**Exhibit 4.19****Final Execution Copy****SECURITIES PURCHASE AGREEMENT**     This Securities Purchase Agreement (this “Agreement”) is made and entered into on the 30th dayof November, 2007 by and among Michael J. Walters (“Walters”), Norman Stanley (“Stanley”; andtogether with Walters the “Management Sellers”), Lonnie S. McMillian (“McMillian”), Stoneway LLC,an Alabama limited liability company (“Stoneway”; and together with McMillian, the “InvestorSellers”) and Eurand Pharmaceuticals, Inc., a Delaware corporation (the “Buyer”). The ManagementSellers and the Investor Sellers are sometimes referred to herein as the “Sellers”.     The Management Sellers own all of the issued and outstanding shares of capital stock (the“SourceCF Shares”) of SourceCF, Inc., an Alabama corporation (“SourceCF”), and also own all of theissued and outstanding membership interests (the “Nutritionals Interests”) of SourceCFNutritionals, LLC, an Alabama limited liability company (“Nutritionals”; together with SourceCF,the “Companies”, and each of Nutritionals and SourceCF individually, a “Company”).     Other than those CR&D Interests owned by SourceCF and Nutritionals, the Investor Sellers ownall of the issued and outstanding membership interests (the “CR&D Interests”; and collectively withthe SourceCF Shares and the Nutritionals Interests, the “Securities”) of SourceCF Clinical Research& Development, LLC, a Delaware limited liability company (“CR&D”).     Each Seller owns the number and type of Securities set forth after such Seller’s name incolumn A of Exhibit A hereto. The Buyer desires to purchase from the Sellers, and the Sellersdesire to sell to the Buyer, all of the Securities in accordance with the provisions of thisAgreement.     In connection with the consummation of the transactions contemplated by this Agreement,SourceCF is entering into agreements with all holders (the “Optionees”) of Outstanding SecuritiesRights (as defined in Section 4.2(b) hereof). These agreements provide, among other things, forthe cancellation of all such Outstanding Securities Rights and the payment by SourceCF to theOptionees of the various amounts referred to in this Agreement (including as set forth with respectto the Optionees in Exhibit A hereto). Each Optionee owns the number and type of OutstandingSecurities Rights set forth after such Optionee’s name in column A of Exhibit A hereto.     NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree as follows:     1. Sale and Purchase of Securities.     1.1 Purchase Price. Subject to the terms and conditions of this Agreement and on thebasis of and in reliance upon the representations, warranties, covenants and agreements set forthherein, on the Closing Date (as defined in Section 2(a) hereof) the Sellers shall sell to the Buyerand the Buyer shall purchase from the Sellers all of the Securities in exchange for a purchaseprice of up to $9,600,000, less the amount to be paid to the Optionees pursuant to Section 6.4hereof and this Section 1 (the “Purchase Price”), which Purchase Price shall consist of the InitialCash Payment, the Revenue Milestone Payment and the Deferred Payment (each as hereinafter defined).     1.2 Initial Cash Payment. A cash payment in the amount set forth after each Seller’sname in column B of Exhibit A hereto shall be paid by the Buyer to such Seller at the Closing (asdefined in Section 2(a) hereof) in the manner provided in Section 2(b) hereof, with $6,600,000,less the amount of initial cash payments to be paid to the Optionees upon termination of theiroptions pursuant to Section 6.4
 

 
hereof (other than payments which may be subsequently made to Optionees with respect to theDeferred Payment or the Revenue Milestone), being the total amount of cash to be paid to all of theSellers on the Closing Date (collectively, the “Initial Cash Payment”);     1.3 Subsequent Payments.     (a) Revenue Milestone Payment.          (i) The term “Revenue Milestone” shall mean the achievement of $9.0 million in Revenues of theCompanies and Subsidiaries for the calendar year 2008. The Revenue Milestone shall beappropriately adjusted by the Buyer and the Sellers’ Representative (as defined in Section 10.16(a)hereof) in the event that the Companies and Subsidiaries, during calendar year 2008 and only inaccordance with an affirmative management decision of the Buyer, make material changes to theirbusinesses that have a negative impact on the ability of the Companies and the Subsidiaries toachieve the Revenue Milestone.          (ii) The term “Revenues” shall mean the consolidated revenues of the Companies andSubsidiaries derived from their sale and license of products (and any related sales commissions) ofthe Companies and Subsidiaries, excluding all vitamin products, in existence on the Closing Date,and as computed in a manner consistent with the prior practices of the Companies and Subsidiariesand the accounting principles applied by the Companies and Subsidiaries in computing revenues priorto the Closing.          (iii) The term “Revenue Milestone Payment” shall mean $1,500,000.     (b) Deferred Payment. Additional cash payments, aggregating $1,500,000, shall be paidby the Buyer in accordance with Section 1.3(c) hereof to each of the persons listed on Exhibit Ahereto (being the Sellers and the Optionees) (such payments, collectively, the “Deferred Payment”).     (c) Subsequent Payments Generally. The Buyer shall cause the Companies andSubsidiaries to use reasonable commercial efforts to achieve the Revenue Milestone. The partiesagree that, except as set forth in Sections 9.4 and 9.6 hereof, the amounts earned and payable withrespect to the Revenue Milestone, if any, and the Deferred Payment shall serve as the sole sourcefor the payment of any indemnification obligations of the Sellers pursuant to Section 9.2.     (d) Distribution of Subsequent Payments.          (i) Promptly following the second anniversary of the Closing Date, but in any event within tendays thereafter, the Revenue Milestone Payment (if earned) and the Deferred Payment shall beallocated and distributed by the Buyer to the Sellers, and by SourceCF to the Optionees, in allcases based on the percentages set forth in Column C of Exhibit A. Such Deferred Payment andRevenue Milestone Payment distributions shall be reduced for any amounts reasonably required inrespect of any then pending indemnification claims, and any excess amount so deferred once therelated indemnification matter is finally resolved shall also be distributed to such persons withinten days after such resolution.          (ii) Promptly following December 31, 2008, but in any event within sixty (60) days thereof,the Buyer shall determine whether the Revenue Milestone has been achieved. If it determines thatthe Revenue Milestone has been achieved, it shall so notify the Sellers’ Representative (and theBuyer may, but shall not be obligated to, include with such notice the financial statementsreferred to in the following sentence). If the Buyer so determines that the Revenue Milestone hasnot been achieved, it shall provide a statement to the Sellers’ Representative that the RevenueMilestone has not been met,
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together with detailed written statement of its calculation of theRevenues of the Companies and Subsidiaries for purposes of determining the Revenue Milestone (the“Revenue Milestone Statement”).          (iii) In the event that the Revenue Milestone Statement reflects that the Revenue Milestonehas not been achieved, the Sellers’ Representative shall notify the Buyer in writing (the “Buyer’sNotice”) within forty-five (45) days after receipt of the Revenue Milestone Statement with respectto its acceptance or dispute of such Revenue Milestone Statement. If the Buyer’s Notice is not soprovided, the Sellers’ Representative shall be deemed to have accepted the Revenue MilestoneStatement. In the event that the Sellers’ Representative timely disputes such Revenue MilestoneStatement in the Buyer’s Notice, the Sellers’ Representative shall set forth in such notice thefacts of the dispute and, to the extent with its reasonable ability, its calculation of theRevenues of the Companies and Subsidiaries for purposes of determining whether the RevenueMilestone was achieved. The Buyer and the Sellers’ Representative shall meet and use theirrespective best efforts to resolve the items or amounts in dispute. If the parties are unable toreach an agreement within thirty (30) days after the Buyer’s receipt of the Sellers’Representative’s disagreement notification, the Accounting Referee (defined below) will review thedisputed items or amounts and compute the Revenues of the Companies and Subsidiaries for purposesof determining whether the Revenue Milestone was achieved. Such determination shall be made withinthirty (30) days after the date on which the Accounting Referee begins its review and shall bebinding on the parties. Buyer shall seek to provide full access for the Accounting Referee to theBuyer’s auditor, including the auditor’s work papers. If the Accounting Referee determines thatthe Revenue Milestone has been achieved, the Revenue Milestone Payment shall be promptlydistributed as set forth in Section 1.3(d)(i) hereof. Furthermore, in the event that theAccounting Referee’s determination reflects that the Revenue Milestone was achieved, the fees,costs and expenses of the Accounting Referee shall be paid by the Buyer, and, in the event theAccounting Referee’s determination reflects that the Revenue Milestone was not achieved, then thefees, costs and expenses of the Accounting Referee shall be paid by the Management Sellers. Theterm “Accounting Referee” shall mean a certified public accountant which is appointed by mutualwritten agreement of the parties or if the parties are unable to agree on such appointment, theAccounting Referee shall be appointed by a single arbitrator selected in accordance with the rulesof the American Arbitration Association who shall choose an Accounting Referee who is a partner ina “Big-4” auditing firm which is not the auditor of either party.     (e) In connection with this Section 1.3, if the Sellers’ Representative is not employed by oneof the Companies or Subsidiaries, or does not otherwise have access to Buyer’s books and records,then upon reasonable notice and during Buyer’s normal business hours, any certified publicaccountants engaged by the Seller’s Representative at his sole expense (but not the Seller’sRepresentative himself) shall have the right to inspect the books and records relating to theCompanies and the Subsidiaries solely as required in connection with the verification as to whetherthe Revenue Milestone was achieved, provided that, such inspection shall be limited to those booksand records pertaining to the 2008 calendar year and, to the extent applicable, the 2007 calendaryear.          2. Closing. (a) The closing (the “Closing”) of the sale and purchase of Interestsdescribed in Section 1 hereof shall take place at the offices of Morgan, Lewis & Bockius LLP, 1701Market Street, Philadelphia, Pennsylvania 19103, commencing on the date hereof. The date of theClosing is sometimes herein referred to as the “Closing Date”.     (b) At the Closing, each Seller shall deliver to the Buyer, free and clear of all pledges,liens, transfer and stamp tax obligations, encumbrances, claims and other charges thereon of everykind, as applicable (i) the certificates for the SourceCF Shares to be sold by such Seller innegotiable form, duly endorsed in blank, or with separate stock transfer powers attached theretoand signed in blank, and (ii) assignments of the Nutritionals Interests and the CR&D Interests, inexchange for the delivery by the Buyer to such Seller of the consideration to be paid to suchSeller pursuant to Section 1 hereof. All cash payments shall be by wire transfer of immediatelyavailable funds to such accounts at such banks as the
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payees thereof shall direct in writingdelivered to the Buyer no less than three business days prior to the Closing.     (c) At the Closing, and at the request of the Sellers, the Buyer shall pay $400,000 to X-GENPharmaceuticals, Inc. (“X-GEN”) in full satisfaction of SourceCF’s obligations to X-GEN under asettlement letter agreement, dated November ___, 2007, between SourceCF and X-GEN. Such paymentshall be by wire transfer of immediately available funds to such account at such bank as theSellers shall direct in writing delivered to the Buyer prior to the Closing. The Purchase Pricereferred to in Section 1.1 reflects a $400,000 reduction to account for the Closing payment beingmade by Buyer to X-GEN on behalf of SourceCF pursuant to this Section 2(c).     (d) At the Closing, the Sellers shall make available to the Buyer the written resignations ofall the directors and managers of the Companies except for such directors and managers as the Buyershall designate in writing, and shall cause to be made available to the successor and anycontinuing directors and managers and to the officers of the Companies, including any new officerselected on the Closing Date (the “post-Closing Company directors, managers and officers”), allminute books, stock record books, books of account, corporate seals, leases, contracts, agreements,securities, bank, checking and money market accounts, other investments, deposits, customer andsubscriber lists, files and other documents, instruments and papers belonging to the Companies andshall cause full possession and control of all of the assets and properties of every kind andnature, tangible and intangible, of the Companies and of all other things and matters pertaining tothe operation of the business of the Companies to be transferred and delivered to the post-ClosingCompany directors, managers and officers. At the Closing, the Sellers shall deliver to the Buyer,and the Buyer shall deliver to the Sellers, the certificates, opinions and other instruments anddocuments referred to in Sections 7 and 8 hereof, respectively.     3. Representations and Warranties of the Sellers. Each Seller severally, not jointlyand severally, and only as to himself or itself and not as to any other Seller, represents andwarrants to the Buyer as follows:     3.1 Securities Ownership; Authority. Such Seller is the lawful owner of record andbeneficially of the number and type of Securities set beside such Seller’s name in column A ofExhibit A hereto, free and clear of all pledges, liens, encumbrances, claims and other charges andrestrictions thereon of every kind, including without limitation any agreements, subscriptions,options, warrants, calls, commitments or rights (contingent or otherwise) of any character grantingto any person any interest in or right to acquire from such Seller at any time, or upon thehappening of any stated event, any Securities owned by such Seller. Such Seller has full right,power and authority to execute, deliver and perform this Agreement. This Agreement has been dulyexecuted and delivered by such Seller. This Agreement constitutes the legal, valid and bindingobligation of such Seller enforceable against him or it in accordance with its terms.     3.2 Validity of Contemplated Transactions; Etc. The execution, delivery andperformance of this Agreement by such Seller will not contravene or violate (a), any law, rule orregulation to which such Seller is subject or (b) any judgment, order, writ, injunction or decreeof any court, arbitrator or governmental or regulatory official, body or authority which isapplicable to such Seller; nor will such execution, delivery or performance violate, be in conflictwith or result in the breach (with or without the giving of notice or lapse of time, or both) ofany term, condition or provision of, or require the consent of any other party to, any contract,commitment, agreement, lease, license, permit, authorization, document or other understanding, oralor written, to or by which such Seller is a party or otherwise bound or affected. Noauthorization, approval or consent of, and no registration or filing with, any governmental orregulatory official, body or authority is required in connection with the execution, delivery andperformance of this Agreement by such Seller.
