Exhibit 10.37

CONFIDENTIAL TREATMENT

AGREEMENT AND PLAN OF MERGER

This
Agreement and Plan of Merger (this "Agreement") is made and entered into as of December 24, 2007 (the
"Agreement Date"), by and among (i)Cubist Pharmaceuticals, Inc., a Delaware corporation
("Parent"), (ii)Edison Merger Corp., a Delaware corporation and a wholly owned Subsidiary of
Parent ("Merger Sub"), (iii)Illumigen Biosciences, Inc.a Washington corporation (the
"Company"), and (iv)IB Securityholders, LLCas the Holders Representative referred
to herein for the limited purposes specifically set forth herein and only in its capacity as such. Capitalized terms used herein without definition shall have the respective meanings set forth in
Article 1 hereof.

WHEREAS, in accordance with the terms set forth herein, the Merger Sub shall merge with and into the Company (the
"Merger"), following which the Company shall continue as the surviving corporation and a wholly owned subsidiary of the Parent (the surviving
corporation is referred to herein as the "Surviving Corporation"), upon the terms and subject to the conditions set forth in this Agreement and in
accordance with the provisions of Washington Law and Delaware Law;

WHEREAS, the board of directors of the Company (the "Company Board") has carefully
considered the terms of this Agreement and has determined that this Agreement and the terms and conditions of the transactions contemplated hereby, including the Merger, are fair and in the best
interests of, and are advisable to, the Company and the Company Shareholders (as defined below);

WHEREAS, concurrently with the execution and delivery of this Agreement, Company and certain Company Shareholders are executing and
delivering a Voting and Support Agreement in the form ofExhibit Ahereto pursuant to which, among other things, such Company Shareholders are
covenanting to: (i) immediately after the execution and delivery of this Agreement, vote in favor of the adoption of this Agreement and the transactions contemplated hereby, including, but not
limited to, the Merger, (ii) retain ownership of the shares of Company Stock held by them as of the date hereof until the earlier of the consummation of the Merger or the termination of this
Agreement pursuant to Article 10 hereof and (iii) otherwise to support this Agreement and the transactions contemplated hereby; and

WHEREAS, the Company Board will be submitting this Agreement and the performance of the transactions contemplated hereby to the holders of
the shares of the capital stock of the Company (collectively, the "Company Shareholders"), for their adoption by written consent in accordance with
Section 23B.07.040 of Washington Law, and the Company Board is recommending that the Company Shareholders vote for the adoption of this Agreement and the transactions contemplated hereby.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained and intending to be legally
bound hereby, the Parent, the Merger Sub and the Company hereby agree as follows:

---

---



ARTICLE 1
DEFINITIONS

"Abandonment Notice" means the delivery by Parent to the Holders Representative, at any time after the Effective
Time, of a written notice disclosing the Parent's election to henceforth cease development of any and all Contingent Payment Products.

"Abandonment Grantback Notice" has the meaning ascribed to such term in Section 6.10(a) hereof.

"Accountants" has the meaning ascribed to such term in Section 2.7(k) hereof.

"Adverse Recommendation" has the meaning ascribed to such term in Section 7.24(d) hereof.

"Affiliate" shall mean, with respect to any person or entity, any person or entity that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, such person or entity.

"Affiliated Group" has the meaning ascribed to it in Section 1504 of the Code, and in addition includes any analogous combined,
consolidated or unitary group, as defined under any applicable state, local, or foreign income Tax law.

"Agreed Contingent Payment Amount" has the meaning ascribed to such term in Section 2.7(j) hereof.

"Agreement" has the meaning ascribed to such term in the introductory paragraph hereof.

"Agreement Date" has the meaning ascribed to such term in the introductory paragraph hereof.

"Amended Articles" has the meaning ascribed to such term in Section 4.30 hereof.

"Application For Marketing Approval" means a new drug application or a biologics license application or any functional equivalent of such
an application seeking approval to market a pharmaceutical product in the United States or elsewhere.

"Appraiser" has the meaning ascribed to such term in Section 2.7(k) hereof.

"Articles of Merger" has the meaning ascribed to such term in Section 2.2 hereof.

"Available Closing Cash" means the amount of the Company's and its Subsidiaries' cash that, as of the close of business on the business
day immediately preceding the Closing Date, is held on hand by the Company or any of its Subsidiaries or on deposit in any bank account in full compliance with the provisions of Section 6.14
hereof, subject to the following adjustments: (i)minusthe aggregate amount of the Company's and its Subsidiaries' uncollected checks or other
payment orders or instructions as of the close of business on the business day immediately preceding the Closing Date; and (ii)minusthe
aggregate amount of any checks or other payment orders or instructions made, given or executed by the Company and its Subsidiaries on the Closing Date; provided, that the amount of any items listed in
clauses (ii) or (iii) shall not be a reduction of Available Closing Cash to the extent
that such items have been made, given or executed for the purpose of paying one or more Closing Liabilities that resulted in an adjustment of Closing Consideration.

---

2

---



"Blocking Third Party Patent" has the meaning ascribed to such term in Section 2.7(f) hereof.

"Blocking Third Party Patent Application" has the meaning ascribed to such term in Section 2.7(f) hereof.

"Board of Managers" has the meaning ascribed to such term in Section 3.7(a) hereof.

"Breach Dispute Notice" has the meaning ascribed to such term in Section 6.10(c) hereof.

"business day" (whether such term is capitalized or not) means any day (other than Saturday, Sunday or a legal holiday) that banks located
in Boston, Massachusetts are open for business.

"Buyer Group" means Parent and its direct and indirect Subsidiaries, Affiliates, successors, permitted assignees and permitted licensees
of any Compound, any Contingent Payment Product, the Company Program, or any portion of or interest in any of the foregoing, and includes, after the Effective Time, the Surviving Corporation and its
Affiliates, successors, permitted assignees and permitted licensees of any Compound, any Contingent Payment Product, the Company Program, or any portion of or interest in any of the foregoing (all of
the foregoing being collectively referred to as the "Members of the Buyer Group").

"Capitalization Certificate" has the meaning ascribed to such term in Section 8.3(d)(ii) hereof.

"Certificate" or "Certificates" has the meaning ascribed to such term in
Section 3.2 hereof.

"CERCLA" has the meaning ascribed to such term in Section 4.14(b) hereof.

"Closing" has the meaning ascribed to such term in Section 2.2 hereof.

"Closing Consideration" means nine million dollars ($9,000,000.00), subject to the following adjustments:
(i)minusthe aggregate amount of all Closing Liabilities that have not been paid, satisfied or discharged as of the close of business on the
business day immediately preceding the Closing Date; and (ii)plusthe aggregate amount of all Available Closing Cash.

"Closing Date" has the meaning ascribed to such term in Section 2.2 hereof.

---

3

---



"Closing Liabilities" has the meaning ascribed to such term in Section 2.6(b) hereof.

"Code" means the Internal Revenue Code of 1986, as amended.

"Commercially Reasonable Efforts" means the level of efforts and resources reasonably appropriate to develop and/or commercialize (as
applicable) a Section 6.9 Contingent Payment Product in a sustained manner consistent with the efforts and resources that a similarly situated biopharmaceutical company would typically devote
to a product of similar market potential, profit potential, and/or proprietary protection, and similar scientific, technical, development, regulatory and competitive risks, based on market conditions
then prevailing; for this purpose, in order to be considered "similarly situated" to Parent and Company, a comparable biopharmaceutical company shall be presumed not to have
[]*.

"Common Warrants" shall mean all outstanding warrants exercisable for shares of Company Common Stock.

"Company" has the meaning ascribed to such term in the introductory paragraph hereof.

"Company Board" has the meaning ascribed to such term in the recitals hereof.

"Company Common Stock" means the Company's common stock, $.0001 par value per share.

"Company Disclosure Schedule" has the meaning ascribed to such term in Article 4 hereof.

"Company Employee Benefit Plan" has the meaning ascribed to such term in Section 4.13(a) hereof.

"Company Grantback Assets" has the meaning ascribed to such term in Section 6.10(a) hereof.

"Company Indemnified Party" has the meaning ascribed to such term in Section 9.3 hereof.

"Company Intellectual Property" means (i) Company Patents and (ii) all Intellectual Property (other than Company Patents)
owned by, or licensed to, the Company.

"Company Options" means the issued and outstanding options to purchase shares of Company Common Stock granted under the Company Plan.

"Company Patents" means those United States, international and foreign patents and patent applications (including provisional
applications), in each case that are listed inSchedule 4.9of the Company Disclosure Schedule, and any subsequent continuations,
continuations-in-part, divisionals, reexaminations, reissues, restorations (together with supplemental protection certificates in Europe), provisions, foreign counterparts and
extensions thereof.

"Company Plan" means the Company's 2000 Stock Option Plan.

---

4

---



"Company Preferred Stock" means any or all of the Company's Series A Preferred Stock, $.0001 par value per share and any or all of
the Company's Series B Preferred Stock, $.0001 par value per share.

"Company Products" has the meaning ascribed to such term in Section 4.25(a) hereof.

"Company Program" means all of the Company's programs as currently being conducted, and as currently contemplated to be conducted, by the
Company related to the application of the Compound for the treatment of infections caused by HCV.

"Company Program Assets" means all assets of the Company used in or related to the Company Program, including, without limitation,
(a) any Compound, (b) all patent rights, inventions, know-how, trade secrets, trademarks and other intellectual property rights owned or controlled by the Company that are
necessary or useful to carry out such program or to research, develop, make, have made, use, import, export, market, distribute, have distributed, offer to sell, sell and have sold any Compound, and
(c) all non-disclosure, invention assignment and non-competition agreements entered into by the Company with its employees and consultants.

"Company Program Contract" has the meaning ascribed to such term in Section 4.17(a) hereof.

"Company Program Expenditures" means identifiable expenditures specifically related to the development of a Contingent Payment Product
with an indication for the treatment of infections caused by HCV (but excluding overhead and other expense allocations not specifically identifiable thereto).

"Company Registered Intellectual Property" means those United States, international and foreign: (a) patents and patent
applications (including provisional applications); (b) registered trademarks, registered service marks, applications to register trademarks or service marks,
intent-to-use applications, or other registrations or applications related to trademarks or service marks; (c) registered copyrights and applications for copyright
registration; and (d) registered domain names and applications for domain name registrations, in each case that are owned by or licensed to the Company.

"Company Stock" means, as the context may require, any or all of the Company Common Stock and the Company Preferred Stock.

"Company Shareholders" has the meaning ascribed to such term in the recitals hereof.

"Company's Most Recent Balance Sheet" has the meaning ascribed to such term in Section 4.6 hereof.

"Compensation Liabilities" has the meaning ascribed to such term in Section 6.16(b) hereof.

"Complementary Technology" has the meaning ascribed to such term in Section 2.7(f) hereof.

---

5

---



"Compound" means IB657 and any oligoadenylate synthetase protein, []*.

"Confidentiality Agreement" has the meaning ascribed to such term in Section 6.11 hereof.

"Contingent Consideration" means the aggregate amount that Parent is required to pay, if any, pursuant to, and in accordance with, the
provisions of Section 2.7 hereof, to the Holders Representative for the benefit of the Participating Holders.

"Contingent Earn-Out Payment" has the meaning ascribed to such term in Section 2.7(b) hereof.

"Contingent Earn-Out Payment Amount" means, with respect to all Contingent Payment Products, a payment amount equal to
(i) []* of the portion of Net Sales from sales of all Contingent Payment Products, if any, by Buyer Group everywhere in the world during any calendar year after the
Effective Time that is less than or equal to []*,plus, (ii) []* of the portion of Net Sales from
sales of all Contingent Payment Products, if any, by Buyer Group everywhere in the world during any calendar year after the Effective Time that exceeds []*.

"Contingent Earn-Out Payment Year" means each calendar year in which Net Sales of any Contingent Payment Product occur.

"Contingent Payment" means any payment resulting from the Contingent Consideration.

"Contingent Payment Amount" has the meaning ascribed to such term in Section 2.7(g) hereof.

"Contingent Payment Audit" has the meaning ascribed to such term in Section 2.7(h) hereof.

"Contingent Payment Audit Period" has the meaning ascribed to such term in Section 2.7(h) hereof.

"Contingent Payment Certificate" has the meaning ascribed to such term in Section 2.7(g) hereof.

"Contingent Payment Dispute Period" has the meaning ascribed to such term in Section 2.7(h) hereof.

"Contingent Payment Product" means any pharmaceutical composition or product that includes a Compound as an active pharmaceutical
ingredient,providedthat the composition, use, or production of such Compound is the subject of a Valid and Enforceable Claim of a Company Patent,
which Company Patent (i) was owned or controlled by the Company immediately prior to the Effective Time, which ownership or control shall be deemed to have included any subsequent
continuations, continuations in part, divisionals, reexaminations, reissues, restorations (together with supplemental protection certificates in Europe), provisions, foreign counterparts, and
extensions, and (ii) is owned or controlled by Parent or the Surviving Corporation or any of their Affiliates, successors, permitted assignees and permitted licensees at all times following the
Effective Time.

---

6

---



"Corresponding HCV Milestone Payment" means, (i) with respect to HCV Milestone One, the HCV Milestone One Payment, (ii) with
respect to HCV Milestone Two, the HCV Milestone Two Payment, (iii) with respect to HCV Milestone Three, the HCV Milestone Three Payment, (iv) with respect to HCV Milestone Four, the HCV
Milestone Four Payment, (v) with respect to HCV Milestone Five, the HCV Milestone Five Payment, (vi) with respect to HCV Milestone Six, the HCV Milestone Six Payment, (vii) with
respect to HCV Milestone Seven, the HCV Milestone Seven Payment, (viii) with respect to HCV Milestone Eight, the HCV Milestone Eight Payment and (ix) with respect to HCV Milestone Nine,
the HCV Milestone Nine Payment.

"Corresponding HCV []* Milestone Payment" means, (i) with respect to HCV []*
Milestone Four, the HCV []* Milestone Four Payment, (ii) with respect to HCV []* Milestone Five, the HCV []* Milestone
Five Payment, (iii) with respect to HCV []* Milestone Six, the HCV []* Milestone Six Payment and (iv) with respect to HCV
[]* Milestone Seven, the HCV []* Milestone Seven Payment.

"Corresponding Non-HCV Milestone Payment" means, (i) with respect to Non-HCV Milestone One, the
Non-HCV Milestone One Payment, (ii) with respect to Non-HCV Milestone Two, the Non-HCV Milestone Two Payment, (iii) with respect to
Non-HCV Milestone Three, the
Non-HCV Milestone Three Payment, (iv) with respect to Non-HCV Milestone Four, the Non-HCV Milestone Four Payment, (v) with respect to
Non-HCV Milestone Five, the Non-HCV Milestone Five Payment, (vi) with respect to Non-HCV Milestone Six, the Non-HCV Milestone Six Payment and
(vii) with respect to Non-HCV Milestone Seven, the Non-HCV Milestone Seven Payment.

