Document:

Prepared by MerrillDirect

Exhibit 10.31.2

Heartport, Inc.

700 Bay Road

Redwood City, California 94063

Attention: Earl Adamy

Re:        Approval of Deltagen, Inc.

Dear Mr. Adamy:

             This
letter is to serve as approval by Woodside Technology Center, LLC, a
Delaware limited liability company (“Landlord”),
of Deltagen, Inc., a Delaware corporation (“Subtenant”),
as a subtenant of Heartport, Inc., a Delaware corporation (“Tenant”), in the portion of
the Premises described in the Sublease between Tenant and Subtenant, dated as
of July 10, 2001 (the “Sublease”).  Capitalized terms used but not defined
herein shall have the meanings set forth in the Lease (as such term is
hereinafter defined).

             This
approval is based upon the terms and conditions of the Amended and Restated
Industrial Build-to-Suit Lease between Landlord and Tenant, dated July 10,
2001 (as amended, the “Lease”), and
the understanding that the proposed transaction is a sublease under the Lease
and is not an assignment of the Lease. 
The Sublease will be subject to, and be limited by, the terms of the
Lease.  In that regard, we understand
that the Subtenant has expressly agreed to be bound by the terms of the Lease,
which would include, without limitation, the waivers of subrogation set forth
in the Lease.  Landlord agrees that
Subtenant's use of the Premises, or portions thereof constituting the subleased
premises under the Sublease, for executive, professional and corporate office
uses, research and development uses, laboratory and laboratory animal uses,
research and development in the areas of biotechnology and pharmaceuticals, and
ancillary warehousing and distribution, shall be included in and consistent
with the Permitted Uses under the Lease, provided that such use complies with
and is subject to the restrictions and obligations set forth in
Sections 5.11 and 5.17 of the 740 Bay Lease (as hereinafter defined).

             Except
for any rights expressly granted to Tenant under the 740 Bay Road Lease,
Landlord has not agreed to any non-disturbance or similar rights for the
Subtenant, nor has Landlord agreed to recognize the Sublease or the Subtenant
in the event of the expiration or earlier termination of the Lease.  No such agreement by Landlord in the future
shall be effective unless set forth in writing addressed to the Subtenant, nor
has Landlord represented that it will so agree.  As used herein, “740 Bay Road Lease”
means the Lease Agreement by and between Landlord and Subtenant, dated as of
July 11, 2001, relating to certain premises commonly known as 740 Bay
Road in Redwood City, California.

             Landlord’s consent is
conditioned upon the prompt payment to Landlord in accordance with
Section 15(a) of the Lease of fifty percent (50%) of the difference
between each payment of rent or other consideration received by Tenant under
the Sublease and the Rent payable under the Lease, after recovery by Tenant of
the Transfer Costs and other adjustments are made as provided in Section 15(a)
of the Lease.  No later than
January 1, 2002,  Tenant shall
deliver to Landlord a worksheet (the “Sublease
Profits Worksheet”) showing in reasonable detail the
calculation of the actual Transfer Costs incurred by  Tenant to date, the time period for the payment of such Transfer
Costs out of the rentals payable by Subtenant under the Sublease, and the
actual sublease profits to be paid to Landlord (and the timing of such
payments) under the Lease.  Tenant shall
periodically update the Sublease Profits Worksheet from time to time to reflect
new information that becomes available. 
Tenant shall additionally provide to Landlord the information delivered
by Subtenant pursuant to Exhibit “D” of the Sublease.

             The
obligations of Landlord under the Lease are for the benefit of Tenant only, and
Subtenant will not have any right to enforce the Lease against Landlord.  Any acceptance by Landlord of payments of
Base Rent or other sums due under the Sublease from Subtenant shall be for the
convenience of Tenant and Subtenant, and shall not constitute an agreement by
Landlord to recognize Subtenant as a tenant or otherwise be deemed to modify
the matters set forth in this letter.

             This
letter is an approval of the Subtenant only, and does not constitute the
consent of Landlord to the terms of the Sublease or to any Alterations which
may be contemplated in connection with the subleasing.  No party shall have the right to make any
Alterations to the Premises except in strict accordance with the terms of
Section 9 of the Lease.

             By
executing this letter, Tenant agrees to (i) indemnify and hold harmless
Landlord against and from any and all claims for work or labor performed or for
materials or supplies furnished to or at the request of Subtenant in connection
with the performance of any work done for the account of Subtenant within the
Premises, (ii) notify Landlord in writing within ten (10) days after
Subtenant takes possession of each of Phase 1, Phase 2, Phase 3
and Phase 4 (as such terms are defined in the Sublease) under the
Sublease, and (iii) provide to Landlord, within ten (10) days after
the execution of the same by Subtenant, a copy of the executed Schedule of
Terms (attached as Exhibit “E” to the Sublease).

             By
executing this letter, Subtenant agrees that Landlord shall have no liability
whatsoever for the return to Subtenant of the security deposit or letter of
credit delivered to Tenant under the Sublease, except and solely to the extent
that (i) Landlord shall obtain actual possession of such security deposit
and/or letter of credit, and (ii) Subtenant shall be entitled to the
return of the same under the terms of the Sublease.

             Nothing contained in this
letter shall be deemed a waiver of Landlord’s right under the Lease to approve
or disapprove any other sublease, subsublease or assignment.

             IN WITNESS WHEREOF,
the parties hereto have executed this Consent as of the date first above
written.

	WOODSIDE TECHNOLOGY CENTER, LLC,
	a
  Delaware limited liability company
	 
	By:	National
  Office Partners Limited Partnership,
	 	a
  Delaware limited partnership,
	 	its
  sole member
	 	 
	 	By:	Hines
  National Office Partners Limited Partnership,
	 	 	a
  Texas limited partnership,
	 	 	general
  partner
	 	 	 
	 	 	By:	Hines
  Fund Management, L.L.C.,
	 	 	 	a
  Delaware limited liability company,
	 	 	 	general
  partner
	 	 	 	 
	 	 	 	By:	Hines
  Interests Limited Partnership,
	 	 	 	 	a
  Delaware limited partnership
	 	 	 	 	its
  sole member
	 	 	 	 	 
	 	 	 	 	By:	Hines
  Holdings, Inc.,
	 	 	 	 	 	a
  Texas corporation,
	 	 	 	 	 	its
  general partner
	 	 	 	 	 	 
	 	 	 	 	 	By:
	 	 	 	 	 	 	

	 	 	 	 	 	Its:
	 	 	 	 	 	 	

	 	 
	ACCEPTED AND
  AGREED TO:	 	HEARTPORT,
  INC.,

  a Delaware corporation
	 
	 	 	By:
	 	 	 	

	 	 	 
	 	 	Its:
	 	 	 	

	 	 	 
	 	 	Dated:
	 	 	 	

	 	 	 
	 	 	DELTAGEN,
  INC.,
	 	 	a
  Delaware corporation
	 	 	 
	 	 	By:
	 	 	 	

	 	 	 
	 	 	Its:
	 	 	 	

	 	 	 
	 	 	Dated:Prepared by MerrillDirect

 

             EXECUTIVE VERSION

CONFIDENTIAL TREATMENT REQUESTED.  CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN SEPERATELY FILED WITH THE COMMISSION.

 

 

AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION

dated
as of July 24, 2001

among

DELTAGEN, INC.,

WINTER GAMES ACQUISITION
CORPORATION

and

ARCARIS, INC.

TABLE OF CONTENTS

	ARTICLE
  I	THE
  MERGER
	 	 
	 	Section
  1.1	Effective
  Time of the Merger
	 	 	 
	 	Section
  1.2	Closing
	 	 	 
	 	Section
  1.3	Effects
  of the Merger
	 	 	 
	 	Section
  1.4	Directors
  and Officers
	 	 	 
	ARTICLE
  II	CONVERSION
  OF SECURITIES
	 	 
	 	Section
  2.1	Conversion
  of Capital Stock
	 	 	 
	 	Section
  2.2	Escrow
  Agreement
	 	 	 
	 	Section
  2.3	Dissenting
  Shares
	 	 	 
	 	Section
  2.4	Exchange
  of Certificates
	 	 	 
	 	Section
  2.5	Distributions
  with Respect to Unexchanged Shares
	 	 	 
	 	Section
  2.6	No
  Fractional Shares
	 	 	 
	 	Section
  2.7	Tax
  and Accounting Consequences
	 	 	 
	 	Section 2.8	No Further Ownership
  Rights in Target Capital Stock
	 	 	 
	 	Section
  2.9	Taking
  of Necessary Action; Further Action
	 	 	 
	ARTICLE III	REPRESENTATIONS AND
  WARRANTIES OF TARGET
	 	 
	 	Section 3.1	Organization of Target
	 	 	 
	 	Section 3.2	Target Capital
  Structure
	 	 	 
	 	Section
  3.3	Authority;
  No Conflict; Required Filings and Consents
	 	 	 
	 	Section
  3.4	Financial
  Statements; Absence of Undisclosed Liabilities
	 	 	 
	 	Section
  3.5	Tax
  Matters
	 	 	 
	 	Section
  3.6	Absence
  of Certain Changes or Events
	 	 	 
	 	Section
  3.7	Title
  and Related Matters
	 	 	 
	 	Section
  3.8	Proprietary
  Rights
	 	 	 
	 	Section
  3.9	Employee
  Benefit Plans
	 	 	 
	 	Section
  3.10	Bank
  Accounts
	 	 	 
	 	Section
  3.11	Contracts
	 	 	 
	 	Section
  3.12	[Reserved]
	 	 	 
	 	Section
  3.13	Compliance
  With Law
	 	 	 
	 	Section
  3.14	Labor
  Difficulties; No Discrimination
	 	 	 
	 	Section
  3.15	[Reserved]
	 	 	 
	 	Section
  3.16	Insider
  Transactions
	 	 	 
	 	Section
  3.17	Employees,
  Independent Contractors and Consultants
	 	 	 

 

	 	Section
  3.18	Insurance
	 	 	 
	 	Section
  3.19	Litigation
	 	 	 
	 	Section
  3.20	Governmental
  Authorizations and Regulations
	 	 	 
	 	Section 3.21	Subsidiaries
	 	 	 
	 	Section
  3.22	Compliance
  with Environmental Requirements
	 	 	 
	 	Section 3.23	Corporate Documents
	 	 	 
	 	Section
  3.24	No
  Brokers
	 	 	 
	 	Section
  3.25	[Reserved]
	 	 	 
	 	Section 3.26	Target Action
	 	 	 
	 	Section
  3.27	Offers
	 	 	 
	 	Section 3.28	Information
  Statement
	 	 	 
	 	Section
  3.29	[Reserved]
	 	 	 
	 	Section
  3.30	Complete
  Copies of Materials
	 	 	 
	 	Section 3.31	Export Control
  Laws.
	 	 	 
	 	Section
  3.32	[Reserved]
	 	 	 
	 	Section
  3.33	Disclosure
	 	 	 
	ARTICLE
  IV	REPRESENTATIONS
  AND WARRANTIES OF ACQUIROR AND SUB
	 	 
	 	Section
  4.1	Organization
  of Acquiror and Sub
	 	 	 
	 	Section
  4.2	Acquiror
  and Merger Sub Capital Structure
	 	 	 
	 	Section
  4.3	Authority;
  No Conflict; Required Filings and Consents
	 	 	 
	 	Section
  4.4	Commission
  Filings; Financial Statements
	 	 	 
	 	Section
  4.5	Absence
  of Certain Changes or Events
	 	 	 
	 	Section 4.6	Compliance with
  Laws
	 	 	 
	 	Section 4.7	Interim
  Operations of Sub
	 	 	 
	 	Section
  4.8	Disclosure
	 	 	 
	 	Section 4.9	Stockholders
  Consent
	 	 	 
	 	Section
  4.10	Litigation
	 	 	 
	ARTICLE V	PRECLOSING COVENANTS OF
  TARGET
	 	 
	 	Section 5.1	Notice to Target
  Stockholders
	 	 	 
	 	Section 5.2	Advice of Changes
	 	 	 
	 	Section 5.3	Operation of
  Business
	 	 	 
	 	Section 5.4	Access to
  Information
	 	 	 
	 	Section
  5.5	Satisfaction
  of Conditions Precedent
	 	 	 
	 	Section 5.6	Other Negotiations
						

 

	 	 	 
	ARTICLE
  VI	PRECLOSING
  AND OTHER COVENANTS OF ACQUIROR AND SUB
	 	 
	 	Section 6.1	Advice of Changes
	 	 	 
	 	Section
  6.2	Reservation
  of Acquiror Common Stock
	 	 	 
	 	Section
  6.3	Satisfaction
  of Conditions Precedent
	 	 	 
	 	Section
  6.4	Nasdaq
  National Market Listing
	 	 	 
	 	Section
  6.5	Stock
  Options
	 	 	 
	 	Section
  6.6	Registration
  of Shares Issued in the Merger
	 	 	 
	 	Section
  6.7	Procedures
  for Sale of Shares Under Registration Statement
	 	 	 
	 	Section
  6.8	Certain
  Employee Benefit Matters
	 	 	 
	 	Section 6.9	Indemnity of Target
  Affiliates
	 	 	 
	ARTICLE VII	OTHER AGREEMENTS
	 	 
	 	Section 7.1	Confidentiality
	 	 	 
	 	Section 7.2	No Public
  Announcement
	 	 	 
	 	Section
  7.3	Regulatory
  Filings; Consents; Reasonable Efforts
	 	 	 
	 	Section 7.4	Further Assurances
	 	 	 
	 	Section 7.5	Escrow Agreement
	 	 	 
	 	Section
  7.6	FIRPTA
	 	 	 
	 	Section
  7.7	Blue
  Sky Laws
	 	 	 
	 	Section
  7.8	Other
  Filings
	 	 	 
	ARTICLE VIII	CONDITIONS
  TO MERGER
	 	 
	 	Section
  8.1	Conditions
  to Each Party’s Obligation to Effect the Merger
	 	 	 
	 	Section
  8.2	Additional
  Conditions to Obligations of Acquiror and Sub
	 	 	 
	 	Section 8.3	Additional Conditions to
  Obligations of Target
	 	 	 
	ARTICLE
  IX	TERMINATION
  AND AMENDMENT
	 	 
	 	Section
  9.1	Termination
	 	 	 
	 	Section 9.2	Effect of
  Termination
	 	 	 
	 	Section 9.3	Fees and Expenses
	 	 	 
	ARTICLE X	ESCROW
  AND INDEMNIFICATION
	 	 
	 	Section 10.1	Indemnification
	 	 	 
	 	Section
  10.2	Escrow
  Fund
	 	 	 
	 	Section 10.3	Damage Threshold
	 	 	 
	 	Section 10.4	Escrow Periods
	 	 	 
	 	Section 10.5	Claims Upon
  Escrow Fund
	 	 	 
	 	Section
  10.6	Valuation
	 	 	 
	 	Section 10.7	Objections to
  Claims
	 	 	 
	 	Section 10.8	Resolution of
  Conflicts
	 	 	 
	 	Section 10.9	Stockholders’ Agent
	 	 	 
	 	Section
  10.10	Actions
  of the Stockholders’ Agent
	 	 	 
	 	Section 10.11	Third-Party Claims
	 	 	 
	ARTICLE
  XI	MISCELLANEOUS
	 	 
	 	Section
  11.1	Survival
  of Representations and Covenants
	 	 	 
	 	Section
  11.2	Notices
	 	 	 
	 	Section 11.3	Interpretation
	 	 	 
	 	Section 11.4	Counterparts
	 	 	 
	 	Section
  11.5	Entire
  Agreement; No Third Party Beneficiaries
	 	 	 
	 	Section 11.6	Governing Law
	 	 	 
	 	Section
  11.7	Assignment
	 	 	 
	 	Section
  11.8	Amendment
	 	 	 
	 	Section 11.9	Extension; Waiver
	 	 	 
	 	Section 11.10	Specific
  Performance
				

 

EXHIBITS

EXHIBIT A - EMPLOYMENT AGREEMENT

EXHIBIT B - NONCOMPETITION AGREEMENT

EXHIBIT C - ESCROW AGREEMENT

EXHIBIT D - SUBJECT MATTER OF OPINION OF COUNSEL TO TARGET

EXHIBIT E - SUBJECT MATTER OF OPINION OF COUNSEL TO ACQUIROR

EXHIBIT F - RESTRICTED STOCK AGREEMENT

AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION

             THIS
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION dated as of July 24, 2001 (this
“Agreement”), is entered into by and among Deltagen, Inc., a Delaware corporation
(“Acquiror”), Winter Games Acquisition Corporation, a Delaware corporation and
a wholly-owned subsidiary of Acquiror (“Sub”), and Arcaris, Inc., a Delaware
corporation (“Target”).

RECITALS:

             A.         The Boards of Directors of Acquiror,
Sub and Target deem it advisable and in the best interests of each corporation
and the respective stockholders that Acquiror and Target combine in order to
advance the long-term business interests of Acquiror and Target;

             B.          The combination of Acquiror and Target
shall be effected by the terms of this Agreement through a transaction in which
Sub will merge with and into Target, Target will become a wholly-owned
subsidiary of Acquiror and the stockholders of Target will become stockholders
of Acquiror (the “Merger”);

             C.          For Federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
“Code”);

             D.         For accounting purposes, it is intended
that the Merger shall be accounted for as a purchase;

             E.          As a further condition and inducement
to Acquiror’s willingness to enter into this Agreement, certain employees of
Target who are also stockholders of Target, including Alexander Kamb, Laura
Handley, and Mark Stump have, concurrently with the execution of this Agreement
executed and delivered Employment Agreements in the form attached hereto as Exhibit
A which agreements shall only become effective at the Effective Time (as
defined in Section 1.1 below), and Alexander Kamb has agreed to execute,
simultaneously at the Closing (as defined herein) and deliver to Acquiror a
Noncompetition Agreement in the form attached hereto as Exhibit B (the
“Noncompetition Agreement”), which agreement shall only become effective at the
Effective Time.

             F.          As a further condition and inducement
to Acquiror’s willingness to enter into this Agreement, Alexander Kamb has
agreed to execute, simultaneously at the Closing and deliver to Acquiror a
restricted stock agreement in the form attached hereto as Exhibit F (the
“Restricted Stock Agreement”).

             G.          As a further condition and inducement
to Acquiror’s willingness to enter into this Agreement, Target’s majority
shareholder Warburg Pincus Ventures, L.P. (“Warburg”) has concurrently with the
execution of this Agreement executed and delivered to Acquiror a sale
restriction Agreement (the “Sale Restriction Agreement”).

             H.         As a further condition and inducement
to Acquiror’s willingness to enter into this Agreement Warburg and any of its
Affiliates that are holders of Target Common Stock or Target Preferred Stock,
and Alexander Kamb have has concurrently with the execution of this Agreement
executed and delivered to Acquiror support agreements (the “Support
Agreements”).

             NOW,
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:

 

ARTICLE I

THE MERGER

             Section 1.1       Effective Time of the Merger.  Subject to the provisions of this Agreement,
a certificate of merger (the “Certificate of Merger”) in such mutually
acceptable form as is required by the relevant provisions of the Delaware
Corporations Code (“Delaware Law”) shall be duly executed by the Surviving
Corporation (as defined in Section 1.3) and thereafter delivered to the
Secretary of State of the State of Delaware for filing on the Closing Date (as
defined in Section 1.2). The Merger shall become effective upon the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
(the “Effective Time”).

             Section
1.2       Closing.  The closing of the Merger (the “Closing”)
will take place at 10:00 a.m., California time, on such date as is agreed by
Acquiror and Target, which shall be no later than the second business day after
satisfaction or waiver of the latest to occur of the conditions set forth in
Article VIII (the “Closing Date”), at the offices of Orrick, Herrington &
Sutcliffe LLP, 400 Sansome Street, San Francisco, California unless another
date, time or place is agreed to in writing by Acquiror and Target.

             Section 1.3       Effects
of the Merger.