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     3.3 No Claims Against the Companies. Except as set forth on Schedule 3.3 hereto, suchSeller does not have any claim, either accrued, absolute, contingent or otherwise and whether knownor unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured,againstany of the Companies or Subsidiaries (as hereinafter defined) for any reason except, in thecase of any Seller who is an employee of a Company, for unpaid salary in the ordinary course.     3.4 No Other Representations or Warranties. EXCEPT TO THE EXTENT EXPRESSLY SET FORTHIN THIS AGREEMENT AND PERMITTED BY APPLICABLE LAW, NO SELLER MAKES ANY REPRESENTATION OR WARRANTY,EXPRESSED OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE SHARES OR IN RESPECT OF ANY OF THECOMPANIES OR ANY OF THEIR RESPECTIVE ASSETS, LIABILITIES OR OPERATIONS, INCLUDING WITH RESPECT TOMERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND SUCH OTHER REPRESENTATIONS AND WARRANTIESARE EXPRESSLY DISCLAIMED.     4. Representations and Warranties of the Management Sellers. Each of the ManagementSellers, jointly and severally, represents and warrants to the Buyer as follows:     4.1 Corporate Existence. Each of the Companies is a corporation or limited liabilitycompany duly organized, validly existing and in good standing under the laws of its jurisdiction ofincorporation or formation, and it has all requisite power and authority and all necessarylicenses, permits and authorizations to carry on its business as it has been and is now beingconducted and to own, lease and operate the properties used in connection therewith. Except forthe jurisdictions set forth on Schedule 4.1 hereto, no Company is required to be qualified as aforeign corporation authorized to do business in any other jurisdiction.     4.2 Capitalization. (a) The total authorized, issued and outstanding capitalizationof each of the Companies is set forth on Schedule 4.2 hereto. All of the Securities have been dulyauthorized and validly issued, are fully paid and non-assessable, were not issued in violation ofthe terms of any agreement or other understanding binding upon the issuing Company and were issuedin compliance with all applicable charter documents of the issuing Company and all applicablefederal, state and foreign securities laws, rules and regulations. Except as set forth on Schedule4.2 hereto, there are, and have been, no preemptive rights with respect to the issuance of theSecurities or any other shares of capital stock or membership interests of any Company. Allredemptions and repurchases of shares of capital stock or membership interests by any Company, eachof which is listed and described on Schedule 4.2 hereto, have been completed in accordance with lawand the terms thereof, and no Company has any liability or obligation of any nature in connectiontherewith. Except for the agreements, contracts and commitments listed on Schedule 4.2 hereto, noCompany is a party to, or has ever entered into or made, any agreement, contract or commitment inconnection with any redemption or repurchase of shares of its capital stock or membershipinterests.     (b) As a result of the cancellation of each outstanding subscription, option, warrant,convertible security, call, commitment, agreement or right (contingent or otherwise and whether ornot exercisable or vested) of any character to purchase or otherwise acquire from any Company orany Seller any shares or membership interests of, or any securities convertible into shares ormembership interests of, and of the Companies (each, an “Outstanding Securities Right”) pursuant toSection 6.4, there are, and will be, no Outstanding Securities Rights immediately following theClosing. Each Optionee is the lawful owner of record of the number and type of OutstandingSecurities Rights set beside such Optionee’s name in column A of Exhibit A hereto     4.3 No Interest in Other Entities. (a) CR&D and SourceCF Inhalation Systems, LLC, aDelaware limited liability company wholly-owned by CR&D (“Inhalation”), (each, a “Subsidiary” andtogether, the “Subsidiaries”), are the only direct or indirect subsidiaries of either of theCompanies. Each
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Subsidiary is a limited liability company duly organized, validly existing and ingood standing under the laws of the State of Delaware, and has all requisite power and authorityand all licenses, permits and authorizations necessary to carry on its business as it has been andis now being conducted and to own, lease and operate the properties used in connection therewith.Except for the jurisdictions set forth onSchedule 4.3(a) hereto, no Subsidiary is required to be qualified as a foreign corporationauthorized to do business in any other jurisdiction.     (b) The total authorized, issued and outstanding capitalization of each Subsidiary is setforth on Schedule 4.3(b) hereto. Except as set forth on Schedule 4.3(b), all of such issued andoutstanding membership interests have been duly authorized and validly issued, are fully paid andnon-assessable, were not issued in violation of the terms of any agreement or other understandingbinding upon the corresponding Subsidiary and were issued in compliance with all applicable charterdocuments of such Subsidiary and all applicable federal, state and foreign securities laws, rulesand regulations. There are, and have been, no preemptive rights with respect to the issuance ofsuch issued and outstanding membership interests or any other membership interests of eitherSubsidiary. Except as set forth on Schedule 4.3(b) hereto, there have been no redemptions andrepurchases of membership interests by any Subsidiary, and no Company or Subsidiary has anyliability or obligation of any nature in connection therewith. Except as set forth on Schedule4.3(b) hereto, no Subsidiary is a party to, or has within the past five years entered into or made,any agreement, contract or commitment in connection with any redemption or repurchase of itsmembership interests.     (c) The Companies are the lawful owner of record and beneficially of all of the issued andoutstanding membership interests of CR&D, other than those CR&D Interests owned by the InvestorSellers, free and clear of all pledges, liens, encumbrances, claims and other charges andrestrictions thereon of every kind. Except as set forth on Schedule 4.3(c) hereto, there are nooutstanding subscriptions, options, warrants, convertible securities, calls, commitments,agreements or rights (contingent or otherwise) of any character to purchase or otherwise acquirefrom either of the Companies, or CR&D, any membership interests of, or any securities convertibleinto membership interests of, CR&D.     (d) CR&D is the lawful owner of record and beneficially of all of the issued and outstandingmembership interests of Inhalation, free and clear of all pledges, liens, encumbrances, claims andother charges and restrictions thereon of every kind. Except as set forth on Schedule 4.3(d)hereto, there are no outstanding subscriptions, options, warrants, convertible securities, calls,commitments, agreements or rights (contingent or otherwise) of any character to purchase orotherwise acquire from either of the Companies, CR&D or Inhalation, any membership interests of, orany securities convertible into membership interests of, Inhalation.     (e) No Company or Subsidiary owns any shares of any corporation other than as set forth inSection 4.3 hereto or on Schedule 4.3(e) hereto, and no Company or Subsidiary has any otherownership, membership or other investment interest, either of record, beneficially or equitably, inany association, company, partnership, joint venture or legal entity, except for bank, checking andmoney market accounts and other cash equivalent investments or as otherwise set forth on Schedule4.3(e) hereto.     4.4 Financial Statements. (a) The Sellers have delivered to the Buyer prior to thedate hereof the balance sheets of the Companies and Subsidiaries as of December 31, 2006 and 2005and the related statements of income and cash flows for the 12-month periods then ended (the“Annual Financials”). The Sellers have also delivered to the Buyer prior to the date hereof thebalance sheets of the Companies and Subsidiaries as of July 31, 2007 and the related statements ofincome and cash flows for the 7-month period then ended (the “Interim Financials”; and togetherwith the Annual Financials, the “Company Financials”). The Company Financials (including withoutlimitation all notes, comments, schedules and supplemental data contained in or annexed to suchstatements), true, correct and complete copies of all of
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which are attached hereto as Schedule 4.4,are accurate, complete and in accordance with the books and records of the Companies andSubsidiaries and present fairly in all material respects the financial position and assets andliabilities of the Companies and Subsidiaries as of their respective dates and the results of theiroperations and their cash flows for the periods then ended, in conformity, to the knowledge of theManagement Sellers, with Generally Accepted Accounting Principles as promulgated by the FinancialAccounting Standards Board and consistently applied in the United States (“GAAP”), except forsuch differences from GAAP as are described on Schedule 4.4(a) hereto. Schedule 4.4(a)(ii) heretocontains a list of all invoices greater than $1,000 recorded in the accounting books of theCompanies and the Subsidiaries during the month of August 2007, and identifies in each case whethereach invoice is for goods received or services provided before or after July 31, 2007.     (b) The accounting books and records maintained by the Companies and Subsidiaries, and uponwhich all of the Company Financials are based, are true, correct and complete and accuratelyreflect all of its items of income and expense, assets, liabilities and businesses. The Companiesand the Subsidiaries maintain a system of internal accounting controls sufficient to providereasonable assurances that transactions are recorded as necessary to permit preparation offinancial statements, to the knowledge of the Management Sellers, in conformity with GAAP and tomaintain accountability for assets except as set forth on Schedule 4.4 hereto.     4.5 Accounts Receivable. All accounts receivable of the Companies and Subsidiariesare valid and genuine, arise out of bona fide sales and deliveries of goods, performance ofservices or other business transactions, are not subject to valid defenses, set-offs orcounterclaims other than normal returns and allowances and were generated only in the ordinarycourse of business. All accounts receivable reflected in the Companies’ July 31, 2007 balancesheet included in the Company Financials, less the allowance for doubtful accounts reflected onsuch balance sheet, will be collected in full within 180 days after the Closing Date.     4.6 Inventory and Equipment. All inventory and equipment of the Companies andSubsidiaries as of the date hereof or reflected on the Company Financials or (a) was acquired inaccordance with the regular business practices of the Companies and Subsidiaries, (b) consisted andconsists of items of a quality and quantity useable in the ordinary course of its businessconsistent with past practice, subject to normal wear and tear and routine maintenance, and (c)conformed and conforms to all applicable laws, ordinances, codes, rules and regulations relatingthereto and to the construction, use, operation and maintenance thereof. None of such inventory orequipment is obsolete or has been maintained other than in accordance with the regular businesspractices of the Companies and Subsidiaries. The inventory of the Companies and Subsidiaries isreflected on the Company Financials based on cost, and the equipment of the Companies and theSubsidiaries is reflected on the Company Financials based on their respective tax basis therein(other than with respect to normal year end adjustments to allocate tax depreciation).     4.7 Absence of Undisclosed Liabilities. To the knowledge of the Management Sellers,no Company or Subsidiary is liable for or subject to any liability except for:     (a) those liabilities and obligations reflected or reserved against on the July 31, 2007balance sheet included in a Company Financials to the extent not heretofore paid or discharged;     (b) those liabilities and obligations arising in the ordinary course of its businessconsistent with past practice under any contract, commitment or agreement specifically disclosed onany Schedule to this Agreement or not required to be disclosed thereon because of the term oramount involved or otherwise;     (c) those liabilities and obligations incurred, consistent with past practice, in the ordinarycourse of its business since July 31, 2007, which liabilities and obligations in the aggregate areof a character and magnitude consistent with past practice; and
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     (d) those liabilities and obligations set forth on Schedule 4.7 hereto.For purposes of Sections 4.7 and 9.1 hereof, the term “liabilities” shall include withoutlimitation any direct or indirect liability, indebtedness, guaranty, endorsement, claim, loss,damage, deficiency, cost, expense, obligation or responsibility, either accrued, absolute,contingent or otherwise and whetherknown or unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured orunsecured.     4.8 Existing Condition. Except as disclosed on Schedule 4.8 hereto, since July 31,2007, the Companies and Subsidiaries have been operated in the ordinary course of businessconsistent with past practice and no Company or Subsidiary has:     (a) sold, assigned or transferred any of its assets or properties except in the ordinarycourse of its business consistent with past practice;     (b) redeemed, purchased or otherwise acquired any of its capital stock or membershipinterests.     (c) made or suffered any amendment to or termination of any material contract or commitment towhich it is or was a party or by which it or any of its properties are or were bound     (d) made or committed to make any capital expenditures in excess of $25,000 individually or$100,000 in the aggregate;     (e) paid any bonuses or committed to pay any bonuses;     (f) declared, made, paid or otherwise become committed to make or pay any dividend or otherdistribution in favor of any of the Sellers in respect of his, her or its capital stock ormembership interests;     (g) hired any new employees or made any offers of employment to any person;     (h) created, incurred, assumed or guaranteed any indebtedness for money borrowed or incurredany other liabilities exceeding $25,000 in the aggregate except for current liabilities incurredconsistent with past practice;     (i) suffered any damage, destruction or loss, whether or not covered by insurance, (i)materially and adversely affecting its business, results of operations, assets, liabilities orfinancial condition or (ii) of any item carried on its books of account at more than $10,000;     (j) made any material, long-term commitments with respect to either of the Companies or theSubsidiaries or its business other than in the ordinary course of business consistent with pastpractice;     (k) suffered any material adverse change in its business, results of operations, assets,liabilities or financial condition; or     (l) entered into any transaction other than in the ordinary course of its business consistentwith past practice.     4.9 Assets and Properties. (a) No Company or Subsidiary owns any real property.Schedule 4.9 hereto contains a list of each parcel of real property leased or subleased by aCompany or Subsidiary or in which a Company or Subsidiary has any real estate interest and eachlease agreement under which a Company or Subsidiary has any direct or indirect leasehold interestin any real property (collectively, “Real Property”). Schedule 4.9 hereto also contains a list ofall inventory and equipment owned by the Companies and Subsidiaries as of July 31, 2007. TheCompanies and the Subsidiaries are in possession
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of all of their Real Property. The Companies andthe Subsidiaries own outright, have good, valid and marketable titleto and are in possession of all of their owned tangible properties and tangible assets, whether real, personal or mixed,including without limitation all of the tangible properties and tangible assets reflected in theCompany Financials and those acquired since July 31, 2007 (except in each case for properties andassets sold or otherwise disposed of since July 31, 2007 in the ordinary course of itsbusiness consistent with past practice), free and clear of all mortgages, liens, pledges,security interests, charges, claims, restrictions and other encumbrances and defects of title ofany nature whatsoever, except liens for current taxes not yet due and payable and items disclosedon Schedule 4.9 hereto. Except as disclosed on Schedule 4.9 hereto, all leases, subleases,licenses, permits and authorizations of the Companies and the Subsidiaries in any manner related tothe Real Property, assets, properties or businesses of the Companies and Subsidiaries and all otherinstruments, documents and agreements pursuant to which a Company or Subsidiary has obtained theright to use any real or personal property are in good standing, valid and effective in accordancewith their respective terms, and there is not under any of such leases, subleases, licenses,permits, authorizations, instruments, documents or agreements any existing default by any Companyor Subsidiary (or to the Knowledge of the Management Sellers the other parties thereto) or eventwhich with the giving of notice or lapse of time, or both, would constitute a default by anyCompany or Subsidiary (or to the Knowledge of the Management Sellers the other parties thereto).     (b) Except as disclosed on Schedule 4.9 hereto, the tangible assets, Real Property, SourceCFIntellectual Property, Technology, agreements, contracts, commitments, licenses, permits and otherrights of the Companies and Subsidiaries are all of the assets, Real Property, SourceCFIntellectual Property, Technology, agreements, contracts, commitments, licenses, permits and otherrights necessary and sufficient: (i) for the operation of the businesses of the Companies andSubsidiaries in substantially the same manner as customarily conducted over the twelve-month periodpreceding the date hereof and (ii) for the Companies and Subsidiaries to operate such businesses ona stand-alone basis after the Closing consistent with past practices.     (c) All material facilities, buildings, vehicles, equipment, furniture and fixtures, leaseholdimprovements and other material items of tangible personal property owned, leased or used by theCompanies and Subsidiaries are in good operating condition and repair, subject to normal wear andtear and routine maintenance, are useable in the regular and ordinary course of the Companies’ andthe Subsidiaries’ business and conform to all applicable laws, ordinances, codes, rules andregulations relating thereto and to the construction, use, operation and maintenance thereof.     (d) To the Knowledge of the Management Sellers, the Real Property includes without limitationall machinery, equipment, appliances and fixtures necessary or useful for the proper supply ofheat, ventilation, air conditioning, electricity, water service, fire protection, gas and lightingservice to the buildings that are located on the Real Property.     (e) Since January 1, 2001, no notice has been received by any Management Seller, eitherCompany or either Subsidiary from the holder of any mortgage or from any insurance company that hasissued a policy with respect to the Real Property or by any Board of Fire Underwriters, or otherbody exercising similar functions, claiming any defects or deficiencies with respect to the RealProperty, or requesting performance of any demolition, repairs, alterations or other work to theReal Property.     (f) To the Knowledge of the Management Sellers:     (i) no public or private nuisance condition currently exists, or to the Knowledge ofany Management Seller, Company or Subsidiary has existed, on or with respect to the RealProperty;
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     (ii) the Real Property has adequate connections to sanitary sewer, storm sewer, water,electricity, gas, telephone and all other necessary utilities and services, and there are nocircumstances or conditions which exist which would result in termination of suchconnections;     (iii) there is no present or threatened ban, moratorium or other limitation of any kindon new connections or additional flows to any sewage treatment plant serving or to serve theReal Property or the conveyance facilities leading to any such sewage treatment plant; and     (iv) no work has been performed at, and no materials have been or will be furnished to,the Real Property which might give rise to any mechanics’, materialmen’s or other lienagainst the Real Property.     4.10 Tax Matters. (a) The Companies and the Subsidiaries have filed all Tax Returns(as defined in Section 4.10(k) hereof) required to be filed under applicable laws and regulationsfor periods ending on or before the Closing Date. All such Tax Returns were true, correct andcomplete in all material respects and were prepared in substantial compliance with all applicablelaws and regulations. All Taxes (as defined in Section 4.10(k) hereof) (other than Taxes not yetdue and payable) owed by the Companies and Subsidiaries or with regard to the activities of theCompanies and Subsidiaries, have been paid (whether or not shown on any Tax Return). No Company orSubsidiary is currently the beneficiary of any extension of time within which to file any TaxReturn. No claim has ever been made by an authority in a jurisdiction where a Company orSubsidiary does not file Tax Returns that a Company or Subsidiary, or its operations, is or may besubject to taxation by that jurisdiction. There are no mortgages, liens, pledges, securityinterests, charges, claims, restrictions and other encumbrances and defects of title of any naturewhatsoever for Taxes (other than Taxes not yet due and payable) upon any of the assets of theCompanies or the Subsidiaries.     (b) The Companies and the Subsidiaries have withheld and paid all Taxes (other than Taxes notyet due and payable) required to have been withheld and paid in connection with any amounts paid orowing to any employee, independent contractor, creditor, shareholder, or other third party.     (c) No Seller or director, manager or officer (or employee responsible for Tax matters) of anyCompany or Subsidiary expects any authority to assess any additional Taxes for any period for whichTax Returns have been filed. No foreign, federal, state, or local tax audits or administrative orjudicial Tax proceedings are pending, or to the knowledge of the Management Sellers, beingconducted with respect to any Company or Subsidiary, or the activity of any Companies or theSubsidiaries. No Company or Subsidiary have received from any foreign, federal, state, or localtaxing authority (including jurisdictions where a Company or Subsidiary has not filed Tax Returns)any (i) notice indicating an intent to open an audit or other review, (ii) request for informationrelated to Tax matters, or (iii) notice of deficiency or proposed adjustment for any amount of Taxproposed, asserted, or assessed by any taxing authority against a Company or Subsidiary.     (d) Schedule 4.10(d) hereto lists all federal, state, local, and foreign income Tax Returnsfiled with respect to the Companies or the Subsidiaries and their activities for taxable periodsended on or after December 31, 2001, indicates all Tax Returns for such taxable periods for whichthe Management Sellers have been notified that such taxable period have been audited and indicatesall Tax Returns for such taxable periods that currently are the subject of an audit. The Sellershave delivered to the Buyer true, correct and complete copies of all federal income Tax Returns,examination reports (to the extent delivered to the Companies) and statements of deficienciesassessed against or agreed to by a Company, a Subsidiary or the Sellers.