"Corresponding Sales-Based Milestone Payment" means, (i) with respect to Sales-Based Milestone One, the Sales-Based Milestone One
Payment and (ii) with respect to Sales-Based Milestone Two, the Sales-Based Milestone Two Payment.

"CPR" has the meaning ascribed to such term in Section 6.10(c) hereof.

"Cure Notice" has the meaning ascribed to such term in Section 6.10(c) hereof.

"D&O Policy" has the meaning ascribed to such term in Section 6.8 hereof.

"Damages" means all damages, losses, claims, demands, actions, causes of action, diminutions of value, suits, litigations, arbitrations,
liabilities, costs, and expenses, including court costs and the reasonable fees and expenses of legal counsel, in each case, regardless of whether relating to a third-party claim.

"Delaware Law" means the Delaware General Corporation Law, as amended from time to time.

"Dispute Notice" has the meaning ascribed to such term in Section 2.7(i) hereof.

"Disputed Contingent Payment Amount" has the meaning ascribed to such term in Section 2.7(j) hereof.

---

7

---



"Disqualified Shareholder" means (with respect to any securities of the Company) Parent, Merger Sub or any Subsidiary of Parent or Merger
Sub or any of their respective Affiliates or any transferees of any such securities of the Company at any time held by any of the foregoing.

"Dissenting Shares" means shares of Company Stock that are outstanding immediately prior to the Effective Time of the Merger and which are
held by shareholders who shall have not voted in favor of the Merger or consented thereto in writing and who shall have exercised rights of appraisal for such shares of Company Stock in accordance
with Washington Law and who, as of the Effective Time, have not effectively withdrawn or lost such dissenters' rights.

"dollars" (whether such word is capitalized or not) means United States dollars, the lawful currency of the United States of America.

"Effective Time" has the meaning ascribed to such term in Section 2.2 hereof.

"Eligible Company Option" has the meaning ascribed to such term in Section 3.1(c) hereof.

"EMEA" means the European Medicines Agency of the European Union with headquarters in London, United Kingdom.

"Environmental Laws" has the meaning ascribed to such term in Section 4.14(b) hereof.

"Environmental Permits" has the meaning ascribed to such term in Section 4.14(f) hereof.

"EPA" has the meaning ascribed to such term in Section 4.14(c) hereof.

"EPO" means the European Patent Office.

"ERISA" has the meaning ascribed to such term in Section 4.13(c) hereof.

"Escrow Agent" has the meaning ascribed to such term in Section 2.6(a)(ii) hereof.

"Escrow Agreement" has the meaning ascribed to such term in Section 2.6(a)(ii) hereof.

"Escrow Deposit Amount" has the meaning ascribed to such term in Section 2.6(a)(ii) hereof.

"Escrow Funds" shall mean the aggregate amounts being held by the Escrow Agent in escrow pursuant to the Escrow Agreement.

"Facility Leases" means (i) that certain Sublease, dated as of December 1, 2005, by and between the Company and Cell
Therapeutics, Inc and (ii) any lease or sublease that the Company may enter into in connection with relocating its operations to a different location from the location specified in the Sublease
set forth in clause (i) of this definition.

"FDA" means the United States Food and Drug Administration.

---

8

---



"FDCA" has the meaning ascribed to such term in Section 4.25(a) hereof.

"Financial Statements" has the meaning ascribed to such term in Section 4.6 hereof.

"First Commercial Sale" means the []* by a Member of the Buyer Group of a Contingent Payment Product
[]* to a purchaser []* for such sale in whichever country such sale occurs.

"First European Commercial Sale" means the []* by a Member of the Buyer Group of a Contingent Payment Product
[]* to a purchaser []* for such sale []*.

"First U.S. Commercial Sale" means the []* by a Member of the Buyer Group of a Contingent Payment Product
[]* to a purchaser []* for such sale []*.

"Fraud Claim" has the meaning ascribed to such term in Section 9.6(a) hereof.

"Governmental Authority" means any United States (federal, state or local) or foreign government, or governmental, regulatory or
administrative authority, agency or commission.

"Governmental Entity" means any government or any agency, bureau, board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign, as well as any corporations owned or chartered by any such governmental agency, bureau,
board, commission, court, department, official, political subdivision, tribunal or other instrumentality.

"Government Contract" means any Government Prime Contract or Government Subcontract, together with any modifications, amendments or
waivers thereto, as to which either (a) any performance is outstanding; (b) the Government
has not made final payment; (c) any routine cost audits have not been completed; or (d) there is any outstanding audit, investigation, or dispute. A task order or delivery order is not
itself a Government Contract but is a part of the Government Contract under which it was issued.

"Government Prime Contract" means any prime contract, basic ordering agreement, letter contract, or purchase order between the Company and
any state or the Federal government.

"Government Subcontract" means any subcontract, basic ordering agreement, letter subcontract, or purchase order between the Company and
any higher-tier contractor with respect to a Government Prime Contract.

"Grantback Assets" has the meaning ascribed to such term in Section 6.10(a) hereof.

"Grantback Date" means the date upon which Parent grants any and all licenses to the Holders Representative pursuant to
Section 6.10(a) or Section 6.10(d), as applicable.

"Grantback Licensed Patents" has the meaning ascribed to such term in Section 6.10(f) hereof.

"Hazardous Substances" has the meaning ascribed to such term in Section 4.14(c) hereof.

---

9

---



"HCV" means the hepatitis C virus and all genotypes, strains, quasispecies, and clinical isolates thereof.

"HCV First Commercial Sale" has the meaning ascribed to such term in Section 6.9(a) hereof.

"HCV Milestone" means any of HCV Milestone One, HCV Milestone Two, HCV Milestone Three, HCV Milestone Four, HCV Milestone Five, HCV
Milestone Six, HCV Milestone Seven, HCV Milestone Eight and HCV Milestone Nine.

"HCV Milestone One" means the []* by a Member of the Buyer Group of a []*.

"HCV Milestone Two" means the []* by a Member of the Buyer Group of a []*.

"HCV Milestone Three" means the []* by a Member of the Buyer Group for any Contingent Payment Product that
includes treatments of infections caused by HCV []*.

"HCV Milestone Four" means []* of any Contingent Payment Product []* with an indication
for the treatment of infections caused by HCV.

"HCV Milestone Five" means []* of any Contingent Payment Product []* with an indication
for the treatment of infections caused by HCV.

"HCV Milestone Six" means the []* by a Member of the Buyer Group of an []* any Contingent
Payment Product []* with an indication for the treatment of infections caused by HCV.

"HCV Milestone Seven" means the []*, by a Member of the Buyer Group of []* any Contingent
Payment Product []* with an indication for the treatment of infections caused by HCV.

"HCV Milestone Eight" means the []* of a Contingent Payment Product with an indication for treatment of infections
caused by HCV.

"HCV Milestone Nine" means the []* of a Contingent Payment Product with an indication for treatment of infections
caused by HCV.

"HCV Milestone Payment" means any of HCV Milestone One Payment, HCV Milestone Two Payment, HCV Milestone Three Payment, HCV Milestone Four
Payment, HCV Milestone Five Payment, HCV Milestone Six Payment, HCV Milestone Seven Payment, HCV Milestone Eight Payment and HCV Milestone Nine Payment.

"HCV Milestone One Payment" means one million two hundred fifty thousand dollars ($1,250,000.00).

"HCV Milestone Two Payment" means one million two hundred fifty thousand dollars ($1,250,000.00).

---

10

---



"HCV Milestone Three Payment" means three million dollars ($3,000,000.00),providedthat
if the Non-HCV Milestone One Payment has been made by the Parent prior to the occurrence of HCV Milestone Three, then the "HCV Milestone Three
Payment" shall mean zero dollars ($0.00).

"HCV Milestone Four Payment" means thirty million dollars ($30,000,000.00),providedthat
if the HCV []* Milestone Four Payment has been made by the Parent prior to the occurrence of HCV Milestone Four, then the "HCV Milestone Four
Payment" shall mean fifteen million dollars ($15,000,000.00).

"HCV Milestone Five Payment" means twenty five million dollars ($25,000,000.00),providedthat if the HCV []* Milestone Five Payment has been made by the Parent prior to the occurrence of HCV Milestone Five*, then the "HCV Milestone Five
Payment" shall mean twelve million five hundred thousand dollars ($12,500,000.00)*.

"HCV Milestone Six Payment" means ten million dollars ($10,000,000.00),providedthat if
the HCV []* Milestone Six Payment has been made by the Parent prior to the occurrence of HCV Milestone Six, then the "HCV Milestone Six
Payment" shall mean five million dollars ($5,000,000.00).

"HCV Milestone Seven Payment" means five million dollars ($5,000,000.00),providedthat if
the HCV []* Milestone Seven Payment has been made by the Parent prior to the occurrence of HCV Milestone Seven, then the "HCV Milestone Seven
Payment" shall mean two million five hundred thousand dollars ($2,500,000.00).

"HCV Milestone Eight Payment" means thirty million dollars ($30,000,000.00).

"HCV Milestone Nine Payment" means ten million dollars ($10,000,000.00).

"HCV []*Milestone" means any of HCV []*
Milestone Four, HCV []* Milestone Five, HCV []* Milestone Six and HCV []* Milestone Seven.

"HCV []*Milestone Four" means []* of any
Contingent Payment Product []* with an indication for the treatment of infections caused by HCV.

"HCV []* Milestone Five" means []* of any Contingent Payment Product
[]* with an indication for the treatment of infections caused by HCV.

"HCV []* Milestone Six" means the []* by a Member of the Buyer Group of an
[]* any Contingent Payment Product []* with an indication for the treatment of infections caused by HCV.

"HCV []* Milestone Seven" means the []*, by a Member of the Buyer Group of an
[]* any Contingent Payment Product []* with an indication for the treatment of infections caused by HCV.

"HCV []* Milestone Payment" means any of HCV []* Milestone Four Payment, HCV
[]* Milestone Five Payment, HCV []* Milestone Six Payment and HCV []* Milestone Seven Payment.

---

11

---



"HCV []* Milestone Four Payment" means fifteen million dollars ($15,000,000.00), providedthat if the HCV Milestone Four Payment has been made by the Parent prior to the
occurrence of HCV []* Milestone Four,
then the "HCV []* Milestone Four Payment" shall mean zero dollars ($0.00).

"HCV []* Milestone Five Payment" means twelve million five hundred thousand dollars ($12,500,000.00), providedthat if the HCV Milestone Five Payment has been made by
the Parent prior to the occurrence of HCV []* Milestone Five,
then the "HCV []* Milestone Five Payment" shall mean zero dollars ($0.00).

"HCV []* Milestone Six Payment" means five million dollars ($5,000,000.00), providedthat if the HCV Milestone Six Payment has been made by the Parent prior to the
occurrence of HCV []* Milestone Six,
then the "HCV []* Milestone Six Payment" shall mean zero dollars ($0.00).

"HCV []* Milestone Seven Payment" means two million five hundred thousand dollars ($2,500,000.00), providedthat if the HCV Milestone Seven Payment has been made by the
Parent prior to the occurrence of HCV []* Milestone Seven,
then the "HCV []* Milestone Seven Payment" shall mean zero dollars ($0.00).

"Holders Representative" means IB Securityholders, LLC, pursuant to its appointment to serve as such under Section 3.7
hereof.

"Holders Representative Reimbursement Amount" has the meaning ascribed to such term in Section 2.6(a)(i) hereof.

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

"IB657" means the compound known as IB657 that is owned or exclusively licensed by the Company immediately prior to the Effective Time and
is being developed by the Company immediately prior to the Effective Time for the treatment of infections caused by HCV.

"Indebtedness," as applied to any person, means (a) all indebtedness of such person for borrowed money, whether current or funded,
or secured or unsecured, (b) all indebtedness of such person for the deferred purchase price of property or services represented by a note or other security, (c) all indebtedness of such
person created or arising under any conditional sale or other title retention agreement (even if the rights and remedies of the seller or lender under such agreement in the event of default are
limited to repossession or sale of specific property), (d) all indebtedness of such person secured by a purchase money mortgage or other Lien to secure all or part of the purchase price of
property subject to such mortgage or other Lien, (e) all accounts payable, notes payable and accrued expenses of such person, (f) all indebtedness or liabilities of such person that
would be required to be reflected on a balance sheet or referred to in the notes thereto in accordance with generally accepted accounting principles, (g) all indebtedness, liabilities or
obligations of such person that are identified inSchedule 4.10of the Company Disclosure Schedule as "Indebtedness," if any, (h) all other
obligations of such person under leases that have been or must be, in accordance with generally accepted accounting principles, recorded as capital leases in respect of which such person is liable as
lessee, (i) any liability of such person in respect of banker's acceptances or letters of credit, and (j) all indebtedness referred to in clauses (a), (b), (c), (d), (e), (f),
(g), (h) or (i) hereof that is directly or indirectly guaranteed by such person or which such person has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect
of which such person has otherwise assured a creditor against loss.

---

12

---



"Indemnified Party" has the meaning ascribed to such term in Section 9.4 hereof.

"Indemnifying Party" has the meaning ascribed to such term in Section 9.4 hereof.

"Initial Press Release" has the meaning ascribed to such term in Section 11.15 hereof.

"Intellectual Property" means any or all of the following and all rights in, arising out of, or associated therewith: (a) all
United States, international and foreign patents and applications thereof and all reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (b) all inventions (whether patentable or not), invention disclosures, improvements, drug candidates, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (c) all copyrights, copyright registrations and applications
therefor, and all other rights corresponding thereto throughout the world; (d) all industrial designs and any registration and applications therefor throughout the world; (e) all trade
names, logos, common law trademarks and service marks, trademark and service mark registration and applications therefor throughout the world; (f) all databases and data collections and all
rights therein throughout the world; and (g) any similar or equivalent rights to any of the foregoing everywhere in the world.

"IRB" has the meaning ascribed to such term in Section 4.25(d) hereof.

"IRS" has the meaning ascribed to such term in Section 4.13(b) hereof.

"knowledge," when used to qualify a representation or warranty in this Agreement, has the following meaning: Where a representation or
warranty is made to the Company's knowledge, or with a similar qualification, the Company will be conclusively deemed to have knowledge of any matter with respect to which any of Charles Magness,
Shawn Iadonato or Donald Elmer has actual knowledge or which a reasonable investigation of facts or information in the possession of any of the Company's employees, attorneys or agents, including but
not limited to, any information contained in the patent searches described onSchedule 4.9(k)of the Company Disclosure Schedule, prior to the
Effective Time would have disclosed to any of them. Where a representation or warranty is made to the Parent's knowledge, or with a similar qualification, Parent will be conclusively deemed to have
knowledge of any matter with respect to which Parent's Chief Executive Officer, Chief Financial Officer, General Counsel, Senior Vice President of Research and Development and Corporate Development or
Senior Vice President of Commercial Operations has actual knowledge or which a reasonable investigation of facts or information in the possession of any employee, attorney or agent of Parent (or any
of its Subsidiaries or controlled Affiliates) prior to the Effective Time would have disclosed to any of them.