             (a)         At the Effective Time (i) the separate
existence of Sub shall cease and Sub shall be merged with and into Target (Sub
and Target are sometimes referred to herein as the “Constituent Corporations”
and Target following consummation of the Merger is sometimes referred to herein
as the “Surviving Corporation”), (ii) subject to Section 6.9 of this Agreement,
the Certificate of Merger shall provide that the Restated Certificate of Incorporation
of the Target as amended and restated as set forth in such Certificate of
Merger shall become  the Certificate of
Incorporation of the Surviving Corporation, until the same shall thereafter be
altered, amended or repealed in accordance with applicable law or such
Certificate of Incorporation and (iii) subject to Section 6.9 of this
Agreement, the Bylaws of Sub as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation.

             (b)        At the Effective Time, the effect of the
Merger shall be as provided this Agreement and in the applicable provisions of
Delaware Law.  Without limiting the
generality of the foregoing, at and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of
a public as well as of a private nature, and be subject to all the
restrictions, disabilities and duties of each of the Constituent Corporations.

             Section 1.4       Directors and Officers.  The directors of Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation, and the officers of 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.

ARTICLE II

CONVERSION OF SECURITIES

             Section 2.1       Conversion of Capital Stock.  At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of Common Stock,
$0.001 par value of Target (“Target Common Stock”), or, Series A Preferred
Stock, $0.001 par value (the “Target Series A Stock”), Series B Preferred
Stock, $0.001 par value (the “Target Series B Stock”), Series C Preferred
Stock, $0.001 par value (the “Target Series C Stock”), Series D Preferred
Stock, $0.001 par value (the “Target Series D Stock”), Series E Preferred
Stock, $0.001 par value (the “Target Series E Stock”), or Series F Preferred
Stock, $0.001 par value (the “Target Series F Stock”), of Target (collectively,
the “Target Preferred Stock”) or capital stock of Sub:

             (a)         Capital Stock of Sub.  Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, $0.001 par value, of the Surviving
Corporation.

             (b)        Cancellation of Acquiror-Owned and
Target-Owned Stock.  Any shares of
Target Common Stock or Target Preferred Stock that are owned by Acquiror, Sub,
Target or any other direct or indirect wholly-owned Subsidiary (as defined
below) of Acquiror or Target shall be canceled and retired and shall cease to
exist and no stock of Acquiror or other consideration shall be delivered in exchange.  As used in this Agreement, the word
“Subsidiary” means, with respect to any other party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party
or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interest in
such partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the Board of Directors or others performing similar functions with respect to
such corporation or other organization or a majority of the profit interests in
such other organization is directly or indirectly owned or controlled by such
party or by any one or more of its subsidiaries, or by such party and one or
more of its subsidiaries.

             (c)         Conversion of Outstanding Target
Capital Stock

Shares
issued at Closing:

	 	(i)	             Subject to Sections 2.1(b), 2.2,
  2.3 and 2.4, and in addition to any shares of Acquiror Common Stock to be
  received pursuant to Section 2.1(e), at the Effective Time:
	 	 	 
	 	(1)	each
  issued and outstanding share of Target Series F Stock shall be converted into
  the right to receive a fraction of a fully paid and nonassessable share of
  Acquiror Common Stock (as defined in Section 4.2) equal to (A) $6.20, divided
  by (B) the Average Acquiror Closing Price (as defined in subsection (ii)
  below) (the total number of shares of Acquiror Common Stock to be issued
  pursuant to this Section 2.1(c)(i)(1) shall be referred to herein as the
  “Series F Liquidation Preference Shares”); it being understood that 10% of
  the Series F Liquidation Preference Shares to be issued hereunder shall be
  placed in escrow in accordance with Section 2.2(a);
	 	 	 
	 	(2)	each
  issued and outstanding share of Target Series A Stock, Target Series B Stock,
  Target Series C Stock, Target Series D Stock and Target Series E Stock, shall
  be converted into the right to receive that number of shares of Acquiror
  Common Stock equal to (A) the Exchange Ratio, multiplied by (B) that number
  of shares of Target Common Stock into which such share of Target Series A
  Stock, Target Series B Stock, Target Series C Stock, Target Series D Stock or
  Target Series E Stock, as the case may be, is then convertible; it being
  understood that 10% of the shares of Acquiror Common Stock to be issued
  hereunder shall be placed in escrow in accordance with Section 2.2(a); and
	 	 	 
	 	(3)	each
  issued and outstanding share of Target Common Stock, shall be converted into
  the right to receive that number of shares of Acquiror Common Stock equal to
  the Exchange Ratio (as defined in Section 2.1(c)(ii)), it being understood
  that 10% of the shares of Acquiror Common Stock to be issued hereunder shall
  be placed in escrow in accordance with Section 2.2(a).
	 	 	 
	 	(ii)	             The “Exchange Ratio” shall be
  equal to that fraction of a share of Acquiror Common Stock calculated by
  dividing (1) the Total Merger Shares, less the aggregate number of Series F
  Liquidation Preference Shares, by (2) the Adjusted Diluted Target
  Capitalization.  The “Total Merger
  Shares” shall be equal to the quotient obtained by dividing (1) the Adjusted
  Merger Consideration, by (2) the Average Acquiror Closing Price.  The “Adjusted Merger Consideration” shall
  be equal to (1) $8,200,000, plus (2) the aggregate amount of cash and cash
  equivalents held by Target as of the Effective Time minus (3) the sum of (A)
  the aggregate exercise price received by Target as the result of the exercise
  of Target Options and Target Warrants between May 31, 2001 and the Closing
  Date, plus (B) except as such are specifically set forth on Schedule 2.1(c),
  the total amount of all fees, costs and expenses incurred by Target in connection
  with the Merger, including, without limitation all fees, costs and expenses
  of services provided to Target plus (C) the principal amount of that certain
  secured loan made by Acquiror to Target on May 31, 2001, plus any accrued
  interest thereon, plus (D) the total amount of the items listed on Schedule
  2.1(c).  The “Average Acquiror Closing
  Price” shall be equal to $8.585.  The
  “Adjusted Diluted Target Capitalization” shall be equal to the (1) aggregate
  number of shares of Target Common Stock outstanding as of immediately prior
  to the Effective Time (assuming for such calculation the conversion of all
  shares of Target Preferred Stock and the exercise of all outstanding Target
  Options and Target Warrants), less (2) the total number of shares of Target Series
  F Stock outstanding as of immediately prior to the Effective Time.

 

	 	(iii)	             All shares of Target Common Stock
  and Target Preferred Stock converted pursuant to this Section 2.1(c) into the
  right to receive Acquiror Common Stock shall, when so converted, no longer be
  outstanding and shall automatically be canceled and retired and shall cease
  to exist, and each holder of a certificate representing any such shares shall
  cease to have any rights with respect thereto, except the right to receive
  the shares of Acquiror Common Stock and any cash in lieu of fractional shares
  of Acquiror Common Stock to be issued or paid in consideration therefor upon
  the surrender of such certificate in accordance with Section 2.4, without
  interest.

             (d)        In addition to any Merger Shares to be
received by the stockholders of the Company pursuant to Section 2.1(c), if any
Earn-Out Shares are required to be paid by the Acquiror pursuant to Section
2.1(e), then

	 	(i)	             each former holder of Target
  Series A Stock, Target Series B Stock, Target Series C Stock, Target Series D
  Stock and Target Series E Stock, shall be entitled to receive for each share
  of any such series held by such holder as of immediately prior to the
  Effective Time that fraction of an Earn Out Share equal to (A) the Earn Out
  Exchange Ratio applicable to the Earn Out Shares then being paid, as
  calculated pursuant to Section 2.1(d)(iii), multiplied by (B) that number of
  shares of Target Common Stock into which such share of Target Series A Stock,
  Target Series B Stock, Target Series C Stock, Target Series D Stock or Target
  Series E Stock, as the case may be, was convertible as of the Effective Time;
  it being understood that 10% of any Earn Out Shares to be issued hereunder
  shall be placed in escrow in accordance with Section 2.2(a); and
	 	 	 
	 	(ii)	             each former holder of Target
  Common Stock, shall be entitled to receive for each share of Target Common
  Stock held by such holder as of immediately prior to the Effective Time that
  fraction of an Earn Out Share equal to the Earn Out Exchange Ratio applicable
  to the Earn Out Shares then being paid, as calculated pursuant to Section
  2.1(d)(iii); it being understood that 10% of any Earn Out Shares to be issued
  hereunder shall be placed in escrow in accordance with Section 2.2(a).
	 	 	 
	 	(iii)	             The “Earn Out Exchange Ratio”
  shall, from time to time, be equal to that fraction of a share of Acquiror
  Common Stock calculated by dividing (1) the total amount of any Earn Out
  Shares then required to be paid, divided by (2) the Adjusted Diluted Target
  Capitalization.

             (e)         Earn Out Shares.  Subject to Section 2.2, upon satisfaction of
one or more of the conditions set forth in clauses (i) through (v) of this
Section 2.1(e), Acquiror shall be required to issue to the former security
holders of Target up to an aggregate of 547,467 shares of Acquiror Common Stock
(such aggregate number of shares being referred to herein as the “Earn Out
Shares”).

Upon* 
by the Surviving Corporation and certain*  (each a *) of each *to the* set forth in clauses (i) through (v)
below to *derived from the Surviving Corporation’s (or its affiliates) research
(i.e., a **the Surviving Corporation and its affiliates the *) (each a *) set
forth below, that number of Earn Out Shares 
relating to such *shall be distributed to the former holders of Target
securities in accordance with Section 2.1(d); provided, however, that the
number of Earn Out Shares payable under any specific* described in clauses (i)
through (v) below shall be reduced by the number of shares of Acquiror Common
Stock equal to (W) the net present value (employing an annual discount rate of
8%) of any *(other than the first *of any annual* assessed for periods
beginning at least one year after the* 
of such *) required under such *, divided by the Average Acquiror
Closing Price, (X) the fair market value of any intellectual property of a
party other than Target that is *to the* in exchange for such *divided by the
Average Acquiror Closing Price, (Y) other than with respect to the *to* of* of
Target’s *) the fair market value of any *that is *to the *in exchange for
such* divided by the Average Acquiror Closing Price and (Z) to the extent
any *is not free of *and *on *to *, the amount determined by Acquiror in its
sole and absolute discretion in good faith (after consultation with *) equal to
(A) the cost of such *on a *and* basis less (B) the cost of such *,
divided by the Average Acquiror Closing Price. 
Acquiror and Surviving Corporation shall not engage in bad faith during
the *and shall not in bad faith delay the* 
of any* solely in order to cause the reduction or elimination of any
amounts to be paid under this Section 2.1(e).

*Confidential portions of this document
have been redacted and have been filed separately with the Commission.

 

Subject to the provisions set forth
above, with respect to all *, the scope, terms and conditions of such *shall be
acceptable to Acquiror in its sole and absolute discretion.

	 	(i)	             Subject to the reductions set
  forth above and herein, upon*  of a *,
  and/or purchase of a product that * a *, such *or product relating to a *with
  *(the *) prior to or on the date that is *months after the Effective
  Time,*  Earn Out Shares will be paid
  out in accordance with Section 2.1(d) and Section 6.5.  If the *is executed after the date that
  is* months after the Effective Time but prior to or on the date that is
  *months after the Effective Time, then *Earn Out Shares will be paid out in
  accordance with Section 2.1(d) and Section 6.5.  If the* is not executed prior to or on the date that is *months
  after the Effective Time, no Earn Out Shares will be required to be paid
  under this clause (i). 
  Notwithstanding the foregoing, if the* set forth in (ii) below is
  obtained prior to the *, no Earn Out Shares will be required to be paid under
  this clause (i).
	 	 	 
	 	(ii)	             Subject to the reductions set
  forth above and herein, upon* (the *) prior to or on the date that is *months
  after the Effective Time, *Earn Out Shares will be paid out in accordance
  with Section 2.1(d) and Section 6.5. 
  If the *is executed after the date that is* months after the Effective
  Time but prior or on to the date that is *months after the Effective Time,
  then *Earn Out Shares will be paid out in accordance with Section 2.1(d) and
  Section 6.5.  If the* is not executed
  prior to or on the date that is* months after the Effective Time, then no
  Earn Out Shares will be required to be paid under this clause (ii).  Notwithstanding the foregoing (X) if
  the*  is obtained before the*  set forth in (i) above, then all
  references to *Earn Out Shares in this subsection (ii) shall be increased to*
  Earn Out Shares and all references to *Earn Out Shares in this subsection
  (ii) shall be increased to* Earn Out Shares, (Y) if the*  is obtained after the*  set forth in (iv) below and after
  the*  set forth in (i) above, then,
  then all amounts referred to in this subsection shall be further reduced by
  *Earn Out Shares during the period prior to the date that is *months after
  the Effective Time and* Earn Out Shares thereafter and (Z) if the*  is obtained after the*  set forth in (v) below and after the*  set forth in (i) above, then all amounts
  referred to in this subsection shall be further reduced by *Earn Out Shares
  during the period prior to the date that is *months after the Effective Time
  and *Earn Out Shares thereafter.

For clarification, the total number of
Earn Out Shares to be paid by the Acquiror under this Section 2.1(d) for
obtaining *of the*  and the*  under (i) and (ii) above will in no event
exceed *Earn Out Shares, and 10% of any amounts to be paid to former Target
stockholders hereunder shall be deposited into the Escrow Fund as Escrow
Shares.

	 	(iii)	             Subject to the reductions set
  forth above and herein, upon*  of
  a*  relating to *with*  or its * or *  (the *) or relating to *with *or its authorized assignee
  or*  (the *) prior to or on the date
  that is* months after the Effective Time, then (A) *Earn Out Shares will be
  paid out in accordance with Section 2.1(d) and Section 6.5 if*  the* 
  or the*  has been executed
  prior to the date that is *months after the Effective Time or (B) *Earn Out
  Shares of the Earn-Out will be paid out in accordance with Section 2.1(d) and
  Section 6.5 if*  the*  or the* 
  is executed during the period that begins on the date that is *months
  after the Effective Time and ends on the date that is *months after the
  Effective Time.  If*  the* 
  or the*  is executed after the
  date that is* months after the Effective Time but prior to or on the date
  that is *months after the Effective Time, then* Earn Out Shares will be paid
  out in accordance with Section 2.1(d) and Section 6.5.  If *the* 
  the*  is executed prior to or
  on the date that is* months after the Effective Time, then no Earn Out Shares
  will be required to be paid under this clause (iii).  Notwithstanding the foregoing (X) no
  portion of the Earn-Out Shares will be required to be paid under this clause
  (iii) until such time as *the*  or
  the*  has been executed.

 

*Confidential portions of this document
have been redacted and have been filed separately with the Commission.

 

 

	 	(iv)	             Subject to the reductions set
  forth above and herein, upon*  of
  a*  with *(the *) prior to or on the
  date that is* months after the Effective Time, then (A) *Earn Out Shares will
  be paid out in accordance with Section 2.1(d) and Section 6.5 if*  the* 
  or the*  has been executed
  prior to the date that is *months after the Effective Time or (B) *Earn Out
  Shares of the Earn-Out will be paid out in accordance with Section 2.1(d) and
  Section 6.5 if*  the*  or the* 
  is executed  during the period
  that begins on the date that is *months after the Effective Time and ends on
  the date that is *months after the Effective Time.  If the*  is executed
  after the date that is* months after the Effective Time but prior to or on
  the date that is *months after the Effective Time, then* Earn Out Shares will
  be paid out in accordance with Section 2.1(d) and Section 6.5.  Notwithstanding the foregoing, if
  the*  and the*  are obtained prior to the *, then all
  references to *Earn Out Shares in this subsection (iv) shall be increased to*
  Earn Out Shares and all references to *Earn Out Shares in this subsection
  (iv) shall be increased to* Earn Out Shares; and further notwithstanding the
  foregoing (X) no portion of the Earn-Out Shares required to be paid under
  this clause (iv) shall be paid until such time as *the*  or the* 
  has been executed.
	 	 	 
	 	(v)	             Subject to the reductions set
  forth above and herein, upon*  of
  a*  relating to the *with *(the *)
  prior to or on the date that is* months after the Effective Time, then (A)
  *Earn Out Shares will be paid out in accordance with Section 2.1(d) and
  Section 6.5 if*  the*  or the* 
  has been executed prior to the date that is* months after the
  Effective Time or (B) *Earn Out Shares of the Earn-Out will be paid out in
  accordance with Section 2.1(d) and Section 6.5 if*  the*  or the*  is executed  during the period that begins on the date that is *months after
  the Effective Time and ends on the date that is *months after the Effective
  Time.  If such*  is executed after the date that is* months
  after the Effective Time but prior to the date that is *months after the
  Effective Time, then* Earn Out Shares will be paid out in accordance with
  Section 2.1(d) and Section 6.5.  
  Notwithstanding the foregoing, if the*  and the*  are obtained
  prior to the *, then all references to *Earn Out Shares in this subsection
  (v) shall be increased to* Earn Out Shares and all references to *Earn Out
  Shares in this subsection (v) shall be increased to* Earn Out Shares; and
  further notwithstanding the foregoing (X) no portion of the Earn-Out Shares
  to be paid under this subsection (v) shall be paid until such time as
  *the*  or the*  has been executed.

For clarification, the total number of
Earn Out Shares to be paid under clauses (i) through (v) above shall for * all
of the*  under clauses (i) through (v)
above will in no event exceed 547,467 Earn Out Shares, and 10% of any the total
number of Earn Out Shares actually paid under clauses (i) through (v) above
shall be deposited into the Escrow Fund as Escrow Shares.

             (f)         Target Stock Options.  At the Effective Time, all then outstanding
options, whether vested or unvested to purchase Target Common Stock under
Target’s 1997 Equity Incentive Plan (the “Target Stock Plan”) or otherwise
issued prior to adoption of the Target Stock Plan (the “Target Options”) that
by their terms survive the Closing will be assumed by Acquiror in accordance
with Section 6.5.

             (g)        Restricted Shares.  Shares of Target Common Stock or Target
Preferred Stock which are subject to repurchase by Target in the event the
holder thereof ceases to be employed by Target (“Target Restricted Shares”)
shall be converted into Acquiror Common Stock on the same basis as provided in
Section 2.1(c) above and shall be registered in such holder’s name, but shall
be held by Target or Acquiror pursuant to the existing agreements in effect on
the date of this Agreement.  Holders of
the Target Restricted Shares are identified on Schedule 2.1(g) together with
the vesting schedules associated with such shares.

*Confidential portions of this document
have been redacted and have been filed separately with the Commission.

 

 

             Section
2.2       Escrow Agreement.  At the Effective Time, or such later time as
is determined in accordance with Section 2.3(b), Acquiror shall (i) deliver to
each holder of capital stock of Target a certificate representing that number
of Merger Shares equal to 90% of the total number of Merger Shares to which
such holder is entitled to receive pursuant to Section 2.1(c), and (ii) deliver
to the Escrow Agent, to be held in escrow, a certificate representing that
number of Merger Shares equal to 10% of the total number of Merger Shares to
which such holder is entitled to receive pursuant to Section 2.1(c).  In addition, at any time that Acquiror is
required to pay to the former holders of Target capital stock any Earn Out
Shares pursuant to Section 2.1(d), upon such date of payment, Acquiror shall
(i) deliver to each such stockholder a certificate representing that number of
Earn Out Shares to be paid at such time equal to 90% of the total number of
Earn Out Shares then required to be paid, and (ii) deliver to the Escrow Agent,
to be held in escrow, that number of Earn Out Shares to be paid at such time
equal to 10% of the total number of Earn Out Shares then required to be
paid.  The aggregate number of Merger
Shares to be placed in escrow and any Earn Out Shares placed in escrow from
time to time pursuant to this Section 2.2 shall be collectively referred to
herein as the “Escrow Shares”.   The
Escrow Shares shall be held as security for the indemnification rights of
Acquiror under Article X and pursuant to the provisions of an escrow agreement
(the “Escrow Agreement”) executed pursuant to Section 7.6.