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     (e) No Seller, Company or Subsidiary has waived any statute of limitations in respect of Taxesor agreed to any extension of time with respect to a Tax assessment or deficiency with regard tothe operations of the Companies or the Subsidiaries.     (f) No Company or Subsidiary has made any payments, are obligated to make any payments or area party to any agreement that under certain circumstances could obligate it to make any paymentsthat will not be deductible under sections 280G, 404 or 162 of the Code or that will trigger theimposition ofpenalty taxes under section 409A of the Code. No Company or Subsidiary has been a UnitedStates real property holding corporation within the meaning of section 897(c)(2) of the Code duringthe applicable period specified in section 897(c)(1)(A)(ii) of the Code. Prior to the Closing, noCompany or Subsidiary is a party to any tax allocation or sharing agreement. Prior to the Closing,no Company or Subsidiary has been a member of an affiliated group filing a consolidated federalincome Tax Return; prior to the Closing, no Company or Subsidiary has liability for the Taxes ofany person under Treasury Regulations section 1.1502-6 (or any similar provision of state, local orforeign law), or as a transferee or successor, by contract or otherwise.     (g) The unpaid Taxes of the Companies and Subsidiaries (i) as of July 31, 2007 do not exceedthe reserve for Tax liability (rather than any reserve for deferred taxes established to reflecttiming differences between book and tax income), if any, set forth on the face of the CompanyFinancials (rather than in any notes thereto), and (ii) do not exceed that reserve as adjusted forthe passage of time through the Closing in accordance with the past custom and practice of theCompanies and Subsidiaries.     (h) Except for any Taxes which may result from the acquisition of the Companies andSubsidiaries and the integration of the Companies and Subsidiaries in any consolidated group of theBuyer or any tax election or other change in tax methodology, resulting on or after the Closing, noCompany or Subsidiary will be required to include any item of income in, or exclude any item ofdeduction from, taxable income for any taxable period (or portion thereof) ending after the ClosingDate as a result of any (i) change in method of accounting for a taxable period ending on or priorto the Closing Date under section 481(c) of the Code (or any corresponding or similar provision ofstate, local or foreign income Tax law); (ii) “closing agreement” as described in section 7121 ofthe Code (or any corresponding or similar provision of state, local or foreign income Tax law)executed on or prior to the Closing Date; (iii) deferred intercompany gain or any excess lossaccount described in Treasury Regulations section 1.1502 (or any corresponding or similar provisionof state, local or foreign income Tax law); (iv) installment sale or open transaction dispositionmade on or prior to the Closing Date; (v) prepaid amount received on or prior to the Closing Date;or (vi) position on a Tax Return that could give rise to a penalty under section 6662 of the Code.     (i) Schedule 4.10(i) sets forth the adjusted basis of each Company and each Subsidiary in itstangible assets as of December 31, 2006.     (j) No Company or Subsidiary has distributed stock of another entity nor has its stock beendistributed by another entity, in a transaction that was purported or intended to be governed inwhole or in part by sections 355 or 361 of the Code.     (k) For purposes of this Agreement, “Taxes” means any federal, state, local, or foreignincome, gross receipts, license, payroll, employment, excise, severance, stamp, occupation,premium, windfall profits, environmental (including taxes under Code §59A), customs duties, capitalstock, franchise, profits, withholding, social security (or similar), unemployment, disability,real property, personal property, sales, use, transfer, registration, value added, alternative oradd-on minimum, estimated or other tax of any kind whatsoever, including any interest, penalty, oraddition thereto, whether disputed or not and including any obligations to indemnify or otherwiseassume or succeed to the Tax liability of any other person; and “Tax Return” means any return,declaration, report, claim for refund or information
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return or statement relating to Taxes,including any schedule or attachment thereto, and including any amendment thereof. All citationsto provisions of the Code, or to the Treasury Regulations promulgated thereunder, include anyamendments thereto and any substitute or successor provisions thereto.     4.11 Legal Proceedings; Etc. Except as disclosed on Schedule 4.11 hereto:     (a) there are no disputes, claims, actions, suits or proceedings (including without limitationlocal zoning or building ordinance proceedings), arbitrations or investigations, eitheradministrative or judicial,pending or, to the knowledge of any Seller, Company or Subsidiary, threatened or contemplated,by or against or affecting either Company, either Subsidiary or its assets or businesses, before orby any court or governmental or regulatory official, body or authority, or before an arbitrator ofany kind;     (b) no Management Seller has any knowledge of any condition or state of facts or theoccurrence of any event that might reasonably form the basis of any dispute, claim, action, suit,proceeding or arbitration against or affecting a Company or Subsidiary; and     (c) no Company or Subsidiary is a party or otherwise subject to the provisions of anyjudgment, order, writ, injunction or decree of any court, arbitrator or governmental or regulatoryofficial, body or authority.     4.12 Compliance with Law. Each Company and Subsidiary has complied in all materialrespects with each, and is not in any material respect in violation of any, law, rule or regulationto which it or its business is, or its operations, assets or properties are, subject and has notfailed to obtain or adhere to the requirements of any license, permit or other authorizationnecessary to the ownership of its assets and properties or to the conduct of its business. Withoutlimiting the generality of the foregoing, (a) no Management Seller, Company, Subsidiary or anydirector, manager, officer, employee or agent of or, to the Knowledge of any Management Seller, anyconsultant to a Company or Subsidiary, or to the Knowledge of any Management Seller any otherperson authorized to act on behalf of a Company or Subsidiary, has unlawfully offered, paid oragreed to pay, directly or indirectly, any money or anything of value to or for the benefit of anyindividual who is or was an official or employee or candidate for office of the government of anycountry or any political subdivision, agency or instrumentality thereof or any employee or agent ofany customer or supplier of a Company or Subsidiary, and (b) each Company and each Subsidiary is incompliance with all applicable federal, state and local laws respecting employment and employmentpractices, including without limitation laws relating to employment discrimination and sexualharassment.     4.13 Validity of Contemplated Transactions; Etc. Except as set forth on Schedule 4.13hereto, the execution, delivery and performance of this Agreement by the Sellers will notcontravene or violate (a) any law, rule or regulation to which a Company or Subsidiary is subject,(b) any judgment, order, writ, injunction or decree of any court, arbitrator or governmental orregulatory official, body or authority which is applicable to a Company or Subsidiary or (c) thecharter documents of a Company or Subsidiary; nor will such execution, delivery or performanceviolate, be in conflict with or result in the breach (with or without the giving of notice or lapseof time, or both) of any term, condition or provision of, or require the consent of any other partyto, any contract, commitment, agreement, lease, license, permit, authorization, document or otherunderstanding, oral or written, to or by which a Company or Subsidiary is a party or otherwisebound or affected or by which any of the assets or properties of a Company or Subsidiary may bebound or affected or give any party with rights thereunder the right to terminate, modify,accelerate, renegotiate or otherwise change any of the existing rights or obligations of a Companyor Subsidiary thereunder.     4.14 Insurance. (a) Schedule 4.14 hereto contains a true and correct summarydescription of the insurance coverage (including any deductible amounts), and the ManagementSellers have delivered
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to the Buyer true, correct and complete copies of each insurance policy, ineffect now, or at any time between January 1, 2001 and the date of this Agreement, with respect toeach of the Companies and Subsidiaries and its business and properties, together with a descriptionof each insurance claim in excess of $10,000 made by a Company or Subsidiary during the past fiveyears. There has been no default under any such coverage, nor has there been any failure to giveany notice or present any claim under any such coverage in a timely fashion or in the manner ordetail required by the policy or binder. There are no outstanding unpaid premiums other thanpremiums accrued but not yet payable in the ordinary course of business of the Companies andSubsidiaries, and there are no provisions in any insurance coverage of a Company or Subsidiary forretroactive or retrospective premium adjustments. Except as set forth onSchedule 4.14 hereto, no notice of cancellation or nonrenewal with respect to, or disallowanceof any claim under, any such coverage has been received by a Company or Subsidiary. Except as setforth on Schedule 4.14(i) hereto, all general liability and products liability insurance policiesmaintained by the Companies and Subsidiaries are and historically have been claims-made policies,and there have been no gaps in the maintenance of such coverage. There are no outstandingperformance bonds or other surety arrangements covering or issued for the benefit of any Company orSubsidiary or their businesses or as to which a Company or Subsidiary has or may incur anyliability.     (b) Except as set forth on Schedule 4.14(b) hereto, no Company or Subsidiary has taken anyaction (or failed to take any action) that would result in the rescission or cancellation of, ordenial of any claim under, any insurance policies owned or held by any Company or Subsidiary,including but not limited to, the failure of any Company or Subsidiary to timely report any claimor disclose knowledge of occurrences or circumstances that could ultimately lead to a claim to thecarrier of such policy(ies).     (c) Except as set forth on Schedule 4.14(c) hereto, all insurance applications, renewals,submissions, responses or related statements of any kind by or on behalf of any Company orSubsidiary have been true, accurate and complete and have disclosed, where required to be disclosedunder the applicable policy or by law, any claim, occurrences or circumstances known by any Companyor Subsidiary.     4.15 Contracts and Commitments. Except as listed and described on Schedule 4.15hereto or, in the case of benefit plans and arrangements, Schedule 4.18 hereto, no Company orSubsidiary is a party to or otherwise bound or affected by any written or oral:     (a) agreement, contract or commitment with any present or former shareholder, director,officer, employee or consultant or for the employment of any person, including without limitationany consultant;     (b) agreement, contract, commitment or arrangement with any labor union or otherrepresentative of employees;     (c) agreement, contract or commitment for the purchase of, or payment for, supplies orproducts, or for the performance of services by a third party, involving in any one case $10,000 ormore;     (d) agreement, contract or commitment to sell or supply products or to perform services,involving in any one case $25,000 or more;     (e) agreement, contract or commitment (i) providing for payments based upon the revenues orprofits of a Company, a Subsidiary or any other entity or (ii) continuing over a period of morethan six months from the date hereof or exceeding $25,000 in value;     (f) representative or sales agency agreement, contract or commitment;     (g) lease under which it is either lessor or lessee;
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     (h) note, debenture, bond, conditional sale agreement, equipment trust agreement, letter ofcredit agreement, loan agreement or other agreement or contract, commitment or arrangement for theborrowing or lending of money (including without limitation loans to or from officers, directors,any Seller, any investor in any Seller or any member of any of their immediate families),agreement, contract, commitment or arrangement for a line of credit or guarantee, pledge orundertaking relating in any manner whatsoever of or to the indebtedness of any other person;     (i) agreement, contract or commitment with any governmental agency, commission, department orother governmental body or for any political or charitable contribution;     (j) agreement, contract or commitment for any capital expenditure in excess of $25,000;     (k) agreement, contract or commitment limiting or restraining it from engaging or competing inany lines of business with any person, nor is any manager, officer or employee of a Company orSubsidiary subject to any such agreement;     (l) license, franchise, distributorship or other similar agreement, contract or commitment,including without limitation those which relate in whole or in part to any patent, trademark, tradename, service mark, or copyright or application(s) or registration(s) for any of the foregoing, orto any ideas, technical assistance or other know-how or any other intellectual property of or usedby a Company or Subsidiary; or     (m) material agreement, contract or commitment not made in the ordinary course of itsbusiness.Except as may be disclosed on Schedule 4.15 hereto, each of the agreements, contracts, commitments,arrangements, leases and other instruments, documents and undertakings listed on Schedule 4.15hereto, or not required to be listed thereon because of the term or amount involved or otherwise,is valid and enforceable in accordance with its terms, and the applicable Company or Subsidiarywhich is a party thereto is, and to the Knowledge of the Management Sellers, the other partiesthereto are, in compliance with the provisions thereof, neither the applicable Company orSubsidiary which is a party thereto is, nor to the Knowledge of the Management Sellers, the otherparties thereto are, in default in the performance, observance or fulfillment of any materialobligation, covenant or condition contained therein, and no event has occurred which with orwithout the giving of notice or lapse of time, or both, would constitute a default by theapplicable Company or Subsidiary, or and to the Knowledge of the Management Sellers the otherparties thereto, thereunder; furthermore, except as may be disclosed on Schedule 4.15 hereto, nosuch agreement, contract, commitment, arrangement, lease or other instrument, document orundertaking, in the reasonable opinion of a Company, a Subsidiary or any Management Seller,contains any contractual requirement with which there is a reasonable likelihood a Company, aSubsidiary or any other party thereto will be unable or unwilling to comply. There are nooutstanding or threatened disputes or disagreements with respect to any such agreement, contract,commitment, arrangement, lease or other instrument. Except as set forth on Schedule 4.15,there are no negotiations of or attempts to renegotiate, outstanding rights to any amounts paid orpayable by or to a Company or a Subsidiary under current or contemplated agreements, contracts,commitments, arrangements, leases and other instruments disclosed on Schedule 4.15.     4.16 Additional Information. Schedule 4.16 hereto contains, to the extent notdescribed in some other Schedule hereto, accurate lists and summary descriptions of the following:     (a) all vehicles, equipment, furniture and fixtures, leasehold improvements and other materialitems of personal property owned or leased by a Company or Subsidiary, specifying which are ownedand which are leased and, with respect to leased property, specifying the identity of the lessor,the rental rate and the unexpired term of the lease, and also, with respect to any vehicles,specifying the VIN;
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     (b) all real property and interests in real property owned, leased or otherwise held by aCompany or Subsidiary, specifying which are owned, leased or otherwise held and, with respect toleased property, specifying the identity of the lessor, the rental rate and the unexpired term ofthe lease;     (c) the names of all present directors and managers of the Companies and Subsidiaries;     (d) the names and current annual salaries or hourly rates of all present officers andemployees of the Companies and Subsidiaries together with a statement of the full amount of anybonuses, profit sharing or other remuneration paid to each such person and to any director ormanager during the current or the last fiscal year or payable to each such person in the future andthe basis therefor;     (e) the names and addresses of each bank and other financial institution or fund in which aCompany or Subsidiary maintains an account (whether checking, savings, money market or otherwise),lock box or safe deposit box, and the account numbers and names of persons having signing authorityor other access with respect thereto;     (f) a listing and description of all cash equivalent items held by the Companies or theSubsidiaries;     (g) all licenses, permits and governmental authorizations issued to or otherwise held by aCompany or Subsidiary;     (h) the names of all persons authorized to borrow money or incur or guarantee indebtedness onbehalf of a Company or Subsidiary;     (i) the names of all persons holding powers of attorney from a Company or Subsidiary and asummary statement of the terms thereof; and     (j) a listing of any current liabilities of a Company or Subsidiary not incurred in theordinary course of business consistent with the past practice.     4.17 Labor Matters. There are no labor controversies, grievances, troubles ordisputes, in any manner or form whatsoever, pending or threatened against a Company or Subsidiary,and no Management Seller, Company or Subsidiary has any knowledge of any facts that would be likelyto give rise to such a controversy, trouble, grievance or dispute. There is no union representingthe interests of any employees of a Company or Subsidiary, there are no employees of a Company orSubsidiary known or believed by any Management Seller, Company, or Subsidiary to be currentlyseeking union representation, there is no union known or believed by any Seller, Company orSubsidiary to be currently seeking to represent such employees and, within the past five years, noCompany or Subsidiary has committed any unfair labor practice, as defined in the National LaborRelations Act, as amended. The relations of each Company and each Subsidiary with its employeesare good, and no Seller, Company or Subsidiary has knowledge of any facts that would be likely toaffect adversely such relations.     4.18 Benefit Plans and Arrangements. (a) Schedule 4.18 hereto lists all employeebenefit plans (within the meaning of section 3(3) of the federal Employee Retirement IncomeSecurity Act of 1974, as amended (“ERISA”)), and other funds, policies, arrangements, practices,customs and understandings or programs relating to one or more employees of a Company or Subsidiaryor a Benefits Affiliate (as defined in this Section 4.18), whether or not they are or are intendedto be (i) covered or qualified under the Code, ERISA or any other applicable law, (ii) written ororal, (iii) funded or unfunded or (iv) generally available to any or all employees (or formeremployees) of a Company or Subsidiary and/or one or more of its Benefits Affiliates (and/or theirbeneficiaries or dependents), which were or are established, contributed to or maintained by aCompany or Subsidiary and/or one or more of its Benefits
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Affiliates, including without limitationwelfare, fringe benefit, pension, profit sharing, retirement, stock purchase, stock option, stockbonus, disability or wage continuation, sick pay or vacation pay, supplemental unemployment,severance or deferred compensation plans (the “Plans”). For purposes of this Section 4.18 only,the term “Benefits Affiliate” shall include (i) any corporation which is a member of a controlledgroup of corporations (as defined in section 414(b) of the Code) which includes a Company orSubsidiary, (ii) any trade or business (whether or not incorporated) which is under common control(as defined in section 414(c) of Code) with a Company or Subsidiary, (iii) any organization(whether or not incorporated) which is a member of an affiliated service group (as defined insection 414(m) of the Code) which includes a Company or Subsidiary and (iv) any other entityrequired to be aggregated with a Company or Subsidiary pursuant to the regulations issued undersection 414(o) of the Code.     (b) The Sellers have delivered or made available to the Buyer true, correct and completecopies of (i) all documents governing the Plans, and all amendments thereto, (ii) all reports filedwithin the past three (3) years by a Company or Subsidiary, a Benefits Affiliate or a Plan officialwith the United States Department of Labor, the Internal Revenue Service (the “IRS”) or any otherfederal or state regulatory agency with respect to a Plan, (iii) all summary plan descriptions,notices and other reporting and disclosure material furnished to participants in any of the Plans,(iv) all actuarial, accounting and financial reports, if any, prepared with respect to any of thePlans and (v) all currently effective IRS ruling or determination letters on any of the Plans.     (c) The Plans and provisions thereof, any trusts created thereby and the operation of thePlans are (and at all times have been) in all material respects in compliance with and conform (andat all times have been in all material respects in compliance with and conformed) to the applicableprovisions of the Code, ERISA and all other applicable statutes and governmental rules andregulations.     (d) The Plans marked on Schedule 4.18(d) hereto as “Qualified Plans” are the only Plans thatare intended to meet the requirements of section 401(a) of the Code (a “Qualified Plan”). TheCompany and its Benefits Affiliates have never maintained or contributed to any other QualifiedPlan. Each of the Qualified Plans has been determined by the IRS to be qualified under section401(a) of the Code and exempt from tax under section 501(a) of the Code, and each suchdetermination remains in effect and has not been revoked. Nothing has occurred with respect to thedesign or operation of any Qualified Plan that could cause the loss of such qualification orexemption or the imposition of any liability, lien, penalty or tax under ERISA or the Code, and theQualified Plans have been timely amended to comply with current law and regulations.     (e) With respect to each Plan, there has occurred no non-exempt “prohibited transaction”(within the meaning of section 4975 of the Code or section 406 of ERISA) or breach of any fiduciaryduty described in section 404 of ERISA that could result in any liability, direct or indirect, fora Company, Subsidiary or Benefits Affiliate or any shareholder, officer, director or employee of aCompany or Subsidiary or a Benefits Affiliate. The Company and its Benefits Affiliates have paidall amounts that a Company or Subsidiary and its Benefits Affiliates are required to pay ascontributions to the Plans as of the last day of the most recent fiscal year of each of the Plans;all benefits accrued under any funded or unfunded Plan have been paid, accrued or otherwiseadequately reserved, to the knowledge of the Management Sellers, in conformity with GAAP, exceptfor such differences from GAAP as are described on Schedule 4.4(a) hereto; and all monies withheldfrom employee paychecks with respect to Plans have been transferred to the appropriate Plan in atimely manner as required by applicable law. No Plan provides for the investment in stock of aCompany or Subsidiary or a Benefits Affiliate.     (f) The Company and its Benefits Affiliates have not incurred any liability for any excise,income or other taxes or penalties with respect to any Plan, and no event has occurred and nocircumstance exists or has existed that could give rise to any such liability. There are nopending or