---

13

---



"Liens" means any and all liens, claims, mortgages, security interests, pledges, options, rights of first offer or refusal, charges,
encumbrances, limitations on voting rights, and restrictions on transfer of any kind, except (i) in the case of
references to securities, those arising under applicable securities laws solely by reason of the fact that such securities were issued pursuant to exemptions from registration under such securities
laws, (ii) mechanic's, materialmen's and similar liens, (iii) liens for Taxes not yet due and payable and (iv) liens arising under worker's compensation, unemployment insurance,
social security, retirement and similar legislation.

"LLC Agreement" shall mean the Limited Liability Company Agreement of IB Securityholders, LLC dated December 21, 2007 in the
form attached hereto asExhibit B.

"Lost Certificate or Document Affidavit" has the meaning ascribed to such term in Section 3.4 hereof.

"Material Adverse Effect" means (a) with respect to the Company any change or effect that, when taken individually or together with
all other similar or related adverse changes or effects, is or is reasonably likely to be materially adverse to the business, results of operations and financial condition of the Company and its
Subsidiaries, taken as a whole, or to adversely affect the ability of the Company to consummate the transactions contemplated hereby, and (b) with respect to Parent any change or effect that,
when taken individually or together with all other similar or related adverse changes or effects, is or is reasonably likely to be materially adverse to the business, results of operations and
financial condition of Parent and its Subsidiaries, taken as a whole, or to adversely affect the ability of the Parent or the Merger Sub to consummate the transactions contemplated hereby, except, in
each case of (a) and (b) above, for any such changes or effects resulting from or arising as a result of (i) changes in general political or geopolitical conditions,
(ii) changes in the healthcare, pharmaceutical or biotechnology industries generally, or (iii) changes generally applicable to the economy or securities market in the United States or
the world economy or international securities markets, unless in any such instance such change described in (i), (ii) or (iii) above impacts the Company or Parent, as the case may be, in
a materially disproportionate manner relative to the majority of other similar entities impacted by such change. A decline or any fluctuation in the trading price or prices of Parent Common Stock
shall in no event constitute a Material Adverse Effect with respect to Parent.

"Material Contract" has the meaning ascribed to such term in Section 4.17(a) hereof.

"Maximum Amount" has the meaning ascribed to such term in Section 6.8 hereof.

"Member of the Buyer Group" has the meaning ascribed to such term in the definition of "Buyer
Group" hereof.

"Merger" has the meaning ascribed to such term in the recitals hereof.

"Merger Certificate" has the meaning ascribed to such term in Section 2.2 hereof.

"Merger Consideration" means, collectively, the Closing Consideration, the Contingent Consideration and any amounts distributed pursuant
to Section 2.6(c).

---

14

---



"Merger Consideration Certificate" has the meaning ascribed to such term in Section 2.6(b) hereof.

"Merger Documents" has the meaning ascribed to such term in Section 2.2 hereof.

"Merger Sub" has the meaning ascribed to such term in the introductory paragraph hereof.

"Net Sales" means, with respect to a Contingent Payment Product, gross revenues recorded by Parent and gross revenues recorded by all
other Members of the Buyer Group in the aggregate during any calendar year (or portion of a calendar year as to which Contingent Earn-Out Payments may be due under Section 2.7(b))
arising from sales of such Contingent Payment Product in all countries of the world, except to the extent otherwise provided below in this definition and subject to certain deductions specified
further below. Net Sales shall be computed in accordance with generally accepted accounting principles as prescribed for application by publicly traded companies in the United States, but in any case
such gross revenues shall be reduced by the following amounts to the extent applicable with respect to any sale to a particular customer that is not a Member of the Buyer Group: applicable fees;
discounts; refunds; rebates; replacement or other credits allowed for return of product or as reimbursement for damaged product; freight and other shipping charges not borne by the customer; customs
duties; sales and use taxes, value added taxes (VAT) and any other governmental tax or charge (except income taxes) imposed on or at the time of the importation, exportation, use, transportation, or
sale of product to a particular customer, to the extent not borne by that customer. "Net Sales" shall not, however, include (A) gross revenues
with respect to sales of any Contingent Payment Product that (i) are recorded by any Member of the Buyer Group in a country where such sales by a person who is not a Member of the Buyer Group
would not infringe a Valid and Enforceable Claim of an issued patent in such country that is within the definition of Company Patents, and (ii) either (x) []* or
(y) arise after the time at which there is a generic or unlicensed version or equivalent of such Contingent Payment Product that has been lawfully marketed or received governmental marketing
approval in such country, (B) gross revenues with respect to sales of any Contingent Payment Product for non-commercial use in any country of the world, including sales for
compassionate use or for research, pre-clinical development or clinical development, or (C) gross revenues with respect to sales of any Contingent Payment Product by any member of
the Buyer Group to any other member of the Buyer Group in any country of the world if such sales are for re-sale or re-transfer purposes or for purposes of manufacturing or
packaging a product for re-sale or re-transfer. If a Contingent Payment Product is sold in combination with other products or other components proprietary to the Buyer Group,
then "Net Sales" shall be based on the []*.

"Non-Compliance Grantback Notice" has the meaning ascribed to such term in Section 6.10(d) hereof.

"Non-Compliance Grantback" has the meaning ascribed to such term in Section 6.10(d) hereof.

---

15

---



"Non-Compliance Notice" has the meaning ascribed to such term in Section 6.10(b) hereof.

"Non-HCV Indication" means any indication for treatment other than an indication for treatment of infections caused by HCV.

"Non-HCV Milestone" means any of Non-HCV Milestone One, Non-HCV Milestone Two, Non-HCV
Milestone Three, Non-HCV Milestone Four, Non-HCV Milestone Five, Non-HCV Milestone Six and Non-HCV Milestone Seven.

"Non-HCV Milestone One" means the []* by a Member of the Buyer Group of an []*
for any Contingent Payment Product that includes treatment of a Non-HCV Indication []*.

"Non-HCV Milestone Two" means []* of any Contingent Payment Product for the treatment of a
Non-HCV Indication.

"Non-HCV Milestone Three" means []* of any Contingent Payment Product for the treatment of a
Non-HCV Indication.

"Non-HCV Milestone Four" means the []* by a Member of the Buyer Group of an
[]* any Contingent Payment Product with a Non-HCV Indication.

"Non-HCV Milestone Five" means []* by a Member of the Buyer Group with the
[]*, of an []* any Contingent Payment Product with a Non-HCV Indication.

"Non-HCV Milestone Six" means []* by a Member of the Buyer Group of []* or its
functional equivalent with respect to any Contingent Payment Product for the treatment of a Non-HCV Indication.

"Non-HCV Milestone Seven" means []* by a Member of the Buyer Group of []*,
with respect to any Contingent Payment Product for the treatment of a Non-HCV Indication.

"Non-HCV Milestone Payment" means any of Non-HCV Milestone One Payment, Non-HCV Milestone Two Payment,
Non-HCV Milestone Three Payment,
Non-HCV Milestone Four Payment, Non-HCV Milestone Five Payment, Non-HCV Milestone Six Payment and Non-HCV Milestone Seven Payment.

"Non-HCV Milestone One Payment" means three million dollars ($3,000,000.00), providedthat if the HCV Milestone Three Payment has been made by the Parent prior to the
occurrence of Non-HCV Milestone One, then the
"Non-HCV Milestone One Payment" shall mean zero dollars ($0.00).

"Non-HCV Milestone Two Payment" means (i) thirteen million dollars ($13,000,000.00) upon the first occurrence, if any,
of Non-HCV Milestone Two and (ii) six million five hundred thousand dollars ($6,500,000.00) upon the second occurrence, if any, of Non-HCV Milestone Two.

"Non-HCV Milestone Three Payment" means (i) twenty million dollars ($20,000,000.00) upon the first occurrence, if any,
of Non-HCV Milestone Three and (ii) ten million dollars ($10,000,000.00) upon the second occurrence, if any, of Non-HCV Milestone Three.

---

16

---



"Non-HCV Milestone Four Payment" means (i) ten million dollars ($10,000,000.00) upon the first occurrence, if any, of
Non-HCV Milestone Four and (ii) five million dollars ($5,000,000.00) upon the second occurrence, if any, of Non-HCV Milestone Four.

"Non-HCV Milestone Five Payment" means (i) five million dollars ($5,000,000.00) upon the first occurrence, if any, of
Non-HCV Milestone Five and (ii) two million five hundred thousand dollars ($2,500,000.00) upon the second occurrence, if any, of Non-HCV Milestone Five.

"Non-HCV Milestone Six Payment" means (i) twenty million dollars ($20,000,000.00) upon the first occurrence, if any, of
Non-HCV Milestone Six and (ii) ten million dollars ($10,000,000.00) upon the second occurrence, if any, of Non-HCV Milestone Six.

"Non-HCV Milestone Seven Payment" means (i) ten million dollars ($10,000,000.00) upon the first occurrence, if any, of
Non-HCV Milestone Seven and (ii) five million dollars ($5,000,000.00) upon the second occurrence, if any, of Non-HCV Milestone Seven.

"Option Agreement" means that certain letter agreement between Parent and the Company dated as of October 15, 2007.

"Outside Date" has the meaning ascribed to such term in Section 10.1(g) hereof.

"Parent" has the meaning ascribed to such term in the introductory paragraph hereof.

"Parent Disclosure Schedule" has the meaning ascribed to such term in Article 5 hereof.

"Parent Grantback Assets" has the meaning ascribed to such term in Section 6.10(a) hereof.

"Parent Grantback Work Product" has the meaning ascribed to such term in Section 6.10(a) hereof.

"Parent Indemnified Parties" has the meaning ascribed to such term in Section 9.2 hereof.

"Participating Holders" means those persons (other than the holders of Dissenting Shares, the Company, any Disqualified Shareholder or any
Subsidiary of the Company) who, immediately prior to the Effective Time of the Merger, were holders of shares of Company Common Stock or Company Preferred Stock or holders of Common Warrants or
Eligible Company Options, and whose interests therein, as the result of the Merger, are converted into the right to receive a portion of the Merger Consideration.

"person" (whether such term is capitalized or not) means an individual, corporation, partnership, limited partnership, limited liability
company, syndicate, person (including a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or
instrumentality of a government.

---

17

---



"Personnel" has the meaning ascribed to such term in Section 6.16(a) hereof.

"Phase I" means a clinical trial, either singular or one of several such clinical trials, intended to provide an initial evaluation
of the safety, pharmacokinetic and/or pharmacological effects of a Contingent Payment Product in human subjects, either healthy or diseased, and to gather sufficient information about the drug's
pharmacokinetics and pharmacological effects to permit the design of a well-controlled, scientifically valid, Phase II study; provided that for certain indications, administration
to diseased patients may be required, necessary or useful in order for such trial to provide an indication of activity or effectiveness and in such instance(s) such a trial shall nonetheless be deemed
"Phase I".

"Phase II" means a clinical trial, either singular or one of several such clinical trials, usually but not always conducted after
the completion of a Phase I trial, intended to evaluate the effectiveness and/or side effects and risks of a Contingent Payment Product in human subjects, and to gather sufficient information
about the drug's effectiveness and/or side effects and risks to permit the design of a well-controlled, scientifically valid, Phase III study.

"Phase III" means a clinical trial, usually but not always conducted after the completion of a Phase II trial, that is
intended to gather additional information as to the effectiveness and safety of a Contingent Payment Product in human subjects, in order to evaluate the overall benefits and risks of such Contingent
Payment Product and to provide an adequate basis for physician labeling.

"Post-Approval Notice" has the meaning ascribed to such term in Section 6.5 hereof.

"Preferred Stock Closing Amount" has the meaning ascribed to such term in Section 2.6(a)(iii) hereof.

"Presumed Breach Events" has the meaning ascribed to such term in Section 6.9(b) hereof.

"PTO" means the United States Patent and Trademark Office.

"RCRA" has the meaning ascribed to such term in Section 4.14(b) hereof.

"Reimbursable Expenses" has the meaning ascribed to such term in Section 2.6(a)(i) hereof.

"Required Shareholder Approval" has the meaning ascribed to such term in Section 4.30 hereof.

"Rights Documents" has the meaning ascribed to such term in Section 3.2(a) hereof.

"Sales-Based Milestone" means any of Sales-Based Milestone One and Sales-Based Milestone Two.

"Sales-Based Milestone One" means the first occurrence of Net Sales of Contingent Payment Products in excess of
[]* after the Effective Time.

---

18

---



"Sales-Based Milestone Two" means the first occurrence of Net Sales of Contingent Payment Products in excess of
[]* after the Effective Time other than the year in which the Sales-Based Milestone One occurs.

"Sales-Based Milestone One Payment" means thirty million dollars ($30,000,000.00).

"Sales-Based Milestone Two Payment" means seventy million dollars ($70,000,000.00).

"Sales-Based Milestone Payment" means any of Sales-Based Milestone One Payment and Sales-Based Milestone Two Payment.

"SARA" has the meaning ascribed to such term in Section 4.14(b) hereof.

"SEC" has the meaning ascribed to such term in Section 5.4 hereof.

"Section 6.9 Contingent Payment Product" means any Contingent Payment Product that includes Section 6.9 IB657 as an active
pharmaceutical ingredient and that is being developed for the treatment of infections caused by HCV as an indication.

"Section 6.9 IB657" means []*.

"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

"Services Agreement" means the services agreement between Parent and ServicesCo substantially in the form of Exhibit Cattached hereto.

"ServicesCo" shall mean Lecura, Inc., a Washington corporation.

"Subsidiary" or "Subsidiaries" (whether or not capitalized) of any person means
(i) any corporation, or other legal entity of which such person (either above or through or together with any other Subsidiary or Subsidiaries), owns, directly or indirectly, more than 50% of
the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity or
(ii) any partnership, limited partnership, limited liability company, joint venture, association, trust, or other entity in which such person (directly or indirectly through another Subsidiary
or Subsidiaries) holds more than 50% of the equity interests the holders of which are generally entitled to vote for the election of the governing body of such legal entity.

"Superior Proposal" has the meaning ascribed to such term in Section 7.24(a) hereof.

"Surviving Corporation" has the meaning ascribed to such term in the recitals hereof.

"Surviving Corporation Articles" has the meaning ascribed to such term in Section 2.4(a) hereof.

"Takeover Proposal" has the meaning ascribed to such term in Section 7.24(a) hereof.