             Section
2.3       Dissenting Shares.

             (a)         Notwithstanding any provision of this
Agreement to the contrary, any shares of Target Common Stock or Target
Preferred Stock held by a holder who has exercised, or who still has the right
to exercise, such holder’s dissenter’s rights in accordance with Section 262 of
Delaware Law (“Dissenting Shares”), shall not be converted into or represent a
right to receive Acquiror Common Stock pursuant to Section 2.1, but the holder
of the Dissenting Shares shall only be entitled to such rights as are granted
by Section 262 of Delaware Law.

             (b)        Notwithstanding the provisions of
Section 2.3(a), if any holder of shares of Target Common Stock or Target
Preferred Stock who does not vote in favor of the Merger Agreement or who
demands his dissenter’s rights with respect to such shares under Section 2.1
shall effectively withdraw or lose (through failure to perfect or otherwise)
his rights to receive payment for the fair market value of such shares under
Delaware Law, then, as of the later of the Effective Time or the occurrence of
such event, such holder’s shares shall automatically be converted into and
represent only the right to receive Acquiror Common Stock and payment for
fractional shares as provided in Section 2.1(c) and 2.6, without interest, upon
surrender of the certificate or certificates representing such shares; provided that if such holder effectively
withdraws or loses his right to receive payment for the fair market value of
such shares after the Effective Time, then, at such time Acquiror will deposit
in escrow certificates representing 10% of the shares of Acquiror Common Stock
which such holder would otherwise be entitled to receive.

             (c)         Target shall give Acquiror (i) prompt
notice of any written demands for payment with respect to any shares of capital
stock of Target pursuant to Section 262 of Delaware Law, withdrawals of such
demands, and any other instruments served pursuant to Delaware Law and received
by the Target and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for dissenter’s rights under Delaware
Law.  Target shall not, except with the
prior written consent of Acquiror, voluntarily make any payment with respect to
any demands for dissenter’s rights with respect to Target Common Stock or
Target Preferred Stock or offer to settle or settle any such demands.

             Section 2.4       Exchange of Certificates.

             (a)         From and after the Effective Time, each
holder of an outstanding certificate or certificates (“Certificates”) which
represented shares of Target Common Stock or Target Preferred Stock immediately
prior to the Effective Time shall have the right to surrender each Certificate
to Acquiror (or at Acquiror’s option, an exchange agent to be appointed by
Acquiror), and receive in exchange for all Certificates held by such holder a
certificate representing the number of whole shares of Acquiror Common Stock
(other than the Escrow Shares attributable to such holder) into which the
Target Common Stock or Target Preferred Stock evidenced by the Certificates so
surrendered shall have been converted pursuant to the provisions of Article II
of this Agreement.  The surrender of
Certificates shall be accompanied by duly completed and executed Letters of
Transmittal, which (along with appropriate instructions) shall be sent by Acquiror’s
Transfer Agent to the former Target stockholders promptly but in any event with
five business days thereafter following the Closing Date. Until surrendered,
each outstanding Certificate which prior to the Effective Time represented
shares of Target Common Stock or Target Preferred Stock shall be deemed for all
corporate purposes to evidence ownership of the number of whole shares of
Acquiror Common Stock into which the shares of Target Common Stock or Target
Preferred Stock have been converted but shall, subject to applicable
dissenter’s rights under applicable law and Section 2.3, have no other rights.
Subject to dissenter’s rights under applicable law and Section 2.3, from and
after the Effective Time, the holders of shares of Target Common Stock or
Target Preferred Stock shall cease to have any rights in respect of such shares
and their rights shall be solely in respect of the Acquiror Common Stock into
which such shares of Target Common Stock or Target Preferred Stock have been
converted. From and after the Effective Time, there shall be no further
registration of transfers on the records of Target of shares of Target Common
Stock or Target Preferred Stock outstanding immediately prior to the Effective
Time.

             (b)        If any shares of Acquiror Common Stock
are to be issued in the name of a person other than the person in whose name
the Certificate(s) surrendered in exchange therefor is registered, it shall be
a condition to the issuance of such shares that (i) the Certificate(s) so
surrendered shall be transferable, and shall be properly assigned, endorsed or
accompanied by appropriate stock powers, (ii) such transfer shall otherwise be
proper and (iii) the person requesting such transfer shall pay Acquiror, or its
exchange agent, any transfer or other taxes payable by reason of the foregoing
or establish to the satisfaction of Acquiror that such taxes have been paid or
are not required to be paid. 
Notwithstanding the foregoing, neither Acquiror nor Target shall be
liable to a holder of shares of Target Common Stock or Target Preferred Stock
for shares of Acquiror Common Stock issuable to such holder pursuant to the
provisions of Article II of the Agreement that are delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.

             (c)         In the event any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed, Acquiror
shall issue in exchange for such lost, stolen or destroyed Certificate the
shares of Acquiror Common Stock issuable in exchange therefor pursuant to the
provisions of Article II of the Agreement. 
The Board of Directors of Acquiror may in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificate to provide to Acquiror an indemnity agreement
against any claim that may be made against Acquiror with respect to the
Certificate alleged to have been lost, stolen or destroyed.

             (d)        The certificate or certificates
representing the shares of Acquiror Common Stock to be issued or paid under
this Agreement shall bear the following legends (as well as any legends
required by applicable state and federal corporate and securities laws):

THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
SALE OR DISTRIBUTION THEREOF.  NO SUCH
SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO
THE ACQUIROR THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.

             Section 2.5       Distributions with Respect to
Unexchanged Shares.  No
dividends or other distributions declared or made after the Effective Time with
respect to Acquiror Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the shares of Acquiror Common Stock represented thereby and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to Section
2.6 below until the holder of record of such Certificate shall surrender such
Certificate.  Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Acquiror Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a fractional
share of Acquiror Common Stock to which such holder is entitled pursuant to
Section 2.6 below and the amount of dividends or other distributions with a
record date after the Effective Time previously paid with respect to such whole
shares of Acquiror Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Acquiror Common Stock.

             Section 2.6       No
Fractional Shares.  No
certificate or scrip representing fractional shares of Acquiror Common Stock
shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a shareholder of Acquiror. Notwithstanding any other provision of
this Agreement, each holder of shares of Target Common Stock or Target Preferred
Stock exchanged pursuant to the Merger who would otherwise have been entitled
to receive a fraction of a share of Acquiror Common Stock (after taking into
account all Certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of
a share of Acquiror Common Stock multiplied by the Average Acquiror Closing
Price.

             Section 2.7       Tax and Accounting Consequences.

             (a)         It is intended by the parties hereto
that the Merger shall constitute a “reorganization” within the meaning of
Section 368 of the Code. The parties hereto adopt this Agreement as a “plan of
reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Income Tax Regulations.

             (b)        It is intended by the parties hereto
that the Merger shall qualify for accounting treatment as a purchase.

             Section 2.8       No Further Ownership Rights in Target
Capital Stock.  All shares of
Acquiror Common Stock issued upon the surrender for exchange of shares of Target
Common Stock and Target Preferred Stock in accordance with the terms hereof
(including any cash paid in lieu of fractional shares) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Target Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Target Common Stock and
Target Preferred Stock which were outstanding immediately prior to the
Effective Time.  If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article II.

             Section 2.9       Taking of Necessary Action; Further
Action.  If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Target, the officers and directors of Target are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action, so long as such action is
not inconsistent with this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF TARGET

             Target
represents and warrants to Acquiror and Sub that the statements contained in
this Article III are true and correct, except as set forth in the disclosure
schedule delivered by Target to Acquiror on or before the date of this
Agreement (the “Target Disclosure Schedule”). 
The Target Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
III.

             Section 3.1       Organization of Target.  Target is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has all requisite corporate power to own, lease and operate its property and to
carry on its business as now being conducted, and is duly qualified or licensed
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of its business or ownership or leasing of
properties makes such qualification or licensing necessary and where the
failure to be so qualified or licensed would be reasonably likely to result in
a Target Material Adverse Effect (as defined below).  The Target Disclosure Schedule contains a true and complete
listing of the locations of all sales offices, manufacturing facilities, and
any other offices or facilities of Target and a true and complete list of all
states in which Target maintains any employees. The Target Disclosure Schedule
contains a true and complete list of all states in which Target is duly
qualified or licensed to transact business as a foreign corporation.

             “Target
Material Adverse Effect” means any change or effect that is materially adverse
to the condition (financial or otherwise), assets, liabilities, business or
results of operations of the Target taken as a whole; provided, however, that
none of the Excluded MAE Factors shall be deemed (either alone or in
combination) to constitute, and none of the Excluded MAE Factors shall be taken
into account in determining whether there has been or will be, a Target
Material Adverse Effect.

             “Excluded
MAE factors” means, with respect to the Target or Acquiror: (a) any change in
the market price or trading volume of the Target’s or Acquiror’s stock, as
applicable; (b) any failure by the Target or Acquiror, as applicable, to meet
internal projections or forecasts or published revenue or earnings predictions;
or (c) any adverse change or effect (including any litigation, loss of
employees, cancellation of or delay in customer orders, reduction in revenues
or income or disruption of business relationships) arising from or attributable
or relating to: (i) the announcement or pendency of the Merger, (ii) conditions
affecting the industry or industry sector in which the Target or the Acquiror,
as applicable, or any of their respective Subsidiaries participates, the U.S.
economy as a whole or any foreign economy in any location where the Target or
Acquiror, as applicable, or any of its respective Subsidiaries has material
operations or sales, (iii) conditions affecting third party suppliers of the
Target  or Acquiror, as applicable, (iv)
legal, accounting, investment banking or other fees or expenses incurred in
connection with the transactions contemplated by this Agreement, (v) the
payment of any amounts due to, or the provision of any other benefits to, any
officers or employees under employment contracts, non-competition agreements,
employee benefit plans, severance arrangements or other arrangements in
existence as of the date of this Agreement, (vi) compliance with the terms of,
or the taking of any action required by, this Agreement, (vii) the taking of
any action approved or consented to by the Target or Acquiror, as applicable,
(viii) any change in accounting requirements or principles or any change in
applicable laws, rules or regulations or the interpretation thereof, or (ix)
any action required to be taken under applicable laws, rules, regulations or
agreements, other than antitrust or unfair competition laws, rules or
regulations.

             Section 3.2       Target Capital Structure.

             (a)         The authorized capital stock of Target
consists of 50,000,000 shares of Target Common Stock, 24,000,000 shares of
Target non-voting Common Stock and 10,000,000 shares of Target Preferred Stock,
of which 250,000 shares are designated as Series A Preferred Stock, 450,000
shares are designated as Series B Preferred Stock, 2,000,000 shares are
designated as Series C Preferred Stock, 2,200,000 shares are designated as
Series D Preferred Stock, 4,400,000 shares are designated as Series E Preferred
Stock and 325,000 shares are designated as Series F Preferred Stock.  As of the date of this Agreement, there
are:  (i) 942,032 shares of Target
Common Stock issued and outstanding, all of which are validly issued, fully paid
and nonassessable and 37,266 of which are subject to repurchase rights under
the Target Stock Plan or related agreements as described in the Target
Disclosure Schedule; no shares of Target non-voting Common Stock issued or
outstanding; (ii) 250,000 shares of Series A Preferred Stock issued and
outstanding, 333,331 shares of Series B Preferred Stock issued and outstanding,
1,502,236 shares of Series C Preferred Stock issued and outstanding, 1,540,449
shares of Series D Preferred Stock issued and outstanding, 855,566 shares of
Series E Preferred Stock issued and outstanding, and 40,322 shares of Series F
Preferred Stock issued and outstanding, all of which are validly issued, fully
paid and nonassessable, and all of which are convertible into Target Common
Stock on a one share for one share basis; (iii) 4,408,360 shares of Target
Common Stock reserved for future issuance upon conversion of the Target
Preferred Stock; (iv) 412,249 shares of Target Common Stock reserved for future
issuance pursuant to Target Options granted and outstanding under the Target
Stock Plan; (v) 92,500 shares of Target Common Stock reserved for future
issuance pursuant to Target Options granted and outstanding outside of the
Target Stock Plan and (vi) 265,802 shares of Target Common Stock available and
reserved for issuance upon exercise of options or pursuant to awards to be
granted in the future under the Target Stock Plan.  The issued and outstanding shares of Target Common Stock and
Target Preferred Stock are held of record by the stockholders of Target as set
forth and identified in the stockholder list attached as Schedule 3.2(a) to the
Target Disclosure Schedule.  The issued
and outstanding Target Options are held of record by the option holders as set
forth and identified on Schedule 3.2(a). 
The issued and outstanding warrants to acquire Target Common Stock and
Target Preferred Stock are held of record by the warrantholder as set forth and
identified on Schedule 3.2(a) (the “Target Warrants”).  All shares of Target Common Stock and Target
Preferred Stock subject to issuance as specified above, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid and
nonassessable.  All shares of Target
Common Stock issuable upon the exercise of Target Options, upon issuance on the
terms and conditions specified in the instrument pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and
nonassessable.  Except as otherwise set
forth in Schedule 3.2(a), none of the issued and outstanding shares of Target
Common Stock are subject to contractual rights to repurchase upon the
termination of the employment or consulting services of the holder thereof with
Target or its affiliates.  All
outstanding shares of Target Common Stock and Target Preferred Stock and
outstanding Target Options (collectively “Target Securities”) were issued in
compliance with applicable federal and state securities laws.  Except for the redemption rights of the
Target Preferred Stock provided for in the Certificate of Incorporation, there
are no obligations, contingent or otherwise, of Target to repurchase, redeem or
otherwise acquire any shares of Target Common Stock or Target Preferred Stock
or make any investment (in the form of a loan, capital contribution or
otherwise) in any other entity.  An
updated Schedule 3.2(a) reflecting changes, if any, permitted by this Agreement
in the capitalization of Target between the date hereof and the Effective Time
shall be delivered by Target to Acquiror on the Closing Date.

             (b)        Except as set forth in this Section 3.2,
there are no equity securities of any class or series of Target, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. 
Except as set forth in this Section 3.2, there are no options, warrants,
equity securities, calls, rights, commitments or agreements of any character to
which Target is a party or by which it is bound obligating Target to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of Target or (except as set forth in the stock restriction
agreements, stock option agreements and the Investor Rights Agreements listed
in Schedule 3.2) obligating Target to grant, extend, accelerate the vesting of
or enter into any such option, warrant, equity security, call, right,
commitment or agreement.  Target is not
in discussion, formal or informal, with any person or entity regarding the
issuance of any form of additional Target equity that has not been issued or
committed to prior to the date of this Agreement.  Except as provided in this Agreement and the other Transaction
Documents (as defined in Section 3.3(a)) or any transaction contemplated hereby
or thereby, there are no voting trusts, proxies or other agreements or
understandings with respect to the voting of the shares of capital stock of
Target.

             (c)         Other than as set forth on Schedule
3.2(a), all Target Options have been issued in accordance with the terms of the
Target Stock Plan and pursuant to the standard forms of option agreement
previously provided to Acquiror or its representatives.  Except as set forth in Schedule 3.2, neither
the consummation of transactions contemplated by this Agreement or the other
Transaction Documents nor any action taken by Target in connection with such
transactions will result in (i) any acceleration of vesting in favor of any
optionee under any Target Option; (ii) any acceleration of vesting in favor of
any stockholder under the Target Stock Plan whose shares are subject to a right
of repurchase on behalf of the Target; (iii) any additional benefits for any
optionee under any Target Option; or (iv) the inability of Acquiror or Target
after the Effective Time to exercise any right or benefit held by Target prior
to the Effective Time with respect to any Target Option assumed by Acquiror or
any stock awards under the Target Stock Plan, including, without limitation,
the right to repurchase an optionee’s or stockholder’s unvested shares on
termination of such optionee’s or stockholder’s employment. The assumption by
Acquiror of Target Options in accordance with Section 6.5 hereunder will not
(i) give the optionees additional benefits which they did not have under their
options prior to such assumption (after taking into account the existing
provisions of the options, such as their respective exercise prices and vesting
schedules and after taking into account the terms of this Agreement) and (ii)
constitute a breach of the Target Stock Plan or any agreement entered into
pursuant to such plan.

             Section 3.3       Authority; No Conflict; Required
Filings and Consents.

             (a)         Target has all requisite corporate
power and authority to enter into this Agreement and all Transaction Documents
to which it is or will become a party and to consummate the transactions
contemplated by this Agreement and such Transaction Documents.  The execution and delivery by Target of this
Agreement and such Transaction Documents and the consummation by Target of the
transactions contemplated by this Agreement and such Transaction Documents have
been duly authorized by all necessary corporate action on the part of Target
(other than the approval of the Merger by Target’s stockholders) under the
provisions of Delaware Law and Target’s Certificate of Incorporation.  This Agreement has been and such Transaction
Documents have been or, to the extent not executed as of the date hereof, will
be duly executed and delivered by Target. This Agreement and each of the
Transaction Documents to which Target is a party constitutes, and each of the
Transaction Documents to which Target will become a party when executed and
delivered by Target will constitute, assuming the due authorization, execution
and delivery by the other parties hereto and thereto, the valid and binding
obligation of Target, enforceable against Target in accordance with their
respective terms, except to the extent that enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity, regardless of whether such enforceability is considered
in a proceeding at law or in equity. For purposes of this Agreement,
“Transaction Documents” means the Certificate of Merger.

             (b)        The execution and delivery by Target of
this Agreement and the Transaction Documents to which it is or will become a
party does not and the consummation by Target of the transactions contemplated
by this Agreement and the Transaction Documents to which it is or will become a
party will not, (i) conflict with, or result in any violation or breach of any
provision of the Certificate of Incorporation or Bylaws of Target, (ii) result
in any violation or breach of, or constitute (with or without notice or lapse
of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, contract or other agreement, instrument or obligation to
which Target is a party or by which it or any of its properties or assets may
be bound, or (iii) conflict or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Target or any of its properties or assets, except in the case of (ii) and
(iii) for any such conflicts, violations, defaults, terminations, cancellations
or accelerations which would not have a Target Material Adverse Effect.

             (c)         No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality (“Governmental Entity”) is required by or with respect to
Target in connection with the execution and delivery of this Agreement or of
any other Transaction Document to which it is or will become a party or the
consummation of the transactions contemplated by this Agreement or such
Transaction Document, except for (i) the filing of the Certificate of Merger
with the Delaware Secretary of State, (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable federal and state securities laws and (iii) such consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
reasonably be expected to have a Target Material Adverse Effect.

             Section 3.4       Financial Statements; Absence of
Undisclosed Liabilities.

             (a)         Target has delivered to Acquiror copies
of Target’s audited balance sheets as of December 31, 2000 and December 31,
1999 and the related statements of operations, stockholders’ equity and cash
flow for the years then ended and for the period from May 22, 1996 to December
31, 2000 (collectively, the “Target Financial Statements”).

             (b)        The Target Financial Statements present
fairly in all material respects the financial position, results of operations
and cash flows of Target as of their historical dates and for the periods indicated.  The Target Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated and with each other.

             (c)         Target has delivered to Acquiror copies
of Target’s balance sheet as of May 31, 2001 (the “Most Recent Balance Sheet”).

             (d)        Target has no debt, liability, or
obligation of any nature, whether accrued, absolute, contingent, or otherwise,
and whether due or to become due, that is not reflected or reserved against in
the Most Recent Balance Sheet (including any notes thereto), except for
(i) those debts, liabilities and obligations that may have been incurred
after the date of the Most Recent Balance Sheet or that would not reasonably be
required, in accordance with generally accepted accounting principles applied
on a basis consistent with prior periods, to be included in a balance sheet or
the notes thereto (ii) liabilities and obligations incurred under
contracts entered into after the date of Most Recent Balance Sheet.  All debts, liabilities, and obligations
incurred after the date of the Most Recent Balance Sheet were incurred in the
ordinary course of business (except for liabilities or obligations incurred in
connection with the transaction contemplated by this Agreement), and are usual
and normal in amount and do not exceed $10,000 individually or $50,000 in
aggregate.