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threatened claims by or on behalf of any Plans, or by or on behalf of any participantsin or beneficiaries of any Plans or other persons, alleging any breach of fiduciary duty on thepart of a Company or Subsidiary or any Benefits Affiliate or any of their officers, directors oremployees under ERISA or any applicable law, or claiming benefit payments other than those made inthe ordinary operation of such Plans, nor is there any basis for any such claim. No Plan ispresently under audit or examination (nor has notice been received of a potential audit orexamination) by the IRS, the Department of Labor or any other governmental entity, and no mattersare pending with respect to any Plan under any IRS program.     (g) No Plan contains any provision or is subject to any law that would prohibit thetransactions contemplated by this Agreement or that would give rise to any vesting of benefits,severance, termination, or other payments or liabilities as a result of the transactionscontemplated by this Agreement, and no payments or benefits under any Plan or other agreement of aCompany, Subsidiary or Benefits Affiliate will be considered “excess parachute payments” undersection 280G of the Code. No Plan triggers theimposition of penalty taxes under section 409A of the Code. Each Plan that is subject tosection 409A of the Code has been maintained and operated in good faith based on IRS guidance withrespect to section 409A of the Code and has been amended to comply with section 409A of the Code.No Company, Subsidiary or Benefits Affiliate has declared or paid any bonus compensation incontemplation of the transactions contemplated by this Agreement.     (h) No Company, Subsidiary or Benefits Affiliate has made any plan or commitment, whether ornot legally binding, to create any additional Plan or to modify or change any existing Plan. Nostatement, either written or oral, has been made by any Company, Subsidiary or Benefits Affiliatesto any person with regard to any Plan that was not in accordance with the Plan and that could havean adverse economic consequence to a Company, Subsidiary or Benefits Affiliates. All Plans may beamended or terminated without penalty by a Company, Subsidiary or Benefits Affiliate at any time onor after the Closing.     (i) All persons classified by a Company, Subsidiary or Benefits Affiliate as independentcontractors satisfy and have at all times satisfied the requirements of applicable law to be soclassified; a Company or Subsidiary and its Benefits Affiliates have fully and accurately reportedtheir compensation on IRS Forms 1099 when required to do so; and no Company, Subsidiary or BenefitsAffiliates have any obligations to provide benefits with respect to such persons under Plans orotherwise. No individuals are currently providing, or have ever provided, services to a Company,Subsidiary or Benefits Affiliate pursuant to a leasing agreement or similar type of arrangement,nor has any Company, Subsidiary or Benefits Affiliate entered into any arrangement whereby suchservices will be provided.     (j) No Plan is, and no Company, Subsidiary or Benefits Affiliate has any liability, actual orcontingent, with respect to any Plan that is (i) a defined benefit pension plan subject to Title IVof ERISA, (ii) a multiemployer pension plan, as that term is defined in sections 4001(a)(3) and3(37) of ERISA, (iii) a plan providing life, health or medical benefits to retired or terminatedemployees (other than as required by sections 601-608 of ERISA) or (iv) a “multiple employerwelfare arrangement” as defined in section 3(40) of ERISA.     (k) With respect to any Plan that is an employee welfare benefit plan (within the meaning ofsection 3(1) of ERISA) (a “Welfare Plan”), (i) each Welfare Plan for which contributions areclaimed as deductions under any provision of the Code is in compliance with all applicablerequirements pertaining to such deductions and (ii) any Plan that is a group health plan (withinthe meaning of section 5000(b)(1) of the Code) complies, and in each and every case has complied,with all of the requirements of ERISA and section 4980B of the Code.     (l) Except as otherwise provided in this Section 4.18, no Company or Subsidiary provides ormaintains, or is required under applicable law to provide or maintain, for its employees, itself orany other person, any pension, retirement, profit-sharing or other plan or policy for the benefitof employees, itself
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or any other person which is required to comply with, and no Company orSubsidiary has liabilities with respect to itself or any other person under ERISA.     4.19 Environmental Matters. In addition to the representations and warranties inSection 4.12 hereof and not in limitation thereof, and except as disclosed on Schedule 4.19 hereto,(a) no releases by any of the Companies and, to the Knowledge of the Management Seller, by anyother persons of Hazardous Materials (as defined in this Section 4.19) in violation ofEnvironmental Laws have occurred at or from any property which is now owned, operated, leased orotherwise used by a Company or Subsidiary or which was owned, operated, leased or otherwise used atany prior time by a Company or Subsidiary or any of their predecessors, (b) there are no past,pending or threatened Environmental Claims (as defined in this Section 4.19) against a Company orSubsidiary, (c) there are no underground storage tanks owned by a Company or Subsidiary, or, to theKnowledge of the Management Sellers, located at any facility now or at any prior time owned,operated, leased or otherwise used by a Company or Subsidiary or any of their predecessors, (d) tothe Knowledge of the Management Sellers, there are nofacts, circumstances, or conditions that would reasonably be expected to restrict, under anyEnvironmental Law or Environmental Permit (each as defined in this Section 4.19) in effect prior toor at the Closing Date, the ownership, occupancy, use or transferability of any property owned,operated, leased or otherwise used by a Company or Subsidiary, or to give rise to any legalliability of a Company or Subsidiary under the Environmental Laws pertaining to any property now orat any prior time owned, operated, leased or otherwise used by a Company or Subsidiary or any oftheir predecessors, (e) no Management Seller, Company or Subsidiary has received a request underany of the Environmental Laws for information relating to any property now or at any prior timeowned, operated, leased or otherwise used by a Company or Subsidiary or any of their predecessors,(f) to the Knowledge of the Management Sellers, there are no unsatisfied financial assurance orclosure requirements under the Environmental Laws pertaining to any property now or at any timeowned, operated, leased or otherwise used by a Company or Subsidiary or any of their predecessors,(g) to the Knowledge of the Management Sellers, none of the properties owned, operated, leased orotherwise used by a Company or Subsidiary or any of their predecessors, are now or have in the pastbeen listed on the National Priorities List of sites under the Comprehensive EnvironmentalResponse, Compensation and Liability Act, as amended (42 U.S.C. §9601 et seq.) (“CERCLA”), theCERCLA Information System, or any comparable state or local environmental database, (h) to theKnowledge of the Management Sellers, there is no asbestos-containing material, lead-based paint orequipment containing polychlorinated biphenyls located at any of the facilities or properties nowor at any prior time owned, operated, leased or otherwise used by a Company or Subsidiary or any oftheir predecessors, (i) no Management Seller, Company or Subsidiary has provided information to anygovernmental authority of any actual, threatened or suspected releases of Hazardous Materials orany violation of an Environmental Permit or other requirement of Environmental Laws and (j) to theKnowledge of the Management Sellers, there is no liability with respect to the cleanup orinvestigation at any facility or property at which a Company or Subsidiary or any of theirpredecessors disposed or arranged for the disposal or treatment (with a transporter or otherwise)of Hazardous Materials. As used in this Agreement:     (i) “Environmental Claims” means any and all administrative or judicial actions, suits,orders, claims, liens, notices, investigations, violations or proceedings related to anyapplicable Environmental Law or any Environmental Permit brought, issued or asserted by agovernmental authority or third party for compliance, damages, penalties, removal, response,remedial or other action pursuant to any applicable Environmental Law or for personal injuryor property damage resulting from the release of a Hazardous Material at, to or from anyfacility or property of a Company or Subsidiary or any of their predecessors, or anyfacility or property at which a Company or Subsidiary or any of their predecessors disposedor arranged for the disposal or treatment (with a transporter or otherwise) of HazardousMaterials, including without limitation employees of a Company or Subsidiary seeking damagesfor exposure to Hazardous Materials;
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     (ii) “Environmental Laws” means any and all federal, state and local laws, statutes,ordinances, codes, rules and regulations related to protection of the environment, naturalresources, safety or health or the handling, use, recycle, generation, treatment, storage,transportation or disposal of Hazardous Materials, and any common law cause of actionrelating to the environment, natural resources, safety, health or the management of orexposure to Hazardous Materials;     (iii) “Environmental Permits” means any and all permits, licenses, approvals,authorizations and consents required by any governmental authority under any applicableEnvironmental Laws and includes any and all orders, consent orders or binding agreementsissued or entered into by a governmental authority under any applicable Environmental Law;and     (iv) “Hazardous Materials” means any and all hazardous, toxic or radioactivesubstances, materials and wastes which are regulated by any state or local governmentalauthorityor the United States of America, including without limitation any material or substancethat is: (A) defined as a “hazardous substance”, “regulated substance” or “solid waste”under applicable state law, (B) petroleum, petroleum products or wastes, (C) asbestos, (D)designated as a “hazardous substance” pursuant to section 311 of the Federal Water PollutionControl Act, as amended, 33 U.S.C. §1251 etseq. (33 U.S.C. § 1321), (E)defined as a “hazardous waste” pursuant to section 1004 of the Resource Conservation andRecovery Act, as amended, 42 U.S.C. §6901 etseq. (42 U.S.C. §6903), (F)defined as a “hazardous substance” pursuant to section 101 of the CERCLA, (G) defined as a“regulated substance” pursuant to section 9001 of the Resource Conservation and RecoveryAct, as amended, 42 U.S.C. §6901 etseq. (42 U.S.C. §6991) or (H) otherwiseregulated under the Toxic Substances Control Act, as amended, 15 U.S.C. §2601 etseq., the Clean Air Act, as amended, 42 U.S.C. §7401 etseq., theHazardous Materials Transportation Act, as amended, 49 U.S.C. §1801 etseq.,the Federal Insecticide, Fungicide and Rodenticide Act, as amended, 7 U.S.C. §136 etseq., the Emergency Planning and Community Right-to-Know Act, as amended, 42 U.S.C.§11001 etseq., the Safe Drinking Water Act, as amended, 42 U.S.C. §300(f)etseq., or the Occupational Safety and Health Act, as amended, 29 U.S.C.§651 etseq.     4.20 Intellectual Property Matters (a) Schedule 4.20(a) hereto sets forth a completelist of all SourceCF Intellectual Property Rights which are subject of registrations orapplications for registration (as hereinafter defined in this Section 4.20(a)) and specifies thejurisdictions in which such SourceCF Intellectual Property Rights have been issued or registered orin which an application for such issuance and registration has been filed, including the respectiveregistration or application numbers and the names of all registered owners. Schedule 4.20(a)hereto also lists any proceedings or actions before any court, tribunal (including the PTO orequivalent authority anywhere in the world) related to any SourceCF Intellectual Property Right.As used in this Agreement:     (i) “Intellectual Property” means any or all of the following and all rights therein,arising out thereof, or associated therewith: (A) all US and foreign patents and utilitymodels and applications therefor and all reissues, divisions, re-examinations, renewals,extensions, provisionals, continuations and continuations-in-part thereof, foreigncounterparts, improvements thereto, and equivalent or similar rights anywhere in the worldin inventions and discoveries, including invention disclosures (collectively, “Patents”),(B) all proprietary information, including trade secrets, know-how, methodologies,processes, customer lists, supplier lists, products plans, service plans and rights inresearch and development (collectively, “Know-How”), (C) all copyrights, copyrightregistrations and applications therefor and all other rights corresponding theretothroughout the world, and any renewals, modifications and extensions thereof (collectively,“Copyrights”), (D) all industrial designs and any registrations and applications thereforthroughout the world, (E) all rights in World Wide Web addresses and
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domain names andapplications and registrations therefor (collectively, “World Wide Web Property”), (F) alltrade names, logos, common law trademarks and service marks, trademark and service markregistrations and applications therefor, brand names, trade dress, and all goodwillassociated therewith throughout the world and any renewals, modifications and extensionsthereof (collectively, “Trademarks”), (G) any Technology (not included in one of theforegoing (A)-(F)) that is the subject of an application for registration, certificate,filing, registration or other document issued by, filed with, or recorded by, any state,government or other public legal authority, and (H) any corresponding or equivalent rightsto any of the foregoing anywhere in the world.     (ii) “SourceCF Intellectual Property Rights” means all Intellectual Property in and towhich the Company or a Subsidiary owns all right, title and interest.     (iii) “SourceCF Licensed Intellectual Property Rights” means all Intellectual Propertylicensed or sublicensed by the Company or a Subsidiary from a third party.     (iv) “Technology” means any or all of the following: (A) works of authorship includingcomputer programs, source code and executable code, whether embodied in software, firmwareor otherwise, documentation, designs, files, net lists, records, data and mask works, (B)inventions (whether or not patentable), improvements, tools, methods, processes andtechnology, (C) technical data, tools, methods and processes, (D) databases, datacompilations, data collections and technical data, (E) Know How, and (F) all instantiationsof the foregoing in any form and embodied in any media.     (b) Except as set forth in Schedule 4.20(b) hereto, each SourceCF Intellectual Property Rightlisted in Schedule 4.20(a) is in compliance with all requirements required to maintain theforegoing in full force and effect (including payment of all filing, examination, annuity andmaintenance fees) and all necessary documents and certificates in connection with such SourceCFIntellectual Property Rights have been filed with the relevant patent, copyright, trademark orother authorities in the US or foreign jurisdictions, as the case may be, for the purposes ofmaintaining such SourceCF Intellectual Property Rights in the jurisdictions set forth in Schedule4.20(a) hereto. Except as set forth on Schedule 4.20(b) hereto, there are no actions that must betaken by a Company or Subsidiary within 60 days after the Closing Date, including the payment ofany registration, maintenance or renewal fees or the filing of any responses to PTO office actions,documents, applications or certificates for the purposes of obtaining, maintaining, perfecting orpreserving or renewing any SourceCF Intellectual Property Rights listed in Schedule 4.20(a) in thejurisdictions set forth in Schedule 4.20(a) hereto.     (i) In each case in which a Company or Subsidiary has acquired all right, title andinterest to any Technology or Intellectual Property from any person, such Company orSubsidiary (as the case may be) has obtained a valid and enforceable assignment sufficientto irrevocably transfer all rights in such Technology or Intellectual Property to itsufficient to allow such Company or Subsidiary to file for and, as applicable, maintain, therelated SourceCF Intellectual Property Rights. To the extent necessary under applicablelaws and regulations, the Companies and Subsidiaries have recorded each such assignment to aCompany or Subsidiary with the relevant governmental or regulatory body or authority,including the PTO, the US Copyright Office, or their respective equivalents in any relevantforeign jurisdiction, as the case may be.     (ii) Except as set forth on Schedule 4.20(b) hereto, no Company or Subsidiary hasclaimed a particular status, including “small entity status” as defined under section 3 ofthe Small Business Act, in an application for any SourceCF Intellectual Property Rights,which claim of status was at the time made, or which has since become, inaccurate or false.
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     (c) Except as set forth in Schedule 4.20(c) hereto, to the knowledge of the ManagementSellers, the Companies and Subsidiaries, there is no information, material, fact or circumstance,including any information or fact that would constitute prior art, that would render any SourceCFIntellectual Property Rights or SourceCF Licensed Intellectual Property Rights listed in Schedule4.20(a) invalid or unenforceable, or would adversely affect any pending application for anySourceCF Intellectual Property Right and no Company or Subsidiary has misrepresented, or failed todisclose or has any knowledge of any material misrepresentation or failure to disclose, any fact orcircumstance in any application for any SourceCF Intellectual Property Right that would constitutefraud or a misrepresentation (as defined by the governing law of the United Stated Court of Appealsfor the Federal Circuit as of the Effective Date of this Agreement) with respect to suchapplication or that would otherwise affect the validity or enforceability of any SourceCFIntellectual Property Right.     (d) Except as set forth in Schedule 4.20(d) hereto, each item of the SourceCF IntellectualProperty Rights is free and clear of all mortgages, liens, pledges, security interests, charges,claims, restrictions and other encumbrances and defects of title of any nature whatsoever.     (i) Except as set forth in Schedule 4.20(d) hereto, the Companies and Subsidiaries arethe exclusive owners of all SourceCF Intellectual Property Rights listed in Schedule 4.20(a)hereto and have the right to the use the SourceCF Intellectual Property Rights in connectionwith the business of the Companies and Subsidiaries as currently conducted and as currentlycontemplated to be conducted by any Company or Subsidiary. Furthermore, no Company orSubsidiary is contractually obligated to pay any compensation to any third party in respectof the SourceCF Intellectual Property Rights.     (ii) Schedule 4.20(d) hereto sets forth a complete list of all agreements, contractsand commitments (other than assignments of copyright by employees, consultants andindividual contributors of the Companies and Subsidiaries) pursuant to which a third partyhas licensed or transferred any Intellectual Property that is included in the SourceCFLicensed Intellectual Property Rights to any Company or Subsidiary and includes the datethereof and identity of all parties thereto.     (iii) Except as set forth in Schedule 4.20(d) hereto, no person who has licensed anyTechnology or Intellectual Property rights to any Company or Subsidiary (other than“off-the-shelf” software) has ownership rights or license rights to improvements made bysuch Company or Subsidiary in such Technology or Intellectual Property.     (iv) Except as set forth in Schedule 4.20(d) hereto, the Companies and Subsidiarieshave sufficient rights (and no Company or Subsidiary is contractually obligated to pay anycompensation, other than licensing fees, milestones, royalties and similar obligations setforth in the applicable license agreement and referenced in Schedule 4.20(d) hereto, to anythird party in respect thereof, to use the SourceCF Licensed Intellectual Property inconnection with the business of the Companies and Subsidiaries as currently conducted and ascurrently contemplated to be conducted by any Company or Subsidiary.     (v) Except as set forth in Schedule 4.20(d) hereto, none of the Technology or servicesof any Company or Subsidiary include or incorporate any software (other than off-the-shelfor click-through software applications or non-customized software applications programshaving an acquisition price of less than $10,000) whose ownership has been retained by athird party.     (vi) Except as set forth in Schedule 4.20(d) hereto, all Technology used in ornecessary to the conduct of the business of the Companies and Subsidiaries as currently
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conducted and as currently contemplated to be conducted by any Company or Subsidiarywas written or created solely by either (i) employees of a Company or Subsidiary actingwithin the scope of their employment or (ii) third parties who have validly and irrevocablyassigned all of their rights, including Intellectual Property rights therein, to a Companyor Subsidiary, and no third party owns or has any rights to any of the SourceCF IntellectualProperty Rights listed on Schedule 4.20(a).     (vii) Neither the Company nor the Subsidiaries have granted rights that conflict withthe rights or licenses included in the SourceCF Intellectual Property Rights or the SourceCFLicensed Intellectual Property Rights.     (viii) There are no existing agreements, options, commitments, or rights with, of, orto any person to acquire or obtain any rights with respect to SourceCF Intellectual PropertyRight or SourceCF Licensed Intellectual Property Right.     (e) Neither the Company nor the Subsidiaries have entered into any agreement to indemnify anyperson against any charge of infringement of any intellectual property that would impact theability of a Company or Subsidiary to enforce the SourceCF Intellectual Property Right or, to theextent enforceable by the Company or its Subsidiaries, the SourceCF Licensed Intellectual PropertyRight.     (f) All employees and consultants of the Companies and Subsidiaries have entered into validand binding written agreements with the Companies and Subsidiaries sufficient to vest title in theCompanies and Subsidiaries of all Intellectual Property created by such employee or consultantwhile employed or engaged by a Company or Subsidiaries. Schedule 4.20(f) hereto lists eachemployee and consultant of a Company or Subsidiary who has developed or contributed to thedevelopment of any SourceCF Intellectual Property Rights or has developed or contributedIntellectual Property covered by the SourceCF Licensed Intellectual Property Rights.     (g) Except as set forth in Schedule 4.20(g) hereto, the Companies and Subsidiaries have takencommercially reasonable steps to protect the rights of the Companies and Subsidiaries in (i)SourceCF Intellectual Property Rights and the SourceCF Licensed Intellectual Property Rights, (ii)the confidential information and Know How that they wish to protect or any Know How or confidentialinformation of third parties provided to any Company or Subsidiary and (iii) the source code of allproprietary software of the Companies and Subsidiaries and related system-level documentation, and,without limiting the foregoing, each Company and Subsidiary has and enforces a policy requiringeach employee and contractor to execute a proprietary information/nondisclosure agreementsubstantially in the form(s) provided to the Buyer and all employees and contractors of theCompanies and Subsidiaries have executed such an agreement.     (h) Except as set forth in Schedule 4.20(h) hereto, no Management Seller, Company orSubsidiary has transferred ownership of, or granted any exclusive license of or right to use, orauthorized the retention of any rights to, or joint ownership of, any Technology or IntellectualProperty right that is or was included in the SourceCF Intellectual Property Rights or the SourceCFLicensed Intellectual Property Rights, to any third party.     (i) To the knowledge of the Management Sellers, the Company and Subsidiaries, withoutindependent investigation, the SourceCF Intellectual Property Rights and the SourceCF LicensedIntellectual Property Rights constitutes all the Technology and Intellectual Property rightsreasonably necessary to conduct the business of the Companies and Subsidiaries as currentlyconducted and as currently contemplated to be conducted by any Company or Subsidiary.