---

19

---



"Tax" or "Taxes" (and with correlative meaning,
"Taxable" and "Taxing") means any federal, state, local, or non-United States income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, import value added, excise, export, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, personal property, capital stock, net worth, intangibles, social security, pension insurance contributions,
unemployment, disability, payroll, license, employee, withholding tax, including, but not limited to, on salaries and wages, or other tax or levy or contribution, of any kind whatsoever, including any
interest, penalties, special charges or additions to tax in respect of the foregoing.

"Tax Return" means any return, declaration, report, claim for refund, information return or other document (including any related or
supporting estimates, elections, schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Tax or the administration of
any laws, regulations or administrative requirements relating to any Tax.

"Taxation Authority" means any Governmental Authority having any responsibility for (a) the determination, assessment or collection
or payment of any Tax, or (b) the administration, implementation or enforcement of or compliance with any law relating to any Tax.

"Third Party Consideration Claim" has the meaning ascribed to such term in Section 9.2 hereof.

"Third Party Payment" has the meaning ascribed to such term in Section 2.7(d) hereof.

"Third Party Payment Offset" has the meaning ascribed to such term in Section 2.7(d) hereof.

"Threshold Amount" has the meaning ascribed to such term in Section 9.6(a) hereof.

"Transaction Expenses" means all expenses of each of the Company, its Subsidiaries and the Participating Holders incurred by the Company
or any of its Subsidiaries in connection with the preparation, execution and consummation of this Agreement, the transactions contemplated hereby and the Closing, including all fees and disbursements
of attorneys, accountants and other advisors (including, but not limited to, P2 Partners, LLC) and service providers of the Participating Holders or the Company or any of its Subsidiaries.

"Valid and Enforceable Claim" means (i) a claim of any issued patent which has not expired, lapsed, or been held invalid,
unpatentable or unenforceable by court or other authority of competent jurisdiction in the issuing country in a decision which is not subject to pending appeal or was not or is no longer appealable,
or (ii) a claim in any pending patent application which has not been the subject of a final rejection notice from which an appeal cannot be taken or with respect to which the applicable period
of appeal has expired.

"Washington Law" means the Business Corporation Act of the State of Washington (Title 23B of the Revised Code of Washington), as amended
from time to time.

---

20

---



ARTICLE 2
THE MERGER

2.1The Merger.Subject to the other terms and conditions of this Agreement, including those set forth in
Article 8 hereof, and in accordance with Washington Law and Delaware Law, at the Effective Time (as defined below), Merger Sub shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger.

2.2Consummation of the Merger; Effective Time.Subject to the fulfillment or waiver of all of the conditions
contained in Article 8, as soon as is reasonably practicable after, but in no event later than, the fifth business day following the fulfillment or waiver of such conditions, a closing (the
"Closing") will be held at the offices of Bingham McCutchen LLP in Boston, Massachusetts (or such other place as the parties may agree). The date
on which the Effective Time (as defined below) occurs is referred to herein as the "Closing Date." On the Closing Date, Parent, Merger Sub and the
Company shall cause the Merger to be consummated by filing (i) with the Secretary of State of the State of Delaware a certificate of merger, substantially in the form of Exhibit D-1hereto,
executed in accordance with the relevant provisions of Delaware Law (the "Merger
Certificate") and (ii) with the Secretary of State of the State of Washington articles of merger, substantially in the form ofExhibit
D-2hereto, executed in accordance with the relevant provisions of Washington Law (the "Articles of Merger" and
together with the Merger Certificate, the "Merger Documents"). The term "Effective Time" means the later
of the date and time of the filing of the Merger Documents with (i) the Secretary of State of the State of Delaware and (ii) the Secretary of State of the State of Washington, as
applicable (or such later time as may be agreed by each of the parties hereto and specified in the Merger Documents in accordance with Delaware Law and Washington Law, as applicable).

2.3Effect of the Merger.At the Effective Time, the effect of the Merger shall be as provided in this
Agreement, the Merger Documents and as provided by the applicable provisions of Delaware Law and Washington Law. Without limiting the generality of the foregoing, and subject thereto, upon the
consummation of the Merger, all the property (including, but not limited to, the Company Program Assets and all related Intellectual Property and licenses to Intellectual Property), rights,
privileges, powers and franchises of the Company and the Merger Sub shall remain vested in the Surviving Corporation, and, subject to this Agreement, all debts, liabilities, obligations, restrictions,
disabilities and duties of each of those corporations shall continue to be the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.

2.4Charter; Bylaws.



---

21

---





2.5Directors and Officers.The directors of the Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in accordance with the Surviving Corporation Articles and the bylaws of the Surviving Corporation, and until their respective
successors are duly elected and qualified or until their earlier death, disability, resignation or removal. The officers of the Merger Sub immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified or until their earlier death, disability, resignation or removal.

2.6Closing Date Consideration.



---

22

---





---

23

---



2.7Contingent Consideration.



---

24

---





---

25

---





---

26

---





---

27

---







---

28

---





---

29

---



Appraiser
in the course of the dispute proceeding, is discovered by the Holders Representative after the completion of any determination by an Appraiser, and such material fact, if taken into account
in the calculation of the applicable Contingent Payment Amount, would have resulted in an increase in such Contingent Payment Amount. The fees and expenses of the Appraiser shall be paid by the party
who demands submission of the dispute to appraisal;provided, that if any Contingent Payment Amount calculated on the basis of matters determined by the
Appraiser in any examination conducted pursuant to this Section 2.7(k) is greater than the corresponding Contingent Payment Amount set forth on the relevant Contingent Payment Certificate by an
amount equal to more than the greater of (i) []* or (ii) five percent (5%) of the Contingent Payment Amount set forth in the relevant Contingent Payment
Certificate, then Parent shall pay all of the fees and expenses of the Appraiser; all reasonable out-of-pocket costs and expenses actually incurred by the Holders
Representative in connection with such Contingent Payment Audit; and if any final Contingent Payment Amount calculated on the basis of matters determined by the Appraiser in any examination conducted
pursuant to this Section 2.7(k) is less than the corresponding Contingent Payment Amount set forth on the relevant Contingent Payment Certificate, then (x) Holders Representative shall
pay all of the reasonable out-of-pocket costs and expenses actually incurred by Parent in connection with such Contingent Payment Audit and (y) Parent shall be entitled
to offset the difference between the Contingent Payment Amount set forth on the relevant Contingent Payment Certificate and such lesser amount against any and all amounts that Parent would otherwise
be required to pay pursuant to this Section 2.7 (after giving effect to any other adjustments thereto pursuant to this Section 2.7). For purposes of clarification, any dispute over any
matter relevant to any Contingent Payment Amount that the Appraiser is not authorized to determine pursuant to the foregoing provisions of this Section 2.7(k) shall fall within the purview of
the dispute resolution mechanics contemplated by Section 11.13 hereof.



---

30

---





ARTICLE 3
CONVERSION OF SECURITIES;
EXCHANGE OF CERTIFICATES; PAYMENTS

3.1Conversion of Securities.



---

31

---



shares
of Company Common Stock so converted shall cease to have any rights with respect thereto, except the right to receive the consideration set forth in this Section 3.1(a) following the
surrender of such certificate in accordance with the provisions of Sections 3.1 and 3.2 hereof and Section 3.1 of the LLC Agreement.



All
shares of Company Preferred Stock (other than Dissenting Shares), when so converted pursuant to this Section 3.1(b), shall no longer be outstanding and shall automatically be
cancelled and cease to exist, and each holder of a certificate representing any share of Company Preferred Stock so converted shall cease to have any rights with respect thereto, except the right to
receive the consideration set forth in this Section 3.1(b) following the surrender of such certificate in accordance with Sections 2.6(d), 3.1 and 3.2 hereof.



---

32

---



Option
Notice and Termination Agreement attached asExhibit Bto the LLC Agreement, a portion of any Contingent Consideration that may be
paid or become payable by the Parent to the Holders Representative, such portion to be determined in accordance with the provisions of Section 3.1 of the LLC Agreement; and
(iv) terminate all unvested Company Options without consideration. Notwithstanding the foregoing, the portion of the Contingent Consideration, if any, that any holder of an Eligible Company
Option shall be entitled to receive in exchange for such Eligible Company Option shall be reduced by the total amount (including all principal and interest), if any, owed by such holder to the Company
under any promissory note outstanding at the Effective Time that was made by such holder to the Company in connection with the exercise of any such Eligible Company Option. All Company Options, when
terminated as contemplated under this Section 3.1(c), shall no longer be outstanding and shall automatically cease to exist, and each holder of a Company Option shall cease to have any rights
with respect thereto, except the right to receive the consideration set forth in this Section 3.1(c) with respect to any Company Option that is an Eligible Company Option.



3.2Exchange of Certificates and Instruments.



---

33

---



and
collectively the "Certificates") and the grant and other documents evidencing any Eligible Company Options or Common Warrants (the
"Rights Documents") held by such Participating Holder, or Lost Certificate or Document Affidavits pursuant to Section 3.4 hereof. Pursuant to
Section 2.6(d), the receipt by Parent and the Holders Representative of such transmittal letter and the Certificates for outstanding shares of Company Preferred Stock shall be a condition
precedent to the delivery by Parent to holders of any such shares of Company Preferred Stock of any portion of the Preferred Stock Closing Amount to which such Participating Holder may be entitled
under Sections 2.6(a) and 2.6(d) of this Agreement in respect of the shares of Company Preferred Stock held by such Participating Holder. Pursuant to Section 3.1 of the LLC
Agreement, the receipt by Parent and the Holders Representative of such transmittal letter and the Certificates and Rights Documents for all other shares of Company Stock, Eligible Company Options or
Common Warrants held by any Participating Holder shall be a condition precedent to the distribution by the Holders Representative of any portion of the Contingent Consideration to which such
Participating Holder may be or become entitled under Sections 2.7(a) or 2.7(b) of this Agreement. Whether or not surrendered as contemplated by this Section 3.2(a), each Certificate and
Rights Document shall be deemed at any time after the Effective Time to represent only the right to receive following such surrender the applicable amounts of the Merger Consideration payable with
respect thereto pursuant to this Agreement and Section 3.1 of the LLC Agreement. The transmittal materials contemplated by this Section 3.2(a) may include any certifications
Parent may request with respect to compliance with any withholding obligations of Parent or the Surviving Corporation under the Code or other applicable Tax law.



---

34

---



3.3No Transfers.



---

35

---



3.4Lost Certificates, Etc.In the event that any Certificate or Rights Document has been lost, stolen, or
destroyed, then upon receipt by Parent or the Holders Representative, as applicable, of appropriate evidence as to such loss, theft, or destruction, and to the ownership of such Certificate or Rights
Document by the person claiming such Certificate or Rights Document to be lost, stolen, or destroyed, the receipt by Parent or the Holders Representative, as applicable, (or their designees) of an
affidavit (a "Lost Certificate or Document Affidavit") with appropriate and customary indemnification and the surrender pursuant to
Section 3.2(a) hereof by such person of all other Certificates and Rights Documents registered in the name of such person that have not been lost, stolen, destroyed or previously surrendered,
then such person shall be entitled to receive the appropriate portion of the Merger Consideration pursuant to the provisions of Sections 2.6 and 2.7 hereof and Section 3.1 of
the LLC Agreement.

3.5No Interest.Except as otherwise provided in Section 2.7(l), no interest shall be paid or shall
accrue on the Merger Consideration or any portion thereof payable by Parent or the Holders Representative pursuant to, and in accordance with, the provisions of this Agreement or the LLC
Agreement.

3.6Dissenting Shares.



---

36

---



and
in accordance with, the provisions of Article 9 hereof in connection with any Damages suffered or incurred by Parent in connection with such exercise of appraisal rights (other than costs
incurred by Parent as a result of participation at its own expense, as described above).

3.7Holders Representative.



---

37

---







---

38

---



negligence.
The death or incapacity, or dissolution or other termination of existence, of any Participating Holder shall not terminate the authority and agency of the Holders Representative. By virtue
of the adoption of this Agreement and the approval of the Merger by the shareholders of the Company, each Participating Holder (regardless of whether or not such Participating Holder votes in favor of
the adoption of this Agreement and the approval of the Merger, whether at a meeting or by written consent in lieu thereof) hereby agrees to the provisions of this Agreement, including, without
limitation, the provisions of this Section 3.7 and Article 9 hereof.



---

39

---



ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent, the Merger Sub and the Surviving Corporation as follows as of each of (a) the Agreement Date and
(b) the Closing Date, subject in each case to such exceptions as are set forth in the Company's disclosure schedule attached to this Agreement which disclosure schedule complies with
Section 11.5 hereof (the "Company Disclosure Schedule"):

4.1Incorporation; Authority.The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Washington and has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as presently conducted
and as presently proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction where such qualification is required and in which failure to
so qualify would have a Material Adverse Effect on the Company. The Company has delivered to Parent complete and correct copies of its articles of incorporation and by-laws, in each case
with all amendments thereto, which articles of incorporation and by-laws are in full force and effect.

4.2Authorization and Enforceability.The Company has all requisite corporate power to enter into this Agreement
and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company, subject only to the approval of the Merger and the adoption of this Agreement by the Company's shareholders. The Company Board has
(i) approved and declared the advisability of this Agreement and the transactions contemplated hereby and (ii) determined that the Merger is in the best interests of the shareholders of
the Company and is on terms that are fair to such shareholders. This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except as such enforcement may be limited by (i) the effect of bankruptcy, insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights, or (ii) the rules governing the availability of specific performance, injunctive relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in law or equity.

4.3Governmental and Other Third-Party Consents, Non-Contravention, Etc.No consent, approval, order
or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection
with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for (i) the filing of Merger Documents with the Delaware Secretary of
State and Washington Secretary of State, as applicable; and (ii) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not have a
Material Adverse Effect on the Company and would not prevent, or materially alter or delay any of the transactions contemplated by this Agreement. The execution, delivery, and performance of this
Agreement and the consummation of such transactions will not violate (a) any provision of the Company's articles of incorporation or by-laws, as amended and in effect at the
Effective Time, (b) any order, judgment, injunction, award or decree of any court or state or federal governmental or regulatory body applicable to the Company, or (c) any judgment,
decree, order, statute, rule, regulation, agreement, instrument, or other obligation to which the Company is a party or by or to which it or any of its assets is bound or subject, which violation will
not have a Material Adverse Effect on the Company.