             (e)         Target has no liability to Silicon
Valley Bank pursuant to any loan or security agreements.

             Section
3.5       Tax Matters.

             (a)         For purposes of this Section 3.5 and
other provisions of this Agreement relating to Taxes, the following definitions
shall apply:

                           (i)          The term “Taxes” shall mean all taxes,
however denominated, including any interest, penalties or other additions to
tax that may become payable in respect thereof, (A) imposed by any federal,
territorial, state, local or foreign government or any agency or political
subdivision of any such government, which taxes shall include, without limiting
the generality of the foregoing, all income or profits taxes (including but not
limited to, federal income taxes and state income taxes), payroll and employee
withholding taxes, unemployment insurance, social security taxes, sales and use
taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, ozone depleting chemicals taxes, transfer
taxes, workers’ compensation, Pension Benefit Guaranty Corporation premiums and
other governmental charges, and other obligations of the same or of a similar
nature to any of the foregoing, which are required to be paid, withheld or
collected, (B) any liability for the payment of amounts referred to in (A) as a
result of being a member of any affiliated, consolidated, combined or unitary
group, or (C) any liability for amounts referred to in (A) or (B) as a result
of any obligations to indemnify another person.

                           (ii)         The term “Returns” shall mean all
reports, estimates, declarations of estimated tax, information statements and
returns relating to, or required to be filed in connection with, any Taxes,
including information returns or reports with respect to backup withholding and
other payments to third parties.

             (b)        All Returns required to be filed by or
on behalf of Target have been duly filed on a timely basis.  All Taxes shown to be payable on such
Returns or on subsequent assessments with respect thereto, and all payments of
estimated Taxes required to be made by or on behalf of Target under Section
6655 of the Code or comparable provisions of state, local or foreign law, have
been paid in full on a timely basis or have been accrued on the Most Recent
Balance Sheet, to Target’s knowledge, and no other Taxes are payable by Target
with respect to items or periods covered by such Returns (whether or not shown
on or reportable on such Returns). Target has withheld and paid over all Taxes
required to have been withheld and paid over, and complied with all information
reporting and backup withholding requirements, including maintenance of
required records with respect thereto, in connection with amounts paid or owing
to any employee, creditor, independent contractor, or other third party.  There are no liens on any of the assets of
Target with respect to Taxes, other than liens for Taxes not yet due and
payable or for Taxes that Target is contesting in good faith through
appropriate proceedings and for which appropriate reserves have been
established on the Most Recent Balance Sheet. 
Target has not at any time been (i) a member of an affiliated group of
corporations filing consolidated, combined or unitary income or franchise tax
returns, or (ii) a member of any partnership or joint venture for a period for
which the statue of limitations for any Tax potentially applicable as a result
of such membership has not expired.

             (c)         The amount of Target’s liability for
unpaid Taxes (whether actual or contingent) for all periods through the date of
the Most Recent Balance Sheet does not, in the aggregate, exceed the amount of
the liability accruals for Taxes reflected on the Most Recent Balance Sheet,
and the Most Recent Balance Sheet reflects proper accrual in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods of all liabilities for Taxes payable after the date of the Most
Recent Balance Sheet attributable to transactions and events occurring prior to
such date.  No liability for Taxes has
been incurred (or prior to Closing will be incurred) since such date other than
in the ordinary course of business.

             (d)        Acquiror has been furnished by Target
with true and complete copies of (i) relevant portions of income tax audit
reports, statements of deficiencies, closing or other agreements received by or
on behalf of Target relating to Taxes, and (ii) all federal and state income or
franchise tax Returns and state sales and use tax Returns for or including
Target for all periods since the inception of Target.  Target does not do business in, or derive income from or have a
taxable nexus with any state other than states for which Returns have been duly
filed and furnished to Acquiror.

             (e)         The Returns of or including Target have
never been audited by a government or taxing authority, nor is any such audit
in process, pending or, to Target’s knowledge, threatened (either in writing or
verbally, formally or informally). No deficiencies exist or have been asserted
(either in writing or verbally, formally or informally), and Target has not
received notice (either in writing or verbally, formally or informally) that it
has not filed a Return or paid Taxes required to be filed or paid. Target is
neither a party to any action or proceeding for assessment or collection of
Taxes, nor has such event been asserted or threatened (either in writing or
verbally, formally or informally) against Target or any of its assets. No
waiver or extension of any statute of limitations is in effect with respect to
Taxes or Returns of Target. Target has disclosed on its federal and state
income and franchise tax Returns all positions taken therein that could give
rise to a substantial understatement penalty within the meaning of Code Section
6662 or comparable provisions of applicable state tax laws.

             (f)         Target is not, nor has it ever been, a
party to any tax sharing agreement.

             (g)        Target is not, nor has it been, a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code, and Acquiror is not required to withhold tax by
reason of Section 1445 of the Code. Target is not a “consenting corporation”
under Section 341(f) of the Code. Target has not entered into any compensatory
agreements with respect to the performance of services which payment thereunder
would result in a nondeductible expense to Target pursuant to Section 280G of
the Code or an excise tax to the recipient of such payment pursuant to Section
4999 of the Code.  Target has not agreed
to, nor is it required to make any adjustment under Code Section 481(a) by
reason of, a change in accounting method. 
Target is not, nor has it been, a “reporting corporation” subject to the
information reporting and record maintenance requirements of Section 6038A and
the regulations thereunder. Target is in compliance with the terms and
conditions of any applicable tax exemptions, agreements or orders of any
foreign government to which it may be subject or which it may have claimed, and
the transactions contemplated by this Agreement will not have any adverse
effect on such compliance.

             Section 3.6       Absence of Certain Changes or Events.  Since the date of the Most Recent Balance
Sheet, Target has not:

             (a)         suffered any change or effect that has
had a Target Material Adverse Effect;

             (b)        granted or agreed to make any increase
in the compensation payable or to become payable by Target to its officers or
employees;

             (c)         declared, set aside or paid any
dividend or made any other distribution on or in respect of the shares of the
capital stock of Target or declared any direct or indirect redemption,
retirement, purchase or other acquisition by Target of such shares;

             (d)        made any change in the accounting
methods or practices it follows, whether for general financial or tax purposes,
or any change in depreciation or amortization policies or rates adopted
therein;

             (e)         sold, leased, abandoned or otherwise
disposed of any real property or any material machinery, equipment or other
operating property;

             (f)         sold, assigned, transferred, licensed
or otherwise disposed of any patent, trademark, trade name, brand name,
copyright (or pending application for any patent, trademark or copyright)
invention, work of authorship, process, know-how, formula or trade secret or
interest thereunder or other intangible asset, except as set forth in Schedule
3.6 or 3.11;

             (g)        permitted or allowed any of its property
or assets to be subjected to any mortgage, deed of trust, pledge, lien,
security interest or other encumbrance of any kind (except those permitted
under Section 3.7);

             (h)        made any capital expenditure or
commitment individually in excess of $10,000 or in the aggregate in excess of
$50,000;

             (i)          paid, loaned or advanced any amount
to, or sold, transferred or leased any properties or assets to, or entered into
any agreement or arrangement with, any of its Affiliates (as defined in Section
3.16), officers, directors or stockholders or any affiliate or associate of any
of the foregoing (except in the case of salaries in the ordinary course of
business);

             (j)          made any amendment to or terminated
any agreement which, if not so amended or terminated, would be required to be
disclosed on the Target Disclosure Schedule; or

             (k)         agreed to take any action described in
this Section 3.6 or outside of its ordinary course of business.

             Section 3.7       Title and Related Matters.  Target has good and marketable title to all
the properties, real and personal, owned by and used in or necessary for the
operation of the business of Target, free and clear of all mortgages, liens,
pledges, charges or encumbrances of any kind or character, except the lien of
current taxes not yet due and payable. 
The equipment of Target used in the operation of its business is, taken
as a whole, (i) adequate for the business currently conducted by Target and
(ii) in good operating condition and repair, ordinary wear and tear
excepted.  All real or personal property
leases to which Target is a party are valid, binding, enforceable and effective
against Target in accordance with their respective terms.  To the knowledge of Target, there is not
under any of such leases any existing material default or event of default or
event which, with notice or lapse of time or both, would constitute a material
default.  The Target Disclosure Schedule
contains a description of all personal property leased or owned with an
individual net book value in excess of $10,000 and real property leased or
owned by Target, describing its interest in said property.  True and correct copies of Target’s real
property and personal property leases have been provided to Acquiror or its
representatives.

             Section 3.8       Proprietary
Rights.

             (a)         The Target Disclosure Schedule sets
forth a complete list of each of the following items (i) all patents and
pending applications therefor, registrations of trademarks (including service
marks) and pending applications therefor, and registrations of copyrights and
applications therefor and registered mask works and pending applications
therefor, that are owned by the Target (collectively, the “Target Owned IP”),
(ii) all licenses, agreements and contracts relating to the Target Proprietary
Rights (as defined in Section 3.8(b) of this Agreement) pursuant to which the
Target or any of its Subsidiaries are entitled to use any Target Proprietary
Rights owned by any third party (the “Third Party Licenses”) and (iii) all
agreements under which the Target or any of its Subsidiaries has granted any
third party the right to use any Target Proprietary Rights, including the
unexpired material transfer agreements.

             (b)        Except to the extent identified in
appropriate sections of the Target Disclosure Schedule, the Target is the owner
of, or is licensed to use, in all jurisdictions as necessary, all intellectual
property, including, without limitation, all patents and pending patent
applications, supplementary protection certificates, patent reissues,
reexaminations, extensions, trademarks and pending trademark applications,
trade dress, service marks and service mark registrations, pending service mark
applications, domain names, logos, commercial symbols, business name
registrations, trade names, copyrights and copyright registrations, computer
hardware and software, mask works and pending mask work registration
applications, industrial designs and pending applications for registration of
such industrial designs, including, without limitation, any and all pending
applications for renewal, extensions, reexaminations and reissues of any of the
foregoing intellectual property rights where applicable, inventions (whether
patentable or unpatentable and whether or not reduced to practice), biological
materials, trade secrets, formulae, know-how, technical information, research
data, research raw data, laboratory notebooks, procedures, designs, proprietary
technology and information (hereinafter collectively, “Intellectual Property
Rights”) held or used in the business or necessary for the operation of the
properties, assets and businesses of the Target (including, without limitation,
the technology, information, databases, data lists, data compilations, and all
proprietary rights developed or discovered or used in connection with or
contained in all versions and implementations of  any product or technology which has been or is being marketed,
distributed, licensed, used or sold by Target or currently is under development
by Target (collectively, the “Target Products”)) (hereinafter the “Target
Proprietary Rights”), except as would not, individually or in the aggregate,
have or reasonably be expected to have, a Target Material Adverse Effect,
except for any Intellectual Property Rights the Target reasonably believes
after due investigation to be invalid and except for any Intellectual Property
Rights relating to off-the-shelf software generally available to the public at
a cost not exceeding $5,000.

             (c)         Except to the extent identified in the
Target Disclosure Schedule, the Target is 
the sole legal and beneficial owner of all the Target Proprietary Rights
(subject to the Third Party Licenses), except as would not, individually or in
the aggregate, have or reasonably be expected to have, a Target Material
Adverse Effect.

             (d)        The Target has not entered into any
agreements, licenses or created any mortgages, liens, security interests,
leases, pledges, encumbrances, equities, claims, charges, options,
restrictions, rights of first refusal, title retention agreements or other
exceptions to title which convey any rights in the Target Proprietary Rights,
limit the ability of the Target to enforce or maintain Target Proprietary Rights
or restrict the use by the Target of the Target Proprietary Rights in any way,
except as provided in agreements and instruments disclosed in the Target
Disclosure Schedule and furnished to Acquiror prior to the date of this
Agreement.

             (e)         Except as listed in the Target
Disclosure Schedule, to the knowledge of the Target, the Target is in
compliance in all material respects with the Third Party Licenses that are
material to the conduct of the business of the Target.

             (f)         Except as set forth on the Target Disclosure
Schedule, (i) the Target is not, and will not be as a result of the execution,
delivery or performance of this Agreement, or the consummation of the Merger or
the other transactions contemplated hereby or thereby in breach, violation or
default of any Third Party Licenses that are material to the conduct of the
business of the Target and (ii) the rights of the Target to the Target
Proprietary Rights will not be affected by the execution, delivery or
performance of this Agreement or the consummation of the Merger or the other
transactions contemplated hereby or thereby.

             (g)        Except as set forth on the Target
Disclosure Schedule, the Target has the right to license to third parties the
use of all Target Proprietary Rights.

             (h)        Except as listed in the Target
Disclosure Schedule, to the knowledge of the Target, (i) all registrations and
filings relating to the Target Owned IP are in good standing, (ii) all
maintenance and renewal fees necessary to preserve the rights of the Target in
respect of the Target Owned IP have been made and (iii) the registrations and
filings relating to the Target Owned IP are proceeding and there are no
material facts which could significantly undermine those registrations or
filings or reduce to a significant extent the scope of protection of any
patents arising from such applications.

             (i)          Except as set forth on the Target
Disclosure Schedule, the practice, manufacturing, marketing, distribution,
testing, sale, offer for sale, importation and use of technologies, compounds, products,
processes, nucleic acid arrays, methods, software and technologies previously
used and presently in use by the Target, licensees or sublicensees in the
countries where the Target has conducted or proposes to conduct such
activities, to the knowledge of the Target, does not and would not infringe and
does not and will not result in the misappropriation or other unauthorized use
of Intellectual Property Rights of any third party that are reasonably believed
by the Target after due investigation to be valid, except as would not,
individually or in the aggregate, have, or reasonably be expected to have, a
Target Material Adverse Effect.

             (j)          Except for the matters set forth in
the Target Disclosure Schedule, there are no allegations, claims, suits or proceedings
instituted or pending against the Target, or, to the Target’s knowledge,
against any other person, which challenge the rights possessed by the Target to
use the Target Proprietary Rights or the ownership (with respect to Target
Owned IP), validity, priority, enforceability, scope or effectiveness of any of
the Target Proprietary Rights, including without limitation any interferences,
oppositions, cancellations or other contested proceedings and, to the knowledge
of the Target, there are no threats of the same.

             (k)         To the knowledge of the Target, except
for the matters set forth in the Target Disclosure Schedule, there is no
unauthorized use, infringement or misappropriation of the Target Proprietary
Rights by any third party, including any employee or former employee of the
Target, except as would not, individually or in the aggregate, have, or
reasonably be expected to have, a Target Material Adverse Effect.

             (l)          Except as set forth in the Target
Disclosure Schedule, (i) commercially reasonable measures have been taken to
maintain the confidentiality of the inventions, trade secrets, formulae,
know-how, technical information, research data, research raw data, laboratory
notebooks, procedures, designs, proprietary technology and information of the Target,
and all other information the value of which to the Target is contingent upon
maintenance of the confidentiality thereof (“Confidential Information”) and
(ii) without limiting the generality of the foregoing, each employee, officer,
and director of the Target and each consultant to the Target who was involved
in the development of Target Proprietary Rights or Confidential Information who
has had access to Confidential Information of the Target has entered into an
agreement suitable to vest all ownership rights to any Target Proprietary
Rights (subject to the Third Party Licenses) and has entered into an agreement
for maintaining all confidential information of the Target except for those
individuals listed in the Target Disclosure Schedule whose involvement in the
business of the Target is described with specificity therein. All use,
disclosure or appropriation of Confidential Information not owned by Target has
been pursuant to the terms of a written agreement between Target and the owner
of such Confidential Information, or is otherwise lawful.

             (m)        Except as set forth in the Target
Disclosure Schedule, the Target has not entered into any contract or agreement
to indemnify any other person for or against any charge of infringement or
misappropriation of, or interference or conflict with respect to, any of the
Target Proprietary Rights.

             (n)        No product liability or warranty claims
have been communicated in writing to or threatened against Target.

             Section 3.9       Employee Benefit Plans.

             (a)         The Target Disclosure Schedule lists,
with respect to Target and any trade or business (whether or not incorporated)
which is treated as a single employer with Target (an “ERISA Affiliate”) within
the meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all material
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), (ii) each loan to a
non-officer employee, loans to officers and directors and any stock option,
stock purchase, phantom stock, stock appreciation right, supplemental
retirement, severance, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code Section 125) or dependent care
(Code Section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to senior
management of Target and that do not generally apply to all employees, and (v)
any current or former employment or executive compensation or severance
agreements, written or otherwise, for the benefit of, or relating to, any
present or former employee, consultant or director of Target as to which (with
respect to any of items (i) through (v) above) any potential liability is borne
by Target (together, the “Target Employee Plans”).

             (b)        Target has delivered to or made
available to Acquiror or its representatives a copy of each of the Target
Employee Plans and related plan documents (including trust documents, insurance
policies or contracts, employee booklets, summary plan descriptions and other
authorizing documents, and, to the extent still in its possession, any material
employee communications relating thereto) and has, with respect to each Target
Employee Plan which is subject to ERISA reporting requirements, provided copies
of any Form 5500 reports filed for the last three plan years.  Any Target Employee Plan intended to be
qualified under Section 401(a) of the Code has either obtained from the
Internal Revenue Service a favorable determination letter as to its qualified
status under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation, or has applied to the Internal
Revenue Service for such a determination letter prior to the expiration of the
requisite period under applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for such determination letter and to
make any amendments necessary to obtain a favorable determination. Target has
also furnished Acquiror with the most recent Internal Revenue Service
determination letter issued with respect to each such Target Employee Plan, and
nothing has occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax-qualified status of any
Target Employee Plan subject to Code Section 401(a).

             (c)         (i) None of the Target Employee Plans
promises or provides retiree medical or other retiree welfare benefits to any
person; (ii) there has been no “prohibited transaction,” as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any Target Employee Plan, which could reasonably be expected to have, in the
aggregate, a Material Adverse Affect on Target, (iii) each Target Employee Plan
has been administered in accordance with its terms and in compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except as would not have, in the aggregate, a
Target Material Adverse Effect, and Target and each subsidiary or ERISA
Affiliate have performed all material obligations required to be performed by
them under, are not in any material respect in default, under or violation of,
and have no knowledge of any material default or violation by any other party
to, any of the Target Employee Plans; (iv) neither Target nor any subsidiary or
ERISA Affiliate is subject to any material liability or penalty under Sections
4976 through 4980 of the Code or Title I of ERISA with respect to any of the
Target Employee Plans; (v) all contributions required to be made by Target or
any subsidiary or ERISA Affiliate to any Target Employee Plan have been made on
or before their due dates and a reasonable amount has been accrued for
contributions to each Target Employee Plan for the current plan years; (vi)
with respect to each Target Employee Plan, no “reportable event” within the meaning
of Section 4043 of ERISA (excluding any such event for which the thirty (30)
day notice requirement has been waived under the regulations to Section 4043 of
ERISA) nor any event described in Section 4062, 4063 or 4041 of ERISA has
occurred; and (vii) no Target Employee Plan is covered by, and neither Target
nor any subsidiary or ERISA Affiliate has incurred or expects to incur any
liability under Title IV of ERISA or Section 412 of the Code.  With respect to each Target Employee Plan
subject to ERISA as either an employee pension plan within the meaning of
Section 3(2) of ERISA or an employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, Target has prepared in good faith and timely filed all
requisite governmental reports (which were true and correct as of the date
filed) and has properly and timely filed and distributed or posted all notices
and reports to employees required to be filed, distributed or posted with
respect to each such Target Employee Plan except as would not give rise, in the
aggregate, to a Target Material Adverse Effect.  No suit, administrative proceeding, action or other litigation
has been brought, or to the best knowledge of Target is threatened, against or
with respect to any such Target Employee Plan, including any audit or inquiry
by the IRS or United States Department of Labor.  Neither Target nor any ERISA Affiliate is a party to, or has made
any contribution to or otherwise incurred any obligation under, any “multi-employer
plan” as defined in Section 3(37) of ERISA.