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     (j) To the knowledge of the Management Sellers, the Companies and Subsidiaries, there havebeen no acts or omissions by the officers, managers, directors, employees, contractors andlicensees of aCompany or Subsidiary the result of which would be to materially compromise the rights of anyCompany or Subsidiary to enforce legal protection for SourceCF Intellectual Property Rights or theSourceCF Licensed Intellectual Property Rights.     (k) Except as set forth in Schedule 4.20(k) hereto, the execution and delivery of thisAgreement by Management Sellers, and the consummation of the transactions contemplated hereby, willnot cause any Company or Subsidiary to be in default under any license, sublicense or otheragreement, contract or commitment listed in, or which should be listed in, Schedule 4.20(d) hereto,nor cause the forfeiture or termination or give rise to a right of forfeiture or termination of anySourceCF Intellectual Property Right or SourceCF Licensed Intellectual Property Right or thatrequires the execution and filing with an appropriate governmental agency (including any affidavitsor renewals) or the consent of a third party in connection with the consummation of thetransactions contemplated by this Agreement.     (l) The Companies and the Subsidiaries have not received notice that they are in default of,and to the knowledge of the Management Sellers, Companies, or Subsidiaries, are not in default ofand have not failed to perform under, any of the foregoing licenses, sublicenses or otheragreements, contracts and commitments, and to the knowledge of the Management Sellers, Companies,or Subsidiaries, no other party to any such license, sublicense or other agreement, contract orcommitment is in default thereof or has failed to perform a material obligation thereunder and nothird party has raised any claim, dispute or controversy to the attention of the Companies orSubsidiaries with respect to any of the foregoing licenses, agreements, contracts or commitments.     (m) With respect to the SourceCF Licensed Intellectual Property Rights, the Companies andSubsidiaries are in compliance with all license terms and conditions, and no Company, Subsidiary orManagement Seller has received written notice or warning or, to the knowledge of the ManagementSellers, the Companies or Subsidiaries, oral notice or warning of alleged nonperformance, delay indelivery or other noncompliance by a Company or Subsidiary with respect to their obligationsthereunder.     (n) Following the Closing, the Companies and Subsidiaries will be permitted to exercise all oftheir rights under the SourceCF Licensed Intellectual Property Rights to the same extent theCompanies and Subsidiaries would have been able to had the transactions contemplated by thisAgreement not occurred and without the payment of any additional amounts or consideration otherthan ongoing fees, royalties or payments which the Companies and Subsidiaries would otherwise berequired to pay and without obtaining the consent or permission of any party to such licenses,sublicenses and other agreements, contracts and commitments except for third party consents setforth in Schedule 4.20(d) hereto.     (i) The Companies and the Subsidiaries have obtained any and all necessary consentsfrom consumers with regard to the collection and dissemination by the Companies’ andSubsidiaries’ of personal consumer information in accordance with the privacy policypublished on any website owned and/or operated by or on behalf of the Companies andSubsidiaries and the practices of the Companies and Subsidiaries regarding the collectionand use of personal consumer information are and have been in accordance with such privacypolicies.     (ii) When exporting or re-exporting products and information directly or indirectly,via any means, including electronic transfer, the Companies and Subsidiaries have done so inaccordance with the US Department of Commerce Bureau of Industry and Security ExportAdministration Regulations and the laws of host countries, and the Companies andSubsidiaries have obtained any necessary export approvals. Specifically and withoutlimitation, the
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Companies and Subsidiaries have not exported products to embargoed orotherwise restricted countries or end users.     (iii) Sellers have implemented reasonable procedures to reduce the contamination of theTechnology of the Companies and Subsidiaries with Harmful Code, where “Harmful Code” meansany code constructed with the ability to damage, interfere with, or adversely affectcomputer programs, data files or hardware without the consent or intent of the computeruser, including self-replacing and self-propagating programming instructions commonly called“viruses,” “trojan horses” and “worms.”     (o) Except as set forth on Schedule 4.20(o) hereto, no Company or Subsidiary has been sued orcharged as a defendant in any dispute, claim, action, suit, proceeding, arbitration orinvestigation which involves a claim of infringement of any Technology or Intellectual Propertyright of any third party. To the knowledge of the Management Sellers, the operation of thebusiness of the Companies and Subsidiaries as currently conducted and as currently contemplated tobe conducted by any Company or Subsidiary does not and will not infringe or misappropriate anyTechnology or Intellectual Property right of any third party, violate any right to privacy orpublicity of any third party or constitute unfair competition or trade practices under the laws ofany US state or federal or any foreign jurisdiction, and no Company or Subsidiary has receivednotice from any third party claiming that the businesses of the Companies and Subsidiaries ascurrently conducted or as currently contemplated to be conducted by any Company or Subsidiaryinfringes or misappropriates any Technology or Intellectual Property right of any third party orconstitutes unfair competition or trade practices under the laws of any jurisdiction (nor does anyManagement Seller, Company or Subsidiary have knowledge of any basis therefor). The Companies andthe Subsidiaries have taken reasonable measures customary in the line of business in which theCompany or Subsidiary operate to prevent the inclusion of third party proprietary materials in theproducts and services of the Companies and Subsidiaries, unless the Companies and Subsidiaries havesecured the necessary license rights for the conduct of their business.     (p) Except as set forth on Schedule 4.20(p) hereto, to the knowledge of the ManagementSellers, no person is infringing or misappropriating any SourceCF Intellectual Property Right orSourceCF Licensed Intellectual Property Right.     (q) Except as set forth in Schedule 4.20(q), no SourceCF Intellectual Property Right or, tothe knowledge of the Management Sellers, no SourceCF Licensed Intellectual Property Right orservice of a Company or Subsidiary is subject to any proceeding or outstanding decree, order,judgment or settlement agreement or stipulation that restricts in any manner the use, transfer orlicensing thereof by a Company or Subsidiary or may affect the validity, use or enforceability ofsuch right.     (r) To the knowledge of the Management Sellers, Companies or Subsidiaries, no (i) product,Technology, or service of a Company or Subsidiary, (ii) material published or distributed by aCompany or Subsidiary or (iii) conduct or statement of a Company or Subsidiary constitutes adefamatory statement or material, false advertising or otherwise violates any applicable federal,state or foreign law or regulations.     4.21 Food and Drug Administration Compliance. Except as set forth on Schedule 4.21hereof, in addition to the representations and warranties in Section 4.12 hereof and not inlimitation thereof:     (a) each Company and Subsidiary has complied with all applicable statutes, regulations,policies, guidances or guidelines (including rules, codes, plans, injunctions, judgments, orders,decrees, rulings and charges thereunder) administered or issued by any federal, state, local orforeign agency or governmental body, including the United States Food and Drug Administration(“FDA”), having regulatory authority over a Company’s or Subsidiary’s products or operations,including, but not limited
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to, the following: (i) the Federal Food, Drug and Cosmetic Act, asamended, (“FFDCA”) and the regulations promulgated thereunder; (ii) any applicable FDAinvestigational new drug application, new drug application, investigational device exemption,premarket approval or 510(k) premarket notification; (iii) the applicable provisions of FDA’s goodmanufacturing practice requirements, as set forth at 21C.F.R. Parts 210, 211 and 820; and (iv) state laws and regulations governing the practice ofpharmacy and the distribution of drugs and medical devices;     (b) each Company and Subsidiary holds all permits, licenses, variances, exemptions,certificates, consents, product listings, establishment registrations, orders, approvals,notifications and other authorizations from governmental or regulatory bodies or authorities whichare required to market, sell or distribute its products, to own, lease and operate its propertiesand assets, or to carry on its business as it is now being conducted, or otherwise which arematerial to the operation of the businesses of the Companies and Subsidiaries, including all FDAnotifications and applications required to be cleared or approved for any products researched,developed, tested, distributed, packaged, labeled, marketed, manufactured, compounded, distributed,sold and/or commercialized by a Company or Subsidiary in the United States (collectively, the“SourceCF Permits”). None of the Companies or Subsidiaries test, manufacture or compound anyproducts;     (c) all such SourceCF Permits are in full force and effect, and none of SourceCF Permits havebeen withdrawn, revoked, suspended or cancelled nor is any such withdrawal, revocation, suspensionor cancellation pending or, to the knowledge of any Seller, Company or Subsidiary threatened, andthe Companies and Subsidiaries have been and are in compliance in all material respects with theterms of SourceCF Permits and any conditions placed thereon;     (d) except as identified in Schedule 4.21 hereto, no governmental agency or regulatoryauthority has issued any notice, warning letter, regulatory letter, untitled letter, FDA Form 483or other communication or correspondence to a Company or Subsidiary, alleging that a Company orSubsidiary is or was in violation of any law, regulation, rule, ordinance, clearance, approval,permission, authorization, consent, exemption, guidance or guideline applicable to productsresearched developed, tested, manufactured, compounded, packaged, labeled, marketed, distributed,sold, and/or commercialized by a Company or Subsidiary, or alleging that a Company or Subsidiarywas or is the subject of any pending, threatened or anticipated administrative agency or governmententity investigation, proceeding, review or inquiry, or that there are circumstances currentlyexisting which might reasonably be expected to lead to any loss of or refusal to renew any ofSourceCF Permits;     (e) no products of a Company or Subsidiary have been recalled, whether voluntary or otherwise,or are or have been subject to device removal or correction reporting requirements, and noManagement Seller, Company or Subsidiary has received notice, either completed or pending, of anyproceeding seeking a recall, removal or corrective action of any products, and no ManagementSeller, Company or Subsidiary is aware of any information to indicate that a recall may benecessary for any products of a Company or Subsidiary;     (f) no Company or Subsidiary, and no employee or agent of a Company or Subsidiary, has made anuntrue statement of material fact or fraudulent statement to, or filed a false claim or reportwith, any governmental or regulatory authority, or failed to disclose a material fact required tobe disclosed to any governmental or regulatory authority, or has ever been investigated by the FDA,National Institutes of Health (“NIH”), Office of the Inspector General for the Department of Healthand Human Services (“OIG”), Department of Justice or other comparable governmental authority fordata or healthcare program fraud;     (g) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand,notice, review or inquiry relating to a Company’s or a Subsidiary’s development, testing,manufacture,
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distribution or sale of its products has been filed or commenced, or is pendingagainst a Company or Subsidiary, and to the knowledge of the Management Sellers, the Companies andSubsidiaries, no such action, suit, proceeding, hearing, investigation, charge, complaint, claim,demand or notice is pending or has been threatened;     (h) no investigation or review by any governmental or regulatory body or authority is pending,or to the knowledge of any Management Seller, Company or Subsidiary threatened, against any Companyor Subsidiary, nor, to the knowledge of any Management Seller, Company or Subsidiary, has anygovernmental or regulatory body or authority indicated an intention to conduct the same;     (i) no Company or Subsidiary, nor any employee or agent of a Company or Subsidiary, has been(i) disqualified or debarred by the FDA or other Governmental Authority for any purpose pursuant toapplicable law (including but not limited to the statutory debarment provisions at 21 U.S.C. §335a(a) or (b)); or (ii) charged or convicted for conduct relating to the development or approvalof, or otherwise relating to the regulation of, any drug product under any applicable law; and     (j) no Company or Subsidiary, nor any employee or agent of a Company or Subsidiary, hasviolated or caused a violation of any federal or state health care fraud and abuse or false claimsstatute or regulation, including without limitation the anti-kickback provisions of the SocialSecurity Act, 42 U.S.C. § 1320a-7b(b), or has been excluded or threatened with exclusion understate or federal statutes or regulations, including under 42 U.S.C. § 1320a-7 or relevantregulations in 42 C.F.R. Part 1001, or assessed or threatened with assessment of civil moneypenalties pursuant to 42 U.S.C. Part 1003.     4.22 Transactions with Affiliates. Except as set forth in Schedule 4.22 hereto, noSeller or any current or former director, manager, officer, shareholder, member or employee of anyCompany or Subsidiary owns or during the past three years has owned, directly or indirectly, orhas, or within the past three years has had, an interest, either of record, beneficially orequitably, in any business, corporate or otherwise, which (a) has or had, or which is or was aparty to, or in any asset or property which is or was the subject of, any material contract,agreement, business arrangement, relationship or course of dealing with a Company or Subsidiary, or(b) conducts any of the same businesses as, or a similar business to, any of the businessesconducted by the Companies and Subsidiaries.     4.23 No Brokers or Finders. All negotiations by the Sellers relative to thisAgreement have been carried on by the Sellers directly without the intervention of any person whomay be entitled to any brokerage or finder’s fee or other commission or compensation in respecthereof or the consummation of the transactions contemplated hereby.     4.24 No Third Party Options. Except as set forth in Schedule 4.24 hereto, there areno existing agreements, options, commitments or rights with, to or in any third person to acquireany of the assets or properties of a Company or Subsidiary or any interest therein, except forthose contracts entered into in the ordinary course of business consistent with past practice forthe sale of the Companies’ and the Subsidiaries’ products and services.     4.25 Schedules; Delivery of Documents; Corporate Records. The Sellers have deliveredor made available to the Buyer the originals or true, correct and complete copies of all documents,including without limitation all amendments, supplements or modifications thereof or waiverscurrently in effect thereunder, referred to on the Schedules hereto or otherwise material to therepresentations and warranties in this Agreement and have also delivered to the Buyer copies of thecharters and organizational documents (each as amended to date) of the Companies and Subsidiaries.The minute, stock and membership interest record books of the Companies and Subsidiaries, whichhave been made available to the Buyer for its inspection, contain true, correct and complete copiesof all charter documents and the records of all material meetings and consents in lieu of meetingof the Boards of Directors and Boards of
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Managers (and any committees thereof) and votingshareholders and members of each Company or Subsidiary since the date of its incorporation orformation.     4.26 Completeness of Disclosure. No representation or warranty by any Sellercontained in this Agreement or any Schedule or Exhibit hereto contains or will contain any untruestatement of amaterial fact or omits or will omit to state any material fact necessary to make any statementherein or therein not misleading.     5. Representations and Warranties of the Buyer. The Buyer represents and warrants toeach of the Sellers as follows:     5.1 Corporate Existence. The Buyer is a corporation duly organized, validly existingand in good standing under the laws of the State of Delaware.     5.2 Corporate Power and Authorization. The Buyer has the corporate power to execute,deliver and perform this Agreement. The execution, delivery and performance hereof by the Buyerhave been duly authorized by all necessary corporate action. This Agreement is a legal, valid andbinding obligation of the Buyer and is enforceable against the Buyer in accordance with its terms.     5.3 Validity of Contemplated Transactions; Etc. The execution, delivery andperformance of this Agreement by the Buyer will not contravene or violate (a) any law, rule orregulation to which the Buyer is subject, (b) any judgment, order, writ, injunction or decree ofany court, arbitrator or governmental or regulatory official, body or authority which is applicableto the Buyer or (c) the Certificate of Incorporation or Bylaws of the Buyer; nor will suchexecution, delivery or performance violate, be in conflict with or result in the breach (with orwithout the giving of notice or lapse of time, or both) of any term, condition or provision of, orrequire the consent of any other party to, any contract, commitment or agreement, oral or written,to or by which the Buyer is a party or otherwise bound or affected or by which any of the Buyer’sassets or properties may be bound or affected. No authorization, approval or consent of, and noregistration or filing with, any governmental or regulatory official, body or authority is requiredin connection with the execution, delivery and performance hereof by the Buyer.     5.4 No Brokers or Finders. All negotiations by the Buyer relative to this Agreementhave been carried on by the Buyer or its affiliates directly without the intervention of any personwho may be entitled to any brokerage or finder’s fee or other commission or compensation in respecthereof or the consummation of the transactions contemplated hereby.     6. Covenants.     6.1 Non-Competition. The Buyer and each of the Management Sellers hereby agree thatthe covenants set forth in this Section 6.1 are a material and substantial part of the transactionscontemplated by this Agreement.     (a) Prohibited Activities. Subject to the last paragraph of this Section 6.1(a),until one year after termination of any employment relationship which he may have with the Buyer(or any of its affiliates) or a Company or Subsidiary or any successor to, or new subsidiary of,the Buyer (or any of its affiliates) a Company or Subsidiary or any such successor or subsidiary(individually, a “New Entity” and collectively, “New Entities”), each Management Seller agrees thathe will not, anywhere in the world (the “Territory”), unless acting for a Company or Subsidiary orany such New Entity or in accordance with the Buyer’s prior written consent:     (i) (directly or indirectly) own, manage, operate, join, control, finance orparticipate in the ownership, management, operation, control or financing of, or beconnected as an officer,
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director, employee, principal, agent, representative, consultant,investor, owner, partner, manager, joint venturer or otherwise with, or permit his name tobe used by or in connection with, any business or enterprise engaged anywhere in theTerritory in any of the businesses engaged in by the Buyer, a Company or Subsidiary on theClosing Date, or any of the businesses engaged in by the Buyer, Eurand N.V. (to the extent aManagement Seller is involved in such Eurand N.V.businesses or acquires confidential or proprietary information relating thereto), aCompany or Subsidiary or any such New Entity, either during his employment or at the time ofits termination;     (ii) call on or solicit any person who or which is, at that time, or has been withinone year prior thereto, a customer of the Buyer, Eurand N.V., a Company or Subsidiary or ofany such New Entity with respect to any business covered by clause (i) above; or     (iii) solicit the employment of or hire any person who at the time of such solicitationor hiring or who within one year prior thereto, is or was employed by the Buyer, EurandN.V., a Company or Subsidiary or by any such New Entity on a full or part-time basis.Notwithstanding the above, the foregoing covenant shall not be deemed to (i) prohibit either of theManagement Sellers from acquiring as a passive investment not more than one percent of theoutstanding voting capital stock of a competing business, whose stock is traded on a nationalsecurities exchange or through the automated quotation system of a registered securitiesassociation or (ii) prohibit or restrict any Management Seller from serving as an employee orconsultant to, or making contributions to, the CF Foundation, the Boomer Esiason Foundation or theCystic Fibrosis Therapeutics Development Network, or otherwise providing any services thereto.If a Management Seller is entitled to a severance payment from a Company or Subsidiary or NewEntity following his termination of employment, the provision in clause (y) in the first paragraphof this Section 6.1(a) shall only apply if and so long as the Management Seller is paid suchseverance payment in accordance with the applicable terms thereof.     (b) Prohibited Activities — Use of Name. Each Seller acknowledges and agrees (i)that the name “SourceCF” and all related or similar trade names, trademarks, service marks,corporate names and logos or any part, derivative or combination thereof (collectively, the“SourceCF Names & Marks”) constitute part of the SourceCF Intellectual Property and, as such, arevaluable assets of the Companies and Subsidiaries, and (ii) that following the Closing, no suchSeller, directly or indirectly through or with any third party, will be entitled to, and will not,use, directly or indirectly, the SourceCF Names & Marks or any variations and derivations thereof.     (c) Remedies. Each Management Sellers acknowledges that (i) the businesses of theCompanies and Subsidiaries are global in scope and the provisions of this Section 6.1 arereasonable and necessary to protect the legitimate interests of the Buyer as the purchaser of theSecurities, (ii) any violation of this Section 6.1 will result in irreparable injury to the Buyer,the Companies and Subsidiaries and the other new entities referred to in Section 6.1(a) hereof, andthat damages at law would not be reasonable or adequate compensation to the Buyer, the Companies orthe Subsidiaries and such New Entities for a violation of this Section 6.1 and (iii) the Buyer, theCompanies and Subsidiaries and any such new entities shall be entitled to have the provisions ofthis Section 6.1 specifically enforced by preliminary and permanent injunctive relief without thenecessity of proving actual damages and without posting bond or other security as well as to anequitable accounting of all earnings, profits and other benefits arising out of any violation ofthis Section 6.1, including without limitation estimated future earnings. In the event that theprovisions of this Section 6.1 should ever be deemed to exceed the time, geographic, product or anyother limitations permitted by applicable law, then such provisions shall be deemed reformed to themaximum permitted by applicable law.