---

40

---



4.4Capitalization.The authorized and outstanding capital stock and other securities of the Company are as set
forth inSchedule 4.4of the Company Disclosure Schedule including (1) the total number of shares of Company Common Stock for which all
shares of Company Preferred Stock outstanding immediately prior to the Effective Time are then convertible in the aggregate, (2) the number of shares of Company Common Stock for which each
share of Company Preferred Stock outstanding immediately prior to the Effective Time is then convertible, (3) the total number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time, (4) a list of each Eligible Company Option and each Common Warrant, the exercise price per share thereof, the aggregate exercise price thereof and the
name of the holder thereof, (5) the number of shares of Company Common Stock issuable upon exercise of the Common Warrants immediately prior to the Effective Time, (6) the total number
of shares of Company Common Stock issuable upon exercise of all Eligible Company Options, (7) the aggregate exercise price of those Eligible Company Options that are entitled to receive any
portion of the Merger Consideration pursuant to Section 3.1(c) hereof, and (8) the aggregate exercise price of those Common Warrants, if any, that are outstanding immediately prior to
the Effective Time and that are entitled to receive any portion of the Merger Consideration pursuant to Section 3.1(d)(II) hereof. All of such outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid and non-assessable, and all of such outstanding shares and other securities are owned of record as set forth in Schedule 4.4of the Company
Disclosure Schedule, and were issued in compliance with all applicable laws, including securities laws, and all
applicable preemptive or similar rights of any person. No person has a valid right to rescind any purchase of any shares of the Company's capital stock or other securities. Other than as set forth on Schedule 4.4of the Company Disclosure Schedule, there are no agreements or other obligations to which the Company is a party or by which it is
bound to purchase or sell any shares of its capital stock or other securities, and no outstanding convertible or exchangeable securities, options, warrants or other rights to acquire from the Company
any shares of its capital stock or other securities.Schedule 4.4of the Company Disclosure Schedule sets forth the name of each person who holds
any option, warrant or other right to acquire shares of the Company's capital stock or other securities, the number and type of shares or securities subject to such option or right, the
per-share exercise price payable therefor and, in the case of warrants, the priority and amount of consideration to be payable upon exercise thereof. The per-share exercise
price payable for each of the options set forth onSchedule 4.4of the Company Disclosure Schedule is equal to or greater than the fair market value of
the Company Common Stock as of the date of grant of each such option. Each option set forth onSchedule 4.4of the Company Disclosure Schedule, and all
options outstanding immediately prior to the Effective Time, have been, or shall be, as the case may be, granted under, and are or shall be, as the case may be, subject to, all of the terms of the
Company Plan.

4.5Subsidiaries.The Company does not have any Subsidiaries or own any legal and/or beneficial interests in or
to any other business enterprise or other person.

4.6Financial Statements.Attached toSchedule 4.6of the
Company Disclosure Schedule are copies of the audited balance sheet of the Company as of December 31, 2006, and the related audited statements of income and retained earnings and
cash flows, respectively, of the Company, for the fiscal year ended on such date, certified by Moss Adams LLC, independent

---

41

---



public
accountants, and copies of the unaudited balance sheet of the Company as of June 30, 2007, and the related unaudited statements of income and retained earnings and cash flows,
respectively, of the Company for the six months then ended (collectively, the "Financial Statements" and such unaudited balance sheet as of
June 30, 2007, the "Company's Most Recent Balance Sheet"). Such financial statements have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods; such balance sheet presents fairly and accurately in all material respects the financial condition of the Company as of its
respective date; and such statements of income and retained earnings and cash flows, respectively, presents fairly and accurately in all material respects the results of operations and retained
earnings, or cash flows, as the case may be, of the Company for the period covered thereby, except, in the case of unaudited interim financial statements, subject to normal year-end
adjustments that have not been and are not expected to be material in amount.

4.7Absence of Certain Changes.Since the date of the Company's Most Recent Balance Sheet, except as disclosed
onSchedule 4.7of the Company Disclosure Schedule, there has not been any: (i) change in the assets, liabilities, sales, income, or
business of the Company or in its relationships with suppliers, customers, or lessors, other than changes that were both in the ordinary course of business and have not caused, either in any case or
in the aggregate, a Material Adverse Effect on the Company; (ii) acquisition or disposition by the Company of any material asset or property; (iii) damage, destruction or loss, whether
or not covered by insurance, materially and adversely affecting, either in any case or in the aggregate, the business or any material property of the Company; (iv) declaration, setting aside or
payment of any dividend or any other distributions in respect of any shares of capital stock of the Company; (v) issuance of any shares of the capital stock of the Company or any direct or
indirect redemption, purchase, or other acquisition by the Company of any such capital stock; (vi) loss of the services of any officer or key employee or consultant, or any increase in the
compensation, pension, or other benefits payable or to become payable by the Company to any of its officers or key employees or consultants, or any bonus payments or arrangements made to or with any
of them; (vii) forgiveness or cancellation of any debts or claims by the Company or any waivers of any rights; (viii) entry by the Company into any transaction with any of its
Affiliates; (ix) incurrence by the Company of any obligations or liabilities, whether absolute, accrued, contingent or otherwise (including without limitation liabilities as guarantor or
otherwise with respect to obligations of others), other than obligations and liabilities incurred in the ordinary course of business with persons other than Affiliates of the Company;
(x) incurrence or imposition of any Lien on any of the assets, tangible or intangible, of the Company; or (xi) discharge or satisfaction by the Company of any Lien or payment by the
Company of any obligation or liability (fixed or contingent) other than (A) current liabilities included in the Company's Most Recent Balance Sheet, (B) current liabilities to persons
other than Affiliates of the Company incurred since the date of the Company's Most Recent Balance Sheet in the ordinary course of business, and (C) current liabilities incurred in connection
with the transactions contemplated hereby and as disclosed inSchedule 4.7of the Company Disclosure Schedule.

4.8Properties and Assets.



---

42

---





4.9Intellectual Property.



---

43

---





---

44

---





4.10Indebtedness.The Company has no Indebtedness outstanding except as set forth in Schedule 4.10of the Company
Disclosure Schedule. The Company is not in default with respect to any outstanding Indebtedness or any agreement,
instrument, or other obligation relating thereto and no such Indebtedness or any agreement, instrument or other obligation relating thereto purports to limit the issuance of any securities by the
Company, or (except as set forth onSchedule 4.10of the Company Disclosure Schedule) the operation of its businesses. Complete and correct
copies of all agreements, instruments, and other obligations (including all amendments, supplements, waivers, and consents) relating to any Indebtedness of the Company have been furnished to Parent.

4.11Absence of Undisclosed Liabilities.Except to the extent (a) reflected or reserved against in the
Company's Most Recent Balance Sheet, (b) described onSchedule 4.11of the Company Disclosure Schedule, or (c) the payment or
satisfaction of which has been provided for by cash in the Company's bank accounts or otherwise in its possession, the Company does not have any liabilities or obligations, whether accrued, absolute,
contingent, or otherwise (including, without limitation, liabilities, as guarantor or otherwise, in respect of obligations of others) that would be required to be reflected or reserved against in a
balance sheet prepared in accordance with generally accepted accounting principles or referred to in the notes thereto.

---

45

---



4.12Taxes.



---

46

---





---

47

---





---

48

---







For
purposes of this Section 4.12, references to the Company shall be deemed to include the Company and all of its Subsidiaries.

4.13Employee Benefit Plans.



---

49

---





---

50

---



4.14Safety and Environmental Matters.Except as set forth on Schedule 4.14of the Company Disclosure Schedule:



---

51

---





4.15Labor Relations.The Company is and has been in compliance with all federal and state laws respecting
employment and employment practices, terms and conditions of employment, wages and hours, and nondiscrimination in employment, and is not and has not been engaged in any unfair labor practice. There
is no charge or proceeding pending, or to the Company's knowledge, threatened, against the Company alleging unlawful discrimination in employment practices or unfair labor practice before any court or
agency, including without limitation the National Labor Relations Board. There is no labor strike, dispute, work slow-down, or work stoppage pending, or to the Company's knowledge,
threatened against or involving the Company. No one has petitioned within the last five years or is now petitioning for union representation of any of the employees of the Company. No grievance or
arbitration proceeding arising out of or under any collective bargaining agreement is pending against the Company and no claim therefor has been asserted. None of the employees of the Company is
covered by any collective bargaining agreement, and no collective bargaining agreement is currently being negotiated by the Company. The Company has not experienced any work stoppage or other labor
difficulty during the last five years.

---

52

---



4.16Litigation.Except as set forth inSchedule 4.16of
the Company Disclosure Schedule, no litigation, arbitration, action, suit, proceeding, or investigation (whether conducted by any judicial or regulatory body, arbitrator, or other person) is pending
(as evidenced by the Company's receipt of service of process or other written notice of such pendency), or to the Company's knowledge, threatened, against the Company, nor is there any basis therefor
known to the Company.

4.17Material Contracts.



---

53

---





4.18Potential Conflicts of Interest.No officer, director, or, to the Company's knowledge, shareholder of the
Company (a) owns, directly or indirectly, any interest (excepting not more than five percent (5%) stock holdings for investment purposes in securities of publicly held and traded companies) in,
or is an officer, director, employee, or consultant of, any person that furnishes or sells services, drug candidates or products that the Company furnishes or sells or proposes to furnish or sell or
is a lessor, lessee, customer, or supplier of the Company; (b) owns, directly or indirectly, in whole or in part (other than solely as a result of his or its ownership of Company Stock), any
tangible or intangible property that the Company is using or the use of which is necessary for the business of the Company; or (c) to the Company's knowledge, has any cause of action or other
claim whatsoever against, or owes any amount to, the Company, except for claims in the ordinary course of business, including, without limitation, claims for accrued vacation pay, accrued benefits
under Employee Benefit Plans, and similar matters and agreements.

4.19Insurance.Schedule 4.19of the Company Disclosure
Schedule lists the policies of products liability, theft, fire, liability, worker's compensation, life, property and casualty, directors and officers, and other insurance owned or held by the Company.
Such policies of insurance are of the kinds, cover such risks, and are in such amounts and with such deductibles and exclusions, as are consistent with prudent business practice for companies in the
Company's line of business and of a similar size and location. All such policies are in full force and effect; are sufficient for compliance by the Company with all requirements of law and of all
agreements to which the Company is a party; are valid, outstanding, and enforceable policies and provide that they will remain in full force and effect through the respective dates set forth on Schedule 4.19of the Company Disclosure Schedule; and will not in any way be affected by, or terminate or lapse as a result of the consummation
of, the transactions contemplated by this Agreement.

---

54

---



4.20Bank Accounts, Signing Authority, Powers of
Attorney.Schedule 4.20of the Company Disclosure Schedule sets forth a complete and accurate list of all
bank, brokerage, and other accounts, and all safe-deposit boxes, of the Company, together with the balances and contents of each, and the persons with signing or other authority to act
with respect thereto. Except as so listed, the Company does not have any account or safe deposit box in any bank, and no person has any power, whether singly or jointly, to sign any checks on behalf
of the Company, to withdraw any money or other property from any bank, brokerage, or other account of the Company, or to act under any agency or power of attorney granted by the Company at any time
for any purpose.Schedule 4.20of the Company Disclosure Schedule also sets forth the names of all persons authorized to borrow money or sign
notes on behalf of the Company.

4.21Relationships With Suppliers and Licensors.No current supplier to the Company has notified the Company of
an intention to terminate or substantially alter its existing business relationship with the Company, nor has any licensor under a license agreement with the Company notified the Company of an
intention to terminate or substantially alter the Company's rights under such license, which termination or alteration would have a Material Adverse Effect on the Company.

4.22Employment of Officers, Employees.The name and current annual salary and other compensation payable by the
Company to each of its employees including but not limited to wages, salary, commissions, normal bonus, profit sharing, deferred compensation, and other extra compensation) are as set forth on Schedule 4.22of the Company Disclosure Schedule. Except to the extent otherwise disclosed on Schedule 4.22of the Company Disclosure Schedule, none of the
current or former officers, directors, employees or consultants of the Company is a
party to, or the beneficiary of, any agreement, plan or arrangement that provides for any payment (whether of severance pay or otherwise) becoming due to such current or former officer, director,
employee or consultant upon termination of his or her relationship with the Company or as a result of the Merger, or that provides for the vesting, acceleration of payment, or increases in the amount
of any benefit payable to or in respect of such current or former director, officer, consultant, or employee upon termination of his or her relationship with the Company or as a result of the Merger.

4.23Minute Books.The minute books of the Company made available to Parent for inspection accurately record
therein all actions taken by the Company Board, all committees thereof, and the Company's shareholders.

4.24Brokers.Except as set forth onSchedule 4.24of the
Company Disclosure Schedule, no finder, broker, agent, or other intermediary has acted for or on behalf of the Company in connection with the negotiation, preparation, execution, or delivery of this
Agreement or the consummation of the Merger or the other transactions contemplated hereby.Schedule 4.24of the Company Disclosure Schedule sets forth
the compensation or payment obligations of the Company with respect to any such finder, broker, agent or other intermediary. The Company shall have provided to Parent a true, correct and complete copy
of any and all engagement letters or other agreements between the Company and any such finder, broker, agent or other intermediary.

---

55

---



4.25Regulatory Compliance.



---

56

---





4.26Compliance with Other Agreements, Laws, Etc.To Company's knowledge, it has complied with, and is in
compliance with, (a) all laws, statutes, governmental regulations and all judicial or administrative tribunal orders, judgments, writs, injunctions, decrees or similar commands applicable to
its business, (b) all unwaived terms and provisions of all contracts, agreements and indentures to which the Company is a party, or by which the Company or any of its properties is subject, and
(c) its articles of incorporation and by-laws, respectively, each as amended to date; in the case of the preceding clauses (a) and (b), excepting only any such noncompliance
that, both individually and in the aggregate, have not resulted and will not result in any Material Adverse Effect with respect to the Company. The Company has not been charged with, or to its
knowledge, been under investigation with respect to, any violation of any provision of any federal, state, or local law or administrative regulation.

---

57

---



4.27Permits, Licenses, and Programs; No Debarment.



4.28Manufacturing and Marketing Rights.The Company has not granted rights to manufacture, produce, distribute,
assemble, license, market, or sell its products to any other person and is not bound by any agreement that affects the Company's exclusive right to manufacture, produce, distribute, assemble, license,
market, or sell its products.

4.29Distribution of Merger Consideration.The Merger Consideration, when distributed in accordance with the
terms of this Agreement and the LLC Agreement, will have been distributed to the holders of Company Stock in accordance with the provisions of the Company's articles of incorporation in effect
immediately prior to the Effective Time and any other document or agreement among the Company and such holders related to the distribution of the Merger Consideration.

4.30Required Shareholder Approval.The only votes, consents and approvals of the shareholders of the Company
required pursuant to Title 23B of the Revised Code of Washington to adopt this Agreement, approve the terms of this Agreement and approve the Merger and the transactions contemplated hereby (the
"Required Shareholder Approval") are as follows: (A) the affirmative vote of the holders of a majority of the outstanding voting power of the
Company Preferred Stock and the Company Common Stock, voting together as single class, in favor of the adoption of this Agreement and the approval
of the Merger and the terms thereof; (B) the affirmative vote of the holders of a majority of the outstanding shares of Company Preferred Stock, voting separately as a class, in favor of the
adoption of this Agreement and the approval of the Merger and the terms thereof; and (C) the affirmative vote of (i) the holders of a majority

---

58

---



of
the outstanding voting power of the Company Preferred Stock and the Company Common Stock, voting together as single class, (ii) the holders of a majority of the outstanding shares of Company
Preferred Stock, voting separately as a class, and (iii) the holders of a majority of the outstanding voting power of the Company Common Stock, approving the amendment of the Company's Articles
of Incorporation substantially in the form ofExhibit Iattached hereto (the "Amended Articles").