             (d)        With respect to each Target Employee
Plan, Target has complied with (i) the applicable health care continuation and
notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”) and the proposed regulations thereunder and (ii) the applicable
requirements of the Family Leave Act of 1993 and the regulations thereunder,
except to the extent that such failure to comply would not, in the aggregate,
have a Target Material Adverse Effect.

             (e)         Except as set forth in the Target
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of Target or any other ERISA Affiliate to severance benefits or any
other payment (including, without limitation, unemployment compensation, golden
parachute or bonus), except as expressly provided in this Agreement, or (ii)
accelerate the time of payment or vesting of any such benefits, or (iii)
increase or accelerate any benefits or the amount of compensation due any such
employee or service provider.  No
payment which will or may be made by Target or any of its subsidiaries to any
employee will be characterized as an “excess parachute payment” within the
meaning of Section 280G(b)(1) of the Code.

             (f)         There has been no amendment to, written
interpretation or announcement (whether or not written) by Target or other
ERISA Affiliate relating to, or change in participation or coverage under, any
Target Employee Plan which would materially increase the expense of maintaining
such Plan above the level of expense incurred with respect to that Plan for the
most recent fiscal year included in the Target Financial Statements.

             (g)        All Target Options which are treated by
Target as “incentive stock options” under Section 422 of the Code comply with
the requirements of that Section.  All
Target Options and other equity grants by target have complied with all federal
and state securities laws.

             Section
3.10     Bank Accounts.  The Target Disclosure Schedule sets forth
the names and locations of all banks, trusts, companies, savings and loan
associations, and other financial institutions at which Target maintains
accounts of any nature and the names of all persons authorized to draw thereon
or make withdrawals therefrom.

             Section
3.11     Contracts.

             (a)         Except
as set forth on the Target Disclosure Schedule:

                           (i)          Target has no agreements, contracts or
commitments that provide for the sale, licensing, transfer, assignment,
distribution, marketing, promotion or resale by Target of any Target Products
or Target Proprietary Rights, nor has Target granted any license of any Target
trademarks or servicemarks.

                           (ii)         Target has no Third Party Licenses.

                           (iii)        Target has no agreements, contracts or
commitments that call for fixed and/or contingent payments or expenditures by
or to Target (including, without limitation, any advertising or revenue sharing
arrangement) individually in excess of $10,000.

                           (iv)       Target has no outstanding sales or
advertising contract, commitment or proposal that Target currently expects to
result in any loss to Target upon completion or performance thereof.

                           (v)        Target has no outstanding agreements,
contracts or commitments to employ, engage or utilize officers, employees,
agents, consultants, advisors, salesmen, sales representatives, distributors or
dealers that are not cancelable by Target “at will” and without liability,
penalty or premium.

                           (vi)       Target has no employment, independent
contractor or similar agreement, contract or commitment that is not terminable
on no more than thirty (30) days’ notice without penalty, liability or premium
of any type, including, without limitation, severance or termination pay.

                           (vii)      Target has no currently effective
collective bargaining or union agreements, contracts or commitments.

                           (viii)     Target is not restricted by agreement from
competing with any person or from carrying on its business anywhere in the
world.

                           (ix)        Target has not guaranteed any
obligations of other persons or made any agreements to acquire or guarantee any
obligations of other persons.

                           (x)         Target has no outstanding loan or
advance to any person; nor is it party to any line of credit, standby
financing, revolving credit or other similar financing arrangement of any sort
which would permit the borrowing by Target of any sum.

                           (xi)        Target has no agreements pursuant to
which Target has agreed to manufacture for, supply to or distribute to any
third party any Target Products or Target Components.

                           (xii)       There are no agreements, understandings
or proposed transactions between the Target and any of its officers, directors,
affiliates, any affiliate thereof or any family members thereof.

             True
and correct copies of each document or instrument listed on the Target
Disclosure Schedule pursuant to this Section 3.11(a) (the “Material Contracts”)
have been provided to Acquiror or its representatives.

             (b)        All of the Material Contracts listed on
the Target Disclosure Schedule are valid and binding against Target and, to
Target’s knowledge, in full force and effect, and enforceable by Target in
accordance with their respective terms. 
As of the date hereof, no party to any such Material Contract has
notified Target that it intends to cancel, withdraw, modify or amend such
contract, agreement or arrangement.

             (c)         Target is not in material default under
or in material breach or violation of, nor, to Target’s knowledge, is there any
valid basis for any claim of material default by Target under, or material
breach or violation by Target of, any Material Contract.  To Target’s knowledge, no other party is in
material default under or in material breach or violation of, nor is there any
valid basis for any claim of material default by any other party under or any
material breach or violation by any other party of, any Material Contract.

             (d)        Except as specifically indicated on the
Target Disclosure Schedule, none of the Material Contracts provides for
indemnification by Target of any third party. 
No claims have been made or threatened that would require
indemnification by Target, and Target has not paid any amounts to indemnify any
third party as a result of indemnification requirements of any kind.

             Section
3.12     [Reserved]

             Section 3.13     Compliance With Law. 
Target, with respect to the operation of its business is in compliance
in all material respects with all applicable laws and regulations. Neither
Target nor, to Target’s knowledge, any of its employees has directly or
indirectly paid or delivered any fee, commission or other sum of money or item of
property, however characterized, to any finder, agent, government official or
other party in the United States or any other country, that was or is in
violation of any federal, state, or local statute or law or of any statute or
law of any other country having jurisdiction. 
Target has not participated directly or indirectly in any boycotts or
other similar practices affecting any of its customers.  Target has complied in all material respects
at all times with any and all applicable federal, state and foreign laws,
rules, regulations, proclamations and orders relating to the importation or
exportation of its products.

             Section 3.14     Labor Difficulties; No Discrimination.

             (a)         Target is not engaged in any unfair
labor practice and is not in material violation of any applicable laws
respecting employment and employment practices, terms and conditions of
employment, and wages and hours.  There
is no unfair labor practice complaint against Target actually pending or, to the
knowledge of Target, threatened before the National Labor Relations Board.
There is no strike, labor dispute, slowdown, or stoppage actually pending or,
to the knowledge of Target, threatened against Target.  To the knowledge of Target, no union organizing
activities are taking place with respect to the business of Target.  No grievance, nor any arbitration proceeding
arising out of or under any collective bargaining agreement is pending and, to
the knowledge of Target, no claims therefor exist.  No collective bargaining agreement that is binding on Target
restricts it from relocating or closing any of its operations. Target has not
experienced any material work stoppage or other material labor difficulty.

             (b)        There is no, and has not been any, claim
against Target, or to Target’s knowledge, threatened against Target, based on
actual or alleged race, age, sex, disability or other harassment or
discrimination, or similar tortuous conduct, nor to the knowledge of Target, is
there any basis for any such claim.

             (c)         There are no pending claims against
Target or any of its subsidiaries under any workers compensation plan or policy
or for long term disability.  Neither
Target nor any of its subsidiaries has any monetary material obligations under
COBRA with respect to any former employees or qualifying beneficiaries
thereunder.  There are no proceedings
pending or, to the knowledge of Target, threatened, between Target and any of
their respective employees, which proceedings have or would reasonably be
expected to have a Target Material Adverse Effect.

             Section
3.15     [Reserved]

             Section 3.16     Insider Transactions.  To the knowledge of Target, no affiliate (“Affiliate”) as defined
in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) of Target has any interest in any equipment or other property,
real or personal, tangible or intangible, including, without limitation, any
Target Proprietary Rights or any creditor, supplier, customer, manufacturer,
agent, representative, or distributor of Target Products; provided, however, that no such Affiliate
or other person shall be deemed to have such an interest solely by virtue of
the ownership of less than 1% of the outstanding stock or debt securities of
any publicly-held company, the stock or debt securities of which are traded on
a recognized stock exchange or quoted on the National Association of Securities
Dealers Automated Quotation System.

             Section 3.17     Employees, Independent Contractors and
Consultants.  The Target
Disclosure Schedule lists and describes all past and all currently effective
written or, to Target’s knowledge, oral consulting, independent contractor
and/or employment agreements and other material agreements concluded with
individual employees, independent contractors or consultants to which Target is
a party.  True and correct copies of all
such written agreements have been provided to or made available to Acquiror or
its representatives.  All independent
contractors have been properly classified as independent contractors for the
purposes of federal and applicable state tax laws, laws applicable to employee
benefits and other applicable law.  All
salaries and wages paid by Target are in compliance in all material respects
with applicable federal, state and local laws. 
Also shown on the Target Disclosure Schedule are the names, positions
and salaries or rates of pay, including bonuses, of all persons presently
employed by Target.

             Section
3.18     Insurance. The fire,
liability and other insurance policies held by Target are set forth on
Schedule 3.18.  The Target Disclosure
Schedule contains a list of all claims made by Target under such policies.  Target has not done anything, either by way
of action or inaction, that to the knowledge of Target, might invalidate such
policies in whole or in part. There is no claim pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid and Target is otherwise in compliance
with the terms of such policies and bonds in all material respects. Target has
no knowledge of any threatened termination of, or material premium increase
with respect to, any of such policies.

             Section
3.19     Litigation. There is
no private or governmental action, suit, proceeding, claim, arbitration or
investigation pending before any agency, court or tribunal, foreign or
domestic, or, to the knowledge of Target, threatened against Target or any of
its properties or any of its officers or directors (in their capacities as
such).  There is no judgment, decree or
order against Target, or, to the knowledge of Target, any of its respective
directors or officers (in their capacities as such).  To Target’s knowledge, no circumstances exist that could form a
valid basis for a claim against Target relating to any claim of infringement of
any Intellectual Property Right.

             Section 3.20     Governmental Authorizations and
Regulations. Target has obtained each federal, state, county, local or
foreign governmental consent, license, permit, grant, or other authorization of
a Governmental Entity (i) pursuant to which Target currently operates or holds
any interest in any of its properties or (ii) that is required for the
operation of Target’s business or the holding of any such interest, and all of
such authorizations are in full force and effect, except where the failure to
obtain or have any such Target authorizations would not reasonably be expected
to have a Target Material Adverse Effect. 
Target is in compliance in all material respects with all terms and
conditions of all such permits, licenses and authorizations.

             Section
3.21     Subsidiaries.  Target has no subsidiaries.  Target does not own or control (directly or
indirectly) any capital stock, bonds or other securities of, and does not have
any proprietary interest in, any other corporation, general or limited
partnership, firm, association or business organization, entity or enterprise,
and Target does not control (directly or indirectly) the management or policies
of any other corporation, partnership, firm, association or business
organization, entity or enterprise.

             Section 3.22     Compliance with Environmental
Requirements.  Target is not
aware of, nor has Target received written notice of, any conditions, circumstances,
activities, practices, incidents, or actions which may form a valid basis of
any claim, action, suit, proceeding, hearing, or investigation of, by, against
or relating to Target, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge, release or threatened release into the environment, of any
pollutant, contaminant, or hazardous or toxic substance, material or waste, or
relating to the safety of employees, workers or other persons.

             Section 3.23     Corporate Documents. 
Target has furnished to Acquiror or its representatives copies of: (a)
its Certificate of Incorporation and Bylaws, as amended to date; (b) its minute
book containing all records required to be set forth of all proceedings,
consents, actions, and meetings of the stockholders, the board of directors and
any committees thereof; (c) all material permits, orders, and consents issued
by any regulatory agency with respect to Target, or any securities of Target,
and all applications for such permits, orders, and consents; and (d) the stock
transfer books of Target setting forth all transfers of any capital stock.  The corporate minute books, stock
certificate books, stock registers and other corporate records of Target are
complete and accurate, and the signatures appearing on all documents contained
therein are the true signatures of the persons purporting to have signed the
same.  All actions reflected in such
books and records were duly and validly taken in compliance with the laws of
the applicable jurisdiction.

             Section
3.24     No Brokers.  Neither Target nor, to Target’s knowledge,
any Target stockholder is obligated for the payment of fees or expenses of any
broker or finder in connection with the origin, negotiation or execution of
this Agreement or the other Transaction Documents or in connection with any
transaction contemplated hereby or thereby other than as set forth in the
Target Disclosure Schedule.

             Section
3.25     [Reserved]

             Section 3.26     Target Action.  The Board of Directors of Target, by
unanimous written consent or at a meeting duly called and held, has by the
unanimous vote of all directors (i) determined that the Merger is fair and in
the best interests of Target and its stockholders, (ii) approved the Merger and
this Agreement in accordance with the provisions of Delaware Law, and (iii)
directed that this Agreement and the Merger be submitted to Target stockholders
for their approval and resolved to recommend that Target stockholders vote in
favor of the approval of this Agreement and the Merger.

             Section
3.27     Offers.  Target has suspended or terminated, and has
the legal right to terminate or suspend, all negotiations and discussions of
Acquisition Transactions (as defined in Section 5.6) with parties other than
Acquiror.

             Section 3.28     Information Statement.  The information supplied by Target for inclusion in the
information statement to be sent to the stockholders of Target in connection
with the notice required under Section 228(d) and Section 262(d)(2) of Delaware
Law of Target (such information statement as amended or supplemented is
referred to herein as the “Information Statement”) shall not, on the date the
Information Statement is first mailed to Target stockholders contain any statement
which is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they are made, not false or
misleading.  Notwithstanding the
foregoing, Target makes no representation, warranty or covenant with respect to
any information supplied by or relating to Acquiror or Sub which is contained
in any of the foregoing documents.

             Section
3.29     [Reserved]

             Section 3.30     Complete Copies of Materials.  Target has delivered or made available true
and complete copies of each document which has been requested by Acquiror or
its counsel in connection with their legal and accounting review of Target and
its subsidiaries.

             Section 3.31     Export Control Laws. 
Target has conducted its export transactions in accordance with
applicable provisions of the United States export control laws and regulations,
including but not limited to the Export Administration Act and implementing
Export Administration Regulations except for violations which would not have a
Target Material Adverse Effect.  Without
limiting the foregoing, Target represents and warrants that:

             (a)         Target has obtained all export licenses
and other approvals required for its exports of products, software and
technologies from the United States;

             (b)        Target is in compliance with the terms
of all applicable export licenses or other approvals;

             (c)         There are no pending or, to the
knowledge of Target, threatened claims against Target with respect to such
export licenses or other approvals;

             (d)        There are no actions, conditions or
circumstances pertaining to Target’s export transactions that may give rise to
any future claims; and

             (e)         No consents or approvals for the
transfer of export licenses to Acquiror are required, or such consents and
approvals can be obtained expeditiously without material cost.

             Section
3.32     [Reserved]

             Section
3.33     Disclosure.  No statements by Target contained in this
Agreement, its exhibits and schedules nor in any of the certificates or
documents, including any of the Transaction Documents, delivered or required to
be delivered by Target to Acquiror or Sub under this Agreement contains any
untrue statement of a material fact or omits (when read together with all such
other statements) to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made.

ARTICLE
IV

REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUB

             Acquiror
and Sub represent and warrant to Target and the former Target stockholders
that, the statements contained in this Article IV are true and correct.

             Section 4.1       Organization of Acquiror and Sub.  Each of Acquiror and its subsidiaries,
including Sub, is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and has
all requisite corporate power to own, lease and operate its property and to
carry on its business as now being conducted and is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the
failure to be so qualified or licensed would have an Acquiror Material Adverse
Effect.

             “Acquiror
Material Adverse Effect” means any change or effect that is materially adverse
to the condition (financial or otherwise), assets, liabilities, business or
results of operations of the Acquiror or its subsidiaries taken as a whole,
provided, however, that none of the Excluded MAE Factors shall be deemed (either
alone or in combination) to constitute, and none of the Excluded MAE Factors
shall be taken into account in determining whether there has been or will be,
an Acquiror Material Adverse Effect, and provided, further that no developments
related to Acquiror’s pending litigation with Lexicon Genetics, Inc. shall
constitute an Acquiror Material Adverse Effect.

             Section 4.2       Acquiror and Merger Sub Capital
Structure.  The authorized
capital stock of Acquiror consists of 75,000,000 shares of Common Stock, par
value of $0.001 per share (“Acquiror Common Stock”) and 5,000,000 shares of
Preferred Stock, par value $0.001 per share (“Acquiror Preferred Stock”), of
which there were issued and outstanding as of the close of business on May 4,
2001, 29,895,666 shares of Acquiror Common Stock and no shares of Acquiror
Preferred Stock. There are no other outstanding shares of capital stock or
voting securities of Acquiror other than shares of Acquiror Common Stock issued
after May 4, 2001 under Acquiror’s 2000 Employee Stock Purchase Plan (the
“ESPP”) or upon the exercise of options issued under Acquiror’s 1998 Stock
Incentive Plan or 2000 Stock Incentive Plan. 
The authorized capital stock of Sub consists of 1,000 shares of Common
Stock, all of which are issued and outstanding and are held by Acquiror.  All outstanding shares of Acquiror and Sub
have been duly authorized, validly issued, fully paid and are nonassessable and
free of any liens or encumbrances other than any liens or encumbrances created
by or imposed upon the holders thereof. 
As of the close of business on July 19, 2001, Acquiror has reserved an
aggregate of 5,383,921 shares of Common Stock for issuance to employees,
directors and independent contractors upon exercise of outstanding options to
acquire shares of Acquiror Common Stock issued under the Acquiror stock option
plans and an aggregate of 472,142 shares of Common Stock for issuance upon
exercise of outstanding warrants. Other than as contemplated by this Agreement
or under the ESPP, and except as described in this Section 4.2, there are no
other options, warrants, calls, rights, commitments or agreements to which
Acquiror or Sub is a party or by which either of them is bound obligating
Acquiror or Sub to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of the capital
stock of Acquiror or Sub or obligating Acquiror or Sub to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.  The shares of Acquiror Common Stock to be
issued pursuant to the Merger (including shares of Acquiror Common Stock issued
upon exercise of Target Options assumed by Acquiror) have been reserved for
issuance and will be duly authorized, validly issued, fully paid, and non-
assessable and issued in compliance with all applicable federal or state
securities laws.

             Section 4.3       Authority; No Conflict; Required
Filings and Consents.

             (a)         Each of Acquiror and Sub has all
requisite corporate power and authority to enter into this Agreement and the
other Transaction Documents to which it is or will become a party and to
consummate the transactions contemplated by this Agreement and such Transaction
Documents.  The execution and delivery
of this Agreement and such Transaction Documents and the consummation of the
transactions contemplated by this Agreement and such Transaction Documents have
been duly authorized by all necessary corporate action on the part of Acquiror
and Sub under the provisions of Delaware Law and Acquiror’s and Sub’s
respective certificates of incorporation. 
This Agreement has been and such Transaction Documents have been or, to
the extent not executed as of the date hereof, will be duly executed and
delivered by Acquiror and Sub.  This
Agreement and each of the Transaction Documents to which Acquiror or Sub is a
party constitutes, and each of the Transaction Documents to which Acquiror or
Sub will become a party when executed and delivered by Acquiror or Sub will
constitute, the valid and binding obligation of Acquiror or Sub, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the enforcement of creditors’ rights generally and by general
principles of equity, regardless of whether such enforceability is considered
in a proceeding at law or in equity.

             (b)        The execution and delivery by Acquiror
or Sub of this Agreement and the Transaction Documents to which it is or will
become a party does not, and consummation of the transactions contemplated by
this Agreement or the Transaction Documents to which it is or will become a
party will not, (i) conflict with, or result in any violation or breach of any
provision of the Certificate of Incorporation or Bylaws of Acquiror or Sub,
(ii) result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Acquiror or Sub is a party or by which either of them or
any of their properties or assets may be bound, or (iii) conflict or violate
any permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Acquiror or Sub or any of
their properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not have an Acquiror Material Adverse Effect.

             (c)         No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Acquiror or Sub in connection with the
execution and delivery of this Agreement or the Transaction Documents to which
it is or will become a party or the consummation of the transactions
contemplated hereby or thereby, except for (i) the filing of the Certificate of
Merger with the Delaware Secretary of State, (ii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and the laws of any
foreign country, and (iii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not
reasonably be expected to have an Acquiror Material Adverse Effect.

