "Purchase Price" means $493,600,000.

            "RCRA" has the meaning set forth in Section 0.

            "Representation Termination Date" has the meaning set forth inSection 8.2(a).

            "Required Stockholder Vote" has the meaning set forth in Section2.2.

            "Section 280G" has the meaning set forth in Section 5.2(d).

            "Series A Preferred Stock" means the Series A Preferred Stock(par value $0.001 per share) of Target.

            "Series B Preferred Stock" means the Series B Preferred Stock(par value $0.001 per share) of Target.

            "Severance Obligations" means all bonuses, parachute payments,and change of control payments required to be paid by Target or anyof its Subsidiaries to its employees as provided in Section 5.11,including the amount payable to Dennis Podlesack under his offerletter with Target based on the Merger, equal to 1% of the"Liquidation Proceeds" as defined in such offer letter (butexcluding amounts payable based on the achievement of the MilestoneEvent).

            "Stockholders’ Agent" has the meaning set forth inSection 0.

            "Subsidiary" means an entity for which an amount of the votingsecurities, other voting rights or voting partnership interests,which is sufficient to elect at least a majority of suchentity’s board of directors or other governing body (or, ifthere are no such voting interests, 50% or more of the equityinterests of which), is owned directly or indirectly by Target.

            "Superior Proposal" has the meaning set forth in Section5.9(c).

            "Surviving Corporation" has the meaning set forth inSection 0.

            "Takeda Agreement" means that certain Agreement dated September30, 2003 (and as subsequently amended by the parties thereto) byand between Takeda Pharmaceutical Company Limited (previously knownas Takeda Chemical Industries, Ltd.), and Target (which Agreementwas originally entered into by Takeda Chemical Industries, Ltd. andbetween Peninsula Pharmaceuticals, Inc., the predecessor ininterest to Target).

            "Takeover Proposal" has the meaning set forth in Section5.9(a).

            "Target" has the meaning set forth in the introductoryparagraph.

            "Target 401(k) Plan" has the meaning set forth in Section5.6(b).

            "Target Balance Sheet" has the meaning set forth in Section2.4.

            "Target Balance Sheet Date" has the meaning set forth inSection 0.

            "Target Capital Stock" means all shares of Target Common Stock,Series A Preferred Stock, and Series B Preferred Stock issued andoutstanding as of just prior to the Closing.

            "Target Closing Certificate" has the meaning set forth inSection 6.2(c).

            "Target Common Stock" means the common stock (par value $0.001per share) of Target.

            "Target Disclosure Schedule" has the meaning set forth inSection 0.

            "Target Employees" means all persons who were, immediately priorto the Effective Time, employees of Target or any of itsSubsidiaries.

            "Target Employee Plans" has the meaning set forth inSection 0.

            "Target Facilities" has the meaning set forth inSection 0.

            "Target Financial Statements" has the meaning set forth inSection 0.

            "Target IP Rights" has the meaning set forth in Section2.9(a).

            "Target Material Adverse Effect" means any change, event,occurrence, or state of facts that has caused, or is likely toresult in, a change or effect that is materially adverse to theCurrent Target Business (it being understood that solely forpurposes of this definition, "Current Target Business" shallinclude, but not be limited to, the material Target IP Rightslicensed to Target under the Takeda Agreement, whether or not suchrights are currently being exploited) taken as a whole;provided, however, that none of the following shallbe deemed, either alone or in combination, to constitute, and noneof the following shall be taken into account in determining whetherthere has been or will be, a Target Material Adverse Effect: (A)any change, effect, event, occurrence, state of facts ordevelopment relating to the United States economy or securitiesmarkets in general, (B) any adverse change, effect, event,occurrence, state of facts or development reasonably attributableto conditions affecting the industry in which Target participates,to the extent that the effects do not disproportionately impactTarget compared to other entities in the industry in which Targetoperates, (C) any change, effect, event, occurrence, state of factsor development that arises out of or results from the announcementor pendency of this Agreement or any of the transactionscontemplated by this Agreement (including any change, effect,event, occurrence, state of facts or development resulting from orrelating to any litigation or any departure or loss of employeesthat arises from or by virtue of such announcement or pendency ofthis Agreement or any of the transactions contemplated by thisAgreement), (D) any change, effect, event, occurrence, state offacts or development resulting from or relating to any change inlaws or regulations applicable to Target or any of its Subsidiaryafter the date hereof that does not adversely affect Target in amaterially disproportionate manner as compared to others in theindustry in which Target operates, (E) any change, effect, event,occurrence, state of facts or development resulting from orrelating to any change in GAAP and (F) any change, effect, event,occurrence, state of facts or development that arises out of orresults from (1) any action or failure to act on the part of Targetor any of its Subsidiaries that is expressly approved by Acquirorin writing or that is permitted or required by this Agreement, (2)any action or failure to act on the part of any person acting orfailing to act at the request or direction in writing of Acquiroror any Affiliate of Acquiror or (3) any action or failure to act onthe part of Acquiror or any Affiliate of Acquiror.

            "Target Option" means an option granted under the 2005 EquityIncentive Plan.

            "Target Preferred Stock" means the Series A Preferred Stock andSeries B Preferred Stock.

            "Target Products" has the meaning set forth inSection 2.21(a).

            "Tax" and "Taxes" have the meanings set forth inSection 0.

            "Tax Returns" has the meaning set forth in Section 0.

            "Trademark Rights" has the meaning set forth inSection 0.

            "Transaction Expenses" means the investment banking, accounting,legal and other fees and expenses incurred by Target or any of itsSubsidiaries in connection with this Agreement and the transactionscontemplated herein.

            "Transfer" has the meaning set forth in Section 1.13.