4.31Government Contract Matters.



---

59

---





4.32Disclosure.No representation or warranty by the Company in this Agreement or in any exhibit or Schedule
hereto contains or will contain at the time made or deemed to be made pursuant to this Agreement any untrue statement of a material fact or omits or will omit to state a material fact required to be
stated herein or therein or necessary to make the statements contained herein or therein on the whole not false or misleading.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE MERGER SUB

Parent and the Merger Sub hereby represent and warrant to the Company as follows as of each of (a) the Agreement Date and (b) the Closing Date,
subject in each case to such exceptions as are set forth in the Parent Disclosure Schedule attached to this Agreement (the "Parent Disclosure
Schedule"):

5.1Incorporation; Authority.Each of Parent and the Merger Sub is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as
presently conducted and as presently proposed to be conducted. Each of Parent and the Merger Sub is duly qualified to transact business and is in good standing in each jurisdiction where such
qualification is required and in which failure to so qualify would have a Material Adverse Effect on the Parent.

---

60

---



5.2Ownership of Merger Sub; No Prior Activities.Merger Sub is a direct, wholly-owned Subsidiary of Parent,
was
formed solely for the purpose of engaging in the transactions contemplated by this Agreement and has engaged in no business activity other than as contemplated by this Agreement.

5.3Authorization and Enforceability.Each of Parent and the Merger Sub has all requisite corporate power to
enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent and the Merger Sub, subject only to the adoption of this Agreement by Parent as the sole stockholder of Merger Sub (which shall
be effected by written consent immediately following the execution and delivery of this Agreement). This Agreement has been duly executed and delivered by each of Parent and the Merger Sub and
constitutes the valid and binding obligation of each of Parent and the Merger Sub, enforceable in accordance with its terms, except as such enforcement may be limited by (i) the effect of
bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights, or (ii) the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and general principles of equity, regardless of whether considered in a proceeding in law or equity.

5.4Governmental and Other Third-Party Consents, Non-Contravention, Etc.No consent, approval, order
or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of Parent or Merger Sub is required in
connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for (i) the filing of Merger Documents with the Delaware
Secretary of State and Washington Secretary of State, as applicable; (ii) the filing by Parent of such reports and information with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder, as may be required in
connection with this Agreement, the Merger and the other transactions contemplated by this Agreement; and (iii) such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on Parent and would not prevent, or materially alter or delay any of the transactions contemplated by this Agreement. The execution,
delivery, and performance of this Agreement and the consummation of such transactions will not violate (a) any provision of Parent's or the Merger Sub's Certificate of Incorporation or
by-laws, as amended and in effect, (b) any order, judgment, injunction, award or decree of any court or state or federal governmental or regulatory body applicable to Parent or the
Merger Sub, or (c) any judgment, decree, order, statute, rule, regulation, agreement, instrument, or other obligation to which Parent or the Merger Sub is a party or by or to which such entity
or any of its assets is bound or subject, which violation will not have a Material Adverse Effect on Parent or Merger Sub. Parent's Board of Directors has in good faith estimated that the present
value of the Merger Consideration as of the Effective Time will not equal or exceed the minimum size-of-transaction threshold that would require notification under the HSR Act.

---

61

---



5.5Brokers.Except as set forth onSchedule 5.5of the Parent
Disclosure Schedule, neither Parent nor Merger Sub have incurred, nor will they incur, any liability for brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar
charges in connection with this Agreement or the consummation of the transactions contemplated hereby.

5.6Adequacy of Funds.Parent currently has and will at the Closing have adequate financial resources to pay the
Closing Consideration as contemplated by Section 2.6 hereof, and Parent will have adequate financial resources to satisfy its payment obligations under Section 2.7 hereof, when such
payment obligations are due.

5.7Absence of Certain Changes.Since March 31, 2007, there has not been any change in the business,
financial condition or prospects, or business relationships of Parent that has or is reasonably likely to have a materially adverse effect on the ability or commitment of Parent to fulfill its
obligations under this Agreement, including but not limited to those under Section 6.9 hereof.

ARTICLE 6
MUTUAL COVENANTS.

6.1Satisfaction of Conditions.Each of the parties will use commercially reasonable efforts to cause the
satisfaction as promptly as possible of the conditions contained in Sections 8.1 through 8.3 hereof that impose obligations on it or require action on its part or the part of any of its
shareholders or Affiliates.

6.2Further Assurances.Subject to the terms and conditions set forth in this Agreement, from time to time both
before and after the Effective Time, the Company, Parent, Merger Sub and the Holders Representative will use (and each of the foregoing will use commercially reasonable efforts to cause their
respective members, officers and directors to use) their respective commercially reasonable efforts, as promptly as is practicable, to take or cause to be taken all actions, and to do or cause to be
done all other things, as are necessary, proper, or advisable to consummate and make effective the Merger and the other transactions contemplated hereby.

6.3Regulatory Approval; Further Assurances.



---

62

---





6.4Amended Articles and Required Shareholder Approval.Following the execution of this Agreement, the Company
will (i) promptly solicit the Required Shareholder Approval by written consent and (ii) after having received the Required Shareholder Approval, file the Amended Articles with the
Secretary of State of the State of Washington. The Company Board will recommend to its shareholders the adoption and approval of this Agreement and the transactions contemplated hereby and the other
matters to be submitted to its shareholders in connection therewith, subject to withdrawal only as allowed under Section 7.24(d).

6.5Notice of Merger and Appraisal Rights; Notice of Shareholder Approval.As promptly as practicable following
the Agreement Date, the Company shall prepare and deliver to the shareholders of the Company a Notice of Merger and Appraisal Rights (the "Shareholder
Notice"), which Shareholder Notice shall comply in all respects with the requirements of

---

63

---



Washington
Law. As promptly as practicable after the Required Shareholder Approval has been obtained, the Company shall prepare and deliver a notice (the
"Post-Approval Notice") informing the Company's shareholders of the written consent obtaining the Required Shareholder Approval, which
Post-Approval Notice shall comply in all respects with the requirements of Washington Law.

6.6Consents.The Company shall use commercially reasonable efforts to obtain the consents, waivers and
approvals necessary for the consummation of the Merger and the transactions contemplated under this Agreement (all of such consents, waivers and approvals having been set forth in Schedule 6.6of the
Company Disclosure Schedule), including, but not limited to, all consents, waivers and approvals that are necessary or required in
connection with, or as a result of, the Merger to preserve all of the Company's rights and benefits in its business, assets, properties, leases and contracts following the Merger and without incurring
any additional or special liability, or accelerating any existing liability or obligation, in connection with or under its business, assets, properties, leases and contracts following the Merger.

6.7Notification of Certain Matters.



---

64

---



6.8Indemnification of Directors and Officers.From and after the Effective Time, Parent shall cause the
Surviving Corporation to fulfill and honor in all respects the obligations, to the extent legally permissible, of the Company to its directors and officers pursuant to the indemnification provisions
under the Company's articles of incorporation or by-laws as in effect on the date hereof. Parent shall use commercially reasonable efforts to cause the Surviving Corporation to maintain in
effect for six (6) years from the Effective Time the current policies of directors' and officers' liability insurance (the "D&O Policy")
maintained by the Company (provided that Surviving Corporation may substitute in place thereof policies reasonably satisfactory to it of at least the same coverage containing terms and conditions
which are not materially less advantageous to the individuals covered by the D&O Policy);provided, that in no event shall the Surviving Corporation be
required to pay premiums for such insurance in excess of one hundred seventy-five percent (175%) of premiums currently paid by the Company (the"Maximum
Amount") and if current insurance coverage cannot be maintained or obtained for the Maximum Amount, the Surviving Corporation shall obtain as much directors' and officers'
liability insurance as can be obtained by paying an annual premium not in excess of the Maximum Amount. Nothing in this Section 6.8 shall obligate Parent or the Surviving Corporation to make
any payments, other than for premiums not to exceed the Maximum Amount, in respect of the D&O Policy. If at any time the Surviving Corporation or Parent is required to make indemnification payments to
persons who were directors, officers or employees of the Company at or prior to the Effective Time pursuant to this Section 6.8, then Parent shall have the right to make a claim for
indemnification therefor pursuant to Section 9.2 hereof,providedthe indemnifiable claim against the former Company director, officer or
employee is of a type that is subject to indemnification coverage pursuant to Section 9.2.

6.9Due Diligence Obligations.



---

65

---





---

66

---



6.10Grantback Provisions.



---

67

---





---

68

---





---

69

---





---

70

---



6.11Confidentiality.    Any and all non-public information disclosed or made available by Parent to
the Company or by the Company to Parent as a result of the negotiations or due diligence investigations leading to the execution of this Agreement and the consummation of the transactions contemplated
under this Agreement, or in furtherance thereof, including, without limitation, any information disclosed or made available pursuant to Section 7.1 hereof, shall remain subject to the terms and
conditions of that certain Mutual Confidentiality Agreement, by and between the Company and Parent, dated May 19, 2006 (the "Confidentiality
Agreement").

6.12Employees.    The Company shall terminate, and shall cause its Subsidiaries, to the extent necessary, to
terminate, all employees of the Company and its Subsidiaries, respectively, effective as of immediately prior to the Effective Time.

6.13Non-Company Program Liabilities.    Prior to the Effective Time, the Company shall satisfy,
discharge or pay, or provide for the satisfaction, discharge or payment of (which may include requesting Parent to pay or assume at Closing, and deduct from the Closing Consideration, the Closing
Liabilities set forth in the Merger Consideration Certificate pursuant to Section 2.6(b)), all of its and its Subsidiaries' liabilities or obligations (whether accrued or contingent),
including, without limitation, (i) accounts payable accrued for in the books and records of the Company immediately prior to the Effective Time, (ii) Transaction Expenses and
(iii) employee-related liabilities of any kind or nature;provided,however, that,
notwithstanding the foregoing, the Company may have liabilities under any written executory Company Program Contracts, but only if and to the extent that such liabilities accrue and arise from and
after the Closing.

6.14Bank Accounts; Maintenance of Cash Balances.    Except for those bank accounts listed on Schedule 4.20of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries shall open or maintain any bank, brokerage or other
accounts, or safe-deposit boxes. At Closing, all cash held by the Company or any of its Subsidiaries shall be held in one or more of those bank accounts listed on Schedule 4.20of the Company Disclosure
Schedules that are not foreign bank accounts.

6.15Termination of Company Employee Benefit Plans.    Effective immediately prior to the Closing and contingent
upon the Closing, the Company will terminate any and all Company Employee Benefit Plans intended to qualify as a qualified cash or deferred arrangement under Section 401(k) of the Code and
effective as of such termination, no employee of the Company shall have any right to contribute any amounts to any Company Employee Benefit Plan intended to qualify as a qualified cash or deferred
arrangement under Section 401(k) of the Code. At the request of Parent, the Company will provide Parent with evidence that such Company Employee Benefit Plans have been terminated effective
immediately prior to the Closing pursuant to resolutions duly adopted by the Company Board. In addition, the Company will terminate any and all other Company Employee Benefit Plans, including any
group health, dental, severance, separation or salary continuation plans, programs or arrangements, effective immediately prior to the Closing and contingent upon the Closing, and, at the request of
Parent, the Company will provide Parent with evidence that such Company Employee Benefit Plans
have been so terminated pursuant to resolutions duly adopted by the Company Board. The Company also shall take such other actions in furtherance of terminating such Company Employee Benefit Plans as
Parent may reasonably require.

---

71

---



6.16Employees and Compensation.



No
Member of the Buyer Group (including for the avoidance of doubt the Surviving Corporation) shall have any obligation to provide or liability for the provision of compensation or
benefits to any of the Company's Personnel, current or former, whether in connection with their employment or engagement or the termination of the same and including without limitation under or in
connection with the establishment, maintenance, or termination of any Company Employee Benefit Plan (collectively, "Compensation Liabilities").

6.17Tax Certificate.    At the Closing, the Company shall deliver to Parent a certificate dated as of immediately
prior to the Effective Time, setting forth the following information as to each share of the Company's stock (as defined in Treas. Reg. § 1.382-2(a)(3)), as of the
Closing Date: (i) the date of issuance, (ii) the holder at issuance, (iii) the issue price and (if different), in the case of common stock or options on common stock, the most
recent fair market value determination of such common stock made by the Company's board of directors for purposes of option grants, (iv) the date(s) of any transfer(s), (v) any
information available to the Company as to the fair market value at the time of transfer, (vi) any information as to the holder of that share from time to time that is described in Treas. Reg.
§§ 1.382-2T(h)(6) and/or 1.382-2T(k) and is actually known to the Company (it being understood that the Company shall be considered to actually
know only such information as is available from existing Company records and shall not require the Company to make any investigation), and (vii) a summary of any written materials indicative
of, or other information or estimates as to, the fair market value of that share from time to time (including, e.g., the exercise price of any incentive stock options granted at any time at or
following the issuance date of that share to acquire shares of the same class of stock), provided that no obligation to indemnify shall arise as a result of any good-faith valuation errors
that may be reflected in the information provided pursuant to this Section 6.17.

6.18Patent Diligence.    Without limiting Parent's obligations set forth in Section 6.9(a), following the
Effective Time, Parent shall use commercially reasonable efforts to obtain and maintain an issued Company Patent in each of []*. In addition, Parent shall use commercially
reasonable efforts to obtain issued patents from those patent applications within the Company Patents for which claims are allowed by the applicable patent authorities and for which the issuance of a
patent by such applicable patent authorities for such allowed claims would satisfy HCV Milestone One or HCV Milestone Two. Notwithstanding the foregoing, from and after the Grantback Date, the
provisions of this Section 6.18 shall be of no further force or effect and the provisions of Section 6.10(f) shall thereafter apply.

---

72

---



ARTICLE 7
CONDUCT OF BUSINESS PENDING THE CLOSING

From and after the date of this Agreement and until the Closing, except as otherwise specifically agreed by Parent:

7.1Full Access.    Subject to applicable law, the Company will afford to Parent and its authorized representatives
full access, upon request and reasonable notice and during normal business hours, to all of the properties, books, records, contracts, and documents of the Company, and a reasonable opportunity to
make such investigations as Parent desires to make, and will furnish or cause to be furnished to Parent and its authorized representatives all such information with respect to the Company's affairs
and businesses as Parent reasonably requests. No information or knowledge obtained by Parent in any investigation pursuant to this Section 7.1 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions of the parties to consummate the Merger.