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     (d) Jurisdiction. The Buyer and each of the Management Sellers intend to and dohereby confer jurisdiction to enforce the covenants set forth in this Section 6.1 upon the courtsof any jurisdiction within the geographical scope of such covenants. In addition to Section 10.14hereof and not in limitation thereof, if the courts of any one or more of such jurisdictions holdsuch covenants unenforceable in whole or in part, it is the intention of the Buyer and each of theManagement Sellers that such determination not bar or in any way adversely affect the right of theBuyer, the Companies or the Subsidiaries and any suchnew entities to equitable relief and remedies hereunder in courts of any other jurisdiction asto breaches or violations of this Section 6.1, such covenants being, for this purpose, severableinto diverse and independent covenants.     6.2 Tax Matters.     (a) Preparation, Filing and Audit of Pre-Closing and Post-Closing Period Tax Returns.     (i) Tax Periods Ending on or Before the Closing Date. The Management Sellersshall prepare, or cause to be prepared, and file, or cause to be filed, all Tax Returns of,for, or including the Companies and Subsidiaries for all periods ending on or prior to theClosing Date which are filed after the Closing Date. The Management Sellers shall permitthe Buyer to review and comment on each such Tax Return described in the preceding sentenceprior to filing. The Management Sellers will be responsible for any and all liability withrespect to such Tax Returns if such Tax is not reserved for on the financial statements(provided that, with respect to any SourceCF, Inc. United States or Alabama income Taxliability with respect to the period beginning on January 1, 2007 and ending on the ClosingDate, the Management Sellers will not be responsible for the first $80,000 of any suchSourceCF, Inc. Tax liability, and shall not be responsible for all such amounts in excess ofsuch $80,000 amount), and, upon request from the Buyer, the Management Sellers shall providereasonable assurances that such liability has been satisfied in a timely manner.     (ii) Tax Periods Beginning Before and Ending after the Closing Date*.*The Buyeror its successor shall prepare, or cause to be prepared, and file, or cause to be filed, allTax Returns of, for, or including the Companies and Subsidiaries for periods which beginbefore the Closing Date and end after the Closing Date. The Management Sellers shall paywithin 15 days following any demand by the Buyer or its successor with respect to such TaxReturns, an amount equal to the portion of such Taxes which relates to the portion of suchtaxable period ending at the close of the Closing Date and which was not reserved for on thefinancial statements (as determined pursuant to Section 6.2(c) hereof).     (iii) Audit. If the IRS or any other governmental entity undertakes an auditof any of the Tax Returns of, for or including the Companies or the Subsidiaries for anyperiod ending on or prior to the Closing Date or for any Straddle Period, the Buyer shallpromptly notify the Management Sellers of such audit. If the audit is an audit for anyperiod ending on or before the Closing, the Management Sellers shall, at their sole cost andexpense, respond to and control such audit on behalf of the Companies and Subsidiaries,subject to the right of the Buyer (at its sole cost and expense) to participate in suchaudit and to provide comments, in advance of any settlement agreement or other final actionto be taken in connection therewith. If the audit is for any period ending after theClosing Date or any Straddle Period return, the Buyer shall respond to and control suchaudit, subject to the Management Sellers’ right (at their sole cost and expense) toparticipate in any such audit, and also subject to the right of the Management Sellers toapprove, in advance, any settlement agreement or other final action to be taken inconnection therewith if such action relates to any matter as to which the Management Sellersare obligated to provide indemnification hereunder. No approval referred to in thisparagraph shall be unreasonably withheld by the Management Sellers. The Buyer shallcooperate with the Management Sellers in
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responding to any such audit, including preservingand making available relevant records and making appropriate personnel available to assistin any such audit response. Any penalties or other consequences due to Buyer’s failure totimely notify the Management Sellers under this Section 6.2(a)(iii) shall be borne solely byBuyer. The Management Sellers shall be entitled to be reimbursed by the Companies and theSubsidiaries if the Taxes had been reserved but had not been paid by the Companies orSubsidiaries after Closing.     (iv) Extensions or Waivers. The Buyer and the Management Sellers agree not toenter into a voluntary extension or waiver of any statute of limitations for any taxableperiod that ends on or before the Closing Date, or which begins before and ends after theClosing Date, without a prior mutual discussion and consent (which consent will not beunreasonably withheld).     (b) Cooperation in Filing Tax Returns. The Buyer and the Management Sellers shall,and shall each cause their affiliates to, provide to the other such cooperation and information, asand to the extent reasonably requested, in connection with the filing of any Tax Return, amendedTax Return or claim for refund, determining liability for Taxes or a right to refund of Taxes, orin conducting any audit, litigation or other proceeding with respect to Taxes. Such cooperationand information shall include providing copies of all relevant portions of relevant Tax Returns,together with relevant accompanying schedules and relevant work papers, relevant documents relatingto rulings and other determinations by Taxing Authorities, and relevant records concerning theownership and Tax basis of property, which any such party may possess. Each party will retain allTax Returns, schedules, work papers, and all material records and other documents relating to Taxmatters, of the Companies and Subsidiaries for the Tax period first ending after the Closing Dateand for all prior Tax periods until the later of either (i) the expiration of the applicablestatute of limitations (and, to the extent notice is provided with respect thereto, any extensionsthereof) for the Tax periods to which the Tax Returns and other documents relate or (ii) eightyears following the due date (without extension) for such Tax Returns. Thereafter, the partyholding such Tax Returns or other documents may dispose of them provided that such party shall giveto the other party the notice prior to doing so. Each party shall make its employees reasonablyavailable on a mutually convenient basis at its cost to provide explanation of any documents orinformation so provided.     (c) Allocation of Certain Taxes.     (i) If the Companies and Subsidiaries are permitted but not required under applicablestate, local, or foreign income Tax Laws to treat the Closing Date as the last day of ataxable period, then the parties shall treat that day as the last day of a taxable period.     (ii) In the case of Taxes arising in a taxable period of one of the Companies or theSubsidiaries that includes, but does not end on, the Closing Date, except as provided inSection 6.2(c)(iii), the allocation of such Taxes between the Pre-Closing Period and thePost-Closing Period shall be made on the basis of an interim closing of the books as of theend of the Closing Date. “Post-Closing Period” means any taxable period or portion thereofbeginning after the Closing Date. If a taxable period begins on or prior to the ClosingDate and ends after the Closing Date, then the portion of the taxable period that begins onthe day following the Closing Date shall constitute a Post-Closing Period. “Pre-ClosingPeriod” means any taxable period or portion thereof that is not a Post-Closing Period. Theparties do not contemplate that the transactions under this Agreement will result in gainrecognition for the Companies or the Subsidiaries for Federal income tax purposes and theparties further agree not to take any contrary reporting position on any Tax Return, makeany contrary election for or on behalf of the Company or the Subsidiaries, or dissolve,liquidate, convert, merge, or otherwise change any Company or Subsidiary, change any taxaccounting methodology, include the Company or any Subsidiary in any consolidated group orreturn or make any other change, in such a way as to
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cause gain recognition for federalincome tax purposes for any Company or Subsidiary in a Pre-Closing Period.     (iii) Subject to Sections 6.2(c)(i) and 6.2(c)(ii), in the case of any Taxes that areimposed on a periodic basis and are payable for a taxable period that includes, but does notend on, the Closing Date, the portion of such Tax which relates to the portion of suchtaxable period ending on the Closing Date shall (A) in the case of any Taxes (includingTaxes based on capitalization, debt or shares of stock authorized, issued or outstanding, orad valorem Taxes),other than Taxes based upon or related to income or receipts, or franchise Taxes, bedeemed to be the amount of such Tax for the entire taxable period multiplied by a fraction,the numerator of which is the number of days in the taxable period ending on the ClosingDate and the denominator of which is the number of days in the entire taxable period, and(B) in the case of any Tax based upon or related to income or receipts, or franchise Taxesbe deemed equal to the amount which would be payable if the relevant taxable period ended asof the end of the Closing Date. All determinations necessary to give effect to theforegoing allocations shall be made in a manner consistent with the prior practice of theCompanies.     (d) Carryovers, Refunds, and Related Matters.     (i) Any refund of Taxes to any Company or Subsidiary (including any interest thereon)shall be the property of the applicable Company or Subsidiary, or their respectivesuccessors, and shall be retained by the applicable Company or Subsidiary, or theirrespective successors. For the avoidance of doubt, any refund or rebate of Taxesattributable in part or in whole to the compensation deduction for a Company or Subsidiaryassociated with the cancellation of compensatory options shall be retained by such Companyor Subsidiary.     (ii) If any item of loss or credit of one of the Companies or the Subsidiaries for aPost-Closing Period is carried back to a Pre-Closing Period, is used or otherwise absorbedand results in a refund or a reduction of Taxes otherwise payable, then such amounts shallbe retained by the applicable Company or Subsidiary, or their respective successors. To theextent necessary, the Management Sellers shall cooperating (including filing amended returnsif necessary) in obtaining such amounts.     (iii) In the event that one of the Companies or the Subsidiaries (or successor thereto)realizes any item of loss or credit for Tax purposes for any Post-Closing Period, the Buyermay, in its sole discretion, carry forward such loss or credit.     (iv) The Buyer shall not take any action, make any election or otherwise cause anyCompany or Subsidiary to make any tax elections, amendments or other positions differentfrom that taken by the Companies and the Subsidiaries, cause any Company or Subsidiary toliquidate, dissolve or merge, or take any other action so as to cause the Pre-Closing PeriodTaxes to increase or change in such a manner as to cause any Seller or Company or Subsidiaryto recognize any additional tax liability for any Pre-Closing Period.     (e) Termination of Tax Sharing Agreements. Any and all Tax allocation or sharingagreements or other agreements or arrangements binding the Companies or the Subsidiaries shall beterminated with respect to the Companies and Subsidiaries as of the day before the Closing Dateand, from and after the Closing Date, no Company or Subsidiary shall be obligated to make anypayment to any Seller or affiliate, Taxing authority or other person pursuant to any such agreementor arrangement for any past or future period.
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     6.3 Pre-Closing Cash Distribution. The parties acknowledge that at or before theClosing hereunder, the Companies and Subsidiaries will distribute all their available cash to theSellers, subject to the following. In connection therewith the Management Sellers represent,warrant, covenant and agree as follows:     (a) such distributions were made in accordance with law and all applicable charter,organizational documents and contractual and other obligations of the Companies and Subsidiaries;     (b) at the time of the Closing, no Company or Subsidiary will have any Indebtedness.“Indebtedness” means, with respect to any person, (i) all indebtedness of such person, whether ornotcontingent, for borrowed money, (ii) all obligations of such person for the deferred purchaseprice of property or services, (iii) all obligations of such person evidenced by notes, bonds,debentures or other similar instruments, (iv) all indebtedness created or arising under anyconditional sale or other title retention agreement with respect to property acquired by suchperson (even though the rights and remedies of the seller or lender under such agreement in theevent of default are limited to repossession or sale of such property), (v) all obligations of suchperson as lessee under leases that have been or should be, in accordance with generally acceptedaccounting principles, recorded as capital leases (other than any vehicle leases), (vi) allobligations, contingent or otherwise, of such person under acceptance, letter of credit or similarfacilities, (vii) all obligations of such person to purchase, redeem, retire, defease or otherwiseacquire for value any capital stock of such person or any warrants, rights or options to acquiresuch capital stock, valued, in the case of redeemable preferred stock, at the greater of itsvoluntary or involuntary liquidation preference plus accrued and unpaid dividends, (viii) allIndebtedness of others referred to in clauses (i) through (vii) above guaranteed by such person,and (ix) all Indebtedness referred to in clauses (i) through (vii) above secured by (or for whichthe holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by)any mortgage, lien, pledge, security interest, charge, claim, restriction and other encumbrance ordefect of title of any nature whatsoever on property (including, without limitation, accounts andcontract rights) owned by such person, even though such person has not assumed or become liable forthe payment of such Indebtedness;     (c) since July 31, 2007 the Companies and Subsidiaries have paid their financial obligationsin the ordinary course consistent with past practices, with such payments aggregating at least$1,100,000 (which amount includes the payments since such date with respect to purchases ofinventory and employer-related payroll taxes);     (d) prior to the Closing, the Companies and Subsidiaries will pay all amounts owing in respectof employee services performed on or prior to the Closing Date (including without limitation allcompensation, bonuses and 401(k) contributions) or, if not so paid prior to the Closing, thepre-Closing cash distribution to the Sellers referred to above in this Section 6.3 shall be reducedby, and the Companies and Subsidiaries shall retain, cash sufficient to cover in full all suchunpaid amounts; and     (e) in addition to the foregoing, the Management Sellers shall provide that the Companies andSubsidiaries retain $42,000 after any pre-closing cash distribution to the Sellers by the Companiesand Subsidiaries prior to the Closing leaves $42,000.     6.4 Options and Warrants. At or immediately prior to Closing, each OutstandingSecurities Right shall be canceled, and shall be converted into the right to receive only thatconsideration set forth on Schedule 6.4 hereto. The Buyer shall contribute to SourceCF the amountof the initial cash payments to be paid to the Optionees upon termination of their options pursuantto this Section 6.4 (other than payments which may be subsequently made to Optionees with respectto the Deferred Payment or the Revenue Milestone). Furthermore, the Buyer shall contribute toSourceCF, to the extent required, any amounts required by SourceCF to make any subsequent paymentsto Optionees with respect to the Deferred Payment or the Revenue Milestone.