             Section 4.4       Commission Filings; Financial
Statements.

             (a)         Acquiror has filed with the Commission
and made available to Target or its representatives all forms, reports and
documents required to be filed by Acquiror with the Commission since August 2,
2000 (collectively, the “Acquiror Commission Reports”). The Acquiror Commission
Reports constitute all of the documents required to be filed by the Acquiror
under Section 13 or 14 of the Exchange Act with the Commission since August 2,
2000. The Acquiror Commission Reports (i) at the time filed, (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) complied in all material respects with the applicable requirements
of the Securities Act of 1933, as amended, (the “Securities Act”), and the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material
fact or omit to state a material fact required to be stated in such Acquiror
Commission Reports or necessary in order to make the statements in such
Acquiror Commission Reports, in the light of the circumstances under which they
were made, not misleading.

             (b)        Each of the financial statements
(including, in each case, any related notes) contained in the Acquiror
Commission Reports, including any Acquiror Commission Reports filed after the
date of this Agreement until the Closing, complied or will comply as to form in
all material respects with the applicable published rules and regulations of
the Commission with respect thereto, was prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q
of the Commission) and fairly presented the consolidated financial position of
Acquiror and its subsidiaries as at the respective dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount.

             Section 4.5       Absence of Certain Changes or Events.  Except as otherwise disclosed in the
Acquiror Commission Reports, since March 31, 2001, Acquiror and its
subsidiaries have conducted their business in the ordinary course and, since
such date, Acquiror has not suffered any change or effect that has resulted in
an Acquiror Material Adverse Effect (other than any change in the business of
Acquiror occurring as a result of the execution or announcement of this
Agreement and provided that changes in the trading prices of Acquiror Common
Stock shall not in and of itself constitute a change with respect to Acquiror).

             Section 4.6       Compliance
with Laws.  Acquiror has
complied with, is not in violation of, and has not received any notices of
violation with respect to, any federal, state or local statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for failures to comply or violations which
would not reasonably be expected to have an Acquiror Material Adverse Effect.

             Section 4.7       Interim Operations of Sub.  Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged in no
other business activities and has conducted its operations only as contemplated
by this Agreement.

             Section
4.8       Disclosure.  No statements by Acquiror contained in this
Agreement, its exhibits and schedules, or any of the certificates or documents,
including any of the Transaction Documents, required to be delivered by
Acquiror or Sub to Target under this Agreement contain any untrue statement of
material fact or omits (when read together with all such other statements) to
state a material fact necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made.

             Section 4.9       Stockholders Consent.  No consent or approval of the shareholders of Acquiror is
required or necessary for Acquiror to enter into this Agreement or the
Transaction Documents or to consummate the transactions contemplated hereby and
thereby.

             Section
4.10     Litigation.  Except as otherwise disclosed in the
Acquiror Commission Reports, (i) there is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any
agency, court or tribunal, foreign or domestic, or, to the knowledge of
Acquiror or any of its subsidiaries, threatened against Acquiror or any of its
properties or any of its officers or directors (in their capacities as such),
which, if determined adversely to Acquiror, would have an Acquiror Material
Adverse Effect, and (ii) there is no judgment, decree or order against
Acquiror, or, to the knowledge of Acquiror, any of its respective directors or
officers (in their capacities as such) relating to the business of Acquiror,
the presence of which would have an Acquiror Material Adverse Effect.  To Acquiror’s knowledge, no circumstances
exist that could form a valid basis for a claim against Acquiror as a result of
the conduct of Acquiror’s business (including, without limitation, any claim of
infringement of any intellectual property right) that would have an Acquiror
Material Adverse Effect.

ARTICLE V

PRECLOSING COVENANTS OF TARGET

             During
the period from the date of this Agreement until the Effective Time, Target
covenants and agrees as follows:

             Section 5.1       Notice to Target Stockholders.  Prior to the Effective Time, Target will
send to all stockholders who have not consented to the Merger Agreement the
notice required under Section 228(e) and Section 262(d)(2) of Delaware Law,
along with the Information Statement. 
The notice and the Information Statement shall comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder.  The Information
Statement shall contain the unanimous recommendation of the Board of Directors
of Target that the Target stockholders approve the Merger and this Agreement
and the conclusion of the Board of Directors that the terms and conditions of
the Merger are fair and reasonable to the stockholders of Target.  Anything to the contrary contained herein
notwithstanding, Target shall not include in the Information Statement any
information with respect to Acquiror or its affiliates or associates, the form
and content of which information shall not have been approved by Acquiror prior
to such inclusion.

             Section
5.2       Advice of Changes.  Target will promptly advise Acquiror in
writing of any event occurring subsequent to the date of this Agreement which
would render any representation or warranty of Target contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect.

             Section 5.3       Operation of Business.  During the period from the date of this Agreement and continuing
until the earlier of the termination of the Agreement or the Effective Time,
Target agrees (except to the extent that Acquiror shall otherwise consent in
writing), to carry on its business in the usual, regular and ordinary course in
substantially the same manner as previously conducted, to pay its debts and
taxes when due, subject to good faith disputes over such debts or taxes, to the
extent commercially reasonable to pay or perform other obligations when due,
and, to the extent consistent with such business, use commercially reasonable
efforts consistent with past practices and policies to preserve intact its
present business organization, keep available the services of its present
officers and key employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it.  Target shall promptly
notify Acquiror of any event or occurrence not in the ordinary course of
business of Target.  Except as expressly
contemplated by this Agreement, Target shall not, without the prior written
consent of Acquiror:

             (a)         Accelerate, amend or change the period
of exercisability or the vesting schedule of options or restricted stock
granted under any employee stock plan or agreements or authorize cash payments
in exchange for any Target Option or any options granted under any of such
plans except as specifically required by the terms of such plans or any related
agreements or any such agreements in effect as of the date of this Agreement
and disclosed in the Target Disclosure Schedule;

             (b)        Declare or pay any dividends on or make
any other distributions (whether in cash, stock or property) in respect of any
of its capital stock, or split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities (other than with
respect to the exercise of Target Options or Target Warrants or the conversion
of Target Preferred Stock) in respect of, in lieu of or in substitution for
shares of capital stock of such party, or purchase or otherwise acquire,
directly or indirectly, any shares of its capital stock except from former
employees, directors and consultants in accordance with agreements providing
for the repurchase of shares in connection with any termination of service by
such party;

             (c)         Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or securities convertible into shares of
its capital stock, or subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating it to issue any
such shares or other convertible securities, other than (i) the issuance of (A)
shares of Target Common Stock issuable upon exercise of Target Options or
pursuant to other commitments that are outstanding on the date of this
Agreement and set forth in Schedule 3.2, (B) shares of Target Common Stock issuable
upon conversion of shares of Target Preferred Stock or (C) shares of
Target Common Stock or Target Preferred Stock upon the exercise of Target
Warrants or (ii) the repurchase of shares of Common Stock from terminated
employees pursuant to the terms of outstanding stock restriction or similar
agreements;

             (d)        Acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial equity interest in or
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership or other business organization or division, or
otherwise acquire or agree to acquire any assets;

             (e)         Sell, lease, license or otherwise
dispose of any of its properties or assets which are material, individually or
in the aggregate, to the business of Target, except in the ordinary course of
business;

             (f)         Except as set forth in Section 3.6 of
the Disclosure Schedule, (i) increase or agree to increase the compensation
payable or to become payable to its officers or employees, except for increases
in salary or wages of non-officer employees in accordance with past practices,
(ii) grant any additional severance or termination pay to, or enter into any
employment or severance agreements with, officers, (iii) grant any severance or
termination pay to, or enter into any employment or severance agreement, with
any non- officer employee, except in accordance with past practices, (iv) enter
into any collective bargaining agreement, or (v) establish, adopt, enter into
or amend in any material respect any bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, trust, fund,
policy or arrangement for the benefit of any directors, officers or employees;

             (g)        Revalue any of its assets, including
writing down the value of inventory or writing off notes or accounts
receivable;

             (h)        Incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities
or warrants or rights to acquire any debt securities or guarantee any debt
securities of others;

             (i)          Amend or propose to amend its
Certificate of Incorporation or Bylaws;

             (j)          Incur or commit to incur any capital
expenditures in excess of $50,000 in the aggregate or in excess of $10,000 as
to any individual matter;

             (k)         Lease, license, sell, transfer or
encumber or permit to be encumbered any asset, Target Proprietary Right or
other property associated with the business of Target (including sales or
transfers to Affiliates of Target) except for license agreements entered into
in the ordinary course of business.

             (l)          Enter into any lease or contract for
the purchase or sale of any property, real or personal, except in the ordinary
course of business;

             (m)        Fail to maintain its equipment and other
assets in good working condition and repair according to the standards it has
maintained up to the date of this Agreement, subject only to ordinary wear and
tear;

             (n)        Change accounting methods;

             (o)        Amend or terminate any material
contract, agreement or license to which it is a party except in the ordinary
course of business;

             (p)        Loan any amount to any person or entity,
or guaranty or act as a surety for any obligation;

             (q)        Waive or release any material right or
claim, except in the ordinary course of business;

             (r)         Make or change any Tax or accounting
election, change any annual accounting period, adopt or change any accounting
method, file any amended Return, enter into any closing agreement, settle any
Tax claim or assessment relating to Target, surrender any right to claim refund
of Taxes or consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment relating to Target if any such
election, adoption, change, amendment, agreement, settlement, surrender,
consent or other similar action or omission would have the effect of increasing
the Tax liability of Target or Acquiror;

             (s)         Take any action, or fail to take any
action, that would cause a Target Material Adverse Effect;

             (t)         Enter into any agreement in which the
obligation of Target exceeds $10,000 or shall not terminate or be subject to
termination for convenience within 180 days following execution;

             (u)        Enter into any agreement not in the
ordinary course of business (including without limitation any material
licenses, any exclusive agreements of any kind, or any agreements providing for
obligations that would extend beyond six months of the date of this Agreement);
or

             (v)        Take, or agree in writing or otherwise
to take, any of the actions described in Sections (a) through (u) above, or any
action which is reasonably likely to make any of Target’s representations or
warranties contained in this Agreement untrue or incorrect in any material
respect on the date made (to the extent so limited) or as of the Effective
Time.

             Section 5.4       Access to Information.  Until the Closing, Target shall allow Acquiror and its agents
reasonable free access during normal business hours upon reasonable notice to
its files, books, records, and offices, including, without limitation, any and
all information relating to taxes, commitments, contracts, leases, licenses,
and personal property and financial condition. 
Until the Closing, Target shall cause its accountants to cooperate with
Acquiror and its agents in making available all financial information
requested, including without limitation the right to examine all working papers
pertaining to all financial statements prepared or audited by such accountants.
No information or knowledge obtained in any investigation pursuant to this
Section shall effect or be deemed to modify any representation or warranty
contained in this Agreement or its exhibits and schedules.  All such access shall be subject to the
terms of the Confidentiality Agreement (as defined in Section 7.1).

             Section 5.5       Satisfaction of Conditions Precedent.  Target will use its best efforts to satisfy
or cause to be satisfied all the conditions precedent which are set forth in
Sections 8.1 and 8.2, and Target will use commercially reasonable efforts to
cause the transactions contemplated by this Agreement to be consummated, and,
without limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all notices
to, third parties which may be necessary or reasonably required on its part in
order to effect the transactions contemplated by this Agreement.  Target shall use commercially reasonable
efforts to obtain any and all consents necessary with respect to those Material
Contracts listed on Schedule 5.5 of the Target Disclosure Schedule in
connection with the Merger (the “Material Consents”).

             Section 5.6       Other
Negotiations.  Target will not
(and it will not permit any of its officers, directors, employees, agents and
Affiliates on its behalf to) take any action to solicit, initiate, seek,
encourage or support any inquiry, proposal or offer from, furnish any
information to, or participate in any negotiations with, any corporation,
partnership, person or other entity or group (other than Acquiror) regarding
any acquisition of Target, any merger or consolidation with or involving
Target, or any acquisition of any material portion of the stock or assets of
Target or any material license of Target Proprietary Rights, except for license
agreements entered into in the ordinary course of business (any of the
foregoing being referred to in this Agreement as an “Acquisition Transaction”)
or enter into an agreement concerning any Acquisition Transaction with any party
other than Acquiror.  If between the
date of this Agreement and the termination of this Agreement pursuant to
Section 9.1, Target receives from a third party any offer or indication of
interest regarding any Acquisition Transaction, or any request for information
regarding any Acquisition Transaction, Target shall (i) notify Acquiror
immediately (orally and in writing) of such offer, indication of interest or
request, including the identity of such party and a summary of the terms of any
proposal therein, and (ii) notify such third party of Target’s obligations
under this Agreement.

ARTICLE
VI

PRECLOSING AND OTHER COVENANTS OF ACQUIROR AND SUB

             Section
6.1       Advice of Changes.  Acquiror and Sub will promptly advise Target
in writing of any event occurring subsequent to the date of this Agreement
which would render any representation or warranty of Acquiror or Sub contained
in this Agreement, if made on or as of the date of such event or the Closing
Date, untrue or inaccurate in any material respect.

             Section 6.2       Reservation of Acquiror Common Stock.  Acquiror shall reserve for issuance, out of
its authorized but unissued capital stock, the maximum number of shares of
Acquiror Common Stock as may be issuable upon consummation of the Merger,
including shares of Acquiror Common Stock that will be issued upon exercise of
Target Options assumed by Acquiror.

             Section 6.3       Satisfaction of Conditions Precedent.  Acquiror and Sub will use commercially
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Sections 8.1 and 8.3, and Acquiror and Sub
will use commercially reasonable efforts to cause the transactions contemplated
by this Agreement to be consummated, and, without limiting the generality of
the foregoing, to obtain all consents and authorizations of third parties and
to make all filings with, and give all notices to, third parties which may be
necessary or reasonably required on its part in order to effect the
transactions contemplated hereby.

             Section 6.4       Nasdaq National Market Listing.  Acquiror shall cause the shares of Acquiror
Common Stock issuable to the stockholders of Target in the Merger, including
shares of Acquiror Common Stock issuable upon exercise of Acquiror Options, to
be authorized for listing on the Nasdaq National Market prior to the Closing.

             Section
6.5       Stock Options.

             (a)         (i) At the Effective Time, each
outstanding Target Option, whether vested or unvested, shall be assumed by
Acquiror and deemed to constitute an option (an “Acquiror Option”) to acquire,
on the same terms and conditions as were applicable under the Target Option,
the number of shares of Acquiror Common Stock equal to the number of shares
that the holder of such Target Option would have been entitled to receive
pursuant to such option multiplied by the Exchange Ratio (rounded down to the
nearest whole number), at a price per share (rounded up to the nearest whole
cent) equal to the per share exercise price for the shares of Target Common
Stock otherwise purchasable pursuant to such Target Option divided by the
Exchange Ratio; and (ii) at the time that any Earn Out Shares are paid pursuant
to Section 2.1(e) hereof, each Acquiror Option will be adjusted to include the
number of shares of Acquiror Common Stock equal to the number of shares of
Target that the holder of such Target Option would have been entitled to
receive pursuant to such Target Option immediately prior to the Effective Time
(assuming for purposes of this calculation that all such Target Options were
fully vested) multiplied by the Earn Out Exchange Ratio then applicable
(rounded down to the nearest whole number), at a price per share (rounded up to
the nearest whole cent) equal to the per share exercise price for the shares of
Target Common Stock otherwise purchasable pursuant to such Target Option
divided by the Earn Out Exchange Ratio then applicable, and notice of such
adjustment will be provided to the holders of such Target Options; provided, however, that, in the case of
any Target Option to which Section 422 of the Code applies (“incentive stock
options”), the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be
determined in order to comply with Section 424(a) of the Code. The term,
exercisability, vesting schedule, acceleration events, status as an “incentive
stock option” under Section 422 of the Code, if applicable, and all of the
other terms of the option shall otherwise remain unchanged.

             (b)        As soon as practicable (and in any event
within 5 business days) after the Effective Time, Acquiror shall deliver to the
participants in the Target Stock Plan or other holders of Target Options
appropriate notice setting forth such participants’ rights pursuant thereto and
the grants pursuant to the Target Stock Plan or otherwise shall continue in
effect on the same terms and conditions (subject to the adjustments required by
this Section 6.5 after giving effect to the Merger). Acquiror shall comply with
the terms of the Target Stock Plan and use commercially reasonable efforts to
ensure, to the extent required by, and subject to the provisions of, such
Target Stock Plan and Sections 422 and 424(a) of the Code, that Target Options
which qualified as incentive stock options prior the Effective Time continue to
qualify as incentive stock options after the Effective Time.

             (c)         Acquiror shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of
Acquiror Common Stock for delivery upon exercise of Target Options assumed in
accordance with this Section 6.5. As soon as practicable after the Effective
Time and in any event no later than 10 days after the Closing Date, Acquiror
shall file a registration statement on Form S-8 (or any successor or other
appropriate forms) under the Securities Act or another appropriate form with
respect to the shares of Acquiror Common Stock subject to such options and
shall use its commercially reasonable efforts to maintain the effectiveness of
such registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain outstanding.

             Section 6.6       Registration of Shares Issued in the
Merger.

             (a)         Registrable Shares. For purposes
of this Agreement, “Registrable Shares” shall mean the shares of Acquiror
Common Stock issued in the Merger, including any and all Escrow Shares, but
excluding shares of Acquiror Common Stock issued in the Merger that have been
sold or otherwise transferred without the consent of Acquiror (which shall not
be unreasonably withheld) by the stockholders of Target who initially received
such shares in the Merger prior to the effective date of the Registration
Statement (as defined below) (collectively, the “Holders”) and excluding shares
of Acquiror Common Stock issuable upon exercise of Target Options (the issuance
of which will be registered on Form S-8); provided however, that a distribution
of shares of Acquiror Common Stock issued in the Merger without additional
consideration, to underlying beneficial owners (such as the general and limited
partners, stockholders or trust beneficiaries of a Holder) shall not be deemed
such a sale or transfer for purposes of this Section 6.6 and such underlying
beneficial owners shall be entitled to the same rights under this Section 6.6
as the initial Holder from which the Registrable Shares were received and shall
be deemed Holders for the purposes of this Section 6.6.

             (b)        Required Registration. Acquiror
shall prepare and file with the Commission a registration statement on Form S-3
(or such successor or other appropriate form that Acquiror is eligible to use)
under the Securities Act with respect to the Registrable Shares (the
“Registration Statement”) by the later of (i) 10 days after the date it
becomes eligible to register shares on Form S-3, (ii) 10 days after the
Effective Time or (iii) August 14, 2001, and to effect all such registrations,
qualifications and compliances in connection therewith (including, without limitation,
filing any Exchange Act reports or Financial Statements with the Commission and
obtaining appropriate qualifications under applicable state securities or “blue
sky” laws and compliance with any other applicable governmental requirements or
regulations) as any selling Holder may reasonably request and that would permit
or facilitate the public sale of Registrable Shares (provided however that
Acquiror shall not be required in connection therewith to qualify to do
business or to file a general consent to service of process in any such state
or jurisdiction), in each case so that such Registration Statement and all
other such registrations, qualifications and compliances may become effective
as soon as possible thereafter, but in any event no later than 30 days after
the filing thereof, or as soon as practicable thereafter in the event such
Registration Statement becomes subject to review by the Commission Staff.

             (c)         Effectiveness; Trading Window;
Suspension Right.

                           (i)          Acquiror will use its commercially reasonable
efforts to maintain the effectiveness of the Registration Statement and other
applicable registrations, qualifications and compliances for one (1) year from
the Closing Date (the “Registration Effective Period”), and from time to time
will amend or supplement the Registration Statement and the prospectus
contained therein as and to the extent necessary to comply with the Securities
Act, the Exchange Act and any applicable state securities statute or
regulation, subject to the following limitations and qualifications.