7.2Course of Business Pending the Closing.    Subject to the provisions set forth below in this Article 7,
the Company shall operate the Company's business in the ordinary course consistent with past practices.

7.3No Dividends, Issuances, Repurchases, Etc.Except as set forth onSchedule
7.3of the Company Disclosure Schedule, the Company will not declare, set aside, or pay any dividends (whether in cash, shares of stock, other property, or otherwise) on, or
make any other distribution in respect of, any shares of its capital stock or other securities, or purchase, redeem, or otherwise acquire for value any shares of its capital stock or other securities.
Except as set forth onSchedule 7.3of the Company Disclosure Schedule, the Company will not issue any shares of its capital stock or other securities
(including without limitation any options, warrants, or other rights to acquire Company Stock), other than shares of Company Stock issued upon the due exercise or conversion of Eligible Company
Options, Company Preferred Stock or Common Warrants listed inSchedule 4.4of the Company Disclosure Schedule (which exercises or conversions will be
disclosed by the Company in a supplement to the Company Disclosure Schedule pursuant to Section 7.25 hereof).

7.4No Compensation Changes.Except in the ordinary course of business consistent with
past practices, the Company will not increase the base salary payable or to become payable to any of its officers, directors, employees, consultants or agents, or pay or increase any severance, bonus,
insurance, pension, or other benefit plan, payment, or arrangement made to, for, or with any such officers, directors, employees, consultants or agents, except as described in Schedule 7.4of the
Company Disclosure Schedule. The Company shall not pay any severance benefits to, enter into any contract, agreement or arrangement
to provide severance benefits to, or implement any severance plan for the benefit of, any of the Company's officers, directors, employees or consultants, except pursuant to any severance plan,
contract or arrangement described inSchedule 4.13orSchedule 7.4of the Company Disclosure Schedule.

---

73

---



7.5Contracts and Commitments.    Except as set forth on Schedule 7.5of the Company Disclosure Schedule, the Company will
not enter into any material contract or commitment, or engage in any other
transaction, other than as specifically contemplated by this Agreement or in the schedules hereto or with the prior written consent of Parent.

7.6Purchase and Sale of Assets.    Except as set forth on Schedule 7.6of the Company Disclosure Schedule, the Company
will not purchase, lease as lessee, license as licensee, or otherwise acquire any
interest in, or sell, lease as lessor, license as licensor, or otherwise dispose of any interest in, any assets (including, without limitation, any Company Intellectual Property), other than purchases
and sales of assets, leases, or licenses in the ordinary course of business or in amounts not exceeding ten thousand dollars ($10,000) individually or fifty thousand dollars ($50,000) in the
aggregate. Notwithstanding the foregoing, in no event shall the Company sell, lease, license or otherwise dispose of any Company Intellectual Property, computer hard drives, computer servers, computer
network hardware, physical or electronic offsite storage materials, electronic tapes and/or other backup media materials or material written documents of the Company.

7.7Liabilities.    The Company shall not incur any Indebtedness or enter into any contracts or commitments
involving potential payments to or by the Company or any Subsidiary of the Company, except for accounts payable and payroll and other services liabilities incurred or entered into by the Company in
the ordinary course of business consistent with past practices and expenses incurred in furtherance of the Merger.

7.8Charter and By-Laws.    Except as set forth onSchedule
7.8of the Company Disclosure Schedule, the Company shall not cause, permit or propose any amendments to its articles of incorporation or by-laws except as
contemplated under this Agreement.

7.9Acquisitions.    Except to the extent permitted under Section 7.6 above, the Company shall not make, or
permit to be made, any acquisition of property, assets or businesses.

7.10Capital Expenditures.    The Company shall not authorize or incur any single capital expenditure in excess of
ten thousand dollars ($10,000) or capital expenditures which in the aggregate exceed fifty thousand dollars ($50,000).

7.11Accounts Payable.    The Company shall make payment with respect to all of its accounts payable and its
Indebtedness in a timely manner in accordance with their respective terms in the ordinary course of business consistent with the Company's past practices, and shall make payment of or provision for
all such accounts payable and Indebtedness prior to Closing in accordance with Section 6.13 hereof.

7.12Employees.    The Company shall not hire any employee without the prior written consent of Parent.

---

74

---



7.13Accounting Policies.    Except as may be required as a result of a change in law or in generally accepted
accounting principles, change any of the accounting practices or principles used by it.

7.14Taxes.    The Company shall not, and shall not permit any Subsidiary to, make any Tax election or settle or
compromise any material federal, state, local or foreign Tax liability (other than settlements or compromises not involving any payments of Taxes), change its annual tax accounting period, change any
method of Tax accounting, enter into any closing agreement relating to any Tax, surrender any right to claim a Tax refund, or consent to any extension or waiver of the limitations period applicable to
any Tax claim or assessment. The Company shall, and shall cause each of its Subsidiaries to, timely file all of its Tax Returns as they become due (taking all timely filed proper extension requests
into account), all such Tax Returns to be true, correct and complete, and the Company shall, and shall cause each of its Subsidiaries to, timely pay and discharge as they become due and payable all
Taxes (other than Taxes contested in good faith by the Company or its Subsidiaries in appropriate proceedings), assessments and other governmental charges or levies imposed upon it or its income or
any of its property.

7.15Legal.    The Company shall not settle or compromise any pending or threatened suit, action or claim.

7.16Extraordinary Transactions.    The Company shall not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company (other than the Merger, or except as permitted under Section 7.24(d)).

7.17New Agreements; Amendments.    Except as set forth onSchedule
7.17of the Company Disclosure Schedule, the Company shall not enter into or modify, or permit any Subsidiary to enter into or modify, any supply, license, development,
research or collaboration agreement with any other person or entity.

7.18Obligations.    The Company shall not obligate itself to do any of the things that the Company is prohibited
from doing pursuant to any of the provisions of this Section 7.

7.19Preservation of Organization.    The Company will use commercially reasonable efforts to preserve its business
organization intact, to preserve for the benefit of the Surviving Corporation its present business relationships with its suppliers, customers, employees, consultants and others having business
relationships with it.

7.20Intellectual Property Rights.    The Company will maintain, preserve and protect the Company Intellectual
Property.

7.21No Default.    The Company will not take or omit to take any action, or permit any action or omission to act,
that would cause a default under or a breach of any of its contracts, commitments, or obligations.

7.22Compliance with Laws.    The Company will duly comply in all material respects with all applicable laws,
regulations, and orders.

---

75

---



7.23Advice of Change.    The Company will promptly advise Parent in writing of any event or occurrence which
results in or is reasonably likely to result in a Material Adverse Effect on the Company.

7.24No Solicitation by Target; Board Recommendation; Fiduciary Exceptions.



---

76

---





---

77

---





7.25Disclosure Supplements.    From time to time before the Closing, and in any event immediately before the
Closing, each of Parent and the Company will promptly advise the other in writing of any matter hereafter arising or becoming known to the disclosing party that, if existing, occurring, or known at or
before the date of this Agreement, would have been required to be set forth or described in the Company Disclosure Schedule or Parent Disclosure Schedule, as the case may be, or that is necessary to
correct any information in such Disclosure Schedule that is or has become inaccurate. No such disclosure will be taken into account in determining whether the conditions to (i) in the case of
any such supplemental disclosure by Parent, the obligations of the Company, and (ii) in the case of any such supplemental disclosure by the Company, the respective obligations of Parent and
Merger Sub, to consummate the transactions contemplated by this Agreement have been satisfied. If the Merger is consummated, then for purposes of the indemnification provisions of this Agreement, such
supplemental disclosures pursuant to this Section 7.25 will have no effect on the availability of indemnification hereunder.

7.26Subsidiaries.The Company shall not permit any Subsidiary to take any action that
the Company is not permitted to do pursuant to this Section 7.

ARTICLE 8
CONDITIONS TO THE PARTIES' OBLIGATIONS

8.1Mutual Conditions.    The parties' obligations to consummate the Merger are subject to the satisfaction (or
waiver by each such party, in its sole discretion) of each of the conditions set forth in this Section 8.1 on or before the Closing Date. If the Merger is consummated, such conditions will
conclusively be deemed to have been satisfied or waived.



8.2Conditions to the Company's Obligations.    The obligations of the Company to consummate the Merger are subject
to the satisfaction (or waiver by the Company, in its sole discretion) of each of the conditions set forth in this Section 8.2 on or before the Closing Date. If the Merger is consummated, such
conditions will conclusively be deemed to have been satisfied or waived.

---

78

---





8.3Conditions to Parent's and Merger Sub's Obligations.    The obligations of each of Parent and Merger Sub,
respectively, to consummate the Merger are subject to the satisfaction (or waiver by Parent, in its sole discretion) of each of the conditions set forth in this Section 8.3 on or before the
Closing Date. If the Merger is consummated, such conditions will conclusively be deemed to have been satisfied or waived.



---

79

---





---

80

---





81

---









ARTICLE 9
INDEMNIFICATION

9.1Effectiveness.The provisions of this Article 9 shall apply and become effective only if the Merger
is consummated.

9.2Joint and Several Indemnification by Participating Holders.Subject to the limitations set forth in
Section 9.6 hereof, the Participating Holders, jointly and severally, shall indemnify, defend, and hold harmless Parent, the Surviving Corporation
and each of the directors, officers, employees, agents, representatives and other Affiliates of Parent and/or Merger Sub (all persons entitled to indemnification under this Section 9.2 being
hereinafter referred to as the "Parent Indemnified Parties") from and against any and all Damages related to or arising, directly or indirectly, out of
or in connection with (i) any breach by the Company of any representation, warranty, covenant, agreement, obligation, or undertaking made by the Company in this Agreement (including any
schedule or exhibit hereto), or any other agreement, instrument, certificate, or other document delivered by or on behalf of the Company in connection with this Agreement, the Merger, or any of the
other transactions contemplated hereby, (ii) any payments (and the amount thereof) made or to be made by Parent, the Merger Sub or the Surviving Corporation after the Effective Time with
respect to any Dissenting Shares, to the extent that such payments exceed the portion of the Merger Consideration that would have been paid with respect to such Dissenting Shares pursuant to
Section 3.1 had such Dissenting Shares not been Dissenting Shares, (iii) any claim made by any third party, other than any

---

82

---



Participating
Rights Holder or holder of Dissenting Shares, that all or any portion of the Merger Consideration is owed to such third party (a "Third Party Consideration
Claim"), (iv) any claim made by any Participating Rights Holder that all or any portion of the Merger Consideration to which such Participating Rights Holder is entitled
to under the Company's Certificate of Incorporation, as amended and in effect immediately prior to the Effective Time, any other agreement between the Company and such Participating Rights Holder
and/or applicable law has not been paid to or received by such Participating Rights Holder, (v) any claim arising as a result of any inaccuracy or error in the Capitalization Certificate or the
Merger Consideration Certificate, (vi) any claims made by any Company Shareholder in connection with this Agreement or the transactions contemplated hereby, whether based upon any alleged
breach of fiduciary or other duty by any officer, director or shareholder of the Company or otherwise, or any claims by any officer, director, employee or shareholder of the Company to indemnification
by the Company or the Surviving Corporation with respect to any such claim, (vii) any Transaction Expenses that are not paid by the Company prior to the Effective Time, (viii) severance
liabilities or obligations of the Company or any other employee-related liabilities of any kind of the Company, including, without limitation, any and all Compensation Liabilities and any and all
claims for post-termination health insurance benefits, (ix) any and all other liabilities arising from the operation of the business of the Company and its Subsidiaries prior to the
Effective Time, (x) any and all liabilities arising from or related to any Facility Lease whether arising prior to or after the Effective Time, or (xi) any and all liabilities arising
from or related to (A) that certain DAAD audit referred to on Schedule 4.11 of the Company Disclosure Schedule, (B) that certain U.S. Army Contract No.
DAAD19-03-C-005 dated April 8, 2005 or (c) a breach of any of the representations or warranties set forth in Section 4.31 of this Agreement, in
all such cases, whether arising prior to or after the Effective Time;provided, however, that the foregoing clauses (vii), (viii) and
(ix) shall in no event include any of the liabilities referred to in such clauses if and to the extent that such liabilities are paid by Parent and deducted from the Closing Consideration
pursuant to Section 6.13 hereof.

9.3Indemnification by Parent.Subject to the limitations set forth in Section 9.7 hereof, Parent shall
indemnify, defend, and hold harmless Company, the Participating Holders and the Holders Representative and each of the directors, officers, employees, agents, representatives and other Affiliates of
the Company and the Holders Representative (all persons entitled to indemnification under this Section 9.3 being hereinafter referred to as the "Company Indemnified
Parties") from and against any and all Damages related to or arising, directly or indirectly, out of or in connection with any breach by the Parent of any representation,
warranty, covenant, agreement, obligation, or undertaking made by the Parent in this Agreement (including any schedule or exhibit hereto), or any other agreement, instrument, certificate, or other
document delivered by or on behalf of the Parent in connection with this Agreement, the Merger, or any of the other transactions contemplated hereby. The Holders Representative shall have the
exclusive right to bring or defend, as applicable, any claims on behalf of any Company Indemnified Party.

---

83

---



9.4Third Party Claims.Each Parent Indemnified Party or Company Indemnified Party (each, an
"Indemnified Party"), as applicable, shall give prompt written notification to the other party (the "Indemnifying
Party") of the commencement of any action, suit or proceeding relating to a third party claim for which indemnification pursuant to this Section 9 may be sought; provided,however, that no delay on the part of such Indemnified Party in notifying the other party
shall relieve the Indemnifying Party of any liability or obligation hereunder except to the extent of any damage or liability caused by or arising out of such delay. Within twenty (20) days
after delivery of such notification, the Indemnifying Party may (except to the extent otherwise provided below in this Section 9.4), upon written notice to such Indemnified Party, assume
control of the defense of such action, suit or proceeding with counsel reasonably satisfactory to such Indemnified Party,providedthat, the third party
seeks monetary damages only. If the Indemnifying Party does not so assume control of such defense, the Indemnified Party may elect to control such defense. The party not controlling such defense may
participate therein at its own expense; provided that if the Indemnifying Party assumes control of such defense and such Indemnified Party reasonably concludes that the Indemnifying Party and such
Indemnified Party have conflicting interests or different defenses available with respect to such action, suit or proceeding, the reasonable fees and expenses of counsel to such Indemnified Party
shall be considered "Damages" for purposes of this Agreement. The party controlling such defense shall keep the other party advised of the status of such action, suit or proceeding and the defense
thereof and shall consider in good faith recommendations made by the other party with respect thereto. The Indemnified Party shall not agree to any settlement of such action, suit or proceeding
without the prior written consent of the Indemnifying Party which shall not be unreasonably withheld or delayed. The Indemnifying Party shall not agree to any settlement of or the entry of a judgment
in any action, suit or proceeding without the prior written consent of the applicable Indemnified Party, which shall not be unreasonably withheld or delayed (it being understood that it is reasonable
to withhold such consent if, among other things, the settlement or the entry of a judgment (A) lacks a complete release of all Indemnified Parties for all liability with respect thereto or
(B) imposes any liability or obligation on any Indemnified Party). For the avoidance of doubt, the Holders Representative shall be granted the right to bring or defend, as applicable, any
claims on behalf of any Company Indemnified Party. Notwithstanding anything to the contrary expressed or implied herein, Parent shall control all claims relating to any Third Party Consideration
Claim, Taxes and all claims relating to any Compound, Contingent Payment Product or intellectual property of the Company or any of its Affiliates or Subsidiaries.