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     6.5 Replacement Lease at Biotech Center. SourceCF is currently negotiating a leasefor new office space in the Hudson Alpha Biotech Center (the “New Lease”), to which the Companiesand Subsidiaries will relocate when their current lease terminates. The parties agree thatSourceCF will be the lessee on the New Lease, which is anticipated to be signed after the Closing,and that SourceCF will lease the premises subject thereto for a period not to exceed five years andfor a base rent of not more than $15.00 per square foot and on such other reasonable terms andconditions, and provided that, in any case the New Lease shall provide for the early termination ofsuch lease beginning on the thirtieth month thereof (and continuing thereafter) by payment of atermination fee of not more than the equivalent of six months rent thereunder.     7. Conditions Precedent to Buyer’s Obligations. The obligation of the Buyer underthis Agreement to purchase the Securities is subject to the fulfillment or satisfaction, prior toor at the Closing, of each of the following conditions precedent:     7.1 Representations and Warranties; Performance of Obligations. All of therepresentations and warranties of the Sellers contained in this Agreement shall be true, correctand complete on and as of the Closing Date in all material respects; all of the terms, covenants,agreements and conditions of this Agreement to be complied with, performed or satisfied by theSellers on or before the Closing Date shall have been duly complied with, performed or satisfied byeach Seller in all material respects; and the Buyer shall have received a certificate dated theClosing Date and signed by all of the Sellers, to the foregoing effects.     7.2 Opinion of Sellers’ Counsel. The Buyer shall have received the written opiniondated the Closing Date of Bradley Arant Rose & White LLP, counsel for the Sellers, in form andsubstance reasonably satisfactory to the Buyer and its counsel.     7.3 Employment Agreements. The Buyer shall have received the Employment Agreements ofeach of Walters and Stanley in the forms of Exhibits B and C hereto, respectively, duly executed byeach of Walters and Stanley (the “Walters and Stanley Employment Agreements”).     7.4 Material Contracts. The Buyer shall have received from the Seller’sRepresentative, executed on terms satisfactory to the Buyer, (i) a letter of consent containingconfirmations and representations from PARI GmbH (“PARI”) in connection with the acquisition ofInhalation by the Buyer hereunder and the continued supply of the PARI eFlow devices, (ii) a letterof consent regarding confirmations and representations from The Technology Partnership plc (“TTP”)in connection with the acquisition of Inhalation by the Buyer hereunder and the continued supply ofthe PARI eFlow devices, (iii) an agreement between SourceCF and X-Gen Pharmaceuticals, Inc.extending the companies’ current sales and marketing agreements, and (iv) an agreement betweenSourceCF and National Vitamin extending the companies’ current agreements with regard to the supplyof vitamin products.     7.5 Approval of Counsel; Corporate Matters. All actions, proceedings, resolutions,instruments and documents required to carry out this Agreement or incidental hereto and all otherrelated legal matters shall have been approved on the Closing Date by Morgan, Lewis & Bockius LLP,counsel for the Buyer, in the exercise of its reasonable judgment. The Sellers shall also havedelivered to the Buyer such other documents, instruments, certifications and further assurances assuch counsel for the Buyer may reasonably require.     8. Conditions Precedent to the Sellers’ Obligations. The obligations of the Sellersunder this Agreement to sell the Securities are subject to the fulfillment or satisfaction, priorto or at the Closing, of each of the following conditions precedent:
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     8.1 Representations and Warranties; Performance of Obligations. All of therepresentations and warranties of the Buyer contained in this Agreement shall be true, correct andcomplete on and as of the Closing Date in all material respects; all of the terms, covenants,agreements and conditions of this Agreement to be complied with, performed or satisfied by theBuyer on or before the Closing Date shall have been duly complied with, performed or satisfied bythe Buyer in all material respects; and the Sellers shall have received a certificate dated theClosing Date and signed by an officer of the Buyer to the foregoing effects.     8.2 Opinion of Buyer’s Counsel. The Sellers shall have received the written opiniondated the Closing Date of Morgan, Lewis & Bockius LLP, counsel for the Buyer, in form and substancereasonably satisfactory to the Sellers and their counsel.     8.3 Employment Agreements. Walters and Stanley shall have received the Walters andStanley Employment Agreements, duly executed by the Company party thereto.     8.4 Approval of Counsel; Corporate Matters. All actions, proceedings, resolutions,instruments and documents required to carry out this Agreement or incidental hereto and all otherrelated legal matters shall have been approved on the Closing Date by Bradley Arant Rose & WhiteLLP, counsel for the Sellers, in the exercise of their reasonable judgment. The Buyer shall alsohave delivered to the Sellers such other documents, instruments, certifications and furtherassurances as such counsel for the Sellers may reasonably require.     9. Indemnification.     9.1 Indemnification by Each Seller. Solely out of the Revenue Milestone Payment andthe Deferred Payment (except as otherwise provided in Section 9.6), each Seller severally, notjointly and severally, and only as to himself or itself and not as to any other Seller, shallreimburse, defend, indemnify and hold harmless the Buyer and its affiliates (including withoutlimitation after the Closing a Company or Subsidiary) and each of their directors, officers andother employees (each such person and its, his or her heirs, administrators, personalrepresentatives, successors and assigns is referred to herein as a “Buyer Indemnified Party”) from,against and in respect of:     (a) any and all liabilities, losses, claims, damages, actions, suits, proceedings, demands,assessments, adjustments, diminutions in value, settlement payments, deficiencies, costs andexpenses (including without limitation reasonable attorneys’ fees and expenses) (collectively,“Claims”) suffered, sustained, incurred or paid by any Buyer Indemnified Party in connection with,resulting from or arising out of:     (i) any breach of any representation or warranty of such Seller in Article 3 of thisAgreement;     (ii) any nonfulfillment of any covenant or agreement on the part of such Seller setforth in this Agreement; and     (b) any and all actions, suits, claims, proceedings, investigations, allegations, demands,assessments, audits, fines, judgments, costs and other expenses (including without limitationreasonable attorneys’ fees and expenses) incident to any of the foregoing or to the enforcement ofthis Section 9.1.     (c) The parties agree that the Buyer’s sole remedy for any successful indemnification claimpursuant to this Section 9.1, shall be to reduce, or make an offset against, the Revenue MilestonePayment or the Deferred Payment, as the case may be, by the amount of the Buyer’s successfulindemnification claim. Buyer agrees that any successful indemnification claim under this Section 9shall only be entitled
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to one reduction even though such claim for indemnity may be accountableunder different sections of this Section 9.     9.2 Indemnification by the Management Sellers. Solely out of the Revenue MilestonePayment and the Deferred Payment (except as otherwise provided in Section 9.6), each ManagementSeller jointly and severally shall reimburse, defend, indemnify and hold harmless the BuyerIndemnified Parties from, against and in respect of:     (a) any and all Claims suffered, sustained, incurred or paid by any Buyer Indemnified Party inconnection with, resulting from or arising out of:     (i) any breach of any representation or warranty of a Seller in this Agreement or inany certificate or other writing delivered by or on behalf of any Seller or a Company orSubsidiary in connection herewith (other than the representations and warranties inArticle 3 hereof which are exclusively subject to the indemnification covenant set forth inSection 9.1 hereof);     (ii) any nonfulfillment of any covenant or agreement on the part of any Seller setforth in this Agreement, including the covenants contained in Sections 6.3(b) and 6.3(c);     (iii) any breach of any of the agreements listed on Schedule 9.2(a)(iii) hereto to theextent such breach occurred prior to the Closing or was caused by the consummation of theClosing;     (iv) any of the items listed on Schedule 9.2(a)(iv) hereto;     (v) the assertion against any Buyer Indemnified Party of any liability or obligationrelating to or arising out of the business, operations, assets or activities of a Company, aSubsidiary or any predecessor thereof at or prior to the Closing to the extent suchliabilities or obligations are not referred to in Sections 4.7(i), (ii) or (iii) hereof, orout of the actions or omissions of a Company, a Subsidiary or any predecessor’s directors,managers, officers, shareholders, members, partners, employees or agents at or prior to theClosing; or     (vi) any liability or obligation which relates to or which involves an EnvironmentalClaim (as defined in Section 4.19 hereof) or otherwise relates to or involves a claim,liability or obligation which arises out of or is based upon, any Environmental Law (asdefined in Section 3.19 hereof) to the extent that such liability or obligation relates toor arises out of, in whole or in part, any activity occurring, condition existing, omissionto act or other matter existing prior to the Closing; and     (b) any and all actions, suits, claims, proceedings, investigations, allegations, demands,assessments, audits, fines, judgments, costs and other expenses (including without limitationreasonable attorneys’ fees and expenses) incident to any of the foregoing or to the enforcement ofthis Section 9.2.     (c) The parties agree that the Buyer’s sole remedy for any successful indemnification claimpursuant to this Section 9.2, shall be to reduce , or make an offset against, the Revenue MilestonePayment or the Deferred Payment, as the case may be, by the amount of the Buyer’s successfulindemnification claim. Buyer agrees that any successful indemnification claim under this Section 9shall only be entitled to one reduction even though such claim for indemnity may be accountableunder difference sections of this Section 9.
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     9.3 Indemnification by the Buyer. The Buyer shall reimburse, defend, indemnify andhold harmless each Seller (each such person and its heirs, successors and assigns is referred toherein as a “Seller Indemnified Party”) from, against and in respect of:     (a) any and all Claims suffered, sustained, incurred or paid by any Seller Indemnified Partyin connection with, resulting from or arising out of (i) any breach of any representation orwarranty of the Buyer in this Agreement or in any certificate or other writing delivered by or onbehalf of the Buyer in connection herewith, or (ii) any nonfulfillment of any covenant or agreementon the part of the Buyer set forth in this Agreement; and     (b) any and all actions, suits, claims, proceedings, investigations, allegations, demands,assessments, audits, fines, judgments, costs and other expenses (including without limitationreasonable attorneys’ fees and expenses) incident to any of the foregoing or to the enforcement ofthis Section 9.3.     9.4 Limitations on Liability. (a) Notwithstanding anything to the contrary containedin this Agreement, other than as otherwise provided in Section 9.6 hereof , and except that theselimitations shall not apply to any indemnification claim arising under or with respect to any ofSections 4.2 and 4.23 hereof, the Buyer shall not be entitled to reduce or offset against theRevenue Milestone Payment or the Deferred Payment under Section 9.1(a)(i) or 9.2(a)(i) for anybreach of any representation or warranty until and then only to the extent that the aggregateclaims under Sections 9.1(a)(i) and 9.2(a)(i) exceeds in the aggregate $200,000 (the “Deductible”).     (b) Notwithstanding anything to the contrary in this Agreement, other than (i) as otherwiseprovided in Section 9.6 hereof and (ii) for injunctive relief:               (1) the Sellers are not liable in any manner under this Agreement, and the Buyer shall looksolely to an offset against the Deferred Payment and the Revenue Milestone Payment;               (2) the indemnities provided in Sections 9.1 and 9.2 are intended to be and shall be the soleand exclusive remedies of the Buyer Indemnified Parties with respect to this Agreement (and thenegotiation, execution and delivery hereof), the letter agreement dated September 5, 2007 andaccepted September 6, 2007 and as amended to date, among the Buyer, the Management Sellers, theCompanies and Subsidiaries (the “Letter of Intent”), the Non-Disclosure Agreement, dated April 10,2007, between SourceCF and Eurand, N.V., or any certificate delivered by the Sellers at the Closingpursuant to this Agreement;               (3) the sole and exclusive remedy of the Buyer Indemnified Parties under Sections 9.1 and 9.2hereof shall be limited to the reduction of, or making an offset against, the amounts earned andpayable with respect to the Revenue Milestone and the Deferred Payment; and               (4) except for the indemnities provided in Sections 9.1, 9.2 and 9.3 hereof, the BuyerIndemnified Parties and the Seller Indemnified Parties have no remedies at law or in equity withrespect to this Agreement (and the negotiation, execution and delivery hereof), the Letter ofIntent, the Non-Disclosure Agreement, dated April 10, 2007, between SourceCF and Eurand, N.V., orany certificate delivered by the Sellers at the Closing pursuant to this Agreement.     (c) Except as otherwise provided in Section 9.6 hereof and except that this limitation shallnot apply to any indemnification claim arising under or with respect to either of Sections 5.3 and5.4 hereof, the Buyer shall not be liable to any Seller Indemnified Party under Section 9.3(a)(i)hereof for any breach of any representation or warranty until, and then only to the extent that,the amount for which it would
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otherwise (but for this provision) be liable to all SellerIndemnified Parties for all such breaches exceeds in the aggregate the Deductible.     (d) For purposes of this Section 9, in computing the amount for which the Revenue MilestonePayment or the Deferred Payment would otherwise be offset or reduced with respect to a Claim theamount of such claim shall be amount (i) net of any tax benefit actually realized by a BuyerIndemnified Party as a result of such Claim, loss, liability or damage, and (ii) the net amount(after reduction for applicable costs and expenses) of any insurance proceeds and indemnity,contribution or other similar payment recovered by a Buyer Indemnified Party or any affiliate ofthem from any third party with respect thereto. Each Buyer Indemnified Party and their affiliatesshall take all commercially reasonable steps required to mitigate any such Claim, loss, liabilityor damage.     9.5 Survival of Representations and Warranties. Except as provided in Section 9.6hereof, the representations and warranties given or made by any Seller or the Buyer in thisAgreement or in any certificate or other writing furnished in connection herewith shall survive theClosing for a period of 18 months after the Closing Date and shall thereafter terminate and be ofno further force or effect, except that (a) all representations and warranties relating to Taxesand Tax Returns (as defined in Section 4.10 hereof) shall survive the Closing for the period of theapplicable statutes of limitation plus any extensions or waivers thereof, or (b) allrepresentations and warranties set forth in Sections 3.1, 3.2, 3.3, 4.2, 4.23, 5.3 and 5.4 hereofshall survive the Closing without limitation and (c) any representation or warranty as to which aclaim (including without limitation a contingent claim) shall have been asserted by written noticein accordance with this Agreement during the survival period shall continue in effect with respectto such claim until such claim shall have been finally resolved or settled. Notwithstanding anyinvestigation or audit conducted before or after the Closing Date or the decision of any party tocomplete the Closing, each party shall be entitled to rely upon the representations and warrantiesof the other party or parties set forth herein.     9.6 Exceptions to Limitations. Nothing herein shall be deemed to limit or restrict inany manner any rights or remedies which any Buyer Indemnified Party has, or might have, at law, inequity or otherwise, against the Sellers, or which any Seller Indemnified Party has or might haveagainst the Buyer, based on any intentional and willful misrepresentation or intentional andwillful breach of warranty or intentional and willful failure to fulfill any agreement or covenantset forth herein.     9.7 Payment of Indemnification Obligations. In the event that any Seller or the Buyeris required to make any payment under this Section 9, such party shall promptly pay the BuyerIndemnified Party or the Seller Indemnified Party, as the case may be, the amount of such indemnityobligation. If there should be a dispute as to such amount, such Seller or the Buyer, as the casemay be, shall nevertheless pay when due such portion, if any, of the obligation as shall not besubject to dispute. The difference, if any, between the amount of the obligation ultimatelydetermined as properly payable under this Section 9 and the portion, if any, theretofore paid shallbear interest for the period from the date the amount was demanded by the Buyer Indemnified Partyor the Seller Indemnified Party, as the case may be, until payment in full, payable on demand, atthe fluctuating rate per annum which at all times shall be two percentage points in excess of therate which is publicly announced from time to time by JP Morgan Chase Bank, N.A. or its successoras its “prime rate”. The Buyer shall have the right to set off any amount owing, and shall alsohave the right to defer payment of any amount that the Buyer believes in good faith is or may beowing, by a Seller to the Buyer or another Buyer Indemnified Party under this Agreement against thepayment obligations of the Buyer with respect to the Revenue Milestone Payment and the DeferredPayment set forth in Section 1.3 hereof; provided, however, if Buyer defers a payment and it islater determined that Buyer should not have deferred such amount, then Buyer shall pay to Sellersinterest on each such deferred payment from the date of deferral to the date of payment at the rateset forth above in this Section 9.7.