                           (ii)         Following the date on which the
Registration Statement is first declared effective and subject to the
restrictions set forth in the Restricted Stock Agreement and the Sale
Restriction Agreement, the Holders will be permitted (subject in all cases to
Section 6.7 below) to offer and sell Registrable Shares under the Registration
Statement during the Registration Effective Period in the manner described in
the Registration Statement provided that the Registration Statement remains effective
and has not been suspended; provided,
however, that such offers and sales may only occur during the period
that begins at the close of business on the second trading day following the
date of public disclosure of the Acquiror’s financial results for a particular
fiscal quarter or year and ending on the close of business on the later of
(i) 30 days after such date, and (ii) the last day of the second
month of the next fiscal quarter.

                           (iii)        Notwithstanding any other provision of
this Section 6.6, Acquiror shall have the right pursuant to its insider trading
policy, at any time to require that all Holders suspend further open market
offers and sales of Registrable Shares whenever, and for such period of time as
there is material undisclosed information or events with respect to Acquiror
the disclosure of which would be seriously detrimental to the Acquiror;
provided, however, that Acquiror shall also suspend further open market offers
and sales of its shares by those persons or entities then subject to Acquiror’s
insider trading policy.  Acquiror will
promptly give the Holders notice of any such suspension.

             (d)        Expenses. Acquiror shall bear all
costs and expenses for purposes of this Section 6.6, including, without
limitation, printing expenses (including a reasonable number of prospectuses
for circulation by the selling Holders), reasonable legal fees and
disbursements of counsel for Acquiror and one counsel for the selling Holders
(up to $5,000), “blue sky” expenses, accounting fees and filing fees, but shall
not include underwriting commissions or similar charges, legal fees and
disbursements of other counsel for the selling Holders.

 

             (e)         Indemnification.

                           (i)          To the extent permitted by law,
Acquiror will indemnify and hold harmless each Holder, any underwriter (as
defined in the Securities Act) for such Holder, its officers, directors,
stockholders or partners and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a “Violation”): (A)
any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (B) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(C) any violation or alleged violation by Acquiror of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law; and
Acquiror will pay to each such Holder (and its officers, directors,
stockholders or partners), underwriter or controlling person, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 6.6(e)(i) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of
Acquiror; nor shall Acquiror be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon (a) a Violation which occurs in reliance upon and in conformity with
information furnished expressly for use in the Registration Statement by any
such Holder, or (b) a Violation that would not have occurred if such Holder had
delivered to the purchaser the version of the Prospectus most recently provided
by Acquiror to the Holder as of the date of such sale.

                           (ii)         To the extent permitted by law, each
selling Holder will indemnify and hold harmless Acquiror, each of its
directors, each of its officers who has signed the Registration Statement, each
person, if any, who controls Acquiror within the meaning of the Securities Act,
any underwriter, any other Holder selling securities pursuant to the
Registration Statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation (which includes without limitation the
failure of the Holder to comply with the prospectus delivery requirements under
the Securities Act, and the failure of the Holder to deliver the most current
prospectus provided by Acquiror prior to such sale), in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in the Registration Statement or such Violation is caused by the Holder’s
failure to deliver to the purchaser of the Holder’s Registrable Shares a
prospectus (or amendment or supplement thereto) that had been made available to
the Holder by Acquiror; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this Section 6.6(e)(ii) in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 6.6(e)(ii) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder, which
consent shall not be unreasonably withheld. 
The aggregate indemnification and contribution liability of each Holder
under this Section 6.6(e)(ii) shall not exceed the net proceeds received by
such Holder in connection with sale of shares pursuant to the Registration
Statement.

                           (iii)        Each person entitled to indemnification
under this Section 6.6(e) (the “Indemnified Party”) shall give notice to the
party required to provide indemnification (the “Indemnifying Party”) promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought and shall permit the Indemnifying Party to assume the
defense of any such claim and any litigation resulting therefrom, provided that
counsel for the Indemnifying Party who conducts the defense of such claim or
any litigation resulting therefrom shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party’s expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6.6 unless the
Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in
the defense of any such claim or litigation, shall (except with the consent of
each Indemnified Party) consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.

                           (iv)       To the extent that the indemnification
provided for in this Section 6.6(e) is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any
loss, liability, claim, damage or expense referred to herein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions which resulted in such loss, liability, claim, damage
or expense, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Indemnifying Party
or by the Indemnified Party and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission.

             (f)         Current Public Information.  Until the earlier of the first anniversary
of the Closing Date (or, if any Holder is an affiliate of Acquiror, the second
anniversary of the Closing Date) or the date all shares of Acquiror Common
Stock subject to this Section 6.6 have been sold, Acquiror will timely file all
reports required to be filed by it under the Exchange Act, and the rules and
regulations adopted by the Commission thereunder, all to the extent required to
enable such Holders to sell their shares pursuant to Rule 144 and the
Registration Statement.  Upon written
request, Acquiror will deliver to such Holders a written statement as to
whether it has complied with such requirements.

             Section 6.7       Procedures for Sale of Shares Under
Registration Statement.

             (a)         Delivery of Prospectus.  For any offer or sale of any of the
Registrable Shares by a Holder in a transaction that is not exempt under the
Securities Act, the Holder, in addition to complying with any other federal
securities laws, shall deliver a copy of the final prospectus (or amendment of
or supplement to such prospectus) of Acquiror covering the Registrable Shares
in the form furnished to the Holder by Acquiror to the purchaser of any of the
Registrable Shares on or before the settlement date for the purchase of such
Registrable Shares.

             (b)        Copies of Prospectuses. Acquiror
shall, upon the effectiveness of the Registration Statement and within two (2)
trading days following any request, furnish to such Holder a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus shall not as of the date of delivery to the
Holder include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or incomplete in the light of the circumstances under
which they were made.

             Section 6.8       Certain Employee Benefit Matters.  From and after the Effective Time, employees
of Target at the Effective Time will be provided with employee benefits by the
Surviving Corporation or Acquiror which in the aggregate are no less favorable
to such employees than those provided from time to time by Acquiror to
similarly situated employees.  If any
employee of Target becomes a participant in any employee benefit plan, program,
policy or arrangement of Acquiror, such employee shall be given credit for all
service prior to the Effective Time with Target to the extent permissible under
such plan, program, policy or arrangement. 
All Target Options assumed by Acquiror at the Effective Time pursuant to
the terms of Section 6.5(a) shall remain outstanding following the Effective on
the same terms and conditions as prior to the Effective Time, subject to the
adjustments contemplated by such Section 6.5. Employees of Target as of the
Effective Time shall be permitted to participate in the ESPP commencing on the
first enrollment date following the Effective Time, subject to compliance with
the eligibility and other provisions of such plan.

             Section 6.9       Indemnity of Target Affiliates.

             (a)         Acquiror shall not, for a period of six
years after the Effective Time, take any action to alter or impair any exculpatory
or indemnification provisions now existing in the Certificate of Incorporation
or By-laws of Target for the benefit of any individual who served as a director
or officer of Target at any time prior to the Effective Time (the “Indemnified
Executives”), except for any changes which do not affect the application of
such provisions to acts or omissions of such individuals prior to the Effective
Time.

ARTICLE VII

OTHER AGREEMENTS

             Section
7.1       Confidentiality.  Each party acknowledges Acquiror and Target
have previously executed a Mutual Non-Disclosure Agreement dated February 22,
2001 (the “Confidentiality Agreement”), which agreement shall continue in full
force and effect in accordance with its terms.

             Section 7.2       No Public Announcement.  The parties have agreed upon the form and substances of a joint
press release announcing the consummation of the Merger, which shall be issued
at a time and in a manner mutually agreed upon. Other than such joint press
release, the parties shall make no public announcement concerning this
Agreement, their discussions or any other memoranda, letters or agreements
between the parties relating to the Merger; provided,
however, that either of the parties, but only after reasonable
consultation with the other, may make disclosure if required under applicable
law.

             Section 7.3       Regulatory Filings; Consents;
Reasonable Efforts.  Subject to
the terms and conditions of this Agreement, Target and Acquiror shall use
commercially reasonable efforts to (i) make all necessary filings with respect
to the Merger and this Agreement under the Exchange Act and applicable blue sky
or similar securities laws and obtain required approvals and clearances with
respect thereto and supply all additional information requested in connection
therewith; (ii) make merger notification or other appropriate filings with
federal, state or local governmental bodies or applicable foreign governmental
agencies and obtain required approvals and clearances with respect thereto and
supply all additional information requested in connection therewith; (iii)
obtain all consents, waivers, approvals, authorizations and orders required in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the Merger; and (iv) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement as promptly as practicable.

             Section 7.4       Further
Assurances.  Prior to the
Closing, each party agrees to cooperate fully with the other parties and to
execute such further instruments, documents and agreements and to give such
further written assurances, as may be reasonably requested by any other party
to better evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.

             Section
7.5       Escrow Agreement.  On or before the Effective Date, Acquiror
shall, and the parties hereto shall exercise commercially reasonable efforts to
cause the Escrow Agent (as defined in Section 10.2) and the Stockholders’ Agent
(as defined in Section 10.9) to enter into an Escrow Agreement in the form
attached hereto as Exhibit C.

             Section
7.6       FIRPTA.  Target shall, prior to the Closing Date,
provide Acquiror with a properly executed Foreign Investment and Real Property
Tax Act of 1980 (“FIRPTA”) FIRPTA Notification Letter which states that shares
of capital stock of Target do not constitute “United States real property
interests” under Section 897(c) of the Code, for purposes of satisfying
Acquiror’s obligations under Treasury Regulation Section 1.1445-2(c)(3).  In addition, simultaneously with delivery of
such FIRPTA Notification Letter, Target shall provide to Acquiror, as agent for
Target, a form of notice to the Internal Revenue Service in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2), along with written
authorization for Acquiror to deliver such notice form to the Internal Revenue
Service on behalf of Target upon the Closing of the Merger.

             Section
7.7       Blue Sky Laws.  Acquiror shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Acquiror Common Stock in connection
with the Merger.  Target shall use its
best efforts to assist Acquiror as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable in
connection with the issuance of Acquiror Common Stock in connection with the
Merger.

             Section
7.8       Other Filings.  As promptly as practicable after the date of
this Agreement, Target and Acquiror will prepare and file any other filings
required under the Exchange Act, the Securities Act or any other Federal,
foreign or state securities or blue sky laws relating to the Merger and the
transactions contemplated by this Agreement (the “Other Filings”).  The Other Filings will comply in all
material respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. 
Whenever any event occurs which is required to be set forth in an
amendment or supplement to any Other Filing, Target or Acquiror, as the case
may be, will promptly inform the other of such occurrence and cooperate in
making any appropriate amendment or supplement, and/or mailing to stockholders
of Target, such amendment or supplement.

ARTICLE VIII

CONDITIONS TO MERGER

             Section 8.1       Conditions to Each Party’s Obligation
to Effect the Merger. The respective obligations of each party to this
Agreement to effect the Merger shall be subject to the satisfaction prior to
the Closing Date of the following conditions:

             (a)         No Injunctions or Restraints;
Illegality.  No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall have been issued,
nor shall any proceeding brought by a domestic administrative agency or
commission or other domestic Governmental Entity or other third party, seeking
any of the foregoing be pending; nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed applicable
to the Merger which makes the consummation of the Merger illegal.

             (b)        The issuance of Acquiror Common Stock in
the Merger shall be exempt from registration pursuant to Regulation D
promulgated under the Securities Act.

             Section 8.2       Additional Conditions to Obligations
of Acquiror and Sub. The obligations of Acquiror and Sub to effect the
Merger are subject to the satisfaction of each of the following conditions, any
of which may be waived in writing exclusively by Acquiror and Sub:

             (a)         Conversion of Preferred Stock;
Dissenting Stockholders. Holders of not more than 5% of Target’s issued and
outstanding capital stock as of the Closing shall have elected to exercise
dissenters’ or appraisal rights under Delaware Law as to such shares.

             (b)        Escrow Agreement.  The Escrow Agent and Stockholders’ Agent
have executed and delivered to Acquiror the Escrow Agreement and such agreement
shall remain in full force and effect.

             (c)         Investor Questionnaire. Each
stockholder of Target who is not an “affiliate” of Target and who has executed
a written consent in favor of the Merger shall have executed and delivered to
Acquiror an investor questionnaire.

             (d)        Ancillary Agreements.  Each of the Restricted Stock Agreement,
Employment Agreements, Sale Restriction Agreement and  Support Agreements executed and delivered concurrently with the
execution of this Agreement shall remain in full force and effect.  Each of the Restricted Stock Agreement and
the Noncompetition Agreement shall be executed and delivered concurrently with
the Closing.

             (e)         Opinion of Target’s Counsel.  Acquiror shall have received an opinion
dated the Closing Date of Cooley Godward LLP, counsel to Target, as to the
matters in the form attached hereto as Exhibit D.

             (f)         Approvals. All authorizations,
consents (including the Material Consents), or approvals of, or notifications
to any third party, required by Target’s contracts, agreements or other
obligations in connection with the consummation of the Merger shall have
occurred or been obtained except for any the absence of which is not reasonably
likely to have a Target Material Adverse Effect (it being agreed that the
absence of consents listed on Schedule 3.3 would not have a Target Material
Adverse Effect).

             (g)        Termination of Agreements.  The following agreements between Target and
certain of its stockholders shall have been terminated:  (i) the Securities Purchase Agreement dated
July 16, 1997, among Warburg, Dr. Howard M. Goodman and Target, (ii) the
Securities Purchase Agreement dated September, 1998, among Warburg, Ledbetter
Davidson International, Inc., Kevin Kinsella and Target, (iii)  the Securities Purchase Agreement dated July
12, 2000, by and among Warburg and Target and (iv) the Equity Line of Credit Agreement
dated April 20, 2001, by and among Warburg and Target.

             (h)        Board Resignations. Target shall
have received written letters of resignation from each of the current members
of the Target Board of Directors and from each officer of Target, in each case
effective at the Effective Time.

             (i)          Material Adverse Effect. Since
the date hereof, there shall not have occurred any event or events, which has
had, individually or in the aggregate, or would reasonably be expected to have,
a Target Material Adverse Effect.

             (j)          Warrant Exercise.  All outstanding warrants to purchase Target
Common Stock or Target Preferred Stock shall have been exercised or cancelled.

             (k)          Termination of Target’s 401(k) Plan.  If Target maintains or sponsors a plan
subject to Section 401(k) of the Code, Target’s Board of Directors shall have
adopted a resolution terminating such plan contingent on the Closing and
effective as of at least one calendar day prior to the Effective Time.

             (l)          Representations, Warranties and
Covenants.  (i) Except for the
representations and warranties contained in Sections 3.5(c) and 3.33, each
of the representations and warranties of Target in this Agreement that is
expressly qualified by a reference to materiality shall be true in all respects
as so qualified, and each of the representations and warranties of Target in
this Agreement that is not so qualified shall be true and correct in all
material respects, on and as of the Closing Date as though such representation
or warranty had been made on and as of the Closing (except that those representations
and warranties which address matters only as of a particular date shall remain
true and correct as of such date, and (ii) Target shall have performed and
complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by
Target as of the Closing.

             (m)        Target’s Officer Certificate.  A certificate, dated the Closing Date, of an
officer of Target (i) attaching copies of the Articles of Incorporation and
Bylaws, and any amendments thereto, of Target, (ii) attaching a good standing
certificate of Target, duly certified by the Secretary of State of the State of
Delaware, (iii) certifying (A) that attached thereto are true and correct
copies of action by written consent or resolutions duly adopted by the Board of
Directors, of Target and continuing in effect, which authorize the execution,
delivery and performance by Target of this Agreement and the Certificate of
Merger and the consummation of the transactions contemplated hereby and
thereby; and (B) that there are no proceedings for the dissolution or
liquidation of Target, and (iv) certifying the incumbency, signatures and
authority of the officers of Target authorized to execute, deliver and perform
this Agreement and the Certificate of Merger and all other documents,
instruments or agreements related thereto executed or to be executed by Target.

             Section 8.3       Additional Conditions to Obligations
of Target.  The obligation of Target
to effect the Merger is subject to the satisfaction of each of the following
conditions, any of which may be waived, in writing, exclusively by Target:

             (a)         Opinion of Acquiror’s Counsel.  Target shall have received an opinion dated
the Closing Date of Orrick, Herrington & Sutcliffe LLP, counsel to Acquiror,
as to the matters attached hereto as Exhibit E.

             (b)        Material Adverse Effect. Since
the date hereof, there shall not have occurred any event or events, which
could, individually or in the aggregate, have or reasonably be expected to
have, an Acquiror Material Adverse Effect.

             (c)         Shareholder Consent.  This Agreement and the Merger shall have
been duly approved and adopted by the holders of a majority of the shares of
the capital stock of Target outstanding as of the date hereof.

             (d)        Nasdaq.  Acquiror shall have filed with the Nasdaq National Market a
Notification Form For Change in Number of Shares Outstanding with respect to
the shares of Acquiror Common Stock issuable upon conversion of the Target
Capital Stock in the Merger (including pursuant to the assumption of Target
Options).

             (e)         Representations, Warranties and
Covenants.  (i) Each of the
representations and warranties of Acquiror and Sub in this Agreement that is
expressly qualified by a reference to materiality shall be true in all respects
as so qualified, and each of the representations and warranties of Acquiror and
Sub in this Agreement that is not so qualified shall be true and correct in all
material respects, on and as of the Closing Date as though such representation
or warranty had been made on and as of the Closing (except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date), and (ii) each of Acquiror
and Sub shall have performed and complied in all material respects with all
covenants, obligations and conditions of this Agreement required to be
performed and complied with by Acquiror and Sub as of the Closing.

             (f)         Acquiror’s Officer Certificate.  A certificate, dated the Closing Date, of an
officer of Acquiror (i) attaching copies of the Articles of Incorporation and
Bylaws, and any amendments thereto, of Acquiror, (ii) attaching a good standing
certificate of Acquiror, duly certified by the Secretary of State of the State
of Delaware, (iii)  certifying (A) that
attached thereto are true and correct copies of action by written consent or
resolutions duly adopted by the Board of Directors, of Acquiror and continuing
in effect, which authorize the execution, delivery and performance by Acquiror
of this Agreement and the consummation of the transactions contemplated hereby;
and (B) that there are no proceedings for the dissolution or liquidation of
Acquiror, and (iv) certifying the incumbency, signatures and authority of the
officers of Acquiror authorized to execute, deliver and perform this Agreement
and all other documents, instruments or agreements related thereto executed or
to be executed by Acquiror.

             (g)        Merger Sub’s Officer Certificate.  A certificate, dated the Closing Date, of an
officer of Merger Sub (i) attaching copies of the Articles of Incorporation and
Bylaws, and any amendments thereto, of Merger Sub, (ii) attaching a good
standing certificate of Merger Sub, duly certified by the Secretary of State of
the State of Delaware, (iii)  certifying
(A) that attached thereto are true and correct copies of action by written
consent or resolutions duly adopted by the Board of Directors, of Merger Sub
and continuing in effect, which authorize the execution, delivery and
performance by Merger Sub of this Agreement and the Certificate of Merger and
the consummation of the transactions contemplated hereby and thereby; and (B)
that there are no proceedings for the dissolution or liquidation of Merger Sub,
and (iv) certifying the incumbency, signatures and authority of the officers of
Merger Sub authorized to execute, deliver and perform this Agreement and the
Certificate of Merger and all other documents, instruments or agreements
related thereto executed or to be executed by Merger Sub.