9.5Payment of Claims.(a)    In the event of any claim for indemnification pursuant to
Section 9.2 or 9.3 hereof, the Indemnified Party will advise the Indemnifying Party in writing with reasonable specificity of the amount and circumstances surrounding such claim. If within
thirty (30) days of a claim for indemnification the Indemnifying Party has not contested pursuant to Section 11.13 such claim in writing, the full amount thereof shall be paid
(i) with respect to any Parent Indemnified Party, out of the Escrow Funds to the extent available and subject to the limitations set forth in Section 9.6 below, within two
(2) days after the expiration of such period, and (ii) with respect to any Company Indemnified Party, by Parent, subject to the limitations set forth in Section 9.7 below, via
wire transfer to the Holders Representative within two (2) days after the expiration of such period. With respect to the Parent Indemnified Party, to the extent the Escrow Funds are
insufficient or not available to satisfy the full amount of such claim for indemnification, Parent shall be entitled to set off, and accordingly reduce, any Contingent Payment that Parent would
otherwise be required to pay to the Holders Representative pursuant to Section 2.7 hereof, subject to the limitations set forth in Section 9.6 hereof, provided, however, that any Parent
Indemnified Party shall not be entitled to set-off or reduce any Contingent Payment in the event and to
the extent that adequate funds have been reserved in escrow, or previously offset by the Parent. Upon the final determination of any indemnified claim pursuant to Section 9.2, the full amount
of any excess offset or reduction amount shall be released by the Parent Indemnified Party and paid by wire transfer to the Holders Representative within five (5) business days after such final
determination.

---

84

---





9.6Limitations of Liability of Company.



---

85

---





9.7Limitations of Liability of Parent.



---

86

---





9.8Insurance Collection.The Indemnified Party shall use commercially reasonable efforts to pursue, and to
cause its Affiliates to use commercially reasonable efforts to pursue, all insurance claims to which it may be entitled in connection with any Damages it incurs for which it makes a claim for
indemnification pursuant to this Article 9,providedthat (i) the foregoing provisions of this Section 9.8 shall not be a condition
precedent for any Indemnified Party to make any claim for indemnification pursuant to this Article 9 and (ii) the foregoing provisions of this Section 9.8 shall not apply to any
Fraud Claim. The parties shall cooperate with each other in pursuing any such insurance claims. If any Indemnified Party recovers any amount from any insurer after payment to such Indemnified Party of
all Damages suffered or incurred by such Indemnified Party in respect of the matters to which such insurance payment relates, then such Indemnified Party will promptly pay over to the Indemnifying
Party the amount so recovered, to the extent not in excess of the amount previously paid to such Indemnified Party in respect of such matter.

9.9Subrogation.In the event that a Indemnified Party is indefeasibly indemnified in full pursuant to this
Article 9 with respect to any matter, the Indemnifying Party shall be subrogated, to the extent of the amount of indemnification received by such Indemnified Party, to the rights of such
Indemnified Party against all other persons in respect of the matter for which such indemnification was received by such Indemnified Party, to the extent permitted by applicable insurance policies of
such Indemnified Party, and, upon such subrogation, the Indemnifying Party may assert such rights against such other persons.

9.10Exclusive Remedies.The parties hereby acknowledge and agree that, if the Merger is consummated, the sole
and exclusive remedies of any and all Indemnified Parties in respect of any and all claims (except any Fraud Claim) relating to any breach or purported breach of any representation, warranty,
covenant, agreement, obligation, or undertaking that is contained in this Agreement or otherwise relating thereto will be pursuant to the indemnification provisions of this Article 9; provided,however, that the foregoing provisions of this Section 9.10 shall not apply to limit
the exercise of any remedy seeking specific performance or injunctive relief or the exercise by the Holders Representative of its rights under Sections 6.10(d) and 6.10(e) to obtain the
Non-Compliance Grantback). Notwithstanding anything to the contrary in this Agreement, including but not limited to the provisions of this Section 9.10 or any other provisions of
this Article 9, in the event that the Holders Representative obtains, or elects to require, the license of the Grantback Assets pursuant to Section 6.10 above, then such license shall be
the sole and exclusive remedy with respect to any breach by Parent of its obligations under Section 6.9 hereof.

---

87

---



ARTICLE 10
TERMINATION

10.1Termination.This Agreement may be terminated and the Merger abandoned at any time prior to the Effective
Time (whether before or after approval of the Merger by the shareholders of the Company or by Parent as sole stockholder of Merger Sub) only as follows:



---

88

---





10.2Effect of Termination.If this Agreement is terminated pursuant to Section 10.1 hereof, then
(a) the provisions of this Section 10.2, Section 10.3 and Article 11 shall survive any such termination, (b) such termination shall not relieve any party hereto from
liability arising from any breach by such party of any provision of this Agreement if such breach occurred prior to such termination, (c) each party will redeliver all documents, work papers
and other material of the other party or parties relating to the transactions contemplated hereby including such memoranda, notes, lists, records or other documents compiled or derived from such
material, whether so obtained before or after the execution hereof, to the party furnishing the same and (d) all information received by any party hereto with respect to the business of the
other parties or their affiliated companies shall remain subject to the terms of the Confidentiality Agreement.

10.3Costs and Expenses.



---

89

---



ARTICLE 11
GENERAL

11.1Cooperation.Each of the parties will cooperate with the others and use commercially reasonable efforts to
prepare all necessary documentation, to effect all necessary filings, and to obtain all necessary permits, consents, approvals, and authorizations of all governmental bodies and other third parties
necessary to consummate the transactions contemplated by this Agreement.

11.2Survival of Provisions.The provisions of this Agreement, including without limitation the representations
and warranties of the parties, and the provisions of the other documents executed and delivered in connection with this Agreement, the Merger, and the other transactions contemplated hereby will be
deemed material, and, notwithstanding any investigation by or on behalf of any party or any knowledge that any party has or should have as a result of such investigation, will be deemed to have been
relied on by each party, and will survive the Closing and the consummation of the Merger and the other transactions contemplated hereby, subject to all of the limitations set forth in Article 9
hereof, including, without limitation, the limitations set forth in Section 9.5(c) hereof.

11.3Benefits of Agreement; No Assignments; No Third-Party Beneficiaries.



---

90

---





11.4Notices.All notices, requests, payments, instructions, or other documents to be given hereunder will be in
writing or by written telecommunication, and will be deemed to have been duly given if (i) delivered personally (effective upon delivery), (ii) mailed by registered or certified mail,
return receipt requested, postage prepaid (effective five (5) business days after dispatch), (iii) sent by a reputable, established courier service that guarantees next business day
delivery (effective the next business day), or (iv) sent by telecopier followed within 24 hours by confirmation by one of the foregoing methods (effective upon receipt of the telecopy in
complete, readable form), addressed as follows (or to such other address as the recipient party may have furnished to the sending party for the purpose pursuant to this section):



| |  | Cubist Pharmaceuticals, Inc.
65 Hayden Avenue
Lexington, Massachusetts 02421
Attention:    Chief Executive Officer
Telecopier No.: 781-861-0566
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------

---

91

---





| |  | Cubist Pharmaceuticals, Inc.
65 Hayden Avenue
Lexington, Massachusetts 02421
Attention:    General Counsel
Telecopier No.: 781-861-0566
| |  | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | and                                                                                                                                    
| |  | Bingham McCutchen LLP
150 Federal Street
Boston, Massachusetts 02110                                                                   
| |  | Attention:                                                                                                                             
| |  |                                                                                                                                        
| |  | Telecopier No.: (617) 951-8736                                                                                                         



| |  | Illumigen Biosciences Inc.
201 Elliott Ave. West, Suite 500
Seattle, Washington 98119
Attention:    Charles Magness
Telecopier No.: (206) 378-0408
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  | IB Securityholders, LLC,
Attn: Donald J. Elmer c/o Pacific Horizon Ventures
701 Fifth Avenue, Suite 4970
Seattle, Washington 98104
Telecopier No.: (206) 682 1181
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | DLA Piper US LLP
701 Fifth Avenue, Suite 7000
Seattle, Washington 98104-7044
Attention:    John M. Steel
Telecopier No.: (206) 839-4801
| |  | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | Heller Ehrman LLP
701 Fifth Avenue, Suite 6100
Seattle, Washington 98104-7098
Attention:    Greg Papciak
Telecopier No. (206) 515-8885 

---

92

---



11.5Disclosure in Schedules.For purposes of this Agreement, with respect to any matter that is clearly
disclosed on any Schedule of the Parent Disclosure Schedule or the Company Disclosure Schedule, as the case may be, in such a way as to make its relevance to the information called for by another
Section of this Agreement or another Schedule of Parent Disclosure Schedule or the Company Disclosure Schedule, as the case may be, readily apparent, such matter shall be deemed to have been disclosed
in response to such other Section, notwithstanding the omission of any appropriate cross-reference thereto;provided, however, that each of Parent and the
Company hereby covenants to make a good faith diligent effort to make all appropriate cross-references within and
to any and all Schedules of Parent Disclosure Schedule and the Company Disclosure Schedule, respectively.

11.6Counterparts.This Agreement may be executed by the parties in separate counterparts, each of which when so
executed and delivered will be an original, but all of which together will constitute one and the same agreement. In pleading or proving this Agreement, it will not be necessary to produce or account
for more than one such counterpart.

11.7Captions.The captions of sections or subsections of this Agreement are for reference only and will not
affect the interpretation or construction of this Agreement.

11.8Equitable Relief.Each of the parties hereby acknowledges that any breach by it of its obligations under
this Agreement would cause substantial and irreparable damage to the parties, and that money damages would be an inadequate remedy therefor, and accordingly, acknowledges and agrees that each other
party will be entitled to an injunction, specific performance, and/or other equitable relief to prevent the breach of such obligations.

11.9Construction.The language used in this Agreement is the language chosen by the parties to express their
mutual intent, and no rule of strict construction will be applied against any party.

11.10Waivers.No waiver of any breach or default hereunder will be valid unless in a writing signed by the
waiving party. No failure or other delay by any party exercising any right, power, or privilege hereunder will be or operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.

11.11Entire Agreement.This Agreement, together with the exhibits and schedules hereto and the other
agreements, instruments, certificates, and other documents referred to herein as having been or to be executed and delivered in connection with the transactions contemplated hereby (including, without
limitation, the Confidentiality Agreement, the
Escrow Agreement and the LLC Agreement), contains the entire understanding and agreement among the parties, and supersedes any prior understandings or agreements among them, or between or among
any of them, with respect to the subject matter hereof.

11.12Governing Law.This Agreement will be governed by and interpreted and construed in accordance with the
internal laws of Commonwealth of Massachusetts, as applied to contracts under seal made, and entirely to be performed, within the Commonwealth of Massachusetts, and without reference to principles of
conflicts or choice of laws, except as to matters concerning the internal affairs of any of the corporation or entity parties hereto which shall be governed by the corporate laws of their respective
jurisdictions of incorporation or organization.

---

93

---



11.13Mediation and Arbitration.



---

94

---





11.14Jurisdiction and Venue of Suits Arising From Section 6.9 or 6.10 or Breach Thereof.Notwithstanding
any other provision of this Agreement, any dispute, controversy or claim arising from or under Section 6.9 or 6.10 of this Agreement or from the breach of either of those sections shall not be
subject to arbitration under this Agreement. The parties hereto agree that any action or proceeding arising from Section 6.9 or 6.10 of this Agreement or from the breach of either of those
sections shall be instituted only in a state or federal court located in Suffolk County, Massachusetts. Each party hereby irrevocably submits to the jurisdiction of such court and irrevocably waives
any objection to venue in such court and any objection that such court is an inconvenient forum.

11.15Publicity.Upon the execution and delivery of this Agreement by all parties hereto, Parent and Company
shall each issue a press release in the form of the joint press release attached hereto asExhibit K(the "Initial Press
Release"). From the date of this Agreement through the Effective Time, no public release or announcement following the Initial Press Release concerning the transactions
contemplated by this Agreement shall be issued by a party without the prior consent of the other party (which consent shall not be unreasonably withheld or delayed), except as such release or
announcement as may be required by law or the rules or regulations of any applicable securities exchange, in which case the party required to make the release or announcement shall allow the other
party reasonable time to comment on such release or announcement in advance of such issuance;provided, however, that each of the parties may make internal
announcements to their respective employees that are consistent with the parties' prior public
disclosures regarding the transactions contemplated by this Agreement;provided,further, that the
Company may communicate with the holders of Company Common Stock, Company Preferred Stock, Company Options and Common Warrants, as well as certain third parties, to the extent necessary to obtain the
consents and approvals contemplated by this Agreement.

11.16Use of Illumigen Name.Parent agrees that the Holders Representative shall be permitted to use of the word
"Illumigen" in its legal name immediately after the Effective Time.

11.17Amendment.This Agreement may not be amended, modified, changed, waived or supplemented except by a
writing duly executed by Parent, Merger Sub and the Company;provided however, that any amendment, modification, change, waiver or supplement to any
provision or provisions of this Agreement at any time subsequent to the time the Company Shareholders approve this Agreement may be effected and implemented if, but only if, such amendment,
modification, change, waiver or supplement is set forth in a written instrument or agreement duly executed by Parent and the Holders Representative.

[Signature Page Follows]

---

95

---



IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement and Plan of Merger under seal as of the date first above written.

|PARENT:                 |  | CUBIST PHARMACEUTICALS, INC.
|----------------------- |  | ----------------------------
|                        |  | By:                         
|                        |  |                             
|                        |  |                             
|MERGER SUB:             |  | EDISON MERGER CORP.         
|                        |  | By:                         
|                        |  |                             
|                        |  |                             
|COMPANY:                |  | ILLUMIGEN BIOSCIENCES, INC. 
|                        |  | By:                         
|                        |  |                             
|                        |  |                             
|HOLDERS REPRESENTATIVE: |  | IB SECURITYHOLDERS, LLC     
|                        |  | By:                         
|                        |  |                             
|                        |  |                             
|                        |  | By:                         
|                        |  |                             
|                        |  |                             

[Signature Page to Merger Agreement]

---

---



QuickLinks