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     9.8 Indemnification Procedure. All claims for indemnification under Sections 9.1, 9.2and 9.3 hereof shall be asserted and resolved as follows:     (a) In the event that any claim or demand for which an indemnifying party (each an“Indemnifying Party”) would be liable to an indemnified party (each an “Indemnified Party”)hereunder is asserted against an Indemnified Party by a third party, the Indemnified Party shallwith reasonable promptness notify the Indemnifying Party of such claim or demand, specifying thenature of such claim or demand and the amount or the estimated amount thereof to the extent thenfeasible (which estimate shall not be conclusive of the final amount of such claim or demand) (the“Claim Notice”). The Indemnifying Party shall have 30 days from the receipt of the Claim Notice(the “Notice Period”) to notify the Indemnified Party (i) whether or not the Indemnifying Partydisputes the Indemnifying Party’s liability to the Indemnified Party hereunder with respect to suchclaim or demand and (ii) whether or not the Indemnifying Party desires, at the sole cost andexpense of the Indemnifying Party, to defend against such claim or demand, provided that theIndemnified Party is hereby authorized (but not obligated) prior to and during the Notice Period tofile any motion, answer or other pleading which shall be reasonably necessary or appropriate toprotect the Indemnified Party’s interests. In the event that the Indemnifying Party notifies theIndemnified Party within the Notice Period that the Indemnifying Party desires to defend theIndemnified Party against such claim or demand and except as hereinafter provided, the IndemnifyingParty shall have the right to defend by appropriate proceedings, which proceedings shall bepromptly settled or prosecuted by the Indemnifying Party to a final conclusion. If the IndemnifiedParty desires to participate in, but not control, any such defense or settlement the IndemnifiedParty may do so at the Indemnified Party’s sole cost and expense. If the Indemnifying Party electsnot to defend the Indemnified Party against such claim or demand, whether by not giving theIndemnified Party timely notice as provided above or otherwise, then the Indemnified Party, withoutwaiving any rights against the Indemnifying Party, may settle or defend against any such claim inthe Indemnified Party’s sole discretion and, if it is ultimately determined that the IndemnifyingParty is responsible therefor under this Section 9 then the Indemnified Party shall be entitled torecover from the Indemnifying Party the amount of any settlement or judgment and all indemnifiablecosts and expenses of the Indemnified Party with respect thereto, including interest as provided inSection 9.7 hereof in accordance with the process provided in this Section 9, subject to thelimitations contained in this Section 9, including without limitation Section 9.4 hereof.     (b) If, in the reasonable opinion of the Indemnified Party, notice of which shall be given inwriting to the Indemnifying Party, any such claim or demand seeks material prospective relief whichcould have a material adverse effect on the business, results of operations, assets, liabilities orfinancial condition of the Indemnified Party or a Company or Subsidiary, the Indemnified Partyshall have the right to control the defense of any such claim or demand and the amount of anyjudgment or settlement and the reasonable costs and expenses of defense shall be included as partof the indemnification obligations of the Indemnifying Party hereunder, to the extent suchIndemnified Party is entitled to indemnification hereunder with respect to such claim or demand.If the Indemnified Party should elect to exercise such right, the Indemnifying Party shall have theright to participate in, but not control, the defense of such claim or demand at the sole cost andexpense of the Indemnifying Party.     (c) In the event the Indemnified Party should have a claim against the Indemnifying Partyhereunder which does not involve a claim or demand being asserted against or sought to be collectedby a third party, the Indemnified Party shall with reasonable promptness send a Claim Notice withrespect to such claim to the Indemnifying Party. If the Indemnifying Party does not notify theIndemnified Party within the Notice Period that the Indemnifying Party disputes such claim, theamount of such claim shall be conclusively deemed correct.     (d) Nothing herein shall be deemed to prevent the Indemnified Party from making a good faithclaim hereunder for potential or contingent claims or demands provided the Claim Notice sets forththe
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specific basis for any such potential or contingent claim or demand to the extent then feasibleand the Indemnified Party has reasonable grounds to believe that such a claim or demand may bemade. The Indemnified Party’s failure to give reasonably prompt notice to the Indemnifying Partyof any actual, threatened or possible claim or demand which may give rise to a right ofindemnification hereunder,whether or not involving a third party, shall not relieve the Indemnifying Party of anyliability which the Indemnifying Party may have to the Indemnified Party unless the failure to givesuch notice materially and adversely prejudiced the Indemnifying Party. The procedures set forthin this Section 9.8(d) and Section 9.8 hereof shall not apply to claims or demands of a BuyerIndemnified Party which, in the reasonable opinion of the Buyer, would be covered by theDeductible.     10. Miscellaneous.     10.1 Expenses; Sales and Transfer Taxes. (a) The Buyer shall pay its expensesincidental to the preparation hereof and, through the Closing, the carrying out by it of theprovisions hereof and the consummation by it of the transactions contemplated hereby, and theSellers shall pay their expenses incidental to the preparation hereof and, through the Closing, thecarrying out by them of the provisions hereof and the consummation by them of the transactionscontemplated hereby. Notwithstanding the foregoing, the parties acknowledge and agree that priorto the Closing the Companies may have paid or reimbursed the Sellers for certain of Sellers’ suchexpenses, but the only effect of such payments has been to reduce the pre-Closing cash distributionreferred to in Section 6.3, and after the Closing no Company shall have any such further payment orreimbursement obligations. Furthermore, the parties hereto shall pay their own expenses incidentalto the carrying out of the provisions hereof after the Closing, and no such expenses of theSellers, including without limitation the Sellers’ legal fees and expenses, shall be paid by or outof any of the assets or properties of a Company or Subsidiary.     (b) The Sellers shall pay all transfer, documentary, sales, use, stamp, registration and othersuch Taxes, and all conveyance fees, recording charges and other fees and charges (including anypenalties and interest) incurred in connection with this Agreement and the transactionscontemplated hereby, and the Sellers shall, at their own expense, file all necessary tax returnsand other documentation with respect to all such Taxes, fees and charges, and, if required byapplicable law, Buyer will, and will cause its affiliates to, join in the execution of any such TaxReturns and other documentation.     10.2 Contents of Agreement; Parties in Interest; Etc. This Agreement sets forth theentire understanding of the parties hereto with respect to the transactions contemplated hereby.It shall not be amended or modified except by a written instrument duly executed by each of theparties hereto. Any and all previous agreements and understandings between or among the partiesregarding the subject matter hereof, whether written or oral and including without limitation theLetter of Intent are superseded by this Agreement.     10.3 Assignment and Binding Effect. All of the terms and provisions of this Agreementshall be binding upon and inure to the benefit of and be enforceable by the heirs, administrators,personal representatives, successors and assigns of the parties hereto.     10.4 Waiver. Any term or provision of this Agreement may be waived at any time by theparty entitled to the benefit thereof by a written instrument duly executed by such party.     10.5 Notices. Any notice, request, claim, demand, waiver, consent, approval or othercommunication which is required or permitted hereunder shall be in writing and shall be deemedgiven if delivered personally or sent by telefax (with confirmation of receipt), by certified mail,postage prepaid, or by recognized courier service, as follows:   If to Buyer, to: If to any Seller, to the Seller’s Representative:
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   Eurand Pharmaceuticals, Inc. Michael J. Walters790 Township Line Road 6705 Odyssey DriveYardley, PA 19067 Huntsville, AL 35806Attention: President Telefax: (256) 704-4878Telefax: (215) 968-2941    with a required copy to:with a required copy to:   Bradley Arant Rose & White LLPEurand Pharmaceuticals, Inc. 200 Clinton Avenue, West, Suite 900790 Township Line Road Huntsville, AL 35801Yardley, PA 19067 Attention: Hall B. Bryant III, Esq.Attention: General Counsel Telefax: (256) 517-5287Telefax: (215) 968-2941  or to such other address as the person to whom notice is to be given may have specified in a noticeduly given to the sender as provided herein. Such notice, request, claim, demand, waiver, consent,approval or other communication shall be deemed to have been given as of the date so delivered,telefaxed, mailed or dispatched or, if given by any other means, shall be deemed given only whenactually received by the addressee.     10.6 Publicity. Except for such disclosure as is deemed necessary in the reasonablejudgment of a party to comply with applicable laws, no public announcement, news release,statement, publication, or presentation relating to the existence of this Agreement, the subjectmatter hereof, or a party’s performance hereunder will be made by any party without the priorwritten approval of all other parties, which approval shall not be unreasonably withheld ordelayed. Notwithstanding the foregoing, (i) the parties agree to each issue press releasespromptly after the Closing, the form and content of such releases shall be agreed in writing inadvance by all parties, (ii) any party may publish and republish, in whole or in part, anypublicity release and/or make any statement to communication media, financial analysts or othersthat is the same or substantially similar to a publicity release or statement that has beenpreviously approved by all parties in accordance with the terms hereof, without obtaining the priorapproval of the other parties, and (iii) any party may upon notice to the other parties make anydisclosure in filings with regulatory agencies or exchanges or as required by law or applicablecourt order; provided that the other parties shall have the opportunity to consult on suchdisclosures and filings.     10.7 Release; Termination of Other Agreements. (a) Effective as of the Closing andwithout the requirement of taking any further action, each Seller hereby fully and forever remises,releases, acquits and discharges each Company and Subsidiary (for the benefit of each Company andSubsidiary and the Buyer) of and from any and all claims, demands, agreements, contracts,covenants, promises, actions, compensation and benefits (including without limitation severancecompensation; but excluding any unpaid wages and salary compensation), suits, causes of action,obligations, controversies, debts, costs, expenses, accounts, damages, judgments, losses andliabilities of whatever kind or nature, at law or in equity or otherwise, whether known or unknown,which against a Company or Subsidiary he or it may have had, now has or can, shall or may now or inthe future have, for or by reason of any matter, cause or thing whatsoever from the beginning ofthe world to the date of these presents, including without limitation all matters relating in anyway to employment with a Company or Subsidiary.     (b) Effective as of the Closing and without the requirement of taking any further action, eachSeller, Company and Subsidiary hereby terminates in its entirety the SourceCF, Inc. FoundingShareholders’ Buy-Sell Agreement dated May 25, 2004, with the effect that after the Closing none ofthe
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parties to such agreement shall have any rights, liabilities or obligations thereunder or inconnection therewith.     10.8 Specific Performance. Each party hereto acknowledges that the other parties willbe irreparably harmed and that there will be no adequate remedy at law for any violation by any ofthem of any of the covenants or agreements contained in this Agreement. It is accordingly agreedthat, in addition to any other remedies which may be available upon the breach of any suchcovenants or agreements, eachparty hereto shall have the right to obtain injunctive relief to restrain a breach orthreatened breach of, or otherwise to obtain specific performance of, the other parties’ covenantsand agreements contained in this Agreement.     10.9 Pennsylvania Law to Govern. This Agreement shall be governed by and interpretedand enforced in accordance with the laws of the Commonwealth of Pennsylvania.     10.10 No Benefit to Others. The representations, warranties, covenants and agreementscontained in this Agreement are for the sole benefit of, and may be enforced by, the parties heretoand, (a) in the case of Section 6.1 hereof, each affiliate of the Buyer (including withoutlimitation after the Closing each Company and Subsidiary), (b) in the case of Section 9 hereof, theother Buyer Indemnified Parties and Seller Indemnified Parties and, (c) in the case of Sections6.1, 10.1(a) and 10.7 hereof, each Company and Subsidiary, and also in each case his, her or itsheirs, administrators, personal representatives, successors and assigns, and they shall not beconstrued as conferring any rights on any other persons.     10.11 Headings; Interpretation. All section headings contained in this Agreement arefor convenience of reference only, do not form a part of this Agreement and shall not affect in anyway the meaning or interpretation hereof. Words used herein, regardless of the number and genderspecifically used, shall be deemed and construed to include any other number, singular or plural,and any other gender, masculine, feminine or neuter, as the context requires. Any reference to a“person” herein shall include an individual, firm, corporation, partnership, trust, governmentalauthority or body, association, unincorporated organization or any other entity. The term“knowledge” means, with respect to the Management Sellers, the actual knowledge of such ManagementSellers and that knowledge which the Management Sellers, as officers, managers or directors of theCompanies and Subsidiaries, would reasonably be expected to have obtained in the management of thebusiness of the Companies and Subsidiaries.     10.12 Further Assurances. At any time and from time to time after the Closing, theparties agree to cooperate with each other, to execute and deliver such other documents,instruments of transfer or assignment, files, books and records and do all such further acts andthings as may be reasonably required to carry out the intent of the parties hereunder.     10.13 Exhibit; Schedules. The Exhibits hereto and the Schedules referred to hereinare intended to be and hereby are specifically made a part of this Agreement.     10.14 Severability. If any provision of this Agreement or the application thereof toany person or circumstance is held invalid or unenforceable in any jurisdiction, the remainderhereof, and the application of such provision to such person or circumstance in any otherjurisdiction or to other persons or circumstances in any jurisdiction, shall not be affectedthereby, and to this end the provisions of this Agreement shall be severable.     10.15 Counterparts. This Agreement may be executed in any number of counterparts andany party hereto may execute any such counterpart, each of which when executed and delivered shallbe deemed to be an original and all of which counterparts taken together shall constitute but oneand the same instrument. This Agreement shall become binding when one or more counterparts takentogether
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shall have been executed and delivered by the parties. It shall not be necessary inmaking proof of this Agreement or any counterpart hereof to produce or account for any of the othercounterparts.     10.16 Sellers’ Representative.     (a) In order to efficiently administer the activities of the parties under this Agreement onand after the Closing Date, the Sellers hereby designate Michael J. Walters as their representative(the “Sellers’ Representative”) and hereby authorize the Sellers’ Representative (i) to take allactionsnecessary in connection with the defense and/or settlement of any claims for which the Sellersmay be required to indemnify the Buyer pursuant to Article IX hereof; (ii) to give and receive allnotices required to be given under this Agreement and under any other documents or agreementsexecuted in connection with this Agreement; (iii) to object to, or authorize delivery to the Buyerof all or any portion of the Revenue Milestone Payment or Deferred Payment provided for in Section1.3 in satisfaction of Claims of the Buyer, to negotiate and enter into settlements and compromisesof, and demand arbitration and comply with orders of courts and awards of arbitrators with respectto, such Claims; (iv) to provide instructions to the Buyer for disbursement to the Sellers inaccordance with this Agreement of the Revenue Milestone Payment and the Deferred Payment; and (v)to take any and all additional actions as is necessary or appropriate in the judgment of theSellers’ Representative for the accomplishment of the foregoing or as contemplated to be taken byor on behalf of the Sellers by the terms of this Agreement and any other documents in connectionherewith.     (b) In the event that the Sellers’ Representative dies, becomes unable to perform hisresponsibilities hereunder or resigns from such position, Norman Stanley shall be deemed to be theSellers’ Representative for purposes of this Agreement. In the event that the alternate Sellers’Representative dies, becomes unable to perform his responsibilities hereunder or resigns from suchposition, the Sellers shall appoint a substitute Sellers’ Representative and shall in writinginform the Buyer.     (c) No bond shall be required of the Sellers’ Representative, and the Sellers’ Representativeshall receive no compensation for his or her services. Notices or communications to or from theSellers’ Representative for all purposes under this Agreement or in any other Document shallconstitute notice to or from each of the Sellers.     (d) By their execution of this Agreement, the Sellers acknowledge and agree that:     (i) all decisions and actions by the Sellers’ Representative, including, withoutlimitation, any agreement between the Sellers’ Representative and the Buyer relating to thedefense or settlement of any claims for which the Sellers may be required to indemnify theBuyer pursuant to Section 9 hereof, shall be binding upon all of the Sellers, and no Sellershall have (A) the right to object, dissent, protest or otherwise contest the same or (B)any cause of action against the Sellers’ Representative for any action taken, decision madeor instruction given by the Sellers’ Representative under this Agreement while acting ingood faith, except for intentional fraud or willful breach of this Agreement by the Sellers’Representative;     (ii) the Buyer shall be able to rely conclusively on the instructions and decisions ofthe Sellers’ Representative as to the settlement of any claims for indemnification by theBuyer pursuant to Section 9 hereof and all other actions taken by the Sellers’Representative hereunder, and no Seller shall have any cause of action against the Buyer forany action taken by Buyer in reliance upon the instructions or decisions of the Sellers’Representative;
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     (iii) the provisions of this Section 10.16 are independent and severable, irrevocableand coupled with an interest and shall be enforceable notwithstanding any rights or remediesthat any Seller may have in connection with the transactions contemplated by this Agreement;     (iv) the provisions of this Section 10.16 shall be binding upon the executors, heirs,legal representatives and successors of each Seller, and any references in this Agreement toa Seller or the Sellers shall mean and include the successors to Seller’s rights hereunder,whether pursuant to testamentary disposition, the laws of descent and distribution orotherwise; and     (v) the Sellers’ Representative will have no liability to the Sellers with respect toactions taken or omitted to be taken in good faith in his capacity as the Sellers’Representative,except with respect to any liability resulting directly from the Sellers’Representative’s intentional fraud or willful misconduct. Each Seller agrees to severally,pro rata in accordance with each Seller’s ownership of the Shares on the date hereof, andnot jointly, indemnify and hold harmless the Sellers’ Representative from and against anyand all (A) reasonable expenses incurred by the Sellers’ Representative in connection withthe performance or administration of the Sellers’ Representative’s duties hereunder (the“Expenses”), (B) reasonable legal fees incurred by the Sellers’ Representative in connectionwith the performance or administration of the Sellers’ Representative’s duties hereunder(collectively, “Legal Fees”), which Legal Fees are hereby authorized by the Sellers, and (C)any damages or expenses (“Damages”) asserted against, resulting to, or imposed upon, orincurred or suffered by the Sellers’ Representative without intentional fraud or willfulmisconduct on the part of the Sellers’ Representative, and arising out of or in connectionwith the acceptance, performance or administration by Sellers’ Representative’s dutieshereunder. In the event that the Sellers’ Representative is entitled to indemnification forExpenses, Legal Fees and/or Damages at a time when funds are to be disbursed from the EscrowFund to the Sellers, the Sellers’ Representative may cause the Escrow Agent to pay to theSellers’ Representative out of the amount otherwise to be paid to the Sellers an amountequal to such Expenses, Legal Fees and/or Damages.     (e) In connection with the cancellation of their Outstanding Securities Rights, the Optioneeswill also appoint the Sellers’ Representative to act on their behalf on terms substantiallyidentical to the foregoing provisions of this Section 10.16.     10.17 Seller’s Representative’s Counsel. The Buyer understands and agrees that theSellers’ Representative and/or any of the Sellers will be entitled to retain the services ofBradley Arant Rose & White, LLC (“BARW”) as their attorneys in the event of any dispute between theBuyer or the Companies, on the one hand, and the Sellers’ Representative and/or any of the Sellers,on the other hand, concerning any of this Agreement and the related agreements and the transactionscontemplated thereby or whether otherwise involving the Companies and any Subsidiariesnotwithstanding any result of BARW’s prior representation of the Companies or any Subsidiaries.Notwithstanding the sale of the Securities to the Buyer, the Buyer agrees that, in any disputebetween the Buyer and any Seller regarding this Agreement, any related agreements or any of thetransactions contemplated thereby, neither the Buyer nor the Companies nor the Subsidiaries shallhave the right to assert (and the Buyer shall cause the Companies and any Subsidiaries not toassert) the attorney/client privilege as to pre-Closing communications between the Sellers’Representative, any Seller, the Companies, the Subsidiaries, or any officer, director or employeeof the Companies or any Subsidiaries (collectively, “Designated Persons”) on one hand, and BARW, onthe other hand, to the extent that the privileged communications relate to this Agreement, anyrelated agreements or any of the transactions contemplated thereby. The files generated andmaintained by BARW as a result of the law firm’s representation of the Companies or anySubsidiaries and, if applicable, the Sellers’ Representative, in connection with this Agreement,any related agreements or any of the transactions contemplated thereby shall be and become theexclusive property of the Sellers’ Representative and/or the Sellers, as applicable. Buyer shallnot, nor shall Buyer allow the
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Companies or the Subsidiaries to, assert or otherwise claim thatBARW shall not be eligible to represent the Sellers’ Representative or the Sellers due to anyconflict of interest, and the Buyer waives any such conflict and agrees to cause the Companies andthe Subsidiaries to waive any such conflict.[Signature pages follow]
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     INWITNESS WHEREOF, the parties hereto have duly executed this Securities Purchase Agreementon the date first written.Witness:        [ILLEGIBLE] **/s/ Michael J. Walters**    **MICHAEL J. WALTERS**      Witness:        [ILLEGIBLE] **/s/ Norman Stanley**    **NORMAN STANLEY**       Witness:        [ILLEGIBLE] **/s/ Lonnie S. McMillian**    **LONNIE S. McMILLIAN**              **STONEWAY LLC**