ARTICLE IX

TERMINATION AND AMENDMENT

             Section
9.1       Termination.  This Agreement may be terminated at any time
prior to the Effective Time:

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

             (b)        by either Acquiror or Target, by giving
written notice to the other party, if a court of competent jurisdiction or
other Governmental Entity shall have issued a nonappealable final order, decree
or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger, except,
if such party relying on such order, decree or ruling or other action shall not
have complied with its respective obligations under Sections 5.5 or 6.3 of this
Agreement, as the case may be;

             (c)         by Acquiror, by giving written notice
to Target, if the Closing shall not have occurred on or before 11:59 p.m.
(Pacific Standard Time) on August 24, 2001 (the “Deadline”) by reason of the
failure of any condition precedent under Section 8.1 or 8.2 (unless the failure
results primarily from a breach by Acquiror of any representation, warranty, or
covenant of Acquiror contained in this Agreement or Acquiror’s failure to
fulfill a condition precedent to closing or other default); or

             (d)        by Target, by giving written notice to
Acquiror, if the Closing shall not have occurred on or before the Deadline by
reason of the failure of any condition precedent under Section 8.1 or 8.3
(unless the failure results primarily from a breach by Target of any
representation, warranty, or covenant of Target contained in this Agreement or
Target’s failure to fulfill a condition precedent to closing or other default).

             Section 9.2       Effect of Termination.  In the event of termination of this Agreement as provided in
Section 9.1, this Agreement shall immediately become void and there shall be no
liability or obligation on the part of Acquiror, Target, Sub or their
respective officers, directors, stockholders or Affiliates, except as set forth
in Section 9.3 and further except to the extent that such termination results
from the willful breach by any such party of any of its representations,
warranties or covenants set forth in this Agreement.

             Section
9.3       Fees and Expenses.  If the Merger is consummated, all legal,
accounting, investment banking, broker’s and finder’s fees and expenses
incurred by Target or its stockholders in connection with the Merger shall be
deemed expenses of the stockholders of Target and shall be deemed to be
transaction expenses and shall reduce the merger consideration pursuant to
Section 2.1(c) and will not become obligations of Target.  Any amount of such fees or expenses in
excess of the amounts set forth on Schedule 2.1(c) shall be borne by the former
Target stockholders and shall not become obligations of the Surviving
Corporation.

ARTICLE X

ESCROW AND INDEMNIFICATION

             Section
10.1     Indemnification.  From and after the Effective Time and
subject to the limitations contained in Section 10.2, Acquiror shall be
indemnified and held harmless against any loss, expense, liability or other
damage, including attorneys’ fees, to the extent of the amount of such loss,
expense, liability or other damage (collectively “Damages”) that Acquiror has
incurred by reason of (i) the breach by Target of any representation, warranty,
covenant or agreement of Target contained in this Agreement that occurs or
becomes known to Acquiror during the Escrow Period (as defined in Section 10.4
below), (ii) any claims relating to the information set forth in Section 3.14
of the Target Disclosure Schedule, (iii) any claims relating to the information
set forth in Sections 3.8(b) (other than the cost of obtaining the Licenses set
forth in Section 2.1 above) and 3.8(j) of the Target Disclosure Schedule or
(iv) any claims for the fees of Target’s Scientific Advisory Board for periods ending
prior to January 1, 2001 that are not waived by members of Target’s Scientific
Advisory Board within sixty (60) days of the date hereof.  Such indemnification shall be Acquiror’s
sole and exclusive remedy for any such breach by Target, for any such claims
relating to Sections 3.8 and 3.14 of the Target Disclosure Schedule or for any
such claims for the fees of Target’s Scientific Advisory Board for periods
ending prior to January 1, 2001. 
Acquiror acknowledges that, with respect to the evaluation of the Target
Financial Statements for purposes of making any claim under this Section 10.1
for a breach of the representations and warranties set forth in Section 3.4(b),
Acquiror has had the opportunity to review Target’s accounting policies and
methods and underlying assumptions inherent in the Target Financial Statements
and, accordingly, Acquiror shall be required to consistently apply the
accounting policies, methods and assumptions in the audited Target Financial
Statements.

             Section
10.2     Escrow Fund.  As security for the indemnities in Section
10.1, the Escrow Shares shall be deposited with, Wells Fargo Bank, National
Association (or such other institution selected by Acquiror with the reasonable
consent of Target) as escrow agent (the “Escrow Agent”) in accordance with
Section 2.2, such deposit to constitute the Escrow Fund (the “Escrow
Fund”) and to be governed by the terms set forth in this Article X and in the
Escrow Agreement.  Notwithstanding the
foregoing, the indemnification rights afforded to Acquiror pursuant to this
Article X shall be limited to the Escrow Fund and Acquiror shall not be
entitled to pursue any claims for indemnification under this Article X or
otherwise against any former Target stockholder directly or personally and the
sole recourse of Acquiror shall be to make claims against the Escrow Fund in
accordance with the terms of the Escrow Agreement.

             Section
10.3     Damage Threshold.  Notwithstanding the foregoing, Acquiror may
not receive any shares from the Escrow Fund unless and until the total amount
of Damages incurred by Acquiror exceeds 
$25,000, provided, however,
that after Acquiror has incurred an aggregate of $25,000 in Damages, Acquiror
shall be entitled to receive Escrow Shares equal in value to the full amount of
Damages.

             Section
10.4     Escrow Periods.  The escrow shall commence on the Closing
Date and terminate one year thereafter (the period from the Closing to such
date referred to as the “Escrow Period”), provided,
however, that if there are any unsatisfied claims for Damages
specified in any Officer’s Certificate theretofore delivered to the Escrow
Agent and the Stockholders’ Agent (as defined in Section 10.9) prior to
termination of the Escrow Period with respect to facts and circumstances
existing  prior to expiration of the
Escrow Period, then all Escrow Shares shall remain in the Escrow Fund until
such claims have been finally resolved.

             Section 10.5     Claims Upon Escrow Fund. In the event Acquiror
suffers any Damages, then on or before the last day of the Escrow Period, it
shall deliver a certificate signed by any appropriately authorized officer of
Acquiror (an “Officer’s Certificate”)

                           (i)          Stating the aggregate amount of
Acquiror’s Damages or an estimate thereof, in each case to the extent known or
determinable at such time, and,

                           (ii)         Specifying in reasonable detail the
individual items of such Damages included in the amount so stated, the date
each such item was paid or properly accrued or arose, and the nature of the
misrepresentation, breach or claim to which such item is related.

             Section
10.6     Valuation. For the
purpose of compensating Acquiror for its Damages pursuant to this Agreement,
the value per share of the Escrow Shares shall be the average closing price of
Acquiror’s Common Stock as quoted on the Nasdaq National Stock Market for the
ten trading days ending on (A) the last day of the thirty (30) day period set
forth in Section 10.7, (B) the date of delivery to the Escrow Agent of a
memorandum pursuant to Section 10.8(a) or (C) the date of delivery to the
Escrow Agent of a court decision pursuant to Section 10.8(b).

             Section 10.7     Objections to Claims. At the time of delivery of any
Officer’s Certificate to the Escrow Agent, a duplicate copy of such Officer’s
Certificate shall be delivered to the Stockholders’ Agent (as defined in
Section 10.9 below) and for a period of thirty (30) days after such delivery,
the Escrow Agent shall make no delivery of Escrow Shares pursuant to the Escrow
Agreement unless the Escrow Agent shall have received written authorization
from the Stockholders’ Agent to make such delivery. After the expiration of
such thirty (30) day period, the Escrow Agent shall make delivery of the Escrow
Shares in the Escrow Fund in accordance with the Escrow Agreement, provided
that no such delivery may be made if the Stockholders’ Agent shall object in a
written statement to the claim made in the Officer’s Certificate, and such
statement shall have been delivered to the Escrow Agent and to Acquiror prior
to the expiration of such thirty (30) day period.

             Section 10.8     Resolution of Conflicts.

             (a)         In case the Stockholders’ Agent shall
so object in writing to any claim or claims by Acquiror made in any Officer’s
Certificate, Acquiror shall have thirty (30) days to respond in a written
statement to the objection of the Stockholders’ Agent.  If after such thirty (30) day period there
remains a dispute as to any claims, the Stockholders’ Agent and Acquiror shall
attempt in good faith for thirty (30) days to agree upon the rights of the
respective parties with respect to each of such claims. If the Stockholders’
Agent and Acquiror should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and shall distribute the Escrow Shares from the Escrow Fund in accordance with
the terms of the memorandum.

             (b)        If no such agreement can be reached
after good faith negotiation, the Escrow Agent shall only be entitled to act in
accordance with the decision of a court of competent jurisdiction and make or
withhold payments out of the Escrow Fund in accordance with such decision.

 

             Section 10.9     Stockholders’ Agent.

             (a)         Jonathan Leff shall be constituted
and appointed as agent (the “Stockholders’ Agent”) for and on behalf of the
former Target stockholders to give and receive notices and communications, to
authorize delivery to Acquiror of the Escrow Shares or other property from the
Escrow Fund in satisfaction of claims by Acquiror, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises of,
and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of the Stockholders’ Agent for the accomplishment
of the foregoing.  Such agency may be
changed by the holders of a majority in interest of the Escrow Shares from time
to time upon not less than ten (10) days’ prior written notice to
Acquiror.  No bond shall be required of
the Stockholders’ Agent, and the Stockholders’ Agent shall receive no
compensation for services; provided that the Stockholders’ Agent shall be
entitled to reimbursement of all expenses incurred in the satisfaction of its
duties hereunder and shall be reimbursed out of the Escrow Fund.  Notices or communications to or from the
Stockholders’ Agent shall constitute notice to or from each of the former
Target stockholders.

             (b)        The Stockholders’ Agent shall not be
liable for any act done or omitted hereunder as Stockholders’ Agent while
acting in good faith and in the exercise of reasonable judgment, and any act
done or omitted pursuant to the advice of counsel shall be conclusive evidence
of such good faith. The former Target stockholders shall severally and pro
rata, in accordance with their Pro Rata Portion, indemnify the Stockholders’
Agent and hold him harmless against any loss, liability or expense incurred
without gross negligence or bad faith on the part of the Stockholders’ Agent
and arising out of or in connection with the acceptance or administration of
his duties under this Agreement or the Escrow Agreement.

             (c)         The Stockholders’ Agent shall have
reasonable access to information about Target and Acquiror and the reasonable
assistance of Target’s and Acquiror’s officers and employees for purposes of
performing his duties and exercising the rights under this Article X, provided that the Stockholders’ Agent
shall treat confidentially and not disclose any nonpublic information from or
about Target or Acquiror to anyone (except on a need to know basis to
individuals who agree to treat such information confidentially).

             Section 10.10   Actions of the Stockholders’ Agent.
A decision, act, consent or instruction of the Stockholders’ Agent shall
constitute a decision of all of the former Target stockholders for whom shares
of Acquiror Common Stock otherwise issuable to them are deposited in the Escrow
Fund and shall be final, binding and conclusive upon each such former Target
stockholder, and the Escrow Agent and Acquiror may rely upon any decision, act,
consent or instruction of the Stockholders’ Agent as being the decision, act,
consent or instruction of each and every such former Target stockholder. The
Escrow Agent and Acquiror are hereby relieved from any liability to any person
for any acts done by them in accordance with such decision, act, consent or
instruction of the Stockholders’ Agent.

             Section 10.11   Third-Party Claims.

             (a)         If any third party shall notify Acquiror
or its affiliates with respect to any matter (hereinafter referred to as a “Third
Party Claim”), which may result in Damages, then Acquiror shall give prompt
notice to Stockholders’ Agent (and in any event within 10 business days) of
Acquiror becoming aware of any such Third Party Claim or of facts upon which
any such Third Party Claim will be based setting forth such material
information with respect to the Third Party Claim as is reasonably available to
Acquiror; provided, however, that no delay or failure on the part of Acquiror
in notifying Stockholders’ Agent shall relieve Stockholders from any obligation
hereunder unless Stockholders are thereby prejudiced (and then solely to the
extent of such prejudice).

             (b)        In case any Third Party Claim is asserted
against Acquiror or its affiliates, Stockholders’ Agent will be entitled, if he
so elects by written notice delivered to Acquiror within 30 days after
receiving Acquiror’s notice under Section 10.11(a), to assume the defense
thereof, at the expense of Stockholders’ Agent, so long as

                           (i)          Acquiror has reasonably determined
that Damages which may be incurred as a result of the Third Party Claim do not
exceed either individually, or when aggregated with all other Third Party
Claims, the total dollar value of the Escrow Shares determined in accordance
with the Escrow Agreement; and

                           (ii)         the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief; and

                           (iii)        counsel selected by Stockholders’ Agent
is reasonably acceptable to Acquiror.

             If
Stockholders’ Agent so assumes any such defense, he shall conduct the defense
of the Third Party Claim actively and diligently. Stockholders’ Agent shall not
compromise or settle such Third Party Claim or consent to entry of any judgment
in respect thereof without the prior written consent of Acquiror.

             (c)         In the event that Stockholders’ Agent
assumes the defense of the Third Party Claim in accordance with Section
10.11(b) above, Acquiror or its affiliates may retain separate counsel and
participate in the defense of the Third Party Claim, but the fees and expenses
of such counsel shall be at the expense of Acquiror unless Acquiror or its
affiliates shall reasonably determine that there is a material conflict of
interest between or among Acquiror or its affiliates and Stockholders with
respect to such Third Party Claim, in which case the reasonable fees and
expenses of such counsel will be reimbursed out of the Escrow Fund. Acquiror or
its affiliates will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of Stockholders’ Agent which shall not be unreasonably withheld.
Acquiror will cooperate in the defense of the Third Party Claim and will
provide full access to documents, assets, properties, books and records
reasonably requested by Stockholders’ Agent and material to the claim and will
make available all officers, directors and employees reasonably requested by
Stockholders’ Agent for investigation, depositions and trial.

             (d)        In the event that Stockholders’ Agent
fails or elects not to assume the defense of Acquiror or its affiliates against
such Third Party Claim, which Stockholders’ Agent had the right to assume under
Section 10.11(b) above, (i) Acquiror or its affiliates shall have the right to
undertake the defense and (ii) Acquiror shall not compromise or settle such
Third Party Claim or consent to entry of any judgment in respect thereof
without the prior written consent of Stockholders’ Agent which shall not be
unreasonably withheld. In the event that the Stockholders’ Agent is not
entitled to assume the defense of Acquiror or its affiliates against such Third
Party Claim pursuant to Section 10.11(b) above, (i) Acquiror or its affiliates
shall have the right to undertake the defense and (ii) Acquiror shall not
compromise or settle such Third Party Claim or consent to entry of any judgment
in respect thereof without the prior written consent of Stockholders’ Agent
which shall not be unreasonably withheld. In each case, Acquiror or its
affiliates shall conduct the defense of the Third Party Claim actively and
diligently, and Stockholders’ Agent will cooperate with Acquiror or its
affiliates in the defense of that claim and will use its reasonable efforts to
make available all individuals reasonably requested by Acquiror for
investigation, depositions and trial.

ARTICLE XI

MISCELLANEOUS

             Section 11.1     Survival of Representations and
Covenants.  All representations
and warranties of Target, Acquiror and Sub contained in this Agreement shall
survive the Closing and any investigation at any time made by or on behalf of
Acquiror or Target until the end of the Escrow Period; provided that the
maximum amount recoverable under this Agreement by the former Target
stockholders for a breach of the representations and warranties of Acquiror or
Sub shall be an amount equal to 10% of the total number of shares of Acquiror
Common Stock issued in the Merger multiplied by the average closing price of Acquiror’s
Common Stock for the ten trading days prior to execution hereof.  If Escrow Shares or other assets are
retained in the Escrow Fund beyond expiration of the period specified in the
Escrow Agreement, then (notwithstanding the expiration of such time period) the
representation, warranty, covenant or agreement applicable to such claim shall
survive until, but only for purposes of, the resolution of the claim to which
such retained Escrow Shares or other assets relate.  All covenants and agreements of Target, Acquiror and Sub shall
continue in effect in accordance with their terms.

             Section
11.2     Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or two business days after being
mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):

             with a copy to:

             (a)         if to Acquiror or Sub:

Deltagen,
Inc.

1003 Hamilton Avenue

Menlo Park, CA  94025

Attention:  President

Fax No.:  (650) 752-0202

Telephone No.:  (650) 752-0200

with
a copy at the same address to the attention of the General Counsel and
Secretary and with a copy to:

Orrick,
Herrington & Sutcliffe LLP

400 Sansome Street

San Francisco, CA  94111

Attention:  Alan Talkington, Esq.

Fax No.  (415) 773-5759

Telephone No.:  (415) 773-5762

             (b)        if to Target, to:

Arcaris,
Inc.

615 Arapeen Drive

Suite 300

Salt Lake City, UT  84108

Attention:  President

Fax No:  (801) 303-0333

Telephone No.:  (801) 303-0300

             with
a copy to:

Cooley
Godward LLP

4365 Executive Drive

Suite 1100

San Diego, CA  92121-2128

Attention:  Carl Sanchez, Esq.

Fax No:  (858) 453-3555

Telephone No.:  (858) 550-6042

             (c)         if to Stockholders’ Agent, to:

Jonathan
Leff

E.M. Warburg Pincus & Co. LLC

466 Lexington Avenue

New York, New York 10017

Fax No:  (212) 878-9361

Telephone No.:  (212) 878-0817

             Section
11.3     Interpretation.  When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated.  The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.  Whenever the words
“include,” “includes” or “including” are used in this Agreement they shall be
deemed to be followed by the words “without limitation.”  The phrase “made available” in this
Agreement shall mean that the information referred to has been made available
if requested by the party to whom such information is to be made available.
References to the “knowledge of Target” or “Target’s knowledge” or any similar
expression shall mean the actual knowledge, after reasonable inquiry, of Alexander
Kamb, Laura Handley, Danielle Hayes and any other individual who is an
executive officer of Target.

             Section
11.4     Counterparts.  This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.

             Section 11.5     Entire Agreement; No Third Party Beneficiaries.  This Agreement (including the documents and
the instruments referred to herein), the Confidentiality Agreement, and the
Transaction Documents (a) constitute the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) are not intended to confer
upon any person other than the parties hereto (including without limitation any
Target employees) any rights or remedies hereunder; provided that the
provisions in Article II concerning issuance of shares of Acquiror Common Stock
in the Merger, the representations and warranties in Article IV and the
provisions in Section 6.6 concerning registration rights are intended for the
benefit of all Target stockholders and may be enforced by them; and the
provisions in Section 6.9 concerning indemnification of directors and officers
are intended for the benefit of such individuals and may be enforced by them.

             Section
11.6     Governing Law.  This Agreement shall be governed and
construed in accordance with the laws of the State of California without regard
to any applicable conflicts of law.

             Section
11.7     Assignment.  Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. 
Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.

             Section
11.8     Amendment.  This Agreement may be amended by the parties
hereto, at any time before or after approval of matters presented in connection
with the Merger by the stockholders of Target, but after any such stockholder
approval, no amendment shall be made which by law requires the further approval
of stockholders without obtaining such further approval.  This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto.

             Section
11.9     Extension; Waiver.  At any time prior to the Effective Time, the
parties hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or the other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations or warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party.

             Section 11.10   Specific Performance. 
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties
shall be entitled to injunctive relief to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.

[Signature
Page Follows]

             IN
WITNESS WHEREOF, Acquiror, Sub and Target have caused this Agreement and Plan
of Merger and Reorganization to be signed by their respective officers
thereunto duly authorized as of the date first written above.

	 	DELTAGEN,
  INC.
	 	 
	 	By:  /s/
  Augustine G. Yee
	 	Name:  Augustine G. Yee
	 	Title:  General Counsel
	 	 
	 	WINTER
  GAMES ACQUISITION CORPORATION
	 	 
	 	By:  /s/ Augustine G. Yee
	 	Name:  Augustine G. Yee
	 	Title:  General
  Counsel
	 	 
	 	ARCARIS,
  INC.
	 	 
	 	By:  /s/ Alexander Kamb
	 	Name:  Alexander
  Kamb
	 	Title:  President
  and CEO

 

 

 

 

 

 

[SIGNATURE PAGE OF AGREEMENT
AND PLAN OF MERGER AND REORGANZATION]

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